By John Martens
Oct. 4 (Bloomberg) -- KBC Group NV, Belgium's biggest financial-services company by market value, said its Russian unit didn't run out of funding, even as interbank lending surged to a record last month.
Absolut Bank's short-term needs were met through access to KBC funding and loans provided by Russia's central bank, KBC Chief Executive Officer Andre Bergen told investors at a conference in Antwerp today. Retail banking in Russia has become ``more difficult lately, but is still solid,'' he said.
A measure of financial stocks on Russia's benchmark Micex Index fell 25 percent last month as credit markets seized up, pushing the MosPrime rate on overnight loans between Russian banks to a record 11.08 percent on Sept. 17. The collapse in shares led the government to pledge more than $100 billion in emergency funding after closing the stock market for two days.
European banks face ``challenging times'' as the ``blue-sky scenario of the past five years has vanished,'' Bergen said. He added that further actions to drive down costs are ``possible'' after approving only 95 percent of budgeted spending at the start of the year.
Third-quarter earnings will show the negative impact of writedowns on the securities portfolio and margin pressure in Belgium, Bergen said. Commercial activities remained ``sustained'' on growth in central Europe, he added.
Bergen declined to say if the Brussels-based financial- services company was asked by the Belgian government to make a bid for parts of Fortis.
To contact the reporter on this story: John Martens in Antwerp, Belgium via jmartens1@bloomberg.net
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Sunday, October 5, 2008
European Leaders Meet on Crisis, Focus on Oversight, Accounting
By Sandrine Rastello
Oct. 4 (Bloomberg) -- European leaders, convening today on the global financial crisis, have so far agreed on only one thing: Europe likely won't emulate the response of the U.S., where Congress gave final approval to a $700 billion rescue yesterday.
At the summit called by French President Nicolas Sarkozy that started around 4:30 p.m. in Paris, they're seeking to bridge divisions in the 27-nation bloc that have undermined a coordinated response to the deepening credit crunch. Governments rescued five European banks this week as their economies sink toward recession.
``Collective action is even more necessary in Europe than in the U.S. because Europe is more complex than the U.S.,'' Dominique Strauss-Kahn, managing director of the International Monetary Fund, said today in Paris after meeting Sarkozy. ``Action must be taken quickly and in a concerted manner.''
After Sarkozy and others dismissed the notion of creating a fund to shore up ailing financial institutions, the leaders of Germany, Britain, Italy, Luxembourg, the European Central Bank and the European Commission arrived at the Elysee Palace to discuss tighter financial rules and oversight, looser accounting standards, steps to limit economic damage, and cooperation on bank-deposit guarantees.
The days leading up to the meeting were marked by discord, with Germany criticizing a plan floated by French Finance Minister Christine Lagarde to set up a rescue fund and a chorus of opposition to Ireland's decision to guarantee the deposits and debts of its banks.
`Common Sense'
The fissures appeared as leaders arrived for the meeting. Sarkozy told reporters ``we must have a global answer to a global problem.'' Merkel, standing beside him, appealed to each country's ``common sense'' to prevent crises in the future.
Sarkozy distanced himself from Lagarde's proposal, outlined in an Oct. 1 interview with Germany's Handelsblatt newspaper, after Germany torpedoed the idea. ECB President Jean-Claude Trichet said Europe shouldn't try to copy the U.S. bailout.
``We don't have a federal budget, and so the idea that we could do the same doesn't fit the political structure of Europe,'' Trichet said Oct. 2.
Germany, Europe's biggest economy, expressed skepticism this week of any joint action, even after guaranteeing a 35 billion-euro ($48 billion) credit line for Hypo Real Estate Holding AG to save it from collapse.
``The idea of applying one solution, one big bang'' to the crisis ``is not practicable and would create new, enormous problems,'' German Finance Ministry spokesman Torsten Albig said Oct. 1. ``The tailor-made solution is the right way.''
Sarkozy's Call
Sarkozy has called for better control of credit-rating firms, stricter bank regulation and executive-pay limits.
The French president questioned, in a Sept. 25 speech, accounting rules that require banks to review their holdings each quarter and report losses when the value declines, the so- called mark-to-market standard. Banks worldwide have written down $587.7 billion since last year, according to data compiled by Bloomberg.
Italian Finance Minister Giulio Tremonti yesterday said the accounting rules would be on today's agenda.
``A chunk of the discussion will also be dedicated to bookkeeping methods that are less suicidal than those applied today,'' Tremonti said at a conference in Capri, southern Italy. ``We have rules that we don't need, not those we do need.''
Bank Guarantees
Fallout from the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy hit Europe this week, with Germany, France, Belgium, Luxembourg, the Netherlands, Iceland and the U.K. rescuing lenders and Italian Prime Minister Silvio Berlusconi pledging to prevent losses for depositors. Sarkozy made the same pledge last week.
U.K. Prime Minister Gordon Brown, whose government seized lender Bradford & Bingley Plc this week, said leaders would continue propping up banks.
``No sound, solvent banks should be allowed to fail due to lack of liquidity,'' he said in Paris. ``We'll do whatever is necessary to ensure the stability of the system.''
Leaders may seek to harmonize the guarantee of deposit levels in the wake of the Irish move, said Laurence Boone, an economist at Barclays Capital in Paris. The U.K. bank regulator yesterday increased its insurance ceiling to 50,000 pounds ($88,500) per account from 35,000 pounds to stem a flow of funds to Ireland.
Harmonization ``would avoid unfair competition,'' Boone said. That ``could be used to say they have a common position and correct the impression that every country is doing its own rescue thing in its corner.''
Rate Cut Considered
With the economic outlook darkening, Trichet said on Oct. 2 that ECB policy makers had debated an interest-rate cut for the first time since the credit squeeze began last year when they decided to leave their benchmark at 4.25 percent.
Money-market rates jumped to records yesterday and the Bank of England relaxed borrowing rules for financial institutions to counter what it called ``extraordinary'' strains.
Speaking to reporters in London today before leaving for Paris, Brown said he'll propose a 12-billion-pound ($21.3 billion) fund ``so that small businesses in our country and the rest of Europe can get money immediately so that they can continue to employ staff and continue to provide services.''
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net;
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China Welcomes U.S. Rescue Plan, Offers Cooperation
By Irene Shen
Oct. 4 (Bloomberg) -- China's central bank said it hopes to see enhanced cooperation and coordination with U.S. and among other countries to stabilize global financial markets after the U.S. Congress approved a $700 billion rescue package.
``We're happy to see the bailout passage,'' the People's Bank of China said in a statement on its Web site today. ``All countries should take the responsibility to cooperate, as we share the same interest and goal in facing this crisis.''
The central bank said it had already taken measures to reduce the impact of the U.S. financial crisis on China and would continue to do so, without specifying. It last month reduced its one-year lending rate to 7.20 percent from 7.47 percent, and lowered the reserve-requirement ratio for smaller banks to 16.5 percent from 17.5 percent.
``If China doesn't move actively, the global recession would be deeper,'' said Frank Gong, JPMorgan Chase & Co.'s Hong Kong-based chief China economist.
``To keep China's economy strong and stable is the biggest contribution we can make to the global economy,'' the central bank said in today's statement, citing Premier Wen Jiabao.
The House of Representatives voted in favor of the bailout yesterday after rejecting the original bill on Sept. 29. The bailout comes after global banks racked up almost $590 billion in credit losses and asset writedowns stemming from the worst housing slump since the Great Depression.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
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Oct. 4 (Bloomberg) -- China's central bank said it hopes to see enhanced cooperation and coordination with U.S. and among other countries to stabilize global financial markets after the U.S. Congress approved a $700 billion rescue package.
``We're happy to see the bailout passage,'' the People's Bank of China said in a statement on its Web site today. ``All countries should take the responsibility to cooperate, as we share the same interest and goal in facing this crisis.''
The central bank said it had already taken measures to reduce the impact of the U.S. financial crisis on China and would continue to do so, without specifying. It last month reduced its one-year lending rate to 7.20 percent from 7.47 percent, and lowered the reserve-requirement ratio for smaller banks to 16.5 percent from 17.5 percent.
``If China doesn't move actively, the global recession would be deeper,'' said Frank Gong, JPMorgan Chase & Co.'s Hong Kong-based chief China economist.
``To keep China's economy strong and stable is the biggest contribution we can make to the global economy,'' the central bank said in today's statement, citing Premier Wen Jiabao.
The House of Representatives voted in favor of the bailout yesterday after rejecting the original bill on Sept. 29. The bailout comes after global banks racked up almost $590 billion in credit losses and asset writedowns stemming from the worst housing slump since the Great Depression.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
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South Korea Orders Mars, Nestle to Recall Products
By Heejin Koo
Oct. 4 (Bloomberg) -- Nestle SA, the world's largest food company, and Mars Inc. have been ordered by South Korea to remove from store shelves three products that tested positive for an industrial chemical that has killed and sickened babies.
Melamine was found in Mars' M&M chocolate milk and Snickers peanut Funsize, and in KitKat chocolate bars produced by Nestle Tianjin in China, the Korea Food and Drug Administration said today in an e-mailed statement.
Dairy products tainted with melamine, which can boost protein readings when added to diluted milk, have killed four babies and sickened 53,000 children in China, leading countries from France to India to ban Chinese imports. Melamine is used to tan leather and make plastic.
South Korean authorities on Sept. 25 banned the import of all dairy and related products made in China after melamine was found in a biscuit product imported from Hong Kong and in a snack product imported from China by Haitai Confectionery & Foods Co..
``The melamine levels announced by the KFDA do not pose a health risk,'' Mars Korea said in an e-mailed statement. ``Mars is recalling these products because it is legally obligated to do so following the announcement'' by South Korean authorities.
The South Korean agency found a melamine level of 2.38 parts per million (ppm) in the M&Ms and 1.78 ppm in Snickers peanut Funsize.
`Reporting Limit'
``Minute traces of melamine are commonly found throughout the global food chain and melamine levels below 2.5 ppm are not deemed to indicate adulteration with melamine,'' the Mars statement said. It asked authorities to adopt ``a harmonized reporting limit for melamine in line with the internationally accepted standards.''
The agency has said that the South Korean government does not allow any minimum level of melamine in its food products.
Nestle confirmed it had been asked by the Korean agency to withdraw one batch of mini KitKat made in China after tests ``detected minute traces of melamine in a single batch out of eight Nestle confectionery items tested,'' the Swiss company said in an e-mailed statement. No melamine was detected in the seven other products.
``The company immediately complied with the authorities' request, even though this product is absolutely safe by recognized international standards,'' Nestle said. ``South Korea has no regulations on maximum levels of melamine in food, and the conditions under which the South Korean authorities conducted their tests are unclear.''
To contact the reporter on this story: Heejin Koo in Seoul at hjkoo@bloomberg.net
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Oct. 4 (Bloomberg) -- Nestle SA, the world's largest food company, and Mars Inc. have been ordered by South Korea to remove from store shelves three products that tested positive for an industrial chemical that has killed and sickened babies.
Melamine was found in Mars' M&M chocolate milk and Snickers peanut Funsize, and in KitKat chocolate bars produced by Nestle Tianjin in China, the Korea Food and Drug Administration said today in an e-mailed statement.
Dairy products tainted with melamine, which can boost protein readings when added to diluted milk, have killed four babies and sickened 53,000 children in China, leading countries from France to India to ban Chinese imports. Melamine is used to tan leather and make plastic.
South Korean authorities on Sept. 25 banned the import of all dairy and related products made in China after melamine was found in a biscuit product imported from Hong Kong and in a snack product imported from China by Haitai Confectionery & Foods Co..
``The melamine levels announced by the KFDA do not pose a health risk,'' Mars Korea said in an e-mailed statement. ``Mars is recalling these products because it is legally obligated to do so following the announcement'' by South Korean authorities.
The South Korean agency found a melamine level of 2.38 parts per million (ppm) in the M&Ms and 1.78 ppm in Snickers peanut Funsize.
`Reporting Limit'
``Minute traces of melamine are commonly found throughout the global food chain and melamine levels below 2.5 ppm are not deemed to indicate adulteration with melamine,'' the Mars statement said. It asked authorities to adopt ``a harmonized reporting limit for melamine in line with the internationally accepted standards.''
The agency has said that the South Korean government does not allow any minimum level of melamine in its food products.
Nestle confirmed it had been asked by the Korean agency to withdraw one batch of mini KitKat made in China after tests ``detected minute traces of melamine in a single batch out of eight Nestle confectionery items tested,'' the Swiss company said in an e-mailed statement. No melamine was detected in the seven other products.
``The company immediately complied with the authorities' request, even though this product is absolutely safe by recognized international standards,'' Nestle said. ``South Korea has no regulations on maximum levels of melamine in food, and the conditions under which the South Korean authorities conducted their tests are unclear.''
To contact the reporter on this story: Heejin Koo in Seoul at hjkoo@bloomberg.net
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U.S., India to Sign Nuclear Accord After Bush Approves Bill
By Bibhudatta Pradhan and M.C. Govardhana Rangan
Oct. 4 (Bloomberg) -- The U.S. and India will sign the civil nuclear energy agreement, conceived in 2005, once President George W. Bush gives his approval to the bill that's just been approved by Congress.
``The president will sign the legislation very soon,'' U.S. Secretary of State Condoleezza Rice said in New Delhi today at a joint press conference with Indian counterpart Pranab Mukherjee.
The nuclear agreement, passed by the Senate Oct. 1 by a vote of 86-13, allows U.S. nuclear suppliers to trade with India for the first time since it tested an atomic bomb in 1974. The Bush administration made the accord a top foreign-policy priority as a way to lock in potential political and economic links far beyond the nuclear-energy industry.
India expects the agreement to be signed shortly, said Foreign Minister Mukherjee.
After President Bush approves the bill, the process will be complete and ``we will be in a position to sign the agreement at a mutually convenient date,'' Mukherjee said.
The remaining steps were procedural, according to Rice.
``I don't want anyone to think that we have open issues,'' she told reporters in New Delhi today. ``We don't have open issues. These are administrative issues of signing.''
Rice also said that the various pieces of legislation tied to the agreement weren't contradictory.
``We make clear again that the Hyde Act is completely consistent with the 123 agreement we signed with India and the 123 agreement is consistent with the Hyde Act,'' Rice said. ``The U.S will keep its commitments to both.''
Talks With Companies
India aims to start final negotiations next week with General Electric Co., Areva SA, Westinghouse Electric Co. and Rosatom Corp. on building reactors as early as next year.
``The dream is to start work next year,'' S.K. Jain, chairman of state-owned Nuclear Power Corp. of India, the nation's monopoly atomic energy utility, said in a telephone interview yesterday. ``But there's a full set of procedures to be followed after the companies agree.''
India had been waiting for U.S. approval before starting talks with companies.
``We will begin focused negotiations with the four short- listed companies, GE, Areva, Westinghouse and Rosatom, starting next week,'' Jain said. Getting the projects started ``can take anywhere between three to eight months. The hesitation is over.''
Nuclear Power will also seek to buy fuel for the reactors that it's planning to set up.
``We are also looking to buy more nuclear fuel or yellow cake by year-end and plan to start work at two sites, in Jaitapur in Maharashtra and Kudankulam in Tamil Nadu,'' Jain said.
India Visit
Rice is meeting officials including Prime Minister Manmohan Singh and opposition leader L.K. Advani in New Delhi. She will also visit Kazakhstan during her Oct. 3-5 trip, the State Department has said.
The discussions in India included a range of issues other than the nuclear agreement, including trade, counterterrorism, human rights, religious freedom, education and the region.
India has been assured by Pakistan's President Asif Ali Zardari that his country's territory won't be used to carry out terrorist activities against India, Mukherjee said.
``We all have a stake in a successful civilian government in Pakistan that can deal with Pakistan's considerable challenges, be they economic, political, or particularly, internal security,'' Rice said. ``Pakistan, more than anyone else, has an interest in fighting terrorism.''
To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; M.C. Govardhana Rangan in Mumbai at grangan@bloomberg.net.
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Tata Motors Scraps Factory for World's Cheapest Car on Protests
By Vipin V. Nair
Oct. 4 (Bloomberg) -- Tata Motors Ltd., India's biggest truckmaker, abandoned its newly built factory for the world's cheapest car because of violent protests by farmers, hampering plans to start selling the $2,500 vehicle this year.
Tata Motors will move equipment and machinery from Singur in West Bengal state to a new location to be decided later, Chairman Ratan Tata told reporters in Kolkata yesterday. The company has yet to evaluate how much of the 15 billion rupees ($319 million) invested in the project will be lost, he said.
``We have taken this decision because we do not see any change on the horizon,'' Ratan Tata said. The company will strive to meet this quarter's deadline for Nano sales, he said.
Shifting to a new site may hinder Tata's challenge to Suzuki Motor Corp., maker of more than half the cars sold in India, before new entrants including Renault SA start selling low-cost cars. Ratan Tata, 70, conceived the Nano project to lure the nation's 45 million motorcycle and scooter owners to upgrade.
``It's a big setback for Tata Motors,'' said Gaurav Lohia, an analyst at KR Choksey Shares & Sec Pvt., who has a ``buy'' rating on the company's stock. ``I expect the production and rollout of the Nano to be slowing down.''
Tata Motors fell 9.15 rupees, or 2.7 percent, to 330.5 rupees in Mumbai trading yesterday before the announcement. The shares have declined 54 percent so far this year, compared with the benchmark index's 38 percent drop.
Land disputes, protests by environmental groups and delays in getting government approval have stalled projects across India including a $12 billion steel plant planned by Korea's Posco.
Trinamool Congress
Tata Motors on Aug. 29 halted construction of the factory and threatened to pull out of the site after local political party Trinamool Congress party rejected compensation proposals by the West Bengal state government for farmers.
In August, at least 2,000 men and women, mostly illiterate, protested in front of the Tata Motors factory at Singur, about 1 1/2 hours north of Kolkata. The Trinamool party blocked roads to protest the land compensation package for the farmers.
The party didn't oppose the 600 acres of land where the Tata Motors plant was under construction, according to its leader Mamata Banerjee. The balance of about 400 acres of land acquired for vendors must be returned to farmers, whose livelihood was taken away by the plant, she said.
The Communist-led government in West Bengal state had said it was ready to compensate farmers by returning about 70 acres (28 hectares) of land already given to Tata Motors and its component-makers. The state also offered to increase the cash payments by 50 percent for the people who gave their land.
`Integral' Project
Tata Motors had said the project was ``integral'' and the plant couldn't be constructed without vendors getting facilities.
``The Nano is a unique project,'' said Tarun Das, chief mentor of the Confederation of Indian Industry, the country's largest business grouping. ``Any forced change to its plan of implementation will delay the launch of the Nano and also impact the cost,'' Das said in a statement Oct. 2.
Tata Motors last month said it's ``actively'' looking for alternatives to the factory in Singur. The automaker got an offer for 1,000 acres of land and other incentives from the southern state of Karnataka, Managing Director Ravi Kant said Sept. 18.
Sri Lanka, India's neighbor, also offered land to Tata Motors to set up the Nano factory, the nation's Investment Promotion Minister Sarath Amunugama said.
One of two cars sold in the country is made by Suzuki's local unit Maruti Suzuki India Ltd. In comparison, Tata Motors controlled 13.9 percent of the market in the year ended March 31, making it the nation's third-largest automaker.
To contact the reporter on this story: Vipin V. Nair in Mumbai at Vnair12@bloomberg.net.
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Saturday, October 4, 2008
Asian Currencies: Ringgit, Baht Fall on Concern Exports to Slow
By Lilian Karunungan and David Yong
Oct. 4 (Bloomberg) -- Malaysia's ringgit and the Thai baht fell this week on concern the deepening credit crisis will push the U.S. economy into a recession and reduce demand for Asian exports and emerging-market assets.
The Philippine peso and the Singapore dollar also declined as a regional stock index slumped 7.6 percent, the worst week in 13 months. Overseas investors pulled almost 26 billion ringgit ($7.5 billion) from Malaysia's debt market since April, according to data from the central bank.
``Some markets are going to be affected more than others and Malaysia relies a lot on the U.S. for electronic exports,'' said Joanna Tan, a regional economist at Forecast Pte in Singapore. The ringgit is falling because ``investors are shunning markets that are deemed riskier.''
The ringgit fell 0.9 percent this week to 3.4670 per dollar as of 4:15 p.m. yesterday in Kuala Lumpur, its biggest decline since the five days ended Sept. 5, according to data compiled by Bloomberg. The baht declined 0.8 percent this week to 34.21.
Global funds cut their investments in Malaysian debt for a third month in July, according to data published by Bank Negara Malaysia on its Web site. They reduced their holdings to 100.6 billion ringgit from 104.9 billion ringgit in June and a peak of 126.5 billion ringgit in April, the data show.
Growth Target
Malaysia may revise its economic growth forecast this year due to deepening global financial turmoil, Finance Minister Najib Razak said this week. The government ``will reevaluate its targets'' if the global financial crisis leads to a significant downturn, he said in Kuala Lumpur on Sept. 30.
The Thai baht had its first weekly loss in three on speculation Prime Minister Somchai Wongsawat will call elections soon, possibly leading to more political demonstrations. Anti- government protesters have occupied Government House in Bangkok since Aug. 26 and are calling for a new parliament.
``The global macroeconomic backdrop is hardly conducive for Asian currencies, including the baht,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore. ``On top of that you have the domestic political uncertainties with the big question now on whether Somchai will call for elections and when.''
The baht is the third-worst performer of Asia's 10 most- active traded currencies this year after the South Korean won and Indian rupee.
Exports Slow
Thai exports rose at the slowest pace in five months in August and Commerce Minister Chaiya Sasomsup said on Oct. 2 overseas sales will probably increase no more than 20 percent this year, down from a previous estimate of 25 percent.
The government last month cut its 2008 economic growth forecast to 5.1 percent, from 5.6 percent, and said the economy will slow to between 4 percent and 5 percent next year as political uncertainty and turbulent global markets curb spending, investment and exports.
The Singapore dollar had its worst week in a month. Daiwa SB Investments Ltd. and Aberdeen Asset Management Asia Ltd. are selling the currency on speculation the central bank will limit its advance as the economy teeters on the brink of recession.
Policy Meeting
The Monetary Authority of Singapore will slow the pace of appreciation at its biannual foreign-exchange policy meeting on Oct. 10, according to seven of 14 strategists surveyed by Bloomberg News. Four expect gains to be halted, two expect a shift down in the range for the currency's moves and only one predicts no change.
The Singapore dollar dropped 1.4 percent in the five days to S$1.4488.
The Philippine peso fell a second week as the rising cost of borrowing dollars spurred local companies to sell pesos to get the U.S. currency. The peso declined for the fifth time in six days as the benchmark stock index dropped 1.8 percent, the most in more than two weeks.
``There is a lack of liquidity for dollars so companies and banks who need dollars have to sell pesos,'' said Marcelo Ayes, senior vice president for Treasury at Rizal Commercial Banking Corp. in Manila.
The peso declined 0.6 percent this week to 47.025, extending its losses this year to 12.2 percent, according to Tullett Prebon Plc.
Elsewhere, the Taiwan dollar lost 0.4 percent this week to NT$32.18 and Vietnam's dong was unchanged at 16,600. Markets were closed yesterday in South Korea, China and Indonesia for public holidays.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net; David Yong in Singapore at dyong@bloomberg.net.
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Oct. 4 (Bloomberg) -- Malaysia's ringgit and the Thai baht fell this week on concern the deepening credit crisis will push the U.S. economy into a recession and reduce demand for Asian exports and emerging-market assets.
The Philippine peso and the Singapore dollar also declined as a regional stock index slumped 7.6 percent, the worst week in 13 months. Overseas investors pulled almost 26 billion ringgit ($7.5 billion) from Malaysia's debt market since April, according to data from the central bank.
``Some markets are going to be affected more than others and Malaysia relies a lot on the U.S. for electronic exports,'' said Joanna Tan, a regional economist at Forecast Pte in Singapore. The ringgit is falling because ``investors are shunning markets that are deemed riskier.''
The ringgit fell 0.9 percent this week to 3.4670 per dollar as of 4:15 p.m. yesterday in Kuala Lumpur, its biggest decline since the five days ended Sept. 5, according to data compiled by Bloomberg. The baht declined 0.8 percent this week to 34.21.
Global funds cut their investments in Malaysian debt for a third month in July, according to data published by Bank Negara Malaysia on its Web site. They reduced their holdings to 100.6 billion ringgit from 104.9 billion ringgit in June and a peak of 126.5 billion ringgit in April, the data show.
Growth Target
Malaysia may revise its economic growth forecast this year due to deepening global financial turmoil, Finance Minister Najib Razak said this week. The government ``will reevaluate its targets'' if the global financial crisis leads to a significant downturn, he said in Kuala Lumpur on Sept. 30.
The Thai baht had its first weekly loss in three on speculation Prime Minister Somchai Wongsawat will call elections soon, possibly leading to more political demonstrations. Anti- government protesters have occupied Government House in Bangkok since Aug. 26 and are calling for a new parliament.
``The global macroeconomic backdrop is hardly conducive for Asian currencies, including the baht,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore. ``On top of that you have the domestic political uncertainties with the big question now on whether Somchai will call for elections and when.''
The baht is the third-worst performer of Asia's 10 most- active traded currencies this year after the South Korean won and Indian rupee.
Exports Slow
Thai exports rose at the slowest pace in five months in August and Commerce Minister Chaiya Sasomsup said on Oct. 2 overseas sales will probably increase no more than 20 percent this year, down from a previous estimate of 25 percent.
The government last month cut its 2008 economic growth forecast to 5.1 percent, from 5.6 percent, and said the economy will slow to between 4 percent and 5 percent next year as political uncertainty and turbulent global markets curb spending, investment and exports.
The Singapore dollar had its worst week in a month. Daiwa SB Investments Ltd. and Aberdeen Asset Management Asia Ltd. are selling the currency on speculation the central bank will limit its advance as the economy teeters on the brink of recession.
Policy Meeting
The Monetary Authority of Singapore will slow the pace of appreciation at its biannual foreign-exchange policy meeting on Oct. 10, according to seven of 14 strategists surveyed by Bloomberg News. Four expect gains to be halted, two expect a shift down in the range for the currency's moves and only one predicts no change.
The Singapore dollar dropped 1.4 percent in the five days to S$1.4488.
The Philippine peso fell a second week as the rising cost of borrowing dollars spurred local companies to sell pesos to get the U.S. currency. The peso declined for the fifth time in six days as the benchmark stock index dropped 1.8 percent, the most in more than two weeks.
``There is a lack of liquidity for dollars so companies and banks who need dollars have to sell pesos,'' said Marcelo Ayes, senior vice president for Treasury at Rizal Commercial Banking Corp. in Manila.
The peso declined 0.6 percent this week to 47.025, extending its losses this year to 12.2 percent, according to Tullett Prebon Plc.
Elsewhere, the Taiwan dollar lost 0.4 percent this week to NT$32.18 and Vietnam's dong was unchanged at 16,600. Markets were closed yesterday in South Korea, China and Indonesia for public holidays.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net; David Yong in Singapore at dyong@bloomberg.net.
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Asia Stocks Post Biggest Weekly Drop in 13 Months; Toyota Falls
By Ian C. Sayson
Oct. 4 (Bloomberg) -- Asian stocks posted the biggest weekly drop in 13 months on concern a $700 billion U.S. bank bailout will fail to stimulate demand for the region's exports.
Toyota Motor Corp. fell 14 percent this week, the most in 21 years, after its U.S. car sales plunged 32 percent last month. BHP Billiton, the world's biggest miner, dropped 15 percent as commodity prices headed for their biggest weekly decline in 50 years. Babcock & Brown Ltd. paced a drop in financial stocks, sliding 20 percent, as borrowing costs increased.
``Investors are worried that economic conditions and earnings will still deteriorate even with this rescue plan,'' said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co. in Tokyo, which manages $3.3 billion. ``The weakening global demand is becoming more of a concern to many investors.''
The MSCI Asia Pacific Index dropped 8.0 percent this week, the most since the five days ended Aug. 17, 2007, when credit markets first seized up as the U.S. subprime mortgage crisis prompted banks to rein in lending. The index has slumped 33 percent this year as the credit crunch brought down banks including Lehman Brothers Holdings Inc.
The index tumbled 3.9 percent on Sept. 30 after the U.S. House of Representatives blocked the first passage of the rescue plan.
A measure of commodity producers tumbled 14.9 percent, the most since at least 1995, when Bloomberg data on the index was first compiled. All 10 industry groups declined.
Toyota, the world's No. 2 carmaker, fell 14 percent this week to 4,080 yen, its biggest loss since October 1987. The company said it offered no-interest loans on 11 models in the U.S., where its sales tanked the most in 21 years.
The financial crisis may push the U.S. into a recession, the International Monetary Fund said this week, after predicting a moderate contraction in July. First-time jobless claims in the U.S. surged to a seven-year high in the week ended Sept. 27 while factory bookings fell the most in two years in August, according to government data.
``We know that there's a financial crisis, and now the question is are we going to have an economic correction or crisis,'' said Masayuki Kubota, a senior fund manager at Daiwa SB Investments Ltd. in Tokyo, who helps oversee $1.7 billion. ``If it does turn into a crisis, there is a lot of downside for equity markets.''
BHP Billiton dropped 15 percent to A$30.42, the most since October 1987 on concern demand for raw materials will weaken. Mitsubishi Corp., which generates more than half of its profit from commodities trading, fell 21 percent to 1,938 yen, its biggest loss based on data that goes back until September 1974.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have fallen 10.9 percent this week, the largest drop since at least 1956 on concern that demand will weaken as global economic growth slows. Crude oil has lost 12.2 percent to $93.88 a barrel, its worst performance since the week ending Dec. 3, 2004.
Babcock, Orix
Babcock & Brown, a manager of infrastructure assets, fell 20 percent to A$1.84 on concern that the global credit crisis will choke financing. Orix Corp., which has debt equal to three times its equity, plunged 24 percent to 10,690 yen, its sharpest retreat since January 2000.
Banks in Singapore are charging each other three-month U.S. dollar loans at 4.27 percent, the highest since Jan. 11. Hong Kong's interbank offered rate for similar-term loans in the city's currency climbed to 3.81 percent, the highest since Dec. 10.
Hang Seng Bank Ltd., Hong Kong's second-biggest bank by assets, fell 17 percent to HK$123.70, its biggest loss since April 1988, after saying it holds debt issued by Washington Mutual Inc., which collapsed last week.
Sun Hung Kai Properties Ltd., Hong Kong's No. 1 developer by market value, lost 13.4 percent to HK$74, the most since September 2001, on concern real estate purchases will weaken after banks including HSBC Holdings Plc raised the cost of mortgages in the city.
BYD Co., the biggest gainer on MSCI's Asian index, jumped 64 percent to HK$13.78. China's largest rechargeable-battery maker surged after billionaire Warren Buffett's MidAmerican Energy Holdings Co. said it will buy a 9.9 percent stake for HK$1.8 billion ($232 million).
``It's a good time to pick up value stocks, those with steady cashflows, high dividend yields and good earnings visibility,'' said Masahiko Ejiri, who helps manage about $30 billion at Mizuho Asset Management Co. in Tokyo. ``I am sure the U.S. knows the gravity of the situation and a plan will be reached to save their financial institutions.''
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
Read more...
Oct. 4 (Bloomberg) -- Asian stocks posted the biggest weekly drop in 13 months on concern a $700 billion U.S. bank bailout will fail to stimulate demand for the region's exports.
Toyota Motor Corp. fell 14 percent this week, the most in 21 years, after its U.S. car sales plunged 32 percent last month. BHP Billiton, the world's biggest miner, dropped 15 percent as commodity prices headed for their biggest weekly decline in 50 years. Babcock & Brown Ltd. paced a drop in financial stocks, sliding 20 percent, as borrowing costs increased.
``Investors are worried that economic conditions and earnings will still deteriorate even with this rescue plan,'' said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co. in Tokyo, which manages $3.3 billion. ``The weakening global demand is becoming more of a concern to many investors.''
The MSCI Asia Pacific Index dropped 8.0 percent this week, the most since the five days ended Aug. 17, 2007, when credit markets first seized up as the U.S. subprime mortgage crisis prompted banks to rein in lending. The index has slumped 33 percent this year as the credit crunch brought down banks including Lehman Brothers Holdings Inc.
The index tumbled 3.9 percent on Sept. 30 after the U.S. House of Representatives blocked the first passage of the rescue plan.
A measure of commodity producers tumbled 14.9 percent, the most since at least 1995, when Bloomberg data on the index was first compiled. All 10 industry groups declined.
Toyota, the world's No. 2 carmaker, fell 14 percent this week to 4,080 yen, its biggest loss since October 1987. The company said it offered no-interest loans on 11 models in the U.S., where its sales tanked the most in 21 years.
The financial crisis may push the U.S. into a recession, the International Monetary Fund said this week, after predicting a moderate contraction in July. First-time jobless claims in the U.S. surged to a seven-year high in the week ended Sept. 27 while factory bookings fell the most in two years in August, according to government data.
``We know that there's a financial crisis, and now the question is are we going to have an economic correction or crisis,'' said Masayuki Kubota, a senior fund manager at Daiwa SB Investments Ltd. in Tokyo, who helps oversee $1.7 billion. ``If it does turn into a crisis, there is a lot of downside for equity markets.''
BHP Billiton dropped 15 percent to A$30.42, the most since October 1987 on concern demand for raw materials will weaken. Mitsubishi Corp., which generates more than half of its profit from commodities trading, fell 21 percent to 1,938 yen, its biggest loss based on data that goes back until September 1974.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have fallen 10.9 percent this week, the largest drop since at least 1956 on concern that demand will weaken as global economic growth slows. Crude oil has lost 12.2 percent to $93.88 a barrel, its worst performance since the week ending Dec. 3, 2004.
Babcock, Orix
Babcock & Brown, a manager of infrastructure assets, fell 20 percent to A$1.84 on concern that the global credit crisis will choke financing. Orix Corp., which has debt equal to three times its equity, plunged 24 percent to 10,690 yen, its sharpest retreat since January 2000.
Banks in Singapore are charging each other three-month U.S. dollar loans at 4.27 percent, the highest since Jan. 11. Hong Kong's interbank offered rate for similar-term loans in the city's currency climbed to 3.81 percent, the highest since Dec. 10.
Hang Seng Bank Ltd., Hong Kong's second-biggest bank by assets, fell 17 percent to HK$123.70, its biggest loss since April 1988, after saying it holds debt issued by Washington Mutual Inc., which collapsed last week.
Sun Hung Kai Properties Ltd., Hong Kong's No. 1 developer by market value, lost 13.4 percent to HK$74, the most since September 2001, on concern real estate purchases will weaken after banks including HSBC Holdings Plc raised the cost of mortgages in the city.
BYD Co., the biggest gainer on MSCI's Asian index, jumped 64 percent to HK$13.78. China's largest rechargeable-battery maker surged after billionaire Warren Buffett's MidAmerican Energy Holdings Co. said it will buy a 9.9 percent stake for HK$1.8 billion ($232 million).
``It's a good time to pick up value stocks, those with steady cashflows, high dividend yields and good earnings visibility,'' said Masahiko Ejiri, who helps manage about $30 billion at Mizuho Asset Management Co. in Tokyo. ``I am sure the U.S. knows the gravity of the situation and a plan will be reached to save their financial institutions.''
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
Read more...
Schwarzenegger Says Federal Loan to State an Option
By Michael B. Marois
Oct. 3 (Bloomberg) -- Passage of a $700 billion financial- market rescue plan doesn't mean California won't need to ask the federal government for an emergency loan to pay bills, Governor Arnold Schwarzenegger said.
Schwarzenegger, a 61-year-old Republican, has called a meeting of top legislative leaders Oct. 8 to discuss the state's looming cash shortage, brought on by the global credit crisis that dried up the supply of money for loans.
The governor wrote a letter to U.S. Secretary Henry Paulson last night, saying turmoil in the credit markets has impeded the state's access to short-term financing commonly used by states and local governments to pay bills until tax revenue arrives later in the year. California and other U.S. states may need emergency federal loans if the credit crisis doesn't ease soon, Schwarzenegger said.
California, the most populous U.S. state, will run out of money by the end of this month and needs $7 billion in funding.
President George W. Bush today signed the legislation passed minutes earlier by the House of Representatives that is supposed to restart lending by authorizing the government to buy troubled assets from financial institutions reeling from record home foreclosures.
``On the way from the airport to here, I heard the great news that the House has voted for the $700 billion bill, which is extremely important not only for the state of California but the whole nation,'' Schwarzenegger told reporters in San Diego. ``Right now, because liquidity has dried up, it's very difficult to get a loan. So if we can't get it through the normal course, we will go to the federal government for help and we have already set that in motion.''
Salaries Threatened
Without the short-term funding, California may be forced to halt or significantly delay payments for teachers' salaries, nursing homes, law enforcement and ``every other state-funded service,'' said Treasurer Bill Lockyer, a Democrat.
``The fed has long had authority to provide liquidity to the municipal market,'' Lockyer said during an interview on Bloomberg Radio. ``The (rescue bill) actually has a little bit more explicit authority to do that. If we can't rely on traditional markets, maybe that's where we will go. It's an alternative if nothing else works.''
Bank of America Corp. and Goldman Sachs Group Inc. have already been selected to manage the note sale, now scheduled for the week of Oct. 13. One option Lockyer said he is considering is to borrow the money from Wall Street in chucks rather than seeking all $7 billion at once.
Pension Plan Investment
One California lawmaker said the state should consider borrowing the money from its public employee pension system, the largest such pension fund in the U.S., with $214 billion in assets.
Senator Dean Florez, a Democrat, said the California Public Employees' Retirement System could buy all the state's cash flow notes, earning more in interest than the system would by investing that same amount of money in U.S. Treasury notes.
``Many financial institutions have moved a great deal of their liquid assets into low-interest Treasury notes as a safety strategy. Rather than keeping these assets at the federal level, it would make more sense if these assets were used to purchase the short-term California debt especially with the state facing the current unprecedented cash shortage,'' Florez said in a letter to Lockyer, a member of the pension fund's governing board.
Letters of Credit
Tom Dressler, spokesman for Lockyer, said the treasurer plans to ask Calpers and its sister fund, the California State Teachers' Retirement System, about purchasing some of the notes or providing letters of credit. The teacher's fund is the second biggest in the nation.
The pension fund already invests in state and local governments by selling letters of credit to bond issuers. In June, Calpers doubled to $10 billion its credit enhancement program, seeking to take advantage in the rise in the cost of letters of credit, another byproduct of the credit crisis. The fund in June voted to withdraw a prohibition against backing no more than $250 million of any one bond issue.
California finance officials had wanted to obtain the cash from the credit market in late August or early September. The sale was delayed as lawmakers and Schwarzenegger fought through a record-long budget stalemate that left the state without an enacted spending plan until Sept. 23.
The state borrowed $7 billion through short-term notes last October, $3 billion in 2006 and $6 billion in fiscal 2005. It has borrowed $4.7 billion annually on average in the short-term market since 1990.
California, the biggest borrower in the municipal-bond market, has $51 billion in general-obligation debt outstanding The state is rated A+ by Fitch Ratings and Standard & Poor's, fifth-highest rankings, and a comparable A1 by Moody's Investors Service.
To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Passage of a $700 billion financial- market rescue plan doesn't mean California won't need to ask the federal government for an emergency loan to pay bills, Governor Arnold Schwarzenegger said.
Schwarzenegger, a 61-year-old Republican, has called a meeting of top legislative leaders Oct. 8 to discuss the state's looming cash shortage, brought on by the global credit crisis that dried up the supply of money for loans.
The governor wrote a letter to U.S. Secretary Henry Paulson last night, saying turmoil in the credit markets has impeded the state's access to short-term financing commonly used by states and local governments to pay bills until tax revenue arrives later in the year. California and other U.S. states may need emergency federal loans if the credit crisis doesn't ease soon, Schwarzenegger said.
California, the most populous U.S. state, will run out of money by the end of this month and needs $7 billion in funding.
President George W. Bush today signed the legislation passed minutes earlier by the House of Representatives that is supposed to restart lending by authorizing the government to buy troubled assets from financial institutions reeling from record home foreclosures.
``On the way from the airport to here, I heard the great news that the House has voted for the $700 billion bill, which is extremely important not only for the state of California but the whole nation,'' Schwarzenegger told reporters in San Diego. ``Right now, because liquidity has dried up, it's very difficult to get a loan. So if we can't get it through the normal course, we will go to the federal government for help and we have already set that in motion.''
Salaries Threatened
Without the short-term funding, California may be forced to halt or significantly delay payments for teachers' salaries, nursing homes, law enforcement and ``every other state-funded service,'' said Treasurer Bill Lockyer, a Democrat.
``The fed has long had authority to provide liquidity to the municipal market,'' Lockyer said during an interview on Bloomberg Radio. ``The (rescue bill) actually has a little bit more explicit authority to do that. If we can't rely on traditional markets, maybe that's where we will go. It's an alternative if nothing else works.''
Bank of America Corp. and Goldman Sachs Group Inc. have already been selected to manage the note sale, now scheduled for the week of Oct. 13. One option Lockyer said he is considering is to borrow the money from Wall Street in chucks rather than seeking all $7 billion at once.
Pension Plan Investment
One California lawmaker said the state should consider borrowing the money from its public employee pension system, the largest such pension fund in the U.S., with $214 billion in assets.
Senator Dean Florez, a Democrat, said the California Public Employees' Retirement System could buy all the state's cash flow notes, earning more in interest than the system would by investing that same amount of money in U.S. Treasury notes.
``Many financial institutions have moved a great deal of their liquid assets into low-interest Treasury notes as a safety strategy. Rather than keeping these assets at the federal level, it would make more sense if these assets were used to purchase the short-term California debt especially with the state facing the current unprecedented cash shortage,'' Florez said in a letter to Lockyer, a member of the pension fund's governing board.
Letters of Credit
Tom Dressler, spokesman for Lockyer, said the treasurer plans to ask Calpers and its sister fund, the California State Teachers' Retirement System, about purchasing some of the notes or providing letters of credit. The teacher's fund is the second biggest in the nation.
The pension fund already invests in state and local governments by selling letters of credit to bond issuers. In June, Calpers doubled to $10 billion its credit enhancement program, seeking to take advantage in the rise in the cost of letters of credit, another byproduct of the credit crisis. The fund in June voted to withdraw a prohibition against backing no more than $250 million of any one bond issue.
California finance officials had wanted to obtain the cash from the credit market in late August or early September. The sale was delayed as lawmakers and Schwarzenegger fought through a record-long budget stalemate that left the state without an enacted spending plan until Sept. 23.
The state borrowed $7 billion through short-term notes last October, $3 billion in 2006 and $6 billion in fiscal 2005. It has borrowed $4.7 billion annually on average in the short-term market since 1990.
California, the biggest borrower in the municipal-bond market, has $51 billion in general-obligation debt outstanding The state is rated A+ by Fitch Ratings and Standard & Poor's, fifth-highest rankings, and a comparable A1 by Moody's Investors Service.
To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net.
Read more...
Bank-Rescue Plan Wins Approval as House Reverses Vote
By Christopher Stern and Laura Litvan
Oct. 3 (Bloomberg) -- Congress passed and President George W. Bush signed a $700 billion financial-market rescue plan designed to unlock credit markets and restore confidence in the nation's banking system.
The bipartisan legislation reversed the House rejection earlier this week that sent global stock markets plunging. The measure authorizes the government to buy troubled assets from financial institutions reeling from record home foreclosures. The bill contains $149 billion in tax breaks and affirms regulators' power to suspend asset-valuing rules that companies blame for fueling the crisis.
``These steps represent decisive action to ease the credit crunch that is now threatening our economy,'' Bush said at the White House.
The House approved the measure 263-171, four days after rejecting an earlier version. The bill's defeat on Sept. 29 caused a 778-point drop in the Dow Jones Industrial Average, prompting dozens of lawmakers to switch their vote on the legislation, the government's largest intervention in the markets since Franklin Roosevelt's New Deal.
`Stopping the Panic'
``The issue is stopping the panic,'' said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington. ``The plan's not perfect, but it's certainly better than doing nothing. Now Treasury has to be very aggressive about purchasing a wide range of assets very quickly.''
The Dow Jones Industrial Average fell 12 points to 10,470.74 at 2:50 p.m. in New York.
House Majority Leader Steny Hoyer, a Maryland Democrat, said the bill is ``critical to stabilizing our economy.''
Bush made more than a dozen phone calls to Republican lawmakers to lobby for the bill. The bill was backed by 172 Democrats and 91 Republicans. Over two-thirds of Democrats voted for the measure while fewer than half of Republicans supported it. On Sept. 29, the 140 Democrats voting for the plan were joined by 65 Republicans.
``The stock-market drop on Monday served as a wake-up call to a lot of people,'' said Representative John Yarmuth, a Kentucky Democrat who announced today he was switching his vote in favor of the bailout plan.
House leaders, who said they wouldn't set a vote on the revised measure unless they were sure it would pass, decided to go forward with the debate after conferring last night.
Republican Alternative
A group of Republicans last night tried to offer an alternative that would spend only $250 billion until the end of the year.
Representative Spencer Bachus said that out of ``prudence'' Congress should appropriate only the $50 billion a month the Treasury could distribute this year.
The Democratic-controlled Rules Committee rejected the amendment, saying any changes to the measure would require Senate action, delaying the start of the program. The Senate approved the legislation on Wednesday.
Some Republican lawmakers opposed the measure today, defying Bush and the party's congressional leaders.
``If Congress bails out some firms and sectors, how can it say no to others?'' said Representative Jeb Hensarling of Texas.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed last month the largest intervention in financial markets since the Great Depression, in a three-page outline.
Economic Turmoil
They said it was needed to prevent the spread of economic turmoil sparked by a record number of home foreclosures. Among the victims were Lehman Brothers Holdings Inc., which was forced into bankruptcy last month, and Fannie Mae, Freddie Mac and American International Group Inc., which were taken over by the government.
Paulson urged Congress to immediately give him almost unchecked legislative authority to take action. Lawmakers responded by demanding increased oversight, more aid to prevent foreclosures and limits on executive compensation at companies that benefit from the program.
Bush endorsed a compromise, saying it was needed to prevent a painful recession.
Credit-market turmoil is hitting local governments. U.S. states and municipalities have managed to sell about $700 million of tax-exempt bonds this week, less than 15 percent of a typical week's new fixed-rate issues.
Emergency Loans
California Governor Arnold Schwarzenegger wrote Paulson last night, saying that his and other states may need emergency federal loans to maintain government operations if the credit crunch continues.
``This credit crisis has the power to grind the U.S. economy to a halt,'' Schwarzenegger wrote in a letter e-mailed to Paulson.
Companies lobbied in support of the rescue measure. Automakers said tougher loan standards partly accounted for a 27 percent plunge in U.S. auto sales last month.
The market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said yesterday. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6 percent, during the week ended Oct. 1.
``This is not a bailout for Wall Street anymore,'' Carolyn McCarthy, a New York Democrat who represents suburbs near New York City, said on the House floor this morning. ``This is about the small stores on Main Street.''
Risky and Costly
Still, House lawmakers earlier this week rejected the agreement that congressional leaders reached with the administration, with many saying it was too risky and costly.
The Senate then sweetened the package -- and enlarged the legislation to 450 pages -- by linking the rescue plan to a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000.
The Senate also tied the package to a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade, a move popular among House Republicans. The provisions include $17 billion in credits for the development of solar, wind and other forms of renewable energy.
Democrat Barack Obama and Republican John McCain returned from the presidential campaign trail to vote for the plan in the Senate this week.
Obama said he had talked to several lawmakers in an attempt to generate support for the legislation.
`Some Assurance'
``There were a number of members of Congress who had voted no that I talked to,'' Obama said in Glenside, Pennsylvania. ``And I think more than anything what they wanted was some assurance that this $700 billion was not going to a few banks but that in fact, that it is designed to ensure that the credit markets are working for Main Street.''
McCain, in comments in Flagstaff, Arizona, said the bill ``isn't perfect and it's an outrage that it's even necessary.''
``The action Congress took today is a tourniquet,'' he said. ``Further action is needed and it shouldn't take a crisis to get this country to act.''
The bill also affirms the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Federal Reserve Chairman Ben S. Bernanke, applauding enactment of the rescue plan, said the central bank will keep using ``all of the powers at our disposal'' to ease the credit crisis.
To contact the reporters on this story: Laura Litvan in Washington at litvan@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Congress passed and President George W. Bush signed a $700 billion financial-market rescue plan designed to unlock credit markets and restore confidence in the nation's banking system.
The bipartisan legislation reversed the House rejection earlier this week that sent global stock markets plunging. The measure authorizes the government to buy troubled assets from financial institutions reeling from record home foreclosures. The bill contains $149 billion in tax breaks and affirms regulators' power to suspend asset-valuing rules that companies blame for fueling the crisis.
``These steps represent decisive action to ease the credit crunch that is now threatening our economy,'' Bush said at the White House.
The House approved the measure 263-171, four days after rejecting an earlier version. The bill's defeat on Sept. 29 caused a 778-point drop in the Dow Jones Industrial Average, prompting dozens of lawmakers to switch their vote on the legislation, the government's largest intervention in the markets since Franklin Roosevelt's New Deal.
`Stopping the Panic'
``The issue is stopping the panic,'' said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington. ``The plan's not perfect, but it's certainly better than doing nothing. Now Treasury has to be very aggressive about purchasing a wide range of assets very quickly.''
The Dow Jones Industrial Average fell 12 points to 10,470.74 at 2:50 p.m. in New York.
House Majority Leader Steny Hoyer, a Maryland Democrat, said the bill is ``critical to stabilizing our economy.''
Bush made more than a dozen phone calls to Republican lawmakers to lobby for the bill. The bill was backed by 172 Democrats and 91 Republicans. Over two-thirds of Democrats voted for the measure while fewer than half of Republicans supported it. On Sept. 29, the 140 Democrats voting for the plan were joined by 65 Republicans.
``The stock-market drop on Monday served as a wake-up call to a lot of people,'' said Representative John Yarmuth, a Kentucky Democrat who announced today he was switching his vote in favor of the bailout plan.
House leaders, who said they wouldn't set a vote on the revised measure unless they were sure it would pass, decided to go forward with the debate after conferring last night.
Republican Alternative
A group of Republicans last night tried to offer an alternative that would spend only $250 billion until the end of the year.
Representative Spencer Bachus said that out of ``prudence'' Congress should appropriate only the $50 billion a month the Treasury could distribute this year.
The Democratic-controlled Rules Committee rejected the amendment, saying any changes to the measure would require Senate action, delaying the start of the program. The Senate approved the legislation on Wednesday.
Some Republican lawmakers opposed the measure today, defying Bush and the party's congressional leaders.
``If Congress bails out some firms and sectors, how can it say no to others?'' said Representative Jeb Hensarling of Texas.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed last month the largest intervention in financial markets since the Great Depression, in a three-page outline.
Economic Turmoil
They said it was needed to prevent the spread of economic turmoil sparked by a record number of home foreclosures. Among the victims were Lehman Brothers Holdings Inc., which was forced into bankruptcy last month, and Fannie Mae, Freddie Mac and American International Group Inc., which were taken over by the government.
Paulson urged Congress to immediately give him almost unchecked legislative authority to take action. Lawmakers responded by demanding increased oversight, more aid to prevent foreclosures and limits on executive compensation at companies that benefit from the program.
Bush endorsed a compromise, saying it was needed to prevent a painful recession.
Credit-market turmoil is hitting local governments. U.S. states and municipalities have managed to sell about $700 million of tax-exempt bonds this week, less than 15 percent of a typical week's new fixed-rate issues.
Emergency Loans
California Governor Arnold Schwarzenegger wrote Paulson last night, saying that his and other states may need emergency federal loans to maintain government operations if the credit crunch continues.
``This credit crisis has the power to grind the U.S. economy to a halt,'' Schwarzenegger wrote in a letter e-mailed to Paulson.
Companies lobbied in support of the rescue measure. Automakers said tougher loan standards partly accounted for a 27 percent plunge in U.S. auto sales last month.
The market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said yesterday. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6 percent, during the week ended Oct. 1.
``This is not a bailout for Wall Street anymore,'' Carolyn McCarthy, a New York Democrat who represents suburbs near New York City, said on the House floor this morning. ``This is about the small stores on Main Street.''
Risky and Costly
Still, House lawmakers earlier this week rejected the agreement that congressional leaders reached with the administration, with many saying it was too risky and costly.
The Senate then sweetened the package -- and enlarged the legislation to 450 pages -- by linking the rescue plan to a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000.
The Senate also tied the package to a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade, a move popular among House Republicans. The provisions include $17 billion in credits for the development of solar, wind and other forms of renewable energy.
Democrat Barack Obama and Republican John McCain returned from the presidential campaign trail to vote for the plan in the Senate this week.
Obama said he had talked to several lawmakers in an attempt to generate support for the legislation.
`Some Assurance'
``There were a number of members of Congress who had voted no that I talked to,'' Obama said in Glenside, Pennsylvania. ``And I think more than anything what they wanted was some assurance that this $700 billion was not going to a few banks but that in fact, that it is designed to ensure that the credit markets are working for Main Street.''
McCain, in comments in Flagstaff, Arizona, said the bill ``isn't perfect and it's an outrage that it's even necessary.''
``The action Congress took today is a tourniquet,'' he said. ``Further action is needed and it shouldn't take a crisis to get this country to act.''
The bill also affirms the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Federal Reserve Chairman Ben S. Bernanke, applauding enactment of the rescue plan, said the central bank will keep using ``all of the powers at our disposal'' to ease the credit crisis.
To contact the reporters on this story: Laura Litvan in Washington at litvan@bloomberg.net
Read more...
Paulson Recruits Asset Managers as Rescue Moves Ahead
By Rebecca Christie and Robert Schmidt
Oct. 3 (Bloomberg) -- Treasury Secretary Henry Paulson is hiring as many as 10 asset-management firms to join the lawyers and bankers he is recruiting to jumpstart the government's new $700 billion bank-rescue program.
The Treasury began implementing the plan within an hour of the House of Representatives vote giving Paulson the extraordinary powers he had sought to combat the U.S. financial crisis. Paulson is seeking to assemble a team to determine which toxic securities to target, how to value them and how to arrange purchases.
``This is something that, for a typical company, would take no less than five years,'' said Lynn Turner, a former chief accountant at the Securities and Exchange Commission. ``Anyone who thinks they can do this in two weeks is insane.''
Already, BlackRock Inc., Pacific Investment Management Co. and Legg Mason Inc. are seeking to become money managers for the program, people familiar with the matter said. The three firms have been informally advising the Treasury as it negotiated the bailout package with Congress, the people said.
Ed Forst, the former Goldman Sachs Group Inc. executive Paulson hired to head the transition team, started work last week and is charged with helping establish the new Office of Financial Stability.
``Paulson did not want to lose precious days waiting,'' said Howard Glaser, a former chief legal adviser of the Department of Housing and Urban Development.
Treasury officials said Forst, who was given a contract worth $5,000, is likely to stay for several weeks before returning to Harvard University, where he sits on the board that oversees the $34.9 billion endowment.
Outside Contractors
Lobbyists say the Treasury wants to run the program as much as possible with outside contractors. Career Treasury staff would handle the administrative tasks.
While the department will bypass some government contracting rules, as the legislation allows, it says it plans to put a formal and transparent process in place to hire the private-sector help. The department may also tap the Federal Deposit Insurance Corp. to manage the mortgage portfolio.
``We've been doing a lot of work getting ready for this,'' Paulson told reporters immediately after the House voted. ``Once the legislation is signed, we're going to be going out and lining up advisers from the private sector.''
Signed Into Law
President George W. Bush signed the measure shortly after Paulson spoke.
The Treasury plans to hire about two dozen employees along with five to 10 asset-management firms. The workers will be a mix of government employees and contractors, with a range of legal, financial and accounting skills.
The firms will be evaluated based on the cost and scope of services they offer. The Treasury is still working out a conflict-of-interest policy and details for guidelines on compensation.
Officials cautioned it will take at least four weeks to set up the first of the long-sought asset purchases. These purchases will start slowly with a series of pilot programs.
The Emergency Economic Stabilization Act of 2008 gives Paulson immediate authority to buy as much as $250 billion in troubled assets from banks and other financial institutions. The White House may expand the program by another $100 billion, and the Treasury can access the remaining $350 billion with Congressional consultation.
`Very Quickly'
The plan allows Treasury officials to ``intervene very quickly if they want to,'' said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington and former director of the Federal Reserve Board's Division of Monetary Affairs. He predicts the Treasury will ``act in markets first,'' possibly by working through the Fed.
While the new law gives the Treasury power to inject capital directly into the banking system, department officials say their focus will be to help banks get rid of illiquid assets.
Reinhart says Paulson will take his time setting up asset- buying competitions such as reverse auctions, in which the government would accept the lowest price offered by banks selling a type of asset.
``Auctions are complicated,'' Reinhart said. ``If you're talking about mortgages, there is a very significant information disadvantage to the government relative to the private sector, so they have to be really careful about the way they structure those auctions.''
Horizon
Paulson has an incentive to be deliberate: The next president, along with his new cabinet, takes office Jan. 20, and Paulson's reputation depends on his program's long-term track record.
``No one will know if this works for several years,'' said Stuart Eizenstat, former deputy secretary of the Treasury and now a partner at Covington & Burling, a Washington-based law firm. ``This is very much his plan; it will bear his name and his imprint for generations to come.''
The plan sets up a Troubled Asset Relief Program, or TARP, available to ``any financial institution'' that meets the Treasury's conditions. Residential and commercial mortgages and mortgage-backed securities are the primary targets, although the Treasury and the Fed are able to add other asset classes as needed. The Treasury also will set up an insurance fund for mortgage securities that will charge premiums.
Guidelines
Banks won't be allowed to sell assets to the Treasury for more than what they paid, unless they purchased the assets from another bank already in bankruptcy or conservatorship. Congress instructed the Treasury to issue conflict-of-interest guidelines, so banks don't take unfair advantage of the new program.
Because the Treasury is able to buy whole mortgage loans under the plan, it may be able to encourage mortgage servicers to work out easier repayment arrangements for strapped homeowners, although the mechanics are likely to be very difficult, said Michael Carliner, a consultant and former economist for the National Association of Home Builders, a trade group in Washington.
Debt Sales
The new program, combined with existing borrowing needs, could add up to a half-trillion dollars worth of debt the Treasury will have to sell before the end of December, said Ward McCarthy, a former Fed economist who is now a principal at Stone and McCarthy Research Associates in New Jersey. The department was already was weighing additional types of debt sales to finance this year's budget deficit. Fiscal year 2009 started on Oct. 1; in July the Bush administration projected a $482 billion shortfall.
As a result, markets should be prepared for the Treasury to move more suddenly than usual, McCarthy said. ``Expect them to come out with six-guns blazing because Paulson wants to make an impression.''
The Treasury could add three- and seven-year notes, as its borrowing advisory committee has proposed. It also could reopen existing notes and bonds, or even hold a series of one-time medium- and long-term debt sales.
``Under normal circumstances, the Treasury's financing decisions are guided by its desire to be regular and predictable,'' said Louis Crandall, chief economist at Wrightson ICAP in New Jersey.
``However, there is certainly nothing `regular' about this rescue package, so that approach is not relevant,'' he said.
To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.netRobert Schmidt in Washington at rschmidt5@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Treasury Secretary Henry Paulson is hiring as many as 10 asset-management firms to join the lawyers and bankers he is recruiting to jumpstart the government's new $700 billion bank-rescue program.
The Treasury began implementing the plan within an hour of the House of Representatives vote giving Paulson the extraordinary powers he had sought to combat the U.S. financial crisis. Paulson is seeking to assemble a team to determine which toxic securities to target, how to value them and how to arrange purchases.
``This is something that, for a typical company, would take no less than five years,'' said Lynn Turner, a former chief accountant at the Securities and Exchange Commission. ``Anyone who thinks they can do this in two weeks is insane.''
Already, BlackRock Inc., Pacific Investment Management Co. and Legg Mason Inc. are seeking to become money managers for the program, people familiar with the matter said. The three firms have been informally advising the Treasury as it negotiated the bailout package with Congress, the people said.
Ed Forst, the former Goldman Sachs Group Inc. executive Paulson hired to head the transition team, started work last week and is charged with helping establish the new Office of Financial Stability.
``Paulson did not want to lose precious days waiting,'' said Howard Glaser, a former chief legal adviser of the Department of Housing and Urban Development.
Treasury officials said Forst, who was given a contract worth $5,000, is likely to stay for several weeks before returning to Harvard University, where he sits on the board that oversees the $34.9 billion endowment.
Outside Contractors
Lobbyists say the Treasury wants to run the program as much as possible with outside contractors. Career Treasury staff would handle the administrative tasks.
While the department will bypass some government contracting rules, as the legislation allows, it says it plans to put a formal and transparent process in place to hire the private-sector help. The department may also tap the Federal Deposit Insurance Corp. to manage the mortgage portfolio.
``We've been doing a lot of work getting ready for this,'' Paulson told reporters immediately after the House voted. ``Once the legislation is signed, we're going to be going out and lining up advisers from the private sector.''
Signed Into Law
President George W. Bush signed the measure shortly after Paulson spoke.
The Treasury plans to hire about two dozen employees along with five to 10 asset-management firms. The workers will be a mix of government employees and contractors, with a range of legal, financial and accounting skills.
The firms will be evaluated based on the cost and scope of services they offer. The Treasury is still working out a conflict-of-interest policy and details for guidelines on compensation.
Officials cautioned it will take at least four weeks to set up the first of the long-sought asset purchases. These purchases will start slowly with a series of pilot programs.
The Emergency Economic Stabilization Act of 2008 gives Paulson immediate authority to buy as much as $250 billion in troubled assets from banks and other financial institutions. The White House may expand the program by another $100 billion, and the Treasury can access the remaining $350 billion with Congressional consultation.
`Very Quickly'
The plan allows Treasury officials to ``intervene very quickly if they want to,'' said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington and former director of the Federal Reserve Board's Division of Monetary Affairs. He predicts the Treasury will ``act in markets first,'' possibly by working through the Fed.
While the new law gives the Treasury power to inject capital directly into the banking system, department officials say their focus will be to help banks get rid of illiquid assets.
Reinhart says Paulson will take his time setting up asset- buying competitions such as reverse auctions, in which the government would accept the lowest price offered by banks selling a type of asset.
``Auctions are complicated,'' Reinhart said. ``If you're talking about mortgages, there is a very significant information disadvantage to the government relative to the private sector, so they have to be really careful about the way they structure those auctions.''
Horizon
Paulson has an incentive to be deliberate: The next president, along with his new cabinet, takes office Jan. 20, and Paulson's reputation depends on his program's long-term track record.
``No one will know if this works for several years,'' said Stuart Eizenstat, former deputy secretary of the Treasury and now a partner at Covington & Burling, a Washington-based law firm. ``This is very much his plan; it will bear his name and his imprint for generations to come.''
The plan sets up a Troubled Asset Relief Program, or TARP, available to ``any financial institution'' that meets the Treasury's conditions. Residential and commercial mortgages and mortgage-backed securities are the primary targets, although the Treasury and the Fed are able to add other asset classes as needed. The Treasury also will set up an insurance fund for mortgage securities that will charge premiums.
Guidelines
Banks won't be allowed to sell assets to the Treasury for more than what they paid, unless they purchased the assets from another bank already in bankruptcy or conservatorship. Congress instructed the Treasury to issue conflict-of-interest guidelines, so banks don't take unfair advantage of the new program.
Because the Treasury is able to buy whole mortgage loans under the plan, it may be able to encourage mortgage servicers to work out easier repayment arrangements for strapped homeowners, although the mechanics are likely to be very difficult, said Michael Carliner, a consultant and former economist for the National Association of Home Builders, a trade group in Washington.
Debt Sales
The new program, combined with existing borrowing needs, could add up to a half-trillion dollars worth of debt the Treasury will have to sell before the end of December, said Ward McCarthy, a former Fed economist who is now a principal at Stone and McCarthy Research Associates in New Jersey. The department was already was weighing additional types of debt sales to finance this year's budget deficit. Fiscal year 2009 started on Oct. 1; in July the Bush administration projected a $482 billion shortfall.
As a result, markets should be prepared for the Treasury to move more suddenly than usual, McCarthy said. ``Expect them to come out with six-guns blazing because Paulson wants to make an impression.''
The Treasury could add three- and seven-year notes, as its borrowing advisory committee has proposed. It also could reopen existing notes and bonds, or even hold a series of one-time medium- and long-term debt sales.
``Under normal circumstances, the Treasury's financing decisions are guided by its desire to be regular and predictable,'' said Louis Crandall, chief economist at Wrightson ICAP in New Jersey.
``However, there is certainly nothing `regular' about this rescue package, so that approach is not relevant,'' he said.
To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.netRobert Schmidt in Washington at rschmidt5@bloomberg.net.
Read more...
Brazil's Real Has Biggest Weekly Decline Since September 2002
By Adriana Brasileiro
Oct. 3 (Bloomberg) -- Brazil's real dropped the most this week in six years as a deepening global credit crisis curbed investment in Latin America's biggest economy.
The currency erased gains today on speculation the $700 billion U.S. financial bailout won't be an economic cure-all. The real rose as much as 1.6 percent before the U.S. Congress passed legislation to unlock credit markets.
``I don't see a more consistent recovery of the currency, even after the approval of the rescue plan,'' said Gabriel Levy, an economist who helps manage 250 million reais ($123 million) at Sparta Administradora de Recursos, an asset-management firm in Sao Paulo.
The real sank 9.8 percent this week to 2.0440 per dollar at 5:29 p.m. New York time, from 1.8445 on Sept. 26. It's the steepest weekly decline since September 2002. The real fell 1.1 percent today, its third straight daily drop.
The real was the biggest loser against the dollar this week among the 16 most-active currencies tracked by Bloomberg. It's down 24 percent from a nine-year high reached Aug. 1.
Finance Minister Guido Mantega said today in Sao Paulo that he doesn't expect the real to return to ``excessively overvalued'' levels.
The government is studying ``creative ways'' to use the country's record international reserves to add liquidity to local credit markets, Mantega said. Brazil's foreign reserves reached $207.3 billion yesterday.
Falling commodity prices also contributed to losses in the real. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials has fallen 29 percent from a record high on July 2.
Brazil is the world's biggest exporter of beef, orange juice, sugar and coffee. Commodities account for two-thirds of the country's exports, according to the Brazilian Foreign Trade Association in Rio de Janeiro.
The yield on Brazil's overnight futures contract for January 2009 delivery fell 1 basis point to 14 percent.
To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Brazil's real dropped the most this week in six years as a deepening global credit crisis curbed investment in Latin America's biggest economy.
The currency erased gains today on speculation the $700 billion U.S. financial bailout won't be an economic cure-all. The real rose as much as 1.6 percent before the U.S. Congress passed legislation to unlock credit markets.
``I don't see a more consistent recovery of the currency, even after the approval of the rescue plan,'' said Gabriel Levy, an economist who helps manage 250 million reais ($123 million) at Sparta Administradora de Recursos, an asset-management firm in Sao Paulo.
The real sank 9.8 percent this week to 2.0440 per dollar at 5:29 p.m. New York time, from 1.8445 on Sept. 26. It's the steepest weekly decline since September 2002. The real fell 1.1 percent today, its third straight daily drop.
The real was the biggest loser against the dollar this week among the 16 most-active currencies tracked by Bloomberg. It's down 24 percent from a nine-year high reached Aug. 1.
Finance Minister Guido Mantega said today in Sao Paulo that he doesn't expect the real to return to ``excessively overvalued'' levels.
The government is studying ``creative ways'' to use the country's record international reserves to add liquidity to local credit markets, Mantega said. Brazil's foreign reserves reached $207.3 billion yesterday.
Falling commodity prices also contributed to losses in the real. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials has fallen 29 percent from a record high on July 2.
Brazil is the world's biggest exporter of beef, orange juice, sugar and coffee. Commodities account for two-thirds of the country's exports, according to the Brazilian Foreign Trade Association in Rio de Janeiro.
The yield on Brazil's overnight futures contract for January 2009 delivery fell 1 basis point to 14 percent.
To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net
Read more...
Cocoa Rises on Expectations Demand to Rise, Weakness in Dollar
By Yi Tian
Oct. 3 (Bloomberg) -- Cocoa rose in New York on expectations sales of the chocolate ingredient will pick up during the holidays and as the falling dollar increases the appeal of the commodity for buyers holding other currencies.
Cocoa demand tends to increase toward year-end, said Stephanie Kinard, a broker with JKV Global in Chicago. The dollar lost as much as 0.6 percent today against a basket of six major currencies, including the pound. Cocoa is traded in pounds in the U.K. and West Africa, the biggest cocoa exporting region.
``We may see some near-term positive momentum as we approach the holidays in spite of an economic slowdown,'' Kinard said. ``The rule of falling greenback and rising pound applies to today's market.''
Cocoa futures for December delivery rose $18, or 0.7 percent, to $2,469 a metric ton on ICE Futures U.S. Still, cocoa fell 10 percent this week, the biggest such decline since the week ended March 21.
In the third quarter, the most-active contract tumbled 20 percent, the most since the first quarter of 1992.
Cocoa ``has been a bit oversold,'' which also helped to explain the gains today, Kinard said.
The price may fall as low as $2,445, now that the six- month low of $2,496 reached on Sept. 15, was breached, according to Michael Ragazzo, the president of MBL Commodities Ltd. in New York.
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Cocoa rose in New York on expectations sales of the chocolate ingredient will pick up during the holidays and as the falling dollar increases the appeal of the commodity for buyers holding other currencies.
Cocoa demand tends to increase toward year-end, said Stephanie Kinard, a broker with JKV Global in Chicago. The dollar lost as much as 0.6 percent today against a basket of six major currencies, including the pound. Cocoa is traded in pounds in the U.K. and West Africa, the biggest cocoa exporting region.
``We may see some near-term positive momentum as we approach the holidays in spite of an economic slowdown,'' Kinard said. ``The rule of falling greenback and rising pound applies to today's market.''
Cocoa futures for December delivery rose $18, or 0.7 percent, to $2,469 a metric ton on ICE Futures U.S. Still, cocoa fell 10 percent this week, the biggest such decline since the week ended March 21.
In the third quarter, the most-active contract tumbled 20 percent, the most since the first quarter of 1992.
Cocoa ``has been a bit oversold,'' which also helped to explain the gains today, Kinard said.
The price may fall as low as $2,445, now that the six- month low of $2,496 reached on Sept. 15, was breached, according to Michael Ragazzo, the president of MBL Commodities Ltd. in New York.
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
Read more...
Gold Futures Have Weekly Drop on Dollar's Rally; Silver Rises
By Pham-Duy Nguyen
Oct. 3 (Bloomberg) -- Gold fell, capping the biggest weekly decline since August, as the dollar rose, reducing the appeal of the precious metal as an alternative investment. Silver advanced.
The dollar has risen 4.3 percent this week against a weighted basket of six major currencies. The U.S. Congress approved a $700 billion plan to rescue ailing banks. Gold gained 5.5 percent last month as Lehman Brothers Holdings Inc. collapsed and the U.S. government took over American International Group Inc., Fannie Mae and Freddie Mac.
``Gold is looking at dollar strength,'' said Frank Lesh, a trader at FuturePath Trading LLC Chicago. ``The approval of the bailout package is dollar-friendly and equity-friendly and holds gold back.''
Gold futures for December delivery fell $11.10, or 1.3 percent, to $833.20 an ounce on the Comex division of the New York Mercantile Exchange. The metal is down 6.2 percent this week, the most since the week that ended Aug. 15.
Silver futures for December delivery rose 20.5 cents, or 1.8 percent, to $11.325 an ounce. The metal dropped 13 percent yesterday and 30 percent in the third quarter.
``Yesterday's plunge in silver was absolutely too much,'' said Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago.
Precious metals have declined this week as investors sold holdings to cover losses in other markets, McGhee said.
`Massive Asset Liquidation'
``There's been massive asset liquidation from hedge funds and long-term holders who needed to raise cash,'' McGhee said. ``Gold is doing what it should do as a store of value -- gold has held its value against other assets.''
Gold may still rally following the U.S. House vote on the bailout plan, said James Turk, founder of Goldmoney.com, which held $405 million of gold and silver in storage for investors at the end of September.
``Gold has not lost its safe-haven status because there is no counterparty risk when you own gold,'' Turk said. ``The bailout plan accomplishes little because it does not address the underlying issue, which is solvency.''
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record 755.3 metric tons on September 30.
The dollar index and the Standard & Poor's 500 Index pared gains after the bailout plan was passed.
``It's one of those buy-the-rumor, sell-the-news trades,'' Lesh said. ``The fact is that housing is still horrible and the economy is getting worse. We've lost the support of large commodity index buyers and commodities are under pressure. They're not buying gold.''
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Gold fell, capping the biggest weekly decline since August, as the dollar rose, reducing the appeal of the precious metal as an alternative investment. Silver advanced.
The dollar has risen 4.3 percent this week against a weighted basket of six major currencies. The U.S. Congress approved a $700 billion plan to rescue ailing banks. Gold gained 5.5 percent last month as Lehman Brothers Holdings Inc. collapsed and the U.S. government took over American International Group Inc., Fannie Mae and Freddie Mac.
``Gold is looking at dollar strength,'' said Frank Lesh, a trader at FuturePath Trading LLC Chicago. ``The approval of the bailout package is dollar-friendly and equity-friendly and holds gold back.''
Gold futures for December delivery fell $11.10, or 1.3 percent, to $833.20 an ounce on the Comex division of the New York Mercantile Exchange. The metal is down 6.2 percent this week, the most since the week that ended Aug. 15.
Silver futures for December delivery rose 20.5 cents, or 1.8 percent, to $11.325 an ounce. The metal dropped 13 percent yesterday and 30 percent in the third quarter.
``Yesterday's plunge in silver was absolutely too much,'' said Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago.
Precious metals have declined this week as investors sold holdings to cover losses in other markets, McGhee said.
`Massive Asset Liquidation'
``There's been massive asset liquidation from hedge funds and long-term holders who needed to raise cash,'' McGhee said. ``Gold is doing what it should do as a store of value -- gold has held its value against other assets.''
Gold may still rally following the U.S. House vote on the bailout plan, said James Turk, founder of Goldmoney.com, which held $405 million of gold and silver in storage for investors at the end of September.
``Gold has not lost its safe-haven status because there is no counterparty risk when you own gold,'' Turk said. ``The bailout plan accomplishes little because it does not address the underlying issue, which is solvency.''
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record 755.3 metric tons on September 30.
The dollar index and the Standard & Poor's 500 Index pared gains after the bailout plan was passed.
``It's one of those buy-the-rumor, sell-the-news trades,'' Lesh said. ``The fact is that housing is still horrible and the economy is getting worse. We've lost the support of large commodity index buyers and commodities are under pressure. They're not buying gold.''
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Read more...
Emerging Market Stocks Post Biggest Weekly Retreat in 7 Years
By William Mauldin
Oct. 3 (Bloomberg) -- Emerging-market stocks had the biggest weekly decline in seven years, led by banks and energy companies as commodity prices dropped on speculation the U.S. is headed for a recession.
The MSCI Emerging Markets Index dropped 2.3 percent to 741.73, after a 3.4 percent decline yesterday. The index lost 10 percent this week, the most since the September 2001 terrorist attacks.
``Investors are running from emerging markets because they're thinking a slowdown in the U.S. and developed markets will have a much greater effect on their own economies,'' said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow. ``U.S. consumers are using about a million barrels less of oil a day than they were 18 months ago, and the U.S. financial sector is bringing money back home, taking a lot of cash out of emerging markets and commodities.''
Turkey's benchmark index fell the most in three weeks, losing 4.2 percent to 34,553 in the first trading day since Sept. 29. Russia's Micex Index slumped 5.3 percent, extending its annual loss to 51 percent.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, had a weekly decline of 10 percent, the most since at least 1956. The index has slumped 31 percent from a record on July 3.
India, Russia
India's Sensex index slid 4.1 percent to 12,526.32. Reliance Industries Ltd., India's biggest company by market value, slumped 7.6 percent, to its lowest in a year.
The Philippine Stock Exchange Index fell 1.8 percent to 2,566.21 at the close in Manila, the most since Sept. 18. Banco de Oro Unibank Inc., the nation's No. 2 lender by value, fell 2.6 percent.
VTB Group, Russia's second-biggest lender, fell 5.5 percent, to 4.57 kopeks on the Micex Stock Exchange. The bank said it lost 9.31 billion rubles ($360 million) in September due to ``negative market dynamics.''
Russia suspended trading for two days and pledged more than $150 billion in emergency funding last month as the seizure in capital markets, falling oil prices and a five-day war with Georgia in August drove away investors. About $58.9 billion has left the country since Aug. 8, according to BNP Paribas SA.
OAO Rosneft, Russia's biggest oil producer, fell 7 percent to 143.22 rubles, a seventh day of declines.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Emerging-market stocks had the biggest weekly decline in seven years, led by banks and energy companies as commodity prices dropped on speculation the U.S. is headed for a recession.
The MSCI Emerging Markets Index dropped 2.3 percent to 741.73, after a 3.4 percent decline yesterday. The index lost 10 percent this week, the most since the September 2001 terrorist attacks.
``Investors are running from emerging markets because they're thinking a slowdown in the U.S. and developed markets will have a much greater effect on their own economies,'' said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow. ``U.S. consumers are using about a million barrels less of oil a day than they were 18 months ago, and the U.S. financial sector is bringing money back home, taking a lot of cash out of emerging markets and commodities.''
Turkey's benchmark index fell the most in three weeks, losing 4.2 percent to 34,553 in the first trading day since Sept. 29. Russia's Micex Index slumped 5.3 percent, extending its annual loss to 51 percent.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, had a weekly decline of 10 percent, the most since at least 1956. The index has slumped 31 percent from a record on July 3.
India, Russia
India's Sensex index slid 4.1 percent to 12,526.32. Reliance Industries Ltd., India's biggest company by market value, slumped 7.6 percent, to its lowest in a year.
The Philippine Stock Exchange Index fell 1.8 percent to 2,566.21 at the close in Manila, the most since Sept. 18. Banco de Oro Unibank Inc., the nation's No. 2 lender by value, fell 2.6 percent.
VTB Group, Russia's second-biggest lender, fell 5.5 percent, to 4.57 kopeks on the Micex Stock Exchange. The bank said it lost 9.31 billion rubles ($360 million) in September due to ``negative market dynamics.''
Russia suspended trading for two days and pledged more than $150 billion in emergency funding last month as the seizure in capital markets, falling oil prices and a five-day war with Georgia in August drove away investors. About $58.9 billion has left the country since Aug. 8, according to BNP Paribas SA.
OAO Rosneft, Russia's biggest oil producer, fell 7 percent to 143.22 rubles, a seventh day of declines.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
Read more...
Canada Stocks Have Worst Week Since 2000 on Recession Concerns
By John Kipphoff
Oct. 3 (Bloomberg) -- Canadian stocks fell a third day, completing their steepest weekly slide in almost eight years, on concern the $700 billion U.S. plan to rescue banks won't avert a recession for the Canada's biggest trade partner.
Financial shares dropped, led by Manulife Financial Corp. and Brookfield Asset Management Inc., after borrowing costs climbed as the financial-system bailout headed for approval. Potash Corp. of Saskatchewan Inc. paced a record slide in mining companies and Canadian Natural Resources Ltd. led energy producers lower as crude oil posted its worst weekly drop since 2004.
The Standard & Poor's/TSX Composite Index fell 0.9 percent to 10,803.35 in Toronto after rising 4.2 percent earlier. Canada's main stock benchmark, which derives more than two- fifths of its value from raw-materials and energy shares, slid 10.9 percent this week as commodity prices plunged. The S&P/TSX fell 11.1 percent in the last week of October 2000.
``Sell on the news,'' said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. ``This is only the beginning of the hard work of re-liquifying credit markets. A lot of people are getting off the materials trade, saying we'll still have a recession.''
Manulife Financial, Canada's largest insurance company, fell 2 percent to C$36.47 completing its worst weekly drop since June. Brookfield, the manager of $95 billion in assets including real estate and power stations, dropped 5.5 percent to C$26.16, the lowest since January. Toronto-Dominion Bank, the nation's second-biggest lender, slid 1.8 percent to C$59.43 after climbing as much as 3.6 percent earlier.
Reeling
U.S. Congress passed and President George W. Bush signed a mesure that authorizes the government to buy troubled assets from financial institutions reeling from record U.S. home foreclosures. The S&P/TSX fell 6.95 percent yesterday, and 6.93 percent on Sept. 29 when the House of Representatives' rejected the government's earlier rescue plan.
Global financial institutions have had almost $590 billion in losses and writedowns on mortgage-related securities. Canadian banks account for about $10.8 billion of the total. The London interbank offered rate that banks charge each other for loans in U.S. dollars rose the highest since January.
Canadian Imperial Bank of Commerce rose 1.2 percent to C$58.50 after Cerberus Capital Management LP agreed to invest more than $1 billion cash in the bank's troubled U.S. real- estate portfolio, helping reduce the lender's risk.
Industry Groups
Measures of financial companies in the S&P/TSX retreated 1.4 percent. An index of energy stocks dropped 1.6 percent today, while a gauge of raw-materials stocks added 1.9 percent. Energy producers and raw-materials companies' respective weekly drops of 15 percent and 20 percent were the groups' worst such performance since 1995 when the indexes began.
Canadian Natural, the country's second-largest natural-gas producer, fell 1.8 percent to C$63.92. Imperial Oil Ltd., the biggest oil and gas producer, dropped 4.5 percent to C$41.51. Enbridge Inc., Canada's biggest pipeline company, retreated 3.2 percent to C$39.42.
Crude oil futures fell 9 cents to $93.88 a barrel in New York, taking their weekly drop to 12 percent this week after fuel demand fell to the lowest since October 2001. Oil, copper and corn led commodities toward their worst week since at least 1956 this week, according to the Reuters/Jefferies CRB Index.
Potash Corp. advanced 1.2 percent to C$102.21 today. The biggest maker of crop nutrients fell 33 percent this week, the worst such drop since trading began in 1989, after declining commodity prices, missed earnings at Mosaic Co. and a downgrade to ``underperform'' at Merrill Lynch & Co. sparked a slump in Potash and other agricultural companies.
Barrick Gold Corp. added 5.1 percent to C$34.95 even as price of the precious metal fell for a second day. The biggest producer of gold dropped the most in two decades yesterday.
Magna International Inc. plunged after Russian billionaire Oleg Deripaska ceded his investment in the car-parts maker. Magna fell 5.9 percent to C$46.32, the lowest price since February 1996, after a bank financing Deripaska's $1.54 billion purchase of shares in the company asked for the money back.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Canadian stocks fell a third day, completing their steepest weekly slide in almost eight years, on concern the $700 billion U.S. plan to rescue banks won't avert a recession for the Canada's biggest trade partner.
Financial shares dropped, led by Manulife Financial Corp. and Brookfield Asset Management Inc., after borrowing costs climbed as the financial-system bailout headed for approval. Potash Corp. of Saskatchewan Inc. paced a record slide in mining companies and Canadian Natural Resources Ltd. led energy producers lower as crude oil posted its worst weekly drop since 2004.
The Standard & Poor's/TSX Composite Index fell 0.9 percent to 10,803.35 in Toronto after rising 4.2 percent earlier. Canada's main stock benchmark, which derives more than two- fifths of its value from raw-materials and energy shares, slid 10.9 percent this week as commodity prices plunged. The S&P/TSX fell 11.1 percent in the last week of October 2000.
``Sell on the news,'' said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. ``This is only the beginning of the hard work of re-liquifying credit markets. A lot of people are getting off the materials trade, saying we'll still have a recession.''
Manulife Financial, Canada's largest insurance company, fell 2 percent to C$36.47 completing its worst weekly drop since June. Brookfield, the manager of $95 billion in assets including real estate and power stations, dropped 5.5 percent to C$26.16, the lowest since January. Toronto-Dominion Bank, the nation's second-biggest lender, slid 1.8 percent to C$59.43 after climbing as much as 3.6 percent earlier.
Reeling
U.S. Congress passed and President George W. Bush signed a mesure that authorizes the government to buy troubled assets from financial institutions reeling from record U.S. home foreclosures. The S&P/TSX fell 6.95 percent yesterday, and 6.93 percent on Sept. 29 when the House of Representatives' rejected the government's earlier rescue plan.
Global financial institutions have had almost $590 billion in losses and writedowns on mortgage-related securities. Canadian banks account for about $10.8 billion of the total. The London interbank offered rate that banks charge each other for loans in U.S. dollars rose the highest since January.
Canadian Imperial Bank of Commerce rose 1.2 percent to C$58.50 after Cerberus Capital Management LP agreed to invest more than $1 billion cash in the bank's troubled U.S. real- estate portfolio, helping reduce the lender's risk.
Industry Groups
Measures of financial companies in the S&P/TSX retreated 1.4 percent. An index of energy stocks dropped 1.6 percent today, while a gauge of raw-materials stocks added 1.9 percent. Energy producers and raw-materials companies' respective weekly drops of 15 percent and 20 percent were the groups' worst such performance since 1995 when the indexes began.
Canadian Natural, the country's second-largest natural-gas producer, fell 1.8 percent to C$63.92. Imperial Oil Ltd., the biggest oil and gas producer, dropped 4.5 percent to C$41.51. Enbridge Inc., Canada's biggest pipeline company, retreated 3.2 percent to C$39.42.
Crude oil futures fell 9 cents to $93.88 a barrel in New York, taking their weekly drop to 12 percent this week after fuel demand fell to the lowest since October 2001. Oil, copper and corn led commodities toward their worst week since at least 1956 this week, according to the Reuters/Jefferies CRB Index.
Potash Corp. advanced 1.2 percent to C$102.21 today. The biggest maker of crop nutrients fell 33 percent this week, the worst such drop since trading began in 1989, after declining commodity prices, missed earnings at Mosaic Co. and a downgrade to ``underperform'' at Merrill Lynch & Co. sparked a slump in Potash and other agricultural companies.
Barrick Gold Corp. added 5.1 percent to C$34.95 even as price of the precious metal fell for a second day. The biggest producer of gold dropped the most in two decades yesterday.
Magna International Inc. plunged after Russian billionaire Oleg Deripaska ceded his investment in the car-parts maker. Magna fell 5.9 percent to C$46.32, the lowest price since February 1996, after a bank financing Deripaska's $1.54 billion purchase of shares in the company asked for the money back.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
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El Paso, Gannett, National City, Yahoo: U.S. Equity Preview
By Lu Wang
Oct. 3 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading on Oct. 6. Stock symbols are in parentheses, and share prices are as of 5:30 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December lost 16.10, or 1.4 percent, to 1,108.30. Dow Jones Industrial Average futures fell 193, or 1.8 percent, to 10,364. Nasdaq-100 Index futures slipped 33, or 2.2 percent, to 1,477.50.
El Paso Corp. (EP US): The owner of the largest U.S. network of natural-gas pipelines said two of its 27 operated platforms in the Gulf of Mexico were ``heavily damaged'' by recent hurricanes and that much of its production in the region remains shut-in. The stock added 0.7 percent to $10.96 in regular trading.
Gannett Co. (GCI US): The largest U.S. newspaper publisher borrowed $1.2 billion under its unsecured revolving credit lines, bringing the total amount of such debt to about $1.9 billion. The stock fell 6.8 percent to $15.18 in regular trading.
National City Corp. (NCC US) fell 14 cents, or 4 percent, to $3.37. Ohio's biggest bank had its debt downgraded by Fitch Ratings as the economy weakens and real estate-related loans go bad.
Yahoo! Inc. (YHOO US): The company said Google Inc. (GOOG US) agreed to a ``brief delay'' in the start of a planned Internet-advertising partnership. Yahoo rose 2.7 percent to $16 in regular trading while Google lost 0.9 percent to $386.91.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
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Oct. 3 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading on Oct. 6. Stock symbols are in parentheses, and share prices are as of 5:30 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December lost 16.10, or 1.4 percent, to 1,108.30. Dow Jones Industrial Average futures fell 193, or 1.8 percent, to 10,364. Nasdaq-100 Index futures slipped 33, or 2.2 percent, to 1,477.50.
El Paso Corp. (EP US): The owner of the largest U.S. network of natural-gas pipelines said two of its 27 operated platforms in the Gulf of Mexico were ``heavily damaged'' by recent hurricanes and that much of its production in the region remains shut-in. The stock added 0.7 percent to $10.96 in regular trading.
Gannett Co. (GCI US): The largest U.S. newspaper publisher borrowed $1.2 billion under its unsecured revolving credit lines, bringing the total amount of such debt to about $1.9 billion. The stock fell 6.8 percent to $15.18 in regular trading.
National City Corp. (NCC US) fell 14 cents, or 4 percent, to $3.37. Ohio's biggest bank had its debt downgraded by Fitch Ratings as the economy weakens and real estate-related loans go bad.
Yahoo! Inc. (YHOO US): The company said Google Inc. (GOOG US) agreed to a ``brief delay'' in the start of a planned Internet-advertising partnership. Yahoo rose 2.7 percent to $16 in regular trading while Google lost 0.9 percent to $386.91.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
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Brazilian Stocks Fall, Led by Aracruz, Banks; Bolsa Declines
By Paulo Winterstein and William Freebairn
Oct. 3 (Bloomberg) -- Brazilian stocks fell to the lowest since April 2007 as Aracruz Celulose SA, the world's biggest pulp producer, reported it may lose about $1 billion from derivatives and banks slid on the prospect of worsening credit conditions.
Aracruz dropped the most in 14 years after Morgan Stanley cut its profit estimates and Merrill Lynch & Co. downgraded the stock to ``neutral'' from ``buy.'' Votorantim Celulose & Papel SA, which plans to merge with Aracruz, slid more than 10 percent. Uniao de Bancos Brasileiros SA led declines in banks even as Congress passed a $700 billion financial-market rescue plan designed to unlock credit markets.
``You had a patient with a very high fever, almost in convulsions, and when you administer the medicine you come back to a lower temperature,'' said Ures Folchini, head of proprietary trading at WestLB AG's Brazilian unit. ``It will take a while for things to return to normal.''
The Bovespa index slid 3.5 percent to 44,517.32. The weekly decline of 12 percent was the most in six years. The BM&FBovespa MidLarge Cap index dropped 3.4 percent, while the BM&FBovespa Small Cap index slipped 3.7 percent. Mexico's Bolsa dropped 4.3 percent, while Chile's Ipsa retreated 2.4 percent.
Aracruz slid 25 percent to 4.85 reais, the biggest drop since at least August 1994. The company said the ``fair value'' of its currency-related derivative contracts at the end of last quarter was negative 1.95 billion reais, or $1.02 billion, after Brazil's real slumped. The accounting loss from derivative transactions is ``higher than what the market was expecting,'' Morgan Stanley analysts, including Carlos De Alba, wrote.
``We expect the negative short-term impact on the company's shares to persist, also affecting'' Votorantim shares, Unibanco analysts wrote.
Votorantim fell 11 percent to 22.99 reais. Brazil's third- largest pulp and paper maker agreed in August to pay 2.71 billion reais ($1.5 billion) to double its stake in Aracruz.
Banks Fall
Unibanco dropped 10 percent to 16.32 reais.
Brazil eased requirements on reserves that banks must keep at the central bank for the second time in two weeks in response to worsening credit conditions sparked by the international financial crisis.
``The central bank is being proactive, acknowledging that liquidity restrictions have increased in Brazil,'' Deutsche Bank AG analyst Mario Pierry wrote in a note to clients. ``This is the third measure implemented by the central bank in two weeks to improve liquidity conditions in the money market.''
Stocks had rallied earlier today on speculation the $700 billion bank bailout package would pass.
U.S. Bailout
The U.S. legislation, a bipartisan effort to restore confidence in the nation's banking system, authorizes the government to buy troubled assets from financial institutions reeling from record home foreclosures. The bill contains $149 billion in tax breaks and affirms regulators' power to suspend asset-valuing rules that companies blame for fueling the crisis.
``The package is without a doubt positive but it doesn't solve all the economic problems,'' said Italo Lombardi, economist at Roubini Global Economics LLC in a Bloomberg Television interview. ``It will help a bit some individual institutions but it doesn't guarantee that the system will begin to offer more credit.''
Mexico's Bolsa index had its biggest weekly decline in eight years. The daily drop was led by retailers on concern the U.S. economic slowdown will be prolonged and spread to Mexico.
Controladora Comercial Mexicana SAB, the owner of supermarkets and Costco stores in Mexico, fell the most in two weeks after Banco Santander SA said the company may report ``modest'' third-quarter results. Comercial Mexicana may say third-quarter net income fell 75 percent and sales at stores open at least a year grew 3 percent, Santander analysts Joaquin Ley and Roberto Liano wrote in a research note today.
Comercial Mexicana retreated 8.2 percent to 22.37 pesos.
Argentina's Merval fell 0.5 percent. Colombia's IGBC and Peru's Lima General index were little changed. The MSCI index of Latin American shares dropped 4.8 percent and had its biggest weekly decline in 18 years.
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Brazilian stocks fell to the lowest since April 2007 as Aracruz Celulose SA, the world's biggest pulp producer, reported it may lose about $1 billion from derivatives and banks slid on the prospect of worsening credit conditions.
Aracruz dropped the most in 14 years after Morgan Stanley cut its profit estimates and Merrill Lynch & Co. downgraded the stock to ``neutral'' from ``buy.'' Votorantim Celulose & Papel SA, which plans to merge with Aracruz, slid more than 10 percent. Uniao de Bancos Brasileiros SA led declines in banks even as Congress passed a $700 billion financial-market rescue plan designed to unlock credit markets.
``You had a patient with a very high fever, almost in convulsions, and when you administer the medicine you come back to a lower temperature,'' said Ures Folchini, head of proprietary trading at WestLB AG's Brazilian unit. ``It will take a while for things to return to normal.''
The Bovespa index slid 3.5 percent to 44,517.32. The weekly decline of 12 percent was the most in six years. The BM&FBovespa MidLarge Cap index dropped 3.4 percent, while the BM&FBovespa Small Cap index slipped 3.7 percent. Mexico's Bolsa dropped 4.3 percent, while Chile's Ipsa retreated 2.4 percent.
Aracruz slid 25 percent to 4.85 reais, the biggest drop since at least August 1994. The company said the ``fair value'' of its currency-related derivative contracts at the end of last quarter was negative 1.95 billion reais, or $1.02 billion, after Brazil's real slumped. The accounting loss from derivative transactions is ``higher than what the market was expecting,'' Morgan Stanley analysts, including Carlos De Alba, wrote.
``We expect the negative short-term impact on the company's shares to persist, also affecting'' Votorantim shares, Unibanco analysts wrote.
Votorantim fell 11 percent to 22.99 reais. Brazil's third- largest pulp and paper maker agreed in August to pay 2.71 billion reais ($1.5 billion) to double its stake in Aracruz.
Banks Fall
Unibanco dropped 10 percent to 16.32 reais.
Brazil eased requirements on reserves that banks must keep at the central bank for the second time in two weeks in response to worsening credit conditions sparked by the international financial crisis.
``The central bank is being proactive, acknowledging that liquidity restrictions have increased in Brazil,'' Deutsche Bank AG analyst Mario Pierry wrote in a note to clients. ``This is the third measure implemented by the central bank in two weeks to improve liquidity conditions in the money market.''
Stocks had rallied earlier today on speculation the $700 billion bank bailout package would pass.
U.S. Bailout
The U.S. legislation, a bipartisan effort to restore confidence in the nation's banking system, authorizes the government to buy troubled assets from financial institutions reeling from record home foreclosures. The bill contains $149 billion in tax breaks and affirms regulators' power to suspend asset-valuing rules that companies blame for fueling the crisis.
``The package is without a doubt positive but it doesn't solve all the economic problems,'' said Italo Lombardi, economist at Roubini Global Economics LLC in a Bloomberg Television interview. ``It will help a bit some individual institutions but it doesn't guarantee that the system will begin to offer more credit.''
Mexico's Bolsa index had its biggest weekly decline in eight years. The daily drop was led by retailers on concern the U.S. economic slowdown will be prolonged and spread to Mexico.
Controladora Comercial Mexicana SAB, the owner of supermarkets and Costco stores in Mexico, fell the most in two weeks after Banco Santander SA said the company may report ``modest'' third-quarter results. Comercial Mexicana may say third-quarter net income fell 75 percent and sales at stores open at least a year grew 3 percent, Santander analysts Joaquin Ley and Roberto Liano wrote in a research note today.
Comercial Mexicana retreated 8.2 percent to 22.37 pesos.
Argentina's Merval fell 0.5 percent. Colombia's IGBC and Peru's Lima General index were little changed. The MSCI index of Latin American shares dropped 4.8 percent and had its biggest weekly decline in 18 years.
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.
Read more...
Friday, October 3, 2008
U.S. Service Industries Expanded at Slower Pace
By Bob Willis
Oct. 3 (Bloomberg) -- Service industries in the U.S. expanded at a slower pace in September as companies cut back on hiring.
The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, decreased to 50.2, higher than forecast, from 50.6 in August, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction.
A three-year housing slump that triggered the recent credit meltdown is reverberating across the economy, prompting increased job losses and declines in spending. Earlier today, the Labor Department reported the economy last month lost the most jobs in five years.
``With domestic demand weak, as export demand falls, that will soften the economy,'' Anna Piretti, a senior economist at BNP Paribas in New York, said before the report.
Economists forecast the index would decline to 50, the dividing line between growth and contraction, according to the median of 67 projections in a Bloomberg News survey. Estimates ranged from 42 to 51.9.
Another report from the ISM earlier this week showed manufacturing shrank in September at the fastest pace since the last recession in 2001. The ISM's factory index fell to 43.5, for a sixth reading of contraction in the last nine months, from 49.9 in August.
Payrolls Drop
The economy lost 159,000 jobs last month, for a total of 760,000 job cuts so far this year, the Labor Department said earlier today. Service industries subtracted 82,000 workers in September and financial firms cut payrolls by 17,000, Labor said.
The financial industry has been especially battered as the current credit crisis prompted the Bush administration to ask Congress for $700 billion to shore up the banking industry. Barclays Plc, the U.K. bank that bought parts of Lehman Brothers U.S. businesses, may cut as many as 5,000 jobs at the bankrupt company, Wall Street recruiters said last week.
The ISM's employment index dropped to 44.2 from 45.4 in August. The institute's business activity index declined to 52.1 from 51.6, while its new orders gauge rose to 50.8 from 49.7.
The ISM's measure for backorders dropped to 46.5 from 49. The group's measure of prices paid by non-manufacturing businesses fell to 70 from 72.9 a month earlier.
Energy costs in September continued to recede from July's record highs. The average price for a barrel of crude oil last month was $103.76, compared with $116.69 a month earlier.
Slowing growth abroad is also affecting U.S. service companies from banks, to business services and hotel chains.
Marriott International Inc., the biggest U.S. hotel chain, forecast a steeper drop in 2009 earnings than analysts estimated as withering economies around the globe erode travel budgets.
``In 2009, at a minimum, the company expects the business environment to remain unusually challenging,'' the company said this week.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Service industries in the U.S. expanded at a slower pace in September as companies cut back on hiring.
The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, decreased to 50.2, higher than forecast, from 50.6 in August, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction.
A three-year housing slump that triggered the recent credit meltdown is reverberating across the economy, prompting increased job losses and declines in spending. Earlier today, the Labor Department reported the economy last month lost the most jobs in five years.
``With domestic demand weak, as export demand falls, that will soften the economy,'' Anna Piretti, a senior economist at BNP Paribas in New York, said before the report.
Economists forecast the index would decline to 50, the dividing line between growth and contraction, according to the median of 67 projections in a Bloomberg News survey. Estimates ranged from 42 to 51.9.
Another report from the ISM earlier this week showed manufacturing shrank in September at the fastest pace since the last recession in 2001. The ISM's factory index fell to 43.5, for a sixth reading of contraction in the last nine months, from 49.9 in August.
Payrolls Drop
The economy lost 159,000 jobs last month, for a total of 760,000 job cuts so far this year, the Labor Department said earlier today. Service industries subtracted 82,000 workers in September and financial firms cut payrolls by 17,000, Labor said.
The financial industry has been especially battered as the current credit crisis prompted the Bush administration to ask Congress for $700 billion to shore up the banking industry. Barclays Plc, the U.K. bank that bought parts of Lehman Brothers U.S. businesses, may cut as many as 5,000 jobs at the bankrupt company, Wall Street recruiters said last week.
The ISM's employment index dropped to 44.2 from 45.4 in August. The institute's business activity index declined to 52.1 from 51.6, while its new orders gauge rose to 50.8 from 49.7.
The ISM's measure for backorders dropped to 46.5 from 49. The group's measure of prices paid by non-manufacturing businesses fell to 70 from 72.9 a month earlier.
Energy costs in September continued to recede from July's record highs. The average price for a barrel of crude oil last month was $103.76, compared with $116.69 a month earlier.
Slowing growth abroad is also affecting U.S. service companies from banks, to business services and hotel chains.
Marriott International Inc., the biggest U.S. hotel chain, forecast a steeper drop in 2009 earnings than analysts estimated as withering economies around the globe erode travel budgets.
``In 2009, at a minimum, the company expects the business environment to remain unusually challenging,'' the company said this week.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Read more...
Europe Retail Sales Fell in August From Year Earlier
By Fergal O'Brien
Oct. 3 (Bloomberg) -- European retail sales declined in August as the economy extended its slump and the global financial crisis intensified, undermining consumer confidence.
Sales fell 1.8 percent in August from a year earlier, matching the pace of decline recorded in July, the European Union's statistics office in Luxembourg said today. From the previous month, sales rose 0.3 percent. A separate report showed services activity contracted for a fourth month in September.
With the outlook for the economy deteriorating and unemployment rising, consumer sentiment is waning even as oil prices decline. As the credit squeeze intensifies, European Central Bank President Jean-Claude Trichet yesterday opened the door to the first interest-rate cut in five years and said ``upside risks to price stability have diminished somewhat.''
``The latest data, together with recent weak industrial- production figures, suggest that euro-zone GDP might well have fallen again in the third quarter,'' said Jennifer McKeown, an economist at Capital Economics in London. ``There is nothing here to prevent ECB interest-rate cuts in the future.''
Europe's economy contracted in the second quarter for the first time in a decade and will probably stagnate for the remainder of this year, according to the European Commission.
French President Nicolas Sarkozy will host a meeting in Paris tomorrow of leaders from Britain, Italy and Germany, as well as Trichet, to prepare a European position on the financial crisis, which forced the U.K. government to seize Bradford & Bingley Plc and prompted state-backed rescues of Fortis and Dexia SA.
Consumer Confidence
An EU index of consumer confidence held at minus 19 in September, close to the 14-year low of minus 20 reached in July. Hennes & Mauritz AB, Europe's second-biggest clothes retailer, this week reported its weakest profit growth since 2003 on slowing demand in German, U.K. and Swedish markets. Gruppo Coin SpA, Italy's largest department-store chain, last month said second-quarter profit fell 75 percent.
A survey of purchasing managers at retailers published this week indicated that the slump in sales continued into last month. The measure of sales in the index fell to 46.2 from 47.7 in August, where a reading below 50 indicates contraction.
Economists had forecast a 2.4 percent decline in annual euro-area retail sales in August, according to the median of 19 estimates in a Bloomberg News survey.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- European retail sales declined in August as the economy extended its slump and the global financial crisis intensified, undermining consumer confidence.
Sales fell 1.8 percent in August from a year earlier, matching the pace of decline recorded in July, the European Union's statistics office in Luxembourg said today. From the previous month, sales rose 0.3 percent. A separate report showed services activity contracted for a fourth month in September.
With the outlook for the economy deteriorating and unemployment rising, consumer sentiment is waning even as oil prices decline. As the credit squeeze intensifies, European Central Bank President Jean-Claude Trichet yesterday opened the door to the first interest-rate cut in five years and said ``upside risks to price stability have diminished somewhat.''
``The latest data, together with recent weak industrial- production figures, suggest that euro-zone GDP might well have fallen again in the third quarter,'' said Jennifer McKeown, an economist at Capital Economics in London. ``There is nothing here to prevent ECB interest-rate cuts in the future.''
Europe's economy contracted in the second quarter for the first time in a decade and will probably stagnate for the remainder of this year, according to the European Commission.
French President Nicolas Sarkozy will host a meeting in Paris tomorrow of leaders from Britain, Italy and Germany, as well as Trichet, to prepare a European position on the financial crisis, which forced the U.K. government to seize Bradford & Bingley Plc and prompted state-backed rescues of Fortis and Dexia SA.
Consumer Confidence
An EU index of consumer confidence held at minus 19 in September, close to the 14-year low of minus 20 reached in July. Hennes & Mauritz AB, Europe's second-biggest clothes retailer, this week reported its weakest profit growth since 2003 on slowing demand in German, U.K. and Swedish markets. Gruppo Coin SpA, Italy's largest department-store chain, last month said second-quarter profit fell 75 percent.
A survey of purchasing managers at retailers published this week indicated that the slump in sales continued into last month. The measure of sales in the index fell to 46.2 from 47.7 in August, where a reading below 50 indicates contraction.
Economists had forecast a 2.4 percent decline in annual euro-area retail sales in August, according to the median of 19 estimates in a Bloomberg News survey.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
On the Seventh Day, They Worked, Amid Finance Crisis
By Oshrat Carmiel and Demian McLean
Oct. 3 (Bloomberg) -- Sunday is the new Monday.
From Wall Street to Washington, the U.S. credit crisis has claimed the leisurely weekend along with Lehman Brothers Holdings Inc. and Washington Mutual Inc.
``The news cycle is ruining everyone's weekend,'' Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ in New York, said in an e-mail. In addition to working more at the office, he's tethered to his BlackBerry on Saturdays and Sundays ``waiting for the next shoe to drop.''
Every weekend since Labor Day, the meltdown has forced U.S. Treasury and Federal Reserve officials, members of Congress and Wall Street executives to huddle under pressure to react before Asian markets reopened.
On Saturday, Sept. 6, Treasury Secretary Henry Paulson gathered with the chief executive officers of Fannie Mae and Freddie Mac. On Sunday, Sept. 7, the government seized control of the mortgage-finance companies.
The following weekend, New York Fed President Timothy Geithner summoned Wall Street leaders to discuss the possible sale of Lehman Brothers. By Sunday night, Lehman was preparing bankruptcy papers and Merrill Lynch & Co. was selling itself to Bank of America Corp.
Forget Fishing
The next two weekends, government officials met in Washington to discuss a proposed $700 billion bailout of the financial-services industry.
The Senate approved the rescue on Oct. 1 and the House of Representatives is scheduled to vote on it today, setting up another weekend of work to study and implement details if the measure passes, or come up with something else if it fails.
``Every weekend, there's been a crisis,'' said David Kotok, chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey, which manages $1 billion in assets.
Kotok said he had planned to spend his September weekends on a fishing boat. Instead, he's been on his computer and phone, trying to translate details of the latest news to worried clients.
``I've been here the last three Sundays, and I'll be here this Sunday,'' John Silvia, chief economist at Wachovia Corp., said on Sept. 26, referring to the bank's Charlotte, North Carolina, headquarters. ``A lot of people are here.''
Wachovia's What-If
Sundays at Wachovia were more like strategy sessions rather than actual workdays, Silvia said. He and his colleagues followed the news and came up with ``what-if'' scenarios, he said.
The what-if for Wachovia came on the morning of Monday, Sept. 29, when the company agreed in principle to sell its consumer banking business to Citigroup Inc. The deal, triggered by Wachovia's mounting mortgage losses, was brokered by the Federal Deposit Insurance Corp. over the weekend.
Citigroup had more than 200 people ``working on this nonstop'' for the 72 hours before the deal was announced, Citigroup Chief Executive Officer Vikram Pandit said in a Sept. 29 teleconference. Wells Fargo & Co. said today it had agreed to buy Wachovia for $15.1 billion in stock without federal assistance, ending the Citigroup deal.
Wachovia's Silvia said he'll be working again this weekend, studying the continued fallout from the crisis.
``It's almost most like the bubonic plague in Europe,'' Silvia said. ``It just goes from one town to the other town and you wipe out the entire population fast.''
The Treasury Department sent Paulson and a team of aides to Capitol Hill at noon on Saturday, Sept. 27, spokeswoman Michele Davis said. Some worked with lawmakers until 3 a.m. on the rescue package, she said.
Sunday Buffets
That team was replaced the next day with one that also toiled overnight, this time on the Wachovia sale.
``Working weekends has become so normal here that we now have a buffet breakfast and lunch each day,'' Davis said. ``Sunday was a spread more common on a day of watching football -- wings, cheese sticks, hot dogs and chili.''
In New York on the weekend of Sept. 13, Shai Waisman, a partner at Weil Gotshal & Manges LLP, missed a planned dinner with friends from Texas who were on a layover at John F. Kennedy International Airport. He had to prepare papers for the Lehman bankruptcy, which his firm is handling.
That Sunday, a cousin from Israel arrived for a visit and let herself into his apartment. She stayed for seven days, Waisman said, and he never saw her once.
``I've never seen so many New Yorkers with the same ashen, exhausted look at the same obscene hours,'' Waisman said.
His firm is also handling the Washington Mutual bankruptcy. ``I will be working this and every coming weekend for the foreseeable future,'' Waisman said in an e-mail yesterday.
`Days Run Together'
In Congress, the crisis has forced committees to schedule votes on other matters to late on weekend nights. The House Committee on Rules voted on tax-relief and energy-related bills at 10 p.m. on Sunday, Sept. 28, a ``highly unusual'' time slot, said Emily Davis, a spokeswoman for Representative Pete Sessions, a Texas Republican who sits on the committee.
``The last time I had a day off was a couple weekends ago,'' Davis said. ``The days just run together.''
The past several weekends, U.S. Representative Eric Cantor and his aides have dined on pizza, Popeyes fried chicken and ``a couple nights of bad Chinese,'' said Rob Collins, chief of staff for the Republican from Virginia, who is deputy minority whip. About 10 Cantor staffers have been working weekends, Collins said.
Collins's wife, at home with their 10-month-old child, joined the social-networking site Facebook.com one weekend night as he worked until 11 p.m., Collins said.
The first message posted to her profile: ``I wish Congress would pass this bill so my son could see his father for once.''
Paulson's Rest
Takeout Taxi, a Falls Church, Virginia, company that delivers food from Washington restaurants, has seen orders more than double to as many as 150 the last three Sundays from the typical 50 to 70, said call representative Jenna Burrows.
``Sundays are usually pretty slow, but we've had a dinner rush each night that lasts till 10 o'clock,'' Burrows said Sept. 29. ``They want chicken tikka masala and kabobs.''
The long hours may be taking a toll on Treasury Secretary Paulson as well. During the marathon negotiating session Sept. 28 on Capitol Hill, he leaned back in his chair at one point and closed his eyes, sparking worries that he might need a doctor.
It wasn't a health crisis, just fatigue, said a person familiar with the deliberations.
To contact the reporters on this story: Oshrat Carmiel in New York ocarmiel1@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Sunday is the new Monday.
From Wall Street to Washington, the U.S. credit crisis has claimed the leisurely weekend along with Lehman Brothers Holdings Inc. and Washington Mutual Inc.
``The news cycle is ruining everyone's weekend,'' Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ in New York, said in an e-mail. In addition to working more at the office, he's tethered to his BlackBerry on Saturdays and Sundays ``waiting for the next shoe to drop.''
Every weekend since Labor Day, the meltdown has forced U.S. Treasury and Federal Reserve officials, members of Congress and Wall Street executives to huddle under pressure to react before Asian markets reopened.
On Saturday, Sept. 6, Treasury Secretary Henry Paulson gathered with the chief executive officers of Fannie Mae and Freddie Mac. On Sunday, Sept. 7, the government seized control of the mortgage-finance companies.
The following weekend, New York Fed President Timothy Geithner summoned Wall Street leaders to discuss the possible sale of Lehman Brothers. By Sunday night, Lehman was preparing bankruptcy papers and Merrill Lynch & Co. was selling itself to Bank of America Corp.
Forget Fishing
The next two weekends, government officials met in Washington to discuss a proposed $700 billion bailout of the financial-services industry.
The Senate approved the rescue on Oct. 1 and the House of Representatives is scheduled to vote on it today, setting up another weekend of work to study and implement details if the measure passes, or come up with something else if it fails.
``Every weekend, there's been a crisis,'' said David Kotok, chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey, which manages $1 billion in assets.
Kotok said he had planned to spend his September weekends on a fishing boat. Instead, he's been on his computer and phone, trying to translate details of the latest news to worried clients.
``I've been here the last three Sundays, and I'll be here this Sunday,'' John Silvia, chief economist at Wachovia Corp., said on Sept. 26, referring to the bank's Charlotte, North Carolina, headquarters. ``A lot of people are here.''
Wachovia's What-If
Sundays at Wachovia were more like strategy sessions rather than actual workdays, Silvia said. He and his colleagues followed the news and came up with ``what-if'' scenarios, he said.
The what-if for Wachovia came on the morning of Monday, Sept. 29, when the company agreed in principle to sell its consumer banking business to Citigroup Inc. The deal, triggered by Wachovia's mounting mortgage losses, was brokered by the Federal Deposit Insurance Corp. over the weekend.
Citigroup had more than 200 people ``working on this nonstop'' for the 72 hours before the deal was announced, Citigroup Chief Executive Officer Vikram Pandit said in a Sept. 29 teleconference. Wells Fargo & Co. said today it had agreed to buy Wachovia for $15.1 billion in stock without federal assistance, ending the Citigroup deal.
Wachovia's Silvia said he'll be working again this weekend, studying the continued fallout from the crisis.
``It's almost most like the bubonic plague in Europe,'' Silvia said. ``It just goes from one town to the other town and you wipe out the entire population fast.''
The Treasury Department sent Paulson and a team of aides to Capitol Hill at noon on Saturday, Sept. 27, spokeswoman Michele Davis said. Some worked with lawmakers until 3 a.m. on the rescue package, she said.
Sunday Buffets
That team was replaced the next day with one that also toiled overnight, this time on the Wachovia sale.
``Working weekends has become so normal here that we now have a buffet breakfast and lunch each day,'' Davis said. ``Sunday was a spread more common on a day of watching football -- wings, cheese sticks, hot dogs and chili.''
In New York on the weekend of Sept. 13, Shai Waisman, a partner at Weil Gotshal & Manges LLP, missed a planned dinner with friends from Texas who were on a layover at John F. Kennedy International Airport. He had to prepare papers for the Lehman bankruptcy, which his firm is handling.
That Sunday, a cousin from Israel arrived for a visit and let herself into his apartment. She stayed for seven days, Waisman said, and he never saw her once.
``I've never seen so many New Yorkers with the same ashen, exhausted look at the same obscene hours,'' Waisman said.
His firm is also handling the Washington Mutual bankruptcy. ``I will be working this and every coming weekend for the foreseeable future,'' Waisman said in an e-mail yesterday.
`Days Run Together'
In Congress, the crisis has forced committees to schedule votes on other matters to late on weekend nights. The House Committee on Rules voted on tax-relief and energy-related bills at 10 p.m. on Sunday, Sept. 28, a ``highly unusual'' time slot, said Emily Davis, a spokeswoman for Representative Pete Sessions, a Texas Republican who sits on the committee.
``The last time I had a day off was a couple weekends ago,'' Davis said. ``The days just run together.''
The past several weekends, U.S. Representative Eric Cantor and his aides have dined on pizza, Popeyes fried chicken and ``a couple nights of bad Chinese,'' said Rob Collins, chief of staff for the Republican from Virginia, who is deputy minority whip. About 10 Cantor staffers have been working weekends, Collins said.
Collins's wife, at home with their 10-month-old child, joined the social-networking site Facebook.com one weekend night as he worked until 11 p.m., Collins said.
The first message posted to her profile: ``I wish Congress would pass this bill so my son could see his father for once.''
Paulson's Rest
Takeout Taxi, a Falls Church, Virginia, company that delivers food from Washington restaurants, has seen orders more than double to as many as 150 the last three Sundays from the typical 50 to 70, said call representative Jenna Burrows.
``Sundays are usually pretty slow, but we've had a dinner rush each night that lasts till 10 o'clock,'' Burrows said Sept. 29. ``They want chicken tikka masala and kabobs.''
The long hours may be taking a toll on Treasury Secretary Paulson as well. During the marathon negotiating session Sept. 28 on Capitol Hill, he leaned back in his chair at one point and closed his eyes, sparking worries that he might need a doctor.
It wasn't a health crisis, just fatigue, said a person familiar with the deliberations.
To contact the reporters on this story: Oshrat Carmiel in New York ocarmiel1@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
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U.S. House Clears Way to Pass New $700 Billion Plan
By Laura Litvan and Brian Faler
Oct. 3 (Bloomberg) -- The U.S. House of Representatives cleared the way to complete action on a Senate-passed $700 billion financial-market rescue package that was refashioned to entice enough votes for passage.
By a vote of 223-205, the House prevented members from offering amendments that could snarl the proceedings. The tally signaled the plan has enough support to clear Congress and be sent to President George W. Bush to be signed into law.
At least 20 House members said they will drop their opposition to the plan and support it. The measure failed by a dozen votes earlier this week. The House roll call was scheduled for early this afternoon.
``I don't like this at all,'' said Tennessee Republican Zach Wamp, who is dropping his opposition. ``As a matter of fact I hate it. But we're out of options. Congress has to act.''
Representative James Clyburn of South Carolina, the vote- counting whip for Democrats, said more Democrats will support the bill than the 140 who backed it earlier this week.
The Bush administration issued a statement today saying it ``strongly supports and urges swift House passage'' of the bill.
The legislation lets the government buy troubled assets from financial institutions rocked by record home foreclosures. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank-deposit insurance and changes in securities law.
It also restates securities regulators' authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis. The Senate approved the bill Wednesday 74-25.
Sweetening the Pot
The add-ons may help sway lawmakers such as Jim Gerlach, as did phone calls from his suburban Philadelphia constituents. Many of his supporters shifted to backing the bailout following the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the bill.
The Dow rose 205.49 points, or 2 percent, to 10,688.34 at 11:22 a.m. in New York.
Among those abandoning their opposition were Democrats Shelley Berkley of Nevada and Gabrielle Giffords of Arizona and Republicans Ileana Ros-Lehtinen of Florida, John Shadegg of Arizona and Jim Ramstad of Minnesota. At least three other Republicans, Gerlach and Tim Murphy of Pennsylvania and Patrick Tiberi of Ohio, and Democrat Bill Pascrell of New Jersey, may vote yes on the measure.
Signaling Confidence
House Majority Leader Steny Hoyer and the Republican leadership signaled their confidence in advance that the measure would pass.
``There is a broad feeling that the economy is at risk and that average Americans will be badly hurt if the economy continues to go downhill, and that action is necessary,'' Hoyer said.
Minority Leader John Boehner had said the plan wouldn't come up for a vote until leaders were assured of passage and today predicted approval. Republicans cited the economy as the main reason they were switching.
Shadegg said on Bloomberg Television that he would support the measure, citing a ``breakdown'' in credit markets that makes it difficult for small businesses to pay employees. Ros-Lehtinen said in a statement she would back the bailout because it boosts Federal Deposit Insurance Corp. limits and adds tax breaks for families.
Company Support
Companies are also pushing Congress to pass the measure, saying the curtailment of credit may result in job cuts.
Automakers said tougher loan standards partly accounted for a 27 percent plunge in U.S. auto sales last month.
The market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said yesterday. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6 percent, during the week ended Oct. 1.
Yet the addition of the tax cuts and special breaks for companies such as an Oregon-based maker of wooden arrows and Virgin Islands rum-makers may turn off some deficit-wary Democrats.
Representative Mike Ross, an Arkansas Democrat who supported the original bailout bill, said he didn't know how the so-called Blue Dog coalition of fiscally conservative Democrats would vote on the version with the Senate's add-ons.
``I don't even know what I'll do,'' Ross said.
The extra spending on federal projects is also repelling some Republicans.
Still Opposed
Representative Spencer Bachus, an Alabama Republican who supported the earlier bailout plan, called the Senate version ``a travesty,'' saying in an interview that he is ``strongly considering'' voting against it.
California Democrat Brad Sherman called the measure a ``pork-laden, earmark-laden bailout bill.''
As the House prepared to approve the rescue plan, the rate banks charge each other to borrow dollars overnight dropped to 1.996 percent after soaring to 6.875 percent on Sept. 30, the day after the House vote rejecting the earlier bailout proposal.
The London interbank offered rate for three-month loans in dollars, however, rose to 4.33 percent, the highest since January. The Libor rate for three-month euro loans rose to a record 5.33 percent.
The Labor Department reported today that the U.S. lost 159,000 jobs in September, the biggest monthly drop since March 2003. For the second straight month, the unemployment rate was 6.1 percent -- the highest level since September 2003.
Yesterday, the department said 497,000 people filed first- time applications for jobless benefits during the week ended Sept. 27, the highest level in seven years.
To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Brian Faler in Washington at faler@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- The U.S. House of Representatives cleared the way to complete action on a Senate-passed $700 billion financial-market rescue package that was refashioned to entice enough votes for passage.
By a vote of 223-205, the House prevented members from offering amendments that could snarl the proceedings. The tally signaled the plan has enough support to clear Congress and be sent to President George W. Bush to be signed into law.
At least 20 House members said they will drop their opposition to the plan and support it. The measure failed by a dozen votes earlier this week. The House roll call was scheduled for early this afternoon.
``I don't like this at all,'' said Tennessee Republican Zach Wamp, who is dropping his opposition. ``As a matter of fact I hate it. But we're out of options. Congress has to act.''
Representative James Clyburn of South Carolina, the vote- counting whip for Democrats, said more Democrats will support the bill than the 140 who backed it earlier this week.
The Bush administration issued a statement today saying it ``strongly supports and urges swift House passage'' of the bill.
The legislation lets the government buy troubled assets from financial institutions rocked by record home foreclosures. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank-deposit insurance and changes in securities law.
It also restates securities regulators' authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis. The Senate approved the bill Wednesday 74-25.
Sweetening the Pot
The add-ons may help sway lawmakers such as Jim Gerlach, as did phone calls from his suburban Philadelphia constituents. Many of his supporters shifted to backing the bailout following the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the bill.
The Dow rose 205.49 points, or 2 percent, to 10,688.34 at 11:22 a.m. in New York.
Among those abandoning their opposition were Democrats Shelley Berkley of Nevada and Gabrielle Giffords of Arizona and Republicans Ileana Ros-Lehtinen of Florida, John Shadegg of Arizona and Jim Ramstad of Minnesota. At least three other Republicans, Gerlach and Tim Murphy of Pennsylvania and Patrick Tiberi of Ohio, and Democrat Bill Pascrell of New Jersey, may vote yes on the measure.
Signaling Confidence
House Majority Leader Steny Hoyer and the Republican leadership signaled their confidence in advance that the measure would pass.
``There is a broad feeling that the economy is at risk and that average Americans will be badly hurt if the economy continues to go downhill, and that action is necessary,'' Hoyer said.
Minority Leader John Boehner had said the plan wouldn't come up for a vote until leaders were assured of passage and today predicted approval. Republicans cited the economy as the main reason they were switching.
Shadegg said on Bloomberg Television that he would support the measure, citing a ``breakdown'' in credit markets that makes it difficult for small businesses to pay employees. Ros-Lehtinen said in a statement she would back the bailout because it boosts Federal Deposit Insurance Corp. limits and adds tax breaks for families.
Company Support
Companies are also pushing Congress to pass the measure, saying the curtailment of credit may result in job cuts.
Automakers said tougher loan standards partly accounted for a 27 percent plunge in U.S. auto sales last month.
The market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said yesterday. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6 percent, during the week ended Oct. 1.
Yet the addition of the tax cuts and special breaks for companies such as an Oregon-based maker of wooden arrows and Virgin Islands rum-makers may turn off some deficit-wary Democrats.
Representative Mike Ross, an Arkansas Democrat who supported the original bailout bill, said he didn't know how the so-called Blue Dog coalition of fiscally conservative Democrats would vote on the version with the Senate's add-ons.
``I don't even know what I'll do,'' Ross said.
The extra spending on federal projects is also repelling some Republicans.
Still Opposed
Representative Spencer Bachus, an Alabama Republican who supported the earlier bailout plan, called the Senate version ``a travesty,'' saying in an interview that he is ``strongly considering'' voting against it.
California Democrat Brad Sherman called the measure a ``pork-laden, earmark-laden bailout bill.''
As the House prepared to approve the rescue plan, the rate banks charge each other to borrow dollars overnight dropped to 1.996 percent after soaring to 6.875 percent on Sept. 30, the day after the House vote rejecting the earlier bailout proposal.
The London interbank offered rate for three-month loans in dollars, however, rose to 4.33 percent, the highest since January. The Libor rate for three-month euro loans rose to a record 5.33 percent.
The Labor Department reported today that the U.S. lost 159,000 jobs in September, the biggest monthly drop since March 2003. For the second straight month, the unemployment rate was 6.1 percent -- the highest level since September 2003.
Yesterday, the department said 497,000 people filed first- time applications for jobless benefits during the week ended Sept. 27, the highest level in seven years.
To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Brian Faler in Washington at faler@bloomberg.net.
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