Commentary by Mark Gilbert
Nov. 27 (Bloomberg) -- It’s the conversation every parent dreads. “Mom, dad, you know how I’ve always been a little different from the other kids? Well, I think it’s time you knew the truth. I think I’m, um, an investment banker!”
So how do you stop the fruit of your loins, the inheritors of your estate, the bearers of your lineage, from making a huge lifestyle mistake and bringing shame on your name? Here are some alternative professions you should consider steering your offspring toward in order to avoid the stigma of having a finance professional in the family.
A Pirate’s Life for Me!
There’s no parrot, eye patch, tricorn hat or peg leg these days. You do, however, get your own AK-47 rifle. In recent weeks, piracy has become the highest-profile profession in the world. Shiver me timbers!
To be sure, hijacking supertankers was a lot more lucrative when oil was trading at more than $140 a barrel, compared with its current value of about $50. The past year’s 90 percent decline in the Baltic Dry Index, a measure of the cost of shipping commodities around the world, suggests ship owners aren’t earning enough money to buy the kind of armed protection that might make a pirate’s life more difficult.
No wonder hijackings by Somali pirates in the Gulf of Aden region have tripled, with more than 581 crew members taken hostage in the year to September, up from 172 in all of 2007, according to the International Maritime Bureau.
In truth, growing up to be Captain Jack Sparrow isn’t that different from a career in finance, based on the lyrics of a song made famous by Walt Disney Co.: “We extort, we pilfer, we filch and sack, drink up, me hearties, yo ho! Maraud and embezzle and even hijack, drink up, me hearties, yo ho!”
Close Enough for Government Work
Nobody goes into investment banking because they love photocopying, enjoy working through the night fueled only by pizza and diet soda, or get a kick out of cold-calling investors begging them to buy the latest whiz-bang derivative.
There were only ever two reasons to endure finance’s abusive working conditions: filthy lucre, and a Darwinist hope that you might one day rise to become chief executive officer.
The first reason has disappeared in a puff of writedowns and bailouts. Bonus is a dirty word. The days when the ability to say “this AAA rated collateralized debt obligation is priced at par” with a straight face was enough to earn you a Bentley- buying payout are over for the foreseeable future.
These days, inching your way up the greasy pole of management isn’t the best way to achieve seniority at an investment bank. Instead, a career in the civil service beckons as the fast-track to becoming the person who calls the shots. Heck, half of the world’s finance professionals are already working for the government, while the other half can barely write a trading ticket without permission.
Whirlybird Flyer
“Quantitative easing” is the new black, with the U.S. Treasury throwing cash at the recession as fast as the printing presses can engrave bills. The likely next action from the policy-making playbook, after the Federal Reserve interest rate drops to zero, is direct purchases of U.S. government debt.
In his November 2002 speech about “Deflation: Making Sure ‘It’ Doesn’t Happen Here,” Fed Chairman Ben Bernanke referred to the possibility that the central bank might “begin announcing explicit ceilings for yields on longer-maturity Treasury debt, say, bonds maturing within the next two years.”
That speech prompted the moniker “Helicopter Ben,” referring to Nobel Prize-winning economist Milton Friedman’s phrase about helicopters dropping money into the economy. Pay for your daughter’s flying lessons now, and that pilot’s license could get her a job at the Fed in the not-too-distant future.
Keep the Faith
“The development of economic systems which concentrate on the common good depends on a determinate ethical system. The decline of such discipline can actually cause the laws of the market to collapse. We need a maximum of specialized economic understanding, but also a maximum of ethos so that specialized economic understanding may enter the service of the right goals.”
Was that U.S. President-elect Barack Obama? Maybe World Bank President Robert Zoellick? Perhaps International Monetary Fund Managing Director Dominique Strauss-Kahn? Or United Nations Secretary-General Ban Ki-moon? In fact, the guy with his finger on the financial pulse was Cardinal Joseph Ratzinger, in a 1985 paper titled “Market Economy and Ethics.” Ratzinger became Pope Benedict XVI in April 2005.
So maybe you should be guiding your firstborn toward the priesthood, especially in these economically challenged times. As the pope said last month, “Money vanishes, it is nothing; the only solid reality is the word of God.”
Choo-Choo
Cars are individualistic, bad for the environment and increasingly frustrating in a gridlocked world -- all SO 20th century. With Obama as U.S. president and governments in Europe rediscovering their socialist principles, improved public transport will soon be back on the agenda. Remember when every small boy wanted to be a train driver?
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
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Thursday, November 27, 2008
Australian Worldwide Sells First Tui Crude Cargo to New Zealand
By Angela Macdonald-Smith
Nov. 27 (Bloomberg) -- Australian Worldwide Exploration Ltd., operator of the $269 million Tui oil project in New Zealand, said it made its first sale of crude from the venture to a refinery in that country.
The 300,000 barrel-cargo is due to be delivered to the Whangarei refinery in New Zealand in the second week of January as a result of a sale agreement concluded today with Chevron Corp., Bruce Wood, managing director of the Sydney-based company, said today in Sydney. Previous sales of Tui crude have mostly been to refineries in eastern Australia, he said.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Nov. 27 (Bloomberg) -- Australian Worldwide Exploration Ltd., operator of the $269 million Tui oil project in New Zealand, said it made its first sale of crude from the venture to a refinery in that country.
The 300,000 barrel-cargo is due to be delivered to the Whangarei refinery in New Zealand in the second week of January as a result of a sale agreement concluded today with Chevron Corp., Bruce Wood, managing director of the Sydney-based company, said today in Sydney. Previous sales of Tui crude have mostly been to refineries in eastern Australia, he said.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Centennial Says Demand for Coal ‘Strong’, Getting Extra Orders
By Madelene Pearson
Nov. 27 (Bloomberg) -- Centennial Coal Co., Australia’s fourth-largest producer, said demand for coal remains “strong” and the company is confident that any economic slowdown will have a limited effect on forecast export sales.
“The company continues to receive enquiries for coal to be shipped via Port Kembla, with many of these enquiries seeking additional coal over and above already contracted levels as buyers seek to ensure security of supply,” Centennial said today in a statement to the Australian stock exchange.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Nov. 27 (Bloomberg) -- Centennial Coal Co., Australia’s fourth-largest producer, said demand for coal remains “strong” and the company is confident that any economic slowdown will have a limited effect on forecast export sales.
“The company continues to receive enquiries for coal to be shipped via Port Kembla, with many of these enquiries seeking additional coal over and above already contracted levels as buyers seek to ensure security of supply,” Centennial said today in a statement to the Australian stock exchange.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Korea Won Falls on Month-End Import Bills; Bonds Little Changed
By Kim Kyoungwha
Nov. 27 (Bloomberg) -- South Korea’s won fell, ending two days of gains, on speculation importers bought dollars to pay month-end bills. Bonds were little changed.
The won may rebound later in the day once importer deals are completed, said Roh Sang Chil, a foreign-exchange dealer with Kookmin Bank in Seoul. Korea reported a record current-account surplus for October today, signaling an increase of incoming funds that may ease a shortage of dollars.
“There were some scheduled orders for dollars from importers, which is dragging the won down in a market that otherwise would have rallied” because of the surplus, said Roh.
The won fell 0.3 percent to 1,482.65 per dollar as of 10:30 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency is down 37 percent since the end of June, the worst performance among the 10 most-traded Asian currencies outside of Japan. For November, the won has lost more than 9 percent.
The Bank of Korea reported a current-account surplus of $4.91 billion, following a deficit of $1.35 billion in September. The current account is the broadest measure of trade, tracking goods, services and investment income.
“The surplus is beyond expectations,” said Lee Myung Hoon, a currency dealer with state-run Industrial Bank of Korea in Seoul. “Falling oil prices and less overseas travel mean the trend can be sustained which is a big boost to the won.”
Swap Funds
The central bank will receive $4 billion from the Federal Reserve using a currency-swap line for the first time to provide U.S. dollars to local banks struggling to secure foreign funds.
The money is part of last month’s agreement under which the Fed will provide up to $30 billion, the Bank of Korea said in a statement in Seoul today. The central bank will provide the funds to local lenders in the foreign-exchange swap market on Dec. 2, it said.
Government bonds were little changed. The yield on the benchmark three-year note stood at 4.88 percent, according to Korea Securities Dealers Association.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Nov. 27 (Bloomberg) -- South Korea’s won fell, ending two days of gains, on speculation importers bought dollars to pay month-end bills. Bonds were little changed.
The won may rebound later in the day once importer deals are completed, said Roh Sang Chil, a foreign-exchange dealer with Kookmin Bank in Seoul. Korea reported a record current-account surplus for October today, signaling an increase of incoming funds that may ease a shortage of dollars.
“There were some scheduled orders for dollars from importers, which is dragging the won down in a market that otherwise would have rallied” because of the surplus, said Roh.
The won fell 0.3 percent to 1,482.65 per dollar as of 10:30 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency is down 37 percent since the end of June, the worst performance among the 10 most-traded Asian currencies outside of Japan. For November, the won has lost more than 9 percent.
The Bank of Korea reported a current-account surplus of $4.91 billion, following a deficit of $1.35 billion in September. The current account is the broadest measure of trade, tracking goods, services and investment income.
“The surplus is beyond expectations,” said Lee Myung Hoon, a currency dealer with state-run Industrial Bank of Korea in Seoul. “Falling oil prices and less overseas travel mean the trend can be sustained which is a big boost to the won.”
Swap Funds
The central bank will receive $4 billion from the Federal Reserve using a currency-swap line for the first time to provide U.S. dollars to local banks struggling to secure foreign funds.
The money is part of last month’s agreement under which the Fed will provide up to $30 billion, the Bank of Korea said in a statement in Seoul today. The central bank will provide the funds to local lenders in the foreign-exchange swap market on Dec. 2, it said.
Government bonds were little changed. The yield on the benchmark three-year note stood at 4.88 percent, according to Korea Securities Dealers Association.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Australia, New Zealand Dollars Gain Fourth Day as Equities Rise
By Candice Zachariahs
Nov. 27 (Bloomberg) -- The Australian and New Zealand dollars advanced a fourth day, the longest winning streak in more than two months, as gains in U.S. stocks and China’s biggest rate cut in 11 years spur investors to buy higher-yielding assets.
The currencies also rose as the European Union unveiled a $259 billion stimulus proposal and prices increased for commodities that account for more than half of Australia and New Zealand’s exports.
“The overall risk environment has improved,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “That suggests the Aussie can maybe get up to 66.5 cents and the kiwi to 56 cents towards the end of this week.”
Australia’s currency rose 1 percent to 65.43 U.S. cents as of 7:40 a.m. in Sydney from 64.78 cents late in Asia yesterday. The currency advanced 1.6 percent to 62.63 yen.
New Zealand’s dollar gained 0.9 percent to 55.34 U.S. cents from 54.88 in Asia yesterday. It bought 52.97 yen from 52.22.
The currencies advanced as the Standard & Poor’s 500 index posted its longest streak of gains since May. Exxon Mobil Corp. and Chevron Corp., the biggest U.S. oil companies, were among the biggest contributors to the advance as crude traded above $50 a barrel for a third day. The UBS Bloomberg Constant Maturity Commodity index of 26 raw materials advanced 2.5 percent.
China, Australia’s biggest trading partner, cut its key lending rate by 1.08 percentage points to 5.58 percent to boost growth amid its deepest economic slowdown in almost two decades.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Nov. 27 (Bloomberg) -- The Australian and New Zealand dollars advanced a fourth day, the longest winning streak in more than two months, as gains in U.S. stocks and China’s biggest rate cut in 11 years spur investors to buy higher-yielding assets.
The currencies also rose as the European Union unveiled a $259 billion stimulus proposal and prices increased for commodities that account for more than half of Australia and New Zealand’s exports.
“The overall risk environment has improved,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “That suggests the Aussie can maybe get up to 66.5 cents and the kiwi to 56 cents towards the end of this week.”
Australia’s currency rose 1 percent to 65.43 U.S. cents as of 7:40 a.m. in Sydney from 64.78 cents late in Asia yesterday. The currency advanced 1.6 percent to 62.63 yen.
New Zealand’s dollar gained 0.9 percent to 55.34 U.S. cents from 54.88 in Asia yesterday. It bought 52.97 yen from 52.22.
The currencies advanced as the Standard & Poor’s 500 index posted its longest streak of gains since May. Exxon Mobil Corp. and Chevron Corp., the biggest U.S. oil companies, were among the biggest contributors to the advance as crude traded above $50 a barrel for a third day. The UBS Bloomberg Constant Maturity Commodity index of 26 raw materials advanced 2.5 percent.
China, Australia’s biggest trading partner, cut its key lending rate by 1.08 percentage points to 5.58 percent to boost growth amid its deepest economic slowdown in almost two decades.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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N.Z. Annual Trade Deficit Widens to NZ$5.22 Billion
By Tracy Withers
Nov. 27 (Bloomberg) -- New Zealand’s annual trade deficit widened in October as higher oil shipments pushed imports to a record, outpacing a gain in exports.
The gap widened to NZ$5.22 billion ($2.9 billion) in the 12 months ended Oct. 31 from NZ$5.05 billion in the year through September, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of eight analysts was for a NZ$5.21 billion shortfall.
The annual trade gap is the widest this year and the deficit may expand further as a recession in the world’s major economies slashes commodity prices and curbs demand for exports. Prices of butter, meat and other export commodities dropped 7.4 percent from September, the most in 21 years, according to an index compiled by ANZ National Bank Ltd.
“The underlying trade deficit trend continues to worsen and the outlook is uncertain given the downside risk to exports from a global recession,” said Shamubeel Eaqub, economist at Goldman Sachs JBWere Ltd. in Auckland.
The U.S., Japanese, U.K. and euro-area economies will all shrink next year, the Organization for Economic Cooperation and Development said this week.
Eaqub expects the economies of New Zealand’s major trading partners to grow 2.2 percent this year and just 0.5 percent in 2009, which will weigh on commodity prices.
Domestic Recession
Still, the New Zealand’s dollar’s 30 percent fall against the U.S. currency the past six months will provide some support for exporters, he said.
Import growth may also slow amid a domestic recession, which is likely to curb demand for cars, consumer goods and business equipment, Eaqub said.
In October, imports rose 15 percent from a year earlier to a record NZ$4.78 billion, the statistics agency said.
The figures aren’t adjusted for inflation and reflect higher prices for imports as well as actual shipments. Crude oil imports almost doubled as prices increased from a year earlier and the volume delivered increased 40 percent, the statistics agency said.
Purchases of electrical machinery, toys and sporting equipment rose from a year earlier, the agency said. Car imports slumped 19 percent and capital equipment imports also slumped.
Exports Gain
Exports rose 14 percent in October from a year earlier to NZ$3.83 billion. The trend in export growth is slowing, the statistics agency said. The annual increase averaged about 30 percent in the three months ended August.
Sales of milk powder, butter and cheese, which make up almost one-fifth of overseas shipments, rose 14 percent in October from a year earlier. Meat, log and seafood shipments also increased.
Economists monitor the rolling, 12-month trade balance because of volatility in the month-on-month figures, which aren’t seasonally adjusted. In October, there was a NZ$942 million trade deficit compared with an NZ$774 million gap a year earlier. Economists expected a NZ$1 billion deficit.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Nov. 27 (Bloomberg) -- New Zealand’s annual trade deficit widened in October as higher oil shipments pushed imports to a record, outpacing a gain in exports.
The gap widened to NZ$5.22 billion ($2.9 billion) in the 12 months ended Oct. 31 from NZ$5.05 billion in the year through September, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of eight analysts was for a NZ$5.21 billion shortfall.
The annual trade gap is the widest this year and the deficit may expand further as a recession in the world’s major economies slashes commodity prices and curbs demand for exports. Prices of butter, meat and other export commodities dropped 7.4 percent from September, the most in 21 years, according to an index compiled by ANZ National Bank Ltd.
“The underlying trade deficit trend continues to worsen and the outlook is uncertain given the downside risk to exports from a global recession,” said Shamubeel Eaqub, economist at Goldman Sachs JBWere Ltd. in Auckland.
The U.S., Japanese, U.K. and euro-area economies will all shrink next year, the Organization for Economic Cooperation and Development said this week.
Eaqub expects the economies of New Zealand’s major trading partners to grow 2.2 percent this year and just 0.5 percent in 2009, which will weigh on commodity prices.
Domestic Recession
Still, the New Zealand’s dollar’s 30 percent fall against the U.S. currency the past six months will provide some support for exporters, he said.
Import growth may also slow amid a domestic recession, which is likely to curb demand for cars, consumer goods and business equipment, Eaqub said.
In October, imports rose 15 percent from a year earlier to a record NZ$4.78 billion, the statistics agency said.
The figures aren’t adjusted for inflation and reflect higher prices for imports as well as actual shipments. Crude oil imports almost doubled as prices increased from a year earlier and the volume delivered increased 40 percent, the statistics agency said.
Purchases of electrical machinery, toys and sporting equipment rose from a year earlier, the agency said. Car imports slumped 19 percent and capital equipment imports also slumped.
Exports Gain
Exports rose 14 percent in October from a year earlier to NZ$3.83 billion. The trend in export growth is slowing, the statistics agency said. The annual increase averaged about 30 percent in the three months ended August.
Sales of milk powder, butter and cheese, which make up almost one-fifth of overseas shipments, rose 14 percent in October from a year earlier. Meat, log and seafood shipments also increased.
Economists monitor the rolling, 12-month trade balance because of volatility in the month-on-month figures, which aren’t seasonally adjusted. In October, there was a NZ$942 million trade deficit compared with an NZ$774 million gap a year earlier. Economists expected a NZ$1 billion deficit.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Yen Gains on Speculation Global Recession to Curb Carry Trades
By Stanley White
Nov. 27 (Bloomberg) -- The yen rose for a third day against the euro and advanced versus the dollar on speculation a global recession will spur investors to pare holdings of higher- yielding assets funded in Japan.
The yen strengthened versus the Australian dollar before reports that may show money-supply growth and inflation are slowing in Europe, giving the European Central Bank more scope to cut interest rates. Data yesterday showed U.S. consumer spending, durable-goods orders and new-home sales fell last month as the global financial crisis damped consumption.
“The market is focused on how much the economic outlook will deteriorate in Europe and the U.S.,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “An economic downturn will push up the yen, because traders will be reluctant to take on risk.”
The yen rose to 122.99 per euro as of 9:57 a.m. in Tokyo from 123.24 late yesterday in New York. It gained to 95.41 per dollar from 95.67. The euro was little changed at $1.2895 from $1.2880. The yen may advance to 121.90 versus the euro and 94.80 against the yen today, Amikura said.
The Indian rupee may decline on speculation overseas investors will shun the country’s assets after a terrorist attack targeting foreigners in Mumbai, India’s financial hub, left as many as 80 people dead and 240 injured. The rupee traded at 49.4350 per dollar at yesterday’s close in Mumbai.
U.S. Holiday
The yen climbed to 62.17 against the Australian dollar from 62.38 yesterday in New York. It was at 146.42 to the British pound from 146.61. In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is currency market moves can erase those profits. Japan’s benchmark rate of 0.3 percent is the lowest among industrialized economies.
Currency moves may be exaggerated today as U.S. financial markets are closed for the Thanksgiving Day holiday, according to Mitsuru Sahara, senior currency sales manager in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest lender by assets.
“I expect the poor economic outlook to push up the yen,” Sahara said. “Terrorism in India is also somewhat unsettling. We cannot rule out big swings in currencies today because volume will be very light as the U.S. markets are out of the action.”
The yen may move between 94.50 and 96 versus the dollar today, he said.
Money Supply
M3 money supply, which the ECB uses as a gauge of future inflation, slowed to an 8.1 percent gain in October from an 8.6 percent increase the previous month, according to a Bloomberg News survey of economists before the data is released today.
Consumer prices in the 15 countries that share the euro rose 2.4 percent in November, slower than a 3.2 percent gain the previous month, a separate report tomorrow may show.
U.S. consumer spending, the biggest contributor to the economy, fell 1 percent last month, after dropping 0.3 percent in September, the Commerce Department reported yesterday. New- home sales in the U.S. fell to an annual pace of 433,000, the lowest level in 17 years. Orders for long-lasting goods declined 6.2 percent, following a 0.2 percent decrease in September.
The Federal Reserve committed up to $800 billion on Nov. 25 in new funding to thaw credit flow for homebuyers, consumers and small businesses.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, rose 0.8 percent to 85.667 yesterday. The index climbed to 88.463 on Nov. 21, the highest level since April 2006.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net.
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Nov. 27 (Bloomberg) -- The yen rose for a third day against the euro and advanced versus the dollar on speculation a global recession will spur investors to pare holdings of higher- yielding assets funded in Japan.
The yen strengthened versus the Australian dollar before reports that may show money-supply growth and inflation are slowing in Europe, giving the European Central Bank more scope to cut interest rates. Data yesterday showed U.S. consumer spending, durable-goods orders and new-home sales fell last month as the global financial crisis damped consumption.
“The market is focused on how much the economic outlook will deteriorate in Europe and the U.S.,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “An economic downturn will push up the yen, because traders will be reluctant to take on risk.”
The yen rose to 122.99 per euro as of 9:57 a.m. in Tokyo from 123.24 late yesterday in New York. It gained to 95.41 per dollar from 95.67. The euro was little changed at $1.2895 from $1.2880. The yen may advance to 121.90 versus the euro and 94.80 against the yen today, Amikura said.
The Indian rupee may decline on speculation overseas investors will shun the country’s assets after a terrorist attack targeting foreigners in Mumbai, India’s financial hub, left as many as 80 people dead and 240 injured. The rupee traded at 49.4350 per dollar at yesterday’s close in Mumbai.
U.S. Holiday
The yen climbed to 62.17 against the Australian dollar from 62.38 yesterday in New York. It was at 146.42 to the British pound from 146.61. In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is currency market moves can erase those profits. Japan’s benchmark rate of 0.3 percent is the lowest among industrialized economies.
Currency moves may be exaggerated today as U.S. financial markets are closed for the Thanksgiving Day holiday, according to Mitsuru Sahara, senior currency sales manager in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest lender by assets.
“I expect the poor economic outlook to push up the yen,” Sahara said. “Terrorism in India is also somewhat unsettling. We cannot rule out big swings in currencies today because volume will be very light as the U.S. markets are out of the action.”
The yen may move between 94.50 and 96 versus the dollar today, he said.
Money Supply
M3 money supply, which the ECB uses as a gauge of future inflation, slowed to an 8.1 percent gain in October from an 8.6 percent increase the previous month, according to a Bloomberg News survey of economists before the data is released today.
Consumer prices in the 15 countries that share the euro rose 2.4 percent in November, slower than a 3.2 percent gain the previous month, a separate report tomorrow may show.
U.S. consumer spending, the biggest contributor to the economy, fell 1 percent last month, after dropping 0.3 percent in September, the Commerce Department reported yesterday. New- home sales in the U.S. fell to an annual pace of 433,000, the lowest level in 17 years. Orders for long-lasting goods declined 6.2 percent, following a 0.2 percent decrease in September.
The Federal Reserve committed up to $800 billion on Nov. 25 in new funding to thaw credit flow for homebuyers, consumers and small businesses.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, rose 0.8 percent to 85.667 yesterday. The index climbed to 88.463 on Nov. 21, the highest level since April 2006.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net.
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Oil Drops as Recession Raises Concerns of Falling Fuel Demand
By Christian Schmollinger
Nov. 27 (Bloomberg) -- Crude oil fell in New York after the latest economic reports in the U.S. showed a deepening recession that may cut fuel demand in the world’s largest oil user.
Consumer spending fell the most in 7 years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said yesterday. Gasoline demand dropped 1.3 percent from last week, the Energy Department said yesterday in its weekly report.
“While we continue to get weaker-than-expected macro data, I think it’s going to be hard to call a low for the crude market,” said Toby Hassall, an analyst at Commodity Warrants Australia in Sydney. “The bias is definitely to the downside.”
Crude oil for January delivery dropped as much as $1.04, or 1.9 percent, to $53.40 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $53.48 a barrel at 9:40 a.m. Singapore time. Futures have dropped 63 percent since reaching a record $147.27 on July 11.
Yesterday, crude futures increased $3.67, or 7.2 percent, to settle at $54.44 a barrel. Markets in the U.S. will be shut today because of the Thanksgiving holiday.
“I think there would have been quite a few traders out there that wanted to square up their short positions heading into the long weekend,” said Hassall. “There would have been a bit more buying of contracts.”
A short position is when a trader has sold more futures contracts than he has bought and is a bet that prices will fall.
U.S. Supplies, OPEC
Brent crude oil for January settlement fell as much as 67 cents, or 1.2 percent, to $53.25 a barrel on London’s ICE Futures Europe exchange. It was at $53 a barrel at 9:49 a.m. Singapore time. The contract gained $3.57, or 7.1 percent, to settle at $53.92 a barrel yesterday.
U.S. crude-oil supplies rose 7.28 million barrels to 320.8 million barrels last week, according to the Energy Department. It was the ninth-straight increase, the longest stretch since April 2005. Stockpiles were forecast to climb 1 million barrels, according to the median of 14 analyst estimates in a Bloomberg News survey.
Gasoline inventories rose 1.84 million barrels, or 0.9 percent, to 200.5 million barrels, the department said. A 500,000 barrel gain was forecast, according to the survey.
Crude oil demand may climb as refineries boost processing. Refineries increased operating rates by 1.3 percentage points to 86.2 percent of capacity, the highest since September. A 0.1 percentage-point gain was forecast.
The Organization of Petroleum Exporting Countries, which controls more than 40 percent of the world’s crude, is due to meet in Cairo on Nov. 29.
OPEC nations may cut output for the second time in as many months after recessions in the U.S. and Europe dragged oil below $50 a barrel. Last month, they agreed to cut production by 1.5 million barrels a day.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Nov. 27 (Bloomberg) -- Crude oil fell in New York after the latest economic reports in the U.S. showed a deepening recession that may cut fuel demand in the world’s largest oil user.
Consumer spending fell the most in 7 years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said yesterday. Gasoline demand dropped 1.3 percent from last week, the Energy Department said yesterday in its weekly report.
“While we continue to get weaker-than-expected macro data, I think it’s going to be hard to call a low for the crude market,” said Toby Hassall, an analyst at Commodity Warrants Australia in Sydney. “The bias is definitely to the downside.”
Crude oil for January delivery dropped as much as $1.04, or 1.9 percent, to $53.40 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $53.48 a barrel at 9:40 a.m. Singapore time. Futures have dropped 63 percent since reaching a record $147.27 on July 11.
Yesterday, crude futures increased $3.67, or 7.2 percent, to settle at $54.44 a barrel. Markets in the U.S. will be shut today because of the Thanksgiving holiday.
“I think there would have been quite a few traders out there that wanted to square up their short positions heading into the long weekend,” said Hassall. “There would have been a bit more buying of contracts.”
A short position is when a trader has sold more futures contracts than he has bought and is a bet that prices will fall.
U.S. Supplies, OPEC
Brent crude oil for January settlement fell as much as 67 cents, or 1.2 percent, to $53.25 a barrel on London’s ICE Futures Europe exchange. It was at $53 a barrel at 9:49 a.m. Singapore time. The contract gained $3.57, or 7.1 percent, to settle at $53.92 a barrel yesterday.
U.S. crude-oil supplies rose 7.28 million barrels to 320.8 million barrels last week, according to the Energy Department. It was the ninth-straight increase, the longest stretch since April 2005. Stockpiles were forecast to climb 1 million barrels, according to the median of 14 analyst estimates in a Bloomberg News survey.
Gasoline inventories rose 1.84 million barrels, or 0.9 percent, to 200.5 million barrels, the department said. A 500,000 barrel gain was forecast, according to the survey.
Crude oil demand may climb as refineries boost processing. Refineries increased operating rates by 1.3 percentage points to 86.2 percent of capacity, the highest since September. A 0.1 percentage-point gain was forecast.
The Organization of Petroleum Exporting Countries, which controls more than 40 percent of the world’s crude, is due to meet in Cairo on Nov. 29.
OPEC nations may cut output for the second time in as many months after recessions in the U.S. and Europe dragged oil below $50 a barrel. Last month, they agreed to cut production by 1.5 million barrels a day.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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India’s Nifty Index Futures Decline in Singapore Trading
By Chen Shiyin
Nov. 27 (Bloomberg) -- Indian stock futures fell in Singapore, in the first market reaction to coordinated terrorist attacks that killed as many as 80 people in India’s financial hub of Mumbai.
S&P CNX Nifty Index futures for November delivery fell 1.8 percent to 2,700 as of 9:09 a.m. in Singapore. The contract, derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd., added 4.2 percent in Mumbai yesterday.
Gunmen armed with rifles and grenades raided five-star hotels in India’s first terrorist attack targeting foreigners. Fire spread through the luxury Taj Mahal Palace and Tower hotel, where terrorists were holding as many as 15 people hostage, the Press Trust of India reported. A little-known Islamist group called the Deccan Mujahadeen claimed responsibility for the attacks, PTI said.
India’s benchmark Bombay Stock Exchange Sensitive Index, or Sensex, yesterday rose 3.8 percent to 9,026.72, the most since Nov. 21, after China slashed its key lending rate and the U.S. committed as much as $800 billion to unfreeze lending. Reliance Industries Ltd. and ICICI Bank Ltd. led gains among the largest stocks on heightened speculation India will follow other countries in easing interest rates.
Overseas funds sold a net 3.12 billion rupees ($63 million) of Indian stocks on Nov. 24, increasing outflows from equities this year to $13.5 billion, the nation’s market regulator said.
Multiple attacks have rocked India’s cities this year with bombs planted in markets, theaters and near mosques. Mumbai is an international financial hub, and the location of the attacks caused concern that tourists and visiting business people may be among those killed or wounded.
Read more...
Nov. 27 (Bloomberg) -- Indian stock futures fell in Singapore, in the first market reaction to coordinated terrorist attacks that killed as many as 80 people in India’s financial hub of Mumbai.
S&P CNX Nifty Index futures for November delivery fell 1.8 percent to 2,700 as of 9:09 a.m. in Singapore. The contract, derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd., added 4.2 percent in Mumbai yesterday.
Gunmen armed with rifles and grenades raided five-star hotels in India’s first terrorist attack targeting foreigners. Fire spread through the luxury Taj Mahal Palace and Tower hotel, where terrorists were holding as many as 15 people hostage, the Press Trust of India reported. A little-known Islamist group called the Deccan Mujahadeen claimed responsibility for the attacks, PTI said.
India’s benchmark Bombay Stock Exchange Sensitive Index, or Sensex, yesterday rose 3.8 percent to 9,026.72, the most since Nov. 21, after China slashed its key lending rate and the U.S. committed as much as $800 billion to unfreeze lending. Reliance Industries Ltd. and ICICI Bank Ltd. led gains among the largest stocks on heightened speculation India will follow other countries in easing interest rates.
Overseas funds sold a net 3.12 billion rupees ($63 million) of Indian stocks on Nov. 24, increasing outflows from equities this year to $13.5 billion, the nation’s market regulator said.
Multiple attacks have rocked India’s cities this year with bombs planted in markets, theaters and near mosques. Mumbai is an international financial hub, and the location of the attacks caused concern that tourists and visiting business people may be among those killed or wounded.
Read more...
Japan Stocks Jump After China Rate Cut Spurs Oil, Copper Rally
By Masaki Kondo
Nov. 27 (Bloomberg) -- Japanese stocks advanced, led by resource and shipping companies, after China’s biggest interest- rate cut in 11 years sparked a rebound in commodity prices.
Mitsubishi Corp., which gets more than half its earnings from commodities, climbed 5.6 percent after China cut its benchmark rate to spur growth, sending oil and copper prices higher. Nippon Yusen K.K., Japan’s biggest shipping company, gained 5 percent after UBS AG recommended buying the shares. Panasonic Corp. fell 4.6 percent on a media report the company will cut its annual earnings target.
The Nikkei 225 Stock Average climbed 201.96, or 2.5 percent, to 8,415.18 as of 9:33 a.m. in Tokyo. The broader Topix index rose 16.33, or 2 percent, to 833.55, with more than three stocks rallying for each that fell. In New York, the Standard & Poor’s 500 Index rallied 3.5 percent, bringing its four-day gain to 18 percent, after President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head an economic advisory board.
“Investors are waiting for authorities to implement more measures to support the economy,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co. said in an interview with Bloomberg Television. Volcker’s nomination “made Obama’s economic policies more defined.”
Credit losses and writedowns at financial companies nearing $1 trillion have prompted central banks and governments to cut interest rates and boost spending to stem a global economic contraction. The International Monetary Fund predicted this month the U.S., Europe and Japan may have their first simultaneous recession in the post-World War II era.
Rate Cut
The People’s Bank of China yesterday cut its one-year lending rate by 108 basis points to 5.58 percent, less than three weeks after announcing a 4 trillion yuan ($586 billion) economic stimulus plan. Meanwhile, the European Union proposed a 200 billion euro ($259 billion) stimulus package.
Mitsubishi, Japan’s biggest trading house by value, climbed 5.6 percent to 1,114 yen, while Inpex Corp., Japan’s largest oil and gas explorer, jumped 7.7 percent to 561,000 yen, extending its gain to a fourth day. Sumitomo Metal Mining Co., the nation’s second-largest copper smelter, rose 7.2 percent to 809 yen.
Crude oil for January delivery advanced 7.2 percent yesterday to settle at $54.44 a barrel in New York, paring losses to 63 percent from a record $147.27 on July 11. Copper futures for March delivery rose 2.3 percent.
Nippon Yusen leapt 5 percent to 484 yen, and Mitsui O.S.K. Lines Ltd., Japan’s second-biggest shipping line, added 7.2 percent to 477 yen. Kawasaki Kisen Kaisha Ltd., the No. 3, jumped 4.6 percent to 363 yen. Jun Harada, a Tokyo-based analyst for UBS, raised his ratings on the companies to “buy” from “neutral,” citing lower fuel prices.
Panasonic Earnings
Panasonic, the world’s largest maker of consumer electronics, sank 4.6 percent to 1,285 yen, making it the worst performer on the Nikkei. The company will cut its full-year forecast for operating profit by more than 30 percent, national broadcaster NHK reported today without citing anyone. Panasonic, which was cut to “neutral” from “buy” yesterday by Merrill Lynch & Co., earlier forecast operating profit to rise 7.8 percent in the year to March 31.
Yesterday, the value of stocks traded in Tokyo tumbled by a fifth from the previous day to the lowest level since a half-day session on Dec. 28. The daily trading value had been lower than the yearly average of 2.4 trillion yen since Nov. 5.
“The global economy is still deteriorating and this isn’t the time yet for investors to feel reassured,” said Ichiyoshi’s Akino. “The thin trading volumes show how unsure people are about the market outlook.”
Nikkei futures expiring in December added 3.1 percent to 8,390 in Osaka and gained 3.1 percent to 8,415 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
Nov. 27 (Bloomberg) -- Japanese stocks advanced, led by resource and shipping companies, after China’s biggest interest- rate cut in 11 years sparked a rebound in commodity prices.
Mitsubishi Corp., which gets more than half its earnings from commodities, climbed 5.6 percent after China cut its benchmark rate to spur growth, sending oil and copper prices higher. Nippon Yusen K.K., Japan’s biggest shipping company, gained 5 percent after UBS AG recommended buying the shares. Panasonic Corp. fell 4.6 percent on a media report the company will cut its annual earnings target.
The Nikkei 225 Stock Average climbed 201.96, or 2.5 percent, to 8,415.18 as of 9:33 a.m. in Tokyo. The broader Topix index rose 16.33, or 2 percent, to 833.55, with more than three stocks rallying for each that fell. In New York, the Standard & Poor’s 500 Index rallied 3.5 percent, bringing its four-day gain to 18 percent, after President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head an economic advisory board.
“Investors are waiting for authorities to implement more measures to support the economy,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co. said in an interview with Bloomberg Television. Volcker’s nomination “made Obama’s economic policies more defined.”
Credit losses and writedowns at financial companies nearing $1 trillion have prompted central banks and governments to cut interest rates and boost spending to stem a global economic contraction. The International Monetary Fund predicted this month the U.S., Europe and Japan may have their first simultaneous recession in the post-World War II era.
Rate Cut
The People’s Bank of China yesterday cut its one-year lending rate by 108 basis points to 5.58 percent, less than three weeks after announcing a 4 trillion yuan ($586 billion) economic stimulus plan. Meanwhile, the European Union proposed a 200 billion euro ($259 billion) stimulus package.
Mitsubishi, Japan’s biggest trading house by value, climbed 5.6 percent to 1,114 yen, while Inpex Corp., Japan’s largest oil and gas explorer, jumped 7.7 percent to 561,000 yen, extending its gain to a fourth day. Sumitomo Metal Mining Co., the nation’s second-largest copper smelter, rose 7.2 percent to 809 yen.
Crude oil for January delivery advanced 7.2 percent yesterday to settle at $54.44 a barrel in New York, paring losses to 63 percent from a record $147.27 on July 11. Copper futures for March delivery rose 2.3 percent.
Nippon Yusen leapt 5 percent to 484 yen, and Mitsui O.S.K. Lines Ltd., Japan’s second-biggest shipping line, added 7.2 percent to 477 yen. Kawasaki Kisen Kaisha Ltd., the No. 3, jumped 4.6 percent to 363 yen. Jun Harada, a Tokyo-based analyst for UBS, raised his ratings on the companies to “buy” from “neutral,” citing lower fuel prices.
Panasonic Earnings
Panasonic, the world’s largest maker of consumer electronics, sank 4.6 percent to 1,285 yen, making it the worst performer on the Nikkei. The company will cut its full-year forecast for operating profit by more than 30 percent, national broadcaster NHK reported today without citing anyone. Panasonic, which was cut to “neutral” from “buy” yesterday by Merrill Lynch & Co., earlier forecast operating profit to rise 7.8 percent in the year to March 31.
Yesterday, the value of stocks traded in Tokyo tumbled by a fifth from the previous day to the lowest level since a half-day session on Dec. 28. The daily trading value had been lower than the yearly average of 2.4 trillion yen since Nov. 5.
“The global economy is still deteriorating and this isn’t the time yet for investors to feel reassured,” said Ichiyoshi’s Akino. “The thin trading volumes show how unsure people are about the market outlook.”
Nikkei futures expiring in December added 3.1 percent to 8,390 in Osaka and gained 3.1 percent to 8,415 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
China Stocks Surge in U.S. on Interest-Rate Cut; Bonds May Gain
By Darren Boey and Chua Kong Ho
Nov. 27 (Bloomberg) -- China stocks rose in U.S. trading and bonds may rally after the central bank slashed its key lending rate by the most in 11 years to support growth in the world's fourth-largest economy.
Depositary receipts for PetroChina Co., the nation's largest oil producer, climbed 11 percent. Cnooc Ltd., the biggest offshore oil producer, surged 13 percent. China Mobile Ltd., the No. 1 cell-phone operator, rose 10 percent.
The key one-year lending rate will drop 108 basis points to 5.58 percent from today, the People's Bank of China said on its Web site yesterday. The cut, announced after Chinese markets closed, comes less than three weeks after the country announced a 4 trillion yuan ($586 billion) stimulus package.
``It's an aggressive cut,'' said Michelle Qi, who helps oversee about $790 million at Bank of Communications Schroder Fund Management. ``Markets will probably go up. Investors will look at the economic figures because the rate cut isn't the only tool and they'll see what other policies are in the pipeline.''
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose 0.5 percent yesterday to 1,843.49. The gauge has declined 65 percent this year as the deepening global slowdown threatened the country's export industry. The economy grew 9 percent, the weakest pace in five years, in the third quarter. Export orders fell last month to the lowest level since 2005.
Reserve Ratio
The benchmark stock index has risen 9.9 percent since the government announced its stimulus plan on Nov. 9, which spans housing, rural development, railroads and power grids. The CSI 300 now trades at 12.6 times estimated profit, about a third of its valuation at the start of this year.
PetroChina climbed 11 percent to $83.55. Cnooc jumped 13 percent to $80.33. China Mobile added 10 percent to $46.89.
The central bank also lowered the amount that the country's biggest banks must hold in reserve to 16 percent from 17 percent, effective Dec. 5. The requirement for smaller banks will fall to 14 percent from 16 percent. Reducing the so-called reserve ratio frees up more cash for banks to lend.
``The past six weeks have seen a rapid deterioration in the economic picture,'' said Gabriel Gondard, deputy chief investment officer at Fortune SGAM Fund Management Co., which oversees about $7 billion. ``You can read it as good news that the government and central bank are extremely reactive or bad news that the slowdown is much worse than initially thought.''
Bonds May Rally
China's government bonds may rise, paring declines this week, as the rate cut was larger-than-expected. Some investors had said the reduction would happen last weekend.
``The bonds will jump tomorrow as the amount of the rate- cut exceeded market expectations by a large margin,'' said Fan Xiulan, a Beijing-based fixed-income analyst at BOC International Holdings, the investment banking arm of Bank of China Ltd. She said most analysts had expected a 54 basis-point reduction, compared with 108 basis points announced yesterday.
The yield on the 3.68 percent note due September 2018 rose 15 basis points this week to 3.15 percent, according to the China Interbank Bond Market. It has fallen from as high as 3.76 percent on Sept. 27. A basis point is 0.01 percentage point.
The yuan has been little changed since July as the government sought exchange rate stability during a global credit crisis. The currency closed at 6.8287 a dollar yesterday in Shanghai, falling 0.2 percent in the past four months, according to the China Foreign Exchange Trade System.
``The rate cut won't have a big influence on the yuan,'' said Yang Shengkun, a currency analyst in Beijing at China Citic Bank Co., a unit of China's biggest state investment company. ``China will keep the yuan stable for at least one year to spur the economy, in addition to the $4 trillion yuan fiscal stimulus package.''
To contact the reporters on this story: Darren Boey in Hong Kong at dboey@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net.
Read more...
Nov. 27 (Bloomberg) -- China stocks rose in U.S. trading and bonds may rally after the central bank slashed its key lending rate by the most in 11 years to support growth in the world's fourth-largest economy.
Depositary receipts for PetroChina Co., the nation's largest oil producer, climbed 11 percent. Cnooc Ltd., the biggest offshore oil producer, surged 13 percent. China Mobile Ltd., the No. 1 cell-phone operator, rose 10 percent.
The key one-year lending rate will drop 108 basis points to 5.58 percent from today, the People's Bank of China said on its Web site yesterday. The cut, announced after Chinese markets closed, comes less than three weeks after the country announced a 4 trillion yuan ($586 billion) stimulus package.
``It's an aggressive cut,'' said Michelle Qi, who helps oversee about $790 million at Bank of Communications Schroder Fund Management. ``Markets will probably go up. Investors will look at the economic figures because the rate cut isn't the only tool and they'll see what other policies are in the pipeline.''
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose 0.5 percent yesterday to 1,843.49. The gauge has declined 65 percent this year as the deepening global slowdown threatened the country's export industry. The economy grew 9 percent, the weakest pace in five years, in the third quarter. Export orders fell last month to the lowest level since 2005.
Reserve Ratio
The benchmark stock index has risen 9.9 percent since the government announced its stimulus plan on Nov. 9, which spans housing, rural development, railroads and power grids. The CSI 300 now trades at 12.6 times estimated profit, about a third of its valuation at the start of this year.
PetroChina climbed 11 percent to $83.55. Cnooc jumped 13 percent to $80.33. China Mobile added 10 percent to $46.89.
The central bank also lowered the amount that the country's biggest banks must hold in reserve to 16 percent from 17 percent, effective Dec. 5. The requirement for smaller banks will fall to 14 percent from 16 percent. Reducing the so-called reserve ratio frees up more cash for banks to lend.
``The past six weeks have seen a rapid deterioration in the economic picture,'' said Gabriel Gondard, deputy chief investment officer at Fortune SGAM Fund Management Co., which oversees about $7 billion. ``You can read it as good news that the government and central bank are extremely reactive or bad news that the slowdown is much worse than initially thought.''
Bonds May Rally
China's government bonds may rise, paring declines this week, as the rate cut was larger-than-expected. Some investors had said the reduction would happen last weekend.
``The bonds will jump tomorrow as the amount of the rate- cut exceeded market expectations by a large margin,'' said Fan Xiulan, a Beijing-based fixed-income analyst at BOC International Holdings, the investment banking arm of Bank of China Ltd. She said most analysts had expected a 54 basis-point reduction, compared with 108 basis points announced yesterday.
The yield on the 3.68 percent note due September 2018 rose 15 basis points this week to 3.15 percent, according to the China Interbank Bond Market. It has fallen from as high as 3.76 percent on Sept. 27. A basis point is 0.01 percentage point.
The yuan has been little changed since July as the government sought exchange rate stability during a global credit crisis. The currency closed at 6.8287 a dollar yesterday in Shanghai, falling 0.2 percent in the past four months, according to the China Foreign Exchange Trade System.
``The rate cut won't have a big influence on the yuan,'' said Yang Shengkun, a currency analyst in Beijing at China Citic Bank Co., a unit of China's biggest state investment company. ``China will keep the yuan stable for at least one year to spur the economy, in addition to the $4 trillion yuan fiscal stimulus package.''
To contact the reporters on this story: Darren Boey in Hong Kong at dboey@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net.
Read more...
Asian Stocks Advance on China Rate Cut; Indian Futures Slide
By Patrick Rial and Masaki Kondo
Nov. 27 (Bloomberg) -- Asian stocks rose after China slashed interest rates by the most in more than a decade to spur growth. Indian stock futures slumped after terrorist attacks killed 80 people in Mumbai, the nation's financial hub.
BHP Billiton Ltd., which doubled sales to China in the last two years, climbed 5.5 percent after the nation's biggest interest-rate cut in 11 years drove up commodity prices. Komatsu Ltd., which controls 17 percent of China's excavator market, added 4.7 percent. Futures on the S&P CNX Nifty index of Indian stocks lost 1.8 percent in Singapore after gunmen armed with rifles and grenades raided five-star hotels in the country's first terrorist attack targeting foreigners.
The MSCI Asia Pacific Index gained 1.5 percent to 81.30 as of 10:14 a.m. in Tokyo, a third consecutive advance. The gauge is still down 49 percent in 2008 as the financial crisis sparked a global recession.
The People's Bank of China yesterday cut its one-year lending rate by 108 basis points to 5.58 percent, less than three weeks after announcing a 4 trillion yuan ($586 billion) economic stimulus plan. In addition, the European Union proposed a 200 billion euro ($259 billion) spending package.
China is the largest trading partner for Japan and Australia and was the biggest contributor to global economic growth last year. The Nikkei 225 Stock Average advanced 2.7 percent to 8,432.86. Other equity benchmarks open for trading also climbed.
Paul Volcker
U.S. stocks jumped yesterday as the Standard & Poor's 500 Index erased an early decline to rally 3.5 percent, bringing its four-day gain to 18 percent. President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head an economic advisory board, boosting investor confidence.
Volcker's nomination ``made Obama's economic policies more defined,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. ``Investors are waiting for authorities to implement more measures to support the economy.''
BHP gained 5.5 percent to A$28.75. The company supplies commodities such as iron ore to China for use in steel production. Komatsu, the world's second-largest maker of construction machinery, rose 4.7 percent to 1,073 yen. Fortescue Metals Group Ltd., which sells iron ore to two of China's five largest steelmakers, rallied 9.9 percent to A$1.89.
``This is by far the most aggressive move PBOC has ever done in our memory,'' said Xue Lan, Hong Kong-based head of China research at Citigroup, said in a report. ``We believe market could have found a short-term bottom, and that a more aggressive strategy will pay off.''
Panasonic Earnings
Credit losses and writedowns at financial companies nearing $1 trillion have prompted central banks and governments to cut interest rates and boost spending to stem a global economic contraction. The International Monetary Fund predicted this month the U.S., Europe and Japan may have their first simultaneous recession in the post-World War II era.
Crude oil for January delivery advanced 7.2 percent yesterday to settle at $54.44 a barrel in New York, paring losses to 63 percent from a record $147.27 on July 11. Copper futures for March delivery rose 2.3 percent.
Panasonic Corp., which had its shares downgraded by Merrill Lynch & Co., dropped by 4.1 percent to 1,292 yen. The world's largest maker of consumer electronics will cut its full-year operating profit forecast by more than 30 percent, national broadcaster NHK reported today without citing anyone.
``The global economy is still deteriorating and this isn't the time yet for investors to feel reassured,'' said Ichiyoshi's Akino. ``The thin trading volumes show how unsure people are about the market outlook.''
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
Nov. 27 (Bloomberg) -- Asian stocks rose after China slashed interest rates by the most in more than a decade to spur growth. Indian stock futures slumped after terrorist attacks killed 80 people in Mumbai, the nation's financial hub.
BHP Billiton Ltd., which doubled sales to China in the last two years, climbed 5.5 percent after the nation's biggest interest-rate cut in 11 years drove up commodity prices. Komatsu Ltd., which controls 17 percent of China's excavator market, added 4.7 percent. Futures on the S&P CNX Nifty index of Indian stocks lost 1.8 percent in Singapore after gunmen armed with rifles and grenades raided five-star hotels in the country's first terrorist attack targeting foreigners.
The MSCI Asia Pacific Index gained 1.5 percent to 81.30 as of 10:14 a.m. in Tokyo, a third consecutive advance. The gauge is still down 49 percent in 2008 as the financial crisis sparked a global recession.
The People's Bank of China yesterday cut its one-year lending rate by 108 basis points to 5.58 percent, less than three weeks after announcing a 4 trillion yuan ($586 billion) economic stimulus plan. In addition, the European Union proposed a 200 billion euro ($259 billion) spending package.
China is the largest trading partner for Japan and Australia and was the biggest contributor to global economic growth last year. The Nikkei 225 Stock Average advanced 2.7 percent to 8,432.86. Other equity benchmarks open for trading also climbed.
Paul Volcker
U.S. stocks jumped yesterday as the Standard & Poor's 500 Index erased an early decline to rally 3.5 percent, bringing its four-day gain to 18 percent. President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head an economic advisory board, boosting investor confidence.
Volcker's nomination ``made Obama's economic policies more defined,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. ``Investors are waiting for authorities to implement more measures to support the economy.''
BHP gained 5.5 percent to A$28.75. The company supplies commodities such as iron ore to China for use in steel production. Komatsu, the world's second-largest maker of construction machinery, rose 4.7 percent to 1,073 yen. Fortescue Metals Group Ltd., which sells iron ore to two of China's five largest steelmakers, rallied 9.9 percent to A$1.89.
``This is by far the most aggressive move PBOC has ever done in our memory,'' said Xue Lan, Hong Kong-based head of China research at Citigroup, said in a report. ``We believe market could have found a short-term bottom, and that a more aggressive strategy will pay off.''
Panasonic Earnings
Credit losses and writedowns at financial companies nearing $1 trillion have prompted central banks and governments to cut interest rates and boost spending to stem a global economic contraction. The International Monetary Fund predicted this month the U.S., Europe and Japan may have their first simultaneous recession in the post-World War II era.
Crude oil for January delivery advanced 7.2 percent yesterday to settle at $54.44 a barrel in New York, paring losses to 63 percent from a record $147.27 on July 11. Copper futures for March delivery rose 2.3 percent.
Panasonic Corp., which had its shares downgraded by Merrill Lynch & Co., dropped by 4.1 percent to 1,292 yen. The world's largest maker of consumer electronics will cut its full-year operating profit forecast by more than 30 percent, national broadcaster NHK reported today without citing anyone.
``The global economy is still deteriorating and this isn't the time yet for investors to feel reassured,'' said Ichiyoshi's Akino. ``The thin trading volumes show how unsure people are about the market outlook.''
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
Copper Prices Gain to One-Week High on China Interest-Rate Cut
By Millie Munshi
Nov. 26 (Bloomberg) -- Copper prices rose to the highest in more than a week after China, the world’s biggest metals user, lowered interest rates to revive economic growth.
The People’s Bank of China reduced its key lending rate by the most in 11 years. A surge in demand by China, the biggest contributor to global growth, helped spur a six-year rally in copper futures. The metal climbed to a record in May.
“Prices are higher on account of the stimulus measures announced overnight from China,” Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said in a report. “We suspect values could stage another push higher.”
Copper futures for March delivery rose 3.75 cents, or 2.3 percent, to $1.6915 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $1.7335, the highest for a most-active contract since Nov. 14. The all-time high on May 5 was $4.2605.
The metal’s price was also boosted by the European Union’s announcement that it would coordinate a $259 billion stimulus proposal for the 27-nation economy.
“Governments are doing whatever they can to stimulate their economies,” said Ron Goodis, a retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “It’s helping to take out the panic that’s been in these markets and bringing money back in.
Copper has plunged 44 percent this year as the global recession reduced demand. The price is headed for the first annual decline since 2001, the last time the U.S. economy contracted.
Bearish Outlook
The slumping global economy still will hurt copper and other commodities, and prices won’t “bottom out” until the first half of 2009, the Australia & New Zealand Banking Group said. Raw materials may drop an additional 10 percent to 15 percent, the group forecast.
“I can’t see the base metals doing much,” Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York, said in an interview this week.
The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 2.6 percent today, led by energy prices. On Nov. 21, the gauge touched the lowest level since April 2003.
“We don’t really know how long this recession is going to last, and the demand for the metals is not there,” Groenewegen said. “We have to look at stimulus plans as more of efforts just to stop the bleeding, not a reason to be bullish.”
On the London Metal Exchange, copper for delivery in three months rose $60, or 1.6 percent, to $3,755 a metric ton ($1.70 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
Read more...
Nov. 26 (Bloomberg) -- Copper prices rose to the highest in more than a week after China, the world’s biggest metals user, lowered interest rates to revive economic growth.
The People’s Bank of China reduced its key lending rate by the most in 11 years. A surge in demand by China, the biggest contributor to global growth, helped spur a six-year rally in copper futures. The metal climbed to a record in May.
“Prices are higher on account of the stimulus measures announced overnight from China,” Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said in a report. “We suspect values could stage another push higher.”
Copper futures for March delivery rose 3.75 cents, or 2.3 percent, to $1.6915 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $1.7335, the highest for a most-active contract since Nov. 14. The all-time high on May 5 was $4.2605.
The metal’s price was also boosted by the European Union’s announcement that it would coordinate a $259 billion stimulus proposal for the 27-nation economy.
“Governments are doing whatever they can to stimulate their economies,” said Ron Goodis, a retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “It’s helping to take out the panic that’s been in these markets and bringing money back in.
Copper has plunged 44 percent this year as the global recession reduced demand. The price is headed for the first annual decline since 2001, the last time the U.S. economy contracted.
Bearish Outlook
The slumping global economy still will hurt copper and other commodities, and prices won’t “bottom out” until the first half of 2009, the Australia & New Zealand Banking Group said. Raw materials may drop an additional 10 percent to 15 percent, the group forecast.
“I can’t see the base metals doing much,” Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York, said in an interview this week.
The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 2.6 percent today, led by energy prices. On Nov. 21, the gauge touched the lowest level since April 2003.
“We don’t really know how long this recession is going to last, and the demand for the metals is not there,” Groenewegen said. “We have to look at stimulus plans as more of efforts just to stop the bleeding, not a reason to be bullish.”
On the London Metal Exchange, copper for delivery in three months rose $60, or 1.6 percent, to $3,755 a metric ton ($1.70 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
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U.S. Economy: Goods Orders, Consumer Spending Tumble
By Timothy R. Homan and Shobhana Chandra
Nov. 26 (Bloomberg) -- U.S. business investment weakened last month and consumers are retrenching worldwide, reports today showed, heightening pressure on policy makers to take stronger steps to combat the credit squeeze.
Americans cut spending by 1 percent in October, the biggest drop since the last recession in 2001, while British households slashed expenditures last quarter by the most in 13 years, government agencies said today. A U.S. Commerce Department report showed orders for durable goods slumped twice as much as forecast as domestic and foreign demand dried up.
The intensifying global economic downturn spurred China’s central bank to cut its benchmark interest rate by the most in 11 years today, while the European Union proposed $259 billion in stimulus measures. In the U.S., President-elect Barack Obama held his third press conference in as many days to name former Federal Reserve Chairman Paul Volcker as an economic adviser.
“It’s about as bad as the 1970s and 1980s,” said David Hensley, director of global economic coordination for JPMorgan Chase & Co. in New York. “We’re looking at back-to-back very deep” slump in the global economy this quarter and next.
The decline in personal spending in the U.S. last month followed a 0.3 percent drop in September, the Commerce Department said today in Washington.
Adjusted for inflation, spending fell 0.5 percent, a fifth consecutive decrease. The last time price-adjusted spending dropped as many months in a row was in 1990-91.
Holiday Sales
Retailers are concerned about the November-December holiday season, which brings in one-third or more of annual revenue. Zale Corp., the biggest U.S. jewelry chain by stores, yesterday rescinded its annual forecast, saying in a statement that it “does not believe it can reliably gauge likely holiday performance or sales in the balance of fiscal 2009.”
Yields on 10-year Treasury notes fell to 2.98 percent at 5:15 p.m. in New York from 3.11 percent late yesterday. Yields on German 10-year bunds slid to 3.28 percent, the lowest close in almost three years.
The U.S. spending report showed incomes rose 0.3 percent after a 0.1 percent gain in September, and measures of inflation decelerated. The price gauge tied to purchases fell 0.6 percent in October and was up 3.2 percent from the same month in 2007. Stripping out fuel and energy, prices were unchanged on the month and up 2.1 percent from a year before.
The inflation rate in Germany, Europe’s largest economy, slowed more than forecast this month to 1.5 percent, the Federal Statistics Office said. That gives the European Central Bank greater leeway to keep cutting rates.
U.K. Spending
In Britain, government figures showed consumer spending fell 0.2 percent and fixed investment dropped by 2.4 percent in the third quarter from the previous three months. Europe’s second-largest economy suffered a 0.5 percent contraction in the period, the first decline in 16 years.
U.K. Chancellor of the Exchequer Alistair Darling this week pledged 20 billion pounds ($30 billion) of tax cuts and spending as the loan freeze and rising unemployment threatened to exacerbate the recession.
In the U.S., the Reuters/University of Michigan final index of consumer sentiment dropped to 55.3 in November, the lowest level since 1980.
Italian business confidence fell to the lowest in more than 15 years in November amid a recession in Europe’s fourth-biggest economy.
Postwar Low
“We’re probably going to cut our forecasts for U.S., Europe and world growth next year by at least” half a percentage point, said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “This is one of the worst recessions in the post-war period.”
The Fed will probably cut its benchmark rate by half a point, to 0.5 percent, and may lower it to zero, Behravesh said. Macroeconomic Advisers LLC, JPMorgan and HSBC Holdings Inc. analysts already predict a zero rate by January.
China’s central bank said it will lower its key one-year lending rate by 108 basis points to 5.58 percent effective tomorrow, extending efforts to prevent an economic slump less than three weeks after the government unveiled a 4 trillion yuan ($586 billion) stimulus plan.
China’s economy, the biggest contributor to global growth, will expand at the slowest pace in almost two decades next year, the World Bank forecast yesterday.
U.S. orders for durable goods, which are meant to last several years, slid 6.2 percent last month after a 0.2 percent drop in September, the Commerce Department reported. The median forecast of 72 economists in a Bloomberg News survey was for a 3 percent drop.
Durable Goods
Excluding demand for transportation equipment, which tends to be volatile, orders dropped 4.4 percent, also more than anticipated and the biggest decline since January 2002. Those bookings were projected to fall 1.6 percent, according to the Bloomberg survey.
Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, decreased 4 percent, the biggest decline in almost two years. Shipments of those items, used in calculating gross domestic product, fell 2.4 percent following a 1.6 percent gain in September.
Following the durable-goods and spending reports, economists at Morgan Stanley in New York projected the U.S. economy would contract at a 5.1 percent annual pace this quarter, more than they previously anticipated.
“The capital-spending recession is just under way, where the consumer recession has been very well in train,” Cary Leahey, a senior U.S. economist at Decision Economics Inc. in New York, said in an interview with Bloomberg Television. “You have a very adverse one-two punch for the economy.”
Jobless Claims
The number of Americans filing first-time claims for unemployment benefits fell to 529,000 last week, while remaining close to the highest level since 1992, Labor Department figures showed. The four-week moving average for claims reached a 26- year high.
Obama this week warned of “millions” of additional job losses without a new stimulus plan. He called for a two-year package to undergird the economy, investing in infrastructure and energy projects and aiding the unemployed. “Help is on the way,” Obama said today.
The president elect, who takes office Jan. 20, spoke in Chicago to announce Volcker will lead a new White House panel aimed at reviving growth. He has already designated New York Fed President Timothy Geithner as his Treasury secretary and former Treasury chief Lawrence Summers to head the National Economic Council.
The European Union is coordinating a 200 billion-euro ($259 billion) stimulus for its 27-nation economy. The package, to which individual countries will contribute 170 billion euros, is equivalent to 1.5 percent of the region’s GDP.
‘Exceptional Crisis’
“We may even need more,” European Commission President Jose Barroso said in unveiling the proposal in Brussels today, adding that the plan was an “exceptional response” to an “exceptional crisis.”
Back in the U.S., a government report showed that the housing slump -- the trigger for the credit crisis and economic turmoil -- is intensifying.
Purchases of new houses dropped 5.3 percent to an annual pace of 433,000, lower than forecast and the fewest since January 1991, the Commerce Department said today in Washington. The median sales price decreased to a four-year low.
“We’re going from bad to worse,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, who accurately forecast the drop in consumer spending in today’s report. “The recession is deepening.”
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Read more...
Nov. 26 (Bloomberg) -- U.S. business investment weakened last month and consumers are retrenching worldwide, reports today showed, heightening pressure on policy makers to take stronger steps to combat the credit squeeze.
Americans cut spending by 1 percent in October, the biggest drop since the last recession in 2001, while British households slashed expenditures last quarter by the most in 13 years, government agencies said today. A U.S. Commerce Department report showed orders for durable goods slumped twice as much as forecast as domestic and foreign demand dried up.
The intensifying global economic downturn spurred China’s central bank to cut its benchmark interest rate by the most in 11 years today, while the European Union proposed $259 billion in stimulus measures. In the U.S., President-elect Barack Obama held his third press conference in as many days to name former Federal Reserve Chairman Paul Volcker as an economic adviser.
“It’s about as bad as the 1970s and 1980s,” said David Hensley, director of global economic coordination for JPMorgan Chase & Co. in New York. “We’re looking at back-to-back very deep” slump in the global economy this quarter and next.
The decline in personal spending in the U.S. last month followed a 0.3 percent drop in September, the Commerce Department said today in Washington.
Adjusted for inflation, spending fell 0.5 percent, a fifth consecutive decrease. The last time price-adjusted spending dropped as many months in a row was in 1990-91.
Holiday Sales
Retailers are concerned about the November-December holiday season, which brings in one-third or more of annual revenue. Zale Corp., the biggest U.S. jewelry chain by stores, yesterday rescinded its annual forecast, saying in a statement that it “does not believe it can reliably gauge likely holiday performance or sales in the balance of fiscal 2009.”
Yields on 10-year Treasury notes fell to 2.98 percent at 5:15 p.m. in New York from 3.11 percent late yesterday. Yields on German 10-year bunds slid to 3.28 percent, the lowest close in almost three years.
The U.S. spending report showed incomes rose 0.3 percent after a 0.1 percent gain in September, and measures of inflation decelerated. The price gauge tied to purchases fell 0.6 percent in October and was up 3.2 percent from the same month in 2007. Stripping out fuel and energy, prices were unchanged on the month and up 2.1 percent from a year before.
The inflation rate in Germany, Europe’s largest economy, slowed more than forecast this month to 1.5 percent, the Federal Statistics Office said. That gives the European Central Bank greater leeway to keep cutting rates.
U.K. Spending
In Britain, government figures showed consumer spending fell 0.2 percent and fixed investment dropped by 2.4 percent in the third quarter from the previous three months. Europe’s second-largest economy suffered a 0.5 percent contraction in the period, the first decline in 16 years.
U.K. Chancellor of the Exchequer Alistair Darling this week pledged 20 billion pounds ($30 billion) of tax cuts and spending as the loan freeze and rising unemployment threatened to exacerbate the recession.
In the U.S., the Reuters/University of Michigan final index of consumer sentiment dropped to 55.3 in November, the lowest level since 1980.
Italian business confidence fell to the lowest in more than 15 years in November amid a recession in Europe’s fourth-biggest economy.
Postwar Low
“We’re probably going to cut our forecasts for U.S., Europe and world growth next year by at least” half a percentage point, said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “This is one of the worst recessions in the post-war period.”
The Fed will probably cut its benchmark rate by half a point, to 0.5 percent, and may lower it to zero, Behravesh said. Macroeconomic Advisers LLC, JPMorgan and HSBC Holdings Inc. analysts already predict a zero rate by January.
China’s central bank said it will lower its key one-year lending rate by 108 basis points to 5.58 percent effective tomorrow, extending efforts to prevent an economic slump less than three weeks after the government unveiled a 4 trillion yuan ($586 billion) stimulus plan.
China’s economy, the biggest contributor to global growth, will expand at the slowest pace in almost two decades next year, the World Bank forecast yesterday.
U.S. orders for durable goods, which are meant to last several years, slid 6.2 percent last month after a 0.2 percent drop in September, the Commerce Department reported. The median forecast of 72 economists in a Bloomberg News survey was for a 3 percent drop.
Durable Goods
Excluding demand for transportation equipment, which tends to be volatile, orders dropped 4.4 percent, also more than anticipated and the biggest decline since January 2002. Those bookings were projected to fall 1.6 percent, according to the Bloomberg survey.
Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, decreased 4 percent, the biggest decline in almost two years. Shipments of those items, used in calculating gross domestic product, fell 2.4 percent following a 1.6 percent gain in September.
Following the durable-goods and spending reports, economists at Morgan Stanley in New York projected the U.S. economy would contract at a 5.1 percent annual pace this quarter, more than they previously anticipated.
“The capital-spending recession is just under way, where the consumer recession has been very well in train,” Cary Leahey, a senior U.S. economist at Decision Economics Inc. in New York, said in an interview with Bloomberg Television. “You have a very adverse one-two punch for the economy.”
Jobless Claims
The number of Americans filing first-time claims for unemployment benefits fell to 529,000 last week, while remaining close to the highest level since 1992, Labor Department figures showed. The four-week moving average for claims reached a 26- year high.
Obama this week warned of “millions” of additional job losses without a new stimulus plan. He called for a two-year package to undergird the economy, investing in infrastructure and energy projects and aiding the unemployed. “Help is on the way,” Obama said today.
The president elect, who takes office Jan. 20, spoke in Chicago to announce Volcker will lead a new White House panel aimed at reviving growth. He has already designated New York Fed President Timothy Geithner as his Treasury secretary and former Treasury chief Lawrence Summers to head the National Economic Council.
The European Union is coordinating a 200 billion-euro ($259 billion) stimulus for its 27-nation economy. The package, to which individual countries will contribute 170 billion euros, is equivalent to 1.5 percent of the region’s GDP.
‘Exceptional Crisis’
“We may even need more,” European Commission President Jose Barroso said in unveiling the proposal in Brussels today, adding that the plan was an “exceptional response” to an “exceptional crisis.”
Back in the U.S., a government report showed that the housing slump -- the trigger for the credit crisis and economic turmoil -- is intensifying.
Purchases of new houses dropped 5.3 percent to an annual pace of 433,000, lower than forecast and the fewest since January 1991, the Commerce Department said today in Washington. The median sales price decreased to a four-year low.
“We’re going from bad to worse,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, who accurately forecast the drop in consumer spending in today’s report. “The recession is deepening.”
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Read more...
Most Dividends Cut Since 1950s as Banks Conserve Cash
By Lynn Thomasson and Eric Martin
Nov. 26 (Bloomberg) -- Stock dividends are disappearing at the fastest rate in 50 years as the worsening recession forces U.S. companies to conserve cash.
Citigroup Inc., Genworth Financial Inc. and New York Times Co. are leading 91 companies listed on the biggest U.S. exchanges in reducing or suspending payouts to shareholders this month, the most since May 1958, when 113 companies slashed dividends, according to data compiled by Standard & Poor’s. The reductions in November exceeded the 81 dividend cuts in October and 60 in September.
“Until we start to see the economy turn around, you have to assume broadly that dividends could be at risk in many sectors of the economy, especially among financials,” said Fritz Meyer, the Denver-based senior market strategist at Invesco Aim Advisors Inc., which manages about $358 billion.
The recession and global credit crunch are reducing profits for the fifth straight quarter and leaving less spare cash for quarterly payments to shareholders. Curtailing dividends adds more injury to investors battered by this year’s 42 percent decline in the S&P 500 Index, the worst performance since 1931.
Financial companies accounted for six of the eight dividend cuts or suspensions in the S&P 500 this month through Nov. 24, based on data from S&P index analyst Howard Silverblatt. The industry has lost $972 billion worldwide from the subprime mortgage market collapse and raised $880 billion to replace it.
Higher Yield
U.S. stocks climbed today, driving the S&P 500 to the biggest four-day advance since 1933, as a rally in oil prices lifted energy shares and investors speculated President-elect Barack Obama’s economic team will bolster growth. The S&P 500 gained 3.5 percent to 887.68.
Tumbling stock prices are increasing the dividend yield for S&P 500 companies to the highest level in at least 15 years. The 3.8 percent yield, on a weekly basis, is greater than the 3.6 percent return from a 30-year U.S. Treasury.
Options prices, earnings growth and industry trends suggest that 83 companies may boost their dividend, according to data compiled by Bloomberg. 3M Co., Eli Lilly & Co. and Coca-Cola Co., each yielding more than 3.1 percent, have increased their payout for the past 25 years and likely will do so again, data from S&P and Bloomberg show.
“We’re looking for companies that have the balance sheet and cash flow in this environment to maintain their dividend,” said Brad Evans, a fund manager at Milwaukee-based Heartland Advisors Inc., which manages $2.5 billion. “When things settle down, the wheat will be separated from the chaff.”
Citigroup, Genworth
Citigroup, which lost 69 percent of its market value in the past two months, said it would pay a quarterly dividend of no more than 1 cent a share over the next three years after receiving a $20 billion cash injection from the government this week. The New York-based lender, which paid 54 cents a share last year, has reduced its payment three times in 2008.
Genworth, the insurer spun off by General Electric Co., suspended its 10-cent quarterly payout earlier this month. Shares of the Richmond, Virginia-based company plunged 43 percent in New York Stock Exchange composite trading a day after it reported a $258 million third-quarter loss.
New York Times cut its quarterly dividend by 74 percent to 6 cents on Nov. 20. The New York-based company called the decision “difficult but necessary” as revenue dropped 9.4 percent from the year-earlier period.
D.R. Horton Inc., the biggest U.S. homebuilder, yesterday cut its dividend for the quarter to 3.75 cents a share from 7.5 cents as record foreclosures deepened the housing slump. The reduction was the second for the Fort Worth, Texas-based company this year.
“Companies feel like they have to conserve capital,” said Bill Stone, who oversees $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “If you’re out there raising a lot of capital, it doesn’t make a whole lot of sense to turn around and be paying it out.”
To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.
Read more...
Nov. 26 (Bloomberg) -- Stock dividends are disappearing at the fastest rate in 50 years as the worsening recession forces U.S. companies to conserve cash.
Citigroup Inc., Genworth Financial Inc. and New York Times Co. are leading 91 companies listed on the biggest U.S. exchanges in reducing or suspending payouts to shareholders this month, the most since May 1958, when 113 companies slashed dividends, according to data compiled by Standard & Poor’s. The reductions in November exceeded the 81 dividend cuts in October and 60 in September.
“Until we start to see the economy turn around, you have to assume broadly that dividends could be at risk in many sectors of the economy, especially among financials,” said Fritz Meyer, the Denver-based senior market strategist at Invesco Aim Advisors Inc., which manages about $358 billion.
The recession and global credit crunch are reducing profits for the fifth straight quarter and leaving less spare cash for quarterly payments to shareholders. Curtailing dividends adds more injury to investors battered by this year’s 42 percent decline in the S&P 500 Index, the worst performance since 1931.
Financial companies accounted for six of the eight dividend cuts or suspensions in the S&P 500 this month through Nov. 24, based on data from S&P index analyst Howard Silverblatt. The industry has lost $972 billion worldwide from the subprime mortgage market collapse and raised $880 billion to replace it.
Higher Yield
U.S. stocks climbed today, driving the S&P 500 to the biggest four-day advance since 1933, as a rally in oil prices lifted energy shares and investors speculated President-elect Barack Obama’s economic team will bolster growth. The S&P 500 gained 3.5 percent to 887.68.
Tumbling stock prices are increasing the dividend yield for S&P 500 companies to the highest level in at least 15 years. The 3.8 percent yield, on a weekly basis, is greater than the 3.6 percent return from a 30-year U.S. Treasury.
Options prices, earnings growth and industry trends suggest that 83 companies may boost their dividend, according to data compiled by Bloomberg. 3M Co., Eli Lilly & Co. and Coca-Cola Co., each yielding more than 3.1 percent, have increased their payout for the past 25 years and likely will do so again, data from S&P and Bloomberg show.
“We’re looking for companies that have the balance sheet and cash flow in this environment to maintain their dividend,” said Brad Evans, a fund manager at Milwaukee-based Heartland Advisors Inc., which manages $2.5 billion. “When things settle down, the wheat will be separated from the chaff.”
Citigroup, Genworth
Citigroup, which lost 69 percent of its market value in the past two months, said it would pay a quarterly dividend of no more than 1 cent a share over the next three years after receiving a $20 billion cash injection from the government this week. The New York-based lender, which paid 54 cents a share last year, has reduced its payment three times in 2008.
Genworth, the insurer spun off by General Electric Co., suspended its 10-cent quarterly payout earlier this month. Shares of the Richmond, Virginia-based company plunged 43 percent in New York Stock Exchange composite trading a day after it reported a $258 million third-quarter loss.
New York Times cut its quarterly dividend by 74 percent to 6 cents on Nov. 20. The New York-based company called the decision “difficult but necessary” as revenue dropped 9.4 percent from the year-earlier period.
D.R. Horton Inc., the biggest U.S. homebuilder, yesterday cut its dividend for the quarter to 3.75 cents a share from 7.5 cents as record foreclosures deepened the housing slump. The reduction was the second for the Fort Worth, Texas-based company this year.
“Companies feel like they have to conserve capital,” said Bill Stone, who oversees $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “If you’re out there raising a lot of capital, it doesn’t make a whole lot of sense to turn around and be paying it out.”
To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.
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Canada Stocks Gain on Oil, Takeover Speculation; Suncor Rises
By John Kipphoff
Nov. 26 (Bloomberg) -- Canadian stocks gained a fourth day, the longest rally since August, as energy shares climbed on rising oil prices and speculation commodity producers whose shares have slumped may be targeted for buyouts.
Suncor Energy Inc. led energy producers higher after Nexen Inc. dismissed speculation it may be a takeover target. Potash Corp. of Saskatchewan Inc. advanced along with prices of corn and soybeans. BCE Inc. plunged after its auditor said that the planned C$52 billion ($42 billion) leveraged buyout would leave Canada’s biggest phone company insolvent.
The Standard & Poor’s/TSX Composite Index rose 2.4 percent to 8,643.52 in Toronto. The S&P/TSX has still fallen 38 percent this year and is poised for its worst annual drop on record, after worldwide credit losses approached $1 trillion and commodity prices slumped form records.
“I’m cautiously optimistic for a three-month rally,” said Andrew Martyn, who helps manage about C$450 million at Toronto- based Davis-Rea Ltd. “There are some really beaten-down companies. Look for companies who need no money. The long-term trend is still down.”
Measures of energy and raw-materials producers gained 6.4 percent and 6.5 percent, paring their respective year-to-date declines to 34 and 41 percent. The two industries account for more than two fifths of the S&P/TSX’s value and led the index to a record in June as a five-year boom in commodities peaked.
Oil-Sands Producers
Suncor Energy Inc., the second-largest oil-sands producer, gained 12 percent to C$26.19. The stock has lost more than half its value this year. Canadian Natural Resources Ltd., owner of the Horizon oilsands mine, rose 12 percent to C$49. EnCana Corp., the nation’s biggest energy company, added 8.4 percent to C$56.33.
Nexen, the co-owner of the Long Lake oilsands project in Alberta, gained 11 percent to C$22.28 and earlier climbed as much as 19 percent, before reiterating that it isn’t for sale. Rival oil and gas producers, including France’s Total SA and Royal Dutch Shell Plc, were considering takeover bids, the Financial Times reported Oct. 29, without saying where it got the information. Total spokesman Kevin Church and Shell spokeswoman Sarah Smallhorn declined to comment today.
Petro-Canada, which is has put on hold a final decision on its C$25.3 billion ($20.6 billion) Fort Hills oils sands project, added 13 percent to C$29.20.
Long Lake partner Opti Canada Inc. and Fort Hills investor Teck Cominco Ltd. also rose. Opti jumped a record 44 percent to C$1.80.
Teck, Canada’s biggest diversified mining company, added 26 percent to C$5.27. It has still lost 85 percent of its value this year on concern that it won’t be able to repay $9.8 billion in loans that it took out to finance acquisitions.
China Rate Cut
Crude oil for January delivery climbed 7.2 percent to $54.19 a barrel in New York after China, the second-biggest energy-consuming country, cut interest rates to bolster growth, and on speculation that OPEC nations, the producers of more than 40 percent of the world’s oil, may cut output again. Futures have dropped 63 percent from a record in July.
Natural-gas, copper, corn and soybean prices advanced, sending the Reuters/Jefferies CRB Index of 19 commodities to a 3.3 percent gain, its third in four days since falling by over half on Nov. 20 from a July record.
Potash, the biggest maker of crop nutrients by market value, increased 5.5 percent to C$76.26. Goldcorp Inc., the second-biggest bullion mining company by market value, gained 7.2 percent to C$32.75.
BHP Billiton Ltd., the world’s largest mining company, may target other acquisitions to replace the growth its failed hostile bid for Rio Tinto Group would have provided, said Evy Hambro, a BlackRock Inc. money manager.
Rebound
Research In Motion, the maker of the BlackBerry e-mail phone, gained 8.3 percent to C$55 after sliding 12 percent in two days on analyst reports saying a shortage in supply may hurt sales of its new “Storm” handset in the U.S. The stock has retreated two thirds since reaching a record on June 19.
“You have to be prepared to hold for two years,” Martyn said. “This feels like a bear-market rally.”
BCE dropped 34 percent to C$25.25 and earlier slid 40 percent for its steepest decline since January 1983, when Bloomberg records begin. The current price in Toronto is 43 percent below the C$42.75 a share offered for BCE by the Ontario Teachers’ Pension Plan and its partners.
BCE, which planned to go private by Dec. 11, said KPMG has evaluated the company and said it would probably be insolvent if it completes the deal under current terms and market conditions. KPMG also said the phone company’s current capital structure meets solvency requirements, BCE said.
“It looks unlikely that the BCE deal will be completed,” said Michael Smedley, who helps manage about $1.2 billion at Morgan Meighen & Associates in Toronto, including BCE shares. “It’s the most serious local market event to take place during this long financial crisis.”
Telus, the nation’s second-largest phone company, declined 1.9 percent to C$38.09. Rogers, the biggest mobile-phone provider, slipped 2.3 percent to C$34.40.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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Nov. 26 (Bloomberg) -- Canadian stocks gained a fourth day, the longest rally since August, as energy shares climbed on rising oil prices and speculation commodity producers whose shares have slumped may be targeted for buyouts.
Suncor Energy Inc. led energy producers higher after Nexen Inc. dismissed speculation it may be a takeover target. Potash Corp. of Saskatchewan Inc. advanced along with prices of corn and soybeans. BCE Inc. plunged after its auditor said that the planned C$52 billion ($42 billion) leveraged buyout would leave Canada’s biggest phone company insolvent.
The Standard & Poor’s/TSX Composite Index rose 2.4 percent to 8,643.52 in Toronto. The S&P/TSX has still fallen 38 percent this year and is poised for its worst annual drop on record, after worldwide credit losses approached $1 trillion and commodity prices slumped form records.
“I’m cautiously optimistic for a three-month rally,” said Andrew Martyn, who helps manage about C$450 million at Toronto- based Davis-Rea Ltd. “There are some really beaten-down companies. Look for companies who need no money. The long-term trend is still down.”
Measures of energy and raw-materials producers gained 6.4 percent and 6.5 percent, paring their respective year-to-date declines to 34 and 41 percent. The two industries account for more than two fifths of the S&P/TSX’s value and led the index to a record in June as a five-year boom in commodities peaked.
Oil-Sands Producers
Suncor Energy Inc., the second-largest oil-sands producer, gained 12 percent to C$26.19. The stock has lost more than half its value this year. Canadian Natural Resources Ltd., owner of the Horizon oilsands mine, rose 12 percent to C$49. EnCana Corp., the nation’s biggest energy company, added 8.4 percent to C$56.33.
Nexen, the co-owner of the Long Lake oilsands project in Alberta, gained 11 percent to C$22.28 and earlier climbed as much as 19 percent, before reiterating that it isn’t for sale. Rival oil and gas producers, including France’s Total SA and Royal Dutch Shell Plc, were considering takeover bids, the Financial Times reported Oct. 29, without saying where it got the information. Total spokesman Kevin Church and Shell spokeswoman Sarah Smallhorn declined to comment today.
Petro-Canada, which is has put on hold a final decision on its C$25.3 billion ($20.6 billion) Fort Hills oils sands project, added 13 percent to C$29.20.
Long Lake partner Opti Canada Inc. and Fort Hills investor Teck Cominco Ltd. also rose. Opti jumped a record 44 percent to C$1.80.
Teck, Canada’s biggest diversified mining company, added 26 percent to C$5.27. It has still lost 85 percent of its value this year on concern that it won’t be able to repay $9.8 billion in loans that it took out to finance acquisitions.
China Rate Cut
Crude oil for January delivery climbed 7.2 percent to $54.19 a barrel in New York after China, the second-biggest energy-consuming country, cut interest rates to bolster growth, and on speculation that OPEC nations, the producers of more than 40 percent of the world’s oil, may cut output again. Futures have dropped 63 percent from a record in July.
Natural-gas, copper, corn and soybean prices advanced, sending the Reuters/Jefferies CRB Index of 19 commodities to a 3.3 percent gain, its third in four days since falling by over half on Nov. 20 from a July record.
Potash, the biggest maker of crop nutrients by market value, increased 5.5 percent to C$76.26. Goldcorp Inc., the second-biggest bullion mining company by market value, gained 7.2 percent to C$32.75.
BHP Billiton Ltd., the world’s largest mining company, may target other acquisitions to replace the growth its failed hostile bid for Rio Tinto Group would have provided, said Evy Hambro, a BlackRock Inc. money manager.
Rebound
Research In Motion, the maker of the BlackBerry e-mail phone, gained 8.3 percent to C$55 after sliding 12 percent in two days on analyst reports saying a shortage in supply may hurt sales of its new “Storm” handset in the U.S. The stock has retreated two thirds since reaching a record on June 19.
“You have to be prepared to hold for two years,” Martyn said. “This feels like a bear-market rally.”
BCE dropped 34 percent to C$25.25 and earlier slid 40 percent for its steepest decline since January 1983, when Bloomberg records begin. The current price in Toronto is 43 percent below the C$42.75 a share offered for BCE by the Ontario Teachers’ Pension Plan and its partners.
BCE, which planned to go private by Dec. 11, said KPMG has evaluated the company and said it would probably be insolvent if it completes the deal under current terms and market conditions. KPMG also said the phone company’s current capital structure meets solvency requirements, BCE said.
“It looks unlikely that the BCE deal will be completed,” said Michael Smedley, who helps manage about $1.2 billion at Morgan Meighen & Associates in Toronto, including BCE shares. “It’s the most serious local market event to take place during this long financial crisis.”
Telus, the nation’s second-largest phone company, declined 1.9 percent to C$38.09. Rogers, the biggest mobile-phone provider, slipped 2.3 percent to C$34.40.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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Options Traders Bet February Oil Will Fall Below $25 a Barrel
By Robert Tuttle
Nov. 26 (Bloomberg) -- Oil traders placed bets that crude oil for February delivery will collapse to below $25 a barrel as economies around the world slide more deeply into recession, cutting energy demand.
February $25 puts, the seventh-most actively traded option, rose 8 cents to 10 cents a barrel, or $100 a contract, at 4:19 p.m. on the New York Mercantile Exchange. A total of 184 lots traded, up from none yesterday. Earlier in the day, it was the most actively traded option. The puts fell 1 cent to 1 cent at 5:14 p.m.
“It’s a lottery ticket,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “It’s somebody making a bet that crude oil is going to crash in the next six weeks.”
Crude oil futures have dropped 53 percent in the past three months, dropping below $50 a barrel last week, as a credit squeeze pushed economies into recession and reduced demand for petroleum products. Orders for U.S. durable goods fell twice as much as forecast in October, the Commerce Department said today.
The Organization of Petroleum Exporting Countries, producers of more than 40 percent of world oil, will reduce output before the end of the year to stem the decline in price, according to 18 of 21 analysts surveyed by Bloomberg. The group is scheduled to meet in Cairo on Nov. 29 and in Algeria on Dec. 17.
“If OPEC doesn’t get ahead of the curve, those $25 puts are going to start to look interesting,” said Dominick Chirichella, a senior partner at the Energy Management Institute in New York.
Saudi Production
Saudi Arabia, OPEC’s largest producer, may be under pressure to maintain output levels so as not to harm the world economy, Chirichella said.
Crude oil for January delivery gained $3.67, or 7.2 percent, to settle at $54.44 a barrel on the exchange. Futures gained after China, the world’s second-biggest energy consumer, reduced interest rates the most in 11 years to raise economic growth. Stocks in the U.S., Europe and Asia rose the first three days of this week.
“With stock markets around the world stabilizing, the idea that crude oil could end its bear market is very much possible,” Cordier said.
March $60 puts, the most actively traded contract, fell $2.25 to $8.76 a barrel, or $8,760 a contract. A total of 400 lots traded, up from zero yesterday.
January $56 calls, the second most actively traded contract, gained $1.23 to $3.41 a barrel, or $3,410 a contract, on 380 lots traded. January $45 puts, the third-most actively traded option, fell 89 cents to 86 cents a barrel, or $860 a contract, on 351 lots traded.
One options contract equals 1,000 barrels of oil.
To contact the reporter on this story: Robert Tuttle in New York at rtuttle@bloomberg.net
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Nov. 26 (Bloomberg) -- Oil traders placed bets that crude oil for February delivery will collapse to below $25 a barrel as economies around the world slide more deeply into recession, cutting energy demand.
February $25 puts, the seventh-most actively traded option, rose 8 cents to 10 cents a barrel, or $100 a contract, at 4:19 p.m. on the New York Mercantile Exchange. A total of 184 lots traded, up from none yesterday. Earlier in the day, it was the most actively traded option. The puts fell 1 cent to 1 cent at 5:14 p.m.
“It’s a lottery ticket,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “It’s somebody making a bet that crude oil is going to crash in the next six weeks.”
Crude oil futures have dropped 53 percent in the past three months, dropping below $50 a barrel last week, as a credit squeeze pushed economies into recession and reduced demand for petroleum products. Orders for U.S. durable goods fell twice as much as forecast in October, the Commerce Department said today.
The Organization of Petroleum Exporting Countries, producers of more than 40 percent of world oil, will reduce output before the end of the year to stem the decline in price, according to 18 of 21 analysts surveyed by Bloomberg. The group is scheduled to meet in Cairo on Nov. 29 and in Algeria on Dec. 17.
“If OPEC doesn’t get ahead of the curve, those $25 puts are going to start to look interesting,” said Dominick Chirichella, a senior partner at the Energy Management Institute in New York.
Saudi Production
Saudi Arabia, OPEC’s largest producer, may be under pressure to maintain output levels so as not to harm the world economy, Chirichella said.
Crude oil for January delivery gained $3.67, or 7.2 percent, to settle at $54.44 a barrel on the exchange. Futures gained after China, the world’s second-biggest energy consumer, reduced interest rates the most in 11 years to raise economic growth. Stocks in the U.S., Europe and Asia rose the first three days of this week.
“With stock markets around the world stabilizing, the idea that crude oil could end its bear market is very much possible,” Cordier said.
March $60 puts, the most actively traded contract, fell $2.25 to $8.76 a barrel, or $8,760 a contract. A total of 400 lots traded, up from zero yesterday.
January $56 calls, the second most actively traded contract, gained $1.23 to $3.41 a barrel, or $3,410 a contract, on 380 lots traded. January $45 puts, the third-most actively traded option, fell 89 cents to 86 cents a barrel, or $860 a contract, on 351 lots traded.
One options contract equals 1,000 barrels of oil.
To contact the reporter on this story: Robert Tuttle in New York at rtuttle@bloomberg.net
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Corn, Soybeans Rise After China Cuts Rates to Boost Economy
By Jeff Wilson
Nov. 26 (Bloomberg) -- Corn and soybeans rose after China, the world’s biggest oilseed importer and pork producer, slashed interest rates to spur its economy, reviving prospects for an increase in demand for livestock feed and vegetable oil.
Most commodities rose after the People’s Bank of China lowered its one-year lending rate by the most in 11 years. The European Union proposed a 200 billion-euro ($259 billion) economic-stimulus plan to revive growth and investment.
“There will be more interest-rate cuts to prevent global instability,” said Roy Huckabay, an executive vice president for the Linn Group in Chicago. “Even during recessions, the demand for agricultural products still holds up pretty well.”
Corn futures for December delivery rose 0.5 cent, or 0.1 percent, to $3.54 a bushel on the Chicago Board of Trade. The price has fallen 56 percent from a record $7.9925 in late June, reaching a 13-month low of $3.365 on Nov. 21.
Soybean futures for January delivery gained 3 cents, or 0.3 percent, to $8.86 a bushel. Still, the most-active contract is down 46 percent from the all-time high of $16.3675 on July 3. The price reached a 14-month low at $8.3525 on Nov. 21.
The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 3.3 percent, led by gains of more than 6 percent in energy prices. On Nov. 21, the gauge touched the lowest since April 2003.
Fuel Consumption Rises
Corn and soybean prices also climbed after a government report showed that U.S. fuel use last week climbed 510,000 barrels to 19.5 million barrels a day, which may boost demand for alternative fuels made from crops.
Average U.S. ethanol production in September fell 1 percent to 640,000 barrels from a record in August, an Energy Department report today showed. Still, daily production rose 45 percent from a year earlier and was the second-highest ever.
Corn and soybeans “are trading off the daily movements in the petroleum markets,” said Robert Lekberg, a market analyst for Penson GHCO in Chicago.
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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Nov. 26 (Bloomberg) -- Corn and soybeans rose after China, the world’s biggest oilseed importer and pork producer, slashed interest rates to spur its economy, reviving prospects for an increase in demand for livestock feed and vegetable oil.
Most commodities rose after the People’s Bank of China lowered its one-year lending rate by the most in 11 years. The European Union proposed a 200 billion-euro ($259 billion) economic-stimulus plan to revive growth and investment.
“There will be more interest-rate cuts to prevent global instability,” said Roy Huckabay, an executive vice president for the Linn Group in Chicago. “Even during recessions, the demand for agricultural products still holds up pretty well.”
Corn futures for December delivery rose 0.5 cent, or 0.1 percent, to $3.54 a bushel on the Chicago Board of Trade. The price has fallen 56 percent from a record $7.9925 in late June, reaching a 13-month low of $3.365 on Nov. 21.
Soybean futures for January delivery gained 3 cents, or 0.3 percent, to $8.86 a bushel. Still, the most-active contract is down 46 percent from the all-time high of $16.3675 on July 3. The price reached a 14-month low at $8.3525 on Nov. 21.
The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 3.3 percent, led by gains of more than 6 percent in energy prices. On Nov. 21, the gauge touched the lowest since April 2003.
Fuel Consumption Rises
Corn and soybean prices also climbed after a government report showed that U.S. fuel use last week climbed 510,000 barrels to 19.5 million barrels a day, which may boost demand for alternative fuels made from crops.
Average U.S. ethanol production in September fell 1 percent to 640,000 barrels from a record in August, an Energy Department report today showed. Still, daily production rose 45 percent from a year earlier and was the second-highest ever.
Corn and soybeans “are trading off the daily movements in the petroleum markets,” said Robert Lekberg, a market analyst for Penson GHCO in Chicago.
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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Gold Futures Fall, Ending Rally, as Dollar Gains; Silver Drops
By Millie Munshi
Nov. 26 (Bloomberg) -- Gold fell for the first time in six days, halting the longest rally since July, as a rebound in the dollar slashed demand for the precious metal as an alternative investment. Silver and platinum fell.
The U.S. currency jumped as much as 1.9 percent against the euro today. Gold often moves in the opposite direction of the dollar. The metal has dropped 3.2 percent this year as the dollar gained 13 percent versus the euro.
“Gold has run out of gas,” said Donald Selkin, the chief market strategist at National Securities Corp. in New York. “It’s closely correlated with the dollar today.”
Gold futures for February delivery dropped $9.20, or 1.1 percent, to $811.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal touched a record $1,033.90 on March 17. Gold rose for five straight sessions through yesterday, the longest rally since July 15.
Gold also fell today as investors sold the metal after prices surged 12 percent in the previous five sessions, Selkin said.
“It had a big run up so it’s not surprising that people are looking to take some profits,” Selkin said. “It moved up very quickly.”
The metal’s seven-day relative strength index, a measure of how fast prices have moved, jumped to 78.5 yesterday. Readings higher than 70 signal prices may be poised to drop.
Crude Oil Rises
The losses for gold may be limited as crude-oil prices move higher, increasing demand for the metal as a hedge against inflation, said Ron Goodis, a retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey.
Crude oil on the Nymex added as much as 6.1 percent today. Some investors buy precious metals to preserve purchasing power as higher energy prices increase consumer costs.
“Inflation will continue to make gold bullish,” Goodis said.
Silver futures for March delivery lost 3.6 cents, or 0.3 percent, to $10.27 an ounce on the Comex.
Platinum futures for January delivery fell $1.90, or 0.2 percent, to $869.70 an ounce on the Nymex. Palladium for March delivery lost $6.05, or 3.1 percent, to $191.65 an ounce. Both metals are used to make car-pollution control devices.
Johnson Matthey Plc, the producer of a third of all catalytic converters, said second-half earnings will be 5 percent to 15 percent lower than a year earlier as car sales slump. Automakers account for more than 60 percent of global platinum consumption, according to the company.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
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Nov. 26 (Bloomberg) -- Gold fell for the first time in six days, halting the longest rally since July, as a rebound in the dollar slashed demand for the precious metal as an alternative investment. Silver and platinum fell.
The U.S. currency jumped as much as 1.9 percent against the euro today. Gold often moves in the opposite direction of the dollar. The metal has dropped 3.2 percent this year as the dollar gained 13 percent versus the euro.
“Gold has run out of gas,” said Donald Selkin, the chief market strategist at National Securities Corp. in New York. “It’s closely correlated with the dollar today.”
Gold futures for February delivery dropped $9.20, or 1.1 percent, to $811.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal touched a record $1,033.90 on March 17. Gold rose for five straight sessions through yesterday, the longest rally since July 15.
Gold also fell today as investors sold the metal after prices surged 12 percent in the previous five sessions, Selkin said.
“It had a big run up so it’s not surprising that people are looking to take some profits,” Selkin said. “It moved up very quickly.”
The metal’s seven-day relative strength index, a measure of how fast prices have moved, jumped to 78.5 yesterday. Readings higher than 70 signal prices may be poised to drop.
Crude Oil Rises
The losses for gold may be limited as crude-oil prices move higher, increasing demand for the metal as a hedge against inflation, said Ron Goodis, a retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey.
Crude oil on the Nymex added as much as 6.1 percent today. Some investors buy precious metals to preserve purchasing power as higher energy prices increase consumer costs.
“Inflation will continue to make gold bullish,” Goodis said.
Silver futures for March delivery lost 3.6 cents, or 0.3 percent, to $10.27 an ounce on the Comex.
Platinum futures for January delivery fell $1.90, or 0.2 percent, to $869.70 an ounce on the Nymex. Palladium for March delivery lost $6.05, or 3.1 percent, to $191.65 an ounce. Both metals are used to make car-pollution control devices.
Johnson Matthey Plc, the producer of a third of all catalytic converters, said second-half earnings will be 5 percent to 15 percent lower than a year earlier as car sales slump. Automakers account for more than 60 percent of global platinum consumption, according to the company.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
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Brazil Stocks Gain, Led by Tim on Buyout Speculation; ALL Rises
By Paulo Winterstein
Nov. 26 (Bloomberg) -- Brazilian stocks advanced for a third day as Tim Participacoes SA surged after a report it may be sold and materials companies climbed on speculation their growth outlook has improved.
Tim climbed 18 percent on reports its parent, Telecom Italia SpA, may sell the Brazilian mobile-phone unit to Telefonica SA. ALL America Latina Logistica SA jumped 16 percent as investors bet Latin America’s largest railroad operator won’t see as big a drop in volume as projected. JBS SA, the world’s biggest beef producer, added 18 percent after Brazil said the European Union will resume the meat’s imports from three states.
A sale of Tim is “very plausible,” said Guilherme Figueiredo, who helps manage $700 million at M. Safra & Co. in Sao Paulo. “In this environment, where local companies or their overseas parents are having difficulties, you’re going to see a lot of consolidation happening.”
The Bovespa advanced 1,656.75, or 4.8 percent, to 36,469.61, extending its gain this week to 17 percent. The BM&FBovespa Small Cap index rose 3.1 percent. The BM&FBovespa MidLarge Cap index climbed 4.6 percent. Mexico’s Bolsa added 3.8 percent, while Chile’s Ipsa increased 0.4 percent.
Tim ordinary shares added 1.09 real to 7 reais, while the preferred stock gained 41 centavos, or 12 percent, to 3.87 reais. Telecom Italia is considering selling either its fixed- line network or its mobile phone unit in Brazil, Il Sole 24 Ore reported, without saying where it got the information. The most “natural” buyer for Tim would be Spain’s Telefonica, the Italian newspaper said.
Telecom Italia ‘Problems’
“The parent company is having some problems, so this is something that I think is going to happen,” Figueiredo said.
Telecom Italia would “have to come up with a significant surprise to offset the potential for more downside risks to 2009 forecasts,” Credit Suisse Group AG analyst Justin Funnell wrote in a note dated today.
ALL gained the most this month on the expectation that transported volume in the quarter will fall “only about 3 percent, removing a lot of the concern” about steeper drops due to more expensive credit for agricultural producers, said Marco Saravalle, a Sao Paolo-based analyst with Coinvalores Ltda., in a phone interview.
Brazil may boost loans to agricultural cooperatives and fund fertilizer distributors after global turmoil reduced farm financing, O Estado de S. Paulo said today, citing government officials.
“The market is a little less frightened,” Saravalle said.
JBS Climbs
JBS rose 73 centavos to 4.70 reais, the biggest gain in more than a month. The EU will resume imports on Dec. 1 from the center-western Brazilian states of Mato Grosso and Mato Grosso do Sul and the southeastern state of Minas Gerais, the Agriculture Ministry said today in a statement. Sao Paulo-based JBS operates seven of its 22 beef units in those three states.
The EU banned Brazilian beef imports in January, saying that the world’s biggest exporter of the meat failed to ensure its animals were healthy.
Mexico’s Bolsa rose for the third time in four days, led by Cemex SA. The largest cement maker in North America surged 25 percent, the most in at least 14 years, to 8.64 pesos. Cemex shares have risen by a third since economic advisers to U.S. President-elect Barack Obama said yesterday he may propose a plan of as much as $600 million to finance highway projects and other spending.
In other Latin American markets, Argentina’s Merval rose 5.3 percent, Colombia’s IGBC index added 2 percent, and Peru’s IGBVL rose 2.8 percent. The Morgan Stanley Capital International index of Latin American shares advanced 7.8 percent.
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net
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Nov. 26 (Bloomberg) -- Brazilian stocks advanced for a third day as Tim Participacoes SA surged after a report it may be sold and materials companies climbed on speculation their growth outlook has improved.
Tim climbed 18 percent on reports its parent, Telecom Italia SpA, may sell the Brazilian mobile-phone unit to Telefonica SA. ALL America Latina Logistica SA jumped 16 percent as investors bet Latin America’s largest railroad operator won’t see as big a drop in volume as projected. JBS SA, the world’s biggest beef producer, added 18 percent after Brazil said the European Union will resume the meat’s imports from three states.
A sale of Tim is “very plausible,” said Guilherme Figueiredo, who helps manage $700 million at M. Safra & Co. in Sao Paulo. “In this environment, where local companies or their overseas parents are having difficulties, you’re going to see a lot of consolidation happening.”
The Bovespa advanced 1,656.75, or 4.8 percent, to 36,469.61, extending its gain this week to 17 percent. The BM&FBovespa Small Cap index rose 3.1 percent. The BM&FBovespa MidLarge Cap index climbed 4.6 percent. Mexico’s Bolsa added 3.8 percent, while Chile’s Ipsa increased 0.4 percent.
Tim ordinary shares added 1.09 real to 7 reais, while the preferred stock gained 41 centavos, or 12 percent, to 3.87 reais. Telecom Italia is considering selling either its fixed- line network or its mobile phone unit in Brazil, Il Sole 24 Ore reported, without saying where it got the information. The most “natural” buyer for Tim would be Spain’s Telefonica, the Italian newspaper said.
Telecom Italia ‘Problems’
“The parent company is having some problems, so this is something that I think is going to happen,” Figueiredo said.
Telecom Italia would “have to come up with a significant surprise to offset the potential for more downside risks to 2009 forecasts,” Credit Suisse Group AG analyst Justin Funnell wrote in a note dated today.
ALL gained the most this month on the expectation that transported volume in the quarter will fall “only about 3 percent, removing a lot of the concern” about steeper drops due to more expensive credit for agricultural producers, said Marco Saravalle, a Sao Paolo-based analyst with Coinvalores Ltda., in a phone interview.
Brazil may boost loans to agricultural cooperatives and fund fertilizer distributors after global turmoil reduced farm financing, O Estado de S. Paulo said today, citing government officials.
“The market is a little less frightened,” Saravalle said.
JBS Climbs
JBS rose 73 centavos to 4.70 reais, the biggest gain in more than a month. The EU will resume imports on Dec. 1 from the center-western Brazilian states of Mato Grosso and Mato Grosso do Sul and the southeastern state of Minas Gerais, the Agriculture Ministry said today in a statement. Sao Paulo-based JBS operates seven of its 22 beef units in those three states.
The EU banned Brazilian beef imports in January, saying that the world’s biggest exporter of the meat failed to ensure its animals were healthy.
Mexico’s Bolsa rose for the third time in four days, led by Cemex SA. The largest cement maker in North America surged 25 percent, the most in at least 14 years, to 8.64 pesos. Cemex shares have risen by a third since economic advisers to U.S. President-elect Barack Obama said yesterday he may propose a plan of as much as $600 million to finance highway projects and other spending.
In other Latin American markets, Argentina’s Merval rose 5.3 percent, Colombia’s IGBC index added 2 percent, and Peru’s IGBVL rose 2.8 percent. The Morgan Stanley Capital International index of Latin American shares advanced 7.8 percent.
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net
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American Railcar, BCE, Borders, Rambus: U.S. Equity Movers
By Elizabeth Campbell and Whitney Kisling
Nov. 26 (Bloomberg) -- The following companies had unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 4 p.m. in New York.
American Railcar Industries Inc. (ARII US) jumped 26 percent, the most since it began trading in January 2006, to $8.42. The railroad-equipment maker whose biggest shareholder is Carl Icahn was raised to “neutral” from “sell” at UBS AG after a “substantial” share-price decline of about 69 percent since mid-March.
Andersons Inc. (ANDE US) plunged 18 percent, the most since at least February 1996, to $12.95. The grain marketer and fertilizer distributor cut its 2008 profit forecast for the second time in a month, citing the “unpredictability” in plant- nutrient product valuation.
Assurant Inc. (AIZ US) gained 22 percent, the most since it began trading in February 2004, to $21.79. The home insurer’s competitor ZC Sterling Corp. agreed to be bought by QBE Insurance Group Ltd. for $575 million. The deal signals that Assurant’s unit insuring properties for lenders could be valued at $3 billion, said John Nadel, an analyst at Sterne Agee & Leach Inc.
BCE Inc. (BCE US) fell 34 percent, the most since at least July 1980, to $20.63. Canada’s largest phone company said it may not be able to go private by its Dec. 11 target because of the economic slump, signaling the buyout may collapse.
Borders Group Inc. (BGP US) plunged 40 percent, the most since it began trading in May 1995, to $1. The second-largest U.S. bookseller said it’s no longer considering a sale of the company after posting a wider third-quarter loss.
Central Garden & Pet Co. (CENTA US) added 13 percent to $3.75, the highest price since Oct. 17. The seller of Pennington grass seed and Sevin bug killer reported fourth-quarter profit, excluding some items, of 6 cents a share. That was triple the average analyst estimate, according to Bloomberg data.
Fluor Corp. (FLR US) added 14 percent to $44.68, the highest price since Oct. 13. The largest publicly traded U.S. engineering firm was raised to “buy” from “hold” at Stanford Group, which cited the likelihood of infrastructure spending by President- elect Barack Obama and the “notable competitive capabilities” of the company.
Macy’s Inc. (M US) rose 8.8 percent to $7.03, the highest price since Nov. 14. The second-biggest U.S. department store chain’s acquisition of rival May Co. in 2005 is helping it weather the retail slump, the Wall Street Journal reported.
Magna Entertainment Corp. (MECA US) jumped 43 percent, the most since Nov. 3, to $2.01. The money-losing horse-track operator run by businessman Frank Stronach said it’s in talks with parent MI Developments to recapitalize and emerge as a stand-alone business.
Rambus Inc. (RMBS US) increased 31 percent, the most since March 26, to $9.10. The designer and licensor of memory chips won a pre-trial ruling that other chipmakers infringed one claim, or element, of a patent in a case scheduled for trial in January.
Thomas & Betts Corp. (TNB US) dropped 5.2 percent, the most since Nov. 20, to $18.41. The second-largest maker of electronic connectors in North America said fourth-quarter profit will be lower than it previously forecast, citing a “meaningful change in U.S. market conditions.”
Waste Management Inc. (WMI US) fell 5.2 percent to $28.37, the lowest price since Oct. 27. North America’s largest trash hauler forecast a steeper decline in fourth-quarter earnings, citing the downturn in the recycling commodities market.
Xerox Corp. (XRX US) rose 17 percent to $7.30, the lowest price since Nov. 7. The world’s largest maker of color printers said sales of paper, toner and supplies will lift 2009 earnings.
To contact the reporters on this story: Elizabeth Campbell in New York at ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
Read more...
Nov. 26 (Bloomberg) -- The following companies had unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 4 p.m. in New York.
American Railcar Industries Inc. (ARII US) jumped 26 percent, the most since it began trading in January 2006, to $8.42. The railroad-equipment maker whose biggest shareholder is Carl Icahn was raised to “neutral” from “sell” at UBS AG after a “substantial” share-price decline of about 69 percent since mid-March.
Andersons Inc. (ANDE US) plunged 18 percent, the most since at least February 1996, to $12.95. The grain marketer and fertilizer distributor cut its 2008 profit forecast for the second time in a month, citing the “unpredictability” in plant- nutrient product valuation.
Assurant Inc. (AIZ US) gained 22 percent, the most since it began trading in February 2004, to $21.79. The home insurer’s competitor ZC Sterling Corp. agreed to be bought by QBE Insurance Group Ltd. for $575 million. The deal signals that Assurant’s unit insuring properties for lenders could be valued at $3 billion, said John Nadel, an analyst at Sterne Agee & Leach Inc.
BCE Inc. (BCE US) fell 34 percent, the most since at least July 1980, to $20.63. Canada’s largest phone company said it may not be able to go private by its Dec. 11 target because of the economic slump, signaling the buyout may collapse.
Borders Group Inc. (BGP US) plunged 40 percent, the most since it began trading in May 1995, to $1. The second-largest U.S. bookseller said it’s no longer considering a sale of the company after posting a wider third-quarter loss.
Central Garden & Pet Co. (CENTA US) added 13 percent to $3.75, the highest price since Oct. 17. The seller of Pennington grass seed and Sevin bug killer reported fourth-quarter profit, excluding some items, of 6 cents a share. That was triple the average analyst estimate, according to Bloomberg data.
Fluor Corp. (FLR US) added 14 percent to $44.68, the highest price since Oct. 13. The largest publicly traded U.S. engineering firm was raised to “buy” from “hold” at Stanford Group, which cited the likelihood of infrastructure spending by President- elect Barack Obama and the “notable competitive capabilities” of the company.
Macy’s Inc. (M US) rose 8.8 percent to $7.03, the highest price since Nov. 14. The second-biggest U.S. department store chain’s acquisition of rival May Co. in 2005 is helping it weather the retail slump, the Wall Street Journal reported.
Magna Entertainment Corp. (MECA US) jumped 43 percent, the most since Nov. 3, to $2.01. The money-losing horse-track operator run by businessman Frank Stronach said it’s in talks with parent MI Developments to recapitalize and emerge as a stand-alone business.
Rambus Inc. (RMBS US) increased 31 percent, the most since March 26, to $9.10. The designer and licensor of memory chips won a pre-trial ruling that other chipmakers infringed one claim, or element, of a patent in a case scheduled for trial in January.
Thomas & Betts Corp. (TNB US) dropped 5.2 percent, the most since Nov. 20, to $18.41. The second-largest maker of electronic connectors in North America said fourth-quarter profit will be lower than it previously forecast, citing a “meaningful change in U.S. market conditions.”
Waste Management Inc. (WMI US) fell 5.2 percent to $28.37, the lowest price since Oct. 27. North America’s largest trash hauler forecast a steeper decline in fourth-quarter earnings, citing the downturn in the recycling commodities market.
Xerox Corp. (XRX US) rose 17 percent to $7.30, the lowest price since Nov. 7. The world’s largest maker of color printers said sales of paper, toner and supplies will lift 2009 earnings.
To contact the reporters on this story: Elizabeth Campbell in New York at ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
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U.S. Stocks Gain, S&P 500 Surges Most in Four Days Since 1933
By Elizabeth Stanton
Nov. 26 (Bloomberg) -- U.S. stocks gained, driving the Standard & Poor’s 500 Index to the steepest four-day surge since 1933, as a rally in oil prices lifted energy shares and investors speculated President-elect Barack Obama’s economic team will bolster growth.
Exxon Mobil Corp. and Chevron Corp., the biggest U.S. oil companies, were among the largest contributors to the advance as crude jumped 7.2 percent to trade above $50 a barrel for a third day. General Motors Corp., which will make its case for federal bailout funds after tomorrow’s Thanksgiving holiday, rallied 35 percent. The market overcame an early tumble spurred by government reports depicting a deepening recession.
The S&P 500 climbed 3.5 percent to 887.68 after falling as much as 1.9 percent. The index has now surged 18 percent since dropping to an 11-year low on Nov. 20. The Dow Jones Industrial Average increased 247.14 points, or 2.9 percent, to 8,726.61.
“The market has very bad economic data coming out, but layered onto that is renewed optimism from the Obama nominations that are being rolled out daily,” said Robert Lutts, president of Cabot Money Management in Boston, which oversees about $400 million. “Eternal hope is being poured into that vessel, that this team is going to rescue us.”
Benchmark indexes erased earlier declines after Obama picked former Federal Reserve Chairman Paul Volcker to head an economic advisory board and said he will implement a plan to bolster growth on “day one.” This week, Obama also named Fed Bank of New York chief Tim Geithner as Treasury secretary and former Harvard University President Lawrence Summers as White House economic director.
$800 Billion
The S&P 500 gained yesterday after the deepening recession prompting the Fed to commit as much as $800 billion to help resuscitate lending markets. The index has still tumbled 43 percent from its October 2007 record as credit-related losses and writedowns at global financial companies approached $1 trillion, threatening global economic growth.
Exxon rose 3.6 percent to $80.89 and contributed the most to the S&P 500’s gain. Chevron added 4.4 percent to $79.93.
GM, the nation’s largest automaker, jumped $1.25 to $4.81. Ford Motor Co., the second-biggest, rallied 30 percent to $2.15.
The two companies, which reported almost $30 billion in 2008 losses, and Chrysler LLC have cut jobs and production as U.S. sales this year appear headed toward the lowest in 17 years. The automakers have been lobbying the U.S. for $25 billion in aid after their cash burn accelerated. Lawmakers plan to consider a rescue of the industry after the Thanksgiving holiday.
Fluor, Target Gain
Fluor Corp. added 14 percent to $44.68. The largest publicly traded U.S. engineering firm was raised to “buy” from “hold” at Stanford Group, which cited the likelihood of infrastructure spending under Obama and the “notable competitive capabilities” of the company.
Target Corp. and Kohl’s Corp. led S&P 500 retailers to a 5.9 percent gain before the traditional start of the holiday shopping season on the day after Thanksgiving. Stores including Kohl’s and Macy’s Inc. offered discounts last week and this week, before what analysts project will be the weakest season in six years.
Target, the second-largest U.S. discount chain, climbed 9.8 percent to $35.13. Kohl’s, the fourth-biggest U.S. department- store company, gained 8.9 percent to $32.71. Macy’s Inc., the second-biggest, added 8.8 percent to $7.03.
J. Crew Group Inc. fell 2 percent to $10.83. The clothing retailer run by former Gap Inc. Chief Executive Officer Millard Drexler lowered its annual earnings forecast for the third time this year.
Mortgage Rates Fall
Lennar Corp. led homebuilders in the S&P 500 to a 14 percent advance, climbing 23 percent to $7.40. U.S. mortgage rates plunged by the most in at least seven years yesterday on the Fed’s plan to buy $600 billion of mortgage-related debt. The average rate for a 30-year fixed mortgage fell to about 5.5 percent last night after starting the day at 6.38 percent, according to an estimate from Bankrate Inc.
Cisco Systems Inc., the biggest maker of networking gear, and Intel Corp., the largest semiconductor producer, contributed most to a 4.2 percent gain by technology companies in the S&P 500. The group is trading at a price-to-earnings ratio under 13. Its valuation slid to 11.4 times reported profits last week, the cheapest since Bloomberg began tracking the data in 1995.
Cisco gained 6.3 percent to $16.39 and Intel added 6.4 percent to $13.97.
“No one can escape the gravity of what’s going on in the global economy -- it’s too powerful -- but we’re approaching the point where the worst is fully in the stocks,” said Matthew Kaufler, a money manager at Clover Capital Management Inc., which oversees $2.6 billion in Rochester, New York.
Bargaining Power
Nucor Corp. led gains in steelmakers amid speculation yesterday’s decision by BHP Billiton Ltd., the world’s biggest mining company, to scrap its $66 billion hostile takeover bid for Rio Tinto Group will strengthen the industry’s bargaining position for iron ore. Nucor, the largest U.S.-based producer, advanced 8.2 percent to $34.90.
Earlier declines in the stock market came after government reports showed orders for durable goods shrank 6.2 percent, twice as much as the median economist forecast, and consumer spending declined the most since 2001.
“There’s still a lot of stress and strain in the economy and the market as a whole that hasn’t been alleviated yet by the steps taken by the Fed and the Treasury,” said Michael Mullaney, a Boston-based money manager at Fiduciary Trust Co., which oversees $10 billion. “It’s going to take the fiscal stimulus coming from Obama in 2009 to hopefully get liftoff in the real economy. I don’t think we have any significant catalyst between now and then to really jumpstart the entire stock market.”
Takeover Unravels
Citigroup Inc. rose 16 percent to $7.05 for the second- biggest advance in the Dow average after General Motors. BCE Inc., the Canadian phone carrier that had planned to go private in a leveraged buyout, signaled the takeover may unravel because the debt load might force the company into insolvency. A collapse of the deal may allow Citigroup, Toronto-Dominion Bank and Deutsche Bank AG to avert potential writedowns from financing it.
Borders Group Inc. plunged 40 percent to $1. The second- largest U.S. bookseller said it’s no longer considering a sale of the company after posting a wider third-quarter loss.
Rambus Inc. climbed 31 percent to $9.10. The designer and licensor of memory chips won a pretrial ruling that other chipmakers infringed one element of a patent in a case scheduled for trial in January.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
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Nov. 26 (Bloomberg) -- U.S. stocks gained, driving the Standard & Poor’s 500 Index to the steepest four-day surge since 1933, as a rally in oil prices lifted energy shares and investors speculated President-elect Barack Obama’s economic team will bolster growth.
Exxon Mobil Corp. and Chevron Corp., the biggest U.S. oil companies, were among the largest contributors to the advance as crude jumped 7.2 percent to trade above $50 a barrel for a third day. General Motors Corp., which will make its case for federal bailout funds after tomorrow’s Thanksgiving holiday, rallied 35 percent. The market overcame an early tumble spurred by government reports depicting a deepening recession.
The S&P 500 climbed 3.5 percent to 887.68 after falling as much as 1.9 percent. The index has now surged 18 percent since dropping to an 11-year low on Nov. 20. The Dow Jones Industrial Average increased 247.14 points, or 2.9 percent, to 8,726.61.
“The market has very bad economic data coming out, but layered onto that is renewed optimism from the Obama nominations that are being rolled out daily,” said Robert Lutts, president of Cabot Money Management in Boston, which oversees about $400 million. “Eternal hope is being poured into that vessel, that this team is going to rescue us.”
Benchmark indexes erased earlier declines after Obama picked former Federal Reserve Chairman Paul Volcker to head an economic advisory board and said he will implement a plan to bolster growth on “day one.” This week, Obama also named Fed Bank of New York chief Tim Geithner as Treasury secretary and former Harvard University President Lawrence Summers as White House economic director.
$800 Billion
The S&P 500 gained yesterday after the deepening recession prompting the Fed to commit as much as $800 billion to help resuscitate lending markets. The index has still tumbled 43 percent from its October 2007 record as credit-related losses and writedowns at global financial companies approached $1 trillion, threatening global economic growth.
Exxon rose 3.6 percent to $80.89 and contributed the most to the S&P 500’s gain. Chevron added 4.4 percent to $79.93.
GM, the nation’s largest automaker, jumped $1.25 to $4.81. Ford Motor Co., the second-biggest, rallied 30 percent to $2.15.
The two companies, which reported almost $30 billion in 2008 losses, and Chrysler LLC have cut jobs and production as U.S. sales this year appear headed toward the lowest in 17 years. The automakers have been lobbying the U.S. for $25 billion in aid after their cash burn accelerated. Lawmakers plan to consider a rescue of the industry after the Thanksgiving holiday.
Fluor, Target Gain
Fluor Corp. added 14 percent to $44.68. The largest publicly traded U.S. engineering firm was raised to “buy” from “hold” at Stanford Group, which cited the likelihood of infrastructure spending under Obama and the “notable competitive capabilities” of the company.
Target Corp. and Kohl’s Corp. led S&P 500 retailers to a 5.9 percent gain before the traditional start of the holiday shopping season on the day after Thanksgiving. Stores including Kohl’s and Macy’s Inc. offered discounts last week and this week, before what analysts project will be the weakest season in six years.
Target, the second-largest U.S. discount chain, climbed 9.8 percent to $35.13. Kohl’s, the fourth-biggest U.S. department- store company, gained 8.9 percent to $32.71. Macy’s Inc., the second-biggest, added 8.8 percent to $7.03.
J. Crew Group Inc. fell 2 percent to $10.83. The clothing retailer run by former Gap Inc. Chief Executive Officer Millard Drexler lowered its annual earnings forecast for the third time this year.
Mortgage Rates Fall
Lennar Corp. led homebuilders in the S&P 500 to a 14 percent advance, climbing 23 percent to $7.40. U.S. mortgage rates plunged by the most in at least seven years yesterday on the Fed’s plan to buy $600 billion of mortgage-related debt. The average rate for a 30-year fixed mortgage fell to about 5.5 percent last night after starting the day at 6.38 percent, according to an estimate from Bankrate Inc.
Cisco Systems Inc., the biggest maker of networking gear, and Intel Corp., the largest semiconductor producer, contributed most to a 4.2 percent gain by technology companies in the S&P 500. The group is trading at a price-to-earnings ratio under 13. Its valuation slid to 11.4 times reported profits last week, the cheapest since Bloomberg began tracking the data in 1995.
Cisco gained 6.3 percent to $16.39 and Intel added 6.4 percent to $13.97.
“No one can escape the gravity of what’s going on in the global economy -- it’s too powerful -- but we’re approaching the point where the worst is fully in the stocks,” said Matthew Kaufler, a money manager at Clover Capital Management Inc., which oversees $2.6 billion in Rochester, New York.
Bargaining Power
Nucor Corp. led gains in steelmakers amid speculation yesterday’s decision by BHP Billiton Ltd., the world’s biggest mining company, to scrap its $66 billion hostile takeover bid for Rio Tinto Group will strengthen the industry’s bargaining position for iron ore. Nucor, the largest U.S.-based producer, advanced 8.2 percent to $34.90.
Earlier declines in the stock market came after government reports showed orders for durable goods shrank 6.2 percent, twice as much as the median economist forecast, and consumer spending declined the most since 2001.
“There’s still a lot of stress and strain in the economy and the market as a whole that hasn’t been alleviated yet by the steps taken by the Fed and the Treasury,” said Michael Mullaney, a Boston-based money manager at Fiduciary Trust Co., which oversees $10 billion. “It’s going to take the fiscal stimulus coming from Obama in 2009 to hopefully get liftoff in the real economy. I don’t think we have any significant catalyst between now and then to really jumpstart the entire stock market.”
Takeover Unravels
Citigroup Inc. rose 16 percent to $7.05 for the second- biggest advance in the Dow average after General Motors. BCE Inc., the Canadian phone carrier that had planned to go private in a leveraged buyout, signaled the takeover may unravel because the debt load might force the company into insolvency. A collapse of the deal may allow Citigroup, Toronto-Dominion Bank and Deutsche Bank AG to avert potential writedowns from financing it.
Borders Group Inc. plunged 40 percent to $1. The second- largest U.S. bookseller said it’s no longer considering a sale of the company after posting a wider third-quarter loss.
Rambus Inc. climbed 31 percent to $9.10. The designer and licensor of memory chips won a pretrial ruling that other chipmakers infringed one element of a patent in a case scheduled for trial in January.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
Read more...
Cotton Rises on Signs of Textile-Mill Demand After Price Slump
By Yi Tian
Nov. 26 (Bloomberg) -- Cotton futures rose to the highest in three weeks on speculation that textile mills are stocking up on supplies after prices this month tumbled to the lowest in six years.
Mills in countries such as China, India and Turkey had reduced purchases as the global recession slashed demand for textiles and clothing. On Nov. 12, cotton touched 39.23 cents a pound, the lowest since June 19, 2002.
“It does appear that at least for the near term, a bottom has been made,” said Rogers Varner, the president of Varner Brothers in Cleveland, Mississippi. “It may be that merchants need some cotton for shipping post-holidays.”
Cotton futures for March delivery rose 2.8 cents, or 6.4 percent, to 46.55 cents a pound on ICE Futures U.S. in New York. Earlier, the price reached 46.63 cents, the highest for a most- active contract since Nov. 4.
U.S. equities gained for a fourth straight session. Commodities including crude oil and corn increased after China slashed interest rates to bolster its economy. The dollar fell to a three-week low yesterday against a basket of six major currencies and was down 2.8 percent this week.
“The rally in stocks, crude and corn and weakness in the dollar, if only in the short term, will be of a huge help to cotton and could go a long way toward cementing a seasonal low,” Sharon Johnson, an analyst for First Capitol Group in Atlanta, said in a report on Nov. 24.
The March cotton contract may reach 47 cents to 49 cents, Varner said. A “mini-rally” to that level probably would trigger sales of fiber held under a federal subsidy program, he said.
Cotton may trade from 39.4 cents to 49.8 cents for several weeks before “a buying opportunity” around Dec. 26, Varner said.
Cotton trading will be closed tomorrow for the U.S. Thanksgiving holiday.
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
Read more...
Nov. 26 (Bloomberg) -- Cotton futures rose to the highest in three weeks on speculation that textile mills are stocking up on supplies after prices this month tumbled to the lowest in six years.
Mills in countries such as China, India and Turkey had reduced purchases as the global recession slashed demand for textiles and clothing. On Nov. 12, cotton touched 39.23 cents a pound, the lowest since June 19, 2002.
“It does appear that at least for the near term, a bottom has been made,” said Rogers Varner, the president of Varner Brothers in Cleveland, Mississippi. “It may be that merchants need some cotton for shipping post-holidays.”
Cotton futures for March delivery rose 2.8 cents, or 6.4 percent, to 46.55 cents a pound on ICE Futures U.S. in New York. Earlier, the price reached 46.63 cents, the highest for a most- active contract since Nov. 4.
U.S. equities gained for a fourth straight session. Commodities including crude oil and corn increased after China slashed interest rates to bolster its economy. The dollar fell to a three-week low yesterday against a basket of six major currencies and was down 2.8 percent this week.
“The rally in stocks, crude and corn and weakness in the dollar, if only in the short term, will be of a huge help to cotton and could go a long way toward cementing a seasonal low,” Sharon Johnson, an analyst for First Capitol Group in Atlanta, said in a report on Nov. 24.
The March cotton contract may reach 47 cents to 49 cents, Varner said. A “mini-rally” to that level probably would trigger sales of fiber held under a federal subsidy program, he said.
Cotton may trade from 39.4 cents to 49.8 cents for several weeks before “a buying opportunity” around Dec. 26, Varner said.
Cotton trading will be closed tomorrow for the U.S. Thanksgiving holiday.
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
Read more...
Wednesday, November 26, 2008
It is That Simple: Dollar is Up as Long as Investor's Sentiment is Down...
| Daily Forex Fundamentals | Written by Lena Manousarides | Nov 26 08 14:42 GMT | | |
| The day starts with markets falling across the board and the fact that more negative news hit the wires regarding the global economic future does not help trader's confidence! DOW JONES didn't manage to build up on the three days rally and so it fell yesterday together with Asian and European markets today. The market “domino” is so clear. Its starts with US futures, continue in Asia and ends in Europe with dollar appreciating as a result. EUR/USD is trading lower again and the fact that we saw a euro rally for two days does not by any means alter the downside scenario for the pair, as risk aversion comes back to hunt it! The pair stopped the upside move at good resistance level of 1.3060 and from then on it fell more than 100 points all the way down to 1.29. For now as long as 1.29 holds we might see some further upside however with Thanksgiving Day just around the corner all bets are off! A clear break of 1.2830 will alter the upside scenario for now and make dollar bulls the ones in control. Today the economic data out of UK were dismal for the pound, as the GDP numbers contracted for yet another month and made recession now a sure thing. The pound managed to correct since Monday towards 1.55 as we mentioned but the negative data do not let sterling run wild. As long as 1.54 holds we may see further downside for the pound however once again tomorrow's thin trading conditions can be rather unpredictable. The market participants were waiting anxiously for the durable orders out of the US and when the news hit the wires that they fell almost double than anticipated, the fear and uncertainty returned. No matter how much traders want and need to believe that the economic crisis will come to an end, bad news like that do not help and make every positive market sentiment fade away. Next we have consumer confidence out of the US and also new home sales which traders will monitor closely. News that China lowered their interest rates once again for the most since 1997 has left traders shocked and frustrated, and the speculations of worsening economic conditions globally are getting now even bigger. The announcement of China couple of weeks ago about a stimulus plan of $586B in order to help the deteriorating global economy, gave some relief in investors, however since then the country's growth has slowed down according to the latest numbers and the extreme easing in rates shows that there is desperation and uncertainty. The bottom line is this: we all want to see the positive sentiment returning in the markets and we are all for normal trading conditions without economic worries and panic , however it is clear that we are not there yet and there is a long way till we reach that point. If we think about it logically, it is not very difficult to predict the markets next move. As long as bad data surrounding us and instability rules the way to go looks more likely to be on the downside. So therefore, until we see signs that the risk aversion is no longer a threat, we may as well go with the flow. One look in the US, Japan and European future market can tell you where the dollar is heading next. So far the markets are telling us that dollar is here to stay... Lena Manousarides Email: manousarides@yahoo.com Lena Manousarides is a professional Trader and an independent Market Analyst, who pioneers in Fx trading in Athens, Greece. After several years of professional trading in the Forex Market, Lena formerly worked with FXGreece as a Market Analyst, writing articles on a daily basis, using fundamental and technical analysis. She also writes for several major financial newspapers in Greece and is in the process of becoming professional Commodity Trading Advisor. | |
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Personal Income Holds On, Spending Plummets
| Daily Forex Fundamentals | Written by Wachovia Corporation | Nov 26 08 14:45 GMT | | |
| Personal income rose a larger-than-expected 0.3 percent in October, despite a rapidly weakening labor market. While income held up, spending virtually crashed, declining 1.0 percent on the month—the largest decline since the aftermath of September 11th. This sets up an extremely weak fourth quarter for spending and GDP. Income Up & Inflation Moves Out of the Way
Spending Dropped Sharply
Wachovia Corporation Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value. | |
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