By Adria Cimino
Aug. 27 (Bloomberg) -- European stock-index futures declined as higher oil prices hurt the profit outlook for airlines, travel companies and carmakers.
Lufthansa AG, Europe's second-biggest airline, Carnival Plc and Daimler AG may follow their U.S.-traded securities lower as oil rose for a third day. Baloise Holding AG, Switzerland's third-biggest insurer, may be active after profit missed analysts' estimates. Taylor Wimpey Plc, the U.K.'s largest homebuilder, may slip after booking a first-half loss of $2.62 billion and saying it's still in talks with lenders to avoid breaching loan agreements.
Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, slipped 11, or 0.3 percent, to 3,299 at 7:29 a.m. in London. The U.K.'s FTSE 100 Index may open unchanged, according to Cantor Index, a betting firm.
``European equities are looking at a broadly unchanged to slightly softer start to the session,'' Matthew Buckland, a trader at CMC Markets in London, wrote in a note to clients. ``Oil prices remain high with the threat that hurricane Gustav could impact production.''
U.S. stocks advanced yesterday, rebounding from the biggest drop in a month, as higher oil prices boosted energy shares and analysts said Fannie Mae and Freddie Mac have enough capital to last the year. Asian stocks gained today.
The U.S. Federal Deposit Insurance Corp., which provides cover for U.S. bank deposits, may have to tap Treasury Department funds to carry it through an anticipated wave of bank failures, the Wall Street Journal reported, citing chairman Sheila Bair. Bair told the Journal the borrowing wouldn't be to cover any FDIC losses, instead it would provide short-term liquidity to cover bank failures.
Lufthansa, Carnival
American depositary receipts of Lufthansa lost 0.9 percent from the stock's close in Germany. ADRs of Carnival, the world's largest cruise-line company, retreated 0.4 percent from the share's close in the U.K. Daimler, the world's second-biggest maker of luxury cars, ended 0.5 percent lower.
Crude oil rose in New York as meteorologists forecast that Tropical Storm Gustav will enter the Gulf of Mexico, home to more than a fifth of U.S. oil production. The contract for October delivery rose as much as 0.7 percent to $117.12 on the New York Mercantile Exchange. Oil gained 1 percent to $116.27 yesterday.
Baloise reported a 42 percent drop in first-half profit to 268.2 million Swiss francs ($244.9 million) after income from its life business and investments fell. That missed analysts' estimates.
Taylor Wimpey
Taylor Wimpey booked a first-half loss of 1.42 billion pounds ($2.62 billion) after writing down the value of land and said it's still in talks with lenders to avoid breaching loan agreements.
Taylor Nelson Sofres Plc may be active after Manager Magazin reported GfK AG, Germany's biggest market research company, withdrew from the bidding for the company.
GfK withdrew after Apax Partners Worldwide LLP, the company it was planning to make a combined takeover bid with, wanted various controlling rights over Taylor Nelson, the magazine said in an article on its Web site, without saying where it got the information.
Fortis might gain after Ping An Insurance (Group) Co., China's second-largest insurer, bought shares in the company. Ping An paid 10 euros for each share of Fortis in a June share sale by Belgium's biggest financial-services company, spokesman Sheng Ruisheng said.
``Ping An's investment in Fortis is a long-term one,'' Sheng said on a Web cast today. ``Although its share price has fallen a lot this year due to various factors, we're still confident in its future development.''
Heineken, Allianz
Heineken NV, the biggest Dutch brewer, may be active after first-half profit jumped 35 percent to 407 million euros after the purchase of Britain's Scottish & Newcastle Plc.
The brewer in total had 134 million euros of one-time costs, including 59 million euros of reorganization expenses in France. Excluding the one-time costs, analysts had estimated first-half profit of 540 million euros, according to the median estimate of seven analysts surveyed by Bloomberg News.
Allianz SE, Europe's largest insurer, may decide this week whether to sell Dresdner Bank to Commerzbank AG or China Development Bank, three people with knowledge of the matter said.
Spokesmen at Commerzbank, Dresdner and Allianz declined to comment. China Development Bank spokesman Xu Fei didn't answer a call to his mobile phone.
Scor, Antofagasta
Scor SE, France's biggest reinsurer, said first-half net income rose 24 percent to 225 million euros, surpassing analysts' estimates, as it used deferred tax assets to offset costs related to the acquisition of Switzerland's Converium Holding AG.
Antofagasta Plc, the copper producer controlled by Chile's Luksic family, said first-half profit rose 8.8 percent to $792.8 million after output advanced and prices increased.
CNP Assurances SA, France's largest life insurer, said first-half net income rose 1.1 percent to 574 million euros. The company reiterated its forecast for 2008 current net income to rise at least 10 percent.
National Grid Plc, the manager of Britain's power- transmission network, had its recommendation cut to ``equal weight'' from ``overweight'' at Lehman Brothers Holdings Inc.
Seadrill Ltd., the Norwegian oil-rig company set up by billionaire John Fredriksen, was upgraded to ``buy'' from ``hold'' at RBS.
Nokia Oyj and Samsung Electronics Co., the world's two biggest makers of mobile phones, gained market share in the second quarter as global handset sales rose 12 percent, Gartner Inc. said.
Nokia raised its market share by unit sales to 39.5 percent from 36.7 percent a year earlier, the market research company said. Samsung increased its share to 15.2 percent from 13.3 percent.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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Wednesday, August 27, 2008
Costain, Taylor Wimpey, Paddy Power: U.K., Irish Equity Preview
By Jonathan Browning
Aug. 27 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses and prices are from the last market close.
The benchmark FTSE 100 Index declined 34.9, or 0.6 percent, to 5470.70. The FTSE All-Share Index fell 0.6 percent, and Ireland's ISEQ Index rose 0.6 percent.
U.K. companies:
Antofagasta Plc (ANTO LN): The copper producer controlled by Chile's Luksic family is scheduled to report earnings. The shares fell 5 pence, or 0.9 percent, to 570 pence.
Ark Therapeutics Group Plc (AKT LN): The U.K. developer of gene-based medicines is scheduled to publish earnings. The stock declined 0.5 pence, or 0.7 percent, to 67 pence.
Brit Insurance Holdings Plc (BRE LN): The Lloyd's of London insurer is scheduled to report earnings. The stock fell 5.75 pence, or 3 percent, to 185.5 pence.
Costain Group Plc (COST LN): The U.K.'s oldest construction company is scheduled to publish earnings. The shares rose 0.5 pence, or 2 percent, to 25.25 pence.
G4S Plc (GFS LN): The world's second-largest security company is scheduled to report earnings. The shares declined 1.25 pence, or 0.6 percent, to 211.5 pence.
Hargreaves Lansdown Plc (HL/ LN): The U.K. financial adviser that raised $370 million in an initial public offering last year is scheduled to publish earnings. The shares fell 3.75 pence, or 2.3 percent, to 160.75 pence.
Johnston Press Plc (JPR LN): The publisher of U.K. regional newspapers including the Yorkshire Post is scheduled to publish earnings. The stock dropped 0.25 pence, or 0.5 percent, to 51 pence.
Moneysupermarket.com Group Plc (MONY LN): The U.K. company, whose Web sites allow users to compare finance and travel prices, is scheduled to report earnings. The shares dropped 6.5 pence, or 7.8 percent, to 76.5 pence.
Petrofac Ltd. (PFC LN): The U.K.-based oil and gas services provider is scheduled to report earnings. The shares rose 5.5 pence, or 0.9 percent, to 592.5 pence.
Plaza Centers NV (PLAZ LN): The Israeli builder controlled by Mordechay Zisser is scheduled to report earnings. The shares rose 0.75 pence, or 0.7 percent, to 115.5 pence.
Segro Plc (SGRO LN): Britain's largest owner of business parks is scheduled to publish earnings. The shares fell 3.5 pence, or 0.8 percent, to 420.25 pence.
Serco Group Plc (SRP LN): The U.K. services company that operates London's Docklands Light Railway is scheduled to report earnings.
Severfield-Rowen Plc (SFR LN): The U.K. steel supplier that helped build Arsenal Football Club's stadium is scheduled to report earnings. The stock rose 15 pence, or 6.4 percent, to 251 pence.
Spirax-Sarco Engineering Plc (SPX LN): The world's biggest maker of steam-driven pumps is scheduled to publish earnings. The stock declined 8 pence, or 0.7 percent, to 1090 pence.
Taylor Nelson Sofres Plc (TNS LN): The U.K. market research company facing a hostile bid from WPP Group Plc is scheduled to publish earnings. The stock rose 0.25 pence, or 0.1 percent, to 268.75 pence.
Taylor Wimpey Plc (TW/ LN): The U.K.'s largest homebuilder is scheduled to report earnings. The shares rose 6.5 pence, or 14.3 percent, to 52 pence.
Tullow Oil Plc (TLW LN): The U.K. explorer with the most exploration licenses in Africa is scheduled to report earnings. The shares rose 2.3 pence, or 2.2 percent, to 105.75 pence.
Vitec Group Plc (VTC LN): The U.K. broadcast-equipment maker that helped NBC cover the Beijing Olympics is scheduled to report earnings. The shares dropped 1.75 pence, or 0.4 percent, to 413.5 pence.
Yule Catto & Co. (YULC LN): A U.K. supplier of drug and cosmetic ingredients is scheduled to publish earnings. The shares dropped 1 penny, or 0.7 percent, to 139.25.
Irish companies:
Glanbia Plc (GLB ID): The producer of a third of Ireland's milk and cheese is scheduled to publish earnings. The stock fell 5 cents or 1.1 percent, to 4.55 euros.
Independent News & Media Plc (INM ID): The publisher of the U.K.'s Independent newspaper is scheduled to report earnings. The stock fell 5 cents, or 3.4 percent, to 1.42 euros.
Kingspan Group Plc (KSP ID): Europe's largest maker of flooring and insulation panels is scheduled to report earnings. The shares fell 15 cents, or 2.1 percent, to 6.99 euros.
Paddy Power Plc (PWL ID): Ireland's largest bookmaker is scheduled to report earnings. The stock fell 5 cents, or 0.3 percent, to 16.05 euros.
To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net
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Aug. 27 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses and prices are from the last market close.
The benchmark FTSE 100 Index declined 34.9, or 0.6 percent, to 5470.70. The FTSE All-Share Index fell 0.6 percent, and Ireland's ISEQ Index rose 0.6 percent.
U.K. companies:
Antofagasta Plc (ANTO LN): The copper producer controlled by Chile's Luksic family is scheduled to report earnings. The shares fell 5 pence, or 0.9 percent, to 570 pence.
Ark Therapeutics Group Plc (AKT LN): The U.K. developer of gene-based medicines is scheduled to publish earnings. The stock declined 0.5 pence, or 0.7 percent, to 67 pence.
Brit Insurance Holdings Plc (BRE LN): The Lloyd's of London insurer is scheduled to report earnings. The stock fell 5.75 pence, or 3 percent, to 185.5 pence.
Costain Group Plc (COST LN): The U.K.'s oldest construction company is scheduled to publish earnings. The shares rose 0.5 pence, or 2 percent, to 25.25 pence.
G4S Plc (GFS LN): The world's second-largest security company is scheduled to report earnings. The shares declined 1.25 pence, or 0.6 percent, to 211.5 pence.
Hargreaves Lansdown Plc (HL/ LN): The U.K. financial adviser that raised $370 million in an initial public offering last year is scheduled to publish earnings. The shares fell 3.75 pence, or 2.3 percent, to 160.75 pence.
Johnston Press Plc (JPR LN): The publisher of U.K. regional newspapers including the Yorkshire Post is scheduled to publish earnings. The stock dropped 0.25 pence, or 0.5 percent, to 51 pence.
Moneysupermarket.com Group Plc (MONY LN): The U.K. company, whose Web sites allow users to compare finance and travel prices, is scheduled to report earnings. The shares dropped 6.5 pence, or 7.8 percent, to 76.5 pence.
Petrofac Ltd. (PFC LN): The U.K.-based oil and gas services provider is scheduled to report earnings. The shares rose 5.5 pence, or 0.9 percent, to 592.5 pence.
Plaza Centers NV (PLAZ LN): The Israeli builder controlled by Mordechay Zisser is scheduled to report earnings. The shares rose 0.75 pence, or 0.7 percent, to 115.5 pence.
Segro Plc (SGRO LN): Britain's largest owner of business parks is scheduled to publish earnings. The shares fell 3.5 pence, or 0.8 percent, to 420.25 pence.
Serco Group Plc (SRP LN): The U.K. services company that operates London's Docklands Light Railway is scheduled to report earnings.
Severfield-Rowen Plc (SFR LN): The U.K. steel supplier that helped build Arsenal Football Club's stadium is scheduled to report earnings. The stock rose 15 pence, or 6.4 percent, to 251 pence.
Spirax-Sarco Engineering Plc (SPX LN): The world's biggest maker of steam-driven pumps is scheduled to publish earnings. The stock declined 8 pence, or 0.7 percent, to 1090 pence.
Taylor Nelson Sofres Plc (TNS LN): The U.K. market research company facing a hostile bid from WPP Group Plc is scheduled to publish earnings. The stock rose 0.25 pence, or 0.1 percent, to 268.75 pence.
Taylor Wimpey Plc (TW/ LN): The U.K.'s largest homebuilder is scheduled to report earnings. The shares rose 6.5 pence, or 14.3 percent, to 52 pence.
Tullow Oil Plc (TLW LN): The U.K. explorer with the most exploration licenses in Africa is scheduled to report earnings. The shares rose 2.3 pence, or 2.2 percent, to 105.75 pence.
Vitec Group Plc (VTC LN): The U.K. broadcast-equipment maker that helped NBC cover the Beijing Olympics is scheduled to report earnings. The shares dropped 1.75 pence, or 0.4 percent, to 413.5 pence.
Yule Catto & Co. (YULC LN): A U.K. supplier of drug and cosmetic ingredients is scheduled to publish earnings. The shares dropped 1 penny, or 0.7 percent, to 139.25.
Irish companies:
Glanbia Plc (GLB ID): The producer of a third of Ireland's milk and cheese is scheduled to publish earnings. The stock fell 5 cents or 1.1 percent, to 4.55 euros.
Independent News & Media Plc (INM ID): The publisher of the U.K.'s Independent newspaper is scheduled to report earnings. The stock fell 5 cents, or 3.4 percent, to 1.42 euros.
Kingspan Group Plc (KSP ID): Europe's largest maker of flooring and insulation panels is scheduled to report earnings. The shares fell 15 cents, or 2.1 percent, to 6.99 euros.
Paddy Power Plc (PWL ID): Ireland's largest bookmaker is scheduled to report earnings. The stock fell 5 cents, or 0.3 percent, to 16.05 euros.
To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net
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Japan Stocks Fall on Developer's Bankruptcy; Papermakers Rise
By Masaki Kondo
Aug. 27 (Bloomberg) -- Japan's stocks fell after developer Sohken Homes Co. filed for bankruptcy, sparking concern consumers are holding back on purchases as the economy slows.
Sumitomo Realty & Development Co., Japan's third-biggest developer, slumped 2.9 percent while Sohken tumbled by its daily limit. Nissan Motor Co., Japan's third-largest automaker, dropped 4.7 percent after Morgan Stanley cut its price target. Nippon Paper Group Inc. led a gauge of papermakers to the biggest gain in three weeks as investors flocked to companies whose earnings are relatively resilient against an economic slowdown.
``If consumers were confident their salaries would remain secure, they'd buy condos and homes even with 30-year loans,'' said Yoshihiro Ito, senior strategist at Okasan Asset Management Co. in Tokyo, which oversees about $9.3 billion. ``With rising prices and stagnant income growth, that isn't the case now.''
The Nikkei 225 Stock Average dropped 25.75, or 0.2 percent, to close at 12,752.96 in Tokyo. The broader Topix index retreated 5.66, or 0.5 percent, to 1,223.69. More than two stocks declined for each that rose on the Topix.
Failures at rival developers exacerbated a worsening property market and difficulty in refinancing debt, Sohken said yesterday when it filed for court protection from 33.9 billion yen ($310 million) in liabilities.
The collapse followed those of the parent of Asahi Homes Co. on Aug. 25 and condominium builder Urban Corp., which became Japan's biggest bankruptcy case in six years on Aug. 13. Bankruptcies among Japanese property companies more than doubled to 60 in July from a year earlier, according to Tokyo Shoko Research Ltd.
Nikkei futures expiring in September dipped 0.2 percent to 12,760 in Osaka and slumped 0.3 percent to 12,750 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Asian Stocks Gain, Led by Woodside, China Cosco on Earnings
By Chen Shiyin
Enlarge Image/Details
Aug. 27 (Bloomberg) -- Asian stocks gained, led by commodities producers and shipping companies, after Woodside Petroleum Ltd.'s earnings beat estimates and China Cosco Holdings Co. and Jiangxi Copper Co. said profit climbed.
Woodside, Australia's No. 2 oil and gas producer, jumped 3.9 percent as a new project and higher prices boosted profit. China Cosco, Asia's largest shipping company by market value, climbed 2.3 percent in Hong Kong after surging Chinese demand for raw materials helped net income more than double. Jiangxi Copper Co., China's biggest smelter of the metal, rose 2.8 percent.
``We're positive on commodities companies in the longer term as emerging-market usage of raw materials continue to grow,'' said Michael Foo, Singapore-based head of Asian portfolio management at Clariden Leu AG, which manages the equivalent of $126 billion in assets globally. ``Still, we remain cautious as a slowing economy is going to have a negative impact on earnings in the next few months.''
The MSCI Asia-Pacific Index gained 0.5 percent to 123.01 as of 2:15 p.m. in Tokyo, rebounding from a loss of as much as 0.2 percent. The regional measure has dropped 22 percent this year as the world's largest financial companies posted writedowns and credit losses of more than $500 billion, and inflation soared.
Japan's Nikkei 225 Stock Average slipped 0.2 percent to 12,752.88, paced by Mitsubishi Estate Co., after rival developer Sohken Homes Co. filed for bankruptcy. About half the region's stock indexes gained.
Ratings Downgrade
Macquarie Group Ltd. dropped to the lowest in almost four years as UBS AG downgraded Australia's biggest securities firm, saying the operating environment remains ``difficult.'' Hyundai Heavy Industries Co., the world's No. 1 shipbuilder, slumped after saying it plans to bid for a stake in Daewoo Shipbuilding & Marine Engineering Co.
U.S. stocks advanced yesterday, rebounding from the biggest drop in a month. Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, jumped after Citigroup Inc. analysts said the companies have enough capital to last the year. Futures for the Standard & Poor's 500 Index rose 0.1 percent today.
Woodside gained A$2.18 to A$58.68, set for its highest close since July 16. The company posted first-half profit of A$1.02 billion ($874 million) on record prices, topping the median forecast of A$939.3 million in a Bloomberg survey of analysts.
The shares also gained after crude oil for October delivery rose 1 percent to $116.27 a barrel in New York yesterday on forecasts showing that Hurricane Gustav may enter the Gulf of Mexico, home to more than a fifth of U.S. oil production. Futures were at $116.91 today.
Oil Producers
Inpex Holdings Inc., Japan's largest oil explorer, added 1.2 percent to 1.141 million yen. PetroChina Co., China's biggest explorer, climbed 2.2 percent to HK$10.18 in Hong Kong.
Cnooc Ltd., China's No. 1 offshore oil company, rose 3.2 percent to HK$11.56 in Hong Kong. The company may say today first-half net income rose 52 percent to 22.1 billion yuan ($3.2 billion), according to the median estimate of five analysts surveyed by Bloomberg.
China Cosco climbed 34 cents to HK$14.92 in Hong Kong. Net income rose to 15.1 billion yuan ($2.2 billion) in the first half from 7.2 billion yuan a year earlier, the shipping line said.
Jiangxi Copper rose 2.8 percent to HK$11.86, poised for its highest close since Aug. 7. First-half profit rose 32 percent to 2.77 billion yuan ($404 million) because of a surge in byproduct prices, the company said.
Sime Darby Bhd., Malaysia's No. 1 palm-oil producer, gained 2.3 percent to 6.60 ringgit after saying fourth-quarter profit climbed 60 percent amid a jump in the price of the commodity.
Property Revaluations
Macquarie plunged 8.9 percent to A$41.95, on course for its lowest close since November 2004, after UBS cut its rating to ``neutral'' from ``buy,'' saying that slower stock and commodities trading and fewer investment bank deals will hurt earnings. The company also has ``less capital flexibility'' amid the global credit crunch, UBS said.
Also in Sydney, GPT Group dropped 2.7 percent to A$1.655 after reporting a first-half loss on writedowns to property and goodwill. The Australian real estate investment trust may sell as much as A$4.4 billion ($3.8 billion) of assets, GPT said today.
``People are expecting another reasonably large round of write-offs to come out of the investment banks,'' said Angus Gluskie, who helps oversee $500 million at White Funds Management in Sydney. ``It's been a weak time for the property market. We're expecting to see continued downward revaluations on property assets over upcoming periods.''
Mitsubishi Estate, Japan's second-biggest property developer, dropped 1.9 percent to 2,380 yen. Sumitomo Realty & Development Co., the third-largest, fell 1.9 percent to 2,380 yen.
Sohken Bankruptcy
The deteriorating Japanese property market and difficulty refinancing debt have been exacerbated by failures of other developers, Sohken said yesterday after markets shut. The company filed for court protection from creditors with liabilities of 33.9 billion yen ($309 million).
Bankruptcies among Japanese property companies more than doubled to 60 in July from a year earlier, according to Tokyo Shoko Research Ltd.
In South Korea, Hyundai Heavy dropped 3.1 percent to 236,500 won after the world's largest shipbuilder said it plans to bid for a controlling stake in Daewoo Shipbuilding & Marine Engineering Co. It's competing with Posco, GS Group and Hanwha Group to acquire a 50.4 percent holding being sold by state-run Korea Development Bank and Korea Asset Management Corp.
``We question Hyundai Heavy's rationale in buying another shipbuilder at this point in the cycle amid its own capacity expansion,'' Sanjeev Rana, an analyst at Merrill Lynch & Co., wrote in a report today. Hyundai Heavy's bid ``is likely to intensify the bidding war,'' said Rana, who rates the shipbuilder's stock ``underperform.''
Daewoo Shipbuilding, the world's third-largest maker of ships, rose 2 percent to 35,400 won.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net
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Enlarge Image/Details
Aug. 27 (Bloomberg) -- Asian stocks gained, led by commodities producers and shipping companies, after Woodside Petroleum Ltd.'s earnings beat estimates and China Cosco Holdings Co. and Jiangxi Copper Co. said profit climbed.
Woodside, Australia's No. 2 oil and gas producer, jumped 3.9 percent as a new project and higher prices boosted profit. China Cosco, Asia's largest shipping company by market value, climbed 2.3 percent in Hong Kong after surging Chinese demand for raw materials helped net income more than double. Jiangxi Copper Co., China's biggest smelter of the metal, rose 2.8 percent.
``We're positive on commodities companies in the longer term as emerging-market usage of raw materials continue to grow,'' said Michael Foo, Singapore-based head of Asian portfolio management at Clariden Leu AG, which manages the equivalent of $126 billion in assets globally. ``Still, we remain cautious as a slowing economy is going to have a negative impact on earnings in the next few months.''
The MSCI Asia-Pacific Index gained 0.5 percent to 123.01 as of 2:15 p.m. in Tokyo, rebounding from a loss of as much as 0.2 percent. The regional measure has dropped 22 percent this year as the world's largest financial companies posted writedowns and credit losses of more than $500 billion, and inflation soared.
Japan's Nikkei 225 Stock Average slipped 0.2 percent to 12,752.88, paced by Mitsubishi Estate Co., after rival developer Sohken Homes Co. filed for bankruptcy. About half the region's stock indexes gained.
Ratings Downgrade
Macquarie Group Ltd. dropped to the lowest in almost four years as UBS AG downgraded Australia's biggest securities firm, saying the operating environment remains ``difficult.'' Hyundai Heavy Industries Co., the world's No. 1 shipbuilder, slumped after saying it plans to bid for a stake in Daewoo Shipbuilding & Marine Engineering Co.
U.S. stocks advanced yesterday, rebounding from the biggest drop in a month. Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, jumped after Citigroup Inc. analysts said the companies have enough capital to last the year. Futures for the Standard & Poor's 500 Index rose 0.1 percent today.
Woodside gained A$2.18 to A$58.68, set for its highest close since July 16. The company posted first-half profit of A$1.02 billion ($874 million) on record prices, topping the median forecast of A$939.3 million in a Bloomberg survey of analysts.
The shares also gained after crude oil for October delivery rose 1 percent to $116.27 a barrel in New York yesterday on forecasts showing that Hurricane Gustav may enter the Gulf of Mexico, home to more than a fifth of U.S. oil production. Futures were at $116.91 today.
Oil Producers
Inpex Holdings Inc., Japan's largest oil explorer, added 1.2 percent to 1.141 million yen. PetroChina Co., China's biggest explorer, climbed 2.2 percent to HK$10.18 in Hong Kong.
Cnooc Ltd., China's No. 1 offshore oil company, rose 3.2 percent to HK$11.56 in Hong Kong. The company may say today first-half net income rose 52 percent to 22.1 billion yuan ($3.2 billion), according to the median estimate of five analysts surveyed by Bloomberg.
China Cosco climbed 34 cents to HK$14.92 in Hong Kong. Net income rose to 15.1 billion yuan ($2.2 billion) in the first half from 7.2 billion yuan a year earlier, the shipping line said.
Jiangxi Copper rose 2.8 percent to HK$11.86, poised for its highest close since Aug. 7. First-half profit rose 32 percent to 2.77 billion yuan ($404 million) because of a surge in byproduct prices, the company said.
Sime Darby Bhd., Malaysia's No. 1 palm-oil producer, gained 2.3 percent to 6.60 ringgit after saying fourth-quarter profit climbed 60 percent amid a jump in the price of the commodity.
Property Revaluations
Macquarie plunged 8.9 percent to A$41.95, on course for its lowest close since November 2004, after UBS cut its rating to ``neutral'' from ``buy,'' saying that slower stock and commodities trading and fewer investment bank deals will hurt earnings. The company also has ``less capital flexibility'' amid the global credit crunch, UBS said.
Also in Sydney, GPT Group dropped 2.7 percent to A$1.655 after reporting a first-half loss on writedowns to property and goodwill. The Australian real estate investment trust may sell as much as A$4.4 billion ($3.8 billion) of assets, GPT said today.
``People are expecting another reasonably large round of write-offs to come out of the investment banks,'' said Angus Gluskie, who helps oversee $500 million at White Funds Management in Sydney. ``It's been a weak time for the property market. We're expecting to see continued downward revaluations on property assets over upcoming periods.''
Mitsubishi Estate, Japan's second-biggest property developer, dropped 1.9 percent to 2,380 yen. Sumitomo Realty & Development Co., the third-largest, fell 1.9 percent to 2,380 yen.
Sohken Bankruptcy
The deteriorating Japanese property market and difficulty refinancing debt have been exacerbated by failures of other developers, Sohken said yesterday after markets shut. The company filed for court protection from creditors with liabilities of 33.9 billion yen ($309 million).
Bankruptcies among Japanese property companies more than doubled to 60 in July from a year earlier, according to Tokyo Shoko Research Ltd.
In South Korea, Hyundai Heavy dropped 3.1 percent to 236,500 won after the world's largest shipbuilder said it plans to bid for a controlling stake in Daewoo Shipbuilding & Marine Engineering Co. It's competing with Posco, GS Group and Hanwha Group to acquire a 50.4 percent holding being sold by state-run Korea Development Bank and Korea Asset Management Corp.
``We question Hyundai Heavy's rationale in buying another shipbuilder at this point in the cycle amid its own capacity expansion,'' Sanjeev Rana, an analyst at Merrill Lynch & Co., wrote in a report today. Hyundai Heavy's bid ``is likely to intensify the bidding war,'' said Rana, who rates the shipbuilder's stock ``underperform.''
Daewoo Shipbuilding, the world's third-largest maker of ships, rose 2 percent to 35,400 won.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net
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Big Turkish Weddings Ravaged by Runaway Inflation Erdogan Abets
By Steve Bryant and Ben Holland
Aug. 27 (Bloomberg) -- At Denizati, a bakery in Turkey's capital city of Ankara, customers can no longer afford the top-priced cream and pistachio wedding cakes because of high food and fuel prices. As the cost of flour and sugar has more than doubled since 2007, the family owned bakery has had to fire 4 of its 15 employees.
The bakery is one of the fortunate shops on Hosdere Street in central Ankara. In a five-block stretch of the street, 10 businesses are up for sale or shuttered. ``Customers aren't coming anymore,'' says Hanim Baltici, manager of the Kartal liquor store, which will close if no one buys it. ``They're all in debt, and every penny they earn goes straight to the bank.''
After a six-year boom, marked by the construction of multistory shopping malls, art and history museums and a highway network to replace potholed roads, Turkey's $660 billion economy is racked by inflation once again. Driven by record commodity prices and a surge in government spending, the rate jumped to 12.1 percent in July from a 37-year low of 6.9 percent a year earlier.
As inflation quickens, the economy is slowing, reminding Turks of the stagflation that ravaged the nation in 2000 and '01 and shaking their confidence in Central Bank Governor Durmus Yilmaz.
``Inflation is like high blood pressure: Once you have it, it's very difficult to get rid of,'' says Ersin Ozince, the 55-year-old chief executive officer of Turkiye Is Bankasi AS, the country's second-biggest publicly traded bank. ``We need to be very decisive and very careful now because of the painful experiences of the past.''
Islamists and Secularists
The political turmoil in Turkey -- the only Muslim member of the North Atlantic Treaty Organization and a Western ally in the fight against terrorism -- isn't helping.
In July, the Constitutional Court put an end to the latest confrontation between the Islamists who control the government and secularists. The armed forces, who head the secularist camp, have toppled four governments since 1960. They're fighting the ruling Justice and Development Party, known as the AKP, for pushing Islamic practices such as the wearing of headscarves.
The court rejected a lawsuit to outlaw the party for mixing politics and religion while also punishing the AKP by slashing its state funding in half to $20 million for next year.
Fighting the Kurds
Two days before the ruling, terrorists ignited two bombs on a busy Istanbul shopping street that killed 17 people and injured more than 150. The government of Prime Minister Recep Tayyip Erdogan responded by using warplanes to bomb the mountain positions of the Kurdistan Workers' Party, whom the government suspects was behind the Istanbul attacks.
Turkey's two-decade battle against the autonomy- seeking Kurds helps explain why it has NATO's second- largest army, which devoured almost 10 percent of the national budget last year.
Erdogan, 54, is becoming more spendthrift, particularly now that he's no longer reined in by an International Monetary Fund accord. In 2005, Erdogan agreed to IMF-backed budget targets in exchange for a $10 billion loan to pay off debt stemming from the government's rescue of the banking system four years earlier. The spate of bank failures was caused by unregulated lending and helped push inflation above 70 percent at the start of 2002.
Erdogan Defies IMF
Last year, in an appeal to voters prior to the general election, the AKP violated the IMF accord by boosting spending to bring drinking water to isolated villages and distribute free food and household supplies to 500,000 of Ankara's 4 million inhabitants.
The AKP, which also tried to criminalize adultery in 2004 in a country that's 99 percent Muslim, won the election with 47 percent of the vote. The percentage of voters backing the AKP over 13 other parties was the largest in a general election in more than four decades.
The prime minister is now opening the spigot even wider. In May, during the same week in which the IMF agreement expired, the government announced plans to invest $15 billion over five years in farm irrigation and new roads in the largely Kurdish, southeastern part of the country.
The spending, which may help Erdogan win elections in March in this region, will turn a budget surplus of 1.9 billion liras ($1.6 billion) in the first half of the year into a 15.9 billion-lira deficit by the end of 2008, according to government projections.
Inflation Fears
``There is fiscal loosening, and it will not bode well for inflation,'' says Asli Savranoglu, an economist at EFG Istanbul Securities. ``Spending will no doubt increase ahead of the local elections, and the municipalities have probably started to spend more than budgeted already.''
Erdogan's stepped-up spending comes as a 43 percent jump in global food prices in the 12 months through June and $120-a-barrel oil batter Turkey's economy. In a nation that relies on imports for 95 percent of its energy, the cost of a ferry trip across the Bosporus waterway dividing the European and Asian halves of Istanbul jumped 22 percent to 1.40 liras in June alone.
High oil and natural gas costs, as well as the lira's appreciation during the past two years, widened Turkey's trade gap to $37 billion in the first half of 2008 from $27.7 billion a year earlier.
Central Bank Stumbles
Yilmaz, the 61-year-old central bank governor, has stumbled in trying to check inflation. The bank won its independence from government control in 2001 as a prelude to the IMF accord. Yilmaz, a City University, London- trained economist, worked at the bank for 26 years before he was promoted to the top spot in April 2006.
He wasn't the government's first choice: one AKP candidate, who was rejected by then President Ahmet Necdet Sezer, was the head of an Islamic bank that follows instructions from the Koran to avoid interest payments.
Within a month of becoming governor, Yilmaz reversed three years of steady cuts that had taken the benchmark overnight borrowing rate to a low of 13.25 percent from 80 percent in 2001. The governor, in moving to boost the slumping lira, added 4.25 percentage points to the rate in the space of two months. The currency rebounded 6 percent in July 2006 after the rate hike to 17.5 percent.
Yilmaz Under Pressure
The following year, government ministers and industrialists, concerned about an economic slowdown, began publicly attacking the higher rates. Although Yilmaz ratcheted down the rate to 16.75 percent in August, arguing that inflation was slowing toward his 4 percent target for 2008, that wasn't low enough for exporters and labor unions, which placed full-page ads in national newspapers.
``Don't let employment and production die,'' the Turkish Exporters Assembly and the country's largest unions said in their Oct. 16 ads. ``Don't just act like you're cutting interest rates, really cut them.''
Yilmaz's series of four more cuts to 15.25 percent by February 2008 prompted economists and investors to question the bank's independence from political pressure. ``The central bank is still maturing into its autonomy,'' Isbank's Ozince says. ``Even central banks can make mistakes, but it's hard to steer the right path, because unknown factors can dominate, especially in shallow waters like Turkey's.''
Missing Targets
Only three months later, in May, as it became clear that the governor would miss his inflation target for the third straight year, Yilmaz began hiking rates again, to 16.75 percent. He also set a higher inflation target of 7.5 percent for 2009.
``They've been missing inflation targets for too long,'' says Jean-Dominique Butikofer, who helps manage about $725 million as head of emerging-market debt at Union Bancaire Privee in Zurich. ``They should have reacted much earlier on rates. The jury is still out to decide if inflation is being tackled or not.''
As industrial leaders launch a new round of barbs at Yilmaz -- Nurettin Ozdebir, chairman of the Ankara Chamber of Industry, called the central bank ``cowardly and timid'' in July -- the governor has little room to move. After the economy expanded at an annual rate of almost 7 percent in the six years from 2002, Turkey began slowing down.
Growth Slows
The bank's July survey of about 80 economists and businesses forecasts growth of 4 percent this year and 4.5 percent in 2009. ``The data shows us that the economy is continuing to slow down,'' Yilmaz said on July 28. ``Domestic sales, production and indicators of confidence support this view.''
Turkey's six-year expansion -- the longest in its history --has been fueled by tighter bank regulations, the sale of state-owned companies and a surge in investment from overseas. The AKP drew in $51 billion in foreign direct investment in the three years to 2007, more than the combined total of all the governments before it. The funding, along with IMF-mandated tight budgets, allowed the government to reduce public-sector debt to 39 percent of the country's gross domestic product last year from 74 percent in 2002.
Modern Art Museum
As wealth grew in Istanbul, property developers swarmed to its dilapidated 19th-century buildings, described in melancholy terms in Nobel Prize laureate Orhan Pamuk's memoir Istanbul: Memories and the City (Knopf, 2005). Investors converted them into chic apartment buildings, cafes and restaurants as real estate prices in the country's commercial hub rose to rival London's.
Luxury department store chain Harvey Nichols, based in London, opened an 8,000-square-meter (86,000-square-foot) branch in Istanbul in 2006. And Eczacbasi Group, a Turkish ceramics and pharmaceuticals company, took a waterside warehouse and turned it into Istanbul Modern, the country's first privately funded modern art museum, complete with an elegant bar where well-heeled Istanbulites sip California pinot noir overlooking the Bosporus Strait.
Foreign companies also went on a buying spree in Turkey. Citigroup Inc., General Electric Co., ING Groep NV and Vodafone Plc bought Turkish banks and mobile phone companies. By the end of 2007, 9 of Turkey's 10 biggest nonstate banks had an international owner or partner, and all three mobile phone networks were majority owned by foreigners.
Fivefold Stock Gain
The ISE National 100 Index, Turkey's benchmark stock index, rose more than fivefold from the beginning of 2003 to the end of '07 and reached a high of 58,231.9 on Oct. 15, 2007.
This year, the measure fell as much as 40 percent to a low of 33,208.24 on July 1 as the court battle over AKP's future scared investors away. While the market rebounded in anticipation of the party's legal victory, the wrestling between secularists and the AKP has distracted Turkey from its decades-old project of European Union membership.
The EU says the government should do more to meet membership criteria by rescinding laws used to prosecute writers and intellectuals including Pamuk, restoring property seized from non-Muslim religious groups, allowing more competition and enforcing environmental standards.
Erdogan's Pledge
A day after the court ruling, Erdogan pledged to keep his government on a secular footing and the nation on the road to the EU. That would help lure back investors and keep the economy growing. In the first six months of the year, foreign direct investment fell to $7.6 billion from $12.5 billion in the same period of 2007.
Some analysts question whether the prime minister will keep his word. Erdogan made a similar speech a year ago after his party won the general elections by a landslide. Six months later, he proposed Islam-inspired legislation, including an end to the headscarf ban for students.
Yilmaz, for his part, hasn't responded directly to his critics. He does say the bank needs to gain the public's confidence. ``We've been defeated by inflation; there's no question about it,'' Yilmaz said in a speech to business leaders in June. ``From now on, our credibility depends on what we do. We can win it back.''
More than the governor's reputation is at stake. Higher inflation will likely lead to the shuttering of more businesses such as those along Hosdere Street, dragging the economy down even further.
To contact the reporters on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net; Ben Holland in Istanbul at bholland1@bloomberg.net.
Read more...
Aug. 27 (Bloomberg) -- At Denizati, a bakery in Turkey's capital city of Ankara, customers can no longer afford the top-priced cream and pistachio wedding cakes because of high food and fuel prices. As the cost of flour and sugar has more than doubled since 2007, the family owned bakery has had to fire 4 of its 15 employees.
The bakery is one of the fortunate shops on Hosdere Street in central Ankara. In a five-block stretch of the street, 10 businesses are up for sale or shuttered. ``Customers aren't coming anymore,'' says Hanim Baltici, manager of the Kartal liquor store, which will close if no one buys it. ``They're all in debt, and every penny they earn goes straight to the bank.''
After a six-year boom, marked by the construction of multistory shopping malls, art and history museums and a highway network to replace potholed roads, Turkey's $660 billion economy is racked by inflation once again. Driven by record commodity prices and a surge in government spending, the rate jumped to 12.1 percent in July from a 37-year low of 6.9 percent a year earlier.
As inflation quickens, the economy is slowing, reminding Turks of the stagflation that ravaged the nation in 2000 and '01 and shaking their confidence in Central Bank Governor Durmus Yilmaz.
``Inflation is like high blood pressure: Once you have it, it's very difficult to get rid of,'' says Ersin Ozince, the 55-year-old chief executive officer of Turkiye Is Bankasi AS, the country's second-biggest publicly traded bank. ``We need to be very decisive and very careful now because of the painful experiences of the past.''
Islamists and Secularists
The political turmoil in Turkey -- the only Muslim member of the North Atlantic Treaty Organization and a Western ally in the fight against terrorism -- isn't helping.
In July, the Constitutional Court put an end to the latest confrontation between the Islamists who control the government and secularists. The armed forces, who head the secularist camp, have toppled four governments since 1960. They're fighting the ruling Justice and Development Party, known as the AKP, for pushing Islamic practices such as the wearing of headscarves.
The court rejected a lawsuit to outlaw the party for mixing politics and religion while also punishing the AKP by slashing its state funding in half to $20 million for next year.
Fighting the Kurds
Two days before the ruling, terrorists ignited two bombs on a busy Istanbul shopping street that killed 17 people and injured more than 150. The government of Prime Minister Recep Tayyip Erdogan responded by using warplanes to bomb the mountain positions of the Kurdistan Workers' Party, whom the government suspects was behind the Istanbul attacks.
Turkey's two-decade battle against the autonomy- seeking Kurds helps explain why it has NATO's second- largest army, which devoured almost 10 percent of the national budget last year.
Erdogan, 54, is becoming more spendthrift, particularly now that he's no longer reined in by an International Monetary Fund accord. In 2005, Erdogan agreed to IMF-backed budget targets in exchange for a $10 billion loan to pay off debt stemming from the government's rescue of the banking system four years earlier. The spate of bank failures was caused by unregulated lending and helped push inflation above 70 percent at the start of 2002.
Erdogan Defies IMF
Last year, in an appeal to voters prior to the general election, the AKP violated the IMF accord by boosting spending to bring drinking water to isolated villages and distribute free food and household supplies to 500,000 of Ankara's 4 million inhabitants.
The AKP, which also tried to criminalize adultery in 2004 in a country that's 99 percent Muslim, won the election with 47 percent of the vote. The percentage of voters backing the AKP over 13 other parties was the largest in a general election in more than four decades.
The prime minister is now opening the spigot even wider. In May, during the same week in which the IMF agreement expired, the government announced plans to invest $15 billion over five years in farm irrigation and new roads in the largely Kurdish, southeastern part of the country.
The spending, which may help Erdogan win elections in March in this region, will turn a budget surplus of 1.9 billion liras ($1.6 billion) in the first half of the year into a 15.9 billion-lira deficit by the end of 2008, according to government projections.
Inflation Fears
``There is fiscal loosening, and it will not bode well for inflation,'' says Asli Savranoglu, an economist at EFG Istanbul Securities. ``Spending will no doubt increase ahead of the local elections, and the municipalities have probably started to spend more than budgeted already.''
Erdogan's stepped-up spending comes as a 43 percent jump in global food prices in the 12 months through June and $120-a-barrel oil batter Turkey's economy. In a nation that relies on imports for 95 percent of its energy, the cost of a ferry trip across the Bosporus waterway dividing the European and Asian halves of Istanbul jumped 22 percent to 1.40 liras in June alone.
High oil and natural gas costs, as well as the lira's appreciation during the past two years, widened Turkey's trade gap to $37 billion in the first half of 2008 from $27.7 billion a year earlier.
Central Bank Stumbles
Yilmaz, the 61-year-old central bank governor, has stumbled in trying to check inflation. The bank won its independence from government control in 2001 as a prelude to the IMF accord. Yilmaz, a City University, London- trained economist, worked at the bank for 26 years before he was promoted to the top spot in April 2006.
He wasn't the government's first choice: one AKP candidate, who was rejected by then President Ahmet Necdet Sezer, was the head of an Islamic bank that follows instructions from the Koran to avoid interest payments.
Within a month of becoming governor, Yilmaz reversed three years of steady cuts that had taken the benchmark overnight borrowing rate to a low of 13.25 percent from 80 percent in 2001. The governor, in moving to boost the slumping lira, added 4.25 percentage points to the rate in the space of two months. The currency rebounded 6 percent in July 2006 after the rate hike to 17.5 percent.
Yilmaz Under Pressure
The following year, government ministers and industrialists, concerned about an economic slowdown, began publicly attacking the higher rates. Although Yilmaz ratcheted down the rate to 16.75 percent in August, arguing that inflation was slowing toward his 4 percent target for 2008, that wasn't low enough for exporters and labor unions, which placed full-page ads in national newspapers.
``Don't let employment and production die,'' the Turkish Exporters Assembly and the country's largest unions said in their Oct. 16 ads. ``Don't just act like you're cutting interest rates, really cut them.''
Yilmaz's series of four more cuts to 15.25 percent by February 2008 prompted economists and investors to question the bank's independence from political pressure. ``The central bank is still maturing into its autonomy,'' Isbank's Ozince says. ``Even central banks can make mistakes, but it's hard to steer the right path, because unknown factors can dominate, especially in shallow waters like Turkey's.''
Missing Targets
Only three months later, in May, as it became clear that the governor would miss his inflation target for the third straight year, Yilmaz began hiking rates again, to 16.75 percent. He also set a higher inflation target of 7.5 percent for 2009.
``They've been missing inflation targets for too long,'' says Jean-Dominique Butikofer, who helps manage about $725 million as head of emerging-market debt at Union Bancaire Privee in Zurich. ``They should have reacted much earlier on rates. The jury is still out to decide if inflation is being tackled or not.''
As industrial leaders launch a new round of barbs at Yilmaz -- Nurettin Ozdebir, chairman of the Ankara Chamber of Industry, called the central bank ``cowardly and timid'' in July -- the governor has little room to move. After the economy expanded at an annual rate of almost 7 percent in the six years from 2002, Turkey began slowing down.
Growth Slows
The bank's July survey of about 80 economists and businesses forecasts growth of 4 percent this year and 4.5 percent in 2009. ``The data shows us that the economy is continuing to slow down,'' Yilmaz said on July 28. ``Domestic sales, production and indicators of confidence support this view.''
Turkey's six-year expansion -- the longest in its history --has been fueled by tighter bank regulations, the sale of state-owned companies and a surge in investment from overseas. The AKP drew in $51 billion in foreign direct investment in the three years to 2007, more than the combined total of all the governments before it. The funding, along with IMF-mandated tight budgets, allowed the government to reduce public-sector debt to 39 percent of the country's gross domestic product last year from 74 percent in 2002.
Modern Art Museum
As wealth grew in Istanbul, property developers swarmed to its dilapidated 19th-century buildings, described in melancholy terms in Nobel Prize laureate Orhan Pamuk's memoir Istanbul: Memories and the City (Knopf, 2005). Investors converted them into chic apartment buildings, cafes and restaurants as real estate prices in the country's commercial hub rose to rival London's.
Luxury department store chain Harvey Nichols, based in London, opened an 8,000-square-meter (86,000-square-foot) branch in Istanbul in 2006. And Eczacbasi Group, a Turkish ceramics and pharmaceuticals company, took a waterside warehouse and turned it into Istanbul Modern, the country's first privately funded modern art museum, complete with an elegant bar where well-heeled Istanbulites sip California pinot noir overlooking the Bosporus Strait.
Foreign companies also went on a buying spree in Turkey. Citigroup Inc., General Electric Co., ING Groep NV and Vodafone Plc bought Turkish banks and mobile phone companies. By the end of 2007, 9 of Turkey's 10 biggest nonstate banks had an international owner or partner, and all three mobile phone networks were majority owned by foreigners.
Fivefold Stock Gain
The ISE National 100 Index, Turkey's benchmark stock index, rose more than fivefold from the beginning of 2003 to the end of '07 and reached a high of 58,231.9 on Oct. 15, 2007.
This year, the measure fell as much as 40 percent to a low of 33,208.24 on July 1 as the court battle over AKP's future scared investors away. While the market rebounded in anticipation of the party's legal victory, the wrestling between secularists and the AKP has distracted Turkey from its decades-old project of European Union membership.
The EU says the government should do more to meet membership criteria by rescinding laws used to prosecute writers and intellectuals including Pamuk, restoring property seized from non-Muslim religious groups, allowing more competition and enforcing environmental standards.
Erdogan's Pledge
A day after the court ruling, Erdogan pledged to keep his government on a secular footing and the nation on the road to the EU. That would help lure back investors and keep the economy growing. In the first six months of the year, foreign direct investment fell to $7.6 billion from $12.5 billion in the same period of 2007.
Some analysts question whether the prime minister will keep his word. Erdogan made a similar speech a year ago after his party won the general elections by a landslide. Six months later, he proposed Islam-inspired legislation, including an end to the headscarf ban for students.
Yilmaz, for his part, hasn't responded directly to his critics. He does say the bank needs to gain the public's confidence. ``We've been defeated by inflation; there's no question about it,'' Yilmaz said in a speech to business leaders in June. ``From now on, our credibility depends on what we do. We can win it back.''
More than the governor's reputation is at stake. Higher inflation will likely lead to the shuttering of more businesses such as those along Hosdere Street, dragging the economy down even further.
To contact the reporters on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net; Ben Holland in Istanbul at bholland1@bloomberg.net.
Read more...
S. Korea Stocks: Romanson, Daewoo Ship, Hyundai Heavy, Samsung
By Kyung Bok Cho
Aug. 27 (Bloomberg) -- South Korea's Kospi index lost 11.86, or 0.8 percent, to 1,490.25 as of 9:12 a.m. in Seoul.
The following are among the most-active stocks in South Korean markets.
Companies that do business in North Korea: Cheryong Industrial Co. (033100 KS), which supplies electrical equipment to North Korea, lost 130 won, or 5.4 percent, to 2,270. Romanson Co. (026040 KS), a watch maker that has a factory in the Communist country, dropped 40 won, or 3.5 percent, to 1,090.
North Korea said yesterday it stopped disabling the Yongbyon nuclear reactor Aug. 14 after the U.S. failed to remove it from a list of state sponsors of terrorism, potentially disrupting talks to dismantle its nuclear-weapons program.
Shipbuilders: Daewoo Shipbuilding & Marine Engineering Co. (042660 KS), the world's third-largest shipyard, gained 550 won, or 1.6 percent, to 35,250. Hyundai Heavy Industries Co. (009540 KS), which said yesterday it will submit a bid for a controlling stake in Daewoo Shipbuilding, declined 9,000 won, or 3.7 percent, to 235,000.
Samsung Heavy Industries Co. (010140 KS), the world's second-largest shipbuilder, slid 900 won, or 2.8 percent, to 31,300. The shares may underperform as Hyundai Heavy is bidding for Daewoo Shipbuilding to prevent being overtaken by Samsung Heavy, wrote Sung Ki Jong, an analyst at Daewoo Securities Co. in a note to investors.
Samsung Electronics Co. (005930 KS), the world's biggest computer-memory maker, retreated 13,000 won, or 2.4 percent, to 527,000. Citigroup Inc. cut its price estimate by 15 percent to 700,000 won, in a report, citing ``slippage in near-term fundamentals.''
Separately, third-quarter operating profit, or sales minus the cost of goods sold and administrative expenses, will be 1.02 trillion won, CJ Investment & Securities Co. said in a report. It had previously estimated as much as 1.3 trillion won.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
Read more...
Aug. 27 (Bloomberg) -- South Korea's Kospi index lost 11.86, or 0.8 percent, to 1,490.25 as of 9:12 a.m. in Seoul.
The following are among the most-active stocks in South Korean markets.
Companies that do business in North Korea: Cheryong Industrial Co. (033100 KS), which supplies electrical equipment to North Korea, lost 130 won, or 5.4 percent, to 2,270. Romanson Co. (026040 KS), a watch maker that has a factory in the Communist country, dropped 40 won, or 3.5 percent, to 1,090.
North Korea said yesterday it stopped disabling the Yongbyon nuclear reactor Aug. 14 after the U.S. failed to remove it from a list of state sponsors of terrorism, potentially disrupting talks to dismantle its nuclear-weapons program.
Shipbuilders: Daewoo Shipbuilding & Marine Engineering Co. (042660 KS), the world's third-largest shipyard, gained 550 won, or 1.6 percent, to 35,250. Hyundai Heavy Industries Co. (009540 KS), which said yesterday it will submit a bid for a controlling stake in Daewoo Shipbuilding, declined 9,000 won, or 3.7 percent, to 235,000.
Samsung Heavy Industries Co. (010140 KS), the world's second-largest shipbuilder, slid 900 won, or 2.8 percent, to 31,300. The shares may underperform as Hyundai Heavy is bidding for Daewoo Shipbuilding to prevent being overtaken by Samsung Heavy, wrote Sung Ki Jong, an analyst at Daewoo Securities Co. in a note to investors.
Samsung Electronics Co. (005930 KS), the world's biggest computer-memory maker, retreated 13,000 won, or 2.4 percent, to 527,000. Citigroup Inc. cut its price estimate by 15 percent to 700,000 won, in a report, citing ``slippage in near-term fundamentals.''
Separately, third-quarter operating profit, or sales minus the cost of goods sold and administrative expenses, will be 1.02 trillion won, CJ Investment & Securities Co. said in a report. It had previously estimated as much as 1.3 trillion won.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Australia Stocks: Babcock, Centro, Macquarie, Rio, Woodside
By Shani Raja
Aug. 27 (Bloomberg) -- The S&P/ASX 200 Index rose 4.70, or 0.1 percent, to 5,012.20 at 10:44 a.m. in Sydney. The broader All Ordinaries Index gained 3.40 points, or 0.1 percent, to 5,085.70, while the futures index expiring in September advanced 0.6 percent to 5,017.
Babcock & Brown Infrastructure Group (BBI AU), owner of ports and energy transmission lines in Australia, Europe and the U.S. slumped 4 cents, or 6 percent, to 63 cents, the benchmark's second-worst performer. Babcock Infrastructure slumped to a full- year loss as costs rose, the company said yesterday, as it cut dividends in a bid to strengthen its balance sheet.
Centro Properties Group (CNP AU) dropped 1 cent, or 5.7 percent, to 16.5 cents, a record low. Centro fell for the third day after saying shareholders may be affected if it offers hybrid securities to win an extension on debt.
Macquarie Group Ltd. (MQG AU) fell A$1.65, or 3.6 percent, to A$44.40, the lowest since April 18. Australia's biggest securities firm had its rating cut to ``neutral'' from ``buy'' at UBS AG.
Rio Tinto Group (RIO AU), the world's third-largest mining company, rose 54 cents, or 0.4 percent, to A$124.60, the highest since July 31. Rio yesterday posted first-half profit that beat analyst estimates on increased aluminum sales and record iron ore prices.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, gained 85 cents, or 1.5 percent, to A$57.35, the highest since July 17. Crude oil for October delivery rose $1.16, or 1 percent, to settle at $116.27 a barrel at 2:58 p.m. on the New York Mercantile Exchange.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Aug. 27 (Bloomberg) -- The S&P/ASX 200 Index rose 4.70, or 0.1 percent, to 5,012.20 at 10:44 a.m. in Sydney. The broader All Ordinaries Index gained 3.40 points, or 0.1 percent, to 5,085.70, while the futures index expiring in September advanced 0.6 percent to 5,017.
Babcock & Brown Infrastructure Group (BBI AU), owner of ports and energy transmission lines in Australia, Europe and the U.S. slumped 4 cents, or 6 percent, to 63 cents, the benchmark's second-worst performer. Babcock Infrastructure slumped to a full- year loss as costs rose, the company said yesterday, as it cut dividends in a bid to strengthen its balance sheet.
Centro Properties Group (CNP AU) dropped 1 cent, or 5.7 percent, to 16.5 cents, a record low. Centro fell for the third day after saying shareholders may be affected if it offers hybrid securities to win an extension on debt.
Macquarie Group Ltd. (MQG AU) fell A$1.65, or 3.6 percent, to A$44.40, the lowest since April 18. Australia's biggest securities firm had its rating cut to ``neutral'' from ``buy'' at UBS AG.
Rio Tinto Group (RIO AU), the world's third-largest mining company, rose 54 cents, or 0.4 percent, to A$124.60, the highest since July 31. Rio yesterday posted first-half profit that beat analyst estimates on increased aluminum sales and record iron ore prices.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, gained 85 cents, or 1.5 percent, to A$57.35, the highest since July 17. Crude oil for October delivery rose $1.16, or 1 percent, to settle at $116.27 a barrel at 2:58 p.m. on the New York Mercantile Exchange.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Japan Stocks Fall on Developer's Bankruptcy; Inpex Rises on Oil
By Masaki Kondo
Aug. 27 (Bloomberg) -- Japan stocks fell after developer Sohken Homes Co. filed for bankruptcy, raising concern tighter lending from banks will trigger more failures.
Sohken wasn't traded as orders to sell exceeded those to buy. Isuzu Motors Ltd., Japan's largest maker of light-duty trucks, dropped 3.1 percent after Mitsubishi UFJ Securities Co. cut its price estimate by 17 percent. Inpex Holdings Inc., Japan's largest oil and gas explorer, gained for the first time in three days after crude extended its gain to a second day.
The Nikkei 225 Stock Average fell 59.07, or 0.5 percent, to 12,719.64 at 9:48 a.m. in Tokyo. The broader Topix index retreated 4.71, or 0.4 percent, to 1,224.64. Almost three stocks declined for each that rose on the Topix.
The deteriorating Japanese property market and difficulty refinancing debt have been exacerbated by failures of other developers, Sohken said yesterday after markets shut, as it filed for court protection from creditors with 33.9 billion yen ($309 million) in liabilities. Bankruptcies among Japanese property companies more than doubled to 60 in July from a year earlier, according to Tokyo Shoko Research Ltd.
Mitsubishi Estate Co., Japan's second-biggest developer, lost 1.9 percent to 2,380 yen, while Sumitomo Realty & Development Co. sank 1.6 percent to 2,210 yen. Condominium developer Touei Housing Corp. plunged 8.8 percent to 260 yen. Developers posted the second-biggest drop after automakers.
Isuzu dived to 401 yen after Mitsubishi UFJ analyst Shotaro Noguchi lowered his 12-month price target on the stock to 500 yen. Honda Motor Co., Japan's second-biggest carmaker, slipped 1.9 percent to 3,540 yen.
Hurricane Gustav
Inpex advanced 1.7 percent to 1.147 million yen, sending mining companies to the biggest gain among 33 industry groups on the Topix. Japan Petroleum Exploration Co., the second biggest, rose 2 percent to 7,160 yen.
Crude oil for October delivery rose 1 percent to $116.27 a barrel on the New York Mercantile Exchange yesterday on forecasts showing Hurricane Gustav may enter the Gulf of Mexico, home to more than a fifth of U.S. oil production. The contract fell 31 cents to $115.96 at 8:42 a.m. Sydney time.
Nikkei futures expiring in September retreated 0.4 percent to 12,730 in Osaka and slumped 0.5 percent to 12,725 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Japan's Inflation Probably Exceeded 2% for First Time in Decade
By Mayumi Otsuma
Aug. 27 (Bloomberg) -- Japan's consumer-price inflation probably exceeded 2 percent for the first time in a decade as companies passed rising costs onto households, deterring spending and weakening the economy.
Core prices, which exclude fresh food, climbed 2.3 percent in July from a year earlier after rising 1.9 percent in June, according to the median estimate of 37 economists surveyed by Bloomberg ahead of government figures to be released Aug. 29.
Price increases are unlikely to prompt the Bank of Japan to raise interest rates anytime soon because the economy is on the brink of a recession and Governor Masaaki Shirakawa expects inflation will ease. Factory output and household spending fell in July and the jobless rate stayed close to a two-year high, analysts predict separate reports will show on the same day.
``Consumer prices will probably begin to decelerate in the fourth quarter but continue to damp consumption at least until early next year,'' said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. ``The next rate increase will be in the third quarter of 2009 at the earliest, and only after the bank confirms a pickup in the economy.''
Only one of the economists predicted July inflation at lower than 2 percent. Core prices haven't risen 2 percent since January 1998, when they were boosted by a sales tax increase. Excluding the tax, they last gained that much 16 years ago.
Shirakawa said this week that core price gains will moderate after accelerating ``slightly'' in coming months. There are few signs commodity-driven inflation is spreading because wage growth is weak, he said. Crude oil has fallen 21 percent since exceeding $147 a barrel for the first time on July 11.
`Key Factor'
Excluding food and energy, prices rose 0.1 percent in July from a year earlier, economists predict, the same pace as June and only the third gain since 1998. Faster increases in the gauge would be the ``key factor'' in determining interest-rate action by the central bank, said Takuji Okubo, a senior economist at Merrill Lynch & Co. in Tokyo.
The Bank of Japan has kept the key overnight lending rate at 0.5 percent since doubling it in February 2007. It shelved a policy of gradual rate increases in April.
Demand for goods and services slipped below Japan's productive capacity for the first time in almost two years last quarter, a Cabinet Office report on the output gap showed this week, adding to signs that inflation remains subdued. The central bank last week described the world's second-largest economy as ``sluggish'' for the first time in a decade, after a report showed gross domestic product fell an annualized 2.4 percent in the second quarter.
Reaching Peak
``As oil-driven inflation eases, the pace of consumer-price gains will also slow, while the economy's weakening demand will make it difficult for companies to raise prices,'' said Akira Maekawa, an economist at UBS AG in Tokyo. ``Core prices will probably peak at around 2.5 percent in the current quarter.''
Bank of Japan policy makers consider core prices to be stable between zero and 2 percent. Breaching the range ``will only be temporary and probably won't induce any policy action,'' said Ryutaro Kono, chief economist at BNP Paribas in Tokyo.
Core prices in Tokyo, a harbinger of nationwide inflation, advanced 1.7 percent in August from a year earlier, according to the median estimate of 34 economists. Prices in the capital increased 1.6 percent in July.
Kokuyo Co., an Osaka-based stationery maker, this week said it will raise prices of photocopy paper by 9 percent in October to reflect higher costs of oil and wood chips. Tokyo Electric Power Co. plans to adopt a new pricing system next month to better respond to changes in fuel expenses.
Carmakers, which had managed to absorb cost increases by increasing productivity, are also attempting to charge more.
Pricier Prius
Toyota Motor Corp., Japan's largest automaker, said this week that it will raise prices on some domestic models for the first time in 16 years, paving the way for smaller rivals to follow suit. Still, Toyota plans to limit price increases to popular hybrids, such as the Prius, and some commercial vehicles.
``It's still doubtful that retail price increases of cars and other durable goods will spread at a time when consumption is so weak,'' said Shinke of Dai-Ichi Life. ``It's still hard to expect the Japanese economy to head into overall inflation.''
Household sentiment fell to the lowest level in at least 26 years in July, and consumers' willingness to buy long-lasting products also slid to a record low.
Weakening demand at home and abroad prompted companies to cut production 0.4 percent in July from a month earlier, a second consecutive decline, economists estimate. Household spending dropped for a fifth month and the unemployment rate stayed at 4.1 percent, according to analysts surveyed.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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Asian Stocks Gain, Led by Inpex and Rio Tinto; Macquarie Falls
By Chen Shiyin
Aug. 27 (Bloomberg) -- Asian stocks advanced, led by energy and mining companies, after oil prices rallied and Rio Tinto Group said first-half profit doubled.
Inpex Holdings Inc., Japan's largest oil explorer, climbed 2 percent after crude rose more than $1 a barrel in New York yesterday. Rio Tinto, the world's third-largest mining company, gained 1 percent after posting earnings that topped analyst estimates. Macquarie Group Ltd., Australia's biggest securities firm, dropped 3.6 percent after UBS AG downgraded the shares.
The MSCI Asia Pacific Index climbed 0.3 percent to 122.66 as of 9:20 a.m. in Tokyo. The regional measure has dropped 22 percent this year as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.
Japan's Nikkei 225 Stock Average slipped 0.2 percent to 12,752.47, led by Mitsubishi Estate Co., after rival developer Sohken Homes Co. filed for bankruptcy. Australia's S&P/ASX 200 Index added 0.5 percent, posting the only gain among markets open for trading.
U.S. stocks advanced yesterday, rebounding from the biggest drop in a month. Freddie Mac and Fannie Mae, the largest U.S. mortgage-finance companies, jumped after Citigroup Inc. analysts said the companies have enough capital to last the year.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net
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Aug. 27 (Bloomberg) -- Asian stocks advanced, led by energy and mining companies, after oil prices rallied and Rio Tinto Group said first-half profit doubled.
Inpex Holdings Inc., Japan's largest oil explorer, climbed 2 percent after crude rose more than $1 a barrel in New York yesterday. Rio Tinto, the world's third-largest mining company, gained 1 percent after posting earnings that topped analyst estimates. Macquarie Group Ltd., Australia's biggest securities firm, dropped 3.6 percent after UBS AG downgraded the shares.
The MSCI Asia Pacific Index climbed 0.3 percent to 122.66 as of 9:20 a.m. in Tokyo. The regional measure has dropped 22 percent this year as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.
Japan's Nikkei 225 Stock Average slipped 0.2 percent to 12,752.47, led by Mitsubishi Estate Co., after rival developer Sohken Homes Co. filed for bankruptcy. Australia's S&P/ASX 200 Index added 0.5 percent, posting the only gain among markets open for trading.
U.S. stocks advanced yesterday, rebounding from the biggest drop in a month. Freddie Mac and Fannie Mae, the largest U.S. mortgage-finance companies, jumped after Citigroup Inc. analysts said the companies have enough capital to last the year.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net
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Australian Business Investment Probably Rose 2%, Survey Shows
By Jacob Greber
Aug. 27 (Bloomberg) -- Australian business investment probably rose as miners including Rio Tinto Group expanded to meet Chinese demand for iron ore, offsetting a slide in spending by companies that rely on domestic spending.
Capital spending rose 2 percent in the three months to June 30 after falling 2.5 percent in first quarter, according to the median estimate of 23 economists surveyed by Bloomberg. Forecasts ranged from a gain of 6 percent to a 3.9 percent drop. The report will be released tomorrow at 11:30 a.m. in Sydney.
A mining boom is helping offset weaker consumer spending that will probably prompt the central bank to cut borrowing costs next week for the first time in seven years. Spending may cool after business confidence in July held at the lowest level since 2001, stock markets tumbled and sales growth slowed at retailers such as Harvey Norman Holdings Ltd.
``We expect the strength in business investment will continue to be concentrated in the mining sector,'' said Kieran Davies, chief economist at ABN Amro Australia Ltd. in Sydney.
Export income is forecast to surge after mining companies including Rio Tinto negotiated a price increase of as much as 97 percent for iron ore destined for China.
``The Reserve Bank will watch the investment figures closely to monitor the extent to which tighter credit conditions have affected the outlook for investment spending in the year ahead,'' Davies said.
The central bank may soon cut interest rates to avoid a ``deeper and more persistent'' economic slowdown, policy makers said in the minutes of their Aug. 5 meeting, released last week.
Economy Slows
Australia's $1 trillion economy expanded at the weakest pace in almost two years in the three months through March and growth is forecast to remain ``low'' in the second and third quarters, the central bank said last week. Figures for economic growth in the second quarter will be released on Sept. 3.
The economy is slowing as consumers cut spending to offset the highest borrowing costs in 12 years and a surge in gasoline prices, forcing companies including Qantas Airways Ltd. and Ford Motor Co. to fire workers.
The nation's All Ordinaries Index of stocks has tumbled 21 percent this year.
``Whilst we expect business investment plans to remain positive, the rate of growth will likely moderate over the course of the year as the high cost of debt and a slowing domestic economy weigh further on business sentiment,'' said Richard Gibbs, chief economist at Macquarie Group Ltd. in Sydney.
A survey of more than 400 companies by National Australia Bank Ltd., published on Aug. 12, showed business confidence in July held at the lowest level since the 2001 terrorist attacks in the U.S.
Bloomberg Survey
Investors forecast a 100 percent chance that central bank Governor Glenn Stevens will cut the benchmark lending rate to 7 percent from 7.25 percent on Sept. 2, according to a Credit Suisse Group index based on trading in interest-rate swaps.
Policy makers last raised interest rates in March, adding to increases in February, November and last August.
The following table gives economists' estimates of the change in business capital expenditure in the second quarter from the previous three months:
QoQ
Change
-------------------------------------
Median 2.0%
Average 1.9%
High forecast 6.0%
Low forecast -3.9%
No. of forecasts 23
-------------------------------------
4Cast Ltd. 6.0%
AMP Capital 2.0%
ANZ Banking Group 1.5%
Ausbil Dexia -0.1%
Barclays -3.9%
BT Financial 1.0%
Citigroup 1.0%
Commonwealth Bank 4.0%
Goldman Sachs 2.0%
ICAP Australia 3.0%
JPMorgan Chase 4.0%
Lehman Brothers 4.0%
Merrill Lynch 5.0%
Macquarie 3.0%
National Australia Bank 2.0%
Nomura 2.0%
RBC Capital Markets -1.0%
St. George Bank 4.0%
Suncorp Banking 2.0%
TD Securities -1.6%
Reuters IFR 1.0%
UBS 1.0%
Westpac Bank 2.0%
=====================================
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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Asia Is About to Give U.S. a Kick in the Fannie: William Pesek
Commentary by William Pesek
Aug. 27 (Bloomberg) -- Intelligence reports. Unemployment statistics. National-security estimates. Political polls. World leaders sure have their hands full digesting reams of data.
The next U.S. president should add this to his must-read list: the Federal Reserve's H.4.1 table.
Economists have long weeded through the New York Fed's weekly release. With a dry, wonky name such as ``Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks,'' it's no wonder U.S. presidents aren't known to peruse its contents.
Yet it will tell the next leader -- be it Republican John McCain or Democrat Barack Obama -- how willing foreigners are to continue financing the U.S.'s way of life. Alas, there are good reasons for the U.S. to learn how to live without Asia's money.
The great stampede out of dollar assets that many analysts predicted hasn't happened. Demand for U.S. debt has been quite resilient amid a sliding dollar and a widening credit crisis. Even problems at Fannie Mae and Freddie Mac haven't yet precipitated a massive capital exodus.
The operative word is ``yet.'' The almost $10 billion drop in central-bank holdings of agency debt this month doesn't necessarily mean the flight is afoot. Yet Asia is anxiously awaiting news of how the U.S. handles troubles at government- sponsored mortgage-finance companies.
China, for example, holds $376 billion of long-term U.S. agency debt and, according to James McCormack, head of Asian sovereign ratings at Fitch Ratings Ltd. in Hong Kong, most of it is in Fannie and Freddie assets. Fannie and Freddie aren't just too big to fail -- they're too geopolitical to fail.
Catastrophic Risk
``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu Yongding, a former adviser to China's central bank, said last week. ``If it is not the end of the world, it is the end of the current international financial system.''
Even if Fannie and Freddie are bailed out, recent events mark the end of the U.S.'s financing arrangement as we know it. It's a reality for which the U.S. should now plan.
China alone will be a prickly customer to deal with. A conservative estimate would put China's U.S. agency holdings at 10 percent of its gross domestic product.
Say the U.S. opted not to repay investors on time and in full. How would China's 1.3 billion people, awash in post- Olympics confidence, respond to the wealthy U.S. leaving China with big losses? If the tables were turned, you can just imagine the public outcry for the U.S. to stop lending to China.
Asia Holds Mortgage
Those arguing the U.S. will hold its ground in these turbulent times ignore how dependent the U.S. is on Asia's money. It's often said that the U.S. built a large, productive economy over the years, and Asia holds the mortgage. Well, it's true.
It's also true that Asia has few alternatives. The magnitude of the region's trade surpluses leaves few options other than parking money in the most liquid securities and keeping currencies from rising into uncompetitive territory.
One alternative is euro assets, though diversifying out of the dollar has its risks. If investors got wind of big dollar holders such as Japan, China or Russia rushing into the euro, markets would plunge and leave central banks with major losses.
While this is a tale of co-dependency, the real issue is the extent to which the U.S. is reliant on foreign money.
The U.S. current-account deficit was $176.4 billion in the first quarter, compared with the average shortfall of $100 billion since 1993. That isn't the product of the U.S. supporting global growth; it's about Asia's money helping the U.S. live perilously beyond its means.
Fractured System
If Wall Street's woes worsen, Asia will need those reserves to ward off speculators. Even so, the dollar's gyrations over the last year will make Asians wary.
The Fed's interest-rate cuts weakened the dollar 7 percent against the euro and 5 percent against the yen over the last year, while Bear Stearns Cos.' demise dented confidence in American-style capitalism. Sovereign wealth funds that plunged billions of dollars into U.S. banks may have second thoughts.
For Obama or McCain, the challenge will be to repair a fractured U.S. financial system and to wean consumers off their habit of overborrowing. The process will be even harder as the U.S. finds itself less able to rely on financing from Asia.
How would McCain pay for tax cuts without Asia's money? How would Obama follow through on his protectionist rhetoric in a region on which the U.S. is so dependent?
All the talk from Obama or McCain about a strong America ignores how the U.S. is losing some economic-policy autonomy. Any move by Treasury Secretary Henry Paulson to restructure U.S. agency debt now has foreign-policy consequences and will need to be looked at through that prism.
There's no doubt the next U.S. leader will be a busy man. What's less in doubt is that he will have to manage with less financial help from Asia.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
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Paladin Energy Forecasts Doubling of Uranium Output This Year
By Angela Macdonald-Smith
Aug. 27 (Bloomberg) -- Paladin Energy Ltd., the Australian producer of uranium in Africa, said output is set to more than double this year as volumes increase at the Langer Heinrich mine in Namibia and a new project starts in Malawi.
Production should rise to 3.6 million pounds of uranium oxide in the year ending June 30, 2009, from 1.71 million in the preceding 12 months, Managing Director John Borshoff said on a conference call. Output should increase to 6.8 million pounds the following year, to 7.4 million in 2010-11 and 9.3 million in 2011-12, he said.
Paladin is due to complete an expansion of the Namibian project by the year end. The $200 million Kayalekera project in Malawi is due to start operating in January. It is also seeking to develop ventures in Australia, including the Mt. Isa and Angela projects. Global demand for uranium is rising as the construction of nuclear power plants gathers pace.
``This sets us up very well for what a true uranium company has to be, not just one project but a whole series of projects in stages of development with production coming in,'' Borshoff said late yesterday in a conference call, published on the company's Web site.
Borshoff said the company is ``confident'' that Australia's Queensland state, which bans uranium mining, will ``have a positive outlook for this metal'' by 2012, allowing the Mt. Isa project to start construction. Cameco Corp., Paladin's partner at the Angela deposit in the Northern Territory, should ``get the green light in a few months'' to start exploration work, he said.
The outlook for the uranium market is ``very strong,'' with ``stagnant'' supply and ``very bullish'' demand, Borshoff said.
The world needs to build 32 new nuclear plants each year as part of measures to cut greenhouse gas emissions in half by 2050, the Paris-based International Energy Agency has said. The International Atomic Energy Agency forecasts that 60 nuclear plants will be built in the next 15 years.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Aug. 27 (Bloomberg) -- Paladin Energy Ltd., the Australian producer of uranium in Africa, said output is set to more than double this year as volumes increase at the Langer Heinrich mine in Namibia and a new project starts in Malawi.
Production should rise to 3.6 million pounds of uranium oxide in the year ending June 30, 2009, from 1.71 million in the preceding 12 months, Managing Director John Borshoff said on a conference call. Output should increase to 6.8 million pounds the following year, to 7.4 million in 2010-11 and 9.3 million in 2011-12, he said.
Paladin is due to complete an expansion of the Namibian project by the year end. The $200 million Kayalekera project in Malawi is due to start operating in January. It is also seeking to develop ventures in Australia, including the Mt. Isa and Angela projects. Global demand for uranium is rising as the construction of nuclear power plants gathers pace.
``This sets us up very well for what a true uranium company has to be, not just one project but a whole series of projects in stages of development with production coming in,'' Borshoff said late yesterday in a conference call, published on the company's Web site.
Borshoff said the company is ``confident'' that Australia's Queensland state, which bans uranium mining, will ``have a positive outlook for this metal'' by 2012, allowing the Mt. Isa project to start construction. Cameco Corp., Paladin's partner at the Angela deposit in the Northern Territory, should ``get the green light in a few months'' to start exploration work, he said.
The outlook for the uranium market is ``very strong,'' with ``stagnant'' supply and ``very bullish'' demand, Borshoff said.
The world needs to build 32 new nuclear plants each year as part of measures to cut greenhouse gas emissions in half by 2050, the Paris-based International Energy Agency has said. The International Atomic Energy Agency forecasts that 60 nuclear plants will be built in the next 15 years.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Japan's Yen, Philippine Peso, Thai Baht: Asia Currency Preview
By Bob Chen
Aug. 27 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: Chief Cabinet Secretary Nobutaka Machimura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Finance Minister Bunmei Ibuki will address reporters at 5 p.m.
The yen was at 109.68 a dollar at 8:58 a.m. in New York.
Philippine peso: The central bank may raise the benchmark interest rate by a quarter-percentage point to 6 percent tomorrow, according to 13 of 15 economists in a Bloomberg News survey. Two expect a half-point increase.
The economy expanded 5 percent in the second quarter from a year earlier, the slowest pace since the three months ended September 2005, economists said in another survey before the government reports the data at 10 a.m. in Manila tomorrow.
The peso was at 45.995.
Hong Kong dollar: The government will report trade balance data for July tomorrow. Exports rose 5.5 percent after they fell in June for the first time in two years, according to a Bloomberg News survey of economists.
The Hong Kong dollar was at HK$7.8076.
Thai baht: The central bank will raise its benchmark interest rate by a quarter-percentage point to 3.75 percent today, according to 15 of 21 economists surveyed by Bloomberg News. The rest expect no change. The decision is due at 2:30 p.m. in Bangkok.
The baht was at 34.23.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
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Aug. 27 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: Chief Cabinet Secretary Nobutaka Machimura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Finance Minister Bunmei Ibuki will address reporters at 5 p.m.
The yen was at 109.68 a dollar at 8:58 a.m. in New York.
Philippine peso: The central bank may raise the benchmark interest rate by a quarter-percentage point to 6 percent tomorrow, according to 13 of 15 economists in a Bloomberg News survey. Two expect a half-point increase.
The economy expanded 5 percent in the second quarter from a year earlier, the slowest pace since the three months ended September 2005, economists said in another survey before the government reports the data at 10 a.m. in Manila tomorrow.
The peso was at 45.995.
Hong Kong dollar: The government will report trade balance data for July tomorrow. Exports rose 5.5 percent after they fell in June for the first time in two years, according to a Bloomberg News survey of economists.
The Hong Kong dollar was at HK$7.8076.
Thai baht: The central bank will raise its benchmark interest rate by a quarter-percentage point to 3.75 percent today, according to 15 of 21 economists surveyed by Bloomberg News. The rest expect no change. The decision is due at 2:30 p.m. in Bangkok.
The baht was at 34.23.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
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Philippines May Raise Interest Rates as Inflation Hurts Growth
By Karl Lester M. Yap
Aug. 27 (Bloomberg) -- The Philippine central bank may raise interest rates for a third month to temper inflation that is hindering the nation's economic expansion.
Bangko Sentral ng Pilipinas will tomorrow increase its benchmark interest rate by 0.25 percentage point to 6 percent, according to 13 of 15 economists surveyed by Bloomberg News. Two predict a half-point jump to 6.25 percent.
Gross domestic product growth probably slowed last quarter as inflation approaching a 16-year high hurt consumer spending. Asian countries from Vietnam to India have raised borrowing costs this year as surging commodity costs fueled price gains.
``Recent inflation numbers are high and inflation is still rising,'' said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc. ``Maintaining price stability is more important for the central bank.''
The economy grew 5 percent in the second quarter from a year earlier, according to the median estimate of 13 economists surveyed by Bloomberg News, compared with 5.2 percent in the previous three months. The government will release the growth data tomorrow.
Record oil and rice prices have hurt Philippine consumer spending, which makes up 70 percent of the economy.
``Going forward, there is a real risk that inflation expectations will become unanchored,'' said Vishnu Varathan, a regional economist at Forecast Singapore Pte. ``It is crucial to raise rates even if we see commodity prices are falling.''
Crude oil in New York has fallen about a fifth from a record $147.27 a barrel on July 11.
Tight Policy
Bangko Sentral Governor Amando Tetangco said Aug. 5 the bank will maintain a ``tight'' monetary policy after a report showed inflation accelerated to 12.2 percent last month. The central bank in July raised its inflation forecast for this year to a range of 9 percent to 11 percent, from a previous estimate of 7 percent to 9 percent.
The government last week lowered its 2008 growth target for a second time this year to between 5.5 percent and 6.4 percent. The economy grew 7.2 percent in 2007.
Rising borrowing costs and record commodity prices are sapping growth in the world's largest economies, damping demand from the U.S., Japan, and Europe for Philippine-made Intel Corp. computer chips and The Gap Inc. clothing.
Growth in exports, which account for two-fifths of the Philippines' $118 billion economy, may slow to 5 percent this year, the weakest since 2005, the government said in July.
Remittances
Philippine remittances from the tenth of the population that works abroad, equivalent to about 10 percent of the Southeast Asian economy, may also falter after jumping to a record $1.45 billion in June.
Slowing global growth may limit overseas jobs as companies lay off workers and freeze expansion. Half of the Philippines' remittances come from the U.S., where leading indicators last week showed a slowdown will deepen in the second half of 2008.
President Gloria Arroyo in May pledged to boost investment and increase spending on subsidies to help Filipinos cope with soaring prices, abandoning her plan to balance the budget this year in favor of spurring growth.
The following tables show economists' forecasts for Philippine economic growth and the central bank's benchmark interest rate:
Philippine GDP Growth Estimates
----------------------------------------------------------------
2Q 2Q 3Q 4Q GDP GDP
Firm YoY QoQ SA YoY YoY 2008 2009
----------------------------------------------------------------
Median 5.0% 1.6% 5.7% 5.7% 5.4% 5.5%
Average 4.9% 1.6% 5.6% 5.4% 5.3% 5.5%
High 5.6% 2.5% 6.3% 6.3% 5.6% 6.1%
Low 4.0% 0.9% 4.8% 3.6% 4.7% 4.4%
Number of Estimates 13 7 5 5 7 5
----------------------------------------------------------------
Action Economics 5.5% 2.3% 5.7% 5.7% 5.5% 5.5%
BDO Unibank 5.3% 0.9% 5.3% 5.5% 5.5% 6.0%
Citi 4.8% -- -- -- 5.1% --
DBS Group 4.5% -- -- -- -- --
Forecast Singapore 5.0% -- -- -- -- --
HSBC 5.0% 1.9% 4.8% 3.6% 4.7% 4.4%
Ideaglobal 5.4% -- -- -- 5.4% --
ING Groep NV 4.7% 2.5% -- -- -- --
Lehman Brothers 4.5% 1.6% -- -- -- --
Moody's Economy.com 5.1% -- 5.7% 6.3% 5.6% 6.1%
Standard Chartered 4.0% 1.0% -- -- -- --
Reuters IFR 4.1% 1.2% 6.3% 6.0% 5.4% 5.5%
UBS 5.6% -- -- -- -- --
----------------------------------------------------------------
Philippines Overnight Borrowing Rate Estimates
----------------------------------------------------
Policy Meeting Aug. Oct. Nov End
Dates 28 9 20 2008
----------------------------------------------------
Median 6.00% 6.25% 6.38% 6.25%
% forecasts at Median 87% 67% 0% 43%
High 6.25% 6.50% 6.50% 6.50%
Low 6.00% 6.00% 6.00% 6.00%
Number of Estimates 15 6 6 7
----------------------------------------------------
Action Economics 6.00% 6.25% 6.25% 6.25%
BDO Unibank 6.00% 6.25% 6.50% 6.50%
Capital Economics 6.25% -- -- --
Citi 6.00% -- -- --
Credit Suisse 6.00% 6.25% 6.50% 6.50%
DBS Group 6.00% -- -- --
Forecast Singapore 6.00% -- -- --
HSBC 6.00% 6.00% 6.00% 6.00%
Ideaglobal 6.00% -- -- 6.25%
ING Groep NV 6.00% -- -- --
Lehman Brothers 6.00% -- -- --
Moody's Economy.com 6.25% 6.50% 6.50% 6.50%
Standard Chartered 6.00% -- -- --
Reuters IFR 6.00% 6.25% 6.25% 6.25%
UBS 6.00% -- -- --
----------------------------------------------------
To contact the reporter on this story: Karl Lester M. Yap in Manila at o kyap5@bloomberg.net.
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New Zealand Dollar Advances From Two-Week Low on Stock Gains
By Tracy Withers
Aug. 27 (Bloomberg) -- The New Zealand dollar rose from a two-week low amid a recovery in U.S. stocks that encouraged investors to seek higher-yielding currencies.
The currency climbed against the yen as stocks rebounded from the biggest drop in a month, boosting demand for so-called carry trades. Investors turned to currencies such as the New Zealand dollar where the benchmark interest rate is 8 percent, or 6 percentage points higher than the Federal Reserve's target.
``A recovery in U.S. stock markets helped underpin yen crosses and the New Zealand dollar rebounded off its lows,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``The risks are skewed in favor of the currency extending its gains.''
New Zealand's currency gained to 69.70 U.S. cents at 9:35 a.m. in Wellington trading, from 69.06 cents late in Asia yesterday. The currency rose to 76.38 yen from 75.87 yen.
The currency recovered from a two-week-low of 68.99 cents set yesterday when investors spurned higher-yielding assets amid fresh concerns about credit market losses.
When stocks rise, investors have the confidence to borrow cheaply in nations such as Japan, where the benchmark rate is 0.5 percent, and buy assets in New Zealand. The strategy is known as a carry trade, with the risks that moves in currencies can erase profits.
The New Zealand dollar also gained before a report today that is expected to show a recovery in business confidence in August, Hampton said.
The ANZ National Bank Ltd. survey showed companies were pessimistic about their sales for a fifth straight month in July, adding to signs the economy is in a recession.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net
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Aug. 27 (Bloomberg) -- The New Zealand dollar rose from a two-week low amid a recovery in U.S. stocks that encouraged investors to seek higher-yielding currencies.
The currency climbed against the yen as stocks rebounded from the biggest drop in a month, boosting demand for so-called carry trades. Investors turned to currencies such as the New Zealand dollar where the benchmark interest rate is 8 percent, or 6 percentage points higher than the Federal Reserve's target.
``A recovery in U.S. stock markets helped underpin yen crosses and the New Zealand dollar rebounded off its lows,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``The risks are skewed in favor of the currency extending its gains.''
New Zealand's currency gained to 69.70 U.S. cents at 9:35 a.m. in Wellington trading, from 69.06 cents late in Asia yesterday. The currency rose to 76.38 yen from 75.87 yen.
The currency recovered from a two-week-low of 68.99 cents set yesterday when investors spurned higher-yielding assets amid fresh concerns about credit market losses.
When stocks rise, investors have the confidence to borrow cheaply in nations such as Japan, where the benchmark rate is 0.5 percent, and buy assets in New Zealand. The strategy is known as a carry trade, with the risks that moves in currencies can erase profits.
The New Zealand dollar also gained before a report today that is expected to show a recovery in business confidence in August, Hampton said.
The ANZ National Bank Ltd. survey showed companies were pessimistic about their sales for a fifth straight month in July, adding to signs the economy is in a recession.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net
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Euro Trades Near Six-Month Low Before German Inflation Report
By Stanley White and Ye Xie
Aug. 27 (Bloomberg) -- The euro traded near a six-month low against the dollar before a government report forecast to show German inflation slowed this month, reducing pressure on the European Central Bank to raise borrowing costs.
The 15-nation euro was headed for its biggest monthly drop against the dollar since its 1999 debut after data yesterday showed German business confidence weakened more than economists expected. The Australian dollar rebounded from an 11-month low as rising U.S. stocks gave investors confidence to buy the nation's higher-yielding assets.
``The euro is mired in a mid-term downtrend,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Slowing inflation is yet another reason why we can't expect the ECB to raise rates. Traders will continue to push the euro lower.''
The euro traded at $1.4645 at 8:51 a.m. in Tokyo, after touching $1.4571 yesterday, the weakest since Feb. 14. The euro was at 160.43 yen from 160.64 yesterday when it dropped to 159.95, the lowest level since May 12. The dollar was little changed at 109.54 yen. The euro may fall to $1.4570 and 159.90 yen today, Ishikawa forecast.
The euro has weakened 6.1 percent decline against the dollar this month. It has fallen 4.7 percent versus the yen in August, the most since a 5.8 percent drop in March 2004, as a report showed the European economy contracted last quarter.
High Yielder
The Australian dollar bought 85.48 U.S. cents from 85.15 cents in late Asian trading yesterday when it fell to 84.94, the lowest since Sept. 20. It gained to 93.64 yen from 93.54 yesterday as U.S. stocks rebounded from the biggest drop in a month, encouraging so-called carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the rates. The risk is that currency market moves can erase those profits.
Australia's benchmark interest rate is 7.25 percent, compared with 2 percent in the U.S. and 0.5 percent in Japan.
The greenback has risen against all 16 of the most-traded currencies this month, with gains ranging from a 10.2 percent advance against the Australian dollar to a 1.2 percent increase versus Mexico's peso, as a 20 percent drop in the price of oil from a record bolstered the outlook for the U.S. economy.
The ICE futures exchange's Dollar Index, which compares the greenback against the currencies of six U.S. trading partners, was little changed at 77.261 after reaching 77.619 yesterday, the highest level since Dec. 26.
Inflation Data
Germany's consumer prices rose 3.4 percent in August from a year earlier after a 3.5 percent increase in the previous month, according to the median forecast of 22 economists surveyed by Bloomberg News, when a harmonized European Union method is used. A 0.2 percent monthly decline is forecast. The report from the Federal Statistics Office is due today.
The Ifo institute reported yesterday that its German business confidence index declined this month to the lowest level in three years.
The implied yield on the Euribor futures contract expiring in September 2009 fell 6 basis points, or 0.06 percentage point, to 4.32 percent. The yield averaged 18 basis points above the ECB's benchmark, currently 4.25 percent, from 1999 to August 2007.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net
Read more...
Aug. 27 (Bloomberg) -- The euro traded near a six-month low against the dollar before a government report forecast to show German inflation slowed this month, reducing pressure on the European Central Bank to raise borrowing costs.
The 15-nation euro was headed for its biggest monthly drop against the dollar since its 1999 debut after data yesterday showed German business confidence weakened more than economists expected. The Australian dollar rebounded from an 11-month low as rising U.S. stocks gave investors confidence to buy the nation's higher-yielding assets.
``The euro is mired in a mid-term downtrend,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Slowing inflation is yet another reason why we can't expect the ECB to raise rates. Traders will continue to push the euro lower.''
The euro traded at $1.4645 at 8:51 a.m. in Tokyo, after touching $1.4571 yesterday, the weakest since Feb. 14. The euro was at 160.43 yen from 160.64 yesterday when it dropped to 159.95, the lowest level since May 12. The dollar was little changed at 109.54 yen. The euro may fall to $1.4570 and 159.90 yen today, Ishikawa forecast.
The euro has weakened 6.1 percent decline against the dollar this month. It has fallen 4.7 percent versus the yen in August, the most since a 5.8 percent drop in March 2004, as a report showed the European economy contracted last quarter.
High Yielder
The Australian dollar bought 85.48 U.S. cents from 85.15 cents in late Asian trading yesterday when it fell to 84.94, the lowest since Sept. 20. It gained to 93.64 yen from 93.54 yesterday as U.S. stocks rebounded from the biggest drop in a month, encouraging so-called carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the rates. The risk is that currency market moves can erase those profits.
Australia's benchmark interest rate is 7.25 percent, compared with 2 percent in the U.S. and 0.5 percent in Japan.
The greenback has risen against all 16 of the most-traded currencies this month, with gains ranging from a 10.2 percent advance against the Australian dollar to a 1.2 percent increase versus Mexico's peso, as a 20 percent drop in the price of oil from a record bolstered the outlook for the U.S. economy.
The ICE futures exchange's Dollar Index, which compares the greenback against the currencies of six U.S. trading partners, was little changed at 77.261 after reaching 77.619 yesterday, the highest level since Dec. 26.
Inflation Data
Germany's consumer prices rose 3.4 percent in August from a year earlier after a 3.5 percent increase in the previous month, according to the median forecast of 22 economists surveyed by Bloomberg News, when a harmonized European Union method is used. A 0.2 percent monthly decline is forecast. The report from the Federal Statistics Office is due today.
The Ifo institute reported yesterday that its German business confidence index declined this month to the lowest level in three years.
The implied yield on the Euribor futures contract expiring in September 2009 fell 6 basis points, or 0.06 percentage point, to 4.32 percent. The yield averaged 18 basis points above the ECB's benchmark, currently 4.25 percent, from 1999 to August 2007.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net
Read more...
Australian, N.Z. Dollars Rise as Stock Gain Boosts Carry Trades
By Ron Harui and Tracy Withers
Aug. 27 (Bloomberg) -- The Australian dollar climbed from its weakest level in 11 months and the New Zealand dollar rose from near a two-week low as stocks advanced, giving investors more confidence to buy higher-yielding assets.
The two currencies also snapped two days of losses versus the yen as analysts said Fannie Mae and Freddie Mac have enough capital to last the year, prompting funds to return to so-called carry trades. The yield advantage of 10-year New Zealand government bonds over similar-maturity Japanese debt widened to 4.63 percentage points from 4.59 percentage points at the end of last month.
``There was some recovery in investor risk-appetite which reduced selling pressure on carry trades such as the Australian dollar-yen,'' John Kyriakopoulos, a currency strategist at National Australia Bank Ltd. in Sydney, wrote in a client note.
Australia's dollar advanced 0.7 percent to 85.74 U.S. cents as of 10:28 a.m. in Sydney, from 85.15 cents late in Asia yesterday when it reached 84.94 cents, the lowest since Sept. 20. The currency climbed 0.2 percent to 93.76 yen.
New Zealand's dollar gained 1.1 percent to 69.84 U.S. cents from 69.06 cents late in Asia yesterday when it touched 68.99 cents, the weakest since Aug. 13. The currency strengthened 0.7 percent to 76.39 yen.
Benchmark interest rates are 7.25 percent in Australia and 8 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making the South Pacific nations popular targets for carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the two. The risk is that currency market moves can erase those profits.
Best Performer
The New Zealand dollar was the best performer of the 16 most-traded currencies against the yen today as U.S. stocks rebounded from the largest drop in a month. The Standard & Poor's 500 Index strengthened 0.4 percent yesterday and the Dow Jones Industrial Average increased 0.2 percent.
``A recovery in U.S. stock markets helped underpin yen crosses and the New Zealand dollar rebounded off its lows,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``The risks are skewed in favor of the currency extending its gains.''
The New Zealand dollar also gained before an ANZ National Bank Ltd. survey today that will probably show business confidence improved in August, Hampton said.
The ANZ National Bank survey showed last month that companies were pessimistic about their sales for a fifth month in July, adding to signs the economy is in a recession.
Australian government bonds gained. The yield on the 10- year note fell 2 basis points, or 0.02 percentage point, to 5.73 percent, according to data compiled by Bloomberg. The price of the 5.25 percent bond due March 2019 rose 0.144, or A$1.44 per A$1,000 face amount, to 96.224.
New Zealand government debt was little changed, with the yield on the benchmark 10-year note holding at 6.06 percent.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.
Read more...
Aug. 27 (Bloomberg) -- The Australian dollar climbed from its weakest level in 11 months and the New Zealand dollar rose from near a two-week low as stocks advanced, giving investors more confidence to buy higher-yielding assets.
The two currencies also snapped two days of losses versus the yen as analysts said Fannie Mae and Freddie Mac have enough capital to last the year, prompting funds to return to so-called carry trades. The yield advantage of 10-year New Zealand government bonds over similar-maturity Japanese debt widened to 4.63 percentage points from 4.59 percentage points at the end of last month.
``There was some recovery in investor risk-appetite which reduced selling pressure on carry trades such as the Australian dollar-yen,'' John Kyriakopoulos, a currency strategist at National Australia Bank Ltd. in Sydney, wrote in a client note.
Australia's dollar advanced 0.7 percent to 85.74 U.S. cents as of 10:28 a.m. in Sydney, from 85.15 cents late in Asia yesterday when it reached 84.94 cents, the lowest since Sept. 20. The currency climbed 0.2 percent to 93.76 yen.
New Zealand's dollar gained 1.1 percent to 69.84 U.S. cents from 69.06 cents late in Asia yesterday when it touched 68.99 cents, the weakest since Aug. 13. The currency strengthened 0.7 percent to 76.39 yen.
Benchmark interest rates are 7.25 percent in Australia and 8 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making the South Pacific nations popular targets for carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the two. The risk is that currency market moves can erase those profits.
Best Performer
The New Zealand dollar was the best performer of the 16 most-traded currencies against the yen today as U.S. stocks rebounded from the largest drop in a month. The Standard & Poor's 500 Index strengthened 0.4 percent yesterday and the Dow Jones Industrial Average increased 0.2 percent.
``A recovery in U.S. stock markets helped underpin yen crosses and the New Zealand dollar rebounded off its lows,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``The risks are skewed in favor of the currency extending its gains.''
The New Zealand dollar also gained before an ANZ National Bank Ltd. survey today that will probably show business confidence improved in August, Hampton said.
The ANZ National Bank survey showed last month that companies were pessimistic about their sales for a fifth month in July, adding to signs the economy is in a recession.
Australian government bonds gained. The yield on the 10- year note fell 2 basis points, or 0.02 percentage point, to 5.73 percent, according to data compiled by Bloomberg. The price of the 5.25 percent bond due March 2019 rose 0.144, or A$1.44 per A$1,000 face amount, to 96.224.
New Zealand government debt was little changed, with the yield on the benchmark 10-year note holding at 6.06 percent.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.
Read more...
Oil Is Steady After Rising on Gulf of Mexico Hurricane Threat
By Mark Shenk
Aug. 27 (Bloomberg) -- Crude oil was little changed after rising more than $1 a barrel yesterday on forecasts showing that Hurricane Gustav may enter the Gulf of Mexico, home to more than a fifth of U.S. oil production.
Gustav had sustained winds of 75 miles (120 kilometers) an hour, the National Hurricane Center said in an advisory at 5 p.m. Miami time. Russia, the world's second-biggest oil producer, recognized the independence of two breakaway regions in Georgia yesterday, risking a deepening rift with the West.
``Gustav has the potential to be a major hurricane,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``At this time of year hurricanes become a major concern.''
Crude oil for October delivery fell 31 cents to $115.96 a barrel at 8:42 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 61 percent from a year ago. Futures have dropped 21 percent since touching $147.27 barrel on July 11, the highest since trading began in 1983. Yesterday, oil rose $1.16, or 1 percent, to settle at $116.27 a barrel.
Gasoline for September delivery rose 0.13 cent to $2.9710 a gallon in New York. Yesterday, it climbed 8.74 cents, or 3 percent, to settle at $2.9697 a gallon.
Pump prices haven't increased since July 19, according to AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 0.9 cent to $3.672 a gallon, AAA said yesterday on its Web site. Prices reached a record $4.114 a gallon on July 17.
Strengthening Hurricane
``Prices surged because Gustav appears to be strengthening as it moves toward the Gulf,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. Gustav weakened after reaching Haiti and is forecast to reintensify. ``The news from Georgia is also helping send prices higher. Tension is ratcheting up instead of cooling down.''
Gustav was about 60 miles (95 kilometers) west-southwest of the Haitian capital, Port-au-Prince, and was heading northwest at about 10 mph. Forecasts from the Hurricane Center show Gustav approaching eastern Cuba today. The hurricane will probably move along the southern coast of Cuba and then between the island and the Yucatan Peninsula in Mexico, heading for the Gulf.
Gustav has the potential to grow from Category 1 into a Category 4 hurricane with winds of at least 131 miles per hour by the time it enters the Gulf, said Jim Rouiller, a senior energy meteorologist with Planalytics Inc., a forecaster based in Wayne, Pennsylvania, whose clients include oil companies.
Katrina, Rita
U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita shut refineries and platforms as they struck the Gulf of Mexico coast in August and September 2005. Katrina closed 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the hurricanes.
``There's a fear that Gustav might be a replay of Katrina or Rita,'' said Kyle Cooper, an analyst at IAF Advisors in Houston.
German Chancellor Angela Merkel said that Russia's decision to recognize two breakaway Georgian regions of South Ossetia and Abkhazia breaches international law and will not be accepted by European Union members meeting to discuss the fallout from the war in Georgia.
``It's a very serious situation for Russia,'' said Alexander Rahr, a Russia and Eurasia expert at the German Council on Foreign Relations in Berlin. ``Russia now risks getting itself into complete international isolation.''
Caspian Sea
Oil fell earlier as the dollar strengthened to a six-month high against the euro, limiting the appeal of commodities as a hedge, and shipments of Caspian Sea crude oil resumed after a pipeline fire.
The euro tumbled against the dollar after a report showed German business confidence dropped by more than economists forecast. The European currency declined 0.8 percent to $1.4642 in New York, from $1.4754 Aug. 25. It touched $1.4571, the lowest level since Feb. 14.
``It's a battle between the dollar and the weather for dominance in this market,'' said Tom Bentz, a broker at BNP Paribas in New York. ``The German economic numbers put crude under pressure because it raises concern about lower European demand and sent the dollar to a six-month high. The dollar has been the primary driving force of the oil market for more than six months.''
Two tankers at the Turkish port of Ceyhan are loading crude pumped through the Baku-Tbilisi-Ceyhan pipeline for the first time since the 1 million-barrel-a-day link was shut by a fire on Aug. 5.
Brent crude oil for October settlement rose 60 cents, or 0.5 percent, to settle at $114.63 a barrel yesterday on London's ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
Aug. 27 (Bloomberg) -- Crude oil was little changed after rising more than $1 a barrel yesterday on forecasts showing that Hurricane Gustav may enter the Gulf of Mexico, home to more than a fifth of U.S. oil production.
Gustav had sustained winds of 75 miles (120 kilometers) an hour, the National Hurricane Center said in an advisory at 5 p.m. Miami time. Russia, the world's second-biggest oil producer, recognized the independence of two breakaway regions in Georgia yesterday, risking a deepening rift with the West.
``Gustav has the potential to be a major hurricane,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``At this time of year hurricanes become a major concern.''
Crude oil for October delivery fell 31 cents to $115.96 a barrel at 8:42 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 61 percent from a year ago. Futures have dropped 21 percent since touching $147.27 barrel on July 11, the highest since trading began in 1983. Yesterday, oil rose $1.16, or 1 percent, to settle at $116.27 a barrel.
Gasoline for September delivery rose 0.13 cent to $2.9710 a gallon in New York. Yesterday, it climbed 8.74 cents, or 3 percent, to settle at $2.9697 a gallon.
Pump prices haven't increased since July 19, according to AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 0.9 cent to $3.672 a gallon, AAA said yesterday on its Web site. Prices reached a record $4.114 a gallon on July 17.
Strengthening Hurricane
``Prices surged because Gustav appears to be strengthening as it moves toward the Gulf,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. Gustav weakened after reaching Haiti and is forecast to reintensify. ``The news from Georgia is also helping send prices higher. Tension is ratcheting up instead of cooling down.''
Gustav was about 60 miles (95 kilometers) west-southwest of the Haitian capital, Port-au-Prince, and was heading northwest at about 10 mph. Forecasts from the Hurricane Center show Gustav approaching eastern Cuba today. The hurricane will probably move along the southern coast of Cuba and then between the island and the Yucatan Peninsula in Mexico, heading for the Gulf.
Gustav has the potential to grow from Category 1 into a Category 4 hurricane with winds of at least 131 miles per hour by the time it enters the Gulf, said Jim Rouiller, a senior energy meteorologist with Planalytics Inc., a forecaster based in Wayne, Pennsylvania, whose clients include oil companies.
Katrina, Rita
U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita shut refineries and platforms as they struck the Gulf of Mexico coast in August and September 2005. Katrina closed 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the hurricanes.
``There's a fear that Gustav might be a replay of Katrina or Rita,'' said Kyle Cooper, an analyst at IAF Advisors in Houston.
German Chancellor Angela Merkel said that Russia's decision to recognize two breakaway Georgian regions of South Ossetia and Abkhazia breaches international law and will not be accepted by European Union members meeting to discuss the fallout from the war in Georgia.
``It's a very serious situation for Russia,'' said Alexander Rahr, a Russia and Eurasia expert at the German Council on Foreign Relations in Berlin. ``Russia now risks getting itself into complete international isolation.''
Caspian Sea
Oil fell earlier as the dollar strengthened to a six-month high against the euro, limiting the appeal of commodities as a hedge, and shipments of Caspian Sea crude oil resumed after a pipeline fire.
The euro tumbled against the dollar after a report showed German business confidence dropped by more than economists forecast. The European currency declined 0.8 percent to $1.4642 in New York, from $1.4754 Aug. 25. It touched $1.4571, the lowest level since Feb. 14.
``It's a battle between the dollar and the weather for dominance in this market,'' said Tom Bentz, a broker at BNP Paribas in New York. ``The German economic numbers put crude under pressure because it raises concern about lower European demand and sent the dollar to a six-month high. The dollar has been the primary driving force of the oil market for more than six months.''
Two tankers at the Turkish port of Ceyhan are loading crude pumped through the Baku-Tbilisi-Ceyhan pipeline for the first time since the 1 million-barrel-a-day link was shut by a fire on Aug. 5.
Brent crude oil for October settlement rose 60 cents, or 0.5 percent, to settle at $114.63 a barrel yesterday on London's ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
Tuesday's News Recap: US Consumer Confidence, Housing Data Upbeat; FOMC Minutes
Tuesday's News Recap: US Consumer Confidence, Housing Data Upbeat; FOMC Minutes
27 Agustus 2008 4:29
(CEP News) - Markets received a flurry of U.S. economic data on Tuesday, including a higher-than-expected consumer confidence reading in August and an increase in July new home sales reported by the Department of Commerce. In the afternoon, markets received minutes from the FOMC's Aug. 5 meeting, as well as comments from Bank of Canada Deputy Governor David Longworth.
Read more...
27 Agustus 2008 4:29
(CEP News) - Markets received a flurry of U.S. economic data on Tuesday, including a higher-than-expected consumer confidence reading in August and an increase in July new home sales reported by the Department of Commerce. In the afternoon, markets received minutes from the FOMC's Aug. 5 meeting, as well as comments from Bank of Canada Deputy Governor David Longworth.
Read more...
Economic Calendar Eco Data 8/27/08
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