By Brian Swint
Oct. 20 (Bloomberg) -- U.K. house prices posted the biggest annual decline in at least six years in October as the British economy stared ``into the abyss,'' Rightmove Plc said.
The average asking price for a home fell 4.9 percent from a year earlier, the most since records began in 2002, to 229,691 pounds ($398,000), Britain's most-used property Web site said today. In London, prices dropped 2 percent from a year ago.
``Certainly from an economic point of view, we've stared into the abyss,'' Miles Shipside, commercial director at Rightmove, said in a Bloomberg Television interview. ``With unemployment growing, we can see a lot of repossessions about to happen. The situation is going to get more severe.''
Britain is in a recession and will contract for the next three quarters, according to a report published today by Ernst & Young's ITEM Club, which uses the same forecasting model as the U.K. Treasury. The financial crisis forced the government to rescue banks and has left a dearth of loans for potential homebuyers.
The government last week announced an unprecedented 37 billion-pound bailout for Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group Plc. Bradford & Bingley Plc was seized last month, and Northern Rock Plc was nationalized earlier this year after the first U.K. bank run in more than century.
The intervention in the banking sector is the biggest since the nationalization wave by the socialist government of Clement Attlee after World War II.
Brown's Rescue
Brown last month suspended the tax on home purchases of less than 175,000 pounds. The government has also promised 250 billion pounds in interbank loan guarantees to unfreeze money markets in response to the crisis that cost banks worldwide more than $600 billion in losses and writedowns.
Asking prices for a home still rose 1 percent from September, led by gains in the East and West Midlands and the Southeast, today's report showed. Price declined the most on the month in Wales and the north. In London, prices increased 0.3 percent on the month.
``For those on the market now, they haven't been dropping their prices particularly,'' Shipside said. ``But they're going to face fairly severe competition from some forced sales from this unfortunately high unemployment that's coming.''
The economy stalled in the second quarter, ending the longest stretch of uninterrupted growth in more than a century. A government report this week will probably show that gross domestic product contracted 0.2 percent in the third quarter, the median forecast of 35 economists in a Bloomberg News survey shows.
U.K. Forecast
The economy will shrink 1 percent next year, the ITEM Club predicted today. It forecast that the Bank of England, which lowered the benchmark interest rate by a half point to 4.5 percent on Oct. 8, will cut it further in coming months.
``The supply of credit to companies and households is likely to remain severely restricted,'' said Peter Spencer, the ITEM Club's chief economist and a former U.K. Treasury official. ``The bank now has room for further cuts as early as next month. We see base rate falling to 3 percent next year.''
Economists including Citigroup Inc.'s Michael Saunders and UBS AG's Amit Kara predict that the Bank of England will follow last week's emergency interest-rate reduction with another half- point cut at the next scheduled meeting on Nov. 6. Minutes of last month's meeting, showing how each of the nine panel members voted, will be published Oct. 22.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
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Monday, October 20, 2008
New Zealand May Expand Bank Guarantees, Cullen Says
By Tracy Withers
Oct. 20 (Bloomberg) -- New Zealand officials are working on a plan to guarantee wholesale deposits at the nation's banks, Finance Minister Michael Cullen said.
``The Reserve Bank and Treasury are working on a possible wholesale deposit guarantee scheme,'' Cullen said in a debate broadcast today on Radio New Zealand. ``There is no need for an urgent decision. We have time to work through it.''
New Zealand last week put guaranteed retail deposits to bolster confidence in financial institutions. Unlike other nations such as Australia and South Korea, Cullen's plan doesn't guarantee wholesale deposits from global fund managers and local lenders say that may make it more difficult to raise funds when credit markets reopen.
South Korea yesterday said it will guarantee $100 billion of lenders' foreign-currency debt. Governments in Greece, Ireland and Switzerland also announced deposit guarantees last week as part of a coordinated European response to the global financial crisis.
Units of Australian-based banks handle about 90 percent of all New Zealand deposits, and officials are taking this ownership into account, Cullen said.
``The majority of our institutions are owned from offshore and the New Zealand government does not want to be writing a blank check for offshore shareholders,'' he said.
Yesterday, opposition National Party leader John Key said New Zealand's plan is ``out of line'' with Australia and there is a risk local institutions will switch their funds.
``The sooner we are able to resolve the current issues around the deposit guarantee scheme, the sooner we will give certainty to those involved in the banking sector,'' Key said in an e-mailed statement.
National leads the governing Labour Party in opinion polls ahead of the Nov. 8 election. Key said he will work with the government to ensure decisions are made.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Trichet Urges Banks to Lend After Returning to Recovery `Path'
By Simon Kennedy and Anne-Sylvaine Chassany
Enlarge Image/Details
Oct. 20 (Bloomberg) -- European Central Bank President Jean- Claude Trichet urged banks to start lending again after policy makers put them on to the ``the path'' of recovery by pumping record amounts of cash into money markets.
``I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said in an interview on French radio RTL late yesterday. The banking system is ``on the path to normalization,'' he said.
The cost of borrowing dollars in London fell last week for the first week since July after the ECB offered lenders as many euros as they wanted and joined counterparts in promising unlimited dollars as well. Central bankers and governments have stepped up efforts to end the 14-month-old credit crunch that's threatening to tip the global economy into recession.
``We're facing a very important market correction which is lasting,'' Trichet said, declining to say the credit crunch is over. ``We are facing a very serious systemic liquidity crisis.''
As well as offering unlimited amounts of dollars and euros to banks, the ECB this month cut interest rates for the first time since 2003 and loosened rules on the collateral it will accept from banks when making loans. European governments including those in France, Germany and Spain committed 1.3 trillion euros ($1.7 trillion) to guarantee bank loans and take stakes in lenders.
Still, in a sign the crisis continues to reverberate, the Netherlands yesterday put 10 billion euros into ING Groep NV after the biggest Dutch financial-services company said it expects its first quarterly loss.
Lehman Collapse
Trichet said policy makers are acting to give banks the ability to refinance and boost their capital after September's collapse of Lehman Brothers Holdings Inc. prompted lenders to hoard cash. That sent the cost of credit surging, hurting the economy by choking off money to consumers and companies.
ECB council member George Provopoulos said the central bank ``remains vigilant and will do what is needed'' to both reduce inflation and ensure stability in markets, according to an interview with To Vima newspaper published yesterday. Colleague Ewald Nowotny told Austrian state broadcaster ORF-TV that, while the crisis should be ``under control'' by the middle of next year, the economy will suffer for longer.
Trichet criticized investors for creating the crisis by behaving with too much ``short-termism,'' which he blamed for amplifying the rise and the decline of markets. He said that having mis-priced risk, financial markets should now be subjected to greater transparency and regulation to curb their volatility.
Review Financial System
``We said there was an underestimation of the risks and of the price to be paid for these risks,'' he said. The crisis ``must force us to review the entire international financial system.''
ECB council member Erkki Liikanen told Finnish state broadcaster YLE TV1 yesterday that regulation will be strengthened across borders. ``All national regulators of banks operating across borders must join forces,'' he said. ``It will be a part of EU legislation and I'm sure it will even be agreed on a multinational level beyond that.''
While the ECB this month cut its benchmark rate by a half- point to 3.75 percent, with inflation still almost double its 2 percent limit, Trichet said its focus is ``entirely oriented to ensure price stability.''
``We will always, at any moment, do what is necessary so that I can continue to say to our citizens `you can have confidence, you will have medium-term price stability','' Trichet said. Such a goal should lend confidence to financial markets as ``there's now more than in the past the recognition of the fact that price stability'' helps expansion and hiring, he said.
`Important Slowdown'
The ECB president described his 15-nation euro-area economy as being in a ``very, very important growth slowdown,'' driven by tighter credit and also by this year's record fuel and food costs. Nowotny predicted the growth rate next year ``will be significantly below what we have in 2008.''
Such an outlook explains why investors expect the ECB to cut its benchmark rate to 3.25 percent by the end of the year, Eonia forward contracts show.
The ECB, which next releases economic forecasts in December, in September predicted growth of 1.4 percent this year and 1.2 percent in 2009. With the crisis worsening, the International Monetary Fund this month said it expects the euro-area to grow 0.2 percent next year, the weakest since the single currency began trading in 1999, after 1.3 percent in 2008.
Trichet acknowledged his own central bank had taken on risk by boosting liquidity and accepting lower-rated securities for loans.
``We're taking risks and we've made decisions that increased our risks, because we were facing a systemic liquidity crisis of first importance,'' he said. The ECB is an ``inspirer of confidence,'' Trichet said.
To contact the reporters on this story: Anne-Sylvaine Chassany in Paris achassany@bloomberg.net; Simon Kennedy in Paris at Skennedy4@bloomberg.net
Read more...
Enlarge Image/Details
Oct. 20 (Bloomberg) -- European Central Bank President Jean- Claude Trichet urged banks to start lending again after policy makers put them on to the ``the path'' of recovery by pumping record amounts of cash into money markets.
``I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said in an interview on French radio RTL late yesterday. The banking system is ``on the path to normalization,'' he said.
The cost of borrowing dollars in London fell last week for the first week since July after the ECB offered lenders as many euros as they wanted and joined counterparts in promising unlimited dollars as well. Central bankers and governments have stepped up efforts to end the 14-month-old credit crunch that's threatening to tip the global economy into recession.
``We're facing a very important market correction which is lasting,'' Trichet said, declining to say the credit crunch is over. ``We are facing a very serious systemic liquidity crisis.''
As well as offering unlimited amounts of dollars and euros to banks, the ECB this month cut interest rates for the first time since 2003 and loosened rules on the collateral it will accept from banks when making loans. European governments including those in France, Germany and Spain committed 1.3 trillion euros ($1.7 trillion) to guarantee bank loans and take stakes in lenders.
Still, in a sign the crisis continues to reverberate, the Netherlands yesterday put 10 billion euros into ING Groep NV after the biggest Dutch financial-services company said it expects its first quarterly loss.
Lehman Collapse
Trichet said policy makers are acting to give banks the ability to refinance and boost their capital after September's collapse of Lehman Brothers Holdings Inc. prompted lenders to hoard cash. That sent the cost of credit surging, hurting the economy by choking off money to consumers and companies.
ECB council member George Provopoulos said the central bank ``remains vigilant and will do what is needed'' to both reduce inflation and ensure stability in markets, according to an interview with To Vima newspaper published yesterday. Colleague Ewald Nowotny told Austrian state broadcaster ORF-TV that, while the crisis should be ``under control'' by the middle of next year, the economy will suffer for longer.
Trichet criticized investors for creating the crisis by behaving with too much ``short-termism,'' which he blamed for amplifying the rise and the decline of markets. He said that having mis-priced risk, financial markets should now be subjected to greater transparency and regulation to curb their volatility.
Review Financial System
``We said there was an underestimation of the risks and of the price to be paid for these risks,'' he said. The crisis ``must force us to review the entire international financial system.''
ECB council member Erkki Liikanen told Finnish state broadcaster YLE TV1 yesterday that regulation will be strengthened across borders. ``All national regulators of banks operating across borders must join forces,'' he said. ``It will be a part of EU legislation and I'm sure it will even be agreed on a multinational level beyond that.''
While the ECB this month cut its benchmark rate by a half- point to 3.75 percent, with inflation still almost double its 2 percent limit, Trichet said its focus is ``entirely oriented to ensure price stability.''
``We will always, at any moment, do what is necessary so that I can continue to say to our citizens `you can have confidence, you will have medium-term price stability','' Trichet said. Such a goal should lend confidence to financial markets as ``there's now more than in the past the recognition of the fact that price stability'' helps expansion and hiring, he said.
`Important Slowdown'
The ECB president described his 15-nation euro-area economy as being in a ``very, very important growth slowdown,'' driven by tighter credit and also by this year's record fuel and food costs. Nowotny predicted the growth rate next year ``will be significantly below what we have in 2008.''
Such an outlook explains why investors expect the ECB to cut its benchmark rate to 3.25 percent by the end of the year, Eonia forward contracts show.
The ECB, which next releases economic forecasts in December, in September predicted growth of 1.4 percent this year and 1.2 percent in 2009. With the crisis worsening, the International Monetary Fund this month said it expects the euro-area to grow 0.2 percent next year, the weakest since the single currency began trading in 1999, after 1.3 percent in 2008.
Trichet acknowledged his own central bank had taken on risk by boosting liquidity and accepting lower-rated securities for loans.
``We're taking risks and we've made decisions that increased our risks, because we were facing a systemic liquidity crisis of first importance,'' he said. The ECB is an ``inspirer of confidence,'' Trichet said.
To contact the reporters on this story: Anne-Sylvaine Chassany in Paris achassany@bloomberg.net; Simon Kennedy in Paris at Skennedy4@bloomberg.net
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Australia's Producer Prices Rise 2% on Energy, Water
By Jacob Greber
Oct. 20 (Bloomberg) -- Prices paid to Australian producers rose in the third quarter by almost twice as much as economists forecast as costs for energy, water and construction climbed.
The producer price index advanced 2 percent after rising 1 percent in the second quarter, the Bureau of Statistics said in Sydney today. It was the biggest increase since the series began in 1998. The median estimate of 14 economists surveyed by Bloomberg was for a 1.2 percent gain. The index climbed 5.6 percent from a year earlier.
The record increase may stoke speculation central bank Governor Glenn Stevens won't repeat this month's decision to cut the benchmark interest rate by 1 percentage point to 6 percent, the biggest reduction since a recession in 1992. Prices for imported goods may climb in coming quarters after the Australian dollar tumbled 21 percent against the U.S. currency this year.
The third-quarter gain in producer prices was ``driven by higher import prices in line with the weaker Australian dollar,'' Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said ahead of today's report.
The Australian dollar rose to 69.75 U.S. cents at 11:37 a.m. in Sydney from 69.56 cents immediately before the report. The yield on the benchmark two-year government bond fell 2 basis points to 4.26 percent. A basis point is 0.01 percentage point.
Energy, gas and water costs rose 7.4 percent in the third quarter, and construction gained 1.8 percent, today's report showed.
Unemployment Rises
Annual core inflation probably accelerated in the third quarter to 4.8 percent from 4.5 percent in the previous three months, according to the median estimate of 16 economists surveyed by Bloomberg News. Stevens has said the rate will probably peak in the fourth quarter.
The government will publish the consumer prices index on Oct. 22. The central bank aims to keep annual price gains between 2 percent and 3 percent on average.
Governor Stevens said on Oct. 7 that he expects the inflation rate to fall in 2009 as the nation's 17-year economic expansion slows. Gross domestic product rose 0.3 percent in the second quarter, the slowest pace in more than three years.
Unemployment rose to 4.3 percent last month from 4.1 percent in August as companies such as Qantas Airways Ltd. and Ford Motor Co. fired workers.
Bank Deposits
Signs that growth is cooling faster than forecast by the central bank was a key reason Governor Stevens cut the overnight cash rate target this month by twice as much as economists forecast. Policy makers have reduced borrowing costs by 1.25 percentage points since early September.
The deepening worldwide financial crisis prompted the Australian government to guarantee bank deposits last week, while the central bank added money into the financial system.
Prime Minister Kevin Rudd also announced A$10.4 billion ($7.2 billion) in grants to seniors, families and first-home buyers, and said it may provide further stimulus.
The measures ``certainly make it much less likely that we'll get further aggressive Reserve Bank easing, given the fiscal stimulus is equivalent to a few rate cuts,'' Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, said ahead of today's report.
Stevens will lower the benchmark rate by half a point to 5.5 percent on Nov. 4, according to 14 of 16 economists surveyed by Bloomberg late last week.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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Oct. 20 (Bloomberg) -- Prices paid to Australian producers rose in the third quarter by almost twice as much as economists forecast as costs for energy, water and construction climbed.
The producer price index advanced 2 percent after rising 1 percent in the second quarter, the Bureau of Statistics said in Sydney today. It was the biggest increase since the series began in 1998. The median estimate of 14 economists surveyed by Bloomberg was for a 1.2 percent gain. The index climbed 5.6 percent from a year earlier.
The record increase may stoke speculation central bank Governor Glenn Stevens won't repeat this month's decision to cut the benchmark interest rate by 1 percentage point to 6 percent, the biggest reduction since a recession in 1992. Prices for imported goods may climb in coming quarters after the Australian dollar tumbled 21 percent against the U.S. currency this year.
The third-quarter gain in producer prices was ``driven by higher import prices in line with the weaker Australian dollar,'' Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said ahead of today's report.
The Australian dollar rose to 69.75 U.S. cents at 11:37 a.m. in Sydney from 69.56 cents immediately before the report. The yield on the benchmark two-year government bond fell 2 basis points to 4.26 percent. A basis point is 0.01 percentage point.
Energy, gas and water costs rose 7.4 percent in the third quarter, and construction gained 1.8 percent, today's report showed.
Unemployment Rises
Annual core inflation probably accelerated in the third quarter to 4.8 percent from 4.5 percent in the previous three months, according to the median estimate of 16 economists surveyed by Bloomberg News. Stevens has said the rate will probably peak in the fourth quarter.
The government will publish the consumer prices index on Oct. 22. The central bank aims to keep annual price gains between 2 percent and 3 percent on average.
Governor Stevens said on Oct. 7 that he expects the inflation rate to fall in 2009 as the nation's 17-year economic expansion slows. Gross domestic product rose 0.3 percent in the second quarter, the slowest pace in more than three years.
Unemployment rose to 4.3 percent last month from 4.1 percent in August as companies such as Qantas Airways Ltd. and Ford Motor Co. fired workers.
Bank Deposits
Signs that growth is cooling faster than forecast by the central bank was a key reason Governor Stevens cut the overnight cash rate target this month by twice as much as economists forecast. Policy makers have reduced borrowing costs by 1.25 percentage points since early September.
The deepening worldwide financial crisis prompted the Australian government to guarantee bank deposits last week, while the central bank added money into the financial system.
Prime Minister Kevin Rudd also announced A$10.4 billion ($7.2 billion) in grants to seniors, families and first-home buyers, and said it may provide further stimulus.
The measures ``certainly make it much less likely that we'll get further aggressive Reserve Bank easing, given the fiscal stimulus is equivalent to a few rate cuts,'' Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, said ahead of today's report.
Stevens will lower the benchmark rate by half a point to 5.5 percent on Nov. 4, according to 14 of 16 economists surveyed by Bloomberg late last week.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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South Korea Pledges $130 Billion to Aid Banks, Market
By Kyung Bok Cho and William Sim
Oct. 20 (Bloomberg) -- South Korea sought to rescue its financial system by guaranteeing $100 billion of lenders' foreign-currency debts and providing $30 billion in U.S. dollars to banks.
The won rose and the Kospi was little changed after the government said it will also give tax benefits for long-term investors, and the central bank will provide ``adequate'' currency liquidity to the markets. The plan, unveiled yesterday, aims to help lenders overcome overseas funding difficulties.
South Korea, struggling with Asia's worst-performing currency and a stock market that has lost 38 percent this year, joins Europe, Australia and Hong Kong in providing banks with state backing amid a global lending drought. The measures should boost confidence in the banking system and return attention to ``Korea's solid macroeconomic fundamentals,'' the International Monetary Fund said.
The guarantee is ``essential,'' said Kim Hag Ju, head of research at Samsung Securities Co. in Seoul. ``Rather than give banks the money they need, it's much cheaper and effective to back their debts so they can borrow it. With the credit freeze, it's extremely difficult for a bank or company to be able to borrow money without a sovereign guarantee.''
The Kospi slipped 0.3 percent to 1,177.11 at 9:29 a.m. in Seoul after initially rising as much as 1.3 percent. The index fell 9.4 percent on Oct. 16, the biggest drop since September 2001, and is heading for its first annual decline since 2002.
Currency Rises
The won gained 4.1 percent to 1,280.80 against the U.S. dollar today. The currency fell last week by the most since an IMF bailout of South Korea in 1997 after Standard & Poor's said it may cut the credit ratings of the nation's largest lenders.
South Korea's government said it has no immediate plan to recapitalize lenders or increase deposit guarantees.
The moves by other countries to guarantee debt spurred the decision, Finance Minister Kang Man Soo told reporters in Seoul yesterday, at a joint press briefing with central bank Governor Lee Seong Tae and Jun Kwang Woo, head of the Financial Services Commission. ``We will take similar measures to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial market.''
The credit crisis has raised the cost of borrowing and reduced access to funds as global lending dried up. South Korean banks secure as much as 12 percent of their funding from international markets, according to Moody's Investors Service.
Solid Economy
The package ``should support confidence in the Korean financial system and return attention to Korea's solid macroeconomic fundamentals, including sizeable foreign reserves,'' IMF Managing Director Dominique Strauss-Kahn said.
The economy is in its 10th year of expansion, driven mainly by increased exports to China, Europe and the Middle East.
South Korea has been amassing foreign currency since the 1997-1998 Asian financial crisis and is now the world's sixth- largest holder of reserves, which fell for a sixth month in September to $239.7 billion.
The government will guarantee as much as $100 billion for local banks' new foreign debt taken out from Oct. 20 to June 30 next year, according to yesterday's statement. The protection is valid for three years.
Policy makers said a recapitalization of the nation's financial institutions or an expansion of deposit guarantees are ``not necessary.'' Still, the government will ``take proper actions'' should the need arise, according to the statement.
Overseas Debt
Korean lenders have $235.3 billion of overseas liabilities, with about $32.7 billion due to mature in the fourth quarter, according to the Financial Supervisory Service.
To boost dollar liquidity, the government will provide the banking industry with $30 billion from its foreign reserves, the statement said. The government has already promised to supply a total of $15 billion to banks and the won-dollar swap market.
Authorities will continue ``smoothing'' operations in the currency market to avoid ``extreme volatilities,'' they said in yesterday's statement.
``They have to do that because the market was pushing them by attacking the Korean won,'' said V. Anantha-Nageswaran, chief investment officer for Asia Pacific at Bank Julius Baer (Singapore) Ltd., part of Switzerland's biggest independent money manager for the wealthy. ``They know what the stakes are. The currency could completely careen out of proportion.''
The government will give tax benefits to investors who hold equity or corporate-bond funds for more than three years to encourage long-term investing and stabilize the markets, yesterday's statement said. The breaks include an exemption from taxes on dividends.
South Korea will inject 1 trillion won ($767 million) into Industrial Bank of Korea, the nation's biggest lender to small- and mid-sized businesses, by transferring its equity stakes in the state companies.
To contact the reporters for this story: Kyung Bok Cho in Hong Kong at kcho7@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net
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Oil Industry Must Step Up Cooperation on Carbon, Executive Says
By Angela Macdonald-Smith
Oct. 20 (Bloomberg) -- Oil and gas companies need to step up cooperation with each other and with regulators on carbon capture and disposal to help address climate change, said Leo Roodhart, president of the Society of Petroleum Engineers.
The global financial crisis, which threatens to slow international efforts to tackle global warming, makes collaboration more important, Roodhart, who is also head of strategic innovation at Royal Dutch Shell Plc's international unit, said in an interview.
Carbon capture and storage technology involves extracting the gas from emissions from power generation and industrial processes and piping it into underground storage rather than venting it into the air. Schlumberger Ltd., Santos Ltd., Shell and Xstrata Plc are among companies involved in proposed carbon capture and storage projects in Australia.
``There is a financial crisis without a doubt,'' Roodhart said in a telephone interview late yesterday in advance of a Society of Petroleum Engineers conference in Perth, Western Australia. ``But establishing a carbon storage project would take a decade to be effective, while the financial crisis will last one, maybe two years.''
The successful development of carbon capture and storage projects would extend the use of fossil fuels such as coal and oil.
Australia could have commercial carbon geo-sequestration projects in operation within 10 years, driven by the government's policy of backing demonstration and commercial- scale ventures, said Sandeep Sharma, program manager with Australia's Cooperative Research Centre for Greenhouse Gas Technologies.
The oil and gas industry has the know-how and processes to implement carbon capture and storage and can play a ``significant role in expediting its deployment,'' Sharma said in a statement released at the conference.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Oct. 20 (Bloomberg) -- Oil and gas companies need to step up cooperation with each other and with regulators on carbon capture and disposal to help address climate change, said Leo Roodhart, president of the Society of Petroleum Engineers.
The global financial crisis, which threatens to slow international efforts to tackle global warming, makes collaboration more important, Roodhart, who is also head of strategic innovation at Royal Dutch Shell Plc's international unit, said in an interview.
Carbon capture and storage technology involves extracting the gas from emissions from power generation and industrial processes and piping it into underground storage rather than venting it into the air. Schlumberger Ltd., Santos Ltd., Shell and Xstrata Plc are among companies involved in proposed carbon capture and storage projects in Australia.
``There is a financial crisis without a doubt,'' Roodhart said in a telephone interview late yesterday in advance of a Society of Petroleum Engineers conference in Perth, Western Australia. ``But establishing a carbon storage project would take a decade to be effective, while the financial crisis will last one, maybe two years.''
The successful development of carbon capture and storage projects would extend the use of fossil fuels such as coal and oil.
Australia could have commercial carbon geo-sequestration projects in operation within 10 years, driven by the government's policy of backing demonstration and commercial- scale ventures, said Sandeep Sharma, program manager with Australia's Cooperative Research Centre for Greenhouse Gas Technologies.
The oil and gas industry has the know-how and processes to implement carbon capture and storage and can play a ``significant role in expediting its deployment,'' Sharma said in a statement released at the conference.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Northwest Australia May Have More Tropical Cyclones
By Angela Macdonald-Smith
Oct. 20 (Bloomberg) -- Australia's northwest may have more tropical cyclones than average this season, the Bureau of Meteorology said, potentially threatening oil production and mining operations.
The region may have between five and seven tropical cyclones in the season starting Nov. 1, up from four last year, the Canberra-based Bureau said today in a statement on its Web site. There is a higher-than-normal risk of a cyclone striking before Christmas, it said.
BHP Billiton Ltd., Woodside Petroleum Ltd. and Santos Ltd., Australia's three biggest oil and gas producers, were among companies that last year halted production at offshore oil fields because of tropical cyclones, including Nicholas, Ophelia and Pancho. Australia's northwest typically has an average of five tropical cyclones each season, which runs until April 30.
``With the likelihood of early activity, we expect to see a greater number of cyclones this season,'' Andrew Burton, manager of severe weather services, said in the statement. ``It's likely we'll see around two coastal impacts, with one of them being severe.''
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Oct. 20 (Bloomberg) -- Australia's northwest may have more tropical cyclones than average this season, the Bureau of Meteorology said, potentially threatening oil production and mining operations.
The region may have between five and seven tropical cyclones in the season starting Nov. 1, up from four last year, the Canberra-based Bureau said today in a statement on its Web site. There is a higher-than-normal risk of a cyclone striking before Christmas, it said.
BHP Billiton Ltd., Woodside Petroleum Ltd. and Santos Ltd., Australia's three biggest oil and gas producers, were among companies that last year halted production at offshore oil fields because of tropical cyclones, including Nicholas, Ophelia and Pancho. Australia's northwest typically has an average of five tropical cyclones each season, which runs until April 30.
``With the likelihood of early activity, we expect to see a greater number of cyclones this season,'' Andrew Burton, manager of severe weather services, said in the statement. ``It's likely we'll see around two coastal impacts, with one of them being severe.''
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Krugman Proves Keynesianism Isn't Dead After All: William Pesek
Commentary by William Pesek
Oct. 20 (Bloomberg) -- It's hard to forget the first time I met Paul Krugman. It was in the men's room.
It was in Singapore in August 1998 and I found myself washing my hands next to the economist -- or at least trying to. As we chatted briefly about the speech he had just delivered on the ``liquidity trap'' undermining Japan, we realized the sinks in the lavatory were broken.
``That's the trouble with liquidity problems,'' Krugman deadpanned. ``They tend to follow you around the world.''
The reason Krugman's joke comes back to me has less to do with him winning the Nobel Prize in economics than the situation in which the global financial system finds itself. The question is whether central banks will lose their ability to control credit and, ultimately, economies.
Krugman, 55, didn't get the Nobel for his work on Japan's lost decade, but for ``analysis of trade patterns and locations of economic activity.'' The Princeton University professor and New York Times columnist is among President George W. Bush's most prominent critics. Coming less than a month before an election, the award left some economists wondering if the Nobel committee was playing politics.
Alan Greenspan also can't be happy. Krugman's columns often connect the dots between the former Federal Reserve chairman's free-market policies and the credit crisis. Greenspan's stock as a guru is falling as fast as Krugman's is rising.
Monetary Paralysis
Krugman's work is getting considerable attention in Asia, and for good reason. His reputation in this region was made in the mid-1990s when he was among the most consistent predictors of the 1997 Asian crisis. A couple of years later, Krugman correctly opined that Asia would stage an impressive comeback.
The economist's research on Japan's monetary paralysis could prove equally prescient in Asia and beyond.
In July, this column explored the risk that lost decades may become the global rule, not the exception. Considering how much worse the crisis has gotten since then, it's becoming harder and harder to dismiss such an outlook.
Since January, the Fed has cut its key interest rate from 4.25 percent to 1.50 percent. Has it helped the U.S. economy?
While there's a considerable lag between central-bank moves and their effect on the economy, U.S. consumers haven't yet begun to feel the full fallout from the credit crisis. Fed Chairman Ben Bernanke will be under pressure to push rates even lower.
Turning Japanese
``For all practical purposes, we're in liquidity trap territory,'' Krugman told Bloomberg's Tom Keene on Oct. 6. ``Bernanke can cut rates some more, but it's not going to have any impact on the real economy. So yes, traditional, conventional monetary policy is out of room. No more bullets.'' America, Krugman added, ``has turned Japanese.''
Added Jon Corzine, the New Jersey governor and former chairman of Goldman, Sachs & Co., in an Oct. 12 interview with NBC: ``What is maybe most important, we need a real economic stimulus. We're in what you call a liquidity trap.''
Krugman did as much as anyone to popularize the phrase generally thought to be coined by John Maynard Keynes. The Nobel committee honoring Krugman at this point in time seems part of a growing realization that Keynesianism, with its emphasis on the government's role in the economy, isn't dead after all.
`Comrade Bush'
Far from it. At the rate the U.S. is socializing its financial system, it seems only a matter of time before airlines, automakers and major retailers find their way onto the government's balance sheet. It would be the ultimate irony if the U.S. had to bail out Wal-Mart Stores Inc. with borrowed Chinese money so that it can support all those Chinese factory workers.
Globalization is bringing the world full circle -- from state-owned companies to privatization to the re-nationalization of those enterprises. It's no wonder Venezuelan President Hugo Chavez is referring to the U.S. leader as ``Comrade Bush'' and saying ``now Bush is to the left of even me.''
While that's an overstatement, the policies long advocated by Keynes, and more recently by Krugman, will have more sway than those of laissez-faire capitalism enthusiast Milton Friedman. You can bet worsening market turmoil will prompt Asian governments to follow the U.S.'s lead on public bailouts.
Among the biggest risks is central-bank impotence. As Neil Mellor, London-based currency strategist at Bank of New York Mellon Corp., points out, the mere fact investors are talking about liquidity traps could feed a ``self-perpetuating gloom.'' Keynes, after all, spoke of the mysterious role of ``animal spirits'' in economies.
It was in a similar vein that in 1998 Krugman published his widely circulated paper on Japan's liquidity woes. Krugman speaks of the forces haunting Asia's biggest economy as if they were ghosts in an otherwise functioning machine.
Japan's credit system remains more trapped than free. It's a reminder things could get worse if other nations turn Japanese.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
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OPEC Plans Supply Cut as Crude Oil Heads Toward $50
By Grant Smith and Margot Habiby
Oct. 20 (Bloomberg) -- OPEC, the supplier of more than 40 percent of the world's oil, plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s sends crude toward $50 a barrel.
Options contracts to sell oil at $50 by December soared 28- fold in the past two weeks on the New York Mercantile Exchange. Goldman Sachs Group Inc. and Merrill Lynch & Co. analysts say crude, which fell more than 50 percent from a record high in July to a 14-month low last week, may drop another 44 percent should the world economy slip into a recession.
The Organization of Petroleum Exporting Countries, which meets Oct. 24 in Vienna, three weeks earlier than planned, is facing the weakest growth in demand since 1993 just as new fields come on line from Angola to the Gulf of Mexico. Members may cut daily output by as much as 2 million barrels, President Chakib Khelil said yesterday.
``OPEC is going to try to prevent some of the price decline,'' Francisco Blanch, head of global commodities research at Merrill in London, said in a Bloomberg television interview. ``It's going to be very difficult to stem a price fall.''
Options contracts that allow holders to sell 1,000 barrels of oil for $50 each by December closed at $280 on the Nymex on Oct. 17, up from $10 on Oct. 3. Oil rose a second day today, gaining 0.8 percent to $72.45 a barrel at 7:50 a.m. in Singapore.
Budget Pressures
Even at today's prices, Venezuela and Iran, two of the organization's 13 members, may struggle to balance budgets because they rely on energy sales for more than half of their revenue, according to estimates compiled by the U.S. Central Intelligence Agency.
``Some countries like Venezuela and Iran need prices above $80 a barrel,'' said Leo Drollas, deputy director of the Centre for Global Energy Studies, a London-based consulting company. ``The Saudis have a bottom price of about $65 a barrel, but they might go ahead with a cut to keep solidarity within OPEC.''
Gross domestic product in the six-member Gulf Cooperation Council of Saudi Arabia, United Arab Emirates, Kuwait, Oman, Qatar and Bahrain would shrink 25 percent if oil averaged $50 next year, ING Bank NV estimates.
Ministers from Algeria, Libya, Iran and Venezuela already called for a reduction in supplies from the current quota of 28.8 million barrels a day. Khelil, also Algeria's oil minister, said that while there is consensus for a cut, there is no agreement on its size. It may be necessary to make the cuts in two stages to ensure price stability, he told Algerian state television yesterday.
Qatar, Saudi Arabia
Qatari Oil Minister Abdullah bin Hamad al-Attiyah told Al Jazeera TV the cut will likely be 1 million barrels a day, or 14 percent more than his nation pumps. Saudi Arabia, which dominates OPEC proceedings as the group's largest producer, has yet to comment on its intentions.
Attempts to support prices when the Standard & Poor's 500- Index is down 36 percent this year may sour relations between OPEC and its customers. Both U.S. presidential candidates, John McCain and Barack Obama, have called for greater energy independence to limit reliance on foreign oil.
U.K. Prime Minister Gordon Brown described potential supply cuts as ``absolutely scandalous'' on Oct. 17, Agence France- Presse reported.
The world's industrialized economies will expand next year at the slowest pace since 1982, the International Monetary Fund said Oct. 8. Growth will weaken to 0.5 percent in 2009, from 1.5 percent this year, sending U.S. unemployment to its highest level in 16 years, the agency said.
Reducing Estimates
While OPEC already agreed to curb production by observing output quotas after a Sept. 10 meeting to lower supplies by 500,000 barrels a day, members routinely pump more than their allocation, according to data compiled by Bloomberg. Since that session, Credit Suisse Group pared its forecast for oil next year by 32 percent to $75 a barrel. Deutsche Bank AG cut its 2009 assessment by 23 percent to $92.50 on Sept. 29. BNP Paribas SA lowered its outlook by 18 percent to $92.50 on Oct. 10.
At the same time, Exxon Mobil Corp.'s Saxi-Batuque fields off Angola's shore started pumping in August, while BP Plc's Thunder Horse field in the Gulf of Mexico is scheduled to increase supplies by the end of the year. World oil capacity will rise 1.45 million barrels a day in 2009, twice the rate of growth in demand, according to the International Energy Agency.
``Prices could fall as low as $50 a barrel during the fourth quarter if OPEC can't find a way to offset the financial meltdown,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Oil Stocks Plunge
The prospect of OPEC cuts, slowing economic growth and falling prices drove the Dow Jones Europe Stoxx Oil & Gas Index down 25 percent in the past five weeks. Irving, Texas-based Exxon Mobil, the world's biggest oil company, fell 37 percent this year, while The Hague-based Royal Dutch Shell Plc, the second-biggest, lost 33 percent.
OPEC lowered its forecast for demand in 2009 last week, saying consumption will be 450,000 barrels a day less than expected at 87.21 million a day. The Paris-based International Energy Agency shaved its 2009 outlook the previous week and said this year's demand growth of 0.5 percent will be the weakest since 1993.
U.S. motorists are driving less after gasoline pump prices topped $4 a gallon in July. Vehicle-miles traveled on all U.S. roads that month were 3.7 percent lower than a year earlier, Federal Highway Administration data show. Prices fell to an average of $3.21 a gallon last week, according to the Department of Energy.
Output Cut
As demand declined, OPEC trimmed supplies 3.8 percent to 31.8 million barrels a day in September, according to Geneva- based tanker-tracking service PetroLogistics Ltd. Saudi Arabia's volume fell 520,000 barrels a day to 9.18 million, PetroLogistics said.
``This may be OPEC's toughest balancing act in their history,'' said Tetsu Emori, the fund manager at Astmax Co. in Tokyo, Japan's biggest commodities asset manager with $200 million under management. ``By the time OPEC announces a cut, they would be hoping to have seen the bottom of the price.''
The last time OPEC slashed quotas was at a December 2006 meeting in Abuja, Nigeria. That 500,000 barrel-a-day cut took effect in February 2007 and followed an earlier, 1.2 million- barrel reduction in October 2006. Those actions were reversed later in 2007 as prices rallied.
``The situation has gotten dire enough that they're willing to move and even become a topic of conversation'' during the U.S. election campaign, Ronald Smith, chief strategist at Alfa Bank in Moscow, said in a Bloomberg television interview. OPEC will cut by 1 million barrels a day ``at the very minimum'' and potentially ``wait until after the election, then add another million on top of it, or half a million,'' he said.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net; Margot Habiby in Dallas at mhabiby@bloomberg.net.
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Oct. 20 (Bloomberg) -- OPEC, the supplier of more than 40 percent of the world's oil, plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s sends crude toward $50 a barrel.
Options contracts to sell oil at $50 by December soared 28- fold in the past two weeks on the New York Mercantile Exchange. Goldman Sachs Group Inc. and Merrill Lynch & Co. analysts say crude, which fell more than 50 percent from a record high in July to a 14-month low last week, may drop another 44 percent should the world economy slip into a recession.
The Organization of Petroleum Exporting Countries, which meets Oct. 24 in Vienna, three weeks earlier than planned, is facing the weakest growth in demand since 1993 just as new fields come on line from Angola to the Gulf of Mexico. Members may cut daily output by as much as 2 million barrels, President Chakib Khelil said yesterday.
``OPEC is going to try to prevent some of the price decline,'' Francisco Blanch, head of global commodities research at Merrill in London, said in a Bloomberg television interview. ``It's going to be very difficult to stem a price fall.''
Options contracts that allow holders to sell 1,000 barrels of oil for $50 each by December closed at $280 on the Nymex on Oct. 17, up from $10 on Oct. 3. Oil rose a second day today, gaining 0.8 percent to $72.45 a barrel at 7:50 a.m. in Singapore.
Budget Pressures
Even at today's prices, Venezuela and Iran, two of the organization's 13 members, may struggle to balance budgets because they rely on energy sales for more than half of their revenue, according to estimates compiled by the U.S. Central Intelligence Agency.
``Some countries like Venezuela and Iran need prices above $80 a barrel,'' said Leo Drollas, deputy director of the Centre for Global Energy Studies, a London-based consulting company. ``The Saudis have a bottom price of about $65 a barrel, but they might go ahead with a cut to keep solidarity within OPEC.''
Gross domestic product in the six-member Gulf Cooperation Council of Saudi Arabia, United Arab Emirates, Kuwait, Oman, Qatar and Bahrain would shrink 25 percent if oil averaged $50 next year, ING Bank NV estimates.
Ministers from Algeria, Libya, Iran and Venezuela already called for a reduction in supplies from the current quota of 28.8 million barrels a day. Khelil, also Algeria's oil minister, said that while there is consensus for a cut, there is no agreement on its size. It may be necessary to make the cuts in two stages to ensure price stability, he told Algerian state television yesterday.
Qatar, Saudi Arabia
Qatari Oil Minister Abdullah bin Hamad al-Attiyah told Al Jazeera TV the cut will likely be 1 million barrels a day, or 14 percent more than his nation pumps. Saudi Arabia, which dominates OPEC proceedings as the group's largest producer, has yet to comment on its intentions.
Attempts to support prices when the Standard & Poor's 500- Index is down 36 percent this year may sour relations between OPEC and its customers. Both U.S. presidential candidates, John McCain and Barack Obama, have called for greater energy independence to limit reliance on foreign oil.
U.K. Prime Minister Gordon Brown described potential supply cuts as ``absolutely scandalous'' on Oct. 17, Agence France- Presse reported.
The world's industrialized economies will expand next year at the slowest pace since 1982, the International Monetary Fund said Oct. 8. Growth will weaken to 0.5 percent in 2009, from 1.5 percent this year, sending U.S. unemployment to its highest level in 16 years, the agency said.
Reducing Estimates
While OPEC already agreed to curb production by observing output quotas after a Sept. 10 meeting to lower supplies by 500,000 barrels a day, members routinely pump more than their allocation, according to data compiled by Bloomberg. Since that session, Credit Suisse Group pared its forecast for oil next year by 32 percent to $75 a barrel. Deutsche Bank AG cut its 2009 assessment by 23 percent to $92.50 on Sept. 29. BNP Paribas SA lowered its outlook by 18 percent to $92.50 on Oct. 10.
At the same time, Exxon Mobil Corp.'s Saxi-Batuque fields off Angola's shore started pumping in August, while BP Plc's Thunder Horse field in the Gulf of Mexico is scheduled to increase supplies by the end of the year. World oil capacity will rise 1.45 million barrels a day in 2009, twice the rate of growth in demand, according to the International Energy Agency.
``Prices could fall as low as $50 a barrel during the fourth quarter if OPEC can't find a way to offset the financial meltdown,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Oil Stocks Plunge
The prospect of OPEC cuts, slowing economic growth and falling prices drove the Dow Jones Europe Stoxx Oil & Gas Index down 25 percent in the past five weeks. Irving, Texas-based Exxon Mobil, the world's biggest oil company, fell 37 percent this year, while The Hague-based Royal Dutch Shell Plc, the second-biggest, lost 33 percent.
OPEC lowered its forecast for demand in 2009 last week, saying consumption will be 450,000 barrels a day less than expected at 87.21 million a day. The Paris-based International Energy Agency shaved its 2009 outlook the previous week and said this year's demand growth of 0.5 percent will be the weakest since 1993.
U.S. motorists are driving less after gasoline pump prices topped $4 a gallon in July. Vehicle-miles traveled on all U.S. roads that month were 3.7 percent lower than a year earlier, Federal Highway Administration data show. Prices fell to an average of $3.21 a gallon last week, according to the Department of Energy.
Output Cut
As demand declined, OPEC trimmed supplies 3.8 percent to 31.8 million barrels a day in September, according to Geneva- based tanker-tracking service PetroLogistics Ltd. Saudi Arabia's volume fell 520,000 barrels a day to 9.18 million, PetroLogistics said.
``This may be OPEC's toughest balancing act in their history,'' said Tetsu Emori, the fund manager at Astmax Co. in Tokyo, Japan's biggest commodities asset manager with $200 million under management. ``By the time OPEC announces a cut, they would be hoping to have seen the bottom of the price.''
The last time OPEC slashed quotas was at a December 2006 meeting in Abuja, Nigeria. That 500,000 barrel-a-day cut took effect in February 2007 and followed an earlier, 1.2 million- barrel reduction in October 2006. Those actions were reversed later in 2007 as prices rallied.
``The situation has gotten dire enough that they're willing to move and even become a topic of conversation'' during the U.S. election campaign, Ronald Smith, chief strategist at Alfa Bank in Moscow, said in a Bloomberg television interview. OPEC will cut by 1 million barrels a day ``at the very minimum'' and potentially ``wait until after the election, then add another million on top of it, or half a million,'' he said.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net; Margot Habiby in Dallas at mhabiby@bloomberg.net.
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Australia Dollar to Slump to 59 U.S. Cents, CBA's Grace Says
By Candice Zachariahs
Enlarge Image/Details
Oct. 20 (Bloomberg) -- The Australian dollar will slump 15 percent in the next five months, according to Commonwealth Bank of Australia, the most bearish of 27 forecasts tracked by Bloomberg, as the U.S. and Europe fall into recession.
``It's unavoidable that the U.S. and Europe go into recession and probably Japan, too, and Asia will slow,'' said Sydney-based Richard Grace, chief currency strategist at Commonwealth Bank of Australia. He expects the currency will reach 59 U.S. cents in the first quarter of 2009. ``The world basically fell off a cliff and that's what changed our forecast,'' he said today by phone.
Banks including Commonwealth Bank and Westpac Banking Corp. had forecast in May that the Aussie, as the currency is also called, would reach parity versus the U.S. dollar on the back of a global commodity boom this year. The currency rose 0.3 percent to 69.11 cents at 8:45 a.m. in Sydney, from 68.88 cents late on Oct. 17 in New York.
The Australian dollar has tumbled 30 percent since reaching a 25-year high of 98.49 U.S. cents on July 16 as equity markets dropped after a global credit squeeze raised concerns the world will tip into a recession. Australia's 17-year economic expansion has been fueled by demand for commodities from emerging markets including China and India.
``We're going to continue to see downward revisions to global growth,'' Grace said.
The Australian dollar will fall to 59 cents in the first quarter of 2009, its lowest since March 2003, wrote Grace in a research note dated Oct. 17.
The currency will recover to 64 U.S. cents by the second quarter of 2009 and then to 75 cents by the end of next year.
Westpac now expects the currency will end 2008 at 65 U.S. cents, slide to 62 cents in the first three months of 2009 and then recover to 74 cents by the end of next year, according to Bloomberg data.
Interest Rates
The Reserve Bank of Australia reduced borrowing costs by 1 percentage point, the most since a recession in 1992, to 6 percent on Oct. 7, to spur slowing demand. Traders are betting the central bank will cut rates by a further 1.42 percentage points over the next 12 months, according to a Credit Suisse Group index based on overnight interest swaps.
``The narrowing in interest-rate spreads will also work to apply downward pressure on the Australian dollar,'' Grace said.
Australia's currency has been a favorite among so-called carry trade investors, who borrow in countries with lower interest rates and invest in nations offering higher returns. Japan has a benchmark rate of 0.5 percent and the key U.S. measure is 1.5 percent.
The risk in carry trades is that exchange-rate changes can erase profits.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Enlarge Image/Details
Oct. 20 (Bloomberg) -- The Australian dollar will slump 15 percent in the next five months, according to Commonwealth Bank of Australia, the most bearish of 27 forecasts tracked by Bloomberg, as the U.S. and Europe fall into recession.
``It's unavoidable that the U.S. and Europe go into recession and probably Japan, too, and Asia will slow,'' said Sydney-based Richard Grace, chief currency strategist at Commonwealth Bank of Australia. He expects the currency will reach 59 U.S. cents in the first quarter of 2009. ``The world basically fell off a cliff and that's what changed our forecast,'' he said today by phone.
Banks including Commonwealth Bank and Westpac Banking Corp. had forecast in May that the Aussie, as the currency is also called, would reach parity versus the U.S. dollar on the back of a global commodity boom this year. The currency rose 0.3 percent to 69.11 cents at 8:45 a.m. in Sydney, from 68.88 cents late on Oct. 17 in New York.
The Australian dollar has tumbled 30 percent since reaching a 25-year high of 98.49 U.S. cents on July 16 as equity markets dropped after a global credit squeeze raised concerns the world will tip into a recession. Australia's 17-year economic expansion has been fueled by demand for commodities from emerging markets including China and India.
``We're going to continue to see downward revisions to global growth,'' Grace said.
The Australian dollar will fall to 59 cents in the first quarter of 2009, its lowest since March 2003, wrote Grace in a research note dated Oct. 17.
The currency will recover to 64 U.S. cents by the second quarter of 2009 and then to 75 cents by the end of next year.
Westpac now expects the currency will end 2008 at 65 U.S. cents, slide to 62 cents in the first three months of 2009 and then recover to 74 cents by the end of next year, according to Bloomberg data.
Interest Rates
The Reserve Bank of Australia reduced borrowing costs by 1 percentage point, the most since a recession in 1992, to 6 percent on Oct. 7, to spur slowing demand. Traders are betting the central bank will cut rates by a further 1.42 percentage points over the next 12 months, according to a Credit Suisse Group index based on overnight interest swaps.
``The narrowing in interest-rate spreads will also work to apply downward pressure on the Australian dollar,'' Grace said.
Australia's currency has been a favorite among so-called carry trade investors, who borrow in countries with lower interest rates and invest in nations offering higher returns. Japan has a benchmark rate of 0.5 percent and the key U.S. measure is 1.5 percent.
The risk in carry trades is that exchange-rate changes can erase profits.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Korean Won Gains Most in Week on Government Bank Debt Guarantee
By Kim Kyoungwha
Oct. 20 (Bloomberg) -- South Korea's won rose the most in a week after the government sought to rescue its financial system by guaranteeing $100 billion of banks' foreign-currency debt.
The currency gained for a second day, paring this year's loss to 27 percent, after the Bank of Korea said it will provide $30 billion in U.S. dollars to lenders. The measures followed an Oct. 15 report by Standard & Poor's there's a more than 50 percent chance Korean banks won't be able to find foreign funding, threatening their ability to repay short-term debt.
``This is a very substantial package and addresses many of the key concerns regarding bank debt and dollar liquidity,'' said Dwyfor Evans, a currency strategist with State Street Global Markets in Hong Kong. ``We are not so convinced that this has long-term relevance, after all, bailout packages elsewhere have not led to sustained recovery in currencies.''
The won rose 2.9 percent to 1,296.5 per dollar at 9:15 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency lost 9.5 percent this month. South Korean foreign- currency debt due in a year almost tripled to $176 billion between June and the end of 2005, helping make the currency Asia's worst performer.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Oct. 20 (Bloomberg) -- South Korea's won rose the most in a week after the government sought to rescue its financial system by guaranteeing $100 billion of banks' foreign-currency debt.
The currency gained for a second day, paring this year's loss to 27 percent, after the Bank of Korea said it will provide $30 billion in U.S. dollars to lenders. The measures followed an Oct. 15 report by Standard & Poor's there's a more than 50 percent chance Korean banks won't be able to find foreign funding, threatening their ability to repay short-term debt.
``This is a very substantial package and addresses many of the key concerns regarding bank debt and dollar liquidity,'' said Dwyfor Evans, a currency strategist with State Street Global Markets in Hong Kong. ``We are not so convinced that this has long-term relevance, after all, bailout packages elsewhere have not led to sustained recovery in currencies.''
The won rose 2.9 percent to 1,296.5 per dollar at 9:15 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency lost 9.5 percent this month. South Korean foreign- currency debt due in a year almost tripled to $176 billion between June and the end of 2005, helping make the currency Asia's worst performer.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Australian, New Zealand Dollars Gain on South Korea Banking Aid
By Candice Zachariahs
Oct. 20 (Bloomberg) -- The Australian and New Zealand dollars rose after South Korea said it will guarantee bank debts and bail out lenders to stabilize financial markets, prompting investors to buy higher-yielding assets.
South Korea said yesterday it will guarantee $100 billion in bank debts and provide $30 billion to financial institutions after Standard & Poor's said last week it may cut the credit ratings of the nation's largest lenders. The currencies also advanced as European Central Bank President Jean-Claude Trichet said the banking system is ``on the path to normalization.''
``The Koreans coming up with a rescue package of their own is helping to lower risk aversion,'' said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. The Australian and New Zealand dollars will see ``a tentative rise as risk aversion eases.''
The Australian dollar gained 1 percent to 69.57 U.S. cents as of 8:04 p.m. in Sydney, from 68.88 cents late in New York on Oct. 17. New Zealand's dollar rose 0.5 percent to 61.50 cents from 61.21 cents in New York.
Australia's currency advanced 1 percent to 70.71 yen, from 70 yen in late New York trading Oct. 17. New Zealand's dollar traded at 62.17 yen, from 62.24 last week.
Bank Guarantees
New Zealand Finance Minister Michael Cullen said today officials are working on a possible plan to guarantee wholesale deposits at the nation's banks.
The currencies gained after South Korea yesterday joined Hong Kong, Australia and countries in Europe in providing state backing to banks amid a global financial crisis.
Europe's banking system is ``on the path'' to recovery, ECB President Trichet said yesterday on French Radio RTL.
``I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said.
His comments came after the Netherlands agreed to invest 10 billion euros ($13.4 billion) in ING Groep NV, the biggest Dutch financial services firm. ING shares dropped a record 27 percent on Oct. 17 after the company said it will post a loss of 500 million euros in the third quarter, its first quarterly loss.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Dollar Falls Toward One-Week Low Versus Yen on Recession Risk
By Stanley White
Oct. 20 (Bloomberg) -- The dollar fell toward the lowest in a week against the yen on speculation a U.S. housing slump and a seizure in credit markets will tip the world's largest economy into recession.
The dollar also slid for the first time in four days versus the euro on concern Federal Reserve Chairman Ben S. Bernanke will forecast a prolonged downturn when he speaks today. The U.S. economic outlook for the next two quarters worsened in September as rising unemployment encouraged consumers to spend less, data may also show today. The South Korean won rose the most in a week after the government guaranteed $100 billion of lenders' foreign-currency debts to rescue the nation's financial system.
``Pessimistic comments on the economy could knock the dollar lower,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``There's a good chance the U.S. is in a recession.''
The dollar declined to 101.55 yen at 9:34 a.m. in Tokyo from 101.69 yen late in New York on Oct. 17. It fell to 99.27 yen on Oct. 16, the lowest since Oct. 10. Against the euro, the dollar weakened to $1.3444 from $1.3410. The euro bought 136.44 yen from 136.21 yen. The dollar may fall to 101 yen today, Ishikawa said.
The South Korean won rose 2.1 percent from the end of last week to 1,307 per dollar. The Bank of Korea said yesterday it will provide $30 billion in U.S. dollars to banks to increase their access to funding. The won tumbled last week by the most since an International Monetary Fund bailout in 1997.
Bernanke Testimony
Bernanke will testify at the House Budget Committee on the economic outlook and financial markets at 10 a.m. in Washington today. A rebound in U.S. growth won't happen right away as the government tries to unfreeze credit markets roiled by losses on mortgage derivatives, he said on Oct. 15.
Economists surveyed by Bloomberg in the first week of October said the economy contracted at a 0.2 percent annual pace in the three months through September and will shrink at a 0.8 percent rate in the final quarter of the year. Declines in consumer spending will tip the economy into a recession, the survey showed.
The U.S. index of leading indicators fell 0.1 percent last month, according to the median estimate in a separate Bloomberg survey before the Conference Board report at 10 a.m. New York time. The index, a gauge of the economy's direction in the next three to six months, has posted only two monthly gains this year.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net.
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Oct. 20 (Bloomberg) -- The dollar fell toward the lowest in a week against the yen on speculation a U.S. housing slump and a seizure in credit markets will tip the world's largest economy into recession.
The dollar also slid for the first time in four days versus the euro on concern Federal Reserve Chairman Ben S. Bernanke will forecast a prolonged downturn when he speaks today. The U.S. economic outlook for the next two quarters worsened in September as rising unemployment encouraged consumers to spend less, data may also show today. The South Korean won rose the most in a week after the government guaranteed $100 billion of lenders' foreign-currency debts to rescue the nation's financial system.
``Pessimistic comments on the economy could knock the dollar lower,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``There's a good chance the U.S. is in a recession.''
The dollar declined to 101.55 yen at 9:34 a.m. in Tokyo from 101.69 yen late in New York on Oct. 17. It fell to 99.27 yen on Oct. 16, the lowest since Oct. 10. Against the euro, the dollar weakened to $1.3444 from $1.3410. The euro bought 136.44 yen from 136.21 yen. The dollar may fall to 101 yen today, Ishikawa said.
The South Korean won rose 2.1 percent from the end of last week to 1,307 per dollar. The Bank of Korea said yesterday it will provide $30 billion in U.S. dollars to banks to increase their access to funding. The won tumbled last week by the most since an International Monetary Fund bailout in 1997.
Bernanke Testimony
Bernanke will testify at the House Budget Committee on the economic outlook and financial markets at 10 a.m. in Washington today. A rebound in U.S. growth won't happen right away as the government tries to unfreeze credit markets roiled by losses on mortgage derivatives, he said on Oct. 15.
Economists surveyed by Bloomberg in the first week of October said the economy contracted at a 0.2 percent annual pace in the three months through September and will shrink at a 0.8 percent rate in the final quarter of the year. Declines in consumer spending will tip the economy into a recession, the survey showed.
The U.S. index of leading indicators fell 0.1 percent last month, according to the median estimate in a separate Bloomberg survey before the Conference Board report at 10 a.m. New York time. The index, a gauge of the economy's direction in the next three to six months, has posted only two monthly gains this year.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net.
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Australian Wheat Crop Forecast Lowered by Citigroup on Weather
By Madelene Pearson
Oct. 20 (Bloomberg) -- Australia, the world's sixth-largest wheat exporter, may gather less of the grain this harvest than previously forecast because of dry weather, Citigroup Inc. said.
Output may be 21 million metric tons in the harvest under way, down from its previous estimate of 23.2 million tons, Citigroup's Jonathan Snape said in a report dated Oct. 17.
``Recent drying across the southern acreage has seen deterioration in crop expectations for the region with South Australia and Victoria the hardest hit,'' he said in the note.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Oct. 20 (Bloomberg) -- Australia, the world's sixth-largest wheat exporter, may gather less of the grain this harvest than previously forecast because of dry weather, Citigroup Inc. said.
Output may be 21 million metric tons in the harvest under way, down from its previous estimate of 23.2 million tons, Citigroup's Jonathan Snape said in a report dated Oct. 17.
``Recent drying across the southern acreage has seen deterioration in crop expectations for the region with South Australia and Victoria the hardest hit,'' he said in the note.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Newcastle Coal Price Declines for Ninth Week After Oil Slumps
By Jesse Riseborough
Oct. 20 (Bloomberg) -- Power station coal prices at Australia's Newcastle port, a benchmark for Asia, fell for a ninth week, dropping to a 9-month low, amid declining freight rates and as falling oil prices reduced demand for the fuel.
The weekly index for power-station coal prices at the New South Wales port fell $7.20, or 6.4 percent, to $104.70 a metric ton in the week ended Oct. 17, according to the globalCOAL NEWC Index. Crude oil dropped 7.5 percent last week and has slumped 24 percent in the past three weeks.
The Baltic Dry Index, a measure of shipping costs for commodities, fell for a 10th consecutive trading session in London on Oct. 17, indicating a slump in demand. OPEC, the supplier of more than 40 percent of the world's oil, plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s sends prices lower.
``It is taking its lead from the oil market and Baltic freight rates, both of those are flagging lower prices,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. An OPEC decision to cut oil production may ``trigger a mild relief rally in oil which could flow on to the coal market.''
Newcastle coal traded below the $125 a ton contract price for a third week and is 46 percent off a record $194.79 set for the week ended July 4. The monthly index fell 10 percent to $144.82 a ton in September from $160.90 the previous month.
``The risk is still on the downside and sentiment is very much focusing around demand at the moment, not supply,'' ANZ's Pervan said.
To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net
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Oct. 20 (Bloomberg) -- Power station coal prices at Australia's Newcastle port, a benchmark for Asia, fell for a ninth week, dropping to a 9-month low, amid declining freight rates and as falling oil prices reduced demand for the fuel.
The weekly index for power-station coal prices at the New South Wales port fell $7.20, or 6.4 percent, to $104.70 a metric ton in the week ended Oct. 17, according to the globalCOAL NEWC Index. Crude oil dropped 7.5 percent last week and has slumped 24 percent in the past three weeks.
The Baltic Dry Index, a measure of shipping costs for commodities, fell for a 10th consecutive trading session in London on Oct. 17, indicating a slump in demand. OPEC, the supplier of more than 40 percent of the world's oil, plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s sends prices lower.
``It is taking its lead from the oil market and Baltic freight rates, both of those are flagging lower prices,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. An OPEC decision to cut oil production may ``trigger a mild relief rally in oil which could flow on to the coal market.''
Newcastle coal traded below the $125 a ton contract price for a third week and is 46 percent off a record $194.79 set for the week ended July 4. The monthly index fell 10 percent to $144.82 a ton in September from $160.90 the previous month.
``The risk is still on the downside and sentiment is very much focusing around demand at the moment, not supply,'' ANZ's Pervan said.
To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net
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Asia Commodities Day Ahead: Mosaic Looking for Acquisitions
Oct. 20 (Bloomberg) -- Mosaic Co., flush with $3 billion cash from selling crop nutrients at record prices, is prowling for acquisitions. Pilgrim's Pride Corp. plunged 24 percent in New York trading amid speculation the company may file for bankruptcy. Corn, soybeans and wheat rose. PPG Industries Inc. raised its quarterly dividend. Gold and silver fell; copper climbed.
AGRICULTURAL COMMODITIES
Mosaic Executives Seek Fertilizer Acquisition Targets
Mosaic Co., flush with $3 billion cash from selling crop nutrients at record prices, is prowling for companies made vulnerable by the global credit crisis and plunging stock prices.
Pilgrim's Pride Plunges 24% Amid Bankruptcy Speculation
Pilgrim's Pride Corp., the largest U.S. chicken producer, plunged 24 percent in New York trading amid speculation the company may file for bankruptcy if it fails to refinance its debt. Pilgrim's Pride fell 76 cents to $2.47 in New York trading.
Corn, Soybeans Rise as Export Demand Climbs After Price Slump
Corn rose the most in five weeks and soybeans gained for a second straight day on signs that a price slump this month will revive demand for shipments from the U.S., the world's largest exporter of the crops. Corn climbed 18.5 cents, or 4.8 percent, to $4.03 a bushel in Chicago. Soybeans gained 26.5 cents, or 3 percent, to $9.0675 a bushel.
Wheat Rises on Bets U.S. Exports to Climb Following Price Slide
Wheat rose for the first time in four sessions on speculation that demand will increase for supplies from the U.S., the biggest seller of the grain, after prices touched a 16-month low yesterday. Wheat climbed 11 cents, or 2 percent, to $5.6625 a bushel in Chicago.
Hogs, Cattle Gain as Low Meat Prices May Spur Retailer Buying
Hog futures rose from a nine-month low and cattle gained on speculation that the lowest U.S. meat prices in six months will spur buying from retailers. Hogs rose 0.325 cent, or 0.6 percent, to 56.3 cents a pound in Chicago. Cattle rose 1.725 cents, or 1.9 percent, to 92.55 cents a pound. Feeder cattle gained 1.425 cents, or 1.5 percent, to 98.05 cents a pound.
PRECIOUS METALS, GEMS
Gold Drops Most in Week Since August on Ebbing Inflation Fears
Gold fell in New York, ending its worst week in two months, as a report showed single-family home construction sank to the slowest pace in 26 years, easing inflation concerns as the economy cools. Gold dropped $16.80, or 2.1 percent, to $787.70 an ounce. Silver declined 30 cents, or 3.1 percent, to $9.335 an ounce.
Platinum Drops to Lowest Close in Three Years on Demand Concern
Platinum, used in jewelry and car parts, plunged in New York to the lowest closing price since July 2005 on concern that an economic slump may curb demand for goods ranging from vehicles to wristwatches. Platinum fell $10.30, or 1.2 percent, to $881 an ounce in New York. Palladium rose $1.40, or 0.8 percent, to $174.50 an ounce.
INDUSTRIAL METALS, MINING
Copper Rebounds on Bets Demand to Increase After Price Slump
Copper rose, rebounding from the lowest price since January 2006, on speculation that a plunge in the past five months may encourage buyers to step up purchases as mine disruptions threaten supply. Copper climbed 9.4 cents, or 4.5 percent, to $2.1795 a pound.
CHEMICALS
PPG Increases Dividend Payout to 53 Cents a Share
PPG Industries Inc., the world's second-biggest paintmaker, raised its quarterly dividend a day after announcing that slowing demand for coatings hasn't hurt its ability to generate cash.
SOFT COMMODITIES
Sugar Rises in N.Y. as Weaker Dollar Boosts Oil, Ethanol Demand
Sugar rose for the first time in three sessions in New York on speculation that demand for cane-based fuel will increase as a weaker dollar fueled a gain in crude oil. Raw sugar gained 0.42 cent, or 3.8 percent, to 11.58 cents a pound. Orange juice jumped 3.4 cents, or 4.2 percent, to 83.55 cents a pound.
Coffee Price Gains as Equity Indexes Rise; Cocoa Futures Fall
Coffee prices climbed the most in almost four weeks in New York as U.S. equities headed for the first weekly gains in a month. Arabica coffee rose 2.65 cents, or 2.3 percent, to $1.156 a pound. Cocoa fell $2 to $2,122 a metric ton in New York. In London, robusta coffee rose $33, or 1.9 percent, to $1,794 a metric ton.
Cotton Futures Jump by Exchange Limit as U.S. Exports Increase
Cotton prices jumped the most allowed by ICE Futures U.S. on speculation that demand for U.S. exports will continue to climb. Cotton rose by the limit of 3 cents, or 6.1 percent, to 52.57 cents in New York.
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AGRICULTURAL COMMODITIES
Mosaic Executives Seek Fertilizer Acquisition Targets
Mosaic Co., flush with $3 billion cash from selling crop nutrients at record prices, is prowling for companies made vulnerable by the global credit crisis and plunging stock prices.
Pilgrim's Pride Plunges 24% Amid Bankruptcy Speculation
Pilgrim's Pride Corp., the largest U.S. chicken producer, plunged 24 percent in New York trading amid speculation the company may file for bankruptcy if it fails to refinance its debt. Pilgrim's Pride fell 76 cents to $2.47 in New York trading.
Corn, Soybeans Rise as Export Demand Climbs After Price Slump
Corn rose the most in five weeks and soybeans gained for a second straight day on signs that a price slump this month will revive demand for shipments from the U.S., the world's largest exporter of the crops. Corn climbed 18.5 cents, or 4.8 percent, to $4.03 a bushel in Chicago. Soybeans gained 26.5 cents, or 3 percent, to $9.0675 a bushel.
Wheat Rises on Bets U.S. Exports to Climb Following Price Slide
Wheat rose for the first time in four sessions on speculation that demand will increase for supplies from the U.S., the biggest seller of the grain, after prices touched a 16-month low yesterday. Wheat climbed 11 cents, or 2 percent, to $5.6625 a bushel in Chicago.
Hogs, Cattle Gain as Low Meat Prices May Spur Retailer Buying
Hog futures rose from a nine-month low and cattle gained on speculation that the lowest U.S. meat prices in six months will spur buying from retailers. Hogs rose 0.325 cent, or 0.6 percent, to 56.3 cents a pound in Chicago. Cattle rose 1.725 cents, or 1.9 percent, to 92.55 cents a pound. Feeder cattle gained 1.425 cents, or 1.5 percent, to 98.05 cents a pound.
PRECIOUS METALS, GEMS
Gold Drops Most in Week Since August on Ebbing Inflation Fears
Gold fell in New York, ending its worst week in two months, as a report showed single-family home construction sank to the slowest pace in 26 years, easing inflation concerns as the economy cools. Gold dropped $16.80, or 2.1 percent, to $787.70 an ounce. Silver declined 30 cents, or 3.1 percent, to $9.335 an ounce.
Platinum Drops to Lowest Close in Three Years on Demand Concern
Platinum, used in jewelry and car parts, plunged in New York to the lowest closing price since July 2005 on concern that an economic slump may curb demand for goods ranging from vehicles to wristwatches. Platinum fell $10.30, or 1.2 percent, to $881 an ounce in New York. Palladium rose $1.40, or 0.8 percent, to $174.50 an ounce.
INDUSTRIAL METALS, MINING
Copper Rebounds on Bets Demand to Increase After Price Slump
Copper rose, rebounding from the lowest price since January 2006, on speculation that a plunge in the past five months may encourage buyers to step up purchases as mine disruptions threaten supply. Copper climbed 9.4 cents, or 4.5 percent, to $2.1795 a pound.
CHEMICALS
PPG Increases Dividend Payout to 53 Cents a Share
PPG Industries Inc., the world's second-biggest paintmaker, raised its quarterly dividend a day after announcing that slowing demand for coatings hasn't hurt its ability to generate cash.
SOFT COMMODITIES
Sugar Rises in N.Y. as Weaker Dollar Boosts Oil, Ethanol Demand
Sugar rose for the first time in three sessions in New York on speculation that demand for cane-based fuel will increase as a weaker dollar fueled a gain in crude oil. Raw sugar gained 0.42 cent, or 3.8 percent, to 11.58 cents a pound. Orange juice jumped 3.4 cents, or 4.2 percent, to 83.55 cents a pound.
Coffee Price Gains as Equity Indexes Rise; Cocoa Futures Fall
Coffee prices climbed the most in almost four weeks in New York as U.S. equities headed for the first weekly gains in a month. Arabica coffee rose 2.65 cents, or 2.3 percent, to $1.156 a pound. Cocoa fell $2 to $2,122 a metric ton in New York. In London, robusta coffee rose $33, or 1.9 percent, to $1,794 a metric ton.
Cotton Futures Jump by Exchange Limit as U.S. Exports Increase
Cotton prices jumped the most allowed by ICE Futures U.S. on speculation that demand for U.S. exports will continue to climb. Cotton rose by the limit of 3 cents, or 6.1 percent, to 52.57 cents in New York.
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Natural Rubber Stockpiles in Tokyo Decline 19% to Record Low
By Aya Takada
Oct. 20 (Bloomberg) -- Natural rubber inventories monitored by the Tokyo Commodity Exchange declined 19 percent to a record low on Oct. 10, according to data from the exchange.
Inventories of the commodity, used to make car tires, dropped to 1,408 metric tons from 1,741 tons on Sept. 30 and have slumped 84 percent from this year's peak of 8,907 tons on Feb. 20, the exchange said today in a faxed statement.
Rubber for March delivery gained 2.4 percent to 173.2 yen a kilogram ($1,706 a metric ton) on the Tokyo exchange at 9:17 a.m. local time.
To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net
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Oct. 20 (Bloomberg) -- Natural rubber inventories monitored by the Tokyo Commodity Exchange declined 19 percent to a record low on Oct. 10, according to data from the exchange.
Inventories of the commodity, used to make car tires, dropped to 1,408 metric tons from 1,741 tons on Sept. 30 and have slumped 84 percent from this year's peak of 8,907 tons on Feb. 20, the exchange said today in a faxed statement.
Rubber for March delivery gained 2.4 percent to 173.2 yen a kilogram ($1,706 a metric ton) on the Tokyo exchange at 9:17 a.m. local time.
To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net
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Oil Rises a Second Day on Signs OPEC Is Poised to Reduce Output
By Gavin Evans
Oct. 20 (Bloomberg) -- Crude oil rose a second day in New York on signs OPEC is poised to cut production to stem an increase in stockpiles and a 51 percent decline in prices from July's record.
Members of the Organization of Petroleum Exporting Countries favor a cut and may pare output in stages to maintain stable prices as global growth slows, group president Chakib Khelil said in a television interview. The Conference Board's index of leading U.S. indicators, due today, probably fell for a third time in September, according to a survey of economists.
``OPEC is just trying to preempt any sort of on-going weakness in oil demand,'' Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney, said in an interview with Bloomberg Television. ``We're not going to see too much more downside in oil prices from here.''
Crude oil for November delivery rose as much as $1.34, or 1.9 percent, to $73.19 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $72.60 at 7:20 a.m. in Singapore.
The contract rose $2, or 2.9 percent, to $71.85 on Oct. 17, its first gain in four days. Oil dropped 7.5 percent last week as fuel stockpiles rose amid slowing demand. Prices reached a 14-month low of $68.57 on Oct. 16.
Brent crude oil for December settlement rose 40 cents, or 0.6 percent, to $70 a barrel on London's ICE Futures Europe exchange. The contract jumped 2.6 percent to $69.60 on Oct. 17.
`Significant Cut'
OPEC, which supplies more than 40 percent of the world's oil, brought forward to Oct. 24 a November meeting to discuss output levels. While there is as yet no consensus on the size of the reduction, the group may cut by as much as 2 million barrels a day, Khelil said in an interview on Algerian television.
``That would be a significant cut,'' Fat Prophets' Wendt said. OPEC's 13 members produced 32.2 million barrels a day in September, according to a survey of analysts and producers.
Oil has more than halved from the record $147.27 a barrel reached in July as the global financial crisis threatened to push the world into recession.
Stockpiles in the U.S., the world's largest consumer, increased by 6 percent in the three weeks ended Oct. 10 as fuel use slowed. Daily gasoline demand, based on deliveries from refineries and terminals, fell to a three-year low of 8.69 million barrels in the week ended Oct. 3,
Markets have been driven more by fear and panic than ``rational, considered'' analysis in recent months and global demand for oil products is still increasing faster than new production is being developed, Fat Prophets' Wendt said.
Prices need to stabilize at about $80 a barrel to justify continued investment in exploration and development, he said.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
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ANZ Bank, HSBC, Posco, Samsung: Asia Ex-Japan Equity Preview
By Anuchit Nguyen
Oct. 20 (Bloomberg) -- The following companies may have unusual price changes in Asia trading, excluding Japan, today. Stock symbols are in parentheses, and share prices are from the previous close.
Australia & New Zealand Banking Group Ltd. (ANZ AU): The nation's fourth-largest bank by market value cut the price of its variable interest rate mortgages after global money rates eased. ANZ reduced its variable interest rates by 25 basis points, or 0.25 percentage point, the Melbourne-based bank said in an e- mailed statement. The bank fell 48 cents, or 2.8 percent, to A$16.85.
Bank of the Philippine Islands (BPI PM): The nation's largest bank by value said the local unit of American International Group Inc. is an ``acquisition prospect.'' The bank, which is raising up to 15 billion pesos in additional capital, gained 1 peso, or 2.5 percent, to 41.50 pesos.
China Construction Bank Corp.(939 HK): The nation's second- biggest lender said profit for the first nine months rose 48 percent to 84.6 billion yuan ($12.4 billion), or 0.36 yuan per share, the Beijing-based bank said in a statement to the Hong Kong Stock Exchange. The bank lost 25 cents, or 6.7 percent, to HK$3.50.
Fortescue Metals Group Ltd. (FMG AU): Australia's third- largest iron ore exporter said it hasn't been forced to renegotiate freight contract rates for shipments from its A$2.8 billion ($1.9 billion) project. ``We haven't been forced to renegotiate shipping prices,'' Cameron Morse, a Perth-based Fortescue spokesman, said. ``We are selling every ton of ore we can produce.'' The stock declined 16 cents, or 5.2 percent, to A$2.94.
Hindustan Zinc Ltd. (HZ IN): India's largest producer of the metal cut the price of zinc for the fifth time this month following a global slump in commodities. The Udaipur, Rajasthan- based company lowered the price by 5.3 percent to 76,700 rupees ($1,569) a metric ton from 81,000 rupees, it said on its Web site. It also cut the price of lead by 5.2 percent to 90,200 rupees a ton, from 95,200 rupees. The stock dropped 18.2 rupees, or 6.1 percent, to 281.15.
HSBC Holdings Plc (5 HK): Europe's biggest bank by market value is in talks with Metrovacesa SA as a deadline approaches next month for refinancing the loan the Spanish developer used to buy HSBC's London headquarters. The bank provided a bridge loan of 800 million pounds ($1.4 billion) to Metrovacesa, Spain's largest real-estate company, to buy the 45-story tower in the Canary Wharf business district for 1.09 billion pounds in April last year. The bank lost HK$3.30, or 3 percent, to HK$105.20.
Kasikornbank Pcl (KBANK TB): Thailand's fourth-largest lender posted a profit of 3.84 billion baht ($112 million) in the third quarter, a 12 percent increase from the same period last year. Net interest and dividend income climbed 17 percent to 11 billion baht. The stock dropped 1.5 baht, or 2.7 percent, to 54.5.
KNM Group Bhd. (KNMG MK): FMR LLC, parent of Fidelity Investments, sold 4.5 million shares in the Malaysian oil and gas services provider, trimming its stake to 9.6 percent, a stock exchange filing showed. FMR sold the shares from Oct. 9 to 13, according to the filing. KNM slid 7 sen, or 10 percent, to 61.5 sen.
New Times Group Holdings Ltd. (166 HK): The Hong Kong-based property investor and financial services provider canceled a proposed HK$10.3 billion ($1.3 billion) acquisition of oilfields in Argentina. New Times plans to renegotiate the deal after an independent valuation found the oil concessions to be worth about $1.5 billion, compared with the $15 billion required under the agreement, the company said in a statement to the Hong Kong Stock Exchange. New Times surged 6 cents, or 16 percent, to 43 cents.
Posco (005490 KS): Posco, Asia's third-biggest steelmaker, agreed with Japanese partners to buy 40 percent of Brazilian iron-ore producer Nacional Minerios SA for about 4 trillion won ($3 billion) to secure supplies and curb costs. Posco will hold 6.48 percent of Cia. Siderurgica Nacional SA's unit, known as Namisa, which is worth about $505 million, said Posco spokeswoman Ko Min Jin. The steelmaker rose 500 won, or 0.2 percent, to 302,000.
Philex Mining Corp. (PX PM): The largest local mining company's profit this year may be little changed from the 5 billion pesos ($104 million) net income it posted in 2007, Chairman Walter Brown said. The stock gained 10 centavos, or 1.6 percent, to 6.20 pesos.
Leighton Holdings Ltd. (LEI AU): Australia's largest engineering and construction company agreed to borrow A$520 million ($353 million) from a group of nine banks to refinance maturing debt. Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia and National Australia Bank Ltd. led the group of lenders that will provide a three-year revolving credit line, according to Bloomberg data. Leighton lost A$2.01, or 6.4 percent, to A$29.20.
Megaworld Corp. (MEG PM): The second-largest local builder said it acquired 11.3 million of its own shares, when the stock fell to its lowest close since July 13, 2005. The stock decreased 3 centavos, or 3 percent, to 96 centavos.
Samsung Electronics Co. (005930 KS): The world's biggest maker of liquid-crystal-display televisions expects to increase its share of the European market for liquid-crystal displays after it opened a factory in Slovakia. Even though the global financial crisis may depress demand for displays in the coming year, the market should rebound in two or three years, Vice- President Yeong-Duk Cho said. The stock rose 1,000 won, or 0.2 percent, to 505,000.
Sichuan Hongda Chemical Industry Co. (600331 CH): China's third-largest zinc producer said profit probably fell by more than 90 percent in the first nine months of this year from a year earlier because of a slump in metal prices. The Chengdu, Sichuan province-based company didn't give profit details today in a statement to the Shanghai stock exchange. Sichuan Hongda gained 0.04 yuan, or 0.8 percent, to 4.93.
TMB Bank Pcl (TMB TB): Thailand's sixth-largest lender, controlled by ING Groep NV, posted a net income of 1.67 billion baht ($49 million) in the third quarter from a net loss of 2.5 billion baht in the same period a year earlier. Net interest and dividend income was little changed at 4.09 billion baht. The lender in the period booked a 662 million baht gain from recovery of bad loans with provisions of 4.34 billion baht for uncollectible debt. The bank lost 0.01 baht, or 1.5 percent, to 0.65.
UltraTech Cement Ltd. (UTCEM IN): India's second-biggest producer of the material said second-quarter profit declined 12 percent to 1.64 billion rupees ($33.5 million). Revenue rose 19 percent to 14.2 billion rupees. UltraTech dropped 20.6 rupees, or 5.2 percent, to 374.05.
Vastalux Energy Bhd. (VAST MK): The oil and gas service Provider said it won a 32.5 million ringgit contract from Petronas Dagangan Bhd. for the reactivation works of a liquefied petroleum gas filling plant in the southern Johor state. Vastalux rose 4 sen, or 8.3 percent, to 52 sen.
Westpac Banking Corp. (WBC AU): Australia's second-largest lender by market value, will take a charge against its full-year profit after firing as many as 450 workers, the Sydney Morning Herald reported. The bank has fired 300 workers at its BT Investment Management unit, which added staff to handle new money being invested in pension plans after tax changes, the Herald said, without saying where it got the information. Another 150 back-office workers have also lost their jobs, the newspaper said. The bank declined 52 cents, or 2.4 percent, to A$21.48.
To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net.
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Oct. 20 (Bloomberg) -- The following companies may have unusual price changes in Asia trading, excluding Japan, today. Stock symbols are in parentheses, and share prices are from the previous close.
Australia & New Zealand Banking Group Ltd. (ANZ AU): The nation's fourth-largest bank by market value cut the price of its variable interest rate mortgages after global money rates eased. ANZ reduced its variable interest rates by 25 basis points, or 0.25 percentage point, the Melbourne-based bank said in an e- mailed statement. The bank fell 48 cents, or 2.8 percent, to A$16.85.
Bank of the Philippine Islands (BPI PM): The nation's largest bank by value said the local unit of American International Group Inc. is an ``acquisition prospect.'' The bank, which is raising up to 15 billion pesos in additional capital, gained 1 peso, or 2.5 percent, to 41.50 pesos.
China Construction Bank Corp.(939 HK): The nation's second- biggest lender said profit for the first nine months rose 48 percent to 84.6 billion yuan ($12.4 billion), or 0.36 yuan per share, the Beijing-based bank said in a statement to the Hong Kong Stock Exchange. The bank lost 25 cents, or 6.7 percent, to HK$3.50.
Fortescue Metals Group Ltd. (FMG AU): Australia's third- largest iron ore exporter said it hasn't been forced to renegotiate freight contract rates for shipments from its A$2.8 billion ($1.9 billion) project. ``We haven't been forced to renegotiate shipping prices,'' Cameron Morse, a Perth-based Fortescue spokesman, said. ``We are selling every ton of ore we can produce.'' The stock declined 16 cents, or 5.2 percent, to A$2.94.
Hindustan Zinc Ltd. (HZ IN): India's largest producer of the metal cut the price of zinc for the fifth time this month following a global slump in commodities. The Udaipur, Rajasthan- based company lowered the price by 5.3 percent to 76,700 rupees ($1,569) a metric ton from 81,000 rupees, it said on its Web site. It also cut the price of lead by 5.2 percent to 90,200 rupees a ton, from 95,200 rupees. The stock dropped 18.2 rupees, or 6.1 percent, to 281.15.
HSBC Holdings Plc (5 HK): Europe's biggest bank by market value is in talks with Metrovacesa SA as a deadline approaches next month for refinancing the loan the Spanish developer used to buy HSBC's London headquarters. The bank provided a bridge loan of 800 million pounds ($1.4 billion) to Metrovacesa, Spain's largest real-estate company, to buy the 45-story tower in the Canary Wharf business district for 1.09 billion pounds in April last year. The bank lost HK$3.30, or 3 percent, to HK$105.20.
Kasikornbank Pcl (KBANK TB): Thailand's fourth-largest lender posted a profit of 3.84 billion baht ($112 million) in the third quarter, a 12 percent increase from the same period last year. Net interest and dividend income climbed 17 percent to 11 billion baht. The stock dropped 1.5 baht, or 2.7 percent, to 54.5.
KNM Group Bhd. (KNMG MK): FMR LLC, parent of Fidelity Investments, sold 4.5 million shares in the Malaysian oil and gas services provider, trimming its stake to 9.6 percent, a stock exchange filing showed. FMR sold the shares from Oct. 9 to 13, according to the filing. KNM slid 7 sen, or 10 percent, to 61.5 sen.
New Times Group Holdings Ltd. (166 HK): The Hong Kong-based property investor and financial services provider canceled a proposed HK$10.3 billion ($1.3 billion) acquisition of oilfields in Argentina. New Times plans to renegotiate the deal after an independent valuation found the oil concessions to be worth about $1.5 billion, compared with the $15 billion required under the agreement, the company said in a statement to the Hong Kong Stock Exchange. New Times surged 6 cents, or 16 percent, to 43 cents.
Posco (005490 KS): Posco, Asia's third-biggest steelmaker, agreed with Japanese partners to buy 40 percent of Brazilian iron-ore producer Nacional Minerios SA for about 4 trillion won ($3 billion) to secure supplies and curb costs. Posco will hold 6.48 percent of Cia. Siderurgica Nacional SA's unit, known as Namisa, which is worth about $505 million, said Posco spokeswoman Ko Min Jin. The steelmaker rose 500 won, or 0.2 percent, to 302,000.
Philex Mining Corp. (PX PM): The largest local mining company's profit this year may be little changed from the 5 billion pesos ($104 million) net income it posted in 2007, Chairman Walter Brown said. The stock gained 10 centavos, or 1.6 percent, to 6.20 pesos.
Leighton Holdings Ltd. (LEI AU): Australia's largest engineering and construction company agreed to borrow A$520 million ($353 million) from a group of nine banks to refinance maturing debt. Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia and National Australia Bank Ltd. led the group of lenders that will provide a three-year revolving credit line, according to Bloomberg data. Leighton lost A$2.01, or 6.4 percent, to A$29.20.
Megaworld Corp. (MEG PM): The second-largest local builder said it acquired 11.3 million of its own shares, when the stock fell to its lowest close since July 13, 2005. The stock decreased 3 centavos, or 3 percent, to 96 centavos.
Samsung Electronics Co. (005930 KS): The world's biggest maker of liquid-crystal-display televisions expects to increase its share of the European market for liquid-crystal displays after it opened a factory in Slovakia. Even though the global financial crisis may depress demand for displays in the coming year, the market should rebound in two or three years, Vice- President Yeong-Duk Cho said. The stock rose 1,000 won, or 0.2 percent, to 505,000.
Sichuan Hongda Chemical Industry Co. (600331 CH): China's third-largest zinc producer said profit probably fell by more than 90 percent in the first nine months of this year from a year earlier because of a slump in metal prices. The Chengdu, Sichuan province-based company didn't give profit details today in a statement to the Shanghai stock exchange. Sichuan Hongda gained 0.04 yuan, or 0.8 percent, to 4.93.
TMB Bank Pcl (TMB TB): Thailand's sixth-largest lender, controlled by ING Groep NV, posted a net income of 1.67 billion baht ($49 million) in the third quarter from a net loss of 2.5 billion baht in the same period a year earlier. Net interest and dividend income was little changed at 4.09 billion baht. The lender in the period booked a 662 million baht gain from recovery of bad loans with provisions of 4.34 billion baht for uncollectible debt. The bank lost 0.01 baht, or 1.5 percent, to 0.65.
UltraTech Cement Ltd. (UTCEM IN): India's second-biggest producer of the material said second-quarter profit declined 12 percent to 1.64 billion rupees ($33.5 million). Revenue rose 19 percent to 14.2 billion rupees. UltraTech dropped 20.6 rupees, or 5.2 percent, to 374.05.
Vastalux Energy Bhd. (VAST MK): The oil and gas service Provider said it won a 32.5 million ringgit contract from Petronas Dagangan Bhd. for the reactivation works of a liquefied petroleum gas filling plant in the southern Johor state. Vastalux rose 4 sen, or 8.3 percent, to 52 sen.
Westpac Banking Corp. (WBC AU): Australia's second-largest lender by market value, will take a charge against its full-year profit after firing as many as 450 workers, the Sydney Morning Herald reported. The bank has fired 300 workers at its BT Investment Management unit, which added staff to handle new money being invested in pension plans after tax changes, the Herald said, without saying where it got the information. Another 150 back-office workers have also lost their jobs, the newspaper said. The bank declined 52 cents, or 2.4 percent, to A$21.48.
To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net.
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Deutsche Bank Cuts Metal Price Forecasts on Economic Outlook
By Glenys Sim
Oct. 20 (Bloomberg) -- Deutsche Bank AG lowered its price forecasts for copper and aluminum because of ``rapid deterioration'' in the outlook for the global economy.
Copper will average $7,117 a metric ton this year, down 7 percent from a previous estimate, the bank said in an Oct. 17 report. The metal will average $4,161 a ton in 2009 and $4,740 in 2010, down 37 and 31 percent respectively from earlier predictions.
The bank cut its forecast for aluminum this year by 4 percent to $2,605 a ton. The forecast for next year was reduced 29 percent to $1,874 and by 24 percent to $2,249 in 2010.
Deutsche pared its forecasts for global gross domestic product growth to 1.2 percent in 2009, compared with a prediction of 3.4 percent made four months ago.
``We believe energy and industrial metal prices are the most exposed to further price weakness in this environment,'' analysts led by London-based Michael Lewis wrote.
The bank cut it prediction for nickel by 6 percent to $21,289 a ton in 2008, 43 percent to $10,279 in 2009, and 31 percent to $13,338 in 2010. Zinc may average 6 percent below the previous forecast at $1,889 a ton this year, 30 percent lower at $1,190 next year, and 33 percent less at $1,543 in 2010.
Lead forecasts were reduced by 5 percent to $2,134 a ton this year, 32 percent to $1,213 next year, and 12 percent to $1,257 in 2010. The bank lowered its tin forecast by 5 percent to $18,313 a ton this year, 24 percent to $12,693 in 2009, and 12 percent to $11,684 in 2010.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Oct. 20 (Bloomberg) -- Deutsche Bank AG lowered its price forecasts for copper and aluminum because of ``rapid deterioration'' in the outlook for the global economy.
Copper will average $7,117 a metric ton this year, down 7 percent from a previous estimate, the bank said in an Oct. 17 report. The metal will average $4,161 a ton in 2009 and $4,740 in 2010, down 37 and 31 percent respectively from earlier predictions.
The bank cut its forecast for aluminum this year by 4 percent to $2,605 a ton. The forecast for next year was reduced 29 percent to $1,874 and by 24 percent to $2,249 in 2010.
Deutsche pared its forecasts for global gross domestic product growth to 1.2 percent in 2009, compared with a prediction of 3.4 percent made four months ago.
``We believe energy and industrial metal prices are the most exposed to further price weakness in this environment,'' analysts led by London-based Michael Lewis wrote.
The bank cut it prediction for nickel by 6 percent to $21,289 a ton in 2008, 43 percent to $10,279 in 2009, and 31 percent to $13,338 in 2010. Zinc may average 6 percent below the previous forecast at $1,889 a ton this year, 30 percent lower at $1,190 next year, and 33 percent less at $1,543 in 2010.
Lead forecasts were reduced by 5 percent to $2,134 a ton this year, 32 percent to $1,213 next year, and 12 percent to $1,257 in 2010. The bank lowered its tin forecast by 5 percent to $18,313 a ton this year, 24 percent to $12,693 in 2009, and 12 percent to $11,684 in 2010.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
Read more...
Australia Stocks: Fortescue Metals, Rio, Wesfarmers, Woodside
By Ian C. Sayson
Oct. 20 (Bloomberg) -- The S&P/ASX 200 Index gained 89.80 points, or 2.3 percent, to 4,060.60 as of 10:20 a.m. in Sydney, after a three-day, 8.4 percent loss. The broader All Ordinaries Index added 74.60, or 1.9 percent, to 4,019.40, while the S&P/ASX 200 Index futures contract due in December rose 0.9 percent to 4,088.
The following is a list of companies whose shares were among the most active Australian trading. Stocks symbols are in parentheses after company names.
Oil companies: Woodside Petroleum Ltd. (WPL AU), operator of Australia's A$25 billion ($20 billion) North West Shelf liquefied natural gas venture, advanced A$1.60, or 4.4 percent, to A$37.60. Santos Ltd. (STO AU), Australia's third-biggest oil and gas producer, climbed 38 cents, or 3.6 percent, to A$10.81.
Crude advanced $2 a barrel in New York on signs that OPEC will announce a production cut at a meeting this week.
Fortescue Metals Group Ltd. (FMG AU), Australia's third- largest iron ore exporter, added 18 cents, or 6.1 percent, to A$3.12. Billionaire Philip Falcone, a New-York based hedge fund manager, has scrapped plans to sell a 15 percent stake in Fortescue Metals, the Australian newspaper said, citing the company's Chief Executive Officer Andrew Forrest.
Rio Tinto Group (RIO AU), the world' third-largest mining company, gained A$4.3, or 6.9 percent, to A$66.92, ending a three-day, 24 percent slump. Rio will get A$400 million ($279 million) in free carbon permits per year under the government's proposed emissions trading system, the Financial Review reported.
Wesfarmers Ltd. (WES AU), Australia's second-largest retailer, added 86 cents, or 4.3 percent, to A$20.80, its first gain in three sessions. The company expects to successfully refinance about A$3 billion ($2 billion) of debt maturing before the end of 2009, Chief Executive Officer Richard Goyder said.
Westpac Banking Corp. (WBC AU), Australia's second-largest lender by market value, gained 80 cents, or 3.7 percent, to A$22.28, its first advance in four days. The bank will take a charge against its full-year profit after firing as many as 450 workers, the Sydney Morning Herald reported Oct. 18.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
Read more...
Oct. 20 (Bloomberg) -- The S&P/ASX 200 Index gained 89.80 points, or 2.3 percent, to 4,060.60 as of 10:20 a.m. in Sydney, after a three-day, 8.4 percent loss. The broader All Ordinaries Index added 74.60, or 1.9 percent, to 4,019.40, while the S&P/ASX 200 Index futures contract due in December rose 0.9 percent to 4,088.
The following is a list of companies whose shares were among the most active Australian trading. Stocks symbols are in parentheses after company names.
Oil companies: Woodside Petroleum Ltd. (WPL AU), operator of Australia's A$25 billion ($20 billion) North West Shelf liquefied natural gas venture, advanced A$1.60, or 4.4 percent, to A$37.60. Santos Ltd. (STO AU), Australia's third-biggest oil and gas producer, climbed 38 cents, or 3.6 percent, to A$10.81.
Crude advanced $2 a barrel in New York on signs that OPEC will announce a production cut at a meeting this week.
Fortescue Metals Group Ltd. (FMG AU), Australia's third- largest iron ore exporter, added 18 cents, or 6.1 percent, to A$3.12. Billionaire Philip Falcone, a New-York based hedge fund manager, has scrapped plans to sell a 15 percent stake in Fortescue Metals, the Australian newspaper said, citing the company's Chief Executive Officer Andrew Forrest.
Rio Tinto Group (RIO AU), the world' third-largest mining company, gained A$4.3, or 6.9 percent, to A$66.92, ending a three-day, 24 percent slump. Rio will get A$400 million ($279 million) in free carbon permits per year under the government's proposed emissions trading system, the Financial Review reported.
Wesfarmers Ltd. (WES AU), Australia's second-largest retailer, added 86 cents, or 4.3 percent, to A$20.80, its first gain in three sessions. The company expects to successfully refinance about A$3 billion ($2 billion) of debt maturing before the end of 2009, Chief Executive Officer Richard Goyder said.
Westpac Banking Corp. (WBC AU), Australia's second-largest lender by market value, gained 80 cents, or 3.7 percent, to A$22.28, its first advance in four days. The bank will take a charge against its full-year profit after firing as many as 450 workers, the Sydney Morning Herald reported Oct. 18.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
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Asian Stocks Climb for Second Day as South Korea Supports Banks
By Patrick Rial and Satoshi Kawano
Oct. 20 (Bloomberg) -- Asian stocks advanced, boosting the benchmark index for a second day, after South Korea's government guaranteed bank debt and a possible output cut by OPEC drove oil prices higher.
Shinhan Financial Group Ltd., South Korea's second-largest financial company, rose 3.3 percent, snapping a three-day slump. BHP Billiton Ltd., Australia's biggest oil producer, climbed 5.1 percent on speculation the Organization of Petroleum Exporting Countries will reduce output targets at its meeting this week to support prices. Panasonic Corp. jumped 6.9 percent on a report profit will exceed the company's estimate.
``Company earnings may not be as bad as we feared,'' said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. ``The recent declines in the stock market have already priced in possible negative results.''
The MSCI Asia Pacific Index rose 1.4 percent to 88.50 as of 9:39 a.m. in Tokyo. The gauge is still down 44 percent for the year, set for its worst annual performance since the benchmark was created in 1987. Japan's Nikkei 225 Stock Average added 1.9 percent to 8,856.52. Equity benchmarks throughout the region advanced.
U.S. stocks slipped on Oct. 17, with the Standard & Poor's 500 Index losing 0.6 percent. New home construction fell to the lowest in a quarter century, while consumer confidence dropped the most on record, sending shares lower.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at Skawano1@bloomberg.net
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Japan Stocks Rise on Earnings Reports, Valuations; Nissan Gains
By Masaki Kondo and Satoshi Kawano
Oct. 20 (Bloomberg) -- Japan's stocks rose on speculation corporate earnings will beat expectations and after declines made shares cheap.
Nippon Steel Corp. and JFE Holdings Inc., Japan's biggest steelmakers, jumped more than 4 percent after the Nikkei newspaper said they may boost their annual earnings targets. Panasonic Corp. rose 6.6 percent on a report the company may beat its profit forecast owing to increased sales of televisions. Nissan Motor Co. gained 4.6 percent after a recent drop in its stock price pushed UBS AG to recommend buying the shares.
``Company earnings may not be as bad as we feared,'' said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. ``The recent declines in the stock market have already priced in possible negative results.''
The Nikkei 225 Stock Average gained 72.64, or 0.8 percent, to 8,766.46 as of 9:36 a.m. in Tokyo. The broader Topix index advanced 8.62, or 1 percent, to 902.91. More than two shares climbed for each that fell on the Topix.
Nippon Steel jumped 4.4 percent to 330 yen, while JFE added 6.1 percent to 2,360 yen. Nippon Steel may raise its annual estimate of pretax profit to 520 billion yen ($5.12 billion) from 450 billion yen this month because of falling costs for materials and fuel and higher steel prices, Nikkei said today. JFE may post 510 billion yen in pretax profit, compared with its July forecast of 450 billion yen, the newspaper said, without saying where it got the information.
TV Sales
Panasonic, the world's largest maker of consumer electronics, jumped 6.6 percent to 1,599 yen. The Osaka-based company may report at least 220 billion yen in operating profit for the six months to Sept. 30, boosted by TV sales, the Nikkei said on Oct. 18. In April, the company forecast first-half profit will decline 9.1 percent to 200 billion yen.
Nissan, Japan's third-biggest automaker, gained 4.6 percent to 506 yen, while smaller rival Daihatsu Motor Co. advanced 4.9 percent to 946 yen. Mazda Motor Corp. rose 1.5 percent to 280 yen. The companies had their investment ratings boosted to ``buy'' from ``neutral'' by UBS, which cited recent price drops.
The Topix fell 20 percent in the month through Oct. 17, while Nissan declined 34 percent.
Nikkei futures expiring in December added 0.9 percent to 8,780 in Osaka and climbed 1.3 percent to 8,770 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.
Read more...
Sunday, October 19, 2008
Stocks eye earnings for economic clues
By Leah Schnurr
NEW YORK (Reuters) - Even as credit market strains show signs of easing, a barrage of earnings will steal the spotlight this week as Wall Street looks for a picture of how profits will fare in the face of a severe economic slowdown.
Stock investors will pay close attention to any guidance that comes out of earning season as they shift their focus from uncertainty about a recession to how long a downturn could last and how big a bite it could take out of the bottom line.
When New York trading resumes on Monday, it will be the day after the anniversary of the 1987 stock market crash that happened on October 19, known as "Black Monday." On that date, the Dow fell a record 22.6 percent -- its largest one-day percentage decline ever.
This October, the Dow is down about 38 percent from its record closing high set about a year ago on October 9, 2007.
This week, Wall Street also will watch for whether overnight borrowing costs will continue to ease, signaling that attempts by global authorities to unlock frozen credit markets are taking hold.
"Importantly, there will be statements made by companies about the prospects for business," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, in Albany, New York.
"We know that the third quarter was a disaster and the question is: 'What's happening in the fourth quarter and beyond?'"
Some analysts are anticipating that companies will need to cut their forecasts, highlighting that deteriorating growth could continue longer than had been expected.
"The current outlook needs to be adjusted, and it's being adjusted in one direction -- and that's down," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management, in New York.
Market watchers got a taste of earnings season last week, with results from bellwethers such as Google (GOOG.O: Quote, Profile, Research, Stock Buzz), Honeywell (HON.N: Quote, Profile, Research, Stock Buzz) and Intel (INTC.O: Quote, Profile, Research, Stock Buzz).
On Monday, September's index of leading U.S. economic indicators will kick off a fairly light week for data. Wednesday's weekly mortgage market index, Thursday's weekly U.S. claims for jobless benefits and Friday's report on September U.S. existing home sales will be scrutinized for signs of further weakness in the housing and job markets.
NUMBERS NOT BAD, BUT NOT GREAT
Analysts said that while corporate results overall have not been fantastic, they weren't as dire as had been feared. They are expecting to see more of the same this week as earnings season picks up steam.
Among the heavy hitters set to release earnings this week are Caterpillar Inc (CAT.N: Quote, Profile, Research, Stock Buzz), 3M Co (MMM.N: Quote, Profile, Research, Stock Buzz), Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz), and McDonald's Corp (MDC.N: Quote, Profile, Research, Stock Buzz) -- all Dow components. In the tech sector, Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz), Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz), Amazon.com Inc (AMZN.O: Quote, Profile, Research, Stock Buzz) and Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) are scheduled to report. These are among the most prominent companies listed on the Nasdaq.
"I would say earnings are not going to be great, but they're not going to be as bad as some of the rumors and fears that were going around last week," said Al Kugel, chief investment strategist at Atlantic Trust in Chicago.
Kugel added that the earnings have provided the backdrop to tempt some bargain hunters back into the market as some buyers start to think that worse results have already been priced into stocks.
At Friday's close, U.S. stocks finished the session lower after a volatile session.
But for the week, stocks rose. The blue-chip Dow Jones industrial average .DJI rose 4.75 percent, its best gain in 5-1/2 years, while the Standard & Poor's 500 Index .SPX gained 4.59 percent, for its best week since February. The Nasdaq Composite Index .IXIC advanced 3.75 percent for the week.
FOLLOW THE MONEY
But analysts said earnings will not entirely run the show, as attention will still be paid to short-term credit markets to see whether recent moves by global central banks to stimulate lending are working.
Major global money rates fell on Friday, underscoring hope that authorities' maneuvers have started to thaw the frozen credit markets.
Overnight borrowing costs for dollars, euros and sterling funds, reflected in the London interbank offered rate, eased, but longer-term lending rates remained high.
A sense that central banks have been able to stop the fallout from the credit crisis that is more than a year old now would return some confidence to a market that has been battered by the fear of more casualties to come.
Analysts said rampant volatility will remain the hallmark of the markets after the record-setting surge last week in the barometer of investor fear, the Chicago Board Options Exchange Volatility Index, also known as the VIX .VIX.
The three major U.S. stock indexes have swung in a wide range every day as investor sentiment has vacillated from one minute to the next.
In addition to existing home sales and the sprinkling of other economic reports this week, investors also will keep their eyes on the Fed.
On Monday, Federal Reserve Chairman Ben Bernanke is scheduled to testify at a House Budget Committee hearing about the economic outlook and the financial markets.
Read more...
NEW YORK (Reuters) - Even as credit market strains show signs of easing, a barrage of earnings will steal the spotlight this week as Wall Street looks for a picture of how profits will fare in the face of a severe economic slowdown.
Stock investors will pay close attention to any guidance that comes out of earning season as they shift their focus from uncertainty about a recession to how long a downturn could last and how big a bite it could take out of the bottom line.
When New York trading resumes on Monday, it will be the day after the anniversary of the 1987 stock market crash that happened on October 19, known as "Black Monday." On that date, the Dow fell a record 22.6 percent -- its largest one-day percentage decline ever.
This October, the Dow is down about 38 percent from its record closing high set about a year ago on October 9, 2007.
This week, Wall Street also will watch for whether overnight borrowing costs will continue to ease, signaling that attempts by global authorities to unlock frozen credit markets are taking hold.
"Importantly, there will be statements made by companies about the prospects for business," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, in Albany, New York.
"We know that the third quarter was a disaster and the question is: 'What's happening in the fourth quarter and beyond?'"
Some analysts are anticipating that companies will need to cut their forecasts, highlighting that deteriorating growth could continue longer than had been expected.
"The current outlook needs to be adjusted, and it's being adjusted in one direction -- and that's down," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management, in New York.
Market watchers got a taste of earnings season last week, with results from bellwethers such as Google (GOOG.O: Quote, Profile, Research, Stock Buzz), Honeywell (HON.N: Quote, Profile, Research, Stock Buzz) and Intel (INTC.O: Quote, Profile, Research, Stock Buzz).
On Monday, September's index of leading U.S. economic indicators will kick off a fairly light week for data. Wednesday's weekly mortgage market index, Thursday's weekly U.S. claims for jobless benefits and Friday's report on September U.S. existing home sales will be scrutinized for signs of further weakness in the housing and job markets.
NUMBERS NOT BAD, BUT NOT GREAT
Analysts said that while corporate results overall have not been fantastic, they weren't as dire as had been feared. They are expecting to see more of the same this week as earnings season picks up steam.
Among the heavy hitters set to release earnings this week are Caterpillar Inc (CAT.N: Quote, Profile, Research, Stock Buzz), 3M Co (MMM.N: Quote, Profile, Research, Stock Buzz), Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz), and McDonald's Corp (MDC.N: Quote, Profile, Research, Stock Buzz) -- all Dow components. In the tech sector, Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz), Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz), Amazon.com Inc (AMZN.O: Quote, Profile, Research, Stock Buzz) and Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) are scheduled to report. These are among the most prominent companies listed on the Nasdaq.
"I would say earnings are not going to be great, but they're not going to be as bad as some of the rumors and fears that were going around last week," said Al Kugel, chief investment strategist at Atlantic Trust in Chicago.
Kugel added that the earnings have provided the backdrop to tempt some bargain hunters back into the market as some buyers start to think that worse results have already been priced into stocks.
At Friday's close, U.S. stocks finished the session lower after a volatile session.
But for the week, stocks rose. The blue-chip Dow Jones industrial average .DJI rose 4.75 percent, its best gain in 5-1/2 years, while the Standard & Poor's 500 Index .SPX gained 4.59 percent, for its best week since February. The Nasdaq Composite Index .IXIC advanced 3.75 percent for the week.
FOLLOW THE MONEY
But analysts said earnings will not entirely run the show, as attention will still be paid to short-term credit markets to see whether recent moves by global central banks to stimulate lending are working.
Major global money rates fell on Friday, underscoring hope that authorities' maneuvers have started to thaw the frozen credit markets.
Overnight borrowing costs for dollars, euros and sterling funds, reflected in the London interbank offered rate, eased, but longer-term lending rates remained high.
A sense that central banks have been able to stop the fallout from the credit crisis that is more than a year old now would return some confidence to a market that has been battered by the fear of more casualties to come.
Analysts said rampant volatility will remain the hallmark of the markets after the record-setting surge last week in the barometer of investor fear, the Chicago Board Options Exchange Volatility Index, also known as the VIX .VIX.
The three major U.S. stock indexes have swung in a wide range every day as investor sentiment has vacillated from one minute to the next.
In addition to existing home sales and the sprinkling of other economic reports this week, investors also will keep their eyes on the Fed.
On Monday, Federal Reserve Chairman Ben Bernanke is scheduled to testify at a House Budget Committee hearing about the economic outlook and the financial markets.
Read more...
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