WASHINGTON, Sept 2 (Reuters) - A new tropical depression formed in the far eastern Atlantic Ocean south of the Cape Verde Islands and was expected to become a tropical storm later on Tuesday, the U.S. National Hurricane Center said.
The depression, which will be called Tropical Storm Josephine once its maximum sustained winds reach 39 miles per hour (64 kph), was located 170 miles (270 km) southeast of the Cape Verde Islands, the Miami-based center said.
It was the 10th tropical depression of this year's busy Atlantic hurricane season.
As Hurricane Gustav was downgraded to a tropical storm after slamming the U.S. Gulf coast, Hurricane Hanna is threatening the U.S. east coast from Florida to the Carolinas, and Tropical Storm Ike formed in the Atlantic Ocean.
(Reporting by Sandra Maler)
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Tuesday, September 2, 2008
Gustav shields McCain from Democrat barbs
* Republican convention off to a slow start
* 10,000 protest against Bush and Iraq war
* Bush may address convention remotely - reports
* Republicans rally around Sarah Palin
By Steve Holland
ST. PAUL, Sept 2 (Reuters) - Not only is Gustav slowing Republican presidential hopeful John McCain's big convention party, it also is sparing him from Democratic criticism that his election would amount to a third Bush term.
Convention organizers held a truncated business-only session on Monday and scrapped a planned speech by President George W. Bush, who visited Texas instead to oversee Gustav relief efforts.
The absence of the president, whose nationwide approval ratings hover around 30 percent, did not deter a crowd of as many as 10,000 protesters who marched to the convention hall, chanting anti-war slogans and holding signs criticizing Bush and the war in Iraq.
Police in riot gear used pepper spray and smoke bombs, and arrested at least 130 demonstrators.
As Hurricane Gustav slammed the Gulf coast on Monday before being downgraded to a tropical storm, an unofficial bipartisan ceasefire prevailed, with most Republicans and Democrats pulling their punches while a major part of the country was being battered by the storm.
Several television news channels reported that Bush may address the convention remotely on Tuesday but the White House would not confirm the reports. According to the White House, Bush has no official engagements on Tuesday.
Normally, Republican speakers this week would be extolling the virtues of McCain and trying to define his Democratic rival Barack Obama as a liberal who would raise taxes.
Instead, the conclave in Minnesota has turned from politicking to raising money for Gustav victims, with U.S. first lady Laura Bush and McCain's wife Cindy leading the charge.
Democrats arrived in St. Paul looking to attack McCain just as the McCain team had lashed out at Obama all last week at Obama's nominating convention in Denver. McCain is to be formally nominated by the Republicans on Wednesday as the party's candidate to face Obama in the Nov. 4 election.
The Democrats' message is that McCain offers "more of the same" as Bush, whose handling of the Katrina hurricane three years ago was widely criticized and contributed to his low approval ratings.
MIXED BLESSING
While McCain is missing out on a chance to define Obama for the American people, he also is not having to endure criticism about appearances by Bush and Vice President Dick Cheney, who both canceled trips to St. Paul to speak.
As Gustav steals St. Paul's thunder, McCain's vice presidential running mate, Alaska Gov. Sarah Palin, is undergoing new scrutiny and paying some dividends for McCain.
Palin's surprise pick has injected some fresh energy into the McCain campaign, leading to larger crowds at his rallies. Since he made the announcement last Friday, his campaign has raised $10 million, contributing to an August tally of $47 million.
But Palin also brings some baggage to the ticket.
She and her husband Todd announced on Monday that their 17-year-old daughter, Bristol, was pregnant, and said the news was being released to counter Internet rumors that the Alaska governor's five-month-old son was actually her daughter's baby.
Republicans, however, rallied around Palin following the announcement.
"I just think she's remarkable," Cindy McCain told the Fox News channel. "She truly is a great match for my husband." (Additional reporting by John Whitesides and Andy Sullivan; Editing by Sandra Maler)
Read more...
* 10,000 protest against Bush and Iraq war
* Bush may address convention remotely - reports
* Republicans rally around Sarah Palin
By Steve Holland
ST. PAUL, Sept 2 (Reuters) - Not only is Gustav slowing Republican presidential hopeful John McCain's big convention party, it also is sparing him from Democratic criticism that his election would amount to a third Bush term.
Convention organizers held a truncated business-only session on Monday and scrapped a planned speech by President George W. Bush, who visited Texas instead to oversee Gustav relief efforts.
The absence of the president, whose nationwide approval ratings hover around 30 percent, did not deter a crowd of as many as 10,000 protesters who marched to the convention hall, chanting anti-war slogans and holding signs criticizing Bush and the war in Iraq.
Police in riot gear used pepper spray and smoke bombs, and arrested at least 130 demonstrators.
As Hurricane Gustav slammed the Gulf coast on Monday before being downgraded to a tropical storm, an unofficial bipartisan ceasefire prevailed, with most Republicans and Democrats pulling their punches while a major part of the country was being battered by the storm.
Several television news channels reported that Bush may address the convention remotely on Tuesday but the White House would not confirm the reports. According to the White House, Bush has no official engagements on Tuesday.
Normally, Republican speakers this week would be extolling the virtues of McCain and trying to define his Democratic rival Barack Obama as a liberal who would raise taxes.
Instead, the conclave in Minnesota has turned from politicking to raising money for Gustav victims, with U.S. first lady Laura Bush and McCain's wife Cindy leading the charge.
Democrats arrived in St. Paul looking to attack McCain just as the McCain team had lashed out at Obama all last week at Obama's nominating convention in Denver. McCain is to be formally nominated by the Republicans on Wednesday as the party's candidate to face Obama in the Nov. 4 election.
The Democrats' message is that McCain offers "more of the same" as Bush, whose handling of the Katrina hurricane three years ago was widely criticized and contributed to his low approval ratings.
MIXED BLESSING
While McCain is missing out on a chance to define Obama for the American people, he also is not having to endure criticism about appearances by Bush and Vice President Dick Cheney, who both canceled trips to St. Paul to speak.
As Gustav steals St. Paul's thunder, McCain's vice presidential running mate, Alaska Gov. Sarah Palin, is undergoing new scrutiny and paying some dividends for McCain.
Palin's surprise pick has injected some fresh energy into the McCain campaign, leading to larger crowds at his rallies. Since he made the announcement last Friday, his campaign has raised $10 million, contributing to an August tally of $47 million.
But Palin also brings some baggage to the ticket.
She and her husband Todd announced on Monday that their 17-year-old daughter, Bristol, was pregnant, and said the news was being released to counter Internet rumors that the Alaska governor's five-month-old son was actually her daughter's baby.
Republicans, however, rallied around Palin following the announcement.
"I just think she's remarkable," Cindy McCain told the Fox News channel. "She truly is a great match for my husband." (Additional reporting by John Whitesides and Andy Sullivan; Editing by Sandra Maler)
Read more...
Deals of the day -- mergers and acquisitions
Sept 2 (Reuters) - The following bids, mergers, acquisitions and disposals involving European, U.S. and Asian companies were reported by 0900 GMT on Tuesday.
** State-owned Korea Development Bank (KDB) confirmed that it was in talks with Lehman Brothers for a possible investment in the troubled U.S. bank, but other reports said the price of the deal remained an issue. To read more, please double click on
** The world's third biggest platinum producer Lonmin said a merger with Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) would lead to major synergy benefits and the firm would like to hold talks with its hostile suitor if a formal bid is made at a higher level.
** French utility group GDF Suez said it would buy U.S. electricity provider FirstLight Power Enterprises. GDF gave no financial details in a statement, but according to industry sources quoted by Le Figaro newspaper the deal would be worth 1.3 billion euros . (Compiled by Tina Kwan in Singapore, Aftab Ahmed in Bangalore)
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** State-owned Korea Development Bank (KDB) confirmed that it was in talks with Lehman Brothers for a possible investment in the troubled U.S. bank, but other reports said the price of the deal remained an issue. To read more, please double click on
** The world's third biggest platinum producer Lonmin said a merger with Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) would lead to major synergy benefits and the firm would like to hold talks with its hostile suitor if a formal bid is made at a higher level.
** French utility group GDF Suez said it would buy U.S. electricity provider FirstLight Power Enterprises. GDF gave no financial details in a statement, but according to industry sources quoted by Le Figaro newspaper the deal would be worth 1.3 billion euros . (Compiled by Tina Kwan in Singapore, Aftab Ahmed in Bangalore)
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Plummeting oil boosts dollar as emerging stocks slump
By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - Hurricane Gustav's fading winds prompted a large selloff in oil to around $105 a barrel on Tuesday, helping boost the dollar to 10-month high against major currencies, while political risk shook emerging markets.
European stocks gained, but emerging markets fell to a near 18-month low on economic worries and concerns about Thailand following Prime Minister Samak Sundaravej's declaration of a state of emergency.
Oil was undergoing a relative rout, with the price of New York crude down nearly $10 a barrel at $105.64, a level last seen about five months ago.
A weakened Hurricane Gustav, now downgraded to a tropical storm, spared major oil facilities in the U.S. Gulf.
"There is another month of peak hurricane season to go, and there will be other threats," Michael Wittner, global head of oil research at Societe Generale, said in a research note.
"However, the market reaction to Gustav has confirmed our opinion that when the disruption threats fade, the underlying factors (for oil) are bearish."
The fall combined with an ongoing trend to dump European currencies on a souring global growth outlook, lifting the dollar to a 10-month high against major currencies.
The dollar index .DXY, a gauge of its performance against six major currencies, climbed around 1.2 percent to 78.075. The euro slid 0.7 percent to below $1.45.
Britain's pound also continued to get a drubbing on the UK's poor economic outlook, falling 0.8 percent to $1.7863.
"No one wants to catch a falling knife, and sterling is that falling knife," said Divyang Shah, chief strategist at Commonwealth Bank of Australia.
EMERGING SLIDE
The decline in oil prices and the euro's slide boosted European exporters, lifting the FTSEurofirst 300 index up around 0.7 percent.
But economic and political woes battered emerging market shares.
Emerging stocks as measured by MSCI's benchmarket sector index .MSCIEF fell to their lowest level since March 2007.
Thai Army chief Anupong Paochinda said he would not use force to evict protesters occupying the prime minister's official compound despite a state of emergency giving him the power to do so.
Central banks in Malaysia, India and elsewhere in Asia defended their weak currencies.
"Central banks are trying their best to stop the flood of outflows," a trader in Singapore said.
In South Korea, where the won has been plumbing multi-year lows, the authorities restricted their efforts to meetings and warnings. The won dropped to a 4-year low against the dollar with investors concerned about a flight of capital from Asia's fourth-largest economy.
Euro zone government bonds were lower, with 2-year yields rising to 4.093 percent and 10-years up tp 4.183 percent.
(Additional reporting by Naomi Tajitsu)
Read more...
LONDON (Reuters) - Hurricane Gustav's fading winds prompted a large selloff in oil to around $105 a barrel on Tuesday, helping boost the dollar to 10-month high against major currencies, while political risk shook emerging markets.
European stocks gained, but emerging markets fell to a near 18-month low on economic worries and concerns about Thailand following Prime Minister Samak Sundaravej's declaration of a state of emergency.
Oil was undergoing a relative rout, with the price of New York crude down nearly $10 a barrel at $105.64, a level last seen about five months ago.
A weakened Hurricane Gustav, now downgraded to a tropical storm, spared major oil facilities in the U.S. Gulf.
"There is another month of peak hurricane season to go, and there will be other threats," Michael Wittner, global head of oil research at Societe Generale, said in a research note.
"However, the market reaction to Gustav has confirmed our opinion that when the disruption threats fade, the underlying factors (for oil) are bearish."
The fall combined with an ongoing trend to dump European currencies on a souring global growth outlook, lifting the dollar to a 10-month high against major currencies.
The dollar index .DXY, a gauge of its performance against six major currencies, climbed around 1.2 percent to 78.075. The euro slid 0.7 percent to below $1.45.
Britain's pound also continued to get a drubbing on the UK's poor economic outlook, falling 0.8 percent to $1.7863.
"No one wants to catch a falling knife, and sterling is that falling knife," said Divyang Shah, chief strategist at Commonwealth Bank of Australia.
EMERGING SLIDE
The decline in oil prices and the euro's slide boosted European exporters, lifting the FTSEurofirst 300 index up around 0.7 percent.
But economic and political woes battered emerging market shares.
Emerging stocks as measured by MSCI's benchmarket sector index .MSCIEF fell to their lowest level since March 2007.
Thai Army chief Anupong Paochinda said he would not use force to evict protesters occupying the prime minister's official compound despite a state of emergency giving him the power to do so.
Central banks in Malaysia, India and elsewhere in Asia defended their weak currencies.
"Central banks are trying their best to stop the flood of outflows," a trader in Singapore said.
In South Korea, where the won has been plumbing multi-year lows, the authorities restricted their efforts to meetings and warnings. The won dropped to a 4-year low against the dollar with investors concerned about a flight of capital from Asia's fourth-largest economy.
Euro zone government bonds were lower, with 2-year yields rising to 4.093 percent and 10-years up tp 4.183 percent.
(Additional reporting by Naomi Tajitsu)
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FACTBOX-Likely scenarios after Japan PM Fukuda resigns
Sept 2 (Reuters) - Whoever succeeds Prime Minister Yasuo Fukuda following his abrupt resignation faces big problems, including a deadlocked parliament and pressure to call an early election.
Opposition parties won control of parliament's upper house last year, enabling them to delay legislation and reject key appointments.
An election for the more powerful lower chamber, where the Liberal Democratic Party-led ruling bloc holds a huge majority, must be held by September 2009.
The following are some possible political scenarios.
NEW PM, ELECTION TIMING
* Frontrunner LDP Secretary-General Taro Aso, or another candidate, wins a party leadership election expected around Sept. 22, gets a bounce in public opinion polls and calls a general election by the end of this year after enacting an extra budget to fund an economic relief package, or early in 2009 at the start of the next regular session of parliament.
* The new prime minister fails to boost the LDP's popularity, and delays the general election until after the 2009/10 budget is passed in March of next year or even closer to the end of lower house lawmakers' terms in September 2009.
ELECTION OUTCOME?
* No matter when the election is held, the LDP and its junior partner are expected to lose their two-thirds majority in the lower house, which allows them to enact laws rejected by the upper chamber, but the scale of their setback remains in doubt.
* The main opposition Democratic Party could become the biggest party in the lower house and form a coalition with smaller allies, ejecting the LDP from power for only the second time in its 53-year history.
* The LDP remains the biggest party in the lower house, keeps its junior partner the New Komeito party in the coalition and stays in power, although with a reduced majority, meaning policy-making remains difficult.
* The margin of victory is so small that both the LDP and Democratic Party hope to form a ruling coalition and engage in a tug-of-war to lure potential defectors into their camps. The New Komeito party is a wild card in that it could decide to change sides and link up with the Democrats.
* Disaffected lawmakers from both major parties form one or more small parties of 20-30 members in hopes of holding the balance of power in a coalition led by the LDP or the Democrats.
Decisions to change party allegiances are likely to be determined as much by personal factors as policy stances, if not more so. Both the LDP and the Democrats are a mix of lawmakers from across the political spectrum, while in many ways the junior coalition partner, the New Komeito party, is closer in policy terms to the Democrats. (Reporting by Isabel Reynolds and Linda Sieg; Editing by Michael Watson)
Read more...
Opposition parties won control of parliament's upper house last year, enabling them to delay legislation and reject key appointments.
An election for the more powerful lower chamber, where the Liberal Democratic Party-led ruling bloc holds a huge majority, must be held by September 2009.
The following are some possible political scenarios.
NEW PM, ELECTION TIMING
* Frontrunner LDP Secretary-General Taro Aso, or another candidate, wins a party leadership election expected around Sept. 22, gets a bounce in public opinion polls and calls a general election by the end of this year after enacting an extra budget to fund an economic relief package, or early in 2009 at the start of the next regular session of parliament.
* The new prime minister fails to boost the LDP's popularity, and delays the general election until after the 2009/10 budget is passed in March of next year or even closer to the end of lower house lawmakers' terms in September 2009.
ELECTION OUTCOME?
* No matter when the election is held, the LDP and its junior partner are expected to lose their two-thirds majority in the lower house, which allows them to enact laws rejected by the upper chamber, but the scale of their setback remains in doubt.
* The main opposition Democratic Party could become the biggest party in the lower house and form a coalition with smaller allies, ejecting the LDP from power for only the second time in its 53-year history.
* The LDP remains the biggest party in the lower house, keeps its junior partner the New Komeito party in the coalition and stays in power, although with a reduced majority, meaning policy-making remains difficult.
* The margin of victory is so small that both the LDP and Democratic Party hope to form a ruling coalition and engage in a tug-of-war to lure potential defectors into their camps. The New Komeito party is a wild card in that it could decide to change sides and link up with the Democrats.
* Disaffected lawmakers from both major parties form one or more small parties of 20-30 members in hopes of holding the balance of power in a coalition led by the LDP or the Democrats.
Decisions to change party allegiances are likely to be determined as much by personal factors as policy stances, if not more so. Both the LDP and the Democrats are a mix of lawmakers from across the political spectrum, while in many ways the junior coalition partner, the New Komeito party, is closer in policy terms to the Democrats. (Reporting by Isabel Reynolds and Linda Sieg; Editing by Michael Watson)
Read more...
Euro below $1.45 as oil tumble lifts dollar
Tue Sep 2, 2008 9:56am EDT
By Jamie McGeever
LONDON (Reuters) - The dollar extended its rally on Tuesday to fresh 2008 highs against a basket of currencies as oil's startling fall toward $105 a barrel boosted expectations of lower global inflation and non-U.S. interest rates.
The euro fell to its lowest in seven months against the rampant greenback below $1.45, while sterling's dismal run continued and it fell to fresh historical lows.
Compounding an increasingly bleak UK economic outlook, the dollar's broad strength helped push the pound firmly below $1.80 to a fresh low since April 2006, and the pound also made new historical lows against the euro and a basket of currencies.
But the dominant theme driving financial markets on Tuesday was oil's tumble to $105.46/bbl following the downgrade of Hurricane Gustav on Monday to Category 2.
Oil is down almost 30 percent from its record peak just shy of $150/bbl in July. This suggests inflation around the world will come down in the coming months, giving central banks room to deliver growth-supportive interest rates cuts.
Australia's central bank cut rates by a quarter percentage point earlier on Tuesday to 7 percent, helping drive the Australian dollar down sharply to its lowest in a year.
Base rates in the United States have already been slashed in the past year to 2 percent while Japanese rates stand at only 0.75 percent. These rates are unlikely to go much lower.
"What does that mean? We will see mounting rate cut expectations, which means spreads will move in favor of the U.S. dollar and partly in favor of the yen," said Michael Klawitter, head of FX strategy at Dresdner Kleinwort.
"So consequently, the dollar in gaining by default. That's the key driver at the moment - what will we see with rates spreads in 2009."
At 4:30 a.m. EDT the euro was down 0.8 percent on the day at $1.4485 below $1.45 for the first time since February and more than 15 cents off its all-time high struck mid-July.
The dollar index .DXY climbed 1.3 percent to 78.198, a near ten-month high.
The Australian dollar was down 2.1 percent at $0.8340 its lowest in a year, after the Reserve Bank of Australia cut rates a quarter point to 7 percent.
The dollar was up 0.5 percent against the yen at 108.58 yen above a one-month low of 107.62 struck the previous day.
Sterling touched a two-year low of $1.7850 before pulling back to $1.7920, down 0.5 percent.
The Australian dollar fell to $0.8472 and hit a fresh one-year low of $0.8458. It had briefly risen as high as $0.8534 after the rate cut news.
MASSIVE MOVES
The moves, with global FX market liquidity returning to more normal levels as U.S. markets open after the Labor Day holiday on Monday, have been staggering.
Oil is down 8 percent from Friday's settlement close, its biggest one-day fall (because Monday was a U.S. holiday) in over five years and takes its fall from the July peak to almost 30 percent.
The euro is down almost 10 percent from its July peak, sterling has shed more than 10 percent against the dollar in barely a month, and the dollar index has appreciated by 10 percent since mid-July.
All eyes will be on ECB President Jean-Claude Trichet on Thursday when he speaks to reporters after, in all probability, keeping rates on hold at 4.25 percent.
With oil falling sharply, investors will be looking for signs his anti-inflation rhetoric is cooling. Maurice Pomery, head of currency strategy at IDEAGlobal, noted that the RBA was until recently one of the most hawkish central banks.
"I strongly believe others will follow sooner than expected," he said, with the possible exception of the ECB.
But even they will be forced to recognize the changing environment. And if they don't: "Nobody will take then at face value," said Klawitter at Dresdner.
The UK pound, already under heavy selling pressure after Britain's finance minister said at the weekend that economic challenges are the greatest in 60 years, fell further.
It fell 0.8 percent to a two-and-a-half year low against the dollar at $1.7849 a 12-year low on a trade-weighted measure at 88.5 and the euro earlier hit a record high of 81.62 pence.
To the extent that economic data will have any influence on trading Tuesday, attention now turns to euro zone producer prices figures and the latest snapshot of the U.S. manufacturing sector with the August ISM report.
Read more...
By Jamie McGeever
LONDON (Reuters) - The dollar extended its rally on Tuesday to fresh 2008 highs against a basket of currencies as oil's startling fall toward $105 a barrel boosted expectations of lower global inflation and non-U.S. interest rates.
The euro fell to its lowest in seven months against the rampant greenback below $1.45, while sterling's dismal run continued and it fell to fresh historical lows.
Compounding an increasingly bleak UK economic outlook, the dollar's broad strength helped push the pound firmly below $1.80 to a fresh low since April 2006, and the pound also made new historical lows against the euro and a basket of currencies.
But the dominant theme driving financial markets on Tuesday was oil's tumble to $105.46/bbl following the downgrade of Hurricane Gustav on Monday to Category 2.
Oil is down almost 30 percent from its record peak just shy of $150/bbl in July. This suggests inflation around the world will come down in the coming months, giving central banks room to deliver growth-supportive interest rates cuts.
Australia's central bank cut rates by a quarter percentage point earlier on Tuesday to 7 percent, helping drive the Australian dollar down sharply to its lowest in a year.
Base rates in the United States have already been slashed in the past year to 2 percent while Japanese rates stand at only 0.75 percent. These rates are unlikely to go much lower.
"What does that mean? We will see mounting rate cut expectations, which means spreads will move in favor of the U.S. dollar and partly in favor of the yen," said Michael Klawitter, head of FX strategy at Dresdner Kleinwort.
"So consequently, the dollar in gaining by default. That's the key driver at the moment - what will we see with rates spreads in 2009."
At 4:30 a.m. EDT the euro was down 0.8 percent on the day at $1.4485 below $1.45 for the first time since February and more than 15 cents off its all-time high struck mid-July.
The dollar index .DXY climbed 1.3 percent to 78.198, a near ten-month high.
The Australian dollar was down 2.1 percent at $0.8340 its lowest in a year, after the Reserve Bank of Australia cut rates a quarter point to 7 percent.
The dollar was up 0.5 percent against the yen at 108.58 yen above a one-month low of 107.62 struck the previous day.
Sterling touched a two-year low of $1.7850 before pulling back to $1.7920, down 0.5 percent.
The Australian dollar fell to $0.8472 and hit a fresh one-year low of $0.8458. It had briefly risen as high as $0.8534 after the rate cut news.
MASSIVE MOVES
The moves, with global FX market liquidity returning to more normal levels as U.S. markets open after the Labor Day holiday on Monday, have been staggering.
Oil is down 8 percent from Friday's settlement close, its biggest one-day fall (because Monday was a U.S. holiday) in over five years and takes its fall from the July peak to almost 30 percent.
The euro is down almost 10 percent from its July peak, sterling has shed more than 10 percent against the dollar in barely a month, and the dollar index has appreciated by 10 percent since mid-July.
All eyes will be on ECB President Jean-Claude Trichet on Thursday when he speaks to reporters after, in all probability, keeping rates on hold at 4.25 percent.
With oil falling sharply, investors will be looking for signs his anti-inflation rhetoric is cooling. Maurice Pomery, head of currency strategy at IDEAGlobal, noted that the RBA was until recently one of the most hawkish central banks.
"I strongly believe others will follow sooner than expected," he said, with the possible exception of the ECB.
But even they will be forced to recognize the changing environment. And if they don't: "Nobody will take then at face value," said Klawitter at Dresdner.
The UK pound, already under heavy selling pressure after Britain's finance minister said at the weekend that economic challenges are the greatest in 60 years, fell further.
It fell 0.8 percent to a two-and-a-half year low against the dollar at $1.7849 a 12-year low on a trade-weighted measure at 88.5 and the euro earlier hit a record high of 81.62 pence.
To the extent that economic data will have any influence on trading Tuesday, attention now turns to euro zone producer prices figures and the latest snapshot of the U.S. manufacturing sector with the August ISM report.
Read more...
Oil heads towards $100 as Gustav fades
Tue Sep 2, 2008 5:37am EDT
By Jane Merriman
LONDON (Reuters) - Oil slid towards $100 a barrel on Tuesday, after early reports showed Hurricane Gustav had spared major U.S. Gulf oil facilities.
U.S. crude fell to $107.17 a barrel by 5:07 a.m. EDT, down $8.29 from Friday's close. It touched a session low of $105.46, its lowest since April 2.
A U.S. public holiday on Monday meant the New York Mercantile Exchange did not issue an official settlement price.
London Brent crude was down $3.46 at $105.95.
As the hurricane was downgraded to a tropical storm, the market returned its focus to a string of bearish factors, including a softer global economy, weaker demand for oil and a stronger U.S. dollar.
These had already begun to drive prices down from a peak of $147.27 a barrel hit on July 11.
Hurricane Gustav, combined with Russia's conflict with Georgia, which disrupted flows of oil and gas, had halted the slide.
"If it were not for these threats, we would have been testing $100 already," said Mike Wittner, of Societe Generale.
An upturn in the dollar, plus falls in oil demand in the United States and China, the world's top two energy consumers, look set to exert further pressure on the market.
The weak dollar contributed to oil's surge this year as investors turned to oil as a hedge. The U.S. currency has shown signs of bottoming out and hit a 10-month peak against a basket of currencies on Tuesday.
"Economic woes and the dollar strength will help oil move down. It's highly likely to go below $100," said Christopher Bellew of Bache Commodities Limited.
LIMITED DAMAGE
Early checks by some U.S. refiners reported no damage from Gustav, which had originally been classed as the biggest threat to the U.S. Gulf oil sector since devastation from Hurricane Katrina in 2005.
Some 1.3 million barrels per day of offshore oil production and some 2.67 million bpd of refining capacity was shut because of the storm.
The Gulf is home to a quarter of U.S. oil output and more than a third of U.S. refining capacity.
Louisiana Governor Bobby Jindal said on Monday that Exxon Mobil Corp would ask for crude oil from the U.S. emergency supply on Tuesday and Shell Oil Co was expected to make a similar request.
(Reporting by Jane Merriman and Barbara Lewis in London and Chua Baizhen in Singapore)
Read more...
By Jane Merriman
LONDON (Reuters) - Oil slid towards $100 a barrel on Tuesday, after early reports showed Hurricane Gustav had spared major U.S. Gulf oil facilities.
U.S. crude fell to $107.17 a barrel by 5:07 a.m. EDT, down $8.29 from Friday's close. It touched a session low of $105.46, its lowest since April 2.
A U.S. public holiday on Monday meant the New York Mercantile Exchange did not issue an official settlement price.
London Brent crude was down $3.46 at $105.95.
As the hurricane was downgraded to a tropical storm, the market returned its focus to a string of bearish factors, including a softer global economy, weaker demand for oil and a stronger U.S. dollar.
These had already begun to drive prices down from a peak of $147.27 a barrel hit on July 11.
Hurricane Gustav, combined with Russia's conflict with Georgia, which disrupted flows of oil and gas, had halted the slide.
"If it were not for these threats, we would have been testing $100 already," said Mike Wittner, of Societe Generale.
An upturn in the dollar, plus falls in oil demand in the United States and China, the world's top two energy consumers, look set to exert further pressure on the market.
The weak dollar contributed to oil's surge this year as investors turned to oil as a hedge. The U.S. currency has shown signs of bottoming out and hit a 10-month peak against a basket of currencies on Tuesday.
"Economic woes and the dollar strength will help oil move down. It's highly likely to go below $100," said Christopher Bellew of Bache Commodities Limited.
LIMITED DAMAGE
Early checks by some U.S. refiners reported no damage from Gustav, which had originally been classed as the biggest threat to the U.S. Gulf oil sector since devastation from Hurricane Katrina in 2005.
Some 1.3 million barrels per day of offshore oil production and some 2.67 million bpd of refining capacity was shut because of the storm.
The Gulf is home to a quarter of U.S. oil output and more than a third of U.S. refining capacity.
Louisiana Governor Bobby Jindal said on Monday that Exxon Mobil Corp would ask for crude oil from the U.S. emergency supply on Tuesday and Shell Oil Co was expected to make a similar request.
(Reporting by Jane Merriman and Barbara Lewis in London and Chua Baizhen in Singapore)
Read more...
Nikkei falls 1.8 pct to 5-mth low, Inpex slides
*Nikkei falls to five-month closing low
*Inpex and other energy shares plunge on oil price fall
*Fukuda resignation mostly seen having little direct impact (Adds stocks and comments)
By Taiga Uranaka
TOKYO, Sept 2 (Reuters) - Japan's Nikkei stock average fell 1.8 percent to a five-month closing low on Tuesday, with energy shares such as oil and gas field developer Inpex Holdings Inc plunging on a sharp slide in oil prices.
The market moved in a narrow range for most of the day but fell sharply in the last hour of trade, hit by a sharp drop in index futures, whose impact was exaggerated by thin trade.
While most market participants said Prime Minister Yasuo Fukuda's abrupt resignation had no direct impact on the market, some said there was nervousness about foreign investor reaction.
"After all, this is two prime ministers in a row who have basically just given up, it looks pretty negative," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
The benchmark Nikkei .N225 ended down 224.71 points to 12,609.47, after rising as high as 12,920.52, while the broader Topix fell 1.5 percent to 1,212.37.
Although trade picked up slightly, with 1.8 billion shares changing hands, compared to last week's daily average of 1.42 billion, it was still thin.
"The number of market participants was small despite expectations for foreign investors to return after the Labor Day holiday," said Norio Shimura, deputy head of the equity department at Chuo Securities.
ENERGY STOCKS DOWN
Inpex fell 6.7 percent to 1.07 million yen, becoming the biggest percentage loser on the Nikkei after oil plunged more than $4 on Monday.
Concerns that Hurricane Gustav would cause lasting damage to the U.S. oil sector eased after the storm weakened before hitting the Louisiana coast. [O/N]
Trading houses, which have stakes in oil fields, were also hit, with Mitsubishi Corp dropping 4.1 percent to 2,825 yen and Mitsui & Co down 5.4 percent at 1,790 yen.
Toto Ltd slid 4.7 percent to 759 yen after the toilet maker said it was likely to post a first-half net loss of 3 billion yen, down from its previous estimate of 1 billion yen profit on a special loss due to problems in its hot water heaters.
Aso Foam Crete Co Ltd ended up 29.6 percent, or by the daily limit of 80 yen, at 350 yen, on speculation that Liberal Democratic Party Secretary-General Taro Aso would become prime minister following Fukuda's resignation.
The Jasdaq-traded company which specialises in concrete structure projects is owned by Aso's family and is the only listed company among the 60 firms that make up the Aso Group.
Animation and comic-related shares also attracted investors as Aso is known as a comic buff.
Mandarake Inc , a second-hand "manga" comic store chain, soared 16.5 percent to 353,000 yen, and trading card retailer Broccoli Co Ltd jumped 20.7 percent to 70 yen.
Declining shares beat advancing ones by more than 9 to 1. (Reporting by Taiga Uranaka; Editing by Edwina Gibbs)
Read more...
*Inpex and other energy shares plunge on oil price fall
*Fukuda resignation mostly seen having little direct impact (Adds stocks and comments)
By Taiga Uranaka
TOKYO, Sept 2 (Reuters) - Japan's Nikkei stock average fell 1.8 percent to a five-month closing low on Tuesday, with energy shares such as oil and gas field developer Inpex Holdings Inc plunging on a sharp slide in oil prices.
The market moved in a narrow range for most of the day but fell sharply in the last hour of trade, hit by a sharp drop in index futures, whose impact was exaggerated by thin trade.
While most market participants said Prime Minister Yasuo Fukuda's abrupt resignation had no direct impact on the market, some said there was nervousness about foreign investor reaction.
"After all, this is two prime ministers in a row who have basically just given up, it looks pretty negative," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
The benchmark Nikkei .N225 ended down 224.71 points to 12,609.47, after rising as high as 12,920.52, while the broader Topix fell 1.5 percent to 1,212.37.
Although trade picked up slightly, with 1.8 billion shares changing hands, compared to last week's daily average of 1.42 billion, it was still thin.
"The number of market participants was small despite expectations for foreign investors to return after the Labor Day holiday," said Norio Shimura, deputy head of the equity department at Chuo Securities.
ENERGY STOCKS DOWN
Inpex fell 6.7 percent to 1.07 million yen, becoming the biggest percentage loser on the Nikkei after oil plunged more than $4 on Monday.
Concerns that Hurricane Gustav would cause lasting damage to the U.S. oil sector eased after the storm weakened before hitting the Louisiana coast. [O/N]
Trading houses, which have stakes in oil fields, were also hit, with Mitsubishi Corp dropping 4.1 percent to 2,825 yen and Mitsui & Co down 5.4 percent at 1,790 yen.
Toto Ltd slid 4.7 percent to 759 yen after the toilet maker said it was likely to post a first-half net loss of 3 billion yen, down from its previous estimate of 1 billion yen profit on a special loss due to problems in its hot water heaters.
Aso Foam Crete Co Ltd ended up 29.6 percent, or by the daily limit of 80 yen, at 350 yen, on speculation that Liberal Democratic Party Secretary-General Taro Aso would become prime minister following Fukuda's resignation.
The Jasdaq-traded company which specialises in concrete structure projects is owned by Aso's family and is the only listed company among the 60 firms that make up the Aso Group.
Animation and comic-related shares also attracted investors as Aso is known as a comic buff.
Mandarake Inc , a second-hand "manga" comic store chain, soared 16.5 percent to 353,000 yen, and trading card retailer Broccoli Co Ltd jumped 20.7 percent to 70 yen.
Declining shares beat advancing ones by more than 9 to 1. (Reporting by Taiga Uranaka; Editing by Edwina Gibbs)
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HK shares end 0.7 pct higher as airlines rise
* Late rally in helps HSI close higher
* Chinese airlines soar on lower crude prices; CNOOC slumps
* Turnover remains thin (Updates to close)
By Parvathy Ullatil
HONG KONG, Sept 2 (Reuters) - Hong Kong shares recouped earlier losses to add 0.7 percent, lifted by gains in airline stocks and refiner Sinopec as crude prices fell back.
CNOOC fell 5.2 percent after U.S. crude prices extended losses on speculation that a weaker-than-expected Hurricane Gustav would not lead to any major supply disruption. Prices had run up in the wake of the approaching storm.
Lower oil prices propped up shares in Air China , the nation's biggest international airline, which gained 8.7 percent to close at a near one-month high of HK$4.11.
China Southern Airlines rallied 9.5 percent while Asia's third largest airline Cathay Pacific rose 3.5 percent.
A range of stocks, including power utility CLP Holdings and conglomerate Swire Pacific , crept higher in afternoon trade as investors wagered two days of sharp declines in oil prices would lift Wall Street, which was closed on Monday for a public holiday.
"It is very encouraging to see the way oil prices collapsed as soon as the threat of a major supply disruption abated. It shows that oil is still on the back foot," said Howard Gorges, vice chairman with South China Brokerages.
The benchmark Hang Seng Index .HSI closed 136.15 points higher at 21,042.46 after dropping to 20,595.59 earlier.
Mainboard turnover fell to HK$49.4 billion ($6.3 billion) from Monday's 1-1/2-year low of HK$41.1 billion.
"Given the slim turnover in the market it is pretty easy for short sellers to push the market lower. We still haven't hit a level which will support strong buying," said Gorges.
U.S. markets were closed on Monday for Labor Day.
End-of-the-session short covering lifted index heavyweights HSBC Holdings and China Mobile more than 1 percent each.
Sinopec Corp, Asia's biggest refiner, advanced 3.2 percent with lower crude oil prices seen easing pressure on its refining margins.
Shares in port operator China Merchants Holdings jumped 4.4 percent after it reported 33 percent growth in first half net profit at HK$2 billion.
The China Enterprises Index .HSCE of top locally listed mainland Chinese firms slipped 1.2 percent.
Retreating oil prices drove up the U.S. dollar, reducing the safe haven appeal of bullion. Gold miner Zijin Mining fell 6.2 percent to a one week low of HK$4.85, while Lingbao Gold dropped 4.2 percent.
Aluminum Corp of China slipped 2.8 percent as investors fretted over a bigger-than-expected fall in first-half profits as the company grapples with falling prices for its main products.
Shares in China Resources Power fell 3.6 percent after Deutsche Bank downgraded it to "hold" on valuation grounds. (Reporting by Parvathy Ullatil; Editing by Louise Heavens)
Read more...
* Chinese airlines soar on lower crude prices; CNOOC slumps
* Turnover remains thin (Updates to close)
By Parvathy Ullatil
HONG KONG, Sept 2 (Reuters) - Hong Kong shares recouped earlier losses to add 0.7 percent, lifted by gains in airline stocks and refiner Sinopec as crude prices fell back.
CNOOC fell 5.2 percent after U.S. crude prices extended losses on speculation that a weaker-than-expected Hurricane Gustav would not lead to any major supply disruption. Prices had run up in the wake of the approaching storm.
Lower oil prices propped up shares in Air China , the nation's biggest international airline, which gained 8.7 percent to close at a near one-month high of HK$4.11.
China Southern Airlines rallied 9.5 percent while Asia's third largest airline Cathay Pacific rose 3.5 percent.
A range of stocks, including power utility CLP Holdings and conglomerate Swire Pacific , crept higher in afternoon trade as investors wagered two days of sharp declines in oil prices would lift Wall Street, which was closed on Monday for a public holiday.
"It is very encouraging to see the way oil prices collapsed as soon as the threat of a major supply disruption abated. It shows that oil is still on the back foot," said Howard Gorges, vice chairman with South China Brokerages.
The benchmark Hang Seng Index .HSI closed 136.15 points higher at 21,042.46 after dropping to 20,595.59 earlier.
Mainboard turnover fell to HK$49.4 billion ($6.3 billion) from Monday's 1-1/2-year low of HK$41.1 billion.
"Given the slim turnover in the market it is pretty easy for short sellers to push the market lower. We still haven't hit a level which will support strong buying," said Gorges.
U.S. markets were closed on Monday for Labor Day.
End-of-the-session short covering lifted index heavyweights HSBC Holdings and China Mobile more than 1 percent each.
Sinopec Corp, Asia's biggest refiner, advanced 3.2 percent with lower crude oil prices seen easing pressure on its refining margins.
Shares in port operator China Merchants Holdings jumped 4.4 percent after it reported 33 percent growth in first half net profit at HK$2 billion.
The China Enterprises Index .HSCE of top locally listed mainland Chinese firms slipped 1.2 percent.
Retreating oil prices drove up the U.S. dollar, reducing the safe haven appeal of bullion. Gold miner Zijin Mining fell 6.2 percent to a one week low of HK$4.85, while Lingbao Gold dropped 4.2 percent.
Aluminum Corp of China slipped 2.8 percent as investors fretted over a bigger-than-expected fall in first-half profits as the company grapples with falling prices for its main products.
Shares in China Resources Power fell 3.6 percent after Deutsche Bank downgraded it to "hold" on valuation grounds. (Reporting by Parvathy Ullatil; Editing by Louise Heavens)
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FTSE slips early on weak commodities; BA rises
* FTSE 100 falls 0.3 pct
* Weak metal, oil prices weigh on commodity stocks
* BA soars on lower crude prices
* Housebuilders rise on UK housing plan
By Dominic Lau
LONDON, Sept 2 (Reuters) - Britain's leading share index edged down early on Tuesday as weak metal and crude oil prices weighed on commodity stocks, though banks gained on a UK government plan to bolster the slumping housing market.
By 0733 GMT, the commodity-heavy FTSE 100 was down 15.7 points, or 0.3 percent, at 5,587.1, after falling 0.6 percent on Monday to snap a three-day winning run. The UK benchmark is down 13 percent so far this year.
Energy stocks fell as crude prices CLc1 extended Monday's $4 plunge by more than $1 to below $109 a barrel amid early signs that the weakened Hurricane Gustav had spared major Gulf oil facilities.
BP , Royal Dutch Shell , gas producer BG Group , Cairn Energy and Tullow Oil were off between 1.1 and 3.9 percent.
Weaker metal prices also weighed on mining stocks, with BHP Billiton , Rio Tinto , Xstrata , Anglo American , Antofagasta, Vedanta Resources and Eurasian Natural Resources down 1.4 to 3.3 percent.
Lonmin added 0.3 percent after it said it continued to believe that Xstrata's unsolicited, pre-conditional proposed offer undervalued the company's assets and reserves and would continue to oppose it.
Falling oil prices lifted British Airways , which soared 5.1 percent to top the FTSE 100 gainers.
Prime Minister Gordon Brown will unveil plans later on Tuesday to boost the country's slumping housing market as he launches a fightback after nearly a year trailing in the opinion polls.
"It's more of a cosmetic initiative. It's not really going to have a huge amount of effect on the market place. It shows willing socially and I think that's correct," said David Buik, strategist at BGC Partners.
Midcap housebuilders Persimmon , Taylor Wimpey , Barratt Developments , Bovis Homes and Bellway rose 3.9 to 8.9 percent. Building materials distributor Wolseley advanced 3.1 percent.
Banks were also firmer, with Royal Bank of Scotland , Barclays , HSBC , HBOS and Lloyds TSB putting on between 0.1 and 1.6 percent.
Investors will likely keep an eye on the U.S. ISM survey due at 1400 GMT for further clues on the state of the world's largest economy.
Mid-cap Informa put on 0.7 percent after the Times said private equity firms bidding for the publishing and events group were believed to be close to securing financing for the 3 billion pound acquisition.
Pubs group Greene King said it would meet its expectations for the current financial year, despite tough trading and a lacklustre outlook for the UK economy. The mid-cap firm was up 1.4 percent.
Within the pub sector, Enterprise Inns , Whitbread , Punch Taverns and Mitchells & Butlers dipped between 0.7 and 1.7 percent.
Read more...
* Weak metal, oil prices weigh on commodity stocks
* BA soars on lower crude prices
* Housebuilders rise on UK housing plan
By Dominic Lau
LONDON, Sept 2 (Reuters) - Britain's leading share index edged down early on Tuesday as weak metal and crude oil prices weighed on commodity stocks, though banks gained on a UK government plan to bolster the slumping housing market.
By 0733 GMT, the commodity-heavy FTSE 100 was down 15.7 points, or 0.3 percent, at 5,587.1, after falling 0.6 percent on Monday to snap a three-day winning run. The UK benchmark is down 13 percent so far this year.
Energy stocks fell as crude prices CLc1 extended Monday's $4 plunge by more than $1 to below $109 a barrel amid early signs that the weakened Hurricane Gustav had spared major Gulf oil facilities.
BP , Royal Dutch Shell , gas producer BG Group , Cairn Energy and Tullow Oil were off between 1.1 and 3.9 percent.
Weaker metal prices also weighed on mining stocks, with BHP Billiton , Rio Tinto , Xstrata , Anglo American , Antofagasta, Vedanta Resources and Eurasian Natural Resources down 1.4 to 3.3 percent.
Lonmin added 0.3 percent after it said it continued to believe that Xstrata's unsolicited, pre-conditional proposed offer undervalued the company's assets and reserves and would continue to oppose it.
Falling oil prices lifted British Airways , which soared 5.1 percent to top the FTSE 100 gainers.
Prime Minister Gordon Brown will unveil plans later on Tuesday to boost the country's slumping housing market as he launches a fightback after nearly a year trailing in the opinion polls.
"It's more of a cosmetic initiative. It's not really going to have a huge amount of effect on the market place. It shows willing socially and I think that's correct," said David Buik, strategist at BGC Partners.
Midcap housebuilders Persimmon , Taylor Wimpey , Barratt Developments , Bovis Homes and Bellway rose 3.9 to 8.9 percent. Building materials distributor Wolseley advanced 3.1 percent.
Banks were also firmer, with Royal Bank of Scotland , Barclays , HSBC , HBOS and Lloyds TSB putting on between 0.1 and 1.6 percent.
Investors will likely keep an eye on the U.S. ISM survey due at 1400 GMT for further clues on the state of the world's largest economy.
Mid-cap Informa put on 0.7 percent after the Times said private equity firms bidding for the publishing and events group were believed to be close to securing financing for the 3 billion pound acquisition.
Pubs group Greene King said it would meet its expectations for the current financial year, despite tough trading and a lacklustre outlook for the UK economy. The mid-cap firm was up 1.4 percent.
Within the pub sector, Enterprise Inns , Whitbread , Punch Taverns and Mitchells & Butlers dipped between 0.7 and 1.7 percent.
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Crude fall lifts Europe shares; euro boosts autos
* FTSEurofirst 300 up 0.7 percent
* Airlines, autos gain as oil, euro fall
* Miners and oil stocks limit index's advance
By Joanne Frearson
LONDON, Sept 2 (Reuters) - European shares rose early on Tuesday as a sharp fall in the oil price took the edge off inflation concerns and lifted airlines and travel stocks, while autos gained from a weakening euro.
At 0845 GMT, the FTSEurofirst 300 index of top European shares was 0.7 percent higher at 1,198.16, recovering from a low of 1,182.72 points.
Oil CLc1 sank nearly $9.50 a barrel to around $106, hitting its lowest since early April on initial signs that a weakened Hurricane Gustav spared major Gulf oil facilities.
BP , Total , StatoilHydro and Royal Dutch Shell fell between 1 and 2.4 percent.
"There is no real reason why the oil price should go up with Hurricane Gustav weakening. The market should be led by further weakness in the commodity price," said Justin Urquhart Stewart, director at Seven Investment Management.
Airline stocks gained on the lower oil price, with Lufthansa up 3 percent, British Airways up 5.2 percent and Air France KLM up 3 percent.
Travel operators were also helped by the lower oil price, Thomas Cook Group and Carnival CCCL.L both up over 5 percent.
Automobiles notched up strong gains, benefiting from a weaker euro. German car maker Daimler ticked up 4.3 percent, while peer BMW rose 5 percent, and France's Renault edged up 4.2 percent.
German exchange operator Deutsche Boerse rose 3.8 percent after its two biggest shareholders said they would work together to explore all options for shareholder value creation.
In the UK banking sector, Barclays was up 3 percent on reports the group is in talks to sell 50 percent of its Spanish insurance and pension business.
Across Europe, Britain's FTSE .FTSE rose 0.4 percent, Germany's DAX .GDAXI gained 1.1 percent, and France's CAC .FCHI rose 0.9 percent.
TOO MANY BANKS?
Germany's Commerzbank was down 2.8 percent as UBS cut its price target to 19.5 euros from 22 euros. The bank is buying rival Dresdner, a unit of insurer Allianz , for $14.5 billion.
"In Europe, there is still concern over the German banking sector and how much more rationalisation is needed. There are too many banks and not enough business and little reason to be positive," said Stewart.
Sticking with the downside, Alcatel-Lucent fell 1 percent after the world's top provider of fixed-line telecoms networks named a new management team.
Energy stocks fell sharply, with BP , StatOilHydro and Total down 1.9-4 percent, while miners also declined.
Rio Tinto was among the heaviest drags on the index, with a fall of 4 percent. (Reporting by Joanne Frearson, editing by Will Waterman)
Read more...
* Airlines, autos gain as oil, euro fall
* Miners and oil stocks limit index's advance
By Joanne Frearson
LONDON, Sept 2 (Reuters) - European shares rose early on Tuesday as a sharp fall in the oil price took the edge off inflation concerns and lifted airlines and travel stocks, while autos gained from a weakening euro.
At 0845 GMT, the FTSEurofirst 300 index of top European shares was 0.7 percent higher at 1,198.16, recovering from a low of 1,182.72 points.
Oil CLc1 sank nearly $9.50 a barrel to around $106, hitting its lowest since early April on initial signs that a weakened Hurricane Gustav spared major Gulf oil facilities.
BP , Total , StatoilHydro and Royal Dutch Shell fell between 1 and 2.4 percent.
"There is no real reason why the oil price should go up with Hurricane Gustav weakening. The market should be led by further weakness in the commodity price," said Justin Urquhart Stewart, director at Seven Investment Management.
Airline stocks gained on the lower oil price, with Lufthansa up 3 percent, British Airways up 5.2 percent and Air France KLM up 3 percent.
Travel operators were also helped by the lower oil price, Thomas Cook Group and Carnival CCCL.L both up over 5 percent.
Automobiles notched up strong gains, benefiting from a weaker euro. German car maker Daimler ticked up 4.3 percent, while peer BMW rose 5 percent, and France's Renault edged up 4.2 percent.
German exchange operator Deutsche Boerse rose 3.8 percent after its two biggest shareholders said they would work together to explore all options for shareholder value creation.
In the UK banking sector, Barclays was up 3 percent on reports the group is in talks to sell 50 percent of its Spanish insurance and pension business.
Across Europe, Britain's FTSE .FTSE rose 0.4 percent, Germany's DAX .GDAXI gained 1.1 percent, and France's CAC .FCHI rose 0.9 percent.
TOO MANY BANKS?
Germany's Commerzbank was down 2.8 percent as UBS cut its price target to 19.5 euros from 22 euros. The bank is buying rival Dresdner, a unit of insurer Allianz , for $14.5 billion.
"In Europe, there is still concern over the German banking sector and how much more rationalisation is needed. There are too many banks and not enough business and little reason to be positive," said Stewart.
Sticking with the downside, Alcatel-Lucent fell 1 percent after the world's top provider of fixed-line telecoms networks named a new management team.
Energy stocks fell sharply, with BP , StatOilHydro and Total down 1.9-4 percent, while miners also declined.
Rio Tinto was among the heaviest drags on the index, with a fall of 4 percent. (Reporting by Joanne Frearson, editing by Will Waterman)
Read more...
Gustav Spares New Orleans; Hurricane Hanna Heads for Carolinas
By Brian K. Sullivan and Alex Morales
Sept. 2 (Bloomberg) -- Gustav, now downgraded to a depression over western Louisiana, spared New Orleans the devastation wrought three years ago by Katrina, as Hurricane Hanna passed over the Bahamas on a course for the Carolinas.
Hurricane Gustav left half of New Orleans without power as it lashed Louisiana and Mississippi, toppling trees and tearing off roofs. The city's flood defenses remained intact and the death toll may have been kept to single figures, officials said. Katrina flooded 80 percent of the city and killed 1,800 people.
``We had everything coordinated. We had a good plan,'' New Orleans Mayor Ray Nagin said on CNN late yesterday. Officials are ``getting the city ready to receive its citizens again.''
Some 1.9 million people fled Louisiana's coastal areas as authorities, stung by criticism of their handling of Katrina, undertook the biggest evacuation in the state's history. Emergency workers stacked sandbags late yesterday and prevented a storm surge from overwhelming a levee south of New Orleans.
``We have stopped the bleeding,'' Billy Nungesser, president of Plaquemines Parish, about 55 miles (88 kilometers) from New Orleans, said in a statement. ``So far no homes have flooded,'' he said.
An unmanned Predator drone and a helicopter with night- vision equipment will survey the area's flood barriers, Louisiana Governor Bobby Jindal told reporters yesterday in Baton Rouge, the state capital.
Death Toll
The storm killed more than 70 people in the Dominican Republic, Haiti and Jamaica, as it passed over the Caribbean. In the U.S., seven deaths are being blamed on the storm so far, Jindal said, adding that the toll may rise.
``We're not hearing reports at this time of large numbers of fatalities or injuries,'' Jindal said. ``You are going to see severe property damage.''
Gustav's winds slowed to about 35 miles per hour shortly before 4 a.m. local time, the National Hurricane Center said. The storm was moving northwest at almost 10 mph and was about 135 miles northwest of Lafayette, Louisiana, the center said. It is forecast to cross into northeastern Texas later today.
To the southeast, Hurricane Hanna was stalled and bringing heavy rain to the southeastern Bahamas, the Turks and Caicos and Haiti, the center said. The system, packing 80 mph winds, was 35 miles east-northeast of Great Inagua Island, the center said in an advisory posted on its Web site at about 4:30 a.m. Miami time. Hanna was drifting east at 2 mph and is forecast to begin moving northeast before possible landfall in South Carolina on Sept. 5.
East of Hanna, Tropical Storm Ike formed, while off the West Africa coast, the 10th tropical depression of the Atlantic hurricane season developed today.
Tested Preparedness
Gustav tested the preparedness of authorities after Katrina, which made landfall as a Category 3 storm, killed 1,800 people in Louisiana and Mississippi and caused more than $80 billion in damage.
The Army Corps of Engineers has worked since 2005 to strengthen the levees, which form a ring surrounding New Orleans, a city of 300,000 people that lies below sea-level. Work isn't scheduled to be complete until 2011.
Waves crashed high against some flood walls yesterday and washed over the Industrial Canal, exposing weaknesses in the system. Gustav, which came ashore as a Category 2 storm, was less powerful than Katrina and brought a maximum storm surge of about 14 feet, some 5 feet lower than in 2005.
After Katrina, thousands of people were forced to take shelter at the New Orleans Superdome and Convention Center. Only an estimated 10,000 people remained in the city this time to ride out the storm.
House Shaking
In Chauvin, close to the coast southeast of Houma, resident Miriam LeBoeuf stayed put as the eye of the storm passed over.
``My house is 5 feet off the ground, it was shaking like a freight train,'' she said by telephone yesterday. ``I have glass shelves and they shook right off the wall.''
Lafourche Parish, southwest of New Orleans, said it was beginning to assess the impact of the storm and that high winds had damaged a large number of homes and businesses.
The hurricane shut down all oil production in the Gulf of Mexico and 95 percent of gas production as Exxon Mobil Corp., Royal Dutch Shell Plc and other companies took safety measures, Jindal said. As much as 20 percent of oil and gas production may be restored by this weekend, he added.
Jindal asked the federal government to release fuel from the Strategic Petroleum Reserve as about 85 percent of South Louisiana service stations don't have gasoline in their tanks.
Gustav may trigger insurance claims of as much as $10 billion, making it potentially the fourth-costliest storm to hit the U.S., according to Newark, California-based Risk Management Solutions Inc.
Insured losses on land will be between $3 billion and $7 billion and oil-drilling damage between $1 billion and $3 billion, it said. That's ``significantly smaller'' than Katrina's record $41.1 billion, Robert Muir-Wood, head of research for RMS, said in an interview on Bloomberg Television.
To contact the reporter on this story: Brian K. Sullivan in Baton Rouge at bsullivan10@bloomberg.net; Alex Morales in London at amorales2@bloomberg.net.
Read more...
Sept. 2 (Bloomberg) -- Gustav, now downgraded to a depression over western Louisiana, spared New Orleans the devastation wrought three years ago by Katrina, as Hurricane Hanna passed over the Bahamas on a course for the Carolinas.
Hurricane Gustav left half of New Orleans without power as it lashed Louisiana and Mississippi, toppling trees and tearing off roofs. The city's flood defenses remained intact and the death toll may have been kept to single figures, officials said. Katrina flooded 80 percent of the city and killed 1,800 people.
``We had everything coordinated. We had a good plan,'' New Orleans Mayor Ray Nagin said on CNN late yesterday. Officials are ``getting the city ready to receive its citizens again.''
Some 1.9 million people fled Louisiana's coastal areas as authorities, stung by criticism of their handling of Katrina, undertook the biggest evacuation in the state's history. Emergency workers stacked sandbags late yesterday and prevented a storm surge from overwhelming a levee south of New Orleans.
``We have stopped the bleeding,'' Billy Nungesser, president of Plaquemines Parish, about 55 miles (88 kilometers) from New Orleans, said in a statement. ``So far no homes have flooded,'' he said.
An unmanned Predator drone and a helicopter with night- vision equipment will survey the area's flood barriers, Louisiana Governor Bobby Jindal told reporters yesterday in Baton Rouge, the state capital.
Death Toll
The storm killed more than 70 people in the Dominican Republic, Haiti and Jamaica, as it passed over the Caribbean. In the U.S., seven deaths are being blamed on the storm so far, Jindal said, adding that the toll may rise.
``We're not hearing reports at this time of large numbers of fatalities or injuries,'' Jindal said. ``You are going to see severe property damage.''
Gustav's winds slowed to about 35 miles per hour shortly before 4 a.m. local time, the National Hurricane Center said. The storm was moving northwest at almost 10 mph and was about 135 miles northwest of Lafayette, Louisiana, the center said. It is forecast to cross into northeastern Texas later today.
To the southeast, Hurricane Hanna was stalled and bringing heavy rain to the southeastern Bahamas, the Turks and Caicos and Haiti, the center said. The system, packing 80 mph winds, was 35 miles east-northeast of Great Inagua Island, the center said in an advisory posted on its Web site at about 4:30 a.m. Miami time. Hanna was drifting east at 2 mph and is forecast to begin moving northeast before possible landfall in South Carolina on Sept. 5.
East of Hanna, Tropical Storm Ike formed, while off the West Africa coast, the 10th tropical depression of the Atlantic hurricane season developed today.
Tested Preparedness
Gustav tested the preparedness of authorities after Katrina, which made landfall as a Category 3 storm, killed 1,800 people in Louisiana and Mississippi and caused more than $80 billion in damage.
The Army Corps of Engineers has worked since 2005 to strengthen the levees, which form a ring surrounding New Orleans, a city of 300,000 people that lies below sea-level. Work isn't scheduled to be complete until 2011.
Waves crashed high against some flood walls yesterday and washed over the Industrial Canal, exposing weaknesses in the system. Gustav, which came ashore as a Category 2 storm, was less powerful than Katrina and brought a maximum storm surge of about 14 feet, some 5 feet lower than in 2005.
After Katrina, thousands of people were forced to take shelter at the New Orleans Superdome and Convention Center. Only an estimated 10,000 people remained in the city this time to ride out the storm.
House Shaking
In Chauvin, close to the coast southeast of Houma, resident Miriam LeBoeuf stayed put as the eye of the storm passed over.
``My house is 5 feet off the ground, it was shaking like a freight train,'' she said by telephone yesterday. ``I have glass shelves and they shook right off the wall.''
Lafourche Parish, southwest of New Orleans, said it was beginning to assess the impact of the storm and that high winds had damaged a large number of homes and businesses.
The hurricane shut down all oil production in the Gulf of Mexico and 95 percent of gas production as Exxon Mobil Corp., Royal Dutch Shell Plc and other companies took safety measures, Jindal said. As much as 20 percent of oil and gas production may be restored by this weekend, he added.
Jindal asked the federal government to release fuel from the Strategic Petroleum Reserve as about 85 percent of South Louisiana service stations don't have gasoline in their tanks.
Gustav may trigger insurance claims of as much as $10 billion, making it potentially the fourth-costliest storm to hit the U.S., according to Newark, California-based Risk Management Solutions Inc.
Insured losses on land will be between $3 billion and $7 billion and oil-drilling damage between $1 billion and $3 billion, it said. That's ``significantly smaller'' than Katrina's record $41.1 billion, Robert Muir-Wood, head of research for RMS, said in an interview on Bloomberg Television.
To contact the reporter on this story: Brian K. Sullivan in Baton Rouge at bsullivan10@bloomberg.net; Alex Morales in London at amorales2@bloomberg.net.
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U.S. Factories Probably Stagnated for Second Month in August
By Bob Willis
Enlarge Image/Details
Sept. 2 (Bloomberg) -- Manufacturing in the U.S. stagnated in August for a second month as weakening domestic demand countered rising exports, economists said before a report today.
The Institute for Supply Management's factory index was unchanged at 50.0, according to the median estimate in a Bloomberg survey before today's report from the Tempe, Arizona- based group. The ISM gauge has hovered near 50, the dividing line between expansion and contraction, for the past year.
Manufacturers are paring output and investments as tumbling home prices and high gasoline and other commodity costs squeeze demand. Surging exports are keeping factories from stumbling as the broader economy slows.
``Exports continue to save the day as strong demand from abroad is putting a floor under manufacturing,'' said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. ``Final demand will remain weak as the fiscal stimulus boost fades and tight credit conditions hurt investment.''
Economists' forecasts ranged from 48.5 to 52. The ISM will release the report at 10 a.m. New York time.
A separate report from the Commerce Department at the same time may show construction spending fell 0.4 percent in July for a second month, according to economists surveyed by Bloomberg.
The economy will grow at an average 0.7 percent pace in the second half of the year, economists surveyed by Bloomberg News forecast in the first week of August. Last week, the government reported the economy grew at a better-than-forecast 3.3 percent annual rate in the second quarter, following 0.9 percent in the first three months of the year.
Shrinking Trade Deficit
The smallest trade deficit in eight years was the biggest contributor to growth last quarter. The smaller gap added 3.1 percentage points to growth, the most since 1980. That is likely to diminish as overseas economies slow and the dollar strengthens.
Manufacturers have also turned cautious as consumer spending weakens as the effects of tax rebate checks fade and Americans continue to cope with tumbling house prices and gasoline that topped $4 a gallon two months ago.
The auto industry is at the forefront of the manufacturing slump. Sales of cars and light trucks in July slid to a 12.5 million annual rate, the lowest level since 1993, according to industry figures.
General Motors Corp. Chief Executive Officer Rick Wagoner said Aug. 16 he's not yet seeing signs of a recovery in the U.S. economy or in vehicle sales.
The sluggish economy helped push GM, the world's largest automaker, to a $15.5 billion loss in the second quarter. ``It still feels to me like we're in it,'' Wagoner said of the economic slowdown.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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Enlarge Image/Details
Sept. 2 (Bloomberg) -- Manufacturing in the U.S. stagnated in August for a second month as weakening domestic demand countered rising exports, economists said before a report today.
The Institute for Supply Management's factory index was unchanged at 50.0, according to the median estimate in a Bloomberg survey before today's report from the Tempe, Arizona- based group. The ISM gauge has hovered near 50, the dividing line between expansion and contraction, for the past year.
Manufacturers are paring output and investments as tumbling home prices and high gasoline and other commodity costs squeeze demand. Surging exports are keeping factories from stumbling as the broader economy slows.
``Exports continue to save the day as strong demand from abroad is putting a floor under manufacturing,'' said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. ``Final demand will remain weak as the fiscal stimulus boost fades and tight credit conditions hurt investment.''
Economists' forecasts ranged from 48.5 to 52. The ISM will release the report at 10 a.m. New York time.
A separate report from the Commerce Department at the same time may show construction spending fell 0.4 percent in July for a second month, according to economists surveyed by Bloomberg.
The economy will grow at an average 0.7 percent pace in the second half of the year, economists surveyed by Bloomberg News forecast in the first week of August. Last week, the government reported the economy grew at a better-than-forecast 3.3 percent annual rate in the second quarter, following 0.9 percent in the first three months of the year.
Shrinking Trade Deficit
The smallest trade deficit in eight years was the biggest contributor to growth last quarter. The smaller gap added 3.1 percentage points to growth, the most since 1980. That is likely to diminish as overseas economies slow and the dollar strengthens.
Manufacturers have also turned cautious as consumer spending weakens as the effects of tax rebate checks fade and Americans continue to cope with tumbling house prices and gasoline that topped $4 a gallon two months ago.
The auto industry is at the forefront of the manufacturing slump. Sales of cars and light trucks in July slid to a 12.5 million annual rate, the lowest level since 1993, according to industry figures.
General Motors Corp. Chief Executive Officer Rick Wagoner said Aug. 16 he's not yet seeing signs of a recovery in the U.S. economy or in vehicle sales.
The sluggish economy helped push GM, the world's largest automaker, to a $15.5 billion loss in the second quarter. ``It still feels to me like we're in it,'' Wagoner said of the economic slowdown.
Bloomberg Survey
============================================
ISM ISM
Manu Prices
Index Index
============================================
Date of Release 09/02 09/02
Observation Period Aug. Aug.
--------------------------------------------
Median 50.0 82.0
Average 49.9 81.2
High Forecast 52.0 88.0
Low Forecast 48.5 70.0
Number of Participants 66 11
Previous 50.0 88.5
--------------------------------------------
4CAST Ltd. 49.5 ---
Action Economics 50.5 70.0
Aletti Gestielle SGR 50.2 75.0
Argus Research Corp. 52.0 ---
Banc of America Securitie 49.5 ---
Bank of Tokyo- Mitsubishi 50.6 ---
Bantleon Bank AG 49.3 ---
BBVA 48.5 ---
BMO Capital Markets 50.0 88.0
BNP Paribas 49.0 ---
Briefing.com 50.2 ---
CIBC World Markets 51.0 ---
ClearView Economics 50.5 ---
Commerzbank AG 49.0 ---
Credit Suisse 49.5 82.0
Daiwa Securities America 51.5 82.0
Danske Bank 50.0 ---
DekaBank 50.5 ---
Desjardins Group 50.0 ---
Deutsche Postbank AG 50.3 ---
Dresdner Kleinwort 49.8 87.0
DZ Bank 51.0 ---
First Trust Advisors 49.9 ---
Fortis 50.0 ---
FTN Financial 51.0 ---
Goldman, Sachs & Co. 50.0 ---
H&R Block Financial Advis 49.5 ---
Helaba 49.5 ---
HSBC Markets 50.0 82.0
IDEAglobal 49.5 ---
Informa Global Markets 49.0 ---
ING Financial Markets 49.5 81.0
Insight Economics 50.5 ---
Intesa-SanPaulo 49.5 ---
Janney Montgomery Scott L 49.2 ---
JPMorgan Private Client 50.6 ---
Landesbank Berlin 48.5 ---
Landesbank BW 48.5 ---
Lehman Brothers 51.0 ---
Lloyds TSB 50.0 ---
Maria Fiorini Ramirez Inc 49.5 ---
Merk Investments 49.3 ---
Merrill Lynch 50.0 ---
MFC Global Investment Man 49.0 82.5
Moody's Economy.com 50.0 ---
Morgan Stanley & Co. 49.0 ---
National Bank Financial 50.0 ---
Natixis 49.0 ---
Newedge 49.7 ---
Nomura Securities Intl. 49.5 85.0
Nord/LB 50.5 ---
PNC Bank 50.5 ---
RBS Greenwich Capital 49.5 ---
Ried, Thunberg & Co. 49.5 ---
Schneider Trading Associa 51.0 79.0
Scotia Capital 49.0 ---
Societe Generale 50.0 ---
Stone & McCarthy Research 49.3 ---
TD Securities 50.0 ---
Thomson Financial/IFR 51.9 ---
Unicredit MIB 50.0 ---
University of Maryland 50.5 ---
Wachovia Corp. 50.2 ---
WestLB AG 49.3 ---
Westpac Banking Co. 49.5 ---
Wrightson Associates 49.5 ---
============================================
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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Aso, Favorite to Lead Japan, May Increase Spending
By Keiko Ujikane
More Photos/Details
Sept. 2 (Bloomberg) -- Taro Aso, the favorite to become Japan's prime minister, may increase government spending in a country that already has the world's largest public debt, analysts said.
Aso, secretary-general of the ruling Liberal Democratic Party, is favored by polls to take over from Yasuo Fukuda, 72, who resigned as prime minister yesterday after less than a year in office marked by political gridlock and plunging popularity.
Aso, 67, said last month that the government should consider postponing its goal of balancing the budget by 2011 because Japan may be in a recession. In contrast, Fukuda and Finance Minister Bunmei Ibuki stuck to the pledge even as they prepared an economic stimulus package unveiled last week.
``Aso, whilst not exactly an `old guard' fiscal spendthrift, is certainly not in the camp of the Ministry of Finance-oriented fiscal conservatives who formed the core of Fukuda's Cabinet,'' Peter Wilson, a yen strategist at the London-based subsidiary of Mitsubishi UFJ Financial Group Inc., said in a note.
Fukuda's government on Aug. 29 said it would spend about 2 trillion yen ($18 billion) in measures to boost an economy that contracted at an annual 2.4 percent pace in the second quarter.
The government also announced a one-off tax cut for low income earners that may have to be funded by the issue of bonds later this year should tax revenue fall short of expectations.
Borrow and Spend
``If Aso becomes the next prime minister, the risk will be more spending and borrowing as he focuses on boosting the economy,'' said Tatsuo Ichikawa, a senior strategist in Tokyo at RBS Securities Japan Ltd. ``That's negative to the government's fiscal outlook, but there may be limited impact on bonds in the near term as investors are more focused on slowing growth.''
Bonds rallied over the past three months on concern the economy will keep slowing, pushing the yield on 10-year debt to 1.4 percent on Aug. 29, the lowest since April. The yield fell 1.5 basis points to 1.455 percent at the lunch break in Tokyo.
In a Jiji Press poll taken last month, Aso was voted the most-suitable person for prime minister among all political parties. Other candidates include former Defense Minister Yuriko Koike, 56, according to Dan Harada, an LDP member and founder of the Nagatacho Forum consulting company.
The LDP may elect a new president around Sept. 20, public broadcaster NHK reported, without saying where it got the information. The LDP president becomes prime minister because of the party's strength in parliament.
`Populist Measures'
Aso's selection as leader ``should push the bond market toward the realization it was coming to anyway -- that more Japanese government bonds will have to be issued,'' said Wilson. ``The risk now is that such populist measures will be larger than before and that Aso may even throw in some additional measures of his own.''
The LDP agreed to include the tax cut for low-income earners in the stimulus plan after lobbying from its junior coalition partner, the New Komeito Party. The government hasn't decided on the scale of the tax cut or how it would be funded.
Tax revenue was 51 trillion yen in the year ended March 31, 2.9 percent less than the 52.6 trillion yen projected in December, the Finance Ministry said in July.
``There's a possibility that a shortfall in tax revenue will expand to between 3 trillion yen and 4 trillion yen'' this fiscal year, said Kazuhiko Sano, chief strategist at Nikko Citigroup Ltd. in Tokyo. ``It's unavoidable to issue bonds.''
Japan's public debt will total 182 percent of gross domestic product in 2008, according to the Organization for Economic Cooperation and Development.
Debt Rating
``Even if all goes according to the government's plan over the medium term, it will be very difficult -- almost impossible -- to achieve a primary budget balance by 2011,'' said Takahira Ogawa, director of sovereign ratings at Standard & Poor's in Singapore. ``There are voices from inside and outside the LDP saying, `postpone a little bit' because macroeconomic conditions are not good.''
Standard & Poor's raised the rating on Japan's long-term, local-currency debt to AA, the third-highest investment grade, in April 2007. Ogawa said he didn't expect Japan to balance the budget by 2011 even before Fukuda's resignation.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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More Photos/Details
Sept. 2 (Bloomberg) -- Taro Aso, the favorite to become Japan's prime minister, may increase government spending in a country that already has the world's largest public debt, analysts said.
Aso, secretary-general of the ruling Liberal Democratic Party, is favored by polls to take over from Yasuo Fukuda, 72, who resigned as prime minister yesterday after less than a year in office marked by political gridlock and plunging popularity.
Aso, 67, said last month that the government should consider postponing its goal of balancing the budget by 2011 because Japan may be in a recession. In contrast, Fukuda and Finance Minister Bunmei Ibuki stuck to the pledge even as they prepared an economic stimulus package unveiled last week.
``Aso, whilst not exactly an `old guard' fiscal spendthrift, is certainly not in the camp of the Ministry of Finance-oriented fiscal conservatives who formed the core of Fukuda's Cabinet,'' Peter Wilson, a yen strategist at the London-based subsidiary of Mitsubishi UFJ Financial Group Inc., said in a note.
Fukuda's government on Aug. 29 said it would spend about 2 trillion yen ($18 billion) in measures to boost an economy that contracted at an annual 2.4 percent pace in the second quarter.
The government also announced a one-off tax cut for low income earners that may have to be funded by the issue of bonds later this year should tax revenue fall short of expectations.
Borrow and Spend
``If Aso becomes the next prime minister, the risk will be more spending and borrowing as he focuses on boosting the economy,'' said Tatsuo Ichikawa, a senior strategist in Tokyo at RBS Securities Japan Ltd. ``That's negative to the government's fiscal outlook, but there may be limited impact on bonds in the near term as investors are more focused on slowing growth.''
Bonds rallied over the past three months on concern the economy will keep slowing, pushing the yield on 10-year debt to 1.4 percent on Aug. 29, the lowest since April. The yield fell 1.5 basis points to 1.455 percent at the lunch break in Tokyo.
In a Jiji Press poll taken last month, Aso was voted the most-suitable person for prime minister among all political parties. Other candidates include former Defense Minister Yuriko Koike, 56, according to Dan Harada, an LDP member and founder of the Nagatacho Forum consulting company.
The LDP may elect a new president around Sept. 20, public broadcaster NHK reported, without saying where it got the information. The LDP president becomes prime minister because of the party's strength in parliament.
`Populist Measures'
Aso's selection as leader ``should push the bond market toward the realization it was coming to anyway -- that more Japanese government bonds will have to be issued,'' said Wilson. ``The risk now is that such populist measures will be larger than before and that Aso may even throw in some additional measures of his own.''
The LDP agreed to include the tax cut for low-income earners in the stimulus plan after lobbying from its junior coalition partner, the New Komeito Party. The government hasn't decided on the scale of the tax cut or how it would be funded.
Tax revenue was 51 trillion yen in the year ended March 31, 2.9 percent less than the 52.6 trillion yen projected in December, the Finance Ministry said in July.
``There's a possibility that a shortfall in tax revenue will expand to between 3 trillion yen and 4 trillion yen'' this fiscal year, said Kazuhiko Sano, chief strategist at Nikko Citigroup Ltd. in Tokyo. ``It's unavoidable to issue bonds.''
Japan's public debt will total 182 percent of gross domestic product in 2008, according to the Organization for Economic Cooperation and Development.
Debt Rating
``Even if all goes according to the government's plan over the medium term, it will be very difficult -- almost impossible -- to achieve a primary budget balance by 2011,'' said Takahira Ogawa, director of sovereign ratings at Standard & Poor's in Singapore. ``There are voices from inside and outside the LDP saying, `postpone a little bit' because macroeconomic conditions are not good.''
Standard & Poor's raised the rating on Japan's long-term, local-currency debt to AA, the third-highest investment grade, in April 2007. Ogawa said he didn't expect Japan to balance the budget by 2011 even before Fukuda's resignation.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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Switzerland Second Quarter GDP: Statistical Summary (Table)
By Kristian Siedenburg
Sept. 2 (Bloomberg) -- Following is the summary of second quarter GDP for Switzerland from the State Secretariat for Economic Affairs in Berne:
To contact the reporter on this story: Kristian Siedenburg in Budapest at ksiedenburg@bloomberg.net
Last Updated: September 2, 2008 01:45 EDT
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Sept. 2 (Bloomberg) -- Following is the summary of second quarter GDP for Switzerland from the State Secretariat for Economic Affairs in Berne:
==============================================================================
2Q 1Q 4Q 3Q 2Q 1Q
2008 2008 2007 2007 2007 2007
==============================================================================
------------ QoQ Percentage Changes (SA) ------------
Real GDP QoQ 0.4% 0.3% 1.0% 0.7% 0.9% 1.0%
Final Consumption 0.7% 0.3% 0.2% 0.4% 0.5% 0.6%
Household Consumption 0.6% 0.2% 0.5% 0.8% 0.6% 0.8%
Government Consumption 0.4% 0.4% -1.6% -1.2% -0.2% -0.1%
Gross Fixed Capital -0.7% 0.6% 0.7% -2.8% 3.5% 1.3%
Exports 3.6% 0.8% 0.0% 2.1% 1.2% 2.8%
Imports 3.8% -3.0% 2.4% 0.8% 0.7% -0.7%
------------ YoY Percentage Changes (NSA) -----------
Real GDP YoY 2.3% 3.0% 3.8% 3.1% 3.4% 3.0%
Final Consumption 1.8% 1.0% 2.0% 1.7% 1.5% 1.1%
Household Consumption 2.5% 1.7% 3.0% 2.2% 1.7% 1.5%
==============================================================================
2Q 1Q 4Q 3Q 2Q 1Q
2008 2008 2007 2007 2007 2007
==============================================================================
Government Consumption -1.6% -2.6% -3.2% -1.2% 0.7% -0.8%
Gross Fixed Capital -2.2% 2.1% 2.6% 4.4% 8.1% 6.4%
Exports 6.3% 3.9% 6.1% 11.2% 12.3% 8.4%
Imports 4.0% 0.7% 3.2% 8.3% 6.7% 5.8%
==============================================================================
Source: State Secretariat for Economic Affairs (SECO)
To contact the reporter on this story: Kristian Siedenburg in Budapest at ksiedenburg@bloomberg.net
Last Updated: September 2, 2008 01:45 EDT
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Mboweni Says He Will Continue as Central Bank Governor If Asked
By Vernon Wessels
Sept. 2 (Bloomberg) -- South African central bank Governor Tito Mboweni said he will remain in his position next year after his term ends if he is asked to.
``I will complete my current term, '' Mboweni told reporters in Pretoria today. ``If asked to serve, I will.''
The president selects the governor and his deputies for five- year terms.
Mboweni, 49, was appointed by President Thabo Mbeki in August 1999 to lead the Reserve Bank after serving as a labor minister in former President Nelson Mandela's Cabinet. Mbeki, who lost the leadership of the ruling African National Congress to Jacob Zuma in December, steps down as president after elections next year.
The governor oversaw the introduction of inflation targeting in 2000, a policy that has been criticized by the Congress of South African Trade Unions, an ally of the ANC that lobbied for Zuma's appointment as leader.
The Reserve Bank has raised its benchmark interest rate by 5 percentage points to 12 percent since June 2006 as inflation exceeded the 3 percent to 6 percent target range. The inflation rate surged to more than double the target in July, reaching 13 percent, the statistics office said on Aug. 27.
In an interview conducted by the Pretoria News three weeks before and published on Aug. 29, Mboweni said it ``might not be a good idea'' to head the central bank too long.
To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net
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Sept. 2 (Bloomberg) -- South African central bank Governor Tito Mboweni said he will remain in his position next year after his term ends if he is asked to.
``I will complete my current term, '' Mboweni told reporters in Pretoria today. ``If asked to serve, I will.''
The president selects the governor and his deputies for five- year terms.
Mboweni, 49, was appointed by President Thabo Mbeki in August 1999 to lead the Reserve Bank after serving as a labor minister in former President Nelson Mandela's Cabinet. Mbeki, who lost the leadership of the ruling African National Congress to Jacob Zuma in December, steps down as president after elections next year.
The governor oversaw the introduction of inflation targeting in 2000, a policy that has been criticized by the Congress of South African Trade Unions, an ally of the ANC that lobbied for Zuma's appointment as leader.
The Reserve Bank has raised its benchmark interest rate by 5 percentage points to 12 percent since June 2006 as inflation exceeded the 3 percent to 6 percent target range. The inflation rate surged to more than double the target in July, reaching 13 percent, the statistics office said on Aug. 27.
In an interview conducted by the Pretoria News three weeks before and published on Aug. 29, Mboweni said it ``might not be a good idea'' to head the central bank too long.
To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net
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Swiss Economic Growth, Inflation Startle Economists
By Joshua Gallu
Sept. 2 (Bloomberg) -- Swiss economic growth unexpectedly accelerated and inflation eased, reinforcing the case for the central bank to keep interest rates unchanged.
Gross domestic product, the value of all goods and services, rose 0.4 percent from the first quarter, when it increased 0.3 percent, the State Secretariat for Economic Affairs in Bern said today. Economists expected growth to slow to 0.2 percent, the median in a Bloomberg survey of 19 forecasts shows. August inflation unexpectedly slowed to 2.9 percent from 3.1 percent.
Growth in emerging markets including India and China is fueling demand for exports like power networks and machinery while the lowest unemployment in six years is boosting Swiss spending. Exporters may see sales growth evaporate as the economies of the country's main trading partners cool. The 15-nation euro-area economy shrank in the second quarter and its manufacturing and service industries contracted in August.
``It's amazing we didn't see the same effects in Switzerland that we saw in Europe from high oil prices and slower global growth,'' said Jan Amrit Poser, chief economist at Bank Sarasin in Zurich. ``There's no case for rate cuts in September. The Swiss National Bank doesn't need to act right now.''
Franc Rises
The franc gained as much 0.2 percent to 1.6061 against the euro from 1.6099 before today's figures were released and traded at 1.6094 at 10:09 a.m. in Zurich. Against the dollar, the Swiss currency rose to as high as 1.1008.
The SNB kept its key rate at a six-year high in June as it balanced risks to growth and inflation. At 2.75 percent, Switzerland's benchmark rate is the third lowest among major economies after Japan's 0.5 percent and the U.S.'s 2 percent. The SNB holds its next monetary policy meeting Sept. 18.
Investors expect Swiss interest rates to remain unchanged through the end of the year, futures trading shows. The implied rate on the 3-month Liffe contract expiring in December gained 0.1 percentage points from yesterday to 2.75 percent at 10:41 a.m. in Zurich. That compares with 3.42 percent on June 13.
Economic growth will slow more markedly in the second half of the year than it did in the first six months, SNB President Jean- Pierre Roth said in an newspaper interview last week.
Outlook Dims
Slower growth and the 27 percent drop in the cost of oil from a record $147.27 a barrel on July 11 may ease price pressures further in the coming months. Swiss leading economic indicators declined to the lowest in five years in August and a consumption indicator fell to the lowest since December 2006.
``What's worrying is that we have quite a significant slowdown in investments and a build-up of inventories,'' Poser said. ``Those two things will weigh on growth going forward. We're probably in for a phase of below-potential growth.''
Investment contracted by 0.7 percent in the second quarter after growing the first three months of the year, today's report showed. Equipment purchases fell by 0.9 percent from the previous quarter while construction declined 0.3 percent.
From the second quarter of last year, the economy grew at a rate of 2.3 percent, down from 3 percent in the previous three months, today's report showed. Private spending grew 2.5 percent from a year earlier and 0.6 percent from the previous quarter.
`Bucking the Trend'
``Swiss consumers are bucking the trend,'' said Reto Huenerwadel, senior economist at UBS AG in Zurich. ``Inflation hasn't impacted private consumption, but if you look at employment growth it doesn't appear to be sustainable going forward.''
Consumer prices fell 0.3 percent from July. Heating oil dropped 10.5 percent from July, carrots fell 11.1 percent and cabbage prices declines 13.3 percent.
Still, ``inflation risks are far from over,'' Eoin O'Callaghan, an economist at BNP Paribas in London, said in a research note. Core inflation, excluding food, energy and seasonal products, rose 0.2 percent from the previous month when it fell 0.7 percent.
Company spending on construction slid 0.5 percent from the first quarter, when it decreased 0.3 percent, today's report showed. Imports rose 3.8 percent from the previous quarter, when they declined 3 percent. Exports grew 3.6 percent and consumption expanded by 0.7 percent.
In the year, the economy will probably grow between 1.5 percent and 2 percent after expanding 3.3 percent last year, the central bank forecasts.
``In all, the release and breakdown confirm that the Swiss economy is slowing,'' and ``it is doing so in a relatively elegant way,'' O'Callaghan said.
To contact the reporter on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net
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Sept. 2 (Bloomberg) -- Swiss economic growth unexpectedly accelerated and inflation eased, reinforcing the case for the central bank to keep interest rates unchanged.
Gross domestic product, the value of all goods and services, rose 0.4 percent from the first quarter, when it increased 0.3 percent, the State Secretariat for Economic Affairs in Bern said today. Economists expected growth to slow to 0.2 percent, the median in a Bloomberg survey of 19 forecasts shows. August inflation unexpectedly slowed to 2.9 percent from 3.1 percent.
Growth in emerging markets including India and China is fueling demand for exports like power networks and machinery while the lowest unemployment in six years is boosting Swiss spending. Exporters may see sales growth evaporate as the economies of the country's main trading partners cool. The 15-nation euro-area economy shrank in the second quarter and its manufacturing and service industries contracted in August.
``It's amazing we didn't see the same effects in Switzerland that we saw in Europe from high oil prices and slower global growth,'' said Jan Amrit Poser, chief economist at Bank Sarasin in Zurich. ``There's no case for rate cuts in September. The Swiss National Bank doesn't need to act right now.''
Franc Rises
The franc gained as much 0.2 percent to 1.6061 against the euro from 1.6099 before today's figures were released and traded at 1.6094 at 10:09 a.m. in Zurich. Against the dollar, the Swiss currency rose to as high as 1.1008.
The SNB kept its key rate at a six-year high in June as it balanced risks to growth and inflation. At 2.75 percent, Switzerland's benchmark rate is the third lowest among major economies after Japan's 0.5 percent and the U.S.'s 2 percent. The SNB holds its next monetary policy meeting Sept. 18.
Investors expect Swiss interest rates to remain unchanged through the end of the year, futures trading shows. The implied rate on the 3-month Liffe contract expiring in December gained 0.1 percentage points from yesterday to 2.75 percent at 10:41 a.m. in Zurich. That compares with 3.42 percent on June 13.
Economic growth will slow more markedly in the second half of the year than it did in the first six months, SNB President Jean- Pierre Roth said in an newspaper interview last week.
Outlook Dims
Slower growth and the 27 percent drop in the cost of oil from a record $147.27 a barrel on July 11 may ease price pressures further in the coming months. Swiss leading economic indicators declined to the lowest in five years in August and a consumption indicator fell to the lowest since December 2006.
``What's worrying is that we have quite a significant slowdown in investments and a build-up of inventories,'' Poser said. ``Those two things will weigh on growth going forward. We're probably in for a phase of below-potential growth.''
Investment contracted by 0.7 percent in the second quarter after growing the first three months of the year, today's report showed. Equipment purchases fell by 0.9 percent from the previous quarter while construction declined 0.3 percent.
From the second quarter of last year, the economy grew at a rate of 2.3 percent, down from 3 percent in the previous three months, today's report showed. Private spending grew 2.5 percent from a year earlier and 0.6 percent from the previous quarter.
`Bucking the Trend'
``Swiss consumers are bucking the trend,'' said Reto Huenerwadel, senior economist at UBS AG in Zurich. ``Inflation hasn't impacted private consumption, but if you look at employment growth it doesn't appear to be sustainable going forward.''
Consumer prices fell 0.3 percent from July. Heating oil dropped 10.5 percent from July, carrots fell 11.1 percent and cabbage prices declines 13.3 percent.
Still, ``inflation risks are far from over,'' Eoin O'Callaghan, an economist at BNP Paribas in London, said in a research note. Core inflation, excluding food, energy and seasonal products, rose 0.2 percent from the previous month when it fell 0.7 percent.
Company spending on construction slid 0.5 percent from the first quarter, when it decreased 0.3 percent, today's report showed. Imports rose 3.8 percent from the previous quarter, when they declined 3 percent. Exports grew 3.6 percent and consumption expanded by 0.7 percent.
In the year, the economy will probably grow between 1.5 percent and 2 percent after expanding 3.3 percent last year, the central bank forecasts.
``In all, the release and breakdown confirm that the Swiss economy is slowing,'' and ``it is doing so in a relatively elegant way,'' O'Callaghan said.
To contact the reporter on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net
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Subbarao May Raise Rates as India's Next RBI Governor
By Cherian Thomas
Sept. 2 (Bloomberg) -- Duvvuri Subbarao, an advocate of higher interest rates as the top bureaucrat at India's Finance Ministry, now has the chance to turn his words into action.
Finance Minister P. Chidambaram yesterday named the 59- year-old Subbarao to succeed Yaga Venugopal Reddy as governor of the Reserve Bank of India. Raising rates is the ``obvious'' answer to surging prices, Subbarao said in a July 28 interview with Bloomberg Television. He brushed aside questions about policy today, telling reporters in New Delhi he'd talk later.
The appointment comes two weeks after the government's chief economic adviser, Arvind Virmani, urged the central bank to tighten policy to bring inflation down from a 16-year high. Spiraling costs have contributed to Prime Minister Manmohan Singh's Congress party losing ground in nine of 11 state polls since January 2007. A national election must be held before May.
``Governments have lost elections in the past on inflation,'' said Maya Bhandari, senior economist at Lombard Street Research Ltd. in London. Subbarao ``needs to be much tougher with monetary policy'' than Reddy was.
The benchmark Sensitive index gained 0.9 percent to 14,630.04 at 10:00 a.m. in Mumbai, while the yield on the key 10-year bond declined 5 basis points to 8.57 percent. The rupee fell 0.1 percent to 42.19 per dollar.
Reddy's five-year term ends this week. He's been raising borrowing costs since 2004 to prevent the world's fastest growing major economy after China from overheating. Inflation surged to 12.6 percent last month after the government raised fuel costs to cut its subsidy burden. It was the biggest gain since Singh, then finance minister, started to open the economy to foreign investors in the early 1990s.
Singh's Splurge
Singh, who announced a 21 percent salary increase for about 5 million government employees last month, is reaching out to voters with pre-election handouts. In February, he waived $17 billion of farm loans. Such spending can stimulate consumer demand and fan inflation, Chakrabarty Rangarajan, a former central bank governor, said last month.
India's inflation rate jumped to more than 12 percent from 8.75 percent in three months, forcing Reddy to raise the central bank's key repurchase rate by 125 basis points to 9 percent. Before that, he had increased the repurchase rate by 175 basis points since October 2004.
Reddy, 67, also raised the cash reserve ratio, or the proportion of funds that lenders need to set aside as reserves, by 4 percentage points to 9 percent since December 2006.
The central bank will increase the repurchase rate by another quarter point or half point by the end of October, according to eight of 12 economists surveyed by Bloomberg News after the last monetary policy announcement on July 29.
Not `Dogmatic'
``In the present circumstances one has to be a bit of a monetarist to fight inflation,'' said Gopal Krishan Chadha, 68, an economist who worked with Subbarao at the Prime Minister's Economic Advisory Council between 2005 and 2007, referring to Subbarao's emphasis on monetary policy to keep prices in check. ``But he is not a mechanical bureaucrat or dogmatic.''
An engineering graduate from the elite Indian Institute of Technology before he joined the civil service, Subbarao was also deputed to the World Bank, where he was the lead economist between 1999 and 2004 for public finance in Africa and East Asia.
He holds a masters degree in economics from Ohio State University and was a Humphrey Fellow at the Massachusetts Institute of Technology. He got his doctorate from India's Andhra University.
``He is a good, cool-headed thinker and won't react in a hurry,'' Chadha said.
Slowing Expansion
Subbarao has to battle soaring inflation at a time when India's record economic growth threatens to be undone by higher borrowing costs. India's $912 billion economy grew 7.9 percent in the three months to June 30, the slowest pace since 2004, the government said Aug. 29.
India may lose its position as the world's second fastest- growing major economy, according to World Bank estimates. Russia's economy may grow 7.1 percent in 2008, overtaking India's 7 percent expansion, while China may expand 9.4 percent this year, the bank forecast in June.
Complicating monetary policy in India are Soviet-style price controls. The government subsidizes oil and orders cement and steel companies to keep prices unchanged even as costs go up globally. More than half India's population of 1.2 billion people lives on less than $2 a day.
It makes the economy vulnerable to unpredictable price shocks, as happened in June when the government was forced to cut fuel subsidies to protect refiners from going bankrupt after oil prices surged.
``That's the big challenge for any central bank governor in India -- it's hard to figure out when a sudden price spurt hits the economy,'' N. R. Bhanumurthy, an economist at Institute of Economic Growth in New Delhi said.
Subbarao was appointed for three years. Eight out of 10 economists surveyed by Bloomberg News expected the government to extend Reddy's term because of his decade-long experience at the Reserve Bank of India.
To contact the reporters on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net
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Sept. 2 (Bloomberg) -- Duvvuri Subbarao, an advocate of higher interest rates as the top bureaucrat at India's Finance Ministry, now has the chance to turn his words into action.
Finance Minister P. Chidambaram yesterday named the 59- year-old Subbarao to succeed Yaga Venugopal Reddy as governor of the Reserve Bank of India. Raising rates is the ``obvious'' answer to surging prices, Subbarao said in a July 28 interview with Bloomberg Television. He brushed aside questions about policy today, telling reporters in New Delhi he'd talk later.
The appointment comes two weeks after the government's chief economic adviser, Arvind Virmani, urged the central bank to tighten policy to bring inflation down from a 16-year high. Spiraling costs have contributed to Prime Minister Manmohan Singh's Congress party losing ground in nine of 11 state polls since January 2007. A national election must be held before May.
``Governments have lost elections in the past on inflation,'' said Maya Bhandari, senior economist at Lombard Street Research Ltd. in London. Subbarao ``needs to be much tougher with monetary policy'' than Reddy was.
The benchmark Sensitive index gained 0.9 percent to 14,630.04 at 10:00 a.m. in Mumbai, while the yield on the key 10-year bond declined 5 basis points to 8.57 percent. The rupee fell 0.1 percent to 42.19 per dollar.
Reddy's five-year term ends this week. He's been raising borrowing costs since 2004 to prevent the world's fastest growing major economy after China from overheating. Inflation surged to 12.6 percent last month after the government raised fuel costs to cut its subsidy burden. It was the biggest gain since Singh, then finance minister, started to open the economy to foreign investors in the early 1990s.
Singh's Splurge
Singh, who announced a 21 percent salary increase for about 5 million government employees last month, is reaching out to voters with pre-election handouts. In February, he waived $17 billion of farm loans. Such spending can stimulate consumer demand and fan inflation, Chakrabarty Rangarajan, a former central bank governor, said last month.
India's inflation rate jumped to more than 12 percent from 8.75 percent in three months, forcing Reddy to raise the central bank's key repurchase rate by 125 basis points to 9 percent. Before that, he had increased the repurchase rate by 175 basis points since October 2004.
Reddy, 67, also raised the cash reserve ratio, or the proportion of funds that lenders need to set aside as reserves, by 4 percentage points to 9 percent since December 2006.
The central bank will increase the repurchase rate by another quarter point or half point by the end of October, according to eight of 12 economists surveyed by Bloomberg News after the last monetary policy announcement on July 29.
Not `Dogmatic'
``In the present circumstances one has to be a bit of a monetarist to fight inflation,'' said Gopal Krishan Chadha, 68, an economist who worked with Subbarao at the Prime Minister's Economic Advisory Council between 2005 and 2007, referring to Subbarao's emphasis on monetary policy to keep prices in check. ``But he is not a mechanical bureaucrat or dogmatic.''
An engineering graduate from the elite Indian Institute of Technology before he joined the civil service, Subbarao was also deputed to the World Bank, where he was the lead economist between 1999 and 2004 for public finance in Africa and East Asia.
He holds a masters degree in economics from Ohio State University and was a Humphrey Fellow at the Massachusetts Institute of Technology. He got his doctorate from India's Andhra University.
``He is a good, cool-headed thinker and won't react in a hurry,'' Chadha said.
Slowing Expansion
Subbarao has to battle soaring inflation at a time when India's record economic growth threatens to be undone by higher borrowing costs. India's $912 billion economy grew 7.9 percent in the three months to June 30, the slowest pace since 2004, the government said Aug. 29.
India may lose its position as the world's second fastest- growing major economy, according to World Bank estimates. Russia's economy may grow 7.1 percent in 2008, overtaking India's 7 percent expansion, while China may expand 9.4 percent this year, the bank forecast in June.
Complicating monetary policy in India are Soviet-style price controls. The government subsidizes oil and orders cement and steel companies to keep prices unchanged even as costs go up globally. More than half India's population of 1.2 billion people lives on less than $2 a day.
It makes the economy vulnerable to unpredictable price shocks, as happened in June when the government was forced to cut fuel subsidies to protect refiners from going bankrupt after oil prices surged.
``That's the big challenge for any central bank governor in India -- it's hard to figure out when a sudden price spurt hits the economy,'' N. R. Bhanumurthy, an economist at Institute of Economic Growth in New Delhi said.
Subbarao was appointed for three years. Eight out of 10 economists surveyed by Bloomberg News expected the government to extend Reddy's term because of his decade-long experience at the Reserve Bank of India.
To contact the reporters on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net
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Australia Cuts Key Rate for First Time Since 2001
By Jacob Greber
Sept. 2 (Bloomberg) -- Australia's central bank cut its benchmark interest rate for the first time in seven years amid signs the nation's $1 trillion economy is slowing.
Governor Glenn Stevens and his board reduced the overnight cash rate target by a quarter point to 7 percent in Sydney today, as forecast by 22 of 23 economists surveyed by Bloomberg News.
The biggest slump in retail sales in six years, a slide in business confidence and concern about the global credit squeeze meant ``there was now scope for monetary policy to become less restrictive,'' Stevens said. A report tomorrow will show gross domestic product expanded by the least in two years in the second quarter, according to a survey of economists.
``This is a huge psychological step,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds about $128 billion of assets. ``It's taken a bit of the pressure-cooker atmosphere off the consumer and off business.''
Traders, who had been betting Stevens would cut rates again in October, pared those positions after economists said today's statement suggested the central bank won't aggressively reduce interest rates. The implied yield on the 30-day interbank futures contracts due in October rose 3 basis points to 6.84 percent.
``Stevens has stepped away from signaling outright that further rate cuts are on the way,'' said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``The timing of the next cut will depend on economic reports.''
Bank Stocks
The Australian dollar, the worst performer among the 17 most-active currencies since June 30, rose immediately after today's decision to as high as 85.33 U.S. cents. It later fell to trade at 84.14 cents at 4:56 p.m. in Sydney.
Shares in Australia's four largest banks, which have fallen more than 25 percent this year, rose today on speculation lower rates will buoy lending. National Australia Bank Ltd., the No. 1 lender by assets, added 0.6 percent, Westpac Banking Corp. gained 1.5 percent, Commonwealth Bank of Australia rose 1 percent and ANZ Bank increased 1.9 percent.
All four said they will pass today's quarter-point cut to mortgage holders.
``Weighing up the available domestic and international information, the board judged that there was now scope for monetary policy to become less restrictive,'' Stevens said in a statement.
Mortgage Repayments
Policy makers will ``continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2 percent to 3 percent target over time.''
Prior to today's decision, the nation's major lenders added an average 105 basis points to mortgage rates in 2008 as the global credit squeeze drove up funding costs. The central bank raised its benchmark by a total of 50 basis points in that time.
Today's cut will reduce repayments on an average A$250,000 ($211,000) home loan by A$42 a month, according to the Real Estate Institute. A report yesterday showed households spent 39.8 percent of their incomes on mortgage payments in the June quarter, the most in the 22 years the institute has measured affordability.
The reduction is welcome and will provide ``some modest relief'' to borrowers, Prime Minister Kevin Rudd told parliament after the decision. Still, ``interest rates took a long time to rise and they will take a long time to come back down,'' he said.
`Tough Times Ahead'
``There will be more tough times ahead as we continue to experience economic turbulence abroad and high inflation and interest rates at home.''
Policy makers raised borrowing costs 12 times between May 2002 and March this year, adding 300 basis points to the benchmark rate as it fought to curb consumer prices that jumped 4.5 percent in the second quarter of this year. The bank last cut the benchmark in December 2001, when it was 4.25 percent.
Since the bank's last meeting on Aug. 5, reports have shown new home sales fell to a two-year low and lending to consumers and businesses rose at the slowest annual pace since 2002. Companies including Qantas Airways Ltd., Ford Motor Co. and Starbucks Corp. have announced job cuts.
The government will publish a report tomorrow at 11:30 a.m. in Sydney showing second-quarter gross domestic product rose 0.4 percent from the previous three months, when it expanded 0.6 percent, according to the median estimate of 23 economists surveyed by Bloomberg.
Inflation Threat
``Given the opposing forces at work, considerable uncertainty has surrounded the outlook for demand and inflation,'' Stevens said today. ``On balance, however, it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead.''
Inflation ``is likely to decline over time, provided wages growth remains contained,'' said Stevens, who forecasts consumer-price gains will fall to below 3 percent during 2010.
Central bank policy makers ``are signaling that each coming meeting is a month-to-month proposition,'' said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. ``We expect another cut this year, but probably not in October. They are in no rush.''
Stevens, along with his counterparts in Europe, Asia and the U.S., faces the challenge of balancing slowing household spending, which accounts for about 60 percent of Australia's economy, with the threat that inflation will accelerate amid rising energy costs and a shortage of skilled labor.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Sept. 2 (Bloomberg) -- Australia's central bank cut its benchmark interest rate for the first time in seven years amid signs the nation's $1 trillion economy is slowing.
Governor Glenn Stevens and his board reduced the overnight cash rate target by a quarter point to 7 percent in Sydney today, as forecast by 22 of 23 economists surveyed by Bloomberg News.
The biggest slump in retail sales in six years, a slide in business confidence and concern about the global credit squeeze meant ``there was now scope for monetary policy to become less restrictive,'' Stevens said. A report tomorrow will show gross domestic product expanded by the least in two years in the second quarter, according to a survey of economists.
``This is a huge psychological step,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds about $128 billion of assets. ``It's taken a bit of the pressure-cooker atmosphere off the consumer and off business.''
Traders, who had been betting Stevens would cut rates again in October, pared those positions after economists said today's statement suggested the central bank won't aggressively reduce interest rates. The implied yield on the 30-day interbank futures contracts due in October rose 3 basis points to 6.84 percent.
``Stevens has stepped away from signaling outright that further rate cuts are on the way,'' said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``The timing of the next cut will depend on economic reports.''
Bank Stocks
The Australian dollar, the worst performer among the 17 most-active currencies since June 30, rose immediately after today's decision to as high as 85.33 U.S. cents. It later fell to trade at 84.14 cents at 4:56 p.m. in Sydney.
Shares in Australia's four largest banks, which have fallen more than 25 percent this year, rose today on speculation lower rates will buoy lending. National Australia Bank Ltd., the No. 1 lender by assets, added 0.6 percent, Westpac Banking Corp. gained 1.5 percent, Commonwealth Bank of Australia rose 1 percent and ANZ Bank increased 1.9 percent.
All four said they will pass today's quarter-point cut to mortgage holders.
``Weighing up the available domestic and international information, the board judged that there was now scope for monetary policy to become less restrictive,'' Stevens said in a statement.
Mortgage Repayments
Policy makers will ``continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2 percent to 3 percent target over time.''
Prior to today's decision, the nation's major lenders added an average 105 basis points to mortgage rates in 2008 as the global credit squeeze drove up funding costs. The central bank raised its benchmark by a total of 50 basis points in that time.
Today's cut will reduce repayments on an average A$250,000 ($211,000) home loan by A$42 a month, according to the Real Estate Institute. A report yesterday showed households spent 39.8 percent of their incomes on mortgage payments in the June quarter, the most in the 22 years the institute has measured affordability.
The reduction is welcome and will provide ``some modest relief'' to borrowers, Prime Minister Kevin Rudd told parliament after the decision. Still, ``interest rates took a long time to rise and they will take a long time to come back down,'' he said.
`Tough Times Ahead'
``There will be more tough times ahead as we continue to experience economic turbulence abroad and high inflation and interest rates at home.''
Policy makers raised borrowing costs 12 times between May 2002 and March this year, adding 300 basis points to the benchmark rate as it fought to curb consumer prices that jumped 4.5 percent in the second quarter of this year. The bank last cut the benchmark in December 2001, when it was 4.25 percent.
Since the bank's last meeting on Aug. 5, reports have shown new home sales fell to a two-year low and lending to consumers and businesses rose at the slowest annual pace since 2002. Companies including Qantas Airways Ltd., Ford Motor Co. and Starbucks Corp. have announced job cuts.
The government will publish a report tomorrow at 11:30 a.m. in Sydney showing second-quarter gross domestic product rose 0.4 percent from the previous three months, when it expanded 0.6 percent, according to the median estimate of 23 economists surveyed by Bloomberg.
Inflation Threat
``Given the opposing forces at work, considerable uncertainty has surrounded the outlook for demand and inflation,'' Stevens said today. ``On balance, however, it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead.''
Inflation ``is likely to decline over time, provided wages growth remains contained,'' said Stevens, who forecasts consumer-price gains will fall to below 3 percent during 2010.
Central bank policy makers ``are signaling that each coming meeting is a month-to-month proposition,'' said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. ``We expect another cut this year, but probably not in October. They are in no rush.''
Stevens, along with his counterparts in Europe, Asia and the U.S., faces the challenge of balancing slowing household spending, which accounts for about 60 percent of Australia's economy, with the threat that inflation will accelerate amid rising energy costs and a shortage of skilled labor.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Brown Suspends U.K. Stamp Duty in Moves to Spur Housing Market
By Gonzalo Vina
Enlarge Image/Details
Sept. 2 (Bloomberg) -- Prime Minister Gordon Brown suspended a homebuyer tax and proposed spending 1 billion pounds ($1.8 billion) sooner than planned to help reverse Britain's worst housing slump in at least 18 years.
The money will be used to help people buy new homes and support those struggling to pay their mortgages. From tomorrow, residential properties worth less than 175,000 pounds will be exempt from stamp duty for a year under plans announced by Chancellor of the Exchequer Alistair Darling.
The measures are part of a package of relief aimed at preventing the economy from tipping into a recession and bolstering the popularity of the ruling Labour Party, which has lagged behind the Conservative Party in polls since October. The economic slowdown has sent the pound to a record low against the euro.
The rescue package will be funded by spending more quickly the 6.5 billion pounds earmarked for social-housing programs over the next three years so that more of it is used in the next 12 months.
The stamp duty move effectively raises the current threshold for paying the tax from 125,000 pounds. As a result, the share of housing transactions exempt from the levy will rise to a half from a third. The move will cost the Treasury 600 million pounds in foregone revenue over the 12 months.
Darling was quoted in the Guardian Aug. 30 as saying the U.K. is facing ``arguably the worst'' economic conditions since World War II. That prompted Brown's spokesman, Michael Ellam, yesterday to deny a rift between the two men.
Interest-Free Loan
The program would offer help to thousands of first-time buyers earning less than 60,000 pounds a year for up to a third of the value of a newly built property. The interest-free loans, funded by the government and the property developer, will be available for up to five years.
The government will also give money to several thousand households at risk of falling behind with mortgage payments in return for an equity stake in the properties. Housing associations would be given the money to buy and then rent back properties to those struggling to make payments, or buy or rent a share of the property to help reduce payments.
The plans are part of a broader economic package that Brown will unveil by Sept. 8, when the Cabinet meets for the first time following the summer parliamentary recess.
Nationwide Building Society said last week that house prices declined 10.5 percent in August from a year earlier, the biggest drop since the final quarter of 1990.
Heading for Recession
The stamp duty equals 1 percent of the purchase price for houses costing between 125,000 pounds and 250,000 pounds. The fee rises to 3 percent for homes up to 500,000 pounds and to 4 percent above that level. The average U.K. house price was 178,364 pounds in July, according to the Land Registry, making the levy about 1,700 pounds.
Britain is heading for its first recession since the early 1990s after the economy stagnated in the second quarter. A surge in food and fuel costs ate into the wages of consumers as a worldwide credit crunch dried up mortgage financing.
The credit freeze has prompted lenders to raise interest rates and curtail lending, and there is little sign that the squeeze is easing. Lending between banks fell 68 percent in July from a year earlier after financial institutions hoarded cash, according to Bank of England data published yesterday.
The economic slump has reduced support for the ruling Labour Party to the lowest since it took office in 1997. The opposition Conservative Party, led by David Cameron, widened its lead to 22 percentage points in a YouGov Plc poll finished on Aug. 21, up from 8 points at the beginning of the year.
In a Populus poll published in the Times newspaper today, 39 percent said they thought Cameron and George Osborne, the Conservative spokesman on economic matters, are best able to deal with the U.K.'s economic difficulties, compared with 30 percent who put their trust in Brown and Darling.
To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net
Read more...
Enlarge Image/Details
Sept. 2 (Bloomberg) -- Prime Minister Gordon Brown suspended a homebuyer tax and proposed spending 1 billion pounds ($1.8 billion) sooner than planned to help reverse Britain's worst housing slump in at least 18 years.
The money will be used to help people buy new homes and support those struggling to pay their mortgages. From tomorrow, residential properties worth less than 175,000 pounds will be exempt from stamp duty for a year under plans announced by Chancellor of the Exchequer Alistair Darling.
The measures are part of a package of relief aimed at preventing the economy from tipping into a recession and bolstering the popularity of the ruling Labour Party, which has lagged behind the Conservative Party in polls since October. The economic slowdown has sent the pound to a record low against the euro.
The rescue package will be funded by spending more quickly the 6.5 billion pounds earmarked for social-housing programs over the next three years so that more of it is used in the next 12 months.
The stamp duty move effectively raises the current threshold for paying the tax from 125,000 pounds. As a result, the share of housing transactions exempt from the levy will rise to a half from a third. The move will cost the Treasury 600 million pounds in foregone revenue over the 12 months.
Darling was quoted in the Guardian Aug. 30 as saying the U.K. is facing ``arguably the worst'' economic conditions since World War II. That prompted Brown's spokesman, Michael Ellam, yesterday to deny a rift between the two men.
Interest-Free Loan
The program would offer help to thousands of first-time buyers earning less than 60,000 pounds a year for up to a third of the value of a newly built property. The interest-free loans, funded by the government and the property developer, will be available for up to five years.
The government will also give money to several thousand households at risk of falling behind with mortgage payments in return for an equity stake in the properties. Housing associations would be given the money to buy and then rent back properties to those struggling to make payments, or buy or rent a share of the property to help reduce payments.
The plans are part of a broader economic package that Brown will unveil by Sept. 8, when the Cabinet meets for the first time following the summer parliamentary recess.
Nationwide Building Society said last week that house prices declined 10.5 percent in August from a year earlier, the biggest drop since the final quarter of 1990.
Heading for Recession
The stamp duty equals 1 percent of the purchase price for houses costing between 125,000 pounds and 250,000 pounds. The fee rises to 3 percent for homes up to 500,000 pounds and to 4 percent above that level. The average U.K. house price was 178,364 pounds in July, according to the Land Registry, making the levy about 1,700 pounds.
Britain is heading for its first recession since the early 1990s after the economy stagnated in the second quarter. A surge in food and fuel costs ate into the wages of consumers as a worldwide credit crunch dried up mortgage financing.
The credit freeze has prompted lenders to raise interest rates and curtail lending, and there is little sign that the squeeze is easing. Lending between banks fell 68 percent in July from a year earlier after financial institutions hoarded cash, according to Bank of England data published yesterday.
The economic slump has reduced support for the ruling Labour Party to the lowest since it took office in 1997. The opposition Conservative Party, led by David Cameron, widened its lead to 22 percentage points in a YouGov Plc poll finished on Aug. 21, up from 8 points at the beginning of the year.
In a Populus poll published in the Times newspaper today, 39 percent said they thought Cameron and George Osborne, the Conservative spokesman on economic matters, are best able to deal with the U.K.'s economic difficulties, compared with 30 percent who put their trust in Brown and Darling.
To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net
Read more...
Spain Entering Recession, Unemployment to Jump, Survey Shows
By Ainhoa Goyeneche and Emma Ross-Thomas
Sept. 2 (Bloomberg) -- Spain is probably entering into a recession that will push the unemployment rate to a peak of 14 percent, as a slump in the housing market spreads through the rest of the economy, a survey of economists showed.
The chances of Spain's economy shrinking for two straight quarters by the end of next year increased to 67.5 percent from 50 percent a month ago, according to the median of 14 responses in a Bloomberg News survey. Eight of the 10 economists who forecast the start of the recession predicted it would begin in the third quarter of this year.
Spain, which grew faster than the euro-region for more than a decade on the back of a construction boom, expanded at the slowest pace since a 1993 recession in the second quarter as banks reined in lending and higher living costs eroded incomes. Retail sales have fallen for eight months and data today showed Spain's jobless ranks swelled for a fifth month in August.
Unemployment in Spain, which created half the euro- region's jobs between 2001 and 2006, will rise to a peak of 14 percent, a median forecast from the survey showed. Joblessness reached 10.4 percent in the second quarter.
``It's very difficult to see a corrective medicine in the short-term,'' said David Owen, chief economist for developed markets at Dresdner Kleinwort in London, who says the Spanish economy may not expand for five years.
Banks have seen loan defaults rise while real estate companies have written down the value of their assets. Property developer Inmobiliaria Colonial SA reported a net loss of 2.38 billion euros ($3.5 billion) for the first half as it wrote down the value of property assets and a stake in a construction firm.
The Spanish government has forecast economic growth of 1.6 percent for this year, 1 percent for next, and aims to return to growth levels around 3 percent from 2010. Finance Minister Pedro Solbes has said he is not forecasting a recession, even after the euro-region economy contracted in the second quarter.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net
Read more...
Sept. 2 (Bloomberg) -- Spain is probably entering into a recession that will push the unemployment rate to a peak of 14 percent, as a slump in the housing market spreads through the rest of the economy, a survey of economists showed.
The chances of Spain's economy shrinking for two straight quarters by the end of next year increased to 67.5 percent from 50 percent a month ago, according to the median of 14 responses in a Bloomberg News survey. Eight of the 10 economists who forecast the start of the recession predicted it would begin in the third quarter of this year.
Spain, which grew faster than the euro-region for more than a decade on the back of a construction boom, expanded at the slowest pace since a 1993 recession in the second quarter as banks reined in lending and higher living costs eroded incomes. Retail sales have fallen for eight months and data today showed Spain's jobless ranks swelled for a fifth month in August.
Unemployment in Spain, which created half the euro- region's jobs between 2001 and 2006, will rise to a peak of 14 percent, a median forecast from the survey showed. Joblessness reached 10.4 percent in the second quarter.
``It's very difficult to see a corrective medicine in the short-term,'' said David Owen, chief economist for developed markets at Dresdner Kleinwort in London, who says the Spanish economy may not expand for five years.
Banks have seen loan defaults rise while real estate companies have written down the value of their assets. Property developer Inmobiliaria Colonial SA reported a net loss of 2.38 billion euros ($3.5 billion) for the first half as it wrote down the value of property assets and a stake in a construction firm.
The Spanish government has forecast economic growth of 1.6 percent for this year, 1 percent for next, and aims to return to growth levels around 3 percent from 2010. Finance Minister Pedro Solbes has said he is not forecasting a recession, even after the euro-region economy contracted in the second quarter.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net
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I Am Ready to Be Japan's Next Prime Minister: William Pesek
Commentary by William Pesek
Sept. 2 (Bloomberg) -- Here's a pub quiz expatriates in Tokyo pull out around the time the third bottle of sake arrives: Quick, name Japan's last five prime ministers.
Americans put on the spot in a comparable way need to reach back to 1977 and Jimmy Carter. Brits need to think back to James Callaghan in 1976, Germans to Walter Scheel in 1974 and Chinese to Deng Xiaoping -- also in the 1970s.
Japanese only need to remember Keizo Obuchi in 1998. At the moment, Japan has had as many leaders since then as Italy. Once a replacement is chosen for Yasuo Fukuda, who quit yesterday after less than a year in the job, Japanese will only need to look back to 2000 to name their last five leaders.
What does it say about a Group of Seven economy that presents investors with a revolving door of hapless leaders?
Well fear not intrepid Japanese. You too, investors who plowed back into Japan these last six years thinking it was the buy of the decade. For I have a solution to your troubles -- I humbly put forth my name for consideration.
Okay, it technically can't happen, as I'm not Japanese and my language skills are questionable. I'm under the age of 65, which is pretty much how old one needs to be even to be considered.
But hey, why not take a chance? If a first-term governor of Alaska can be considered for vice president of the world's biggest economy, why not let an inexperienced gaijin lead the second-largest?
I have my acceptance speech all worked out. Here goes.
Aso's Prospects
My Japanese friends, we have once again seen the side effects of playing this game of ``Let's Have a New Prime Minister Every 12 Months.'' It's not helping Japan's image overseas. A clear sign of that is how the world yawned at Fukuda-san's sudden departure on Monday.
Now, there was talk of Taro Aso as the next PM, but was that really what you wanted? Sure, the former foreign minister has a certain charisma with voters longing for some leadership. But come on, do you really think this gaffe-prone politician would have lasted much longer than Fukuda's 11 months?
Remember the last, last prime minister, Shinzo Abe, lasted about that long. Abe proved no match for the ascendant Democratic Party of Japan, which wrested control of the upper house of parliament from the Liberal Democratic Party in July 2007.
Koizumi's Return?
There was also talk of bringing back Japan's most famous Elvis Presley fan: Junichiro Koizumi. I'll say it again: C'mon. You have to love a guy who from 2001 to 2006 actually told banks to dispose of their bad loans after a decade of delay tactics. And give Koizumi his due for trying to reduce public-works spending and privatize enterprises like Japan Post.
Yet the romanticized view of ``Koizumi the reformer'' is wildly overdone. He was more talk than reality, highlighting what Japan needed to do to then leaving it to his successors to do it. Would Koizumi really have stepped back into the thick of things to grapple with the world's largest public debt, a shrinking population and stagflation?
Koizumi, after all, went out on a global high. The last most folks outside Japan saw of him was his visit to Elvis's house in Memphis in 2006. Who can forget the bewildered look on President George W. Bush's face as Koizumi donned Elvis's sunglasses and played air guitar? Koizumi would have to be dragged back into power kicking and screaming (given his love of Elvis, shaking his hips, too).
My Platform
But not me. I'm ready to lead, and here's what I plan to do. I'll announce a new fiscal stimulus package every few months, all paid for with fresh borrowing. I'll avoid any major revamp of the corporate tax system. If companies want to set up shop in Hong Kong and Singapore over a little thing like uncompetitive tax rates, then so be it. And I won't bother making it easier for start-up companies. Entrepreneurs are just so high maintenance, aren't they?
I pledge to give you more of the same. Top cabinet posts will go to the people who really deserve them: my friends. I will spend untold billions of dollars of public funds through contracts at my friends' companies. I will build roads, bridges and dams no one needs. I will champion the construction of museums and other white elephants in the countryside that no one visits. Concrete Economics is back.
Saving the LDP
And, I will champion the next generation of Japan's leadership -- young guys in their late 50s! I would mention some female empowerment stuff here, but who would believe such talk from a Japanese leader?
And there you have it -- my pledge to protect the status quo and save the ruling LDP. Never mind that there's nothing liberal or democratic about the crowd that's run Japan for all but 10 months since 1955.
Avoiding change at all costs is what your leaders have been doing. I'll deliver more of just that -- at least until you replace me in 12 months.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
Read more...
Sept. 2 (Bloomberg) -- Here's a pub quiz expatriates in Tokyo pull out around the time the third bottle of sake arrives: Quick, name Japan's last five prime ministers.
Americans put on the spot in a comparable way need to reach back to 1977 and Jimmy Carter. Brits need to think back to James Callaghan in 1976, Germans to Walter Scheel in 1974 and Chinese to Deng Xiaoping -- also in the 1970s.
Japanese only need to remember Keizo Obuchi in 1998. At the moment, Japan has had as many leaders since then as Italy. Once a replacement is chosen for Yasuo Fukuda, who quit yesterday after less than a year in the job, Japanese will only need to look back to 2000 to name their last five leaders.
What does it say about a Group of Seven economy that presents investors with a revolving door of hapless leaders?
Well fear not intrepid Japanese. You too, investors who plowed back into Japan these last six years thinking it was the buy of the decade. For I have a solution to your troubles -- I humbly put forth my name for consideration.
Okay, it technically can't happen, as I'm not Japanese and my language skills are questionable. I'm under the age of 65, which is pretty much how old one needs to be even to be considered.
But hey, why not take a chance? If a first-term governor of Alaska can be considered for vice president of the world's biggest economy, why not let an inexperienced gaijin lead the second-largest?
I have my acceptance speech all worked out. Here goes.
Aso's Prospects
My Japanese friends, we have once again seen the side effects of playing this game of ``Let's Have a New Prime Minister Every 12 Months.'' It's not helping Japan's image overseas. A clear sign of that is how the world yawned at Fukuda-san's sudden departure on Monday.
Now, there was talk of Taro Aso as the next PM, but was that really what you wanted? Sure, the former foreign minister has a certain charisma with voters longing for some leadership. But come on, do you really think this gaffe-prone politician would have lasted much longer than Fukuda's 11 months?
Remember the last, last prime minister, Shinzo Abe, lasted about that long. Abe proved no match for the ascendant Democratic Party of Japan, which wrested control of the upper house of parliament from the Liberal Democratic Party in July 2007.
Koizumi's Return?
There was also talk of bringing back Japan's most famous Elvis Presley fan: Junichiro Koizumi. I'll say it again: C'mon. You have to love a guy who from 2001 to 2006 actually told banks to dispose of their bad loans after a decade of delay tactics. And give Koizumi his due for trying to reduce public-works spending and privatize enterprises like Japan Post.
Yet the romanticized view of ``Koizumi the reformer'' is wildly overdone. He was more talk than reality, highlighting what Japan needed to do to then leaving it to his successors to do it. Would Koizumi really have stepped back into the thick of things to grapple with the world's largest public debt, a shrinking population and stagflation?
Koizumi, after all, went out on a global high. The last most folks outside Japan saw of him was his visit to Elvis's house in Memphis in 2006. Who can forget the bewildered look on President George W. Bush's face as Koizumi donned Elvis's sunglasses and played air guitar? Koizumi would have to be dragged back into power kicking and screaming (given his love of Elvis, shaking his hips, too).
My Platform
But not me. I'm ready to lead, and here's what I plan to do. I'll announce a new fiscal stimulus package every few months, all paid for with fresh borrowing. I'll avoid any major revamp of the corporate tax system. If companies want to set up shop in Hong Kong and Singapore over a little thing like uncompetitive tax rates, then so be it. And I won't bother making it easier for start-up companies. Entrepreneurs are just so high maintenance, aren't they?
I pledge to give you more of the same. Top cabinet posts will go to the people who really deserve them: my friends. I will spend untold billions of dollars of public funds through contracts at my friends' companies. I will build roads, bridges and dams no one needs. I will champion the construction of museums and other white elephants in the countryside that no one visits. Concrete Economics is back.
Saving the LDP
And, I will champion the next generation of Japan's leadership -- young guys in their late 50s! I would mention some female empowerment stuff here, but who would believe such talk from a Japanese leader?
And there you have it -- my pledge to protect the status quo and save the ruling LDP. Never mind that there's nothing liberal or democratic about the crowd that's run Japan for all but 10 months since 1955.
Avoiding change at all costs is what your leaders have been doing. I'll deliver more of just that -- at least until you replace me in 12 months.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
Read more...
European Factory Prices Rose 9% in July as Oil Reached Record
By Fergal O'Brien
Sept. 2 (Bloomberg) -- European producer prices increased by the most in at least 18 years in July, as crude oil reached a record before easing last month.
The 9 percent increase from a year earlier in the 15 euro countries was the biggest since the series began in 1990 and followed an 8 percent gain in June, the European Union statistics office in Luxembourg said today. Economists expected a 9.1 percent gain, according to the median of 24 forecasts in a Bloomberg News survey.
Crude oil, which reached a record $147.27 a barrel on July 11, has fallen almost 28 percent since then to a five-month low, easing inflation pressures. Data last week showed that consumer- price growth eased to 3.8 percent last month from 4 percent. Still, the European Central Bank will probably keep interest rates at a seven-year high this week as it seeks to prevent a wage-price spiral.
``The data reflects the pressure from oil we saw until last month, but this may be the peak,'' said Aurelio Maccario, chief euro area economist at Unicredit MIB in Milan. After Hurricane Gustav passed the U.S. Gulf Coast without causing major damage to offshore platforms, ``it seems the downward trend we've seen in oil has become a little bit more entrenched.''
The ECB lifted the benchmark interest rate to 4.25 percent in July on concerns that consumer-price gains at twice the bank's 2 percent limit will become embedded in the economy even as growth cools. While it left rates unchanged last month, policy makers Axel Weber and Lucas Papademos last week said the ECB remains focused on inflation risks and may need to lift rates again if they intensify.
All but one of 53 economists surveyed by Bloomberg News predict the bank will leave the benchmark rate at 4.25 percent on Sept. 4 and only five expect a cut this year.
From a month earlier, producer prices rose 1.1 percent in the euro area in July. Annual energy-price inflation accelerated to 29.4 percent from 27.6 percent, today's report showed.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
Sept. 2 (Bloomberg) -- European producer prices increased by the most in at least 18 years in July, as crude oil reached a record before easing last month.
The 9 percent increase from a year earlier in the 15 euro countries was the biggest since the series began in 1990 and followed an 8 percent gain in June, the European Union statistics office in Luxembourg said today. Economists expected a 9.1 percent gain, according to the median of 24 forecasts in a Bloomberg News survey.
Crude oil, which reached a record $147.27 a barrel on July 11, has fallen almost 28 percent since then to a five-month low, easing inflation pressures. Data last week showed that consumer- price growth eased to 3.8 percent last month from 4 percent. Still, the European Central Bank will probably keep interest rates at a seven-year high this week as it seeks to prevent a wage-price spiral.
``The data reflects the pressure from oil we saw until last month, but this may be the peak,'' said Aurelio Maccario, chief euro area economist at Unicredit MIB in Milan. After Hurricane Gustav passed the U.S. Gulf Coast without causing major damage to offshore platforms, ``it seems the downward trend we've seen in oil has become a little bit more entrenched.''
The ECB lifted the benchmark interest rate to 4.25 percent in July on concerns that consumer-price gains at twice the bank's 2 percent limit will become embedded in the economy even as growth cools. While it left rates unchanged last month, policy makers Axel Weber and Lucas Papademos last week said the ECB remains focused on inflation risks and may need to lift rates again if they intensify.
All but one of 53 economists surveyed by Bloomberg News predict the bank will leave the benchmark rate at 4.25 percent on Sept. 4 and only five expect a cut this year.
From a month earlier, producer prices rose 1.1 percent in the euro area in July. Annual energy-price inflation accelerated to 29.4 percent from 27.6 percent, today's report showed.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
U.S. Aug. LNG Imports Drop 63% on Asian Demand, Consultant Says
By Dinakar Sethuraman
Sept. 2 (Bloomberg) -- Shipments of liquefied natural gas to the U.S. declined by 63 percent in August on increased domestic production and higher Asian demand, a consultant said.
The total supply of natural gas from imported LNG during August 2008 fell to 30.7 billion cubic feet from 83.2 billion in August 2007, Pan EurAsian Enterprises, Inc., a U.S. LNG consultant, said in an e-mailed report yesterday. Total imports this year dropped 61 percent to 236.9 billion cubic feet.
Shipments of LNG may fall to 360 billion cubic feet of re- vaporized natural gas, the smallest amount since 2002, because higher domestic production of the cleaner-burning fuel keeps prices lower than in Asia and Europe, Pan EurAsian said in July.
``Market conditions in the global LNG business have changed dramatically in the past year with Asian demand for LNG picking up strongly in a supply-constrained marketplace,'' Pan EurAsian said. ``Prices for LNG in Asia are approaching $20 per million British thermal units versus natural gas market prices in the U.S. (Henry Hub) that are around $8 per million Btu.''
The price gap has led to traders diverting LNG shipments away from the U.S. and northern Europe to buyers in Japan, South Korea, China, India and Taiwan, according to the report.
The drop in imports has occurred even after the opening of U.S. LNG import terminals at Northeast Gateway, Massachusetts Bay and Sabine Pass, Louisiana, Pan EurAsian said.
Re-vaporized natural gas is fuel that's converted from the chilled, liquefied form.
To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.
Read more...
Sept. 2 (Bloomberg) -- Shipments of liquefied natural gas to the U.S. declined by 63 percent in August on increased domestic production and higher Asian demand, a consultant said.
The total supply of natural gas from imported LNG during August 2008 fell to 30.7 billion cubic feet from 83.2 billion in August 2007, Pan EurAsian Enterprises, Inc., a U.S. LNG consultant, said in an e-mailed report yesterday. Total imports this year dropped 61 percent to 236.9 billion cubic feet.
Shipments of LNG may fall to 360 billion cubic feet of re- vaporized natural gas, the smallest amount since 2002, because higher domestic production of the cleaner-burning fuel keeps prices lower than in Asia and Europe, Pan EurAsian said in July.
``Market conditions in the global LNG business have changed dramatically in the past year with Asian demand for LNG picking up strongly in a supply-constrained marketplace,'' Pan EurAsian said. ``Prices for LNG in Asia are approaching $20 per million British thermal units versus natural gas market prices in the U.S. (Henry Hub) that are around $8 per million Btu.''
The price gap has led to traders diverting LNG shipments away from the U.S. and northern Europe to buyers in Japan, South Korea, China, India and Taiwan, according to the report.
The drop in imports has occurred even after the opening of U.S. LNG import terminals at Northeast Gateway, Massachusetts Bay and Sabine Pass, Louisiana, Pan EurAsian said.
Re-vaporized natural gas is fuel that's converted from the chilled, liquefied form.
To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.
Read more...
Temasek Offers Financing to Bidders for Senoko Power
By Dinakar Sethuraman
Sept. 2 (Bloomberg) -- Temasek Holdings Pte, Singapore's government-owned investment company, is arranging financing for bidders for Senoko Power Ltd., the country's largest utility, after a global credit crisis reduced availability of funds.
Credit Suisse Group AG and Morgan Stanley & Co., advising Temasek on the sale, will organize a bridge loan for two years at a cost of about 2.5 percentage points over the London Interbank Offered Rate, according to a document sent to buyers last month, a copy of which was obtained by Bloomberg News. The funds may be lent by banks including DBS Group Holdings Ltd. and United Overseas Bank Ltd.
``It certainly improves the chance of selling the assets by providing readily available financing, it makes it easier for buyers,'' said John Corrin, the Hong Kong-based chairman of the Asia Pacific Loan Market Association. ``It provides a fallback for those who can't find other alternatives.''
The collapse of the U.S. subprime mortgage market has caused a slump in mergers and acquisitions, making it more difficult for companies such as Temasek to sell assets. Transactions in Asia's power industry have totaled $16.5 billion so far this year, a fifth of those in 2007, according to data compiled by Bloomberg.
Temasek is trying to ``sweeten the deal as we are in the middle of a credit crisis,'' said Simon Powell, head of power research at CLSA Ltd. in Hong Kong. ``The Philippines government offered various funding arrangements during the recent sale of government assets in generation this year.''
More Competition
Selling the city-state's largest utility will further open the electricity sector to competition after the disposal of Tuas Power earlier this year. The sale of Senoko Power, as well as Temasek's third generator Power Seraya Ltd., will be completed by the end of 2009, the company said in a statement in July.
``The divestment of Senoko Power is progressing as scheduled,'' Temasek said in an e-mail on Aug. 28. Credit Suisse spokeswoman Jennifer Iu declined to comment in an e-mail sent on Aug. 27 while Morgan Stanley spokesman Nick Footitt declined to comment in an e-mail yesterday.
Temasek may get as much as $3 billion for Senoko Power, the Economic Times, India's biggest business paper, said yesterday. The state investment company, which bought stakes in companies such as Merrill Lynch & Co. after banks wrote down $500 billion of investments tied to the U.S. subprime mortgages, may use extra funds to pick up investments at good value.
Bidders Short-Listed
Temasek has short-listed five bidders including Keppel Corp., Tata Power Co., a venture between GDF Suez SA and Marubeni Corp., a venture between CLP Holdings Ltd. and Mitsubishi Corp., and YTL Corp. Final offers may be submitted by tomorrow, said one of the bidders, who declined to be named citing confidentiality.
Built at a cost of S$2.6 billion ($1.8 billion), Senoko's 3,300 megawatts of capacity supplied 30 percent of the island nation's electricity needs last year.
Senoko Power earned S$245 million before interest, taxes and depreciation on revenue of S$2.49 billion for the year ended March 31, 2008.
In March, Beijing-based China Huaneng agreed to pay S$4.24 billion for Tuas, the smallest of Temasek's three generators.
Tuas is the best asset because the units are bigger and the turbines more advanced, making it more efficient and competitive than Senoko Power and Power Seraya, CLSA's Powell said.
Tuas Power station consists of four blocks of natural gas- fired combined cycle plants and two units of steam plants with a total generating capacity of 2,670 megawatts, the company Web site said.
`Better Economics'
``Tuas is one of the lowest-cost generators in Singapore and has better economics from a short-run marginal cost of generation perspective,'' Powell said. ``The Senoko plant is older and the units are smaller.''
Temasek, which manages about $130 billion in assets, last year revived a plan abandoned six years ago to sell the Singapore companies in order to tap rising demand for power assets.
Senoko Power and Power Seraya were transferred in 2001 to Temasek from Singapore Power Ltd., the main electricity supplier, after the government separated ownership of generators from transmission and distribution. Temasek had owned Tuas Power since 1995.
To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.
Read more...
Sept. 2 (Bloomberg) -- Temasek Holdings Pte, Singapore's government-owned investment company, is arranging financing for bidders for Senoko Power Ltd., the country's largest utility, after a global credit crisis reduced availability of funds.
Credit Suisse Group AG and Morgan Stanley & Co., advising Temasek on the sale, will organize a bridge loan for two years at a cost of about 2.5 percentage points over the London Interbank Offered Rate, according to a document sent to buyers last month, a copy of which was obtained by Bloomberg News. The funds may be lent by banks including DBS Group Holdings Ltd. and United Overseas Bank Ltd.
``It certainly improves the chance of selling the assets by providing readily available financing, it makes it easier for buyers,'' said John Corrin, the Hong Kong-based chairman of the Asia Pacific Loan Market Association. ``It provides a fallback for those who can't find other alternatives.''
The collapse of the U.S. subprime mortgage market has caused a slump in mergers and acquisitions, making it more difficult for companies such as Temasek to sell assets. Transactions in Asia's power industry have totaled $16.5 billion so far this year, a fifth of those in 2007, according to data compiled by Bloomberg.
Temasek is trying to ``sweeten the deal as we are in the middle of a credit crisis,'' said Simon Powell, head of power research at CLSA Ltd. in Hong Kong. ``The Philippines government offered various funding arrangements during the recent sale of government assets in generation this year.''
More Competition
Selling the city-state's largest utility will further open the electricity sector to competition after the disposal of Tuas Power earlier this year. The sale of Senoko Power, as well as Temasek's third generator Power Seraya Ltd., will be completed by the end of 2009, the company said in a statement in July.
``The divestment of Senoko Power is progressing as scheduled,'' Temasek said in an e-mail on Aug. 28. Credit Suisse spokeswoman Jennifer Iu declined to comment in an e-mail sent on Aug. 27 while Morgan Stanley spokesman Nick Footitt declined to comment in an e-mail yesterday.
Temasek may get as much as $3 billion for Senoko Power, the Economic Times, India's biggest business paper, said yesterday. The state investment company, which bought stakes in companies such as Merrill Lynch & Co. after banks wrote down $500 billion of investments tied to the U.S. subprime mortgages, may use extra funds to pick up investments at good value.
Bidders Short-Listed
Temasek has short-listed five bidders including Keppel Corp., Tata Power Co., a venture between GDF Suez SA and Marubeni Corp., a venture between CLP Holdings Ltd. and Mitsubishi Corp., and YTL Corp. Final offers may be submitted by tomorrow, said one of the bidders, who declined to be named citing confidentiality.
Built at a cost of S$2.6 billion ($1.8 billion), Senoko's 3,300 megawatts of capacity supplied 30 percent of the island nation's electricity needs last year.
Senoko Power earned S$245 million before interest, taxes and depreciation on revenue of S$2.49 billion for the year ended March 31, 2008.
In March, Beijing-based China Huaneng agreed to pay S$4.24 billion for Tuas, the smallest of Temasek's three generators.
Tuas is the best asset because the units are bigger and the turbines more advanced, making it more efficient and competitive than Senoko Power and Power Seraya, CLSA's Powell said.
Tuas Power station consists of four blocks of natural gas- fired combined cycle plants and two units of steam plants with a total generating capacity of 2,670 megawatts, the company Web site said.
`Better Economics'
``Tuas is one of the lowest-cost generators in Singapore and has better economics from a short-run marginal cost of generation perspective,'' Powell said. ``The Senoko plant is older and the units are smaller.''
Temasek, which manages about $130 billion in assets, last year revived a plan abandoned six years ago to sell the Singapore companies in order to tap rising demand for power assets.
Senoko Power and Power Seraya were transferred in 2001 to Temasek from Singapore Power Ltd., the main electricity supplier, after the government separated ownership of generators from transmission and distribution. Temasek had owned Tuas Power since 1995.
To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.
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