By Jesse Westbrook
Oct. 8 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Christopher Cox hired a former head of the Congressional Budget Office as a senior adviser after lawmakers criticized the agency's actions in handling financial turmoil.
Cox hired Dan Crippen to help on a congressionally mandated review of accounting rules and ``new policy issues facing the commission in the current economic crisis,'' the SEC said in a statement yesterday. Crippen, 56, led the agency that forecasts budget deficits and surpluses from 1999 to 2003, the SEC said.
``Dr. Crippen has spent decades dealing with vital financial-policy issues at the highest level of government,'' Cox said in the statement. ``We look forward to drawing on his skills as we work to protect investors and restore confidence in our markets.''
Cox is bringing on Crippen and adding public relations staff after senators including Republicans Charles Grassley and Richard Shelby blasted his supervision of Bear Stearns Cos. and other investment banks. John McCain, the Republican presidential nominee, said last month Cox should be fired because the SEC let hedge funds ``turn our markets into a casino.''
Crippen worked in the Republican administration of Ronald Reagan before becoming CBO director, advising the former president during the savings and loans crisis and after the October 1987 stock-market crash.
He also was a founding partner and senior vice president of the Duberstein Group, a lobbying firm led by Reagan's former chief of staff, Kenneth Duberstein. Crippen didn't return a telephone call seeking comment.
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Public Relations Help
Cox also brought in Andrew Weinstein, a former spokesman for the Dulles, Virginia-based AOL unit of Time Warner Inc., and Erik Hotmire, a former spokesman for Republican U.S. Senator Sam Brownback, to help respond to press scrutiny.
Weinstein has more than 20 years of experience in ``media relations, crisis communications and public-policy strategy,'' according to a biography on the Web site of Widmeyer Communications. Widmeyer, which employed Weinstein, described him as AOL's ``top media strategist.''
He worked on former Senator Bob Dole's unsuccessful 1996 Republican presidential campaign and in the office of former House Speaker Newt Gingrich. The SEC hired Weinstein as a paid consultant and Hotmire will be a full-time employee.
``They were brought on to support our three-person press staff in the Office of Public Affairs to help us communicate with investors and the public during the current credit crisis,'' SEC spokesman John Nester said.
Inspector General
The SEC also has been faulted by Inspector General David Kotz, who in a Sept. 26 report said the agency failed to respond to ``numerous, potential red flags'' at Bear Stearns such as the securities firm's excessive borrowing and over-concentration in mortgage securities.
The Federal Reserve and U.S. Treasury orchestrated a forced sale of Bear Stearns to JPMorgan Chase & Co. in March to prevent the investment bank from collapsing and triggering a broader market panic.
Cox, a former Republican congressman who has said he plans to step down at the end of the Bush administration in January, announced Sept. 26 that the SEC would stop monitoring the capital, leverage and liquidity of securities firms after the two remaining companies scrutinized by the agency, Morgan Stanley and Goldman Sachs Group Inc., became banks overseen by the Fed.
The central bank has gained authority this year at the SEC's expense after Bear Stearns was sold and Bank of America Corp. bought Merrill Lynch & Co. Lehman Brothers Holdings Inc., the last of five securities firms overseen by the SEC, declared bankruptcy last month.
To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.
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Wednesday, October 8, 2008
Dollar-Yen Volatility Is Near Decade-High; G-7 May Disappoint
By Stanley White
Oct. 8 (Bloomberg) -- Volatility implied by dollar-yen options rose to the highest in almost a decade on speculation the Group of Seven nations will fail to coordinate a response to the credit crisis, according to Bank of Tokyo-Mitsubishi UFJ Ltd.
Dealers traded yen call options expiring in the next few days with strike prices at 100 yen and 95 yen, betting Japan's currency will extend gains, said Takeharu Miki, an options manager at the company. The deepening credit crunch will prompt a further exit from so-called carry trades, Miki said. In the trades, investors borrow in yen to fund higher-yielding asset purchases.
A Japanese Finance Ministry official, who spoke to reporters today on condition of anonymity, downplayed the need for the G-7 to take joint action on interest rates or currencies to stem the crisis of confidence in the financial system when they meet in Washington starting on Oct. 10.
``The options market is already pricing in a disappointing outcome from the G-7,'' said Miki of Bank of Tokyo-Mitsubishi UFJ, a unit of Japan's biggest lender by assets. ``People are wary of the likelihood that the yen will go higher. Part of this is risk aversion. The yen also benefits because Japan's banks are relatively unscathed by this turmoil.''
The yen rose to 99.61 per dollar, the highest since April 1, and last traded at 100.13 as of 8 a.m. in London from 101.47 late yesterday in New York. Japan's currency has gained 6 percent against the greenback so far this month.
Implied volatility for dollar-yen options expiring in one month with a strike price near the current market rate rose to 25.55 percent, the highest since October 1998.
Risk Reversals
The dollar's one-month 25-delta risk-reversal rate against the yen widened to minus 6.26 percent, the most since March 18, indicating a greater premium for yen calls that allow purchases over yen puts that grant the right to sell.
Delta measures the rate of change in an option's value relative to moves in the underlying currencies. Dealers quote implied volatility, a measure of expectations for future currency swings, as part of pricing options. The strike price is the level at which the buyer of an option may exercise it.
The G-7 meets as losses on subprime mortgage-related derivatives have caused credit markets to seize up and led officials in the U.S. and Europe to bail out their banks. The G-7 includes Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
In carry trades investors get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. Benchmark rates are 0.5 percent in Japan, 2 percent in the U.S. and 4.25 percent in Europe.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- Volatility implied by dollar-yen options rose to the highest in almost a decade on speculation the Group of Seven nations will fail to coordinate a response to the credit crisis, according to Bank of Tokyo-Mitsubishi UFJ Ltd.
Dealers traded yen call options expiring in the next few days with strike prices at 100 yen and 95 yen, betting Japan's currency will extend gains, said Takeharu Miki, an options manager at the company. The deepening credit crunch will prompt a further exit from so-called carry trades, Miki said. In the trades, investors borrow in yen to fund higher-yielding asset purchases.
A Japanese Finance Ministry official, who spoke to reporters today on condition of anonymity, downplayed the need for the G-7 to take joint action on interest rates or currencies to stem the crisis of confidence in the financial system when they meet in Washington starting on Oct. 10.
``The options market is already pricing in a disappointing outcome from the G-7,'' said Miki of Bank of Tokyo-Mitsubishi UFJ, a unit of Japan's biggest lender by assets. ``People are wary of the likelihood that the yen will go higher. Part of this is risk aversion. The yen also benefits because Japan's banks are relatively unscathed by this turmoil.''
The yen rose to 99.61 per dollar, the highest since April 1, and last traded at 100.13 as of 8 a.m. in London from 101.47 late yesterday in New York. Japan's currency has gained 6 percent against the greenback so far this month.
Implied volatility for dollar-yen options expiring in one month with a strike price near the current market rate rose to 25.55 percent, the highest since October 1998.
Risk Reversals
The dollar's one-month 25-delta risk-reversal rate against the yen widened to minus 6.26 percent, the most since March 18, indicating a greater premium for yen calls that allow purchases over yen puts that grant the right to sell.
Delta measures the rate of change in an option's value relative to moves in the underlying currencies. Dealers quote implied volatility, a measure of expectations for future currency swings, as part of pricing options. The strike price is the level at which the buyer of an option may exercise it.
The G-7 meets as losses on subprime mortgage-related derivatives have caused credit markets to seize up and led officials in the U.S. and Europe to bail out their banks. The G-7 includes Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
In carry trades investors get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. Benchmark rates are 0.5 percent in Japan, 2 percent in the U.S. and 4.25 percent in Europe.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net
Read more...
Yen Surges to Six-Month High as Stocks Drop, Carry Trades Cut
By Stanley White and Ron Harui
Oct. 8 (Bloomberg) -- The yen surged, breaching 100 per dollar for the first time in six months, after a plunge in Asian stocks prompted investors to reduce holdings of higher-yielding assets funded in Japan.
The currency also advanced to the strongest in three years versus the euro after the International Monetary Fund said the world economy is headed for a recession next year. Gains accelerated as benchmark stock indexes in Japan, Hong Kong, South Korea, Indonesia, Singapore, Taiwan and Thailand slid more than 5 percent.
``Lingering fears about the health of financial sectors in the U.S. and Europe and concerns over a global recession should continue to underpin the yen,'' said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. ``We're far from out of the woods and any restoration of investor confidence will take time.''
Japan's currency rose to 100.23 per dollar at 7:53 a.m. in London from 101.47 late yesterday in New York. It reached 99.61, the highest since April 1. The yen climbed to 136.08 against the euro from 137.89. It reached 135.04, the strongest since September 2005. The dollar fell to $1.3634 per euro from $1.3588.
Against the Australian dollar, the yen rose to 68.74 from 72.84 late yesterday in Asia. It also advanced to 61.65 per New Zealand dollar from 64.11. The Australian dollar fell as low as 67.49 U.S. cents, the weakest level since September 2003. New Zealand's dollar weakened 2.8 percent to 61.15 U.S. cents.
Stocks Slide
The yen advanced as Asian money market rates rose, reflecting the reluctance among banks to lend as finance companies fail. The Hong Kong's three-month interbank offered rate rose 29 basis points to 4.15 percent, even as Hong Kong's central bank slashed the rate at which it lends to banks.
South Korea's won slid 5 percent to 1,395 against the greenback, the lowest in a decade, as a seizure in global credit markets forced companies to turn to currency exchanges to meet their dollar needs. Asia's 10 most-active currencies outside of Japan all declined today.
The region's shares also tumbled, extending a global sell- off that's erased more than $5 trillion of market value in the past week. The world economy is headed for a recession next year, with U.S. growth forecast at 0.1 percent, according to International Monetary Fund reports published this week.
The stocks rout deterred carry trades, in which investors get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. Benchmark rates are 0.5 percent in Japan, 4.25 percent in Europe, 5 percent in the U.K., 6 percent in Australia and 7.5 percent in New Zealand.
The risk of a carry trade is that currency moves wipe out profits. Implied volatility on one-month dollar-yen options soared to 25.56 percent, the highest since October 1998, from 21.79 percent yesterday.
U.S. Rates
The dollar may weaken further against Japan's currency as the Federal Reserve signals it's prepared to lower interest rates. Philadelphia Fed President Charles Plosser speaks on monetary policy at 7:45 a.m. in New York today.
The Fed ``will need to consider whether the current stance of policy remains appropriate,'' Chairman Ben S. Bernanke said yesterday after the U.S. central bank decided to buy commercial paper and help revive the corporate debt market.
``The dollar is likely to edge lower,'' said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co., Japan's fifth-largest broker by revenue. ``A possible Fed rate cut highlights how dire the situation is in the U.S. The fundamentals simply aren't sound.''
Futures on the Chicago Board of Trade showed yesterday a 68 percent chance the Fed will lower its 2 percent target lending rate by a half-percentage point at its Oct. 29 policy meeting, up from 42 percent a day earlier.
U.K. Bank Plan
The British pound rose after Prime Minister Gordon Brown's government said it will inject about 50 billion pounds ($87 billion) into the nation's banks.
The U.K. government nationalized Northern Rock Plc and Bradford & Bingley Plc to save them from collapse this year. The pound climbed $1.7513 from $1.7455 yesterday. It advanced to 77.41 pence per euro from 77.87.
The Bank of England will reduce its 5 percent benchmark rate by a quarter-percentage point tomorrow, according to the median forecast of economists surveyed by Bloomberg News. Finance ministers and central bankers from the Group of Seven nations will meet in Washington the next day to discuss the deepening financial crisis.
G-7 Meeting
The ministers will discuss stabilizing global stock markets, said a Japanese official who briefed reporters on condition of anonymity. Joint action on currencies and interest rates should depend on economic conditions in member countries, the official said. The G-7 includes Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
UBS AG recommends investors buy the dollar at 102.40 yen, with a target of 107, as governments work to restore confidence in the global financial system.
``The market has reasons to respond positively to efforts from officials in Europe and the U.S.,'' wrote analysts led by Benedikt Germanier, a Stamford, Connecticut-based currency strategist at UBS, in a research note yesterday. ``Efforts may soon reach a critical level in our view, helping investors' sentiment.''
The yen also may gain as Japanese investors repatriate funds to cover for potential losses before the fiscal year ends in March, said Tomoko Fujii, Tokyo-based head of economics and strategy at Bank of America Corp.
``There's still an upside risk to the yen,'' Fujii said, confirming a research note dated yesterday. ``Japanese financial institutions are not very profitable. Domestic equities are weak, which means no valuation gain cushion. In that case, there could be serious repatriation pressure.''
To contact the reporters on this story: Stanley White in Tokyo at Swhite28@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- The yen surged, breaching 100 per dollar for the first time in six months, after a plunge in Asian stocks prompted investors to reduce holdings of higher-yielding assets funded in Japan.
The currency also advanced to the strongest in three years versus the euro after the International Monetary Fund said the world economy is headed for a recession next year. Gains accelerated as benchmark stock indexes in Japan, Hong Kong, South Korea, Indonesia, Singapore, Taiwan and Thailand slid more than 5 percent.
``Lingering fears about the health of financial sectors in the U.S. and Europe and concerns over a global recession should continue to underpin the yen,'' said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. ``We're far from out of the woods and any restoration of investor confidence will take time.''
Japan's currency rose to 100.23 per dollar at 7:53 a.m. in London from 101.47 late yesterday in New York. It reached 99.61, the highest since April 1. The yen climbed to 136.08 against the euro from 137.89. It reached 135.04, the strongest since September 2005. The dollar fell to $1.3634 per euro from $1.3588.
Against the Australian dollar, the yen rose to 68.74 from 72.84 late yesterday in Asia. It also advanced to 61.65 per New Zealand dollar from 64.11. The Australian dollar fell as low as 67.49 U.S. cents, the weakest level since September 2003. New Zealand's dollar weakened 2.8 percent to 61.15 U.S. cents.
Stocks Slide
The yen advanced as Asian money market rates rose, reflecting the reluctance among banks to lend as finance companies fail. The Hong Kong's three-month interbank offered rate rose 29 basis points to 4.15 percent, even as Hong Kong's central bank slashed the rate at which it lends to banks.
South Korea's won slid 5 percent to 1,395 against the greenback, the lowest in a decade, as a seizure in global credit markets forced companies to turn to currency exchanges to meet their dollar needs. Asia's 10 most-active currencies outside of Japan all declined today.
The region's shares also tumbled, extending a global sell- off that's erased more than $5 trillion of market value in the past week. The world economy is headed for a recession next year, with U.S. growth forecast at 0.1 percent, according to International Monetary Fund reports published this week.
The stocks rout deterred carry trades, in which investors get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. Benchmark rates are 0.5 percent in Japan, 4.25 percent in Europe, 5 percent in the U.K., 6 percent in Australia and 7.5 percent in New Zealand.
The risk of a carry trade is that currency moves wipe out profits. Implied volatility on one-month dollar-yen options soared to 25.56 percent, the highest since October 1998, from 21.79 percent yesterday.
U.S. Rates
The dollar may weaken further against Japan's currency as the Federal Reserve signals it's prepared to lower interest rates. Philadelphia Fed President Charles Plosser speaks on monetary policy at 7:45 a.m. in New York today.
The Fed ``will need to consider whether the current stance of policy remains appropriate,'' Chairman Ben S. Bernanke said yesterday after the U.S. central bank decided to buy commercial paper and help revive the corporate debt market.
``The dollar is likely to edge lower,'' said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co., Japan's fifth-largest broker by revenue. ``A possible Fed rate cut highlights how dire the situation is in the U.S. The fundamentals simply aren't sound.''
Futures on the Chicago Board of Trade showed yesterday a 68 percent chance the Fed will lower its 2 percent target lending rate by a half-percentage point at its Oct. 29 policy meeting, up from 42 percent a day earlier.
U.K. Bank Plan
The British pound rose after Prime Minister Gordon Brown's government said it will inject about 50 billion pounds ($87 billion) into the nation's banks.
The U.K. government nationalized Northern Rock Plc and Bradford & Bingley Plc to save them from collapse this year. The pound climbed $1.7513 from $1.7455 yesterday. It advanced to 77.41 pence per euro from 77.87.
The Bank of England will reduce its 5 percent benchmark rate by a quarter-percentage point tomorrow, according to the median forecast of economists surveyed by Bloomberg News. Finance ministers and central bankers from the Group of Seven nations will meet in Washington the next day to discuss the deepening financial crisis.
G-7 Meeting
The ministers will discuss stabilizing global stock markets, said a Japanese official who briefed reporters on condition of anonymity. Joint action on currencies and interest rates should depend on economic conditions in member countries, the official said. The G-7 includes Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
UBS AG recommends investors buy the dollar at 102.40 yen, with a target of 107, as governments work to restore confidence in the global financial system.
``The market has reasons to respond positively to efforts from officials in Europe and the U.S.,'' wrote analysts led by Benedikt Germanier, a Stamford, Connecticut-based currency strategist at UBS, in a research note yesterday. ``Efforts may soon reach a critical level in our view, helping investors' sentiment.''
The yen also may gain as Japanese investors repatriate funds to cover for potential losses before the fiscal year ends in March, said Tomoko Fujii, Tokyo-based head of economics and strategy at Bank of America Corp.
``There's still an upside risk to the yen,'' Fujii said, confirming a research note dated yesterday. ``Japanese financial institutions are not very profitable. Domestic equities are weak, which means no valuation gain cushion. In that case, there could be serious repatriation pressure.''
To contact the reporters on this story: Stanley White in Tokyo at Swhite28@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
Read more...
Australian Dollar Falls to Five-Year Low Against Greenback, Yen
By Jacob Greber and Candice Zachariahs
Oct. 8 (Bloomberg) -- The Australian dollar slumped to its lowest level in more than five years against the greenback and the yen as investors sold higher-yielding assets on concern frozen credit markets will stall the global economy.
The local dollar tumbled for the 11th day against the U.S. currency, losing more than 18 percent over the period, on concern investors will reduce bets on Australian and New Zealand assets funded by loans in countries where borrowing costs are lower. Increased volatility and a rout in stock markets is damping the appeal of the so-called carry trades.
Markets are ``are pricing for the apocalypse,'' said Peter Pontikis, an economist at Suncorp-Metway Ltd. in Brisbane. ``The fear factor is really out there. This isn't rational. We're in the zone between the authorization of the U.S. bailout package and when the actual liquification of the U.S. banking system comes into effect.''
The Australian dollar fell as low as 67.49 U.S. cents, the weakest level since September 2003, before trading at 68.18 cents as of 5:55 p.m. in Sydney, from 71.50 cents in late Asian trading yesterday. The so-called Aussie slid 5.8 percent to 68.62 yen, after touching 67.32, the lowest since January 2003.
New Zealand's dollar dropped 2.3 percent to 61.48 U.S. cents from 62.92 cents late in Asia yesterday. It slid 4.2 percent to 61.42 yen.
Global Recession
The global economy is headed for a recession next year as the U.S. expansion almost grinds to a halt, the International Monetary Fund forecast before a Group-of-Seven meeting this week. Australian home-loan approvals dropped to a seven-year low in August, according to government figures reported today.
Shares tumbled across the Asia-Pacific region today, extending a global sell-off that's wiped out more than $5 trillion of market value in the past week. The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to a record 53.68 yesterday.
``The Aussie is a barometer of global financial market sentiment so it takes a particularly hard hit,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. The Australian dollar has lost 16 percent since the beginning of October and more than 30 percent since hitting a 25-year high on July 16.
The Australian and New Zealand currencies are popular targets for the carry trade, where investors seek higher returns on investments funded in countries with lower borrowing costs. The risk is that exchange-rate fluctuations erase profits.
Benchmark interest rates are 6 percent in Australia and 7.5 percent in New Zealand. That compares with 0.5 percent in Japan and 2 percent for the U.S. benchmark
Bonds Gain
Australian 10-year bonds rose for a fifth day. The yield on the 5.25 percent security due March 2019 fell 13 basis points to 4.93 percent, according to data compiled by Bloomberg. The price gained 1.052, or A$10.52 per A$1,000 face amount, to 102.575. A basis point is 0.01 percentage point.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, dropped to 6.570 percent today from 6.740 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- The Australian dollar slumped to its lowest level in more than five years against the greenback and the yen as investors sold higher-yielding assets on concern frozen credit markets will stall the global economy.
The local dollar tumbled for the 11th day against the U.S. currency, losing more than 18 percent over the period, on concern investors will reduce bets on Australian and New Zealand assets funded by loans in countries where borrowing costs are lower. Increased volatility and a rout in stock markets is damping the appeal of the so-called carry trades.
Markets are ``are pricing for the apocalypse,'' said Peter Pontikis, an economist at Suncorp-Metway Ltd. in Brisbane. ``The fear factor is really out there. This isn't rational. We're in the zone between the authorization of the U.S. bailout package and when the actual liquification of the U.S. banking system comes into effect.''
The Australian dollar fell as low as 67.49 U.S. cents, the weakest level since September 2003, before trading at 68.18 cents as of 5:55 p.m. in Sydney, from 71.50 cents in late Asian trading yesterday. The so-called Aussie slid 5.8 percent to 68.62 yen, after touching 67.32, the lowest since January 2003.
New Zealand's dollar dropped 2.3 percent to 61.48 U.S. cents from 62.92 cents late in Asia yesterday. It slid 4.2 percent to 61.42 yen.
Global Recession
The global economy is headed for a recession next year as the U.S. expansion almost grinds to a halt, the International Monetary Fund forecast before a Group-of-Seven meeting this week. Australian home-loan approvals dropped to a seven-year low in August, according to government figures reported today.
Shares tumbled across the Asia-Pacific region today, extending a global sell-off that's wiped out more than $5 trillion of market value in the past week. The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to a record 53.68 yesterday.
``The Aussie is a barometer of global financial market sentiment so it takes a particularly hard hit,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. The Australian dollar has lost 16 percent since the beginning of October and more than 30 percent since hitting a 25-year high on July 16.
The Australian and New Zealand currencies are popular targets for the carry trade, where investors seek higher returns on investments funded in countries with lower borrowing costs. The risk is that exchange-rate fluctuations erase profits.
Benchmark interest rates are 6 percent in Australia and 7.5 percent in New Zealand. That compares with 0.5 percent in Japan and 2 percent for the U.S. benchmark
Bonds Gain
Australian 10-year bonds rose for a fifth day. The yield on the 5.25 percent security due March 2019 fell 13 basis points to 4.93 percent, according to data compiled by Bloomberg. The price gained 1.052, or A$10.52 per A$1,000 face amount, to 102.575. A basis point is 0.01 percentage point.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, dropped to 6.570 percent today from 6.740 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
Read more...
Crude Oil Falls to 8-Month Low on Demand Slump, Credit Turmoil
By Nesa Subrahmaniyan and Grant Smith
Oct. 8 (Bloomberg) -- Crude oil fell to a 10-month low as the worsening financial crisis looked set to constrain consumption in the U.S. and other developed nations.
Oil dropped to its lowest since Dec. 6 as global stock markets tumbled on concern the credit crisis will topple more banks and slowing growth will cut demand. U.S. gasoline demand dropped 9.5 percent last week, according to MasterCard Inc., and falling consumption prompted the Energy Department to cut its oil price forecasts yesterday.
``Demand destruction is prevalent in developed countries with consumption falling at about 3 to 4 percent,'' said Tobias Merath, a commodity analyst at Credit Suisse Group in Singapore. ``The credit crunch is forcing traders to de-leverage their positions as they have no access to credit.''
Crude oil for November delivery fell as much as $4.01, or 4.5 percent, to $86.05 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $86.51 a barrel at 9:24 a.m. in London.
Futures have declined 40 percent from the record $147.27 reached July 11. Yesterday, crude oil rose $2.25 to $90.06 a barrel in New York.
European and Asian stocks plunged, driving the Nikkei 225 Stock Average to its biggest drop since October 1987. The MSCI World Index lost 2.8 percent to 1,010.85 at 8:50 a.m. in London.
The Standard & Poor's 500 Index slid 60.66 points, or 5.7 percent yesterday, to 996.23, extending its 2008 tumble to 32 percent in the market's worst yearly slump since 1937.
Demand Slump
Credit ``conditions are unlikely to improve significantly in the next few weeks or months, commodities prices may very well remain under pressure in the near future,'' Goldman Sachs Group Inc. commodity research analysts including Giovanni Serio and Jeffrey Currie said in a report yesterday.
U.S. motorists bought an average 8.625 million barrels of gasoline a day in the week ended Oct. 3, down from 9.536 million a year earlier, MasterCard, the second-biggest credit-card company, said yesterday in its SpendingPulse report. It was the 24th consecutive weekly decline, and the biggest since September 2005, after Hurricane Katrina sent pump prices to records.
The drop comes as tightening credit markets, bank failures and rising unemployment claims may indicate that the U.S. is entering a recession, curtailing fuel consumption.
West Texas Intermediate crude oil, the U.S. benchmark, will average $112 a barrel in 2008, the Energy Department said in its monthly Short-Term Energy Outlook. The forecast is down 3.3 percent from $115.81 a barrel estimated last month, the report from the department's Energy Information Administration showed.
OECD Demand
U.S. oil demand will average 19.8 million barrels a day this year, down 830,000 barrels a day from 2007. This year's demand forecast was reduced 270,000 barrels from last month.
Demand among the 30-member Organization for Economic Cooperation and Development will fall 1.07 million barrels to 48.07 million barrels a day, the Energy Department said.
The OECD doesn't include developing countries such as Brazil, China and India. Consumption by non-OECD countries will rise 1.4 million barrels a day to 38.07 million barrels.
``Problems in the credit market are impeding the ability to build or hold inventory, placing excessive downward pressure on near-term prices,'' the Goldman analysts said.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Crude oil fell to a 10-month low as the worsening financial crisis looked set to constrain consumption in the U.S. and other developed nations.
Oil dropped to its lowest since Dec. 6 as global stock markets tumbled on concern the credit crisis will topple more banks and slowing growth will cut demand. U.S. gasoline demand dropped 9.5 percent last week, according to MasterCard Inc., and falling consumption prompted the Energy Department to cut its oil price forecasts yesterday.
``Demand destruction is prevalent in developed countries with consumption falling at about 3 to 4 percent,'' said Tobias Merath, a commodity analyst at Credit Suisse Group in Singapore. ``The credit crunch is forcing traders to de-leverage their positions as they have no access to credit.''
Crude oil for November delivery fell as much as $4.01, or 4.5 percent, to $86.05 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $86.51 a barrel at 9:24 a.m. in London.
Futures have declined 40 percent from the record $147.27 reached July 11. Yesterday, crude oil rose $2.25 to $90.06 a barrel in New York.
European and Asian stocks plunged, driving the Nikkei 225 Stock Average to its biggest drop since October 1987. The MSCI World Index lost 2.8 percent to 1,010.85 at 8:50 a.m. in London.
The Standard & Poor's 500 Index slid 60.66 points, or 5.7 percent yesterday, to 996.23, extending its 2008 tumble to 32 percent in the market's worst yearly slump since 1937.
Demand Slump
Credit ``conditions are unlikely to improve significantly in the next few weeks or months, commodities prices may very well remain under pressure in the near future,'' Goldman Sachs Group Inc. commodity research analysts including Giovanni Serio and Jeffrey Currie said in a report yesterday.
U.S. motorists bought an average 8.625 million barrels of gasoline a day in the week ended Oct. 3, down from 9.536 million a year earlier, MasterCard, the second-biggest credit-card company, said yesterday in its SpendingPulse report. It was the 24th consecutive weekly decline, and the biggest since September 2005, after Hurricane Katrina sent pump prices to records.
The drop comes as tightening credit markets, bank failures and rising unemployment claims may indicate that the U.S. is entering a recession, curtailing fuel consumption.
West Texas Intermediate crude oil, the U.S. benchmark, will average $112 a barrel in 2008, the Energy Department said in its monthly Short-Term Energy Outlook. The forecast is down 3.3 percent from $115.81 a barrel estimated last month, the report from the department's Energy Information Administration showed.
OECD Demand
U.S. oil demand will average 19.8 million barrels a day this year, down 830,000 barrels a day from 2007. This year's demand forecast was reduced 270,000 barrels from last month.
Demand among the 30-member Organization for Economic Cooperation and Development will fall 1.07 million barrels to 48.07 million barrels a day, the Energy Department said.
The OECD doesn't include developing countries such as Brazil, China and India. Consumption by non-OECD countries will rise 1.4 million barrels a day to 38.07 million barrels.
``Problems in the credit market are impeding the ability to build or hold inventory, placing excessive downward pressure on near-term prices,'' the Goldman analysts said.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
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Platinum Futures Drop as Equities Slump Prompts Moves Into Cash
By Dave McCombs
Oct. 8 (Bloomberg) -- Platinum futures in Tokyo fell for the eighth time in 10 days as the Japanese currency traded near a six-month high versus the dollar and Asian stocks plunged, prompting some investors to move money out of metals into cash.
The futures, down 58 percent from the record set in March, have plunged as declining equities signaled expectations demand for the metal will drop. A stronger Japanese currency reduces the appeal of yen-denominated futures for the metal, which trades globally in dollars.
``After the very weak Asian equity market and the stronger yen, we are seeing selling'' on the Tokyo Commodity Exchange, Wakako Harada, a trader at Mitsubishi Corp. in Tokyo, said today by phone.
Platinum for August delivery dropped 4.4 percent to 3,100 yen a gram ($952 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most-active contract on Oct. 6 sank to 3,033 yen a gram, the lowest since July 15, 2005.
Metal for immediate delivery shed $46 to $968.50 an ounce at 11:07 a.m. in Tokyo, a 4.5 percent drop from New York yesterday.
Declines were exacerbated as the difference between bid and offer prices widened, a sign that fewer market participants are trading the metal, said Harada. Some participants are reluctant to trade because of concern that some banks may default on futures contracts, she said.
``It's getting worse,'' Harada said. ``The plunge in equities prices for some banks shows we cannot trust some of their credit ratings.''
Open interest, the total outstanding futures contracts, has fallen to half the average for this year, based on the 15-day moving average. Open interest is at 19,686 contracts on average for the past 15 days, compared with the one-year average of 33,318 contracts.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net
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Oct. 8 (Bloomberg) -- Platinum futures in Tokyo fell for the eighth time in 10 days as the Japanese currency traded near a six-month high versus the dollar and Asian stocks plunged, prompting some investors to move money out of metals into cash.
The futures, down 58 percent from the record set in March, have plunged as declining equities signaled expectations demand for the metal will drop. A stronger Japanese currency reduces the appeal of yen-denominated futures for the metal, which trades globally in dollars.
``After the very weak Asian equity market and the stronger yen, we are seeing selling'' on the Tokyo Commodity Exchange, Wakako Harada, a trader at Mitsubishi Corp. in Tokyo, said today by phone.
Platinum for August delivery dropped 4.4 percent to 3,100 yen a gram ($952 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most-active contract on Oct. 6 sank to 3,033 yen a gram, the lowest since July 15, 2005.
Metal for immediate delivery shed $46 to $968.50 an ounce at 11:07 a.m. in Tokyo, a 4.5 percent drop from New York yesterday.
Declines were exacerbated as the difference between bid and offer prices widened, a sign that fewer market participants are trading the metal, said Harada. Some participants are reluctant to trade because of concern that some banks may default on futures contracts, she said.
``It's getting worse,'' Harada said. ``The plunge in equities prices for some banks shows we cannot trust some of their credit ratings.''
Open interest, the total outstanding futures contracts, has fallen to half the average for this year, based on the 15-day moving average. Open interest is at 19,686 contracts on average for the past 15 days, compared with the one-year average of 33,318 contracts.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net
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Gold Jumps to One-Week High After Asian Stock Markets Plunge
By Feiwen Rong
Oct. 8 (Bloomberg) -- Gold jumped to the highest in a week after Asian stocks plunged, driving investors to seek the bullion as a haven asset amid a deepening credit crisis.
Japan's Nikkei 225 Stock Average posted its biggest drop since October 1987 and Indonesia halted stock trading after the benchmark index tumbled 10 percent. The MSCI Asia Pacific Index slumped 7.1 percent to 91.70 as of 2:51 p.m. in Singapore, on concern the credit will topple more banks and slowing growth will cut demand for region's exports.
``It's a crisis and people are panicking now,'' Wallace Ng, precious metals trader at Fortis Bank, said by phone from Hong Kong today. ``Investors really want to seek a safe haven as equities and foreign exchange rates dropped.''
Bullion for immediate delivery jumped $15.43, or 1.7 percent, to $902.53 an ounce, the highest since Sept. 30, before trading at $902.27 an ounce at 2:46 p.m. in Singapore. Silver for immediate delivery was up 1.4 percent at $11.74 an ounce.
To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Oct. 8 (Bloomberg) -- Gold jumped to the highest in a week after Asian stocks plunged, driving investors to seek the bullion as a haven asset amid a deepening credit crisis.
Japan's Nikkei 225 Stock Average posted its biggest drop since October 1987 and Indonesia halted stock trading after the benchmark index tumbled 10 percent. The MSCI Asia Pacific Index slumped 7.1 percent to 91.70 as of 2:51 p.m. in Singapore, on concern the credit will topple more banks and slowing growth will cut demand for region's exports.
``It's a crisis and people are panicking now,'' Wallace Ng, precious metals trader at Fortis Bank, said by phone from Hong Kong today. ``Investors really want to seek a safe haven as equities and foreign exchange rates dropped.''
Bullion for immediate delivery jumped $15.43, or 1.7 percent, to $902.53 an ounce, the highest since Sept. 30, before trading at $902.27 an ounce at 2:46 p.m. in Singapore. Silver for immediate delivery was up 1.4 percent at $11.74 an ounce.
To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Soybeans Extend Gain as 13-Month Low May Attract Chinese Buyers
By Jae Hur
Oct. 8 (Bloomberg) -- Soybeans advanced for a second day on speculation that China's purchases may rise after prices fell to a 13-month low and on optimism that emergency measures in the U.S. and Europe will revive economic growth and boost demand.
The oilseed gained as much as 6.8 percent today, corn climbed for the first time in 10 days and wheat advanced. China was said in early trade to place orders for about 5,000 soybean contracts for nearby delivery months, Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said. This is equal to about 680,000 metric tons.
``The grain market has been driven by growing concern over the global credit crisis,'' Shigemoto said. ``If the concern calms down, the fundamentals of the market will attract attention again.''
Soybeans for November delivery jumped as much as 63 cents to $9.89 bushel in after-hours electronic trading on the Chicago Board of Trade and were at $9.5525 as of 12:20 p.m. Singapore time. The oilseed earlier fell to $9.145, the lowest since Sept. 12, 2007. Futures reached a record $16.3675 on July 3.
The Standard & Poor's GSCI Index of 24 commodities rose 1.3 percent yesterday, gaining by the most in a week after the Federal Reserve said it will create a special fund to boost liquidity for debt that hundreds of companies use to finance payrolls and other cash needs. The gauge fell to an 11-month low on Oct. 6.
Chicago futures also gained after Argentine farmers began a protest outside congress yesterday to pressure the government to remove taxes and restrictions on exports of grains and beef.
Farmers Strike
Farmers withheld grains and beef in their fifth day of a strike set to end today. Argentine President Cristina Fernandez de Kirchner will tomorrow announce measures to help small farmers and producers hit by a drought.
The 14-day relative strength index, a gauge of momentum, has fallen below 30 since Oct. 2 for corn and soybeans, signaling prices may rise.
Corn for December delivery advanced as much as 15.5 cents, or 3.7 percent, to $4.325 a bushel after falling to $4.1275 a bushel, the lowest since Dec. 7. The contract was at $4.2875 by 12:39 p.m. Singapore time. Futures touched a record $7.9925 on June 27.
Wheat for December delivery rose as much as 16.25 cents, or 2.7 percent, to $6.195 a bushel and was at $6.1325 as of 12:40 p.m. in Singapore.
The contract gained 1.3 percent yesterday on speculation that U.S. export sales will rise after prices on Oct. 6 slumped to $5.88, the lowest since July 9, 2007. Futures reached a record $13.495 on Feb. 27.
In China, January-delivery soybeans on the Dalian Commodity Exchange fell as much as 5 percent to 3,461 yuan ($508) a metric ton, plunging by the daily limit for the third straight day. Corn for May delivery rose as much as 1.8 percent to 1,680 yuan and was at 1,666 yuan by the midday break.
To contact the reporter for this story: Jae Hur in Singapore at jhur1@bloomberg.net
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Oct. 8 (Bloomberg) -- Soybeans advanced for a second day on speculation that China's purchases may rise after prices fell to a 13-month low and on optimism that emergency measures in the U.S. and Europe will revive economic growth and boost demand.
The oilseed gained as much as 6.8 percent today, corn climbed for the first time in 10 days and wheat advanced. China was said in early trade to place orders for about 5,000 soybean contracts for nearby delivery months, Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said. This is equal to about 680,000 metric tons.
``The grain market has been driven by growing concern over the global credit crisis,'' Shigemoto said. ``If the concern calms down, the fundamentals of the market will attract attention again.''
Soybeans for November delivery jumped as much as 63 cents to $9.89 bushel in after-hours electronic trading on the Chicago Board of Trade and were at $9.5525 as of 12:20 p.m. Singapore time. The oilseed earlier fell to $9.145, the lowest since Sept. 12, 2007. Futures reached a record $16.3675 on July 3.
The Standard & Poor's GSCI Index of 24 commodities rose 1.3 percent yesterday, gaining by the most in a week after the Federal Reserve said it will create a special fund to boost liquidity for debt that hundreds of companies use to finance payrolls and other cash needs. The gauge fell to an 11-month low on Oct. 6.
Chicago futures also gained after Argentine farmers began a protest outside congress yesterday to pressure the government to remove taxes and restrictions on exports of grains and beef.
Farmers Strike
Farmers withheld grains and beef in their fifth day of a strike set to end today. Argentine President Cristina Fernandez de Kirchner will tomorrow announce measures to help small farmers and producers hit by a drought.
The 14-day relative strength index, a gauge of momentum, has fallen below 30 since Oct. 2 for corn and soybeans, signaling prices may rise.
Corn for December delivery advanced as much as 15.5 cents, or 3.7 percent, to $4.325 a bushel after falling to $4.1275 a bushel, the lowest since Dec. 7. The contract was at $4.2875 by 12:39 p.m. Singapore time. Futures touched a record $7.9925 on June 27.
Wheat for December delivery rose as much as 16.25 cents, or 2.7 percent, to $6.195 a bushel and was at $6.1325 as of 12:40 p.m. in Singapore.
The contract gained 1.3 percent yesterday on speculation that U.S. export sales will rise after prices on Oct. 6 slumped to $5.88, the lowest since July 9, 2007. Futures reached a record $13.495 on Feb. 27.
In China, January-delivery soybeans on the Dalian Commodity Exchange fell as much as 5 percent to 3,461 yuan ($508) a metric ton, plunging by the daily limit for the third straight day. Corn for May delivery rose as much as 1.8 percent to 1,680 yuan and was at 1,666 yuan by the midday break.
To contact the reporter for this story: Jae Hur in Singapore at jhur1@bloomberg.net
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Tin Slumps to Lowest in a Year; Nickel Plunges to 33-Month Low
By Glenys Sim
Oct. 8 (Bloomberg) -- Tin dropped to the lowest in over a year and nickel plummeted to a 33-month low on the London Metal Exchange as the credit crisis deepened, raising concerns that a slowdown in the global economy will curb demand for raw materials.
Copper plunged by the exchange-imposed daily limit for a third day in Shanghai as equities tumbled on concern more banks will topple as they run short of money. Japan's Nikkei 225 Stock Average dropped the most in over 20 years and Indonesia halted stock trading after the benchmark index slumped 10 percent.
``An economic slowdown will impact consumption for all metals,'' said Lin Yuhui, research manager at China International Futures Co. from Shenzhen today. ``People are just unwinding positions and exiting most markets.''
Tin, the best performer on the London Metal Exchange this year, dropped to a one-year low. The metal, used mainly in soldering, slumped 41 percent from a record $25,500 a metric ton reached May 15 and is down 8.1 percent this year.
Tin for delivery in three months fell 6.8 percent to $15,100 a ton at 2:19 p.m. Singapore time, the lowest since Sept. 19, 2007. Until the end of last week, tin was up for the year as stockpiles fell and China and Indonesia, the two biggest producers, curbed supplies.
Nickel, the worst exchange's worst performer this year, declined 2.8 percent to $13,801 a ton, the lowest since January 2006. The metal has fallen 47 percent this year as demand from the stainless steel industry, which accounts for two-thirds of total nickel use, weakened.
Copper Declines
Copper on the dropped as much as 4.4 percent to $5,380 a ton, the lowest intra-day level since Feb. 8, 2007. It traded at $5,420 at 2:32 p.m. Singapore time.
Copper for December delivery on the Shanghai Futures Exchange dropped by 2,920 yuan, or 6 percent, from the previous settlement price, to 45,720 yuan ($6,712) a metric ton when the exchange opened for trading at 9 a.m. local time.
``Heightened nervousness in global equity markets will put the base metals on the back foot,'' Mark Pervan, Australia & New Zealand Banking Group Ltd.'s head of commodity research wrote in an e-mail today.
A rising U.S. dollar will also discourage buying, Pervan said. The dollar index, a weighted measure against six major currencies including the euro, yen and pound, has risen 2.1 percent since the start of the month.
Among other LME-traded metals, aluminum slipped 1.8 percent to $2,251 a ton, zinc was down 0.3 percent at $1,545, and lead lost 2.6 percent to $1,588 as of 2:33 p.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Oct. 8 (Bloomberg) -- Tin dropped to the lowest in over a year and nickel plummeted to a 33-month low on the London Metal Exchange as the credit crisis deepened, raising concerns that a slowdown in the global economy will curb demand for raw materials.
Copper plunged by the exchange-imposed daily limit for a third day in Shanghai as equities tumbled on concern more banks will topple as they run short of money. Japan's Nikkei 225 Stock Average dropped the most in over 20 years and Indonesia halted stock trading after the benchmark index slumped 10 percent.
``An economic slowdown will impact consumption for all metals,'' said Lin Yuhui, research manager at China International Futures Co. from Shenzhen today. ``People are just unwinding positions and exiting most markets.''
Tin, the best performer on the London Metal Exchange this year, dropped to a one-year low. The metal, used mainly in soldering, slumped 41 percent from a record $25,500 a metric ton reached May 15 and is down 8.1 percent this year.
Tin for delivery in three months fell 6.8 percent to $15,100 a ton at 2:19 p.m. Singapore time, the lowest since Sept. 19, 2007. Until the end of last week, tin was up for the year as stockpiles fell and China and Indonesia, the two biggest producers, curbed supplies.
Nickel, the worst exchange's worst performer this year, declined 2.8 percent to $13,801 a ton, the lowest since January 2006. The metal has fallen 47 percent this year as demand from the stainless steel industry, which accounts for two-thirds of total nickel use, weakened.
Copper Declines
Copper on the dropped as much as 4.4 percent to $5,380 a ton, the lowest intra-day level since Feb. 8, 2007. It traded at $5,420 at 2:32 p.m. Singapore time.
Copper for December delivery on the Shanghai Futures Exchange dropped by 2,920 yuan, or 6 percent, from the previous settlement price, to 45,720 yuan ($6,712) a metric ton when the exchange opened for trading at 9 a.m. local time.
``Heightened nervousness in global equity markets will put the base metals on the back foot,'' Mark Pervan, Australia & New Zealand Banking Group Ltd.'s head of commodity research wrote in an e-mail today.
A rising U.S. dollar will also discourage buying, Pervan said. The dollar index, a weighted measure against six major currencies including the euro, yen and pound, has risen 2.1 percent since the start of the month.
Among other LME-traded metals, aluminum slipped 1.8 percent to $2,251 a ton, zinc was down 0.3 percent at $1,545, and lead lost 2.6 percent to $1,588 as of 2:33 p.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Philippine Banks Will Be Sheltered From Crisis, Investors Say
By Ian C. Sayson
Oct. 8 (Bloomberg) -- The global credit crisis, which has claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc., will have a ``minimal'' impact on Philippine banks, the nation's biggest investors said.
``We are confident in the sound macro fundamentals of the Philippine economy,'' Paul Joseph Garcia, president of the Fund Managers Association of the Philippines, said in a statement. Investors should ``exercise sobriety in this time of uncertainty,'' he said.
The association's 44 members manage at least 2 trillion pesos ($42 billion) in assets, according to Garcia, who is also chief investment officer of ING Investment Management Ltd.'s Manila unit. The group's members include mutual-fund companies and state pension funds.
The Philippine Stock Exchange Index has slumped 35 percent this year and is set for its biggest annual loss since 1997 amid concerns the deepening credit crisis will drag on global economic growth.
The credit turmoil, sparked by a U.S. housing slump, has caused $592 billion in writedowns and credit losses among banks worldwide and erased $4 trillion in global stock market value this month, Bloomberg data show.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net.
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Oct. 8 (Bloomberg) -- The global credit crisis, which has claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc., will have a ``minimal'' impact on Philippine banks, the nation's biggest investors said.
``We are confident in the sound macro fundamentals of the Philippine economy,'' Paul Joseph Garcia, president of the Fund Managers Association of the Philippines, said in a statement. Investors should ``exercise sobriety in this time of uncertainty,'' he said.
The association's 44 members manage at least 2 trillion pesos ($42 billion) in assets, according to Garcia, who is also chief investment officer of ING Investment Management Ltd.'s Manila unit. The group's members include mutual-fund companies and state pension funds.
The Philippine Stock Exchange Index has slumped 35 percent this year and is set for its biggest annual loss since 1997 amid concerns the deepening credit crisis will drag on global economic growth.
The credit turmoil, sparked by a U.S. housing slump, has caused $592 billion in writedowns and credit losses among banks worldwide and erased $4 trillion in global stock market value this month, Bloomberg data show.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net.
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Japan's Nikkei 225 Records 3rd-Biggest Drop; $250 Billion Lost
By Patrick Rial
Oct. 8 (Bloomberg) -- Japan's shares plunged, driving the Nikkei 225 Stock Average to its third-largest decline. The accelerating credit crisis prompted a sell-off that erased more than $250 billion in equity value.
Toyota Motor Corp., the world's second-largest carmaker, fell the most in 21 years after Nikko Citigroup Ltd. cut its rating. Mizuho Financial Group Inc. slid 7.7 percent as bankruptcies surged to the highest since May 2003. Elpida Memory Inc., the nation's largest computer memory maker, dropped to a record low as the yen strengthened to 100 against the dollar.
``It's capitulation,'' said Masafumi Oshiden, a Tokyo-based fund manager at BlackRock Inc., which oversees more than $1.4 trillion. ``There are lots of forced sellers. If you're a fund that's going bust you need to close out all your positions.''
The Nikkei 225 Stock Average sank 952.58, or 9.4 percent, to 9,203.32 at the close of trading in Tokyo, the steepest fall since a 15 percent drop in October 1987. The broader Topix index declined 78.60, or 8 percent, to 899.01, also the biggest loss in 21 years. Losses accelerated through the day as markets across Asia plummeted and Indonesia's exchange suspended trading.
The $250 billion in value erased from the main board of the Tokyo exchange was the most for a single day since at least 1989.
Toyota plunged 12 percent to 3,280 yen, the biggest slide since October 1987. Nikko Citigroup's Noriyuki Matsushima cut his rating to ``sell'' from ``buy,'' saying operating profit is likely to be 1.1 trillion yen ($10.9 billion) for the year ending in March, 31 percent below the company's estimate.
Interest Rate Cut?
The Nikkei newspaper said Toyota's operating profit may drop 40 percent this year to 1.3 trillion due to slowing demand for cars.
Isuzu Motors Ltd., Japan's largest maker of light-duty trucks, slid 14 percent to 192 yen, the steepest fall since August 2004. Hino Motors Ltd., which makes trucks for Toyota, dropped 14 percent to 295 yen after Nikko Citigroup also lowered the shares to ``hold'' from ``buy.''
``Investors are liquidating their stock positions because they are frightened of taking on any risks,'' said Takashi Miyazaki, who helps oversee $61 billion at Mitsubishi UFJ Asset Management Co. in Tokyo. ``The jury is still out on how bad this is going to turn out for the global economy.''
Mizuho, Japan's second-largest listed bank, dropped 7.7 percent to 361,000 yen. Sumitomo Mitsui Financial Group Inc., the third largest, declined 6.5 percent to 559,000 yen.
IMF Loss Estimate
Efforts by political leaders globally have done little to assuage concern that the credit crisis is intensifying. Federal Reserve Chairman Ben S. Bernanke signaled yesterday the central bank is ready to reduce interest rates, which sparked only a temporary rebound in U.S. markets. The Standard & Poor's 500 Index fell below 1,000 for the first time since 2003.
The UK will invest about 50 billion pounds ($87 billion) in the banking system, including the purchase of preferred shares. The Bank of England will also make at least 200 pounds available for bank loans, the Treasury said in a Regulatory News Service statement today. The worsening credit crisis has forced the U.K to join the U.S., Ireland, Iceland, Belgium and Spain in implementing bailout measures.
In a report on the financial system, the International Monetary Fund raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.
Nippon Steel Corp., the nation's largest maker of the alloy, dropped 12 percent to 281 yen after its chairman said in an interview with the Nikkei that global steel demand will slow. JFE Holdings Inc., the No. 2, fell 14 percent to 2,330 yen.
Slower Growth
Profits for companies on the main board of the Tokyo exchange are likely to fall 13 percent before taxes this year, according to a report from Shoji Hirakawa, chief equity strategist at UBS AG in Tokyo.
Profit concerns have started to drag on shares across industries. Elpida lost 14 percent to 1,236 yen, a record low. Kao Corp., which makes toiletries and other household goods, stumbled 6.7 percent to 2,580 yen. Seven & I Holdings Co., the nation's top retailer, slumped 11 percent to 2,630 yen.
Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc., yesterday lowered his 2009 growth forecast for Japan's economy to 0.5 percent from 1.3 percent, citing contagion from slower expansion overseas.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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Oct. 8 (Bloomberg) -- Japan's shares plunged, driving the Nikkei 225 Stock Average to its third-largest decline. The accelerating credit crisis prompted a sell-off that erased more than $250 billion in equity value.
Toyota Motor Corp., the world's second-largest carmaker, fell the most in 21 years after Nikko Citigroup Ltd. cut its rating. Mizuho Financial Group Inc. slid 7.7 percent as bankruptcies surged to the highest since May 2003. Elpida Memory Inc., the nation's largest computer memory maker, dropped to a record low as the yen strengthened to 100 against the dollar.
``It's capitulation,'' said Masafumi Oshiden, a Tokyo-based fund manager at BlackRock Inc., which oversees more than $1.4 trillion. ``There are lots of forced sellers. If you're a fund that's going bust you need to close out all your positions.''
The Nikkei 225 Stock Average sank 952.58, or 9.4 percent, to 9,203.32 at the close of trading in Tokyo, the steepest fall since a 15 percent drop in October 1987. The broader Topix index declined 78.60, or 8 percent, to 899.01, also the biggest loss in 21 years. Losses accelerated through the day as markets across Asia plummeted and Indonesia's exchange suspended trading.
The $250 billion in value erased from the main board of the Tokyo exchange was the most for a single day since at least 1989.
Toyota plunged 12 percent to 3,280 yen, the biggest slide since October 1987. Nikko Citigroup's Noriyuki Matsushima cut his rating to ``sell'' from ``buy,'' saying operating profit is likely to be 1.1 trillion yen ($10.9 billion) for the year ending in March, 31 percent below the company's estimate.
Interest Rate Cut?
The Nikkei newspaper said Toyota's operating profit may drop 40 percent this year to 1.3 trillion due to slowing demand for cars.
Isuzu Motors Ltd., Japan's largest maker of light-duty trucks, slid 14 percent to 192 yen, the steepest fall since August 2004. Hino Motors Ltd., which makes trucks for Toyota, dropped 14 percent to 295 yen after Nikko Citigroup also lowered the shares to ``hold'' from ``buy.''
``Investors are liquidating their stock positions because they are frightened of taking on any risks,'' said Takashi Miyazaki, who helps oversee $61 billion at Mitsubishi UFJ Asset Management Co. in Tokyo. ``The jury is still out on how bad this is going to turn out for the global economy.''
Mizuho, Japan's second-largest listed bank, dropped 7.7 percent to 361,000 yen. Sumitomo Mitsui Financial Group Inc., the third largest, declined 6.5 percent to 559,000 yen.
IMF Loss Estimate
Efforts by political leaders globally have done little to assuage concern that the credit crisis is intensifying. Federal Reserve Chairman Ben S. Bernanke signaled yesterday the central bank is ready to reduce interest rates, which sparked only a temporary rebound in U.S. markets. The Standard & Poor's 500 Index fell below 1,000 for the first time since 2003.
The UK will invest about 50 billion pounds ($87 billion) in the banking system, including the purchase of preferred shares. The Bank of England will also make at least 200 pounds available for bank loans, the Treasury said in a Regulatory News Service statement today. The worsening credit crisis has forced the U.K to join the U.S., Ireland, Iceland, Belgium and Spain in implementing bailout measures.
In a report on the financial system, the International Monetary Fund raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.
Nippon Steel Corp., the nation's largest maker of the alloy, dropped 12 percent to 281 yen after its chairman said in an interview with the Nikkei that global steel demand will slow. JFE Holdings Inc., the No. 2, fell 14 percent to 2,330 yen.
Slower Growth
Profits for companies on the main board of the Tokyo exchange are likely to fall 13 percent before taxes this year, according to a report from Shoji Hirakawa, chief equity strategist at UBS AG in Tokyo.
Profit concerns have started to drag on shares across industries. Elpida lost 14 percent to 1,236 yen, a record low. Kao Corp., which makes toiletries and other household goods, stumbled 6.7 percent to 2,580 yen. Seven & I Holdings Co., the nation's top retailer, slumped 11 percent to 2,630 yen.
Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc., yesterday lowered his 2009 growth forecast for Japan's economy to 0.5 percent from 1.3 percent, citing contagion from slower expansion overseas.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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Asian Stocks Plunge on Credit Concern; Nikkei Average Tumbles
By Chua Kong Ho and Rebecca Keenan
Oct. 8 (Bloomberg) -- Asian stocks tumbled, driving the Nikkei 225 Stock Average to its biggest drop since October 1987, and U.S. futures fell on concern the credit crisis will topple more banks and slowing growth will cut demand for exports.
Indonesia halted stock trading after the benchmark index tumbled 10 percent. Mitsubishi UFJ Financial Group Inc. dropped 5.9 percent as the International Monetary Fund said institutions may need $675 billion in fresh capital and as the cost of protecting Asia-Pacific bonds from default climbed. Toyota Motor Corp. slumped 12 percent after Nikkei English News said profit may drop and after the dollar slumped versus the yen.
``It is capitulation,'' said Hans Kunnen, head of investment market research at Colonial First State Global Management, which manages $128 billion. ``It is across-the-board fear that economic conditions will get seriously worse.''
The MSCI Asia Pacific Index fell 7 percent to 91.79 as of 3:20 p.m. in Tokyo, bringing its decline this year to 42 percent. The measure is set for its lowest close since April 2, 1990, when Japan's asset bubble was deflating. Financial stocks contributed the most to the index's drop.
Japan's Nikkei 225 Stock Average lost 9.4 percent to 9,203.32, the biggest plunge since global markets crashed in October 1987. The Hang Seng slumped 5.6 percent as Hong Kong's monetary authority cut interest rates in an effort to keep the credit crisis from spreading.
Australia's S&P/ASX 200 Index declined 5 percent as consumer confidence fell the most in two years. Shares dropped across Asia, extending a global sell-off that has wiped out more than $5 trillion of market value in the past week.
Global Rout
Indonesia's trading halt, the first since September 2002 when a bomb blast at the stock exchange killed 15 people, is the latest official measure to stem the stock-market rout.
Australia's central bank yesterday cut interest rates by the most since 1992, while Federal Reserve Chairman Ben S. Bernanke signaled he's also ready to reduce borrowing costs. The U.K. is preparing a rescue package for British banks which includes cash injections, people familiar with the plan said.
The efforts have done little to assuage concerns that the credit crisis will claim more institutions. Standard & Poor's 500 futures dropped 2.2 percent today. Financial companies dragged the index down by 5.7 percent yesterday.
``The panic selling continues,'' said Yoo Byung Ok, who oversees the equivalent of $3 billion at Mirae Asset Investments Co. in Seoul. ``The plans for propping up the markets aren't having an effect.''
Lower Growth Forecast
The cost of protecting bonds from default increased, with the Markit iTraxx Japan index of credit-default swaps rising 7.5 basis points to 201.5, according to prices from Credit Suisse Group. The dollar dipped below 100 against the yen for the first time since April 1. Treasuries were little changed, with yields near a three-week low.
Mitsubishi UFJ, Japan's biggest bank, slumped 5.9 percent to 763 yen. National Australia Bank Ltd., the nation's largest bank, sank 6.4 percent to A$24.35.
The IMF raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.
`Nowhere To Hide'
``We are talking about a global recession in the offing,'' said Jason Chong, who oversees $1.6 billion as chief investment officer at UOB-OSK Asset Management in Kuala Lumpur. ``There's really nowhere to hide as far as investing is concerned.''
HSBC Holdings Plc, Europe's largest bank, dropped 2.6 percent to HK$117.40 in Hong Kong. The base rate for banks in the city will drop to 2.5 percent from 3.5 percent tomorrow, based on the U.S. benchmark target rate plus 50 basis points, the Hong Kong Monetary Authority said today.
Toyota, the world's second-largest automaker, fell 6.7 percent to 3,460 yen. Operating profit may drop 40 percent to about 1.3 trillion yen ($12.8 billion), or 300 billion yen less than the company projected, the Nikkei newspaper said.
Honda Motor dropped 6.2 percent to 2,410 yen. Isuzu Motors Ltd., Japan's largest maker of light-duty trucks, plunged 11 percent to 199 yen.
Commodities Slump
UBS AG reduced its estimate for sales growth at Japanese companies to 2 percent from 5 percent and predicted recurring profit will decline 12.8 percent due to the global slowdown. Goldman, Sachs & Co. cut its estimate for Japan's growth next year to 0.5 percent from 1.3 percent.
Alumina Ltd., which owns a mining venture with Alcoa Inc., tumbled 16 percent to A$2.50 in Sydney, the most since January 2008. Alcoa reported a worse-than-expected earnings and cut its forecast for aluminum demand growth.
Resources stocks also fell as oil and metals prices declined on concern demand will slow. BHP Billiton Ltd., the world's largest mining company, declined 5.7 percent to A$29.90. Rio Tinto Group fell 7.6 percent to A$81.12. Cnooc Ltd., China's largest offshore oil explorer, fell 12 percent to HK$6.65.
Oil futures in New York declined as much as 1.2 percent in after-hours trading. Futures have declined 39 percent from their July 11 record. Copper on the London Metal Exchange slumped 4.4 percent in Asian trading hours.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net.
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Oct. 8 (Bloomberg) -- Asian stocks tumbled, driving the Nikkei 225 Stock Average to its biggest drop since October 1987, and U.S. futures fell on concern the credit crisis will topple more banks and slowing growth will cut demand for exports.
Indonesia halted stock trading after the benchmark index tumbled 10 percent. Mitsubishi UFJ Financial Group Inc. dropped 5.9 percent as the International Monetary Fund said institutions may need $675 billion in fresh capital and as the cost of protecting Asia-Pacific bonds from default climbed. Toyota Motor Corp. slumped 12 percent after Nikkei English News said profit may drop and after the dollar slumped versus the yen.
``It is capitulation,'' said Hans Kunnen, head of investment market research at Colonial First State Global Management, which manages $128 billion. ``It is across-the-board fear that economic conditions will get seriously worse.''
The MSCI Asia Pacific Index fell 7 percent to 91.79 as of 3:20 p.m. in Tokyo, bringing its decline this year to 42 percent. The measure is set for its lowest close since April 2, 1990, when Japan's asset bubble was deflating. Financial stocks contributed the most to the index's drop.
Japan's Nikkei 225 Stock Average lost 9.4 percent to 9,203.32, the biggest plunge since global markets crashed in October 1987. The Hang Seng slumped 5.6 percent as Hong Kong's monetary authority cut interest rates in an effort to keep the credit crisis from spreading.
Australia's S&P/ASX 200 Index declined 5 percent as consumer confidence fell the most in two years. Shares dropped across Asia, extending a global sell-off that has wiped out more than $5 trillion of market value in the past week.
Global Rout
Indonesia's trading halt, the first since September 2002 when a bomb blast at the stock exchange killed 15 people, is the latest official measure to stem the stock-market rout.
Australia's central bank yesterday cut interest rates by the most since 1992, while Federal Reserve Chairman Ben S. Bernanke signaled he's also ready to reduce borrowing costs. The U.K. is preparing a rescue package for British banks which includes cash injections, people familiar with the plan said.
The efforts have done little to assuage concerns that the credit crisis will claim more institutions. Standard & Poor's 500 futures dropped 2.2 percent today. Financial companies dragged the index down by 5.7 percent yesterday.
``The panic selling continues,'' said Yoo Byung Ok, who oversees the equivalent of $3 billion at Mirae Asset Investments Co. in Seoul. ``The plans for propping up the markets aren't having an effect.''
Lower Growth Forecast
The cost of protecting bonds from default increased, with the Markit iTraxx Japan index of credit-default swaps rising 7.5 basis points to 201.5, according to prices from Credit Suisse Group. The dollar dipped below 100 against the yen for the first time since April 1. Treasuries were little changed, with yields near a three-week low.
Mitsubishi UFJ, Japan's biggest bank, slumped 5.9 percent to 763 yen. National Australia Bank Ltd., the nation's largest bank, sank 6.4 percent to A$24.35.
The IMF raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.
`Nowhere To Hide'
``We are talking about a global recession in the offing,'' said Jason Chong, who oversees $1.6 billion as chief investment officer at UOB-OSK Asset Management in Kuala Lumpur. ``There's really nowhere to hide as far as investing is concerned.''
HSBC Holdings Plc, Europe's largest bank, dropped 2.6 percent to HK$117.40 in Hong Kong. The base rate for banks in the city will drop to 2.5 percent from 3.5 percent tomorrow, based on the U.S. benchmark target rate plus 50 basis points, the Hong Kong Monetary Authority said today.
Toyota, the world's second-largest automaker, fell 6.7 percent to 3,460 yen. Operating profit may drop 40 percent to about 1.3 trillion yen ($12.8 billion), or 300 billion yen less than the company projected, the Nikkei newspaper said.
Honda Motor dropped 6.2 percent to 2,410 yen. Isuzu Motors Ltd., Japan's largest maker of light-duty trucks, plunged 11 percent to 199 yen.
Commodities Slump
UBS AG reduced its estimate for sales growth at Japanese companies to 2 percent from 5 percent and predicted recurring profit will decline 12.8 percent due to the global slowdown. Goldman, Sachs & Co. cut its estimate for Japan's growth next year to 0.5 percent from 1.3 percent.
Alumina Ltd., which owns a mining venture with Alcoa Inc., tumbled 16 percent to A$2.50 in Sydney, the most since January 2008. Alcoa reported a worse-than-expected earnings and cut its forecast for aluminum demand growth.
Resources stocks also fell as oil and metals prices declined on concern demand will slow. BHP Billiton Ltd., the world's largest mining company, declined 5.7 percent to A$29.90. Rio Tinto Group fell 7.6 percent to A$81.12. Cnooc Ltd., China's largest offshore oil explorer, fell 12 percent to HK$6.65.
Oil futures in New York declined as much as 1.2 percent in after-hours trading. Futures have declined 39 percent from their July 11 record. Copper on the London Metal Exchange slumped 4.4 percent in Asian trading hours.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net.
Read more...
HSBC, RBS Face Financing Double Whammy as Rates Rise
By Ben Livesey and Shelley Smith
Oct. 8 (Bloomberg) -- HSBC Holdings Plc, Royal Bank of Scotland Group Plc and the biggest U.K. banks face the most debt coming due in at least 10 years as the credit market seizure raises borrowing costs to the highest on record.
The six largest British banks have 54 billion pounds ($95 billion) of debt to refinance by April, triple the amount of the year-ago period, according to data compiled by Bloomberg. HSBC, the U.K.'s biggest bank, and RBS each have about 11.5 billion pounds of debt due, while Barclays Plc has 15.9 billion pounds maturing, the data show.
Financing costs are soaring as banks hoard cash after the credit crunch triggered by the U.S. subprime mortgage crisis a year ago. The three-month London interbank offered rate in dollars rose to 4.32 percent from 2.64 percent in March, while the equivalent rate for euros increased to a record 5.38 percent, from 4.74 percent six months ago.
``The banks have no idea how they are going to manage rolling over their debt,'' said Kornelius Purps, a Munich-based bond strategist at UniCredit SpA. ``The central banks will have to intervene.''
Rates rose this month even as the U.K. announced a cash injection to prevent a collapse of the banking system, Europe's policy makers provided emergency funding and U.S. President George W. Bush approved a $700 billion rescue plan.
Government Rescue
Prime Minister Gordon Brown's government will invest about 50 billion pounds in the U.K.'s banks, the Treasury said in a statement today.
The government will buy preference shares and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan. The government will also provide a guarantee of about 250 billion pounds to help refinance debt, the statement said.
Banks need more capital after the worst U.S. housing slump since the Great Depression and $593 billion in worldwide losses and writedowns caused their stocks to tumble, forced Lehman Brothers Holdings Inc. into bankruptcy and pushed the U.K. government to nationalize Bradford & Bingley Plc.
The U.K. bank debt includes bonds, commercial paper and equity-linked notes and compares with 18 billion pounds repaid in the year-earlier period.
Investors are demanding an average 4.02 percentage points more in yield to buy bank bonds rather than government securities, up from 0.95 percentage point last year, according to indexes compiled by Merrill Lynch & Co. The so-called spread on investment-grade corporate bonds overall averages about 3.35 percentage points.
Lloyds TSB Debt
Rising yields may cost the banks as much as $5.6 billion more in annual interest compared with a year earlier should they refinance all of the debt in the bond market, Merrill data show.
``Bond investors are the guys that will decide the future of these banks and at the moment they're not prepared to roll over their financing,'' said Simon Maughan, a London-based bank analyst at MF Global Securities Ltd. ``If you can't roll over you're in an awful lot of trouble.''
Lloyds TSB Group Plc, the London-based bank that agreed to buy HBOS Plc in a stock swap on Sept. 18, has about 512 million pounds of bonds to refinance by the end of March, Bloomberg data show. HBOS, based in Edinburgh, has 11.9 billion pounds of debt due in the next six months.
Lloyds spokesman Emile Abu-Shakra in London declined to comment, as did a spokesman for HBOS. Lloyds TSB will pay about 10.2 billion pounds in a stock swap for HBOS, based on yesterday's closing share prices.
`Normal Business'
Standard Chartered Plc, the London-based bank that earns most of its money in Asia, needs to repay about 2.4 billion pounds of debt.
``The outstanding 2.4 billion pounds in the context of a 400 billion-pound balance sheet is not material,'' spokesman Arijit De said. ``Standard Chartered is not dependent on wholesale funding markets.''
Barclays has no debt that counts as regulatory capital maturing before the end of March, according to Simon Eaton, a London-based spokesman. ``Any other financing represents our normal course of business,'' he said.
HSBC's maturities aren't a reflection of funding requirements, London-based spokesman Patrick McGuinness said. ``In parts of our business we are managing down the balance sheet, and in others we are seeing strong deposit growth.''
RBS spokeswoman Carolyn McAdam declined to comment.
The U.K. central bank will cut its benchmark interest rate a quarter-percentage point to 4.75 percent tomorrow, according to the median estimate of 61 economists surveyed by Bloomberg News.
Federal Reserve Chairman Ben S. Bernanke yesterday signaled a cut in U.S. interest rates to shore up the economy and reduce funding pressure on banks. The European Central Bank said this month it will allow more banks to participate in its unscheduled cash auctions.
``If confidence returns there is less of a liquidity issue and the debt can be rolled over,'' said Neil Smith, an analyst at WestLB AG in Dusseldorf. ``Three months should be enough.''
To contact the reporter on this story: Ben Livesey in London blivesey@bloomberg.net; Shelley Smith in London at ssmith118@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- HSBC Holdings Plc, Royal Bank of Scotland Group Plc and the biggest U.K. banks face the most debt coming due in at least 10 years as the credit market seizure raises borrowing costs to the highest on record.
The six largest British banks have 54 billion pounds ($95 billion) of debt to refinance by April, triple the amount of the year-ago period, according to data compiled by Bloomberg. HSBC, the U.K.'s biggest bank, and RBS each have about 11.5 billion pounds of debt due, while Barclays Plc has 15.9 billion pounds maturing, the data show.
Financing costs are soaring as banks hoard cash after the credit crunch triggered by the U.S. subprime mortgage crisis a year ago. The three-month London interbank offered rate in dollars rose to 4.32 percent from 2.64 percent in March, while the equivalent rate for euros increased to a record 5.38 percent, from 4.74 percent six months ago.
``The banks have no idea how they are going to manage rolling over their debt,'' said Kornelius Purps, a Munich-based bond strategist at UniCredit SpA. ``The central banks will have to intervene.''
Rates rose this month even as the U.K. announced a cash injection to prevent a collapse of the banking system, Europe's policy makers provided emergency funding and U.S. President George W. Bush approved a $700 billion rescue plan.
Government Rescue
Prime Minister Gordon Brown's government will invest about 50 billion pounds in the U.K.'s banks, the Treasury said in a statement today.
The government will buy preference shares and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan. The government will also provide a guarantee of about 250 billion pounds to help refinance debt, the statement said.
Banks need more capital after the worst U.S. housing slump since the Great Depression and $593 billion in worldwide losses and writedowns caused their stocks to tumble, forced Lehman Brothers Holdings Inc. into bankruptcy and pushed the U.K. government to nationalize Bradford & Bingley Plc.
The U.K. bank debt includes bonds, commercial paper and equity-linked notes and compares with 18 billion pounds repaid in the year-earlier period.
Investors are demanding an average 4.02 percentage points more in yield to buy bank bonds rather than government securities, up from 0.95 percentage point last year, according to indexes compiled by Merrill Lynch & Co. The so-called spread on investment-grade corporate bonds overall averages about 3.35 percentage points.
Lloyds TSB Debt
Rising yields may cost the banks as much as $5.6 billion more in annual interest compared with a year earlier should they refinance all of the debt in the bond market, Merrill data show.
``Bond investors are the guys that will decide the future of these banks and at the moment they're not prepared to roll over their financing,'' said Simon Maughan, a London-based bank analyst at MF Global Securities Ltd. ``If you can't roll over you're in an awful lot of trouble.''
Lloyds TSB Group Plc, the London-based bank that agreed to buy HBOS Plc in a stock swap on Sept. 18, has about 512 million pounds of bonds to refinance by the end of March, Bloomberg data show. HBOS, based in Edinburgh, has 11.9 billion pounds of debt due in the next six months.
Lloyds spokesman Emile Abu-Shakra in London declined to comment, as did a spokesman for HBOS. Lloyds TSB will pay about 10.2 billion pounds in a stock swap for HBOS, based on yesterday's closing share prices.
`Normal Business'
Standard Chartered Plc, the London-based bank that earns most of its money in Asia, needs to repay about 2.4 billion pounds of debt.
``The outstanding 2.4 billion pounds in the context of a 400 billion-pound balance sheet is not material,'' spokesman Arijit De said. ``Standard Chartered is not dependent on wholesale funding markets.''
Barclays has no debt that counts as regulatory capital maturing before the end of March, according to Simon Eaton, a London-based spokesman. ``Any other financing represents our normal course of business,'' he said.
HSBC's maturities aren't a reflection of funding requirements, London-based spokesman Patrick McGuinness said. ``In parts of our business we are managing down the balance sheet, and in others we are seeing strong deposit growth.''
RBS spokeswoman Carolyn McAdam declined to comment.
The U.K. central bank will cut its benchmark interest rate a quarter-percentage point to 4.75 percent tomorrow, according to the median estimate of 61 economists surveyed by Bloomberg News.
Federal Reserve Chairman Ben S. Bernanke yesterday signaled a cut in U.S. interest rates to shore up the economy and reduce funding pressure on banks. The European Central Bank said this month it will allow more banks to participate in its unscheduled cash auctions.
``If confidence returns there is less of a liquidity issue and the debt can be rolled over,'' said Neil Smith, an analyst at WestLB AG in Dusseldorf. ``Three months should be enough.''
To contact the reporter on this story: Ben Livesey in London blivesey@bloomberg.net; Shelley Smith in London at ssmith118@bloomberg.net
Read more...
Moscow's Micex Halts Trading for Two Days After Record Rout
By Torrey Clark and Alex Nicholson
Oct. 8 (Bloomberg) -- Moscow's Micex Stock Exchange suspended trading for two days after shares plunged 14 percent in the first half hour, extending a record decline.
Trading stopped at 11:05 a.m. and won't resume until Oct. 10 unless the Federal Financial Markets Service says otherwise, Micex spokesman Alexei Gerasyuk said by phone. The smaller RTS bourse shut for one hour, until 12:05 p.m.
The 30-stock Micex Index slumped for a sixth day, to 637.87, the lowest level since June 2005. Russian regulators have halted stock trading 10 times since Sept. 16 amid the country's biggest financial crisis since the debt default and ruble devaluation of 1998.
``There is an absence of anyone with any inclination to buy,'' said James Beadle, an investment strategist at Pilgrim Asset Management in Moscow. ``With the stock market having collapsed so far, there is a genuine fear of default between counterparties.''
To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Moscow's Micex Stock Exchange suspended trading for two days after shares plunged 14 percent in the first half hour, extending a record decline.
Trading stopped at 11:05 a.m. and won't resume until Oct. 10 unless the Federal Financial Markets Service says otherwise, Micex spokesman Alexei Gerasyuk said by phone. The smaller RTS bourse shut for one hour, until 12:05 p.m.
The 30-stock Micex Index slumped for a sixth day, to 637.87, the lowest level since June 2005. Russian regulators have halted stock trading 10 times since Sept. 16 amid the country's biggest financial crisis since the debt default and ruble devaluation of 1998.
``There is an absence of anyone with any inclination to buy,'' said James Beadle, an investment strategist at Pilgrim Asset Management in Moscow. ``With the stock market having collapsed so far, there is a genuine fear of default between counterparties.''
To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net.
Read more...
Global Stocks, U.S. Futures Tumble as Credit Concern Deepens
By Michael Patterson
Oct. 8 (Bloomberg) -- Stocks tumbled in Europe and Asia and U.S. index futures sank on concern the credit crisis will deepen, toppling more banks and pushing the global economy into recession. The dollar fell against the yen, while Treasuries rose.
Credit Suisse Group AG and Societe Generale SA fell more than 4 percent as the International Monetary Fund said financial institutions may need $675 billion in fresh capital. Slumps by bank stocks helped push Japan's Nikkei 225 Stock Average to its biggest drop since October 1987, while stock exchanges in Russia and Indonesia halted trading after their benchmark indexes tumbled more than 10 percent.
The MSCI World Index lost 2.8 percent to 1,010.85 at 8:05 a.m. in London, falling for the fifth day as all 10 industry groups retreated. Standard & Poor's 500 Index futures slid 2.1 percent.
The S&P 500 fell below 1,000 for the first time since 2003 yesterday, while the S&P 500 Financials Index slumped 12 percent to its lowest level since 1997 even after Federal Reserve Chairman Ben S. Bernanke signaled he is ready to cut interest rates.
``Investors are capitulating,'' said Oumkaltoum El Ouarti, a fund manager at KBL Richelieu Gestion, which has $6.2 billion in Paris. ``There's a crisis of confidence and actions so far haven't restored it. We need to see action on a global scale.''
$44 Billion Injection
Europe's Dow Jones Stoxx 600 Index declined 5.4 percent. Germany's DAX slipped 3 percent, while France's CAC 40 lost 3.6 percent. The U.K.'s FTSE 100 fell 2 percent.
Prime Minister Gordon Brown's government will invest at least 25 billion pounds ($44 billion) in an unprecedented step to prevent a collapse of the U.K. banking system. HBOS Plc and Lloyds TSB Group Plc advanced.
The MSCI Asia Pacific Index fell 6.9 percent today on concern slowing growth will cut demand for exports. Japan's Nikkei 225 Stock Average lost 9.4 percent.
The yen surged beyond 100 per dollar for the first time in six months after a plunge in Asian stocks prompted investors to reduce holdings of higher-yielding assets funded in Japan.
U.S. two-year note yields dropped 8 basis points to 1.39 percent, according to BGCantor Market Data.
Oil fell in New York, trading below $90 a barrel, as consumption weakens in the U.S. and other developed nations as the deepening credit crisis threatens economic growth.
$1.4 Trillion
The world's major banks may need $675 billion in fresh capital over the next several years to recover from a credit crisis that shows few signs of abating, the International Monetary Fund said yesterday.
In a report on the financial system, the Washington-based IMF raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.
``As we've seen in the U.S., government intervention isn't freeing up credit markets and at the end of the day that is the key point,'' Matthew Buckland, a dealer at CMC Markets in London, wrote in a note to clients. ``If it's difficult for companies and individuals to get hold of credit, it's going to be difficult to stimulate growth and break out of this recessionary mindset.''
Today is the last day of a U.S. Securities and Exchange Commission rule banning short sales in more than 980 financial companies. Since it was announced Sept. 18, companies covered by the rule are down an average of 16 percent, according to data compiled by Bloomberg.
Stock Valuations
The Stoxx 600, which has lost 34 percent this year, was valued at 10 times the reported earnings of companies in the index yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World Index was valued at 12.4 times profit yesterday, the cheapest since at least 1995, while the Standard & Poor's 500 Index traded for 19 times earnings.
Credit Suisse dropped 4.4 percent to 48 francs, and Societe Generale slumped 6.4 percent to 56.655 euros.
HBOS, the U.K. bank that agreed to be bought by Lloyds TSB, added 6.4 percent to 100 pence. Lloyds TSB climbed 4.3 percent to 235.25 pence.
The U.K. government will buy preference shares, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan, the Treasury said in a Regulatory News Service statement today. The government will also provide a guarantee of about 250 billion pounds to help refinance debt.
Commodities Drop
BHP Billiton Ltd., the world's largest mining company, dropped 6.4 percent to 1,017 pence. Rio Tinto Group, the third- largest, declined 7 percent to 2,714 pence. Copper, the metal used in wires and pipes, dropped 4.4 percent to $5,380 earlier, the lowest intra-day level since February 8, 2007.
BP, Europe's second-biggest oil company, fell 2.2 percent to 437.25 pence. Total SA sank 2.4 percent to 39.065 euros.
Crude oil for November delivery slumped as much as $1.44, or 1.6 percent, to $88.62 a barrel in electronic trading on the New York Mercantile Exchange.
J Sainsbury Plc slid 5.8 percent to 296.5 pence. The third- largest U.K. supermarket chain said revenue climbed 4.3 percent at stores open at least a year excluding gasoline in the 16 weeks ended Oct. 4 and that it sees a challenging environment through the second-half. The British retailer said customers are cooking more for themselves.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Stocks tumbled in Europe and Asia and U.S. index futures sank on concern the credit crisis will deepen, toppling more banks and pushing the global economy into recession. The dollar fell against the yen, while Treasuries rose.
Credit Suisse Group AG and Societe Generale SA fell more than 4 percent as the International Monetary Fund said financial institutions may need $675 billion in fresh capital. Slumps by bank stocks helped push Japan's Nikkei 225 Stock Average to its biggest drop since October 1987, while stock exchanges in Russia and Indonesia halted trading after their benchmark indexes tumbled more than 10 percent.
The MSCI World Index lost 2.8 percent to 1,010.85 at 8:05 a.m. in London, falling for the fifth day as all 10 industry groups retreated. Standard & Poor's 500 Index futures slid 2.1 percent.
The S&P 500 fell below 1,000 for the first time since 2003 yesterday, while the S&P 500 Financials Index slumped 12 percent to its lowest level since 1997 even after Federal Reserve Chairman Ben S. Bernanke signaled he is ready to cut interest rates.
``Investors are capitulating,'' said Oumkaltoum El Ouarti, a fund manager at KBL Richelieu Gestion, which has $6.2 billion in Paris. ``There's a crisis of confidence and actions so far haven't restored it. We need to see action on a global scale.''
$44 Billion Injection
Europe's Dow Jones Stoxx 600 Index declined 5.4 percent. Germany's DAX slipped 3 percent, while France's CAC 40 lost 3.6 percent. The U.K.'s FTSE 100 fell 2 percent.
Prime Minister Gordon Brown's government will invest at least 25 billion pounds ($44 billion) in an unprecedented step to prevent a collapse of the U.K. banking system. HBOS Plc and Lloyds TSB Group Plc advanced.
The MSCI Asia Pacific Index fell 6.9 percent today on concern slowing growth will cut demand for exports. Japan's Nikkei 225 Stock Average lost 9.4 percent.
The yen surged beyond 100 per dollar for the first time in six months after a plunge in Asian stocks prompted investors to reduce holdings of higher-yielding assets funded in Japan.
U.S. two-year note yields dropped 8 basis points to 1.39 percent, according to BGCantor Market Data.
Oil fell in New York, trading below $90 a barrel, as consumption weakens in the U.S. and other developed nations as the deepening credit crisis threatens economic growth.
$1.4 Trillion
The world's major banks may need $675 billion in fresh capital over the next several years to recover from a credit crisis that shows few signs of abating, the International Monetary Fund said yesterday.
In a report on the financial system, the Washington-based IMF raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.
``As we've seen in the U.S., government intervention isn't freeing up credit markets and at the end of the day that is the key point,'' Matthew Buckland, a dealer at CMC Markets in London, wrote in a note to clients. ``If it's difficult for companies and individuals to get hold of credit, it's going to be difficult to stimulate growth and break out of this recessionary mindset.''
Today is the last day of a U.S. Securities and Exchange Commission rule banning short sales in more than 980 financial companies. Since it was announced Sept. 18, companies covered by the rule are down an average of 16 percent, according to data compiled by Bloomberg.
Stock Valuations
The Stoxx 600, which has lost 34 percent this year, was valued at 10 times the reported earnings of companies in the index yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World Index was valued at 12.4 times profit yesterday, the cheapest since at least 1995, while the Standard & Poor's 500 Index traded for 19 times earnings.
Credit Suisse dropped 4.4 percent to 48 francs, and Societe Generale slumped 6.4 percent to 56.655 euros.
HBOS, the U.K. bank that agreed to be bought by Lloyds TSB, added 6.4 percent to 100 pence. Lloyds TSB climbed 4.3 percent to 235.25 pence.
The U.K. government will buy preference shares, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan, the Treasury said in a Regulatory News Service statement today. The government will also provide a guarantee of about 250 billion pounds to help refinance debt.
Commodities Drop
BHP Billiton Ltd., the world's largest mining company, dropped 6.4 percent to 1,017 pence. Rio Tinto Group, the third- largest, declined 7 percent to 2,714 pence. Copper, the metal used in wires and pipes, dropped 4.4 percent to $5,380 earlier, the lowest intra-day level since February 8, 2007.
BP, Europe's second-biggest oil company, fell 2.2 percent to 437.25 pence. Total SA sank 2.4 percent to 39.065 euros.
Crude oil for November delivery slumped as much as $1.44, or 1.6 percent, to $88.62 a barrel in electronic trading on the New York Mercantile Exchange.
J Sainsbury Plc slid 5.8 percent to 296.5 pence. The third- largest U.K. supermarket chain said revenue climbed 4.3 percent at stores open at least a year excluding gasoline in the 16 weeks ended Oct. 4 and that it sees a challenging environment through the second-half. The British retailer said customers are cooking more for themselves.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
Read more...
Buffett's Goldman, GE Warrants Worthless for Now as Shares Drop
By Erik Holm
Oct. 8 (Bloomberg) -- Billionaire investor Warren Buffett's instant paper profits on Goldman Sachs Group Inc. and General Electric Co. have been wiped out amid the stock market's worst yearly slump since 1937.
Goldman, the most profitable Wall Street firm, fell 7.3 percent yesterday in New York trading to $115, the price at which Buffett can buy $5 billion of shares at any point in the next five years. When the deal was announced last month, Goldman closed at $125.05, meaning Buffett was $437 million ahead.
Goldman and GE also sold Buffett a combined $8 billion in preferred shares that pay a 10 percent dividend, allowing his Berkshire Hathaway Inc. to earn $800 million a year without the warrants unless the companies collapse. In exchange, the firms got Berkshire's cash and the endorsement of the ``Oracle of Omaha'' at a time when stock prices are falling on concern that a tightening credit market may hobble even the largest companies.
Buffett ``doesn't have a two-week time horizon,'' said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which holds Berkshire and GE shares. ``Just because these prices drop below the strike price, it doesn't suggest that either of them are not exceptionally good investments.''
GE, the world's biggest maker of jet engines, agreed Oct. 1 to give Berkshire warrants to purchase $3 billion in shares at $22.25 apiece. The stock, which closed at $24.50 that day, dropped to $20.30 yesterday.
Pick and Hold
``You've got to pick them and hold them,'' said Gerald Martin, a finance professor at American University's Kogod School of Business in Washington. ``He admits that he can't time markets, and he takes a very long time horizon.''
Buffett, heralded as the world's best stock picker, agreed to the investments while some rivals find themselves with a cash shortage. The worst housing slump since the Great Depression has resulted in record mortgage defaults in the U.S. and a yearlong contraction in global credit markets, driving down stock prices and sending firms like Goldman and GE in search of funds.
For Buffett, whose Berkshire Hathaway had $44.3 billion in cash at the start of the year, it's also been a call to action. He's committed at least $28 billion this year to acquire companies, finance buyouts and purchase securities for Omaha, Nebraska-based Berkshire. Buffett is Berkshire's chairman.
``We want to use cash,'' Buffett told PBS's Charlie Rose in an interview last week. ``There are times when cash buys more than other times, and this is one of those times where it buys more.''
`Beginning to Scream'
Goldman has fallen 47 percent this year through yesterday in New York Stock Exchange composite trading; GE has declined 45 percent. The Standard & Poor's 500 Index slid 60.66 points, or 5.7 percent, to 996.23 yesterday, extending its 2008 tumble to 32 percent in the market's worst yearly slump in 71 years.
``Top-quality, well-managed firms like Goldman and GE are getting to the point where the values are beginning to scream,'' Betz said. ``Those are the sorts of companies that will continue to earn money and continue to function well.''
Buffett, ranked the second-richest man in the U.S. by Forbes magazine, transformed Berkshire from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate jet leasing and insurance.
To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.
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Oct. 8 (Bloomberg) -- Billionaire investor Warren Buffett's instant paper profits on Goldman Sachs Group Inc. and General Electric Co. have been wiped out amid the stock market's worst yearly slump since 1937.
Goldman, the most profitable Wall Street firm, fell 7.3 percent yesterday in New York trading to $115, the price at which Buffett can buy $5 billion of shares at any point in the next five years. When the deal was announced last month, Goldman closed at $125.05, meaning Buffett was $437 million ahead.
Goldman and GE also sold Buffett a combined $8 billion in preferred shares that pay a 10 percent dividend, allowing his Berkshire Hathaway Inc. to earn $800 million a year without the warrants unless the companies collapse. In exchange, the firms got Berkshire's cash and the endorsement of the ``Oracle of Omaha'' at a time when stock prices are falling on concern that a tightening credit market may hobble even the largest companies.
Buffett ``doesn't have a two-week time horizon,'' said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which holds Berkshire and GE shares. ``Just because these prices drop below the strike price, it doesn't suggest that either of them are not exceptionally good investments.''
GE, the world's biggest maker of jet engines, agreed Oct. 1 to give Berkshire warrants to purchase $3 billion in shares at $22.25 apiece. The stock, which closed at $24.50 that day, dropped to $20.30 yesterday.
Pick and Hold
``You've got to pick them and hold them,'' said Gerald Martin, a finance professor at American University's Kogod School of Business in Washington. ``He admits that he can't time markets, and he takes a very long time horizon.''
Buffett, heralded as the world's best stock picker, agreed to the investments while some rivals find themselves with a cash shortage. The worst housing slump since the Great Depression has resulted in record mortgage defaults in the U.S. and a yearlong contraction in global credit markets, driving down stock prices and sending firms like Goldman and GE in search of funds.
For Buffett, whose Berkshire Hathaway had $44.3 billion in cash at the start of the year, it's also been a call to action. He's committed at least $28 billion this year to acquire companies, finance buyouts and purchase securities for Omaha, Nebraska-based Berkshire. Buffett is Berkshire's chairman.
``We want to use cash,'' Buffett told PBS's Charlie Rose in an interview last week. ``There are times when cash buys more than other times, and this is one of those times where it buys more.''
`Beginning to Scream'
Goldman has fallen 47 percent this year through yesterday in New York Stock Exchange composite trading; GE has declined 45 percent. The Standard & Poor's 500 Index slid 60.66 points, or 5.7 percent, to 996.23 yesterday, extending its 2008 tumble to 32 percent in the market's worst yearly slump in 71 years.
``Top-quality, well-managed firms like Goldman and GE are getting to the point where the values are beginning to scream,'' Betz said. ``Those are the sorts of companies that will continue to earn money and continue to function well.''
Buffett, ranked the second-richest man in the U.S. by Forbes magazine, transformed Berkshire from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate jet leasing and insurance.
To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.
Read more...
Bernanke Fails to Quell Turmoil as Investors Seek Rate Cuts
By Craig Torres
Oct. 8 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke's message of readiness to cut interest rates failed to assuage investors clamoring for immediate action to support jobs and growth.
Bernanke said in a speech yesterday that an intensifying credit crunch means officials must ``consider'' lowering borrowing costs. Three hours later, U.S. stock indexes closed at their lowest levels in five years and headed for their worst annual declines since 1937.
Fed officials, who have kept their benchmark rate at 2 percent since April, may have wanted time for their record loans to the financial industry and new programs, including purchases of commercial paper, to bear fruit before lowering rates. Investors instead perceive the economic outlook deteriorating more rapidly, necessitating rate reductions.
Bernanke and his colleagues ``understand the disease, but they haven't been able to pre-empt it,'' said Dominic Konstam, head of interest-rate strategy at Credit Suisse Group in New York. ``They haven't been able to move quickly to head the next thing off.''
The Standard & Poor's 500 Stock Index slid 5.7 percent yesterday to 996.23, after a 3.9 percent slump the previous day. The declines both followed pre-market opening announcements of fresh actions by the Fed to unblock credit markets. On Oct. 6, the central bank doubled its planned auctions of cash to banks to as much as $900 billion. Yesterday, it unveiled a unit to buy commercial paper, debt used by companies for short-term funding.
`Best Choice'
``The Federal Reserve's massive injection of financial liquidity of late isn't registering with investors who appear to be clamoring for interest-rate cuts instead,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York. A reduction of at least three quarters of a point would be ``the best choice'' because it would help banks boost their margins between the cost of funds and rates of return.
Policy makers aren't scheduled to meet to consider changes to their benchmark lending rate until Oct. 28-29. The Federal Open Market Committee has left its target rate unchanged at the last three meetings after cutting it by 3.25 percentage points from September to April.
Traders see 32 percent odds of a three-quarter point move at or before this month's meeting, with 100 percent chance of a half-point move.
Waning Authority
In more typical market conditions, stocks rally when a Fed chief indicates he'll reduce rates. Now, Bernanke's message may have less power because traders already anticipated for weeks that policy makers would need to make that move, and because of rising concern even rate cuts may do little to immediately help banks scrambling to reduce their vulnerability to loan losses.
``In normal times, a rate cut would have a positive effect,'' said Gary Schlossberg, senior economist at Wells Capital Management in San Francisco. ``What's troubling the market'' is concern about ``the solvency and losses of major institutions. The market is uneasy because it doesn't have a lot of information on what the depth of those losses will be.''
Bernanke has pushed the limits of the Fed's powers to create an array of unprecedented lending programs as the credit crisis spread from banks to securities firms, mutual funds, the biggest U.S. insurer and now corporate America.
Commercial Paper
The Fed yesterday said it will shore up the commercial paper market, a $1.6 trillion industry where banks get short- term funds and companies issue a type of IOU to pay for day-to- day activities such as payrolls and rent. That's on top of the auctions of cash to banks and some $147 billion in loans to Wall Street bond dealers and $152 billion in lending to backstop money market mutual funds as of Oct. 1.
While the liquidity facilities give the Fed a larger role in short-term financing, they don't replicate the lending by banks to businesses and consumers needed to give growth a lift.
``This is really a question of getting cash into the hands of middle-American businesses,'' said David Rosen, chief investment officer of the Graham & Dodd Fund LP in New York. ``The guy that needs credit is the average Joe who runs a business which employs 20 to 30 people.''
Financial conditions have worsened since Fed officials last cut interest rates in April. Commercial paper outstanding slid to a three-year low last week and consumer credit fell by $7.9 billion in August, the most since statistics began in 1943, Fed data showed yesterday.
``Even households with good credit histories are now facing difficulties obtaining mortgage loans or home equity lines of credit,'' Bernanke said.
Since the Fed chief's previous public address, on Sept. 24 to Congress, the three-month London interbank offered rate climbed 0.84 percentage point to 4.32 percent, indicating banks' growing concerns about each others' credit risks.
``Lack of trust and fears of more bankruptcies has made lenders and borrowers pull back from dealing with one another altogether,'' Christopher Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, wrote in a note. ``Sometimes it feels as if we are going to be banking with the post office soon.''
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke's message of readiness to cut interest rates failed to assuage investors clamoring for immediate action to support jobs and growth.
Bernanke said in a speech yesterday that an intensifying credit crunch means officials must ``consider'' lowering borrowing costs. Three hours later, U.S. stock indexes closed at their lowest levels in five years and headed for their worst annual declines since 1937.
Fed officials, who have kept their benchmark rate at 2 percent since April, may have wanted time for their record loans to the financial industry and new programs, including purchases of commercial paper, to bear fruit before lowering rates. Investors instead perceive the economic outlook deteriorating more rapidly, necessitating rate reductions.
Bernanke and his colleagues ``understand the disease, but they haven't been able to pre-empt it,'' said Dominic Konstam, head of interest-rate strategy at Credit Suisse Group in New York. ``They haven't been able to move quickly to head the next thing off.''
The Standard & Poor's 500 Stock Index slid 5.7 percent yesterday to 996.23, after a 3.9 percent slump the previous day. The declines both followed pre-market opening announcements of fresh actions by the Fed to unblock credit markets. On Oct. 6, the central bank doubled its planned auctions of cash to banks to as much as $900 billion. Yesterday, it unveiled a unit to buy commercial paper, debt used by companies for short-term funding.
`Best Choice'
``The Federal Reserve's massive injection of financial liquidity of late isn't registering with investors who appear to be clamoring for interest-rate cuts instead,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York. A reduction of at least three quarters of a point would be ``the best choice'' because it would help banks boost their margins between the cost of funds and rates of return.
Policy makers aren't scheduled to meet to consider changes to their benchmark lending rate until Oct. 28-29. The Federal Open Market Committee has left its target rate unchanged at the last three meetings after cutting it by 3.25 percentage points from September to April.
Traders see 32 percent odds of a three-quarter point move at or before this month's meeting, with 100 percent chance of a half-point move.
Waning Authority
In more typical market conditions, stocks rally when a Fed chief indicates he'll reduce rates. Now, Bernanke's message may have less power because traders already anticipated for weeks that policy makers would need to make that move, and because of rising concern even rate cuts may do little to immediately help banks scrambling to reduce their vulnerability to loan losses.
``In normal times, a rate cut would have a positive effect,'' said Gary Schlossberg, senior economist at Wells Capital Management in San Francisco. ``What's troubling the market'' is concern about ``the solvency and losses of major institutions. The market is uneasy because it doesn't have a lot of information on what the depth of those losses will be.''
Bernanke has pushed the limits of the Fed's powers to create an array of unprecedented lending programs as the credit crisis spread from banks to securities firms, mutual funds, the biggest U.S. insurer and now corporate America.
Commercial Paper
The Fed yesterday said it will shore up the commercial paper market, a $1.6 trillion industry where banks get short- term funds and companies issue a type of IOU to pay for day-to- day activities such as payrolls and rent. That's on top of the auctions of cash to banks and some $147 billion in loans to Wall Street bond dealers and $152 billion in lending to backstop money market mutual funds as of Oct. 1.
While the liquidity facilities give the Fed a larger role in short-term financing, they don't replicate the lending by banks to businesses and consumers needed to give growth a lift.
``This is really a question of getting cash into the hands of middle-American businesses,'' said David Rosen, chief investment officer of the Graham & Dodd Fund LP in New York. ``The guy that needs credit is the average Joe who runs a business which employs 20 to 30 people.''
Financial conditions have worsened since Fed officials last cut interest rates in April. Commercial paper outstanding slid to a three-year low last week and consumer credit fell by $7.9 billion in August, the most since statistics began in 1943, Fed data showed yesterday.
``Even households with good credit histories are now facing difficulties obtaining mortgage loans or home equity lines of credit,'' Bernanke said.
Since the Fed chief's previous public address, on Sept. 24 to Congress, the three-month London interbank offered rate climbed 0.84 percentage point to 4.32 percent, indicating banks' growing concerns about each others' credit risks.
``Lack of trust and fears of more bankruptcies has made lenders and borrowers pull back from dealing with one another altogether,'' Christopher Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, wrote in a note. ``Sometimes it feels as if we are going to be banking with the post office soon.''
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net.
Read more...
Localiza, Sul America, Wal-Mart Mexico: Latin Equity Preview
By William Freebairn and Heloiza Canassa
Oct. 8 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 5.6 percent to 2,362.08 yesterday. Markets in Peru are closed today for a holiday.
Brazil
Fertilizantes Fosfatados SA - Fosfertil (FFTL4 BS): A Brazilian fertilizer industry group reduced its 2008 sales forecast by 1 million tons to 25 million tons on falling commodity prices, Reuters said. Fosfertil, Brazil's biggest fertilizer maker by market value, fell 2 percent to 12 reais.
Localiza Rent a Car SA (RENT3 BS): Latin America's biggest car-rental company said net revenue rose 39 percent to 530.4 million reais ($229.4 million) in the third quarter from a year earlier, in a regulatory filing. Sales beat the 480.8 million reais average of four estimates compiled by Bloomberg. Localiza rose 6.8 percent to 6.76 reais.
Sul America SA (SULA11 BS): The insurer backed by Dutch financial firm ING Groep NV said it will buy back as much as 3 percent of outstanding stock units after a 49 percent decline this year. Sul America plans to buy back as many as 1.05 million units over the next year, it said yesterday in a regulatory filing. Sul America fell 5.6 percent to 15.30 reais.
Chile
Cia. de Telecomunicaciones de Chile SA (CTCA CC): Telefonica SA may sweeten an offer to buy stock in its Chilean unit it doesn't already own after minority shareholders yesterday blocked a bid priced at 1,000 pesos a share, Natalia Aranguiz, an analyst at FIT Research, said by phone. Telefonica SA's press representative in Chile declined to comment. Telefonica Chile, as the country's biggest fixed-line carrier is known, dropped 4.4 percent to 867.34 pesos.
Mexico
Grupo Aeroportuario del Centro Norte SAB (OMAB MM): The operator of 13 Mexican airports said September passenger traffic fell 7.5 percent as international travel declined. That was less than the 9 percent to 11 percent decline forecast by Credit Suisse Group AG in a research report dated Oct. 6. Oma, as the company is known, fell 1.2 percent to 13.94 pesos.
Industrias Penoles SAB (PE&OLES* MM): The world's largest primary silver producer's Fresnillo unit boosted its stake in Canadian mining company Mag Silver to 19 percent by buying 2.51 million shares Oct. 7. Penoles and its affiliates together own 20 percent of Mag Silver, Fresnillo said in a statement to the Mexican stock exchange yesterday. Penoles fell 9.9 percent to 115.22 pesos.
Wal-Mart de Mexico SAB (WALMEXV MM): Latin America's largest retailer said yesterday third-quarter profit fell 3 percent to 3.27 billion pesos ($266 million), or 38.6 centavos a share. The results trailed the 41 centavos expected by seven analysts in a Bloomberg survey. Walmex, as the company is known, was little changed at 29.01 pesos.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Heloiza Canassa in Sao Paulo at hcanassa@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 5.6 percent to 2,362.08 yesterday. Markets in Peru are closed today for a holiday.
Brazil
Fertilizantes Fosfatados SA - Fosfertil (FFTL4 BS): A Brazilian fertilizer industry group reduced its 2008 sales forecast by 1 million tons to 25 million tons on falling commodity prices, Reuters said. Fosfertil, Brazil's biggest fertilizer maker by market value, fell 2 percent to 12 reais.
Localiza Rent a Car SA (RENT3 BS): Latin America's biggest car-rental company said net revenue rose 39 percent to 530.4 million reais ($229.4 million) in the third quarter from a year earlier, in a regulatory filing. Sales beat the 480.8 million reais average of four estimates compiled by Bloomberg. Localiza rose 6.8 percent to 6.76 reais.
Sul America SA (SULA11 BS): The insurer backed by Dutch financial firm ING Groep NV said it will buy back as much as 3 percent of outstanding stock units after a 49 percent decline this year. Sul America plans to buy back as many as 1.05 million units over the next year, it said yesterday in a regulatory filing. Sul America fell 5.6 percent to 15.30 reais.
Chile
Cia. de Telecomunicaciones de Chile SA (CTCA CC): Telefonica SA may sweeten an offer to buy stock in its Chilean unit it doesn't already own after minority shareholders yesterday blocked a bid priced at 1,000 pesos a share, Natalia Aranguiz, an analyst at FIT Research, said by phone. Telefonica SA's press representative in Chile declined to comment. Telefonica Chile, as the country's biggest fixed-line carrier is known, dropped 4.4 percent to 867.34 pesos.
Mexico
Grupo Aeroportuario del Centro Norte SAB (OMAB MM): The operator of 13 Mexican airports said September passenger traffic fell 7.5 percent as international travel declined. That was less than the 9 percent to 11 percent decline forecast by Credit Suisse Group AG in a research report dated Oct. 6. Oma, as the company is known, fell 1.2 percent to 13.94 pesos.
Industrias Penoles SAB (PE&OLES* MM): The world's largest primary silver producer's Fresnillo unit boosted its stake in Canadian mining company Mag Silver to 19 percent by buying 2.51 million shares Oct. 7. Penoles and its affiliates together own 20 percent of Mag Silver, Fresnillo said in a statement to the Mexican stock exchange yesterday. Penoles fell 9.9 percent to 115.22 pesos.
Wal-Mart de Mexico SAB (WALMEXV MM): Latin America's largest retailer said yesterday third-quarter profit fell 3 percent to 3.27 billion pesos ($266 million), or 38.6 centavos a share. The results trailed the 41 centavos expected by seven analysts in a Bloomberg survey. Walmex, as the company is known, was little changed at 29.01 pesos.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Heloiza Canassa in Sao Paulo at hcanassa@bloomberg.net.
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U.S. Stock Futures, Dollar Decline as Credit Concern Deepens
By Kyung Bok Cho
Oct. 8 (Bloomberg) -- U.S. stock-index futures dropped on concern the credit crisis will topple more banks and slow global growth. The dollar declined against the yen after Asian shares plunged, prompting investors to cut holdings of higher-yielding assets funded in Japan.
Standard & Poor's 500 Index futures expiring in December lost 24.10, or 2.4 percent, to 982.00 at 2:58 p.m. Tokyo time. Dow Jones Industrial Average futures slid 221, or 2.3 percent, to 9,324. Nasdaq-100 futures dropped 28.25, or 2.1 percent, to 1,309.25.
Asian stocks tumbled today, with Japan's Nikkei 225 Stock Average falling the most since October 1987. Indonesia halted stock trading after the benchmark lost 10 percent, while Hong Kong's Hang Seng Index fell below 16,000 for the first time in two years.
Yesterday, the S&P 500 slumped below 1,000 for the first time since 2003, on speculation banks and real-estate companies are running short of money as the credit crisis worsens.
Japan's currency rose to 99.96 per dollar at 6:30 a.m. in London from 101.47 late yesterday in New York. It reached 99.87, the highest since April 1. It's the first time in six months the yen gained beyond 100 per dollar.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Oct. 8 (Bloomberg) -- U.S. stock-index futures dropped on concern the credit crisis will topple more banks and slow global growth. The dollar declined against the yen after Asian shares plunged, prompting investors to cut holdings of higher-yielding assets funded in Japan.
Standard & Poor's 500 Index futures expiring in December lost 24.10, or 2.4 percent, to 982.00 at 2:58 p.m. Tokyo time. Dow Jones Industrial Average futures slid 221, or 2.3 percent, to 9,324. Nasdaq-100 futures dropped 28.25, or 2.1 percent, to 1,309.25.
Asian stocks tumbled today, with Japan's Nikkei 225 Stock Average falling the most since October 1987. Indonesia halted stock trading after the benchmark lost 10 percent, while Hong Kong's Hang Seng Index fell below 16,000 for the first time in two years.
Yesterday, the S&P 500 slumped below 1,000 for the first time since 2003, on speculation banks and real-estate companies are running short of money as the credit crisis worsens.
Japan's currency rose to 99.96 per dollar at 6:30 a.m. in London from 101.47 late yesterday in New York. It reached 99.87, the highest since April 1. It's the first time in six months the yen gained beyond 100 per dollar.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Europe shares plunge in early trade as banks slide
LONDON, Oct 8 (Reuters) - European shares tumbled 4 percent in early trade on Wednesday, led lower by banks, as investors across the globe dumped shares amid mounting jitters about the financial system and a deep recession.
At 0721 GMT, the FTSEurofirst 300 index of top European shares was down 4.1 percent at 962.47 points after hitting a four-year low of 959.60.
The index has already lost about 11 percent this week, on track to record its worst weekly performance since mid-2002.
Banks were the hardest hit, with UniCredit down 10 percent, Dexia falling 10.3 percent and Societe Generale slipping 6.7 percent.
Commonwealth Bank agreed to buy struggling British bank HBOS's Australian unit BankWest and other assets for a cheap A$2.1 billion ($1.5 billion). HBOS rose 20 percent.
The worst financial crisis since the Great Depression, which has heightened gloom about the global economy, forced Britain to announce new measures to help the banking sector.
The UK government unveiled a multi-billion pound rescue package for British banks that included plans to inject up to 50 billion pounds of government money into the country's biggest operators.
Royal Bank of Scotland jumped 9.8 percent but Barclays fell 6 percent and Lloyds fell 2.4 percent.
The decision followed days of crippling pressure on banks, some of which have lost nearly half their value on the stock market amid investor fears they could collapse if they are not handed a massive liquidity lifeline.
"The provision of extra liquidity will hope to free up lending in the short to medium term. The hope is that this will kick-start the banking sector once again, and breathe a much needed air of confidence back into the system," said Chris Hossain, senior sales manager at ODL Securities Ltd.
"The risk is that if this doesn't work, where do we go next? A co-ordinated rate cut would logically seem to be the next step, but after that, there isn't much more we can do."
The gloomy outlook continued to hurt global markets, with Japan's Nikkei average .N225 tumbling 9.4 percent on Wednesday and U.S. stocks sliding more than 5 percent overnight.
Federal Reserve Chairman Ben Bernanke on Tuesday cautioned that downside risks to economic growth had worsened and signalled a readiness to lower interest rates.
Spanish Prime Minister Jose Luis Rodriguez Zapatero late on Tuesday said Spain will raise its guarantee for deposits in its banks to 100,000 euros and set up a 30 billion euro fund to buy assets from banks and keep credit flowing to the economy.
On Wednesday, energy stocks also fell, tracking a sharp decline in crude prices that retreated below $88 a barrel as concerns the global financial crisis will crimp oil demand overshadowed signs that OPEC producers may consider a supply cut.
BP , Royal Dutch Shell , gas producer BG Group and Tullow Oil shed between 3.5 and 5.7 percent.
Mining stocks were also sharply lower.
(Reporting by Atul Prakash)
Read more...
At 0721 GMT, the FTSEurofirst 300 index of top European shares was down 4.1 percent at 962.47 points after hitting a four-year low of 959.60.
The index has already lost about 11 percent this week, on track to record its worst weekly performance since mid-2002.
Banks were the hardest hit, with UniCredit down 10 percent, Dexia falling 10.3 percent and Societe Generale slipping 6.7 percent.
Commonwealth Bank agreed to buy struggling British bank HBOS's Australian unit BankWest and other assets for a cheap A$2.1 billion ($1.5 billion). HBOS rose 20 percent.
The worst financial crisis since the Great Depression, which has heightened gloom about the global economy, forced Britain to announce new measures to help the banking sector.
The UK government unveiled a multi-billion pound rescue package for British banks that included plans to inject up to 50 billion pounds of government money into the country's biggest operators.
Royal Bank of Scotland jumped 9.8 percent but Barclays fell 6 percent and Lloyds fell 2.4 percent.
The decision followed days of crippling pressure on banks, some of which have lost nearly half their value on the stock market amid investor fears they could collapse if they are not handed a massive liquidity lifeline.
"The provision of extra liquidity will hope to free up lending in the short to medium term. The hope is that this will kick-start the banking sector once again, and breathe a much needed air of confidence back into the system," said Chris Hossain, senior sales manager at ODL Securities Ltd.
"The risk is that if this doesn't work, where do we go next? A co-ordinated rate cut would logically seem to be the next step, but after that, there isn't much more we can do."
The gloomy outlook continued to hurt global markets, with Japan's Nikkei average .N225 tumbling 9.4 percent on Wednesday and U.S. stocks sliding more than 5 percent overnight.
Federal Reserve Chairman Ben Bernanke on Tuesday cautioned that downside risks to economic growth had worsened and signalled a readiness to lower interest rates.
Spanish Prime Minister Jose Luis Rodriguez Zapatero late on Tuesday said Spain will raise its guarantee for deposits in its banks to 100,000 euros and set up a 30 billion euro fund to buy assets from banks and keep credit flowing to the economy.
On Wednesday, energy stocks also fell, tracking a sharp decline in crude prices that retreated below $88 a barrel as concerns the global financial crisis will crimp oil demand overshadowed signs that OPEC producers may consider a supply cut.
BP , Royal Dutch Shell , gas producer BG Group and Tullow Oil shed between 3.5 and 5.7 percent.
Mining stocks were also sharply lower.
(Reporting by Atul Prakash)
Read more...
Nikkei plunges 9.4 pct, biggest 1-day fall since '87
By Aiko Hayashi
TOKYO (Reuters) - The Nikkei average plunged 9.4 percent on Wednesday, its biggest one-day drop since the 1987 stock market crash, as fear spread of a global recession, fueled by expectations of a slide in profits at Toyota Motor Corp and a firmer yen.
Panic over the fast-spreading financial crisis dragged down markets across Asia, with Japanese steelmakers such as Nippon Steel Corp sliding, as the Nikkei set another five-year closing low.
"The deteriorating outlook for the economy and the deepening financial crisis are pushing fear to its limit," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"Investors want to dump shares as their willingness to take risks has shrunk, but no one wants to buy even if stocks are valued cheaply."
The yen climbed to a six-month high against the tumbling U.S. dollar, as investors stampeded away from stocks and risky positions.
The Nikkei posted its biggest one-day fall since a 14.9 percent drop on October 20, 1987, the day after Black Monday.
The Indonesia Stock Exchange halted trading on Wednesday after the benchmark composite index .JKSE dropped more than 10 percent, while Hong Kong's main stock market index .HSI dropped more than 5 percent.
The benchmark Nikkei .N225 slid 952.58 points to 9,203.32, its lowest close since 2003. The broader Topix lost 8.0 percent to 899.01.
Toyota tumbled 11.6 percent to 3,280 yen after the Nikkei business daily said it was likely to post a 40 percent slide in annual profit, thanks to weak sales in North America and slower growth in China.
A company source told Reuters that Toyota was considering cutting its annual earnings forecasts due to sluggish demand.
Analysts said that even at lower valuations, investors would still shun the market as more companies were expected to cut their earnings forecasts.
(Reporting by Aiko Hayashi; Additional reporting by Masayuki Kitano and Kiyoshi Takenaka; Editing by Rodney Joyce)
Read more...
TOKYO (Reuters) - The Nikkei average plunged 9.4 percent on Wednesday, its biggest one-day drop since the 1987 stock market crash, as fear spread of a global recession, fueled by expectations of a slide in profits at Toyota Motor Corp and a firmer yen.
Panic over the fast-spreading financial crisis dragged down markets across Asia, with Japanese steelmakers such as Nippon Steel Corp sliding, as the Nikkei set another five-year closing low.
"The deteriorating outlook for the economy and the deepening financial crisis are pushing fear to its limit," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"Investors want to dump shares as their willingness to take risks has shrunk, but no one wants to buy even if stocks are valued cheaply."
The yen climbed to a six-month high against the tumbling U.S. dollar, as investors stampeded away from stocks and risky positions.
The Nikkei posted its biggest one-day fall since a 14.9 percent drop on October 20, 1987, the day after Black Monday.
The Indonesia Stock Exchange halted trading on Wednesday after the benchmark composite index .JKSE dropped more than 10 percent, while Hong Kong's main stock market index .HSI dropped more than 5 percent.
The benchmark Nikkei .N225 slid 952.58 points to 9,203.32, its lowest close since 2003. The broader Topix lost 8.0 percent to 899.01.
Toyota tumbled 11.6 percent to 3,280 yen after the Nikkei business daily said it was likely to post a 40 percent slide in annual profit, thanks to weak sales in North America and slower growth in China.
A company source told Reuters that Toyota was considering cutting its annual earnings forecasts due to sluggish demand.
Analysts said that even at lower valuations, investors would still shun the market as more companies were expected to cut their earnings forecasts.
(Reporting by Aiko Hayashi; Additional reporting by Masayuki Kitano and Kiyoshi Takenaka; Editing by Rodney Joyce)
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Asian Market Update
Daily Forex Fundamentals | Written by Trade The News | Oct 08 08 04:22 GMT |
The Hang Seng and Nikkei lead Asian equities lower
Forex: Volatility in FX majors was suspiciously subdued in Wednesday's Asian session in spite of the rout in Far East equity indices. USDJPY was tightly rangebound just above ¥101 figure, allowing yen crosses to bounce off their recent lows. EURUSD is oscillating around the €1.36 handle with the dollar also paring its recent gains against GBP and CHF. Renewed downside in the former appears to be constrained by £1.7430 intraday support while the selloff in the latter remains suspended on approach to USDCHF $1.15 level. Australian dollar appears to be the outperformer among the majors, finding support at AUD0.7050 followed by a breach of AUD0.71 against the greenback. AUD is also rising relative to EUR, GBP, JPY, and NZD. Aussie rally is particularly noteworthy in light of poor economic data from Australia that saw a -2.2% decline in monthly home loans and a sharp 11% drop in Westpac Consumer sentiment, as traders remain enthused by the prospects of an impact from a much wider rate cut on the Aussie economy. Over in Asia's emerging markets, South Korean Won is under immense selling pressure with USD/KRW rising above 1,300 - a 7 1/2 year low for the Won. Testimony from South Korea's central bank official revealed efforts to secure loans to raise funds in the face of an ongoing liquidity drain. USDSGD continues to struggle with $1.47 handle while Taiwan dollar was pressued by central bank's warning of an unscheduled policy meeting if conditions demand it.
Asian Equities: The Nikkei 225 is lower by more than 4.5% and trading below 10,000. Declines in Tokyo are being led by Toyota Motors, whose shares are declining by more than 6% following an unconfirmed report in the Nikkei news that the company's FY operating profit could decline by 40% versus the prior year. Other decliners in Japan include shares of banks and steel makers. The S&P ASX 200 is declining by more than 4%, despite the RBA's recent larger than expected interest rate cut. Declines in Sydney are being led by financials and miners. The Kospi is off by more than 3%, led by declines in shares of industrials, technology companies and banks. The Shanghai Composite is lower by more than 3%, led by weakness in financial companies. China's largest property developer, Vanke's shares are lower by more than 3% on reports that its September sales declined sharply. In other Asian equity trading, the Hang Seng is declining by more than 5.5%, the Taiex is close to 4.3% lower, the Straits Times is lower by close to 4% and the Jakarta Composite is off by more than 9%.
Commodities: Crude oil prices are lower by more than 1%, tracking the weaker equities. Spot Gold is gaining by more than 0.20%, but is well off of the session's best levels.
Trade The News Staff
Trade The News, Inc.
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.
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The Hang Seng and Nikkei lead Asian equities lower
Forex: Volatility in FX majors was suspiciously subdued in Wednesday's Asian session in spite of the rout in Far East equity indices. USDJPY was tightly rangebound just above ¥101 figure, allowing yen crosses to bounce off their recent lows. EURUSD is oscillating around the €1.36 handle with the dollar also paring its recent gains against GBP and CHF. Renewed downside in the former appears to be constrained by £1.7430 intraday support while the selloff in the latter remains suspended on approach to USDCHF $1.15 level. Australian dollar appears to be the outperformer among the majors, finding support at AUD0.7050 followed by a breach of AUD0.71 against the greenback. AUD is also rising relative to EUR, GBP, JPY, and NZD. Aussie rally is particularly noteworthy in light of poor economic data from Australia that saw a -2.2% decline in monthly home loans and a sharp 11% drop in Westpac Consumer sentiment, as traders remain enthused by the prospects of an impact from a much wider rate cut on the Aussie economy. Over in Asia's emerging markets, South Korean Won is under immense selling pressure with USD/KRW rising above 1,300 - a 7 1/2 year low for the Won. Testimony from South Korea's central bank official revealed efforts to secure loans to raise funds in the face of an ongoing liquidity drain. USDSGD continues to struggle with $1.47 handle while Taiwan dollar was pressued by central bank's warning of an unscheduled policy meeting if conditions demand it.
Asian Equities: The Nikkei 225 is lower by more than 4.5% and trading below 10,000. Declines in Tokyo are being led by Toyota Motors, whose shares are declining by more than 6% following an unconfirmed report in the Nikkei news that the company's FY operating profit could decline by 40% versus the prior year. Other decliners in Japan include shares of banks and steel makers. The S&P ASX 200 is declining by more than 4%, despite the RBA's recent larger than expected interest rate cut. Declines in Sydney are being led by financials and miners. The Kospi is off by more than 3%, led by declines in shares of industrials, technology companies and banks. The Shanghai Composite is lower by more than 3%, led by weakness in financial companies. China's largest property developer, Vanke's shares are lower by more than 3% on reports that its September sales declined sharply. In other Asian equity trading, the Hang Seng is declining by more than 5.5%, the Taiex is close to 4.3% lower, the Straits Times is lower by close to 4% and the Jakarta Composite is off by more than 9%.
Commodities: Crude oil prices are lower by more than 1%, tracking the weaker equities. Spot Gold is gaining by more than 0.20%, but is well off of the session's best levels.
Trade The News Staff
Trade The News, Inc.
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.
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Forex Technicals: The Day Ahead, October 8
| Daily Forex Technicals | Written by DailyFX | Oct 08 08 02:23 GMT | | |
| The EURUSD gained for the first day since 9/25. Evidence suggests that this is the beginning of a larger USD decline.
EURUSDThe path that I outlined last night is proving correct so far; 'the decline from 1.4871 is an impulse (5 waves) and indicates that a short term low likely forms soon. The ensuing advance should prove corrective. When the advance gets underway, expect strength until at least 1.3911. This is the 4th wave of one less degree.' There is no change here. Additional strength could reach the mid 1.41 level (former resistance and Fibonacci at 1.4138/70).
USDJPYI wrote yesterday that '100 is the next level that will be put to the test. Former support just shy of 103 (102.81 to be exact) is potential resistance as is the breakout level of 103.50.' The USDJPY came right into the mentioned resistance zone and price was turned back. Price should remain below 103.28 going forward.
GBPUSDThe GBPUSD decline from 1.8675 is now in 5 waves and price broke below the September low to confirm the longer term bear. An advance, although corrective, should begin soon. I am expecting the advance to reach at least the 1.7843-79 area.
USDCHFThe USDCHF exceeded 1.1422. The advance is in 5 waves (as is the EURUSD decline from 1.4871) so a 3 wave corrective decline is expected to begin soon. Initial support is at 1.1215 and the Fibonacci zone begins at 1.1178.
USDCADThe advance from 1.03 is in 5 waves so we should see a corrective decline begin soon in the USDCAD. Support begins at 1.0830, although a deeper decline is likely.
AUDUSDPrice has reached the .70 figure but there is no evidence that the decline is over. If a larger correction unfolds, then look for resistance in the 7416-.7517 area going forward. This is former congestion and a Fibonacci level. Be aware that COT positioning indicates potential for a bottom to form soon though. The next bearish objective is near .65.
NZSDUSDThe drop below .6435 confirms that wave 5 (within the 5 wave drop from .8219) is underway (possibly near completion). With 5 waves down (although no evidence that wave 5 is complete), there is the possibility of a significant bottom forming soon.
Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Fed's Bernanke Tips Hat To Rate Cut
| Daily Forex Fundamentals | Written by MG Financial Group | Oct 08 08 02:32 GMT | | |
| The global financial crisis continues to drive the volatile movements in the foreign exchange market, with the yen and dollar benefiting from safe haven flows amid heightened risk aversion. The US equity bourses extended its dive for another session with the Dow Jones losing 5.1% to 9,447.11, the Nasdaq plunged 5.8% to 1,754.88 and the S&P 500 shredding another 5.74% to break beneath the 1,000-level to 996.23. Amid growing speculation of coordinated intervention by global central banks, Fed Chairman Bernanke raised the prospects for a rate cut suggesting the FOMC would 'need to consider whether the current stance of policy remains appropriate' given the current 'extraordinary stress' on the financial system. It was also revealed earlier that the Fed would be purchasing commercial paper issues to facilitate the improved flow of credit with Bernanke saying they will continue to pursue tools at its disposal to improve market functioning and liquidity. Meanwhile, fears overseas have heavily weighed on the sterling and euro - amid burgeoning skepticism over the stability of European and British financial institutions. It was announced earlier today the UK would inject up to 50 billion pounds into several banks, with the government purchasing preferred shares of the banks - thus partially nationalizing the institutions. Governments across the globe have stepped up efforts to inject liquidity into cash-strapped financial institutions in order to stave off further tightening in the credit markets and stem the crisis. The minutes of the FOMC's September 16th meeting revealed deliberations for a rate cut, with Board members expressing greater pessimism over growth in the coming year. The minutes showed some members calling for a 'policy response' to the detrimental impact of the financial crisis on growth. With the next Fed policy meeting at the end of October, we look for a 50-basis point rate cut from the FOMC, lowering its benchmark lending rate to 1.50%. In the coming session, the economic reports slated for release include the ECB monthly report, Eurozone GDP and US pending home sales. MG Financial Group Legal disclaimer and risk disclosure MG Financial Group, or any of its related companies, will not be held responsible for the reliability or accuracy of the information available on this site. The content provided is put forward in good faith and believed to be accurate, however, there are no implicit guarantees of accuracy or timeliness. | |
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Australian Home-Loan Approvals Drop for Seventh Month
By Jacob Greber
Oct. 8 (Bloomberg) -- Australian home-loan approvals declined for a seventh month, supporting the central bank's decision yesterday to cut the benchmark lending rate by one percentage point, the most since a recession in 1992.
The number of loans granted to build or buy homes and apartments fell 2.2 percent from July, when they slid a revised 0.9 percent, the statistics bureau said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg News was for a 1 percent decline.
Demand for new homes may climb in coming months after Reserve Bank of Australia Governor Glenn Stevens cut the overnight cash rate target to 6 percent, the lowest in almost two years, on signs the economy's expansion is slowing more than forecast. Home-buyers have also become less willing to borrow after companies such as Qantas Airways Ltd. and Ford Motor Co. started firing workers.
``Stricter bank lending and general negative sentiment should act to restrain lending,'' Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, said ahead of today's report.
Australian lenders have taken ``a more cautious attitude to lending'' and tripled provisions for bad debts, according to a Reserve Bank report last month.
The Australian dollar was little changed after today's report. It traded at 71.01 U.S. cents at 11:34 a.m. in Sydney from 70.98 cents when the report was released and 71.50 in late Asian trading yesterday.
Mortgage Payments
House prices declined for the first time in almost three years in the second quarter, the government said on Aug. 4, after banks raised mortgage rates and rationed lending because they faced higher funding costs amid the global credit squeeze.
Yesterday's cut to the benchmark lending rate was twice as much as economists forecast.
``An unusually large movement in the cash rate was appropriate in order to bring about a significant reduction in costs to borrowers,'' Stevens said yesterday.
Australia's four biggest banks, led by Commonwealth Bank of Australia and Westpac Banking Corp., cut their standard variable home loan rates by 80 basis points after the decision.
That will reduce the monthly repayments on an average A$250,000 ($178,000) mortgage by almost A$140. About 90 percent of Australian home buyers have variable interest-rate loans that traditionally move with the central bank's benchmark.
Australia's economy grew 0.3 percent in the three months through June, the slowest quarterly expansion since the end of 2004, as consumer spending contracted for the first time since 1993.
Consumer Confidence
Credit provided by banks and financial institutions to home buyers rose 0.4 percent in August, the smallest monthly increase in 22 years, according to Reserve Bank figures.
A separate report showed house-building approvals fell for a second month.
Australian consumer confidence plunged 11 percent in September, according to a Westpac Banking Corp. survey taken before yesterday's interest-rate cut and released in Sydney today.
Households spent almost 40 percent of their incomes on mortgage payments in the June quarter, the most in the 22 years that the Real Estate Institute has measured affordability.
The total value of lending fell 3 percent to A$17.5 billion in August, today's report showed.
Lending to owner occupiers declined 2.1 percent, while the value of lending to investors who plan to rent or resell homes dropped 5 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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Oct. 8 (Bloomberg) -- Australian home-loan approvals declined for a seventh month, supporting the central bank's decision yesterday to cut the benchmark lending rate by one percentage point, the most since a recession in 1992.
The number of loans granted to build or buy homes and apartments fell 2.2 percent from July, when they slid a revised 0.9 percent, the statistics bureau said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg News was for a 1 percent decline.
Demand for new homes may climb in coming months after Reserve Bank of Australia Governor Glenn Stevens cut the overnight cash rate target to 6 percent, the lowest in almost two years, on signs the economy's expansion is slowing more than forecast. Home-buyers have also become less willing to borrow after companies such as Qantas Airways Ltd. and Ford Motor Co. started firing workers.
``Stricter bank lending and general negative sentiment should act to restrain lending,'' Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, said ahead of today's report.
Australian lenders have taken ``a more cautious attitude to lending'' and tripled provisions for bad debts, according to a Reserve Bank report last month.
The Australian dollar was little changed after today's report. It traded at 71.01 U.S. cents at 11:34 a.m. in Sydney from 70.98 cents when the report was released and 71.50 in late Asian trading yesterday.
Mortgage Payments
House prices declined for the first time in almost three years in the second quarter, the government said on Aug. 4, after banks raised mortgage rates and rationed lending because they faced higher funding costs amid the global credit squeeze.
Yesterday's cut to the benchmark lending rate was twice as much as economists forecast.
``An unusually large movement in the cash rate was appropriate in order to bring about a significant reduction in costs to borrowers,'' Stevens said yesterday.
Australia's four biggest banks, led by Commonwealth Bank of Australia and Westpac Banking Corp., cut their standard variable home loan rates by 80 basis points after the decision.
That will reduce the monthly repayments on an average A$250,000 ($178,000) mortgage by almost A$140. About 90 percent of Australian home buyers have variable interest-rate loans that traditionally move with the central bank's benchmark.
Australia's economy grew 0.3 percent in the three months through June, the slowest quarterly expansion since the end of 2004, as consumer spending contracted for the first time since 1993.
Consumer Confidence
Credit provided by banks and financial institutions to home buyers rose 0.4 percent in August, the smallest monthly increase in 22 years, according to Reserve Bank figures.
A separate report showed house-building approvals fell for a second month.
Australian consumer confidence plunged 11 percent in September, according to a Westpac Banking Corp. survey taken before yesterday's interest-rate cut and released in Sydney today.
Households spent almost 40 percent of their incomes on mortgage payments in the June quarter, the most in the 22 years that the Real Estate Institute has measured affordability.
The total value of lending fell 3 percent to A$17.5 billion in August, today's report showed.
Lending to owner occupiers declined 2.1 percent, while the value of lending to investors who plan to rent or resell homes dropped 5 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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