By Ben Livesey and Jon Menon
More Photos/Details
Oct. 8 (Bloomberg) -- Britain's banks will get an unprecedented 50 billion-pound ($87 billion) government lifeline and emergency loans from the central bank after the freeze in credit markets threatened to bring down the financial system.
The government will offer to buy preference shares to help boost capital at Royal Bank of Scotland Group Plc, Barclays Plc and at least six other banks, the Treasury said in a statement today. The plan also guarantees about 250 billion pounds of loans and increases the amount the Bank of England makes available for banks to borrow to at least 200 billion pounds.
The emergency action failed to stem the stock market rout, with the U.K.'s benchmark FTSE 100 Index falling as much as 7.8 percent. Prime Minister Prime Minister Gordon Brown is following U.S. President George W. Bush, who approved a plan last week to spend $700 billion to prop up financial institutions with untested measures as equities plunged around the world.
``The global market has ceased to function,'' Brown said today at a press conference in London. ``The banking system must be sounder, and that is why we are putting the capital in.''
Brown's government was forced to act as the economy tumbled toward a recession and shares of the country's biggest banks lost more than half their value in a week. Edinburgh-based RBS, Britain's third-largest bank by market value, had its credit rating cut by Standard & Poor's for the first time in almost a decade on concern that its financial health was deteriorating.
While U.K. support for banks will help in the short term, ``even these huge amounts will not avert the downward course of the U.K.,'' said Sandy Chen, a London-based analyst at Panmure Gordon & Co., who has ``sell'' ratings on Barclays and RBS. ``House prices will continue to fall, unemployment will continue to rise.''
Nationalizing Banks
The steps to partially nationalize the industry provide the ``building blocks to allow banks to return to their basic function of providing cash and investment,'' Chancellor of the Exchequer Alistair Darling said today.
Britain joins the U.S. and many European countries in rushing out bailout measures. Germany, Ireland and Greece have pledged to guarantee savers' deposits. Iceland has taken over two of the nation's three biggest banks, and Spain has agreed to spend as much as 50 billion euros ($68 billion) to buy bank assets.
The U.K. initiative comes after the government took control of Northern Rock Plc and Bradford & Bingley Plc earlier this year and arranged the takeover of Edinburgh-based HBOS Plc, the country's biggest mortgage lender.
Weaker Banks
``The weaker banks were being dealt with by nationalization or acquisition, leaving a smaller number of stronger banks with greater market share,'' said Fidelity International Ltd.'s Sanjeev Shah, who took over the $4 billion U.K. Special Situations Fund from Anthony Bolton at the start of the year. ``Now the U.K. government is putting in place a formal plan to provide further capital injections to key U.K. banking entities.''
Darling and Brown are trying to prevent the financial- services industry, which accounts for about a fifth of London's economy, from collapsing under the weight of the global credit crunch. Financial-service companies will cut 12,000 jobs before the end of the year, about 33 percent more than a year earlier, according to estimates last month from the Confederation of British Industry, the country's biggest business lobby group.
The government said today it will make 25 billion pounds immediately available to banks in the form of preference shares and is ready to provide another 25 billion pounds. It doesn't specify how much each bank will get. The amount available will vary, depending on their dividend payouts and executive pay policies. The plan requires the banks to lend to small businesses and home owners, the government said.
Budget Deficit
The rescue may break Brown's pledge to keep debt below 40 percent of the country's gross domestic product. The budget deficit climbed to the highest since 1993 in August, with debt amounting to 43 percent of GDP when the liabilities of Northern Rock are factored in. The Treasury probably will provide details later today on how it will fund the plan.
London-based HSBC, Europe's biggest bank, said it doesn't plan to receive capital from the U.K. because it has sufficient funding. Standard Chartered Plc, the London-based bank that makes most of its profit in Asia, and Abbey National, the U.K. unit of Spain's Banco Santander SA, also said they won't seek capital from the government.
Most British banks were lower, even after central bankers in the U.S. and Europe announced a coordinated cut in interest rates. Standard Chartered fell 10 percent to 1,187 pence at 2 p.m. in London, Barclays dropped 6.7 percent, and Lloyds TSB declined 5.6 percent. HBOS jumped 47 percent and RBS gained 19 percent after both banks suffered record declines yesterday.
Not for Shareholders
``The point of this is not to bail out shareholders in banks,'' said Charles Mackinnon, chief investment officer at London-based Thurleigh Investment. ``The point is not to pay executive bonuses. It's to enable the economy to keep on going.''
The government should have specified how much capital goes to each bank, said Robert Talbut, who manages 31 billion pounds at Royal London Asset Management in London. ``To say 25 billion pounds is available and it's up to each bank how they will draw it down isn't credible,'' he said.
While RBS denied yesterday that it asked the government for help, the bank has been short of capital since it paid about 14 billion euros ($19 billion) last year for the investment banking and Asian units of Amsterdam-based ABN Amro Holding NV. The 12.3 billion pounds that RBS raised by selling shares at 200 pence apiece in June wasn't enough, and shares now trade for about half as much.
RBS, Barclays, Lloyds TSB and three other U.K. banks need to repay as much as 54 billion pounds of debt by the end of March 2009 as borrowing costs reach record highs and banks are reluctant to lend to each other. The total, which includes bonds, convertible bonds and commercial paper, is triple the debt repaid in the same period a year ago.
`Significant Issues'
Barclays, which said it has no debt that counts as regulatory capital maturing before the end of March, praised today's funding plan. It ``addresses the most significant issues in the market, namely confidence in the strength of the banking system and the working of the money markets,'' Barclays Chief Executive Officer John Varley said today in statement.
The government plan will address ``unprecedented conditions in the financial system'' and help RBS strengthen its position, RBS Chief Executive Officer Fred Goodwin said in a statement.
RBS, which bought NatWest bank for 24 billion pounds in 2000, is struggling with rising defaults and a slumping housing market in Britain and the U.S. The bank, which had 5.9 billion of writedowns and a net loss of 761 million pounds in the first half, will have about 1.1 billion pounds of writedowns later this year, threatening its ability to reach a target of raising Tier 1 equity capital to 6 percent by the end of 2008, analysts at JPMorgan Chase & Co. said Oct. 1.
Management Changes
RBS hasn't discussed management changes as part of its participation in the U.K. funding plan, spokeswoman Carolyn McAdam said today. A report in London's Daily Telegraph, which said the CEO and chairman of RBS would step down, was inaccurate, she said.
HBOS fell 41 percent yesterday to a new low as investors became skeptical of its government-arranged takeover by London- based Lloyds TSB, the U.K.'s biggest provider of checking accounts.
Lloyds TSB agreed Sept. 18 to buy HBOS in a stock swap valued at the time at 10.4 billion pounds. HBOS's market value has since fallen to 5.1 billion pounds, even though Lloyds TSB's takeover was still valued yesterday at more than 10 billion pounds.
Lloyds TSB ``is working with HBOS management on all aspects of the transaction,'' the London-based bank said today in a statement. The U.K. funding plan ``is very much in the interests of shareholders and customers,'' HBOS said in a separate statement.
To contact the reporter on this story: Ben Livesey in London blivesey@bloomberg.net
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Wednesday, October 8, 2008
U.S. Economy Still Most Competitive Despite Crisis, WEF Says
By Simon Kennedy
Oct. 8 (Bloomberg) -- The U.S. retained the title of most competitive nation for a fifth year even as its economy is roiled by the biggest financial crisis since the Great Depression, the World Economic Forum said.
The U.S. led Switzerland, Denmark and Sweden in the Geneva- based organization's annual rankings of 134 nations, receiving top marks for innovation, the size of its markets and labor productivity.
The efficiency of the world's largest economy may provide it with a cushion as it slides towards a recession and its banking sector continues to be hurt by last month's collapse of Lehman Brothers Holdings Inc. The U.S. government is beginning to implement a $700 billion finance-rescue package.
``Despite rising concerns about the soundness of the banking sector and other macroeconomic weaknesses, the country's many other strengths continue to make it a very productive environment,'' the report said of the U.S.
The U.S. was still ranked only 66th for macroeconomic security with the forum warning its overall productivity may wane in coming years because its federal budget deficit and debt suggest it is ``not preparing'' for the retirement of the baby boom generation.
Singapore, Finland, Germany, the Netherlands and Japan rounded out the top ten as they did last year with Canada's replacement of the U.K. the only change in the main tier.
U.K. Weakness
Canada was promoted from 13th because of its transport and telecommunications infrastructure, while the U.K. fell to 12th from ninth because of growing weakness in financial services following government bailouts of Northern Rock Plc and Bradford & Bingley Plc.
The World Economic Forum, funded by more than 1,000 corporations and best known for its annual conference in the Swiss ski-resort of Davos, has published competitiveness reports since 1979. The rankings include marks for over 110 variables including quality of education, health care and innovation.
Among the other Group of Seven industrial nations, Germany followed the U.S. although its ranking slipped to seventh from fifth as its labor markets remain rigid. Japan fell one place to ninth, dragged down by its sluggish economy and high public debt.
France rose to 16th from 14th, winning credit for having the second best infrastructure in the world. Italy fell below Barbados to 49th from 46th as its inflexible labor market and wasteful government spending hinder competitiveness.
Most of the largest emerging markets gained ground on their richer rivals, with China joining the top 30 for the first time.
A boom in oil revenues lifted Russia to 51st from 58th, while India dropped two places to 39th as its widening budget deficit offsets its business sophistication. Brazil jumped eight slots to 64th after improving its public finances.
To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- The U.S. retained the title of most competitive nation for a fifth year even as its economy is roiled by the biggest financial crisis since the Great Depression, the World Economic Forum said.
The U.S. led Switzerland, Denmark and Sweden in the Geneva- based organization's annual rankings of 134 nations, receiving top marks for innovation, the size of its markets and labor productivity.
The efficiency of the world's largest economy may provide it with a cushion as it slides towards a recession and its banking sector continues to be hurt by last month's collapse of Lehman Brothers Holdings Inc. The U.S. government is beginning to implement a $700 billion finance-rescue package.
``Despite rising concerns about the soundness of the banking sector and other macroeconomic weaknesses, the country's many other strengths continue to make it a very productive environment,'' the report said of the U.S.
The U.S. was still ranked only 66th for macroeconomic security with the forum warning its overall productivity may wane in coming years because its federal budget deficit and debt suggest it is ``not preparing'' for the retirement of the baby boom generation.
Singapore, Finland, Germany, the Netherlands and Japan rounded out the top ten as they did last year with Canada's replacement of the U.K. the only change in the main tier.
U.K. Weakness
Canada was promoted from 13th because of its transport and telecommunications infrastructure, while the U.K. fell to 12th from ninth because of growing weakness in financial services following government bailouts of Northern Rock Plc and Bradford & Bingley Plc.
The World Economic Forum, funded by more than 1,000 corporations and best known for its annual conference in the Swiss ski-resort of Davos, has published competitiveness reports since 1979. The rankings include marks for over 110 variables including quality of education, health care and innovation.
Among the other Group of Seven industrial nations, Germany followed the U.S. although its ranking slipped to seventh from fifth as its labor markets remain rigid. Japan fell one place to ninth, dragged down by its sluggish economy and high public debt.
France rose to 16th from 14th, winning credit for having the second best infrastructure in the world. Italy fell below Barbados to 49th from 46th as its inflexible labor market and wasteful government spending hinder competitiveness.
Most of the largest emerging markets gained ground on their richer rivals, with China joining the top 30 for the first time.
A boom in oil revenues lifted Russia to 51st from 58th, while India dropped two places to 39th as its widening budget deficit offsets its business sophistication. Brazil jumped eight slots to 64th after improving its public finances.
To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net
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Indian Rupee Falls to 5 1/2-Year Low on Capital-Outflow Concern
By Anil Varma
Oct. 8 (Bloomberg) -- India's rupee fell to the lowest level in 5 1/2 years on speculation a global stocks slide will encourage investors to take more money out of the nation.
The currency dropped for a fourth day, joining declines in eight of Asia's 10 most-active currencies. India's benchmark share index fell 3.1 percent and Japan's Nikkei 225 Stock Average lost 9.4 percent following a slump in U.S. equities.
``The rupee market is concerned over the large amount of foreign investments that are being pulled out from India as well as elsewhere,'' said Nizam Idris, a foreign-exchange strategist at UBS AG in Singapore. ``Sentiment across currency markets is soured by extreme risk aversion.''
The rupee fell 0.2 percent to 48.00 versus the dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg, the weakest level since January 2003. The currency fell as low as 48.81 in intraday trading. The rupee may decline to 49 this year and 50 by the end of March, Idris said. The all- time low for the rupee is 49.07, reached in June 2002.
The Bombay Stock Exchange's Sensitive Index has fallen more than 44 percent this year, wiping out all of 2007's gains. Funds based abroad sold $9.8 billion more Indian shares than they bought this year, according to the Securities and Exchange Board of India.
Implied volatility on one-month dollar-rupee options rose to 24.3 percent today, the highest in at least nine years, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices.
`External Debt'
The rupee also fell on concern India's rising overseas debt will add pressure to its balance of payments amid a global financial crisis.
``The rupee market is also concerned about India's high external debt level,'' UBS's Idris said.
India's outstanding overseas debt increased 22.8 percent in the year through June to a record $221.3 billion, the central bank said on Sept. 30.
The government may allow more overseas investments in corporate and government bonds and ease overseas borrowing rules for local companies to boost dollar inflows.
The finance ministry is considering a proposal to raise the limit on holdings of government bonds by overseas investors from $5 billion and that on corporate bonds from $3 billion, said an official who did not want to be named.
The rupee pared losses after the U.S. Federal Reserve, European Central Bank and four other central banks lowered interest rates in a coordinated emergency effort to ease the economic effects of the global financial crisis.
The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point.
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
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Oct. 8 (Bloomberg) -- India's rupee fell to the lowest level in 5 1/2 years on speculation a global stocks slide will encourage investors to take more money out of the nation.
The currency dropped for a fourth day, joining declines in eight of Asia's 10 most-active currencies. India's benchmark share index fell 3.1 percent and Japan's Nikkei 225 Stock Average lost 9.4 percent following a slump in U.S. equities.
``The rupee market is concerned over the large amount of foreign investments that are being pulled out from India as well as elsewhere,'' said Nizam Idris, a foreign-exchange strategist at UBS AG in Singapore. ``Sentiment across currency markets is soured by extreme risk aversion.''
The rupee fell 0.2 percent to 48.00 versus the dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg, the weakest level since January 2003. The currency fell as low as 48.81 in intraday trading. The rupee may decline to 49 this year and 50 by the end of March, Idris said. The all- time low for the rupee is 49.07, reached in June 2002.
The Bombay Stock Exchange's Sensitive Index has fallen more than 44 percent this year, wiping out all of 2007's gains. Funds based abroad sold $9.8 billion more Indian shares than they bought this year, according to the Securities and Exchange Board of India.
Implied volatility on one-month dollar-rupee options rose to 24.3 percent today, the highest in at least nine years, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices.
`External Debt'
The rupee also fell on concern India's rising overseas debt will add pressure to its balance of payments amid a global financial crisis.
``The rupee market is also concerned about India's high external debt level,'' UBS's Idris said.
India's outstanding overseas debt increased 22.8 percent in the year through June to a record $221.3 billion, the central bank said on Sept. 30.
The government may allow more overseas investments in corporate and government bonds and ease overseas borrowing rules for local companies to boost dollar inflows.
The finance ministry is considering a proposal to raise the limit on holdings of government bonds by overseas investors from $5 billion and that on corporate bonds from $3 billion, said an official who did not want to be named.
The rupee pared losses after the U.S. Federal Reserve, European Central Bank and four other central banks lowered interest rates in a coordinated emergency effort to ease the economic effects of the global financial crisis.
The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point.
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
Read more...
BP's Forties Crude Oil Output May Fall in January
By Alexander Kwiatkowski
Oct. 8 (Bloomberg) -- BP Plc said production of North Sea Forties oil, part of the benchmark used to price two-thirds of the world's crude, will probably rise 4 percent in December before falling in January.
BP, the operator of the Forties Pipeline System, forecasts December production at 700,000 barrels a day, compared with 673,000 barrels a day in November, according to an update on its Web site. January output is scheduled to decline 2.7 percent to 681,000 barrels a day, it said. October production is forecast at 649,000 barrels a day.
Forties, a blend of oil from more than 70 fields in the North Sea, is one of the four North Sea crude types that determine the price of Dated Brent. The others are Royal Dutch Shell Plc's Brent blend, StatoilHydro ASA's Oseberg and ConocoPhillips's Ekofisk.
BP said the share of Buzzard crude in the blend, which affects its quality and value, remained above forecast for the 13th consecutive week after Nexen Inc. further delayed maintenance at the field.
The proportion of Buzzard, a so-called medium-sour crude oil, fell to 29 percent in the week ended Oct. 5, from 30 percent the previous week, according to BP. BP forecasts that Buzzard's share will average 26 percent in September and 25 percent in October.
Sulfur Content
Buzzard's share affects the quality and price of Forties because it contains a larger amount of sulfur than other grades in the blend. High sulfur content cuts the amount of valuable low-sulfur products such as gasoline that can be extracted.
Buzzard production was scheduled to decline in August during planned maintenance at the field. Operator Nexen yesterday said unsuitable weather continued to delay the works which were yet to begin.
Forties crude rose to the highest in two months relative to Dated Brent after Vitol Group bought a cargo from Total S.A.
Forties cargoes loading in 10 to 21 days cost 30 cents less than Dated Brent, compared with a discount of 40 cents yesterday, according to data compiled by Bloomberg. That is the smallest discount since Aug. 4.
The trader bought a cargo from Total loading between Oct. 24 and Oct. 26 at a discount of 30 cents to Dated Brent, the company said.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- BP Plc said production of North Sea Forties oil, part of the benchmark used to price two-thirds of the world's crude, will probably rise 4 percent in December before falling in January.
BP, the operator of the Forties Pipeline System, forecasts December production at 700,000 barrels a day, compared with 673,000 barrels a day in November, according to an update on its Web site. January output is scheduled to decline 2.7 percent to 681,000 barrels a day, it said. October production is forecast at 649,000 barrels a day.
Forties, a blend of oil from more than 70 fields in the North Sea, is one of the four North Sea crude types that determine the price of Dated Brent. The others are Royal Dutch Shell Plc's Brent blend, StatoilHydro ASA's Oseberg and ConocoPhillips's Ekofisk.
BP said the share of Buzzard crude in the blend, which affects its quality and value, remained above forecast for the 13th consecutive week after Nexen Inc. further delayed maintenance at the field.
The proportion of Buzzard, a so-called medium-sour crude oil, fell to 29 percent in the week ended Oct. 5, from 30 percent the previous week, according to BP. BP forecasts that Buzzard's share will average 26 percent in September and 25 percent in October.
Sulfur Content
Buzzard's share affects the quality and price of Forties because it contains a larger amount of sulfur than other grades in the blend. High sulfur content cuts the amount of valuable low-sulfur products such as gasoline that can be extracted.
Buzzard production was scheduled to decline in August during planned maintenance at the field. Operator Nexen yesterday said unsuitable weather continued to delay the works which were yet to begin.
Forties crude rose to the highest in two months relative to Dated Brent after Vitol Group bought a cargo from Total S.A.
Forties cargoes loading in 10 to 21 days cost 30 cents less than Dated Brent, compared with a discount of 40 cents yesterday, according to data compiled by Bloomberg. That is the smallest discount since Aug. 4.
The trader bought a cargo from Total loading between Oct. 24 and Oct. 26 at a discount of 30 cents to Dated Brent, the company said.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
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National Grid Chief Says Power Forecast Shouldn't Cause `Panic'
By Paul Dobson
Oct. 8 (Bloomberg) -- National Grid Plc Chief Executive Officer Steve Holliday said record-high U.K. power prices for November and forecasts for reduced surplus generation capacity shouldn't cause concern that supplies may be cut.
Extended maintenance at coal-fired and nuclear stations this year has lowered available capacity, meaning costlier reserve generation is required to satisfy demand. National Grid, Britain's power-transmission network manager, cut forecasts for surplus production in November the last two weeks.
``This is just the system working, actually, and we shouldn't panic about it,'' Holliday said in an interview in London yesterday. ``If generation doesn't come back and we do get a cold spell and we're into insufficient margin territory,'' the grid will issue a warning notice.
If that doesn't work, ``we then have another layer of safety and then finally we've got other responses, way before we actually get into a demand problem,'' he said.
November baseload power, the contract for around-the-clock supplies, rose 11 percent yesterday to 150.50 pounds ($264) a megawatt-hour, the highest ever price for a one-month contract. It fell 5 percent today to 143 pounds a megawatt hour as of 12:30 p.m. local time.
The system of forecasts and warnings National Grid provides ``is all about making sure we've got enough safety cushion over and above the forecast peak demand,'' Holliday said.
National Grid said on May 27, when the shutdown of British Energy Group Plc's 1,200-megawatt Sizewell-B power plant caused supply interruptions in parts of England, that steps to reduce demand were imminent because of insufficient spare supplies. It was the first such notice since 2006.
``The normal market signals will get more power stations online as necessary,'' Laura Schmidt, a spokeswoman for the U.K. Association of Electricity Producers, said yesterday.
Utilities are preparing plants for the winter. E.ON AG's U.K. unit has stocked up on coal supplies, checked plants are able to run on back-up distillate fuel and prepared an oil-fired plant that only runs at times of peak demand, spokeswoman Emily Highmore said yesterday.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
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Oct. 8 (Bloomberg) -- National Grid Plc Chief Executive Officer Steve Holliday said record-high U.K. power prices for November and forecasts for reduced surplus generation capacity shouldn't cause concern that supplies may be cut.
Extended maintenance at coal-fired and nuclear stations this year has lowered available capacity, meaning costlier reserve generation is required to satisfy demand. National Grid, Britain's power-transmission network manager, cut forecasts for surplus production in November the last two weeks.
``This is just the system working, actually, and we shouldn't panic about it,'' Holliday said in an interview in London yesterday. ``If generation doesn't come back and we do get a cold spell and we're into insufficient margin territory,'' the grid will issue a warning notice.
If that doesn't work, ``we then have another layer of safety and then finally we've got other responses, way before we actually get into a demand problem,'' he said.
November baseload power, the contract for around-the-clock supplies, rose 11 percent yesterday to 150.50 pounds ($264) a megawatt-hour, the highest ever price for a one-month contract. It fell 5 percent today to 143 pounds a megawatt hour as of 12:30 p.m. local time.
The system of forecasts and warnings National Grid provides ``is all about making sure we've got enough safety cushion over and above the forecast peak demand,'' Holliday said.
National Grid said on May 27, when the shutdown of British Energy Group Plc's 1,200-megawatt Sizewell-B power plant caused supply interruptions in parts of England, that steps to reduce demand were imminent because of insufficient spare supplies. It was the first such notice since 2006.
``The normal market signals will get more power stations online as necessary,'' Laura Schmidt, a spokeswoman for the U.K. Association of Electricity Producers, said yesterday.
Utilities are preparing plants for the winter. E.ON AG's U.K. unit has stocked up on coal supplies, checked plants are able to run on back-up distillate fuel and prepared an oil-fired plant that only runs at times of peak demand, spokeswoman Emily Highmore said yesterday.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
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South African Rand Near Six-Year Low as Central Banks Cut Rates
By Garth Theunissen and Janice Kew
Oct. 8 (Bloomberg) -- South Africa's rand traded near a six- year low against the dollar after the Federal Reserve, European Central Bank and four other central banks lowered interest rates in a coordinated effort to ease the global financial crisis.
The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank cut their benchmark rates by a half point. The central banks of Switzerland and China also took part. Earlier, the rand fell for a third day as investors sold emerging-market assets on concern the credit crisis would prompt a recession in the world's biggest economies.
``There's a general sense of relief worldwide that has helped reduce some of the extreme risk aversion we've seen in markets recently,'' said Elisabeth Gruie, an emerging-markets currency strategist in London at BNP Paribas SA, France's biggest bank. ``Emerging-market currencies have come under extreme selling pressure in recent times and this is providing some respite.''
The rand slipped to 9.2820 per dollar by 2:42 p.m. in Johannesburg after earlier falling as much as 5.4 percent to 9.4469, the weakest since November 2002. It dropped versus 11 of the 16 most-traded currencies monitored by Bloomberg, slipping 3 percent to 12.5416 per euro.
The Fed's decision brought its benchmark rate to 1.5 percent and the Frankfurt-based ECB's main refinancing rate is now 3.75 percent. China cut interest rates for the second time in three weeks, reducing the main rate to 6.93 percent.
The Bank of Japan, which didn't participate in the move, said it supported the action.
U.K. Bailout
The cut in borrowing costs followed the U.K. Treasury's statement that it will buy preference shares in the nation's banks to partially nationalize the industry, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan. Britain joins the U.S., Germany, Ireland, Greece, Iceland and Spain in rushing out bailout measures for financial institutions struggling with a global credit crisis.
``The bailouts might help stabilize the banking system but they won't stop the world's major economies from slowing,'' said George Glynos, managing director of Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions in Johannesburg. ``Emerging-market assets are selling off aggressively because of fears a global recession may be deeper than originally anticipated.''
Glynos recommends selling the rand ``up to the 9.5 per dollar level'', and said it will trade in a range between 9.26 and 9.55 to the dollar in the next two weeks.
``I would lock in profits at about the 9.5 level as it's unlikely to fall beyond that,'' he predicted.
Equity Losses
The rand dropped as stock markets around the world slumped on concern the fallout from the credit crisis and the seizure in bank lending will stifle expansion and erode corporate earnings.
``Investors are still focusing on markets that are likely to be affected by what seems like an inevitable global recession,'' said Robert Beange, an emerging-markets currency strategist in London at JPMorgan Chase & Co. ``People are using that as an excuse to sell out of risky assets like the rand.''
Government bonds were mixed. The yield on South Africa's benchmark 13.5 percent security due September 2015 added 2 basis points to 8.80 percent. The yield on the 13 percent note maturing in August 2010 lost 4 basis points to 9.20 percent. Yields move inversely to bond prices.
To contact the reporters on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.netJanice Kew in Johannesburg at jkew1@bloomberg.net
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Oct. 8 (Bloomberg) -- South Africa's rand traded near a six- year low against the dollar after the Federal Reserve, European Central Bank and four other central banks lowered interest rates in a coordinated effort to ease the global financial crisis.
The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank cut their benchmark rates by a half point. The central banks of Switzerland and China also took part. Earlier, the rand fell for a third day as investors sold emerging-market assets on concern the credit crisis would prompt a recession in the world's biggest economies.
``There's a general sense of relief worldwide that has helped reduce some of the extreme risk aversion we've seen in markets recently,'' said Elisabeth Gruie, an emerging-markets currency strategist in London at BNP Paribas SA, France's biggest bank. ``Emerging-market currencies have come under extreme selling pressure in recent times and this is providing some respite.''
The rand slipped to 9.2820 per dollar by 2:42 p.m. in Johannesburg after earlier falling as much as 5.4 percent to 9.4469, the weakest since November 2002. It dropped versus 11 of the 16 most-traded currencies monitored by Bloomberg, slipping 3 percent to 12.5416 per euro.
The Fed's decision brought its benchmark rate to 1.5 percent and the Frankfurt-based ECB's main refinancing rate is now 3.75 percent. China cut interest rates for the second time in three weeks, reducing the main rate to 6.93 percent.
The Bank of Japan, which didn't participate in the move, said it supported the action.
U.K. Bailout
The cut in borrowing costs followed the U.K. Treasury's statement that it will buy preference shares in the nation's banks to partially nationalize the industry, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan. Britain joins the U.S., Germany, Ireland, Greece, Iceland and Spain in rushing out bailout measures for financial institutions struggling with a global credit crisis.
``The bailouts might help stabilize the banking system but they won't stop the world's major economies from slowing,'' said George Glynos, managing director of Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions in Johannesburg. ``Emerging-market assets are selling off aggressively because of fears a global recession may be deeper than originally anticipated.''
Glynos recommends selling the rand ``up to the 9.5 per dollar level'', and said it will trade in a range between 9.26 and 9.55 to the dollar in the next two weeks.
``I would lock in profits at about the 9.5 level as it's unlikely to fall beyond that,'' he predicted.
Equity Losses
The rand dropped as stock markets around the world slumped on concern the fallout from the credit crisis and the seizure in bank lending will stifle expansion and erode corporate earnings.
``Investors are still focusing on markets that are likely to be affected by what seems like an inevitable global recession,'' said Robert Beange, an emerging-markets currency strategist in London at JPMorgan Chase & Co. ``People are using that as an excuse to sell out of risky assets like the rand.''
Government bonds were mixed. The yield on South Africa's benchmark 13.5 percent security due September 2015 added 2 basis points to 8.80 percent. The yield on the 13 percent note maturing in August 2010 lost 4 basis points to 9.20 percent. Yields move inversely to bond prices.
To contact the reporters on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.netJanice Kew in Johannesburg at jkew1@bloomberg.net
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Yen Rises to 3-Year High on Concern Rate Cuts May Fall Short
By Ye Xie and Kim-Mai Cutler
Enlarge Image/Details
Oct. 8 (Bloomberg) -- The yen rose to a three-year high against the euro and gained versus the dollar on concern interest-rate cuts by global central banks may fail to boost confidence, encouraging the sale of higher-yielding assets.
Japan's currency surged against the Australian dollar, the New Zealand dollar and the Norwegian krone on speculation deepening credit market turmoil will lead to a drop in carry trades. The Mexican peso and the Brazilian real plunged versus the greenback on reduced demand for emerging-market currencies.
``They waited too long to sort these things out,'' said Scott Ainsbury, a portfolio manager who helps manage $14.6 billion in currencies at New York-based FX Concepts Inc. ``It's not enough. You buy nothing else but the dollar and the yen.''
The yen gained 0.3 percent to 137.49 per euro at 10:02 a.m. in New York, from 137.89 yesterday. It touched 134.17, the strongest level since August 2005. Japan's currency advanced 0.9 percent to 100.53 per dollar from 101.47. The dollar depreciated 0.7 percent to $1.3676 per euro from $1.3588. It touched $1.3444 on Oct. 6, the strongest since August 2007, when the credit market crisis gathered momentum.
The Federal Reserve reduced its target lending rate by a half-percentage point to 1.5 percent, while the European Central Bank and the central banks of the U.K., Canada, Sweden and Switzerland also reduced rates. Separately, China's central bank lowered its key one-year lending rate.
Surging Yen
The yen gained 6 percent to 67.35 against the Aussie, 4.3 percent to 60.57 versus the New Zealand dollar and 1 percent to 16.22 against the krone on bets investors will abandon trades in which they get funds in a country with low borrowing costs buy assets where returns are higher.
The Bank of Japan held its target lending rate at 0.5 percent yesterday, compared with 7.5 percent in New Zealand and 5.75 percent in Norway. The Reserve Bank of Australia cut its target rate by 1 percentage point to 6 percent yesterday.
Implied volatility on one-month euro-dollar options reached 20.11 percent, an all-time high. Implied volatility on one-month dollar-yen options soared to 25.42 percent, the highest since October 1998.
The real dropped 6 percent to 2.4501 against the dollar, while the peso declined 7 percent to 13.2339.
Finance ministers and central bankers from the Group of Seven nations will meet in Washington on Oct. 10 to discuss the financial crisis. Measures to stabilize global stock markets will be on the agenda, according to a Japanese official who briefed reporters on condition of anonymity before the central banks' announcement. The G-7 comprises Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
G-7 Meeting
``The actions are a good sign for the upcoming G-7 meeting,'' said Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, France's biggest bank. ``It's showing that some sort of coordination may be taking place.''
The ECB's main refinancing rate is now 3.75 percent; Canada's fell to 2.5 percent; the Bank of England's rate dropped to 4.5 percent; and Sweden's rate declined to 4.25 percent. Separately, China cut interest rates for the second time in three weeks, reducing the main rate to 6.93 percent.
The Fed also cut its rate on direct loans to banks, the so- called discount rate, by a half-point to 1.75 percent. The U.S. central bank said yesterday it would set up a special vehicle to buy commercial paper and help revive the corporate-debt market.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
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Enlarge Image/Details
Oct. 8 (Bloomberg) -- The yen rose to a three-year high against the euro and gained versus the dollar on concern interest-rate cuts by global central banks may fail to boost confidence, encouraging the sale of higher-yielding assets.
Japan's currency surged against the Australian dollar, the New Zealand dollar and the Norwegian krone on speculation deepening credit market turmoil will lead to a drop in carry trades. The Mexican peso and the Brazilian real plunged versus the greenback on reduced demand for emerging-market currencies.
``They waited too long to sort these things out,'' said Scott Ainsbury, a portfolio manager who helps manage $14.6 billion in currencies at New York-based FX Concepts Inc. ``It's not enough. You buy nothing else but the dollar and the yen.''
The yen gained 0.3 percent to 137.49 per euro at 10:02 a.m. in New York, from 137.89 yesterday. It touched 134.17, the strongest level since August 2005. Japan's currency advanced 0.9 percent to 100.53 per dollar from 101.47. The dollar depreciated 0.7 percent to $1.3676 per euro from $1.3588. It touched $1.3444 on Oct. 6, the strongest since August 2007, when the credit market crisis gathered momentum.
The Federal Reserve reduced its target lending rate by a half-percentage point to 1.5 percent, while the European Central Bank and the central banks of the U.K., Canada, Sweden and Switzerland also reduced rates. Separately, China's central bank lowered its key one-year lending rate.
Surging Yen
The yen gained 6 percent to 67.35 against the Aussie, 4.3 percent to 60.57 versus the New Zealand dollar and 1 percent to 16.22 against the krone on bets investors will abandon trades in which they get funds in a country with low borrowing costs buy assets where returns are higher.
The Bank of Japan held its target lending rate at 0.5 percent yesterday, compared with 7.5 percent in New Zealand and 5.75 percent in Norway. The Reserve Bank of Australia cut its target rate by 1 percentage point to 6 percent yesterday.
Implied volatility on one-month euro-dollar options reached 20.11 percent, an all-time high. Implied volatility on one-month dollar-yen options soared to 25.42 percent, the highest since October 1998.
The real dropped 6 percent to 2.4501 against the dollar, while the peso declined 7 percent to 13.2339.
Finance ministers and central bankers from the Group of Seven nations will meet in Washington on Oct. 10 to discuss the financial crisis. Measures to stabilize global stock markets will be on the agenda, according to a Japanese official who briefed reporters on condition of anonymity before the central banks' announcement. The G-7 comprises Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
G-7 Meeting
``The actions are a good sign for the upcoming G-7 meeting,'' said Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, France's biggest bank. ``It's showing that some sort of coordination may be taking place.''
The ECB's main refinancing rate is now 3.75 percent; Canada's fell to 2.5 percent; the Bank of England's rate dropped to 4.5 percent; and Sweden's rate declined to 4.25 percent. Separately, China cut interest rates for the second time in three weeks, reducing the main rate to 6.93 percent.
The Fed also cut its rate on direct loans to banks, the so- called discount rate, by a half-point to 1.75 percent. The U.S. central bank said yesterday it would set up a special vehicle to buy commercial paper and help revive the corporate-debt market.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
Read more...
Australian, New Zealand Dollars Fall to Lowest in Five Years
By Lilian Karunungan and Candice Zachariahs
Oct. 8 (Bloomberg) -- The Australian and New Zealand dollars slumped to their lowest level in more than five years against the greenback as investors sold higher-yielding assets on concern frozen credit markets will stall the global economy.
The Australian currency fell the most since 1983 as rising exchange-rate swings, a drop in commodity prices and a rout in stock markets damped the appeal of the so-called carry trades. It tumbled for the 11th day against the U.S. currency, losing 21.3 over the period, on concern investors will reduce bets on Australian and New Zealand assets funded by loans in countries where borrowing costs are lower.
``Oh my god! It's quite extraordinary,'' said Thomas Harr, a Singapore-based senior currency strategist at Standard Chartered Plc. ``As long as we have this credit crisis and global stocks markets collapse, then there's no end for these things going on. The only clear winners here are the U.S. dollar and especially the yen.''
The Australian dollar fell as much as 9.8 percent to 64.51 U.S. cents, the weakest level since 2003, before trading at 66.99 cents as of 12:02 p.m. in London, from 71.50 cents in late Asian trading yesterday. It rebounded following a half percentage point rate cut by the European Central Bank, the Federal Reserve and other central banks. The so-called Aussie slid 9.6 percent to 65.88 yen, after touching 63.75, the lowest since 2002.
New Zealand's dollar dropped as much as 7.95 percent to 57.92 U.S. cents, the weakest since 2003, before trading at 60.25. It slid 6.9 percent to 59.70 yen.
Markets are ``are pricing for the apocalypse,'' said Peter Pontikis, an economist at Suncorp-Metway Ltd. in Brisbane. ``The fear factor is really out there. This isn't rational.''
Global Recession
The global economy is headed for a recession next year as the U.S. expansion almost grinds to a halt, the International Monetary Fund forecast before a Group-of-Seven meeting this week. Australian home-loan approvals dropped to a seven-year low in August, according to government figures reported today.
Shares tumbled across the Asia-Pacific region today, extending a global sell-off that's wiped out more than $5 trillion of market value in the past week. The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to a record 53.68 yesterday.
Copper declined $330, or 5.9 percent, to $5,300 a ton. Tin dropped to a one-year low and nickel declined to the lowest in 33 months. Raw materials account for 60 percent of Australia's exports and sales of commodities such as lumber make up 70 percent of New Zealand's overseas shipments. Gold and crude oil are Australia's third and fourth most-valuable raw material export.
``The Aussie is a barometer of global financial market sentiment so it takes a particularly hard hit,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. The Australian dollar has lost 17.6 percent since the beginning of October and 33 percent since hitting a 25-year high on July 16.
The Australian and New Zealand currencies are popular targets for the carry trade, where investors seek higher returns on investments funded in countries with lower borrowing costs. The risk is that exchange-rate fluctuations erase profits.
Benchmark interest rates are 6 percent in Australia and 7.5 percent in New Zealand. That compares with 0.5 percent in Japan and 2 percent for the U.S. benchmark
Bonds Gain
Australian 10-year bonds rose for a fifth day. The yield on the 5.25 percent security due March 2019 fell 13 basis points to 4.93 percent, according to data compiled by Bloomberg. The price gained 1.052, or A$10.52 per A$1,000 face amount, to 102.575. A basis point is 0.01 percentage point.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, dropped to 6.570 percent today from 6.740 yesterday.
To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- The Australian and New Zealand dollars slumped to their lowest level in more than five years against the greenback as investors sold higher-yielding assets on concern frozen credit markets will stall the global economy.
The Australian currency fell the most since 1983 as rising exchange-rate swings, a drop in commodity prices and a rout in stock markets damped the appeal of the so-called carry trades. It tumbled for the 11th day against the U.S. currency, losing 21.3 over the period, on concern investors will reduce bets on Australian and New Zealand assets funded by loans in countries where borrowing costs are lower.
``Oh my god! It's quite extraordinary,'' said Thomas Harr, a Singapore-based senior currency strategist at Standard Chartered Plc. ``As long as we have this credit crisis and global stocks markets collapse, then there's no end for these things going on. The only clear winners here are the U.S. dollar and especially the yen.''
The Australian dollar fell as much as 9.8 percent to 64.51 U.S. cents, the weakest level since 2003, before trading at 66.99 cents as of 12:02 p.m. in London, from 71.50 cents in late Asian trading yesterday. It rebounded following a half percentage point rate cut by the European Central Bank, the Federal Reserve and other central banks. The so-called Aussie slid 9.6 percent to 65.88 yen, after touching 63.75, the lowest since 2002.
New Zealand's dollar dropped as much as 7.95 percent to 57.92 U.S. cents, the weakest since 2003, before trading at 60.25. It slid 6.9 percent to 59.70 yen.
Markets are ``are pricing for the apocalypse,'' said Peter Pontikis, an economist at Suncorp-Metway Ltd. in Brisbane. ``The fear factor is really out there. This isn't rational.''
Global Recession
The global economy is headed for a recession next year as the U.S. expansion almost grinds to a halt, the International Monetary Fund forecast before a Group-of-Seven meeting this week. Australian home-loan approvals dropped to a seven-year low in August, according to government figures reported today.
Shares tumbled across the Asia-Pacific region today, extending a global sell-off that's wiped out more than $5 trillion of market value in the past week. The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to a record 53.68 yesterday.
Copper declined $330, or 5.9 percent, to $5,300 a ton. Tin dropped to a one-year low and nickel declined to the lowest in 33 months. Raw materials account for 60 percent of Australia's exports and sales of commodities such as lumber make up 70 percent of New Zealand's overseas shipments. Gold and crude oil are Australia's third and fourth most-valuable raw material export.
``The Aussie is a barometer of global financial market sentiment so it takes a particularly hard hit,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. The Australian dollar has lost 17.6 percent since the beginning of October and 33 percent since hitting a 25-year high on July 16.
The Australian and New Zealand currencies are popular targets for the carry trade, where investors seek higher returns on investments funded in countries with lower borrowing costs. The risk is that exchange-rate fluctuations erase profits.
Benchmark interest rates are 6 percent in Australia and 7.5 percent in New Zealand. That compares with 0.5 percent in Japan and 2 percent for the U.S. benchmark
Bonds Gain
Australian 10-year bonds rose for a fifth day. The yield on the 5.25 percent security due March 2019 fell 13 basis points to 4.93 percent, according to data compiled by Bloomberg. The price gained 1.052, or A$10.52 per A$1,000 face amount, to 102.575. A basis point is 0.01 percentage point.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, dropped to 6.570 percent today from 6.740 yesterday.
To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
Read more...
U.K. Two-Year Notes Rise After Coordinated Interest-Rate Cuts
By Agnes Lovasz
Oct. 8 (Bloomberg) -- U.K. government two-year notes rose after the Bank of England joined central banks around the world in cutting interest rates to ward off a collapse of the financial system.
The U.K. central bank reduced its key rate half a percentage point to 4.5 percent a day before its scheduled decision. Policy makers in the U.S., euro region, Sweden, Switzerland, Canada and China also reduced rates. The U.K. government said earlier it will invest 50 billion pounds ($87 billion) in the nation's banks to help ease the lending freeze.
``The rate cut in the context of the plans to bail out the financial sector tells you that U.K. policy is coming to terms with the problem,'' said Russell Jones, head of global fixed- income and currency research in London at RBC Capital Markets. ``The general situation for global bond markets is good and that extends to the gilt market.''
The yield on the two-year gilt dropped 16 basis points to 3.44 percent. The price of the 4.75 percent security due June 2010 climbed 0.25, or 2.5 pounds per 1,000-pound ($1,741) face amount, to 102.09. The 10-year gilt was little changed, yielding 4.23 percent. Bond yields move inversely to prices.
The pound slipped to $1.7422 as of 2:10 p.m. in London, from $1.7455 yesterday. The currency fell to 78.19 pence per euro, from 77.87 pence.
That pushed the difference in yield, or spread, between two- and 10-year gilts to 80 basis points, the widest since July 2003, as investors favored shorter-dated maturities.
``The environment favors the short end rather than the long end because we're going to see a great deal more supply,'' said Jones. ``And you could argue there's still lot more potential for rate cuts in the U.K.''
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- U.K. government two-year notes rose after the Bank of England joined central banks around the world in cutting interest rates to ward off a collapse of the financial system.
The U.K. central bank reduced its key rate half a percentage point to 4.5 percent a day before its scheduled decision. Policy makers in the U.S., euro region, Sweden, Switzerland, Canada and China also reduced rates. The U.K. government said earlier it will invest 50 billion pounds ($87 billion) in the nation's banks to help ease the lending freeze.
``The rate cut in the context of the plans to bail out the financial sector tells you that U.K. policy is coming to terms with the problem,'' said Russell Jones, head of global fixed- income and currency research in London at RBC Capital Markets. ``The general situation for global bond markets is good and that extends to the gilt market.''
The yield on the two-year gilt dropped 16 basis points to 3.44 percent. The price of the 4.75 percent security due June 2010 climbed 0.25, or 2.5 pounds per 1,000-pound ($1,741) face amount, to 102.09. The 10-year gilt was little changed, yielding 4.23 percent. Bond yields move inversely to prices.
The pound slipped to $1.7422 as of 2:10 p.m. in London, from $1.7455 yesterday. The currency fell to 78.19 pence per euro, from 77.87 pence.
That pushed the difference in yield, or spread, between two- and 10-year gilts to 80 basis points, the widest since July 2003, as investors favored shorter-dated maturities.
``The environment favors the short end rather than the long end because we're going to see a great deal more supply,'' said Jones. ``And you could argue there's still lot more potential for rate cuts in the U.K.''
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
Read more...
Iceland's Krona Quoted Almost 50 Percent Below Peg
By Bo Nielsen
(Corrects headline, first paragraph to reflect accurate percentage change.)
Oct. 8 (Bloomberg) -- Iceland's krona was priced at almost 50 percent below the peg against the euro set by the central bank yesterday to stabilize the currency as regulators said they took control of Glitnir Bank hf, the country's No. 3 lender.
Nordea Bank AB, the biggest Scandinavian lender, said the price suggested by bid/ask spreads in pre-market trading was 255 per euro, compared with the 131 per euro level established by the central bank yesterday. There had been no buying of the krona to support the peg by the central bank, Nordea said.
``It's looking very gloomy for Iceland at the moment,'' said Bjarke Roed-Frederiksen, an economist in Copenhagen at Nordea. ``The currency isn't trading at the price the central bank has set and we're already seeing signs that people don't want to accept krona in transactions on Iceland.''
Sweden's central bank said it will loan as much as 5 billion kronor ($700 million) to the Swedish unit of Iceland's Kaupthing Bank hf after it was unable to meet payment obligations and was put up for sale.
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
Read more...
(Corrects headline, first paragraph to reflect accurate percentage change.)
Oct. 8 (Bloomberg) -- Iceland's krona was priced at almost 50 percent below the peg against the euro set by the central bank yesterday to stabilize the currency as regulators said they took control of Glitnir Bank hf, the country's No. 3 lender.
Nordea Bank AB, the biggest Scandinavian lender, said the price suggested by bid/ask spreads in pre-market trading was 255 per euro, compared with the 131 per euro level established by the central bank yesterday. There had been no buying of the krona to support the peg by the central bank, Nordea said.
``It's looking very gloomy for Iceland at the moment,'' said Bjarke Roed-Frederiksen, an economist in Copenhagen at Nordea. ``The currency isn't trading at the price the central bank has set and we're already seeing signs that people don't want to accept krona in transactions on Iceland.''
Sweden's central bank said it will loan as much as 5 billion kronor ($700 million) to the Swedish unit of Iceland's Kaupthing Bank hf after it was unable to meet payment obligations and was put up for sale.
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
Read more...
Indonesia Biofuel Policy to Reduce Palm Oil Exports
By Claire Leow and Yoga Rusmana
Oct. 8 (Bloomberg) -- Exports of palm oil from Indonesia, the largest producer, may decline by as much as 1.5 million metric tons a year after the nation made the use of renewable energy mandatory, a government official said.
``In relation to the mandatory policy for bio-energy issued last month, we see that the use of agricultural products for alternative energy will increase,'' Bayu Krisnamurthi, a deputy to Coordinating Minister for Economic Affairs Boediono, said today in Jakarta. ``This will cut our exports'' of palm oil.
A fall in supplies from Indonesia, the top producer of the tropical oil, may help support prices that slumped to a two-year low this week on concern slowing global economic growth will dent demand for commodities.
The mandate is ``positive for the week'' for palm oil prices, said Tan Ting Min, a plantation analyst at Credit Suisse Group in Kuala Lumpur.
Indonesia said Sept. 26 diesel used for transportation must have minimum 1 percent biodiesel starting this month. The mix was set at 2.5 percent for industrial users. The nation also mandated 1 percent bio-ethanol mix for cars using subsidized fuel starting 2009, while industries using gasoline must ensure 5 percent of the fuel has bioethanol.
Fossil Fuels
Palm oil, with the highest calorific value of any vegetable oil, can be added to diesel to stretch supplies of fossil fuels. Brazil mandates the use of ethanol, made from sugar cane, in cars while the U.S. uses corn to make ethanol.
Indonesia's biofuel industry can produce between 1.3 million tons to 1.5 million tons annually, said Krisnamurthi. Capacity may double to 3 million tons by 2010, he said.
The country's palm oil output will be more than 19 million tons next year and exceed 20 million in 2010, he added. Food and chemicals industry may use 4.5 million tons this year and next, and 5 million tons in 2010, Krisnamurthi said.
Palm oil for December delivery is trading at 1,819 ringgit ($520) a ton on the Malaysia Derivatives Exchange at 4:14 p.m. local time. Prices have dived 60 percent from a peak in March.
Futures may average 2,900 ringgit a ton in 2009, compared with 3,226 ringgit so far this year, Credit Suisse's Tan said.
To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Yoga Rusmana in Jakarta at yrusmana@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- Exports of palm oil from Indonesia, the largest producer, may decline by as much as 1.5 million metric tons a year after the nation made the use of renewable energy mandatory, a government official said.
``In relation to the mandatory policy for bio-energy issued last month, we see that the use of agricultural products for alternative energy will increase,'' Bayu Krisnamurthi, a deputy to Coordinating Minister for Economic Affairs Boediono, said today in Jakarta. ``This will cut our exports'' of palm oil.
A fall in supplies from Indonesia, the top producer of the tropical oil, may help support prices that slumped to a two-year low this week on concern slowing global economic growth will dent demand for commodities.
The mandate is ``positive for the week'' for palm oil prices, said Tan Ting Min, a plantation analyst at Credit Suisse Group in Kuala Lumpur.
Indonesia said Sept. 26 diesel used for transportation must have minimum 1 percent biodiesel starting this month. The mix was set at 2.5 percent for industrial users. The nation also mandated 1 percent bio-ethanol mix for cars using subsidized fuel starting 2009, while industries using gasoline must ensure 5 percent of the fuel has bioethanol.
Fossil Fuels
Palm oil, with the highest calorific value of any vegetable oil, can be added to diesel to stretch supplies of fossil fuels. Brazil mandates the use of ethanol, made from sugar cane, in cars while the U.S. uses corn to make ethanol.
Indonesia's biofuel industry can produce between 1.3 million tons to 1.5 million tons annually, said Krisnamurthi. Capacity may double to 3 million tons by 2010, he said.
The country's palm oil output will be more than 19 million tons next year and exceed 20 million in 2010, he added. Food and chemicals industry may use 4.5 million tons this year and next, and 5 million tons in 2010, Krisnamurthi said.
Palm oil for December delivery is trading at 1,819 ringgit ($520) a ton on the Malaysia Derivatives Exchange at 4:14 p.m. local time. Prices have dived 60 percent from a peak in March.
Futures may average 2,900 ringgit a ton in 2009, compared with 3,226 ringgit so far this year, Credit Suisse's Tan said.
To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Yoga Rusmana in Jakarta at yrusmana@bloomberg.net
Read more...
Copper Drops to 30-Month Low in N.Y. on Global Growth Outlook
By Millie Munshi
Oct. 8 (Bloomberg) -- Copper dropped to the lowest price since March 2006 on concern that a coordinated reduction in interest rates in the U.S. and Europe won't be enough to restore investor confidence and revive economic growth.
The U.S. Federal Reserve, European Central Bank and four other central banks lowered borrowing costs in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression. U.S. stock futures fell after the announcement and the Reuters/Jefferies CRB Index of 19 commodities extended losses.
``The market is saying this action is not enough,'' said Frank McGhee, the head metals dealer at Integrated Brokerage Services LLC in Chicago. ``The best the central banks can do to turn the tide is turn confidence, and they haven't been able to do that. Copper will continue to get punished in view of the continued, deteriorating global economic outlook.''
Copper futures for December delivery dropped 14.15 cents, or 5.6 percent, to $2.393 a pound at 9:17 on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $2.3475 a pound, the lowest for a most-active contract since March 23, 2006.
Before today, copper had tumbled 17 percent this year as tighter lending conditions stalled global growth and construction demand waned amid the U.S. housing slump.
On the London Metal Exchange, copper for delivery in three months lost $309.75, or 5.5 percent, to $5,320.50 a metric ton ($2.41 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Copper dropped to the lowest price since March 2006 on concern that a coordinated reduction in interest rates in the U.S. and Europe won't be enough to restore investor confidence and revive economic growth.
The U.S. Federal Reserve, European Central Bank and four other central banks lowered borrowing costs in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression. U.S. stock futures fell after the announcement and the Reuters/Jefferies CRB Index of 19 commodities extended losses.
``The market is saying this action is not enough,'' said Frank McGhee, the head metals dealer at Integrated Brokerage Services LLC in Chicago. ``The best the central banks can do to turn the tide is turn confidence, and they haven't been able to do that. Copper will continue to get punished in view of the continued, deteriorating global economic outlook.''
Copper futures for December delivery dropped 14.15 cents, or 5.6 percent, to $2.393 a pound at 9:17 on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $2.3475 a pound, the lowest for a most-active contract since March 23, 2006.
Before today, copper had tumbled 17 percent this year as tighter lending conditions stalled global growth and construction demand waned amid the U.S. housing slump.
On the London Metal Exchange, copper for delivery in three months lost $309.75, or 5.5 percent, to $5,320.50 a metric ton ($2.41 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
Read more...
French Crop Office Reiterates Forecasts for Wheat, Corn Output
By Gregory Viscusi
Oct. 8 (Bloomberg) -- France's farmers will reap 22 percent more soft wheat and 25 percent more barley after planting more acres and as yields improve, the French National Crops Office said, reiterating forecasts from a month ago.
Soft-wheat production will rise to 37.4 million metric tons, ONIGC said in a report handed to journalists. France dedicated 4.2 percent more land to the crop, at 5 million hectares (12.4 million acres), and yields rose almost 16 percent, ONIGC said.
Hard-wheat output will rise 10 percent to 2.2 million tons, barley will advance to 12 million tons and corn will be little changed at 14.3 million tons, ONIGC said.
France aims to export about 8.5 million tons of soft wheat outside the European Union, about 500,000 tons more than forecast a month ago. Sales are being buoyed by demand from North Africa and Iran.
To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@Bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- France's farmers will reap 22 percent more soft wheat and 25 percent more barley after planting more acres and as yields improve, the French National Crops Office said, reiterating forecasts from a month ago.
Soft-wheat production will rise to 37.4 million metric tons, ONIGC said in a report handed to journalists. France dedicated 4.2 percent more land to the crop, at 5 million hectares (12.4 million acres), and yields rose almost 16 percent, ONIGC said.
Hard-wheat output will rise 10 percent to 2.2 million tons, barley will advance to 12 million tons and corn will be little changed at 14.3 million tons, ONIGC said.
France aims to export about 8.5 million tons of soft wheat outside the European Union, about 500,000 tons more than forecast a month ago. Sales are being buoyed by demand from North Africa and Iran.
To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@Bloomberg.net.
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Coffee Falls to Lowest in 15 Months on Concern Demand May Slip
By Ron Day
Oct. 8 (Bloomberg) -- Coffee fell for a sixth straight session, touching the lowest price since July 2007, on speculation that demand will tumble as the global economy slows.
Inventories in warehouses monitored by ICE Futures U.S. are rising and exports from Brazil, the world's biggest producer, are increasing. The U.S. Federal Reserve, the European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of a spreading financial crisis that has clogged credit markets.
``Things are very well deteriorated,'' said Julio Sera, a trader at Hencorp Futures in Miami. ``If you look at certified stocks, they do nothing but go up, and exports from Brazil are going up.''
Arabica coffee futures for December delivery fell 2.45 cents, or 2.1 percent, to $1.1175 a pound at 9:24 a.m. on ICE in New York. Earlier, the price reached $1.0935, the lowest for a most-active contract since July 16, 2007.
Sera said the price may drop to $1 a pound in the short term.
To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.
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Oct. 8 (Bloomberg) -- Coffee fell for a sixth straight session, touching the lowest price since July 2007, on speculation that demand will tumble as the global economy slows.
Inventories in warehouses monitored by ICE Futures U.S. are rising and exports from Brazil, the world's biggest producer, are increasing. The U.S. Federal Reserve, the European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of a spreading financial crisis that has clogged credit markets.
``Things are very well deteriorated,'' said Julio Sera, a trader at Hencorp Futures in Miami. ``If you look at certified stocks, they do nothing but go up, and exports from Brazil are going up.''
Arabica coffee futures for December delivery fell 2.45 cents, or 2.1 percent, to $1.1175 a pound at 9:24 a.m. on ICE in New York. Earlier, the price reached $1.0935, the lowest for a most-active contract since July 16, 2007.
Sera said the price may drop to $1 a pound in the short term.
To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.
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Oil Falls, Giving Up Rebound That Followed Interest Rate Cuts
By Grant Smith
Oct. 8 (Bloomberg) -- Crude oil fell, giving up a rebound that followed coordinated interest rate cuts by central banks in the U.S., Europe and China intended to thaw credit markets.
The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point to shore up confidence and global growth. Prices gained as much as 93 cents immediately after the rate reductions were announced.
``We're entering a steep cyclical downturn across almost all commodities,'' said Helen Henton, head of commodity research at Standard Chartered Plc in London. ``The demand picture will look increasingly worrisome for the next six months regardless of what central banks do.''
Crude oil for November delivery fell $1.65, or 1.8 percent, to $88.41 a barrel on the New York Mercantile Exchange at 9:49 a.m. in New York. Before the rates cuts, crude fell as much as 4.5 percent, to $86.05, the lowest since Dec. 6, 2007.
Global stock markets traded lower after temporarily recouping losses following the rate cuts. Europe's Dow Jones Stoxx 600 Index was down 4.4 percent at 8:23 a.m. in New York. The Standard & Poor's 500 Index lost 1 percent.
``Forget even about $70 a barrel next year if there's a major recession,'' Leo Drollas, deputy executive director at the Center for Global Energy Studies, said today in an interview in Amsterdam. Oil ``will go slowly down further because the world economy is heading for the rocks.''
U.S. Fuel Supply
The U.S. Energy Department will probably say that U.S. fuel supplies rose last week, according to Bloomberg survey before the department's weekly report, scheduled for release at 10:35 a.m. in Washington.
Gasoline inventories probably gained 1.5 million barrels in the week ended Oct. 3 from 179.6 million barrels the week before. Consumption of the motor fuel dropped 9.5 percent from a year earlier to 8.625 million barrels a day last week, according to MasterCard Inc.
``Many commodities like platinum, agricultural commodities or gasoline have fallen below their production costs,'' said Jochen Hitzfeld, an analyst at UniCredit Markets & Investment Banking. ``Markets are overly pessimistic and prices will probably shoot up again in October.''
Brent crude oil for November settlement dropped as much as $3.66, or 4.3 percent, to $81 a barrel on London's ICE Futures Europe exchange and traded at $84.17 at 9:49 a.m. London time.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Oct. 8 (Bloomberg) -- Crude oil fell, giving up a rebound that followed coordinated interest rate cuts by central banks in the U.S., Europe and China intended to thaw credit markets.
The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point to shore up confidence and global growth. Prices gained as much as 93 cents immediately after the rate reductions were announced.
``We're entering a steep cyclical downturn across almost all commodities,'' said Helen Henton, head of commodity research at Standard Chartered Plc in London. ``The demand picture will look increasingly worrisome for the next six months regardless of what central banks do.''
Crude oil for November delivery fell $1.65, or 1.8 percent, to $88.41 a barrel on the New York Mercantile Exchange at 9:49 a.m. in New York. Before the rates cuts, crude fell as much as 4.5 percent, to $86.05, the lowest since Dec. 6, 2007.
Global stock markets traded lower after temporarily recouping losses following the rate cuts. Europe's Dow Jones Stoxx 600 Index was down 4.4 percent at 8:23 a.m. in New York. The Standard & Poor's 500 Index lost 1 percent.
``Forget even about $70 a barrel next year if there's a major recession,'' Leo Drollas, deputy executive director at the Center for Global Energy Studies, said today in an interview in Amsterdam. Oil ``will go slowly down further because the world economy is heading for the rocks.''
U.S. Fuel Supply
The U.S. Energy Department will probably say that U.S. fuel supplies rose last week, according to Bloomberg survey before the department's weekly report, scheduled for release at 10:35 a.m. in Washington.
Gasoline inventories probably gained 1.5 million barrels in the week ended Oct. 3 from 179.6 million barrels the week before. Consumption of the motor fuel dropped 9.5 percent from a year earlier to 8.625 million barrels a day last week, according to MasterCard Inc.
``Many commodities like platinum, agricultural commodities or gasoline have fallen below their production costs,'' said Jochen Hitzfeld, an analyst at UniCredit Markets & Investment Banking. ``Markets are overly pessimistic and prices will probably shoot up again in October.''
Brent crude oil for November settlement dropped as much as $3.66, or 4.3 percent, to $81 a barrel on London's ICE Futures Europe exchange and traded at $84.17 at 9:49 a.m. London time.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Gold Futures Surge Above $900, Silver Rises on Demand for Haven
By Pham-Duy Nguyen
Oct. 8 (Bloomberg) -- Gold surged above $900 an ounce on speculation that moves by central banks to ease the global credit crunch won't revive financial markets, boosting demand for the precious metal as a haven. Silver also gained.
The Federal Reserve, the European Central Bank and four other central banks lowered benchmark lending rates in the face of the worst financial crisis since the Great Depression. Equities in Asia and Europe fell, and U.S. stock-index futures still headed lower. Gold is up 9.5 percent this week.
``The rate cuts are not enough to restore confidence,'' said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. ``All they did was put another Band-Aid on. You still have systemic fear. People who were afraid of the banking system are still massively scared. Gold is a storehouse of value when all the world's assets have declined.''
Gold futures for December delivery rose $30.20, or 3.4 percent, to $912.20 an ounce at 9:36 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the metal reached $924.90. The price rallied to a record $1,033.90 in March after the Fed slashed borrowing costs over seven months.
Silver futures for December delivery jumped 48 cents, or 4.2 percent, to $11.86 an ounce. Before today, the price dropped 24 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Gold surged above $900 an ounce on speculation that moves by central banks to ease the global credit crunch won't revive financial markets, boosting demand for the precious metal as a haven. Silver also gained.
The Federal Reserve, the European Central Bank and four other central banks lowered benchmark lending rates in the face of the worst financial crisis since the Great Depression. Equities in Asia and Europe fell, and U.S. stock-index futures still headed lower. Gold is up 9.5 percent this week.
``The rate cuts are not enough to restore confidence,'' said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. ``All they did was put another Band-Aid on. You still have systemic fear. People who were afraid of the banking system are still massively scared. Gold is a storehouse of value when all the world's assets have declined.''
Gold futures for December delivery rose $30.20, or 3.4 percent, to $912.20 an ounce at 9:36 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the metal reached $924.90. The price rallied to a record $1,033.90 in March after the Fed slashed borrowing costs over seven months.
Silver futures for December delivery jumped 48 cents, or 4.2 percent, to $11.86 an ounce. Before today, the price dropped 24 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Russia Halts Shares as Medvedev Funding Plan Fails to Stem Rout
By Torrey Clark and William Mauldin
Oct. 8 (Bloomberg) -- Russian authorities closed the Micex Stock Exchange for two days as a new $36 billion injection into the banking system by President Dmitry Medvedev failed to halt the country's biggest stock collapse since 1998.
The Micex Index plunged for a sixth day, falling 14 percent to 637.87, the lowest level in more than three years, before trading was halted at 11:05 a.m. in Moscow. The bourse won't open until Oct. 10 unless regulators say otherwise, Micex Chief Executive Officer Alexei Rybnikov said in an interview. The dollar-denominated RTS exchange was shut indefinitely.
The 30-stock Micex Index has lost more than half its value since August, when the five-day war between Russia and Georgia and falling commodity prices caused investors to withdraw about $60 billion, according to BNP Paribas SA data. Russia's government, facing its biggest test since the debt default and ruble devaluation a decade ago, has responded by pledging at least $186 billion in emergency support.
``This time, the government has got plenty of money and the problem is a global one,'' Mark Mobius, executive chairman of Templeton Asset Management Ltd., which manages about $30 billion in emerging market stocks, said in a phone interview today. ``I'm surprised the Russian government is not taking equity stakes in exchange for all this cash they're doling out. In that sense, Russia is acting more capitalistically than the U.S. in all of this.''
Mobius said yesterday he's using the market declines to add to Russian holdings.
Micex
The Russian market at first appeared to be largely immune from the effects of the credit crisis, and the Micex fell only 7.2 percent in the first half of the year, compared with a 12 percent drop for the MSCI World Index. The ruble strengthened to 24.07 to the dollar on July 14, days after crude prices peaked.
Since June 30, the Micex dropped 64 percent, while the ruble weakened to 26.10 to the dollar as crude prices fell, Prime Minister Vladimir Putin attacked coal and steel producer OAO Mechel, Russia sent troops and warplanes into Georgia and quickening inflation contributed to slowing economic growth.
The FTSE Russia IOB Index, a measure of Russian global depositary receipts trading in London, fell 3.1 percent at 10:38 a.m. in London.
Energy companies led the decline today before shares were suspended, with OAO Gazprom, the world's biggest natural-gas producer, falling 17 percent to 116.90 rubles. OAO Rosneft, the biggest oil producer, slid 14 percent to 91.29 rubles, while smaller rival OAO Lukoil dropped 16 percent to 940 rubles.
`Similar to 1998'
``The situation is similar to 1998, but back then companies used their own resources to pull themselves up,'' said Anton Struchenevsky, an economist at Troika Dialog in Moscow. The real sector of the economy is much more dependent on the credit markets now, ``so the restoration of the financial industry will go hand in hand with the real sector,'' he said.
When Putin took over as president on Dec. 31, 1999, he inherited a government that had defaulted on $40 billion of debt and devalued the ruble in August 1998, wiping out millions of people's savings and pushing Russia to the edge of bankruptcy.
Since then, the economy has grown almost 7 percent a year on average, fueled by high oil prices. Now, the prospects for Russia are clouding as crude prices fall on concern of a global economic slowdown. Oil futures have declined 40 percent from the record $147.27 reached July 11. Russia depends on oil and gas for more than two-thirds of its export earnings.
The cost of protecting Russian government debt against default jumped 52 basis points to 352, the highest in at least four years, according to CMA Datavision's credit-default swap prices.
``Most of the Russian blue chips are extremely undervalued,'' Rybnikov said on Bloomberg Television. ``The market will certainly find its bottom at some point.''
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Russian authorities closed the Micex Stock Exchange for two days as a new $36 billion injection into the banking system by President Dmitry Medvedev failed to halt the country's biggest stock collapse since 1998.
The Micex Index plunged for a sixth day, falling 14 percent to 637.87, the lowest level in more than three years, before trading was halted at 11:05 a.m. in Moscow. The bourse won't open until Oct. 10 unless regulators say otherwise, Micex Chief Executive Officer Alexei Rybnikov said in an interview. The dollar-denominated RTS exchange was shut indefinitely.
The 30-stock Micex Index has lost more than half its value since August, when the five-day war between Russia and Georgia and falling commodity prices caused investors to withdraw about $60 billion, according to BNP Paribas SA data. Russia's government, facing its biggest test since the debt default and ruble devaluation a decade ago, has responded by pledging at least $186 billion in emergency support.
``This time, the government has got plenty of money and the problem is a global one,'' Mark Mobius, executive chairman of Templeton Asset Management Ltd., which manages about $30 billion in emerging market stocks, said in a phone interview today. ``I'm surprised the Russian government is not taking equity stakes in exchange for all this cash they're doling out. In that sense, Russia is acting more capitalistically than the U.S. in all of this.''
Mobius said yesterday he's using the market declines to add to Russian holdings.
Micex
The Russian market at first appeared to be largely immune from the effects of the credit crisis, and the Micex fell only 7.2 percent in the first half of the year, compared with a 12 percent drop for the MSCI World Index. The ruble strengthened to 24.07 to the dollar on July 14, days after crude prices peaked.
Since June 30, the Micex dropped 64 percent, while the ruble weakened to 26.10 to the dollar as crude prices fell, Prime Minister Vladimir Putin attacked coal and steel producer OAO Mechel, Russia sent troops and warplanes into Georgia and quickening inflation contributed to slowing economic growth.
The FTSE Russia IOB Index, a measure of Russian global depositary receipts trading in London, fell 3.1 percent at 10:38 a.m. in London.
Energy companies led the decline today before shares were suspended, with OAO Gazprom, the world's biggest natural-gas producer, falling 17 percent to 116.90 rubles. OAO Rosneft, the biggest oil producer, slid 14 percent to 91.29 rubles, while smaller rival OAO Lukoil dropped 16 percent to 940 rubles.
`Similar to 1998'
``The situation is similar to 1998, but back then companies used their own resources to pull themselves up,'' said Anton Struchenevsky, an economist at Troika Dialog in Moscow. The real sector of the economy is much more dependent on the credit markets now, ``so the restoration of the financial industry will go hand in hand with the real sector,'' he said.
When Putin took over as president on Dec. 31, 1999, he inherited a government that had defaulted on $40 billion of debt and devalued the ruble in August 1998, wiping out millions of people's savings and pushing Russia to the edge of bankruptcy.
Since then, the economy has grown almost 7 percent a year on average, fueled by high oil prices. Now, the prospects for Russia are clouding as crude prices fall on concern of a global economic slowdown. Oil futures have declined 40 percent from the record $147.27 reached July 11. Russia depends on oil and gas for more than two-thirds of its export earnings.
The cost of protecting Russian government debt against default jumped 52 basis points to 352, the highest in at least four years, according to CMA Datavision's credit-default swap prices.
``Most of the Russian blue chips are extremely undervalued,'' Rybnikov said on Bloomberg Television. ``The market will certainly find its bottom at some point.''
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
Read more...
Indonesia Halts Stock Trading After 10 Percent Plunge
By Berni Moestafa
Enlarge Image/Details
Oct. 8 (Bloomberg) -- Indonesia's stock exchange halted share-market trading for the first time in eight years after the benchmark index plunged 10 percent, the biggest decline since the 1998 Asian financial crisis.
Trading was suspended indefinitely, the exchange said in an e-mailed statement. The Jakarta Composite Index plummeted the most in Asia, where credit market turmoil drove the MSCI Asia Pacific Index to its biggest loss since 1990. Almost a quarter of Indonesian shares fell at least 10 percent as lending costs rose to near a two-year high.
Bonds and the rupiah declined, while the cost to protect government debt from default rose to the highest level since at least 2004. The benchmark stock index is down 21 percent this week, the worst weekly drop since at least April 1983, data compiled by Bloomberg showed. It has fallen 47 percent this year.
``It's justified for us to suspend'' trading if the index falls more than 20 percent in just three days, Ahmad Fuad Rahmany, chairman of the Capital Market and Financial Institutions Supervisory Agency said in a mobile-phone text message. ``Under an irrational market situation, we can't let the market mechanism govern stock prices in a disorderly manner.''
Exchange officials will meet market participants today to decide whether to extend the suspension tomorrow, said Erry Firmansyah, president director of the bourse. The exchange is ``looking into'' the cause of the market slump, he said.
Indonesia is battling rising inflation at a time when the global credit crisis may slow exports. The country's central bank raised its key interest rate yesterday by a quarter-basis point to 9.5 percent after inflation accelerated to 12.1 percent.
Global Uncertainty
``People are panicking,'' said Suherman Santikno, head of research at Jakarta-based PT Batavia Prosperindo Sekuritas, which manages about $573 million in assets. ``With uncertainty in the global economy, it's best to hold cash.''
Indonesian authorities last halted trading of the country's shares in September 2000, when a bomb exploded in the exchange building's car park, killing 15 people.
PT Astra International, Indonesia's largest auto retailer, tumbled 20 percent to 12,800 rupiah and PT Indosat, the nation's second-biggest telephone company, fell 23 percent to 3,950 rupiah. PT Adaro Energy, Indonesia's second-largest coal producer, plunged 19 percent to 810 rupiah.
The rupiah dropped 1 percent to 9,658 per dollar at 5:26 p.m. local time, paring a decline of 2 percent on speculation the central bank sold dollars.
``They sold dollars at 9,700,'' said Joanna Tan, an economist at Forecast Singapore Pte.
Bonds Drop
Ten-year government bonds tumbled, the biggest fluctuation of any government debt market today. The yield on the 9 percent note due September 2018 rose to 14.56 percent, compared with 12.95 percent yesterday, according to closing prices at the Inter Dealer Market Association. The price fell 7.0000, or 70,000 rupiah per 1 million rupiah face amount, to 71.250. A basis point is 0.01 percentage points.
Stocks also fell after commodity prices continued to slump as investors exit leveraged bets and slowing growth cuts demand for raw materials.
PT Astra Agro Lestari, Indonesia's biggest publicly listed plantation company, retreated 15 percent to 8,400 rupiah and PT International Nickel Indonesia, the nation's largest producer of the metal, slid 13 percent to 2,250 rupiah.
The value of the 19 commodities in the Reuters-Jefferies CRB Index dropped 43 percent from its July 3 peak through Oct. 6, data compiled by Bloomberg show. Crude oil slid to its lowest since Feb. 7 today, while palm oil lost 57 percent from its March 3 record and nickel fell 60 percent from its May 2007 record.
`Speculative Money'
``Too much of the Indonesian market is tied to commodities,'' said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which has the equivalent of $1.2 billion in equity assets. ``Also, the currency is very weak, suggesting that a lot of speculative money is pulling out of the market.''
Credit-default swap contracts on Indonesia jumped 80 basis points to 560 at 2 p.m. in Singapore, Barclays Capital prices show. The default swaps rose to 522.5 basis points on Oct. 6, the highest in more than four years, according to CMA Datavision, whose prices go back to 2004.
The three-month rate at which Indonesian banks charge each other for loans rose a fifth of a percentage point today to 11.17 percent, near the highest since October 2006.
To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net
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Enlarge Image/Details
Oct. 8 (Bloomberg) -- Indonesia's stock exchange halted share-market trading for the first time in eight years after the benchmark index plunged 10 percent, the biggest decline since the 1998 Asian financial crisis.
Trading was suspended indefinitely, the exchange said in an e-mailed statement. The Jakarta Composite Index plummeted the most in Asia, where credit market turmoil drove the MSCI Asia Pacific Index to its biggest loss since 1990. Almost a quarter of Indonesian shares fell at least 10 percent as lending costs rose to near a two-year high.
Bonds and the rupiah declined, while the cost to protect government debt from default rose to the highest level since at least 2004. The benchmark stock index is down 21 percent this week, the worst weekly drop since at least April 1983, data compiled by Bloomberg showed. It has fallen 47 percent this year.
``It's justified for us to suspend'' trading if the index falls more than 20 percent in just three days, Ahmad Fuad Rahmany, chairman of the Capital Market and Financial Institutions Supervisory Agency said in a mobile-phone text message. ``Under an irrational market situation, we can't let the market mechanism govern stock prices in a disorderly manner.''
Exchange officials will meet market participants today to decide whether to extend the suspension tomorrow, said Erry Firmansyah, president director of the bourse. The exchange is ``looking into'' the cause of the market slump, he said.
Indonesia is battling rising inflation at a time when the global credit crisis may slow exports. The country's central bank raised its key interest rate yesterday by a quarter-basis point to 9.5 percent after inflation accelerated to 12.1 percent.
Global Uncertainty
``People are panicking,'' said Suherman Santikno, head of research at Jakarta-based PT Batavia Prosperindo Sekuritas, which manages about $573 million in assets. ``With uncertainty in the global economy, it's best to hold cash.''
Indonesian authorities last halted trading of the country's shares in September 2000, when a bomb exploded in the exchange building's car park, killing 15 people.
PT Astra International, Indonesia's largest auto retailer, tumbled 20 percent to 12,800 rupiah and PT Indosat, the nation's second-biggest telephone company, fell 23 percent to 3,950 rupiah. PT Adaro Energy, Indonesia's second-largest coal producer, plunged 19 percent to 810 rupiah.
The rupiah dropped 1 percent to 9,658 per dollar at 5:26 p.m. local time, paring a decline of 2 percent on speculation the central bank sold dollars.
``They sold dollars at 9,700,'' said Joanna Tan, an economist at Forecast Singapore Pte.
Bonds Drop
Ten-year government bonds tumbled, the biggest fluctuation of any government debt market today. The yield on the 9 percent note due September 2018 rose to 14.56 percent, compared with 12.95 percent yesterday, according to closing prices at the Inter Dealer Market Association. The price fell 7.0000, or 70,000 rupiah per 1 million rupiah face amount, to 71.250. A basis point is 0.01 percentage points.
Stocks also fell after commodity prices continued to slump as investors exit leveraged bets and slowing growth cuts demand for raw materials.
PT Astra Agro Lestari, Indonesia's biggest publicly listed plantation company, retreated 15 percent to 8,400 rupiah and PT International Nickel Indonesia, the nation's largest producer of the metal, slid 13 percent to 2,250 rupiah.
The value of the 19 commodities in the Reuters-Jefferies CRB Index dropped 43 percent from its July 3 peak through Oct. 6, data compiled by Bloomberg show. Crude oil slid to its lowest since Feb. 7 today, while palm oil lost 57 percent from its March 3 record and nickel fell 60 percent from its May 2007 record.
`Speculative Money'
``Too much of the Indonesian market is tied to commodities,'' said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which has the equivalent of $1.2 billion in equity assets. ``Also, the currency is very weak, suggesting that a lot of speculative money is pulling out of the market.''
Credit-default swap contracts on Indonesia jumped 80 basis points to 560 at 2 p.m. in Singapore, Barclays Capital prices show. The default swaps rose to 522.5 basis points on Oct. 6, the highest in more than four years, according to CMA Datavision, whose prices go back to 2004.
The three-month rate at which Indonesian banks charge each other for loans rose a fifth of a percentage point today to 11.17 percent, near the highest since October 2006.
To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net
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Faber Says Rate Cuts Will Fail to Stem Equities Rout
By Ian C. Sayson
Oct. 8 (Bloomberg) -- Investor Marc Faber said a series of coordinated interest-rate cuts by central banks including the Federal Reserve to ease the economic effects of the global financial crisis won't halt a worldwide slide in equities.
``Artificially low interest rates'' that encouraged consumers and banks to take on more debt were the main cause of the credit-market turmoil that caused the failure of Bear Stearns Cos. and Lehman Brothers Holdings Inc., according to Faber, who predicted the 1987 stock-market crash.
``The slashing of interest rates will not help very much,'' Faber, who manages $300 million, said in an interview in Manila. `They may cushion somewhat the decline but make matters worse.''
The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point in a bid to unfreeze global credit markets. The deepening credit crisis caused a worldwide sell-off in stocks that has dragged the MSCI World Index down by 35 percent this year.
The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point.
Today's decision follows a global meltdown that sent U.S. stock indexes heading for their biggest annual decline since 1937. Japan's benchmark today had the worst drop in two decades. Policy makers are aiming to unfreeze credit markets after the premium on the three-month London interbank offered rate over the Fed's main rate doubled in two weeks to a record.
Speculative Investments
Policy makers are reducing rates as economies weaken around the world. The International Monetary Fund said the global economy is heading for a recession in 2009 and increased its estimate of losses from the financial crisis to $1.4 trillion.
The Fed cut its key rate to 1.5 percent, a level last seen in September 2004. Low interest rates on deposits have pushed consumers to speculate on higher yields in other assets including stocks, real estate and commodities, Faber said.
``Had central banks around the world kept interest rates that encourage saving we won't have these problems today,'' the investor said.
Faber, publisher of the Gloom, Boom & Doom report, told investors to sell U.S. stocks a week before 1987's so-called Black Monday crash, according to his Web site, and recommended buying gold at the start of its six-year rally.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- Investor Marc Faber said a series of coordinated interest-rate cuts by central banks including the Federal Reserve to ease the economic effects of the global financial crisis won't halt a worldwide slide in equities.
``Artificially low interest rates'' that encouraged consumers and banks to take on more debt were the main cause of the credit-market turmoil that caused the failure of Bear Stearns Cos. and Lehman Brothers Holdings Inc., according to Faber, who predicted the 1987 stock-market crash.
``The slashing of interest rates will not help very much,'' Faber, who manages $300 million, said in an interview in Manila. `They may cushion somewhat the decline but make matters worse.''
The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point in a bid to unfreeze global credit markets. The deepening credit crisis caused a worldwide sell-off in stocks that has dragged the MSCI World Index down by 35 percent this year.
The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point.
Today's decision follows a global meltdown that sent U.S. stock indexes heading for their biggest annual decline since 1937. Japan's benchmark today had the worst drop in two decades. Policy makers are aiming to unfreeze credit markets after the premium on the three-month London interbank offered rate over the Fed's main rate doubled in two weeks to a record.
Speculative Investments
Policy makers are reducing rates as economies weaken around the world. The International Monetary Fund said the global economy is heading for a recession in 2009 and increased its estimate of losses from the financial crisis to $1.4 trillion.
The Fed cut its key rate to 1.5 percent, a level last seen in September 2004. Low interest rates on deposits have pushed consumers to speculate on higher yields in other assets including stocks, real estate and commodities, Faber said.
``Had central banks around the world kept interest rates that encourage saving we won't have these problems today,'' the investor said.
Faber, publisher of the Gloom, Boom & Doom report, told investors to sell U.S. stocks a week before 1987's so-called Black Monday crash, according to his Web site, and recommended buying gold at the start of its six-year rally.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
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U.K. Stocks Drop, Economic Woes Overshadow Global Rate Cuts
By Sarah Thompson
Oct. 8 (Bloomberg) -- U.K. stocks slid as emergency interest rate cuts by global central banks failed to allay fears of a world-wide recession. HSBC Holdings Plc, Europe's biggest bank, dropped 3.7 percent.
BP Plc and BHP Billiton Ltd. fell as oil and metals prices declined.
The benchmark FTSE 100 index lost 198.83, or 4.3 percent, to 4,406.39 at 2:20 p.m. in London. The U.K. index has swung between losses and gains at least a dozen times. The FTSE All-Share Index retreated 3.9 percent. Ireland's ISEQ Index fell 5.9 percent.
The Bank of England, Federal Reserve, European Central Bank, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point.
The Fed's Open Market Committee, which voted unanimously for the move, said in its statement that ``incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending.''
``The bounce straight after this announcement was short- lived,'' said Jesper Kruger, a money manager in Copenhagen at ATP, which has about $64 billion. ``The underlying economic picture remains very worrying. There's a long, painful road to recovery ahead of us.''
HSBC slid 3.7 percent to 868 pence. Efforts by governments around the world to restore confidence in the banking system have failed to unlock credit markets and stem share declines that sent the MSCI World to the lowest level since August 2004 earlier today. The cost of borrowing in dollars overnight in London soared for a third day and European money-market rates climbed to records before the central banks' announcement.
Oil Falls
BP, Europe's second-biggest oil company, dropped 3.8 percent to 430.5. BHP, the world's largest mining company, fell 9.4 percent to 985.
Crude oil for November delivery traded at $88.24 a barrel, $1.82 lower, on the New York Mercantile Exchange at 8:57 a.m. in New York. Before the rates cuts, crude fell as much as 4.5 percent, to $86.05, the lowest since Dec. 6, 2007.
Copper for delivery in three months slumped as much as 7.2 percent to $5,227 a metric ton at 2:16 p.m. in London. Platinum, nickel, lead, zinc and aluminum prices also fell.
Shares of J Sainsbury Plc, the third-largest U.K. food retailer, were put on sale for 250 pence each by Kaupthing Bank Hf, three people involved in the transaction said.
Sainsbury fell as much as 18 percent in London trading, wiping almost 1 billion pounds ($1.7 billion) off its market value. The stake consists of about 168 million shares, according to the people, who didn't want to be identified because the sale has yet to close. The stock traded down 6.2 percent at 292.25 pence at 2:24 p.m.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- U.K. stocks slid as emergency interest rate cuts by global central banks failed to allay fears of a world-wide recession. HSBC Holdings Plc, Europe's biggest bank, dropped 3.7 percent.
BP Plc and BHP Billiton Ltd. fell as oil and metals prices declined.
The benchmark FTSE 100 index lost 198.83, or 4.3 percent, to 4,406.39 at 2:20 p.m. in London. The U.K. index has swung between losses and gains at least a dozen times. The FTSE All-Share Index retreated 3.9 percent. Ireland's ISEQ Index fell 5.9 percent.
The Bank of England, Federal Reserve, European Central Bank, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point.
The Fed's Open Market Committee, which voted unanimously for the move, said in its statement that ``incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending.''
``The bounce straight after this announcement was short- lived,'' said Jesper Kruger, a money manager in Copenhagen at ATP, which has about $64 billion. ``The underlying economic picture remains very worrying. There's a long, painful road to recovery ahead of us.''
HSBC slid 3.7 percent to 868 pence. Efforts by governments around the world to restore confidence in the banking system have failed to unlock credit markets and stem share declines that sent the MSCI World to the lowest level since August 2004 earlier today. The cost of borrowing in dollars overnight in London soared for a third day and European money-market rates climbed to records before the central banks' announcement.
Oil Falls
BP, Europe's second-biggest oil company, dropped 3.8 percent to 430.5. BHP, the world's largest mining company, fell 9.4 percent to 985.
Crude oil for November delivery traded at $88.24 a barrel, $1.82 lower, on the New York Mercantile Exchange at 8:57 a.m. in New York. Before the rates cuts, crude fell as much as 4.5 percent, to $86.05, the lowest since Dec. 6, 2007.
Copper for delivery in three months slumped as much as 7.2 percent to $5,227 a metric ton at 2:16 p.m. in London. Platinum, nickel, lead, zinc and aluminum prices also fell.
Shares of J Sainsbury Plc, the third-largest U.K. food retailer, were put on sale for 250 pence each by Kaupthing Bank Hf, three people involved in the transaction said.
Sainsbury fell as much as 18 percent in London trading, wiping almost 1 billion pounds ($1.7 billion) off its market value. The stake consists of about 168 million shares, according to the people, who didn't want to be identified because the sale has yet to close. The stock traded down 6.2 percent at 292.25 pence at 2:24 p.m.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Read more...
German Stocks Drop; Siemens, BMW Decline on Economic Concern
By Alexis Xydias
Oct. 8 (Bloomberg) -- German stocks fell for a third day as concerted action from central banks worldwide to stem the effects of the credit crisis failed to ease concern the broader economy will falter.
Siemens AG, Europe's largest engineering company, and Bayerische Motoren Werke AG, the world's largest maker of luxury cars, led losses among companies sensitive to economic growth.
The benchmark DAX Index slid 2.2 percent to 5,212.36 at 2:33 p.m. in Frankfurt, after earlier slumping as much as 8.6 percent below the 5,000 mark for the first time in three years. Stocks pared losses after the Federal Reserve, European Central Bank and four other central banks cut interest rates. The HDAX Index of the country's 110 biggest companies fell 2.6 percent.
``The cuts are very good news and will help in the longer term, but right now we don't have ears for good news,'' said Sergi Martin, who oversees $9 billion as chief executive officer at Credit Andorra's Credit Invest asset management unit in Andorra La Vella, Andorra. ``There is a lot of panic and the type of problems we face are not solved in one day or by one action. It's too soon to be positive on the market.''
The DAX has slumped 36 percent this year as a financial crisis sparked by U.S. subprime-mortgage defaults damaged the solvency of banks, blocking money markets and pushing the global economy toward a recession.
BMW, Continental
Siemens fell 2.2 percent to 53.33 euros. The stock was downgraded to ``sell'' from ``hold'' at ING Groep NV, which said the company may trail current earnings estimates and disappoint on cost-savings targets.
BMW slid 1.8 percent to 24.11 euros. The company said car deliveries slumped 15 percent last month as the credit crunch discouraged consumers from making large purchases.
Shares of Continental AG that were tendered in Schaeffler Group's takeover offer gained 9.3 percent to 59 euros after the family owned ball-bearing maker said it plans to file for European Union antitrust approval next week. Non-tendered shares in Continental, Europe's second-biggest car-parts maker, declined 6.5 percent to 43.50 euros.
The following stocks also rose or fell in the German market. Stock symbols are in parentheses:
Deutsche Bank AG (DBK GY) fell 1.77 euros, or 4.1 percent, to 41.81 euros. Germany's biggest bank said the outlook for the banking industry ``remains difficult'' as market turmoil continues.
Freenet AG (FNT GY), the German mobile-phone and Internet operator that agreed to buy competitor Debitel AG, slid 6.8 percent to 4.96 euros. Goldman Sachs Group Inc. cut its share- price estimate for the company 27 percent to 13.20 euros.
Q-Cells AG (QCE GY), the world's largest solar-cell maker, dropped 4.2 percent to 38.35 euros. Nordex AG (NDX1 GY), a German windmill maker, slid 6.5 percent to 13.70 euros.
German renewable energy stocks fell on concern the companies will have to cut prices to attract clients as the global credit crisis reduces funding for solar parks and wind farms. Piper Jaffray & Co. analyst Torben Sommer cut his recommendation on Q- Cells to ``neutral'' from ``buy,'' citing negative effects of the credit-market turmoil.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- German stocks fell for a third day as concerted action from central banks worldwide to stem the effects of the credit crisis failed to ease concern the broader economy will falter.
Siemens AG, Europe's largest engineering company, and Bayerische Motoren Werke AG, the world's largest maker of luxury cars, led losses among companies sensitive to economic growth.
The benchmark DAX Index slid 2.2 percent to 5,212.36 at 2:33 p.m. in Frankfurt, after earlier slumping as much as 8.6 percent below the 5,000 mark for the first time in three years. Stocks pared losses after the Federal Reserve, European Central Bank and four other central banks cut interest rates. The HDAX Index of the country's 110 biggest companies fell 2.6 percent.
``The cuts are very good news and will help in the longer term, but right now we don't have ears for good news,'' said Sergi Martin, who oversees $9 billion as chief executive officer at Credit Andorra's Credit Invest asset management unit in Andorra La Vella, Andorra. ``There is a lot of panic and the type of problems we face are not solved in one day or by one action. It's too soon to be positive on the market.''
The DAX has slumped 36 percent this year as a financial crisis sparked by U.S. subprime-mortgage defaults damaged the solvency of banks, blocking money markets and pushing the global economy toward a recession.
BMW, Continental
Siemens fell 2.2 percent to 53.33 euros. The stock was downgraded to ``sell'' from ``hold'' at ING Groep NV, which said the company may trail current earnings estimates and disappoint on cost-savings targets.
BMW slid 1.8 percent to 24.11 euros. The company said car deliveries slumped 15 percent last month as the credit crunch discouraged consumers from making large purchases.
Shares of Continental AG that were tendered in Schaeffler Group's takeover offer gained 9.3 percent to 59 euros after the family owned ball-bearing maker said it plans to file for European Union antitrust approval next week. Non-tendered shares in Continental, Europe's second-biggest car-parts maker, declined 6.5 percent to 43.50 euros.
The following stocks also rose or fell in the German market. Stock symbols are in parentheses:
Deutsche Bank AG (DBK GY) fell 1.77 euros, or 4.1 percent, to 41.81 euros. Germany's biggest bank said the outlook for the banking industry ``remains difficult'' as market turmoil continues.
Freenet AG (FNT GY), the German mobile-phone and Internet operator that agreed to buy competitor Debitel AG, slid 6.8 percent to 4.96 euros. Goldman Sachs Group Inc. cut its share- price estimate for the company 27 percent to 13.20 euros.
Q-Cells AG (QCE GY), the world's largest solar-cell maker, dropped 4.2 percent to 38.35 euros. Nordex AG (NDX1 GY), a German windmill maker, slid 6.5 percent to 13.70 euros.
German renewable energy stocks fell on concern the companies will have to cut prices to attract clients as the global credit crisis reduces funding for solar parks and wind farms. Piper Jaffray & Co. analyst Torben Sommer cut his recommendation on Q- Cells to ``neutral'' from ``buy,'' citing negative effects of the credit-market turmoil.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
Read more...
Toronto-Dominion Bank May Decline; Barrick Gold May Rise
By John Kipphoff
Oct. 8 (Bloomberg) -- Toronto-Dominion Bank may fall, based on bids on the Toronto Stock Exchange, after interest-rate cuts from North American and European central banks failed to allay investor concern that a recession is coming.
European stocks indexes and U.S. stock futures dropped even after the U.S. Federal Reserve, the Bank of Canada and the European Central Bank among others announced a coordinated half percentage-point cut in borrowing costs aimed at unlocking frozen global credit markets. British banks including Royal Bank of Scotland Group Plc will get a 50 billion-pound ($87 billion) government lifeline and emergency loans from the Bank of England.
Barrick Gold Corp. may rise, pacing an advance among bullion miners, after prices of the precious metal advanced for a third day as financial turmoil spurred investors to seek a haven. Overall, commodities fell today, dragged down by lower prices for copper and crude oil.
The Standard & Poor's/TSX Composite Index fell 3.9 percent to 9,829.55 yesterday in Toronto, the lowest since June 2005. Canada's main equity benchmark has fallen 35 percent from its June 18 record after the contraction in global credit caused by U.S. and European bank failures dragged down commodity prices and the raw-material and energy shares that make up more than two-fifths of the S&P/TSX value.
Toronto-Dominion, Canada's second-largest lender by assets, may fall C$1.04 to C$54.98, bids already submitted in Toronto indicated. Royal Bank of Canada, the biggest, may decline 63 cents to C$44.50. Manulife Financial Corp. Canada's biggest insurer, may drop 67 cents, bids showed.
Gold for immediate delivery rose as much as 3.3 percent to $916.15 an ounce in London. Barrick Gold may gain C$1.30 to C$34.97, based on bids. Goldcorp Inc. may rise 84 cents to C$29.67.
U.S. stock-index futures sank after retailers reported September sales that disappointed investors, overshadowing the unprecedented series of interest-rate cuts by central banks.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- Toronto-Dominion Bank may fall, based on bids on the Toronto Stock Exchange, after interest-rate cuts from North American and European central banks failed to allay investor concern that a recession is coming.
European stocks indexes and U.S. stock futures dropped even after the U.S. Federal Reserve, the Bank of Canada and the European Central Bank among others announced a coordinated half percentage-point cut in borrowing costs aimed at unlocking frozen global credit markets. British banks including Royal Bank of Scotland Group Plc will get a 50 billion-pound ($87 billion) government lifeline and emergency loans from the Bank of England.
Barrick Gold Corp. may rise, pacing an advance among bullion miners, after prices of the precious metal advanced for a third day as financial turmoil spurred investors to seek a haven. Overall, commodities fell today, dragged down by lower prices for copper and crude oil.
The Standard & Poor's/TSX Composite Index fell 3.9 percent to 9,829.55 yesterday in Toronto, the lowest since June 2005. Canada's main equity benchmark has fallen 35 percent from its June 18 record after the contraction in global credit caused by U.S. and European bank failures dragged down commodity prices and the raw-material and energy shares that make up more than two-fifths of the S&P/TSX value.
Toronto-Dominion, Canada's second-largest lender by assets, may fall C$1.04 to C$54.98, bids already submitted in Toronto indicated. Royal Bank of Canada, the biggest, may decline 63 cents to C$44.50. Manulife Financial Corp. Canada's biggest insurer, may drop 67 cents, bids showed.
Gold for immediate delivery rose as much as 3.3 percent to $916.15 an ounce in London. Barrick Gold may gain C$1.30 to C$34.97, based on bids. Goldcorp Inc. may rise 84 cents to C$29.67.
U.S. stock-index futures sank after retailers reported September sales that disappointed investors, overshadowing the unprecedented series of interest-rate cuts by central banks.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
Read more...
U.S. Stocks Rise on Rate Cuts; Bank of New York, Intel Gain
By Lynn Thomasson
Oct. 8 (Bloomberg) -- U.S. stocks rose for the first time in six days as a coordinated cut in interest rates by six central banks bolstered expectations the economy will recover from the worst financial crisis since the Great Depression.
Bank of New York Mellon Corp., Occidental Petroleum Corp. and Intel Corp. climbed more than 3 percent after the Federal Reserve joined its European counterparts in lowering benchmark rates by half a percentage point.
The Standard & Poor's 500 Index added 20.64 points, or 2.1 percent, to 1,016.87 at 9:52 a.m. in New York. The Dow Jones Industrial Average added 162.32, or 1.7 percent, to 9,609.43. The Nasdaq Composite Index increased 29.57, or 1.7 percent, to 1,784.45. Eleven stocks rose for every 10 that fell on the New York Stock Exchange.
The S&P 500 snapped its longest losing streak since January. The gauge's 15 percent slide from Sept. 30 through yesterday was its third-steepest five-day losing streak on record, according to Bespoke Investment Group LLC, a Harrison, New York-based research firm. The bigger declines from five straight losses occurred in 1932.
Rate Cuts
The Fed, European Central Bank and four other central banks lowered interest rates in an unprecedented, emergency coordinated bid to ease the economic effects of the financial crisis. The Fed cut its benchmark rate by a half point to 1.5 percent and said the ECB and central banks of the U.K., Canada, Sweden and Switzerland are also reducing borrowing costs.
Bank of America Corp. dropped $1.93 to $21.84. The bank that's buying Merrill Lynch & Co. sold 455 million shares for $22 each, 8 percent less than yesterday's closing price of $23.77. The shares fell 26 percent in New York Stock Exchange composite trading Oct. 7, the biggest drop in at least 28 years, after the bank slashed its dividend in half.
The world's major banks may need $675 billion in fresh capital over the next several years to recover from a credit crisis that shows few signs of abating, the International Monetary Fund said yesterday.
Today is the last day of a U.S. Securities and Exchange Commission rule banning short sales in more than 980 financial companies. Since it was announced Sept. 18, companies covered by the rule are down an average of 16 percent, according to data compiled by Bloomberg.
Earnings at S&P 500 companies probably dropped on average of 5.6 percent in the third quarter, according to analysts' estimates compiled by Bloomberg.
Financial companies are forecast to lead the decline in profits with a 64 percent decrease, followed by an 11 percent slide in earnings at retailers, hoteliers, restaurant chains and other so-called consumer discretionary companies.
At the open of exchanges today, the S&P 500 had tumbled 36 percent from its record a year ago, leaving it valued at 19 times the earnings of its companies. Europe's Dow Jones Stoxx 600 Index, which has lost 35 percent this year, was valued at 10 times the reported earnings of its companies as of yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World Index was valued at 12.4 times profit yesterday, the cheapest since at least 1995.
To contact the reporter for this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Oct. 8 (Bloomberg) -- U.S. stocks rose for the first time in six days as a coordinated cut in interest rates by six central banks bolstered expectations the economy will recover from the worst financial crisis since the Great Depression.
Bank of New York Mellon Corp., Occidental Petroleum Corp. and Intel Corp. climbed more than 3 percent after the Federal Reserve joined its European counterparts in lowering benchmark rates by half a percentage point.
The Standard & Poor's 500 Index added 20.64 points, or 2.1 percent, to 1,016.87 at 9:52 a.m. in New York. The Dow Jones Industrial Average added 162.32, or 1.7 percent, to 9,609.43. The Nasdaq Composite Index increased 29.57, or 1.7 percent, to 1,784.45. Eleven stocks rose for every 10 that fell on the New York Stock Exchange.
The S&P 500 snapped its longest losing streak since January. The gauge's 15 percent slide from Sept. 30 through yesterday was its third-steepest five-day losing streak on record, according to Bespoke Investment Group LLC, a Harrison, New York-based research firm. The bigger declines from five straight losses occurred in 1932.
Rate Cuts
The Fed, European Central Bank and four other central banks lowered interest rates in an unprecedented, emergency coordinated bid to ease the economic effects of the financial crisis. The Fed cut its benchmark rate by a half point to 1.5 percent and said the ECB and central banks of the U.K., Canada, Sweden and Switzerland are also reducing borrowing costs.
Bank of America Corp. dropped $1.93 to $21.84. The bank that's buying Merrill Lynch & Co. sold 455 million shares for $22 each, 8 percent less than yesterday's closing price of $23.77. The shares fell 26 percent in New York Stock Exchange composite trading Oct. 7, the biggest drop in at least 28 years, after the bank slashed its dividend in half.
The world's major banks may need $675 billion in fresh capital over the next several years to recover from a credit crisis that shows few signs of abating, the International Monetary Fund said yesterday.
Today is the last day of a U.S. Securities and Exchange Commission rule banning short sales in more than 980 financial companies. Since it was announced Sept. 18, companies covered by the rule are down an average of 16 percent, according to data compiled by Bloomberg.
Earnings at S&P 500 companies probably dropped on average of 5.6 percent in the third quarter, according to analysts' estimates compiled by Bloomberg.
Financial companies are forecast to lead the decline in profits with a 64 percent decrease, followed by an 11 percent slide in earnings at retailers, hoteliers, restaurant chains and other so-called consumer discretionary companies.
At the open of exchanges today, the S&P 500 had tumbled 36 percent from its record a year ago, leaving it valued at 19 times the earnings of its companies. Europe's Dow Jones Stoxx 600 Index, which has lost 35 percent this year, was valued at 10 times the reported earnings of its companies as of yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World Index was valued at 12.4 times profit yesterday, the cheapest since at least 1995.
To contact the reporter for this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Brazilian Stocks Plunge as Global Rate Cuts Fail to Ease Crisis
By Alexander Ragir
Oct. 8 (Bloomberg) -- Brazilian stocks plunged for a fifth day after an unprecedented coordinated effort by six central banks to cut interest rates failed to ease concern the credit crisis will bring global growth to a halt.
Cia. Vale do Rio Doce led a drop in metals producers after copper and nickel prices tumbled on concern demand for commodities is waning. Petroleo Brasileiro SA, Brazil's state- controlled oil company, fell as oil dropped below $88 a barrel.
The Bovespa index slid 1,972.59, or 4.9 percent, to 38,167.26 at 9:14 a.m. New York time. The index has lost 24 percent over the past five days. BM&FBovespa MidLarge Cap index fell 5.6 percent, while the BM&FBovespa Small Cap index retreated 3.4 percent.
The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point to shore up confidence and global growth.
U.S. stock-index futures tumbled.
Vale, the world's biggest iron ore miner, dropped 6.4 percent to 24.35 reais. Copper futures fell 5.6 percent in New York. Nickel futures dropped 4.2 percent in London.
Petrobras sank 7 percent to 26.31 reais.
Crude oil for November delivery slid 2.4 percent to $87.91 a barrel in New York.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;
Read more...
Oct. 8 (Bloomberg) -- Brazilian stocks plunged for a fifth day after an unprecedented coordinated effort by six central banks to cut interest rates failed to ease concern the credit crisis will bring global growth to a halt.
Cia. Vale do Rio Doce led a drop in metals producers after copper and nickel prices tumbled on concern demand for commodities is waning. Petroleo Brasileiro SA, Brazil's state- controlled oil company, fell as oil dropped below $88 a barrel.
The Bovespa index slid 1,972.59, or 4.9 percent, to 38,167.26 at 9:14 a.m. New York time. The index has lost 24 percent over the past five days. BM&FBovespa MidLarge Cap index fell 5.6 percent, while the BM&FBovespa Small Cap index retreated 3.4 percent.
The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point to shore up confidence and global growth.
U.S. stock-index futures tumbled.
Vale, the world's biggest iron ore miner, dropped 6.4 percent to 24.35 reais. Copper futures fell 5.6 percent in New York. Nickel futures dropped 4.2 percent in London.
Petrobras sank 7 percent to 26.31 reais.
Crude oil for November delivery slid 2.4 percent to $87.91 a barrel in New York.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;
Read more...
China's Alibaba Group to invest 5 bln yuan in Taobao
By Kirby Chien
BEIJING, Oct 8 (Reuters) - The parent of China's top e-commerce firm Alibaba.com Inc said on Wednesday it would invest 5 billion yuan ($733 million) in its online auction unit Taobao over five years to build its business.
Alibaba Group said the investment -- an additional 3 billion yuan on top an earlier 2 billion yuan injection -- would go towards adding people, equipment and improving technology at the firm known as China's eBay .
However, the five-year old Taobao, which executives said broke even for the first time in August and could turn a profit next year, will continue to offer its services for free to buyers and individual sellers.
"We have never made making a profit a central goal for the company," Daniel Zhang, the chief operating officer told reporters. "Rather, we are looking to improve service and provide a better platform for customers."
But some Alibaba investors balked at the large investment in a loss-making unit when uncertainty and risk are overwhelming global stock markets.
Alibaba's Hong Kong-listed shares slumped 15.8 percent on the day, underperforming the 11.5 percent fall on the Hang Seng China Enterprises Index .HSCE.
"Alibaba's fall was due primarily to the unfavourable environment for small and medium enterprises, which are Alibaba's main customers," said Kevin Tam, an analyst at China Everbright Securities based in Hong Kong.
Tam was, however, still upbeat about Taobao's long-term prospects in China's fast growing online market, as were company executives.
"Given the rapid growth of Internet use in China, we expect online shopping will become a mainstream Internet application in the near future," Jonathan Lu, Taobao president, said in a statement.
China is estimated to have more Internet users than any other country.
According to iResearch, China's online shopping market grew in gross merchandise volume to 56 billion yuan last year from 16 billion yuan in 2005.
U.S. Internet company Yahoo is a key investor in Alibaba.com.
The announcement comes after Alibaba.com posted a 159 percent rise in second quarter net profit, while warning that prospects were darkening as global woes caused small and medium-sized firms to cut spending. ($1=6.820 Yuan) (Reporting by Kirby Chien)
Read more...
BEIJING, Oct 8 (Reuters) - The parent of China's top e-commerce firm Alibaba.com Inc said on Wednesday it would invest 5 billion yuan ($733 million) in its online auction unit Taobao over five years to build its business.
Alibaba Group said the investment -- an additional 3 billion yuan on top an earlier 2 billion yuan injection -- would go towards adding people, equipment and improving technology at the firm known as China's eBay .
However, the five-year old Taobao, which executives said broke even for the first time in August and could turn a profit next year, will continue to offer its services for free to buyers and individual sellers.
"We have never made making a profit a central goal for the company," Daniel Zhang, the chief operating officer told reporters. "Rather, we are looking to improve service and provide a better platform for customers."
But some Alibaba investors balked at the large investment in a loss-making unit when uncertainty and risk are overwhelming global stock markets.
Alibaba's Hong Kong-listed shares slumped 15.8 percent on the day, underperforming the 11.5 percent fall on the Hang Seng China Enterprises Index .HSCE.
"Alibaba's fall was due primarily to the unfavourable environment for small and medium enterprises, which are Alibaba's main customers," said Kevin Tam, an analyst at China Everbright Securities based in Hong Kong.
Tam was, however, still upbeat about Taobao's long-term prospects in China's fast growing online market, as were company executives.
"Given the rapid growth of Internet use in China, we expect online shopping will become a mainstream Internet application in the near future," Jonathan Lu, Taobao president, said in a statement.
China is estimated to have more Internet users than any other country.
According to iResearch, China's online shopping market grew in gross merchandise volume to 56 billion yuan last year from 16 billion yuan in 2005.
U.S. Internet company Yahoo is a key investor in Alibaba.com.
The announcement comes after Alibaba.com posted a 159 percent rise in second quarter net profit, while warning that prospects were darkening as global woes caused small and medium-sized firms to cut spending. ($1=6.820 Yuan) (Reporting by Kirby Chien)
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