By Michael Patterson
Aug. 13 (Bloomberg) -- Stock investors from Mexico City to Madrid are growing less pessimistic after oil tumbled 23 percent and concerns about bank losses receded, a survey of Bloomberg users showed.
While most investors expect benchmark indexes to decline, fewer predict losses than in July for the Standard & Poor's 500 Index, the FTSE 100 Index, France's CAC 40 Index, Italy's S&P/MIB Index, the Swiss Market Index, Germany's DAX Index, Spain's IBEX 35 Index and Mexico's Bolsa, according to the Bloomberg Professional Global Confidence Survey. Brazilian investors were the most bullish for a ninth month. Only in Japan did they grow more bearish, last week's survey of 2,229 users showed.
The MSCI World Index rebounded 1.8 percent from an almost two-year low last month as oil's decline eased concern that inflation will force central banks to increase interest rates as economies slow. Financial shares led the rally after earnings reports from Citigroup Inc., Societe Generale SA and Credit Suisse Group AG exceeded analysts' projections.
``Commodities will continue to correct and this will help equities,'' said Philippe Gijsels, a survey participant who helps oversee about $62 billion in Brussels as senior equity strategist at Fortis Global Markets. ``It also seems the worst is behind us in banks.''
All the same, ``if you look at the long-term picture, we have not seen all we need to see to declare the end of the bear market,'' he said.
`Fragile State'
Stock indexes in all 10 nations plunged 20 percent or more since September. The MSCI World, which fell as much as 21 percent from its October peak, traded in July at 14.1 times average reported earnings, the cheapest since Bloomberg began tracking the weekly data in February 1995. The measure was valued at 15.7 times profit yesterday.
``If you back up a step and look at earnings there's no doubt that the economy is in a fragile state,'' Scott Richter, who helps oversee about $21 billion at Fifth Third Asset Management in Cleveland, said in a Bloomberg Television interview.
Global economic growth will weaken to 4.1 percent this year from 5 percent in 2007, the International Monetary Fund said last month. A decline in lending may worsen the slowdown as financial companies saddled with about $500 billion of credit losses and asset writedowns preserve cash, a Federal Reserve report showed this week.
Brazil Optimism
Analysts cut estimates for 2008 profit growth at S&P 500 companies to 1.6 percent from 15.1 percent in December, according to data compiled by Bloomberg. Earnings in Europe's Stoxx 600 Index are projected to fall 2.5 percent, compared with estimates for 10.7 percent growth at the end of 2007, the data indicate.
The Bloomberg stock confidence index in the U.S. rose to 34.15 from 28.39 in July, while the U.K. measure increased to 23.77 from 18.26. The gauge in Mexico climbed to 45.45 from 43.36.
In Brazil, the only market where investors predicted gains, the index advanced to 60.76 from 54.29. A reading below 50 indicates investors expect stocks to retreat in the next six months while a reading above 50 signifies a potential rally.
Sentiment improved as oil dropped from a record $147.27 a barrel. Gasoline, copper, corn and soybeans also tumbled, sending the Reuters/Jefferies CRB Commodity Index to its biggest monthly decline since 1980 in July.
The retreat eased concern that the Fed and the European Central Bank will boost borrowing costs to contain inflation that climbed at a 5 percent pace in the U.S. during June and a 4.1 percent rate in the Euro region in July.
`Credit Crunch'
``The view is that falling crude oil prices is good for the equity markets,'' said Nick Batsford, a London-based technical analyst at Hobart Capital Markets Ltd. who participated in the survey. ``People are also suggesting we are getting close to the end of the credit crunch.''
The MSCI World Financials Index climbed 9.5 percent from an almost five-year low on July 15. New York-based Citigroup, the biggest U.S. bank by assets, Paris-based Societe Generale, France's second-largest bank, and Zurich-based Credit Suisse, Switzerland's second-biggest bank, jumped more than 25 percent from their 2008 lows.
Even though bank stocks climbed, ``uneasiness'' in the financial system and the economic outlook may cause equities to retreat, according to Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co. in Tokyo.
Lower Forecasts
The Bloomberg confidence index in Japan fell 6.52 points to 32.93, the lowest level since the survey began in December. The Nikkei 225 Stock Average lost 15 percent this year as Tokyo-based Sony Corp., the world's second-largest maker of consumer electronics, and Daikin Industries Ltd., the second-biggest maker of air conditioners, declined.
Both reduced profit forecasts in the past month, citing weak demand from the U.S. and Europe.
``The worsening of the macroeconomic picture in Europe and Japan has started to emerge,'' said Sekiguchi, who helps oversee about $61 billion. ``There is doubt about how long oil's decline'' can lift stocks, he said.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
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Wednesday, August 13, 2008
CVS, Deere, Longs Drug Stores, Nvidia: U.S. Equity Preview
By Katherine Greene
Aug. 13 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets. Stock symbols are in parentheses after company names, and prices are as of 7:47 a.m. in New York, unless stated otherwise.
Applied Materials Inc. (AMAT US): The largest maker of chip- production machinery forecast orders that topped some analysts' estimates, signaling that a slump spurred by memory-chip companies may be nearing an end. The shares climbed 1.2 percent to $18.70 in extended trading yesterday.
Cree Inc. (CREE US): The maker of semiconductors that illuminate mobile phones and street lamps reported fourth-quarter profit of 16 cents a share, excluding some items, topping the 14- cent average estimate of analysts surveyed by Bloomberg. The shares jumped 9.5 percent in $21 in extended trading yesterday.
Deere & Co. (DE US) slid 7.7 percent to $63.98. The world's largest maker of farm equipment reported third-quarter earnings that missed analysts' estimates on higher raw material costs and projected fourth-quarter profit below forecasts.
Longs Drug Stores Corp. (LDG US) surged 30 percent to $70.05. CVS Caremark Corp. (CVS US) said it would buy the owner of the namesake drugstore chain on the U.S. West Coast for $2.7 billion to expand its reach to the western U.S.
CVS fell 5.3 percent to $36.03.
Nvidia Corp. (NVDA US) rose 5.7 percent to $11.70. The second-largest maker of computer-graphics chips said it boosted a share buyback program by $1 billion.
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net.
Read more...
Aug. 13 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets. Stock symbols are in parentheses after company names, and prices are as of 7:47 a.m. in New York, unless stated otherwise.
Applied Materials Inc. (AMAT US): The largest maker of chip- production machinery forecast orders that topped some analysts' estimates, signaling that a slump spurred by memory-chip companies may be nearing an end. The shares climbed 1.2 percent to $18.70 in extended trading yesterday.
Cree Inc. (CREE US): The maker of semiconductors that illuminate mobile phones and street lamps reported fourth-quarter profit of 16 cents a share, excluding some items, topping the 14- cent average estimate of analysts surveyed by Bloomberg. The shares jumped 9.5 percent in $21 in extended trading yesterday.
Deere & Co. (DE US) slid 7.7 percent to $63.98. The world's largest maker of farm equipment reported third-quarter earnings that missed analysts' estimates on higher raw material costs and projected fourth-quarter profit below forecasts.
Longs Drug Stores Corp. (LDG US) surged 30 percent to $70.05. CVS Caremark Corp. (CVS US) said it would buy the owner of the namesake drugstore chain on the U.S. West Coast for $2.7 billion to expand its reach to the western U.S.
CVS fell 5.3 percent to $36.03.
Nvidia Corp. (NVDA US) rose 5.7 percent to $11.70. The second-largest maker of computer-graphics chips said it boosted a share buyback program by $1 billion.
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net.
Read more...
U.S. Stock Futures Decline; Deere, Macy's, Wal-Mart Retreat
By Michael Patterson
Aug. 13 (Bloomberg) -- U.S. stock-index futures dropped as profit from Deere & Co. trailed analysts' projections and Macy's Inc. said full-year earnings may fall more than previously forecast.
Deere, the largest maker of farm equipment, declined 8.1 percent. Macy's, the second-biggest U.S. department store chain, retreated after reporting a 2.1 percent slump in second-quarter same-store sales. Wal-Mart Stores Inc. fell before a Commerce Department report forecast to show that retail sales decreased for the first time in five months.
Standard & Poor's 500 Index futures expiring in September lost 6.9, or 0.5 percent, to 1,284.6 as of 8:26 a.m. in New York. Dow Jones Industrial Average futures fell 55 to 11,590. Nasdaq- 100 Index futures slipped 2.75 to 1,942. Asian shares declined after Japan's economy contracted, while stocks in Europe sank on concern bank losses will deepen.
``To go out and try and speculate where the bottoms are is always a risky approach to the market,'' Stephen Pope, the London-based chief global market strategist at Cantor Fitzgerald, said in an interview on Bloomberg Television. ``We can easily end up with some damage being caused and suddenly you're long and wrong.''
U.S. stocks dropped yesterday after JPMorgan Chase & Co. said it may post more credit losses and analysts cut profit estimates for Goldman Sachs Group Inc. The S&P 500's 12 percent decline this year is the second-best performance among benchmark indexes in the world's 20 biggest equity markets, according to data compiled by Bloomberg. The gauge has rallied 6.2 percent from an almost three-year low last month as crude prices sank more than 20 percent from a record.
Earnings Watch
Profits at S&P 500 companies that reported results since July 8 beat analysts' estimates in seven of 10 industries, according to data compiled by Bloomberg. Results at financial and consumer companies were dragged down by losses at banks including Merrill Lynch & Co. and carmaker General Motors Corp.
Deere retreated $5.62 to $63.35 in early New York trading. Third-quarter profit was $1.32 a share, missing the $1.37 average of 17 analyst estimates compiled by Bloomberg.
Macy's lost 38 cents to $19.89.
Wal-Mart, the world's largest retailer, slipped 21 cents to $59.04 in Germany. McDonald's Corp., the largest restaurant company, retreated 32 cents to $63.63.
Economy Watch
Retail sales probably fell 0.1 percent after a 0.1 percent gain the prior month, according to the median of 75 estimates in a Bloomberg survey. The report is due at 8:30 a.m. in Washington.
Sales excluding automobiles climbed 0.5 percent in July, according to the survey median. Higher gasoline prices probably increased spending at service stations and boosted the sales figure, economists said.
The Labor Department may report at the same time that import prices in July rose 1 percent, according to the survey median. That would compare with a 2.6 percent gain the prior month, when the cost of imported petroleum surged 8 percent.
WellCare Health Plans Inc. dropped $2.20 to $40 in early New York trading. The U.S. managed-care provider being investigated for possible fraud said it may report a loss for the first half of the year because of increased legal expenses and rising costs in Medicare drug plans.
Applied Materials, Nvidia
Applied Materials Inc., the largest maker of semiconductor- production machinery, added 35 cents to $18.82 in Germany. The company said orders will increase between 5 percent and 10 percent in the fourth quarter, which ends in October, from the previous three months. Orders last quarter had fallen 16 percent from the previous period.
Nvidia Corp. jumped 92 cents to $11.99 in Germany. The second-biggest maker of computer-graphics chips increased its stock repurchase plan to $2.7 billion, or about 44 percent of shares outstanding. Nvidia also posted its first quarterly loss in six years.
CVS Caremark Corp. may be active. The second-biggest U.S. drugstore chain agreed to buy Longs Drug Stores Corp. for $2.7 billion to add pharmacies in the two fastest growing U.S. states. The shares didn't trade in Europe.
U.S. stocks pulled ahead of Brazil, Russia, India and China this week for the first time in 2008, spurred by the Federal Reserve's efforts to cut borrowing costs even as the biggest developing countries are raising theirs, according to Bloomberg data.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
Read more...
Aug. 13 (Bloomberg) -- U.S. stock-index futures dropped as profit from Deere & Co. trailed analysts' projections and Macy's Inc. said full-year earnings may fall more than previously forecast.
Deere, the largest maker of farm equipment, declined 8.1 percent. Macy's, the second-biggest U.S. department store chain, retreated after reporting a 2.1 percent slump in second-quarter same-store sales. Wal-Mart Stores Inc. fell before a Commerce Department report forecast to show that retail sales decreased for the first time in five months.
Standard & Poor's 500 Index futures expiring in September lost 6.9, or 0.5 percent, to 1,284.6 as of 8:26 a.m. in New York. Dow Jones Industrial Average futures fell 55 to 11,590. Nasdaq- 100 Index futures slipped 2.75 to 1,942. Asian shares declined after Japan's economy contracted, while stocks in Europe sank on concern bank losses will deepen.
``To go out and try and speculate where the bottoms are is always a risky approach to the market,'' Stephen Pope, the London-based chief global market strategist at Cantor Fitzgerald, said in an interview on Bloomberg Television. ``We can easily end up with some damage being caused and suddenly you're long and wrong.''
U.S. stocks dropped yesterday after JPMorgan Chase & Co. said it may post more credit losses and analysts cut profit estimates for Goldman Sachs Group Inc. The S&P 500's 12 percent decline this year is the second-best performance among benchmark indexes in the world's 20 biggest equity markets, according to data compiled by Bloomberg. The gauge has rallied 6.2 percent from an almost three-year low last month as crude prices sank more than 20 percent from a record.
Earnings Watch
Profits at S&P 500 companies that reported results since July 8 beat analysts' estimates in seven of 10 industries, according to data compiled by Bloomberg. Results at financial and consumer companies were dragged down by losses at banks including Merrill Lynch & Co. and carmaker General Motors Corp.
Deere retreated $5.62 to $63.35 in early New York trading. Third-quarter profit was $1.32 a share, missing the $1.37 average of 17 analyst estimates compiled by Bloomberg.
Macy's lost 38 cents to $19.89.
Wal-Mart, the world's largest retailer, slipped 21 cents to $59.04 in Germany. McDonald's Corp., the largest restaurant company, retreated 32 cents to $63.63.
Economy Watch
Retail sales probably fell 0.1 percent after a 0.1 percent gain the prior month, according to the median of 75 estimates in a Bloomberg survey. The report is due at 8:30 a.m. in Washington.
Sales excluding automobiles climbed 0.5 percent in July, according to the survey median. Higher gasoline prices probably increased spending at service stations and boosted the sales figure, economists said.
The Labor Department may report at the same time that import prices in July rose 1 percent, according to the survey median. That would compare with a 2.6 percent gain the prior month, when the cost of imported petroleum surged 8 percent.
WellCare Health Plans Inc. dropped $2.20 to $40 in early New York trading. The U.S. managed-care provider being investigated for possible fraud said it may report a loss for the first half of the year because of increased legal expenses and rising costs in Medicare drug plans.
Applied Materials, Nvidia
Applied Materials Inc., the largest maker of semiconductor- production machinery, added 35 cents to $18.82 in Germany. The company said orders will increase between 5 percent and 10 percent in the fourth quarter, which ends in October, from the previous three months. Orders last quarter had fallen 16 percent from the previous period.
Nvidia Corp. jumped 92 cents to $11.99 in Germany. The second-biggest maker of computer-graphics chips increased its stock repurchase plan to $2.7 billion, or about 44 percent of shares outstanding. Nvidia also posted its first quarterly loss in six years.
CVS Caremark Corp. may be active. The second-biggest U.S. drugstore chain agreed to buy Longs Drug Stores Corp. for $2.7 billion to add pharmacies in the two fastest growing U.S. states. The shares didn't trade in Europe.
U.S. stocks pulled ahead of Brazil, Russia, India and China this week for the first time in 2008, spurred by the Federal Reserve's efforts to cut borrowing costs even as the biggest developing countries are raising theirs, according to Bloomberg data.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
Read more...
U.K. Bank Stocks Drop, Led by RBS; Marks & Spencer Retreats
By Sarah Thompson
Aug. 13 (Bloomberg) -- U.K. bank stocks fell, paced by Royal Bank of Scotland Group Plc and Barclays Plc, on concern about earnings at financial companies after ING Groep NV said second-quarter profit dropped 25 percent.
Barratt Developments Plc paced declines among U.K. homebuilders after analysts told investors to sell housing stocks following a rally and the Bank of England cut its economic growth forecast. Marks & Spencer Group Plc, the U.K.'s largest clothing retailer, slipped after Redburn Partners LLP suggested investors sell the shares.
The FTSE 100 Index lost 40.1, or 0.7 percent, to 5,494.4 at 12:39 p.m. in London. The FTSE All-Share Index slid 0.8 percent. Ireland's ISEQ Index fell 1.9 percent.
The Bank of England reduced its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years in July. Earlier today, ING said net income fell as investment earnings at wholesale-banking and insurance units declined.
RBS, the U.K.'s second-biggest bank, declined 5.1 percent to 233. Barclays, the U.K.'s third-biggest bank, fell 4.4 percent to 361.75. HSBC Holding Plc, Europe's biggest bank by market value, lost 1.6 percent to 855.5.
Barratt, Britain's second-biggest homebuilder, dropped 14 percent to 138 pence. Larger rival Taylor Wimpey Plc declined 4 percent to 55.75 pence and Redrow Plc slid 9.5 percent to 160. Claims for jobless benefits climbed the most since December 1992 in July, the Office for National Statistics said today in London.
Britain's housing market is at a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said yesterday. A squeeze on credit has locked out buyers and pushed property prices into their steepest decline for at least a quarter century in July, according to HBOS Plc.
Rising unemployment may exacerbate the housing slump and replace the credit squeeze as the main driver of weakness, Panmure Gordon & Co. analyst Rachael Waring said today.
M&S dropped 7.3 percent to 274.5 after it was downgraded to ``sell'' at Redburn, which said the company's share of the food market is declining while growth falters for Per Una fashions.
A weaker food market will make the next few years ``very challenging'' for London-based Marks, which is unlikely to increase its dividend over the next five years, Redburn said in a research note today.
The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.
U.K. companies:
Anglo American Plc (AAL LN) added 127 pence, or 4.7 percent, to 2,806. The world's fourth-biggest diversified mining company plans to invest $3.36 billion in two iron- ore mines in Brazil.
Balfour Beatty Plc (BBY LN) added 4.5 pence, or 1.1 percent, to 414.75. Britain's biggest builder said first- half profit rose 77 percent as a U.S. acquisition boosted military housing orders and it won civil engineering and maintenance contracts in Dubai.
Benfield Plc (BFD LN) increased 10.25 pence, or 4 percent, to 267.5. Execution Ltd. noted ``rumors of a bid from either Goldman's private equity or Aon Corp. have resurfaced.''
``Benfield have always staunchly maintained they wish to stay independent'' but ``given that results are likely to stagnate for the next 18 months, a premium bid could be attractive for shareholders who may pressure management,'' Execution wrote in an e-mail to clients.
Separately, Merrill Lynch & Co. raised its recommendation to ``buy'' from ``underperform.''
British Energy Group Plc (BGY LN) gained 3 pence, or 0.4 percent, to 708. British Energy reported better-than- estimated profit for the first quarter and said reactor repairs are proceeding to plan.
DSG International Plc (DSGI LN) decreased 8.07 pence, or 13 percent, to 53.25 pence. The U.K.'s largest consumer- electronics retailer was downgraded to ``underweight'' from ``neutral'' at JPMorgan Chase & Co., which said it believes investor hopes for asset sales are ``misplaced.''
Friends Provident Plc (FP/ LN) slid 3.7 pence, or 4 percent, to 88.5 pence. The 176-year-old British insurer was cut to ``underperform'' from ``neutral'' at Merrill Lynch & Co., which cited the ``stalling disposal program.''
Imperial Tobacco Group Plc (IMT LN) gained 33 pence, or 1.8 percent, to 1,831. Europe's second-largest cigarette maker expects stronger sales of lower-priced products to enable it to keep expanding in Europe as tobacco consumption stagnates, FT Deutschland reported.
Micro Focus International Plc (MCRO LN) jumped 22 pence, or 8.2 percent, to 290.5. The U.K. business software maker whose clients include Accenture Ltd. said revenue excluding acquisitions and profit margins for the first quarter met its forecasts.
Misys Plc (MSY LN) fell 8.25 pence, or 4.7 percent, to 168. The U.K.'s third-biggest software maker was cut to ``sell'' from ``neutral'' at UBS AG, which cited possible risks from the merger with Allscripts Healthcare Solutions Inc.
Thomas Cook Group Plc (TCG LN) lost 7.25 pence, or 3 percent, to 237.75. Europe's second-biggest travel company said third-quarter sales remained ``strong'' after consumers maintained spending on vacations.
``While the 4-to-2 industry consolidation has so far proved a complete success,'' said Collins Stewart analyst Andrew Fitchie, the ``real test lies ahead, with the consumer squeeze building up momentum in the U.K. and increasingly now, in Europe.'' He sees ``risk surrounding full-year 2009 estimates.''
Irish companies:
Anglo Irish Bank Plc (ANGL ID) added 14.5 cents, or 2.4 percent, to 6.165 euros. Ireland's third-biggest bank by market value said fiscal full-year earnings will rise 15 percent even as lending growth slows.
Elan Corp Plc (ELN ID) lost 32 cents, or 4.3 percent, to 7.15 euros. Ireland's largest drugmaker declined to comment on a report that it received first-round bids for its medicine delivery unit.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Read more...
Aug. 13 (Bloomberg) -- U.K. bank stocks fell, paced by Royal Bank of Scotland Group Plc and Barclays Plc, on concern about earnings at financial companies after ING Groep NV said second-quarter profit dropped 25 percent.
Barratt Developments Plc paced declines among U.K. homebuilders after analysts told investors to sell housing stocks following a rally and the Bank of England cut its economic growth forecast. Marks & Spencer Group Plc, the U.K.'s largest clothing retailer, slipped after Redburn Partners LLP suggested investors sell the shares.
The FTSE 100 Index lost 40.1, or 0.7 percent, to 5,494.4 at 12:39 p.m. in London. The FTSE All-Share Index slid 0.8 percent. Ireland's ISEQ Index fell 1.9 percent.
The Bank of England reduced its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years in July. Earlier today, ING said net income fell as investment earnings at wholesale-banking and insurance units declined.
RBS, the U.K.'s second-biggest bank, declined 5.1 percent to 233. Barclays, the U.K.'s third-biggest bank, fell 4.4 percent to 361.75. HSBC Holding Plc, Europe's biggest bank by market value, lost 1.6 percent to 855.5.
Barratt, Britain's second-biggest homebuilder, dropped 14 percent to 138 pence. Larger rival Taylor Wimpey Plc declined 4 percent to 55.75 pence and Redrow Plc slid 9.5 percent to 160. Claims for jobless benefits climbed the most since December 1992 in July, the Office for National Statistics said today in London.
Britain's housing market is at a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said yesterday. A squeeze on credit has locked out buyers and pushed property prices into their steepest decline for at least a quarter century in July, according to HBOS Plc.
Rising unemployment may exacerbate the housing slump and replace the credit squeeze as the main driver of weakness, Panmure Gordon & Co. analyst Rachael Waring said today.
M&S dropped 7.3 percent to 274.5 after it was downgraded to ``sell'' at Redburn, which said the company's share of the food market is declining while growth falters for Per Una fashions.
A weaker food market will make the next few years ``very challenging'' for London-based Marks, which is unlikely to increase its dividend over the next five years, Redburn said in a research note today.
The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.
U.K. companies:
Anglo American Plc (AAL LN) added 127 pence, or 4.7 percent, to 2,806. The world's fourth-biggest diversified mining company plans to invest $3.36 billion in two iron- ore mines in Brazil.
Balfour Beatty Plc (BBY LN) added 4.5 pence, or 1.1 percent, to 414.75. Britain's biggest builder said first- half profit rose 77 percent as a U.S. acquisition boosted military housing orders and it won civil engineering and maintenance contracts in Dubai.
Benfield Plc (BFD LN) increased 10.25 pence, or 4 percent, to 267.5. Execution Ltd. noted ``rumors of a bid from either Goldman's private equity or Aon Corp. have resurfaced.''
``Benfield have always staunchly maintained they wish to stay independent'' but ``given that results are likely to stagnate for the next 18 months, a premium bid could be attractive for shareholders who may pressure management,'' Execution wrote in an e-mail to clients.
Separately, Merrill Lynch & Co. raised its recommendation to ``buy'' from ``underperform.''
British Energy Group Plc (BGY LN) gained 3 pence, or 0.4 percent, to 708. British Energy reported better-than- estimated profit for the first quarter and said reactor repairs are proceeding to plan.
DSG International Plc (DSGI LN) decreased 8.07 pence, or 13 percent, to 53.25 pence. The U.K.'s largest consumer- electronics retailer was downgraded to ``underweight'' from ``neutral'' at JPMorgan Chase & Co., which said it believes investor hopes for asset sales are ``misplaced.''
Friends Provident Plc (FP/ LN) slid 3.7 pence, or 4 percent, to 88.5 pence. The 176-year-old British insurer was cut to ``underperform'' from ``neutral'' at Merrill Lynch & Co., which cited the ``stalling disposal program.''
Imperial Tobacco Group Plc (IMT LN) gained 33 pence, or 1.8 percent, to 1,831. Europe's second-largest cigarette maker expects stronger sales of lower-priced products to enable it to keep expanding in Europe as tobacco consumption stagnates, FT Deutschland reported.
Micro Focus International Plc (MCRO LN) jumped 22 pence, or 8.2 percent, to 290.5. The U.K. business software maker whose clients include Accenture Ltd. said revenue excluding acquisitions and profit margins for the first quarter met its forecasts.
Misys Plc (MSY LN) fell 8.25 pence, or 4.7 percent, to 168. The U.K.'s third-biggest software maker was cut to ``sell'' from ``neutral'' at UBS AG, which cited possible risks from the merger with Allscripts Healthcare Solutions Inc.
Thomas Cook Group Plc (TCG LN) lost 7.25 pence, or 3 percent, to 237.75. Europe's second-biggest travel company said third-quarter sales remained ``strong'' after consumers maintained spending on vacations.
``While the 4-to-2 industry consolidation has so far proved a complete success,'' said Collins Stewart analyst Andrew Fitchie, the ``real test lies ahead, with the consumer squeeze building up momentum in the U.K. and increasingly now, in Europe.'' He sees ``risk surrounding full-year 2009 estimates.''
Irish companies:
Anglo Irish Bank Plc (ANGL ID) added 14.5 cents, or 2.4 percent, to 6.165 euros. Ireland's third-biggest bank by market value said fiscal full-year earnings will rise 15 percent even as lending growth slows.
Elan Corp Plc (ELN ID) lost 32 cents, or 4.3 percent, to 7.15 euros. Ireland's largest drugmaker declined to comment on a report that it received first-round bids for its medicine delivery unit.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Read more...
Mid-Day Report: Sterling Dives on Dovish King
| Market Overview | Written by ActionForex.com | Aug 13 08 12:47 GMT | | |
| Sterling is sold off sharply across the board after markets are confirmed of the risk in recession in UK. Quarterly Inflation Report from BoE released today showed the bank significantly revised down growth forecasts on 2009 Q1 from 1% yoy to 0.1% yoy. BoE Governor King mentioned in the press conference that "broadly flat output means there is a possibility of a quarter or two of negative growth." When asked about the risks of first recession since 1991, Governor admitted that there are clearly "downside risks". Regarding inflation, the report said that the current record inflation is temporary and should fall back to the bank's 2% target in two years if interest rates remains unchanged at the current 5%. The reports are clearly dovish and there has been growing speculation that once inflation risks recede, the next move from BoE will be a cut and could be a sharp cut to stimulate the economy. Employment report released from UK today adds further pressure on Sterling. Unemployment rate climbed more than expected to 5.4% in Jun. Claimant count had the biggest increase since Dec 92 in Jul and jumped 20.1k to 864.7k. Technically speaking, the GBP/USD dives through a key long term trend line support today, reaffirming medium term weakness. GBP/JPY's recent development also confirms that medium term rebound has already completed in Jul and is set to retest 192 level. Elsewhere, markets have little reaction to US retail sales report released today. Headline sales dropped -0.1% mom in Jul, inline with expectation. Ex-auto sales climbed 0.4%, below consensus of 0.5%. Import price index rose 1.7% mom, 21.6% yoy in Jul. Other data released today saw Eurozone industrial production flat mom in Jun and dropped -0.5% yoy, worse than expected. Japan Q2 GDP dropped by -0.6% qoq, -2.4% yoy following downward revision in Q1. Current account surplus widened to 493.9b. Trade surplus shrank to 252.1B. GBP/USD Mid-Day OutlookDaily Pivots: (S1) 1.8905; (P) 1.9013; (R1) 1.9074; More Cable dives through mentioned long term trend line support (now at 1.8937) today and reaches as low as 1.8736 so far. At this point, further decline is still expected as long as 1.9037 minor resistance holds. Sustained trading below the trend line now encourages deeper fall to next target of 100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360. On the upside, though, above 1.9037 will argue that cable has finally made a short term bottom after drawing support from the trend line and bring rebound towards 4 hours 55 EMA (now at 1.9337) before staging another fall. In the bigger picture, medium term fall from 2.1161 (07 high) is still progress. Note that bearish divergence conditions in monthly MACD and RSI argue that the whole up trend from 1.3680 (01 low) has also topped out at 2.1161 too. Break of the mentioned long term trend line line support (01 low of 1.3680, 05 low of 1.7047, now near to1.89 region) adds more credence to this case. Focus is now on next important cluster support at 1.8303/60 (100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360 and 38.2% retracement of 1.3680 to 2.1161 at 1.8303). On the upside, while strong rebound might be seen, a break of 2.0158 resistance is still needed to indicate fall from 2.1161 has completed. Otherwise, another fall should still be seen after correction.
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Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | Japan GDP Q/Q Q2 | -0.60% | -0.60% | 1.00% | 0.80% |
| 23:50 | JPY | Japan GDP annualised Q2 | -2.40% | -2.30% | 4.00% | 3.20% |
| 23:50 | JPY | Japan GDP deflator Y/Y Q2 | -1.60% | -1.50% | -1.50% | |
| 23:50 | JPY | Japan Current account Jun | 493.9B | 490.2B | 2000.8B | |
| 23:50 | JPY | Japan Trade balance (jpy) Jun | 252.1B | 293.6B | 529.4B | |
| 00:30 | AUD | AU W'pac consumer confi. Aug | 9.10% | N/A | -6.70% | |
| 08:30 | GBP | U.K. Claimant count Jul | 2.70% | 2.60% | 2.60% | |
| 08:30 | GBP | U.K. ILO unemployment rate Jun | 5.40% | 5.30% | 5.20% | |
| 08:30 | GBP | U.K. Avg. earnings 3m Y/Y Jun | 3.40% | 3.60% | 3.80% | |
| 09:00 | EUR | Eurozone Ind'l prod'n M/M Jun | 0.00% | 0.10% | -1.90% | -1.80% |
| 09:00 | EUR | Eurozone Ind'l prod'n Y/Y Jun | -0.50% | 0.40% | -0.60% | -0.40% |
| 09:30 | GBP | BOE Quaterly Inflation Report | ||||
| 12:30 | USD | U.S. Retail sales M/M Jul | -0.10% | -0.10% | 0.10% | 0.30% |
| 12:30 | USD | U.S. Retail sales less auto M/M Jul | 0.40% | 0.50% | 0.80% | 0.90% |
| 12:30 | USD | U.S. Import price index M/M Jul | 1.70% | 1.00% | 2.60% | 2.90% |
| 12:30 | USD | U.S. Import price index Y/Y Jul | 21.60% | 20.90% | 20.50% | 21.10% |
| 14:00 | USD | U.S. Business inventories Jun | 0.50% | 0.30% |
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BoE August Inflation Report Shakes Markets
| Daily Forex Fundamentals | Written by Danske Bank | Aug 13 08 12:04 GMT | | |
| The Bank of England (BoE) released its August Inflation Report at 11.30. As expected, the BoE revised its growth path downwards and the inflation path upwards compared to the May Inflation Report. Although such revisions were expected in general, markets were surprised how negative the report was and also how downbeat BoE Governor Mervyn King was at the following press conference. The BoE now predicts CPI inflation to peak at 4.9% in Q3. The BoE notes that the inflation outlook is unusually uncertain and that there are significant risks on both sides of the central projection. The key risk on the downside is the possibility that the high level of energy prices and the disruption in credit markets lead to a deeper and more prolonged period of subdued demand, leading CPI inflation to undershoot the target of 2%. The key risk on the upside is the possibility that the period of inflation feeds into inflation expectations and thereby to higher wages going forward. The BoE states that the balance of risks around the central projection for inflation is 'judged to be on the upside'. Furthermore, the BoE notes that 'there is a range of views among the Committee on both the central projection and the balance of risks', meaning that the committee currently is very split, also confirmed by the latest 7-1-1 decision for keeping rates on hold. On the growth outlook, the BoE states that the UK economy will slow sharply and that production will grow at a very modest 0.1% m/m in Q109. The BoE projection is that output now will be broadly flat in the early part of the forecast period (two years) as sluggish real income growth and constraints on the ability of households to borrow dampen consumer spending, while the weak outlook for demand and the housing market will lead to falls in business and residential investment. In the latter part of the forecast period, the BoE expects economic growth to pick up gradually, as the restraining effect of higher energy prices on demand and output dissipates, credit conditions ease and the lower level of sterling continues to support net trade. The BoE acknowledges that risks around the central projection are on the downside, particularly in the medium term. BoE Governor Mervyn King was quite downbeat at the press conference and said that: "The growth forecasts are markedly lower than in May", "CPI above target will be temporary", "Near term CPI outlook has deteriorated (after the fall in oil prices)", "Central view isn't for a severe downturn" and "Next year will be difficult". The market reaction to the Inflation Report was quite strong; EUR/GBP rose from 0.7860 to 0.7930, before falling slightly back. The yield on the 2Y UK gilt dropped around 15bp to 4.52% after the release. These movements are significant, as the reaction to the May Inflation Report, which also had a worried tone and contained some controversial content, was rather limited. In our view, the Inflation Report depicts a pretty fair picture of the challenges confronting UK policy makers. The growth prospects are unusually bleak due to the downturn in housing prices threatening to suppress consumption, but the BoE cannot justify resuming the easing cycle while inflation is still soaring. But as soon as inflation has peaked and starts to come down to more tolerable levels, the BoE can again cut rates. Accordingly, we expect the BoE to lower the base rate down to 4% by end-'09 (base rate currently 5%) in order to stimulate the economy and to ensure that inflation does not undershoot target. Our outlook for GBP underperformance remains. We currently anticipate EUR/GBP to return to territory beyond 0.80 and higher levels cannot be ruled out when the slump in the UK economy becomes clearer.
Disclaimer This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets' research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission. | |
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FX Thoughts for the Day
Daily Forex Technicals | Written by Kshitij Consultancy Services | Aug 13 08 12:00 GMT |
USD-CHF @ 1.0883/88.... Could consolidate between 1.0750-1.0925
R: 1.0900 / 1.0920 / 1.0960 / 1.1000-25
S: 1.0875 / 1.0850-40 / 1.0800 / 1.0750-35
The Support at 1.08 has held in the day and resulted in a rise towards 1.0925 since then. The Resistance at 1.0925 is strong and could result in a dip once again.
Having said this, a slow consolidation could take place between 1.0750-1.0925 in the week ahead without breaking past either the Support or the Resistance.
Have a look at the 3-day chart at: http://www.kshitij.com/graphgallery/chfcandle.shtml
GBP-USD @ 1.8769/73.... Economy in Trouble!
R: 1.8800 / 1.8840 / 1.8880-8900
S: 1.8740 / 1.8720-10 / 1.8675
Our target of 1.88 given in our report earlier in the day has already been met. This sharp decline of over 240 pips in the day is owing to the data that release that was below expectation. UK Claimant count change, UK Average Earnings Index and the Unemployment rate were all released in the day and resulted in the Cable being pressured.
There are some rumours in the market about the UK raising interest rates owing to the infaltion which is close to the double their comfort level at 2.2%. However, the market is still pressuring the pair downwards. With rising interest rates in an economy that is having negligible growth, the market isnt expected to react otherwise. From here, have a keen eye on the economic releases which are continuing to worsen over the last few months.
AUD-USD @ 0.8698/0.8702.... 0.8670-60 important Support
R: 0.8705 / 0.8725-35 / 0.8765
S: 0.8630 / 0.8600 / 0.8575
As expected earlier in the day, the pair has moved higher towards 0.8740-45, and facing Resistance there has come down below 0.87 once again. From here, if the Support at 0.8670 holds, a further rise towards 0.88 could be seen over the week.
However, a break below 0.8670 would mean that the rise was just a spike up and could now be bearish once again to target levels below 0.86. The eventual target of this fall could be 0.85, which happens to be the 61.8% Retracement of the rise from 0.7674 (Aug-07) to 0.9851 (Jul-08).
Happy Trading!
Kshitij Consultancy Service
http://www.fxthoughts.com
Legal disclaimer and risk disclosure
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
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USD-CHF @ 1.0883/88.... Could consolidate between 1.0750-1.0925
R: 1.0900 / 1.0920 / 1.0960 / 1.1000-25
S: 1.0875 / 1.0850-40 / 1.0800 / 1.0750-35
The Support at 1.08 has held in the day and resulted in a rise towards 1.0925 since then. The Resistance at 1.0925 is strong and could result in a dip once again.
Having said this, a slow consolidation could take place between 1.0750-1.0925 in the week ahead without breaking past either the Support or the Resistance.
Have a look at the 3-day chart at: http://www.kshitij.com/graphgallery/chfcandle.shtml
GBP-USD @ 1.8769/73.... Economy in Trouble!
R: 1.8800 / 1.8840 / 1.8880-8900
S: 1.8740 / 1.8720-10 / 1.8675
Our target of 1.88 given in our report earlier in the day has already been met. This sharp decline of over 240 pips in the day is owing to the data that release that was below expectation. UK Claimant count change, UK Average Earnings Index and the Unemployment rate were all released in the day and resulted in the Cable being pressured.
There are some rumours in the market about the UK raising interest rates owing to the infaltion which is close to the double their comfort level at 2.2%. However, the market is still pressuring the pair downwards. With rising interest rates in an economy that is having negligible growth, the market isnt expected to react otherwise. From here, have a keen eye on the economic releases which are continuing to worsen over the last few months.
AUD-USD @ 0.8698/0.8702.... 0.8670-60 important Support
R: 0.8705 / 0.8725-35 / 0.8765
S: 0.8630 / 0.8600 / 0.8575
As expected earlier in the day, the pair has moved higher towards 0.8740-45, and facing Resistance there has come down below 0.87 once again. From here, if the Support at 0.8670 holds, a further rise towards 0.88 could be seen over the week.
However, a break below 0.8670 would mean that the rise was just a spike up and could now be bearish once again to target levels below 0.86. The eventual target of this fall could be 0.85, which happens to be the 61.8% Retracement of the rise from 0.7674 (Aug-07) to 0.9851 (Jul-08).
Happy Trading!
Kshitij Consultancy Service
http://www.fxthoughts.com
Legal disclaimer and risk disclosure
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
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London Session Recap
Daily Forex Fundamentals | Written by Forex.com | Aug 13 08 11:58 GMT |
The greenback gained some ground against the majors in London after being sold for the better part of the Asia session. The trend of disappointing economic data out of Europe continued and helped the buck out. Euro-zone industrial production showed no growth in June, taking the annual rate to a worse than expected -0.5% from -0.4% the prior month.
Meanwhile, the UK employment report was nothing to write home about. UK jobless claims rose a higher than anticipated 20.1K in July after an upwardly revised 20.0K the prior month. The increase in unemployment was the highest in nearly 16 years and this led the Bank of England to cut growth forecasts, to boot.
EURUSD traded lower on the weak data, opening the session near 1.4925 and closing around the 1.4870 mark. GBPUSD got pounded -- no pun intended -- more than 200 pips from an open near 1.8975 to a close around the 1.8760 level. This helped USDCAD higher, and the pair was sitting near 1.0700 at the close after opening around the 1.0650 area. USDJPY also managed to gain -- after pulling back sharply in the Asia session -- from an open near 108.85 towards 108.95 at the close.
The market will now focus on US retail sales data due up at 1230GMT. The consensus is for a -0.1% decline on the headline and for a 0.5% gain excluding the downtrodden auto industry. A downside surprise should see some giveback in the USD initially and could provide an opportunity to enter into fresh USD long positions at a better price. Stay tuned!
Upcoming Economic Data Releases (NY Session) Prior Estimate
* 8/13/2008 12:30 GMT US Import Price Index (MoM) JUL 2.6% 1.0%
* 8/13/2008 12:30 GMT US Import Price Index (YoY) JUL 20.5% 20.9%
* 8/13/2008 12:30 GMT US Advance Retail Sales JUL 0.1% 0.1%
* 8/13/2008 12:30 GMT US Retail Sales Less Autos JUL 0.8% 0.5%
* 8/13/2008 14:00 GMT US Business Inventories JUN 0.3% 0.5%
* 8/13/2008 14:30 GMT US DOE U.S. Crude Oil Inventories AUG 8 1614K - -
* 8/13/2008 14:30 GMT US DOE U.S. Gasoline Inventories AUG 8 -4344K - -
Forex.com
http://www.forex.com
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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The greenback gained some ground against the majors in London after being sold for the better part of the Asia session. The trend of disappointing economic data out of Europe continued and helped the buck out. Euro-zone industrial production showed no growth in June, taking the annual rate to a worse than expected -0.5% from -0.4% the prior month.
Meanwhile, the UK employment report was nothing to write home about. UK jobless claims rose a higher than anticipated 20.1K in July after an upwardly revised 20.0K the prior month. The increase in unemployment was the highest in nearly 16 years and this led the Bank of England to cut growth forecasts, to boot.
EURUSD traded lower on the weak data, opening the session near 1.4925 and closing around the 1.4870 mark. GBPUSD got pounded -- no pun intended -- more than 200 pips from an open near 1.8975 to a close around the 1.8760 level. This helped USDCAD higher, and the pair was sitting near 1.0700 at the close after opening around the 1.0650 area. USDJPY also managed to gain -- after pulling back sharply in the Asia session -- from an open near 108.85 towards 108.95 at the close.
The market will now focus on US retail sales data due up at 1230GMT. The consensus is for a -0.1% decline on the headline and for a 0.5% gain excluding the downtrodden auto industry. A downside surprise should see some giveback in the USD initially and could provide an opportunity to enter into fresh USD long positions at a better price. Stay tuned!
Upcoming Economic Data Releases (NY Session) Prior Estimate
* 8/13/2008 12:30 GMT US Import Price Index (MoM) JUL 2.6% 1.0%
* 8/13/2008 12:30 GMT US Import Price Index (YoY) JUL 20.5% 20.9%
* 8/13/2008 12:30 GMT US Advance Retail Sales JUL 0.1% 0.1%
* 8/13/2008 12:30 GMT US Retail Sales Less Autos JUL 0.8% 0.5%
* 8/13/2008 14:00 GMT US Business Inventories JUN 0.3% 0.5%
* 8/13/2008 14:30 GMT US DOE U.S. Crude Oil Inventories AUG 8 1614K - -
* 8/13/2008 14:30 GMT US DOE U.S. Gasoline Inventories AUG 8 -4344K - -
Forex.com
http://www.forex.com
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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FX Thoughts for the Day
Daily Forex Technicals | Written by Kshitij Consultancy Services | Aug 13 08 12:00 GMT |
USD-CHF @ 1.0883/88.... Could consolidate between 1.0750-1.0925
R: 1.0900 / 1.0920 / 1.0960 / 1.1000-25
S: 1.0875 / 1.0850-40 / 1.0800 / 1.0750-35
The Support at 1.08 has held in the day and resulted in a rise towards 1.0925 since then. The Resistance at 1.0925 is strong and could result in a dip once again.
Having said this, a slow consolidation could take place between 1.0750-1.0925 in the week ahead without breaking past either the Support or the Resistance.
Have a look at the 3-day chart at: http://www.kshitij.com/graphgallery/chfcandle.shtml
GBP-USD @ 1.8769/73.... Economy in Trouble!
R: 1.8800 / 1.8840 / 1.8880-8900
S: 1.8740 / 1.8720-10 / 1.8675
Our target of 1.88 given in our report earlier in the day has already been met. This sharp decline of over 240 pips in the day is owing to the data that release that was below expectation. UK Claimant count change, UK Average Earnings Index and the Unemployment rate were all released in the day and resulted in the Cable being pressured.
There are some rumours in the market about the UK raising interest rates owing to the infaltion which is close to the double their comfort level at 2.2%. However, the market is still pressuring the pair downwards. With rising interest rates in an economy that is having negligible growth, the market isnt expected to react otherwise. From here, have a keen eye on the economic releases which are continuing to worsen over the last few months.
AUD-USD @ 0.8698/0.8702.... 0.8670-60 important Support
R: 0.8705 / 0.8725-35 / 0.8765
S: 0.8630 / 0.8600 / 0.8575
As expected earlier in the day, the pair has moved higher towards 0.8740-45, and facing Resistance there has come down below 0.87 once again. From here, if the Support at 0.8670 holds, a further rise towards 0.88 could be seen over the week.
However, a break below 0.8670 would mean that the rise was just a spike up and could now be bearish once again to target levels below 0.86. The eventual target of this fall could be 0.85, which happens to be the 61.8% Retracement of the rise from 0.7674 (Aug-07) to 0.9851 (Jul-08).
Happy Trading!
Kshitij Consultancy Service
http://www.fxthoughts.com
Legal disclaimer and risk disclosure
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
Read more...
USD-CHF @ 1.0883/88.... Could consolidate between 1.0750-1.0925
R: 1.0900 / 1.0920 / 1.0960 / 1.1000-25
S: 1.0875 / 1.0850-40 / 1.0800 / 1.0750-35
The Support at 1.08 has held in the day and resulted in a rise towards 1.0925 since then. The Resistance at 1.0925 is strong and could result in a dip once again.
Having said this, a slow consolidation could take place between 1.0750-1.0925 in the week ahead without breaking past either the Support or the Resistance.
Have a look at the 3-day chart at: http://www.kshitij.com/graphgallery/chfcandle.shtml
GBP-USD @ 1.8769/73.... Economy in Trouble!
R: 1.8800 / 1.8840 / 1.8880-8900
S: 1.8740 / 1.8720-10 / 1.8675
Our target of 1.88 given in our report earlier in the day has already been met. This sharp decline of over 240 pips in the day is owing to the data that release that was below expectation. UK Claimant count change, UK Average Earnings Index and the Unemployment rate were all released in the day and resulted in the Cable being pressured.
There are some rumours in the market about the UK raising interest rates owing to the infaltion which is close to the double their comfort level at 2.2%. However, the market is still pressuring the pair downwards. With rising interest rates in an economy that is having negligible growth, the market isnt expected to react otherwise. From here, have a keen eye on the economic releases which are continuing to worsen over the last few months.
AUD-USD @ 0.8698/0.8702.... 0.8670-60 important Support
R: 0.8705 / 0.8725-35 / 0.8765
S: 0.8630 / 0.8600 / 0.8575
As expected earlier in the day, the pair has moved higher towards 0.8740-45, and facing Resistance there has come down below 0.87 once again. From here, if the Support at 0.8670 holds, a further rise towards 0.88 could be seen over the week.
However, a break below 0.8670 would mean that the rise was just a spike up and could now be bearish once again to target levels below 0.86. The eventual target of this fall could be 0.85, which happens to be the 61.8% Retracement of the rise from 0.7674 (Aug-07) to 0.9851 (Jul-08).
Happy Trading!
Kshitij Consultancy Service
http://www.fxthoughts.com
Legal disclaimer and risk disclosure
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
Read more...
Overnight News Recap: BOE Quarterly Inflation Report, EU Industrial Production
News Recap | Written by CEP News | Aug 13 08 11:46 GMT |
(CEP News)- European industrial production and the UK's inflation report dominated the news in Europe while Japanese GDP data pointed to a decline in the country's economy on Wednesday.
The Bank of England published its quarterly inflation report and said "it was more likely than not" that the inflation rate in the UK would reach and exceed 5% and that inflation uncertainties were "greater than usual".
In its report, the BOE noted the sharp price rises in June, primarily due to increases in food and petrol costs. The central bank forecast further increases in CPI well above the 2% target over the next few months, in part due to expectations of higher retail gas and electricity prices.
However, according to projections, inflation will fall sharply to slightly below target in the medium term, as upward pressures from energy, food and import prices begin to pull back. "The projection for inflation in the near term is markedly higher than in the May Report," the BOE noted.
The Office for National Statistics (ONS) reported that the number of individuals claiming unemployment benefits in the UK rose 20,100 in July to 864,700, thus pushing the claimant count rate to 2.7%, up from June's 2.6% level.
Economists had expected no change to the claimant count rate for the month and had forecast an increase of only 17,000 individuals claiming jobless benefits in July. June had seen the number of jobless claims rise 20,000, revised up from an initial figure of +15,500.
According to Eurostat, euro zone industrial production showed some unexpected weakness in June as it contracted 0.5% year-over-year. Economists had expected a rebound of 0.2% after the output level fell 0.4% in May.
Disaggregating the data, Eurostat noted that production in the capital goods sector had risen 1.4% in June compared to the same month one year ago, while non-durable goods production slipped 0.6% over the same period. Durable goods production dropped 5.3% in the year while output in the energy sector saw a 0.8% loss.
European equity markets are trading lower with the Eurostoxx losing 22.13 points on the day and the UK FTSE 100 down 38.50 points to 5496.
In Germany, the bund was down 1.0 tick to 113.79 with yields down 0.1 bps to 4.23%, while the 10-year gilt was down 17.0 ticks to 108.52 with yields up 2.2 bps to 4.66%.
The euro was up 0.01 cents to 1.4927 USD.
Downside surprises were seen in Norwegian retail sales for June, with Statistics Norway reporting that sales, excluding motor vehicles and petrol, only rose 0.1% year-over-year. Economists had expected a stronger gain of 1.0% after May's retail sales rose 6.1% annually.
In monthly terms, Norwegian sales levels fell 0.2% in June, down from both the 0.2% increase expected and the 1.2% jump seen in May.
The Spanish consumer price index continued to accelerate in July as it grew 5.3% in the month compared to the same month one year ago, up from both the expected 5.2% growth rate and the 5.0% increase seen in June, according to a report by the National Statistics Institute (INE) released Wednesday.
The most notable gains were seen in transportation costs, which jumped 10.6% in yearly terms, followed by housing and utility costs, which gained 8.4% over the same period.
Statistics Estonia released its GDP preliminary estimates on Wednesday and announced that the country's economy contracted 1.4% on an annualized basis in the second quarter of 2008. Economists had expected a less pronounced decline of 0.3% after the economy grew 0.1% in Q1.
"According to preliminary estimations, decrease in the GDP was most of all influenced by the decrease in the value added of manufacturing, wholesale and retail trade, transport and storage, energy and real estate activities," the statistics agency noted in a press release.
In Japan, preliminary Q2 GDP shows the economy contracted by 0.6%, a drop from the previous quarter's revised 0.8% positive performance. On annualized basis, the GDP dropped 2.4%, a significant drop from the previous 4.0% year-over-year result. The nominal GDP data shows a decline of 0.7%, a drop from the previous quarter's 0.2%.
Japan's current account grew to ¥493.9B, a sharp drop from the previous month's ¥2000.6B result. The adjusted current account came in at ¥493.9B, a steep decline from the previous month's ¥2032.7B figure.
JP Gross Domestic Product (Q/Q) Q2 Preliminary: -0.60% vs Revised: +0.8% vs Prior:+1.0%
JP GDP Annualized Q2 Preliminary: -2.4% vs Prior:+4.0% vs Prior: +3.2%
JP Nominal GDP (Q/Q) Q2 Preliminary: -0.7% vs Revised: +0.2% vs Prior: +0.5%
JP GDP Deflator (Y/Y) Q2 Preliminary: -1.6% vs Prior: -1.5%
JP Current Account Total June: +¥493.9B vs Prior: +¥2000.6B
JP Adjusted Current Account Total June: +¥1290.7B vs Prior: +¥2032.7B
JP Trade Balance - BOP Basis June: +¥252.1B vs Prior: +¥529.4B
AU Westpac Consumer Confidence August : +9.1% vs Prior: -6.7%
AU Wage Cost Index (Q/Q) Q2 : +1.2% vs Prior: +0.9%
AU Wage Cost Index (Y/Y) Q2: +4.2% vs Prior: +4.1%
GB Claimant Count Rate July: +2.7% vs Prior: +2.6%
GB Jobless Claims Change July: +20.1.K vs Revised: +20.0K vs Prior: 15.5K
GB Average Earnings including bonus 3M/(Y/Y) June: +3.4% vs Prior: +3.8%
GB Average Earnings ex-bonus 3M/(Y/Y) June: +3.7% vs Prior: +3.8%
GB ILO Unemployment Rate (3mths) June: 5.4% vs Prior: 5.2%
GB Manufacturing Unit Wage Cost (3Ms/(Y/Y)) June: +1.6% vs Revised:+1.9% vs Prior:+1.8%
GB Bank of England Quarterly Inflation Report
EU Euro-Zone Industrial Production (M/M) (SA) June: 0.0% vs Revised: -1.8% vs
Prior: -1.9%
EU Euro-Zone Industrial Production (Y/Y) June: -0.5% vs Revised: -0.4% vs Prior: -0.6%
By Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, ngirgis@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
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(CEP News)- European industrial production and the UK's inflation report dominated the news in Europe while Japanese GDP data pointed to a decline in the country's economy on Wednesday.
The Bank of England published its quarterly inflation report and said "it was more likely than not" that the inflation rate in the UK would reach and exceed 5% and that inflation uncertainties were "greater than usual".
In its report, the BOE noted the sharp price rises in June, primarily due to increases in food and petrol costs. The central bank forecast further increases in CPI well above the 2% target over the next few months, in part due to expectations of higher retail gas and electricity prices.
However, according to projections, inflation will fall sharply to slightly below target in the medium term, as upward pressures from energy, food and import prices begin to pull back. "The projection for inflation in the near term is markedly higher than in the May Report," the BOE noted.
The Office for National Statistics (ONS) reported that the number of individuals claiming unemployment benefits in the UK rose 20,100 in July to 864,700, thus pushing the claimant count rate to 2.7%, up from June's 2.6% level.
Economists had expected no change to the claimant count rate for the month and had forecast an increase of only 17,000 individuals claiming jobless benefits in July. June had seen the number of jobless claims rise 20,000, revised up from an initial figure of +15,500.
According to Eurostat, euro zone industrial production showed some unexpected weakness in June as it contracted 0.5% year-over-year. Economists had expected a rebound of 0.2% after the output level fell 0.4% in May.
Disaggregating the data, Eurostat noted that production in the capital goods sector had risen 1.4% in June compared to the same month one year ago, while non-durable goods production slipped 0.6% over the same period. Durable goods production dropped 5.3% in the year while output in the energy sector saw a 0.8% loss.
European equity markets are trading lower with the Eurostoxx losing 22.13 points on the day and the UK FTSE 100 down 38.50 points to 5496.
In Germany, the bund was down 1.0 tick to 113.79 with yields down 0.1 bps to 4.23%, while the 10-year gilt was down 17.0 ticks to 108.52 with yields up 2.2 bps to 4.66%.
The euro was up 0.01 cents to 1.4927 USD.
Downside surprises were seen in Norwegian retail sales for June, with Statistics Norway reporting that sales, excluding motor vehicles and petrol, only rose 0.1% year-over-year. Economists had expected a stronger gain of 1.0% after May's retail sales rose 6.1% annually.
In monthly terms, Norwegian sales levels fell 0.2% in June, down from both the 0.2% increase expected and the 1.2% jump seen in May.
The Spanish consumer price index continued to accelerate in July as it grew 5.3% in the month compared to the same month one year ago, up from both the expected 5.2% growth rate and the 5.0% increase seen in June, according to a report by the National Statistics Institute (INE) released Wednesday.
The most notable gains were seen in transportation costs, which jumped 10.6% in yearly terms, followed by housing and utility costs, which gained 8.4% over the same period.
Statistics Estonia released its GDP preliminary estimates on Wednesday and announced that the country's economy contracted 1.4% on an annualized basis in the second quarter of 2008. Economists had expected a less pronounced decline of 0.3% after the economy grew 0.1% in Q1.
"According to preliminary estimations, decrease in the GDP was most of all influenced by the decrease in the value added of manufacturing, wholesale and retail trade, transport and storage, energy and real estate activities," the statistics agency noted in a press release.
In Japan, preliminary Q2 GDP shows the economy contracted by 0.6%, a drop from the previous quarter's revised 0.8% positive performance. On annualized basis, the GDP dropped 2.4%, a significant drop from the previous 4.0% year-over-year result. The nominal GDP data shows a decline of 0.7%, a drop from the previous quarter's 0.2%.
Japan's current account grew to ¥493.9B, a sharp drop from the previous month's ¥2000.6B result. The adjusted current account came in at ¥493.9B, a steep decline from the previous month's ¥2032.7B figure.
JP Gross Domestic Product (Q/Q) Q2 Preliminary: -0.60% vs Revised: +0.8% vs Prior:+1.0%
JP GDP Annualized Q2 Preliminary: -2.4% vs Prior:+4.0% vs Prior: +3.2%
JP Nominal GDP (Q/Q) Q2 Preliminary: -0.7% vs Revised: +0.2% vs Prior: +0.5%
JP GDP Deflator (Y/Y) Q2 Preliminary: -1.6% vs Prior: -1.5%
JP Current Account Total June: +¥493.9B vs Prior: +¥2000.6B
JP Adjusted Current Account Total June: +¥1290.7B vs Prior: +¥2032.7B
JP Trade Balance - BOP Basis June: +¥252.1B vs Prior: +¥529.4B
AU Westpac Consumer Confidence August : +9.1% vs Prior: -6.7%
AU Wage Cost Index (Q/Q) Q2 : +1.2% vs Prior: +0.9%
AU Wage Cost Index (Y/Y) Q2: +4.2% vs Prior: +4.1%
GB Claimant Count Rate July: +2.7% vs Prior: +2.6%
GB Jobless Claims Change July: +20.1.K vs Revised: +20.0K vs Prior: 15.5K
GB Average Earnings including bonus 3M/(Y/Y) June: +3.4% vs Prior: +3.8%
GB Average Earnings ex-bonus 3M/(Y/Y) June: +3.7% vs Prior: +3.8%
GB ILO Unemployment Rate (3mths) June: 5.4% vs Prior: 5.2%
GB Manufacturing Unit Wage Cost (3Ms/(Y/Y)) June: +1.6% vs Revised:+1.9% vs Prior:+1.8%
GB Bank of England Quarterly Inflation Report
EU Euro-Zone Industrial Production (M/M) (SA) June: 0.0% vs Revised: -1.8% vs
Prior: -1.9%
EU Euro-Zone Industrial Production (Y/Y) June: -0.5% vs Revised: -0.4% vs Prior: -0.6%
By Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, ngirgis@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
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The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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Japan Economy Shrinks 2.4% as Exports Decline; Recession Looms
By Jason Clenfield
Aug. 13 (Bloomberg) -- Japan's economy, the world's second biggest, contracted last quarter as exports fell and consumers spent less, bringing the country to the brink of its first recession in six years.
Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The Nikkei 225 Stock Average fell 2.1 percent, the most since Aug. 1.
Exports dropped for the first time in three years, robbing Japan of the engine that drove its longest postwar expansion, while record fuel and food prices deterred spending at home. Toyota Motor Corp. last week reported its worst earnings decline in five years as U.S. sales slumped, and Japan Airlines Corp. said it will cut wages to counter rising costs.
``The economy will keep flying at a low level this year as demand weakens, even from Europe and Asia,'' said Hiromichi Shirakawa, chief economist at Credit Suisse Group in Tokyo. ``Japan's economy is deteriorating.''
The yen rose because investors reduced holdings of riskier assets on concern that Japan's contraction signals a deepening global economic slump. The currency traded at 108.82 per dollar at 4:30 p.m. in Tokyo from 109.33 before the report.
Asia's biggest economy shrank 0.6 percent from the first quarter, when it grew 0.8 percent, today's report showed. The drop in GDP was in line with economists' estimates.
Housing investment unexpectedly fell, causing the Topix Real Estate index to tumble 3.5 percent. Mitsui Fudosan Co. and Mitsubishi Estate Co., Japan's biggest property developers, led the declines.
Bank of Japan
The government last week described the economy as ``weakening,'' language it hadn't used since 2001. Stalling growth and the fastest inflation in a decade have created a dilemma for the Bank of Japan, which will probably have to keep its benchmark interest rate at 0.5 percent for the rest of the year, according to economists surveyed last month.
Japan joins Canada and Italy among Group of Seven economies that have contracted this year. The European Union shrank 0.2 percent in the second quarter from the first, economists estimate a report will show tomorrow. The U.S. grew 0.5 percent last quarter, buoyed by a temporary boost from tax rebates that economists expect will fade.
Exports slumped 2.3 percent, the most since the 2001-2002 recession, the Cabinet Office said. Imports fell 2.8 percent.
Consumer spending, which accounts for more than half of the economy, decreased 0.5 percent from the previous quarter, compared with expectations of 0.6 percent.
`Becoming Cautious'
``With prices rising, consumers are becoming cautious about spending,'' Economic and Fiscal Policy Minister Kaoru Yosano said today. Prime Minister Yasuo Fukuda plans to announce relief measures later this month to help companies and households cope with record energy costs.
Household sentiment fell in July to the lowest ever, after inflation outpaced wage growth. Summer bonuses at Japan's biggest companies dropped for the first time since 2002, according to the Keidanren business lobby.
The world's second-largest economy has yet to contract for two consecutive quarters, one definition of a recession. Still, rising costs and slowing exports have eroded profits, forcing businesses to cut production, investment and hiring.
Domestic demand, which includes company and consumer spending, accounted for 0.4 percentage point of the economy's quarter-on-quarter contraction. Business investment slipped 0.2 percent, less than the 0.6 percent analysts predicted.
Toyota, JAL
Toyota, Japan's biggest company, last week lowered its vehicle sales forecast by 3.5 percent for the year ending March 2009. Since June, Toyota has fired 800 workers at a Kyushu-based subsidiary that's making fewer sport-utility vehicles and Lexus sedans bound for the U.S.
Japan Airlines, the country's largest carrier by sales, said last week that it will reduce workers' pay by 5 percent to compensate for the increase in fuel prices.
Housing investment slid 3.4 percent as homebuyers shunned new condominiums because of rising prices and banks tightened lending to developers. Economists anticipated a 1.4 percent rise.
``Demand for new homes has weakened and we believe residential investment is unlikely to recover much further in coming quarters,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo.
Still, the current slowdown is unlikely to be as severe as past recessions because companies have paid off debt and shed extra workers and idle equipment, said Huw McKay.
`Floor Under This Economy'
``We're not in the kind of situation we were in at the end of previous expansions,'' said McKay, senior international economist at Westpac Banking Corp. in Sydney. ``There's going to be a floor under this economy.''
Companies plan to increase investment by 4.1 percent in the year ending March 31, according to a survey released last week by the Development Bank of Japan. While that's slower than last fiscal year's 7.7 percent, it's better than the 10 percent decline recorded during the 2001 recession.
The Bank of Japan's most recent business survey showed that labor demand is close to a 16-year high. The job-to-applicant ratio was at 0.91 in June, meaning almost every person who wants a job can get one. Seven years ago, there were two applicants competing for every position.
The recent decline in energy and material prices may also provide respite for Japan's companies and households. Oil has dropped 22 percent since exceeding $147 a barrel for the first time on July 17.
``These are weak numbers but not disastrous,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``With global commodity prices now tumbling, this bad news is largely old news.''
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
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Russia Becomes Worst 3rd-Quarter Stock Market on Oil
By William Mauldin
Aug. 13 (Bloomberg) -- Russia's RTS stock index is turning into the world's worst performer this quarter as tumbling oil, a war in Georgia and the probe of a steel company remind investors owning shares in the former Communist nation can be perilous.
The RTS fell 22 percent since June 30, even after President Dmitry Medvedev halted the invasion of Georgia yesterday, sending the index up 3.5 percent. The retreat this quarter is the steepest among indexes in the world's 20 biggest stock markets, according to data compiled by Bloomberg.
While the slump pushed valuations of the 48 companies in the index to the lowest level since March 2006, Firebird Management LLC, Credit Suisse Group's Clariden Leu and Banco Santander SA are avoiding the country. The government's investigation of steel producer OAO Mechel comes five years after the state's assault on OAO Yukos Oil Co., while its decision to send tanks into Georgia shook confidence in Medvedev.
``This bounce should be sold,'' said Ian Hague, the New York-based founding partner of Firebird, who reduced Russian stock holdings in the past three months to less than half of the $1.8 billion he had invested in countries that made up the former Soviet Union.
``Russia will be a pariah. It is a pariah. It's difficult to do anything other than reduce your exposure,'' Hague said yesterday after returning from Tbilisi, the Georgian capital.
Cold War
Russia promised to pull troops from Georgia after Medvedev ordered an end to a five-day incursion in the former Soviet republic. The conflict was Russia's first major foreign offensive since the collapse of the Soviet Union in 1991, and strained relations with the U.S., as President George W. Bush said the action would have ``serious consequences'' if it continued.
The RTS Index fell 2 percent since the invasion began on Aug. 8. The dollar-denominated gauge rose 0.2 percent to 1,806.59 as of 11:36 a.m. today in Moscow, leaving it 27 percent below its record high of 2,487.92 in May. The RTS surged 14-fold during Vladimir Putin's presidency from 2000 to 2008.
OAO Rosneft and OAO Lukoil, Russia's biggest oil producers, helped drag down the RTS. The Moscow-based companies tumbled more than 17 percent since June through yesterday as crude slumped 23 percent from the July record of $147.27 a barrel. Moscow-based OAO GMK Norilsk Nickel, Russia's biggest mining company, sank 26 percent as the Reuters/Jefferies CRB Commodity Index posted the biggest monthly drop since 1980 in July.
Every stock in the RTS except St. Petersburg-based OAO Polymetal, Russia's largest silver producer, declined. Moscow- based Mechel, controlled by billionaire Igor Zyuzin, slid 41 percent.
Siberian Labor Camp
Prime Minister Putin accused Mechel of price fixing on July 24, and said four days later the company used offshore traders to minimize taxes. The actions spurred comparisons with the dismantling of Yukos, which was bankrupted in 2006 during Putin's presidency after the government claimed more than $30 billion in back taxes.
Yukos' founder, Mikhail Khodorkovsky, is serving eight years in a Siberian labor camp. Some of his company's assets were transferred to state-controlled Rosneft. The RTS Index fell 11 percent in October 2003, the month of Khodorkovsky's arrest, as investors grew concerned that more companies would fall victim to government takeovers. It was the index's worst monthly decline in two years at the time.
Putin presided over eight years of economic growth as president. Medvedev, his handpicked successor, has struggled to combat inflation since taking over in May.
`Bad to Worse'
JPMorgan Chase & Co. cited the ``risk that non-conventional methods may be used to control inflation,'' when it cut Russian stocks to ``underweight'' last month. The New York-based bank also said that economic ``momentum'' was slowing in the world's biggest energy exporter.
Russia's annual inflation rate was 15.1 percent in both May and June, matching the highest level in five years, data from the Federal Statistics Service show. The International Monetary Fund estimates the country's economic growth will slow to 6.8 percent this year from 8.1 percent in 2007. The Washington-based fund expects a 6.3 percent expansion in 2009, which would be the weakest since 2002.
``Unfortunately, the global and even the Russian macroeconomic picture is going from bad to worse,'' said Zina Psiola, who manages $1.1 billion in Russian stocks at Clariden Leu in Zurich.
`Not as Evil'
The RTS rallied 4.7 percent this week through yesterday as Medvedev said Russia secured the safety of its peacekeeping troops and citizens in the breakaway regions of South Ossetia and Abkhazia.
The index was valued at 9.8 times earnings at the end of last week, the cheapest since March 12, 2006, weekly data compiled by Bloomberg show. The 62 percent discount to the Standard & Poor's 500 Index, the benchmark for American equities, was the widest since 2005, making the market attractive to investors such as Wermuth Asset Management's Jochen Wermuth.
``Negative news is at a record level, and there's too much irrational fear in the case of Mechel and Georgia,'' said Wermuth, who manages about $1 billion in Frankfurt. ``Russia is not as evil as people think.''
For Banco Santander's Nerea Heras, Russian equities aren't cheap enough to compensate for political risk and accelerating inflation. Heras, who manages about $1.5 billion in emerging markets equities in Madrid, is buying shares in Turkey and India.
``There are other interesting countries to invest money in rather than Russia,'' Heras said.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
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Estonia GDP Shrinks Most Since 1994, Enters Recession
By Ott Ummelas
Aug. 13 (Bloomberg) -- Estonia's economy contracted the most in almost 14 years in the second quarter, becoming the second European Union economy to enter a recession since the start of the global credit crunch.
The economy shrank a preliminary 0.9 percent from the previous quarter, following a 0.5 percent decline in the January to March period, the Tallinn-based statistics office said on its Web site today. The economy shrank an annual 1.4 percent, the biggest decline since the third quarter of 1994 and the first annual contraction since the third quarter of 1999.
``The worsening in the global economy, rampant inflation and energy price shocks have eased the way for Estonia to enter a recession,'' said Violeta Klyviene, senior Baltic analyst with Danske Bank AS, said in a phone interview.
Stalled consumption and falling real estate investment cooled the Baltic economies of Estonia, Latvia and Lithuania last year after a boom since joining the European Union in 2004. The International Monetary Fund and other institutions have predicted the $16.4 billion economy of the former Soviet republic would fall into recession as consumers spend less and property prices fall.
Estonia is the second EU economy to enter a recession since global credit markets seized up last year. Denmark did so in the first quarter.
Klyviene forecast the economy will contract about 1 percent this year, compared with an earlier forecast of 0.8 percent. Economists expected an annual contraction of 0.3 percent, according to the median estimate of six economists in a Bloomberg survey.
Latvia's economic expansion slowed to a preliminary 0.2 percent growth in the second quarter, the slowest pace in 12 1/2 years, from 3.3 percent in the fourth quarter, the Riga-based statistics office said on Aug.8. Lithuania's economic growth slowed to 5.5 percent in the second quarter from 7 percent in the previous three months, Statistics Lithuania said on July 28.
To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net
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Aug. 13 (Bloomberg) -- Estonia's economy contracted the most in almost 14 years in the second quarter, becoming the second European Union economy to enter a recession since the start of the global credit crunch.
The economy shrank a preliminary 0.9 percent from the previous quarter, following a 0.5 percent decline in the January to March period, the Tallinn-based statistics office said on its Web site today. The economy shrank an annual 1.4 percent, the biggest decline since the third quarter of 1994 and the first annual contraction since the third quarter of 1999.
``The worsening in the global economy, rampant inflation and energy price shocks have eased the way for Estonia to enter a recession,'' said Violeta Klyviene, senior Baltic analyst with Danske Bank AS, said in a phone interview.
Stalled consumption and falling real estate investment cooled the Baltic economies of Estonia, Latvia and Lithuania last year after a boom since joining the European Union in 2004. The International Monetary Fund and other institutions have predicted the $16.4 billion economy of the former Soviet republic would fall into recession as consumers spend less and property prices fall.
Estonia is the second EU economy to enter a recession since global credit markets seized up last year. Denmark did so in the first quarter.
Klyviene forecast the economy will contract about 1 percent this year, compared with an earlier forecast of 0.8 percent. Economists expected an annual contraction of 0.3 percent, according to the median estimate of six economists in a Bloomberg survey.
Latvia's economic expansion slowed to a preliminary 0.2 percent growth in the second quarter, the slowest pace in 12 1/2 years, from 3.3 percent in the fourth quarter, the Riga-based statistics office said on Aug.8. Lithuania's economic growth slowed to 5.5 percent in the second quarter from 7 percent in the previous three months, Statistics Lithuania said on July 28.
To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net
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Japan's Current-Account Surplus Narrows by a Record
By Keiko Ujikane
Aug. 13 (Bloomberg) -- Japan's current-account surplus narrowed by a record in June as exports fell and higher oil prices pushed up the import bill.
The surplus shrank 67.4 percent to 493.9 billion yen ($4.5 billion) from 1.52 trillion yen a year earlier, the Ministry of Finance said in Tokyo today. The median estimate of 29 economists surveyed by Bloomberg News was for the gap to decrease to 494.7 billion yen.
Rising energy and raw material costs are taking a toll on sales abroad as well as spending by companies and consumers at home, threatening the nation's longest postwar expansion. Japan's economy shrank last quarter, bringing the country to the brink of its first recession in six years, a separate report showed today.
``Japan has been in an economic downturn since the end of last year and the downturn may last 12 to 18 months,'' said Susumu Kato, chief economist at Calyon Securities in Tokyo. ``Both domestic and external demand may remain weak.''
Japan's economy shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo.
Exports fell 1.5 percent in June from a year earlier, the first decline since November 2003, today's report showed. Imports climbed 17.8 percent to a record 6.59 trillion yen. Japan imports virtually all of its oil. Crude oil surged to a record $147.27 a barrel on July 11.
Higher import costs are being reflected in wholesale prices, which rose 7.1 percent to a 27-year high in July from a year earlier, a central bank report showed yesterday.
The narrowing of the surplus was limited by returns on investments made overseas.
The income surplus, the difference between money earned abroad and payments made to foreign investors in Japan, gained 29.9 percent to 593.4 billion from a year earlier, according to today's report.
The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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British Energy Beats Profit Estimates, Reactor Repairs on Plan
By Paul Dobson
Aug. 13 (Bloomberg) -- British Energy Group Plc, the nuclear power producer that rejected a bid from Electricite de France SA, reported better-than-expected profit for the first quarter and said reactor repairs are proceeding to plan.
Earnings before interest, tax, depreciation and amortization for the three months through June fell 49 percent to 129 million pounds ($245 million), beating the 88.5 million- pound median estimate of four analysts surveyed by Bloomberg. The company sold output from its atomic and coal-fed plants at higher prices.
Production was crimped by the closure of the Heysham-1 and Hartlepool plants late last year because of corroded wires. The repairs are on schedule, Chief Executive Officer Bill Coley said on a conference call today. He declined to comment on the takeover offer.
East Kilbride, Scotland-based British Energy spurned a 12 billion-pound bid from Electricite de France on Aug. 1, two people with knowledge of the talks said. Rivals want to buy the utility to capture rising U.K. electricity prices and build reactors adjacent to its eight existing nuclear plants. It left the door open for more talks after U.K. Business Secretary John Hutton backed the French utility's approach.
British Energy rose as much as 10 pence, or 1.4 percent, to 715 pence in London trading and was at 710 pence as of 8:09 a.m. local time.
Lower Output
Net income for the three months through June fell to 62 million pounds from 179 million pounds a year ago, the company said today in a statement. Its reactors produced 27 percent less power in the quarter compared with the year-earlier period.
``We have been able to benefit from the higher power prices prevailing during the period through the sales of previously uncontracted volumes,'' and wider profit margins from the coal- fired Eggborough power plant, the company said.
It revised up cost estimates for repairs to the Heysham-1 and Hartlepool reactors to 115 million pounds from 50 million pounds and said it plans to start all four reactors in the third quarter of its financial year, the three months from October.
The U.K. government, which owns 35.6 percent of British Energy, supports the building of new reactors that will replace older plants without increasing carbon-dioxide emissions. The U.K. said it was disappointed by the failure to reach a deal with Paris-based Electricite de France. There was a big difference between the offer price and the price some shareholders wanted, Hutton said.
Centrica Plc, the U.K.'s biggest electricity and gas supplier, has said it would consider merging with British Energy should its attempt to acquire a minority stake in the nuclear power producer fail.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
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Iran Sells All Oil Held in Floating Storage Tanks, Shana Says
By Ayesha Daya
Aug. 13 (Bloomberg) -- Iran sold all the crude it held in floating storage tanks, Shana reported, citing Ali Asghar Arshi, manager for international affairs at the National Iranian Oil Co.
Arshi said oil stockpiles built up as refineries underwent seasonal maintenance work and were sold at a higher price as crude rose in recent months, the state-run news agency reported.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Aug. 13 (Bloomberg) -- Iran sold all the crude it held in floating storage tanks, Shana reported, citing Ali Asghar Arshi, manager for international affairs at the National Iranian Oil Co.
Arshi said oil stockpiles built up as refineries underwent seasonal maintenance work and were sold at a higher price as crude rose in recent months, the state-run news agency reported.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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India May Delay $10 Billion of Electricity Projects, FT Says
By Archana Chaudhary
Aug. 13 (Bloomberg) -- Indian electricity companies may delay $10 billion of projects as fund-raising becomes difficult, the Financial Times reported, citing a report by London-based brokerage Arden Partners Ltd.
India may fall short of adding 90,000 megawatts in capacity by 2012 as projects that need $6 billion in debt and $4 billion in equity may be delayed after interest rates rose and shares on stock markets declined, the newspaper said.
Share sales have fallen after the Indian stock market declined and the Reserve Bank of India, the country's central bank, raised rates to contain inflation that reached a 13-year high, the report said.
To contact the reporter on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.
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Aug. 13 (Bloomberg) -- Indian electricity companies may delay $10 billion of projects as fund-raising becomes difficult, the Financial Times reported, citing a report by London-based brokerage Arden Partners Ltd.
India may fall short of adding 90,000 megawatts in capacity by 2012 as projects that need $6 billion in debt and $4 billion in equity may be delayed after interest rates rose and shares on stock markets declined, the newspaper said.
Share sales have fallen after the Indian stock market declined and the Reserve Bank of India, the country's central bank, raised rates to contain inflation that reached a 13-year high, the report said.
To contact the reporter on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.
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Ahmadinejad May Sign Oil and Gas Deals With Turkey, Shana Says
By Ayesha Daya
Aug. 13 (Bloomberg) -- Iranian President Mahmoud Ahmadinejad and Oil Minister Gholamhossein Nozari may sign oil and gas deals with Turkey when they visit tomorrow, Shana reported.
Last year the two countries signed agreements to build a pipeline to transport gas to Europe through Turkey, fund gas exploration in Iran and raise Iranian gas export volumes to Turkey, the news agency of Iran's oil ministry said.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Aug. 13 (Bloomberg) -- Iranian President Mahmoud Ahmadinejad and Oil Minister Gholamhossein Nozari may sign oil and gas deals with Turkey when they visit tomorrow, Shana reported.
Last year the two countries signed agreements to build a pipeline to transport gas to Europe through Turkey, fund gas exploration in Iran and raise Iranian gas export volumes to Turkey, the news agency of Iran's oil ministry said.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Exxon Starts Up Saxi, Batuque Oil Fields in Angola
By Angela Macdonald-Smith
Aug. 13 (Bloomberg) -- Exxon Mobil Corp., the biggest U.S. oil company, started production up the Saxi and Batuque oil fields off Angola's coast, adding to output at its largest offshore project.
When combined with the Mondo field, which started up in January, production from the Kizomba C project is expected to reach 200,000 barrels a day of oil later this year, Irving, Texas-based Exxon Mobil said today in a statement distributed on Business Wire.
Africa was the second-cheapest place for Exxon Mobil to pump oil last year, after the Asia Pacific-Middle East region, according to public filings. The Kizomba C project, which includes 36 wells and two production ships, will take total output in Block 15 to about 700,000 barrels a day when it reaches full production.
Exxon started pumping oil from the Xikomba deepwater development in Block 15 in 2003, from Kizomba A in 2004 and from Kizomba B the following year. BP Plc owns 26.67 percent of the venture, while Eni SpA owns 20 percent and StatoilHydro ASA 13.33 percent.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Aug. 13 (Bloomberg) -- Exxon Mobil Corp., the biggest U.S. oil company, started production up the Saxi and Batuque oil fields off Angola's coast, adding to output at its largest offshore project.
When combined with the Mondo field, which started up in January, production from the Kizomba C project is expected to reach 200,000 barrels a day of oil later this year, Irving, Texas-based Exxon Mobil said today in a statement distributed on Business Wire.
Africa was the second-cheapest place for Exxon Mobil to pump oil last year, after the Asia Pacific-Middle East region, according to public filings. The Kizomba C project, which includes 36 wells and two production ships, will take total output in Block 15 to about 700,000 barrels a day when it reaches full production.
Exxon started pumping oil from the Xikomba deepwater development in Block 15 in 2003, from Kizomba A in 2004 and from Kizomba B the following year. BP Plc owns 26.67 percent of the venture, while Eni SpA owns 20 percent and StatoilHydro ASA 13.33 percent.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Australia's LNG Ltd. Secures Site for Gas Plant in Queensland
By Angela Macdonald-Smith
Aug. 13 (Bloomberg) -- Liquefied Natural Gas Ltd., an Australian developer of LNG projects too small for major suppliers, secured a site for a proposed project in Queensland state, bringing the venture closer to reality.
The license agreement with Gladstone Ports Corp. allocates an area at Fisherman's Landing at Gladstone port on the Queensland coast, Perth-based LNG Ltd. said today in a statement to the Australian stock exchange. The accord also provides a framework to negotiate arrangements for the use of the port, dredging, wharf modifications and other services, it said.
LNG Ltd., partnered by Norway's Golar LNG Ltd., is scheduled early next year to approve investment in an initial 1.5 million metric-ton-a-year production unit that will start deliveries in 2011. This month it awarded a construction services contract to SK Group's engineering and construction arm and said it expects to conclude an LNG sales accord this quarter. The project is one of five rival ventures planning LNG plants near Gladstone based on gas from coal seams.
LNG Ltd. fell 2 Australian cents, or 2.2 percent, to 91 cents in Sydney trading at 2:43 p.m. local time, giving it a market value of about A$131 million. The company has yet to arrange financing for the first phase of the project, to cost about $400 million.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Aug. 13 (Bloomberg) -- Liquefied Natural Gas Ltd., an Australian developer of LNG projects too small for major suppliers, secured a site for a proposed project in Queensland state, bringing the venture closer to reality.
The license agreement with Gladstone Ports Corp. allocates an area at Fisherman's Landing at Gladstone port on the Queensland coast, Perth-based LNG Ltd. said today in a statement to the Australian stock exchange. The accord also provides a framework to negotiate arrangements for the use of the port, dredging, wharf modifications and other services, it said.
LNG Ltd., partnered by Norway's Golar LNG Ltd., is scheduled early next year to approve investment in an initial 1.5 million metric-ton-a-year production unit that will start deliveries in 2011. This month it awarded a construction services contract to SK Group's engineering and construction arm and said it expects to conclude an LNG sales accord this quarter. The project is one of five rival ventures planning LNG plants near Gladstone based on gas from coal seams.
LNG Ltd. fell 2 Australian cents, or 2.2 percent, to 91 cents in Sydney trading at 2:43 p.m. local time, giving it a market value of about A$131 million. The company has yet to arrange financing for the first phase of the project, to cost about $400 million.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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South Korea to Expand Nuclear Power, Reduce Dependence on Crude
By Shinhye Kang
Aug. 13 (Bloomberg) -- South Korea, Asia's third-largest crude oil buyer, will expand the use of nuclear power and alternative energy sources to counter high oil prices and reduce greenhouse-gas emissions.
The government plans to raise the use of nuclear power to 41 percent of total supplies by 2030 from the current 26 percent, the Ministry of Knowledge and Economy said in an e-mailed statement today.
Under the government's long-term energy plan, the proportion of renewable-energy consumption, including solar, wind and water, should be raised to 11 percent by 2030 from the current 2.2 percent.
With additional nuclear-power plants and renewable energy use, South Korea can reduce oil use to 33 percent of its energy mix by 2030 from 44 percent, the ministry said.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net
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Aug. 13 (Bloomberg) -- South Korea, Asia's third-largest crude oil buyer, will expand the use of nuclear power and alternative energy sources to counter high oil prices and reduce greenhouse-gas emissions.
The government plans to raise the use of nuclear power to 41 percent of total supplies by 2030 from the current 26 percent, the Ministry of Knowledge and Economy said in an e-mailed statement today.
Under the government's long-term energy plan, the proportion of renewable-energy consumption, including solar, wind and water, should be raised to 11 percent by 2030 from the current 2.2 percent.
With additional nuclear-power plants and renewable energy use, South Korea can reduce oil use to 33 percent of its energy mix by 2030 from 44 percent, the ministry said.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net
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Lundin Petroleum Net Income Rises 23% on Record Crude
By Marianne Stigset
Aug. 13 (Bloomberg) -- Lundin Petroleum AB, Sweden's largest oil explorer, said second-quarter profit gained 23 percent as record oil prices more than made up for a decline in output.
Net income rose to 380 million kronor ($60 million), or 1.20 krona a share, from 309 million kronor, or 0.98 krona, a year earlier, the Stockholm-based company said today in an e- mailed statement. That missed the 403 million-krona median estimate of six analysts surveyed by Bloomberg. Sales of oil and gas increased 23 percent to 1.7 billion kronor.
``We continue to believe in a high oil price going forward,'' Chief Executive Officer Ashley Heppenstall said in the statement. ``The oil industry is finding it increasingly difficult to increase supply and as a result oil prices have had to rise to reduce demand.''
Oil prices almost doubled from a year earlier, climbing above $140 a barrel for the first time in June. The company brought on new production from the Alvheim field in Norway. It's also expanding in South East Asia with new licenses in Malaysia, Vietnam, Cambodia and Indonesia, as well as in Sudan and Congo.
Production fell 25 percent to 27,600 barrels of oil equivalent a day, from 36,700 barrels last year, Lundin said. Output for the first six months averaged 27,000 barrels of oil equivalent a day, 17 percent below forecast, due to delays in the start-up of the Alvheim field in Norway and the K5F project in the Netherlands, as well as delays to drilling at the Broom field in the U.K, Lundin said.
The explorer cut its production guidance for the year to 32,500 barrels of oil equivalent a day, down from a previous forecast of 36,500 barrels. It expects to pump over 40,000 barrels of oil equivalent a day next year, it said.
Lundin has risen 6.3 percent so far this year on the Stockholm Stock Exchange, giving the company a market value of 22.7 billion kronor. The benchmark OMX Stockholm 30 Index has declined 17 percent in the period.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
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Aug. 13 (Bloomberg) -- Lundin Petroleum AB, Sweden's largest oil explorer, said second-quarter profit gained 23 percent as record oil prices more than made up for a decline in output.
Net income rose to 380 million kronor ($60 million), or 1.20 krona a share, from 309 million kronor, or 0.98 krona, a year earlier, the Stockholm-based company said today in an e- mailed statement. That missed the 403 million-krona median estimate of six analysts surveyed by Bloomberg. Sales of oil and gas increased 23 percent to 1.7 billion kronor.
``We continue to believe in a high oil price going forward,'' Chief Executive Officer Ashley Heppenstall said in the statement. ``The oil industry is finding it increasingly difficult to increase supply and as a result oil prices have had to rise to reduce demand.''
Oil prices almost doubled from a year earlier, climbing above $140 a barrel for the first time in June. The company brought on new production from the Alvheim field in Norway. It's also expanding in South East Asia with new licenses in Malaysia, Vietnam, Cambodia and Indonesia, as well as in Sudan and Congo.
Production fell 25 percent to 27,600 barrels of oil equivalent a day, from 36,700 barrels last year, Lundin said. Output for the first six months averaged 27,000 barrels of oil equivalent a day, 17 percent below forecast, due to delays in the start-up of the Alvheim field in Norway and the K5F project in the Netherlands, as well as delays to drilling at the Broom field in the U.K, Lundin said.
The explorer cut its production guidance for the year to 32,500 barrels of oil equivalent a day, down from a previous forecast of 36,500 barrels. It expects to pump over 40,000 barrels of oil equivalent a day next year, it said.
Lundin has risen 6.3 percent so far this year on the Stockholm Stock Exchange, giving the company a market value of 22.7 billion kronor. The benchmark OMX Stockholm 30 Index has declined 17 percent in the period.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
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Aleo Solar Rises After Company Says Profit More Than Doubled
By Nicholas Comfort Joseph Mapother
Aug. 13 (Bloomberg) -- Aleo Solar AG, a German maker of solar-energy products, rose in Frankfurt after saying second- quarter profit more than doubled on sales in the Spanish market and expansion into the Czech Republic and Bulgaria.
Aleo Solar gained as much as 54 cents, or 5.8 percent, to 9.85 euros in Xetra electronic trading. A close at that price would the biggest one-day gain since July 31. The stock was up 44 cents as of 9:43 a.m. local time.
The company said in a statement today second-quarter net income jumped to 4.4 million euros ($6.7 million) from 1.7 million euros a year earlier. Sales rose 71 percent to 90.5 million euros.
Oldenburg, Germany-based Aleo reiterated its full-year sales forecast of ``at least'' 330 million euros, 40 percent of which will come from outside of Germany.
``Aleo Solar will benefit this year from the strong demand in Spain'' in the first half and Germany in the second, Unicredit SpA analyst Alexander Stiehler said in a note to investors today.
The Munich-based analyst left his ``hold'' rating and 2008 sales estimate of 359 million euros unchanged.
To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.netJoseph Mapother in Frankfurt at jmapother1@bloomberg.net
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Aug. 13 (Bloomberg) -- Aleo Solar AG, a German maker of solar-energy products, rose in Frankfurt after saying second- quarter profit more than doubled on sales in the Spanish market and expansion into the Czech Republic and Bulgaria.
Aleo Solar gained as much as 54 cents, or 5.8 percent, to 9.85 euros in Xetra electronic trading. A close at that price would the biggest one-day gain since July 31. The stock was up 44 cents as of 9:43 a.m. local time.
The company said in a statement today second-quarter net income jumped to 4.4 million euros ($6.7 million) from 1.7 million euros a year earlier. Sales rose 71 percent to 90.5 million euros.
Oldenburg, Germany-based Aleo reiterated its full-year sales forecast of ``at least'' 330 million euros, 40 percent of which will come from outside of Germany.
``Aleo Solar will benefit this year from the strong demand in Spain'' in the first half and Germany in the second, Unicredit SpA analyst Alexander Stiehler said in a note to investors today.
The Munich-based analyst left his ``hold'' rating and 2008 sales estimate of 359 million euros unchanged.
To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.netJoseph Mapother in Frankfurt at jmapother1@bloomberg.net
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Korea Electric Records Wider-than-Expected Loss
By Shinhye Kang
Aug. 13 (Bloomberg) -- Korea Electric Power Corp., supplier of almost all of the country's power, posted a second-quarter loss wider than analysts expected as fuel costs rose while the government capped electricity tariffs to fight inflation.
The loss amounted to 763.6 billion won ($736 million) in the quarter ended June 30 compared with a profit of 266 billion won a year earlier, the power producer said in a statement today. Seven analysts surveyed by Bloomberg News estimated a loss of 474 billion won on average.
Record crude oil prices helped drive up the cost of importing coal and natural gas while the government kept electricity tariffs unchanged after raising them on Jan. 15 last year. Korea Electric's fuel costs climbed 21.8 percent in the second quarter from a year earlier, Hana Daetoo Securities Co. said in a report on July 8.
``Korea Electric cannot avoid weak earnings in the second half and even next year without a sharp increase in electricity tariffs,'' said Joo Ick Chan, an analyst at Hana Daetoo.
The state-run utility reported a 908.2 billion won operating loss, its second consecutive quarterly loss. Sales rose 4.9 percent to 6.84 trillion won.
Asia's fourth-biggest economy is battling with inflation that has reached a 10-year high. Record energy and food costs pushed up annual consumer prices by 5.9 percent in July, the biggest gain since November 1998.
Cost of Coal
The cost of coal, from which 41 percent of Korea Electric's power is generated, rose 71 percent in the second quarter from a year earlier, according to Hana Daetoo. Nuclear energy accounts for 37 percent of the utility's generation, liquefied natural gas 16 percent, and oil 4 percent.
Thermal-coal prices at Australia's Newcastle port, a benchmark for Asia, advanced to a record $194.79 a metric ton in the week ended July 4, before retreating to $156.16 last week, according to the globalCOAL NEWC Index.
Korea Electric's fuel costs would increase 37 percent this year and climb a further 27 percent in 2009, Citigroup Global Markets said in a report on Aug. 6.
In May, the utility said fuel costs will rise by 2 trillion won this year. Fuel costs increased 15 percent to 11 trillion won last year, it said on Feb. 1.
The recent drop in commodity and energy prices may limit Korea Electric's losses, said Yun Hee Do, an analyst at Korea Investment & Securities Co. Crude oil has lost 22 percent since touching a record $147.27 a barrel in New York last month as unprecedented fuel costs threatened demand in the U.S., the world's largest energy consumer.
``Everybody agrees that Korea Electric will suffer an operating loss until next year, but falling crude oil prices will at least boost investor sentiment,'' said Yun.
Inflation Threat
The government has said it will moderately boost electricity charges to narrow Korea Electric's losses. The generator must raise tariffs by 30 percent next year to cover the rise in costs, said Yun at Korea Investment. In reality, the government may only allow a more limited increase due to inflation concerns, he said.
The 5.9 percent gain in consumer prices last month was the ninth consecutive breach of the central bank's target of keeping inflation between 2.5 percent and 3.5 percent for the three years to 2009. South Korea's decade-high inflation is a serious concern and the government will work to restrain price increases, Vice Finance Minister Kim Dong Soo said on Aug. 5.
``If prices rise further when the economy weakens, it will reduce purchasing power, damp consumer sentiment and the economic outlook will become more difficult,'' Kim said.
The government plans to hold a meeting on Aug. 21 to discuss utility charges, the Ministry of Knowledge Economy said.
Korea Electric shares fell 2.3 percent to 31,950 won in Seoul at 1:34 p.m. local time, compared with a 1.1 percent decline in the benchmark stock index Kospi. The stock has dropped 19 percent this year.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.
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Aug. 13 (Bloomberg) -- Korea Electric Power Corp., supplier of almost all of the country's power, posted a second-quarter loss wider than analysts expected as fuel costs rose while the government capped electricity tariffs to fight inflation.
The loss amounted to 763.6 billion won ($736 million) in the quarter ended June 30 compared with a profit of 266 billion won a year earlier, the power producer said in a statement today. Seven analysts surveyed by Bloomberg News estimated a loss of 474 billion won on average.
Record crude oil prices helped drive up the cost of importing coal and natural gas while the government kept electricity tariffs unchanged after raising them on Jan. 15 last year. Korea Electric's fuel costs climbed 21.8 percent in the second quarter from a year earlier, Hana Daetoo Securities Co. said in a report on July 8.
``Korea Electric cannot avoid weak earnings in the second half and even next year without a sharp increase in electricity tariffs,'' said Joo Ick Chan, an analyst at Hana Daetoo.
The state-run utility reported a 908.2 billion won operating loss, its second consecutive quarterly loss. Sales rose 4.9 percent to 6.84 trillion won.
Asia's fourth-biggest economy is battling with inflation that has reached a 10-year high. Record energy and food costs pushed up annual consumer prices by 5.9 percent in July, the biggest gain since November 1998.
Cost of Coal
The cost of coal, from which 41 percent of Korea Electric's power is generated, rose 71 percent in the second quarter from a year earlier, according to Hana Daetoo. Nuclear energy accounts for 37 percent of the utility's generation, liquefied natural gas 16 percent, and oil 4 percent.
Thermal-coal prices at Australia's Newcastle port, a benchmark for Asia, advanced to a record $194.79 a metric ton in the week ended July 4, before retreating to $156.16 last week, according to the globalCOAL NEWC Index.
Korea Electric's fuel costs would increase 37 percent this year and climb a further 27 percent in 2009, Citigroup Global Markets said in a report on Aug. 6.
In May, the utility said fuel costs will rise by 2 trillion won this year. Fuel costs increased 15 percent to 11 trillion won last year, it said on Feb. 1.
The recent drop in commodity and energy prices may limit Korea Electric's losses, said Yun Hee Do, an analyst at Korea Investment & Securities Co. Crude oil has lost 22 percent since touching a record $147.27 a barrel in New York last month as unprecedented fuel costs threatened demand in the U.S., the world's largest energy consumer.
``Everybody agrees that Korea Electric will suffer an operating loss until next year, but falling crude oil prices will at least boost investor sentiment,'' said Yun.
Inflation Threat
The government has said it will moderately boost electricity charges to narrow Korea Electric's losses. The generator must raise tariffs by 30 percent next year to cover the rise in costs, said Yun at Korea Investment. In reality, the government may only allow a more limited increase due to inflation concerns, he said.
The 5.9 percent gain in consumer prices last month was the ninth consecutive breach of the central bank's target of keeping inflation between 2.5 percent and 3.5 percent for the three years to 2009. South Korea's decade-high inflation is a serious concern and the government will work to restrain price increases, Vice Finance Minister Kim Dong Soo said on Aug. 5.
``If prices rise further when the economy weakens, it will reduce purchasing power, damp consumer sentiment and the economic outlook will become more difficult,'' Kim said.
The government plans to hold a meeting on Aug. 21 to discuss utility charges, the Ministry of Knowledge Economy said.
Korea Electric shares fell 2.3 percent to 31,950 won in Seoul at 1:34 p.m. local time, compared with a 1.1 percent decline in the benchmark stock index Kospi. The stock has dropped 19 percent this year.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.
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Australia Carbon Price May Jump Sevenfold by 2020, Analyst Says
By Angela Macdonald-Smith
Aug. 13 (Bloomberg) -- Australia's carbon price may surge sevenfold within 10 years of the start of trading as targets to reduce gases blamed for global warming become more demanding, said New Carbon Finance, an emissions trading analysis firm.
Prices may rise from about A$10 ($8.71) per metric ton of carbon dioxide when emissions trading starts in 2010 to A$40 in 2015 and A$70 by 2020, Jonathan Malsbury, research manager for the firm, said at a seminar in Sydney.
Australia's government has a target to cut greenhouse gas emissions by 60 percent from 2000 levels by 2050 and is due to propose shorter-term targets later this year. Reducing the stringency of emissions targets and increasing the scope for importing international carbon credits are among measures that could reduce forecast prices, New Carbon Finance said.
``Our analysis suggests that by doubling access to international credits the carbon price could be reduced by around A$20 per ton of carbon dioxide-equivalent in 2020,'' London-based Malsbury said at the seminar late yesterday. ``The use of international credits is crucial to avoid very expensive abatement'' and an onerous effect on the economy, he said.
New Carbon Finance, a unit of London-based New Energy Finance Ltd., counts among its clients JPMorgan Chase & Co., Fidelity Investments and Europe's two biggest oil companies, Royal Dutch Shell Plc and BP Plc. International carbon credits include emission reduction units created by projects in developing countries under the United Nations' Kyoto Protocol.
Banking, Borrowing
Allowing the so-called banking and borrowing of permits, as proposed by the Australian government, increases the efficiency and effectiveness of the trading system and helps avoid price spikes, Malsbury said. Banking involves allowing companies to hold permits created in one compliance period for use in a future one, while borrowing involves using permits created for a future compliance period to meet current obligations under the trading system.
New Carbon Finance's base-case forecast assumes the government will use emission caps under the Kyoto Protocol from 2010-2012, requiring ``minimal'' reductions, and ``a much more demanding obligation'' to 2020 on the way to a 60 percent reduction by 2050.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Aug. 13 (Bloomberg) -- Australia's carbon price may surge sevenfold within 10 years of the start of trading as targets to reduce gases blamed for global warming become more demanding, said New Carbon Finance, an emissions trading analysis firm.
Prices may rise from about A$10 ($8.71) per metric ton of carbon dioxide when emissions trading starts in 2010 to A$40 in 2015 and A$70 by 2020, Jonathan Malsbury, research manager for the firm, said at a seminar in Sydney.
Australia's government has a target to cut greenhouse gas emissions by 60 percent from 2000 levels by 2050 and is due to propose shorter-term targets later this year. Reducing the stringency of emissions targets and increasing the scope for importing international carbon credits are among measures that could reduce forecast prices, New Carbon Finance said.
``Our analysis suggests that by doubling access to international credits the carbon price could be reduced by around A$20 per ton of carbon dioxide-equivalent in 2020,'' London-based Malsbury said at the seminar late yesterday. ``The use of international credits is crucial to avoid very expensive abatement'' and an onerous effect on the economy, he said.
New Carbon Finance, a unit of London-based New Energy Finance Ltd., counts among its clients JPMorgan Chase & Co., Fidelity Investments and Europe's two biggest oil companies, Royal Dutch Shell Plc and BP Plc. International carbon credits include emission reduction units created by projects in developing countries under the United Nations' Kyoto Protocol.
Banking, Borrowing
Allowing the so-called banking and borrowing of permits, as proposed by the Australian government, increases the efficiency and effectiveness of the trading system and helps avoid price spikes, Malsbury said. Banking involves allowing companies to hold permits created in one compliance period for use in a future one, while borrowing involves using permits created for a future compliance period to meet current obligations under the trading system.
New Carbon Finance's base-case forecast assumes the government will use emission caps under the Kyoto Protocol from 2010-2012, requiring ``minimal'' reductions, and ``a much more demanding obligation'' to 2020 on the way to a 60 percent reduction by 2050.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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