By Judy Chen and Kim Kyoungwha
July 14 (Bloomberg) -- China's yuan climbed to the highest level since a dollar link was abandoned in 2005 on signs policy makers will seek a stronger currency to rein in inflation.
The yuan rose for a third day, extending its gain this year to 7 percent, surpassing the 6.86 percent advance for all of 2007 and making it the best performer among the 10 most-active Asian currencies excluding the yen. Curbing inflation will have a ``preeminent'' position among all macroeconomic controls this year, Premier Wen Jiabao reiterated this month.
``The government is still concentrating on the battle against inflation and needs to strengthen the local currency to win it,'' said Cao Lie, a Shanghai-based currency dealer at Bank of China Ltd., the country's largest foreign-exchange trader.
The yuan advanced 0.08 percent to 6.8286 versus the dollar as of 11:23 a.m. in Shanghai, from 6.8340 at the end of last week, according to the China Foreign Exchange Trade System. It rose as high as 6.8253 today, the strongest since the dollar peg was scrapped.
The People's Bank of China set the reference rate for yuan trading at the highest since the end of the peg for a third day. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the so-called central parity rate, which was fixed at 6.8266 today.
Slowing Growth
China may announce this week that the nation's growth slowed for the fourth quarter, a sign the government's policies to cool Asia's second-largest economy are taking effect.
Second-quarter gross domestic product may rise 10.3 percent, according to economists surveyed by Bloomberg News, slowing from the first quarter's 10.6 percent expansion. The statistics bureau is due to release the figure at 10 a.m. on July 17.
A global slowdown, rising production costs and a stronger yuan have hurt Chinese exports, threatening profits and jobs in the world's fastest-growing major economy.
``China may slow the yuan's appreciation and raise exporters' tax rebates to forestall the further deterioration in exports,'' said Xing Ziqiang, a Beijing-based economist at China International Capital Corp., the nation's biggest investment bank.
Xing forecast the yuan will appreciate 4.3 percent in the second half of this year to 6.57, slower than the first half's 6.6 percent advance.
Local-currency bonds rose, pushing yields to a two-week low, on speculation the government data will show slowing growth.
The yield on the 4.35 percent note due in November 2014 fell 7 basis points to 4.17 percent, the lowest since June 30, according to the China Interbank Bond Market. The price climbed to 100.99 from 100.63. A basis point is 0.01 percentage point.
To contact the reporters on this story:
[bn:PRSN=1] Judy Chen [] in Shanghai at
xchen45@bloomberg.net;
[bn:PRSN=1] Kim Kyoungwha [] in Beijing at
kkim19@bloomberg.net.
Read more...
Monday, July 14, 2008
Asian Currencies: Ringgit Leads Gains; Korean Won Snaps Advance
By Lilian Karunungan and David Yong
July 14 (Bloomberg) -- Malaysia's ringgit rose, leading gains in Asian currencies, on speculation widening credit-market losses in the world's biggest economy will prompt investors to shun the dollar. The South Korean won fell.
The ringgit traded at the strongest in more than three weeks against the dollar after U.S. shares fell for a sixth week as fuel prices climbed to a record. U.S. Treasury Secretary Henry Paulson asked the Congress for authority to buy unlimited stakes in Fannie Mae and Freddie Mac, which finance almost half of the $12 trillion of U.S. mortgages, after the companies lost about half their value last week.
``The U.S. dollar is in a weak environment with seemingly endless problems in the financial system and that's supporting the ringgit,'' said Nor Alfian Din, a senior currency trader at Maybank Islamic Bhd. in Kuala Lumpur. ``People are looking for safe-haven currencies'' with strong fundamentals, he said.
The ringgit rose 0.3 percent to 3.2360 per dollar as of 11:50 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It earlier climbed to 3.2330, the strongest level since June 18. South Korea's currency fell to 1,004.80 in Seoul, compared with 1,002.30 at the end of last week, according to Seoul Money Brokerage Services Ltd.
The U.S. Dollar Index traded on ICE Futures in New York fell as low as 71.77 today, the weakest since April 23. The index, down 6 percent this year, declined to 70.70 on March 17, the lowest since it was first compiled in 1973.
Intervention
The ringgit also advanced on speculation Asian central banks will prefer stronger local currencies to help stem inflation after crude oil rose to a record $147.27 a barrel on July 11, Alfian said.
South Korea's won declined, following its biggest weekly gain in a decade, as oil prices above $140 a barrel and sales of local shares by global funds bolstered demand for the dollar.
The currency advanced 4.8 percent last week, spurred by speculation the government will intervene to support the won and temper the fastest inflation in 10 years. President Lee Myung Bak vowed last week to ``get rid of factors'' in the foreign- exchange market that are pushing up consumer prices.
``High oil prices'' are exerting pressure on the won to weaken, said Park Haeil, an options trader at Shinhan Bank in Seoul. ``Still, market participants stayed on the lookout for government intervention.''
The won's gain last week was the biggest since March 1998, helping trim this year's loss to 6.6 percent.
Selling Stocks
Investors abroad sold Korean shares today, the 26th consecutive day they have offloaded more equities than they bought, according to stock exchange data.
Finance Minister Kang Man Soo last week pledged that the government will tackle risks stemming from oil costs and inflation. Bank of Korea Governor Lee Seong Tae said the bank may intervene if necessary because the currency market ``overreacts.'' Central banks intervene by buying or selling currencies.
Indonesia's rupiah held near its highest level against the dollar in more than three months on speculation the central bank will seek a stronger currency and higher interest rates to curb inflation.
The central bank has raised interest rates three times this year to 8.75 percent as inflation accelerated to a 21-month high following a 30 percent increase in fuel prices in May. The central bank has said that it wants a stronger currency to reinforce its efforts to fight inflation.
Attractive Yields
``Yields are quite attractive and Bank Indonesia has come up to talk about currency strength,'' said Wai Ho Leong, a regional economist at Barclays Capital in Singapore. ``A stable currency and high-yield environment will look quite attractive for the rupiah in the short term.''
The currency rose as high as 9,153 a dollar, the strongest since April 2, before trading at 9,156 in Jakarta, compared with 9,162 on July 11, according to data compiled by Bloomberg. The rupiah is the third-best performer in the region this month, gaining 0.8 percent against the dollar.
Bank Indonesia Deputy Governor Hartadi Sarwono said on July 11 that the central bank ``supports a stronger rupiah'' and that overseas funds are buying Indonesia's bills and bonds.
Elsewhere, the Singapore dollar rose 0.2 percent to S$1.3558 and the Philippine peso fell 0.3 percent to 45.54, according to Tullett Prebon Plc. The Thai baht was little changed at 33.67. Taiwan's dollar was at 30.40 compared with 30.392 on July 11, while Vietnam's dong was at 16,837.50 versus 16,841.50.
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.
Read more...
July 14 (Bloomberg) -- Malaysia's ringgit rose, leading gains in Asian currencies, on speculation widening credit-market losses in the world's biggest economy will prompt investors to shun the dollar. The South Korean won fell.
The ringgit traded at the strongest in more than three weeks against the dollar after U.S. shares fell for a sixth week as fuel prices climbed to a record. U.S. Treasury Secretary Henry Paulson asked the Congress for authority to buy unlimited stakes in Fannie Mae and Freddie Mac, which finance almost half of the $12 trillion of U.S. mortgages, after the companies lost about half their value last week.
``The U.S. dollar is in a weak environment with seemingly endless problems in the financial system and that's supporting the ringgit,'' said Nor Alfian Din, a senior currency trader at Maybank Islamic Bhd. in Kuala Lumpur. ``People are looking for safe-haven currencies'' with strong fundamentals, he said.
The ringgit rose 0.3 percent to 3.2360 per dollar as of 11:50 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It earlier climbed to 3.2330, the strongest level since June 18. South Korea's currency fell to 1,004.80 in Seoul, compared with 1,002.30 at the end of last week, according to Seoul Money Brokerage Services Ltd.
The U.S. Dollar Index traded on ICE Futures in New York fell as low as 71.77 today, the weakest since April 23. The index, down 6 percent this year, declined to 70.70 on March 17, the lowest since it was first compiled in 1973.
Intervention
The ringgit also advanced on speculation Asian central banks will prefer stronger local currencies to help stem inflation after crude oil rose to a record $147.27 a barrel on July 11, Alfian said.
South Korea's won declined, following its biggest weekly gain in a decade, as oil prices above $140 a barrel and sales of local shares by global funds bolstered demand for the dollar.
The currency advanced 4.8 percent last week, spurred by speculation the government will intervene to support the won and temper the fastest inflation in 10 years. President Lee Myung Bak vowed last week to ``get rid of factors'' in the foreign- exchange market that are pushing up consumer prices.
``High oil prices'' are exerting pressure on the won to weaken, said Park Haeil, an options trader at Shinhan Bank in Seoul. ``Still, market participants stayed on the lookout for government intervention.''
The won's gain last week was the biggest since March 1998, helping trim this year's loss to 6.6 percent.
Selling Stocks
Investors abroad sold Korean shares today, the 26th consecutive day they have offloaded more equities than they bought, according to stock exchange data.
Finance Minister Kang Man Soo last week pledged that the government will tackle risks stemming from oil costs and inflation. Bank of Korea Governor Lee Seong Tae said the bank may intervene if necessary because the currency market ``overreacts.'' Central banks intervene by buying or selling currencies.
Indonesia's rupiah held near its highest level against the dollar in more than three months on speculation the central bank will seek a stronger currency and higher interest rates to curb inflation.
The central bank has raised interest rates three times this year to 8.75 percent as inflation accelerated to a 21-month high following a 30 percent increase in fuel prices in May. The central bank has said that it wants a stronger currency to reinforce its efforts to fight inflation.
Attractive Yields
``Yields are quite attractive and Bank Indonesia has come up to talk about currency strength,'' said Wai Ho Leong, a regional economist at Barclays Capital in Singapore. ``A stable currency and high-yield environment will look quite attractive for the rupiah in the short term.''
The currency rose as high as 9,153 a dollar, the strongest since April 2, before trading at 9,156 in Jakarta, compared with 9,162 on July 11, according to data compiled by Bloomberg. The rupiah is the third-best performer in the region this month, gaining 0.8 percent against the dollar.
Bank Indonesia Deputy Governor Hartadi Sarwono said on July 11 that the central bank ``supports a stronger rupiah'' and that overseas funds are buying Indonesia's bills and bonds.
Elsewhere, the Singapore dollar rose 0.2 percent to S$1.3558 and the Philippine peso fell 0.3 percent to 45.54, according to Tullett Prebon Plc. The Thai baht was little changed at 33.67. Taiwan's dollar was at 30.40 compared with 30.392 on July 11, while Vietnam's dong was at 16,837.50 versus 16,841.50.
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.
Read more...
Australian Dollar Gains on Growth View; N.Z. Dollar Unchanged
By Ron Harui and Tracy Withers
July 14 (Bloomberg) -- The Australian dollar rose on speculation the economy will withstand widening losses among U.S. financial institutions. The New Zealand dollar was little changed as retail sales dropped by the most in four years.
Australia's currency approached a 25-year high as concerns that the U.S. subprime-mortgage crisis may deepen prompted investors to seek higher-yielding assets in the South Pacific nation. New Zealand's currency snapped a three-day advance on prospects its economy may have entered a recession, backing the case for the central bank to lower interest rates.
``We actually think the Australian dollar could achieve parity within two to three weeks if the markets start to cave in on the U.S. dollar due to renewed financial markets turmoil,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd. in Sydney, in a research note today.
Australia's currency bought 96.84 U.S. cents at 2:20 p.m. in Sydney from 96.62 late in New York on July 11. It earlier reached 97.11 cents, near the July 11 high of 97.16 cents, which was the strongest level since February 1983. The currency traded at 103.04 yen from 102.69 yen.
New Zealand's currency was little changed at 76.15 U.S. cents from 76.14 cents late in New York on July 11. The currency bought 81.01 yen from 80.94 yen.
Fannie, Freddie
The Australian dollar is the second-best performer among the 16 most-active currencies in the past five days, gaining 1.7 percent, as Fannie Mae and Freddie Mac, the two largest buyers of U.S. home loans, suffered a collapse in confidence sending their share values down by about half last week.
Treasury Secretary Henry Paulson asked that Congress enact legislation giving the Treasury temporary authority to buy equity ``if needed'' in Fannie Mae and Freddie Mac, and to increase their lines of credit with the department from $2.25 billion each.
Australia's currency has risen 10.3 percent this year on speculation the nation's financial institutions have avoided the worst of the U.S. subprime crisis that's caused more than $400 billion in losses due to a lack of confidence in credit markets.
`Generally Well Placed'
``The main Australian institutions are generally well placed'' to prosper in the current environment, Reserve Bank of Australia Governor Glenn Stevens said July 9.
New Zealand's currency fell after retail spending slumped 1.2 percent in May from April when it increased the same amount, according to a government report. The median estimate in a Bloomberg News survey of 12 economists was for a 0.1 percent decline.
``Retail activity remains very weak and supports the notion that the New Zealand economy is in a technical recession, which should cap the New Zealand dollar,'' said Sue Trinh, senior currency strategist in Sydney at RBC Capital Markets.
The nation's economy contracted 0.3 percent in the first quarter from the fourth quarter, Statistics New Zealand said on June 27. Eight of 13 economists surveyed by Bloomberg expect it also shrank in the second quarter, putting the economy in its first recession since 1998.
Australian government debt fell. The yield on the 10-year note rose 5 basis points to 6.41 percent. The price of the 5.25 percent bond maturing in March 2019 declined 0.353, or A$3.53 per A$1,000 face amount, to 91.107. A basis point is equivalent to 0.01 percentage point.
New Zealand 10-year government bonds gained for an eighth day. The yield on the 10-year note dropped 2 basis points to 6.10 percent. Bond yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net
Read more...
July 14 (Bloomberg) -- The Australian dollar rose on speculation the economy will withstand widening losses among U.S. financial institutions. The New Zealand dollar was little changed as retail sales dropped by the most in four years.
Australia's currency approached a 25-year high as concerns that the U.S. subprime-mortgage crisis may deepen prompted investors to seek higher-yielding assets in the South Pacific nation. New Zealand's currency snapped a three-day advance on prospects its economy may have entered a recession, backing the case for the central bank to lower interest rates.
``We actually think the Australian dollar could achieve parity within two to three weeks if the markets start to cave in on the U.S. dollar due to renewed financial markets turmoil,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd. in Sydney, in a research note today.
Australia's currency bought 96.84 U.S. cents at 2:20 p.m. in Sydney from 96.62 late in New York on July 11. It earlier reached 97.11 cents, near the July 11 high of 97.16 cents, which was the strongest level since February 1983. The currency traded at 103.04 yen from 102.69 yen.
New Zealand's currency was little changed at 76.15 U.S. cents from 76.14 cents late in New York on July 11. The currency bought 81.01 yen from 80.94 yen.
Fannie, Freddie
The Australian dollar is the second-best performer among the 16 most-active currencies in the past five days, gaining 1.7 percent, as Fannie Mae and Freddie Mac, the two largest buyers of U.S. home loans, suffered a collapse in confidence sending their share values down by about half last week.
Treasury Secretary Henry Paulson asked that Congress enact legislation giving the Treasury temporary authority to buy equity ``if needed'' in Fannie Mae and Freddie Mac, and to increase their lines of credit with the department from $2.25 billion each.
Australia's currency has risen 10.3 percent this year on speculation the nation's financial institutions have avoided the worst of the U.S. subprime crisis that's caused more than $400 billion in losses due to a lack of confidence in credit markets.
`Generally Well Placed'
``The main Australian institutions are generally well placed'' to prosper in the current environment, Reserve Bank of Australia Governor Glenn Stevens said July 9.
New Zealand's currency fell after retail spending slumped 1.2 percent in May from April when it increased the same amount, according to a government report. The median estimate in a Bloomberg News survey of 12 economists was for a 0.1 percent decline.
``Retail activity remains very weak and supports the notion that the New Zealand economy is in a technical recession, which should cap the New Zealand dollar,'' said Sue Trinh, senior currency strategist in Sydney at RBC Capital Markets.
The nation's economy contracted 0.3 percent in the first quarter from the fourth quarter, Statistics New Zealand said on June 27. Eight of 13 economists surveyed by Bloomberg expect it also shrank in the second quarter, putting the economy in its first recession since 1998.
Australian government debt fell. The yield on the 10-year note rose 5 basis points to 6.41 percent. The price of the 5.25 percent bond maturing in March 2019 declined 0.353, or A$3.53 per A$1,000 face amount, to 91.107. A basis point is equivalent to 0.01 percentage point.
New Zealand 10-year government bonds gained for an eighth day. The yield on the 10-year note dropped 2 basis points to 6.10 percent. Bond yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net
Read more...
Russian Industrial Output Probably Slowed in June: Week Ahead
By Alex Nicholson and Emma O'Brien
July 14 (Bloomberg) -- Russian industrial production growth slowed in June because of a traditional summer lull and a decline in state manufacturing orders, the Federal Statistics Service may say this week.
The annual rate slipped to 6 percent from 6.7 in May, according to the median of 21 forecasts in a Bloomberg survey.
State orders for goods have lost momentum since government changes carried out in early May, said Vladimir Tikhomirov, chief economist at UralSib Financial Corp. in Moscow. Vladimir Putin, appointed prime minister on May 8 after leaving the presidency, moved officials from the Kremlin into new roles in government.
``In summer, activity slows,'' Tikhomirov said. ``It's nothing catastrophic. We expect to see an acceleration in the second half.''
The economy of Russia, the world's biggest energy exporter, grew 8.5 percent in the first quarter, the second-fastest pace since 2000, as annual investment growth averaged more than 20 percent in the first three months, spurring expansion in the construction and retail industries. Industrial production rose to a nine-month high of 9.2 percent in April.
The Federal Statistics Service is scheduled to release industrial production data on July 16 or July 17.
Company News
In corporate news, the new board of OAO GMK Norilsk Nickel, with billionaire Vladimir Potanin as chairman, meets on July 14 to discuss the long-term strategy of Russia's biggest mining company.
United Co. Rusal, which owns 25 percent in Norilsk and wants to combine with the nickel miner, said last week the board's lineup was skewed in favor of Potanin. Rusal wants to re-elect it and expand it to 13 from nine at a special shareholders' meeting.
Mikhail Prokhorov, the billionaire who together with Potanin acquired Norilsk from the state in 1996 and is now a Rusal shareholder, said on July 10 he would consider returning as chief executive officer of the nickel miner.
Evraz Group SA, Russia's second-largest steelmaker, will release a trading update on production on July 15.
VTB Group, Russia's second-biggest bank, may say profit in the first quarter dropped on trading losses.
Markets
Russia's benchmark Micex stock index declined for a third week, falling 2.7 percent, led by OAO GMK Norilsk Nickel, Russia's largest mining company, on concern global demand for steel will decline. OAO Gazprom, the world's biggest gas company, slid 3.9 percent in the week to 306.19 rubles.
The ruble strengthened 0.3 percent against its dollar-euro basket last week as the central bank said it expanded the currency's trading range for the second time in a month. The ruble advanced as much as 0.4 percent on July 10 to a record 29.4001. Bank Rossii purchased as much as $3 billion to weaken it again later in the day, according to Trust Investment Bank estimates.
The currency was at 29.4389 to the basket by the end of last week, after it slipped 0.3 percent to 36.9980 per euro, and gained to a nine-year high of 23.2260 per dollar bringing its rise from July 4 to 1 percent.
Russian government bonds climbed last week, as the central bank boosted its key interest rates July 11 by a quarter- percentage point for the fourth time this year.
The yield on the benchmark 7.5 percent bond due in March 2030 was at 5.54 percent by July 11, from 5.69 percent a week earlier. The yield on the 8.25 percent note maturing in March 2010 was at 5.49 percent, from 5.52 percent on July 4. Bond yields move inversely to prices.
The following is a list of events in Russia this week:
OAO GMK Norilsk Nickel board meeting July 14
German Economy Minister Gloss Arrives in Russia July 14
Evraz Group SA trading update July 15
Russian consumer price growth update July 16
Russian industrial production update July 16 or
later
VTB Group reports first-quarter profit July 16
To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net
Read more...
July 14 (Bloomberg) -- Russian industrial production growth slowed in June because of a traditional summer lull and a decline in state manufacturing orders, the Federal Statistics Service may say this week.
The annual rate slipped to 6 percent from 6.7 in May, according to the median of 21 forecasts in a Bloomberg survey.
State orders for goods have lost momentum since government changes carried out in early May, said Vladimir Tikhomirov, chief economist at UralSib Financial Corp. in Moscow. Vladimir Putin, appointed prime minister on May 8 after leaving the presidency, moved officials from the Kremlin into new roles in government.
``In summer, activity slows,'' Tikhomirov said. ``It's nothing catastrophic. We expect to see an acceleration in the second half.''
The economy of Russia, the world's biggest energy exporter, grew 8.5 percent in the first quarter, the second-fastest pace since 2000, as annual investment growth averaged more than 20 percent in the first three months, spurring expansion in the construction and retail industries. Industrial production rose to a nine-month high of 9.2 percent in April.
The Federal Statistics Service is scheduled to release industrial production data on July 16 or July 17.
Company News
In corporate news, the new board of OAO GMK Norilsk Nickel, with billionaire Vladimir Potanin as chairman, meets on July 14 to discuss the long-term strategy of Russia's biggest mining company.
United Co. Rusal, which owns 25 percent in Norilsk and wants to combine with the nickel miner, said last week the board's lineup was skewed in favor of Potanin. Rusal wants to re-elect it and expand it to 13 from nine at a special shareholders' meeting.
Mikhail Prokhorov, the billionaire who together with Potanin acquired Norilsk from the state in 1996 and is now a Rusal shareholder, said on July 10 he would consider returning as chief executive officer of the nickel miner.
Evraz Group SA, Russia's second-largest steelmaker, will release a trading update on production on July 15.
VTB Group, Russia's second-biggest bank, may say profit in the first quarter dropped on trading losses.
Markets
Russia's benchmark Micex stock index declined for a third week, falling 2.7 percent, led by OAO GMK Norilsk Nickel, Russia's largest mining company, on concern global demand for steel will decline. OAO Gazprom, the world's biggest gas company, slid 3.9 percent in the week to 306.19 rubles.
The ruble strengthened 0.3 percent against its dollar-euro basket last week as the central bank said it expanded the currency's trading range for the second time in a month. The ruble advanced as much as 0.4 percent on July 10 to a record 29.4001. Bank Rossii purchased as much as $3 billion to weaken it again later in the day, according to Trust Investment Bank estimates.
The currency was at 29.4389 to the basket by the end of last week, after it slipped 0.3 percent to 36.9980 per euro, and gained to a nine-year high of 23.2260 per dollar bringing its rise from July 4 to 1 percent.
Russian government bonds climbed last week, as the central bank boosted its key interest rates July 11 by a quarter- percentage point for the fourth time this year.
The yield on the benchmark 7.5 percent bond due in March 2030 was at 5.54 percent by July 11, from 5.69 percent a week earlier. The yield on the 8.25 percent note maturing in March 2010 was at 5.49 percent, from 5.52 percent on July 4. Bond yields move inversely to prices.
The following is a list of events in Russia this week:
OAO GMK Norilsk Nickel board meeting July 14
German Economy Minister Gloss Arrives in Russia July 14
Evraz Group SA trading update July 15
Russian consumer price growth update July 16
Russian industrial production update July 16 or
later
VTB Group reports first-quarter profit July 16
To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net
Read more...
Turkey's Central Bank May Increase Benchmark Rate: Week Ahead
By Steve Bryant
July 14 (Bloomberg) -- Turkey's central bank will probably raise its benchmark interest rate this week, sacrificing economic growth to tame inflation, a survey shows.
The bank will lift the overnight borrowing rate by half a percentage point to 16.75 percent, according to 11 of 20 economists surveyed by Bloomberg. Eight expect a quarter-point increase and one forecast three-quarters of a point. The bank will announce its decision at 7 p.m. on June 17.
A third increase in borrowing costs in as many months would be the bank's response to surging energy and food prices that have driven up inflation in emerging economies including South Africa and Brazil. Turkey added 1 percentage point to the rate in May and June, making it the highest among major developing markets.
``The trend for inflation remains upward,'' said Erkin Isik, an economist for Fortis Bank AS in Istanbul. ``With uncertainty on foreign markets still high, there's no reason for the bank to change its stance.''
The central bank on June 4 abandoned its target of 4 percent inflation for next year, setting a goal of 7.5 percent after record oil prices made the objective unattainable. Regaining market confidence is the bank's central task, Governor Durmus Yilmaz said the following day. The bank has missed its inflation target for the last two years.
Inflation unexpectedly slowed to 10.6 percent in June from 10.7 percent a month earlier as grocery prices dropped. Still, pressure from energy costs remains and inflation is likely to accelerate in the next few months, the bank said on July 4.
Debt Redemption
Yields on Turkish domestic bonds fell last week. The yield fell 0.7 percentage point to 21.75 percent last week. The yield reached 22.80 percent on July 1, the highest since October 2006.
The Treasury will sell six-month and 12-month debt this week as it seeks to meet a total of about $36 billion in repayments in July and August, the heaviest in Turkish history. It faces redemptions of 13.6 billion liras this week.
The benchmark ISE-100 stock index rose 2.1 percent to 35,006.46 last week, the first week in six it's risen. The measure hit a two-year low on July 1 and has slumped 18 percent since March 14, when prosecutors filed a lawsuit to shut down the governing Justice and Development Party, accusing it of seeking to introduce Islamic Sharia law to secular Turkey. It's not clear when a verdict will be reached.
The government's statistics agency is due to publish April unemployment figures on July 15 and consumer confidence numbers on July 16.
The following is a list of important events in Turkey next week:
Event Date
Treasury to sell six-month debt July 14
April unemployment data July 15
Treasury to sell 12-month debt July 15
June consumer confidence July 16
Treasury to repay 13.6 billion liras July 16
Central bank base rate decision July 17
To contact the reporter on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net;
Read more...
July 14 (Bloomberg) -- Turkey's central bank will probably raise its benchmark interest rate this week, sacrificing economic growth to tame inflation, a survey shows.
The bank will lift the overnight borrowing rate by half a percentage point to 16.75 percent, according to 11 of 20 economists surveyed by Bloomberg. Eight expect a quarter-point increase and one forecast three-quarters of a point. The bank will announce its decision at 7 p.m. on June 17.
A third increase in borrowing costs in as many months would be the bank's response to surging energy and food prices that have driven up inflation in emerging economies including South Africa and Brazil. Turkey added 1 percentage point to the rate in May and June, making it the highest among major developing markets.
``The trend for inflation remains upward,'' said Erkin Isik, an economist for Fortis Bank AS in Istanbul. ``With uncertainty on foreign markets still high, there's no reason for the bank to change its stance.''
The central bank on June 4 abandoned its target of 4 percent inflation for next year, setting a goal of 7.5 percent after record oil prices made the objective unattainable. Regaining market confidence is the bank's central task, Governor Durmus Yilmaz said the following day. The bank has missed its inflation target for the last two years.
Inflation unexpectedly slowed to 10.6 percent in June from 10.7 percent a month earlier as grocery prices dropped. Still, pressure from energy costs remains and inflation is likely to accelerate in the next few months, the bank said on July 4.
Debt Redemption
Yields on Turkish domestic bonds fell last week. The yield fell 0.7 percentage point to 21.75 percent last week. The yield reached 22.80 percent on July 1, the highest since October 2006.
The Treasury will sell six-month and 12-month debt this week as it seeks to meet a total of about $36 billion in repayments in July and August, the heaviest in Turkish history. It faces redemptions of 13.6 billion liras this week.
The benchmark ISE-100 stock index rose 2.1 percent to 35,006.46 last week, the first week in six it's risen. The measure hit a two-year low on July 1 and has slumped 18 percent since March 14, when prosecutors filed a lawsuit to shut down the governing Justice and Development Party, accusing it of seeking to introduce Islamic Sharia law to secular Turkey. It's not clear when a verdict will be reached.
The government's statistics agency is due to publish April unemployment figures on July 15 and consumer confidence numbers on July 16.
The following is a list of important events in Turkey next week:
Event Date
Treasury to sell six-month debt July 14
April unemployment data July 15
Treasury to sell 12-month debt July 15
June consumer confidence July 16
Treasury to repay 13.6 billion liras July 16
Central bank base rate decision July 17
To contact the reporter on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net;
Read more...
Polish Inflation Rate Probably Rose to 4-Year High: Week Ahead
By Monika Rozlal
July 14 (Bloomberg) -- Poland's inflation rate probably rose to the highest in four years in June as fuel, alcohol and tobacco prices rose, increasing pressure on the central bank to lift borrowing costs.
Inflation accelerated for a third month to 4.6 percent from 4.4 percent in May, according to the median estimate of 10 economists surveyed by Bloomberg. The Finance Ministry on July 1 forecast 4.5 percent. The report will be published by the Warsaw- based Central Statistics Office on July 15.
Accelerating price growth, combined with reports likely to show rising wages and employment, may prompt the central bank to raise the benchmark seven-day reference rate for a fifth time this year from 6 percent. Policy makers have lifted rates eight times in the past 15 months to damp consumer demand and cap inflation.
``Since food price growth is likely to lift the inflation rate above 5 percent and will keep it high for a longer time than the central bank forecasts, I believe there will be more than one rate hike this year,'' said Bartosz Pawlowski, a strategist at TD Securities in London, in an e-mail. ``The first one will come even before the October inflation outlook is published.''
Inflation has exceeded the Narodowy Bank Polski's 2.5 percent target since October last year.
Demands for higher wages have been spurred by rising fuel and food prices as well as a labor shortage. Economists surveyed by Bloomberg expect average corporate wage growth accelerated in June to 11 percent from annual 10.5 percent a month earlier.
The government forecasts 2008 economic growth at 5.5 percent.
Further Indications
June industrial output data, due on July 18, may also support expectations for interest rate increases. Economists forecast growth of 9.4 percent compared with 2.3 percent in May, when there were fewer working days than a year earlier.
The May current account deficit, to be published by the National Bank of Poland on July 15, widened to 1.64 billion euros ($2.57 billion) from 1.55 billion euros in April, according to the median forecast of 10 economists.
In last week's markets, the zloty set a new all-time high of 3.2612 per euro on July 11, a weekly gain of 1.6 percent. The zloty has gained almost 10 percent against the euro since the beginning of the year.
The yield on the 5.25 percent benchmark government bond due October 2017 fell 3.2 percent this week to 6.5 percent, while the yield on the 5 percent five-year benchmark bond due October 2013 slid 3.8 percent to 6.5 percent.
The benchmark WIG20 stock index lost 0.2 percent to 2,517.32 last week, a more than two-and-a-half year low. Polskie Gornictwo Naftowe i Gazownictwo SA climbed 6.2 percent as the gas monopoly announced plans to build new pipelines to Germany or Austria.
Publisher Agora SA tumbled 15.5 percent to 26.2 zloty, as 1.84 million shares from employee stock programs started trading on the Warsaw Stock Exchange.
The following is a list of important events in Poland this week:
Event Date
Sale of 13-week, 52-week T-bills July 14
June M3 money supply July 14
June inflation July 15
June corporate wages, employment July 15
May current account July 15
Dom Development press conference July 15
Telekomunikacja press conference July 16
June industrial output, PPI July 18
To contact the reporter on this story: Monika Rozlal in Warsaw at mrozlal@bloomberg.net
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July 14 (Bloomberg) -- Poland's inflation rate probably rose to the highest in four years in June as fuel, alcohol and tobacco prices rose, increasing pressure on the central bank to lift borrowing costs.
Inflation accelerated for a third month to 4.6 percent from 4.4 percent in May, according to the median estimate of 10 economists surveyed by Bloomberg. The Finance Ministry on July 1 forecast 4.5 percent. The report will be published by the Warsaw- based Central Statistics Office on July 15.
Accelerating price growth, combined with reports likely to show rising wages and employment, may prompt the central bank to raise the benchmark seven-day reference rate for a fifth time this year from 6 percent. Policy makers have lifted rates eight times in the past 15 months to damp consumer demand and cap inflation.
``Since food price growth is likely to lift the inflation rate above 5 percent and will keep it high for a longer time than the central bank forecasts, I believe there will be more than one rate hike this year,'' said Bartosz Pawlowski, a strategist at TD Securities in London, in an e-mail. ``The first one will come even before the October inflation outlook is published.''
Inflation has exceeded the Narodowy Bank Polski's 2.5 percent target since October last year.
Demands for higher wages have been spurred by rising fuel and food prices as well as a labor shortage. Economists surveyed by Bloomberg expect average corporate wage growth accelerated in June to 11 percent from annual 10.5 percent a month earlier.
The government forecasts 2008 economic growth at 5.5 percent.
Further Indications
June industrial output data, due on July 18, may also support expectations for interest rate increases. Economists forecast growth of 9.4 percent compared with 2.3 percent in May, when there were fewer working days than a year earlier.
The May current account deficit, to be published by the National Bank of Poland on July 15, widened to 1.64 billion euros ($2.57 billion) from 1.55 billion euros in April, according to the median forecast of 10 economists.
In last week's markets, the zloty set a new all-time high of 3.2612 per euro on July 11, a weekly gain of 1.6 percent. The zloty has gained almost 10 percent against the euro since the beginning of the year.
The yield on the 5.25 percent benchmark government bond due October 2017 fell 3.2 percent this week to 6.5 percent, while the yield on the 5 percent five-year benchmark bond due October 2013 slid 3.8 percent to 6.5 percent.
The benchmark WIG20 stock index lost 0.2 percent to 2,517.32 last week, a more than two-and-a-half year low. Polskie Gornictwo Naftowe i Gazownictwo SA climbed 6.2 percent as the gas monopoly announced plans to build new pipelines to Germany or Austria.
Publisher Agora SA tumbled 15.5 percent to 26.2 zloty, as 1.84 million shares from employee stock programs started trading on the Warsaw Stock Exchange.
The following is a list of important events in Poland this week:
Event Date
Sale of 13-week, 52-week T-bills July 14
June M3 money supply July 14
June inflation July 15
June corporate wages, employment July 15
May current account July 15
Dom Development press conference July 15
Telekomunikacja press conference July 16
June industrial output, PPI July 18
To contact the reporter on this story: Monika Rozlal in Warsaw at mrozlal@bloomberg.net
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Freddie Mac Likely to Find Buyers After Paulson Plan
By Dawn Kopecki
July 14 (Bloomberg) -- Freddie Mac is likely to find buyers for $3 billion of debt it plans to sell after U.S. Treasury Secretary Henry Paulson announced steps to help the beleaguered mortgage-finance company.
Freddie Mac is scheduled to sell three-month and six-month reference bills today in an auction. Paulson announced a plan last night to recapitalize Freddie Mac and Fannie Mae if needed to stem a crisis of confidence in the two companies.
``This will shore up that debt offering,'' said Paul Miller, an analyst who covers Freddie Mac and Fannie Mae stocks at Friedman Billings Ramsey & Co. in Arlington, Virginia. ``They need to make sure that that debt offering goes well.''
Freddie Mac and Fannie Mae shares dropped by almost 50 percent last week on concern they may collapse. The companies' debt rallied on July 11 after Paulson said they had government support. Fannie Mae and Freddie Mac issue debt to raise money for their purchases of mortgage securities. The firms accounted for about 81 percent of demand in the first quarter as other buyers retreated.
Fannie Mae's 10-year notes yielded 68 basis points more than Treasuries of comparable maturity on July 11, with the gap narrowing from 88 basis points the day before. The difference widened to almost 1 percentage point in March, the most since 2000, as credit markets froze and investors sought the safest securities.
`Explicit Backing'
The yield difference between Freddie Mac's 10-year debt and U.S. 10-year notes narrowed to 75 basis points from 94 basis points on July 10. A basis point is 0.01 percentage point.
Paulson's statement yesterday effectively turned an implicit guarantee into explicit backing, said Christopher Whalen, co- founder of independent research firm Institutional Risk Analytics in Torrance, California. ``Obviously re-nationalization is imminent,'' Whalen said. ``It's a begrudging acceptance of the inevitable.''
Fannie Mae last week paid record yields over benchmark rates on $3 billion of two-year notes amid concern the company didn't have enough capital. The 3.25 percent notes priced to yield 3.27 percent, or 0.74 percentage point more than comparable Treasuries. That's the biggest spread since Fannie Mae first sold two-year benchmark debt in 2000.
Auction Sentiment
Freddie Mac sells three-month and six-month reference bills every Monday, its Web site said.
``I think Freddie's auction would have gone okay, but now I think it will go even easier,'' said Andrew Brenner, who trades the companies' debt as co-head of structured products and emerging markets at MF Global Ltd. in New York, the world's largest broker of exchange-traded futures and options contracts.
The Treasury Department is working to make sure the sale draws bids, according to a report today from Wrightson ICAP LLC, a research company that specializes in government finance, in Jersey City, New Jersey.
``We were glad to read that Treasury officials had been calling around to ensure adequate participation in the auction,'' Wrightson wrote, without attributing the information.
Paulson said yesterday he is seeking Congressional approval for a ``temporary'' increase of the companies' lines of credit with the Treasury from the current $2.25 billion each, and the right to buy equity ``if needed,'' according to a statement released by the Treasury in Washington. Paulson is seeking unlimited authority for 18 months to buy as much stock as he deems necessary.
Japan Funds
Global banks and finance firms have reported losses of about $410 billion on securities tied to U.S. subprime mortgages. Japan's Fukoku Mutual Life Insurance Co. said there's a risk those losses will spread and recommended investors put their money into government debt, pinpointing Germany or France. Mizuho Asset Management Co. said the firm holds no Fannie Mae and Freddie Mac debt.
Mizuho Asset, which oversees the equivalent of $37.5 billion as part of Japan's second-largest bank, has no plans to bid at Freddie Mac's auction today.
``We are concerned about the U.S. housing market, so we don't have any agency debt,'' said Hiromasa Nakamura, a senior fund manager at Mizuho. ``It will be a difficult auction.''
The Federal Reserve Board of Governors also authorized the New York Fed to lend directly to Fannie Mae and Freddie Mac through the discount window to meet their liquidity needs if necessary, the central bank said yesterday in a press release.
Korea Pension Fund
The discount window offers direct loans to commercial banks at an interest rate that's now 2.25 percent, a quarter point above the Fed's benchmark rate. Bernanke opened it to investment banks at the time of the collapse of Bear Stearns Cos. in March to alleviate the credit crisis.
``We directly bought the agency bonds in the latter half of last year when credit spreads widened,'' said Kwag Dae Hwan, head of global investments at South Korea's $220 billion National Pension Service in Seoul. ``An increasing number of funds investing in that market are sprouting up as spreads have widened abnormally.'' Kwag is considering adding to his agency holdings.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
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Paulson Puts Treasury's Weight Behind Fannie Mae, Freddie Mac
By Brendan Murray and Dawn Kopecki
July 14 (Bloomberg) -- Treasury Secretary Henry Paulson put the weight of the federal government behind Fannie Mae and Freddie Mac, the beleaguered companies that buy or finance almost half of the $12 trillion of U.S. mortgages.
Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
The steps would bring the U.S. closer to giving an explicit guarantee for the debt sold by the shareholder-owned, federally chartered companies. That reflects a need for the government to bail out an economy that's been rocked by the worst housing recession in 25 years, the credit crisis, and soaring energy costs.
``They appear to be crossing the Rubicon,'' Sean Egan, president of Egan-Jones Ratings Co., a credit-rating company based in Haverford, Pennsylvania, said, referring to Caesar's invasion of Italy to set up a dictatorship.
The announcements followed weekend talks between the firms, government officials, lawmakers and regulators, after Fannie Mae and Freddie Mac lost about half their value last week.
`Explicit' Guarantee
Paulson's proposal, which the Treasury anticipates will be incorporated into an existing congressional bill and approved this week, signals a shift toward an explicit guarantee of Fannie Mae and Freddie Mac debt. The shareholder-owned companies are government-sponsored enterprises, giving investors the indication of an implicit federal backing.
``It is time to recognize that the GSEs were always dependent upon government support and now we must make the implicit explicit,'' said Christopher Whalen, co-founder of independent research firm Institutional Risk Analytics in Torrance, California.
Paulson proposed that Congress give the Treasury temporary authority to buy equity in the firms ``if needed,'' and to increase their lines of credit with the department from $2.25 billion each. The temporary authority may be for 18 months, a Treasury official told reporters on a conference call on condition of anonymity.
As lenders retreated from the housing market, Washington- based Fannie Mae and McLean, Virginia-based Freddie Mac grew to account for more than 80 percent of the home loans packaged into securities.
`Bailout' for Economy
``Fannie Mae and Freddie Mac provide an enormous amount of liquidity to the mortgage market'' and ``without them, mortgage rates would be significantly higher,'' Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina, wrote in a note to clients. ``The bailout is for the housing market and the broader U.S. economy.''
Freddie Mac is scheduled to sell $3 billion in short-term notes today, and Paulson's comments indicate a concern about a collapse in private investors' willingness to fund the firms. The companies issue debt to raise money for their purchases of mortgage securities.
``This will shore up that debt offering,'' said Paul Miller, an equity analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. ``They couldn't risk waking up'' and ``having that offering go poorly,'' he said.
Role for Fed
Paulson also proposed that the Fed get a ``consultative role'' overseeing the companies' capital requirements. The central bank's role has already grown during the credit crisis to include sharing supervision of investment banks with the Securities and Exchange Commission.
Yesterday's announcements came two days before Fed Chairman Ben S. Bernanke's semiannual testimony on the economy to Congress, where he will likely face questions from lawmakers on the implications of the Fannie Mae and Freddie Mac turmoil.
While the Fed last month signaled that inflation was starting to pose a larger threat than economic growth, the chance of an interest-rate increase this year is fading, analysts said.
``It is hard to see them tightening anytime this year,'' said Brian Sack, senior economist at Macroeconomic Advisers LLC in Washington, who used to work at the Fed. Growth in the second half of the year ``looks weaker than we thought'' as the housing downturn continues, he said.
Paulson said use of the Treasury's credit line or any stock investment ``would carry terms and conditions necessary to protect the taxpayer.'' The Treasury official said he didn't recall any time in the past when the government has taken an equity stake in either company.
Home Loan Banks
The Treasury also proposed temporary access to a bigger credit line for the Federal Home Loan Banks, the dozen regional lenders that extend credit to customers including commercial banks, thrifts, insurance companies and credit unions.
Congressional reaction wasn't uniform. While Senator Charles Schumer, a New York Democrat who chairs the congressional Joint Economic Committee, expressed support, the head of the Senate Banking Committee refrained from any specific endorsement.
Christopher Dodd, the Connecticut Democrat who chairs the banking panel, said he planned to call over ``coming days'' a hearing with Paulson, Bernanke and Securities and Exchange Commission Chairman Christopher Cox.
President George W. Bush in a statement called on Congress to enact the legislation.
Access to Funds
The heads of the companies indicated the steps would help them keep access to private capital.
``Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market,'' Fannie Mae Chief Executive Officer Daniel Mudd said in a statement. ``We continue to hold more than adequate capital reserves.''
Freddie Mac CEO Richard Syron said ``We are heartened by yesterday's announcement,'' which should ``go a long way toward reassuring world markets that Freddie Mac and Fannie Mae will continue to support America's homebuyers and renters.''
Some investors may still rebuff the mortgage giants because of concern about the U.S. housing market, where prices and sales continue to decline.
``We are concerned about the U.S. housing market, so we don't have any agency debt,'' said Hiromasa Nakamura, a senior investor at Mizuho Asset Management Co. in Tokyo, which oversees the equivalent of $37.5 billion as part of Japan's second- largest bank. Nakamura predicted today's Freddie Mac bond sale ``will be a difficult auction.''
Emergency Statement
The last Treasury secretary to make an emergency statement from the department's main building was Robert Rubin, who sought to calm investors after the Dow Jones Industrial Average fell 554 points on Oct. 27, 1997.
Freddie Mac shares tumbled 47 percent in New York Stock Exchange composite trading last week and Fannie Mae lost 45 percent of its value, forcing Paulson July 11 to issue a statement of support for the companies in their ``current form.'' Trading of Fannie Mae that day amounted to 41 percent of its total shares outstanding, with a 61 percent figure for Freddie Mac.
Preferred securities tumbled as investors questioned if Freddie and Fannie will be able to continue to pay dividends. Freddie Mac's 5.57 percent preferred lost 39 percent this year and Fannie Mae's 5.5 percent preferred dropped 31 percent.
Shareholder Concern
Yesterday's announcement may not offer much help for shareholders, said Andrew Parmentier, a senior policy analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia.
``Any capital infusion of any nature is going to be dilutive to shareholders,'' Parmentier said.
The companies have already raised $20 billion to cover losses amid the highest delinquency rates in at least 29 years. Freddie Mac said earlier this month it planned to sell $5.5 billion of equity after it reports earnings next month.
The cost to protect against a default on the companies' subordinated debt jumped last week. Credit-default swaps linked to Freddie's bonds rose to 251 basis points, while contracts on Fannie's increased to 246 basis points, according to CMA Datavision. On July 4, both were at 177 basis points and they started the year at 77. A basis point is 0.01 percentage point.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt.
Senior debt of both companies trades as if they were rated A3 instead of Aaa by Moody's Investors Service, according to data from the rankings firm's credit strategy group.
To contact the reporters on this story: Brendan Murray at brmurray@bloomberg.net; Dawn Kopecki in Washington at dkopecki@bloomberg.net
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Gross Likes Dollar More Than Euro for 1st Time on EU
By Gavin Finch
July 14 (Bloomberg) -- For three years euro bulls used the prospect of higher interest rates in Europe to justify the currency's 31 percent rally against the dollar. No more.
A growing number of the world's biggest investors say a slowdown in the region's economy may be more severe than in the U.S., forcing the European Central Bank to reverse this month's rate increase. By January, the euro will be lower against the dollar, yen and even the pound, according to the median estimate of strategists surveyed by Bloomberg. Bill Gross, manager of the world's biggest bond fund, turned bearish on the euro for the first time since the currency's inception in 1999.
``We might have hit a point where the euro doesn't have a lot to stand on,'' said Emanuele Ravano, co-head of European strategy in London for Gross's Pacific Investment Management Co., which runs the $129 billion Pimco Total Return Fund. ``The euro is ultimately very overvalued. It could be quite a bit lower at some point in time over the next couple of years.''
The euro fell as much as 1.7 percent to $1.5611 in the week following President Jean-Claude Trichet's comments on July 3 that he had ``no bias'' on further changes in borrowing costs after boosting the main refinancing rate to 4.25 percent from 4 percent. Before Trichet spoke the currency traded near a record high on speculation the ECB would signal more than one rate increase was needed to tame inflation.
Hedge Funds Flee
As the odds that the ECB will lift rates dwindled, hedge funds sold the 15-nation common currency, according to Zurich- based UBS AG, the world's second-biggest currency trader behind Deutsche Bank AG in Frankfurt. New York-based Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, said it's ``increasingly confident'' the euro will fall.
``Capital flows look less supportive for the euro and, with the ECB out of the way, the interest-rate policy would also seem to support our view,'' Stephen Hull, a strategist for Lehman in London, wrote in a research note July 11.
The euro is 30 percent overvalued versus the dollar, based on purchasing power parity, according to Newport Beach, California-based Pimco. That's more than any other currency among the Group of 10 richest nations. Purchasing power parity accounts for differences in the exchange rates of national currencies.
``When a currency gets between 25 percent and 30 percent overvalued it tends'' to revert to the mean, said Ravano. The euro may drop to $1.535 from $1.5938 last week, he said.
Burger Test
The Economist's Big Mac Index, which compares prices for the McDonald's Corp. product globally, shows the hamburger is 22 percent more expensive in Europe than in the U.S.
``We're not far off the capitulation point for the euro,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon, the investment-banking unit of Credit Agricole SA, France's second-biggest bank. The euro will fall to $1.52 by the end of the third quarter and to $1.45 by April 2009, he said.
The European single currency's gain since December 2005 was spurred by eight increases in the ECB's key refinancing rate.
French President Nicolas Sarkozy complained that the currency's strength was harming the competitiveness of European exporters and risked damaging economic growth. Exports from Germany, Europe's largest economy, declined 3.2 percent in May, the most in almost four years, the Federal Statistics Office in Wiesbaden said July 9.
Gross domestic product in the 15 nations sharing the euro will slow to 1.4 percent in 2009, from 1.7 percent this year, according to the median forecast of 29 economists in a Bloomberg survey. The U.S. economy will grow 1.8 percent next year, from 1.5 percent this year, according to the median of 78 estimates.
`Sharp Slowing'
There are ``concrete signs of a sharp slowing of euro-zone growth,'' Robert Sinche, head of global currency strategy at Bank of America Corp. in New York, wrote in a note dated July 11. Investors should sell the euro against the dollar, he said.
It may be too soon to bet against the euro because the U.S. economy is also slowing, according to Derek Halpenny, head of currency research in London at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest bank by market value. The euro will rise to $1.62 by the end of the third quarter, before falling back to $1.58 in the final three months of the year, he said.
``We're bullish on the euro,'' Halpenny said. ``The real story over the next three months is going to be the obvious and continued downturn in the U.S. economy compared to Europe.''
The ECB will cut the key rate a quarter-percentage point to 4 percent by the end of June 2009, according to the median of 30 economists in a Bloomberg survey. The Federal Reserve has lowered its target rate for overnight loans seven times since September to 2 percent.
`Incredibly Bearish'
``The rally in the euro is over and we're now incredibly bearish on the currency given the outlook for Europe's economy,'' said Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, the most accurate foreign-exchange forecaster in a 2007 Bloomberg survey.
The euro will slide to $1.50 by the end of the third quarter and $1.45 by year-end, he said. Redeker is more bearish than most strategists. The common European currency will weaken 5.7 percent to $1.50 by year-end, and slip to $1.45 by mid-2009, according to the median of 37 analysts surveyed by Bloomberg.
``At current levels the euro is an awfully expensive currency,'' said Stephen Jen, chief currency strategist at Morgan Stanley in London and a former Fed economist. ``We see fair value for the currency at around $1.30.''
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
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Dollar Index May Decline to Record Low on Charts, Goldman Says
By Kosuke Goto
July 14 (Bloomberg) -- The U.S. Dollar Index may extend its decline to reach a record low of 70.70 should it close below so- called support at 71.82, said Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc., the world's biggest securities firm.
The index, which tracks the performance of the dollar against six of the nation's biggest trading partners, has fallen through the lower boundary, or support, of an ascending channel that connects the lows of March 17, April 22 and May 22, London- based Edgeley said. The next support level at 71.82 is the low set on May 22, he said. Support is a level where buy orders may be clustered.
``The Dollar Index has broken below the shallow bull channel base line again, testing wave support at 71.82,'' Edgeley wrote in a research note yesterday. ``A close below would suggest a retest of the all-time lows at 70.70.''
The U.S. Dollar Index traded on ICE Futures in New York fell as low as 71.77, the weakest since April 23, before trading at 72.03 as of 1:03 p.m. in Tokyo from 72.10 on July 11. The index declined to 70.70 on March 17, the lowest since it was first compiled in 1973. The index has fallen 6 percent this year.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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July 14 (Bloomberg) -- The U.S. Dollar Index may extend its decline to reach a record low of 70.70 should it close below so- called support at 71.82, said Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc., the world's biggest securities firm.
The index, which tracks the performance of the dollar against six of the nation's biggest trading partners, has fallen through the lower boundary, or support, of an ascending channel that connects the lows of March 17, April 22 and May 22, London- based Edgeley said. The next support level at 71.82 is the low set on May 22, he said. Support is a level where buy orders may be clustered.
``The Dollar Index has broken below the shallow bull channel base line again, testing wave support at 71.82,'' Edgeley wrote in a research note yesterday. ``A close below would suggest a retest of the all-time lows at 70.70.''
The U.S. Dollar Index traded on ICE Futures in New York fell as low as 71.77, the weakest since April 23, before trading at 72.03 as of 1:03 p.m. in Tokyo from 72.10 on July 11. The index declined to 70.70 on March 17, the lowest since it was first compiled in 1973. The index has fallen 6 percent this year.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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Zinc Rallies for Fourth Day in Asia After China Cuts Production
By Glenys Sim
July 14 (Bloomberg) -- Zinc advanced for a fourth day in Asia, extending the 15 percent gain made in the past three days, after some Chinese zinc producers agreed Saturday to cut output.
Zinc and lead smelters in China, the world's largest producer of the metals, agreed to cut output by 10 percent from July to September to reduce costs and ease a power shortage, the Shanghai Nonferrous Metals Trade Association said in a statement.
``The problem zinc faces is oversupply, and this is what will keep the rally in check,'' said Li Zhicheng, an analyst at Zhujiang Futures Co. in Guangzhou. ``It's not just ample supply of the metal itself. In China, the concentrates market is also well supplied at the moment.''
Zinc for delivery in three months on the London Metal Exchange gained as much as 4.7 percent to $2,120 a metric ton, and traded at $2,080 at 1:23 p.m. Singapore time. The contract has declined 12 percent since the beginning of the year.
Zinc for delivery in September, the most-active contract, rose as much as 345 yuan, or 2.2 percent, to 16,150 yuan ($2,364) a ton on the Shanghai Futures Exchange, and stood at 16,120 yuan at the 11:30 a.m. local time break. The contract has gained 5.5 percent in the past two days.
The International Lead and Zinc Study Group forecasts the metal used to galvanize steel will have a surplus of 215,000 tons this year as global output expands.
Lower Forecasts
Macquarie Bank Ltd. and UBS AG lowered their zinc price forecasts this year, citing weak demand and adequate supply.
Zinc will average 95.3 cents a pound ($2,100 a metric ton) this year, down 11 percent from a previous forecast of 107.6 cents, Macquarie said today. Zinc will average 97 cents a pound this year, UBS said July 11. Its previous forecast was $1.15.
``We continue to see 2008 and 2009 as a challenging time for zinc producers, with rapid growth in global zinc mine production and slow growth in demand, leaving both the concentrates and the metal markets in surplus,'' Macquarie analysts led by Jim Lennon said in a report today.
Prices of zinc have also fallen as stockpiles more than doubled in the past year. Inventories tracked by the London Metal Exchange stood at 151,000 tons July 11, up from 69,825 tons a year ago.
Among other LME-traded metals, copper gained 0.7 percent to $8,325 a ton, aluminum added 0.5 percent to $3,333, lead was up 3.8 percent at $2,040.25, and nickel was 1.4 percent higher at $21,900 a ton. Tin had not traded as of 1:20 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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July 14 (Bloomberg) -- Zinc advanced for a fourth day in Asia, extending the 15 percent gain made in the past three days, after some Chinese zinc producers agreed Saturday to cut output.
Zinc and lead smelters in China, the world's largest producer of the metals, agreed to cut output by 10 percent from July to September to reduce costs and ease a power shortage, the Shanghai Nonferrous Metals Trade Association said in a statement.
``The problem zinc faces is oversupply, and this is what will keep the rally in check,'' said Li Zhicheng, an analyst at Zhujiang Futures Co. in Guangzhou. ``It's not just ample supply of the metal itself. In China, the concentrates market is also well supplied at the moment.''
Zinc for delivery in three months on the London Metal Exchange gained as much as 4.7 percent to $2,120 a metric ton, and traded at $2,080 at 1:23 p.m. Singapore time. The contract has declined 12 percent since the beginning of the year.
Zinc for delivery in September, the most-active contract, rose as much as 345 yuan, or 2.2 percent, to 16,150 yuan ($2,364) a ton on the Shanghai Futures Exchange, and stood at 16,120 yuan at the 11:30 a.m. local time break. The contract has gained 5.5 percent in the past two days.
The International Lead and Zinc Study Group forecasts the metal used to galvanize steel will have a surplus of 215,000 tons this year as global output expands.
Lower Forecasts
Macquarie Bank Ltd. and UBS AG lowered their zinc price forecasts this year, citing weak demand and adequate supply.
Zinc will average 95.3 cents a pound ($2,100 a metric ton) this year, down 11 percent from a previous forecast of 107.6 cents, Macquarie said today. Zinc will average 97 cents a pound this year, UBS said July 11. Its previous forecast was $1.15.
``We continue to see 2008 and 2009 as a challenging time for zinc producers, with rapid growth in global zinc mine production and slow growth in demand, leaving both the concentrates and the metal markets in surplus,'' Macquarie analysts led by Jim Lennon said in a report today.
Prices of zinc have also fallen as stockpiles more than doubled in the past year. Inventories tracked by the London Metal Exchange stood at 151,000 tons July 11, up from 69,825 tons a year ago.
Among other LME-traded metals, copper gained 0.7 percent to $8,325 a ton, aluminum added 0.5 percent to $3,333, lead was up 3.8 percent at $2,040.25, and nickel was 1.4 percent higher at $21,900 a ton. Tin had not traded as of 1:20 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Global Demand for Coconut Oil May Exceed Exports, Producers Say
By Luzi Ann Javier
July 14 (Bloomberg) -- Global demand for coconut oil will exceed exports in the second half, boosting prices, as restaurant companies including McDonald's Corp. shift to trans-fat-free oils, according to a forecast from the biggest producers' group.
Demand from buyers including the U.S. may reach 1.58 million metric tons, while exports may total 1.01 million tons, according to the Asian and the Pacific Coconut Community, which comprises 15 exporting nations and accounts for about 90 percent of global output. Coconut oil is used in cooking and beauty creams.
Increased demand, partly spurred by health concerns, has boosted coconut oil prices 60 percent in the past year. So-called trans-fat oils, or vegetable oils like soybean oil which are treated with hydrogen to extend the shelf life of products like fried foods, have been linked to artery-clogging cholesterol, prompting some users to seek alternatives.
``The preference for tropical oils such as coconut oil and palm oil is increasing in the U.S. after the trans-fat issue has become a big health concern,'' Amrizal Idroes, a marketing officer at the community, said today in a phone interview. Idroes helped to draw up the group's forecasts for exports, demand and prices.
Coconut oil futures in Rotterdam, the global benchmark, may trade between $1,500 and $1,650 a ton in the second half compared with an average of $1,448 in the first six months, Idroes said from Jakarta.
The price in Rotterdam, a major destination for the commodity, was $1,485 a ton on July 11, said Idroes, who forecast in January that the oil would range from $1,200 to $1,300 in the first half.
U.S and China
U.S. coconut oil imports may rise 24 percent to 304,200 tons in the second half from a year ago, boosted by demand for trans- fat-free oils, Idroes said. China's imports may rise 89 percent to 122,500 tons in the second half as demand for food rises during the summer Olympic games, Idroes said.
McDonald's will complete a switch to trans-fat-free cooking oils at U.S. stores by the end of the year, Chief Executive Officer Jim Skinner said on May 22. Walt Disney Co., the world's largest theme-park operator, said last October, it was planning to phase out trans fats from food over the next two years.
The switches present ``an opportunity'' for coconut oil exporters, he said.
The monthly average opening inventory of coconut oil in Rotterdam fell 40 percent to 14,667 metric tons in the first six months of the year, from a year earlier, as demand outstripped production, Idroes said.
To contact the reporter for this story: Luzi Ann Javier in Manila at ljavier@bloomberg.net
Read more...
July 14 (Bloomberg) -- Global demand for coconut oil will exceed exports in the second half, boosting prices, as restaurant companies including McDonald's Corp. shift to trans-fat-free oils, according to a forecast from the biggest producers' group.
Demand from buyers including the U.S. may reach 1.58 million metric tons, while exports may total 1.01 million tons, according to the Asian and the Pacific Coconut Community, which comprises 15 exporting nations and accounts for about 90 percent of global output. Coconut oil is used in cooking and beauty creams.
Increased demand, partly spurred by health concerns, has boosted coconut oil prices 60 percent in the past year. So-called trans-fat oils, or vegetable oils like soybean oil which are treated with hydrogen to extend the shelf life of products like fried foods, have been linked to artery-clogging cholesterol, prompting some users to seek alternatives.
``The preference for tropical oils such as coconut oil and palm oil is increasing in the U.S. after the trans-fat issue has become a big health concern,'' Amrizal Idroes, a marketing officer at the community, said today in a phone interview. Idroes helped to draw up the group's forecasts for exports, demand and prices.
Coconut oil futures in Rotterdam, the global benchmark, may trade between $1,500 and $1,650 a ton in the second half compared with an average of $1,448 in the first six months, Idroes said from Jakarta.
The price in Rotterdam, a major destination for the commodity, was $1,485 a ton on July 11, said Idroes, who forecast in January that the oil would range from $1,200 to $1,300 in the first half.
U.S and China
U.S. coconut oil imports may rise 24 percent to 304,200 tons in the second half from a year ago, boosted by demand for trans- fat-free oils, Idroes said. China's imports may rise 89 percent to 122,500 tons in the second half as demand for food rises during the summer Olympic games, Idroes said.
McDonald's will complete a switch to trans-fat-free cooking oils at U.S. stores by the end of the year, Chief Executive Officer Jim Skinner said on May 22. Walt Disney Co., the world's largest theme-park operator, said last October, it was planning to phase out trans fats from food over the next two years.
The switches present ``an opportunity'' for coconut oil exporters, he said.
The monthly average opening inventory of coconut oil in Rotterdam fell 40 percent to 14,667 metric tons in the first six months of the year, from a year earlier, as demand outstripped production, Idroes said.
To contact the reporter for this story: Luzi Ann Javier in Manila at ljavier@bloomberg.net
Read more...
Corn Falls to 1-Month Low on U.S. Stockpiles Forecast, Weather
By Jae Hur
July 14 (Bloomberg) -- Corn tumbled to a one-month low after a government report showed an increase in U.S. inventories before the 2009 harvest and on speculation ideal crop weather will help the U.S. crop recover from the worst Midwest flooding in 15 years.
About 833 million bushels of unsold corn will be on hand before next year's harvest, up from 673 million forecast a month ago, the U.S. Department of Agriculture said July 11. The surplus for the year ending Aug. 31 will be 1.598 billion bushels, up 12 percent from last month's estimate as ethanol-plant construction delays and falling demand for animal feed lifts this year's corn supply, the government said.
``The USDA report last Friday was the main catalyst for the movement in today's trade,'' said John Reeve, associate director for agricultural commodities at UBS AG in Singapore. ``The numbers were certainly very bearish for corn.''
Corn for December delivery lost as much as 24.75 cents, or 3.5 percent, to $6.845 a bushel, the lowest since June 11, in after-hours trading on the Chicago Board of Trade and stood at $6.86 as of 12:17 p.m. Singapore time.
The price declined 8.7 percent last week, the biggest such drop since March. Most-active futures still have almost doubled in the past year, reaching a record $7.9925 on June 27.
Global inventories will total 105.3 million tons, up 2 percent from 103.3 million tons predicted a month ago, and down from the 124.6 million expected this year, the USDA said July 11.
The corn market was also under pressure from forecasts for favorable crop weather this week that could help develop plants in the U.S. Midwest, said Takaki Shigemoto, an analyst at Tokyo- based broker Okachi & Co.
Soybeans Drop
In other markets, soybeans declined for the first day in four on concern the recent gains close to a record were overdone. Wheat fell on speculation that a drop in corn prices will reduce demand for the grain as a cheaper alternative to feed livestock.
Soybeans for November delivery fell as much as 41 cents, or 2.6 percent, to $15.55 a bushel and traded at $15.60 as of 12:17 p.m. Singapore time. The contract rose as high as $16.20 on July 11, the highest since its July 3 record of $16.3675. Most-active futures have risen 79 percent in the past year.
The USDA projection of drops in U.S. output and reserves has already been factored into the market, UBS's Reeves said.
This year's U.S. crop will total 3 billion bushels, down 3.4 percent from 3.105 billion forecast in June, the USDA said. Yields are projected to fall to 41.6 bushels an acre from 42.1 bushels estimated in June. Inventories before next year's harvest will total 140 million bushels, down 20 percent forecast in June.
Wheat Falls
Wheat for September delivery declined as much as 1.5 percent to $8.18 a bushel and traded at $8.2075 as of 11:53 a.m. Singapore time. Prices have slumped 39 percent from a record $13.495 set on Feb. 27 as higher prices spurred farmers to boost planting.
The USDA predicted the U.S. winter-wheat crop will total 1.864 billion bushels after ample rain and warm temperatures in May and June helped plants in the southern Great Plains from Texas to Kansas. The harvest, which the USDA said was 52 percent complete as of July 6, has been helped by dry weather.
U.S. inventories of all varieties, before next year's harvest, are forecast to rise 75 percent to 537 million bushels, compared with 306 million this year. Last month, the government forecast reserves would rise to 487 million bushels.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
Read more...
July 14 (Bloomberg) -- Corn tumbled to a one-month low after a government report showed an increase in U.S. inventories before the 2009 harvest and on speculation ideal crop weather will help the U.S. crop recover from the worst Midwest flooding in 15 years.
About 833 million bushels of unsold corn will be on hand before next year's harvest, up from 673 million forecast a month ago, the U.S. Department of Agriculture said July 11. The surplus for the year ending Aug. 31 will be 1.598 billion bushels, up 12 percent from last month's estimate as ethanol-plant construction delays and falling demand for animal feed lifts this year's corn supply, the government said.
``The USDA report last Friday was the main catalyst for the movement in today's trade,'' said John Reeve, associate director for agricultural commodities at UBS AG in Singapore. ``The numbers were certainly very bearish for corn.''
Corn for December delivery lost as much as 24.75 cents, or 3.5 percent, to $6.845 a bushel, the lowest since June 11, in after-hours trading on the Chicago Board of Trade and stood at $6.86 as of 12:17 p.m. Singapore time.
The price declined 8.7 percent last week, the biggest such drop since March. Most-active futures still have almost doubled in the past year, reaching a record $7.9925 on June 27.
Global inventories will total 105.3 million tons, up 2 percent from 103.3 million tons predicted a month ago, and down from the 124.6 million expected this year, the USDA said July 11.
The corn market was also under pressure from forecasts for favorable crop weather this week that could help develop plants in the U.S. Midwest, said Takaki Shigemoto, an analyst at Tokyo- based broker Okachi & Co.
Soybeans Drop
In other markets, soybeans declined for the first day in four on concern the recent gains close to a record were overdone. Wheat fell on speculation that a drop in corn prices will reduce demand for the grain as a cheaper alternative to feed livestock.
Soybeans for November delivery fell as much as 41 cents, or 2.6 percent, to $15.55 a bushel and traded at $15.60 as of 12:17 p.m. Singapore time. The contract rose as high as $16.20 on July 11, the highest since its July 3 record of $16.3675. Most-active futures have risen 79 percent in the past year.
The USDA projection of drops in U.S. output and reserves has already been factored into the market, UBS's Reeves said.
This year's U.S. crop will total 3 billion bushels, down 3.4 percent from 3.105 billion forecast in June, the USDA said. Yields are projected to fall to 41.6 bushels an acre from 42.1 bushels estimated in June. Inventories before next year's harvest will total 140 million bushels, down 20 percent forecast in June.
Wheat Falls
Wheat for September delivery declined as much as 1.5 percent to $8.18 a bushel and traded at $8.2075 as of 11:53 a.m. Singapore time. Prices have slumped 39 percent from a record $13.495 set on Feb. 27 as higher prices spurred farmers to boost planting.
The USDA predicted the U.S. winter-wheat crop will total 1.864 billion bushels after ample rain and warm temperatures in May and June helped plants in the southern Great Plains from Texas to Kansas. The harvest, which the USDA said was 52 percent complete as of July 6, has been helped by dry weather.
U.S. inventories of all varieties, before next year's harvest, are forecast to rise 75 percent to 537 million bushels, compared with 306 million this year. Last month, the government forecast reserves would rise to 487 million bushels.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
Read more...
MSCI World May Lose 14% Before Bear Market Ends, History Shows
By Lynn Thomasson
July 14 (Bloomberg) -- The MSCI World Index, the global benchmark for stocks in developed nations that tumbled into a bear market last week, may not stop falling until it reaches a three-year low, if history is any guide.
The measure of 1,742 companies in 23 markets slid 1.1 percent to 1,345.47 on July 11, bringing the loss since its October record to 20 percent. A decline of another 14 percent would match the average slump of seven bear markets since calculations on the index began in 1969, data compiled by Birinyi Associates Inc. and Bloomberg show.
Shares around the world dropped for six straight weeks, the longest streak since October 2002, as losses and writedowns at banks exceeded $400 billion, oil prices rose to a record and growing concerns about the health of Fannie Mae and Freddie Mac caused their stocks to plunge more than 60 percent. Companies in the Standard & Poor's 500 Index will report a 14 percent decline in second-quarter profits, according to estimates of analysts compiled by Bloomberg.
``It is unlikely we have seen the low point for equity markets,'' said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which oversees about $125 billion. ``The next few months will see worse news on economic growth, profits and inflation, and worries about the financial sector are also likely to persist.''
Previous Bear Markets
The MSCI World's retreat has lasted 257 calendar days. In the seven previous bear markets, the index fell an average of 31 percent from its peak over 391 days, according to data from Birinyi Associates, the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi.
A similar drop would send the MSCI World down to about 1,160, a level it last closed below on July 8, 2005. The index at that point had advanced 64 percent from its previous bear- market low of 703.70 on Oct. 9, 2002.
The five-year bull market that ended on Oct. 31, 2007, was the MSCI World's third-longest, as the index posted a 139 percent gain over 1,848 days, data from Birinyi and Bloomberg show.
Stock indexes in Japan, France, Germany, Hong Kong, Australia, Switzerland and Italy already fell more than 20 percent from their highs -- the common definition of a bear market. The MSCI World passed the threshold last week after the S&P 500, the benchmark for American equities, and the U.K.'s FTSE 100 Index also entered bear markets.
Financial Shares Tumble
U.S. and British financial companies and homebuilders led the drop after the worst U.S. housing slump since the Great Depression drove bank losses related to subprime-contaminated securities to $410 billion and forced lenders to raise almost $325 billion. The MSCI World Financials Index slid 28 percent this year, the steepest decline among 10 industry groups.
Fannie Mae and Freddie Mac, which own or guarantee about half of the $12 trillion of U.S. mortgages, and Lehman Brothers Holdings Inc., once the biggest U.S. underwriter of mortgage bonds, lost about three-fourths of their value in 2008. Washington-based Fannie Mae slid 45 percent last week, while McLean, Virginia-based Freddie Mac sank 47 percent on concern they may require a bailout that would wipe out shareholders. New York-based Lehman declined 17 percent on July 11.
Taylor Wimpey Plc, the U.K.'s largest homebuilder, is the only stock in the MSCI World to drop more in 2008, losing 81 percent. The London-based company may need cash to avoid a default on its 1.7 billion pounds ($3.4 billion) of debt in the worst U.K. housing slump since 1978.
Gloomy Consumers
British house prices fell by the most since 1992 in June, and consumer prices jumped 3.3 percent in May from a year earlier, the most since at least 1997.
The surge in oil, which climbed above $147 a barrel last week, helped send consumer confidence in Britain to the lowest since the poll tax riots 18 years ago. American shoppers are even more pessimistic, with U.S. consumer confidence near the lowest since 1980 after six months of job losses.
``You've got a situation where all the major growth engines of economies around the world are slowing down,'' said George Feiger, chief executive officer of Contango Capital Advisors, which oversees about $2 billion in Berkeley, California. ``It's going to be sluggish coming around.''
Companies dependent on discretionary spending by consumers lost 22 percent this year, the second-steepest drop among the MSCI World's 10 industry groups.
London to Las Vegas
Marks & Spencer Group Plc, the U.K.'s largest clothing retailer, slid 59 percent as the London-based company's sales dropped the most since 2005. Las Vegas-based MGM Mirage and Las Vegas Sands Corp. retreated 71 percent and 67 percent, respectively, as gambling revenue from the Las Vegas Strip declined for five straight months.
This year's decline left the MSCI World valued at 14.1 times the profits of its companies, the cheapest since at least 1995, according to weekly data compiled by Bloomberg.
Financial companies trade at the lowest in at least 13 years, with a price-to-earnings ratio of 9.7, while the MSCI World Consumer Discretionary Index is valued at 17.7 times earnings, the cheapest since March 2006. Those prices aren't low enough to lure some investors.
``I've been very pessimistic about the banks and consumer stocks for some time,'' said Patrick Evershed, a London-based fund manager at New Star Asset Management Ltd., which oversees $41 billion. ``I cannot see any relief any time soon.''
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
July 14 (Bloomberg) -- The MSCI World Index, the global benchmark for stocks in developed nations that tumbled into a bear market last week, may not stop falling until it reaches a three-year low, if history is any guide.
The measure of 1,742 companies in 23 markets slid 1.1 percent to 1,345.47 on July 11, bringing the loss since its October record to 20 percent. A decline of another 14 percent would match the average slump of seven bear markets since calculations on the index began in 1969, data compiled by Birinyi Associates Inc. and Bloomberg show.
Shares around the world dropped for six straight weeks, the longest streak since October 2002, as losses and writedowns at banks exceeded $400 billion, oil prices rose to a record and growing concerns about the health of Fannie Mae and Freddie Mac caused their stocks to plunge more than 60 percent. Companies in the Standard & Poor's 500 Index will report a 14 percent decline in second-quarter profits, according to estimates of analysts compiled by Bloomberg.
``It is unlikely we have seen the low point for equity markets,'' said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which oversees about $125 billion. ``The next few months will see worse news on economic growth, profits and inflation, and worries about the financial sector are also likely to persist.''
Previous Bear Markets
The MSCI World's retreat has lasted 257 calendar days. In the seven previous bear markets, the index fell an average of 31 percent from its peak over 391 days, according to data from Birinyi Associates, the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi.
A similar drop would send the MSCI World down to about 1,160, a level it last closed below on July 8, 2005. The index at that point had advanced 64 percent from its previous bear- market low of 703.70 on Oct. 9, 2002.
The five-year bull market that ended on Oct. 31, 2007, was the MSCI World's third-longest, as the index posted a 139 percent gain over 1,848 days, data from Birinyi and Bloomberg show.
Stock indexes in Japan, France, Germany, Hong Kong, Australia, Switzerland and Italy already fell more than 20 percent from their highs -- the common definition of a bear market. The MSCI World passed the threshold last week after the S&P 500, the benchmark for American equities, and the U.K.'s FTSE 100 Index also entered bear markets.
Financial Shares Tumble
U.S. and British financial companies and homebuilders led the drop after the worst U.S. housing slump since the Great Depression drove bank losses related to subprime-contaminated securities to $410 billion and forced lenders to raise almost $325 billion. The MSCI World Financials Index slid 28 percent this year, the steepest decline among 10 industry groups.
Fannie Mae and Freddie Mac, which own or guarantee about half of the $12 trillion of U.S. mortgages, and Lehman Brothers Holdings Inc., once the biggest U.S. underwriter of mortgage bonds, lost about three-fourths of their value in 2008. Washington-based Fannie Mae slid 45 percent last week, while McLean, Virginia-based Freddie Mac sank 47 percent on concern they may require a bailout that would wipe out shareholders. New York-based Lehman declined 17 percent on July 11.
Taylor Wimpey Plc, the U.K.'s largest homebuilder, is the only stock in the MSCI World to drop more in 2008, losing 81 percent. The London-based company may need cash to avoid a default on its 1.7 billion pounds ($3.4 billion) of debt in the worst U.K. housing slump since 1978.
Gloomy Consumers
British house prices fell by the most since 1992 in June, and consumer prices jumped 3.3 percent in May from a year earlier, the most since at least 1997.
The surge in oil, which climbed above $147 a barrel last week, helped send consumer confidence in Britain to the lowest since the poll tax riots 18 years ago. American shoppers are even more pessimistic, with U.S. consumer confidence near the lowest since 1980 after six months of job losses.
``You've got a situation where all the major growth engines of economies around the world are slowing down,'' said George Feiger, chief executive officer of Contango Capital Advisors, which oversees about $2 billion in Berkeley, California. ``It's going to be sluggish coming around.''
Companies dependent on discretionary spending by consumers lost 22 percent this year, the second-steepest drop among the MSCI World's 10 industry groups.
London to Las Vegas
Marks & Spencer Group Plc, the U.K.'s largest clothing retailer, slid 59 percent as the London-based company's sales dropped the most since 2005. Las Vegas-based MGM Mirage and Las Vegas Sands Corp. retreated 71 percent and 67 percent, respectively, as gambling revenue from the Las Vegas Strip declined for five straight months.
This year's decline left the MSCI World valued at 14.1 times the profits of its companies, the cheapest since at least 1995, according to weekly data compiled by Bloomberg.
Financial companies trade at the lowest in at least 13 years, with a price-to-earnings ratio of 9.7, while the MSCI World Consumer Discretionary Index is valued at 17.7 times earnings, the cheapest since March 2006. Those prices aren't low enough to lure some investors.
``I've been very pessimistic about the banks and consumer stocks for some time,'' said Patrick Evershed, a London-based fund manager at New Star Asset Management Ltd., which oversees $41 billion. ``I cannot see any relief any time soon.''
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Alfa, B2W, Embraer, Minera Cerro Verde: Latin Equity Preview
By William Freebairn and Paulo Winterstein
July 14 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares rose 0.1 percent to 4,344.8 on July 11. In Brazil, preferred shares are the most commonly traded class of stock.
Brazil
B2W Cia. Global do Varejo (BTOW3 BS): Brazil's biggest Internet retailer should benefit from expanding access to broadband services in Brazil, Credit Suisse analyst Marcel Moraes said July 11 in a note to clients. Brazilian Internet commerce rose 42 percent in the second quarter, in line with the analyst's estimate for B2W, Moraes wrote, citing E-BIT market research company's data. Rio de Janeiro-based B2W gained 1.5 percent to 55.83 reais.
Empresa Brasileira de Aeronautica SA (EMBR3 BS): The world's fourth-largest aircraft maker sold five EMB-190 jets to China's Kun Peng Airlines for $187.5 million. Delivery of the 98-seat planes are expected to begin this year, Sao Jose dos Campos, Brazil-based Embraer said July 11 in an e-mailed statement. Embraer fell 0.6 percent to 10.84 reais.
Chile
Cap SA (CAP CC): Chile's biggest steel producer plans to sell $550 million in new shares to finance a doubling of iron- ore production by 2012, the company said July 11. The announcement that Cap will decide on a steelmaking expansion plan within 30 days is ``positive,'' Larrain Vial SA analyst Juan Jose Ponce said in a phone interview from Santiago on July 11. Cap fell 7.2 percent to 18,832 pesos.
Mexico
Alfa SAB (ALFAA MM): Mexican auto production fell 1.2 percent in June from a year earlier, a ``lackluster'' performance, Banco Santander SA analysts Luis Miranda and Diego Laresgoiti wrote in a research report e-mailed July 11. ``If the current trend continues, we can expect to see weaker numbers'' in the second half, the analysts said. Alfa is the world's largest maker of engine blocks and heads. Alfa fell 0.6 percent to 66.24 pesos.
Peru
Sociedad Minera Cerro Verde (SMCV PE): The unit of Freeport McMoran Inc. that is Peru's third-largest copper producer failed to reach an agreement with workers in talks, union General Secretary Leoncio Amudio said in a phone interview July 11. The workers may go on strike July 16, he said. Cerro Verde fell 0.4 percent to $24.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net
Read more...
July 14 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares rose 0.1 percent to 4,344.8 on July 11. In Brazil, preferred shares are the most commonly traded class of stock.
Brazil
B2W Cia. Global do Varejo (BTOW3 BS): Brazil's biggest Internet retailer should benefit from expanding access to broadband services in Brazil, Credit Suisse analyst Marcel Moraes said July 11 in a note to clients. Brazilian Internet commerce rose 42 percent in the second quarter, in line with the analyst's estimate for B2W, Moraes wrote, citing E-BIT market research company's data. Rio de Janeiro-based B2W gained 1.5 percent to 55.83 reais.
Empresa Brasileira de Aeronautica SA (EMBR3 BS): The world's fourth-largest aircraft maker sold five EMB-190 jets to China's Kun Peng Airlines for $187.5 million. Delivery of the 98-seat planes are expected to begin this year, Sao Jose dos Campos, Brazil-based Embraer said July 11 in an e-mailed statement. Embraer fell 0.6 percent to 10.84 reais.
Chile
Cap SA (CAP CC): Chile's biggest steel producer plans to sell $550 million in new shares to finance a doubling of iron- ore production by 2012, the company said July 11. The announcement that Cap will decide on a steelmaking expansion plan within 30 days is ``positive,'' Larrain Vial SA analyst Juan Jose Ponce said in a phone interview from Santiago on July 11. Cap fell 7.2 percent to 18,832 pesos.
Mexico
Alfa SAB (ALFAA MM): Mexican auto production fell 1.2 percent in June from a year earlier, a ``lackluster'' performance, Banco Santander SA analysts Luis Miranda and Diego Laresgoiti wrote in a research report e-mailed July 11. ``If the current trend continues, we can expect to see weaker numbers'' in the second half, the analysts said. Alfa is the world's largest maker of engine blocks and heads. Alfa fell 0.6 percent to 66.24 pesos.
Peru
Sociedad Minera Cerro Verde (SMCV PE): The unit of Freeport McMoran Inc. that is Peru's third-largest copper producer failed to reach an agreement with workers in talks, union General Secretary Leoncio Amudio said in a phone interview July 11. The workers may go on strike July 16, he said. Cerro Verde fell 0.4 percent to $24.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net
Read more...
Ivanhoe Energy, NovaGold Resources: Canada Stock Market Preview
By John Kipphoff
July 14 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading on July 14. Stock symbols are in parentheses, and share prices are from the last close in Toronto.
The Standard & Poor's/TSX Composite Index fell 0.3 percent to 13,709.10 on July 11.
Ivanhoe Energy Inc. (IE CN): The company developing a method to increase profit from heavy-oil production said it completed the purchase of oil-sands assets in Alberta from Talisman Energy Inc. (TLM CN) for C$90 million ($88.9 million), instead of C$105 million as announced on May 29.
Ivanhoe is buying Talisman's interest in two leases, not three, as originally planned, the Calgary-based company said in a statement on Canada NewsWire. Ivanhoe fell 2.3 percent to C$2.94
NovaGold Resources Inc. (NG CN): The co-developer of the Donlin Creek gold mine in Alaska reported a second-quarter loss of 8 cents a share before one-time items after markets closed. The deficit was twice as big as two analysts in a Bloomberg survey predicted. The shares rose 6 percent to C$7.62.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
Read more...
July 14 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading on July 14. Stock symbols are in parentheses, and share prices are from the last close in Toronto.
The Standard & Poor's/TSX Composite Index fell 0.3 percent to 13,709.10 on July 11.
Ivanhoe Energy Inc. (IE CN): The company developing a method to increase profit from heavy-oil production said it completed the purchase of oil-sands assets in Alberta from Talisman Energy Inc. (TLM CN) for C$90 million ($88.9 million), instead of C$105 million as announced on May 29.
Ivanhoe is buying Talisman's interest in two leases, not three, as originally planned, the Calgary-based company said in a statement on Canada NewsWire. Ivanhoe fell 2.3 percent to C$2.94
NovaGold Resources Inc. (NG CN): The co-developer of the Donlin Creek gold mine in Alaska reported a second-quarter loss of 8 cents a share before one-time items after markets closed. The deficit was twice as big as two analysts in a Bloomberg survey predicted. The shares rose 6 percent to C$7.62.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
Read more...
Continental, Philips, Fortis, EADS: European Equity Preview
By Nadja Brandt
July 14 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.
The Dow Jones Stoxx 600 fell 2.7 percent to 270.36. The Dow Jones Stoxx 50 Index dropped 2.7 percent to 2,756.09. The Euro Stoxx 50 Index, a benchmark for the nations using the euro, decreased 2.6 percent to 3,197.78.
BP Plc (BP/ LN): Europe's second-largest oil company failed to reach an agreement with its Russian partners over the management of their Moscow-based TNK-BP venture at a meeting in Cyprus, the Financial Times reported, citing a person familiar with the matter. The stock declined 1.5 pence, or 0.3 percent, to 538.75.
Continental AG (CON GY): Schaeffler Group, a closely held German car-parts maker, held talks with Continental about taking the company private and may spin off Continental's tire business to help finance the transaction, Frankfurter Allgemeine Zeitung said, citing unidentified people.
Hannes Boekhoff, a spokesman for Hanover, Germany-based Continental, and Detlef Sieverdingbeck, a spokesman for Herzogenaurach, Germany-based Schaeffler Group, both said their companies don't comment on speculation.
The shares slumped 4.44 euros, or 7.6 percent, to 53.96 euros.
E.ON AG (EOA GY): Shares of the world's largest utility by sales, RWE AG (RWE GY) and Energie Baden-Wuerttemberg AG (EBK GY) may move after Chancellor Angela Merkel told Bild am Sonntag she will stand up for prolonging the lifespan of the country's nuclear power plants beyond their scheduled permanent shutdown.
E.ON shares retreated 2.38 euros, or 1.9 percent, to 122.39 euros. Shares of RWE, Germany's second-largest utility, slipped 1.02 euros or 1.3 percent to 77.81 euros.
European Aeronautic, Defence & Space Co. (EAD FP): The company's Airbus unit, the world's biggest maker of commercial jets, may announce about $60 billion of orders at this week's Farnborough air show, Le Figaro said, without citing anyone.
EADS separately said as much as one third of its order book is at risk of deferral or cancellation as spiraling oil prices wipe out airline earnings.
Airbus's revenue is also being hurt by the weakness of the dollar, the denomination for plane sales, and the U.S. currency may also scupper its plans to sell a U.K. factory to bring to down costs, EADS Chief Executive Officer Louis Gallois said.
Shares of EADS fell 1.29 euros, or 11 percent, to 10.74 euros.
Fortis (FORB BB): Belgium's biggest financial-services company ousted Chief Executive Officer Jean-Paul Votron after the 24 billion-euro ($38 billion) purchase of ABN Amro Holding NV depleted capital and forced him to cancel a dividend. Fortis lost 41 cents, or 4.2 percent, to 9.45 euros.
ITV Plc (ITV LN): The U.K.'s biggest commercial broadcaster has talked to strategic investors who want to buy British Sky Broadcasting Group Plc's 18 percent stake, the Observer reported, without saying where it got the information.
BSkyB will be told soon whether it has won an appeal against a ruling by the Competition Commission that it must reduce its stake in ITV to at least 7.5 percent, the newspaper reported. The stock declined 1.8 pence, or 4.5 pence, to 38.3.
Royal Philips Electronics NV (PHIA NA): Europe's largest consumer-electronics maker plans to report second-quarter results. The company may say profit plunged as U.S. television prices fell and after selling a semiconductor stake a year earlier, according to analysts surveyed by Bloomberg News. The shares fell 1.23 euros, or 6 percent, to 19.42 euros.
To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net
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July 14 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.
The Dow Jones Stoxx 600 fell 2.7 percent to 270.36. The Dow Jones Stoxx 50 Index dropped 2.7 percent to 2,756.09. The Euro Stoxx 50 Index, a benchmark for the nations using the euro, decreased 2.6 percent to 3,197.78.
BP Plc (BP/ LN): Europe's second-largest oil company failed to reach an agreement with its Russian partners over the management of their Moscow-based TNK-BP venture at a meeting in Cyprus, the Financial Times reported, citing a person familiar with the matter. The stock declined 1.5 pence, or 0.3 percent, to 538.75.
Continental AG (CON GY): Schaeffler Group, a closely held German car-parts maker, held talks with Continental about taking the company private and may spin off Continental's tire business to help finance the transaction, Frankfurter Allgemeine Zeitung said, citing unidentified people.
Hannes Boekhoff, a spokesman for Hanover, Germany-based Continental, and Detlef Sieverdingbeck, a spokesman for Herzogenaurach, Germany-based Schaeffler Group, both said their companies don't comment on speculation.
The shares slumped 4.44 euros, or 7.6 percent, to 53.96 euros.
E.ON AG (EOA GY): Shares of the world's largest utility by sales, RWE AG (RWE GY) and Energie Baden-Wuerttemberg AG (EBK GY) may move after Chancellor Angela Merkel told Bild am Sonntag she will stand up for prolonging the lifespan of the country's nuclear power plants beyond their scheduled permanent shutdown.
E.ON shares retreated 2.38 euros, or 1.9 percent, to 122.39 euros. Shares of RWE, Germany's second-largest utility, slipped 1.02 euros or 1.3 percent to 77.81 euros.
European Aeronautic, Defence & Space Co. (EAD FP): The company's Airbus unit, the world's biggest maker of commercial jets, may announce about $60 billion of orders at this week's Farnborough air show, Le Figaro said, without citing anyone.
EADS separately said as much as one third of its order book is at risk of deferral or cancellation as spiraling oil prices wipe out airline earnings.
Airbus's revenue is also being hurt by the weakness of the dollar, the denomination for plane sales, and the U.S. currency may also scupper its plans to sell a U.K. factory to bring to down costs, EADS Chief Executive Officer Louis Gallois said.
Shares of EADS fell 1.29 euros, or 11 percent, to 10.74 euros.
Fortis (FORB BB): Belgium's biggest financial-services company ousted Chief Executive Officer Jean-Paul Votron after the 24 billion-euro ($38 billion) purchase of ABN Amro Holding NV depleted capital and forced him to cancel a dividend. Fortis lost 41 cents, or 4.2 percent, to 9.45 euros.
ITV Plc (ITV LN): The U.K.'s biggest commercial broadcaster has talked to strategic investors who want to buy British Sky Broadcasting Group Plc's 18 percent stake, the Observer reported, without saying where it got the information.
BSkyB will be told soon whether it has won an appeal against a ruling by the Competition Commission that it must reduce its stake in ITV to at least 7.5 percent, the newspaper reported. The stock declined 1.8 pence, or 4.5 pence, to 38.3.
Royal Philips Electronics NV (PHIA NA): Europe's largest consumer-electronics maker plans to report second-quarter results. The company may say profit plunged as U.S. television prices fell and after selling a semiconductor stake a year earlier, according to analysts surveyed by Bloomberg News. The shares fell 1.23 euros, or 6 percent, to 19.42 euros.
To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net
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BP, Centrica, ITV, Low & Bonar: U.K., Irish Equity Preview
By Lenka Ponikelska
July 14 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. markets today. Stock symbols are in parentheses and prices are from the last market close.
The benchmark FTSE 100 Index fell 145.2, or 2.7 percent, to 5,261.6. The FTSE All-Share Index lost 70.54, or 2.6 percent, to 2,660.9.
Ireland's ISEQ Index declined 271.81, or 5.8 percent, to 4,414.8.
U.K. Companies:
BP Plc (BP/ LN): Europe's second-largest oil company failed to reach an agreement with its Russian partners over the management of their Moscow-based TNK-BP venture at a meeting in Cyprus, the Financial Times reported, citing a person familiar with the matter. The stock declined 1.5 pence, or 0.3 percent, to 538.75.
Centrica Plc (CNA LN): Britain's biggest energy supplier is in discussions with potential investors in its planned 3.5 billion pound ($6.7 billion) wind-farm program, the Financial Times reported, without citing anyone. The shares fell 13.5 pence, or 4.5 percent, to 285.5.
Diageo Plc (DGE LN): The company's American depositary receipts may rise more than 30 percent in a year as the maker of Johnnie Walker scotch and Guinness stout withstands concerns about declining sales, Barron's reported, citing an analyst.
Banc of America Securities analyst Bryan Spillane expects the world's largest distiller will post a 9 percent gain in operating profit this year and as much as 8 percent in 2009, the weekly newspaper said in its July 14 issue. The shares fell 28 pence, or 3.2 percent, to 857.
ITV Plc (ITV LN): The U.K.'s biggest commercial broadcaster has talked to strategic investors who want to buy British Sky Broadcasting Group Plc's 18 percent stake, the Observer reported, without saying where it got the information.
BSkyB will be told soon whether it has won an appeal against a ruling by the Competition Commission that it must reduce its stake in ITV to at least 7.5 percent, the newspaper reported. The stock declined 1.8 pence, or 4.5 pence, to 38.3.
Low & Bonar Plc (LWB LN): The U.K. flooring and fabrics maker with U.S. operations is releasing earnings. The shares fell 6 pence, or 6.5 percent, to 87.
Playtech Ltd. (PTEC LN): The company may announce a four- year license with Viacom Inc.'s Paramount Pictures to produce games based on the Hollywood movies ``Gladiator'' and ``The Untouchables,'' the London-based Times reported, without saying where it got its information. The stock fell 12.75 pence, or 2.6 percent, to 476.25
Scottish & Southern Energy Plc (SSE LN): The company may be considering a takeover offer for Arcapita Bank BSC's electricity- supply division in Ireland, the London-based Sunday Times reported, citing unidentified people with direct knowledge of the matter. The shares fell 49 pence, or 3.4 percent, to 1,379.
St. Modwen Properties Plc (SMP LN): The U.K. company that regenerates town centers and industrial areas is due to report earnings. The stock fell 1.5 pence, or 0.5 percent, to 315.
Wolseley Plc (WOS LN): The company plans to cut hundreds of jobs after a decline in the U.K. and U.S. housing markets, the Sunday Telegraph reported, without saying where it got the information.
Wolseley is expected to say the housing turmoil has made forecasting revenue ``increasingly difficult,'' the newspaper reported. The stock fell 11 pence, or 3.6 percent, to 297.
To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net
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July 14 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. markets today. Stock symbols are in parentheses and prices are from the last market close.
The benchmark FTSE 100 Index fell 145.2, or 2.7 percent, to 5,261.6. The FTSE All-Share Index lost 70.54, or 2.6 percent, to 2,660.9.
Ireland's ISEQ Index declined 271.81, or 5.8 percent, to 4,414.8.
U.K. Companies:
BP Plc (BP/ LN): Europe's second-largest oil company failed to reach an agreement with its Russian partners over the management of their Moscow-based TNK-BP venture at a meeting in Cyprus, the Financial Times reported, citing a person familiar with the matter. The stock declined 1.5 pence, or 0.3 percent, to 538.75.
Centrica Plc (CNA LN): Britain's biggest energy supplier is in discussions with potential investors in its planned 3.5 billion pound ($6.7 billion) wind-farm program, the Financial Times reported, without citing anyone. The shares fell 13.5 pence, or 4.5 percent, to 285.5.
Diageo Plc (DGE LN): The company's American depositary receipts may rise more than 30 percent in a year as the maker of Johnnie Walker scotch and Guinness stout withstands concerns about declining sales, Barron's reported, citing an analyst.
Banc of America Securities analyst Bryan Spillane expects the world's largest distiller will post a 9 percent gain in operating profit this year and as much as 8 percent in 2009, the weekly newspaper said in its July 14 issue. The shares fell 28 pence, or 3.2 percent, to 857.
ITV Plc (ITV LN): The U.K.'s biggest commercial broadcaster has talked to strategic investors who want to buy British Sky Broadcasting Group Plc's 18 percent stake, the Observer reported, without saying where it got the information.
BSkyB will be told soon whether it has won an appeal against a ruling by the Competition Commission that it must reduce its stake in ITV to at least 7.5 percent, the newspaper reported. The stock declined 1.8 pence, or 4.5 pence, to 38.3.
Low & Bonar Plc (LWB LN): The U.K. flooring and fabrics maker with U.S. operations is releasing earnings. The shares fell 6 pence, or 6.5 percent, to 87.
Playtech Ltd. (PTEC LN): The company may announce a four- year license with Viacom Inc.'s Paramount Pictures to produce games based on the Hollywood movies ``Gladiator'' and ``The Untouchables,'' the London-based Times reported, without saying where it got its information. The stock fell 12.75 pence, or 2.6 percent, to 476.25
Scottish & Southern Energy Plc (SSE LN): The company may be considering a takeover offer for Arcapita Bank BSC's electricity- supply division in Ireland, the London-based Sunday Times reported, citing unidentified people with direct knowledge of the matter. The shares fell 49 pence, or 3.4 percent, to 1,379.
St. Modwen Properties Plc (SMP LN): The U.K. company that regenerates town centers and industrial areas is due to report earnings. The stock fell 1.5 pence, or 0.5 percent, to 315.
Wolseley Plc (WOS LN): The company plans to cut hundreds of jobs after a decline in the U.K. and U.S. housing markets, the Sunday Telegraph reported, without saying where it got the information.
Wolseley is expected to say the housing turmoil has made forecasting revenue ``increasingly difficult,'' the newspaper reported. The stock fell 11 pence, or 3.6 percent, to 297.
To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net
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Continental, E.ON, Henkel, RWE, Siemens: German Equity Preview
By Andreas Hippin
July 14 (Bloomberg) -- The following companies may have unusual price changes in Germany today. Stock symbols are in parentheses, and share prices are from the previous close.
The X-DAX Index fell 2.3 percent to 6,168.22. The measure, derived from trading in DAX Index futures, provides an estimate of Germany's benchmark index. The DAX retreated 151.7, or 2.4 percent, to 6,153.30.
313 Music JWP AG (JWP GY): Major investors in the music company which emerged from Jack White Productions AG offered their support, Berlin-based Tagesspiegel said. The company will publish its annual report next week, according to the report. The shares jumped 9 euro cents, or 18 percent, to 59 cents.
Bayerische Motoren Werke AG (BMW GY): The world's biggest luxury carmaker has reached only half of its target to cut 8,100 jobs by the end of the year, Auto Motor und Sport reported, citing Manfred Schoch, a supervisory board member and BMW works council head. The shares dropped 1.1 euros, or 3.7 percent, to 28.76 euros.
Continental AG (CON GY): Schaeffler Group, a closely held German car-parts maker, held talks with Continental about taking the company private and may spin off Continental's tire business to help finance the transaction, Frankfurter Allgemeine Zeitung said, citing unidentified people.
Hannes Boekhoff, a spokesman for Hanover, Germany-based Continental, and Detlef Sieverdingbeck, a spokesman for Herzogenaurach, Germany-based Schaeffler Group, both said their companies don't comment on speculation.
The shares slumped 4.44 euros, or 7.6 percent, to 53.96 euros.
E.ON AG (EOA GY): Shares of the world's largest utility by sales, RWE AG (RWE GY) and Energie Baden-Wuerttemberg AG (EBK GY) may move after Chancellor Angela Merkel told Bild am Sonntag she will stand up for prolonging the lifespan of the country's nuclear power plants beyond their scheduled permanent shutdown.
E.ON shares retreated 2.38 euros, or 1.9 percent, to 122.39 euros. Shares of RWE, Germany's second-largest utility, slipped 1.02 euros, or 1.3 percent, to 77.81 euros. Energie Baden- Wuerttemberg, the country's third-biggest, was unchanged at 45.50 euros.
Freenet AG (FNT GY): Chief Executive Officer Eckhard Spoerr predicted shareholders United Internet AG and Drillisch AG will boost their joint stake in the German mobile-phone and Internet company to 29.9 percent, Welt am Sonntag reported, citing an interview with Spoerr. The shares added 14 cents, or 1.2 percent, to 12.33 euros.
GfK AG (GFK GY): Germany's biggest market research company sees ``good prospects'' for taking over U.K.'s Taylor Nelson Sofres Plc, Berlin-based Welt am Sonntag reported, citing Chief Executive Officer Klaus Wuebbenhorst. The shares fell 92 cents, or 4.2 percent, to 21.10 euros.
Henkel KGaA (HEN3 GY): The maker of Persil detergent and Dial soap said it will raise prices as some of its raw material costs almost doubled, Frankfurter Allgemeine Sonntagszeitung reported, citing an interview with Chief Financial Officer Lothar Steinebach. The shares declined 1.09 euros, or 4.5 percent, to 23.39 euros.
Highlight Communications AG (HLG GY): EM.Sport Media AG (EV4 GY), the company partly owned by German media entrepreneur Leo Kirch, won't increase its stake in Highlight beyond 49 percent, Spiegel magazine reported, citing no one. The shares decreased 1 cent, or 0.1 percent, to 7.13 euros.
Norddeutsche Affinerie AG (NDA GY): Europe's largest copper refiner plans acquisitions outside of Europe, such as in Asia and South America, Euro am Sonntag said, citing Chief Executive Officer Bernd Drouven. The shares rose 1.17 euros, or 3.3 percent, to 36.30 euros.
Siemens AG (SIE GY): The region's largest engineering company may exit a computer-manufacturing venture with Japan's Fujitsu Ltd., the world's last computer maker to produce PCs in a high-income country, Sueddeutsche Zeitung reported. Siemens shares retreated 1.78 euros, or 2.5 percent, to 68.78 euros.
Wirecard AG (WDI GY): Oyster Asset Management SA reduced its stake in the vendor of online payment software to about 9,000 companies below 3 percent. The shares fell 29 cents, or 4.2 percent, to 6.62 euros.
To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.
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July 14 (Bloomberg) -- The following companies may have unusual price changes in Germany today. Stock symbols are in parentheses, and share prices are from the previous close.
The X-DAX Index fell 2.3 percent to 6,168.22. The measure, derived from trading in DAX Index futures, provides an estimate of Germany's benchmark index. The DAX retreated 151.7, or 2.4 percent, to 6,153.30.
313 Music JWP AG (JWP GY): Major investors in the music company which emerged from Jack White Productions AG offered their support, Berlin-based Tagesspiegel said. The company will publish its annual report next week, according to the report. The shares jumped 9 euro cents, or 18 percent, to 59 cents.
Bayerische Motoren Werke AG (BMW GY): The world's biggest luxury carmaker has reached only half of its target to cut 8,100 jobs by the end of the year, Auto Motor und Sport reported, citing Manfred Schoch, a supervisory board member and BMW works council head. The shares dropped 1.1 euros, or 3.7 percent, to 28.76 euros.
Continental AG (CON GY): Schaeffler Group, a closely held German car-parts maker, held talks with Continental about taking the company private and may spin off Continental's tire business to help finance the transaction, Frankfurter Allgemeine Zeitung said, citing unidentified people.
Hannes Boekhoff, a spokesman for Hanover, Germany-based Continental, and Detlef Sieverdingbeck, a spokesman for Herzogenaurach, Germany-based Schaeffler Group, both said their companies don't comment on speculation.
The shares slumped 4.44 euros, or 7.6 percent, to 53.96 euros.
E.ON AG (EOA GY): Shares of the world's largest utility by sales, RWE AG (RWE GY) and Energie Baden-Wuerttemberg AG (EBK GY) may move after Chancellor Angela Merkel told Bild am Sonntag she will stand up for prolonging the lifespan of the country's nuclear power plants beyond their scheduled permanent shutdown.
E.ON shares retreated 2.38 euros, or 1.9 percent, to 122.39 euros. Shares of RWE, Germany's second-largest utility, slipped 1.02 euros, or 1.3 percent, to 77.81 euros. Energie Baden- Wuerttemberg, the country's third-biggest, was unchanged at 45.50 euros.
Freenet AG (FNT GY): Chief Executive Officer Eckhard Spoerr predicted shareholders United Internet AG and Drillisch AG will boost their joint stake in the German mobile-phone and Internet company to 29.9 percent, Welt am Sonntag reported, citing an interview with Spoerr. The shares added 14 cents, or 1.2 percent, to 12.33 euros.
GfK AG (GFK GY): Germany's biggest market research company sees ``good prospects'' for taking over U.K.'s Taylor Nelson Sofres Plc, Berlin-based Welt am Sonntag reported, citing Chief Executive Officer Klaus Wuebbenhorst. The shares fell 92 cents, or 4.2 percent, to 21.10 euros.
Henkel KGaA (HEN3 GY): The maker of Persil detergent and Dial soap said it will raise prices as some of its raw material costs almost doubled, Frankfurter Allgemeine Sonntagszeitung reported, citing an interview with Chief Financial Officer Lothar Steinebach. The shares declined 1.09 euros, or 4.5 percent, to 23.39 euros.
Highlight Communications AG (HLG GY): EM.Sport Media AG (EV4 GY), the company partly owned by German media entrepreneur Leo Kirch, won't increase its stake in Highlight beyond 49 percent, Spiegel magazine reported, citing no one. The shares decreased 1 cent, or 0.1 percent, to 7.13 euros.
Norddeutsche Affinerie AG (NDA GY): Europe's largest copper refiner plans acquisitions outside of Europe, such as in Asia and South America, Euro am Sonntag said, citing Chief Executive Officer Bernd Drouven. The shares rose 1.17 euros, or 3.3 percent, to 36.30 euros.
Siemens AG (SIE GY): The region's largest engineering company may exit a computer-manufacturing venture with Japan's Fujitsu Ltd., the world's last computer maker to produce PCs in a high-income country, Sueddeutsche Zeitung reported. Siemens shares retreated 1.78 euros, or 2.5 percent, to 68.78 euros.
Wirecard AG (WDI GY): Oyster Asset Management SA reduced its stake in the vendor of online payment software to about 9,000 companies below 3 percent. The shares fell 29 cents, or 4.2 percent, to 6.62 euros.
To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.
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Air France-KLM, Carrefour, EADS, Total: French Equity Preview
By Francois de Beaupuy and David Whitehouse
July 14 (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 tumbled 130.92, or 3.1 percent, to a three-year low of 4,100.64 in Paris. The SBF 120 Index lost 3 percent.
Companies that are sensitive to the price of oil may be active after the price of crude breached $147 a barrel for the first time. Total SA (FP FP), Europe's third-largest oil company, added 32 cents, or 0.6 percent, to 50.17 euros. Air France-KLM Group, (AF FP), Europe's largest airline, sank 1.17 euros, or 7.9 percent, to 13.70 euros. Michelin & Cie. (ML FP), the world's second-largest tiremaker, tumbled 2.99 euros, or 6.5 percent, to 42.90 euros.
Carrefour SA (CA FP): Europe's biggest retailer won't proceed with an initial share sale of its property unit if the price doesn't correspond to the market value of its assets, Le Journal des Finances reported, citing Carrefour Chief Executive Officer Jose Luis Duran. The shares of Carrefour fell 75 cents, or 2.4 percent, to 30.75 euros.
European Aeronautic, Defence & Space Co. (EAD FP): The company's Airbus unit, the world's biggest maker of commercial jets, may announce about $60 billion of orders at next week's Farnborough air show, Le Figaro said, without citing anyone.
EADS separately said as much as one-third of its order book is at risk of deferral or cancellation as spiraling oil prices wipe out airline earnings.
Airbus's revenue is also being hurt by the weakness of the dollar, the denomination for plane sales, and the U.S. currency may also scupper its plans to sell a U.K. factory to bring to down costs, EADS Chief Executive Officer Louis Gallois said.
Shares of EADS fell 1.29 euros, or 11 percent, to 10.74 euros.
Eurofins Scientific SA (ERF FP): The company, which provides quality testing for wine and drugmakers, expects its operating profit to rise in 2009, founder and Chairman Gilles Martin said in an interview with Investir. He said the company aims for an operating profit of 15 percent of sales in the ``medium term,'' according to the newspaper. The shares fell 9 cents, or 0.2 percent, to 50.3 euros.
To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.
Read more...
July 14 (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 tumbled 130.92, or 3.1 percent, to a three-year low of 4,100.64 in Paris. The SBF 120 Index lost 3 percent.
Companies that are sensitive to the price of oil may be active after the price of crude breached $147 a barrel for the first time. Total SA (FP FP), Europe's third-largest oil company, added 32 cents, or 0.6 percent, to 50.17 euros. Air France-KLM Group, (AF FP), Europe's largest airline, sank 1.17 euros, or 7.9 percent, to 13.70 euros. Michelin & Cie. (ML FP), the world's second-largest tiremaker, tumbled 2.99 euros, or 6.5 percent, to 42.90 euros.
Carrefour SA (CA FP): Europe's biggest retailer won't proceed with an initial share sale of its property unit if the price doesn't correspond to the market value of its assets, Le Journal des Finances reported, citing Carrefour Chief Executive Officer Jose Luis Duran. The shares of Carrefour fell 75 cents, or 2.4 percent, to 30.75 euros.
European Aeronautic, Defence & Space Co. (EAD FP): The company's Airbus unit, the world's biggest maker of commercial jets, may announce about $60 billion of orders at next week's Farnborough air show, Le Figaro said, without citing anyone.
EADS separately said as much as one-third of its order book is at risk of deferral or cancellation as spiraling oil prices wipe out airline earnings.
Airbus's revenue is also being hurt by the weakness of the dollar, the denomination for plane sales, and the U.S. currency may also scupper its plans to sell a U.K. factory to bring to down costs, EADS Chief Executive Officer Louis Gallois said.
Shares of EADS fell 1.29 euros, or 11 percent, to 10.74 euros.
Eurofins Scientific SA (ERF FP): The company, which provides quality testing for wine and drugmakers, expects its operating profit to rise in 2009, founder and Chairman Gilles Martin said in an interview with Investir. He said the company aims for an operating profit of 15 percent of sales in the ``medium term,'' according to the newspaper. The shares fell 9 cents, or 0.2 percent, to 50.3 euros.
To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.
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Asian Market Update
Daily Forex Fundamentals | Written by Trade The News | Jul 14 08 05:10 GMT |
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Treasury to lend to Fannie and Freddie, Bush backs Israel plan for strike on Iran
U.S. Treasury Secretary Paulson on Sunday asked Congress to approve a rescue package that would give officials the power to inject billions of federal dollars into Freddie and Fannie through investments and loans. The Fed also announced it would make one of its short-term lending programs available to the two companies. Some officials briefed on the plan said Congress could be asked to extend the total line of credit to the institutions to $300B, according to the New York Times. To 'protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards,' said Paulson.
Market reaction to the FNM/FRE news: It looks like the market was prepared for a worst-case scenario for the mortgage giants, and the knee-jerk reaction was to celebrate and buy the USD and U.S. stocks futures on the back of the announcement. Some traders were puzzled by the sharp market movement on the news, because the details of the package were already leaked through newspaper articles in the WSJ and the FT over the weekend. It looks like the USD will continue to struggle in the near-term, unless these announced measures are perceived as likely to bring FNM and FRE back to health. Focus now shifts to Fed chairman Bernanke's semi-annual testimony to Congress on Tuesday, where he will be questioned on the prospects for the U.S. economy and health of the financial system. Overall, Asia took the news as a positive, but European markets may take a different view. Some analysts say the U.S. government is signaling it won't throw a lifeline to struggling financial companies apart from Fannie Mae and Freddie Mac, marking a shift to a new and potentially more volatile phase of the credit crisis. 'The credit crisis has obviously entered into a new phase - the government has one bailout left in them, and this is it,' said Jeffrey Gundlach at TCW Group, in an interview with AP. 'One consequence of Freddie and Fannie is that other firms are allowed to go under,' he said.
President Bush tells the Israeli government that he may be prepared to approve a future military strike on Iran: President George W Bush has told the Israeli government that he may be prepared to approve a future military strike on Iranian nuclear facilities if negotiations broke down, according to a senior Pentagon official quoted in The London Times. 'It's really all down to the Israelis,' the Pentagon official added. 'This administration will not attack Iran. This has already been decided. But the president is really preoccupied with the nuclear threat against Israel and I know he doesn't believe that anything but force will deter Iran.'
New Zealand retail sales fall at fastest pace in four years in May: (NZ MAY RETAIL SALES MOM: -1.2% V -0.1% expected, 1.0% prior; EX-AUTO: 0.7% V 0.5% expected, -0.5% prior) Retail sales fell a seasonally adjusted -1.2% in May, the biggest monthly decline since February 2004, led by lower car and furniture sales, Statistics New Zealand data showed. Analysts now shift focus to tomorrow's inflation data, with money markets pricing in a 50/50 chance of a rate cut at the RBNZ's next review on July 24.
New Zealand's service sector at a 16 month low: (NZ JUNE PERFORMANCE OF SERVICES INDEX: 45.6 V 49.1 prior) Business NZ chief executive Phil O'Reilly said the latest result was consistent with the general downturn of the Kiwi economy. Analysts also talked about the weaker than expected employment subcomponent. 'This fits with a number of other measures that warn us the jobs market is about to come off the boil much more obviously than has been the case in the official records to date,' said Craig Ebert at Bank of New Zealand.
Equities: At 0:08 EDT Japan's Nikkei is +0.69%, the S&P/ASX200 is -0.80%, South Korea's KOSPI is -0.07%, and the Shanghai composite index is +0.34%. The S&P500 future contract gained +0.86% since Friday's close, last trading at 1,250.50. A rising USD/JPY inspired investors to buy the battered Japanese exporters, pushing the Nikkei above 13,100. But the Nikkei's upside looks limited, with many Asian investors staying on the sidelines and awaiting Wall Street's reaction to the FNM/FRE news. Retailers, selected resource stocks and banks dragged the S&P/ASX200 index lower, with the index finding support around 4,940. South Korea's Posco Steel reported solid earnings results, but offshore events continue to dominate price action in Seoul.
Commodities: Nymex crude oil sold off in the early Asian morning, but the commodity rebounded back to $145/bbl. Oil prices look set to move higher, with energy traders betting that the USD will remain under pressure this week. Spot gold rose +0.50% between 18:00 EDT and 0:04 EDT, last trading at $965.40/oz.
Other news: The U.S. Federal Deposit Insurance Corporation has suspended service at IndyMac Bank, one of the largest U.S. mortgage originators, after a bank run from depositors. IndyMac had $19B of deposits as of March 31, and the bailout could cost the FDIC 7.5%-15% of its insurance fund. Some analysts think the Indymac suspension would result in an increase in insurance costs for all U.S. banks, and a New York Times article suggests that up to 150 U.S. banks could fail or seek mergers over the next 12-18 months.
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Asian Stocks Fall on Near-Record Crude Oil; Cathay, Kepco Drop
By Chen Shiyin
July 14 (Bloomberg) -- Asian stocks fell for the first time in four days, led by airlines and shipping companies, on speculation that near-record crude-oil prices and a slump in transportation rates will hurt earnings.
Cathay Pacific Airways Ltd. led airlines lower on concern crude's surge beyond $147 a barrel on July 11 will raise fuel costs. Shipping lines declined, paced by Mitsui O.S.K. Lines Ltd., as a gauge of commodity-transportation rates dropped. Korea Electric Power Corp. slumped on speculation a price increase by the power supplier won't make up for increased fuel expenses.``It's very tricky at the moment,'' Sean Fenton, who manages the equivalent of $700 million as portfolio manager at Tribeca Investment Partners in Sydney, said in a Bloomberg TV interview. ``You're seeing high oil prices destroy demand'' in some regions.
The MSCI Asia-Pacific Index lost 0.5 percent to 132.94 at 1:15 p.m. Tokyo time, after gaining as much as 0.6 percent. About two stocks retreated for each that gained on the measure, which has dropped 15 percent this year.
Most benchmarks declined, with Japan's Nikkei 225 Stock Average little changed at 13,044.81. Daiichi Sankyo Co. dropped after U.S. courts started probes against Ranbaxy Laboratories Ltd., which is set to be acquired by the Japanese drugmaker.
Posco advanced to a two-week high in Seoul, leading gains by steelmakers, after the company boosted its profit forecast.
U.S. markets declined on July 11, extending the longest stretch of weekly losses for the Standard & Poor's 500 Index since 2004, as growing concern about the health of Fannie Mae and Freddie Mac sent bank shares to an 11-year low.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Hanny Wan in Hong Kong at hwan3@bloomberg.net.
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Forex and Dow Jones Recommended Levels
Daily Forex Technicals | Written by FXtechtrade | Jul 14 08 05:12 GMT |
EUR/USD
Today's support: - 1.5868 and 1.5840(main), where correction is possible. Break would give 1.5814, where correction also may be. Then follows 1.5781. Break of the latter would result in 1.5750. If a strong impulse, we would see 1.5728. Continuation will give 1.5716 and 1.5694.
Today's resistance: - 1.5955, 1.5973 and 1.5997(main). Break would give 1.6023, where a correction is possible. Then goes 1.6054. Break of the latter would result in 1.6076. If a strong impulse, we'd see 1.6098. Continuation will give 1.6120.
USD/JPY
Today's support: - 106.20(main). Break would bring 105.94, where correction is possible. Then 105.72. If a strong impulse, we would see 105.53. Continuation would give 105.24.
Today's resistance: - 106.88, 107.23 and 107.33(main), where a correction may happen. Break would bring 107.56, where also a correction may be. Then 107.81. If a strong impulse, we would see 108.03. Continuation will give 108.19 and 108.37.
DOW JONES INDEX
Today's support: - 11 058.74 and 11 025.00(main), where a delay and correction may happen. Break of the latter will give 10 980.00, where correction also can be. Then follows 10 884.36. Be there a strong impulse, we would see 10 856.20. Continuation will bring 10 819.68 and 10 800.00.
Today's resistance: - 11 250.00, 11 296.30, 11 317.40 and 11 340.00 (main), where a delay and correction may happen. Break would bring 11 373.72, where a correction may happen. Then follows 11 396.22, where a delay and correction could also be. Be there a strong impulse, we'd see 11 418.80. Continuation would bring 11 441.26.
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EUR/USD
Today's support: - 1.5868 and 1.5840(main), where correction is possible. Break would give 1.5814, where correction also may be. Then follows 1.5781. Break of the latter would result in 1.5750. If a strong impulse, we would see 1.5728. Continuation will give 1.5716 and 1.5694.
Today's resistance: - 1.5955, 1.5973 and 1.5997(main). Break would give 1.6023, where a correction is possible. Then goes 1.6054. Break of the latter would result in 1.6076. If a strong impulse, we'd see 1.6098. Continuation will give 1.6120.
USD/JPY
Today's support: - 106.20(main). Break would bring 105.94, where correction is possible. Then 105.72. If a strong impulse, we would see 105.53. Continuation would give 105.24.
Today's resistance: - 106.88, 107.23 and 107.33(main), where a correction may happen. Break would bring 107.56, where also a correction may be. Then 107.81. If a strong impulse, we would see 108.03. Continuation will give 108.19 and 108.37.
DOW JONES INDEX
Today's support: - 11 058.74 and 11 025.00(main), where a delay and correction may happen. Break of the latter will give 10 980.00, where correction also can be. Then follows 10 884.36. Be there a strong impulse, we would see 10 856.20. Continuation will bring 10 819.68 and 10 800.00.
Today's resistance: - 11 250.00, 11 296.30, 11 317.40 and 11 340.00 (main), where a delay and correction may happen. Break would bring 11 373.72, where a correction may happen. Then follows 11 396.22, where a delay and correction could also be. Be there a strong impulse, we'd see 11 418.80. Continuation would bring 11 441.26.
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Most Japan Stocks Fall, Led by Shipping Lines; Steelmakers Gain
By Patrick Rial and Satoshi Kawano
July 14 (Bloomberg) -- Most Japanese stocks fell, led by shipping lines after cargo rates for commodities fell. Steelmakers advanced after a South Korean producer raised its earnings forecast.
Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping line by sales, fell the most in almost two weeks. Daiichi Sankyo Co. dropped the most in four months after its Indian buyout target was probed for falsification of data on generic drugs. JFE Holdings Inc., the world's third-largest steelmaker, soared after South Korea's Posco said demand from China helped profit climb last quarter.
The Nikkei 225 Stock Average fell 38.94, or 0.3 percent, to 13,000.75 as of 1:59 p.m. in Tokyo, erasing a 1.1 percent gain. The broader Topix index dipped 3.34, or 0.3 percent, to 1,282.57. Seventeen of 33 industry groups on the Topix sank.
Mitsui O.S.K. fell 2.6 percent to 1,410 yen, the biggest drop since July 2. Market leader Nippon Yusen K.K. dropped 2 percent to 953 yen. The Baltic Dry Index, a measure of shipping costs for commodities, tumbled on Friday for the first time since July 4.
Daiichi Sankyo, Japan's third-biggest drugmaker, sank 4.8 percent to 3,010 yen, the steepest slump since March 17 and the Nikkei's second-biggest decline. India's Ranbaxy Laboratories Ltd., set to be acquired by Daiichi, is being probed by U.S. courts for falsifying data and failing to meet quality controls on generic drugs.
JFE Holdings jumped 5.4 percent to 5,460 yen, its steepest advance since April 25. Nippon Steel Corp., the world's second- biggest steelmaker, gained 3.6 percent to 582 yen.
Posco, Asia's third-biggest steelmaker, said second-quarter profit rose 34 percent after increasing prices as demand from automakers and shipbuilders rose. Also, ArcelorMittal, the world's biggest steelmaker, and ThyssenKrupp AG are seeking to renegotiate steel contracts with Nissan Motor Co. and other automakers, NHK television said on July 12. JFE and Nippon Steel have been raising prices in order to offset material costs.
To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net
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Malaysia Stocks to Rise as Political Woes Ease, JPMorgan Says
By Chan Tien Hin
July 14 (Bloomberg) -- Bumiputra-Commerce Holdings Bhd., Bursa Malaysia Bhd. and WCT Bhd. are among stocks recommended by JPMorgan Chase & Co. to benefit from a rebound in Malaysia's market as concern about a government leadership struggle abates.
Prime Minister Abdullah Ahmad Badawi, who led the ruling coalition this year to its worst electoral performance, last week set June 2010 to hand over power to his deputy, Najib Razak. The Kuala Lumpur Composite Index has fallen 12 percent since the March 10 elections, pushing the benchmark into a bear market.
``The Malaysian market is poised for a bounce,'' Chris Oh, an analyst at JPMorgan, wrote in a report today. The move is an ``optimal outcome'' and provides a ``calming effect'' for investors who have ``steered away from the equity market,'' he said.
Announcing the handover date may thwart a leadership challenge this year and ease Malaysia's political turmoil after Abdullah's National Front coalition in March lost its two-thirds parliamentary majority and ceded control of almost half the contested states.
The index has tumbled 25 percent since its Jan. 11 record high, more than the 20 percent threshold many consider to signal a bear market. The index dropped 0.7 percent to 1,142.59 as of 11:06 a.m. local time.
The leadership transition allows for Abdullah to focus on ``policy making and structural reform as the infighting abates,'' Oh said in the report.
Abdullah's announcement gives him time for an ``orderly transition and enables proper restructuring of the party leadership to be more relevant to the public in the run-up to the next election,'' he said.
Bumiputra-Commerce, Malaysia's second-biggest bank, fell 5 sen, or 0.6 percent, to 7.75 ringgit at 10:58 a.m. local time. It has fallen 30 percent this year. Bursa, the stock exchange manager, lost 2.2 percent to 6.75 ringgit. It's down 53 percent this year. WCT, a builder that's fallen 32 percent this year, slid 1 percent to 2.85 ringgit.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
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July 14 (Bloomberg) -- Bumiputra-Commerce Holdings Bhd., Bursa Malaysia Bhd. and WCT Bhd. are among stocks recommended by JPMorgan Chase & Co. to benefit from a rebound in Malaysia's market as concern about a government leadership struggle abates.
Prime Minister Abdullah Ahmad Badawi, who led the ruling coalition this year to its worst electoral performance, last week set June 2010 to hand over power to his deputy, Najib Razak. The Kuala Lumpur Composite Index has fallen 12 percent since the March 10 elections, pushing the benchmark into a bear market.
``The Malaysian market is poised for a bounce,'' Chris Oh, an analyst at JPMorgan, wrote in a report today. The move is an ``optimal outcome'' and provides a ``calming effect'' for investors who have ``steered away from the equity market,'' he said.
Announcing the handover date may thwart a leadership challenge this year and ease Malaysia's political turmoil after Abdullah's National Front coalition in March lost its two-thirds parliamentary majority and ceded control of almost half the contested states.
The index has tumbled 25 percent since its Jan. 11 record high, more than the 20 percent threshold many consider to signal a bear market. The index dropped 0.7 percent to 1,142.59 as of 11:06 a.m. local time.
The leadership transition allows for Abdullah to focus on ``policy making and structural reform as the infighting abates,'' Oh said in the report.
Abdullah's announcement gives him time for an ``orderly transition and enables proper restructuring of the party leadership to be more relevant to the public in the run-up to the next election,'' he said.
Bumiputra-Commerce, Malaysia's second-biggest bank, fell 5 sen, or 0.6 percent, to 7.75 ringgit at 10:58 a.m. local time. It has fallen 30 percent this year. Bursa, the stock exchange manager, lost 2.2 percent to 6.75 ringgit. It's down 53 percent this year. WCT, a builder that's fallen 32 percent this year, slid 1 percent to 2.85 ringgit.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
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