By Toru Fujioka
Aug. 20 (Bloomberg) -- The Bank of Japan cut its economic assessment, saying growth in the world's second-largest economy is ``sluggish'' for the first time in 10 years.
``Japan's economic growth has been sluggish,'' the central bank said in its monthly economic report in Tokyo today, downgrading its evaluation for the second month. In July, policy makers said that the expansion was ``slowing further.''
Bank of Japan Governor Masaaki Shirakawa said yesterday that the nation's recovery may be delayed because rising oil and materials costs as well as a global slowdown are denting demand. Japan's economy contracted last quarter, putting it on the brink of its first recession in six years, and economists say the slump will prevent the bank from raising interest rates until 2009 at the earliest.
``The BOJ de facto admitted that the economy is in recession,'' said Masaaki Kanno, a former central bank official and now chief economist at JPMorgan Chase & Co. in Tokyo. ``The bank will not move for quite a long period.''
Today's report elaborates on a statement issued yesterday, when the central bank kept the key interest rate unchanged at 0.5 percent. The rate, the lowest among industrialized economies, hasn't been raised since it was doubled in February 2007.
The Bank of Japan cut its view of exports, production, capital investment and consumer spending in today's report.
``Growth in exports is expected to remain only modest for the time being, due to the slowdown in overseas economies,'' the bank said.
Soaring material costs and weakening sales have eroded profits, prompting companies to pare manufacturing, investment and hiring. Production, exports and household spending declined in June, and the unemployment rate climbed to the highest in almost two years.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
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Wednesday, August 20, 2008
U.K. Budget Surplus Shrank as Slowdown Curbed Tax
By Jennifer Ryan
Aug. 20 (Bloomberg) -- Britain's government budget surplus shrank in July as the economic slump sapped tax receipts, putting Prime Minister Gordon Brown at risk of breaking decade-old borrowing rules.
The 4.8 billion-pound ($8.9 billion) surplus was the smallest for the month since 2005, the Office for National Statistics said today. The median forecast in a survey of 15 economists was for a surplus of 4.3 billion pounds. In the first four months of the fiscal year, the deficit was 19.1 billion pounds, 10.7 billion more than a year earlier.
Brown may find it hard to keep borrowing within the limits he set as finance minister in 1997 as the economy teeters on the brink of a recession. The slump has damaged his reputation for competent management of the economy and reduced public support for the ruling Labour Party to the lowest since it took office.
``The slower pace of economic growth this year compared to last year is limiting receipts,'' said David Page, an economist at Investec Securities in London. ``Public finances are clearly very stressed.''
The Treasury usually has a surplus in July and three other months of the year when quarterly corporation tax payments are made. For the remaining months of the year, the government has usually reports a deficit.
Deficit Measure
A cash-based measure showed the budget surplus was 12.6 billion pounds in July, compared with 13.3 billion pounds a year earlier. Economists forecast a surplus of 10 billion pounds.
``We are on course to leave the next generation a higher national debt and the highest budget deficit of any major economy in the world,'' George Osborne, a Conservative lawmaker who speaks on finance, will say in a speech today, according to his office. ``All the leaks and briefings coming out of Downing Street at the moment suggest that the prime minister is preparing to try to buy his way out of trouble by bribing people with their own borrowed money.''
Government spending increased 6.9 percent. Tax receipts rose 2.7 percent in July from a year earlier as higher oil prices prompted North Sea producers to pay more tax.
About 4 billion pounds of the 9.9 billion pounds in corporation tax payments was from North Sea companies, more than twice as much as in the same month a year ago, the Office for National Statistics said. Tax from all companies fell from a year ago partly because July 2007 receipts were boosted by revenue from newly-created Real Estate Investment Trusts. Overall, corporation tax receipts rose 1.5 percent.
Darling's Forecast
The government is almost certain to borrow more in the current fiscal year than the 43 billion pounds Chancellor of the Exchequer Alistair Darling forecast in March, according to a survey of economists conducted by the Treasury in July.
In March, Darling forecast economic growth of as much as 2.25 percent this year and 2.75 percent in 2009. In its bleakest assessment of the economy in a decade, the Bank of England last week predicted virtually no growth over the next year and said at least one quarter of contraction is possible.
At stake is a government commitment to borrow only for investment over the economic cycle and keep debt below 40 percent of gross domestic product. In July, the government's total debt burden of 543 billion pounds amounted to 37.3 percent of GDP, up from 36.1 percent a year earlier.
Soaring fuel and food prices and the worst housing slump since the early 1990s are deepening the unpopularity of Brown, whose party has lost two parliamentary seats since May and lags behind the opposition Conservatives by about 20 points in opinion polls.
Brown has until June 2010 to hold the next election, and hopes of an economic rebound before then are dimming, prompting some of his own lawmakers to suggest he step down.
The U.K. budget deficit will reach 3.3 percent of GDP this year and next, the European Commission, the European Union's executive agency, forecast in April. In the 27-nation EU, only Hungary faces a bigger shortfall this year at 4 percent of GDP. The deficit in the U.S. is forecast at 5 percent of GDP and 1.9 percent in Japan.
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
Read more...
Aug. 20 (Bloomberg) -- Britain's government budget surplus shrank in July as the economic slump sapped tax receipts, putting Prime Minister Gordon Brown at risk of breaking decade-old borrowing rules.
The 4.8 billion-pound ($8.9 billion) surplus was the smallest for the month since 2005, the Office for National Statistics said today. The median forecast in a survey of 15 economists was for a surplus of 4.3 billion pounds. In the first four months of the fiscal year, the deficit was 19.1 billion pounds, 10.7 billion more than a year earlier.
Brown may find it hard to keep borrowing within the limits he set as finance minister in 1997 as the economy teeters on the brink of a recession. The slump has damaged his reputation for competent management of the economy and reduced public support for the ruling Labour Party to the lowest since it took office.
``The slower pace of economic growth this year compared to last year is limiting receipts,'' said David Page, an economist at Investec Securities in London. ``Public finances are clearly very stressed.''
The Treasury usually has a surplus in July and three other months of the year when quarterly corporation tax payments are made. For the remaining months of the year, the government has usually reports a deficit.
Deficit Measure
A cash-based measure showed the budget surplus was 12.6 billion pounds in July, compared with 13.3 billion pounds a year earlier. Economists forecast a surplus of 10 billion pounds.
``We are on course to leave the next generation a higher national debt and the highest budget deficit of any major economy in the world,'' George Osborne, a Conservative lawmaker who speaks on finance, will say in a speech today, according to his office. ``All the leaks and briefings coming out of Downing Street at the moment suggest that the prime minister is preparing to try to buy his way out of trouble by bribing people with their own borrowed money.''
Government spending increased 6.9 percent. Tax receipts rose 2.7 percent in July from a year earlier as higher oil prices prompted North Sea producers to pay more tax.
About 4 billion pounds of the 9.9 billion pounds in corporation tax payments was from North Sea companies, more than twice as much as in the same month a year ago, the Office for National Statistics said. Tax from all companies fell from a year ago partly because July 2007 receipts were boosted by revenue from newly-created Real Estate Investment Trusts. Overall, corporation tax receipts rose 1.5 percent.
Darling's Forecast
The government is almost certain to borrow more in the current fiscal year than the 43 billion pounds Chancellor of the Exchequer Alistair Darling forecast in March, according to a survey of economists conducted by the Treasury in July.
In March, Darling forecast economic growth of as much as 2.25 percent this year and 2.75 percent in 2009. In its bleakest assessment of the economy in a decade, the Bank of England last week predicted virtually no growth over the next year and said at least one quarter of contraction is possible.
At stake is a government commitment to borrow only for investment over the economic cycle and keep debt below 40 percent of gross domestic product. In July, the government's total debt burden of 543 billion pounds amounted to 37.3 percent of GDP, up from 36.1 percent a year earlier.
Soaring fuel and food prices and the worst housing slump since the early 1990s are deepening the unpopularity of Brown, whose party has lost two parliamentary seats since May and lags behind the opposition Conservatives by about 20 points in opinion polls.
Brown has until June 2010 to hold the next election, and hopes of an economic rebound before then are dimming, prompting some of his own lawmakers to suggest he step down.
The U.K. budget deficit will reach 3.3 percent of GDP this year and next, the European Commission, the European Union's executive agency, forecast in April. In the 27-nation EU, only Hungary faces a bigger shortfall this year at 4 percent of GDP. The deficit in the U.S. is forecast at 5 percent of GDP and 1.9 percent in Japan.
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
Read more...
Philippines Lowers 2008 Growth Target a Second Time
By Karl Lester M. Yap
More Photos/Details
Aug. 20 (Bloomberg) -- The Philippines cut its 2008 economic-growth forecast for the second time this year as faster inflation hurt consumption, adding pressure on the government to boost spending on food and fuel subsidies to the poor.
Gross domestic product may expand 5.5 percent to 6.4 percent this year, from an earlier forecast of as much as 6.6 percent, Economic Planning Undersecretary Augusto Santos said in a telephone interview from Manila today.
Philippine stocks and the peso fell on concern the government may expand subsidies for the third of the 96 million population that lives on less than a $1 a day, widening its deficit. A 62 percent jump in oil prices in the past year has fueled Asian inflation that may reach a decade high this year, deepening an economic slowdown brought on by falling U.S. demand.
``The government will have to do more pump-priming,'' said Joric Nazario, treasurer at Philippine Veterans Bank in Manila. ``More expenses may mean bigger deficits down the road. It becomes less attractive to hold peso assets.''
President Gloria Arroyo in May pledged to boost investment and lift spending on rice and other subsidies to help Filipinos cope with soaring prices, abandoning her plan to balance the budget this year. Finance Secretary Gary Teves has said the government may post a 2008 deficit of 40 billion pesos to 75 billion pesos.
Intel Chips
The $118 billion economy expanded 5.2 percent in the first three months of 2008, the slowest pace in six quarters. Inflation in the Philippines accelerated to 12.2 percent last month, the fastest pace in more than 16 years, crimping consumer spending that makes up 70 percent of the economy.
Global growth has slowed as the U.S. housing recession hurts demand for made-in-Asia Intel Corp. computer chips and other goods, while record commodity prices leave consumers with less to spend around the world.
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. Europe's economy last quarter shrank for the first time since the introduction of the euro almost a decade ago.
``It's mainly because of the economic slowdown brought about by high oil prices,'' Santos said of the Philippines' new growth forecast. Crude oil reached a record $147.27 a barrel on July 11.
The Philippines imports almost all of its oil. Local pump prices have risen 42 percent this month from a year ago, according to Department of Energy data.
Peso, Stocks
The peso declined 0.5 percent to 45.73 against the dollar at 10:59 a.m. in Manila, according to Tullett Prebon Plc. It had gained as much as 0.08 percent before Santos's comment. The Philippine benchmark stock index fell to a two-week low.
Shares of Bank of the Philippine Islands, the nation's biggest lender by market value, fell the most in almost three weeks in Manila trading on speculation slower-than-expected economic growth will cool demand for loans.
Jollibee Foods Corp., the Philippines' largest fast-food company, last week posted its third straight quarterly profit decline as higher meat and rice prices eroded sales. Globe Telecom Inc., the nation's second-largest mobile-phone company, this month said profit fell 27 percent in the second quarter as Filipinos cut back on calls and text messages.
The government first cut its growth target in May to 5.7 percent to 6.6 percent this year, from 6.3 percent to 7 percent previously. It will release second-quarter economic data next week.
To contact the reporter for this story: Karl Lester M. Yap in Manila at o kyap5@bloomberg.net.
Read more...
More Photos/Details
Aug. 20 (Bloomberg) -- The Philippines cut its 2008 economic-growth forecast for the second time this year as faster inflation hurt consumption, adding pressure on the government to boost spending on food and fuel subsidies to the poor.
Gross domestic product may expand 5.5 percent to 6.4 percent this year, from an earlier forecast of as much as 6.6 percent, Economic Planning Undersecretary Augusto Santos said in a telephone interview from Manila today.
Philippine stocks and the peso fell on concern the government may expand subsidies for the third of the 96 million population that lives on less than a $1 a day, widening its deficit. A 62 percent jump in oil prices in the past year has fueled Asian inflation that may reach a decade high this year, deepening an economic slowdown brought on by falling U.S. demand.
``The government will have to do more pump-priming,'' said Joric Nazario, treasurer at Philippine Veterans Bank in Manila. ``More expenses may mean bigger deficits down the road. It becomes less attractive to hold peso assets.''
President Gloria Arroyo in May pledged to boost investment and lift spending on rice and other subsidies to help Filipinos cope with soaring prices, abandoning her plan to balance the budget this year. Finance Secretary Gary Teves has said the government may post a 2008 deficit of 40 billion pesos to 75 billion pesos.
Intel Chips
The $118 billion economy expanded 5.2 percent in the first three months of 2008, the slowest pace in six quarters. Inflation in the Philippines accelerated to 12.2 percent last month, the fastest pace in more than 16 years, crimping consumer spending that makes up 70 percent of the economy.
Global growth has slowed as the U.S. housing recession hurts demand for made-in-Asia Intel Corp. computer chips and other goods, while record commodity prices leave consumers with less to spend around the world.
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. Europe's economy last quarter shrank for the first time since the introduction of the euro almost a decade ago.
``It's mainly because of the economic slowdown brought about by high oil prices,'' Santos said of the Philippines' new growth forecast. Crude oil reached a record $147.27 a barrel on July 11.
The Philippines imports almost all of its oil. Local pump prices have risen 42 percent this month from a year ago, according to Department of Energy data.
Peso, Stocks
The peso declined 0.5 percent to 45.73 against the dollar at 10:59 a.m. in Manila, according to Tullett Prebon Plc. It had gained as much as 0.08 percent before Santos's comment. The Philippine benchmark stock index fell to a two-week low.
Shares of Bank of the Philippine Islands, the nation's biggest lender by market value, fell the most in almost three weeks in Manila trading on speculation slower-than-expected economic growth will cool demand for loans.
Jollibee Foods Corp., the Philippines' largest fast-food company, last week posted its third straight quarterly profit decline as higher meat and rice prices eroded sales. Globe Telecom Inc., the nation's second-largest mobile-phone company, this month said profit fell 27 percent in the second quarter as Filipinos cut back on calls and text messages.
The government first cut its growth target in May to 5.7 percent to 6.6 percent this year, from 6.3 percent to 7 percent previously. It will release second-quarter economic data next week.
To contact the reporter for this story: Karl Lester M. Yap in Manila at o kyap5@bloomberg.net.
Read more...
Qatar Sells 3.5 Million Barrels of Condensate Oil for October
By Christian Schmollinger
Aug. 20 (Bloomberg) -- Qatar International Petroleum Marketing Co., a state-owned company also called Tasweeq, sold 3.5 million barrels of condensate for October, said three traders who submitted bids for the cargoes.
Details of the company's sales are as follows:
-----------------------------------------------------------
Product: Deodorized Field Condensate
Quantity: 500,000 barrels a cargo
Buyers: Exxon Mobil Corp. x 3 cargoes
GS Caltex Corp. x 1 cargo
Loading: October
Price: Premium of between $1 a barrel and $3 a barrel to
the price of Dubai crude oil published by pricing
service Platts.
Port: Ras Laffan terminal (northern Qatar)
------------------------------------------------------------
Product: Low-Sulfur Condensate
Quantity: 500,000 barrels a cargo
Buyers: Exxon Mobil x 1 cargo
Mitsubishi Corp. x 1 cargo
Emirates National Oil Co. x 1 cargo
Loading: October
Price: Discount of between parity and $1 a barrel to the
price of Dubai crude oil published by pricing
service Platts.
Port: Ras Laffan terminal (northern Qatar)
-----------------------------------------------------------
Condensate is a type of light crude oil produced in association with natural gas and is usually processed into products such as naphtha, a raw material for gasoline and chemicals.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Norway Should Mull Higher Rates to Quell Overheating, OECD Says
By Tasneem Brogger
Aug. 20 (Bloomberg) -- Norway should consider raising interest rates further as the economy of the fifth-largest oil exporter risks overheating and inflation pressures mount, the Organization for Economic Cooperation and Development said.
``The continuing strength of the economy in early 2008 is certainly a reminder that the danger of overheating will not recede immediately and interest rates may need to go higher,'' the Paris-based OECD said in an e-mailed report released today.
Norway's central bank raised the key rate in June and indicated at the time it may lift it once more by a quarter point this year to 6 percent to prevent inflation from becoming entrenched. Policy makers will likely raise the key rate next month, according to UBS Ltd., after underlying inflation rose to a seven-and-a-half year high of 2.9 percent in July.
``In view of ongoing inflationary pressures, it is too early to say whether monetary policy has been successful in stabilising inflation close to the target,'' the OECD said.
Norges Bank targets price gains of 2.5 percent ``over time.'' Policy makers opted to leave the key rate at 5.75 percent at their Aug. 13 meeting. The bank next meets to discuss rates on Sept. 24.
The mainland economy will grow 3.25 percent this year, compared with 6.2 percent in 2007, the central bank forecast on June 25. At the same time, inflation adjusted for taxes and energy will accelerate to 2.5 percent from 1.4 percent in 2007, the bank estimates.
``Despite slowing demand, the output gap will not be closed for some time,'' the OECD said. ``It is likely that inflationary pressures will continue for some time.''
To contact the reporters on this story: Tasneem Brogger in Copenhagen at tbrogger@bloomberg.net;
Read more...
Aug. 20 (Bloomberg) -- Norway should consider raising interest rates further as the economy of the fifth-largest oil exporter risks overheating and inflation pressures mount, the Organization for Economic Cooperation and Development said.
``The continuing strength of the economy in early 2008 is certainly a reminder that the danger of overheating will not recede immediately and interest rates may need to go higher,'' the Paris-based OECD said in an e-mailed report released today.
Norway's central bank raised the key rate in June and indicated at the time it may lift it once more by a quarter point this year to 6 percent to prevent inflation from becoming entrenched. Policy makers will likely raise the key rate next month, according to UBS Ltd., after underlying inflation rose to a seven-and-a-half year high of 2.9 percent in July.
``In view of ongoing inflationary pressures, it is too early to say whether monetary policy has been successful in stabilising inflation close to the target,'' the OECD said.
Norges Bank targets price gains of 2.5 percent ``over time.'' Policy makers opted to leave the key rate at 5.75 percent at their Aug. 13 meeting. The bank next meets to discuss rates on Sept. 24.
The mainland economy will grow 3.25 percent this year, compared with 6.2 percent in 2007, the central bank forecast on June 25. At the same time, inflation adjusted for taxes and energy will accelerate to 2.5 percent from 1.4 percent in 2007, the bank estimates.
``Despite slowing demand, the output gap will not be closed for some time,'' the OECD said. ``It is likely that inflationary pressures will continue for some time.''
To contact the reporters on this story: Tasneem Brogger in Copenhagen at tbrogger@bloomberg.net;
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Tropical Storm Crosses Florida; May Become Hurricane
By Brian K. Sullivan and Aaron Sheldrick
Aug. 20 (Bloomberg) -- Tropical Storm Fay may strengthen into a hurricane when it moves over the Atlantic Ocean, after crossing southern Florida, where it left at least four people injured, cut power to thousands of homes and flooded streets.
Fay's eye was over the east coast of Florida about 15 miles (25 kilometers) south-southeast of Melbourne at 2 a.m. local time today, the National Hurricane Center said in its latest advisory. Winds slowed to 50 miles per hour from 65 mph earlier and the storm was moving north-northeast at 7 mph.
A hurricane watch remains in place for coast areas from Flagler Beach, Florida, to Altamaha Sound in Georgia. Fay is forecast to strengthen again as it passes over the warm Gulf Stream waters of the Atlantic, the hurricane center said.
A man who was kite surfing was critically injured when he was slammed against a building in Fort Lauderdale, am540 WFLA radio reported on its Web site. Two people were injured in Brevard County in a tornado sparked by Fay, the station said. More than 50 homes were damaged or destroyed, it said.
About 95,000 homes lost power in Naples in southwestern Florida where Fay came ashore, the radio station said. The storm flooded streets and knocked down trees in the town, it said.
About 93,000 homes statewide were without power at 11 a.m. yesterday, according to a Florida Power & Light Co. statement. The company is working with out-of-state personnel to restore service, it said.
Seriously Injured
A man was seriously injured by flying debris in Marathon Key, Florida, while preparing for the storm, according to a statement on the Monroe County Web site yesterday.
Fay was forecast to bring as much as 15 inches (38 centimeters) of rain to parts of Florida. A storm surge of as much as 3 feet above normal high tide is possible, the hurricane center said.
The center warned of flash floods for areas in east central Florida. A tropical storm warning was in effect along parts of Florida's east coast as well as Lake Okeechobee.
Dan Kottlowski, senior meteorologist at private forecaster AccuWeather Inc. in State College, Pennsylvania, said there is ``a good chance'' it will become a hurricane.
``There is very warm water in the Gulf Stream current off the coast,'' he said. ``If it can get over that, some computer information says it could strengthen to at least a Category 1 hurricane.''
Kottlowski said models show the storm heading over the ocean then turning toward the west and making landfall in Georgia on Aug. 21 or 22. Storms become hurricanes once maximum sustained winds reach 74 mph.
Gulf of Mexico
Some models show the storm re-emerging in the Gulf of Mexico, said Brian Wimer, a meteorologist for AccuWeather.
If Fay enters the Gulf, it may make landfall between New Orleans and the Florida panhandle on Aug. 23, Jeff Masters, director of meteorology at private forecaster Weather Underground Inc., said on his blog.
The storm killed more than a dozen people in the Caribbean, including several in Haiti, the Associated Press reported. It killed five people in the Dominican Republic, the country's Emergency Operations Center said on its Web site.
Orange juice prices fell, after yesterday touching the highest this month as the storm approached. Florida is the world's second-largest orange grower.
Orange juice futures for November delivery fell 3.8 percent to $1.0455 a pound on ICE Futures U.S., the former New York Board of Trade.
The state was investigating about 40 complaints about retailers selling gasoline, batteries, water and other emergency supplies at inflated prices, said Sandi Copes, a spokeswoman for Florida's attorney-general.
The National Aeronautics and Space Administration closed its Kennedy Space Center in Cape Canaveral, Florida, for the day because of the storm, the space agency said in a statement.
To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net; Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.
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Russian Action in Georgia Shows Limits of West, NATO
By Viola Gienger and Ken Fireman
Aug. 20 (Bloomberg) -- Almost a week after Secretary of State Condoleezza Rice told Russia it couldn't roll back the clock to 1968 and invade its neighbors, the U.S. and European allies are still trying to reverse the Russian incursion into Georgia.
Allied and Georgian officials say Russian troops remain in control of about a third of Georgia, including the Black Sea port of Poti and the central city of Gori, in defiance of a cease-fire agreement signed Aug. 16.
Russia yesterday laid out conditions for it to pull out.
``For the withdrawal of Russian troops to happen, two things are necessary: the pullback of Georgian forces to their barracks and, secondly, we need to be assured that our peacekeepers are not going to be attacked again,'' Russia's ambassador to the United Nations, Vitaly Churkin, told reporters late yesterday.
Most troops will start pulling back to South Ossetia and Russia after construction of checkpoints and bases is completed by Aug. 22, Russian President Dmitry Medvedev told his French counterpart Nicolas Sarkozy yesterday, according to a statement from the Kremlin.
Masha Lipman, a political analyst at the Moscow Carnegie Center, said that while there has been ``no shortage of rhetoric'' from U.S. officials ``there doesn't seem to be any effective leverage that the West can use'' to force a Russian withdrawal. ``This conflict has clearly shown the limits of American influence and power,'' she said.
NATO Meeting
Those limitations were on display yesterday at an emergency meeting of North Atlantic Treaty Organization foreign ministers in Brussels.
The ministers condemned the Russian incursion and canceled any NATO-Russian meetings until it ends.
``There can be no business as usual with Russia under present circumstances,'' Secretary-General Jaap de Hoop Scheffer told reporters.
Far from pulling out, the Russian military is sharpening its threat to Georgia. It has moved more than a dozen SS-21 missile launchers into the pro-Russia breakaway region of South Ossetia, according to a senior U.S. defense official who spoke on condition of anonymity. This may put the Georgian capital, Tbilisi, in range of the missiles, which can fly as far as 75 miles (120 kilometers), according to the Federation of American Scientists' Web site.
Not 1968
Rice said Aug. 14 that ``this is no longer 1968 and the invasion of Czechoslovakia, when a great power invaded a small neighbor and overthrew its government.'' NATO ``is not going to permit a new line to be drawn in Europe'' between those in the alliance and those outside it, she said yesterday.
At the same time, the U.S. declined to push for putting NATO membership for Georgia or Ukraine, another former Soviet republic, on a fast track, and French Foreign Minister Bernard Kouchner said the European Union wouldn't reconsider its support for Russia's bid to join the World Trade Organization. NATO earlier this year offered the two countries the possibility of eventual membership.
Alastair Cameron, head of European security issues at the Royal United Services Institute in London, called the session a ``lowest-common-denominator'' meeting that reflected NATO's limited options for influencing Russian behavior.
NATO ``has no real mandate in the region'' and wouldn't be able to deliver effective military aid to the Georgians in any case, Cameron said in an interview.
UN Resolution
At the UN, France introduced a draft resolution on Georgia to the Security Council that demands compliance with the cease- fire agreement, the withdrawal of Russian troops to their pre- war positions and the return of Georgian forces to their bases. Russia rejected the measure because the text doesn't match the European-brokered truce, Churkin said.
Medvedev told UN Secretary-General Ban Ki-moon yesterday the Security Council must support the six-point truce plan brokered by France, according to the Kremlin press service. The heads of UN aid agencies will be given assistance to assess humanitarian needs after the conflict, Medvedev said.
The conflict has become the sharpest confrontation between Russia and the West since the end of the Cold War.
Georgia, the birthplace of Soviet-era dictator Josef Stalin, became a western ally on Russia's border in part because it is an emerging corridor for oil and natural-gas shipments from the Caspian Sea region to Europe, skirting Russia.
A former U.S. ambassador to Russia, James Collins, said the decision yesterday not to press for quick Georgian membership in NATO was the right one, given ``uncertainty about just what Georgia's membership would mean'' in the midst of a conflict.
Damage Ties
Collins, who heads the Russia and Eurasia program at the Washington-based Carnegie Endowment for International Peace, said he expected Russia's immediate reaction to NATO's suspension of contacts would be dismissive. In the longer term, Russian leaders may realize that a continuing confrontation with the West would damage economic ties and decrease investor confidence, he predicted.
In Moscow, Russian Foreign Minister Sergei Lavrov accused NATO of attempting to ``whitewash'' Georgia's ``criminal regime'' led by pro-western President Mikheil Saakashvili. Russia invaded on Aug. 8 in response to Georgia's attempt Aug. 7 to retake South Ossetia, which has been protected by Russian peacekeepers since it attempted to break away from Georgia in the early 1990s.
Government spokesman Dmitry Peskov said Russia couldn't return Gori to Georgian control because there are no Georgian police or emergency officials there to accept the handover.
Peskov confirmed the presence of ``some Russian military'' in Poti, saying they were there as peacekeepers rather than occupiers. Russian military operations have disrupted the movement of goods on Georgian roads and through the port.
To contact the reporters on this story: Viola Gienger in Brussels at vgienger@bloomberg.net; Ken Fireman in Washington at kfireman1@bloomberg.net
Read more...
Aug. 20 (Bloomberg) -- Almost a week after Secretary of State Condoleezza Rice told Russia it couldn't roll back the clock to 1968 and invade its neighbors, the U.S. and European allies are still trying to reverse the Russian incursion into Georgia.
Allied and Georgian officials say Russian troops remain in control of about a third of Georgia, including the Black Sea port of Poti and the central city of Gori, in defiance of a cease-fire agreement signed Aug. 16.
Russia yesterday laid out conditions for it to pull out.
``For the withdrawal of Russian troops to happen, two things are necessary: the pullback of Georgian forces to their barracks and, secondly, we need to be assured that our peacekeepers are not going to be attacked again,'' Russia's ambassador to the United Nations, Vitaly Churkin, told reporters late yesterday.
Most troops will start pulling back to South Ossetia and Russia after construction of checkpoints and bases is completed by Aug. 22, Russian President Dmitry Medvedev told his French counterpart Nicolas Sarkozy yesterday, according to a statement from the Kremlin.
Masha Lipman, a political analyst at the Moscow Carnegie Center, said that while there has been ``no shortage of rhetoric'' from U.S. officials ``there doesn't seem to be any effective leverage that the West can use'' to force a Russian withdrawal. ``This conflict has clearly shown the limits of American influence and power,'' she said.
NATO Meeting
Those limitations were on display yesterday at an emergency meeting of North Atlantic Treaty Organization foreign ministers in Brussels.
The ministers condemned the Russian incursion and canceled any NATO-Russian meetings until it ends.
``There can be no business as usual with Russia under present circumstances,'' Secretary-General Jaap de Hoop Scheffer told reporters.
Far from pulling out, the Russian military is sharpening its threat to Georgia. It has moved more than a dozen SS-21 missile launchers into the pro-Russia breakaway region of South Ossetia, according to a senior U.S. defense official who spoke on condition of anonymity. This may put the Georgian capital, Tbilisi, in range of the missiles, which can fly as far as 75 miles (120 kilometers), according to the Federation of American Scientists' Web site.
Not 1968
Rice said Aug. 14 that ``this is no longer 1968 and the invasion of Czechoslovakia, when a great power invaded a small neighbor and overthrew its government.'' NATO ``is not going to permit a new line to be drawn in Europe'' between those in the alliance and those outside it, she said yesterday.
At the same time, the U.S. declined to push for putting NATO membership for Georgia or Ukraine, another former Soviet republic, on a fast track, and French Foreign Minister Bernard Kouchner said the European Union wouldn't reconsider its support for Russia's bid to join the World Trade Organization. NATO earlier this year offered the two countries the possibility of eventual membership.
Alastair Cameron, head of European security issues at the Royal United Services Institute in London, called the session a ``lowest-common-denominator'' meeting that reflected NATO's limited options for influencing Russian behavior.
NATO ``has no real mandate in the region'' and wouldn't be able to deliver effective military aid to the Georgians in any case, Cameron said in an interview.
UN Resolution
At the UN, France introduced a draft resolution on Georgia to the Security Council that demands compliance with the cease- fire agreement, the withdrawal of Russian troops to their pre- war positions and the return of Georgian forces to their bases. Russia rejected the measure because the text doesn't match the European-brokered truce, Churkin said.
Medvedev told UN Secretary-General Ban Ki-moon yesterday the Security Council must support the six-point truce plan brokered by France, according to the Kremlin press service. The heads of UN aid agencies will be given assistance to assess humanitarian needs after the conflict, Medvedev said.
The conflict has become the sharpest confrontation between Russia and the West since the end of the Cold War.
Georgia, the birthplace of Soviet-era dictator Josef Stalin, became a western ally on Russia's border in part because it is an emerging corridor for oil and natural-gas shipments from the Caspian Sea region to Europe, skirting Russia.
A former U.S. ambassador to Russia, James Collins, said the decision yesterday not to press for quick Georgian membership in NATO was the right one, given ``uncertainty about just what Georgia's membership would mean'' in the midst of a conflict.
Damage Ties
Collins, who heads the Russia and Eurasia program at the Washington-based Carnegie Endowment for International Peace, said he expected Russia's immediate reaction to NATO's suspension of contacts would be dismissive. In the longer term, Russian leaders may realize that a continuing confrontation with the West would damage economic ties and decrease investor confidence, he predicted.
In Moscow, Russian Foreign Minister Sergei Lavrov accused NATO of attempting to ``whitewash'' Georgia's ``criminal regime'' led by pro-western President Mikheil Saakashvili. Russia invaded on Aug. 8 in response to Georgia's attempt Aug. 7 to retake South Ossetia, which has been protected by Russian peacekeepers since it attempted to break away from Georgia in the early 1990s.
Government spokesman Dmitry Peskov said Russia couldn't return Gori to Georgian control because there are no Georgian police or emergency officials there to accept the handover.
Peskov confirmed the presence of ``some Russian military'' in Poti, saying they were there as peacekeepers rather than occupiers. Russian military operations have disrupted the movement of goods on Georgian roads and through the port.
To contact the reporters on this story: Viola Gienger in Brussels at vgienger@bloomberg.net; Ken Fireman in Washington at kfireman1@bloomberg.net
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Korea Electric Power Names LG's Kim Ssang Su as CEO
By Shinhye Kang
Aug. 20 (Bloomberg) -- Korea Electric Power Corp., the country's dominant electricity supplier, named Kim Ssang Su, the former head of LG Electronics Inc., as chief executive.
Shareholders approved Kim's appointment today, the state- run utility said in an e-mailed statement. Kim will replace Lee Won Gul, who stepped down in May after South Korea's President Lee Myung Bak took office in February. The new government has the right to replace managers at state companies.
Kim, 63, was chief executive at LG Electronics, the world's third-largest television maker, from 2003 to 2007. Under his charge, LG's mobile-phone sales surged, challenging Motorola Inc.'s as the world's No. 3 handset maker. Kim is currently adviser at the electronics maker.
``Kim was famous for focusing on innovation and reform when he led LG Electronics,'' said Yun Hee Do, an analyst at Korea Investment & Securities Co. ``The market will anticipate the same style of management at Korea Electric.''
Korea Electric posted its biggest quarterly loss since 2003 in the three months ended June 30 as fuel costs mounted while the government capped electricity tariffs to fight inflation. The utility had a loss of 763.6 billion won ($727 million), compared with a profit of 266 billion won in the same period a year earlier.
The South Korean government has said it plans to raise electricity charges to narrow Korea Electric's losses, while the country's ruling Grand National Party opposes a big increase of tariffs.
Korea Electric shares rose 2.3 percent, or 700 won, to 32,050 won at 1:27 p.m. local time in Seoul trading. The stock has dropped 19 percent this year, in line with the benchmark Kospi index.
Kim will run Korea Electric for three years starting 2008. The government has a 51 percent stake in the utility.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net;
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PVC Prices May Rise as China Extends Olympic Closures
By Yu-huay Sun and Wang Ying
Aug. 20 (Bloomberg) -- PVC, the oil-derived plastic used in construction and some Louis Vuitton handbags, may gain 10 percent as China extends a shutdown of factories to improve air quality beyond the Beijing Olympics.
Prices will probably reach a record $1,400 a metric ton this year because of production curbs in China, source of almost 25 percent of the world's polyvinyl chloride, said Danny Ho, an analyst at Yuanta Securities Co., Taiwan's largest brokerage.
China has closed some PVC plants because most of its factories make the material from coal, a process that pollutes air and consumes electricity. Reduced supplies may increase home construction costs because PVC is required at every building site as it's used to insulate electrical wires and for piping. Toys and raincoats may also cost more, industry officials said.
``PVC supply is falling,'' Ho said in an interview in Taipei. Many factories will stay shut after the Aug. 8-24 Olympics Games to meet tighter pollution regulations and because of shortages of coal and power, he said.
As much as 30 percent of China's PVC capacity may currently be idled by the Olympics, stricter environmental controls and higher raw-material costs, said Zhang Guomin, vice chairman of the China Chlor-Alkali Industry Association, which represents about 100 PVC producers.
Christmas Trees
``The situation won't change much after the Olympics,'' Zhang said in an interview in the northern Chinese city of Tianjin. Some plants will remain shut because of pollution curbs and inadequate electricity supply, he said.
``PVC prices should be on an uptrend'' because of plant closures and rising costs, Zhang said.
Asian PVC prices may rise next month because of demand from manufacturers of items such as toys and plastic Christmas trees before year-end orders, said Cindy Mo, a Shanghai-based director at consultants Chemical Markets Associates Inc.
That may benefit Tokyo-based Shin-Etsu Chemical Co. and Taiwan's Formosa Plastics Corp., the world's biggest PVC makers.
``Oil-based PVC producers should be able to raise prices because their coal-based rivals are under pressure to charge more due to rising costs,'' said Erik Chang, a Taipei-based analyst at Capital Securities Corp.
More than two-thirds of China's PVC production is coal based, the association's Zhang said. In Japan and Taiwan, PVC is mostly made from ethylene, extracted from oil.
Beijing Huaer
PVC-maker Beijing Huaer Co. is on a list of plants shut for the Games, China's official Xinhua news agency said July 15.
Environment Protection Minister Zhou Shengxian in May told provinces neighboring Beijing, including Hebei and Inner Mongolia, to close polluting factories and order power plants to cut emissions by the end of June in time for the Games.
``Most of the measures that we announced to improve the environment and cut emissions are long-term and will continue after the Olympic Games,'' Fan Yuansheng, director of pollution control at the environment ministry said at an Aug. 3 press conference in Beijing. ``We will continue increasing efforts to protect the environment and improve air quality in Beijing.''
Formosa raised its benchmark prices for customers in Taiwan by NT$1.5 (5 cents) a kilogram to a record this month, spokesman Jerry Lin said Aug. 1. He declined to give actual prices because they are confidential. The material's price was $1,275 a ton in the East Asian spot market in the week that started Aug. 13, according to oil-pricing service Platts.
Gains in PVC prices contrast with petrochemicals such as ethylene glycol, used in fabrics, which are dropping because of increasing production in the Middle East and China. ``Prices of 80 percent of petrochemicals are heading lower, but PVC isn't among them,'' Yuanta's Ho said.
Coal's Record
China, battling a sixth year of electricity shortages, mothballed almost 3 percent of its coal-fired generating capacity as of July 25 as fuel supplies dwindled, said the State Grid Corp. of China, its largest power distributor.
The shortage has reached 40 million tons, Wu Chenghou, adviser to the China Coal Transport and Distribution Association, told reporters in Beijing July 17. Benchmark prices at Qinhuangdao, China's largest port for the fuel, reached a record $168 a metric ton Aug. 8, according to the McCloskey Group Ltd.
China stepped up curbs on coal-based PVC plants in November, when the National Development and Reform Commission banned their construction in protected areas including near tourist attractions, sources of drinking water, railroads and highways.
PVC is the second-most common form of plastic. In 2007, global demand totaled 33.6 million metric tons, including 9.89 million tons in China, according to Taiwan's Petrochemical Industry magazine. The mainland produced 9.4 million tons of PVC.
Handbags, Shoes
The material is used in floors and in window frames as an alternative to iron, wood or aluminum. A more malleable form becomes synthetic leather for sports shoes and some handbags. Luxury goods producers including LVMH Moet Hennessy Louis Vuitton SA and Chanel SA use PVC in some handbags and shoes, targeting consumers seeking a lighter and easier-to-maintain alternative to genuine leather.
The most common plastic is polyethylene, used in plastic bags and packaging.
PVC's gains may be pared by slower growth in China's property market, said Zhang of the Chlor-Alkali association.
July property prices rose at the slowest pace in 14 months, according to data from the development commission, as the government tightened lending to rein in soaring property prices.
Growth in China's PVC output this year will slow to less than 10 percent from previous ``double-digit'' gains because of pollution curbs, Chemical Markets' Mo said.
Output may total 10 million metric tons in 2010, less than the 12 million tons estimated about two years ago, because of the measures targeting pollution and energy conservation, Capital Securities' Chang said.
To contact the reporters on this story: Yu-huay Sun in Taipei at ysun7@bloomberg.net; Wang Ying in Beijing at ywang30@bloomberg.net
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DNO Quarterly Net Falls 89% After One-Time Gain a Year Earlier
By Maren Naess Olsen
Aug. 20 (Bloomberg) -- DNO International ASA, the Norwegian oil producer operating in northern Iraq, said second-quarter profit fell 89 percent after a one-time gain boosted earnings a year earlier.
Net income dropped to 13.6 million kroner ($2.53 million), or 0.02 krone a share, from 122.5 million kroner, or 0.14 krone, a year earlier, the Oslo-based company said today in a statement distributed by Hugin. That missed the 35 million-kroner median estimate of analysts surveyed by Bloomberg News.
DNO, the first foreign company to pump oil in Iraq since the industry was nationalized in 1972, is supplying the northern Kurdistan region while it awaits approval to export crude. The company booked a 98 million-krone gain from the sale of North Sea licenses to Bayerngas Norge AS in the second quarter of last year.
DNO and other oil producers have benefited from rising prices for crude, which traded 90 percent higher in the second quarter than a year earlier and climbed above $140 a barrel for the first time in June. DNO's sales advanced 30 percent to 412.5 million kroner in the period, exceeding an analyst estimate of 411 million kroner.
The company started drilling in northern Iraq in November 2005 and has signed production-sharing agreements with Kurdistan's regional government. Iraq, with an estimated 115 billion barrels of proven oil reserves, holds the world's third- largest crude resources behind Saudi Arabia and Iran, according to BP Plc figures. DNO also operates in Yemen.
To contact the reporter on this story: Maren Naess Olsen in London at molsen10@bloomberg.net
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Aug. 20 (Bloomberg) -- DNO International ASA, the Norwegian oil producer operating in northern Iraq, said second-quarter profit fell 89 percent after a one-time gain boosted earnings a year earlier.
Net income dropped to 13.6 million kroner ($2.53 million), or 0.02 krone a share, from 122.5 million kroner, or 0.14 krone, a year earlier, the Oslo-based company said today in a statement distributed by Hugin. That missed the 35 million-kroner median estimate of analysts surveyed by Bloomberg News.
DNO, the first foreign company to pump oil in Iraq since the industry was nationalized in 1972, is supplying the northern Kurdistan region while it awaits approval to export crude. The company booked a 98 million-krone gain from the sale of North Sea licenses to Bayerngas Norge AS in the second quarter of last year.
DNO and other oil producers have benefited from rising prices for crude, which traded 90 percent higher in the second quarter than a year earlier and climbed above $140 a barrel for the first time in June. DNO's sales advanced 30 percent to 412.5 million kroner in the period, exceeding an analyst estimate of 411 million kroner.
The company started drilling in northern Iraq in November 2005 and has signed production-sharing agreements with Kurdistan's regional government. Iraq, with an estimated 115 billion barrels of proven oil reserves, holds the world's third- largest crude resources behind Saudi Arabia and Iran, according to BP Plc figures. DNO also operates in Yemen.
To contact the reporter on this story: Maren Naess Olsen in London at molsen10@bloomberg.net
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LNG Project Delays May Cut 100 Million Tons of Supply
By Dinakar Sethuraman and Catherine Yang
Aug. 20 (Bloomberg) -- Delays in liquefied natural gas ventures led by Exxon Mobil Corp. and Chevron Corp. may pare global supplies by 100 million metric tons, more than the annual demand of South Korea and Japan, the world's biggest importers.
Projects in Australia, Nigeria, Algeria and the Baltics have been shelved or postponed, prompting the capacity shortfall by 2013, said Ian Angell, vice president of gas and power at Wood Mackenzie Consultants Ltd. The deficit, enough to power 250 million homes, will cause spot LNG prices to trade at parity or at a premium to oil, he said.
Prices of the fuel have increased sevenfold in the last five years to a record $20 per million British thermal units while the rate of project approvals last year missed forecasts, adding to concern supply will be insufficient to meet demand. Global LNG trade rose 7.3 percent last year, outpacing crude oil's 1.2 percent, according to the BP Plc Statistical Review of World Energy June 2008.
``There's an increasingly higher linkage between LNG prices and oil prices given the overall shortage in Asia,'' Angell, 46, said in an interview with Bloomberg television today. ``The reduction in scheduled capacity is really impacting the supply side.''
Projects from Australia to Nigeria may have produced about 88 million tons in the first six months of 2008, Andy Flower, an industry consultant and a former executive at BP Plc's LNG business, said on Aug. 18. He expects output to rise by 14 percent or about 25 million tons next year.
Alternative Fuels
Demand for alternative fuels such as LNG and coal will continue to rise amid a slowdown in global economic growth because both are used by power generators with a longer planning horizon, Angell said.
Asian coal prices have more than doubled this year to records on rising consumption and railroad and port bottlenecks in Australia and South Africa, the world's biggest suppliers.
``Power decisions are being made in Asia not by 1-year or 2-year growth projections but long-term projections, which remain robust in China, Vietnam and other countries in Asia,'' Angell said.
Demand for spot LNG cargoes has climbed in Japan after the shutdown of the world's biggest nuclear-fired power plant last July, Angell said.
Gas now accounts for 26 percent of the nation's power generation fuel mix, compared with 23 percent earlier while nuclear's contribution has declined to 21 percent from 25 percent prior to the closures, Angell said. Demand for oil and gas used in power generation increased by 15 percent last year.
To contact the reporters on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net; Catherine Yang in Hong Kong at cyyang@bloomberg.net
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Aug. 20 (Bloomberg) -- Delays in liquefied natural gas ventures led by Exxon Mobil Corp. and Chevron Corp. may pare global supplies by 100 million metric tons, more than the annual demand of South Korea and Japan, the world's biggest importers.
Projects in Australia, Nigeria, Algeria and the Baltics have been shelved or postponed, prompting the capacity shortfall by 2013, said Ian Angell, vice president of gas and power at Wood Mackenzie Consultants Ltd. The deficit, enough to power 250 million homes, will cause spot LNG prices to trade at parity or at a premium to oil, he said.
Prices of the fuel have increased sevenfold in the last five years to a record $20 per million British thermal units while the rate of project approvals last year missed forecasts, adding to concern supply will be insufficient to meet demand. Global LNG trade rose 7.3 percent last year, outpacing crude oil's 1.2 percent, according to the BP Plc Statistical Review of World Energy June 2008.
``There's an increasingly higher linkage between LNG prices and oil prices given the overall shortage in Asia,'' Angell, 46, said in an interview with Bloomberg television today. ``The reduction in scheduled capacity is really impacting the supply side.''
Projects from Australia to Nigeria may have produced about 88 million tons in the first six months of 2008, Andy Flower, an industry consultant and a former executive at BP Plc's LNG business, said on Aug. 18. He expects output to rise by 14 percent or about 25 million tons next year.
Alternative Fuels
Demand for alternative fuels such as LNG and coal will continue to rise amid a slowdown in global economic growth because both are used by power generators with a longer planning horizon, Angell said.
Asian coal prices have more than doubled this year to records on rising consumption and railroad and port bottlenecks in Australia and South Africa, the world's biggest suppliers.
``Power decisions are being made in Asia not by 1-year or 2-year growth projections but long-term projections, which remain robust in China, Vietnam and other countries in Asia,'' Angell said.
Demand for spot LNG cargoes has climbed in Japan after the shutdown of the world's biggest nuclear-fired power plant last July, Angell said.
Gas now accounts for 26 percent of the nation's power generation fuel mix, compared with 23 percent earlier while nuclear's contribution has declined to 21 percent from 25 percent prior to the closures, Angell said. Demand for oil and gas used in power generation increased by 15 percent last year.
To contact the reporters on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net; Catherine Yang in Hong Kong at cyyang@bloomberg.net
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Tullow Rises After UBS Upgrades Stock to `Buy' on Exploration
By Clementine Fletcher and Eduard Gismatullin
Aug. 20 (Bloomberg) -- Tullow Oil Plc, the U.K. explorer with the most exploration licenses in Africa, rose in London trading after it was upgraded to ``buy'' from ``neutral'' at UBS AG because of future drilling potential.
Tullow rose as much as 40 pence, or 5.8 percent, to 734 pence and was trading at 730 pence at 8:22 a.m. local time.
``The company plans to drill 14 wells over the balance of the year with further high impact potential in Uganda, Ghana, Mauritania and Guyana into 2009,'' Adrian Wood, a London-based analyst, wrote in a note. ``Further exploration success could possibly make Tullow an M&A target next year.''
The bank has a price estimate of 950 pence on the stock.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
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Aug. 20 (Bloomberg) -- Tullow Oil Plc, the U.K. explorer with the most exploration licenses in Africa, rose in London trading after it was upgraded to ``buy'' from ``neutral'' at UBS AG because of future drilling potential.
Tullow rose as much as 40 pence, or 5.8 percent, to 734 pence and was trading at 730 pence at 8:22 a.m. local time.
``The company plans to drill 14 wells over the balance of the year with further high impact potential in Uganda, Ghana, Mauritania and Guyana into 2009,'' Adrian Wood, a London-based analyst, wrote in a note. ``Further exploration success could possibly make Tullow an M&A target next year.''
The bank has a price estimate of 950 pence on the stock.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
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Georgian Ports Run Out of Oil as Russian Troops Block Railways
By Eduard Gismatullin
Aug. 20 (Bloomberg) -- Georgian Black Sea ports are running out of crude and oil-product supplies as Russian military troops block railways near the city of Khashuri, a shipping agent said.
Rail transportation will probably resume in three to four days, Vako Kavzharadze, an agent at TeRo Co. Ltd. in the Georgian port of Batumi, said today in an e-mailed statement.
BP Plc, Azerbaijan's national oil company and other exporters halted crude and product exports by rail through Georgia to the Black Sea after a bridge was blown up near the village of Grakali on Aug. 16.
An ``alternative bridge is fixed, however Russian troops blocked the railways near the city of Khashuri,'' about 100 kilometers (60 miles) from Tbilisi, Kavzharadze said.
Anatoly Nogovitsyn, deputy chief of Russia's General Staff, denied his military was involved in the bridge attack.
Two main pipelines for Azeri crude remain shut because of the conflict in Georgia and a fire that damaged the Turkish stretch of a 1 million-barrel-a-day link. Russia started withdrawing its troops from Georgia after President Dmitry Medvedev announced the pullout Aug. 17.
Shippers declared force majeure on exports from the Supsa and Ceyhan ports, a legal clause that exempts them from meeting contracts because of circumstances beyond their control.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
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Aug. 20 (Bloomberg) -- Georgian Black Sea ports are running out of crude and oil-product supplies as Russian military troops block railways near the city of Khashuri, a shipping agent said.
Rail transportation will probably resume in three to four days, Vako Kavzharadze, an agent at TeRo Co. Ltd. in the Georgian port of Batumi, said today in an e-mailed statement.
BP Plc, Azerbaijan's national oil company and other exporters halted crude and product exports by rail through Georgia to the Black Sea after a bridge was blown up near the village of Grakali on Aug. 16.
An ``alternative bridge is fixed, however Russian troops blocked the railways near the city of Khashuri,'' about 100 kilometers (60 miles) from Tbilisi, Kavzharadze said.
Anatoly Nogovitsyn, deputy chief of Russia's General Staff, denied his military was involved in the bridge attack.
Two main pipelines for Azeri crude remain shut because of the conflict in Georgia and a fire that damaged the Turkish stretch of a 1 million-barrel-a-day link. Russia started withdrawing its troops from Georgia after President Dmitry Medvedev announced the pullout Aug. 17.
Shippers declared force majeure on exports from the Supsa and Ceyhan ports, a legal clause that exempts them from meeting contracts because of circumstances beyond their control.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
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OPEC Oil Production Cut `Is an Option,' Libya's Ghanem Says
By Maher Chmaytelli
Aug. 20 (Bloomberg) -- OPEC, the supplier of more than 40 percent of the world's oil, may decide to cut production at a meeting on Sept. 9 because the market is oversupplied, Libya's top oil official said.
``We will study Venezuela's call for lower production, and the logic behind it,'' Shokri Ghanem, the chairman of Libya's National Oil Corp. said in a telephone interview from Tripoli today. ``The market is now oversupplied. If a cut helps bring it to balance, then why not? It's an option.''
Venezuela, South America's biggest oil producer, will propose that the Organization of Petroleum Exporting Countries cut oil output quotas if crude prices continue to fall, Energy and Oil Minister Rafael Ramirez said yesterday.
To contact the reporter on this story: Maher Chmaytelli in Nicosia at mchmaytelli@bloomberg.net.
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Aug. 20 (Bloomberg) -- OPEC, the supplier of more than 40 percent of the world's oil, may decide to cut production at a meeting on Sept. 9 because the market is oversupplied, Libya's top oil official said.
``We will study Venezuela's call for lower production, and the logic behind it,'' Shokri Ghanem, the chairman of Libya's National Oil Corp. said in a telephone interview from Tripoli today. ``The market is now oversupplied. If a cut helps bring it to balance, then why not? It's an option.''
Venezuela, South America's biggest oil producer, will propose that the Organization of Petroleum Exporting Countries cut oil output quotas if crude prices continue to fall, Energy and Oil Minister Rafael Ramirez said yesterday.
To contact the reporter on this story: Maher Chmaytelli in Nicosia at mchmaytelli@bloomberg.net.
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Buy Won, Rupiah, Rupee on Cheaper Oil, RBS Advises
By Patricia Lui
Aug. 20 (Bloomberg) -- Investors should buy the Korean won, Indonesian rupiah and Indian rupee because the currencies will benefit from the drop in crude oil prices, according to the Royal Bank of Scotland Group Plc.
China's yuan and the Singapore and Taiwan dollars, Asia's top three performers during the first half, are likely to weaken as oil gets cheaper, according to research published today by the U.K.'s second-biggest bank. The recommendations are based on a model analysts designed to compare performances of regional currencies against changes in the prices of oil and stocks.
``Singapore's dollar and the yuan are the region's two most vulnerable currencies,'' wrote Chia Woon Khien, an interest-rate strategist at RBS in Singapore. ``In contrast, the won and the rupiah would be relatively buffered by their positive correlation to falling oil prices.''
The Singapore and Taiwan dollars are the two biggest losers among Asia's 10 most-active currencies outside Japan this quarter, weakening as the price of crude on the New York Mercantile Exchange dropped 18 percent. In the first half of the year they and the yuan were the best performers as oil surged 46 percent.
The won and the rupee were among the region's three biggest decliners in the first half, while the rupiah is the sole gainer among the three since the end of June. Crude recently traded at $114.90 a barrel in New York, 22 percent lower than the record $147.27 reached July 11.
`Oil, Stocks Drivers'
``The oil price was definitely the dominant common driver of the regional currencies over the past 18 months, explaining as much as 66 percent of their co-movements,'' according to the note, which added that stocks were the ``second common factor,'' accounting for up to 26 percent of movements during the period.
RBS examined a scenario in which oil prices fell 10 percent and stock markets rose by the same amount because cheaper crude boosts companies' profits.
The yuan, the Thai baht and the Singapore and Taiwan dollars would weaken as the ``negative direct impact from falling oil prices would be too large to be offset by the positive indirect impact from the equity market,'' the bank's analysts wrote.
The won, rupee and the Philippine peso ``will benefit the most,'' Chia wrote.
Hong Kong, Indonesia
Hong Kong's dollar and Indonesia's rupiah are ``neutral'' due to ``weak correlations'' to both oil and stocks, RBS added.
Investors should buy the U.S. dollar and sell the Singapore currency, the yuan and the ringgit on a three-month forward basis in equal proportions, the note suggested. It also recommended buying the won and selling Singapore dollars on a three-month forward to earn a positive carry of 70 basis points. A basis point is 0.01 percentage point.
Buying the won, rupee and rupiah and selling the yuan, Singapore and Taiwan dollars on a three-month forward basis would earn a net carry of 5.51 percent, RBS' note read.
Forwards contracts are agreements in which assets are bought and sold at current prices for settlement at a later specified time and date. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them.
To contact the report on this story: Patricia Lui in Singapore at plui4@bloomberg.net
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Aug. 20 (Bloomberg) -- Investors should buy the Korean won, Indonesian rupiah and Indian rupee because the currencies will benefit from the drop in crude oil prices, according to the Royal Bank of Scotland Group Plc.
China's yuan and the Singapore and Taiwan dollars, Asia's top three performers during the first half, are likely to weaken as oil gets cheaper, according to research published today by the U.K.'s second-biggest bank. The recommendations are based on a model analysts designed to compare performances of regional currencies against changes in the prices of oil and stocks.
``Singapore's dollar and the yuan are the region's two most vulnerable currencies,'' wrote Chia Woon Khien, an interest-rate strategist at RBS in Singapore. ``In contrast, the won and the rupiah would be relatively buffered by their positive correlation to falling oil prices.''
The Singapore and Taiwan dollars are the two biggest losers among Asia's 10 most-active currencies outside Japan this quarter, weakening as the price of crude on the New York Mercantile Exchange dropped 18 percent. In the first half of the year they and the yuan were the best performers as oil surged 46 percent.
The won and the rupee were among the region's three biggest decliners in the first half, while the rupiah is the sole gainer among the three since the end of June. Crude recently traded at $114.90 a barrel in New York, 22 percent lower than the record $147.27 reached July 11.
`Oil, Stocks Drivers'
``The oil price was definitely the dominant common driver of the regional currencies over the past 18 months, explaining as much as 66 percent of their co-movements,'' according to the note, which added that stocks were the ``second common factor,'' accounting for up to 26 percent of movements during the period.
RBS examined a scenario in which oil prices fell 10 percent and stock markets rose by the same amount because cheaper crude boosts companies' profits.
The yuan, the Thai baht and the Singapore and Taiwan dollars would weaken as the ``negative direct impact from falling oil prices would be too large to be offset by the positive indirect impact from the equity market,'' the bank's analysts wrote.
The won, rupee and the Philippine peso ``will benefit the most,'' Chia wrote.
Hong Kong, Indonesia
Hong Kong's dollar and Indonesia's rupiah are ``neutral'' due to ``weak correlations'' to both oil and stocks, RBS added.
Investors should buy the U.S. dollar and sell the Singapore currency, the yuan and the ringgit on a three-month forward basis in equal proportions, the note suggested. It also recommended buying the won and selling Singapore dollars on a three-month forward to earn a positive carry of 70 basis points. A basis point is 0.01 percentage point.
Buying the won, rupee and rupiah and selling the yuan, Singapore and Taiwan dollars on a three-month forward basis would earn a net carry of 5.51 percent, RBS' note read.
Forwards contracts are agreements in which assets are bought and sold at current prices for settlement at a later specified time and date. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them.
To contact the report on this story: Patricia Lui in Singapore at plui4@bloomberg.net
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Asian Currencies: Singapore Dollar Rises, Peso Falls on Growth
By Lilian Karunungan and Ron Harui
Aug. 20 (Bloomberg) -- The Singapore dollar gained the most in a month after it held above a so-called support level for a third day and the U.S. dollar weakened. The Philippine peso fell after the government lowered its economic growth forecast.
Singapore's dollar, which is managed against a basket of currencies by the central bank, climbed from a six-month low after the euro rose 0.6 percent yesterday, the most since July 11. The support level at around S$1.42 represents the Singapore dollar's lows the past three days, according to data compiled by Bloomberg.
``Certainly the U.S. dollar has run out of gas after testing S$1.42,'' said Emmanuel Ng, an economist at Oversea- Chinese Banking Corp. in Singapore. ``The Singapore dollar is trading off its basket components. The euro gained.''
The Singapore dollar rose 0.5 percent, the most since July 15, to S$1.4097 against the U.S. dollar as of 12:06 p.m. in the city from S$1.4165 late yesterday, when it reached S$1.4202, the lowest since Feb. 14. The peso declined 0.5 percent to 45.710 to the U.S. dollar in Manila, according to Tullett Prebon Plc.
Singapore's dollar is the best performer among the 10 most- traded currencies in Asia outside Japan. Ng forecasts the local currency will trade between S$1.4030 and S$1.4130 today.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support is where buy orders may be clustered, while resistance is where there may be sell orders.
Second Time
The Philippine peso fell, reversing earlier gains, after the government forecast weaker economic growth for the second time this year, citing higher oil prices.
The peso declined for a sixth day, after rising as much as 0.3 percent, after National Economic Development Authority Deputy Director-General Augusto Santos said gross domestic product may expand 5.5 percent to 6.4 percent this year, compared with a previous forecast 5.7 percent to 6.6 percent.
``It becomes less attractive to hold peso assets,'' said Joric Nazario, treasurer at Philippine Veterans Bank in Manila. The central bank ``will be reluctant to raise rates and the government will have to do more pump priming, more expenses may mean bigger deficits down the road.''
Malaysia's ringgit rose against the dollar on speculation recent declines were excessive and as U.S. stocks fell on concern credit losses at banks in the world's biggest economy were far from over.
The ringgit's relative strength index, a technical gauge, passed a key level last week, signaling a reversal in direction is due. Lehman Brothers Holdings Inc. may write down about $4 billion in credit losses in the third quarter and American International Group Inc. could be forced to raise more capital, analysts on Wall Street said yesterday.
Fall Excessive
The ringgit rose 0.1 percent to 3.3315 per dollar from 3.3350 at the close yesterday, according to data compiled by Bloomberg. The currency reached its lowest this year at 3.3515 on Aug. 18.
``We saw excessive weakening in the ringgit after the break of 3.3050 due mainly to dollar strength but there should be some consolidation in the dollar going forward,'' said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``Any further weakness in the ringgit is unlikely,'' he said, adding that the currency will trade between 3.3200 to 3.3400 against the dollar today.
The 14-day relative strength index reached 80.9 last week for the U.S. dollar versus the ringgit, according to data compiled by Bloomberg. A level above 70 suggests buying of the U.S. currency may have peaked.
`Drastic' Fluctuations
South Korean's won gained, halting an eight-day decline, after Vice Finance Minister Kim Dong Soo said today the government continues to watch foreign-exchange trading for ``drastic'' fluctuations. Bonds advanced.
The comment came after the won weakened below 1,050 to the dollar for the first time in almost seven weeks, signaling that central-bank officials bought Korea's currency to help stem inflation, said Park Hae Il, an options trader with Shinhan Bank in Seoul. The won fell 11 percent this year, the second-worst performer among Asia's 10 most-active currencies.
The currency gained 0.1 percent to 1,048.65 against the dollar, according to Seoul Money Brokerage Services Ltd.
Elsewhere, Indonesia's rupiah rose 0.1 percent to 9,183. Taiwan's dollar was little changed at NT$31.385 and Thailand's baht dropped 0.2 percent to 34.15. The Vietnamese dong advanced 0.3 percent to 16,630.
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
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Aug. 20 (Bloomberg) -- The Singapore dollar gained the most in a month after it held above a so-called support level for a third day and the U.S. dollar weakened. The Philippine peso fell after the government lowered its economic growth forecast.
Singapore's dollar, which is managed against a basket of currencies by the central bank, climbed from a six-month low after the euro rose 0.6 percent yesterday, the most since July 11. The support level at around S$1.42 represents the Singapore dollar's lows the past three days, according to data compiled by Bloomberg.
``Certainly the U.S. dollar has run out of gas after testing S$1.42,'' said Emmanuel Ng, an economist at Oversea- Chinese Banking Corp. in Singapore. ``The Singapore dollar is trading off its basket components. The euro gained.''
The Singapore dollar rose 0.5 percent, the most since July 15, to S$1.4097 against the U.S. dollar as of 12:06 p.m. in the city from S$1.4165 late yesterday, when it reached S$1.4202, the lowest since Feb. 14. The peso declined 0.5 percent to 45.710 to the U.S. dollar in Manila, according to Tullett Prebon Plc.
Singapore's dollar is the best performer among the 10 most- traded currencies in Asia outside Japan. Ng forecasts the local currency will trade between S$1.4030 and S$1.4130 today.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support is where buy orders may be clustered, while resistance is where there may be sell orders.
Second Time
The Philippine peso fell, reversing earlier gains, after the government forecast weaker economic growth for the second time this year, citing higher oil prices.
The peso declined for a sixth day, after rising as much as 0.3 percent, after National Economic Development Authority Deputy Director-General Augusto Santos said gross domestic product may expand 5.5 percent to 6.4 percent this year, compared with a previous forecast 5.7 percent to 6.6 percent.
``It becomes less attractive to hold peso assets,'' said Joric Nazario, treasurer at Philippine Veterans Bank in Manila. The central bank ``will be reluctant to raise rates and the government will have to do more pump priming, more expenses may mean bigger deficits down the road.''
Malaysia's ringgit rose against the dollar on speculation recent declines were excessive and as U.S. stocks fell on concern credit losses at banks in the world's biggest economy were far from over.
The ringgit's relative strength index, a technical gauge, passed a key level last week, signaling a reversal in direction is due. Lehman Brothers Holdings Inc. may write down about $4 billion in credit losses in the third quarter and American International Group Inc. could be forced to raise more capital, analysts on Wall Street said yesterday.
Fall Excessive
The ringgit rose 0.1 percent to 3.3315 per dollar from 3.3350 at the close yesterday, according to data compiled by Bloomberg. The currency reached its lowest this year at 3.3515 on Aug. 18.
``We saw excessive weakening in the ringgit after the break of 3.3050 due mainly to dollar strength but there should be some consolidation in the dollar going forward,'' said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``Any further weakness in the ringgit is unlikely,'' he said, adding that the currency will trade between 3.3200 to 3.3400 against the dollar today.
The 14-day relative strength index reached 80.9 last week for the U.S. dollar versus the ringgit, according to data compiled by Bloomberg. A level above 70 suggests buying of the U.S. currency may have peaked.
`Drastic' Fluctuations
South Korean's won gained, halting an eight-day decline, after Vice Finance Minister Kim Dong Soo said today the government continues to watch foreign-exchange trading for ``drastic'' fluctuations. Bonds advanced.
The comment came after the won weakened below 1,050 to the dollar for the first time in almost seven weeks, signaling that central-bank officials bought Korea's currency to help stem inflation, said Park Hae Il, an options trader with Shinhan Bank in Seoul. The won fell 11 percent this year, the second-worst performer among Asia's 10 most-active currencies.
The currency gained 0.1 percent to 1,048.65 against the dollar, according to Seoul Money Brokerage Services Ltd.
Elsewhere, Indonesia's rupiah rose 0.1 percent to 9,183. Taiwan's dollar was little changed at NT$31.385 and Thailand's baht dropped 0.2 percent to 34.15. The Vietnamese dong advanced 0.3 percent to 16,630.
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
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Gold May Gain in London Trading as Physical Demand Strengthens
By Rachel Graham
Aug. 20 (Bloomberg) -- Gold, little changed today in London, may advance on signs that physical demand for gold is gaining after the biggest weekly drop in five months. Silver, platinum and palladium rose.
Demand for gold rose 7 percent to 736 metric tons in the second quarter, compared with the first quarter, the World Gold Council said Aug. 13. This includes jewelry demand, which showed the first quarterly increase in a year. Gold is finding ``some support'' because of strong demand from the jewelry industry and investors in exchange-traded funds, UBS AG said yesterday.
``Physical demand is robust,'' Afshin Nabavi, a senior vice president at MKS Finance SA, one of Switzerland's four bullion refiners, said by phone from Geneva. ``We've not seen this level of demand for some time.''
Gold for immediate delivery fell 65 cents to $813.55 an ounce as of 9 a.m. in London. Futures for December rose $1.70, or 0.2 percent, to $818.50 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
Among other metals for immediate delivery, silver gained 5.99 cents, or 0.5 percent, to $13.29 an ounce and palladium added 75 cents, or 0.3 percent, to $287.25. Platinum rose $6.25, or 0.5 percent, to $1,365.75 an ounce.
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
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Aug. 20 (Bloomberg) -- Gold, little changed today in London, may advance on signs that physical demand for gold is gaining after the biggest weekly drop in five months. Silver, platinum and palladium rose.
Demand for gold rose 7 percent to 736 metric tons in the second quarter, compared with the first quarter, the World Gold Council said Aug. 13. This includes jewelry demand, which showed the first quarterly increase in a year. Gold is finding ``some support'' because of strong demand from the jewelry industry and investors in exchange-traded funds, UBS AG said yesterday.
``Physical demand is robust,'' Afshin Nabavi, a senior vice president at MKS Finance SA, one of Switzerland's four bullion refiners, said by phone from Geneva. ``We've not seen this level of demand for some time.''
Gold for immediate delivery fell 65 cents to $813.55 an ounce as of 9 a.m. in London. Futures for December rose $1.70, or 0.2 percent, to $818.50 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
Among other metals for immediate delivery, silver gained 5.99 cents, or 0.5 percent, to $13.29 an ounce and palladium added 75 cents, or 0.3 percent, to $287.25. Platinum rose $6.25, or 0.5 percent, to $1,365.75 an ounce.
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
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South African Rand Declines Against U.S. Dollar for Second Day
By Garth Theunissen
Aug. 20 (Bloomberg) -- South Africa's rand declined against the dollar for a second day.
The rand slipped as much as 0.6 percent to 7.7833 per dollar and was at 7.7526 by 9:23 a.m. in Johannesburg, from 7.7366 yesterday. It also weakened versus 11 of the 16 most-actively traded currencies monitored by Bloomberg.
South Africa's currency fell against the dollar and euro yesterday after the prices of gold and platinum slumped. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.
Gold fell below $800 an ounce on concern a stronger U.S. dollar will continue to erode its appeal as an alternative investment. Platinum slumped to an 11-month low on speculation weaker global economic growth will trim demand for vehicles, which use the metal in their pollution-cutting devices known as autocatalysts.
The rand declined even after a government report yesterday showed economic growth rebounded in the second quarter from the slowest pace in six years. Africa's biggest economy expanded an annualized 4.9 percent, from 2.1 percent in the first three months of the year, Pretoria-based Statistics South Africa said.
Government bonds fell, with the yield on South Africa's benchmark 13.5 percent security due September 2015 rising 8 basis points to 9.16 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net.
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Aug. 20 (Bloomberg) -- South Africa's rand declined against the dollar for a second day.
The rand slipped as much as 0.6 percent to 7.7833 per dollar and was at 7.7526 by 9:23 a.m. in Johannesburg, from 7.7366 yesterday. It also weakened versus 11 of the 16 most-actively traded currencies monitored by Bloomberg.
South Africa's currency fell against the dollar and euro yesterday after the prices of gold and platinum slumped. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.
Gold fell below $800 an ounce on concern a stronger U.S. dollar will continue to erode its appeal as an alternative investment. Platinum slumped to an 11-month low on speculation weaker global economic growth will trim demand for vehicles, which use the metal in their pollution-cutting devices known as autocatalysts.
The rand declined even after a government report yesterday showed economic growth rebounded in the second quarter from the slowest pace in six years. Africa's biggest economy expanded an annualized 4.9 percent, from 2.1 percent in the first three months of the year, Pretoria-based Statistics South Africa said.
Government bonds fell, with the yield on South Africa's benchmark 13.5 percent security due September 2015 rising 8 basis points to 9.16 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net.
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Yen Falls as China Stock Gains Boost Confidence in Carry Trades
By Kosuke Goto
Aug. 20 (Bloomberg) -- The yen fell against the dollar and euro as stock gains in Europe and Asia encouraged investors to buy higher-yielding assets funded in the Japanese currency.
The yen also declined against the Australian and New Zealand dollars, favorites of so-called carry trades, as China's benchmark stock index jumped the most since April. The British pound traded near a two-year low on speculation minutes of the Bank of England's last meeting, released today, will signal policy makers expect inflation to slow.
``It was a big surprise to see Chinese stocks surging,'' said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany's second-largest bank. ``This boosts risk appetite, prompting yen selling.''
The yen was at 110.07 against the U.S. currency at 8:20 a.m. in London, from 109.72 yesterday in New York. The Japanese currency traded at 162.26 per euro from 162.13. The dollar was at $1.4740 per euro, from $1.4776 yesterday, when it touched $1.4631, the strongest level since Feb. 20.
Japan's currency may fall to 110.30 per dollar and 162.50 a euro today, Muramatsu forecast.
The yen declined 0.3 percent to 78.51 against New Zealand's currency and 0.2 percent to 95.87 versus the Australian dollar, as China's CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 7.9 percent.
The pound fell against the dollar to $1.8616 from $1.8670. It slipped to $1.8512 on Aug. 15, the lowest level since July 2006.
`Trade War'
JPMorgan Chase & Co., the third-largest U.S. bank, predicts the Bank of England will lower its benchmark 5 percent interest rate as early as November, a change from its previous estimate of February 2009. The Bank of England releases its minutes at 9:30 a.m. in London.
The yuan climbed 0.16 percent to 6.8534 a dollar, the most in three weeks, after U.S. Treasury Secretary Henry Paulson urged China to let its currency appreciate to curb inflation.
Paulson said yesterday on a conference call hosted by Foreign Affairs magazine that measures in Congress to punish China for depressing the value of the currency might spark a ``trade war'' that would be unproductive.
The yen also weakened on speculation the Bank of Japan will keep interest rates at the lowest level among industrial nations over the coming year. The central bank cut its economic assessment, saying growth in the world's second-largest economy is ``sluggish'' for the first time in 10 years, according to its monthly economic report released in Tokyo today.
Bank of Japan
The Bank of Japan yesterday kept its target lending rate at 0.5 percent, supporting demand for carry trades. By comparison, New Zealand's benchmark rate is 8 percent, Australia's is 7.25 percent and the Federal Reserve's target is 2 percent.
In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the rates. The risk is that currency market moves can erase those profits.
Bank of America Corp. lowered its forecast for the yen as the bank pushed back its estimate for a BOJ interest-rate increase from April 2009 to July 2009. The currency will fall to 110 per dollar by year-end and to 112 by March 31, versus earlier forecasts of 108 and 109, Tomoko Fujii, Tokyo-based head of economics and strategy for Japan at the second-largest U.S. bank, wrote in a research note.
Rates, Risk Appetite
``The Japanese yen price action remains dominated by relative interest-rate expectations as well as risk appetite developments,'' she said. ``In our judgment, the Fed will probably begin to hike rates earlier and more aggressively than the BOJ.''
There is a 1 percent chance the BOJ will reduce borrowing costs to 0.25 percent by the end of September, according to calculations by JPMorgan Chase & Co. using overnight interest- rate swaps. The odds for a cut by year-end are 11 percent.
Any gains in the dollar may be limited by speculation credit-market losses at U.S. financial firms will deepen and as crude oil prices rose, raising concern that the nation's economic slowdown will be prolonged.
``The U.S. credit-market turmoil won't settle down any time soon,'' said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``Rising oil prices also weigh on the dollar. I am a dollar bear.''
The U.S. currency may decline to 109.10 yen and $1.4850 a euro today, Saito forecast.
Crude Oil
Crude oil fell, trading at $114.64 a barrel. The euro-dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they move in lockstep.
Lehman Brothers Holdings Inc., the largest underwriter of mortgage bonds before the subprime market collapsed, may write down about $4 billion in credit-related investments and other assets when it reports fiscal third-quarter earnings, JPMorgan Chase analysts said Aug. 18. Goldman Sachs Group Inc. said yesterday it's ``increasingly likely'' American International Group Inc., the biggest U.S. insurer by assets, will have to raise more capital.
Futures on the Chicago Board of Trade show a 20 percent chance the U.S. central bank will raise the 2 percent target rate for overnight lending between banks by at least a quarter-point by its Dec. 16 meeting, down from 37 percent odds a week earlier. Policy makers next meet Sept. 16.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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U.K. Pound Declines Against Dollar and Euro Before BOE Minutes
By Lukanyo Mnyanda and Andrew MacAskill
Aug. 20 (Bloomberg) -- The U.K. pound declined against the dollar and euro on speculation the minutes of the Bank of England's last policy meeting will show more policy makers favor cutting interest rates to revive the economy.
The currency traded near the lowest level in two years versus its U.S. counterpart and fell for a third day against the euro. Governor Mervyn King, who with six other members of the Monetary Policy Committee voted to keep interest rates on hold in July, said Aug. 13 there is a ``chill in the economic air.'' One member voted for an increase and another for a reduction last month.
``We have come to the view there could be one or two votes for a cut,'' said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. ``This could be a new catalyst triggering a new phase of sterling weakness.''
The pound was at $1.8598 by 9:14 a.m. in London, from $1.8670 yesterday. It slipped to $1.8512 on Aug. 15, the lowest level since July 2006. It was also at 79.31 pence per euro, from 79.14. It may drop to $1.80 by the end of the year, Mellor said.
The U.K. currency dropped yesterday after policy maker Tim Besley, who voted for higher rates at the July 10 meeting, wrote in the Sun newspaper that increases in food and energy prices will slow, allowing inflation to ease toward the central bank's 2 percent ceiling by the end of 2009. The minutes, showing how the panel voted Aug. 7, are due for release at 9:30 a.m. in London.
Britain's currency lost 3 percent against the dollar last week, its biggest five-day decline since the period through July 1, 2005, as traders bet falling house prices will exacerbate the economic slowdown as the threat of a recession looms. The central bank kept its benchmark rate at 5 percent on Aug. 7, as policy makers weighed the risk of accelerating inflation against the threat of a recession.
Gilts Slip
Gilts fell, with the yield on the 10-year bond rising 1 basis point to 4.59 percent. The 5 percent security due March 2018 slipped 0.07, or 70 pence per 1,000-pound ($1,862) face amount, to 103.10. The yield on the two-year gilt, which is more sensitive to the outlook for interest rates, climbed 2 basis points to 4.56 percent. Bond yields move inversely to prices.
The spread between U.K. government bonds and their German counterparts has narrowed as traders bet the end of a decade-long rally in the nation's housing market will persuade policy makers to cut interest rates. The 10-year gilt yielded 43 basis points more than the German bund, down from 69 basis points on Feb. 25, the widest this year.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
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Aug. 20 (Bloomberg) -- The U.K. pound declined against the dollar and euro on speculation the minutes of the Bank of England's last policy meeting will show more policy makers favor cutting interest rates to revive the economy.
The currency traded near the lowest level in two years versus its U.S. counterpart and fell for a third day against the euro. Governor Mervyn King, who with six other members of the Monetary Policy Committee voted to keep interest rates on hold in July, said Aug. 13 there is a ``chill in the economic air.'' One member voted for an increase and another for a reduction last month.
``We have come to the view there could be one or two votes for a cut,'' said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. ``This could be a new catalyst triggering a new phase of sterling weakness.''
The pound was at $1.8598 by 9:14 a.m. in London, from $1.8670 yesterday. It slipped to $1.8512 on Aug. 15, the lowest level since July 2006. It was also at 79.31 pence per euro, from 79.14. It may drop to $1.80 by the end of the year, Mellor said.
The U.K. currency dropped yesterday after policy maker Tim Besley, who voted for higher rates at the July 10 meeting, wrote in the Sun newspaper that increases in food and energy prices will slow, allowing inflation to ease toward the central bank's 2 percent ceiling by the end of 2009. The minutes, showing how the panel voted Aug. 7, are due for release at 9:30 a.m. in London.
Britain's currency lost 3 percent against the dollar last week, its biggest five-day decline since the period through July 1, 2005, as traders bet falling house prices will exacerbate the economic slowdown as the threat of a recession looms. The central bank kept its benchmark rate at 5 percent on Aug. 7, as policy makers weighed the risk of accelerating inflation against the threat of a recession.
Gilts Slip
Gilts fell, with the yield on the 10-year bond rising 1 basis point to 4.59 percent. The 5 percent security due March 2018 slipped 0.07, or 70 pence per 1,000-pound ($1,862) face amount, to 103.10. The yield on the two-year gilt, which is more sensitive to the outlook for interest rates, climbed 2 basis points to 4.56 percent. Bond yields move inversely to prices.
The spread between U.K. government bonds and their German counterparts has narrowed as traders bet the end of a decade-long rally in the nation's housing market will persuade policy makers to cut interest rates. The 10-year gilt yielded 43 basis points more than the German bund, down from 69 basis points on Feb. 25, the widest this year.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
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China to Widen Foreign Exchange Services in Beijing, Shanghai
By Judy Chen and Belinda Cao
Aug. 20 (Bloomberg) -- China will widen foreign exchange services for individuals in Beijing and Shanghai to meet rising demand for buying and selling currency, the government said today.
Trials in the two cities will let non-financial institutions offer foreign-currency services to individuals for the first time, the State Administration of Foreign Exchange.
The regulations will ``improve currency-exchange services to meet rising demand for these services by individuals,'' the administration said on its Web site today, without saying when the trials will begin or which institutions will be involved.
China's currency, known as the renminbi, cannot be freely converted, making it difficult for companies and individuals to take yuan in and out of the country. The government is easing restrictions on transactions to help slow the growth of foreign reserves which rose to a record $1.8 trillion at the end of June.
China approved new rules on Aug. 6, easing some controls on foreign currency management. It canceled a previous requirement for companies to transfer and sell foreign-currency earnings to banks.
The widening of foreign-currency services announced today means that non-Chinese people will be able to sell up to $500 worth of yuan a day. The limit will rise to $1,000 once individuals have passed beyond the country's customs checkpoints at airports, ports and other border controls, the statement said.
Shanghai, China's financial center, will allow approved non- banking institutions to provide such services in the city's Pudong district, according to a separate statement by the currency regulator distributed in the city today ahead of a news briefing.
Preparing for Expo
The trial services in the Pudong financial district will be a preparatory step for the World Expo that will take place in Shanghai in 2010, SAFE said in the statement.
Shanghai Zhangjiang ICE Foreign Exchange Ltd., a joint venture between Zhangjiang Group and International Currency Exchange (Europe) Plc, a UK-based private foreign exchange agency will be the first non-financial company allowed to offer the service, SAFE said.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net;
Read more...
Aug. 20 (Bloomberg) -- China will widen foreign exchange services for individuals in Beijing and Shanghai to meet rising demand for buying and selling currency, the government said today.
Trials in the two cities will let non-financial institutions offer foreign-currency services to individuals for the first time, the State Administration of Foreign Exchange.
The regulations will ``improve currency-exchange services to meet rising demand for these services by individuals,'' the administration said on its Web site today, without saying when the trials will begin or which institutions will be involved.
China's currency, known as the renminbi, cannot be freely converted, making it difficult for companies and individuals to take yuan in and out of the country. The government is easing restrictions on transactions to help slow the growth of foreign reserves which rose to a record $1.8 trillion at the end of June.
China approved new rules on Aug. 6, easing some controls on foreign currency management. It canceled a previous requirement for companies to transfer and sell foreign-currency earnings to banks.
The widening of foreign-currency services announced today means that non-Chinese people will be able to sell up to $500 worth of yuan a day. The limit will rise to $1,000 once individuals have passed beyond the country's customs checkpoints at airports, ports and other border controls, the statement said.
Shanghai, China's financial center, will allow approved non- banking institutions to provide such services in the city's Pudong district, according to a separate statement by the currency regulator distributed in the city today ahead of a news briefing.
Preparing for Expo
The trial services in the Pudong financial district will be a preparatory step for the World Expo that will take place in Shanghai in 2010, SAFE said in the statement.
Shanghai Zhangjiang ICE Foreign Exchange Ltd., a joint venture between Zhangjiang Group and International Currency Exchange (Europe) Plc, a UK-based private foreign exchange agency will be the first non-financial company allowed to offer the service, SAFE said.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net;
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China May Increase Copper Imports By 60% From June
By Li Xiaowei
Aug. 20 (Bloomberg) -- China's manufacturers, the world's largest copper consumers, may raise imports by as much as 60 percent from June after a price slump, trader Bayin Resources Co. said.
Imports of refined copper may jump to between 100,000 metric tons and 120,000 tons a month, Frank Zhou, deputy manager of Bayin's copper division, said today in an interview from Shanghai. Purchases fell to 75,707 tons in June, lower than the monthly average of 114,502 tons in the first half.
Copper futures in London has fallen 15 percent from last month's record of $8,940 a ton, amid concern a global economic slowdown would curb demand. China imported 23 percent less refined copper in the first six months from a year ago as demand from consumers such as appliance makers fell.
``There has reemerged a lot of appetite for London copper these days,'' Zhou said over the phone. ``Demand from these inquiring buyers is quite inelastic as they are users, not speculators.''
London-based Barclays Bank Plc holds a 15 percent stake in Bayin. Bayin traded 300,000 tons of copper and 200,000 tons of aluminum last year, according to its Web site.
Price Gap
A narrowing price gap between Chinese and international prices is making imports cheaper, Zhou said. The gap has dropped from historical highs in June.
Copper for three months delivery in London rose 0.3 percent to $7,596 a ton at 1:36 p.m. Shanghai time. Copper for November delivery climbed as much as 1,680 yuan, or 2.9 percent, to 58,930 yuan ($8,597) a ton on the Shanghai Futures Exchange. The most-active contract was at 58,580 yuan at 1:56 p.m. local time.
China's economic expansion has slowed for four quarters, prompting the government to put a bigger emphasis on maintaining growth and protecting jobs. Government statements last month dropped references to a ``tight'' monetary policy.
``As the Chinese economy appears to remain in a downturn, copper users are unlikely to buy unless there's a good bargain,'' Sheng Weimin, manager at Maike Futures Co., said today by phone from Shanghai.
China may consume 10 percent less copper this year because of credit tightening policies by the government, Maike, the country's largest copper importer, forecast in January.
The Asian nation accounts for 23 percent of the world's copper demand, which is estimated at 18.8 million tons, according to Barclays Capital, the investment banking unit of Barclays.
Copper prices may fall a further 10 percent to 15 percent in the short term amid economic growth concerns and weaker demand from China, UBS AG said Aug. 15.
To contact the reporter on this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net
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Crude Oil Trades Little Changed Before U.S. Inventory Report
By Grant Smith
Aug. 20 (Bloomberg) -- Crude oil traded little changed before a weekly U.S. government report on oil stockpiles, forecast to show that crude supplies expanded in the world's largest energy user.
Inventories of crude oil probably rose 1 million barrels in the week ended Aug. 15 from 296.5 million the previous week, according to a Bloomberg survey. Oil gave up earlier gains amid strengthening in the dollar, which yesterday touched its highest in six months, limiting the hedging appeal of commodities.
``We would not want to be long going into the numbers,'' said Edward Meir, an analyst at MF Global Ltd. in Connecticut. ``A set of bearish or in-line numbers could rapidly roll back much of yesterday's gains.''
Crude oil for September delivery was at $114.90 a barrel on the New York Mercantile Exchange at 8:51 a.m. London time, 37 cents higher, after gaining as much as 83 cents, or 0.7 percent, to $115.36 a barrel.
Yesterday, futures gained $1.66, or 1.5 percent, to settle at $114.53 a barrel. The September oil contract expires at the close of Nymex trading today.
The Energy Department is scheduled to release its report at 10:35 a.m. in Washington. U.S. supplies of gasoline probably fell a fourth week, by 3 million barrels last week from 202.8 million barrels the previous week, according to the median of 13 responses in a Bloomberg News survey of analysts.
The dollar was at $1.4753 against the euro, compared with $1.4776 yesterday, when it touched $1.4631, the strongest level since Feb. 20.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Aug. 20 (Bloomberg) -- Crude oil traded little changed before a weekly U.S. government report on oil stockpiles, forecast to show that crude supplies expanded in the world's largest energy user.
Inventories of crude oil probably rose 1 million barrels in the week ended Aug. 15 from 296.5 million the previous week, according to a Bloomberg survey. Oil gave up earlier gains amid strengthening in the dollar, which yesterday touched its highest in six months, limiting the hedging appeal of commodities.
``We would not want to be long going into the numbers,'' said Edward Meir, an analyst at MF Global Ltd. in Connecticut. ``A set of bearish or in-line numbers could rapidly roll back much of yesterday's gains.''
Crude oil for September delivery was at $114.90 a barrel on the New York Mercantile Exchange at 8:51 a.m. London time, 37 cents higher, after gaining as much as 83 cents, or 0.7 percent, to $115.36 a barrel.
Yesterday, futures gained $1.66, or 1.5 percent, to settle at $114.53 a barrel. The September oil contract expires at the close of Nymex trading today.
The Energy Department is scheduled to release its report at 10:35 a.m. in Washington. U.S. supplies of gasoline probably fell a fourth week, by 3 million barrels last week from 202.8 million barrels the previous week, according to the median of 13 responses in a Bloomberg News survey of analysts.
The dollar was at $1.4753 against the euro, compared with $1.4776 yesterday, when it touched $1.4631, the strongest level since Feb. 20.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Asia Session Recap
| Daily Forex Fundamentals | Written by Forex.com | Aug 20 08 05:48 GMT | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gold and 'Black Gold' helped to cool off the US Dollars recent win streak, as the EUR/USD peaked its upward climb just above 1.4800 at 1.4806 in early Asian trading. Although relatively better than expected ZEW data helped fuel the Euro as well, it seems that the strengthening in crude oil and gold was the prime catalyst in the EUR/USD move upward. However, as the Asia session wore on, the EUR/USD did fall from its highs to end the session just under 1.4770 as the short lived Euro rally seemed to fizzle a bit. EUR/JPY was choppy all session, stuck between 162.39 and 162.03 with no real direction. AUD/USD benefited early from the rally in gold and oil, as it looked strong early taking off from its lows of 0.8704 to touch a .8742 high. The Aussie elation was short lived however, as the pair slid to fresh lows of 0.8697 mid-session. The Aussie Dollar was up from the lows by about 20 pips as of this writing. The NZD/USD followed the same path, and was ultimately higher by 25 pips from the 0.7125 open. AUD/NZD was on a downward road all session, starting near 1.2235 and dipping below 1.2200 as London watched the sun rise. It is hard to believe that this pair was above 1.2900 on the first of this month. The vulnerable GBP/USD lost more ground, from 1.8675 to 1.8660 for the session ahead of the Bank of England's August minutes later at 8:30 GMT. Don't expect miracles here as UK politicians have been hapless in the wake of the Cable's collapse. Traders will seek an answer to when the BoE will lower interest rates as the minutes are read. USD/JPY moved a bit higher in subdued trading, and the range was a slow and tight 30 pips, with it about 10 pips above the 109.70 open as of this report. Be cognizant of the moves in oil and gold in the US, they have helped to guide this market…..
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 Technical Analysis
| Daily Forex Technicals | Written by Mizuho Corporate Bank | Aug 20 08 06:20 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||
EURUSD
Comment: A small 'bullish engulfing' candle yesterday here and something similar in a series of other currencies adds weight to our view that the Euro is trying to form a slow interim base against retracement support. For today we ought to hold above 1.4685, probably with a cautious upside probe to 1.4800/1.4850. Strategy: Attempt longs at 1.4765, adding to 1.4665; stop below 1.4600. Short term target 1.4800 and then 1.5000. Direction of Trade: → Chart Levels:
GBPUSD
Comment: Small signs that Cable is finding its feet with the first up-day after twelve consecutive down-days. The verdict? Could do better. Over the next fortnight we expect a messy attempt at basing followed by a bounce to 1.9000. Strategy: Attempt longs at 1.8635; stop below 1.8500. Short term target 1.8700, then 1.8800. Direction of Trade: → Chart Levels:
USDJPY
Comment: Slightly unsteady as we work in a sort of upward-sloping 'wedge' formation. We are still looking for signs of topping at the 110.00/110.50 pivotal chart area. A daily close below 109.25 might add a little bearish pressure. Strategy: Attempt shorts at 109.75, adding to 110.35; stop above 110.75. Short term target 109.55 then 108.55. Direction of Trade: → Chart Levels:
EUR/JPY
Comment: Retracing half of the previous big rally, holding clearly under the 'broadening top', and likely to move sideways today. Late this week or late this month we expect a drop to 158.00, and further out a slide to 152.00. Below here and the long term picture gets seriously interesting. Strategy: Sell at 162.25, adding to 163.65; stop above 164.00. Short term target 161.00/160.60, then 158.00. Direction of Trade: →↘ Chart Levels:
Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy. | |||||||||||||||||||||||||||||||||||||||||||||||||
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