By Theresa Barraclough
Aug. 2 (Bloomberg) -- Japan's 10-year bonds completed a weekly gain as local stocks slumped following a U.S. report that showed the world's biggest economy grew less than economists expected last quarter.
Benchmark yields fell to a three-month low yesterday as the Nikkei 225 Stock Average declined the most in three weeks, luring investors to the relative safety of debt. Bonds also advanced as Japanese government reports this week showed wages fell, unemployment climbed to the highest in almost two years and industrial output declined.
``The market is focusing on the downside risks to the economy and the uncertainty in the financial system,'' said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. in Tokyo and the top-rated debt analyst in Japan according to Nikkei Veritas newspaper. ``The Bank of Japan has been making a point of industrial production, which suggests the Japanese economy is already in a recession.''
The yield on the 1.7 percent bond due June 2018 fell 6 basis points this week to 1.51 percent in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.520 yen to 101.632 yen. The yield dropped 2 basis points, or 0.02 percentage point, and touched 1.505 percent yesterday, the lowest since April 24.
Ten-year bond futures for September delivery rose 0.78 this week to 136.72 on the Tokyo Stock Exchange and the Nikkei 225 Stock Average fell 1.8 percent.
Japanese bond yields often move in the same direction as stocks. Benchmark 10-year yields had a correlation of 0.80 with the Nikkei 225 in the past two weeks, according to data compiled by Bloomberg. A value of 1 means the two moved in lockstep.
Slower Growth
The U.S. economy grew at a 1.9 percent annualized rate in the three months to June 30, the Commerce Department said in Washington on July 31, less than the median projection of 2.3 percent in a Bloomberg News survey.
The Japanese economy may have contracted last quarter 1.6 percent from a year earlier, Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp., wrote yesterday in a research note. The government will release the data Aug. 13.
Given ``the negative impact of higher energy and food prices on real income and spending, there should be room for modest declines in JGB yields,'' Tokyo-based Fujii wrote.
Benchmark bonds completed a monthly gain on July 31 after the Labor Ministry said monthly wages dropped for the first time this year in June, declining 0.6 percent from a year earlier.
Industrial Output
Factory output contracted 0.8 percent in the three months ended June 30, the first back-to-back decline since 2001, the Trade Ministry said July 30. The jobless rate unexpectedly climbed to 4.1 percent in June, from 4 percent in May, the statistics bureau said July 29.
Gains in government securities were limited this week on speculation inflation will keep accelerating, eroding the value of the fixed payments from debt.
Food and fuel prices are rising faster than wages, squeezing household budgets and causing consumer sentiment to drop to the lowest level in at least 26 years last month. Core consumer prices climbed 1.9 percent in June, the most in a decade, the government said last week.
``Inflation will remain a sub-theme,'' weighing on bonds, said Naka Matsuzawa, chief strategist at Nomura Securities Co. in Tokyo. ``Once the economic outlook settles, then the focus will turn back to inflation.''
Breakeven Rates
The extra yield paid by 10-year conventional government debt compared with similar-dated inflation-linked bonds fell to 26 basis points yesterday from 39 basis points two weeks ago, according to Bloomberg data. The so-called breakeven inflation rate reflects investor expectations for average annual increases in the consumer price index over the next decade.
The Ministry of Finance will sell 500 billion yen ($4.65 billion) in 10-year inflation-linked bonds on Aug. 7.
Five-year yields fell to the lowest in two weeks yesterday as the odds the Bank of Japan will raise interest rates this year dropped to 8 percent, interest-rate swaps show. The five-year yield slid 6.5 basis points this week to 1.075 percent.
The probability the central bank will increase its target rate to 0.75 percent, from 0.5 percent, was 10 percent on July 31, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps. That's down from as high as 92 percent on June 11.
Investors should buy Japan's shorter-dated notes and sell longer-maturity bonds, BNP's Shimamoto said.
The difference in yield between two-year and 10-year debt was 75 basis points yesterday, compared with 81 basis points two weeks ago, according to data compiled by Bloomberg. The gap is likely to widen to 84 basis points by the end of September, according to a Bloomberg News survey of economists and analysts.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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Saturday, August 2, 2008
Sri Lanka in Fierce Battles With Tamil Rebels Ahead of Summit
By Cherian Thomas and Anusha Ondaatjie
Aug. 2 (Bloomberg) -- Sri Lankan forces fought with Tamil Tiger rebels in the island's north before a meeting of South Asian leaders in the capital, underscoring the decision to shift the summit to Colombo because of security fears.
At least 11 soldiers and nine Liberation Tigers of Tamil Eelam rebels were killed in the fighting yesterday in the Mullaitivu district, about 250 kilometers (155 miles) north of Colombo, military spokesman Udaya Nanayakkara said in a telephone interview. The LTTE declared a 10-day cease-fire to coincide with the South Asian Association for Regional Cooperation's summit, even as the group said they will be forced to take defensive actions against military advances.
Sri Lankan President Mahinda Rajapaksa may open the two-day summit today with an appeal for assistance in fighting terrorism from the other seven leaders in the region, home to the most people affected by conflicts, according to the World Bank.
Sri Lanka's army is driving LTTE forces from camps in the north after capturing the east a year ago in the worst defeat for the rebels in their fight for a separate homeland in the island nation. Rajapaksa said July 13 his government is ready for talks with the LTTE if the rebels disarm.
Rajapaksa's government formally ended a 2002 cease-fire in January after stepping up attacks on the rebels when two rounds of peace talks failed in 2006. The group is designated a terrorist organization by India, the U.S. and European Union.
More than 70,000 people have been killed in the conflict in the country of 20 million people where Tamils make up 11.9 percent of the population and ethnic Sinhalese almost 74 percent, according to a 2001 census.
Terrorism Accord
Rajapaksa is expected to join Indian Prime Minister Manmohan Singh, Pakistan's Yousuf Raza Gilani and Saarc's other leaders to sign an accord to share intelligence on terrorism at the annual two-day summit that starts today. The agreement calls on members to give each other ``the widest possible measure'' of legal assistance in fighting crime.
Saarc, formed in 1985, also includes Nepal, Bangladesh, Bhutan, the Maldives and Afghanistan.
Economic growth slowed for the first time in a year in the first quarter as the escalating violence, including bomb attacks in Colombo, curbed spending.
India and Sri Lanka have increased naval patrols in the Palk Strait between the countries to combat the LTTE.
The Sri Lankan government shifted the venue of the summit from the central hill town of Kandy to Colombo and has deployed about 20,000 police and security personnel around the capital.
To contact the reporters on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net; Anusha Ondaatjie in Colombo at anushao@bloomberg.net
Read more...
Aug. 2 (Bloomberg) -- Sri Lankan forces fought with Tamil Tiger rebels in the island's north before a meeting of South Asian leaders in the capital, underscoring the decision to shift the summit to Colombo because of security fears.
At least 11 soldiers and nine Liberation Tigers of Tamil Eelam rebels were killed in the fighting yesterday in the Mullaitivu district, about 250 kilometers (155 miles) north of Colombo, military spokesman Udaya Nanayakkara said in a telephone interview. The LTTE declared a 10-day cease-fire to coincide with the South Asian Association for Regional Cooperation's summit, even as the group said they will be forced to take defensive actions against military advances.
Sri Lankan President Mahinda Rajapaksa may open the two-day summit today with an appeal for assistance in fighting terrorism from the other seven leaders in the region, home to the most people affected by conflicts, according to the World Bank.
Sri Lanka's army is driving LTTE forces from camps in the north after capturing the east a year ago in the worst defeat for the rebels in their fight for a separate homeland in the island nation. Rajapaksa said July 13 his government is ready for talks with the LTTE if the rebels disarm.
Rajapaksa's government formally ended a 2002 cease-fire in January after stepping up attacks on the rebels when two rounds of peace talks failed in 2006. The group is designated a terrorist organization by India, the U.S. and European Union.
More than 70,000 people have been killed in the conflict in the country of 20 million people where Tamils make up 11.9 percent of the population and ethnic Sinhalese almost 74 percent, according to a 2001 census.
Terrorism Accord
Rajapaksa is expected to join Indian Prime Minister Manmohan Singh, Pakistan's Yousuf Raza Gilani and Saarc's other leaders to sign an accord to share intelligence on terrorism at the annual two-day summit that starts today. The agreement calls on members to give each other ``the widest possible measure'' of legal assistance in fighting crime.
Saarc, formed in 1985, also includes Nepal, Bangladesh, Bhutan, the Maldives and Afghanistan.
Economic growth slowed for the first time in a year in the first quarter as the escalating violence, including bomb attacks in Colombo, curbed spending.
India and Sri Lanka have increased naval patrols in the Palk Strait between the countries to combat the LTTE.
The Sri Lankan government shifted the venue of the summit from the central hill town of Kandy to Colombo and has deployed about 20,000 police and security personnel around the capital.
To contact the reporters on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net; Anusha Ondaatjie in Colombo at anushao@bloomberg.net
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First Priority Becomes Eighth Failed Bank; SunTrust Buys Assets
By David Mildenberg and Alison Vekshin
Aug. 2 (Bloomberg) -- First Priority Bank with six branches on Florida's Gulf Coast was closed by state regulators, becoming the eighth U.S. bank to collapse this year amid failed loans and writedowns linked to a slump in home prices.
First Priority, with $259 million in assets, was shut yesterday by the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corp. sold $227 million in deposits to SunTrust Banks Inc. of Atlanta, the agency said in a statement. Six First Priority branches in Bradenton, Sarasota and Venice will open Aug. 4 as SunTrust offices, the FDIC said.
The pace of bank closings is accelerating as securities firms report more than $480 billion in writedowns and credit losses since 2007, when three banks were shuttered. Regulators in July closed IndyMac Bancorp, a California-based mortgage lender with $32 billion in assets, the third-largest bank seizure that will cost the U.S. deposit insurance fund $4 billion to $8 billion.
``The only thing sure other than death and taxes is that deposit insurance premiums will be going up as more banks fail,'' said Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine. He expects 300 U.S. banks to fail in the next several years, mainly because of mounting losses from real estate-related loans.
SunTrust, the largest bank based in Georgia, will buy Bradenton-based First Priority's deposits held for 4,000 customers for no premium, while acquiring about $42 million in assets, the FDIC said. The U.S. deposit insurance fund will pay an estimated $72 million, the FDIC said. First Priority had about $13 million in uninsured deposits in 840 accounts, although the total may be revised, the FDIC said.
`Problematic Situation'
``We are pleased to be in a position to support the FDIC in its effort to resolve a problematic situation,'' SunTrust Chief Executive Officer James Wells said in a statement. SunTrust will seek jobs for 50 employees of First Priority, the bank said.
The FDIC insures deposits of up to $100,000 per depositor per bank, and up to $250,000 for some retirement accounts at 8,494 institutions with $13.4 trillion in assets.
Homeowners who defaulted in June outnumbered those who caught up on payments as Bank of America Corp., Wells Fargo & Co. and other lenders sought to modify the loans, the Mortgage Insurance Companies of America reported July 31. The pace of foreclosures more than doubled in the second quarter from a year earlier, RealtyTrac Inc. said in July.
Lenders on the FDIC's ``problem list'' climbed to 90 in the first quarter from 76 in the fourth quarter of 2007, the agency said in May. FDIC Chairman Sheila Bair said 13 percent of listed banks may fail, while the remainder are nursed back to health or are sold off to healthier lenders.
More Failures Forecast
Bair and Comptroller of the Currency John Dugan said on July 28 they expected more lenders to fail this year as the pace of shutdowns returns to more normal levels.
The FDIC has closed 36 banks since October 2000, according to a list at fdic.gov. The U.S. shut 12 banks in 2002, the highest in the period, and 2005 and 2006 had no closures.
First Priority is the first Florida bank to fail since Guaranty National Bank in Tallahassee in March 2004, the FDIC said.
U.S. bank regulators closed Reno-based First National Bank of Nevada and Newport Beach, California-based First Heritage Bank in July; Staples, Minnesota-based First Integrity Bank and ANB Financial in Bentonville, Arkansas, in May; Hume Bank in Hume, Missouri, in March; and Douglass National Bank in Kansas City, Missouri, in January. The six lenders had about $5.89 billion in assets.
To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net
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Aug. 2 (Bloomberg) -- First Priority Bank with six branches on Florida's Gulf Coast was closed by state regulators, becoming the eighth U.S. bank to collapse this year amid failed loans and writedowns linked to a slump in home prices.
First Priority, with $259 million in assets, was shut yesterday by the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corp. sold $227 million in deposits to SunTrust Banks Inc. of Atlanta, the agency said in a statement. Six First Priority branches in Bradenton, Sarasota and Venice will open Aug. 4 as SunTrust offices, the FDIC said.
The pace of bank closings is accelerating as securities firms report more than $480 billion in writedowns and credit losses since 2007, when three banks were shuttered. Regulators in July closed IndyMac Bancorp, a California-based mortgage lender with $32 billion in assets, the third-largest bank seizure that will cost the U.S. deposit insurance fund $4 billion to $8 billion.
``The only thing sure other than death and taxes is that deposit insurance premiums will be going up as more banks fail,'' said Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine. He expects 300 U.S. banks to fail in the next several years, mainly because of mounting losses from real estate-related loans.
SunTrust, the largest bank based in Georgia, will buy Bradenton-based First Priority's deposits held for 4,000 customers for no premium, while acquiring about $42 million in assets, the FDIC said. The U.S. deposit insurance fund will pay an estimated $72 million, the FDIC said. First Priority had about $13 million in uninsured deposits in 840 accounts, although the total may be revised, the FDIC said.
`Problematic Situation'
``We are pleased to be in a position to support the FDIC in its effort to resolve a problematic situation,'' SunTrust Chief Executive Officer James Wells said in a statement. SunTrust will seek jobs for 50 employees of First Priority, the bank said.
The FDIC insures deposits of up to $100,000 per depositor per bank, and up to $250,000 for some retirement accounts at 8,494 institutions with $13.4 trillion in assets.
Homeowners who defaulted in June outnumbered those who caught up on payments as Bank of America Corp., Wells Fargo & Co. and other lenders sought to modify the loans, the Mortgage Insurance Companies of America reported July 31. The pace of foreclosures more than doubled in the second quarter from a year earlier, RealtyTrac Inc. said in July.
Lenders on the FDIC's ``problem list'' climbed to 90 in the first quarter from 76 in the fourth quarter of 2007, the agency said in May. FDIC Chairman Sheila Bair said 13 percent of listed banks may fail, while the remainder are nursed back to health or are sold off to healthier lenders.
More Failures Forecast
Bair and Comptroller of the Currency John Dugan said on July 28 they expected more lenders to fail this year as the pace of shutdowns returns to more normal levels.
The FDIC has closed 36 banks since October 2000, according to a list at fdic.gov. The U.S. shut 12 banks in 2002, the highest in the period, and 2005 and 2006 had no closures.
First Priority is the first Florida bank to fail since Guaranty National Bank in Tallahassee in March 2004, the FDIC said.
U.S. bank regulators closed Reno-based First National Bank of Nevada and Newport Beach, California-based First Heritage Bank in July; Staples, Minnesota-based First Integrity Bank and ANB Financial in Bentonville, Arkansas, in May; Hume Bank in Hume, Missouri, in March; and Douglass National Bank in Kansas City, Missouri, in January. The six lenders had about $5.89 billion in assets.
To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net
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Nissan Bucks U.S. Slump as Asians Gain Record Share
By Alan Ohnsman and Mike Ramsey
Aug. 2 (Bloomberg) -- Nissan Motor Co.'s U.S. sales gain in July propelled Asia-based automakers to a market-share record as declining demand for fuel-thirsty trucks from U.S.-based competitors pushes the industry toward its worst year since 1993.
Nissan was the only large automaker to boost sales, posting an 8.5 percent gain. Toyota Motor Corp., Asia's biggest carmaker, had a 12 percent drop, and Honda Motor Co.'s sales slid 1.6 percent. Asian brands held 49 percent of the market, as General Motors Corp., Ford Motor Co. and Chrysler LLC's U.S. brands shrank to a record low 42.7 percent, according to Autodata Corp.
``The market realignment -- moving to more cars, away from trucks -- plays to strengths of the Japanese automakers, particularly Honda,'' said Jesse Toprak, director of industry analysis for automotive research firm Edmunds.com in Santa Monica, California. ``Nissan benefited to some extent because Honda was short of inventory for some small-car models.''
U.S. auto sales fell 13 percent, including a 25 percent drop for light trucks, as gasoline prices stayed near $4 gallon amid a weak economy. July's unemployment rate rose to the highest in four years, the Labor Department said yesterday. Second-quarter economic growth, announced July 30, missed the 2.3 percent median projection in a Bloomberg survey.
Sales Drop
GM's sales dropped 26 percent, Ford's fell 15 percent and Chrysler's declined 29 percent. The three U.S.-based automakers rely more on light trucks, which include pickups, sport-utility vehicles and vans, than Asia-based competitors.
The slumping market spread across three continents as GM, Bayerische Motoren Werke AG and Nissan posted quarterly financial results yesterday that trailed analysts' estimates.
GM's $15.5 billion loss was the third worst in the 100-year history of the biggest U.S. automaker. Tokyo-based Nissan's net income plunged 43 percent, while earnings at Munich-based BMW slid by a third.
``A recovery in the North American market looks far off,'' said Yuuki Sakurai, a Tokyo-based general manager at Fukoku Mutual Life Insurance Co., which manages about $54 billion.
Sales for European brands dropped 2 percent, even as Volkswagen AG, BMW and Daimler AG's Mercedes-Benz reported gains, respectively, of 1.5 percent, 2.1 percent and 1.4 percent. European carmakers' market share rose 1 point to 8.3 percent.
Lowest Since 1992
The industry's annualized selling rate for July was 12.6 million vehicles, the lowest since April 1992, according to Autodata.
Toyota, second in U.S. sales this year behind GM, sold 197,424 vehicles, a decline from 224,058. Sales of the Toyota City, Japan-based company's light trucks tumbled 27 percent, including a 42 percent drop for the Tundra large pickup.
The company sold 8 percent fewer Prius gasoline-electric hatchbacks as it strains to meet demand for the fuel-efficient cars. The total decline adjusted for two more sales days than in July 2007 was 19 percent, Toyota said in a statement.
Toyota, which announced July 10 that it's suspending production of Tundras and Sequoia large SUVs through November, will boost supply of Corolla and Yaris small cars by 40,000 units, Bob Carter, vice president of U.S. Toyota brand sales, said in a conference call yesterday.
Toyota's market share was 17.4 percent, up 0.3 point from a year earlier, Autodata said.
Toyota's American depositary receipts fell 97 cents to $85.08 yesterday in New York Stock Exchange composite trading.
Honda
Honda, the only major automaker to expand sales this year, said sales last month fell to 138,744 from 141,048 in July 2007. It sold 22 percent fewer light trucks, with declines of 43 percent each for the Pilot SUV and Ridgeline pickup. Sales of Fit subcompacts jumped 93 percent.
``Honda is very inventory constrained on models like Civic,'' Toprak said in an interview. ``That's likely to be the case in August and September as well.''
Honda's market share rose 1.4 points to 12.2 percent. The Tokyo-based automaker said its total adjusted for sales days declined 9.2 percent.
Honda's ADRs declined 6 cents to $31.93 in New York yesterday.
Nissan, Hyundai
Nissan, Japan's third-largest automaker, sold 95,319 vehicles last month, rising from 87,877, spokesman Fred Standish said in an interview yesterday.
Sales rose 16 percent for Nissan's Sentra small cars and 14 percent for its Versa subcompacts. The automaker increased truck sales 18 percent, helped by the new Rogue crossover SUV and a 24 percent gain for its Frontier small pickup.
Nissan's market share grew 1.7 percent to 8.4 percent.
Hyundai Motor Co., South Korea's largest automaker, sold 40,703 vehicles, down 6.5 percent from a year earlier. Kia Motors Corp., a Hyundai affiliate, increased sales 5 percent to 28,021.
Nissan's American depositary receipts fell 91 cents, or 5.9 percent, to $14.40 yesterday in Nasdaq Stock Market composite trading. Hyundai and Kia shares don't trade on a primary U.S. exchange.
Ford-affiliated Mazda Motor Corp. said sales dropped 13 percent, hurt by lower sales of CX-7 and CX-9 SUVs and the Mazda6 sedan that's being replaced this month.
Fuji Heavy Industries Ltd.'s Subaru reported a 5.4 percent increase. Mitsubishi Motors Corp.'s sales dropped 6.8 percent, while Japan's Suzuki Motor Corp. posted a 2 percent increase from a year ago.
To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net
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Aug. 2 (Bloomberg) -- Nissan Motor Co.'s U.S. sales gain in July propelled Asia-based automakers to a market-share record as declining demand for fuel-thirsty trucks from U.S.-based competitors pushes the industry toward its worst year since 1993.
Nissan was the only large automaker to boost sales, posting an 8.5 percent gain. Toyota Motor Corp., Asia's biggest carmaker, had a 12 percent drop, and Honda Motor Co.'s sales slid 1.6 percent. Asian brands held 49 percent of the market, as General Motors Corp., Ford Motor Co. and Chrysler LLC's U.S. brands shrank to a record low 42.7 percent, according to Autodata Corp.
``The market realignment -- moving to more cars, away from trucks -- plays to strengths of the Japanese automakers, particularly Honda,'' said Jesse Toprak, director of industry analysis for automotive research firm Edmunds.com in Santa Monica, California. ``Nissan benefited to some extent because Honda was short of inventory for some small-car models.''
U.S. auto sales fell 13 percent, including a 25 percent drop for light trucks, as gasoline prices stayed near $4 gallon amid a weak economy. July's unemployment rate rose to the highest in four years, the Labor Department said yesterday. Second-quarter economic growth, announced July 30, missed the 2.3 percent median projection in a Bloomberg survey.
Sales Drop
GM's sales dropped 26 percent, Ford's fell 15 percent and Chrysler's declined 29 percent. The three U.S.-based automakers rely more on light trucks, which include pickups, sport-utility vehicles and vans, than Asia-based competitors.
The slumping market spread across three continents as GM, Bayerische Motoren Werke AG and Nissan posted quarterly financial results yesterday that trailed analysts' estimates.
GM's $15.5 billion loss was the third worst in the 100-year history of the biggest U.S. automaker. Tokyo-based Nissan's net income plunged 43 percent, while earnings at Munich-based BMW slid by a third.
``A recovery in the North American market looks far off,'' said Yuuki Sakurai, a Tokyo-based general manager at Fukoku Mutual Life Insurance Co., which manages about $54 billion.
Sales for European brands dropped 2 percent, even as Volkswagen AG, BMW and Daimler AG's Mercedes-Benz reported gains, respectively, of 1.5 percent, 2.1 percent and 1.4 percent. European carmakers' market share rose 1 point to 8.3 percent.
Lowest Since 1992
The industry's annualized selling rate for July was 12.6 million vehicles, the lowest since April 1992, according to Autodata.
Toyota, second in U.S. sales this year behind GM, sold 197,424 vehicles, a decline from 224,058. Sales of the Toyota City, Japan-based company's light trucks tumbled 27 percent, including a 42 percent drop for the Tundra large pickup.
The company sold 8 percent fewer Prius gasoline-electric hatchbacks as it strains to meet demand for the fuel-efficient cars. The total decline adjusted for two more sales days than in July 2007 was 19 percent, Toyota said in a statement.
Toyota, which announced July 10 that it's suspending production of Tundras and Sequoia large SUVs through November, will boost supply of Corolla and Yaris small cars by 40,000 units, Bob Carter, vice president of U.S. Toyota brand sales, said in a conference call yesterday.
Toyota's market share was 17.4 percent, up 0.3 point from a year earlier, Autodata said.
Toyota's American depositary receipts fell 97 cents to $85.08 yesterday in New York Stock Exchange composite trading.
Honda
Honda, the only major automaker to expand sales this year, said sales last month fell to 138,744 from 141,048 in July 2007. It sold 22 percent fewer light trucks, with declines of 43 percent each for the Pilot SUV and Ridgeline pickup. Sales of Fit subcompacts jumped 93 percent.
``Honda is very inventory constrained on models like Civic,'' Toprak said in an interview. ``That's likely to be the case in August and September as well.''
Honda's market share rose 1.4 points to 12.2 percent. The Tokyo-based automaker said its total adjusted for sales days declined 9.2 percent.
Honda's ADRs declined 6 cents to $31.93 in New York yesterday.
Nissan, Hyundai
Nissan, Japan's third-largest automaker, sold 95,319 vehicles last month, rising from 87,877, spokesman Fred Standish said in an interview yesterday.
Sales rose 16 percent for Nissan's Sentra small cars and 14 percent for its Versa subcompacts. The automaker increased truck sales 18 percent, helped by the new Rogue crossover SUV and a 24 percent gain for its Frontier small pickup.
Nissan's market share grew 1.7 percent to 8.4 percent.
Hyundai Motor Co., South Korea's largest automaker, sold 40,703 vehicles, down 6.5 percent from a year earlier. Kia Motors Corp., a Hyundai affiliate, increased sales 5 percent to 28,021.
Nissan's American depositary receipts fell 91 cents, or 5.9 percent, to $14.40 yesterday in Nasdaq Stock Market composite trading. Hyundai and Kia shares don't trade on a primary U.S. exchange.
Ford-affiliated Mazda Motor Corp. said sales dropped 13 percent, hurt by lower sales of CX-7 and CX-9 SUVs and the Mazda6 sedan that's being replaced this month.
Fuji Heavy Industries Ltd.'s Subaru reported a 5.4 percent increase. Mitsubishi Motors Corp.'s sales dropped 6.8 percent, while Japan's Suzuki Motor Corp. posted a 2 percent increase from a year ago.
To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net
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Yahoo Investors Support Board; CEO Jerry Yang Gets 85% of Votes
By Crayton Harrison and Amy Thomson
Aug. 2 (Bloomberg) -- Yahoo! Inc.'s investors threw their weight behind the Internet company's board yesterday, with 85 percent of votes supporting Chief Executive Officer Jerry Yang after he fought off a proxy fight with Carl Icahn.
Each director received at least 77 percent of the votes cast, Sunnyvale, California-based Yahoo said yesterday after its annual meeting. Icahn was appointed to the board after the vote.
The result gives Yang a boost after he drew criticism for passing up a $47.5 billion takeover offer from Microsoft Corp. Yang, who co-founded the company in 1995 and took over as CEO last year, said yesterday that Yahoo's Internet advertising strategy is on the verge of paying off.
``Yahoo still has pressure to boost its stock,'' said Colin Gillis, an analyst at Canaccord Adams Inc. in New York. While Icahn didn't get the power on the board that he originally sought, his presence ``certainly breaks the status quo.''
Chairman Roy Bostock received about 80 percent of the votes, Yahoo said. Director Arthur Kern received the lowest number, with 78 percent. About 153 million shares were withheld for Yang's re-election, Yahoo said.
The board will expand to 11 members from nine to make room for two of Icahn's nominees, part of an agreement announced last month to placate the investor. The directors will be named by Aug. 15, Yahoo said.
Yahoo, owner of the second most used Internet search engine after Google Inc., fell 9 cents to $19.80 yesterday in Nasdaq Stock Market trading. Microsoft's offer sent Yahoo as high as $29.98 in February, and the software maker at one point bid $33 a share.
`Massive Transformation'
``We are still in the middle of a massive transformation,'' said Yang, 39. ``The Internet is still the only industry, really, that's growing in advertising revenue.''
Chief Financial Officer Blake Jorgensen said Yahoo is seeing sales growth even amid the economic slowdown. Yahoo's balance sheet is ``extremely healthy'' and the company may buy back shares and make acquisitions in years to come, he said.
Bostock said yesterday that Microsoft never made its $33 a share offer in writing, calling it an ``offhand comment'' that was never communicated explicitly to the board. The software maker also didn't talk about regulatory implications of the deal, he said. Yahoo and Microsoft have sparred over what happened during the negotiations.
``Yahoo is attempting to rewrite history yet again with statements that are not supported by the facts,'' Redmond, Washington-based Microsoft said yesterday in an e-mail.
Meeting Goals
Bostock said Yahoo is meeting its goals and credited executives with ``one hell of a performance.''
Some Yahoo shareholders applauded after Eric Jackson of Ironfire Capital LLC asked for Bostock to resign if investors withheld enough votes. Bostock said he won't step down.
More than 100 shareholders attended the meeting and appeared to be outnumbered by empty chairs.
``The event of the summer was a nonevent,'' said Canaccord's Gillis, who has a ``hold'' rating on the stock. The meeting had none of the fireworks that had been expected before the Icahn agreement, he said.
Since Yang took over in June 2007, Yahoo stock is down 30 percent. The company's share of the U.S. Web-search market has dropped 4 points from 25.1 percent, according to researcher ComScore Inc. in Reston, Virginia. Analysts estimate net sales growth will slow to 10 percent this year, the fifth straight annual decline.
Kotick Departs
Director Robert Kotick left as part of the deal with Icahn, Yahoo said.
Former AOL chief Jonathan Miller, who was nominated to fill an opening, isn't allowed to work for Yahoo because he pledged not to join any of Time Warner Inc.'s competitors until next year, the media company said. Miller, 51, left AOL in 2006. Yahoo spokeswoman Diana Wong declined to comment.
Bostock told investors that Yahoo's board was in charge of the talks with Microsoft. Icahn had accused Yang of sabotaging the takeover.
``I want to make it absolutely clear to everyone that the board controlled the process of dealing with Microsoft right from the beginning,'' Bostock said. ``We called the shots and we were deeply involved in every step.''
To contact the reporters on this story: Crayton Harrison in San Jose, California, at tharrison5@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net.
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Aug. 2 (Bloomberg) -- Yahoo! Inc.'s investors threw their weight behind the Internet company's board yesterday, with 85 percent of votes supporting Chief Executive Officer Jerry Yang after he fought off a proxy fight with Carl Icahn.
Each director received at least 77 percent of the votes cast, Sunnyvale, California-based Yahoo said yesterday after its annual meeting. Icahn was appointed to the board after the vote.
The result gives Yang a boost after he drew criticism for passing up a $47.5 billion takeover offer from Microsoft Corp. Yang, who co-founded the company in 1995 and took over as CEO last year, said yesterday that Yahoo's Internet advertising strategy is on the verge of paying off.
``Yahoo still has pressure to boost its stock,'' said Colin Gillis, an analyst at Canaccord Adams Inc. in New York. While Icahn didn't get the power on the board that he originally sought, his presence ``certainly breaks the status quo.''
Chairman Roy Bostock received about 80 percent of the votes, Yahoo said. Director Arthur Kern received the lowest number, with 78 percent. About 153 million shares were withheld for Yang's re-election, Yahoo said.
The board will expand to 11 members from nine to make room for two of Icahn's nominees, part of an agreement announced last month to placate the investor. The directors will be named by Aug. 15, Yahoo said.
Yahoo, owner of the second most used Internet search engine after Google Inc., fell 9 cents to $19.80 yesterday in Nasdaq Stock Market trading. Microsoft's offer sent Yahoo as high as $29.98 in February, and the software maker at one point bid $33 a share.
`Massive Transformation'
``We are still in the middle of a massive transformation,'' said Yang, 39. ``The Internet is still the only industry, really, that's growing in advertising revenue.''
Chief Financial Officer Blake Jorgensen said Yahoo is seeing sales growth even amid the economic slowdown. Yahoo's balance sheet is ``extremely healthy'' and the company may buy back shares and make acquisitions in years to come, he said.
Bostock said yesterday that Microsoft never made its $33 a share offer in writing, calling it an ``offhand comment'' that was never communicated explicitly to the board. The software maker also didn't talk about regulatory implications of the deal, he said. Yahoo and Microsoft have sparred over what happened during the negotiations.
``Yahoo is attempting to rewrite history yet again with statements that are not supported by the facts,'' Redmond, Washington-based Microsoft said yesterday in an e-mail.
Meeting Goals
Bostock said Yahoo is meeting its goals and credited executives with ``one hell of a performance.''
Some Yahoo shareholders applauded after Eric Jackson of Ironfire Capital LLC asked for Bostock to resign if investors withheld enough votes. Bostock said he won't step down.
More than 100 shareholders attended the meeting and appeared to be outnumbered by empty chairs.
``The event of the summer was a nonevent,'' said Canaccord's Gillis, who has a ``hold'' rating on the stock. The meeting had none of the fireworks that had been expected before the Icahn agreement, he said.
Since Yang took over in June 2007, Yahoo stock is down 30 percent. The company's share of the U.S. Web-search market has dropped 4 points from 25.1 percent, according to researcher ComScore Inc. in Reston, Virginia. Analysts estimate net sales growth will slow to 10 percent this year, the fifth straight annual decline.
Kotick Departs
Director Robert Kotick left as part of the deal with Icahn, Yahoo said.
Former AOL chief Jonathan Miller, who was nominated to fill an opening, isn't allowed to work for Yahoo because he pledged not to join any of Time Warner Inc.'s competitors until next year, the media company said. Miller, 51, left AOL in 2006. Yahoo spokeswoman Diana Wong declined to comment.
Bostock told investors that Yahoo's board was in charge of the talks with Microsoft. Icahn had accused Yang of sabotaging the takeover.
``I want to make it absolutely clear to everyone that the board controlled the process of dealing with Microsoft right from the beginning,'' Bostock said. ``We called the shots and we were deeply involved in every step.''
To contact the reporters on this story: Crayton Harrison in San Jose, California, at tharrison5@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net.
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Asian Currencies: Taiwan Dollar Leads Drop; Rupiah Bucks Trend
By David Yong
Aug. 2 (Bloomberg) -- Taiwan's dollar fell, leading declines in Asian currencies this week, on speculation the central bank will seek a weaker exchange rate to aid exporters as the U.S. economy slows.
The island's currency capped its biggest weekly decline in two years after data showed the U.S. economy, the world's biggest, grew slower than economists forecast in the second quarter and shrank in the final three months of 2007. Indonesia's rupiah was the sole gainer among Asia's 10 most- traded currencies outside Japan as the prospect of higher interest rates drew funds.
Taiwan's central bank ``could turn its focus to help exporters now that the U.S. outlook is not all that good,'' said Forest Chen, chief economist in Taipei at Taiwan Securities Investment Advisory. ``Foreign investors are selling stocks because higher energy and labor costs are hurting profits at exporters.''
The island's dollar weakened to NT$30.645 yesterday, according to Taipei Forex Inc. The currency dropped 0.8 percent this week, the most since July 2006. Indonesia's rupiah rose 0.3 percent in the past five days to 9,096, extending a winning streak that began at the start of June.
The rupiah advanced on speculation the central bank will raise interest rates next week to curb inflation. Dollar demand from refiners contributed to a decline in South Korea's won this week, while Thailand's baht slumped as heightened political risks prompted investors to sell the nation's stocks.
Stock Sales
Taiwan's gross domestic product may rise 4.78 percent in 2008, after climbing 5.72 percent in 2007, the statistics bureau forecast in May. Foreigners sold the equivalent of $4.03 billion more of the island's stocks than they bought in July, according to Taiwan Stock Exchange data.
Taiwan's currency rallied in the first half after Ma Ying- jeou won the island's presidential election in March by pledging closer economic ties with China.
China's yuan fell 0.35 percent to 6.8425 per dollar in Shanghai from 6.8189 a week ago, according to the China Foreign Exchange Trade System. That's the biggest weekly drop since a peg against the dollar was scrapped in July 2005.
Traders in the forwards market scaled back expectations for the size of its advance over the next 12 months after the Politburo, the Communist Party's top decision-making body, said July 25 it will focus on ``steady'' growth after the economy expanded at the slowest pace since 2005 in the second quarter.
``The government is determined to slow the appreciation to help exporters cope with weaker overseas demand,'' said Wen Li, a Beijing-based dealer at Bank of China Ltd., the country's biggest foreign-currency trader. ``The dollar's strength this week gave the central bank a chance to adjust the pace.''
Political Jitters
The Thai baht fell yesterday to 33.53 per dollar, adding to a five-month losing streak, after the Bangkok Criminal Court on July 31 convicted the wife of former Prime Minister Thaksin Shinawatra and her brother of tax evasion. The nation's benchmark stock index fell 1 percent this week, extending its slide for the past month to 12 percent.
``The downside for the baht is coming from the political front,'' said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore. ``Capital outflows will also play a part in determining the currency's movements. The central bank has been watching the currency.''
Possible Rate Increase
Indonesia's rupiah, which last posted a weekly decline in May, strengthened on speculation the central bank will raise borrowing costs on Aug. 5. Bank Indonesia lifted its benchmark reference rate for bill sales three times since May to 8.75 percent.
The nation's consumer prices index rose 11.9 percent from a year earlier in July, the biggest increase in 22 months, the statistics bureau reported yesterday. Economists had expected an 11.15 percent gain, a Bloomberg News survey showed.
``The stronger rupiah is due to expectations that Bank Indonesia will raise rates again after today's inflation numbers,'' said Ho Woei Chen, an economist at United Overseas Bank, Singapore's second-largest lender. ``There are also possible bond inflows due to the high yields.''
Bank Indonesia Governor Boediono said in Bali yesterday that rising overseas inflows helped lift the nation's currency and the central bank will use all instruments, including raising the reserve requirement for banks, to fight inflation.
Oil Importers
Korea's won slid on concern that oil importers are buying more dollars to pay bills and on speculation global funds took money home after selling local shares. The Kospi stock index fell 1.5 percent this week.
The currency dropped to 1,014.60 per dollar for a 0.5 percent loss this week, according to Seoul Money Brokerage Services Ltd.
``We have the same pattern everyday that importers and banks are buying dollars, then the authorities emerge to ensure it's not getting out of control,'' said Jay Won, a currency trader with Korea Exchange Bank in Seoul. ``Market players are being cautious after yesterday's intervention.''
Malaysia's ringgit weakened 0.4 percent to 3.2635, its biggest weekly loss since June 13, on concern a U.S. economic slowdown will hurt exports.
``It's a poor signal for Asian economies that rely on exports for growth,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. ``The trade balance and currencies could weaken'' if the gloom persists.
Elsewhere, Vietnam's dong rose 0.3 percent this week to 16,750 per dollar and the Philippine peso weakened 0.4 percent to 44.225. The Singapore dollar declined 0.8 percent to S$1.3699, near a six-week low of S$1.3709.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net
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Aug. 2 (Bloomberg) -- Taiwan's dollar fell, leading declines in Asian currencies this week, on speculation the central bank will seek a weaker exchange rate to aid exporters as the U.S. economy slows.
The island's currency capped its biggest weekly decline in two years after data showed the U.S. economy, the world's biggest, grew slower than economists forecast in the second quarter and shrank in the final three months of 2007. Indonesia's rupiah was the sole gainer among Asia's 10 most- traded currencies outside Japan as the prospect of higher interest rates drew funds.
Taiwan's central bank ``could turn its focus to help exporters now that the U.S. outlook is not all that good,'' said Forest Chen, chief economist in Taipei at Taiwan Securities Investment Advisory. ``Foreign investors are selling stocks because higher energy and labor costs are hurting profits at exporters.''
The island's dollar weakened to NT$30.645 yesterday, according to Taipei Forex Inc. The currency dropped 0.8 percent this week, the most since July 2006. Indonesia's rupiah rose 0.3 percent in the past five days to 9,096, extending a winning streak that began at the start of June.
The rupiah advanced on speculation the central bank will raise interest rates next week to curb inflation. Dollar demand from refiners contributed to a decline in South Korea's won this week, while Thailand's baht slumped as heightened political risks prompted investors to sell the nation's stocks.
Stock Sales
Taiwan's gross domestic product may rise 4.78 percent in 2008, after climbing 5.72 percent in 2007, the statistics bureau forecast in May. Foreigners sold the equivalent of $4.03 billion more of the island's stocks than they bought in July, according to Taiwan Stock Exchange data.
Taiwan's currency rallied in the first half after Ma Ying- jeou won the island's presidential election in March by pledging closer economic ties with China.
China's yuan fell 0.35 percent to 6.8425 per dollar in Shanghai from 6.8189 a week ago, according to the China Foreign Exchange Trade System. That's the biggest weekly drop since a peg against the dollar was scrapped in July 2005.
Traders in the forwards market scaled back expectations for the size of its advance over the next 12 months after the Politburo, the Communist Party's top decision-making body, said July 25 it will focus on ``steady'' growth after the economy expanded at the slowest pace since 2005 in the second quarter.
``The government is determined to slow the appreciation to help exporters cope with weaker overseas demand,'' said Wen Li, a Beijing-based dealer at Bank of China Ltd., the country's biggest foreign-currency trader. ``The dollar's strength this week gave the central bank a chance to adjust the pace.''
Political Jitters
The Thai baht fell yesterday to 33.53 per dollar, adding to a five-month losing streak, after the Bangkok Criminal Court on July 31 convicted the wife of former Prime Minister Thaksin Shinawatra and her brother of tax evasion. The nation's benchmark stock index fell 1 percent this week, extending its slide for the past month to 12 percent.
``The downside for the baht is coming from the political front,'' said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore. ``Capital outflows will also play a part in determining the currency's movements. The central bank has been watching the currency.''
Possible Rate Increase
Indonesia's rupiah, which last posted a weekly decline in May, strengthened on speculation the central bank will raise borrowing costs on Aug. 5. Bank Indonesia lifted its benchmark reference rate for bill sales three times since May to 8.75 percent.
The nation's consumer prices index rose 11.9 percent from a year earlier in July, the biggest increase in 22 months, the statistics bureau reported yesterday. Economists had expected an 11.15 percent gain, a Bloomberg News survey showed.
``The stronger rupiah is due to expectations that Bank Indonesia will raise rates again after today's inflation numbers,'' said Ho Woei Chen, an economist at United Overseas Bank, Singapore's second-largest lender. ``There are also possible bond inflows due to the high yields.''
Bank Indonesia Governor Boediono said in Bali yesterday that rising overseas inflows helped lift the nation's currency and the central bank will use all instruments, including raising the reserve requirement for banks, to fight inflation.
Oil Importers
Korea's won slid on concern that oil importers are buying more dollars to pay bills and on speculation global funds took money home after selling local shares. The Kospi stock index fell 1.5 percent this week.
The currency dropped to 1,014.60 per dollar for a 0.5 percent loss this week, according to Seoul Money Brokerage Services Ltd.
``We have the same pattern everyday that importers and banks are buying dollars, then the authorities emerge to ensure it's not getting out of control,'' said Jay Won, a currency trader with Korea Exchange Bank in Seoul. ``Market players are being cautious after yesterday's intervention.''
Malaysia's ringgit weakened 0.4 percent to 3.2635, its biggest weekly loss since June 13, on concern a U.S. economic slowdown will hurt exports.
``It's a poor signal for Asian economies that rely on exports for growth,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. ``The trade balance and currencies could weaken'' if the gloom persists.
Elsewhere, Vietnam's dong rose 0.3 percent this week to 16,750 per dollar and the Philippine peso weakened 0.4 percent to 44.225. The Singapore dollar declined 0.8 percent to S$1.3699, near a six-week low of S$1.3709.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net
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Asian Stocks Post Weekly Drop on Earnings Concern; Toyota Falls
By [bn:PRSN=1] Kyung Bok Cho []
Aug. 2 (Bloomberg) -- Asian stocks fell this week after Toyota Motor Corp. forecast lower sales and Australia & New Zealand Banking Group Ltd. said bad loans will erode profit, deepening concern slowing economic growth will dent earnings.
Toyota, the world's biggest automaker by market value, slid after it cut its sales projection on cooling demand. ANZ, Australia's fourth-largest bank, declined after saying full-year profit will drop by the most since 1992. Neptune Orient Lines Ltd. retreated after Lloyd's List said trade between Asia and Europe fell for the first time in seven years in June.
``Things could get ugly,'' said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc., which manages about $5.9 billion in assets. ``We could see more downside from here as corporate earnings are released.''
The MSCI Asia Pacific Index dropped 1.8 percent to 130.63. Japan's Nikkei 225 Stock Average lost 1.8 percent. Most benchmark indexes across the region declined.
Toyota slipped 6.7 percent to 4,610 yen. The company said it expects to sell 9.5 million vehicles globally this year, down 3.6 percent from its initial estimate of 9.85 million. Record U.S. gasoline prices prompted Toyota to cut its sales forecasts for the Toyota and Lexus brands by 7.6 percent.
ANZ lost 8.9 percent to A$16.17. The bank said earnings per share may fall 20 percent to 25 percent in the 12 months to Sept. 30, as it tripled provisions for delinquent loans from a year earlier.
`Long Downward Trend'
National Australia Bank Ltd., which raised its provisions for mortgage-related losses on July 25, slumped 8.4 percent to A$24.34. A planned A$850 million ($814 million) bond sale was cut to A$260 million after some investors pulled out, the bank said.
``Company earnings globally are on a long downward trend as we adjust to the new realities,'' said Takashi Kamiya, who helps oversee $16 billion as chief economist at T&D Asset Management Co. in Tokyo. ``Banks and consumers overextended themselves in the housing bubble and now that is coming back to bite them.''
Separately in the U.S., the Commerce Department said the world's largest economy contracted in the fourth quarter of last year, compared with an earlier figure that showed an expansion. Gross domestic product grew at a 1.9 percent annualized pace in the second quarter, less than economists expected.
Neptune Orient, Southeast Asia's largest container-shipping company, lost 3.2 percent to S$2.75. Hanjin Shipping Co., South Korea's largest shipping line, plunged 14 percent to 33,000 won.
Asia-Northern Europe container traffic declined 0.5 percent last month as European countries headed toward recession, Lloyd's List said, citing the Far Eastern Freight Conference.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Aug. 2 (Bloomberg) -- Asian stocks fell this week after Toyota Motor Corp. forecast lower sales and Australia & New Zealand Banking Group Ltd. said bad loans will erode profit, deepening concern slowing economic growth will dent earnings.
Toyota, the world's biggest automaker by market value, slid after it cut its sales projection on cooling demand. ANZ, Australia's fourth-largest bank, declined after saying full-year profit will drop by the most since 1992. Neptune Orient Lines Ltd. retreated after Lloyd's List said trade between Asia and Europe fell for the first time in seven years in June.
``Things could get ugly,'' said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc., which manages about $5.9 billion in assets. ``We could see more downside from here as corporate earnings are released.''
The MSCI Asia Pacific Index dropped 1.8 percent to 130.63. Japan's Nikkei 225 Stock Average lost 1.8 percent. Most benchmark indexes across the region declined.
Toyota slipped 6.7 percent to 4,610 yen. The company said it expects to sell 9.5 million vehicles globally this year, down 3.6 percent from its initial estimate of 9.85 million. Record U.S. gasoline prices prompted Toyota to cut its sales forecasts for the Toyota and Lexus brands by 7.6 percent.
ANZ lost 8.9 percent to A$16.17. The bank said earnings per share may fall 20 percent to 25 percent in the 12 months to Sept. 30, as it tripled provisions for delinquent loans from a year earlier.
`Long Downward Trend'
National Australia Bank Ltd., which raised its provisions for mortgage-related losses on July 25, slumped 8.4 percent to A$24.34. A planned A$850 million ($814 million) bond sale was cut to A$260 million after some investors pulled out, the bank said.
``Company earnings globally are on a long downward trend as we adjust to the new realities,'' said Takashi Kamiya, who helps oversee $16 billion as chief economist at T&D Asset Management Co. in Tokyo. ``Banks and consumers overextended themselves in the housing bubble and now that is coming back to bite them.''
Separately in the U.S., the Commerce Department said the world's largest economy contracted in the fourth quarter of last year, compared with an earlier figure that showed an expansion. Gross domestic product grew at a 1.9 percent annualized pace in the second quarter, less than economists expected.
Neptune Orient, Southeast Asia's largest container-shipping company, lost 3.2 percent to S$2.75. Hanjin Shipping Co., South Korea's largest shipping line, plunged 14 percent to 33,000 won.
Asia-Northern Europe container traffic declined 0.5 percent last month as European countries headed toward recession, Lloyd's List said, citing the Far Eastern Freight Conference.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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US Payroll Data Shows Economy Shedding Less Jobs Than Expected, Dollar Boost Short Lived
| Daily Forex Fundamentals | Written by CMS Forex | Aug 01 08 20:21 GMT | | |
| AUS Manufacturing Down In July, Inflation Shows Signs of Cooling In Australia the manufacturing PMI posted a 46.9 for July, the second straight month that activity contracted. The slower domestic economy, higher interest rates and softness in housing construction all weighed on activity. These factors are being compounded by weaker global growth, rising costs and the high Australian dollar. Inflation at least seemed to cool in July, with the annual rate of inflation, as measured by the TDMI gauge, falling to 4.6%. That's a welcoming sign for the central bank which is betting a moderation in growth will work to soften price increases. AUD/USD - Aussie Continues its Slide As Rate Cuts Factored Into Price
The Aussie-US Dollar pair continued to tumble as traders increase speculation that the Reserve Bank of Australia will move to cut rates sooner rather than later. Policy members do not want what began as a moderation in growth to turn into a serious slowdown. The pair fell about 100 pips this session and is down 280 pips from its high for the week near .96. GER Retail Sales Fall 1.4% in June, Sharper Than Expected Retail sales in Germany fell 1.4% in June, more than double what economists expected. On the year sales were down 3.9%. The report highlights how weak consumer confidence and high inflation are choking spending and Euro-zone growth numbers are set to be much weaker in the 2nd quarter compared to the 1st. EUR and UK Manufacturing Declines in July Manufacturing activity in both the Euro-zone and the UK contracted in July as both economies succumb to the US-led global slowdown. The UK figure was the lowest since December 1998. EUR/CHF - As European Stocks Weaken Today, So Does Euro vs Franc
The Euro-Swiss Franc pair fell as European stocks stumbled in Friday overnight trading. From its high yesterday around 1.6360 the pair tested 1.6290 a slide of 70 pips. GBP/JPY - Pound Falls to Yen as UK Stocks Fall Dimming Risk Appetite for Carry Trade
Stocks in the UK fell as well, and the Pound-Yen pair fell through support near 213.50 overnight. From yesterday's high the pair slid as much as 240 pips to test the 212 level, but recovered slightly as NY trading got under way. US Economy Sheds 51K Jobs, Better Than Forecast, Unemployment Rate Increases to 5.7% The US economy shed 51K jobs in July, the seventh straight month of job losses. The number was better than forecast and gave the Dollar a boost in the minutes following the release. The unemployment rate increased to 5.7% from 5.5%, surprising forecasts on the upside. US ISM Manufacturing Index at 50, Construction Spending Falls The US manufacturing activity posted a reading of 50 in July, indicating that hte activity leve was flat. Most of the positive contribution came from the employment sub-index as new orders and deliveries fell. The prices paid component cooled somewhat as well. Construction spending fell 0.4% for June, and is down 5.9% on the year. EUR/USD - Knee Jerk Reaction to Payroll Data Pared Quickly
The Euro-Dollar showed the knee-jerk reaction in favor of the Dollar following the payroll data, but those gains were quickly cut down as NY trading went on. For the week, the Dollar has moved from the 1.57 level to trade near 1.5550 as attention turns to next week's interest rate announcements from the Fed and the ECB. USD/JPY - Dollar Falls vs Yen on Economic News Last 2 Sessions, Oil Price Increase
The Dollar-Yen pair drifted lower overnight and experienced choppy trading during the NY session. Oil prices staged a rally, increasing about $4 per barrel at one point, and the main US stock indexes were in the red. From a high near 108.30, yesterday the pair is down about 70 pips to trade near 107.60. 4 Central Bank Decide on Rates Next Week There are 4 central banks deciding on interest rates next week, the Reserve Bank of Australia, the Bank of England, the European Central Bank and the US Federal Reserve. Traders will be looking for clues as to future policy from the announcements. Capital Market Services, L.L.C. ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C. | |
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Daily Market Commentary - Fundamental Outlook
| Daily Forex Fundamentals | Written by GCI Financial | Aug 01 08 20:05 GMT | | |
| € The euro weakened vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.5515 level and was capped around the $1.5605 level. The common currency traded at its lowest level since 24 June. U.S. non-farm payrolls data for July were released and were off 51,000, better-than-expected. The U.S. unemployment rate rose to 5.7%, its highest level in more than four years, and average hourly wages rose 0.3% m/m and 3.4% y/y in July. The U.S. economy has shed 463,000 jobs since January and many economists believe the weakening U.S. labour market will worsen. Other data released today saw June total construction spending fall 0.4% as June housing spending fell to its lowest level in nearly seven years while July ISM manufacturing fell to 50.0 from 50.2 in June with the prices index decline to 88.5 from 91.5 in June. In eurozone news, German retail sales fell 3.9% y/y while German final July manufacturing PMI printed at 50.9. Also, EMU-15 July manufacturing PMI fell to 47.4. Euro bids are cited around the $1.5585/ 1.5230 level. ¥/ CNY The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the ¥107.30 level and was capped around the ¥107.90 level. As expected, Prime Minister Fukuda reshuffled his cabinet and named some fiscal hawks to key government positions including Bunmei Ibuki who is the new finance minister. When the pair was trading below the psychologically-important ¥100 figure, Ibuki is quoted as having said it is "undesirable." Fukuda said his country faces "acute economic hardship" but the new Cabinet members are more known for their views regarding cutting the national debt by raising taxes. The pair moved to intraday lows after the release after the release of U.S. jobs data for July. The Nikkei 225 stock index lost 2.11% to close at ¥13,094.59. Dollar bids are cited around the ¥106.40 level. The euro moved lower vis-Ã -vis the yen as the single currency tested bids around the ¥166.95 level and was capped around the ¥168.30 level. The British pound and Swiss franc came off vis-Ã -vis the yen as the crosses tested bids around the ¥212.00 figure and ¥102.30 levels, respectively. The Chinese yuan weakened vis-Ã -vis the U.S. dollar as the greenback closed at CNY 6.8425 in the over-the-counter market, up from CNY 6.8317. Data released in China overnight saw the CFLP July PMI weaken to 48.4 while the CLSA July PMI was unchanged at 53.3. ₤ The British pound fell sharply vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.9725 level and was capped around the $1.9840. The pair fell to its lowest level since 10 July. Bank of England Monetary Policy Committee member Tucker reported "My take at our recent July meeting was, broadly, that since the May inflation report, the near-term outlook for inflation had deteriorated, underlining the risk that the rise in commodity prices will feed through to wage and price setting. The outlook for demand and output had also deteriorated, which in degree should help to contain those upside risks to inflation." Data released in the U.K. today saw July factory activity decline for a third consecutive month while Q2 company liquidations rose in England and Wales. In mergers and acquisitions news, it is being reported that Electricite de France SA has abandoned its proposed ₤12 billion bid for British Energy. Also, U.K. manufacturing PMI fell to 44.3. Cable bids are cited around the $1.9360 level. The euro moved higher vis-Ã -vis the British pound as the single currency tested offers around the ₤0.7890 level and was supported around the ₤0.7845 level. CHF The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.0510 level and was supported around the CHF 1.0460 level. U.S. dollar offers are cited around the CHF 1.0515/ 1.0625 levels. The euro and British pound came off vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6285 and CHF 2.0680 levels, respectively. GCI Financial DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained. | |
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Closing Market Update: Bond Market Suggests Bank of Canada Will Cut Rates
| Market Updates | Written by CEP News | Aug 01 08 22:04 GMT | | |
| (CEP News) - Canadian interest rate derivatives continued to rally in shortened trading on Friday, suggesting growing conviction the Bank of Canada will lower rates as soon as September. In the U.S., equities closed and Treasury yields were down slightly. The U.S. dollar made modest gains and crude finished above $125 per barrel. Market watchers are puzzled by the rally in Canadian fixed income. The bond market posted its best week since February and derivative pricing suggests the Bank of Canada is preparing to cut rates. Economists say the market is offside. Following soft GDP figures on Thursday, bankers' acceptance futures contracts (BAX) at the Montreal Exchange have undergone an extraordinary rally. The Sept BAX is yielding 3.125%, implying a 58%-70% likelihood the BOC will cut rates at the Sept. 3 meeting. The December contract is fully priced in for one quarter-point cut by the end of the year and suggests a 40% chance of another. "It's all out of whack. None of the guys on the street understand it," a BAX trader in Montreal said. "Everyone on the desk is scratching their head," another strategist in Toronto said. Some suggest a short-covering rally is underway, but other markets are pointing in the same direction. Overnight index swaps are pricing in a 23% chance of a BOC cut in September and are fully priced in for lower rates by year end. The cash market has also experienced a strong rally bringing two-year yields well below the 3.00% overnight target. Still, few economists are predicting the Bank of Canada will follow the market's lead. "We would need some major bad economic news for the Bank of Canada to cut in September. It's not impossible for December but we think the BOC will stay put for quite a while," said Mathieu D'Anjou, economist at Desjardins Securities. Yields on two-year Canadian government bonds were down 6.0 bps to 2.89%, with five-year yields down 4.8 bps to 3.20%, 10-year yields down 4.7 bps to 3.66% and 30-year yields down 2.7 bps to 4.07%. The December 08 BAX contract was up 5.0 ticks to 97.05 and the September 09 contract was up 0.015 to 96.875. In the U.S., the main news came from the jobs and automotive sector. A small upside surprise in the U.S. employment figures for July temporarily boosted the U.S. dollar, Treasury yields and equity futures, but sentiment later reversed. Nonfarm payrolls fell by 51k in July against a decline of the 75k expected. It was the seventh straight month of job losses. It was a bad day for auto manufacturers. It started with General Motors reporting a $15.5 billion second-quarter net loss compared to a profit of $784 million in the same quarter a year ago. Later, year-over-year auto sales figures for March were released. Chrysler sales fell 29%; GM sales fell 26%; Toyota sales fell 12%; Ford sales fell 15% and Honda sales fell 1.6%. "We expect the second half of 2008 will be more challenging that the first half as economic and credit conditions weaken," Ford's marketing chief Jim Farley said in a statement. U.S. two-year yields were down 1.7 bps to 2.49%, with five-year yields down 2.1 bps to 3.21%, 10-year yields down 1.0 bps to 3.94% and 30-year yields flat at 4.57%. The Eurodollar March 09 contract was down 3.0 ticks to 96.89. The yield curve was steeper, with the 10/2-year spread up 0.5 bps to 144.17 bps. The payrolls report inspired a spurt of trading that quickly sputtered out. Total cash volume was reportedly at 65% of normal, traders said. "Treasuries rallied early in the morning in anticipation of a horrific payrolls number, sold off sharply after nonfarm payrolls failed to match the worst fears, and then rallied back to finish slightly up on the day. Monthly car sales were horrific," wrote Benjamin Cheng, fixed income strategist at UBS. Even as U.S. auto sales slumped, Canadian sales of vehicles surged 5% compared to the same month last year, and are up 2.7% year to date, DesRosiers Automotive Consultants Inc. said. Toronto's S&P/TSX composite index closed down 96 points to 13497, the Dow Jones industrial average closed down 52 points to 11326, the S&P 500 closed down 7 points to 1260 and the Nasdaq closed down 15 points to 2311. On the month and the week, the Dow was virtually flat. The TSX lost 1.1% in July after a 6.7% decline in June. However, Canadian stocks finished the month on a strong note as the TSX gained 0.7% on the week after seven consecutive weeks of losses. On Friday, the Canadian dollar was down 0.0030 to 0.9732 against the U.S. dollar (1.0277 USD/CAD). The U.S. dollar briefly touched 1.0300, but traders said it was defended by an options barrier that expired at 10 a.m. EDT. On the month, the Canadian dollar fell 0.0076 against the U.S. dollar and lost 1.0% on a trade-weighted basis. "Like its commodity-related peers, CAD weakened amid softening oil prices, particularly in the second half of July," wrote currency strategists at Morgan Stanley in a research report. On Friday, the U.S. dollar was down 0.20 to 107.72 against the yen and the Dollar Index was up 0.214 to 73.441. The U.S. dollar gained 0.4% in July, according to the Fed's trade-weighted index. The euro was down 0.0055 to 1.5548 against the U.S. dollar, down 0.0011 to 1.5978 against the Canadian dollar, up 0.0012 to 0.7877 against the pound sterling and was lower by 0.90 to 167.48 against the yen. The pound sterling was down 0.0100 to 1.9742 against the U.S. dollar and down 0.0043 to 2.0289 against the Canadian dollar. WTI crude oil was up $1.07 to $125.15. The front month gold contract at the Chicago Board of Trade was down $3.80 to $918.60 per ounce. All data taken at 4:15 p.m. EDT. By Adam Button, abutton@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca CEP Newswires - CEP News © 2008. All Rights Reserved. www.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. | |
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Friday's News Recap: U.S. Payrolls Fall Below Forecasts; ISM Mfg Treads Water
| News Recap | Written by CEP News | Aug 01 08 21:35 GMT | | |
| (CEP News) - The day ended with little additional economic news following the morning's two small upside surprises. A less dismal than expected U.S. nonfarm employment report and an ISM manufacturing survey showing the sector treading water were the main events of the day. In Canada, bankruptcies moved lower, and in Europe, the UK's manufacturing index and German retail sales both declined further than expected. U.S. nonfarm payrolls declined for the seventh straight month, falling less than expectations by a total of 51k jobs in July, according to the Bureau of Labor Statistics. Declines in the two previous months were upwardly revised by 26k, putting the three-month average of losses at -50k per month. In addition, the unemployment rate ticked up two-tenths to a four-year high at 5.7% (5.682%) despite expectations for an increase to only 5.6%. Average hourly earnings rose 0.3% from June for a total gain of 3.4% since July 2007. The average weekly earnings came in flat on the month but rose 2.8% year-over-year. According to the Commissioner of the Bureau of Labor Statistics Keith Hall, the 34k decline in the services sector jobs were mostly attributed to a fall in temporary jobs. He added that health care employment was one of the few sectors that showed strength rising by 33k over the month. Hall also noted that there was a notable increase in youth unemployment in July as millions of summer students struggled to find a place in the job market. In an interview with Bloomberg Television, former St. Louis Fed Chief William Poole called the news a "marginal surprise," adding that weakness in the labour market could keep the Fed on hold for some time. He also warned that the U.S. was "gradually building in a longer-run inflation problem that could come to haunt us next year." Following the BLS report, the Institute for Supply Management reported that their manufacturing index came in flat in July, after one month of modest growth and four months of declines. The survey's 50.0 reading beat the consensus forecast of 49.0. The components told a different story than the headline, however, as new orders fell to a seven-year low of 45.0, down from the prior month's 49.6 and marking the eighth straight month of slowdown. In contrast to the morning's nonfarm payrolls report, the ISM employment component expanded at 51.9 in the survey, following seven months of slowdown. Prices moderated from the previous month's 29-year high, moving down to a still-elevated 88.6 from 91.5. Simultaneous with the ISM's report, the U.S. Department of Commerce reported that construction spending in the U.S. fell 0.4% month-over-month in June while the previous month's 0.4% decline was revised to a flat reading. Residential construction declined by 1.7%, down slightly from May's 1.1% decrease, while non-residential construction gained 0.4% after rising 0.7% in the previous month. It was a bad day for auto manufacturers, as General Motors turned a few heads with its third largest loss in the history of the company. The firm reported a second-quarter adjusted loss per share of $11.21 compared to the street's forecast for a $2.40 loss per share. The second-quarter net loss was $15.5 billion, compared to a profit of $784 million in the same quarter one year ago. Later, year-over-year auto sales figures for March were released. Chrysler fell 29%; GM sales 26%; Toyoto 12%; Ford 15% and Honda 1.6%. "We expect the second half of 2008 will be more challenging that the first half as economic and credit conditions weaken," Ford's marketing chief Jim Farley said in a statement. But even as U.S. auto sales slumped in July, Canadian sales of vehicles surged 5% compared to the same month last year and are up 2.7% year to date, according to DesRosiers Automotive Consultants Inc. "Look up the definition of defying gravity and you will see three words ... 'CANADIAN VEHICLE SALES'," wrote auto industry expert Dennis DesRosiers, who said the jump in sales came despite a recessionary quarter in Ontario, weakening employment numbers and a Canadian dollar at parity. In Canada, the economic news was light ahead of the long weekend for Ontario, as the Office of the Superintendent of Bankruptcy reported that the number of bankruptcies in June declined 5.6% from the previous month, but was up 3.3% on an annual basis. Both consumer and business bankruptcies fell in June, with 7,013 individuals filing for bankruptcy during the month compared with 7,364 in May. On the business side, 465 companies filed for bankruptcies, down 16.1% from May's total of 554. Canadian markets will be closed on Monday for the holiday. In Europe, a sharper-than-expected decline in German retail sales and the UK's manufacturing PMI were among the macroeconomic events, along with downward revisions to some of the preliminary statistics of manufacturing in the euro zone. On Friday, the Federal Statistical Office (Destatis) reported that German retail sales fell 1.4% month-over-month in June following May's 0.5% gain. However, economists had expected a less pronounced drop of 0.5%. May's figure was revised down from an initial reading of 1.3%. German retail sales also surprised to the downside in annualized terms, falling 3.9% against predictions of only a 0.8% decline for the month. Conversely, May had seen a 1.0% gain in sales, revised up from 0.7%. Markit Economics reported that the UK manufacturing PMI fell to 44.3 for the month, its lowest level since December 1998. Economists had expected a less pronounced decline to 45.5 after the index had fallen to 45.9 in June, revised down from an initial reading of 45.8. Markit Economics also released its final estimates for the euro zone manufacturing purchasing managers' index in July, and reported that the PMI fell to 47.4, the lowest level since June 2003. Disaggregating the data, the economics firm noted that the manufacturing output index for July had slipped to 46.7 in the month, down from the initial estimate of 46.9, as well as the 49.6 level seen in June. By Erik Kevin Franco, efranco@economicnews.ca with contributions from Patrick McGee, pmcgee@economicnews.ca, Steve Stecyk, sstecyk@econoicnews.ca, Geoff Matthews, gmatthews@economicnews.ca and Todd Wailoo, twailoo@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca CEP Newswires - CEP News © 2008. All Rights Reserved. www.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. | |
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Friday, August 1, 2008
Ibuki Becomes Japan's Finance Minister; Yosano Replaces Ota
By Lily Nonomiya and Jason Clenfield
Aug. 1 (Bloomberg) -- Bunmei Ibuki was named Japan's finance minister as Prime Minister Yasuo Fukuda turns to a former finance ministry official to help stave off a recession and reduce the world's biggest public debt.
Ibuki, 70, replaces Fukushiro Nukaga amid concern that he failed to rein in spending enough to balance the budget by 2011. Kaoru Yosano, 69, was chosen as economic and fiscal policy minister, replacing Hiroko Ota and returning to the post he held under Junichiro Koizumi from 2005 to 2006.
Fukuda probably chose Ibuki, the Liberal Democratic Party's No. 2 official, as a way to shore up support from within the party. Yosano's appointment, meanwhile, may signal that he's serious about cutting the debt and nurturing a recovery in the world's second-largest economy, said economist Masamichi Adachi.
``The message behind Yosano's appointment is that Fukuda is not giving up on fiscal consolidation,'' said Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. ``Ibuki isn't a big- picture guy, he's just a powerful politician.''
Hosting last month's Group of Eight summit failed to revive Fukuda's support in the polls, prompting the Cabinet reshuffle. His public approval rating has fallen by half since he took office in September, punctured by a feisty opposition that controls the less-powerful upper house of parliament, and criticism within his own party that he lacks a vision for Japan.
Ibuki was education minister under previous Prime Minister Shinzo Abe, and until today served as the LDP's secretary general. He worked in the Finance Ministry's budget bureau after graduating with a degree in economics from Kyoto University.
First Since Miyazawa
He's the first former Finance Ministry official to serve as finance minister since Kiichi Miyazawa ended his last stint in the job in 2001. The father of two also worked at the Japanese embassy in London for four years.
Yosano is head of the LDP's fiscal policy panel, charged with finding ways to cut debt that the Organization for Economic Cooperation and Development estimates at 182 percent of gross domestic product. He favors raising taxes and cutting spending to balance the budget.
Doubling the 5 percent consumption tax by 2015 would help Japan care for one of the world's most rapidly aging societies, Yosano said in a May interview. ``We may not be able to continue our good welfare system after a couple of years,'' he said.
Decisions on taxes may become more pressing as slowing growth causes revenue to decline. Still, even with Yosano in the Cabinet, Fukuda's declining popularity and the prospect of a general election within the next 12 months means any debate on the sales tax may be delayed.
Not Realistic
``I don't think it's realistic to expect the government to seriously discuss raising taxes right before the election,'' said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. ``That's not the message Fukuda wants to send.''
The last prime minister to raise the sales tax, Ryutaro Hashimoto, had to resign after the 1997 increase led the LDP to an election defeat.
The government will probably miss its goal of balancing the books by the year ending March 2012, according to a Cabinet Office report last month. The Finance Ministry this week increased its cap on general spending for next fiscal year by 1.1 percent to 47.8 trillion yen ($444 billion).
Yosano and Ibuki will inherit an economy that may already be in a recession. Exports, production, household spending and wages all declined in June. Morgan Stanley yesterday cut Japan's 2009 growth estimate to 0.2 percent and said a ``deepening recession'' was possible.
The new ministers probably won't try to influence decisions by the Bank of Japan, economists said. Though the central bank is independent, some officials in the past have urged the policy board to keep interest rates low to spur growth.
``The Bank of Japan doesn't have to worry about political pressure with this Cabinet reshuffle,'' said Shiraishi at HSBC.
The bank has ``normalized'' rates without hurting financial markets and should keep doing so without interference from politicians, Yosano said in an interview in October. He said last month that raising the benchmark rate from the current 0.5 percent would reward Japan's savers.
To contact the reporters on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net.
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Aug. 1 (Bloomberg) -- Bunmei Ibuki was named Japan's finance minister as Prime Minister Yasuo Fukuda turns to a former finance ministry official to help stave off a recession and reduce the world's biggest public debt.
Ibuki, 70, replaces Fukushiro Nukaga amid concern that he failed to rein in spending enough to balance the budget by 2011. Kaoru Yosano, 69, was chosen as economic and fiscal policy minister, replacing Hiroko Ota and returning to the post he held under Junichiro Koizumi from 2005 to 2006.
Fukuda probably chose Ibuki, the Liberal Democratic Party's No. 2 official, as a way to shore up support from within the party. Yosano's appointment, meanwhile, may signal that he's serious about cutting the debt and nurturing a recovery in the world's second-largest economy, said economist Masamichi Adachi.
``The message behind Yosano's appointment is that Fukuda is not giving up on fiscal consolidation,'' said Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. ``Ibuki isn't a big- picture guy, he's just a powerful politician.''
Hosting last month's Group of Eight summit failed to revive Fukuda's support in the polls, prompting the Cabinet reshuffle. His public approval rating has fallen by half since he took office in September, punctured by a feisty opposition that controls the less-powerful upper house of parliament, and criticism within his own party that he lacks a vision for Japan.
Ibuki was education minister under previous Prime Minister Shinzo Abe, and until today served as the LDP's secretary general. He worked in the Finance Ministry's budget bureau after graduating with a degree in economics from Kyoto University.
First Since Miyazawa
He's the first former Finance Ministry official to serve as finance minister since Kiichi Miyazawa ended his last stint in the job in 2001. The father of two also worked at the Japanese embassy in London for four years.
Yosano is head of the LDP's fiscal policy panel, charged with finding ways to cut debt that the Organization for Economic Cooperation and Development estimates at 182 percent of gross domestic product. He favors raising taxes and cutting spending to balance the budget.
Doubling the 5 percent consumption tax by 2015 would help Japan care for one of the world's most rapidly aging societies, Yosano said in a May interview. ``We may not be able to continue our good welfare system after a couple of years,'' he said.
Decisions on taxes may become more pressing as slowing growth causes revenue to decline. Still, even with Yosano in the Cabinet, Fukuda's declining popularity and the prospect of a general election within the next 12 months means any debate on the sales tax may be delayed.
Not Realistic
``I don't think it's realistic to expect the government to seriously discuss raising taxes right before the election,'' said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. ``That's not the message Fukuda wants to send.''
The last prime minister to raise the sales tax, Ryutaro Hashimoto, had to resign after the 1997 increase led the LDP to an election defeat.
The government will probably miss its goal of balancing the books by the year ending March 2012, according to a Cabinet Office report last month. The Finance Ministry this week increased its cap on general spending for next fiscal year by 1.1 percent to 47.8 trillion yen ($444 billion).
Yosano and Ibuki will inherit an economy that may already be in a recession. Exports, production, household spending and wages all declined in June. Morgan Stanley yesterday cut Japan's 2009 growth estimate to 0.2 percent and said a ``deepening recession'' was possible.
The new ministers probably won't try to influence decisions by the Bank of Japan, economists said. Though the central bank is independent, some officials in the past have urged the policy board to keep interest rates low to spur growth.
``The Bank of Japan doesn't have to worry about political pressure with this Cabinet reshuffle,'' said Shiraishi at HSBC.
The bank has ``normalized'' rates without hurting financial markets and should keep doing so without interference from politicians, Yosano said in an interview in October. He said last month that raising the benchmark rate from the current 0.5 percent would reward Japan's savers.
To contact the reporters on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net.
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U.S. July Employment Situation: Statistical Summary (Table)
By Kristy Scheuble
Aug. 1 (Bloomberg) -- Following is a summary of the July employment situation from the Labor Department.
==============================================================================
July June May April March Feb. 3-month
2008 2008 2008 2008 2008 2008 Average
==============================================================================
Unemployment rate 5.7% 5.5% 5.5% 5.0% 5.1% 4.8% 5.6%
Rate (3 decimals) 5.682% 5.505% 5.492% 4.953% 5.082% 4.812% 5.560%
Avg. hourly earnings 0.3% 0.3% 0.3% 0.1% 0.3% 0.3% 0.3%
Avg. weekly hours 33.6 33.7 33.7 33.8 33.8 33.7 33.7
------------------------------------------------------------------------------
Nonfarm employment -51 -51 -47 -67 -88 -83 -50
Previous estimate n/a -62 -62 -67 -88 -83 n/a
Net Revision 26
Manufacturing -35 -35 -21 -52 -46 -47 -30
Previous estimate n/a -33 -22 -52 -46 -47 n/a
Household employment -72 -155 -285 362 -24 -255 -171
------------------------------------------------------------------------------
==============================================================================
July June May April March Feb. 3-month
2008 2008 2008 2008 2008 2008 Average
==============================================================================
------------Monthly Change in Employment------------
Nonfarm employment -51 -51 -47 -67 -88 -83 -50
Total private -76 -94 -99 -91 -103 -109 -90
Goods-producing -46 -77 -51 -109 -79 -91 -58
Construction -22 -49 -38 -59 -39 -44 -36
Manufacturing -35 -35 -21 -52 -46 -47 -30
Service providing -5 26 4 42 -9 8 8
Trade, transport -39 -15 -45 -56 -27 -52 -33
Retail trade -17 -6 -24 -46 -27 -43 -16
Information -13 -6 -5 -6 -3 2 -8
Financial 0 -13 -3 -2 0 -13 -5
Business services -24 -39 -49 17 -59 -28 -37
Temporary help -29 -33 -36 -19 -31 -38 -33
Education, health 39 55 63 48 44 48 52
Leisure, hospitality 1 7 -11 14 16 16 -1
Government 25 43 52 24 15 26 40
------------------------------------------------------------------------------
==============================================================================
July June May April March Feb. 3-month
2008 2008 2008 2008 2008 2008 Average
==============================================================================
----------------------Earnings-----------------------
Avg. hourly earnings $18.06 $18.00 $17.95 $17.89 $17.87 $17.81 $18.00
MOM% change 0.3% 0.3% 0.3% 0.1% 0.3% 0.3% 0.3%
YOY% change 3.4% 3.4% 3.5% 3.5% 3.7% 3.7% 3.4%
Avg. weekly earnings $606.82 $606.60 $604.92 $604.68 $604.01 $600.20 $606.11
MOM% change 0.0% 0.3% 0.0% 0.1% 0.6% 0.3% 0.1%
YOY% change 2.8% 2.8% 3.2% 3.5% 3.3% 3.7% 2.9%
--------------------Hours of Work--------------------
Total private 33.6 33.7 33.7 33.8 33.8 33.7 33.7
MOM% change -0.3% 0.0% -0.3% 0.0% 0.3% 0.0% -0.2%
Manufacturing 41.0 41.0 41.0 41.0 41.2 41.1 41.0
MOM% change 0.0% 0.0% 0.0% -0.5% 0.2% 0.0% 0.0%
Overtime 3.8 3.8 3.9 4.0 4.0 4.0 3.8
--------------------Aggregate Hours--------------------
Aggregate hours index 106.6 107.0 107.1 107.5 107.6 107.3 106.9
3-month annualized -2.1% -0.9% -0.4% -0.6% -1.1% -0.6% n/a
MOM% change -0.4% -0.1% -0.4% -0.1% 0.3% -0.1% -0.3%
==============================================================================
July June May April March Feb. 3-month
2008 2008 2008 2008 2008 2008 Average
==============================================================================
-----------Labor Force Status (thousands)-------------
Pool available labor 13,781 13,387 13,253 12,381 12,545 12,153 13,474
Level change 394 134 872 -164 392 -280 467
Augmented Unemp. Rate 8.6% 8.4% 8.3% 7.8% 7.9% 7.7% 8.5%
Civilian labor force 154,603 154,390 154,534 153,957 153,784 153,374 154,509
Level change 213 -144 577 173 410 -450 215
Participation rate 66.1% 66.1% 66.2% 66.0% 66.0% 65.9% 66.1%
Employment 145,819 145,891 146,046 146,331 145,969 145,993 145,919
Level change -72 -155 -285 362 -24 -255 -171
Employment ratio 62.4% 62.4% 62.6% 62.7% 62.6% 62.7% 62.5%
Unemployment 8,784 8,499 8,487 7,626 7,815 7,381 8,590
Level change 285 12 861 -189 434 -195 386
Avg. duration (wks) 17.1 17.5 16.6 16.9 16.2 16.8 17.1
Median duration 9.7 10.0 8.3 9.3 8.1 8.4 9.3
Not in labor force 79,261 79,237 78,871 79,241 79,211 79,436 79,123
Level change 24 366 -370 30 -225 644 7
Job leavers 9.8% 9.9% 10.3% 11.2% 10.1% 10.4% 10.0%
==============================================================================
July June May April March Feb. 3-month
2008 2008 2008 2008 2008 2008 Average
==============================================================================
--------------------Diffusion Index--------------------
Private nonfarm 41.2 42.2 46.4 45.6 47.4 41.4 43.3
3-mo. average 43.3 44.7 46.5 44.8 44.7 45.1 n/a
Manufacturing 27.4 32.7 44.6 35.1 38.1 28.6 34.9
3-mo. average 34.9 37.5 39.3 33.9 35.7 35.1 n/a
==============================================================================
NOTE: All figures seasonally adjusted. Employment figures in thousands.
The augmented unemployment rate is the number of job wanters plus the number
unemployed divided by the labor force plus the number of job wanters.
To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net
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Swedish Economy Grows at Slowest Pace Since 2001
By Johan Carlstrom
Aug. 1 (Bloomberg) -- Sweden's economy grew at its slowest pace in almost seven years in the second quarter as unemployment reached a two-year high, inflation accelerated and interest rates rose.
Gross domestic product expanded an annual 0.7 percent, compared with a revised 2.1 percent in the previous three months, Statistics Sweden said today. The median forecast of 13 economists surveyed by Bloomberg was for 2 percent growth. GDP was unchanged from the first quarter.
Today's report may deter the central bank, or Riksbank, from going through with its forecast that interest rates will rise twice more this year to stem an inflation rate that reached a 15- year high in June. The bank had forecast economic growth of 2.1 percent for the second quarter.
``There's no room for the Riksbank to raise the interest rate,'' said Robert Bergqvist, chief economist at SEB AB, Sweden's second-largest bank by assets.
The yield on the 5.25 percent government note fell 10 basis points to 4.39 percent by 11:50 a.m. in Stockholm. The krona strengthened to 9.4377 per euro from 9.4413.
``The extremely weak Q2 GDP report, together with other very weak, more forward looking, economic indicators that we have received the past few days have reduced the probability of rate hikes during the autumn substantially,'' said Anna Raaman, economist at Handelbanken AB in a client note.
Slowing Down
The consumer confidence index fell to a 13-year low of minus 18.2 in July from minus 10.2 the month before, the National Institute of Economic Research said yesterday. Manufacturing industry contracted for the first time in five years in the same month, a Swedbank survey of purchasing managers showed today.
The Riksbank lifted its benchmark lending rate to 4.5 percent last month to limit inflation which accelerated to an annual 4.3 percent in June on the back of rising food and oil prices.
Net trade cut 0.4 percentage point from annual growth in the second quarter, Statistics Sweden said. Household consumption added 1 point, fiscal spending contributed 0.1 point and investment added 1.9 percentage points. The spending figures were not adjusted for calendar effects, unlike the overall GDP number.
Productivity declined an annual 1.3 percent in the second quarter, the largest fall since Statistics Sweden started to publish the figure in 1993, said Olle Holmgren, an economist at SEB. That will add to pressure on companies to raise prices.
``This highlights that inflation still is a Riksbank headache,'' Holmgren said in a client note. ``Still the risk for another rate hike in September has been reduced significantly.''
The central bank, which has an inflation target of 2 percent, predicts growth will slow to 2.1 percent this year and 1.2 percent in 2009 from 2.8 percent last year. Inflation will probably ease to 2.3 percent in 2010, it forecasts.
Several companies, including Ericsson AB, the world largest maker of wireless networks, and Sandvik AB, the world's biggest maker of metal-cutting tools, have said they will cut staff in Sweden as the economy slows. Unemployment rose to 8.1 percent in June from 5.9 percent in May.
To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.
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Aug. 1 (Bloomberg) -- Sweden's economy grew at its slowest pace in almost seven years in the second quarter as unemployment reached a two-year high, inflation accelerated and interest rates rose.
Gross domestic product expanded an annual 0.7 percent, compared with a revised 2.1 percent in the previous three months, Statistics Sweden said today. The median forecast of 13 economists surveyed by Bloomberg was for 2 percent growth. GDP was unchanged from the first quarter.
Today's report may deter the central bank, or Riksbank, from going through with its forecast that interest rates will rise twice more this year to stem an inflation rate that reached a 15- year high in June. The bank had forecast economic growth of 2.1 percent for the second quarter.
``There's no room for the Riksbank to raise the interest rate,'' said Robert Bergqvist, chief economist at SEB AB, Sweden's second-largest bank by assets.
The yield on the 5.25 percent government note fell 10 basis points to 4.39 percent by 11:50 a.m. in Stockholm. The krona strengthened to 9.4377 per euro from 9.4413.
``The extremely weak Q2 GDP report, together with other very weak, more forward looking, economic indicators that we have received the past few days have reduced the probability of rate hikes during the autumn substantially,'' said Anna Raaman, economist at Handelbanken AB in a client note.
Slowing Down
The consumer confidence index fell to a 13-year low of minus 18.2 in July from minus 10.2 the month before, the National Institute of Economic Research said yesterday. Manufacturing industry contracted for the first time in five years in the same month, a Swedbank survey of purchasing managers showed today.
The Riksbank lifted its benchmark lending rate to 4.5 percent last month to limit inflation which accelerated to an annual 4.3 percent in June on the back of rising food and oil prices.
Net trade cut 0.4 percentage point from annual growth in the second quarter, Statistics Sweden said. Household consumption added 1 point, fiscal spending contributed 0.1 point and investment added 1.9 percentage points. The spending figures were not adjusted for calendar effects, unlike the overall GDP number.
Productivity declined an annual 1.3 percent in the second quarter, the largest fall since Statistics Sweden started to publish the figure in 1993, said Olle Holmgren, an economist at SEB. That will add to pressure on companies to raise prices.
``This highlights that inflation still is a Riksbank headache,'' Holmgren said in a client note. ``Still the risk for another rate hike in September has been reduced significantly.''
The central bank, which has an inflation target of 2 percent, predicts growth will slow to 2.1 percent this year and 1.2 percent in 2009 from 2.8 percent last year. Inflation will probably ease to 2.3 percent in 2010, it forecasts.
Several companies, including Ericsson AB, the world largest maker of wireless networks, and Sandvik AB, the world's biggest maker of metal-cutting tools, have said they will cut staff in Sweden as the economy slows. Unemployment rose to 8.1 percent in June from 5.9 percent in May.
To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.
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China Manufacturing Shrinks for First Time on Record
By Li Yanping and Nipa Piboontanasawat
Aug. 1 (Bloomberg) -- Manufacturing in China contracted for the first time since a survey began in 2005 as export demand faltered and factories closed to clear the air before the Olympic Games.
The Purchasing Managers' Index fell to a seasonally adjusted 48.4 in July from 52 in June, the China Federation of Logistics and Purchasing said today in an e-mailed statement.
The expansion of the world's fourth-biggest economy slowed for the fourth straight quarter in the three months through June on weaker U.S. demand. China raised tax rebates for shipments of textiles and garments today and the commerce ministry is pressing for slower yuan gains to protect exporters after the currency's 6.8 percent advance against the dollar this year.
``Companies are less willing to invest as export growth slumps, credit gets tighter and the economic outlook worsens,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. ``Factory closures ahead of the Olympic Games may also have played a role.''
The yuan fell 0.1 percent to 6.8409 against the dollar as of 11:13 a.m. in Shanghai.
The government has closed construction sites and shuttered factories in and around Beijing to clear smog before the games start next week. Shougang Corp., a Beijing-based steelmaker, will keep only one of four blast furnaces open during the games.
Not Enough Electricity
China also faces power shortages. The government has asked coal producers to increase deliveries to power stations to help ease a sixth year of electricity shortages and ensure supplies for the games, according to a July 30 report by the state-run Xinhua News Agency.
Six of 11 sub-indexes in the PMI fell to record lows, including output, new orders and export orders.
``The size of the slowdown is unexpected,'' said Xing Ziqiang, a Beijing-based economist at China International Capital Corp., the nation's biggest investment bank. ``The government may use a more active fiscal policy, slow gains by the yuan, and encourage lending to small companies.''
The Communist Party's Politburo said July 25 that maintaining growth and fighting inflation are the two biggest priorities for the rest of the year. Inflation this year is the fastest since 1996. Consumer prices rose 7.1 percent in June.
China is raising tax rebates on exports of textiles and garments to 13 percent from 11 percent today, according to the State Administration of Taxation. The Ministry of Commerce had urged China's cabinet to rein in currency gains and raise some rebates, a ministry official said July 14, speaking on condition of anonymity.
Yuan's Advance
The yuan's advance against the dollar in 2008 has been at more than double the pace of a year earlier.
The economy expanded 10.1 percent in the second quarter as the trade surplus narrowed 12 percent from a year earlier to $58.14 billion.
Today's survey ``may indicate the economy will continue to weaken,'' Zhang Liqun, a senior research fellow at the State Council's Development Research Center, said in the statement. Companies ``are facing increasing difficulties and this could curb economic growth and reduce employment and incomes.''
The PMI is based on a survey that started in January 2005 of more than 700 companies in 20 industries, including energy, metallurgy, textile, automobile and electronics. A reading above 50 reflects an expansion, below 50 a contraction.
The output index fell to 47.4 in July from 54.2 in June, while the index of new orders dropped to 46.2 from 52.6. The index of export orders declined to 46.7 from 50.2.
Conflicting Survey
The CFLP jointly releases the figures with the National Bureau of Statistics.
A second PMI, released today by CLSA Asia-Pacific Markets, showed Chinese manufacturing continuing to expand last month. The surveys conflict because they have different methodologies. The CLSA index was a seasonally adjusted 53.3.
Output and orders are slowing gradually and from high levels, suggesting that the central bank ``has no room to ease monetary policy,'' Eric Fishwick, head of economic research at CLSA in Singapore, said in an e-mailed statement.
To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net
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U.K. Manufacturing Shrinks Most in a Decade in July
By Svenja O'Donnell
Aug. 1 (Bloomberg) -- U.K. manufacturing contracted by the most in a decade in July and prices charged by factories rose at the fastest pace since at least 1999, worsening the Bank of England's dilemma as it tries to avert a recession.
The Chartered Institute of Purchasing and Supply's index of manufacturing dropped to 44.3, the lowest since December 1998, from 45.9 in June. Economists expected 45.5, the median of 27 forecasts in a Bloomberg News survey showed. Readings below 50 signal contraction.
The slump in manufacturing is deepening after reports this week showed that U.K. house prices dropped the most since 1991 in July and consumer confidence declined to a record low. At the same time, some central bank policy makers argue it may be necessary to raise interest rates to combat faster inflation.
``Recession, here we come,'' said Alan Clarke, an economist at BNP Paribas SA in London. ``The Bank of England's dilemma isn't changing but the extremes are fanning out and getting much worse.''
A subindex measuring prices for goods charged by factories rose to 63.1 from 62.6, the highest since that series started in November 1999. A gauge of input prices increased to 82.4, the most since records started in 1992, from 82.1. The CIPS report is based on a survey of more than 600 manufacturers.
The pound was little changed after the figures and traded at $1.9783 against the dollar at 12:25 p.m. in London. A separate report today showed corporate insolvencies increased 11.6 percent in the second quarter from the previous three months.
Earnings
Slower growth in the U.K. and around the world is starting to hurt companies' earnings. Tomkins Plc, the U.K. maker of auto parts and building materials founded in 1925, said yesterday first-half profit slumped. CSR Plc, the U.K. maker of microchips used in Nokia Oyj mobile phones, said July 29 that fewer sales of headsets and non-cellular products is eroding profit.
While manufacturing accounts for 15 percent of the economy, business services and finance make up 28 percent of gross domestic product.
Weaker growth is eroding support for Prime Minister Gordon Brown. A YouGov Plc poll published by the Daily Telegraph newspaper today showed only 15 percent of Britons say he is up to the job. He may also be losing the support of some lawmakers amid speculation that Foreign Secretary David Miliband is plotting to oust him.
The manufacturing slump is hurting the economy just as faster inflation prevents the Bank of England from cutting rates.
Consumer-price inflation reached 3.8 percent in June, the fastest pace in at least 11 years, and the central bank kept its benchmark rate at 5 percent this month. Policy makers will meet again next week and will probably keep the rate unchanged for a fourth month, according to all 30 economists in a Bloomberg News survey.
Some policy makers may still vote for a rate increase. Timothy Besley, one of the Bank of England's nine rate setters, said in an interview with the Daily Telegraph this week that ``more activism in policy now means one can afford to be less active later.''
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Aug. 1 (Bloomberg) -- U.K. manufacturing contracted by the most in a decade in July and prices charged by factories rose at the fastest pace since at least 1999, worsening the Bank of England's dilemma as it tries to avert a recession.
The Chartered Institute of Purchasing and Supply's index of manufacturing dropped to 44.3, the lowest since December 1998, from 45.9 in June. Economists expected 45.5, the median of 27 forecasts in a Bloomberg News survey showed. Readings below 50 signal contraction.
The slump in manufacturing is deepening after reports this week showed that U.K. house prices dropped the most since 1991 in July and consumer confidence declined to a record low. At the same time, some central bank policy makers argue it may be necessary to raise interest rates to combat faster inflation.
``Recession, here we come,'' said Alan Clarke, an economist at BNP Paribas SA in London. ``The Bank of England's dilemma isn't changing but the extremes are fanning out and getting much worse.''
A subindex measuring prices for goods charged by factories rose to 63.1 from 62.6, the highest since that series started in November 1999. A gauge of input prices increased to 82.4, the most since records started in 1992, from 82.1. The CIPS report is based on a survey of more than 600 manufacturers.
The pound was little changed after the figures and traded at $1.9783 against the dollar at 12:25 p.m. in London. A separate report today showed corporate insolvencies increased 11.6 percent in the second quarter from the previous three months.
Earnings
Slower growth in the U.K. and around the world is starting to hurt companies' earnings. Tomkins Plc, the U.K. maker of auto parts and building materials founded in 1925, said yesterday first-half profit slumped. CSR Plc, the U.K. maker of microchips used in Nokia Oyj mobile phones, said July 29 that fewer sales of headsets and non-cellular products is eroding profit.
While manufacturing accounts for 15 percent of the economy, business services and finance make up 28 percent of gross domestic product.
Weaker growth is eroding support for Prime Minister Gordon Brown. A YouGov Plc poll published by the Daily Telegraph newspaper today showed only 15 percent of Britons say he is up to the job. He may also be losing the support of some lawmakers amid speculation that Foreign Secretary David Miliband is plotting to oust him.
The manufacturing slump is hurting the economy just as faster inflation prevents the Bank of England from cutting rates.
Consumer-price inflation reached 3.8 percent in June, the fastest pace in at least 11 years, and the central bank kept its benchmark rate at 5 percent this month. Policy makers will meet again next week and will probably keep the rate unchanged for a fourth month, according to all 30 economists in a Bloomberg News survey.
Some policy makers may still vote for a rate increase. Timothy Besley, one of the Bank of England's nine rate setters, said in an interview with the Daily Telegraph this week that ``more activism in policy now means one can afford to be less active later.''
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Pound Headed for Weekly Drop as Manufacturing Index Declines
By Agnes Lovasz
Aug. 1 (Bloomberg) -- The pound headed for its biggest weekly drop against the dollar since mid June as U.K. manufacturing shrank by the most in a decade, adding to evidence a recession is looming.
An index based on a survey of more than 600 manufacturers by the Chartered Institute of Purchasing and Supply dropped to 44.3 in July, the lowest since December 1998, from 45.9 the previous month. The U.K. currency extended its drop after British Energy Group Plc, the nation's biggest nuclear-power producer, rejected a takeover approach from Electricite de France SA, according to people with knowledge of the talks.
``The news you're getting about the British economy goes only in one direction,'' said Lutz Karpowitz, a Frankfurt-based currency strategist at Commerzbank AG, Germany's second-biggest lender. ``The economy is very weak and we don't see signs of a recovery. The pound is going to get weaker against the euro and the dollar.''
The pound slipped to $1.9781 by 12:42 p.m. in London, from $1.9841 yesterday, bringing it weekly drop to 0.8 percent. The British currency was at 78.72 pence per euro, from 78.64, gaining 0.2 percent in the week.
The U.K. currency will slide to 82 pence per euro and $1.96 by the end of the March, before recovering, Karpowitz said.
Retail visits fell 2.6 percent from a year earlier, Experian Group Ltd. said today in an e-mailed report. The company forecasts sales volumes in the next 12 months will be ``the slowest period since the early 1990s,'' according to the report.
Gilts Decline
U.K. government bonds were little changed. The yield on the 10-year gilt was 4.81 percent. The 5 percent security due March 2018 dropped 0.03, or 30 pence per 1,000-pound ($1,978) face amount, to 101.47. The yield on the two-year gilt climbed 2 basis points to 4.81 percent. Bond yields move inversely to prices.
Bank of England policy makers left the nation's key interest rate unchanged at the past three meetings even as inflation accelerated to the fastest pace in 11 years. Prices rose 3.8 percent in June from a year earlier, almost double the central bank's 2 percent target. The bank next meets Aug. 7.
The pound has fallen 6.7 percent against the euro this year as tumbling house prices and accelerating inflation slowed the pace of growth.
The prospect of higher interest rates receded in the past month, with the implied yield on the December short-sterling futures contract at 5.76 percent today, from 6.21 percent a month ago. The contract rose 5 basis points today.
Gloomy Outlook
Britain's economic outlook has deteriorated in the past month after ``bad news'' on retail sales, Bank of England policy maker David Blanchflower, the only official to vote for a rate cut this month, said two days ago. U.K. house prices fell the most in nearly two decades in July and consumer confidence dropped to a record, reports showed yesterday.
Other reports this week showed mortgage approvals fell to the lowest since at least 1999 and an index of U.K. retail sales dropped to a 25-year low, house prices declined the most in almost two decades and consumer confidence slumped to a record.
The faltering economy will weaken the pound to $1.90 and to 80 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg. The yield on the 10-year note will end the year at 4.89 percent, according to a separate survey.
To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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Aug. 1 (Bloomberg) -- The pound headed for its biggest weekly drop against the dollar since mid June as U.K. manufacturing shrank by the most in a decade, adding to evidence a recession is looming.
An index based on a survey of more than 600 manufacturers by the Chartered Institute of Purchasing and Supply dropped to 44.3 in July, the lowest since December 1998, from 45.9 the previous month. The U.K. currency extended its drop after British Energy Group Plc, the nation's biggest nuclear-power producer, rejected a takeover approach from Electricite de France SA, according to people with knowledge of the talks.
``The news you're getting about the British economy goes only in one direction,'' said Lutz Karpowitz, a Frankfurt-based currency strategist at Commerzbank AG, Germany's second-biggest lender. ``The economy is very weak and we don't see signs of a recovery. The pound is going to get weaker against the euro and the dollar.''
The pound slipped to $1.9781 by 12:42 p.m. in London, from $1.9841 yesterday, bringing it weekly drop to 0.8 percent. The British currency was at 78.72 pence per euro, from 78.64, gaining 0.2 percent in the week.
The U.K. currency will slide to 82 pence per euro and $1.96 by the end of the March, before recovering, Karpowitz said.
Retail visits fell 2.6 percent from a year earlier, Experian Group Ltd. said today in an e-mailed report. The company forecasts sales volumes in the next 12 months will be ``the slowest period since the early 1990s,'' according to the report.
Gilts Decline
U.K. government bonds were little changed. The yield on the 10-year gilt was 4.81 percent. The 5 percent security due March 2018 dropped 0.03, or 30 pence per 1,000-pound ($1,978) face amount, to 101.47. The yield on the two-year gilt climbed 2 basis points to 4.81 percent. Bond yields move inversely to prices.
Bank of England policy makers left the nation's key interest rate unchanged at the past three meetings even as inflation accelerated to the fastest pace in 11 years. Prices rose 3.8 percent in June from a year earlier, almost double the central bank's 2 percent target. The bank next meets Aug. 7.
The pound has fallen 6.7 percent against the euro this year as tumbling house prices and accelerating inflation slowed the pace of growth.
The prospect of higher interest rates receded in the past month, with the implied yield on the December short-sterling futures contract at 5.76 percent today, from 6.21 percent a month ago. The contract rose 5 basis points today.
Gloomy Outlook
Britain's economic outlook has deteriorated in the past month after ``bad news'' on retail sales, Bank of England policy maker David Blanchflower, the only official to vote for a rate cut this month, said two days ago. U.K. house prices fell the most in nearly two decades in July and consumer confidence dropped to a record, reports showed yesterday.
Other reports this week showed mortgage approvals fell to the lowest since at least 1999 and an index of U.K. retail sales dropped to a 25-year low, house prices declined the most in almost two decades and consumer confidence slumped to a record.
The faltering economy will weaken the pound to $1.90 and to 80 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg. The yield on the 10-year note will end the year at 4.89 percent, according to a separate survey.
To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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Crude Oil Falls a Second Day as Slowing Economy Damps Demand
By Grant Smith
Aug. 1 (Bloomberg) -- Oil fell for a second day, after posting its biggest monthly drop since 2004 in July, on concern global consumption is falling amid slowing economic growth.
Demand is faltering in the U.S., the world's largest energy user, where the unemployment rate rose to its highest in four years, government data showed today. Manufacturing in China, the world's second-biggest energy consumer, contracted for the first time since a survey of purchasing managers began in 2005.
``The growing prospect of demand destruction in the U.S., and potentially other parts of the world, combined with technical indicators that suggest it's time to sell, is keeping prices under pressure,'' said Christopher Bellew, senior broker at Bache Commodities Ltd. in London.
Crude oil for September delivery declined as much as $1.98 cents, or 1.6 percent, to $122.10 a barrel on the New York Mercantile Exchange. The contract traded at $122.92 a barrel at 1:41 p.m. London time.
Futures dropped 11 percent in July, the biggest one-month drop since December 2004. Yesterday, the September contract fell $2.69, or 2.1 percent, to settle at $124.08 a barrel.
Oil prices have slipped more than $23 a barrel, or 16 percent, from the $147.27 record on July 11 on signs of declining demand in the U.S., which consumed about 24 percent of the world's crude in 2007.
U.S. payrolls fell by 51,000, less than forecast, after a decline of 51,000 in June that was smaller than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, the highest since March 2004, from 5.5 percent the prior month.
Economy Shrank
The U.S. economy shrank at the end of 2007 and grew less than forecast in this year's second quarter. Gross domestic product increased at a 1.9 percent annualized rate, the Commerce Department said in Washington yesterday, compared with the median projection of 2.3 percent in a Bloomberg News survey.
``U.S. economic indicators are weighing heavily on sentiment,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``Negative refining margins are discouraging refiners from making gasoline.''
China's Purchasing Managers' Index fell to a seasonally adjusted 48.4 in July from 52 in June, the China Federation of Logistics and Purchasing said today in an e-mailed statement.
Brent crude oil for September settlement fell as much as $2.04, or 1.7 percent, to $121.94 a barrel, and traded at $122.30 a barrel at 1:37 p.m. London time on London's ICE Futures Europe exchange. Yesterday, the contract declined $3.12, or 2.5 percent, yesterday to close at $123.98 a barrel.
Crude prices may fall next week on slowing demand. Thirteen of 29 analysts surveyed by Bloomberg News, or 45 percent, said prices will drop through August 8. Seven of the respondents, or 24 percent, said oil will rise and nine forecast little change. Last week 46 percent expected a decline.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net.
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Aug. 1 (Bloomberg) -- Oil fell for a second day, after posting its biggest monthly drop since 2004 in July, on concern global consumption is falling amid slowing economic growth.
Demand is faltering in the U.S., the world's largest energy user, where the unemployment rate rose to its highest in four years, government data showed today. Manufacturing in China, the world's second-biggest energy consumer, contracted for the first time since a survey of purchasing managers began in 2005.
``The growing prospect of demand destruction in the U.S., and potentially other parts of the world, combined with technical indicators that suggest it's time to sell, is keeping prices under pressure,'' said Christopher Bellew, senior broker at Bache Commodities Ltd. in London.
Crude oil for September delivery declined as much as $1.98 cents, or 1.6 percent, to $122.10 a barrel on the New York Mercantile Exchange. The contract traded at $122.92 a barrel at 1:41 p.m. London time.
Futures dropped 11 percent in July, the biggest one-month drop since December 2004. Yesterday, the September contract fell $2.69, or 2.1 percent, to settle at $124.08 a barrel.
Oil prices have slipped more than $23 a barrel, or 16 percent, from the $147.27 record on July 11 on signs of declining demand in the U.S., which consumed about 24 percent of the world's crude in 2007.
U.S. payrolls fell by 51,000, less than forecast, after a decline of 51,000 in June that was smaller than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, the highest since March 2004, from 5.5 percent the prior month.
Economy Shrank
The U.S. economy shrank at the end of 2007 and grew less than forecast in this year's second quarter. Gross domestic product increased at a 1.9 percent annualized rate, the Commerce Department said in Washington yesterday, compared with the median projection of 2.3 percent in a Bloomberg News survey.
``U.S. economic indicators are weighing heavily on sentiment,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``Negative refining margins are discouraging refiners from making gasoline.''
China's Purchasing Managers' Index fell to a seasonally adjusted 48.4 in July from 52 in June, the China Federation of Logistics and Purchasing said today in an e-mailed statement.
Brent crude oil for September settlement fell as much as $2.04, or 1.7 percent, to $121.94 a barrel, and traded at $122.30 a barrel at 1:37 p.m. London time on London's ICE Futures Europe exchange. Yesterday, the contract declined $3.12, or 2.5 percent, yesterday to close at $123.98 a barrel.
Crude prices may fall next week on slowing demand. Thirteen of 29 analysts surveyed by Bloomberg News, or 45 percent, said prices will drop through August 8. Seven of the respondents, or 24 percent, said oil will rise and nine forecast little change. Last week 46 percent expected a decline.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net.
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U.S. Payrolls Drop 51,000 Jobs; Jobless Rate Rises
By Shobhana Chandra
Aug. 1 (Bloomberg) -- The U.S. lost jobs in July for a seventh straight month and the unemployment rate rose, increasing the risk that the economic slowdown will worsen.
Payrolls fell by 51,000, less than forecast, after a decline of 51,000 in June that was smaller than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, the highest since March 2004, from 5.5 percent the prior month.
Fewer jobs, combined with decreasing property values, stricter lending rules and near-record energy prices, threaten to cut household spending. Cutbacks at UAL Corp. and Starbucks Corp. signal firings are spreading beyond builders and manufacturers as the cost of raw materials soars.
``There's not a whole lot of optimism among employers,'' Peter Kretzmer, a senior economist at Bank of America Corp. in New York, said before the report. ``The economy will get worse, and that can certainly generate more weakness in the labor market.''
Treasuries were little changed and stock-index futures advanced. Yields on benchmark 10-year notes were at 3.94 percent at 8:41 a.m. in New York, from 3.95 percent late yesterday. Futures on the Standard & Poor's 500 Stock Index gained 0.3 percent to 1,271.10.
Revisions added 26,000 to payroll figures previously reported for May and June.
Economists' Forecasts
Economists had projected payrolls would drop by 75,000 after a 62,000 decline the prior month, according to the median of 80 forecasts in a Bloomberg News survey. Estimates ranged from decreases of 150,000 to no change. The jobless rate was forecast to rise to 5.6 percent.
The employment figures may reinforce concern that the economy was in a recession. The July cuts bring the total drop in payrolls so far this year to 463,000.
The National Bureau of Economic Research, the official arbiter of U.S. contractions, tracks payrolls, sales, incomes, production and gross domestic product in making the recession call. The group defines downturns as a ``significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.
The economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, figures from the Commerce Department showed yesterday. Some economists said this indicated the U.S. slipped into a recession late last year. Investors pared bets the Federal Reserve will raise interest rates in 2008.
`Remain Weak'
``The labor market is likely to remain weak, if not deteriorate a bit further,'' Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, said before the report. ``This should keep the Fed uncomfortably on hold as policymakers are forced to grapple with the coexistence of recessionary and inflationary forces.''
More Americans filed initial claims for unemployment benefits last week than at any time in over five years, Labor reported yesterday. Consumer confidence surveys have indicated that Americans, growing more pessimistic about job prospects, may trim spending.
``There's a very high level of uncertainty'' about the economy, Conrad DeQuadros, economist and co-founder of RDQ Economics in New York, said in a Bloomberg Radio interview yesterday. ``The job numbers will provide a much more up-to-date picture.''
Starbucks, the world's largest chain of coffee shops, this week said it'll cut another 1,000 jobs as sales slump. The Seattle-based company on July 1 announced plans to eliminate as many as 12,000 positions worldwide.
Factory Jobs
Factory payrolls fell 35,000 after declining by the same amount in June. Economists had forecast a drop of 40,000. The decrease included a drop of 3,000 jobs in auto manufacturing and parts industries.
General Motors Corp. may cut about 5,000 U.S. jobs by year- end, people familiar with the plan said this week. July announcements at airlines included 7,000 cuts at UAL's United Airlines, and 6,840 at American Airlines parent AMR Corp.
The protracted housing slump and resulting credit crisis were also reflected in today's report. Construction payrolls declined 22,000, the smallest drop since October, after decreasing 49,000. Payrolls at financial firms were unchanged after declining 13,000 the prior month.
Services Payrolls
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 5,000 workers, the first decline since March. Retail payrolls decreased by 16,500 after a drop of 6,300.
Government jobs increased by 25,000, the 12th month of gains in public payrolls, after an increase of 43,000.
The average work week shrank to 33.6 hours from 33.7 hours. Average weekly hours worked by production workers were unchanged at 41, and overtime was also unchanged at 3.8 hours. That brought the average weekly earnings up by 22 cents to $606.82 in July.
Workers' average hourly wages rose 6 cents, or 0.3 percent, to $18.06, matching economists' forecasts.
Sealed Air Corp., the maker of Bubble Wrap packaging, said this week it plans to eliminate 900 to 1,000 jobs globally after second-quarter profit fell because of rising costs to make plastics.
``We certainly are facing a challenging environment in 2008,'' Chief Financial Officer David Kelsey said in a July 30 telephone interview.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
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Aug. 1 (Bloomberg) -- The U.S. lost jobs in July for a seventh straight month and the unemployment rate rose, increasing the risk that the economic slowdown will worsen.
Payrolls fell by 51,000, less than forecast, after a decline of 51,000 in June that was smaller than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, the highest since March 2004, from 5.5 percent the prior month.
Fewer jobs, combined with decreasing property values, stricter lending rules and near-record energy prices, threaten to cut household spending. Cutbacks at UAL Corp. and Starbucks Corp. signal firings are spreading beyond builders and manufacturers as the cost of raw materials soars.
``There's not a whole lot of optimism among employers,'' Peter Kretzmer, a senior economist at Bank of America Corp. in New York, said before the report. ``The economy will get worse, and that can certainly generate more weakness in the labor market.''
Treasuries were little changed and stock-index futures advanced. Yields on benchmark 10-year notes were at 3.94 percent at 8:41 a.m. in New York, from 3.95 percent late yesterday. Futures on the Standard & Poor's 500 Stock Index gained 0.3 percent to 1,271.10.
Revisions added 26,000 to payroll figures previously reported for May and June.
Economists' Forecasts
Economists had projected payrolls would drop by 75,000 after a 62,000 decline the prior month, according to the median of 80 forecasts in a Bloomberg News survey. Estimates ranged from decreases of 150,000 to no change. The jobless rate was forecast to rise to 5.6 percent.
The employment figures may reinforce concern that the economy was in a recession. The July cuts bring the total drop in payrolls so far this year to 463,000.
The National Bureau of Economic Research, the official arbiter of U.S. contractions, tracks payrolls, sales, incomes, production and gross domestic product in making the recession call. The group defines downturns as a ``significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.
The economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, figures from the Commerce Department showed yesterday. Some economists said this indicated the U.S. slipped into a recession late last year. Investors pared bets the Federal Reserve will raise interest rates in 2008.
`Remain Weak'
``The labor market is likely to remain weak, if not deteriorate a bit further,'' Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, said before the report. ``This should keep the Fed uncomfortably on hold as policymakers are forced to grapple with the coexistence of recessionary and inflationary forces.''
More Americans filed initial claims for unemployment benefits last week than at any time in over five years, Labor reported yesterday. Consumer confidence surveys have indicated that Americans, growing more pessimistic about job prospects, may trim spending.
``There's a very high level of uncertainty'' about the economy, Conrad DeQuadros, economist and co-founder of RDQ Economics in New York, said in a Bloomberg Radio interview yesterday. ``The job numbers will provide a much more up-to-date picture.''
Starbucks, the world's largest chain of coffee shops, this week said it'll cut another 1,000 jobs as sales slump. The Seattle-based company on July 1 announced plans to eliminate as many as 12,000 positions worldwide.
Factory Jobs
Factory payrolls fell 35,000 after declining by the same amount in June. Economists had forecast a drop of 40,000. The decrease included a drop of 3,000 jobs in auto manufacturing and parts industries.
General Motors Corp. may cut about 5,000 U.S. jobs by year- end, people familiar with the plan said this week. July announcements at airlines included 7,000 cuts at UAL's United Airlines, and 6,840 at American Airlines parent AMR Corp.
The protracted housing slump and resulting credit crisis were also reflected in today's report. Construction payrolls declined 22,000, the smallest drop since October, after decreasing 49,000. Payrolls at financial firms were unchanged after declining 13,000 the prior month.
Services Payrolls
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 5,000 workers, the first decline since March. Retail payrolls decreased by 16,500 after a drop of 6,300.
Government jobs increased by 25,000, the 12th month of gains in public payrolls, after an increase of 43,000.
The average work week shrank to 33.6 hours from 33.7 hours. Average weekly hours worked by production workers were unchanged at 41, and overtime was also unchanged at 3.8 hours. That brought the average weekly earnings up by 22 cents to $606.82 in July.
Workers' average hourly wages rose 6 cents, or 0.3 percent, to $18.06, matching economists' forecasts.
Sealed Air Corp., the maker of Bubble Wrap packaging, said this week it plans to eliminate 900 to 1,000 jobs globally after second-quarter profit fell because of rising costs to make plastics.
``We certainly are facing a challenging environment in 2008,'' Chief Financial Officer David Kelsey said in a July 30 telephone interview.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
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