By Tim Culpan
Aug. 14 (Bloomberg) -- Solar energy equipment makers Sino- American Silicon Products Inc. and Gintech Energy Corp. climbed to six-week highs in Taipei trading after a report that Taiwan's Premier will visit the chairmen of the two companies.
Sino-American added 2.8 percent to NT$150, its highest since June 26, and Gintech climbed 2.7 percent to NT$231 as of 9:34 a.m. in Taipei, compared with a 0.1 percent decline in the benchmark Taiex index.
Premier Liu Chao-shiuan will meet with solar energy producers Gintech and Sino-American tomorrow as part of efforts by the government to promote a renewable energy bill, the Economic Daily News reported, citing an unidentified cabinet official. The bill will set guidelines for pricing of power from alternative sources, the newspaper said.
Gintech, based in Taipei, is Taiwan's second-largest maker of solar cells, while Sino-American produces silicon wafers used in cell manufacturing.
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.
Read more...
Thursday, August 14, 2008
Formosa Forecasts 2010 Recovery, Daily News Reports
By Yu-huay Sun
(Corrects company name in third paragraph.)
Aug. 14 (Bloomberg) -- The global petrochemical industry may start to recover in 2010, a year earlier than previous projections, the Economic Daily News reported, citing Formosa Plastics Corp. Chairman Lee Chih-tsuen.
Competition may force older plants out of business, reducing supply, the Taipei-based, Chinese-language newspaper quoted Lee as saying.
Formosa Plastics is the world's second-largest maker of polyvinyl chloride, or PVC, used in construction and consumer goods such as handbags. Lee said in June petrochemical companies' earnings will be eroded by competition from China and the Middle East next year and 2010.
To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net
Read more...
(Corrects company name in third paragraph.)
Aug. 14 (Bloomberg) -- The global petrochemical industry may start to recover in 2010, a year earlier than previous projections, the Economic Daily News reported, citing Formosa Plastics Corp. Chairman Lee Chih-tsuen.
Competition may force older plants out of business, reducing supply, the Taipei-based, Chinese-language newspaper quoted Lee as saying.
Formosa Plastics is the world's second-largest maker of polyvinyl chloride, or PVC, used in construction and consumer goods such as handbags. Lee said in June petrochemical companies' earnings will be eroded by competition from China and the Middle East next year and 2010.
To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net
Read more...
Shenhua Group Wins Approval to Build China Coal Mine
By Wang Ying
Aug. 14 (Bloomberg) -- Shenhua Group Corp., China's largest coal producer, won government approval to develop a northern coal mine with annual capacity of 10 million metric tons as the nation seeks to bolster output of the fuel.
Hong Kong-listed China Shenhua Energy Co.'s parent has proven about 3 billion tons of coal reserves at the Tarangaole mine in Inner Mongolia, the State-owned Assets Supervision and Administration Commission said in a statement on its Web site today. The project was approved by the National Development and Reform Commission, it said.
``The coal's quality is good, with low sulfur, low phosphorus and high calorific value,'' the Beijing-based commission said in the statement. The mine has an estimated lifespan of more than 95 years, it said.
The country mothballed almost 3 percent of its coal-fired generating capacity as of July 25 because of shortages of the fuel, the State Grid Corp. of China said. The nation will increase production at large mines to improve supplies in the second half of this year, Wang Dexue, vice minister of the State Administration of Work Safety, said Aug. 9.
To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net.
Read more...
Aug. 14 (Bloomberg) -- Shenhua Group Corp., China's largest coal producer, won government approval to develop a northern coal mine with annual capacity of 10 million metric tons as the nation seeks to bolster output of the fuel.
Hong Kong-listed China Shenhua Energy Co.'s parent has proven about 3 billion tons of coal reserves at the Tarangaole mine in Inner Mongolia, the State-owned Assets Supervision and Administration Commission said in a statement on its Web site today. The project was approved by the National Development and Reform Commission, it said.
``The coal's quality is good, with low sulfur, low phosphorus and high calorific value,'' the Beijing-based commission said in the statement. The mine has an estimated lifespan of more than 95 years, it said.
The country mothballed almost 3 percent of its coal-fired generating capacity as of July 25 because of shortages of the fuel, the State Grid Corp. of China said. The nation will increase production at large mines to improve supplies in the second half of this year, Wang Dexue, vice minister of the State Administration of Work Safety, said Aug. 9.
To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net.
Read more...
Credit-Crunch Villains Should Own Up, Do Penance: Mark Gilbert
Commentary by Mark Gilbert
Aug. 14 (Bloomberg) -- Psychiatry suggests that people hit by catastrophe begin in denial, become angry, then try to bargain their way out of the dilemma, then get depressed, before finally accepting their misfortune and resuming their lives. One year on, the villains of the credit crunch haven't moved past denial.
In the current edition of the Economist, there's a 2,000- word article by an unidentified risk manager at what the weekly magazine calls a ``large global bank.''
Even though the author is shielded by anonymity, he -- I'll bet you beer for a month that a woman didn't write it -- refuses to take any blame for acquiescing in the hubris that brought the finance industry's most munificent decade to a shuddering, writedown-ridden halt.
I thought risk managers existed to manage risk, acting as a bank's conscience and preventing runaway traders from betting the ranch on dubious intuitions and misinterpreted spreadsheets. How quaint! ``Rubber stamper'' is a more accurate job description.
``Often in meetings, our gut reactions as risk managers were negative,'' the risk manager writes. ``But it was difficult to come up with hard-and-fast arguments for why you should decline a transaction, especially when you were sitting opposite a team that had worked for weeks on a proposal, which you had received an hour before the meeting started.''
Bean Counting
I had to read that final sentence twice. How on God's green Earth could even the most experienced credit officer be expected to judge the merits of a complex transaction in just 60 minutes? Clearly, the risk department should have demanded more time to decide whether the six beans of profit claimed by the traders were in fact generated by multiplying two beans of revenue by eight beans of risk.
Basic mathematical skills also seem to have been missing in action at the large global bank.
``We had not paid enough attention to the ever-growing mountain of highly rated but potentially illiquid assets,'' the article says. ``We had not fully appreciated that 20 percent of a very large number can inflict far greater losses than 80 percent of a small number.''
Letting traders build piles of complicated debt with insufficient scrutiny is a recipe for creating a bank balance sheet that is opaque, unfathomable and downright dangerous -- which is exactly what has happened. Writedowns around the world have now surpassed $500 billion.
Just Say No
``A banking specialist Ph.D. who has spent 20 years at Bank College studying nothing but banks, and whose every waking second is committed to understanding banks, would struggle to conduct due diligence upon banks consistent with making an informed assessment of the risks they hold and the risk they represent,'' says Tim Price, director of investments at PFP Wealth Management in London.
The Economist's guest writer, however, blames the people who came up with the bonus-boosting transactions, rather than the supine overseers who chose to look the other way. It turns out that the risk manager was just a guy who can't say no.
``Most of the time the business line would simply not take no for an answer, especially if the profits were big enough,'' the author writes. ``This made it hard to discourage transactions. If a risk manager said no, he was immediately on a collision course with the business line. The risk thinking therefore leaned toward giving the benefit of the doubt to the risk-takers.''
Asleep at Stopcock
So THAT'S how the world's investment banks found themselves up to their necks in toxic debt; the guys who were supposed to keep the sewers from backing up were asleep at the stopcocks! What possible purpose is served by a risk department with a light that never switches to red from green?
The most amazing revelation in the risk manager's testimony is his disclosure that the guardians of financial stability all heard a clanging alarm bell more than two years before the credit crunch began -- and decided to ignore it.
Most asset-backed debt had links to the creditworthiness of U.S. automakers, because those companies had sold so many bonds. So General Motors Corp.'s loss of its investment-grade rating in May 2005 triggered a dislocation in the structured-credit markets, though not the one the credit analysts anticipated.
``The reverse happened of what we had expected; AAA tranches went down in price and non-investment-grade tranches went up, resulting in losses as we marked the positions to market,'' the risk manager writes. ``This was entirely counterintuitive.''
Tarred and Feathered
You might expect that such a nasty shock might prompt increased vigilance and skepticism about the financial models used to measure risk. You'd be wrong. If the unraveling of those automaker-related trades counts as the first black swan of the credit crunch, it is clear that risk managers decided that someone must have tarred that cygnet's feathers.
``We had failed to draw the correct conclusions,'' the risk manager says. ``We should have insisted that all structured tranches, not just the non-investment-grade ones, be sold. But we did not believe that prices on AAA assets could fall by more than about 1 percent. A 20 percent drop on assets with virtually no default risk seemed inconceivable, though this did eventually occur.''
Until the custodians of finance move beyond the denial stage, recovery is impossible. Unfortunately, the article by the unidentified risk manager suggests that is a forlorn hope -- making an overdue apology from the architects of this financial mess even less likely.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
Read more...
Aug. 14 (Bloomberg) -- Psychiatry suggests that people hit by catastrophe begin in denial, become angry, then try to bargain their way out of the dilemma, then get depressed, before finally accepting their misfortune and resuming their lives. One year on, the villains of the credit crunch haven't moved past denial.
In the current edition of the Economist, there's a 2,000- word article by an unidentified risk manager at what the weekly magazine calls a ``large global bank.''
Even though the author is shielded by anonymity, he -- I'll bet you beer for a month that a woman didn't write it -- refuses to take any blame for acquiescing in the hubris that brought the finance industry's most munificent decade to a shuddering, writedown-ridden halt.
I thought risk managers existed to manage risk, acting as a bank's conscience and preventing runaway traders from betting the ranch on dubious intuitions and misinterpreted spreadsheets. How quaint! ``Rubber stamper'' is a more accurate job description.
``Often in meetings, our gut reactions as risk managers were negative,'' the risk manager writes. ``But it was difficult to come up with hard-and-fast arguments for why you should decline a transaction, especially when you were sitting opposite a team that had worked for weeks on a proposal, which you had received an hour before the meeting started.''
Bean Counting
I had to read that final sentence twice. How on God's green Earth could even the most experienced credit officer be expected to judge the merits of a complex transaction in just 60 minutes? Clearly, the risk department should have demanded more time to decide whether the six beans of profit claimed by the traders were in fact generated by multiplying two beans of revenue by eight beans of risk.
Basic mathematical skills also seem to have been missing in action at the large global bank.
``We had not paid enough attention to the ever-growing mountain of highly rated but potentially illiquid assets,'' the article says. ``We had not fully appreciated that 20 percent of a very large number can inflict far greater losses than 80 percent of a small number.''
Letting traders build piles of complicated debt with insufficient scrutiny is a recipe for creating a bank balance sheet that is opaque, unfathomable and downright dangerous -- which is exactly what has happened. Writedowns around the world have now surpassed $500 billion.
Just Say No
``A banking specialist Ph.D. who has spent 20 years at Bank College studying nothing but banks, and whose every waking second is committed to understanding banks, would struggle to conduct due diligence upon banks consistent with making an informed assessment of the risks they hold and the risk they represent,'' says Tim Price, director of investments at PFP Wealth Management in London.
The Economist's guest writer, however, blames the people who came up with the bonus-boosting transactions, rather than the supine overseers who chose to look the other way. It turns out that the risk manager was just a guy who can't say no.
``Most of the time the business line would simply not take no for an answer, especially if the profits were big enough,'' the author writes. ``This made it hard to discourage transactions. If a risk manager said no, he was immediately on a collision course with the business line. The risk thinking therefore leaned toward giving the benefit of the doubt to the risk-takers.''
Asleep at Stopcock
So THAT'S how the world's investment banks found themselves up to their necks in toxic debt; the guys who were supposed to keep the sewers from backing up were asleep at the stopcocks! What possible purpose is served by a risk department with a light that never switches to red from green?
The most amazing revelation in the risk manager's testimony is his disclosure that the guardians of financial stability all heard a clanging alarm bell more than two years before the credit crunch began -- and decided to ignore it.
Most asset-backed debt had links to the creditworthiness of U.S. automakers, because those companies had sold so many bonds. So General Motors Corp.'s loss of its investment-grade rating in May 2005 triggered a dislocation in the structured-credit markets, though not the one the credit analysts anticipated.
``The reverse happened of what we had expected; AAA tranches went down in price and non-investment-grade tranches went up, resulting in losses as we marked the positions to market,'' the risk manager writes. ``This was entirely counterintuitive.''
Tarred and Feathered
You might expect that such a nasty shock might prompt increased vigilance and skepticism about the financial models used to measure risk. You'd be wrong. If the unraveling of those automaker-related trades counts as the first black swan of the credit crunch, it is clear that risk managers decided that someone must have tarred that cygnet's feathers.
``We had failed to draw the correct conclusions,'' the risk manager says. ``We should have insisted that all structured tranches, not just the non-investment-grade ones, be sold. But we did not believe that prices on AAA assets could fall by more than about 1 percent. A 20 percent drop on assets with virtually no default risk seemed inconceivable, though this did eventually occur.''
Until the custodians of finance move beyond the denial stage, recovery is impossible. Unfortunately, the article by the unidentified risk manager suggests that is a forlorn hope -- making an overdue apology from the architects of this financial mess even less likely.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
Read more...
Forex and Dow Jones Recommended Levels
Daily Forex Technicals | Written by FXtechtrade | Aug 14 08 03:08 GMT |
EUR/USD
Today's support: - 1.4850, 1.4827 and 1.4805 (main), where correction is possible. Break would give 1.4781, where correction also may be. Then follows 1.4787. Break of the latter would result in 1.4738. If a strong impulse, we would see 1.4716. Continuation will give 1.4698 and 1.4683.
Today's resistance: - 1.4963(main). Break would give 1.4987, where a correction is possible. Then goes 1.5012. Break of the latter would result in 1.5022. If a strong impulse, we'd see 1.5044. Continuation will give 1.5064.
USD/JPY
Today's support: - 109.06, 108.84, 108.50 and 108.33(main). Break would bring 108.11, where correction is possible. Then 107.96. If a strong impulse, we would see 107.78. Continuation would give 107.54 and 107.28.
Today's resistance: - 109.58, 109.72 and 109.94(main), where a correction may happen. Break would bring 110.22, where also a correction may be. Then 110.48. If a strong impulse, we would see 110.70. Continuation will give 110.93.
DOW JONES INDEX
Today's support: - 11 473.21 and 11 430.00(main), where a delay and correction may happen. Break of the latter will give 11 393.44, where correction also can be. Then follows 11 351.28. Be there a strong impulse, we would see 11 337.19. Continuation will bring 11 311.80 and 11 293.58.
Today's resistance: - 11 593.13, 11 621.25, 11 666.30 and 11 697.87(main), where a delay and correction may happen. Break would bring 11 723.20, where a correction may happen. Then follows 11 754.84, where a delay and correction could also be. Be there a strong impulse, we'd see 11 773.13. Continuation would bring 11 792.80.
FXtechtrade
http://www.fxtechtrade.com
Disclaimer: Any information presented by Nikolajs Serikovs at this very website should be in no way understood as an offer, promise or guarantee for receiving a profit or avoiding the losses. Stated here levels of support and resistance must not be construed as an investment advice or endorsement for any financial instrument. There exists no guarantee that the market would behave in accordance with the information stated here Prepared in Republic of Latvia for the worldwide distribution.
Read more...
EUR/USD
Today's support: - 1.4850, 1.4827 and 1.4805 (main), where correction is possible. Break would give 1.4781, where correction also may be. Then follows 1.4787. Break of the latter would result in 1.4738. If a strong impulse, we would see 1.4716. Continuation will give 1.4698 and 1.4683.
Today's resistance: - 1.4963(main). Break would give 1.4987, where a correction is possible. Then goes 1.5012. Break of the latter would result in 1.5022. If a strong impulse, we'd see 1.5044. Continuation will give 1.5064.
USD/JPY
Today's support: - 109.06, 108.84, 108.50 and 108.33(main). Break would bring 108.11, where correction is possible. Then 107.96. If a strong impulse, we would see 107.78. Continuation would give 107.54 and 107.28.
Today's resistance: - 109.58, 109.72 and 109.94(main), where a correction may happen. Break would bring 110.22, where also a correction may be. Then 110.48. If a strong impulse, we would see 110.70. Continuation will give 110.93.
DOW JONES INDEX
Today's support: - 11 473.21 and 11 430.00(main), where a delay and correction may happen. Break of the latter will give 11 393.44, where correction also can be. Then follows 11 351.28. Be there a strong impulse, we would see 11 337.19. Continuation will bring 11 311.80 and 11 293.58.
Today's resistance: - 11 593.13, 11 621.25, 11 666.30 and 11 697.87(main), where a delay and correction may happen. Break would bring 11 723.20, where a correction may happen. Then follows 11 754.84, where a delay and correction could also be. Be there a strong impulse, we'd see 11 773.13. Continuation would bring 11 792.80.
FXtechtrade
http://www.fxtechtrade.com
Disclaimer: Any information presented by Nikolajs Serikovs at this very website should be in no way understood as an offer, promise or guarantee for receiving a profit or avoiding the losses. Stated here levels of support and resistance must not be construed as an investment advice or endorsement for any financial instrument. There exists no guarantee that the market would behave in accordance with the information stated here Prepared in Republic of Latvia for the worldwide distribution.
Read more...
China Increases Energy Output to Meet Olympics Demand
By Winnie Zhu
Aug. 14 (Bloomberg) -- China increased energy production last month to ensure supplies during the Olympics Games in Beijing, which last until Aug. 24.
Crude oil production rose by 5 percent, the quickest pace this year, to 16.17 million metric tons, or about 3.8 million barrels a day, the National Bureau of Statistics in Beijing said in an e-mailed statement today. Production fell just short of the record 16.18 million tons pumped in May.
Coal production rose 11 percent to 220 million tons, second only to the record of 239 million tons mined in June. Electricity generation gained 8 percent to a record 319.5 billion kilowatt-hours.
Chinese refiners have been boosting oil processing to increase fuel supplies for the Games. The 15 biggest oil refineries raised their operating rates to 88.9 percent last month from 82.4 percent in June, the China Petroleum and Chemical Industry Association said this week.
Crude oil processing climbed to a record 29.6 million tons, or 7.2 million barrels a day, in June, government figures show.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net
Read more...
Aug. 14 (Bloomberg) -- China increased energy production last month to ensure supplies during the Olympics Games in Beijing, which last until Aug. 24.
Crude oil production rose by 5 percent, the quickest pace this year, to 16.17 million metric tons, or about 3.8 million barrels a day, the National Bureau of Statistics in Beijing said in an e-mailed statement today. Production fell just short of the record 16.18 million tons pumped in May.
Coal production rose 11 percent to 220 million tons, second only to the record of 239 million tons mined in June. Electricity generation gained 8 percent to a record 319.5 billion kilowatt-hours.
Chinese refiners have been boosting oil processing to increase fuel supplies for the Games. The 15 biggest oil refineries raised their operating rates to 88.9 percent last month from 82.4 percent in June, the China Petroleum and Chemical Industry Association said this week.
Crude oil processing climbed to a record 29.6 million tons, or 7.2 million barrels a day, in June, government figures show.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net
Read more...
Korea's Won Advances on Intervention Speculation; Bonds Decline
By Kim Kyoungwha and Judy Chen
Aug. 14 (Bloomberg) -- South Korea's won rose, ending a five-day loss, on speculation the central bank will buy the currency to help quell inflation. Bonds fell.
The won gained after approaching 1,040 to the dollar for the first time since July 7, a level that may prompt the Bank of Korea to act, said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. Rising oil and food costs pushed up consumer prices 5.9 percent in July from a year earlier, the biggest gain since November 1998.
``Traders are on high alert against any intervention,'' Lee said. ``Demand for the dollar is still strong from importers and foreign stock sales.''
The currency climbed to 1,037.70 versus the dollar as of 10:11 a.m. in Seoul, compared with 1,039.40 yesterday, according to Seoul Money Brokerage Services Ltd. The won will move between 1,036 and 1,040 today, Lee forecast.
Korean policy makers pledged this week to take action in the market to curb ``undesirable'' one-sided moves in the won and limit the cost of imports.
Central banks intervene in the currency market by arranging sales or purchases of foreign exchange.
Government bonds fell for a fourth day after rising crude oil prices stoked concerns that inflation will accelerate.
``The market may have not fully priced in what will happen in terms of monetary policy,'' said Kong Dong Rak, a fixed- income strategist with Hana Daetoo Securities Co. in Seoul. ``The absolute level of yields is seen low given the lingering risk of higher rates.''
Bonds Decline
Central bank Governor Lee Seong Tae and his colleagues last week unexpectedly raised the nation's benchmark interest rate, saying rising prices posed a greater threat than slowing economic growth. The seven-day repurchase rate was increased by a quarter-percentage point to an eight-year high of 5.25 percent. The bank next meets on Sept. 11.
The yield on the 5.25 percent note due March 2013 rose 3 basis points to about 5.84 percent, according to Korea Securities Dealers Association. A basis point is 0.01 percentage point.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net
Read more...
Aug. 14 (Bloomberg) -- South Korea's won rose, ending a five-day loss, on speculation the central bank will buy the currency to help quell inflation. Bonds fell.
The won gained after approaching 1,040 to the dollar for the first time since July 7, a level that may prompt the Bank of Korea to act, said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. Rising oil and food costs pushed up consumer prices 5.9 percent in July from a year earlier, the biggest gain since November 1998.
``Traders are on high alert against any intervention,'' Lee said. ``Demand for the dollar is still strong from importers and foreign stock sales.''
The currency climbed to 1,037.70 versus the dollar as of 10:11 a.m. in Seoul, compared with 1,039.40 yesterday, according to Seoul Money Brokerage Services Ltd. The won will move between 1,036 and 1,040 today, Lee forecast.
Korean policy makers pledged this week to take action in the market to curb ``undesirable'' one-sided moves in the won and limit the cost of imports.
Central banks intervene in the currency market by arranging sales or purchases of foreign exchange.
Government bonds fell for a fourth day after rising crude oil prices stoked concerns that inflation will accelerate.
``The market may have not fully priced in what will happen in terms of monetary policy,'' said Kong Dong Rak, a fixed- income strategist with Hana Daetoo Securities Co. in Seoul. ``The absolute level of yields is seen low given the lingering risk of higher rates.''
Bonds Decline
Central bank Governor Lee Seong Tae and his colleagues last week unexpectedly raised the nation's benchmark interest rate, saying rising prices posed a greater threat than slowing economic growth. The seven-day repurchase rate was increased by a quarter-percentage point to an eight-year high of 5.25 percent. The bank next meets on Sept. 11.
The yield on the 5.25 percent note due March 2013 rose 3 basis points to about 5.84 percent, according to Korea Securities Dealers Association. A basis point is 0.01 percentage point.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net
Read more...
Japan Service Demand Falls, Reflecting Weak Spending
By Toru Fujioka and Keiko Ujikane
Aug. 14 (Bloomberg) -- Japan's demand for services fell the most in four months in June as higher energy and food costs discouraged spending in the world's second-largest economy.
The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, decreased 0.8 percent from May, the Trade Ministry said today in Tokyo. The median estimate of 33 economists surveyed by Bloomberg News was for a 0.3 percent drop.
A drop in spending by consumers, whose sentiment is at the lowest level in at least 26 years, contributed to the economy's contraction last quarter. Economists say that Japan may slip into its first recession since 2001 this year as households cut back just as a weakening global economy hurts exporters.
``It's becoming more apparent that price increases are making consumers spend less,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. ``Consumer spending will probably stay weak in the months ahead. Chances for a recession are increasing.''
Gross domestic product contracted an annualized 2.4 percent last quarter, the Cabinet Office said yesterday. The government last week described the economy as ``weakening,'' language it hadn't used in seven years.
``Rising prices for daily necessities are stopping consumers from spending,'' Tadashi Okamura, chairman of the Japanese Chamber of Commerce, said yesterday.
Cutting Spending
The price of frequently purchased goods rose 4.2 percent in June, when wages dropped for the first time this year. Households cut spending for a fourth month after the jobless rate rose to the highest since September 2006.
``Demand for services is weakening because of rising food and gasoline prices,'' said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. ``We can't count on consumer spending to help the waning economy.''
Sluggish consumer spending and higher prices are prompting some companies to reconsider plans for expansion.
Morinaga & Co., a Tokyo-based confectioner, postponed this year's construction of a plant in Gunma Prefecture because of rising oil prices and weak consumer spending, according to Rika Baba, a company spokeswoman. Profits fell 67.2 percent in the three months ended in June, the company reported this month.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
Read more...
Aug. 14 (Bloomberg) -- Japan's demand for services fell the most in four months in June as higher energy and food costs discouraged spending in the world's second-largest economy.
The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, decreased 0.8 percent from May, the Trade Ministry said today in Tokyo. The median estimate of 33 economists surveyed by Bloomberg News was for a 0.3 percent drop.
A drop in spending by consumers, whose sentiment is at the lowest level in at least 26 years, contributed to the economy's contraction last quarter. Economists say that Japan may slip into its first recession since 2001 this year as households cut back just as a weakening global economy hurts exporters.
``It's becoming more apparent that price increases are making consumers spend less,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. ``Consumer spending will probably stay weak in the months ahead. Chances for a recession are increasing.''
Gross domestic product contracted an annualized 2.4 percent last quarter, the Cabinet Office said yesterday. The government last week described the economy as ``weakening,'' language it hadn't used in seven years.
``Rising prices for daily necessities are stopping consumers from spending,'' Tadashi Okamura, chairman of the Japanese Chamber of Commerce, said yesterday.
Cutting Spending
The price of frequently purchased goods rose 4.2 percent in June, when wages dropped for the first time this year. Households cut spending for a fourth month after the jobless rate rose to the highest since September 2006.
``Demand for services is weakening because of rising food and gasoline prices,'' said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. ``We can't count on consumer spending to help the waning economy.''
Sluggish consumer spending and higher prices are prompting some companies to reconsider plans for expansion.
Morinaga & Co., a Tokyo-based confectioner, postponed this year's construction of a plant in Gunma Prefecture because of rising oil prices and weak consumer spending, according to Rika Baba, a company spokeswoman. Profits fell 67.2 percent in the three months ended in June, the company reported this month.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
Read more...
Euro Falls Before Report Forecast to Show Economy Contracted
By Stanley White
Aug. 14 (Bloomberg) -- The euro fell against the yen before a regional report forecast to show Europe's economy contracted in the second quarter.
The currency also declined against the U.S. dollar for a second day as signs of slowing economic growth may prompt traders to reduce bets on higher interest rates in the 15 countries that share the euro. Australia's dollar was little changed, halting a 12-day losing streak, as prices of the commodities the country exports such as gold increased.
``The euro's weak trend is unlikely to change,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``Europe's economy is facing so many difficulties that I can't be optimistic on the outlook for the currency.''
The euro declined to 162.84 yen at 10:27 a.m. in Tokyo from 163.43 late yesterday, when it reached a three-month low of 161.40. The euro was at $1.4876 from $1.4919. It fell to a 5 1/2-month low of $1.4816 on Aug. 12. The dollar bought 109.47 yen from 109.53.
The Australian dollar traded at 86.88 U.S. cents from 86.84 cents in late Asian trading yesterday, when it touched 85.93, the lowest since January. It rose to 95.08 yen from 94.60 as the UBS Bloomberg Constant Maturity Commodity Index gained 2.9 percent, climbing for the first time in four days. Gold, the nation's third most-valuable raw material export, increased for the first time this month.
The currency pared gains after Reserve Bank of Australia Deputy Governor Ric Battellino told lawmakers the central bank cannot wait for inflation to fall before it starts lowering interest rates from a 12-year high of 7.25 percent.
European Economy
Europe's economy shrank 0.2 percent in the second quarter, after 0.7 percent growth in the first, according to the median forecast of 40 economists surveyed by Bloomberg News. The European Union's statistics office in Luxembourg will release the data today. Germany's economy, the largest in the region, probably shrank the most since 1993, a separate survey shows.
Traders have reduced bets the European Central Bank will raise interest rates a second time this year on mounting evidence the slowdown sparked by the collapse of the U.S. housing market is spreading to the region.
The implied yield on the December Euribor futures contract is 4.95 percent, compared with 5.04 percent at the end of July.
Treasury Redemption
The yen may rise against the dollar on speculation Japanese investors will repatriate some earnings on investments in U.S. Treasuries.
The U.S. will pay $38.8 billion in principal and coupons on government debt tomorrow. Japan is the largest foreign owner of Treasuries, according to U.S. government data.
Japanese investors sold 461.3 billion yen ($4.3 billion) in overseas bonds and notes on a net basis last week, the second week of net sales and the most since the week ended April 18, the Finance Ministry said earlier today in Tokyo.
``There's a great chance that the yen will appreciate,'' said Akira Takei, the general manager in Tokyo for international bonds at Mizuho Asset Management Co., which oversees the equivalent of $37.3 billion. ``People want to avoid risks. Repatriation will play some part in yen strength as there is some comfort in holding funds in your own currency.''
Oil Prices
Any gains in the dollar may be limited by speculation a rebound in oil prices will discourage consumer spending in the world's largest user of the fuel. The U.S. dollar has risen 6.7 percent against the euro in the past month as the price of oil slumped more than 20 percent from a record.
Crude oil for September delivery rose 76 cents to $116.76 a barrel after a U.S. Energy Department report showed a bigger- than-forecast decline in inventories of gasoline.
``The resurgence of oil prices is causing the market to second-guess if the rebound of the U.S. dollar is temporary in nature,'' said Firas Askari, head currency trader at BMO Capital Markets in Toronto.
Sales at U.S. retailers dropped in July for the first time in five months, the Commerce Department said yesterday in Washington, as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net
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Aug. 14 (Bloomberg) -- The euro fell against the yen before a regional report forecast to show Europe's economy contracted in the second quarter.
The currency also declined against the U.S. dollar for a second day as signs of slowing economic growth may prompt traders to reduce bets on higher interest rates in the 15 countries that share the euro. Australia's dollar was little changed, halting a 12-day losing streak, as prices of the commodities the country exports such as gold increased.
``The euro's weak trend is unlikely to change,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``Europe's economy is facing so many difficulties that I can't be optimistic on the outlook for the currency.''
The euro declined to 162.84 yen at 10:27 a.m. in Tokyo from 163.43 late yesterday, when it reached a three-month low of 161.40. The euro was at $1.4876 from $1.4919. It fell to a 5 1/2-month low of $1.4816 on Aug. 12. The dollar bought 109.47 yen from 109.53.
The Australian dollar traded at 86.88 U.S. cents from 86.84 cents in late Asian trading yesterday, when it touched 85.93, the lowest since January. It rose to 95.08 yen from 94.60 as the UBS Bloomberg Constant Maturity Commodity Index gained 2.9 percent, climbing for the first time in four days. Gold, the nation's third most-valuable raw material export, increased for the first time this month.
The currency pared gains after Reserve Bank of Australia Deputy Governor Ric Battellino told lawmakers the central bank cannot wait for inflation to fall before it starts lowering interest rates from a 12-year high of 7.25 percent.
European Economy
Europe's economy shrank 0.2 percent in the second quarter, after 0.7 percent growth in the first, according to the median forecast of 40 economists surveyed by Bloomberg News. The European Union's statistics office in Luxembourg will release the data today. Germany's economy, the largest in the region, probably shrank the most since 1993, a separate survey shows.
Traders have reduced bets the European Central Bank will raise interest rates a second time this year on mounting evidence the slowdown sparked by the collapse of the U.S. housing market is spreading to the region.
The implied yield on the December Euribor futures contract is 4.95 percent, compared with 5.04 percent at the end of July.
Treasury Redemption
The yen may rise against the dollar on speculation Japanese investors will repatriate some earnings on investments in U.S. Treasuries.
The U.S. will pay $38.8 billion in principal and coupons on government debt tomorrow. Japan is the largest foreign owner of Treasuries, according to U.S. government data.
Japanese investors sold 461.3 billion yen ($4.3 billion) in overseas bonds and notes on a net basis last week, the second week of net sales and the most since the week ended April 18, the Finance Ministry said earlier today in Tokyo.
``There's a great chance that the yen will appreciate,'' said Akira Takei, the general manager in Tokyo for international bonds at Mizuho Asset Management Co., which oversees the equivalent of $37.3 billion. ``People want to avoid risks. Repatriation will play some part in yen strength as there is some comfort in holding funds in your own currency.''
Oil Prices
Any gains in the dollar may be limited by speculation a rebound in oil prices will discourage consumer spending in the world's largest user of the fuel. The U.S. dollar has risen 6.7 percent against the euro in the past month as the price of oil slumped more than 20 percent from a record.
Crude oil for September delivery rose 76 cents to $116.76 a barrel after a U.S. Energy Department report showed a bigger- than-forecast decline in inventories of gasoline.
``The resurgence of oil prices is causing the market to second-guess if the rebound of the U.S. dollar is temporary in nature,'' said Firas Askari, head currency trader at BMO Capital Markets in Toronto.
Sales at U.S. retailers dropped in July for the first time in five months, the Commerce Department said yesterday in Washington, as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net
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Crude Oil Rises a Second Day on Lower U.S. Gasoline Supplies
By Christian Schmollinger
Aug. 14 (Bloomberg) -- Crude oil rose for a second day after a U.S. Energy Department report yesterday showed a bigger- than-forecast decline in inventories of gasoline as refiners shut units and imports fell.
Gasoline supplies dropped 6.39 million barrels to 202.8 million barrels last week, the biggest decline since October 2002 when tropical storms disrupted Gulf of Mexico output. Gold, silver and nickel also rebounded on speculation declines since July were exaggerated.
``The product numbers were weaker than expected and that pushed the prices higher,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``The oil price had come down fairly sharply over the previous few days, so there was a reaction to that.''
Crude oil for September delivery rose as much as 87 cents, or 0.8 percent, to $116.87 a barrel and was trading at $116.85 at 9:32 a.m. Singapore time on the New York Mercantile Exchange.
Yesterday, futures increased $2.99, or 2.6 percent, to settle at $116 a barrel, the biggest one-day gain since July 30. Prices are up 61 percent from a year ago.
U.S. gasoline stockpiles were forecast to drop 2.15 million barrels, according to a Bloomberg News survey. Oil prices fell 5.8 percent in the previous three days to yesterday's session.
Refineries operated at 85.9 percent of capacity, down 1.1 percentage points from the week before, the report showed. Analysts forecast a 0.5 percentage-point drop.
Petroleum-product imports fell 17 percent to 2.6 million barrels a day, the lowest since the week ended April 1, 2005, the report showed. Crude oil imports dropped 5.3 percent to 9.66 million barrels a day, the lowest since the week ended July 4.
Crude Inventories
Inventories of crude oil fell 316,000 barrels to 296.5 million, the department said. Supplies were forecast to rise 300,000 barrels, according to the median of responses by 13 analysts surveyed by Bloomberg News.
U.S. fuel demand averaged 20.2 million barrels a day during the past four weeks, down 2.8 percent from a year earlier, the department said. Gasoline consumption averaged 9.4 million barrels a day over the period, down 1.9 percent from a year ago.
Gasoline use declined 2.1 percent through July, the American Petroleum Institute said in a monthly report released yesterday. Auto sales fell to the lowest since 1993 in the month, causing U.S. retail sales to drop for the first time in five months. Consumer spending makes up more than two-thirds of the U.S. economy.
Damage Assessment
Prices of oil have slipped more than $30 from a record $147.27 on July 11 amid signs that U.S. fuel demand is falling because of record pump prices and a slowing economy.
U.S. motorists drove less in June for an eighth consecutive month, the Federal Highway Administration said. Vehicle-miles traveled fell 4.7 percent from a year earlier, the Washington- based agency said in a report yesterday. The month's 12.2 billion-mile drop brought the total since November to 53.2 billion miles, the agency said.
BP Plc and Botas International Ltd., a Turkish operating company, started damage assessment at an oil pipeline in the eastern part of the country following a fire.
BP, Europe's second-biggest oil company, is now able to access the Baku-Tbilisi-Ceyhan pipeline after it cooled down, company spokesman Toby Odone said yesterday. The assessment will be conducted for ``a week or so,'' he said.
``It'll take quite a while to work out what has happened,'' Odone said by phone from London. Turkish authorities are also investigating the cause of the explosion, he said.
Oil Pipeline
The fire on the link, which has a 1 million barrel-a-day capacity, started on Aug. 5 following an explosion in the Erzincan province. The Kurdistan Workers' Party claimed responsibility for the attack.
BP's venture declared force majeure on exports from the Baku-Supsa oil link, Odone said. The pipeline from Azerbaijan through Georgia to the Black Sea was closed for a second day as a precaution. Russian President Dmitry Medvedev Aug. 12 ordered a halt to a Russian offensive in Georgia after six days of fighting.
Brent crude oil for September settlement rose $2.32, or 2.1 percent, to settle at $113.47 a barrel on London's ICE Futures Europe exchange yesterday. Futures touched $110.47 on Aug. 12, the lowest since May 2. The contract expires today.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Aug. 14 (Bloomberg) -- Crude oil rose for a second day after a U.S. Energy Department report yesterday showed a bigger- than-forecast decline in inventories of gasoline as refiners shut units and imports fell.
Gasoline supplies dropped 6.39 million barrels to 202.8 million barrels last week, the biggest decline since October 2002 when tropical storms disrupted Gulf of Mexico output. Gold, silver and nickel also rebounded on speculation declines since July were exaggerated.
``The product numbers were weaker than expected and that pushed the prices higher,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``The oil price had come down fairly sharply over the previous few days, so there was a reaction to that.''
Crude oil for September delivery rose as much as 87 cents, or 0.8 percent, to $116.87 a barrel and was trading at $116.85 at 9:32 a.m. Singapore time on the New York Mercantile Exchange.
Yesterday, futures increased $2.99, or 2.6 percent, to settle at $116 a barrel, the biggest one-day gain since July 30. Prices are up 61 percent from a year ago.
U.S. gasoline stockpiles were forecast to drop 2.15 million barrels, according to a Bloomberg News survey. Oil prices fell 5.8 percent in the previous three days to yesterday's session.
Refineries operated at 85.9 percent of capacity, down 1.1 percentage points from the week before, the report showed. Analysts forecast a 0.5 percentage-point drop.
Petroleum-product imports fell 17 percent to 2.6 million barrels a day, the lowest since the week ended April 1, 2005, the report showed. Crude oil imports dropped 5.3 percent to 9.66 million barrels a day, the lowest since the week ended July 4.
Crude Inventories
Inventories of crude oil fell 316,000 barrels to 296.5 million, the department said. Supplies were forecast to rise 300,000 barrels, according to the median of responses by 13 analysts surveyed by Bloomberg News.
U.S. fuel demand averaged 20.2 million barrels a day during the past four weeks, down 2.8 percent from a year earlier, the department said. Gasoline consumption averaged 9.4 million barrels a day over the period, down 1.9 percent from a year ago.
Gasoline use declined 2.1 percent through July, the American Petroleum Institute said in a monthly report released yesterday. Auto sales fell to the lowest since 1993 in the month, causing U.S. retail sales to drop for the first time in five months. Consumer spending makes up more than two-thirds of the U.S. economy.
Damage Assessment
Prices of oil have slipped more than $30 from a record $147.27 on July 11 amid signs that U.S. fuel demand is falling because of record pump prices and a slowing economy.
U.S. motorists drove less in June for an eighth consecutive month, the Federal Highway Administration said. Vehicle-miles traveled fell 4.7 percent from a year earlier, the Washington- based agency said in a report yesterday. The month's 12.2 billion-mile drop brought the total since November to 53.2 billion miles, the agency said.
BP Plc and Botas International Ltd., a Turkish operating company, started damage assessment at an oil pipeline in the eastern part of the country following a fire.
BP, Europe's second-biggest oil company, is now able to access the Baku-Tbilisi-Ceyhan pipeline after it cooled down, company spokesman Toby Odone said yesterday. The assessment will be conducted for ``a week or so,'' he said.
``It'll take quite a while to work out what has happened,'' Odone said by phone from London. Turkish authorities are also investigating the cause of the explosion, he said.
Oil Pipeline
The fire on the link, which has a 1 million barrel-a-day capacity, started on Aug. 5 following an explosion in the Erzincan province. The Kurdistan Workers' Party claimed responsibility for the attack.
BP's venture declared force majeure on exports from the Baku-Supsa oil link, Odone said. The pipeline from Azerbaijan through Georgia to the Black Sea was closed for a second day as a precaution. Russian President Dmitry Medvedev Aug. 12 ordered a halt to a Russian offensive in Georgia after six days of fighting.
Brent crude oil for September settlement rose $2.32, or 2.1 percent, to settle at $113.47 a barrel on London's ICE Futures Europe exchange yesterday. Futures touched $110.47 on Aug. 12, the lowest since May 2. The contract expires today.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Australia Stocks: David Jones, Equinox Minerals, Minara, Santos
By Shani Raja
Aug. 14 (Bloomberg) -- The S&P/ASX 200 Index rose 42.10 points, or 0.9 percent, to 4,993.70 at 10:15 a.m. in Sydney, the most in more than a week. The broader All Ordinaries Index gained 43.90, or 0.9 percent, to 5,039.80, while the futures index expiring in September advanced 0.6 percent to 4,942.
Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced A$1.43, or 3.9 percent to A$38.19, the highest since Aug. 4. Rio Tinto Group (RIO AU), the world's third-largest mining company, gained A$4.65, or 4.2 percent, to A$116.25.
Minara Resources Ltd. (MRE AU), Australia's second-largest nickel producer, rose 9 cents, or 7.9 percent, to A$1.29, the fourth-biggest gainer on the index. Equinox Minerals Ltd. (EQN AU), developer of Africa's largest copper mine, rallied 38 cents, or 12 percent, to A$3.54, the biggest gainer.
A measure of six metals traded on the London Metal Exchange rose 3.2 percent. Zinc advanced 2.2 percent, copper 3.9 percent and nickel 7.7 percent.
Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, added A$1.44, or 2.8 percent, to A$53.55, the most since July 31. Santos Ltd. (STO AU) added 42 cents, or 2.5 percent, to A$17.42.
Crude oil futures rose more than $2 a barrel after a U.S. Energy Department report showed a bigger-than forecast decline in inventories of gasoline as refiners shut units and imports fell. Crude oil for September delivery rose $2.99, or 2.6 percent, to settle at $116 a barrel at 2:48 p.m. on the New York Mercantile Exchange, the biggest one-day gain since July 30.
ASX Ltd. (ASX AU), operator of Australia's largest stock exchange, advanced 63 cents, or 1.8 percent, to A$35.43, partly reversing yesterday's 4.1 percent loss. ASX posted a 6.1 percent gain in second-half profit on increased trading volume and new share listings.
David Jones Ltd. (DJS AU), Australia's second-largest department store chain, gained 16 cents, or 4.4 percent, to A$3.81, the highest since March 7. The company said second-half earnings rose more than forecast as it cut inventory holdings to lower costs.
Maryborough Sugar Factory Ltd. (MSF AU) fell 5 cents, or 2.5 percent, to A$1.95, the lowest since July 8. The Australian producer and refiner of raw sugar began merger talks with Tully Sugar Ltd. as it seeks to expand into far north Queensland state.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Aug. 14 (Bloomberg) -- The S&P/ASX 200 Index rose 42.10 points, or 0.9 percent, to 4,993.70 at 10:15 a.m. in Sydney, the most in more than a week. The broader All Ordinaries Index gained 43.90, or 0.9 percent, to 5,039.80, while the futures index expiring in September advanced 0.6 percent to 4,942.
Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced A$1.43, or 3.9 percent to A$38.19, the highest since Aug. 4. Rio Tinto Group (RIO AU), the world's third-largest mining company, gained A$4.65, or 4.2 percent, to A$116.25.
Minara Resources Ltd. (MRE AU), Australia's second-largest nickel producer, rose 9 cents, or 7.9 percent, to A$1.29, the fourth-biggest gainer on the index. Equinox Minerals Ltd. (EQN AU), developer of Africa's largest copper mine, rallied 38 cents, or 12 percent, to A$3.54, the biggest gainer.
A measure of six metals traded on the London Metal Exchange rose 3.2 percent. Zinc advanced 2.2 percent, copper 3.9 percent and nickel 7.7 percent.
Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, added A$1.44, or 2.8 percent, to A$53.55, the most since July 31. Santos Ltd. (STO AU) added 42 cents, or 2.5 percent, to A$17.42.
Crude oil futures rose more than $2 a barrel after a U.S. Energy Department report showed a bigger-than forecast decline in inventories of gasoline as refiners shut units and imports fell. Crude oil for September delivery rose $2.99, or 2.6 percent, to settle at $116 a barrel at 2:48 p.m. on the New York Mercantile Exchange, the biggest one-day gain since July 30.
ASX Ltd. (ASX AU), operator of Australia's largest stock exchange, advanced 63 cents, or 1.8 percent, to A$35.43, partly reversing yesterday's 4.1 percent loss. ASX posted a 6.1 percent gain in second-half profit on increased trading volume and new share listings.
David Jones Ltd. (DJS AU), Australia's second-largest department store chain, gained 16 cents, or 4.4 percent, to A$3.81, the highest since March 7. The company said second-half earnings rose more than forecast as it cut inventory holdings to lower costs.
Maryborough Sugar Factory Ltd. (MSF AU) fell 5 cents, or 2.5 percent, to A$1.95, the lowest since July 8. The Australian producer and refiner of raw sugar began merger talks with Tully Sugar Ltd. as it seeks to expand into far north Queensland state.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Most Japan Stocks Fall on Urban Bankruptcy; Shipping Lines Gain
By Patrick Rial
Enlarge Image/Details
Aug. 14 (Bloomberg) -- Most Japanese stocks slumped after Urban Corp. became the largest Japanese company to file for bankruptcy this year and Merrill Lynch & Co. said the global credit crisis is far from over.
Urban was poised to fall by 48 percent after defaulting on $2.35 billion in debt, leading property developers lower. Kawasaki Kisen Kaisha Ltd. led a gauge of shipping lines to their biggest gain in five months after cargo fees rose for the first time in 23 days. Mitsui & Co., Japan's second-biggest trading company rose after commodities had their biggest gain since June.
``Japan's property market experienced its own mini-bubble where enthusiasm got overheated, but now the failures have started, and there's still more bad news to come,'' said Hideyuki Ookoshi, who helps oversee $365 million at Chiba-Gin Asset Management Co. ``People are looking to pick up oversold commodities shares and shippers on their longer-term outlook.''
The Nikkei 225 Stock Average slipped 24.16, or 0.2 percent, to 12,998.89 as of 10:40 a.m. in Tokyo, after rising as much as 0.5 percent. The broader Topix index lost 3.73, or 0.3 percent, to 1,242.75. Three shares retreated for every two that rose on the Topix.
Urban shares were offered lower by 30 yen, or 48 percent, to 32 yen after it became the latest in a string of real estate companies to declare bankruptcy in recent months. Banks have been cutting off funding to developers with overextended balance sheets and poor management, according to Nobuo Tomoda, an analyst at credit research firm Tokyo Shoko Research Ltd.
`Far From Over'
Financial shares led a 0.3 percent decline in the Standard & Poor's 500 Index yesterday after Merrill's Chief Equity strategist Richard Bernstein said buying bank shares at the current time is risky as ``the problems in the financial sector appear to us to be far from over.'' The credit crisis is not limited to U.S. banks with subprime loan-related securities, he added in a note to clients.
Mitsui Fudosan, the nation's biggest developer, slipped 2.4 percent to 2,265 yen. NTT Urban Development Co., which manages property for the nation's largest telephone company, slumped 6.1 percent to 144,200 yen. Kenedix Inc., a real estate investment manager, tumbled 7.6 percent to 52,600 yen after reporting a 45 percent decline in first-half net income.
``Urban's bankruptcy filing may cause a sudden surge in nervousness about the financial system and spark worries about a chain reaction of developer failures,'' Mitsushige Akino, who oversees the equivalent of $468 million at Ichiyoshi Investment Management Co. in Tokyo., said in a Bloomberg Television interview.
Kansai Urban Banking Corp. plunged 10 percent to 152 yen after the company said it may not be able to recover a 6 billion yen ($55 million) loan to Urban Corp. Hiroshima Bank Ltd. lost 2.2 percent to 399 yen after lowering its profit forecast to write off loans that may not be recoverable from the failed developer.
Baltic Dry
Kawasaki Kisen added 3.8 percent to 762 yen. Mitsui O.S.K. Lines Ltd., the nation's second-biggest bulk shipper, jumped 3.9 percent to 1,283 yen. A gauge of shipping companies rose the most since March 25.
The Baltic Dry Index, a measure of freight costs, climbed 1.5 percent yesterday, breaking a 23-day losing streak that was the longest losing run in three years.
Mitsui & Co., which generates more than half its profit from commodities trading, jumped 4.1 percent to 1,837 yen. Inpex Holdings Inc., Japan's biggest oil explorer, rose 2.7 percent to 1.1 million yen.
Crude oil rose 2.6 percent to $116 a barrel in New York, the biggest one-day gain since July 30, after a U.S. Energy Department report showed a bigger-than-forecast decline in inventories of gasoline. Prices for metals including copper, gold and nickel also surged, sending the Reuters/Jefferies CRB Index of 19 commodities to its biggest one-day gain since June.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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Enlarge Image/Details
Aug. 14 (Bloomberg) -- Most Japanese stocks slumped after Urban Corp. became the largest Japanese company to file for bankruptcy this year and Merrill Lynch & Co. said the global credit crisis is far from over.
Urban was poised to fall by 48 percent after defaulting on $2.35 billion in debt, leading property developers lower. Kawasaki Kisen Kaisha Ltd. led a gauge of shipping lines to their biggest gain in five months after cargo fees rose for the first time in 23 days. Mitsui & Co., Japan's second-biggest trading company rose after commodities had their biggest gain since June.
``Japan's property market experienced its own mini-bubble where enthusiasm got overheated, but now the failures have started, and there's still more bad news to come,'' said Hideyuki Ookoshi, who helps oversee $365 million at Chiba-Gin Asset Management Co. ``People are looking to pick up oversold commodities shares and shippers on their longer-term outlook.''
The Nikkei 225 Stock Average slipped 24.16, or 0.2 percent, to 12,998.89 as of 10:40 a.m. in Tokyo, after rising as much as 0.5 percent. The broader Topix index lost 3.73, or 0.3 percent, to 1,242.75. Three shares retreated for every two that rose on the Topix.
Urban shares were offered lower by 30 yen, or 48 percent, to 32 yen after it became the latest in a string of real estate companies to declare bankruptcy in recent months. Banks have been cutting off funding to developers with overextended balance sheets and poor management, according to Nobuo Tomoda, an analyst at credit research firm Tokyo Shoko Research Ltd.
`Far From Over'
Financial shares led a 0.3 percent decline in the Standard & Poor's 500 Index yesterday after Merrill's Chief Equity strategist Richard Bernstein said buying bank shares at the current time is risky as ``the problems in the financial sector appear to us to be far from over.'' The credit crisis is not limited to U.S. banks with subprime loan-related securities, he added in a note to clients.
Mitsui Fudosan, the nation's biggest developer, slipped 2.4 percent to 2,265 yen. NTT Urban Development Co., which manages property for the nation's largest telephone company, slumped 6.1 percent to 144,200 yen. Kenedix Inc., a real estate investment manager, tumbled 7.6 percent to 52,600 yen after reporting a 45 percent decline in first-half net income.
``Urban's bankruptcy filing may cause a sudden surge in nervousness about the financial system and spark worries about a chain reaction of developer failures,'' Mitsushige Akino, who oversees the equivalent of $468 million at Ichiyoshi Investment Management Co. in Tokyo., said in a Bloomberg Television interview.
Kansai Urban Banking Corp. plunged 10 percent to 152 yen after the company said it may not be able to recover a 6 billion yen ($55 million) loan to Urban Corp. Hiroshima Bank Ltd. lost 2.2 percent to 399 yen after lowering its profit forecast to write off loans that may not be recoverable from the failed developer.
Baltic Dry
Kawasaki Kisen added 3.8 percent to 762 yen. Mitsui O.S.K. Lines Ltd., the nation's second-biggest bulk shipper, jumped 3.9 percent to 1,283 yen. A gauge of shipping companies rose the most since March 25.
The Baltic Dry Index, a measure of freight costs, climbed 1.5 percent yesterday, breaking a 23-day losing streak that was the longest losing run in three years.
Mitsui & Co., which generates more than half its profit from commodities trading, jumped 4.1 percent to 1,837 yen. Inpex Holdings Inc., Japan's biggest oil explorer, rose 2.7 percent to 1.1 million yen.
Crude oil rose 2.6 percent to $116 a barrel in New York, the biggest one-day gain since July 30, after a U.S. Energy Department report showed a bigger-than-forecast decline in inventories of gasoline. Prices for metals including copper, gold and nickel also surged, sending the Reuters/Jefferies CRB Index of 19 commodities to its biggest one-day gain since June.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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Australian Dollar Pares Gain After Comment by RBA Official
By Ron Harui
Aug. 14 (Bloomberg) -- Australia's dollar pared gains after a central bank official said policy makers are in a ``position to consider cutting interest rates.'' New Zealand's dollar also trimmed its advance against the U.S. currency.
Australia's dollar dropped to 87.05 U.S. cents at 9:59 a.m. in Sydney, from an earlier high of 87.72 cents and 86.84 in late Asian trading yesterday. The New Zealand's dollar, which earlier gained as much as 1.5 percent, traded at 69.91 U.S. cents from 69.56 cents late yesterday.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net;
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Aug. 14 (Bloomberg) -- Australia's dollar pared gains after a central bank official said policy makers are in a ``position to consider cutting interest rates.'' New Zealand's dollar also trimmed its advance against the U.S. currency.
Australia's dollar dropped to 87.05 U.S. cents at 9:59 a.m. in Sydney, from an earlier high of 87.72 cents and 86.84 in late Asian trading yesterday. The New Zealand's dollar, which earlier gained as much as 1.5 percent, traded at 69.91 U.S. cents from 69.56 cents late yesterday.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net;
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Most Asian Stocks Gain, Led by BHP, Nippon Yusen; Banks Decline
By Chen Shiyin
Aug. 14 (Bloomberg) -- Most Asian stocks climbed after a rebound in oil and metals prices boosted raw-material suppliers and transportation companies. Financial shares dropped after Merrill Lynch Co. said the credit crisis is far from over.
BHP Billiton Ltd., the world's largest mining company, rose in Sydney, driving a measure of Asian commodity producers to the biggest gain since April 23. Nippon Yusen K.K., Japan's No. 1 shipping line, advanced in Tokyo. National Australia Bank Ltd. fell after Merrill's chief strategist Richard Bernstein said investors are underestimating the size of the credit crisis.
About four stocks dropped for every three that gained on the MSCI Asia Pacific Index, which was little changed at 126.26 as of 10 a.m. in Tokyo. The gauge has slumped 20 percent this year as accelerating inflation and slower growth assailed the region's economies and global financial companies posted writedowns and credit losses of more than $500 billion.
Japan's Nikkei 225 Stock Average rose 0.3 percent to 13,057.30. Limiting gains, NTT Urban Development Co. led the nation's developers lower after condominium builder Urban Corp. filed for court protection yesterday with $2.35 billion in debt.
U.S. stocks dropped yesterday for a second day after earnings from Deere & Co., the largest maker of tractors, disappointed investors and the Commerce Department reported the first decrease in chain-store sales in five months.
Crude oil for September delivery advanced 2.6 percent to $116 a barrel, the largest gain since July 30, and futures climbed as much as 0.5 percent to $116.53 today. A measure of six metals traded on the London Metal Exchange rose 3.2 percent, its largest gain since March 27.
The rebound in commodity prices coincided with a rebound in the Baltic Dry Index, which tracks transport costs of raw commodities on international trade routes. The gauge gained 1.5 percent yesterday, ending a 23-day, 25 percent slump.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
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Aug. 14 (Bloomberg) -- Most Asian stocks climbed after a rebound in oil and metals prices boosted raw-material suppliers and transportation companies. Financial shares dropped after Merrill Lynch Co. said the credit crisis is far from over.
BHP Billiton Ltd., the world's largest mining company, rose in Sydney, driving a measure of Asian commodity producers to the biggest gain since April 23. Nippon Yusen K.K., Japan's No. 1 shipping line, advanced in Tokyo. National Australia Bank Ltd. fell after Merrill's chief strategist Richard Bernstein said investors are underestimating the size of the credit crisis.
About four stocks dropped for every three that gained on the MSCI Asia Pacific Index, which was little changed at 126.26 as of 10 a.m. in Tokyo. The gauge has slumped 20 percent this year as accelerating inflation and slower growth assailed the region's economies and global financial companies posted writedowns and credit losses of more than $500 billion.
Japan's Nikkei 225 Stock Average rose 0.3 percent to 13,057.30. Limiting gains, NTT Urban Development Co. led the nation's developers lower after condominium builder Urban Corp. filed for court protection yesterday with $2.35 billion in debt.
U.S. stocks dropped yesterday for a second day after earnings from Deere & Co., the largest maker of tractors, disappointed investors and the Commerce Department reported the first decrease in chain-store sales in five months.
Crude oil for September delivery advanced 2.6 percent to $116 a barrel, the largest gain since July 30, and futures climbed as much as 0.5 percent to $116.53 today. A measure of six metals traded on the London Metal Exchange rose 3.2 percent, its largest gain since March 27.
The rebound in commodity prices coincided with a rebound in the Baltic Dry Index, which tracks transport costs of raw commodities on international trade routes. The gauge gained 1.5 percent yesterday, ending a 23-day, 25 percent slump.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
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Halliburton's Lesar Says Oil's Slide Is No Threat to New Orders
By Ayesha Daya
Aug. 14 (Bloomberg) -- Halliburton Co., the world's second- largest oilfield-services provider, said crude oil's 17 percent slide this quarter is unlikely to reduce orders for drilling and exploration contracts.
``Customers are basing decisions on significantly lower oil prices, and they plan very long-term projects that don't switch on or switch off based on the oil price,'' Chief Executive Officer David Lesar said in a telephone interview from Houston yesterday. ``I don't really see it having a major impact on our business.''
Oil tumbled about $30 a barrel since setting a record $147.27 on July 11 on signs that demand in the U.S., which uses a quarter of the world's oil, and Europe will falter as the world economy slows. Prices are about 60 percent higher than a year ago.
Halliburton opened a second headquarters in Dubai last year to court state-run Middle East oil companies that control two- thirds of the world's reserves as they spend more to increase production. The company sold its stake in engineering unit KBR Inc. last year to focus on oilfield work. Its North American division is based in Houston.
The company's biggest Middle East operations are in Saudi Arabia, the world's largest oil producer, where it's drilling wells for the Khurais oilfield. Khurais will produce 1.2 million barrels a day once completed and is state-run Saudi Aramco's biggest project to boost capacity 11 percent to 12.5 million barrels a day in 2009.
Khurais Meets Plan
``Khurais is going very well and is coming to an end,'' said Lesar, 55. ``It is on track and on time.''
Halliburton won a contract in April to provide offshore services at the Manifa field, which has an output target of 900,000 barrels of oil a day, making it Saudi Arabia's second- largest new project.
``We're just in the ramp-up phase and are waiting for some of the drilling rigs to become available, so that project is more ahead of us at this point in time,'' said Lesar. ``We'll probably get started at the latter part of this year, but certainly as we get into early next year.''
The Khurais field will operate by June 2009, and Manifa will add heavy crude from onshore and offshore fields from mid-2011, according to Aramco.
South America
Lesar is heading to Argentina in a tour of Halliburton's South American projects. The company is growing fastest in Latin America, where second-quarter revenue rose by about 33 percent, compared with a year earlier.
Halliburton's revenue outside of North America expanded 26 percent year-on-year, exceeding the company's 20 percent target, Lesar said. He expects ``robust opportunities'' in most Middle Eastern countries where new technologies are required and contractors are in short supply. He's talking with international oil companies about joint projects in Iraq, and will be vying for Abu Dhabi's $10 billion sour gas project, in which ConocoPhillips has a 40 percent stake.
Earnings at Halliburton fell 67 percent in the second quarter because of a year-ago gain from the sale of KBR, and analysts in a Bloomberg survey estimate earnings per share in the third quarter will increase 16 percent from a year earlier.
Halliburton rose about 19 percent in New York Stock Exchange Composite trading so far this year. Schlumberger Ltd., the world's biggest oilfield contractor, fell about 2 percent, while the Standard and Poor's 500 Integrated Oil & Gas Index dropped 12 percent.
The 13-nation Organization of Petroleum Exporting Countries is expected to earn oil export revenue of $1.17 trillion this year, according to U.S. Energy Department estimates.
``A lot of the reservoirs that are being developed today are certainly more difficult to access,'' Lesar said. ``You're looking at heavier oil, higher pressure, deeper water and higher temperatures.''
Lesar said Halliburton wants to be involved in Kuwait's plans to produce an extra 700,000 barrels a day of heavy oil, which is more difficult to pump than conventional reserves. Exxon Mobil Corp. is helping Kuwait expand heavy oil output.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Aug. 14 (Bloomberg) -- Halliburton Co., the world's second- largest oilfield-services provider, said crude oil's 17 percent slide this quarter is unlikely to reduce orders for drilling and exploration contracts.
``Customers are basing decisions on significantly lower oil prices, and they plan very long-term projects that don't switch on or switch off based on the oil price,'' Chief Executive Officer David Lesar said in a telephone interview from Houston yesterday. ``I don't really see it having a major impact on our business.''
Oil tumbled about $30 a barrel since setting a record $147.27 on July 11 on signs that demand in the U.S., which uses a quarter of the world's oil, and Europe will falter as the world economy slows. Prices are about 60 percent higher than a year ago.
Halliburton opened a second headquarters in Dubai last year to court state-run Middle East oil companies that control two- thirds of the world's reserves as they spend more to increase production. The company sold its stake in engineering unit KBR Inc. last year to focus on oilfield work. Its North American division is based in Houston.
The company's biggest Middle East operations are in Saudi Arabia, the world's largest oil producer, where it's drilling wells for the Khurais oilfield. Khurais will produce 1.2 million barrels a day once completed and is state-run Saudi Aramco's biggest project to boost capacity 11 percent to 12.5 million barrels a day in 2009.
Khurais Meets Plan
``Khurais is going very well and is coming to an end,'' said Lesar, 55. ``It is on track and on time.''
Halliburton won a contract in April to provide offshore services at the Manifa field, which has an output target of 900,000 barrels of oil a day, making it Saudi Arabia's second- largest new project.
``We're just in the ramp-up phase and are waiting for some of the drilling rigs to become available, so that project is more ahead of us at this point in time,'' said Lesar. ``We'll probably get started at the latter part of this year, but certainly as we get into early next year.''
The Khurais field will operate by June 2009, and Manifa will add heavy crude from onshore and offshore fields from mid-2011, according to Aramco.
South America
Lesar is heading to Argentina in a tour of Halliburton's South American projects. The company is growing fastest in Latin America, where second-quarter revenue rose by about 33 percent, compared with a year earlier.
Halliburton's revenue outside of North America expanded 26 percent year-on-year, exceeding the company's 20 percent target, Lesar said. He expects ``robust opportunities'' in most Middle Eastern countries where new technologies are required and contractors are in short supply. He's talking with international oil companies about joint projects in Iraq, and will be vying for Abu Dhabi's $10 billion sour gas project, in which ConocoPhillips has a 40 percent stake.
Earnings at Halliburton fell 67 percent in the second quarter because of a year-ago gain from the sale of KBR, and analysts in a Bloomberg survey estimate earnings per share in the third quarter will increase 16 percent from a year earlier.
Halliburton rose about 19 percent in New York Stock Exchange Composite trading so far this year. Schlumberger Ltd., the world's biggest oilfield contractor, fell about 2 percent, while the Standard and Poor's 500 Integrated Oil & Gas Index dropped 12 percent.
The 13-nation Organization of Petroleum Exporting Countries is expected to earn oil export revenue of $1.17 trillion this year, according to U.S. Energy Department estimates.
``A lot of the reservoirs that are being developed today are certainly more difficult to access,'' Lesar said. ``You're looking at heavier oil, higher pressure, deeper water and higher temperatures.''
Lesar said Halliburton wants to be involved in Kuwait's plans to produce an extra 700,000 barrels a day of heavy oil, which is more difficult to pump than conventional reserves. Exxon Mobil Corp. is helping Kuwait expand heavy oil output.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Australian Dollar Snaps 12-Day Slide on Bets Sell-Off Excessive
By Candice Zachariahs
Aug. 14 (Bloomberg) -- Australia's dollar gained, snapping a 12-day losing streak versus the U.S. currency, after investors deemed the currency's sell-off was excessive and prices of commodities the nation exports such as gold and crude oil rose.
The Australian currency pared its loss against the U.S. dollar to 10 percent in the past month and 7.1 percent versus the yen as the UBS-Bloomberg Constant Maturity Commodity Index rebounded to its biggest one-day gain since June 6. It climbed against all 16 of the most-traded currencies as signals on charts traders watch to predict price movements showed the Australian dollar was due to pare losses.
``The Australian dollar has lost ground for more than 10 days straight and for a major currency that is rather unusual,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``A rebound has been overdue. Some of these market moves are looking somewhat overextended.''
Australia's dollar strengthened 0.9 percent to 87.60 U.S. cents at 8:33 a.m. in Sydney, from 86.84 cents in late Asian trading yesterday when it touched 85.93, the lowest since Jan. 23. It gained 1.3 percent to 95.79 yen, from 94.60 yesterday.
The local dollar has been the worst performer of the 16 most-active currencies over the past month. Its 14-day relative strength index has fallen to 19.62 against the U.S. dollar and 29.35 versus the yen. An RSI, a gauge of momentum over a given period, below 30 or above 70 signals a reversal may occur.
Interest-Rate Bets
The currency has fallen over the past month on speculation the Reserve Bank of Australia 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 1.05 percentage points 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.
Australia's dollar gained as the UBS Bloomberg Constant Maturity Commodity Index rose 2.9 percent, gaining for the first time in four days. Gold, the nation's third most-valuable raw material export, increased for the first time this month, while the price of crude oil rose $2 a barrel after a U.S. government report showed a bigger-than-forecast decline in gasoline inventories. Commodities account for 60 percent of Australia's exports.
Australian government bonds gained for a fifth day. The yield on the 10-year bond fell 2 basis points, or 0.02 percentage point, to 5.85 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.135, or A$1.35 per A$1,000 face amount, to 95.302. 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. 14 (Bloomberg) -- Australia's dollar gained, snapping a 12-day losing streak versus the U.S. currency, after investors deemed the currency's sell-off was excessive and prices of commodities the nation exports such as gold and crude oil rose.
The Australian currency pared its loss against the U.S. dollar to 10 percent in the past month and 7.1 percent versus the yen as the UBS-Bloomberg Constant Maturity Commodity Index rebounded to its biggest one-day gain since June 6. It climbed against all 16 of the most-traded currencies as signals on charts traders watch to predict price movements showed the Australian dollar was due to pare losses.
``The Australian dollar has lost ground for more than 10 days straight and for a major currency that is rather unusual,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``A rebound has been overdue. Some of these market moves are looking somewhat overextended.''
Australia's dollar strengthened 0.9 percent to 87.60 U.S. cents at 8:33 a.m. in Sydney, from 86.84 cents in late Asian trading yesterday when it touched 85.93, the lowest since Jan. 23. It gained 1.3 percent to 95.79 yen, from 94.60 yesterday.
The local dollar has been the worst performer of the 16 most-active currencies over the past month. Its 14-day relative strength index has fallen to 19.62 against the U.S. dollar and 29.35 versus the yen. An RSI, a gauge of momentum over a given period, below 30 or above 70 signals a reversal may occur.
Interest-Rate Bets
The currency has fallen over the past month on speculation the Reserve Bank of Australia 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 1.05 percentage points 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.
Australia's dollar gained as the UBS Bloomberg Constant Maturity Commodity Index rose 2.9 percent, gaining for the first time in four days. Gold, the nation's third most-valuable raw material export, increased for the first time this month, while the price of crude oil rose $2 a barrel after a U.S. government report showed a bigger-than-forecast decline in gasoline inventories. Commodities account for 60 percent of Australia's exports.
Australian government bonds gained for a fifth day. The yield on the 10-year bond fell 2 basis points, or 0.02 percentage point, to 5.85 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.135, or A$1.35 per A$1,000 face amount, to 95.302. 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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Euro May Fall Before Report Forecast to Show Economy Contracted
By Ye Xie and Candice Zachariahs
Aug. 14 (Bloomberg) -- The euro may decline against the dollar before a report forecast to show Europe's economy contracted in the second quarter.
The yen dropped yesterday against the Canadian dollar and Brazil's real after an increase in crude oil prices led investors to buy back the currencies of commodity exporters. The dollar erased gains versus the euro as the first advance in crude oil in four days renewed concern higher energy costs may restrain U.S. consumer spending.
``The one thing that's problematic for the euro is the GDP data coming out, which everybody is very anxious about,'' said Boris Schlossberg, director of currency research in New York at online currency trader GFT Forex.
The euro traded at $1.4917 at 6 a.m. in Tokyo, after reaching a 5 1/2-month low of $1.4816 on Aug. 12. The yen was at 109.38 per dollar, following a 0.1 percent decline yesterday. Japan's currency traded at 163.13 per euro, after dropping 0.2 percent and reaching 161.40, the strongest level since May 16.
Europe's economy shrank 0.2 percent in the second quarter, after 0.7 percent growth in the previous three months, according to the median forecast of 40 economists surveyed by Bloomberg News. The European Union's statistics office in Luxembourg will release the data today.
The pound fell to a 22-month low against the dollar yesterday after the Bank of England cut its growth forecast and unemployment increased the most in almost 16 years. Sterling dropped as much as 1.7 percent to $1.8640, the lowest since October 2006, in its ninth straight drop. The pound declined as much as 1.5 percent to 79.86 pence per euro, the weakest level since July 14.
Yen Turnaround
Japan's currency fell 0.8 percent to 68.01 versus the Brazilian real yesterday after earlier rising 1.2 percent to 66.68, the strongest since July 18. The yen dropped 0.4 percent to 103.13 versus the Canadian dollar following a gain of 1.2 percent to 101.52, the highest since April 24.
``It really looks to be a short squeeze,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. ``It caught the market napping.''
Commodities such as oil and gold account for half of Canada's exports. The real has gained 8.4 percent against the yen this year as coffee and sugar prices rose.
Crude oil for September delivery increased 3 percent to $116.37 a barrel yesterday after a U.S. Energy Department report showed a bigger-than-forecast decline in inventories of gasoline. Gold prices increased 1.8 percent to $827.20 an ounce.
Dollar's Gains
The dollar has gained 4.7 percent versus the euro this month, the biggest increase among major currencies, on speculation the European economy is slowing and a 6.5 percent drop in crude oil prices in August may moderate a slowdown in U.S. consumer spending.
``The resurgence of oil prices is causing the market to second-guess if the rebound of the U.S. dollar is temporary in nature,'' said Firas Askari, head currency trader at BMO Capital Markets in Toronto.
Sales at U.S. retailers dropped in July for the first time in five months, the Commerce Department said yesterday in Washington, as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
The 0.1 percent decrease matched the median forecast of 75 economists surveyed by Bloomberg and followed a 0.3 percent gain in the prior month that was larger than previously reported.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.
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Aug. 14 (Bloomberg) -- The euro may decline against the dollar before a report forecast to show Europe's economy contracted in the second quarter.
The yen dropped yesterday against the Canadian dollar and Brazil's real after an increase in crude oil prices led investors to buy back the currencies of commodity exporters. The dollar erased gains versus the euro as the first advance in crude oil in four days renewed concern higher energy costs may restrain U.S. consumer spending.
``The one thing that's problematic for the euro is the GDP data coming out, which everybody is very anxious about,'' said Boris Schlossberg, director of currency research in New York at online currency trader GFT Forex.
The euro traded at $1.4917 at 6 a.m. in Tokyo, after reaching a 5 1/2-month low of $1.4816 on Aug. 12. The yen was at 109.38 per dollar, following a 0.1 percent decline yesterday. Japan's currency traded at 163.13 per euro, after dropping 0.2 percent and reaching 161.40, the strongest level since May 16.
Europe's economy shrank 0.2 percent in the second quarter, after 0.7 percent growth in the previous three months, according to the median forecast of 40 economists surveyed by Bloomberg News. The European Union's statistics office in Luxembourg will release the data today.
The pound fell to a 22-month low against the dollar yesterday after the Bank of England cut its growth forecast and unemployment increased the most in almost 16 years. Sterling dropped as much as 1.7 percent to $1.8640, the lowest since October 2006, in its ninth straight drop. The pound declined as much as 1.5 percent to 79.86 pence per euro, the weakest level since July 14.
Yen Turnaround
Japan's currency fell 0.8 percent to 68.01 versus the Brazilian real yesterday after earlier rising 1.2 percent to 66.68, the strongest since July 18. The yen dropped 0.4 percent to 103.13 versus the Canadian dollar following a gain of 1.2 percent to 101.52, the highest since April 24.
``It really looks to be a short squeeze,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. ``It caught the market napping.''
Commodities such as oil and gold account for half of Canada's exports. The real has gained 8.4 percent against the yen this year as coffee and sugar prices rose.
Crude oil for September delivery increased 3 percent to $116.37 a barrel yesterday after a U.S. Energy Department report showed a bigger-than-forecast decline in inventories of gasoline. Gold prices increased 1.8 percent to $827.20 an ounce.
Dollar's Gains
The dollar has gained 4.7 percent versus the euro this month, the biggest increase among major currencies, on speculation the European economy is slowing and a 6.5 percent drop in crude oil prices in August may moderate a slowdown in U.S. consumer spending.
``The resurgence of oil prices is causing the market to second-guess if the rebound of the U.S. dollar is temporary in nature,'' said Firas Askari, head currency trader at BMO Capital Markets in Toronto.
Sales at U.S. retailers dropped in July for the first time in five months, the Commerce Department said yesterday in Washington, as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
The 0.1 percent decrease matched the median forecast of 75 economists surveyed by Bloomberg and followed a 0.3 percent gain in the prior month that was larger than previously reported.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.
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Yen, Rupee, Indonesian Rupiah, Thai Baht: Asia Currency Preview
By Bob Chen
Aug. 14 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Finance Ministry will release weekly portfolio flows data at 8:50 a.m. in Tokyo.
The yen was at 108.61 a dollar at 9 a.m. in New York.
Indian rupee: Wholesale prices jumped 12.2 percent in the week ended Aug. 2 from a year earlier, the biggest gain since January 1995, economists said in a Bloomberg News survey before the government reports the data at 6 p.m. today.
The rupee was at 42.65.
Chinese yuan: Industrial output expanded 15.9 percent in July from a year earlier, versus a 16 percent gain the previous month, economists said in a Bloomberg News survey before the government reports the data at 10 a.m. today.
The yuan was at 6.8570.
Indonesian rupiah: Gross domestic product rose 6.13 percent in the second quarter from a year earlier, economists said in a Bloomberg News survey before the government reports the data today. GDP expanded 6.28 percent in the first quarter.
The rupiah was at 9,180.
Thai baht: The University of the Thai Chamber of Commerce will report July consumer confidence at 11 a.m. today. The gauge fell to 70.8 in June, the lowest level this year.
The baht was at 33.68.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
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Aug. 14 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Finance Ministry will release weekly portfolio flows data at 8:50 a.m. in Tokyo.
The yen was at 108.61 a dollar at 9 a.m. in New York.
Indian rupee: Wholesale prices jumped 12.2 percent in the week ended Aug. 2 from a year earlier, the biggest gain since January 1995, economists said in a Bloomberg News survey before the government reports the data at 6 p.m. today.
The rupee was at 42.65.
Chinese yuan: Industrial output expanded 15.9 percent in July from a year earlier, versus a 16 percent gain the previous month, economists said in a Bloomberg News survey before the government reports the data at 10 a.m. today.
The yuan was at 6.8570.
Indonesian rupiah: Gross domestic product rose 6.13 percent in the second quarter from a year earlier, economists said in a Bloomberg News survey before the government reports the data today. GDP expanded 6.28 percent in the first quarter.
The rupiah was at 9,180.
Thai baht: The University of the Thai Chamber of Commerce will report July consumer confidence at 11 a.m. today. The gauge fell to 70.8 in June, the lowest level this year.
The baht was at 33.68.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
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New Zealand Currency Gains Most in Month Versus U.S. Dollar
By Candice Zachariahs
Aug. 14 (Bloomberg) -- The New Zealand dollar gained the most in four weeks against the U.S. currency and four months versus the Japanese yen after a technical indicator showed the currency's recent decline may have been overdone.
The kiwi, as the currency is called, has dropped 7.7 percent against the dollar and 4.8 percent against the yen over the past month. The local dollar slid after the Reserve Bank of New Zealand reduced its benchmark rate to 8 percent on July 24 and said further cuts were likely.
``It's a signal that a low is in and that the market should reverse after trending, in this case, lower for the past few weeks,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``The New Zealand dollar looks like it's potentially going to bounce quite hard.''
New Zealand's currency strengthened 1 percent to 70.27 U.S. cents at 8:43 a.m. in Wellington, from 69.56 cents in late Asian trading yesterday. It gained 1.6 percent to 77.01 yen, from 75.8 yesterday.
The kiwi's 14-day relative strength index against the dollar fell to 26.6. A reading below 30 suggests a change in price direction is imminent.
New Zealand's dollar was the second-worst performer against the U.S. dollar among the 16 most-traded currencies over the past month, after the Australian currency. Investors have increased bets that the Reserve Bank will reduce the 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.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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Aug. 14 (Bloomberg) -- The New Zealand dollar gained the most in four weeks against the U.S. currency and four months versus the Japanese yen after a technical indicator showed the currency's recent decline may have been overdone.
The kiwi, as the currency is called, has dropped 7.7 percent against the dollar and 4.8 percent against the yen over the past month. The local dollar slid after the Reserve Bank of New Zealand reduced its benchmark rate to 8 percent on July 24 and said further cuts were likely.
``It's a signal that a low is in and that the market should reverse after trending, in this case, lower for the past few weeks,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``The New Zealand dollar looks like it's potentially going to bounce quite hard.''
New Zealand's currency strengthened 1 percent to 70.27 U.S. cents at 8:43 a.m. in Wellington, from 69.56 cents in late Asian trading yesterday. It gained 1.6 percent to 77.01 yen, from 75.8 yesterday.
The kiwi's 14-day relative strength index against the dollar fell to 26.6. A reading below 30 suggests a change in price direction is imminent.
New Zealand's dollar was the second-worst performer against the U.S. dollar among the 16 most-traded currencies over the past month, after the Australian currency. Investors have increased bets that the Reserve Bank will reduce the 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.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net
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Australia Stocks Preview: Centro, Minara, Rio, Telstra, Westpac
By Shani Raja
Aug. 14 (Bloomberg) -- The following is a list of companies whose shares may rise or fall in Australia. This preview includes news announced after markets closed on yesterday. Prices are from yesterday's close unless otherwise stated.
The S&P/ASX 200 Index futures contract due in September dropped 0.8 percent to 4,910 at 6:59 a.m. in Sydney. The Bank of New York Australia ADR Index gained 2.6 percent in New York.
The S&P/ASX 200 Index fell 102 points, or 2 percent, to 4,951.60.
Australian companies scheduled to report earnings today include: Stockland (SGP AU), Leighton Holdings Ltd. (LEI AU), ASX Ltd. (ASX AU) and Futuris Corp (FCL AU).
Mining shares: A measure of six metals traded on the London Metal Exchange rose 3.2 percent. Zinc advanced 2.2 percent, copper 3.9 percent and nickel 7.7 percent. Minara Resources Ltd. (MRE AU), Australia's second-largest nickel producer, rose 1.5 cents, or 1.3 percent, to A$1.20.
American depositary receipts of BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced 3.4 percent to the equivalent of A$38.04 a share in New York, A$1.28 higher than the A$36.76 close in Sydney.
Separately, Rio Tinto Group (RIO AU), the world's third- largest mining company, and India's NMDC Ltd. plan to jointly explore for iron-ore assets in India and overseas. Rio slipped A$2.40, or 2.1 percent, to A$111.60.
Oil companies: Crude oil futures rose more than $2 a barrel after a U.S. Energy Department report showed a bigger-than forecast decline in inventories of gasoline as refiners shut units and imports fell. Crude oil for September delivery rose $2.99, or 2.6 percent, to settle at $116 a barrel at 2:48 p.m. on the New York Mercantile Exchange, the biggest one-day gain since July 30.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, added 17 cents, or 0.3 percent, to A$52.11.
Centro Properties Group (CNP AU): Centro may be planning to sell its A$420 million ($367 million) stake in three shopping centers in West Australia state to help refinance loans, the Australian Financial Review reported, citing unidentified sources. Centro lost 1.5 cents, or 5.3 percent, to 27 cents.
Macquarie Group Ltd. (MGQ AU): Australia's biggest securities firm hired six people, including JPMorgan Chase & Co. economist Rajeev Malik, to expand product offerings in India, the world's second-fastest growing major economy. Macquarie declined A$1.11, or 2 percent, to A$54.10.
Maryborough Sugar Factory Ltd. (MSF AU): The Australian producer and refiner of raw sugar began merger talks with Tully Sugar Ltd. as it seeks to expand into far north Queensland state. Maryborough dropped 5 cents, or 2.5 percent, to A$1.95.
Telstra Corp. (TLS AU): Telstra is planning to negotiate labor contracts with non-unionized workers to save up to A$50 million ($43.7 million) over the next three years, the Sydney Morning Herald reported. Australia's largest phone company will target workers in business units that have low union participation rates, the newspaper said, citing leaked confidential Telstra documents. Telstra fell 18 cents, or 4 percent, to A$4.32.
Westpac Banking Corp. (WBC AU): Australia's second-largest bank by market value won regulatory approval for its A$17.4 billion ($15 billion) bid to buy St. George Bank Ltd., creating the nation's biggest mortgage lender. Westpac lost 99 cents, or 4 percent, to A$23.51.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Aug. 14 (Bloomberg) -- The following is a list of companies whose shares may rise or fall in Australia. This preview includes news announced after markets closed on yesterday. Prices are from yesterday's close unless otherwise stated.
The S&P/ASX 200 Index futures contract due in September dropped 0.8 percent to 4,910 at 6:59 a.m. in Sydney. The Bank of New York Australia ADR Index gained 2.6 percent in New York.
The S&P/ASX 200 Index fell 102 points, or 2 percent, to 4,951.60.
Australian companies scheduled to report earnings today include: Stockland (SGP AU), Leighton Holdings Ltd. (LEI AU), ASX Ltd. (ASX AU) and Futuris Corp (FCL AU).
Mining shares: A measure of six metals traded on the London Metal Exchange rose 3.2 percent. Zinc advanced 2.2 percent, copper 3.9 percent and nickel 7.7 percent. Minara Resources Ltd. (MRE AU), Australia's second-largest nickel producer, rose 1.5 cents, or 1.3 percent, to A$1.20.
American depositary receipts of BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced 3.4 percent to the equivalent of A$38.04 a share in New York, A$1.28 higher than the A$36.76 close in Sydney.
Separately, Rio Tinto Group (RIO AU), the world's third- largest mining company, and India's NMDC Ltd. plan to jointly explore for iron-ore assets in India and overseas. Rio slipped A$2.40, or 2.1 percent, to A$111.60.
Oil companies: Crude oil futures rose more than $2 a barrel after a U.S. Energy Department report showed a bigger-than forecast decline in inventories of gasoline as refiners shut units and imports fell. Crude oil for September delivery rose $2.99, or 2.6 percent, to settle at $116 a barrel at 2:48 p.m. on the New York Mercantile Exchange, the biggest one-day gain since July 30.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, added 17 cents, or 0.3 percent, to A$52.11.
Centro Properties Group (CNP AU): Centro may be planning to sell its A$420 million ($367 million) stake in three shopping centers in West Australia state to help refinance loans, the Australian Financial Review reported, citing unidentified sources. Centro lost 1.5 cents, or 5.3 percent, to 27 cents.
Macquarie Group Ltd. (MGQ AU): Australia's biggest securities firm hired six people, including JPMorgan Chase & Co. economist Rajeev Malik, to expand product offerings in India, the world's second-fastest growing major economy. Macquarie declined A$1.11, or 2 percent, to A$54.10.
Maryborough Sugar Factory Ltd. (MSF AU): The Australian producer and refiner of raw sugar began merger talks with Tully Sugar Ltd. as it seeks to expand into far north Queensland state. Maryborough dropped 5 cents, or 2.5 percent, to A$1.95.
Telstra Corp. (TLS AU): Telstra is planning to negotiate labor contracts with non-unionized workers to save up to A$50 million ($43.7 million) over the next three years, the Sydney Morning Herald reported. Australia's largest phone company will target workers in business units that have low union participation rates, the newspaper said, citing leaked confidential Telstra documents. Telstra fell 18 cents, or 4 percent, to A$4.32.
Westpac Banking Corp. (WBC AU): Australia's second-largest bank by market value won regulatory approval for its A$17.4 billion ($15 billion) bid to buy St. George Bank Ltd., creating the nation's biggest mortgage lender. Westpac lost 99 cents, or 4 percent, to A$23.51.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Economic Calendar Eco Data 8/14/08
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Dollar Index And The Financial Sector
Daily Forex Fundamentals | Written by TheLFB-Forex.com | Aug 13 08 21:11 GMT |
Dollar Index: During an interview with CNBC on Tuesday, Minneapolis Federal Reserve Bank President Gary Stern said that the decline in energy prices has slowed the inflation outlook, allowing the Fed "to be patient" when it comes to considering raising interest rates. In a recent speech he said that the Fed would need to raise rates "sooner rather than later," but now believes it "pays to be patient" with monetary policy changes. Mr. Stern also said "I think it will be a close call," with regards to whether the U.S. goes into recession. Also on Tuesday Dallas Fed President Richard Fisher, who voted to increase rates last week, said the U.S. faces “a sustained period of anemia” and that “in the second half of this year we will broach zero growth.” And Richmond Fed President Jeffrey Lacker, who isn't an FOMC voter but is known to hawkish, said there is a chance of recession and that “it's hard to gauge when we're going to hit a bottom in housing.” On the charts, the index is continuing to maintain above a weekly resistance trend line drawn from October 12 2006 through June 14 and Aug 16 2007. On the day, the index rose .087 (0.11%) to 76.239.
The Financial Sector: The sector took another hit on Wednesday after Merrill Lynch (MER) Chief Investment Strategist Richard Bernstein said investors are "significantly underestimating" potential losses from credit-related write downs and said the credit crisis is "far from over" and Guy Moszkowski, Merrill's top-rated analyst for securities firms, downgraded Morgan Stanley (MS) whose shares lost 5.53%, Goldman Sachs (GS) which lost 1.43%, Lehman Brothers (LEH) down 3.95% as well as Citigroup (C), whose shares lost 0.73%. "Conditions have deteriorated significantly from July," wrote Moszkowski. "The typical summer slowdown has been exacerbated by renewed fear over credit, the direction of the economy, and home-price depreciation, along with the sudden about-face in the oil price and hedge-fund losses." That led to a broad sell off among financial firms, as the KBW bank Index plunged 4.11%. And in a sign of continuing liquidity stress, The Federal Reserve reported its Term Auction Facility (TAF) offering on Monday lent $25 billion for 84 days with a rate of 2.754%, well above the 2.00% target and 2.25% discount window rates. Bidders had requested a total $54.8B. Monday's auction was the first of the $25B 84day loans, which the Fed said in July would be offered in addition to the $75B 28 day auctions it runs every two weeks. The Fed has said that biweekly TAF auctions will alternate between $75B 28 day loans and $25B 84 day loans as long as financial conditions warrant. The XLF closed on 20.57 after falling 0.61 point (2.88%) on relatively heavy volume of 229,047,378, against the daily average of 174,995,000. Volume in the XLF has increased over 70% on a daily basis since the beginning of July.
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U.S. Session Wrap Short sellers get naked again?
The rule against naked short selling against 19 financial stocks expired after Tuesday's trading session, and financial stocks took a hit on Wednesday after Merrill Lynch warned the credit crisis is "far from over" while it downgraded the shares of rivals Goldman Sachs, Morgan Stanley and Lehman Brothers. The S.E.C.'s restriction didn't do much for the shares of financial firms anyway, as Arturo Bris, a finance professor at IMD business school in Lausanne, Switzerland, found that the SEC-imposed restraints "contributed to a decline in share prices for the 19 stocks" totaling about $60 billion. Depending on whether you use the IMF ($1 trillion) or Nouriel Roubini ($2 trillion), since financial firms have written off about $500 billion of losses, we're either 50 or 25 percent through the worst credit crisis since the Great Depression. It's almost quaint to think that Lehman's shares declined nearly 50% in 1973 when the firm announced it had lost $6.7 million on some wrong-way interest rate bets.
At the close of floor trading on the NYSE, the DOW was on 11,532.96 after falling 109.51 (0.94%). The index had been down 190 points at one point during the session The S&P closed on 1285.83, down 3.76 (0.29%) while the NASDAQ finished trading on 2428.62 with a decrease of 1.99 (0.08%). Treasuries were actually lower even as traders moved away from equities. The two-year note yield rose 5.3 basis points to 2.472%. The benchmark 10-year note gained 4.6 basis points to yield 3.941%. The dollar was mixed during N.Y. trading, losing to the euro (0.05%) and yen (0.24%) while trading much higher against the pound (1.43%).
In other news, it appears that the Russian/Georgian conflict is taking a new turn. President Bush announced that U.S. military aircraft carrying medical supplies to the Georgian capital of Tblisi left for the area Wednesday morning, warning Russia that he expected it to be allowed to deliver its aid. Russian troops pushed deep into Georgia, aiming to seize the strategic city of Gori and cutting the main highway that crosses the country. It may be possible that Russia might eventually take over control of three BP pipelines that run through the country, but its aims may be to make an economic gain rather than to cut off the supply.
Demand for liquidity by global banks is still in evidence as the Fed, ECB and SNB continued to pump U.S. dollars into the banking system. The ECB said it allocated $20 billion in a 28-day dollar auction and demand was high as total bids amounted to $91.1 billion, more than four times the amount allotted. The funds were offered at a fixed rate of 2.45%. The Fed said it awarded $50 billion in 28 day credit at 2.45% out of $75.46 billion in bids received. The SNB auctioned $4 billion at 2.01%. The bank reported that demand totaled $11.60 billion.
Crude oil for September delivery rose $3.46 (3.06%) to close on $116.47 a barrel after a U.S. government report showed a bigger-than-forecast decline in inventories of gasoline.
Gold futures for December delivery rose $16.90 (2.1%) $831.50 an ounce on speculation its recent 12% decline was excessive.
Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com
TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.
The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.
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Dollar Index: During an interview with CNBC on Tuesday, Minneapolis Federal Reserve Bank President Gary Stern said that the decline in energy prices has slowed the inflation outlook, allowing the Fed "to be patient" when it comes to considering raising interest rates. In a recent speech he said that the Fed would need to raise rates "sooner rather than later," but now believes it "pays to be patient" with monetary policy changes. Mr. Stern also said "I think it will be a close call," with regards to whether the U.S. goes into recession. Also on Tuesday Dallas Fed President Richard Fisher, who voted to increase rates last week, said the U.S. faces “a sustained period of anemia” and that “in the second half of this year we will broach zero growth.” And Richmond Fed President Jeffrey Lacker, who isn't an FOMC voter but is known to hawkish, said there is a chance of recession and that “it's hard to gauge when we're going to hit a bottom in housing.” On the charts, the index is continuing to maintain above a weekly resistance trend line drawn from October 12 2006 through June 14 and Aug 16 2007. On the day, the index rose .087 (0.11%) to 76.239.
The Financial Sector: The sector took another hit on Wednesday after Merrill Lynch (MER) Chief Investment Strategist Richard Bernstein said investors are "significantly underestimating" potential losses from credit-related write downs and said the credit crisis is "far from over" and Guy Moszkowski, Merrill's top-rated analyst for securities firms, downgraded Morgan Stanley (MS) whose shares lost 5.53%, Goldman Sachs (GS) which lost 1.43%, Lehman Brothers (LEH) down 3.95% as well as Citigroup (C), whose shares lost 0.73%. "Conditions have deteriorated significantly from July," wrote Moszkowski. "The typical summer slowdown has been exacerbated by renewed fear over credit, the direction of the economy, and home-price depreciation, along with the sudden about-face in the oil price and hedge-fund losses." That led to a broad sell off among financial firms, as the KBW bank Index plunged 4.11%. And in a sign of continuing liquidity stress, The Federal Reserve reported its Term Auction Facility (TAF) offering on Monday lent $25 billion for 84 days with a rate of 2.754%, well above the 2.00% target and 2.25% discount window rates. Bidders had requested a total $54.8B. Monday's auction was the first of the $25B 84day loans, which the Fed said in July would be offered in addition to the $75B 28 day auctions it runs every two weeks. The Fed has said that biweekly TAF auctions will alternate between $75B 28 day loans and $25B 84 day loans as long as financial conditions warrant. The XLF closed on 20.57 after falling 0.61 point (2.88%) on relatively heavy volume of 229,047,378, against the daily average of 174,995,000. Volume in the XLF has increased over 70% on a daily basis since the beginning of July.
class="fullpost">
U.S. Session Wrap Short sellers get naked again?
The rule against naked short selling against 19 financial stocks expired after Tuesday's trading session, and financial stocks took a hit on Wednesday after Merrill Lynch warned the credit crisis is "far from over" while it downgraded the shares of rivals Goldman Sachs, Morgan Stanley and Lehman Brothers. The S.E.C.'s restriction didn't do much for the shares of financial firms anyway, as Arturo Bris, a finance professor at IMD business school in Lausanne, Switzerland, found that the SEC-imposed restraints "contributed to a decline in share prices for the 19 stocks" totaling about $60 billion. Depending on whether you use the IMF ($1 trillion) or Nouriel Roubini ($2 trillion), since financial firms have written off about $500 billion of losses, we're either 50 or 25 percent through the worst credit crisis since the Great Depression. It's almost quaint to think that Lehman's shares declined nearly 50% in 1973 when the firm announced it had lost $6.7 million on some wrong-way interest rate bets.
At the close of floor trading on the NYSE, the DOW was on 11,532.96 after falling 109.51 (0.94%). The index had been down 190 points at one point during the session The S&P closed on 1285.83, down 3.76 (0.29%) while the NASDAQ finished trading on 2428.62 with a decrease of 1.99 (0.08%). Treasuries were actually lower even as traders moved away from equities. The two-year note yield rose 5.3 basis points to 2.472%. The benchmark 10-year note gained 4.6 basis points to yield 3.941%. The dollar was mixed during N.Y. trading, losing to the euro (0.05%) and yen (0.24%) while trading much higher against the pound (1.43%).
In other news, it appears that the Russian/Georgian conflict is taking a new turn. President Bush announced that U.S. military aircraft carrying medical supplies to the Georgian capital of Tblisi left for the area Wednesday morning, warning Russia that he expected it to be allowed to deliver its aid. Russian troops pushed deep into Georgia, aiming to seize the strategic city of Gori and cutting the main highway that crosses the country. It may be possible that Russia might eventually take over control of three BP pipelines that run through the country, but its aims may be to make an economic gain rather than to cut off the supply.
Demand for liquidity by global banks is still in evidence as the Fed, ECB and SNB continued to pump U.S. dollars into the banking system. The ECB said it allocated $20 billion in a 28-day dollar auction and demand was high as total bids amounted to $91.1 billion, more than four times the amount allotted. The funds were offered at a fixed rate of 2.45%. The Fed said it awarded $50 billion in 28 day credit at 2.45% out of $75.46 billion in bids received. The SNB auctioned $4 billion at 2.01%. The bank reported that demand totaled $11.60 billion.
Crude oil for September delivery rose $3.46 (3.06%) to close on $116.47 a barrel after a U.S. government report showed a bigger-than-forecast decline in inventories of gasoline.
Gold futures for December delivery rose $16.90 (2.1%) $831.50 an ounce on speculation its recent 12% decline was excessive.
Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com
TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.
The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.
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JPY Crosses Plunge Overnight on Risk Aversion from Carry Trade, Then Recover in NY Trading
| Daily Forex Fundamentals | Written by CMS Forex | Aug 13 08 21:03 GMT | | |
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JPN GDP For 2nd Quarter Declined 0.6%, Annual Pace at -2.3% Japanese GDP hit forecasts of a 0.6% decline for the 2nd quarter, with annualized GDP falling to -2.3%. The economy had expanded a downwardly revised 3.2% in annual terms in the 1st quarter. Exports declined in the 2nd quarter, the first time that's happened in 3 years. The Japanese stock index, the Nikkei 225, was down 2.1% on the news, which boosted a wave of risk aversion in the Asian session. JPN Current Account Suprlus Shrinks The current account surplus for Japan shrank to Y490 billion. That's the 4th straight month of declines and reflects a similar situation as the GDP data. Foreign demand for Japanese products is stalling, as the BOP basis trade balance showed. AUS Consumer Sentiment Rebounds for August, Wages Rise More Than Expected In Australia, the WMI consumer sentiment increased 9.1%, as consumers felt optimistic about recent drops in oil. Wages in Australia rose 1.2% in the 2nd quarter and are up 4.2% on the year. Those figures beat expectations, and will worry the RBA as it reflects the potential for inflation pressures to continue. AUD/JPY - Aussie Slides vs Yen in Overnight Trading, Recovers in NY Session
The Aussie-Yen pair, a favorite of carry trade because of the high interest rates in Australia and the low ones in Japan, showed a clear case of risk aversion overnight. Traders, seeing the poor GDP and stock performance from Japan, sold the pair down to the 92.10 level. From here the Aussie found support and managed top pare all the overnight losses. UK Claimant Count Up 20K, 6th Month of Increases In the UK, July's claimant count increased by 20K, the highest since December 1992.It's the sixth straight month of increase in unemployment claims and comes on the heel of an upward revision in June. The unemployment rate rose to 5.4% for the 3 months through June, from its previous 5.2%. UK Wages Down, BoE Sees Peak to Inflation, Lowers Growth Projections Wage growth in the UK were down to 3.4%. The data makes it apparent that the labor market in the UK has slackened. The Bank of England's quarterly inflation report suggested that inflation in the UK will come down rapidly after peaking in the next month or so. The bank also cut its growth forecasts, signaling that policy members may be more dovish going forward. GBP/JPY - Pound Sinks vs Yen as Carry Trade Pulls Back Overnight
The Pound-Yen, another favorite for carry trade, was down sharply as well. From an overnight high near 207.40 the pair plunged 450 pips in the Yen's favor, finding support near 202.50. Today's losses came mainly after the BOE report and continued into early NY trading. At its support the pair began to rally somewhat, climbing back to 204.40 in the afternoon. GBP/USD - Pound Tumbles vs Dollar Following BoE Report
The Pound-Dollar pair saw a 250-pip move in 2 hours following the UK releases. After a period of consolidation yesterday, the Pound now breaks below 1.8950, continuing the selling in this pair witnessed last week. The pair was near 2.0 at the beginning of this month. Following the US releases, the Dollar extended its gains to test 1.8650. US Retail Sales Down -0.1% As Auto Sales Dissapoint Against this backdrop, US retail sales data did not have as much impact. Sales fell 0.1%, with the "Core" reading which excludes autos rising 0.4%. The jump in sales seen following the tax rebates has now definitely faded. US Import Prices Climb 1.7% m/m The US import price index climbed 1.7% on the month, and is now running at a 21.6% annual pace. The fall in the Dollar and increase in oil and energy prices are the major factors here. US Business Inventories up 0.7% in June, Sales Up 1.7% US Business inventories were up 0.7% on the month, higher than expected. With sales up 1.7%, the inventory-to-sales ratio decreased yet again to a record low of 1.23. An increase in inventories while sales are also up as well is a positive sign for GDP. USD/JPY - Dollar Falls Overnight to Yen but Recovers in NY Trading
US stocks were down today as the auto industry took a bite out of the sales data and earnings outlooks looked shaky. The Dollar-Yen fell during the Asian session, but support held at 108.40, and the pair was trading 30 pips higher as of 11AM EST. Since hitting a high near 110.30, the Dollar has retreated about 180 pips. Upcoming Releases Tonight, Japan releases its measure of the services industry and New Zealand posts its Manufacturing PMI. Overnight, Switzerland reveals a report on consumer confidence. Germany will post its GDP and CPI data. Also overnight, the Euro-zone releases its CPI and GDP, along with the ECB monthly bulletin. Tomorrow in the US, we get another round of data on consumer prices along with weekly jobless claims. Capital Market Services, L.L.C. ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C. | |
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Yen Crosses are Violent but Present Opportunities
| Daily Forex Technicals | Written by DailyFX | Aug 13 08 21:08 GMT | | |
| The Yen crosses are a violent bunch but there are great opportunities right now. Most notably, the EURJPY may be forming a secondary low. EURJPYWe wrote last week that “a bullish bias is warranted against 158.60 but with 5 waves up from there, the EURJPY is susceptible to a correction back to at least 165.31.” 165.31 gave way and price spiked below the 61.8% of 158.60-169.97, finding support near the 6/4 low of 161.73. There is a chance that a wave 2 low (within the bullish cycle from 158.60) is in place.
GBPJPYThe drop from 250 is in 3 waves to this point (A-B-C). However, the advance from 192.60 is choppy and could therefore be a 4th wave that will give way to a 5th wave that ends below 192.60. As long as price is below the trendline drawn off of the July 2007 and November 2007 highs, the preferred count is that the GBPJPY is headed lower (below 192.60).
CHFJPYThe big picture focus remains on the A-B-C advance from the 2000 low at 58.82. Wave C would equal wave A (arithmetically) at 112.27 but waves A and C do not have to be equal. The advance has already satisfied minimum expectations and a long time support line has acted as resistance since December 2007. Price plummeted from the line and tested 100 today. A cautious bullish bias is warranted against the trendline that is drawn off of the August 2007 and January 2008 lows. Be aware though that a break of that line could lead to a violent sell-off that would not end until below 92.15.
CADJPYThe CADJPY has declined as expected but today's reversal candle suggests that the decline may be nearing an end. As such, we are moving from bearish to neutral. Price remains below the 200 day SMA (which exhibits negative slope), which is bearish. However, a potential inverse head and shoulders pattern has formed, which is a bullish reversal pattern. Signals are mixed…be careful.
AUDJPYCould the AUDJPY be setting up for a larger bullish break? The count above is a bullish triangle. There are of course alternate counts and the pair could still decline near term even under this count and test triangle support near 90.
NZDJPYThe NZDJPY broke down over the last week and dropped to its lowest level since last August only to rebound over 300 pips from today's low. Still, the trend is towards lower prices. Look for resistance near former congestion from earlier this month in the .7850-.79 zone. This level also intersects with the underside of a former support line. TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.
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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Closing Market Recap: Equities and Fixed Income Diverge; Oil Rebounds
Market Updates | Written by CEP News | Aug 13 08 21:35 GMT |
(CEP News) - U.S. equity markets fell for the second day in a row on Wednesday, but interest rate markets didn't follow, in what was a departure from the past week when they moved in lock-step.
Equity markets in Canada and the United States took their cues from commodities. WTI crude oil rallied $2.99 to $116.00 per barrel on the biggest U.S. weekly gasoline supply drawdown in more than 10 years. Gold was also up $16.60 to $831.30. This pulled down U.S. stock markets, but helped the TSX to its best session this month.
Toronto's S&P/TSX composite index closed up 210 points to 13377, the Dow Jones industrial average closed down 110 points to 11533, the S&P 500 closed down 4 points to 1286 and the Nasdaq closed down 2 points to 2429.
Aside from the stock market decline, market participants noted a seemingly solid stream of bond bullish news, including speculation about brokerage writedowns, strong demand for the $50 billion TAF auction and slightly weaker-than-expected U.S. retail sales.
But Treasury traders said a number of factors pushed up yields:
- Technical resistance was a common refrain. Two-year futures, 10-year futures and Eurodollar contracts all opened the session at the top of their four-month ranges and were unable to make a break on low volumes.
- There was an increase in corporate supply, including a pending $3.5 billion issue from Fannie Mae, and mumblings about rate-lock selling.
- WTI crude oil rallied $2.99 to $116.00 per barrel on the biggest U.S. weekly gasoline supply drawdown in more than 10 years. Other commodities were also higher and the rise reignited inflation worries ahead of Thursday's consumer price index report.
- Equity markets rebounded in the afternoon, mitigating the flight-to-quality. After falling as low as 1274, the S&P 500 closed down 4 points to 1286.
- Traders commented on large sales out of Asia. This coincided with an afternoon rally in USD/JPY -- a seemingly contradictory move.
- Business inventories for June were up 0.7%, better than the 0.5% expected and the highest in five months. This follows a string of strong second- quarter figures that economists say will result in upward revisions to Q2 GDP, perhaps to 2.8% from the previously reported 1.9%.
U.S. two-year yields were up 4.9 bps to 2.47%, with five-year yields up 5.8 bps to 3.20%, 10-year yields up 3.6 bps to 3.93% and 30-year yields up 2.6 bps to 4.56%. The Eurodollar March 09 contract was down 4.0 ticks to 96.94. The yield curve was flatter, with the 10/2-year spread down 1.7 bps to 145.94 bps.
Yields on two-year Canadian government bonds were up 4.1 bps to 2.78%, with five-year yields up 3.5 bps to 3.13%, 10-year yields up 1.5 bps to 3.61% and 30-year yields flat at 4.03%. The December 08 BAX contract was down 3.0 ticks to 97.18.
Overseas, the pound sterling was hammered and UK fixed income markets rallied following the release of the Bank of England's Inflation Report. The BOE downgraded its growth forecast and upwardly revised inflation.
The pound was marginally higher ahead of the report, but tumbled swiftly following the release -- from 1.9001 to 1.8696 USD -- the lowest since Oct. 2006.
A multitude of strategists initiated short GBP positions, including RBC's David Watt, who said "the BOE's inflation report highlighted a clear concern with the growth outlook most notably with the potential performance of the domestic economy ¥ There is much greater scope for the BoE to cut rates given the concern over the medium prospects for the UK economy."
Yields on UK two-year bonds were down 16.6 bps to 4.50%, with five-year yields down 14.3 bps to 4.45%, 10-year yields down 3.1 bps to 4.60% and 30-year yields up 2.7 bps to 4.43%.
In Germany, returns on two-year German bonds were down 3.5 bps to 4.01%, with five-year yields down 4.4 bps to 4.01%, 10-year yields down 2.4 bps to 4.21% and 30-year yields flat at 4.63%.
The Canadian dollar was up 0.0010 to 0.9411 against the U.S. dollar (1.0627 USD/CAD) and up 0.29 to 102.99 against the yen.
The U.S. dollar was up 0.22 to 109.45 against the yen and the Dollar Index was up 0.099 to 76.251.
The euro was down 0.0002 to 1.4923 against the U.S. dollar, up 0.0018 to 1.5858 against the Canadian dollar, up 0.0116 to 0.7982 against the pound sterling and was higher by 0.25 to 163.31 against the yen.
All data taken at 5:24 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.
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(CEP News) - U.S. equity markets fell for the second day in a row on Wednesday, but interest rate markets didn't follow, in what was a departure from the past week when they moved in lock-step.
Equity markets in Canada and the United States took their cues from commodities. WTI crude oil rallied $2.99 to $116.00 per barrel on the biggest U.S. weekly gasoline supply drawdown in more than 10 years. Gold was also up $16.60 to $831.30. This pulled down U.S. stock markets, but helped the TSX to its best session this month.
Toronto's S&P/TSX composite index closed up 210 points to 13377, the Dow Jones industrial average closed down 110 points to 11533, the S&P 500 closed down 4 points to 1286 and the Nasdaq closed down 2 points to 2429.
Aside from the stock market decline, market participants noted a seemingly solid stream of bond bullish news, including speculation about brokerage writedowns, strong demand for the $50 billion TAF auction and slightly weaker-than-expected U.S. retail sales.
But Treasury traders said a number of factors pushed up yields:
- Technical resistance was a common refrain. Two-year futures, 10-year futures and Eurodollar contracts all opened the session at the top of their four-month ranges and were unable to make a break on low volumes.
- There was an increase in corporate supply, including a pending $3.5 billion issue from Fannie Mae, and mumblings about rate-lock selling.
- WTI crude oil rallied $2.99 to $116.00 per barrel on the biggest U.S. weekly gasoline supply drawdown in more than 10 years. Other commodities were also higher and the rise reignited inflation worries ahead of Thursday's consumer price index report.
- Equity markets rebounded in the afternoon, mitigating the flight-to-quality. After falling as low as 1274, the S&P 500 closed down 4 points to 1286.
- Traders commented on large sales out of Asia. This coincided with an afternoon rally in USD/JPY -- a seemingly contradictory move.
- Business inventories for June were up 0.7%, better than the 0.5% expected and the highest in five months. This follows a string of strong second- quarter figures that economists say will result in upward revisions to Q2 GDP, perhaps to 2.8% from the previously reported 1.9%.
U.S. two-year yields were up 4.9 bps to 2.47%, with five-year yields up 5.8 bps to 3.20%, 10-year yields up 3.6 bps to 3.93% and 30-year yields up 2.6 bps to 4.56%. The Eurodollar March 09 contract was down 4.0 ticks to 96.94. The yield curve was flatter, with the 10/2-year spread down 1.7 bps to 145.94 bps.
Yields on two-year Canadian government bonds were up 4.1 bps to 2.78%, with five-year yields up 3.5 bps to 3.13%, 10-year yields up 1.5 bps to 3.61% and 30-year yields flat at 4.03%. The December 08 BAX contract was down 3.0 ticks to 97.18.
Overseas, the pound sterling was hammered and UK fixed income markets rallied following the release of the Bank of England's Inflation Report. The BOE downgraded its growth forecast and upwardly revised inflation.
The pound was marginally higher ahead of the report, but tumbled swiftly following the release -- from 1.9001 to 1.8696 USD -- the lowest since Oct. 2006.
A multitude of strategists initiated short GBP positions, including RBC's David Watt, who said "the BOE's inflation report highlighted a clear concern with the growth outlook most notably with the potential performance of the domestic economy ¥ There is much greater scope for the BoE to cut rates given the concern over the medium prospects for the UK economy."
Yields on UK two-year bonds were down 16.6 bps to 4.50%, with five-year yields down 14.3 bps to 4.45%, 10-year yields down 3.1 bps to 4.60% and 30-year yields up 2.7 bps to 4.43%.
In Germany, returns on two-year German bonds were down 3.5 bps to 4.01%, with five-year yields down 4.4 bps to 4.01%, 10-year yields down 2.4 bps to 4.21% and 30-year yields flat at 4.63%.
The Canadian dollar was up 0.0010 to 0.9411 against the U.S. dollar (1.0627 USD/CAD) and up 0.29 to 102.99 against the yen.
The U.S. dollar was up 0.22 to 109.45 against the yen and the Dollar Index was up 0.099 to 76.251.
The euro was down 0.0002 to 1.4923 against the U.S. dollar, up 0.0018 to 1.5858 against the Canadian dollar, up 0.0116 to 0.7982 against the pound sterling and was higher by 0.25 to 163.31 against the yen.
All data taken at 5:24 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
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