Daily Report: EUR/USD and AUD/USD Finally Formed a Short Term Bottom?

Market Overview | Written by ActionForex.com | Aug 28 08 07:32 GMT |

Despite initial strength, the greenback is gradually turning soft this week following rebound in oil prices. USD/CAD and USD/JPY has correcting for some time already. Now it seems that EUR/USD and AUD/USD are both finally bottoming. Both pairs are now pressing near term resistance level with clear sign of loss of downside momentum. Further upside in both pairs will confirm this case and bring stronger rally. The tricky one is Sterling which remains under tremendous pressure, across the board. Some sell off is seen against yen and Swissy after nationwide house prices fell for the ninth month by -1.9% mom in Aug, dragging yoy rate to -10.5%. On the other hand, the Euro remains supported by comments from ECB weber yesterday that discussion in rate cut is premature. Focus will turn to Germany job report, Eurozone M3 and sentiments indicators. Germany unemployment rate is expected to remain unchanged at 7.8% in Aug. Eurozone M3 money supply growth is expected to continue to slow from 9.5% yoy to 9.0%. Business climate and Economic sentiments are expected to show further deterioration. Q2 GDP revision will be the main focus from US today. Markets expect a large upward revision from preliminary estimate of 1.9% to 2.7% mainly due to much better than expected performance of net exports in Jun. Though impact to the markets may be muted as the data is considered 'old'. Dollar strength and weakness will likely continue to be driven by developments in crude oil. AUD/USD Daily Outlook Daily Pivots: (S1) 0.8532; (P) 0.8584; (R1) 0.8638; More AUD/USD's recovery from 0.8493 continues today and is now pressing 0.8689 minor resistance and 4 hours 55 EMA. An intraday low should be in place with 4 hours MACD crossed above signal line again. Outlook is turned neutral for the moment. Further break of 0.8812 resistance will confirm that a short term bottom is in place after meeting mentioned 0.8512 cluster support target. In such case, stronger rebound should be seen to 38.2% retracement of 0.9849 to 0.8493 at 0.9011 or above but upside should be limited by 61.8% retracement at 0.9331 and bring fall resumption. On the downside, sustained break of 0.8512 cluster support will indicate decline from 0.9849 has resumed and bring deeper decline to test long term trend line support and 0.80/81 level. In the bigger picture, AUD/USD has completed a diagonal triangle pattern that started at 0.7675, with 0.9849 as a false break with bearish divergence conditions in daily and weekly MACD and RSI. Break of 55 weeks EMA reaffirmed that 0.9849 is an important top. Fall from 0.9849 has now dived into medium term support zone of 0.7675 and 0.8870, with 0.8008 key medium term support in between as expected. Firm break of 0.8512 cluster support (61.8% retracement of 0.7675 to 0.9849 at 0.8505) will put long term trend line support (0.4773 (01 low), 0.7015, now at 0.8105) into focus.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
6:00	GBP	U.K. Nationwide hse price Y/Y Aug	-10.50%	-9.50%	-8.10%
6:00	GBP	U.K. Nationwide hse price M/M Aug	-1.90%	-1.50%	-1.70%	-1.50%
8:00	EUR	Germany Unemployment change Aug		-10K	-20K
8:00	EUR	Germany Unemployment rate Aug		7.80%	7.80%
8:00	EUR	Eurozone M3 Y/Y Jul		9.00%	9.50%
8:00	EUR	Eurozone M3 3M Jul		9.50%	9.90%
9:00	EUR	Eurozone Business climate Aug		-0.3	-0.21
9:00	EUR	Eurozone Economic sentiment Aug		89.1	89.5
10:00	GBP	U.K. CBI Distributive Trades Aug		-30	-36
12:30	USD	U.S. PCE core M/M Q2		2.10%	2.10%
12:30	USD	U.S. PCE index M/M Q2		4.20%	3.90%
12:30	USD	U.S. GDP deflator Q2		1.10%	1.10%
12:30	USD	U.S. GDP Q2		2.70%	1.90%
12:30	USD	U.S. Jobless claims		428K	432K
12:30	CAD	Canada Current account Q2		8.00B	5.56B

Read more...

Asia Session Recap

Daily Forex Fundamentals | Written by Forex.com | Aug 28 08 07:14 GMT |

The US Dollar slipped again in Asian trading as influential ECB Board member Axel Weber let the hawkish verbiage fly, stating that any talk of a Euro Zone rate cut was very premature. Also helping to make the Euro the flavor of the day was the continued increase in oil prices, as Hurricane Gustav continued to hone in on the US Gulf region and its oil rigs. EUR/USD began its journey tonight right at its lows of 1.4720 and just took off from there to its eventual highs of 1.4806. EUR/GBP made a profound move as it blew through stops to a 0.8061 high, an area not tread on since April. EUR/JPY made a new high of 162.01 mid-way through the session, and then systematically slid to new lows of just under 161.00 as the session came to a close. USD/JPY looked weak all session, falling about 60 pips to just under 109.00, as a story released from a Japanese newspaper stating that the US, Europe and Japan were set to intervene on behalf of a troubled US Dollar back in March had little to no effect on the market. Tomorrow we will see a bunch of Japanese data, including CPI, industrial production, unemployment, and household spending. Upcoming Economic Data Releases (London Session): 28-29 AUG GE Consumer Price Index (MoM) AUG P 0.60% -0.20% 28-29 AUG GE Consumer Price Index (YoY) AUG P 3.30% 3.20% 28-29 AUG GE CPI - EU Harmonised (MoM) AUG P 0.70% -0.20% 8/28/2008 6:00 UK Nat'wide House prices sa (MoM) AUG -1.70% -1.50% 8/28/2008 6:00 UK Nat'wide House prices nsa(YoY) AUG -8.10% -9.60% 8/28/2008 6:00 GE ILO Unemployment Rate JUL 7.30% 7.30% 8/28/2008 7:15 SZ Employment Level 2Q 3.899M 3.911M 8/28/2008 7:15 SZ Employment Level (YoY) 2Q 2.80% 2.10% 8/28/2008 7:55 GE Unemployment Change (000's) AUG -20K -10K 8/28/2008 7:55 GE Unemployment Rate (s.a) AUG 7.80% 7.80% 8/28/2008 8:00 EC Euro-Zone M3 s.a. (YoY) JUL 9.50% 9.00% 8/28/2008 8:00 EC Euro-Zone M3 s.a. 3 mth ave. JUL 9.90% 9.50% 8/28/2008 10:00 UK U.K. CBI August Distributive Trades Report 28-Aug Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Read more...

Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Aug 28 08 07:56 GMT |

CHF The pre-planned short positions from the key resistance range have been realized with attainment of minimal assumed target. OsMA trend indicator having marked the close activity parity of both parties does not give grounds to choose planning priorities for today but taking into account the current stage of bearish development with short term oversold factor, we assume a possibility of pair return to the nearest resistance range below bottom boundary of Ichimoku cloud at 1.0930/50, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.0870/90, 1.0810/30 and/or further breakout variant below 1.0800 with the targets 1.0740/60, 1.0700/20. An alternative for buyers will be above 1.1010 with the targets 1.1060/80, 1.1100/20. GBP The pre-planned breakout variant for sells has been realized with attainment of assumed targets. OsMA trend indicator having marked the preservation of minimal bearish advantage supports a choice of priorities for planning of short-term sells. Hence taking into account the current ascending direction of indicator chart, we assume a possibility of attainment of the nearest resistance range 1.8410/30, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.8340/60, 1.8280/1.8300 and/or further breakout variant up to 1.8220/40, 1.8140/60, 1.8060/80. An alternative for buyers will be above 1.8500 with the targets 1.8540/60, 1.8580/1.8600. JPY The pre-planned short positions from the key resistance range have been realized but with a loss of several points in attainment of minimal assumed target. OsMA trend indicator having marked considerably high level of bullish development gives grounds to incompletion of bullish development. Hence and taking into account the descending direction of indicator chart, we assume a possibility of attainment of supports 108.60/80, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 109.20/40, 110.60/80 and/or further breakout variant above 110.20 with the targets 110.60/80, 111.00/20. An alternative for sells will be below 108.00 with the targets 107.40/60, 107.00/20. EUR The pre-planned buyers' positions from the key support range have been realized with attainment of main assumed targets. OsMA trend indicator having marked the features of overbought factor with a preservation of buyers' advantage supports a choice of bullish planning priorities for today. Nevertheless at this point taking into account the active phase of bullish development and insufficient bullish potential to break a channel line '2' to reduce trading risks, we assume a possibility of further movement within the version of descending channel with pair return to supports 1.4760/80, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.4820/40 and/or further breakout variant up to 1.4880/1.4900, 1.4920/40. An alternative for sells will be below 1.4680 with the targets 1.4620/40, 1.4580/1.4600. FOREX Ltd www.forexltd.co.uk

Read more...

Daily Forex Market Commentary

Daily Forex Technicals | Written by Global Forex Trading | Aug 28 08 01:13 GMT |

The proximity of Labor Day weekend surely doesn't make things easier in the currency markets. Nor did the half-baked measures at Fannie Mae. The dollar closed slightly lower against the euro and franc on Wednesday, but basically flat versus the pound and yen. However, trading was quite volatile. The dollar lacks much direction, so expect more choppy trading for a couple of days. Only the German unemployment rate report is of interest, as the Nationswide housing price report should be negative. Euro/dollar The euro/dollar corrected into an inside range on Wednesday after falling to a near 6 ½-month low a day earlier. Again, following an early recovery, the pair should resume its decline. My model reversed its short position. Sideways to lower trading is likely. Initial resistance is now seen at 1.4780. The next good level is at 1.4800. A pivotal level is in place at 1.4910. Immediate support comes at 1.4710. The next levels are 1.4665 and 1.4572. Below 1.4540, support comes at 1.4485 and 1.4455. Oscillators are mixed. NEAR-TERM: Mixed with downside risk MEDIUM-TERM: Bearish LONG-TERM: Mixed Dollar/yen Dollar/yen had an outside day ahead of month end, but closed virtually unchanged on Wednesday. Unless the 110.00 area gives way, the pair will retest the 108.65 area. My model is (barely) short. Immediate resistance is still in place at 110.00. Strong resistance follows at 110.35 from a 50-point pivot, which targets 109.85 and 110.85. Distant resistance is 111.60 from another 50-point pivot, which targets 112.10 and 111.10. Strong support remains at 109.15 from a 50-point pivot, which targets 109.65 and 108.65. Oscillators are mixed. NEAR-TERM: Mixed MEDIUM-TERM: Bullish LONG-TERM: Mixed Sterling/dollar Sterling/dollar sank to a new over two-year low on Wednesday and the selling pressure should continue. Initial support is at 1.8286. This is followed by 1.8245. Below 1.8207, cable has support at 1.8127. Immediate resistance now comes at 1.8437. This is followed by 1.8565. The next strong resistance remains 1.8620. Oscillators are falling. NEAR-TERM: Mixed with downside risk MEDIUM-TERM: Bearish LONG-TERM: Mixed Dollar/Swiss franc Dollar/Swiss closed marginally lower after alternating up and down days for eight days. The medium-term outlook remains positive, but trading should remain choppy for a couple of days. Initial resistance is at 1.1025. The next levels come at 1.1054 and 1.1086. Strong resistance follows at 1.1185. The pair still sees immediate support at 1.0955. This is followed by the area between 1.0925 and 1.0915. A pivot low remains at 1.0844, but this should not be challenged. Oscillators are rising. NEAR-TERM: Mixed to slightly bullish MEDIUM-TERM: Bullish LONG-TERM: Mixed Cornelius Luca Global Forex Trading http://www.gftforex.com DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Read more...

Australian Company Investment Rose More Than Forecast

By Jacob Greber

Aug. 28 (Bloomberg) -- Australian business investment rose more than economists forecast in the second quarter as mining companies spent extra on machinery and equipment to meet demand from China.

Capital spending rose 5.7 percent from the previous three months, when it gained a revised 1 percent, the Bureau of Statistics said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for a 2 percent gain.

Increased investment 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.

``With retail looking sluggish, growth is increasingly reliant on strong business investment,'' Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, said ahead of today's report.

The Australian dollar climbed to 86.45 U.S. cents at 11:37 a.m. in Sydney from 86.05 cents before the report was released. The two-year bond yield rose 2 basis points to 5.70 percent. A basis point is 0.01 percentage point.

Spending on buildings and structures fell 0.5 percent and company investment in the new plant and equipment advanced 8 percent in the second quarter, today's report showed.

Investment Outlook

Companies forecast investment of A$99.8 billion ($86 billion) in the year ending June 30, 2009, which is 14.5 percent more than the estimated three months earlier and 26 percent greater than the corresponding estimate last year.

Export income is forecast by the central bank to rise 20 percent this year after mining companies including Rio Tinto negotiated a price increase of as much as 97 percent for iron ore destined for China.

Still, the Reserve Bank of Australia 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.

Australia's $1 trillion economy expanded at the weakest pace in almost two years in the three months through March and growth will 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.

Stocks Slump

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.

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.

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.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net



Read more...

Spain May Suffer From ECB Lending Curbs as Expansion Falters

By Ben Sills and Esteban Duarte

Aug. 28 (Bloomberg) -- Spain's economy, brought to the brink of a recession by surging global credit costs, may find money even harder to come by when the European Central Bank tightens its lending practices.

Spain's banks have stored up 89 billion euros of their own asset-backed securities, more than any euro-region country, because the ECB accepts them as collateral in auctions, according to UniCredit SpA. Now the central bank wants to change the rules, ECB council member Yves Mersch said in an interview on Aug. 23, a move that may leave Spain holding the bag.

``This may affect negatively the profitability of Spanish banks and their ability to lend,'' said Willem Buiter, a professor at London School of Economics and a former Bank of England policy maker. ``It could lead to slower growth.''

Spain's banks have relied on cheap money from the ECB to help provide credit to consumers and companies even as the economy is buffeted by a real-estate downturn. Without the ECB, the country would be more dependent on foreign investors, who are demanding higher returns before committing funds.

ECB officials have agreed to adjust collateral rules in response to some banks' attempts at ``gaming the system,'' Mersch told Bloomberg News at the Federal Reserve's annual retreat in Jackson Hole, Wyoming. Axel Weber, another council member, said in an interview published yesterday in Frankfurt that the ECB must ensure its rules are ``not abused.''

Fitch Warning

The share of asset-backed bonds in the collateral deposited with the ECB jumped by a third last year. What's more, the quality of the assets underlying those bonds has deteriorated, Fitch Ratings said in a report in May. Spanish banks are pooling ``higher risk'' mortgages and consumer loans to back the bonds, Fitch said.

``We see bonds being issued just to forward them directly to the ECB,'' said Kornelius Purps, a fixed-income strategist in Munich at UniCredit, Europe's fourth-largest bank.

Holders of asset-backed securities can get money 39 percent cheaper at central-bank auctions than through investors. A Spanish mortgage-backed bond rated at the highest credit rating trades with a spread of about 2.8 percentage points to the euro interbank offered rate, or Euribor. The resulting rate of 7.76 percent compares with an average rate of 4.74 percent at yesterday's ECB auction for three-month money.

Since the credit squeeze began a year ago, Spanish institutions raised their monthly borrowing from the ECB by 31 billion euros to a record 49.4 billion euros, according to data compiled by Bloomberg based on central-bank figures. The increase is three times the size of Prime Minister Jose Luis Rodriguez Zapatero's fiscal stimulus package aimed at averting a recession.

`Delicate Situation'

``The economy is in a very delicate situation,'' said Jose Luis Martinez, a strategist at Citigroup Inc. in Madrid, who predicts a recession in Spain in the second half of the year. ``One reason for that is the tighter credit conditions and anything which exacerbates that is bad news.''

Spain's economy grew 0.1 percent in the second quarter, the slowest in 15 years. The euro region's gross domestic product shrank for the first time since the introduction of the single currency in 1999.

One option for ECB policy makers is to reduce the amount of money that can be borrowed for every euro of asset-backed collateral, Natacha Valla, chief economist of Goldman Sachs Group Inc. in Paris, said in a report after Mersch's comments.

Spanish Debt

Buiter said the ECB may make it harder for banks to use as collateral bonds backed by loans they themselves granted. Banco Popular Espanol SA, Spain's no. 3 lender, tripled its holdings of assets eligible in ECB auctions to 15.2 billion euros since December 2006. The bank faces 7 billion euros of debt maturities over the next 18 months.

Spain's economy doubled in size over the past decade as the decline in borrowing costs brought by euro membership spurred construction and consumer spending. That spree saw Spain run up the world's second-biggest current-account deficit after the U.S., leaving businesses and consumers reliant on foreign lenders.

With household debt reaching 130 percent of incomes, consumption was already slowing when the global credit crunch began. The turbulence triggered a collapse in the housing market as investors became more reluctant to provide financing to Spanish lenders. Home sales fell by a third in May from a year earlier.

``If the ECB restricts the possibilities for using asset- backed bonds in refinancing operations, the market spread will widen again,'' said Sylvain Broyer, an economist at Natixis in Frankfurt. ``Such a tightening will hurt the part of the euro-zone economy which is weakest right now.''

To contact the reporters on this story: Ben Sills in Madrid at bsills@bloomberg.netEsteban Duarte in Madrid at eduarterubia@bloomberg.net;



Read more...

South Korea Manufacturers Sentiment Rises on Oil Drop

By William Sim

Aug. 28 (Bloomberg) -- South Korean manufacturers' confidence climbed from a three-year low on optimism the recent drop in oil prices will help improve profitability.

An index measuring businesses expectations for September rose to 79 from 74 the previous month, according to a survey of 1,452 manufacturers released by the Bank of Korea in Seoul today. A score lower than 100 means pessimists outnumber optimists.

Declining commodity prices may ease costs pressures on Korean businesses and consumers, helping to spur a recovery in domestic demand. The economy expanded at the slowest pace in more than a year last quarter as consumers cut back non- essential spending as they paid more for fuel and food.

``Sentiment is improving a bit but still low,'' said Go You Sun, an economist at Daewoo Securities Co. in Seoul. ``It'll take a while to see a major improvement depending on oil prices, exports and other key factors.''

Carmakers Hyundai Motor Co. and General Motors Corp.'s South Korean unit are manufacturers that raised prices earlier this year to recoup increased costs for steel and other raw materials.

The Korean won rose 0.3 percent to 1,080.67 against the dollar at 9:47 a.m. in Seoul. The Kospi index of shares fell 0.2 percent to 1,490.48.

An index measuring the outlook for commodity costs declined to 130 from 157, meaning fewer manufacturers expect prices to rise compared with last month's poll, today's report showed. An index measuring profitability climbed to 79 from 70.

Inflation Outlook

Crude oil has dropped 20 percent from a record $147 a barrel reached on July 11.

South Korea's inflation rate in August may not be as high as in July because fuel and other commodity prices are falling, Vice Finance Minister Kim Dong Soo said in a BBS radio interview in Seoul today. Inflation accelerated to a 10-year high of 5.9 percent in July.

An index of non-manufacturing companies' expectations for September rose 77 from 75 on the improved outlook for profits and cash flows. The Bank of Korea surveyed the manufacturers and 711 non-manufacturers between Aug. 18 and Aug. 22.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net.



Read more...

Abdullah May Use Malaysia Budget to Stymie Opposition Challenge

By Stephanie Phang

Aug. 28 (Bloomberg) -- Malaysia's Prime Minister Abdullah Ahmad Badawi, facing challenges to his leadership amid slowing growth and faster inflation, may cut taxes and put more cash in the hands of consumers to bolster support in his 2009 budget.

Abdullah, 68, may propose income tax reductions, lower employee contributions to the national pension fund and cash handouts or rebates to the poor in his budget speech tomorrow, according to economists surveyed by Bloomberg News.

The U.S.-led economic slowdown has hurt Malaysian exports, threatening growth and complicating Abdullah's efforts to stay in power after the ruling coalition's worst election performance in half a century in March. Opposition leader Anwar Ibrahim this week won a by-election, returning to parliament for the first time in a decade and furthering his plan to oust the government.

``Anwar's landslide victory could prompt more desperate and populist measures by the incumbent government to retain its grip on power,'' said Kit Wei Zheng, a Singapore-based economist at Citigroup Inc. ``There is definitely an upside risk to the fiscal deficit.''

Malaysia has refrained from joining its neighbors in raising borrowing costs to cool inflation this year. The central bank this week held its overnight policy rate at 3.5 percent for a 19th straight meeting, citing concern growth will falter, even as inflation reached a 26-year high in July.

The $151 billion Southeast Asian economy probably expanded 6 percent in the second quarter, the slowest pace in a year, according to the median forecast of 16 economists surveyed by Bloomberg News in the week to Aug. 26.

`Political Uncertainty'

``Rising prices, a falling stock market and increased political uncertainty are likely to have dampened consumer spending during the second quarter,'' said Nikhilesh Bhattacharyya, an economist at Moody's Economy.com in Sydney.

Abdullah will announce new economic growth forecasts for 2008 and next year tomorrow, together with estimates for the budget deficit and public spending plans.

Asian governments from the Philippines to Singapore have cut growth forecasts this year as a U.S. slowdown spreads. Inflation that the Asian Development Bank estimates may reach a decade high in 2008 has forced governments to spend more on subsidies to help the poor cope with higher oil and food prices.

Malaysia's inflation accelerated to 8.5 percent last month after the government cut fuel subsidies to keep down its own costs as oil prices rose. The central bank this week said inflation should ``moderate substantially'' in the second half of 2009.

Voter anger over rising prices contributed to opposition gains in March elections that deprived Abdullah's ruling coalition of its two-thirds majority in parliament.

Public Discontent

In response to public discontent over costlier fuel, Abdullah last week cut gasoline prices by 5.6 percent and lowered diesel costs by 3.1 percent, saying he wants to ease the burden of consumers and reduce inflationary pressure. In June, he shelved some public works projects to focus public spending on food security, public transportation and housing and help Malaysians cope with surging prices.

Anwar, 61, a member of Abdullah's coalition until he was fired a decade ago, is now the leader of an alliance of opposition parties and has said he plans to lure enough lawmakers from the ruling coalition to form a new government next month. The former deputy premier has promised to reduce fuel prices should he seize power.

Tax Relief

``Budget 2009 should factor in the need to boost government popularity via people-oriented measures now that Anwar has completed another phase of his political comeback,'' said Suhaimi Ilias, an economist at Aseambankers Malaysia Bhd. in Kuala Lumpur. ``There is this immediate need to address the downside risks to growth and upside risks to inflation.''

Abdullah may increase rebates or relief for taxpayers, cut the road tax on vehicles, and increase the number of items whose prices are controlled in tomorrow's budget, said Lee Heng Guie, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur.

He may also reduce import taxes on raw materials, and lower a withholding tax on dividends for real estate investment trusts, to reduce business costs and encourage investment, according to Citigroup. To make up for the lower revenue as a result of tax cuts, the government may raise taxes on cigarettes and alcohol.

Malaysia last cut the top income tax rate to 28 percent from 29 percent in 2002. The government has posted budget deficits since 1998, when it began spending more than it earned to revive an economy hurt by the 1997 Asian financial crisis.

To contact the reporter on this story: Stephanie Phang in Kuala Lumpur at sphang@bloomberg.net

Read more...

Cullen Says New Zealand Economy Faces `Serious Challenge'

By Tracy Withers

Aug. 28 (Bloomberg) -- New Zealand's economy is facing a serious challenge as soaring credit costs and rising fuel and food prices put consumers under pressure, Finance Minister Michael Cullen said.

``New Zealand is acing a serious economic challenge generated by the global credit crunch and steep rises in commodity prices,'' Cullen said in a speech in Auckland today. Consumers ``have certainly felt pressure this year, both at the petrol pump and the supermarket checkout.''

The $105 billion economy was probably in recession in the six months through June as drought and a plunging housing market curbed spending, the Treasury Department said this month. The central bank cut interest rates last month for the first time in five years and said further reductions are likely as demand slows and inflation eases.

``Relief is in sight both through lower interest rates and personal tax cuts on Oct. 1,'' Cullen said. Notes of his speech were posted on the government Web Site.

The government's strategy of reducing debt and maintaining a strong fiscal position is the correct one in face of ``the most complex and challenging set of economic forces we have confronted in at least two decades,'' he said.

High debt means New Zealand will have structurally higher relative interest rates irrespective of the cycle of monetary policy, he said.

Cullen has bolstered saving by starting a fund from which future pensions will be paid and by introducing a workplace savings plan.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.



Read more...

Days of Rage in Streets Start Derailing Asia: William Pesek

Commentary by William Pesek

Aug. 28 (Bloomberg) -- Asia has indeed decoupled -- not from the U.S. economy, but from political reality.

Thailand is Exhibit A. Three years ago, it was the post- Asian-crisis role model. Living standards were rising, investors were funneling in and Asian peers were envious of ``Thaksinomics.''

The reference here is to the dual-track plan to boost domestic demand and export growth championed by Thaksin Shinawatra. The former Thai prime minister was removed in a September 2006 coup amid corruption allegations. Thaksin fled to the U.K. and bought soccer team Manchester City.

Yet the military leaders who replaced him were painfully inept. That paved the way for the People Power Party to be elected in December 2007. Its pro-Thaksin leader, former television chef Samak Sundaravej, is facing massive protests and calls for his resignation.

And just like that, one of Southeast Asia's shining examples of stability, prosperity and democracy is descending into farce. The joke among investors is which English Premier League team will Samak buy if he flees Thailand?

It's less of a joking matter that strategists like Dwyfor Evans of State Street Global Markets in Hong Kong say Thailand's baht may slide more than 3 percent by year-end, leading global funds to pull money from the country.

Malaysia's Woes

Events in Malaysia also are troubling. Again, this is an economy than won kudos following the Asian crisis a decade ago. Malaysia's headline-grabbing backlash against the International Monetary Fund moved to the background as growth returned, stocks rose and commodity prices soared.

Now, headlines are filled with ``sodomy'' and ``opposition official arrested'' and ``leadership crisis.'' The personality in question is Anwar Ibrahim, who's been accused of having illegal sex with a man. This week, Anwar won back a seat in parliament, increasing his chances of ousting Prime Minister Abdullah Ahmad Badawi. Malaysia's government is adrift when its economy can least afford it.

``At a time when Asia is under pressure from external forces, strong and stable leadership is crucial,'' says Simon Grose-Hodge, a strategist at LGT Group in Singapore. ``Malaysia and Thailand seem unable to deliver that.''

Biggest Surprises

Politics often offer the biggest surprises in Asian markets. In recent years, investors have found themselves less shocked by reports on gross domestic product, inflation or stock movements than coup attempts, scandals or disagreements between neighboring governments.

Disputes abound: China and Taiwan over sovereignty, Japan and South Korea over rocks in the sea, Indonesia and Singapore over pollution, India and Pakistan over disputed territory, Thailand and Cambodia over borders and North Korea and the rest of Asia over nuclear weapons. The Philippines is often on guard for the next ``people power'' rebellion.

Politics is holding Asia back, distracting officials from spreading the benefits of growth, reducing poverty, improving education and upgrading roads, bridges and power system to compete in the global economy. It's also scaring away investors who are growing increasingly risk adverse as the global credit crunch worsens.

Success Story

The region does have its success stories, like Indonesia. Rampant corruption and persistent poverty aren't undermining President Susilo Bambang Yudhoyono's efforts to put Southeast Asia's largest economy on a higher growth path.

``Indonesia,'' says Bruce Gale, a political risk analyst based in Singapore, ``is a lot more stable politically than many foreigners seem to realize.''

Yet politics is even getting in the way of Asia's most developed nations. Take Japan, which is experiencing paralysis at the highest levels of government. Prime Minister Yasuo Fukuda's slipping political support is complicating efforts to shield Asia's largest economy from recession.

Recent declines in markets speak to how Asia hasn't decoupled from the U.S. economy, as pundits once asserted. This period of global instability would be less dangerous if governments were better equipped to handle them.

The fallout from Wall Street's losses continues to flow this way. Michael Dee of Temasek Holdings Pte, Singapore's $130 billion sovereign wealth fund, yesterday found himself in the surreal position of voicing confidence in the once mighty Merrill Lynch & Co.

Merrill has a ``great franchise which has existed through many crises through a long period of time,'' Dee, Temasek's senior managing director of international, told Bloomberg Television.

Unique Asia

Since December, Temasek, Merrill's biggest shareholder, has invested about $5 billion in the third-largest U.S. securities firm. Dee said he has ``great confidence'' in Merrill Chief Executive Officer John Thain. Last year, Thain replaced the ousted Stan O'Neal, who oversaw the firm's largest quarterly loss in its 93-year history.

If Southeast Asia is to stand its ground amid a potential U.S. recession it needs more predictable and transparent government. Only then will economies have credible institutions like judiciaries, central banks, media and watchdog groups to weed out corruption. From there, more efficient and stable economic growth might follow.

All this sets Asia apart from many of the world's markets. Analysts typically assess economies by locking themselves in offices and studying government data, bond yields, stock valuations, and the like. Here in Asia, more luck might be had looking out the window at the street demonstrations below.

(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



Read more...

Vector Electricity Customer Growth Slows to Five-Year Low

By Gavin Evans

Aug. 28 (Bloomberg) -- Vector Ltd., New Zealand's biggest electricity and gas distributor, said new connection growth to its power networks slowed to the lowest in at least five years as home construction declined.

Electricity connections rose 1 percent to 680,664 at June 30, having increased 1.5 percent a year earlier, according to data the Auckland-based company e-mailed today. The rate is the slowest since Vector's 2002 acquisition of UnitedNetworks Ltd.

New Zealand building approvals fell to the lowest in almost 22 years in June amid falling home prices and declining consumer confidence. New connections since June have fallen by as much as 50 percent from a year earlier, Vector Chief Executive Officer Simon Mackenzie said yesterday.

Vector last month sold its Wellington power network to Cheung Kong Infrastructure Holdings Ltd. to focus on faster- growing Auckland, home to about a quarter of the nation's 4.3 million people.

Electricity connections in the Auckland and Northland regions increased 1.2 percent to 518,467 at June 30, after rising 1.6 percent a year earlier, according to today's data. Gas pipeline connections rose 2.9 percent to 147,198, after gaining 3 percent a year earlier.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net



Read more...

Korean Won Strengthens a Second Day on Intervention Speculation

By Kim Kyoungwha

Aug. 28 (Bloomberg) -- South Korea's won strengthened for a second day after Vice Finance Minister Kim Dong Soo said the central bank will take action to prevent drastic moves in the currency when necessary.

Policy makers are seeking a stronger currency to curb an inflation rate that rose to a decade high of 5.9 percent in July. The vice minister spoke in a BBS radio interview today. The currency lost 6.8 percent the past month, making it Asia's worst performer, as global funds took money out after selling the nation's equities and as refiners bought dollars to import oil.

``Market participants are unwilling to push the dollar higher given that ministry officials' rhetoric raised the possibility of intervention,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``Offshore players are selling the dollar, which is also adding to the won's advance.''

The currency rose 0.3 percent to 1,080.25 against the dollar as of 9:31 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It has fallen 13.6 percent this year, the worst performer among the 10 most-active regional currencies outside of Japan.

Central banks intervene in the currency market by selling or buying foreign exchange. The Korean currency will trade between 1,075 and 1,087 today, Won forecast.

Fund managers outside the nation sold more Korean shares than they bought for an eighth day, stock exchange data showed.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;



Read more...

Origin Energy Profit Rises 13% on Retail, Oil Gains

By Angela Macdonald-Smith

Aug. 28 (Bloomberg) -- Origin Energy Ltd., the Australian utility fighting off a A$13.7 billion ($12 billion) takeover bid from BG Group Plc, said full-year profit rose 13 percent, buoyed by the purchase of a retailing unit and higher oil prices.

Net income advanced to A$516.7 million in the year ended June 30, from A$456.9 million a year earlier, Sydney-based Origin said today in a statement to the Australian stock exchange. Profit before one-time items rose 20 percent to A$443 million, compared with the market consensus of A$440.7 million cited by Credit Suisse Group.

Origin benefited from a full-year contribution from the Sun Retail business in Queensland it bought for A$1.2 billion in February 2007. Record oil and gas sales and higher prices boosted returns from petroleum exploration and production. Managing Director Grant King today retained a target of 10-15 percent annual growth in per-share earnings.

``A number of projects are expected to make initial or significantly increased contributions to Origin's financial performance in the current financial year,'' King said in the statement. ``The result highlights the strength of our existing businesses.''

Origin Energy dropped 1 cent, or 0.1 percent, to A$16.00 in Sydney trading at 10:06 a.m. local time.

Sales gained 29 percent to A$8.3 billion. Origin declared a final dividend of 13 cents a share, up from 11 cents a year earlier.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net



Read more...

Korean Won Strengthens a Second Day on Intervention Speculation

By Kim Kyoungwha

Aug. 28 (Bloomberg) -- South Korea's won strengthened for a second day after Vice Finance Minister Kim Dong Soo said the central bank will take action to prevent drastic moves in the currency when necessary.

Policy makers are seeking a stronger currency to curb an inflation rate that rose to a decade high of 5.9 percent in July. The vice minister spoke in a BBS radio interview today. The currency lost 6.8 percent the past month, making it Asia's worst performer, as global funds took money out after selling the nation's equities and as refiners bought dollars to import oil.

``Market participants are unwilling to push the dollar higher given that ministry officials' rhetoric raised the possibility of intervention,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``Offshore players are selling the dollar, which is also adding to the won's advance.''

The currency rose 0.3 percent to 1,080.25 against the dollar as of 9:31 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It has fallen 13.6 percent this year, the worst performer among the 10 most-active regional currencies outside of Japan.

Central banks intervene in the currency market by selling or buying foreign exchange. The Korean currency will trade between 1,075 and 1,087 today, Won forecast.

Fund managers outside the nation sold more Korean shares than they bought for an eighth day, stock exchange data showed.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;



Read more...

Australian Dollar Declines as Returns on Fixed-Income Diminish

By Chris Young

Aug. 28 (Bloomberg) -- The Australian dollar fell toward its lowest level this year against the U.S. currency on concern investors will seek higher-yielding assets elsewhere on prospects the central bank will lower interest rates next week.

The currency declined for a second day against the New Zealand dollar as traders bet the Reserve Bank of Australia will cut its 7.25 benchmark borrowing cost on Sept. 2, the first reduction in seven years. Australian 10-year government bond yields dropped to a 17-month low, 32 basis points less than similar-maturity New Zealand debt compared with 7 basis points more than a month ago. New Zealand's interest rate is 8 percent.

The Australian dollar declined to 85.83 U.S. cents as of 8:50 a.m. in Sydney from 86.18 in late Asian trading yesterday. It touched 84.94 cents on Aug. 26, the lowest since September. The currency fell 0.5 percent to NZ$1.2224, taking its loss the past month to 5.1 percent versus New Zealand's dollar.

``The RBA looms as a key event risk for the Australian dollar and traders are cautious before this,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``The Aussie will struggle to get over resistance at 86 cents,'' she said, referring to the currency by its nickname.

The Aussie has dropped against all 16 of the most-traded currencies in August and is down 8.9 percent against the U.S. dollar, heading for its biggest monthly loss since July 1986.

13 Percent Drop

The currency has plunged almost 13 percent since reaching a 25-year high of 98.49 cents on July 16 as reports have shown Australian business confidence held in July to the lowest level since 2001, home-loan approvals fell to a four-year low in June, and employers hired fewer workers. Australia's central bank said on Aug. 19 it may soon cut rates to avoid a ``deeper and more persistent'' economic slowdown.

Traders expect the Reserve Bank will cut rates by a quarter-percentage point next week and lower the benchmark to at least 6.25 percent in the next year, according to Credit Suisse Group indexes based on interest-rate swaps.

Australian government debt gained for a third day. The yield on the 10-year bond fell 1 basis point, or 0.01 percentage point, to 5.70 percent, the lowest since mid-March 2007. The price of the 5.25 percent security maturing in March 2019 rose 0.107, or A$1.07 per A$1,000 face amount, to 96.446. Yields move inversely to prices.

To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.



Read more...

Euro May Climb for Second Day on Weber's Comments, Crude Oil

By Stanley White and Ye Xie

Aug. 28 (Bloomberg) -- The euro may rise against the dollar for a second day as European Central Bank council member Axel Weber said discussion about a reduction in interest rates is ``premature'' and crude oil prices increased.

The currency advanced from a six-month low versus the dollar yesterday as traders reduced bets that the ECB will lower borrowing costs next year. The yen fell from a three-month high against the euro and dropped versus South Africa's rand as an increase in orders for U.S. durable goods encouraged investors to sell Japan's currency and buy higher-yielding assets.

``The ECB is trying to correct some of the easing expectations in 2009,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. ``Oil is going to be bid up again. The dollar will have to give up some of its gains over the rest of the week.''

The 15-nation euro traded at $1.4726 at 8:39 a.m. in Tokyo, after rising 0.5 percent yesterday. It touched $1.4571 on Aug. 26, the lowest level since mid-February. The dollar was little changed at 109.47 yen. The yen traded at 161.22 per euro, after falling 0.4 percent. It strengthened beyond 160 on Aug. 26 for the first time since May 12.

Any declines in the dollar may be limited after the Nikkei English News reported, citing unnamed sources, that the U.S. Treasury Department, Japan's Finance Ministry and the European Central Bank in mid-March drew up plans to strengthen the dollar following troubles at Bear Stearns Cos.

Dollar Intervention

``Traders will be more wary about selling the dollar,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``While officials didn't intervene earlier this year, we have a clear sign of how far they're willing to go to prevent the dollar from going into freefall.''

The dollar slumped to record lows against the euro, the Swiss franc and hit a 12-year low versus the yen in March as the Fed sponsored a bail out of Bear Stearns and lowered interest rates to restore confidence in the financial system following the collapse of the U.S. subprime mortgage market.

ECB spokeswoman Eszter Miltenyi and Treasury spokeswoman Brookly McLaughlin declined to comment on the report.

Sterling fell to a two-year low versus the dollar yesterday and dropped against the euro on bets a deepening slump in the nation's housing market will force the Bank of England to cut interest rates. The pound was little changed at $1.8367 after yesterday declining to $1.8286, the lowest since July 2006. Against the euro, the British currency was at 80.20 pence, after reaching 80.31 pence, the weakest since June 9.

Weaker Yen

The yen dropped 0.7 percent to 14.13 versus the South African rand yesterday and 0.5 percent to 9.89 South Korean won as the boost in U.S. durable goods encouraged investors to resume carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.5 percent compares with 12 percent in South Africa and 5.25 percent in South Korea.

Bookings for U.S. goods made to last several years increased 1.3 percent in July after a revised gain of the same amount in the previous month, the Commerce Department reported yesterday. The median forecast of 76 economists surveyed by Bloomberg News was for no change in durable goods orders.

Traders reduced bets that the ECB will cut its 4.25 percent main refinancing rate next year. The implied yield on the Euribor futures contract expiring in September 2009 rose 11 basis points, or 0.11 percentage point, to 4.43 percent yesterday. The yield averaged 18 basis points above the ECB's benchmark from 1999 to August 2007.

ECB Stance

Policy makers at the ECB may need to raise borrowing costs once the economic outlook ``brightens'' toward the end of the year and next year, said Weber, who heads Germany's Bundesbank, in an interview in Frankfurt yesterday.

ECB council member Klaus Liebscher said in a speech yesterday in Berlin that ``vigilance is more necessary than ever'' regarding inflation. Annual inflation of 4 percent in the countries using the euro is twice the ECB's target of just below 2 percent.

``In order for the euro to go lower, the market has to see an indication of ECB rate cuts, which require inflation to come lower,'' said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. ``We are finding equilibrium.''

Crude Oil Gains

Crude oil for October delivery rose 1.8 percent to $118.37 a barrel yesterday on forecasts Tropical Storm Gustav will strengthen as it enters the Gulf of Mexico, home to 26 percent of U.S. production. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

The euro has fallen 8 percent from a record of $1.6038 set on July 15 as the European economy shrank in the second quarter and crude oil declined 20 percent from its all-time high reached last month. The currency has dropped 5.9 percent against the dollar in August, the biggest monthly decline since the European currency began trading in 1999.

``The fall of the euro may be a little bit too far, too fast,'' said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, in an interview on Bloomberg Television. ``I won't be surprised to see a little bit of a corrective rally. But that's in the overall declining trend.''

To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net



Read more...

New Zealand Dollar Advances After Business Confidence Improved

By Ron Harui and Tracy Withers

Aug. 28 (Bloomberg) -- The New Zealand dollar rose on optimism that the South Pacific economy is recovering from a first-half recession, prompting traders to pare bets on central bank interest-rate reductions.

New Zealand's dollar gained for a second day after a survey yesterday showed business confidence improved in August for the first time in six months. The currency trimmed this week's loss to 0.8 percent as the difference in yield between 10-year New Zealand and U.S. government bonds widened to 2.27 percentage points from 2.17 percentage points at the end of July.

``The business confidence data revealed a more positive outlook,'' said Philip Borkin, an economist at ANZ National Bank Ltd. in Wellington. ``U.S. dollar fortunes may wane'' against the New Zealand dollar, he said.

The New Zealand dollar advanced 0.2 percent to 70.34 U.S. cents at 12:01 p.m. in Wellington from 70.17 cents late in Asia yesterday. It reached 68.26 cents on Aug. 13, the lowest since Aug. 17, 2007. The currency rose 0.8 percent to 76.96 yen from 76.36 yen.

Companies were positive about sales and profits over the next 12 months, according to an ANZ National Bank Ltd. survey. A second measure of economic confidence improved to minus 21 from minus 43 and firms were less pessimistic about profits, hiring and investment plans.

New Zealand's $105 billion economy was probably in a recession in the six months through June, the Treasury Department said Aug. 4.

Traders are betting the Reserve Bank of New Zealand will lower its 8 percent official cash rate by 1.45 percentage points over the next 12 months, down from 1.50 percentage points a week earlier, according to a Credit Suisse Group index based on interest-rate swaps.

New Zealand government debt was little changed. The yield on the benchmark 10-year note was at 6.04 percent and the three- year yield held at 6.13 percent. Yields move inversely to prices.

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 Steady After Rising as Gustav Threatens U.S. Gulf Platforms

By Mark Shenk

Aug. 28 (Bloomberg) -- Crude oil was little changed in New York after rising on speculation Tropical Storm Gustav will become the most damaging hurricane since Katrina as it moves toward production platforms in the Gulf of Mexico.

Gustav may become a ``destructive hurricane rivaling Rita and Katrina,'' which shut refineries and platforms in the Gulf and sent oil prices to a record, Joe Bastardi of AccuWeather.com in State College, Pennsylvania, said yesterday. Gustav was packing sustained winds of about 50 miles (85 kilometers) an hour, the National Hurricane Center said at 5 p.m. Miami time.

``The forecasts have Gustav heading for Louisiana, which is very bad news,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``If the storm track holds, this could shape up to be an untimely repeat of Hurricane Katrina. The damage caused by Katrina is in the collective consciousness of everyone who trades.''

Crude oil for October delivery rose 11 cents to $118.26 a barrel at 8:44 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 65 percent from a year ago. Futures have dropped 20 percent since touching a record $147.27 a barrel on July 11. Yesterday, oil rose $1.88, or 1.6 percent, to $118.15.

Natural gas for October delivery fell 2 cents to $8.588 per million British thermal units after rising 22.1 cents, or 2.6 percent, to $8.608 per million British thermal units yesterday in New York.

Rig Evacuations

Energy producers will evacuate ``several thousand'' employees from offshore rigs yesterday because of the storm, said Ted Falgout, the director of Louisiana's Port Fourchon. Almost 20,000 workers are on offshore platforms, about one- quarter of which are needed to maintain output, Falgout said in an interview.

``Most companies are waiting until Friday to decide whether they need to shut down production,'' Falgout said. ``If you look at models showing the storm's track, it should scare you.''

The Gulf accounts for about 14 percent of U.S. gas output. The coast along Louisiana and Texas is home to 42 percent of U.S. refining capacity.

Gustav was about 90 miles (150 kilometers) southeast of Guantanamo, Cuba, and forecast to head into the central Gulf of Mexico by Aug. 31, the hurricane center said.

The storm has the potential to grow to a Category 4 hurricane with winds of at least 131 miles per hour by the time it enters the Gulf, said Jim Rouiller, senior energy meteorologist with Planalytics Inc. in Wayne, Pennsylvania.

Katrina and Rita

In August and September 2005 U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita struck the Gulf Coast. 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 storms.

``Since Katrina there's a greater perception of our vulnerability, especially to a strong storm,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``There's a potential of disruption throughout the industry.''

The hurricane center's track for Gustav takes it toward waters south of Louisiana, where U.S. offshore oil and gas platforms and pipelines are most concentrated.

``If the storm does intensify to a Category 4 or 5 and stays on its current path, you will see a definite impact on the offshore Gulf production,'' said Dominick Chirichella, senior partner at the Energy Management Institute in New York. ``A lot of rigs will shut down as they move essential personnel off.''

U.S. Inventories

Prices also rose after a government report showed that U.S. gasoline supplies dropped for a fifth week. Gasoline stockpiles fell 1.18 million barrels to 195.4 million barrels, the Energy Department said in its weekly report. A drop of 2.45 million barrels was expected, according to the median of 12 analyst responses in a Bloomberg News survey.

Crude-oil inventories dropped 177,000 barrels to 305.8 million barrels, the report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, climbed 57,000 barrels to 132.1 million barrels.

Gasoline for September delivery climbed 9.75 cents, or 3.3 percent, to $3.0672 a gallon in New York, the highest settlement since Aug. 1. Heating oil for September delivery increased 5.18 cents, or 1.6 percent, to settle at $3.2617 a gallon.

OPEC Meeting

The Organization of Petroleum Exporting Countries, producer of 42 percent of the world's oil, should maintain output when it meets in Vienna next month to help curb prices, International Energy Agency Executive Director Nobuo Tanaka said. The IEA, which advises 27 developed nations on energy policy, was set up in 1974 in response to the Arab oil embargo.

``We wish producers will maintain the current level of production,'' Tanaka said in an interview at an oil conference in Stavanger, Norway. ``The current price level is putting a burden on the global economy.''

Brent crude oil for October settlement rose $1.59, or 1.4 percent, to settle at $116.22 a barrel 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...

Australia Stocks: BHP, Leighton, Macarthur, Rio, Woodside

By Shani Raja and Chan Tien Hin

Aug. 28 (Bloomberg) -- The S&P/ASX 200 Index rose 47 points, or 0.9 percent, to 5,058.20 at 10:19 a.m. in Sydney, headed for its highest since July 24. The broader All Ordinaries Index gained 42.80 points, or 0.8 percent, to 5,130.60, while the futures index expiring in September advanced 1.1 percent to 5,040.

Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, gained 58 cents, or 1.4 percent to A$41.47, set for its highest since July 2. Rio Tinto Group (RIO AU), the world's third-largest mining company, advanced A$1.97 cents, or 1.6 percent, to A$126.97. Minara Resources Ltd. (MRE AU), Australia's second-largest nickel producer, rallied 8 cents, or 5 percent, to A$1.57, headed for its highest since Aug. 8.

A measure of six metals traded on the London Metal Exchange climbed 1.4 percent. Zinc rose 3.4 percent, copper 0.9 percent and nickel 4.8 percent.

Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, climbed A$1.68, or 2.9 percent, to A$60.10, headed for its highest level since July 15. Santos Ltd. (STO AU) jumped 56 cents, or 2.9 percent, to A$19.96, highest since July 2.

Oil, natural gas and gasoline rose on speculation Tropical Storm Gustav will become the most damaging hurricane since Katrina as it moves toward production platforms in the Gulf of Mexico. Crude oil for October delivery increased 1.6 percent to settle at $118.15 a barrel on the New York Mercantile Exchange.

Leighton Holdings Ltd. (LEI AU) dropped 60 cents, or 1.3 percent, to A$45.00, set for its lowest since Aug. 26. Al Habtoor Leighton Group, the Dubai-based contractor constructing the Paris Sorbonne University campus in Abu Dhabi, plans to sell as much as 40 percent of its shares in an initial public offering in May. The Al Habtoor Leighton Group was established in September 2007 after the merger of Al Habtoor Engineering with the Gulf operations of Leighton International.

Macarthur Coal Ltd. (MCC AU), the world's biggest exporter of pulverized coal, fell 26 cents, or 1.8 percent, to A$14.34, set for its biggest decline since Aug. 19, after the company said full-year profit rose 9.3 percent on higher prices and the sale of a stake in a mine. Profit was less than a July 10 estimate of A$80 million to A$90 million due to a late accounting adjustment on the sale of its 19.6 percent stake in the Monto Coal 2 mine, it said.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net



Read more...

S. Korea Stocks: Hyundai Motor, DC Chemical, LG Dacom, Samsung

By Kyung Bok Cho

Aug. 28 (Bloomberg) -- South Korea's Kospi index advanced 7.82, or 0.5 percent, to 1,501.74 as of 9:08 a.m. in Seoul.

The following are among the most-active stocks in South Korean markets.

Carmakers: Hyundai Motor Co. (005380 KS), South Korea's biggest carmaker, dropped 1,900 won, or 2.6 percent, to 71,000. Kia Motors Corp. (000270 KS), an affiliate, slid 100 won, or 0.7 percent, to 13,550.

Hyundai and Kia said yesterday they lost about 48 billion won ($44 million) in production due to strikes that day, the first of three planned days of stoppages.

Separately, Hyundai is recalling 65,000 Elantra sedans in the U.S. to replace a fuel pump that may lose pressure and degrade the engine's performance. The Elantra is the company's second-best selling vehicle in the country.

DC Chemical Co. (010060 KS), a maker of petrochemicals and solar-power materials, gained 10,000 won, or 3.5 percent, to 298,500. The company said it received a 488.2 billion won ($452 million) order for polysilicon from Swiss Wafers AG.

LG Dacom Corp. (015940 KS), which owns 45.4 percent of Internet service provider LG Powercom Corp., rose 600 won, or 3.1 percent, to 20,100. South Korea may sell state-owned Korea Electric Power Corp.'s 43.1 percent stake in LG Powercom, Maeil Business Newspaper reported. The government may sell the stake once the Internet service provider is listed, the newspaper said.

``There were many rumors of an LG Powercom listing in the past, but now more than ever it appears an IPO will really happen,'' Good Morning Shinhan Securities Co. said in a report. The news is ``positive'' for LG Dacom, the brokerage said.

Samsung Electronics Co. (005930 KS), Asia's biggest maker of chips and flat screens, lost 4,000 won, or 0.8 percent, to 526,000. Morgan Stanley cut its recommendation to ``equal- weight,'' from ``overweight,'' in a report. The brokerage said it expects a ``hard landing'' for liquid-crystal displays and that the dynamic random access memory, or DRAM, industry ``refuses to consolidate and improve.''

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net



Read more...

Asian Stocks Rise on U.S. Durable Goods Orders; BHP Advances

By Chen Shiyin

Aug. 28 (Bloomberg) -- Asian stocks rose for a second day, led by mining companies and banks, after U.S. orders for durable goods unexpectedly advanced in July and concern eased that credit-market losses will widen.

BHP Billiton Ltd. climbed 1.8 percent as optimism the world's largest economy is recovering spurred gains in prices of copper and other metals. Hyundai Heavy Industries Co. advanced 1.7 percent after the world's biggest shipbuilder said July sales increased 36 percent. Westpac Banking Corp. rose 1.8 percent in Sydney after Fannie Mae and Freddie Mac sold $3 billion in debt at yields that suggest the U.S. mortgage-finance companies won't need a government bailout.

The MSCI Asia Pacific Index climbed 0.4 percent to 123.30 as of 9:22 a.m. in Tokyo, extending yesterday's 0.4 percent advance. About three stocks rose for every two that dropped among the gauge's 988 members.

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 added 0.3 percent to 12,794.67, halting a two-day, 1 percent retreat. Ricoh Co., the country's second-largest maker of office machines, jumped 4.9 percent after agreeing to buy equipment distributor Ikon Office Solutions Inc. for $1.62 billion. Stock indexes also advanced in South Korea and Australia.

U.S. stocks rose yesterday after the Commerce Department said orders for goods mean to last several years advanced 1.3 percent in July. Fannie Mae and Freddie Mac posted the biggest gains on the Standard & Poor's 500 Index, rallying more than 15 percent each.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.



Read more...

Japan Consumer Lender Stocks Jump, Led by Acom; Developers Fall

By Masaki Kondo

Aug. 28 (Bloomberg) -- Japan's consumer lenders gained after a newspaper report boosted speculation banks will raise their stakes in the companies. Developers tumbled on concern bankruptcies in the industry will spread.

Acom Co., Japan's largest consumer lender, jumped the most in nine months after the Mainichi newspaper said Mitsubishi UFJ Financial Group Inc. will buy its shares. Promise Co., a lender that's a fifth owned by Sumitomo Mitsui Financial Group Inc., jumped 4.5 percent. Canon Inc., the nation's biggest office- equipment maker, sank 4.2 percent after rival Ricoh Co. agreed to buy a U.S. distributor. Mitsubishi Estate Co., Japan's second biggest developer, extended its drop to a third day.

The Nikkei 225 Stock Average advanced 27.17, or 0.2 percent, to 12,780.13 as of 9:41 a.m. in Tokyo. The broader Topix index retreated 1.96, or 0.2 percent, to 1,221.73. Almost two stocks fell for each that rose on the Topix.

Mitsubishi UFJ, the nation's biggest publicly traded bank, will spend 140 billion yen ($1.28 billion) to lift its stake in Acom to 40 percent from 15 percent to expand its retail business, the Mainichi said today, without saying where it obtained the information. Acom said nothing has been decided.

Acom surged 9.9 percent to 3,120 yen, set for the sharpest advance since Nov. 6, while Mitsubishi UFJ edged up 0.5 percent to 821 yen. Promise climbed 4.5 percent to 2,435 yen, while Takefuji Corp. rose 2.5 percent to 1,452 yen. Consumer lenders posted the biggest gain among 33 industry groups on the Topix.

Ricoh, Japan's second-largest maker of office machines, agreed to buy Ikon Office Solutions Inc. for $1.62 billion in cash, the Malvern, Pennsylvania-based company said yesterday.

`Negative' for Canon

``We take a positive view of the dealer acquisition as a basic strategy for expanding the copier business,'' Yoshitsugu Yamamoto, an analyst for UBS AG, wrote in a report dated today. ``Canon is now at risk of losing half of its copier sales in North America.''

Canon tumbled 4.2 percent to 4,840 yen, set for the sharpest drop since July 25. Ricoh leapt 6 percent to 1,830 yen, headed for the biggest gain since March 19.

Mitsubishi Estate dropped 1.5 percent to 2,340 yen, while Mitsui Fudosan Co., Japan's largest real-estate company, lost 2 percent to 2,250 yen. Sumitomo Realty & Development Co., the third biggest, slumped 1.6 percent to 2,145 yen. Developers were the biggest losers among Topix groups.

``A grave atmosphere lingers among investors as bankruptcies among smaller real estate companies are continuing,'' Mitsushige Akino, who oversees the equivalent of $468 million at Ichiyoshi Investment Management Co. in Tokyo, said in an interview with Bloomberg Television.

Nikkei futures expiring in September added 0.2 percent to 12,800 in Osaka and were unchanged at 12,800 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.



Read more...

Economic Calendar Eco Data 8/28/08

GMT Ccy Events Actual Consensus Previous Revised 06:00 GBP U.K. Nationwide hse price Y/Y Aug -9.50% -8.10% 06:00 GBP U.K. Nationwide hse price M/M Aug -1.50% -1.70% 08:00 EUR Germany Unemployment change Aug -10K -20K 08:00 EUR Germany Unemployment rate Aug 7.80% 7.80% 08:00 EUR Eurozone M3 Y/Y Jul 9.00% 9.50% 08:00 EUR Eurozone M3 3M Jul 9.50% 9.90% 09:00 EUR Eurozone Business climate Aug -0.3 -0.21 09:00 EUR Eurozone Economic sentiment Aug 89.1 89.5 10:00 GBP U.K. CBI Distributive Trades Aug -30 -36 12:30 USD U.S. PCE core M/M Q2 2.10% 2.10% 12:30 USD U.S. PCE index M/M Q2 4.20% 3.90% 12:30 USD U.S. GDP deflator Q2 1.10% 1.10% 12:30 USD U.S. GDP Q2 2.70% 1.90% 12:30 USD U.S. Jobless claims 428K 432K 12:30 CAD Canada Current account Q2 8.00B 5.56B

Read more...

Closing Market Recap: Equities Close Higher and Treasuries Rally

Closing Market Recap: Equities Close Higher and Treasuries Rally
28 Agustus 2008 3:46
(CEP News) - North American equities gained on Wednesday following a commodity rally and better-than-expected U.S. economic data. Elsewhere, the Canadian dollar continued to strengthen and Treasuries grinded higher despite a soft 2-year auction.



Read more...

Wednesday's News Recap: U.S. Durable Goods Upbeat, Markets Brace for Gustav

Wednesday's News Recap: U.S. Durable Goods Upbeat, Markets Brace for Gustav
28 Agustus 2008 4:15
(CEP News) - The U.S. durable goods report for July surprised to the upside on Wednesday, while an unexpected decline in crude inventories was reported by the Energy Information Administration. Meanwhile, markets are keeping a watchful eye on Tropical Storm Gustav, which threatens to take aim at oil production facilities in the Gulf of Mexico.



Read more...