By Pham-Duy Nguyen
Oct. 10 (Bloomberg) -- Gold rose, heading for the biggest weekly gain in almost a month, after equities fell worldwide, boosting the appeal of the precious metal as a haven asset.
Stocks in Asia and Europe tumbled, and U.S. stock futures fell, driving the MSCI World Index down 19 percent this week, the worst drop on record. The Reuters/Jefferies CRB Index of 19 raw materials slid for a second day and is down 7.1 percent since Oct. 3, while gold has gained 9.9 percent.
``Gold is now rising while most everything else is still being liquidated as the deleveraging digs deeper,'' said James Turk, the founder of Goldmoney.com, which held $405 million of gold and silver in storage for investors at the end of September. ``People who have managed to get liquid in recent weeks are now focusing on safety, and they are buying gold.''
Gold futures for December delivery jumped $29.30, or 3.3 percent, to $915.80 an ounce at 9:01 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest weekly gain since Sept. 19, when most-active futures rose 13 percent. The metal reached a record $1,033.90 on March 17.
Silver futures for December delivery fell 27.5 cents, or 2.3 percent, to $11.60 an ounce. Before today, the price dropped 20 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Friday, October 10, 2008
Cotton Plunges as U.S. Cuts Export Forecast on Slowing Economy
By Shruti Date Singh
Oct. 10 (Bloomberg) -- Cotton plunged to a 16-month low, dropping the most allowed by ICE Futures U.S. in New York, after the government cut its export forecast by 10 percent because the slowing economy will curb demand for textiles.
The U.S., the world's biggest cotton exporter, will ship 13 million bales in the year that began Aug. 1, less than the 14.5 million expected in September and below last year's shipments of 13.65 million, the Department of Agriculture said. The average estimate of seven analysts and traders in a Bloomberg survey was 13.7 million bales. Cotton prices are down 27 percent this year.
``We are in a dramatic economic slowdown as witnessed by the huge cut in the U.S. export projection and reduced world usage,'' Mike Stevens, an analyst with Swiss Financial Services in Mandeville, Louisiana, said today in an e-mail after the report.
Cotton futures for December delivery declined the exchange's 3-cent limit, or 5.7 percent, to 49.44 cents a pound at 9:14 a.m. on ICE. That is the lowest price for a most-active contract since May 24, 2007.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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Oct. 10 (Bloomberg) -- Cotton plunged to a 16-month low, dropping the most allowed by ICE Futures U.S. in New York, after the government cut its export forecast by 10 percent because the slowing economy will curb demand for textiles.
The U.S., the world's biggest cotton exporter, will ship 13 million bales in the year that began Aug. 1, less than the 14.5 million expected in September and below last year's shipments of 13.65 million, the Department of Agriculture said. The average estimate of seven analysts and traders in a Bloomberg survey was 13.7 million bales. Cotton prices are down 27 percent this year.
``We are in a dramatic economic slowdown as witnessed by the huge cut in the U.S. export projection and reduced world usage,'' Mike Stevens, an analyst with Swiss Financial Services in Mandeville, Louisiana, said today in an e-mail after the report.
Cotton futures for December delivery declined the exchange's 3-cent limit, or 5.7 percent, to 49.44 cents a pound at 9:14 a.m. on ICE. That is the lowest price for a most-active contract since May 24, 2007.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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U.K. FTSE 100 Slumps Below 4,000; HBOS, Barclays, BHP Lead Drop
By Sarah Jones
Oct. 10 (Bloomberg) -- U.K. stocks tumbled to a five-year low, sending the U.K.'s FTSE 100 Index below 4,000, on deepening concern the global economy will fall into a recession.
HBOS Plc, Barclays Plc and Royal Bank of Scotland Group Plc tumbled at least 15 percent as investors anticipated losses linked to Lehman Brothers Holdings Inc. BHP Billiton Ltd. and Royal Dutch Shell Plc led a retreat by commodity producers after base metals sold off and crude oil fell more than $5 a barrel.
The benchmark FTSE 100 sank 320.37, or 7.4 percent, to 3,993.43 at 12:56 p.m. in London. The index has tumbled 20 percent this week, the steepest decline since the so-called Black Monday stock market crash in October 1987. The FTSE All-Share Index dropped 7.2 percent today and Ireland's ISEQ Index fell 3.1 percent.
``It is one of those days when you just join the dots of depression,'' said Justin Urquhart Stewart, who helps oversee about $3.4 billion as a London-based director of 7 Investment Management. ``You have the underlying issue of the global economy and banks measures that as yet haven't shown any fruit.''
More than $4 trillion has been erased from global equities this week even as central banks from London to Washington were forced to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money.
HBOS, the U.K.'s largest mortgage lender, fell 18 percent to 125.9 pence after earlier plunging as much as 28 percent. Royal Bank of Scotland, Britain's third-largest bank, fell 18 percent to 79 pence and Barclays, the second-biggest, lost 15 percent to 205 pence.
`Real Concern'
``There is real concern about the auction of the Lehman liabilities,'' said Royal London Asset Management's Robert Talbut. ``Until that takes place, it's difficult to see whether everyone will come out the other side.''
The Lehman auction, which starts at 10:30 a.m. in New York, may force sellers of credit default swaps to make payouts after more than 350 banks and investors have agreed to settle the contracts.
Barclays said it won't take losses on the auction to settle contracts that protected Lehman Brothers bondholders against a default.
BHP, the world's largest mining company, lost 9.8 percent to 934.5 pence as copper tumbled in London. Rio Tinto Group, the third-biggest, fell 12 percent to 2,425 pence. Xstrata Plc declined 14 percent to 1,197 pence.
``It's all sentiment based,'' said 7 Investment Management's Urquhart Stewart. ``Investors are questioning whether they want to be in the market at all.''
Copper Plunges
Copper is headed for the biggest weekly plunge in more than two decades as equities dropped on concern rate cuts by central banks aren't enough to boost world economies. Nickel, zinc and aluminum also fell on the London Metal Exchange.
Shell, Europe's largest oil company, declined 7.2 percent to 1,333 pence as crude oil fell as much as 6.3 percent to $81.13 a barrel in New York.
BP Plc, Europe's second biggest oil company, lost 4.6 percent to 390.75 pence. BG Group Plc dropped 4.5 percent to 786 pence.
Oil is heading for its biggest weekly drop since 2004 on concern the deepening financial crisis will push the global economy into a recession.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.
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Oct. 10 (Bloomberg) -- U.K. stocks tumbled to a five-year low, sending the U.K.'s FTSE 100 Index below 4,000, on deepening concern the global economy will fall into a recession.
HBOS Plc, Barclays Plc and Royal Bank of Scotland Group Plc tumbled at least 15 percent as investors anticipated losses linked to Lehman Brothers Holdings Inc. BHP Billiton Ltd. and Royal Dutch Shell Plc led a retreat by commodity producers after base metals sold off and crude oil fell more than $5 a barrel.
The benchmark FTSE 100 sank 320.37, or 7.4 percent, to 3,993.43 at 12:56 p.m. in London. The index has tumbled 20 percent this week, the steepest decline since the so-called Black Monday stock market crash in October 1987. The FTSE All-Share Index dropped 7.2 percent today and Ireland's ISEQ Index fell 3.1 percent.
``It is one of those days when you just join the dots of depression,'' said Justin Urquhart Stewart, who helps oversee about $3.4 billion as a London-based director of 7 Investment Management. ``You have the underlying issue of the global economy and banks measures that as yet haven't shown any fruit.''
More than $4 trillion has been erased from global equities this week even as central banks from London to Washington were forced to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money.
HBOS, the U.K.'s largest mortgage lender, fell 18 percent to 125.9 pence after earlier plunging as much as 28 percent. Royal Bank of Scotland, Britain's third-largest bank, fell 18 percent to 79 pence and Barclays, the second-biggest, lost 15 percent to 205 pence.
`Real Concern'
``There is real concern about the auction of the Lehman liabilities,'' said Royal London Asset Management's Robert Talbut. ``Until that takes place, it's difficult to see whether everyone will come out the other side.''
The Lehman auction, which starts at 10:30 a.m. in New York, may force sellers of credit default swaps to make payouts after more than 350 banks and investors have agreed to settle the contracts.
Barclays said it won't take losses on the auction to settle contracts that protected Lehman Brothers bondholders against a default.
BHP, the world's largest mining company, lost 9.8 percent to 934.5 pence as copper tumbled in London. Rio Tinto Group, the third-biggest, fell 12 percent to 2,425 pence. Xstrata Plc declined 14 percent to 1,197 pence.
``It's all sentiment based,'' said 7 Investment Management's Urquhart Stewart. ``Investors are questioning whether they want to be in the market at all.''
Copper Plunges
Copper is headed for the biggest weekly plunge in more than two decades as equities dropped on concern rate cuts by central banks aren't enough to boost world economies. Nickel, zinc and aluminum also fell on the London Metal Exchange.
Shell, Europe's largest oil company, declined 7.2 percent to 1,333 pence as crude oil fell as much as 6.3 percent to $81.13 a barrel in New York.
BP Plc, Europe's second biggest oil company, lost 4.6 percent to 390.75 pence. BG Group Plc dropped 4.5 percent to 786 pence.
Oil is heading for its biggest weekly drop since 2004 on concern the deepening financial crisis will push the global economy into a recession.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.
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European Stocks Slump; Stoxx 600 Heads for Worst Week on Record
By Sarah Thompson
Oct. 10 (Bloomberg) -- European stocks tumbled, driving the Dow Jones Stoxx 600 Index to its worst week on record, amid concern the deepening credit crisis will send the global economy into recession.
Rio Tinto Group, E.ON AG and Barclays Plc fell more than 7 percent in Europe. Nobel Biocare Holding AG plummeted 25 percent after the world's largest maker of dental implants said it may not meet its full-year guidance. Total SA sank 3.9 percent after oil dipped below $80 a barrel on concern the economic slowdown will stifle demand.
The Stoxx 600 slumped 4.5 percent to 211.85 as of 3:08 p.m. in London, extending this week's decline to 19 percent, the most since records began in January 1987.
``We have reached the panic stage,'' said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which has the equivalent of $48 billion. ``This is worse than 1987 because then it was largely confined to the stock market, with limited effects on the underlying economy. Fundamentals don't count anymore.''
Stocks pared declines after Italian Prime Minister Silvio Berlusconi said European Union and Group of Eight leaders are discussing the idea of closing the world's financial markets while they ``rewrite the rules of international finance.''
More than $25 trillion has been erased from global equities in 2008. Central banks from London and Frankfurt to Washington and Hong Kong this week were forced to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money.
`Seized Up'
The cost of borrowing in dollars for three months jumped to the highest level since Dec. 27, the British Bankers' Association said.
The London interbank offered rate, or Libor, that banks charge each other for such loans rose 7 basis points to 4.82 percent, the BBA said today. The Libor-OIS spread, a gauge of cash scarcity among banks, widened 11 basis points to 365 basis points. One basis point is 0.01 percentage point.
``A very dangerous mix has taken place in the money and credit markets and hedge funds are clearly withdrawing flows from equities,'' said Francisco Salvador, director at Venture Finanzas SA in Madrid. ``We are waiting for some rational order to be restored, and very abrupt sell-offs are always followed by abrupt rebounds, but meanwhile we'll see panic.''
The VStoxx Index, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, surged as much as 28 percent to 74.54 today, the highest in at least nine years.
National Markets
National benchmark indexes decreased more than 4 percent in all 17 western European markets that were open. Germany's DAX fell 9.3 percent. The U.K.'s FTSE 100 lost 8.9 percent, while France's CAC 40 retreated 9.1 percent.
Iceland yesterday suspended equity trading today until Oct. 13 after the government seized Kaupthing hf, the country's biggest bank.
Exchanges in Russia and Ukraine were suspended indefinitely. Russia's government will start buying stocks of domestic companies next week to help support prices, Prime Minister Vladimir Putin said.
Consob, Italy's securities-market regulator, banned all short sales on the country's stocks.
The cost of default protection on corporate bonds soared to records on concern the credit crisis will trigger more failures.
Credit-default swaps on Europe's benchmark Markit iTraxx Crossover index surged 57 basis points to 730, according to JPMorgan. Credit-market indexes in Australia and Japan also rose after the CDX North America Investment Grade index jumped in New York late yesterday.
`Seized Up'
``The wheels of commerce have effectively seized up,'' said Kate Schapiro, who oversees $250 million in equities at Sentinel Asset Management in San Francisco. ``Trapped by the fear of losing everything, we're seeing one-sided selling.''
The International Monetary Fund will use a ``rapid-fire'' emergency-loan program to lend hundreds of billions of dollars to emerging markets as the credit squeeze threatens to hobble nations that until this year were weaning themselves off the fund's aid.
Rio Tinto, the world's third-largest mining company, lost 9.7 percent to 2,483 pence. E.ON, Germany's biggest utility, sank 7.7 percent to 26.07 euros.
Barclays slipped 9.1 percent to 219.75 pence. The U.K.'s second-biggest bank said it's ``considering a number of options, including capital raising, relating to the industry-wide commitment.''
U.K. banks as a whole have until the end of the year to add 25 billion pounds ($42 billion) to their reserves under the government's plan, Barclays said in the statement.
Valuations
The MSCI Europe Index traded at 8.61 times the current earnings of the companies in the index yesterday, the cheapest since September 1981, according to data from JPMorgan Chase & Co. in London. The MSCI World Index traded at 10.85 times, the lowest since October 1982, the data show. The S&P 500 traded at 17.39 times earnings, the cheapest since September 2007, based on data compiled by Bloomberg.
Nobel Biocare Holding AG tumbled 25 percent to 21.7 francs. Before today, the company expected sales to rise in the ``low single-digits'' while profitability on earnings before interest and taxation was supposed to remain at 2007 levels at a constant exchange rate.
Chief Executive Officer Domenico Scala, the former Syngenta AG executive brought in to replace Heliane Canepa in July 2007, said Aug. 11 there were ``encouraging initial signs'' of recovery and that the worst might be over in the U.S. market.
Total, Europe's third-largest oil company, dropped 3.9 percent to 34.56 euros. Royal Dutch Shell Plc, the region's biggest, sank 3.3 percent to 1,389 pence.
Crude for November delivery fell as much as $7.02 to $79.57 a barrel in New York. Copper slumped in London, set for its worst week in more than two decades.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
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Best Buy, Chevron, Macy's, Morgan Stanley: U.S. Equity Movers
By Whitney Kisling
Oct. 10 (Bloomberg) -- The following companies are having unusual price changes in U.S. trading today. Stock symbols are in parentheses, and share prices are as of 9:40 a.m. in New York.
American International Group Inc. (AIG US) fell 16 percent to $2.01. The insurance company that receives $122.8 billion from the U.S. government has already tapped $70.3 billion from the Federal Reserve, mostly for collateral obligations and losses related to lending securities, the Wall Street Journal reported.
Best Buy Co. (BBY US) dropped 9.1 percent to $23.92, the lowest intraday price since May 2003. The world's largest electronics retailer said sales at its U.S. stores open at least 14 months fell about 2 percent as the credit crisis slowed consumer spending.
Biogen Idec Inc. (BIIB US) lost 4.7 percent to $42.66, the lowest intraday price since September 2006. The company said it will halt work on the drug baminercept for rheumatoid arthritis because it failed in a mid-stage study.
Centex Corp. (CTX US) fell 9.9 percent to $9.16, the lowest intraday price since March 2000. The homebuilder suspended its quarterly dividend, citing the ``difficult business environment.''
Chevron Corp. (CVX US) slid 8.9 percent to $58.29, the lowest intraday price since June 2002. The second-biggest U.S. energy company said its oil and natural-gas output headed for an eighth-straight quarterly decline.
Cytec Industries Inc. (CYT US) plunged 18 percent to $24.26 for the biggest intraday loss in 10 years. The maker of reinforced plastics for airplane parts said profit will fall this year rather than rise as previously expected because of a Boeing Co. (BA US) strike and weakening global demand.
General Motors Corp. (GM US) dropped for a seventh day, losing 8.6 percent to $4.35. Standard & Poor's said the largest U.S. automaker, along with Ford Motor Co. (F US), could be forced into bankruptcy as economies across the world slow and car sales erode.
Macy's Inc. (M US) slid 17 percent to $9.47 and fell as much as 19 percent for the biggest intraday decline since July 2000. The second-largest U.S. department-store company said profit this year may fall more than it previously forecast after the U.S. economy and consumer confidence weakened.
Morgan Stanley (MS US) slid 28 percent to $8.92 and earlier fell to $8.70, the lowest since April 1995. Moody's Investors Service said it may cut the U.S. investment bank's credit rating on concern the financial crisis threatens earnings and investor confidence. Moody's put Morgan Stanley's A1 long-term rating on review and lowered the outlook for Goldman Sachs Group Inc.'s (GS US) Aa3 long-term rating to negative. Goldman fell 15 percent to $86.02.
Wachovia Corp. (WB US) rose 23 percent to $4.44 for the biggest gain in the Standard & Poor's 500 Index. Citigroup Inc. (C US) walked away from its attempt to buy the sixth-biggest U.S. bank, handing victory to Wells Fargo & Co. (WFC US) with its takeover bid.
To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net
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Oct. 10 (Bloomberg) -- The following companies are having unusual price changes in U.S. trading today. Stock symbols are in parentheses, and share prices are as of 9:40 a.m. in New York.
American International Group Inc. (AIG US) fell 16 percent to $2.01. The insurance company that receives $122.8 billion from the U.S. government has already tapped $70.3 billion from the Federal Reserve, mostly for collateral obligations and losses related to lending securities, the Wall Street Journal reported.
Best Buy Co. (BBY US) dropped 9.1 percent to $23.92, the lowest intraday price since May 2003. The world's largest electronics retailer said sales at its U.S. stores open at least 14 months fell about 2 percent as the credit crisis slowed consumer spending.
Biogen Idec Inc. (BIIB US) lost 4.7 percent to $42.66, the lowest intraday price since September 2006. The company said it will halt work on the drug baminercept for rheumatoid arthritis because it failed in a mid-stage study.
Centex Corp. (CTX US) fell 9.9 percent to $9.16, the lowest intraday price since March 2000. The homebuilder suspended its quarterly dividend, citing the ``difficult business environment.''
Chevron Corp. (CVX US) slid 8.9 percent to $58.29, the lowest intraday price since June 2002. The second-biggest U.S. energy company said its oil and natural-gas output headed for an eighth-straight quarterly decline.
Cytec Industries Inc. (CYT US) plunged 18 percent to $24.26 for the biggest intraday loss in 10 years. The maker of reinforced plastics for airplane parts said profit will fall this year rather than rise as previously expected because of a Boeing Co. (BA US) strike and weakening global demand.
General Motors Corp. (GM US) dropped for a seventh day, losing 8.6 percent to $4.35. Standard & Poor's said the largest U.S. automaker, along with Ford Motor Co. (F US), could be forced into bankruptcy as economies across the world slow and car sales erode.
Macy's Inc. (M US) slid 17 percent to $9.47 and fell as much as 19 percent for the biggest intraday decline since July 2000. The second-largest U.S. department-store company said profit this year may fall more than it previously forecast after the U.S. economy and consumer confidence weakened.
Morgan Stanley (MS US) slid 28 percent to $8.92 and earlier fell to $8.70, the lowest since April 1995. Moody's Investors Service said it may cut the U.S. investment bank's credit rating on concern the financial crisis threatens earnings and investor confidence. Moody's put Morgan Stanley's A1 long-term rating on review and lowered the outlook for Goldman Sachs Group Inc.'s (GS US) Aa3 long-term rating to negative. Goldman fell 15 percent to $86.02.
Wachovia Corp. (WB US) rose 23 percent to $4.44 for the biggest gain in the Standard & Poor's 500 Index. Citigroup Inc. (C US) walked away from its attempt to buy the sixth-biggest U.S. bank, handing victory to Wells Fargo & Co. (WFC US) with its takeover bid.
To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net
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Mexico's Peso Declines for Eighth Day as Global Markets Plunge
By Michael J. Moore
Oct. 10 (Bloomberg) -- Mexico's peso weakened for an eighth day as world financial markets plunged and central bank efforts yesterday failed to stem investor demand for the safety of U.S. dollars.
The peso plunged as much as 6.1 percent, a tumble that will trigger a $400 million dollar auction by the central bank. The bank sold $2.5 billion in the past two days and said it would offer an additional $400 million a day when the peso weakens more than 2 percent.
The peso was down 4.3 percent to 13.8113 per dollar at 9:20 a.m. New York time, from 13.2194 yesterday. It's down 29 percent from a six-year high reached on Aug. 4 and touched a record low of 14.2927 on Oct. 8. The peso's intraday decline that day of 13.8 percent was the biggest since the government abandoned a currency peg in December 1994.
Banco de Mexico is tapping into a near-record $84 billion of foreign reserves built up during a six-year rally in oil, the country's biggest export. Oil has tumbled from a record high of $147.27 a barrel reached on July 11, trimming Mexico's export receipts and adding to the peso's decline. Oil sank below $80 a barrel today as the worst financial crisis since the Great Depression cut into demand for energy.
The central bank offered $400 million in the foreign exchange market in three auctions yesterday. Each time the sale flopped as investors balked at buying dollars at the above-market rate the central bank was offering. The bank said it would offer the dollars at a rate at least 2 percent higher than the previous day's rate. At the time of the auctions, the peso was down less than 2 percent.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
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Oct. 10 (Bloomberg) -- Mexico's peso weakened for an eighth day as world financial markets plunged and central bank efforts yesterday failed to stem investor demand for the safety of U.S. dollars.
The peso plunged as much as 6.1 percent, a tumble that will trigger a $400 million dollar auction by the central bank. The bank sold $2.5 billion in the past two days and said it would offer an additional $400 million a day when the peso weakens more than 2 percent.
The peso was down 4.3 percent to 13.8113 per dollar at 9:20 a.m. New York time, from 13.2194 yesterday. It's down 29 percent from a six-year high reached on Aug. 4 and touched a record low of 14.2927 on Oct. 8. The peso's intraday decline that day of 13.8 percent was the biggest since the government abandoned a currency peg in December 1994.
Banco de Mexico is tapping into a near-record $84 billion of foreign reserves built up during a six-year rally in oil, the country's biggest export. Oil has tumbled from a record high of $147.27 a barrel reached on July 11, trimming Mexico's export receipts and adding to the peso's decline. Oil sank below $80 a barrel today as the worst financial crisis since the Great Depression cut into demand for energy.
The central bank offered $400 million in the foreign exchange market in three auctions yesterday. Each time the sale flopped as investors balked at buying dollars at the above-market rate the central bank was offering. The bank said it would offer the dollars at a rate at least 2 percent higher than the previous day's rate. At the time of the auctions, the peso was down less than 2 percent.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
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Baltic Dry Index Has Record Drop as Credit Freeze Cuts Demand
By Alistair Holloway
Oct. 10 (Bloomberg) -- The Baltic Dry Index, a measure of shipping costs for commodities, had its biggest drop on record as a credit freeze weakened demand for commodities.
The index tracking transport costs on international trade routes retreated 282 points, or 11 percent, to 2,221 points, according to the Baltic Exchange in London. Bloomberg data on the index go back to January 1985. The index had dropped 55 percent over the last three weeks.
``There has been an acute and significant decrease in near- term demand for shipping capacity,'' Jon Windham, a Macquarie Bank Ltd. analyst in Hong Kong, said in a report dated yesterday. ``The primary cause is a significant fall off in general demand driven largely by companies' fears to extend cash.'' Further rate drops are possible, he said.
The cost of borrowing in dollars in London for three months rose after cash injections and rate cuts by 10 central banks including the U.S. Federal Reserve failed to thaw credit markets. The turmoil was sparked by a U.S. housing slump last year that uncovered bad debt and led to the collapse or bailout of banks including Lehman Brothers Holdings Inc.
To contact the reporter on this story: Alistair Holloway in London at aholloway1@bloomberg.net
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Oct. 10 (Bloomberg) -- The Baltic Dry Index, a measure of shipping costs for commodities, had its biggest drop on record as a credit freeze weakened demand for commodities.
The index tracking transport costs on international trade routes retreated 282 points, or 11 percent, to 2,221 points, according to the Baltic Exchange in London. Bloomberg data on the index go back to January 1985. The index had dropped 55 percent over the last three weeks.
``There has been an acute and significant decrease in near- term demand for shipping capacity,'' Jon Windham, a Macquarie Bank Ltd. analyst in Hong Kong, said in a report dated yesterday. ``The primary cause is a significant fall off in general demand driven largely by companies' fears to extend cash.'' Further rate drops are possible, he said.
The cost of borrowing in dollars in London for three months rose after cash injections and rate cuts by 10 central banks including the U.S. Federal Reserve failed to thaw credit markets. The turmoil was sparked by a U.S. housing slump last year that uncovered bad debt and led to the collapse or bailout of banks including Lehman Brothers Holdings Inc.
To contact the reporter on this story: Alistair Holloway in London at aholloway1@bloomberg.net
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Brazil's Bovespa Plunges 10%, Heads For Worst Week Since 1999
By Alexander Ragir
Oct. 10 (Bloomberg) -- Brazilian stocks fell for a seventh day and headed for the worst week this decade, as metal prices slid the most in four years on concern a global recession will sap demand for raw materials. The Bovespa's 10 percent plunge triggered a trading halt.
Cia. Vale do Rio Doce sank 9.9 percent after Goldman Sachs Group Inc. cut its 2009 iron ore price forecast and nickel dropped 18 percent in London. Petroleo Brasileiro SA, Brazil's state-controlled oil company, dropped the most in almost a month as crude prices fell below $80 a barrel.
The Bovespa index slid 3,777.22 to 33,303.08 at 9:34 a.m. New York time. The index fell 25 percent so far this week, poised for the worst weekly decline since January 1999. BM&FBovespa MidLarge Cap index dropped 8.7 percent, while the BM&FBovespa Small Cap index dropped 8.5 percent.
Petrobras fell 11 percent to 23.01 reais. Crude oil for November delivery lost as much as $7.02 in New York.
Vale dropped 2.42 reais to 22.13 reais. The Bloomberg Base Metals 3-Month Price Commodity Index dropped 7.5 percent to 159.18, the biggest decline since October 2004. Copper headed for its biggest weekly rout in 22 years in London.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
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Oct. 10 (Bloomberg) -- Brazilian stocks fell for a seventh day and headed for the worst week this decade, as metal prices slid the most in four years on concern a global recession will sap demand for raw materials. The Bovespa's 10 percent plunge triggered a trading halt.
Cia. Vale do Rio Doce sank 9.9 percent after Goldman Sachs Group Inc. cut its 2009 iron ore price forecast and nickel dropped 18 percent in London. Petroleo Brasileiro SA, Brazil's state-controlled oil company, dropped the most in almost a month as crude prices fell below $80 a barrel.
The Bovespa index slid 3,777.22 to 33,303.08 at 9:34 a.m. New York time. The index fell 25 percent so far this week, poised for the worst weekly decline since January 1999. BM&FBovespa MidLarge Cap index dropped 8.7 percent, while the BM&FBovespa Small Cap index dropped 8.5 percent.
Petrobras fell 11 percent to 23.01 reais. Crude oil for November delivery lost as much as $7.02 in New York.
Vale dropped 2.42 reais to 22.13 reais. The Bloomberg Base Metals 3-Month Price Commodity Index dropped 7.5 percent to 159.18, the biggest decline since October 2004. Copper headed for its biggest weekly rout in 22 years in London.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
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Crude Oil Drops Below $80 as Equities Slump on Credit Freeze
By Mark Shenk
Oct. 10 (Bloomberg) -- Crude oil fell below $80 for the first time in a year and copper headed for its biggest weekly drop in more than 20 years on concern that the deepening financial crisis will push the global economy into a recession.
Oil in New York is approaching its biggest weekly decline since 2003 as plunging share prices in Asia and Europe caused the MSCI World Index to drop to the lowest since 1970. All commodities with the exception of gold are down on signs that demand for raw materials will drop as the global economy falters.
``No matter where you look, there is bleeding everywhere,'' said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. ``I don't know where the bottom is. It's clear that we are headed for a painful couple of years.''
Crude oil for November delivery fell $5.17, or 6 percent, to $81.42 a barrel at 9:46 a.m. on the New York Mercantile Exchange. Futures touched $78.61, the lowest since Oct. 9, 2007. Prices have dropped 45 percent from the record $147.27 a barrel reached on July 11.
More than $4 trillion has been erased from global equities this week even as central banks across the world were forced to cut interest rates on concern banks will run out of money.
``This is a market that is moving on emotion, not the supply and demand picture,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``We are looking for a landing place, and I have no idea where it is.''
Commodities Tumble
The Reuters/Jefferies CRB Index of 19 commodities tumbled to the lowest in more than a year today. The CRB fell as much as 10.41 to 300.12, the weakest since Aug. 22, 2007. The index has slumped 36 percent from a record on July 3.
The International Energy Agency, an adviser to 28 nations, cut its forecast for global oil demand next year by 0.5 percent as the worst financial crisis since the 1930s threatens a global recession.
The MSCI World Index fell for a seventh day, losing 3.9 percent, and Japan's Nikkei 225 Stock Average slumped 11 percent, the second-biggest drop on record. Europe's Dow Jones Stoxx 600 declined 7.6 percent.
``Oil is not a safe haven, because you have to use it,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``Gold and putting money in your mattress look like the safest places to put your money.''
Brent crude oil for November settlement declined $5.19, or 6.3 percent, to $77.47 a barrel on London's ICE Futures Europe exchange. Futures touched $75 a barrel, the lowest since Sept. 11, 2007.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
Oct. 10 (Bloomberg) -- Crude oil fell below $80 for the first time in a year and copper headed for its biggest weekly drop in more than 20 years on concern that the deepening financial crisis will push the global economy into a recession.
Oil in New York is approaching its biggest weekly decline since 2003 as plunging share prices in Asia and Europe caused the MSCI World Index to drop to the lowest since 1970. All commodities with the exception of gold are down on signs that demand for raw materials will drop as the global economy falters.
``No matter where you look, there is bleeding everywhere,'' said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. ``I don't know where the bottom is. It's clear that we are headed for a painful couple of years.''
Crude oil for November delivery fell $5.17, or 6 percent, to $81.42 a barrel at 9:46 a.m. on the New York Mercantile Exchange. Futures touched $78.61, the lowest since Oct. 9, 2007. Prices have dropped 45 percent from the record $147.27 a barrel reached on July 11.
More than $4 trillion has been erased from global equities this week even as central banks across the world were forced to cut interest rates on concern banks will run out of money.
``This is a market that is moving on emotion, not the supply and demand picture,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``We are looking for a landing place, and I have no idea where it is.''
Commodities Tumble
The Reuters/Jefferies CRB Index of 19 commodities tumbled to the lowest in more than a year today. The CRB fell as much as 10.41 to 300.12, the weakest since Aug. 22, 2007. The index has slumped 36 percent from a record on July 3.
The International Energy Agency, an adviser to 28 nations, cut its forecast for global oil demand next year by 0.5 percent as the worst financial crisis since the 1930s threatens a global recession.
The MSCI World Index fell for a seventh day, losing 3.9 percent, and Japan's Nikkei 225 Stock Average slumped 11 percent, the second-biggest drop on record. Europe's Dow Jones Stoxx 600 declined 7.6 percent.
``Oil is not a safe haven, because you have to use it,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``Gold and putting money in your mattress look like the safest places to put your money.''
Brent crude oil for November settlement declined $5.19, or 6.3 percent, to $77.47 a barrel on London's ICE Futures Europe exchange. Futures touched $75 a barrel, the lowest since Sept. 11, 2007.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
ICICI Drops by Record, Says It Has Enough Liquidity
By Chitra Somayaji and M.C. Govardhana Rangan
Oct. 10 (Bloomberg) -- ICICI Bank Ltd., the Indian lender with the biggest losses on overseas investments, said it has sufficient funds after its shares fell the most since they started trading in September 1997.
The shares dropped 20 percent to close at 363.65 rupees in Mumbai trading. The stock earlier fell as much as 28 percent following Joint Managing Director Chanda Kochhar's statement that the bank has adequate amounts of capital and ``small exposure'' to overseas investments and loans. India's benchmark Sensitive Index dropped 7.1 percent.
The bank, the worst performer among financial stocks in Asia today, has slumped 46 percent from the beginning of September as the global credit crisis led to the collapse or seizure of U.S. and U.K. banks. The Reserve Bank of India and Finance Minister Palaniappan Chidambaram last week issued statements reassuring investors that India's second-largest bank has enough capital.
A large Indian bank borrowed 10 billion rupees ($208 million) from another at an interest rate of more than 20 percent this week, the highest rate charged for a 45-day loan between the nation's lenders since the mid-1990s, Mint reported earlier today, without saying where it got the information.
The banks can't be named as that was a condition for confirming the details, the newspaper said. The banks are large and more than adequately capitalized, according to the report.
The story doesn't refer to ICICI, which therefore doesn't need to comment, spokesman Charudatta Deshpande said.
`Sufficient Liquidity'
``The bank has sufficient liquidity,'' Kochhar told reporters in Mumbai today. The lender, which has about 120 billion rupees in funds in its international operations, doesn't fund its overseas business with domestic funds, she said.
ICICI holds cash of about $45 million against $150 million in loans made to an Indonesian company, Kochhar told CNBC-TV18 today. PT Bakrie & Brothers borrowed $150 million from ICICI using PT Bumi Resources shares, which were valued almost three times the loan based on share prices on July 25, as collateral.
``These are small exposures given our size and our profitability,'' Kochhar said.
India today made the steepest cut since 2001 in the amount of cash lenders need to set aside as reserves to cushion the economy from a global slowdown, after the rupee slumped to a record low and overnight lending rates doubled. Indian lenders have enough capital, Finance Minister Chidambaram reiterated.
Capital Adequacy
ICICI's capital adequacy ratio was 13.4 percent as of June 30, more than the minimum 9 percent required by regulators, Chief Executive Officer K.V. Kamath said on Sept. 30.
``This is just the reflection of the global liquidity squeeze as about 70 percent of the stock is held by foreigners,'' said Vaibhav Agrawal, banking analyst at Angel Broking Ltd. ``This is just selling pressure and has gone beyond fundamentals.''
Reports of rumors about Mumbai-based ICICI's financial positions have led some depositors to withdraw cash from the bank in some locations, the Reserve Bank of India said on Sept. 30.
ICICI Bank may have to set aside an additional $28 million for potential losses on the 57 million euros ($77 million) in Lehman Brothers Holdings Inc. debt held by its U.K. unit, according to a Sept. 16 statement from the lender.
The bank recorded $100 million in marked-to-market losses for the fourth quarter ended March 31 on overseas investments. For the fiscal year, the writedowns totaled $170 million.
The world's largest banks have recorded losses and writedowns of more than $590 billion since the collapse of the U.S. subprime- mortgage market led to a global credit contraction.
The cost of default protection on ICICI rose to a record, credit-default swaps show.
Five-year contracts on the bank's debt were quoted 130 basis points higher at 900, Barclays Capital prices show. The swaps, which rise as perceptions of credit quality deteriorate, are equivalent to $900,000 annually to protect a $10 million investment in the notes.
To contact the reporters on this story: Chitra Somayaji in Mumbai at csomayaji@bloomberg.net.
Read more...
Oct. 10 (Bloomberg) -- ICICI Bank Ltd., the Indian lender with the biggest losses on overseas investments, said it has sufficient funds after its shares fell the most since they started trading in September 1997.
The shares dropped 20 percent to close at 363.65 rupees in Mumbai trading. The stock earlier fell as much as 28 percent following Joint Managing Director Chanda Kochhar's statement that the bank has adequate amounts of capital and ``small exposure'' to overseas investments and loans. India's benchmark Sensitive Index dropped 7.1 percent.
The bank, the worst performer among financial stocks in Asia today, has slumped 46 percent from the beginning of September as the global credit crisis led to the collapse or seizure of U.S. and U.K. banks. The Reserve Bank of India and Finance Minister Palaniappan Chidambaram last week issued statements reassuring investors that India's second-largest bank has enough capital.
A large Indian bank borrowed 10 billion rupees ($208 million) from another at an interest rate of more than 20 percent this week, the highest rate charged for a 45-day loan between the nation's lenders since the mid-1990s, Mint reported earlier today, without saying where it got the information.
The banks can't be named as that was a condition for confirming the details, the newspaper said. The banks are large and more than adequately capitalized, according to the report.
The story doesn't refer to ICICI, which therefore doesn't need to comment, spokesman Charudatta Deshpande said.
`Sufficient Liquidity'
``The bank has sufficient liquidity,'' Kochhar told reporters in Mumbai today. The lender, which has about 120 billion rupees in funds in its international operations, doesn't fund its overseas business with domestic funds, she said.
ICICI holds cash of about $45 million against $150 million in loans made to an Indonesian company, Kochhar told CNBC-TV18 today. PT Bakrie & Brothers borrowed $150 million from ICICI using PT Bumi Resources shares, which were valued almost three times the loan based on share prices on July 25, as collateral.
``These are small exposures given our size and our profitability,'' Kochhar said.
India today made the steepest cut since 2001 in the amount of cash lenders need to set aside as reserves to cushion the economy from a global slowdown, after the rupee slumped to a record low and overnight lending rates doubled. Indian lenders have enough capital, Finance Minister Chidambaram reiterated.
Capital Adequacy
ICICI's capital adequacy ratio was 13.4 percent as of June 30, more than the minimum 9 percent required by regulators, Chief Executive Officer K.V. Kamath said on Sept. 30.
``This is just the reflection of the global liquidity squeeze as about 70 percent of the stock is held by foreigners,'' said Vaibhav Agrawal, banking analyst at Angel Broking Ltd. ``This is just selling pressure and has gone beyond fundamentals.''
Reports of rumors about Mumbai-based ICICI's financial positions have led some depositors to withdraw cash from the bank in some locations, the Reserve Bank of India said on Sept. 30.
ICICI Bank may have to set aside an additional $28 million for potential losses on the 57 million euros ($77 million) in Lehman Brothers Holdings Inc. debt held by its U.K. unit, according to a Sept. 16 statement from the lender.
The bank recorded $100 million in marked-to-market losses for the fourth quarter ended March 31 on overseas investments. For the fiscal year, the writedowns totaled $170 million.
The world's largest banks have recorded losses and writedowns of more than $590 billion since the collapse of the U.S. subprime- mortgage market led to a global credit contraction.
The cost of default protection on ICICI rose to a record, credit-default swaps show.
Five-year contracts on the bank's debt were quoted 130 basis points higher at 900, Barclays Capital prices show. The swaps, which rise as perceptions of credit quality deteriorate, are equivalent to $900,000 annually to protect a $10 million investment in the notes.
To contact the reporters on this story: Chitra Somayaji in Mumbai at csomayaji@bloomberg.net.
Read more...
Most U.S. Stocks Decline on Credit Crisis; Regional Banks Gain
By Lynn Thomasson
Oct. 10 (Bloomberg) -- Most U.S. stocks fell as the escalating credit crisis spurred concern more companies will fail. Benchmark indexes pared declines as regional banks rallied on speculation they'll capture more market share.
Wachovia Corp., Fifth Third Bancorp and Regions Financial Corp. climbed more than 15 percent, helping the Standard & Poor's 500 Index pare a slump of as much 7.7 percent.
The S&P 500 lost 7.43 points, or 0.8 percent, to 902.49 at 10:17 a.m. in New York, extending its weekly plunge to 18 percent. The Dow Jones Industrial Average slipped 77.02 points, or 0.9 percent, to 8,502.17, paring a 697 point drop. The Nasdaq Composite Index added 0.1 percent to 1,646.83.
The S&P 500 has fallen for eight straight days, its longest losing streak since 1996. The declines pushed both the S&P 500 and Dow average down more than 40 percent from their peaks last October and set them on course for their worst yearly returns since the Great Depression.
The rout left the S&P 500 valued at 17 times reported earnings of its companies, its cheapest level in more than a year.
Credit markets stayed frozen as the cost of borrowing in dollars in London for three months rose for a fourth consecutive day. The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 7 basis points to 4.82 percent today, the British Bankers' Association said.
More than $20 trillion has been wiped off equity markets in the last 12 months as the financial crisis that started with non-performing U.S. subprime loans spread to economies globally.
To contact the reporter for this story: Lynn Thomasson in New York at lthomasson@bloomberg.net;
Read more...
Oct. 10 (Bloomberg) -- Most U.S. stocks fell as the escalating credit crisis spurred concern more companies will fail. Benchmark indexes pared declines as regional banks rallied on speculation they'll capture more market share.
Wachovia Corp., Fifth Third Bancorp and Regions Financial Corp. climbed more than 15 percent, helping the Standard & Poor's 500 Index pare a slump of as much 7.7 percent.
The S&P 500 lost 7.43 points, or 0.8 percent, to 902.49 at 10:17 a.m. in New York, extending its weekly plunge to 18 percent. The Dow Jones Industrial Average slipped 77.02 points, or 0.9 percent, to 8,502.17, paring a 697 point drop. The Nasdaq Composite Index added 0.1 percent to 1,646.83.
The S&P 500 has fallen for eight straight days, its longest losing streak since 1996. The declines pushed both the S&P 500 and Dow average down more than 40 percent from their peaks last October and set them on course for their worst yearly returns since the Great Depression.
The rout left the S&P 500 valued at 17 times reported earnings of its companies, its cheapest level in more than a year.
Credit markets stayed frozen as the cost of borrowing in dollars in London for three months rose for a fourth consecutive day. The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 7 basis points to 4.82 percent today, the British Bankers' Association said.
More than $20 trillion has been wiped off equity markets in the last 12 months as the financial crisis that started with non-performing U.S. subprime loans spread to economies globally.
To contact the reporter for this story: Lynn Thomasson in New York at lthomasson@bloomberg.net;
Read more...
Indonesia, Russia and Ukraine Suspend Stock Trading
By Darren Boey
Oct. 10 (Bloomberg) -- Indonesia halted stock-market trading for a second full day, while exchanges in Russia and Ukraine were suspended indefinitely as the credit crisis extended a plunge in global equities.
Iceland's market remains shut for the second day, part of a suspension that will last through Oct. 13. A 10 percent decline in Thailand's benchmark index triggered a 30-minute halt.
``We are probably close to the point of maximum pessimism,'' said Simon Rudolph, a fund manager at the Hong Kong unit of Franklin Templeton Investments, which manages $507.2 billion of assets. ``We are seeing a lot of paralysis, people not knowing what to do, people not wanting to invest.''
Shares tumbled in Europe and Asia today as the credit freeze deepened, worsening the outlook for the global economy. Japan's Nikkei 225 Stock Average slumped 9.6 percent, the most since the October 1987 stock-market crash. The MSCI World Index dropped 4 percent as of 1:50 p.m. in London, taking its slide this month to 22 percent.
Investments on U.S. mortgage-related securities have caused $591 billion of losses at the world's biggest financial institutions and led to the collapses of Bear Stearns Cos. and Lehman Brothers Holdings Inc. The crisis prompted the U.S. government to take control of Fannie Mae, Freddie Mac and American International Group Inc.
Market Regulators
Indonesia's exchange first halted trading Oct. 8 after the benchmark index plunged 10 percent, before shutting down the bourse yesterday. Trading in Indonesia will ``hopefully'' resume Oct. 13, bourse President Erry Firmansyah said today.
``Several measures still need time to be prepared today and over the weekend before we're ready to open our market,'' said Ahmad Fuad Rahmany, chairman of the country's Capital Market and Financial Institution Supervisory Agency.
Russia's Micex and RTS stock exchanges delayed the opening of trading today on orders of the market regulator. As of 3 p.m. Moscow time it was unclear when trading will start, Alexei Gerasyuk, spokesman for Micex, said in a telephone interview. The RTS won't resume stock trading until ``further notice,'' the bourse wrote in an e-mailed statement.
Vienna's bourse reopened after earlier suspending trading until 12 p.m. local time. The ATX Index fell 11 percent.
Thailand's SET Index fell as much as 10 percent today, triggering the first 30-minute trading halt in almost two years.
There's no official plan to suspend trading for the full day because it will ``scare off investors,'' Pakorn Malakul Na Ayudhya, the bourse's chairman, told reporters this morning.
``The sell-off won't probably grind to a halt yet,'' said Sukkawat Prasurtying, chief investment officer at Manulife Asset Management Co. in Bangkok, who oversees about $150 million of assets. ``Fundamentals don't mean anything right now.''
To contact the reporter on this story: Darren Boey in Hong Kong at dboey@bloomberg.net.
Read more...
Swiss Jobless Rate Unexpectedly Increases, Stoking Growth Fears
| Daily Forex Fundamentals | Written by DailyFX | Oct 10 08 11:11 GMT | | |
|
Fundamental Headlines
GBPUSD - The clash between Great Britain and Iceland has intensified after the U.K. seized the assets of Icelandic banks operating in Europe's second largest economy in order to safeguard depositors. The U.K. Treasury ensured that all deposits held at Icelandic banks are protected as accounts in Kaupthing Singer & Friedlander and Heritable have already been transferred to ING Direct. Meanwhile, U.K. authorities are still negotiating with Icelandic regulators about protecting deposits at Icesave, a U.K.-based subsidiary of Landsbanki which is not covered by the Financial Services Compensation Scheme (FSCS). Furthermore, as U.K. deposits in Iceland are not protected under the FSCS, Prime Minister Brown threatened to 'take further action' against Iceland if the money is not returned, which includes freezing assets of Icelandic companies that operate within Britain. U.K.'s Chancellor Darling and his Icelandic counterpart are scheduled to attend an IMF meeting over the weekend to discuss the situation. USDCHF - The seasonally adjusted unemployment rate in Switzerland rose for the first time in five years, climbing to 2.6% from 2.5%, while the unadjusted jobless rate continued to hold steady at 2.4%. Indeed, the surprising downturn in labor market suggests that the economic activity throughout Europe have slow considerably, and conditions may only get worse as Germany and the U.K. teeter on the brink of a recession. As a result, market participants are anticipating the Swiss Nation Bank, who joined the coordinated rate cut earlier this week, to lower rates further in the months ahead as growth prospects for the global economy deteriorates.
Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Daily Forex Analysis
Daily Forex Technicals | Written by FOREXYARD | Oct 10 08 11:00 GMT |
Headlines
G7 Summit on Financial Crisis Kicks Off Today
Today's meeting of finance ministers and central bankers from the world's leading industrial nations kicks off today as the financial crisis is the primary focus of today's economy. Apparently recent measures have not been sufficient enough to turn the corner of this crisis; therefore, markets are expecting central banks around the world to cut rates further. These rate cuts, and other possible solutions, will be the main talking points in today's G7 Summit.
Economic News
USD - Interest Rate Cut Strengthens U.S. Currency
After declining for the past three days, the USD finally started to gain versus the EUR yesterday rising to $1.3558 at the close of yesterday's trading session. This could be attributed to the steadily climbing short-term interest rates in global money markets despite coordinated efforts by many central banks this week to ease the credit crisis. Regardless of these efforts, there is still a fear of further bank failures. This is leading many banks to start hoarding cash, especially the USD, and also discouraging inter-bank lending. The resulting investor demand for dollars has pushed the USD's value higher against the other major currencies.
The USD's gains also came amid speculation that the Group of Seven (G7) meeting of finance ministers and central bankers today would follow Wednesday's coordinated rate cuts with bold steps to unblock the flow of credit in global markets. The market is looking forward to the G7 meeting, as well as a broader meeting of G20 countries over the weekend, for a more coordinated approach to the global financial crisis. Perhaps this meeting will instill confidence in the market. Traders expect the G7 to take another major step to guarantee more inter-bank lending.
Apparently the current measures are not yet sufficient to turn the corner of this crisis. Therefore, markets expect central banks around the world to cut rates further after the Fed, the ECB and the central banks of Canada, England, China, Sweden and Switzerland cut rates simultaneously on Wednesday. As the dollar broke out of its recent depreciating trading pattern in today's early trading session, analysts are predicting a continuation of its upward movement over the weekend, and further rate cuts will help bolster this movement. Unless today's G7 Summit creates a sudden rally for the other major world currencies, the USD will likely continue its bullish run.
EUR - Euro-Zone Rate Cut Can Take Up to Two Years to Digest
European banks are more highly leveraged than their U.S. counterparts, and the perception of a recession in Europe hasn't yet been priced in. The EUR's value versus the USD already reflects expectations that the difference between the benchmark rates for the Fed and the European Central Bank (ECB) will narrow in the future, which the coordinated cut did not change. The ECB lowered its overnight lending rate by half a percentage point to 3.75% yesterday; and the Federal Reserve reduced its target lending rate by a half-percentage point to 1.5 %, both moves are expected to generate more confidence in money markets and increase the volume of inter-bank lending.
The EUR is likely to benefit against the dollar should the European Central Bank lower overnight borrowing costs. The ECB independent rate cuts will also likely fuel further gains for the EUR since it will demonstrate the capacity for the ECB to be proactive on economic and financial developments. In the last few months, the ECB has been less aggressive than the Fed in addressing financial problems, and as the credit crisis was worsening in Europe, the EUR was steadily falling against the USD. However, the latest ECB move was an effective rate cut, which reassured the banks that they could rely on it to keep liquidity circulating and also bring more confidence to the markets.
Nevertheless, the Euro- Zone is likely to responds more slowly to changes in official interest rates than countries like the United States. The Euro-Zone economy can take up to two years to digest rate changes because of its diverse and decentralized nature. The ECB is now considering the impact of impaired functioning of money markets on the pass-through of rate changes, although it is too early to draw any definite conclusions. Unless today's G7 Summit produces strong indicators for Europe's economic future, the EUR could continue to lose ground to its currency counterparts.
JPY - Japanese Currency a Safe-Haven in Times of Financial Turmoil
The yen is headed for its biggest weekly gain versus the dollar on speculation a global stock market rout will prompt investors to pare holdings of higher-yielding assets funded with JPY. The yen rose to 98.86 per dollar, headed for a 6.8% gain this week. Apparently the market's trend is to buy the yen as the credit crunch is spreading from the financial sector to other companies, meaning currency traders can't take on more risk. The yen is probably going to continue strengthening since continued financial market volatility is now spilling over to concern about global growth outlook.
Despite the synchronized cut in borrowing costs around the world this week, fears are still growing that the global economy is shifting toward recession. This move is seen as too little and too late, and investors doubt that the meeting of the G7 nations later today will achieve much. As a result, the Japanese currency has become a refuge from the worsening financial crisis. The yen is gaining in these times of financial turmoil as investors unwind carry trades using the low-yielding Japanese currency to buy higher-yielding currencies. As the panic mode gripping investors deepens on fears that the global financial system is faltering, the Japanese currency has acted as a safe-haven. As with the other major currencies, unless today's G7 Summit produces positive results for the global economy, the JPY will continue its recent trend.
Oil - Recent Price of Crude Oil Not Seen Since Last October
It has been one year since the price of Crude Oil reached the price where it currently sits. The difference comes from the direction the price of this commodity is moving. Last October, when Oil hit $82, it was beginning a significant upward trend which ended in July at $147 a barrel. At the moment, the price of Crude Oil is on a major downward trend which analysts are predicting won't end until it sinks as low as $50.
Speculation has come to play a major role in spot trading recently. The expectations of a production cut from OPEC in November have some investors worried that the price of Oil may see a premature rise as a result of this speculation. Price increases are not necessarily the aim of OPEC. Rather, stabilization in prices is the objective as movements, such as those seen over the last year, are unsustainable and potentially damaging to the demand for Crude Oil. Price jumps also generate a stronger motivation to those in search of alternative fuel sources, which cause further deterioration to demand and price value for traditional fuel sources like Oil. Also, with a strengthening dollar, Oil is continuing to see depreciation to its dollar value. Unless something occurs which reverses this trend, the price of Oil will continue to fall as analysts are forecasting.
Technical News
EUR/USD
The pair has been range-trading for the past few days, and is now traded around the 1.3620 level. Currently, the Bollinger Bands on the 4-hour chart are tightening, suggesting that a sharp movement is impending, and as all oscillators on the 4 hour-chart are pointing down it appears that the move will be bearish. Traders should wait for the breach and swing.
GBP/USD
The cable is currently in the midst of a very strong downtrend and dropped over 400 pips in one day. Right now, the pair's price has dropped beneath the Bollinger Bands' lower border, indicating that another bearish session might take place. Going short appears to be a good strategy today.
USD/JPY
There is a very distinct bearish channel forming on the daily chart, as the pair is now floating in the middle of it. A bearish cross on the 1-hour chart's Slow Stochastic suggests that another bearish move is forthcoming. Going short might be the right choice today.
USD/CHF
After peaking at the 1.1485 level, the pair is dropping consistently and is now traded around the 1.1185 level. Currently, as all oscillators on the 4-hour chart are pointing down, it seems that the bearish movement could extend. Going short appears to be the preferable choice today.
The Wild Card
Wild - Silver
After appreciating from $10.80 an ounce to $12.20, Silver prices dropped to $11.80. And now, as a bearish cross on the 4-hour chart's Slow Stochastic took place, it appears that Silver might experience a bearish correction. This might be a great opportunity for forex traders to enter a very promising trend.
FOREXYARD
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Headlines
G7 Summit on Financial Crisis Kicks Off Today
Today's meeting of finance ministers and central bankers from the world's leading industrial nations kicks off today as the financial crisis is the primary focus of today's economy. Apparently recent measures have not been sufficient enough to turn the corner of this crisis; therefore, markets are expecting central banks around the world to cut rates further. These rate cuts, and other possible solutions, will be the main talking points in today's G7 Summit.
Economic News
USD - Interest Rate Cut Strengthens U.S. Currency
After declining for the past three days, the USD finally started to gain versus the EUR yesterday rising to $1.3558 at the close of yesterday's trading session. This could be attributed to the steadily climbing short-term interest rates in global money markets despite coordinated efforts by many central banks this week to ease the credit crisis. Regardless of these efforts, there is still a fear of further bank failures. This is leading many banks to start hoarding cash, especially the USD, and also discouraging inter-bank lending. The resulting investor demand for dollars has pushed the USD's value higher against the other major currencies.
The USD's gains also came amid speculation that the Group of Seven (G7) meeting of finance ministers and central bankers today would follow Wednesday's coordinated rate cuts with bold steps to unblock the flow of credit in global markets. The market is looking forward to the G7 meeting, as well as a broader meeting of G20 countries over the weekend, for a more coordinated approach to the global financial crisis. Perhaps this meeting will instill confidence in the market. Traders expect the G7 to take another major step to guarantee more inter-bank lending.
Apparently the current measures are not yet sufficient to turn the corner of this crisis. Therefore, markets expect central banks around the world to cut rates further after the Fed, the ECB and the central banks of Canada, England, China, Sweden and Switzerland cut rates simultaneously on Wednesday. As the dollar broke out of its recent depreciating trading pattern in today's early trading session, analysts are predicting a continuation of its upward movement over the weekend, and further rate cuts will help bolster this movement. Unless today's G7 Summit creates a sudden rally for the other major world currencies, the USD will likely continue its bullish run.
EUR - Euro-Zone Rate Cut Can Take Up to Two Years to Digest
European banks are more highly leveraged than their U.S. counterparts, and the perception of a recession in Europe hasn't yet been priced in. The EUR's value versus the USD already reflects expectations that the difference between the benchmark rates for the Fed and the European Central Bank (ECB) will narrow in the future, which the coordinated cut did not change. The ECB lowered its overnight lending rate by half a percentage point to 3.75% yesterday; and the Federal Reserve reduced its target lending rate by a half-percentage point to 1.5 %, both moves are expected to generate more confidence in money markets and increase the volume of inter-bank lending.
The EUR is likely to benefit against the dollar should the European Central Bank lower overnight borrowing costs. The ECB independent rate cuts will also likely fuel further gains for the EUR since it will demonstrate the capacity for the ECB to be proactive on economic and financial developments. In the last few months, the ECB has been less aggressive than the Fed in addressing financial problems, and as the credit crisis was worsening in Europe, the EUR was steadily falling against the USD. However, the latest ECB move was an effective rate cut, which reassured the banks that they could rely on it to keep liquidity circulating and also bring more confidence to the markets.
Nevertheless, the Euro- Zone is likely to responds more slowly to changes in official interest rates than countries like the United States. The Euro-Zone economy can take up to two years to digest rate changes because of its diverse and decentralized nature. The ECB is now considering the impact of impaired functioning of money markets on the pass-through of rate changes, although it is too early to draw any definite conclusions. Unless today's G7 Summit produces strong indicators for Europe's economic future, the EUR could continue to lose ground to its currency counterparts.
JPY - Japanese Currency a Safe-Haven in Times of Financial Turmoil
The yen is headed for its biggest weekly gain versus the dollar on speculation a global stock market rout will prompt investors to pare holdings of higher-yielding assets funded with JPY. The yen rose to 98.86 per dollar, headed for a 6.8% gain this week. Apparently the market's trend is to buy the yen as the credit crunch is spreading from the financial sector to other companies, meaning currency traders can't take on more risk. The yen is probably going to continue strengthening since continued financial market volatility is now spilling over to concern about global growth outlook.
Despite the synchronized cut in borrowing costs around the world this week, fears are still growing that the global economy is shifting toward recession. This move is seen as too little and too late, and investors doubt that the meeting of the G7 nations later today will achieve much. As a result, the Japanese currency has become a refuge from the worsening financial crisis. The yen is gaining in these times of financial turmoil as investors unwind carry trades using the low-yielding Japanese currency to buy higher-yielding currencies. As the panic mode gripping investors deepens on fears that the global financial system is faltering, the Japanese currency has acted as a safe-haven. As with the other major currencies, unless today's G7 Summit produces positive results for the global economy, the JPY will continue its recent trend.
Oil - Recent Price of Crude Oil Not Seen Since Last October
It has been one year since the price of Crude Oil reached the price where it currently sits. The difference comes from the direction the price of this commodity is moving. Last October, when Oil hit $82, it was beginning a significant upward trend which ended in July at $147 a barrel. At the moment, the price of Crude Oil is on a major downward trend which analysts are predicting won't end until it sinks as low as $50.
Speculation has come to play a major role in spot trading recently. The expectations of a production cut from OPEC in November have some investors worried that the price of Oil may see a premature rise as a result of this speculation. Price increases are not necessarily the aim of OPEC. Rather, stabilization in prices is the objective as movements, such as those seen over the last year, are unsustainable and potentially damaging to the demand for Crude Oil. Price jumps also generate a stronger motivation to those in search of alternative fuel sources, which cause further deterioration to demand and price value for traditional fuel sources like Oil. Also, with a strengthening dollar, Oil is continuing to see depreciation to its dollar value. Unless something occurs which reverses this trend, the price of Oil will continue to fall as analysts are forecasting.
Technical News
EUR/USD
The pair has been range-trading for the past few days, and is now traded around the 1.3620 level. Currently, the Bollinger Bands on the 4-hour chart are tightening, suggesting that a sharp movement is impending, and as all oscillators on the 4 hour-chart are pointing down it appears that the move will be bearish. Traders should wait for the breach and swing.
GBP/USD
The cable is currently in the midst of a very strong downtrend and dropped over 400 pips in one day. Right now, the pair's price has dropped beneath the Bollinger Bands' lower border, indicating that another bearish session might take place. Going short appears to be a good strategy today.
USD/JPY
There is a very distinct bearish channel forming on the daily chart, as the pair is now floating in the middle of it. A bearish cross on the 1-hour chart's Slow Stochastic suggests that another bearish move is forthcoming. Going short might be the right choice today.
USD/CHF
After peaking at the 1.1485 level, the pair is dropping consistently and is now traded around the 1.1185 level. Currently, as all oscillators on the 4-hour chart are pointing down, it seems that the bearish movement could extend. Going short appears to be the preferable choice today.
The Wild Card
Wild - Silver
After appreciating from $10.80 an ounce to $12.20, Silver prices dropped to $11.80. And now, as a bearish cross on the 4-hour chart's Slow Stochastic took place, it appears that Silver might experience a bearish correction. This might be a great opportunity for forex traders to enter a very promising trend.
FOREXYARD
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European Market Update
| Daily Forex Fundamentals | Written by Trade The News | Oct 10 08 10:04 GMT | | |
| Equity markets in free fall; all eyes looking towards G7 for solutions ECONOMIC DATA(SZ) Switzerland Sept Unemployment Rate: 2.4% v 2.4%;Unemployment Rate SA: 2.6% v 2.5%e (FR) France Aug Industrial Production M/M: -0.4% v -0.8%e; Y/Y: -2.6% v -2.6% (DE) Denmark Sept CPI M/M: 0.4% v 0.3%e; Y/Y: 4.2% v 4.0% (NE) Netherlands Industrial Production M/M: -1.3% v 0.5%e; Y/Y: -1.3% v 0.0%e (IT) Aug Industrial Production M/M: 1.4% v 0.6%e; Y/Y: -5.3% v -4.0; Y/Y: (NO) Norway Sept Producer Prices incl Oil M/M: -0.4% v -1.8%e; Y/Y: 30.3% v 28.5%e (SW) Sweden Sept AMV Unemployment Rate: 3.1% v 3.0% SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUMIn equities: Reportedly SEC extended its Short Selling ban until Oct 17th (unconfirmed reports) Barclays [BARC.UK] Confirmed it was considering several options, including raising capital to the industry-wide commitment to increase Tier 1 capital in the sector || RPS Group [RPS.UK] Announced acquisition of Paras for £6.4 million. || Admiral Group [ADM.UK] stated that its YTD Revenues were up 13% y/y at £718M and added that it wason track to hit or exceed 2008 estimates. The company noted that its balance sheet remained strong || Tele2 [TEL2B.SW] Stated that it would take a SEK943B goodwill impairment charge in Q3. || Severstal [CHMF.RU] Announced a reduction in its steel production in Russia, North America and Europe facilities in October citing the changing global economic conditions. The company noted that it would reduce Cherepovets steel production by 25%. It stated it is reviewing its full year guidance issued with its 1H08 results and will update the market in due course. || British Energy [BGY.UK] provided BCU update; notes work on reactors is going well but that Hartlepool, Heysham 1 reactors are behind schedule and not likely to return until next year, which would result higher than £115M. || Gold Field [GFI] Guided Q1 2009 production lower, 798k oz v 820k prior, citing slower production at Cerro Corona. The group cash costs are expected to be in line with previous guidance, at approximately R154,000/kg (618/oz) and is on track to meet 1M ounces production level by Q309 || Rhodia [RHA.FR] RHA.FR: Announced plans to buyback up to 2M shares (2% of shares outstanding). || Man AG [MAN.GE] CEO stated that it saw a 10% decline in Truck business unit for 2009 and reiterated 100K truck deliveries target for 2008 || Unicore [UMI.BE] Maintained its FY guidance ans sought holder approval to cancel 5M shares. It added that it saw 2008 as a record year Company is planning to complete remaining buyback of €70M worth of shares but did note a noticeable slowdown in their automotive sector || Erste Bank [EBS.AS] EBS.AS: Confirmed that it had €300M in exposure to Iceland. || Wincorp [WIN.GE] CEO stated that its Fiscal year sales were up 8% y/y and would reach the upper end of forecasts. The company plans to increase FY dividend. || Norddeutsche Affiner [NDA.GE] stated that Salzgitter [SZG.GE] holds 20% stake in co. || Deutsche PostBank [DBP.GE] CEO stated that there wereno negative effects at this time which could prevent or halt Deutsche Bank agreement . The company also stated it would maintain its 2010 targets Speakers: German regulator BaFin stated that the stability of German Insurance sector not threatened. The regulator noted that recent insurance surveys showed that the impact of financial crisis has limited been limited, but added that nurturance companies could expect significantly lower investment results || Germany DIW Institute forecasted German Q4 GDP to increase by 0.3% || China PBoC stated that its country's financial system wa stable and safe. China seeks to increase domestic demand and promote international payments balance. PBoC stated that it was not optimistic over global economic outlook. It reiterated its plans to remain flexible concerning their macroeconomic policy; need to coordinate money, fiscal, trade, industry policies. || German Fin Ministry spokesperson noted that not currently mulling any nationalization of banks || World Bank Head stated that countries must focus on bad financial sector assets. He added that the recent round of coordinated interest rate cuts will take time to work through. In Currencies: The CHF was broadly firmer on risk aversion flows against the major pairs. USD/CHF was off 100+ pips to test below the 12 level; EUR/CHF was off almost 200 pips in early European trading at 1.5160. The EUR/USD was steady for the most part hugging the 1.36 area. Regulators in South Korea to reportedly require banks to disclose the fx transactions records with customers. Dealers noting that the move possible in line with President Myung-bak's comments that recent depreciation of currency had been a result of speculative moves in the FX market. If proposal is carried out, would be the first time the Central Bank has asked for this type of information from private and commercial banks In Energy: IEA: lowered it world oil demand for both 2008 and 2009 adding that demand has weakened due high prices and from the ensuing economic slowdown . IEA cuts its 2008 global oil demand growth forecast By -250K BPD and its 2009 global oil demand forecast by -190K BPD. It noted that China's 20 08 was demand seen steady with growth of 8.0M BPD and its 2009 outlook looks firm. The IEA warned that the financial Fallout io hit oil project development as world oil demand Growth headed towards 15-Year low on credit crisis concerns ||Oil Qatar Oil Min: Confirmed that OPEC would discuss reducing oil supply during November's meeting || Libya confirmed the withdrawal of $7B in deposits from Swiss Banks after recently halted oil shipments into Switzerland. Reportly Libyan actions are a response to 'poor treatment of Libyan diplomats and businessmen by the canton of Geneva || Libya reiterates that OPEC should cut oil production at Nov meeting In Fixed Income: India Central bank canceled a planned INR100B bond auction || Norwegian Fin Min Extended Repo operations to NOK6B from NOK 3B prior. || France announced that it would sell up to €5.5B in bonds and notes in Oct Credit Crisis: India Central Bank cuts its cash reserve ratio by 150bps to 7.50%. Originally on Oct 6th, the central bank announced a 50bps cut to 8.50% effective on the Oct 11th, but implemented a more aggressive cut today. || Russian Central Bank reportedly revoked banking license, citing liquidity concerns. Russia revoked the license of ZAO Eurasia-Center bank withdrawn after failure to settle client accounts. || South Korean Brokerage Heads agreed to halt selling foreign financial instruments || Swiss Interim Fin Min reportedly stated that the govt was considering raising the level of guarantees on bank deposits .The official added that it was clear that the financial markets and economic crisis would have an impact on the Swiss economy, but she expects that the country will be less impacted than other countries. The current guarantee level is CHF30K ($26,584) NOTESEuropean equity market followed Asia and the late US equity price action on the downside. The Nikkei had its worst week on record as it lost over 2500 points to close at 8,276. Both the FTSE 100 index and DAX opened 10% lower before recovering and the Swiss franc currency seems to be getting its 'safe have' status back. Rumors circulated that the SEC re-imposed the ban on short selling that traders seems to have picked up and continued questions about exactly how the payment of the Lehman Credit default swaps ($400bln) would play out. The key barometer of European market sentiment so far on remains the performance of key equity indices. They are currently in a near 'meltdown mode' following an abysmal performance late in the U.S. yesterday and a heavy sell off in the Far East today. All eyes turning toward G7 as the finance minister gather to convene today at 18:00 GMT in Washington. There were rumors of a formal G8 summit of World leaders should be called soon to discuss the financial market situation. But dealers are skeptical as to what the central banks and politicians can do. Dealer summarizing the 'panic' as being driven by the vicious cycle of continuing deleveraging, margin related calls coupled with declining fundamentals. As G7 convenes there are calls f for another round of coordinated interest rate cuts and speculation that currency intervention could result. Ideas range from blanket guarantees of all deposits, freezes on foreclosures and unlimited massive liquidity injections, public provision of credit, massive direct govt stimulus, public recapitalization of banking system, borrow lender agreements at the country level to maintain orderly financing of deficits. But a head dealer in Europe noted that 'most of this has already been announced' Looking ahead: General Electric [GE] kicks off the rush to earnings season. Back on Sept 25th the company cut its FY08 EPS $1.95-2.10 compared to $2.20e, which was prior guidance of $2.20-2.30 which was reaffirmed 3 times this year. 7:00 (CA) Sept Net Change in Employment: 10.0Ke v prior 15.2K; Unemployment Rate: 6.2%e v 6.1% prior Trade The News Staff Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing. | |
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Pressure For G7 Action
| Daily Forex Fundamentals | Written by Investica | Oct 10 08 10:44 GMT | | |
| The dollar will continue to gain structural support from the severe liquidity crisis in global credit markets. Nevertheless, it will be increasingly difficult for the US currency to sustain strength given the underlying US fears. Sentiment surrounding the financial markets initially improved following the co-ordinated interest rate cuts on Wednesday and this lessened dollar demand slightly. Underlying tensions were still severe and sentiment deteriorated again later in the session as credit spreads failed to narrow. The US Treasury stated that it would consider buying direct stakes in the banks and markets will be looking for further measures at the G7 meetings on Friday and over the weekend. Wall Street was subjected to further heavy selling pressure later in the US session and the Euro dipped to test levels near 1.36 as there were renewed losses on the crosses. If US economic fears increase, then the dollar will find it more difficult to gain support. The panic in global markets has still tended to dominate over the past 24 hours and the dollar pushed beyond 1.3550 against the Euro in Asian trading on Friday. Any move to insure US bank deposits would tend to be a negative medium-term dollar factor, but the US currency was still finding support on Friday as market tensions remained severe. Investica Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors. | |
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Euro Firms Ahead Of G7 Meeting, Will Governments Guarantee Interbank Lending?
| Daily Forex Fundamentals | Written by DailyFX | Oct 10 08 10:18 GMT | | |
| Talking Points
Euro Firms Ahead of G7 Meeting, Will Governments Guarantee Interbank Lending? After a test of 1.3500 the Euro bounced from support rallying over a 100 bps. The pair would find resistance at 1.3650 and has started to consolidate ahead of the upcoming G7 meeting. Finance ministers and central bankers from the U.S. Japan, Germany, U.K., France, Canada and Italy will meet in Washington D.C. today to discuss what other measures can be taken to help stem the crisis. It is the first meeting of global policy makers since the current crisis began to heighten a month ago. A statement will be released at 6pm where some sort of more unified effort is expected to be proposed. U.S. Treasury Secretary Hank Paulson and ECB President Trichet are also scheduled to speak after the meeting. Speculation is that the one of the main topics to be discussed at the G7 meeting is the possibility of governments guaranteeing interbank lending in an attempt to bring down Libor rates. The interbank lending rate has skyrocketed despite the coordinated rate cut and the liquidity efforts undertaken by the various governments. The failure of the rate to ease has perpetuated the current freefall in equities as the Nikkei dropped 9% today following the U.S. markets dropping to their lowest levels in five years. The major pairs have started to consolidate ahead of the potential actions from the world's top policy makers. Fundamental data from the Euro-Zone was better than expected as French Industrial production declined 0.4% in August against expectations of -0.8%. Nevertheless, activity fell from 1.4% in July as the region's second biggest economy is headed toward a recession. Meanwhile, Italian industrial production unexpectedly improved 1.4% against expectations of a 0.6% gain. These results and the string of better than expected data from Germany, the region's largest economy, may be enough to keep the ECB on hold over the near-term following their 50 bps cut. Market participants are still pricing in 128 bps worth of rate cuts over the next twelve months. These expectations have continued to weigh on the EURUSD despite recent hawkish rhetoric from ECB officials. President Bush is scheduled to speak today at 10 Am in an effort to assure Americans that the U.S. government is doing everything in its power to stem the current crisis which could add dollar support. However, we may see little volatility ahead of the results of the G7 meeting. The collapse of equity markets is being fueled by panic and risk aversion, which is evident by the strength of the Yen crosses. However, outside of the USDJPY the greenback has continued to strengthen against other major currencies. The two causes for this recent strength have been the belief that the U.S. is better positioned to emerge from this crisis and the flight to the safety of U.S. treasuries. Therefore, next week we may see the dollar weaken if risk appetite increases. However, the decline may be short lived as investors view the U.S. as the most attractive market and stocks and real estate at current valuations will be very attractive. The U.S. Trade Balance deficit is expected to have narrowed as the value of oil exports have declined, which will be overshadowed by the other events scheduled today.
Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Daily Technical Strategist
| Daily Forex Technicals | Written by FXTechstrategy | Oct 10 08 10:25 GMT | | |||||||||||||||||||||||||||||||||||||
| Today's Focus: EURUSD & GBPUSD
EURUSDEUR looks to head to the downside again as its attempt on the upside was halted ahead of the 1.3852/82 zone, its Sept 11'08 low/July'07 high opening up risk towards its YTD low at 1.3443.Presence of three shooting star candles remains supportive of the said retest which is also in line with its medium term downtrend. Invalidating the latter will push the pair lower aiming at its Dec'04 high/August'07 low at 1.3366/61 where a break could see EUR weaken further towards the 1.3312/1.3264 zone, its .618 Ret (1.1640-1.6038 rally)/Jun'07 low. On the upside, the 1.3682/66 zone, its April'07/Dec'04 highs will serve as the first target ahead of the 1.3852/82 zone followed by its Oct'07 low at 1.4015 and subsequently its Sept 16'08 low at 1.4073.The daily studies are oversold and a positive divergence is in place supporting a temporary bounce case. On the whole, the pair's broader bias remains to the downside with any corrective gains seen as short term.
GBPUSDGBP maintained its medium term downtrend Thursday breaking through and closing below its Nov'05 low at 1.7049.As highlighted in our Thursday analysis, with a loss of the 1.7049 level achieved and its June'03 high at 1.6857 being challenged in early morning trading today, GBP's longer term downside weakness has been triggered. In such a case, its .618 Ret (1.3682-2.1161 rally, monthly chart) at 1.6552 is seen as the next downside target on a convincing loss of the 1.6857 level, its June'03 high. Below there will favour a move towards the 1.6175 level, representing its Mar'03 high. Resistance comes in at the 1.7049 level ahead of its April'06 low at 1.7251 and then the 1.7447 level, its Sept 11'08.All in all, having eroded the 1.7049 level,GBP is poised to head further lower beyond the 1.6857
Mohammed Isah This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report | |||||||||||||||||||||||||||||||||||||
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Brazil reiterates no change to oil contracts
LISBON, Oct 10 (Reuters) - Brazil will not alter existing contracts with foreign and local oil producers that have discovered huge reserves in the subsalt cluster deep under the ocean floor, Energy Minister Edison Lobao reiterated on Friday.
Speaking at a Portuguese-Brazilian business meeting in Lisbon, Lobao also hailed the presence of Portugal's Galp Energia (GALP.LS: Quote, Profile, Research, Stock Buzz) in several Santos basin blocks, calling it an important partner of Brazil's state-run oil giant Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz)(PBR.N: Quote, Profile, Research, Stock Buzz).
"Brazil will respect all the contracts. The sanctity of the contracts will never be broken," Lobao said.
Galp has a 10 percent stake in the Tupi discovery, where Petrobras estimated recoverable reserves at up to 8 billion barrels, and in a number of other important projects like Jupiter and Iara.
Other partners in these and other subsalt blocks include Britain's BG Group (BG.L: Quote, Profile, Research, Stock Buzz), Spain's Repsol (REP.MC: Quote, Profile, Research, Stock Buzz) and ExxonMobil (XOM.N: Quote, Profile, Research, Stock Buzz) of the United States.
After the Tupi reserve announcement last November, Brazil started mulling changes to its oil law and other rules for oil exploration and production, eyeing more taxes and royalties, as well as changing the way it offers new concessions to leave high-potential blocks in state hands.
But it has repeatedly said any changes would apply only to future contracts.
Also on Friday, Galp and Petrobras signed a draft deal to set up a joint venture to produce 500,000 tonnes a year of biodiesel, with half of that amount to be produced in Portugal for distribution in Europe. The partners were yet to confirm the commercial viability of the project. (Reporting by Elisabete Tavares and Andrei Khalip; editing by James Jukwey)
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Yen cuts fear-induced gains in volatile trade; G7 eyed
By Veronica Brown
LONDON (Reuters) - The Japanese yen retreated from three-year highs against the euro but remained elevated in highly volatile trade on Friday, as unnerved investors unloaded risk on deep worries about the global financial system.
Stock markets in Europe were down sharply -- but off earlier lows -- keeping the Japanese unit as the currency of choice.
In overnight Asian trade, Japan's Nikkei share average .N225 plunged nearly 12 percent at one stage and was down 23 percent for the week -- about twice what it suffered in the week of the 1987 crash -- after U.S. stocks slid sharply on huge selling of bank and insurance shares.
Tokyo stocks were also hit by the bankruptcy filing of insurer Yamato Life, the first Japanese financial institution to fall victim to the credit crisis.
Coordinated interest rate cuts by the Federal Reserve and major central banks this week failed to relieve investor fears that the freeze in credit markets will cause more damage to banks and a sharp economic recession around the world.
"Essentially we're flying blind. No-one has a clue what's going on," DZ Bank currency strategist Sonja Marten said.
"The uncertainty is too great and volatility is incredible. It's a question of market confidence and somehow we're going to have to get it back," she added.
Leaders from Group of Seven powers are meeting in Washington to mull other joint measures to try and stop the panic in markets.
The euro slid to a three-year low of 132.80 yen before substantially cutting losses to 134.89 yen, down 0.2 percent on the day, according to Reuters data.
The dollar hit a 6-1/2 month low of 97.92 yen before clawing back to 98.96 yen, down 0.4 percent on the day.
The Australian dollar, the most battered of major currencies due to its once favored status in the carry trade, was down almost 4 percent at 65.18 yen.
As investors continued scrambling for cash, the dollar hit a 14-month peak .DXY against a basket of major currencies before retreating to trade flat on the day. The euro was up 0.1 percent to $1.3620.
G7 SOLUTION?
The world's economic powers are facing huge pressure to contain the financial crisis on growing fears of a global economic recession.
In a bid to unfreeze bank lending and staunch massive losses in equity markets, the U.S. government is weighing guaranteeing billions of dollars in bank debt and temporarily insuring all U.S. bank deposits, The Wall Street Journal reported.
"Markets would appear to require reassurance that global policymakers are prepared to be global leaders," RBC strategists said in a note to clients.
British Prime Minister Gordon Brown called for a global solution to the crisis and urged other countries to adopt Britain's actions to save the banking system.
Other governments should follow Britain in putting money into struggling banks and offering guarantees worth hundreds of billions to persuade banks to start lending to each other, Brown wrote in an article in The Times newspaper.
(Reporting by Veronica Brown; Editing by Chris Pizzey)
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LONDON (Reuters) - The Japanese yen retreated from three-year highs against the euro but remained elevated in highly volatile trade on Friday, as unnerved investors unloaded risk on deep worries about the global financial system.
Stock markets in Europe were down sharply -- but off earlier lows -- keeping the Japanese unit as the currency of choice.
In overnight Asian trade, Japan's Nikkei share average .N225 plunged nearly 12 percent at one stage and was down 23 percent for the week -- about twice what it suffered in the week of the 1987 crash -- after U.S. stocks slid sharply on huge selling of bank and insurance shares.
Tokyo stocks were also hit by the bankruptcy filing of insurer Yamato Life, the first Japanese financial institution to fall victim to the credit crisis.
Coordinated interest rate cuts by the Federal Reserve and major central banks this week failed to relieve investor fears that the freeze in credit markets will cause more damage to banks and a sharp economic recession around the world.
"Essentially we're flying blind. No-one has a clue what's going on," DZ Bank currency strategist Sonja Marten said.
"The uncertainty is too great and volatility is incredible. It's a question of market confidence and somehow we're going to have to get it back," she added.
Leaders from Group of Seven powers are meeting in Washington to mull other joint measures to try and stop the panic in markets.
The euro slid to a three-year low of 132.80 yen before substantially cutting losses to 134.89 yen, down 0.2 percent on the day, according to Reuters data.
The dollar hit a 6-1/2 month low of 97.92 yen before clawing back to 98.96 yen, down 0.4 percent on the day.
The Australian dollar, the most battered of major currencies due to its once favored status in the carry trade, was down almost 4 percent at 65.18 yen.
As investors continued scrambling for cash, the dollar hit a 14-month peak .DXY against a basket of major currencies before retreating to trade flat on the day. The euro was up 0.1 percent to $1.3620.
G7 SOLUTION?
The world's economic powers are facing huge pressure to contain the financial crisis on growing fears of a global economic recession.
In a bid to unfreeze bank lending and staunch massive losses in equity markets, the U.S. government is weighing guaranteeing billions of dollars in bank debt and temporarily insuring all U.S. bank deposits, The Wall Street Journal reported.
"Markets would appear to require reassurance that global policymakers are prepared to be global leaders," RBC strategists said in a note to clients.
British Prime Minister Gordon Brown called for a global solution to the crisis and urged other countries to adopt Britain's actions to save the banking system.
Other governments should follow Britain in putting money into struggling banks and offering guarantees worth hundreds of billions to persuade banks to start lending to each other, Brown wrote in an article in The Times newspaper.
(Reporting by Veronica Brown; Editing by Chris Pizzey)
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SNAPSHOT - Financial crisis - 1000 GMT
NEWS
- Pan-European indices hit 5-year lows, Japan's Nikkei
registers biggest one day drop since 1987 crash.
- G7 finance ministers, central bankers, gather in
Washington
- U.S. considering guaranteeing billions of dollars of bank
debt and temporarily insuring all U.S. bank deposits, Wall
Street Journal says
- Russia's lower house of parliament passes two anti-crisis
packages worth $86 billion
- Oil falls $4 to one-year low and International Energy
Agency cuts demand forecast for 2008 to lowest rate in
percentage terms since 1993. Gold rises to 2 1/2 month high; yen
falls back against euro after hitting a three-year high
- IMF activates emergency financing mechanism
QUOTES
"It's time for the 'kitchen sink' -- as in, throw everything
there is at the problem and in such scale that the 'shock and
awe' break the current cycle of fear," Charles Diebel, a rate
strategist at Nomura, said in a note to clients.
"There's nothing left for us to trust... Investors are
scurrying to convert to cash. A lack of confidence is coupling
with panic." - Takashi Ushio, Marusan Securities
"If there's something the IMF can do, I want them to do it
flexibly. Japan will cooperate with that, including providing
funds for it," Japanese Finance Minister Shoichi Nakagawa
"... because this is a global problem, it requires a global
solution." - British PM Brown
UPCOMING (Times in GMT)
FRIDAY
G7 finance ministers and central bankers meet in Washington
1400 - Bush statement
2245 - Paulson news conference
2300 - Trichet news conference
SATURDAY
G7 finance ministers and central bankers meet in Washington
South Korean, Japanese finance ministers to meet in
Washington
Sarkozy, Merkel meet in France
MONDAY
Annual meeting of IMF/World Bank in Washington
U.S. fixed-income markets closed, Columbus Day
Read more...
- Pan-European indices hit 5-year lows, Japan's Nikkei
registers biggest one day drop since 1987 crash.
- G7 finance ministers, central bankers, gather in
Washington
- U.S. considering guaranteeing billions of dollars of bank
debt and temporarily insuring all U.S. bank deposits, Wall
Street Journal says
- Russia's lower house of parliament passes two anti-crisis
packages worth $86 billion
- Oil falls $4 to one-year low and International Energy
Agency cuts demand forecast for 2008 to lowest rate in
percentage terms since 1993. Gold rises to 2 1/2 month high; yen
falls back against euro after hitting a three-year high
- IMF activates emergency financing mechanism
QUOTES
"It's time for the 'kitchen sink' -- as in, throw everything
there is at the problem and in such scale that the 'shock and
awe' break the current cycle of fear," Charles Diebel, a rate
strategist at Nomura, said in a note to clients.
"There's nothing left for us to trust... Investors are
scurrying to convert to cash. A lack of confidence is coupling
with panic." - Takashi Ushio, Marusan Securities
"If there's something the IMF can do, I want them to do it
flexibly. Japan will cooperate with that, including providing
funds for it," Japanese Finance Minister Shoichi Nakagawa
"... because this is a global problem, it requires a global
solution." - British PM Brown
UPCOMING (Times in GMT)
FRIDAY
G7 finance ministers and central bankers meet in Washington
1400 - Bush statement
2245 - Paulson news conference
2300 - Trichet news conference
SATURDAY
G7 finance ministers and central bankers meet in Washington
South Korean, Japanese finance ministers to meet in
Washington
Sarkozy, Merkel meet in France
MONDAY
Annual meeting of IMF/World Bank in Washington
U.S. fixed-income markets closed, Columbus Day
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European shares down 6.8 pct in global plunge
* FTSEurofirst 300 tumbles 6.8 pct, part of global slide
* Index hits lowest level since July 2003
* Oil stocks plunge as crude declines sharply
By Rebekah Curtis
LONDON, Oct 10 (Reuters) - European stocks tumbled nearly 7 percent early on Friday, swept into a global panic sell-off as investors feared world governments' efforts to thaw credit markets would fail to ward off a global recession.
Fragile banks led the decline, with Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) off 9.6 percent and Santander (SAN.MC: Quote, Profile, Research, Stock Buzz) down 7.1 percent. HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), a standout faller in Europe, dropped 13.7 percent.
Oil shares also tumbled, with BP (BP.L: Quote, Profile, Research, Stock Buzz) and Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) down 5 and 5.9 percent respectively as crude fell 4.3 percent.
At 0910 GMT, the pan-European FTSEurofirst 300 index was down 6.8 percent at 858.86 points, after falling more than 9 percent in early trade and hitting its lowest level since July 2003.
The index has fallen more than 21 percent so far this week, on track for its worst week on record, in a credit crisis that has frozen interbank lending, hammered banks and slowed the global economy.
European shares have dropped about 43 percent in the year to date.
World stocks slumped to their lowest levels in five years on Friday. Measures from the United States, Britain and other countries to fight the worst financial crisis in 80 years -- even this week's coordinated interest rate cuts -- have failed to calm credit and money markets and quell investor fears.
Finance chiefs from the Group of Seven rich nations meet in Washington later on Friday to discuss how to stem the crisis.
"The steps that have been taken thus far have yet to prove their worth," said Mike Lenhoff, chief market strategist at Brewin Dolphin in London.
"The bears are in their element at the moment," he added. "It's as if the financial system has lost its capacity to function."
Britain's FTSE 100 .FTSE lost 5.5 percent, France's CAC .FCHI lost 6.5 percent and Germany's DAX .GDAXI shed 8.2 percent. The major national indexes earlier fell as much as 10 percent.
Japan's Nikkei 225 .N225 fell nearly 10 percent on Friday, while Wall Street's Dow Jones industrial average .DJI shed more than 7 percent on Thursday.
Investors blamed the slide in U.S. stocks on Thursday on the expiry of a ban on short-selling of financial stocks, there was intense speculation on whether U.S. authorities would extend the restrictions.
DEFENSIVES SLIDE
Even traditionally defensive stocks failed to offer investors shelter in the stricken European market. Utilities tumbled, with E.ON (EONGn.DE: Quote, Profile, Research, Stock Buzz) the biggest individual negative weight in Europe, off 11 percent.
GDF Suez (GSZ.PA: Quote, Profile, Research, Stock Buzz) shares dropped 8 percent, extending Thursday's 13 percent fall after Belgian energy minister Paul Magnette told Le Soir newspaper of plans to cap electricity prices at subsidiary Electrabel.
Pharmaceutical stocks, usually seen as defensives, were not spared: AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) was down 5.5 percent, GlaxoSmithKline (GSK.L: Quote, Profile, Research, Stock Buzz) off 6.1 percent and Novartis (NOVN.VX: Quote, Profile, Research, Stock Buzz) down 5.7 percent.
Heavyweight stock Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) dropped 7 percent.
Miners took a whipping as copper
Equity trading in Russia, Austria, Iceland, Romania, Ukraine and Indonesia was halted while nearly half of Milan stocks were suspended for excessive losses.
"It's just a panic ... investors are deciding: 'This is the time at which were going to throw in the towel'," said Peter Dixon, an economist at Commerzbank in London. "As one of my colleagues said: 'Game over please insert coins'." (Editing by Paul Bolding)
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