By Brian Swint
Oct. 16 (Bloomberg) -- Confidence in the world economy tumbled in October after a deepening freeze in financial markets increased the chances of a recession, a survey of Bloomberg users on six continents showed.
The Bloomberg Professional Global Confidence Index fell to 4 from 11.3 in September, the lowest reading since the survey started in November. Sentiment dropped the most in Asia and Europe and was weakest in Japan. The results reflect responses from 3,764 Bloomberg users in more than 100 countries.
Stock markets plunged the most since at least 1970 last week as concerns about a potential collapse of the banking system reverberated through the world economy. That's sapping confidence just as the U.S. and Europe hurtle toward recession, forcing central banks to slash interest rates in tandem and governments to rescue financial institutions.
``We're going to see a repeat of the 1987 dynamic after the stock market crash where business confidence fell sharply and you saw a significant retrenchment in business investment as a result,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.
Bloomberg users from Dubai to New York posted responses to the survey between Oct. 6 and Oct. 10 after the U.S. Congress's decision to approve a $700 billion rescue plan for banks. The U.K. unveiled plans to buy stakes in banks as well as lending guarantees on Oct. 8. The survey didn't reflect a decision by euro-region governments on Oct. 12 to back similar measures.
Country Economies
When asked about their own economies, British respondents were the most pessimistic, with the index falling to 3 from 5.7. The U.S. reading declined to 5.1 from 15.2 and a gauge of Japanese confidence slipped to 5.4 from 7. While Brazilian users were the most optimistic, its index still plunged the most for any country, falling 32 points to 26.2.
The credit squeeze, which worsened after the collapse of Lehman Brothers Holdings Inc. last month, is dragging down a global economy already hit by a record surge in oil prices this year. U.S. employers cut the most jobs in five years in September, while confidence among Japanese consumers and German investors are both close to record lows.
``On top of the financial crisis, we're likely to see spillovers into the real sector,'' said Alvin Liew, an economist at Standard Chartered Plc in Singapore who took part in the survey. ``If this slowdown is a protracted one, that would have knock-on impact on domestic demand as well.''
IMF Estimates
The International Monetary Fund last week forecast that global growth will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007. That would mean a world recession under the fund's informal definition.
Respondents in all countries except Brazil were more confident their central banks would cut rates, the survey showed, with U.K. users expecting the biggest declines. The Bank of England's benchmark rate of 4.5 percent is still the highest among the Group of Seven nations even after last week's 50 basis point reduction.
The MSCI World Index, which fell 20 percent last week, has since rebounded after euro region nations committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders. Treasury Secretary Henry Paulson said this week he plans to use $250 billion of taxpayer funds to purchase stakes in thousands of financial firms, while central banks are slashing rates and flooding the financial system with cash.
The measures may be starting to work. The rate banks charge each other to borrow dollars for three months fell for a third day yesterday, declining 9 basis points to 4.55 percent, according to the British Bankers' Association. The one-week rate fell to 3.83 percent from 4.08 percent on Oct. 13.
``The various rescue packages have essentially prevented something bad from turning into something much worse,'' said Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. Still, ``the U.S., Europe and Japan are all headed to a recession. The credit crunch has hit them equally hard.''
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
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Thursday, October 16, 2008
Australian Central Bank Adds A$2.79 Billion to Money System
By Candice Zachariahs
Oct. 16 (Bloomberg) -- Australia's central bank added A$2.79 billion ($1.83 billion) to the financial system, seeking to ease funding costs as banks hoard cash due to the global credit squeeze.
The Reserve Bank of Australia added funds through so-called repurchase agreements after estimating money markets would have a deficit of A$1.82 billion today. Australian banks increased deposits held at the RBA by A$40 million to A$9.813 billion yesterday, after those holdings reached a record A$11.04 billion on Sept. 30, the RBA said today on its Web site.
Australian banks' borrowing costs eased today, according to a gauge that measures the availability of funds in the market. The difference between the rate banks charge each other for three-month loans and the overnight indexed swap rate stood at 75.5 basis points, or 0.755 percentage point at 10:37 a.m. in Sydney, heading for the smallest since Oct. 2, from 95.50 yesterday. The gap has averaged 47 points this year.
Interbank lending rates have jumped as banks hoarded cash after Lehman Brothers Holdings Inc. went bankrupt last month. Funding eased this week after Australian Prime Minister Kevin Rudd guaranteed bank deposits and European leaders promised to shore up lenders, seeking to unlock frozen credit markets.
The London interbank offered rate, or Libor, that banks charge each other for three-month dollar loans dropped yesterday for a third day, its longest sequence of declines in seven weeks according to the British Bankers' Association. It slid 9 basis points to 4.55 percent.
Banks hold cash in RBA exchange settlement accounts, on- call deposits at the central bank that receive interest at 0.25 percentage point below the central bank's benchmark rate.
In repurchase agreements, or repos, central banks typically buy debt securities for a set period, temporarily raising the amount of money available in the banking system.
Repos help maintain enough money to keep overnight interest rates close to the central bank's target. They don't signal a policy shift. RBA Governor Glenn Stevens lowered the cash target rate to 6 percent on Oct. 7.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- Australia's central bank added A$2.79 billion ($1.83 billion) to the financial system, seeking to ease funding costs as banks hoard cash due to the global credit squeeze.
The Reserve Bank of Australia added funds through so-called repurchase agreements after estimating money markets would have a deficit of A$1.82 billion today. Australian banks increased deposits held at the RBA by A$40 million to A$9.813 billion yesterday, after those holdings reached a record A$11.04 billion on Sept. 30, the RBA said today on its Web site.
Australian banks' borrowing costs eased today, according to a gauge that measures the availability of funds in the market. The difference between the rate banks charge each other for three-month loans and the overnight indexed swap rate stood at 75.5 basis points, or 0.755 percentage point at 10:37 a.m. in Sydney, heading for the smallest since Oct. 2, from 95.50 yesterday. The gap has averaged 47 points this year.
Interbank lending rates have jumped as banks hoarded cash after Lehman Brothers Holdings Inc. went bankrupt last month. Funding eased this week after Australian Prime Minister Kevin Rudd guaranteed bank deposits and European leaders promised to shore up lenders, seeking to unlock frozen credit markets.
The London interbank offered rate, or Libor, that banks charge each other for three-month dollar loans dropped yesterday for a third day, its longest sequence of declines in seven weeks according to the British Bankers' Association. It slid 9 basis points to 4.55 percent.
Banks hold cash in RBA exchange settlement accounts, on- call deposits at the central bank that receive interest at 0.25 percentage point below the central bank's benchmark rate.
In repurchase agreements, or repos, central banks typically buy debt securities for a set period, temporarily raising the amount of money available in the banking system.
Repos help maintain enough money to keep overnight interest rates close to the central bank's target. They don't signal a policy shift. RBA Governor Glenn Stevens lowered the cash target rate to 6 percent on Oct. 7.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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South Korea's Store Sales Decline for First Time in Nine Months
By William Sim
Oct. 16 (Bloomberg) -- South Korea's department store sales declined for the first time in nine months in September, adding to signs the economy is cooling.
Sales at the nation's three biggest chains fell 0.3 percent from a year earlier, following a 14 percent gain in August, the Ministry of Knowledge Economy said in Gwacheon today.
Rising living costs and the benchmark stock index's 29 percent drop this year have eroded consumer confidence and cooled sales for retailers including by Lotte Shopping Co. The Bank of Korea this month cut interest rates for the first time in four years, joining global central bank efforts to stem economic fallout from the deepening financial crisis.
Shares in Lotte Shopping, the nation's largest department store operator, have fallen 48 percent in 2008, and those in Hyundai Department Store Co., the second biggest, have dropped 35 percent.
South Korea added the fewest number of jobs in almost four years last month as the faltering economy prompted manufacturers and builders to fire workers.
The $970 billion economy grew 4.8 percent in the second quarter, the weakest pace in more than a year, as consumers cut spending. The government last month announced almost $20 billion in tax cuts for workers and small businesses to try to bolster faltering domestic demand.
Sales of men's clothing dropped 13.8 percent in September from a year earlier and spending on household goods fell 9.5 percent, today's report showed.
Sales of luxury goods at department stores climbed 24.7 percent, the smallest increase in six months.
Spending at discount stores slumped 9.2 percent from a year earlier, the biggest drop in 11 months, following a 1.1 percent gain in August, according to today's figures.
To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net.
Read more...
Oct. 16 (Bloomberg) -- South Korea's department store sales declined for the first time in nine months in September, adding to signs the economy is cooling.
Sales at the nation's three biggest chains fell 0.3 percent from a year earlier, following a 14 percent gain in August, the Ministry of Knowledge Economy said in Gwacheon today.
Rising living costs and the benchmark stock index's 29 percent drop this year have eroded consumer confidence and cooled sales for retailers including by Lotte Shopping Co. The Bank of Korea this month cut interest rates for the first time in four years, joining global central bank efforts to stem economic fallout from the deepening financial crisis.
Shares in Lotte Shopping, the nation's largest department store operator, have fallen 48 percent in 2008, and those in Hyundai Department Store Co., the second biggest, have dropped 35 percent.
South Korea added the fewest number of jobs in almost four years last month as the faltering economy prompted manufacturers and builders to fire workers.
The $970 billion economy grew 4.8 percent in the second quarter, the weakest pace in more than a year, as consumers cut spending. The government last month announced almost $20 billion in tax cuts for workers and small businesses to try to bolster faltering domestic demand.
Sales of men's clothing dropped 13.8 percent in September from a year earlier and spending on household goods fell 9.5 percent, today's report showed.
Sales of luxury goods at department stores climbed 24.7 percent, the smallest increase in six months.
Spending at discount stores slumped 9.2 percent from a year earlier, the biggest drop in 11 months, following a 1.1 percent gain in August, according to today's figures.
To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net.
Read more...
EU Pushes for Overhaul of Post-World War II Financial System
By James G. Neuger and Mark Deen
Oct. 16 (Bloomberg) -- European Union leaders pressed for an overhaul of the global financial system to prevent a repeat of the credit crunch that sparked the biggest stock-market selloff since the Great Depression.
EU leaders called for a global summit as soon as next month to rewrite the 1944 Bretton Woods accord that paved the way for Europe's post-World War II reconstruction and set up the institutions that oversee the world economy today.
``We had the emerging market crisis, we had the Internet bubble, now we have this massive crisis,'' French President Nicolas Sarkozy told reporters after chairing the first session of an EU summit late yesterday in Brussels. Europe insists on the ``re-foundation of the international financial system.''
The European initiative is likely to face headwinds from the U.S., which has used its dominance of international financial institutions to promote a brand of capitalism that has come into at least temporary disrepute.
``The U.S. got what it wanted in 1944 and, I suspect, will do so again simply because the Europeans won't be able to decide what they want,'' said Martin Weale, director of the National Institute of Economic and Social Research in London.
President George W. Bush ``definitely'' favors holding a Group of Eight meeting before the end of the year, White House spokesman Tony Fratto said in Washington. European governments pressed for a wider summit, including leaders of developing economies such as China, India, Brazil and South Africa.
EU Presidency
To jumpstart that process, Sarkozy, holder of the EU's six- month presidency, will travel with European Commission President Jose Barroso to the U.S. on Oct. 18 to meet Bush.
Separately, concern mounted that the banking crisis will drag down the broader European economy, where business and consumer sentiment had already slumped to the lowest level since the September 2001 terrorist attacks in the U.S.
``This financial crisis is starting to have an impact on consumers and companies,'' Barroso said.
While stressing a global approach to regulation, European governments are split over how to go about it, with leading countries --including Britain -- traditionally opposed to handing over business regulation to outside authorities. Calls for a single financial supervisor in Europe continued to get little traction.
Proposals for stiffer regulation floated by EU leaders yesterday included more international supervision for cross-border banks, a global ``early warning'' system for crises, a revamp of the International Monetary Fund, tougher regulations on hedge funds, new rules for credit rating companies, limits on executive pay and punishments for excessive risk-taking.
EU leaders will set up a financial crisis taskforce to improve coordination among the bloc's 27 governments, and endorsed an end of ``mark-to-market'' accounting to maintain a level playing field with the U.S.
Gordon Brown
U.K. Prime Minister Gordon Brown, author of the British bank- bailout plan that was copied across Europe and in the U.S., called for an end-of-year deadline to place each of the world's top 30 banks under the supervision of a panel of regulators from the countries where it is active.
``We now have global financial markets, but what we do not have is anything other than national and regional regulation and supervision,'' Brown said.
Treatment of tax havens such as the Cayman Islands and Monaco may be overhauled as part of any new global financial framework, Sarkozy said.
``It will be part of discussions Saturday in Washington,'' the French leader said. ``Will we continue to work with tax havens? It's a valid question. We've passed into a new era. It's a question we'll put on the table and immediately.''
EU governments initially reacted to the crisis in a ``piecemeal and ad hoc'' fashion, ``creating an impression of disorder and sending confused signals to financial markets,'' aides to Barroso said in a paper prepared last week and released yesterday.
European Leaders
In the meantime, European leaders have committed as much as $2 trillion to guarantee interbank lending and buy stakes in banks, to prevent hobbled credit markets from tipping the broader economy into recession.
The U.S. followed suit, announcing an unprecedented $250 billion government investment in banks, starting with nine institutions deemed critical to the survival of the system.
Growing doubts that the bailout will keep the U.S. out of recession hammered U.S. stocks, leading to the steepest plunge since the crash of 1987.
``There needs to be a new Bretton Woods,'' Italian Prime Minister Silvio Berlusconi said. ``The consensus is very strong and it keeps growing stronger.''
To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Mark Deen in Brussels at markdeen@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- European Union leaders pressed for an overhaul of the global financial system to prevent a repeat of the credit crunch that sparked the biggest stock-market selloff since the Great Depression.
EU leaders called for a global summit as soon as next month to rewrite the 1944 Bretton Woods accord that paved the way for Europe's post-World War II reconstruction and set up the institutions that oversee the world economy today.
``We had the emerging market crisis, we had the Internet bubble, now we have this massive crisis,'' French President Nicolas Sarkozy told reporters after chairing the first session of an EU summit late yesterday in Brussels. Europe insists on the ``re-foundation of the international financial system.''
The European initiative is likely to face headwinds from the U.S., which has used its dominance of international financial institutions to promote a brand of capitalism that has come into at least temporary disrepute.
``The U.S. got what it wanted in 1944 and, I suspect, will do so again simply because the Europeans won't be able to decide what they want,'' said Martin Weale, director of the National Institute of Economic and Social Research in London.
President George W. Bush ``definitely'' favors holding a Group of Eight meeting before the end of the year, White House spokesman Tony Fratto said in Washington. European governments pressed for a wider summit, including leaders of developing economies such as China, India, Brazil and South Africa.
EU Presidency
To jumpstart that process, Sarkozy, holder of the EU's six- month presidency, will travel with European Commission President Jose Barroso to the U.S. on Oct. 18 to meet Bush.
Separately, concern mounted that the banking crisis will drag down the broader European economy, where business and consumer sentiment had already slumped to the lowest level since the September 2001 terrorist attacks in the U.S.
``This financial crisis is starting to have an impact on consumers and companies,'' Barroso said.
While stressing a global approach to regulation, European governments are split over how to go about it, with leading countries --including Britain -- traditionally opposed to handing over business regulation to outside authorities. Calls for a single financial supervisor in Europe continued to get little traction.
Proposals for stiffer regulation floated by EU leaders yesterday included more international supervision for cross-border banks, a global ``early warning'' system for crises, a revamp of the International Monetary Fund, tougher regulations on hedge funds, new rules for credit rating companies, limits on executive pay and punishments for excessive risk-taking.
EU leaders will set up a financial crisis taskforce to improve coordination among the bloc's 27 governments, and endorsed an end of ``mark-to-market'' accounting to maintain a level playing field with the U.S.
Gordon Brown
U.K. Prime Minister Gordon Brown, author of the British bank- bailout plan that was copied across Europe and in the U.S., called for an end-of-year deadline to place each of the world's top 30 banks under the supervision of a panel of regulators from the countries where it is active.
``We now have global financial markets, but what we do not have is anything other than national and regional regulation and supervision,'' Brown said.
Treatment of tax havens such as the Cayman Islands and Monaco may be overhauled as part of any new global financial framework, Sarkozy said.
``It will be part of discussions Saturday in Washington,'' the French leader said. ``Will we continue to work with tax havens? It's a valid question. We've passed into a new era. It's a question we'll put on the table and immediately.''
EU governments initially reacted to the crisis in a ``piecemeal and ad hoc'' fashion, ``creating an impression of disorder and sending confused signals to financial markets,'' aides to Barroso said in a paper prepared last week and released yesterday.
European Leaders
In the meantime, European leaders have committed as much as $2 trillion to guarantee interbank lending and buy stakes in banks, to prevent hobbled credit markets from tipping the broader economy into recession.
The U.S. followed suit, announcing an unprecedented $250 billion government investment in banks, starting with nine institutions deemed critical to the survival of the system.
Growing doubts that the bailout will keep the U.S. out of recession hammered U.S. stocks, leading to the steepest plunge since the crash of 1987.
``There needs to be a new Bretton Woods,'' Italian Prime Minister Silvio Berlusconi said. ``The consensus is very strong and it keeps growing stronger.''
To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Mark Deen in Brussels at markdeen@bloomberg.net
Read more...
Europe's Central Banks Intensify Effort to Jolt Market to Life
By Simon Kennedy and Christian Vits
Oct. 16 (Bloomberg) -- Europe's central banks are intensifying efforts to jolt credit markets back to life.
The European Central Bank yesterday said it will accept lower-rated securities as collateral when lending to banks and offer them as many euros as they want over the next six months. The Swiss central bank said it will conduct currency swaps with the ECB. The Bank of England will unveil plans to revamp its market operations at 11 a.m. in London today.
``Central banks are throwing everything they can at the credit markets to get them working again,'' said Win Thin, an economist at Brown Brothers Harriman & Co.
Policy makers are becoming more creative as they bid to end a 14-month credit freeze which has left their economies on the edge of recession. While the cost of borrowing euros has fallen, banks continue to deposit record amounts of cash with the ECB, a sign they remain reluctant to lend to each other.
Throwing open the door to what it will accept when lending, the ECB will now exchange cash for debt securities denominated in dollars, pounds and yen as well as euros. They must also be issued in the 15-nation bloc. The changes take effect imminently and stay in force until the end of next year.
``Essentially, they are moving to provide financing in a much more substantial way to the banking system,'' said Julian Callow, chief European economist at Barclays Capital in London.
The rating on the bonds accepted in market operations was cut to BBB- from A-, with the exception of asset-backed securities. The ECB also said it's expanding its program of offering banks unlimited cash to all ``longer-term'' operations. Previously this only applied to its weekly operations.
Tackling Crisis
The Bank of England is also stepping up its efforts amid criticism it hasn't done enough to tackle the crisis and plans to introduce a discount window facility. Kenneth Broux, economist at Lloyds TSB Group Plc, said it may follow the ECB in widening the collateral and credit ratings it will accept for loans.
``Central banks are moving in coordinated fashion, which is good news, and there's room for the Bank of England to follow,'' he said.
The shift follows a redoubling of efforts by policy makers to thaw money markets. In the past week, the ECB said it will offer banks as many euros and dollars as they want and joined the Bank of England and other counterparts in a united round of interest-rate cuts. Governments have also established programs to recapitalize banks and guarantee bank lending.
The Frankfurt-based central bank last week cut its main rate to 3.75 percent from 4.25 percent.
Rate Cut
``The ECB is trying to ensure that at least a significant share of the 50 basis-point rate cut which it consented on Oct. 8 will be effectively passed to the rest of the economy,'' said Gilles Moec, an economist at Bank of America Corp. in London and a former official at the French central bank.
Policy makers have so far had some success in reducing money market rates with the cost of borrowing euros over three months falling for a fifth day yesterday to 5.175 percent.
Even so, that remains well above the bank's 3.75 percent refinancing rate. Banks remain skeptical of lending to each other, depositing a record 196.1 billion euros ($267 billion) with the ECB two days ago rather than storing it elsewhere.
``Despite some positive reaction, the interbank market has still not come to life,'' said Carsten Brzeski, an economist at ING Group in Brussels. ``The only question remains whether the ECB has any ammunition left.''
President Jean-Claude Trichet said Oct. 12 that the ECB lacks the legal powers to immediately follow the Federal Reserve in opening a facility to buy commercial paper.
Running Short
The ECB may have acted in part because some banks were running short of acceptable collateral, according to Moec. Dropping the cap on cash over a longer time should also help the economy by reducing 3-month and 6-month lending rates which serve as benchmarks for some loans to companies and consumers, he said.
``It's a very significant step,'' said Moec. ``They are acting to influence both the price of money and the quantity of money out there.''
In an effort to make it easier for banks in Europe to access dollar liquidity, the ECB said it will start offering dollars through foreign-exchange swaps. Separately, the ECB and the Swiss National Bank announced they will conduct seven-day currency swaps to lower money-market rates for Swiss francs.
The ECB's increased generosity marks a reversal from Sept. 4 when it announced plans to tighten its lending rules. The bankruptcy of Lehman Brothers Holdings Inc. on Sept. 14 precipitated the latest chapter of the credit crisis, causing banks to stop lending to each other out of concern they may not get their money back.
``The expansion of the eligibility criteria announced today will be combined with vigilant monitoring of the use of the framework,'' the ECB said.
To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.netChristian Vits in Frankfurt at cvits@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- Europe's central banks are intensifying efforts to jolt credit markets back to life.
The European Central Bank yesterday said it will accept lower-rated securities as collateral when lending to banks and offer them as many euros as they want over the next six months. The Swiss central bank said it will conduct currency swaps with the ECB. The Bank of England will unveil plans to revamp its market operations at 11 a.m. in London today.
``Central banks are throwing everything they can at the credit markets to get them working again,'' said Win Thin, an economist at Brown Brothers Harriman & Co.
Policy makers are becoming more creative as they bid to end a 14-month credit freeze which has left their economies on the edge of recession. While the cost of borrowing euros has fallen, banks continue to deposit record amounts of cash with the ECB, a sign they remain reluctant to lend to each other.
Throwing open the door to what it will accept when lending, the ECB will now exchange cash for debt securities denominated in dollars, pounds and yen as well as euros. They must also be issued in the 15-nation bloc. The changes take effect imminently and stay in force until the end of next year.
``Essentially, they are moving to provide financing in a much more substantial way to the banking system,'' said Julian Callow, chief European economist at Barclays Capital in London.
The rating on the bonds accepted in market operations was cut to BBB- from A-, with the exception of asset-backed securities. The ECB also said it's expanding its program of offering banks unlimited cash to all ``longer-term'' operations. Previously this only applied to its weekly operations.
Tackling Crisis
The Bank of England is also stepping up its efforts amid criticism it hasn't done enough to tackle the crisis and plans to introduce a discount window facility. Kenneth Broux, economist at Lloyds TSB Group Plc, said it may follow the ECB in widening the collateral and credit ratings it will accept for loans.
``Central banks are moving in coordinated fashion, which is good news, and there's room for the Bank of England to follow,'' he said.
The shift follows a redoubling of efforts by policy makers to thaw money markets. In the past week, the ECB said it will offer banks as many euros and dollars as they want and joined the Bank of England and other counterparts in a united round of interest-rate cuts. Governments have also established programs to recapitalize banks and guarantee bank lending.
The Frankfurt-based central bank last week cut its main rate to 3.75 percent from 4.25 percent.
Rate Cut
``The ECB is trying to ensure that at least a significant share of the 50 basis-point rate cut which it consented on Oct. 8 will be effectively passed to the rest of the economy,'' said Gilles Moec, an economist at Bank of America Corp. in London and a former official at the French central bank.
Policy makers have so far had some success in reducing money market rates with the cost of borrowing euros over three months falling for a fifth day yesterday to 5.175 percent.
Even so, that remains well above the bank's 3.75 percent refinancing rate. Banks remain skeptical of lending to each other, depositing a record 196.1 billion euros ($267 billion) with the ECB two days ago rather than storing it elsewhere.
``Despite some positive reaction, the interbank market has still not come to life,'' said Carsten Brzeski, an economist at ING Group in Brussels. ``The only question remains whether the ECB has any ammunition left.''
President Jean-Claude Trichet said Oct. 12 that the ECB lacks the legal powers to immediately follow the Federal Reserve in opening a facility to buy commercial paper.
Running Short
The ECB may have acted in part because some banks were running short of acceptable collateral, according to Moec. Dropping the cap on cash over a longer time should also help the economy by reducing 3-month and 6-month lending rates which serve as benchmarks for some loans to companies and consumers, he said.
``It's a very significant step,'' said Moec. ``They are acting to influence both the price of money and the quantity of money out there.''
In an effort to make it easier for banks in Europe to access dollar liquidity, the ECB said it will start offering dollars through foreign-exchange swaps. Separately, the ECB and the Swiss National Bank announced they will conduct seven-day currency swaps to lower money-market rates for Swiss francs.
The ECB's increased generosity marks a reversal from Sept. 4 when it announced plans to tighten its lending rules. The bankruptcy of Lehman Brothers Holdings Inc. on Sept. 14 precipitated the latest chapter of the credit crisis, causing banks to stop lending to each other out of concern they may not get their money back.
``The expansion of the eligibility criteria announced today will be combined with vigilant monitoring of the use of the framework,'' the ECB said.
To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.netChristian Vits in Frankfurt at cvits@bloomberg.net
Read more...
Risk Drifts From Banks to Governments to You, Me: Mark Gilbert
Commentary by Mark Gilbert
Oct. 16 (Bloomberg) -- Anyone who lost money in the collapse of Lehman Brothers Holdings Inc. should probably be reaching for their lawyers about now.
Our money -- yours and mine -- is now keeping the global financial system afloat. In a capitulation that beggars belief, governments all around the world have pledged our money -- yours and mine -- to fund a ``No Bank Left Behind'' program. And no matter what the politicians say, that means our money -- yours and mine -- is now at risk in the casino.
So the decision to let Lehman go to the wall last month looks increasingly like (a) an experiment in brinkmanship gone wrong (b) a worthless sacrifice to the angry gods of moral hazard (c) the biggest mistake that the authorities have made during the current crisis (d) all of the above.
The U.S. Treasury's theory that the demise of Bear Stearns Cos. was rapid and unforeseen, whereas traders and investors had sufficient time to brace themselves for the collapse of Lehman, is undone by the chaos and panic seen in recent weeks as trading desks rush to untangle the mess of unraveling deals. Listen to any of the recent comments from European Central Bank policy makers on the topic of Lehman, and you can hear the undercurrent of puzzled anger at the decision.
Hoarding Carrots
It's way, way too early to gauge the effectiveness of U.S. Treasury Secretary Henry Paulson's plan to cure the financial crisis by spending $250 billion making Uncle Sam a shareholder in thousands of financial companies, guaranteeing bank debt and buying commercial paper.
What is clear, though, is that however many carrots the U.S. gives to Wall Street, the government doesn't have much of a stick to flagellate the banks into replanting those vegetables on Main Street, where the real economy is facing starvation.
``Leaving businesses and consumers without access to financing is totally unacceptable,'' Paulson said this week when he revealed his latest bailout for the banks. ``When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend,'' said assistant U.S. Treasury Secretary David Nason.
I disagree. If the alternative is lending money to businesses that are about to go bust and consumers who are about to lose their jobs, then restricting credit seems not just acceptable, it is downright prudent.
No Credit
``Will banks turn on the lending taps and will corporates fall over themselves for the liquidity? We don't think so,'' Suki Mann, a credit strategist at Societe Generale SA in London, wrote in a research note this week. ``Deleveraging won't stop overnight. The cost of credit will remain high.''
The global effort by central banks to shore up the precarious capital position of the financial industry using our money -- yours and mine -- is a direct consequence of the earlier decision to let Lehman hang.
The failure to prevent Lehman's collapse -- sandwiched between the shotgun marriage of Bear Stearns to JPMorgan Chase & Co. and the gazillion-dollar loan to keep American International Group Inc. from going pop -- sapped whatever remaining confidence banks had in each other. It removed any yardstick to judge which institutions would be deemed too important to fail.
Far from being a panacea, the accelerated effort to funnel our money -- mine and yours -- to plug the yawning holes in bank balance sheets, hasn't alleviated any of the dangers. Risk has just been reallocated.
Goldman Default
So the cost of buying credit-default swaps to insure against Goldman Sachs Group Inc. defaulting on its bonds plummeted to about 234 basis points this week from as high as 543 basis points last week. The benchmark default-swap on U.S. government debt, meantime, has jumped to about 37 basis points from 19 basis points two months ago.
In the U.K., Royal Bank of Scotland Group Plc default swaps cost about 85 basis points, down from almost 300 basis points last week. U.K. government debt, though, is deemed twice as risky as it was two months ago in the credit-derivatives market.
``With country after country guaranteeing deposits and senior creditors, and also doing everything they can to protect the financial system as we know it, senior financial risks should migrate closer toward sovereign risk,'' Jim Reid, a credit strategist at Deutsche Bank AG in London, wrote in a report this week.
Pension Pain
It doesn't stop there. The crisis of confidence has destroyed about $27 trillion of value in the global stock market in the past year. That isn't a typographical error. The combined market capitalization of the world's publicly traded companies is down to about $36 trillion, from a high of $63 trillion reached a year ago, according to data compiled by Bloomberg.
So anyone who has diligently socked money away into a pension plan has seen the value of those contributions destroyed. Put another way, risk has been transferred down the food chain. It started in the banks, filtered through the governments, and now it is infecting our pensions -- yours and mine.
You can guess what is coming next in this crisis. Regulators will call for centralized oversight of financial markets. Some bright spark will suggest that what the world needs is a global central bank, within the environs of the Bank for International Settlements.
And an ex-partner of Goldman will humbly agree to run the show. Rearrange the words ``stable door,'' ``shutting the,'' and ``after the horse has bolted'' to form a well-known phrase.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
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Oct. 16 (Bloomberg) -- Anyone who lost money in the collapse of Lehman Brothers Holdings Inc. should probably be reaching for their lawyers about now.
Our money -- yours and mine -- is now keeping the global financial system afloat. In a capitulation that beggars belief, governments all around the world have pledged our money -- yours and mine -- to fund a ``No Bank Left Behind'' program. And no matter what the politicians say, that means our money -- yours and mine -- is now at risk in the casino.
So the decision to let Lehman go to the wall last month looks increasingly like (a) an experiment in brinkmanship gone wrong (b) a worthless sacrifice to the angry gods of moral hazard (c) the biggest mistake that the authorities have made during the current crisis (d) all of the above.
The U.S. Treasury's theory that the demise of Bear Stearns Cos. was rapid and unforeseen, whereas traders and investors had sufficient time to brace themselves for the collapse of Lehman, is undone by the chaos and panic seen in recent weeks as trading desks rush to untangle the mess of unraveling deals. Listen to any of the recent comments from European Central Bank policy makers on the topic of Lehman, and you can hear the undercurrent of puzzled anger at the decision.
Hoarding Carrots
It's way, way too early to gauge the effectiveness of U.S. Treasury Secretary Henry Paulson's plan to cure the financial crisis by spending $250 billion making Uncle Sam a shareholder in thousands of financial companies, guaranteeing bank debt and buying commercial paper.
What is clear, though, is that however many carrots the U.S. gives to Wall Street, the government doesn't have much of a stick to flagellate the banks into replanting those vegetables on Main Street, where the real economy is facing starvation.
``Leaving businesses and consumers without access to financing is totally unacceptable,'' Paulson said this week when he revealed his latest bailout for the banks. ``When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend,'' said assistant U.S. Treasury Secretary David Nason.
I disagree. If the alternative is lending money to businesses that are about to go bust and consumers who are about to lose their jobs, then restricting credit seems not just acceptable, it is downright prudent.
No Credit
``Will banks turn on the lending taps and will corporates fall over themselves for the liquidity? We don't think so,'' Suki Mann, a credit strategist at Societe Generale SA in London, wrote in a research note this week. ``Deleveraging won't stop overnight. The cost of credit will remain high.''
The global effort by central banks to shore up the precarious capital position of the financial industry using our money -- yours and mine -- is a direct consequence of the earlier decision to let Lehman hang.
The failure to prevent Lehman's collapse -- sandwiched between the shotgun marriage of Bear Stearns to JPMorgan Chase & Co. and the gazillion-dollar loan to keep American International Group Inc. from going pop -- sapped whatever remaining confidence banks had in each other. It removed any yardstick to judge which institutions would be deemed too important to fail.
Far from being a panacea, the accelerated effort to funnel our money -- mine and yours -- to plug the yawning holes in bank balance sheets, hasn't alleviated any of the dangers. Risk has just been reallocated.
Goldman Default
So the cost of buying credit-default swaps to insure against Goldman Sachs Group Inc. defaulting on its bonds plummeted to about 234 basis points this week from as high as 543 basis points last week. The benchmark default-swap on U.S. government debt, meantime, has jumped to about 37 basis points from 19 basis points two months ago.
In the U.K., Royal Bank of Scotland Group Plc default swaps cost about 85 basis points, down from almost 300 basis points last week. U.K. government debt, though, is deemed twice as risky as it was two months ago in the credit-derivatives market.
``With country after country guaranteeing deposits and senior creditors, and also doing everything they can to protect the financial system as we know it, senior financial risks should migrate closer toward sovereign risk,'' Jim Reid, a credit strategist at Deutsche Bank AG in London, wrote in a report this week.
Pension Pain
It doesn't stop there. The crisis of confidence has destroyed about $27 trillion of value in the global stock market in the past year. That isn't a typographical error. The combined market capitalization of the world's publicly traded companies is down to about $36 trillion, from a high of $63 trillion reached a year ago, according to data compiled by Bloomberg.
So anyone who has diligently socked money away into a pension plan has seen the value of those contributions destroyed. Put another way, risk has been transferred down the food chain. It started in the banks, filtered through the governments, and now it is infecting our pensions -- yours and mine.
You can guess what is coming next in this crisis. Regulators will call for centralized oversight of financial markets. Some bright spark will suggest that what the world needs is a global central bank, within the environs of the Bank for International Settlements.
And an ex-partner of Goldman will humbly agree to run the show. Rearrange the words ``stable door,'' ``shutting the,'' and ``after the horse has bolted'' to form a well-known phrase.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
Read more...
ASX Set to List Coal, Gas Futures Starting Next Year
By Angela Macdonald-Smith
Oct. 16 (Bloomberg) -- The Australian Securities Exchange plans to introduce futures contracts for coal, natural gas, and renewable energy credits next year that should help energy companies better manage risks posed by changing prices.
The exchange, owned by ASX Ltd., intends to start trading in the contracts between February and May next year, probably starting with power-station coal for which there is most demand, Anthony Collins, general manager for emerging markets, said today in Sydney.
ASX revived electricity futures in Australia in 2002 and the new contracts will enable energy and financial companies to trade between different fuels through the same market, reducing risks arising from fluctuating prices and carbon costs. The coal futures contract will be based on Japanese-quality thermal coal exported from Newcastle, the world's biggest coal-export harbor.
``In terms of the largest market to service, it's coal; it's coming of age,'' Collins said in an interview following a briefing. ``The timing is very good and everybody wants it, because at the moment, just like the banks don't trust each other because of the counter-party exposure, in the commodity market that's also constraining trade. So, it's the best time to have a cleared market for physical coal.''
Coal futures trading on the ASX may start with 10-15 market participants, rising to ``hundreds if not thousands'' within five years. Trading volumes could rival those in West Texas Intermediate, the U.S. benchmark oil variety, he said.
London Rival
The ASX coal contracts will compete against those planned by ICE Futures in London, which Collins expects will be less popular because they will be settled in cash against trades, bids and offers in the over-the-counter market, instead of in delivered fuel.
``The problem with that is, in the over-the-counter market the liquidity is drying up because of the counter-party issues,'' he said. ``We think that deliverable contracts is a much better specification.''
The coal futures will be monthly contracts each for 1,000 metric tons of power-station coal exported from Newcastle in New South Wales. The ASX has yet to announce the fees for market participants.
New Zealand power futures will be among the more than 20 new products to be listed within the four-month period, Collins said.
The ASX can't give a date yet for the start of carbon futures trading, likely later in 2009, because the timing depends on the Australian government's legislation for the start of emissions trading, Collins said. Australia's proposed carbon trading system, intended to help tackle greenhouse gases blamed for global warming, is due to start on July 1, 2010.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- The Australian Securities Exchange plans to introduce futures contracts for coal, natural gas, and renewable energy credits next year that should help energy companies better manage risks posed by changing prices.
The exchange, owned by ASX Ltd., intends to start trading in the contracts between February and May next year, probably starting with power-station coal for which there is most demand, Anthony Collins, general manager for emerging markets, said today in Sydney.
ASX revived electricity futures in Australia in 2002 and the new contracts will enable energy and financial companies to trade between different fuels through the same market, reducing risks arising from fluctuating prices and carbon costs. The coal futures contract will be based on Japanese-quality thermal coal exported from Newcastle, the world's biggest coal-export harbor.
``In terms of the largest market to service, it's coal; it's coming of age,'' Collins said in an interview following a briefing. ``The timing is very good and everybody wants it, because at the moment, just like the banks don't trust each other because of the counter-party exposure, in the commodity market that's also constraining trade. So, it's the best time to have a cleared market for physical coal.''
Coal futures trading on the ASX may start with 10-15 market participants, rising to ``hundreds if not thousands'' within five years. Trading volumes could rival those in West Texas Intermediate, the U.S. benchmark oil variety, he said.
London Rival
The ASX coal contracts will compete against those planned by ICE Futures in London, which Collins expects will be less popular because they will be settled in cash against trades, bids and offers in the over-the-counter market, instead of in delivered fuel.
``The problem with that is, in the over-the-counter market the liquidity is drying up because of the counter-party issues,'' he said. ``We think that deliverable contracts is a much better specification.''
The coal futures will be monthly contracts each for 1,000 metric tons of power-station coal exported from Newcastle in New South Wales. The ASX has yet to announce the fees for market participants.
New Zealand power futures will be among the more than 20 new products to be listed within the four-month period, Collins said.
The ASX can't give a date yet for the start of carbon futures trading, likely later in 2009, because the timing depends on the Australian government's legislation for the start of emissions trading, Collins said. Australia's proposed carbon trading system, intended to help tackle greenhouse gases blamed for global warming, is due to start on July 1, 2010.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Arrow Energy Says Currency Rates Boost Returns From Shell Deal
By Angela Macdonald-Smith
Oct. 16 (Bloomberg) -- Arrow Energy Ltd., which in June agreed a $700 million sale of stakes in coal-seam gas ventures to Royal Dutch Shell Plc, said a decline in the Australian dollar has boosted local currency returns from the transaction.
The change in the exchange rates since the accord was reached has increased the value of an initial payment to be made by Shell by some A$130 million ($85 million) to about A$640 million, Brisbane-based Arrow Energy said today in a statement to the Australian stock exchange.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- Arrow Energy Ltd., which in June agreed a $700 million sale of stakes in coal-seam gas ventures to Royal Dutch Shell Plc, said a decline in the Australian dollar has boosted local currency returns from the transaction.
The change in the exchange rates since the accord was reached has increased the value of an initial payment to be made by Shell by some A$130 million ($85 million) to about A$640 million, Brisbane-based Arrow Energy said today in a statement to the Australian stock exchange.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
India Joins Brazil, Russia in Injecting Funds, Holding Rates
By Cherian Thomas and Archana Chaudhary
Oct. 16 (Bloomberg) -- India joined Brazil and Russia in injecting funds into commercial banks to tackle the global credit crunch without risking interest rate-cuts that may fan inflation.
The Reserve Bank of India yesterday cut its cash reserve ratio to 6.5 percent from 7.5 percent to ease the worst cash crisis in the economy since 2000. Russia lowered its reserve requirement for the second time in a month, while Brazil reduced the measure Oct. 13 for the fourth time in three weeks.
Only China among the so-called BRIC economies has cut interest rates after the nation's inflation rate almost halved since April. Prices are still at elevated levels in India, Russia and Brazil, and the decline in their currencies this year may stoke inflation from higher import costs.
``There are a number of countries that haven't cut rates and the common feature for all of them is that their domestic inflation numbers are still quite high,'' said Subir Gokarn, Asia-Pacific chief economist at Standard & Poor's. ``That is really what is holding back the Reserve Bank of India.''
Brazil's real has slumped 28 percent from a nine-year high on Aug. 1 and India's rupee fell to a record low this month as investors spooked by the global credit crisis have sold emerging market assets. Stocks tumbled in all three markets yesterday on concern a U.S. recession will depress corporate earnings worldwide and deepen financial turmoil.
`Gigantic Casino'
``It's unacceptable that we will pay for the irresponsibility of speculators that transformed the world into a gigantic casino and at the same time they give us lessons on how we should govern our countries,'' Brazilian President Luiz Inacio Lula da Silva said in New Delhi yesterday. ``We are the victims of a financial crisis generated by the rich countries.''
India has injected one trillion rupees ($21 billion) since Oct. 11 as call money rates surged and mutual funds sought government help to meet redemptions by investors. India's call rates, which averaged 8.42 percent in the past six months, closed at 10.25 percent yesterday.
The government yesterday increased interest rates on deposits by non-resident Indians and doubled the overseas investment limit in corporate bonds to $6 billion to shore up the rupee from near a record low.
Finance Minister Palaniappan Chidambaram also advanced the payment of 250 billion rupees to banks for providing debt relief to farmers and said it will make finance available for lenders to raise their capital adequacy ratio to 12 percent. No bank has a capital ratio, a measure of financial health, below the central bank's 9 percent lower limit, he said.
Seeking More Liquidity
``This is a step in the right direction as liquidity is much required in the economy,'' said Y. M. Deosthalee, chief financial officer at Larsen & Toubro Ltd., India's biggest engineering company. ``The call money rates had risen sharply because banks were cash-strapped.''
These measures may free up bank lending, giving central bank Governor Duvvuri Subbarao room to resist a cut in interest rates. Inflation is still double the central bank's target even after slowing to a three-month low of 11.80 percent last month.
Besides, the 18.8 percent drop in the rupee against the dollar since January, the biggest drop since 1991, after investors sold a record $11 billion of Indian equities, may make imports costlier and negate the drop in global prices of oil, wheat and other commodities, analysts say.
The International Monetary Fund and Goldman Sachs Group Inc. cut their growth forecast for India this month because of the repercussions of the global financial crisis on the $1.2 trillion economy, Asia's third largest.
``Inflation continues to be a big worry,'' said Dharmakirti Joshi, an economist at Mumbai-based rating company Crisil Ltd. ``Maintaining a status quo on interest rates would be an appropriate response as inflation continues to be much above the Reserve Bank's expectation.''
To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.
Read more...
Oct. 16 (Bloomberg) -- India joined Brazil and Russia in injecting funds into commercial banks to tackle the global credit crunch without risking interest rate-cuts that may fan inflation.
The Reserve Bank of India yesterday cut its cash reserve ratio to 6.5 percent from 7.5 percent to ease the worst cash crisis in the economy since 2000. Russia lowered its reserve requirement for the second time in a month, while Brazil reduced the measure Oct. 13 for the fourth time in three weeks.
Only China among the so-called BRIC economies has cut interest rates after the nation's inflation rate almost halved since April. Prices are still at elevated levels in India, Russia and Brazil, and the decline in their currencies this year may stoke inflation from higher import costs.
``There are a number of countries that haven't cut rates and the common feature for all of them is that their domestic inflation numbers are still quite high,'' said Subir Gokarn, Asia-Pacific chief economist at Standard & Poor's. ``That is really what is holding back the Reserve Bank of India.''
Brazil's real has slumped 28 percent from a nine-year high on Aug. 1 and India's rupee fell to a record low this month as investors spooked by the global credit crisis have sold emerging market assets. Stocks tumbled in all three markets yesterday on concern a U.S. recession will depress corporate earnings worldwide and deepen financial turmoil.
`Gigantic Casino'
``It's unacceptable that we will pay for the irresponsibility of speculators that transformed the world into a gigantic casino and at the same time they give us lessons on how we should govern our countries,'' Brazilian President Luiz Inacio Lula da Silva said in New Delhi yesterday. ``We are the victims of a financial crisis generated by the rich countries.''
India has injected one trillion rupees ($21 billion) since Oct. 11 as call money rates surged and mutual funds sought government help to meet redemptions by investors. India's call rates, which averaged 8.42 percent in the past six months, closed at 10.25 percent yesterday.
The government yesterday increased interest rates on deposits by non-resident Indians and doubled the overseas investment limit in corporate bonds to $6 billion to shore up the rupee from near a record low.
Finance Minister Palaniappan Chidambaram also advanced the payment of 250 billion rupees to banks for providing debt relief to farmers and said it will make finance available for lenders to raise their capital adequacy ratio to 12 percent. No bank has a capital ratio, a measure of financial health, below the central bank's 9 percent lower limit, he said.
Seeking More Liquidity
``This is a step in the right direction as liquidity is much required in the economy,'' said Y. M. Deosthalee, chief financial officer at Larsen & Toubro Ltd., India's biggest engineering company. ``The call money rates had risen sharply because banks were cash-strapped.''
These measures may free up bank lending, giving central bank Governor Duvvuri Subbarao room to resist a cut in interest rates. Inflation is still double the central bank's target even after slowing to a three-month low of 11.80 percent last month.
Besides, the 18.8 percent drop in the rupee against the dollar since January, the biggest drop since 1991, after investors sold a record $11 billion of Indian equities, may make imports costlier and negate the drop in global prices of oil, wheat and other commodities, analysts say.
The International Monetary Fund and Goldman Sachs Group Inc. cut their growth forecast for India this month because of the repercussions of the global financial crisis on the $1.2 trillion economy, Asia's third largest.
``Inflation continues to be a big worry,'' said Dharmakirti Joshi, an economist at Mumbai-based rating company Crisil Ltd. ``Maintaining a status quo on interest rates would be an appropriate response as inflation continues to be much above the Reserve Bank's expectation.''
To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.
Read more...
Yen, Singapore's Dollar, Philippine Peso: Asia Currency Preview
By Bob Chen
Oct. 16 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Exchange rates are from the previous session.
Japanese yen: Chief Cabinet Secretary Takeo Kawamura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Vice Finance Minister Kazuyuki Sugimoto is scheduled to address the press at 5 p.m.
The yen was at 100.91 a dollar at 8:30 a.m. in New York.
Singapore dollar: Non-oil domestic exports fell 9.7 percent in September from a year earlier, economists forecast in a Bloomberg News survey before the government reports the data at 1 p.m. tomorrow. Overseas shipments slid 13.8 percent in August, the biggest drop in 20 months.
The Singapore dollar was at S$1.4696.
Philippine peso: The central bank will report today the nation's balance of payments data for September. The Southeast Asian country reported a deficit of $54 million in August.
The peso was at 47.61.
Chinese yuan: The People's Bank of China may report wholesale prices for September as early as today. Wholesale prices rose 8.2 percent in August from a year earlier, slowing from a 9.4 percent gain the previous month.
The yuan was at 6.832.
Indian rupee: The government doubled the overseas investment limit in corporate bonds to $6 billion. Wholesale prices rose 11.86 percent in the week ended Oct. 4 from a year earlier, economists forecast in a Bloomberg survey before the government reports the data at 6 p.m. local time. Prices gained 11.80 percent the previous week.
The rupee was at 48.50.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
Read more...
Oct. 16 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Exchange rates are from the previous session.
Japanese yen: Chief Cabinet Secretary Takeo Kawamura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Vice Finance Minister Kazuyuki Sugimoto is scheduled to address the press at 5 p.m.
The yen was at 100.91 a dollar at 8:30 a.m. in New York.
Singapore dollar: Non-oil domestic exports fell 9.7 percent in September from a year earlier, economists forecast in a Bloomberg News survey before the government reports the data at 1 p.m. tomorrow. Overseas shipments slid 13.8 percent in August, the biggest drop in 20 months.
The Singapore dollar was at S$1.4696.
Philippine peso: The central bank will report today the nation's balance of payments data for September. The Southeast Asian country reported a deficit of $54 million in August.
The peso was at 47.61.
Chinese yuan: The People's Bank of China may report wholesale prices for September as early as today. Wholesale prices rose 8.2 percent in August from a year earlier, slowing from a 9.4 percent gain the previous month.
The yuan was at 6.832.
Indian rupee: The government doubled the overseas investment limit in corporate bonds to $6 billion. Wholesale prices rose 11.86 percent in the week ended Oct. 4 from a year earlier, economists forecast in a Bloomberg survey before the government reports the data at 6 p.m. local time. Prices gained 11.80 percent the previous week.
The rupee was at 48.50.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
Read more...
Oil Falls to 13-Month Low on Recession Concern, Equities Drop
By Mark Shenk
Oct. 16 (Bloomberg) -- Crude oil fell to a 13-month low because of skepticism a rescue of the world's banks will be enough to avoid a recession and stem a decline in global fuel demand, and after U.S. stocks plunged the most since 1987.
Oil, which has followed movements in equity markets this month, fell as the Standard & Poor's 500 Index and Dow Jones Industrial Average tumbled yesterday. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast because of ``dramatically worsening'' financial market conditions.
``The oil market is under a lot of pressure and nothing is going to change that anytime soon,'' said Ric Navy, a broker at BNP Paribas SA in New York. ``We are entering a poor-demand cycle, which will put further downward pressure on prices.''
Crude oil for November delivery fell $1.02, or 1.4 percent, to $73.52 a barrel at 9:32 a.m. Sydney time on the New York Mercantile Exchange. It earlier touched $73.18, the lowest since Aug. 30, 2007. Prices are down 16 percent from a year ago and have dropped 50 percent from the record $147.27 a barrel reached on July 11.
Yesterday, oil dropped $4.09, or 5.2 percent, to settle at $74.54 a barrel.
The retreat in stock prices over the past two days erased almost all of the gains in the S&P 500 and Dow on Oct. 13, when the market rallied the most since the 1930s on speculation government intervention will ease the credit crisis.
Exxon, Chevron
Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, the three biggest U.S. oil companies, led energy stocks to the biggest retreat among 10 S&P 500 industries yesterday.
Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York.
OPEC, supplier of more than 40 percent of the world's oil, cut its forecast yesterday for oil demand next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day. The 13-member group will hold an extraordinary meeting on Nov. 18 in Vienna, after a decision to trim supplies last month failed to stem a slump in prices.
Last week, the International Energy Agency, an adviser to 28 nations, lowered its projection for global oil demand next year by 0.5 percent to 87.2 million barrels a day.
A government report today may show that U.S. crude-oil and gasoline inventories rose last week, according to the median of responses by analysts in a Bloomberg News survey. The report will be released a day late because of the Columbus Day federal holiday Oct. 13 in the U.S.
Hovensa LLC, operator of the third-biggest refinery in the Americas, was to close processing units at its St. Croix, U.S. Virgin Islands, facility because Hurricane Omar was forecast to hit the islands yesterday.
Brent crude oil for November settlement declined $3.73, or 5 percent, to settle at $70.80 a barrel on London's ICE Futures Europe exchange yesterday. It was the lowest settlement since Aug. 28, 2007.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
Oct. 16 (Bloomberg) -- Crude oil fell to a 13-month low because of skepticism a rescue of the world's banks will be enough to avoid a recession and stem a decline in global fuel demand, and after U.S. stocks plunged the most since 1987.
Oil, which has followed movements in equity markets this month, fell as the Standard & Poor's 500 Index and Dow Jones Industrial Average tumbled yesterday. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast because of ``dramatically worsening'' financial market conditions.
``The oil market is under a lot of pressure and nothing is going to change that anytime soon,'' said Ric Navy, a broker at BNP Paribas SA in New York. ``We are entering a poor-demand cycle, which will put further downward pressure on prices.''
Crude oil for November delivery fell $1.02, or 1.4 percent, to $73.52 a barrel at 9:32 a.m. Sydney time on the New York Mercantile Exchange. It earlier touched $73.18, the lowest since Aug. 30, 2007. Prices are down 16 percent from a year ago and have dropped 50 percent from the record $147.27 a barrel reached on July 11.
Yesterday, oil dropped $4.09, or 5.2 percent, to settle at $74.54 a barrel.
The retreat in stock prices over the past two days erased almost all of the gains in the S&P 500 and Dow on Oct. 13, when the market rallied the most since the 1930s on speculation government intervention will ease the credit crisis.
Exxon, Chevron
Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, the three biggest U.S. oil companies, led energy stocks to the biggest retreat among 10 S&P 500 industries yesterday.
Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York.
OPEC, supplier of more than 40 percent of the world's oil, cut its forecast yesterday for oil demand next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day. The 13-member group will hold an extraordinary meeting on Nov. 18 in Vienna, after a decision to trim supplies last month failed to stem a slump in prices.
Last week, the International Energy Agency, an adviser to 28 nations, lowered its projection for global oil demand next year by 0.5 percent to 87.2 million barrels a day.
A government report today may show that U.S. crude-oil and gasoline inventories rose last week, according to the median of responses by analysts in a Bloomberg News survey. The report will be released a day late because of the Columbus Day federal holiday Oct. 13 in the U.S.
Hovensa LLC, operator of the third-biggest refinery in the Americas, was to close processing units at its St. Croix, U.S. Virgin Islands, facility because Hurricane Omar was forecast to hit the islands yesterday.
Brent crude oil for November settlement declined $3.73, or 5 percent, to settle at $70.80 a barrel on London's ICE Futures Europe exchange yesterday. It was the lowest settlement since Aug. 28, 2007.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
Australia, New Zealand Dollars Drop on Global Recession Concern
By Candice Zachariahs
Oct. 16 (Bloomberg) -- The Australian and New Zealand dollars fell the most since Oct. 8, when they plunged to five- year lows versus the greenback, as equities and commodities tumbled on concern the world is sliding into recession.
The currencies fell a second day against the U.S. dollar and Japan's yen as the UBS Bloomberg Constant Maturity Commodity index of 26 raw materials lost 4.7 percent. U.S. stocks slid the most since the 1987 crash, hammered by the biggest retail sales drop in three years. Raw materials make up 60 percent of Australia's exports and 70 percent of New Zealand's.
``Sentiment's pretty bad on the Australian dollar and we probably will retest the lows,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. ``The unavoidable recession in the U.S., Europe and probably Japan suggests that downward pressure will remain on the Aussie dollar as global growth estimates continue to get revised down,'' he said referring to the currency by its nickname.
The Australian dollar dropped 6.3 percent to 66.17 U.S. cents as of 7:50 a.m. in Sydney, from 70.60 cents late in Asian trading yesterday. On Oct. 8, the Aussie plunged as much as 9.8 percent to a five-year low of 64.51. New Zealand's dollar slid 3.7 percent today to 60.05 cents from 62.38 cents. On Oct. 8 it touched 57.92 cents, also the lowest since 2003.
Australia's dollar dropped 7.8 percent to 66.08 yen, from 71.67 yesterday. It touched 63.75 yen Oct. 8, the weakest since 2002. New Zealand's currency was 5.3 percent lower at 59.94 yen from 63.33 yesterday.
The currencies slid as Exxon Mobil Corp. and Chevron Corp. tumbled more than 12 percent after commodity prices declined on concern slowing economies will hurt demand. Crude oil, Australia's fourth most-valuable commodity export, fell below $75 for the first time in more than a year.
The South Pacific nations' dollars also declined as 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 near a record yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Oct. 16 (Bloomberg) -- The Australian and New Zealand dollars fell the most since Oct. 8, when they plunged to five- year lows versus the greenback, as equities and commodities tumbled on concern the world is sliding into recession.
The currencies fell a second day against the U.S. dollar and Japan's yen as the UBS Bloomberg Constant Maturity Commodity index of 26 raw materials lost 4.7 percent. U.S. stocks slid the most since the 1987 crash, hammered by the biggest retail sales drop in three years. Raw materials make up 60 percent of Australia's exports and 70 percent of New Zealand's.
``Sentiment's pretty bad on the Australian dollar and we probably will retest the lows,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. ``The unavoidable recession in the U.S., Europe and probably Japan suggests that downward pressure will remain on the Aussie dollar as global growth estimates continue to get revised down,'' he said referring to the currency by its nickname.
The Australian dollar dropped 6.3 percent to 66.17 U.S. cents as of 7:50 a.m. in Sydney, from 70.60 cents late in Asian trading yesterday. On Oct. 8, the Aussie plunged as much as 9.8 percent to a five-year low of 64.51. New Zealand's dollar slid 3.7 percent today to 60.05 cents from 62.38 cents. On Oct. 8 it touched 57.92 cents, also the lowest since 2003.
Australia's dollar dropped 7.8 percent to 66.08 yen, from 71.67 yesterday. It touched 63.75 yen Oct. 8, the weakest since 2002. New Zealand's currency was 5.3 percent lower at 59.94 yen from 63.33 yesterday.
The currencies slid as Exxon Mobil Corp. and Chevron Corp. tumbled more than 12 percent after commodity prices declined on concern slowing economies will hurt demand. Crude oil, Australia's fourth most-valuable commodity export, fell below $75 for the first time in more than a year.
The South Pacific nations' dollars also declined as 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 near a record yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Yen Extends Gains on Speculation U.S. Will Enter a Recession
By Stanley White and Ye Xie
Oct. 16 (Bloomberg) -- The yen rose toward a seven-month high versus the dollar after the biggest decline in U.S. retail sales in three years added to concern the credit-market crisis will push the world's largest economy into a recession.
Japan's currency also approached the strongest level in three years versus the euro and gained the most in a week against the Australian dollar as global stocks plunged, encouraging investors to sell higher-yielding assets and pay back low-cost loans in Japan.
``We're not in an environment where you can take on risk, and that supports a stronger yen,'' said Osao Iizuka, head of foreign-exchange trading in Tokyo at Sumitomo Trust & Banking Co., Japan's seventh-largest publicly listed lender. ``Stock markets keep on falling because there's good reason to expect economic growth to deteriorate.''
The yen traded at 99.58 per dollar as of 8:32 a.m. in Tokyo, from 99.96 late yesterday in New York. It reached 97.92 on Oct. 10, the highest level since March 19. The yen was at 133.99 per euro from 134.93 yesterday. It climbed to 132.24 on Oct. 10, the strongest since June 2005. The dollar traded at $1.3458 per euro, from $1.3499. The yen may rise to 99 per dollar and 132 versus the euro today, Iizuka forecast.
Against the Australian dollar, the yen jumped 8.8 percent from late yesterday in Asia to 65.38, its biggest gain since Oct. 8. Japan's currency also surged 6 percent to 59.55 per New Zealand dollar and rose 1.3 percent versus the South African rand to 9.3000 from late yesterday in New York.
Carry Trades
Japan's currency gained on speculation investors will abandon carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark rate compares with 1.5 percent in the U.S., 3.75 percent in Europe, 6 percent in Australia, 7.5 percent in New Zealand and 12 percent in South Africa.
Nikkei 225 Stock Average futures in Chicago tumbled 11 percent from the Osaka close and U.S. stocks plunged the most since the crash of 1987 after U.S. retail sales decreased 1.2 percent in September, the most since August 2005, following a 0.4 percent drop the previous month, the Commerce Department reported yesterday. The economy deteriorated throughout the U.S. last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book because of the color of its cover.
``Yen buying is still the mainstream trade because of risk aversion,'' said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. ``We are in a recession.''
Fed Chairman Ben S. Bernanke said in a speech in New York yesterday that government efforts to calm financial markets and stem the credit market crisis probably won't lead to an economic rebound ``right away.''
Confidence Index
Expectations for currency appreciation were the highest for the yen, the Swiss franc and the dollar, according to the Bloomberg Professional Global Confidence Index, based on a survey of 3,764 Bloomberg users last week. The index for the yen rose to 71.89 from 64.75. For the franc, it increased to 65.04 from 44.51. The index for the dollar was 61.28, down from 68.86.
Money-market rates fell for a third day yesterday, fueling speculation that global bailouts are starting to thaw credit markets. The London interbank offered rate, or Libor, that banks charge each other for three-month dollar loans dropped 9 basis points, or 0.09 percentage point, to 4.55 percent, the British Bankers' Association said.
The dollar rose to the highest level versus the euro since March 2007 on Oct. 10, partly as banks' reluctance to lend to each other spurred a surge in demand for U.S. currency funding in global money markets. The U.S. Treasury announced on Oct. 14 a plan to inject $250 billion into financial institutions, a day after European governments committed $1.8 trillion to guarantee loans and invest in lenders.
`Slow Improvement'
``There will be slow improvement in wholesale funding,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``Over time, the dollar funding issue will sort itself out, which will lead to some retracement of the recent dollar gains.''
The yen has climbed 12 percent versus the euro and 38 percent versus the rand this month on concern credit market losses will lead to a global recession. The speed of the yen's appreciation will slow as ``a lot of speculative positions'' are washed out, said Sinche.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.
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Oct. 16 (Bloomberg) -- The yen rose toward a seven-month high versus the dollar after the biggest decline in U.S. retail sales in three years added to concern the credit-market crisis will push the world's largest economy into a recession.
Japan's currency also approached the strongest level in three years versus the euro and gained the most in a week against the Australian dollar as global stocks plunged, encouraging investors to sell higher-yielding assets and pay back low-cost loans in Japan.
``We're not in an environment where you can take on risk, and that supports a stronger yen,'' said Osao Iizuka, head of foreign-exchange trading in Tokyo at Sumitomo Trust & Banking Co., Japan's seventh-largest publicly listed lender. ``Stock markets keep on falling because there's good reason to expect economic growth to deteriorate.''
The yen traded at 99.58 per dollar as of 8:32 a.m. in Tokyo, from 99.96 late yesterday in New York. It reached 97.92 on Oct. 10, the highest level since March 19. The yen was at 133.99 per euro from 134.93 yesterday. It climbed to 132.24 on Oct. 10, the strongest since June 2005. The dollar traded at $1.3458 per euro, from $1.3499. The yen may rise to 99 per dollar and 132 versus the euro today, Iizuka forecast.
Against the Australian dollar, the yen jumped 8.8 percent from late yesterday in Asia to 65.38, its biggest gain since Oct. 8. Japan's currency also surged 6 percent to 59.55 per New Zealand dollar and rose 1.3 percent versus the South African rand to 9.3000 from late yesterday in New York.
Carry Trades
Japan's currency gained on speculation investors will abandon carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark rate compares with 1.5 percent in the U.S., 3.75 percent in Europe, 6 percent in Australia, 7.5 percent in New Zealand and 12 percent in South Africa.
Nikkei 225 Stock Average futures in Chicago tumbled 11 percent from the Osaka close and U.S. stocks plunged the most since the crash of 1987 after U.S. retail sales decreased 1.2 percent in September, the most since August 2005, following a 0.4 percent drop the previous month, the Commerce Department reported yesterday. The economy deteriorated throughout the U.S. last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book because of the color of its cover.
``Yen buying is still the mainstream trade because of risk aversion,'' said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. ``We are in a recession.''
Fed Chairman Ben S. Bernanke said in a speech in New York yesterday that government efforts to calm financial markets and stem the credit market crisis probably won't lead to an economic rebound ``right away.''
Confidence Index
Expectations for currency appreciation were the highest for the yen, the Swiss franc and the dollar, according to the Bloomberg Professional Global Confidence Index, based on a survey of 3,764 Bloomberg users last week. The index for the yen rose to 71.89 from 64.75. For the franc, it increased to 65.04 from 44.51. The index for the dollar was 61.28, down from 68.86.
Money-market rates fell for a third day yesterday, fueling speculation that global bailouts are starting to thaw credit markets. The London interbank offered rate, or Libor, that banks charge each other for three-month dollar loans dropped 9 basis points, or 0.09 percentage point, to 4.55 percent, the British Bankers' Association said.
The dollar rose to the highest level versus the euro since March 2007 on Oct. 10, partly as banks' reluctance to lend to each other spurred a surge in demand for U.S. currency funding in global money markets. The U.S. Treasury announced on Oct. 14 a plan to inject $250 billion into financial institutions, a day after European governments committed $1.8 trillion to guarantee loans and invest in lenders.
`Slow Improvement'
``There will be slow improvement in wholesale funding,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``Over time, the dollar funding issue will sort itself out, which will lead to some retracement of the recent dollar gains.''
The yen has climbed 12 percent versus the euro and 38 percent versus the rand this month on concern credit market losses will lead to a global recession. The speed of the yen's appreciation will slow as ``a lot of speculative positions'' are washed out, said Sinche.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.
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Australia Stocks Fall on Concern World Economy Will Deteriorate
By Shani Raja
Oct. 16 (Bloomberg) -- Australian stocks tumbled, led by banks, resources and energy companies, on concern the global economy will deteriorate, even as governments beef up efforts to stabilize the international banking system.
Macquarie Group Ltd., Australia's biggest securities company, slumped 8.5 percent. BHP Billiton Ltd., the world's largest mining company, plunged the most in 21 years. Woodside Petroleum Ltd. dropped to its lowest price since March 2007.
``The market's now pricing in a significant global slowdown,'' said Saxon Nicholls, Melbourne-based principal at Herschel Asset Management Ltd., which manages about $500 million. ``That implies slowing demand for commodities, and the concept of a more general slowdown affecting pretty much everything.''
Australia's benchmark S&P/ASX 200 Index fell 5.5 percent to 4,036.90 at 10:20 a.m., stalling its rebound from the worst weekly rout in its history dating back to 1992 as governments worldwide took steps to shore up banks. U.S. stocks dropped the most since 1987 yesterday after the biggest decline in retail sales in three years, and amid growing doubts that bank bailouts will prevent the economic slump from worsening.
The Standard & Poor's 500 Index sank 9 percent to 907.84, with nine companies declining more than 20 percent. The Dow Jones Industrial Average retreated 733.08, or 7.9 percent, to 8,577.91, its second-biggest point drop ever.
A measure of six metals traded in London slumped 6.5 percent yesterday, with copper dropping 7.2 percent, zinc 6.7 percent and nickel 7 percent. In New York, crude oil fell 5.2 percent, and dropped below $75 a barrel for the first time in more than a year.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Oct. 16 (Bloomberg) -- Australian stocks tumbled, led by banks, resources and energy companies, on concern the global economy will deteriorate, even as governments beef up efforts to stabilize the international banking system.
Macquarie Group Ltd., Australia's biggest securities company, slumped 8.5 percent. BHP Billiton Ltd., the world's largest mining company, plunged the most in 21 years. Woodside Petroleum Ltd. dropped to its lowest price since March 2007.
``The market's now pricing in a significant global slowdown,'' said Saxon Nicholls, Melbourne-based principal at Herschel Asset Management Ltd., which manages about $500 million. ``That implies slowing demand for commodities, and the concept of a more general slowdown affecting pretty much everything.''
Australia's benchmark S&P/ASX 200 Index fell 5.5 percent to 4,036.90 at 10:20 a.m., stalling its rebound from the worst weekly rout in its history dating back to 1992 as governments worldwide took steps to shore up banks. U.S. stocks dropped the most since 1987 yesterday after the biggest decline in retail sales in three years, and amid growing doubts that bank bailouts will prevent the economic slump from worsening.
The Standard & Poor's 500 Index sank 9 percent to 907.84, with nine companies declining more than 20 percent. The Dow Jones Industrial Average retreated 733.08, or 7.9 percent, to 8,577.91, its second-biggest point drop ever.
A measure of six metals traded in London slumped 6.5 percent yesterday, with copper dropping 7.2 percent, zinc 6.7 percent and nickel 7 percent. In New York, crude oil fell 5.2 percent, and dropped below $75 a barrel for the first time in more than a year.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Japan Stock Futures Sink on U.S. Retail Sales; Honda, Sony Drop
By Masaki Kondo
Oct. 16 (Bloomberg) -- Japan's stock futures tumbled in Chicago as the biggest decline in U.S. retail sales in three years pointed to a deepening recession and diminished demand for Japanese-made goods.
U.S.-traded receipts of Honda Motor Co., which gets more than half its profit from North America, retreated 13 percent from the closing share price in Tokyo yesterday. Sony Corp., maker of the PlayStation 3 game machine, dived 12 percent.
``Market players are increasingly nervous that global economies will sink even further,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. ``The slump in U.S. retail sales reignited those fears.''
Nikkei 225 Stock Average futures expiring in December closed at 8,465 in Chicago, 11 percent lower than 9,490 earlier in Osaka and down from 9,460 in Singapore. The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, sank 9.4 percent, the most on record.
Sales at U.S. retailers fell 1.2 percent in September, the most since August 2005 and extending a drop to a third month, the first time that's happened since 1992. The result coincided with the Federal Reserve's release of its Beige Book report, in which the Fed said economic activities weakened last month throughout the country with deteriorating sales of cars and retailing.
Yesterday, the Nikkei recovered from an intraday loss to climb 1.1 percent to 9,547.47. The broader Topix index slipped 0.1 percent to 955.51. In New York, the Standard & Poor's 500 Index had its steepest drop since the crash of 1987, almost erasing all the gains on Oct. 13, when the market climbed the most since the 1930s on speculation a U.S. government plan to support banks will ease the credit crisis.
Yen, Steelmakers
The yen appreciated to as much as 99.34 from 101.85 at the close of stock trading in Tokyo yesterday. A 1 yen change against the dollar alters Sony's annual operating profit by 4 billion yen ($40 million), the company said in May.
Nippon Steel Corp., the world's second-biggest maker of alloy, JFE Holdings Inc. and Kobe Steel Ltd. had their investment ratings cut to ``neutral'' from ``buy'' at UBS AG.
``In fiscal 2009, nationwide crude steel output should see the first full-blown correction since fiscal 1998 on deterioration in domestic and overseas supply and demand,'' UBS analyst Atsushi Yamaguchi wrote in a report yesterday. He slashed his 12-month price estimates on the three Japanese steelmakers by as much as 64 percent.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Oct. 16 (Bloomberg) -- Japan's stock futures tumbled in Chicago as the biggest decline in U.S. retail sales in three years pointed to a deepening recession and diminished demand for Japanese-made goods.
U.S.-traded receipts of Honda Motor Co., which gets more than half its profit from North America, retreated 13 percent from the closing share price in Tokyo yesterday. Sony Corp., maker of the PlayStation 3 game machine, dived 12 percent.
``Market players are increasingly nervous that global economies will sink even further,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. ``The slump in U.S. retail sales reignited those fears.''
Nikkei 225 Stock Average futures expiring in December closed at 8,465 in Chicago, 11 percent lower than 9,490 earlier in Osaka and down from 9,460 in Singapore. The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, sank 9.4 percent, the most on record.
Sales at U.S. retailers fell 1.2 percent in September, the most since August 2005 and extending a drop to a third month, the first time that's happened since 1992. The result coincided with the Federal Reserve's release of its Beige Book report, in which the Fed said economic activities weakened last month throughout the country with deteriorating sales of cars and retailing.
Yesterday, the Nikkei recovered from an intraday loss to climb 1.1 percent to 9,547.47. The broader Topix index slipped 0.1 percent to 955.51. In New York, the Standard & Poor's 500 Index had its steepest drop since the crash of 1987, almost erasing all the gains on Oct. 13, when the market climbed the most since the 1930s on speculation a U.S. government plan to support banks will ease the credit crisis.
Yen, Steelmakers
The yen appreciated to as much as 99.34 from 101.85 at the close of stock trading in Tokyo yesterday. A 1 yen change against the dollar alters Sony's annual operating profit by 4 billion yen ($40 million), the company said in May.
Nippon Steel Corp., the world's second-biggest maker of alloy, JFE Holdings Inc. and Kobe Steel Ltd. had their investment ratings cut to ``neutral'' from ``buy'' at UBS AG.
``In fiscal 2009, nationwide crude steel output should see the first full-blown correction since fiscal 1998 on deterioration in domestic and overseas supply and demand,'' UBS analyst Atsushi Yamaguchi wrote in a report yesterday. He slashed his 12-month price estimates on the three Japanese steelmakers by as much as 64 percent.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Brazil's Real Falls as U.S. Retail Drop Cuts High-Yield Demand
By Drew Benson
Oct. 15 (Bloomberg) -- Brazil's real sank 5.9 percent, the most in a week, as a government report showed U.S. retail sales plunged last month, evidence the global credit crisis has begun to deepen a slowdown in the world's biggest economy.
``What we see verifies that the American scenario is worsening,'' said Vanderlei Arruda, who manages the foreign- exchange trading desk at Sao Paulo-based Corretora Souza Barros. ``That's reflected in the U.S. stock market and, automatically, in Brazil, where we see investors moving from the stock market to dollars.''
The real sank to 2.2265 per dollar at 5:17 p.m. New York time, from 2.0963 yesterday, halting a two-day rebound that had driven it up almost 10 percent. Brazil's currency is down 14.5 percent this month and 29.9 percent from a nine-year high reached on Aug. 1. Brazil's central bank bought reais in the currency market for a second straight day to stem the currency's slide.
``All of the high-yielders are getting killed today,'' said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. ``Across emerging markets, you're going to see currencies ebb and flow with risk aversion.''
Brazil's central bank bought $1 billion worth of reais in two repurchase agreement, or repo, auctions. The central bank also said it sold 26,710 currency swaps contracts to shore up the real. The bank plans to buy another $1 billion worth of reais of 6-month repos tomorrow.
Retail Sales Slump
Demand for reais declined after a U.S. government report today showed retail sales fell 1.2 percent in September, the most since August 2005. A government report today showed that retail sales also softened in Brazil, Latin America's biggest economy, in August. Sales rose 9.8 percent in August, down from 11.3 percent growth in August.
Global stock markets extended declines after the U.S. report, further curbing demand for higher-yielding securities. Brazilian stock trading was halted after the Bovespa index plunged 10 percent on concern slowing global growth will crimp companies' profit and erode demand for raw materials.
Deutsche Bank AG now expects the Brazilian economy to expand 2.2 percent in 2009, compared with a previous forecast of 3.6 percent.
The yield on Brazil's overnight futures contract for January 2009 delivery was unchanged at 13.93 percent today. The yield on the government's zero-coupon bond due in January 2010 rose 11 basis points, or 0.11 percentage point, to 14.85 percent, according to Banco Votorantim.
To contact the reporter on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net
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Oct. 15 (Bloomberg) -- Brazil's real sank 5.9 percent, the most in a week, as a government report showed U.S. retail sales plunged last month, evidence the global credit crisis has begun to deepen a slowdown in the world's biggest economy.
``What we see verifies that the American scenario is worsening,'' said Vanderlei Arruda, who manages the foreign- exchange trading desk at Sao Paulo-based Corretora Souza Barros. ``That's reflected in the U.S. stock market and, automatically, in Brazil, where we see investors moving from the stock market to dollars.''
The real sank to 2.2265 per dollar at 5:17 p.m. New York time, from 2.0963 yesterday, halting a two-day rebound that had driven it up almost 10 percent. Brazil's currency is down 14.5 percent this month and 29.9 percent from a nine-year high reached on Aug. 1. Brazil's central bank bought reais in the currency market for a second straight day to stem the currency's slide.
``All of the high-yielders are getting killed today,'' said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. ``Across emerging markets, you're going to see currencies ebb and flow with risk aversion.''
Brazil's central bank bought $1 billion worth of reais in two repurchase agreement, or repo, auctions. The central bank also said it sold 26,710 currency swaps contracts to shore up the real. The bank plans to buy another $1 billion worth of reais of 6-month repos tomorrow.
Retail Sales Slump
Demand for reais declined after a U.S. government report today showed retail sales fell 1.2 percent in September, the most since August 2005. A government report today showed that retail sales also softened in Brazil, Latin America's biggest economy, in August. Sales rose 9.8 percent in August, down from 11.3 percent growth in August.
Global stock markets extended declines after the U.S. report, further curbing demand for higher-yielding securities. Brazilian stock trading was halted after the Bovespa index plunged 10 percent on concern slowing global growth will crimp companies' profit and erode demand for raw materials.
Deutsche Bank AG now expects the Brazilian economy to expand 2.2 percent in 2009, compared with a previous forecast of 3.6 percent.
The yield on Brazil's overnight futures contract for January 2009 delivery was unchanged at 13.93 percent today. The yield on the government's zero-coupon bond due in January 2010 rose 11 basis points, or 0.11 percentage point, to 14.85 percent, according to Banco Votorantim.
To contact the reporter on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net
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Omar Strengthens in Caribbean, Aims at Virgin Islands
By Brian K. Sullivan
Oct. 15 (Bloomberg) -- Hurricane Omar strengthened in the Caribbean south of Puerto Rico, causing the closure of a refinery in St. Croix, as forecasters said the storm will hit the Virgin Islands by early tomorrow.
Hurricane warnings were in place in the U.S. Virgin Islands, site of the Hovensa oil refinery, the third-biggest in the Americas; the British Virgin Islands; and islands including St. Maarten/St. Martin, the National Hurricane Center in Miami said. A hurricane warning means sustained winds of at least 74 miles (119 kilometers) per hour are expected within a day.
Omar's winds increased to 90 mph as it swirled 150 miles south-southwest of St. Croix, the center said in an advisory shortly before 5 p.m. Miami time. The system was moving east- northeast at 15 mph, after intensifying from a tropical storm late yesterday.
``Additional strengthening is forecast during the next 24 hours,'' the center said. ``Omar should be a Category 2 hurricane by the time it reaches the northern Leeward Islands'' by early tomorrow.
A Category 2 hurricane, the second-weakest on the five-step Saffir-Simpson scale, has winds of 96 mph to 110 mph.
A hurricane warning may be required for Puerto Rico later today, the U.S. hurricane center said. Tropical-storm warnings, which indicate winds of 39 mph to 73 mph are likely within a day, were in place in Puerto Rico, Antigua, Barbuda and Montserrat.
Two days ago, Omar caused blackouts in Venezuela and halted shipping at Jose, one of the country's main oil terminals, the state oil company, Petroleos de Venezuela SA, said yesterday in an e-mailed statement.
`Shutting Down'
``Hovensa LLC is in the process of shutting down essentially all its processing and auxiliary equipment at the St. Croix refinery except those necessary to maintain supply of power to the complex,'' Alex Moorhead, a spokesman for the facility, said by telephone.
The refinery handled 456,000 barrels a day in July, according to the latest U.S. Energy Department records. The U.S. mainland received 338,000 barrels a day of refined products from the plant. The refinery is jointly owned by Hess Corp. of New York and Petroleos de Venezuela.
Omar may bring as much as 12 inches (30 centimeters) of rain to the Netherlands Antilles and 20 inches to Puerto Rico and the northern Leeward Islands, the center said. Those rains could produce ``life-threatening'' flash floods and mudslides, it said.
Islands Batten Down
U.S. Virgin Islands Governor John deJongh Jr. closed schools, dismissed non-essential government workers this morning and ordered a curfew beginning at 6 p.m. local time, according to a statement.
``We will vigorously enforce this curfew as it is necessary that we clear the streets and avoid persons becoming injured by the effects of a tropical storm,'' Police Commissioner James McCall said in the statement on the governor's Web site.
The Public Works Department was distributing sandbags on all of the territory's islands.
To the west, the center of a tropical depression moved inland over Honduras and may bring as much as 15 inches of rain, threatening lethal flooding and landslides there and in Nicaragua, Belize, Guatemala and Mexico's Yucatan Peninsula, the center said in a separate advisory. The system was 25 miles east- southeast of Limon, Honduras, and moving west at 7 mph, and its maximum sustained winds increased to 35 mph.
``Some strengthening is forecast during the next 24 hours and the depression could become a tropical storm later today or tonight,'' the U.S. agency said.
To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net
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Oct. 15 (Bloomberg) -- Hurricane Omar strengthened in the Caribbean south of Puerto Rico, causing the closure of a refinery in St. Croix, as forecasters said the storm will hit the Virgin Islands by early tomorrow.
Hurricane warnings were in place in the U.S. Virgin Islands, site of the Hovensa oil refinery, the third-biggest in the Americas; the British Virgin Islands; and islands including St. Maarten/St. Martin, the National Hurricane Center in Miami said. A hurricane warning means sustained winds of at least 74 miles (119 kilometers) per hour are expected within a day.
Omar's winds increased to 90 mph as it swirled 150 miles south-southwest of St. Croix, the center said in an advisory shortly before 5 p.m. Miami time. The system was moving east- northeast at 15 mph, after intensifying from a tropical storm late yesterday.
``Additional strengthening is forecast during the next 24 hours,'' the center said. ``Omar should be a Category 2 hurricane by the time it reaches the northern Leeward Islands'' by early tomorrow.
A Category 2 hurricane, the second-weakest on the five-step Saffir-Simpson scale, has winds of 96 mph to 110 mph.
A hurricane warning may be required for Puerto Rico later today, the U.S. hurricane center said. Tropical-storm warnings, which indicate winds of 39 mph to 73 mph are likely within a day, were in place in Puerto Rico, Antigua, Barbuda and Montserrat.
Two days ago, Omar caused blackouts in Venezuela and halted shipping at Jose, one of the country's main oil terminals, the state oil company, Petroleos de Venezuela SA, said yesterday in an e-mailed statement.
`Shutting Down'
``Hovensa LLC is in the process of shutting down essentially all its processing and auxiliary equipment at the St. Croix refinery except those necessary to maintain supply of power to the complex,'' Alex Moorhead, a spokesman for the facility, said by telephone.
The refinery handled 456,000 barrels a day in July, according to the latest U.S. Energy Department records. The U.S. mainland received 338,000 barrels a day of refined products from the plant. The refinery is jointly owned by Hess Corp. of New York and Petroleos de Venezuela.
Omar may bring as much as 12 inches (30 centimeters) of rain to the Netherlands Antilles and 20 inches to Puerto Rico and the northern Leeward Islands, the center said. Those rains could produce ``life-threatening'' flash floods and mudslides, it said.
Islands Batten Down
U.S. Virgin Islands Governor John deJongh Jr. closed schools, dismissed non-essential government workers this morning and ordered a curfew beginning at 6 p.m. local time, according to a statement.
``We will vigorously enforce this curfew as it is necessary that we clear the streets and avoid persons becoming injured by the effects of a tropical storm,'' Police Commissioner James McCall said in the statement on the governor's Web site.
The Public Works Department was distributing sandbags on all of the territory's islands.
To the west, the center of a tropical depression moved inland over Honduras and may bring as much as 15 inches of rain, threatening lethal flooding and landslides there and in Nicaragua, Belize, Guatemala and Mexico's Yucatan Peninsula, the center said in a separate advisory. The system was 25 miles east- southeast of Limon, Honduras, and moving west at 7 mph, and its maximum sustained winds increased to 35 mph.
``Some strengthening is forecast during the next 24 hours and the depression could become a tropical storm later today or tonight,'' the U.S. agency said.
To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net
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Corn, Soybeans Fall to Year's Lowest Prices on Demand Outlook
By Jeff Wilson
Oct. 15 (Bloomberg) -- Corn and soybeans fell to the lowest prices of the year on speculation that a government plan to rescue banks will fail to prevent a global slowdown, leading to reduced demand for food, animal feed and crop-based fuel.
U.S. retail sales dropped in September by the most in three years as rising job losses and plunging home prices slowed consumer purchases, the Commerce Department said today. Corn prices are down 51 percent from a record in June and soybeans are the cheapest in 13 months, down 48 percent from the highest ever in July.
``It still continues to be concerns about the economy and its impact on grain demand,'' said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa. ``Just because there may be a thawing in the banking system does not mean there will be demand for new loans. People fear more problems.''
Corn futures for December delivery fell 23.25 cents, or 5.7 percent, to $3.88 a bushel on the Chicago Board of Trade, and touched $3.8475 the lowest since Nov. 19, 2007. The most-active contract has plunged 20 percent this month after dropping a record 36 percent in the quarter ended Sept. 30.
Soybean futures for November delivery fell 38 cents, or 4.2 percent, to $8.58 a bushel in Chicago. The price earlier touched $8.465, the lowest for a most-active contract since Aug. 27, 2007. Soybeans reached a record $16.3675 on July 3.
The Standard & Poor's Commodity Index of 24 raw materials fell as much as 4.7 percent to a 13-month low. The index is down 46 percent since reaching a record on July 3. Crude oil fell below $75 a barrel for the first time since September 2007.
``The key is the crude-oil market and when falling energy prices begin to help boost consumer confidence,'' Roose said. ``There will be businesses that benefit from falling oil prices.''
Slowing Economy
Grain and soybean prices are falling as investors reduce bets on higher inflation as the economy slows, analysts said.
The unemployment rate in the U.S. may rise as economic growth in coming quarters expands at an anemic pace, Federal Reserve Bank of Boston president Eric Rosengren said today. San Francisco Fed President Janet Yellen said yesterday that the U.S. already is in recession.
Federal Reserve Chairman Ben S. Bernanke said government efforts to calm financial markets and stem the credit crisis probably won't result in an immediate economic rebound, though the pace of inflation may slow.
``Historic markets like we saw this year in the grains often overshoot economic value to the topside before undershooting it to the downside,'' said Jim Gerlach, president of A/C Trading Inc. in Fowler, Indiana. ``There is risk in corn down to $3.25 to $3.50 a bushel in the coming weeks and $7.50 to $8 in soybeans.''
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show. The U.S. is the world's biggest grower and exporter of both crops.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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Oct. 15 (Bloomberg) -- Corn and soybeans fell to the lowest prices of the year on speculation that a government plan to rescue banks will fail to prevent a global slowdown, leading to reduced demand for food, animal feed and crop-based fuel.
U.S. retail sales dropped in September by the most in three years as rising job losses and plunging home prices slowed consumer purchases, the Commerce Department said today. Corn prices are down 51 percent from a record in June and soybeans are the cheapest in 13 months, down 48 percent from the highest ever in July.
``It still continues to be concerns about the economy and its impact on grain demand,'' said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa. ``Just because there may be a thawing in the banking system does not mean there will be demand for new loans. People fear more problems.''
Corn futures for December delivery fell 23.25 cents, or 5.7 percent, to $3.88 a bushel on the Chicago Board of Trade, and touched $3.8475 the lowest since Nov. 19, 2007. The most-active contract has plunged 20 percent this month after dropping a record 36 percent in the quarter ended Sept. 30.
Soybean futures for November delivery fell 38 cents, or 4.2 percent, to $8.58 a bushel in Chicago. The price earlier touched $8.465, the lowest for a most-active contract since Aug. 27, 2007. Soybeans reached a record $16.3675 on July 3.
The Standard & Poor's Commodity Index of 24 raw materials fell as much as 4.7 percent to a 13-month low. The index is down 46 percent since reaching a record on July 3. Crude oil fell below $75 a barrel for the first time since September 2007.
``The key is the crude-oil market and when falling energy prices begin to help boost consumer confidence,'' Roose said. ``There will be businesses that benefit from falling oil prices.''
Slowing Economy
Grain and soybean prices are falling as investors reduce bets on higher inflation as the economy slows, analysts said.
The unemployment rate in the U.S. may rise as economic growth in coming quarters expands at an anemic pace, Federal Reserve Bank of Boston president Eric Rosengren said today. San Francisco Fed President Janet Yellen said yesterday that the U.S. already is in recession.
Federal Reserve Chairman Ben S. Bernanke said government efforts to calm financial markets and stem the credit crisis probably won't result in an immediate economic rebound, though the pace of inflation may slow.
``Historic markets like we saw this year in the grains often overshoot economic value to the topside before undershooting it to the downside,'' said Jim Gerlach, president of A/C Trading Inc. in Fowler, Indiana. ``There is risk in corn down to $3.25 to $3.50 a bushel in the coming weeks and $7.50 to $8 in soybeans.''
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show. The U.S. is the world's biggest grower and exporter of both crops.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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Energy, Metals Lead Commodity Slump as Economic Outlook Dims
By Millie Munshi
Oct. 15 (Bloomberg) -- Tumbling prices for energy, metals and grains led commodities to their lowest since February 2005 as the prospect of a global recession dimmed the outlook for raw-material demand.
Crude oil, down 5.2 percent, dipped below $75 a barrel for the first time in more than a year. Copper fell 7.7 percent, soybeans reached a 13-month low and cotton touched the lowest price since May 2007. The Reuters/Jefferies CRB Index of 19 commodities fell 4.5 percent to 283.04, the lowest since Feb. 10, 2005.
Federal Reserve Bank of San Francisco President Janet Yellen said late yesterday the U.S. is in a recession, and the government today reported retail sales in September dropped by the most in three years. The CRB index is down 40 percent from a record in July as falling equities, reduced lending and slowdowns in manufacturing and construction signaled a drop in demand.
``The debate over whether or not the world will be in a recession is over -- we're clearly in a recession,'' said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey. ``This is going to mean much, much lower prices for the cyclical commodities.''
Commodity shipping rates also plunged to the lowest in more than five years today as a lack of trade finance left cargoes stranded and the global economic slowdown reduced consumption.
Crude oil for November delivery fell $4.09 to $74.54 a barrel on the New York Mercantile Exchange, the lowest settlement price since Aug. 31, 2007. The most-active contract traded as low as 73.55.
Cutting Forecasts
The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, cut its 2009 demand forecast for a second month because of ``dramatically worsening'' conditions in financial markets.
Banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. cut their price forecasts for commodities including oil and copper this week by as much as 56 percent, citing a larger-than-expected economic slowdown.
Confidence in the global economy plunged in October after a deepening freeze in credit markets increased the chances of a recession, a survey of Bloomberg users on six continents showed.
``In a relatively short period of time, the economic scenario has moved from a somewhat-contained, developed-country downturn to a deeper and more synchronized global economic slowdown,'' Michael Jansen, a London-based analyst at JPMorgan Securities Ltd., said in a report today. There will be ``weaker-than-anticipated demand.''
Haven Asset
Gold gained as much as 2.4 percent today, as escalating financial turmoil boosted the appeal of the precious metal as a haven asset. The metal gained 3.1 percent last week as the CRB plunged 11 percent and the Dow Jones Industrial Average tumbled 18 percent.
``Gold is the only safe bet now,'' Pento of Delta Global said. ``Precious metals will hold up much better than any other investment. I expect gold to go much higher and make new all- time highs in 2009.''
Gold futures for December delivery finished little changed today, down 50 cents at $839 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the most-active contract rose as high as $859.20 The price touched a record $1,033.90 on March 17.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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Oct. 15 (Bloomberg) -- Tumbling prices for energy, metals and grains led commodities to their lowest since February 2005 as the prospect of a global recession dimmed the outlook for raw-material demand.
Crude oil, down 5.2 percent, dipped below $75 a barrel for the first time in more than a year. Copper fell 7.7 percent, soybeans reached a 13-month low and cotton touched the lowest price since May 2007. The Reuters/Jefferies CRB Index of 19 commodities fell 4.5 percent to 283.04, the lowest since Feb. 10, 2005.
Federal Reserve Bank of San Francisco President Janet Yellen said late yesterday the U.S. is in a recession, and the government today reported retail sales in September dropped by the most in three years. The CRB index is down 40 percent from a record in July as falling equities, reduced lending and slowdowns in manufacturing and construction signaled a drop in demand.
``The debate over whether or not the world will be in a recession is over -- we're clearly in a recession,'' said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey. ``This is going to mean much, much lower prices for the cyclical commodities.''
Commodity shipping rates also plunged to the lowest in more than five years today as a lack of trade finance left cargoes stranded and the global economic slowdown reduced consumption.
Crude oil for November delivery fell $4.09 to $74.54 a barrel on the New York Mercantile Exchange, the lowest settlement price since Aug. 31, 2007. The most-active contract traded as low as 73.55.
Cutting Forecasts
The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, cut its 2009 demand forecast for a second month because of ``dramatically worsening'' conditions in financial markets.
Banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. cut their price forecasts for commodities including oil and copper this week by as much as 56 percent, citing a larger-than-expected economic slowdown.
Confidence in the global economy plunged in October after a deepening freeze in credit markets increased the chances of a recession, a survey of Bloomberg users on six continents showed.
``In a relatively short period of time, the economic scenario has moved from a somewhat-contained, developed-country downturn to a deeper and more synchronized global economic slowdown,'' Michael Jansen, a London-based analyst at JPMorgan Securities Ltd., said in a report today. There will be ``weaker-than-anticipated demand.''
Haven Asset
Gold gained as much as 2.4 percent today, as escalating financial turmoil boosted the appeal of the precious metal as a haven asset. The metal gained 3.1 percent last week as the CRB plunged 11 percent and the Dow Jones Industrial Average tumbled 18 percent.
``Gold is the only safe bet now,'' Pento of Delta Global said. ``Precious metals will hold up much better than any other investment. I expect gold to go much higher and make new all- time highs in 2009.''
Gold futures for December delivery finished little changed today, down 50 cents at $839 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the most-active contract rose as high as $859.20 The price touched a record $1,033.90 on March 17.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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Asian Stocks in U.S. Fall Most Since 2001; Nikkei Futures Slide
By Lu Wang
Oct. 15 (Bloomberg) -- Asian shares trading in the U.S. plunged and futures signaled Japan stocks may fall 12 percent after slumping U.S. retail sales stoked concern the slowdown in the world's largest economy is worsening.
BHP Billiton, the world's largest mining company, had the worst drop since 1987 after oil and copper prices tumbled on growing speculation deteriorating growth will cut demand for commodities. Toyota Motor Corp. and Panasonic Corp. led a retreat in carmakers and electronics companies.
The Bank of New York Mellon Asia ADR Price Index, which tracks the region's American depositary receipts, fell 11 percent to 93.81, the biggest slide since at least December 2001.
Nikkei 225 Stock Average futures expiring in December were at 8,375 in Chicago as of 5:08 p.m. New York time, 12 percent less than their close of 9,490 in Osaka, Japan.
Consumer purchases in the U.S. fell 1.2 percent in September, the most in three years. The drop marked the third- straight monthly decline, the first time that's happened since comparable records began in 1992, Commerce Department figures showed. The report helped push the Standard & Poor's 500 Index down 9.1 percent, the biggest loss since the crash of 1987.
Melbourne-based BHP Billiton tumbled 17 percent to $35.17. Crude oil fell below $75 a barrel for the first time in more than a year while copper plunged 7.7 percent.
PetroChina Co., the country's largest energy company, decreased 14 percent to $74.92. Santos Ltd., an Australian oil and natural gas producer, slipped 9.6 percent to $32.36.
Toyota, Asia's biggest automaker, slumped 10 percent to $63.71. The company gets about 37 percent of its revenue from North America.
Honda Motor Co., Japan's second-largest automaker, sank 14 percent to $20.57. Tata Motors Ltd., the Indian automaker that bought Jaguar and Land Rover from Ford Motor Co., fell 5.2 percent to $6.01.
Panasonic, the world's largest maker of consumer electronics, lost 11 percent to $13.80. Small rival Sony Corp. declined 11 percent to $23.43.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
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Oct. 15 (Bloomberg) -- Asian shares trading in the U.S. plunged and futures signaled Japan stocks may fall 12 percent after slumping U.S. retail sales stoked concern the slowdown in the world's largest economy is worsening.
BHP Billiton, the world's largest mining company, had the worst drop since 1987 after oil and copper prices tumbled on growing speculation deteriorating growth will cut demand for commodities. Toyota Motor Corp. and Panasonic Corp. led a retreat in carmakers and electronics companies.
The Bank of New York Mellon Asia ADR Price Index, which tracks the region's American depositary receipts, fell 11 percent to 93.81, the biggest slide since at least December 2001.
Nikkei 225 Stock Average futures expiring in December were at 8,375 in Chicago as of 5:08 p.m. New York time, 12 percent less than their close of 9,490 in Osaka, Japan.
Consumer purchases in the U.S. fell 1.2 percent in September, the most in three years. The drop marked the third- straight monthly decline, the first time that's happened since comparable records began in 1992, Commerce Department figures showed. The report helped push the Standard & Poor's 500 Index down 9.1 percent, the biggest loss since the crash of 1987.
Melbourne-based BHP Billiton tumbled 17 percent to $35.17. Crude oil fell below $75 a barrel for the first time in more than a year while copper plunged 7.7 percent.
PetroChina Co., the country's largest energy company, decreased 14 percent to $74.92. Santos Ltd., an Australian oil and natural gas producer, slipped 9.6 percent to $32.36.
Toyota, Asia's biggest automaker, slumped 10 percent to $63.71. The company gets about 37 percent of its revenue from North America.
Honda Motor Co., Japan's second-largest automaker, sank 14 percent to $20.57. Tata Motors Ltd., the Indian automaker that bought Jaguar and Land Rover from Ford Motor Co., fell 5.2 percent to $6.01.
Panasonic, the world's largest maker of consumer electronics, lost 11 percent to $13.80. Small rival Sony Corp. declined 11 percent to $23.43.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
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Brazil Stocks Plunge on Lower Growth Prospects, Currency Losses
By Paulo Winterstein
Oct. 15 (Bloomberg) -- Brazilian stocks plunged the most in a decade after analysts said currency losses may cost companies as much as $27 billion and reduced forecasts for economic growth.
Banco Itau Holding Financeira SA and railroad operator ALL America Latina Logistica paced declines in banks and industrial companies after JPMorgan Chase & Co. Deutsche Bank AG and Standard & Poor's said Brazil's economy may grow less than 3 percent. Cia. Vale do Rio Doce and Petroleo Brasileiro SA dropped after metal prices tumbled and analysts lowered their oil forecasts. Rossi Residencial SA led homebuilders lower after JPMorgan said sales may weaken in the fourth quarter.
The concern is ``the magnitude of contagion the financial problems will have on the real economy,'' said Daniella Marques, who manages about 1.75 billion reais in assets at Mercatto Gestao de Recursos in Rio de Janeiro. ``Markets will stay volatile until this is better understood.''
The Bovespa slid 4,736.01, or 11 percent, to 36,833.02, erasing about 80 percent of its biggest rally this decade. Trading was extended by 30 minutes after a 10 percent decline earlier triggered a halt. Mexico's Bolsa dropped 5 percent and the MSCI Latin America Index fell 14 percent.
Brazil's economic growth will slow more than previously expected next year as the global credit crunch restricts financing in the local economy, Standard & Poor's analyst Lisa Schineller said today.
Slowing Growth
Brazil's economy will expand 3 percent or less next year, down from a forecast of 4 percent made just last month, Schineller said. JPMorgan forecasts Brazil's economy to grow 2.8 percent in 2009, down from 5 percent this year. Deutsche expects the Brazilian economy to expand 2.2 percent in 2009, compared with the previous forecast of 3.6 percent.
These forecasts compare with the 4.5 percent growth projected in the Brazilian government's 2009 budget and the 3.7 percent median estimate of economists surveyed by Bloomberg.
Itau, Brazil's second-biggest non-state bank, fell amid doubt that U.S. plans to bail out banks will keep the economy out of a recession. The stock dropped 11 percent to 26.09 reais.
ALL, Latin America's biggest railroad operator, slid 6.2 percent to 12.90 reais.
The U.S. is in a recession and policy makers' interest-rate stance is aimed at addressing the risks of a deeper downturn, according to San Francisco Federal Reserve President Janet Yellen. Confidence in the global economy fell in October after a deepening freeze in financial markets increased the chances of a recession, a survey of Bloomberg users on six continents showed.
Commodity Producers Slide
The worst financial crisis since the Great Depression is also freezing credit and thwarting acquisitions and expansions. Global miner Rio Tinto Group may delay the planned sale this year of $10 billion of assets.
Vale, the world's biggest iron-ore and nickel miner, fell 15 percent to 23.50 reais, the biggest decline since at least 1994. Bradespar SA, part of Vale's controlling shareholder, lost 19 percent to 17 reais. The Bloomberg Base Metals 3-Month Price Commodity Index dropped for the first time in three days, declining 7.1 percent to 156.68.
Petrobras slid 12 percent to 24 reais. Brazil's state- controlled oil company had its 2009 share-price forecast cut 38 percent at Raymond James & Associates, citing the prospect of lower crude prices. Oil fell below $75 a barrel for the first time in more than a year.
Rossi dropped 16 percent to 3.19 reais. Homebuilders may report weaker sales in the fourth quarter as the global slowdown affects Brazil's growth, JPMorgan analyst Adrian Huerta wrote.
Negative Feedback
``The likelihood of negative feedback about sales in October from management on the mid-November conference calls is high,'' Huerta wrote in a note to investors. ``Fundamentals and growth expectations are likely to deteriorate.''
Net Servicos de Comunicacao SA fell after Deutsche said its profit will be hurt by the ``deteriorating'' economy. Brazil's biggest cable-TV operator dropped 8.1 percent to 13.33 reais. Net is ``attractive only in the longer term once the economy stabilizes,'' wrote Deutsche analyst Miguel Garcia.
Brazilian companies may post 60 billion reais of losses related to foreign-exchange derivatives and several may go bankrupt, former central bank deputy governor Paulo Vieira da Cunha said today. Brazilian companies made ``very imprudent bets'' on exchange rates, he said.
The BM&FBovespa MidLarge Cap index dropped 11 percent, while the BM&FBovespa Small Cap index dropped 10 percent.
Bolsa Drops
Mexico's Bolsa index fell for the first time this week, led by mining companies and retailers, after Deutsche cut its gross domestic product growth estimate to 1.1 percent from 3.5 percent.
Industrias Penoles SAB, the world's largest primary silver producer, fell the most in a week as prices of the metal tumbled. Grupo Mexico SAB slipped as copper fell more than 10 percent.
Penoles fell 14 percent to 134.91 pesos. Grupo Mexico declined 16 percent to 8.40 pesos. Soriana dropped 1.4 percent to 27.49 pesos.
Elsewhere in Latin America, Argentina's Merval fell 12 percent, Colombia's IGBC slipped 6.4 percent and Peru's Lima General index slid 8.6 percent. Chile's Ipsa slipped 0.4 percent.
-- With reporting by Alexander Ragir in Rio de Janeiro, William Freebairn in Mexico City, James Attwood in Santiago and Fabio Alves in New York. Editor: Allen Wan
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
Read more...
Oct. 15 (Bloomberg) -- Brazilian stocks plunged the most in a decade after analysts said currency losses may cost companies as much as $27 billion and reduced forecasts for economic growth.
Banco Itau Holding Financeira SA and railroad operator ALL America Latina Logistica paced declines in banks and industrial companies after JPMorgan Chase & Co. Deutsche Bank AG and Standard & Poor's said Brazil's economy may grow less than 3 percent. Cia. Vale do Rio Doce and Petroleo Brasileiro SA dropped after metal prices tumbled and analysts lowered their oil forecasts. Rossi Residencial SA led homebuilders lower after JPMorgan said sales may weaken in the fourth quarter.
The concern is ``the magnitude of contagion the financial problems will have on the real economy,'' said Daniella Marques, who manages about 1.75 billion reais in assets at Mercatto Gestao de Recursos in Rio de Janeiro. ``Markets will stay volatile until this is better understood.''
The Bovespa slid 4,736.01, or 11 percent, to 36,833.02, erasing about 80 percent of its biggest rally this decade. Trading was extended by 30 minutes after a 10 percent decline earlier triggered a halt. Mexico's Bolsa dropped 5 percent and the MSCI Latin America Index fell 14 percent.
Brazil's economic growth will slow more than previously expected next year as the global credit crunch restricts financing in the local economy, Standard & Poor's analyst Lisa Schineller said today.
Slowing Growth
Brazil's economy will expand 3 percent or less next year, down from a forecast of 4 percent made just last month, Schineller said. JPMorgan forecasts Brazil's economy to grow 2.8 percent in 2009, down from 5 percent this year. Deutsche expects the Brazilian economy to expand 2.2 percent in 2009, compared with the previous forecast of 3.6 percent.
These forecasts compare with the 4.5 percent growth projected in the Brazilian government's 2009 budget and the 3.7 percent median estimate of economists surveyed by Bloomberg.
Itau, Brazil's second-biggest non-state bank, fell amid doubt that U.S. plans to bail out banks will keep the economy out of a recession. The stock dropped 11 percent to 26.09 reais.
ALL, Latin America's biggest railroad operator, slid 6.2 percent to 12.90 reais.
The U.S. is in a recession and policy makers' interest-rate stance is aimed at addressing the risks of a deeper downturn, according to San Francisco Federal Reserve President Janet Yellen. Confidence in the global economy fell in October after a deepening freeze in financial markets increased the chances of a recession, a survey of Bloomberg users on six continents showed.
Commodity Producers Slide
The worst financial crisis since the Great Depression is also freezing credit and thwarting acquisitions and expansions. Global miner Rio Tinto Group may delay the planned sale this year of $10 billion of assets.
Vale, the world's biggest iron-ore and nickel miner, fell 15 percent to 23.50 reais, the biggest decline since at least 1994. Bradespar SA, part of Vale's controlling shareholder, lost 19 percent to 17 reais. The Bloomberg Base Metals 3-Month Price Commodity Index dropped for the first time in three days, declining 7.1 percent to 156.68.
Petrobras slid 12 percent to 24 reais. Brazil's state- controlled oil company had its 2009 share-price forecast cut 38 percent at Raymond James & Associates, citing the prospect of lower crude prices. Oil fell below $75 a barrel for the first time in more than a year.
Rossi dropped 16 percent to 3.19 reais. Homebuilders may report weaker sales in the fourth quarter as the global slowdown affects Brazil's growth, JPMorgan analyst Adrian Huerta wrote.
Negative Feedback
``The likelihood of negative feedback about sales in October from management on the mid-November conference calls is high,'' Huerta wrote in a note to investors. ``Fundamentals and growth expectations are likely to deteriorate.''
Net Servicos de Comunicacao SA fell after Deutsche said its profit will be hurt by the ``deteriorating'' economy. Brazil's biggest cable-TV operator dropped 8.1 percent to 13.33 reais. Net is ``attractive only in the longer term once the economy stabilizes,'' wrote Deutsche analyst Miguel Garcia.
Brazilian companies may post 60 billion reais of losses related to foreign-exchange derivatives and several may go bankrupt, former central bank deputy governor Paulo Vieira da Cunha said today. Brazilian companies made ``very imprudent bets'' on exchange rates, he said.
The BM&FBovespa MidLarge Cap index dropped 11 percent, while the BM&FBovespa Small Cap index dropped 10 percent.
Bolsa Drops
Mexico's Bolsa index fell for the first time this week, led by mining companies and retailers, after Deutsche cut its gross domestic product growth estimate to 1.1 percent from 3.5 percent.
Industrias Penoles SAB, the world's largest primary silver producer, fell the most in a week as prices of the metal tumbled. Grupo Mexico SAB slipped as copper fell more than 10 percent.
Penoles fell 14 percent to 134.91 pesos. Grupo Mexico declined 16 percent to 8.40 pesos. Soriana dropped 1.4 percent to 27.49 pesos.
Elsewhere in Latin America, Argentina's Merval fell 12 percent, Colombia's IGBC slipped 6.4 percent and Peru's Lima General index slid 8.6 percent. Chile's Ipsa slipped 0.4 percent.
-- With reporting by Alexander Ragir in Rio de Janeiro, William Freebairn in Mexico City, James Attwood in Santiago and Fabio Alves in New York. Editor: Allen Wan
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
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U.S. Stocks Drop Most Since Crash of 1987 on Recession Concerns
By Lynn Thomasson
Oct. 15 (Bloomberg) -- U.S. stocks plunged the most since the crash of 1987, hammered by the biggest drop in retail sales in three years and growing doubt that plans to bail out banks will keep the economic slump from deepening.
Exxon Mobil Corp. and Chevron Corp. tumbled more than 12 percent as oil fell below $75 a barrel on concern the slowing economy will hurt demand. Wal-Mart Stores Inc. retreated 8 percent after the Commerce Department said purchases at chain stores decreased 1.2 percent last month. Morgan Stanley lost 16 percent after Oppenheimer & Co. analyst Meredith Whitney said the government's bank rescue is not a ``panacea'' solution.
The Standard & Poor's 500 Index sank 90.17 points, or 9 percent, to 907.84, with nine companies declining more than 20 percent. The Dow Jones Industrial Average retreated 733.08, or 7.9 percent, to 8,577.91, its second-biggest point drop ever. The Nasdaq Composite Index lost 150.68, or 8.5 percent, to 1,628.33. About 37 stocks fell for each that rose on the New York Stock Exchange.
``It's absolutely trading on fear right now and uncertainty, because nobody knows yet how bad the economy is going to get,'' said John Wilson, the co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, which manages $120 billion. ``It's disquieting to me, and I've been doing this for 35 years.''
Rally Pared
The retreat over the past two days erased almost all of the gains in the S&P 500 and Dow on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York.
All 10 S&P 500 industries fell more than 6 percent today. About $1.1 trillion in value was erased from all U.S. equities. The declines came after the drop in retail sales was almost twice economists' estimates, sending Macy's Inc. and Dillard's Inc. down more than 15 percent. The Federal Reserve's index of New York manufacturing slumped to minus-24.6, a record low. The data overshadowed a retreat in money-market rates and better-than- estimated earnings reports from JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp.
``A big chunk of our economy is in recession right now,'' said Tom Wirth, senior investment officer at Chemung Canal Trust Co. in Elmira, New York, which manages $1.5 billion. ``There's fear the Christmas season is going to be miserable.''
VIX Jumps
The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 26 percent to 69.25 for the biggest gain in three weeks. The measure, known as Wall Street's ``fear gauge,'' has tripled since the beginning of September.
About 1.7 billion shares changed hands on the floor of the NYSE. The value of shares traded on the Big Board was $43.3 billion, the lowest since Oct. 3.
The S&P 500 lost more points on Sept. 29 when it fell 106.62, while its percentage decline of 8.8 percent was less than today's tumble.
Stocks in Europe and Asia fell for the first time in three days, helping push the MSCI World Index, a benchmark for 23 developed countries, to a 7.3 percent decline. Brazilian stock trading was briefly halted after the Bovespa index plunged 10 percent. The index closed down 13 percent after trading resumed.
Exxon Mobil, Chevron and ConocoPhillips, the three biggest U.S. oil companies, helped lead energy companies to the biggest retreat among 10 S&P 500 industries as crude fell below $75 a barrel for the first time in more than a year. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast for a second month.
Lowest Level
The S&P 500 Energy Index, once the year's best performing industry group, retreated 15 percent today for its steepest lost since the gauge was created in 1989. It is down 49 percent from its peak in May.
Citigroup Inc. fell $2.39, 13 percent, to $16.23 and Morgan Stanley slid $3.54 to $18.13 after Oppenheimer's Whitney said the capital infusions from the Treasury are ``one large step in the right direction,'' though not a ``panacea.''
``We are at least several quarters away from stabilizing fundamentals,'' Whitney wrote in a note dated yesterday. ``Credit costs will continue to surprise on the upside and revenues will begin to surprise on the downside as companies will be forced to make money off of lower asset bases.''
Visa Inc., MasterCard Inc. and American Express Co. had declines greater than 11 percent on concern consumers will charge less during the holiday season.
JPMorgan Erases Gain
JPMorgan erased earlier gains and fell 5.5 percent to $38.49 even after the largest U.S. bank by market value reported quarterly earnings that beat analysts' estimates. The company will set aside more money to cover loan losses as the lender braces for the economic slump to get ``a lot worse,'' Chief Executive Officer Jamie Dimon said.
Jones Apparel Group Inc. lost 30 percent to $9.51, the biggest drop in the S&P 500. The maker of Jones New York clothing and Nine West shoes forecast profit lower than its previous projection and S&P strongly recommended selling the stock.
Dell Inc. dropped 11 percent to $12.58. The world's second- largest personal-computer maker was cut to ``neutral'' from overweight by JPMorgan analyst Mark Moskowitz. The company gets about 60 percent of revenue from personal computers, which is a ``hurdle to achieving consistent growth,'' the analyst said.
EBay Inc. retreated 14 percent to $15.33. The largest Internet auction company was cut to ``underperform'' at Merrill Lynch & Co., which said it doesn't expect ``positive'' third- quarter results or fourth-quarter forecast. EBay reports earnings after the official close of U.S. exchanges today.
Coke Gains
Coca-Cola Co. climbed 1.1 percent to $44.21 for the only advance in the Dow average. The world's largest soft-drink maker posted third-quarter per-share profit that exceeded analysts' estimates by 8.1 percent on increased sales outside the U.S.
Genentech Inc. added 3 percent to $81.50. The largest U.S. maker of cancer drugs said third-quarter profit rose 6.7 percent as sales of tumor-fighting medicines beat analysts' estimates.
The S&P 500 fell yesterday as a worsening earnings outlook at PepsiCo Inc. and Microsoft Corp. overshadowed the $2 trillion global push to rescue the financial system. The U.S. is in a recession and the Fed's interest-rate stance is aimed at addressing the risks of a deeper slump, according to San Francisco Federal Reserve President Janet Yellen.
Weakening Economy
The economy deteriorated throughout the U.S. last month and pessimism about the outlook spread, the Federal Reserve said in its regional economic survey. Retailing, auto sales and tourism declined in ``most'' districts, while housing and construction ``weakened or remained low,'' according to the Beige Book report, published two weeks before officials meet to set interest rates.
Confidence in the global economy plunged in October after a deepening freeze in financial markets increased the chances of a recession, a survey of Bloomberg users on six continents showed. The Bloomberg Professional Global Confidence Index fell to 4 from 11.3 in September, the lowest since the survey began in November.
The latest chapter in the credit crisis came when Lehman Brothers Holdings Inc. filed the biggest bankruptcy in history on Sept. 15. The company's hedge-fund clients are now largely unable to access their Lehman accounts even as the value of the securities continues to fluctuate along with the markets.
Margin Calls
The investors may be required to put up more collateral if the value of those securities drops, a process known as a margin call, according to Steven Pearson, the partner at PricewaterhouseCoopers responsible for unraveling Lehman's U.K. operations.
Goldman Sachs Group Inc.'s Hedge Fund VIP Basket, an index of stocks with the most hedge-fund ownership, slumped 12 percent today.
Dollar money-market rates fell after the European Central Bank, Bank of England and Swiss National Bank offered lenders unlimited U.S. currency for the first time in a coordinated effort to unlock credit markets. Three-month dollar Libor slid 0.09 point to 4.55 percent.
BHP Billiton Ltd., the world's largest mining company, and Xstrata Plc, the fourth-biggest copper producer, lost more than 14 percent as copper, lead, tin and nickel prices slid on the London Metals Exchange. Posco, Asia's third-largest steelmaker, retreated 8.5 percent.
`Slowing Hard'
``The rest of the world is slowing and slowing hard, and so that translates to basically being underweight the global cyclicals, which is energy and materials,'' Binky Chadha, the New York-based chief U.S. equity strategist at Deutsche Bank AG, said on Bloomberg Radio.
Merrill Lynch & Co., Honeywell International Inc., Citigroup Inc. and Google Inc. are among the S&P 500 companies slated to release earnings this week.
The S&P 500 has tumbled 38 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $640 billion. The U.S. stock benchmark is valued at 11 times estimated 2008 profit for its companies. When that price-to-earnings ratio sank to 10.9 on Oct. 10, the index was the cheapest compared with the multiple using trailing profit since June 1985.
The S&P 500 has tumbled 42 percent from its Oct. 9, 2007, record and the Dow has lost 39 percent from its peak the same day.
``I'm pretty sure that if I go all in right now, I'll be better off in the next six months, but boy, I'll lose some sleep,'' said Morgan Keegan's Wilson. ``There's always that little nagging voice that says, `What if it's different this time?'''
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Oct. 15 (Bloomberg) -- U.S. stocks plunged the most since the crash of 1987, hammered by the biggest drop in retail sales in three years and growing doubt that plans to bail out banks will keep the economic slump from deepening.
Exxon Mobil Corp. and Chevron Corp. tumbled more than 12 percent as oil fell below $75 a barrel on concern the slowing economy will hurt demand. Wal-Mart Stores Inc. retreated 8 percent after the Commerce Department said purchases at chain stores decreased 1.2 percent last month. Morgan Stanley lost 16 percent after Oppenheimer & Co. analyst Meredith Whitney said the government's bank rescue is not a ``panacea'' solution.
The Standard & Poor's 500 Index sank 90.17 points, or 9 percent, to 907.84, with nine companies declining more than 20 percent. The Dow Jones Industrial Average retreated 733.08, or 7.9 percent, to 8,577.91, its second-biggest point drop ever. The Nasdaq Composite Index lost 150.68, or 8.5 percent, to 1,628.33. About 37 stocks fell for each that rose on the New York Stock Exchange.
``It's absolutely trading on fear right now and uncertainty, because nobody knows yet how bad the economy is going to get,'' said John Wilson, the co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, which manages $120 billion. ``It's disquieting to me, and I've been doing this for 35 years.''
Rally Pared
The retreat over the past two days erased almost all of the gains in the S&P 500 and Dow on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York.
All 10 S&P 500 industries fell more than 6 percent today. About $1.1 trillion in value was erased from all U.S. equities. The declines came after the drop in retail sales was almost twice economists' estimates, sending Macy's Inc. and Dillard's Inc. down more than 15 percent. The Federal Reserve's index of New York manufacturing slumped to minus-24.6, a record low. The data overshadowed a retreat in money-market rates and better-than- estimated earnings reports from JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp.
``A big chunk of our economy is in recession right now,'' said Tom Wirth, senior investment officer at Chemung Canal Trust Co. in Elmira, New York, which manages $1.5 billion. ``There's fear the Christmas season is going to be miserable.''
VIX Jumps
The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 26 percent to 69.25 for the biggest gain in three weeks. The measure, known as Wall Street's ``fear gauge,'' has tripled since the beginning of September.
About 1.7 billion shares changed hands on the floor of the NYSE. The value of shares traded on the Big Board was $43.3 billion, the lowest since Oct. 3.
The S&P 500 lost more points on Sept. 29 when it fell 106.62, while its percentage decline of 8.8 percent was less than today's tumble.
Stocks in Europe and Asia fell for the first time in three days, helping push the MSCI World Index, a benchmark for 23 developed countries, to a 7.3 percent decline. Brazilian stock trading was briefly halted after the Bovespa index plunged 10 percent. The index closed down 13 percent after trading resumed.
Exxon Mobil, Chevron and ConocoPhillips, the three biggest U.S. oil companies, helped lead energy companies to the biggest retreat among 10 S&P 500 industries as crude fell below $75 a barrel for the first time in more than a year. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast for a second month.
Lowest Level
The S&P 500 Energy Index, once the year's best performing industry group, retreated 15 percent today for its steepest lost since the gauge was created in 1989. It is down 49 percent from its peak in May.
Citigroup Inc. fell $2.39, 13 percent, to $16.23 and Morgan Stanley slid $3.54 to $18.13 after Oppenheimer's Whitney said the capital infusions from the Treasury are ``one large step in the right direction,'' though not a ``panacea.''
``We are at least several quarters away from stabilizing fundamentals,'' Whitney wrote in a note dated yesterday. ``Credit costs will continue to surprise on the upside and revenues will begin to surprise on the downside as companies will be forced to make money off of lower asset bases.''
Visa Inc., MasterCard Inc. and American Express Co. had declines greater than 11 percent on concern consumers will charge less during the holiday season.
JPMorgan Erases Gain
JPMorgan erased earlier gains and fell 5.5 percent to $38.49 even after the largest U.S. bank by market value reported quarterly earnings that beat analysts' estimates. The company will set aside more money to cover loan losses as the lender braces for the economic slump to get ``a lot worse,'' Chief Executive Officer Jamie Dimon said.
Jones Apparel Group Inc. lost 30 percent to $9.51, the biggest drop in the S&P 500. The maker of Jones New York clothing and Nine West shoes forecast profit lower than its previous projection and S&P strongly recommended selling the stock.
Dell Inc. dropped 11 percent to $12.58. The world's second- largest personal-computer maker was cut to ``neutral'' from overweight by JPMorgan analyst Mark Moskowitz. The company gets about 60 percent of revenue from personal computers, which is a ``hurdle to achieving consistent growth,'' the analyst said.
EBay Inc. retreated 14 percent to $15.33. The largest Internet auction company was cut to ``underperform'' at Merrill Lynch & Co., which said it doesn't expect ``positive'' third- quarter results or fourth-quarter forecast. EBay reports earnings after the official close of U.S. exchanges today.
Coke Gains
Coca-Cola Co. climbed 1.1 percent to $44.21 for the only advance in the Dow average. The world's largest soft-drink maker posted third-quarter per-share profit that exceeded analysts' estimates by 8.1 percent on increased sales outside the U.S.
Genentech Inc. added 3 percent to $81.50. The largest U.S. maker of cancer drugs said third-quarter profit rose 6.7 percent as sales of tumor-fighting medicines beat analysts' estimates.
The S&P 500 fell yesterday as a worsening earnings outlook at PepsiCo Inc. and Microsoft Corp. overshadowed the $2 trillion global push to rescue the financial system. The U.S. is in a recession and the Fed's interest-rate stance is aimed at addressing the risks of a deeper slump, according to San Francisco Federal Reserve President Janet Yellen.
Weakening Economy
The economy deteriorated throughout the U.S. last month and pessimism about the outlook spread, the Federal Reserve said in its regional economic survey. Retailing, auto sales and tourism declined in ``most'' districts, while housing and construction ``weakened or remained low,'' according to the Beige Book report, published two weeks before officials meet to set interest rates.
Confidence in the global economy plunged in October after a deepening freeze in financial markets increased the chances of a recession, a survey of Bloomberg users on six continents showed. The Bloomberg Professional Global Confidence Index fell to 4 from 11.3 in September, the lowest since the survey began in November.
The latest chapter in the credit crisis came when Lehman Brothers Holdings Inc. filed the biggest bankruptcy in history on Sept. 15. The company's hedge-fund clients are now largely unable to access their Lehman accounts even as the value of the securities continues to fluctuate along with the markets.
Margin Calls
The investors may be required to put up more collateral if the value of those securities drops, a process known as a margin call, according to Steven Pearson, the partner at PricewaterhouseCoopers responsible for unraveling Lehman's U.K. operations.
Goldman Sachs Group Inc.'s Hedge Fund VIP Basket, an index of stocks with the most hedge-fund ownership, slumped 12 percent today.
Dollar money-market rates fell after the European Central Bank, Bank of England and Swiss National Bank offered lenders unlimited U.S. currency for the first time in a coordinated effort to unlock credit markets. Three-month dollar Libor slid 0.09 point to 4.55 percent.
BHP Billiton Ltd., the world's largest mining company, and Xstrata Plc, the fourth-biggest copper producer, lost more than 14 percent as copper, lead, tin and nickel prices slid on the London Metals Exchange. Posco, Asia's third-largest steelmaker, retreated 8.5 percent.
`Slowing Hard'
``The rest of the world is slowing and slowing hard, and so that translates to basically being underweight the global cyclicals, which is energy and materials,'' Binky Chadha, the New York-based chief U.S. equity strategist at Deutsche Bank AG, said on Bloomberg Radio.
Merrill Lynch & Co., Honeywell International Inc., Citigroup Inc. and Google Inc. are among the S&P 500 companies slated to release earnings this week.
The S&P 500 has tumbled 38 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $640 billion. The U.S. stock benchmark is valued at 11 times estimated 2008 profit for its companies. When that price-to-earnings ratio sank to 10.9 on Oct. 10, the index was the cheapest compared with the multiple using trailing profit since June 1985.
The S&P 500 has tumbled 42 percent from its Oct. 9, 2007, record and the Dow has lost 39 percent from its peak the same day.
``I'm pretty sure that if I go all in right now, I'll be better off in the next six months, but boy, I'll lose some sleep,'' said Morgan Keegan's Wilson. ``There's always that little nagging voice that says, `What if it's different this time?'''
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Canadian Stocks Fall on U.S. Recession Concern, Led by EnCana
By John Kipphoff
Oct. 15 (Bloomberg) -- Canadian stocks fell, wiping out two-thirds of their biggest gain in 32 years, as commodity and financial shares sank on speculation global bank bailouts won't be enough to prop up the economy and demand for raw materials.
EnCana Corp. paced a record decline in energy producers after crude oil sank below $75 a barrel for the first time in a year and the company delayed a split into separate oil and gas units. Manulife Financial Corp. led banks and insurers lower after helping the main index rally the most since 1976 yesterday on U.S. plans to rescue banks, unlock credit and bolster growth.
``Even if we get through the credit crisis, we still have a U.S. recession to deal with,'' said Gareth Watson who helps manage about $65 billion as associate director at ScotiaMcLeod's portfolio advisory group, based in Toronto. ``There's a question of demand for particular commodities. Canada won't escape the U.S. weakness.''
The Standard & Poor's/TSX Composite Index dropped 6.4 percent to 9,323.83 in Toronto after jumping 9.8 percent yesterday when the U.S. outlined details of a $250 billion plan to buy equity stakes in banks. Canada's main equity benchmark is trading 38 percent below its June 18 record.
Reports today suggested that the economy in the U.S., Canada's biggest trading partner, is slowing. Retail sales fell 1.2 percent in September and prices paid to U.S. producers fell 0.4 percent. The Federal Reserve Bank of New York's general economic index dropped to the lowest level in October since 2001. San Francisco Federal Reserve President Janet Yellen said yesterday that the U.S. may already be in a recession.
Retreat
EnCana, Canada's biggest energy company by market value, fell 13 percent to C$44.30 after jumping 17 percent yesterday. Canadian Oil Sands Trust, lead partner in the world's largest oil-sands mining company, slid 21 percent to C$22.19 for its worst drop since trading began in 1995.
Suncor Energy Inc., the second-biggest oil-sands producer, slid a record 14 percent to C$24.99. Canadian Natural Resources Ltd. declined 15 percent to C$47.01. Birchcliff Energy Ltd., the oil and gas producer whose biggest shareholder is Canadian billionaire Seymour Schulich, dropped 19 percent to C$5.21, the most in four years.
Crude oil for November delivery fell 5.3 percent to $74.50 in New York, slipping below $75 a barrel for the first time since September 2007. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast for a second month, citing ``dramatically worsening'' conditions in financial markets. The U.S. takes about three-quarters of Canada's total exports and is the biggest buyer of the Canadian oil and gas.
Energy Drop
A gauge of energy companies fell 11 percent, the most since the index was started in December 1987. A measure of raw- materials producers slipped 9.7 percent as prices of industrial metals retreated.
Potash Corp. of Saskatchewan Inc., the largest maker of crop nutrients, dropped 19 percent to C$91.51, more than wiping out yesterday's 10 percent gain. Teck Cominco Ltd., Canada's biggest diversified mining company, fell 18 percent to C$15.46 for its biggest loss in eight years. Inmet Mining Corp. slid 15 percent to C$25.39, the lowest since December 2005.
Copper tumbled, leading a decline in industrial metals today, as a slump in shipping costs heightened speculation that demand will weaken. Soybean, corn and wheat slid in Chicago.
Pessimism on stocks soared to an all-time high as a growing conviction the global economy is in a recession spurred investors to shun commodity shares, a Merrill Lynch & Co. survey showed. A measure of confidence in the global economy plunged in October to the lowest reading on record, according to the Bloomberg Professional Global Confidence Index.
`Still Scared'
``A lot of people are still scared and are saying, `get me out of here before it goes down again,''' Stephen Jarislowsky, who helps oversee about $43 billion as chairman of Montreal- based money manager Jarislowsky Fraser Ltd. said yesterday. ``A lot of people have sworn off the stock markets altogether.''
Financial stocks fell 3.4 percent as a group even as the Bank of Canada lent banks and brokers C$10 billion ($8.54 billion) for 28 days, putting emergency cash into the system to encourage lending.
Manulife, North America's biggest insurance company by assets, slid 4.8 percent to C$29.05, after a 15 percent gain. Royal Bank of Canada, the nation's biggest lender, fell 4.3 percent to C$45. Toronto-Dominion Bank, the second-largest, slid 3.5 percent to C$56.68.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
Read more...
Oct. 15 (Bloomberg) -- Canadian stocks fell, wiping out two-thirds of their biggest gain in 32 years, as commodity and financial shares sank on speculation global bank bailouts won't be enough to prop up the economy and demand for raw materials.
EnCana Corp. paced a record decline in energy producers after crude oil sank below $75 a barrel for the first time in a year and the company delayed a split into separate oil and gas units. Manulife Financial Corp. led banks and insurers lower after helping the main index rally the most since 1976 yesterday on U.S. plans to rescue banks, unlock credit and bolster growth.
``Even if we get through the credit crisis, we still have a U.S. recession to deal with,'' said Gareth Watson who helps manage about $65 billion as associate director at ScotiaMcLeod's portfolio advisory group, based in Toronto. ``There's a question of demand for particular commodities. Canada won't escape the U.S. weakness.''
The Standard & Poor's/TSX Composite Index dropped 6.4 percent to 9,323.83 in Toronto after jumping 9.8 percent yesterday when the U.S. outlined details of a $250 billion plan to buy equity stakes in banks. Canada's main equity benchmark is trading 38 percent below its June 18 record.
Reports today suggested that the economy in the U.S., Canada's biggest trading partner, is slowing. Retail sales fell 1.2 percent in September and prices paid to U.S. producers fell 0.4 percent. The Federal Reserve Bank of New York's general economic index dropped to the lowest level in October since 2001. San Francisco Federal Reserve President Janet Yellen said yesterday that the U.S. may already be in a recession.
Retreat
EnCana, Canada's biggest energy company by market value, fell 13 percent to C$44.30 after jumping 17 percent yesterday. Canadian Oil Sands Trust, lead partner in the world's largest oil-sands mining company, slid 21 percent to C$22.19 for its worst drop since trading began in 1995.
Suncor Energy Inc., the second-biggest oil-sands producer, slid a record 14 percent to C$24.99. Canadian Natural Resources Ltd. declined 15 percent to C$47.01. Birchcliff Energy Ltd., the oil and gas producer whose biggest shareholder is Canadian billionaire Seymour Schulich, dropped 19 percent to C$5.21, the most in four years.
Crude oil for November delivery fell 5.3 percent to $74.50 in New York, slipping below $75 a barrel for the first time since September 2007. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast for a second month, citing ``dramatically worsening'' conditions in financial markets. The U.S. takes about three-quarters of Canada's total exports and is the biggest buyer of the Canadian oil and gas.
Energy Drop
A gauge of energy companies fell 11 percent, the most since the index was started in December 1987. A measure of raw- materials producers slipped 9.7 percent as prices of industrial metals retreated.
Potash Corp. of Saskatchewan Inc., the largest maker of crop nutrients, dropped 19 percent to C$91.51, more than wiping out yesterday's 10 percent gain. Teck Cominco Ltd., Canada's biggest diversified mining company, fell 18 percent to C$15.46 for its biggest loss in eight years. Inmet Mining Corp. slid 15 percent to C$25.39, the lowest since December 2005.
Copper tumbled, leading a decline in industrial metals today, as a slump in shipping costs heightened speculation that demand will weaken. Soybean, corn and wheat slid in Chicago.
Pessimism on stocks soared to an all-time high as a growing conviction the global economy is in a recession spurred investors to shun commodity shares, a Merrill Lynch & Co. survey showed. A measure of confidence in the global economy plunged in October to the lowest reading on record, according to the Bloomberg Professional Global Confidence Index.
`Still Scared'
``A lot of people are still scared and are saying, `get me out of here before it goes down again,''' Stephen Jarislowsky, who helps oversee about $43 billion as chairman of Montreal- based money manager Jarislowsky Fraser Ltd. said yesterday. ``A lot of people have sworn off the stock markets altogether.''
Financial stocks fell 3.4 percent as a group even as the Bank of Canada lent banks and brokers C$10 billion ($8.54 billion) for 28 days, putting emergency cash into the system to encourage lending.
Manulife, North America's biggest insurance company by assets, slid 4.8 percent to C$29.05, after a 15 percent gain. Royal Bank of Canada, the nation's biggest lender, fell 4.3 percent to C$45. Toronto-Dominion Bank, the second-largest, slid 3.5 percent to C$56.68.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
Read more...
BioMarin, EBay, Kinder Morgan, Xilinx: U.S. Equity Preview
By Lu Wang
Oct. 15 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:45 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December lost 99, or 9.9 percent, to 903.30. Dow Jones Industrial Average futures fell 858, or 9.2 percent, to 8,504. Nasdaq-100 Index futures slipped 137, or 10 percent, to 1,229.
BioMarin Pharmaceutical Inc. (BMRN US): The company said its experimental treatment known as 6R-BH4 helped ease the constriction of arteries, a condition that often strikes patients with sickle cell disease. The stock slid 8 percent to $20.93 in regular trading.
EBay Inc. (EBAY US) fell 90 cents, or 5.9 percent, to $14.43. The world's biggest Internet auctioneer forecast its first quarterly sales decline in the final months of this year and said 2008 earnings would be lower than earlier predicted.
Kinder Morgan Energy Partners LP (KMP US): The largest U.S. pipeline partnership by market value said third-quarter profit was 49 cents a unit. Analysts, on average, expected the partnership to earn 59 cents, according to a Bloomberg survey. The stock lost 5.3 percent to $47.12 in regular trading.
Playboy Enterprises Inc. (PLA US): The men's magazine publisher said it plans to fire 55 people as part of an expanded cost-cutting effort. The stock fell 13 percent to $2.10 in regular trading.
Xilinx Inc. (XLNX US) gained 49 cents, or 2.5 percent, to $19.98 The world's biggest maker of programmable semiconductors reported second-quarter profit excluding some items of 38 cents a share, 1 cent higher than the average analyst estimate in a Bloomberg survey.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
Read more...
Oct. 15 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:45 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December lost 99, or 9.9 percent, to 903.30. Dow Jones Industrial Average futures fell 858, or 9.2 percent, to 8,504. Nasdaq-100 Index futures slipped 137, or 10 percent, to 1,229.
BioMarin Pharmaceutical Inc. (BMRN US): The company said its experimental treatment known as 6R-BH4 helped ease the constriction of arteries, a condition that often strikes patients with sickle cell disease. The stock slid 8 percent to $20.93 in regular trading.
EBay Inc. (EBAY US) fell 90 cents, or 5.9 percent, to $14.43. The world's biggest Internet auctioneer forecast its first quarterly sales decline in the final months of this year and said 2008 earnings would be lower than earlier predicted.
Kinder Morgan Energy Partners LP (KMP US): The largest U.S. pipeline partnership by market value said third-quarter profit was 49 cents a unit. Analysts, on average, expected the partnership to earn 59 cents, according to a Bloomberg survey. The stock lost 5.3 percent to $47.12 in regular trading.
Playboy Enterprises Inc. (PLA US): The men's magazine publisher said it plans to fire 55 people as part of an expanded cost-cutting effort. The stock fell 13 percent to $2.10 in regular trading.
Xilinx Inc. (XLNX US) gained 49 cents, or 2.5 percent, to $19.98 The world's biggest maker of programmable semiconductors reported second-quarter profit excluding some items of 38 cents a share, 1 cent higher than the average analyst estimate in a Bloomberg survey.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
Read more...
VIX `Exploding' as Stocks Plunge on Growing Recession Concern
By Jeff Kearns
Oct. 15 (Bloomberg) -- The benchmark index for U.S. stock options jumped to the second-highest close in its 18-year history after a slump in retail sales heightened concern the nation may not avoid a prolonged recession.
``Volatility is exploding,'' Brian Stutland, president of Stutland Equities LLC, said in a Bloomberg Television interview from the Chicago Board Options Exchange floor. ``People's outlook on the entire U.S. economy is changing.''
The VIX, as the CBOE Volatility Index is known, surged 26 percent to 69.25, or almost triple its average during the past year. Before last week, the VIX had never closed over 50. The VIX measures the cost of using options as insurance against declines in the Standard & Poor's 500 Index, which tumbled 9 percent for the steepest slide since the 1987 crash.
The VIX is ``like blood pressure and it's through the roof,'' said John O'Donoghue, co-head of trading at Cowen & Co. in New York. ``The levels of bearish sentiment we're seeing we haven't seen in years.''
October VIX futures, which expire in a week, added 9.3 percent to 58.36. November futures rose 5.1 percent to 43.01.
The VXO Volatility Index, a predecessor to the VIX that reflects the price of options on the S&P 100, climbed 17 percent to 68.35, the third-highest close since October 1987. The index, known as the ``old VIX,'' reached an intraday record of 172.79, the highest in its almost 23-year history, a day after the 1987 stock-market crash.
Consumer purchases fell 1.2 percent in September, almost twice analysts' estimate. The decline marked the third-straight monthly retreat, the first time that's happened since comparable records began in 1992, according to the Commerce Department.
``The consumer is having a lot of problems,'' said Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co. in New York. ``Credit availability does seem to have produced a big shock throughout the U.S. economy.''
Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will increase or decrease.
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
Oct. 15 (Bloomberg) -- The benchmark index for U.S. stock options jumped to the second-highest close in its 18-year history after a slump in retail sales heightened concern the nation may not avoid a prolonged recession.
``Volatility is exploding,'' Brian Stutland, president of Stutland Equities LLC, said in a Bloomberg Television interview from the Chicago Board Options Exchange floor. ``People's outlook on the entire U.S. economy is changing.''
The VIX, as the CBOE Volatility Index is known, surged 26 percent to 69.25, or almost triple its average during the past year. Before last week, the VIX had never closed over 50. The VIX measures the cost of using options as insurance against declines in the Standard & Poor's 500 Index, which tumbled 9 percent for the steepest slide since the 1987 crash.
The VIX is ``like blood pressure and it's through the roof,'' said John O'Donoghue, co-head of trading at Cowen & Co. in New York. ``The levels of bearish sentiment we're seeing we haven't seen in years.''
October VIX futures, which expire in a week, added 9.3 percent to 58.36. November futures rose 5.1 percent to 43.01.
The VXO Volatility Index, a predecessor to the VIX that reflects the price of options on the S&P 100, climbed 17 percent to 68.35, the third-highest close since October 1987. The index, known as the ``old VIX,'' reached an intraday record of 172.79, the highest in its almost 23-year history, a day after the 1987 stock-market crash.
Consumer purchases fell 1.2 percent in September, almost twice analysts' estimate. The decline marked the third-straight monthly retreat, the first time that's happened since comparable records began in 1992, according to the Commerce Department.
``The consumer is having a lot of problems,'' said Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co. in New York. ``Credit availability does seem to have produced a big shock throughout the U.S. economy.''
Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will increase or decrease.
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
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