By Bob Chen
Sept. 22 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Bank of Japan will release minutes from its Aug. 18-19 meeting at 8:50 a.m. in Tokyo.
Chief Cabinet Secretary Nobutaka Machimura will hold briefings at 11 a.m. and 4 p.m.
The ruling Liberal Democratic Party will vote at 2 p.m. to decide the next prime minister.
Vice Finance Minister Kazuyuki Sugimoto is scheduled to give a press conference at 5 p.m.
The yen was at 106.85 a dollar at 8:02 a.m. in Sydney.
Hong Kong dollar: Prices of consumer goods rose 5.9 percent in August from a year earlier, economists said in a Bloomberg News survey before the government reports the data at 4:30 p.m. today. Inflation accelerated to 6.3 percent in July, matching the fastest pace in more than a decade.
The government will report second-quarter balance of payments at the same time.
The Hong Kong dollar was at 7.7833.
Taiwan dollar: The unemployment rate was unchanged at 3.91 percent in August from the previous month, economists said in a Bloomberg survey before the National Statistics Office reports the data at 4 p.m. local time.
The Taiwan dollar was at NT$32.158.
Malaysian ringgit: Inflation quickened to 8.4 percent in August, holding near July's 27-year high of 8.5 percent, according to a Bloomberg survey before a statistics department report due on Sept. 24. Bank Negara will report Malaysia's foreign reserves as of Sept. 15 at 5 p.m. today in Kuala Lumpur. The reserves were at $122.58 billion on Aug. 29.
The ringgit was at 3.4527.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
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Monday, September 22, 2008
South Korean Store Sales Rise By Most in Three Years
By Seyoon Kim
Sept. 22 (Bloomberg) -- South Korea's department store sales increased at the fastest pace in almost three years in August as outlets lowered prices to attract shoppers.
Sales at the three biggest chains rose 14 percent from a year earlier, more than double July's 5.9 percent gain, the Ministry of Knowledge Economy said in Gwacheon today. Last month's increase was the biggest since December 2005.
Retailers including Lotte Shopping Co. held discount sales in August to woo customers, while shoppers also bought more televisions and sporting goods during the Beijing Olympics. Confidence among consumers rebounded last month from an eight- year low thanks to a drop in oil prices.
``Stores are holding more promotional events to get consumers to open their wallets,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``But it's still premature to say consumer spending has recovered as concerns about economic growth slowing and financial markets linger.''
Sales of sports goods climbed 12.7 percent in August from a year earlier, today's report showed. Sales of luxury goods at department stores jumped 38.7 percent.
``The jump in sales of luxury goods show there's a bipolarization of income and spending,'' Hyundai's Lee said. ``People with higher income seem to be less affected by what's going on in the economy.''
Economic Growth
The pickup in spending may be temporary as renewed turmoil on global financial markets shakes confidence. The Kospi stock index has dropped 23 percent this year and the currency has slumped 22 percent against the dollar.
Asia's fourth-largest economy expanded 4.8 percent last quarter, the weakest pace in more than a year, as spiraling living costs prompted consumers to cut spending.
Shares in Lotte Shopping, the nation's largest department store operator, have fallen 31 percent in 2008, and those in Hyundai Department Store Co., the second biggest, have dropped 26 percent.
Sales at discount stores rose 1.1 percent last month from a year earlier, moderating from a 2.1 percent gain in July, today's report showed.
To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
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Australia, New Zealand Dollars Reach 2-Week Highs on U.S. Plan
By Tracy Withers
Sept. 22 (Bloomberg) -- The Australian and New Zealand dollars rose to the highest in more than two weeks amid speculation the cost of a U.S. plan to ease credit-market losses will boost debt in the world's biggest economy.
The currencies extended gains after stocks rallied worldwide as the rescue plan boosted demand for higher-yielding assets funded with loans in Japan. Treasury Secretary Henry Paulson's plan, which includes spending $700 billion on soured mortgage-related assets, will increase U.S. debt, analysts said.
``The plan would be financed out of government debt and this triggered heavy selling of the U.S. dollar,'' said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. ``A recovery in risk appetite and the generally weaker U.S. dollar will provide some support for the New Zealand currency.''
New Zealand's dollar rose to 69.06 U.S. cents at 9:12 a.m. in Wellington, the highest since Sept. 2, from 68.90 cents in late New York trading on Sept. 19. The currency fell to 73.76 yen from 74.04 yen.
Australia's currency traded at 83.72 U.S. cents, the highest since Sept. 4, up from 83.40 cents on Sept. 19. It declined 0.1 percent to 89.48 yen.
The Standard & Poor's 500 index rose 4 percent on Sept. 19 after the government announced its plan to purge banks of bad assets and curb bets on share declines.
``News of the bailout triggered a strong recovery in global equity markets, which underpinned risk appetite and demand for currencies like the New Zealand dollar,'' said Hampton.
The New Zealand dollar surged 1.8 percent against the U.S. dollar and 3.8 percent against the yen on Sept. 19. The Australian currency jumped 5.6 percent against the yen and 3.7 percent versus the greenback.
New Zealand's benchmark interest rates is 7.5 percent and Australia's stand at 7 percent, compared with 0.5 percent in Japan and 2 percent in the U.S., making the nations' assets favorites with investors seeking higher returns.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Sept. 22 (Bloomberg) -- The Australian and New Zealand dollars rose to the highest in more than two weeks amid speculation the cost of a U.S. plan to ease credit-market losses will boost debt in the world's biggest economy.
The currencies extended gains after stocks rallied worldwide as the rescue plan boosted demand for higher-yielding assets funded with loans in Japan. Treasury Secretary Henry Paulson's plan, which includes spending $700 billion on soured mortgage-related assets, will increase U.S. debt, analysts said.
``The plan would be financed out of government debt and this triggered heavy selling of the U.S. dollar,'' said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. ``A recovery in risk appetite and the generally weaker U.S. dollar will provide some support for the New Zealand currency.''
New Zealand's dollar rose to 69.06 U.S. cents at 9:12 a.m. in Wellington, the highest since Sept. 2, from 68.90 cents in late New York trading on Sept. 19. The currency fell to 73.76 yen from 74.04 yen.
Australia's currency traded at 83.72 U.S. cents, the highest since Sept. 4, up from 83.40 cents on Sept. 19. It declined 0.1 percent to 89.48 yen.
The Standard & Poor's 500 index rose 4 percent on Sept. 19 after the government announced its plan to purge banks of bad assets and curb bets on share declines.
``News of the bailout triggered a strong recovery in global equity markets, which underpinned risk appetite and demand for currencies like the New Zealand dollar,'' said Hampton.
The New Zealand dollar surged 1.8 percent against the U.S. dollar and 3.8 percent against the yen on Sept. 19. The Australian currency jumped 5.6 percent against the yen and 3.7 percent versus the greenback.
New Zealand's benchmark interest rates is 7.5 percent and Australia's stand at 7 percent, compared with 0.5 percent in Japan and 2 percent in the U.S., making the nations' assets favorites with investors seeking higher returns.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Dollar May Get `Crushed' as Traders Weigh Up Bailout
By Bo Nielsen and Anchalee Worrachate
Sept. 22 (Bloomberg) -- Treasury Secretary Henry Paulson's plan to end the rout in U.S. financial markets may derail the dollar's three-month rally as investors weigh the costs of the rescue.
The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.
``As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, which manages about $15 billion.
The dollar fell against 14 of the world's most-traded currencies on Sept. 19, including the euro, as Paulson unveiled the plan, while the Standard & Poor's 500 Index rose 4 percent. The plan may end the rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real, strategists said.
Paulson's plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nation's debt ceiling by 6.6 percent to $11.315 trillion. Officials may also start a $400 billion Federal Deposit Insurance Corp. pool to insure investors in money-market funds.
Dollar `Downdraft'
``The downdraft on the dollar from the hit to the balance sheet of the U.S. government will dwarf the short-term gains from solving the banking crisis,'' said David Woo, London-based global head of foreign-exchange strategy at Barclays, the third- biggest currency trader, according to a 2008 survey by Euromoney Institutional Investor Plc.
Paulson and Federal Reserve Chairman Ben S. Bernanke began plotting the rescue last week after New York-based Lehman Brothers Holdings Inc. filed for bankruptcy, the government seized control of American International Group Inc. and Merrill Lynch & Co. was forced into the arms of Charlotte, North Carolina-based Bank of America Corp.
Morgan Stanley dropped as much as 44 percent Sept. 17, the biggest one-day decline in its history, and Goldman Sachs Group Inc., where Paulson was chief executive officer from 1998 to 2006, lost 26 percent. Both are based in New York.
The dollar fell 0.2 percent to $1.4498 per euro as of 8:25 a.m. in Tokyo, after dropping 1.7 percent in the week to Sept. 19. It slid 0.8 percent to 106.61 yen, extending last week's 0.5 percent decline.
Dollar Hegemony
In the four days following Lehman's bankruptcy, the ICE future exchange's Dollar Index, which measures the currency's performance against the U.S.'s six biggest trading partners, dropped 1.2 percent. It fell 0.2 percent today, leaving it 1.1 percent higher this year.
``After years of doubting the hegemonic status of the dollar, this proves it's still there,'' said Stephen Jen, London-based head of research at Morgan Stanley. ``But of course this situation is definitely not stable. The capital leaving the emerging markets is only going into the dollar and that's a powerful force. It's a very uncomfortable balance.''
By the end of the year, the euro will weaken to $1.43 and the yen will trade at 108 to the dollar, according to analyst surveys by Bloomberg. The dollar will depreciate to 1.65 against the real, compared with 1.83 on Sept. 19.
Growth, Deficits
Although the dollar may suffer short-term, at least one analyst says the U.S. government's planned rescue will strengthen the currency before long. Paulson's proposals will return foreign-exchange markets to the trend of the past months, according to Adam Boyton, senior currency strategist at Frankfurt-based Deutsche Bank AG, the world's biggest currency- trading bank. Since the end of June, the Dollar Index has gained 7.2 percent.
``It's a positive plan that's ultimately good for the dollar,'' said New York-based Boyton. ``It reduces risk and volatility and gets the focus back on macroeconomic fundamentals, which suggest weakness throughout the rest of the globe next year, with returning strength in the U.S.''
The U.S. economy may expand 1.5 percent next year, according to the median estimate of 80 analysts surveyed by Bloomberg. That compares with 1.1 percent for the euro-region and 1.15 percent for Japan, the world's second-largest economy.
`Huge New Supply'
The rescue comes as the U.S. budget deficit and the current-account balance, the broadest measure of trade, grow. The Congressional Budget Office projects the spending shortfall will increase to $438 billion next year from $407 billion. The current account deficit is up from $167.24 billion in December.
``Investors may start to worry about the amount of debt the U.S. is taking on and its impact on the dollar,'' said Geoffrey Yu, a currency strategist in London at UBS AG, the second- largest foreign-exchange trader. ``The fact that they mentioned taxpayer money implies that they're going to issue debt. If there's going to be a huge new supply of Treasuries, this will be dollar negative. It's too much for the dollar to take.''
Traders are also concerned the bank bailout will spread to other U.S. industries suffering from the credit crunch that's holding back an economy growing at its slowest pace since 2001. Detroit-based General Motors Corp., the world's biggest automaker, said last week it will tap the remaining $3.5 billion of a $4.5 billion credit line to pay for restructuring costs.
`Damaged' Currencies
Lower interest rates may also weigh on the dollar. Futures on the Chicago Board of Trade show there's a 38 percent chance policy makers will lower their target rate for overnight lending between banks to at least 1.75 percent by January from 2 percent currently. A month ago, they showed a 46 percent chance of an increase to 2.25 percent.
Rates in the U.S. are already the lowest of any the Group of 10 industrialized nations except Japan, where they are 0.5 percent. The European Central Bank's benchmark is 4.25 percent.
Another drawback for the dollar is that the Fed's key rate is 3.4 percentage points less than the rate of inflation, the most since 1980, so investors lose money by investing in short- term U.S. fixed-income assets.
``People thought that the Fed was done cutting,'' said Andrew Balls, an executive vice president and member of the investment committee of Newport, California-based Pacific Investment Management Co., which oversees almost $830 billion. ``In the longer term the diversification away from the dollar will remain intact. The U.S. hasn't done itself any favors in making its assets attractive to foreign investors.''
Brazil, Australia
The biggest beneficiaries may be Brazil's real and Australia's dollar, as demand for higher-yielding assets rebounds, according to Goldman Sachs. The two currencies, the biggest losers versus the dollar since July, may rebound 7.7 percent and 4.6 percent, respectively, the next two weeks, Goldman Sachs forecasts.
``The currencies that have been damaged the most have the best growth,'' said Jens Nordvig, a strategist with Goldman Sachs in New York. ``You're going to see a lot of flows back into these currencies now.''
To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net
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Dollar Falls on Speculation U.S. Bailout Plan to Increase Debt
By Stanley White
Sept. 22 (Bloomberg) -- The dollar fell for the first day in three against the yen on speculation a U.S. government plan to buy soured mortgage-related assets from banks will widen the country's budget deficit.
The dollar traded near a two-week low against the euro on speculation the combination of spending $700 billion on mortgage securities and $400 billion to guarantee money-market funds may rattle investors' confidence in the U.S.'s ability to repay debt.
``Problems with the U.S. deficit will haunt the dollar,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``This is a reason for the dollar to go lower. Spending such a large amount on this rescue package will remind traders that the fiscal health of the U.S. is set to worsen.''
The dollar fell to 106.99 yen as of 7:48 a.m. in Tokyo, from 107.45 in New York late on Sept. 19. The U.S. currency traded at to $1.4456 per euro, near a two-week low of $1.4541 reached on Sept. 18. The euro bought 154.70 yen from 155.46 yen. The dollar may decline to 106.30 yen today, Ishikawa said.
Treasury Secretary Henry Paulson's plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nation's debt ceiling by 6.6 percent to $11.315 trillion. Officials may also start a $400 billion Federal Deposit Insurance Corp. pool to insure investors in money-market funds.
Crushed
``As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, which manages about $15 billion.
The dollar fell against 14 of the world's most-traded currencies, including the euro, on Sept. 19 as Paulson unveiled the plan, which also sparked a 4 percent jump in the Standard & Poor's 500 Index. The plan may end the dollar rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real, strategists said.
Paulson and Federal Reserve Chairman Ben S. Bernanke began plotting the rescue last week after New York-based Lehman Brothers Holdings Inc. filed for bankruptcy, the government seized control of American International Group Inc. and Merrill Lynch & Co. was forced into the arms Charlotte, North Carolina- based Bank of America Corp.
Morgan Stanley dropped as much as 44 percent Sept. 17, the biggest one-day decline in its history, and Goldman Sachs Group Inc., where Paulson was chief executive officer from 1998 to 2006, lost 26 percent. Both are based in New York.
``The downdraft on the dollar from the hit to the balance sheet of the U.S. government will dwarf the short-term gains from solving the banking crisis,'' said David Woo, London-based global head of foreign-exchange strategy at Barclays, the third- biggest currency trader, according to a 2008 survey by Euromoney Institutional Investor Plc.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net
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Crude Oil Falls After Nigerian Militants Call End to Attacks
By Gavin Evans
Sept. 22 (Bloomberg) -- Crude oil fell for the first time in four days as Nigerian militants stopped attacks on oil facilities and investors awaited the U.S. government's proposed $700 billion rescue package for the finance industry.
The rally in oil, up 15 percent the past three days, stalled as the Movement for the Emancipation of the Niger Delta, known as MEND, ended attacks that cut production by 280,000 barrels a day the past week. U.S. lawmakers are pledging fast consideration of the Treasury's plan to buy devalued mortgage- related securities from investment firms to keep the financial system from stalling.
``Up until the weekend, MEND had been talking about an `oil war','' said David Moore, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``Anything that is able to provide some stability for the financial system and shore up the economic outlook is a supporting factor.''
Crude oil for October delivery fell as much as $1.20, or 1.2 percent, to $103.35 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $103.63 at 9:50 a.m. in Sydney. The contract, which expires at the close of trading today, jumped as much as 7.4 percent on Sept. 19 as investors bought oil to cancel out earlier bets on falling prices.
The more widely held November contract traded at $102.40 a barrel, down 0.3 percent. It gained 5.3 percent on Sept. 19, leaving it at a $1.80-a-barrel discount to October oil, the biggest margin between the two leading contracts for six months.
Hurricane, Sentiment
October's premium over the November contract also reflects the ``very tight'' physical market in the U.S. after Hurricane Ike cut production and shut some gulf refineries, Commonwealth's Moore said. Day-to-day shifts in investor sentiment have also been ``extreme,'' he said.
Oil fell more than $10 a barrel early last week as the bankruptcy of Lehman Brothers Holdings Inc. shocked world equity markets. Prices gained 3.3 percent over the five trading days, the first weekly increase since August, as the dollar slumped on the prospect of the biggest U.S. financial bailout since the Great Depression.
The U.S. dollar fell to $1.4495 against the euro in early Asian trading today. The currency dropped 1.7 percent last week, its biggest decline since March 28, to $1.4466 per euro in late New York trading on Sept. 19.
While the U.S. rescue package has put pressure on the dollar, it's too early to say how much more weakness may be to come, and how that will flow into commodity markets, Moore said.
A lot will depend on the timing of asset purchases and the prices paid, and on the level of underlying economic activity, he said.
``We're in the very early days of understanding the package,'' Moore said. Investors are continuing to ``fine-tune'' their perceptions of it and what it will mean for the U.S. economy, he said.
Brent crude oil for November settlement rose $4.42, or 4.6 percent, to $99.61 a barrel on London's ICE Futures Europe exchange on Sept. 19.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
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Asia Commodities Day Ahead: Financial Distress May Boost Gold
Sept. 22 (Bloomberg) -- A drop in global equities may be a boon for precious metals and a curse for industrial materials, a Deutsche Bank AG report said. Brazil's biosafety committee approved genetically engineered corn and cotton seeds produced by Monsanto Co. Soybeans, corn and wheat rose. Hexion Specialty Chemicals Inc. agreed to sell epoxy-resin assets in Germany and the U.S. to resolve antitrust concerns raised by its pending acquisition of Huntsman Corp. Gold fell, and copper climbed.
COMMODITIES INVESTMENT
Financial Distress May Help Gold, Hurt Copper, Deutsche Says
A drop in global equities may be a boon for precious metals and a curse for industrial materials while physical demand rather than financial distress will drive agriculture prices, according to a Deutsche Bank AG report.
AGRICULTURAL COMMODITIES
Monsanto, Syngenta Seeds Approved by Brazilian Biosafety Panel
Brazil's biosafety committee approved genetically engineered corn and cotton seeds produced by Monsanto Co. and modified corn made by Syngenta AG, the first endorsements needed before farmers may grow the crops.
Soybeans, Corn Rebound as Bank Bailout Boosts Stocks, Optimism
Soybeans rose the most in four weeks and corn gained, following crude oil and global equities higher, as government plans to resolve the credit crisis revived prospects for improved worldwide demand. Soybeans gained 27.5 cents, or 2.5 percent, to $11.435 a bushel in Chicago. Corn advanced 15 cents, or 2.8 percent, to $5.4225 a bushel.
Wheat Futures Gain on U.S. Government Plan to Shore Up Economy
Wheat rose on speculation investors moved money into commodities from Treasuries after the U.S. government announced a plan aimed at shoring up the economy. Wheat gained 25.25 cents, or 3.6 percent, to $7.18 a bushel in Chicago.
Cattle Rise as Bank Bailout Plan Boosts Markets; Hogs Gain
Cattle rose the most in a week after a U.S. plan to end the credit crisis triggered a rally in global equity markets, reviving optimism that commodity demand will improve. Cattle gained 1.525 cents, or 1.5 percent, to $1.0325 a pound in Chicago. Feeder cattle gained 1.475 cents, or 1.4 percent, to $1.053 a pound. Hogs rose 1 cent, or 1.5 percent, to 66.05 cents a pound.
CHEMICALS
Hexion to Sell Assets to Spolchemie If Huntsman Merger Closes
Hexion Specialty Chemicals Inc. agreed to sell epoxy-resin assets in Germany and the U.S. to Spolchemie to resolve antitrust concerns raised by the pending acquisition of Huntsman Corp.
PRECIOUS METALS, GEMS
Gold Futures Drop as Equities Surge on U.S. Bank, Credit Plans
Gold futures dropped the most in a week as equities worldwide surged on the U.S. government's plan to ease the credit crunch and curb bets against financial stocks. Gold fell $32.30, or 3.6 percent, to $864.70 an ounce in New York.
Platinum Rises in New York on Plan to End Credit-Market Freeze
Platinum rose on speculation that demand will climb after the Bush administration proposed a plan to resolve the credit crisis and American and U.K. regulators limited investor betting on share declines. Platinum gained $9.40, or 0.8 percent, to $1,147 an ounce in New York. Palladium climbed $2.50, or 1 percent, to $236.95 an ounce.
INDUSTRIAL METALS, MINING
Sinosteel Wins Approval to Buy Stake in Australia's Murchison
Sinosteel Corp., China's second-biggest iron-ore trading company, won Australian government approval to buy as much as 49.9 percent of Murchison Metals Ltd.
Copper Gains as Bank Plan Boosts Shares, Eases Growth Concerns
Copper jumped the most in a month as U.S. government plans to resolve the credit crisis sparked rallies in global equity markets and eased economic concerns. Copper rose 11.05 cents, or 3.6 percent, to $3.1765 a pound in New York.
SOFT COMMODITIES
Cotton Rises as Dollar Falls, Confidence Surges on Credit Plan
Cotton rose the most in three months as the dollar weakened and the U.S. government's plan to resolve the credit-market crisis boosted confidence that demand for commodities will improve. Cotton climbed 1.76 cents, or 2.9 percent, to 62.52 cents a pound in New York.
Coffee Rises Most in Two Weeks as Brazilian Real Strengthens
Coffee rose the most in two weeks in New York on speculation a jump in the Brazilian real will boost the price of supplies from the country and reduce exports. Arabica coffee gained 2.65 cents, or 2 percent, to $1.331 a pound in New York. Robusta coffee climbed $37, or 1.8 percent, to $2,129 a metric ton in London.
Sugar Gains as Commodities, Equities Jump on U.S. Debt Plan
Sugar rose in New York as a U.S. government plan to end the worst credit crisis since the 1930s sent global equities higher, boosting commodity prices. Raw sugar gained 0.18 cent, or 1.3 percent, to 13.64 cents a pound in New York.
Cocoa Rises as Commodities, Equities Rally on U.S. Credit Plan
Cocoa rose for a second straight day as agricultural and energy commodities rallied in tandem with soaring global stocks on a Bush administration plan to halt the credit-market meltdown. Cocoa climbed $34, or 1.3 percent, to $2,690 a metric ton in New York.
Orange Juice Falls a Second Straight Week as Storm Threats Ease
Orange juice fell, dropping for a second week, as concern eased that storms may harm citrus groves in Florida, the biggest orange producer after Brazil. Orange juice slipped 0.4 cent, or 0.4 percent, to 89.90 cents a pound in New York.
Read more...
COMMODITIES INVESTMENT
Financial Distress May Help Gold, Hurt Copper, Deutsche Says
A drop in global equities may be a boon for precious metals and a curse for industrial materials while physical demand rather than financial distress will drive agriculture prices, according to a Deutsche Bank AG report.
AGRICULTURAL COMMODITIES
Monsanto, Syngenta Seeds Approved by Brazilian Biosafety Panel
Brazil's biosafety committee approved genetically engineered corn and cotton seeds produced by Monsanto Co. and modified corn made by Syngenta AG, the first endorsements needed before farmers may grow the crops.
Soybeans, Corn Rebound as Bank Bailout Boosts Stocks, Optimism
Soybeans rose the most in four weeks and corn gained, following crude oil and global equities higher, as government plans to resolve the credit crisis revived prospects for improved worldwide demand. Soybeans gained 27.5 cents, or 2.5 percent, to $11.435 a bushel in Chicago. Corn advanced 15 cents, or 2.8 percent, to $5.4225 a bushel.
Wheat Futures Gain on U.S. Government Plan to Shore Up Economy
Wheat rose on speculation investors moved money into commodities from Treasuries after the U.S. government announced a plan aimed at shoring up the economy. Wheat gained 25.25 cents, or 3.6 percent, to $7.18 a bushel in Chicago.
Cattle Rise as Bank Bailout Plan Boosts Markets; Hogs Gain
Cattle rose the most in a week after a U.S. plan to end the credit crisis triggered a rally in global equity markets, reviving optimism that commodity demand will improve. Cattle gained 1.525 cents, or 1.5 percent, to $1.0325 a pound in Chicago. Feeder cattle gained 1.475 cents, or 1.4 percent, to $1.053 a pound. Hogs rose 1 cent, or 1.5 percent, to 66.05 cents a pound.
CHEMICALS
Hexion to Sell Assets to Spolchemie If Huntsman Merger Closes
Hexion Specialty Chemicals Inc. agreed to sell epoxy-resin assets in Germany and the U.S. to Spolchemie to resolve antitrust concerns raised by the pending acquisition of Huntsman Corp.
PRECIOUS METALS, GEMS
Gold Futures Drop as Equities Surge on U.S. Bank, Credit Plans
Gold futures dropped the most in a week as equities worldwide surged on the U.S. government's plan to ease the credit crunch and curb bets against financial stocks. Gold fell $32.30, or 3.6 percent, to $864.70 an ounce in New York.
Platinum Rises in New York on Plan to End Credit-Market Freeze
Platinum rose on speculation that demand will climb after the Bush administration proposed a plan to resolve the credit crisis and American and U.K. regulators limited investor betting on share declines. Platinum gained $9.40, or 0.8 percent, to $1,147 an ounce in New York. Palladium climbed $2.50, or 1 percent, to $236.95 an ounce.
INDUSTRIAL METALS, MINING
Sinosteel Wins Approval to Buy Stake in Australia's Murchison
Sinosteel Corp., China's second-biggest iron-ore trading company, won Australian government approval to buy as much as 49.9 percent of Murchison Metals Ltd.
Copper Gains as Bank Plan Boosts Shares, Eases Growth Concerns
Copper jumped the most in a month as U.S. government plans to resolve the credit crisis sparked rallies in global equity markets and eased economic concerns. Copper rose 11.05 cents, or 3.6 percent, to $3.1765 a pound in New York.
SOFT COMMODITIES
Cotton Rises as Dollar Falls, Confidence Surges on Credit Plan
Cotton rose the most in three months as the dollar weakened and the U.S. government's plan to resolve the credit-market crisis boosted confidence that demand for commodities will improve. Cotton climbed 1.76 cents, or 2.9 percent, to 62.52 cents a pound in New York.
Coffee Rises Most in Two Weeks as Brazilian Real Strengthens
Coffee rose the most in two weeks in New York on speculation a jump in the Brazilian real will boost the price of supplies from the country and reduce exports. Arabica coffee gained 2.65 cents, or 2 percent, to $1.331 a pound in New York. Robusta coffee climbed $37, or 1.8 percent, to $2,129 a metric ton in London.
Sugar Gains as Commodities, Equities Jump on U.S. Debt Plan
Sugar rose in New York as a U.S. government plan to end the worst credit crisis since the 1930s sent global equities higher, boosting commodity prices. Raw sugar gained 0.18 cent, or 1.3 percent, to 13.64 cents a pound in New York.
Cocoa Rises as Commodities, Equities Rally on U.S. Credit Plan
Cocoa rose for a second straight day as agricultural and energy commodities rallied in tandem with soaring global stocks on a Bush administration plan to halt the credit-market meltdown. Cocoa climbed $34, or 1.3 percent, to $2,690 a metric ton in New York.
Orange Juice Falls a Second Straight Week as Storm Threats Ease
Orange juice fell, dropping for a second week, as concern eased that storms may harm citrus groves in Florida, the biggest orange producer after Brazil. Orange juice slipped 0.4 cent, or 0.4 percent, to 89.90 cents a pound in New York.
Read more...
Australian Stock Exchange Opening Delayed by 30 Mins, Says ASX
By Shani Raja
Sept. 22 (Bloomberg) -- ASX Ltd., which runs Australia's biggest stock exchange, said the opening of the Australian stock exchange will be delayed by 30 minutes pending a clarifying statement on short-selling.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Asian Stocks Advance for the Second Day on U.S. Rescue Plan
By Kyung Bok Cho
Sept. 22 (Bloomberg) -- Asian stocks advanced for the second day after the U.S. government sought unchecked power to buy banks' bad debts, easing concern mortgage losses will drive more companies to failure.
Kookmin Bank gained 4.1 percent after U.S. Democratic lawmakers said they would act quickly on a $700 billion rescue plan for financial companies. Shinhan Financial Group Ltd. gained 3.9 percent after the U.S. Securities and Exchange Commission banned short sales of financial stocks to help stem declines of the kind that triggered the bankruptcy of Lehman Brothers Holdings Inc. and the emergency sale of Merrill Lynch & Co.
``The speed and degree to which the U.S. government has intervened with this buying of nonperforming assets is positive for the market,'' Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television. ``Value stocks that have been brought down to very cheap levels are going to get a second look today.''
The MSCI Asia Pacific Index added 0.6 percent to 114.85 as of 9:06 a.m. in Tokyo, extending the 5.5 percent gain of Sept. 19. Financial stocks were the biggest contributor to the gains.
The regional measure tumbled early last week to the lowest in three years after Lehman filed for bankruptcy, the U.S. government seized control of American International Group Inc. and Merrill was forced to sell itself to Bank of America Corp.
Japan's Nikkei 225 Stock Average rose 1.2 percent to 12,059.13. Stocks also rose in South Korea, while trading in Australia was delayed for 30 minutes pending a clarifying announcement on short-selling, which was banned following similar moves in the U.S. and U.K.
Since the start of 2007, global financial companies have reported more than $510 billion in credit losses and writedowns linked to the slump in the U.S. housing market and slowing economic growth.
Standard & Poor's 500 Index futures fell 0.8 percent in after-hours trading. U.S. stocks advanced on Sept. 19, with the S&P 500 jumping 4 percent to cap its biggest two-day gain since the aftermath of the 1987 crash.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.netMotoko Kakizaki in Tokyo at mkakizaki@bloomberg.net
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Japanese Stocks Jump on Treasury's $700 Billion Bailout Plan
By Patrick Rial
Sept. 22 (Bloomberg) -- Japanese stocks surged, sending the Topix index to its biggest two-day gain since January, after U.S. Treasury Secretary Henry Paulson proposed a $700 billion plan to buy mortgage securities in a bailout of the financial system.
Sumitomo Mitsui Financial Group Inc., Japan's third-largest listed bank, was bid higher by 3 percent. Toyota Motor Corp., the world's largest carmaker by value, was poised to rise 2.1 percent. Paulson's plan would allow the government to buy a variety of mortgage-related securities to relieve a freeze in credit markets, which has pushed financial institutions to the brink.
``The speed and degree to which the U.S. government has intervened to buy nonperforming assets is positive for the market,'' Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co. said in an interview with Bloomberg Television. ``Value stocks that have been brought down to very cheap levels are going to get a second look today.''
The Nikkei 225 Stock Average gained 214.48, or 1.8 percent, to 12,135.34 as of 9:09 a.m. in Tokyo. The broader Topix index climbed 22.90, or 2 percent, to 1,172.02. The benchmark has advanced 6.8 percent in the past two days, the biggest back-to- back rally since Jan. 25.
The credit crisis, sparked by the collapse of the U.S. home- loan market, has seen Lehman Brothers Holdings Inc. file for bankruptcy, and government takeovers of American International Group Inc. and mortgage giants Fannie Mae and Freddie Mac. The turmoil wiped off as much as $20 trillion in global equity values from a peak in October.
Nikkei futures expiring in December added 2.9 percent to 12,220 in Osaka and jumped 2.9 percent to 12,210 in Singapore. Standard & Poor's 500 Index futures lost 0.7 percent to 1,237.80.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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Sunday, September 21, 2008
Kuwait Zain Gains Most in Three Years on Global Rally
By Glen Carey
Sept. 21 (Bloomberg) -- Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, surged the most in almost three years following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
``The regional markets are following the U.S. and Asian markets higher,'' Chandresh Bhatt, an analyst at Kuwait-based Global Financial House KSCC, said today in a phone interview from Kuwait. ``This is mainly backed by the recovery we are witnessing in global capital markets all over the world.''
Zain advanced 7.3 percent to 1,760 fils, its largest jump since November 2005. The company said yesterday it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed. National Mobile Telecommunications Co., the Kuwaiti phone company bought by Qatar Telecom Q.S.A. last year, gained 14 percent to 1,620 fils.
U.S. stocks surged last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
``Telecom companies have the most sustainable cash flow, compared with any other sectors in this region,'' Kunal Bajaj, an analyst at HSBC Holdings Plc, said in a telephone interview from Dubai. ``This sector is considered to be a safe haven.''
Global Investment House has a ``hold'' rating for Zain and a ``buy'' for National Mobile, while HSBC has a ``neutral'' rating for Zain and an ``overweight'' for National Mobile.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
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Sept. 21 (Bloomberg) -- Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, surged the most in almost three years following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
``The regional markets are following the U.S. and Asian markets higher,'' Chandresh Bhatt, an analyst at Kuwait-based Global Financial House KSCC, said today in a phone interview from Kuwait. ``This is mainly backed by the recovery we are witnessing in global capital markets all over the world.''
Zain advanced 7.3 percent to 1,760 fils, its largest jump since November 2005. The company said yesterday it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed. National Mobile Telecommunications Co., the Kuwaiti phone company bought by Qatar Telecom Q.S.A. last year, gained 14 percent to 1,620 fils.
U.S. stocks surged last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
``Telecom companies have the most sustainable cash flow, compared with any other sectors in this region,'' Kunal Bajaj, an analyst at HSBC Holdings Plc, said in a telephone interview from Dubai. ``This sector is considered to be a safe haven.''
Global Investment House has a ``hold'' rating for Zain and a ``buy'' for National Mobile, while HSBC has a ``neutral'' rating for Zain and an ``overweight'' for National Mobile.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
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Saudi Inflation Accelerates 10.9% in August on Rent
By Glen Carey
Sept. 21 (Bloomberg) -- Saudi Arabian inflation accelerated 10.9 percent in August as the cost of rent, water and fuel continued to hover near record levels, the Saudi Press Agency reported, citing the Central Department for Statistics.
Inflation in Saudi has soared since the middle of 2007 when it was at about 3 percent, and has surpassed 10 percent in each of the last three months, though it has eased since reaching a record of 11.1 percent in July.
Inflationary pressures in the kingdom will remain strong as government and private spending increases, exacerbated by the holy month of Ramadan in September, the Saudi Arabian Monetary Agency said in a quarterly inflation report published on its Web site on Sept. 6.
Inflation exceeded 10 percent in five of the six Gulf Cooperation Council states, including Qatar, as oil-fueled economic growth created shortages of housing and services. Crude oil closed last week at $104.55 a barrel on the New York Mercantile Exchange, down 29 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983.
The cost of rent, fuel and water for August in Saudi Arabia increased 18.5 percent, the Saudi Press Agency reported, citing the Central Department for Statistics. The GCC is an economic and political block of Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain, which together pump almost 20 percent of the world's oil.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
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Sept. 21 (Bloomberg) -- Saudi Arabian inflation accelerated 10.9 percent in August as the cost of rent, water and fuel continued to hover near record levels, the Saudi Press Agency reported, citing the Central Department for Statistics.
Inflation in Saudi has soared since the middle of 2007 when it was at about 3 percent, and has surpassed 10 percent in each of the last three months, though it has eased since reaching a record of 11.1 percent in July.
Inflationary pressures in the kingdom will remain strong as government and private spending increases, exacerbated by the holy month of Ramadan in September, the Saudi Arabian Monetary Agency said in a quarterly inflation report published on its Web site on Sept. 6.
Inflation exceeded 10 percent in five of the six Gulf Cooperation Council states, including Qatar, as oil-fueled economic growth created shortages of housing and services. Crude oil closed last week at $104.55 a barrel on the New York Mercantile Exchange, down 29 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983.
The cost of rent, fuel and water for August in Saudi Arabia increased 18.5 percent, the Saudi Press Agency reported, citing the Central Department for Statistics. The GCC is an economic and political block of Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain, which together pump almost 20 percent of the world's oil.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
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Siemens Wins 553 Million-Riyal Contract From Emaar Saudi Unit
By Ayesha Daya
Sept. 21 (Bloomberg) -- Siemens AG, Europe's largest engineering company, won a 553 million-riyal ($147.5 million) contract from Emaar Economic City in Saudi Arabia for electrical works in the King Abdullah Economic City.
Siemens will develop the transmission and distribution network of as many as three sub-stations and related facilities for the first phase of King Abdullah Economic City, Emaar said today in e-mailed statement. Emaar Economic City is a unit of Dubai-based Emaar Properties PJSC, the largest publicly traded property developer in the Middle East.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Sept. 21 (Bloomberg) -- Siemens AG, Europe's largest engineering company, won a 553 million-riyal ($147.5 million) contract from Emaar Economic City in Saudi Arabia for electrical works in the King Abdullah Economic City.
Siemens will develop the transmission and distribution network of as many as three sub-stations and related facilities for the first phase of King Abdullah Economic City, Emaar said today in e-mailed statement. Emaar Economic City is a unit of Dubai-based Emaar Properties PJSC, the largest publicly traded property developer in the Middle East.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Emaar Jumps Most Since Listing on U.S. Bank Bailout
By Ayesha Daya
Sept. 21 (Bloomberg) -- Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, advanced the most since listing following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
Emaar soared to its 15 percent limit to close at 8.05 dirhams in Dubai, the biggest one-day gain since March 2000, data compiled by Bloomberg show. Emaar has still dropped 12 percent this month.
``U.A.E. markets are up due to the rebound in global markets following cash injection plans by the U.S. and other governments,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai. ``Real- estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month.''
Aldar Properties PJSC, Abu Dhabi's largest real-estate developer by market value, rose 9.6 percent to 7.77 dirhams, the largest increase since September 2005. The stock has still declined 20 percent in September.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause a price correction after mid-2009 and a cumulative decline of up to 20 percent by 2011, EFG- Hermes said.
``All reports on the real-estate sector expect Dubai to see a slowdown in its growth, but a correction of 10-20 percent is not a crash,'' said Abdel Khalek. ``I don't see a real estate crisis. They are bullish about Abu Dhabi.''
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Sept. 21 (Bloomberg) -- Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, advanced the most since listing following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
Emaar soared to its 15 percent limit to close at 8.05 dirhams in Dubai, the biggest one-day gain since March 2000, data compiled by Bloomberg show. Emaar has still dropped 12 percent this month.
``U.A.E. markets are up due to the rebound in global markets following cash injection plans by the U.S. and other governments,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai. ``Real- estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month.''
Aldar Properties PJSC, Abu Dhabi's largest real-estate developer by market value, rose 9.6 percent to 7.77 dirhams, the largest increase since September 2005. The stock has still declined 20 percent in September.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause a price correction after mid-2009 and a cumulative decline of up to 20 percent by 2011, EFG- Hermes said.
``All reports on the real-estate sector expect Dubai to see a slowdown in its growth, but a correction of 10-20 percent is not a crash,'' said Abdel Khalek. ``I don't see a real estate crisis. They are bullish about Abu Dhabi.''
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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How're the FX Markets Different after the Financial Tsunami?
| Market Overview | Written by ActionForex.com | Sep 21 08 11:25 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weekly Review and Outlook
All financial markets around the world were rocked by the financial tsunami last week which started with Lehman Brother announcing bankruptcy and Merrill lynch selling to Bank of America. Panic in the markets reached a climax after AIG's bailout failed to restore confidence. Dow once had the sharpest fall since 2001 and dived to 11459 level. Yield on three-months US T-bills dropped to near 0% as investors flocked to the safest short-term assets. Dollar yen tumbled to as low as 103.54. Gold, on the other hand, soared to as high as 926 on safe haven buying. Crude oil dropped to near to $90 level. However, markets' sentiment had a drastic turn following coordinated actions from world's major central banks to almost quadruple the fund injected to the financial markets from $67b to $247b. Risk appetite came back with the sharpest two days rally in stocks since 1987 following US government's bank $700b bank rescue bank and rule to limit short selling in financial stocks. Yen crosses were sharply higher as carry trades returned and the greenback was generally lower across the board. Crude oil, on the other hand, bounced back to above 100 on hope of improved economic outlook. So, after all the events, how's the forex markets different from a week ago? Firstly, dollar index's high of 80.38 made on Sep 11 is confirmed to be a short term top. More pull back is now expected to be seen probably to 75.84 level. That is, the greenback should be generally weak in short term. Such weakness should be apparent against higher yield currencies and commodity currencies, in particular against Aussie, Kiwi, Sterling and also against Euro and probably Canadian dollar too. Secondly, rebound in yen crosses is expected to extend further after making a short term bottom last week. Further upside are expected to be seen, in particular in AUD/JPY, NZD/JPY and GBP/JPY. USD/JPY and USD/CHF will like remains mixed as weakness on both sides counter each other. Thirdly, Gold's strong rebound indicates that medium term correction from 1033 level should have already completed and more upside is expected in gold in short term. This is consistent with the short term dollar bearish view as well as the carry trade return view. But after all, there is no change in the medium term dollar and yen bullish view yet and markets are expected to resume prior dollar and yen up trend after the current corrections complete. Though, the key factors to pay attention will likely be the development in both the stock markets and oil. DOW's rebound, though strong, is still limited by 11867 key near term resistance. Meanwhile, crude oil is also limited below 111/122 resistance zone. Markets will likely resume to it's prior state once rebound in DOW and oil completes. But Dow's break of 11867 and oil's break of 122 will serve as important evidence that markets' sentiment has turned and will dampen the dollar and yen medium term bullish view.
Fed left the federal funds rates unchanged at 2.00%. The more important point to note is that this decision was done by the first unanimous vote in nearly a year. Fisher, who dissented by preferring a hike last time, also voted for no change. in the accompanying statement, Fed acknowledged that "strains in financial markets have increased significantly and labor markets have weakened further." Several factors, including tight credit conditions, ongoing housing contraction and slowing in export growth will "weigh on economic growth" over the "next few quarters". But the fed is still confident that the "substantial easing" and "measures to foster market liquidity" will promote moderate economic growth. Regarding inflation, Fed expects inflation to moderate later this year and next even though outlook remains highly "uncertain". US headline CPI unexpectedly dropped -0.1% mom in Aug. Yoy rate moderated more than expected from 5.6% to 5.4%. Though, core CPI climbed 0.2% mom with yoy rate up from 2.5% to 2.6%. TIC capital flow dropped sharply from 53.4b to 6.1b in Jul. Current account deficit widened to -183.1b in Q2. Jobless claims climbed to 455k. Empire state manufacturing index dropped sharply to -7.4 in Sep. Philly Fed survey surprised on the upside by turning positive to 3.8 in Sep. Industrial production dropped more than expected by -1.1% mom in Aug. Leading indicators dropped more than expected by -0.5% in Aug. NAHB housing markets index recovered more than expected to 18 in Sep. Building permits in US dropped much more than expected by -8.9% to 0.85m in Aug, housing starts dropped -6.2% to 0.89m. Eurozone Q2 labor costs rose 2.7%, below consensus of 2.5%. Final HICP is confirmed to be 3.8% yoy in Aug. Improvement in Germany and Eurozone ZEW economic sentiment were much stronger than expected from -55.5 to -41.1 and -55.7 to -4.09 in Sep respectively. Trade deficit widened to -2.3b in Jul. BoE minutes surprised the markets by revealing a two way split of votes, with ultradove Blanchflower voted for a 50bps cut and no one voted for a hike. In his letter to Chancellor Darling, BoE Governor King explained why the bank fails to bring down inflation and noted that "muted economic growth is necessary to dampen pressures on price and wages". He expects CPI to "peak soon at around 5%". Inflation data from UK showed CPI climbed more than expected to record high of 4.7% yoy in Aug. Though, RPI and RPI-X moderated from 5.00% to 4.8% and from 5.4% to 5.2% yoy respectively. In Aug, claimant count climbed further to 2.8%, jumped sharply to 32.5K versus expectation of 22.3k. Unemployment rate in Jul also rose to 5.5% versus consensus of 5.4%. CBI industrial trend survey came in much worse than expected at -26. Retail sales was surprisingly strong, rising 1.2% mom in Aug comparing to expectation of -0.5%. Yoy rate jumped to 3.3%. Swiss trade surplus narrowed less than expected to 1.43b. SNB left three-month Libor unchanged at 2.25-3.25%, mid point at 2.75% as widely expected. Swiss combined PPI moderated from 4.9% to 4.0% yoy in Aug. Swiss retail sales jumped 6.2%. ZEW improved from -79.6 to -44.4 in Sep. BoJ left rates unchanged at 0.5% as widely expected. In the accompanying statement, BoJ noted that energy prices and weak experts is keeping the economy sluggish but growth will return to a moderate path once commodity price stabilize and global economies improve. Inflation will remain high for months before moderating. Canadian leading indicators rose 0.3% in Aug. Wholesale sales rose 2.3% mom in Jul. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Week Ahead
Economic data will like remain in the back seat this week and intermarket relationship will continue to be dominant in driving movements in the FX markets. As mentioned above one of the key factors to look at is whether DOW will break 11867 level which will raise the odds that correction from last year's high of 14198 has made a medium term bottom. In such case, even stronger rebound will be seen in yen crosses which in turn will give dollar some more pressure. Gold already took the lead last week and confirming the completion of correction from1033 and further strength will also pressure the greenback too. Also, focus will be on whether crude oil will take out 111/122 key short term resistance zone. These developments will have important implications on whether dollar's and yen's medium term rebound has totally finished.
From US existing home sales and new home sales, durable goods orders , Q2 GDP final will be released. Germany Ifo, Gfk and Sep Eurozone PMIs will be main focus in Eurozone. It will be a big week in Canada with retail sales and CPI featured. Other important economic data include Japan AUg CPI and New Zealand Q2 GDP.
GBP/JPY Weekly Outlook
GBP/JPY's strong rebound from 184.47 and break of 193.77 resistance indicates that a short term bottom is finally formed with bullish convergence condition in 4 hours MACD and RSI. Further corrective rebound is expected this week, towards 202.50/206.51 resistance zone. Nevertheless, upside should be limited there and bring down trend resumption. On the downside, below 189.72 will indicate that rebound from 184.47 has completed and should bring retest of this low.
In the bigger picture, whole down trend from 251.09 has resumed after corrective rebound from 192.60 was limited at 215.87 by 55 weeks EMA. Such decline is expected to extend further to 61.8% projection of 251.09 to 192.60 from 215.87 at 179.72 (close to 180 psychological support) first. While some rebound should be seen in near term, medium term outlook will remain bearish as long as 215.87 resistance holds.
In the longer term picture, whole up trend from 148.19 have ended at 251.09 already. At the moment, the favored case is that price actions from 129.32 (95 low) has completed a three wave consolidation up to 251.09. Hence, the downtrend from 251.09 is in favor to extend further at least to long term rising trend line support (now at 175.94). Based on the structure of the current fall from 251.09, it's likely that such decline will extend further to test 148.19 low.
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Will It Work?
Daily Forex Fundamentals | Written by TheLFB-Forex.com | Sep 21 08 11:36 GMT |
Answer: Absolutely
Reason: It has been done successfully before. A very similar situation happened in Sweden in the early 1990's with the difference being that in the Swedish case, the situation was far worse.
Qualifiers: This doesn't mean stocks can only go up and it does not mean the U.S. cannot go into a recession. However, when you put today's losses in proper perspective with respect to Gross Domestic Product and reference a longer term perspective (3+ years), the Treasury's plan to set up a “bad bank” by purchasing distressed mortgage securities will absolutely work. Not only that, but if we have the foresight to follow what the Swedes did afterwards, perhaps we can see a recovery that will be swifter and possibly even avert a recession.
The Wall Street Journal had the foresight to publish an article written by Joellen Perry on April 7 which covered what happened in Sweden during their early 1990's real estate-driven banking crisis. The parallels are so eerily similar that after reading it I became infuriated that the U.S. was unable to learn from history and avert the present crisis entirely.
How familiar does this sound: A deregulation of credit markets fuels a real estate lending boom which is further enabled by low interest rates, lax supervision and poor lending standards. The result? A massive asset inflation (bubble) which sees real-estate values and stock prices more than double in a few short years. Once the bubble bursts and housing prices decline, the banks start totaling up the losses from all the loans they should never have made in the first place. Liquidity dries up. Unemployment rises and the economy is threatened by (and eventually goes into) a recession.
This was Sweden in the late 1980's and it was the U.S. from 2003 until now.
Mr. Paulson's plan offers basically the same solution as was applied in Sweden back in 1992. The Swedes set up so-called bad banks to manage the troubled real estate assets and by doing so allowed the banks to concentrate on their remaining sound businesses and engender their own recoveries. “It became clear that if we didn't do something quickly, the whole system could collapse. If it's just a few institutions, you can have an ad hoc solution, but when the whole system is in danger, you need a new framework." These are not the words of President Bush or Mr. Paulson, although each have recently expressed sentiments which sound exactly the same. They are the words of Göran Lind, a senior adviser to Sweden's central bank at the time of the crisis.
The steps taken back then allowed the Swedish economy, which first suffered through 12% unemployment and a real recession, to recover relatively quickly. By 1994 and 1995, Swedish GDP posted annual growth rates near 4%.
Some Further Comparisons
According to Ms. Perry's article, the total loan losses on Sweden's biggest banks to some 12% of the country's gross domestic product. A table published by Bloomberg on August 12 put total U.S. bank losses at $246.2 billion, just over 48% the IMF estimate of $510 billion in total global losses. In an economy which was over $11 trillion in 2007, that amounts to about 2.25% of GDP, far less than Sweden's' 12%. While bank losses have not been completely totaled, mitigating this is that fact that U.S. banks have raised a total of $163.2 billion in fresh capital. The IMF is currently estimating global losses to reach over $1 trillion.
Once the banks' troubled assets had been taken over, the Swedish government “required the banks to disclose expected losses immediately and it quickly assigned values to other assets, rather than let banks postpone reporting losses and take gradual write-downs. Banks receiving capital injections or loans surrendered shares to the government to avoid the possibility of rewarding shareholders, and to give Swedish taxpayers a chance to profit when the market improved,” according the WSJ article, and according to Mr. Lind, taxpayers did eventually make a profit once the economy recovered and the government found buyers.
One can only hope to see the U.S. take a lesson from history and enact similar measures now.
Currency and Equity Market Implications
Once the market comes to the realization that a solution has been enacted, the dollar will appreciate. While it is difficult to say exactly when that may occur, there will be a good chance to see this happen in October when the National Association of Realtors reports on September existing home sales and median price. As far as stocks are concerned while we wouldn't bother predicting what will happen in the very short term, if you are an investor with a longer term perspective you are likely being presented with an extraordinary buying opportunity at this time.
Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com
TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.
The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.
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Answer: Absolutely
Reason: It has been done successfully before. A very similar situation happened in Sweden in the early 1990's with the difference being that in the Swedish case, the situation was far worse.
Qualifiers: This doesn't mean stocks can only go up and it does not mean the U.S. cannot go into a recession. However, when you put today's losses in proper perspective with respect to Gross Domestic Product and reference a longer term perspective (3+ years), the Treasury's plan to set up a “bad bank” by purchasing distressed mortgage securities will absolutely work. Not only that, but if we have the foresight to follow what the Swedes did afterwards, perhaps we can see a recovery that will be swifter and possibly even avert a recession.
The Wall Street Journal had the foresight to publish an article written by Joellen Perry on April 7 which covered what happened in Sweden during their early 1990's real estate-driven banking crisis. The parallels are so eerily similar that after reading it I became infuriated that the U.S. was unable to learn from history and avert the present crisis entirely.
How familiar does this sound: A deregulation of credit markets fuels a real estate lending boom which is further enabled by low interest rates, lax supervision and poor lending standards. The result? A massive asset inflation (bubble) which sees real-estate values and stock prices more than double in a few short years. Once the bubble bursts and housing prices decline, the banks start totaling up the losses from all the loans they should never have made in the first place. Liquidity dries up. Unemployment rises and the economy is threatened by (and eventually goes into) a recession.
This was Sweden in the late 1980's and it was the U.S. from 2003 until now.
Mr. Paulson's plan offers basically the same solution as was applied in Sweden back in 1992. The Swedes set up so-called bad banks to manage the troubled real estate assets and by doing so allowed the banks to concentrate on their remaining sound businesses and engender their own recoveries. “It became clear that if we didn't do something quickly, the whole system could collapse. If it's just a few institutions, you can have an ad hoc solution, but when the whole system is in danger, you need a new framework." These are not the words of President Bush or Mr. Paulson, although each have recently expressed sentiments which sound exactly the same. They are the words of Göran Lind, a senior adviser to Sweden's central bank at the time of the crisis.
The steps taken back then allowed the Swedish economy, which first suffered through 12% unemployment and a real recession, to recover relatively quickly. By 1994 and 1995, Swedish GDP posted annual growth rates near 4%.
Some Further Comparisons
According to Ms. Perry's article, the total loan losses on Sweden's biggest banks to some 12% of the country's gross domestic product. A table published by Bloomberg on August 12 put total U.S. bank losses at $246.2 billion, just over 48% the IMF estimate of $510 billion in total global losses. In an economy which was over $11 trillion in 2007, that amounts to about 2.25% of GDP, far less than Sweden's' 12%. While bank losses have not been completely totaled, mitigating this is that fact that U.S. banks have raised a total of $163.2 billion in fresh capital. The IMF is currently estimating global losses to reach over $1 trillion.
Once the banks' troubled assets had been taken over, the Swedish government “required the banks to disclose expected losses immediately and it quickly assigned values to other assets, rather than let banks postpone reporting losses and take gradual write-downs. Banks receiving capital injections or loans surrendered shares to the government to avoid the possibility of rewarding shareholders, and to give Swedish taxpayers a chance to profit when the market improved,” according the WSJ article, and according to Mr. Lind, taxpayers did eventually make a profit once the economy recovered and the government found buyers.
One can only hope to see the U.S. take a lesson from history and enact similar measures now.
Currency and Equity Market Implications
Once the market comes to the realization that a solution has been enacted, the dollar will appreciate. While it is difficult to say exactly when that may occur, there will be a good chance to see this happen in October when the National Association of Realtors reports on September existing home sales and median price. As far as stocks are concerned while we wouldn't bother predicting what will happen in the very short term, if you are an investor with a longer term perspective you are likely being presented with an extraordinary buying opportunity at this time.
Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com
TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.
The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.
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GM Will Draw on Remaining $3.5 Billion in Credit Line
By Jeff Green and Alan Ohnsman
Sept. 20 (Bloomberg) -- General Motors Corp., burning through cash after three years of losses, will tap the remaining $3.5 billion of a revolving credit line as the crisis on Wall Street threatens to crimp companies' ability to borrow.
The balance of the $4.5 billion line will go to help cover restructuring costs, GM said in a statement late yesterday. The Detroit-based automaker said it also completed a $322 million debt-to-equity exchange.
``The disruption in the credit markets have been profound,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``GM has its own set of sizable problems, but I think this was a liquidity play.''
Banks have tightened lending amid the worst housing market since the Great Depression, and this week's bankruptcy of Lehman Brothers Holdings Inc. and government takeover of American International Group Inc. may further curb access to credit.
GM Chief Executive Officer Rick Wagoner has orchestrated a plan to raise $4 billion to $7 billion by selling assets and adding debt to ensure it has enough liquidity to operate through the end of 2009. GM, the world's largest automaker, has lost $69.8 billion since the end of 2004, its last profitable year.
``GM felt it was a very prudent thing to have the cash on hand to borrow at very attractive rates,'' spokeswoman Julie Gibson said in an interview. ``The timing was right, given the obvious instability in the financial markets.''
Not Expected
``This is not something we expected they would need to do until next year,'' said Mirk Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets including Ford and GM debt.
GM has its own cash needs and its decision to use the credit line may add to the concern in the capital markets. ``It's not good either way,'' said Mikelic.
The automaker's shares rose $1.68, or 15 percent, to $13.08 yesterday in New York Stock Exchange composite trading. The credit-line action was announced after the close of regular trading. The shares have dropped 47 percent this year.
The credit line has been in place since July 2006. Funds being accessed may also be used to retire $750 million of debt coming due in October and for more than $1.2 billion of reorganization costs for bankrupt Delphi Corp., a former GM unit, the automaker said. Delphi disclosed GM's increased bailout costs Sept. 12.
`Mechanism Test'
GM's use of the first $1 billion from the credit line, announced Aug. 1, was a step to ``test the mechanism'' of that borrowing and help meet costs at a ``seasonal low point,'' Chief Financial Officer Ray Young told analysts on Aug. 13.
GM burned through $3.6 billion in the second quarter and said that at the end of June its supply of cash, marketable securities and other funds available fell to $21 billion from $23.9 billion at the end of the first quarter, and $23.6 billion a year earlier. The revolver wasn't included in those figures.
Steps by the U.S. government to shore up the financial system should prevent GM's mining of its revolver from becoming part of a flood of companies drawing down unused funds, Morgan Keegan's Hastings said.
``The prudent CFO or CEO may be tapping their lines of credit, especially if they know they are going to need liquidity in the short term and they're concerned about the market,'' Hastings said. The Federal Reserve's action ``may prompt people to wait and see now, because people certainly were on the verge of panic.''
Government Action
The U.S. government yesterday said it is taking steps to cleanse banks of troubled assets and halt an exodus of investors from money markets in the biggest expansion of federal power over the financial system since the Depression.
The government took over AIG, Fannie Mae and Freddie Mac in the past 13 days, a period when Lehman Brothers filed for bankruptcy and Americans pulled a record $89 billion from money- market funds.
The Bush administration sent to Congress today a $700 billion proposal granting broad power to the U.S. Treasury Department to acquire troubled assets now on the balance sheets of U.S.-based financial companies.
The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit.
Government Loans
GM, along with Ford Motor Co., Chrysler LLC and their suppliers, are also asking Congress to appropriate about $7 billion to back $25 billion in government loans to pay for the shift to build more fuel-efficient models.
It's possible many of the actions taken to gain funds from the market were initiated before the Fed action and new actions may abate, Hastings said.
Ford, the second-largest U.S. automaker, on Sept. 16 said it was assessing the impact of Lehman's failure on $1.13 billion of lending agreements it had with subsidiaries of the investment bank.
GMAC LLC, the money-losing home and auto lender partly owned by GM, renewed a credit facility with Citigroup Inc. yesterday, giving the company access to $13.8 billion, down from $21.4 billion that was available last year. GM sold 51 percent of GMAC to Cerberus Capital Management LP in November 2006.
International Lease Finance Corp., the airplane-leasing company owned by AIG, said Sept. 19 it is borrowing $6.5 billion in emergency funding, the maximum amount allowed under its three credit lines.
Seeking Cash
ILFC asked its lenders for the cash on Sept. 16, the day New York-based AIG agreed to give the government an 80 percent stake of itself in exchange for an $85 billion loan.
AIG's unit that makes home and auto loans, American General Finance Inc., said Sept. 19 in a separate filing that it borrowed $4.58 billion under its credit facilities, and said it too asked for the money on Sept. 16.
``Everyone is running to cash, hoarding it, and we're not out of the woods yet,'' Mikelic said. ``There's a little less pressure with the government stepping in. But the government needs to keep printing money, printing securities, even if there is negative yield.''
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net.
Read more...
Sept. 20 (Bloomberg) -- General Motors Corp., burning through cash after three years of losses, will tap the remaining $3.5 billion of a revolving credit line as the crisis on Wall Street threatens to crimp companies' ability to borrow.
The balance of the $4.5 billion line will go to help cover restructuring costs, GM said in a statement late yesterday. The Detroit-based automaker said it also completed a $322 million debt-to-equity exchange.
``The disruption in the credit markets have been profound,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``GM has its own set of sizable problems, but I think this was a liquidity play.''
Banks have tightened lending amid the worst housing market since the Great Depression, and this week's bankruptcy of Lehman Brothers Holdings Inc. and government takeover of American International Group Inc. may further curb access to credit.
GM Chief Executive Officer Rick Wagoner has orchestrated a plan to raise $4 billion to $7 billion by selling assets and adding debt to ensure it has enough liquidity to operate through the end of 2009. GM, the world's largest automaker, has lost $69.8 billion since the end of 2004, its last profitable year.
``GM felt it was a very prudent thing to have the cash on hand to borrow at very attractive rates,'' spokeswoman Julie Gibson said in an interview. ``The timing was right, given the obvious instability in the financial markets.''
Not Expected
``This is not something we expected they would need to do until next year,'' said Mirk Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets including Ford and GM debt.
GM has its own cash needs and its decision to use the credit line may add to the concern in the capital markets. ``It's not good either way,'' said Mikelic.
The automaker's shares rose $1.68, or 15 percent, to $13.08 yesterday in New York Stock Exchange composite trading. The credit-line action was announced after the close of regular trading. The shares have dropped 47 percent this year.
The credit line has been in place since July 2006. Funds being accessed may also be used to retire $750 million of debt coming due in October and for more than $1.2 billion of reorganization costs for bankrupt Delphi Corp., a former GM unit, the automaker said. Delphi disclosed GM's increased bailout costs Sept. 12.
`Mechanism Test'
GM's use of the first $1 billion from the credit line, announced Aug. 1, was a step to ``test the mechanism'' of that borrowing and help meet costs at a ``seasonal low point,'' Chief Financial Officer Ray Young told analysts on Aug. 13.
GM burned through $3.6 billion in the second quarter and said that at the end of June its supply of cash, marketable securities and other funds available fell to $21 billion from $23.9 billion at the end of the first quarter, and $23.6 billion a year earlier. The revolver wasn't included in those figures.
Steps by the U.S. government to shore up the financial system should prevent GM's mining of its revolver from becoming part of a flood of companies drawing down unused funds, Morgan Keegan's Hastings said.
``The prudent CFO or CEO may be tapping their lines of credit, especially if they know they are going to need liquidity in the short term and they're concerned about the market,'' Hastings said. The Federal Reserve's action ``may prompt people to wait and see now, because people certainly were on the verge of panic.''
Government Action
The U.S. government yesterday said it is taking steps to cleanse banks of troubled assets and halt an exodus of investors from money markets in the biggest expansion of federal power over the financial system since the Depression.
The government took over AIG, Fannie Mae and Freddie Mac in the past 13 days, a period when Lehman Brothers filed for bankruptcy and Americans pulled a record $89 billion from money- market funds.
The Bush administration sent to Congress today a $700 billion proposal granting broad power to the U.S. Treasury Department to acquire troubled assets now on the balance sheets of U.S.-based financial companies.
The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit.
Government Loans
GM, along with Ford Motor Co., Chrysler LLC and their suppliers, are also asking Congress to appropriate about $7 billion to back $25 billion in government loans to pay for the shift to build more fuel-efficient models.
It's possible many of the actions taken to gain funds from the market were initiated before the Fed action and new actions may abate, Hastings said.
Ford, the second-largest U.S. automaker, on Sept. 16 said it was assessing the impact of Lehman's failure on $1.13 billion of lending agreements it had with subsidiaries of the investment bank.
GMAC LLC, the money-losing home and auto lender partly owned by GM, renewed a credit facility with Citigroup Inc. yesterday, giving the company access to $13.8 billion, down from $21.4 billion that was available last year. GM sold 51 percent of GMAC to Cerberus Capital Management LP in November 2006.
International Lease Finance Corp., the airplane-leasing company owned by AIG, said Sept. 19 it is borrowing $6.5 billion in emergency funding, the maximum amount allowed under its three credit lines.
Seeking Cash
ILFC asked its lenders for the cash on Sept. 16, the day New York-based AIG agreed to give the government an 80 percent stake of itself in exchange for an $85 billion loan.
AIG's unit that makes home and auto loans, American General Finance Inc., said Sept. 19 in a separate filing that it borrowed $4.58 billion under its credit facilities, and said it too asked for the money on Sept. 16.
``Everyone is running to cash, hoarding it, and we're not out of the woods yet,'' Mikelic said. ``There's a little less pressure with the government stepping in. But the government needs to keep printing money, printing securities, even if there is negative yield.''
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net.
Read more...
Tawuniya Insurance Tells Saudi Exchange It's Not Exposed to AIG
By Abdulla Fardan
Sept. 21 (Bloomberg) -- The Company for Cooperative Insurance, the largest Saudi Arabian insurer by market value, said it hasn't been affected by the difficulties facing American International Group, Inc.
Tawuniya, as the Saudi company also known, has no re- insurance agreement with the AIG, it said in a statement posted on the Saudi Stock Exchange Web site yesterday.
The Saudi company's business with AIG includes only ''limited'' optional re-insurance policies that has been placed with the U.S. insurer on customer's request and have no impact on the Tawuniya financial position, it said in the statement.
To contact the reporter on this story: Abdulla Fardan in Bahrain at afardan@bloomberg.net
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Sept. 21 (Bloomberg) -- The Company for Cooperative Insurance, the largest Saudi Arabian insurer by market value, said it hasn't been affected by the difficulties facing American International Group, Inc.
Tawuniya, as the Saudi company also known, has no re- insurance agreement with the AIG, it said in a statement posted on the Saudi Stock Exchange Web site yesterday.
The Saudi company's business with AIG includes only ''limited'' optional re-insurance policies that has been placed with the U.S. insurer on customer's request and have no impact on the Tawuniya financial position, it said in the statement.
To contact the reporter on this story: Abdulla Fardan in Bahrain at afardan@bloomberg.net
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Kuwait Wealth Fund May Buy Kuwaiti Stocks, Asharq Al-Awsat Says
By Zainab Fattah
Sept. 21 (Bloomberg) -- The Kuwait Investment Authority may inject as much as one billion dinars ($3.75 billion) into Kuwait's stock market to alleviate sharp declines, Asharq al- Awsat reported, citing unidentified officials.
The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen stocks lose 12 billion dinars in value so far this month, the newspaper said.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Sept. 21 (Bloomberg) -- The Kuwait Investment Authority may inject as much as one billion dinars ($3.75 billion) into Kuwait's stock market to alleviate sharp declines, Asharq al- Awsat reported, citing unidentified officials.
The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen stocks lose 12 billion dinars in value so far this month, the newspaper said.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Dubai's Construction Delays Raise Home Prices, EFG-Hermes Says
By Arif Sharif
Sept. 21 (Bloomberg) -- Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
Dubai residential property prices jumped 14.4 percent so far this year, EFG-Hermes estimates, versus its expectations of a 5-to-10 percent rise for 2008. Prices rose 18.9 percent in 2007 compared with its forecast of a 10-15 percent gain.
The supply of new property ``came short of our expectations for a fourth year,'' Sana Kapadia, an analyst at Egypt's biggest publicly-traded investment bank, said in an e- mailed report. ``The supply of new units remains a key determinant of the timing of a potential correction.''
The constraints have halted construction of some projects and stalled the start of others, and EFG-Hermes' expectations of a delivery of 64,000 housing units in 2008 is unlikely to be met, the report said. Supply is expected to peak in the first half of 2009, when 70,000 units will be delivered, it added.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause the price correction to deepen, EFG-Hermes warned.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Sept. 21 (Bloomberg) -- Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
Dubai residential property prices jumped 14.4 percent so far this year, EFG-Hermes estimates, versus its expectations of a 5-to-10 percent rise for 2008. Prices rose 18.9 percent in 2007 compared with its forecast of a 10-15 percent gain.
The supply of new property ``came short of our expectations for a fourth year,'' Sana Kapadia, an analyst at Egypt's biggest publicly-traded investment bank, said in an e- mailed report. ``The supply of new units remains a key determinant of the timing of a potential correction.''
The constraints have halted construction of some projects and stalled the start of others, and EFG-Hermes' expectations of a delivery of 64,000 housing units in 2008 is unlikely to be met, the report said. Supply is expected to peak in the first half of 2009, when 70,000 units will be delivered, it added.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause the price correction to deepen, EFG-Hermes warned.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Amlak, Tamweel, Rebound After Falling to 52-Week Lows Last Week
By Arif Sharif
Sept. 21 (Bloomberg) -- Amlak Finance PJSC and Tamweel PJSC, the United Arab Emirates' two biggest mortgage lenders, jumped more than 10 percent in Dubai as investors hunted for bargains after the shares fell to annual lows last week.
Amlak jumped 9.8 percent to 3.6 dirhams at 11:11 a.m. Dubai time after rising as much as 14 percent earlier in the day. Tamweel rose 8.4 percent to 4.13 dirhams after gaining 11.3 percent. Amlak lost almost 14 percent in the past two weeks and Tamweel fell 34 percent, both hitting 52-week lows on Sept. 15.
Tamweel, the U.A.E.'s second-biggest mortgage provider by market value, said Sept. 9 its deputy chief executive officer had been held by Dubai government authorities in connection with an ongoing corruption investigation.
``This is an expected rebound after prices dropped to very attractive levels last week,'' said Nadine Wehbe, a senior analyst at Orion Brokers in Dubai. ``The investigations into Tamweel had an impact on the entire sector as well and the shares were affected badly, which it shouldn't have.''
Amlak trades at a price-earnings multiple of 9.7 times to its estimated 2008 earnings and Tamweel at an estimated PE of 5.4, according to Bloomberg data.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Sept. 21 (Bloomberg) -- Amlak Finance PJSC and Tamweel PJSC, the United Arab Emirates' two biggest mortgage lenders, jumped more than 10 percent in Dubai as investors hunted for bargains after the shares fell to annual lows last week.
Amlak jumped 9.8 percent to 3.6 dirhams at 11:11 a.m. Dubai time after rising as much as 14 percent earlier in the day. Tamweel rose 8.4 percent to 4.13 dirhams after gaining 11.3 percent. Amlak lost almost 14 percent in the past two weeks and Tamweel fell 34 percent, both hitting 52-week lows on Sept. 15.
Tamweel, the U.A.E.'s second-biggest mortgage provider by market value, said Sept. 9 its deputy chief executive officer had been held by Dubai government authorities in connection with an ongoing corruption investigation.
``This is an expected rebound after prices dropped to very attractive levels last week,'' said Nadine Wehbe, a senior analyst at Orion Brokers in Dubai. ``The investigations into Tamweel had an impact on the entire sector as well and the shares were affected badly, which it shouldn't have.''
Amlak trades at a price-earnings multiple of 9.7 times to its estimated 2008 earnings and Tamweel at an estimated PE of 5.4, according to Bloomberg data.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Gulf General Investment, Baader Bank Merge Brokerage Units
By Zainab Fattah
Sept. 21 (Bloomberg) -- Gulf General Investment Co., an investment company based in the United Arab Emirates, merged its brokerage unit with Germany's Baader Bank AG.
The merger will create Gulf Baader Capital Market L.L.C., the companies said in a joint statement posted on the Web site of Dubai's bourse today.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Sept. 21 (Bloomberg) -- Gulf General Investment Co., an investment company based in the United Arab Emirates, merged its brokerage unit with Germany's Baader Bank AG.
The merger will create Gulf Baader Capital Market L.L.C., the companies said in a joint statement posted on the Web site of Dubai's bourse today.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Persian Gulf Shares Rebound on Fed's Bailout Plan; Emaar Climbs
By Zainab Fattah
Sept. 21 (Bloomberg) -- Persian Gulf shares advanced as the U.S. government announced a plan to buy $700 billion in bad mortgage investments from financial companies to purge banks of bad assets and after global markets rallied late last week.
Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, jumped the most since 2005. National Bank of Abu Dhabi PJSC rose the most in almost eight months and Zain gained after raising $4.49 billion through a capital increase.
``The Fed's bailout will write off bad debt which is great news and gives banks the opportunity to recover,'' said Haissam Arabi, a Dubai-based managing director of asset management at Shuaa Capital PSC who oversees $1.8 billion.
The Dubai Financial Market General Index climbed 7.8 percent to 4,229.87 at 1:21 p.m. local time, its biggest one-day gain since Jan. 23. The Abu Dhabi Securities Exchange General Index added 5.8 percent, while the Kuwait Stock Exchange Index rose 3.3 percent.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies. Yesterday, the Bush administration sought unchecked power from congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets. Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill.
Injection
The Kuwait Investment Authority may inject as much as 1 billion dinars ($3.75 billion) into Kuwait's stock market to alleviate recent declines, Asharq al-Awsat reported today, citing unidentified officials. The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen shares lose 12 billion dinars in value so far this month, the newspaper said.
Emaar jumped 13 percent to 7.9 dirhams, its biggest gain since June 2005. Aldar Properties PJSC climbed 9.9 percent to 7.79 dirhams. Emaar has still dropped 13 percent this month, while Aldar is down 20 percent so far in September.
`Most Hit'
``Real-estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai.
Emaar Misr for Development SAE, a unit of Emaar, will invest 12 billion Egyptian pounds ($2.1 billion) in a luxury real-state project in Cairo, Al-Alam al-Yom reported Sept. 18, citing the company's Chief Executive Officer Sameh Mohtadi.
National Bank of Abu Dhabi, the U.A.E.'s second-biggest bank by assets, surged 7 percent to 16 dirhams, the biggest gain since Jan. 23.
Zain soared 7.3 percent to 1,760 fils, its largest advance since November 2005. The Kuwaiti phone company with operations in 22 Middle Eastern and African countries said it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
Tadawul Falls
Oman's Muscat Securities Market 30 Index rose 4.3 percent, its largest gain since November 2000. Qatar's Doha Securities Market Index surged 7.9 percent, while the Bahrain All Share Index added 0.8 percent. Saudi Arabia's Tadawul All Share Index declined 0.6 percent, ending two days of advances.
Al-Mazaya Holding Co. climbed 5.9 percent to 720 fils. The Kuwait-based property developer said it plans to set up two new units in Bahrain and Ajman, the United Arab Emirates.
Gulf General Investment Co. added 4.4 percent to 9.45 dirhams. The investment company based in the U.A.E. merged its brokerage unit with Germany's Baader Bank AG.
National Central Cooling Co. advanced 7.3 percent to 1.62 dirhams. The air-conditioning company, known as Tabreed, plans to spend 4 billion dirhams ($1.1 billion) in the next two years on expansion.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
Read more...
Sept. 21 (Bloomberg) -- Persian Gulf shares advanced as the U.S. government announced a plan to buy $700 billion in bad mortgage investments from financial companies to purge banks of bad assets and after global markets rallied late last week.
Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, jumped the most since 2005. National Bank of Abu Dhabi PJSC rose the most in almost eight months and Zain gained after raising $4.49 billion through a capital increase.
``The Fed's bailout will write off bad debt which is great news and gives banks the opportunity to recover,'' said Haissam Arabi, a Dubai-based managing director of asset management at Shuaa Capital PSC who oversees $1.8 billion.
The Dubai Financial Market General Index climbed 7.8 percent to 4,229.87 at 1:21 p.m. local time, its biggest one-day gain since Jan. 23. The Abu Dhabi Securities Exchange General Index added 5.8 percent, while the Kuwait Stock Exchange Index rose 3.3 percent.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies. Yesterday, the Bush administration sought unchecked power from congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets. Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill.
Injection
The Kuwait Investment Authority may inject as much as 1 billion dinars ($3.75 billion) into Kuwait's stock market to alleviate recent declines, Asharq al-Awsat reported today, citing unidentified officials. The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen shares lose 12 billion dinars in value so far this month, the newspaper said.
Emaar jumped 13 percent to 7.9 dirhams, its biggest gain since June 2005. Aldar Properties PJSC climbed 9.9 percent to 7.79 dirhams. Emaar has still dropped 13 percent this month, while Aldar is down 20 percent so far in September.
`Most Hit'
``Real-estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai.
Emaar Misr for Development SAE, a unit of Emaar, will invest 12 billion Egyptian pounds ($2.1 billion) in a luxury real-state project in Cairo, Al-Alam al-Yom reported Sept. 18, citing the company's Chief Executive Officer Sameh Mohtadi.
National Bank of Abu Dhabi, the U.A.E.'s second-biggest bank by assets, surged 7 percent to 16 dirhams, the biggest gain since Jan. 23.
Zain soared 7.3 percent to 1,760 fils, its largest advance since November 2005. The Kuwaiti phone company with operations in 22 Middle Eastern and African countries said it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
Tadawul Falls
Oman's Muscat Securities Market 30 Index rose 4.3 percent, its largest gain since November 2000. Qatar's Doha Securities Market Index surged 7.9 percent, while the Bahrain All Share Index added 0.8 percent. Saudi Arabia's Tadawul All Share Index declined 0.6 percent, ending two days of advances.
Al-Mazaya Holding Co. climbed 5.9 percent to 720 fils. The Kuwait-based property developer said it plans to set up two new units in Bahrain and Ajman, the United Arab Emirates.
Gulf General Investment Co. added 4.4 percent to 9.45 dirhams. The investment company based in the U.A.E. merged its brokerage unit with Germany's Baader Bank AG.
National Central Cooling Co. advanced 7.3 percent to 1.62 dirhams. The air-conditioning company, known as Tabreed, plans to spend 4 billion dirhams ($1.1 billion) in the next two years on expansion.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
Read more...
Alitalia May Be Grounded Within a Week, Matteoli Tells Sole
By Andrew Davis
Sept. 21 (Bloomberg) -- Alitalia SpA will be grounded within six days if a buyer isn't found for the insolvent carrier, Italian Transport Minister Altero Matteoli said in an interview with Il Sole-24 Ore.
Vito Riggio, head of Italian airline regulator Enac, meets with Alitalia officials tomorrow to discuss revoking its temporary license if there isn't evidence the carrier has enough funds to operate for three months, the paper said. Riggio has said flights would be grounded seven to 10 days after revocation, Sole reported.
``There isn't that much time, the decision will have to be taken sooner,'' Matteoli told the newspaper.
The only way for the airline to survive is for unions to reverse course and support an Italian bid for the carrier's commercial flight business by CAI, an investment group led by Piaggio & C. SpA Chairman Roberto Colaninno, Matteoli told the newspaper.
that have opposed an
To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net
Read more...
Sept. 21 (Bloomberg) -- Alitalia SpA will be grounded within six days if a buyer isn't found for the insolvent carrier, Italian Transport Minister Altero Matteoli said in an interview with Il Sole-24 Ore.
Vito Riggio, head of Italian airline regulator Enac, meets with Alitalia officials tomorrow to discuss revoking its temporary license if there isn't evidence the carrier has enough funds to operate for three months, the paper said. Riggio has said flights would be grounded seven to 10 days after revocation, Sole reported.
``There isn't that much time, the decision will have to be taken sooner,'' Matteoli told the newspaper.
The only way for the airline to survive is for unions to reverse course and support an Italian bid for the carrier's commercial flight business by CAI, an investment group led by Piaggio & C. SpA Chairman Roberto Colaninno, Matteoli told the newspaper.
that have opposed an
To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net
Read more...
Kuwait Zain Gains Most in Three Years on U.S. Bank Rescue Plan
By Glen Carey
Sept. 21 (Bloomberg) -- Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, surged the most in almost three years following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
``This is mainly backed by the recovery we are witnessing in global capital markets all over the world,'' Chandresh Bhatt, an analyst at Kuwait-based Global Financial House KSCC, said today in a phone interview from Kuwait. ``The regional markets are following the U.S. and Asian markets higher.''
Zain advanced 7.3 percent to 1,760 fils as of 12:29 p.m., its largest advance since November 2005. The company said yesterday it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
National Mobile Telecommunications Co., the Kuwaiti phone company bought by Qatar Telecom Q.S.A. last year, gained 14 percent to 1,620 fils.
U.S. stocks surged last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
``Telecom companies have the most sustainable cash flow, compared with any other sectors in this region,'' Kunal Bajaj, an analyst at HSBC Holdings Plc, said in a telephone interview from Dubai. ``This sector is considered to be a safe haven.''
Global Investment House has a ``hold'' rating for Zain and a ``buy'' for National Mobile, while HSBC has a ``neutral'' rating for Zain and an ``overweight'' for National Mobile.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
Read more...
Sept. 21 (Bloomberg) -- Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, surged the most in almost three years following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
``This is mainly backed by the recovery we are witnessing in global capital markets all over the world,'' Chandresh Bhatt, an analyst at Kuwait-based Global Financial House KSCC, said today in a phone interview from Kuwait. ``The regional markets are following the U.S. and Asian markets higher.''
Zain advanced 7.3 percent to 1,760 fils as of 12:29 p.m., its largest advance since November 2005. The company said yesterday it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
National Mobile Telecommunications Co., the Kuwaiti phone company bought by Qatar Telecom Q.S.A. last year, gained 14 percent to 1,620 fils.
U.S. stocks surged last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
``Telecom companies have the most sustainable cash flow, compared with any other sectors in this region,'' Kunal Bajaj, an analyst at HSBC Holdings Plc, said in a telephone interview from Dubai. ``This sector is considered to be a safe haven.''
Global Investment House has a ``hold'' rating for Zain and a ``buy'' for National Mobile, while HSBC has a ``neutral'' rating for Zain and an ``overweight'' for National Mobile.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
Read more...
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