By Marianne Stigset
Oct. 14 (Bloomberg) -- Robusta coffee advanced in London on speculation central banks' efforts to ease the credit crisis will spur demand for commodities. White sugar also gained.
The U.S. will invest about $125 billion in nine of the nation's biggest banks, while France, Germany, Spain, Austria and the Netherlands have committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and buy stakes in lenders. Stocks rose worldwide, with Japan's Nikkei 225 gauge climbing the most ever.
``It's mostly outside influences, with stocks gaining'' that are buoying coffee prices, Ryan Bennett, a cocoa and coffee trader at Sucden(U.K.) Ltd. in London, said by phone.
Robusta for January delivery rose $36, or 2 percent, to $1,850 a metric ton as of 2:22 p.m. on London's Liffe exchange. The beans have declined 3 percent this year, outperforming the 11 percent drop in the UBS Bloomberg CMCI index of 26 raw materials.
U.S. Dollar Index, a gauge that includes the euro, fell for a second day. Commodity prices measured by the Reuters/Jefferies CRB Index of 19 raw materials gained 3 percent yesterday after plunging 20 percent in the past two weeks as banks failed, credit markets froze and the outlook for the global economy worsened.
The cost of borrowing in dollars for three months dropped to 4.64 percent, from 4.75 percent today, the British Bankers' Association said. The London interbank offered rate for three- month dollar loans surged to the highest this year on Oct. 10.
``A drop in Libor rates would signal that the interbank markets started working again, which would be very positive for commodities,'' Tobias Merath, head of commodity research at Credit Suisse Group, wrote in a note today, prior to the release of the new rates.
Global Demand
Growth in global coffee demand may surpass 1.7 percent this year, rising to a record, the International Coffee Organization said on Aug. 8. Consumption may exceed 126.5 million bags in 2008, compared with 124.4 million bags last year, the ICO said.
Output worldwide in the year starting Oct. 1, 2008, will climb 8 percent to 128 million bags, from an estimated 118.1 million bags in the current year, the ICO said. A bag weighs 60 kilograms (132 pounds).
Coffee bean exports from Indonesia, Asia's second-largest grower after Vietnam, may fall 29 percent this year as farmers hoard the crop in the hope of selling later at better prices, a trade official said.
The nation's farmers, who mainly grow the bitter-tasting robusta bean, may export 250,000 tons in 2008, compared with 350,000 tons last year, said Rachim Kartabrata, executive secretary of the Indonesian Coffee Exporters Association.
Cocoa Usage
Cocoa futures for December delivery fell 2 pounds, or 0.2 percent, to 1,365 pounds ($2,397) a ton on Liffe.
European cocoa bean usage fell in the third quarter, the first quarterly decline since 2004, the European Cocoa Association said today in a report. Chocolate makers processed 348,501 metric tons in the quarter, compared with 351,040 tons a year ago, the Brussels-based group said.
Cocoa traded on the Liffe exchange in London fell 16 percent in the third quarter, the worst performance since the second quarter of 2003. Stockpiles in warehouses monitored by the exchange rose from 111,380 tons to 163,290 tons in the period.
White sugar for March delivery climbed $1.90, or 0.6 percent, to $345.20 a ton.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
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Tuesday, October 14, 2008
Citi Advises Buy-Write to Increase Lafarge, BA Return
By Gareth Gore
Oct. 14 (Bloomberg) -- Citigroup Inc. advised clients to simultaneously buy shares and sell call options in companies including Lafarge SA, British Airways Plc and Syngenta AG as a way to boost stock-market returns after option prices surged.
The buy-write strategy allows investors to keep the premium paid for the option so long as shares fail to rise above a certain level. Investors should also use the strategy on Royal Ahold NV, Total SA, Bayer AG, Accor SA and LVMH Moet Hennessy Louis Vuitton SA, the brokerage said.
``Heightened uncertainty creates opportunities,'' London- based analyst Stuart MacDonnell wrote in a note to clients dated today, adding that ``perception of risk in derivatives markets has spiked'' after the price paid for European options surged to the highest in at least nine years.
Clients should buy shares whilst selling call options expiring in December at strike levels 10 percent above the current stock price, the brokerage said. The buy-write strategy will outperform a rally in the shares of up to 10 percent plus the premium paid, it said.
American-style call options such as those traded on most European companies give the buyer the right to buy shares at a pre-agreed price by a specific date. By selling a call, an investor is betting the option won't be exercised, allowing them to keep as profit the premium paid.
VStoxx Index
European option prices rose as global stocks plummeted on concern the deepening credit crisis will send the global economy into recession. The VStoxx Index, which measures the cost of using options as insurance against declines in the Dow Jones Euro Stoxx 50 Index, rose as high as 81.03, the highest in at least nine years.
The VStoxx Index dropped as much as 12 percent today to 59.14, the lowest in three days.
``The perception of risk in the derivatives markets has increased dramatically,'' Citigroup added in the note to clients. ``This risk perception is also reflected at the single stock level, with premiums trading high even on relatively 'good quality' stocks.''
To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net.
Read more...
Oct. 14 (Bloomberg) -- Citigroup Inc. advised clients to simultaneously buy shares and sell call options in companies including Lafarge SA, British Airways Plc and Syngenta AG as a way to boost stock-market returns after option prices surged.
The buy-write strategy allows investors to keep the premium paid for the option so long as shares fail to rise above a certain level. Investors should also use the strategy on Royal Ahold NV, Total SA, Bayer AG, Accor SA and LVMH Moet Hennessy Louis Vuitton SA, the brokerage said.
``Heightened uncertainty creates opportunities,'' London- based analyst Stuart MacDonnell wrote in a note to clients dated today, adding that ``perception of risk in derivatives markets has spiked'' after the price paid for European options surged to the highest in at least nine years.
Clients should buy shares whilst selling call options expiring in December at strike levels 10 percent above the current stock price, the brokerage said. The buy-write strategy will outperform a rally in the shares of up to 10 percent plus the premium paid, it said.
American-style call options such as those traded on most European companies give the buyer the right to buy shares at a pre-agreed price by a specific date. By selling a call, an investor is betting the option won't be exercised, allowing them to keep as profit the premium paid.
VStoxx Index
European option prices rose as global stocks plummeted on concern the deepening credit crisis will send the global economy into recession. The VStoxx Index, which measures the cost of using options as insurance against declines in the Dow Jones Euro Stoxx 50 Index, rose as high as 81.03, the highest in at least nine years.
The VStoxx Index dropped as much as 12 percent today to 59.14, the lowest in three days.
``The perception of risk in the derivatives markets has increased dramatically,'' Citigroup added in the note to clients. ``This risk perception is also reflected at the single stock level, with premiums trading high even on relatively 'good quality' stocks.''
To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net.
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Asian Stocks Gain on Bank Stakes Plan; Nikkei Surges Most Ever
By Chua Kong Ho and Chan Tien Hin
Oct. 14 (Bloomberg) -- Asian stocks surged, driving Japan's Nikkei 225 Stock Average to its biggest gain on record, as U.S. and European governments agreed to buy stakes in banks to avert a collapse in financial markets. The yen fell.
The Nikkei jumped 14.2 percent, rebounding from the worst week in its 59-year history, as people briefed on the plan said the U.S. government will invest in nine of the nation's biggest banks. Sony Corp., Toyota Motor Corp. and Mitsubishi UFJ Financial Group Inc. climbed more than 14 percent. National Australia Bank Ltd. added 7.3 percent after the government announced an economic stimulus package. Fortescue Metals Group Ltd. rose 55 percent as commodity prices rebounded.
Governments are ``tackling the root of the problem,'' said Christopher Wong, who helps manage about $25 billion in assets as investment manager at Aberdeen Asset Management Asia Ltd. in Singapore. ``They're putting confidence back into the market by not just adding liquidity but adding strength to the banks that serve Main Street.''
The MSCI Asia Pacific Index rose 9.5 percent to 97.05 as of 7:06 p.m. in Tokyo, its biggest advance since 1998. About half of the measure's 990 members gained by 9 percent or more. The index has dropped 38 percent in 2008 as concern that frozen credit markets will trigger a recession erased about $28 trillion in value from global stock markets.
The Nikkei added 1,171.14 to 9,447.57. Japan's markets were shut for a holiday yesterday, when the MSCI World Index jumped 9.5 percent on speculation state investments in banks will drive down money market rates. Australia's S&P/ASX 200 gained 3.7 percent, led by Babcock & Brown Ltd. and Rio Tinto Ltd. Hong Kong's Hang Seng Index rose 3.2 percent, bringing its two-day advance to 14 percent, as Cnooc Ltd. climbed.
Citigroup, Goldman Sachs
Standard & Poor's 500 Index futures gained 1.3 percent. The S&P rebounded yesterday from its worst week in 75 years with an 11.6 percent advance, its steepest since 1939.
The Bush administration will invest about $125 billion in nine banks including Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley, said the people. France, Germany, Spain, the Netherlands and Austria have committed $1.8 trillion to guarantee bank loans and take stakes in lenders.
The yen fell 0.4 percent to 102.46 per dollar, on course for its four-day drop since July.
Money-market rates declined. Singapore's three-month dollar loan rate dropped 13 basis points to 4.66 percent while Hong Kong's local dollar rate lost 2 basis points to 4.42 percent. The Libor-OIS spread, a gauge of cash scarcity, narrowed to 3.54 percentage points from 3.66 percentage points last week.
`More Time Needed'
``The U.S. and Europe now seem to be promising unlimited support to remove the deep-rooted disbelief in the financial system,'' said Yoo Byung Ok, who oversees the equivalent of $3 billion at Mirae Asset Investments Co. in Seoul. ``The key issue here is whether these market gains can be sustained or not. I believe more time is needed to dispel worries about the ripple effect on global economies.''
Sony, the world's second-largest consumer electronics maker, gained 17 percent to 2,785 yen, the most since at least 1974. Toyota, Japan's largest automaker, jumped 16 percent to 3,720 yen and Honda Motor Co. gained 18 percent to 2,485 yen.
Mitsubishi UFJ gained 14 percent to 810 yen, the most since October 2003. The bank, Japan's biggest, won an additional $300 million in annual dividends for its $9 billion investment in Morgan Stanley after shares of the U.S. securities firm dropped.
National Australia Bank, the country's largest, jumped 7.3 percent to A$24.03. Babcock & Brown, a manager of infrastructure assets, soared 39 percent to A$1.79. Prime Minister Kevin Rudd said his administration will spend A$10.4 billion ($7.3 billion) to boost the economy.
Commodities Rebound
Copper headed for the biggest two-day gain since at least 1986 and crude oil rose, leading an advance in commodities, as the bank injections reduced investor concerns the credit crunch will drive the global economy into a recession.
The Reuters/Jeffries CRB Index of 19 raw materials from coffee to silver gained 3 percent yesterday, after plunging 20 percent in the past two weeks. Copper for delivery in three months on the London Metal Exchange rose as much as 7.5 percent, bringing gains in the past two days to 13 percent, the most since at least 1986. Oil added 2.4 percent to $83.10 a barrel.
Fortescue Metals, Australia's third-largest iron ore producer, soared 55 percent to A$4.37, paring its loss this year to 42 percent. Rio Tinto, the world's third-largest mining company, gained 4.3 percent to A$82.80. Inpex Corp., Japan's biggest oil explorer, surged 14 percent to 746,000 yen. Cnooc, China's largest offshore oil producer, rose 14 percent to HK$7.17.
Yen Weakens
The yen weakened against the Australian and New Zealand dollars as the U.S. Treasury plan to acquire bank stakes encouraged investors to add to holdings of high-yielding assets funded in the Japanese currency.
Against the Australian dollar, the yen plunged 7 percent to 72.61 from 67.57 late yesterday in Asia. Japan's currency fell 4.7 percent versus the New Zealand dollar to 63.83. South Korea's won climbed 3 percent to 11.7975 versus the yen.
``Policy makers are gradually restoring confidence in banks and credit markets,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``This promotes risk-taking activity that is likely to weaken the yen.''
The cost of protecting Japanese and Australian corporate bonds from default declined. The Markit iTraxx Japan index of credit-default swaps fell 45 basis points to 1.80 percentage points, according to Morgan Stanley. Credit-default swaps, contracts to protect against or speculate on default, pay the buyer face value if a company fails to adhere to its debt agreements.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
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Global Stocks Climb on Bank Investment; Citigroup, Goldman Gain
By Adria Cimino
Oct. 14 (Bloomberg) -- Stocks climbed worldwide, with the Standard & Poor's 500 Index extending yesterday's biggest gain in seven decades, as the U.S. plans to inject $250 billion in banks and urged the lenders to use the funds to spur economic growth.
Citigroup Inc., Goldman Sachs Group Inc. and Deutsche Bank AG rallied more than 14 percent. Societe Generale SA rose 9.1 percent after posting profit, saying it doesn't need more capital. The yen fell against the euro as support for banks encouraged investors to buy higher-yielding assets funded in the Japanese currency. Money-market rates declined in Europe and Asia.
``The market is saluting the bailout plan,'' said Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris, which has about $5.5 billion under management. ``The efforts are moving in the right direction to avoid systemic risk, restore confidence and open the credit markets.''
The S&P 500 added 3.3 percent to 1,036.38 at 9:32 a.m. in New York, following yesterday's 11.6 percent gain. The MSCI World Index added 5 percent, bringing its two-day advance to 15 percent, the most since records began in 1970.
The U.S. investment in banks came after France, Germany, Spain, the Netherlands and Austria pledged 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders.
Europe's Dow Jones Stoxx 600 Index climbed 5.2 percent. The MSCI Asia Pacific Index surged 9.2 percent today, the most since 1998, with Japan's Nikkei 225 Stock Average jumping 14 percent, the most in its 59-year history, as trading resumed following yesterday's public holiday.
Citigroup, Goldman
Citigroup gained 16 percent to $18.32, and Goldman Sachs climbed 14 percent to $127.
With the equity purchases, Treasury Secretary Hank Paulson is using more than a third of the $700 billion in government support Congress gave him the authority to use on Oct. 3.
Paulson didn't identify the nine companies. People familiar with the plan said nine companies will get about $125 billion: Citigroup, Goldman Sachs, Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., the people said.
``We must restore confidence in our financial system,'' Paulson said in a statement in Washington. ``The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.''
Deutsche Bank, Germany's biggest bank, rallied 17 percent to 40.78 euros. Barclays Plc, the U.K.'s second-largest bank, gained 18 percent to 254 pence.
Money-Market Rates Fall
Money-market rates fell in London with the cost of borrowing in dollars for one week dropping the most in almost a month.
The London interbank offered rate, or Libor, that banks charge each other for such loans slipped 50 basis points to 4.08 percent, the British Bankers' Association said. It was at a record of 4.76 percent on Oct. 9. The overnight dollar rate lost 29 basis points to 2.18 percent, down from 3.94 percent a week ago. The three-month rate fell 12 basis points to 4.64 percent. The Libor-OIS spread, a gauge of cash scarcity among banks, narrowed 15 basis points to 339 basis points.
Rates fell across Asia after Japan and Australia pumped $15 billion into the financial system.
``We are now seeing solvency being dealt with, we are seeing huge amounts of liquidity being thrown at the market,'' Simon Ballard, a senior portfolio manager at Fortis Investments, said in a Bloomberg Television interview. ``Banks will little by little start to face one another in the interbank market.''
The yen fell to 139.53 per euro from 138.57 late yesterday. Against the dollar, the yen was at 102.16 from 102.01. U.S. Treasuries declined the most in two weeks.
Volatility Falls
The VStoxx Index, which measures the cost of using options as insurance against declines in the Euro Stoxx 50, dropped as much as 12 percent today to 59.14, the lowest in three days. The index almost doubled last week.
National benchmarks advanced in all 18 western European markets except Belgium and Iceland. The U.K.'s FTSE 100 climbed 6 percent as BHP Billiton Ltd. and Cadbury Plc gained. France's CAC 40 jumped 5.8 percent as Total SA advanced. Germany's DAX rallied 5.5 percent. Fortis sank 67 percent, dragging Belgium's BEL20 Index down 0.4 percent.
Iceland's benchmark stock index plunged 77 percent in the first day of trading after a three-day suspension following the collapse of the country's banking industry.
Clawing Back Losses
The Stoxx 600 advanced 9.9 percent yesterday, clawing back more than a third of last week's 22 percent slump. The index has dropped 35 percent in 2008 as concern that frozen credit markets will trigger a recession erased about $28 trillion in value from global stock markets.
Financial firms have reported $636 billion in losses and writedowns from U.S. mortgage-related investments since the beginning of last year.
Fortis, the financial-services firm bailed out by three governments and BNP Paribas SA, plunged 67 percent to 1.77 euros as the shares resumed trading. Fortis said it will receive 14.4 billion euros from the sale of its Dutch and Belgian insurance and banking businesses.
``Uncertainty remains about what Fortis insurance international ultimately is worth and about what value will eventually come out of the structured-products portfolio,'' said Albert Ploegh, an Amsterdam-based analyst at ING Groep NV, who rates Fortis a ``hold.''
Concern the credit crisis will tip Europe into a recession helped push German investor confidence to near a record low. The ZEW Center for European Economic Research said its index of investor and analyst expectations slumped to minus 63 this month.
Earnings Outlook
Earnings in the U.S. are forecast to drop as the economic slowdown cuts demand. Analysts predict operating profit at S&P 500 companies fell 7.5 percent last quarter from a year earlier, according to data compiled by Bloomberg.
The S&P 500, the benchmark for American equities, ended last week valued at 17.2 times earnings of companies in the index, the cheapest in more than a year. Yesterday's rally pushed its price-to-earnings ratio to 19.2.
The MSCI World Index traded at 11 times the earnings of its 1,730 companies on Oct. 10, the lowest on record, and closed yesterday at 12 times profit. Europe's Stoxx 600 was valued at 8.5 times earnings last week, also the lowest on record, and climbed to 9.4 times profit yesterday.
SocGen
Societe Generale surged 9.1 percent to 53.45 euros. France's second-largest bank by market value said it will report ``positive'' net income for the third quarter. Leaving aside one- time items, profit stood at about 1 billion euros, the bank said.
BHP Billiton, the world's biggest mining company, added 10 percent to 1,147 pence, while Rio Tinto Group, the world's second- largest iron ore producer, jumped 9.6 percent to 3,066 pence.
Energy shares gained the most among the 18 industry groups in the Stoxx 600.
Total, Europe's biggest oil refiner, climbed 11 percent to 40.61 euros. BP Plc, the region's second-largest oil company, jumped 10 percent to 460.25 pence. Royal Dutch Shell Plc, the largest, added 11 percent to 1,570 pence.
Copper for delivery in three months on the London Metal Exchange rose as much as 9.6 percent to $5,605 a ton, bringing gains in the past two days to 13 percent, the most since at least 1986. Oil added as much as 4.5 percent to $84.83 a barrel.
Cadbury climbed 7.8 percent to 537.5 pence. The world's largest confectioner said revenue increased in the third quarter by 6 percent, excluding acquisitions and disposals.
Accor SA increased 11 percent to 35 euros. Europe's biggest hotel owner was raised to ``overweight'' from ``equal-weight'' at Morgan Stanley, which said the current share price offers a ``compelling entry point.''
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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Oct. 14 (Bloomberg) -- Stocks climbed worldwide, with the Standard & Poor's 500 Index extending yesterday's biggest gain in seven decades, as the U.S. plans to inject $250 billion in banks and urged the lenders to use the funds to spur economic growth.
Citigroup Inc., Goldman Sachs Group Inc. and Deutsche Bank AG rallied more than 14 percent. Societe Generale SA rose 9.1 percent after posting profit, saying it doesn't need more capital. The yen fell against the euro as support for banks encouraged investors to buy higher-yielding assets funded in the Japanese currency. Money-market rates declined in Europe and Asia.
``The market is saluting the bailout plan,'' said Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris, which has about $5.5 billion under management. ``The efforts are moving in the right direction to avoid systemic risk, restore confidence and open the credit markets.''
The S&P 500 added 3.3 percent to 1,036.38 at 9:32 a.m. in New York, following yesterday's 11.6 percent gain. The MSCI World Index added 5 percent, bringing its two-day advance to 15 percent, the most since records began in 1970.
The U.S. investment in banks came after France, Germany, Spain, the Netherlands and Austria pledged 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders.
Europe's Dow Jones Stoxx 600 Index climbed 5.2 percent. The MSCI Asia Pacific Index surged 9.2 percent today, the most since 1998, with Japan's Nikkei 225 Stock Average jumping 14 percent, the most in its 59-year history, as trading resumed following yesterday's public holiday.
Citigroup, Goldman
Citigroup gained 16 percent to $18.32, and Goldman Sachs climbed 14 percent to $127.
With the equity purchases, Treasury Secretary Hank Paulson is using more than a third of the $700 billion in government support Congress gave him the authority to use on Oct. 3.
Paulson didn't identify the nine companies. People familiar with the plan said nine companies will get about $125 billion: Citigroup, Goldman Sachs, Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., the people said.
``We must restore confidence in our financial system,'' Paulson said in a statement in Washington. ``The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.''
Deutsche Bank, Germany's biggest bank, rallied 17 percent to 40.78 euros. Barclays Plc, the U.K.'s second-largest bank, gained 18 percent to 254 pence.
Money-Market Rates Fall
Money-market rates fell in London with the cost of borrowing in dollars for one week dropping the most in almost a month.
The London interbank offered rate, or Libor, that banks charge each other for such loans slipped 50 basis points to 4.08 percent, the British Bankers' Association said. It was at a record of 4.76 percent on Oct. 9. The overnight dollar rate lost 29 basis points to 2.18 percent, down from 3.94 percent a week ago. The three-month rate fell 12 basis points to 4.64 percent. The Libor-OIS spread, a gauge of cash scarcity among banks, narrowed 15 basis points to 339 basis points.
Rates fell across Asia after Japan and Australia pumped $15 billion into the financial system.
``We are now seeing solvency being dealt with, we are seeing huge amounts of liquidity being thrown at the market,'' Simon Ballard, a senior portfolio manager at Fortis Investments, said in a Bloomberg Television interview. ``Banks will little by little start to face one another in the interbank market.''
The yen fell to 139.53 per euro from 138.57 late yesterday. Against the dollar, the yen was at 102.16 from 102.01. U.S. Treasuries declined the most in two weeks.
Volatility Falls
The VStoxx Index, which measures the cost of using options as insurance against declines in the Euro Stoxx 50, dropped as much as 12 percent today to 59.14, the lowest in three days. The index almost doubled last week.
National benchmarks advanced in all 18 western European markets except Belgium and Iceland. The U.K.'s FTSE 100 climbed 6 percent as BHP Billiton Ltd. and Cadbury Plc gained. France's CAC 40 jumped 5.8 percent as Total SA advanced. Germany's DAX rallied 5.5 percent. Fortis sank 67 percent, dragging Belgium's BEL20 Index down 0.4 percent.
Iceland's benchmark stock index plunged 77 percent in the first day of trading after a three-day suspension following the collapse of the country's banking industry.
Clawing Back Losses
The Stoxx 600 advanced 9.9 percent yesterday, clawing back more than a third of last week's 22 percent slump. The index has dropped 35 percent in 2008 as concern that frozen credit markets will trigger a recession erased about $28 trillion in value from global stock markets.
Financial firms have reported $636 billion in losses and writedowns from U.S. mortgage-related investments since the beginning of last year.
Fortis, the financial-services firm bailed out by three governments and BNP Paribas SA, plunged 67 percent to 1.77 euros as the shares resumed trading. Fortis said it will receive 14.4 billion euros from the sale of its Dutch and Belgian insurance and banking businesses.
``Uncertainty remains about what Fortis insurance international ultimately is worth and about what value will eventually come out of the structured-products portfolio,'' said Albert Ploegh, an Amsterdam-based analyst at ING Groep NV, who rates Fortis a ``hold.''
Concern the credit crisis will tip Europe into a recession helped push German investor confidence to near a record low. The ZEW Center for European Economic Research said its index of investor and analyst expectations slumped to minus 63 this month.
Earnings Outlook
Earnings in the U.S. are forecast to drop as the economic slowdown cuts demand. Analysts predict operating profit at S&P 500 companies fell 7.5 percent last quarter from a year earlier, according to data compiled by Bloomberg.
The S&P 500, the benchmark for American equities, ended last week valued at 17.2 times earnings of companies in the index, the cheapest in more than a year. Yesterday's rally pushed its price-to-earnings ratio to 19.2.
The MSCI World Index traded at 11 times the earnings of its 1,730 companies on Oct. 10, the lowest on record, and closed yesterday at 12 times profit. Europe's Stoxx 600 was valued at 8.5 times earnings last week, also the lowest on record, and climbed to 9.4 times profit yesterday.
SocGen
Societe Generale surged 9.1 percent to 53.45 euros. France's second-largest bank by market value said it will report ``positive'' net income for the third quarter. Leaving aside one- time items, profit stood at about 1 billion euros, the bank said.
BHP Billiton, the world's biggest mining company, added 10 percent to 1,147 pence, while Rio Tinto Group, the world's second- largest iron ore producer, jumped 9.6 percent to 3,066 pence.
Energy shares gained the most among the 18 industry groups in the Stoxx 600.
Total, Europe's biggest oil refiner, climbed 11 percent to 40.61 euros. BP Plc, the region's second-largest oil company, jumped 10 percent to 460.25 pence. Royal Dutch Shell Plc, the largest, added 11 percent to 1,570 pence.
Copper for delivery in three months on the London Metal Exchange rose as much as 9.6 percent to $5,605 a ton, bringing gains in the past two days to 13 percent, the most since at least 1986. Oil added as much as 4.5 percent to $84.83 a barrel.
Cadbury climbed 7.8 percent to 537.5 pence. The world's largest confectioner said revenue increased in the third quarter by 6 percent, excluding acquisitions and disposals.
Accor SA increased 11 percent to 35 euros. Europe's biggest hotel owner was raised to ``overweight'' from ``equal-weight'' at Morgan Stanley, which said the current share price offers a ``compelling entry point.''
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
Read more...
Icelandic Stocks Drop 77% as Trading Resumes After 3-Day Halt
By Jakob Lindstroem
Oct. 14 (Bloomberg) -- Iceland's benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks.
Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf collapsed this month with debts equivalent to as much as 12 times the size of Iceland's economy. The three banks accounted for about 76 percent of the ICEX 15 Index's value prior to the nationalization.
The OMX Iceland 15 Index fell 2,317.23, or 77 percent, to 687.39 as of 11:48 a.m. local time. Five of the 13 other stocks in the index didn't trade, while the five that did account for about 7.1 percent of the index's value.
Trading was halted since Oct. 9 after the measure lost 30 percent in nine days as the country's financial system collapsed. Iceland's delegation started talks in Moscow today to secure an emergency loan of as much as 4 billion euros ($5.47 billion) from Russia.
The country should seek aid from the IMF and later apply for European Union membership and adopt the euro, Foreign Minister Ingibjorg Solrun Gisladottir wrote in Morgunbladid on Oct. 13.
Among the stocks that did trade today, Alfesca, a maker of salted fish products, dropped 0.85 krona, or 16 percent, to 4.6 kronur. Icelandair Group Holding hf, the country's largest carrier, retreated 0.7 krona, or 4.5 percent, to 14.8 kronur. Marel hf, an Icelandic meat processing company, added 1 krona, or 1.4 percent, to 72.7 kronur.
To contact the reporter on this story: Jakob Lindstroem in Stockholm at jlindstroem@bloomberg.net.
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Oct. 14 (Bloomberg) -- Iceland's benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks.
Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf collapsed this month with debts equivalent to as much as 12 times the size of Iceland's economy. The three banks accounted for about 76 percent of the ICEX 15 Index's value prior to the nationalization.
The OMX Iceland 15 Index fell 2,317.23, or 77 percent, to 687.39 as of 11:48 a.m. local time. Five of the 13 other stocks in the index didn't trade, while the five that did account for about 7.1 percent of the index's value.
Trading was halted since Oct. 9 after the measure lost 30 percent in nine days as the country's financial system collapsed. Iceland's delegation started talks in Moscow today to secure an emergency loan of as much as 4 billion euros ($5.47 billion) from Russia.
The country should seek aid from the IMF and later apply for European Union membership and adopt the euro, Foreign Minister Ingibjorg Solrun Gisladottir wrote in Morgunbladid on Oct. 13.
Among the stocks that did trade today, Alfesca, a maker of salted fish products, dropped 0.85 krona, or 16 percent, to 4.6 kronur. Icelandair Group Holding hf, the country's largest carrier, retreated 0.7 krona, or 4.5 percent, to 14.8 kronur. Marel hf, an Icelandic meat processing company, added 1 krona, or 1.4 percent, to 72.7 kronur.
To contact the reporter on this story: Jakob Lindstroem in Stockholm at jlindstroem@bloomberg.net.
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U.S. Stocks Rally on Government Plan to Buy Stakes in Banks
By Lynn Thomasson
Oct. 14 (Bloomberg) -- U.S. stocks rallied, extending the market's biggest gain since the 1930s, as the government outlined plans to spend $250 billion buying stakes in the nation's banks to shore up confidence.
Citigroup Inc., Merrill Lynch & Co. and Goldman Sachs Group Inc. added more than 14 percent. Exxon Mobil Corp. and Chevron Corp. climbed as oil rose past $84 a barrel on speculation the rescue will be enough to avoid a global recession. European and Asian shares advanced, sending the MSCI World Index to its biggest two-day gain on record.
The government's intervention ``is a huge move and is probably the last roll of the dice,'' said David Hart, a senior equity analyst at London-based investment adviser Fat Prophets U.K. Ltd. ``The authorities now need to let some of these things have a chance to work through the system.''
The Standard & Poor's 500 Index rose 35.02, or 3.5 percent, to 1,038.37 at 9:34 a.m. in New York. The Dow Jones Industrial Average climbed 359.29, or 3.8 percent, to 9,746.9 after a 936- point rally yesterday. The Nasdaq Composite Index increased 46.28, or 2.5 percent, to 1,890.53. About 27 stocks rose for each that fell on the New York Stock Exchange.
The S&P 500 extended its biggest one-day gain since 1939 and the Dow added to its best rally since 1933. The S&P 500 is still down 30 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide top $635 billion. The S&P 500 was valued at 19 times the earnings of its companies at the start of trading today, 2.5 percent below its average over the past five years.
Cash Injections
Citigroup added 17 percent to $18.48, Merrill Lynch gained 19 percent to $20.94 and Goldman Sachs climbed 14 percent to $126.89.
The three companies are among nine banks to receive half of the $250 billion in exchange for preferred stock, people familiar with the plan said. The other lenders to receive investments are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., according to the people.
Paulson urged banks receiving the capital to use it to spur economic growth and not hoard it, while not identifying any of the lenders targeted. President George W. Bush said at the White House that the government's intention is to preserve and ``not take over'' the free market.
`Additional Cushion'
``This move would be big,'' Deutsche Bank AG analysts led by Mike Mayo wrote in a note to clients. ``Banks should gain better debt and equity funding and additional cushion to resolve capital market issues, notwithstanding ongoing and increasingly worse fallout from weakness in the real economy.''
The government's plan to inject cash into financial institutions, coupled with similar actions by countries around the world, may jumpstart the stalled global financial system, Blackstone Group LP Chief Executive Officer Stephen Schwarzman said today at the Super Return Middle East conference in Dubai.
Money-market rates fell on expectations the plans will bolster lending. The London interbank offered rate, or Libor, that banks charge each other for three-month dollar loans slid 12 basis points to 4.64 percent today, the biggest drop since March 17, according to the British Bankers' Association. It was at 4.82 percent on Oct. 10, the highest level since December.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net;
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Paulson Urges Banks to Deploy Capital to Spur Economy
By Rebecca Christie and Robert Schmidt
Oct. 14 (Bloomberg) -- Treasury Secretary Henry Paulson urged banks receiving $250 billion in capital injections from the government to use the funds to spur economic growth.
``We must restore confidence in our financial system,'' Paulson said at a press conference in Washington. ``The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.''
With the equity purchases, Paulson is using more than a third of the $700 billion in government support Congress gave him the authority to use on Oct. 3. He didn't identify any of the lenders. People familiar with the plan said nine companies will get $125 billion: Citigroup Inc., Goldman Sachs Group Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp.
``These are healthy institutions, and they have taken this step for the good of the U.S. economy,'' Paulson said. Stocks rose around the world on expectations the rescue will help alleviate the credit crisis.
Paulson made the remarks in advance of a press conference in Washington with Federal Reserve Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.
Paulson said the Treasury will dedicate $250 billion for boosting bank capital through preferred stock purchases. The regulators said in a statement that ``thousands'' of financial companies would participate.
Pay Limits
Participating banks will need to accept limits on executive pay and so-called golden parachute payments. They also will need to give the Treasury warrants for an amount equal to 15 percent of the senior preferred investment, with a strike price determined by the bank's share price at the time of issuance.
The senior preferred shares will pay a dividend of 5 percent for the first five years and 9 percent after that, the Treasury said. The purchase price of the stock will be the market price of the banks' common shares at the time of the transaction. Companies will be able to buy back the equity at par after three years.
The U.S. initiative followed an announcement that France, Germany, Spain, the Netherlands and Austria committed $1.8 trillion to guarantee bank loans and take stakes in lenders.
Europe's Dow Jones Stoxx 600 Index today climbed 5.2 percent. The MSCI Asia Pacific Index surged 9.3 percent today, the most since 1998, with Japan's Nikkei jumping 14 percent as trading resumed following yesterday's public holiday.
IMF Estimates
Last week, the International Monetary Fund estimated that banks around the world would need $675 billion in fresh capital over the next several years to recover. The IMF also said Oct. 7 that losses tied to U.S. loans and securitized assets would total $1.4 trillion, an almost 50 percent increase from a prediction in April.
The move marks a change in the Treasury chief's strategy to alleviate a global credit crunch after he initially said the focus of the plan would be buying up illiquid mortgage-related assets. Banks have struggled to regain the confidence of investors, counterparties and clients after bad loans caused $637 billion of writedowns and losses across the industry.
``This is an essential short-term measure to ensure the viability of the U.S. banking system,'' President George W. Bush said at the White House after meeting with his Working Group on Financial Markets, which includes Paulson and Bernanke.
To contact the reporter on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net. Robert Schmidt in Washington at rschmidt5@bloomberg.net.
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Chilean Stocks: Santander, Banco de Chile, Cencosud, CGE, SQM
By James Attwood
Oct. 14 (Bloomberg) -- The following companies are having unusual price changes in Chilean trading. Stock symbols are in parentheses, and share prices are as of the 8:57 a.m. in New York.
The Ipsa index rose 5.6 percent to 2,497.11 after rallying 13 percent yesterday.
Banco Santander Chile (BSAN CC) rose 9 percent to 20.5 pesos, extending yesterday's 14 percent jump. Global financial stocks extended a rally as the U.S. injected $250 billion in banks and urged the lenders to use the funds to spur economic growth. Santander is Chile's biggest bank.
Banco de Chile (CHILE CC), the country's second-biggest bank, gained 9.2 percent to 33 pesos after yesterday's 16 percent rally.
Cencosud SA (CENCOSUD CC) gained 11 percent to 1,110 pesos, poised for a 28 percent two-day gain, the biggest since trading began in May 2004. Chile's biggest retailer was reiterated ``buy'' at Banco Santander SA, which said in a note to clients today that a planned sale of new shares may reduce the company's financial ``uncertainty.''
Cia. General de Eletricidad SA (CGE CC) rose 4.6 percent to 2,950 pesos, extending this week's gain to 23 percent. The Santiago-based electric generator and distribution company received permission yesterday from Chile's government environmental agency, Conama, to build its Nuble hydroelectric plant in the Biobio region, El Mercurio reported.
Sociedad Quimica y Minera de Chile SA (SQM/B CC) gained 13 percent to 13,100 pesos, poised for a 38 percent two-day jump, the biggest since Bloomberg records began in June 1994. Global crop and energy prices extended a rally, signaling higher demand for the fertilizers that Soquimich produces.
To contact the reporter on this story: James Attwood in Santiago at jattwood3@bloomberg.net;
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Oct. 14 (Bloomberg) -- The following companies are having unusual price changes in Chilean trading. Stock symbols are in parentheses, and share prices are as of the 8:57 a.m. in New York.
The Ipsa index rose 5.6 percent to 2,497.11 after rallying 13 percent yesterday.
Banco Santander Chile (BSAN CC) rose 9 percent to 20.5 pesos, extending yesterday's 14 percent jump. Global financial stocks extended a rally as the U.S. injected $250 billion in banks and urged the lenders to use the funds to spur economic growth. Santander is Chile's biggest bank.
Banco de Chile (CHILE CC), the country's second-biggest bank, gained 9.2 percent to 33 pesos after yesterday's 16 percent rally.
Cencosud SA (CENCOSUD CC) gained 11 percent to 1,110 pesos, poised for a 28 percent two-day gain, the biggest since trading began in May 2004. Chile's biggest retailer was reiterated ``buy'' at Banco Santander SA, which said in a note to clients today that a planned sale of new shares may reduce the company's financial ``uncertainty.''
Cia. General de Eletricidad SA (CGE CC) rose 4.6 percent to 2,950 pesos, extending this week's gain to 23 percent. The Santiago-based electric generator and distribution company received permission yesterday from Chile's government environmental agency, Conama, to build its Nuble hydroelectric plant in the Biobio region, El Mercurio reported.
Sociedad Quimica y Minera de Chile SA (SQM/B CC) gained 13 percent to 13,100 pesos, poised for a 38 percent two-day jump, the biggest since Bloomberg records began in June 1994. Global crop and energy prices extended a rally, signaling higher demand for the fertilizers that Soquimich produces.
To contact the reporter on this story: James Attwood in Santiago at jattwood3@bloomberg.net;
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FX Thoughts for the Day
Daily Forex Technicals | Written by Kshitij Consultancy Services | Oct 14 08 12:11 GMT |
USD-CHF @ 1.1280/84... Could dip in the day
R: 1.1320 / 1.1360 / 1.1390-1400 / 1.1450 / 1500
S: 1.1270-50 / 1.1200 / 1.1150 / 1.1100
The pair continues to trade within the tight trading range of 50-pips. For the day the Support at 1.13 is being tested, and there is a high probability that the pair could slip lower during the day towards 1.1250, and 1.1196, the Max Low for the day.
Overall the pair is ranged between 1.11 and 1.15 and could vacillate between these levels for the week.
GBP-USD @ 1.7621/25... Could rise towards 1.77
R: 1.7650 / 1.7700 / 1.7770 / 1.7835
S: 1.7500 / 1.7400 / 1.7350 / 1.7300
The dip towards 1.74 has seen some buying interest and a subsequent rise in the pair has seen.
The pair conitinues to reamin bullish and could now target 1.77 in the short term and provided the Resistance at 1.77 gives way, then may be towards 1.7850-7900 over the course of the week.
The bailout plan proposed by the UK government has lead to short covering and resulted in some market relief. Cable could continue to surge provided the sentiment is not disturbed once again.
Holding:
Long GBP 10K at 1.7542, SL Open, TP 1.7700 (up from 1.7750)
AUD-USD @ 0.7231/35... Could rise towards 0.7345
R: 0.7235-50 / 0.7270 / 0.7300-15 / 0.7350
S: 0.7060-50 / 0.7000 / 0.6925 / 0.6850 / 0.6800
Our long on Aussie has seen profit during the day as the pair continues to rise. For now the pair could face some minor Resistance near 0.7250.
A dip towards 0.7160-30 could be bought, as the pair is still bullish as long as the Support at 0.71 holds. Overall, the pair could be headed towards 0.74-75 over the course of the week.
Limit Buy Order:
Buy AUD 10K at 0.7158, SL 0.6939, TP 0.7300
Buy AUD 10K at 0.6819, SL 0.6789, TP 0.7009
Kshitij Consultancy Service
http://www.fxthoughts.com
Legal disclaimer and risk disclosure
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
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USD-CHF @ 1.1280/84... Could dip in the day
R: 1.1320 / 1.1360 / 1.1390-1400 / 1.1450 / 1500
S: 1.1270-50 / 1.1200 / 1.1150 / 1.1100
The pair continues to trade within the tight trading range of 50-pips. For the day the Support at 1.13 is being tested, and there is a high probability that the pair could slip lower during the day towards 1.1250, and 1.1196, the Max Low for the day.
Overall the pair is ranged between 1.11 and 1.15 and could vacillate between these levels for the week.
GBP-USD @ 1.7621/25... Could rise towards 1.77
R: 1.7650 / 1.7700 / 1.7770 / 1.7835
S: 1.7500 / 1.7400 / 1.7350 / 1.7300
The dip towards 1.74 has seen some buying interest and a subsequent rise in the pair has seen.
The pair conitinues to reamin bullish and could now target 1.77 in the short term and provided the Resistance at 1.77 gives way, then may be towards 1.7850-7900 over the course of the week.
The bailout plan proposed by the UK government has lead to short covering and resulted in some market relief. Cable could continue to surge provided the sentiment is not disturbed once again.
Holding:
Long GBP 10K at 1.7542, SL Open, TP 1.7700 (up from 1.7750)
AUD-USD @ 0.7231/35... Could rise towards 0.7345
R: 0.7235-50 / 0.7270 / 0.7300-15 / 0.7350
S: 0.7060-50 / 0.7000 / 0.6925 / 0.6850 / 0.6800
Our long on Aussie has seen profit during the day as the pair continues to rise. For now the pair could face some minor Resistance near 0.7250.
A dip towards 0.7160-30 could be bought, as the pair is still bullish as long as the Support at 0.71 holds. Overall, the pair could be headed towards 0.74-75 over the course of the week.
Limit Buy Order:
Buy AUD 10K at 0.7158, SL 0.6939, TP 0.7300
Buy AUD 10K at 0.6819, SL 0.6789, TP 0.7009
Kshitij Consultancy Service
http://www.fxthoughts.com
Legal disclaimer and risk disclosure
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
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Dollar reversed against Euro and Sterling following major central banks measures to rescue the global financial system
Daily Forex Fundamentals | Written by AC-Markets | Oct 14 08 08:47 GMT |
Forex Market Issues and Risks
News and Events:
The Dollar reversed on Monday on its worst day against the Euro in 3-weeks on Monday. The Yen weakened broadly against majors as credit conditions eased after major central banks released measures to rescue a distressed global financial system. The euro and sterling were also rising after UK, France and Germany governments announced plans to recapitalize their banking systems.
All recent news improved the return in risk appetite on Monday's after the Federal Reserve, the European Central Bank, Bank of England, and Swiss National Bank said they would provide commercial banks with as much Dollar liquidity as they needed at fixed rates to help money markets. Britain said it would pour $64bio into three of its biggest banks as part of a plan to restore confidence, helping a recovery in the Sterling. France and Germany also unveiled plans to recapitalize their banks.
Australia also said it would guarantee deposits in its banks. Yen has been a major beneficiary of increased risk aversion in the last few months amid troubles in the global financial sector. Investors have unwound billions of dollars in risky carry trades financed using the Yen's ultra-low rates, bolstering the Japanese currency.
Yesterday, EurUsd rose 1.74% to 1.3643, its best day since Sept. 22nd. UsdJpy rose 1.85% to 102.53 rebounding from earlier 99.56 low. EurJpy climbed 3.61% to 139.88. GbpUsd rose 2.36% to 1.7445 from a five-year 1.6786 low on Friday. UsdChf was mixed -0.3% at 1.1352. AudUsd rose 9.68% to 0.7067, still down 28.69% for the last 2 quarters. AudJpy jumped 11.72% higher at 72.35. Volumes were lighter as Tokyo and Canadian and the New York bond markets were closed for national holidays.
Today Key Issues:
* 06:45 EUR September French CPI final 0% vs -0.1% (mom)
* 06:45 EUR September French CPI final 3.4% vs 3.5% (yoy)
* 07:30 EUR September Spain CPI 0% vs -0.2% (mom)
* 07:30 EUR September Spain CPI 4.6% vs 4.9% (yoy)
* 08:00 EUR September Italy Consumer Prices final -0.3% vs 0.1% (mom)
* 08:00 EUR September Italy Consumer Prices final 3.8% vs 4.1% (yoy)
* 08:30 GBP September CPI 0.4% vs 0.6% (mom)
* 08:30 GBP September CPI 5% vs 4.7% (yoy)
* 08:30 GBP September RPI 0.5% vs 0.3% (mom)
* 08:30 GBP September RPI 4.9% vs 4.8% (yoy)
* 09:00 EUR October ZEW current conditions -15 vs -1
* 09:00 EUR October ZEW economic sentiment -51.1 vs -41.1
* 09:00 EUR August Euro-zone Industrial production 1.1% vs -0.3% (mom)
* 09:00 EUR August Euro-zone Industrial production -1.6% vs -1.7% (yoy)
* 16:00 EUR France's Jouyet speaks to EU Parliament
* 16:00 USD Treasury's Kimmitt speaks about economy
* 17:15 EUR ECB's Trichet speaking in New York
* 18:00 USD September Federal budget $70b vs $112.6b
* 21:00 USD weekly ABC Consumer confidence -44 vs -43
* 23:50 JPY August Current account NSA -42.3% vs -17.3%
The Risk Today:
EurUsd Last week strong pressure hit strong support 1.3666 December 2004 high and broke below 1.3500. Market strongly rebounded today on 1.3666 former support and now initial resistance. On the upside, only a return over 1.4000 and 1.5000 will release actual pressure and may put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200. Initial resistance holds 1.4002 former trendline support. On the downside, renewed weakness will focus on 1.3056 support (retracement of 0.8231 – 1.6039 advance). Initial support holds 1.3259 Friday low.
GbpUsd Last week market dropped as low as 1.6786 strong support. It recovered yesterday over 1.7422 former support. On the upside, strong support holds 1.7697 last week high ahead of 1.8304 former support. But renewed downtrend may look for 1.6568 November 2003 low and 61.8% retracement of 1.3682–2.1161 advances). Following supports are 1.4560 trendline and 1.3682 March 2001 low.
UsdJpy Downtrend started in September is still running and hit 97.91 low Friday. Market rebounded yesterday up to 102.58 high. On the further upside, recovery over 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 102.58 yesterday high. On the downside, renewed pressure may open the way to 95.75 17th March low. Current weak trend will stand below 103 upper trendline resistance.
UsdChf Market posted 1.1489 high last week. Further advance may open the way to 1.1596 December high and strong resistance. Initial support holds 1.1129 Friday low. On the downside, only weakness below 1.0692, 22nd September low, would give direction or open the way down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.
ACM FOREX
Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
Read more...
Forex Market Issues and Risks
News and Events:
The Dollar reversed on Monday on its worst day against the Euro in 3-weeks on Monday. The Yen weakened broadly against majors as credit conditions eased after major central banks released measures to rescue a distressed global financial system. The euro and sterling were also rising after UK, France and Germany governments announced plans to recapitalize their banking systems.
All recent news improved the return in risk appetite on Monday's after the Federal Reserve, the European Central Bank, Bank of England, and Swiss National Bank said they would provide commercial banks with as much Dollar liquidity as they needed at fixed rates to help money markets. Britain said it would pour $64bio into three of its biggest banks as part of a plan to restore confidence, helping a recovery in the Sterling. France and Germany also unveiled plans to recapitalize their banks.
Australia also said it would guarantee deposits in its banks. Yen has been a major beneficiary of increased risk aversion in the last few months amid troubles in the global financial sector. Investors have unwound billions of dollars in risky carry trades financed using the Yen's ultra-low rates, bolstering the Japanese currency.
Yesterday, EurUsd rose 1.74% to 1.3643, its best day since Sept. 22nd. UsdJpy rose 1.85% to 102.53 rebounding from earlier 99.56 low. EurJpy climbed 3.61% to 139.88. GbpUsd rose 2.36% to 1.7445 from a five-year 1.6786 low on Friday. UsdChf was mixed -0.3% at 1.1352. AudUsd rose 9.68% to 0.7067, still down 28.69% for the last 2 quarters. AudJpy jumped 11.72% higher at 72.35. Volumes were lighter as Tokyo and Canadian and the New York bond markets were closed for national holidays.
Today Key Issues:
* 06:45 EUR September French CPI final 0% vs -0.1% (mom)
* 06:45 EUR September French CPI final 3.4% vs 3.5% (yoy)
* 07:30 EUR September Spain CPI 0% vs -0.2% (mom)
* 07:30 EUR September Spain CPI 4.6% vs 4.9% (yoy)
* 08:00 EUR September Italy Consumer Prices final -0.3% vs 0.1% (mom)
* 08:00 EUR September Italy Consumer Prices final 3.8% vs 4.1% (yoy)
* 08:30 GBP September CPI 0.4% vs 0.6% (mom)
* 08:30 GBP September CPI 5% vs 4.7% (yoy)
* 08:30 GBP September RPI 0.5% vs 0.3% (mom)
* 08:30 GBP September RPI 4.9% vs 4.8% (yoy)
* 09:00 EUR October ZEW current conditions -15 vs -1
* 09:00 EUR October ZEW economic sentiment -51.1 vs -41.1
* 09:00 EUR August Euro-zone Industrial production 1.1% vs -0.3% (mom)
* 09:00 EUR August Euro-zone Industrial production -1.6% vs -1.7% (yoy)
* 16:00 EUR France's Jouyet speaks to EU Parliament
* 16:00 USD Treasury's Kimmitt speaks about economy
* 17:15 EUR ECB's Trichet speaking in New York
* 18:00 USD September Federal budget $70b vs $112.6b
* 21:00 USD weekly ABC Consumer confidence -44 vs -43
* 23:50 JPY August Current account NSA -42.3% vs -17.3%
The Risk Today:
EurUsd Last week strong pressure hit strong support 1.3666 December 2004 high and broke below 1.3500. Market strongly rebounded today on 1.3666 former support and now initial resistance. On the upside, only a return over 1.4000 and 1.5000 will release actual pressure and may put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200. Initial resistance holds 1.4002 former trendline support. On the downside, renewed weakness will focus on 1.3056 support (retracement of 0.8231 – 1.6039 advance). Initial support holds 1.3259 Friday low.
GbpUsd Last week market dropped as low as 1.6786 strong support. It recovered yesterday over 1.7422 former support. On the upside, strong support holds 1.7697 last week high ahead of 1.8304 former support. But renewed downtrend may look for 1.6568 November 2003 low and 61.8% retracement of 1.3682–2.1161 advances). Following supports are 1.4560 trendline and 1.3682 March 2001 low.
UsdJpy Downtrend started in September is still running and hit 97.91 low Friday. Market rebounded yesterday up to 102.58 high. On the further upside, recovery over 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 102.58 yesterday high. On the downside, renewed pressure may open the way to 95.75 17th March low. Current weak trend will stand below 103 upper trendline resistance.
UsdChf Market posted 1.1489 high last week. Further advance may open the way to 1.1596 December high and strong resistance. Initial support holds 1.1129 Friday low. On the downside, only weakness below 1.0692, 22nd September low, would give direction or open the way down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.
EURUSD GBPUSD USDJPY USDCHF
1.5000 P 1.9363 S 105.00 S 1.2153 T
1.4867 S 1.8304 M 103.00 T 1.1596 S
1.3666 M 1.7697 S 102.58 M 1.1489 M
1.3650 1.7470 102.45 1.1345
1.3360 T 1.6786 M 100.00 P 1.1129 M
1.3259 M 1.6568 S 97.91 M 1.0692 S
1.3056 T 1.4560 T 95.75 T 1.0005 K
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
ACM FOREX
Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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Daily Forex Analysis
Daily Forex Technicals | Written by FOREXYARD | Oct 14 08 09:03 GMT |
Headlines
European Bailout Restores Some Needed Confidence to Markets
The major European powers agreed to their own financial bailout yesterday, pledging over $700 billion to solidify Europe's banking institutions.
USD - Dollar Gives Back as Investors Return from Safety
Global markets reacted positively to news that the British, French, and German governments would commit funds to the prop up the continent's banking sector. Yesterday's trading lacked the price volatility that has been seen in the USD the last two weeks, with the Dollar dropping against the EUR and GBP, while taking slight gains against the JPY. U.S. financial markets were closed yesterday for a banking holiday.
Not just with words, but with firm commitments to action by the European governments helped push the Dollar lower yesterday against the EUR and the GBP. Perhaps traders were waiting for assurances that the worlds largest banks would not be allowed to fail, as was the case with Lehman Brothers. Government intervention is helping to reduce risk aversion, easing investor fears, and in turn creating the opportunity for traders to get back into riskier assets. Recently currency markets have witnessed a flight to safety in the Dollar and the JPY. During the past two weeks the Dollar has made gains of over 1200 pips against the EUR and dropped against the JPY almost 600 pips.
Today we will hear from FOMC Member Plosser and his remarks regarding the current state of the U.S. financial system. Traders will be listening for any hint as to the implementation of the U.S. financial rescue plan. Investors will continue to look for added confidence in the markets. Recently this has been in the form of government intervention. Another factor that has gone largely unnoticed in the currency markets has been the steady drop in Crude Oil prices. The price of Crude may not stay depressed for long. Any resurgence in Crude prices could push the USD lower in the short term.
EUR - European Bank Bailout Program Takes Shape
With no economic indicators released yesterday, the 15 nation currency's movement was mainly affected by the G7 rescue plan. Finally with such a move the European economy is expected to boost consumer confidence. The effect has already influenced the markets as European shares in the equity markets managed to rise 4.5% throughout the early hours.
The French Finance Ministry held a press conference yesterday to announce the creation of a 40 billion euro fund to purchase bad bank debts. Similar announcements are expected by additional Nations across Europe, while some have already been announced yesterday. With more and more central banks taking action to save the European banking sector, we may possibly see stabilizing equity markets and the EUR currency stabilizing in the near term.
With a batch of indicators to be released today, expectations for a more intense trading day today are high. ECB Trichet will hold a speech today in New York, while we can expect the German ZEW Economic sentiment to provide a better view of the European economic health. Traders may be looking in both ways as to the direction of the European economic health. Recently the Euro-Zone economy has been trending down but, with the recent European government bailout announcement, look for the EUR to post small gains in the near future.
JPY - JPY Jumps as Panic Grips Investors
As Japanese investors begin liquidating in excess of $1.3 trillion in overseas assets in order to bring money into the country, the Yen continue to extend its gains against its major currencies. The reason for the reshuffling of assets is due to the global slump in equities.
The Yen, which is a preferable currency in times of financial uncertainty, looks set for further appreciation. The Japanese currency may advance to 95 per Dollar should Japanese investment trusts, insurance companies and pension funds start selling foreign holdings. Yesterday the JPY rose for the third straight day to 99.87 from 100.67 per dollar at 12:04 p.m. in Tokyo on Friday. It has gained 8% over the past month. There has been almost no change in JPY versus the EUR, after European leaders agreed to guarantee bank borrowing and bolster big lenders. It declined to 134.76 Yen, from 134.96 at the end of last week.
As European countries have further room to cut Interest Rates in response to slowing global growth, evolving yield differentials should be further supportive of the Yen. The European Central Bank's benchmark rate of 3.75% compares with 1.5% in the U.S. and 0.5% in Japan. Traders raised bets on an ECB rate cut later this year.
OIL - Unexpected Rise in Crude Oil prices
Crude Oil begins to gain after falling below $82 a barrel at the end of last week. It rose after policymakers around the world took new and drastic steps to rescue banks and prevent the global economy from sinking into recession.
The governments of the U.S., Europe and Asia are offering their support for the banking system to stem the financial crisis threatening the global economy. After Crude declined for the past few months on concern that a global recession will cut demand for fuel, the market waits to see some evidence that these government interventions are having a positive influence, or are at least dampening the global panic. The recovery process is likely to be very long winded and will likely take about as long as the crisis. If government measures to shore up markets succeed, Oil prices will be poised for a recovery.
Moreover, since the EUR jumped the most in three weeks against the dollar today on the region's bank rescue plan it will also likely to speed up the crude prices . Because a weaker dollar typically supports Oil prices, it makes commodities cheaper for buyers in other currencies.
The announcements from over the weekend are likely to have some positive effects on the markets. And even though it's still very early at this stage to say if they would put an end to the financial crisis, the market's positive expectations are more than likely to raise crude prices.
Technical News
EUR/USD
The daily chart shows fresh signs of a bullish move, suggesting that the downtrend has vanished. The 4 chart's RSI also supports this notion indicating that the upwards momentum has more steam in it. Going long with tight stops might be the right strategy today.
GBP/USD
The daily chart shows fresh signs of a bullish move, suggesting that the downtrend has vanished. The 4 chart's RSI also supports this notion indicating that the upwards momentum has more steam in it. Going long with tight stops might be the right strategy today.
USD/JPY
On a daily chart the pair is showing consistent bullish momentum for a while now and today is no difference. Although the signal is not strong the pair might have a local target at 1.0400, which might make it feasible for forex traders to go long with tight stops.
USD/CHF
The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The Wild Card
Oil
The 4 hour chart is showing growing bullish momentum, while the daily studies also support that notion. This may prove to be a good opportunity for forex traders to join a potentially strong uptrend that might yield high profits.
Indicators
Date Time (GMT) Country Event Period Previous Forecast Actual
10/14 08:30 GBP CPI y/y 4.7% 5.0% 5.2%
08:30 GBP Core CPI y/y 2.0% 2.1% 2.2%
08:30 GBP DCLG HPI y/y -0.3% -1.1% -
08:30 GBP RPI y/y 4.8% 4.9% 5.0%
09:00 EUR German ZEW Economic Sentiment -41.1 -51.1 -
09:00 EUR Industrial Production m/m -0.3% 1.1% -
09:00 EUR ZEW Economic Sentiment -40.9 -57.2 -
12:05 USD President Bush Speaks * * *
12:30 CAD New Motor Vehicle Sales m/m -0.8% -1.0% -
12:30 USD Fed Chairman Bernanke Speaks * * *
14:00 USD IBD/TIPP Economic Optimism 45.8 44.5 -
16:15 EUR ECB President Trichet Speaks * * *
16:30 USD FOMC Member Plosser Speaks * * *
18:00 USD Federal Budget Balance -111.9B 47.0B -
23:50 JPY Current Account 1.56T 1.15T -
10/15 00:30 AUD RBA Monthly Bulletin - - -
00:30 AUD MI Leading Index m/m 0.2% - -
04:30 JPY Revised Industrial Production m/m -3.5% -3.5% -
06:00 EUR German Final CPI m/m -0.1% -0.1% -
FOREXYARD
Read more...
Headlines
European Bailout Restores Some Needed Confidence to Markets
The major European powers agreed to their own financial bailout yesterday, pledging over $700 billion to solidify Europe's banking institutions.
USD - Dollar Gives Back as Investors Return from Safety
Global markets reacted positively to news that the British, French, and German governments would commit funds to the prop up the continent's banking sector. Yesterday's trading lacked the price volatility that has been seen in the USD the last two weeks, with the Dollar dropping against the EUR and GBP, while taking slight gains against the JPY. U.S. financial markets were closed yesterday for a banking holiday.
Not just with words, but with firm commitments to action by the European governments helped push the Dollar lower yesterday against the EUR and the GBP. Perhaps traders were waiting for assurances that the worlds largest banks would not be allowed to fail, as was the case with Lehman Brothers. Government intervention is helping to reduce risk aversion, easing investor fears, and in turn creating the opportunity for traders to get back into riskier assets. Recently currency markets have witnessed a flight to safety in the Dollar and the JPY. During the past two weeks the Dollar has made gains of over 1200 pips against the EUR and dropped against the JPY almost 600 pips.
Today we will hear from FOMC Member Plosser and his remarks regarding the current state of the U.S. financial system. Traders will be listening for any hint as to the implementation of the U.S. financial rescue plan. Investors will continue to look for added confidence in the markets. Recently this has been in the form of government intervention. Another factor that has gone largely unnoticed in the currency markets has been the steady drop in Crude Oil prices. The price of Crude may not stay depressed for long. Any resurgence in Crude prices could push the USD lower in the short term.
EUR - European Bank Bailout Program Takes Shape
With no economic indicators released yesterday, the 15 nation currency's movement was mainly affected by the G7 rescue plan. Finally with such a move the European economy is expected to boost consumer confidence. The effect has already influenced the markets as European shares in the equity markets managed to rise 4.5% throughout the early hours.
The French Finance Ministry held a press conference yesterday to announce the creation of a 40 billion euro fund to purchase bad bank debts. Similar announcements are expected by additional Nations across Europe, while some have already been announced yesterday. With more and more central banks taking action to save the European banking sector, we may possibly see stabilizing equity markets and the EUR currency stabilizing in the near term.
With a batch of indicators to be released today, expectations for a more intense trading day today are high. ECB Trichet will hold a speech today in New York, while we can expect the German ZEW Economic sentiment to provide a better view of the European economic health. Traders may be looking in both ways as to the direction of the European economic health. Recently the Euro-Zone economy has been trending down but, with the recent European government bailout announcement, look for the EUR to post small gains in the near future.
JPY - JPY Jumps as Panic Grips Investors
As Japanese investors begin liquidating in excess of $1.3 trillion in overseas assets in order to bring money into the country, the Yen continue to extend its gains against its major currencies. The reason for the reshuffling of assets is due to the global slump in equities.
The Yen, which is a preferable currency in times of financial uncertainty, looks set for further appreciation. The Japanese currency may advance to 95 per Dollar should Japanese investment trusts, insurance companies and pension funds start selling foreign holdings. Yesterday the JPY rose for the third straight day to 99.87 from 100.67 per dollar at 12:04 p.m. in Tokyo on Friday. It has gained 8% over the past month. There has been almost no change in JPY versus the EUR, after European leaders agreed to guarantee bank borrowing and bolster big lenders. It declined to 134.76 Yen, from 134.96 at the end of last week.
As European countries have further room to cut Interest Rates in response to slowing global growth, evolving yield differentials should be further supportive of the Yen. The European Central Bank's benchmark rate of 3.75% compares with 1.5% in the U.S. and 0.5% in Japan. Traders raised bets on an ECB rate cut later this year.
OIL - Unexpected Rise in Crude Oil prices
Crude Oil begins to gain after falling below $82 a barrel at the end of last week. It rose after policymakers around the world took new and drastic steps to rescue banks and prevent the global economy from sinking into recession.
The governments of the U.S., Europe and Asia are offering their support for the banking system to stem the financial crisis threatening the global economy. After Crude declined for the past few months on concern that a global recession will cut demand for fuel, the market waits to see some evidence that these government interventions are having a positive influence, or are at least dampening the global panic. The recovery process is likely to be very long winded and will likely take about as long as the crisis. If government measures to shore up markets succeed, Oil prices will be poised for a recovery.
Moreover, since the EUR jumped the most in three weeks against the dollar today on the region's bank rescue plan it will also likely to speed up the crude prices . Because a weaker dollar typically supports Oil prices, it makes commodities cheaper for buyers in other currencies.
The announcements from over the weekend are likely to have some positive effects on the markets. And even though it's still very early at this stage to say if they would put an end to the financial crisis, the market's positive expectations are more than likely to raise crude prices.
Technical News
EUR/USD
The daily chart shows fresh signs of a bullish move, suggesting that the downtrend has vanished. The 4 chart's RSI also supports this notion indicating that the upwards momentum has more steam in it. Going long with tight stops might be the right strategy today.
GBP/USD
The daily chart shows fresh signs of a bullish move, suggesting that the downtrend has vanished. The 4 chart's RSI also supports this notion indicating that the upwards momentum has more steam in it. Going long with tight stops might be the right strategy today.
USD/JPY
On a daily chart the pair is showing consistent bullish momentum for a while now and today is no difference. Although the signal is not strong the pair might have a local target at 1.0400, which might make it feasible for forex traders to go long with tight stops.
USD/CHF
The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The Wild Card
Oil
The 4 hour chart is showing growing bullish momentum, while the daily studies also support that notion. This may prove to be a good opportunity for forex traders to join a potentially strong uptrend that might yield high profits.
Indicators
Date Time (GMT) Country Event Period Previous Forecast Actual
10/14 08:30 GBP CPI y/y 4.7% 5.0% 5.2%
08:30 GBP Core CPI y/y 2.0% 2.1% 2.2%
08:30 GBP DCLG HPI y/y -0.3% -1.1% -
08:30 GBP RPI y/y 4.8% 4.9% 5.0%
09:00 EUR German ZEW Economic Sentiment -41.1 -51.1 -
09:00 EUR Industrial Production m/m -0.3% 1.1% -
09:00 EUR ZEW Economic Sentiment -40.9 -57.2 -
12:05 USD President Bush Speaks * * *
12:30 CAD New Motor Vehicle Sales m/m -0.8% -1.0% -
12:30 USD Fed Chairman Bernanke Speaks * * *
14:00 USD IBD/TIPP Economic Optimism 45.8 44.5 -
16:15 EUR ECB President Trichet Speaks * * *
16:30 USD FOMC Member Plosser Speaks * * *
18:00 USD Federal Budget Balance -111.9B 47.0B -
23:50 JPY Current Account 1.56T 1.15T -
10/15 00:30 AUD RBA Monthly Bulletin - - -
00:30 AUD MI Leading Index m/m 0.2% - -
04:30 JPY Revised Industrial Production m/m -3.5% -3.5% -
06:00 EUR German Final CPI m/m -0.1% -0.1% -
FOREXYARD
Read more...
OceanaGold delays production start at Philippine mine
MANILA, Oct 14 (Reuters) - Australia-based gold miner OceanaGold will start commercial production at its Philippine copper and gold venture in January, 2010, nearly a year behind its initial plan, while it looks for a partner, a company official said on Tuesday.
"We're looking at January 2010. We'd like to spend the whole of 2009 constructing and developing the project," company spokesman Ramoncito Gozar told reporters on the sidelines of a mining conference in Manila.
The company is seeking a partner to help fund an additional $185 million needed for the Didipio copper and gold project to take off.
Gozar said OceanaGold has spent $64 million on the project so far.
The Didipio project in Nueva Vizcaya province north of Manila is only the second mining venture to be operated by a foreign firm in the Philippines.
The firm was earlier hoping to begin commercial production by the first half of 2009.
Gozar said the company has trimmed down the number of prospective partners to four, but did not identify them.
Asked whether OceanaGold, which owns 92 percent of the Didipio project, is willing to give up control to a prospective partner, Gozar said: "We may or may not."
Start-up operations at Didipio were partially suspended earlier this year due to rising development costs.
The project cost was raised to $320 million in May from an original $155 million in 2006 due to higher raw material costs and after Oceanagold altered the project to include a $33-$34 million, 18-megawatt power facility to ensure steady electricity supply at the mine site.
The Didipio mine is expected to produce around 120,000 ounces of gold and around 15,000 tonnes of copper concentrate annually in the first 10 years of production. The mine has a minimum life of 15 years.
(Reporting by Manolo Serapio Jr.; Editing by Kim Coghill)
Read more...
"We're looking at January 2010. We'd like to spend the whole of 2009 constructing and developing the project," company spokesman Ramoncito Gozar told reporters on the sidelines of a mining conference in Manila.
The company is seeking a partner to help fund an additional $185 million needed for the Didipio copper and gold project to take off.
Gozar said OceanaGold has spent $64 million on the project so far.
The Didipio project in Nueva Vizcaya province north of Manila is only the second mining venture to be operated by a foreign firm in the Philippines.
The firm was earlier hoping to begin commercial production by the first half of 2009.
Gozar said the company has trimmed down the number of prospective partners to four, but did not identify them.
Asked whether OceanaGold, which owns 92 percent of the Didipio project, is willing to give up control to a prospective partner, Gozar said: "We may or may not."
Start-up operations at Didipio were partially suspended earlier this year due to rising development costs.
The project cost was raised to $320 million in May from an original $155 million in 2006 due to higher raw material costs and after Oceanagold altered the project to include a $33-$34 million, 18-megawatt power facility to ensure steady electricity supply at the mine site.
The Didipio mine is expected to produce around 120,000 ounces of gold and around 15,000 tonnes of copper concentrate annually in the first 10 years of production. The mine has a minimum life of 15 years.
(Reporting by Manolo Serapio Jr.; Editing by Kim Coghill)
Read more...
MUFG stock sees biggest gain in 5 years on Morgan
(Adds details)
By David Dolan
TOKYO, Oct 14 (Reuters) - Shares of Mitsubishi UFJ Financial Group posted their biggest jump in five years after Japan's top bank came through with a planned $9 billion investment in struggling U.S. firm Morgan Stanley .
Mitsubishi UFJ paid $9 billion for 21 percent of the iconic Wall Street investment bank, all of which it took in preferred shares after rejigging its original agreement to buy both common stock and preferred shares.
The closing of the deal on Monday helped reassure Wall Street investors, who sent Morgan Stanley's stock rocketing after a week of sharp selling on concern the Japanese bank could back out of the arrangement.
By taking the stake in less risky preferred shares, which pay a hefty dividend of 10 percent, Mitsubishi UFJ also assuaged Tokyo investors who worried the deal may be a gamble.
Mitsubishi UFJ was assured by U.S. officials that any potential injection of public money into Morgan Stanley would not dilute its stake, according to a person familiar with the matter.
"There was a lot of concern about this deal at first, but the fact that they were able to change the terms, that they were able to take the stake in preferred shares, that is a positive," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Mitsubishi UFJ said late last month it would buy $3 billion in common shares at $31.25 a share and take the rest in preferred shares, but that changed as the U.S. bank's stock went into freefall.
Under the new terms, about $7.8 billion of Mitsubishi UFJ's investment is in preferred shares with a conversion price of $25.25 a common share with no maturity date. The remaining $1.2 billion is in preferred stock that is not convertible and also has no maturity date.
All of the preferred shares pay a 10 percent dividend, unchanged from the original deal.
NEW TERMS
The Japanese bank pushed for new terms after Morgan's stake price fell to $9.28 last week, bringing the U.S. bank's value to $10 billion and sparking concern among its customers.
Over the weekend, a hesitant Mitsubishi UFJ and the Japanese government pressed the U.S. Treasury to guarantee that any injection of public money would not dilute the Tokyo-based bank's stake, said the source, who declined to be identified.
The two banks said in a statement that they will pursue a global strategic alliance in corporate and investment banking, retail banking and asset management.
Concrete details of the alliance will be determined by the end of June 2009, the two banks said.
Often described as Japan's most conservative bank, Mitsubishi UFJ is now making an aggressive push into the United States, looking to capitalise on a credit crisis that has crippled its Wall Street rivals.
The bank, which has so far avoided heavy subprime losses, last month paid $3.5 billion to take full control of California's UnionBanCal Corp, as it bets on long-term growth in the world's largest economy.
Mitsubishi UFJ is looking to grow behind its softening home market, where it is saddled with slow growth and a declining population.
Shares of Mitsubishi UFJ finished up by their daily limit of 100 yen at 810 yen, a gain of 14.1 percent and the stock's biggest one day rise since October 2003, when it rose 14.2 percent.
Shares of the bank saw little active trade, however, as they spent most of the day flooded with buy orders. (Reporting by David Dolan; editing by Sophie Hardach)
Read more...
By David Dolan
TOKYO, Oct 14 (Reuters) - Shares of Mitsubishi UFJ Financial Group posted their biggest jump in five years after Japan's top bank came through with a planned $9 billion investment in struggling U.S. firm Morgan Stanley .
Mitsubishi UFJ paid $9 billion for 21 percent of the iconic Wall Street investment bank, all of which it took in preferred shares after rejigging its original agreement to buy both common stock and preferred shares.
The closing of the deal on Monday helped reassure Wall Street investors, who sent Morgan Stanley's stock rocketing after a week of sharp selling on concern the Japanese bank could back out of the arrangement.
By taking the stake in less risky preferred shares, which pay a hefty dividend of 10 percent, Mitsubishi UFJ also assuaged Tokyo investors who worried the deal may be a gamble.
Mitsubishi UFJ was assured by U.S. officials that any potential injection of public money into Morgan Stanley would not dilute its stake, according to a person familiar with the matter.
"There was a lot of concern about this deal at first, but the fact that they were able to change the terms, that they were able to take the stake in preferred shares, that is a positive," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Mitsubishi UFJ said late last month it would buy $3 billion in common shares at $31.25 a share and take the rest in preferred shares, but that changed as the U.S. bank's stock went into freefall.
Under the new terms, about $7.8 billion of Mitsubishi UFJ's investment is in preferred shares with a conversion price of $25.25 a common share with no maturity date. The remaining $1.2 billion is in preferred stock that is not convertible and also has no maturity date.
All of the preferred shares pay a 10 percent dividend, unchanged from the original deal.
NEW TERMS
The Japanese bank pushed for new terms after Morgan's stake price fell to $9.28 last week, bringing the U.S. bank's value to $10 billion and sparking concern among its customers.
Over the weekend, a hesitant Mitsubishi UFJ and the Japanese government pressed the U.S. Treasury to guarantee that any injection of public money would not dilute the Tokyo-based bank's stake, said the source, who declined to be identified.
The two banks said in a statement that they will pursue a global strategic alliance in corporate and investment banking, retail banking and asset management.
Concrete details of the alliance will be determined by the end of June 2009, the two banks said.
Often described as Japan's most conservative bank, Mitsubishi UFJ is now making an aggressive push into the United States, looking to capitalise on a credit crisis that has crippled its Wall Street rivals.
The bank, which has so far avoided heavy subprime losses, last month paid $3.5 billion to take full control of California's UnionBanCal Corp, as it bets on long-term growth in the world's largest economy.
Mitsubishi UFJ is looking to grow behind its softening home market, where it is saddled with slow growth and a declining population.
Shares of Mitsubishi UFJ finished up by their daily limit of 100 yen at 810 yen, a gain of 14.1 percent and the stock's biggest one day rise since October 2003, when it rose 14.2 percent.
Shares of the bank saw little active trade, however, as they spent most of the day flooded with buy orders. (Reporting by David Dolan; editing by Sophie Hardach)
Read more...
US to pump $250 bln into banks, Bernanke reassures
* U.S. to inject $250 billion into banks
* Bernanke says measures to restore normality to markets
* Japan to bolster regional banks
By Mike Peacock and Elaine Lies
LONDON/TOKYO, Oct 14 (Reuters) - The United States will announce plans on Tuesday to inject $250 billion into its banks, following similar, concerted measures in Europe to revive money markets and stave off global recession.
The U.S. Treasury is due to unveil its plan at 1230 GMT with about half of the total figure likely to go to the top nine U.S. banks to get them lending to each other again, people familiar with the plan said.
Federal Reserve Chairman Ben Bernanke said in an article on the Wall Street Journal's website that the measures, which he did not detail, constituted a broad-based attempt to end the crisis which began with collapse of the U.S. housing market and now threatens industry and jobs worldwide.
"These steps will allow us to restore more normal market functioning and encourage private capital to further support the reinvigoration of financial markets," he wrote.
The Treasury will buy stakes in Bank of America Corp , Wells Fargo , Citigroup, JPMorgan Chase & Co , Goldman Sachs , Morgan Stanley and Bank of New York Mellon Corp , said two sources speaking on condition of anonymity.
Media reports said State Street Corp and Merrill Lynch would also receive a capital injection.
Japan joined the global push, saying it could inject public funds into regional banks to make sure small firms can get cash.
Similar plans in Europe helped restore some confidence among investors on Monday. London, Berlin and Paris offered direct capital injections for banks and to underwrite interbank lending to revive frozen money markets that threaten cash-strapped businesses as well as the banking system itself.
Germany approved a rescue plan worth up to 500 billion euros ($679 billion) for its banks and France put up a total of 360 billion euros.
Britain, which has led the way with a twin blueprint of bank equity stakes and money market support, had already pledged 250 billion pounds to guarantee lending between banks and stumped up 37 billion pounds to buy into its troubled financial giants.
Even the Gulf with its oil revenues is acting. The United Arab Emirates will pump 70 billion dirhams ($19 billion) of emergency funding into its banking sector.
RECESSION THREAT NOT BANISHED
Markets gave a thumbs up to government action around the globe. Asian stocks surged, with Japan's Nikkei up more than 14 percent -- the biggest one-day gain in its 58-year history while European shares rose around 4 percent.
"Investors are peeping out of their bomb shelters," said Sean Callow, currency strategist at Westpac.
Many stock markets shed as much as 20 percent last week as panic gripped and experts said that while financial meltdown may have been averted, a global recession had not.
Even if the world's major economies manage to turn their ships around, troubles lurk elsewhere.
Officials from Iceland, driven close to collapse as frozen credit markets caused its banks to fail, are in Moscow for talks on an emergency loan that could be worth billions of euros.
Pakistan's foreign reserve situation is "in distress", but it can still meet upcoming debt obligations of up to $3 billion, the country's top economic official said.
Ukraine will ask the International Monetary Fund for a funding programme, according to a senior IMF official.
Some relief was evident in money markets although they were far from operating normally.
In London, interbank rates for overnight dollar deposits were indicated in a range between 1.5 and 3 percent, from around 2-4 percent a day earlier. But three-month dollar deposit rates failed to ease, holding in a range of 4.0-5.4 percent.
On Monday, the Fed, European Central Bank, Bank of England and the Swiss National Bank said they would lend commercial banks as much U.S. dollar liquidity as they needed.
The U.S. administration will also reveal on Tuesday its intentions to allow the Federal Deposit Insurance Corp -- which guarantees bank accounts -- to insure senior preferred debt issued by banks and thrifts for three years, one source said.
That move appeared aimed at unlocking credit markets, vital to business as it faces the danger of recession and to private, individual borrowers.
The U.S. plan to buy stakes in banks marks a quick about-face for Washington policymakers, who until recent days had been focusing on an apparatus to soak up bad assets from banks via a $700 billion fund approved by Congress.
The New York Times said Citi, JPMorgan, Bank of America and Wells Fargo would receive investments of $25 billion each. Goldman Sachs and Morgan Stanley will get $10 billion each. (Editing by Ralph Boulton)
Read more...
* Bernanke says measures to restore normality to markets
* Japan to bolster regional banks
By Mike Peacock and Elaine Lies
LONDON/TOKYO, Oct 14 (Reuters) - The United States will announce plans on Tuesday to inject $250 billion into its banks, following similar, concerted measures in Europe to revive money markets and stave off global recession.
The U.S. Treasury is due to unveil its plan at 1230 GMT with about half of the total figure likely to go to the top nine U.S. banks to get them lending to each other again, people familiar with the plan said.
Federal Reserve Chairman Ben Bernanke said in an article on the Wall Street Journal's website that the measures, which he did not detail, constituted a broad-based attempt to end the crisis which began with collapse of the U.S. housing market and now threatens industry and jobs worldwide.
"These steps will allow us to restore more normal market functioning and encourage private capital to further support the reinvigoration of financial markets," he wrote.
The Treasury will buy stakes in Bank of America Corp , Wells Fargo , Citigroup, JPMorgan Chase & Co , Goldman Sachs , Morgan Stanley and Bank of New York Mellon Corp , said two sources speaking on condition of anonymity.
Media reports said State Street Corp and Merrill Lynch would also receive a capital injection.
Japan joined the global push, saying it could inject public funds into regional banks to make sure small firms can get cash.
Similar plans in Europe helped restore some confidence among investors on Monday. London, Berlin and Paris offered direct capital injections for banks and to underwrite interbank lending to revive frozen money markets that threaten cash-strapped businesses as well as the banking system itself.
Germany approved a rescue plan worth up to 500 billion euros ($679 billion) for its banks and France put up a total of 360 billion euros.
Britain, which has led the way with a twin blueprint of bank equity stakes and money market support, had already pledged 250 billion pounds to guarantee lending between banks and stumped up 37 billion pounds to buy into its troubled financial giants.
Even the Gulf with its oil revenues is acting. The United Arab Emirates will pump 70 billion dirhams ($19 billion) of emergency funding into its banking sector.
RECESSION THREAT NOT BANISHED
Markets gave a thumbs up to government action around the globe. Asian stocks surged, with Japan's Nikkei up more than 14 percent -- the biggest one-day gain in its 58-year history while European shares rose around 4 percent.
"Investors are peeping out of their bomb shelters," said Sean Callow, currency strategist at Westpac.
Many stock markets shed as much as 20 percent last week as panic gripped and experts said that while financial meltdown may have been averted, a global recession had not.
Even if the world's major economies manage to turn their ships around, troubles lurk elsewhere.
Officials from Iceland, driven close to collapse as frozen credit markets caused its banks to fail, are in Moscow for talks on an emergency loan that could be worth billions of euros.
Pakistan's foreign reserve situation is "in distress", but it can still meet upcoming debt obligations of up to $3 billion, the country's top economic official said.
Ukraine will ask the International Monetary Fund for a funding programme, according to a senior IMF official.
Some relief was evident in money markets although they were far from operating normally.
In London, interbank rates for overnight dollar deposits were indicated in a range between 1.5 and 3 percent, from around 2-4 percent a day earlier. But three-month dollar deposit rates failed to ease, holding in a range of 4.0-5.4 percent.
On Monday, the Fed, European Central Bank, Bank of England and the Swiss National Bank said they would lend commercial banks as much U.S. dollar liquidity as they needed.
The U.S. administration will also reveal on Tuesday its intentions to allow the Federal Deposit Insurance Corp -- which guarantees bank accounts -- to insure senior preferred debt issued by banks and thrifts for three years, one source said.
That move appeared aimed at unlocking credit markets, vital to business as it faces the danger of recession and to private, individual borrowers.
The U.S. plan to buy stakes in banks marks a quick about-face for Washington policymakers, who until recent days had been focusing on an apparatus to soak up bad assets from banks via a $700 billion fund approved by Congress.
The New York Times said Citi, JPMorgan, Bank of America and Wells Fargo would receive investments of $25 billion each. Goldman Sachs and Morgan Stanley will get $10 billion each. (Editing by Ralph Boulton)
Read more...
Blackstone says U.S. action breaks back of crisis
By Megan Davies
DUBAI, Oct 14 (Reuters) - Blackstone Group chief executive Stephen Schwarzman said on Tuesday the U.S. government's expected actions to inject billions into its banks could break the back of the credit crisis.
"We will be looking today to an absolute sea change in the global financial system in terms of liquidity," Schwarzman said at a private equity conference in Dubai. This could be the time that "breaks the back of the credit crisis" he said.
The United States will announce plans on Tuesday to inject $250 billion into its banks, marking a turning point in the global financial crisis following a concerted European drive to do the same
The U.S. Treasury is due to unveil its plan at 1230 GMT with about half of the total figure likely to go to the top nine U.S. banks alone to get them lending to each other again, people familiar with the plan said.
"It will take several months before the banking system returns to better health," Schwarzman told reporters on the sidelines of the Super Return conference.
Despite the freeze, he said there was still some access to financing.
"Certain of us still can obtain financing in the current environment," he said. (Editing by Paul Bolding)
Read more...
DUBAI, Oct 14 (Reuters) - Blackstone Group chief executive Stephen Schwarzman said on Tuesday the U.S. government's expected actions to inject billions into its banks could break the back of the credit crisis.
"We will be looking today to an absolute sea change in the global financial system in terms of liquidity," Schwarzman said at a private equity conference in Dubai. This could be the time that "breaks the back of the credit crisis" he said.
The United States will announce plans on Tuesday to inject $250 billion into its banks, marking a turning point in the global financial crisis following a concerted European drive to do the same
The U.S. Treasury is due to unveil its plan at 1230 GMT with about half of the total figure likely to go to the top nine U.S. banks alone to get them lending to each other again, people familiar with the plan said.
"It will take several months before the banking system returns to better health," Schwarzman told reporters on the sidelines of the Super Return conference.
Despite the freeze, he said there was still some access to financing.
"Certain of us still can obtain financing in the current environment," he said. (Editing by Paul Bolding)
Read more...
Gold jumps 2 percent on oil
By Lewa Pardomuan
SINGAPORE (Reuters) - Gold gained more than 2 percent on Tuesday on high oil prices and a firmer euro, recovering from its biggest two-day decline since early 1983, but a rally in stock markets could cap gains.
Not to be outdone, platinum surged 6 percent to a two-week high above $1,000 an ounce, with Tokyo futures rising sharply after traders there returned from a long weekend.
Gold was at $844.20 an ounce, up $13.40 from the New York notional close, having hit an intraday high of $850.00 an ounce. It had dropped to $821 on Monday, its weakest since October 3.
"Actually, we are seeing gold demand for both physical gold and platinum. I guess platinum is more impressive. We've been quite busy selling platinum for investment since we reopened today," said a dealer at a trading house in Tokyo.
"There's gold buying from retail investors but I must say it's not that much because many people concentrate on the rebounding stock markets," he said.
Gold, which struck a record at $1,030.80 in March, traded around $800 in September. It hit a two-month high of $931 on Friday on a weak dollar before tumbling to $823.50 as investors sought cash to cover margin calls from losses in equities.
"The dollar is much lower today and I guess it's still on a bit of a spillover weakness from yesterday," said Adriah Koh, analyst at Phillip Futures in Singapore.
"In the near term, gold's support will probably come in around the $820 region and a break below these levels could bring us to the $800s and possibly the $780 supports," he said.
Oil rose above $83 a barrel after a concerted effort by governments to shore up the banking sector gave hope the current financial crisis may ease.
The Nikkei average .N225 rallied more than 14 percent on Tuesday, the biggest one-day gain in its 58-year history, which in theory reduced gold's appeal as an alternative investment. .T. The euro rose around 0.5 percent to $1.3664.
In addition to getting support from firm gold and heavy buying from Japanese speculators after a weekend holiday, hopes for an easing of the credit crisis and reduced fears of recession pushed up platinum to its strongest in two weeks at $1,040.
By 2:06 a.m. EDT platinum was at $1,022.00 ounce, up $43.50 from New York's notional close. The metal was well still below a record high of $2,290 struck in March, hit by heavy selling on fears of falling demand for autocatalysts, which account for more than 60 percent of global demand.
"I think it really pans down to how the economy is going to do. That will in turn affect the auto industry and affect sentiments on platinum," said Koh of Phillip Futures.
New York gold futures rose $6.0 an ounce to $848.5 an ounce on safe-haven buying.
Precious metals prices at 2:06 a.m. EDT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 844.20 13.40 +1.61 1.38
Spot Silver 10.95 0.30 +2.82 -25.86
Spot Platinum 1022.00 43.50 +4.45 -32.76
Spot Palladium 201.00 4.50 +2.29 -45.38
TOCOM Gold 2770.00 -140.00 -4.81 -9.48 42055
TOCOM Platinum 3392.00 162.00 +5.02 -36.47 15301
TOCOM Silver 360.00 -7.20 -1.96 -33.46 1292
TOCOM Palladium 685.00 44.00 +6.86 -49.30 757
Euro/Dollar 1.3683
Dollar/Yen 102.39
TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Clarence Fernandez)
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SINGAPORE (Reuters) - Gold gained more than 2 percent on Tuesday on high oil prices and a firmer euro, recovering from its biggest two-day decline since early 1983, but a rally in stock markets could cap gains.
Not to be outdone, platinum surged 6 percent to a two-week high above $1,000 an ounce, with Tokyo futures rising sharply after traders there returned from a long weekend.
Gold was at $844.20 an ounce, up $13.40 from the New York notional close, having hit an intraday high of $850.00 an ounce. It had dropped to $821 on Monday, its weakest since October 3.
"Actually, we are seeing gold demand for both physical gold and platinum. I guess platinum is more impressive. We've been quite busy selling platinum for investment since we reopened today," said a dealer at a trading house in Tokyo.
"There's gold buying from retail investors but I must say it's not that much because many people concentrate on the rebounding stock markets," he said.
Gold, which struck a record at $1,030.80 in March, traded around $800 in September. It hit a two-month high of $931 on Friday on a weak dollar before tumbling to $823.50 as investors sought cash to cover margin calls from losses in equities.
"The dollar is much lower today and I guess it's still on a bit of a spillover weakness from yesterday," said Adriah Koh, analyst at Phillip Futures in Singapore.
"In the near term, gold's support will probably come in around the $820 region and a break below these levels could bring us to the $800s and possibly the $780 supports," he said.
Oil rose above $83 a barrel after a concerted effort by governments to shore up the banking sector gave hope the current financial crisis may ease.
The Nikkei average .N225 rallied more than 14 percent on Tuesday, the biggest one-day gain in its 58-year history, which in theory reduced gold's appeal as an alternative investment. .T. The euro rose around 0.5 percent to $1.3664.
In addition to getting support from firm gold and heavy buying from Japanese speculators after a weekend holiday, hopes for an easing of the credit crisis and reduced fears of recession pushed up platinum to its strongest in two weeks at $1,040.
By 2:06 a.m. EDT platinum was at $1,022.00 ounce, up $43.50 from New York's notional close. The metal was well still below a record high of $2,290 struck in March, hit by heavy selling on fears of falling demand for autocatalysts, which account for more than 60 percent of global demand.
"I think it really pans down to how the economy is going to do. That will in turn affect the auto industry and affect sentiments on platinum," said Koh of Phillip Futures.
New York gold futures rose $6.0 an ounce to $848.5 an ounce on safe-haven buying.
Precious metals prices at 2:06 a.m. EDT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 844.20 13.40 +1.61 1.38
Spot Silver 10.95 0.30 +2.82 -25.86
Spot Platinum 1022.00 43.50 +4.45 -32.76
Spot Palladium 201.00 4.50 +2.29 -45.38
TOCOM Gold 2770.00 -140.00 -4.81 -9.48 42055
TOCOM Platinum 3392.00 162.00 +5.02 -36.47 15301
TOCOM Silver 360.00 -7.20 -1.96 -33.46 1292
TOCOM Palladium 685.00 44.00 +6.86 -49.30 757
Euro/Dollar 1.3683
Dollar/Yen 102.39
TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Clarence Fernandez)
Read more...
Nikkei surges over 14 pct in record 1-day gain
*Nikkei surges over 14 pct on global steps for banks
*Nikkei posts biggest 1-day gain in its 58-year history
*Topix up nearly 14 percent
*Exporters driven up by stronger dollar, banks surge
*Mitsubishi UFJ soars after Morgan Stanley deal (Adds comment, details)
By Aiko Hayashi
TOKYO, Oct 14 (Reuters) - The Nikkei average soared more than 14 percent on Tuesday, the biggest one-day gain in its 58-year history, after governments around the world pledged to support struggling banks and restore confidence in the financial system.
It recouped just over half the losses incurred last week, when the Nikkei lost 24 percent.
Mitsubishi UFJ Financial Group shares surged 14 percent, up by their daily limit after Japan's top bank delivered on a planned $9 billion investment in U.S. firm Morgan Stanley
Market participants said the jump in Tokyo shares was mainly due to short covering and not due to new inflows of money.
"There's relief that banks probably won't go bankrupt thanks to the capital injection plans," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
"But after rebounding to some extent, we will inevitably enter a phase of thinking about how the steps will actually impact the global economy."
The benchmark Nikkei .N225 surged 14.2 percent or 1,171.14 points to 9,447.57. The climb surpassed a 13.2 percent jump logged on Oct. 2 1990.
The broader Topix gained 13.7 percent to 956.30.
Earlier in the day, sharp gains triggered a circuit breaker, halting trade in Nikkei futures on the Osaka bourse and Topix futures trading on the Tokyo bourse.
Traders also said that the market surged in part on expectations of a further rise in U.S. stocks. The U.S. Treasury is set to announce a plan to inject $125 billion of capital into the top nine U.S. banks.
The U.S. move follows pledges by the governments of Britain, Germany, France and other European countries of more than 1 trillion euros ($1.36 trillion) to bolster their own banks .
Japan also unveiled steps to stabilise its financial markets, including a possible injection of public funds into regional banks that the government said would be aimed at enhancing smooth financing for smaller firms facing a possible credit crunch. [ID:nT212163] But market participants remained wary, noting that rises above 9,600 level may take some time. "We still don't know exactly how concrete the U.S. plan will be, and there's concern that the scale may be small, so there's some doubt about whether it will really be enough," said Takahiko Murai, general manager of equities at Nozomi Securities.
Wall Street roared back from its worst week ever with one of its best single days ever on Monday, boosted by bargain-hunting after eight days of losses. Japanese markets were closed on Monday for a holiday.
MITSUBISHI UFJ, BANKS RALLY
Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) shares ended at 810 yen, a gain of 14.1 percent. Completion of the deal sent shares in Morgan Stanley soaring and helped power a rally in financial stocks on Wall Street that spilt over into Tokyo.
Sumitomo Mitsui Financial Group , the country's third-largest lender, jumped 16.9 percent to 645,000 yen and Japan's banking index rose 15.3 percent.
Nomura Holdings , Japan's biggest brokerage, shot up 16.3 percent to 1,425 yen.
Shares of carmakers outperformed the broader market as a softer yen and improved stock market sentiment sparked active buying of recently battered blue chips.
The dollar inched up 0.2 percent from late New York to 102.22 yen, having come off a six-month low of 97.91 yen hit on Friday.
Toyota Motor rose 15.5 percent to 3,720 yen, Honda Motor gained 17.8 percent to 2,485 yen and Nissan Motor jumped 17.2 percent to 544 yen.
Mazda Motor jumped 9 percent to 314 yen after Reuters and other media reported loss-laden Ford Motor was considering cutting its 33 percent stake in the Japanese carmaker by 20 percentage points to generate cash.
Canon climbed 16.1 percent to 3,600 yen.
Trade fell off slightly on the Tokyo exchange's first section, with 2.38 billion shares changing hands, below last week's daily average of 2.92 billion.
Advancing stocks outpaced declining ones by 67 to 1. (Additional reporting by Elaine Lies; Editing by Edwina Gibbs)
Read more...
*Nikkei posts biggest 1-day gain in its 58-year history
*Topix up nearly 14 percent
*Exporters driven up by stronger dollar, banks surge
*Mitsubishi UFJ soars after Morgan Stanley deal (Adds comment, details)
By Aiko Hayashi
TOKYO, Oct 14 (Reuters) - The Nikkei average soared more than 14 percent on Tuesday, the biggest one-day gain in its 58-year history, after governments around the world pledged to support struggling banks and restore confidence in the financial system.
It recouped just over half the losses incurred last week, when the Nikkei lost 24 percent.
Mitsubishi UFJ Financial Group shares surged 14 percent, up by their daily limit after Japan's top bank delivered on a planned $9 billion investment in U.S. firm Morgan Stanley
Market participants said the jump in Tokyo shares was mainly due to short covering and not due to new inflows of money.
"There's relief that banks probably won't go bankrupt thanks to the capital injection plans," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
"But after rebounding to some extent, we will inevitably enter a phase of thinking about how the steps will actually impact the global economy."
The benchmark Nikkei .N225 surged 14.2 percent or 1,171.14 points to 9,447.57. The climb surpassed a 13.2 percent jump logged on Oct. 2 1990.
The broader Topix gained 13.7 percent to 956.30.
Earlier in the day, sharp gains triggered a circuit breaker, halting trade in Nikkei futures on the Osaka bourse and Topix futures trading on the Tokyo bourse.
Traders also said that the market surged in part on expectations of a further rise in U.S. stocks. The U.S. Treasury is set to announce a plan to inject $125 billion of capital into the top nine U.S. banks.
The U.S. move follows pledges by the governments of Britain, Germany, France and other European countries of more than 1 trillion euros ($1.36 trillion) to bolster their own banks .
Japan also unveiled steps to stabilise its financial markets, including a possible injection of public funds into regional banks that the government said would be aimed at enhancing smooth financing for smaller firms facing a possible credit crunch. [ID:nT212163] But market participants remained wary, noting that rises above 9,600 level may take some time. "We still don't know exactly how concrete the U.S. plan will be, and there's concern that the scale may be small, so there's some doubt about whether it will really be enough," said Takahiko Murai, general manager of equities at Nozomi Securities.
Wall Street roared back from its worst week ever with one of its best single days ever on Monday, boosted by bargain-hunting after eight days of losses. Japanese markets were closed on Monday for a holiday.
MITSUBISHI UFJ, BANKS RALLY
Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) shares ended at 810 yen, a gain of 14.1 percent. Completion of the deal sent shares in Morgan Stanley soaring and helped power a rally in financial stocks on Wall Street that spilt over into Tokyo.
Sumitomo Mitsui Financial Group , the country's third-largest lender, jumped 16.9 percent to 645,000 yen and Japan's banking index rose 15.3 percent.
Nomura Holdings , Japan's biggest brokerage, shot up 16.3 percent to 1,425 yen.
Shares of carmakers outperformed the broader market as a softer yen and improved stock market sentiment sparked active buying of recently battered blue chips.
The dollar inched up 0.2 percent from late New York to 102.22 yen
Toyota Motor rose 15.5 percent to 3,720 yen, Honda Motor gained 17.8 percent to 2,485 yen and Nissan Motor jumped 17.2 percent to 544 yen.
Mazda Motor jumped 9 percent to 314 yen after Reuters and other media reported loss-laden Ford Motor was considering cutting its 33 percent stake in the Japanese carmaker by 20 percentage points to generate cash.
Canon climbed 16.1 percent to 3,600 yen.
Trade fell off slightly on the Tokyo exchange's first section, with 2.38 billion shares changing hands, below last week's daily average of 2.92 billion.
Advancing stocks outpaced declining ones by 67 to 1. (Additional reporting by Elaine Lies; Editing by Edwina Gibbs)
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HK shares end up 3.2 pct as banks, resources rally
HONG KONG, Oct 14 (Reuters) - Hong Kong shares rose 3.2 percent on Tuesday, building on the previous session's rally, as governments worldwide pledged to pour cash into the financial system, sending shares in Standard Chartered soaring by nearly a fifth.
Resource counters joined the rally after crude oil prices shot up another $2 per barrel on Tuesday. Offshore oil specialist CNOOC and China Shenhua Energy , the world's most valuable coal miner, each gained more than 10 percent.
The benchmark Hang Seng Index .HSI unofficially closed 520.40 points higher at 16,832.56 after soaring to 17,141.05 earlier. The index trimmed gains, tracking a sudden about-turn on the Shanghai bourse which closed 2.7 percent lower on worries about the slowing Chinese economy.
The China Enterprises Index .HSCE of top locally listed mainland Chinese companies finished up 4.6 percent at 8,453.26. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)
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Resource counters joined the rally after crude oil prices shot up another $2 per barrel on Tuesday. Offshore oil specialist CNOOC and China Shenhua Energy , the world's most valuable coal miner, each gained more than 10 percent.
The benchmark Hang Seng Index .HSI unofficially closed 520.40 points higher at 16,832.56 after soaring to 17,141.05 earlier. The index trimmed gains, tracking a sudden about-turn on the Shanghai bourse which closed 2.7 percent lower on worries about the slowing Chinese economy.
The China Enterprises Index .HSCE of top locally listed mainland Chinese companies finished up 4.6 percent at 8,453.26. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)
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European shares extend gains to trade 5 pct higher
FRANKFURT, Oct 14 (Reuters) - European shares extended gains in morning trade on Tuesday as investors cheered for a second day running the government and central bank measures agreed over the weekend to put an end to the financial crisis.
By 0818 GMT, the pan-European FTSEurofirst 300 index was up 5.4 percent at 988.23 points, adding to its strongest one-day percentage rise on record -- 10.1 percent -- on Monday.
U.S. stock markets posted double-digit percentage gains overnight. The United States will announce plans on Tuesday to inject $250 billion into its banks.
The U.S. Treasury is due to unveil its plan at 1230 GMT with about half of the total likely to go to the top nine U.S. banks to get them lending to each other again, people familiar with the plan said.
Oil & gas stocks, thanks to a 3.5 percent rise in the crude oil price to over $84 a barrel, were the top weighted gainers in Europe followed by banks . (Reporting by Peter Starck)
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By 0818 GMT, the pan-European FTSEurofirst 300 index was up 5.4 percent at 988.23 points, adding to its strongest one-day percentage rise on record -- 10.1 percent -- on Monday.
U.S. stock markets posted double-digit percentage gains overnight. The United States will announce plans on Tuesday to inject $250 billion into its banks.
The U.S. Treasury is due to unveil its plan at 1230 GMT with about half of the total likely to go to the top nine U.S. banks to get them lending to each other again, people familiar with the plan said.
Oil & gas stocks, thanks to a 3.5 percent rise in the crude oil price to over $84 a barrel, were the top weighted gainers in Europe followed by banks . (Reporting by Peter Starck)
Read more...
Rudd to Spend A$10.4 Bln to Guard Australian Economy
By Gemma Daley
More Photos/Details
Oct. 14 (Bloomberg) -- Australia will give pensioners, home buyers and families A$10.4 billion ($7.3 billion) in a spending package to boost the economy as the global financial crisis freezes credit and slows growth.
Prime Minister Kevin Rudd will use half the government's estimated budget surplus to encourage consumer spending and bolster the economy, which grew at the slowest pace in more than three years in the second quarter as the housing market slumped, retail sales dropped and stock markets tumbled.
``This strategy will strengthen the national economy and support Australian households, given the risk of a deep and prolonged global economic slowdown,'' Rudd told reporters in Canberra today.
The spending package follows moves this week by Rudd and his Treasurer Wayne Swan to guarantee all deposits and ``term wholesale funding'' among the nation's banks. They also doubled the government's investment in residential mortgage securities to A$8 billion in a bid to unlock credit. Australia's central bank pre-empted global interest-rate cuts last week.
``This package could boost economic growth by 0.9 percentage point in the fourth quarter of this year and the first quarter of 2009,'' said Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne.
Stocks Surge
The Reserve Bank of Australia in August said the economy would expand 2 percent in 2008, slowing from 4.3 percent in the previous calendar year.
Australian stocks surged for a second day, led by banks, energy and resources companies, on speculation U.S. measures to rescue the financial system will help revive the global economy. The benchmark S&P/ASX 200 Index has gained 10 percent this week, rebounding from its worst week since 1987.
The government will spend A$4.8 billion on cash payments to the elderly, A$3.9 billion on one-off handouts to families and A$1.5 billion on increased grants to first-home buyers, Rudd said. It aims to boost consumption and investment as financial turmoil slows job growth and the A$1 trillion economy.
Rudd will fund the spending from the 2008-09 budget surplus, forecast in May at A$21.7 billion. Today's measures will leave a ``comfortable'' surplus, he said.
``The truth is that we are going through the worst financial crisis in our lifetime,'' Rudd said in a televised national address. ``There will be tough times ahead but the government remains determined to take whatever action is necessary in the future to steer the economy through this global financial crisis.''
Home-Buyer Grants
In December, single pensioners will get a A$1,400 payment and couples a A$2,100 bonus under today's package. That will flow to 4 million pensioners, Rudd said.
A first-home-buyer's grant will double to A$14,000 for existing houses and triple to A$21,000 for newly built dwellings, a benefit to go to some 150,000 people.
About two million low-income families will receive a A$1,000 payment for each child under their care. The government also will fund an extra 56,000 training places in the workforce to boost employment.
European nations have committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders amid the global credit crisis. Britain took majority stakes in Bank of Scotland Group Plc and HBOS Plc as a global lending freeze threatens to push the world into recession.
Toxic Debt
The U.S. will spend $700 billion buying toxic bank debt and possibly recapitalize banks. Federal Reserve Chairman Ben S. Bernanke led co-ordinated interest-rate cuts around the world last week. The Reserve Bank of Australia earlier cut its benchmark rate by 1 percentage-point to 6 percent, the biggest reduction since a recession in 1992.
The RBA will cut its overnight cash rate target by 50 basis points at its next meeting on Nov. 4, according to a Credit Suisse index based on overnight swaps trading.
Australian home-loan approvals dropped in August to a seven-year low, cited as one of the reasons Reserve Bank Governor Glenn Stevens reduced rates to the lowest in almost two years. The rate cut reduced monthly payments on an average A$250,000 mortgage by almost A$140.
The construction industry contracted at a record pace in September as work was cut on commercial and apartment buildings. Building work has been shrinking for seven months.
Household Spending
Spending by households contracted by 0.1 percent in the second quarter, the first decrease since 1993, slowing gross domestic product to 0.3 percent from the previous three months.
``This is a significant fiscal stimulus,'' opposition Liberal-National coalition leader Malcolm Turnbull told reporters in Canberra after today's package was announced. ``It will provide stimulus to the economy, that's for certain.''
Stocks surged across Asia today on more expected action by the U.S. to help credit markets.
The U.S. government will announce a plan to rescue frozen credit markets that includes spending about half of a total of $250 billion for stakes in nine major banks, people briefed on the matter said.
The S&P/ASX 200 Index of Australian stocks rose 3.7 percent as of 2:38 p.m. in Sydney. Australia & New Zealand Banking Group Ltd. led financial stocks higher, surging 6.1 percent. BHP Billiton Ltd., the world's largest mining company, gained 3.8 percent.
``Things have changed dramatically in the past couple of weeks,'' Treasurer Wayne Swan, who today returned to Canberra from the U.S., told reporters in Canberra.
Slower global growth has slashed prices for commodity exports that have fueled Australia's 17-year economic boom.
The International Monetary Fund's World Economic Outlook last week forecast global economic growth will slow to 3 percent in 2009, a world recession under the fund's informal definition.
To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net
Read more...
More Photos/Details
Oct. 14 (Bloomberg) -- Australia will give pensioners, home buyers and families A$10.4 billion ($7.3 billion) in a spending package to boost the economy as the global financial crisis freezes credit and slows growth.
Prime Minister Kevin Rudd will use half the government's estimated budget surplus to encourage consumer spending and bolster the economy, which grew at the slowest pace in more than three years in the second quarter as the housing market slumped, retail sales dropped and stock markets tumbled.
``This strategy will strengthen the national economy and support Australian households, given the risk of a deep and prolonged global economic slowdown,'' Rudd told reporters in Canberra today.
The spending package follows moves this week by Rudd and his Treasurer Wayne Swan to guarantee all deposits and ``term wholesale funding'' among the nation's banks. They also doubled the government's investment in residential mortgage securities to A$8 billion in a bid to unlock credit. Australia's central bank pre-empted global interest-rate cuts last week.
``This package could boost economic growth by 0.9 percentage point in the fourth quarter of this year and the first quarter of 2009,'' said Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne.
Stocks Surge
The Reserve Bank of Australia in August said the economy would expand 2 percent in 2008, slowing from 4.3 percent in the previous calendar year.
Australian stocks surged for a second day, led by banks, energy and resources companies, on speculation U.S. measures to rescue the financial system will help revive the global economy. The benchmark S&P/ASX 200 Index has gained 10 percent this week, rebounding from its worst week since 1987.
The government will spend A$4.8 billion on cash payments to the elderly, A$3.9 billion on one-off handouts to families and A$1.5 billion on increased grants to first-home buyers, Rudd said. It aims to boost consumption and investment as financial turmoil slows job growth and the A$1 trillion economy.
Rudd will fund the spending from the 2008-09 budget surplus, forecast in May at A$21.7 billion. Today's measures will leave a ``comfortable'' surplus, he said.
``The truth is that we are going through the worst financial crisis in our lifetime,'' Rudd said in a televised national address. ``There will be tough times ahead but the government remains determined to take whatever action is necessary in the future to steer the economy through this global financial crisis.''
Home-Buyer Grants
In December, single pensioners will get a A$1,400 payment and couples a A$2,100 bonus under today's package. That will flow to 4 million pensioners, Rudd said.
A first-home-buyer's grant will double to A$14,000 for existing houses and triple to A$21,000 for newly built dwellings, a benefit to go to some 150,000 people.
About two million low-income families will receive a A$1,000 payment for each child under their care. The government also will fund an extra 56,000 training places in the workforce to boost employment.
European nations have committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders amid the global credit crisis. Britain took majority stakes in Bank of Scotland Group Plc and HBOS Plc as a global lending freeze threatens to push the world into recession.
Toxic Debt
The U.S. will spend $700 billion buying toxic bank debt and possibly recapitalize banks. Federal Reserve Chairman Ben S. Bernanke led co-ordinated interest-rate cuts around the world last week. The Reserve Bank of Australia earlier cut its benchmark rate by 1 percentage-point to 6 percent, the biggest reduction since a recession in 1992.
The RBA will cut its overnight cash rate target by 50 basis points at its next meeting on Nov. 4, according to a Credit Suisse index based on overnight swaps trading.
Australian home-loan approvals dropped in August to a seven-year low, cited as one of the reasons Reserve Bank Governor Glenn Stevens reduced rates to the lowest in almost two years. The rate cut reduced monthly payments on an average A$250,000 mortgage by almost A$140.
The construction industry contracted at a record pace in September as work was cut on commercial and apartment buildings. Building work has been shrinking for seven months.
Household Spending
Spending by households contracted by 0.1 percent in the second quarter, the first decrease since 1993, slowing gross domestic product to 0.3 percent from the previous three months.
``This is a significant fiscal stimulus,'' opposition Liberal-National coalition leader Malcolm Turnbull told reporters in Canberra after today's package was announced. ``It will provide stimulus to the economy, that's for certain.''
Stocks surged across Asia today on more expected action by the U.S. to help credit markets.
The U.S. government will announce a plan to rescue frozen credit markets that includes spending about half of a total of $250 billion for stakes in nine major banks, people briefed on the matter said.
The S&P/ASX 200 Index of Australian stocks rose 3.7 percent as of 2:38 p.m. in Sydney. Australia & New Zealand Banking Group Ltd. led financial stocks higher, surging 6.1 percent. BHP Billiton Ltd., the world's largest mining company, gained 3.8 percent.
``Things have changed dramatically in the past couple of weeks,'' Treasurer Wayne Swan, who today returned to Canberra from the U.S., told reporters in Canberra.
Slower global growth has slashed prices for commodity exports that have fueled Australia's 17-year economic boom.
The International Monetary Fund's World Economic Outlook last week forecast global economic growth will slow to 3 percent in 2009, a world recession under the fund's informal definition.
To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net
Read more...
China Currency Reserves Rise to Record $1.9 Trillion
By Kevin Hamlin and Li Yanping
Oct. 14 (Bloomberg) -- China's foreign-exchange reserves rose to a world record $1.906 trillion, helping to strengthen the nation's finances as the credit crisis threatens to trigger a global economic slump.
Currency holdings rose 32.9 percent at the end of September from a year earlier, the People's Bank of China said on its Web site today. The increase of about $97 billion over the quarter was down from a $126.6 billion gain in the previous three months.
China has cut interest rates twice in the past month as the worst financial crisis since the Great Depression dims the outlook for exports. The world's fourth-biggest economy can still achieve growth of 10 percent this year and 9 percent in 2009, central bank Deputy Governor Yi Gang said Oct. 11 in Washington.
``Close to $2 trillion in foreign reserves provides China with a strong foundation and more room to adjust policies to enable it to maintain relatively fast growth,'' said Isaac Meng, senior economist at BNP Paribas SA in Beijing.
A record $29.3 billion trade surplus last month contributed to the reserves. Still, the increase in the currency holdings for September alone was only $21.4 billion.
``There's no way that speculative capital is flowing into China now,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. ``The third quarter brought a huge increase in risk aversion and the repatriation of capital from emerging markets to the U.S. in particular.''
Fiscal Strength
Standard & Poor's cited the reserves and the nation's ``strong fiscal position'' when it upgraded China's long-term debt rating to A+, the fifth-highest grade, on July 31.
Government concern that currency inflows will help to ``overheat'' the economy and drive up prices has diminished after four quarters of slowing growth and four months of easing inflation.
China is grappling with how best to manage the reserves, forecast by the International Monetary Fund to reach $2.2 trillion by year's end and $2.7 trillion by the end of 2009. Diversifying away from U.S. Treasury bills has brought losses.
China Investment Corp., the nation's sovereign wealth fund, put money into Morgan Stanley and Blackstone Group LP before their stocks plunged. It also may have as much as $5.4 billion frozen in a U.S. money-market account that suspended withdrawals last month.
`Hot Money'
Smaller increases in the reserves -- down from a record $153.9 billion gain in the first quarter -- may signal waning inflows of so-called ``hot money,'' speculative capital attracted by rising interest rates and a strengthening currency.
China has stalled the yuan's gains against the dollar since mid-July. That step, along with rate cuts and crackdowns by regulators on illegal channels for pumping money into the country, may have helped to stem inflows.
``Unexplained inflows are disappearing,'' said Michael Pettis, a finance professor at Peking University, who estimated that more than $200 million of speculative capital flooded in during the first half.
``Hot money inflows have petered out on slower yuan rises and a perceived economic slowdown,'' said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong. ``The next issue is: how aggressive will the authorities be in easing rates? There's scope for them to be a lot more active.''
The yuan remains Asia's best performer against the dollar this year, rising 7 percent. The nation's key one-year lending and deposit rates are 6.93 percent and 3.87 percent. Economic growth was 10.1 percent in the second quarter.
Money supply growth slowed last month, the central bank said today. M2, the broadest measure, increased 15.3 percent from a year earlier, compared with a 16 percent gain in August.
The median estimate of 14 economists in a Bloomberg News survey was for a 16 percent increase.
To contact the reporter on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net.
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Oct. 14 (Bloomberg) -- China's foreign-exchange reserves rose to a world record $1.906 trillion, helping to strengthen the nation's finances as the credit crisis threatens to trigger a global economic slump.
Currency holdings rose 32.9 percent at the end of September from a year earlier, the People's Bank of China said on its Web site today. The increase of about $97 billion over the quarter was down from a $126.6 billion gain in the previous three months.
China has cut interest rates twice in the past month as the worst financial crisis since the Great Depression dims the outlook for exports. The world's fourth-biggest economy can still achieve growth of 10 percent this year and 9 percent in 2009, central bank Deputy Governor Yi Gang said Oct. 11 in Washington.
``Close to $2 trillion in foreign reserves provides China with a strong foundation and more room to adjust policies to enable it to maintain relatively fast growth,'' said Isaac Meng, senior economist at BNP Paribas SA in Beijing.
A record $29.3 billion trade surplus last month contributed to the reserves. Still, the increase in the currency holdings for September alone was only $21.4 billion.
``There's no way that speculative capital is flowing into China now,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. ``The third quarter brought a huge increase in risk aversion and the repatriation of capital from emerging markets to the U.S. in particular.''
Fiscal Strength
Standard & Poor's cited the reserves and the nation's ``strong fiscal position'' when it upgraded China's long-term debt rating to A+, the fifth-highest grade, on July 31.
Government concern that currency inflows will help to ``overheat'' the economy and drive up prices has diminished after four quarters of slowing growth and four months of easing inflation.
China is grappling with how best to manage the reserves, forecast by the International Monetary Fund to reach $2.2 trillion by year's end and $2.7 trillion by the end of 2009. Diversifying away from U.S. Treasury bills has brought losses.
China Investment Corp., the nation's sovereign wealth fund, put money into Morgan Stanley and Blackstone Group LP before their stocks plunged. It also may have as much as $5.4 billion frozen in a U.S. money-market account that suspended withdrawals last month.
`Hot Money'
Smaller increases in the reserves -- down from a record $153.9 billion gain in the first quarter -- may signal waning inflows of so-called ``hot money,'' speculative capital attracted by rising interest rates and a strengthening currency.
China has stalled the yuan's gains against the dollar since mid-July. That step, along with rate cuts and crackdowns by regulators on illegal channels for pumping money into the country, may have helped to stem inflows.
``Unexplained inflows are disappearing,'' said Michael Pettis, a finance professor at Peking University, who estimated that more than $200 million of speculative capital flooded in during the first half.
``Hot money inflows have petered out on slower yuan rises and a perceived economic slowdown,'' said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong. ``The next issue is: how aggressive will the authorities be in easing rates? There's scope for them to be a lot more active.''
The yuan remains Asia's best performer against the dollar this year, rising 7 percent. The nation's key one-year lending and deposit rates are 6.93 percent and 3.87 percent. Economic growth was 10.1 percent in the second quarter.
Money supply growth slowed last month, the central bank said today. M2, the broadest measure, increased 15.3 percent from a year earlier, compared with a 16 percent gain in August.
The median estimate of 14 economists in a Bloomberg News survey was for a 16 percent increase.
To contact the reporter on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net.
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U.K. Home Sales Fall to Three-Decade Low, RICS Says
By Svenja O'Donnell
Oct. 14 (Bloomberg) -- U.K. home sales fell in September to the lowest level in at least three decades, led by London, as the financial crisis prompted price drops across the nation, the Royal Institution of Chartered Surveyors said.
Estate agents and surveyors sold an average of 11.5 homes in the quarter through last month, the least since the series began in 1978, RICS said in an e-mailed report today. In London, the figure was 8.3. The number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 84, compared with 82 in August.
The global crisis sapped confidence among investors and consumers, pushed mortgage lending to the lowest since at least 1999 and sparked the worst weekly drop for the U.K. FTSE 100 benchmark stock index since 1987. Bank of England policy maker Andrew Sentance said yesterday that the economy may already be in a recession.
``London continues to occupy bottom place in the activity league'' for home sales, the report said. ``Further price falls in the near term are likely.''
Prices declined further in London, Wales, northern England, northwestern England and the East Midlands, and the price balance fell to the lowest on record in Scotland, RICS said.
Prime Minister Gordon Brown said yesterday that the government will take stakes in Royal Bank of Scotland Group Plc and other banks in exchange for 37 billion pounds ($64 billion) in cash. Financial firms have reported $635 billion in losses and writedowns from U.S. mortgage-related investments since the beginning of last year.
Stock Slump
Banks also will have to resume lending to customers ``at 2007 levels'' for at least three years, according to the government agreement. Banks approved 32,000 new mortgages in August, a third of the 104,000 monthly average during 2007.
Subprime losses froze credit markets and prompted fears of a recession which helped push the FTSE 100 down 21 percent last week. The Bank of England cut the benchmark interest rate by half a point to 4.5 percent on Oct. 8, a day before its scheduled monetary policy decision, the biggest reduction in seven years. It joined other banks including the European Central bank and the U.S. Federal Reserve.
``As expected, the financial crises have had a dire effect on the property market this month,'' said Kim Turner, a real- estate agent at Bective Leslie Marsh in London's exclusive Kensington district. ``Buyers are incredibly wary of the market and prices.''
Spending Cut
Consumers have pared spending as weakening house prices and the slowing economy squeezes incomes. Sales in U.K. shops open at least a year fell an annual 1.5 percent in September, the British Retail Consortium, which represents 80 percent of stores, said in a separate report today. Clothing, footwear, furniture and household goods led the drop.
Economic growth stalled in the second quarter, ending the longest stretch of uninterrupted expansion in a century. The International Monetary Fund predicts the U.K. economy will contract 0.1 percent next year after forecasting growth of 1.6 percent six months ago.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Oct. 14 (Bloomberg) -- U.K. home sales fell in September to the lowest level in at least three decades, led by London, as the financial crisis prompted price drops across the nation, the Royal Institution of Chartered Surveyors said.
Estate agents and surveyors sold an average of 11.5 homes in the quarter through last month, the least since the series began in 1978, RICS said in an e-mailed report today. In London, the figure was 8.3. The number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 84, compared with 82 in August.
The global crisis sapped confidence among investors and consumers, pushed mortgage lending to the lowest since at least 1999 and sparked the worst weekly drop for the U.K. FTSE 100 benchmark stock index since 1987. Bank of England policy maker Andrew Sentance said yesterday that the economy may already be in a recession.
``London continues to occupy bottom place in the activity league'' for home sales, the report said. ``Further price falls in the near term are likely.''
Prices declined further in London, Wales, northern England, northwestern England and the East Midlands, and the price balance fell to the lowest on record in Scotland, RICS said.
Prime Minister Gordon Brown said yesterday that the government will take stakes in Royal Bank of Scotland Group Plc and other banks in exchange for 37 billion pounds ($64 billion) in cash. Financial firms have reported $635 billion in losses and writedowns from U.S. mortgage-related investments since the beginning of last year.
Stock Slump
Banks also will have to resume lending to customers ``at 2007 levels'' for at least three years, according to the government agreement. Banks approved 32,000 new mortgages in August, a third of the 104,000 monthly average during 2007.
Subprime losses froze credit markets and prompted fears of a recession which helped push the FTSE 100 down 21 percent last week. The Bank of England cut the benchmark interest rate by half a point to 4.5 percent on Oct. 8, a day before its scheduled monetary policy decision, the biggest reduction in seven years. It joined other banks including the European Central bank and the U.S. Federal Reserve.
``As expected, the financial crises have had a dire effect on the property market this month,'' said Kim Turner, a real- estate agent at Bective Leslie Marsh in London's exclusive Kensington district. ``Buyers are incredibly wary of the market and prices.''
Spending Cut
Consumers have pared spending as weakening house prices and the slowing economy squeezes incomes. Sales in U.K. shops open at least a year fell an annual 1.5 percent in September, the British Retail Consortium, which represents 80 percent of stores, said in a separate report today. Clothing, footwear, furniture and household goods led the drop.
Economic growth stalled in the second quarter, ending the longest stretch of uninterrupted expansion in a century. The International Monetary Fund predicts the U.K. economy will contract 0.1 percent next year after forecasting growth of 1.6 percent six months ago.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
Read more...
German Investor Sentiment Probably Slumped in October
By Christian Vits
Oct. 14 (Bloomberg) -- German investor confidence probably slumped in October as the deepening financial crisis threatened to tip Europe into a recession, a survey of economists shows.
The ZEW Center for European Economic Research will say its index of investor and analyst expectations dropped to minus 51.1 from minus 41.1 in September, according to the median of 35 forecasts in a Bloomberg News survey. ZEW releases the report, which aims to predict economic developments six months ahead, at 11 a.m. in Mannheim.
Germany's benchmark DAX share index dropped 22 percent last week, the most on record, as concern grew that the credit crunch will drag the global economy into recession. Policy makers from the Group of Seven nations pledged at the weekend to take ``all necessary steps'' to stem a market panic and European governments yesterday announced plans to avert a banking collapse across the region.
The ZEW index ``will look lousy,'' said Klaus Baader, chief European economist at Merrill Lynch & Co. in London. ``Fear is increasing that the extreme turbulence will hurt the real economy. I'm particularly concerned about cooling foreign demand.''
In France, manufacturing confidence slumped in September to the lowest in 15 years, the Paris-based Bank of France said today. Manufacturing activity will ``continue to decline in the short term,'' the central bank said.
Slower Growth
Stocks rallied around the world yesterday, with the DAX gaining the most on record, after governments in Europe, the U.S. and Asia agreed to support banks.
Germany will provide as much as 500 billion euros ($681 billion) in loan guarantees and capital to bolster its banking system, the country's biggest government intervention since the Berlin Wall came down in 1989.
Still, the German government will have to lower its forecast for economic growth next year to ``below 0.5 percent'' from its current target of 1.2 percent, said Volker Kauder, parliamentary chief of Chancellor Angela Merkel's Christian Democrats.
Gross domestic product growth will probably slow to 0.2 percent in 2009 from 1.8 percent this year, Frankfurter Allgemeine Zeitung reported, citing a joint forecast by Germany's leading economic research institutes to be presented in Berlin today.
Oil, Euro
The economy contracted in the second quarter and may not have recovered in the third as exports faltered and consumer spending waned. Business confidence dropped to the lowest level in more than three years in September.
Deutz AG, a German maker of diesel engines for trucks and ships, yesterday cut its full-year sales forecast for a second time this year, saying the financial crisis has hurt demand in the U.S. and Europe and that growth in China is slowing.
Europe's economy may be cushioned by falling oil prices, the euro's retreat and lower interest rates.
Oil prices have almost halved since reaching a record $147.27 a barrel in July, boosting consumers' purchasing power, while the euro has dropped more than 14 percent over the same period, making European exports more competitive.
The European Central Bank and the U.S. Federal Reserve last week led a global round of rate cuts, lowering their benchmarks by half a point to 3.75 percent and 1.5 percent respectively. Investors expect the ECB's key rate to be at 3.25 percent by December, according to Eonia forward contracts.
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
Read more...
Oct. 14 (Bloomberg) -- German investor confidence probably slumped in October as the deepening financial crisis threatened to tip Europe into a recession, a survey of economists shows.
The ZEW Center for European Economic Research will say its index of investor and analyst expectations dropped to minus 51.1 from minus 41.1 in September, according to the median of 35 forecasts in a Bloomberg News survey. ZEW releases the report, which aims to predict economic developments six months ahead, at 11 a.m. in Mannheim.
Germany's benchmark DAX share index dropped 22 percent last week, the most on record, as concern grew that the credit crunch will drag the global economy into recession. Policy makers from the Group of Seven nations pledged at the weekend to take ``all necessary steps'' to stem a market panic and European governments yesterday announced plans to avert a banking collapse across the region.
The ZEW index ``will look lousy,'' said Klaus Baader, chief European economist at Merrill Lynch & Co. in London. ``Fear is increasing that the extreme turbulence will hurt the real economy. I'm particularly concerned about cooling foreign demand.''
In France, manufacturing confidence slumped in September to the lowest in 15 years, the Paris-based Bank of France said today. Manufacturing activity will ``continue to decline in the short term,'' the central bank said.
Slower Growth
Stocks rallied around the world yesterday, with the DAX gaining the most on record, after governments in Europe, the U.S. and Asia agreed to support banks.
Germany will provide as much as 500 billion euros ($681 billion) in loan guarantees and capital to bolster its banking system, the country's biggest government intervention since the Berlin Wall came down in 1989.
Still, the German government will have to lower its forecast for economic growth next year to ``below 0.5 percent'' from its current target of 1.2 percent, said Volker Kauder, parliamentary chief of Chancellor Angela Merkel's Christian Democrats.
Gross domestic product growth will probably slow to 0.2 percent in 2009 from 1.8 percent this year, Frankfurter Allgemeine Zeitung reported, citing a joint forecast by Germany's leading economic research institutes to be presented in Berlin today.
Oil, Euro
The economy contracted in the second quarter and may not have recovered in the third as exports faltered and consumer spending waned. Business confidence dropped to the lowest level in more than three years in September.
Deutz AG, a German maker of diesel engines for trucks and ships, yesterday cut its full-year sales forecast for a second time this year, saying the financial crisis has hurt demand in the U.S. and Europe and that growth in China is slowing.
Europe's economy may be cushioned by falling oil prices, the euro's retreat and lower interest rates.
Oil prices have almost halved since reaching a record $147.27 a barrel in July, boosting consumers' purchasing power, while the euro has dropped more than 14 percent over the same period, making European exports more competitive.
The European Central Bank and the U.S. Federal Reserve last week led a global round of rate cuts, lowering their benchmarks by half a point to 3.75 percent and 1.5 percent respectively. Investors expect the ECB's key rate to be at 3.25 percent by December, according to Eonia forward contracts.
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
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