By Bob Willis
Enlarge Image/Details
Oct. 17 (Bloomberg) -- U.S. builders probably broke ground in September on the fewest houses in 17 years, a sign the real- estate market deteriorated even before the recent credit meltdown, economists said before a report today.
Housing starts fell 2.6 percent last month to an annual rate of 872,000, according to the median forecast in a Bloomberg News survey of 74 economists. Another report may show consumer sentiment fell in October for the first time in four months.
Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made qualifying for a mortgage more difficult. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.
``Housing starts will show declines in coming months due to the credit crisis and the weak economy,'' said Terrin Griffiths, an economist at the California Credit Union League in Rancho Cucamonga, California. ``The housing market is continuing to struggle toward a bottom.''
The Commerce Department's report on starts is due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 840,000 to 935,000 units.
Building permits, a sign of future construction, probably fell 2 percent to an 840,000 pace, according to the survey.
At 10 a.m., the Reuters/University of Michigan preliminary estimate of October consumer sentiment probably fell to 65 from 70.3 at the end of September, according to the survey median.
Renewed Slump
The biggest housing slump in a generation was showing signs of nearing a bottom when financial markets began to implode in September, leading to the government takeover of mortgage finance companies Freddie Mac and Fannie Mae, the failure of banks and a $700 billion government rescue plan this month. Recent events are likely delaying any return to stability.
``These things are putting a new nail'' in the housing market's coffin, David Seiders, chief economist at the National Association of Homebuiders, said in an interview on Bloomberg Television yesterday. ``This sort of vicious feedback loop is still in play.''
The National Association of Home Builders/Wells Fargo index of builder confidence decreased in October to its lowest level since records began in 1985, the Washington-based association said yesterday.
Combined sales of new and existing homes have fallen 36 percent from their peaks in mid-2005. Home construction has declined 61 percent from a peak in January 2006. The supply of unsold homes on the market remains above 10 months' worth of sales, signaling homebuilding is likely to continue falling.
Declining Prices
Home prices in major cities are down an average of 20 percent from their mid-2006 peak after nearly doubling in the prior six years, according to research by Yale University economist Robert Shiller.
Falling prices are contributing to the jump in foreclosures as Americans, trying to refinance adjustable-rate loans, find out they owe more than their homes are worth. The drop in prices also means owners can't tap home equity for extra cash, one reason behind the slowdown in consumer spending.
Homebuilders are still reeling. Lennar Corp., the second- largest U.S. homebuilder, on Sept. 23 reported its sixth straight quarterly loss as potential buyers struggled to get mortgages and rising foreclosures increased the supply of homes on the market.
``The weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards,'' Chief Executive Officer Stuart Miller said in a statement.
Bloomberg Survey
================================================================
Housing BuildingU of Mich
Starts Permits Conf.
,000's ,000's Index
================================================================
Date of Release 10/17 10/17 10/17
Observation Period Sept. Sept. Sept. F
----------------------------------------------------------------
Median 872 840 65.0
Average 875 843 65.3
High Forecast 935 910 74.1
Low Forecast 840 820 55.0
Number of Participants 74 48 60
Previous 895 857 70.3
----------------------------------------------------------------
4CAST Ltd. 840 840 64.5
Action Economics 880 830 70.5
Aletti Gestielle SGR 850 845 65.0
Allianz Dresdner Economic 860 --- ---
Argus Research Corp. 890 --- 55.0
Banc of America Securitie 840 --- ---
Bank of Tokyo- Mitsubishi 859 825 74.1
Bantleon Bank AG 870 830 66.0
Barclays Capital 875 --- 65.0
BMO Capital Markets 868 835 66.0
BNP Paribas 852 --- 60.0
Briefing.com 880 845 68.0
Calyon 875 --- 66.7
CFC Group 870 830 64.0
CIBC World Markets 850 820 63.0
Citi 870 840 65.0
ClearView Economics 910 --- ---
Commerzbank AG 880 850 65.0
Credit Suisse 870 --- 62.0
Daiwa Securities America 870 --- 60.0
Danske Bank 890 856 68.0
DekaBank 890 850 64.0
Desjardins Group 850 870 66.0
Deutsche Bank Securities 850 840 60.0
Deutsche Postbank AG 880 --- 68.0
Dresdner Kleinwort 875 --- ---
DZ Bank 880 845 68.0
First Trust Advisors 873 --- 67.0
FTN Financial 875 --- 63.0
Global Insight Inc. 850 866 60.0
Goldman, Sachs & Co. 917 --- ---
H&R Block Financial Advis 880 835 63.0
Helaba 870 840 67.0
High Frequency Economics 900 --- 70.0
Horizon Investments 855 830 60.0
HSBC Markets 850 850 65.0
IDEAglobal 885 845 67.0
ING Financial Markets 870 820 ---
Insight Economics 910 --- 65.0
Intesa-SanPaulo 850 840 60.0
J.P. Morgan Chase 870 830 64.0
Janney Montgomery Scott L 891 853 ---
Landesbank Berlin 860 840 61.0
Landesbank BW 880 845 69.0
Lloyds TSB 880 840 70.0
Maria Fiorini Ramirez Inc 900 --- ---
Merk Investments 868 822 63.0
Merrill Lynch 855 820 63.0
MFC Global Investment Man 865 830 66.5
Moody's Economy.com 910 860 63.0
Morgan Stanley & Co. 870 --- ---
National City Corporation 910 850 68.8
Natixis 850 --- 63.0
Newedge --- --- 67.0
Nomura Securities Intl. 935 910 ---
Nord/LB 890 850 68.5
Okasan Securities 880 --- ---
PNC Bank 900 --- ---
RBS Greenwich Capital 870 --- 65.0
Ried, Thunberg & Co. 880 857 66.0
Schneider Trading Associa 910 855 68.0
Scotia Capital 850 840 ---
Societe Generale 900 --- ---
Standard Chartered 870 830 67.0
Stone & McCarthy Research --- --- 65.0
TD Securities 880 850 65.0
Thomson Financial/IFR 870 845 70.0
Tullett Prebon 870 --- 67.0
UBS Securities LLC 850 --- 59.0
Unicredit MIB 875 850 ---
University of Maryland 865 845 69.0
Wachovia Corp. 895 --- ---
Wells Fargo & Co. 880 830 65.0
WestLB AG 850 840 67.5
Westpac Banking Co. 859 840 67.0
Wrightson Associates 880 850 70.0
================================================================
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.
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Friday, October 17, 2008
Philippine Peso to Fall 4 Percent, Port Operator Says
By Lilian Karunungan
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Oct. 17 (Bloomberg) -- The Philippine peso, which declined 14 percent this year, will drop another 4 percent as financial turmoil saps demand for emerging-market assets, according to the nation's largest port operator.
Slowing economic growth, consumer spending and capital outflows will send the currency to the weakest since November 2006, Rafael Consing, treasurer at International Container Terminal Services Inc. said in an interview from Manila yesterday. Recession in the U.S. and Europe may crimp demand for Philippine goods, hurting the peso, he said.
``In my personal opinion, we could see the peso reach 50 if risk aversion continues and as the greenback is repatriated to recapitalize U.S. banks and corporations,'' said Consing, whose company has operations in Eastern Europe, Latin America, Africa and Asia.
The peso is poised for the first annual loss in four years and is the third-worst performer among Asia's 10 most-active currencies outside Japan. It gained almost 16 percent in 2007, according to the Bankers Association of the Philippines. The currency traded at 48.035 as of 12:46 p.m. in Manila.
Overseas sales contribute about a third of the country's gross domestic product and transfers from Filipinos living abroad a 10th. The U.S. is the Philippines biggest export market and No. 1 source of remittances. Europe accounted for more than a fifth of total trade.
``Our trading partners in the U.S. and Europe are close to a recession,'' Consing said. ``One doesn't really expect strong export numbers to those countries.''
Worker Remittances
The peso will also come under pressure as overseas workers' remittances decelerate and export growth slows, Consing said.
Money sent home by Filipinos rose 10.4 percent in August from a year earlier, compared with 25 percent growth in July, the central bank said in a statement in Manila on Oct. 15.
``We should assume such growth to be tempered, as they themselves might be tightening their belts and perhaps allocating more to savings than consumption,'' Consing said.
Non-deliverable forwards contracts yesterday showed traders are betting the peso will weaken 4 percent to 50.12 against the U.S. currency in 12 months. Forwards are agreements in which assets are bought and sold at current prices for delivery at a later specified time and date.
Growth Forecasts
The Philippines cut its economic growth target four times this year, saying exports and remittances will falter amid a U.S. economic slowdown. The local economy may expand 4.1 percent to 5.1 percent in 2009, Economic Planning Secretary Ralph Recto said in Manila on Oct. 2. The previous forecast was for growth of 4.5 percent to 5.5 percent.
The Philippine Stock Exchange Composite index has dropped 42 percent this year, with overseas investors selling $781.6 million more Philippine shares than they bought, stock exchange data show.
The Philippines, Singapore, Thailand, Indonesia and Vietnam have seen their benchmark stock indexes in 2008 fall more than 40 percent as the contagion from the U.S. credit crisis spread around the world.
Governments from Washington to London to Berlin have been rushing to shore up banks, unlock lending and avert a financial catastrophe since credit markets froze up following the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. U.S. lawmakers passed a $700 billion plan to bail out distressed lenders.
``The jury is still out on whether $700 billion is enough to stave off more bankruptcies among U.S. financial institutions, particularly the regional banks,'' Consing said. ``Any sign of second-round effects will exacerbate risk aversion and this could send U.S. dollar-Asia to new highs. In which case, we will see the peso reaching north of 50,'' he forecasts.
To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net
Read more...
Enlarge Image/Details
Oct. 17 (Bloomberg) -- The Philippine peso, which declined 14 percent this year, will drop another 4 percent as financial turmoil saps demand for emerging-market assets, according to the nation's largest port operator.
Slowing economic growth, consumer spending and capital outflows will send the currency to the weakest since November 2006, Rafael Consing, treasurer at International Container Terminal Services Inc. said in an interview from Manila yesterday. Recession in the U.S. and Europe may crimp demand for Philippine goods, hurting the peso, he said.
``In my personal opinion, we could see the peso reach 50 if risk aversion continues and as the greenback is repatriated to recapitalize U.S. banks and corporations,'' said Consing, whose company has operations in Eastern Europe, Latin America, Africa and Asia.
The peso is poised for the first annual loss in four years and is the third-worst performer among Asia's 10 most-active currencies outside Japan. It gained almost 16 percent in 2007, according to the Bankers Association of the Philippines. The currency traded at 48.035 as of 12:46 p.m. in Manila.
Overseas sales contribute about a third of the country's gross domestic product and transfers from Filipinos living abroad a 10th. The U.S. is the Philippines biggest export market and No. 1 source of remittances. Europe accounted for more than a fifth of total trade.
``Our trading partners in the U.S. and Europe are close to a recession,'' Consing said. ``One doesn't really expect strong export numbers to those countries.''
Worker Remittances
The peso will also come under pressure as overseas workers' remittances decelerate and export growth slows, Consing said.
Money sent home by Filipinos rose 10.4 percent in August from a year earlier, compared with 25 percent growth in July, the central bank said in a statement in Manila on Oct. 15.
``We should assume such growth to be tempered, as they themselves might be tightening their belts and perhaps allocating more to savings than consumption,'' Consing said.
Non-deliverable forwards contracts yesterday showed traders are betting the peso will weaken 4 percent to 50.12 against the U.S. currency in 12 months. Forwards are agreements in which assets are bought and sold at current prices for delivery at a later specified time and date.
Growth Forecasts
The Philippines cut its economic growth target four times this year, saying exports and remittances will falter amid a U.S. economic slowdown. The local economy may expand 4.1 percent to 5.1 percent in 2009, Economic Planning Secretary Ralph Recto said in Manila on Oct. 2. The previous forecast was for growth of 4.5 percent to 5.5 percent.
The Philippine Stock Exchange Composite index has dropped 42 percent this year, with overseas investors selling $781.6 million more Philippine shares than they bought, stock exchange data show.
The Philippines, Singapore, Thailand, Indonesia and Vietnam have seen their benchmark stock indexes in 2008 fall more than 40 percent as the contagion from the U.S. credit crisis spread around the world.
Governments from Washington to London to Berlin have been rushing to shore up banks, unlock lending and avert a financial catastrophe since credit markets froze up following the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. U.S. lawmakers passed a $700 billion plan to bail out distressed lenders.
``The jury is still out on whether $700 billion is enough to stave off more bankruptcies among U.S. financial institutions, particularly the regional banks,'' Consing said. ``Any sign of second-round effects will exacerbate risk aversion and this could send U.S. dollar-Asia to new highs. In which case, we will see the peso reaching north of 50,'' he forecasts.
To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net
Read more...
Chinese Copper Imports May Be Hurt by Credit Crunch, Maike Says
By Li Xiaowei
Oct. 17 (Bloomberg) -- Copper imports by China, the world's biggest consumer, may be hampered by the global credit crunch in the next few months, Maike Futures Co. said.
Volatile money-market rates have made it harder for traders to obtain letters of credit or to convert them into cash, disrupting payments and possibly hurting trade flows, said Sheng Weimin, general manager of Maike Futures, a unit of the Maike Group, the country's largest copper importer.
The recovery of China's demand after the Olympics has been slower than expected and that may help push down copper prices which have already plunged 25 percent this month on the London Metal Exchange. The credit crisis has spurred concern growth could slow further, curbing raw-material demand.
``The financial turmoil has tightened bank loans that most traders rely on for finance'' and has spurred lenders to look more closely at counterparty risk, Sheng said by phone from Shanghai. ``If this continues to be an issue, we may not have as much copper shipped here as we expected on the basis of the favorable arbitrage.''
China imports of copper and copper alloys rebounded 46 percent to 132,978 metric tons in September, data from the customs office showed today. Traders had said they expected the level of imports to be sustained for the remainder of the year as a slump in London prices made imports attractive.
Trading companies in China receive a letter of credit from banks for imports when they buy metal overseas, and pay back the funds after they sell their imports usually within 90 days.
The Maike Group was the country's biggest importer in 2007, bringing in 250,000 tons, or 16 percent of total purchases, Shen Haihua, general manager of Shanghai Maike Dickson Investment Management Co., said in January.
To contact the reporters on this story: Li Xiaowei in Shanghai at xli12@bloomberg.net
Read more...
Oct. 17 (Bloomberg) -- Copper imports by China, the world's biggest consumer, may be hampered by the global credit crunch in the next few months, Maike Futures Co. said.
Volatile money-market rates have made it harder for traders to obtain letters of credit or to convert them into cash, disrupting payments and possibly hurting trade flows, said Sheng Weimin, general manager of Maike Futures, a unit of the Maike Group, the country's largest copper importer.
The recovery of China's demand after the Olympics has been slower than expected and that may help push down copper prices which have already plunged 25 percent this month on the London Metal Exchange. The credit crisis has spurred concern growth could slow further, curbing raw-material demand.
``The financial turmoil has tightened bank loans that most traders rely on for finance'' and has spurred lenders to look more closely at counterparty risk, Sheng said by phone from Shanghai. ``If this continues to be an issue, we may not have as much copper shipped here as we expected on the basis of the favorable arbitrage.''
China imports of copper and copper alloys rebounded 46 percent to 132,978 metric tons in September, data from the customs office showed today. Traders had said they expected the level of imports to be sustained for the remainder of the year as a slump in London prices made imports attractive.
Trading companies in China receive a letter of credit from banks for imports when they buy metal overseas, and pay back the funds after they sell their imports usually within 90 days.
The Maike Group was the country's biggest importer in 2007, bringing in 250,000 tons, or 16 percent of total purchases, Shen Haihua, general manager of Shanghai Maike Dickson Investment Management Co., said in January.
To contact the reporters on this story: Li Xiaowei in Shanghai at xli12@bloomberg.net
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Oil Rises From 13-Month Low as Stocks Gain, OPEC May Cut Output
By Nesa Subrahmaniyan and Christian Schmollinger
Oct. 17 (Bloomberg) -- Crude oil rebounded from a 13-month low in New York as stock markets rallied and on speculation OPEC may announce production cuts at a meeting next week.
Prices fell below $70 a barrel yesterday as U.S. oil inventories rose more than twice as forecast last week, and then rebounded in after-hours electronic trading as Wall Street and Asian stocks rallied. Oil also climbed after OPEC said it brought forward to next week a November meeting to discuss output levels.
``OPEC has to cut, but the only question is by how much,'' said Tetsu Emori, a fund manager at Astmax Co. in Tokyo. ``The U.S. stock market rally had earlier given oil prices an impetus to move up and there's talk about OPEC cutting by 1 million barrels a day, which is bullish.''
Crude oil for November delivery rose as much as $3.17, or 4.5 percent, to $73.02 a barrel, and traded at $72.78 at 1:40 p.m. Singapore time on the New York Mercantile Exchange. Yesterday it fell $4.69, or 6.3 percent, to $69.85 a barrel, the lowest settlement since Aug. 23, 2007.
Asian equities rose, paced by Japanese banks and automakers, and U.S. stock futures gained on signs governments are succeeding in efforts to unlock credit markets.
``As investors see the stock market recover, they want to buy into oil on the perception that the stock market movements are indicative of the future direction of oil,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC in Houston. OPEC ``is concerned about crude's rapid price drop, and they may announce a production cut.''
Stocks Rally
MSCI's Asian index added 1.1 percent to 87.83 as of 12:39 p.m. in Tokyo. Financial shares comprised a quarter of the gains. The index, having posted its biggest-ever advance and decline in the past three days, is set to rise 2.2 percent this week.
Standard & Poor's 500 Index futures added 0.5 percent. Japan's Nikkei 225 Stock Average climbed 1.8 percent to 8,614.35, the region's biggest advance and set for a 4.1 percent weekly gain.
MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever.
Yesterday, the Dow Jones Industrial Average rebounded from a decline of as much as 380 points spurred by the biggest drop in industrial production in 34 years. The index swung by more than 700 points for the sixth straight day.
One Million Barrels
OPEC, which supplies about 40 percent of the world's oil, will likely reduce oil output by 1 million barrels a day at next week's meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.
``It will be one million, or more,'' he told Qatar's Al- Jazeera television channel. ``Prices have fallen a lot and we need to take measures.''
OPEC reduced its forecast for average oil demand next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day, in a report Oct. 15.
``If prices fall to a point when it creates budgetary issues for the individual member countries, they have to act,'' Serene Gardiner, a Dubai-based oil-products analyst at Standard Chartered Plc, said in a Bloomberg Television interview from Kuala Lumpur.
OPEC oil supplies fell 3.8 percent in September to 31.8 million barrels a day, according to revised data from Geneva- based consultants PetroLogistics Ltd. The amount declined from 33.05 million barrels in August because of lower sales by Saudi Arabia and Iran, company founder Conrad Gerber said by e-mail yesterday.
OPEC Estimates
Preliminary estimates from PetroLogistics had indicated a reduction in September supply of 2.4 percent to 32.6 million barrels a day.
Saudi Arabia, the group's biggest member, trimmed its supply to 9.18 million barrels a day last month from 9.7 million a day in August, while Iran reduced its to 3.7 million a day from 4.3 million.
``OPEC's big two sold far less than they actually produced,'' Gerber said.
U.S. crude oil supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report yesterday. Crude oil inventories were forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.
Gasoline stockpiles climbed 6.97 million barrels to 193.8 million barrels in the week ended Oct. 10, the report showed. Supplies were forecast to rise 3 million barrels, according to the Bloomberg survey.
Brent crude oil for December settlement rose as much as $2.76, or 4.1 percent, to $70.60 a barrel on London's ICE Futures Europe exchange. It was at $70.30 a barrel at 12:36 p.m. Singapore time.
To contact the reporters of this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net.
Read more...
Oct. 17 (Bloomberg) -- Crude oil rebounded from a 13-month low in New York as stock markets rallied and on speculation OPEC may announce production cuts at a meeting next week.
Prices fell below $70 a barrel yesterday as U.S. oil inventories rose more than twice as forecast last week, and then rebounded in after-hours electronic trading as Wall Street and Asian stocks rallied. Oil also climbed after OPEC said it brought forward to next week a November meeting to discuss output levels.
``OPEC has to cut, but the only question is by how much,'' said Tetsu Emori, a fund manager at Astmax Co. in Tokyo. ``The U.S. stock market rally had earlier given oil prices an impetus to move up and there's talk about OPEC cutting by 1 million barrels a day, which is bullish.''
Crude oil for November delivery rose as much as $3.17, or 4.5 percent, to $73.02 a barrel, and traded at $72.78 at 1:40 p.m. Singapore time on the New York Mercantile Exchange. Yesterday it fell $4.69, or 6.3 percent, to $69.85 a barrel, the lowest settlement since Aug. 23, 2007.
Asian equities rose, paced by Japanese banks and automakers, and U.S. stock futures gained on signs governments are succeeding in efforts to unlock credit markets.
``As investors see the stock market recover, they want to buy into oil on the perception that the stock market movements are indicative of the future direction of oil,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC in Houston. OPEC ``is concerned about crude's rapid price drop, and they may announce a production cut.''
Stocks Rally
MSCI's Asian index added 1.1 percent to 87.83 as of 12:39 p.m. in Tokyo. Financial shares comprised a quarter of the gains. The index, having posted its biggest-ever advance and decline in the past three days, is set to rise 2.2 percent this week.
Standard & Poor's 500 Index futures added 0.5 percent. Japan's Nikkei 225 Stock Average climbed 1.8 percent to 8,614.35, the region's biggest advance and set for a 4.1 percent weekly gain.
MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever.
Yesterday, the Dow Jones Industrial Average rebounded from a decline of as much as 380 points spurred by the biggest drop in industrial production in 34 years. The index swung by more than 700 points for the sixth straight day.
One Million Barrels
OPEC, which supplies about 40 percent of the world's oil, will likely reduce oil output by 1 million barrels a day at next week's meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.
``It will be one million, or more,'' he told Qatar's Al- Jazeera television channel. ``Prices have fallen a lot and we need to take measures.''
OPEC reduced its forecast for average oil demand next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day, in a report Oct. 15.
``If prices fall to a point when it creates budgetary issues for the individual member countries, they have to act,'' Serene Gardiner, a Dubai-based oil-products analyst at Standard Chartered Plc, said in a Bloomberg Television interview from Kuala Lumpur.
OPEC oil supplies fell 3.8 percent in September to 31.8 million barrels a day, according to revised data from Geneva- based consultants PetroLogistics Ltd. The amount declined from 33.05 million barrels in August because of lower sales by Saudi Arabia and Iran, company founder Conrad Gerber said by e-mail yesterday.
OPEC Estimates
Preliminary estimates from PetroLogistics had indicated a reduction in September supply of 2.4 percent to 32.6 million barrels a day.
Saudi Arabia, the group's biggest member, trimmed its supply to 9.18 million barrels a day last month from 9.7 million a day in August, while Iran reduced its to 3.7 million a day from 4.3 million.
``OPEC's big two sold far less than they actually produced,'' Gerber said.
U.S. crude oil supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report yesterday. Crude oil inventories were forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.
Gasoline stockpiles climbed 6.97 million barrels to 193.8 million barrels in the week ended Oct. 10, the report showed. Supplies were forecast to rise 3 million barrels, according to the Bloomberg survey.
Brent crude oil for December settlement rose as much as $2.76, or 4.1 percent, to $70.60 a barrel on London's ICE Futures Europe exchange. It was at $70.30 a barrel at 12:36 p.m. Singapore time.
To contact the reporters of this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net.
Read more...
Gold Rises from Lowest in a Month on Concern Dollar May Weaken
By Feiwen Rong
Oct. 17 (Bloomberg) -- Gold rose from its lowest in a month as the U.S. dollar headed for its first weekly decline against the euro since September, boosting the appeal of the precious metal as alternative asset.
The dollar fell on speculation reports today will show a deepening housing slowdown is eroding U.S. consumer confidence. The currency also fell against the British pound and the Swiss franc as traders increased their bets on a half-percentage point interest rate cut by the Federal Reserve on Oct. 29.
``Amid the volatile price action, gold is likely to act as a safe haven and provide relative stability,'' Barclays Capital analysts led by Kevin Norrish said in a report yesterday.
Bullion for immediate delivery advanced as much as $5.93, or 0.7 percent, to $810.53 an ounce and traded at $808.33 at 11:32 a.m. in Singapore. It slumped to $786.26 an ounce yesterday, the lowest since Sept. 17. Silver for immediate delivery gained 0.9 percent at $9.76 an ounce.
The dollar is headed for weekly losses against 9 of the 16 most-active currencies. A report later today will probably show U.S. housing starts slowed to an annual rate of 870,000 homes in September, the least since January 1991, according to a Bloomberg News survey of economists. The Commerce Department report is due at 8:30 a.m. in Washington.
Physical Demand
Volatile financial markets have resulted in a notable surge in retail investments in gold coins and bars, Barclays said.
Zuercher Kantonalbank, the Swiss lender that manages about $107 billion, said its gold vault is full after a surge in demand from investors seeking a haven during the credit crunch. The U.S. Mint halted supplies of certain coins due to surging demand, with sales of gold coins rising to levels not seen since 1999.
``There has been a swing from investors investing in gold in any form to investors specifically choosing to invest in physical gold,'' the Barclays analysts said. Open interest in Comex gold futures fell in the three weeks ended Oct. 7 and was at the lowest since August, 2007, according to Commodity Futures Trading Commission data.
December-delivery gold gained 0.7 percent to $810.40 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
Gold for August delivery fell 2.1 percent to 2,633 yen a gram ($805 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break .
To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net
Read more...
Oct. 17 (Bloomberg) -- Gold rose from its lowest in a month as the U.S. dollar headed for its first weekly decline against the euro since September, boosting the appeal of the precious metal as alternative asset.
The dollar fell on speculation reports today will show a deepening housing slowdown is eroding U.S. consumer confidence. The currency also fell against the British pound and the Swiss franc as traders increased their bets on a half-percentage point interest rate cut by the Federal Reserve on Oct. 29.
``Amid the volatile price action, gold is likely to act as a safe haven and provide relative stability,'' Barclays Capital analysts led by Kevin Norrish said in a report yesterday.
Bullion for immediate delivery advanced as much as $5.93, or 0.7 percent, to $810.53 an ounce and traded at $808.33 at 11:32 a.m. in Singapore. It slumped to $786.26 an ounce yesterday, the lowest since Sept. 17. Silver for immediate delivery gained 0.9 percent at $9.76 an ounce.
The dollar is headed for weekly losses against 9 of the 16 most-active currencies. A report later today will probably show U.S. housing starts slowed to an annual rate of 870,000 homes in September, the least since January 1991, according to a Bloomberg News survey of economists. The Commerce Department report is due at 8:30 a.m. in Washington.
Physical Demand
Volatile financial markets have resulted in a notable surge in retail investments in gold coins and bars, Barclays said.
Zuercher Kantonalbank, the Swiss lender that manages about $107 billion, said its gold vault is full after a surge in demand from investors seeking a haven during the credit crunch. The U.S. Mint halted supplies of certain coins due to surging demand, with sales of gold coins rising to levels not seen since 1999.
``There has been a swing from investors investing in gold in any form to investors specifically choosing to invest in physical gold,'' the Barclays analysts said. Open interest in Comex gold futures fell in the three weeks ended Oct. 7 and was at the lowest since August, 2007, according to Commodity Futures Trading Commission data.
December-delivery gold gained 0.7 percent to $810.40 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
Gold for August delivery fell 2.1 percent to 2,633 yen a gram ($805 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break .
To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Straits Asia to Get $300 Million Loan as Bridge Fund Falls Due
By Jake Lloyd-Smith
Oct. 17 (Bloomberg) -- Straits Asia Resources Ltd., the Singapore-listed coal supplier whose stock has more than halved in the past three months, said it has agreed a $300 million loan to refinance debt due for repayment in December.
Standard Chartered Plc has offered the 18-month funding and is finalizing terms, Straits Asia said today in a statement to the Singapore Stock Exchange. The mining company must repay a $230 million bridging loan on Dec. 17, it said. The surplus funds will be used for development plans, according to the statement.
The global credit crisis has prompted banks to hoard cash, choking off funding to some companies and driving up the cost of borrowing. The freeze has roiled financial markets, brought down banks and threatens to trigger a global recession.
Straits Asia will announce the new loan's terms when documentation is completed, which is expected before the end of this month, the company said. Completion of the lending arrangement is expected by mid-November, it said.
The company's stock gained 2.7 percent to 95 Singapore cents before the market's 12:30 p.m. lunch break, when the loan agreement was announced. Still, the shares have plummeted 78 percent since touching an intraday peak of S$4.31 on Feb. 20.
Straits Asia Resources supplies coal to Japan, Taiwan and South Korea. The company bought stakes in two coal projects from Straits Resources Ltd., its major shareholder, for about $100 million in August.
Standard Chartered, based in London, gets most of its profit from Asia.
To contact the reporter on this story: Jake Lloyd-Smith in Singapore at jlloydsmith@bloomberg.net
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Oct. 17 (Bloomberg) -- Straits Asia Resources Ltd., the Singapore-listed coal supplier whose stock has more than halved in the past three months, said it has agreed a $300 million loan to refinance debt due for repayment in December.
Standard Chartered Plc has offered the 18-month funding and is finalizing terms, Straits Asia said today in a statement to the Singapore Stock Exchange. The mining company must repay a $230 million bridging loan on Dec. 17, it said. The surplus funds will be used for development plans, according to the statement.
The global credit crisis has prompted banks to hoard cash, choking off funding to some companies and driving up the cost of borrowing. The freeze has roiled financial markets, brought down banks and threatens to trigger a global recession.
Straits Asia will announce the new loan's terms when documentation is completed, which is expected before the end of this month, the company said. Completion of the lending arrangement is expected by mid-November, it said.
The company's stock gained 2.7 percent to 95 Singapore cents before the market's 12:30 p.m. lunch break, when the loan agreement was announced. Still, the shares have plummeted 78 percent since touching an intraday peak of S$4.31 on Feb. 20.
Straits Asia Resources supplies coal to Japan, Taiwan and South Korea. The company bought stakes in two coal projects from Straits Resources Ltd., its major shareholder, for about $100 million in August.
Standard Chartered, based in London, gets most of its profit from Asia.
To contact the reporter on this story: Jake Lloyd-Smith in Singapore at jlloydsmith@bloomberg.net
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Mexico Bank Will Probably Keep Rate at 8.25% as Peso Weakens
By Jens Erik Gould
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Oct. 17 (Bloomberg) -- Mexico's central bank will probably leave its benchmark interest rate unchanged today on concerns that a reduction to help a sagging economy would further depreciate the currency and fuel inflation.
The bank's five-member board, led by Governor Guillermo Ortiz, will keep the key lending rate at 8.25 percent today, according to 18 of the 20 economists surveyed by Bloomberg. Two analysts forecasts a decrease of a quarter percentage point.
While a rate cut may help the economy resist a worldwide slowdown and credit crunch, it would work against the bank's efforts to prop up the weakening peso, said Rafael Camarena, an economist at Banco Santander SA. Inflation pressures also haven't abated enough to justify a decrease, he said.
``It wouldn't make sense to cut rates,'' Camarena said in a telephone interview from Mexico City. ``An interest-rate cut could generate more volatility in currency markets.''
The central bank has sold $11.2 billion worth of U.S. dollars since last week and purchased pesos in a bid to stem a rout in the currency. The peso tumbled to a record low last week amid the worst global credit crisis since the Great Depression.
Banco de Mexico may stop spending its foreign reserves to prop up the peso soon, Ortiz said yesterday. He said new purchases wouldn't be as large as last week's interventions.
Banxico, as the central bank is known, raised borrowing costs by 0.75 percentage point this year to the highest level in almost three years. It left rates unchanged in September.
Inflation
The bank will wait to cut interest rates because inflation may accelerate in October after slowing in September for the first time since January, said Sergio Luna Martinez, the director of economic research at Citigroup Inc.'s Banamex unit in Mexico City.
``There will be a jump in inflation in October,'' said Luna Martinez, who predicts the bank will lower the interest rate in November. ``This reinforces the idea that it's better not to change rates.''
Consumer prices rose 5.47 percent in September from a year earlier, slower than August's 5.57 percent pace, as prices for agricultural products fell. Luna Martinez forecasts inflation will quicken to 5.7 percent in October.
In July, the central bank raised its inflation forecasts through 2010 because of higher-than-expected commodity costs. It expects annual inflation to reach as high as 6 percent in the fourth quarter, up from a previous forecast of no more than 4.75 percent.
Weaker Economy
Alfredo Coutino, a senior economist for Latin America at Moody's Economy.com, predicts the central bank will reduce its key lending rate today to mitigate the impact of the global financial crisis on Mexico's economy.
``Mexico is the most exposed economy to the U.S. recession,'' Coutino said. ``If monetary restriction remains for a long period of time, economic activity is going to decelerate more for the rest of the year.''
President Felipe Calderon was forced to revise his 2009 budget proposal this month because of the global credit crisis, lowering forecasts for economic growth and oil prices. He also proposed a stimulus package equal to 1 percent of gross domestic product that includes spending on infrastructure, energy and education to help the economy.
Government reports yesterday showed that the slump in the U.S. economy, the buyer of 80 percent of Mexican exports, is deepening as the financial crisis squeezes companies and consumers out of access to credit. U.S. industrial production sank 2.8 percent in September, the most in 34 years.
The tumble in oil from its record high of $147.27 a barrel in July has also fueled declines in the peso. Crude oil dropped as much as 8 percent yesterday to $68.57 a barrel in New York Mercantile Exchange trading, its lowest price since June 27, 2007. Oil accounts for more than a third of fiscal revenue in Mexico.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net.
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Enlarge Image/Details
Oct. 17 (Bloomberg) -- Mexico's central bank will probably leave its benchmark interest rate unchanged today on concerns that a reduction to help a sagging economy would further depreciate the currency and fuel inflation.
The bank's five-member board, led by Governor Guillermo Ortiz, will keep the key lending rate at 8.25 percent today, according to 18 of the 20 economists surveyed by Bloomberg. Two analysts forecasts a decrease of a quarter percentage point.
While a rate cut may help the economy resist a worldwide slowdown and credit crunch, it would work against the bank's efforts to prop up the weakening peso, said Rafael Camarena, an economist at Banco Santander SA. Inflation pressures also haven't abated enough to justify a decrease, he said.
``It wouldn't make sense to cut rates,'' Camarena said in a telephone interview from Mexico City. ``An interest-rate cut could generate more volatility in currency markets.''
The central bank has sold $11.2 billion worth of U.S. dollars since last week and purchased pesos in a bid to stem a rout in the currency. The peso tumbled to a record low last week amid the worst global credit crisis since the Great Depression.
Banco de Mexico may stop spending its foreign reserves to prop up the peso soon, Ortiz said yesterday. He said new purchases wouldn't be as large as last week's interventions.
Banxico, as the central bank is known, raised borrowing costs by 0.75 percentage point this year to the highest level in almost three years. It left rates unchanged in September.
Inflation
The bank will wait to cut interest rates because inflation may accelerate in October after slowing in September for the first time since January, said Sergio Luna Martinez, the director of economic research at Citigroup Inc.'s Banamex unit in Mexico City.
``There will be a jump in inflation in October,'' said Luna Martinez, who predicts the bank will lower the interest rate in November. ``This reinforces the idea that it's better not to change rates.''
Consumer prices rose 5.47 percent in September from a year earlier, slower than August's 5.57 percent pace, as prices for agricultural products fell. Luna Martinez forecasts inflation will quicken to 5.7 percent in October.
In July, the central bank raised its inflation forecasts through 2010 because of higher-than-expected commodity costs. It expects annual inflation to reach as high as 6 percent in the fourth quarter, up from a previous forecast of no more than 4.75 percent.
Weaker Economy
Alfredo Coutino, a senior economist for Latin America at Moody's Economy.com, predicts the central bank will reduce its key lending rate today to mitigate the impact of the global financial crisis on Mexico's economy.
``Mexico is the most exposed economy to the U.S. recession,'' Coutino said. ``If monetary restriction remains for a long period of time, economic activity is going to decelerate more for the rest of the year.''
President Felipe Calderon was forced to revise his 2009 budget proposal this month because of the global credit crisis, lowering forecasts for economic growth and oil prices. He also proposed a stimulus package equal to 1 percent of gross domestic product that includes spending on infrastructure, energy and education to help the economy.
Government reports yesterday showed that the slump in the U.S. economy, the buyer of 80 percent of Mexican exports, is deepening as the financial crisis squeezes companies and consumers out of access to credit. U.S. industrial production sank 2.8 percent in September, the most in 34 years.
The tumble in oil from its record high of $147.27 a barrel in July has also fueled declines in the peso. Crude oil dropped as much as 8 percent yesterday to $68.57 a barrel in New York Mercantile Exchange trading, its lowest price since June 27, 2007. Oil accounts for more than a third of fiscal revenue in Mexico.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net.
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Banorte, Hering, Klabin Segall, Mangels: Latin Equity Preview
By William Freebairn and Paulo Winterstein
Oct. 17 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 3 percent to 2,076.83 yesterday.
Brazil
Cia. Hering (HGTX3 BS): Sales at stores open at least one year rose 25 percent in the third quarter, while gross revenue rose 42 percent, the textile company said yesterday. Hering was unchanged at 5.85 reais.
Klabin Segall SA (KSSA3 BS): The homebuilder said yesterday its contracted sales tripled in the third quarter to 273 million reais ($126 million), while the value of projects on which it began work more than tripled from the year-earlier period to 337 million reais. Klabin Segall rose 3.7 percent to 2.80 reais.
Magnesita Refratarios SA (MAGG3 BS): Latin America's largest producer of specialty tiles used in steel-blast furnaces said yesterday it approved the terms of $475 million in loans to refinance the debt of LWB Refractories GMBH & Co, which it agreed to purchase last month. Magnesita fell 4.9 percent to 7.80 reais.
Mangels Industrial SA (MGEL4 BS): The holding company that produces metal parts such as aluminum wheels plans to buy back as much as 10 percent of preferred shares during the next year. The board of Mangels approved the purchase of many as 860,226 shares, according to a regulatory filing yesterday. Mangels fell 12 percent to 5.87 reais.
Mexico
Grupo Financiero Banorte SAB (GFNORTEO MM): Mexico's largest publicly-traded bank said yesterday the $1.1 million fine its U.S. brokerage unit agreed to pay regulators will have a ``minimal impact.'' The U.S. unit agreed to pay the fine to settle claims it recommended mutual-fund investments that brought clients lower returns than alternatives. Banorte fell 11 percent to 20.42 pesos.
Kimberly-Clark de Mexico SAB (KIMBERA MM): Mexico's biggest maker of paper products said net income fell 1 percent to 863 million pesos ($67.5 million). Net income rose 10 percent, excluding a gain from its monetary position last year that has been eliminated by a change in accounting rules, the company said yesterday. Kimberly-Clark fell 1.1 percent to 37.34 pesos.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net;
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Oct. 17 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 3 percent to 2,076.83 yesterday.
Brazil
Cia. Hering (HGTX3 BS): Sales at stores open at least one year rose 25 percent in the third quarter, while gross revenue rose 42 percent, the textile company said yesterday. Hering was unchanged at 5.85 reais.
Klabin Segall SA (KSSA3 BS): The homebuilder said yesterday its contracted sales tripled in the third quarter to 273 million reais ($126 million), while the value of projects on which it began work more than tripled from the year-earlier period to 337 million reais. Klabin Segall rose 3.7 percent to 2.80 reais.
Magnesita Refratarios SA (MAGG3 BS): Latin America's largest producer of specialty tiles used in steel-blast furnaces said yesterday it approved the terms of $475 million in loans to refinance the debt of LWB Refractories GMBH & Co, which it agreed to purchase last month. Magnesita fell 4.9 percent to 7.80 reais.
Mangels Industrial SA (MGEL4 BS): The holding company that produces metal parts such as aluminum wheels plans to buy back as much as 10 percent of preferred shares during the next year. The board of Mangels approved the purchase of many as 860,226 shares, according to a regulatory filing yesterday. Mangels fell 12 percent to 5.87 reais.
Mexico
Grupo Financiero Banorte SAB (GFNORTEO MM): Mexico's largest publicly-traded bank said yesterday the $1.1 million fine its U.S. brokerage unit agreed to pay regulators will have a ``minimal impact.'' The U.S. unit agreed to pay the fine to settle claims it recommended mutual-fund investments that brought clients lower returns than alternatives. Banorte fell 11 percent to 20.42 pesos.
Kimberly-Clark de Mexico SAB (KIMBERA MM): Mexico's biggest maker of paper products said net income fell 1 percent to 863 million pesos ($67.5 million). Net income rose 10 percent, excluding a gain from its monetary position last year that has been eliminated by a change in accounting rules, the company said yesterday. Kimberly-Clark fell 1.1 percent to 37.34 pesos.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net;
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Stock Gyrations May Roil Trading as 80 Million Options Expire
By Jeff Kearns
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Oct. 17 (Bloomberg) -- The U.S. stock market's wildest swings since 1929 may get even bigger as almost 80 million options expire today.
Owners of the contracts on stocks, indexes and exchange- traded funds have until today's close to take advantage of the rights granted by the calls and puts they own. Investors are preparing for the possibility that market makers will boost volatility by buying and selling stock to hedge the risk of the option trades they have facilitated, according to Scott Nations, president of Fortress Trading Inc.
``I'd expect some fireworks,'' said Herb Kurlan, president of Vtrader Pro LLC, a San Francisco-based options and futures brokerage. ``The unwinding of positions is going to be more pronounced because of the high volatility.''
About a quarter of the approximately 337 million existing options expire today, according to Chicago-based Options Clearing Corp., which settles all trading of exchange-listed contracts and is the world's largest derivatives clearinghouse.
The Standard & Poor's 500 Index moved more than 1 percent in 10 of the 12 trading sessions in October, or 83 percent of the time, amid concern the global economy will enter a recession. That puts the benchmark index for U.S. stocks on track for the biggest swings since November 1929, when gains or losses of at least 1 percent occurred 88 percent of the time, according to S&P analyst Howard Silverblatt.
The most widely owned S&P 500 options expiring this week are October 1,150 puts. The S&P 500's 18 percent retreat from that strike price profited buyers of those contracts, which increased almost sixfold in value this month. Even after yesterday's 4.3 percent surge, the index has slumped 22 percent in three weeks.
Market Makers Hedge Risk
``There could be significant volatility as market makers who are short the options try to hedge that risk,'' said Nations, president of Fortress Trading, a Chicago-based firm that trades options and futures. ``If you're short puts as the market goes down, you have to sell more of the underlying, and if it goes up, you have to buy more back.''
The market already proved volatile yesterday. The S&P 500 jumped 9 percent from its low to its high, the ninth consecutive session that the trough and peak were more than 5 percent apart. The average difference this year is 2.2 percent, compared with 1.2 percent in 2007 and 0.8 percent in 2006.
The Chicago Board Options Exchange Volatility Index, a measure of expected share-price swings and option prices, surged to an intraday record 81.17 yesterday. It dropped 2.4 percent to 67.61 at the close of trading.
`All Hands on Deck'
``We're going to have all hands on deck'' for today's trading, said Joseph Cusick, senior market analyst at OptionsXpress Holdings Inc., a Chicago-based online brokerage. ``There's a possibility it could be explosive, but it should be relatively orderly.''
Last week, the number of options traded in 2008 surpassed the full-year record of 2.86 billion contracts set last year, according to the OCC. U.S. trading of exchange-listed options began in 1973 at the CBOE.
October options on the S&P 500 and other stock indexes finished trading yesterday. The settlement price for those contracts will be determined by today's first trade. For S&P 500 options, which are the most actively traded U.S. contracts, about 24 percent of the total open interest of 17.6 million expires today, according to the CBOE.
Contracts on stocks and ETFs continue trading through today's close.
``We're going to be in for a wild ride,'' said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages $6 billion in San Antonio. ``It's going to be like going to Coney Island.''
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
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Enlarge Image/Details
Oct. 17 (Bloomberg) -- The U.S. stock market's wildest swings since 1929 may get even bigger as almost 80 million options expire today.
Owners of the contracts on stocks, indexes and exchange- traded funds have until today's close to take advantage of the rights granted by the calls and puts they own. Investors are preparing for the possibility that market makers will boost volatility by buying and selling stock to hedge the risk of the option trades they have facilitated, according to Scott Nations, president of Fortress Trading Inc.
``I'd expect some fireworks,'' said Herb Kurlan, president of Vtrader Pro LLC, a San Francisco-based options and futures brokerage. ``The unwinding of positions is going to be more pronounced because of the high volatility.''
About a quarter of the approximately 337 million existing options expire today, according to Chicago-based Options Clearing Corp., which settles all trading of exchange-listed contracts and is the world's largest derivatives clearinghouse.
The Standard & Poor's 500 Index moved more than 1 percent in 10 of the 12 trading sessions in October, or 83 percent of the time, amid concern the global economy will enter a recession. That puts the benchmark index for U.S. stocks on track for the biggest swings since November 1929, when gains or losses of at least 1 percent occurred 88 percent of the time, according to S&P analyst Howard Silverblatt.
The most widely owned S&P 500 options expiring this week are October 1,150 puts. The S&P 500's 18 percent retreat from that strike price profited buyers of those contracts, which increased almost sixfold in value this month. Even after yesterday's 4.3 percent surge, the index has slumped 22 percent in three weeks.
Market Makers Hedge Risk
``There could be significant volatility as market makers who are short the options try to hedge that risk,'' said Nations, president of Fortress Trading, a Chicago-based firm that trades options and futures. ``If you're short puts as the market goes down, you have to sell more of the underlying, and if it goes up, you have to buy more back.''
The market already proved volatile yesterday. The S&P 500 jumped 9 percent from its low to its high, the ninth consecutive session that the trough and peak were more than 5 percent apart. The average difference this year is 2.2 percent, compared with 1.2 percent in 2007 and 0.8 percent in 2006.
The Chicago Board Options Exchange Volatility Index, a measure of expected share-price swings and option prices, surged to an intraday record 81.17 yesterday. It dropped 2.4 percent to 67.61 at the close of trading.
`All Hands on Deck'
``We're going to have all hands on deck'' for today's trading, said Joseph Cusick, senior market analyst at OptionsXpress Holdings Inc., a Chicago-based online brokerage. ``There's a possibility it could be explosive, but it should be relatively orderly.''
Last week, the number of options traded in 2008 surpassed the full-year record of 2.86 billion contracts set last year, according to the OCC. U.S. trading of exchange-listed options began in 1973 at the CBOE.
October options on the S&P 500 and other stock indexes finished trading yesterday. The settlement price for those contracts will be determined by today's first trade. For S&P 500 options, which are the most actively traded U.S. contracts, about 24 percent of the total open interest of 17.6 million expires today, according to the CBOE.
Contracts on stocks and ETFs continue trading through today's close.
``We're going to be in for a wild ride,'' said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages $6 billion in San Antonio. ``It's going to be like going to Coney Island.''
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
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European Stock-Index Futures Rise; SocGen, UBS May Advance
By Adam Haigh
Oct. 17 (Bloomberg) -- European stock-index futures rose, indicating the Dow Jones Stoxx 600 Index will rebound from its steepest two-day retreat since 1987, on a possible government plan to bailout U.S. bond insurers and better-than-estimated earnings from Google Inc. U.S. index futures and Asian shares gained.
Societe Generale SA and UBS AG may advance after Ambac Financial Group Inc., the world's second-largest bond guarantor, said it will present a rescue plan to the Treasury Department. Carrefour SA and Kesa Electricals Plc may be active after Goldman Sachs Group Inc. added the shares to its ``conviction buy'' list.
``We are seeing more positive sentiment after the U.S. gains last night,'' said Matt Buckland, a trader at CMC Markets in London. ``Google's figures were really good and this is helping sentiment not just in the technology sector. Everyone is breathing a sigh of relief after a tricky week.''
Futures on the Euro Stoxx 50, a benchmark for the euro region, added 134, or 5.6 percent, to 2,544 at 7:08 a.m. in London. The U.K.'s FTSE 100 Index is set to open 187 points higher, according to IG Markets.
U.S. stocks rose for the first time in three days yesterday as oil's retreat below $70 a barrel sparked a rally in consumer companies. Financial shares and utilities led Asian markets higher today on signs governments are succeeding in efforts to unlock credit markets.
Concern the seizure in credit markets will trigger a global recession erased $27 trillion in value from stocks worldwide, dragging the Stoxx 600 down 43 percent this year. Financial firms reported $654 billion in losses and writedowns from mortgage-related investments since the beginning of 2007.
Gains, Losses
The Stoxx 600 has gained 0.6 percent so far this week, headed for its first weekly gain in five. The measure rallied 13 percent in the first two days this week, its biggest two-day surge on record, as central banks and governments injected $2 trillion to bailout banks and unlock the credit market.
Reports this week showed declining U.S. retail sales and U.K. unemployment climbing to the highest in since November 2006, driving shares lower in the past two days with the Stoxx 600 posting its biggest two-day drop since the market crash of 1987.
American depositary receipts of Societe Generale climbed 6.3 percent above yesterday's close in Paris. UBS added 3.3 percent from its closing price in Switzerland.
Ambac Chief Executive Officer Michael Callen said it is working with other bond insurers on a plan to send to the U.S. Treasury that would enable them to sell troubled assets to the government.
Google
Google, owner of the most popular Internet search engine, reported profit that topped analysts' estimates, saying customers are still buying Web ads even as the economy slows.
Carrefour, Europe's largest retailer, and Kesa Electricals, the owner of France's Darty electronics stores and Britain's Comet chain, may be active. Goldman Sachs added the shares to its ``conviction buy'' list citing recent share price declines.
Saab AB may be active after the Swedish maker of the Gripen fighter plane reported a third-quarter net loss as customers delayed military projects and orders, prompting the company to deepen its planned cost cuts and eliminate 500 jobs.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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Oct. 17 (Bloomberg) -- European stock-index futures rose, indicating the Dow Jones Stoxx 600 Index will rebound from its steepest two-day retreat since 1987, on a possible government plan to bailout U.S. bond insurers and better-than-estimated earnings from Google Inc. U.S. index futures and Asian shares gained.
Societe Generale SA and UBS AG may advance after Ambac Financial Group Inc., the world's second-largest bond guarantor, said it will present a rescue plan to the Treasury Department. Carrefour SA and Kesa Electricals Plc may be active after Goldman Sachs Group Inc. added the shares to its ``conviction buy'' list.
``We are seeing more positive sentiment after the U.S. gains last night,'' said Matt Buckland, a trader at CMC Markets in London. ``Google's figures were really good and this is helping sentiment not just in the technology sector. Everyone is breathing a sigh of relief after a tricky week.''
Futures on the Euro Stoxx 50, a benchmark for the euro region, added 134, or 5.6 percent, to 2,544 at 7:08 a.m. in London. The U.K.'s FTSE 100 Index is set to open 187 points higher, according to IG Markets.
U.S. stocks rose for the first time in three days yesterday as oil's retreat below $70 a barrel sparked a rally in consumer companies. Financial shares and utilities led Asian markets higher today on signs governments are succeeding in efforts to unlock credit markets.
Concern the seizure in credit markets will trigger a global recession erased $27 trillion in value from stocks worldwide, dragging the Stoxx 600 down 43 percent this year. Financial firms reported $654 billion in losses and writedowns from mortgage-related investments since the beginning of 2007.
Gains, Losses
The Stoxx 600 has gained 0.6 percent so far this week, headed for its first weekly gain in five. The measure rallied 13 percent in the first two days this week, its biggest two-day surge on record, as central banks and governments injected $2 trillion to bailout banks and unlock the credit market.
Reports this week showed declining U.S. retail sales and U.K. unemployment climbing to the highest in since November 2006, driving shares lower in the past two days with the Stoxx 600 posting its biggest two-day drop since the market crash of 1987.
American depositary receipts of Societe Generale climbed 6.3 percent above yesterday's close in Paris. UBS added 3.3 percent from its closing price in Switzerland.
Ambac Chief Executive Officer Michael Callen said it is working with other bond insurers on a plan to send to the U.S. Treasury that would enable them to sell troubled assets to the government.
Google, owner of the most popular Internet search engine, reported profit that topped analysts' estimates, saying customers are still buying Web ads even as the economy slows.
Carrefour, Europe's largest retailer, and Kesa Electricals, the owner of France's Darty electronics stores and Britain's Comet chain, may be active. Goldman Sachs added the shares to its ``conviction buy'' list citing recent share price declines.
Saab AB may be active after the Swedish maker of the Gripen fighter plane reported a third-quarter net loss as customers delayed military projects and orders, prompting the company to deepen its planned cost cuts and eliminate 500 jobs.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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Asian Stocks Advance as Money Market Rates Fall; NTT Soars
By Patrick Rial
Oct. 17 (Bloomberg) -- Asian stocks rose, led by financial companies and utilities, and U.S. futures gained on signs governments are succeeding in efforts to unlock credit markets.
Mitsubishi UFJ Financial Group Inc. added 2 percent and Westfield Group, the world's biggest shopping center owner by market value, jumped 5.6 percent. The benchmark MSCI Asia Pacific Index is set for its first weekly climb since August as government action to shore up banks drove money market rates lower, countering concern the world's economy is heading for a recession. Tokyo Electric Power Co. climbed 8.2 percent as oil prices traded at half their July record.
MSCI's Asian index added 0.6 percent to 87.46 as of 2:45 p.m. in Tokyo. Financial and utilities stocks accounted for about two- thirds of the gains. The index, having posted its biggest-ever advance and decline in the past three days, is set to rise 2.2 percent this week.
``The focus is on what the next policy response will be and the movements of the short-term money markets,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. ``Long-term investors are sitting on the sidelines waiting out this period.''
Standard & Poor's 500 Index futures added 1.3 percent. Japan's Nikkei 225 Stock Average climbed 1.3 percent to 8,567.13 the region's biggest advance and set for a 4.5 percent weekly gain. Nippon Telegraph & Telephone Corp. soared after Nikko Citigroup Ltd. advised investors buy the shares.
China's CSI 300 Index rose 0.6 percent. Citic Securities Co. led the nation's brokerages higher on speculation they may be allowed to offer loans for stock purchases. South Korea's Kospi Index dropped 2 percent, led by KB Financial Group Inc., amid growing concern the nation's banks may struggle to refinance debt.
Share Valuations
MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever. Shares on the index traded at 9.76 times earnings yesterday, near a record low reached on Oct. 10. Stocks rallied earlier this week after central bankers pledged $2 trillion to rescue financial companies and governments including Australia and Hong Kong guaranteed bank deposits.
``Valuations at the moment are pretty reasonable. What I am worried about is that earnings will have to be downgraded,'' said Hans Goetti, who oversees $10 billion in Asia as chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. ``When you have an oversold situation, you can buy almost anything because it's a snap-back rally.''
U.S. Gains
The S&P 500 advanced 4.3 percent yesterday, reversing a drop of 4.6 percent as speculation bond insurers will be bailed out and a retreat in oil prices fueled gains.
Mitsubishi UFJ, Japan's largest listed bank, added 2.8 percent to 762 yen. Westfield rose 5.9 percent to A$16.78. Hong Kong developer Hang Lung Properties Ltd. added 5 percent to HK$16.50.
Hong Kong's three-month interbank offered rate for local dollar loans slid 0.15 percentage point to 4.2 percent, the biggest drop since Sept. 26. The rate Australian banks charge each other for three-month loans fell to 5.66 percent from 6.20 percent a week ago.
The governments of Singapore and Malaysia said yesterday they will guarantee deposits, following Hong Kong, Indonesia, Australia and New Zealand.
Perceived default risk in the region also slipped, with the Markit iTraxx Japan index of credit-default swaps down 7 basis points to 200 at 9:04 a.m. in Tokyo, while a gauge for Australia slumped 12.5 basis points.
Tokyo Electric, Asia's largest power producer, climbed 8.2 percent to 2,570. Kansai Electric Power Co. gained 7.5 percent to 2,230 yen. Both companies use heavy oil in some of their plants.
Crude Oil
Crude oil fell for November deliver dropped below $70 a barrel to as low as $68.57 in New York yesterday, bringing its plunge from a July peak to more than 50 percent. The contract rose 4.3 percent in after-hours trading to $72.87 amid speculation oil-producing nations will cut production.
NTT, Japan's former telephone monopoly, surged 9.8 percent to 425,000 yen. KDDI Corp., the nation's second largest mobile- phone operator, rose 5.7 percent to 538,000 yen. Nikko Citigroup raised its rating on the stocks to ``buy'' from ``hold,'' saying the telecommunications companies were attractive as a ``defensive'' industry amid the deteriorating economic outlook.
KB Financial, which controls South Korea's largest bank, tumbled 8 percent to 39,500 won. Woori Finance Holdings Co., which controls Woori Bank, lost 6.3 percent to 10,350. Standard & Poor's said this week it may cut its credit rating on Kookmin Bank and six other lenders.
Support Measures
South Korea should consider guaranteeing banks' debts to help them overcome difficulties obtaining overseas funding and bolster confidence in the financial system, Kwon Jae Min, an S&P credit analyst said today.
The won rose, rebounding from yesterday's biggest drop in a decade. The Korean currency advanced 2 percent to 1,345 per dollar at 1:13 p.m.
Commodity producers and shipping lines slumped as a rout in metal prices and freight costs continued. BHP Billiton Ltd., the world's largest mining company, declined 4 percent to A$24.78. Neptune Orient Lines Ltd., Southeast Asia's largest shipping company, lost 4.9 percent to S$1.54.
Copper fell to the lowest since 2006, while platinum declined to a level not seen since 2005. The Baltic Dry Index, a measure of shipping costs for commodities, lost 6.8 percent, a ninth day of declines.
Hitachi Ltd., Japan's largest maker of electronics, dropped 4 percent to 533 yen after Goldman, Sachs & Co. lowered the shares to ``sell'' on the view that the company's earnings will miss analyst estimates and its subsidiaries are likely to cut profit forecasts.
Iceland Exposure
Waterland Financial Holdings slumped 3.4 percent to NT$5.47 after the Taipei-based financial-services firm wrote off NT$2.15 billion ($66 million) in Iceland-linked securities. Cathay Financial Holding Co., Taiwan's biggest financial services company, lost 3.5 percent to NT$36.15.
Taiwan's banks hold as much as NT$10 billion of investments linked to securities in Iceland, the Commercial Times reported today, citing the financial regulator.
Citic Securities Co., the brokerage unit of China's biggest investment company, advanced 3.1 percent to 18.85 yuan. Haitong Securities Co., the country's largest listed brokerage by market value, rose 4.4 percent to 18.98 yuan.
Citic and Haitong are among four brokerages that may be allowed by China's government to offer margin trading, an official with knowledge of the matter said. The pilot program will start as early as mid-November, said the official.
Tenaga Nasional Bhd., Malaysia's biggest power producer, fell 1.5 percent to 6.50 ringgit after reporting its first quarterly loss in more than four years.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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Oct. 17 (Bloomberg) -- Asian stocks rose, led by financial companies and utilities, and U.S. futures gained on signs governments are succeeding in efforts to unlock credit markets.
Mitsubishi UFJ Financial Group Inc. added 2 percent and Westfield Group, the world's biggest shopping center owner by market value, jumped 5.6 percent. The benchmark MSCI Asia Pacific Index is set for its first weekly climb since August as government action to shore up banks drove money market rates lower, countering concern the world's economy is heading for a recession. Tokyo Electric Power Co. climbed 8.2 percent as oil prices traded at half their July record.
MSCI's Asian index added 0.6 percent to 87.46 as of 2:45 p.m. in Tokyo. Financial and utilities stocks accounted for about two- thirds of the gains. The index, having posted its biggest-ever advance and decline in the past three days, is set to rise 2.2 percent this week.
``The focus is on what the next policy response will be and the movements of the short-term money markets,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. ``Long-term investors are sitting on the sidelines waiting out this period.''
Standard & Poor's 500 Index futures added 1.3 percent. Japan's Nikkei 225 Stock Average climbed 1.3 percent to 8,567.13 the region's biggest advance and set for a 4.5 percent weekly gain. Nippon Telegraph & Telephone Corp. soared after Nikko Citigroup Ltd. advised investors buy the shares.
China's CSI 300 Index rose 0.6 percent. Citic Securities Co. led the nation's brokerages higher on speculation they may be allowed to offer loans for stock purchases. South Korea's Kospi Index dropped 2 percent, led by KB Financial Group Inc., amid growing concern the nation's banks may struggle to refinance debt.
Share Valuations
MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever. Shares on the index traded at 9.76 times earnings yesterday, near a record low reached on Oct. 10. Stocks rallied earlier this week after central bankers pledged $2 trillion to rescue financial companies and governments including Australia and Hong Kong guaranteed bank deposits.
``Valuations at the moment are pretty reasonable. What I am worried about is that earnings will have to be downgraded,'' said Hans Goetti, who oversees $10 billion in Asia as chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. ``When you have an oversold situation, you can buy almost anything because it's a snap-back rally.''
U.S. Gains
The S&P 500 advanced 4.3 percent yesterday, reversing a drop of 4.6 percent as speculation bond insurers will be bailed out and a retreat in oil prices fueled gains.
Mitsubishi UFJ, Japan's largest listed bank, added 2.8 percent to 762 yen. Westfield rose 5.9 percent to A$16.78. Hong Kong developer Hang Lung Properties Ltd. added 5 percent to HK$16.50.
Hong Kong's three-month interbank offered rate for local dollar loans slid 0.15 percentage point to 4.2 percent, the biggest drop since Sept. 26. The rate Australian banks charge each other for three-month loans fell to 5.66 percent from 6.20 percent a week ago.
The governments of Singapore and Malaysia said yesterday they will guarantee deposits, following Hong Kong, Indonesia, Australia and New Zealand.
Perceived default risk in the region also slipped, with the Markit iTraxx Japan index of credit-default swaps down 7 basis points to 200 at 9:04 a.m. in Tokyo, while a gauge for Australia slumped 12.5 basis points.
Tokyo Electric, Asia's largest power producer, climbed 8.2 percent to 2,570. Kansai Electric Power Co. gained 7.5 percent to 2,230 yen. Both companies use heavy oil in some of their plants.
Crude Oil
Crude oil fell for November deliver dropped below $70 a barrel to as low as $68.57 in New York yesterday, bringing its plunge from a July peak to more than 50 percent. The contract rose 4.3 percent in after-hours trading to $72.87 amid speculation oil-producing nations will cut production.
NTT, Japan's former telephone monopoly, surged 9.8 percent to 425,000 yen. KDDI Corp., the nation's second largest mobile- phone operator, rose 5.7 percent to 538,000 yen. Nikko Citigroup raised its rating on the stocks to ``buy'' from ``hold,'' saying the telecommunications companies were attractive as a ``defensive'' industry amid the deteriorating economic outlook.
KB Financial, which controls South Korea's largest bank, tumbled 8 percent to 39,500 won. Woori Finance Holdings Co., which controls Woori Bank, lost 6.3 percent to 10,350. Standard & Poor's said this week it may cut its credit rating on Kookmin Bank and six other lenders.
Support Measures
South Korea should consider guaranteeing banks' debts to help them overcome difficulties obtaining overseas funding and bolster confidence in the financial system, Kwon Jae Min, an S&P credit analyst said today.
The won rose, rebounding from yesterday's biggest drop in a decade. The Korean currency advanced 2 percent to 1,345 per dollar at 1:13 p.m.
Commodity producers and shipping lines slumped as a rout in metal prices and freight costs continued. BHP Billiton Ltd., the world's largest mining company, declined 4 percent to A$24.78. Neptune Orient Lines Ltd., Southeast Asia's largest shipping company, lost 4.9 percent to S$1.54.
Copper fell to the lowest since 2006, while platinum declined to a level not seen since 2005. The Baltic Dry Index, a measure of shipping costs for commodities, lost 6.8 percent, a ninth day of declines.
Hitachi Ltd., Japan's largest maker of electronics, dropped 4 percent to 533 yen after Goldman, Sachs & Co. lowered the shares to ``sell'' on the view that the company's earnings will miss analyst estimates and its subsidiaries are likely to cut profit forecasts.
Iceland Exposure
Waterland Financial Holdings slumped 3.4 percent to NT$5.47 after the Taipei-based financial-services firm wrote off NT$2.15 billion ($66 million) in Iceland-linked securities. Cathay Financial Holding Co., Taiwan's biggest financial services company, lost 3.5 percent to NT$36.15.
Taiwan's banks hold as much as NT$10 billion of investments linked to securities in Iceland, the Commercial Times reported today, citing the financial regulator.
Citic Securities Co., the brokerage unit of China's biggest investment company, advanced 3.1 percent to 18.85 yuan. Haitong Securities Co., the country's largest listed brokerage by market value, rose 4.4 percent to 18.98 yuan.
Citic and Haitong are among four brokerages that may be allowed by China's government to offer margin trading, an official with knowledge of the matter said. The pilot program will start as early as mid-November, said the official.
Tenaga Nasional Bhd., Malaysia's biggest power producer, fell 1.5 percent to 6.50 ringgit after reporting its first quarterly loss in more than four years.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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South Korean Stocks Fall to Three-Year Low on Funding Concern
By Saeromi Shin and Bomi Lim
Oct. 17 (Bloomberg) -- South Korean stocks fell, dragging the Kospi Index to a three-year low, on heightened concern the country's banks will struggle to refinance their debt.
KB Financial Group Inc., the holding company of Kookmin Bank, slumped 7 percent, as Standard & Poor's said South Korea should consider guaranteeing banks' debt. The agency said on Oct. 15 it may cut the credit ratings on Kookmin and six other financial companies. Woori Finance Holdings Co., which controls South Korea's second-biggest bank, retreated 7.7 percent.
The Kospi dropped 12.11, or 1 percent, to 1,201.67 as of 1:5 p.m. in Seoul, with financial stocks accounting for 60 percent of the decline. The index was set to close at its lowest since Nov. 1, 2005.
``It's true that domestic banks find it more difficult than before to raise funds in both dollars and won, and people therefore feel that money circulation is a bit clogged,'' said Im Jeong Jae, a fund manager at Shinhan BNP Paribas Investment Trust Management Co. in Seoul, which manages the equivalent of $747 million in local equities.
Concern about the banking sector, initially triggered by the global credit squeeze, deepened after a slump in the domestic property market raised fears that debts made to builders could turn bad. Korean banks are feared to lose billion of dollars as more than 500 Korean companies are struggling to repay currency derivatives the banks sold.
A measure of financial shares on the Kospi slumped 4.2 percent. The gauge tumbled 12 percent yesterday as S&P said Korean banks face a more than 50 percent chance that the global credit crunch could threaten their foreign-currency funding. South Korea's lenders have $235.3 billion of foreign-currency liabilities, according to the Financial Supervisory Service.
Emergency Meeting
South Korea should consider guaranteeing banks' debt to help them overcome difficulties obtaining overseas funding and bolster confidence in the financial system, Kwon Jae Min, a credit analyst at S&P in Hong Kong, said today in an interview.
KB Financial tumbled 8.6 percent to 39,650 won. Woori Finance retreated 5.9 percent to 10,400 won. Shinhan Financial Group Ltd., which runs the third-largest bank, declined 8.3 percent to 33,900 won.
South Korean policy makers held an emergency summit today, seeking steps to restore confidence in the economy after the funding concern caused the won to slump by the most since the 1997 financial crisis yesterday, and the Kospi to fall by the most since Sept. 12, 2001.
Finance Minister Kang Man Soo, central bank Governor Lee Seong Tae and Jun Kwang Woo, head of the nation's financial regulator, led the meeting at the presidential office in Seoul.
To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net. Bomi Lim in Seoul at blim30@bloomberg.net
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Oct. 17 (Bloomberg) -- South Korean stocks fell, dragging the Kospi Index to a three-year low, on heightened concern the country's banks will struggle to refinance their debt.
KB Financial Group Inc., the holding company of Kookmin Bank, slumped 7 percent, as Standard & Poor's said South Korea should consider guaranteeing banks' debt. The agency said on Oct. 15 it may cut the credit ratings on Kookmin and six other financial companies. Woori Finance Holdings Co., which controls South Korea's second-biggest bank, retreated 7.7 percent.
The Kospi dropped 12.11, or 1 percent, to 1,201.67 as of 1:5 p.m. in Seoul, with financial stocks accounting for 60 percent of the decline. The index was set to close at its lowest since Nov. 1, 2005.
``It's true that domestic banks find it more difficult than before to raise funds in both dollars and won, and people therefore feel that money circulation is a bit clogged,'' said Im Jeong Jae, a fund manager at Shinhan BNP Paribas Investment Trust Management Co. in Seoul, which manages the equivalent of $747 million in local equities.
Concern about the banking sector, initially triggered by the global credit squeeze, deepened after a slump in the domestic property market raised fears that debts made to builders could turn bad. Korean banks are feared to lose billion of dollars as more than 500 Korean companies are struggling to repay currency derivatives the banks sold.
A measure of financial shares on the Kospi slumped 4.2 percent. The gauge tumbled 12 percent yesterday as S&P said Korean banks face a more than 50 percent chance that the global credit crunch could threaten their foreign-currency funding. South Korea's lenders have $235.3 billion of foreign-currency liabilities, according to the Financial Supervisory Service.
Emergency Meeting
South Korea should consider guaranteeing banks' debt to help them overcome difficulties obtaining overseas funding and bolster confidence in the financial system, Kwon Jae Min, a credit analyst at S&P in Hong Kong, said today in an interview.
KB Financial tumbled 8.6 percent to 39,650 won. Woori Finance retreated 5.9 percent to 10,400 won. Shinhan Financial Group Ltd., which runs the third-largest bank, declined 8.3 percent to 33,900 won.
South Korean policy makers held an emergency summit today, seeking steps to restore confidence in the economy after the funding concern caused the won to slump by the most since the 1997 financial crisis yesterday, and the Kospi to fall by the most since Sept. 12, 2001.
Finance Minister Kang Man Soo, central bank Governor Lee Seong Tae and Jun Kwang Woo, head of the nation's financial regulator, led the meeting at the presidential office in Seoul.
To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net. Bomi Lim in Seoul at blim30@bloomberg.net
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Japan Stocks Rise After Historic Sell-Off; Tepco, DoCoMo Climb
By Masaki Kondo
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Oct. 17 (Bloomberg) -- Japanese stocks rebounded from their worst plunge in two decades as the deepening financial crisis prompted investors to buy companies whose earnings are insulated from a slowdown in overseas markets.
Tokyo Electric Power Co., Asia's biggest utility, gained 8.8 percent, while NTT DoCoMo Inc., Japan's most profitable mobile carrier, rose 7.4 percent after Nikko Citigroup Ltd. recommended its shares as a ``defensive play.'' Mitsui & Co., a trading company that gets more than half its profit from commodities, lost 3.5 percent on speculation oil prices will continue to fall.
``With the financial crisis spilling over into the wider economy, we're in a state of emergency,'' said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion in Tokyo. ``In such a situation, shares in companies with relatively stable earnings provide a safe harbor for investors.''
The Nikkei 225 Stock Average climbed 235.37, or 2.8 percent, to close at 8,693.82 in Tokyo, while the broader Topix index rose 29.77, or 3.4 percent, to 894.29. The Nikkei posted a 5 percent gain this holiday-shortened week, the first advance since the five days ended Sept. 12, and following its worst week ever. The Topix added 6.4 percent this week.
Yesterday, the Nikkei sank 11.4 percent, the biggest slump since October 1987 and its second-sharpest drop ever, after a record 14 percent gain two days earlier.
Nikkei futures expiring in December added 5 percent to 8,660 in Osaka and gained 4.5 percent to 8,660 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Oct. 17 (Bloomberg) -- Japanese stocks rebounded from their worst plunge in two decades as the deepening financial crisis prompted investors to buy companies whose earnings are insulated from a slowdown in overseas markets.
Tokyo Electric Power Co., Asia's biggest utility, gained 8.8 percent, while NTT DoCoMo Inc., Japan's most profitable mobile carrier, rose 7.4 percent after Nikko Citigroup Ltd. recommended its shares as a ``defensive play.'' Mitsui & Co., a trading company that gets more than half its profit from commodities, lost 3.5 percent on speculation oil prices will continue to fall.
``With the financial crisis spilling over into the wider economy, we're in a state of emergency,'' said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion in Tokyo. ``In such a situation, shares in companies with relatively stable earnings provide a safe harbor for investors.''
The Nikkei 225 Stock Average climbed 235.37, or 2.8 percent, to close at 8,693.82 in Tokyo, while the broader Topix index rose 29.77, or 3.4 percent, to 894.29. The Nikkei posted a 5 percent gain this holiday-shortened week, the first advance since the five days ended Sept. 12, and following its worst week ever. The Topix added 6.4 percent this week.
Yesterday, the Nikkei sank 11.4 percent, the biggest slump since October 1987 and its second-sharpest drop ever, after a record 14 percent gain two days earlier.
Nikkei futures expiring in December added 5 percent to 8,660 in Osaka and gained 4.5 percent to 8,660 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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China's Stocks Will Rally on Government Support, Guotai Says
By Chua Kong Ho
Oct. 17 (Bloomberg) -- China's Shanghai Composite Index, down 69 percent from its record high a year ago, is poised to rally even as the deepening financial crisis hammers equities worldwide, the country's largest brokerage by assets predicts.
The Shanghai Composite Index will climb 88 percent to 3,600 points in the next 12 months as government measures to bolster economic growth take effect, said Zhang Xiuqi, Shanghai-based strategist at Guotai Junan Securities Co. in an interview. The index peaked at 6,092.06 on Oct. 16, 2007 and closed at 1,909.94 yesterday.
``The plunge in stock values this year has more than priced in a slowdown in China's economy and the impact of the global crisis,'' Zhang said in a telephone interview, calling his forecast ``conservative.'' He recommends investors favor bank, telecommunications and drug stocks.
China's stocks, the world's most expensive at their peak, are still pricier than U.S. and European shares after the credit freeze triggered a rout in global equities this month. China's government has cut interest rates twice and may boost spending to protect an economy that slowed for a fourth consecutive quarter in the three months through June.
Analysts including Zhang have remained bullish on Chinese equities even as the weakening economy deepened the market's one-year slump. There were ``buy'' ratings on 60 percent of the country's stocks in that time, Bloomberg data show.
Zhang said in April that ``fair value'' for the Shanghai Composite was at 3,300 points, 73 percent higher than yesterday's close. The gauge's average value in the second quarter was 3,318.80.
Skeptical Investors
Mark Konyn, Hong Kong-based chief executive officer at RCM Asia Pacific is skeptical that it's time to buy Chinese equities. The Shanghai Composite Index is valued at 13.7 times estimated earnings, more than 11.6 times for the Standard & Poor's 500 Index and 7.9 times for Europe's Dow Jones Stoxx 600 Index. The Shanghai measure was at 49.4 times at its peak a year ago.
``Confidence has been shattered and it's going to take time for that to come back,'' said Konyn, who is ``underweight'' equities. His company holds $15 billion of Asian assets.
Morgan Stanley said last month that investors should sell into a rally spurred by China's stock support measures as they are ``defense'' and don't mark a ``bottom for recovery.''
Zhang's bullish view is shared by Michael Hartnett, Merrill Lynch & Co.'s chief global emerging markets strategist, who upgraded Chinese shares to ``overweight'' Sept. 2, saying that ``pro-growth policies'' will ease the economic slowdown.
The People's Bank of China cut interest rates for the first time in six years last month and followed that with another reduction three weeks later as central banks around the world cut borrowing costs to unlock frozen credit markets. China's $200 billion sovereign wealth fund also increased its stakes in the largest state-backed banks to shore up investor confidence.
The government will probably cut borrowing costs further and lower bank reserve requirements, freeing up lending and ensuring that a decline in earnings growth will bottom in the second quarter of next year, said Guotai Junan's Zhang.
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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Oct. 17 (Bloomberg) -- China's Shanghai Composite Index, down 69 percent from its record high a year ago, is poised to rally even as the deepening financial crisis hammers equities worldwide, the country's largest brokerage by assets predicts.
The Shanghai Composite Index will climb 88 percent to 3,600 points in the next 12 months as government measures to bolster economic growth take effect, said Zhang Xiuqi, Shanghai-based strategist at Guotai Junan Securities Co. in an interview. The index peaked at 6,092.06 on Oct. 16, 2007 and closed at 1,909.94 yesterday.
``The plunge in stock values this year has more than priced in a slowdown in China's economy and the impact of the global crisis,'' Zhang said in a telephone interview, calling his forecast ``conservative.'' He recommends investors favor bank, telecommunications and drug stocks.
China's stocks, the world's most expensive at their peak, are still pricier than U.S. and European shares after the credit freeze triggered a rout in global equities this month. China's government has cut interest rates twice and may boost spending to protect an economy that slowed for a fourth consecutive quarter in the three months through June.
Analysts including Zhang have remained bullish on Chinese equities even as the weakening economy deepened the market's one-year slump. There were ``buy'' ratings on 60 percent of the country's stocks in that time, Bloomberg data show.
Zhang said in April that ``fair value'' for the Shanghai Composite was at 3,300 points, 73 percent higher than yesterday's close. The gauge's average value in the second quarter was 3,318.80.
Skeptical Investors
Mark Konyn, Hong Kong-based chief executive officer at RCM Asia Pacific is skeptical that it's time to buy Chinese equities. The Shanghai Composite Index is valued at 13.7 times estimated earnings, more than 11.6 times for the Standard & Poor's 500 Index and 7.9 times for Europe's Dow Jones Stoxx 600 Index. The Shanghai measure was at 49.4 times at its peak a year ago.
``Confidence has been shattered and it's going to take time for that to come back,'' said Konyn, who is ``underweight'' equities. His company holds $15 billion of Asian assets.
Morgan Stanley said last month that investors should sell into a rally spurred by China's stock support measures as they are ``defense'' and don't mark a ``bottom for recovery.''
Zhang's bullish view is shared by Michael Hartnett, Merrill Lynch & Co.'s chief global emerging markets strategist, who upgraded Chinese shares to ``overweight'' Sept. 2, saying that ``pro-growth policies'' will ease the economic slowdown.
The People's Bank of China cut interest rates for the first time in six years last month and followed that with another reduction three weeks later as central banks around the world cut borrowing costs to unlock frozen credit markets. China's $200 billion sovereign wealth fund also increased its stakes in the largest state-backed banks to shore up investor confidence.
The government will probably cut borrowing costs further and lower bank reserve requirements, freeing up lending and ensuring that a decline in earnings growth will bottom in the second quarter of next year, said Guotai Junan's Zhang.
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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Computacenter, HBOS, Rank, Ryanair: U.K., Irish Equity Preview
By Kevin Crowley
Oct. 17 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses and prices are from the last market close.
The benchmark FTSE 100 Index dropped 218.20 points, or 5.4 percent, to 3,861.39. The FTSE All-Share Index fell 5.3 percent, and Ireland's ISEQ Index reduced 3.6 percent.
U.K. companies:
Computacenter Plc (CCC LN): The U.K. seller of personal computers is scheduled to issue a trading statement. The stock fell 1.75 pence, or 1.9 percent, to 89 pence.
HBOS Plc (HBOS LN): The U.K. bank being bought by Lloyds TSB Plc said it expects the acquisition to be completed in January. The stock dropped 1.6 pence, or 1.9 percent, to 84.1 pence.
Prudential Plc (PRU LN): The U.K.'s second-biggest insurer denied it was planning a rights offer, the Financial Times reported, after Goldman Sachs Group Inc. said the company is more likely than peers to need additional capital. The shares fell 72.25 pence, or 19.5 percent, to 297.75 pence.
Rank Group Plc (RNK LN): The second-largest U.K. bingo-club and casino operator is set to release a trading statement before the London market opens. The stock decreased 1.25 pence, or 2.2 percent, to 56.25 pence.
Irish Companies:
Ryanair Holdings Plc (RYA ID): Europe's biggest discount airline ordered 10 Boeing 737 aircraft in an order valued at about $745 million at list prices. Shares climbed 7 cents, or 3.3 percent, to 2.05 euros.
To contact the reporter on this story: Kevin Crowley in London kcrowley1@bloomberg.net
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Oct. 17 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses and prices are from the last market close.
The benchmark FTSE 100 Index dropped 218.20 points, or 5.4 percent, to 3,861.39. The FTSE All-Share Index fell 5.3 percent, and Ireland's ISEQ Index reduced 3.6 percent.
U.K. companies:
Computacenter Plc (CCC LN): The U.K. seller of personal computers is scheduled to issue a trading statement. The stock fell 1.75 pence, or 1.9 percent, to 89 pence.
HBOS Plc (HBOS LN): The U.K. bank being bought by Lloyds TSB Plc said it expects the acquisition to be completed in January. The stock dropped 1.6 pence, or 1.9 percent, to 84.1 pence.
Prudential Plc (PRU LN): The U.K.'s second-biggest insurer denied it was planning a rights offer, the Financial Times reported, after Goldman Sachs Group Inc. said the company is more likely than peers to need additional capital. The shares fell 72.25 pence, or 19.5 percent, to 297.75 pence.
Rank Group Plc (RNK LN): The second-largest U.K. bingo-club and casino operator is set to release a trading statement before the London market opens. The stock decreased 1.25 pence, or 2.2 percent, to 56.25 pence.
Irish Companies:
Ryanair Holdings Plc (RYA ID): Europe's biggest discount airline ordered 10 Boeing 737 aircraft in an order valued at about $745 million at list prices. Shares climbed 7 cents, or 3.3 percent, to 2.05 euros.
To contact the reporter on this story: Kevin Crowley in London kcrowley1@bloomberg.net
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Dollar Heads for Weekly Loss Against Euro on Recession Concerns
By Ron Harui
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Oct. 17 (Bloomberg) -- The dollar headed for its first weekly decline against the euro this month, before U.S. reports that will probably show a deepening housing slowdown eroded consumer confidence.
The U.S. currency also dropped on prospects the credit crisis will hurt growth in the world's largest economy, prompting traders to add to bets on a Federal Reserve interest-rate cut. The yen was poised for a weekly loss versus the dollar and the euro as Asian stocks rose, restoring investors' confidence to sell the currency.
``The reports may reinforce worries that the U.S. is in a recession and concerns linger over its financial markets,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``The dollar is still a sell.''
The dollar traded at $1.3467 per euro at 12:36 p.m. in Tokyo from $1.3456 late in New York yesterday and was 0.4 percent lower from $1.3408 on Oct. 10. It traded at 101.58 yen from 101.57 yen yesterday and from 100.67 a week ago, set for its first five-day since Sept. 12.
The U.S. currency was little changed at 1.1375 versus the Swiss franc from 1.1379 yesterday and from 1.1390 a week ago. It also traded at $1.7336 against the British pound from $1.7304 yesterday and from $1.7043 last week.
The yen traded at 136.80 per euro from 136.73 yesterday and from 134.96 on Oct. 10, and was poised for its first weekly loss in four weeks. It declined to 70.41 versus Australia's dollar from 67.72 late in Asia yesterday and dropped to 62.63 against New Zealand's dollar from 61.28.
Economic Reports
The dollar headed for weekly losses against nine of the 16 most-active currencies as U.S. housing starts declined to an annual rate of 870,000 in September, the fewest since January 1991, according to a Bloomberg News survey of economists. The Commerce Department will issue the report at 8:30 a.m. in Washington.
The Reuters/University of Michigan preliminary index of consumer sentiment, due at 10 a.m., likely decreased to 65.0 in October from 70.3 in September, a separate survey showed.
Futures traded on the Chicago Board of Trade show a 46 percent chance the Fed will lower its 1.5 percent target rate for overnight bank loans by a half-percentage point to 1 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a week ago. The odds of a quarter-point cut are 54 percent.
Losses in the dollar may be limited on speculation financial institutions will seek more dollars in the foreign-exchange market amid the credit crisis, according to BNP Paribas SA.
`Requirement for Dollars'
``The U.S. dollar's strength against most Asian currencies has to be put into context that this recent credit crunch in the U.S. economy has led to a lot of requirement for dollars from banks as well as companies,'' said Thio Chin Loo, a senior currency strategist at BNP Paribas in Singapore, in an Bloomberg Television interview. ``It's really the flow of funds that's driving the U.S. dollar stronger.''
The dollar rose to the strongest versus the euro since March 2007 on Oct. 10, partly as banks' reluctance to lend to each other prompted a surge in demand for U.S. currency funding in global money markets.
The London interbank offered rate, or Libor, that banks charge each other for one-month dollar loans, fell yesterday to 4.278 percent from 4.588 percent a week ago, the highest level this year, according to the British Bankers' Association.
The yen declined as the Nikkei 225 Stock Average climbed 2.2 percent and the MSCI Asia-Pacific Index of regional shares rose 1.2 percent. The Standard & Poor's 500 Index advanced 4.3 percent yesterday.
`Less Risk Averse'
Volatility implied by one-month dollar-yen options fell to 20.47 percent from 23.22 percent yesterday and from 29.64 percent on Oct. 10, indicating a smaller risk of exchange-rate fluctuations that may erode profits on so-called carry trades.
``Shares are higher and investors appear to be less risk averse,'' said Yuji Saito, head of the foreign-exchange group at Societe Generale SA in Tokyo. ``There's a bit of yen selling.''
The benchmark interest rate is 0.5 percent in Japan, compared with 6 percent in Australia and 7.5 percent in New Zealand.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
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Oct. 17 (Bloomberg) -- The dollar headed for its first weekly decline against the euro this month, before U.S. reports that will probably show a deepening housing slowdown eroded consumer confidence.
The U.S. currency also dropped on prospects the credit crisis will hurt growth in the world's largest economy, prompting traders to add to bets on a Federal Reserve interest-rate cut. The yen was poised for a weekly loss versus the dollar and the euro as Asian stocks rose, restoring investors' confidence to sell the currency.
``The reports may reinforce worries that the U.S. is in a recession and concerns linger over its financial markets,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``The dollar is still a sell.''
The dollar traded at $1.3467 per euro at 12:36 p.m. in Tokyo from $1.3456 late in New York yesterday and was 0.4 percent lower from $1.3408 on Oct. 10. It traded at 101.58 yen from 101.57 yen yesterday and from 100.67 a week ago, set for its first five-day since Sept. 12.
The U.S. currency was little changed at 1.1375 versus the Swiss franc from 1.1379 yesterday and from 1.1390 a week ago. It also traded at $1.7336 against the British pound from $1.7304 yesterday and from $1.7043 last week.
The yen traded at 136.80 per euro from 136.73 yesterday and from 134.96 on Oct. 10, and was poised for its first weekly loss in four weeks. It declined to 70.41 versus Australia's dollar from 67.72 late in Asia yesterday and dropped to 62.63 against New Zealand's dollar from 61.28.
Economic Reports
The dollar headed for weekly losses against nine of the 16 most-active currencies as U.S. housing starts declined to an annual rate of 870,000 in September, the fewest since January 1991, according to a Bloomberg News survey of economists. The Commerce Department will issue the report at 8:30 a.m. in Washington.
The Reuters/University of Michigan preliminary index of consumer sentiment, due at 10 a.m., likely decreased to 65.0 in October from 70.3 in September, a separate survey showed.
Futures traded on the Chicago Board of Trade show a 46 percent chance the Fed will lower its 1.5 percent target rate for overnight bank loans by a half-percentage point to 1 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a week ago. The odds of a quarter-point cut are 54 percent.
Losses in the dollar may be limited on speculation financial institutions will seek more dollars in the foreign-exchange market amid the credit crisis, according to BNP Paribas SA.
`Requirement for Dollars'
``The U.S. dollar's strength against most Asian currencies has to be put into context that this recent credit crunch in the U.S. economy has led to a lot of requirement for dollars from banks as well as companies,'' said Thio Chin Loo, a senior currency strategist at BNP Paribas in Singapore, in an Bloomberg Television interview. ``It's really the flow of funds that's driving the U.S. dollar stronger.''
The dollar rose to the strongest versus the euro since March 2007 on Oct. 10, partly as banks' reluctance to lend to each other prompted a surge in demand for U.S. currency funding in global money markets.
The London interbank offered rate, or Libor, that banks charge each other for one-month dollar loans, fell yesterday to 4.278 percent from 4.588 percent a week ago, the highest level this year, according to the British Bankers' Association.
The yen declined as the Nikkei 225 Stock Average climbed 2.2 percent and the MSCI Asia-Pacific Index of regional shares rose 1.2 percent. The Standard & Poor's 500 Index advanced 4.3 percent yesterday.
`Less Risk Averse'
Volatility implied by one-month dollar-yen options fell to 20.47 percent from 23.22 percent yesterday and from 29.64 percent on Oct. 10, indicating a smaller risk of exchange-rate fluctuations that may erode profits on so-called carry trades.
``Shares are higher and investors appear to be less risk averse,'' said Yuji Saito, head of the foreign-exchange group at Societe Generale SA in Tokyo. ``There's a bit of yen selling.''
The benchmark interest rate is 0.5 percent in Japan, compared with 6 percent in Australia and 7.5 percent in New Zealand.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
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Australia, New Zealand Dollars Set for 1st Weekly Gain in Month
By Candice Zachariahs
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Oct. 17 (Bloomberg) -- The Australian and New Zealand dollars rose this week for the first time in a month on speculation losses in the currencies were overdone after governments took measures to shore up the financial system.
The Australian currency gained by a record against the yen on Oct. 14 after governments worldwide guaranteed bank deposits and debt and agreed to take stakes in lenders. The South Pacific nations' currencies fell the most in 25 years last week on concern the global economy is headed for a recession.
``There is scope to consolidate a bit because we have come a long way in a short time,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``But ultimately the trend for both currencies is lower in a global recession.''
The Australian dollar rose 9 percent this week to 70.51 yen at 2 p.m. in Sydney from 64.76 yen in New York on Oct. 10. It plunged 20.5 percent last week, the most since it started trading freely in 1983. New Zealand's dollar advanced 4.7 percent, after dropping 14.2 percent last week, to 62.67 yen from 59.86.
Against the dollar, Australia's currency gained 8 percent to 69.43 U.S. cents from 64.32 cents on Oct. 10 in New York. It plunged last week 16.9 percent. New Zealand's dollar rose 3.9 percent to 61.76 cents from 59.45.
The Australian and New Zealand currencies strengthened this week against the greenback after falling to five-year lows on Oct. 8. The International Monetary Fund forecast that ``major advanced economies are now close to recession.''
Exports to Slow
``Consumption in the developed world is going negative in real terms,'' said Sydney-based Ray Attrill, global research director at Forecast Ltd., a research group that counts central banks among its subscribers. ``On that basis, Australia is going to get tarred with the same brush as some of the Asian currencies,'' as exports from emerging economies slow.
Australia's 17 year-long economic boom has been fueled by demand for commodities from emerging markets like China and India. Raw materials make up 60 percent of Australia's exports and 70 percent of New Zealand's.
The UBS Bloomberg Constant Maturity Commodity index of 26 raw materials slid for a third week. Melbourne-based BHP Billiton Ltd., the world's largest mining company, fell by the most in 21 years in trading yesterday, while crude oil, Australia's fourth- most valuable commodity export, dropped below $70 for the first time in 13 months.
A gauge reflecting expectations for stock market price changes and a barometer of risk aversion, the VIX volatility index, rose to a record yesterday.
Australian government bonds fell for the first time in four days. The yield on the 10-year note rose 8 basis points, or 0.08 percentage point, to 5.333 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 declined 0.669, or A$6.69 per A$1,000 face amount, to 99.338.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 6.29 percent today from 6.34 percent yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Oct. 17 (Bloomberg) -- The Australian and New Zealand dollars rose this week for the first time in a month on speculation losses in the currencies were overdone after governments took measures to shore up the financial system.
The Australian currency gained by a record against the yen on Oct. 14 after governments worldwide guaranteed bank deposits and debt and agreed to take stakes in lenders. The South Pacific nations' currencies fell the most in 25 years last week on concern the global economy is headed for a recession.
``There is scope to consolidate a bit because we have come a long way in a short time,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``But ultimately the trend for both currencies is lower in a global recession.''
The Australian dollar rose 9 percent this week to 70.51 yen at 2 p.m. in Sydney from 64.76 yen in New York on Oct. 10. It plunged 20.5 percent last week, the most since it started trading freely in 1983. New Zealand's dollar advanced 4.7 percent, after dropping 14.2 percent last week, to 62.67 yen from 59.86.
Against the dollar, Australia's currency gained 8 percent to 69.43 U.S. cents from 64.32 cents on Oct. 10 in New York. It plunged last week 16.9 percent. New Zealand's dollar rose 3.9 percent to 61.76 cents from 59.45.
The Australian and New Zealand currencies strengthened this week against the greenback after falling to five-year lows on Oct. 8. The International Monetary Fund forecast that ``major advanced economies are now close to recession.''
Exports to Slow
``Consumption in the developed world is going negative in real terms,'' said Sydney-based Ray Attrill, global research director at Forecast Ltd., a research group that counts central banks among its subscribers. ``On that basis, Australia is going to get tarred with the same brush as some of the Asian currencies,'' as exports from emerging economies slow.
Australia's 17 year-long economic boom has been fueled by demand for commodities from emerging markets like China and India. Raw materials make up 60 percent of Australia's exports and 70 percent of New Zealand's.
The UBS Bloomberg Constant Maturity Commodity index of 26 raw materials slid for a third week. Melbourne-based BHP Billiton Ltd., the world's largest mining company, fell by the most in 21 years in trading yesterday, while crude oil, Australia's fourth- most valuable commodity export, dropped below $70 for the first time in 13 months.
A gauge reflecting expectations for stock market price changes and a barometer of risk aversion, the VIX volatility index, rose to a record yesterday.
Australian government bonds fell for the first time in four days. The yield on the 10-year note rose 8 basis points, or 0.08 percentage point, to 5.333 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 declined 0.669, or A$6.69 per A$1,000 face amount, to 99.338.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 6.29 percent today from 6.34 percent yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Crude Oil Rises, Halts 14% Slide Over Three Days as Stocks Gain
By Margot Habiby and Samantha Zee
Oct. 17 (Bloomberg) -- Crude oil rebounded above $70 a barrel, halting a 14 percent price slide over the past three days, as U.S. stocks rose on prospects of a government bailout of bond insurers.
Oil gained for the first day in four after the Dow Jones Industrial Average recovered from a decline of as much as 380 points, spurred by the biggest drop in industrial production in 34 years. Yesterday, oil touched the lowest since June 2007 as the U.S. said supplies rose more than twice as much as forecast.
``As investors see the stock market recover, they want to buy into oil on the perception that the stock market movements are indicative of the future direction of oil,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC in Houston.
Crude oil for November delivery rose $2.85, or 4.1 percent, to $72.70 a barrel at 9:35 a.m. Sydney time on the New York Mercantile Exchange after touching $72.95 a barrel. Yesterday it fell $4.69, or 6.3 percent, to $69.85 a barrel, the lowest settlement since Aug. 23, 2007. Oil touched $68.57 a barrel, the lowest intraday price since June 27, 2007.
Also supporting prices, the Organization of Petroleum Exporting Countries moved its planned emergency meeting forward to Oct. 24 from Nov. 18 to address price declines.
OPEC ``is concerned about crude's rapid price drop, and they may announce a production cut,'' Lipow said.
One Million Barrels
The organization will likely reduce oil output by 1 million barrels a day at next week's meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.
``It will be one million, or more,'' he told Qatar's al- Jazeera television channel. ``Prices have fallen a lot and we need to take measures.''
Oil supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report yesterday. Crude oil inventories were forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.
About 39 percent of oil production in the U.S. Gulf of Mexico remained shut in after Hurricanes Gustav and Ike, which hit Louisiana and Texas last month, the U.S. Minerals Management Service said.
Brent crude oil for November settlement declined $4.48, or 6.3 percent, to settle at $66.32 a barrel on London's ICE Futures Europe exchange yesterday, the lowest closing price since May 10, 2007.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.
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Oct. 17 (Bloomberg) -- Crude oil rebounded above $70 a barrel, halting a 14 percent price slide over the past three days, as U.S. stocks rose on prospects of a government bailout of bond insurers.
Oil gained for the first day in four after the Dow Jones Industrial Average recovered from a decline of as much as 380 points, spurred by the biggest drop in industrial production in 34 years. Yesterday, oil touched the lowest since June 2007 as the U.S. said supplies rose more than twice as much as forecast.
``As investors see the stock market recover, they want to buy into oil on the perception that the stock market movements are indicative of the future direction of oil,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC in Houston.
Crude oil for November delivery rose $2.85, or 4.1 percent, to $72.70 a barrel at 9:35 a.m. Sydney time on the New York Mercantile Exchange after touching $72.95 a barrel. Yesterday it fell $4.69, or 6.3 percent, to $69.85 a barrel, the lowest settlement since Aug. 23, 2007. Oil touched $68.57 a barrel, the lowest intraday price since June 27, 2007.
Also supporting prices, the Organization of Petroleum Exporting Countries moved its planned emergency meeting forward to Oct. 24 from Nov. 18 to address price declines.
OPEC ``is concerned about crude's rapid price drop, and they may announce a production cut,'' Lipow said.
One Million Barrels
The organization will likely reduce oil output by 1 million barrels a day at next week's meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.
``It will be one million, or more,'' he told Qatar's al- Jazeera television channel. ``Prices have fallen a lot and we need to take measures.''
Oil supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report yesterday. Crude oil inventories were forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.
About 39 percent of oil production in the U.S. Gulf of Mexico remained shut in after Hurricanes Gustav and Ike, which hit Louisiana and Texas last month, the U.S. Minerals Management Service said.
Brent crude oil for November settlement declined $4.48, or 6.3 percent, to settle at $66.32 a barrel on London's ICE Futures Europe exchange yesterday, the lowest closing price since May 10, 2007.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.
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Japan's Stocks Rally After Historic Sell-Off; JFE, Tepco Climb
By Masaki Kondo
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Oct. 17 (Bloomberg) -- Japan's stocks rallied as a 23 percent decline in the past month made shares cheap, and investors flocked to companies whose earnings are insulated from an economic slowdown.
JFE Holdings Inc., Japan's second-biggest steelmaker, jumped 6.8 percent after having lost almost two-thirds of its value this year. Tokyo Electric Power Co. gained 6.7 percent after crude oil fell below $70 yesterday for the first time in 14 months. NTT DoCoMo Inc., Japan's largest mobile carrier, surged 7.8 percent after Nikko Citigroup Ltd. said it was a ``defensive'' harbor.
The Nikkei 225 Stock Average climbed 241.01, or 2.9 percent, to 8,699.46 as of 9:43 a.m. in Tokyo, while the broader Topix index rose 29.48, or 3.4 percent, to 894.00. The Nikkei headed for a 4.9 percent gain for this holiday-shortened week, the steepest since Nov. 30, 2007, and following its worst week ever. The Topix was set for a 6.4 percent advance.
``A possible recession has already been priced in once, or even twice,'' Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., said in an interview with Bloomberg Television. ``Sell-offs have crushed cyclical stocks like steelmakers and shipping companies. We're going to a see a technical rebound.''
Yesterday, the Nikkei sank 11.4 percent, the biggest slump since October 1987 and its second-sharpest drop ever, after a record 14 percent gain two days earlier. Concerns that the global economy will fall into a recession overshadowed optimism U.S. and European government plans to shore up banks' capital will avert a collapse of the financial system.
Stimulus Plan
Japan's Economic and Fiscal Policy Minister Kaoru Yosano said yesterday the government will compile an economic stimulus package, its second since August, by the end of the month to support households facing plunging stock values.
JFE jumped 6.8 percent to 2,215 yen, while bigger competitor Nippon Steel Corp. advanced 8 percent to 324 yen. Nissan Motor Co., Japan's third-biggest automaker, rose 4.8 percent to 498 yen as a 36 percent drop in the past month boosted its dividend yield to 8.4 percent.
The broader Topix index lost 23 percent in the past month through yesterday, led by a 43 percent plunge by shipping lines and a 36 percent dive by steelmakers. Stocks on the index had an average dividend yield of 2.41 percent as of Oct. 15, higher than the 1.58 percent yield on 10-year government bonds.
Defensive Plays
Tokyo Electric, Asia's largest utility, climbed 6.7 percent to 2,535 yen, and Kansai Electric Power Co. jumped 7.5 percent to 2,230 yen. Power generators were the biggest winners among 33 industry groups on the Topix.
Crude oil for November delivery fell 6.3 percent to $69.85 a barrel in New York yesterday, the first time oil dropped below $70 since August 2007. The contract rebounded as much as 4.1 percent today.
DoCoMo advanced 7.8 percent to 157,000 yen, and parent Nippon Telegraph & Telephone Corp. rose 6.7 percent to 413,000 yen. KDDI Corp., the nation's second-biggest wireless carrier, gained 5.7 percent to 538,000 yen.
Nikko Citigroup raised its rating on the stocks to ``buy'' from ``hold,'' saying the telecommunications companies were attractive as a ``defensive'' industry amid the deteriorating business environment.
Nikkei futures expiring in December added 5.5 percent to 8,700 in Osaka and gained 5 percent to 8,705 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Oct. 17 (Bloomberg) -- Japan's stocks rallied as a 23 percent decline in the past month made shares cheap, and investors flocked to companies whose earnings are insulated from an economic slowdown.
JFE Holdings Inc., Japan's second-biggest steelmaker, jumped 6.8 percent after having lost almost two-thirds of its value this year. Tokyo Electric Power Co. gained 6.7 percent after crude oil fell below $70 yesterday for the first time in 14 months. NTT DoCoMo Inc., Japan's largest mobile carrier, surged 7.8 percent after Nikko Citigroup Ltd. said it was a ``defensive'' harbor.
The Nikkei 225 Stock Average climbed 241.01, or 2.9 percent, to 8,699.46 as of 9:43 a.m. in Tokyo, while the broader Topix index rose 29.48, or 3.4 percent, to 894.00. The Nikkei headed for a 4.9 percent gain for this holiday-shortened week, the steepest since Nov. 30, 2007, and following its worst week ever. The Topix was set for a 6.4 percent advance.
``A possible recession has already been priced in once, or even twice,'' Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., said in an interview with Bloomberg Television. ``Sell-offs have crushed cyclical stocks like steelmakers and shipping companies. We're going to a see a technical rebound.''
Yesterday, the Nikkei sank 11.4 percent, the biggest slump since October 1987 and its second-sharpest drop ever, after a record 14 percent gain two days earlier. Concerns that the global economy will fall into a recession overshadowed optimism U.S. and European government plans to shore up banks' capital will avert a collapse of the financial system.
Stimulus Plan
Japan's Economic and Fiscal Policy Minister Kaoru Yosano said yesterday the government will compile an economic stimulus package, its second since August, by the end of the month to support households facing plunging stock values.
JFE jumped 6.8 percent to 2,215 yen, while bigger competitor Nippon Steel Corp. advanced 8 percent to 324 yen. Nissan Motor Co., Japan's third-biggest automaker, rose 4.8 percent to 498 yen as a 36 percent drop in the past month boosted its dividend yield to 8.4 percent.
The broader Topix index lost 23 percent in the past month through yesterday, led by a 43 percent plunge by shipping lines and a 36 percent dive by steelmakers. Stocks on the index had an average dividend yield of 2.41 percent as of Oct. 15, higher than the 1.58 percent yield on 10-year government bonds.
Defensive Plays
Tokyo Electric, Asia's largest utility, climbed 6.7 percent to 2,535 yen, and Kansai Electric Power Co. jumped 7.5 percent to 2,230 yen. Power generators were the biggest winners among 33 industry groups on the Topix.
Crude oil for November delivery fell 6.3 percent to $69.85 a barrel in New York yesterday, the first time oil dropped below $70 since August 2007. The contract rebounded as much as 4.1 percent today.
DoCoMo advanced 7.8 percent to 157,000 yen, and parent Nippon Telegraph & Telephone Corp. rose 6.7 percent to 413,000 yen. KDDI Corp., the nation's second-biggest wireless carrier, gained 5.7 percent to 538,000 yen.
Nikko Citigroup raised its rating on the stocks to ``buy'' from ``hold,'' saying the telecommunications companies were attractive as a ``defensive'' industry amid the deteriorating business environment.
Nikkei futures expiring in December added 5.5 percent to 8,700 in Osaka and gained 5 percent to 8,705 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Australia Stocks: Newcrest, National Australia, Qantas, Santos
By Shani Raja
Oct. 17 (Bloomberg) -- The S&P/ASX 200 Index dropped 40.50 points, or 1 percent, to 3,972.90 at 1:03 p.m. in Sydney. The broader All Ordinaries Index lost 7.70 points, or 0.2 percent, to 3,980.40, while the futures index expiring in December advanced 0.7 percent to 4,056.
Gold producers: Newcrest Mining Ltd. (NCM AU), Australia's largest gold producer, fell A$1.03, or 4.3 percent, to A$23.21, the lowest since Oct. 8. Lihir Gold Ltd. (LGL AU), the second- largest gold mining company on the Australian Stock Exchange, slumped 10 cents, or 4.6 percent, to A$1.98, the lowest since Sept. 16.
Gold declined to a one-month low on speculation investors will sell the precious metal to cover losses in other markets. Gold futures for December delivery fell 4.1 percent to $804.50 an ounce on the Comex division of the New York Mercantile Exchange.
National Australia Bank Ltd. (NAB AU), the nation's biggest by assets, declined 53 cents, or 2.3 percent, to A$22.17, the lowest since Oct. 10. The lender declined to comment on reports about its plans to raise funds. National Australia may announce plans in the next few days to seek as much as A$2.5 billion ($1.7 billion) in additional capital, the Sydney Morning Herald reported, without citing anybody.
Platinum Australia Ltd. (PLA AU), which owns mines in South Africa and Australia, plunged 10 cents, or 15 percent, to 57 cents, the lowest since March 2006. Platinum plunged almost 9 percent to the lowest since 2005 on speculation the global economy will fall into recession and demand for the metal will decline.
Qantas Airways Ltd. (QAN AU) surged 12 cents, or 4.7 percent, to A$2.67, the most since August, after Merrill Lynch & Co. raised its rating to ``neutral'' from ``underperform.''
Santos Ltd. (STO AU) fell 30 cents, or 2.8 percent, to A$10.60, extending yesterday's 16 percent slump. Crude oil fell below $70 a barrel in New York to the lowest since June 2007 and gasoline tumbled after a U.S. government report showed stockpiles increased more than twice as much as forecast.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Oct. 17 (Bloomberg) -- The S&P/ASX 200 Index dropped 40.50 points, or 1 percent, to 3,972.90 at 1:03 p.m. in Sydney. The broader All Ordinaries Index lost 7.70 points, or 0.2 percent, to 3,980.40, while the futures index expiring in December advanced 0.7 percent to 4,056.
Gold producers: Newcrest Mining Ltd. (NCM AU), Australia's largest gold producer, fell A$1.03, or 4.3 percent, to A$23.21, the lowest since Oct. 8. Lihir Gold Ltd. (LGL AU), the second- largest gold mining company on the Australian Stock Exchange, slumped 10 cents, or 4.6 percent, to A$1.98, the lowest since Sept. 16.
Gold declined to a one-month low on speculation investors will sell the precious metal to cover losses in other markets. Gold futures for December delivery fell 4.1 percent to $804.50 an ounce on the Comex division of the New York Mercantile Exchange.
National Australia Bank Ltd. (NAB AU), the nation's biggest by assets, declined 53 cents, or 2.3 percent, to A$22.17, the lowest since Oct. 10. The lender declined to comment on reports about its plans to raise funds. National Australia may announce plans in the next few days to seek as much as A$2.5 billion ($1.7 billion) in additional capital, the Sydney Morning Herald reported, without citing anybody.
Platinum Australia Ltd. (PLA AU), which owns mines in South Africa and Australia, plunged 10 cents, or 15 percent, to 57 cents, the lowest since March 2006. Platinum plunged almost 9 percent to the lowest since 2005 on speculation the global economy will fall into recession and demand for the metal will decline.
Qantas Airways Ltd. (QAN AU) surged 12 cents, or 4.7 percent, to A$2.67, the most since August, after Merrill Lynch & Co. raised its rating to ``neutral'' from ``underperform.''
Santos Ltd. (STO AU) fell 30 cents, or 2.8 percent, to A$10.60, extending yesterday's 16 percent slump. Crude oil fell below $70 a barrel in New York to the lowest since June 2007 and gasoline tumbled after a U.S. government report showed stockpiles increased more than twice as much as forecast.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Paulson's Capital May Bring Blackstone, Carlyle Back to Buyouts
By Jason Kelly
Oct. 17 (Bloomberg) -- The U.S. Treasury's pledge to inject $250 billion into banks may coax private-equity leaders Stephen Schwarzman, David Rubenstein and Henry Kravis to resume investing after more than a year spent mostly on the sidelines.
The founders of Blackstone Group LP, Carlyle Group and KKR & Co. LP told investors in Dubai this week that the biggest government intervention in the financial system since the 1930s will help attract private capital to lenders. The U.S. plan, following similar steps by Britain and other nations, may lead to investments of tens of millions dollars, not the $20 billion- plus deals that capped the leveraged-buyout boom of 2006-2007, they said.
Private-equity firms have been hunkered down since the onset of the credit crisis about 16 months ago, scarred by broken deals and frustrated by the evaporation of debt financing crucial to buyouts. The efforts to shore up the credit system may pave a slow road back to deploying the almost $500 billion in uncommitted cash they have raised from pension funds, endowments and foreign governments.
``There's a crying need for capital, and now there's a chance that the government will invest alongside,'' said Rubenstein, the 59-year-old co-founder of Washington-based Carlyle, whose $80 billion in assets rank it second in the buyout industry after Blackstone and ahead of KKR.
The three executives were among more than 100 speakers at the three-day Super Return Middle East conference, where about 750 attendees gathered to discuss the industry's future. The region has become increasingly important to large buyout firms as a source of capital, with governments including the United Arab Emirates, Qatar and Kuwait pouring treasury surpluses -- fueled by soaring oil prices earlier this year -- into their funds.
A Different World
Participants described a buyout world that differs markedly from its peak, when debt-laden deals such as the $43 billion acquisition of power producer TXU Corp. and the $26 billion takeover of Hilton Hotels Corp. brought the once quiet industry into the public spotlight. There have been $194 billion in announced buyouts this year, a decline of 70 percent from the same period in 2007, according to data compiled by Bloomberg.
The hiatus has left private-equity firms sitting on a record amount of cash. New York-based Blackstone, founded by Schwarzman and his former Lehman Brothers partner Peter G. Peterson in 1985, last year announced a $21.7 billion buyout fund, still the industry's largest. Blackstone has $113.5 billion in assets.
Minority Stakes
With those sorts of commitments, private-equity firms need to put that money to work or risk angering investors with returns well below the 20 percent or more they are accustomed to. Buyout firms typically use cash from their funds and debt to take companies private, improve results and sell them three to seven years later.
Unable to rely on record-low rates for debt from Wall Street banks, they are now considering more minority transactions.
``Instead of looking to buy high-quality businesses, we're looking at financing high-quality businesses,'' said TPG Inc.'s Philippe Costeletos, who runs the Fort Worth, Texas-based firm's European operations. ``The highly leveraged deals are no longer an option.''
The banks that once provided financing either no longer exist, in the case of Lehman Brothers Holdings Inc. or Bear Stearns Cos., or are hoarding cash to protect their balance sheets. The struggles extend to banks far from Wall Street, which face liquidity problems as they try to shore up deposits and keep lending to small businesses.
That's an area where private-equity may be equipped to step in, Rubenstein said.
``Banks in places like Texas, Oklahoma and California -- these are the more attractive opportunities,'' he said.
J.C. Flowers
J.C. Flowers & Co., the New York firm run by former Goldman Sachs Group Inc. banker J. Christopher Flowers, last month won approval to buy the First National Bank of Cainesville in Missouri, which has assets of about $14 million. The deal may provide a template for other private-equity firms.
Flowers told regulators he may expand the Missouri bank through acquisitions of troubled financial institutions, according to a regulatory filing.
Bets on struggling banks that proved premature may make private-equity firms more skittish. TPG, managed by David Bonderman, lost more than $1.3 billion on Washington Mutual Inc. in less than five months after regulators seized the thrift.
Flowers similarly saw the value of his minority stake in Germany's Hypo Real Estate Holding AG plunge after the government was forced to bail the lender out.
`Woefully Undercapitalized'
Those investments came before the latest government actions, which include a pledge by U.S. Treasury Secretary Henry Paulson to invest $125 billion in nine banks. An additional $125 billion may be used to buy preferred shares in other institutions.
``The financial crisis has left the system woefully undercapitalized,'' KKR's Kravis, 64, told the audience in Dubai. His New York-based firm manages $61 billion.
``It will be well beyond the capacity of public markets,'' he said.
Those markets, stoked by fears of a deep U.S. recession, may be among the factors that give Kravis and his cohorts pause. After initially rising on news of the government actions, the Standard & Poor's 500 Index has shed 5.7 percent and is down 36 percent this year.
``Investors have yet to regain their own trust and confidence,'' Kravis said.
Schwarzman told the Dubai audience dealing with a slumping economy is manageable and may ultimately be more lucrative for his investors than the buyout boom.
``We'll have a slower economy in some places, a recession and others,'' Schwarzman, 61, said.
``The best returns in private equity have come in a period like the one that we're just entering,'' Schwarzman said. ``This is an absolutely wonderful time.''
To contact the reporter on this story: Jason Kelly in Dubai at jkelly14@bloomberg.net
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Oct. 17 (Bloomberg) -- The U.S. Treasury's pledge to inject $250 billion into banks may coax private-equity leaders Stephen Schwarzman, David Rubenstein and Henry Kravis to resume investing after more than a year spent mostly on the sidelines.
The founders of Blackstone Group LP, Carlyle Group and KKR & Co. LP told investors in Dubai this week that the biggest government intervention in the financial system since the 1930s will help attract private capital to lenders. The U.S. plan, following similar steps by Britain and other nations, may lead to investments of tens of millions dollars, not the $20 billion- plus deals that capped the leveraged-buyout boom of 2006-2007, they said.
Private-equity firms have been hunkered down since the onset of the credit crisis about 16 months ago, scarred by broken deals and frustrated by the evaporation of debt financing crucial to buyouts. The efforts to shore up the credit system may pave a slow road back to deploying the almost $500 billion in uncommitted cash they have raised from pension funds, endowments and foreign governments.
``There's a crying need for capital, and now there's a chance that the government will invest alongside,'' said Rubenstein, the 59-year-old co-founder of Washington-based Carlyle, whose $80 billion in assets rank it second in the buyout industry after Blackstone and ahead of KKR.
The three executives were among more than 100 speakers at the three-day Super Return Middle East conference, where about 750 attendees gathered to discuss the industry's future. The region has become increasingly important to large buyout firms as a source of capital, with governments including the United Arab Emirates, Qatar and Kuwait pouring treasury surpluses -- fueled by soaring oil prices earlier this year -- into their funds.
A Different World
Participants described a buyout world that differs markedly from its peak, when debt-laden deals such as the $43 billion acquisition of power producer TXU Corp. and the $26 billion takeover of Hilton Hotels Corp. brought the once quiet industry into the public spotlight. There have been $194 billion in announced buyouts this year, a decline of 70 percent from the same period in 2007, according to data compiled by Bloomberg.
The hiatus has left private-equity firms sitting on a record amount of cash. New York-based Blackstone, founded by Schwarzman and his former Lehman Brothers partner Peter G. Peterson in 1985, last year announced a $21.7 billion buyout fund, still the industry's largest. Blackstone has $113.5 billion in assets.
Minority Stakes
With those sorts of commitments, private-equity firms need to put that money to work or risk angering investors with returns well below the 20 percent or more they are accustomed to. Buyout firms typically use cash from their funds and debt to take companies private, improve results and sell them three to seven years later.
Unable to rely on record-low rates for debt from Wall Street banks, they are now considering more minority transactions.
``Instead of looking to buy high-quality businesses, we're looking at financing high-quality businesses,'' said TPG Inc.'s Philippe Costeletos, who runs the Fort Worth, Texas-based firm's European operations. ``The highly leveraged deals are no longer an option.''
The banks that once provided financing either no longer exist, in the case of Lehman Brothers Holdings Inc. or Bear Stearns Cos., or are hoarding cash to protect their balance sheets. The struggles extend to banks far from Wall Street, which face liquidity problems as they try to shore up deposits and keep lending to small businesses.
That's an area where private-equity may be equipped to step in, Rubenstein said.
``Banks in places like Texas, Oklahoma and California -- these are the more attractive opportunities,'' he said.
J.C. Flowers
J.C. Flowers & Co., the New York firm run by former Goldman Sachs Group Inc. banker J. Christopher Flowers, last month won approval to buy the First National Bank of Cainesville in Missouri, which has assets of about $14 million. The deal may provide a template for other private-equity firms.
Flowers told regulators he may expand the Missouri bank through acquisitions of troubled financial institutions, according to a regulatory filing.
Bets on struggling banks that proved premature may make private-equity firms more skittish. TPG, managed by David Bonderman, lost more than $1.3 billion on Washington Mutual Inc. in less than five months after regulators seized the thrift.
Flowers similarly saw the value of his minority stake in Germany's Hypo Real Estate Holding AG plunge after the government was forced to bail the lender out.
`Woefully Undercapitalized'
Those investments came before the latest government actions, which include a pledge by U.S. Treasury Secretary Henry Paulson to invest $125 billion in nine banks. An additional $125 billion may be used to buy preferred shares in other institutions.
``The financial crisis has left the system woefully undercapitalized,'' KKR's Kravis, 64, told the audience in Dubai. His New York-based firm manages $61 billion.
``It will be well beyond the capacity of public markets,'' he said.
Those markets, stoked by fears of a deep U.S. recession, may be among the factors that give Kravis and his cohorts pause. After initially rising on news of the government actions, the Standard & Poor's 500 Index has shed 5.7 percent and is down 36 percent this year.
``Investors have yet to regain their own trust and confidence,'' Kravis said.
Schwarzman told the Dubai audience dealing with a slumping economy is manageable and may ultimately be more lucrative for his investors than the buyout boom.
``We'll have a slower economy in some places, a recession and others,'' Schwarzman, 61, said.
``The best returns in private equity have come in a period like the one that we're just entering,'' Schwarzman said. ``This is an absolutely wonderful time.''
To contact the reporter on this story: Jason Kelly in Dubai at jkelly14@bloomberg.net
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Asian Stocks Advance as Money-Market Rates Fall; Toyota Rises
By Patrick Rial
Oct. 17 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to its first weekly advance since August, on signs governments are succeeding in efforts to unlock credit markets.
Westfield Group, the world's largest shopping-center owner by market value, gained 3.3 percent in Sydney and Toyota Motor Corp. added 3.9 percent in Tokyo after money-market rates dropped and corporate bond risk fell. Singapore and Malaysian governments said yesterday they will guarantee bank deposits, following Hong Kong and three other Asian countries, to shore up confidence in the financial industry.
MSCI Asia added 1.1 percent to 87.85 as of 10:10 a.m. in Tokyo, rebounding from an 8.6 percent plunge yesterday that was the worst decline since the gauge was created in 1987. The index is set for a 2 percent gain this week, snapping a six-week, 31 percent plunge.
Shares on MSCI's Asian index traded at 9.76 times earnings yesterday, near a record low reached last week.
Japan's Nikkei 225 Stock Average climbed 1.3 percent to 8,565.40. All other benchmark indexes in the region advanced apart from South Korea and Taiwan. Standard & Poor's 500 Index futures gained 0.6 percent.
U.S. stocks rose yesterday, with the S&P 500 advancing 4.3 percent after swinging between gains and losses throughout the day. Speculation bond insurers will receive a bailout and a retreat in oil prices fueled gains.
``So are we near the bottom?'' Garry Evans, chief Asian equity strategist at HSBC Holdings Plc wrote in a note to clients. ``Certainly, some of the conditions are in place'' such as low earnings multiples and high dividend yields.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
Read more...
Oct. 17 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to its first weekly advance since August, on signs governments are succeeding in efforts to unlock credit markets.
Westfield Group, the world's largest shopping-center owner by market value, gained 3.3 percent in Sydney and Toyota Motor Corp. added 3.9 percent in Tokyo after money-market rates dropped and corporate bond risk fell. Singapore and Malaysian governments said yesterday they will guarantee bank deposits, following Hong Kong and three other Asian countries, to shore up confidence in the financial industry.
MSCI Asia added 1.1 percent to 87.85 as of 10:10 a.m. in Tokyo, rebounding from an 8.6 percent plunge yesterday that was the worst decline since the gauge was created in 1987. The index is set for a 2 percent gain this week, snapping a six-week, 31 percent plunge.
Shares on MSCI's Asian index traded at 9.76 times earnings yesterday, near a record low reached last week.
Japan's Nikkei 225 Stock Average climbed 1.3 percent to 8,565.40. All other benchmark indexes in the region advanced apart from South Korea and Taiwan. Standard & Poor's 500 Index futures gained 0.6 percent.
U.S. stocks rose yesterday, with the S&P 500 advancing 4.3 percent after swinging between gains and losses throughout the day. Speculation bond insurers will receive a bailout and a retreat in oil prices fueled gains.
``So are we near the bottom?'' Garry Evans, chief Asian equity strategist at HSBC Holdings Plc wrote in a note to clients. ``Certainly, some of the conditions are in place'' such as low earnings multiples and high dividend yields.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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Soybeans Rise as Farmers May Withhold Crops After Price Slump
By Jeff Wilson
Oct. 16 (Bloomberg) -- Soybeans rose from a 13-month low on speculation that U.S. farmers will withhold crops from the market after prices plunged from a record in June.
Cash soybean prices in parts of the Midwest have fallen more than 50 percent from highs reached three months ago. With the harvest just past the halfway point, farmers who already got government subsidy checks in the past week don't need to sell any more of their crops for now, analysts said.
Soybean processors and other users of soybeans ``were buying, apparently scared that they can't get enough beans from the farmer,'' said Charlie Sernatinger, a market analyst for Fortis Clearing Americas LLC in Chicago. ``Farmers are selling less than 5 percent of the soybeans'' they are currently harvesting, Sernatinger said.
Soybean futures for November delivery rose 7.75 cents, or 0.9 percent, to $8.8025 a bushel on the Chicago Board of Trade. The price earlier touched $8.38, the lowest for a most-active contract since Aug. 27, 2007. Before today, soybeans were down 47 percent from the all-time high of $16.3675 on July 3.
Farmers will harvest 2.983 billion bushels of soybeans this year, the U.S. Department of Agriculture said last week, up 1.7 percent from a September forecast, as increased acreage more than makes up for a dry August that reduced yields. A crop of that size would be 11 percent bigger than last year after farmers planted 19 percent more acres with the oilseed.
The soybean harvest was 51 percent complete as of Oct. 9, the USDA said this week.
Last year's U.S. soybean crop was valued at $26.8 billion, second only to corn, which was worth, $52.1 billion, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.
Read more...
Oct. 16 (Bloomberg) -- Soybeans rose from a 13-month low on speculation that U.S. farmers will withhold crops from the market after prices plunged from a record in June.
Cash soybean prices in parts of the Midwest have fallen more than 50 percent from highs reached three months ago. With the harvest just past the halfway point, farmers who already got government subsidy checks in the past week don't need to sell any more of their crops for now, analysts said.
Soybean processors and other users of soybeans ``were buying, apparently scared that they can't get enough beans from the farmer,'' said Charlie Sernatinger, a market analyst for Fortis Clearing Americas LLC in Chicago. ``Farmers are selling less than 5 percent of the soybeans'' they are currently harvesting, Sernatinger said.
Soybean futures for November delivery rose 7.75 cents, or 0.9 percent, to $8.8025 a bushel on the Chicago Board of Trade. The price earlier touched $8.38, the lowest for a most-active contract since Aug. 27, 2007. Before today, soybeans were down 47 percent from the all-time high of $16.3675 on July 3.
Farmers will harvest 2.983 billion bushels of soybeans this year, the U.S. Department of Agriculture said last week, up 1.7 percent from a September forecast, as increased acreage more than makes up for a dry August that reduced yields. A crop of that size would be 11 percent bigger than last year after farmers planted 19 percent more acres with the oilseed.
The soybean harvest was 51 percent complete as of Oct. 9, the USDA said this week.
Last year's U.S. soybean crop was valued at $26.8 billion, second only to corn, which was worth, $52.1 billion, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.
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U.S. Stocks Jump on Bond Insurer Bailout Plan, Oil's Retreat
By Eric Martin
Oct. 16 (Bloomberg) -- U.S. stocks rose for the first time in three days as oil's retreat below $70 a barrel sparked a rally in consumer companies and prospects of a government bailout of bond insurers reversed a slide in financial shares.
Ambac Financial Group Inc., the second-largest bond guarantor, jumped 48 percent after saying it will present a rescue plan to the Treasury Department. Wal-Mart Stores Inc. and McDonald's Corp. added more than 5 percent as crude slid to the lowest price in 16 months. The Dow Jones Industrial Average rebounded from a decline of as much as 380 points spurred by the biggest drop in industrial production in 34 years. The index swung by more than 700 points for the sixth straight day.
The S&P 500 advanced 38.59 points, or 4.3 percent, to 946.43. The Dow rallied 401.35 points, or 4.7 percent, to 8,979.26. The Nasdaq Composite jumped 5.5 percent to 1,717.71. About four stocks gained for each that fell on the New York Stock Exchange.
``We have a manic-depressive market,'' said Frederic Dickson, who helps oversee about $20 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ``The speed at which markets are reacting to news right now is close to mind-numbing. If the bond insurers are going to line up at the Treasury, that's probably a good thing. Oil at $70 a barrel has just given the American public a tax break.''
Benchmark indexes halted a two-day slump that threatened to erase the S&P 500's 12 percent gain on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to invest $250 billion in banks will ease the credit crisis. All 10 industry groups climbed at least 1.2 percent today.
Early Retreat
Stocks retreated earlier in the day, sending the S&P 500 down as much as 4.6 percent in morning trading, after Citigroup Inc. said bad loans may rise to a record high and the government said industrial production slumped 2.8 percent in September.
Wal-Mart, the world's biggest retailer, rallied $4.57, or 9.1 percent, to $54.62. McDonald's, the largest restaurant chain, added $2.91, or 5.7 percent, to $54.46. Target Corp., the second biggest U.S. discounter, jumped 6.1 percent to $37.91.
Macy's Inc., Big Lots Inc. and Nike Inc. and Coach Inc. all climbed more than 11 percent to lead the S&P 500 Consumer Discretionary Index to a 4.6 percent advance.
Oil fell and gasoline tumbled after a U.S. government report showed stockpiles increased more than twice as much as forecast. Crude for November delivery fell $4.69, or 6.3 percent, to $69.85 a barrel in New York, the lowest settlement since August 2007. It touched $68.57 a barrel, the lowest since June 27, 2007.
Bond Insurers
MBIA Inc., the largest bond insurer, jumped 32 percent to $9, trimming its 2008 loss to 52 percent. Ambac added 86 cents to $2.66, down 90 percent in the year.
Ambac and other bond insurers are working on a plan to send to the Treasury that would enable them to sell troubled assets to the government, Chief Executive Officer Michael Callen said. The companies also may present a proposal next week that would allow the insurers to guarantee some assets with government backing, Callen said in an interview today.
The Treasury's $700 billion program to buy troubled assets may allow the two guarantors to dispose of bonds backing collateralized debt obligations that they guaranteed, Royal Bank of Scotland Plc analyst Michael Cox said. Banks also may be more willing to cancel credit-default swap contracts they bought from bond insurers if the banks can sell the underlying CDOs to the government, Cox wrote.
Plunge Reversed
The S&P 500 Financials Index reversed a drop of as much as 6.8 percent to close 1.7 percent higher, as the bond-insurer plan spurred a rally in the last half hour of trading.
Citigroup Inc. pared a decline of 9.7 percent, ending down 2 percent to $15.90 and extending this year's loss to 46 percent. The second-biggest U.S. bank by assets reported a fourth consecutive quarterly deficit after at least $13.2 billion of loan losses and securities writedowns. Executives on a conference call said card and mortgage loss rates may exceed historical peaks.
American Express Co., the largest card network by purchases, retreated 77 cents to $23.64, the biggest loss in the Dow.
CIT Group Inc. dropped $1.77, or 38 percent, to $2.91, the steepest decline in the S&P 500. The commercial lender that repaid some debt early this year to assure investors it's solvent lost money for a sixth quarter as it wrote down the value of a unit that lends to companies to fund equipment purchases.
Yahoo Climbs
Yahoo! Inc. climbed as much as 17 percent after Microsoft Corp. Chief Executive Officer Steve Ballmer said a deal with the owner of the most-visited U.S. Web site may still make economic sense for shareholders of both companies. The shares pared their gains to 11 percent after Microsoft later e-mailed a statement saying it has ``no interest'' in acquiring Yahoo! Inc. and there are no discussions between the companies.
The S&P 500 Information Technology Index advanced 4.8 percent, as 67 of its 74 stocks gained.
Google Inc., owner of the most popular search engine, rallied in trading following the close of U.S. exchanges after profit topped analysts estimates as more customers used Web search ads. International Business Machines Corp., the biggest computer-services provider, jumped in extended trading after saying new service contracts amounted to $12.7 billion last quarter, topping estimates.
Peabody, ADM
Peabody Energy Corp. gained 18 percent, the fourth-most in the S&P 500. The largest U.S. coal producer rose $4.44 to $28.68 after saying third-quarter profit grew more than 11-fold and 59 percent more than the average estimate of analysts surveyed by Bloomberg, on increased output and higher prices.
Archer Daniels Midland Co., the world's largest grain processor, added $1.75, or 11 percent, to $17.84. The stock was raised to ``buy'' from ``neutral'' by Merrill Lynch & Co. analysts, who increased their 2009 earnings estimate, saying the company will pay less for crops as their prices decline.
The S&P 500 Industrials Index climbed 4.3 percent. The group dropped as much as 4.3 percent earlier after the Federal Reserve said industrial production was hurt by hurricanes and an aircraft strike combined with the credit crunch to weaken manufacturing. A separate report showed manufacturing in the Philadelphia region dropped more than economists estimated to the lowest since 1990.
The S&P 500 has fallen in 10 of the past 12 trading days as the earnings outlook for companies in the index deteriorated. Profits fell 45 percent on average for the 53 companies that reported third-quarter results from Oct. 7 through this morning, according to Bloomberg data.
`Tough Months'
``The frozen credit markets and the shock coming out of these stresses we've had in the capital markets have exacted a toll on the real economy,'' U.S. Treasury Secretary Henry Paulson said in an interview with Bloomberg Television. ``We've seen that in some of the numbers recently. We're going to have a number of tough months here.''
Wall Street analysts forecast a 7.5 percent drop in earnings in the third quarter in a Bloomberg survey last week. Analysts have maintained forecasts for record profits even as the seizure in credit markets caused banks to stop lending to each other, sent U.S. stocks to the worst week in 75 years and prompted unprecedented efforts to cushion global economies.
Hartford Financial Services Group Inc. dropped 12 percent to $28.86 and Lincoln National Corp. slumped 15 percent to $23.47 after Fitch Ratings said U.S. life insurers face a ``significant'' risk of downgrades because of investment losses. Life insurers may have their ratings cut amid market volatility and because the firms sold retirement products linked to equities, Fitch said.
Rebound From Rout
The S&P 500 yesterday plunged 9 percent, its steepest retreat since the market crash of 1987.
All 10 S&P 500 industries fell more than 6 percent yesterday, with half of the market's losses coming in the final hour of trading. That triggered the biggest plunge in Japanese stocks in two decades and the biggest two-day drop in Europe's Dow Jones Stoxx 600 Index since 1987 today.
About $1.1 trillion in value was erased from all U.S. equities yesterday. The declines came after a drop in retail sales was almost twice economists' estimates, sending Macy's Inc. and Dillard's Inc. down more than 15 percent. The Fed'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.
The S&P 500 has tumbled 36 percent this year and is down almost 40 percent from its record close in October 2007. The Dow has plunged 32 percent in 2008 and is 37 percent below its peak set the same day.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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Oct. 16 (Bloomberg) -- U.S. stocks rose for the first time in three days as oil's retreat below $70 a barrel sparked a rally in consumer companies and prospects of a government bailout of bond insurers reversed a slide in financial shares.
Ambac Financial Group Inc., the second-largest bond guarantor, jumped 48 percent after saying it will present a rescue plan to the Treasury Department. Wal-Mart Stores Inc. and McDonald's Corp. added more than 5 percent as crude slid to the lowest price in 16 months. The Dow Jones Industrial Average rebounded from a decline of as much as 380 points spurred by the biggest drop in industrial production in 34 years. The index swung by more than 700 points for the sixth straight day.
The S&P 500 advanced 38.59 points, or 4.3 percent, to 946.43. The Dow rallied 401.35 points, or 4.7 percent, to 8,979.26. The Nasdaq Composite jumped 5.5 percent to 1,717.71. About four stocks gained for each that fell on the New York Stock Exchange.
``We have a manic-depressive market,'' said Frederic Dickson, who helps oversee about $20 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ``The speed at which markets are reacting to news right now is close to mind-numbing. If the bond insurers are going to line up at the Treasury, that's probably a good thing. Oil at $70 a barrel has just given the American public a tax break.''
Benchmark indexes halted a two-day slump that threatened to erase the S&P 500's 12 percent gain on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to invest $250 billion in banks will ease the credit crisis. All 10 industry groups climbed at least 1.2 percent today.
Early Retreat
Stocks retreated earlier in the day, sending the S&P 500 down as much as 4.6 percent in morning trading, after Citigroup Inc. said bad loans may rise to a record high and the government said industrial production slumped 2.8 percent in September.
Wal-Mart, the world's biggest retailer, rallied $4.57, or 9.1 percent, to $54.62. McDonald's, the largest restaurant chain, added $2.91, or 5.7 percent, to $54.46. Target Corp., the second biggest U.S. discounter, jumped 6.1 percent to $37.91.
Macy's Inc., Big Lots Inc. and Nike Inc. and Coach Inc. all climbed more than 11 percent to lead the S&P 500 Consumer Discretionary Index to a 4.6 percent advance.
Oil fell and gasoline tumbled after a U.S. government report showed stockpiles increased more than twice as much as forecast. Crude for November delivery fell $4.69, or 6.3 percent, to $69.85 a barrel in New York, the lowest settlement since August 2007. It touched $68.57 a barrel, the lowest since June 27, 2007.
Bond Insurers
MBIA Inc., the largest bond insurer, jumped 32 percent to $9, trimming its 2008 loss to 52 percent. Ambac added 86 cents to $2.66, down 90 percent in the year.
Ambac and other bond insurers are working on a plan to send to the Treasury that would enable them to sell troubled assets to the government, Chief Executive Officer Michael Callen said. The companies also may present a proposal next week that would allow the insurers to guarantee some assets with government backing, Callen said in an interview today.
The Treasury's $700 billion program to buy troubled assets may allow the two guarantors to dispose of bonds backing collateralized debt obligations that they guaranteed, Royal Bank of Scotland Plc analyst Michael Cox said. Banks also may be more willing to cancel credit-default swap contracts they bought from bond insurers if the banks can sell the underlying CDOs to the government, Cox wrote.
Plunge Reversed
The S&P 500 Financials Index reversed a drop of as much as 6.8 percent to close 1.7 percent higher, as the bond-insurer plan spurred a rally in the last half hour of trading.
Citigroup Inc. pared a decline of 9.7 percent, ending down 2 percent to $15.90 and extending this year's loss to 46 percent. The second-biggest U.S. bank by assets reported a fourth consecutive quarterly deficit after at least $13.2 billion of loan losses and securities writedowns. Executives on a conference call said card and mortgage loss rates may exceed historical peaks.
American Express Co., the largest card network by purchases, retreated 77 cents to $23.64, the biggest loss in the Dow.
CIT Group Inc. dropped $1.77, or 38 percent, to $2.91, the steepest decline in the S&P 500. The commercial lender that repaid some debt early this year to assure investors it's solvent lost money for a sixth quarter as it wrote down the value of a unit that lends to companies to fund equipment purchases.
Yahoo Climbs
Yahoo! Inc. climbed as much as 17 percent after Microsoft Corp. Chief Executive Officer Steve Ballmer said a deal with the owner of the most-visited U.S. Web site may still make economic sense for shareholders of both companies. The shares pared their gains to 11 percent after Microsoft later e-mailed a statement saying it has ``no interest'' in acquiring Yahoo! Inc. and there are no discussions between the companies.
The S&P 500 Information Technology Index advanced 4.8 percent, as 67 of its 74 stocks gained.
Google Inc., owner of the most popular search engine, rallied in trading following the close of U.S. exchanges after profit topped analysts estimates as more customers used Web search ads. International Business Machines Corp., the biggest computer-services provider, jumped in extended trading after saying new service contracts amounted to $12.7 billion last quarter, topping estimates.
Peabody, ADM
Peabody Energy Corp. gained 18 percent, the fourth-most in the S&P 500. The largest U.S. coal producer rose $4.44 to $28.68 after saying third-quarter profit grew more than 11-fold and 59 percent more than the average estimate of analysts surveyed by Bloomberg, on increased output and higher prices.
Archer Daniels Midland Co., the world's largest grain processor, added $1.75, or 11 percent, to $17.84. The stock was raised to ``buy'' from ``neutral'' by Merrill Lynch & Co. analysts, who increased their 2009 earnings estimate, saying the company will pay less for crops as their prices decline.
The S&P 500 Industrials Index climbed 4.3 percent. The group dropped as much as 4.3 percent earlier after the Federal Reserve said industrial production was hurt by hurricanes and an aircraft strike combined with the credit crunch to weaken manufacturing. A separate report showed manufacturing in the Philadelphia region dropped more than economists estimated to the lowest since 1990.
The S&P 500 has fallen in 10 of the past 12 trading days as the earnings outlook for companies in the index deteriorated. Profits fell 45 percent on average for the 53 companies that reported third-quarter results from Oct. 7 through this morning, according to Bloomberg data.
`Tough Months'
``The frozen credit markets and the shock coming out of these stresses we've had in the capital markets have exacted a toll on the real economy,'' U.S. Treasury Secretary Henry Paulson said in an interview with Bloomberg Television. ``We've seen that in some of the numbers recently. We're going to have a number of tough months here.''
Wall Street analysts forecast a 7.5 percent drop in earnings in the third quarter in a Bloomberg survey last week. Analysts have maintained forecasts for record profits even as the seizure in credit markets caused banks to stop lending to each other, sent U.S. stocks to the worst week in 75 years and prompted unprecedented efforts to cushion global economies.
Hartford Financial Services Group Inc. dropped 12 percent to $28.86 and Lincoln National Corp. slumped 15 percent to $23.47 after Fitch Ratings said U.S. life insurers face a ``significant'' risk of downgrades because of investment losses. Life insurers may have their ratings cut amid market volatility and because the firms sold retirement products linked to equities, Fitch said.
Rebound From Rout
The S&P 500 yesterday plunged 9 percent, its steepest retreat since the market crash of 1987.
All 10 S&P 500 industries fell more than 6 percent yesterday, with half of the market's losses coming in the final hour of trading. That triggered the biggest plunge in Japanese stocks in two decades and the biggest two-day drop in Europe's Dow Jones Stoxx 600 Index since 1987 today.
About $1.1 trillion in value was erased from all U.S. equities yesterday. The declines came after a drop in retail sales was almost twice economists' estimates, sending Macy's Inc. and Dillard's Inc. down more than 15 percent. The Fed'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.
The S&P 500 has tumbled 36 percent this year and is down almost 40 percent from its record close in October 2007. The Dow has plunged 32 percent in 2008 and is 37 percent below its peak set the same day.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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AIG, Ambac, AMD, Google, IBM, Temper-Pedic: U.S. Equity Preview
By Whitney Kisling
Oct. 16 (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 5:50 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December added 0.3 percent to 943.4. Dow Jones Industrial Average futures climbed 19 points, or 0.2 percent, to 8,985. Nasdaq-100 Index futures lost 0.1 percent to 1,321.5.
Advanced Micro Devices Inc. (AMD US) gained 12 percent to $4.60. The second-largest maker of personal-computer processors posted a narrower loss in the third quarter. Sales, excluding a $191 million technology license payment, rose 1.7 percent to $1.59 billion.
Ambac Financial Group Inc. (ABK US) gained 4.1 percent to $2.77. The bond insurer is working with other companies on a plan to send to the U.S. Treasury that would enable them to sell troubled assets to the government. The companies also may present a proposal next week that would allow the insurers to guarantee some assets with government backing.
American International Group Inc. (AIG US) gained 2.1 percent to $2.48. The insurer that turned over control to the U.S. in exchange for an $85 billion loan last month promoted David Herzog to chief financial officer, ending a five-month search. Herzog, 48, was AIG's comptroller for three years.
Google Inc. (GOOG US) rose 9.4 percent to $386.31. The owner of the most popular Internet search engine reported third- quarter profit, excluding some items, that beat the average analyst estimate from a Bloomberg survey. More customers used Web search ads to spur sales.
Informatica Corp. (INFA US): The provider of data organization software to Hewlett-Packard Co. and Nike Inc. issued a new sales target after reporting third-quarter profit dropped 7.4 percent. The company now expects sales of $455 million to $465 million, from a previous forecast of $456 million to $461 million. The shares gained 8 percent to $12.65 in regular trading.
International Business Machines Corp. (IBM US) gained 2.1 percent to $93.47. The biggest computer-services provider said new service contracts totaled $12.7 billion last quarter, helped by deals with Royal Dutch Navy and Bristol-Myers Squibb Co. Contract signings, which indicate future revenue, dropped 4 percent from last year.
Temper-Pedic International Inc. (TPX US) fell 12 percent to $6.80. The maker of foam mattresses and pillows said 2008 earnings would be lower than forecast and suspended its dividend after reporting third-quarter profit of 32 cents a share. The company cited ``extraordinary macroeconomic events.''
To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net
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Oct. 16 (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 5:50 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December added 0.3 percent to 943.4. Dow Jones Industrial Average futures climbed 19 points, or 0.2 percent, to 8,985. Nasdaq-100 Index futures lost 0.1 percent to 1,321.5.
Advanced Micro Devices Inc. (AMD US) gained 12 percent to $4.60. The second-largest maker of personal-computer processors posted a narrower loss in the third quarter. Sales, excluding a $191 million technology license payment, rose 1.7 percent to $1.59 billion.
Ambac Financial Group Inc. (ABK US) gained 4.1 percent to $2.77. The bond insurer is working with other companies on a plan to send to the U.S. Treasury that would enable them to sell troubled assets to the government. The companies also may present a proposal next week that would allow the insurers to guarantee some assets with government backing.
American International Group Inc. (AIG US) gained 2.1 percent to $2.48. The insurer that turned over control to the U.S. in exchange for an $85 billion loan last month promoted David Herzog to chief financial officer, ending a five-month search. Herzog, 48, was AIG's comptroller for three years.
Google Inc. (GOOG US) rose 9.4 percent to $386.31. The owner of the most popular Internet search engine reported third- quarter profit, excluding some items, that beat the average analyst estimate from a Bloomberg survey. More customers used Web search ads to spur sales.
Informatica Corp. (INFA US): The provider of data organization software to Hewlett-Packard Co. and Nike Inc. issued a new sales target after reporting third-quarter profit dropped 7.4 percent. The company now expects sales of $455 million to $465 million, from a previous forecast of $456 million to $461 million. The shares gained 8 percent to $12.65 in regular trading.
International Business Machines Corp. (IBM US) gained 2.1 percent to $93.47. The biggest computer-services provider said new service contracts totaled $12.7 billion last quarter, helped by deals with Royal Dutch Navy and Bristol-Myers Squibb Co. Contract signings, which indicate future revenue, dropped 4 percent from last year.
Temper-Pedic International Inc. (TPX US) fell 12 percent to $6.80. The maker of foam mattresses and pillows said 2008 earnings would be lower than forecast and suspended its dividend after reporting third-quarter profit of 32 cents a share. The company cited ``extraordinary macroeconomic events.''
To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net
Read more...
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