Thursday, July 24, 2008

Wall St futures mixed; eyes on results, home sales

Thu Jul 24, 2008 6:31am EDT

(Reuters) Futures for the S&P were down 0.3 percent, for the Dow Jones industrial average DJc1 down 0.2 percent and for the Nasdaq NDc1 up 0.3 percent at 0940 GMT (5:40 a.m. EDT).

Companies reporting include 3M MMM, Bristol-Myers Squibb , Dow Chemical , Eli Lilly , Ford , Xerox XRX.

Meanwhile, key macro data is U.S. home sales at 1400 GMT (10 a.m. EDT) and jobless claims at 1230 GMT (8:30 a.m. EDT).

After the close on Wednesday the U.S. House of Representatives approved a housing market rescue legislation. The bill will now go to the Senate.

Qualcomm will be watched after it and Nokia late on Wednesday settled a 3-year, three-continent legal battle over patent licenses and royalties for the next 15 years. Qualcomm shares zoomed 22 percent in Frankfurt .

Microsoft said late on Wednesday that Kevin Johnson, president of its largest business division who spearheaded the company's pursuit of Yahoo Inc , was leaving the software maker. A source briefed on the matter reported that Johnson was joining Juniper Networks

Amazon.com shares were up 8 percent in Frankfurt after it posted earnings overnight.

(Reporting by Sitaraman Shankar; Editing by Quentin Bryar)

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Oil falls to 7-week low as slow demand weighs

Thu Jul 24, 2008 5:07am EDT

LONDON (Reuters) - Oil dipped to seven week lows on Thursday due to increasing signs that high prices and economic weakness were slowing demand in the world's top consumer United States.

Oil has now fallen more than $23 a barrel from its record high peak above $147 on July 11, marking the biggest fall in dollar term since futures began trading in New York in 1983. In percentage terms, the 15 percent tumble is the steepest pull-back since early 2007.

U.S. light crude fell as low as $123.62 a barrel, the lowest since early June. It was trading at $124.40 by 0901 GMT (5:01 a.m. EDT), down 4 cents from Wednesday's close.

London Brent crude was 8 cents firmer at $125.37.

U.S. crude tumbled by about $4 on Wednesday as U.S. government data showed a larger-than-expected increase in gasoline stocks last week, together with weak implied demand. U.S. crude stocks dropped after a sharp decline in imports.

Wednesday's drop came despite some supply disruptions and a threat from a militant group to sabotage oil facilities in exporter Nigeria.

Analysts said the market was now reacting to existing fundamentals.

"Warnings like this normally would spook the markets into pushing higher," said MF Global in its research note.

"We can only suggest that the market, finally weighed down by the specter of decreasing energy demand, may not be as responsive to geopolitical headlines as it once was."

The main militant group in Nigeria's oil-producing Niger Delta said on Wednesday it would attack major oil pipelines in the next 30 days to prove it had not received payment from the government to end its campaign.

Hurricane Dolly caused output cuts at some refineries, but spared most offshore oil and natural gas facilities in the Gulf of Mexico.

The market's rout also appeared to spur some traders to unwind short-dollar/long-oil positions built up earlier this year, helping lift the U.S. currency to a one-month high against the yen and in turn driving down other commodity prices.

Open interest in crude oil futures tumbled to its lowest level since January 2, 2007, indicating that the sharp slide in oil prices was more the result of investors liquidating long positions rather than taking up fresh shorts.

(Reporting by Annika Breidthardt in Singapore and Ikuko Kao in London, editing by Anthony Barker)

FTSE falls; oils eclipse gains in banks, Kingfisher

Thu Jul 24, 2008 7:12am EDT

* FTSE 100 down 0.7 pct

* Lower oil prices weigh on energy stocks

* Kingfisher rises on B&Q, margin cheer

* Banks rise, Swiss bank Credit Suisse beats forecasts

By Dominic Lau

LONDON, July 24 (Reuters) - Britain's top share index fell by midday on Thursday as lower oil prices weighed on heavyweight energy stocks, though a trading update boosted retailer Kingfisher (KGF.L: Quote, Profile, Research, Stock Buzz) and Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) results lifted banks.

By 1043 GMT, the FTSE 100 .FTSE was down 36.2 points, or 0.7 percent, at 5,413.7, after rising 1.6 percent on Wednesday.

"It's good that the oil price, which is the big inflationary issue, is receding a little bit. There are all sort of geopolitical things that could flare at any point and send it back to upward track," said Tim Whitehead, head of portfolio services at Redmayne-Bentley.

"It's encouraging short-term. I wouldn't be surprised to see some profit taking and I'll still be cautious on my outlook."

Oil shares were the biggest drag on the index as crude oil CLc1 traded below $125 a barrel, well off its peak of nearly $148 earlier this month.

BP (BP.L: Quote, Profile, Research, Stock Buzz) lost 0.8 percent, Royal Dutch Shell (RDSb.L: Quote, Profile, Research, Stock Buzz) eased 0.9 percent, Cairn Energy (CNE.L: Quote, Profile, Research, Stock Buzz) dropped 4.1 percent, and Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) shed nearly 6 percent.

Gas producer BG Group (BG.L: Quote, Profile, Research, Stock Buzz) lost 4.6 percent although net profit, excluding one-off items, beat forecasts in rising 97 percent to 807 million pounds in the second quarter thanks to high gas prices.

"It may be too early, but there is an emerging view that oil may have at last found a settling point," said Howard Wheeldon, senior strategist at BGC Partners.

"If some form of stability is going to be achieved in the oil price, then it is a good reason for the market to reflect a more positive view."

Miners also eased, with Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz), Ferrexpo (FXPO.L: Quote, Profile, Research, Stock Buzz), Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz) and Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz) down between 0.2 and 3.7 percent.

UK banks were firmer following their recent strong run after Swiss bank Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) beat forecasts with its second-quarter net profit. [ID:nL23103192]

Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz), Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) and HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) were up between 0.3 and 1.4 percent.

Rolls-Royce (RR.L: Quote, Profile, Research, Stock Buzz) advanced 2.2 percent after the engine maker met forecasts with an 8 percent rise in first-half profit and promised more growth and a 10 percent dividend hike.

Scottish & Southern Energy (SSE.L: Quote, Profile, Research, Stock Buzz) shed 5.7 percent after it said it expected adjusted pretax profit to show a modest rise in the year to March 2009. (Additional reporting by Michael Taylor; editing by Rory Channing)

Europe shares extend losses, tracking U.S. futures

FRANKFURT, July 24 (Reuters) - European shares extended losses in early afternoon trading on Thursday, tracking weaker Wall Street stock index futures.

At 1113 GMT, the FTSEurofirst 300 index was 1.2 percent lower at 1,175.01 points.

Daimler (DAIGn.DE: Quote, Profile, Research, Stock Buzz) was the leading loser, down more than 11 percent on disappointment with the German car maker's outlook unveiled together with quarterly earnings broadly in line with market expectations.

Heavyweight energy shares fell as the price of crude oil held below $125 a barrel.

Shares in Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) climbed more than 5 percent after the Swiss bank's quarterly earnings beat market consensus.

Futures NDc1 SPc1 NDc1 on benchmark U.S. equity indexes .DJI .SPX .IXIC eased to trade between 0.4 percent lower and 0.1 percent higher by 1113 GMT. (Reporting by Peter Starck)

Ifo hits euro, stocks; oil below $125 a barrel

Thu Jul 24, 2008 5:03am EDT

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - The price of oil steadied below $125 a barrel on Thursday and positive news on the corporate front lifted some equities, but European stocks suffered after a poor German business climate report.

The euro fell against the dollar and euro zone government bond prices jumped to break a six-session losing streak after the Munich-based Ifo economic research institute said German corporate sentiment declined by more than expected in July to its lowest level in nearly three years.

U.S. light crude for September delivery was down 28 cents at $124.14 a barrel after hitting a seven-week low of $123.89.

Prices have now fallen more than $23 a barrel from their all-time peak above $147 on July 11, easing one of the major worries facing investors and allowing for some risk appetite to return to equity markets.

"We do not see any factors to push up (oil) prices at all at the moment," said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo.

The Ifo report, however, hit European stocks, which had already been struggling because of their heavily energy-related sectors.

The pan-European FTSEurofirst 300 was down 0.8 percent.

Earlier, Japan's Nikkei average .N225 rose 2.2 percent to a four-week closing high, as Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) and other carmakers led gains by exporters on a softer yen versus the dollar and the drop in oil prices.

Morgan Stanley said in a note that it was scrapping its "cautious" stance on banks and diversified financials sector and moving to "neutral".

KINGFISHER, LSE RISE

Kingfisher (KGF.L: Quote, Profile, Research, Stock Buzz) surged more than 10 percent after Europe's biggest home improvements retailer reported a 0.2 percent rise in second-quarter like-for-like sales at its B&Q chain in the UK and improved gross margins in both its UK and French businesses. [ID:nL24902127]

However, British retail sales slumped in June at the sharpest monthly rate since the series began in 1986, more than wiping out May's record rise and bringing three-month growth to its slowest since late last year. [ID:nL4056396]

Within the retail sector, Marks & Spencer (MKS.L: Quote, Profile, Research, Stock Buzz) slipped 2.4 percent and Sainsbury (SBRY.L: Quote, Profile, Research, Stock Buzz) and Tesco (TSCO.L: Quote, Profile, Research, Stock Buzz) both dipped 1.1 percent.

U.S. home sales figures and weekly jobless claims later in the day will provide further clarity on the health of economies.

Index heavyweight Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) extended the previous session's recovery, rising 1.1 percent. The mobile phone group announced on Wednesday a surprise billion-pound share buyback programme after its stock fell a day earlier on a weaker-than-expected trading update.

London Stock Exchange (LSE.L: Quote, Profile, Research, Stock Buzz) rose 6.6 percent after Morgan Stanley upgraded the stock to "equal-weight" from "underweight".

That lifted the DJStoxx European banks index despite the overall falls.

The benchmark added 290.38 points to end at 13,603.31. The broader Topix climbed 2.2 percent to 1,332.57.

OIL STEADY, DOLLAR RISE, BONDS JUMP

Oil dipped to seven week lows due to increasing signs that high prices and economic weakness are slowing demand.

U.S. light crude fell as low as $123.62 a barrel, the lowest since early June. It was trading at $124.83 later.

Crude has now fallen more than $23 a barrel from its record high peak above $147 on July 11.

"We do not see any factors to push up (oil) prices at all at the moment," said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo.

The euro hit a two-week low against the dollar after the slew of soft euro zone data cooled expectations of higher interest rates.

The euro was down a slender 0.1 percent on the day at $1.5665. It earlier slipped as low as $1.5637 immediately after the Ifo report.

Two-year euro zone bond yields were 14 basis points lower at 4.453 percent, while 10-year bond yields were 7 basis points lower at 4.590 percent.

German Business Confidence And U.K. Retail Sales Sink

Daily Forex Fundamentals | Written by DailyFX | Jul 24 08 10:59 GMT |

Fundamental Headlines

GBPUSD - U.K. retail sales fell 3.9% in June from a record high 3.6% the month prior, the most since at least 1986. The decline was led by a 6.9% drop in apparel purchases as many Britons started buying seasonal items in May due to abnormally warm weather. Food sales also declined 3.6% as costs for basic staples like rice remains at record levels. However, as long as inflation concerns remain the BoE may leave rates unchanged for the remainder of the year.

EURUSD - The July German IFO -business indicator fell to 97.5 from 101.3 the month prior, as rising inflation, higher interest rates and a slowing global economy weigh on business leaders. It was the lowest reading in almost three years for the survey of 7,000 executives. Meanwhile, the regions economy continues to show signs of slowing down as the Euro-Zone PMI composite fell to 47.8 from 49.3, the lowest level since March 2006. The downside risks of the economy may keep the ECB from another rate hike, especially with oil prices easing.

USDJPY- Japan's adjusted merchandise trade balance surplus decline to ¥138.6 billion from 362.2 billion as exports fell 1.7%. Slowing demand for cars and electronics worldwide saw demand fall to the lowest in more than four years. Rising inflation across Asia is weighing on emerging market demand which has been the source of growth for the country.

Housing Bill Will Extend Federal Role In Markets (link) - Wall Street Journal
States Slammed By Shortfalls (link) - Wall Street Journal
Crude And Food Falls Help Lift Equities (link) - Financial Times
Euro Declines To Two-Week Low Against Dollar As Confidence Falls (link) - Bloomberg
Credit Suisse Earnings Beat Analysts' Estimates; Shares Climb (link) - Bloomberg

DailyFX

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USD Remains Strong

Daily Forex Fundamentals | Written by Crown Forex | Jul 24 08 10:54 GMT |

Finally the bill that was passed by U.S Treasury Secretary Henry Paulson was approved that Mr. Paulson can support Fannie Mae and Freddie Mac financially as he believes that this will help regain confidence of Americans. Obviously as investors see that the financial markets are starting to become supported, they gain faith in the dollar causing it to remain appreciating in the markets while they also enter the equities market.

The euro is weak versus the gaining greenback as business sentiment in Germany falls while the current account seasonally adjusted for the month of May came in showing that the deficit had widened to 7.3 billion from the prior -0.3 billion as a result of soaring prices of energy products. The EUR/USD is currently trading in an oversold area on a daily basis using the stochastic oscillators at 1.5687 while recording a high of 1.5707 and a low of 1.5637.

The British economy released their retail sales for the month of June coming in at -3.9% worse than the revised prior reading of 3.6% from 3.5% while expectations were at -2.6%. The release of the data deteriorated the sterling as investors continue to lose confidence in the economy as they see it falling. The GBP/USD reached a support at 1.9862 and struggled to breach it while reversing the trend and currently trading at 1.9883 while recording a high of 1.9988 and a low of 1.9832.

The yen is still trading in an overbought area at 107.62 while currently in the markets there is seen unwinding of carry trades as investors sell high yielding currencies and buy low yielding currencies like the yen. The USD/JPY recorded a high of 107.97 and a low of 107.57.

Crown Forex

disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

Euroland: Surveys Smell of Recession

Daily Forex Fundamentals | Written by Danske Bank | Jul 24 08 10:34 GMT |

Overview: July business surveys out of Euroland this morning surprised significantly on the downside: Euro-land Service PMI declined from 50.1 in June to 47.0 (DB: 48.1, Cons: 49.0); Manufacturing PMI declined from 49.2 to 49.0 (DB 48.1, Cons: 49.7); and the German ifo business climate survey dropped from a revised 101.2 in June to 97.5 in July (DB: 99.2, Cons: 100.1).

The data significantly added to the impression that economic growth - in Germany too - is slowing at a fast clip. Not only did the new data indicate that Euroland economic activity is now stagnating, they also suggest that the European economy could be about to slide into a recession, should the business surveys deterio-rate further in the coming months.

Details: The Flash PMI estimates included country details on Germany and France. The German data was the least negative - at least on the surface. German Service PMI picked up to 53.3 in July from 52.1 in June, indicating that the German service sector continues to expand, albeit at a moderate pace. This positive sur-prise was, however, overshadowed by a decline in the German Manufacturing PMI from 52.9 to 50.9 and the even steeper decline in the German ifo index. The details of the German Manufacturing PMI reveal an even weaker picture than portrayed by the headline, as the New Orders index saw an unusually deep plunge from 52.3 in June to 42.3 in July. With output still not contracting (50.6 reading in the Output index), the German manufacturing sector seems to have an ongoing inventory problem, suggesting that production cuts will be necessary to bring demand and supply into balance going forward.

The French data were outright weak. The Manufacturing index declined from 49.2 in June to 47.3 in July, while the Service index declined from 50.1 in June to 47.0 in July. These data suggest that France may be very close to a recession.

Assessment & Outlook: Overall, the PMI's suggest that semi-annual growth in Euroland is tracking close to zero. That said, we are likely to see negative growth rates as early as Q2. This will in part reflect genuine weakness, and in part be a payback for the strong Q1 growth, which was largely carried by technical factors such as heavy inventory-building in Germany, better-than-usual weather, etc. The interesting thing is that today's data lower the baseline for growth in Q3, and thereby increase the risk of a second quarter of con-traction in Euroland GDP growth (see for instance Research Germany: Recession looming, July 16).

The recent weeks' retrenchment in the commodity market combined with today's weaker-than-expected survey data lowers the risk that the ECB will deliver more hikes this year. We continue to see the central bank on hold for a prolonged period.

Danske Bank

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This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets' research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Euro-Zone Fears To Increase

Daily Forex Fundamentals | Written by Investica | Jul 24 08 10:32 GMT |

The weak Euro-zone data will reinforce fears and continue to limit the scope for Euro gains in the near term

The Euro was unable to push back above 1.58 on Wednesday and weakened to test support below 1.57. Oil dipped to a 7-week low which provided support to the dollar while a sharp drop in gold prices was also an important positive influence.

Markets have moved back towards pricing in Federal Reserve interest rate increases during the Autumn and will be looking to assess whether the data provides any justification for a tighter stance. A weak set of data would trigger renewed doubts over the possibility of an interest rate hike this year which would tend to undermine the dollar.

The Euro-zone industrial orders data was weaker than expected on Wednesday with a sharp monthly decline which will maintain unease over economic trends. The dollar held slightly stronger than 1.57 in early Europe on Thursday.

The German IFO survey weakened to 97.5 in July from 101.3 which was the lowest reading for nearly three years and will reinforce fears over a sharp Euro-zone deterioration. The Euro-zone PMI data was also weak with the flash July indices well below the 50.0 level. The French data was notably weak and the Euro dipped to 1.5640 following the data before a recovery back to 1.5680

Investica
http://www.investica.co.uk

Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.

Technical Analysis Daily: USD/JPY

Daily Forex Technicals | Written by iFOREX.bg | Jul 24 08 10:51 GMT |

USD/JPY 107.60

USD/JPY Open 106.87 High 107.97 Low 107.14 Close 107.90

The US Dollar continued rising also against the Japanese Yen from yesterday's bottom 107.14 to today's top 107.97, which are the first support and resistance levels respectively for the currency couple today. If the positive trend continues, next resistance further up is expected at 109.50, the break of which would open potential drop towards 110.20. In downward direction next support further down is expected at 105.45, followed by 104.80.

Technical resistance levels: 108.00 108.90 109.50
Technical support levels: 107.15 106.40 105.55

Trading range: 107.50 - 108.10

Trend: Upward

Buy at 107.60 SL 107.30 TP 108.00

iFOREX.bg Forecasts and Trading Signals
http://www.zifx.com

Forex Brokers Overnight News Recap: Ifo Index, UK Retail Sales Fall Further Than Expected

News Recap | Written by CEP News | Jul 24 08 10:47 GMT |

(CEP News) - A weaker-than-expected business confidence index in Germany and Italy along with weakening manufacturing and services PMIs across the euro zone highlighted Thursday morning's euro zone economic news as UK retail sales contracted sharply. Further east, markets saw an unexpected contraction in the Japanese trade balance along with a bleak assessment of the Japanese economy from a BOJ board member.

According to Germany's Ifo Institute for Economic Research, the business climate indicator for Germany fell to 97.5 in July, down from both the 100.1 level expected and the 101.2 figure recorded in the previous month. June's reading was revised down from an initial figure of 101.3. Looking at the sub-components of the indicator, the current assessment slid down to 105.7 from 108.3. Economists had expected a more moderate fall to 106.5 for the month.

At the same time, the expectations component declined to 90.0 against forecasts of a 93.2 print for July. The previous month had recorded an expectations level of 94.6, revised down from 94.7 previously released.

"The firms are much more dissatisfied with their current business situation and they are clearly more reserved regarding the six-month outlook," Ifo President Hans-Werner Sinn said in a pres release. "These results suggest that the economic upswing is coming to an end."

According to the Office for National Statistics (ONS), retail sales in UK declined by a record 3.9% in June on a monthly basis, down from both the 2.6% decline forecast and the 3.6% increase recorded in the previous month. May's retail sales figure was revised down from a previous growth rate of 3.5%.

In annualized terms, retail sales gained only 2.2% for the month. Economists had expected a growth rate of 4.4% in July following the 7.9% increase seen in May, revised down from 8.1%.

According to advanced estimates from Markit Economics, the German purchasing managers' index for manufacturing fell more than expected to 50.9 in July. Economists had expected a fall only to 52.0 from June's 52.6 level. The manufacturing PMI level is the lowest since August 2005.

Conversely, the German services PMI surprised to the upside, rising to 53.3 after slipping to 52.1 in June. The consensus had called for a further decline in the services indicator to 51.5 for the month.

On Thursday, Markit Economics reported that the French purchasing managers' indexes for both manufacturing and services surprised to the downside in July. According to preliminary estimates, the French manufacturing PMI fell to a five-year low 47.3, down from both the 49.0 expected and the 49.2 figure observed in June. Meanwhile, the services PMI slid all the way to 47.0 from June's 50.1 level. Economists had only expected a decline to 49.7 for the month. July's service indicator level is the lowest recorded in the history of the series.

The French business confidence indicator continued to slide in July as it dropped further to a reading of 98, marking its lowest level since May 2005, according to the National Institute for Statistics and Economic Studies (INSEE). Economists had expected a decline in the sentiment indicator to 100 following June's fall to 101. June's reading was revised down from an initial reading of 102.

Following the release of the French and German purchasing managers' indexes, Markit Economics released its advanced estimates for the euro zone. According to the estimates, the manufacturing PMI for the monetary union fall all the way to 47.5 in July. The consensus forecast had called for a more moderate decline to 48.8 following June's slide to 49.1.

The services PMI also surprised to the downside in July, decreasing to 48.3 against expectations of a 49.0 reading for the month. The index had fallen to 49.1 in June. Taken together, the PMI composite came in at 47.8 for July, down from both the 49.0 figure expected and the 49.3 level recorded in the previous month.

On Thursday, the European Central Bank reported that the euro zone current account deficit rose to €21.4 billion in May, up from both the €6.0 billion deficit expected and the €7.4 billion deficit figure recorded in the previous month. April's reading was revised down from an initial deficit level of €9.2 billion. In seasonally adjusted terms, the ECB reported that the euro zone current account fell to a deficit of €7.3 billion in May after rising to a surplus of €1.5 billion in the previous month. April's figure was revised up from an initial reading of -€0.3 billion.

On Thursday, the Institute for Studies and Economic Analyses (ISAE) reported that Italian business confidence declined further in July to 83.5. The consensus had called for a less pronounced fall in the indicator to 86.5 after slipping to 86.7 in the previous month. June's sentiment level was revised down from an initial reading of 87.1.

According to the Central Statistics Office (CSO), Irish producer prices continued to see a decline in June, falling 2.8% year-over-year in June following May's 3.0% decrease. On a monthly basis, Irish PPI rose 0.9%, up from May's 0.8% growth rate.

In an interview with Italian newspaper La Repubblica published on Thursday, European Commissioner for Economic and Monetary Affairs Joaquin Almunia stressed euro area governments should help, rather than criticize, the European Central Bank in the fight against surging inflation. Almunia also said that the current strength of the euro was a "real problem" and emphasized that the euro area needed to unite on the exchange rate message and speak with a "single voice". Furthermore, the EU Commissioner speculated that the U.S. dollar could fall further and said the yuan was undervalued.

On Thursday, Statistics Sweden announced that the Swedish unemployment rate reached 8.1% in June, representing 416,000 unemployed individuals. Economists had only expected a rise in the unemployment rate to 7.3% after it dipped to 5.9% in the previous period.

Statistics Sweden also said producer price inflation accelerated to 0.5% month-over-month in June, up from both the 0.4% growth rate expected and the 0.1% price increase seen in the previous month. Year-over-year, Swedish PPI increased 3.0%. However, economists had expected a growth rate of 2.9%, unchanged from May's reading.

According to the results of a survey conducted by Statistics Denmark, consumer confidence in the country fell more than expected to -9.7 in July. Economists had only expected a fall to -7.5 after the sentiment indicator slipped down to -6.6 in June.

Speaking at a meeting of business executives in Aomori, Bank of Japan board member Atsushi Mizuno said the government could soon announce a moderate recession in Japan. "The fog hanging over Japan's economy will stick around for the time being," said Mizuno, citing weakening consumer spending data. Nevertheless, there are some positive interpretations of the BOJ keeping rates at the accommodative 0.50% level, he said. However, it is important to keep in mind the side effects of low rates.

According to the Japanese Finance Ministry on Thursday, the merchandise trade balance totalled ¥138.6 billion in June despite forecasts for a widening to ¥500.0 billion from the revised ¥362.2 billion reading in May. Prior to the revision, the balance was ¥365.6 billion. On an adjusted basis, the merchandise trade balance for June was ¥135.4 billion compared to forecasts for a contraction to ¥342.7 billion from a revised ¥520.1 billion in May. Prior to revisions, the adjusted balance was ¥642.3 billion.

After the U.S. House of Representatives passed a housing bill including provisions for the creation of a new GSE regulator and a liquidity backstop to help the beleaguered Fannie Mae and Freddie Mac, U.S. Treasury Secretary Paulson expressed his gratitude for the bills having passed quickly.

JP Merchandise Trade Balance Total June +¥138.6B vs. Exp: +¥500.0B Revised: +¥362.2B Prior: +¥365.6B

JP Adjusted Merchandise Trade Balance June +¥135.4B vs. Exp: +¥342.7B Revised: +¥520.1B Prior: +¥642.3B

FR Business Confidence Indicator July 98 vs. Exp: +100 Revised: 101 Prior: +102

FR Production Outlook Indicator July -34 vs. Exp: -17 Prior: -15

FR Own-Company Production Outlook July +2 vs. Exp: +4 Revised: +6 Prior:+ 7

FR PMI Manufacturing July Preliminary +47.3 vs. Exp: +49.0 Prior: +49.2

FR PMI Services July Preliminary +47.0 vs. Exp: +49.7 Prior: +50.1

DE PMI Manufacturing July Advance +50.9 vs. Exp: +52.0 Prior: +52.6

DE PMI Services July Advance +53.3 vs. Exp: +51.5 Prior: +52.1

IT Business Confidence July +83.5 vs. Exp: +86.5 Revised: +86.7 Prior: +87.1

DE IFO - Business Climate July +97.5 vs. Exp: +100.1 Revised: +101.2 vs. Prior: +101.3

DE IFO - Current Assessment July +105.7 vs. Exp: +106.5 Prior:+ 108.3

DE IFO - Expectations July +90.0 vs. Exp: +93.2 Revised: +94.6 Prior:+94.7

EU ECB Euro-Zone Current Account (SA) May -€7.3 vs. Revised: -€1.5B Prior: -0.3B

EU PMI Manufacturing July Advance 47.5 vs. Exp: 48.7 Prior: 49.2

EU Euro-Zone Current Account (NSA) May Exp: -6.0B Prior: -9.2B

EU PMI Services July Advance 48.3 vs. Exp: +48.8 Prior:+ 49.1

EU PMI Composite July Advance 47.8 vs. Exp: +49.0 Prior:+ 49.3

GB Retail Sales (M/M) June -3.9% vs. Exp: -2.6% Revised: +3.6% Prior: +3.5%

GB Retail Sales (Y/Y) June +2.2% vs. Exp: +4.4% Revised: +7.9% Prior: +8.1%

By Erik Kevin Franco, efranco@economicnews.ca and Todd Wailoo, twailoo@economicnews.ca, edited by Nancy Girgis, ngirgis@economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.

Currency Technical Report

Daily Forex Technicals | Written by FX Greece | Jul 24 08 10:42 GMT |

EUR/USD

Resistance : 1,5700-15/ 1,5740/ 1,1,5765-70/ 1,5800-10
Support : 1,5630-40/ 1,5600/ 1,5570/ 1,5520

Comment : The area of 1,5700-20 could not lead to a reaction over 50 pips, indicating weakness and targets area now at 1,5570-5630. According to the cycles in the daily chart and the support levels (lower Bollinger, trend line MA), there is high possibility for reactions.

A move below 1,5570 with a daily close, would indicate the intention to reach lower levels and the retracement scenario to the base of 1,5300-5400, will be back in the game.

According to the indications mentioned above, the area of 1,5600 will not be easily breached.

First resistance is found at 1,5700-15 followed by 1,5760-70. Next target will be at 1,5800, levels where the trend should be reversed… We will wait for reversal signs…

TRADING EUR/USD

SWING TRADING : We will use a possible decline resumption towards 1,5630 until 1,5570 area for buy positions, with stops below 1,5500 and target at 1,5800. We could add positions at an upward break of 1,5715 area…

INTRADAY TRADING : Retracements towards 1,5630-40 and 1,5600-10 areas, could be used for buy positions, with stops below 1,5565 and target at 1,5710-15 and 1,5760-70. Sell opportunities will emerge at 1,5760-70, adding more positions at 1,5800-10 and setting our stops above 1,5835…

GBP/USD

Resistance : 1,9870/ 1,9900/ 1,9930/ 1,9970/ 2,0020
Support : 1,9830-40/ 1,9790-00/ 1,9750/ 1,9700

Comment : The area of 2.0000 was tested once again as a resistance level, and then the pair moved downwards. The area of 1,9830 is being tested, and judging from the upward channel that sets the move, those levels will not be easily breached. First important resistance for today is found at 1,9900 , followed by the area of 1,9960. A downward break of 1,9800, could lead to 1,9700 area…

TRADING GBP/USD : Buy positions will be tried at the important resistance level of 1,9830, with stops below 1,9780. Our target will be at 1,9900… Sell positions will be tried at 1,9900 and 1,9950 with stops above 1,9985 and target at a retracement to 1,9830 area…

USD/JPY

USD/CHF

FX Greece

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Euro Tumbles Then Recovers As IFO Hits A 3 Year Low - No More Hikes From ECB?

Daily Forex Fundamentals | Written by DailyFX | Jul 24 08 09:58 GMT |

Talking Points

Japanese Yen: tight ranges just below 108.00
Euro: drops to 1.5650 as IFO tumbles below 100
British Pound: Retail Sales much weaker than forecast
US Dollar: Jobless claims and Existing homes on tap

Euro Tumbles Then Recovers as IFO Hits a 3 Year Low - No More Hikes From ECB?

The IFO survey of German consumer confidence fell to a three year low piercing through the psychologically key 100 figure as it printed at 97.5 versus forecasts of 100.1. Sentiment has turned sharply lower as the German economy has finally succumbed to the triple punch combination of higher oil prices, higher interest rates and higher exchange rates.

Germany has been the primary driver of growth in the EZ and tonight's data bodes badly for the region as a whole. Earlier in the night markets saw a big plunge in French business confidence and a much larger uptick in Spanish unemployment to 10.4% indicating that the environment in the rest of the 15 member union is even worse. Given such rapidly deteriorating economic conditions its is difficult to imagine that the ECB would be willing to tighten further and risk tipping the worlds largest economic zone into a full blown recession.

Interestingly enough the EURUSD had a relatively minor reaction to the data recouping most of its losses within an hour of the release. FX traders speculated that the reading in sentiment may have been skewed by record high oil prices and with crude dropping more than $20/bbl since the start of this month, IFO would rebound in August. Nevertheless, tonight's news cannot be viewed as anything but negative for the single currency, especially if the assumption of a rebound next month proves false which would suggest that the contraction in the EZ economy is more serious than many euro bulls believe.

In UK the news was not much brighter as Retail Sales dropped by 3.9% versus -2.6% expected as purchases of apparel and food declined markedly. The UK consumer is clearly feeling pinched and although the BoE monetary policy is unlikely to ease before the year end, the situation on the street is becoming more troubling by the day as demand continues to contract. If the recent drop in oil prices provides a boost to spending in the fall then BoE will maintain its neutral stance. However if conditions worsen materially Mr. King and company may have to take Mr. Blanchflower's advice and lower rates quickly.

In North America today jobless claims will once again be key as the two weeks of seasonal adjustments for auto retooling plants now pass and traders could get a clearer picture of US labor markets. Finally it will be interesting to see if US currency traders take the same sanguine view of overnight news or perhaps drive the euro and cable lower in delayed reaction to the data.

DailyFX

Disclaimer

European Market Update

Daily Forex Fundamentals | Written by Trade The News | Jul 24 08 09:51 GMT |

European Sentiment Shows Signs of Decay

ECONOMIC DATA

FR July Business Confidence Indicator: 98 v 100e || Prior revised from 102 to 101
FR July Production Outlook Indicator: -34 v -17e
FR July Own-Company Production: 2 v 4e || Prior revised from 7 to 6
FR July Preliminary Manufacturing PMI: 47.3 v 49.0e
FR July Preliminary Services PMI: 47.0 v 49.7e

SP Q2 Unemployment Rate: 10.44% v 9.95%e

IT July Business Confidence: 83.5 v 86.5e || Prior revised from 87.1 to 86.7

SW June PPI: M/M 0.5% v 0.4%e || Y/Y 3.0% v 2.9%e
SW June Unemployment Rate: 8.1% v 7.3%e

GE July Advanced Manufacturing PMI: 50.9 v 52.0e
GE July Advanced Services PMI: 53.3 v 51.5e
GE IFO Business Climate: 97.5 v 100.1e || Prior revised from 101.3 to 101.2
GE IFO Current Assessment: 105.7 v 106.5e
GE IFO Expectations: 90.0 v 93.2e || Prior revised from 94.7 to 94.6

EU July Advanced Manufacturing PMI: 47.5 v 48.7e
EU July Advanced Services PMI 48.3 v 48.8e
EU July Advanced Composite PMI: 47.8 v 49.0e
EU May Current Account nsa: -€21.4B v -€6.0Be || Prior revised from -€9.2B to -€7.4B
EU May Current Account: -€7.3B v €1.5B prior || Prior revised to €1.5B from -€300M

UK June Retail Sales: M/M -3.9% v -2.6%e || Prior revised from 3.5% to 3.6% |||| Y/Y 2.2% v 4.4%e || Prior revised form 8.1% to 7.9%

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

In sector rotation overnight Morgan Stanley raised the European banking sector to Neutral from Cautious overnight, and cut the Media & Internet sector to In-Line from Attractive. In equity news Credit Suisse [CSGN.SZ] reported their Q2 Net at CHF1.22B, above consensus estimates of CHF615Me. Core revenue rose to CHF7.83B from CHF3.02B a year ago, while net new assets were CHF17.4B. The CFO said that he expects market conditions to remain volatile, but noted that the company is well positioned to deal with such an environment. Shares opened higher by over 5%. TeliaSonera [TLSN.SW] reported Q2 revenue of SEK25.3B, in line with the SEK25.2B consensus. Net Profit was SEK4.13B, shy of the SEK4.36B consensus estimate, while EBITDA was in line with estimates at SEK8.0B. The company maintained its FY08 outlook, noting that overall market trends remained unchanged in Q2. Shares opened higher by over 2.5%. Pernod Ricard [RI.FR] reported Q4 revenue of €1.5B, in line with the €1.52B consensus. The company guided full-year organic revenue growth of 8.7%, up slightly from its previously guidance of 8.6%. Shares opened higher by over 5%. BG Group [BG.UK] reported Q2 net income of £807M, in line with the £800M consensus. Revenue rose to £3.21B from £2.16B a year ago, while operating profit rose to £1.43B from £747M a year ago. Shares opened lower by over 2.5%. Rolls-Royce [RR.UK] reported 1H net income of £309M, above estimates of £287M, and revenue of £4.05B, above estimates of £3.92B. The company's order book rose by 17% y/y to £53.5B. Shares opened higher by around 2.5%. Renault [RNO.FR] reported 1H revenue of €20.94B, in line with the €20.84B consensus, and net income of €1.47B, above estimates of €1.28B. The company reduced its 2009 sales forecast to 3M cars from the previous forecast of 3.3M cars, and noted that further economic deterioration would make meeting margin goals difficult. Shares opened higher by over 6% but declined shortly thereafter.

The printing presses were relatively dry overnight as the newspapers void of anything interesting and exciting. The Financial Times noted overnight that a Goldman (GS) fund has raised $10B to invest in leveraged buy-out loans. Handelsblatt wrote overnight that Volkswagen [VOW.GE] sees Porsche [POR3.GE] as a takeover defense.

In energy news overnight the Venezuelan Oil Minister said overnight that he sees no need for OPEC to change output despite the price drop in oil. According to an article in the Wall Street Journal, the collapse this week of SemGroup LP, a little known private oil-marketing firm, may have played a role in crude oil's 14% drop over the past 10 days. Semgroup filed for Chapter 11 bankruptcy protection Tuesday, citing amongst other financial woes a loss of at least $2.4 billion in crude-oil futures. Changes in its hedging strategies coincided with big moves in oil recently, the WSJ points out. One theory making the rounds in the market is that as SemGroup's long positions snowballed, so did the oil rally.

In the currencies the USD maintained a firmer tone during Europe as softer Euro-Zone data began to confirm that the economic upswing has come to an end. Although European officials insist that no recession is looming, the Euro, GBP and CHF currencies had trouble finding their footing. The GBP/USD retraced gains achieved during Wednesday's trading session as it fell 100+ pips to 1.9870 on weak retail sales data. The EUR/USD tested 1.5640 following weak IFO data.

In new supply overnight the DMO sold £1.05B in 1.25% 2027 index linked gilts with a real yield of 1.163% and a bid-to-cover of 1.2x. The cover compares to the 1.1x seen at the previous acution.

On the speaker front the IFO' Abberger said that he sees no danger of a recession in Germany, but noted that the economy is cooling considerably. Abberger said that 2008 consumer spending is likely to remain weak, adding that the ECB should remain on hold with interest rate policy. The IFO's Nerb said that the German economic upswing is coming to an end, adding that oil prices continue to weigh on the German economy. Nerb said that the recent oil price decline may have a positive effect on future IFO results. Nerb also noted that the Euro has impacted the index, and recommended that the ECB to keep the rates unchanged. According to La Repubblica the EU's Almunia expressed concerns about the Euro being overvalued and EU inflationary pressures.

NOTES

While the European pre-market was jam packed with earnings from some of Europe's most notable companies economic data was the guiding hand in today's session. Weaker than expected PMI readings, coupled with weaker than expected IFO data in Germany, poor French business confidence, and soft retail sales in the UK provided a somewhat grim outlook for the state of European economic and consumer sentiment. PMI readings in France and the Euro-Zone fell below the key mark of 50 for the third consecutive month, historically indicating a contractionary phase. French business confidence was at its lowest level since May of 2005 as the result of high energy prices, and the strong Euro. According to the IFO economists the weak IFO data was largely the result of high oil prices. The economists speculated that the recent decline in energy prices could have a positive effect on future IFO data, but despite this the economists seemed to project a slightly less optimistic outlook for the German economy. Finally, UK retail sales declined to their lowest m/m level on record as inflationary pressures and slower economic growth hinder consumer sentiment. Waning confidence in the outlook for European sentiment was undeniably the prevalant theme in today's European session.

Looking ahead there are a number of notables expected in the US this morning including Amerisourcebergen (ABC), Autonation (AN), Ashland (ASH), Franklin Resources (BEN), Bunge Limited (BG), Bristol-Myers (BMY), Celgene (CELG), Daimler (DAI), Dow Chemical (DOW), Ford (F), Kimberly Clark (KMB), L-3 Communications Holdings (LLL), Eli Lilly (LLY), Southwest Air (LUV), Level 3 Communications (LVLT), Medco Health Solutions (MHS), 3M (MMM), National City (NCC), Potash (POT), Rohm & Haas (ROH), Union Pacific (UNP), and Xerox (XRX).

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U.K. Retail Sales Fall 3.9%, As Inflation Saps Consumers

Daily Forex Fundamentals | Written by DailyFX | Jul 24 08 09:08 GMT |

U.K. retail sales fell 3.9% in June from a record high 3.6% the month prior, the most since at least 1986. The decline was led by a 6.9% drop in apparel purchases as many Britons started buying seasonal items in May due to abnormally warm weather. Food sales also declined 3.6% as costs for basic staples like rice remains at record levels. Inflation rising to 3.8% has sapped consumer purchasing power, and breached the BoE’s 3% threshold. However, the central bank left interest rates unchanged due to the weakening domestic demand and the biggest housing slump in at least 30 years. continues to weigh on the U.K. economy, with growth in the second quarter expected to have slowed to 1.6% from 2.3% as it inches closer to a recession. The BoE recent vote of 7-1-1 at their last policy meeting with Tim Besley voting for a rate hike and David Blanchflower a rate cut demonstrates the lack of direction for the MPC. Blanchflower called for immediate action from his fellow members as the country heads towards a recession. However, as long as inflation concerns remain the BoE may leave rates unchanged for the remainder of the year.

DailyFX

Disclaimer

Currency Pair Daily Forecasts

Daily Forex Technicals | Written by Finotec Group | Jul 24 08 09:30 GMT |

EUR/USD Daily Technical Reports

EUR/USD-market strategy can be a sell from the level 1.5650$

Technical oscillators supporting the bearish trend for the currency pair

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bearish crossover below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction. Also, MA oscillators indicate a bearish cross on the short MA line. As seen on the chart there are two tops leading downwards to a selling trend, although slightly over sold according to Bollinger.

USD/JPY Daily Technical Reports

USD/JPY-market strategy can be a buy from the level 107.10

Technical oscillators supporting the bullish trend for the currency pair

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bullish crossover above the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction. Also, MA oscillators indicate a bullish cross on the short MA line. As seen on the chart there are two bottoms leading upwards to a buying trend.

GBP/USD Daily Technical Reports

GBP/USD-market strategy can be a sell from the level 1.9843$

Technical oscillators supporting the bearish trend for the currency pair

USD/CHF Daily Technical Reports

USD/CHF-market strategy can be a buy from the level 1.0300

Technical oscillators supporting the bullish trend for the currency pair

Finotec Group Inc.
http://www.finotec.com/

Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

SemGroup Collapse May Have Had Role in Oil's Decline, WSJ Says

By [bn:PRSN=1] Jeran Wittenstein []

July 23 (Bloomberg) -- SemGroup LP, a Tulsa, Oklahoma-based oil trading company that declared bankruptcy yesterday, may have contributed to the decline of oil prices in the past 10 days, the Wall Street Journal reported, citing industry experts.

Before bankruptcy, SemGroup took short positions, or bets that oil prices would fall, as part of its hedging strategy, the newspaper reported, citing a bankruptcy court affidavit. When prices rose, SemGroup covered those bets by taking out equivalent long positions that oil would rise, the Journal said.

After SemGroup couldn't put up collateral for its bets, the company sold its futures account to Barclays Capital on July 16, the report said, citing the affidavit. SemGroup's exit removed ``upward momentum'' from the market, the newspaper said, citing Edward Meir at futures broker MF Global Ltd.

Others say SemGroup's buying stopped long before July 16, near the time oil prices began declining, the newspaper said, citing unidentified traders. Officials representing SemGroup were not immediately available when contacted by Bloomberg News after business hours.

To contact the reporter on this story: Jeran Wittenstein in San Francisco at jwittenstei1@bloomberg.net.

Read more...

Oil Steady Near 7-Week Low as Dollar Rises, Prices Curb Demand

By Grant Smith and Christian Schmollinger

July 24 (Bloomberg) -- Crude oil traded near a seven-week low as a stronger U.S. dollar diminished the appeal of commodities as a currency hedge and data showed faltering demand in the U.S. and Japan.

Futures have fallen 16 percent from a record $147.27 on July 11 as expectations for higher U.S. interest rates buoy the dollar, which traded at a two-week high against the euro today. U.S. fuel demand fell to its lowest since January 2007, Energy Department data showed yesterday, while Japanese oil imports dropped for the first time in nine months.

``There are no signs of strength in the market, which has come down hand-in-hand with the development of the euro- dollar,'' said Gerrit Zambo. ``People are cautious to go back into the market after the big drop in prices.''

Crude oil for September delivery traded at $124.52 a barrel, 8 cents higher on the New York Mercantile Exchange at 10:14 a.m. in London. It earlier fell as much as 82 cents, or 0.7 percent, to $123.62 a barrel.

Yesterday, oil dropped $3.98, or 3.1 percent, to settle at $124.44 a barrel, the lowest close since June 4.

``Oil prices are at a point that will bring about demand- side adjustments that will ultimately cause prices to be at a lower level,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney.

U.S. fuel demand averaged 19.9 million barrels a day last week, the lowest since January 2007, the Energy Department said yesterday. Japan imported 0.7 percent less oil in June than a year ago, the first decline in nine months, the Ministry of Finance said today.

Dollar High

The dollar reached 107.99 against the yen, the highest since June 26, and a two-week high of $1.5638 per euro as U.S. lawmakers approved a rescue package for U.S. mortgage guarantors Fannie Mae and Freddie Mac.

Brent crude oil for September settlement was at $125.40 a barrel, up 11 cents, on London's ICE Futures Europe exchange at 10:01 a.m. London time. It dropped $4.26, or 3.3 percent, to close at $125.29 a barrel yesterday, the lowest settlement since June 4.

Demand has declined for three straight weeks, the Energy Department report showed. U.S. fuel consumption averaged 20.3 million barrels a day in the past four weeks, down 2.1 percent from a year earlier, the department said.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net.

Read more...

Iran to Shut Abadan Crude Unit for Maintenance, Press TV Says

By Nesa Subrahmaniyan

July 24 (Bloomberg) -- Iran will shut a crude oil distillation unit at its Abadan refinery in October for planned maintenance work, Press TV said on its Web site, citing a Reuters report.

Repair works at the 180,000 barrel-a-day crude distillation unit will take place for 30 days to 40 days at the Abadan refinery, the country's largest, the report said, citing an unidentified official from state-owned National Iranian Oil Co.

Iran may import gasoline and diesel to cover shortfalls from the shutdown, according to the report.

The Middle East nation has announced plans to boost its refining capacity to 3.3 million barrels a day in 2012 from 1.56 million barrels a day, Press TV said.

The Abadan refinery can process 450,000 barrels of oil a day, and is located in the southwestern province of Khuzestan at the delta of Arvand River near the Persian Gulf, Press TV said.

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.

Read more...

China Orders Price Caps on Coal Used at Power Plants

By Wang Ying

July 24 (Bloomberg) -- China, the world's biggest coal user, ordered a cap on prices of the fuel to help power producers cope with costs as the country battles a sixth year of electricity shortages. Power companies' shares climbed.

Prices at the country's biggest coal ports, including Qinhuangdao, Tianjin and Tangshan, can't rise beyond the June 19 levels, the National Development and Reform Commission said in a statement on its Web site today.

Asian coal prices have more than doubled this year on rising electricity demand and as railroad and port bottlenecks in Australia and South Africa curb supplies. Prices at Qinhuangdao reached a record $154 a metric ton in May after China ordered the closure of small mines to cut pollution before the Olympics. The nation uses coal to generate 80 percent of its power.

``The price curbs may reduce imports and discourage smaller companies from boosting output, worsening the supply shortage,'' David Fang, a director of information at the China Coal Transport and Distribution Association, said by mobile phone from Beijing today. The curb will ``to some extent'' help power companies reduce fuel purchasing costs.''

China's power plants have been losing money because of rising coal prices and government controls on electricity tariffs. Today's announcement sent the share prices of power utilities higher while those of coal producers fell.

Share Prices

Datang International Power Generation Co. shares rose 0.4 percent to a one-month high in Hong Kong, while Huadian Power International Corp. climbed 3.2 percent, the biggest gain in two weeks. China Shenhua Energy Co., the nation's biggest coal supplier, fell 4.9 percent in Hong Kong, the biggest decline in three weeks. China Coal Energy Co. dropped 3.6 percent.

Prices of coal with an energy content of 5,500 kilocalories are capped at 860 yuan ($126) a ton at Qinhuangdao port, 840 yuan a ton at Tianjin and 850 yuan a ton at Tangshan, the commission, China's top economic planning agency, said today. Kilocalories are a measure of the amount of energy coal generates when burnt.

The government will punish any coal producers that raise prices illegally, it said.

The commission ordered a cap on prices of coal at mines on June 19. The restriction failed to prevent prices from rising at ports, which climbed 22 percent in a month, the Beijing News reported today.

Insufficient fuel supplies have forced the closure of 2.5 percent of the nation's coal-fired power plants, State Grid Corp. of China said on July 7. Government restrictions on transporting hazardous materials near Olympic venues also disrupted some coal production, Zhang Wenjiang, assistant general manager of Shenhua Group Corp., said last week.

Power Shortage

The world's fastest-expanding major economy faces such acute power shortages that electricity-sapping industries including aluminum smelters have had to halt production.

Energy supply shortages have become a ``key factor'' in holding back the nation's economic and social development, the Chinese government said in a statement yesterday.

To conserve energy and cut the nation's demand for oil, Premier Wen Jiabao ordered the nation to cut back on summer air conditioning and drive less, according to yesterday's statement. The nation will also shut more oil-fired power generators, it said.

Wen will raise a consumption tax on vehicles with large- capacity engines, according to the statement, which didn't specify the tax or the engine size. Low-emission vehicles and energy-efficient autos powered by gasoline-electric hybrid systems will get tax breaks.

The government will develop public transport, urging the public to drive at least one day less each week, the statement said. Street lamps, hotels, and public venues will have to switch to energy-efficient lights this year, the government said.

To contact the reporter on this story: Wang Ying in Beijing at wang30@bloomberg.net.

Read more...

Top U.S. Court Near Decision on Exxon Valdez Interest Payments

By Greg Stohr

July 24 (Bloomberg) -- The 19-year story of the Exxon Valdez legal fight has one more chapter still to come.

The U.S. Supreme Court in the next several days may say whether Exxon Mobil Corp. must pay $488 million in interest to tens of thousands of victims of the 1989 Alaska oil spill, the worst in U.S. history.

The high court last month reduced the punitive-damage award in the case to $507.5 million from $2.5 billion. That ruling didn't address whether fishermen and other victims also get interest dating back to 1996, and both sides in the case now want the justices to weigh in on the issue.

The interest question ``should be decided by this court and should be decided now,'' Exxon Mobil, the world's biggest energy company, argued in court papers filed earlier this month in Washington.

The issue is one that has never been addressed by the high court, according to Jeffrey Fisher, the lawyer who argued the victims' case before the justices. The question turns on a Supreme Court rule that governs interest on damage awards, a provision that isn't clear about cases involving a reduction.

The victims are seeking interest, which under federal law is 5.9 percent, dating to the original trial court judgment in 1996.

The two sides are asking the court to address the matter when it issues its formal judgment, an action that under court procedures it can take as soon as July 28. The justices have several options and could either rule on interest themselves or leave the issue for a federal appeals court.

Disputed Rule

The disputed section of the rule says that when a lower court ruling is ``modified or reversed with a direction that a judgment for money be entered below,'' the Supreme Court will address interest at the time it releases its judgment.

The victims say that language has no bearing on the Valdez case and was designed only to give interest to plaintiffs who win damages for the first time at the Supreme Court.

The group is asking the high court to declare that the rule doesn't apply. That would clear the way for the federal appeals court to award interest, a step the victims say the lower court is poised to take.

A trial judge added interest when he first issued judgment on punitive damages in 1996, after a jury had awarded $5 billion. The San Francisco-based 9th U.S. Circuit Court of Appeals eventually reduced the award to $2.5 billion without confronting the interest question. Appeals courts often don't address interest until they issue their formal ``mandate'' closing out the appeal.

Direct Order

As an alternative, the victims say the Supreme Court might instead directly order an award of interest.

Exxon Mobil is asking the justices to award interest accruing only from the date of the Supreme Court ruling, providing the victims with a fraction of the amount they seek.

The company also suggested the high court might say nothing. Exxon Mobil contends that would resolve the question in the company's favor because of the ``default rule'' that a reviewing court is the one that determines whether interest is awarded.

The 1989 Valdez spill dumped 11 million gallons of oil into Alaska's Prince William Sound, devastating wildlife and local businesses.

In its 5-3 decision on June 25, the Supreme Court reduced the punitive damages to the level of compensatory damages, or the actual harm suffered by the spill victims. The majority said a 1- 1 ratio with compensatory damages was ``a fair upper limit'' in maritime cases that don't involve intentional wrongdoing or a company effort to ``augment profit.''

`Punitive Sting'

The victims argued in court papers that, without interest, awards would lose their ``punitive sting'' during appeal.

``The practical effect of granting Exxon Mobil's request would be to reduce the punitive award allowed by this court to $257.5 million in 1996 dollars, or roughly one-half of the $507.5 million this court held the jury was entitled to award them,'' the group argued.

The group says that Exxon Mobil, by not paying the award immediately, has earned $3.9 billion on the money, based on its internal rate of return.

Exxon Mobil, represented by former U.S. solicitor general Walter Dellinger, said the high court in June ``held that $507.5 million is the legally correct amount necessary to deter Exxon and others from future oil spills.''

The company, which is based in Irving, Texas, also says those pressing the suit bear the blame for the delays in the case because they urged the trial judge to ignore higher court decisions calling for a reduction.

``There is also no reason to penalize Exxon by awarding another $488 million in damages when the substantial delay here was not in any sense Exxon's fault,'' the company argued.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

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