By Svenja O'Donnell
July 2 (Bloomberg) -- Former Bank of England policy maker Stephen Nickell said the central bank should avoid raising interest rates to curb inflation as the mortgage market edges close to ``a famine'' and wages stay under control.
``There isn't a great deal of evidence out there that workers are able to push for compensation for higher living costs,'' said Nickell, who is chairman of the U.K. government's National Housing and Planning Advice Unit. ``Keeping rates on hold would be the order of the day.''
Mortgage approvals fell to the lowest level in at least nine years in May and home values dropped the most in June since 1992, bringing the nation closer to a recession. Crude oil rose to a record high this week, stoking inflation and leaving policy makers to consider whether they can risk raising interest rates to contain consumer prices.
``In the mortgage market, it's almost a famine,'' Nickell said in an interview yesterday. ``I'm very pessimistic at the moment. In the end, because of the lack of trust, unless there's some kind of kite-marking and guarantee system so that mortgages can be used as collateral by the lenders, then I'm very gloomy.''
While Bank of England Governor Mervyn King predicts the U.K. economy may contract, accelerating inflation led policy makers including John Gieve, Paul Tucker, Timothy Besley, and Kate Barker to consider raising the rate in June from the current 5 percent.
Inflation Pressure
``I don't necessarily see a recession,'' said Nickell, who was a U.K. rate-setter from 2000 to 2006. ``The difficulty is the inflationary pressures from food and oil which are also having an effect on the economy.''
The crude oil price reached a record above $143 a barrel this week, while corn, wheat and rice prices have all risen to records this year. The inflation rate jumped to 3.3 percent in May, the highest in at least 11 years.
``The more anxious they are about oil prices going on rising and the wage implications of that, the more likely they ought to think about raising rates,'' Nickell said. ``If they feel relatively comfortable about that, they'll go on hold.''
Wage pressures have shown little sign of intensifying, apart from an agreement with tanker drivers at subcontractors for Royal Dutch Shell Plc, Nickell said. The Unite Union representing them sought a 13.2 percent pay increase. Average wages, excluding bonuses, rose an annual 3.9 percent in the quarter through May.
Rate Meeting
The bank will keep the main rate unchanged on July 10, the median of 30 forecasts in a Bloomberg survey of economists shows.
Britain's banks are reining in lending following the collapse of the U.S. subprime mortgage market, which has cost financial institutions worldwide $400 billion in losses and writedowns.
``If the financial markets return to normal, then house prices relative to incomes would just go back up again,'' Nickell said. ``The fundamental fact that houses are being built much more slowly than the creation of households, and they're getting wealthier, just suggests that house prices will start rising again,'' he said.
House prices fell 6.3 percent in June from a year earlier, Nationwide Building Society said yesterday. All things being equal, prices rise about 2 percent if the number of households climbs 1 percent, research by the NHPAU, a panel formed a year ago to advise the government on homebuilding, showed today.
Banks have starved the housing market of mortgages, which dropped to 42,000 in May, the lowest on record. The cost of a home loan fixed for two years with a 25 percent deposit rose to 6.27 percent last month, the highest since 2000. Nickell said the squeeze is preventing people from entering the property market.
``First-time buyers have got to come in, so without them that really undermines the housing market,'' Nickell said. ``It would be around 2015 that house prices got back onto the track that they would have been on had we not had the credit crunch.''
Britons' ability to afford homes won't improve even if house prices drop 5 percent this year and 10 percent in 2009, the NHPAU's research shows.
``This is a financial market recession arising from a lack of trust among financial-market participants,'' Nickell said. ``The demonstration of that is how difficult it is for a first-time buyer to get a mortgage. We're talking about people with good income prospects, secure jobs, who are finding it very hard.''
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Wednesday, July 2, 2008
Countrywide Made Approach to Halifax Estate Agents, FT Reports
By Sabine Pirone
July 2 (Bloomberg) -- Countrywide Plc made a tentative approach recently to acquire the Halifax chain of estate agents from HBOS Plc, the Financial Times reported, without specifying where it got the information.
The approach by the private equity-owned U.K. estate agency was at an early stage and was rejected by HBOS, the U.K.'s largest mortgage lender, the FT said, citing no one.
Apollo Management LP, the firm that bought Countrywide in May 2007 for 1.05 billion pounds ($2.1 billion), Countrywide and HBOS declined to comment, the FT said.
To contact the reporter on this story: Sabine Pirone in London at spirone@bloomberg.net
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July 2 (Bloomberg) -- Countrywide Plc made a tentative approach recently to acquire the Halifax chain of estate agents from HBOS Plc, the Financial Times reported, without specifying where it got the information.
The approach by the private equity-owned U.K. estate agency was at an early stage and was rejected by HBOS, the U.K.'s largest mortgage lender, the FT said, citing no one.
Apollo Management LP, the firm that bought Countrywide in May 2007 for 1.05 billion pounds ($2.1 billion), Countrywide and HBOS declined to comment, the FT said.
To contact the reporter on this story: Sabine Pirone in London at spirone@bloomberg.net
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Mandelson Says Sarkozy Is Undermining Trade Talks, BBC Reports
By Ed Johnson
July 2 (Bloomberg) -- European Union Trade Commissioner Peter Mandelson said French President Nicolas Sarkozy is making his job more difficult and undermining Europe's position at world trade talks, the British Broadcasting Corp. reported.
As France began its six-month presidency of the EU yesterday, Sarkozy said Mandelson's plan to cut agricultural subsidies and tariffs would destroy European jobs, the BBC reported on its Web site.
``I am being undermined and Europe's negotiating position in the world trade talks is being weakened and I regret that,'' Mandelson told the BBC's Newsnight program. Sarkozy's comments will ``make it harder for me.''
To contact the reporter on this story: Ed Johnson in Sydney at ejohnson28@bloomberg.net.
Last Updated: July 2, 2008 00:37 EDT
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July 2 (Bloomberg) -- European Union Trade Commissioner Peter Mandelson said French President Nicolas Sarkozy is making his job more difficult and undermining Europe's position at world trade talks, the British Broadcasting Corp. reported.
As France began its six-month presidency of the EU yesterday, Sarkozy said Mandelson's plan to cut agricultural subsidies and tariffs would destroy European jobs, the BBC reported on its Web site.
``I am being undermined and Europe's negotiating position in the world trade talks is being weakened and I regret that,'' Mandelson told the BBC's Newsnight program. Sarkozy's comments will ``make it harder for me.''
To contact the reporter on this story: Ed Johnson in Sydney at ejohnson28@bloomberg.net.
Last Updated: July 2, 2008 00:37 EDT
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Leveraged Loan Prices Drop to April Lows on Default Concerns
By Pierre Paulden
July 2 (Bloomberg) -- Prices of high-risk, high-yield loans fell to the lowest levels since April in the past week on concern company defaults will rise as the economy slows.
The average actively traded loan fell to 89.32 cents on the dollar, compared with more than 92 cents in mid-June, according to Standard & Poor's LCD. The last time the debt was that low was April 1 when loans traded at 88.84 cents.
Defaults may more than triple in the next year, according to Moody's Investors Service, as record oil prices and the worst housing slump since the Great Depression drag down the economy. Loans ended a three-month rally sparked by banks reducing their backlog of debt to $70 billion from $156 billion at the beginning of the year, according to CreditSights Inc.
``Concern has shifted somewhat from the backlog to the economy,'' Jonathan Insull, a managing director at TCW Asset Management Co., which manages $4 billion in bank loans, said in a telephone interview. ``The backlog remains significant, but one can see the path to the end of that horror.''
Prices of loans made to fund leveraged buyouts were the hardest hit in the past six months. Debt that financed the $7.4 billion takeover of Chrysler LLC has fallen to as low as 50 cents on the dollar.
Defaults may reach 6.3 percent, after falling to a 26-year low of 0.9 percent in December, Moody's estimates. High-yield, or leveraged, loans are rated less than Baa3 by Moody's and below BBB- by S&P.
Investors are demanding more in interest relative to benchmark debt to buy the loans. The average new loan yielded 529 basis points more than the London interbank offered rate this year, compared with 238 basis points a year ago, S&P LCD said.
New Offerings Fall
New leveraged loans fell to $151 billion in the first half of 2008 from $604 billion a year earlier, according to data compiled by Bloomberg. Deals included financing for San Francisco-based Hellman & Friedman LLC's $2.9 billion February acquisition of Goodman Global Inc., a maker of air conditioners, and $1.36 billion of loans that back Carlyle Group's $2.54 billion acquisition of Booz Allen Hamilton Inc.'s U.S. government-consulting business.
Crude oil rose to a record of more than $143 a barrel yesterday, completing the biggest quarterly increase in nine years. Home prices in 20 U.S. metropolitan areas fell 15.3 percent in April, the most on record, according to the S&P/Case- Shiller home-price index.
CLOs Cut Purchases
Loan prices dropped as the main buyers of loans, collateralized loan obligations, cut back, according to CreditSights, an independent bond research firm in New York.
CLOs, a type of collateralized debt obligation that repackages loans into new securities with varying risks, account for about 25 percent of loan purchases this year, down from 63 percent in the first half of 2007, according to CreditSights.
Loans for Chrysler traded as low as 50 cents on the dollar on concern the automaker may run out of money, compared with 63 cents in April when Goldman Sachs Group Inc. sold $500 million of the debt to investors. Auburn Hills, Michigan-based Chrysler has enough cash and has no plans to file for bankruptcy protection, spokesman Dave Elshoff said in a June 26 interview.
Banks may struggle to reduce their holdings, said Scott D'Orsi, a partner at Boston-based Feingold O'Keeffe Capital, which has $1.3 billion in assets.
Lenders are still set to fund the C$52 billion ($51 billion) takeover of BCE Inc., Canada's largest phone company.
Citigroup Inc. and Deutsche Bank AG are leading banks offering loans to finance the $17.9 billion buyout of Clear Channel Communications Inc. They initially offered $3 billion of the loans at 90 cents to 91 cents on the dollar and have cut the price to 85 cents, according to David Novosel, an analyst at Gimme Credit Publications Inc., a bond research firm in Chicago.
``It's premature to say the backlog is over,'' D'Orsi said. ``After success in April and May banks are finding it more challenging to sell off the pipeline, and the hangover supply will begin to compete with the new, better structured deals.''
To contact the reporter on this story: Pierre Paulden in New York at ppaulden@bloomberg.net
Last Updated: July 2, 2008 00:01 EDT
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July 2 (Bloomberg) -- Prices of high-risk, high-yield loans fell to the lowest levels since April in the past week on concern company defaults will rise as the economy slows.
The average actively traded loan fell to 89.32 cents on the dollar, compared with more than 92 cents in mid-June, according to Standard & Poor's LCD. The last time the debt was that low was April 1 when loans traded at 88.84 cents.
Defaults may more than triple in the next year, according to Moody's Investors Service, as record oil prices and the worst housing slump since the Great Depression drag down the economy. Loans ended a three-month rally sparked by banks reducing their backlog of debt to $70 billion from $156 billion at the beginning of the year, according to CreditSights Inc.
``Concern has shifted somewhat from the backlog to the economy,'' Jonathan Insull, a managing director at TCW Asset Management Co., which manages $4 billion in bank loans, said in a telephone interview. ``The backlog remains significant, but one can see the path to the end of that horror.''
Prices of loans made to fund leveraged buyouts were the hardest hit in the past six months. Debt that financed the $7.4 billion takeover of Chrysler LLC has fallen to as low as 50 cents on the dollar.
Defaults may reach 6.3 percent, after falling to a 26-year low of 0.9 percent in December, Moody's estimates. High-yield, or leveraged, loans are rated less than Baa3 by Moody's and below BBB- by S&P.
Investors are demanding more in interest relative to benchmark debt to buy the loans. The average new loan yielded 529 basis points more than the London interbank offered rate this year, compared with 238 basis points a year ago, S&P LCD said.
New Offerings Fall
New leveraged loans fell to $151 billion in the first half of 2008 from $604 billion a year earlier, according to data compiled by Bloomberg. Deals included financing for San Francisco-based Hellman & Friedman LLC's $2.9 billion February acquisition of Goodman Global Inc., a maker of air conditioners, and $1.36 billion of loans that back Carlyle Group's $2.54 billion acquisition of Booz Allen Hamilton Inc.'s U.S. government-consulting business.
Crude oil rose to a record of more than $143 a barrel yesterday, completing the biggest quarterly increase in nine years. Home prices in 20 U.S. metropolitan areas fell 15.3 percent in April, the most on record, according to the S&P/Case- Shiller home-price index.
CLOs Cut Purchases
Loan prices dropped as the main buyers of loans, collateralized loan obligations, cut back, according to CreditSights, an independent bond research firm in New York.
CLOs, a type of collateralized debt obligation that repackages loans into new securities with varying risks, account for about 25 percent of loan purchases this year, down from 63 percent in the first half of 2007, according to CreditSights.
Loans for Chrysler traded as low as 50 cents on the dollar on concern the automaker may run out of money, compared with 63 cents in April when Goldman Sachs Group Inc. sold $500 million of the debt to investors. Auburn Hills, Michigan-based Chrysler has enough cash and has no plans to file for bankruptcy protection, spokesman Dave Elshoff said in a June 26 interview.
Banks may struggle to reduce their holdings, said Scott D'Orsi, a partner at Boston-based Feingold O'Keeffe Capital, which has $1.3 billion in assets.
Lenders are still set to fund the C$52 billion ($51 billion) takeover of BCE Inc., Canada's largest phone company.
Citigroup Inc. and Deutsche Bank AG are leading banks offering loans to finance the $17.9 billion buyout of Clear Channel Communications Inc. They initially offered $3 billion of the loans at 90 cents to 91 cents on the dollar and have cut the price to 85 cents, according to David Novosel, an analyst at Gimme Credit Publications Inc., a bond research firm in Chicago.
``It's premature to say the backlog is over,'' D'Orsi said. ``After success in April and May banks are finding it more challenging to sell off the pipeline, and the hangover supply will begin to compete with the new, better structured deals.''
To contact the reporter on this story: Pierre Paulden in New York at ppaulden@bloomberg.net
Last Updated: July 2, 2008 00:01 EDT
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Soybeans Reach Record for Second Day in Asia on Supply Concern
By Aya Takada
July 2 (Bloomberg) -- Soybeans rose to a record for a second day on concern the worst Midwest flooding in 15 years may curb gains in production and inventories in the U.S., the largest producer and exporter. Corn also advanced and wheat declined.
Soybeans gained as much as 0.8 percent after booking the biggest quarterly gain in 20 years. U.S. farmers may harvest 96.8 percent of the acres planted, down from an earlier forecast of 98.1 percent, the U.S. Department of Agriculture said June 30 in a report. The USDA projected inventories of 175 million bushels before next year's harvest, or 21 days of usage.
``The figures may be revised down further, as the report did not fully reflect the impact of the Midwest flooding,'' Kenji Kobayashi, an analyst at Kanetsu Asset Management Co. in Tokyo, said by phone today.
Soybean futures for November delivery rose 7.25 cents, or 0.5 percent, to $16.1725 a bushel in after-hours trading on the Chicago Board of Trade at 11:18 a.m. in Tokyo, after earlier reaching a record $16.20.
The most-active contract jumped 15 percent in June and 31 percent in the second quarter, the most since the three months through June 1988. Prices gained 87 percent in the past year.
U.S. farmers intended to sow 74.533 million acres of soybeans, and about 95 percent of the crop was planted on June 29, leaving 3.7 million acres yet to plant, USDA data show. The USDA said June 30 harvested acreage would have been 1.3 million acres larger without the flooding.
Farmers Strike
The price also rose on speculation U.S. inventories before the harvest will be smaller than the USDA's forecast on June 10. A three-month old farmers' strike in Argentina boosted demand for U.S. supplies, analysts said.
Corn rose for the first time in four days as rising crude oil rekindled speculation demand for the grain in biofuel production may increase, leading to a drawdown in inventories, Kobayashi at Kanetsu Asset Management said.
Corn for December delivery added 4.25 cents, or 0.6 percent, to $7.5625 a bushel on the Chicago Board of Trade at 11:18 a.m. in Tokyo. Prices plunged the 30-cent maximum allowed by the exchange on June 30 after the USDA reports showed U.S. farmers planted more acres than they indicated three months ago and that crop conditions improved.
Corn futures, which rose to a record $7.9925 on June 27, gained 33 percent in the last quarter and more than doubled in the past year as global reserves are forecast to fall to a 24- year low by the end of August.
Wheat Declines
Wheat fell after Rabobank Group said the likelihood of a rebound in output in Australia, forecast to be the world's third- largest exporter of the grain, improved after rain in June.
Wheat production may be 20 million metric tons to 24 million tons, the bank said in a report e-mailed today, restating an earlier estimate. Australia's worst drought slashed the nation's wheat output the past two harvests, helping send global prices to an all-time high.
September-delivery wheat lost 1.75 cents, or 0.2 percent, to $8.63 a bushel on the Chicago Board of Trade at 11:15 a.m. in Tokyo. Prices declined from a record $13.495 set on February 27 on speculation that global production will increase.
For related news: Stories on grain markets: {NI AGMARKET BN} Stories about food prices: {STNI FOODPRICES } Stories on agriculture and biofuels: {TNI AGR ALTNRG BN } Top agriculture stories: {TOP AGR }
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July 2 (Bloomberg) -- Soybeans rose to a record for a second day on concern the worst Midwest flooding in 15 years may curb gains in production and inventories in the U.S., the largest producer and exporter. Corn also advanced and wheat declined.
Soybeans gained as much as 0.8 percent after booking the biggest quarterly gain in 20 years. U.S. farmers may harvest 96.8 percent of the acres planted, down from an earlier forecast of 98.1 percent, the U.S. Department of Agriculture said June 30 in a report. The USDA projected inventories of 175 million bushels before next year's harvest, or 21 days of usage.
``The figures may be revised down further, as the report did not fully reflect the impact of the Midwest flooding,'' Kenji Kobayashi, an analyst at Kanetsu Asset Management Co. in Tokyo, said by phone today.
Soybean futures for November delivery rose 7.25 cents, or 0.5 percent, to $16.1725 a bushel in after-hours trading on the Chicago Board of Trade at 11:18 a.m. in Tokyo, after earlier reaching a record $16.20.
The most-active contract jumped 15 percent in June and 31 percent in the second quarter, the most since the three months through June 1988. Prices gained 87 percent in the past year.
U.S. farmers intended to sow 74.533 million acres of soybeans, and about 95 percent of the crop was planted on June 29, leaving 3.7 million acres yet to plant, USDA data show. The USDA said June 30 harvested acreage would have been 1.3 million acres larger without the flooding.
Farmers Strike
The price also rose on speculation U.S. inventories before the harvest will be smaller than the USDA's forecast on June 10. A three-month old farmers' strike in Argentina boosted demand for U.S. supplies, analysts said.
Corn rose for the first time in four days as rising crude oil rekindled speculation demand for the grain in biofuel production may increase, leading to a drawdown in inventories, Kobayashi at Kanetsu Asset Management said.
Corn for December delivery added 4.25 cents, or 0.6 percent, to $7.5625 a bushel on the Chicago Board of Trade at 11:18 a.m. in Tokyo. Prices plunged the 30-cent maximum allowed by the exchange on June 30 after the USDA reports showed U.S. farmers planted more acres than they indicated three months ago and that crop conditions improved.
Corn futures, which rose to a record $7.9925 on June 27, gained 33 percent in the last quarter and more than doubled in the past year as global reserves are forecast to fall to a 24- year low by the end of August.
Wheat Declines
Wheat fell after Rabobank Group said the likelihood of a rebound in output in Australia, forecast to be the world's third- largest exporter of the grain, improved after rain in June.
Wheat production may be 20 million metric tons to 24 million tons, the bank said in a report e-mailed today, restating an earlier estimate. Australia's worst drought slashed the nation's wheat output the past two harvests, helping send global prices to an all-time high.
September-delivery wheat lost 1.75 cents, or 0.2 percent, to $8.63 a bushel on the Chicago Board of Trade at 11:15 a.m. in Tokyo. Prices declined from a record $13.495 set on February 27 on speculation that global production will increase.
For related news: Stories on grain markets: {NI AGMARKET BN
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Platinum Futures Gain as Oil Surge Fuels Inflation Hedge Demand
By Dave McCombs
July 2 (Bloomberg) -- Platinum futures gained in Tokyo to more than 7,000 yen a gram after closing below that level for the past seven days, as gains in crude oil buttressed expectations for higher inflation.
The most-active contract rose 6.2 percent last month and gold advanced 4.4 percent as a 9.9 percent gain in oil spurred demand for precious metals as a haven against inflation.
``From the perspective of crude and gold, all the metals are looking better bid,'' Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said today by phone. ``I'm happy to be long platinum.''
Metal for June 2009 delivery in Tokyo rose as much as 59 yen, or 0.9 percent, to 7,017 yen a gram ($2,059 an ounce) on the Tokyo Commodity Exchange. It traded at 7,000 yen at 12:48 p.m. local time. Platinum for immediate delivery gained $6.50 to $2,085.50 an ounce, at 12:46 a.m. in Tokyo, 0.3 percent higher than in New York yesterday.
Crude oil for August delivery rose as much as $1.48 to $142.45 a barrel and was at $142 at 12:48 p.m. Tokyo time in after-hours electronic trading on the New York Mercantile Exchange. Oil touched a record $143.67 on June 30.
The Institute for Supply Management's index of prices paid yesterday jumped to the highest level since July 1979. The gauge for June jumped to 91.5, while economists surveyed by Bloomberg News forecast it would be unchanged from 87 in May.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net.
Last Updated: July 1, 2008 23:57 EDT
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July 2 (Bloomberg) -- Platinum futures gained in Tokyo to more than 7,000 yen a gram after closing below that level for the past seven days, as gains in crude oil buttressed expectations for higher inflation.
The most-active contract rose 6.2 percent last month and gold advanced 4.4 percent as a 9.9 percent gain in oil spurred demand for precious metals as a haven against inflation.
``From the perspective of crude and gold, all the metals are looking better bid,'' Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said today by phone. ``I'm happy to be long platinum.''
Metal for June 2009 delivery in Tokyo rose as much as 59 yen, or 0.9 percent, to 7,017 yen a gram ($2,059 an ounce) on the Tokyo Commodity Exchange. It traded at 7,000 yen at 12:48 p.m. local time. Platinum for immediate delivery gained $6.50 to $2,085.50 an ounce, at 12:46 a.m. in Tokyo, 0.3 percent higher than in New York yesterday.
Crude oil for August delivery rose as much as $1.48 to $142.45 a barrel and was at $142 at 12:48 p.m. Tokyo time in after-hours electronic trading on the New York Mercantile Exchange. Oil touched a record $143.67 on June 30.
The Institute for Supply Management's index of prices paid yesterday jumped to the highest level since July 1979. The gauge for June jumped to 91.5, while economists surveyed by Bloomberg News forecast it would be unchanged from 87 in May.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net.
Last Updated: July 1, 2008 23:57 EDT
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Gold Trades Near 2-1/2 Month High in Asia on Iran Tension, Oil
By Glenys Sim
July 2 (Bloomberg) -- Gold traded near a 2-1/2 month high as geopolitical tension in the Middle East and rising oil prices spurred investor demand for bullion as a haven.
Gold tends to gain alongside oil as demand for a hedge against accelerating consumer price rises. Oil gained for a second day after the International Energy Agency said supplies may not keep up with demand through 2013, and on speculation that Israel could take military action against Iran.
``Bullion prices surged on a mix of heightened geopolitical tensions, higher oil prices, and expectations of an imminent ECB interest rate hike,'' James Steel, an analyst at HSBC Securities in New York, wrote in a report e-mailed today.
Bullion for immediate delivery was at $939.80 an ounce at 10:37 a.m. in Singapore, after reaching $946.08 yesterday, the highest since April 18. Silver for immediate delivery fell 0.2 percent to $18.09 an ounce.
Crude oil for August delivery rose as much as $1.48, or 1.1 percent, to $142.45 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Aiding gold's rally was the declining dollar, which traded near a three-week low against the euro and yen ahead of U.S. job market reports this week. The currency stood at $1.5801 against the euro, compared with $1.5793 late yesterday in New York, and was at 106 yen from 106.13 yen.
Heightened financial market stress, evidenced by widening credit spreads, declines in high yield exchange-traded funds and a rise in credit default insurance, also increase investor risk- averse behavior and supported gold demand, according to Steel.
Gold for August delivery was down 0.4 percent at $941.10 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 10:42 a.m. Singapore time.
Gold for June delivery on the Tokyo Commodity Exchange added 37 yen to 3,230 yen a gram ($948 an ounce) at the 11 a.m. local time break.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
Last Updated: July 1, 2008 22:47 EDT
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July 2 (Bloomberg) -- Gold traded near a 2-1/2 month high as geopolitical tension in the Middle East and rising oil prices spurred investor demand for bullion as a haven.
Gold tends to gain alongside oil as demand for a hedge against accelerating consumer price rises. Oil gained for a second day after the International Energy Agency said supplies may not keep up with demand through 2013, and on speculation that Israel could take military action against Iran.
``Bullion prices surged on a mix of heightened geopolitical tensions, higher oil prices, and expectations of an imminent ECB interest rate hike,'' James Steel, an analyst at HSBC Securities in New York, wrote in a report e-mailed today.
Bullion for immediate delivery was at $939.80 an ounce at 10:37 a.m. in Singapore, after reaching $946.08 yesterday, the highest since April 18. Silver for immediate delivery fell 0.2 percent to $18.09 an ounce.
Crude oil for August delivery rose as much as $1.48, or 1.1 percent, to $142.45 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Aiding gold's rally was the declining dollar, which traded near a three-week low against the euro and yen ahead of U.S. job market reports this week. The currency stood at $1.5801 against the euro, compared with $1.5793 late yesterday in New York, and was at 106 yen from 106.13 yen.
Heightened financial market stress, evidenced by widening credit spreads, declines in high yield exchange-traded funds and a rise in credit default insurance, also increase investor risk- averse behavior and supported gold demand, according to Steel.
Gold for August delivery was down 0.4 percent at $941.10 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 10:42 a.m. Singapore time.
Gold for June delivery on the Tokyo Commodity Exchange added 37 yen to 3,230 yen a gram ($948 an ounce) at the 11 a.m. local time break.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
Last Updated: July 1, 2008 22:47 EDT
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Balfour, Informa, Taylor Wimpey: U.K., Irish Equity Preview
By Sabine Pirone
July 2 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses, and prices are from the last market close.
The benchmark FTSE 100 Index fell 146.00, or 2.6 percent, to 5,479.90. The FTSE All-Share Index fell 2.6 percent and Ireland's ISEQ Index also fell 2.6 percent.
U.K. Companies:
AstraZeneca Plc (AZN LN): The U.K.'s second-largest drugmaker won a court ruling that upheld the enforceability of a patent on its second-biggest drug, the Seroquel antipsychotic medicine. AstraZeneca fell 12 pence, or 0.6 percent, to 2130 pence.
Balfour Beatty Plc (BBY LN): Britain's biggest builder is issuing a trading statement. Balfour Beatty fell 13.75 pence, or 3.2 percent, to 411.25 pence.
BP Plc (BP/ LN): BP's production at the Prudhoe Bay oil field in Alaska, the largest in the U.S., fell in June because of planned repairs and after the Trans-Alaska Pipeline System was shut at the end of the month for maintenance. BP fell 13.75 pence, or 2.4 percent, to 569.5 pence.
GlaxoSmithKline Plc (GSK LN): Europe's largest drugmaker and Novartis AG inflated drug prices paid by Alabama's Medicaid program and must pay the state $114.3 million in damages, a jury found after a two-week civil fraud trial. GlaxoSmithKline fell 10 pence, or 0.9 percent, to 1,103 pence.
Informa Plc (INF LN): Informa, the U.K. publisher of the Lloyd's List maritime newspaper, received a 2.15 billion-pound ($4.29 billion) takeover offer from Providence Equity Partners Ltd., Carlyle Group and Hellman & Friedman LLC. Informa fell 34.75 pence, or 8.4 percent, to 378.25 pence.
John Wood Group Plc (WG/ LN): The U.K.'s largest oilfield- services company is issuing a trading statement. John Wood Group fell 18.75 pence, or 3.8 percent, to 475.75 pence.
Taylor Nelson Sofres Plc (TNS LN): WPP Plc said the delay of a vote by GfK AG shareholders on the planned combination with Taylor Nelson Sofres puts Taylor Nelson owners at a disadvantage as they will have to vote on the deal without knowing whether the merger can proceed. Taylor Nelson Sofres fell 12.75 pence, or 5.5 percent, to 219.5 pence.
Taylor Wimpey Plc (TW/ LN): The U.K. homebuilder is set to announce today that its finance director Peter Johnson will leave, the Financial Times reported. The company is issuing a trading statement. Taylor Wimpey fell 2 pence, or 3.2 percent, to 60 pence.
Irish Companies:
CRH Plc (CHR ID): The world's second-biggest maker and distributor of building materials is issuing a trading statement. CRH fell 1.39 cents, or 7.4 percent, to 17.31 euros.
To contact the reporter on this story: Sabine Pirone in London at spirone@bloomberg.net
Last Updated: July 1, 2008 21:15 EDT
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July 2 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses, and prices are from the last market close.
The benchmark FTSE 100 Index fell 146.00, or 2.6 percent, to 5,479.90. The FTSE All-Share Index fell 2.6 percent and Ireland's ISEQ Index also fell 2.6 percent.
U.K. Companies:
AstraZeneca Plc (AZN LN): The U.K.'s second-largest drugmaker won a court ruling that upheld the enforceability of a patent on its second-biggest drug, the Seroquel antipsychotic medicine. AstraZeneca fell 12 pence, or 0.6 percent, to 2130 pence.
Balfour Beatty Plc (BBY LN): Britain's biggest builder is issuing a trading statement. Balfour Beatty fell 13.75 pence, or 3.2 percent, to 411.25 pence.
BP Plc (BP/ LN): BP's production at the Prudhoe Bay oil field in Alaska, the largest in the U.S., fell in June because of planned repairs and after the Trans-Alaska Pipeline System was shut at the end of the month for maintenance. BP fell 13.75 pence, or 2.4 percent, to 569.5 pence.
GlaxoSmithKline Plc (GSK LN): Europe's largest drugmaker and Novartis AG inflated drug prices paid by Alabama's Medicaid program and must pay the state $114.3 million in damages, a jury found after a two-week civil fraud trial. GlaxoSmithKline fell 10 pence, or 0.9 percent, to 1,103 pence.
Informa Plc (INF LN): Informa, the U.K. publisher of the Lloyd's List maritime newspaper, received a 2.15 billion-pound ($4.29 billion) takeover offer from Providence Equity Partners Ltd., Carlyle Group and Hellman & Friedman LLC. Informa fell 34.75 pence, or 8.4 percent, to 378.25 pence.
John Wood Group Plc (WG/ LN): The U.K.'s largest oilfield- services company is issuing a trading statement. John Wood Group fell 18.75 pence, or 3.8 percent, to 475.75 pence.
Taylor Nelson Sofres Plc (TNS LN): WPP Plc said the delay of a vote by GfK AG shareholders on the planned combination with Taylor Nelson Sofres puts Taylor Nelson owners at a disadvantage as they will have to vote on the deal without knowing whether the merger can proceed. Taylor Nelson Sofres fell 12.75 pence, or 5.5 percent, to 219.5 pence.
Taylor Wimpey Plc (TW/ LN): The U.K. homebuilder is set to announce today that its finance director Peter Johnson will leave, the Financial Times reported. The company is issuing a trading statement. Taylor Wimpey fell 2 pence, or 3.2 percent, to 60 pence.
Irish Companies:
CRH Plc (CHR ID): The world's second-biggest maker and distributor of building materials is issuing a trading statement. CRH fell 1.39 cents, or 7.4 percent, to 17.31 euros.
To contact the reporter on this story: Sabine Pirone in London at spirone@bloomberg.net
Last Updated: July 1, 2008 21:15 EDT
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Daimler, Pfleiderer, Porsche, Volkswagen: German Equity Preview
By Nadja Brandt
July 2 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in Germany. Stock symbols are in parentheses, and share prices are from the previous close.
The X-DAX Index rose 0.4 percent to 6,325.96. The measure, derived from trading in DAX Index futures, provides an estimate of Germany's benchmark index. The DAX dropped 1.6 percent to 6,315.94.
Bayerische Motoren Werke AG (BMW GY): The world's largest maker of luxury cars said U.S. sales dropped 11 percent last month, as demand for is main BMW brand dropped. The shares fell 59 cents, or 1.9 percent, to 29.96 euros.
Daimler AG (DAI GY): The carmaker's Mercedes-Benz USA unit, the world's second-largest luxury carmaker, said U.S. sales slipped 0.1 percent last month. The shares decreased 1.08 euros, or 2.8 percent, to 38.20 euros.
Deutsche Boerse AG (DB1 GY): German stock-exchange trades fell 31 percent to 189 billion euros ($298.4 billion) in June compared with 273.7 billion euros a year earlier, Deutsche Boerse AG said. The shares dropped 2.53 euros, or 3.5 percent, to 69.16 euros.
Pfleiderer AG (PFD4 GY): The supplier of paneling for buildings will buy back up to 1.87 percent of its own shares to settle subscription rights tied to a stock-option plan and to make acquisitions. The shares dropped 29 cents, or 3.3 percent, to 8.38 euros.
Porsche SE (POR3 GY): The maker of the Cayenne sport- utility vehicle said North American sales fell 19 percent last month as demand for the 911 sports car plunged in advance of the introduction of a new version. The shares fell 6.02 euros, or 6.2 percent, to 91.87 euros.
Volkswagen AG (VOW GY): Europe's largest Carmaker said sales in the U.S. climbed 0.3 percent in June on demand for its new Eos convertible coupe. The shares fell 2.71 euros, or 1.5 percent, to 180.57 euros.
To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net
Last Updated: July 2, 2008 00:02 EDT
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July 2 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in Germany. Stock symbols are in parentheses, and share prices are from the previous close.
The X-DAX Index rose 0.4 percent to 6,325.96. The measure, derived from trading in DAX Index futures, provides an estimate of Germany's benchmark index. The DAX dropped 1.6 percent to 6,315.94.
Bayerische Motoren Werke AG (BMW GY): The world's largest maker of luxury cars said U.S. sales dropped 11 percent last month, as demand for is main BMW brand dropped. The shares fell 59 cents, or 1.9 percent, to 29.96 euros.
Daimler AG (DAI GY): The carmaker's Mercedes-Benz USA unit, the world's second-largest luxury carmaker, said U.S. sales slipped 0.1 percent last month. The shares decreased 1.08 euros, or 2.8 percent, to 38.20 euros.
Deutsche Boerse AG (DB1 GY): German stock-exchange trades fell 31 percent to 189 billion euros ($298.4 billion) in June compared with 273.7 billion euros a year earlier, Deutsche Boerse AG said. The shares dropped 2.53 euros, or 3.5 percent, to 69.16 euros.
Pfleiderer AG (PFD4 GY): The supplier of paneling for buildings will buy back up to 1.87 percent of its own shares to settle subscription rights tied to a stock-option plan and to make acquisitions. The shares dropped 29 cents, or 3.3 percent, to 8.38 euros.
Porsche SE (POR3 GY): The maker of the Cayenne sport- utility vehicle said North American sales fell 19 percent last month as demand for the 911 sports car plunged in advance of the introduction of a new version. The shares fell 6.02 euros, or 6.2 percent, to 91.87 euros.
Volkswagen AG (VOW GY): Europe's largest Carmaker said sales in the U.S. climbed 0.3 percent in June on demand for its new Eos convertible coupe. The shares fell 2.71 euros, or 1.5 percent, to 180.57 euros.
To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net
Last Updated: July 2, 2008 00:02 EDT
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Credit Agricole, Faiveley, Sodexo, Suez: French Stocks Preview
By Gregory Viscusi
July 2 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.
France's CAC 40 Index dropped 93.64, or 2.1 percent, to 4,341.21, the lowest since October 2005. The SBF 120 Index retreated 2.1 percent.
Credit Agricole SA (ACA FP): France's third-largest bank by market value raised 5.9 billion euros in a rights offering to replenish capital after writedowns on subprime-infected assets. The shares dropped 61 cents, or 4.7 percent, to 12.37 euros.
Faiveley SA (LEY FP): The maker of equipment for railroads said fiscal 2008 net income rose 24 percent to 36.3 million euros. It also said it's in talks to buy Ellcon International in the U.S. The shares fell 11 cents, or 0.3 percent, to 41.14 euros.
Proservia (ALPRV FP): The computer-services company agreed to buy Altique Groupe in a transaction that values the target at 2.7 million euros. The shares dropped 63 cents, or 3.9 percent, to 15.61 euros.
Societe Generale SA (GLE FP): France's second-largest bank by market value agreed to buy ABN Amro Holding NV's private- banking business in Gibraltar for an undisclosed amount. The shares declined 1.65 euros, or 3 percent, to 53.64 euros.
Sodexo (SW FP): The world's second-largest catering company reports third-quarter sales before the market opens in Paris. Revenue may be 3.39 billion euros, little changed from year- earlier levels, according to the median of five analyst estimates, hurt by the dollar's weakness against the euro. The shares dropped 77 cents, or 1.9 percent, to 40.95 euros.
Suez SA (SZE FP): Shares in the company that's merging with Gaz de France SA will exit the CAC 40, SBF 120 and SBF 250 indexes on July 22, stock market operator NYSE Euronext said. The stock fell 18 cents, or 0.4 percent, to 43.06 euros.
Vetoquinol SA (VETO FP): The drug-testing company bought the animal health business of Canada's Vetcom 1979 Inc. It didn't give financial terms. The shares declined 75 cents, or 2.9 percent, to 25.10 euros.
Xiring (ALXIR FP): The software developer raised 3 million euros selling new shares to funds owned by Credit Agricole and Banques Populaires. The shares fell 10 cents, or 1 percent, to 9.99 euros.
To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net.
Last Updated: July 1, 2008 23:30 EDT
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July 2 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.
France's CAC 40 Index dropped 93.64, or 2.1 percent, to 4,341.21, the lowest since October 2005. The SBF 120 Index retreated 2.1 percent.
Credit Agricole SA (ACA FP): France's third-largest bank by market value raised 5.9 billion euros in a rights offering to replenish capital after writedowns on subprime-infected assets. The shares dropped 61 cents, or 4.7 percent, to 12.37 euros.
Faiveley SA (LEY FP): The maker of equipment for railroads said fiscal 2008 net income rose 24 percent to 36.3 million euros. It also said it's in talks to buy Ellcon International in the U.S. The shares fell 11 cents, or 0.3 percent, to 41.14 euros.
Proservia (ALPRV FP): The computer-services company agreed to buy Altique Groupe in a transaction that values the target at 2.7 million euros. The shares dropped 63 cents, or 3.9 percent, to 15.61 euros.
Societe Generale SA (GLE FP): France's second-largest bank by market value agreed to buy ABN Amro Holding NV's private- banking business in Gibraltar for an undisclosed amount. The shares declined 1.65 euros, or 3 percent, to 53.64 euros.
Sodexo (SW FP): The world's second-largest catering company reports third-quarter sales before the market opens in Paris. Revenue may be 3.39 billion euros, little changed from year- earlier levels, according to the median of five analyst estimates, hurt by the dollar's weakness against the euro. The shares dropped 77 cents, or 1.9 percent, to 40.95 euros.
Suez SA (SZE FP): Shares in the company that's merging with Gaz de France SA will exit the CAC 40, SBF 120 and SBF 250 indexes on July 22, stock market operator NYSE Euronext said. The stock fell 18 cents, or 0.4 percent, to 43.06 euros.
Vetoquinol SA (VETO FP): The drug-testing company bought the animal health business of Canada's Vetcom 1979 Inc. It didn't give financial terms. The shares declined 75 cents, or 2.9 percent, to 25.10 euros.
Xiring (ALXIR FP): The software developer raised 3 million euros selling new shares to funds owned by Credit Agricole and Banques Populaires. The shares fell 10 cents, or 1 percent, to 9.99 euros.
To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net.
Last Updated: July 1, 2008 23:30 EDT
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Asian Stocks Decline, Led by Nippon Yusen, Korean Air, Honda
By Chen Shiyin
July 2 (Bloomberg) -- Asian stocks declined for the ninth time in 10 days, led by automakers and shipping companies, as near-record oil prices drove up costs and curbed spending.
Toyota Motor Corp. retreated in Tokyo after its U.S. sales slumped 21 percent last month. Korean Air Lines Co. dropped to a 14-month low after an analyst said the carrier may post its first operating loss in five years. Nippon Yusen K.K. fell on concern slowing growth will undermine demand for shipping. Japan's Nikkei 225 Stock Average retreated for a 10th day, set for its longest losing streak in 43 years.
``Inflation remains a very big threat to economic growth and earnings with the oil price at such high levels,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets worldwide. ``Equity markets are likely to remain choppy.''
The MSCI Asia Pacific Index lost 0.9 percent to 134.62 at 12:45 p.m. in Tokyo, adding to a 5.9 percent drop in the past nine days. More than two stocks fell for each that gained, as all but one of the index's 10 industry groups declined. The measure is on course for its lowest close since March 20.
Japan's Nikkei 225 sank 1 percent to 13,331.98. South Korea's Kospi index lost 2.2 percent, the region's biggest drop.
Just Group Ltd., Australia's biggest specialty clothing retailer, tumbled after cutting its earnings forecast. BHP Billiton Ltd. fell after Credit Suisse Group cut its earnings estimate for rival aluminum producers Alcoa Inc. and Century Aluminum Co.
Futures Decline
In the U.S., futures on the Standard & Poor's 500 Index fell 0.1 percent. The S&P 500 advanced yesterday, boosted by better- than-forecast sales at General Motors Corp.
Toyota, Japan's biggest carmaker, fell 1 percent to 4,960 yen, set for its lowest close since April 16. North America accounts for a third of the company's total sales.
Vehicle sales plunged 18 percent in the U.S. last month, the steepest slump in almost six years, as consumers turned away from gas-guzzling trucks and found small cars in short supply.
Honda Motor, Japan's second-largest automaker, lost 1.1 percent to 3,600 yen.
Nippon Yusen dropped 2.5 percent to 1,002 yen. Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping line by sales, fell 2.7 percent to 1,453 yen. STX Pan Ocean Co., South Korea's largest operator of vessels that transport coal, iron ore and other commodities, fell 3.2 percent to 1,945 won.
Chinese Demand
The Baltic Dry Index, which tracks the price of shipping bulk commodities, declined 2.2 percent yesterday, the largest loss since June 23. The measure fell on speculation Chinese iron- ore demand is weakening as prices rise.
Korean Air Lines Co., South Korea's largest carrier, dropped 5 percent to 45,600 won, set for its lowest close since September 2004 after Korea Investment & Securities Co. said the company will likely post its first operating loss since 2003 because of fuel costs.
Crude oil for August delivery gained as much as 1.1 percent to $142.45 a barrel in New York today, near the record of $143.67 reached on June 30. Futures have doubled in the past year.
Air China Ltd., the nation's largest international carrier, declined 2.3 percent to HK$3.75 in Hong Kong. Qantas Airways Ltd., Australia's biggest airline, dropped 3.4 percent to A$3.13.
MSCI's Asian index fell 0.6 percent yesterday, extending its first-half loss of 13 percent. Declines in the first six months were the index's worst since 1992, as deepening credit-market losses and surging fuel costs weighed on global economic growth.
Rising Prices
South Korean consumer prices rose by the most in almost 10 years last month, while inflation in Indonesia accelerated to a 21-month high in June, according to statistics released this week. In May, Japan's core consumer prices climbed at the fastest pace in a decade, according to a government report last week.
``Commodity prices are going up higher and higher, and now you have tremendous inflationary pressure to raise interest rates,'' said Edwin Merner, president of Tokyo-based Atlantis Investment Research Corp., which manages $2 billion in assets. ``When you slow the economy, you slow demand.''
Just Group slumped 14 percent to A$2.75 in Sydney, the largest drop since May 2005. Earnings-per-share will be between 29.2 Australian cents and 30.6 cents in the year ending July 31, compared with last month's forecast of 33.4 cents, the company said today.
BHP lost 3 percent to A$43.08. Credit Suisse analysts led by David Gagliano lowered second-quarter and 2008 earnings estimates for Alcoa, the world's third-largest aluminum producer, and Century Aluminum, the second-biggest U.S. producer.
The analysts said profits will be hurt by higher energy and materials costs and a lower average price for the metal.
BHP is the world's six-largest producer of primary aluminum, according to its Web site.
Rio Tinto Group, the world's third-biggest mining company, slipped 2.8 percent to A$133.69. Nippon Mining Holdings Inc., Japan's biggest copper producer, lost 2.8 percent to 662 yen.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
Last Updated: July 2, 2008 00:18 EDT
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China Stocks Gain for First Time in Four Days; Daqin Advances
By Zhang Shidong and Chua Kong Ho
July 2 (Bloomberg) -- China's stocks rose for the first time in four days as some investors took advantage of a market slump that the state-run Xinhua News Agency described as ``irrational'' to buy stocks.
Daqin Railway Co., the operator of China's biggest coal transport network, and Aluminum Corp. of China Ltd., the country's biggest maker of the metal, led the advance.
``Valuations have come down significantly and if you look at growth prospects over the long term, stocks are quite fairly valued,'' said Lode Vermeersch, chief investment officer of KBC Goldstate Fund Management Co. in Shanghai, which manages the equivalent of $634 million in assets.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, added 41.57, or 1.5 percent, to 2,739.92 at the 11:30 a.m. break in Shanghai, following a three- day, 9.5 percent decline.
The gauge has slumped 49 percent this year amid concern government measures to curtail inflation will hurt corporate profits. The measure's 14-day relative strength index, which measures how rapidly stocks have risen or fallen in that period, dropped to 31 yesterday, close to the 30 level that some investors use as a signal to buy.
Economic growth running at better than 10 percent a year helped the CSI 300 climb almost sixfold in 2006 and 2007.
Last year's boom and the recent slump were ``irrational'' and the market shouldn't be ``overly dependent'' on short-term policies, Xinhua said in an editorial late yesterday. China's stock market can still have a ``stable and healthy development'' under the current positive economic conditions, the agency said.
`Some Relief'
China's economic situation is ``better'' than expected even though growth may slow, Xinhua said.
Daqin Railway climbed 4.9 percent to 13.67 yuan, paring its 2008 drop to 47 percent. Aluminum Corp., known as Chalco, added 3.9 percent to 13.49 yuan. The stock is down 66 percent this year.
``Xinhua's article provides some relief and reassurance,'' said Zhang Ling, who manages the equivalent of 1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``But there won't be any material impact. The fundamental things haven't changed yet and this year could be a turning point for China's economy moving to the downside.''
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 1.6 percent to 2,693.42. The Shenzhen Composite Index added 2 percent to 792.18.
Elsewhere, Gansu Jiu Steel Group Hongxing Iron & Steel Ltd., the listed unit of the second-biggest steelmaker in northern China, climbed 4.7 percent to 9.38 yuan. The stock was set for the biggest gain since June 25.
Parent Jiuquan Iron & Steel Group agreed to transfer all its steel and mining assets into a venture with Netherlands- registered metals group International Mineral Resources BV, said the listed unit in a statement today.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Chua Kong Ho in Shanghai at Kchua6@bloomberg.net.
Last Updated: July 2, 2008 00:08 EDT
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July 2 (Bloomberg) -- China's stocks rose for the first time in four days as some investors took advantage of a market slump that the state-run Xinhua News Agency described as ``irrational'' to buy stocks.
Daqin Railway Co., the operator of China's biggest coal transport network, and Aluminum Corp. of China Ltd., the country's biggest maker of the metal, led the advance.
``Valuations have come down significantly and if you look at growth prospects over the long term, stocks are quite fairly valued,'' said Lode Vermeersch, chief investment officer of KBC Goldstate Fund Management Co. in Shanghai, which manages the equivalent of $634 million in assets.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, added 41.57, or 1.5 percent, to 2,739.92 at the 11:30 a.m. break in Shanghai, following a three- day, 9.5 percent decline.
The gauge has slumped 49 percent this year amid concern government measures to curtail inflation will hurt corporate profits. The measure's 14-day relative strength index, which measures how rapidly stocks have risen or fallen in that period, dropped to 31 yesterday, close to the 30 level that some investors use as a signal to buy.
Economic growth running at better than 10 percent a year helped the CSI 300 climb almost sixfold in 2006 and 2007.
Last year's boom and the recent slump were ``irrational'' and the market shouldn't be ``overly dependent'' on short-term policies, Xinhua said in an editorial late yesterday. China's stock market can still have a ``stable and healthy development'' under the current positive economic conditions, the agency said.
`Some Relief'
China's economic situation is ``better'' than expected even though growth may slow, Xinhua said.
Daqin Railway climbed 4.9 percent to 13.67 yuan, paring its 2008 drop to 47 percent. Aluminum Corp., known as Chalco, added 3.9 percent to 13.49 yuan. The stock is down 66 percent this year.
``Xinhua's article provides some relief and reassurance,'' said Zhang Ling, who manages the equivalent of 1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``But there won't be any material impact. The fundamental things haven't changed yet and this year could be a turning point for China's economy moving to the downside.''
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 1.6 percent to 2,693.42. The Shenzhen Composite Index added 2 percent to 792.18.
Elsewhere, Gansu Jiu Steel Group Hongxing Iron & Steel Ltd., the listed unit of the second-biggest steelmaker in northern China, climbed 4.7 percent to 9.38 yuan. The stock was set for the biggest gain since June 25.
Parent Jiuquan Iron & Steel Group agreed to transfer all its steel and mining assets into a venture with Netherlands- registered metals group International Mineral Resources BV, said the listed unit in a statement today.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Chua Kong Ho in Shanghai at Kchua6@bloomberg.net.
Last Updated: July 2, 2008 00:08 EDT
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Honda, Hyundai Avoid Slump as Asians Top U.S. Brands
By Alan Ohnsman and Greg Bensinger
July 2 (Bloomberg) -- Honda Motor Co. and Hyundai Motor Corp. increased June U.S. sales amid an industry decline, leading Asia-based automakers to outsell the domestic brands of General Motors Corp., Ford Motor Co. and Chrysler LLC.
Demand for fuel-efficient cars boosted sales for Honda and Seoul-based Hyundai about 1 percent each from a year earlier while the U.S. total fell 18 percent. GM, Ford and Chrysler sales declined a combined 26 percent, while those of Japanese and South Korean automakers slid 12 percent. Toyota Motor Corp., the biggest Asian automaker, reported a 21 percent drop.
With gasoline prices averaging more than $4 a gallon, June sales reflected the shift in buyer preferences toward smaller vehicles. GM, Ford and Chrysler get more than half of their sales from pickups, sport-utility vehicles and vans, which are larger and less fuel-efficient.
``Small cars like Honda's Civic will remain popular,'' said Koichi Ogawa, who helps oversee $28 billion at Daiwa SB Investments Ltd. in Tokyo. ``With these gasoline prices, U.S. consumers will definitely go for cars with better fuel economy.''
Similarly, sales of new cars, trucks and buses in Japan dropped 3.6 percent to 281,261 in June, the Japan Automobile Dealers Association said yesterday in Tokyo.
Consumer Confidence
Fuel prices, the housing slump and weakest economic growth in five years pushed June's annualized sales rate to the lowest in any month since 1993.
``There are things weighing on the consumer conscience that we haven't seen since the oil embargo of 1973,'' Jim Lentz, president of Toyota's U.S. sales unit, said on a conference call yesterday. ``Fuel prices are going to be the trigger that gets things started again.''
The Asia-based companies for the second time in as many months overtook the U.S. makers, with 46.2 percent of new- vehicle sales, compared with 45.8 percent for GM, Ford and Chrysler.
Toyota sold 193,234 cars and light trucks last month, a drop from 245,739 a year earlier. The company's 21 percent decrease was its biggest in the U.S. since October 2002.
Sales of the company's Prius hybrid plunged 34 percent as supplies of the car ran short. Toyota's Corolla small car and midsize Camry again outsold Ford's F-Series trucks, the perennial top-selling U.S. vehicle. Toyota's Tundra large pickup dropped 53 percent.
Limited supplies of batteries and other parts still restrain availability of Prius and other hybrid models, Lentz said. Toyota has only about a one-day inventory of the Prius, he said.
The Toyota City, Japan-based company declined 0.2 percent to 5,000 yen as of 9:49 a.m. on the Tokyo Stock Exchange.
Honda, Nissan
Honda, the second-largest Japanese automaker, sold 142,539 cars and light trucks in the U.S. last month, an increase of 1.1 percent. Honda for a second consecutive month outsold Chrysler to rank fourth in U.S. sales volume. It trails Auburn Hills, Michigan-based Chrysler by just 69,468 units in the first half.
Sales almost doubled for Honda's Fit small car, rose 37 percent for the Accord and increased 9.5 percent for the Civic, the Tokyo-based company said.
`Perfect Mix'
``Honda is benefiting from a perfect mix of circumstances and production mix,'' said Rebecca Lindland, an analyst at forecaster Global Insight Inc. in Lexington, Massachusetts.
Honda's market share rose 2.3 percentage points to 12 percent.
Nissan, Japan's third-biggest automaker, sold 75,847 Nissan and Infiniti brand vehicles in June, declining 18 percent from a year earlier. Trucks led the drop, including a 71 percent decrease for the Titan large pickup and a 72 percent slide for the Pathfinder SUV.
Honda declined 1.7 percent to 3,580 yen and Nissan fell 1 percent to 858 yen.
Hyundai sold 50,033 vehicles in June, a 1.3 percent increase from a year earlier. The gain came from Accent and Elantra small cars and midsize Sonata sedans, its most fuel- efficient models, the Seoul-based automaker said in a statement.
Similarly, Hyundai affiliate Kia Motors Corp. posted a 7.6 percent sales increase last month to 28,292 vehicles. Gains came from Optima sedans and Rio and Spectra small cars, the company said in a statement.
Mazda Motor Corp., one third owned by Ford, said its sales declined 7.7 percent to 23,771. Subaru, Fuji Heavy Industries Ltd.'s auto brand, reported a 5.3 percent sales gain on higher demand for its new Forester small sport-utility vehicle.
Among smaller brands, Japan's Mitsubishi Motors Corp. reported a 42.4 percent decline and Suzuki Motor Corp. said its sales fell 5.2 percent.
To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net;
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Starbucks to Close 600 Stores, May Cut 12,000 Jobs
By Duane D. Stanford and Joseph Galante
July 1 (Bloomberg) -- Starbucks Corp. will close 600 U.S. coffee shops and eliminate as many as 12,000 jobs, the most in its history, as Chief Executive Officer Howard Schultz slows the chain's expansion after it doubled in size in four years.
Starbucks gained as much as 7.2 percent in late Nasdaq trading after saying the reductions amount to 7 percent of its workforce worldwide. The cuts include full- and part-time employees and will come over the next nine months, the Seattle- based company said today in a regulatory filing.
Seventy percent of the stores to be shut are less than three years old, the company said. Schultz, the 54-year-old former CEO who regained the post in January, is coming to grips with Starbucks' declining earnings and the ``overgrowth'' of the past few years, said Matthew DiFrisco, an analyst at Oppenheimer & Co. in New York.
``It shows Schultz is willing to do the tough things that are necessary,'' James Walsh, an analyst at Coldstream Capital Management Inc. in Bellevue, Washington, said today in a telephone interview. Coldstream has $1.1 billion under management, including Starbucks shares.
Starbucks Chief Financial Officer Peter Bocian estimated the stores were taking 25 percent to 30 percent of sales from nearby locations. The closings will hurt long-term revenue projections while helping the company achieve its profit goals, Bocian said on a conference call, without elaborating.
Fewer Luxuries
Starbucks' sales and earnings have declined as cash- strapped consumers facing record gasoline prices pull back on gourmet coffee and other luxuries. The company still plans to open 200 other company-owned stores through September 2009.
Most of the 600 stores to be closed were opened in late 2005 and 2006, Bocian said on the call with investors and analysts. During that time, more than 50 percent of the new stores had drive-through service, he said.
Consumers are driving less because of gasoline prices that have soared to more than $4 a gallon, according to separate surveys in the past two weeks by Mastercard Advisors analyst Michael McNamara and JPMorgan Securities Inc. analyst Himanshu Patel.
Most of the closings, which include 100 that were announced previously, will be completed by next March, Starbucks said. The stores are located in ``all major U.S. markets,'' the company said, without naming them. Florida and California are among the largest states affected, spokeswoman Valerie O'Neil said in an interview. Starbucks isn't targeting any other stores for closure, Bocian said.
``I think it will be well received by the Street,'' Sharon Zackfia, an analyst at William Blair & Co., said in an interview. ``It's pretty clear they want to enter fiscal '09 with a clean slate.''
Starbucks rose 71 cents, or 4.5 percent, to $16.33 at 6:38 p.m. after the close of regular trading on the Nasdaq Stock Market, following the announcement.
To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net; Joseph Galante in San Francisco at jgalante3@bloomberg.net
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Blockbuster Abandons Circuit City Bid After Review
By Mark Clothier
July 1 (Bloomberg) -- Blockbuster Inc., the world's largest movie-rental chain, walked away from an offer of as much as $1.35 billion for money-losing electronics retailer Circuit City Stores Inc. after taking a closer look at its finances.
``Based on market conditions and the completion of our initial due diligence process, we have determined that it is not in the best interest of Blockbuster's shareholders to proceed with an acquisition of Circuit City,'' Jim Keyes, Blockbuster chairman and chief executive officer, said today in a statement.
Circuit City fell 14 percent in trading after the close of U.S. markets, following the announcement.
Blockbuster, based in Dallas, approached the Richmond, Virginia-based retailer in February with an unsolicited bid of $6 to $8 a share, pending a review of its books. Circuit City, which has lost money the past two years, agreed to the examination after billionaire investor Carl Icahn said he would step in if Blockbuster was unable to obtain financing.
Circuit City may now be more attractive to another company or a buyout firm because fewer bidders probably lowers its asking price. Investor Mark Wattles said June 24 Circuit City was drawing interest from at least three suitors, and a deal may happen within a month.
``Circuit City certainly could be in play,'' said Arvind Bhatia, an analyst at Sterne, Agee & Leach, in a telephone interview. ``I would not be surprised if there are strategic buyers,'' he said.
`Ongoing Process'
Circuit City's exploration of strategic alternatives is ``an active and ongoing process'' and not dependent on a purchase by Blockbuster, spokesman Bill Cimino said in a telephone interview. A message left for Carl Icahn after normal business hours wasn't immediately returned.
Circuit City has opened smaller stores and fired higher paid employees to reduce costs after losing customers to larger Best Buy Co. and Wal-Mart Stores Inc.
Blockbuster has dropped 20 percent since its initial offer was revealed April 14. The shares rose 29 cents, or 12 percent, to $2.80 following the announcement, after ending up 1 cent in New York Stock Exchange composite trading.
Circuit City fell 35 cents to $2.20 after the statement. The shares fell 34 cents, or 12 percent, to $2.55 in regular New York Stock Exchange composite trading.
Bhatia wrote in a June 20 research note that the movie- rental chain was more likely to lower its bid or scrap it altogether than formally offer $6 a share.
Bhatia wrote in a June 20 research note.
To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net
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Kent's Coca-Cola Sees Stock Fizzing, Helped by Dollar
By Duane D. Stanford
July 1 (Bloomberg) -- Muhtar Kent may be the only chief executive officer of Coca-Cola Co. to benefit from an anemic U.S. economy and record oil prices.
The 55-year-old New York native moved into the top job at the world's biggest soft-drink maker today with the stock down 15 percent since the start of this year -- at a level almost as low as when his predecessor, Neville Isdell, was pulled out of retirement in 2004 to fix company sales and returns.
That makes Kent's No. 1 task to convince investors that they have been overestimating the impact of higher food and fuel prices on consumers outside North America, making the soft-drink maker as good as it has ever been, said Lauren Torres, an analyst at HSBC Global Research.
``There are a lot of nervous people out there,'' said Torres, who with a ``hold'' rating is the most pessimistic of the 16 analysts covering the company. ``Fundamentally, I don't think the story at Coke has changed. I think they are becoming a better company.''
The key to the beverage maker's strength is its overseas markets, where the weak dollar has worked to the Atlanta-based company's advantage, said John C. Thompson, a portfolio manager with Thompson Investment Management LLC. Particularly in emerging markets in Asia and Latin America, operating profit's percentage of sales has outstripped North America by twofold, making Coca-Cola a worthwhile investment, Thompson said.
Stock Rally Predicted
``We aren't anticipating Google growth rates here,'' said Thompson, whose firm oversees $1.2 billion in assets, including Coca-Cola stock. ``You don't need rapid growth to make it a decent stock given the huge level of free cash flow they have.''
Free cash flow grew by $1 billion to $5.5 billion last year, helped by acquisitions of bottlers in the Philippines and elsewhere.
HSBC's Torres predicts the shares will rise 19 percent over the next 12 months. They are projected to advance 27 percent, according to analyst estimates compiled by Bloomberg.
While Coca-Cola has been unable to repair the North American market, Isdell, 65, and Kent bolstered growth overseas by focusing on emerging markets such as China and India, as well as mature markets, including Japan and the U.K.
The operating profit margin in North America was 22 percent last year, which compares with 39 percent in the division that includes North Asia and the Middle East and 54 percent in Latin America. Each division accounts for almost a quarter of total operating profit.
Weak-Dollar Advantage
Overseas performance helped bolster the company's stock to an eight-year high of $65.56 on Jan. 10. In the months since, investor concern over a consumer cutback caused by high gasoline and food prices has pushed the shares down. Coca-Cola declined 1.9 percent, or 98 cents, to $51 at 4:02 p.m. in New York Stock Exchange composite trading.
In North America and Europe, Coca-Cola is feeling a consumer slowdown. The company's second-largest distributor, Athens-based Coca-Cola Hellenic Bottling Co., said June 13 that 2008 profit would be lower than previously forecast. That followed a similar statement May 28 by Atlanta-based Coca-Cola Enterprises Inc., the world's largest soft-drink distributor.
Global Sales
Globally that is not yet the case, with the volume of soda sales in the first quarter up 5 percent in all markets outside the North America. Volume was down 3 percent in Canada and the U.S. Overall revenue rose 21 percent in the first quarter.
Kent, the son of a Turkish diplomat, has worked at Coca- Cola or its bottlers since 1978. Hired by Isdell in 2005 to oversee Coca-Cola's international divisions, he has helped overcome a pesticide scare in India, falling canned-coffee sales in Japan and a frayed relationship over concentrate pricing with Coca-Cola Femsa SAB, the largest bottler in Latin America.
He declined to be interviewed for this article.
Kent's career also included management of Coca-Cola's Asia unit and a stint as CEO of Turkish brewer and bottler Efes Beverage Group.
A decade ago, Kent was investigated for short-selling stock of Australian bottler Coca-Cola Amatil Ltd., where he was a manager, hours before the company told investors its profit would miss analysts' estimates. Kent, who wasn't charged with any wrongdoing, paid $260,000 to settle the case and later resigned from Amatil.
Coca-Cola's board had an outside law firm investigate the matter before Isdell hired Kent. The company hasn't made the findings public. Kent has said the transaction was an honest mistake.
Coca-Cola Diversification
Since becoming chief operating officer in December 2006, Kent has taken a special interest in promoting non-carbonated beverages and updating soda packaging. He helped negotiate the $4.1 billion purchase of Glaceau Vitaminwater-maker Energy Brands Inc. and the buying of a stake in Honest Tea.
PepsiCo Inc., with its Gatorade and Tropicana brands and snack food division, has outpaced Coca-Cola in diversification in the past decade.
Kent and Isdell, who will remain chairman until April 2009, have said they are encouraged by growing sales of no-calorie Coca-Cola Zero, which the company calls the most successful new product since Diet Coke. The drink is now in 93 countries. Soda sales, which make up more than 80 percent of revenue worldwide, have declined in the U.S. for seven consecutive quarters.
Coca-Cola faces additional challenges. U.S. fountain sales, which make up a third of revenue, have declined as cash-strapped consumers eat out less. Sales of 20-ounce soft drinks at convenience stores also have slowed, Coca-Cola said.
U.S. growth in sales of sports drinks, bottled water, water enhanced with vitamins and energy drinks, which have helped offset declines in soft drink sales, have decelerated, Morgan Stanley's Bill Pecoriello said June 23 at a conference by Beverage Digest. He is ranked by Institutional Investor magazine as the top U.S. beverage analyst.
To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net.
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Wal-Mart Faces $2 Billion Labor Law Trial, Judge Says
By Margaret Cronin Fisk
July 1 (Bloomberg) -- Wal-Mart Stores Inc. broke Minnesota labor laws, a state judge ruled, handing the world's largest retailer its third-straight defeat in a wage-class action trial and the possibility a jury may order it to pay $2 billion.
The company required hourly employees to work off-the-clock during training and denied full rest or meal breaks in violation of state wage and hour laws, Hastings, Minnesota, District Judge Robert King Jr. held today following a non-jury trial. King ruled Wal-Mart broke labor laws more than 2 million times and ordered the company to give employees $6.5 million in back-pay.
``Wal-Mart's failure to compensate plaintiffs was willful,'' the judge wrote in his 151-page decision. ``Wal-Mart was on notice from numerous sources of the wage and hour violations at issue and failed to correct the problem.''
The lawsuit is one of more than 70 cases, including class actions, or group suits, in which Wal-Mart has been accused of wage-law violations. The retailer lost a $78 million jury verdict in Pennsylvania in 2006 over rest breaks and unpaid work and a $172 million verdict in California in 2005 over meal breaks. Both verdicts have been appealed.
``They are involved in more litigation over alleged violations of wage and hour laws than any other company,'' said Professor Carl Tobias, of the University of Richmond School of Law in Virginia, who has been following the lawsuits. ``They might want to re-evaluate their policies.''
Second Trial
King's decision means Wal-Mart will face a second trial in Minnesota state court, this time before a jury. Minnesota labor law allows a fine of up to $1,000 per violation of wage and hour rules. With 2 million violations, that may total as much as $2 billion. At the Oct. 20 trial, jurors will determine how much each violation is worth, and also consider punitive damages.
Wal-Mart, based in Bentonville, Arkansas, is considering an appeal, said company spokeswoman Daphne Moore.
``Our policies are to pay every associate for every hour worked and to make rest and meal breaks available,'' Moore said in an e-mailed statement. ``Any manager who violates these policies is subject to discipline.''
King ``found that Wal-Mart is lacking in many respects,'' workers' attorney Justin Perl said in an interview. ``Not only does this help our individual clients, but it sends a message to Wal-Mart that there are consequences for willfully depriving its hourly workers of their contractual and statutory rights.''
Composite Trading
Wal-Mart rose 83 cents to $57.03 at 4 p.m. in New York Stock Exchange composite trading.
The lawsuit was filed by four women on behalf of about 56,000 Wal-Mart and Sam's Club employees. The workers claimed company managers denied breaks to keep down labor costs. The Minnesota suit was granted class-action status in 2003, allowing the workers to sue together.
The company also faces class-action suits in state courts in New Jersey, Washington and Missouri. It fought off class certification in multiple states including New York, Illinois and Maryland. Denial of class-action status means individuals must spend more to sue the company on their own.
Wal-Mart won a federal court ruling June 20 denying class status to workers in four states who claimed the company denied rest breaks and manipulated time cards to ``shave'' their pay. The ruling was likely to kill about 35 such actions filed in federal court, according to plaintiffs' lawyers.
Minnesota Plaintiffs
The Minnesota plaintiffs are Nancy Braun, who worked at a Wal-Mart store in Apple Valley; Debbie Simonson and Cindy Severson, who worked in Brooklyn Park; and Pamela Reinert, who worked at stores in the Minneapolis-St. Paul area. Each said she worked off the clock and was denied meal and rest breaks.
Wal-Mart's own audits found that its hourly workers were missing rest and meal breaks, King said. Wal-Mart argued at trial the audits were unreliable, he said.
``Wal-Mart management responded to the audits with no action,'' he wrote. ``They put their heads in the sand.''
King said the evidence didn't support workers' allegations that Wal-Mart managers falsified records by inserting meal breaks into employee records.
The case is Braun v. Wal-Mart Inc., 19-CO-01-9790, District Court, Dakota County, First Judicial District, Minnesota (Hastings).
To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.
Read more...
July 1 (Bloomberg) -- Wal-Mart Stores Inc. broke Minnesota labor laws, a state judge ruled, handing the world's largest retailer its third-straight defeat in a wage-class action trial and the possibility a jury may order it to pay $2 billion.
The company required hourly employees to work off-the-clock during training and denied full rest or meal breaks in violation of state wage and hour laws, Hastings, Minnesota, District Judge Robert King Jr. held today following a non-jury trial. King ruled Wal-Mart broke labor laws more than 2 million times and ordered the company to give employees $6.5 million in back-pay.
``Wal-Mart's failure to compensate plaintiffs was willful,'' the judge wrote in his 151-page decision. ``Wal-Mart was on notice from numerous sources of the wage and hour violations at issue and failed to correct the problem.''
The lawsuit is one of more than 70 cases, including class actions, or group suits, in which Wal-Mart has been accused of wage-law violations. The retailer lost a $78 million jury verdict in Pennsylvania in 2006 over rest breaks and unpaid work and a $172 million verdict in California in 2005 over meal breaks. Both verdicts have been appealed.
``They are involved in more litigation over alleged violations of wage and hour laws than any other company,'' said Professor Carl Tobias, of the University of Richmond School of Law in Virginia, who has been following the lawsuits. ``They might want to re-evaluate their policies.''
Second Trial
King's decision means Wal-Mart will face a second trial in Minnesota state court, this time before a jury. Minnesota labor law allows a fine of up to $1,000 per violation of wage and hour rules. With 2 million violations, that may total as much as $2 billion. At the Oct. 20 trial, jurors will determine how much each violation is worth, and also consider punitive damages.
Wal-Mart, based in Bentonville, Arkansas, is considering an appeal, said company spokeswoman Daphne Moore.
``Our policies are to pay every associate for every hour worked and to make rest and meal breaks available,'' Moore said in an e-mailed statement. ``Any manager who violates these policies is subject to discipline.''
King ``found that Wal-Mart is lacking in many respects,'' workers' attorney Justin Perl said in an interview. ``Not only does this help our individual clients, but it sends a message to Wal-Mart that there are consequences for willfully depriving its hourly workers of their contractual and statutory rights.''
Composite Trading
Wal-Mart rose 83 cents to $57.03 at 4 p.m. in New York Stock Exchange composite trading.
The lawsuit was filed by four women on behalf of about 56,000 Wal-Mart and Sam's Club employees. The workers claimed company managers denied breaks to keep down labor costs. The Minnesota suit was granted class-action status in 2003, allowing the workers to sue together.
The company also faces class-action suits in state courts in New Jersey, Washington and Missouri. It fought off class certification in multiple states including New York, Illinois and Maryland. Denial of class-action status means individuals must spend more to sue the company on their own.
Wal-Mart won a federal court ruling June 20 denying class status to workers in four states who claimed the company denied rest breaks and manipulated time cards to ``shave'' their pay. The ruling was likely to kill about 35 such actions filed in federal court, according to plaintiffs' lawyers.
Minnesota Plaintiffs
The Minnesota plaintiffs are Nancy Braun, who worked at a Wal-Mart store in Apple Valley; Debbie Simonson and Cindy Severson, who worked in Brooklyn Park; and Pamela Reinert, who worked at stores in the Minneapolis-St. Paul area. Each said she worked off the clock and was denied meal and rest breaks.
Wal-Mart's own audits found that its hourly workers were missing rest and meal breaks, King said. Wal-Mart argued at trial the audits were unreliable, he said.
``Wal-Mart management responded to the audits with no action,'' he wrote. ``They put their heads in the sand.''
King said the evidence didn't support workers' allegations that Wal-Mart managers falsified records by inserting meal breaks into employee records.
The case is Braun v. Wal-Mart Inc., 19-CO-01-9790, District Court, Dakota County, First Judicial District, Minnesota (Hastings).
To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.
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Nickell Sees U.K. Rate on Hold as Loan Market Nears `Famine'
By Svenja O'Donnell
July 2 (Bloomberg) -- Former Bank of England policy maker Stephen Nickell said the central bank should avoid raising interest rates to curb inflation as the mortgage market edges close to ``a famine'' and wages stay under control.
``There isn't a great deal of evidence out there that workers are able to push for compensation for higher living costs,'' said Nickell, who is chairman of the U.K. government's National Housing and Planning Advice Unit. ``Keeping rates on hold would be the order of the day.''
Mortgage approvals fell to the lowest level in at least nine years in May and home values dropped the most in June since 1992, bringing the nation closer to a recession. Crude oil rose to a record high this week, stoking inflation and leaving policy makers to consider whether they can risk raising interest rates to contain consumer prices.
``In the mortgage market, it's almost a famine,'' Nickell said in an interview yesterday. ``I'm very pessimistic at the moment. In the end, because of the lack of trust, unless there's some kind of kite-marking and guarantee system so that mortgages can be used as collateral by the lenders, then I'm very gloomy.''
While Bank of England Governor Mervyn King predicts the U.K. economy may contract, accelerating inflation led policy makers including John Gieve, Paul Tucker, Timothy Besley, and Kate Barker to consider raising the rate in June from the current 5 percent.
Inflation Pressure
``I don't necessarily see a recession,'' said Nickell, who was a U.K. rate-setter from 2000 to 2006. ``The difficulty is the inflationary pressures from food and oil which are also having an effect on the economy.''
The crude oil price reached a record above $143 a barrel this week, while corn, wheat and rice prices have all risen to records this year. The inflation rate jumped to 3.3 percent in May, the highest in at least 11 years.
``The more anxious they are about oil prices going on rising and the wage implications of that, the more likely they ought to think about raising rates,'' Nickell said. ``If they feel relatively comfortable about that, they'll go on hold.''
Wage pressures have shown little sign of intensifying, apart from an agreement with tanker drivers at subcontractors for Royal Dutch Shell Plc, Nickell said. The Unite Union representing them sought a 13.2 percent pay increase. Average wages, excluding bonuses, rose an annual 3.9 percent in the quarter through May.
Rate Meeting
The bank will keep the main rate unchanged on July 10, the median of 30 forecasts in a Bloomberg survey of economists shows.
Britain's banks are reining in lending following the collapse of the U.S. subprime mortgage market, which has cost financial institutions worldwide $400 billion in losses and writedowns.
``If the financial markets return to normal, then house prices relative to incomes would just go back up again,'' Nickell said. ``The fundamental fact that houses are being built much more slowly than the creation of households, and they're getting wealthier, just suggests that house prices will start rising again,'' he said.
House prices fell 6.3 percent in June from a year earlier, Nationwide Building Society said yesterday. All things being equal, prices rise about 2 percent if the number of households climbs 1 percent, research by the NHPAU, a panel formed a year ago to advise the government on homebuilding, showed today.
Banks have starved the housing market of mortgages, which dropped to 42,000 in May, the lowest on record. The cost of a home loan fixed for two years with a 25 percent deposit rose to 6.27 percent last month, the highest since 2000. Nickell said the squeeze is preventing people from entering the property market.
``First-time buyers have got to come in, so without them that really undermines the housing market,'' Nickell said. ``It would be around 2015 that house prices got back onto the track that they would have been on had we not had the credit crunch.''
Britons' ability to afford homes won't improve even if house prices drop 5 percent this year and 10 percent in 2009, the NHPAU's research shows.
``This is a financial market recession arising from a lack of trust among financial-market participants,'' Nickell said. ``The demonstration of that is how difficult it is for a first-time buyer to get a mortgage. We're talking about people with good income prospects, secure jobs, who are finding it very hard.''
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
Last Updated: July 1, 2008 19:00 EDT
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July 2 (Bloomberg) -- Former Bank of England policy maker Stephen Nickell said the central bank should avoid raising interest rates to curb inflation as the mortgage market edges close to ``a famine'' and wages stay under control.
``There isn't a great deal of evidence out there that workers are able to push for compensation for higher living costs,'' said Nickell, who is chairman of the U.K. government's National Housing and Planning Advice Unit. ``Keeping rates on hold would be the order of the day.''
Mortgage approvals fell to the lowest level in at least nine years in May and home values dropped the most in June since 1992, bringing the nation closer to a recession. Crude oil rose to a record high this week, stoking inflation and leaving policy makers to consider whether they can risk raising interest rates to contain consumer prices.
``In the mortgage market, it's almost a famine,'' Nickell said in an interview yesterday. ``I'm very pessimistic at the moment. In the end, because of the lack of trust, unless there's some kind of kite-marking and guarantee system so that mortgages can be used as collateral by the lenders, then I'm very gloomy.''
While Bank of England Governor Mervyn King predicts the U.K. economy may contract, accelerating inflation led policy makers including John Gieve, Paul Tucker, Timothy Besley, and Kate Barker to consider raising the rate in June from the current 5 percent.
Inflation Pressure
``I don't necessarily see a recession,'' said Nickell, who was a U.K. rate-setter from 2000 to 2006. ``The difficulty is the inflationary pressures from food and oil which are also having an effect on the economy.''
The crude oil price reached a record above $143 a barrel this week, while corn, wheat and rice prices have all risen to records this year. The inflation rate jumped to 3.3 percent in May, the highest in at least 11 years.
``The more anxious they are about oil prices going on rising and the wage implications of that, the more likely they ought to think about raising rates,'' Nickell said. ``If they feel relatively comfortable about that, they'll go on hold.''
Wage pressures have shown little sign of intensifying, apart from an agreement with tanker drivers at subcontractors for Royal Dutch Shell Plc, Nickell said. The Unite Union representing them sought a 13.2 percent pay increase. Average wages, excluding bonuses, rose an annual 3.9 percent in the quarter through May.
Rate Meeting
The bank will keep the main rate unchanged on July 10, the median of 30 forecasts in a Bloomberg survey of economists shows.
Britain's banks are reining in lending following the collapse of the U.S. subprime mortgage market, which has cost financial institutions worldwide $400 billion in losses and writedowns.
``If the financial markets return to normal, then house prices relative to incomes would just go back up again,'' Nickell said. ``The fundamental fact that houses are being built much more slowly than the creation of households, and they're getting wealthier, just suggests that house prices will start rising again,'' he said.
House prices fell 6.3 percent in June from a year earlier, Nationwide Building Society said yesterday. All things being equal, prices rise about 2 percent if the number of households climbs 1 percent, research by the NHPAU, a panel formed a year ago to advise the government on homebuilding, showed today.
Banks have starved the housing market of mortgages, which dropped to 42,000 in May, the lowest on record. The cost of a home loan fixed for two years with a 25 percent deposit rose to 6.27 percent last month, the highest since 2000. Nickell said the squeeze is preventing people from entering the property market.
``First-time buyers have got to come in, so without them that really undermines the housing market,'' Nickell said. ``It would be around 2015 that house prices got back onto the track that they would have been on had we not had the credit crunch.''
Britons' ability to afford homes won't improve even if house prices drop 5 percent this year and 10 percent in 2009, the NHPAU's research shows.
``This is a financial market recession arising from a lack of trust among financial-market participants,'' Nickell said. ``The demonstration of that is how difficult it is for a first-time buyer to get a mortgage. We're talking about people with good income prospects, secure jobs, who are finding it very hard.''
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
Last Updated: July 1, 2008 19:00 EDT
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Dollar Is Near Three-Week Low Before U.S. Job Market Reports
By Stanley White and Kosuke Goto
July 2 (Bloomberg) -- The dollar traded near a three-week low against the euro before an industry report today that may show U.S. companies lost jobs in June for the first time in four months.
The U.S. currency also traded near a three-week low versus the yen before government data tomorrow that may show U.S. employers cut jobs for a sixth consecutive month, prompting traders to pare bets the Federal Reserve will raise interest rates. South Korea's won fell for a fourth day on speculation soaring oil prices will bolster importers' demand for dollars.
``Buying the dollar now seems to be the wrong move,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Weak numbers from the labor market are sure to push the dollar lower. You can't deny that there are sufficient reasons to worry that the U.S. economy will slow.''
The dollar traded at $1.5804 per euro at 9:54 a.m. in Tokyo from $1.5793 yesterday. It touched $1.5836 on June 30, the lowest level in three weeks, and dropped to a record $1.6019 on April 22. The dollar was little changed at 105.99 yen. It fell to a three-week low of 104.99 yen on June 30. Japan's currency traded was at 167.54 versus the euro from 167.59. The dollar may fall to $1.5830 per euro and 105.50 yen today, Ishikawa forecast.
South Korean Won
The won fell 0.3 percent to 1,050.35 against the dollar as oil gained for a second after the International Energy Agency said supplies may not keep up with demand through 2013.
Asia's worst-performing currency after the Thai baht, may stop falling because the nation's current-account deficit will narrow, Bank of Korea Deputy Governor Rhee Gwang-Ju said in an interview yesterday. The shortfall will shrink to $2.5 billion in the second half from $6.5 billion in the first half, he said.
Companies in the U.S. probably eliminated 20,000 jobs last month after adding 40,000 in May, according to the median forecast of 27 economists surveyed by Bloomberg News. The decline would be the first since February. The report from ADP Employer Services is due at 8:15 a.m. New York time.
The ADP report, which doesn't include government jobs, has overstated private employment changes by 104,000 on average each month since November. A Labor Department report will probably show tomorrow that non-farm payrolls shrank by 60,000 workers last month, according to the median forecast of 79 economists surveyed by Bloomberg News.
Labor Market
``Weak results in the ADP report would raise speculation about weak jobs data'' tomorrow, Tohru Sasaki and Junya Tanase, currency strategists in Tokyo at JPMorgan Chase & Co., wrote in a research note today. ``This would reduce expectations of a rate hike and push down the dollar.''
Futures on the Chicago Board of Trade showed a 25 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks by a quarter-percentage point on Aug. 5, compared with 38 percent odds a week ago.
Crude oil for August delivery rose 68 cents to $141.65 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes. Oil touched a record $143.67 on June 30.
``If oil prices remain persistently higher, the dollar is most likely to be under pressure,'' said Boris Schlossberg, senior currency strategist at DailyFX.com in New York, an online currency dealer.
ECB Policy Meeting
The euro may gain on speculation the European Central Bank will raise interest rates tomorrow and signal more are needed in the second half of the year to stem inflation.
The ECB will increase its benchmark rate by a quarter- percentage point to 4.25 percent, according to 57 of 58 economists surveyed by Bloomberg News.
ECB executive council member Lorenzo Bini Smaghi said yesterday the bank's inflation-fighting mandate means it acts faster than the U.S. Fed's Board. ECB President Jean-Claude Trichet said June 25 the bank is ``in a state of heightened alertness'' on prices.
``We expect the ECB to raise rates three times this year, including tomorrow's one,'' said Masafumi Yamamoto, head of foreign-exchange strategy in Tokyo at Royal Bank of Scotland Group Plc, the world's fifth-largest currency trader. ``The euro may rise to $1.60 against the dollar in coming months.''
The ECB has kept its benchmark rate at 4 percent since June of last year. The Fed lowered rates seven times between September and April, to 2 percent from 5.25 percent.
The yen's real effective exchange rate, measured against 15 currencies of major trading partners, fell for a third month in June, data from the Bank of Japan showed today.
The rate, calculated by the central bank, slipped 2.8 percent last month to 97.2 from 100 in May. The index climbed to a 21-month high of 102.3 in March, as the yen reached 95.76 per dollar on March 17.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netKosuke Goto in Tokyo at kgoto2@bloomberg.net
Last Updated: July 1, 2008 21:01 EDT
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July 2 (Bloomberg) -- The dollar traded near a three-week low against the euro before an industry report today that may show U.S. companies lost jobs in June for the first time in four months.
The U.S. currency also traded near a three-week low versus the yen before government data tomorrow that may show U.S. employers cut jobs for a sixth consecutive month, prompting traders to pare bets the Federal Reserve will raise interest rates. South Korea's won fell for a fourth day on speculation soaring oil prices will bolster importers' demand for dollars.
``Buying the dollar now seems to be the wrong move,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Weak numbers from the labor market are sure to push the dollar lower. You can't deny that there are sufficient reasons to worry that the U.S. economy will slow.''
The dollar traded at $1.5804 per euro at 9:54 a.m. in Tokyo from $1.5793 yesterday. It touched $1.5836 on June 30, the lowest level in three weeks, and dropped to a record $1.6019 on April 22. The dollar was little changed at 105.99 yen. It fell to a three-week low of 104.99 yen on June 30. Japan's currency traded was at 167.54 versus the euro from 167.59. The dollar may fall to $1.5830 per euro and 105.50 yen today, Ishikawa forecast.
South Korean Won
The won fell 0.3 percent to 1,050.35 against the dollar as oil gained for a second after the International Energy Agency said supplies may not keep up with demand through 2013.
Asia's worst-performing currency after the Thai baht, may stop falling because the nation's current-account deficit will narrow, Bank of Korea Deputy Governor Rhee Gwang-Ju said in an interview yesterday. The shortfall will shrink to $2.5 billion in the second half from $6.5 billion in the first half, he said.
Companies in the U.S. probably eliminated 20,000 jobs last month after adding 40,000 in May, according to the median forecast of 27 economists surveyed by Bloomberg News. The decline would be the first since February. The report from ADP Employer Services is due at 8:15 a.m. New York time.
The ADP report, which doesn't include government jobs, has overstated private employment changes by 104,000 on average each month since November. A Labor Department report will probably show tomorrow that non-farm payrolls shrank by 60,000 workers last month, according to the median forecast of 79 economists surveyed by Bloomberg News.
Labor Market
``Weak results in the ADP report would raise speculation about weak jobs data'' tomorrow, Tohru Sasaki and Junya Tanase, currency strategists in Tokyo at JPMorgan Chase & Co., wrote in a research note today. ``This would reduce expectations of a rate hike and push down the dollar.''
Futures on the Chicago Board of Trade showed a 25 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks by a quarter-percentage point on Aug. 5, compared with 38 percent odds a week ago.
Crude oil for August delivery rose 68 cents to $141.65 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes. Oil touched a record $143.67 on June 30.
``If oil prices remain persistently higher, the dollar is most likely to be under pressure,'' said Boris Schlossberg, senior currency strategist at DailyFX.com in New York, an online currency dealer.
ECB Policy Meeting
The euro may gain on speculation the European Central Bank will raise interest rates tomorrow and signal more are needed in the second half of the year to stem inflation.
The ECB will increase its benchmark rate by a quarter- percentage point to 4.25 percent, according to 57 of 58 economists surveyed by Bloomberg News.
ECB executive council member Lorenzo Bini Smaghi said yesterday the bank's inflation-fighting mandate means it acts faster than the U.S. Fed's Board. ECB President Jean-Claude Trichet said June 25 the bank is ``in a state of heightened alertness'' on prices.
``We expect the ECB to raise rates three times this year, including tomorrow's one,'' said Masafumi Yamamoto, head of foreign-exchange strategy in Tokyo at Royal Bank of Scotland Group Plc, the world's fifth-largest currency trader. ``The euro may rise to $1.60 against the dollar in coming months.''
The ECB has kept its benchmark rate at 4 percent since June of last year. The Fed lowered rates seven times between September and April, to 2 percent from 5.25 percent.
The yen's real effective exchange rate, measured against 15 currencies of major trading partners, fell for a third month in June, data from the Bank of Japan showed today.
The rate, calculated by the central bank, slipped 2.8 percent last month to 97.2 from 100 in May. The index climbed to a 21-month high of 102.3 in March, as the yen reached 95.76 per dollar on March 17.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netKosuke Goto in Tokyo at kgoto2@bloomberg.net
Last Updated: July 1, 2008 21:01 EDT
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Taiwan Dollar Beats Baht, Peso, Won as Ma Spurs China Trade
By Aaron Pan and Judy Chen
July 2 (Bloomberg) -- Taiwan's dollar climbed more than any Asian currency this year as improving relations with China bolstered investor confidence in the island's economy.
The currency climbed 6.8 percent against the U.S. dollar, beating the 6.5 percent gain in the Chinese yuan, as new President Ma Ying-jeou negotiated direct flights to China and allowed banks to invest in the world's most-populous nation. The Taiwan dollar will appreciate 1.2 percent and the yuan will strengthen 3.1 percent by year-end, according to the median forecast in a Bloomberg News survey of strategists.
``The Taiwan dollar and the yuan both have further upside and can continue to benefit from closer ties,'' said Norman Chan, chief executive officer of PCM Capital Ltd. in Hong Kong, which manages a fund of Asian hedge funds and recently bought Taiwanese assets. ``I expect further gains in Asian currencies especially if the yuan continues to rise.''
Taiwan's economy grew 6.1 percent in the first quarter from a year earlier as exports of electronics and chemicals to China helped the island weather a U.S. economic slowdown. Taiwan's currency reserves have almost doubled in the past five years to $290 billion and the trade surplus was $2.2 billion in May. The central banks on both sides of the 100-mile (161-kilometer) Taiwan Strait have allowed their currencies to appreciate to moderate inflation.
Diverging Fortunes
Asian currencies with smaller surpluses underperformed this year. The Thai baht dropped 11 percent, the most in Asia, as the current account turned into a deficit and protesters laid siege to Prime Minister Samak Sundaravej's residence.
The Philippine peso weakened 8.3 percent as record rice costs sent President Gloria Arroyo's popularity to the lowest since 2005. The South Korean won lost 10.6 percent as record oil prices widened its trade deficit and prompted a strike by truck drivers that brought ports to a near standstill.
``Dynamics are shifting to focus on political stability,'' said Leslie Phang, the Singapore-based head of investments at the private-clients unit of Schroders Plc, which oversees about $260 billion globally. ``The yuan is certainly still an outperformer and the Taiwan dollar has also benefited.''
Closer Ties
The Taiwan dollar posted its biggest first-half gain since 1989 as the government negotiated an agreement that will allow an average of 3,000 Chinese tourists a day to visit starting July 18. Direct transportation links between China and Taiwan were restricted since the end of a civil war in 1949 when the Communist Party defeated the Kuomintang.
The Taiwan dollar climbed 0.2 percent in June to NT$30.354, the second monthly gain and was little changed at NT$30.360 yesterday. Ma was elected in March, pledging closer ties with China. The currency will rise to NT$30 by the end of this year, according to the median estimate of 21 analysts in Bloomberg's survey.
The yuan, up 1.3 percent last month to 6.8543 per U.S. dollar, will strengthen to 6.65 by the end of the year, according to the median forecast of 25 economists. China's currency rose more than 20 percent since the peg to the dollar was scrapped in 2005.
``Both China and Taiwan will allow their currencies to rise to stem imported inflation,'' said Hideki Hayashi, chief economist in Tokyo at Shinko Securities Co., a unit of Japan's second-largest publicly traded bank.
Rising Interest Rates
The yuan will rise to 6.8 by the end of this year, he said.
Taiwan raised its benchmark interest rate to a seven-year high of 3.625 percent last week, after forecasting 3.29 percent inflation this year, the highest annual rate in 13 years. China's inflation quickened to 8.1 percent in the first five months from 4.8 percent for all of 2007.
Jim Rogers, the investor who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, told an investor conference in Nanjing on June 28 not to ``give up'' on Chinese shares after the country's stock index fell almost 50 percent this year. Rogers told President Ma in a meeting on June 25 that he has been buying Taiwan stocks.
Taiwan's government says the June travel and tourism agreements with China may help boost economic growth to 5 percent this year from the 4.8 percent forecast in December. China expanded 10.6 percent in the first quarter.
Western Asset Management Co., part of Baltimore-based Legg Mason Inc., added to its bet on the yuan in June, expecting a 10 percent gain in the year ahead, said Rajeev De Mello who helps oversee about $600 billion as head of Asian bonds in Singapore.
``Now is a good time to get in,'' he said. ``Chinese reserves are still growing at an incredibly fast pace. It's adding about $50 billion a month, which is more than most countries have in total.''
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Yumi Teso in Singapore at yteso@bloomberg.net.
Last Updated: July 1, 2008 13:27 EDT
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Australian, N.Z. Dollars Fall on Concern Economies Will Slow
By Ron Harui and Tracy Withers
July 2 (Bloomberg) -- The Australian and New Zealand dollars fell on concern growth in the nations will slow, backing the case for the Reserve Bank of Australia to keep interest rates on hold and New Zealand's central bank to cut them.
Australia's currency weakened for a second day before government reports on retail sales and building approvals that may add to signs the economy is cooling. New Zealand's currency also declined for a second day after Reserve Bank of New Zealand Governor Alan Bollard signaled the nation's economic expansion is slowing.
``Should today's reports on retail sales and building approvals indicate demand is continuing to moderate this could trigger a further paring of expectations for an RBA rate hike, weighing on the Australian dollar,'' John Kyriakopoulos, a currency strategist at National Australia Bank Ltd. in Sydney, said in a note to clients.
The Australian dollar fell 0.3 percent to 95.46 U.S. cents as of 10:54 a.m. in Sydney, from 95.73 cents late in Asia yesterday and a 25-year high of 96.68 cents touched June 30. The currency traded at 101.18 yen from 100.90 yen.
New Zealand's currency declined 0.6 percent to 75.76 U.S. cents, the biggest loss since June 23. The currency bought 80.36 yen from 80.35 yen late in Asia yesterday.
Home-building approvals in Australia may have fallen 3.4 percent in May from the previous month, the fourth decline this year, according to the median estimate of economists surveyed by Bloomberg News. Retail sales may have gained 0.1 percent in May, a separate Bloomberg survey showed. Both reports will be published at 11:30 a.m. Sydney time.
Rate Outlook
There is a 24 percent chance the RBA will raise interest rates by a quarter-percentage point to 7.5 percent by October, compared with 52 percent odds a week ago, according to probabilities implied by 30-day interest-rate tracking futures traded on the Sydney Futures Exchange.
Benchmark interest rates are 7.25 percent in Australia and 8.25 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making the South Pacific currencies popular targets for so-called carry trades.
In a carry trade, investors get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the borrowing and lending rate. The risk is currency market moves erase those profits.
The New Zealand dollar slid the most in a week after RBNZ Governor Bollard said late yesterday in an interview with CentralBankNews.com that the economy was probably ``flat'' in the three months ended June 30. Twelve of 13 economists surveyed by Bloomberg expect he will cut rates by September.
`Weigh Negatively'
``Comments from Governor Bollard will continue to weigh negatively on the New Zealand dollar,'' said Philip Borkin, an economist at ANZ National Bank Ltd. in Wellington. ``There are less risky, relatively high-yield currencies to hold.''
There is a 27 percent chance New Zealand's central bank will lower its official cash rate at its next meeting July 24, compared with zero percent odds a month earlier, according to a Credit Suisse Group index based on interest-rate swaps.
``They will be cutting rates before too long,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets under administration. ``We expect the kiwi to keep falling,'' he said, referring to the currency by its nickname.
Australian government bonds declined for a second day. The yield on the 10-year note rose 3 basis points to 6.53 percent, according to data compiled by Bloomberg. The price of the 5.25 percent bond due March 2019 fell 0.234, or A$2.34 per A$1,000 face amount, to 90.265. A basis point is 0.01 percentage point.
New Zealand's government debt was little changed with the 10-year bond yield holding at 6.34 percent.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.
Last Updated: July 1, 2008 21:14 EDT
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Won May Stop Decline After 11% Drop, BOK's Rhee Says
By Kim Kyoungwha
July 2 (Bloomberg) -- South Korea's won, Asia's worst- performing currency after the Thai baht, may stop falling because the nation's current-account deficit will narrow, Bank of Korea Deputy Governor Rhee Gwang-Ju said.
The deficit, the broadest measure of international trade, will shrink to $2.5 billion in the second half from $6.5 billion in the first six months, Rhee, the central bank's head of international affairs, said in an interview yesterday. There is a ``misperception'' of the risks posed to Asia's fourth-biggest economy by an increase in overseas debt, he said.
``There will be no convincing reasons that the won will depreciate further,'' said Rhee, 57. ``The won has depreciated since early March but the trend is not likely to continue for the rest of the year.''
The won, which weakened 11 percent this year, will climb 5 percent to 995 per dollar by Dec. 31, according to the median estimate of 24 strategists surveyed by Bloomberg News. The currency fell as record oil prices quickened inflation to a decade-high of 5.5 percent in June from 3.6 percent in December. The drop is the biggest since the six months ended March 31, 2001. Only the baht's 12 percent slide has been steeper in the region.
The won fell 0.3 percent to 1,050.05 as of 9:40 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. South Korea bought about $7 billion worth of won since the end of May to boost the value of the currency and slow inflation, JoongAng Ilbo newspaper reported yesterday. Rhee declined to comment on intervention or interest-rate policies.
This year's decline in Asian currencies doesn't signal a repeat of the 1997 financial crisis, Rhee said.
No Contagion Risk
In 1997, South Korea's currency reserves plunged by $20.5 billion as the government made an unsuccessful attempt to prop up the exchange rate after an exodus of foreign investors triggered by the collapse in Thailand's baht. The government was forced to turn to the International Monetary Fund for $57 billion of loans to help businesses repay overseas debt. The won slumped 46 percent in the final three months of the year.
``Until now, I don't see the contagion risk,'' Rhee said. ``The situation has changed very much in the region.''
JPMorgan Chase & Co., which correctly forecast the slump in the won, predicts the currency will gain to 1,020 by the end of the year before resuming its decline next year.
``South Korea has many small risks,'' said Lim Jiwon, an economist in Seoul at JPMorgan. While investors are asking about the risk of a regional currency collapse, the possibility is ``quite low,'' she said.
The IMF urged Korea last week to increase monitoring of external debt, which doubled to $412.5 billion on March 31, from $201 billion two years ago, according to central bank data. Debt maturing within a year was equivalent to 82 percent of the nation's reserves, approaching the 89 percent level in 1999.
External Debt
The increase in short-term debt was mainly caused by exporters' locking in dollar rates for their overseas earnings and Korean mutual funds and life insurers hedging investments in overseas stocks, Rhee said. Korean banks, which provided the services, borrowed dollars to limit their risks, he said.
``I'm concerned about the misperception of risk,'' Rhee said, adding that hedging activities will stabilize. ``There will be no problem to repay debt.''
South Korea had $258.1 billion of foreign-exchange reserves on June 30, the world's sixth-largest, compared with $7.3 billion in November 1997. South Korea has since broken up business groups known as chaebol that used overseas bank loans to fund unprofitable global projects.
Central bankers in Asia now meet on a regular basis and will provide funds to each other when needed, Rhee said. Asian governments agreed to lend each other money at favorable terms to support exchange rates in Chiang Mai, Thailand, in 2000.
Export Growth
Exports by Samsung Electronics Co. and Hyundai Motor Co. will help South Korea expand as domestic demand slows, the central bank forecasts. The economy will expand 4.6 percent this year, down from a previous prediction of 4.7 percent and 5 percent in 2007, according to the estimates. Overseas sales will improve the current account in the second half, Rhee said.
``The current-account deficit has shown a seasonal pattern with a deficit in first half and reduced deficit or even a surplus in the second half,'' Rhee said. ``This pattern will continue.''
Rhee said price stability was important to achieve ``sustainable growth.'' The Bank of Korea has kept its benchmark interest rate at a seven-year high of 5 percent to fight inflation.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;
Last Updated: July 1, 2008 21:01 EDT
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Bollard Says N.Z. Economy Won't Recover Until Second Half
By Tracy Withers
July 2 (Bloomberg) -- New Zealand's economy won't recover until the second half of the year, CentralBankNews.com reported, citing an interview with Reserve Bank Governor Alan Bollard.
``The second quarter will be roughly flat followed by a soft pickup later in the year,'' Bollard said, according to the Web site. ``We think we're in for a softer year.''
A report last week showed the economy contracted 0.3 percent, matching Bollard's June 5 forecast. Eight of 13 economists surveyed by Bloomberg News expect the economy also contracted in the second quarter, putting New Zealand in its first recession since 1998 and raising the prospects of interest-rate cuts as early as this month.
``We expected the 0.3 percent contraction,'' Bollard said. ``That doesn't mean we're not disappointed. We are. And it represents quite a significant slowdown.''
A Reserve Bank spokesman confirmed the interview took place. He declined to comment further.
Bollard, who spoke on the sidelines of a Bank for International Settlements conference in Basel, Switzerland, said a weak housing market and drought led to the first-quarter contraction.
``Housing has dropped off quite a lot, which has affected household consumption,'' he said. ``Also, we had a drought in the west coast, where more of the dairy industry is, and as a consequence we lost probably NZ$500 million ($380 million) of dairy production.''
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
Last Updated: July 1, 2008 17:22 EDT
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Asian Stocks Fall for a Fourth Day; BHP, Nippon Yusen Decline
By Chen Shiyin
July 2 (Bloomberg) -- Asian stocks fell for a fourth day, led by mining and shipping companies, on concern that the slowdown in global economic growth will hurt raw-materials demand.
BHP Billiton Ltd., the world's largest mining company, dropped after Credit Suisse Group lowered its earnings estimate for rival aluminum producers Alcoa Inc. and Century Aluminum Co. Nippon Yusen K.K., Japan's largest shipping line, slipped after a measure of transporting bulk commodities retreated.
The MSCI Asia Pacific Index lost 0.4 percent to 135.43 at 9:12 a.m. in Tokyo, with two stocks declining for each that gained. Yesterday, the benchmark completed a three-day, 2.2 percent retreat after reports showed Chinese manufacturing growth slowed, South Korea's inflation accelerated and Japanese business confidence sank to the lowest in four years.
Japan's Nikkei 225 Stock Average sank 0.3 percent to 13,430.13, on course for its 10th straight day of losses. Benchmark indexes also fell in Australia and South Korea.
U.S. stocks advanced yesterday, helping the market rebound from its worst month in six years, after better-than-forecast sales at General Motors Corp. overshadowed concern that rising energy costs will damp corporate profits.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
Last Updated: July 1, 2008 20:29 EDT
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July 2 (Bloomberg) -- Asian stocks fell for a fourth day, led by mining and shipping companies, on concern that the slowdown in global economic growth will hurt raw-materials demand.
BHP Billiton Ltd., the world's largest mining company, dropped after Credit Suisse Group lowered its earnings estimate for rival aluminum producers Alcoa Inc. and Century Aluminum Co. Nippon Yusen K.K., Japan's largest shipping line, slipped after a measure of transporting bulk commodities retreated.
The MSCI Asia Pacific Index lost 0.4 percent to 135.43 at 9:12 a.m. in Tokyo, with two stocks declining for each that gained. Yesterday, the benchmark completed a three-day, 2.2 percent retreat after reports showed Chinese manufacturing growth slowed, South Korea's inflation accelerated and Japanese business confidence sank to the lowest in four years.
Japan's Nikkei 225 Stock Average sank 0.3 percent to 13,430.13, on course for its 10th straight day of losses. Benchmark indexes also fell in Australia and South Korea.
U.S. stocks advanced yesterday, helping the market rebound from its worst month in six years, after better-than-forecast sales at General Motors Corp. overshadowed concern that rising energy costs will damp corporate profits.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
Last Updated: July 1, 2008 20:29 EDT
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Japan Stocks Fall, Sending Nikkei to Worst Streak in 43 Years
By Masaki Kondo and Makiko Kitamura
July 2 (Bloomberg) -- Japan stocks fell, bringing the Nikkei 225 Stock Average's losing streak to the longest in 43 years, after a decline in cargo fees drove down shipping companies.
Nippon Yusen K.K., Japan's largest shipper, and rival Kawasaki Kisen Kaisha Ltd. tumbled for the first time in three days. Isuzu Motors Ltd., the nation's biggest maker of light-duty trucks, led automakers lower after rising gasoline prices curbed demand in the U.S.
The Nikkei 225 Stock Average fell 81.37, or 0.6 percent, to 13,381.83 as of 9:48 a.m. in Tokyo, extending its decline to a 10th day, the longest losing streak since March 1965. The broader Topix index slumped 9.53, or 0.7 percent, to 1,310.54. All but three of 33 industry groups on the Topix fell.
The Baltic Dry Index, a measure of shipping costs for commodities, tumbled the most in a week on speculation Chinese iron-ore demand is weakening as prices rise.
Nippon Yusen sank 2.8 percent to 999 yen with Kawasaki Kisen falling 3 percent to 972 yen. Mitsui O.S.K. Lines Ltd. lost 2.1 percent to 1,462 yen. Shipping lines had the biggest drop among groups on the Topix.
Isuzu tumbled 2.6 percent to 496 yen, set for the lowest since May 12. Suzuki Motor Corp., Japan's No. 1 minicar maker, slumped 4.1 percent to 2,350 yen, and Daihatsu Motor Co. sank 2.1 percent. Automakers accounted 12 percent for the Topix's decline.
Isuzu's sales in the U.S. fell by almost half last month from a year earlier, while Suzuki had a 5.2 percent drop, according to the companies. The price of crude oil almost doubled in the past 12 months.
Nikkei futures expiring in September retreated 0.5 percent to 13,390 in Osaka and slumped 0.5 percent to 13,405 in Singapore.
To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
Last Updated: July 1, 2008 21:05 EDT
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July 2 (Bloomberg) -- Japan stocks fell, bringing the Nikkei 225 Stock Average's losing streak to the longest in 43 years, after a decline in cargo fees drove down shipping companies.
Nippon Yusen K.K., Japan's largest shipper, and rival Kawasaki Kisen Kaisha Ltd. tumbled for the first time in three days. Isuzu Motors Ltd., the nation's biggest maker of light-duty trucks, led automakers lower after rising gasoline prices curbed demand in the U.S.
The Nikkei 225 Stock Average fell 81.37, or 0.6 percent, to 13,381.83 as of 9:48 a.m. in Tokyo, extending its decline to a 10th day, the longest losing streak since March 1965. The broader Topix index slumped 9.53, or 0.7 percent, to 1,310.54. All but three of 33 industry groups on the Topix fell.
The Baltic Dry Index, a measure of shipping costs for commodities, tumbled the most in a week on speculation Chinese iron-ore demand is weakening as prices rise.
Nippon Yusen sank 2.8 percent to 999 yen with Kawasaki Kisen falling 3 percent to 972 yen. Mitsui O.S.K. Lines Ltd. lost 2.1 percent to 1,462 yen. Shipping lines had the biggest drop among groups on the Topix.
Isuzu tumbled 2.6 percent to 496 yen, set for the lowest since May 12. Suzuki Motor Corp., Japan's No. 1 minicar maker, slumped 4.1 percent to 2,350 yen, and Daihatsu Motor Co. sank 2.1 percent. Automakers accounted 12 percent for the Topix's decline.
Isuzu's sales in the U.S. fell by almost half last month from a year earlier, while Suzuki had a 5.2 percent drop, according to the companies. The price of crude oil almost doubled in the past 12 months.
Nikkei futures expiring in September retreated 0.5 percent to 13,390 in Osaka and slumped 0.5 percent to 13,405 in Singapore.
To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
Last Updated: July 1, 2008 21:05 EDT
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