By David Ljunggren
OTTAWA, Oct 13 (Reuters) - Canada's ruling Conservatives look set to retain power on Tuesday in the first national election held in a major industrialized nation since the market meltdown this month.
Prime Minister Stephen Harper triggered the campaign five weeks ago on the grounds that his minority government could no longer work with opposition parties who hold the balance of power in Parliament.
Then shares began to plummet and Harper retooled his campaign in a bid to persuade Canadians that only he could manage the country in such troubled times.
"At this crucial moment for our economy we need a realistic and credible plan to protect our jobs, our savings and our future," he said at a weekend rally, dismissing opposition calls for major government spending programs.
The election is the third in four years and -- according to virtually every poll over the last month -- will produce Canada's third successive minority government.
Harper, who defeated a minority Liberal administration in January 2006, foresees another election relatively soon.
"Obviously the Parliament won't last four years," he told CTV television on Sunday.
The Liberals were hampered this campaign by the ineffective performance of leader Stephane Dion and his insistence that despite tumbling markets and fears of a recession, the party would impose a carbon tax designed to cut greenhouse gases.
Harper says the tax would trigger an immediate recession "as bad as anywhere in the world." Dion says this is nonsense.
"Stephen Harper built his campaign on a lie. He must lose on this lie," he said on Sunday.
Harper is promising to keep taxes and inflation low while maintaining balanced budgets.
"It's the leadership and the plan we need for tough economic times," said Edgar Maghilom, a voter who works at the University of Guelph in Ontario.
"This is the wrong time to tax people. We need a steady hand and good government," he said.
Harper's campaign was by no means smooth. After assuring Canadians all would be well if they waited out the crisis, he suddenly announced measures to stabilize the economy.
Opponents said the prime minister -- a reserved figure -- did not appreciate that ordinary Canadians were worried.
"I understand those concerns. But I also understand that it is my responsibility as Prime Minister not to panic," he said.
The Conservatives had high hopes of winning a majority of the 308 seats in Parliament, in large part by picking up more support in the powerful French-speaking province of Quebec.
But their campaign there stumbled badly, making it almost certain they can only hope for another minority.
"If I get two mandates in a row, two minority mandates, I will be very thankful," Harper told CTV.
The Liberals' fate depends on how much of their support leaks to the left-leaning New Democrats and the Green Party.
Polls show the New Democrats close to the Liberals but not all analysts are sure this will be reflected in the result.
"The systemic (financial) problems will lead people to go to one of the two main established parties. People will have less willingness to experiment," said Allan Tupper, a professor of political science at the University of British Columbia.
The Conservatives hold 127 seats in Parliament while the Liberals have 95.
Dion, whose first language is French, has trouble communicating in English and polls suggest the Liberals are on their way to their worst performance since 1984, when they captured just 40 seats in Parliament. (Editing by Doina Chiacu)
Read more...
Monday, October 13, 2008
HK shrs end up 10 pct, biggest gain in 9 mths
* Main index up 10.2 percent in volatile trade
* China financials soar on government support talk
* PCCW falls on halted sale of HKT stake
(Updates to close)
By Parvathy Ullatil
HONG KONG, Oct 13 (Reuters) - Hong Kong shares surged 10.2 percent in skittish trade on Monday, rebounding from their worst weekly decline in more than a decade after worldwide measures to support markets and help contain the global financial crisis.
The blue-chip index posted its largest single day gain since January, boosted by Chinese financials such as China Merchants Bank , although the index had dipped 0.3 percent earlier in the session amid mixed signals from regional markets.
Shares in PCCW ended down 1.8 percent after the phone company halted the sale of a stake in its new HKT unit, citing the market upheaval.
The stock fell as much as 12.5 percent to HK$2.45 earlier, its lowest level since 1999 when the company repositioned itself as a fixed-line service provider after acquiring Hong Kong Telecom.
Chinese financial stocks rebounded from a week of steep declines on talk that the nation's sovereign fund will embark on another round of buying to support the mainland markets.
Central Huijin, an arm of China Investment Corp bought 2 million shares in each of the nation's top lenders in September.
The benchmark Hang Seng Index .HSI closed 1,515.29 points higher at 16,312.16. The main index lost 16.3 percent last week, its worst weekly fall since the market meltdown of January 1998.
"Guaranteeing bank deposits is a good idea, a strong step towards restoring investors' confidence," said Andrew To, sales director with Taifook Securities.
Regulators in European countries, Australia and New Zealand took increasingly bold measures to shore up their financial markets through measures ranging from blanket bank deposit guarantees to buying stakes in banks directly.
Mainboard turnover rose to HK$72.6 billion ($9.35 billion) from HK$69.4 billion on Friday.
China Merchants Bank led the blue chip gainers, rising 18 percent to HK$16.28.
ICBC , China's biggest bank, jumped 14 percent while China Construction Bank and No.3 lender Bank of China each rose 12 percent.
Top insurer China Life surged 16 percent after dropping to an 18-month low on Friday. Smaller rival Ping An Insurance was also up nearly 16 percent.
The China Enterprises Index .HSCE of top locally listed mainland Chinese firms rose 13.3 percent to 8,083.43.
Shares in China Oilfield Services, the country's largest offshore oil services group, rebounded and closed 12.3 percent higher at HK$5.76. It had fallen as much as 9.7 percent earlier in the session as investors worried about its lower drilling rates and higher finance cost.
Credit Suisse cut its target price to HK$5.75 per share from HK$12.0.
Shares in China's largest listed gold miner, Zijin Mining , closed 5.3 percent up on Monday after falling 9.4 percent at one point earlier as the price of the precious metal dived on a stronger U.S. dollar on Friday.
But Lingbao Gold ended down 0.7 percent after Deutsche Bank cut its rating on the stock to sell from buy, saying the company had yet to make its transformation from being a smelter to a miner of the metal. Lingbao's lack of self sufficiency in gold concentrates would erode its margins, the investment bank said.
(Additional reporting by Alison Leung; Editing by Anne Marie Roantree)
Read more...
* China financials soar on government support talk
* PCCW falls on halted sale of HKT stake
(Updates to close)
By Parvathy Ullatil
HONG KONG, Oct 13 (Reuters) - Hong Kong shares surged 10.2 percent in skittish trade on Monday, rebounding from their worst weekly decline in more than a decade after worldwide measures to support markets and help contain the global financial crisis.
The blue-chip index posted its largest single day gain since January, boosted by Chinese financials such as China Merchants Bank , although the index had dipped 0.3 percent earlier in the session amid mixed signals from regional markets.
Shares in PCCW ended down 1.8 percent after the phone company halted the sale of a stake in its new HKT unit, citing the market upheaval.
The stock fell as much as 12.5 percent to HK$2.45 earlier, its lowest level since 1999 when the company repositioned itself as a fixed-line service provider after acquiring Hong Kong Telecom.
Chinese financial stocks rebounded from a week of steep declines on talk that the nation's sovereign fund will embark on another round of buying to support the mainland markets.
Central Huijin, an arm of China Investment Corp bought 2 million shares in each of the nation's top lenders in September.
The benchmark Hang Seng Index .HSI closed 1,515.29 points higher at 16,312.16. The main index lost 16.3 percent last week, its worst weekly fall since the market meltdown of January 1998.
"Guaranteeing bank deposits is a good idea, a strong step towards restoring investors' confidence," said Andrew To, sales director with Taifook Securities.
Regulators in European countries, Australia and New Zealand took increasingly bold measures to shore up their financial markets through measures ranging from blanket bank deposit guarantees to buying stakes in banks directly.
Mainboard turnover rose to HK$72.6 billion ($9.35 billion) from HK$69.4 billion on Friday.
China Merchants Bank led the blue chip gainers, rising 18 percent to HK$16.28.
ICBC , China's biggest bank, jumped 14 percent while China Construction Bank and No.3 lender Bank of China each rose 12 percent.
Top insurer China Life surged 16 percent after dropping to an 18-month low on Friday. Smaller rival Ping An Insurance was also up nearly 16 percent.
The China Enterprises Index .HSCE of top locally listed mainland Chinese firms rose 13.3 percent to 8,083.43.
Shares in China Oilfield Services, the country's largest offshore oil services group, rebounded and closed 12.3 percent higher at HK$5.76. It had fallen as much as 9.7 percent earlier in the session as investors worried about its lower drilling rates and higher finance cost.
Credit Suisse cut its target price to HK$5.75 per share from HK$12.0.
Shares in China's largest listed gold miner, Zijin Mining , closed 5.3 percent up on Monday after falling 9.4 percent at one point earlier as the price of the precious metal dived on a stronger U.S. dollar on Friday.
But Lingbao Gold ended down 0.7 percent after Deutsche Bank cut its rating on the stock to sell from buy, saying the company had yet to make its transformation from being a smelter to a miner of the metal. Lingbao's lack of self sufficiency in gold concentrates would erode its margins, the investment bank said.
(Additional reporting by Alison Leung; Editing by Anne Marie Roantree)
Read more...
Credit Suisse, Bank of New York Mellon
Oct 13 (Reuters) - The following financial services industry appointments were announced on Monday. To inform us of other job changes, please e-mail moves@thomsonreuters.com.
CREDIT SUISSE
The Swiss investment bank said it appointed Steven Kwok and Sokho Jung as managing directors at Credit Suisse Private Equity Asia.
Kwok joins from Bear Stearns Private Equity, where he was a senior managing director and head of the eagle china retail and consumer fund. Jung joins from Standard Chartered Private Equity, where he was head of Korea from 2002.
BANK OF NEW YORK MELLON
The financial services company named Lee B. Stephens as chief administrative officer for the Asia Pacific region. Stephens was previously a member of the Global Client Management team as executive vice president and head of public sector banking.
MAX NEW YORK LIFE INSURANCE
The joint venture between Max India Ltd and New York Life International named Rajesh Sud as chief executive officer and managing director effective November 1. Sud was earlier deputy managing director.
Rajit Mehta has been appointed as chief operating officer of the joint venture. Mehta was previously deputy chief operating officer.
Gary Bennett has been named executive vice president and Greater China chief executive officer of New York Life International, LLC, effective immediately. He was chief executive officer and managing director of the company since July 2005. (Compiled by Mary Meyase in Bangalore)
Read more...
CREDIT SUISSE
The Swiss investment bank said it appointed Steven Kwok and Sokho Jung as managing directors at Credit Suisse Private Equity Asia.
Kwok joins from Bear Stearns Private Equity, where he was a senior managing director and head of the eagle china retail and consumer fund. Jung joins from Standard Chartered Private Equity, where he was head of Korea from 2002.
BANK OF NEW YORK MELLON
The financial services company named Lee B. Stephens as chief administrative officer for the Asia Pacific region. Stephens was previously a member of the Global Client Management team as executive vice president and head of public sector banking.
MAX NEW YORK LIFE INSURANCE
The joint venture between Max India Ltd and New York Life International named Rajesh Sud as chief executive officer and managing director effective November 1. Sud was earlier deputy managing director.
Rajit Mehta has been appointed as chief operating officer of the joint venture. Mehta was previously deputy chief operating officer.
Gary Bennett has been named executive vice president and Greater China chief executive officer of New York Life International, LLC, effective immediately. He was chief executive officer and managing director of the company since July 2005. (Compiled by Mary Meyase in Bangalore)
Read more...
FTSE bounces back 6 pct on banking bailout
* FTSE 100 gains 6 percent
* Banks gain as recapitalisation lifts flagging confidence
* Energy, mining stocks rise on rising commodity prices
By Simon Falush
LONDON, Oct 13 (Reuters) - Britain's top share index surged 6 percent early on Monday, recouping some of last week's heavy losses as a government plan to pump billions of pounds into the troubled banking sector lifted flagging sentiment.
By 0736 GMT the FTSE 100 .FTSE had gained 236.3 points to trade at 4,168.3 after falling 8.9 percent on Friday and haemorrhaging 21 percent last week, its biggest fall since 1987.
Banks gained after the British government said it would make capital investments worth 37 billion pounds ($64 billion) in RBS and a merged Lloyds TSB and HBOS . The FTSE 350 banks index surged 7.6 percent.
Lloyds gained 11.4 percent after it said it had renegotiated its agreed takeover of rival HBOS, dropping its offer to 0.605 of a Lloyds share for every HBOS share, down from the 0.833 agreed on Sept. 18.
HBOS was down 9 percent, the only stock in the blue-chip index showing a loss.
"The market is giving a positive first verdict to the weekend's events. I don't think any more could be expected as the scheme was large, coordinated and covers all angles. Let's hope it works," said Paul Kavanagh, head of market strategy at stockbrokers Killik.
BARCLAYS BOOSTED
Barclays gained 13.5 percent after it said it would boost its capital by more than 6.5 billion pounds but expected to do so without government help.
"I suspect that Barclays have shown the way by saying that they can go out to Asian, Middle Eastern investors and some of their own investors and saying we don't need to take this money from the government, so its quite a confidence statement," Kavanagh said.
Standard Chartered gained 8.7 percent after it said it meets UK capital requirements and was well capitalised and highly liquid.
Other financial stocks also gained on the government measures, with insurers Aviva , Prudential , and Standard Life up between 3.2 and 6.7 percent, while interdealer broker ICAP was up 6.6 percent.
Energy stocks gained as oil CLc1 climbed more than $3, recouping some of Friday's 10 percent dive, as nervousness on the future of the world economy eased somewhat.
BP , BG Group and Cairn Energy advanced between 3.6 and 11.4 percent.
Heavily pressured mining stocks also rallied as metals surged, with copper gaining over 7 percent and gold up 2 percent, also recovering ground after last week's heavy losses.
Anglo American , Kazakhmys , Eurasian Natural Resources , Rio Tinto and Lonmin strengthened between 6.5 and 10.4 percent.
Retailers were supported on hopes that the bank recapitalisation would prevent a deep recession.
Kingfisher added 1 percent, Marks & Spencer put on 3.8 percent, and Next gained 4 percent. (Editing by Will Waterman)
Read more...
* Banks gain as recapitalisation lifts flagging confidence
* Energy, mining stocks rise on rising commodity prices
By Simon Falush
LONDON, Oct 13 (Reuters) - Britain's top share index surged 6 percent early on Monday, recouping some of last week's heavy losses as a government plan to pump billions of pounds into the troubled banking sector lifted flagging sentiment.
By 0736 GMT the FTSE 100 .FTSE had gained 236.3 points to trade at 4,168.3 after falling 8.9 percent on Friday and haemorrhaging 21 percent last week, its biggest fall since 1987.
Banks gained after the British government said it would make capital investments worth 37 billion pounds ($64 billion) in RBS and a merged Lloyds TSB and HBOS . The FTSE 350 banks index surged 7.6 percent.
Lloyds gained 11.4 percent after it said it had renegotiated its agreed takeover of rival HBOS, dropping its offer to 0.605 of a Lloyds share for every HBOS share, down from the 0.833 agreed on Sept. 18.
HBOS was down 9 percent, the only stock in the blue-chip index showing a loss.
"The market is giving a positive first verdict to the weekend's events. I don't think any more could be expected as the scheme was large, coordinated and covers all angles. Let's hope it works," said Paul Kavanagh, head of market strategy at stockbrokers Killik.
BARCLAYS BOOSTED
Barclays gained 13.5 percent after it said it would boost its capital by more than 6.5 billion pounds but expected to do so without government help.
"I suspect that Barclays have shown the way by saying that they can go out to Asian, Middle Eastern investors and some of their own investors and saying we don't need to take this money from the government, so its quite a confidence statement," Kavanagh said.
Standard Chartered gained 8.7 percent after it said it meets UK capital requirements and was well capitalised and highly liquid.
Other financial stocks also gained on the government measures, with insurers Aviva , Prudential , and Standard Life up between 3.2 and 6.7 percent, while interdealer broker ICAP was up 6.6 percent.
Energy stocks gained as oil CLc1 climbed more than $3, recouping some of Friday's 10 percent dive, as nervousness on the future of the world economy eased somewhat.
BP , BG Group and Cairn Energy advanced between 3.6 and 11.4 percent.
Heavily pressured mining stocks also rallied as metals surged, with copper
Anglo American , Kazakhmys , Eurasian Natural Resources , Rio Tinto and Lonmin strengthened between 6.5 and 10.4 percent.
Retailers were supported on hopes that the bank recapitalisation would prevent a deep recession.
Kingfisher added 1 percent, Marks & Spencer put on 3.8 percent, and Next gained 4 percent. (Editing by Will Waterman)
Read more...
Nikkei plunges 9.6 pct, biggest one-day fall since '87
*Nikkei falls 9.6 pct, biggest one-day drop since '87 crash
*Nikkei down 24 pct for week and 46 pct for year
*Growing worry about financial system feeds fears
*Yamato Life bankruptcy filing spooks investors (Adds quotes, details)
By Elaine Lies
TOKYO, Oct 10 (Reuters) - Japan's Nikkei share average plunged 9.6 percent on Friday for its biggest drop since the 1987 stock crash, wiping out $202 billion in market value on growing fears that the financial crisis will spark a global recession.
The Nikkei, which has fallen for seven straight days, lost 24 percent on the week, more than twice what it lost the week of the 1987 crash. It has lost 46 percent this year.
"This is panic. New York, the currencies -- there's nothing left for us to trust," said Takashi Ushio, head of investment strategy at Marusan Securities.
"Investors are scurrying to convert to cash. A lack of confidence is coupling with panic."
Trouble hit home with the bankruptcy filing of Yamato Life Insurance, the first failure of a Japanese financial institution due to the global credit turmoil.
That shocked investors who had viewed Japan has relatively safe from much of the pain seen in the United States and Europe, and who were already rattled by the collapse of a domestic real estate investment trust and a fall in New York shares.
The benchmark Nikkei .N225 sank 881.06 points to 8,276.43, its lowest close since May 2003. At one point it was down more than 1,000 points.
The broader Topix shed 7.1 percent to 840.86.
"The Nikkei has lost close to 20 percent in three days alone, and it's certainly not as if economic fundamentals have worsened that much in that time period," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"It's basically all psychological. And it's not going to stop until fears about the financial system have been erased."
Prime Minister Taro Aso said the Nikkei tumble could hurt the wider economy, while ordinary Japanese were increasingly gloomy.
"I see people getting fired from my company and since my salary has been reduced, I'm tightening my purse strings and have begun to think twice before I buy anything," said Maki Higuchi, a 30-year-old businesswoman.
ACTION NEEDED NOW
The market plunge came as leaders from Group of Seven powers huddled in Washington to mull other joint measures to try and stop the panic in the markets.
The U.S. Treasury Department plans to start directly injecting capital in U.S. banks as soon as the end of October in exchange for passive investment stakes, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.
"The U.S. government is still debating whether it would inject money into financial institutions. It needs to act now even if that would be beyond the current law," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
But participants said the market had lost the ability to move on expectations alone and that only concrete action, or firm promises and a clear timetable, would help.
The slide gained impetus from investor wariness of holding large positions ahead of a three-day weekend in Japan, with Monday a national holiday. "This has become a bit of a jinx, especially since on the last Japanese three-day weekend in September, Lehman Brothers failed," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
Tech stocks were especially battered, with Kyocera Corp losing 13.3 percent to 5,660 yen and TDK Corp down 13.1 percent at 3,320 yen, but selling also extended to defensive shares that had been popular during recent falls. Fast Retailing lost 10.5 percent to 8.560 yen, becoming the biggest drag on the Nikkei 225, and Terumo Corp lost 11.6 percent to 3,820 yen.
Exporters were hit as well as the yen jumped. The dollar hit a six-month low of 97.91 yen on trading platform EBS before clawing back up to 98.83 yen.
Canon Inc lost 6.9 percent to 3,100 yen and Sony Corp shed 5.4 percent to 2,385 yen.
Financials also slid, with top bank Mitsubishi UFJ Financial Group down 8.5 percent to 710 yen and Mizuho Financial Group tumbled 11.8 percent to 330,000 yen, its lowest close since early 2004.
Trade picked up on the Tokyo exchange's first section, with 3.27 billion shares changing hands, compared with last week's daily average of 2.08 billion.
Declining stocks outpaced advancing ones by more than 8 to 1. (Additional reporting by Aiko Hayashi; editing by Edwina Gibbs)
Read more...
*Nikkei down 24 pct for week and 46 pct for year
*Growing worry about financial system feeds fears
*Yamato Life bankruptcy filing spooks investors (Adds quotes, details)
By Elaine Lies
TOKYO, Oct 10 (Reuters) - Japan's Nikkei share average plunged 9.6 percent on Friday for its biggest drop since the 1987 stock crash, wiping out $202 billion in market value on growing fears that the financial crisis will spark a global recession.
The Nikkei, which has fallen for seven straight days, lost 24 percent on the week, more than twice what it lost the week of the 1987 crash. It has lost 46 percent this year.
"This is panic. New York, the currencies -- there's nothing left for us to trust," said Takashi Ushio, head of investment strategy at Marusan Securities.
"Investors are scurrying to convert to cash. A lack of confidence is coupling with panic."
Trouble hit home with the bankruptcy filing of Yamato Life Insurance, the first failure of a Japanese financial institution due to the global credit turmoil.
That shocked investors who had viewed Japan has relatively safe from much of the pain seen in the United States and Europe, and who were already rattled by the collapse of a domestic real estate investment trust and a fall in New York shares.
The benchmark Nikkei .N225 sank 881.06 points to 8,276.43, its lowest close since May 2003. At one point it was down more than 1,000 points.
The broader Topix shed 7.1 percent to 840.86.
"The Nikkei has lost close to 20 percent in three days alone, and it's certainly not as if economic fundamentals have worsened that much in that time period," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"It's basically all psychological. And it's not going to stop until fears about the financial system have been erased."
Prime Minister Taro Aso said the Nikkei tumble could hurt the wider economy, while ordinary Japanese were increasingly gloomy.
"I see people getting fired from my company and since my salary has been reduced, I'm tightening my purse strings and have begun to think twice before I buy anything," said Maki Higuchi, a 30-year-old businesswoman.
ACTION NEEDED NOW
The market plunge came as leaders from Group of Seven powers huddled in Washington to mull other joint measures to try and stop the panic in the markets.
The U.S. Treasury Department plans to start directly injecting capital in U.S. banks as soon as the end of October in exchange for passive investment stakes, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.
"The U.S. government is still debating whether it would inject money into financial institutions. It needs to act now even if that would be beyond the current law," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
But participants said the market had lost the ability to move on expectations alone and that only concrete action, or firm promises and a clear timetable, would help.
The slide gained impetus from investor wariness of holding large positions ahead of a three-day weekend in Japan, with Monday a national holiday. "This has become a bit of a jinx, especially since on the last Japanese three-day weekend in September, Lehman Brothers failed," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
Tech stocks were especially battered, with Kyocera Corp losing 13.3 percent to 5,660 yen and TDK Corp down 13.1 percent at 3,320 yen, but selling also extended to defensive shares that had been popular during recent falls. Fast Retailing lost 10.5 percent to 8.560 yen, becoming the biggest drag on the Nikkei 225, and Terumo Corp lost 11.6 percent to 3,820 yen.
Exporters were hit as well as the yen jumped. The dollar hit a six-month low of 97.91 yen on trading platform EBS before clawing back up to 98.83 yen
Canon Inc lost 6.9 percent to 3,100 yen and Sony Corp shed 5.4 percent to 2,385 yen.
Financials also slid, with top bank Mitsubishi UFJ Financial Group down 8.5 percent to 710 yen and Mizuho Financial Group tumbled 11.8 percent to 330,000 yen, its lowest close since early 2004.
Trade picked up on the Tokyo exchange's first section, with 3.27 billion shares changing hands, compared with last week's daily average of 2.08 billion.
Declining stocks outpaced advancing ones by more than 8 to 1. (Additional reporting by Aiko Hayashi; editing by Edwina Gibbs)
Read more...
Stocks, oil jump after bank rescue plans
By Natsuko Waki
LONDON (Reuters) - World stocks jumped on Monday from last week's five-year low after policymakers around the world took new and drastic steps to rescue banks and prevent the global economy from sinking into recession.
Oil jumped nearly 5 percent from its 13-month low while government bonds tumbled after Britain injected 37 billion pounds ($63.95 billion) buying into leading UK banks.
Australia, New Zealand and the United Arab Emirates guaranteed all bank deposits. Germany, France and Italy are expected to unveil similar moves later.
The interbank cost of borrowing three-month sterling and euro funds eased after the bank rescue measures. European central banks also said they would lend out as much U.S. dollar liquidity as commercial banks need in a further joint bid to tame money market tensions.
"Market sentiment is a bit more positive, the government has grasped the nettle and committed to a rescue plan," said Keith Bowman, equity strategist at Hargreaves Lansdown.
"There's still a huge amount of nervousness and volatility around but we do seem to have taken a step in the right direction with some coordination from governments and some definite action." MSCI world equity index rose 2.3 percent after tumbling 20 percent last week to the five-year low.
European banking stocks rallied more than 5 percent.
"Despite prospects of a worsening economic crisis, we believe that the nationalization of parts of the banking system could be viewed as the defining moment that marked the start of the end of the financial crisis," Philip Finch, global banks analyst at UBS, said in a note to clients.
Not all the equity markets had a chance to react to rescue measures as financial markets in Japan were closed for a public holiday.
GLASS HALF EMPTY?
Money markets -- the source of the wider credit stress for more than a year -- also responded to new bailout plans to tackle the worst financial crisis in 80 years.
Interbank rates for three-month sterling funds fell to 6.26875 percent at the London fixing while three-month euro rates fell to 5.29875 percent. However both rates remain up to 200 basis points above expected interest rates in January.
"Is all of this enough to stop the rot, and even set us on the road toward a build-up in confidence? The glass can be seen as half-full or half-empty," says Ciaran O'Hagan, interest rate strategist at Societe Generale in Paris.
Emerging stocks jumped 3.5 percent after hitting a three-year low. Equity trading is still suspended in Iceland where little trading is done on the crown currency.
U.S. crude oil was up 4.5 percent at $81.20 a barrel. December bund futures fell as much as 100 ticks as capital seeking safety waned as stocks rallied.
The dollar fell a quarter percent against a basket of major currencies while the euro rose 0.1 percent to $1.3576.
(Additional reporting by Simon Falush and Emelia Sithole-Matarise; Editing by Ron Askew)
Read more...
LONDON (Reuters) - World stocks jumped on Monday from last week's five-year low after policymakers around the world took new and drastic steps to rescue banks and prevent the global economy from sinking into recession.
Oil jumped nearly 5 percent from its 13-month low while government bonds tumbled after Britain injected 37 billion pounds ($63.95 billion) buying into leading UK banks.
Australia, New Zealand and the United Arab Emirates guaranteed all bank deposits. Germany, France and Italy are expected to unveil similar moves later.
The interbank cost of borrowing three-month sterling and euro funds eased after the bank rescue measures. European central banks also said they would lend out as much U.S. dollar liquidity as commercial banks need in a further joint bid to tame money market tensions.
"Market sentiment is a bit more positive, the government has grasped the nettle and committed to a rescue plan," said Keith Bowman, equity strategist at Hargreaves Lansdown.
"There's still a huge amount of nervousness and volatility around but we do seem to have taken a step in the right direction with some coordination from governments and some definite action." MSCI world equity index rose 2.3 percent after tumbling 20 percent last week to the five-year low.
European banking stocks rallied more than 5 percent.
"Despite prospects of a worsening economic crisis, we believe that the nationalization of parts of the banking system could be viewed as the defining moment that marked the start of the end of the financial crisis," Philip Finch, global banks analyst at UBS, said in a note to clients.
Not all the equity markets had a chance to react to rescue measures as financial markets in Japan were closed for a public holiday.
GLASS HALF EMPTY?
Money markets -- the source of the wider credit stress for more than a year -- also responded to new bailout plans to tackle the worst financial crisis in 80 years.
Interbank rates for three-month sterling funds fell to 6.26875 percent at the London fixing while three-month euro rates fell to 5.29875 percent. However both rates remain up to 200 basis points above expected interest rates in January.
"Is all of this enough to stop the rot, and even set us on the road toward a build-up in confidence? The glass can be seen as half-full or half-empty," says Ciaran O'Hagan, interest rate strategist at Societe Generale in Paris.
Emerging stocks jumped 3.5 percent after hitting a three-year low. Equity trading is still suspended in Iceland where little trading is done on the crown currency.
U.S. crude oil was up 4.5 percent at $81.20 a barrel. December bund futures fell as much as 100 ticks as capital seeking safety waned as stocks rallied.
The dollar fell a quarter percent against a basket of major currencies while the euro rose 0.1 percent to $1.3576.
(Additional reporting by Simon Falush and Emelia Sithole-Matarise; Editing by Ron Askew)
Read more...
European shares leap as governments bail out banks
* FTSEurofirst 300 jumps 6 pct to 902.06 points
* Banks rally after Eurozone guarunteers, liquidity boost
* Oil shares surge as crude prices bounce
By Rebekah Curtis
LONDON, Oct 13 (Reuters) - European shares were up 6 percent by midday on Monday, led by financials as governments and central banks worldwide took major steps to rescue the global banking system after the brutal fall in world stocks last week.
At 1041 GMT the FTSEurofirst 300 index of leading European shares was up 6 percent at 902.06 points, tracking gains in Asia and after its 22-percent fall last week.
After an emergency meeting in Paris over the weekend European governments agreed to provide capital for banks caught short of funds because of frozen money markets and to insure or buy into new debt issues.
The FTSEurofirst, which hit a five-year low last week, has lost more than 40 percent so far this year in the jaws of a credit crisis that has sparked major losses at the region's banks, frozen interbank lending and slowed the economy.
UBS jumped 15 percent, while Credit Agricole , Banco Santander and HSBC all soared between 6.2 and 8 percent.
Credit Suisse rose 12 percent after Merrill Lynch upgraded it to "neutral" from "underperform", saying last week's 40-percent fall was overdone. Julius Baer rose 12 percent after a Deutsche Bank upgrade.
"The hope in the markets is that political leaders have finally grasped the nettle with substantial and coherent rescue plans now being formulated and rolled into place," said Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers in London.
"For now, the hope is that today will mark a watershed, with vast measures of government reassurance finally rekindling some confidence in the shattered banking sector."
HBOS, RBS TUMBLE
But shares in HBOS tumbled 25 percent and Royal Bank of Scotland lost 3.8 percent, underperforming European rivals after the UK government waded in with $64 billion of taxpayers' cash to bail out RBS, HBOS and Lloyds TSB .
Royal Bank of Scotland earlier slumped about 30 percent as traders cited poor growth prospects and no dividend from the bank for five years.
HBOS shares plunged after Lloyds said it had renegotiated its agreed takeover of the mortgage lender, as both banks unveiled plans to accept UK government money to bolster their finance, traders said. Lloyds fell 4.7 percent.
HBOS investors will now receive 0.605 Lloyds shares for every HBOS share they hold, revised from previous 0.833 Lloyds shares per HBOS share.
"Once the dust settles there's going to be a huge introspection into how the banks are run," said Edward Menashy, a strategist at Charles Stanley in London.
Shares in Societe Generale shed 10 percent as traders cited talk of government intervention and losses on structured products at the bank. SocGen had no immediate comment.
In Paris, a report by Dow Jones Newswires said the French government would create a 40 billion euro ($55 billion) fund to take stakes in banks. The French presidential office declined to comment on the report.
A German financial rescue plan includes a fund to provide up to 400 billion euros in guarantees for banks, according to a draft bill seen by Reuters on Monday.
The world's top central banks also announced on Monday further measures to improve liquidity in short-term U.S. dollar funding markets. European central banks said they would lend out as much U.S. dollar liquidity as commercial banks needed in a further joint bid to resolve money market tensions.
In a joint announcement with the U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank said they would meet all bids from commercial banks at a fixed interest rate.
The interbank cost of borrowing three-month sterling and euro funds eased on Monday.
Oil shares surged as crude oil prices CLc1 added 4.4 percent after sliding 10 percent on Friday. Total , ENI , BP and Royal Dutch Shell gained between 6.7 and 8.4 percent.
Mining shares also rebounded, as gold and copper MCU3 prices regained some lost ground. Kazakhmys , Xstrata , Rio and Anglo American added between 9 and 13 percent.
Dutch company Philips Electronics , a standout loser, fell 6 percent after the company said it posted a 71 percent fall in third-quarter core profit as a charge for asbestos claims and restructuring costs impacted the group result.(Additional reporting by Brian Gorman; Editing by Greg Mahlich)
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* Banks rally after Eurozone guarunteers, liquidity boost
* Oil shares surge as crude prices bounce
By Rebekah Curtis
LONDON, Oct 13 (Reuters) - European shares were up 6 percent by midday on Monday, led by financials as governments and central banks worldwide took major steps to rescue the global banking system after the brutal fall in world stocks last week.
At 1041 GMT the FTSEurofirst 300 index of leading European shares was up 6 percent at 902.06 points, tracking gains in Asia and after its 22-percent fall last week.
After an emergency meeting in Paris over the weekend European governments agreed to provide capital for banks caught short of funds because of frozen money markets and to insure or buy into new debt issues.
The FTSEurofirst, which hit a five-year low last week, has lost more than 40 percent so far this year in the jaws of a credit crisis that has sparked major losses at the region's banks, frozen interbank lending and slowed the economy.
UBS jumped 15 percent, while Credit Agricole , Banco Santander and HSBC all soared between 6.2 and 8 percent.
Credit Suisse rose 12 percent after Merrill Lynch upgraded it to "neutral" from "underperform", saying last week's 40-percent fall was overdone. Julius Baer rose 12 percent after a Deutsche Bank upgrade.
"The hope in the markets is that political leaders have finally grasped the nettle with substantial and coherent rescue plans now being formulated and rolled into place," said Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers in London.
"For now, the hope is that today will mark a watershed, with vast measures of government reassurance finally rekindling some confidence in the shattered banking sector."
HBOS, RBS TUMBLE
But shares in HBOS tumbled 25 percent and Royal Bank of Scotland lost 3.8 percent, underperforming European rivals after the UK government waded in with $64 billion of taxpayers' cash to bail out RBS, HBOS and Lloyds TSB .
Royal Bank of Scotland earlier slumped about 30 percent as traders cited poor growth prospects and no dividend from the bank for five years.
HBOS shares plunged after Lloyds said it had renegotiated its agreed takeover of the mortgage lender, as both banks unveiled plans to accept UK government money to bolster their finance, traders said. Lloyds fell 4.7 percent.
HBOS investors will now receive 0.605 Lloyds shares for every HBOS share they hold, revised from previous 0.833 Lloyds shares per HBOS share.
"Once the dust settles there's going to be a huge introspection into how the banks are run," said Edward Menashy, a strategist at Charles Stanley in London.
Shares in Societe Generale shed 10 percent as traders cited talk of government intervention and losses on structured products at the bank. SocGen had no immediate comment.
In Paris, a report by Dow Jones Newswires said the French government would create a 40 billion euro ($55 billion) fund to take stakes in banks. The French presidential office declined to comment on the report.
A German financial rescue plan includes a fund to provide up to 400 billion euros in guarantees for banks, according to a draft bill seen by Reuters on Monday.
The world's top central banks also announced on Monday further measures to improve liquidity in short-term U.S. dollar funding markets. European central banks said they would lend out as much U.S. dollar liquidity as commercial banks needed in a further joint bid to resolve money market tensions.
In a joint announcement with the U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank said they would meet all bids from commercial banks at a fixed interest rate.
The interbank cost of borrowing three-month sterling and euro funds eased on Monday.
Oil shares surged as crude oil prices CLc1 added 4.4 percent after sliding 10 percent on Friday. Total , ENI , BP and Royal Dutch Shell gained between 6.7 and 8.4 percent.
Mining shares also rebounded, as gold
Dutch company Philips Electronics , a standout loser, fell 6 percent after the company said it posted a 71 percent fall in third-quarter core profit as a charge for asbestos claims and restructuring costs impacted the group result.(Additional reporting by Brian Gorman; Editing by Greg Mahlich)
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Technical Analysis Daily: USD/JPY
Daily Forex Technicals | Written by iFOREX.bg | Oct 13 08 10:43 GMT |
USD/JPY 100.31
USD/JPY Open 100.57 High 101.09 Low 97.88 Close 100.23
The US Dollar climbed significantly on Friday against the Japanese Yen from Friday's bottom 97.88 to this morning's top 101.09, which are the first support and resistance levels respectively for the currency couple today. If the positive trend of the currency couple continues, as we expect for the moment, next resistance further up is expected at 101.85, the break of which would open potential rise towards 102.70. In downward direction next support further down is expected at 97.15, followed by 96.30.
Technical resistance levels: 101.10 101.85 102.70
Technical support levels: 97.90 97.15 96.30
Trading range: 100.20 - 100.85
Trend: Upward
Buy at 100.31 SL 100.01 TP 100.71
iFOREX.bg Forecasts and Trading Signals
http://www.zifx.com
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USD/JPY 100.31
USD/JPY Open 100.57 High 101.09 Low 97.88 Close 100.23
The US Dollar climbed significantly on Friday against the Japanese Yen from Friday's bottom 97.88 to this morning's top 101.09, which are the first support and resistance levels respectively for the currency couple today. If the positive trend of the currency couple continues, as we expect for the moment, next resistance further up is expected at 101.85, the break of which would open potential rise towards 102.70. In downward direction next support further down is expected at 97.15, followed by 96.30.
Technical resistance levels: 101.10 101.85 102.70
Technical support levels: 97.90 97.15 96.30
Trading range: 100.20 - 100.85
Trend: Upward
Buy at 100.31 SL 100.01 TP 100.71
iFOREX.bg Forecasts and Trading Signals
http://www.zifx.com
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European Market Update
Daily Forex Fundamentals | Written by Trade The News | Oct 13 08 10:00 GMT |
Armageddon or opportunity???
ECONOMIC DATA
(CH) China China Trade surplus for Sept $29.3B vs $24.5Be; Exports: 21.5% v 20.0%e; Imports: 21.3% v 22.9%e
2:45 (FR) France Aug Current Account: -€4.2B v -€4B
3:15 (SZ) Switzerland Sept Producer & Import Prices M/M: -0.5% v -0.3%; Y/Y: 3.7% v 3.9%e
4:30 (UK) Sept PPI Input M/M: -1.2% v -1.5%e; Y/Y: 24.5% v 19.8%e; PPI Output M/M: -0.3% v -0.4%e; Y/Y: 8.5% v 8.8%e; PPI Output Core M/M: -0.1% v -0.1% e; Y/Y: 5.4% v 6.0%e
5:50 (NE) Netherlands to sell up to EUR12B in extra auction.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
In equities: HBOS.UK [HBOS.UK] Lloyds revised acquisition terms. HBOS share holders will be granted 0.605 Lloyds share for 1 HBOS share, Co's to raise £17B in capital || Royal bank of Scotland [RBS.UK] Planed to raise £20B in capital, I a deal underwritten by UK Govt. It announced the departure of its CEO. The UK Treasury would buy £5B in preferred stock at 65.5p/shr. The bank would further raise £15B in ordinary shares in measures aimed at raising tier-1 capital ratio. RBS would continue disposal program, identifying non core assets. Lastly no dividend will be paid on ordinary shares until the Preference Shares have been repaid. It is the Board's intention to repay the Preference Shares as soon as possible
|| Barclays [BARC.UK] To raise £6.5B in Tier 1 capital and added that it would not pay final dividend for 2008. The Board expected that the additional capital will be raised from investors without calling on the government funding which has been offered to UK banks. Issue of preference shares is to raise £3B by December 31. its intention is to resume dividend payments in the second half of 2009. || Philips Electronics [PHIA.NV] Reported Q3 Rev €6.3B below analvst estimates of €6.72B. its ; Net €357M vjust above estimates of €352Me. The company noted that it would slow down it €5B share repurchase program. It remained cautious on Q4 end-market demand and cited weaker consumer demand in mature markets || Deutz [DEZ.GE] Revised its 2008 outlook on engine sales putting the figure now at 260K compared to 286K y/y;. the company stated that it saw Chinese growth slowing down. It sees 2008 revenue to grow 2% and guided 2% FY EBIT margin. || Telefonica [TEF.SP] Reaffirmed all 2008 ragets and announced an additional 50M shares to its share repurchase program. || Premier Foods [PFD] Confirmed discussions to reduce debt and that its trading was in line with expectations. The company stated it was in talks with private equity groups to secure cash injection in most recent attempt to sure up balance sheet || Standard Chartered [STAN.UK] Stated that it met UK capital requirements and would not participate in UK govt recapitilization plan , although it welcomed the decisive action taken by the UK Government to stabilize the UK banking system as a whole. || Tui [Tui.GE] Reportedly confirmed sale of its Hapag-Lloyd shipping unit to Hamburg-led Consortium for €4.45B. It plans to pay an undisclosed special dividend to investors with some of the proceeds and spend €700M to buyback a stake in the shipper. || Aztrazeneca [AZN.UK] CEO stated that its IPO and venture capital options are falling as financial crisis reduced access to capital. The chief added that pricing will be challenging in the future
Speakers: ECB's Wellink stated that State puts money into good companies; they will always have positive returns. Notes Netherlands' support for its financial system can go quite far and is confident that support for financial system will work. - Says declining price pressure made interest rate cut possible || (EU) ECB's Stark: Coordinated rate cut was a signal to markets. declining price pressure made interest rate cut possible || ECB'S Bini Smaghi: ECB will not substitute private banking firms or take over commercial paper lending and noted that there would not be another Lehman Brothers || Poland Central Bank Gov stated that its Gov't should reconsider date for entering Eurozone. The official stated that the Polish banking system has no liquidity problems, but ready to act if liquidity issues arise. Interms of monetary policy, the central bank sees lots of arguments justifying need for interest rate cutbut would wait for Oct. inflation projection and Q3 economic data. It did not there are several reasons to at least suspend potential rate increase. || UK's Darling stated that Banks receiving govt funds would have to increase their offering of mortgage and small business lending and added that the UK was experiencing extraordinary times and that the UK bank takeover plan was a crucial step
He added that banks must be run on a commercial basis and that the stabilization and reconstruction are govt aims. the taxpayers would not lose out on their investment. Lastly other global governments should follow the example of the BoE|| SNB Roth: May cut rates if economy worsens. Bank must strengthen capital base and reduce debts || ECB's Noyer stated that the current financial crisis is a major test for valuation frameworks and stated that market based valuation is as good as market's performances || Sweden PM Reinfeldt stated that the country is taking measures to fight the current financial crisis and measures include bank guarantees. He added that the Government was considering increasing deposit guarantees and that the EU accord was a first and most crucial step. Lastly taxpayers should not have to pay for the measures enacted to combat the financial market crisis
In Currencies: The USD and carry-related pairs retraced some of their storng price movements seen last week on the bank of the UK and European bailout plans. EUR/USD back above the 1.36 handle while EUR/JPY probe the 137 area. EUR/CHF testing the 1.54 neighborhood.. ECB's Bini Smaghi stated that the Euro would maintain its strong currency status and that the last couple months do not reflect long-term trend. The ECB member noted that EUR/USD at $1.55 was 'too high'.
Russia may change interest rates but no plans to amend its rouble trading band
In Energy: Saudi Aramco Official: Will maintain and ship contracted oil supplies to Asia in November. It noted that it would cut supplies to Europe in the next month. || Reportedly, Goldman Sachs has been restricted from making a market in price assessment agency Platts' daily oil trading window as counterparty anxiety grows. However, However, the restrictions on its commodities trading arm J Aron are not as severe as those placed earlier on some rivals, who were effectively barred from participating in the window.
In Fixed Income: (UK) DMO confirmed to raise £37B and reopen 1 short-dated gilt auction under new program. The agency would seek views on feasibility of fresh new benchmarks. It anticipated scheduling new auctions from Oct 20th through year-end and it sought views on merits of two auctions on given day
Credit Crisis: UK Government announced it plan to make new tier 1 capital available to UK Banks in a scheme valued at £37B. the Uk will take steps to boost liquidity and aid in restructuring in various banking entities. ||EU approved Ireland bank guarantee plan || German financial market rescue package reportedly totaling €470B in whiit would €400B in bank guarantees and another €70B in bank capital according to an unconfirmed draft bill || Goldman Sachs Analyst comment on the weekend proposal by the EU noting that the European bailout plan appears to be 'comprehensive'. Russia Federation Council approves RUB950B and $50B rescue package || Reportedly Japan Fin Min is mulling guaranteeing all bank deposits || Itraxx Crossover Index at 690 bps; down 40bps from Friday || European bourses exhibited strong gains on the open. Dealers noting that advances are linked to financials so another round of rumors could impede fragile sentiment.
NOTES
The markets initial response has been positive to the G7, European and G20 comments but dealers note that thinking is lacking key specific details. The widespread government intervention on a worldwide basis to prop up ailing banks looks likely to give equity traders some initial upward momentum. European equities surged over 6%-7% in early trading but are slowly seeing these gains erode over the course of the morning. Government guaranteeing of bank lending has the key focus and rallying point. All eyes continue to watch the Libor fixing rates to see if the credit markets buy into the euphoria of the plan. The US cash bond market is closed due to a banking holiday while Japanese markets were also closed today. Corporate earnings will begin to pick up steam this week with several notable financial names to reports with JPM, C, MER, WF, BK expected to report this week . Focus also on the Morgan Stanley- Mitsubishi developments
Looking ahead:
6:30 BOE's Sentence
8:00 US Treasury's Kashkari
8:00 US's Fed Hoenig
Trade The News Staff
Trade The News, Inc.
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.
Read more...
Armageddon or opportunity???
ECONOMIC DATA
(CH) China China Trade surplus for Sept $29.3B vs $24.5Be; Exports: 21.5% v 20.0%e; Imports: 21.3% v 22.9%e
2:45 (FR) France Aug Current Account: -€4.2B v -€4B
3:15 (SZ) Switzerland Sept Producer & Import Prices M/M: -0.5% v -0.3%; Y/Y: 3.7% v 3.9%e
4:30 (UK) Sept PPI Input M/M: -1.2% v -1.5%e; Y/Y: 24.5% v 19.8%e; PPI Output M/M: -0.3% v -0.4%e; Y/Y: 8.5% v 8.8%e; PPI Output Core M/M: -0.1% v -0.1% e; Y/Y: 5.4% v 6.0%e
5:50 (NE) Netherlands to sell up to EUR12B in extra auction.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
In equities: HBOS.UK [HBOS.UK] Lloyds revised acquisition terms. HBOS share holders will be granted 0.605 Lloyds share for 1 HBOS share, Co's to raise £17B in capital || Royal bank of Scotland [RBS.UK] Planed to raise £20B in capital, I a deal underwritten by UK Govt. It announced the departure of its CEO. The UK Treasury would buy £5B in preferred stock at 65.5p/shr. The bank would further raise £15B in ordinary shares in measures aimed at raising tier-1 capital ratio. RBS would continue disposal program, identifying non core assets. Lastly no dividend will be paid on ordinary shares until the Preference Shares have been repaid. It is the Board's intention to repay the Preference Shares as soon as possible
|| Barclays [BARC.UK] To raise £6.5B in Tier 1 capital and added that it would not pay final dividend for 2008. The Board expected that the additional capital will be raised from investors without calling on the government funding which has been offered to UK banks. Issue of preference shares is to raise £3B by December 31. its intention is to resume dividend payments in the second half of 2009. || Philips Electronics [PHIA.NV] Reported Q3 Rev €6.3B below analvst estimates of €6.72B. its ; Net €357M vjust above estimates of €352Me. The company noted that it would slow down it €5B share repurchase program. It remained cautious on Q4 end-market demand and cited weaker consumer demand in mature markets || Deutz [DEZ.GE] Revised its 2008 outlook on engine sales putting the figure now at 260K compared to 286K y/y;. the company stated that it saw Chinese growth slowing down. It sees 2008 revenue to grow 2% and guided 2% FY EBIT margin. || Telefonica [TEF.SP] Reaffirmed all 2008 ragets and announced an additional 50M shares to its share repurchase program. || Premier Foods [PFD] Confirmed discussions to reduce debt and that its trading was in line with expectations. The company stated it was in talks with private equity groups to secure cash injection in most recent attempt to sure up balance sheet || Standard Chartered [STAN.UK] Stated that it met UK capital requirements and would not participate in UK govt recapitilization plan , although it welcomed the decisive action taken by the UK Government to stabilize the UK banking system as a whole. || Tui [Tui.GE] Reportedly confirmed sale of its Hapag-Lloyd shipping unit to Hamburg-led Consortium for €4.45B. It plans to pay an undisclosed special dividend to investors with some of the proceeds and spend €700M to buyback a stake in the shipper. || Aztrazeneca [AZN.UK] CEO stated that its IPO and venture capital options are falling as financial crisis reduced access to capital. The chief added that pricing will be challenging in the future
Speakers: ECB's Wellink stated that State puts money into good companies; they will always have positive returns. Notes Netherlands' support for its financial system can go quite far and is confident that support for financial system will work. - Says declining price pressure made interest rate cut possible || (EU) ECB's Stark: Coordinated rate cut was a signal to markets. declining price pressure made interest rate cut possible || ECB'S Bini Smaghi: ECB will not substitute private banking firms or take over commercial paper lending and noted that there would not be another Lehman Brothers || Poland Central Bank Gov stated that its Gov't should reconsider date for entering Eurozone. The official stated that the Polish banking system has no liquidity problems, but ready to act if liquidity issues arise. Interms of monetary policy, the central bank sees lots of arguments justifying need for interest rate cutbut would wait for Oct. inflation projection and Q3 economic data. It did not there are several reasons to at least suspend potential rate increase. || UK's Darling stated that Banks receiving govt funds would have to increase their offering of mortgage and small business lending and added that the UK was experiencing extraordinary times and that the UK bank takeover plan was a crucial step
He added that banks must be run on a commercial basis and that the stabilization and reconstruction are govt aims. the taxpayers would not lose out on their investment. Lastly other global governments should follow the example of the BoE|| SNB Roth: May cut rates if economy worsens. Bank must strengthen capital base and reduce debts || ECB's Noyer stated that the current financial crisis is a major test for valuation frameworks and stated that market based valuation is as good as market's performances || Sweden PM Reinfeldt stated that the country is taking measures to fight the current financial crisis and measures include bank guarantees. He added that the Government was considering increasing deposit guarantees and that the EU accord was a first and most crucial step. Lastly taxpayers should not have to pay for the measures enacted to combat the financial market crisis
In Currencies: The USD and carry-related pairs retraced some of their storng price movements seen last week on the bank of the UK and European bailout plans. EUR/USD back above the 1.36 handle while EUR/JPY probe the 137 area. EUR/CHF testing the 1.54 neighborhood.. ECB's Bini Smaghi stated that the Euro would maintain its strong currency status and that the last couple months do not reflect long-term trend. The ECB member noted that EUR/USD at $1.55 was 'too high'.
Russia may change interest rates but no plans to amend its rouble trading band
In Energy: Saudi Aramco Official: Will maintain and ship contracted oil supplies to Asia in November. It noted that it would cut supplies to Europe in the next month. || Reportedly, Goldman Sachs has been restricted from making a market in price assessment agency Platts' daily oil trading window as counterparty anxiety grows. However, However, the restrictions on its commodities trading arm J Aron are not as severe as those placed earlier on some rivals, who were effectively barred from participating in the window.
In Fixed Income: (UK) DMO confirmed to raise £37B and reopen 1 short-dated gilt auction under new program. The agency would seek views on feasibility of fresh new benchmarks. It anticipated scheduling new auctions from Oct 20th through year-end and it sought views on merits of two auctions on given day
Credit Crisis: UK Government announced it plan to make new tier 1 capital available to UK Banks in a scheme valued at £37B. the Uk will take steps to boost liquidity and aid in restructuring in various banking entities. ||EU approved Ireland bank guarantee plan || German financial market rescue package reportedly totaling €470B in whiit would €400B in bank guarantees and another €70B in bank capital according to an unconfirmed draft bill || Goldman Sachs Analyst comment on the weekend proposal by the EU noting that the European bailout plan appears to be 'comprehensive'. Russia Federation Council approves RUB950B and $50B rescue package || Reportedly Japan Fin Min is mulling guaranteeing all bank deposits || Itraxx Crossover Index at 690 bps; down 40bps from Friday || European bourses exhibited strong gains on the open. Dealers noting that advances are linked to financials so another round of rumors could impede fragile sentiment.
NOTES
The markets initial response has been positive to the G7, European and G20 comments but dealers note that thinking is lacking key specific details. The widespread government intervention on a worldwide basis to prop up ailing banks looks likely to give equity traders some initial upward momentum. European equities surged over 6%-7% in early trading but are slowly seeing these gains erode over the course of the morning. Government guaranteeing of bank lending has the key focus and rallying point. All eyes continue to watch the Libor fixing rates to see if the credit markets buy into the euphoria of the plan. The US cash bond market is closed due to a banking holiday while Japanese markets were also closed today. Corporate earnings will begin to pick up steam this week with several notable financial names to reports with JPM, C, MER, WF, BK expected to report this week . Focus also on the Morgan Stanley- Mitsubishi developments
Looking ahead:
6:30 BOE's Sentence
8:00 US Treasury's Kashkari
8:00 US's Fed Hoenig
Trade The News Staff
Trade The News, Inc.
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.
Read more...
India Plans to Increase Liquidity, Driving Stock, Rupee Gains
By Cherian Thomas
Oct. 13 (Bloomberg) -- Finance Minister Palaniappan Chidambaram said India plans to increase the amount of cash in the financial system, lifting the rupee from a record low and shares after the biggest drop in 18 years last week.
``The root cause of the present uncertainty is liquidity and not any dramatic change in the fundamentals of the economy,'' Chidambaram said in New Delhi today. ``We are working on more measures that will infuse liquidity and increase the confidence of depositors and investors.''
India's central bank may further cut the amount of cash banks need to set aside as reserves as the tightest credit crunch in 19 months threatens to stall economic growth. Indian stocks led by ICICI Bank Ltd. mirrored gains across Asia today as Australia guaranteed bank deposits while European leaders agreed to support lenders in an effort to restore investor confidence.
``There has to be a sustained effort to calm markets because these are very unusual times,'' said Sujan Hajra, chief economist at Anand Rathi Securities Pvt. in Mumbai. ``A deeper cut in the cash reserve ratio is most likely in India, where the problem is one of liquidity.''
The government, the Reserve Bank of India and the Securities & Exchange Board of India are working on more steps, Chidambaram said, without elaborating. ``We hope to be able to announce them shortly,'' the finance minister said in a televised briefing before the stock market opened.
Markets Rally
India's benchmark Bombay Stock Exchange Sensitive Index, or Sensex, surged 6.3 percent to 11,186.35 after a 16 percent plunge last week. ICICI Bank climbed by a record, reversing its biggest ever drop on Oct. 10, after Chief Executive Officer K.V. Kamath said the nation's second-biggest lender had sufficient funds.
ICICI Bank is being targeted by short sellers who have spread rumors that the bank may struggle to refund depositors, Kamath told NDTV Profit news channel today. India should consider a ban on short sales, he said. Short sellers borrow stock and sell it, hoping to buy it back at a lower price.
The rebound in the markets came after the Reserve Bank of India reduced the cash reserve ratio, or the amount of money lenders need to keep aside as reserves, to 7.5 percent from 9 percent starting Oct. 11. The cut was the sharpest since 2001.
The rupee rose 0.7 percent to 48.10 per dollar, snapping a five-day losing streak, while bond yields on the key 10-year bonds declined 5 basis points to 7.74 percent. Overnight money markets rates fell to 9.85 percent today from 16 percent on Oct. 10, the highest since March 2007. A basis point is 0.01 percentage point.
`Nothing to Fear'
Indian banks are ready to provide credit, are safe and depositors have nothing to fear, Chidambaram said, adding he may make another statement today if needed. A panel set up by the finance ministry panel on liquidity will meet at 3:30 p.m.
Still, Indian real-estate developers will continue to face a shortage of funds even after the central bank cut the amount of cash banks need to hold to ease credit, Macquarie Research said in a note to clients today.
``The capital crunch has hit the sector very hard,'' Macquarie analysts Unmesh Sharma and Bharat Rathi said. ``We believe the tightness will continue for a few more months, given the difficulty in raising capital through bank debt, equity markets and (more recently) private equity.''
The tight money market conditions have emerged at a time when India's industrial output growth has slumped to the weakest pace in at least 14 years. Output at factories, utilities and mines rose 1.3 percent in August from a year earlier after a revised 7.4 percent gain in July, as rising borrowing costs since 2004 to contain inflation sapped consumer demand.
The central bank has increased its key repurchase rate by 3 percentage points to 9 percent since 2004 and the cash reserve ratio by 4 percentage points since December 2006, before last week's cuts in the reserve ratio.
Slowing Growth
The $1.2 trillion economy may slow to 7.9 percent in 2008 and slide further to 6.9 percent in 2009, the International Monetary Fund said this month, as it described the world economy as being ``on the cusp'' of a recession. The IMF estimates India's economy grew 9.3 percent in 2007.
``There is a need to switch the monetary policy stance towards growth because inflation is ebbing,'' said Suresh D. Tendulkar, chairman of the panel of economic advisers to Prime Minister Manmohan Singh. Tendulkar also called for easing restrictions on local companies raising funds overseas.
Inflation in the nation may ease from the current 15-week low with prices of crude oil, wheat and other commodities tumbling as the world economy heads toward a recession.
India's key wholesale price inflation rate fell to 11.80 percent in the week to Sept. 27, the government said Oct. 10, slower than economists expected. Chidambaram said the drop in prices of metal and oil, currently near a 13 month low of $77.7 a barrel, will have a ``beneficial'' effect on inflation.
-- With reporting by Sumit Sharma in Mumbai. Editors: Stephen Foxwell, Nabeel Mohideen.
To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.
Read more...
Oct. 13 (Bloomberg) -- Finance Minister Palaniappan Chidambaram said India plans to increase the amount of cash in the financial system, lifting the rupee from a record low and shares after the biggest drop in 18 years last week.
``The root cause of the present uncertainty is liquidity and not any dramatic change in the fundamentals of the economy,'' Chidambaram said in New Delhi today. ``We are working on more measures that will infuse liquidity and increase the confidence of depositors and investors.''
India's central bank may further cut the amount of cash banks need to set aside as reserves as the tightest credit crunch in 19 months threatens to stall economic growth. Indian stocks led by ICICI Bank Ltd. mirrored gains across Asia today as Australia guaranteed bank deposits while European leaders agreed to support lenders in an effort to restore investor confidence.
``There has to be a sustained effort to calm markets because these are very unusual times,'' said Sujan Hajra, chief economist at Anand Rathi Securities Pvt. in Mumbai. ``A deeper cut in the cash reserve ratio is most likely in India, where the problem is one of liquidity.''
The government, the Reserve Bank of India and the Securities & Exchange Board of India are working on more steps, Chidambaram said, without elaborating. ``We hope to be able to announce them shortly,'' the finance minister said in a televised briefing before the stock market opened.
Markets Rally
India's benchmark Bombay Stock Exchange Sensitive Index, or Sensex, surged 6.3 percent to 11,186.35 after a 16 percent plunge last week. ICICI Bank climbed by a record, reversing its biggest ever drop on Oct. 10, after Chief Executive Officer K.V. Kamath said the nation's second-biggest lender had sufficient funds.
ICICI Bank is being targeted by short sellers who have spread rumors that the bank may struggle to refund depositors, Kamath told NDTV Profit news channel today. India should consider a ban on short sales, he said. Short sellers borrow stock and sell it, hoping to buy it back at a lower price.
The rebound in the markets came after the Reserve Bank of India reduced the cash reserve ratio, or the amount of money lenders need to keep aside as reserves, to 7.5 percent from 9 percent starting Oct. 11. The cut was the sharpest since 2001.
The rupee rose 0.7 percent to 48.10 per dollar, snapping a five-day losing streak, while bond yields on the key 10-year bonds declined 5 basis points to 7.74 percent. Overnight money markets rates fell to 9.85 percent today from 16 percent on Oct. 10, the highest since March 2007. A basis point is 0.01 percentage point.
`Nothing to Fear'
Indian banks are ready to provide credit, are safe and depositors have nothing to fear, Chidambaram said, adding he may make another statement today if needed. A panel set up by the finance ministry panel on liquidity will meet at 3:30 p.m.
Still, Indian real-estate developers will continue to face a shortage of funds even after the central bank cut the amount of cash banks need to hold to ease credit, Macquarie Research said in a note to clients today.
``The capital crunch has hit the sector very hard,'' Macquarie analysts Unmesh Sharma and Bharat Rathi said. ``We believe the tightness will continue for a few more months, given the difficulty in raising capital through bank debt, equity markets and (more recently) private equity.''
The tight money market conditions have emerged at a time when India's industrial output growth has slumped to the weakest pace in at least 14 years. Output at factories, utilities and mines rose 1.3 percent in August from a year earlier after a revised 7.4 percent gain in July, as rising borrowing costs since 2004 to contain inflation sapped consumer demand.
The central bank has increased its key repurchase rate by 3 percentage points to 9 percent since 2004 and the cash reserve ratio by 4 percentage points since December 2006, before last week's cuts in the reserve ratio.
Slowing Growth
The $1.2 trillion economy may slow to 7.9 percent in 2008 and slide further to 6.9 percent in 2009, the International Monetary Fund said this month, as it described the world economy as being ``on the cusp'' of a recession. The IMF estimates India's economy grew 9.3 percent in 2007.
``There is a need to switch the monetary policy stance towards growth because inflation is ebbing,'' said Suresh D. Tendulkar, chairman of the panel of economic advisers to Prime Minister Manmohan Singh. Tendulkar also called for easing restrictions on local companies raising funds overseas.
Inflation in the nation may ease from the current 15-week low with prices of crude oil, wheat and other commodities tumbling as the world economy heads toward a recession.
India's key wholesale price inflation rate fell to 11.80 percent in the week to Sept. 27, the government said Oct. 10, slower than economists expected. Chidambaram said the drop in prices of metal and oil, currently near a 13 month low of $77.7 a barrel, will have a ``beneficial'' effect on inflation.
-- With reporting by Sumit Sharma in Mumbai. Editors: Stephen Foxwell, Nabeel Mohideen.
To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.
Read more...
Asean Plans Package to Assist Lenders, Teves Says
By Shamim Adam
Oct. 13 (Bloomberg) -- Southeast Asian officials and their counterparts from Japan, China and South Korea are studying plans that will allow them to rescue financial institutions facing liquidity problems or holding distressed assets, Philippine Finance Secretary Gary Teves said.
Organizations such as the International Monetary Fund and the World Bank are also joining in the 10-member Association of Southeast Asian Nations' efforts to set up such a facility to help lenders in the region if needed, Teves said in an interview in Washington yesterday. The World Bank indicated it will pledge about $10 billion to the plan, he said.
Asian policy makers have downplayed concern the U.S. turmoil will infect the region's financial systems and said they see little risk their countries will be hit by a crisis similar to the economic meltdown of 1997.
``Despite us being in a better position, we would like to convey a message we're still there to prepare ourselves just in case the financial crisis hits Asean,'' he said. ``We'll try to establish a standard facility to help problem financial institutions address their concerns ranging from liquidity restraints to recapitalization to the possibility of purchasing toxic assets similar to the plan in the U.S.''
The U.S. Congress this month passed legislation allowing the Treasury to spend as much as $700 billion to buy troubled mortgage-related assets and purchase equity in banks. European leaders on Oct. 12 agreed to guarantee new bank refinancing and use taxpayer money to keep distressed lenders afloat.
Access to Cash
Central banks around the globe have injected billions of dollars into the financial system to spur lending and prevent the world from slipping into recession.
G-7 policy makers on Oct. 11 signaled they would intervene to avoid a repeat of last month's collapse of Lehman Brothers Holdings Inc., and promised to ensure major banks have access to cash and are able to tap public funds for capital. European leaders on Oct. 12 agreed to guarantee new bank refinancing and use taxpayer money to keep distressed lenders afloat.
Private companies may also have access to the facility, Teves said. Details of the lending mechanism will be release in the next few weeks, he said.
``It will be large and have minimal conditions because in a situation like this, you have to be very quick in disbursing the funds,'' Teves said.
Foreign Reserves
The Asian financial crisis of 1997-1998, set off by plunging currencies, led to the collapse of companies as they buckled under billions of dollars of debt, forcing Indonesia, Thailand and South Korea to turn to the IMF for bailouts. The region has since accumulated more than $3.3 trillion of reserves, about half of the global total.
Asean and its partners -- Japan, China and South Korea -- have been discussing creating a pool of about $80 billion in Asian foreign-exchange reserves to be tapped by nations should a need arise for them to protect their currencies.
The reserve pool is an expansion of a current arrangement called the Chiangmai Initiative that only allows for bilateral currency swaps. It is designed to ensure central banks have enough to shield their currencies from speculative attacks like those that depleted the reserves of some countries during the Asian financial crisis a decade ago.
Philippine President Gloria Arroyo today said she proposed leaders from Southeast Asia, China, Japan and South Korea meet to discuss the global financial crisis on the sidelines of a larger scheduled summit in Beijing next week.
All countries ``should unite and come up with a coordinated approach to cushion the impact,'' she said in a speech in Manila. Asian and European leaders hold the seventh Asia-Europe meeting in Beijing next week.
Asean includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.
To contact the reporter on this story: Shamim Adam in Washington at sadam2@bloomberg.net
Read more...
Oct. 13 (Bloomberg) -- Southeast Asian officials and their counterparts from Japan, China and South Korea are studying plans that will allow them to rescue financial institutions facing liquidity problems or holding distressed assets, Philippine Finance Secretary Gary Teves said.
Organizations such as the International Monetary Fund and the World Bank are also joining in the 10-member Association of Southeast Asian Nations' efforts to set up such a facility to help lenders in the region if needed, Teves said in an interview in Washington yesterday. The World Bank indicated it will pledge about $10 billion to the plan, he said.
Asian policy makers have downplayed concern the U.S. turmoil will infect the region's financial systems and said they see little risk their countries will be hit by a crisis similar to the economic meltdown of 1997.
``Despite us being in a better position, we would like to convey a message we're still there to prepare ourselves just in case the financial crisis hits Asean,'' he said. ``We'll try to establish a standard facility to help problem financial institutions address their concerns ranging from liquidity restraints to recapitalization to the possibility of purchasing toxic assets similar to the plan in the U.S.''
The U.S. Congress this month passed legislation allowing the Treasury to spend as much as $700 billion to buy troubled mortgage-related assets and purchase equity in banks. European leaders on Oct. 12 agreed to guarantee new bank refinancing and use taxpayer money to keep distressed lenders afloat.
Access to Cash
Central banks around the globe have injected billions of dollars into the financial system to spur lending and prevent the world from slipping into recession.
G-7 policy makers on Oct. 11 signaled they would intervene to avoid a repeat of last month's collapse of Lehman Brothers Holdings Inc., and promised to ensure major banks have access to cash and are able to tap public funds for capital. European leaders on Oct. 12 agreed to guarantee new bank refinancing and use taxpayer money to keep distressed lenders afloat.
Private companies may also have access to the facility, Teves said. Details of the lending mechanism will be release in the next few weeks, he said.
``It will be large and have minimal conditions because in a situation like this, you have to be very quick in disbursing the funds,'' Teves said.
Foreign Reserves
The Asian financial crisis of 1997-1998, set off by plunging currencies, led to the collapse of companies as they buckled under billions of dollars of debt, forcing Indonesia, Thailand and South Korea to turn to the IMF for bailouts. The region has since accumulated more than $3.3 trillion of reserves, about half of the global total.
Asean and its partners -- Japan, China and South Korea -- have been discussing creating a pool of about $80 billion in Asian foreign-exchange reserves to be tapped by nations should a need arise for them to protect their currencies.
The reserve pool is an expansion of a current arrangement called the Chiangmai Initiative that only allows for bilateral currency swaps. It is designed to ensure central banks have enough to shield their currencies from speculative attacks like those that depleted the reserves of some countries during the Asian financial crisis a decade ago.
Philippine President Gloria Arroyo today said she proposed leaders from Southeast Asia, China, Japan and South Korea meet to discuss the global financial crisis on the sidelines of a larger scheduled summit in Beijing next week.
All countries ``should unite and come up with a coordinated approach to cushion the impact,'' she said in a speech in Manila. Asian and European leaders hold the seventh Asia-Europe meeting in Beijing next week.
Asean includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.
To contact the reporter on this story: Shamim Adam in Washington at sadam2@bloomberg.net
Read more...
China's September Foreign Trade Statistics (Table)
By Cesilia Han
Oct. 13 (Bloomberg) -- Following is a table for China's foreign trade statistics in September released by the Beijing-based Customs General Administration.
Note 1: YTD = Year-to-date. Note 2: Figures are subject to revision. Note 3: Percent changes for trade balance are calculated by Bloomberg News.
Source: China Customs General Administration.
To contact the reporter on this story: Cesilia Han in Seoul at chan4@bloomberg.net
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Oct. 13 (Bloomberg) -- Following is a table for China's foreign trade statistics in September released by the Beijing-based Customs General Administration.
==============================================================================
Sept. Aug. July June May April March YTD
2008 2008 2008 2008 2008 2008 2008 2008
==============================================================================
----------------------- USD Billion ---------------------------
Exports 136.40 134.87 136.63 121.15 120.53 118.72 108.91 1074.00
Imports 107.10 106.18 111.40 100.36 100.62 102.29 95.67 893.10
------------------------ YoY% ------------------------ YTD YoY%
Exports 21.5% 21.1% 26.9% 17.2% 28.1% 21.8% 30.3% 22.3%
Imports 21.3% 23.1% 33.7% 31.2% 40.4% 26.7% 24.8% 29.0%
==============================================================================
Note 1: YTD = Year-to-date. Note 2: Figures are subject to revision. Note 3: Percent changes for trade balance are calculated by Bloomberg News.
Source: China Customs General Administration.
To contact the reporter on this story: Cesilia Han in Seoul at chan4@bloomberg.net
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Paulson, Trichet Hope Markets Will Reward Initiatives
By Simon Kennedy
Oct. 13 (Bloomberg) -- Leaders of the world's richest nations are holding their breath in hopes that markets will endorse their latest effort to spend taxpayer cash on saving banks from collapse.
European governments will today outline just how they will carry out pledges to guarantee new bank debt and use public funds to keep troubled banks afloat. The U.S. Treasury will flesh out its proposal to buy stakes in financial firms, and Britain may go as far as underwriting stock sales by four lenders.
``People have been looking for leadership and finally they are getting it,'' billionaire investor George Soros told reporters in Washington yesterday. ``We're in a full-fledged panic, and who knows how people behave in a panic?''
Treasury Secretary Henry Paulson, European Central Bank President Jean-Claude Trichet and their colleagues are betting that logic, rather than the fear that sent stock markets tumbling last week, will govern investors' reactions. The risk is that the lack of a single, global plan to buttress banks prolongs the money-market freeze that's choking households' and companies' access to credit.
The Dow Jones Euro Stoxx 50 Index, a benchmark share index for the euro region, jumped 6.4 percent at 11.00 a.m. Frankfurt time and the euro rose the most in three weeks against the dollar.
`Bold Action Plan'
The U.S. Treasury's official in charge of implementing the $700 billion financial-rescue program approved by Congress, Neel Kashkari, speaks at 8 a.m. in Washington. Paulson said three days ago he wants to implement his new plan to buy stocks in a ``broad array'' of companies as soon as he can.
``We have a bold action plan,'' Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co., told Bloomberg Television in Washington on Oct. 11. ``They must now act fast with overwhelming force.''
The Federal Reserve said today the world's largest central banks including the ECB, the Bank of England and the Swiss National Bank will offer banks unlimited dollar funds in an effort to unlock money markets. The Bank of Japan will consider ``similar measures,'' Washington-based Fed said on its Web site.
British officials announced yesterday the government will take majority stakes in Royal Bank of Scotland Group Plc and HBOS Plc. The Sunday Times reported yesterday that the U.K. may today unveil details on underwriting share sales of as much as 35 billion pounds ($60 billion) in four of the nation's banks.
Prevent Lehman Repeat
Countries are individually implementing the commitments they made at a meeting of finance ministers from the Group of Seven nations on Oct. 10 and yesterday's summit of European leaders. After the G-7 talks, officials vowed to take ``urgent and exceptional action,'' telling banks they would have access to cash and be able to tap public funds for capital.
The goal is to prevent another failure the size of Lehman Brothers Holdings Inc., whose Sept. 15 demise spooked banks into halting loans to each other. The pledges may provide some relief for banks such as Morgan Stanley and Milan-based Unicredit SpA, whose stocks have tumbled as investors questioned their health.
``They're saying `no more Lehmans','' said Raghuram Rajan, a University of Chicago professor and former chief economist at the International Monetary Fund. ``The test is whether they can stop the panic.''
Recapitalizing Banks
Europe's leaders yesterday agreed to guarantee until 2009 bank debt issues with maturities of up to five years, permit governments to buy shares in banks and commit to recapitalizing major banks in trouble. The accord reversed a failure earlier this month to agree on a united front.
``None of our countries acting alone could end this crisis,'' French President Nicolas Sarkozy said in Paris. He and fellow leaders will today announce their own national measures.
Smaller economies also stepped up their response to the turmoil yesterday. Norway will offer commercial banks as much as $55 billion in government bonds in exchange for mortgage debt, while the United Arab Emirates, Australia and New Zealand guaranteed bank deposits.
The flood of new initiatives is being unleashed after markets proved impervious to those adopted last week. Central banks executed emergency interest-rate cuts and pumped more cash into their banking systems, the Fed said it would buy commercial paper, and European governments bailed out banks.
Lack of Coordination
Despite their unprecedented nature, Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York, said the actions appeared disjointed and short on ambition with Germany still refusing to accept there was a problem. ``There was a complete lack of global coordination,'' he said.
With investors worried that governments were chasing events rather than shaping them, the MSCI World Index of equities in 23 developed countries slid 20 percent last week, the most since records began in 1970. Banks refused to lend to each other and propelled borrowing costs higher, threatening to tip the world into its worst recession since the early 1980s.
Policy makers expressed confidence that investors will ultimately recognize the scale of their initiatives. ``We have taken a lot of actions,'' Trichet said in Washington on Oct. 10. ``My experience of markets is that it always takes a little time to capture the elements,'' of decisions taken, he said.
If he's wrong and the conflagration worsens, central banks and governments may be forced to act even more aggressively to avoid a prolonged slump.
``There is a real risk that the impact of the current unprecedented policy momentum on investor confidence will be lost and -- with billions of public sector funds already committed -- policy will have to start again from scratch,'' said Lena Komileva, a London-based economist at Tullett Prebon Plc, the second-biggest broker of transactions between banks.
For French Finance Minister Christine Lagarde, her days as a synchronized swimmer are proving apt for combating the credit crunch. In both, ``you have to hold your breath and for long periods of time,'' she said in Washington.
To contact the reporter on this story: Simon Kennedy in Washington at skennedy4@bloomberg.net
Read more...
Oct. 13 (Bloomberg) -- Leaders of the world's richest nations are holding their breath in hopes that markets will endorse their latest effort to spend taxpayer cash on saving banks from collapse.
European governments will today outline just how they will carry out pledges to guarantee new bank debt and use public funds to keep troubled banks afloat. The U.S. Treasury will flesh out its proposal to buy stakes in financial firms, and Britain may go as far as underwriting stock sales by four lenders.
``People have been looking for leadership and finally they are getting it,'' billionaire investor George Soros told reporters in Washington yesterday. ``We're in a full-fledged panic, and who knows how people behave in a panic?''
Treasury Secretary Henry Paulson, European Central Bank President Jean-Claude Trichet and their colleagues are betting that logic, rather than the fear that sent stock markets tumbling last week, will govern investors' reactions. The risk is that the lack of a single, global plan to buttress banks prolongs the money-market freeze that's choking households' and companies' access to credit.
The Dow Jones Euro Stoxx 50 Index, a benchmark share index for the euro region, jumped 6.4 percent at 11.00 a.m. Frankfurt time and the euro rose the most in three weeks against the dollar.
`Bold Action Plan'
The U.S. Treasury's official in charge of implementing the $700 billion financial-rescue program approved by Congress, Neel Kashkari, speaks at 8 a.m. in Washington. Paulson said three days ago he wants to implement his new plan to buy stocks in a ``broad array'' of companies as soon as he can.
``We have a bold action plan,'' Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co., told Bloomberg Television in Washington on Oct. 11. ``They must now act fast with overwhelming force.''
The Federal Reserve said today the world's largest central banks including the ECB, the Bank of England and the Swiss National Bank will offer banks unlimited dollar funds in an effort to unlock money markets. The Bank of Japan will consider ``similar measures,'' Washington-based Fed said on its Web site.
British officials announced yesterday the government will take majority stakes in Royal Bank of Scotland Group Plc and HBOS Plc. The Sunday Times reported yesterday that the U.K. may today unveil details on underwriting share sales of as much as 35 billion pounds ($60 billion) in four of the nation's banks.
Prevent Lehman Repeat
Countries are individually implementing the commitments they made at a meeting of finance ministers from the Group of Seven nations on Oct. 10 and yesterday's summit of European leaders. After the G-7 talks, officials vowed to take ``urgent and exceptional action,'' telling banks they would have access to cash and be able to tap public funds for capital.
The goal is to prevent another failure the size of Lehman Brothers Holdings Inc., whose Sept. 15 demise spooked banks into halting loans to each other. The pledges may provide some relief for banks such as Morgan Stanley and Milan-based Unicredit SpA, whose stocks have tumbled as investors questioned their health.
``They're saying `no more Lehmans','' said Raghuram Rajan, a University of Chicago professor and former chief economist at the International Monetary Fund. ``The test is whether they can stop the panic.''
Recapitalizing Banks
Europe's leaders yesterday agreed to guarantee until 2009 bank debt issues with maturities of up to five years, permit governments to buy shares in banks and commit to recapitalizing major banks in trouble. The accord reversed a failure earlier this month to agree on a united front.
``None of our countries acting alone could end this crisis,'' French President Nicolas Sarkozy said in Paris. He and fellow leaders will today announce their own national measures.
Smaller economies also stepped up their response to the turmoil yesterday. Norway will offer commercial banks as much as $55 billion in government bonds in exchange for mortgage debt, while the United Arab Emirates, Australia and New Zealand guaranteed bank deposits.
The flood of new initiatives is being unleashed after markets proved impervious to those adopted last week. Central banks executed emergency interest-rate cuts and pumped more cash into their banking systems, the Fed said it would buy commercial paper, and European governments bailed out banks.
Lack of Coordination
Despite their unprecedented nature, Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York, said the actions appeared disjointed and short on ambition with Germany still refusing to accept there was a problem. ``There was a complete lack of global coordination,'' he said.
With investors worried that governments were chasing events rather than shaping them, the MSCI World Index of equities in 23 developed countries slid 20 percent last week, the most since records began in 1970. Banks refused to lend to each other and propelled borrowing costs higher, threatening to tip the world into its worst recession since the early 1980s.
Policy makers expressed confidence that investors will ultimately recognize the scale of their initiatives. ``We have taken a lot of actions,'' Trichet said in Washington on Oct. 10. ``My experience of markets is that it always takes a little time to capture the elements,'' of decisions taken, he said.
If he's wrong and the conflagration worsens, central banks and governments may be forced to act even more aggressively to avoid a prolonged slump.
``There is a real risk that the impact of the current unprecedented policy momentum on investor confidence will be lost and -- with billions of public sector funds already committed -- policy will have to start again from scratch,'' said Lena Komileva, a London-based economist at Tullett Prebon Plc, the second-biggest broker of transactions between banks.
For French Finance Minister Christine Lagarde, her days as a synchronized swimmer are proving apt for combating the credit crunch. In both, ``you have to hold your breath and for long periods of time,'' she said in Washington.
To contact the reporter on this story: Simon Kennedy in Washington at skennedy4@bloomberg.net
Read more...
Japan May Want to Buy Gold, Not Morgan Stanley: William Pesek
Commentary by William Pesek
Enlarge Image/Details
Oct. 13 (Bloomberg) -- Looking at the morning headlines, many of us in Tokyo are tempted to have a side of whiskey with our coffee. Or skip the java and go just for the booze.
None more so than the folks at Mitsubishi UFJ Financial Group Inc., who are about to sink $9 billion into Morgan Stanley. That move seemed brilliant when it was announced last month. Today, it looks a bit troublesome as shares in the fifth-biggest U.S. bank-holding company drop.
Moody's Investors Service said Oct. 10 that Morgan Stanley's credit rating may be cut as the global market slump threatens profits. Chief Executive Officer John Mack last week dismissed rumors Mitsubishi UFJ was having second thoughts. According to reports today, the banks are discussing altering the terms of the deal.
Should Mitsubishi UFJ pull out? One really has to wonder.
Given the way markets are cascading lower and global recession risks are growing, Japan's biggest bank is almost better off speculating in companies that produce scotch, canvas tents and canned soup. And then there's gold, which will surge further as the dollar's value dwindles.
Mitsubishi UFJ sees Morgan Stanley as a long-term investment, a chance to grab a piece of a fabled Wall Street giant humbled by market turmoil. And relative to U.S. peers, Japan's banks are solid, having spent the 2000s writing down bad loans and avoiding risky, hard-to-value investments.
Wouldn't it be a shock if after years of conservatism, a major Japanese bank lost big on a renewed foray overseas?
Acquisitive Japan
Much has been made of how Japanese companies are increasing foreign acquisitions, using their cash-hoards to grab assets beaten down by the credit crisis and unfolding economic slowdown.
Takeovers by companies including Nomura Holdings Inc., TDK Corp., Daiichi Sankyo Co. and, potentially, Mitsubishi UFJ put Japan on course for its biggest buying spree since the 1980s bubble. Back then, Japanese buyers overpaid in a huge way for assets such as New York's Rockefeller Center and California's Pebble Beach Golf Links.
The key for Mitsubishi UFJ CEO Nobuo Kuroyanagi is to heed the lessons of Japan's bubble years. Complicating things is how difficult it is to value assets -- and, by extension, a company's worth -- in this market environment.
Take Korea Development Bank's ill-fated flirtation with Lehman Brothers Holdings Inc. The South Korean bank offered $6.40 a share for a controlling stake in Lehman in the weeks preceding the U.S. firm's bankruptcy last month. Lehman CEO Richard Fuld wanted more.
Asia's Power
The unraveling of the deal left the Korean bank looking quite savvy given what we later found out about Lehman's health. It displayed the real power of savings-rich Asia as U.S. companies bleed capital.
The saga also may get Fuld into hot water. On Oct. 7, U.S. lawmakers grilled him about a Sept. 10 conference call in which he said Lehman's capital reserves were adequate. Representative John Mica, a Florida Republican, asked whether Fuld knew then that Lehman wasn't getting an investment of $3 billion to $5 billion from Korea Development Bank. Fuld said: ``There certainly was no intent to mislead.''
Betting on Morgan Stanley is an even bigger roll of the dice for Mitsubishi UFJ. On one level, Morgan Stanley would seem as good as any U.S. financial company in which to grab a 21 percent stake. On another, who really knows these days?
Risk Factor
In its statement, Moody's hardly suggested the firm is a basket case.
``Morgan Stanley's recent performance has been relatively solid, it has acted to solidify its capital base, it has maintained a good liquidity profile, and it has benefited from a level of systemic support that is factored into the rating,'' Moody's said.
For Mitsubishi UFJ, the risk is quite different from Nomura's purchase of Lehman's Asia-Pacific business. Nomura bought the carcass of a bankrupt company without taking on a potentially risky balance sheet. Mitsubishi UFJ risks buying into a terminally ill patient.
The point isn't to pick on Morgan Stanley. Yet one is hard- pressed to rule out a bad ending for the gamut of financial institutions amid such turmoil.
Consider the experience of sovereign wealth funds. How happy can China be with its multibillion-dollar investments in Blackstone Group LP and Morgan Stanley. Ditto for Singapore, which invested in Merrill Lynch & Co.
It's impossible to know what Mitsubishi UFJ will do. If it sticks to Plan A, the Morgan Stanley deal could be closed as soon as tomorrow, when the Federal Reserve-imposed waiting period expires. Or Mitsubishi UFJ may renege, concluding it risks throwing good money after bad as economies swoon.
Weighing the interests of shareholders won't be easy. If markets rebound soon, Mitsubishi UFJ stockholders will cheer the deal. If Morgan Stanley goes the way of Lehman or Bear Stearns Cos., investors will be livid.
Whatever Mitsubishi UFJ decides, one thing is clear: The risk of buyer's remorse has never been bigger in a global system that has never been so shaky.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
Read more...
Enlarge Image/Details
Oct. 13 (Bloomberg) -- Looking at the morning headlines, many of us in Tokyo are tempted to have a side of whiskey with our coffee. Or skip the java and go just for the booze.
None more so than the folks at Mitsubishi UFJ Financial Group Inc., who are about to sink $9 billion into Morgan Stanley. That move seemed brilliant when it was announced last month. Today, it looks a bit troublesome as shares in the fifth-biggest U.S. bank-holding company drop.
Moody's Investors Service said Oct. 10 that Morgan Stanley's credit rating may be cut as the global market slump threatens profits. Chief Executive Officer John Mack last week dismissed rumors Mitsubishi UFJ was having second thoughts. According to reports today, the banks are discussing altering the terms of the deal.
Should Mitsubishi UFJ pull out? One really has to wonder.
Given the way markets are cascading lower and global recession risks are growing, Japan's biggest bank is almost better off speculating in companies that produce scotch, canvas tents and canned soup. And then there's gold, which will surge further as the dollar's value dwindles.
Mitsubishi UFJ sees Morgan Stanley as a long-term investment, a chance to grab a piece of a fabled Wall Street giant humbled by market turmoil. And relative to U.S. peers, Japan's banks are solid, having spent the 2000s writing down bad loans and avoiding risky, hard-to-value investments.
Wouldn't it be a shock if after years of conservatism, a major Japanese bank lost big on a renewed foray overseas?
Acquisitive Japan
Much has been made of how Japanese companies are increasing foreign acquisitions, using their cash-hoards to grab assets beaten down by the credit crisis and unfolding economic slowdown.
Takeovers by companies including Nomura Holdings Inc., TDK Corp., Daiichi Sankyo Co. and, potentially, Mitsubishi UFJ put Japan on course for its biggest buying spree since the 1980s bubble. Back then, Japanese buyers overpaid in a huge way for assets such as New York's Rockefeller Center and California's Pebble Beach Golf Links.
The key for Mitsubishi UFJ CEO Nobuo Kuroyanagi is to heed the lessons of Japan's bubble years. Complicating things is how difficult it is to value assets -- and, by extension, a company's worth -- in this market environment.
Take Korea Development Bank's ill-fated flirtation with Lehman Brothers Holdings Inc. The South Korean bank offered $6.40 a share for a controlling stake in Lehman in the weeks preceding the U.S. firm's bankruptcy last month. Lehman CEO Richard Fuld wanted more.
Asia's Power
The unraveling of the deal left the Korean bank looking quite savvy given what we later found out about Lehman's health. It displayed the real power of savings-rich Asia as U.S. companies bleed capital.
The saga also may get Fuld into hot water. On Oct. 7, U.S. lawmakers grilled him about a Sept. 10 conference call in which he said Lehman's capital reserves were adequate. Representative John Mica, a Florida Republican, asked whether Fuld knew then that Lehman wasn't getting an investment of $3 billion to $5 billion from Korea Development Bank. Fuld said: ``There certainly was no intent to mislead.''
Betting on Morgan Stanley is an even bigger roll of the dice for Mitsubishi UFJ. On one level, Morgan Stanley would seem as good as any U.S. financial company in which to grab a 21 percent stake. On another, who really knows these days?
Risk Factor
In its statement, Moody's hardly suggested the firm is a basket case.
``Morgan Stanley's recent performance has been relatively solid, it has acted to solidify its capital base, it has maintained a good liquidity profile, and it has benefited from a level of systemic support that is factored into the rating,'' Moody's said.
For Mitsubishi UFJ, the risk is quite different from Nomura's purchase of Lehman's Asia-Pacific business. Nomura bought the carcass of a bankrupt company without taking on a potentially risky balance sheet. Mitsubishi UFJ risks buying into a terminally ill patient.
The point isn't to pick on Morgan Stanley. Yet one is hard- pressed to rule out a bad ending for the gamut of financial institutions amid such turmoil.
Consider the experience of sovereign wealth funds. How happy can China be with its multibillion-dollar investments in Blackstone Group LP and Morgan Stanley. Ditto for Singapore, which invested in Merrill Lynch & Co.
It's impossible to know what Mitsubishi UFJ will do. If it sticks to Plan A, the Morgan Stanley deal could be closed as soon as tomorrow, when the Federal Reserve-imposed waiting period expires. Or Mitsubishi UFJ may renege, concluding it risks throwing good money after bad as economies swoon.
Weighing the interests of shareholders won't be easy. If markets rebound soon, Mitsubishi UFJ stockholders will cheer the deal. If Morgan Stanley goes the way of Lehman or Bear Stearns Cos., investors will be livid.
Whatever Mitsubishi UFJ decides, one thing is clear: The risk of buyer's remorse has never been bigger in a global system that has never been so shaky.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
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Swiss September Producer, Import Price Growth Slows
By Simone Meier
Oct. 13 (Bloomberg) -- Swiss producer and import price growth slowed for a second month in September, adding to signs of easing inflation pressures.
Prices ranging from factory to farm goods as well as imports rose 3.7 percent from a year earlier after gaining 4 percent in August, the Federal Statistics Office in Neuchatel said in a statement today. Economists expected a gain of 3.9 percent, according to the median of seven estimates in a Bloomberg News survey. Prices fell 0.5 percent in the month.
The price of crude oil has dropped 45 percent from a record $147.27 a barrel on July 11, easing pressure on companies to pass on higher costs just as the economy cools. The Swiss central bank along with its largest counterparts around the world last week trimmed borrowing costs to shore up financial markets, saying the crisis has ``diminished'' risks to inflation.
``The data only confirms that inflation was never the biggest problem,'' said Reto Huenerwadel, an economist at UBS AG in Zurich. ``The impact of the financial crisis will be substantial. There's still a lot of uncertainty.''
The Swiss National Bank in coordination with other central banks said today it will offer unlimited dollar funds to financial markets to restore confidence. The Zurich-based central bank last week cut its key rate by 25 basis points to 2.5 percent after the credit crunch pushed up lending costs and forced governments across Europe to bail out banks.
Credit Losses
SNB President Jean-Pierre Roth told Aargauer Zeitung newspaper in an interview published today that the bank is ready to cut interest rates again ``if the economic situation worsens further.'' Still, Swiss banks have a better capitalization than their rivals abroad, he said.
The world's largest financial companies have posted more than $635 billion in writedowns and credit losses since the start of last year after the U.S. housing market collapsed.
In Switzerland, slowing economic growth is making it more difficult for companies to pass on higher costs. The jobless rate unexpectedly rose to 2.6 percent in September when adjusted for seasonal swings from 2.5 percent. Manufacturing last month contracted for the first time in more than five years.
Swiss producer prices rose 3.1 percent from the year earlier period, while declining 0.5 percent in the month, today's report showed. Import prices increased 4.9 percent from September 2007 and declined 0.7 percent from August. Core inflation, excluding volatile costs such as energy, rose 1.9 percent from a year ago and fell 0.1 percent in the month.
To contact the reporters on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.
Read more...
Oct. 13 (Bloomberg) -- Swiss producer and import price growth slowed for a second month in September, adding to signs of easing inflation pressures.
Prices ranging from factory to farm goods as well as imports rose 3.7 percent from a year earlier after gaining 4 percent in August, the Federal Statistics Office in Neuchatel said in a statement today. Economists expected a gain of 3.9 percent, according to the median of seven estimates in a Bloomberg News survey. Prices fell 0.5 percent in the month.
The price of crude oil has dropped 45 percent from a record $147.27 a barrel on July 11, easing pressure on companies to pass on higher costs just as the economy cools. The Swiss central bank along with its largest counterparts around the world last week trimmed borrowing costs to shore up financial markets, saying the crisis has ``diminished'' risks to inflation.
``The data only confirms that inflation was never the biggest problem,'' said Reto Huenerwadel, an economist at UBS AG in Zurich. ``The impact of the financial crisis will be substantial. There's still a lot of uncertainty.''
The Swiss National Bank in coordination with other central banks said today it will offer unlimited dollar funds to financial markets to restore confidence. The Zurich-based central bank last week cut its key rate by 25 basis points to 2.5 percent after the credit crunch pushed up lending costs and forced governments across Europe to bail out banks.
Credit Losses
SNB President Jean-Pierre Roth told Aargauer Zeitung newspaper in an interview published today that the bank is ready to cut interest rates again ``if the economic situation worsens further.'' Still, Swiss banks have a better capitalization than their rivals abroad, he said.
The world's largest financial companies have posted more than $635 billion in writedowns and credit losses since the start of last year after the U.S. housing market collapsed.
In Switzerland, slowing economic growth is making it more difficult for companies to pass on higher costs. The jobless rate unexpectedly rose to 2.6 percent in September when adjusted for seasonal swings from 2.5 percent. Manufacturing last month contracted for the first time in more than five years.
Swiss producer prices rose 3.1 percent from the year earlier period, while declining 0.5 percent in the month, today's report showed. Import prices increased 4.9 percent from September 2007 and declined 0.7 percent from August. Core inflation, excluding volatile costs such as energy, rose 1.9 percent from a year ago and fell 0.1 percent in the month.
To contact the reporters on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.
Read more...
World May Be Lucky to Get Worst Recession Since 1983
By Rich Miller
Oct. 13 (Bloomberg) -- The world may be heading for its worst recession in a quarter of a century -- if it's lucky.
A steep slump looks likely as the credit squeeze crunches economies from the U.S. to Singapore and panic engulfs global financial markets.
``It's certainly going to be the worst since the 1980s,'' says Bradford DeLong, an economics professor at the University of California at Berkeley who worked at the U.S. Treasury Department from 1993 to 1995. ``The hope is that it won't become the worst unemployment business cycle since the Great Depression.''
Of special concern: The two big bulwarks of the global economy in recent years -- U.S. consumer spending and the rapid growth of emerging markets -- may be finally giving way in the face of the 14-month-old financial turmoil.
That raises the odds that the coming economic decline will be long and deep, despite U.S. Treasury Secretary Henry Paulson's $700 billion financial rescue plan, similar efforts by European leaders and the coordinated interest-rate cuts engineered by Federal Reserve Chairman Ben S. Bernanke and other central bankers last week.
``This is the worst crisis I've seen in my 50-year career,'' William Rhodes, senior vice chairman of Citigroup Inc. in New York, told fellow bankers in Washington yesterday. ``We still have to deal with the effects on the real economy here and elsewhere.''
Slowing Growth
The International Monetary Fund's World Economic Outlook last week forecast that global growth will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007. That would mean a world recession under the fund's informal definition -- growth of 3 percent or less -- although current IMF chief economist Olivier Blanchard declined to describe it as such.
One of his predecessors wasn't so shy. ``It's hard to imagine it not being the worst recession in at least 25 years,'' says Kenneth Rogoff, who is now a professor at Harvard University in Cambridge, Massachusetts.
``You can take most of the official forecasts for 2009 and knock two'' percentage points off of them, he adds. That would make it the worst slump since 1982, when the world economy grew 0.9 percent.
``We're heading into a global recession,'' Simon Johnson, also a former IMF chief economist and now a senior fellow at the Peterson Institute for International Economics in Washington, said last month.
Rate-Cut Pressures
Stocks rallied worldwide today after European governments announced measures to shore up financial institutions and central banks pumped unlimited dollar funds into the money markets. The MSCI World Index, which plunged 20 percent last week, rose 2 percent.
Even if the financial markets settle down soon, the deepening decline will put pressure on central bankers to cut interest rates further and on finance ministers to reduce taxes and boost spending.
``There will be more cuts out of all of the central banks,'' says Ethan Harris, economist at Barclays Capital Inc. in New York. ``We are looking at a global recession, and it isn't going to turn quickly.''
U.S. lawmakers, who already enacted one economic-stimulus package this year, will reconvene after the Nov. 4 presidential and congressional elections to consider another.
Stimulus
``We are going to do a stimulus,'' House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said yesterday on the ABC News television program ``This Week.''
The U.S., where the 2 1/2 year-old nosedive in the housing market is now taking down the rest of the economy, is the epicenter of the global slump. Gross domestic product contracted in the third quarter and is set to shrink further in the fourth, according to a survey of 52 economists by Bloomberg News this month.
Consumer spending, after growing uninterruptedly since 1991, finally gave way last quarter in the face of rising unemployment, declining wealth and tightening credit.
Further weakness seems to be in store. The jobless rate, already at a five-year high of 6.1 percent, may rise to 8 percent, says Jan Hatzius, chief U.S. economist at Goldman Sachs Group in New York. That would bring the cumulative increase in unemployment during the recession to 3.5 percentage points, second in the post-World War II era only to the 4.1-point increase recorded in the mid-1970s.
Ripples
Household finances are also being pinched. The steep decline in U.S. stock prices last week alone wiped some $2.16 trillion from investors' wealth. And banks are getting stingier with credit: Borrowing by U.S. consumers fell in August by the most on record as lenders shut access to loans, according to data from the Fed.
The consumer pullback is already sending ripples throughout the economy. Vacancies at U.S. neighborhood and community shopping centers rose to a 14-year-high in the third quarter, New York-based real-estate research firm Reis says.
A sharp reduction in household spending could turn what is shaping up to be the biggest recession since the early 1980s into something worse, Bruce Kasman, chief economist at JPMorgan Chase & Co. told a meeting of the Institute for International Finance in Washington yesterday.
Market Cracks
Cracks are also showing up in the emerging markets, until now the dynamos of the world economy. The MSCI Emerging Markets Index fell 20 percent last week as global investors yanked money from countries such as Brazil and Russia.
Michael Mussa, another former IMF chief economist now with the Peterson Institute, says he has cut his forecast for emerging-market and developing-country growth next year to below 5 percent from 5.7 percent just two weeks ago. That would be the slowest since the Asian financial crisis in 1998 and would compare with an IMF projection of 6.9 percent growth for this year.
``The credit crunch has taken hold in emerging markets, particularly in central Europe and now in Latin America,'' Mexican central bank Governor Guillermo Ortiz told the IIF yesterday. ``This has happened in a few weeks, even days.''
Brazilian Budget Minister Paulo Bernardo said in an interview published yesterday by O Globo newspaper that the government may cut spending and postpone social programs as the financial crisis takes its toll on the economy.
Asia is also feeling the effects. Indian central banker Rakesh Mohan says his country's economy faces ``downside risks'' as global investors turn more cautious.
Pinched Exporters
Even China is feeling the effects, as its exporters are pinched by slowing demand from the U.S. and elsewhere. Trade figures to be released as early as today will probably show that export growth slowed in September, economists said in a Bloomberg survey.
``The financial crisis really has an impact everywhere in the world,'' Yi Gan, the deputy governor of the People's Bank of China, told investors in Washington yesterday.
That impact will grow the longer the crisis drags on. In a bid to restore calm to the financial markets, European leaders agreed yesterday to guarantee bank borrowing and use government money to prevent big lenders from going under.
``Time is of crucial importance,'' JPMorgan Chase's Kasman says. ``The longer we wait to implement the strategies, the more damage we can do to the world economy.''
To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net
Read more...
Oct. 13 (Bloomberg) -- The world may be heading for its worst recession in a quarter of a century -- if it's lucky.
A steep slump looks likely as the credit squeeze crunches economies from the U.S. to Singapore and panic engulfs global financial markets.
``It's certainly going to be the worst since the 1980s,'' says Bradford DeLong, an economics professor at the University of California at Berkeley who worked at the U.S. Treasury Department from 1993 to 1995. ``The hope is that it won't become the worst unemployment business cycle since the Great Depression.''
Of special concern: The two big bulwarks of the global economy in recent years -- U.S. consumer spending and the rapid growth of emerging markets -- may be finally giving way in the face of the 14-month-old financial turmoil.
That raises the odds that the coming economic decline will be long and deep, despite U.S. Treasury Secretary Henry Paulson's $700 billion financial rescue plan, similar efforts by European leaders and the coordinated interest-rate cuts engineered by Federal Reserve Chairman Ben S. Bernanke and other central bankers last week.
``This is the worst crisis I've seen in my 50-year career,'' William Rhodes, senior vice chairman of Citigroup Inc. in New York, told fellow bankers in Washington yesterday. ``We still have to deal with the effects on the real economy here and elsewhere.''
Slowing Growth
The International Monetary Fund's World Economic Outlook last week forecast that global growth will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007. That would mean a world recession under the fund's informal definition -- growth of 3 percent or less -- although current IMF chief economist Olivier Blanchard declined to describe it as such.
One of his predecessors wasn't so shy. ``It's hard to imagine it not being the worst recession in at least 25 years,'' says Kenneth Rogoff, who is now a professor at Harvard University in Cambridge, Massachusetts.
``You can take most of the official forecasts for 2009 and knock two'' percentage points off of them, he adds. That would make it the worst slump since 1982, when the world economy grew 0.9 percent.
``We're heading into a global recession,'' Simon Johnson, also a former IMF chief economist and now a senior fellow at the Peterson Institute for International Economics in Washington, said last month.
Rate-Cut Pressures
Stocks rallied worldwide today after European governments announced measures to shore up financial institutions and central banks pumped unlimited dollar funds into the money markets. The MSCI World Index, which plunged 20 percent last week, rose 2 percent.
Even if the financial markets settle down soon, the deepening decline will put pressure on central bankers to cut interest rates further and on finance ministers to reduce taxes and boost spending.
``There will be more cuts out of all of the central banks,'' says Ethan Harris, economist at Barclays Capital Inc. in New York. ``We are looking at a global recession, and it isn't going to turn quickly.''
U.S. lawmakers, who already enacted one economic-stimulus package this year, will reconvene after the Nov. 4 presidential and congressional elections to consider another.
Stimulus
``We are going to do a stimulus,'' House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said yesterday on the ABC News television program ``This Week.''
The U.S., where the 2 1/2 year-old nosedive in the housing market is now taking down the rest of the economy, is the epicenter of the global slump. Gross domestic product contracted in the third quarter and is set to shrink further in the fourth, according to a survey of 52 economists by Bloomberg News this month.
Consumer spending, after growing uninterruptedly since 1991, finally gave way last quarter in the face of rising unemployment, declining wealth and tightening credit.
Further weakness seems to be in store. The jobless rate, already at a five-year high of 6.1 percent, may rise to 8 percent, says Jan Hatzius, chief U.S. economist at Goldman Sachs Group in New York. That would bring the cumulative increase in unemployment during the recession to 3.5 percentage points, second in the post-World War II era only to the 4.1-point increase recorded in the mid-1970s.
Ripples
Household finances are also being pinched. The steep decline in U.S. stock prices last week alone wiped some $2.16 trillion from investors' wealth. And banks are getting stingier with credit: Borrowing by U.S. consumers fell in August by the most on record as lenders shut access to loans, according to data from the Fed.
The consumer pullback is already sending ripples throughout the economy. Vacancies at U.S. neighborhood and community shopping centers rose to a 14-year-high in the third quarter, New York-based real-estate research firm Reis says.
A sharp reduction in household spending could turn what is shaping up to be the biggest recession since the early 1980s into something worse, Bruce Kasman, chief economist at JPMorgan Chase & Co. told a meeting of the Institute for International Finance in Washington yesterday.
Market Cracks
Cracks are also showing up in the emerging markets, until now the dynamos of the world economy. The MSCI Emerging Markets Index fell 20 percent last week as global investors yanked money from countries such as Brazil and Russia.
Michael Mussa, another former IMF chief economist now with the Peterson Institute, says he has cut his forecast for emerging-market and developing-country growth next year to below 5 percent from 5.7 percent just two weeks ago. That would be the slowest since the Asian financial crisis in 1998 and would compare with an IMF projection of 6.9 percent growth for this year.
``The credit crunch has taken hold in emerging markets, particularly in central Europe and now in Latin America,'' Mexican central bank Governor Guillermo Ortiz told the IIF yesterday. ``This has happened in a few weeks, even days.''
Brazilian Budget Minister Paulo Bernardo said in an interview published yesterday by O Globo newspaper that the government may cut spending and postpone social programs as the financial crisis takes its toll on the economy.
Asia is also feeling the effects. Indian central banker Rakesh Mohan says his country's economy faces ``downside risks'' as global investors turn more cautious.
Pinched Exporters
Even China is feeling the effects, as its exporters are pinched by slowing demand from the U.S. and elsewhere. Trade figures to be released as early as today will probably show that export growth slowed in September, economists said in a Bloomberg survey.
``The financial crisis really has an impact everywhere in the world,'' Yi Gan, the deputy governor of the People's Bank of China, told investors in Washington yesterday.
That impact will grow the longer the crisis drags on. In a bid to restore calm to the financial markets, European leaders agreed yesterday to guarantee bank borrowing and use government money to prevent big lenders from going under.
``Time is of crucial importance,'' JPMorgan Chase's Kasman says. ``The longer we wait to implement the strategies, the more damage we can do to the world economy.''
To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net
Read more...
China's Trade Surplus Widens to Record $29.3 Billion
By Nipa Piboontanasawat and Li Yanping
Oct. 13 (Bloomberg) -- China's trade surplus widened to a record in September, boosting the currency reserves that may shield the world's fourth-biggest economy from the global crisis.
Exports rose 21.5 percent from a year earlier to $136.4 billion after gaining 21.1 percent in August, the customs bureau said on its Web site. The trade surplus climbed to $29.3 billion, a figure derived by deducting the value of imports from the number for exports.
China has cut interest rates twice in a month to stimulate the economy as the worst financial crisis since the Great Depression undermines global growth. The surplus adds to $1.8 trillion of foreign-currency reserves, a buffer that may help the nation to maintain an expansion of more than 9 percent even as a world recession looms.
``It's not a bad thing to have a relatively large trade surplus when there's a global financial crisis,'' said Wang Qian, an economist at J.P. Morgan in Hong Kong. ``China's foreign- currency holdings will help the country to survive the crisis.''
The median forecasts in a survey of 13 economists were for export growth of 20 percent and a trade surplus of $24.5 billion. The previous record was $28.7 billion in August.
``Holding the world's biggest foreign-exchange reserves puts China in a better position to cope with the global financial crisis,'' said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. ``If needed, China may also be able to cooperate with the U.S. on financing the bailout of its financial system.''
Copper, Oil
Imports increased 21.3 percent to $107.1 billion after climbing 23.1 percent in the previous month. Falling prices for commodities such as copper and oil have trimmed the value of inward shipments.
``The good news is that imports are healthy, showing China's domestic demand remains very strong,'' said Mark Williams, a London-based economist with Capital Economics Ltd. ``China's growth rate will slow but it won't be traumatic because export falls will be to some extent offset by healthy spending at home.''
The International Monetary Fund said last week that China's economy may grow as much as 9.3 percent next year. The second- quarter expansion was 10.1 percent.
Export growth is down from 25.7 percent for all of 2007.
``Although the numbers look like China's exports are holding up, the volume growth of exports has slowed to below 10 percent,'' J.P. Morgan's Wang said. ``Export growth will continue to weaken as the economic slowdown spreads from developed economies to emerging markets.''
Garments, Shoes, Furniture
Sales growth this year has been ``sound'' for machinery and electronic exports and weaker for bulk commodities such as garments, shoes and furniture, the customs bureau said. Garment exports in the first nine months rose 1.8 percent to $87 billion, down from 23 percent growth in the same period last year.
Export growth to the U.S. slowed by 4.6 percentage points from a year earlier to 11.2 percent in the first nine months, the customs bureau said. Trade with India ``surged,'' it said, with imports and exports together jumping 54.9 percent through September from a year earlier.
``Maybe world demand is providing a last gasp,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong. ``Look for a sharp slowdown in the fourth quarter. The final two months of the year will be particularly weak as electronics exports are typically shipped during this period and they are the export sector's growth engine.''
Emergency Rate Cuts
China's latest cut in borrowing costs came last week as part of an emergency coordinated bid to thaw credit markets. The Federal Reserve, European Central Bank and four other central banks also lowered rates. China's one-year lending rate stands at 6.93 percent.
Policy makers may also cut taxes, boost spending, loosen restrictions on lending and restrain the yuan's gains against the dollar, already pared to less than 1 percent last quarter, to protect jobs and stimulate the economy, economists say.
``We expect export growth to decelerate sharply in the coming quarters,'' Wang Tao, an economist at UBS AG in Beijing, said Oct. 9. ``As the financial crisis develops, the most important concern for China is economic growth and the government will ease both fiscal and monetary policy to protect it.''
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net; Li Yanping in Beijing at yli16@bloomberg.net
Read more...
Oct. 13 (Bloomberg) -- China's trade surplus widened to a record in September, boosting the currency reserves that may shield the world's fourth-biggest economy from the global crisis.
Exports rose 21.5 percent from a year earlier to $136.4 billion after gaining 21.1 percent in August, the customs bureau said on its Web site. The trade surplus climbed to $29.3 billion, a figure derived by deducting the value of imports from the number for exports.
China has cut interest rates twice in a month to stimulate the economy as the worst financial crisis since the Great Depression undermines global growth. The surplus adds to $1.8 trillion of foreign-currency reserves, a buffer that may help the nation to maintain an expansion of more than 9 percent even as a world recession looms.
``It's not a bad thing to have a relatively large trade surplus when there's a global financial crisis,'' said Wang Qian, an economist at J.P. Morgan in Hong Kong. ``China's foreign- currency holdings will help the country to survive the crisis.''
The median forecasts in a survey of 13 economists were for export growth of 20 percent and a trade surplus of $24.5 billion. The previous record was $28.7 billion in August.
``Holding the world's biggest foreign-exchange reserves puts China in a better position to cope with the global financial crisis,'' said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. ``If needed, China may also be able to cooperate with the U.S. on financing the bailout of its financial system.''
Copper, Oil
Imports increased 21.3 percent to $107.1 billion after climbing 23.1 percent in the previous month. Falling prices for commodities such as copper and oil have trimmed the value of inward shipments.
``The good news is that imports are healthy, showing China's domestic demand remains very strong,'' said Mark Williams, a London-based economist with Capital Economics Ltd. ``China's growth rate will slow but it won't be traumatic because export falls will be to some extent offset by healthy spending at home.''
The International Monetary Fund said last week that China's economy may grow as much as 9.3 percent next year. The second- quarter expansion was 10.1 percent.
Export growth is down from 25.7 percent for all of 2007.
``Although the numbers look like China's exports are holding up, the volume growth of exports has slowed to below 10 percent,'' J.P. Morgan's Wang said. ``Export growth will continue to weaken as the economic slowdown spreads from developed economies to emerging markets.''
Garments, Shoes, Furniture
Sales growth this year has been ``sound'' for machinery and electronic exports and weaker for bulk commodities such as garments, shoes and furniture, the customs bureau said. Garment exports in the first nine months rose 1.8 percent to $87 billion, down from 23 percent growth in the same period last year.
Export growth to the U.S. slowed by 4.6 percentage points from a year earlier to 11.2 percent in the first nine months, the customs bureau said. Trade with India ``surged,'' it said, with imports and exports together jumping 54.9 percent through September from a year earlier.
``Maybe world demand is providing a last gasp,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong. ``Look for a sharp slowdown in the fourth quarter. The final two months of the year will be particularly weak as electronics exports are typically shipped during this period and they are the export sector's growth engine.''
Emergency Rate Cuts
China's latest cut in borrowing costs came last week as part of an emergency coordinated bid to thaw credit markets. The Federal Reserve, European Central Bank and four other central banks also lowered rates. China's one-year lending rate stands at 6.93 percent.
Policy makers may also cut taxes, boost spending, loosen restrictions on lending and restrain the yuan's gains against the dollar, already pared to less than 1 percent last quarter, to protect jobs and stimulate the economy, economists say.
``We expect export growth to decelerate sharply in the coming quarters,'' Wang Tao, an economist at UBS AG in Beijing, said Oct. 9. ``As the financial crisis develops, the most important concern for China is economic growth and the government will ease both fiscal and monetary policy to protect it.''
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net; Li Yanping in Beijing at yli16@bloomberg.net
Read more...
European Leaders Vow Bank Guarantees, Bid to Stop Financial Rot
By James G. Neuger
Oct. 13 (Bloomberg) -- European leaders agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat, helping stem the worst rout in Europe's stock markets in two decades.
At a summit chaired by French President Nicolas Sarkozy, leaders of the 15 countries using the euro hammered out an unprecedented battle plan for bandaging the crippled credit markets and halting panic among investors.
``We need concrete measures, we need unity, which is what we achieved,'' Sarkozy told a press conference late yesterday at the Elysee Palace in Paris. ``None of our countries acting alone could end this crisis.''
As they improvised a response to the banking calamity that started on Wall Street, toppling Lehman Brothers Holdings Inc., Europe's leaders sought to go beyond pledges made by the Group of Seven and deflect criticism that they were making scattershot country-by-country efforts without a credible joint strategy.
``The steps taken in Europe are very positive,'' billionaire investor George Soros said in Washington yesterday. ``The European governments have got religion and realized this is a serious problem they have to address.''
The key measures announced were: a pledge to guarantee until the end of 2009 bank debt issues with maturities up to five years; permission for governments to buy bank stakes; and a commitment to recapitalize what the statement called ``systemically'' critical banks in distress.
European Banks
The statement gave no indication of how much governments were willing to spend or the size of bank assets deemed at risk, and European officials refused to estimate the price tag of the measures. Those numbers will start to emerge today, when France, Germany, Italy and other countries announce national measures.
Bank recapitalizations may reach 300 billion euros ($406 billion), Goldman Sachs Group Inc. analysts said today.
European banks have written down $226.8 billion out of a worldwide total of $635 billion since the U.S. subprime mortgage collapse last year set off the market crisis, according to data compiled by Bloomberg.
The euro, which last week fell to an 18-month low against the dollar, rallied today. The euro rose 1.5 percent, the most since Sept. 22, to $1.3613 at 8:20 a.m. in London, from $1.3408 in New York on Oct. 10. It added 1.6 percent, the most since Sept. 19, to 137.18 yen, from 134.96.
``What has been done over the last three days should provide elements of reassurance,'' Dominique Strauss-Kahn, chief of the International Monetary Fund said on French radio Europe 1 today. The worst of the financial crisis ``may be behind us.''
Stocks rallied worldwide, with the MSCI World Index rebounding from its worst week on record. The Dow Jones Stoxx 50 Index jumped as much as 6.6 percent after last week's 22 percent plunge.
`Hour of Europe'
More than $25 trillion has been erased from global equities in 2008. European benchmark stock indexes tumbled 22 percent last week, the steepest slide in two decades. The Dow Jones Industrial Average notched its worst week since 1914. The MSCI World Index of stocks in 23 developed countries slid 20 percent, the most since records began in 1970.
After the markets dove, finance officials from the G-7 -- the U.S., Japan, Canada, with Europe represented by Britain, France, Germany and Italy -- meeting on Oct. 10 in Washington signaled a determination to intervene without taking concrete steps.
Sarkozy Summits
The euro-15 summit was the second hosted by Sarkozy in eight days, a sign of the speed at which the credit crunch has paralyzed Europe, shaking the foundations of the banking system and threatening to plunge the euro region into its first recession since the currency was created in 1999.
``We don't expect an immediate miraculous result,'' European Commission President Jose Manuel Barroso said.
Often criticized for a preoccupation with inflation, the European Central Bank abruptly reversed course last week, cutting interest rates for the first time since 2003 in a move coordinated with the U.S. Federal Reserve and four other central banks.
The ECB doesn't have the legal power at the moment to follow the Federal Reserve and buy commercial paper to unblock a financing tool that drives everyday commerce for many businesses, said President Jean-Claude Trichet, a participant in yesterday's Paris meeting.
ECB Guarantees
``We are looking at our entire system of guarantees and we can imagine new measures to enlarge access to our system of guarantees,'' Trichet said.
In the U.K., Royal Bank of Scotland Group Plc, the second- biggest U.K. bank before shares collapsed last week, today ousted its chief executive and turned over control to the government in exchange for a 20 billion-pound ($34 billion) lifeline. Lloyds TSB Group Plc cut the terms of its takeover offer for HBOS Plc and said will raise 17 billion pounds ($29 billion) of capital.
Portugal yesterday announced that it will make as much as 20 billion euros ($27 billion) available in guarantees for the financing operations of its banks. Norway, not a European Union member, offered banks as much as $55.4 billion in government bonds in exchange for mortgage debt.
In the U.S., Treasury Secretary Henry Paulson will tap some of the $700 billion financial-rescue package approved by Congress this month to buy equity in financial companies.
To contact the reporter on this story: James G. Neuger in Paris at jneuger@bloomberg.net
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Oct. 13 (Bloomberg) -- European leaders agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat, helping stem the worst rout in Europe's stock markets in two decades.
At a summit chaired by French President Nicolas Sarkozy, leaders of the 15 countries using the euro hammered out an unprecedented battle plan for bandaging the crippled credit markets and halting panic among investors.
``We need concrete measures, we need unity, which is what we achieved,'' Sarkozy told a press conference late yesterday at the Elysee Palace in Paris. ``None of our countries acting alone could end this crisis.''
As they improvised a response to the banking calamity that started on Wall Street, toppling Lehman Brothers Holdings Inc., Europe's leaders sought to go beyond pledges made by the Group of Seven and deflect criticism that they were making scattershot country-by-country efforts without a credible joint strategy.
``The steps taken in Europe are very positive,'' billionaire investor George Soros said in Washington yesterday. ``The European governments have got religion and realized this is a serious problem they have to address.''
The key measures announced were: a pledge to guarantee until the end of 2009 bank debt issues with maturities up to five years; permission for governments to buy bank stakes; and a commitment to recapitalize what the statement called ``systemically'' critical banks in distress.
European Banks
The statement gave no indication of how much governments were willing to spend or the size of bank assets deemed at risk, and European officials refused to estimate the price tag of the measures. Those numbers will start to emerge today, when France, Germany, Italy and other countries announce national measures.
Bank recapitalizations may reach 300 billion euros ($406 billion), Goldman Sachs Group Inc. analysts said today.
European banks have written down $226.8 billion out of a worldwide total of $635 billion since the U.S. subprime mortgage collapse last year set off the market crisis, according to data compiled by Bloomberg.
The euro, which last week fell to an 18-month low against the dollar, rallied today. The euro rose 1.5 percent, the most since Sept. 22, to $1.3613 at 8:20 a.m. in London, from $1.3408 in New York on Oct. 10. It added 1.6 percent, the most since Sept. 19, to 137.18 yen, from 134.96.
``What has been done over the last three days should provide elements of reassurance,'' Dominique Strauss-Kahn, chief of the International Monetary Fund said on French radio Europe 1 today. The worst of the financial crisis ``may be behind us.''
Stocks rallied worldwide, with the MSCI World Index rebounding from its worst week on record. The Dow Jones Stoxx 50 Index jumped as much as 6.6 percent after last week's 22 percent plunge.
`Hour of Europe'
More than $25 trillion has been erased from global equities in 2008. European benchmark stock indexes tumbled 22 percent last week, the steepest slide in two decades. The Dow Jones Industrial Average notched its worst week since 1914. The MSCI World Index of stocks in 23 developed countries slid 20 percent, the most since records began in 1970.
After the markets dove, finance officials from the G-7 -- the U.S., Japan, Canada, with Europe represented by Britain, France, Germany and Italy -- meeting on Oct. 10 in Washington signaled a determination to intervene without taking concrete steps.
Sarkozy Summits
The euro-15 summit was the second hosted by Sarkozy in eight days, a sign of the speed at which the credit crunch has paralyzed Europe, shaking the foundations of the banking system and threatening to plunge the euro region into its first recession since the currency was created in 1999.
``We don't expect an immediate miraculous result,'' European Commission President Jose Manuel Barroso said.
Often criticized for a preoccupation with inflation, the European Central Bank abruptly reversed course last week, cutting interest rates for the first time since 2003 in a move coordinated with the U.S. Federal Reserve and four other central banks.
The ECB doesn't have the legal power at the moment to follow the Federal Reserve and buy commercial paper to unblock a financing tool that drives everyday commerce for many businesses, said President Jean-Claude Trichet, a participant in yesterday's Paris meeting.
ECB Guarantees
``We are looking at our entire system of guarantees and we can imagine new measures to enlarge access to our system of guarantees,'' Trichet said.
In the U.K., Royal Bank of Scotland Group Plc, the second- biggest U.K. bank before shares collapsed last week, today ousted its chief executive and turned over control to the government in exchange for a 20 billion-pound ($34 billion) lifeline. Lloyds TSB Group Plc cut the terms of its takeover offer for HBOS Plc and said will raise 17 billion pounds ($29 billion) of capital.
Portugal yesterday announced that it will make as much as 20 billion euros ($27 billion) available in guarantees for the financing operations of its banks. Norway, not a European Union member, offered banks as much as $55.4 billion in government bonds in exchange for mortgage debt.
In the U.S., Treasury Secretary Henry Paulson will tap some of the $700 billion financial-rescue package approved by Congress this month to buy equity in financial companies.
To contact the reporter on this story: James G. Neuger in Paris at jneuger@bloomberg.net
Read more...
Saudi Aramco to Maintain Supplies to Asian Refiners in November
By Nesa Subrahmaniyan
Oct. 13 (Bloomberg) -- Saudi Aramco, the world's biggest state oil company, will maintain crude supplies in November to customers in Asia at levels agreed under annual contracts, refinery officials said.
The Dhahran, Saudi Arabia-based producer will supply full volumes of crude oil to Asia next month, unchanged from October, said three refinery officials who had received notices from the company. They asked not to be identified because of confidentiality agreements.
Saudi Arabia supplies crudes of different quality, with the Arab Light grade fetching about $4.35 a barrel more than Arab Heavy for November sales to Asia. Heavier crudes yield lower- value products.
Aramco typically tells customers in the first half of the month how much oil they will receive in the following month.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net
Read more...
Oct. 13 (Bloomberg) -- Saudi Aramco, the world's biggest state oil company, will maintain crude supplies in November to customers in Asia at levels agreed under annual contracts, refinery officials said.
The Dhahran, Saudi Arabia-based producer will supply full volumes of crude oil to Asia next month, unchanged from October, said three refinery officials who had received notices from the company. They asked not to be identified because of confidentiality agreements.
Saudi Arabia supplies crudes of different quality, with the Arab Light grade fetching about $4.35 a barrel more than Arab Heavy for November sales to Asia. Heavier crudes yield lower- value products.
Aramco typically tells customers in the first half of the month how much oil they will receive in the following month.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net
Read more...
Fed Says ECB, Others to Offer Unlimited Dollar Funds
By John Fraher and Simone Meier
Oct. 13 (Bloomberg) -- The U.S. Federal Reserve led an unprecedented push by central banks to flood financial markets with dollars, backing up government efforts to restore confidence in the banking system.
The ECB, the Bank of England and the Swiss central bank will offer unlimited dollar funds in auctions with maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said today. The Bank of Japan may introduce ``similar measures.'' The dollar declined and some money-market rates fell.
Policy makers from the Group of Seven nations pledged at the weekend to take ``all necessary steps'' to stem a market panic after the MSCI World stock index plunged 20 percent last week. Central banks last week cut interest rates in tandem for the first time since 2001, the U.S. plans to buy $700 billion in distressed assets from banks and in Europe, the U.K. is leading a push to keep lenders afloat with taxpayers' money.
``By providing unlimited dollar funds they are acting on the back of the G-7 plan to ensure the system is fully liquidized,'' said Lena Komileva, an economist at Tullet Prebon Plc in London. ``We're going to see even more liquidity provided and more aggressive rate cuts are coming.''
`Funding Stresses'
The dollar dropped after the announcement, falling as much as 0.9 percent to $1.3671. The cost of borrowing in euros for three months declined to 5.32 percent today from 5.38 percent, according to the European Banking Federation. Stocks rallied worldwide, with the MSCI World Index climbing 2 percent.
The London interbank offered rate, or Libor, that banks charge each other to borrow dollars for three months last week soared to 4.82 percent, the highest level this year.
``Taken together, the latest moves increase the chances that we will begin to see some relaxation of the intense funding stresses,'' a team including Dominic Wilson, senior global economist at Goldman Sachs Group Inc. in New York, wrote in a note today. ``This is because bank solvency risk should decline as the government offers protection.''
Central banks are expanding their toolkits to push down money-market rates. The Fed on Oct. 7 said it will create a special fund to buy U.S. commercial paper and the ECB last week said it would offer financial institutions unlimited euro funds. The Bank of England is scheduled to announce a revamp of its own money-market operations later this week.
`Work Together'
The ECB, the BOE and the Swiss National Bank ``can provide U.S. dollar funding in quantities sufficient to meet their demand'' into 2009, the Fed said today. ``Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short- term funding markets.''
All of the previous dollar swap arrangements between the Fed and other central banks were capped.
Today's ``action is unprecedented,'' said Neil Mackinnon, chief economist at ECU Plc in London and a former U.K Treasury official. Andrew Milligan, who helps oversee about $260 billion as head of global strategy at Standard Life said that it's a ``much more important'' move than the coordinated rate cut.
G-7 finance chiefs pledged Oct. 10 to take ``urgent and exceptional action'' after stocks plunged and as a global recession looms. European leaders yesterday agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat. Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group will get an unprecedented 37 billion-pound ($64 billion) bailout from the U.K. government.
Lehman Collapse
The collapse of New York-based Lehman Brothers Holdings Inc. precipitated the latest chapter of the 14-month crisis, causing banks to stop lending to each other out of concern they may not get their money back. The world's largest financial companies have posted more than $635 billion in writedowns and credit losses since the start of last year after the U.S. housing market collapsed.
Today's move is ``another welcome measure,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. ``We'll have to see what comes out of it. We all expect more rate cuts, whether they're coordinated or not is another matter.''
To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.
Read more...
Oct. 13 (Bloomberg) -- The U.S. Federal Reserve led an unprecedented push by central banks to flood financial markets with dollars, backing up government efforts to restore confidence in the banking system.
The ECB, the Bank of England and the Swiss central bank will offer unlimited dollar funds in auctions with maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said today. The Bank of Japan may introduce ``similar measures.'' The dollar declined and some money-market rates fell.
Policy makers from the Group of Seven nations pledged at the weekend to take ``all necessary steps'' to stem a market panic after the MSCI World stock index plunged 20 percent last week. Central banks last week cut interest rates in tandem for the first time since 2001, the U.S. plans to buy $700 billion in distressed assets from banks and in Europe, the U.K. is leading a push to keep lenders afloat with taxpayers' money.
``By providing unlimited dollar funds they are acting on the back of the G-7 plan to ensure the system is fully liquidized,'' said Lena Komileva, an economist at Tullet Prebon Plc in London. ``We're going to see even more liquidity provided and more aggressive rate cuts are coming.''
`Funding Stresses'
The dollar dropped after the announcement, falling as much as 0.9 percent to $1.3671. The cost of borrowing in euros for three months declined to 5.32 percent today from 5.38 percent, according to the European Banking Federation. Stocks rallied worldwide, with the MSCI World Index climbing 2 percent.
The London interbank offered rate, or Libor, that banks charge each other to borrow dollars for three months last week soared to 4.82 percent, the highest level this year.
``Taken together, the latest moves increase the chances that we will begin to see some relaxation of the intense funding stresses,'' a team including Dominic Wilson, senior global economist at Goldman Sachs Group Inc. in New York, wrote in a note today. ``This is because bank solvency risk should decline as the government offers protection.''
Central banks are expanding their toolkits to push down money-market rates. The Fed on Oct. 7 said it will create a special fund to buy U.S. commercial paper and the ECB last week said it would offer financial institutions unlimited euro funds. The Bank of England is scheduled to announce a revamp of its own money-market operations later this week.
`Work Together'
The ECB, the BOE and the Swiss National Bank ``can provide U.S. dollar funding in quantities sufficient to meet their demand'' into 2009, the Fed said today. ``Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short- term funding markets.''
All of the previous dollar swap arrangements between the Fed and other central banks were capped.
Today's ``action is unprecedented,'' said Neil Mackinnon, chief economist at ECU Plc in London and a former U.K Treasury official. Andrew Milligan, who helps oversee about $260 billion as head of global strategy at Standard Life said that it's a ``much more important'' move than the coordinated rate cut.
G-7 finance chiefs pledged Oct. 10 to take ``urgent and exceptional action'' after stocks plunged and as a global recession looms. European leaders yesterday agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat. Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group will get an unprecedented 37 billion-pound ($64 billion) bailout from the U.K. government.
Lehman Collapse
The collapse of New York-based Lehman Brothers Holdings Inc. precipitated the latest chapter of the 14-month crisis, causing banks to stop lending to each other out of concern they may not get their money back. The world's largest financial companies have posted more than $635 billion in writedowns and credit losses since the start of last year after the U.S. housing market collapsed.
Today's move is ``another welcome measure,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. ``We'll have to see what comes out of it. We all expect more rate cuts, whether they're coordinated or not is another matter.''
To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.
Read more...
China's 9-Month Power Output Slows on Economy, Securities Says
By Winnie Zhu
Oct. 13 (Bloomberg) -- China's power output growth eased in the first nine months because of a slowing economy and natural disasters, the China Securities Journal said, citing an official at the China Electricity Council.
Power production rose 11.7 percent to 2.59 billion megawatts in the first nine months, compared with a 16.4 percent increase a year earlier, the newspaper said, citing Xie Jucheng, the council's fuel purchasing director. Output gained 8.9 percent to 287.2 billion kilowatt-hours in September, it said.
China's power production growth will slow to between 9 percent and 10 percent from a year earlier in the next few months and output will rise by less than 12 percent this year, three to four percentage points lower than 2007, it said.
China suffered the worst snowstorms in half a century in January and an earthquake killed more than 69,000 in May. China's economy grew 10.1 percent in the three months ended June 30 from a year earlier, slowing for a fourth straight quarter as exports cooled.
Xie didn't reply to calls made to his mobile phone and his office.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net.
Read more...
Oct. 13 (Bloomberg) -- China's power output growth eased in the first nine months because of a slowing economy and natural disasters, the China Securities Journal said, citing an official at the China Electricity Council.
Power production rose 11.7 percent to 2.59 billion megawatts in the first nine months, compared with a 16.4 percent increase a year earlier, the newspaper said, citing Xie Jucheng, the council's fuel purchasing director. Output gained 8.9 percent to 287.2 billion kilowatt-hours in September, it said.
China's power production growth will slow to between 9 percent and 10 percent from a year earlier in the next few months and output will rise by less than 12 percent this year, three to four percentage points lower than 2007, it said.
China suffered the worst snowstorms in half a century in January and an earthquake killed more than 69,000 in May. China's economy grew 10.1 percent in the three months ended June 30 from a year earlier, slowing for a fourth straight quarter as exports cooled.
Xie didn't reply to calls made to his mobile phone and his office.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net.
Read more...
GS Caltex to Restart Fire-Hit Crude-Oil Refining Unit Tomorrow
By Shinhye Kang
Oct. 13 (Bloomberg) -- GS Caltex Corp., South Korea's second-largest refiner, plans to resume operations at its No.2 crude distillation unit tomorrow after shutting it because of a fire, a company official said.
GS Caltex will conduct more safety checks before restarting the unit, which can process 130,000 barrels of oil a day, said the official, who asked not to be named because of company rules.
A blaze broke out at the plant at about 11:40 p.m. local time yesterday, he said. The fire was extinguished in 10 minutes and there were no casualties.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.
Read more...
Oct. 13 (Bloomberg) -- GS Caltex Corp., South Korea's second-largest refiner, plans to resume operations at its No.2 crude distillation unit tomorrow after shutting it because of a fire, a company official said.
GS Caltex will conduct more safety checks before restarting the unit, which can process 130,000 barrels of oil a day, said the official, who asked not to be named because of company rules.
A blaze broke out at the plant at about 11:40 p.m. local time yesterday, he said. The fire was extinguished in 10 minutes and there were no casualties.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.
Read more...
Newcastle Coal Price Extends Slump to 9-Month Low
By Jesse Riseborough
Oct. 13 (Bloomberg) -- Power station coal prices at Australia's Newcastle port, a benchmark for Asia, declined for an eighth week, slumping to a nine-month low as a global credit freeze weakened demand for commodities.
The weekly index for power-station coal prices at the New South Wales port dropped $9.27, or 7.7 percent, to $111.90 a metric ton in the week ended Oct. 10, according to the globalCOAL NEWC Index. Exports of the fuel jumped 35 percent in the week ended 7 a.m. local time today, Newcastle Port Corp. said on its Web site.
The Reuters/Jefferies CRB Index of 19 commodities has fallen 16 percent this month on concern the worst credit squeeze since the Great Depression will curb demand for raw materials. Xstrata Plc, the world's largest exporter of energy coal, BHP Billiton Ltd. and Rio Tinto Group are among the mining companies that ship coal through Newcastle.
The index traded below this year's contract price of $125 a ton for a second week and has lost 43 percent from a July 4 record. The monthly index fell 10 percent to $144.82 a ton in September from $160.90 the previous month.
Goldman Sachs JBWere Pty last week cut its forecast for 2009 contract prices for thermal coal on declines in crude oil. It now forecasts the price will remain at $125 a ton, down from an earlier estimate of $150 a ton.
Shipments from the port, the world's biggest export harbor for the fuel, rose to 1.9 million tons from 1.4 million tons a week earlier. A total of 24 ships, waiting to load 2.1 million tons of coal, were lined up outside the port, down from 26 last week.
Coal ships waited 8.6 days to load coal, down from 9.3 days a week earlier, Newcastle Port said. The waiting time compared with 0.4 day for general cargo vessels last week, it said.
A total of 20 vessels carrying coal left Newcastle in the week ended Oct. 11, Newcastle Port said today in an e-mailed report. Nine ships were bound for Japan, five for Taiwan, three for South Korea, two for Malaysia and one for China, it said.
To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net.
Read more...
Oct. 13 (Bloomberg) -- Power station coal prices at Australia's Newcastle port, a benchmark for Asia, declined for an eighth week, slumping to a nine-month low as a global credit freeze weakened demand for commodities.
The weekly index for power-station coal prices at the New South Wales port dropped $9.27, or 7.7 percent, to $111.90 a metric ton in the week ended Oct. 10, according to the globalCOAL NEWC Index. Exports of the fuel jumped 35 percent in the week ended 7 a.m. local time today, Newcastle Port Corp. said on its Web site.
The Reuters/Jefferies CRB Index of 19 commodities has fallen 16 percent this month on concern the worst credit squeeze since the Great Depression will curb demand for raw materials. Xstrata Plc, the world's largest exporter of energy coal, BHP Billiton Ltd. and Rio Tinto Group are among the mining companies that ship coal through Newcastle.
The index traded below this year's contract price of $125 a ton for a second week and has lost 43 percent from a July 4 record. The monthly index fell 10 percent to $144.82 a ton in September from $160.90 the previous month.
Goldman Sachs JBWere Pty last week cut its forecast for 2009 contract prices for thermal coal on declines in crude oil. It now forecasts the price will remain at $125 a ton, down from an earlier estimate of $150 a ton.
Shipments from the port, the world's biggest export harbor for the fuel, rose to 1.9 million tons from 1.4 million tons a week earlier. A total of 24 ships, waiting to load 2.1 million tons of coal, were lined up outside the port, down from 26 last week.
Coal ships waited 8.6 days to load coal, down from 9.3 days a week earlier, Newcastle Port said. The waiting time compared with 0.4 day for general cargo vessels last week, it said.
A total of 20 vessels carrying coal left Newcastle in the week ended Oct. 11, Newcastle Port said today in an e-mailed report. Nine ships were bound for Japan, five for Taiwan, three for South Korea, two for Malaysia and one for China, it said.
To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net.
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EDF to Consider Sale of Eggborough Power Plant, Times Reports
By Lenka Ponikelska
Oct. 13 (Bloomberg) -- Electricite de France SA is to consider the sale of a coal-fired power station in Eggborough, England, the London-based Times reported, without saying where it got the information.
EDF may be confident that European Union regulators will approve its proposed 12.4 billion-pound ($21.2-billion) takeover of British Energy Group Plc, the newspaper said. Yet it is drawing up a list of possible remedies, including the potential sale of Eggborough, that may smooth the way for the deal, the Times said.
The power station in North Yorkshire was commissioned in 1966 and is one of the U.K.'s biggest generators, producing 1,960 megawatts of electricity, the Times said.
To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net
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Oct. 13 (Bloomberg) -- Electricite de France SA is to consider the sale of a coal-fired power station in Eggborough, England, the London-based Times reported, without saying where it got the information.
EDF may be confident that European Union regulators will approve its proposed 12.4 billion-pound ($21.2-billion) takeover of British Energy Group Plc, the newspaper said. Yet it is drawing up a list of possible remedies, including the potential sale of Eggborough, that may smooth the way for the deal, the Times said.
The power station in North Yorkshire was commissioned in 1966 and is one of the U.K.'s biggest generators, producing 1,960 megawatts of electricity, the Times said.
To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net
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China Boosts Oil Imports to Record on Falling Prices
By Winnie Zhu and Wang Ying
Oct. 13 (Bloomberg) -- China, the world's second-largest energy user, increased crude-oil imports to a record last month, taking advantage of falling prices, as domestic refining capacity climbed.
Crude imports surged 46 percent to 20 million metric tons or 4.87 million barrels a day in September from a year earlier, according to Bloomberg's calculations based on figures provided by the Beijing-based Customs General Administration of China on its Web site today. August purchases were 15.65 million tons.
Crude oil prices have fallen 45 percent from a record $147.27 a barrel reached on July 11 because of concerns the global credit crisis will damp economic growth and oil demand. China's processing capacity climbed in the third quarter as the nation's two biggest oil companies expanded refining capacity in Qingdao and Dalian.
``China aims to take advantage of cheaper crude prices to boost home stockpiles after it slashed imports in the previous months because of the high cost of oil,'' Gong Jinshuang, an oil analyst with China National Petroleum Corp., the nation's second-biggest oil refiner, said by telephone in Beijing today.
China National doubled the capacity of a plant in the northern province of Dalian to 20.5 million tons in August while China Petroleum & Chemical Corp., the nation's biggest refiner, started operating its Qingdao refinery in July. China National's Dushanzi plant in Xinjiang is scheduled to start operating within the year.
China cut crude purchases by 7 percent, the biggest decline in at least two years, to 13.79 million tons in July.
Imports between January and September rose 8.8 percent to 140 million tons, according to today's data. The average oil import price surged 71 percent to $779 per ton.
Fuel imports rose 16.5 percent to 31.28 million tons in the nine month period, the customs said.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.netWang Ying in Beijing at wang30@bloomberg.net.
Read more...
Oct. 13 (Bloomberg) -- China, the world's second-largest energy user, increased crude-oil imports to a record last month, taking advantage of falling prices, as domestic refining capacity climbed.
Crude imports surged 46 percent to 20 million metric tons or 4.87 million barrels a day in September from a year earlier, according to Bloomberg's calculations based on figures provided by the Beijing-based Customs General Administration of China on its Web site today. August purchases were 15.65 million tons.
Crude oil prices have fallen 45 percent from a record $147.27 a barrel reached on July 11 because of concerns the global credit crisis will damp economic growth and oil demand. China's processing capacity climbed in the third quarter as the nation's two biggest oil companies expanded refining capacity in Qingdao and Dalian.
``China aims to take advantage of cheaper crude prices to boost home stockpiles after it slashed imports in the previous months because of the high cost of oil,'' Gong Jinshuang, an oil analyst with China National Petroleum Corp., the nation's second-biggest oil refiner, said by telephone in Beijing today.
China National doubled the capacity of a plant in the northern province of Dalian to 20.5 million tons in August while China Petroleum & Chemical Corp., the nation's biggest refiner, started operating its Qingdao refinery in July. China National's Dushanzi plant in Xinjiang is scheduled to start operating within the year.
China cut crude purchases by 7 percent, the biggest decline in at least two years, to 13.79 million tons in July.
Imports between January and September rose 8.8 percent to 140 million tons, according to today's data. The average oil import price surged 71 percent to $779 per ton.
Fuel imports rose 16.5 percent to 31.28 million tons in the nine month period, the customs said.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.netWang Ying in Beijing at wang30@bloomberg.net.
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