By Tracy Withers
Oct. 23 (Bloomberg) -- New Zealand's central bank cut its benchmark interest rate by a record 1 percentage point to 6.5 percent and foreshadowed further reductions to limit damage from the worldwide financial crisis and a slump in the global economy.
``Economic activity will be further constrained by these international developments,'' Reserve Bank Governor Alan Bollard said in a statement in Wellington today. ``Should the outlook for inflation evolve as projected, we would expect to lower the rate further.''
Central banks have cut interest rates worldwide in an attempt to unfreeze credit markets amid a financial meltdown. Bollard began lowering borrowing costs in July as the economy went into recession, sending New Zealand's dollar tumbling 24 percent and stock prices down 30 percent this year.
``The domestic economy is likely to remain in recession through to the middle of next year at least,'' said Darren Gibbs, chief New Zealand economist at Deutsche Bank AG in Auckland. ``The official cash rate will move to around 5 percent, if not below, by the middle of next year.''
Today's cut is the largest since the Reserve Bank began using the official cash rate in 1999. Nine of 11 economists surveyed by Bloomberg News forecast the move. Two expected a three-quarter point reduction.
Bollard said the market shouldn't expect future rate cuts to be of a similar size.
Currency Bounce
The central bank, which is required to keep average price gains between 1 percent and 3 percent, forecasts the inflation rate will be back in its target range within a year.
New Zealand's dollar pared its declines after the statement because of market expectations Bollard may cut by more. It bought 58.86 U.S. cents at 1:50 p.m. in Wellington from 58.33 cents immediately before the statement.
``With market chatter prior to the meeting of a more than 100-point cut, the decision has seen the New Zealand dollar bounce,'' said Stephen Halmarick, co-head of economic and market analysis at Citigroup Inc. in Sydney.
The Reserve Bank of Australia cut its benchmark rate by 1 percentage point to 6 percent on Oct. 7. India this week cut its rate for the first time since 2004. Canada reduced its benchmark to the lowest since 2004 and foreshadowed more reductions to come.
Bollard cut the rate by a quarter point in July and a half point to 7.5 percent on Sept. 11 as New Zealand entered its first recession in 10 years, contracting 0.2 percent in the second quarter after shrinking in the three months to March.
Export Outlook
He forecast another contraction in the third quarter. Companies also expect sales will shrink in the final three months of the year, according to a survey by the New Zealand Institute of Economic Research Inc.
``Economic activity will be further constrained relative to outlook presented in September,'' Bollard said today. Last month, he forecast the economy would grow 0.6 percent this year and 1.5 percent in 2009.
``New Zealand can expect to face lower demand for exports and credit is likely to be less readily available,'' he said. ``Consumers and businesses are likely to be more cautious and curtail spending.''
While the economy contracts, high fuel and food prices have driven faster inflation. Consumer prices rose at the quickest pace in 18 years in the 12 months ended Sept. 30, Statistics New Zealand said this week.
``With weaker short-term growth and sharply lower oil prices we now expect that annual inflation will return to the target band around the middle of 2009,'' Bollard said. He didn't provide detailed forecasts.
Consumer Confidence
Still, the central bank has concerns that domestic inflation remains ``stubbornly high,'' led by property taxes, electricity prices and construction costs, Bollard said.
The economy has contracted amid a slump in consumer confidence and a plunge in the housing market. Exports, which make up 30 percent of the economy, are slowing as a drought curbs farm production and world butter and cheese prices decline.
House prices dropped 6.1 percent in September from a year earlier. Home sales are close to a 16-year low.
The slowdown in consumer spending will be offset by the New Zealand dollar's decline, lower fuel prices and tax cuts, Bollard said today.
The collapse of Lehman Brother Holdings Inc. last month sparked a crisis of confidence in financial markets, sending stock markets into a freefall and prompting governments around the world to cut borrowing costs and boost capital for banks.
Global Rates
The Federal Reserve, the European Central Bank and counterparts in London, Sweden and Canada cut their benchmark interest rates by half a point in a coordinated move on Oct. 8 to restore confidence and limit damage to their economies.
``The timing and extent of reductions over the coming months will depend on evidence of actual reductions in domestic cost pressures as well as how the global financial developments play out,'' Bollard said today.
Bollard will cut the rate to 6 percent at his next review on Dec. 4, according to the economists surveyed by Bloomberg. The rate will be 5.5 percent by March, the lowest level since April 2004, they forecast.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Thursday, October 23, 2008
Japan Exports Rise Less Than Expected on Market Woes
By Jason Clenfield
Oct. 23 (Bloomberg) -- Japan's exports rose less than economists estimated in September as overseas demand weakened in the wake of a deepening global financial crisis.
Exports, the main engine of economic growth last year, rose 1.5 percent from a year earlier, after rising 0.3 percent in August, the Finance Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted a 5.1 percent increase.
The Nikkei 225 Stock Average slumped to a five-year low on concern that the global economy will fall into a recession, crippling sales of the country's cars and electronics. Toyota Motor Corp. and Honda Motor Co. may report profit fell last quarter, and NEC Electronics Corp. this week changed its full- year forecast to a loss because of slumping chip demand.
``Export declines are imminent, and Japan's getting deeper into a recession,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. ``Consumers around the world can't get money for shopping because of the credit crunch.''
The Nikkei tumbled 6 percent to 8,151.29, the lowest since May 2003, as of 10:27 a.m. in Tokyo. The yen traded at 97.63 per dollar from 97.74 before the report was published, and has gained 8.7 percent this month, adding to exporters' woes.
Japan's government this week acknowledged that the world's second-largest economy has probably entered its first recession in six years. Global stock markets have lost $14 trillion in value since the bankruptcy of Lehman Brothers Holdings Ltd. in September spurred a worldwide financial crisis.
Different World
``The world is a completely different place since Lehman went bankrupt,'' said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo. ``The U.S. is clearly in a full-blown recession and the feedback effects will hit from here.''
Those effects have already started to spill through Europe and Asia, which together account for more than 60 percent of Japan's exports.
European Central Bank President Jean-Claude Trichet this week said the credit freeze and inflation have pushed the euro area into ``in a very, very important growth slowdown.'' China, which in July overtook the U.S. as Japan's biggest export market, grew at its slowest pace in five years last quarter.
Exports to China rose 1.7 percent in September from a year earlier and shipments to Asia climbed 2.9 percent, the Finance Ministry said. Exports to the U.S. dropped 10.9 percent and shipments to Europe fell 9 percent.
Shrinking Surplus
Imports surged 28.8 percent, the fastest pace in more than two years, as energy costs remained higher than a year earlier, even after easing since July. That caused the trade surplus to shrink 94.1 percent to 95.1 billion yen ($973 million). Economists expected the gap to narrow to 574.6 billion yen.
Manufacturers have also been hurt by the yen's appreciation. Japan's currency has risen 10 percent against the dollar and 35 percent versus the euro since August.
Toyota's net income probably dropped 50 percent last quarter, according to five analysts surveyed by Bloomberg News. Honda may say net income slumped 32 percent, analysts said.
NEC Electronics Corp., Japan's third-biggest chipmaker, this week forecast an 8 billion yen loss for the year ending March after earlier saying it would break even.
Companies are also cutting production and hiring plans in anticipation that the financial crisis will stifle demand for Japanese products.
Nissan Motor Co., which makes about 40 percent of its sales in North America, this week joined Toyota and other carmakers in reducing domestic output. The Tokyo-based automaker also said it would fire contract workers, according to the Nikkei newspaper.
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
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Oct. 23 (Bloomberg) -- Japan's exports rose less than economists estimated in September as overseas demand weakened in the wake of a deepening global financial crisis.
Exports, the main engine of economic growth last year, rose 1.5 percent from a year earlier, after rising 0.3 percent in August, the Finance Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted a 5.1 percent increase.
The Nikkei 225 Stock Average slumped to a five-year low on concern that the global economy will fall into a recession, crippling sales of the country's cars and electronics. Toyota Motor Corp. and Honda Motor Co. may report profit fell last quarter, and NEC Electronics Corp. this week changed its full- year forecast to a loss because of slumping chip demand.
``Export declines are imminent, and Japan's getting deeper into a recession,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. ``Consumers around the world can't get money for shopping because of the credit crunch.''
The Nikkei tumbled 6 percent to 8,151.29, the lowest since May 2003, as of 10:27 a.m. in Tokyo. The yen traded at 97.63 per dollar from 97.74 before the report was published, and has gained 8.7 percent this month, adding to exporters' woes.
Japan's government this week acknowledged that the world's second-largest economy has probably entered its first recession in six years. Global stock markets have lost $14 trillion in value since the bankruptcy of Lehman Brothers Holdings Ltd. in September spurred a worldwide financial crisis.
Different World
``The world is a completely different place since Lehman went bankrupt,'' said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo. ``The U.S. is clearly in a full-blown recession and the feedback effects will hit from here.''
Those effects have already started to spill through Europe and Asia, which together account for more than 60 percent of Japan's exports.
European Central Bank President Jean-Claude Trichet this week said the credit freeze and inflation have pushed the euro area into ``in a very, very important growth slowdown.'' China, which in July overtook the U.S. as Japan's biggest export market, grew at its slowest pace in five years last quarter.
Exports to China rose 1.7 percent in September from a year earlier and shipments to Asia climbed 2.9 percent, the Finance Ministry said. Exports to the U.S. dropped 10.9 percent and shipments to Europe fell 9 percent.
Shrinking Surplus
Imports surged 28.8 percent, the fastest pace in more than two years, as energy costs remained higher than a year earlier, even after easing since July. That caused the trade surplus to shrink 94.1 percent to 95.1 billion yen ($973 million). Economists expected the gap to narrow to 574.6 billion yen.
Manufacturers have also been hurt by the yen's appreciation. Japan's currency has risen 10 percent against the dollar and 35 percent versus the euro since August.
Toyota's net income probably dropped 50 percent last quarter, according to five analysts surveyed by Bloomberg News. Honda may say net income slumped 32 percent, analysts said.
NEC Electronics Corp., Japan's third-biggest chipmaker, this week forecast an 8 billion yen loss for the year ending March after earlier saying it would break even.
Companies are also cutting production and hiring plans in anticipation that the financial crisis will stifle demand for Japanese products.
Nissan Motor Co., which makes about 40 percent of its sales in North America, this week joined Toyota and other carmakers in reducing domestic output. The Tokyo-based automaker also said it would fire contract workers, according to the Nikkei newspaper.
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
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Leaders Differ on Financial Crisis as Summit Planned
By Michael McKee and Simon Kennedy
Oct. 22 (Bloomberg) -- World leaders, facing financial markets in turmoil and the possibility of global recession, will discuss ways to fix the crisis at a summit meeting in Washington next month.
U.S. and European leaders, sparring over the causes of the credit crunch and how to cure it, don't expect to reach consensus on what steps to take. Instead, the Nov. 15 summit may produce only an agreement to hold additional meetings.
``Everybody will come with their own ideas,'' White House spokeswoman Dana Perino said. ``Not everybody will have the same solution.''
President George W. Bush, responding to calls from French President Nicolas Sarkozy and U.K. Prime Minister Gordon Brown, invited leaders from the so-called Group of 20 industrialized and developing nations to attend the summit almost two weeks after the U.S. presidential election.
Stock markets around the world have tumbled this year, with declines accelerating as banks all but ceased lending in recent weeks. Since the U.S. investment bank Lehman Brothers Holdings Inc. declared bankruptcy Sept. 15, the Standard & Poor's 500 index has fallen 28 percent, the U.K.'s FTSE 100 is down 25 percent, Germany's DAX 27 percent, and Japan's Nikkei 225 has dropped 29 percent.
Brown wants greater cross-border oversight of banks and other financial firms. ``We must now take action on the global financial recession,'' he said in Parliament today, ``because no country can insulate itself from it.''
Sarkozy's Goal
Sarkozy has called for much stricter government supervision of financial markets and their participants. He said today his goal is to ``reform the international financial system and ensure that the current crisis won't repeat itself thanks to a better regulation.''
Perino, however, suggested the Bush administration is more interested in a discussion of ``principles'' for prudent country- by-country regulation.
And the Financial Services Roundtable, which represents 100 of the largest U.S. banking, insurance and investment companies, said while it supports the idea of international regulatory guidelines for capital standards and consumer protection, the application of those principles should be left to each individual country. ``We live in a global economy,'' said Roundtable President Steve Bartlett.
Safety Net
Jeffrey Sachs, director of Columbia University's Earth Institute in New York and a longtime adviser on economic and fiscal issues to governments worldwide, said the leaders' first goal should be to mitigate the effects of a global recession.
The G-20 should encourage looser fiscal policy in Asian countries such China, South Korea and Japan to stimulate international trade and demand. And the leaders should use their central banks to provide a safety net for banks in emerging- market nations that ``might face a threat to liquidity through no fault of their own,'' he said.
Low interest rates through much of this decade led banks and investment houses around the world to make loans that have since soured. Many of those loans were packaged into other securities, which have also gone bad, forcing financial institutions to write down billions of dollars in assets.
That has led to the worst worldwide credit crunch since the Great Depression. The International Monetary Fund this month forecast global growth would drop to 3 percent next year, which the lender calls the dividing line between global recession and expansion.
Recalling Bretton Woods
European leaders have said the fallout justifies major changes in the way financial institutions are regulated. Sarkozy, 53, has compared the effort to the 1944 Bretton Woods conference in New Hampshire that fixed exchange rates, hitched the world to the gold standard and created the International Monetary Fund and World Bank.
The talks, he said, should aim to impose stricter regulation on financial institutions, curb bonus packages for bankers, overhaul international accounting rules and reshape policies on foreign exchange rates.
``We must reform capitalism so that the most efficient system ever created doesn't destroy its own foundations,'' Sarkozy, whose country now holds the presidency of the 27-nation European Union, said last week.
Brown, 57, has lobbied placing the world's top 30 banks under the supervision of a panel of regulators.
Preserving Capitalism
Bush, 62, said Oct. 18 any reforms must preserve the free- market system and the free flow of trade and investment.
``It is essential we preserve the foundations of democratic capitalism,'' he said.
The differences suggest little may be accomplished, said Allan Meltzer, a professor at Carnegie Mellon University in Pittsburgh. He chaired a congressional commission that studied the international financial system in 2000 after the Asian financial crisis.
``International agreements like Bretton Woods require a fairly large amount of international cooperation and agreement on goals,'' Meltzer, 80, said. ``That isn't present.''
Julian Jessop, chief international economist at Capital Economics Ltd. and a former U.K. Treasury official, also said he was skeptical about what the summits could accomplish.
``What's worked well in the last few weeks is individual countries have come up with their own solutions for the credit crunch and best practices have emerged that others can copy,'' Jessop said. ``It's a global problem, but maybe it's best for countries to come up with their own end.''
Today's Challenges
Sachs, 54, said the meetings would have long-term value only if they are broader than the leaders have suggested so far. The financial architecture put in place at Bretton Woods, designed to deal with the aftermath of World War II, should be replaced by international institutions set up to deal with today's problems, including energy, the environment, climate change, and poverty.
``We need financial institutions that make sense for the challenges we're facing,'' he said, ``not just an effort to fight the last war, which is what financial regulation would do.''
While both U.S. major-party presidential nominees have been informed of plans for the summit, Perino said it's too early to say whether the president-elect would attend. ``We will look for his input after the election'' on Nov. 4, she said.
Democratic presidential nominee Barack Obama said he has advocated for such a summit, but he told reporters in Richmond, Virginia, it would be presumptuous to say ahead of the election whether he would attend. ``We have only one president at a time,'' Obama said today.
`Important Opportunity'
Republican presidential candidate John McCain sees the summit as ``an important opportunity'' for world leaders to share ideas and information, senior economic adviser Doug Holtz-Eakin said in a statement.
The Group of 20, created as a response to the financial crises of the late 1990s, includes finance ministers and central bank governors from the G-8 industrialized nations as well as developing nations.
G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
Others invited include International Monetary Fund managing director Dominique Strauss-Kahn, World Bank President Robert Zoellick and United Nations Secretary General Ban Ki-moon.
To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net; Simon Kennedy in Paris at Skennedy4@bloomberg.net
Read more...
Oct. 22 (Bloomberg) -- World leaders, facing financial markets in turmoil and the possibility of global recession, will discuss ways to fix the crisis at a summit meeting in Washington next month.
U.S. and European leaders, sparring over the causes of the credit crunch and how to cure it, don't expect to reach consensus on what steps to take. Instead, the Nov. 15 summit may produce only an agreement to hold additional meetings.
``Everybody will come with their own ideas,'' White House spokeswoman Dana Perino said. ``Not everybody will have the same solution.''
President George W. Bush, responding to calls from French President Nicolas Sarkozy and U.K. Prime Minister Gordon Brown, invited leaders from the so-called Group of 20 industrialized and developing nations to attend the summit almost two weeks after the U.S. presidential election.
Stock markets around the world have tumbled this year, with declines accelerating as banks all but ceased lending in recent weeks. Since the U.S. investment bank Lehman Brothers Holdings Inc. declared bankruptcy Sept. 15, the Standard & Poor's 500 index has fallen 28 percent, the U.K.'s FTSE 100 is down 25 percent, Germany's DAX 27 percent, and Japan's Nikkei 225 has dropped 29 percent.
Brown wants greater cross-border oversight of banks and other financial firms. ``We must now take action on the global financial recession,'' he said in Parliament today, ``because no country can insulate itself from it.''
Sarkozy's Goal
Sarkozy has called for much stricter government supervision of financial markets and their participants. He said today his goal is to ``reform the international financial system and ensure that the current crisis won't repeat itself thanks to a better regulation.''
Perino, however, suggested the Bush administration is more interested in a discussion of ``principles'' for prudent country- by-country regulation.
And the Financial Services Roundtable, which represents 100 of the largest U.S. banking, insurance and investment companies, said while it supports the idea of international regulatory guidelines for capital standards and consumer protection, the application of those principles should be left to each individual country. ``We live in a global economy,'' said Roundtable President Steve Bartlett.
Safety Net
Jeffrey Sachs, director of Columbia University's Earth Institute in New York and a longtime adviser on economic and fiscal issues to governments worldwide, said the leaders' first goal should be to mitigate the effects of a global recession.
The G-20 should encourage looser fiscal policy in Asian countries such China, South Korea and Japan to stimulate international trade and demand. And the leaders should use their central banks to provide a safety net for banks in emerging- market nations that ``might face a threat to liquidity through no fault of their own,'' he said.
Low interest rates through much of this decade led banks and investment houses around the world to make loans that have since soured. Many of those loans were packaged into other securities, which have also gone bad, forcing financial institutions to write down billions of dollars in assets.
That has led to the worst worldwide credit crunch since the Great Depression. The International Monetary Fund this month forecast global growth would drop to 3 percent next year, which the lender calls the dividing line between global recession and expansion.
Recalling Bretton Woods
European leaders have said the fallout justifies major changes in the way financial institutions are regulated. Sarkozy, 53, has compared the effort to the 1944 Bretton Woods conference in New Hampshire that fixed exchange rates, hitched the world to the gold standard and created the International Monetary Fund and World Bank.
The talks, he said, should aim to impose stricter regulation on financial institutions, curb bonus packages for bankers, overhaul international accounting rules and reshape policies on foreign exchange rates.
``We must reform capitalism so that the most efficient system ever created doesn't destroy its own foundations,'' Sarkozy, whose country now holds the presidency of the 27-nation European Union, said last week.
Brown, 57, has lobbied placing the world's top 30 banks under the supervision of a panel of regulators.
Preserving Capitalism
Bush, 62, said Oct. 18 any reforms must preserve the free- market system and the free flow of trade and investment.
``It is essential we preserve the foundations of democratic capitalism,'' he said.
The differences suggest little may be accomplished, said Allan Meltzer, a professor at Carnegie Mellon University in Pittsburgh. He chaired a congressional commission that studied the international financial system in 2000 after the Asian financial crisis.
``International agreements like Bretton Woods require a fairly large amount of international cooperation and agreement on goals,'' Meltzer, 80, said. ``That isn't present.''
Julian Jessop, chief international economist at Capital Economics Ltd. and a former U.K. Treasury official, also said he was skeptical about what the summits could accomplish.
``What's worked well in the last few weeks is individual countries have come up with their own solutions for the credit crunch and best practices have emerged that others can copy,'' Jessop said. ``It's a global problem, but maybe it's best for countries to come up with their own end.''
Today's Challenges
Sachs, 54, said the meetings would have long-term value only if they are broader than the leaders have suggested so far. The financial architecture put in place at Bretton Woods, designed to deal with the aftermath of World War II, should be replaced by international institutions set up to deal with today's problems, including energy, the environment, climate change, and poverty.
``We need financial institutions that make sense for the challenges we're facing,'' he said, ``not just an effort to fight the last war, which is what financial regulation would do.''
While both U.S. major-party presidential nominees have been informed of plans for the summit, Perino said it's too early to say whether the president-elect would attend. ``We will look for his input after the election'' on Nov. 4, she said.
Democratic presidential nominee Barack Obama said he has advocated for such a summit, but he told reporters in Richmond, Virginia, it would be presumptuous to say ahead of the election whether he would attend. ``We have only one president at a time,'' Obama said today.
`Important Opportunity'
Republican presidential candidate John McCain sees the summit as ``an important opportunity'' for world leaders to share ideas and information, senior economic adviser Doug Holtz-Eakin said in a statement.
The Group of 20, created as a response to the financial crises of the late 1990s, includes finance ministers and central bank governors from the G-8 industrialized nations as well as developing nations.
G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
Others invited include International Monetary Fund managing director Dominique Strauss-Kahn, World Bank President Robert Zoellick and United Nations Secretary General Ban Ki-moon.
To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net; Simon Kennedy in Paris at Skennedy4@bloomberg.net
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Santos Third-Quarter Sales Rise 16% on Oil Price Gain
By Angela Macdonald-Smith
Oct. 23 (Bloomberg) -- Santos Ltd., Australia's third- biggest oil and gas producer, said third-quarter sales rose 16 percent as increased prices outweighed lost output caused by a gas plant blast.
Sales advanced to A$730 million ($485 million) in the three months ended Sept. 30, from A$627 million a year earlier, Adelaide-based Santos said today in a statement to the Australian stock exchange. Output dropped 12 percent to 13.2 million barrels of oil equivalent and Santos maintained a reduced full-year forecast at 54 million to 56 million barrels.
Santos's production was cut in the quarter by reduced output from the John Brookes field after an explosion at Apache Corp.'s Varanus Island gas plant off Australia's northwest coast in June. The company received $2 billion in the quarter from Malaysia's Petroliam Nasional Bhd. for a stake in a coal-seam gas-liquefied natural gas venture.
``The outlook for Santos remains positive despite the global financial crisis,'' Chief Executive Officer David Knox said in the statement. ``All our development projects remain on schedule, and we remain focused on delivering our strategy.''
The average price the company got for its oil in the quarter was 59 percent higher than in the year-earlier period, while the average gas price rose 25 percent.
Santos dropped as much as 91 cents, or 7.8 percent, to A$10.81 in Sydney trading on the exchange and was at A$11.00 at 10:50 a.m. local time. The decline compared with a loss of as much as 4.3 percent in the exchange's benchmark energy index after crude-oil prices fell yesterday in New York.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Oct. 23 (Bloomberg) -- Santos Ltd., Australia's third- biggest oil and gas producer, said third-quarter sales rose 16 percent as increased prices outweighed lost output caused by a gas plant blast.
Sales advanced to A$730 million ($485 million) in the three months ended Sept. 30, from A$627 million a year earlier, Adelaide-based Santos said today in a statement to the Australian stock exchange. Output dropped 12 percent to 13.2 million barrels of oil equivalent and Santos maintained a reduced full-year forecast at 54 million to 56 million barrels.
Santos's production was cut in the quarter by reduced output from the John Brookes field after an explosion at Apache Corp.'s Varanus Island gas plant off Australia's northwest coast in June. The company received $2 billion in the quarter from Malaysia's Petroliam Nasional Bhd. for a stake in a coal-seam gas-liquefied natural gas venture.
``The outlook for Santos remains positive despite the global financial crisis,'' Chief Executive Officer David Knox said in the statement. ``All our development projects remain on schedule, and we remain focused on delivering our strategy.''
The average price the company got for its oil in the quarter was 59 percent higher than in the year-earlier period, while the average gas price rose 25 percent.
Santos dropped as much as 91 cents, or 7.8 percent, to A$10.81 in Sydney trading on the exchange and was at A$11.00 at 10:50 a.m. local time. The decline compared with a loss of as much as 4.3 percent in the exchange's benchmark energy index after crude-oil prices fell yesterday in New York.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Joys of Making $2 a Day in World of Billionaires: William Pesek
Commentary by William Pesek
Oct. 23 (Bloomberg) -- It says much about our time when we are more worried about billionaires than about the poor.
The obsession with those with billions in good times is understandable enough. Now it’s their misfortune that dominates the headlines: Las Vegas mogul Sheldon Adelson and investor Carl Icahn seeing their net worth drop, Russian oligarchs falling on hard times, Chinese and Indian tycoons losing a bundle in stocks.
We hear less about the so-called bottom 1.4 billion. That’s the number of people estimated to live in extreme poverty, which since 1990 has generally been defined as $1 a day or less.
Numbers like this should give markets pause, yet they rarely affect investment decisions, bond yields or stock valuations. It’s getting harder to turn a blind eye to how many consumers are below Asia’s poverty line. Why? The number is growing.
“What we forget when we look at Asia’s rapid growth is those being left behind,” Ifzal Ali, chief economist of the Asian Development Bank, told me in Manila earlier this month. “The combination of surging food prices and turmoil in global markets will significantly increase that number.”
To better understand living standards, Ali oversaw a three- year research project to produce the first Asia-specific benchmark for regional poverty. It redrew the poverty line at $1.35, the median of 16 developing Asian countries in 2005. China didn’t participate.
People at Bottom
The new goalpost is meant to reflect Asia’s rapid growth and widening disparities. Its utility lies in the ability of nations to compare their poverty-reduction progress with Asian peers.
Of course, the world has changed since 2005. The ADB data don’t account for the historic surge over the last year in food and energy prices. They also came well before today’s global credit crisis. And definitions of who is poor can be disorienting. Are we to believe that someone making $2 or $4 a day is suddenly and joyously awash in prosperity?
“In this world, we are so fascinated by the experiences of billionaires, all the while people at the bottom are doing worse and worse,” Ali said.
The need for internationally comparable poverty estimates has never been more important in Asia. It is home both to the world’s fastest-growing economies and the bulk of extreme poor. It’s quite a disconnect: The region with the greatest potential also is home to many of the world’s weakest economic links.
Commodity Prices
The ADB’s measure uses a poverty-specific “purchasing power parity” method that targets the baskets of goods and services used in each country. For example, someone making $1 or $2 a day in Mongolia or Nepal can probably get by better than someone living in Malaysia or Thailand.
Great emphasis is put on the differing quality of items such as food and shopping habits. It matters if consumers in one country are likely to get lesser-quality rice than in others. The same is true of whether they shop at so-called wet markets as opposed to Carrefour SA or Wal-Mart Stores Inc.
Even before this year’s run-up in commodity prices, many households in developing Asia spent more than 50 percent of income on food. As prices rise, more Filipinos, Indians and Indonesians are being pushed into poverty. A 10 percent increase in the cost of grains or general food prices will force tens of millions into extreme poverty.
That should concern executives at Microsoft Corp., Toyota Motor Corp., Airbus SAS and Samsung Electronics Co. relying on Asian growth to boost profits. People pushed into hardship won’t be buying many personal computers, cars, airline tickets or mobile phones.
Credit Crisis
Leaders in Asia need to work harder to make sure high growth rates are shared by all. That means reducing the corruption and economic inefficiencies that benefit the elite. It also means not letting today’s global credit crisis distract countries from spreading the advantages of growth.
Ali has two other big focal points: complacency and inflation. Now that commodity prices have come down from record highs, governments may backtrack on investments in agricultural development. He also says Asia risks losing its hard-won gains against rising prices.
“It’s so important to put the inflation genie back in the bottle,” said Ali, who is retiring this month after more than two decades at the ADB. “Over time, we may regret this. It’s putting short-term expediency over long-term thinking and that worries me.”
For someone in the U.S. or Japan making the equivalent of $50,000 a year, inflation is a challenge. For someone making $2 or $3 a day, rising costs are catastrophic. Such income may put some food on the table, but there is little left over to pay for health care or education.
The result will be slower growth, reduced productivity and less liquid markets than executives and investors would like. It’s great we now have a better way to measure poverty in Asia. It would be even better if governments were doing more about it.
(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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Oct. 23 (Bloomberg) -- It says much about our time when we are more worried about billionaires than about the poor.
The obsession with those with billions in good times is understandable enough. Now it’s their misfortune that dominates the headlines: Las Vegas mogul Sheldon Adelson and investor Carl Icahn seeing their net worth drop, Russian oligarchs falling on hard times, Chinese and Indian tycoons losing a bundle in stocks.
We hear less about the so-called bottom 1.4 billion. That’s the number of people estimated to live in extreme poverty, which since 1990 has generally been defined as $1 a day or less.
Numbers like this should give markets pause, yet they rarely affect investment decisions, bond yields or stock valuations. It’s getting harder to turn a blind eye to how many consumers are below Asia’s poverty line. Why? The number is growing.
“What we forget when we look at Asia’s rapid growth is those being left behind,” Ifzal Ali, chief economist of the Asian Development Bank, told me in Manila earlier this month. “The combination of surging food prices and turmoil in global markets will significantly increase that number.”
To better understand living standards, Ali oversaw a three- year research project to produce the first Asia-specific benchmark for regional poverty. It redrew the poverty line at $1.35, the median of 16 developing Asian countries in 2005. China didn’t participate.
People at Bottom
The new goalpost is meant to reflect Asia’s rapid growth and widening disparities. Its utility lies in the ability of nations to compare their poverty-reduction progress with Asian peers.
Of course, the world has changed since 2005. The ADB data don’t account for the historic surge over the last year in food and energy prices. They also came well before today’s global credit crisis. And definitions of who is poor can be disorienting. Are we to believe that someone making $2 or $4 a day is suddenly and joyously awash in prosperity?
“In this world, we are so fascinated by the experiences of billionaires, all the while people at the bottom are doing worse and worse,” Ali said.
The need for internationally comparable poverty estimates has never been more important in Asia. It is home both to the world’s fastest-growing economies and the bulk of extreme poor. It’s quite a disconnect: The region with the greatest potential also is home to many of the world’s weakest economic links.
Commodity Prices
The ADB’s measure uses a poverty-specific “purchasing power parity” method that targets the baskets of goods and services used in each country. For example, someone making $1 or $2 a day in Mongolia or Nepal can probably get by better than someone living in Malaysia or Thailand.
Great emphasis is put on the differing quality of items such as food and shopping habits. It matters if consumers in one country are likely to get lesser-quality rice than in others. The same is true of whether they shop at so-called wet markets as opposed to Carrefour SA or Wal-Mart Stores Inc.
Even before this year’s run-up in commodity prices, many households in developing Asia spent more than 50 percent of income on food. As prices rise, more Filipinos, Indians and Indonesians are being pushed into poverty. A 10 percent increase in the cost of grains or general food prices will force tens of millions into extreme poverty.
That should concern executives at Microsoft Corp., Toyota Motor Corp., Airbus SAS and Samsung Electronics Co. relying on Asian growth to boost profits. People pushed into hardship won’t be buying many personal computers, cars, airline tickets or mobile phones.
Credit Crisis
Leaders in Asia need to work harder to make sure high growth rates are shared by all. That means reducing the corruption and economic inefficiencies that benefit the elite. It also means not letting today’s global credit crisis distract countries from spreading the advantages of growth.
Ali has two other big focal points: complacency and inflation. Now that commodity prices have come down from record highs, governments may backtrack on investments in agricultural development. He also says Asia risks losing its hard-won gains against rising prices.
“It’s so important to put the inflation genie back in the bottle,” said Ali, who is retiring this month after more than two decades at the ADB. “Over time, we may regret this. It’s putting short-term expediency over long-term thinking and that worries me.”
For someone in the U.S. or Japan making the equivalent of $50,000 a year, inflation is a challenge. For someone making $2 or $3 a day, rising costs are catastrophic. Such income may put some food on the table, but there is little left over to pay for health care or education.
The result will be slower growth, reduced productivity and less liquid markets than executives and investors would like. It’s great we now have a better way to measure poverty in Asia. It would be even better if governments were doing more about it.
(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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BHP Said to Face EU Objections to Hostile Bid for Rio
By Matthew Newman and Brett Foley
Enlarge Image/Details
Oct. 23 (Bloomberg) -- European Union regulators told lawyers for BHP Billiton Ltd. its $69 billion hostile bid for London based Rio Tinto Group may break antitrust rules, two people close to the case said.
The European Commission, the 27-nation European Union's antitrust regulator in Brussels, will likely issue the companies a so-called statement of objections, said the people, who declined to be identified because the regulator's proceedings aren't public. The objections will outline the commission's concerns that the combined company's share of the iron ore market may lead to price increases, the people said.
The decision may pressure BHP to sell assets and prove to regulators by Jan. 15 that the world's biggest mining merger won't restrain competition. Rio has traded at a discount of as much as 29 percent to the value of BHP's offer, indicating the deal may fail. Rio and BHP plunged in Sydney trading.
``The EU is definitely the highest hurdle for BHP and the commission will seek to protect European steel mills,'' Damien Hackett, an analyst at Canaccord Adams Ltd. in London, said by telephone. ``I think BHP will end up with a list of asset divestments that they will find unpalatable.''
Rio Tinto slumped 16 percent to A$66.05 and BHP fell 9.2 percent to A$24.74 at 10:42 a.m. Sydney time on the Australian stock exchange. Commodity prices fell to the lowest in four years yesterday, paced by declines in oil and copper, dragging the 162 company Bloomberg World Mining Index down 9.3 percent.
BHP, based in Melbourne, may have to sell iron-ore or coal assets to get approval for the offer, ING Bank NV analyst Nick Hatch said last month. Global financial turmoil has scuppered other transactions, including Xstrata Plc's proposed 5 billion pound ($8.2 billion) bid for platinum miner Lonmin Plc.
`Chances Deteriorating'
``The financial crisis and governments having to rescue banks recently will give regulators a more negative view,'' Hackett said. ``The chances of BHP succeeding are deteriorating with the crisis, not getting better.''
Illtud Harri, a BHP spokesman in London, said the company will cooperate with the commission directly and won't comment on the process. Rio spokeswoman Christina Mills and Jonathan Todd, a commission spokesman, both declined to comment.
The commission's statement of objections, which is a confidential document, will be sent as late as the first week of November, one person said.
BHP has the right to respond to the concerns and can ask for a hearing. Steelmakers, consumer groups and EU government representatives could attend the hearing and would have access to an edited version of the objections that has been stripped of confidential data.
Negotiations
The commission could use the objections as a basis to block the deal. Companies often overcome the concerns through talks with the commission on remedies to remove antitrust problems. In some cases, the regulator approves takeovers after sending objections and doesn't demand divestments or changes to the deal.
Earlier this year, the commission cleared TomTom NV's 2.9 billion-euro ($3.7 billion) acquisition of Tele Atlas NV without any changes to the terms of the deal after sending the companies a statement of objections in February. Australia raised concerns and then cleared BHP's bid without asking for divestments.
The commission stepped up its investigation in July after an initial five-week review, saying that it had ``serious doubts'' about a combination that would control more than a third of the world's iron-ore exports. BHP, already the world's biggest mining company, would also become the largest producer of copper, aluminum, and coal burned by power plants.
Sweetened Offer
The commission restarted its review on Sept. 29 and will rule on the deal by Jan. 15. The Australian Competition and Consumer Commission and the U.S. Department of Justice have approved the deal without seeking asset sales, while a decision is still pending in South Africa.
Rio, the world's second-largest iron-ore producer, rejected BHP's sweetened, all-share offer on Feb. 6, saying it undervalued the company and its growth prospects. BHP Chief Executive Officer Marius Kloppers, who's borrowing a record $55 billion to pay for the deal, in February increased his offer to 3.4 shares for every one of Rio's, from a 3-for-1 proposal in November.
Asian and European steelmakers oppose the transaction, saying it would give BHP too much influence over iron-ore prices. The combined companies would vie with Brazil's Cia. Vale do Rio Doce as the world's largest supplier of the raw material used to make steel.
The commission's probe has focused on iron-ore pricing, the people said. The EU regulator is concerned that prices would effectively be set by the combined company because of its large sales to China. The EU regulator is also worried about the impact on prices for coking coal, they said.
``The recent iron ore contract price negotiations illustrates what happens when big companies get together,'' Hackett said. BHP and London-based Rio secured contract price increases of as much as 97 percent this year from steelmakers in China, the largest consumer.
The commission isn't likely to ask for asset sales in other areas, such as uranium, the people said.
To contact the reporters on this story: Matthew Newman in Brussels at Mnewman6@bloomberg.net; Brett Foley in London at bfoley8@bloomberg.net
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Enlarge Image/Details
Oct. 23 (Bloomberg) -- European Union regulators told lawyers for BHP Billiton Ltd. its $69 billion hostile bid for London based Rio Tinto Group may break antitrust rules, two people close to the case said.
The European Commission, the 27-nation European Union's antitrust regulator in Brussels, will likely issue the companies a so-called statement of objections, said the people, who declined to be identified because the regulator's proceedings aren't public. The objections will outline the commission's concerns that the combined company's share of the iron ore market may lead to price increases, the people said.
The decision may pressure BHP to sell assets and prove to regulators by Jan. 15 that the world's biggest mining merger won't restrain competition. Rio has traded at a discount of as much as 29 percent to the value of BHP's offer, indicating the deal may fail. Rio and BHP plunged in Sydney trading.
``The EU is definitely the highest hurdle for BHP and the commission will seek to protect European steel mills,'' Damien Hackett, an analyst at Canaccord Adams Ltd. in London, said by telephone. ``I think BHP will end up with a list of asset divestments that they will find unpalatable.''
Rio Tinto slumped 16 percent to A$66.05 and BHP fell 9.2 percent to A$24.74 at 10:42 a.m. Sydney time on the Australian stock exchange. Commodity prices fell to the lowest in four years yesterday, paced by declines in oil and copper, dragging the 162 company Bloomberg World Mining Index down 9.3 percent.
BHP, based in Melbourne, may have to sell iron-ore or coal assets to get approval for the offer, ING Bank NV analyst Nick Hatch said last month. Global financial turmoil has scuppered other transactions, including Xstrata Plc's proposed 5 billion pound ($8.2 billion) bid for platinum miner Lonmin Plc.
`Chances Deteriorating'
``The financial crisis and governments having to rescue banks recently will give regulators a more negative view,'' Hackett said. ``The chances of BHP succeeding are deteriorating with the crisis, not getting better.''
Illtud Harri, a BHP spokesman in London, said the company will cooperate with the commission directly and won't comment on the process. Rio spokeswoman Christina Mills and Jonathan Todd, a commission spokesman, both declined to comment.
The commission's statement of objections, which is a confidential document, will be sent as late as the first week of November, one person said.
BHP has the right to respond to the concerns and can ask for a hearing. Steelmakers, consumer groups and EU government representatives could attend the hearing and would have access to an edited version of the objections that has been stripped of confidential data.
Negotiations
The commission could use the objections as a basis to block the deal. Companies often overcome the concerns through talks with the commission on remedies to remove antitrust problems. In some cases, the regulator approves takeovers after sending objections and doesn't demand divestments or changes to the deal.
Earlier this year, the commission cleared TomTom NV's 2.9 billion-euro ($3.7 billion) acquisition of Tele Atlas NV without any changes to the terms of the deal after sending the companies a statement of objections in February. Australia raised concerns and then cleared BHP's bid without asking for divestments.
The commission stepped up its investigation in July after an initial five-week review, saying that it had ``serious doubts'' about a combination that would control more than a third of the world's iron-ore exports. BHP, already the world's biggest mining company, would also become the largest producer of copper, aluminum, and coal burned by power plants.
Sweetened Offer
The commission restarted its review on Sept. 29 and will rule on the deal by Jan. 15. The Australian Competition and Consumer Commission and the U.S. Department of Justice have approved the deal without seeking asset sales, while a decision is still pending in South Africa.
Rio, the world's second-largest iron-ore producer, rejected BHP's sweetened, all-share offer on Feb. 6, saying it undervalued the company and its growth prospects. BHP Chief Executive Officer Marius Kloppers, who's borrowing a record $55 billion to pay for the deal, in February increased his offer to 3.4 shares for every one of Rio's, from a 3-for-1 proposal in November.
Asian and European steelmakers oppose the transaction, saying it would give BHP too much influence over iron-ore prices. The combined companies would vie with Brazil's Cia. Vale do Rio Doce as the world's largest supplier of the raw material used to make steel.
The commission's probe has focused on iron-ore pricing, the people said. The EU regulator is concerned that prices would effectively be set by the combined company because of its large sales to China. The EU regulator is also worried about the impact on prices for coking coal, they said.
``The recent iron ore contract price negotiations illustrates what happens when big companies get together,'' Hackett said. BHP and London-based Rio secured contract price increases of as much as 97 percent this year from steelmakers in China, the largest consumer.
The commission isn't likely to ask for asset sales in other areas, such as uranium, the people said.
To contact the reporters on this story: Matthew Newman in Brussels at Mnewman6@bloomberg.net; Brett Foley in London at bfoley8@bloomberg.net
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Citic Pacific Tied to Australian Dollar After Currency Losses
By Bob Chen and Theresa Tang
Oct. 23 (Bloomberg) -- Citic Pacific Ltd.'s attempt to manage currency risk means the Chinese steelmaker and property developer has four times more money riding on the Australian dollar than it earned last year.
The unit of China's largest state-owned investment company has contracts committing it to buy as much as A$9.44 billion ($6.3 billion) of the currency, according to an Oct. 20 statement. That's more than quadruple Citic Pacific's market value yesterday, and compares with 2007 net income of HK$10.8 billion ($1.4 billion).
Citic Pacific has plummeted 66 percent in Hong Kong trading since disclosing it has an unrealized loss of HK$14.4 billion on the contracts, which force it to purchase Australian dollars at an average price of 87 U.S. cents. The currency fell 0.6 percent to 66.4 cents as of 10:50 a.m. in Sydney.
``If you buy the stock, you're taking a view on Australian dollars,'' said Billy Ng, a Hong Kong-based analyst at JPMorgan Chase & Co. ``I won't recommend buying, even at this price,'' he said of the stock.
Shares of Hong Kong-based Citic Pacific tumbled 25 percent to HK$4.91 percent yesterday, after a 55 percent drop Oct. 21. Australia's dollar will appreciate to 72 U.S. cents next year, the median forecast of 25 analysts surveyed by Bloomberg shows.
The Australian dollar may trade as low as 50.45 U.S. cents through March 31, according to Divyang Shah, chief strategist in London at CBA Europe, a unit of Commonwealth Bank of Australia. Shah expects the Australian dollar, will be worth 59 U.S. cents at the end of the first quarter of 2009.
Global Losses
Companies around the world are posting losses on foreign exchange hedges amid record high volatility in currency markets. In Brazil, a pulp producer, a poultry company and a cement maker have reported $2.3 billion in losses on currency derivatives. Korean companies may lose as much as $2.2 billion on such contracts, according to Standard & Poor's.
Central banks and governments are pumping unprecedented amounts of cash into the financial system and banks that lost money on derivatives and asset-backed securities.
Citic Pacific's largest position was in so-called Australian dollar target redemption forwards, according to the company, which didn't elaborate. Such over-the-counter contracts aren't traded on an exchange. They differ from typical forwards, or agreements to buy and sell assets at current prices for delivery at a specified time and date, in that they are customized for clients.
The total notional value of outstanding foreign-exchange OTC derivatives in the world increased 78 percent in the two years ended 2007 to $56 trillion, according to the Bank for International Settlements in Basel, Switzerland.
Australia Project
``They have gotten very popular in the last three years and a lot of people have been hurt already,'' said Joseph Ngai, a principal for the financial services sector in Hong Kong at McKinsey & Co., a New York-based consultancy. ``When prices fall, you have to keep buying at a loss.''
Citic Pacific didn't give details of the contracts, except to say that they would deliver a maximum of A$9.44 billion, while its U.S. dollar losses weren't limited. The company said it plans to take delivery of some of the currency, known as the Aussie, because it needs to finance an A$1.6 billion iron ore project in Australia.
``The contracts they're holding will track the Aussie dollar, so if the Aussie dollar goes up then they will go up about the same amount,'' Jackson Wong, an investment manager at Hong Kong- based brokerage Tanrich Securities Co., said in reference to the stock. Wong, who declined to say how much he manages, said he bought Citic Pacific shares.
The Australian dollar was trading close to its 25-year high of 98.49 U.S. cents when Chang and Chau bought the forwards. The contracts have an average strike price of 87 U.S. cents to the Australian dollar.
Unauthorized Trades
Citic Pacific ousted Financial Director Leslie Chang, 54, and Financial Controller Chau Chi Yin, 52, this week because the company said the trades weren't authorized. The contracts incurred losses as the Australian dollar tumbled about 30 percent against its U.S. counterpart from a 25-year high reached in July. Chang and Chau couldn't be reached for comment.
Chang and Chau ``didn't understand the potential downside risks,'' Managing Director Henry Fan said in an Oct. 21 interview.
HSBC Holdings Plc, BNP Paribas SA and Citigroup Inc. were among the banks who sold the derivatives, according to the company. Spokespeople for the banks declined to comment. Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events, such as the weather or changes in interest rates.
`Great Unwinding'
The Securities and Futures Commission in Hong Kong said it started an investigation of Citic Pacific, without giving details. Hong Kong Exchanges & Clearing Ltd., which runs the city's bourse, is also ``looking into'' whether the company complied with listing rules, said Henry Law, a spokesman.
``I'm not quite sure how many understood what they bought, but when everything was going up in a straight line it looked very sensible,'' said Song Seng-Wun, an economist at CIMB-GK Securities Pte Ltd. in Singapore. ``The great unwinding will see more casualties I suspect.''
To limit losses, Citic Pacific has started to cancel some of the contracts, costing it $104 million.
``It's not necessary for Citic Pacific to wind up all of its Australian dollar contracts as it still needs the currency to run its iron ore project,'' said Patrick Chow, an analyst at Everbright Securities in Hong Kong. ``Still, it's difficult to predict what Citic Pacific would do as the visibility of the outlook of the Australia dollar is low.''
To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Theresa Tang in Hong Kong at ttang3@bloomberg.net;
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Oct. 23 (Bloomberg) -- Citic Pacific Ltd.'s attempt to manage currency risk means the Chinese steelmaker and property developer has four times more money riding on the Australian dollar than it earned last year.
The unit of China's largest state-owned investment company has contracts committing it to buy as much as A$9.44 billion ($6.3 billion) of the currency, according to an Oct. 20 statement. That's more than quadruple Citic Pacific's market value yesterday, and compares with 2007 net income of HK$10.8 billion ($1.4 billion).
Citic Pacific has plummeted 66 percent in Hong Kong trading since disclosing it has an unrealized loss of HK$14.4 billion on the contracts, which force it to purchase Australian dollars at an average price of 87 U.S. cents. The currency fell 0.6 percent to 66.4 cents as of 10:50 a.m. in Sydney.
``If you buy the stock, you're taking a view on Australian dollars,'' said Billy Ng, a Hong Kong-based analyst at JPMorgan Chase & Co. ``I won't recommend buying, even at this price,'' he said of the stock.
Shares of Hong Kong-based Citic Pacific tumbled 25 percent to HK$4.91 percent yesterday, after a 55 percent drop Oct. 21. Australia's dollar will appreciate to 72 U.S. cents next year, the median forecast of 25 analysts surveyed by Bloomberg shows.
The Australian dollar may trade as low as 50.45 U.S. cents through March 31, according to Divyang Shah, chief strategist in London at CBA Europe, a unit of Commonwealth Bank of Australia. Shah expects the Australian dollar, will be worth 59 U.S. cents at the end of the first quarter of 2009.
Global Losses
Companies around the world are posting losses on foreign exchange hedges amid record high volatility in currency markets. In Brazil, a pulp producer, a poultry company and a cement maker have reported $2.3 billion in losses on currency derivatives. Korean companies may lose as much as $2.2 billion on such contracts, according to Standard & Poor's.
Central banks and governments are pumping unprecedented amounts of cash into the financial system and banks that lost money on derivatives and asset-backed securities.
Citic Pacific's largest position was in so-called Australian dollar target redemption forwards, according to the company, which didn't elaborate. Such over-the-counter contracts aren't traded on an exchange. They differ from typical forwards, or agreements to buy and sell assets at current prices for delivery at a specified time and date, in that they are customized for clients.
The total notional value of outstanding foreign-exchange OTC derivatives in the world increased 78 percent in the two years ended 2007 to $56 trillion, according to the Bank for International Settlements in Basel, Switzerland.
Australia Project
``They have gotten very popular in the last three years and a lot of people have been hurt already,'' said Joseph Ngai, a principal for the financial services sector in Hong Kong at McKinsey & Co., a New York-based consultancy. ``When prices fall, you have to keep buying at a loss.''
Citic Pacific didn't give details of the contracts, except to say that they would deliver a maximum of A$9.44 billion, while its U.S. dollar losses weren't limited. The company said it plans to take delivery of some of the currency, known as the Aussie, because it needs to finance an A$1.6 billion iron ore project in Australia.
``The contracts they're holding will track the Aussie dollar, so if the Aussie dollar goes up then they will go up about the same amount,'' Jackson Wong, an investment manager at Hong Kong- based brokerage Tanrich Securities Co., said in reference to the stock. Wong, who declined to say how much he manages, said he bought Citic Pacific shares.
The Australian dollar was trading close to its 25-year high of 98.49 U.S. cents when Chang and Chau bought the forwards. The contracts have an average strike price of 87 U.S. cents to the Australian dollar.
Unauthorized Trades
Citic Pacific ousted Financial Director Leslie Chang, 54, and Financial Controller Chau Chi Yin, 52, this week because the company said the trades weren't authorized. The contracts incurred losses as the Australian dollar tumbled about 30 percent against its U.S. counterpart from a 25-year high reached in July. Chang and Chau couldn't be reached for comment.
Chang and Chau ``didn't understand the potential downside risks,'' Managing Director Henry Fan said in an Oct. 21 interview.
HSBC Holdings Plc, BNP Paribas SA and Citigroup Inc. were among the banks who sold the derivatives, according to the company. Spokespeople for the banks declined to comment. Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events, such as the weather or changes in interest rates.
`Great Unwinding'
The Securities and Futures Commission in Hong Kong said it started an investigation of Citic Pacific, without giving details. Hong Kong Exchanges & Clearing Ltd., which runs the city's bourse, is also ``looking into'' whether the company complied with listing rules, said Henry Law, a spokesman.
``I'm not quite sure how many understood what they bought, but when everything was going up in a straight line it looked very sensible,'' said Song Seng-Wun, an economist at CIMB-GK Securities Pte Ltd. in Singapore. ``The great unwinding will see more casualties I suspect.''
To limit losses, Citic Pacific has started to cancel some of the contracts, costing it $104 million.
``It's not necessary for Citic Pacific to wind up all of its Australian dollar contracts as it still needs the currency to run its iron ore project,'' said Patrick Chow, an analyst at Everbright Securities in Hong Kong. ``Still, it's difficult to predict what Citic Pacific would do as the visibility of the outlook of the Australia dollar is low.''
To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Theresa Tang in Hong Kong at ttang3@bloomberg.net;
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New Zealand Dollar Pares Losses Versus Yen on Interest-Rate Cut
By Candice Zachariahs
Oct. 23 (Bloomberg) -- The New Zealand dollar pared losses against the yen as the central bank cut interest rates to 6.5 percent from 7.5 percent, after earlier touching its lowest in more than six years. Australia's dollar also fell versus the yen.
New Zealand's currency slipped to the lowest since September 2003 as traders speculated the Reserve Bank of New Zealand would cut its cash target by more than the 100 basis points estimated by economists.
``There was a lot of speculation the Reserve Bank would cut aggressively and perhaps more aggressively than 100,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``There are a few cowboys disappointed and we've seen the currency rebound a little bit.''
The New Zealand dollar dropped to 56.81 yen before trading at 57.89 yen at 7:44 a.m. in Sydney from 58.84 late in Asia yesterday. Australia's dollar fell 0.3 percent to 65.85 yen from 66.02.
New Zealand's dollar traded at 59.18 U.S. cents, from 59.60 cents in late Asian trading yesterday. It fell to as low as 58.14 U.S. cents before the RBNZ announcement. The Australian dollar rose 0.7 percent to 67.37 U.S. cents from 66.88 cents yesterday.
The Australian and New Zealand dollars fell 36.6 percent and 28.4 percent respectively against the yen over the past three months as equities tumbled, prompting investors to sell higher-yielding assets funding by borrowings in Japan.
Benchmark interest rates are 6 percent in Australia and 6.5 percent in New Zealand, compared with 0.5 percent in Japan and 1.5 percent in the U.S., attracting investors to the South Pacific nations' assets. The risk in such trades is that currency market moves will erase profits.
Stocks Tumbling
``People are very worried about the global recession,'' said Hampton. ``People are bailing out of growth-sensitive currencies like the kiwi in favor of safe-haven currencies like the yen and the U.S dollar.''
The currencies fell against the yen as the Standard & Poor's 500 Index dropped yesterday to the lowest level since April 2003. Exxon Mobil Corp. tumbled 9.7 percent and Freeport- McMoRan Copper & Gold Inc. plunged 18 percent as crude, copper and gold fell.
The S&P 500 extended its 2008 retreat to 39 percent, poised for its worst yearly performance since 1931.
The VIX volatility index, a gauge reflecting expectations for stock-market price changes and risk appetite, rose to 69.65 yesterday. The VIX rose to a record 70.33 on Oct. 17.
The Australian currency rose for the first day in three against the U.S. dollar as investors speculated the past month's 19 percent drop doesn't reflect the outlook for the country's economy.
The Aussie, as the currency is called, has been ``relatively strong in the last 24 hours, perhaps a belated recognition of its relative banking stability, the fact that its corporates are unlikely to be caught up in over-hedges, recent sharp rate cuts and fiscal stimulus announcements,'' wrote Greg Gibbs, a currency strategist at ABN Amro Australia Ltd. in Sydney.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Oct. 23 (Bloomberg) -- The New Zealand dollar pared losses against the yen as the central bank cut interest rates to 6.5 percent from 7.5 percent, after earlier touching its lowest in more than six years. Australia's dollar also fell versus the yen.
New Zealand's currency slipped to the lowest since September 2003 as traders speculated the Reserve Bank of New Zealand would cut its cash target by more than the 100 basis points estimated by economists.
``There was a lot of speculation the Reserve Bank would cut aggressively and perhaps more aggressively than 100,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``There are a few cowboys disappointed and we've seen the currency rebound a little bit.''
The New Zealand dollar dropped to 56.81 yen before trading at 57.89 yen at 7:44 a.m. in Sydney from 58.84 late in Asia yesterday. Australia's dollar fell 0.3 percent to 65.85 yen from 66.02.
New Zealand's dollar traded at 59.18 U.S. cents, from 59.60 cents in late Asian trading yesterday. It fell to as low as 58.14 U.S. cents before the RBNZ announcement. The Australian dollar rose 0.7 percent to 67.37 U.S. cents from 66.88 cents yesterday.
The Australian and New Zealand dollars fell 36.6 percent and 28.4 percent respectively against the yen over the past three months as equities tumbled, prompting investors to sell higher-yielding assets funding by borrowings in Japan.
Benchmark interest rates are 6 percent in Australia and 6.5 percent in New Zealand, compared with 0.5 percent in Japan and 1.5 percent in the U.S., attracting investors to the South Pacific nations' assets. The risk in such trades is that currency market moves will erase profits.
Stocks Tumbling
``People are very worried about the global recession,'' said Hampton. ``People are bailing out of growth-sensitive currencies like the kiwi in favor of safe-haven currencies like the yen and the U.S dollar.''
The currencies fell against the yen as the Standard & Poor's 500 Index dropped yesterday to the lowest level since April 2003. Exxon Mobil Corp. tumbled 9.7 percent and Freeport- McMoRan Copper & Gold Inc. plunged 18 percent as crude, copper and gold fell.
The S&P 500 extended its 2008 retreat to 39 percent, poised for its worst yearly performance since 1931.
The VIX volatility index, a gauge reflecting expectations for stock-market price changes and risk appetite, rose to 69.65 yesterday. The VIX rose to a record 70.33 on Oct. 17.
The Australian currency rose for the first day in three against the U.S. dollar as investors speculated the past month's 19 percent drop doesn't reflect the outlook for the country's economy.
The Aussie, as the currency is called, has been ``relatively strong in the last 24 hours, perhaps a belated recognition of its relative banking stability, the fact that its corporates are unlikely to be caught up in over-hedges, recent sharp rate cuts and fiscal stimulus announcements,'' wrote Greg Gibbs, a currency strategist at ABN Amro Australia Ltd. in Sydney.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Australian Dollar May Drop 25% on Commodities Slump, CBA Says
By Lukanyo Mnyanda
Oct. 23 (Bloomberg) -- The Australian dollar, headed for the worst year since a currency peg ended in 1983, may drop a further 25 percent through March as a slowing global economy saps demand for the country's exports, according to CBA Europe Ltd.
The currency, which slid 17 percent in the third quarter, may trade as low as 50.45 U.S., the weakest since Dec. 21, 2001, in the coming five months, according to Divyang Shah, chief strategist in London at CBA Europe, a unit of Commonwealth Bank of Australia. Shah expects the Australian dollar, which was at 67.5 U.S. cents as of 7:45 a.m. in Sydney, will be worth 59 U.S. cents at the end of the first quarter of 2009.
Australia's dollar, also known as the Aussie, slumped in the three months through Sept. 30 as the Reuters/Jefferies CRB Index, which tracks commodities futures, dropped more than a quarter. The Baltic Dry Index, a measure of shipping costs for commodities, plummeted more than 66 percent. High-yielding currencies including the Aussie, the South African rand and the Brazilian real have also dropped as concern the world economy is headed for recession makes so-called carry trades unattractive.
``Given the deteriorating outlook for commodities, the Aussie is going to remain under pressure,'' Shah said in a telephone interview yesterday. ``Extreme risk aversion is another factor that has weighed on the Aussie.'' Commonwealth Bank is Australia's largest provider of mortgages.
The Australian dollar has declined 23 percent versus the dollar in 2008, the fourth-worst performance of major currencies after the rand, South Korean won and real. The currency, which reached a 25-year high in July, hasn't lost more than a fifth of its value in a year since it was allowed to trade freely in December 1983, according to data compiled by Bloomberg.
Interest-Rate Cuts
The currency may also drop as the Australian central bank cuts interest rate to revive growth, reducing the yields for holding the nation's assets, Shah said.
The Reserve Bank of Australia is expected to cut its benchmark lending rate by 0.5 percentage point to 5.5 percent on Nov. 4, according to a Bloomberg survey of 16 economists. The rate stood at a 12-year high of 7.25 percent in August.
The country's interest rates made Australia a favorite for investors seeking higher returns using funds from a country with low borrowing costs. The risk is exchange-rate fluctuations can erode profits.
The Aussie, together with the rand and the Mexican peso, was one of the currencies described this week by Goldman Sachs Group Inc. as undervalued by more than 20 percent based on inflation, productivity and terms of trade.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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Oct. 23 (Bloomberg) -- The Australian dollar, headed for the worst year since a currency peg ended in 1983, may drop a further 25 percent through March as a slowing global economy saps demand for the country's exports, according to CBA Europe Ltd.
The currency, which slid 17 percent in the third quarter, may trade as low as 50.45 U.S., the weakest since Dec. 21, 2001, in the coming five months, according to Divyang Shah, chief strategist in London at CBA Europe, a unit of Commonwealth Bank of Australia. Shah expects the Australian dollar, which was at 67.5 U.S. cents as of 7:45 a.m. in Sydney, will be worth 59 U.S. cents at the end of the first quarter of 2009.
Australia's dollar, also known as the Aussie, slumped in the three months through Sept. 30 as the Reuters/Jefferies CRB Index, which tracks commodities futures, dropped more than a quarter. The Baltic Dry Index, a measure of shipping costs for commodities, plummeted more than 66 percent. High-yielding currencies including the Aussie, the South African rand and the Brazilian real have also dropped as concern the world economy is headed for recession makes so-called carry trades unattractive.
``Given the deteriorating outlook for commodities, the Aussie is going to remain under pressure,'' Shah said in a telephone interview yesterday. ``Extreme risk aversion is another factor that has weighed on the Aussie.'' Commonwealth Bank is Australia's largest provider of mortgages.
The Australian dollar has declined 23 percent versus the dollar in 2008, the fourth-worst performance of major currencies after the rand, South Korean won and real. The currency, which reached a 25-year high in July, hasn't lost more than a fifth of its value in a year since it was allowed to trade freely in December 1983, according to data compiled by Bloomberg.
Interest-Rate Cuts
The currency may also drop as the Australian central bank cuts interest rate to revive growth, reducing the yields for holding the nation's assets, Shah said.
The Reserve Bank of Australia is expected to cut its benchmark lending rate by 0.5 percentage point to 5.5 percent on Nov. 4, according to a Bloomberg survey of 16 economists. The rate stood at a 12-year high of 7.25 percent in August.
The country's interest rates made Australia a favorite for investors seeking higher returns using funds from a country with low borrowing costs. The risk is exchange-rate fluctuations can erode profits.
The Aussie, together with the rand and the Mexican peso, was one of the currencies described this week by Goldman Sachs Group Inc. as undervalued by more than 20 percent based on inflation, productivity and terms of trade.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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Euro Falls to Lowest Since 2003 Against Yen as Stocks Plunge
By Stanley White and Ye Xie
Oct. 23 (Bloomberg) -- The euro fell to the lowest level since January 2003 against the yen as global stocks plunged, encouraging investors to sell higher-yielding assets and pay back low-cost loans in Japan.
The 15-nation currency dropped below $1.28 for the first time since November 2006 yesterday and the pound tumbled to a five-year low on bets Europe's central banks will cut borrowing costs as the global economy heads for a recession. The Brazilian real and the Russian ruble dropped against the dollar as speculation Argentina will default reduced demand for emerging- market assets.
``The stock rout is likely to push the yen up further against the euro,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The pound also looks vulnerable due to weak economic fundamentals. People are giving up on emerging markets, which is another sign investors don't want to take on risk.''
The euro was at 124.58 yen as of 8:29 a.m. in Tokyo from 125.60 late yesterday in New York, after touching 124.13, the lowest level since January 2003. The euro traded at $1.2728 from $1.2855 late yesterday, the weakest level since November 2006. The yen traded at 97.53 per dollar from 97.66.
Sterling declined to $1.6167 from $1.6267. after touching $1.6139 yesterday, the lowest since September 2003. It dropped as much as 3.4 percent, the biggest decline since September 1992, when investor George Soros drove the currency out of Europe's system of linked exchange rates. The pound was at 78.80 pence per euro.
Yen's Gain
The yen extended gains on speculation stock losses will spread to Asia, prompting investors to unwind carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's currency gained 2.1 percent to 64.64 against the Australian dollar and 1.4 percent to 13.3717 versus the Norwegian krone. The Bank of Japan's target lending rate of 0.5 percent compares with 6 percent in Australia and 5.25 percent in Norway.
The Standard & Poor's 500 Index dropped to the lowest level since April 2003 yesterday on concern a worsening global economic slump will damp corporate profits.
The New Zealand dollar remained lower against its U.S. counterpart today after the Reserve Bank cut the official cash rate by 1 percentage point to 6.50 percent. The kiwi fell 1.2 percent from late yesterday in Asia to 58.86 U.S. cents.
Emerging-market currencies weakened yesterday as Argentina's planned seizure of private pension funds stoked concern the nation faces its second default this decade. The government of President Cristina Fernandez de Kirchner proposed on Oct. 21 taking control of 10 funds, including units of HSBC Holdings Plc and Banco Bilbao Vizcaya Argentaria SA.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.
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Oct. 23 (Bloomberg) -- The euro fell to the lowest level since January 2003 against the yen as global stocks plunged, encouraging investors to sell higher-yielding assets and pay back low-cost loans in Japan.
The 15-nation currency dropped below $1.28 for the first time since November 2006 yesterday and the pound tumbled to a five-year low on bets Europe's central banks will cut borrowing costs as the global economy heads for a recession. The Brazilian real and the Russian ruble dropped against the dollar as speculation Argentina will default reduced demand for emerging- market assets.
``The stock rout is likely to push the yen up further against the euro,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The pound also looks vulnerable due to weak economic fundamentals. People are giving up on emerging markets, which is another sign investors don't want to take on risk.''
The euro was at 124.58 yen as of 8:29 a.m. in Tokyo from 125.60 late yesterday in New York, after touching 124.13, the lowest level since January 2003. The euro traded at $1.2728 from $1.2855 late yesterday, the weakest level since November 2006. The yen traded at 97.53 per dollar from 97.66.
Sterling declined to $1.6167 from $1.6267. after touching $1.6139 yesterday, the lowest since September 2003. It dropped as much as 3.4 percent, the biggest decline since September 1992, when investor George Soros drove the currency out of Europe's system of linked exchange rates. The pound was at 78.80 pence per euro.
Yen's Gain
The yen extended gains on speculation stock losses will spread to Asia, prompting investors to unwind carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's currency gained 2.1 percent to 64.64 against the Australian dollar and 1.4 percent to 13.3717 versus the Norwegian krone. The Bank of Japan's target lending rate of 0.5 percent compares with 6 percent in Australia and 5.25 percent in Norway.
The Standard & Poor's 500 Index dropped to the lowest level since April 2003 yesterday on concern a worsening global economic slump will damp corporate profits.
The New Zealand dollar remained lower against its U.S. counterpart today after the Reserve Bank cut the official cash rate by 1 percentage point to 6.50 percent. The kiwi fell 1.2 percent from late yesterday in Asia to 58.86 U.S. cents.
Emerging-market currencies weakened yesterday as Argentina's planned seizure of private pension funds stoked concern the nation faces its second default this decade. The government of President Cristina Fernandez de Kirchner proposed on Oct. 21 taking control of 10 funds, including units of HSBC Holdings Plc and Banco Bilbao Vizcaya Argentaria SA.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.
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Copper Plunges Below $4,000 for First Time Since November 2005
By Glenys Sim
Oct. 23 (Bloomberg) -- Copper tumbled below $4,000 a metric ton for the first time since November 2005 on concern a deepening global economic slump will damp demand for commodities.
Australian, New Zealand and Japanese shares dropped today on increasing signs the world's economy has tilted into a recession. BHP Billiton Ltd., the world's biggest mining company, lost 11 percent after metal prices plummeted.
``Copper won't be spared the onslaught on commodities as fundamentals ahead look bleak,'' Yu Mengguo, senior analyst at Jinpeng International Futures Co., said from Beijing today.
The metal for delivery in three months fell as much as 4.1 percent to $3,983 a ton, and traded at $3,995 a ton on the London Metal Exchange at 8:54 a.m. Singapore time. Copper is down 17 percent this week, and off 40 percent for the year.
Global production outpaced demand by 65,000 metric tons in July, the International Copper Study Group said Oct. 20.
``Across the board, every area you look at is weak, and copper is not going to be immune from that,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ``It all relates back to the global credit crisis and the prospect of a global recession. I don't see any reason to come in and buy copper or any commodity now.''
BHP Billiton said yesterday that ``uncertainty'' about commodity demand in China will persist after its economy expanded at the slowest pace in five years in the past quarter. Freeport-McMoRan Copper & Gold Inc. said this week it will delay some expansion projects until market conditions improve.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Oct. 23 (Bloomberg) -- Copper tumbled below $4,000 a metric ton for the first time since November 2005 on concern a deepening global economic slump will damp demand for commodities.
Australian, New Zealand and Japanese shares dropped today on increasing signs the world's economy has tilted into a recession. BHP Billiton Ltd., the world's biggest mining company, lost 11 percent after metal prices plummeted.
``Copper won't be spared the onslaught on commodities as fundamentals ahead look bleak,'' Yu Mengguo, senior analyst at Jinpeng International Futures Co., said from Beijing today.
The metal for delivery in three months fell as much as 4.1 percent to $3,983 a ton, and traded at $3,995 a ton on the London Metal Exchange at 8:54 a.m. Singapore time. Copper is down 17 percent this week, and off 40 percent for the year.
Global production outpaced demand by 65,000 metric tons in July, the International Copper Study Group said Oct. 20.
``Across the board, every area you look at is weak, and copper is not going to be immune from that,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ``It all relates back to the global credit crisis and the prospect of a global recession. I don't see any reason to come in and buy copper or any commodity now.''
BHP Billiton said yesterday that ``uncertainty'' about commodity demand in China will persist after its economy expanded at the slowest pace in five years in the past quarter. Freeport-McMoRan Copper & Gold Inc. said this week it will delay some expansion projects until market conditions improve.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Crude Oil Rises Ahead of OPEC Meeting to Discuss Output Cuts
By Christian Schmollinger
Oct. 23 (Bloomberg) -- Crude oil rose in New York, rebounding from a 16-month low ahead of a meeting of the Organization of Petroleum Exporting Countries to discuss production cuts.
Crude oil for December delivery rose as much as $1.06, or 1.6 percent, to $67.81 a barrel on the New York Mercantile Exchange. It was at $67.60 a barrel at 8:24 a.m. Singapore time. Yesterday, crude oil futures fell $5.43 to $66.75 a barrel in New York, the lowest settlement since June 13, 2007.
Prices, which have tumbled 55 percent since reaching a record $147.27 on July 11, are down 24 percent from a year ago.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Oct. 23 (Bloomberg) -- Crude oil rose in New York, rebounding from a 16-month low ahead of a meeting of the Organization of Petroleum Exporting Countries to discuss production cuts.
Crude oil for December delivery rose as much as $1.06, or 1.6 percent, to $67.81 a barrel on the New York Mercantile Exchange. It was at $67.60 a barrel at 8:24 a.m. Singapore time. Yesterday, crude oil futures fell $5.43 to $66.75 a barrel in New York, the lowest settlement since June 13, 2007.
Prices, which have tumbled 55 percent since reaching a record $147.27 on July 11, are down 24 percent from a year ago.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Australia Stocks Update: S&P/ASX 200 Falls 94.20 to 4,061.90
By Darren Boey
Oct. 23 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, fell 2.27 percent at 10:05 a.m.
The index of 200 companies traded on the Australian Stock Exchange fell 94.20 to 4,061.90. Among the stocks in the index, 9 rose, 111 fell and 80 were unchanged.
Declines in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Australia & New Zealand Banking Group Ltd and Csl Ltd/australia. About 65.09 million shares changed hands on the Australian Stock Exchange.
Bhp Billiton Ltd, which fell A$2.75 to A$24.50, was the most active stock by value in Australia.
The next most-active issues were Australia & New Zealand Banking Group Ltd, which fell 90 cents to A$18.10, and Commonwealth Bank Of Australia, which fell 72 cents to A$41.17.
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Oct. 23 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, fell 2.27 percent at 10:05 a.m.
The index of 200 companies traded on the Australian Stock Exchange fell 94.20 to 4,061.90. Among the stocks in the index, 9 rose, 111 fell and 80 were unchanged.
Declines in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Australia & New Zealand Banking Group Ltd and Csl Ltd/australia. About 65.09 million shares changed hands on the Australian Stock Exchange.
Bhp Billiton Ltd, which fell A$2.75 to A$24.50, was the most active stock by value in Australia.
The next most-active issues were Australia & New Zealand Banking Group Ltd, which fell 90 cents to A$18.10, and Commonwealth Bank Of Australia, which fell 72 cents to A$41.17.
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Japanese Stocks Fall a 2nd Day on Commodity Slump, Stronger Yen
By Masaki Kondo
Oct. 23 (Bloomberg) -- Japan stocks fell a second day after commodity prices tumbled on increased speculation a global economic slowdown will reduce demand for raw materials.
Mitsubishi Corp., a Japanese trading house that gets half its profit from commodities, was poised to slide after oil sank to a 16-month low. Mitsubishi Motors Corp. retreated 4 percent after the yen appreciated against the euro to the strongest in five years.
``The large swing in foreign exchange has raised a chance Japanese companies will have to cut their earnings forecasts even deeper,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television.
The Nikkei 225 Stock Average declined 130.82, or 1.5 percent, to 8,543.87 as of 9:02 a.m. in Tokyo. The broader Topix index fell 13.12, or 1.5 percent, to 876.11. Nikkei futures in Osaka traded at 8,250, indicating the gauge may decline to a new five- year low.
Crude oil for December delivery dropped 7.5 percent to $66.75 a barrel in New York yesterday, the lowest settlement since June 2007 as an economic slowdown reduced fuel consumption. Copper futures declined to as much as $1.823, the lowest since November 2005, while gold sank 4.3 percent.
A $1 change in the price of a barrel of oil alters Mitsubishi's annual net income by 1 billion yen ($10 million), according to Mitsubishi UFJ Securities Co.
Meanwhile, the Japanese currency appreciated against the euro to as much as 124.63, the strongest since November 2003, while strengthening against the dollar to as much as 97.23. A stronger yen diminishes the repatriated value of overseas sales.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Oct. 23 (Bloomberg) -- Japan stocks fell a second day after commodity prices tumbled on increased speculation a global economic slowdown will reduce demand for raw materials.
Mitsubishi Corp., a Japanese trading house that gets half its profit from commodities, was poised to slide after oil sank to a 16-month low. Mitsubishi Motors Corp. retreated 4 percent after the yen appreciated against the euro to the strongest in five years.
``The large swing in foreign exchange has raised a chance Japanese companies will have to cut their earnings forecasts even deeper,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television.
The Nikkei 225 Stock Average declined 130.82, or 1.5 percent, to 8,543.87 as of 9:02 a.m. in Tokyo. The broader Topix index fell 13.12, or 1.5 percent, to 876.11. Nikkei futures in Osaka traded at 8,250, indicating the gauge may decline to a new five- year low.
Crude oil for December delivery dropped 7.5 percent to $66.75 a barrel in New York yesterday, the lowest settlement since June 2007 as an economic slowdown reduced fuel consumption. Copper futures declined to as much as $1.823, the lowest since November 2005, while gold sank 4.3 percent.
A $1 change in the price of a barrel of oil alters Mitsubishi's annual net income by 1 billion yen ($10 million), according to Mitsubishi UFJ Securities Co.
Meanwhile, the Japanese currency appreciated against the euro to as much as 124.63, the strongest since November 2003, while strengthening against the dollar to as much as 97.23. A stronger yen diminishes the repatriated value of overseas sales.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Asian Stocks Drop as Commodities Prices Slump; Posco, BHP Fall
By Patrick Rial and Masaki Kondo
Oct. 23 (Bloomberg) -- Asian stocks slumped, sending the region's benchmark index to the lowest level in four years, after commodity prices tumbled on concern a global economic slowdown is reducing demand for raw materials.
Posco retreated 7.8 percent after global steel production dropped last month. BHP Billiton Ltd. and Rio Tinto Group plunged more than 8 percent after European regulators said a takeover of Rio by BHP may break antitrust rules, people close to the case said. Australia & New Zealand Banking Group Ltd. lost 4.8 percent after profit fell by a third.
The MSCI Asia Pacific Index lost 3.2 percent to 85 as of 9:28 a.m. in Tokyo, set for the lowest level since May 2004. The gauge has plunged 46 percent this year.
Japan's Nikkei 225 Stock Average lost 5.2 percent to 8,227.75, poised for its weakest close since May 2003. Equity indexes in Australia, New Zealand and South Korea also tumbled.
U.S. stocks slumped yesterday as the Standard & Poor's 500 Index lost 6.1 percent to the lowest level since April 2003.
Crude oil for December delivery dropped 7.5 percent to $66.75 a barrel in New York yesterday, the lowest settlement since June 2007 as an economic slowdown reduced fuel consumption. Copper futures declined to as much as $1.823, a three-year low, while gold sank 4.3 percent.
The Reuters/Jefferies CRB Index of 19 raw materials plunged as much as 3.3 percent to 269.48, the lowest since Sept. 8, 2004. A measure of six metals traded on the London Metal Exchange fell 5.9 percent, with copper dropping 7.6 percent.
Commodities Slump
BHP lost 8 percent to A$24.91. Rio Tinto declined 15 percent to A$66.97. Woodside Petroleum Ltd., operator of Australia's A$25 billion ($20 billion) North West Shelf liquefied natural gas venture, fell 3 percent to A$39.64.
European Union regulators told lawyers for BHP that its $76 billion hostile bid for Rio Tinto Group may break antitrust rules, two people close to the case said.
Second-half profit at ANZ Banking, the nation's third- largest lender, fell 35 percent to A$1.36 billion ($911 million) as provisions for delinquent loans surged. ANZ dropped 4.8 percent to A$18.09.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net;
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Oct. 23 (Bloomberg) -- Asian stocks slumped, sending the region's benchmark index to the lowest level in four years, after commodity prices tumbled on concern a global economic slowdown is reducing demand for raw materials.
Posco retreated 7.8 percent after global steel production dropped last month. BHP Billiton Ltd. and Rio Tinto Group plunged more than 8 percent after European regulators said a takeover of Rio by BHP may break antitrust rules, people close to the case said. Australia & New Zealand Banking Group Ltd. lost 4.8 percent after profit fell by a third.
The MSCI Asia Pacific Index lost 3.2 percent to 85 as of 9:28 a.m. in Tokyo, set for the lowest level since May 2004. The gauge has plunged 46 percent this year.
Japan's Nikkei 225 Stock Average lost 5.2 percent to 8,227.75, poised for its weakest close since May 2003. Equity indexes in Australia, New Zealand and South Korea also tumbled.
U.S. stocks slumped yesterday as the Standard & Poor's 500 Index lost 6.1 percent to the lowest level since April 2003.
Crude oil for December delivery dropped 7.5 percent to $66.75 a barrel in New York yesterday, the lowest settlement since June 2007 as an economic slowdown reduced fuel consumption. Copper futures declined to as much as $1.823, a three-year low, while gold sank 4.3 percent.
The Reuters/Jefferies CRB Index of 19 raw materials plunged as much as 3.3 percent to 269.48, the lowest since Sept. 8, 2004. A measure of six metals traded on the London Metal Exchange fell 5.9 percent, with copper dropping 7.6 percent.
Commodities Slump
BHP lost 8 percent to A$24.91. Rio Tinto declined 15 percent to A$66.97. Woodside Petroleum Ltd., operator of Australia's A$25 billion ($20 billion) North West Shelf liquefied natural gas venture, fell 3 percent to A$39.64.
European Union regulators told lawyers for BHP that its $76 billion hostile bid for Rio Tinto Group may break antitrust rules, two people close to the case said.
Second-half profit at ANZ Banking, the nation's third- largest lender, fell 35 percent to A$1.36 billion ($911 million) as provisions for delinquent loans surged. ANZ dropped 4.8 percent to A$18.09.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net;
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Pemex Enters Gulf Ultra Deepwater in Search of Oil
By Andres R. Martinez
Oct. 22 (Bloomberg) -- Petroleos Mexicanos has started seismic studies for oil under seas three times deeper than anything it has drilled, marking its entry into ultra deepwater as it seeks to offset an almost five-year decline in output.
Pemex, as the state-owned oil company is known, began laying seismic cables in the Gulf of Mexico on Oct. 18, according to a bulletin on Mexico's Merchant Marine Web site. The study of the area just west of the Mexican side of the Gulf's El Perdido Foldbelt will last until April and provide two-dimensional data on deposits in water as deep as 3,500 meters (11,484 feet).
``Up to now they haven't committed any money to the U.S.- Mexican border,'' George Baker, an independent energy analyst who covers Mexico, said yesterday in a telephone interview. ``They are barely getting their toes wet in deep water.''
Mexico City-based Pemex is hoping to find oil in deep waters, where the company estimates it may have 30 billion barrels of oil, to offset an almost five-year decline in output. Royal Dutch Shell Plc expects by 2010 to begin producing 130,000 barrels of oil a day on the U.S. side of El Perdido, eight miles north of the U.S.-Mexico maritime border.
Mexico's government has argued that fields such as El Perdido straddle the maritime border, and that exploration by companies such as Shell threatens to remove the oil from deposits in Mexican territory or reduce pressure, making it harder and more expensive for the state oil company to explore for crude.
So far, Pemex has drilled seven wells in waters deeper than 500 meters. While the company found oil in one well it hasn't released data to say how much it discovered. Pemex plans to drill 19 more wells in waters as deep as 1,100 meters through 2012. Ultra deepwater projects are generally 5,000 feet or more.
20 Years Later
Pemex is two decades behind companies exploring the U.S. side of the Gulf, where BP Plc made the first ultra-deepwater discovery, Kepler, in August 1987.
A ship contracted by Pemex plans to roll out a 12-kilometer seismic cable (7.5 miles). Additional lines will be placed in concentric circles to study the area, according to the Merchant Marine report.
The seismic studies are being conducted just west of El Perdido, Martha Avelar, a spokeswoman for Pemex, said in an interview without providing further details.
Pemex's oil output fell 14 percent to 2.722 million barrels a day in September. Production at Cantarell, the company's largest field and the third-largest in the world, fell 35 percent, more than twice as fast as government estimates.
Declining output is costing more than 275 billion pesos ($21.2 billion) in sales this year and threatening Mexico's budget, as 40 percent of the government's revenue comes from Pemex royalties.
Oil Legislation
Mexico's Senate energy committee passed seven bills this week, including one that would allow Pemex to hire private companies to explore and produce oil. The companies would not be able to own the oil or book reserves. Instead, they would be paid incentives to find more oil, reach production goals, use new technology or reduce costs.
Mexico nationalized U.K. and U.S. oil assets when it formed Pemex in 1938. Only Pemex is allowed to explore and produce oil, according to Mexico's constitution.
The full Senate and Congress must now consider and vote on the bills. The legislation falls short of President Felipe Calderon's original initiative, which included hiring companies to build and operate refineries.
-- With reporting by Joe Carroll in Chicago and Jens Gould and Adriana Lopez Caraveo in Mexico City. Editor: Robin Saponar, Richard Stubbe
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
Read more...
Oct. 22 (Bloomberg) -- Petroleos Mexicanos has started seismic studies for oil under seas three times deeper than anything it has drilled, marking its entry into ultra deepwater as it seeks to offset an almost five-year decline in output.
Pemex, as the state-owned oil company is known, began laying seismic cables in the Gulf of Mexico on Oct. 18, according to a bulletin on Mexico's Merchant Marine Web site. The study of the area just west of the Mexican side of the Gulf's El Perdido Foldbelt will last until April and provide two-dimensional data on deposits in water as deep as 3,500 meters (11,484 feet).
``Up to now they haven't committed any money to the U.S.- Mexican border,'' George Baker, an independent energy analyst who covers Mexico, said yesterday in a telephone interview. ``They are barely getting their toes wet in deep water.''
Mexico City-based Pemex is hoping to find oil in deep waters, where the company estimates it may have 30 billion barrels of oil, to offset an almost five-year decline in output. Royal Dutch Shell Plc expects by 2010 to begin producing 130,000 barrels of oil a day on the U.S. side of El Perdido, eight miles north of the U.S.-Mexico maritime border.
Mexico's government has argued that fields such as El Perdido straddle the maritime border, and that exploration by companies such as Shell threatens to remove the oil from deposits in Mexican territory or reduce pressure, making it harder and more expensive for the state oil company to explore for crude.
So far, Pemex has drilled seven wells in waters deeper than 500 meters. While the company found oil in one well it hasn't released data to say how much it discovered. Pemex plans to drill 19 more wells in waters as deep as 1,100 meters through 2012. Ultra deepwater projects are generally 5,000 feet or more.
20 Years Later
Pemex is two decades behind companies exploring the U.S. side of the Gulf, where BP Plc made the first ultra-deepwater discovery, Kepler, in August 1987.
A ship contracted by Pemex plans to roll out a 12-kilometer seismic cable (7.5 miles). Additional lines will be placed in concentric circles to study the area, according to the Merchant Marine report.
The seismic studies are being conducted just west of El Perdido, Martha Avelar, a spokeswoman for Pemex, said in an interview without providing further details.
Pemex's oil output fell 14 percent to 2.722 million barrels a day in September. Production at Cantarell, the company's largest field and the third-largest in the world, fell 35 percent, more than twice as fast as government estimates.
Declining output is costing more than 275 billion pesos ($21.2 billion) in sales this year and threatening Mexico's budget, as 40 percent of the government's revenue comes from Pemex royalties.
Oil Legislation
Mexico's Senate energy committee passed seven bills this week, including one that would allow Pemex to hire private companies to explore and produce oil. The companies would not be able to own the oil or book reserves. Instead, they would be paid incentives to find more oil, reach production goals, use new technology or reduce costs.
Mexico nationalized U.K. and U.S. oil assets when it formed Pemex in 1938. Only Pemex is allowed to explore and produce oil, according to Mexico's constitution.
The full Senate and Congress must now consider and vote on the bills. The legislation falls short of President Felipe Calderon's original initiative, which included hiring companies to build and operate refineries.
-- With reporting by Joe Carroll in Chicago and Jens Gould and Adriana Lopez Caraveo in Mexico City. Editor: Robin Saponar, Richard Stubbe
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
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Mexico's Peso Plunges to Record Low on Global Economic Concerns
By Valerie Rota
Oct. 22 (Bloomberg) -- Mexico's peso fell near a record low and yields on the country's benchmark local-currency bonds surged to their highest in more than three years, on mounting concern the global economic slump is deepening.
The peso weakened as much as 5.1 percent as investors pulled out of emerging markets. Banco de Mexico failed to stem a drop in the peso after it purchased $400 million worth of the Mexican currency, adding to the $11.6 billion of pesos it has bought over the past two weeks to stem a rout.
``There is concern that foreign investors will exit their holdings'' of peso bonds, said Agustin Villarreal, a bond trader in Mexico City at Invex Casa de Bolsa SA. ``We're seeing very little liquidity in the long end of the yield curve.''
The peso dropped 4.6 percent to 13.879 per U.S. dollar at 5 p.m. New York time, from 13.2366 yesterday. It was the weakest closing price since Jan. 4, 1971, when Bloomberg began tracking the data. It hit an all-time intraday low of 14.2927 on Oct. 8. Banco de Mexico today sold dollars at an average price of 13.4355 pesos.
Mexico's peso fell for a fourth straight day and has lost nearly a third of its value since reaching a six-year high on Aug. 4. Banco de Mexico has bought $12 billion worth of pesos this month to shore up the currency after it plunged to a record intra-day low of 14.2927 on Oct. 8.
Corporate Losses
The peso's slump has hurt Mexican companies. Controladora Comercial Mexican SAB, Mexico's third-largest retailer declared bankruptcy on Oct. 9 after failing to raise cash to meet margin calls on losses of $1.08 billion of currency derivates. Companies such as Cemex SAB, North America's largest cement maker, and furniture retailer Coppel SA failed to sell all of the commercial paper they offered for sale last week.
``There is an internal credit restriction,'' said Jaime Ascencio, a fixed-income strategist at Mexico City-based Actinver SA, the country's biggest independent money manager. This ``is a crisis of confidence. Investors are wondering why they should buy if there is no guarantee they'll get their money back.''
Declines in the price of oil, Mexico's biggest source of dollar revenues, also fueled losses in the peso. Crude oil for November delivery fell 5.8 percent to $66.75 a barrel on the New York Mercantile Exchange.
Mexico will reduce its spending plan for next year if oil prices fall another $7 to $8 a barrel, as crude is already below the country's $70 a barrel budgeted price for 2009, Finance Minister Agustin Carstens said on Mexico City-based Radio Formula today. The Mexican mix of crude oil for export sold for an average of $58.92 yesterday.
Benchmark Bond
Yields on Mexico's 10 percent security due in December 2024, the country's most-traded bond in pesos, climbed 71 basis points, or 0.71 percentage point, to 10.65 percent. The yield surged to its highest since May 2005. The bond's price fell 5.44 centavos to 94.97 centavos per peso, according to Banco Santander SA.
Foreigners own one-fourth of the country's fixed-rate securities in pesos maturing in a year or more, making them Mexico's biggest holders of the debt. Foreign holdings of Mexican bonds fell 1.6 percent to 282 billion pesos ($21 billion) as of Oct. 13 from the previous month, according to the latest data posted on Banco de Mexico's Web site. They are down 4.8 percent from a record high reached on Aug. 12.
Expectations that a central bank report tomorrow will show inflation slowed in the first half of this month failed to stem losses in Mexican fixed-rate bonds.
Inflation likely decelerated to 0.34 percent in the first two weeks of October from 0.44 percent in the same period a month ago, according to the median of 15 forecasts in a Bloomberg News survey. Consumer prices excluding fresh food and energy items increased 0.18 percent in the first half of the month, less than the 0.41 percent increase in the first half of August, the survey shows.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.
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Oct. 22 (Bloomberg) -- Mexico's peso fell near a record low and yields on the country's benchmark local-currency bonds surged to their highest in more than three years, on mounting concern the global economic slump is deepening.
The peso weakened as much as 5.1 percent as investors pulled out of emerging markets. Banco de Mexico failed to stem a drop in the peso after it purchased $400 million worth of the Mexican currency, adding to the $11.6 billion of pesos it has bought over the past two weeks to stem a rout.
``There is concern that foreign investors will exit their holdings'' of peso bonds, said Agustin Villarreal, a bond trader in Mexico City at Invex Casa de Bolsa SA. ``We're seeing very little liquidity in the long end of the yield curve.''
The peso dropped 4.6 percent to 13.879 per U.S. dollar at 5 p.m. New York time, from 13.2366 yesterday. It was the weakest closing price since Jan. 4, 1971, when Bloomberg began tracking the data. It hit an all-time intraday low of 14.2927 on Oct. 8. Banco de Mexico today sold dollars at an average price of 13.4355 pesos.
Mexico's peso fell for a fourth straight day and has lost nearly a third of its value since reaching a six-year high on Aug. 4. Banco de Mexico has bought $12 billion worth of pesos this month to shore up the currency after it plunged to a record intra-day low of 14.2927 on Oct. 8.
Corporate Losses
The peso's slump has hurt Mexican companies. Controladora Comercial Mexican SAB, Mexico's third-largest retailer declared bankruptcy on Oct. 9 after failing to raise cash to meet margin calls on losses of $1.08 billion of currency derivates. Companies such as Cemex SAB, North America's largest cement maker, and furniture retailer Coppel SA failed to sell all of the commercial paper they offered for sale last week.
``There is an internal credit restriction,'' said Jaime Ascencio, a fixed-income strategist at Mexico City-based Actinver SA, the country's biggest independent money manager. This ``is a crisis of confidence. Investors are wondering why they should buy if there is no guarantee they'll get their money back.''
Declines in the price of oil, Mexico's biggest source of dollar revenues, also fueled losses in the peso. Crude oil for November delivery fell 5.8 percent to $66.75 a barrel on the New York Mercantile Exchange.
Mexico will reduce its spending plan for next year if oil prices fall another $7 to $8 a barrel, as crude is already below the country's $70 a barrel budgeted price for 2009, Finance Minister Agustin Carstens said on Mexico City-based Radio Formula today. The Mexican mix of crude oil for export sold for an average of $58.92 yesterday.
Benchmark Bond
Yields on Mexico's 10 percent security due in December 2024, the country's most-traded bond in pesos, climbed 71 basis points, or 0.71 percentage point, to 10.65 percent. The yield surged to its highest since May 2005. The bond's price fell 5.44 centavos to 94.97 centavos per peso, according to Banco Santander SA.
Foreigners own one-fourth of the country's fixed-rate securities in pesos maturing in a year or more, making them Mexico's biggest holders of the debt. Foreign holdings of Mexican bonds fell 1.6 percent to 282 billion pesos ($21 billion) as of Oct. 13 from the previous month, according to the latest data posted on Banco de Mexico's Web site. They are down 4.8 percent from a record high reached on Aug. 12.
Expectations that a central bank report tomorrow will show inflation slowed in the first half of this month failed to stem losses in Mexican fixed-rate bonds.
Inflation likely decelerated to 0.34 percent in the first two weeks of October from 0.44 percent in the same period a month ago, according to the median of 15 forecasts in a Bloomberg News survey. Consumer prices excluding fresh food and energy items increased 0.18 percent in the first half of the month, less than the 0.41 percent increase in the first half of August, the survey shows.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.
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Belarus Asks IMF for Credit Line as Economy Falters
By Lily Nonomiya
Oct. 22 (Bloomberg) -- Belarus requested aid from the International Monetary Fund, joining Iceland, Pakistan, Hungary and the Ukraine in asking for assistance in weathering the global financial crisis.
``The global financial crisis has adversely affected the Belarusian economy and its access to external finance,'' IMF Managing Director Dominique Strauss-Kahn said in a statement released in Washington today.
Discussions with Belarus will start in the ``next few days'' and the amount of the assistance hasn't been decided. Belarus requested assistance that could be supported by a stand-by arrangement, or line of credit that doesn't necessarily have to be used.
The former Soviet state applied for a $2 billion loan and may also seek funds from central banks and commercial banks in other countries, Interfax reported Oct. 22, citing the Belarusian central bank.
Ukraine said this week it may sign a loan worth as much as $15 billion with the IMF next week as it seeks to inject cash into domestic banks.
To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net
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Oct. 22 (Bloomberg) -- Belarus requested aid from the International Monetary Fund, joining Iceland, Pakistan, Hungary and the Ukraine in asking for assistance in weathering the global financial crisis.
``The global financial crisis has adversely affected the Belarusian economy and its access to external finance,'' IMF Managing Director Dominique Strauss-Kahn said in a statement released in Washington today.
Discussions with Belarus will start in the ``next few days'' and the amount of the assistance hasn't been decided. Belarus requested assistance that could be supported by a stand-by arrangement, or line of credit that doesn't necessarily have to be used.
The former Soviet state applied for a $2 billion loan and may also seek funds from central banks and commercial banks in other countries, Interfax reported Oct. 22, citing the Belarusian central bank.
Ukraine said this week it may sign a loan worth as much as $15 billion with the IMF next week as it seeks to inject cash into domestic banks.
To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net
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Brazilian Real Tumbles as Investors Flee High-Yielding Assets
By Jamie McGee
Oct. 22 (Bloomberg) -- Brazil's real tumbled more than 5 percent for a second consecutive day as investors fled higher- yielding assets amid concerns of a global recession.
Emerging-market bonds, currencies and stocks plunged from Brazil to Russia on speculation Argentina may default on its debt for the second time this decade.
``Equities have put downward pressure on emerging market currencies,'' said Omer Esiner, a senior market foreign-exchange analyst in Washington at Ruesch International Inc., a currency trading company. ``The uncertainty of the current situation prompts investors to seek more liquid, deeper capital markets like you have in the U.S.''
The currency dropped 5.9 percent to 2.379 per U.S. dollar at 5:08 p.m., from 2.2386 yesterday. Earlier, the real fell 6.6 percent, its biggest drop since Oct. 8. The real has dropped 20 percent this month, the third-worst performer among the 16 most- actively traded currencies, trailing only the South African rand and Mexican peso.
Banco Central do Brasil purchased an unspecified amount of reais today at a rate of 2.356 to the dollar. The central bank has sold $3.2 billion in foreign reserves to buy reais in the spot market and to support the real from Oct. 8 to Oct. 20, central bank President Henrique Meirelles said in testimony before congress yesterday. The central bank has also injected $71 billion in the banking system to help smaller lenders.
The central bank will offer 16,000 swap contracts tomorrow, according to a statement today.
Argentine Proposal
Brazilian President Luiz Inacio Lula da Silva authorized federally controlled banks to buy stakes in non-government financial institutions, in a decree published today.
Central bankers ``will not turn the trend,'' said Francisco Diez, director of emerging-market foreign exchange at RBC Capital Markets in New York. ``They will help mitigate it.''
Argentine President Cristina Fernandez de Kirchner's plan to take control of $29 billion of pension assets roiled markets because the last time the government seized savings was in 2001, before it defaulted on $95 billion of debt and triggered a global selloff. Brazil and Argentina are neighboring countries and trading partners.
The Standard & Poor's 500 Index declined 6.1 percent, while Brazil's Bovespa stock index tumbled 10.2 percent.
``It's already a delicate situation in South America,'' Diez said. ``To have further bad news in the region is not helping matters.''
In the first eight months of the year, Brazil advanced against 16 of the most actively traded currencies and traded at record high on Aug.1, at 1.56 per U.S. dollar, supported by record gains in commodity prices.
Repatriating Funds
``You tend to see big moves reverse themselves,'' Esiner said. ``Investors had poured money into these markets over the last couple of years. The credit crisis and the resulting spike in risk aversion has caused investors to repatriate those funds back home.''
The yield on Brazil's overnight futures contract for January 2009 delivery rose 30 basis points, or 0.3 percentage point, to 14.24 percent. The yield on the government's zero- coupon bonds due in January 2010 rose 152 basis points to 16.29 percent, according to Banco Votorantim.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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Oct. 22 (Bloomberg) -- Brazil's real tumbled more than 5 percent for a second consecutive day as investors fled higher- yielding assets amid concerns of a global recession.
Emerging-market bonds, currencies and stocks plunged from Brazil to Russia on speculation Argentina may default on its debt for the second time this decade.
``Equities have put downward pressure on emerging market currencies,'' said Omer Esiner, a senior market foreign-exchange analyst in Washington at Ruesch International Inc., a currency trading company. ``The uncertainty of the current situation prompts investors to seek more liquid, deeper capital markets like you have in the U.S.''
The currency dropped 5.9 percent to 2.379 per U.S. dollar at 5:08 p.m., from 2.2386 yesterday. Earlier, the real fell 6.6 percent, its biggest drop since Oct. 8. The real has dropped 20 percent this month, the third-worst performer among the 16 most- actively traded currencies, trailing only the South African rand and Mexican peso.
Banco Central do Brasil purchased an unspecified amount of reais today at a rate of 2.356 to the dollar. The central bank has sold $3.2 billion in foreign reserves to buy reais in the spot market and to support the real from Oct. 8 to Oct. 20, central bank President Henrique Meirelles said in testimony before congress yesterday. The central bank has also injected $71 billion in the banking system to help smaller lenders.
The central bank will offer 16,000 swap contracts tomorrow, according to a statement today.
Argentine Proposal
Brazilian President Luiz Inacio Lula da Silva authorized federally controlled banks to buy stakes in non-government financial institutions, in a decree published today.
Central bankers ``will not turn the trend,'' said Francisco Diez, director of emerging-market foreign exchange at RBC Capital Markets in New York. ``They will help mitigate it.''
Argentine President Cristina Fernandez de Kirchner's plan to take control of $29 billion of pension assets roiled markets because the last time the government seized savings was in 2001, before it defaulted on $95 billion of debt and triggered a global selloff. Brazil and Argentina are neighboring countries and trading partners.
The Standard & Poor's 500 Index declined 6.1 percent, while Brazil's Bovespa stock index tumbled 10.2 percent.
``It's already a delicate situation in South America,'' Diez said. ``To have further bad news in the region is not helping matters.''
In the first eight months of the year, Brazil advanced against 16 of the most actively traded currencies and traded at record high on Aug.1, at 1.56 per U.S. dollar, supported by record gains in commodity prices.
Repatriating Funds
``You tend to see big moves reverse themselves,'' Esiner said. ``Investors had poured money into these markets over the last couple of years. The credit crisis and the resulting spike in risk aversion has caused investors to repatriate those funds back home.''
The yield on Brazil's overnight futures contract for January 2009 delivery rose 30 basis points, or 0.3 percentage point, to 14.24 percent. The yield on the government's zero- coupon bonds due in January 2010 rose 152 basis points to 16.29 percent, according to Banco Votorantim.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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Cocoa Price Drops to 11-Month Low as Dollar Rises; Coffee Falls
By Shruti Date Singh
Oct. 22 (Bloomberg) -- Cocoa futures fell to the lowest in almost 11 months as the U.S. Dollar Index surged, making commodities more expensive for buyers holding other currencies. Coffee declined.
The index, which values the dollar against six currencies, rose for a third straight day, gaining as much as 2.3 percent and reaching the highest level since November 2006. Among the currencies in the index is the U.K. pound, which is used to trade cocoa in London. A stronger dollar reduces the appeal of commodities as a hedge against inflation for investors.
``Seeing the dollar up, it's going to be difficult for cocoa to go up,'' said Adam Klopfenstein, a senior market strategist for Lind-Waldock in Chicago, a division of MF Global. ``You are seeing a lot of commodities pressured down.''
Cocoa futures for December delivery fell $41, or 2 percent, to $1,996 a metric ton on ICE Futures U.S. in New York. The price earlier reached $1,924, the lowest for a most-active contract since Nov. 28.
The Reuters/Jefferies CRB Index of 19 raw materials fell to the lowest level since August 2004.
Concerns that a slowing economy will reduce consumption of commodities may spur food companies to slow purchases, Klopfenstein said.
Arabica coffee futures for December delivery fell 1.65 cents, or 1.4 percent, to $1.126 a pound on ICE. That is the biggest percentage drop for a most-active contract since Oct. 15.
In London, robusta coffee for January delivery fell $25, or 1.4 percent, to $1,761 a metric ton on the Liffe exchange.
The slump in global equities continues to remind commodity traders of the slowdown in the economy, Klopfenstein said.
The Standard & Poor's 500 Index fell for the third time in four sessions today, declining as much as 5.4 percent. The gauge was down 18 percent this month through yesterday.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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Oct. 22 (Bloomberg) -- Cocoa futures fell to the lowest in almost 11 months as the U.S. Dollar Index surged, making commodities more expensive for buyers holding other currencies. Coffee declined.
The index, which values the dollar against six currencies, rose for a third straight day, gaining as much as 2.3 percent and reaching the highest level since November 2006. Among the currencies in the index is the U.K. pound, which is used to trade cocoa in London. A stronger dollar reduces the appeal of commodities as a hedge against inflation for investors.
``Seeing the dollar up, it's going to be difficult for cocoa to go up,'' said Adam Klopfenstein, a senior market strategist for Lind-Waldock in Chicago, a division of MF Global. ``You are seeing a lot of commodities pressured down.''
Cocoa futures for December delivery fell $41, or 2 percent, to $1,996 a metric ton on ICE Futures U.S. in New York. The price earlier reached $1,924, the lowest for a most-active contract since Nov. 28.
The Reuters/Jefferies CRB Index of 19 raw materials fell to the lowest level since August 2004.
Concerns that a slowing economy will reduce consumption of commodities may spur food companies to slow purchases, Klopfenstein said.
Arabica coffee futures for December delivery fell 1.65 cents, or 1.4 percent, to $1.126 a pound on ICE. That is the biggest percentage drop for a most-active contract since Oct. 15.
In London, robusta coffee for January delivery fell $25, or 1.4 percent, to $1,761 a metric ton on the Liffe exchange.
The slump in global equities continues to remind commodity traders of the slowdown in the economy, Klopfenstein said.
The Standard & Poor's 500 Index fell for the third time in four sessions today, declining as much as 5.4 percent. The gauge was down 18 percent this month through yesterday.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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Gold Falls to One-Year Low as Dollar Rallies; Silver Declines
By Pham-Duy Nguyen
Oct. 22 (Bloomberg) -- Gold fell to the lowest price in more than a year as the dollar jumped, eroding the appeal of the metal as an alternative investment. Silver also declined.
Gold has dropped 12 percent this year as the dollar gained 11 percent against a weighted basket of six major currencies. The Reuters/Jefferies CRB Index of 19 raw materials today dropped to the lowest in four years. Gold reached a record in March as the dollar headed to an all-time low against the euro.
``The strengthening dollar is pressuring gold and commodity prices in general,'' said Tom Hartmann, a commodity analyst at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``People aren't tossing dollars out the window or giving up on paper currencies, so gold is just acting like another commodity at this point.''
Gold futures for December delivery fell $32.80, or 4.3 percent, to $735.20 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $720, the lowest for a most-active contract since Sept. 18, 2007. Gold rose to $1,033.90 on March 17, the highest ever.
Silver futures for December delivery declined 61.5 cents, or 6.1 percent, to $9.46 an ounce. The price is down 37 percent this year, after seven straight annual gains.
The dollar rose as much as 2.3 percent today against the basket of currencies, reaching the highest since November 2006.
`Relentless' Selling
``The selling of gold has been relentless,'' Dennis Gartman, an economist and editor of the Gartman Letter, said in his daily report. ``Commodity prices are very weak as the dollar and the yen are very strong and liquidation is the order of the day.''
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell to 755.6 metric tons yesterday, down 1.9 percent from a record 770.6 ton Oct. 10.
Gold may fall to $700 as the dollar makes further gains against the euro, Hartmann said.
The euro fell below $1.28 for the first time since November 2006 on speculation the European Central Bank will cut borrowing costs at a faster pace than the Federal Reserve. The federal-funds rate is at 1.5 percent, down 3.75 percentage points from September 2007. The ECB's main refinancing rate is at 3.75 percent after an Oct. 8 cut from a seven-year high of 4.25 percent.
``There's just a perception that the U.S. has better tools to deal with the financial crisis than Europe,'' Hartmann said. ``There are too many competing interests in the euro region to come to a decision quickly.''
The 15-nation currency reached a record $1.6038 on July 15.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Oct. 22 (Bloomberg) -- Gold fell to the lowest price in more than a year as the dollar jumped, eroding the appeal of the metal as an alternative investment. Silver also declined.
Gold has dropped 12 percent this year as the dollar gained 11 percent against a weighted basket of six major currencies. The Reuters/Jefferies CRB Index of 19 raw materials today dropped to the lowest in four years. Gold reached a record in March as the dollar headed to an all-time low against the euro.
``The strengthening dollar is pressuring gold and commodity prices in general,'' said Tom Hartmann, a commodity analyst at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``People aren't tossing dollars out the window or giving up on paper currencies, so gold is just acting like another commodity at this point.''
Gold futures for December delivery fell $32.80, or 4.3 percent, to $735.20 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $720, the lowest for a most-active contract since Sept. 18, 2007. Gold rose to $1,033.90 on March 17, the highest ever.
Silver futures for December delivery declined 61.5 cents, or 6.1 percent, to $9.46 an ounce. The price is down 37 percent this year, after seven straight annual gains.
The dollar rose as much as 2.3 percent today against the basket of currencies, reaching the highest since November 2006.
`Relentless' Selling
``The selling of gold has been relentless,'' Dennis Gartman, an economist and editor of the Gartman Letter, said in his daily report. ``Commodity prices are very weak as the dollar and the yen are very strong and liquidation is the order of the day.''
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell to 755.6 metric tons yesterday, down 1.9 percent from a record 770.6 ton Oct. 10.
Gold may fall to $700 as the dollar makes further gains against the euro, Hartmann said.
The euro fell below $1.28 for the first time since November 2006 on speculation the European Central Bank will cut borrowing costs at a faster pace than the Federal Reserve. The federal-funds rate is at 1.5 percent, down 3.75 percentage points from September 2007. The ECB's main refinancing rate is at 3.75 percent after an Oct. 8 cut from a seven-year high of 4.25 percent.
``There's just a perception that the U.S. has better tools to deal with the financial crisis than Europe,'' Hartmann said. ``There are too many competing interests in the euro region to come to a decision quickly.''
The 15-nation currency reached a record $1.6038 on July 15.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Canada Stocks Fall, Led By Oil Producers; EnCana, Suncor Drop
By John Kipphoff
Oct. 22 (Bloomberg) -- Canadian stocks fell, pushing the main index toward its worst monthly drop in 21 years, as energy shares including Canadian Natural Resources Ltd. slumped along with oil prices on signs that fuel consumption is dropping.
Barrick Gold Corp. dropped along with prices of bullion and copper as lower demand and a higher U.S. dollar dimmed the investment appeal of commodities. GMP Capital Trust led financial shares lower after cutting its cash dividend, saying that the global credit crisis curbed equity sales and mergers.
The Standard & Poor's/TSX Composite Index fell 5.7 percent to 9,236.88 in Toronto. Canada's broadest stock benchmark, which derives more than three-quarters of its value from commodity and financial shares, has lost 21 percent in October, the most since after the ``Black Monday'' crash in the same month in 1987.
``There is so much force pulling commodities down hard,'' said Michael Sprung, president of Sprung & Co. Investment Counsel, which manages $50 million in Toronto. ``For the S&P/TSX, 8,000 to 8,500 is not out of the question, as an extreme, 7,500. That would be a 50 percent decline from the peak, not unusual in a bear market.''
The S&P/TSX has dropped 39 percent from its June 18 record as debt markets froze after more than $660 billion in credit losses at global institutions. The ensuing financial crisis, the worst since the Great Depression, led to a collapse in commodity prices and the failure of financial institutions including U.S. investment bank Lehman Brothers Holdings Inc.
Canadian Natural Resources, whose horizon oil-sands mine is scheduled to start production this year, dropped 11 percent today to C$49.26.
Oil Sands Miner
Suncor Energy Inc., the oil-sands mining company, fell 8.2 percent to C$26.46. EnCana Corp., Canada's biggest energy company by value, slid 6.2 percent to C$50.74. Addax Petroleum Corp., which explores for oil in Africa and Iraq, plunged 16 percent to C$16. Opti Canada Inc., which this week put off a decision to expand its Long Lake oil-sands mine because it can't access cash, dropped a record 23 percent to C$5.12.
Crude-oil futures in New York slid 7.5 percent to $66.75 a barrel, the lowest since June 2007, after a U.S. Energy Department report showed that fuel demand during the past four weeks fell 8.5 percent from a year ago. Gold touched $720 an ounce for the first time in a year, and copper extended its decline to the lowest since November 2005. The Reuters/Jefferies CRB Index of 19 raw materials touched the lowest in four years.
Bullion Producer
Barrick Gold, the largest bullion producer, slipped 13 percent to C$25, the lowest in four years. Goldcorp Inc. dropped 14 percent to C$20.84. Agnico-Eagle Mines Ltd., owner of Canada's biggest gold deposit, sank 25 percent to C$31.75, the most since at least 1983. Teck Cominco Ltd., Canada's biggest diversified miner, slid 17 percent to C$14.32 before its second- quarter earnings announcement after markets closed.
Ivanhoe Mines Ltd., which is developing a copper and gold mine in Mongolia with Rio Tinto Plc, plunged 28 percent to C$2.15, the lowest since July 2002.
GMP Capital declined 10 percent to C$5.41, a record. The Toronto-based investment bank cut its monthly payout by more than half to 5 cents yesterday.
``The severity of prevailing volatile market conditions is the worst seen in several decades in the Canadian capital markets,'' Chief Executive Officer Kevin Sullivan said.
The Canadian dollar fell the most since at least 1971 today and has declined 15 percent this month to a three-year low against its U.S. counterpart as investors worldwide sold resource-related assets to pay for losses elsewhere, fueling speculation the five-year commodity boom that lifted Canadian stocks to their peak earlier in 2008 has ended.
Rate Cut
The Bank of Canada lowered its interest rate for overnight loans between commercial banks by a quarter point to 2.25 yesterday and signaled more reductions as it slashed its 2009 forecast for economic growth in Canada by almost three-quarters to 0.6 percent. The central bank predicted exporters will be hurt by a U.S. recession, and a ``mild'' global contraction.
Bank of Nova Scotia, the country's third-largest lender, fell 6.6 percent to C$41.10.
Manulife Financial Corp. fell 5.7 percent to C$25.76. The nation's biggest insurance company slid for a second day after rival Sun Life Financial Inc. reported its first quarterly loss yesterday since demutualization in 2000, on writedowns tied to Lehman Brothers debt, and the falling value of its stock investments. Manulife, which reports results in November, said this month that credit losses will cut profit by C$250 million.
Measures of financial, energy and raw-materials shares fell 4.2 percent, 8 percent and 9.6 percent, respectively today. They are the worst performers this month among the S&P/TSX's 10 industries, down 16 percent, 27 percent and 36 percent.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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Oct. 22 (Bloomberg) -- Canadian stocks fell, pushing the main index toward its worst monthly drop in 21 years, as energy shares including Canadian Natural Resources Ltd. slumped along with oil prices on signs that fuel consumption is dropping.
Barrick Gold Corp. dropped along with prices of bullion and copper as lower demand and a higher U.S. dollar dimmed the investment appeal of commodities. GMP Capital Trust led financial shares lower after cutting its cash dividend, saying that the global credit crisis curbed equity sales and mergers.
The Standard & Poor's/TSX Composite Index fell 5.7 percent to 9,236.88 in Toronto. Canada's broadest stock benchmark, which derives more than three-quarters of its value from commodity and financial shares, has lost 21 percent in October, the most since after the ``Black Monday'' crash in the same month in 1987.
``There is so much force pulling commodities down hard,'' said Michael Sprung, president of Sprung & Co. Investment Counsel, which manages $50 million in Toronto. ``For the S&P/TSX, 8,000 to 8,500 is not out of the question, as an extreme, 7,500. That would be a 50 percent decline from the peak, not unusual in a bear market.''
The S&P/TSX has dropped 39 percent from its June 18 record as debt markets froze after more than $660 billion in credit losses at global institutions. The ensuing financial crisis, the worst since the Great Depression, led to a collapse in commodity prices and the failure of financial institutions including U.S. investment bank Lehman Brothers Holdings Inc.
Canadian Natural Resources, whose horizon oil-sands mine is scheduled to start production this year, dropped 11 percent today to C$49.26.
Oil Sands Miner
Suncor Energy Inc., the oil-sands mining company, fell 8.2 percent to C$26.46. EnCana Corp., Canada's biggest energy company by value, slid 6.2 percent to C$50.74. Addax Petroleum Corp., which explores for oil in Africa and Iraq, plunged 16 percent to C$16. Opti Canada Inc., which this week put off a decision to expand its Long Lake oil-sands mine because it can't access cash, dropped a record 23 percent to C$5.12.
Crude-oil futures in New York slid 7.5 percent to $66.75 a barrel, the lowest since June 2007, after a U.S. Energy Department report showed that fuel demand during the past four weeks fell 8.5 percent from a year ago. Gold touched $720 an ounce for the first time in a year, and copper extended its decline to the lowest since November 2005. The Reuters/Jefferies CRB Index of 19 raw materials touched the lowest in four years.
Bullion Producer
Barrick Gold, the largest bullion producer, slipped 13 percent to C$25, the lowest in four years. Goldcorp Inc. dropped 14 percent to C$20.84. Agnico-Eagle Mines Ltd., owner of Canada's biggest gold deposit, sank 25 percent to C$31.75, the most since at least 1983. Teck Cominco Ltd., Canada's biggest diversified miner, slid 17 percent to C$14.32 before its second- quarter earnings announcement after markets closed.
Ivanhoe Mines Ltd., which is developing a copper and gold mine in Mongolia with Rio Tinto Plc, plunged 28 percent to C$2.15, the lowest since July 2002.
GMP Capital declined 10 percent to C$5.41, a record. The Toronto-based investment bank cut its monthly payout by more than half to 5 cents yesterday.
``The severity of prevailing volatile market conditions is the worst seen in several decades in the Canadian capital markets,'' Chief Executive Officer Kevin Sullivan said.
The Canadian dollar fell the most since at least 1971 today and has declined 15 percent this month to a three-year low against its U.S. counterpart as investors worldwide sold resource-related assets to pay for losses elsewhere, fueling speculation the five-year commodity boom that lifted Canadian stocks to their peak earlier in 2008 has ended.
Rate Cut
The Bank of Canada lowered its interest rate for overnight loans between commercial banks by a quarter point to 2.25 yesterday and signaled more reductions as it slashed its 2009 forecast for economic growth in Canada by almost three-quarters to 0.6 percent. The central bank predicted exporters will be hurt by a U.S. recession, and a ``mild'' global contraction.
Bank of Nova Scotia, the country's third-largest lender, fell 6.6 percent to C$41.10.
Manulife Financial Corp. fell 5.7 percent to C$25.76. The nation's biggest insurance company slid for a second day after rival Sun Life Financial Inc. reported its first quarterly loss yesterday since demutualization in 2000, on writedowns tied to Lehman Brothers debt, and the falling value of its stock investments. Manulife, which reports results in November, said this month that credit losses will cut profit by C$250 million.
Measures of financial, energy and raw-materials shares fell 4.2 percent, 8 percent and 9.6 percent, respectively today. They are the worst performers this month among the S&P/TSX's 10 industries, down 16 percent, 27 percent and 36 percent.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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Brazilian Stocks Fall on Global Growth Concern; Merval Drops
By Alexander Ragir and Paulo Winterstein
Oct. 22 (Bloomberg) -- Brazilian stocks tumbled to the lowest in two years on concern the global economic slump will reduce demand for commodities and Argentina's planned seizure of pension funds may spur investors to dump emerging-market assets.
Federally controlled Banco do Brasil SA dropped 15 percent after the government authorized it to buy stakes in non- government financial companies to ease the credit crunch. Lojas Americanas SA, Brazil's biggest discount retailer, led consumer stocks to the biggest decline since at least 1995 after the International Monetary Fund said Latin America economic growth will slow. ALL America Latina Logistica SA, Latin America's biggest railroad operator, dropped the most in at least three years on concern that slowing commodity demand will hurt profits.
``In this very nervous environment we are living through, some people are avoiding risk at any cost,'' said Jacopo Valentino, who oversees $4 billion as head of Latin American equity at BNP Paribas Asset Management in Sao Paulo. ``It's a sum of the global situation and the neighbor having all these problems makes it even worse. But the imbalances they have in Argentina they don't have in Brazil.''
The Bovespa index fell 10 percent to 35,069.73, the lowest level since September 2006. The BM&FBovespa MidLarge Cap index slid 9.4 percent. The BM&FBovespa Small Cap index slipped 10 percent. Mexico's Bolsa index fell 7 percent. Chile's Ipsa lost 5.9 percent. The MSCI Emerging Markets Index fell 8.4 percent.
Argentina's stocks and bonds plunged for a second day as a planned government takeover of $29 billion of pension funds stoked concern the South American country is headed for its second default this decade. Brazil's real weakened more than 5 percent as investors sold higher-yielding assets.
Banks Decline
Banco do Brasil, Latin America's biggest lender by assets, sank 2.52 reais to 13.88 reais. Lula, in a published decree, also allowed Caixa Economica Federal, known as CEF, to create a subsidiary to act as an investment bank.
The move follows recent central bank steps to inject more than 160 billion reais ($71 billion) in the banking system by easing reserve requirements to help smaller lenders. Bank lending fell 13 percent in the first eight business days of October from the same period the previous month, central bank President Henrique Meirelles told legislators in Brasilia yesterday.
``The incomprehensibly bad timing of the decision to publish a government decree allowing for the purchase of private sector banks by public sector institutions announced this morning has led to serious doubts about the quality of Brazil's banking sector,'' wrote Tony Volpon, chief economist at Sao Paulo-based brokerage CM Capital Markets.
Retailers Slide
Cyrela Brazil Realty SA Empreendimentos e Participacoe, the biggest homebuilder, dropped 17 percent to 10.26 reais. The MSCI Consumer Discretionary Index dropped 18 percent for the biggest decline since at least January 1995.
Lojas Americanas led a drop in retailers, sliding 16 percent to 5 reais.
Growth in Latin America and the Caribbean is likely to slow to 3.2 percent in 2009, according to the IMF. Latin American economic expansion averaged 5 percent in the past four years, said Robinson. Available credit, particularly for export financing, has dried up this year and currencies have fallen as much as 27 percent against the dollar as overseas lenders and investors repatriate funds.
``Given what is happening in the rest of the world, our forecast is for growth in Latin America to slow quite noticeably,'' said David Robinson, the IMF's regional sub- director for the Western Hemisphere.
Steelmaker Gerdau fell 10 percent to 13.10 reais.
Ore Demand
Vale dropped 8.7 percent to 24.10 reais. Slowing global economic growth will reduce demand for iron ore and coal next year, Goldman Sachs Group analyst Marcelo Aguiar wrote in a note. Vale is the world's biggest iron-ore producer.
All fell 20 percent to 9.91 reais.
``Anything related to commodities is toast,'' said Lawrence de Maria, analyst at Sterne, Agee and Leach Inc. ``You're hearing about weakened demand for soybeans from China. Also you have your Argentina disaster du jour, and so there are issues there.''
The Reuters Jefferies Commodities Index fell for a second day, dropping 4.5 percent.
In Argentina, the benchmark Merval stock index plunged 10 percent, extending its decline this week to 23 percent.
President Cristina Fernandez de Kirchner's bid to seize the private funds is undermining investor confidence that was already faltering as prices on the country's commodity exports tumbled and a five-year-old economic expansion began to sputter. The last time the government sought to tap workers' savings to help finance debt payments was in 2001, just before it halted payments on $95 billion of bonds.
Mexico's Bolsa index the most since April 2000 as third- quarter earnings of homebuilder Consorcio Ara SAB and auto parts maker Alfa SAB trailed analyst estimates.
Ara, Mexico's fourth-largest builder, fell 19 percent to 3.91 pesos after third-quarter sales growth slowed and net income dropped. Alfa, the world's biggest maker of aluminum engine heads and blocks, tumbled 9.4 percent to 28.77 pesos after it reported a third-quarter loss.
Colombia's IGBC dropped 4.9 percent and Peru's Lima General index fell 9.4 percent.
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
Read more...
Oct. 22 (Bloomberg) -- Brazilian stocks tumbled to the lowest in two years on concern the global economic slump will reduce demand for commodities and Argentina's planned seizure of pension funds may spur investors to dump emerging-market assets.
Federally controlled Banco do Brasil SA dropped 15 percent after the government authorized it to buy stakes in non- government financial companies to ease the credit crunch. Lojas Americanas SA, Brazil's biggest discount retailer, led consumer stocks to the biggest decline since at least 1995 after the International Monetary Fund said Latin America economic growth will slow. ALL America Latina Logistica SA, Latin America's biggest railroad operator, dropped the most in at least three years on concern that slowing commodity demand will hurt profits.
``In this very nervous environment we are living through, some people are avoiding risk at any cost,'' said Jacopo Valentino, who oversees $4 billion as head of Latin American equity at BNP Paribas Asset Management in Sao Paulo. ``It's a sum of the global situation and the neighbor having all these problems makes it even worse. But the imbalances they have in Argentina they don't have in Brazil.''
The Bovespa index fell 10 percent to 35,069.73, the lowest level since September 2006. The BM&FBovespa MidLarge Cap index slid 9.4 percent. The BM&FBovespa Small Cap index slipped 10 percent. Mexico's Bolsa index fell 7 percent. Chile's Ipsa lost 5.9 percent. The MSCI Emerging Markets Index fell 8.4 percent.
Argentina's stocks and bonds plunged for a second day as a planned government takeover of $29 billion of pension funds stoked concern the South American country is headed for its second default this decade. Brazil's real weakened more than 5 percent as investors sold higher-yielding assets.
Banks Decline
Banco do Brasil, Latin America's biggest lender by assets, sank 2.52 reais to 13.88 reais. Lula, in a published decree, also allowed Caixa Economica Federal, known as CEF, to create a subsidiary to act as an investment bank.
The move follows recent central bank steps to inject more than 160 billion reais ($71 billion) in the banking system by easing reserve requirements to help smaller lenders. Bank lending fell 13 percent in the first eight business days of October from the same period the previous month, central bank President Henrique Meirelles told legislators in Brasilia yesterday.
``The incomprehensibly bad timing of the decision to publish a government decree allowing for the purchase of private sector banks by public sector institutions announced this morning has led to serious doubts about the quality of Brazil's banking sector,'' wrote Tony Volpon, chief economist at Sao Paulo-based brokerage CM Capital Markets.
Retailers Slide
Cyrela Brazil Realty SA Empreendimentos e Participacoe, the biggest homebuilder, dropped 17 percent to 10.26 reais. The MSCI Consumer Discretionary Index dropped 18 percent for the biggest decline since at least January 1995.
Lojas Americanas led a drop in retailers, sliding 16 percent to 5 reais.
Growth in Latin America and the Caribbean is likely to slow to 3.2 percent in 2009, according to the IMF. Latin American economic expansion averaged 5 percent in the past four years, said Robinson. Available credit, particularly for export financing, has dried up this year and currencies have fallen as much as 27 percent against the dollar as overseas lenders and investors repatriate funds.
``Given what is happening in the rest of the world, our forecast is for growth in Latin America to slow quite noticeably,'' said David Robinson, the IMF's regional sub- director for the Western Hemisphere.
Steelmaker Gerdau fell 10 percent to 13.10 reais.
Ore Demand
Vale dropped 8.7 percent to 24.10 reais. Slowing global economic growth will reduce demand for iron ore and coal next year, Goldman Sachs Group analyst Marcelo Aguiar wrote in a note. Vale is the world's biggest iron-ore producer.
All fell 20 percent to 9.91 reais.
``Anything related to commodities is toast,'' said Lawrence de Maria, analyst at Sterne, Agee and Leach Inc. ``You're hearing about weakened demand for soybeans from China. Also you have your Argentina disaster du jour, and so there are issues there.''
The Reuters Jefferies Commodities Index fell for a second day, dropping 4.5 percent.
In Argentina, the benchmark Merval stock index plunged 10 percent, extending its decline this week to 23 percent.
President Cristina Fernandez de Kirchner's bid to seize the private funds is undermining investor confidence that was already faltering as prices on the country's commodity exports tumbled and a five-year-old economic expansion began to sputter. The last time the government sought to tap workers' savings to help finance debt payments was in 2001, just before it halted payments on $95 billion of bonds.
Mexico's Bolsa index the most since April 2000 as third- quarter earnings of homebuilder Consorcio Ara SAB and auto parts maker Alfa SAB trailed analyst estimates.
Ara, Mexico's fourth-largest builder, fell 19 percent to 3.91 pesos after third-quarter sales growth slowed and net income dropped. Alfa, the world's biggest maker of aluminum engine heads and blocks, tumbled 9.4 percent to 28.77 pesos after it reported a third-quarter loss.
Colombia's IGBC dropped 4.9 percent and Peru's Lima General index fell 9.4 percent.
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
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Allstate, Amazon.com, Amgen, F5 Networks: U.S. Equity Preview
By Lu Wang
Oct. 22 (Bloomberg) -- The following companies may have unusual price changes tomorrow in U.S. trading. Stock symbols are in parentheses, and share prices are as of 5:30 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December added 5.20, or 0.6 percent, to 908.20. Dow Jones Industrial Average futures fell 478, or 5.3 percent, to 8,557. Nasdaq-100 Index futures gained 1.50, or 0.1 percent, to 1,249.50.
Alliance Data Systems Corp. (ADS US) rose $2.84, or 6 percent, to $50. The credit-card processor boosted its forecast for 2008 earnings by 5 cents a share to $4.40 a share. Analysts, on average, expected the company to earn $4.37, according to a Bloomberg survey.
Allstate Corp. (ALL US): The largest publicly traded U.S. home and auto insurer suspended share repurchases after investment losses and claims from Hurricane Ike caused the first unprofitable quarter since Katrina hit in 2005. The stock dropped 12 percent to $28.23 in regular trading.
Amazon.com Inc. (AMZN US) fell $6.88, or 14 percent, to $43.11. The world's largest Internet retailer said its full-year sales and operating income would be lower than it originally projected.
Amgen Inc. (AMGN US) gained $2.30, or 4.6 percent, to $52. The world's largest biotechnology company said third-quarter profit rose more than fivefold as sales of its anemia drugs increased. The company forecast full-year earnings of at least $4.45 a share, topping the average estimate of $4.37 by analysts in a Bloomberg survey.
F5 Networks Inc. (FFIV US) rose $2.22, or 11 percent, to $22. The maker of products that manage companies' computer networks forecast first-quarter earnings that topped some analysts' estimates and said it plans to buy back as much as $200 million of its shares.
Seagate Technology (STX US) fell 50 cents, or 6.3 percent, to $7.50. The world's biggest maker of hard-disk drives posted an 83 percent drop in first-quarter profit and forecast earnings that missed analysts' estimates after the slowing economy reduced demand for computers.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
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Oct. 22 (Bloomberg) -- The following companies may have unusual price changes tomorrow in U.S. trading. Stock symbols are in parentheses, and share prices are as of 5:30 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December added 5.20, or 0.6 percent, to 908.20. Dow Jones Industrial Average futures fell 478, or 5.3 percent, to 8,557. Nasdaq-100 Index futures gained 1.50, or 0.1 percent, to 1,249.50.
Alliance Data Systems Corp. (ADS US) rose $2.84, or 6 percent, to $50. The credit-card processor boosted its forecast for 2008 earnings by 5 cents a share to $4.40 a share. Analysts, on average, expected the company to earn $4.37, according to a Bloomberg survey.
Allstate Corp. (ALL US): The largest publicly traded U.S. home and auto insurer suspended share repurchases after investment losses and claims from Hurricane Ike caused the first unprofitable quarter since Katrina hit in 2005. The stock dropped 12 percent to $28.23 in regular trading.
Amazon.com Inc. (AMZN US) fell $6.88, or 14 percent, to $43.11. The world's largest Internet retailer said its full-year sales and operating income would be lower than it originally projected.
Amgen Inc. (AMGN US) gained $2.30, or 4.6 percent, to $52. The world's largest biotechnology company said third-quarter profit rose more than fivefold as sales of its anemia drugs increased. The company forecast full-year earnings of at least $4.45 a share, topping the average estimate of $4.37 by analysts in a Bloomberg survey.
F5 Networks Inc. (FFIV US) rose $2.22, or 11 percent, to $22. The maker of products that manage companies' computer networks forecast first-quarter earnings that topped some analysts' estimates and said it plans to buy back as much as $200 million of its shares.
Seagate Technology (STX US) fell 50 cents, or 6.3 percent, to $7.50. The world's biggest maker of hard-disk drives posted an 83 percent drop in first-quarter profit and forecast earnings that missed analysts' estimates after the slowing economy reduced demand for computers.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
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U.S. Stocks Tumble, S&P 500 Drops to Lowest Level Since 2003
By Elizabeth Stanton
Oct. 22 (Bloomberg) -- U.S. stocks sank and the Standard & Poor's 500 Index dropped to the lowest level since April 2003 on concern a worsening global economic slump will damp profits.
Exxon Mobil Corp. tumbled 9.7 percent and Freeport-McMoRan Copper & Gold Inc. plunged 18 percent as crude fell more than $5 a barrel and an index of commodity prices dropped to four-year low. Coventry Health Care Inc. tumbled 51 percent as the health insurer's earnings were hurt by bad investments and rising medical costs. SanDisk Corp. sank 32 percent after Samsung Electronics Co. abandoned its takeover bid. European and Asian shares fell, while an index of emerging market stocks slumped 8.3 percent on concern Argentina may default on its debt.
The S&P 500 lost 58.27 points, or 6.1 percent, to 896.78. The Dow Jones Industrial Average plunged 514.45, or 5.7 percent, to 8,519.21 as all 30 of its companies dropped. The Nasdaq Composite Index lost 80.93, or 4.8 percent, 1,615.75. About 24 stocks fell for each that rose on the New York Stock Exchange.
``The question is: Is any money at all flowing towards equities?'' said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $16 billion. ``Dividend yields alone should be providing support for some of these stocks, but if everyone's selling and no one is buying, it's hard to overcome that.''
The S&P 500 extended its 2008 retreat to 39 percent, poised for its worst yearly performance since 1931. The benchmark index for U.S. equities has fallen 43 percent from its peak last October. Companies in the index are paying 3.2 percent of their stock price in dividends, near the highest yield since Bloomberg began tracking the data in 1995.
Economic Concern
Growing concern over the fate of the global economy overshadowed another decrease in money-market rates. The three- month London interbank offered rate for dollars dropped for an eighth straight day to 3.54 percent after the U.S. government's latest initiative to resuscitate bank lending, a $540 billion commitment to buy troubled assets from money-market mutual funds.
The U.S. dollar traded for less than $1.28 against the euro for the first time since November 2006 and the pound tumbled to a five-year low on speculation European central banks will cut interest rates to bolster their economies.
About 1.6 billion shares changed hands on the floor of the NYSE, 6.8 percent more than the three-month daily average.
Credit Concern
Today's drop came as a U.S. House panel released e-mails showing employees at Moody's Investors Service and Standard & Poor's privately questioned the value of some mortgage-backed securities that were given creditworthy ratings. Banks worldwide reported more than $660 billion of mortgage-related writedowns and credit losses in the past year.
Exxon Mobil, the largest oil company, lost $6.93 to $64.57 and helped send the S&P 500 Energy Index to a 10.4 percent tumble, the steepest among 10 industries.
Crude for December delivery declined $5.28, or 7.3 percent, to $66.90 a barrel. Futures touched $66.20, the lowest since June 2007. The Reuters/Jefferies CRB index of 19 metals and chemicals slid 4 percent to 276.4, the lowest since July 2004.
ConocoPhillips slid 9.1 percent to $49.06 despite reporting third-quarter profit that exceeded the average analyst estimate.
Freeport-McMoRan, the largest publicly traded copper producer, lost $5.82 to $26.92 and led a gauge of raw-material companies in the S&P 500 to an 8.3 percent decline. Alcoa Inc., the largest U.S. aluminum producer, slid 13 percent to $10.50 for the biggest drop in the Dow average.
SanDisk tumbled $4.67 to $10.09. South Korea's Samsung withdrew its $26-a-share offer for the world's largest maker of memory cards used in digital cameras, saying losses at the U.S. company may worsen as a glut forces chipmakers to cut prices.
Earnings Watch
Coventry Health slumped $14.56 to $13.93. The insurer said third-quarter profit fell to 58 cents a share. That's half the average analyst estimate of $1.06, according to a Bloomberg survey.
Profits retreated 27 percent on average for the 141 companies in the S&P 500 that released results as of this morning, according to data compiled by Bloomberg. The group has trailed analysts' earnings estimates by an average of 2.6 percent.
Wall Street analysts forecast an 11 percent drop in third- quarter earnings in a Bloomberg survey. That would mark the fifth straight quarter of declining profits.
For the fourth quarter, analysts estimate a 24.2 percent increase in profits. For fiscal 2009, they project growth of 18 percent to a combined $95.70 a share for the S&P 500, according to estimates gathered by Bloomberg.
Inflated Estimates?
``Everyone's got to lower their expectations,'' Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, said on Bloomberg Television. ``This year we're looking at operating earnings somewhere in the mid-$90 range for S&P 500 companies. Who knows what next year might be. It might be somewhere in the mid-$70s.''
Boeing Co., the second-largest maker of commercial airplanes, reported a 38 percent decline in earnings after a strike by machinists shuttered factories and halted deliveries. Net income decreased to $695 million, or 96 cents a share. Analysts had estimated earnings of $1.01 a share. The shares slid $3.49, or 7.5 percent, to $42.91.
AT&T Inc., the largest U.S. phone company, lost $1.95 to $23.78. The company posted third-quarter profit that trailed analysts' projections on costs to subsidize Apple Inc.'s iPhone 3G and declines in corporate spending.
Apple advanced 5.9 percent to $96.87. The company reached a goal of selling 10 million iPhones three months ahead of schedule.
The S&P 500's 23 percent drop so far in October is bigger than any monthly loss since May 1940. It hasn't advanced for two straight days since Sept. 25-26.
`Doesn't Pay to Rush'
``To make people feel better you need at least a couple of consecutive up days,'' said Paul Kandel, a New York-based money manager at Sentinel Asset Management, which oversees $5 billion. ``The market's rotating so quickly that it doesn't pay to rush into anything.''
The S&P 500 has moved more than 1 percent on 13 of the 16 trading days this month, making it the most volatile by that measure since September 1932, according to S&P analyst Howard Silverblatt.
Stocks fell yesterday after companies from Texas Instruments Inc. to Freeport-McMoRan posted results that failed to meet analysts' estimates.
At least 139 S&P 500 companies are scheduled to report third-quarter earnings this week.
Rebound Halted
Yesterday's drop halted a rebound in the S&P 500 from an almost 5 1/2-year low on Oct. 10. The benchmark index for U.S. equities climbed 9.6 percent from that date through Oct. 20 as borrowing costs declined, the government planned to buy stakes in banks and Federal Reserve Chairman Ben S. Bernanke endorsed another economic-stimulus package.
VMware Inc. added 7.1 percent to $20.06. The biggest maker of programs that let computers run multiple operating systems earned 24 cents a share in the third quarter, excluding some items. That topped the average estimate in a Bloomberg survey by 18 percent. EMC Corp., the majority owner of VMware, climbed 3 percent to $9.98.
C.H. Robinson Worldwide Inc. rose 9.5 percent to $43.89. The largest U.S. arranger of freight shipments was raised to ```buy'' from ``neutral'' at Merrill Lynch & Co., which cited increased truckloads in the third quarter.
Yahoo! Inc. gained 2.7 percent to $12.39. The Internet company that rejected a takeover offer from Microsoft Corp. said it plans to cut at least 10 percent of its staff after advertising spending slowed.
Broadcom Corp. climbed 6.5 percent to $14.70. The maker of chips for the iPhone and Nintendo Co.'s Wii game console said third-quarter profit increased almost sixfold, topping estimates, on wireless product sales and a technology royalty payment.
Amazon.com Inc. tumbled 13 percent to $43.28 in trading after U.S. exchanges closed. The world's largest Internet retailer said its full-year forecast for sales and operating income would be lower than it originally projected.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net
Read more...
Oct. 22 (Bloomberg) -- U.S. stocks sank and the Standard & Poor's 500 Index dropped to the lowest level since April 2003 on concern a worsening global economic slump will damp profits.
Exxon Mobil Corp. tumbled 9.7 percent and Freeport-McMoRan Copper & Gold Inc. plunged 18 percent as crude fell more than $5 a barrel and an index of commodity prices dropped to four-year low. Coventry Health Care Inc. tumbled 51 percent as the health insurer's earnings were hurt by bad investments and rising medical costs. SanDisk Corp. sank 32 percent after Samsung Electronics Co. abandoned its takeover bid. European and Asian shares fell, while an index of emerging market stocks slumped 8.3 percent on concern Argentina may default on its debt.
The S&P 500 lost 58.27 points, or 6.1 percent, to 896.78. The Dow Jones Industrial Average plunged 514.45, or 5.7 percent, to 8,519.21 as all 30 of its companies dropped. The Nasdaq Composite Index lost 80.93, or 4.8 percent, 1,615.75. About 24 stocks fell for each that rose on the New York Stock Exchange.
``The question is: Is any money at all flowing towards equities?'' said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $16 billion. ``Dividend yields alone should be providing support for some of these stocks, but if everyone's selling and no one is buying, it's hard to overcome that.''
The S&P 500 extended its 2008 retreat to 39 percent, poised for its worst yearly performance since 1931. The benchmark index for U.S. equities has fallen 43 percent from its peak last October. Companies in the index are paying 3.2 percent of their stock price in dividends, near the highest yield since Bloomberg began tracking the data in 1995.
Economic Concern
Growing concern over the fate of the global economy overshadowed another decrease in money-market rates. The three- month London interbank offered rate for dollars dropped for an eighth straight day to 3.54 percent after the U.S. government's latest initiative to resuscitate bank lending, a $540 billion commitment to buy troubled assets from money-market mutual funds.
The U.S. dollar traded for less than $1.28 against the euro for the first time since November 2006 and the pound tumbled to a five-year low on speculation European central banks will cut interest rates to bolster their economies.
About 1.6 billion shares changed hands on the floor of the NYSE, 6.8 percent more than the three-month daily average.
Credit Concern
Today's drop came as a U.S. House panel released e-mails showing employees at Moody's Investors Service and Standard & Poor's privately questioned the value of some mortgage-backed securities that were given creditworthy ratings. Banks worldwide reported more than $660 billion of mortgage-related writedowns and credit losses in the past year.
Exxon Mobil, the largest oil company, lost $6.93 to $64.57 and helped send the S&P 500 Energy Index to a 10.4 percent tumble, the steepest among 10 industries.
Crude for December delivery declined $5.28, or 7.3 percent, to $66.90 a barrel. Futures touched $66.20, the lowest since June 2007. The Reuters/Jefferies CRB index of 19 metals and chemicals slid 4 percent to 276.4, the lowest since July 2004.
ConocoPhillips slid 9.1 percent to $49.06 despite reporting third-quarter profit that exceeded the average analyst estimate.
Freeport-McMoRan, the largest publicly traded copper producer, lost $5.82 to $26.92 and led a gauge of raw-material companies in the S&P 500 to an 8.3 percent decline. Alcoa Inc., the largest U.S. aluminum producer, slid 13 percent to $10.50 for the biggest drop in the Dow average.
SanDisk tumbled $4.67 to $10.09. South Korea's Samsung withdrew its $26-a-share offer for the world's largest maker of memory cards used in digital cameras, saying losses at the U.S. company may worsen as a glut forces chipmakers to cut prices.
Earnings Watch
Coventry Health slumped $14.56 to $13.93. The insurer said third-quarter profit fell to 58 cents a share. That's half the average analyst estimate of $1.06, according to a Bloomberg survey.
Profits retreated 27 percent on average for the 141 companies in the S&P 500 that released results as of this morning, according to data compiled by Bloomberg. The group has trailed analysts' earnings estimates by an average of 2.6 percent.
Wall Street analysts forecast an 11 percent drop in third- quarter earnings in a Bloomberg survey. That would mark the fifth straight quarter of declining profits.
For the fourth quarter, analysts estimate a 24.2 percent increase in profits. For fiscal 2009, they project growth of 18 percent to a combined $95.70 a share for the S&P 500, according to estimates gathered by Bloomberg.
Inflated Estimates?
``Everyone's got to lower their expectations,'' Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, said on Bloomberg Television. ``This year we're looking at operating earnings somewhere in the mid-$90 range for S&P 500 companies. Who knows what next year might be. It might be somewhere in the mid-$70s.''
Boeing Co., the second-largest maker of commercial airplanes, reported a 38 percent decline in earnings after a strike by machinists shuttered factories and halted deliveries. Net income decreased to $695 million, or 96 cents a share. Analysts had estimated earnings of $1.01 a share. The shares slid $3.49, or 7.5 percent, to $42.91.
AT&T Inc., the largest U.S. phone company, lost $1.95 to $23.78. The company posted third-quarter profit that trailed analysts' projections on costs to subsidize Apple Inc.'s iPhone 3G and declines in corporate spending.
Apple advanced 5.9 percent to $96.87. The company reached a goal of selling 10 million iPhones three months ahead of schedule.
The S&P 500's 23 percent drop so far in October is bigger than any monthly loss since May 1940. It hasn't advanced for two straight days since Sept. 25-26.
`Doesn't Pay to Rush'
``To make people feel better you need at least a couple of consecutive up days,'' said Paul Kandel, a New York-based money manager at Sentinel Asset Management, which oversees $5 billion. ``The market's rotating so quickly that it doesn't pay to rush into anything.''
The S&P 500 has moved more than 1 percent on 13 of the 16 trading days this month, making it the most volatile by that measure since September 1932, according to S&P analyst Howard Silverblatt.
Stocks fell yesterday after companies from Texas Instruments Inc. to Freeport-McMoRan posted results that failed to meet analysts' estimates.
At least 139 S&P 500 companies are scheduled to report third-quarter earnings this week.
Rebound Halted
Yesterday's drop halted a rebound in the S&P 500 from an almost 5 1/2-year low on Oct. 10. The benchmark index for U.S. equities climbed 9.6 percent from that date through Oct. 20 as borrowing costs declined, the government planned to buy stakes in banks and Federal Reserve Chairman Ben S. Bernanke endorsed another economic-stimulus package.
VMware Inc. added 7.1 percent to $20.06. The biggest maker of programs that let computers run multiple operating systems earned 24 cents a share in the third quarter, excluding some items. That topped the average estimate in a Bloomberg survey by 18 percent. EMC Corp., the majority owner of VMware, climbed 3 percent to $9.98.
C.H. Robinson Worldwide Inc. rose 9.5 percent to $43.89. The largest U.S. arranger of freight shipments was raised to ```buy'' from ``neutral'' at Merrill Lynch & Co., which cited increased truckloads in the third quarter.
Yahoo! Inc. gained 2.7 percent to $12.39. The Internet company that rejected a takeover offer from Microsoft Corp. said it plans to cut at least 10 percent of its staff after advertising spending slowed.
Broadcom Corp. climbed 6.5 percent to $14.70. The maker of chips for the iPhone and Nintendo Co.'s Wii game console said third-quarter profit increased almost sixfold, topping estimates, on wireless product sales and a technology royalty payment.
Amazon.com Inc. tumbled 13 percent to $43.28 in trading after U.S. exchanges closed. The world's largest Internet retailer said its full-year forecast for sales and operating income would be lower than it originally projected.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net
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