(Adds company comments, rewrites throughout)
By Noriyuki Hirata
TOKYO, Aug 26 (Reuters) - Japan's Toshiba Corp and South Korea's Doosan Heavy Industries & Construction will work together to build nuclear reactors to keep pace with demand, sources close to the matter said on Tuesday.
Doosan would provide know-how on pressurised water reactors to Toshiba and Toshiba supplier IHI Corp . In return, Toshiba and its U.S. nuclear unit Westinghouse would use Doosan's equipment in nuclear plants, company sources said.
Doosan, which won an order from Westinghouse in June, is also expected to supply Westinghouse with equipment for nuclear plants in China, the sources said. IHI, which holds a 3 percent stake in Westinghouse, has been tapped to make pressure vessels for Toshiba and Westinghouse nuclear plants.
Toshiba and Doosan have agreed to discuss how to work together on establishing a supply chain for nuclear plants, but nothing has been decided, said Toshiba spokesman Ken Shinjo.
IHI also said that the three were in talks but that nothing was decided.
Toshiba hopes to win 33 orders for nuclear reactors worldwide by 2015, as concerns about global warming and rising fuel costs boost demand for nuclear energy worldwide.
It competes against General Electric Co , which has teamed up with Hitachi Ltd , and France's Areva , an ally of Mitsubishi Heavy Industries Ltd .
Shares of Toshiba closed down 0.8 percent at 640 yen and IHI closed down 3.1 percent at 191 yen, against the benchmark Nikkei average's .N225 0.8 percent fall. Doosan closed up 0.5 percent at 93,000 won per share, while the market fell 0.8 percent. (Additional reporting by Mayumi Negishi and Sachi Izumi; Editing by Chris Gallagher/Editing by Rory Channing)
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Tuesday, August 26, 2008
Wall St futures point to slight recovery; data eyed
* Futures for the Dow Jones industrial average DJc1, the S&P 500 SPc1 and the Nasdaq 100 NDc1 tick up 0.1-0.2 percent, pointing to a slight recovery on Wall Street after sharp falls on Monday.
* Retailer Big Lots Inc , which specialises in sales of excess inventory, is the only S&P 500 company scheduled to report.
* Also among companies in focus is Anadarko Petroleum which announced a $5 billion share repurchase programme. Its shares in Frankfurt traded 0.8 percent higher.
* Hewlett-Packard expects to close its $13.25 billion buy of Electronic Data Systems Corp on Tuesday, the Wall Street Journal reported.
* Case-Shiller home price index for June due at 1300 GMT.
* U.S. consumer confidence data and U.S. new homes data due at 1400 GMT.
* Crude oil futures CLc1 fall $1.35 a barrel to $113.73, and the dollar rises to a 6-month high against the euro. (Reporting by Sitaraman Shankar; Editing by David Cowell)
Read more...
* Retailer Big Lots Inc , which specialises in sales of excess inventory, is the only S&P 500 company scheduled to report.
* Also among companies in focus is Anadarko Petroleum which announced a $5 billion share repurchase programme. Its shares in Frankfurt traded 0.8 percent higher.
* Hewlett-Packard expects to close its $13.25 billion buy of Electronic Data Systems Corp on Tuesday, the Wall Street Journal reported.
* Case-Shiller home price index for June due at 1300 GMT.
* U.S. consumer confidence data and U.S. new homes data due at 1400 GMT.
* Crude oil futures CLc1 fall $1.35 a barrel to $113.73, and the dollar rises to a 6-month high against the euro
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European shares slip on weaker banks, commodities
* FTSEurofirst 300 falls 1.1 pct
* Oils, mining stocks slip, track weaker commodity prices
* U.S. consumer confidence, new homes data awaited
By Atul Prakash
LONDON, Aug 26 (Reuters) - European shares slipped on Tuesday as concerns about the global economic and financial sector outlook kept investors jumpy and business sentiment continued to slide.
At 0836 GMT, the FTSEurofirst 300 index of top European shares was down 1.1 percent at 1,156.43 points. The index lost 0.6 percent on Monday, when the UK stock market was closed for a holiday.
Tough market conditions were highlighted by a report showing German corporate sentiment fell by more than expected in August, dragged down by a sharp deterioration in companies' business expectations.
Weaker consumer spending led to a contraction of the German economy in the second quarter of this year for the first time since 2004 and household morale was poised to deteriorate further, data showed.
Banks were the heaviest-weighted losers on the FTSEurofirst 300, followed by energy and mining sectors that tracked weaker commodities prices.
Lloyds TSB shed more than 3 percent, Bank of Ireland fell 2.3 percent, Royal Bank of Scotland fell 2.3 percent and Standard Chartered declined 2.8 percent.
"There are too many banks and not enough business," said Justin Urquhart-Stewart, director at 7 Investment Management.
"More pain is also expected in the U.S. housing market with investors still waiting for the bottom," he added.
Investors await U.S. consumer confidence and new homes data later in the session for clearer market direction in the near term.
The FTSEurofirst 300 is down nearly 2 percent so far this month and is on track for its ninth month of losses in the last 10.
Across Europe, Britain's commodity-heavy FTSE 100 .FTSE was down 2 percent, Germany's DAX .GDAXI was down 0.4 percent and France's CAC .FCHI fell 1 percent.
MINERS TRACK METAL PRICES
Mining shares fell, tracking a retreat in Shanghai copper prices and other metals amid renewed concerns about Chinese demand and world economic growth.
Xstrata gave up 4.4 percent, Anglo American slipped 4.2 percent and Antofagasta dropped 3.8 percent.
The gloomy sentiment pulled Rio Tinto down more than 3 percent despite it posting better than expected results with underlying earnings up 55 percent.
Weaker crude oil prices, which fell sharply in the past sessions and traded below $115 a barrel, weighed on oil and energy shares.
BP , Royal Dutch Shell , Tullow Oil and BG Group fell between 2.3 and 3.5 percent.
Investors remained cautious in picking stocks, as the global economic outlook continued to be poor.
The International Monetary Fund has trimmed its world economic growth forecasts for this year and next, largely due to a marked worsening in its outlook for the euro zone, a G20 finance official told Reuters on Monday.
"Poor growth figures from the IMF is a another dose of realism for Europe. The Eurozone lags the U.S. and the UK and this is more evidence that there has been too much overspending and it is likely Merkel and Sarkozy will have to implement reform processes for things to start to improve," said Stewart.
Underlining difficult market conditions, data showed that German consumer sentiment deteriorated by more than expected heading into next month, hurt by concerns about the economic outlook and hitting a fresh 5-year low. (Additional reporting by Joanne Frearson; Editing by Quentin Bryar)
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* Oils, mining stocks slip, track weaker commodity prices
* U.S. consumer confidence, new homes data awaited
By Atul Prakash
LONDON, Aug 26 (Reuters) - European shares slipped on Tuesday as concerns about the global economic and financial sector outlook kept investors jumpy and business sentiment continued to slide.
At 0836 GMT, the FTSEurofirst 300 index of top European shares was down 1.1 percent at 1,156.43 points. The index lost 0.6 percent on Monday, when the UK stock market was closed for a holiday.
Tough market conditions were highlighted by a report showing German corporate sentiment fell by more than expected in August, dragged down by a sharp deterioration in companies' business expectations.
Weaker consumer spending led to a contraction of the German economy in the second quarter of this year for the first time since 2004 and household morale was poised to deteriorate further, data showed.
Banks were the heaviest-weighted losers on the FTSEurofirst 300, followed by energy and mining sectors that tracked weaker commodities prices.
Lloyds TSB shed more than 3 percent, Bank of Ireland fell 2.3 percent, Royal Bank of Scotland fell 2.3 percent and Standard Chartered declined 2.8 percent.
"There are too many banks and not enough business," said Justin Urquhart-Stewart, director at 7 Investment Management.
"More pain is also expected in the U.S. housing market with investors still waiting for the bottom," he added.
Investors await U.S. consumer confidence and new homes data later in the session for clearer market direction in the near term.
The FTSEurofirst 300 is down nearly 2 percent so far this month and is on track for its ninth month of losses in the last 10.
Across Europe, Britain's commodity-heavy FTSE 100 .FTSE was down 2 percent, Germany's DAX .GDAXI was down 0.4 percent and France's CAC .FCHI fell 1 percent.
MINERS TRACK METAL PRICES
Mining shares fell, tracking a retreat in Shanghai copper prices and other metals amid renewed concerns about Chinese demand and world economic growth.
Xstrata gave up 4.4 percent, Anglo American slipped 4.2 percent and Antofagasta dropped 3.8 percent.
The gloomy sentiment pulled Rio Tinto down more than 3 percent despite it posting better than expected results with underlying earnings up 55 percent.
Weaker crude oil prices, which fell sharply in the past sessions and traded below $115 a barrel, weighed on oil and energy shares.
BP , Royal Dutch Shell , Tullow Oil and BG Group fell between 2.3 and 3.5 percent.
Investors remained cautious in picking stocks, as the global economic outlook continued to be poor.
The International Monetary Fund has trimmed its world economic growth forecasts for this year and next, largely due to a marked worsening in its outlook for the euro zone, a G20 finance official told Reuters on Monday.
"Poor growth figures from the IMF is a another dose of realism for Europe. The Eurozone lags the U.S. and the UK and this is more evidence that there has been too much overspending and it is likely Merkel and Sarkozy will have to implement reform processes for things to start to improve," said Stewart.
Underlining difficult market conditions, data showed that German consumer sentiment deteriorated by more than expected heading into next month, hurt by concerns about the economic outlook and hitting a fresh 5-year low. (Additional reporting by Joanne Frearson; Editing by Quentin Bryar)
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Oil falls below $114 as dollar surges
By Alex Lawler
LONDON (Reuters) - Oil fell by more than $1 a barrel to below $114 on Tuesday as the U.S. dollar strengthened, countering concern that Hurricane Gustav could threaten oil installations in the Gulf of Mexico.
The dollar hit a six-month high against the euro on Tuesday after weak German data highlighted a flagging euro zone economy. Dollar strength can limit the appeal of oil and commodities as an inflation hedge.
"The dollar is going to be the main trading input until we have a more definite path on Gustav," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.
U.S. crude fell $1.71 to $113.40 a barrel by 0940 GMT, having dropped as far as $113.15 earlier in the session. London Brent crude was down $1.47 at $112.56.
Tropical Storm Gustav reached hurricane strength as it swirled through the central Caribbean and bore down on Haiti on Tuesday, the U.S. National Hurricane Center said.
A hurricane hunter aircraft reported the storm's top sustained winds were near 80 mph (130 kph) -- above hurricane strength of 74 mph (120 kph) -- as it approached southwest Haiti.
Oil has fallen sharply from a record high of $147.27 reached on July 11 in part due to evidence of a global slowdown in energy demand. It remains up about 15 percent so far this year.
Investors were also keeping an eye on tension between the West and Russia over Georgia. Russia's parliament urged the Kremlin on Monday to recognize two rebel regions of Georgia as independent states.
While the conflict in Georgia has led to some disruption in Azeri oil shipments through Georgia, analysts said the situation was having little influence on oil prices so far.
"Energy markets have not yet focused on what this latest escalation could mean for a potential disruption in energy supplies," said Edward Meir, analyst at MF Global, in a report.
"Until we get better clarity on this latter issue, we expect the price reverberations from this situation to be relatively contained."
(Additional reporting by Osamu Tsukimori and James Topham in Tokyo; editing by James Jukwey)
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LONDON (Reuters) - Oil fell by more than $1 a barrel to below $114 on Tuesday as the U.S. dollar strengthened, countering concern that Hurricane Gustav could threaten oil installations in the Gulf of Mexico.
The dollar hit a six-month high against the euro on Tuesday after weak German data highlighted a flagging euro zone economy. Dollar strength can limit the appeal of oil and commodities as an inflation hedge.
"The dollar is going to be the main trading input until we have a more definite path on Gustav," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.
U.S. crude fell $1.71 to $113.40 a barrel by 0940 GMT, having dropped as far as $113.15 earlier in the session. London Brent crude was down $1.47 at $112.56.
Tropical Storm Gustav reached hurricane strength as it swirled through the central Caribbean and bore down on Haiti on Tuesday, the U.S. National Hurricane Center said.
A hurricane hunter aircraft reported the storm's top sustained winds were near 80 mph (130 kph) -- above hurricane strength of 74 mph (120 kph) -- as it approached southwest Haiti.
Oil has fallen sharply from a record high of $147.27 reached on July 11 in part due to evidence of a global slowdown in energy demand. It remains up about 15 percent so far this year.
Investors were also keeping an eye on tension between the West and Russia over Georgia. Russia's parliament urged the Kremlin on Monday to recognize two rebel regions of Georgia as independent states.
While the conflict in Georgia has led to some disruption in Azeri oil shipments through Georgia, analysts said the situation was having little influence on oil prices so far.
"Energy markets have not yet focused on what this latest escalation could mean for a potential disruption in energy supplies," said Edward Meir, analyst at MF Global, in a report.
"Until we get better clarity on this latter issue, we expect the price reverberations from this situation to be relatively contained."
(Additional reporting by Osamu Tsukimori and James Topham in Tokyo; editing by James Jukwey)
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Wall Street futures point to slight recovery
LONDON (Reuters) - Futures for the Dow Jones industrial average, the S&P 500 and the Nasdaq 100 ticked up 0.1-0.2 percent on Tuesday, pointing to a slight recovery on Wall Street after sharp falls on Monday.
* Retailer Big Lots Inc , which specializes in sales of excess inventory, is the only S&P 500 company scheduled to report.
* Also among companies in focus is Anadarko Petroleum which announced a $5 billion share repurchase program. Its shares in Frankfurt traded 0.8 percent higher.
* Hewlett-Packard expects to close its $13.25 billion buy of Electronic Data Systems Corp on Tuesday, the Wall Street Journal reported.
* Case-Shiller home price index for June due at 9 a.m. EDT.
* U.S. consumer confidence data and U.S. new homes data due at 10 a.m. EDT.
* Crude oil futures fall $1.35 a barrel to $113.73, and the dollar rises to a 6-month high against the euro.
(Reporting by Sitaraman Shankar; Editing by David Cowell)
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* Retailer Big Lots Inc , which specializes in sales of excess inventory, is the only S&P 500 company scheduled to report.
* Also among companies in focus is Anadarko Petroleum which announced a $5 billion share repurchase program. Its shares in Frankfurt traded 0.8 percent higher.
* Hewlett-Packard expects to close its $13.25 billion buy of Electronic Data Systems Corp on Tuesday, the Wall Street Journal reported.
* Case-Shiller home price index for June due at 9 a.m. EDT.
* U.S. consumer confidence data and U.S. new homes data due at 10 a.m. EDT.
* Crude oil futures fall $1.35 a barrel to $113.73, and the dollar rises to a 6-month high against the euro.
(Reporting by Sitaraman Shankar; Editing by David Cowell)
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D.Boerse cuts computer trading fees, share slides
(Adds spokesman quote, analyst view, updates share price)
By Peter Starck
FRANKFURT, Aug 26 (Reuters) - German stock exchange operator Deutsche Boerse AG (DB1Gn.DE: Quote, Profile, Research, Stock Buzz), whose cash equities business Xetra is facing increased competition, said on Tuesday it would cut fees for algorithmic, or computer-driven, transactions.
The Boerse, which earns more from its derivatives trading platform Eurex and custody and settlement house Clearstream than from Xetra, said higher trading volumes were likely to offset some of the revenue lost from the trading and clearing fee cuts.
DZ Bank analyst Matthias Duerr said he expected a negative effect of at most 1 percent on Boerse's earnings per share.
Boerse's own stock, part of the EuroSTOXX50 index of top European shares, fell 1.9 percent to 59.48 euros by 1050 GMT, underperforming an index of the world's leading exchanges , which was down 1.1 percent.
"As of September 2008, a new pricing and discount model will apply for algorithmic trading," the Boerse said in a statement. The maximum discount rate would rise to 60 percent from 49 percent.
"Some ATP (automated trading programme) customers have said they would increase their Xetra order-flow if fees were lower. That's why we have taken this step," a Boerse spokesman told Reuters.
Long established exchanges such as the Boerse, NYSE Euronext (NYX.N: Quote, Profile, Research, Stock Buzz) and the London Stock Exchange (LSE) (LSE.L: Quote, Profile, Research, Stock Buzz) are competing for cash equities trading market share with start-ups such as Japanese Nomura's (8604.T: Quote, Profile, Research, Stock Buzz) Chi-X and Turquoise, the latter a rival platform sponsored by a group of leading global investment banks.
On Aug. 21, SWX Europe, the London-based securities exchange owned by SWX Swiss Exchange, announced a 30 percent cut in trading fees, effective October, following a 15 percent fee cut in April.
The LSE has also unveiled a new tariff model which reduces trading fees by about 10 percent.
In the second quarter of 2008, Deutsche Boerse's Xetra platform accounted for less than a fifth of group revenue and operating profit, while Eurex and Clearstream each delivered around 40 percent of revenue and more than a third of operating profit.
Algorithmic trading accounts for more than 40 percent of Xetra volumes, which the Boerse has said it expects will grow significantly. On Nomura's Chi-X, by comparison, such trading accounts for an estimated 90 percent of the action.
The Boerse said the discounts taking effect next month would reduce annual fee revenue by an estimated 35 million euros ($51.5 million), assuming unchanged volumes compared with the first half of this year.
"Due to the price sensitivity of trading and clearing participants, positive impacts on transaction volumes and correspondingly a large compensation of the price effects on sales revenues are expected," the Boerse said.
DZ Bank's Duerr saw the fee and clearing price adjustments as a move by Boerse to defend its position against alternative trading platforms.
The potential to increase liquidity was positive, he said, reiterating his "buy" recommendation and fair value of 104 euros for the Boerse share. (Additional reporting by Anika Lehmann; editing by David Holmes and Sophie Walker)
Read more...
By Peter Starck
FRANKFURT, Aug 26 (Reuters) - German stock exchange operator Deutsche Boerse AG (DB1Gn.DE: Quote, Profile, Research, Stock Buzz), whose cash equities business Xetra is facing increased competition, said on Tuesday it would cut fees for algorithmic, or computer-driven, transactions.
The Boerse, which earns more from its derivatives trading platform Eurex and custody and settlement house Clearstream than from Xetra, said higher trading volumes were likely to offset some of the revenue lost from the trading and clearing fee cuts.
DZ Bank analyst Matthias Duerr said he expected a negative effect of at most 1 percent on Boerse's earnings per share.
Boerse's own stock, part of the EuroSTOXX50 index of top European shares, fell 1.9 percent to 59.48 euros by 1050 GMT, underperforming an index of the world's leading exchanges , which was down 1.1 percent.
"As of September 2008, a new pricing and discount model will apply for algorithmic trading," the Boerse said in a statement. The maximum discount rate would rise to 60 percent from 49 percent.
"Some ATP (automated trading programme) customers have said they would increase their Xetra order-flow if fees were lower. That's why we have taken this step," a Boerse spokesman told Reuters.
Long established exchanges such as the Boerse, NYSE Euronext (NYX.N: Quote, Profile, Research, Stock Buzz) and the London Stock Exchange (LSE) (LSE.L: Quote, Profile, Research, Stock Buzz) are competing for cash equities trading market share with start-ups such as Japanese Nomura's (8604.T: Quote, Profile, Research, Stock Buzz) Chi-X and Turquoise, the latter a rival platform sponsored by a group of leading global investment banks.
On Aug. 21, SWX Europe, the London-based securities exchange owned by SWX Swiss Exchange, announced a 30 percent cut in trading fees, effective October, following a 15 percent fee cut in April.
The LSE has also unveiled a new tariff model which reduces trading fees by about 10 percent.
In the second quarter of 2008, Deutsche Boerse's Xetra platform accounted for less than a fifth of group revenue and operating profit, while Eurex and Clearstream each delivered around 40 percent of revenue and more than a third of operating profit.
Algorithmic trading accounts for more than 40 percent of Xetra volumes, which the Boerse has said it expects will grow significantly. On Nomura's Chi-X, by comparison, such trading accounts for an estimated 90 percent of the action.
The Boerse said the discounts taking effect next month would reduce annual fee revenue by an estimated 35 million euros ($51.5 million), assuming unchanged volumes compared with the first half of this year.
"Due to the price sensitivity of trading and clearing participants, positive impacts on transaction volumes and correspondingly a large compensation of the price effects on sales revenues are expected," the Boerse said.
DZ Bank's Duerr saw the fee and clearing price adjustments as a move by Boerse to defend its position against alternative trading platforms.
The potential to increase liquidity was positive, he said, reiterating his "buy" recommendation and fair value of 104 euros for the Boerse share. (Additional reporting by Anika Lehmann; editing by David Holmes and Sophie Walker)
Read more...
Copper down on firm dollar, awaits U.S. data
* Copper down almost 2 percent on firm dollar after Ifo data
* Demand weak, copper seen falling towards $7,000 a tonne
* Zinc drops over 3 percent on oversupply, seen lower (Corrects price to ... $1,600 in paragraph six) (Adds fresh comment/details, changes dateline PVS SHANGHAI)
By Anna Stablum
LONDON, Aug 26 (Reuters) - Rising stocks and a firmer U.S. dollar dampened sentiment in industrial metals on Tuesday, while investors awaited U.S. data for more clues about the health of the global economy and future demand.
"We are looking for more downside in copper, towards $7,000 per tonne very short term, until we see any signs of a pick up particularly in Chinese import buying," said analyst Gayle Berry at Barclays Capital.
London Metal Exchange copper for delivery in three months MCU3 fell $135 to $7,525 a tonne by 0932 GMT, after diving by 2.6 percent on Friday before a long weekend with London closed on Monday.
Zinc MZN3 shed 3.8 percent or $70 to $1,760 per tonne.
"We are still very bearish on zinc," Berry said, referring to ample supplies of the metal used to galvanise steel.
"Prices look likely to fall further to $1,550 ... $1,600 can turn out to be a good cost-support level," she added.
Last week, copper gained 3.8 percent, zinc rose 8.4 percent and nickel, lead and tin were up around 11 percent as the dollar eased amid an overall firmer dollar trend.
Rising stocks weighed on copper, up 3,100 tonnes to a six-month high of 166,900, up 52 percent since this year's low in May.
In Shanghai, rumours about large volumes of stock inflows from top copper producer Chile weighed on sentiment.
But Fairfax investment bank said in a note they expected a recovery in metals demand within China to soak up much surplus material, keeping prices supported.
"Renewed buying ... is now expected to draw stocks into China particularly for copper, copper concentrates, iron ore, ferrochrome and coal," it said.
FUTURE DEMAND
Worries about the global economy weighed on metals markets as demand was seen slowing on both sides of the Atlantic.
World stocks hit their lowest level in almost two years on Tuesday as a worsening German business mood and fresh concerns about financial firms triggered a sell-off in risky assets, lifting the dollar to a 2008 high. [ID:nLQ174419]
The Munich-based Ifo economic research institute said its business climate index fell to a lower-than-expected 94.8 this month from 97.5 in July, adding to growing evidence that growth outside the United States is deteriorating and accelerating the euro's tumble.
Investors would look out for the U.S. Redbook at 1255 GMT, U.S. new home sales for July at 1400 GMT, U.S. consumer confidence for August 1400 GMT and U.S. FOMC minutes from August meeting at 1800 GMT.
In industry news, global miner Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz) posted a better-than-expected 55 percent jump in first-half profit, boosted by its 2007 takeover of Alcan and strong Chinese demand.
"While the equity markets are currently focused on downside risks, we believe there are potential offsets on the upside based on continued strength in commodity demand, low inventory levels and a supply side which continues to face multiple constraints," Chairman Paul Skinner said in a statement.
China's economic growth could slip below 9 percent, after years of double-digit rises, if the government does not make drastic policy changes, JPMorgan Chase's chief China economist Frank Gong said.[ID:nSEO11602]
At the same time China's hunger for metals was seen lasting with the country in urgent need to build up infrastructure such as rail transport, he said.
Tin MSN3 was higher at $21,000 against last quote on Friday at $20,900/20,950, while aluminium MAL3 shed $15 to $2,765 and nickel MNI3 fell to $20,150 versus $20,800.
Three-month lead MPB3 eased to $1,860 from Friday's $1,885.
China's lead consumption growth may slow in the second half of this year as weaker domestic demand for electric bicycles offsets increased export orders for car and truck batteries. [ID:nHKG20033]
(Additional reporting by Alfred Cang, editing by Michael Roddy)
Read more...
* Demand weak, copper seen falling towards $7,000 a tonne
* Zinc drops over 3 percent on oversupply, seen lower (Corrects price to ... $1,600 in paragraph six) (Adds fresh comment/details, changes dateline PVS SHANGHAI)
By Anna Stablum
LONDON, Aug 26 (Reuters) - Rising stocks and a firmer U.S. dollar dampened sentiment in industrial metals on Tuesday, while investors awaited U.S. data for more clues about the health of the global economy and future demand.
"We are looking for more downside in copper, towards $7,000 per tonne very short term, until we see any signs of a pick up particularly in Chinese import buying," said analyst Gayle Berry at Barclays Capital.
London Metal Exchange copper for delivery in three months MCU3 fell $135 to $7,525 a tonne by 0932 GMT, after diving by 2.6 percent on Friday before a long weekend with London closed on Monday.
Zinc MZN3 shed 3.8 percent or $70 to $1,760 per tonne.
"We are still very bearish on zinc," Berry said, referring to ample supplies of the metal used to galvanise steel.
"Prices look likely to fall further to $1,550 ... $1,600 can turn out to be a good cost-support level," she added.
Last week, copper gained 3.8 percent, zinc rose 8.4 percent and nickel, lead and tin were up around 11 percent as the dollar eased amid an overall firmer dollar trend.
Rising stocks weighed on copper, up 3,100 tonnes to a six-month high of 166,900, up 52 percent since this year's low in May.
In Shanghai, rumours about large volumes of stock inflows from top copper producer Chile weighed on sentiment.
But Fairfax investment bank said in a note they expected a recovery in metals demand within China to soak up much surplus material, keeping prices supported.
"Renewed buying ... is now expected to draw stocks into China particularly for copper, copper concentrates, iron ore, ferrochrome and coal," it said.
FUTURE DEMAND
Worries about the global economy weighed on metals markets as demand was seen slowing on both sides of the Atlantic.
World stocks hit their lowest level in almost two years on Tuesday as a worsening German business mood and fresh concerns about financial firms triggered a sell-off in risky assets, lifting the dollar to a 2008 high. [ID:nLQ174419]
The Munich-based Ifo economic research institute said its business climate index fell to a lower-than-expected 94.8 this month from 97.5 in July, adding to growing evidence that growth outside the United States is deteriorating and accelerating the euro's
Investors would look out for the U.S. Redbook at 1255 GMT, U.S. new home sales for July at 1400 GMT, U.S. consumer confidence for August 1400 GMT and U.S. FOMC minutes from August meeting at 1800 GMT.
In industry news, global miner Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz) posted a better-than-expected 55 percent jump in first-half profit, boosted by its 2007 takeover of Alcan and strong Chinese demand.
"While the equity markets are currently focused on downside risks, we believe there are potential offsets on the upside based on continued strength in commodity demand, low inventory levels and a supply side which continues to face multiple constraints," Chairman Paul Skinner said in a statement.
China's economic growth could slip below 9 percent, after years of double-digit rises, if the government does not make drastic policy changes, JPMorgan Chase's chief China economist Frank Gong said.[ID:nSEO11602]
At the same time China's hunger for metals was seen lasting with the country in urgent need to build up infrastructure such as rail transport, he said.
Tin MSN3 was higher at $21,000 against last quote on Friday at $20,900/20,950, while aluminium MAL3 shed $15 to $2,765 and nickel MNI3 fell to $20,150 versus $20,800.
Three-month lead MPB3 eased to $1,860 from Friday's $1,885.
China's lead consumption growth may slow in the second half of this year as weaker domestic demand for electric bicycles offsets increased export orders for car and truck batteries. [ID:nHKG20033]
(Additional reporting by Alfred Cang, editing by Michael Roddy)
Read more...
Coach approves $1 bln buyback
(Adds share rise, performance during the year)
LOS ANGELES, Aug 26 (Reuters) - Handbag maker Coach Inc's board authorized a $1 billion stock buyback after completing its previous $ 1 billion authorization, the company said on Monday.
The repurchase would represent more than 10 percent of outstanding shares at the company, and its stock rose about 3 percent to $27.17 in after hours trade. It had dropped nearly 7 percent on the New York Stock Exchange.
Like other retailers and consumer goods makers, the weak U.S. economy has pressured Coach results, and last month it said it was extremely cautious, predicting consumer malaise would continue well into 2009. Shares of the luxury goods company are down 35 percent in the last year. (Reporting by Peter Henderson; Editing by Derek Caney)
Read more...
LOS ANGELES, Aug 26 (Reuters) - Handbag maker Coach Inc's board authorized a $1 billion stock buyback after completing its previous $ 1 billion authorization, the company said on Monday.
The repurchase would represent more than 10 percent of outstanding shares at the company, and its stock rose about 3 percent to $27.17 in after hours trade. It had dropped nearly 7 percent on the New York Stock Exchange.
Like other retailers and consumer goods makers, the weak U.S. economy has pressured Coach results, and last month it said it was extremely cautious, predicting consumer malaise would continue well into 2009. Shares of the luxury goods company are down 35 percent in the last year. (Reporting by Peter Henderson; Editing by Derek Caney)
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Siemens will soon say what job cuts will cost-CEO
(Adds detail, background)
FRANKFURT, Aug 26 (Reuters) - German engineering group Siemens , which plans to slash around 17,000 jobs worldwide, will soon be able to specify how much the job cuts will cost, its chief executive said.
Peter Loescher told journalists late on Monday that talks with labour representatives had been constructive.
Siemens' works council is due to meet on Tuesday and Wednesday to approve the plans designed to speed up cost savings and boost margins.
"It is our wish to book the major parts of provisions for restructuring this (fiscal) year," Loescher said in remarks embargoed for release on Tuesday.
Costs for job cuts are expected to be in a range of mid-to high triple-digit millions of euros.
Siemens could post a net loss in its fourth quarter, which ends on Sept 30, on account of the provisions and due to the sale of its telecoms unit SEN.
But proceeds from the sales of its automotive business VDO are expected to compensate negative impacts for the entire year.
One uncertainty for Siemens remains. The group is being investigated worldwide over suspicious payments to win contracts.
Siemens may face fines or even be banned from bidding for public contracts in the United States once the U.S. Securities and Exchange Commission SEC and the U.S. Department of Justice conclude their investigation.
"We are in talks," Loescher said. "But we are not in charge of the process."
Loescher, who took the helm at Siemens in mid-2007, has promised to slim down the giant company, which makes products ranging from light bulbs and high-speed trains to medical equipment and turbines, so it can catch up with more profitable rivals such as General Electric .
So far, Loescher has reshaped the company into three major sectors aligned with global growth trends -- energy, industry and health care. He has also scaled down the management board to eight from 11 posts. (Reporting by Alexander Huebner; editing by Sue Thomas)
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FRANKFURT, Aug 26 (Reuters) - German engineering group Siemens , which plans to slash around 17,000 jobs worldwide, will soon be able to specify how much the job cuts will cost, its chief executive said.
Peter Loescher told journalists late on Monday that talks with labour representatives had been constructive.
Siemens' works council is due to meet on Tuesday and Wednesday to approve the plans designed to speed up cost savings and boost margins.
"It is our wish to book the major parts of provisions for restructuring this (fiscal) year," Loescher said in remarks embargoed for release on Tuesday.
Costs for job cuts are expected to be in a range of mid-to high triple-digit millions of euros.
Siemens could post a net loss in its fourth quarter, which ends on Sept 30, on account of the provisions and due to the sale of its telecoms unit SEN.
But proceeds from the sales of its automotive business VDO are expected to compensate negative impacts for the entire year.
One uncertainty for Siemens remains. The group is being investigated worldwide over suspicious payments to win contracts.
Siemens may face fines or even be banned from bidding for public contracts in the United States once the U.S. Securities and Exchange Commission SEC and the U.S. Department of Justice conclude their investigation.
"We are in talks," Loescher said. "But we are not in charge of the process."
Loescher, who took the helm at Siemens in mid-2007, has promised to slim down the giant company, which makes products ranging from light bulbs and high-speed trains to medical equipment and turbines, so it can catch up with more profitable rivals such as General Electric .
So far, Loescher has reshaped the company into three major sectors aligned with global growth trends -- energy, industry and health care. He has also scaled down the management board to eight from 11 posts. (Reporting by Alexander Huebner; editing by Sue Thomas)
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Morgan Stanley, Standard Chartered
Aug 26 (Reuters) - The following financial services industry appointments were announced on Tuesday. To inform us of other job changes, please e-mail moves@thomsonreuters.com.
MORGAN STANLEY
Morgan Stanley appointed Gautam Bhandari to head Morgan Stanley Infrastructure in India, Middle East and Sub-Saharan Africa. He was earlier with Morgan Stanley's investment banking division in New York. Bhandari and his team will be based out of Mumbai.
STANDARD CHARTERED
Standard Chartered Bank has appointed Todd McDonald as Global Head of FX Electronic Pricing and Trading.
METLIFE
MetLife Assurance Ltd, an affiliate of MetLife Inc, a life insurer and provider of employee benefits, appointed Dan DeKeizer, a senior MetLife executive, as chief executive officer of its UK pension liability transfer business.
HERMES
Hermes, a pension fund investment manager, appointed Daniel Roff as head of risk and quantitative solutions (fixed income) and Stuart Woodyatt as director of operational risk.
CAVENDISH CAPITAL ADVISORS
Cavendish Capital Advisors LLP said Simon Ramery has joined the firm this month as a Partner. He joined the company from the investment banking business of Kaupthing Bank. (Compiled by Santosh Nadgir in Bangalore)
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MORGAN STANLEY
Morgan Stanley appointed Gautam Bhandari to head Morgan Stanley Infrastructure in India, Middle East and Sub-Saharan Africa. He was earlier with Morgan Stanley's investment banking division in New York. Bhandari and his team will be based out of Mumbai.
STANDARD CHARTERED
Standard Chartered Bank has appointed Todd McDonald as Global Head of FX Electronic Pricing and Trading.
METLIFE
MetLife Assurance Ltd, an affiliate of MetLife Inc, a life insurer and provider of employee benefits, appointed Dan DeKeizer, a senior MetLife executive, as chief executive officer of its UK pension liability transfer business.
HERMES
Hermes, a pension fund investment manager, appointed Daniel Roff as head of risk and quantitative solutions (fixed income) and Stuart Woodyatt as director of operational risk.
CAVENDISH CAPITAL ADVISORS
Cavendish Capital Advisors LLP said Simon Ramery has joined the firm this month as a Partner. He joined the company from the investment banking business of Kaupthing Bank. (Compiled by Santosh Nadgir in Bangalore)
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Germany Ifo Business Confidence for August: Summary (Table)
By Kristian Siedenburg
Aug. 26 (Bloomberg) -- Following is a summary of the August German business confidence report from the Munich-based Ifo:
===============================================================================
Aug. July June May April March Feb. Jan. Dec.
2008 2008 2008 2008 2008 2008 2008 2008 2007
===============================================================================
[bn:WBTKR=GRIFPBUS:IND] Business climate [] 94.8 97.5 101.2 103.4 102.3 104.7 104.0 103.3 103.0
3-mo. average 97.8 100.7 102.3 103.5 103.7 104.0 103.4 103.5 103.7
[bn:WBTKR=GRIFPCA:IND] Current [] 103.2 105.6 108.2 110.0 108.3 111.4 110.3 107.9 108.1
[bn:WBTKR=GRIFPEX:IND] Expectations [] 87.0 89.9 94.6 97.1 96.6 98.3 98.0 98.9 98.2
----------------Business Climate by Sector--------------------
Trade & Industry -11.1 -5.8 1.6 6.0 3.9 8.5 7.2 5.9 5.3
Manufacturing -6.8 2.0 8.0 14.8 13.2 17.7 16.1 17.3 16.6
Construction -26.9 -23.4 -19.0 -20.3 -20.0 -21.8 -25.0 -16.9 -20.4
Wholesale trade -5.4 -7.3 1.9 3.9 1.5 7.6 5.8 3.2 3.2
Retail trade -21.4 -20.5 -6.8 -4.6 -11.0 -1.0 1.2 -17.4 -15.1
===============================================================================
NOTE: Index levels are based at 2000=100. Ifo polls about 7,000
companies which can characterize their situation as good, more
favorable, unchanged or more unfavorable. The current business
situation is the difference between the good and poor responses
while the expectations is the difference between the more
favorable and more unfavorable responses. The business climate
index is the average of the current and expectations components.
SOURCE: Institut fuer Wirtschaftsforschung (Ifo) - Munich
To contact the reporter on this story: Kristian Siedenburg in Budapest at ksiedenburg@bloomberg.net
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Denmark Lowers Growth Forecasts for This Year, 2009
By Tasneem Brogger
Aug. 26 (Bloomberg) -- Denmark's government cut its forecast for expansion this year and next after its economy became the first in Europe to slip into a recession since the credit crisis started.
The economy will grow 1.1 percent on average this year and 0.5 percent in 2009, the Finance Ministry in Copenhagen said in a statement published on its Web site today. That compares with a May estimate for 2008 growth of 1.2 percent and 0.7 percent in 2009. The economy grew 1.7 percent in 2007.
Denmark fell into a recession in the first quarter after house-price declines and soaring food and energy costs undermined consumer demand. Since then, consumer confidence has slumped to an 18-year low, inflation is at an 18-year high and the central bank has had to bail out a commercial lender for the first time in 15 years after its loans to the property market failed.
``The government's painting a picture of an economy that's really stepping on the brakes,'' Steen Bocian, head of global economic research at Danske Bank A/S, said in a note to clients. ``It's not exactly an uplifting picture for the coming years.''
Growth is slowing as inflation accelerates. The government raised its estimate for inflation this year to 3.5 percent from previously 3.3 percent. Inflation will be 2.7 percent in 2009, compared with a May forecast for 2.6 percent.
The central bank can't use policy to stabilize prices or demand as its sole mandate is to keep the krone in a 2.25 percent band against the euro. The bank last raised the key lending rate on July 3, tracking the European Central Bank and bringing the rate to a seven-year high of 4.6 percent.
The government also raised its estimate for expenditure this year to 1.6 percent compared with previously 1.3 percent. It cut its estimate for spending next year to 1.1 percent from 1.2 percent earlier.
``The fiscal policy will help prod the economy forward a little,'' Niels Roenholt, an economist at Jyske Bank A/S, said in a note to clients.
The government plans to borrow 30.1 billion kroner ($5.9 billion) in 2009. That compares with no borrowing requirement this year and a financing need of 3.1 billion kroner in 2007.
The government's budget surplus will narrow to 3.6 percent of the economy this year from 4.8 percent in 2007. The surplus will shrink to 3 percent in 2009, the government estimates.
To contact the reporters on this story: Tasneem Brogger in Copenhagen at tbrogger@bloomberg.net;
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Aug. 26 (Bloomberg) -- Denmark's government cut its forecast for expansion this year and next after its economy became the first in Europe to slip into a recession since the credit crisis started.
The economy will grow 1.1 percent on average this year and 0.5 percent in 2009, the Finance Ministry in Copenhagen said in a statement published on its Web site today. That compares with a May estimate for 2008 growth of 1.2 percent and 0.7 percent in 2009. The economy grew 1.7 percent in 2007.
Denmark fell into a recession in the first quarter after house-price declines and soaring food and energy costs undermined consumer demand. Since then, consumer confidence has slumped to an 18-year low, inflation is at an 18-year high and the central bank has had to bail out a commercial lender for the first time in 15 years after its loans to the property market failed.
``The government's painting a picture of an economy that's really stepping on the brakes,'' Steen Bocian, head of global economic research at Danske Bank A/S, said in a note to clients. ``It's not exactly an uplifting picture for the coming years.''
Growth is slowing as inflation accelerates. The government raised its estimate for inflation this year to 3.5 percent from previously 3.3 percent. Inflation will be 2.7 percent in 2009, compared with a May forecast for 2.6 percent.
The central bank can't use policy to stabilize prices or demand as its sole mandate is to keep the krone in a 2.25 percent band against the euro. The bank last raised the key lending rate on July 3, tracking the European Central Bank and bringing the rate to a seven-year high of 4.6 percent.
The government also raised its estimate for expenditure this year to 1.6 percent compared with previously 1.3 percent. It cut its estimate for spending next year to 1.1 percent from 1.2 percent earlier.
``The fiscal policy will help prod the economy forward a little,'' Niels Roenholt, an economist at Jyske Bank A/S, said in a note to clients.
The government plans to borrow 30.1 billion kroner ($5.9 billion) in 2009. That compares with no borrowing requirement this year and a financing need of 3.1 billion kroner in 2007.
The government's budget surplus will narrow to 3.6 percent of the economy this year from 4.8 percent in 2007. The surplus will shrink to 3 percent in 2009, the government estimates.
To contact the reporters on this story: Tasneem Brogger in Copenhagen at tbrogger@bloomberg.net;
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Asean Ministers Gather to Discuss Trade, Economic Prospects
By Shamim Adam
Aug. 26 (Bloomberg) -- Southeast Asian trade ministers are meeting this week to find ways to boost linkages and advance talks with some of their biggest economic partners as they seek to form a European Union-styled community.
Officials from the Association of Southeast Asian Nations will hold discussions with their counterparts from Japan, China, South Korea, India, Australia and New Zealand in Singapore starting tomorrow. They will meet with business leaders today.
Southeast Asian nations last year agreed to open up their markets further in a bid to create an economic zone modeled after the EU, without a common currency, by 2015. The group has said that it needs to improve its competitiveness as China and India, the world's two fastest-growing major economies, attract an increasing chunk of global investment.
``To gain our share of investments and jobs, Asean needs to become a well-integrated community,'' Singapore Prime Minister Lee Hsien Loong said today. ``We have to continue strengthening our economic foundations, reducing tariff and non-tariff barriers and simplifying business regulations.''
The 10-member group attracted over $60 billion of foreign direct investment in 2007, Lee said. That's up from more than $40 billion the year before. Still, China alone attracted about $83 billion of foreign direct investment last year.
``Foreign investments are critical to all Asean countries because we rely on them to create jobs, to bring in new technology and to open up access to markets around the world,'' Lee said.
India Talks
The region's ministers will attempt to conclude free-trade talks with India's Kamal Nath this week, said former Asean secretary-general Ong Keng Yong, whose term ended last year.
An accord between India, the world's second-most populous country, and Asean has been delayed repeatedly because of disagreement over tariff cuts.
``All the big issues have been negotiated and agreed upon,'' Ong said in an interview with Bloomberg Television in Singapore yesterday. ``We have some loose nuts and bolts to tighten up and I believe this meeting here in Singapore between the Asean and Indian ministers will settle this last bit.''
The group is also pursuing agreements with Australia and New Zealand, China and South Korea to bring down barriers to trade as part of efforts to develop what it calls an Asean Economic Community.
``These agreements are important,'' Singapore's Lee said. ``They enhance market access for our products and services. Such agreements also lay the foundation for us to forge stronger links with the other Asian economies.''
China Trade
China signed a limited free-trade-zone agreement with Asean in July 2005, and Southeast Asian trade with China reached $203 billion last year. It will gradually eliminate levies on about 7,000 commodities from Asean by 2010, covering 93 percent of China's imports from the region.
Southeast Asia's leaders should find ways to help companies become more effective as the region faces rising costs and slowing economic growth, said Robert Yap, chairman of the Asean Business Advisory Council.
Crude oil reached a record $147.27 on July 11, and rice, wheat and palm oil surged to unprecedented levels earlier this year, leading to higher prices for consumers and companies. The U.S. housing recession that has roiled financial markets is hurting Asian exports and threatening expansion in a region the Asian Development Bank says will account for more than a fifth of global growth this year.
``The sentiment of businesses today isn't good,'' Yap told Bloomberg Television today. ``Cost is a pressure. That has created a lot of challenges for businesses operating in Asean.''
Asean includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam. Formed in 1967, it has a combined gross domestic product of more than $1.1 trillion and a population of about 570 million.
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
Read more...
Aug. 26 (Bloomberg) -- Southeast Asian trade ministers are meeting this week to find ways to boost linkages and advance talks with some of their biggest economic partners as they seek to form a European Union-styled community.
Officials from the Association of Southeast Asian Nations will hold discussions with their counterparts from Japan, China, South Korea, India, Australia and New Zealand in Singapore starting tomorrow. They will meet with business leaders today.
Southeast Asian nations last year agreed to open up their markets further in a bid to create an economic zone modeled after the EU, without a common currency, by 2015. The group has said that it needs to improve its competitiveness as China and India, the world's two fastest-growing major economies, attract an increasing chunk of global investment.
``To gain our share of investments and jobs, Asean needs to become a well-integrated community,'' Singapore Prime Minister Lee Hsien Loong said today. ``We have to continue strengthening our economic foundations, reducing tariff and non-tariff barriers and simplifying business regulations.''
The 10-member group attracted over $60 billion of foreign direct investment in 2007, Lee said. That's up from more than $40 billion the year before. Still, China alone attracted about $83 billion of foreign direct investment last year.
``Foreign investments are critical to all Asean countries because we rely on them to create jobs, to bring in new technology and to open up access to markets around the world,'' Lee said.
India Talks
The region's ministers will attempt to conclude free-trade talks with India's Kamal Nath this week, said former Asean secretary-general Ong Keng Yong, whose term ended last year.
An accord between India, the world's second-most populous country, and Asean has been delayed repeatedly because of disagreement over tariff cuts.
``All the big issues have been negotiated and agreed upon,'' Ong said in an interview with Bloomberg Television in Singapore yesterday. ``We have some loose nuts and bolts to tighten up and I believe this meeting here in Singapore between the Asean and Indian ministers will settle this last bit.''
The group is also pursuing agreements with Australia and New Zealand, China and South Korea to bring down barriers to trade as part of efforts to develop what it calls an Asean Economic Community.
``These agreements are important,'' Singapore's Lee said. ``They enhance market access for our products and services. Such agreements also lay the foundation for us to forge stronger links with the other Asian economies.''
China Trade
China signed a limited free-trade-zone agreement with Asean in July 2005, and Southeast Asian trade with China reached $203 billion last year. It will gradually eliminate levies on about 7,000 commodities from Asean by 2010, covering 93 percent of China's imports from the region.
Southeast Asia's leaders should find ways to help companies become more effective as the region faces rising costs and slowing economic growth, said Robert Yap, chairman of the Asean Business Advisory Council.
Crude oil reached a record $147.27 on July 11, and rice, wheat and palm oil surged to unprecedented levels earlier this year, leading to higher prices for consumers and companies. The U.S. housing recession that has roiled financial markets is hurting Asian exports and threatening expansion in a region the Asian Development Bank says will account for more than a fifth of global growth this year.
``The sentiment of businesses today isn't good,'' Yap told Bloomberg Television today. ``Cost is a pressure. That has created a lot of challenges for businesses operating in Asean.''
Asean includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam. Formed in 1967, it has a combined gross domestic product of more than $1.1 trillion and a population of about 570 million.
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
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Polish July Retail Sales Rise Faster Than Expected
By Dorota Bartyzel
Aug. 26 (Bloomberg) -- Polish retail sales rose faster than expected in July and the unemployment rate dropped to the lowest in 17 years, handing the central bank more reason to boost interest rates again.
Sales rose an annual 14.3 percent, compared with an advance of 14.2 percent in June, the Warsaw-based Central Statistical Office reported today. That topped the 14 percent median forecast of 14 economists in a Bloomberg survey. On the month, sales were up 1.8 percent. The jobless rate fell to 9.4 percent from 9.6 percent in June, the lowest since July 1991, the office also said.
Rate setters have indicated inflationary pressure may persist as Poles are buying more goods after their salaries grew an average 10 percent in two years. The central bank-led Monetary Policy Council has lifted borrowing costs 2 percentage points since April 2007 as the inflation rate more than doubled.
``Retail sales have remained strong, suggesting that consumer demand will remain the lynchpin of the stability of our economic growth,'' said Marcin Mrowiec, an economist at Bank Pekao in Warsaw. ``The declining unemployment rate will keep a lot of pressure on wages.''
After the last meeting on rates, policy makers also said they want to see more information to assess the impact of the global economic slowdown on local growth, which the government estimates will slow to 5.5 percent this year from 6.6 percent in 2007.
GDP Report
A report on second-quarter gross domestic product growth is due to be released on Aug. 29. The economy expanded 6.1 percent in the first quarter.
``The growth will be little lower in the second quarter than in the first one,'' said Halina Dmochowska, the vice chairwoman of the Central Statistical Office, at a press conference in Warsaw, according to PAP newswire.
Monetary policy makers, who start their two-day meeting today, will probably keep the key rate unchanged at 6 percent, according to all 17 economists in the Bloomberg survey. A rate decision will be announced tomorrow.
The zloty traded at 3.311 per euro at 10:55, little changed from earlier in the morning and down from 3.302 yesterday.
To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.netMaciej Martewicz in Warsaw at mmartewicz@bloomberg.net
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Aug. 26 (Bloomberg) -- Polish retail sales rose faster than expected in July and the unemployment rate dropped to the lowest in 17 years, handing the central bank more reason to boost interest rates again.
Sales rose an annual 14.3 percent, compared with an advance of 14.2 percent in June, the Warsaw-based Central Statistical Office reported today. That topped the 14 percent median forecast of 14 economists in a Bloomberg survey. On the month, sales were up 1.8 percent. The jobless rate fell to 9.4 percent from 9.6 percent in June, the lowest since July 1991, the office also said.
Rate setters have indicated inflationary pressure may persist as Poles are buying more goods after their salaries grew an average 10 percent in two years. The central bank-led Monetary Policy Council has lifted borrowing costs 2 percentage points since April 2007 as the inflation rate more than doubled.
``Retail sales have remained strong, suggesting that consumer demand will remain the lynchpin of the stability of our economic growth,'' said Marcin Mrowiec, an economist at Bank Pekao in Warsaw. ``The declining unemployment rate will keep a lot of pressure on wages.''
After the last meeting on rates, policy makers also said they want to see more information to assess the impact of the global economic slowdown on local growth, which the government estimates will slow to 5.5 percent this year from 6.6 percent in 2007.
GDP Report
A report on second-quarter gross domestic product growth is due to be released on Aug. 29. The economy expanded 6.1 percent in the first quarter.
``The growth will be little lower in the second quarter than in the first one,'' said Halina Dmochowska, the vice chairwoman of the Central Statistical Office, at a press conference in Warsaw, according to PAP newswire.
Monetary policy makers, who start their two-day meeting today, will probably keep the key rate unchanged at 6 percent, according to all 17 economists in the Bloomberg survey. A rate decision will be announced tomorrow.
The zloty traded at 3.311 per euro at 10:55, little changed from earlier in the morning and down from 3.302 yesterday.
To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.netMaciej Martewicz in Warsaw at mmartewicz@bloomberg.net
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European Market Recap: European Bonds Rally on Weak IFO, Euro Plunges
European Market Recap: European Bonds Rally on Weak IFO, Euro Plunges
26 Agustus 2008 16:34
(CEP News) -European bond markets rallied after business confidence in Europe's largest economy declined much further than expected in August, sending yields lower and the Euro plunging to a six-month low against the US dollar.
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26 Agustus 2008 16:34
(CEP News) -European bond markets rallied after business confidence in Europe's largest economy declined much further than expected in August, sending yields lower and the Euro plunging to a six-month low against the US dollar.
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Drop in Construction Caused German Economy to Shrink
By Christian Vits
Aug. 26 (Bloomberg) -- German companies cut investment in equipment and construction in the second quarter, causing Europe's biggest economy to shrink for the first time in almost four years.
Building investment dropped 3.5 percent from the previous quarter, investment in plant and machinery fell 0.5 percent and consumer spending decreased 0.7 percent, the Federal Statistics Office in Wiesbaden said today. Gross domestic product fell a seasonally adjusted 0.5 percent from the first quarter, when it rose 1.3 percent, the office said, confirming an estimate from Aug. 14. That's the biggest drop since the second quarter of 1998.
The stronger euro and slower global growth have damped demand for German goods just as faster inflation erodes spending power at home. The second-quarter contraction was exacerbated by companies bringing forward investment in construction due to unusually mild weather in the first three months of the year.
``The economy is loosing steam significantly as exports and investments show,'' said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. ``We expect a longer-term economic weakness and don't see a broad-based recovery in 2009.''
The government forecasts that the pace of expansion will slow to 1.7 percent this year and 1.2 percent in 2009 from 2.5 percent in 2007. ``The growth dynamic will moderate in coming months,'' the Economy Ministry said in a statement last week.
In the year, the economy grew 1.7 percent when adjusted for the number of working days. Expansion in the first quarter was revised down from an initially reported 1.5 percent.
Global Slowdown
Growth is slowing around the world after oil and food prices rose to records and the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit.
The economy of the 15 nations sharing the euro contracted 0.2 percent in the three months through June, its first decline since monetary union a decade ago, the European Union's statistics office said on Aug. 14.
German exports fell 0.2 percent in the second quarter from the previous three months, when they rose 2.1 percent, today's report showed. Imports dropped 1.3 percent from the first quarter, when they increased 3.2 percent.
Consumer confidence in Germany dropped to the lowest in more than five years as soaring energy prices sapped purchasing power and the economic outlook deteriorated, the Nuremberg-based market- research company GfK said today.
`Particularly Weak'
Economic growth will be ``particularly weak'' through the third quarter, European Central Bank President Jean-Claude Trichet said on Aug. 7. The ECB last month raised its key interest rate to 4.25 percent, a seven-year high, to curb inflation.
German consumer prices rose 3.5 percent in July from a year earlier, up from 3.4 percent the previous month.
While oil prices have retreated 20 percent from a record $147.27 a barrel reached on July 11, they are still almost 60 percent higher than a year ago. The euro, which rose to a record $1.6038 on July 15, has gained 8 percent in the past 12 months.
Second-quarter profit at Sixt AG, Germany's largest car- rental operator, fell 6.1 percent because of higher financing costs, the company said this week. Sixt predicted pretax earnings this year will fall as much as 16 percent.
The benchmark DAX share index dropped 16 percent in the past year and German factory orders fell for a seventh month in June.
Linos AG, a German maker of optical equipment, said last week it no longer expects 2008 profit and sales to rise, citing postponed orders and lower semiconductor equipment sales.
Emerging Markets
Some German companies are trying to offset falling western European and U.S. orders by expanding in eastern Europe, oil- exporting countries and emerging Asia.
Siemens AG, Europe's largest engineering company, last month reported third-quarter earnings that beat analyst estimates on increased orders for power plants and generator upgrades in Russia and China. Siemens said on Aug. 5 that it will get 10 billion euros ($15.5 billion) of annual orders from China by 2010 as the country boosts spending on utilities and transport networks.
Still, economic expansion in Asia and parts of Europe may not offset weaker global growth. ``Even in emerging markets we see a significant easing in activity,'' said Joerg Lueschow, an economist at WestLB in Dusseldorf. ``We face a global, cyclical slowdown.''
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
Read more...
Aug. 26 (Bloomberg) -- German companies cut investment in equipment and construction in the second quarter, causing Europe's biggest economy to shrink for the first time in almost four years.
Building investment dropped 3.5 percent from the previous quarter, investment in plant and machinery fell 0.5 percent and consumer spending decreased 0.7 percent, the Federal Statistics Office in Wiesbaden said today. Gross domestic product fell a seasonally adjusted 0.5 percent from the first quarter, when it rose 1.3 percent, the office said, confirming an estimate from Aug. 14. That's the biggest drop since the second quarter of 1998.
The stronger euro and slower global growth have damped demand for German goods just as faster inflation erodes spending power at home. The second-quarter contraction was exacerbated by companies bringing forward investment in construction due to unusually mild weather in the first three months of the year.
``The economy is loosing steam significantly as exports and investments show,'' said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. ``We expect a longer-term economic weakness and don't see a broad-based recovery in 2009.''
The government forecasts that the pace of expansion will slow to 1.7 percent this year and 1.2 percent in 2009 from 2.5 percent in 2007. ``The growth dynamic will moderate in coming months,'' the Economy Ministry said in a statement last week.
In the year, the economy grew 1.7 percent when adjusted for the number of working days. Expansion in the first quarter was revised down from an initially reported 1.5 percent.
Global Slowdown
Growth is slowing around the world after oil and food prices rose to records and the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit.
The economy of the 15 nations sharing the euro contracted 0.2 percent in the three months through June, its first decline since monetary union a decade ago, the European Union's statistics office said on Aug. 14.
German exports fell 0.2 percent in the second quarter from the previous three months, when they rose 2.1 percent, today's report showed. Imports dropped 1.3 percent from the first quarter, when they increased 3.2 percent.
Consumer confidence in Germany dropped to the lowest in more than five years as soaring energy prices sapped purchasing power and the economic outlook deteriorated, the Nuremberg-based market- research company GfK said today.
`Particularly Weak'
Economic growth will be ``particularly weak'' through the third quarter, European Central Bank President Jean-Claude Trichet said on Aug. 7. The ECB last month raised its key interest rate to 4.25 percent, a seven-year high, to curb inflation.
German consumer prices rose 3.5 percent in July from a year earlier, up from 3.4 percent the previous month.
While oil prices have retreated 20 percent from a record $147.27 a barrel reached on July 11, they are still almost 60 percent higher than a year ago. The euro, which rose to a record $1.6038 on July 15, has gained 8 percent in the past 12 months.
Second-quarter profit at Sixt AG, Germany's largest car- rental operator, fell 6.1 percent because of higher financing costs, the company said this week. Sixt predicted pretax earnings this year will fall as much as 16 percent.
The benchmark DAX share index dropped 16 percent in the past year and German factory orders fell for a seventh month in June.
Linos AG, a German maker of optical equipment, said last week it no longer expects 2008 profit and sales to rise, citing postponed orders and lower semiconductor equipment sales.
Emerging Markets
Some German companies are trying to offset falling western European and U.S. orders by expanding in eastern Europe, oil- exporting countries and emerging Asia.
Siemens AG, Europe's largest engineering company, last month reported third-quarter earnings that beat analyst estimates on increased orders for power plants and generator upgrades in Russia and China. Siemens said on Aug. 5 that it will get 10 billion euros ($15.5 billion) of annual orders from China by 2010 as the country boosts spending on utilities and transport networks.
Still, economic expansion in Asia and parts of Europe may not offset weaker global growth. ``Even in emerging markets we see a significant easing in activity,'' said Joerg Lueschow, an economist at WestLB in Dusseldorf. ``We face a global, cyclical slowdown.''
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
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Bank of England May Cut Rates as U.K. Economy Slumps
By Jennifer Ryan and Svenja O'Donnell
Aug. 26 (Bloomberg) -- Bank of England policy makers may cut U.K. interest rates this year to protect the economy from recession even as inflation breaches the government target by the widest margin ever, according to a survey of economists.
Half of economists in a Bloomberg News survey on Aug. 22 forecast a rate reduction before the end of 2008, up from 1-in-4 in a poll on Aug. 8. The bank has held its benchmark rate at 5 percent since April as the inflation rate climbed to 4.4 percent in July, more than double the 2 percent target.
Policy makers, who have been weighing the threat of inflation against risks of a recession, may tip toward the need to prop up growth after the economy unexpectedly stalled in the second quarter. Governor Mervyn King said the U.K. faces a ``painful adjustment'' as expansion slows to tame prices.
``They will have to get off that fence and start cutting,'' said Grant Lewis, an economist at Daiwa Securities SMBC Europe in London and a former U.K. Treasury official. ``After inflation peaks in September, the bank's dilemma will get easier, and they will end up having to be pretty aggressive.'' He forecasts a rate cut in November.
The U.K.'s longest stretch of economic growth in more than a century ended as business investment deteriorated the most since 1985 and household spending contracted for the first time in three years, the government statistics office said on Aug. 22. Economists had expected a 0.1 percent increase.
Survey Results
Twelve of 24 economists polled by Bloomberg News last week say the key rate will drop to at least 4.75 percent by the end of the year. That compares with seven of 28 economists when the survey was conducted at the beginning of the month.
Minutes published Aug. 21 covering the August decision for no change in the key rate showed a three-way split in the nine-member panel, the second such division in as many months. Timothy Besley preferred an increase to tame price growth, while David Blanchflower wanted a cut to guard against inflation slowing too far below the target.
Economists brought forward their expectations for a rate cut after the bank published quarterly forecasts on Aug. 13 showing inflation will dip below the 2 percent goal in two years if interest rates remain unchanged.
``The British economy is going through a difficult and painful adjustment,'' King said as he delivered the forecasts. He said output will be ``broadly flat,'' meaning ``there is a possibility of a quarter or two of negative growth.''
Deputy Governor Charles Bean said in an interview with the British Broadcasting Corporation published yesterday that the credit crisis ``will drag on for some considerable time.''
Dropping Pound
Recent reports have sparked a 6.7 percent drop in the pound this month against the dollar, the worst monthly decline since October 1992, when it lost 12 percent.
Some economists are sticking to forecasts for no change in rates this year. They argue that cutting rates while inflation quickens may tell wage bargainers and companies setting prices that the bank isn't focused on meeting its inflation mandate.
King said Aug. 13 a ``reasonable person'' would expect price gains ``to remain high for a while,'' and that the consumer-price index would peak at around 5 percent. Scottish & Southern Energy Plc and E.ON AG's British unit said last week they would charge customers more for power and gas to offset rising wholesale costs.
``A cut seems unwise,'' said Jeavon Lolay, an economist at Lloyds TSB Bank Plc in London. ``Until we're sure that this hump in inflation is out of the way and it's not going to lead to second-round effects, rates should remain on hold.'' He forecasts no change in the benchmark through the end of 2009.
Housing Market
A recession, along with the worst housing-market downturn in more than a quarter of a century and rising joblessness, may be enough to squeeze household consumption and keep price increases from sticking.
Bank of America Corp. economist Matthew Sharratt cut his forecast for U.K. rates last week. He now expects reductions starting this year and the benchmark rate to fall to 3.5 percent by the end of next year, compared with a previous call for rates at 4 percent by the third quarter next year.
``The risk of a mild recession is around 30 percent,'' Sharratt wrote in a research note on Aug. 22. ``The Bank of England will have to come to the rescue in coming months despite concerns over the near-term inflation profile.''
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.netSvenja O'Donnell in London at sodonnell@bloomberg.net
Read more...
Aug. 26 (Bloomberg) -- Bank of England policy makers may cut U.K. interest rates this year to protect the economy from recession even as inflation breaches the government target by the widest margin ever, according to a survey of economists.
Half of economists in a Bloomberg News survey on Aug. 22 forecast a rate reduction before the end of 2008, up from 1-in-4 in a poll on Aug. 8. The bank has held its benchmark rate at 5 percent since April as the inflation rate climbed to 4.4 percent in July, more than double the 2 percent target.
Policy makers, who have been weighing the threat of inflation against risks of a recession, may tip toward the need to prop up growth after the economy unexpectedly stalled in the second quarter. Governor Mervyn King said the U.K. faces a ``painful adjustment'' as expansion slows to tame prices.
``They will have to get off that fence and start cutting,'' said Grant Lewis, an economist at Daiwa Securities SMBC Europe in London and a former U.K. Treasury official. ``After inflation peaks in September, the bank's dilemma will get easier, and they will end up having to be pretty aggressive.'' He forecasts a rate cut in November.
The U.K.'s longest stretch of economic growth in more than a century ended as business investment deteriorated the most since 1985 and household spending contracted for the first time in three years, the government statistics office said on Aug. 22. Economists had expected a 0.1 percent increase.
Survey Results
Twelve of 24 economists polled by Bloomberg News last week say the key rate will drop to at least 4.75 percent by the end of the year. That compares with seven of 28 economists when the survey was conducted at the beginning of the month.
Minutes published Aug. 21 covering the August decision for no change in the key rate showed a three-way split in the nine-member panel, the second such division in as many months. Timothy Besley preferred an increase to tame price growth, while David Blanchflower wanted a cut to guard against inflation slowing too far below the target.
Economists brought forward their expectations for a rate cut after the bank published quarterly forecasts on Aug. 13 showing inflation will dip below the 2 percent goal in two years if interest rates remain unchanged.
``The British economy is going through a difficult and painful adjustment,'' King said as he delivered the forecasts. He said output will be ``broadly flat,'' meaning ``there is a possibility of a quarter or two of negative growth.''
Deputy Governor Charles Bean said in an interview with the British Broadcasting Corporation published yesterday that the credit crisis ``will drag on for some considerable time.''
Dropping Pound
Recent reports have sparked a 6.7 percent drop in the pound this month against the dollar, the worst monthly decline since October 1992, when it lost 12 percent.
Some economists are sticking to forecasts for no change in rates this year. They argue that cutting rates while inflation quickens may tell wage bargainers and companies setting prices that the bank isn't focused on meeting its inflation mandate.
King said Aug. 13 a ``reasonable person'' would expect price gains ``to remain high for a while,'' and that the consumer-price index would peak at around 5 percent. Scottish & Southern Energy Plc and E.ON AG's British unit said last week they would charge customers more for power and gas to offset rising wholesale costs.
``A cut seems unwise,'' said Jeavon Lolay, an economist at Lloyds TSB Bank Plc in London. ``Until we're sure that this hump in inflation is out of the way and it's not going to lead to second-round effects, rates should remain on hold.'' He forecasts no change in the benchmark through the end of 2009.
Housing Market
A recession, along with the worst housing-market downturn in more than a quarter of a century and rising joblessness, may be enough to squeeze household consumption and keep price increases from sticking.
Bank of America Corp. economist Matthew Sharratt cut his forecast for U.K. rates last week. He now expects reductions starting this year and the benchmark rate to fall to 3.5 percent by the end of next year, compared with a previous call for rates at 4 percent by the third quarter next year.
``The risk of a mild recession is around 30 percent,'' Sharratt wrote in a research note on Aug. 22. ``The Bank of England will have to come to the rescue in coming months despite concerns over the near-term inflation profile.''
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.netSvenja O'Donnell in London at sodonnell@bloomberg.net
Read more...
U.K. July Mortgage Approvals Hold Close to Decade Low
By Jennifer Ryan and Brian Swint
Aug. 26 (Bloomberg) -- U.K. mortgage approvals held close to the lowest in at least 11 years in July as property values slumped, a report by the British Bankers' Association showed.
Banks granted 22,448 loans for house purchase, down 65 percent from a year earlier, the London-based BBA, which represents the biggest U.K. banks, said today in a statement. The reading is up from 22,369 in June, the lowest since records began in 1997. The value of mortgages fell to 3.2 billion pounds ($5.8 billion), the least since 1998, from 3.3 billion pounds.
The U.K. property market, which tripled in value in the decade ending last year, is going through the biggest downturn since the early 1990s as banks rein in lending. Bank of England Deputy Governor Charles Bean said last week that the credit crisis will ``drag on for some considerable time.''
``It would be premature to think that the housing market will now start to recover, because overall approval activity continues to be very low,'' David Dooks, director of statistics at the BBA, said in the statement.
The pound extended declines against the dollar. The British currency traded at $1.8337 at 10:53 a.m. in London, from $1.8532 yesterday in New York.
Approvals for re-mortgaging fell 21 percent from a year earlier, today's report showed. Growth in unsecured borrowing slowed to 74 million pounds from 266 million pounds.
U.K. banks have curtailed lending while their writedowns and credit losses from the collapse of the U.S. subprime mortgage market climb above $500 billion.
Standstill
The credit squeeze and the fastest inflation in more than a decade brought economic growth to a standstill in the second quarter, ending the nation's longest stretch of economic growth in a century.
Prime Minister Gordon Brown has pledged to unveil measures to revive the economy next month, while Chancellor of the Exchequer Alistair Darling on Aug. 5 suggested he's considering whether to trim taxes on house purchases.
``While July's slight increase could be the first sign of a stabilization, activity levels are still very low,'' Ann O'Kelly, economic and market analyst at Citigroup Inc., said in a research note.
Residential property prices fell 8.8 percent in July from a year earlier, the most in at least a quarter century, mortgage lender HBOS Plc said on Aug. 7.
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.netBrian Swint in London at bswint@bloomberg.net.
Read more...
Aug. 26 (Bloomberg) -- U.K. mortgage approvals held close to the lowest in at least 11 years in July as property values slumped, a report by the British Bankers' Association showed.
Banks granted 22,448 loans for house purchase, down 65 percent from a year earlier, the London-based BBA, which represents the biggest U.K. banks, said today in a statement. The reading is up from 22,369 in June, the lowest since records began in 1997. The value of mortgages fell to 3.2 billion pounds ($5.8 billion), the least since 1998, from 3.3 billion pounds.
The U.K. property market, which tripled in value in the decade ending last year, is going through the biggest downturn since the early 1990s as banks rein in lending. Bank of England Deputy Governor Charles Bean said last week that the credit crisis will ``drag on for some considerable time.''
``It would be premature to think that the housing market will now start to recover, because overall approval activity continues to be very low,'' David Dooks, director of statistics at the BBA, said in the statement.
The pound extended declines against the dollar. The British currency traded at $1.8337 at 10:53 a.m. in London, from $1.8532 yesterday in New York.
Approvals for re-mortgaging fell 21 percent from a year earlier, today's report showed. Growth in unsecured borrowing slowed to 74 million pounds from 266 million pounds.
U.K. banks have curtailed lending while their writedowns and credit losses from the collapse of the U.S. subprime mortgage market climb above $500 billion.
Standstill
The credit squeeze and the fastest inflation in more than a decade brought economic growth to a standstill in the second quarter, ending the nation's longest stretch of economic growth in a century.
Prime Minister Gordon Brown has pledged to unveil measures to revive the economy next month, while Chancellor of the Exchequer Alistair Darling on Aug. 5 suggested he's considering whether to trim taxes on house purchases.
``While July's slight increase could be the first sign of a stabilization, activity levels are still very low,'' Ann O'Kelly, economic and market analyst at Citigroup Inc., said in a research note.
Residential property prices fell 8.8 percent in July from a year earlier, the most in at least a quarter century, mortgage lender HBOS Plc said on Aug. 7.
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.netBrian Swint in London at bswint@bloomberg.net.
Read more...
German Recession Looms as Business, Consumer Confidence Drop
By Simone Meier
Aug. 26 (Bloomberg) -- German business and consumer confidence fell more than economists forecast, heightening concern that Europe's largest economy may be slipping into a recession.
The Munich-based Ifo institute's business climate index, based on a survey of 7,000 executives, dropped to a three-year low of 94.8 from 97.5 in July. Consumer sentiment slumped to the lowest level in five years, according to Nuremberg-based market research company GfK AG. The euro and bond yields fell.
Germany's economy contracted in the second quarter and may fail to grow in the third. While oil prices have receded from a record $147.27 a barrel, they're still up 60 percent over the past year, crimping companies' spending power just as the euro's appreciation and the U.S. housing slump weigh on exports.
``The economy will barely grow in the third quarter,'' said Gregor Eder, an economist at Dresdner Bank AG in Frankfurt. ``If oil prices remain at the current level or increase, we wouldn't be able to avoid a recession in Germany.''
Ifo's gauge of business expectations dropped to 87, the lowest since February 1993, when Germany was experiencing the worst recession of the past two decades. A measure of current conditions eased to 103.2 from 105.7.
The economy contracted 0.5 percent in the three months through June as construction slumped and companies and households reduced spending, the Federal Statistics Office confirmed today. Exports also fell.
The euro dropped more than a cent after the Ifo report to $1.4597 and yields on 10-year German bonds fell 5 basis points.
ECB Rates
The chances of the European Central Bank cutting interest rates are growing, Ifo economist Gernot Nerb said. The ECB last month raised its key rate by 25 basis points to 4.25 percent to fight inflation.
The rate increase ``was certainly not helpful,'' Nerb said in an interview with Bloomberg Television. ``In the current environment, it would be better if they'' lowered borrowing costs. ``It's difficult to say whether the worst is behind us.''
Investors raised bets that the ECB's next move will be a rate reduction, Eonia forward contracts show. The yield on the March contract fell to 4.11 percent today from 4.61 percent on July 21.
While the German government has maintained its forecast for growth of 1.7 percent this year after 2.5 percent in 2007, the Berlin-based BDB banking association said on Aug. 20 the economy may barely expand in the second half of the year.
Oil, Euro
Arcandor AG, Germany's largest department-store operator, on Aug. 13 reported a loss for the quarter through June and reduced its 2009 earnings forecast. Daimler AG, the world's second-largest luxury carmaker, said Aug. 6 it plans to cut production by 45,000 vehicles by the end of the year. The Stuttgart-based company had already lowered its full-year earnings forecast.
In the economy of the 15 euro nations, manufacturing and service industries contracted for a third straight month in August and confidence in the economic outlook last month dropped the most since the Sept. 11 terrorist attacks in 2001.
The price of crude has dropped 9 percent over the past month to around $114 a barrel and the euro has retreated from an all- time high of $1.6038 on July 15. Some companies are also benefiting from demand in faster-growing economies in Asia and eastern Europe.
Hochtief AG, Germany's largest builder, on Aug. 14 raised its full-year earnings forecasts on increasing demand for construction and mining work. SAP AG, the world's largest maker of business- management software, last month raised its full-year earnings forecast on increasing orders.
Still, ``the airbag effect of lower oil prices and a weaker exchange rate hasn't kicked in,'' said Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich. ``We see a recession risk of 70 percent this year.''
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
Read more...
Aug. 26 (Bloomberg) -- German business and consumer confidence fell more than economists forecast, heightening concern that Europe's largest economy may be slipping into a recession.
The Munich-based Ifo institute's business climate index, based on a survey of 7,000 executives, dropped to a three-year low of 94.8 from 97.5 in July. Consumer sentiment slumped to the lowest level in five years, according to Nuremberg-based market research company GfK AG. The euro and bond yields fell.
Germany's economy contracted in the second quarter and may fail to grow in the third. While oil prices have receded from a record $147.27 a barrel, they're still up 60 percent over the past year, crimping companies' spending power just as the euro's appreciation and the U.S. housing slump weigh on exports.
``The economy will barely grow in the third quarter,'' said Gregor Eder, an economist at Dresdner Bank AG in Frankfurt. ``If oil prices remain at the current level or increase, we wouldn't be able to avoid a recession in Germany.''
Ifo's gauge of business expectations dropped to 87, the lowest since February 1993, when Germany was experiencing the worst recession of the past two decades. A measure of current conditions eased to 103.2 from 105.7.
The economy contracted 0.5 percent in the three months through June as construction slumped and companies and households reduced spending, the Federal Statistics Office confirmed today. Exports also fell.
The euro dropped more than a cent after the Ifo report to $1.4597 and yields on 10-year German bonds fell 5 basis points.
ECB Rates
The chances of the European Central Bank cutting interest rates are growing, Ifo economist Gernot Nerb said. The ECB last month raised its key rate by 25 basis points to 4.25 percent to fight inflation.
The rate increase ``was certainly not helpful,'' Nerb said in an interview with Bloomberg Television. ``In the current environment, it would be better if they'' lowered borrowing costs. ``It's difficult to say whether the worst is behind us.''
Investors raised bets that the ECB's next move will be a rate reduction, Eonia forward contracts show. The yield on the March contract fell to 4.11 percent today from 4.61 percent on July 21.
While the German government has maintained its forecast for growth of 1.7 percent this year after 2.5 percent in 2007, the Berlin-based BDB banking association said on Aug. 20 the economy may barely expand in the second half of the year.
Oil, Euro
Arcandor AG, Germany's largest department-store operator, on Aug. 13 reported a loss for the quarter through June and reduced its 2009 earnings forecast. Daimler AG, the world's second-largest luxury carmaker, said Aug. 6 it plans to cut production by 45,000 vehicles by the end of the year. The Stuttgart-based company had already lowered its full-year earnings forecast.
In the economy of the 15 euro nations, manufacturing and service industries contracted for a third straight month in August and confidence in the economic outlook last month dropped the most since the Sept. 11 terrorist attacks in 2001.
The price of crude has dropped 9 percent over the past month to around $114 a barrel and the euro has retreated from an all- time high of $1.6038 on July 15. Some companies are also benefiting from demand in faster-growing economies in Asia and eastern Europe.
Hochtief AG, Germany's largest builder, on Aug. 14 raised its full-year earnings forecasts on increasing demand for construction and mining work. SAP AG, the world's largest maker of business- management software, last month raised its full-year earnings forecast on increasing orders.
Still, ``the airbag effect of lower oil prices and a weaker exchange rate hasn't kicked in,'' said Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich. ``We see a recession risk of 70 percent this year.''
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
Read more...
Swaps Money Train Prepares for Final Run in Muniland: Joe Mysak
Commentary by Joe Mysak
Aug. 26 (Bloomberg) -- The money train is coming to a screeching halt. Maybe.
The ``money train'' is the term used by David Bronner, chief executive officer of the Retirement Systems of Alabama, to describe the bankers, lawyers, consultants and advisers who helped put together Jefferson County's sewer bond financing and associated mountain of interest-rate swaps. You know, the one that is driving the Alabama county to bankruptcy?
``It's time to stop the money train,'' Bronner told a meeting of local officials on Aug. 15, according to the Birmingham News. ``They are waiting to get paid again, and again, and again.''
Bronner, who has put forward a plan for the retirement fund to buy the sewer system from the county, hit upon something with this characterization of the bond business, or at least certain parts of it, as a ``money train.''
This year's auction-rate securities freeze illustrated the workings of the train. Securities firms were paid to underwrite the auction-rate deals, they were paid to run the regularly scheduled auctions (whether they failed or not), and then they were paid again to refinance the auction-rate debt.
The money train -- what an apt expression!
Perpetual Deals
Or at least that was the plan, until state officials, notably New York State Attorney General Andrew Cuomo and Massachusetts Secretary of State William Galvin, demanded that the securities companies who had built the market and then broke it, to fix it.
Not only will the firms buy individual investors' auction- rate securities back, some of them will also reimburse municipal issuers who refinanced that paper after they started paying higher and higher penalty rates. Well, we shall see.
The money train made its most profitable runs in the land of municipal swaps and derivative products.
Not until I looked at some of these transactions in detail did I realize the financial engineers who set them up never regarded the deals as separate and discrete.
No, they considered these deals as perpetual money machines. If one interest-rate swap wasn't working quite the way the issuer thought it should, that was fine; they could set up another one, and buy a bunch of options from the issuer, as well. So you could never really say this deal was a loser. There was always another deal, and you could simply borrow the amount you needed to terminate one and begin another.
School Districts
In Pennsylvania, some school districts are deciding to get off the swaps-and-derivatives money train, although of course they have to pay to do so.
Bloomberg reported last week on one school district that a few years ago was paid $730,000 for an option to enter into a swap, and is now paying $5.2 million to cancel the transaction.
Some others are doing the same, which just goes to show that there's really no such thing as free money in public finance, I guess. So many small municipalities regarded selling these ``swaptions'' as collecting free money.
They are today presumably wiser. What Pennsylvania should do now is study in some sort of comprehensive way just how school districts have fared since being allowed to get on the swaps-and- derivatives money train in 2003. Everyone in the state house seemed to think it was a terrific idea back then.
In 2007, a team of Bloomberg reporters looked at a batch of the swaps-and-derivatives deals and concluded that the school districts routinely paid too much for both the deals and for the advice they were required to get.
State Role
It is difficult to see how the nation's smaller and less sophisticated municipal-bond issuers -- that is, the majority of the market -- can keep engaging in swaps-and-derivatives transactions that they can neither evaluate nor understand.
Are they still doing so? No doubt they are still being pitched such things.
It doesn't look good for the money train, though, especially as more facts and details are revealed about how these things were priced and sold, and how they behaved under stress.
Maybe the states have a role here. They, after all, are the ones who resolved the auction-rate securities freeze. Maybe now they can take a good look at the public-finance money train.
(Joe Mysak is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net
Read more...
Aug. 26 (Bloomberg) -- The money train is coming to a screeching halt. Maybe.
The ``money train'' is the term used by David Bronner, chief executive officer of the Retirement Systems of Alabama, to describe the bankers, lawyers, consultants and advisers who helped put together Jefferson County's sewer bond financing and associated mountain of interest-rate swaps. You know, the one that is driving the Alabama county to bankruptcy?
``It's time to stop the money train,'' Bronner told a meeting of local officials on Aug. 15, according to the Birmingham News. ``They are waiting to get paid again, and again, and again.''
Bronner, who has put forward a plan for the retirement fund to buy the sewer system from the county, hit upon something with this characterization of the bond business, or at least certain parts of it, as a ``money train.''
This year's auction-rate securities freeze illustrated the workings of the train. Securities firms were paid to underwrite the auction-rate deals, they were paid to run the regularly scheduled auctions (whether they failed or not), and then they were paid again to refinance the auction-rate debt.
The money train -- what an apt expression!
Perpetual Deals
Or at least that was the plan, until state officials, notably New York State Attorney General Andrew Cuomo and Massachusetts Secretary of State William Galvin, demanded that the securities companies who had built the market and then broke it, to fix it.
Not only will the firms buy individual investors' auction- rate securities back, some of them will also reimburse municipal issuers who refinanced that paper after they started paying higher and higher penalty rates. Well, we shall see.
The money train made its most profitable runs in the land of municipal swaps and derivative products.
Not until I looked at some of these transactions in detail did I realize the financial engineers who set them up never regarded the deals as separate and discrete.
No, they considered these deals as perpetual money machines. If one interest-rate swap wasn't working quite the way the issuer thought it should, that was fine; they could set up another one, and buy a bunch of options from the issuer, as well. So you could never really say this deal was a loser. There was always another deal, and you could simply borrow the amount you needed to terminate one and begin another.
School Districts
In Pennsylvania, some school districts are deciding to get off the swaps-and-derivatives money train, although of course they have to pay to do so.
Bloomberg reported last week on one school district that a few years ago was paid $730,000 for an option to enter into a swap, and is now paying $5.2 million to cancel the transaction.
Some others are doing the same, which just goes to show that there's really no such thing as free money in public finance, I guess. So many small municipalities regarded selling these ``swaptions'' as collecting free money.
They are today presumably wiser. What Pennsylvania should do now is study in some sort of comprehensive way just how school districts have fared since being allowed to get on the swaps-and- derivatives money train in 2003. Everyone in the state house seemed to think it was a terrific idea back then.
In 2007, a team of Bloomberg reporters looked at a batch of the swaps-and-derivatives deals and concluded that the school districts routinely paid too much for both the deals and for the advice they were required to get.
State Role
It is difficult to see how the nation's smaller and less sophisticated municipal-bond issuers -- that is, the majority of the market -- can keep engaging in swaps-and-derivatives transactions that they can neither evaluate nor understand.
Are they still doing so? No doubt they are still being pitched such things.
It doesn't look good for the money train, though, especially as more facts and details are revealed about how these things were priced and sold, and how they behaved under stress.
Maybe the states have a role here. They, after all, are the ones who resolved the auction-rate securities freeze. Maybe now they can take a good look at the public-finance money train.
(Joe Mysak is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net
Read more...
BBL to Shut Dutch-U.K. Gas Pipeline Next Month for Maintenance
By Ben Farey
Aug. 26 (Bloomberg) -- BBL Co., the operator of the natural- gas pipeline from the Netherlands to the U.K., will close the link for five days' maintenance next month.
The work will be carried out from 6 a.m. U.K. time on Sept. 22 to 6 a.m. on Sept. 27, BBL said today in an e-mailed statement.
The pipeline can deliver as much as 1.75 million cubic meters of gas an hour, or 42 million cubic meters a day, into the U.K. grid.
To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net
Read more...
Aug. 26 (Bloomberg) -- BBL Co., the operator of the natural- gas pipeline from the Netherlands to the U.K., will close the link for five days' maintenance next month.
The work will be carried out from 6 a.m. U.K. time on Sept. 22 to 6 a.m. on Sept. 27, BBL said today in an e-mailed statement.
The pipeline can deliver as much as 1.75 million cubic meters of gas an hour, or 42 million cubic meters a day, into the U.K. grid.
To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net
Read more...
Hurricane Gustav Gains Strength, Is Heading for Haiti
By Alex Morales and Brian K. Sullivan
Aug. 26 (Bloomberg) -- Hurricane Gustav gained strength over the Caribbean Sea and is forecast to make landfall later today in Haiti, which was hit this month by Tropical Storm Fay.
Gustav, which intensified from a tropical storm earlier today, was packing sustained winds of 85 miles (140 kilometers) per hour, the U.S. National Hurricane Center said in an advisory posted on its Web site just before 5 a.m. Miami time. The system, located 100 miles south-southeast of the Haitian capital, Port- au-Prince, was heading northwest at 9 mph.
``On this track this hurricane should move over southwestern Haiti later today and near or just south of Cuba on Wednesday,'' the center said. ``Intense rains may produce life-threatening flash floods and mud slides.''
Tropical Storm Fay last week left a trail of death and flooding in the Caribbean and Florida, where it made an unprecedented four landfalls before weakening over Mississippi. Haiti in recent years has proved vulnerable to flooding and mudslides caused by storms because deforestation has left the nation short of vegetation to hold rainwater and soil.
A hurricane warning was in place from Barahona in the Dominican Republic westward to Le Mole St. Nicholas in Haiti.
The storm may bring 15 inches (38 centimeters) of rain to parts of the Dominican Republic, Haiti and Jamaica, the U.S. center said, adding that Gustav may become a Category 2 storm, with winds of at least 96 mph, before landfall. Hurricanes are rated on the 5-step Saffir-Simpson scale, with Categories 3 or higher deemed ``major'' storms.
Potential to Strengthen
``Preparations to protect life and property should be rushed to completion,'' the center said. ``Interests in central and western Cuba and the Cayman Islands should closely monitor the progress of Gustav.''
After making landfall in Haiti, Gustav is forecast to track between Cuba and Jamaica, before crossing the western tip of Cuba on Aug. 30 or 31, according to the hurricane center. The storm may acquire ``major'' hurricane status late in the week, Paul Walker, a meteorologist at AccuWeather Inc., said today in a telephone interview from State College, Pennsylvania.
``It has the potential to strengthen to Category 3 as it moves closer to the Cayman Islands later this week,'' Walker said. ``It doesn't look like it'll reach the Gulf of Mexico until the weekend or early next week. It may disrupt the production of oil next week.'' The Gulf is home to about one-fifth of all U.S. oil production.
Gustav formed yesterday as a depression and then a tropical storm, before reaching the 74 mph threshold for a hurricane early today. Gustav is the seventh named storm of the Atlantic hurricane season, which runs from June 1 through Nov. 30. The National Oceanic and Atmospheric Administration's forecasters predict 14 to 18 named storms will develop this year.
To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net; Brian K. Sullivan in Boston at bsullivan10@bloomberg.net.
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Aug. 26 (Bloomberg) -- Hurricane Gustav gained strength over the Caribbean Sea and is forecast to make landfall later today in Haiti, which was hit this month by Tropical Storm Fay.
Gustav, which intensified from a tropical storm earlier today, was packing sustained winds of 85 miles (140 kilometers) per hour, the U.S. National Hurricane Center said in an advisory posted on its Web site just before 5 a.m. Miami time. The system, located 100 miles south-southeast of the Haitian capital, Port- au-Prince, was heading northwest at 9 mph.
``On this track this hurricane should move over southwestern Haiti later today and near or just south of Cuba on Wednesday,'' the center said. ``Intense rains may produce life-threatening flash floods and mud slides.''
Tropical Storm Fay last week left a trail of death and flooding in the Caribbean and Florida, where it made an unprecedented four landfalls before weakening over Mississippi. Haiti in recent years has proved vulnerable to flooding and mudslides caused by storms because deforestation has left the nation short of vegetation to hold rainwater and soil.
A hurricane warning was in place from Barahona in the Dominican Republic westward to Le Mole St. Nicholas in Haiti.
The storm may bring 15 inches (38 centimeters) of rain to parts of the Dominican Republic, Haiti and Jamaica, the U.S. center said, adding that Gustav may become a Category 2 storm, with winds of at least 96 mph, before landfall. Hurricanes are rated on the 5-step Saffir-Simpson scale, with Categories 3 or higher deemed ``major'' storms.
Potential to Strengthen
``Preparations to protect life and property should be rushed to completion,'' the center said. ``Interests in central and western Cuba and the Cayman Islands should closely monitor the progress of Gustav.''
After making landfall in Haiti, Gustav is forecast to track between Cuba and Jamaica, before crossing the western tip of Cuba on Aug. 30 or 31, according to the hurricane center. The storm may acquire ``major'' hurricane status late in the week, Paul Walker, a meteorologist at AccuWeather Inc., said today in a telephone interview from State College, Pennsylvania.
``It has the potential to strengthen to Category 3 as it moves closer to the Cayman Islands later this week,'' Walker said. ``It doesn't look like it'll reach the Gulf of Mexico until the weekend or early next week. It may disrupt the production of oil next week.'' The Gulf is home to about one-fifth of all U.S. oil production.
Gustav formed yesterday as a depression and then a tropical storm, before reaching the 74 mph threshold for a hurricane early today. Gustav is the seventh named storm of the Atlantic hurricane season, which runs from June 1 through Nov. 30. The National Oceanic and Atmospheric Administration's forecasters predict 14 to 18 named storms will develop this year.
To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net; Brian K. Sullivan in Boston at bsullivan10@bloomberg.net.
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Hardy Oil Declines as India Well Plugged, Operating Costs Rise
By Grant Smith and Tara Patel
Aug. 26 (Bloomberg) -- Hardy Oil & Gas Plc, a U.K.-based explorer in India and Nigeria, fell the most in more than three years in London trading after saying operating costs rose and it plugged and abandoned an exploratory well in India.
Hardy fell as much as 58.5 pence, or 13 percent, to 405 pence before recovering to trade 6 percent down at 435.75 pence at 10:23 a.m. London time.
Hardy drilled exploratory well GS01-S1 to a depth of 3,985 meters (13,074 feet) in its GS-01 block in India, and found no hydrocarbons, the Douglas, Isle of Man-based company said today in a statement distributed by the Regulatory News Service.
``Production costs rose dramatically,'' Nick Copeman, analyst at Oriel Securities Ltd. said by telephone from London, adding that the GS-01 block result `` while not key, isn't great news.''
Hardy, which also reported profit in the first half tripled on higher crude prices, said cash flow from operating activities fell to $2 million from $4.1 million last year. ``Increased revenue was more than offset by higher operating and general and administrative costs,'' the statement said.
Net income increased to $6.18 million in the six months ended June 30, or 9 cents a share, from $1.9 million, or 3 cents a share, in the same period last year.
Drilling Plans
Hardy plans to drill 14 wells by the end of next year and expects its Oza project in Nigeria to begin producing from the second quarter of 2009.
It is also exploring in the Krishna Godavari basin of eastern India, where it has a 10 percent interest in Block KG- DWN-2001/1 (D9). ``The board expects the exploration drilling program for D9 to commence in 2008,'' the statement said.
``We see the current weakness in Hardy's share price as an opportunity to get in ahead of drilling on Block D9,'' Nathan Piper, analyst at RBC Capital Markets, which values Hardy at 620 pence a share, said in an e-mail. The block ``has the potential to double the company's value,'' he wrote.
Hardy said it will continue to focus on further drilling for the appraisal of the Dhirubhai 33 (GS01-B1) discovery. It is additionally drilling on the GS01-M1 prospect, it said.
``The company has made significant progress in moving its exploration and development programs forward,'' Chairman E. Paul Mortimer said in the statement.
Sales rose to $9.9 million in the first half from $7 million last year amid a 61 percent jump in the price of oil futures, the company said. Crude surged to records at the start of 2008 amid supply disruptions in Nigeria.
``This is the tenth year we're continuing to have positive results,'' Chief Executive Officer Sastry Karra said in a telephone interview.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Aug. 26 (Bloomberg) -- Hardy Oil & Gas Plc, a U.K.-based explorer in India and Nigeria, fell the most in more than three years in London trading after saying operating costs rose and it plugged and abandoned an exploratory well in India.
Hardy fell as much as 58.5 pence, or 13 percent, to 405 pence before recovering to trade 6 percent down at 435.75 pence at 10:23 a.m. London time.
Hardy drilled exploratory well GS01-S1 to a depth of 3,985 meters (13,074 feet) in its GS-01 block in India, and found no hydrocarbons, the Douglas, Isle of Man-based company said today in a statement distributed by the Regulatory News Service.
``Production costs rose dramatically,'' Nick Copeman, analyst at Oriel Securities Ltd. said by telephone from London, adding that the GS-01 block result `` while not key, isn't great news.''
Hardy, which also reported profit in the first half tripled on higher crude prices, said cash flow from operating activities fell to $2 million from $4.1 million last year. ``Increased revenue was more than offset by higher operating and general and administrative costs,'' the statement said.
Net income increased to $6.18 million in the six months ended June 30, or 9 cents a share, from $1.9 million, or 3 cents a share, in the same period last year.
Drilling Plans
Hardy plans to drill 14 wells by the end of next year and expects its Oza project in Nigeria to begin producing from the second quarter of 2009.
It is also exploring in the Krishna Godavari basin of eastern India, where it has a 10 percent interest in Block KG- DWN-2001/1 (D9). ``The board expects the exploration drilling program for D9 to commence in 2008,'' the statement said.
``We see the current weakness in Hardy's share price as an opportunity to get in ahead of drilling on Block D9,'' Nathan Piper, analyst at RBC Capital Markets, which values Hardy at 620 pence a share, said in an e-mail. The block ``has the potential to double the company's value,'' he wrote.
Hardy said it will continue to focus on further drilling for the appraisal of the Dhirubhai 33 (GS01-B1) discovery. It is additionally drilling on the GS01-M1 prospect, it said.
``The company has made significant progress in moving its exploration and development programs forward,'' Chairman E. Paul Mortimer said in the statement.
Sales rose to $9.9 million in the first half from $7 million last year amid a 61 percent jump in the price of oil futures, the company said. Crude surged to records at the start of 2008 amid supply disruptions in Nigeria.
``This is the tenth year we're continuing to have positive results,'' Chief Executive Officer Sastry Karra said in a telephone interview.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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ONGC May Buy Imperial Energy for $2.58 Billion
By Archana Chaudhary and Stephen Bierman
More Photos/Details
Aug. 26 (Bloomberg) -- Oil & Natural Gas Corp., India's state-run exploration company, may buy Imperial Energy Plc for 1.4 billion pounds ($2.58 billion) to tap Siberian deposits and make up for dwindling output at home.
ONGC made a preliminary offer of 1,250 pence a share, according to Imperial, which said a further announcement ``is expected later today.'' ONGC Chairman R.S. Sharma declined to comment when contacted by telephone from New Delhi.
``ONGC seems to be in a reasonable position in this deal,'' Tony Regan, a consultant with Nexant Inc., said by phone from Singapore. ``But the Chinese can move very quickly when they have to. They're dangerous competitors.''
Chinese companies have outbid Indian rivals as the world's two most populous nations compete for energy assets. India, the second-fastest growing major economy after China, hasn't increased production at home, where output from three-decade-old fields is declining. Su Shulin, the chairman of China Petroleum & Chemical Corp., known as Sinopec, said in Hong Kong today that the parent company is doing preliminary work on a bid for Imperial Energy.
Indian explorers are looking to invest in oil projects in Russia, Kazakhstan, Iran and Africa as the government expects economic growth to accelerate to as much as 10 percent by 2012, fueling demand for vehicles and electricity. The South Asian nation imports more than three-quarters of its oil requirements. ONGC reported a drop in output in the year through March, India's Oil Minister Murli Deora told lawmakers April 15.
Shares Decline
The Indian explorer's shares fell 10.55 rupees, or 1 percent, to 1,004 rupees in Mumbai at 1:45 p.m. local time. Imperial Energy declined 2.3 percent to 1,212 pence in London after reaching a seven-month high last week.
``Investors will await more news on potential competition from China,'' JPMorgan Chase & Co. analysts Andrey Gromadin and Nadia Kazakova of JPMorgan said in a research note today. ``Market participants will likely wait for a bidding war to emerge between ONGC and Sinopec.''
Imperial Energy has 450 million barrels of Russian registered reserves, according to a July company statement. The company is seeking to bring these figures closer in line with its estimates based on Society of Petroleum Engineers standards after the country's government raised questions about differences between the two.
The company, which operates primarily in the Siberian region of Tomsk, had 920 million barrels of oil equivalent of proven and probable reserves as of December 2007, according to an audit by DeGolyer and MacNaughton cited on Imperial's Web site.
Increased Valuations
Drilling successes at the Kiev Eganskoye field on the east side of the Ob River came after the yearly DeGolyer and MacNaughton audit and will likely increase valuations when they are included in the next report, Artem Konchin, an oil and gas analyst at UniCredit Aton in Moscow, said Aug. 21.
Imperial said in April it pumped 7,000 barrels a day in the first quarter. The company plans to produce 25,000 barrels of oil a day by the end of the year and expects to start output at the Kiev Eganskoye field in September.
One of the state-controlled Russian energy companies, either OAO Gazprom or OAO Rosneft, is also likely to be involved in any transaction, the Financial Times reported Aug. 22.
``Large Russian oil companies are looking to diversify downstream internationally, Renaissance Capital chief strategist David Aserkoff said today. ``They may be able to strike a deal where they could partner with a company like ONGC.''
To contact the reporters on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net; Stephen Bierman in Moscow at sbierman1@bloomberg.net.
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More Photos/Details
Aug. 26 (Bloomberg) -- Oil & Natural Gas Corp., India's state-run exploration company, may buy Imperial Energy Plc for 1.4 billion pounds ($2.58 billion) to tap Siberian deposits and make up for dwindling output at home.
ONGC made a preliminary offer of 1,250 pence a share, according to Imperial, which said a further announcement ``is expected later today.'' ONGC Chairman R.S. Sharma declined to comment when contacted by telephone from New Delhi.
``ONGC seems to be in a reasonable position in this deal,'' Tony Regan, a consultant with Nexant Inc., said by phone from Singapore. ``But the Chinese can move very quickly when they have to. They're dangerous competitors.''
Chinese companies have outbid Indian rivals as the world's two most populous nations compete for energy assets. India, the second-fastest growing major economy after China, hasn't increased production at home, where output from three-decade-old fields is declining. Su Shulin, the chairman of China Petroleum & Chemical Corp., known as Sinopec, said in Hong Kong today that the parent company is doing preliminary work on a bid for Imperial Energy.
Indian explorers are looking to invest in oil projects in Russia, Kazakhstan, Iran and Africa as the government expects economic growth to accelerate to as much as 10 percent by 2012, fueling demand for vehicles and electricity. The South Asian nation imports more than three-quarters of its oil requirements. ONGC reported a drop in output in the year through March, India's Oil Minister Murli Deora told lawmakers April 15.
Shares Decline
The Indian explorer's shares fell 10.55 rupees, or 1 percent, to 1,004 rupees in Mumbai at 1:45 p.m. local time. Imperial Energy declined 2.3 percent to 1,212 pence in London after reaching a seven-month high last week.
``Investors will await more news on potential competition from China,'' JPMorgan Chase & Co. analysts Andrey Gromadin and Nadia Kazakova of JPMorgan said in a research note today. ``Market participants will likely wait for a bidding war to emerge between ONGC and Sinopec.''
Imperial Energy has 450 million barrels of Russian registered reserves, according to a July company statement. The company is seeking to bring these figures closer in line with its estimates based on Society of Petroleum Engineers standards after the country's government raised questions about differences between the two.
The company, which operates primarily in the Siberian region of Tomsk, had 920 million barrels of oil equivalent of proven and probable reserves as of December 2007, according to an audit by DeGolyer and MacNaughton cited on Imperial's Web site.
Increased Valuations
Drilling successes at the Kiev Eganskoye field on the east side of the Ob River came after the yearly DeGolyer and MacNaughton audit and will likely increase valuations when they are included in the next report, Artem Konchin, an oil and gas analyst at UniCredit Aton in Moscow, said Aug. 21.
Imperial said in April it pumped 7,000 barrels a day in the first quarter. The company plans to produce 25,000 barrels of oil a day by the end of the year and expects to start output at the Kiev Eganskoye field in September.
One of the state-controlled Russian energy companies, either OAO Gazprom or OAO Rosneft, is also likely to be involved in any transaction, the Financial Times reported Aug. 22.
``Large Russian oil companies are looking to diversify downstream internationally, Renaissance Capital chief strategist David Aserkoff said today. ``They may be able to strike a deal where they could partner with a company like ONGC.''
To contact the reporters on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net; Stephen Bierman in Moscow at sbierman1@bloomberg.net.
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Wind Power Boosted by Utility, Inventor's Air Storage System
By Jim Efstathiou Jr.
Aug. 26 (Bloomberg) -- Public Service Enterprise Group Inc. plans to spend $20 million to develop devices that compress air to store power, unlocking potential electricity production from wind turbines and solar cells.
PSEG, the Newark, New Jersey-based owner of that state's largest electric utility, will announce a joint venture today with Michael Nakhamkin, designer of North America's only power plant that already stores energy underground in the form of pressurized air. When electricity demand rises, the stored air is released to turn a power turbine.
The technology, which works like a battery, might widen use of renewable-energy power plants whose production varies with the weather. The venture, Energy Storage & Power LLC, will improve compressed-air technology to make low-polluting power generation more efficient.
``Anything that does commercial-scale energy storage is huge,'' said John Gardner, a professor of mechanical engineering at Boise State University, who is not involved in the venture, in an interview yesterday. ``It can completely change the economic prospects of a wind farm.''
PSEG will market and license the technology using patents held by Nakhamkin, who is chief technical officer of the new venture and works in Basking Ridge, New Jersey. The systems can be used to generate from 15 to 450 megawatts of power, Nakhamkin said in an interview Monday. One megawatt is enough to power about 900 typical U.S. homes.
Alabama Plant
A 110-megawatt power plant in McIntosh, Alabama, designed by Nakhamkin that opened in 1991 uses natural gas-powered compressors to store air that is later used to power a generator turbine. A newer design makes the system cleaner and more efficient, he said.
``Technologically, this is not rocket science,'' said Arshad Mansoor, a vice president at the Washington-based Electric Power Research Institute, a consultant on air-storage projects. ``We are looking at things that could be made to scale in a cost-effective way and could be deployed in the next five to 10 years.''
Nakhamkin's design requires an additional fuel source such as natural gas to help heat and expand the pressurized gas. Still, power plants using compressed air can deliver three times as much electricity for the same amount of gas as conventional generators, he said.
Power from compressed air can cost ``substantially'' less than from the most-advanced natural-gas stations, said Stephen Byrd, president of PSEG Energy Holdings, a unit of PSEG, in an interview yesterday.
Saving Potential Energy
Storing power as compressed air works like systems at hydroelectric dams that pump water up a hill, saving the potential energy for use later. Both systems complement nuclear power plants, which can't be turned off and on as easily as natural gas or coal generators when demand falls, Mansoor said.
``Pumped hydro emerged in the late '60s and early '70s when the nuclear reactors were built,'' Mansoor said. ``We need to figure out how to store electricity in the nighttime so the nuclear plant can run, and to store wind energy.''
The compressed-air power plant in Alabama can fill an underground cavern with enough air to generate 110 megawatts for 26 hours, Mansoor said. One drawback to the technology is the availability of suitable underground storage space, said Gardner, who published a paper on the technology last year.
Energy Storage & Power could license its technology to utilities seeking to help manage power demand or build new, standalone power stations. A new power plant using the technology could be built in about three years, Byrd said.
``I'm taking people to Alabama to show that it works,'' Nakhamkin said. ``The project can be executed by any professional company.''
To contact the reporters on this story: Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net.
Read more...
Aug. 26 (Bloomberg) -- Public Service Enterprise Group Inc. plans to spend $20 million to develop devices that compress air to store power, unlocking potential electricity production from wind turbines and solar cells.
PSEG, the Newark, New Jersey-based owner of that state's largest electric utility, will announce a joint venture today with Michael Nakhamkin, designer of North America's only power plant that already stores energy underground in the form of pressurized air. When electricity demand rises, the stored air is released to turn a power turbine.
The technology, which works like a battery, might widen use of renewable-energy power plants whose production varies with the weather. The venture, Energy Storage & Power LLC, will improve compressed-air technology to make low-polluting power generation more efficient.
``Anything that does commercial-scale energy storage is huge,'' said John Gardner, a professor of mechanical engineering at Boise State University, who is not involved in the venture, in an interview yesterday. ``It can completely change the economic prospects of a wind farm.''
PSEG will market and license the technology using patents held by Nakhamkin, who is chief technical officer of the new venture and works in Basking Ridge, New Jersey. The systems can be used to generate from 15 to 450 megawatts of power, Nakhamkin said in an interview Monday. One megawatt is enough to power about 900 typical U.S. homes.
Alabama Plant
A 110-megawatt power plant in McIntosh, Alabama, designed by Nakhamkin that opened in 1991 uses natural gas-powered compressors to store air that is later used to power a generator turbine. A newer design makes the system cleaner and more efficient, he said.
``Technologically, this is not rocket science,'' said Arshad Mansoor, a vice president at the Washington-based Electric Power Research Institute, a consultant on air-storage projects. ``We are looking at things that could be made to scale in a cost-effective way and could be deployed in the next five to 10 years.''
Nakhamkin's design requires an additional fuel source such as natural gas to help heat and expand the pressurized gas. Still, power plants using compressed air can deliver three times as much electricity for the same amount of gas as conventional generators, he said.
Power from compressed air can cost ``substantially'' less than from the most-advanced natural-gas stations, said Stephen Byrd, president of PSEG Energy Holdings, a unit of PSEG, in an interview yesterday.
Saving Potential Energy
Storing power as compressed air works like systems at hydroelectric dams that pump water up a hill, saving the potential energy for use later. Both systems complement nuclear power plants, which can't be turned off and on as easily as natural gas or coal generators when demand falls, Mansoor said.
``Pumped hydro emerged in the late '60s and early '70s when the nuclear reactors were built,'' Mansoor said. ``We need to figure out how to store electricity in the nighttime so the nuclear plant can run, and to store wind energy.''
The compressed-air power plant in Alabama can fill an underground cavern with enough air to generate 110 megawatts for 26 hours, Mansoor said. One drawback to the technology is the availability of suitable underground storage space, said Gardner, who published a paper on the technology last year.
Energy Storage & Power could license its technology to utilities seeking to help manage power demand or build new, standalone power stations. A new power plant using the technology could be built in about three years, Byrd said.
``I'm taking people to Alabama to show that it works,'' Nakhamkin said. ``The project can be executed by any professional company.''
To contact the reporters on this story: Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net.
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