By Shani Raja
Aug. 13 (Bloomberg) -- The S&P/ASX 200 Index fell 56.90 points, or 1.1 percent, to 4,996.70 at 10:20 a.m. in Sydney. The broader All Ordinaries Index declined 53.50, or 1.1 percent, to 5,036.80, while the futures index expiring in September lost 1.2 percent to 4,970.
Financial shares: Macquarie Group Ltd. (MQG AU), Australia's biggest investment bank, dropped A$1.21, or 2.2 percent, to A$54, the most since the start of the month. National Australia Bank Ltd. (NAB AU), the nation's largest lender by assets, declined 61 cents, or 2.3 percent, to A$25.86.
U.S. financial stocks fell after JPMorgan Chase & Co. said it may post more credit losses, pushing the worldwide costs for the collapse of the subprime mortgage market to more than $500 billion. The Standard & Poor's 500 Index slid 15.73 points, or 1.2 percent, to 1,289.59.
ABC Learning Centres Ltd. (ABS AU), rose 3 cents, or 4.4 percent, to 71 cents, the biggest gainer on the index. The world's biggest publicly-traded owner of child-care centers agreed to sell its U.K. vouchers business to Computershare Ltd. (CPU AU) for 90 million pounds ($171 million). Computershare declined 73 cents, or 7.3 percent, to A$9.26, the most since 2003.
Commonwealth Bank of Australia (CBA AU), the nation's biggest mortgage lender, slipped 89 cents, or 2 percent, to A$43.62. The bank posted the slowest earnings growth in four years as bad debts doubled and companies including Centro Properties Group struggled to repay loans.
Newcrest Mining Ltd. (NCM AU) declined 22 cents, or 0.9 percent, to A$23.27, the lowest since September 2007. Gold fell for an eighth straight session, the longest slide since 2001, on speculation that the dollar's strength will reduce demand for the precious metal as an alternative investment.
Telstra Corp. (TLS AU), Australia's largest telephone company, fell 10 cents, or 2.2 percent, to A$4.40. The company reported second-half profit rose 13 percent as it attracted more high-speed mobile and Internet users.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Wednesday, August 13, 2008
Malaysia's Ringgit Halts 8-Day Loss as Slump Deemed Excessive
By David Yong
Aug. 13 (Bloomberg) -- Malaysia's ringgit rose from the lowest this year as a technical indicator watched by traders showed the currency's decline this month was excessive.
The ringgit ended an eight-day losing streak, its longest since its peg to the dollar was scrapped in July 2005, on speculation Asian central banks bought their currencies to help curb inflation. The currency also gained as the dollar fell yesterday as JPMorgan Chase & Co. reported a $1.5 billion writedown in mortgage-backed securities, suggesting the U.S. credit crisis may worsen.
``The ringgit's decline is overdone and not justified given its fundamental outlook,'' said Yeah Kim Leng, chief economist in Kuala Lumpur at RAM Holdings Bhd., the nation's biggest rating company. ``The subprime issue will linger in the U.S. and Asia's economies are still going to hold up quite well.''
The ringgit rose 0.3 percent to 3.3140 per dollar as of 9:45 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency yesterday reached 3.3372, the lowest since Dec. 28.
The dollar-ringgit's 14-day relative strength index, a comparison of the magnitude of gains and losses, reached 76 today, according to data compiled by Bloomberg. A level below 30 or above 70 signals a reversal may occur.
JPMorgan's additional writedowns took the industry tally past $500 billion since the subprime-mortgage crisis began last year. U.S. retail sales may have dropped 0.1 percent last month, after a 0.1 percent gain in June, according to a Bloomberg News survey before a Commerce Department report today.
``Central banks do have the interest in reducing the more extreme foreign-exchange volatility, especially when it contributes to inflation,'' said Daniel Hui, a currency strategist at HSBC Holdings Plc in Hong Kong. ``More recently, we might have seen a less vigorous action to slow the currency weakness as inflation concerns have eased.''
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.
Read more...
Aug. 13 (Bloomberg) -- Malaysia's ringgit rose from the lowest this year as a technical indicator watched by traders showed the currency's decline this month was excessive.
The ringgit ended an eight-day losing streak, its longest since its peg to the dollar was scrapped in July 2005, on speculation Asian central banks bought their currencies to help curb inflation. The currency also gained as the dollar fell yesterday as JPMorgan Chase & Co. reported a $1.5 billion writedown in mortgage-backed securities, suggesting the U.S. credit crisis may worsen.
``The ringgit's decline is overdone and not justified given its fundamental outlook,'' said Yeah Kim Leng, chief economist in Kuala Lumpur at RAM Holdings Bhd., the nation's biggest rating company. ``The subprime issue will linger in the U.S. and Asia's economies are still going to hold up quite well.''
The ringgit rose 0.3 percent to 3.3140 per dollar as of 9:45 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency yesterday reached 3.3372, the lowest since Dec. 28.
The dollar-ringgit's 14-day relative strength index, a comparison of the magnitude of gains and losses, reached 76 today, according to data compiled by Bloomberg. A level below 30 or above 70 signals a reversal may occur.
JPMorgan's additional writedowns took the industry tally past $500 billion since the subprime-mortgage crisis began last year. U.S. retail sales may have dropped 0.1 percent last month, after a 0.1 percent gain in June, according to a Bloomberg News survey before a Commerce Department report today.
``Central banks do have the interest in reducing the more extreme foreign-exchange volatility, especially when it contributes to inflation,'' said Daniel Hui, a currency strategist at HSBC Holdings Plc in Hong Kong. ``More recently, we might have seen a less vigorous action to slow the currency weakness as inflation concerns have eased.''
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.
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Japan's Stocks Retreat on Asset Writedown Concern; GDP Declines
By Masaki Kondo
Aug. 13 (Bloomberg) -- Japan's stocks fell after new writedowns pushed global losses related to the U.S. mortgage market past the $500 billion mark and the domestic economy shrank, bringing the country to the brink of recession.
Nomura Holdings Inc. led brokerages to the biggest decline in almost two weeks, while Promise Co., Japan's largest consumer lender by outstanding loans, slumped for the first time in four days. T&D Holdings Inc. sent insurers to the lowest in five months after first-quarter profit tumbled by two-thirds.
The Nikkei 225 Stock Average declined 234.46, or 1.8 percent, to 13,069.14 as of 9:39 a.m. The broader Topix index fell 21.03, or 1.7 percent, to 1,250.39. Seven stocks fell for each that rose on the Topix.
Trading conditions ``have substantially deteriorated,'' JPMorgan Chase & Co. said in a regulatory filing yesterday when it announced new writedowns since July. The No. 2 U.S. bank by value expects the global economy ``to continue to be weak.''
Zurich-based UBS AG yesterday posted a fourth-straight quarterly loss on U.S. mortgage-related writedowns, pushing up worldwide losses from the collapse of the U.S. housing market to more than $500 billion.
Meanwhile, Japan's gross domestic product shrank an annualized 2.4 percent in the three months to June 30, the Cabinet Office reported today before markets opened. The result was in line with economist estimates.
Nomura, Japan's largest brokerage, retreated 2.7 percent to 1,532 yen, while Sumitomo Trust and Banking Co. fell 3.4 percent to 690 yen. Promise sank 4.2 percent to 2,595 yen.
Insurance Companies
T&D, the nation's second-largest publicly traded insurer, tumbled 6.6 percent to 5,540 yen, headed for the biggest decline since March 13. Sompo Japan Insurance Inc. dropped 3.9 percent to 944 yen, while Tokio Marine Holdings Inc dived 3.3 percent to 3,540 yen. Insurance companies, which had been the fourth-biggest winner among 33 Topix groups yesterday, posted the biggest decline today.
Nikkei futures expiring in September retreated 0.8 percent to 13,200 in Osaka and slumped 1 percent to 13,190 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Asian Stocks Decline After T&D, Commonwealth Earnings Falter
By Patrick Rial and Junko Kikkawa
Aug. 13 (Bloomberg) -- Asian stocks dropped, sending the region's benchmark index to a two-year low, after Japan's economy contracted and companies reported weaker profit growth.
T&D Holdings Inc., Japan's largest publicly traded life insurer, dropped after profit slid and Commonwealth Bank of Australia fell after posting the slowest earnings growth in four years. BHP Billiton Ltd., the world's biggest mining company, slumped after copper retreated to a six-month low. China's stocks dropped, extending a 12 percent slump since the day the Olympic Games began on Aug. 8, as trading tumbled to a 21-month low.
``The situation is going to keep getting worse for company earnings, making stock market gains hard to come by,'' Tsuyoshi Shimizu, who helps oversee the equivalent of $26 billion at Mizuho Asset Management Co. in Tokyo, said in an interview with Bloomberg TV. ``The GDP report is being perceived negatively in the market.''
The MSCI Asia Pacific Index dropped 1.3 percent to 126.18 as of 11:20 a.m. in Tokyo, the lowest level since September 2006. Japan's Nikkei 225 Stock Average lost 2.2 percent to 13,006.07. All other benchmark indexes in the region fell apart from Vietnam, which was little changed.
U.S. stocks declined for the first time in three days yesterday, with the Standard & Poor's 500 Index dropping 1.2 percent, as JPMorgan Chase & Co. posted its steepest plunge since 2002. JPMorgan helped push global subprime losses over $500 billion with a $1.5 billion writedown on mortgage-backed securities.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Junko Kikkawa in Tokyo at jkikkawa@bloomberg.net.
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Aug. 13 (Bloomberg) -- Asian stocks dropped, sending the region's benchmark index to a two-year low, after Japan's economy contracted and companies reported weaker profit growth.
T&D Holdings Inc., Japan's largest publicly traded life insurer, dropped after profit slid and Commonwealth Bank of Australia fell after posting the slowest earnings growth in four years. BHP Billiton Ltd., the world's biggest mining company, slumped after copper retreated to a six-month low. China's stocks dropped, extending a 12 percent slump since the day the Olympic Games began on Aug. 8, as trading tumbled to a 21-month low.
``The situation is going to keep getting worse for company earnings, making stock market gains hard to come by,'' Tsuyoshi Shimizu, who helps oversee the equivalent of $26 billion at Mizuho Asset Management Co. in Tokyo, said in an interview with Bloomberg TV. ``The GDP report is being perceived negatively in the market.''
The MSCI Asia Pacific Index dropped 1.3 percent to 126.18 as of 11:20 a.m. in Tokyo, the lowest level since September 2006. Japan's Nikkei 225 Stock Average lost 2.2 percent to 13,006.07. All other benchmark indexes in the region fell apart from Vietnam, which was little changed.
U.S. stocks declined for the first time in three days yesterday, with the Standard & Poor's 500 Index dropping 1.2 percent, as JPMorgan Chase & Co. posted its steepest plunge since 2002. JPMorgan helped push global subprime losses over $500 billion with a $1.5 billion writedown on mortgage-backed securities.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Junko Kikkawa in Tokyo at jkikkawa@bloomberg.net.
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Australian Central Bank Sees No Case for Loans Rules
By Jacob Greber
Aug. 13 (Bloomberg) -- Australia's central bank says there is no case for permanent government intervention in the mortgage market to boost the availability of credit to borrowers.
``While the availability of finance has tightened up recently, over the longer term we do not expect that a shortage of housing finance will be one of the problems that Australia will have to confront,'' Assistant Governor Philip Lowe said at a financial services forum in Sydney today.
The creation of permanent government structures to increase the supply of credit ``can have unintended consequences,'' Lowe said. Government-chartered Freddie Mac and Fannie Mae, which together own or guarantee 42 percent of the $12 trillion U.S. home loan market, have been battered by record delinquencies and rising losses as they struggle to shore up their balance sheets amid the worst housing slump since the Great Depression.
Australia, which doesn't have a government-backed mortgage lender, has a ``very competitive private mortgage market, which has offered a wider range of mortgage products to consumers than that seen in many other countries,'' Lowe said.
Lowe also said ``there's no obvious reason why'' banks wouldn't pass through any reduction in official interest rates by the central bank. ``Over recent weeks, the 90-bank bill rate has fallen considerably. This is often used as a measure of the cost of funds,'' he said.
An Australian parliamentary committee studying housing affordability said in June that a state-backed lending agency, AussieMac, would be ``beneficial in the Australian market.''
Non-Bank Lenders
Housing affordability is at a record low in Australia because of interest rates at a 12-year high and a 140 percent surge in the median national house price since 1999.
The global credit squeeze has also made it harder for lenders that finance mortgages through the securitization market. ``At current spreads, these lenders face difficulties in making profitable prime housing loans at the rates that the banks are charging for these loans,'' Lowe said.
The proportion of new loans for home buyers sold by so- called ``non-bank lenders'' has fallen from around 13 percent a year ago to just over 4 percent, he said.
That has helped boost the share of loans sold by banks such as Commonwealth Bank of Australia ``significantly,'' he added. Commonwealth Bank, the nation's biggest mortgage lender, said today that second-half profit rose 6 percent to A$2.42 billion ($2.11 billion).
`Escaped the Worst'
``We think the securitization market will return,'' Lowe said. ``The financial market architecture that supported that market is still there. Once conditions settle, we're reasonably confident the securitization market will return and'' and help boost competition among lenders.
Lowe said Australia has ``escaped the worst of the excesses seen in the U.S.'' mortgage market and has loan arrears rates that are ``considerably below comparable figures for many other countries.
Just over 0.4 percent of Australian banks' mortgages are more than 90 days in arrears, compared with 2.2 percent in the U.S. and 1.3 percent in the U.K., Lowe said.
One reason Australia has avoided mortgage-market problems is that ``the big lift in aggregate house prices in Australia took place between 1996 and 2003, prior to that in a number of other countries,'' the assistant governor said.
``It meant that just at the time that financial innovation was accelerating around the world and investors were looking for new higher-yielding assets, Australian households were digesting the big run up in debt and house prices that had occurred earlier in the decade,'' Lowe said.
`Better Shape'
While many Australian households' finances ``are undoubtedly currently strained, the aggregate position of the household sector is in better shape than it would have been had the housing boom run on longer and coincided with these developments in the global system.''
Lowe said there are number of proposals being debated around the world to avoid a repeat of the global credit crunch triggered by the U.S. subprime crisis, including addressing how bonuses are paid to bankers, changing the way assets are valued and making central banks ``lean against a financial boom, particularly if significant debt-financed imbalances are building up in the system.''
Another idea is that financial institutions should build up their capital buffers in the good times, Lowe said.
Increasing reserves would likely reduce the need for banks to raise capital when times are tough, though it may also increase the cost of financial intermediation and ``could distort the competitive position of different institutions in the financial system,'' he said.
```The trade-offs are difficult and the implementation challenges are considerable.
``Despite this, finding ways of dealing with financial cycles is important if we are to maintain the broad community consensus that has supported financial liberalization and globalization over recent decades.''
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Aug. 13 (Bloomberg) -- Australia's central bank says there is no case for permanent government intervention in the mortgage market to boost the availability of credit to borrowers.
``While the availability of finance has tightened up recently, over the longer term we do not expect that a shortage of housing finance will be one of the problems that Australia will have to confront,'' Assistant Governor Philip Lowe said at a financial services forum in Sydney today.
The creation of permanent government structures to increase the supply of credit ``can have unintended consequences,'' Lowe said. Government-chartered Freddie Mac and Fannie Mae, which together own or guarantee 42 percent of the $12 trillion U.S. home loan market, have been battered by record delinquencies and rising losses as they struggle to shore up their balance sheets amid the worst housing slump since the Great Depression.
Australia, which doesn't have a government-backed mortgage lender, has a ``very competitive private mortgage market, which has offered a wider range of mortgage products to consumers than that seen in many other countries,'' Lowe said.
Lowe also said ``there's no obvious reason why'' banks wouldn't pass through any reduction in official interest rates by the central bank. ``Over recent weeks, the 90-bank bill rate has fallen considerably. This is often used as a measure of the cost of funds,'' he said.
An Australian parliamentary committee studying housing affordability said in June that a state-backed lending agency, AussieMac, would be ``beneficial in the Australian market.''
Non-Bank Lenders
Housing affordability is at a record low in Australia because of interest rates at a 12-year high and a 140 percent surge in the median national house price since 1999.
The global credit squeeze has also made it harder for lenders that finance mortgages through the securitization market. ``At current spreads, these lenders face difficulties in making profitable prime housing loans at the rates that the banks are charging for these loans,'' Lowe said.
The proportion of new loans for home buyers sold by so- called ``non-bank lenders'' has fallen from around 13 percent a year ago to just over 4 percent, he said.
That has helped boost the share of loans sold by banks such as Commonwealth Bank of Australia ``significantly,'' he added. Commonwealth Bank, the nation's biggest mortgage lender, said today that second-half profit rose 6 percent to A$2.42 billion ($2.11 billion).
`Escaped the Worst'
``We think the securitization market will return,'' Lowe said. ``The financial market architecture that supported that market is still there. Once conditions settle, we're reasonably confident the securitization market will return and'' and help boost competition among lenders.
Lowe said Australia has ``escaped the worst of the excesses seen in the U.S.'' mortgage market and has loan arrears rates that are ``considerably below comparable figures for many other countries.
Just over 0.4 percent of Australian banks' mortgages are more than 90 days in arrears, compared with 2.2 percent in the U.S. and 1.3 percent in the U.K., Lowe said.
One reason Australia has avoided mortgage-market problems is that ``the big lift in aggregate house prices in Australia took place between 1996 and 2003, prior to that in a number of other countries,'' the assistant governor said.
``It meant that just at the time that financial innovation was accelerating around the world and investors were looking for new higher-yielding assets, Australian households were digesting the big run up in debt and house prices that had occurred earlier in the decade,'' Lowe said.
`Better Shape'
While many Australian households' finances ``are undoubtedly currently strained, the aggregate position of the household sector is in better shape than it would have been had the housing boom run on longer and coincided with these developments in the global system.''
Lowe said there are number of proposals being debated around the world to avoid a repeat of the global credit crunch triggered by the U.S. subprime crisis, including addressing how bonuses are paid to bankers, changing the way assets are valued and making central banks ``lean against a financial boom, particularly if significant debt-financed imbalances are building up in the system.''
Another idea is that financial institutions should build up their capital buffers in the good times, Lowe said.
Increasing reserves would likely reduce the need for banks to raise capital when times are tough, though it may also increase the cost of financial intermediation and ``could distort the competitive position of different institutions in the financial system,'' he said.
```The trade-offs are difficult and the implementation challenges are considerable.
``Despite this, finding ways of dealing with financial cycles is important if we are to maintain the broad community consensus that has supported financial liberalization and globalization over recent decades.''
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Japan Second Quarter Preliminary Real GDP: Summary (Table)
By Minh Bui
Aug. 13 (Bloomberg) -- Following is a summary of real gross domestic product from the Cabinet Office in Tokyo.
===============================================================================
2Q 2Q 2Q Contri 1Q 4Q 3Q
2008 2008 2008 bution 2008 2007 2007
QoQ% SAAR YoY% to GDP QoQ% QoQ% QoQ%
===============================================================================
GDP - real -0.6% -2.4% 1.0% n/a 0.8% 0.6% 0.2%
------------------------------------------------------------------------------
Domestic demand -0.6% -2.5% -0.3% -0.6% 0.4% 0.3% -0.3%
Private demand -0.6% -2.2% -0.2% -0.4% 0.5% 0.1% -0.2%
Private consumption -0.5% -1.9% 0.6% -0.3% 0.7% 0.3% 0.0%
Household consumption -0.5% -2.1% 0.5% -0.3% 0.7% 0.3% 0.0%
ex-imputed rent -0.7% -2.8% 0.3% -0.3% 0.7% 0.3% -0.1%
Residential investment -3.4% -13.0% -15.6% -0.1% 4.3% -9.8% -7.3%
Capital investment -0.2% -0.9% 1.3% 0.0% -0.1% 1.1% 0.6%
Private inventories n/a n/a n/a 0.0% -0.1% 0.0% 0.0%
Public Demand -0.9% -3.6% -0.7% -0.2% -0.2% 0.8% -0.4%
===============================================================================
2Q 2Q 2Q Contri 1Q 4Q 3Q
2008 2008 2008 bution 2008 2007 2007
QoQ% SAAR YoY% to GDP QoQ% QoQ% QoQ%
===============================================================================
Government consumption 0.1% 0.3% 0.5% 0.0% -0.5% 0.9% 0.1%
Public investment -5.2% -19.3% -6.9% -0.2% 1.0% 0.1% -2.0%
Public inventory n/a n/a n/a 0.0% 0.0% 0.0% 0.0%
Fixed capital formation -1.5% -6.0% -2.7% -0.3% 0.7% -0.6% -1.1%
Net Exports n/a n/a n/a 0.0% 0.4% 0.3% 0.5%
Exports, goods & services -2.3% -8.9% 6.4% -0.4% 3.4% 2.7% 2.6%
Imports, goods & services -2.8% -10.7% -1.3% 0.5% 1.2% 0.8% -0.3%
-------------------------------------------------------------------------------
GDP Deflator (YoY%) -1.6% n/a n/a n/a -1.5% -1.3% -0.6%
===============================================================================
NOTE: Quarterly percent changes are seasonally adjusted. SAAR is the seasonally adjusted quarter-on-quarter percent change at an annualized rate. Fixed capital formation = residential investment + non-residential investment + public investment. Changes in deflator are from a year ago.
SOURCE: Department of National Accounts, Economic and Social Research Institute, Cabinet Office.
To contact the reporter on this story: Harumi Ichikura in Tokyo hichikura@bloomberg.net
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Trichet May Resist Interest-Rate Cut as Wage-Price Spiral Looms
By Christian Vits
Aug. 13 (Bloomberg) -- European Central Bank President Jean- Claude Trichet may look beyond a likely contraction in the euro region's economy and keep interest rates at a seven-year high to avert a wage-price spiral.
Investors who seized on Trichet's Aug. 7 comments that growth will be ``substantially weaker'' and raised bets that the next step will be an easing missed the point, said Andreas Scheuerle, an economist at Dekabank in Frankfurt.
The reaction to the remarks, which drove the euro down almost seven cents against the dollar, overshadowed Trichet's warning minutes later that his priority is preventing the fastest inflation in 16 years from becoming entrenched.
``Market expectations that the next move will be a cut are premature,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``When it comes to the crunch, the ECB will sacrifice growth to fight inflation.''
Record oil and food costs pushed euro-region inflation to 4.1 percent in July, double the ECB's 2 percent limit. The Frankfurt- based central bank kept its key rate at 4.25 percent last week after raising borrowing costs in July.
While oil prices have retreated 20 percent from a record $147.27 a barrel reached on July 11, inflation may not slow as quickly as investors hope, said Leo Doyle, an economist at Dresdner Kleinwort in London.
`Pipeline Effect'
``The speed of inflation's decline could still disappoint the markets,'' said Doyle. Domestic heating costs ``are likely to continue rising for another six months at least,'' meaning inflation may remain above 3 percent well into next year.
Trichet said last week that ``a pipeline effect'' stemming from commodity-price increases ``is something which is ongoing and undoubtedly creates more risks.'' There is an ``absolute necessity to avoid the materialization of such risks,'' he said at the press conference following the rate decision.
Lower oil prices may also bolster economic growth, lending weight to workers' demands for more pay to compensate for the higher cost of living. ECB policy makers are concerned a wage- price spiral will develop as companies raise prices to cover increased labor costs.
``Trichet can't say he'll fight inflation and then do nothing,'' said Axel Botte, a Paris-based fixed income strategist at Axa Investment Managers which has about $800 billion in assets under management. ``There is still a possibility the ECB may hike and the markets are unprepared for that.''
Response to Trichet
Yields on Eonia forward contracts, a widely used market gauge of interest-rate expectations, plunged after Trichet said growth risks are materializing and the ECB has ``no bias'' on future rates. The yield on the March contract fell to 4.14 percent from 4.35 percent. The euro has dropped as low as $1.4816 since Trichet's press conference from $1.5503 beforehand.
``The economic outlook is deteriorating at such a rate that the ECB will have to cut rates eventually,'' said Stuart Thomson, a money manager at Resolution Investment Management Ltd. in Glasgow, which oversees about $46 billion in bonds.
Trichet's acknowledgement that the growth outlook has deteriorated ``reinforced investors' views that the U.S. economy is a better bet at this stage,'' Thomson said.
GDP Preview
The 15-nation euro-region economy probably contracted 0.2 percent in the second quarter from the first, according to a Bloomberg News survey of economists. The European Union's statistics office in Luxembourg will publish its initial estimate of second-quarter gross domestic product at 11 a.m. tomorrow.
By contrast, the U.S. economy expanded 0.5 percent in the three months through June after the Federal Reserve slashed its key rate to 2 percent from 5.25 percent.
Trichet is unlikely to follow suit as he remains focused on battling inflation and says that economic fundamentals in the euro region remain ``sound.''
Furthermore, ``if the decline in oil prices persists we'll see a positive impact'' on economic growth, said Holger Sandte, chief European economist at WestLB Equity Markets in Dusseldorf. ``A better economic outlook would be grist to the mill for the unions.''
Negotiated wages in Germany, Europe's largest economy, jumped 3.5 percent in the year through April, the biggest gain in 12 years, as companies such as BASF AG and ThyssenKrupp AG bowed to union demands.
Wage inflation in Italy accelerated to 3.6 percent in June, the fastest in three years, even as the Italian economy contracted 0.3 percent in the second quarter.
There is ``a very strong concern that price and wage-setting behavior could add to inflationary pressures,'' Trichet said last week. While growth is weakening, the ECB has ``only one needle'' in its compass and ``that needle is price stability.''
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
Read more...
Aug. 13 (Bloomberg) -- European Central Bank President Jean- Claude Trichet may look beyond a likely contraction in the euro region's economy and keep interest rates at a seven-year high to avert a wage-price spiral.
Investors who seized on Trichet's Aug. 7 comments that growth will be ``substantially weaker'' and raised bets that the next step will be an easing missed the point, said Andreas Scheuerle, an economist at Dekabank in Frankfurt.
The reaction to the remarks, which drove the euro down almost seven cents against the dollar, overshadowed Trichet's warning minutes later that his priority is preventing the fastest inflation in 16 years from becoming entrenched.
``Market expectations that the next move will be a cut are premature,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``When it comes to the crunch, the ECB will sacrifice growth to fight inflation.''
Record oil and food costs pushed euro-region inflation to 4.1 percent in July, double the ECB's 2 percent limit. The Frankfurt- based central bank kept its key rate at 4.25 percent last week after raising borrowing costs in July.
While oil prices have retreated 20 percent from a record $147.27 a barrel reached on July 11, inflation may not slow as quickly as investors hope, said Leo Doyle, an economist at Dresdner Kleinwort in London.
`Pipeline Effect'
``The speed of inflation's decline could still disappoint the markets,'' said Doyle. Domestic heating costs ``are likely to continue rising for another six months at least,'' meaning inflation may remain above 3 percent well into next year.
Trichet said last week that ``a pipeline effect'' stemming from commodity-price increases ``is something which is ongoing and undoubtedly creates more risks.'' There is an ``absolute necessity to avoid the materialization of such risks,'' he said at the press conference following the rate decision.
Lower oil prices may also bolster economic growth, lending weight to workers' demands for more pay to compensate for the higher cost of living. ECB policy makers are concerned a wage- price spiral will develop as companies raise prices to cover increased labor costs.
``Trichet can't say he'll fight inflation and then do nothing,'' said Axel Botte, a Paris-based fixed income strategist at Axa Investment Managers which has about $800 billion in assets under management. ``There is still a possibility the ECB may hike and the markets are unprepared for that.''
Response to Trichet
Yields on Eonia forward contracts, a widely used market gauge of interest-rate expectations, plunged after Trichet said growth risks are materializing and the ECB has ``no bias'' on future rates. The yield on the March contract fell to 4.14 percent from 4.35 percent. The euro has dropped as low as $1.4816 since Trichet's press conference from $1.5503 beforehand.
``The economic outlook is deteriorating at such a rate that the ECB will have to cut rates eventually,'' said Stuart Thomson, a money manager at Resolution Investment Management Ltd. in Glasgow, which oversees about $46 billion in bonds.
Trichet's acknowledgement that the growth outlook has deteriorated ``reinforced investors' views that the U.S. economy is a better bet at this stage,'' Thomson said.
GDP Preview
The 15-nation euro-region economy probably contracted 0.2 percent in the second quarter from the first, according to a Bloomberg News survey of economists. The European Union's statistics office in Luxembourg will publish its initial estimate of second-quarter gross domestic product at 11 a.m. tomorrow.
By contrast, the U.S. economy expanded 0.5 percent in the three months through June after the Federal Reserve slashed its key rate to 2 percent from 5.25 percent.
Trichet is unlikely to follow suit as he remains focused on battling inflation and says that economic fundamentals in the euro region remain ``sound.''
Furthermore, ``if the decline in oil prices persists we'll see a positive impact'' on economic growth, said Holger Sandte, chief European economist at WestLB Equity Markets in Dusseldorf. ``A better economic outlook would be grist to the mill for the unions.''
Negotiated wages in Germany, Europe's largest economy, jumped 3.5 percent in the year through April, the biggest gain in 12 years, as companies such as BASF AG and ThyssenKrupp AG bowed to union demands.
Wage inflation in Italy accelerated to 3.6 percent in June, the fastest in three years, even as the Italian economy contracted 0.3 percent in the second quarter.
There is ``a very strong concern that price and wage-setting behavior could add to inflationary pressures,'' Trichet said last week. While growth is weakening, the ECB has ``only one needle'' in its compass and ``that needle is price stability.''
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
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Japan's Current-Account Surplus Narrows for a Fourth Month
By Keiko Ujikane
Aug. 13 (Bloomberg) -- Japan's current-account surplus narrowed for a fourth month in June as exports fell and record oil prices pushed up the import bill.
The surplus shrank 67.4 percent to 493.9 billion yen ($4.5 billion) from a year earlier, the Ministry of Finance said in Tokyo today. The median estimate of 29 economists surveyed by Bloomberg News was for the gap to decrease to 494.7 billion yen.
Rising energy and raw material costs are taking a toll on sales abroad as well as spending by companies and consumers at home, threatening the nation's longest postwar expansion. Japan's economy shrank last quarter, bringing the country to the brink of its first recession in six years, a separate report showed today.
``We are becoming more downbeat on the global economies,'' said Takehiro Sato, chief Japan economist at Morgan Stanley Japan. ``Worsening terms of trade alongside rising import prices'' have become more pronounced.
Exports fell 1.5 percent in June from a year earlier, compared with a 4.2 percent gain in May, today's report showed. Imports climbed 17.8 percent, compared with 4 percent in May. Japan imports virtually all of its oil. Crude oil surged to a record $147.27 a barrel on July 11.
Higher import costs are being reflected in wholesale prices in Japan, which rose 7.1 percent to a 27-year high in July from a year earlier, a central bank report showed yesterday.
The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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S. Korea Inflation to Ease on Lower Oil, Grain Prices, Kim Says
By Seyoon Kim
Aug. 13 (Bloomberg) -- South Korea's inflation at a 10-year high may ease in the second half because of a drop in oil and grain prices, Vice Finance Minister Kim Dong Soo said.
``We will closely monitor prices and we're hoping prices will stabilize in the second half of this year,'' Kim said on radio today ahead of a weekly government meeting in Gwacheon. ``Stabilizing prices is our priority.''
A surge in oil and food costs pushed up annual consumer prices by 5.9 percent in July from a year earlier, the biggest gain since November 1998.
Kim said the government plans to freeze water, train and highway toll fees while it will try to minimize increases in electricity and bus charges.
The $970 billion economy grew at the slowest annual pace in more than a year last quarter as consumers reined in spending amid soaring living costs. In an effort to stem inflation, the Bank of Korea unexpectedly raised its benchmark interest rate to an eight-year high of 5.25 percent on Aug. 7.
To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
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Aug. 13 (Bloomberg) -- South Korea's inflation at a 10-year high may ease in the second half because of a drop in oil and grain prices, Vice Finance Minister Kim Dong Soo said.
``We will closely monitor prices and we're hoping prices will stabilize in the second half of this year,'' Kim said on radio today ahead of a weekly government meeting in Gwacheon. ``Stabilizing prices is our priority.''
A surge in oil and food costs pushed up annual consumer prices by 5.9 percent in July from a year earlier, the biggest gain since November 1998.
Kim said the government plans to freeze water, train and highway toll fees while it will try to minimize increases in electricity and bus charges.
The $970 billion economy grew at the slowest annual pace in more than a year last quarter as consumers reined in spending amid soaring living costs. In an effort to stem inflation, the Bank of Korea unexpectedly raised its benchmark interest rate to an eight-year high of 5.25 percent on Aug. 7.
To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
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Australian Dollar Extends Slide to 12th Day as Commodities Drop
By Candice Zachariahs
Aug. 13 (Bloomberg) -- Australia's dollar fell for a 12th day on speculation earnings from the nation's exports will drop as the prices of gold, crude oil and copper extended their slide.
The local dollar, known as the Aussie, traded near its weakest in 6 1/2 months after the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities slid for the third day to its lowest since March. Exports of raw materials contribute about 17 percent to Australia's economy.
``Australia looks to be facing lower prices for the key commodities that it exports,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. ``That means less demand for the Aussie dollar, which would temper the pace of improvement in Australia's trade position.''
Australia's dollar declined 0.3 percent to 87.13 U.S. cents at 9:17 a.m. in Sydney from 87.38 cents in late Asian trading yesterday when it touched 87.04, the lowest since Jan. 24. It dropped 1.1 percent to 95.19 yen, from 96.29 yesterday, reaching 95.01, the weakest level since April 17.
The Australian dollar fell against 15 of the 16 most-active currencies after crude oil prices slid to a 14-week low, gold fell for an eighth session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are the nation's third and fourth most-valuable commodity exports.
The Westpac Commodity Futures Index, which tracks prices of the raw material Australia exports, has slumped 14 percent in the past month to the lowest since March.
Interest-Rate Bets
The Aussie has declined 7.5 percent since the beginning of the month as investors bet that the central bank will reduce borrowing costs from a 12-year high of 7.25 percent to boost a slowing economy.
Traders expect the bank to cut interest rates by about 1 percentage point over the next 12 months according to a Credit Suisse Group index based on overnight swaps trading. The RBA said Aug. 11 that a ``significant moderation'' in demand would slow inflation, making room for it to reduce rates.
Loses in the currency were limited before a government report that will probably show wages growth increased 1 percent in the second quarter, after unexpectedly slowing to 0.9 percent in the first three months of the year, according to the median estimate of 24 economists surveyed by Bloomberg News.
``We've seen clear dovish undertones from the RBA,'' Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets, said yesterday. ``The risk is that if the number comes in lower than expected, it would remove another hurdle for the RBA and increase chatter that the first cut may be a 50 basis point cut in September.''
Australian 10-year government bonds climbed for a fifth day, pushing the yield down 5 basis points, or 0.05 percentage point, to 5.82 percent. The last time the rate was at that level was in November. The price of the 5.25 percent bond maturing in March 2019 rose 0.342, or A$3.42 per A$1,000 face amount, to 95.509. Bond yields move inversely to prices.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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Aug. 13 (Bloomberg) -- Australia's dollar fell for a 12th day on speculation earnings from the nation's exports will drop as the prices of gold, crude oil and copper extended their slide.
The local dollar, known as the Aussie, traded near its weakest in 6 1/2 months after the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities slid for the third day to its lowest since March. Exports of raw materials contribute about 17 percent to Australia's economy.
``Australia looks to be facing lower prices for the key commodities that it exports,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. ``That means less demand for the Aussie dollar, which would temper the pace of improvement in Australia's trade position.''
Australia's dollar declined 0.3 percent to 87.13 U.S. cents at 9:17 a.m. in Sydney from 87.38 cents in late Asian trading yesterday when it touched 87.04, the lowest since Jan. 24. It dropped 1.1 percent to 95.19 yen, from 96.29 yesterday, reaching 95.01, the weakest level since April 17.
The Australian dollar fell against 15 of the 16 most-active currencies after crude oil prices slid to a 14-week low, gold fell for an eighth session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are the nation's third and fourth most-valuable commodity exports.
The Westpac Commodity Futures Index, which tracks prices of the raw material Australia exports, has slumped 14 percent in the past month to the lowest since March.
Interest-Rate Bets
The Aussie has declined 7.5 percent since the beginning of the month as investors bet that the central bank will reduce borrowing costs from a 12-year high of 7.25 percent to boost a slowing economy.
Traders expect the bank to cut interest rates by about 1 percentage point over the next 12 months according to a Credit Suisse Group index based on overnight swaps trading. The RBA said Aug. 11 that a ``significant moderation'' in demand would slow inflation, making room for it to reduce rates.
Loses in the currency were limited before a government report that will probably show wages growth increased 1 percent in the second quarter, after unexpectedly slowing to 0.9 percent in the first three months of the year, according to the median estimate of 24 economists surveyed by Bloomberg News.
``We've seen clear dovish undertones from the RBA,'' Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets, said yesterday. ``The risk is that if the number comes in lower than expected, it would remove another hurdle for the RBA and increase chatter that the first cut may be a 50 basis point cut in September.''
Australian 10-year government bonds climbed for a fifth day, pushing the yield down 5 basis points, or 0.05 percentage point, to 5.82 percent. The last time the rate was at that level was in November. The price of the 5.25 percent bond maturing in March 2019 rose 0.342, or A$3.42 per A$1,000 face amount, to 95.509. Bond yields move inversely to prices.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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Japan Economy Shrinks 2.4%, Signaling Recession Looms
By Jason Clenfield
Aug. 13 (Bloomberg) -- Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.
Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg News was for a 2.3 percent contraction.
The drop in exports was the biggest since the 2001 recession, and robs Japan of the engine that drove its longest postwar expansion just as surging food and fuel prices deter spending at home. Toyota Motor Corp. last week reported its worst earnings decline in five years as U.S. sales slumped, and Japan Airlines Corp. said it will cut wages to meet rising costs.
``The bottom line is that the economy is in a clear downturn,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo.
The yen traded at 109.14 per dollar as of 9:20 a.m. in Tokyo from 109.33 before the report was published. The Nikkei 225 Stock Average fell 1.3 percent.
The economy shrank 0.6 percent from the first quarter, when it grew 0.8 percent. The quarterly decline matched economists' predictions.
Exports Fall
Exports dropped 2.3 percent, the first decline in three years. Imports fell 2.8 percent.
Consumer spending, which accounts for more than half of the economy, decreased 0.5 percent from the previous quarter, compared with expectations of a 0.6 percent decline. The decline may have been exaggerated by comparison with the first quarter, when the leap year gave consumers an extra shopping day.
Domestic demand, which includes company and consumer spending, accounted for 0.4 percentage point of the economy's quarter-on-quarter contraction. Capital spending slipped 0.2 percent, compared with expectations of a 0.6 percent drop.
The world's second-largest economy has yet to contract for two consecutive quarters, one definition of a recession. Still, the prices companies pay for raw materials are rising at the fastest pace in 27 years and demand has weakened in the U.S., the country's biggest export market. That's eroded profits, forcing businesses to cut production, investment and hiring.
Toyota Fires Workers
Toyota, Japan's biggest company, last week lowered its vehicle sales forecast by 3.5 percent for the year ending March 2009. Since June, Toyota has fired 800 workers at a Kyushu-based subsidiary that's making fewer sport-utility vehicles and Lexus sedans bound for the U.S.
Prime Minister Yasuo Fukuda, whose popularity has plummeted since he took office last September, said this week that the economic situation is ``severe'' and he plans to announce relief measures later this month end to help companies and households cope with record energy costs.
Japan Air, the country's largest carrier by sales, said last week that it will reduce workers' pay by 5 percent to compensate for the increase in fuel prices.
Consumer sentiment fell in July to the lowest level since records began 26 years ago, after inflation outpaced wage growth. Summer bonuses at Japan's biggest companies dropped for the first time since 2002, according to the Keidanren business lobby.
The government last week described the economy as ``weakening,'' language it hadn't used since the most recent recession in 2001. Stalling growth and the fastest inflation in a decade have created a dilemma for the Bank of Japan, which will probably have to keep its benchmark interest rate at 0.5 percent for the rest of the year, according to economists surveyed last month.
Not as Severe
Still, the current slowdown is unlikely to be as severe as past recessions because companies have paid off debt and shed extra workers and idle equipment, said Huw McKay.
``We're not in the kind of situation we were in at the end of previous expansions,'' said McKay, senior international economist at Westpac Banking Corp. in Sydney. ``There's going to be a floor under this economy.''
Companies plan to increase capital investment by 4.1 percent in the year ending March 31, according to a survey released last week by the Development Bank of Japan. While that's slower than last fiscal year's 7.7 percent, it's better than the 10 percent decline recorded during the 2001 recession.
The Bank of Japan's most recent business survey showed that labor demand is close to a 16-year high. The jobs-to-applicants ratio was at 0.91 in June, meaning almost every person who wants a job can get one. Seven years ago, there were two applicants competing for every position.
``The economy is decelerating,'' said Westpac's McKay. ``But it doesn't look an economy that's collapsing and that's the key point.''
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
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Australian Dollar Extends Slide to 12th Day as Commodities Drop
By Candice Zachariahs
Aug. 13 (Bloomberg) -- Australia's dollar fell for a 12th day on speculation earnings from the nation's exports will drop as the prices of gold, crude oil and copper extended their slide.
The local dollar, known as the Aussie, traded near its weakest in 6 1/2 months after the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities slid for the third day to its lowest since March. Exports of raw materials contribute about 17 percent to Australia's economy.
``Australia looks to be facing lower prices for the key commodities that it exports,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. ``That means less demand for the Aussie dollar, which would temper the pace of improvement in Australia's trade position.''
Australia's dollar declined 0.3 percent to 87.13 U.S. cents at 9:17 a.m. in Sydney from 87.38 cents in late Asian trading yesterday when it touched 87.04, the lowest since Jan. 24. It dropped 1.1 percent to 95.19 yen, from 96.29 yesterday, reaching 95.01, the weakest level since April 17.
The Australian dollar fell against 15 of the 16 most-active currencies after crude oil prices slid to a 14-week low, gold fell for an eighth session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are the nation's third and fourth most-valuable commodity exports.
The Westpac Commodity Futures Index, which tracks prices of the raw material Australia exports, has slumped 14 percent in the past month to the lowest since March.
Interest-Rate Bets
The Aussie has declined 7.5 percent since the beginning of the month as investors bet that the central bank will reduce borrowing costs from a 12-year high of 7.25 percent to boost a slowing economy.
Traders expect the bank to cut interest rates by about 1 percentage point over the next 12 months according to a Credit Suisse Group index based on overnight swaps trading. The RBA said Aug. 11 that a ``significant moderation'' in demand would slow inflation, making room for it to reduce rates.
Loses in the currency were limited before a government report that will probably show wages growth increased 1 percent in the second quarter, after unexpectedly slowing to 0.9 percent in the first three months of the year, according to the median estimate of 24 economists surveyed by Bloomberg News.
``We've seen clear dovish undertones from the RBA,'' Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets, said yesterday. ``The risk is that if the number comes in lower than expected, it would remove another hurdle for the RBA and increase chatter that the first cut may be a 50 basis point cut in September.''
Australian 10-year government bonds climbed for a fifth day, pushing the yield down 5 basis points, or 0.05 percentage point, to 5.82 percent. The last time the rate was at that level was in November. The price of the 5.25 percent bond maturing in March 2019 rose 0.342, or A$3.42 per A$1,000 face amount, to 95.509. Bond yields move inversely to prices.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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Aug. 13 (Bloomberg) -- Australia's dollar fell for a 12th day on speculation earnings from the nation's exports will drop as the prices of gold, crude oil and copper extended their slide.
The local dollar, known as the Aussie, traded near its weakest in 6 1/2 months after the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities slid for the third day to its lowest since March. Exports of raw materials contribute about 17 percent to Australia's economy.
``Australia looks to be facing lower prices for the key commodities that it exports,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. ``That means less demand for the Aussie dollar, which would temper the pace of improvement in Australia's trade position.''
Australia's dollar declined 0.3 percent to 87.13 U.S. cents at 9:17 a.m. in Sydney from 87.38 cents in late Asian trading yesterday when it touched 87.04, the lowest since Jan. 24. It dropped 1.1 percent to 95.19 yen, from 96.29 yesterday, reaching 95.01, the weakest level since April 17.
The Australian dollar fell against 15 of the 16 most-active currencies after crude oil prices slid to a 14-week low, gold fell for an eighth session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are the nation's third and fourth most-valuable commodity exports.
The Westpac Commodity Futures Index, which tracks prices of the raw material Australia exports, has slumped 14 percent in the past month to the lowest since March.
Interest-Rate Bets
The Aussie has declined 7.5 percent since the beginning of the month as investors bet that the central bank will reduce borrowing costs from a 12-year high of 7.25 percent to boost a slowing economy.
Traders expect the bank to cut interest rates by about 1 percentage point over the next 12 months according to a Credit Suisse Group index based on overnight swaps trading. The RBA said Aug. 11 that a ``significant moderation'' in demand would slow inflation, making room for it to reduce rates.
Loses in the currency were limited before a government report that will probably show wages growth increased 1 percent in the second quarter, after unexpectedly slowing to 0.9 percent in the first three months of the year, according to the median estimate of 24 economists surveyed by Bloomberg News.
``We've seen clear dovish undertones from the RBA,'' Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets, said yesterday. ``The risk is that if the number comes in lower than expected, it would remove another hurdle for the RBA and increase chatter that the first cut may be a 50 basis point cut in September.''
Australian 10-year government bonds climbed for a fifth day, pushing the yield down 5 basis points, or 0.05 percentage point, to 5.82 percent. The last time the rate was at that level was in November. The price of the 5.25 percent bond maturing in March 2019 rose 0.342, or A$3.42 per A$1,000 face amount, to 95.509. Bond yields move inversely to prices.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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New Zealand Dollar Gains as U.S. Currency Eases Recent Gains
By Candice Zachariahs
Aug. 13 (Bloomberg) -- The New Zealand dollar rose against the U.S. currency, which gave up recent gains against 10 of the 16 most-traded currencies yesterday.
New Zealand's currency has lost 4.8 percent against the U.S. dollar this month as traders bet that the Reserve Bank of New Zealand will pare interest rates. The bank cut its benchmark rate by a quarter-percentage point on July 24, the first reduction in five years. The U.S. currency halted six days of gains against the euro yesterday, falling from a 5 1/2-month high.
New Zealand's currency rose 0.1 percent to 69.61 U.S. cents at 8:58 a.m. in Wellington, from 69.56 cents in late Asian trading yesterday. It bought 76.07 yen, from 76.67 yesterday.
``It's part of a broader theme where we've seen the U.S. dollar consolidate its recent gains,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``Less than a month ago, the kiwi was trading at 76 cents and now we're talking 70.''
New Zealand's dollar was the third-worst performer of the 16 most-traded currencies over the past month, after the South African and Australian currencies. Investors have increased bets that the Reserve Bank will reduce the 8 percent benchmark rate by 1.49 percentage points over the next 12 months according to a Credit Suisse Group index based on overnight swaps trading yesterday.
Sales of New Zealand houses fell 33 percent from a year ago in July, a report from the Real Estate Institute of New Zealand Inc. said yesterday.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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Aug. 13 (Bloomberg) -- The New Zealand dollar rose against the U.S. currency, which gave up recent gains against 10 of the 16 most-traded currencies yesterday.
New Zealand's currency has lost 4.8 percent against the U.S. dollar this month as traders bet that the Reserve Bank of New Zealand will pare interest rates. The bank cut its benchmark rate by a quarter-percentage point on July 24, the first reduction in five years. The U.S. currency halted six days of gains against the euro yesterday, falling from a 5 1/2-month high.
New Zealand's currency rose 0.1 percent to 69.61 U.S. cents at 8:58 a.m. in Wellington, from 69.56 cents in late Asian trading yesterday. It bought 76.07 yen, from 76.67 yesterday.
``It's part of a broader theme where we've seen the U.S. dollar consolidate its recent gains,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``Less than a month ago, the kiwi was trading at 76 cents and now we're talking 70.''
New Zealand's dollar was the third-worst performer of the 16 most-traded currencies over the past month, after the South African and Australian currencies. Investors have increased bets that the Reserve Bank will reduce the 8 percent benchmark rate by 1.49 percentage points over the next 12 months according to a Credit Suisse Group index based on overnight swaps trading yesterday.
Sales of New Zealand houses fell 33 percent from a year ago in July, a report from the Real Estate Institute of New Zealand Inc. said yesterday.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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Japan's Stock Futures Fall as Asset-Writedown Concerns Reemerge
By Masaki Kondo
Aug. 13 (Bloomberg) -- Japan's stock futures fell after new asset writedowns by global financial companies rekindled concern turmoil in the U.S. housing market will linger.
U.S.-traded receipts of Sumitomo Mitsui Financial Group Inc., Japan's third-biggest publicly traded bank, retreated 2.6 percent from the closing share price in Tokyo yesterday, after JPMorgan Chase & Co. reported an additional $1.5 billion loss on mortgage- backed assets. Nomura Holdings Inc., the nation's largest brokerage, declined 1.4 percent.
Nikkei 225 Stock Average futures expiring in September closed at 13,260 in Chicago yesterday, 0.4 percent lower than 13,310 earlier in Osaka and 0.5 percent down from 13,325 in Singapore. The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 0.8 percent.
``The market will open bearish and is likely to be stagnant,'' Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television.
The Nikkei fell 1 percent to 13,303.60 in Tokyo yesterday. The broader Topix index dropped 0.7 percent to 1,271.42.
Trading conditions ``have substantially deteriorated,'' JPMorgan said in a regulatory filing yesterday when it announced new writedowns since July, adding to $14 billion already reported. The second-largest U.S. bank by value expects the global economy ``to continue to be weak.''
JPMorgan's comments coincided with UBS AG's prediction that ``adverse economic and financial trends'' won't improve for the rest of the year. The Zurich-based bank yesterday posted a fourth straight quarterly loss on U.S. mortgage-related writedowns, pushing up worldwide losses from the collapse of the U.S. housing market to more than $500 billion.
At 8:50 a.m., the Cabinet Office is scheduled to release a report on Japan's gross domestic product. The world's second- largest economy probably shrank an annualized 2.3 percent in the three months ended June 30, according to economist estimates.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Aug. 13 (Bloomberg) -- Japan's stock futures fell after new asset writedowns by global financial companies rekindled concern turmoil in the U.S. housing market will linger.
U.S.-traded receipts of Sumitomo Mitsui Financial Group Inc., Japan's third-biggest publicly traded bank, retreated 2.6 percent from the closing share price in Tokyo yesterday, after JPMorgan Chase & Co. reported an additional $1.5 billion loss on mortgage- backed assets. Nomura Holdings Inc., the nation's largest brokerage, declined 1.4 percent.
Nikkei 225 Stock Average futures expiring in September closed at 13,260 in Chicago yesterday, 0.4 percent lower than 13,310 earlier in Osaka and 0.5 percent down from 13,325 in Singapore. The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 0.8 percent.
``The market will open bearish and is likely to be stagnant,'' Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television.
The Nikkei fell 1 percent to 13,303.60 in Tokyo yesterday. The broader Topix index dropped 0.7 percent to 1,271.42.
Trading conditions ``have substantially deteriorated,'' JPMorgan said in a regulatory filing yesterday when it announced new writedowns since July, adding to $14 billion already reported. The second-largest U.S. bank by value expects the global economy ``to continue to be weak.''
JPMorgan's comments coincided with UBS AG's prediction that ``adverse economic and financial trends'' won't improve for the rest of the year. The Zurich-based bank yesterday posted a fourth straight quarterly loss on U.S. mortgage-related writedowns, pushing up worldwide losses from the collapse of the U.S. housing market to more than $500 billion.
At 8:50 a.m., the Cabinet Office is scheduled to release a report on Japan's gross domestic product. The world's second- largest economy probably shrank an annualized 2.3 percent in the three months ended June 30, according to economist estimates.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Dollar May Fall Before Report Forecast to Show Retail Decline
By Stanley White and Ye Xie
Aug. 13 (Bloomberg) -- The dollar may fall before a government report forecast to show U.S. retail sales declined in July for the first time in five months.
The yen rose to its highest in two months against the euro after JPMorgan Chase & Co. said it will write down losses of at least $1.5 billion on mortgage-backed assets this quarter, leading investors to cut holdings of higher-yielding assets funded in Japan. The Australian dollar fell for a 12th day as prices of commodities the nation exports extended their decline.
``A disappointing retail sales number could limit the dollar against the yen,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank. ``This may also cause declines in stocks, which would encourage yen buying as investors avoid risky trades.''
The dollar traded at $1.4888 per euro at 8:53 a.m. in Tokyo from $1.4926 late yesterday. The dollar was little changed at 109.30 yen. Japan's currency touched 162.68 yen, the highest since June 5, before trading at 162.91 yen from 163.11. The dollar may fall to 108.50 yen today, Yoshida forecast.
The Australian dollar declined to 86.87 U.S. cents from 87.38 cents in late Asian trading yesterday. Crude oil prices slid to the a 14-week low, gold fell for an eighth session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are Australia's third and fourth most- valuable commodity exports.
Japan's Growth
The yen held gains against the euro after a report today showed gross domestic product shrank at an annual rate of 2.4 percent in the three months ended June 30, versus economists' estimates of a 2.3 percent decline, according to a Bloomberg News survey.
The greenback has rallied this month on bets the U.S. economic slowdown is spreading to Europe and as commodity prices have tumbled.
U.S. retail sales probably dropped 0.1 percent last month after increasing 0.1 percent in June, according to the median forecast of 75 economists surveyed by Bloomberg News. It would be the first decline since February. The Commerce Department is scheduled to release the report today.
Federal Reserve Bank of Dallas President Richard Fisher said the economy will ``broach zero growth'' in the second half of the year, the Dallas Morning News reported yesterday.
U.S. gross domestic product increased at an annual rate of 1.9 percent in the second quarter, the Commerce Department reported July 31. The economy contracted 0.2 percent in the final three months of last year.
Stronger Yen
The yen rose to 94.96 versus the Australian dollar from 96.29 in late Asia. It also advanced to 75.63 per New Zealand dollar from 76.67 on speculation investors reduced carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 7.25 percent in Australia and 8 percent in New Zealand.
JPMorgan, the second-largest U.S. bank by market value, said late Aug. 11 that trading conditions ``have substantially deteriorated'' since July. Financial firms have reported more than $493 billion of losses and writedowns on debt securities since the subprime-mortgage market collapsed in 2007.
``I don't think these yen gains are short-lived,'' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York. `If the bad news continues to happen, especially from the U.S., then definitely you will see a clear sign of the peak in the dollar-yen.''
Dollar's Rally
Crude oil fell as much as 1.9 percent to $112.31 yesterday, the lowest since May 2, easing inflation concern for the European Central Bank, which kept its main refinancing rate at a seven-year high of 4.25 percent last week.
The yield on three-month Euribor futures contract for June decreased 0.05 percentage point to 4.48 percent yesterday, indicating some investors bet the ECB will lower borrowing costs by the second quarter of 2009.
The economy of Germany, the largest of the 15 nations that use the euro, probably contracted in the second quarter for the first time in almost four years, according to the median forecast of 41 economists surveyed by Bloomberg News. The government is due to report the data tomorrow.
To contact the reporters on the story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net
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Aug. 13 (Bloomberg) -- The dollar may fall before a government report forecast to show U.S. retail sales declined in July for the first time in five months.
The yen rose to its highest in two months against the euro after JPMorgan Chase & Co. said it will write down losses of at least $1.5 billion on mortgage-backed assets this quarter, leading investors to cut holdings of higher-yielding assets funded in Japan. The Australian dollar fell for a 12th day as prices of commodities the nation exports extended their decline.
``A disappointing retail sales number could limit the dollar against the yen,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank. ``This may also cause declines in stocks, which would encourage yen buying as investors avoid risky trades.''
The dollar traded at $1.4888 per euro at 8:53 a.m. in Tokyo from $1.4926 late yesterday. The dollar was little changed at 109.30 yen. Japan's currency touched 162.68 yen, the highest since June 5, before trading at 162.91 yen from 163.11. The dollar may fall to 108.50 yen today, Yoshida forecast.
The Australian dollar declined to 86.87 U.S. cents from 87.38 cents in late Asian trading yesterday. Crude oil prices slid to the a 14-week low, gold fell for an eighth session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are Australia's third and fourth most- valuable commodity exports.
Japan's Growth
The yen held gains against the euro after a report today showed gross domestic product shrank at an annual rate of 2.4 percent in the three months ended June 30, versus economists' estimates of a 2.3 percent decline, according to a Bloomberg News survey.
The greenback has rallied this month on bets the U.S. economic slowdown is spreading to Europe and as commodity prices have tumbled.
U.S. retail sales probably dropped 0.1 percent last month after increasing 0.1 percent in June, according to the median forecast of 75 economists surveyed by Bloomberg News. It would be the first decline since February. The Commerce Department is scheduled to release the report today.
Federal Reserve Bank of Dallas President Richard Fisher said the economy will ``broach zero growth'' in the second half of the year, the Dallas Morning News reported yesterday.
U.S. gross domestic product increased at an annual rate of 1.9 percent in the second quarter, the Commerce Department reported July 31. The economy contracted 0.2 percent in the final three months of last year.
Stronger Yen
The yen rose to 94.96 versus the Australian dollar from 96.29 in late Asia. It also advanced to 75.63 per New Zealand dollar from 76.67 on speculation investors reduced carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 7.25 percent in Australia and 8 percent in New Zealand.
JPMorgan, the second-largest U.S. bank by market value, said late Aug. 11 that trading conditions ``have substantially deteriorated'' since July. Financial firms have reported more than $493 billion of losses and writedowns on debt securities since the subprime-mortgage market collapsed in 2007.
``I don't think these yen gains are short-lived,'' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York. `If the bad news continues to happen, especially from the U.S., then definitely you will see a clear sign of the peak in the dollar-yen.''
Dollar's Rally
Crude oil fell as much as 1.9 percent to $112.31 yesterday, the lowest since May 2, easing inflation concern for the European Central Bank, which kept its main refinancing rate at a seven-year high of 4.25 percent last week.
The yield on three-month Euribor futures contract for June decreased 0.05 percentage point to 4.48 percent yesterday, indicating some investors bet the ECB will lower borrowing costs by the second quarter of 2009.
The economy of Germany, the largest of the 15 nations that use the euro, probably contracted in the second quarter for the first time in almost four years, according to the median forecast of 41 economists surveyed by Bloomberg News. The government is due to report the data tomorrow.
To contact the reporters on the story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net
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Economic Calendar Eco Data 8/13/08
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Greenback Consolidates Gains
| Daily Forex Fundamentals | Written by CMS Forex | Aug 12 08 22:31 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The dollar traded mixed Tuesday consolidating multi-month highs over last week versus the yen, euro and Canadian dollar, while extending gains against the Australian dollar and sterling. The greenback was initially boosted after the US trade deficit unexpectedly narrowed in June as exports registered their biggest gain in nearly four and a half years. Sterling fell to the lowest level in over two years after more troubling UK economic data. The aussie declined for an 11th day, the longest losing streak since 1975, on slumping commodity prices and increased bets the Reserve Bank of Australia will cut interest rates. The Canadian dollar broke its longest losing streak in three years after Canada's trade surplus widened in June on strong exports. The euro rose modestly snapping a 5-day losing streak. The yen gained as US stocks fell after JPMorgan Chase & Co. reported losses of $1.5 billion on mortgage-backed assets so far this quarter. The GBP/USD dropped for an eight consecutive day as higher-than-expected UK consumer-price inflation increased concerns over the prospects for the UK economy. The pound was under pressure after a survey from the Royal Institution of Chartered Surveyors revealed UK homes sales dropped to a 30-year low in July and data from the British Retail Consortium showed high-street sales fell in July. The Bank of England is in a dilemma as rising inflation makes it harder to cut rates to support economic growth while weak economic growth makes it harder to hike rates to combat inflation. The GBP/USD is oversold, at the lowest level since November 2006. Supports exist at 1.89 and 1.85 and resistances at 1.92 and 1.94. We lowered the stop to 1.9335 to lock in profits.
Financial and Economic News and CommentsUS & Canada The US deficit in international trade of goods and services unexpectedly narrowed 4.1% to $56.77 billion in June on export gain, following May's revised $59.20 billion, the Commerce Department said. The June deficit was much smaller than expected. US exports rose 4.0% to a record $164.42 billion in June, the biggest gain since February 2004, from $158.03 billion in May. Imports also hit a new high, increasing 1.8% to $221.19 billion from $217.24 billion. The US trade deficit with China expanded to $21.43 billion in June from $21.05 billion in May, as exports to China fell $200 million. The deficit with Japan rose to $6.13 billion from $5.05 billion. The trade gap with the euro area increased to $7.20 billion from $6.50 billion. Meanwhile, the US gap with Mexico declined to $5.70 billion from $6.58 billion.
The US budget deficit widened to $102.8 billion in July on tax rebate checks, following a shortfall of $36.4 billion in July 2007, the US Treasury said. July spending rose 27.3% y/y to $263.3 billion, and revenue declined 5.8% y/y to $160.5 billion. Canada's trade surplus widened for a second straight month in June on energy exports. The surplus widened to C$5.76 billion ($5.41 billion) in June from a revised C$5.22 billion in May, Statistics Canada reported. Exports and imports both rose to records, gaining 3.1% and 2%, respectively. The trade surplus with the US was the widest since January 2006. Europe UK consumer-price inflation accelerated to 4.4% y/y in July, the most since records began in 1997 and more than double the Bank of England's 2% target, from 3.8% y/y in June, the Office for National Statistics said. Consumer prices stayed unchanged on the month (0% m/m) in July. Accelerating year-on-year consumerprice inflation makes it harder for the Bank of England to lower interest rates as the threat of a UK recession is looming. UK retail-price inflation quickened to 5% y/y, the fastest pace since 1991. Excluding mortgage-interest payments, it reached 5.3% y/y, the most since 1992, today's data showed.
UK house prices fell in July as the credit squeeze locked out buyers and brought the property market to a "virtual standstill," the Royal Institution of Chartered Surveyors said. The number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by 83.9 percentage points, the group said. Sales in UK shops open at least a year declined an annual 0.9% in July, the British Retail Consortium said. Asia-Pacific Japan's consumer confidence fell to 31.4, a record low in July, from June's 32.6, the Cabinet Office said. Japan's industrial output fell a seasonally adjusted 2.2% m/m in June, bigger than the initial reading of a 2.0% m/m fall, according to revised government data. Japan's producer-price inflation accelerated to 7.1% y/y, a 27-year high in July, after a revised 5.7% y/y increase in June, the Bank of Japan said. China's consumer-price inflation increased a less-than-expected 6.3% y/y in July, cooling to the slowest pace in 10 months, after rising 7.1% y/y in June, the statistics bureau said. The slowdown may encourage policies aimed at sustaining economic growth in China rather than fighting inflation. The Australian confidence index was unchanged in July at -9, indicating Australia's business confidence held at the lowest level in 7 years, according to a National Australia Bank Ltd. survey. FX Strategy Update
Hans Nilsson ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oil Trades Near 14-Week Closing Low on Bets Dollar Will Rise
By Mark Shenk
Aug. 13 (Bloomberg) -- Crude oil traded near a 14-week closing low on speculation that the dollar will strengthen against the euro, weakening the appeal of commodities as an inflation hedge.
``The oil market is still catching up with the rise of the dollar over the last few days,'' said Peter Beutel, president of New Canaan, Connecticut-based Cameron Hanover Inc. ``A lot of people are looking for continued increases for the dollar.''
Most energy and metals futures dropped as the U.S. currency rose to a 5 1/2-month high versus the euro earlier yesterday. Russian President Dmitry Medvedev said he ordered a halt to a five-day offensive in Georgia, a country that connects the oil- rich Caspian Sea region with world markets.
Crude oil for September delivery rose 14 cents to $113.15 a barrel at 8:51 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 58 percent from a year ago. Yesterday, futures lost $1.44, or 1.3 percent, to settle at $113.01 a barrel, the lowest close since May 1, after touching $112.31. Oil has slipped 23 percent from a record $147.27 on July 11.
The dollar traded at $1.4920 per euro at 6 a.m. in Tokyo, after touching $1.4816 yesterday, the strongest since Feb. 26. The dollar was at 109.26 yen, after declining 0.7 percent yesterday. It touched the seven-month high of 110.40 on Aug. 11.
The Standard & Poor's GSCI index of 24 commodities fell as much as 1.4 percent to a four-month low, as metals including lead, zinc and copper slumped. Gold declined for an eighth straight session, the longest slide since 2001. The GSCI index has fallen 22 percent from a record 893.859 on July 3, descending into bear-market terrain.
A fire on the Turkish stretch of the Baku-Tbilisi-Ceyhan pipeline last week halted exports of Azeri Light crude from Azerbaijan via Turkey, forcing the operator, BP Plc, to ship the oil by alternate routes.
No Damage
BP yesterday said it isn't aware of any damage from bombing to the Baku-Tbilisi-Ceyhan link. Russian warplanes attacked a section of the pipeline yesterday, Kakha Lomaia, head of Georgia's National Security Council, said earlier.
``The troubles in Georgia could potentially cut up to 1 million barrels a day, but hasn't sent prices higher,'' Beutel said. ``This is further evidence that the market isn't trading on the fundamentals anymore. Last month investors were sending prices higher without a fundamental reason and this month we are seeing the reverse.''
Brent crude oil for September settlement dropped $1.52, or 1.4 percent, to settle at $111.15 a barrel on London's ICE Futures Europe exchange yesterday, the lowest settlement price since May 1.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Aug. 13 (Bloomberg) -- Crude oil traded near a 14-week closing low on speculation that the dollar will strengthen against the euro, weakening the appeal of commodities as an inflation hedge.
``The oil market is still catching up with the rise of the dollar over the last few days,'' said Peter Beutel, president of New Canaan, Connecticut-based Cameron Hanover Inc. ``A lot of people are looking for continued increases for the dollar.''
Most energy and metals futures dropped as the U.S. currency rose to a 5 1/2-month high versus the euro earlier yesterday. Russian President Dmitry Medvedev said he ordered a halt to a five-day offensive in Georgia, a country that connects the oil- rich Caspian Sea region with world markets.
Crude oil for September delivery rose 14 cents to $113.15 a barrel at 8:51 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 58 percent from a year ago. Yesterday, futures lost $1.44, or 1.3 percent, to settle at $113.01 a barrel, the lowest close since May 1, after touching $112.31. Oil has slipped 23 percent from a record $147.27 on July 11.
The dollar traded at $1.4920 per euro at 6 a.m. in Tokyo, after touching $1.4816 yesterday, the strongest since Feb. 26. The dollar was at 109.26 yen, after declining 0.7 percent yesterday. It touched the seven-month high of 110.40 on Aug. 11.
The Standard & Poor's GSCI index of 24 commodities fell as much as 1.4 percent to a four-month low, as metals including lead, zinc and copper slumped. Gold declined for an eighth straight session, the longest slide since 2001. The GSCI index has fallen 22 percent from a record 893.859 on July 3, descending into bear-market terrain.
A fire on the Turkish stretch of the Baku-Tbilisi-Ceyhan pipeline last week halted exports of Azeri Light crude from Azerbaijan via Turkey, forcing the operator, BP Plc, to ship the oil by alternate routes.
No Damage
BP yesterday said it isn't aware of any damage from bombing to the Baku-Tbilisi-Ceyhan link. Russian warplanes attacked a section of the pipeline yesterday, Kakha Lomaia, head of Georgia's National Security Council, said earlier.
``The troubles in Georgia could potentially cut up to 1 million barrels a day, but hasn't sent prices higher,'' Beutel said. ``This is further evidence that the market isn't trading on the fundamentals anymore. Last month investors were sending prices higher without a fundamental reason and this month we are seeing the reverse.''
Brent crude oil for September settlement dropped $1.52, or 1.4 percent, to settle at $111.15 a barrel on London's ICE Futures Europe exchange yesterday, the lowest settlement price since May 1.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
Forex Technicals: The Day Ahead, August 13
| Daily Forex Technicals | Written by DailyFX | Aug 12 08 22:37 GMT | | |
| Each day following the New York close, a short term technical update will be published for the day ahead. The best short term opportunities for tomorrow are short USDCAD and short USDJPY. The regular technicals are published lower on this page under Daily Technicals.
EUR/USDA 4th wave is most likely underway from 1.4814 as either a triangle or a flat. Expectations are for the advance to reach at least 1.5083. Keep in mind that this rally should be countertrend. A drop below 1.4814 would suggest that a 5th wave from 1.5083 is extending.
USD/JPYThe USDJPY should continue lower near term to at least 107.86 (38.2% of 103.76-110.40). Former support at 109.60 is now resistance.
GBP/USDThe GBPUSD has fallen for 8 straight days now and today may be the ninth. On very short term charts, the decline seems to be subdividing. The bearish bias is intact as long as price is below 1.9082. Below 1.88 is the next objective.
USD/CHFThe USDCHF is testing the topside of a short term channel. Expect a decline to at least 1.0741 near term.
USD/CADVery short term, the USDCAD has decline is in 5 waves. This warns of a top at 1.0726 (at least short term). There is an opportunity to sell against 1.0726 and wait for a deeper decline to materialize over the next few days.
AUD/USDMuch like the GBPUSD, the AUDUSD appears to be extending losses. Short term Fibonacci extensions are at .8558 and .8404. The short term bearish trend is intact as long as price is below .8952.
NZD/USDThe Kiwi is no different from the AUDUSD. Both pairs are extending declines. The Kiwi is bearish as long as price is below .7011 and an objective is at .6766.
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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Tuesday's News Recap: U.S. Trade Deficit Shrinks, Economic Optimism Index Rises
News Recap | Written by CEP News | Aug 12 08 20:36 GMT |
(CEP News) - North American markets received some positive data out of the U.S. Tuesday with the release of trade figures, which showed that the U.S. trade deficit shrunk to its lowest level in three months, as well as an economic optimism index, which rose to its highest level since February. The U.S. monthly deficit, meanwhile, grew in July slightly more than expected. In Canada, the trade surplus rose higher than expected in June.
U.S. economic sentiment improved more than expected in August, following a record low in the previous two months, according to a report from Investor's Business Daily and TechnoMetrica Market Intelligence. The IBD/TIPP index of economic optimism bounced up 5.4 points to a reading of 42.8, up from 37.4 and above expectations of a 39.0 reading. Each of the three subcomponents saw improvement in the month, led by a jump in the economic outlook to 40.1 from the previous month's 29.4.
"Consumer confidence rebounded nicely in August thanks largely to falling gasoline prices," said Raghavan Mayur, president of TIPP, IBD's polling partner. "August's movement may be the start of a long-term rebound in consumer confidence, barring any major economic shocks or a re-ignition of the gasoline price bubble."
The U.S. trade deficit unexpectedly shrank to $56.8 billion in June, as a rise in exports to an all-time high offset another surge in oil imports, the U.S. Department of Commerce reported. The deficit was at its lowest level in three months, and lower than the $61.5 billion expected by economists.
"The narrowing in the trade gap in June was unexpected (in the advance release of second-quarter GDP, the Commerce Department assumed the trade deficit widened in the month)," economists from RDQ wrote in a client note. "At this point, we expect that second-quarter real GDP will be upwardly revised to 2.75% - 3% from the originally reported 1.9%."
Canada's trade surplus rose to $5.8 billion in June, thanks largely to higher export prices, even as the volume of goods shipped continued to decline, Statistics Canada reported. The increase was in line with the consensus estimate of analysts and higher than May's revised $5.2 billion surplus, which was previously reported as $5.5 billion.
Total exports in June soared to a new monthly high of nearly $43.2 billion, while total imports also established a new monthly mark of $37.4 billion, erasing the previous month's record of $36.7 billion.
According to the U.S. Treasury, monthly receipts totalled $160.494 billion and spending came in at $263.261 billion, resulting in a deficit of $102.767 billion for July. Economists were expecting the monthly deficit to come in at $90 billion, following the previous month's $50.7 billion budget deficit. The July 2007 deficit was $36.4 billion.
Job openings in the United States remained at the same level in June, growing 2.6%, the Bureau of Labor Statistics reported Wednesday. From June 2007, the openings rate has fallen from 2.9%. As of the last business day in June, there were 3.6 million nonfarm jobs available, according to the monthly Job Openings and Labor Turnover Survey. Total private job openings held steady at 2.7% from the prior month, still down 3.2% from one year ago, while government job openings fell to 1.9% from 2.0% in the prior month.
Retail sales advanced 2.6% on a year-over-year basis in the week ending Aug. 9, according to a weekly survey from the International Council of Shopping Centers (ICSC) and UBS Securities. Less dramatically, the Johnson Redbook retail survey recorded a 1.5% gain in the week compared to last year. On a week-over-week basis, however, ICSC-UBS sales fell by 1.1%, following a 1.2% advance in the previous week. Similarly, the Redbook report has seen August sales to date fall 1.9% from sales in July.
Speaking in an interview with CNBC, Minneapolis Federal Reserve President Gary Stern (voter) said the outlook on core and headline inflation has improved. Stern commented that the current drop in energy prices has alleviated inflation concerns and added that it would be "some time before we see some growth in the economy." When asked whether the U.S. economy was in a recession, he answered that "a declaration would be a close call."
In overnight news, the Department of Communities and Local Government (DCLG) reported that UK house prices rose 0.6% on a yearly basis in June, down notably from May's 3.0% growth rate as well as the expected 1.5% reading. May's figure was revised down from an initial reading of 3.7%.
Meanwhile, the Office for National Statistics (ONS) reported that the UK retail price index jumped 5.0% year-over-year in July. Economists had expected a slightly less pronounced gain of 4.9% after the index growth rate accelerated to 4.6% in June. July's RPI increase is the highest recorded since May 2001.
In an interview with the German newspaper Stuttgarter Zeitung, published on Tuesday, European Central Bank Governing Council member Axel Weber said he expects the inflation outlook in the euro zone to remain negative for a while and that the financial market crisis could last well into 2009. However, despite these dour forecasts, Weber stressed that there was no need for pessimism regarding the economy and speculated that inflation could fall below 2% this year and possibly into the next.
By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) - North American markets received some positive data out of the U.S. Tuesday with the release of trade figures, which showed that the U.S. trade deficit shrunk to its lowest level in three months, as well as an economic optimism index, which rose to its highest level since February. The U.S. monthly deficit, meanwhile, grew in July slightly more than expected. In Canada, the trade surplus rose higher than expected in June.
U.S. economic sentiment improved more than expected in August, following a record low in the previous two months, according to a report from Investor's Business Daily and TechnoMetrica Market Intelligence. The IBD/TIPP index of economic optimism bounced up 5.4 points to a reading of 42.8, up from 37.4 and above expectations of a 39.0 reading. Each of the three subcomponents saw improvement in the month, led by a jump in the economic outlook to 40.1 from the previous month's 29.4.
"Consumer confidence rebounded nicely in August thanks largely to falling gasoline prices," said Raghavan Mayur, president of TIPP, IBD's polling partner. "August's movement may be the start of a long-term rebound in consumer confidence, barring any major economic shocks or a re-ignition of the gasoline price bubble."
The U.S. trade deficit unexpectedly shrank to $56.8 billion in June, as a rise in exports to an all-time high offset another surge in oil imports, the U.S. Department of Commerce reported. The deficit was at its lowest level in three months, and lower than the $61.5 billion expected by economists.
"The narrowing in the trade gap in June was unexpected (in the advance release of second-quarter GDP, the Commerce Department assumed the trade deficit widened in the month)," economists from RDQ wrote in a client note. "At this point, we expect that second-quarter real GDP will be upwardly revised to 2.75% - 3% from the originally reported 1.9%."
Canada's trade surplus rose to $5.8 billion in June, thanks largely to higher export prices, even as the volume of goods shipped continued to decline, Statistics Canada reported. The increase was in line with the consensus estimate of analysts and higher than May's revised $5.2 billion surplus, which was previously reported as $5.5 billion.
Total exports in June soared to a new monthly high of nearly $43.2 billion, while total imports also established a new monthly mark of $37.4 billion, erasing the previous month's record of $36.7 billion.
According to the U.S. Treasury, monthly receipts totalled $160.494 billion and spending came in at $263.261 billion, resulting in a deficit of $102.767 billion for July. Economists were expecting the monthly deficit to come in at $90 billion, following the previous month's $50.7 billion budget deficit. The July 2007 deficit was $36.4 billion.
Job openings in the United States remained at the same level in June, growing 2.6%, the Bureau of Labor Statistics reported Wednesday. From June 2007, the openings rate has fallen from 2.9%. As of the last business day in June, there were 3.6 million nonfarm jobs available, according to the monthly Job Openings and Labor Turnover Survey. Total private job openings held steady at 2.7% from the prior month, still down 3.2% from one year ago, while government job openings fell to 1.9% from 2.0% in the prior month.
Retail sales advanced 2.6% on a year-over-year basis in the week ending Aug. 9, according to a weekly survey from the International Council of Shopping Centers (ICSC) and UBS Securities. Less dramatically, the Johnson Redbook retail survey recorded a 1.5% gain in the week compared to last year. On a week-over-week basis, however, ICSC-UBS sales fell by 1.1%, following a 1.2% advance in the previous week. Similarly, the Redbook report has seen August sales to date fall 1.9% from sales in July.
Speaking in an interview with CNBC, Minneapolis Federal Reserve President Gary Stern (voter) said the outlook on core and headline inflation has improved. Stern commented that the current drop in energy prices has alleviated inflation concerns and added that it would be "some time before we see some growth in the economy." When asked whether the U.S. economy was in a recession, he answered that "a declaration would be a close call."
In overnight news, the Department of Communities and Local Government (DCLG) reported that UK house prices rose 0.6% on a yearly basis in June, down notably from May's 3.0% growth rate as well as the expected 1.5% reading. May's figure was revised down from an initial reading of 3.7%.
Meanwhile, the Office for National Statistics (ONS) reported that the UK retail price index jumped 5.0% year-over-year in July. Economists had expected a slightly less pronounced gain of 4.9% after the index growth rate accelerated to 4.6% in June. July's RPI increase is the highest recorded since May 2001.
In an interview with the German newspaper Stuttgarter Zeitung, published on Tuesday, European Central Bank Governing Council member Axel Weber said he expects the inflation outlook in the euro zone to remain negative for a while and that the financial market crisis could last well into 2009. However, despite these dour forecasts, Weber stressed that there was no need for pessimism regarding the economy and speculated that inflation could fall below 2% this year and possibly into the next.
By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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Closing Market Recap: Treasuries Rally, Equities Slide and USD Declines
Market Updates | Written by CEP News | Aug 12 08 20:50 GMT |
(CEP News) - Markets took their cue from the embattled financial sector on Tuesday and worries continue to hurt bank and brokerage stocks and boost fixed income. The recent U.S. dollar rally stalled out against the Canadian dollar after trade balance figures were released.
Despite an overall bounce in U.S. equity markets, financial stocks remain under pressure. On Tuesday, Lehman Brothers fell to an August low. Fannie Mae and Freddie Mac fell to their lowest since July 16.
Standard and Poor's downgraded Morgan Stanley's long-term debt late on Monday and Wachovia downwardly revised its second-quarter results. JPMorgan Chase was also down after it reported a $1.5 billion loss in a regulatory filing.
Toronto's S&P/TSX composite index closed down 36 points to 13167, the Dow Jones industrial average closed down 140 points to 11642, the S&P 500 closed down 16 points to 1290 and the Nasdaq closed down 9 points to 2431.
European stock markets closed in negative territory with the Eurostoxx down 7 points to 2955, the UK FTSE 100 down 7 points to 5535 and the German DAX down 24 points to 6586.
Fixed income rallied on diminished expectations for rate hikes in the United States. Hopes were cooled by comments from Minneapolis Federal Reserve President Gary Stern (voter). He took a less hawkish tone than he did a few weeks ago, saying the Fed should be "patient" instead of pushing for immediate rate hikes.
Dallas Fed President Fisher (voter) also dampened economic optimism, saying "I expect that in the second half of this year we will broach zero growth."
Overall, strategists said the Treasury market had little to latch on to. One said flows were "anemic" and another said the Canadian market was "mired in the summer doldrums."
U.S. two-year yields were down 11.5 bps to 2.42%, with five-year yields down 11.6 bps to 3.14%, 10-year yields down 9.1 bps to 3.90% and 30-year yields down 6.6 bps to 4.54%. The Eurodollar March 09 contract was up 14.5 ticks to 97.00. The yield curve was steeper, with the 10/2-year spread up 2.6 bps to 147.72 bps.
Yields on two-year Canadian government bonds were down 1.5 bps to 2.74%, with five-year yields down 2.5 bps to 3.09%, 10-year yields down 3.2 bps to 3.60% and 30-year yields down 2.0 bps to 4.03%. The December 08 BAX contract was up 1.0 tick to 97.22.
In Germany, returns on two-year German bonds were down 5.5 bps to 4.05%, with five-year yields down 5.2 bps to 4.05%, 10-year yields down 4.3 bps to 4.23% and 30-year yields down 4.5 bps to 4.64%.
Yields on UK two-year bonds were down 8.8 bps to 4.67%, with five-year yields down 8.2 bps to 4.59%, 10-year yields down 7.7 bps to 4.64% and 30-year yields down 4.9 bps to 4.40%.
The chief economic data of the day were Canadian and U.S. trade figures, which were released simultaneously at 8:30 a.m. EDT and sent the loonie higher.
The Canadian trade surplus was in line with economists' estimates at $5.8 billion in June, but traders said markets were priced for a disappointing Canadian figure.
In the U.S., the trade deficit improved in June. The Census Bureau's report said it was -$56.8 billion, compared to the -$62.0 billion balance expected by economists. It was the second smallest monthly deficit of the year.
"For the Canadian dollar it was probably more of a relief rally. A lot of people were really worried it was going to be worse than expected," said George Davis, chief FX technical analyst at RBC Capital Markets.
Strategists say the U.S. dollar may continue to slip as it consolidates its recent gains.
"We continue to believe that the EUR/USD sell-off - and the USD rebound - has come too far and too fast, with corrective price action very likely in the weeks ahead," wrote strategists from Bank of America in a client note.
The Canadian dollar was up 0.0059 to 0.9403 against the U.S. dollar (1.0633 USD/CAD) and down 0.15 to 102.78 against the yen.
The U.S. dollar was down 0.75 to 109.32 against the yen and the Dollar Index was up 0.015 to 76.140.
The euro was up 0.0011 to 1.4921 against the U.S. dollar, down 0.0075 to 1.5866 against the Canadian dollar, up 0.0066 to 0.7868 against the pound sterling and was lower by 0.99 to 163.12 against the yen.
The pound sterling was down 0.0146 to 1.8965 against the U.S. dollar and down 0.0266 to 2.0168 against the Canadian dollar.
The day ahead features U.S. advance retail sales data for July. The consensus estimate is for a 0.1% monthly decline in total sales but a 0.5% increase excluding autos.
Mark Frey, vice-president of FX trading at Custom House said weaker retail sales could provide some short term risk to the U.S. dollar.
"We could see a little retracement of the dollar -- nothing to get too excited about but a consolidation of where we have been over the last couple of days. I think the markets could be ahead of the Fed and itself. There is no question the rest of the world is still slowing and it makes it difficult to believe the Fed is going to take rates higher. Once the market realizes that expectations will come back down," he said.
All data taken at 4:35 p.m. EDT.
By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) - Markets took their cue from the embattled financial sector on Tuesday and worries continue to hurt bank and brokerage stocks and boost fixed income. The recent U.S. dollar rally stalled out against the Canadian dollar after trade balance figures were released.
Despite an overall bounce in U.S. equity markets, financial stocks remain under pressure. On Tuesday, Lehman Brothers fell to an August low. Fannie Mae and Freddie Mac fell to their lowest since July 16.
Standard and Poor's downgraded Morgan Stanley's long-term debt late on Monday and Wachovia downwardly revised its second-quarter results. JPMorgan Chase was also down after it reported a $1.5 billion loss in a regulatory filing.
Toronto's S&P/TSX composite index closed down 36 points to 13167, the Dow Jones industrial average closed down 140 points to 11642, the S&P 500 closed down 16 points to 1290 and the Nasdaq closed down 9 points to 2431.
European stock markets closed in negative territory with the Eurostoxx down 7 points to 2955, the UK FTSE 100 down 7 points to 5535 and the German DAX down 24 points to 6586.
Fixed income rallied on diminished expectations for rate hikes in the United States. Hopes were cooled by comments from Minneapolis Federal Reserve President Gary Stern (voter). He took a less hawkish tone than he did a few weeks ago, saying the Fed should be "patient" instead of pushing for immediate rate hikes.
Dallas Fed President Fisher (voter) also dampened economic optimism, saying "I expect that in the second half of this year we will broach zero growth."
Overall, strategists said the Treasury market had little to latch on to. One said flows were "anemic" and another said the Canadian market was "mired in the summer doldrums."
U.S. two-year yields were down 11.5 bps to 2.42%, with five-year yields down 11.6 bps to 3.14%, 10-year yields down 9.1 bps to 3.90% and 30-year yields down 6.6 bps to 4.54%. The Eurodollar March 09 contract was up 14.5 ticks to 97.00. The yield curve was steeper, with the 10/2-year spread up 2.6 bps to 147.72 bps.
Yields on two-year Canadian government bonds were down 1.5 bps to 2.74%, with five-year yields down 2.5 bps to 3.09%, 10-year yields down 3.2 bps to 3.60% and 30-year yields down 2.0 bps to 4.03%. The December 08 BAX contract was up 1.0 tick to 97.22.
In Germany, returns on two-year German bonds were down 5.5 bps to 4.05%, with five-year yields down 5.2 bps to 4.05%, 10-year yields down 4.3 bps to 4.23% and 30-year yields down 4.5 bps to 4.64%.
Yields on UK two-year bonds were down 8.8 bps to 4.67%, with five-year yields down 8.2 bps to 4.59%, 10-year yields down 7.7 bps to 4.64% and 30-year yields down 4.9 bps to 4.40%.
The chief economic data of the day were Canadian and U.S. trade figures, which were released simultaneously at 8:30 a.m. EDT and sent the loonie higher.
The Canadian trade surplus was in line with economists' estimates at $5.8 billion in June, but traders said markets were priced for a disappointing Canadian figure.
In the U.S., the trade deficit improved in June. The Census Bureau's report said it was -$56.8 billion, compared to the -$62.0 billion balance expected by economists. It was the second smallest monthly deficit of the year.
"For the Canadian dollar it was probably more of a relief rally. A lot of people were really worried it was going to be worse than expected," said George Davis, chief FX technical analyst at RBC Capital Markets.
Strategists say the U.S. dollar may continue to slip as it consolidates its recent gains.
"We continue to believe that the EUR/USD sell-off - and the USD rebound - has come too far and too fast, with corrective price action very likely in the weeks ahead," wrote strategists from Bank of America in a client note.
The Canadian dollar was up 0.0059 to 0.9403 against the U.S. dollar (1.0633 USD/CAD) and down 0.15 to 102.78 against the yen.
The U.S. dollar was down 0.75 to 109.32 against the yen and the Dollar Index was up 0.015 to 76.140.
The euro was up 0.0011 to 1.4921 against the U.S. dollar, down 0.0075 to 1.5866 against the Canadian dollar, up 0.0066 to 0.7868 against the pound sterling and was lower by 0.99 to 163.12 against the yen.
The pound sterling was down 0.0146 to 1.8965 against the U.S. dollar and down 0.0266 to 2.0168 against the Canadian dollar.
The day ahead features U.S. advance retail sales data for July. The consensus estimate is for a 0.1% monthly decline in total sales but a 0.5% increase excluding autos.
Mark Frey, vice-president of FX trading at Custom House said weaker retail sales could provide some short term risk to the U.S. dollar.
"We could see a little retracement of the dollar -- nothing to get too excited about but a consolidation of where we have been over the last couple of days. I think the markets could be ahead of the Fed and itself. There is no question the rest of the world is still slowing and it makes it difficult to believe the Fed is going to take rates higher. Once the market realizes that expectations will come back down," he said.
All data taken at 4:35 p.m. EDT.
By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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Tuesday, August 12, 2008
U.S. Trade Gap Unexpectedly Narrows to $56.8 Billion
By Courtney Schlisserman
Aug. 12 (Bloomberg) -- The U.S. trade deficit unexpectedly narrowed in June as the biggest jump in exports in more than four years overcame record imports of petroleum.
The gap shrank 4.1 percent to $56.8 billion from a revised $59.2 billion in May that was smaller than previously estimated, the Commerce Department said today in Washington.
The increase in demand from overseas signals manufacturers like Caterpillar Inc. may be better able to withstand a slump in U.S. sales and an increase in oil prices. Slowing demand for imported goods excluding petroleum means trade will keep helping the economy after making its biggest contribution to growth in 28 years last quarter.
``This is decidedly good news for the U.S. economy,'' said David Resler, chief U.S. economist at Nomura Securities International Inc. in New York, in an interview with Bloomberg Radio. ``It shows that the U.S. economy is still deriving considerable strength from foreign trade,'' with gross domestic product in the second quarter probably growing ``well north of 2 percent.''
Economists had forecast the gap would widen to $62 billion from an initially reported $59.8 billion in May, according to the median of 71 estimates in a Bloomberg News survey. Projections of the deficit ranged from $58 billion to $65.7 billion.
A weaker dollar has helped stoke American exports. The currency has slumped 24 percent versus the euro in the past five years. The dollar has recouped some losses in the past four weeks as the outlook for Europe's economy dimmed. It was little changed after today's figures, at $1.4941 at 8:40 a.m. in New York.
Biggest Since 2004
Exports increased 4 percent, the biggest percentage jump since February 2004, to $164.4 billion, led by record overseas sales of food, industrial supplies, capital goods and consumer goods.
Imports rose 1.8 percent to $221.2 billion after increasing 0.3 percent in May. The import figures reflected a record $44.5 billion in purchases of foreign petroleum as well as record purchases of industrial supplies from overseas and increased demand for foreign-made autos and parts.
A barrel of imported crude oil cost $117.13 in June, up from $106.28 the previous month.
Price Changes
After eliminating the influence of price changes, the trade deficit narrowed to $39.1 billion, the lowest since December 2001, from $43.5 billion in May. Those are the numbers used to calculate gross domestic product and may prompt economists and the government to increase their estimates of second-quarter growth.
Excluding the effect of prices, non-petroleum imports declined during June.
``You've got a weak economy so businesses aren't importing as much and consumers aren't buying as many goods,'' Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, said before the report.
Commerce estimated on July 31 that the narrowest trade deficit in seven years added 2.42 percentage points to growth, the most since 1980, and prevented the U.S. economy from shrinking in the second quarter. Excluding the effect of trade, the economy would have contracted at a 0.5 percent pace, instead of expanding 1.9 percent.
The trade gap with China widened to $21.4 billion from $21 billion in the prior month.
Boost Exports
Some U.S. lawmakers accuse China of keeping its currency undervalued to boost exports.
U.S. Treasury Secretary Henry Paulson, writing this month on the Web site of Foreign Affairs magazine, said yuan strengthening still has ``much further to go.'' Of the advance since a fixed-exchange rate ended in July 2005, Paulson said 70 percent has come about after he initiated semiannual economic talks with China in 2006.
The deficit with the Organization of Petroleum Exporting Countries expanded by $200 million to a record $18.1 billion.
The U.S. trade deficits with Canada, Japan and the European Union widened. The gap with Mexico shrank as exports to that country reached a record.
U.S. manufacturers have received a boost from export orders as economies overseas grew and the dollar weakened.
Caterpillar, the world's largest maker of earthmoving equipment, said July 22 that second-quarter profit climbed 34 percent, helped by demand in China and the Middle East. Developing markets this year may grow more than six times as fast as in North America, where the U.S. may find it hard ``to avoid a recession,'' Chief Executive Officer Jim Owens said in a statement.
Dollar's Rebound
As economic growth in Japan, Germany and other major trading partners weakens and the dollar rebounds, the outlook for exports has softened. The trade-weighted dollar index yesterday rose to the highest level since February.
Harvard University economist Martin Feldstein, a member of the committee that charts the American business cycles, said yesterday the U.S. dollar is cushioning the slowing in the economy and the currency has further to fall.
``Market pressures over time are going to put downward pressure on the dollar,'' Feldstein, who retired in June as president of the National Bureau of Economic Research, said in a Bloomberg Radio interview. ``A more competitive dollar has been the driving force in keeping'' gross domestic product expanding.
The Institute for Supply Management's index of new export orders for manufacturers fell to 54 last month, the lowest level this year. Fifty is the dividing line between expansion and contraction.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
Read more...
Aug. 12 (Bloomberg) -- The U.S. trade deficit unexpectedly narrowed in June as the biggest jump in exports in more than four years overcame record imports of petroleum.
The gap shrank 4.1 percent to $56.8 billion from a revised $59.2 billion in May that was smaller than previously estimated, the Commerce Department said today in Washington.
The increase in demand from overseas signals manufacturers like Caterpillar Inc. may be better able to withstand a slump in U.S. sales and an increase in oil prices. Slowing demand for imported goods excluding petroleum means trade will keep helping the economy after making its biggest contribution to growth in 28 years last quarter.
``This is decidedly good news for the U.S. economy,'' said David Resler, chief U.S. economist at Nomura Securities International Inc. in New York, in an interview with Bloomberg Radio. ``It shows that the U.S. economy is still deriving considerable strength from foreign trade,'' with gross domestic product in the second quarter probably growing ``well north of 2 percent.''
Economists had forecast the gap would widen to $62 billion from an initially reported $59.8 billion in May, according to the median of 71 estimates in a Bloomberg News survey. Projections of the deficit ranged from $58 billion to $65.7 billion.
A weaker dollar has helped stoke American exports. The currency has slumped 24 percent versus the euro in the past five years. The dollar has recouped some losses in the past four weeks as the outlook for Europe's economy dimmed. It was little changed after today's figures, at $1.4941 at 8:40 a.m. in New York.
Biggest Since 2004
Exports increased 4 percent, the biggest percentage jump since February 2004, to $164.4 billion, led by record overseas sales of food, industrial supplies, capital goods and consumer goods.
Imports rose 1.8 percent to $221.2 billion after increasing 0.3 percent in May. The import figures reflected a record $44.5 billion in purchases of foreign petroleum as well as record purchases of industrial supplies from overseas and increased demand for foreign-made autos and parts.
A barrel of imported crude oil cost $117.13 in June, up from $106.28 the previous month.
Price Changes
After eliminating the influence of price changes, the trade deficit narrowed to $39.1 billion, the lowest since December 2001, from $43.5 billion in May. Those are the numbers used to calculate gross domestic product and may prompt economists and the government to increase their estimates of second-quarter growth.
Excluding the effect of prices, non-petroleum imports declined during June.
``You've got a weak economy so businesses aren't importing as much and consumers aren't buying as many goods,'' Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, said before the report.
Commerce estimated on July 31 that the narrowest trade deficit in seven years added 2.42 percentage points to growth, the most since 1980, and prevented the U.S. economy from shrinking in the second quarter. Excluding the effect of trade, the economy would have contracted at a 0.5 percent pace, instead of expanding 1.9 percent.
The trade gap with China widened to $21.4 billion from $21 billion in the prior month.
Boost Exports
Some U.S. lawmakers accuse China of keeping its currency undervalued to boost exports.
U.S. Treasury Secretary Henry Paulson, writing this month on the Web site of Foreign Affairs magazine, said yuan strengthening still has ``much further to go.'' Of the advance since a fixed-exchange rate ended in July 2005, Paulson said 70 percent has come about after he initiated semiannual economic talks with China in 2006.
The deficit with the Organization of Petroleum Exporting Countries expanded by $200 million to a record $18.1 billion.
The U.S. trade deficits with Canada, Japan and the European Union widened. The gap with Mexico shrank as exports to that country reached a record.
U.S. manufacturers have received a boost from export orders as economies overseas grew and the dollar weakened.
Caterpillar, the world's largest maker of earthmoving equipment, said July 22 that second-quarter profit climbed 34 percent, helped by demand in China and the Middle East. Developing markets this year may grow more than six times as fast as in North America, where the U.S. may find it hard ``to avoid a recession,'' Chief Executive Officer Jim Owens said in a statement.
Dollar's Rebound
As economic growth in Japan, Germany and other major trading partners weakens and the dollar rebounds, the outlook for exports has softened. The trade-weighted dollar index yesterday rose to the highest level since February.
Harvard University economist Martin Feldstein, a member of the committee that charts the American business cycles, said yesterday the U.S. dollar is cushioning the slowing in the economy and the currency has further to fall.
``Market pressures over time are going to put downward pressure on the dollar,'' Feldstein, who retired in June as president of the National Bureau of Economic Research, said in a Bloomberg Radio interview. ``A more competitive dollar has been the driving force in keeping'' gross domestic product expanding.
The Institute for Supply Management's index of new export orders for manufacturers fell to 54 last month, the lowest level this year. Fifty is the dividing line between expansion and contraction.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
Read more...
BP Waits for BTC Link to Cool, Stops More Azeri Oil
By Eduard Gismatullin
Aug. 12 (Bloomberg) -- BP Plc is waiting for an oil pipeline in eastern Turkey to cool before it can assess the damage after an explosion last week and has shut oil and gas pipelines across Georgia on security concerns.
BP, partners and Botas International Ltd., a Turkish operating company, can't assess how long repairs will take before examining the BTC pipeline. BP shut down other oil and gas links through Georgia because of precautionary measures and is investigating reports of possible bombings and damage.
Damage assessments in Turkey ``will probably start over the next day or two,'' Murat Lecompte, external affairs director for pipeline operator BTC Co., said in a telephone interview. ``How long the assessment will take we don't know yet.''
The fire was put out yesterday on the pipe, which links Azerbaijan through Georgia with the Turkish port of Ceyhan. The fire broke out on Aug. 5 after a blast in the Erzincan province for which the Kurdistan Workers' Party, or PKK, has claimed responsibility. The 1,768-kilometer (1,100-mile) link contains 10 million barrels of oil at any one time and cost $3.9 billion.
Russian President Dmitry Medvedev today ordered a halt to Russia's offensive in Georgia after six days of fighting in the region of South Ossetia and Abkhazia.
Halted Pipelines
BP and partners stopped pumping crude into the Baku-Supsa pipeline from Azerbaijan to the Georgian Black Sea coast because of ``precautionary measures,'' in the Caucasus, BP spokesman Robert Wine said today.
The Baku-Supsa pipeline was restarted last week after 19 months of repairs. The companies had been filling the link with crude. No tankers have been loaded in the port of Supsa, according to Garsevan Jorbenadze, a Batumi-based ship agent at TeRo Co. Ltd., who arranges for vessels to dock and load.
BP and StatoilHydro ASA also halted natural gas exports from Azerbaijan through the South Caucasus pipeline because of security concern, Toby Odone, a BP spokesman, said today.
Oil is only being transported through the Baku-Novorossiysk link to the Russian Black Sea coast and in rail cars across Georgia to the Black Sea ports, Odone said.
Attack Report
Russian warplanes attacked a section of the BTC pipeline in Georgia today, according to Kakha Lomaia, head of Georgia's National Security Council. The damage on the link near the town of Rustavi is unknown, he said by telephone from Tbilisi.
Anatoly Nogovitsyn, deputy chief of the Russian General Staff, told reporters in Moscow that it hadn't been targeted.
``We can't verify'' the bombing of the BTC pipeline, Hugh McDowell, BP's general manager for Georgia, said by phone today. ``It's being investigated, but there are many different reports and we take each one seriously.''
Georgia shut its Poti port on the Black Sea coast, Jorbenadze said by phone today. Oil is arriving at the Batumi and Supsa terminals by rail from Azerbaijan. The port of Kulevi is operating with disruptions, he said.
``A recent escalation in military engagement between Russia and Georgia poses a threat to certain key oil and gas pipelines which transit Georgia,'' the International Energy Agency said today in a monthly report. ``Georgia's significance to global oil and gas markets is as a transit corridor.''
The Paris-based agency cut its forecast for Azerbaijan's oil production because of an explosion on the BTC pipeline.
The agency lowered its estimate for Azeri crude oil and natural gas liquid extraction by 255,000 barrels to 860,000 barrels a day in the third quarter, David Fyfe, the IEA's supply analyst, said in a telephone interview. The nation's 2008 output was cut by 55,000 barrels a day to 1.02 million barrels.
BP, StatoilHydro and other producers have cut crude production at the Azeri-Chirag-Gunashli and Shah Deniz fields in the Azeri part of the Caspian Sea.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
Read more...
Aug. 12 (Bloomberg) -- BP Plc is waiting for an oil pipeline in eastern Turkey to cool before it can assess the damage after an explosion last week and has shut oil and gas pipelines across Georgia on security concerns.
BP, partners and Botas International Ltd., a Turkish operating company, can't assess how long repairs will take before examining the BTC pipeline. BP shut down other oil and gas links through Georgia because of precautionary measures and is investigating reports of possible bombings and damage.
Damage assessments in Turkey ``will probably start over the next day or two,'' Murat Lecompte, external affairs director for pipeline operator BTC Co., said in a telephone interview. ``How long the assessment will take we don't know yet.''
The fire was put out yesterday on the pipe, which links Azerbaijan through Georgia with the Turkish port of Ceyhan. The fire broke out on Aug. 5 after a blast in the Erzincan province for which the Kurdistan Workers' Party, or PKK, has claimed responsibility. The 1,768-kilometer (1,100-mile) link contains 10 million barrels of oil at any one time and cost $3.9 billion.
Russian President Dmitry Medvedev today ordered a halt to Russia's offensive in Georgia after six days of fighting in the region of South Ossetia and Abkhazia.
Halted Pipelines
BP and partners stopped pumping crude into the Baku-Supsa pipeline from Azerbaijan to the Georgian Black Sea coast because of ``precautionary measures,'' in the Caucasus, BP spokesman Robert Wine said today.
The Baku-Supsa pipeline was restarted last week after 19 months of repairs. The companies had been filling the link with crude. No tankers have been loaded in the port of Supsa, according to Garsevan Jorbenadze, a Batumi-based ship agent at TeRo Co. Ltd., who arranges for vessels to dock and load.
BP and StatoilHydro ASA also halted natural gas exports from Azerbaijan through the South Caucasus pipeline because of security concern, Toby Odone, a BP spokesman, said today.
Oil is only being transported through the Baku-Novorossiysk link to the Russian Black Sea coast and in rail cars across Georgia to the Black Sea ports, Odone said.
Attack Report
Russian warplanes attacked a section of the BTC pipeline in Georgia today, according to Kakha Lomaia, head of Georgia's National Security Council. The damage on the link near the town of Rustavi is unknown, he said by telephone from Tbilisi.
Anatoly Nogovitsyn, deputy chief of the Russian General Staff, told reporters in Moscow that it hadn't been targeted.
``We can't verify'' the bombing of the BTC pipeline, Hugh McDowell, BP's general manager for Georgia, said by phone today. ``It's being investigated, but there are many different reports and we take each one seriously.''
Georgia shut its Poti port on the Black Sea coast, Jorbenadze said by phone today. Oil is arriving at the Batumi and Supsa terminals by rail from Azerbaijan. The port of Kulevi is operating with disruptions, he said.
``A recent escalation in military engagement between Russia and Georgia poses a threat to certain key oil and gas pipelines which transit Georgia,'' the International Energy Agency said today in a monthly report. ``Georgia's significance to global oil and gas markets is as a transit corridor.''
The Paris-based agency cut its forecast for Azerbaijan's oil production because of an explosion on the BTC pipeline.
The agency lowered its estimate for Azeri crude oil and natural gas liquid extraction by 255,000 barrels to 860,000 barrels a day in the third quarter, David Fyfe, the IEA's supply analyst, said in a telephone interview. The nation's 2008 output was cut by 55,000 barrels a day to 1.02 million barrels.
BP, StatoilHydro and other producers have cut crude production at the Azeri-Chirag-Gunashli and Shah Deniz fields in the Azeri part of the Caspian Sea.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
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