By Whitney Kisling and Elizabeth Campbell
Oct. 16 (Bloomberg) -- The following companies are having unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 9:40 a.m. in New York.
Bank of New York Mellon Corp. (BK US) increased 6.1 percent to $31.03. The world's largest custodian of financial assets said third-quarter earnings, excluding some items, were 72 cents a share. Analysts estimated a profit of 69 cents a share, according to a Bloomberg survey.
CIT Group Inc. (CIT US) fell the most in the Standard & Poor's 500 Index, losing 8.1 percent to $4.30. The century-old commercial lender posted a sixth straight quarterly loss after writing down the value of a unit that lends to companies to fund equipment purchases. The third-quarter loss was $297 million before preferred dividends, or $1.11 a share. Analysts surveyed by Bloomberg had an average estimate for a 19-cent profit.
Credit Suisse Group AG America depositary receipts (CS US) jumped 9.4 percent to $41.11. Switzerland's second-biggest bank raised 10 billion francs ($8.83 billion) in capital by selling treasury shares and bonds. The company had a ``pleasant'' result in the third quarter for its private banking business, Chief Executive Officer Brady Dougan said in an SF1 television interview.
EBay Inc. (EBAY US) fell 7.4 percent to $14.20 and earlier fell to $14.12, the lowest intraday price since October 2002. The world's biggest Internet auctioneer forecast its first quarterly sales decline in the final months of this year and said 2008 earnings would be lower than earlier predicted.
Amazon.com Inc. (AMZN US) lost 3.3 percent to $47.11. The world's largest Internet retailer had its target price lowered at Bank of America Corp. on ``macroeconomic concerns'' after EBay lowered its forecast.
FalconStor Software Inc. (FALC US) slumped 12 percent to $3.30, the lowest intraday price since November 1998. The New York-based software-only storage operator cut its forecast for the fourth quarter and the full year, citing ``difficult economic conditions.'' The company said third-quarter profit excluding some items should break even. Analysts estimated earnings of 6 cents a share, according to a Bloomberg survey.
Hershey Co. (HSY US) added 7.6 percent to $35.47 and earlier gained 8.3 percent for the biggest intraday rise since Sept. 22. The largest U.S. chocolate maker said third-quarter profit climbed after price increases helped counter higher costs for cocoa, packaging and transportation. Excluding some one-time items, profit met the average estimate of 15 analysts surveyed by Bloomberg. Hershey reiterated its full-year forecast.
Merrill Lynch & Co. (MER US) rose 5.9 percent to $19.31. The investment bank being taken over by Bank of America Corp. (BAC US) reported a loss for the third quarter of $5.15 billion, or $5.58 a share, compared with the average estimate of $5.18 a share, according to a Bloomberg survey of 15 analysts. That marks the fifth straight quarterly loss after the company posted at least $9.5 billion in writedowns.
Nokia Oyj ADRs (NOK US) climbed 7.1 percent to $16.18. The world's biggest maker of mobile phones may increase market share in the fourth quarter, Chief Executive officer Olli-Pekka Kallasvuo said in a CNBC interview. He spoke after Nokia posted a slide in third-quarter profit from falling prices and a slip in market share for high-end devices.
Peabody Energy Corp. (BTU US) rose the most in the S&P 500, adding 13 percent to $27.30. The largest U.S. coal producer boosted its 2008 earnings forecast after third-quarter profit rose more than 11-fold on increased output and higher prices.
Massey Energy Co. (MEE US), the fourth-largest U.S. coal producer, climbed 9.9 percent to $21.57.
To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Elizabeth Campbell in New York at ecampbell11@bloomberg.net
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Thursday, October 16, 2008
Corus to Reduce Crude Steel Output on Slowing Demand
By Thomas Kutty Abraham
Oct. 16 (Bloomberg) -- Corus, the U.K. unit of India's Tata Steel Ltd., will reduce production by as much as 20 percent over the next three months as demand weakens.
Output will be lowered by 1 million metric tons, Tata said today in a statement. Europe's second-biggest steelmaker produces about 20 million tons annually.
``The decision is aimed at aligning steel production with demand, which is now affected by the consequences of the global financial crisis,'' Tata said. ``No change in production from current levels is planned for the operations'' outside Europe.
Slowing demand from manufacturers and builders is driving down steel prices and forcing producers including ArcelorMittal, the biggest, to consider output cuts. Global steel production and consumption may slump 5 percent next year, Research & Consulting Group AG, a steel-industry consultant, said Oct 9.
``We're taking appropriate steps to optimize our operations and protect our sound financial position over the next few months,'' Chief executive Philippe Varin said in the statement.
Japan's biggest steelmakers, including Nippon Steel Corp., may cut production and accept lower prices in the year starting April 1, 2009, UBS AG said in a report dated today.
To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net
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Oct. 16 (Bloomberg) -- Corus, the U.K. unit of India's Tata Steel Ltd., will reduce production by as much as 20 percent over the next three months as demand weakens.
Output will be lowered by 1 million metric tons, Tata said today in a statement. Europe's second-biggest steelmaker produces about 20 million tons annually.
``The decision is aimed at aligning steel production with demand, which is now affected by the consequences of the global financial crisis,'' Tata said. ``No change in production from current levels is planned for the operations'' outside Europe.
Slowing demand from manufacturers and builders is driving down steel prices and forcing producers including ArcelorMittal, the biggest, to consider output cuts. Global steel production and consumption may slump 5 percent next year, Research & Consulting Group AG, a steel-industry consultant, said Oct 9.
``We're taking appropriate steps to optimize our operations and protect our sound financial position over the next few months,'' Chief executive Philippe Varin said in the statement.
Japan's biggest steelmakers, including Nippon Steel Corp., may cut production and accept lower prices in the year starting April 1, 2009, UBS AG said in a report dated today.
To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net
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Brazil Real Losses May Reach $28 Billion, Hurt Profit
By Alexander Ragir and Fabiola Moura
Oct. 16 (Bloomberg) -- Brazilian companies may report as much as $28 billion of write-offs because of currency bets gone awry as they prepare to release third-quarter results.
Potential losses of 60 billion reais ($28 billion) threaten the solvency of several businesses after the real's unexpected 30 percent drop against the dollar since Aug. 1, said Paulo Vieira da Cunha, a hedge fund manager and former Brazilian central bank deputy governor. Banco Itau Holding Financeira SA Executive Director Sergio Werlang estimated $24 billion in derivative losses. Standard & Poor's analyst Lisa Schineller said the problem may be bigger than what companies have so far disclosed.
After a four-year rally that doubled the value of the real and sent the Bovespa stock index up 150 percent, Latin America's biggest economy has been battered by tumbling commodities and an exodus of international capital. Companies from Sadia SA to Aracruz Celulose SA and Grupo Votorantim made over-optimistic bets on the nation's currency that turned sour, adding to concerns that sent the Bovespa tumbling 11 percent yesterday.
``Management should be blamed for taking excessive risks for these currency and derivative gambles,'' Mark Mobius, who oversees about $30 billion in emerging-market equities at Templeton Asset Management Ltd. in Singapore, said in an e-mail. ``It's important for us to watch this activity very closely.''
The Bovespa index fell 1.4 percent to 36,320.55 at 10:18 a.m. New York time while the real was little changed at 2.2275 per dollar, compared with 2.2265 per dollar late yesterday.
Aracruz, Sadia
The loss estimates are emerging as Brazilian companies start reporting third-quarter results this week. Banco Santander SA cut its profit outlook for Aracruz after the world's biggest eucalyptus-pulp maker said Oct. 2 that it may post a $1 billion loss on derivatives contracts.
Sadia's third-quarter results ``can only be disappointing'' because Brazil's second-biggest food company, based in Concordia, may post a 1 billion-real financial loss from its currency derivatives and increased costs for servicing foreign-denominated debt, Itau Corretora said in a report dated Oct. 14.
Grupo Votorantim, Brazil's biggest diversified industrial group, said Oct. 10 it spent 2.2 billion reais to end loss-making currency swaps. Its pulp-making unit, Votorantim Celulose e Papel SA, said last week in a regulatory filing it will likely report a non-cash loss of 145 million reais related to derivatives, instruments whose value are based on and determined by the underlying value of another security. VCP, based in Sao Paulo, is scheduled to release earnings Oct. 17.
At least 200 Brazilian companies lost money in the currency derivatives market, Estado de S. Paulo reported Oct. 14, citing a government official it didn't name. The next day the Sao Paulo newspaper said Finance Minister Guido Mantega denied the government had such a list of companies.
`Crisis of Confidence'
In New Delhi yesterday, President Luiz Inacio Lula da Silva said ``the companies that bet and lost must cope with the responsibility,'' according to audio of a news conference on the federal government's Web site.
``There's a sort of crisis of confidence in the market about this in figuring out which companies did and didn't hedge responsibly,'' said Daniella Marques, who manages about 1.75 billion reais in assets at Mercatto Gestao de Recursos in Rio de Janeiro. ``This earnings season the companies that had strict control on their positions within their limits will benefit, and those that didn't will get hurt.''
The Bovespa stock index, the best-performer this year through June among the 20 biggest equity markets, lost half of value since its May record on concern the global credit crisis will halt economic growth and weaken demand for the nation's oil, metals and sugar. Commodities account for two-thirds of exports, according to the Brazilian Exporters Association in Rio.
Mexican Losses
In Mexico, currency-related losses also are taking a toll on companies after the peso lost 18 percent against the dollar in the past month. Controladora Comercial Mexicana SAB, a supermarket operator, filed for bankruptcy last week after saying foreign-currency costs rose ``significantly.'' Grupo Industrial Saltillo SAB, a producer of auto parts and building materials, said it took a charge of 600 million pesos in the third quarter.
Many estimates for Brazilian companies' losses are ``outrageous'' and the ``worst is over'' for bad currency bets in the derivatives market, Jorge Sant'Anna, a director at Cetip SA, the nation's clearing house for over-the-counter contracts, said in an interview yesterday.
Companies may dispute the losses, ``saying they lacked knowledge about these transactions and will refuse to pay,'' Cassio Calil, managing director at JPMorgan Chase & Co., said in an interview yesterday in New York. ``I think we will test the judicial system in the country.''
Sadia and Aracruz's announcements prompted at least 14 Brazilian companies to say they didn't speculate on the currency and only used hedging to protect against foreign-exchange swings.
`Imprudent Bets'
Vieira da Cunha, the former Brazilian central bank official who now works as a partner at New York-based hedge fund Tandem Global Partners, said yesterday that several companies may go bankrupt from losses related to foreign-exchange derivatives.
Many large companies made ``very imprudent bets on the path of the exchange rate,'' he said at a conference in New York.
Banco Itau's Werlang, a former central bank director, told Valor Economico this week that companies' losses in the derivatives market may total $24 billion, equal to less than two months of exports. Schineller at S&P said in an interview in New York that the ``size of the problem'' isn't known.
``The market will be scouring balance sheets for any unidentified losses to see if companies that said they were acting responsibly really were,'' said Eduardo Favrin, who oversees $3 billion as head of equities at HSBC Investments Brasil in Sao Paulo. ``There's no way to get around this not hurting third-quarter results.''
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Fabiola Moura in New York at fdemoura@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- Brazilian companies may report as much as $28 billion of write-offs because of currency bets gone awry as they prepare to release third-quarter results.
Potential losses of 60 billion reais ($28 billion) threaten the solvency of several businesses after the real's unexpected 30 percent drop against the dollar since Aug. 1, said Paulo Vieira da Cunha, a hedge fund manager and former Brazilian central bank deputy governor. Banco Itau Holding Financeira SA Executive Director Sergio Werlang estimated $24 billion in derivative losses. Standard & Poor's analyst Lisa Schineller said the problem may be bigger than what companies have so far disclosed.
After a four-year rally that doubled the value of the real and sent the Bovespa stock index up 150 percent, Latin America's biggest economy has been battered by tumbling commodities and an exodus of international capital. Companies from Sadia SA to Aracruz Celulose SA and Grupo Votorantim made over-optimistic bets on the nation's currency that turned sour, adding to concerns that sent the Bovespa tumbling 11 percent yesterday.
``Management should be blamed for taking excessive risks for these currency and derivative gambles,'' Mark Mobius, who oversees about $30 billion in emerging-market equities at Templeton Asset Management Ltd. in Singapore, said in an e-mail. ``It's important for us to watch this activity very closely.''
The Bovespa index fell 1.4 percent to 36,320.55 at 10:18 a.m. New York time while the real was little changed at 2.2275 per dollar, compared with 2.2265 per dollar late yesterday.
Aracruz, Sadia
The loss estimates are emerging as Brazilian companies start reporting third-quarter results this week. Banco Santander SA cut its profit outlook for Aracruz after the world's biggest eucalyptus-pulp maker said Oct. 2 that it may post a $1 billion loss on derivatives contracts.
Sadia's third-quarter results ``can only be disappointing'' because Brazil's second-biggest food company, based in Concordia, may post a 1 billion-real financial loss from its currency derivatives and increased costs for servicing foreign-denominated debt, Itau Corretora said in a report dated Oct. 14.
Grupo Votorantim, Brazil's biggest diversified industrial group, said Oct. 10 it spent 2.2 billion reais to end loss-making currency swaps. Its pulp-making unit, Votorantim Celulose e Papel SA, said last week in a regulatory filing it will likely report a non-cash loss of 145 million reais related to derivatives, instruments whose value are based on and determined by the underlying value of another security. VCP, based in Sao Paulo, is scheduled to release earnings Oct. 17.
At least 200 Brazilian companies lost money in the currency derivatives market, Estado de S. Paulo reported Oct. 14, citing a government official it didn't name. The next day the Sao Paulo newspaper said Finance Minister Guido Mantega denied the government had such a list of companies.
`Crisis of Confidence'
In New Delhi yesterday, President Luiz Inacio Lula da Silva said ``the companies that bet and lost must cope with the responsibility,'' according to audio of a news conference on the federal government's Web site.
``There's a sort of crisis of confidence in the market about this in figuring out which companies did and didn't hedge responsibly,'' said Daniella Marques, who manages about 1.75 billion reais in assets at Mercatto Gestao de Recursos in Rio de Janeiro. ``This earnings season the companies that had strict control on their positions within their limits will benefit, and those that didn't will get hurt.''
The Bovespa stock index, the best-performer this year through June among the 20 biggest equity markets, lost half of value since its May record on concern the global credit crisis will halt economic growth and weaken demand for the nation's oil, metals and sugar. Commodities account for two-thirds of exports, according to the Brazilian Exporters Association in Rio.
Mexican Losses
In Mexico, currency-related losses also are taking a toll on companies after the peso lost 18 percent against the dollar in the past month. Controladora Comercial Mexicana SAB, a supermarket operator, filed for bankruptcy last week after saying foreign-currency costs rose ``significantly.'' Grupo Industrial Saltillo SAB, a producer of auto parts and building materials, said it took a charge of 600 million pesos in the third quarter.
Many estimates for Brazilian companies' losses are ``outrageous'' and the ``worst is over'' for bad currency bets in the derivatives market, Jorge Sant'Anna, a director at Cetip SA, the nation's clearing house for over-the-counter contracts, said in an interview yesterday.
Companies may dispute the losses, ``saying they lacked knowledge about these transactions and will refuse to pay,'' Cassio Calil, managing director at JPMorgan Chase & Co., said in an interview yesterday in New York. ``I think we will test the judicial system in the country.''
Sadia and Aracruz's announcements prompted at least 14 Brazilian companies to say they didn't speculate on the currency and only used hedging to protect against foreign-exchange swings.
`Imprudent Bets'
Vieira da Cunha, the former Brazilian central bank official who now works as a partner at New York-based hedge fund Tandem Global Partners, said yesterday that several companies may go bankrupt from losses related to foreign-exchange derivatives.
Many large companies made ``very imprudent bets on the path of the exchange rate,'' he said at a conference in New York.
Banco Itau's Werlang, a former central bank director, told Valor Economico this week that companies' losses in the derivatives market may total $24 billion, equal to less than two months of exports. Schineller at S&P said in an interview in New York that the ``size of the problem'' isn't known.
``The market will be scouring balance sheets for any unidentified losses to see if companies that said they were acting responsibly really were,'' said Eduardo Favrin, who oversees $3 billion as head of equities at HSBC Investments Brasil in Sao Paulo. ``There's no way to get around this not hurting third-quarter results.''
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Fabiola Moura in New York at fdemoura@bloomberg.net
Read more...
Copper Prices Drop to Lowest Since January 2006 on Economy
By Millie Munshi
Oct. 16 (Bloomberg) -- Copper futures dropped in New York to the lowest price since January 2006 on concern that a deepening global slowdown will curb demand for the metal used in pipes and wires.
China's industrial output in the first nine months slowed compared with the figure through August, an industry report showed today. U.S. ``economic activity will fall short of potential for a time,'' Federal Reserve Chairman Ben S. Bernanke said yesterday in a speech. Before today, copper plunged 48 percent from a record in May on signs of reduced consumption.
``There's continued concerns about recession and it will be affecting demand for copper,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut. ``This will continue to weigh on the price.''
Copper futures for December delivery fell 4.55 cents, or 2.1 percent, to $2.165 a pound at 9:51 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the metal touched $2.0405, the lowest since Jan. 6, 2006.
China's industrial output rose 15.2 percent this year through September, the China Electricity Council said today in a statement. The measure was 15.7 percent through August, government data show. China is set to release nine-month economic data on Oct. 20.
On the London Metal Exchange, copper for delivery in three months dropped $100, or 2 percent, to $4,820 a metric ton ($2.19 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
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Oct. 16 (Bloomberg) -- Copper futures dropped in New York to the lowest price since January 2006 on concern that a deepening global slowdown will curb demand for the metal used in pipes and wires.
China's industrial output in the first nine months slowed compared with the figure through August, an industry report showed today. U.S. ``economic activity will fall short of potential for a time,'' Federal Reserve Chairman Ben S. Bernanke said yesterday in a speech. Before today, copper plunged 48 percent from a record in May on signs of reduced consumption.
``There's continued concerns about recession and it will be affecting demand for copper,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut. ``This will continue to weigh on the price.''
Copper futures for December delivery fell 4.55 cents, or 2.1 percent, to $2.165 a pound at 9:51 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the metal touched $2.0405, the lowest since Jan. 6, 2006.
China's industrial output rose 15.2 percent this year through September, the China Electricity Council said today in a statement. The measure was 15.7 percent through August, government data show. China is set to release nine-month economic data on Oct. 20.
On the London Metal Exchange, copper for delivery in three months dropped $100, or 2 percent, to $4,820 a metric ton ($2.19 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
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Cocoa Prices Decline to Lowest Since January on Waning Demand
By Ron Day
Oct. 16 (Bloomberg) -- Cocoa prices fell to the lowest in nine months on speculation that demand is drying up as the global economy slows.
Energy, metal and agricultural prices have declined as falling equities, tighter lending conditions and sliding retail sales signaled a drop in commodity consumption. Global cocoa output will exceed demand in the year ending Sept. 30, Brussels- based Fortis Bank said last month.
``The overall tone in the market continues to be bearish,'' Stephanie Garner, a cocoa trader at Sucden (U.K.) Ltd. in London, said in a report.
Cocoa futures for December delivery dropped $74, or 3.4 percent, to $2,127 a metric ton at 8:43 a.m. on ICE Futures U.S. in New York. Earlier, the price touched $2,093, the lowest for a most-active contract since Jan. 22. Before today, cocoa dropped 14 percent this month.
Today, the Reuters/Jefferies CRB Index of 19 raw materials extended a decline to the lowest since February 2005.
To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.
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Oct. 16 (Bloomberg) -- Cocoa prices fell to the lowest in nine months on speculation that demand is drying up as the global economy slows.
Energy, metal and agricultural prices have declined as falling equities, tighter lending conditions and sliding retail sales signaled a drop in commodity consumption. Global cocoa output will exceed demand in the year ending Sept. 30, Brussels- based Fortis Bank said last month.
``The overall tone in the market continues to be bearish,'' Stephanie Garner, a cocoa trader at Sucden (U.K.) Ltd. in London, said in a report.
Cocoa futures for December delivery dropped $74, or 3.4 percent, to $2,127 a metric ton at 8:43 a.m. on ICE Futures U.S. in New York. Earlier, the price touched $2,093, the lowest for a most-active contract since Jan. 22. Before today, cocoa dropped 14 percent this month.
Today, the Reuters/Jefferies CRB Index of 19 raw materials extended a decline to the lowest since February 2005.
To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.
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Gold Price Declines in New York as Equities, Raw Materials Fall
By Pham-Duy Nguyen
Oct. 16 (Bloomberg) -- Gold declined for a sixth straight session in New York on speculation that investors will sell the precious metal to cover losses in other markets. Silver fell.
Gold has surpassed equities and other commodities this year as a U.S. housing slump and the credit crisis threaten to push the economy into a recession. The Reuters/Jefferies CRB Index of 19 raw materials dropped 21 percent this year before today and the Standard & Poor's 500 Index lost 38 percent while gold was little changed after notching seven straight annual gains.
``The margin clerks are in control and they are selling what they can to raise capital,'' Dennis Gartman, an economist and editor of the Suffolk, Virginia-based Gartman Letter, told clients. ``Gold is doing quite well in terms of other commodities and relative to global equity markets.''
Gold futures for December delivery fell $17, or 2 percent, to $822 an ounce at 9:35 a.m. on the Comex division of the New York Mercantile Exchange. The price slipped 50 cents yesterday as the S&P 500 fell 9 percent, the most since Oct. 19, 1987.
Silver futures for December delivery fell 36 cents, or 3.5 percent, to $9.82 an ounce. Before today, the price dropped 32 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Oct. 16 (Bloomberg) -- Gold declined for a sixth straight session in New York on speculation that investors will sell the precious metal to cover losses in other markets. Silver fell.
Gold has surpassed equities and other commodities this year as a U.S. housing slump and the credit crisis threaten to push the economy into a recession. The Reuters/Jefferies CRB Index of 19 raw materials dropped 21 percent this year before today and the Standard & Poor's 500 Index lost 38 percent while gold was little changed after notching seven straight annual gains.
``The margin clerks are in control and they are selling what they can to raise capital,'' Dennis Gartman, an economist and editor of the Suffolk, Virginia-based Gartman Letter, told clients. ``Gold is doing quite well in terms of other commodities and relative to global equity markets.''
Gold futures for December delivery fell $17, or 2 percent, to $822 an ounce at 9:35 a.m. on the Comex division of the New York Mercantile Exchange. The price slipped 50 cents yesterday as the S&P 500 fell 9 percent, the most since Oct. 19, 1987.
Silver futures for December delivery fell 36 cents, or 3.5 percent, to $9.82 an ounce. Before today, the price dropped 32 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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German Stocks Drop for Second Day; Metro, Postbank, Bayer Fall
By Stefanie Haxel
Oct. 16 (Bloomberg) -- German stocks dropped for a second day as concern mounted that bank bailouts in the U.S. and Europe will fail to prevent a recession.
Metro AG lost 4.2 percent, leading declines among companies sensitive to economic growth. Deutsche Postbank AG plunged 6.4 percent on speculation the sale of a stake in the lender to Deutsche Bank AG may collapse. Deutsche Post AG, Europe's biggest postal service, fell to a five-year low after rival TNT NV cut its margin forecast.
The benchmark DAX Index dropped 85.47, or 1.8 percent, to 4,776.16 as of 3:26 p.m. in Frankfurt. DAX Index futures expiring in December slipped 1 percent to 4,813.5. The HDAX Index of the country's 110 biggest companies lost 2 percent to 2,392.38.
The DAX Index has fallen 8.1 percent in the past two days, paring its 14 percent rally at the beginning of the week, when the German government announced a 500 billion-euro ($674 billion) rescue package for banks. The measure is down 41 percent this year as credit losses and asset writedowns at financial firms worldwide topped $640 billion.
``The financial market crisis is followed by the recession crisis,'' Robert Halver, head of research at Baader Bank in Frankfurt, said in a Bloomberg Television interview. ``We have massive concern worldwide that the economy may slump.''
Stocks pared some losses after a reports showed initial jobless claims in the U.S. dropped by 16,000 to 461,000 last week, fewer than forecast, while consumer prices were unchanged in September. Economists had estimated an increase.
Growth Over
The German economy, Europe's largest, may fail to grow next year after the yearlong credit squeeze pushed up lending costs and the global expansion slowed, government adviser Beatrice Weder di Mauro said yesterday. The country's leading economic research institutes estimate expansion of just 0.2 percent in 2009, down from 1.4 percent projected earlier.
Metro, Germany's largest retailer, fell 1.19 euros to 27.46. Beiersdorf AG, maker of Nivea skin creams, slid 54 cents, or 1.4 percent, to 38.15 euros. Arcandor AG, the country's biggest department-store owner, declined 18 cents, or 9.8 percent, to 1.65 euros.
Postbank, Germany's biggest consumer bank by clients, slid 1.45 euros to 21.14, poised to close at a record low.
``There has been rumor in the market that the sale may fail,'' said Stefan de Schutter, a portfolio manager at Alpha Wertpapierhandel in Frankfurt. ``I think that's nonsense, it's more realistic that the deal is being put on hold due to the current market situation.''
Deutsche Bank isn't reconsidering the Postbank investment, a company official said today. Germany's biggest bank last month agreed to buy almost 30 percent of Postbank for 2.79 billion euros and has an option to raise its stake.
Margin Forecast
Deutsche Post, Europe's biggest postal service, lost 1.005 euro, or 8.7 percent, to 10.61, the lowest since May 2003. TNT, the region's second-largest express-delivery company, said margins in international and domestic parcel-delivery operations will come in at a ``solid'' 9 percent for the full year with ``somewhat'' lower sales growth. The Dutch company said in July that earnings before interest and taxes as a proportion of sales would be in the low double-digit percentage range.
Bayer AG dropped 3.28 euros, or 7.8 percent, to 38.60 after Merrill Lynch & Co. lowered its recommendation on shares of Germany's biggest drugmaker to ``neutral'' from ``buy.''
``We are increasingly concerned over the near-term outlook for Material Science and Crop Science due to global recession risk and falling commodity prices,'' analyst Sachin Jain wrote in a research note to clients today.
The following stocks also rose or fell in German markets. Symbols are in parentheses.
Allianz SE (ALV GY) retreated 3.39 euros, or 4.4 percent, to 74.61 as CA Cheuvreux lowered its share-price estimate for Europe's largest insurer 12 percent to 115 euros.
Dyckerhoff AG (DYK3 GY) fell 1.38 euro, or 3.5 percent, to 38.02 euros. WestLB AG downgraded the cement maker bought by Buzzi Unicem SpA to ``reduce'' from ``add.''
Elmos Semiconductor AG (ELG GY) dropped 14 cents, or 4 percent, to 3.36 euros after WestLB lowered its recommendation for the maker of semiconductors used in cars to ``hold'' from ``buy.''
Praktiker AG (PRA GY) sank 31 cents, or 6 percent, to 4.85 euros. UniCredit Markets & Investment Banking downgraded shares of Germany's second-biggest home-improvement retailer to ``hold'' from ``buy.''
To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
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Oct. 16 (Bloomberg) -- German stocks dropped for a second day as concern mounted that bank bailouts in the U.S. and Europe will fail to prevent a recession.
Metro AG lost 4.2 percent, leading declines among companies sensitive to economic growth. Deutsche Postbank AG plunged 6.4 percent on speculation the sale of a stake in the lender to Deutsche Bank AG may collapse. Deutsche Post AG, Europe's biggest postal service, fell to a five-year low after rival TNT NV cut its margin forecast.
The benchmark DAX Index dropped 85.47, or 1.8 percent, to 4,776.16 as of 3:26 p.m. in Frankfurt. DAX Index futures expiring in December slipped 1 percent to 4,813.5. The HDAX Index of the country's 110 biggest companies lost 2 percent to 2,392.38.
The DAX Index has fallen 8.1 percent in the past two days, paring its 14 percent rally at the beginning of the week, when the German government announced a 500 billion-euro ($674 billion) rescue package for banks. The measure is down 41 percent this year as credit losses and asset writedowns at financial firms worldwide topped $640 billion.
``The financial market crisis is followed by the recession crisis,'' Robert Halver, head of research at Baader Bank in Frankfurt, said in a Bloomberg Television interview. ``We have massive concern worldwide that the economy may slump.''
Stocks pared some losses after a reports showed initial jobless claims in the U.S. dropped by 16,000 to 461,000 last week, fewer than forecast, while consumer prices were unchanged in September. Economists had estimated an increase.
Growth Over
The German economy, Europe's largest, may fail to grow next year after the yearlong credit squeeze pushed up lending costs and the global expansion slowed, government adviser Beatrice Weder di Mauro said yesterday. The country's leading economic research institutes estimate expansion of just 0.2 percent in 2009, down from 1.4 percent projected earlier.
Metro, Germany's largest retailer, fell 1.19 euros to 27.46. Beiersdorf AG, maker of Nivea skin creams, slid 54 cents, or 1.4 percent, to 38.15 euros. Arcandor AG, the country's biggest department-store owner, declined 18 cents, or 9.8 percent, to 1.65 euros.
Postbank, Germany's biggest consumer bank by clients, slid 1.45 euros to 21.14, poised to close at a record low.
``There has been rumor in the market that the sale may fail,'' said Stefan de Schutter, a portfolio manager at Alpha Wertpapierhandel in Frankfurt. ``I think that's nonsense, it's more realistic that the deal is being put on hold due to the current market situation.''
Deutsche Bank isn't reconsidering the Postbank investment, a company official said today. Germany's biggest bank last month agreed to buy almost 30 percent of Postbank for 2.79 billion euros and has an option to raise its stake.
Margin Forecast
Deutsche Post, Europe's biggest postal service, lost 1.005 euro, or 8.7 percent, to 10.61, the lowest since May 2003. TNT, the region's second-largest express-delivery company, said margins in international and domestic parcel-delivery operations will come in at a ``solid'' 9 percent for the full year with ``somewhat'' lower sales growth. The Dutch company said in July that earnings before interest and taxes as a proportion of sales would be in the low double-digit percentage range.
Bayer AG dropped 3.28 euros, or 7.8 percent, to 38.60 after Merrill Lynch & Co. lowered its recommendation on shares of Germany's biggest drugmaker to ``neutral'' from ``buy.''
``We are increasingly concerned over the near-term outlook for Material Science and Crop Science due to global recession risk and falling commodity prices,'' analyst Sachin Jain wrote in a research note to clients today.
The following stocks also rose or fell in German markets. Symbols are in parentheses.
Allianz SE (ALV GY) retreated 3.39 euros, or 4.4 percent, to 74.61 as CA Cheuvreux lowered its share-price estimate for Europe's largest insurer 12 percent to 115 euros.
Dyckerhoff AG (DYK3 GY) fell 1.38 euro, or 3.5 percent, to 38.02 euros. WestLB AG downgraded the cement maker bought by Buzzi Unicem SpA to ``reduce'' from ``add.''
Elmos Semiconductor AG (ELG GY) dropped 14 cents, or 4 percent, to 3.36 euros after WestLB lowered its recommendation for the maker of semiconductors used in cars to ``hold'' from ``buy.''
Praktiker AG (PRA GY) sank 31 cents, or 6 percent, to 4.85 euros. UniCredit Markets & Investment Banking downgraded shares of Germany's second-biggest home-improvement retailer to ``hold'' from ``buy.''
To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
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Asian Stocks Tumble on Recession Concerns; Nikkei 225 Plunges
By Patrick Rial and Chua Kong Ho
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Oct. 16 (Bloomberg) -- Asian stocks plummeted, driving the MSCI Asia Pacific Index down the most on record, on concern the global economy will sink into a recession and after Standard & Poor's said South Korean banks may fail to refinance debt.
MSCI's Asian index, which comprises the biggest stocks across the region from Australia to Japan, tumbled 8.5 percent to 87.04 at 7:18 p.m. in Tokyo, the largest drop since the measure was compiled in December 1987. Japan's Nikkei 225 Stock Average plunged 11 percent, the steepest loss since the crash of 1987. South Korea's Kospi Index fell 9.4 percent, the most since the 2001 terror attacks, and the won retreated as much as 12 percent.
Falling metal and oil prices dragged BHP Billiton Ltd. down 13 percent and Cnooc Ltd. 8.9 percent lower. While MSCI's Asian index is still up 1.2 percent this week after central bankers around the world announced a $2 trillion global bank rescue, the gauge has lost 45 percent this year as credit markets seized up and economies slowed.
``We're having a U-turn in perception,'' said Mark Konyn, chief executive officer of RCM Asia Pacific Ltd., which oversees $15 billion in Asian assets. ``While remedial measures taken globally have been sufficient to arrest the financial crisis, concerns have quickly shifted to the economy. A synchronized global slowdown threatens a longer and deeper recession.''
Standard & Poor's 500 Index futures gained 0.8 percent, erasing earlier losses after UBS AG said it will raise more than $5 billion from the Swiss government. The S&P tumbled 9.1 percent yesterday, the biggest loss since 1987, after U.S. retail sales fell twice as much as economists estimated.
Sony, Sharp
Concern that U.S. consumers will buy fewer products from Asia drove Sony Corp., the maker of the PlayStation 3 game console, and Sharp Corp. down more than 10 percent. Hong Kong's Hang Seng Index declined 4.8 percent, paring an earlier drop of 8.9 percent, after Air China Ltd. forecast a loss.
Asian benchmark indexes are trading near lows reached last week, when MSCI's Asian gauge fell the most ever on concern the global credit crisis will increase company failures. Markets rebounded earlier this week after the U.S. Treasury said it will invest $250 billion in financial institutions and France, Germany, Spain, the Netherlands and Austria committed $1.8 trillion to guarantee bank loans and take stakes in lenders.
Japan's Prime Minister Taro Aso said today the U.S. bank rescue plan is ``insufficient'' and ``that's why markets are falling.'' Aso was speaking to lawmakers in parliament.
The Nikkei's drop today is the third time the measure has lost more than 9 percent in six trading sessions, and follows a 14 percent jump on Oct. 14.
The Kospi tumbled to its lowest close since June 2006, as S&P said it may cut credit ratings for Kookmin Bank, Woori Bank and five other financial companies. The cost of protecting South Korean debt from default rose.
Won Slumps
KB Financial Group Inc., the holding company for Kookmin Bank, slumped 15 percent to 43,400 won. Woori Finance Holdings Co., which controls Woori Bank, dropped 15 percent to 11,050 won.
The won, Asia's worst-performing currency this year, fell 9.7 percent to 1,373 per dollar at the 3 p.m. stock trading close, Seoul Money Brokerage Services Ltd. said. The currency's 32 percent slump this year threatens to increase the cost of financing dollar-denominated debt.
South Korea's money market rates rose to the highest since January 2001. The benchmark 91-day certificate of deposit rate increased 3 basis points to 6.08 percent, according to the 10:30 a.m. fixing by the Korea Securities Dealers Association.
Other Asian funding costs fell. The rate Australian banks charge each other for three-month loans dropped to 5.695 percent, compared with 7.49 percent on Sept. 19, four days after Lehman Brothers Holdings Inc. filed for bankruptcy. Japanese overnight commercial borrowing rates declined to a one-week low.
Metal, Oil
Commodities prices slumped on concern a global recession will slash demand for raw materials. Copper futures on the London Metal Exchange headed for the biggest two-day decline in more than 12 years. Crude oil fell for a third day, taking its retreat from the July record to more than 50 percent. Crude slid as much as 3.3 percent to $71.21 a barrel recently in New York.
BHP lost 13 percent to A$25.80. Rio Tinto Ltd., the world's third-largest mining company, fell 16 percent to A$66.01. Both plunged the most since October 1987. Rio said yesterday it will idle sections of its highest-cost aluminum plants as prices have slumped amid weakening demand. Cnooc, China's biggest offshore oil producer, slid 8.9 percent to HK$6.12.
``Market players are increasingly nervous that global economies will sink even further,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television.
`Harsh' Outlook
Sony fell 13 percent to 2,320 yen. Sharp, Japan's largest maker of liquid-crystal-display televisions, lost 11 percent to 790 yen. Toyota Motor Corp., the world's second-largest automaker, slumped 9.3 percent to 3,310 yen.
U.S. consumer purchases fell 1.2 percent in September, almost double analysts' estimates. The drop marked the third- straight monthly decline, the first time that's happened since comparable records began in 1992, U.S. Commerce Department figures showed.
``The American spending spree we've seen in the past few years has totally evaporated,'' said Yoshinori Nagano, a Tokyo- based senior strategist at Daiwa Asset Management Co., which manages $96 billion. ``The earnings outlook for auto manufacturers and electronics makers is particularly harsh.''
Samsung Electronics Co., the world's third-largest mobile- phone maker, lost 7.9 percent to 504,000 won. Merrill Lynch & Co. cut its rating on the stock to ``underperform'' from ``buy.''
Lotte Shopping Co., South Korea's biggest department-store chain, plunged 10 percent to 194,000 won after the country's department store sales fell for the first time in nine months in September.
Airlines Drop
Air China, the nation's largest international carrier, plunged 13 percent to HK$2.79, its biggest decline since January, after projecting a nine-month loss. Singapore Airlines Ltd., Asia's most profitable carrier, fell 4 percent to S$12.4 after saying traffic slipped in September, the first drop in more than three years.
The cost of protecting Asia-Pacific bonds from default increased, according to traders of credit-default swaps. The Markit iTraxx Australia index of credit-default swaps rose 27.5 basis points to 225 at 2:28 p.m. in Sydney, Citigroup Inc. data show. The iTraxx Japan climbed 23 basis points to 208, according to Morgan Stanley, and the investment-grade benchmark index for the rest of Asia advanced. Contracts on South Korean sovereign debt approached a record as the won slumped.
``Everybody's just very suspect of trading any emerging market or any name in Asia,'' said Mark McCarthy, a credit trader for ABN Amro Holding NV in Sydney.
Credit-default swaps pay the buyer face value in exchange for the underlying securities, or cash equivalent, if a borrower fails to adhere to its debt agreements.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net.
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Enlarge Image/Details
Oct. 16 (Bloomberg) -- Asian stocks plummeted, driving the MSCI Asia Pacific Index down the most on record, on concern the global economy will sink into a recession and after Standard & Poor's said South Korean banks may fail to refinance debt.
MSCI's Asian index, which comprises the biggest stocks across the region from Australia to Japan, tumbled 8.5 percent to 87.04 at 7:18 p.m. in Tokyo, the largest drop since the measure was compiled in December 1987. Japan's Nikkei 225 Stock Average plunged 11 percent, the steepest loss since the crash of 1987. South Korea's Kospi Index fell 9.4 percent, the most since the 2001 terror attacks, and the won retreated as much as 12 percent.
Falling metal and oil prices dragged BHP Billiton Ltd. down 13 percent and Cnooc Ltd. 8.9 percent lower. While MSCI's Asian index is still up 1.2 percent this week after central bankers around the world announced a $2 trillion global bank rescue, the gauge has lost 45 percent this year as credit markets seized up and economies slowed.
``We're having a U-turn in perception,'' said Mark Konyn, chief executive officer of RCM Asia Pacific Ltd., which oversees $15 billion in Asian assets. ``While remedial measures taken globally have been sufficient to arrest the financial crisis, concerns have quickly shifted to the economy. A synchronized global slowdown threatens a longer and deeper recession.''
Standard & Poor's 500 Index futures gained 0.8 percent, erasing earlier losses after UBS AG said it will raise more than $5 billion from the Swiss government. The S&P tumbled 9.1 percent yesterday, the biggest loss since 1987, after U.S. retail sales fell twice as much as economists estimated.
Sony, Sharp
Concern that U.S. consumers will buy fewer products from Asia drove Sony Corp., the maker of the PlayStation 3 game console, and Sharp Corp. down more than 10 percent. Hong Kong's Hang Seng Index declined 4.8 percent, paring an earlier drop of 8.9 percent, after Air China Ltd. forecast a loss.
Asian benchmark indexes are trading near lows reached last week, when MSCI's Asian gauge fell the most ever on concern the global credit crisis will increase company failures. Markets rebounded earlier this week after the U.S. Treasury said it will invest $250 billion in financial institutions and France, Germany, Spain, the Netherlands and Austria committed $1.8 trillion to guarantee bank loans and take stakes in lenders.
Japan's Prime Minister Taro Aso said today the U.S. bank rescue plan is ``insufficient'' and ``that's why markets are falling.'' Aso was speaking to lawmakers in parliament.
The Nikkei's drop today is the third time the measure has lost more than 9 percent in six trading sessions, and follows a 14 percent jump on Oct. 14.
The Kospi tumbled to its lowest close since June 2006, as S&P said it may cut credit ratings for Kookmin Bank, Woori Bank and five other financial companies. The cost of protecting South Korean debt from default rose.
Won Slumps
KB Financial Group Inc., the holding company for Kookmin Bank, slumped 15 percent to 43,400 won. Woori Finance Holdings Co., which controls Woori Bank, dropped 15 percent to 11,050 won.
The won, Asia's worst-performing currency this year, fell 9.7 percent to 1,373 per dollar at the 3 p.m. stock trading close, Seoul Money Brokerage Services Ltd. said. The currency's 32 percent slump this year threatens to increase the cost of financing dollar-denominated debt.
South Korea's money market rates rose to the highest since January 2001. The benchmark 91-day certificate of deposit rate increased 3 basis points to 6.08 percent, according to the 10:30 a.m. fixing by the Korea Securities Dealers Association.
Other Asian funding costs fell. The rate Australian banks charge each other for three-month loans dropped to 5.695 percent, compared with 7.49 percent on Sept. 19, four days after Lehman Brothers Holdings Inc. filed for bankruptcy. Japanese overnight commercial borrowing rates declined to a one-week low.
Metal, Oil
Commodities prices slumped on concern a global recession will slash demand for raw materials. Copper futures on the London Metal Exchange headed for the biggest two-day decline in more than 12 years. Crude oil fell for a third day, taking its retreat from the July record to more than 50 percent. Crude slid as much as 3.3 percent to $71.21 a barrel recently in New York.
BHP lost 13 percent to A$25.80. Rio Tinto Ltd., the world's third-largest mining company, fell 16 percent to A$66.01. Both plunged the most since October 1987. Rio said yesterday it will idle sections of its highest-cost aluminum plants as prices have slumped amid weakening demand. Cnooc, China's biggest offshore oil producer, slid 8.9 percent to HK$6.12.
``Market players are increasingly nervous that global economies will sink even further,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television.
`Harsh' Outlook
Sony fell 13 percent to 2,320 yen. Sharp, Japan's largest maker of liquid-crystal-display televisions, lost 11 percent to 790 yen. Toyota Motor Corp., the world's second-largest automaker, slumped 9.3 percent to 3,310 yen.
U.S. consumer purchases fell 1.2 percent in September, almost double analysts' estimates. The drop marked the third- straight monthly decline, the first time that's happened since comparable records began in 1992, U.S. Commerce Department figures showed.
``The American spending spree we've seen in the past few years has totally evaporated,'' said Yoshinori Nagano, a Tokyo- based senior strategist at Daiwa Asset Management Co., which manages $96 billion. ``The earnings outlook for auto manufacturers and electronics makers is particularly harsh.''
Samsung Electronics Co., the world's third-largest mobile- phone maker, lost 7.9 percent to 504,000 won. Merrill Lynch & Co. cut its rating on the stock to ``underperform'' from ``buy.''
Lotte Shopping Co., South Korea's biggest department-store chain, plunged 10 percent to 194,000 won after the country's department store sales fell for the first time in nine months in September.
Airlines Drop
Air China, the nation's largest international carrier, plunged 13 percent to HK$2.79, its biggest decline since January, after projecting a nine-month loss. Singapore Airlines Ltd., Asia's most profitable carrier, fell 4 percent to S$12.4 after saying traffic slipped in September, the first drop in more than three years.
The cost of protecting Asia-Pacific bonds from default increased, according to traders of credit-default swaps. The Markit iTraxx Australia index of credit-default swaps rose 27.5 basis points to 225 at 2:28 p.m. in Sydney, Citigroup Inc. data show. The iTraxx Japan climbed 23 basis points to 208, according to Morgan Stanley, and the investment-grade benchmark index for the rest of Asia advanced. Contracts on South Korean sovereign debt approached a record as the won slumped.
``Everybody's just very suspect of trading any emerging market or any name in Asia,'' said Mark McCarthy, a credit trader for ABN Amro Holding NV in Sydney.
Credit-default swaps pay the buyer face value in exchange for the underlying securities, or cash equivalent, if a borrower fails to adhere to its debt agreements.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net.
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European Stocks Fall on Economy Concern; Total, TNT Decline
By Adam Haigh
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Oct. 16 (Bloomberg) -- European stocks declined for a second day on growing concern bank bailout plans in the U.S. and Europe will fail to avert a global recession.
Total SA, Europe's third-biggest oil company, lost 2.8 percent as oil dropped for a third day, extending its decline from a July record to more than 50 percent. TNT NV, Europe's second-largest express-delivery company, lost 8.9 percent after lowering its profit forecast for parcel-delivery operations. Thomson SA dropped 5.9 percent after provider of TV set-top boxes said sales slowed.
``Investor confidence has been hammered,'' said Henk Potts, a London-based fund manager at Barclays Stockbrokers, which has about $45 billion in assets under management. ``There is a considerable amount of unease about how deep the recession could be.''
Europe's Dow Jones Stoxx 600 Index fell 2.4 percent to 212.03 as of 3:08 p.m., trimming this week's gain to 3.4 percent.
Asian shares declined, with Japan's Nikkei 225 Stock Average sinking 11 percent. Banks led South Korea's Kospi Index down 9.4 percent. U.S. stocks were little changed.
European stocks extended declines after reports showed manufacturing in the Philadelphia region shrank more than forecast and U.S. industrial production in the U.S. fell in September by the most in almost 34 years. Earlier, shares pared some losses after the U.S. Labor Department said the cost of living was unchanged in September, less than the 0.1 percent increase anticipated by economists.
Less inflation gives the Federal Reserve more room to cut interest rates to bolster the economy.
Hungary Tumbles
Hungary's BUX Index sank 5.4 percent today, extending yesterday's 12 percent tumble. The European Central Bank will lend as much as 5 billion euros ($6.7 billion) to the Hungarian central bank to help revive the local credit market.
The cost of protecting European corporate bonds from default rose, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 30 basis points to 740, according to JPMorgan Chase & Co.
Money-market rates fell in London and the three-month dollar rate dropped for a fourth day, the longest sequence of declines since June, as central banks and governments provided funding to ease paralysis in the credit markets. The overnight rate dropped to the lowest in almost four years.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans fell 5 basis points to 4.50 percent today, according to the British Bankers' Association. The overnight rate dropped 20 basis points to 1.94 percent, the lowest level since November 2004.
Spread Narrows
The Libor-OIS spread, a gauge of cash scarcity that measures the difference between the three-month dollar rate and the overnight indexed swap rate, narrowed 5 basis points to 340 basis points today. It was about 24 basis points in January.
Concern the seizure in credit markets will trigger a global recession erased $25 trillion in value from stocks worldwide, dragging the Stoxx 600 down 42 percent this year. Financial firms reported $646 billion in losses and writedowns from mortgage-related investments since the beginning of 2007.
Total lost 2.8 percent to 35.55 euros. Royal Dutch Shell Plc, Europe's biggest oil producer, fell 1.9 percent to 1,368 pence.
Crude oil for November delivery sank as much as $3.33, or 4.5 percent, to $71.21 a barrel in after-hours trading on the New York Mercantile Exchange. It reached a record $147.27 on July 11.
TNT, Thomson
TNT fell 8.9 percent to 16.16 euros. The company expects margins in international and domestic express operations to come in at a ``solid'' 9 percent for the full year with ``somewhat'' lower sales growth. TNT said in July that earnings before interest and taxes as a proportion of sales would be in the low double-digit percentage range.
Thomson dropped 7.9 percent to 1.40 euros. The world's largest provider of TV set-top boxes posted a 13 percent drop in third-quarter revenue, hurt by lower sales from film-printing services, satellite decoders and broadcast equipment.
The Stoxx 600 was valued at 8.5 times earnings of companies in the index last week, the cheapest on record, and closed at 9.1 times profit yesterday. The MSCI World Index traded at 11 times the earnings of its 1,730 companies on Oct. 10, the lowest on record, and ended yesterday at 11.5 times profit.
``People who have an appetite for equity risk should absolutely be committing some money,'' said James Bevan, who helps oversee about $10 billion as London-based chief investment officer at CCLA Investment Management.
Slowing Growth
The Stoxx 600 rallied 13 percent in the first two days this week, its biggest two-day surge on record, as central banks and governments injected $2 trillion to bailout banks and unlock the credit market. Reports showing slow U.S. retail sales and U.K. unemployment climbing to the highest in almost four years sent stocks lower.
The Commerce Department yesterday reported U.S. retail sales dropped more than economists predicted, while in the U.K. unemployment climbed in September to the highest since November 2006. Germany slashed its 2009 growth forecast to 0.2 percent from a prediction of 1.2 percent made in April, Chancellor Angela Merkel said today.
UBS AG added 2.2 percent to 20.52 francs. The Swiss National Bank said it will set up a new fund with as much as $54 billion in loans and the government will inject 6 billion Swiss francs ($5.2 billion) of capital into Switzerland's biggest bank.
Credit Suisse Group AG added 7.1 percent to 49.16 francs. The second-biggest Swiss bank raised 10 billion francs from investors including Qatar and Tel Aviv-based Koor Industries Ltd.
Travis Perkins Plc plunged 39 percent to 295.75 pence. The U.K. building-materials distributor that owns the Wickes home- improvement chain said it was scrapping its dividend to hoard cash.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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Enlarge Image/Details
Oct. 16 (Bloomberg) -- European stocks declined for a second day on growing concern bank bailout plans in the U.S. and Europe will fail to avert a global recession.
Total SA, Europe's third-biggest oil company, lost 2.8 percent as oil dropped for a third day, extending its decline from a July record to more than 50 percent. TNT NV, Europe's second-largest express-delivery company, lost 8.9 percent after lowering its profit forecast for parcel-delivery operations. Thomson SA dropped 5.9 percent after provider of TV set-top boxes said sales slowed.
``Investor confidence has been hammered,'' said Henk Potts, a London-based fund manager at Barclays Stockbrokers, which has about $45 billion in assets under management. ``There is a considerable amount of unease about how deep the recession could be.''
Europe's Dow Jones Stoxx 600 Index fell 2.4 percent to 212.03 as of 3:08 p.m., trimming this week's gain to 3.4 percent.
Asian shares declined, with Japan's Nikkei 225 Stock Average sinking 11 percent. Banks led South Korea's Kospi Index down 9.4 percent. U.S. stocks were little changed.
European stocks extended declines after reports showed manufacturing in the Philadelphia region shrank more than forecast and U.S. industrial production in the U.S. fell in September by the most in almost 34 years. Earlier, shares pared some losses after the U.S. Labor Department said the cost of living was unchanged in September, less than the 0.1 percent increase anticipated by economists.
Less inflation gives the Federal Reserve more room to cut interest rates to bolster the economy.
Hungary Tumbles
Hungary's BUX Index sank 5.4 percent today, extending yesterday's 12 percent tumble. The European Central Bank will lend as much as 5 billion euros ($6.7 billion) to the Hungarian central bank to help revive the local credit market.
The cost of protecting European corporate bonds from default rose, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 30 basis points to 740, according to JPMorgan Chase & Co.
Money-market rates fell in London and the three-month dollar rate dropped for a fourth day, the longest sequence of declines since June, as central banks and governments provided funding to ease paralysis in the credit markets. The overnight rate dropped to the lowest in almost four years.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans fell 5 basis points to 4.50 percent today, according to the British Bankers' Association. The overnight rate dropped 20 basis points to 1.94 percent, the lowest level since November 2004.
Spread Narrows
The Libor-OIS spread, a gauge of cash scarcity that measures the difference between the three-month dollar rate and the overnight indexed swap rate, narrowed 5 basis points to 340 basis points today. It was about 24 basis points in January.
Concern the seizure in credit markets will trigger a global recession erased $25 trillion in value from stocks worldwide, dragging the Stoxx 600 down 42 percent this year. Financial firms reported $646 billion in losses and writedowns from mortgage-related investments since the beginning of 2007.
Total lost 2.8 percent to 35.55 euros. Royal Dutch Shell Plc, Europe's biggest oil producer, fell 1.9 percent to 1,368 pence.
Crude oil for November delivery sank as much as $3.33, or 4.5 percent, to $71.21 a barrel in after-hours trading on the New York Mercantile Exchange. It reached a record $147.27 on July 11.
TNT, Thomson
TNT fell 8.9 percent to 16.16 euros. The company expects margins in international and domestic express operations to come in at a ``solid'' 9 percent for the full year with ``somewhat'' lower sales growth. TNT said in July that earnings before interest and taxes as a proportion of sales would be in the low double-digit percentage range.
Thomson dropped 7.9 percent to 1.40 euros. The world's largest provider of TV set-top boxes posted a 13 percent drop in third-quarter revenue, hurt by lower sales from film-printing services, satellite decoders and broadcast equipment.
The Stoxx 600 was valued at 8.5 times earnings of companies in the index last week, the cheapest on record, and closed at 9.1 times profit yesterday. The MSCI World Index traded at 11 times the earnings of its 1,730 companies on Oct. 10, the lowest on record, and ended yesterday at 11.5 times profit.
``People who have an appetite for equity risk should absolutely be committing some money,'' said James Bevan, who helps oversee about $10 billion as London-based chief investment officer at CCLA Investment Management.
Slowing Growth
The Stoxx 600 rallied 13 percent in the first two days this week, its biggest two-day surge on record, as central banks and governments injected $2 trillion to bailout banks and unlock the credit market. Reports showing slow U.S. retail sales and U.K. unemployment climbing to the highest in almost four years sent stocks lower.
The Commerce Department yesterday reported U.S. retail sales dropped more than economists predicted, while in the U.K. unemployment climbed in September to the highest since November 2006. Germany slashed its 2009 growth forecast to 0.2 percent from a prediction of 1.2 percent made in April, Chancellor Angela Merkel said today.
UBS AG added 2.2 percent to 20.52 francs. The Swiss National Bank said it will set up a new fund with as much as $54 billion in loans and the government will inject 6 billion Swiss francs ($5.2 billion) of capital into Switzerland's biggest bank.
Credit Suisse Group AG added 7.1 percent to 49.16 francs. The second-biggest Swiss bank raised 10 billion francs from investors including Qatar and Tel Aviv-based Koor Industries Ltd.
Travis Perkins Plc plunged 39 percent to 295.75 pence. The U.K. building-materials distributor that owns the Wickes home- improvement chain said it was scrapping its dividend to hoard cash.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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U.S. Stocks Drop on Industrial Production, Manufacturing Data
By Eric Martin
Oct. 16 (Bloomberg) -- U.S. stocks retreated, adding to the market's worst one-day loss in 21 years, as reports on industrial production and manufacturing spurred concern the economic slump is worsening.
Boeing Co. and General Motors Corp. retreated more than 2.4 percent after industrial production fell by the most in 34 years and a gauge of manufacturing in Philadelphia slumped to the lowest in almost two decades.
The S&P 500 declined 15.35 points, or 1.7 percent, to 892.49 at 10:15 a.m. in New York, the lowest since April 2003. The Dow Jones Industrial Average slid 141.37, or 1.7 percent, to 8,436.54. The Nasdaq Composite Index slipped 19.66 to 1,608.67. Almost two stocks dropped for each that rose on the New York Stock Exchange.
The retreat over the past two days erased all of the 12 percent gain in the S&P 500 on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York yesterday.
The S&P 500 has tumbled 37 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $646 billion. The measure has retreated 24 percent since Sept. 26.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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Oct. 16 (Bloomberg) -- U.S. stocks retreated, adding to the market's worst one-day loss in 21 years, as reports on industrial production and manufacturing spurred concern the economic slump is worsening.
Boeing Co. and General Motors Corp. retreated more than 2.4 percent after industrial production fell by the most in 34 years and a gauge of manufacturing in Philadelphia slumped to the lowest in almost two decades.
The S&P 500 declined 15.35 points, or 1.7 percent, to 892.49 at 10:15 a.m. in New York, the lowest since April 2003. The Dow Jones Industrial Average slid 141.37, or 1.7 percent, to 8,436.54. The Nasdaq Composite Index slipped 19.66 to 1,608.67. Almost two stocks dropped for each that rose on the New York Stock Exchange.
The retreat over the past two days erased all of the 12 percent gain in the S&P 500 on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York yesterday.
The S&P 500 has tumbled 37 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $646 billion. The measure has retreated 24 percent since Sept. 26.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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Soybeans Extend Losses to 13-Month Low on Financial Crisis
By William Bi
Oct. 16 (Bloomberg) -- Soybeans extended losses to the lowest since August 2007 on growing concern that global economic crisis will cut demand for food and the plunge in prices may force some buyers to cancel contracts. Corn also fell.
U.S. retail sales dropped in September by the most in three years as rising job losses and falling home prices slowed consumer purchases, the Commerce Department said yesterday. There has been speculation of Chinese buyers canceling South American soybeans, said Li Jianlei, analyst of Cofco Futures Co.
``Cash sales have been sliding along with drop in futures,'' Beijing-based Li wrote in a report today. ``Prices will extend the fall beyond the immediate term.''
Soybeans for November delivery fell as much as 18.5 cents, or 2.1 percent, to $8.54 a bushel, the lowest August 29, 2007, in after-hours electronic trading on the Chicago Board of Trade. It traded at $8.5825 at 3:25 p.m. Singapore time. Futures are 48 percent lower than 1a record $16.3675 on July 3.
China's record imports of 4.1 million tons in September also increased domestic supply, reducing future purchases and pressure prices, Li said.
Corn for December delivery fell as much as 9.25 cents, or 2.4 percent, to $3.7875 a bushel, the lowest since November 19, and traded at $3.8275. The most-active contract,which lost 5.7 percent yesterday, fell 52 percent from a record $7.9925 June 27.
On the Dalian Commodity Exchange, soybeans for May delivery fell the exchange-imposed 5 percent limit to 3,009 yuan ($440) a metric ton, and settled at 3,059 yuan.
Corn and soybeans may slump by as much as a third by January as buyers in Asia, the largest export market for U.S. grains, struggle to secure trade financing because of financial crisis, Tokyo-based Unipac Grain Ltd. said.
Reluctant Banks
Importers, including South Korea and Taiwan, are having difficulty purchasing from overseas as local banks are reluctant to offer letters of credit guaranteeing payment, Nobuyuki Chino, president of the grain trading company, said in an interview.
Wheat for December delivery in Chicago fell as much as 7.5 cents, or 1.4 percent, to $5.4825 a bushel, the lowest since june 11, 2007, and was at $5.5025 as of 3:29 p.m. Singapore time. The price, which dropped 3 percent yesterday, is down 59 percent from the record $13.495 on Feb. 27.
The Baltic Dry Index, a measure of commodity-shipping costs, fell 11 percent to 1,615 points, the lowest since Feb. 2003, according to the Baltic Exchange in London.
To contact the reporters on this story: William Bi in Beijing at wbi@bloomberg.net; Jae Hur in Singapore at jhur1@bloomberg.net
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Oct. 16 (Bloomberg) -- Soybeans extended losses to the lowest since August 2007 on growing concern that global economic crisis will cut demand for food and the plunge in prices may force some buyers to cancel contracts. Corn also fell.
U.S. retail sales dropped in September by the most in three years as rising job losses and falling home prices slowed consumer purchases, the Commerce Department said yesterday. There has been speculation of Chinese buyers canceling South American soybeans, said Li Jianlei, analyst of Cofco Futures Co.
``Cash sales have been sliding along with drop in futures,'' Beijing-based Li wrote in a report today. ``Prices will extend the fall beyond the immediate term.''
Soybeans for November delivery fell as much as 18.5 cents, or 2.1 percent, to $8.54 a bushel, the lowest August 29, 2007, in after-hours electronic trading on the Chicago Board of Trade. It traded at $8.5825 at 3:25 p.m. Singapore time. Futures are 48 percent lower than 1a record $16.3675 on July 3.
China's record imports of 4.1 million tons in September also increased domestic supply, reducing future purchases and pressure prices, Li said.
Corn for December delivery fell as much as 9.25 cents, or 2.4 percent, to $3.7875 a bushel, the lowest since November 19, and traded at $3.8275. The most-active contract,which lost 5.7 percent yesterday, fell 52 percent from a record $7.9925 June 27.
On the Dalian Commodity Exchange, soybeans for May delivery fell the exchange-imposed 5 percent limit to 3,009 yuan ($440) a metric ton, and settled at 3,059 yuan.
Corn and soybeans may slump by as much as a third by January as buyers in Asia, the largest export market for U.S. grains, struggle to secure trade financing because of financial crisis, Tokyo-based Unipac Grain Ltd. said.
Reluctant Banks
Importers, including South Korea and Taiwan, are having difficulty purchasing from overseas as local banks are reluctant to offer letters of credit guaranteeing payment, Nobuyuki Chino, president of the grain trading company, said in an interview.
Wheat for December delivery in Chicago fell as much as 7.5 cents, or 1.4 percent, to $5.4825 a bushel, the lowest since june 11, 2007, and was at $5.5025 as of 3:29 p.m. Singapore time. The price, which dropped 3 percent yesterday, is down 59 percent from the record $13.495 on Feb. 27.
The Baltic Dry Index, a measure of commodity-shipping costs, fell 11 percent to 1,615 points, the lowest since Feb. 2003, according to the Baltic Exchange in London.
To contact the reporters on this story: William Bi in Beijing at wbi@bloomberg.net; Jae Hur in Singapore at jhur1@bloomberg.net
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Today's Key Points
| Daily Forex Fundamentals | Written by Danske Bank | Oct 16 08 07:26 GMT | | |
Danske Daily
Markets OvernightStock prices on Wall Street suffered their heaviest falls since the crash of 1987, and equity markets have continued their free fall in Asia overnight, suggesting that we are in for a difficult opening on the European markets today. Following a sense of relief on the financial markets in the first days of the week, yesterday saw a turnaround in sentiment. US equity markets plummeted, with the S&P500 down more than 9% to 908, and the Dow Jones down close to 8 percent to 8.578. The negative sentiment has carried through to Asia overnight, where the Japanese Nikkei255 is trading down more than 10 percent at the time of writing. While the sum of the latest global government initiatives to deal with the financial crisis is likely to have reduced systemic risks significantly, it still seems unlikely that the G3 economies will escape a recession. The recession risk in the US economy was illustrated by yesterday's retail sales data, which showed a 1.2% drop in September, and the Federal Reserves Beige book on the state of the US economy, which revealed a deteriorating outlook across states. Ben Bernanke, chairman of the Federal Reserve, emphasised the economic risk by stating yesterday that: 'Stabilization of the financial markets is a critical first step, but even if they stabilize, as we hope they will, broader economic recovery will not happen right away'. As equity markets dropped, investors turned to safer assets, sending US Treasuries higher. The yield on 2- year notes fell 26bp to 1.55%, while the yield on 10-year notes stands at 3.95%. Increased global growth scares have also helped push the oil price lower. Crude oil for delivery in November has fallen 5 dollars from Tuesday's close and has traded around USD73 per barrel overnight. On the FX market, volatility also remains high. EUR/USD has traded lower overnight, falling temporarily below 1.34. USD/JPY has fallen to 100, and EUR/CHF is trading around 1.53. Negative market sentiment has meant that the Scandies have continued to weaken, and EUR/SEK is now trading above 10, a historical high, while EUR/NOK has risen above 8.80. Global DailyYesterday's bad US retail sales report boosted recession concerns in the markets. Aside from the situation in money and credit markets (which should continue to gradually improve), attention today will turn towards incoming activity data and Q3 earnings reports. Today's data calendar is dominated by US releases. September's CPI is due at 14:30. We look for a below consensus reading of 0.0% m/m (5.0% y/y) on the headline, while our estimate on the core is in line with consensus at a 0.2% m/m (2.5% y/y). However, given the cyclical situation, markets will be more interested in the activity data released later in the day. Industrial production for September at 15:15 and business confidence from Philadelphia Fed for October at 16:00 are likely to confirm that the manufacturing sector is contracting. At 19:00 the October housing market index from NAHB is expected to show no improvement by moving sideways close to its all-time low. A couple of Fed speeches from St. Louis Fed Governor Bullard (neutral, non-voter) at 15:30 and Minneapolis Fed Governor Stern (hawk, voter) at 18:00 could turn interesting in the afternoon. The flow of Q3 earnings reports continues. Today we will receive reports from Nokia (12:00), Bank of New York (12:30), Citigroup (13:00), Google and IBM. Given the very negative sentiment that has developed overnight, European stock markets should start the day lower. With economic concerns and risk aversion on the rise, investors will turn to safe-haven assets. Hence, we should be in for a positive opening in the European bond markets with lower yields and steeper curves Scandi DailyIn Sweden today we receive highly interesting labour market data. Notices of lay-offs have been on the rise since April, which with normal lags should start to feed through in the form of rising unemployment rates about now. Our estimate is consequently a tad above what the seasonal patterns suggest, though recent labour market indicators actually imply an even higher outcome. Nonetheless, financial market focus continues to be strongly on 'crisis-indicators' such as spreads and volatility measures, which is why we do not expect much of an impact from today's numbers. A weak number could, however, have a strong influence on next week's monetary policy meeting at the Riksbank. As widely expected, Norges Bank yesterday cut its policy rate by 50bp to 5.25%. Norges Bank put all its focus on the financial crisis, while the current high rate of inflation received almost no attention. With regards to the financial crisis, Norges Bank said that, 'The most robust approach may therefore now be to implement measures to reduce the uncertainty and stave off particularly adverse outcomes for the economy. This implies a more active monetary policy than normal, both in interest rate setting and through liquidity policy measures.' This implies that Norges Bank is now going to be more front-loaded in cutting rates than most analysts had expected prior to the meeting, but not very different from the pricing in e.g. the NOK FRA market as of today. Norges Bank's focus away from inflation is evident in its statement 'Inflation remains high, but the forces that have fuelled inflation have now diminished.' It is still an open question as to whether Norges Bank will cut rates again in two weeks' time at the ordinary monetary policy meeting on October 29. We guess it will depend on how the NIBOR fixings develop going forward, the global risk picture and the strength of the currency. If NIBOR rates continue to drop in line with the USD LIBOR, Norges Bank is expected to keep rates unchanged at this meeting and just present a monetary policy report that outlines the rate path for the next strategy period. Hence, we still expect the next rate cut in December, although October is certainly also an option. There is little doubt that Norges Bank will present a quite dovish Monetary Policy Report in two weeks, and the market might very well prepare itself for a new rate cut in two weeks. Further, with oil prices under pressure we would not be surprised to see new highs in EUR/NOK today. In the Norwegian government bond market, the situation is still chaotic after the announcement by Norges Bank to flood the market with government bonds. Hence, expect very wide bid/offer spreads in the government bond market. Danske Bank Disclaimer This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets' research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission. | |
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Euro Open: US Dollar Gains On Global Recession Fears - Why?
| Daily Forex Fundamentals | Written by DailyFX | Oct 16 08 07:31 GMT | | |
| The US Dollar has advanced against the major currencies as fears of a global recession replace the credit crunch as the primary concern across financial markets. Having led at the start of the crisis, investors are now betting that the US economy is also likely to lead in the recovery. Key Overnight Developments
Critical Levels
The Euro gained a bit of ground in overnight trading, rising to test 1.35 before selling pressure returned late into the session to prompt a test of pivot point support at 1.3350. A break lower eyes the next hurdle at 1.3277. Sterling also rose for much Asian trading, testing above 1.73 to later settle around the 1.7250 mark. Asia Session Highlights
With little market-moving data on the economic calendar, price action took on a corrective tone for much of the overnight session as the US dollar pared back losses after rising sharply in New York hours despite a dismal US Retail Sales release. Interestingly enough, it seems that forex price action is decoupling from stock performance even though the recent dollar gains coincided with fresh Wall St losses. Indeed, the previously strong inverse correlation between EURUSD and 30-year US Treasury Bonds has weakened to -74% having peaked at -84% last week. Why has the dollar gained? We wrote yesterday that 'traders are apparently taking a step back from the euphoria of recent days…to re-assess the fundamentals.' This has renewed fears of global economic slowdown, pressuring stock markets lower once again. Markets are forward-looking, so the operative question investors are asking themselves given the broad nature of the downturn is: 'Assuming everything is going down, who will rebound first?' This line of thinking seems to favor the greenback considering US authorities were the first to address the current malaise. Having led at the start of the crisis, the US economy is also likely to lead in the recovery. Euro Session: What to Expect
The spreading economic slowdown looks poised to claim Switzerland as its most recent victim: Retail Sales are expected to grow a meager 0.8% in the year to August, a marked slowdown from July's 6.2%. The mountain nation relies on demand from the European Union to absorb 60% of their exports, making it highly sensitive to economic slowdown already evident across the countries of the regional bloc. Indeed, the ZEW Survey is forecast to show investor sentiment sour again in October after a sudden uptick in September spurred on by expectations of a rate cut from the SNB as inflation moderated. After Governor Jean-Pierre Roth and company participated in the coordinated 50-basis-point interest rate cut designed to thaw frozen credit markets, markets have pared back expectations of further easing. Trading in overnight index swaps point to inaction for the next 12 months, so it is reasonable that investor confidence would ease as Swiss businesses look unlikely to get monetary relief even as the global economy falters. On balance, the US Consumer Price Index announcement will likely offer the most market-moving potential as it is released late into the session. The shift in the markets' consensus from the 'decoupling' scenario (prevalent for much of the first half of the year, wherein the US would decline in isolation as the world economy continued to grow) to that of a broad, global downturn has put US fundamentals at the forefront for investors looking to time the bottom. This plays well to the aforementioned reasoning for recent US dollar strength as the markets look to States as the proverbial 'dove carrying an olive branch', signaling the crisis has begun to recede. Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Daily FX Report
| Daily Forex Technicals | Written by Varengold Bank | Oct 16 08 07:36 GMT | | |
| Good morning. The FX market is comparatively steady than the Equity market. Yesterday the Equity markets crashed down again. The Dow had its biggest decline since 1987, with a loss of 733.08 basic points. Also other major indices like DAX, FTSE, NIKKEI and co. note losses in two digit percent areas Markets reviewThe JPY falls across the board despite the Nikkei decrease of 9.6%, with a strong positive correlation between stocks and USD/JPY, which shows signs of break downs. The FOREX market is getting pushed around by players who are rushing to dump risky assets. Some traders said exchange rate moves are being driven by what investors need to sell or buy because they are dumping assets. The USD/JPY is up 0.3% to 100.25, while the EUR/JPY climbs up 0.3% to 135.40. The AUD/JPY dips 4% to 67.62 while the NZD/JPY goes up to 4% to 61.49. On a 90- day basis, the correlation between Nikkei and USD/JPY is down to -0.79 from a plus of 0.55 in September, while the Nikkei and AUD/JPY correlation is still at a very high level of +0.94. The correlation between Nikkei and EUR/JPY is at +0.92. The AUD jumps down 1.9% to 0.6508 despite broad slide in Asian Shares. The currency surge is due to short covering, adding that there wasn't any particular bit of news that triggered the move. So some people in the market were trying to spread false rumours about the RBA intervening. The market moves are exacerbated by low liquidity. The EUR and high yielding currencies slide as world stocks fell, ending a rally seen earlier this week after US and European governments announced sweeping bank rescue plans. The EUR is down 1.02 percent and close the day at 1.3453, GBP is down 1.36 percent and close at 1.7175 and CAD lost 2,5 percent. Technical analysisAUD/JPYAfter the high losses of the AUD versus the JPY the currency pair's support level established at 64.81. The market touched the support level the third time after a trend return at the beginning of this week. The market trades straight at the Support actually and a further increase could cement the support but a break could be possible. | |
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Equities Collapse Gives Usd Strength
| Daily Forex Fundamentals | Written by AC-Markets | Oct 16 08 07:57 GMT | | |
Market BriefThe Usd was considerable stronger in the Asian session, as the equity markets continued to tumble. The EurUsd traded down from 1.3550 to 1.3350 session lows, while the UsdJpy traded from 101.50 to 99.27 session lows. The AudUsd fell at the open to 0.6497, before recovering to 0.6800. As risk aversion defined the session price activities, carry trades and EM continued to come under significant selling pressure, with the GbpJpy at 170.41 and the UsdTry traded higher to 1.5060. VIX spiked higher trading up to 69.25 and crude slipped as fears of a global recession intensified. Weak retail sales in the US and beige book, which reinforced the weakness in US economic activity, prompted another dismal day on Wall Street (largest daily decline since the 1987 stock market crash) with S&P 500 down -9.03% . The indiscriminate, panic like selling carried over into Asia, with the Nikkei currently crashing -11.40%. We don't expect any break in FX trend with Usd & Jpy as gainers and Gbp, Eur, Aud, NZD bearing the brunt of the selling. In Japan, the October's Tankan survey of business conditions significant fell in manufacturer sentiment, with the manufacturing industry index declining to -25, against the prior reading of -14. The deterioration was located in the raw materials & exporting sectors, a signal of slow global demand. In addition, the forecast remains dreary at -21 in 3 months. There was some reference to the effects of the financial market turmoil during the survey period. However, it was the real Japanese economy itself that emerged as the main area of apprehension. As we have stated in the past, as the risk aversion eases we expect the Jpy to come under selling pressure. No major events or data releases scheduled in European session. 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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Risk Drifts From Banks to Governments to You, Me: Mark Gilbert
Commentary by Mark Gilbert
Oct. 16 (Bloomberg) -- Anyone who lost money in the collapse of Lehman Brothers Holdings Inc. should probably be reaching for their lawyers about now.
Our money -- yours and mine -- is now keeping the global financial system afloat. In a capitulation that beggars belief, governments all around the world have pledged our money -- yours and mine -- to fund a ``No Bank Left Behind'' program. And no matter what the politicians say, that means our money -- yours and mine -- is now at risk in the casino.
So the decision to let Lehman go to the wall last month looks increasingly like (a) an experiment in brinkmanship gone wrong (b) a worthless sacrifice to the angry gods of moral hazard (c) the biggest mistake that the authorities have made during the current crisis (d) all of the above.
The U.S. Treasury's theory that the demise of Bear Stearns Cos. was rapid and unforeseen, whereas traders and investors had sufficient time to brace themselves for the collapse of Lehman, is undone by the chaos and panic seen in recent weeks as trading desks rush to untangle the mess of unraveling deals. Listen to any of the recent comments from European Central Bank policy makers on the topic of Lehman, and you can hear the undercurrent of puzzled anger at the decision.
Hoarding Carrots
It's way, way too early to gauge the effectiveness of U.S. Treasury Secretary Henry Paulson's plan to cure the financial crisis by spending $250 billion making Uncle Sam a shareholder in thousands of financial companies, guaranteeing bank debt and buying commercial paper.
What is clear, though, is that however many carrots the U.S. gives to Wall Street, the government doesn't have much of a stick to flagellate the banks into replanting those vegetables on Main Street, where the real economy is facing starvation.
``Leaving businesses and consumers without access to financing is totally unacceptable,'' Paulson said this week when he revealed his latest bailout for the banks. ``When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend,'' said assistant U.S. Treasury Secretary David Nason.
I disagree. If the alternative is lending money to businesses that are about to go bust and consumers who are about to lose their jobs, then restricting credit seems not just acceptable, it is downright prudent.
No Credit
``Will banks turn on the lending taps and will corporates fall over themselves for the liquidity? We don't think so,'' Suki Mann, a credit strategist at Societe Generale SA in London, wrote in a research note this week. ``Deleveraging won't stop overnight. The cost of credit will remain high.''
The global effort by central banks to shore up the precarious capital position of the financial industry using our money -- yours and mine -- is a direct consequence of the earlier decision to let Lehman hang.
The failure to prevent Lehman's collapse -- sandwiched between the shotgun marriage of Bear Stearns to JPMorgan Chase & Co. and the gazillion-dollar loan to keep American International Group Inc. from going pop -- sapped whatever remaining confidence banks had in each other. It removed any yardstick to judge which institutions would be deemed too important to fail.
Far from being a panacea, the accelerated effort to funnel our money -- mine and yours -- to plug the yawning holes in bank balance sheets, hasn't alleviated any of the dangers. Risk has just been reallocated.
Goldman Default
So the cost of buying credit-default swaps to insure against Goldman Sachs Group Inc. defaulting on its bonds plummeted to about 234 basis points this week from as high as 543 basis points last week. The benchmark default-swap on U.S. government debt, meantime, has jumped to about 37 basis points from 19 basis points two months ago.
In the U.K., Royal Bank of Scotland Group Plc default swaps cost about 85 basis points, down from almost 300 basis points last week. U.K. government debt, though, is deemed twice as risky as it was two months ago in the credit-derivatives market.
``With country after country guaranteeing deposits and senior creditors, and also doing everything they can to protect the financial system as we know it, senior financial risks should migrate closer toward sovereign risk,'' Jim Reid, a credit strategist at Deutsche Bank AG in London, wrote in a report this week.
Pension Pain
It doesn't stop there. The crisis of confidence has destroyed about $27 trillion of value in the global stock market in the past year. That isn't a typographical error. The combined market capitalization of the world's publicly traded companies is down to about $36 trillion, from a high of $63 trillion reached a year ago, according to data compiled by Bloomberg.
So anyone who has diligently socked money away into a pension plan has seen the value of those contributions destroyed. Put another way, risk has been transferred down the food chain. It started in the banks, filtered through the governments, and now it is infecting our pensions -- yours and mine.
You can guess what is coming next in this crisis. Regulators will call for centralized oversight of financial markets. Some bright spark will suggest that what the world needs is a global central bank, within the environs of the Bank for International Settlements.
And an ex-partner of Goldman will humbly agree to run the show. Rearrange the words ``stable door,'' ``shutting the,'' and ``after the horse has bolted'' to form a well-known phrase.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
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Oct. 16 (Bloomberg) -- Anyone who lost money in the collapse of Lehman Brothers Holdings Inc. should probably be reaching for their lawyers about now.
Our money -- yours and mine -- is now keeping the global financial system afloat. In a capitulation that beggars belief, governments all around the world have pledged our money -- yours and mine -- to fund a ``No Bank Left Behind'' program. And no matter what the politicians say, that means our money -- yours and mine -- is now at risk in the casino.
So the decision to let Lehman go to the wall last month looks increasingly like (a) an experiment in brinkmanship gone wrong (b) a worthless sacrifice to the angry gods of moral hazard (c) the biggest mistake that the authorities have made during the current crisis (d) all of the above.
The U.S. Treasury's theory that the demise of Bear Stearns Cos. was rapid and unforeseen, whereas traders and investors had sufficient time to brace themselves for the collapse of Lehman, is undone by the chaos and panic seen in recent weeks as trading desks rush to untangle the mess of unraveling deals. Listen to any of the recent comments from European Central Bank policy makers on the topic of Lehman, and you can hear the undercurrent of puzzled anger at the decision.
Hoarding Carrots
It's way, way too early to gauge the effectiveness of U.S. Treasury Secretary Henry Paulson's plan to cure the financial crisis by spending $250 billion making Uncle Sam a shareholder in thousands of financial companies, guaranteeing bank debt and buying commercial paper.
What is clear, though, is that however many carrots the U.S. gives to Wall Street, the government doesn't have much of a stick to flagellate the banks into replanting those vegetables on Main Street, where the real economy is facing starvation.
``Leaving businesses and consumers without access to financing is totally unacceptable,'' Paulson said this week when he revealed his latest bailout for the banks. ``When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend,'' said assistant U.S. Treasury Secretary David Nason.
I disagree. If the alternative is lending money to businesses that are about to go bust and consumers who are about to lose their jobs, then restricting credit seems not just acceptable, it is downright prudent.
No Credit
``Will banks turn on the lending taps and will corporates fall over themselves for the liquidity? We don't think so,'' Suki Mann, a credit strategist at Societe Generale SA in London, wrote in a research note this week. ``Deleveraging won't stop overnight. The cost of credit will remain high.''
The global effort by central banks to shore up the precarious capital position of the financial industry using our money -- yours and mine -- is a direct consequence of the earlier decision to let Lehman hang.
The failure to prevent Lehman's collapse -- sandwiched between the shotgun marriage of Bear Stearns to JPMorgan Chase & Co. and the gazillion-dollar loan to keep American International Group Inc. from going pop -- sapped whatever remaining confidence banks had in each other. It removed any yardstick to judge which institutions would be deemed too important to fail.
Far from being a panacea, the accelerated effort to funnel our money -- mine and yours -- to plug the yawning holes in bank balance sheets, hasn't alleviated any of the dangers. Risk has just been reallocated.
Goldman Default
So the cost of buying credit-default swaps to insure against Goldman Sachs Group Inc. defaulting on its bonds plummeted to about 234 basis points this week from as high as 543 basis points last week. The benchmark default-swap on U.S. government debt, meantime, has jumped to about 37 basis points from 19 basis points two months ago.
In the U.K., Royal Bank of Scotland Group Plc default swaps cost about 85 basis points, down from almost 300 basis points last week. U.K. government debt, though, is deemed twice as risky as it was two months ago in the credit-derivatives market.
``With country after country guaranteeing deposits and senior creditors, and also doing everything they can to protect the financial system as we know it, senior financial risks should migrate closer toward sovereign risk,'' Jim Reid, a credit strategist at Deutsche Bank AG in London, wrote in a report this week.
Pension Pain
It doesn't stop there. The crisis of confidence has destroyed about $27 trillion of value in the global stock market in the past year. That isn't a typographical error. The combined market capitalization of the world's publicly traded companies is down to about $36 trillion, from a high of $63 trillion reached a year ago, according to data compiled by Bloomberg.
So anyone who has diligently socked money away into a pension plan has seen the value of those contributions destroyed. Put another way, risk has been transferred down the food chain. It started in the banks, filtered through the governments, and now it is infecting our pensions -- yours and mine.
You can guess what is coming next in this crisis. Regulators will call for centralized oversight of financial markets. Some bright spark will suggest that what the world needs is a global central bank, within the environs of the Bank for International Settlements.
And an ex-partner of Goldman will humbly agree to run the show. Rearrange the words ``stable door,'' ``shutting the,'' and ``after the horse has bolted'' to form a well-known phrase.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
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Hurricane Omar Strengthens to `Major' Storm Over Virgin Islands
By Brian K. Sullivan and Aaron Sheldrick
Oct. 16 (Bloomberg) -- Hurricane Omar strengthened to a ``major'' storm with winds of 120 miles (193 kilometers) per hour as it passed over the U.S. Virgin Islands, where a curfew was imposed and an oil refinery closed in St. Croix.
Hurricane warnings were in place in the U.S. Virgin Islands, the British Virgin Islands and the islands of Anguilla to the east, the National Hurricane Center in Miami said. A hurricane warning means sustained winds of at least 74 miles per hour are expected within 24 hours.
Omar's winds increased to 120 mph by 1 a.m. Virgin Islands time today, from 115 mph two hours earlier, the center said in an advisory. U.S. Virgin Islands Governor John deJongh Jr. closed schools, dismissed non-essential government workers and ordered a curfew beginning at 6 p.m. local time yesterday, according to a statement.
``We will vigorously enforce this curfew as it is necessary that we clear the streets and avoid persons becoming injured by the effects of a tropical storm,'' Police Commissioner James McCall said in the statement on the governor's Web site.
The Public Works Department was distributing sandbags on all of the territory's islands.
The eye of Omar was 25 miles east-northeast of St. Croix and moving northeast at 20 mph.
Omar may bring as much as 20 inches (50 centimeters) of rain to Puerto Rico and the northern Leeward Islands and 12 inches to the Netherlands Antilles, the center said. Those rains could produce ``life-threatening'' flash floods and mudslides, the advisory said.
Strengthening Possible
Omar is a category 3 storm, the third strongest on the five-step Saffir-Simpson scale, meaning it has winds of between 111 mph and 130 mph.
``Additional strengthening is possible tonight as Omar moves through the northern Leeward Islands,'' the center said. ``Preparations to protect life and property should be rushed to completion.''
Tropical storm warnings, indicating winds of 39 mph to 73 mph are likely within a day, were in place in Puerto Rico, Antigua, Barbuda and Montserrat.
The island of St. Croix in the Virgin Islands is the site of the Hovensa oil refinery, the third-biggest in the Americas.
``Hovensa LLC is in the process of shutting down essentially all its processing and auxiliary equipment at the St. Croix refinery except those necessary to maintain supply of power to the complex,'' Alex Moorhead, a spokesman for the plant, said by telephone.
Causing Blackouts
The refinery handled 456,000 barrels a day in July, according to the latest U.S. Energy Department records. The U.S. mainland received 338,000 barrels a day of refined products from the plant. The refinery is owned by Hess Corp. of New York and the state oil company, Petroleos de Venezuela SA.
Omar caused blackouts in Venezuela two days ago and halted shipping at Jose, one of the country's main oil terminals, Petroleos de Venezuela said yesterday in an e-mailed statement.
To the west, the center of a tropical depression moved inland over Honduras and may bring as much as 15 inches of rain, threatening flooding and landslides there and in Nicaragua, Belize, Guatemala and Mexico's Yucatan Peninsula, the center said in an advisory.
Tropical Depression 16 was 40 miles south-southwest of Limon, Honduras, and moving west-southwest at 7 mph at 9 p.m. Honduras time yesterday. Its maximum sustained winds decreased to 30 mph.
``Little change in strength is forecast during the next 24 hours,'' the U.S. agency said.
To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net; Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.
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Oct. 16 (Bloomberg) -- Hurricane Omar strengthened to a ``major'' storm with winds of 120 miles (193 kilometers) per hour as it passed over the U.S. Virgin Islands, where a curfew was imposed and an oil refinery closed in St. Croix.
Hurricane warnings were in place in the U.S. Virgin Islands, the British Virgin Islands and the islands of Anguilla to the east, the National Hurricane Center in Miami said. A hurricane warning means sustained winds of at least 74 miles per hour are expected within 24 hours.
Omar's winds increased to 120 mph by 1 a.m. Virgin Islands time today, from 115 mph two hours earlier, the center said in an advisory. U.S. Virgin Islands Governor John deJongh Jr. closed schools, dismissed non-essential government workers and ordered a curfew beginning at 6 p.m. local time yesterday, according to a statement.
``We will vigorously enforce this curfew as it is necessary that we clear the streets and avoid persons becoming injured by the effects of a tropical storm,'' Police Commissioner James McCall said in the statement on the governor's Web site.
The Public Works Department was distributing sandbags on all of the territory's islands.
The eye of Omar was 25 miles east-northeast of St. Croix and moving northeast at 20 mph.
Omar may bring as much as 20 inches (50 centimeters) of rain to Puerto Rico and the northern Leeward Islands and 12 inches to the Netherlands Antilles, the center said. Those rains could produce ``life-threatening'' flash floods and mudslides, the advisory said.
Strengthening Possible
Omar is a category 3 storm, the third strongest on the five-step Saffir-Simpson scale, meaning it has winds of between 111 mph and 130 mph.
``Additional strengthening is possible tonight as Omar moves through the northern Leeward Islands,'' the center said. ``Preparations to protect life and property should be rushed to completion.''
Tropical storm warnings, indicating winds of 39 mph to 73 mph are likely within a day, were in place in Puerto Rico, Antigua, Barbuda and Montserrat.
The island of St. Croix in the Virgin Islands is the site of the Hovensa oil refinery, the third-biggest in the Americas.
``Hovensa LLC is in the process of shutting down essentially all its processing and auxiliary equipment at the St. Croix refinery except those necessary to maintain supply of power to the complex,'' Alex Moorhead, a spokesman for the plant, said by telephone.
Causing Blackouts
The refinery handled 456,000 barrels a day in July, according to the latest U.S. Energy Department records. The U.S. mainland received 338,000 barrels a day of refined products from the plant. The refinery is owned by Hess Corp. of New York and the state oil company, Petroleos de Venezuela SA.
Omar caused blackouts in Venezuela two days ago and halted shipping at Jose, one of the country's main oil terminals, Petroleos de Venezuela said yesterday in an e-mailed statement.
To the west, the center of a tropical depression moved inland over Honduras and may bring as much as 15 inches of rain, threatening flooding and landslides there and in Nicaragua, Belize, Guatemala and Mexico's Yucatan Peninsula, the center said in an advisory.
Tropical Depression 16 was 40 miles south-southwest of Limon, Honduras, and moving west-southwest at 7 mph at 9 p.m. Honduras time yesterday. Its maximum sustained winds decreased to 30 mph.
``Little change in strength is forecast during the next 24 hours,'' the U.S. agency said.
To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net; Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.
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Venezuela Supplies 300,000 Barrels of Subsidized Oil
By Matthew Walter
Oct. 16 (Bloomberg) -- Venezuela, the biggest oil exporter in the Americas, is currently supplying 300,000 barrels of oil a day at subsidized prices to poor countries in South America and the Caribbean, President Hugo Chavez said.
The president said Venezuela will continue to press the Organization of Petroleum Exporting Countries to provide subsidized oil to the 50 poorest countries in the world, most of which are in Africa. There isn't yet a ``consensus'' on the issue within the oil-producing cartel, Chavez said late yesterday in comments broadcast by state television.
Chavez said the Venezuelan economy won't collapse even as oil prices decline. Crude oil traded below $73 a barrel today after a global stock plunge heightened concern bank bailouts won't prevent a recession.
``Many want the oil price to continue to drop to see us fall, but Venezuela isn't going to go under,'' he said, according to the state news wire. ``Although no country can say that it won't be affected by this economic disorder, the threat that some sectors want this to create in this country isn't going to materialize.''
Venezuela intends to reduce its dependence on trade with the U.S. by increasing oil shipments to China, he said. The South American country will ``soon'' be sending 400,000 barrels a day to China, with the goal of increasing that to 1 million barrels a day ``in the coming years,'' he said.
Oil Output
Venezuelan oil output was unchanged in September from the previous month at 2.36 million barrels a day, according to Bloomberg estimates.
Chavez said OPEC should also consider Venezuela's proposal to create a development bank. If the initiative fails, he said he'll pursue the option with oil-producing nations such as Russia and Iran.
The socialist leader said his country has benefited from economic and military agreements with Russia, which has sold Venezuela billions of dollars of weapons.
``I think the rebirth of Russia is positive for the world,'' Chavez said. ``If it weren't for Russia, and the rebirth of Russia, Venezuela would be completely disarmed.''
To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net.
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Oct. 16 (Bloomberg) -- Venezuela, the biggest oil exporter in the Americas, is currently supplying 300,000 barrels of oil a day at subsidized prices to poor countries in South America and the Caribbean, President Hugo Chavez said.
The president said Venezuela will continue to press the Organization of Petroleum Exporting Countries to provide subsidized oil to the 50 poorest countries in the world, most of which are in Africa. There isn't yet a ``consensus'' on the issue within the oil-producing cartel, Chavez said late yesterday in comments broadcast by state television.
Chavez said the Venezuelan economy won't collapse even as oil prices decline. Crude oil traded below $73 a barrel today after a global stock plunge heightened concern bank bailouts won't prevent a recession.
``Many want the oil price to continue to drop to see us fall, but Venezuela isn't going to go under,'' he said, according to the state news wire. ``Although no country can say that it won't be affected by this economic disorder, the threat that some sectors want this to create in this country isn't going to materialize.''
Venezuela intends to reduce its dependence on trade with the U.S. by increasing oil shipments to China, he said. The South American country will ``soon'' be sending 400,000 barrels a day to China, with the goal of increasing that to 1 million barrels a day ``in the coming years,'' he said.
Oil Output
Venezuelan oil output was unchanged in September from the previous month at 2.36 million barrels a day, according to Bloomberg estimates.
Chavez said OPEC should also consider Venezuela's proposal to create a development bank. If the initiative fails, he said he'll pursue the option with oil-producing nations such as Russia and Iran.
The socialist leader said his country has benefited from economic and military agreements with Russia, which has sold Venezuela billions of dollars of weapons.
``I think the rebirth of Russia is positive for the world,'' Chavez said. ``If it weren't for Russia, and the rebirth of Russia, Venezuela would be completely disarmed.''
To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net.
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Obama to Declare Carbon Dioxide Dangerous Pollutant If Elected
By Jim Efstathiou Jr.
Oct. 16 (Bloomberg) -- Barack Obama will classify carbon dioxide as a dangerous pollutant that can be regulated should he win the presidential election on Nov. 4, opening the way for new rules on greenhouse gas emissions.
The Democratic senator from Illinois will tell the Environmental Protection Agency that it may use the 1990 Clean Air Act to set emissions limits on power plants and manufacturers, his energy adviser, Jason Grumet, said in an interview. President George W. Bush declined to curb CO2 emissions under the law even after the Supreme Court ruled in 2007 that the government may do so.
If elected, Obama would be the first president to group emissions blamed for global warming into a category of pollutants that includes lead and carbon monoxide. Obama's rival in the presidential race, Republican Senator John McCain of Arizona, has not said how he would treat CO2 under the act.
Obama ``would initiate those rulemakings,'' Grumet said in an Oct. 6 interview in Boston. ``He's not going to insert political judgments to interrupt the recommendations of the scientific efforts.''
Placing heat-trapping pollutants in the same category as ozone may lead to caps on power-plant emissions and force utilities to use the most expensive systems to curb pollution. The move may halt construction plans on as many as half of the 130 proposed new U.S. coal plants.
The president may take action on new rules immediately upon taking office, said David Bookbinder, chief climate counsel for the Sierra Club. Environment groups including the Sierra Club and Natural Resources Defense Council will issue a regulatory agenda for the next president that calls for limits on CO2 from industry.
`Hit Ground Running'
``This is what they should do to hit the ground running,'' Bookbinder said in an Oct. 10 telephone interview.
Separately, Congress is debating legislation to create an emissions market to address global warming, a solution endorsed by both candidates and utilities such as American Electric Power Co., the biggest U.S. producer of electricity from coal. Congress failed to pass a global-warming bill in June and how long it may take lawmakers to agree on a plan isn't known.
``We need federal legislation to deal with greenhouse-gas emissions,'' said Vicki Arroyo, general counsel for the Pew Center on Global Climate Change in Arlington, Virginia. ``In the meantime, there is this vacuum. People are eager to get started on this.''
Bush Fought Court
Burning coal to generate electricity produces more than a third of energy-related carbon dioxide emissions and half the U.S. power supply, according to the Energy Department. Every hour, fossil-fuel combustion generates 3.5 million tons of emissions worldwide, helping create a warming effect that ``already threatens our climate,'' the Paris-based International Energy Agency said.
The EPA under Bush fought the notion that the Clean Air Act applies to CO2 all the way to the Supreme Court. The law has been used successfully to regulate six pollutants, including sulfur dioxide and ozone. Regulation under the act ``could result in an unprecedented expansion of EPA authority,'' EPA Administrator Stephen Johnson said in July. The law ``is the wrong tool for the job.''
Proponents of regulation are hoping for better results under a new president. Obama adviser Grumet, executive director of the National Commission on Energy Policy, said if Congress hasn't acted in 18 months, about the time it would take to draft rules, the president should.
EPA Authority
``The EPA is obligated to move forward in the absence of Congressional action,'' Grumet said. ``If there's no action by Congress in those 18 months, I think any responsible president would want to have the regulatory approach.''
States where coal-fired plants may be affected include Nevada, Utah, New Mexico, Texas, Montana, Minnesota, Illinois, Michigan, Ohio, Pennsylvania, Virginia, Georgia and Florida.
The alternative, a national cap-and-trade program created by Congress, offers industry more options, said Bruce Braine, a vice president at Columbus, Ohio-based American Electric. The world's largest cap-and-trade plan for greenhouse gases opened in Europe in 2005.
Under a cap-and-trade program, polluters may keep less- efficient plants running if they offset those emissions with investments in projects that lower pollution, such as wind- energy turbines or systems that destroy methane gas from landfills.
McCain `Not a Fan'
``Those options may still allow me to build new efficient power plants that might not meet a higher standard,'' Braine said in an Oct. 9 interview. ``That might be a more cost- effective way to approach it.''
McCain hasn't said how he would approach CO2 regulation under the Clean Air Act. McCain adviser and former Central Intelligence Agency director James Woolsey said Oct. 6 that new rules may conflict with Congressional efforts. Policy adviser Rebecca Jensen Tallent said in August that McCain prefers a bill debated by Congress rather than regulations ``established through one agency where one secretary is getting to make a lot of decisions.''
``He is not as big of a fan of standards-based approaches,'' Arroyo said. ``The Supreme Court thinks it's clear that there is greenhouse-gas authority under the Clean Air Act. To take that off the table probably wouldn't be very wise.''
How new regulations would affect the proposed U.S. coal plants depends on how they are written, said Bill Fang, climate issue director for the Edison Electric Institute, a Washington- based lobbying group for utilities. About half of the proposed plants plan to use technologies that are 20 percent more efficient than conventional coal burners.
Stopped Construction
``Several states have denied the applicability of the Clean Air Act to coal permits,'' Fang said in an Oct. 10 interview.
In June, a court in Georgia stopped construction of the 1,200-megawatt Longleaf power plant, a $2 billion project, because developer Dynegy Inc. failed to consider cleaner technology.
An appeals board within the EPA is considering a challenge from the Sierra Club to Deseret Power Electric Cooperative's air permit for its 110-megawatt Bonanza coal plant in Utah on grounds that it failed to require controls on CO2. One megawatt is enough to power about 800 typical U.S. homes.
``Industry has woken up to the fact that a new progressive administration could move quickly to make the United States a leader rather than a laggard,'' said Bruce Nilles, director of the group's national coal campaign.
To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net
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ASX Set to List Coal, Gas Futures Starting Next Year
By Angela Macdonald-Smith
Oct. 16 (Bloomberg) -- The Australian Securities Exchange plans to introduce futures contracts for coal, natural gas, and renewable energy credits next year that should help energy companies better manage risks posed by changing prices.
The exchange, owned by ASX Ltd., intends to start trading in the contracts between February and May next year, probably starting with power-station coal for which there is most demand, Anthony Collins, general manager for emerging markets, said today in Sydney.
ASX revived electricity futures in Australia in 2002 and the new contracts will enable energy and financial companies to trade between different fuels through the same market, reducing risks arising from fluctuating prices and carbon costs. The coal futures contract will be based on Japanese-quality thermal coal exported from Newcastle, the world's biggest coal-export harbor.
``In terms of the largest market to service, it's coal; it's coming of age,'' Collins said in an interview following a briefing. ``The timing is very good and everybody wants it, because at the moment, just like the banks don't trust each other because of the counter-party exposure, in the commodity market that's also constraining trade. So, it's the best time to have a cleared market for physical coal.''
Coal futures trading on the ASX may start with 10-15 market participants, rising to ``hundreds if not thousands'' within five years. Trading volumes could rival those in West Texas Intermediate, the U.S. benchmark oil variety, he said.
London Rival
The ASX coal contracts will compete against those planned by ICE Futures in London, which Collins expects will be less popular because they will be settled in cash against trades, bids and offers in the over-the-counter market, instead of in delivered fuel.
``The problem with that is, in the over-the-counter market the liquidity is drying up because of the counter-party issues,'' he said. ``We think that deliverable contracts is a much better specification.''
The coal futures will be monthly contracts each for 1,000 metric tons of power-station coal exported from Newcastle in New South Wales. The ASX has yet to announce the fees for market participants.
New Zealand power futures will be among the more than 20 new products to be listed within the four-month period, Collins said.
The ASX can't give a date yet for the start of carbon futures trading, likely later in 2009, because the timing depends on the Australian government's legislation for the start of emissions trading, Collins said. Australia's proposed carbon trading system, intended to help tackle greenhouse gases blamed for global warming, is due to start on July 1, 2010.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- The Australian Securities Exchange plans to introduce futures contracts for coal, natural gas, and renewable energy credits next year that should help energy companies better manage risks posed by changing prices.
The exchange, owned by ASX Ltd., intends to start trading in the contracts between February and May next year, probably starting with power-station coal for which there is most demand, Anthony Collins, general manager for emerging markets, said today in Sydney.
ASX revived electricity futures in Australia in 2002 and the new contracts will enable energy and financial companies to trade between different fuels through the same market, reducing risks arising from fluctuating prices and carbon costs. The coal futures contract will be based on Japanese-quality thermal coal exported from Newcastle, the world's biggest coal-export harbor.
``In terms of the largest market to service, it's coal; it's coming of age,'' Collins said in an interview following a briefing. ``The timing is very good and everybody wants it, because at the moment, just like the banks don't trust each other because of the counter-party exposure, in the commodity market that's also constraining trade. So, it's the best time to have a cleared market for physical coal.''
Coal futures trading on the ASX may start with 10-15 market participants, rising to ``hundreds if not thousands'' within five years. Trading volumes could rival those in West Texas Intermediate, the U.S. benchmark oil variety, he said.
London Rival
The ASX coal contracts will compete against those planned by ICE Futures in London, which Collins expects will be less popular because they will be settled in cash against trades, bids and offers in the over-the-counter market, instead of in delivered fuel.
``The problem with that is, in the over-the-counter market the liquidity is drying up because of the counter-party issues,'' he said. ``We think that deliverable contracts is a much better specification.''
The coal futures will be monthly contracts each for 1,000 metric tons of power-station coal exported from Newcastle in New South Wales. The ASX has yet to announce the fees for market participants.
New Zealand power futures will be among the more than 20 new products to be listed within the four-month period, Collins said.
The ASX can't give a date yet for the start of carbon futures trading, likely later in 2009, because the timing depends on the Australian government's legislation for the start of emissions trading, Collins said. Australia's proposed carbon trading system, intended to help tackle greenhouse gases blamed for global warming, is due to start on July 1, 2010.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Exxon Starts Competitive Bidding for PNG LNG Plant
By Angela Macdonald-Smith
Oct. 16 (Bloomberg) -- Exxon Mobil Corp., operator of a proposed $11 billion liquefied natural gas venture in Papua New Guinea, said it started competitive bidding for the construction of the gas processing part of the project.
Bechtel Group Inc. and Chiyoda Corp. will compete against each other for the contract to build processing, storage and loading systems for 6.3 million metric tons a year of LNG output, Exxon's Esso Highlands Ltd. unit said today in an e-mailed statement. The contract will probably be awarded by late 2009 and construction will start in 2010, it said.
Exxon and its partners, including Oil Search Ltd. and Santos Ltd., want to tap demand for LNG that the U.S. company estimates is set to increase by more than 4 percent annually to reach almost half a billion tons a year by 2030, about 15 percent of global gas demand. They decided in May to start initial engineering work, known as FEED, on the project.
``Exxon Mobil is pleased to have the first phase of the LNG plant FEED completed and we look forward to a successful tendering process leading to the downstream engineering, construction and procurement contract,'' Peter Graham, venture manager at Exxon Mobil, said in the statement.
The Papua New Guinea plant, to be built about 20 kilometers (12.4 miles) northwest of Port Moresby on the Gulf of Papua, is scheduled to start shipments in late 2013 or 2014.
KBR, WorleyParsons
Eos, a venture between KBR Inc. and Sydney-based WorleyParsons Ltd., is carrying out initial design and engineering work for the development of gas fields that will supply the project. Construction contracts for that work are also expected to be awarded by late 2009, Exxon said.
Exxon has 41.5 percent of the LNG project, while Port Moresby-based Oil Search has 34 percent, Adelaide-based Santos 17.7 percent, AGL Energy Ltd. 3.6 percent, Nippon Oil Corp. 1.8 percent, the Papua New Guinea government-owned Eda Oil Ltd. 0.2 percent and MRDC, held by local landowners, 1.2 percent. The interests will change when companies nominated by the government take stakes, Exxon said. AGL is in final negotiations to sell its share.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- Exxon Mobil Corp., operator of a proposed $11 billion liquefied natural gas venture in Papua New Guinea, said it started competitive bidding for the construction of the gas processing part of the project.
Bechtel Group Inc. and Chiyoda Corp. will compete against each other for the contract to build processing, storage and loading systems for 6.3 million metric tons a year of LNG output, Exxon's Esso Highlands Ltd. unit said today in an e-mailed statement. The contract will probably be awarded by late 2009 and construction will start in 2010, it said.
Exxon and its partners, including Oil Search Ltd. and Santos Ltd., want to tap demand for LNG that the U.S. company estimates is set to increase by more than 4 percent annually to reach almost half a billion tons a year by 2030, about 15 percent of global gas demand. They decided in May to start initial engineering work, known as FEED, on the project.
``Exxon Mobil is pleased to have the first phase of the LNG plant FEED completed and we look forward to a successful tendering process leading to the downstream engineering, construction and procurement contract,'' Peter Graham, venture manager at Exxon Mobil, said in the statement.
The Papua New Guinea plant, to be built about 20 kilometers (12.4 miles) northwest of Port Moresby on the Gulf of Papua, is scheduled to start shipments in late 2013 or 2014.
KBR, WorleyParsons
Eos, a venture between KBR Inc. and Sydney-based WorleyParsons Ltd., is carrying out initial design and engineering work for the development of gas fields that will supply the project. Construction contracts for that work are also expected to be awarded by late 2009, Exxon said.
Exxon has 41.5 percent of the LNG project, while Port Moresby-based Oil Search has 34 percent, Adelaide-based Santos 17.7 percent, AGL Energy Ltd. 3.6 percent, Nippon Oil Corp. 1.8 percent, the Papua New Guinea government-owned Eda Oil Ltd. 0.2 percent and MRDC, held by local landowners, 1.2 percent. The interests will change when companies nominated by the government take stakes, Exxon said. AGL is in final negotiations to sell its share.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Nuclear Reactors May Supply a Fifth of Global Power by 2050
By Tara Patel
Oct. 16 (Bloomberg) -- Nuclear reactors may produce more than a fifth of global electricity by 2050 as demand for power rises in countries such as China and India, according to a report by the Organization for Economic Cooperation and Development.
At the higher end of forecasts, atomic power output would climb to 22 percent of the total in 2050 from the current 16 percent, according to the study published today by the Paris- based OECD's Nuclear Energy Agency. To reach this level, 54 reactors would need to be built each year between 2030 and 2050, the agency said. There are 439 operating in the world.
Utilities and governments from the U.S. to Abu Dhabi have proposed building reactors to meet increasing energy demand and reduce carbon dioxide emissions, which scientists say cause global warming. More than 90 new plants are approved and in the planning stage, while at least double that are proposed, according to the World Nuclear Association. Applications have been filed for about 20 reactors in the U.S. and China plans to quadruple nuclear capacity from existing and new reactors by 2020.
``The world could construct nuclear power plants at a rate more than sufficient to meet the NEA high scenario projections,'' according to a summary of the report.
The pace of nuclear-generation deals is increasing as atomic power gains prominence amid high crude prices and government targets to reduce reliance on polluting fossil fuels. Total SA is one oil producer that's moving into the industry. The Paris-based company joined forces earlier this year with Areva SA, the world's largest reactor builder, and GDF Suez SA to bid for a planned reactor in Abu Dhabi.
Nuclear `Earthquake'
``It's an earthquake,'' Anne Lauvergeon, chief executive officer of Areva, said Jan. 15. ``For the first time, a Gulf country has decided to start a civil nuclear-energy sector.''
India, where homes and industry suffer chronic power shortages, plans to spend as much as $14 billion to buy reactors from suppliers such as Areva, General Electric Co. and Westinghouse Electric Co. after a U.S.-backed deal helped end a three-decade ban on nuclear generation earlier this month.
Electricite de France SA, the world's biggest reactor operator, last month announced a bid to take over British Energy Plc for 12.5 billion pounds ($21.8 billion) to become the U.K.'s biggest power producer. The French utility, which runs 58 nuclear reactors at home, plans to build four so-called third-generation plants in the U.K., with the first scheduled to start in 2017.
In June, 41 reactors were being built around the world, with an average construction time of 62 months, the OECD said.
Enough Uranium
There is enough uranium, which is used to fuel atomic reactors, to expand the industry ``at least until 2050,'' the report said. ``The current resource-to-consumption ratio is better than that of gas or oil.''
The industry still faces the question of what should be done with high-level radioactive waste, the OECD said. Delays and failures to push through disposal projects ``have a significant negative impact on the image of nuclear energy.''
Quantities of waste are ``relatively small'' and can be stored for extended periods, the agency said, noting that ``no facilities for disposal of spent nuclear fuel and high-level radioactive waste have been licensed.''
To contact the reporter on this story: Tara Patel in Paris at Tpatel2@bloomberg.net
Read more...
Oct. 16 (Bloomberg) -- Nuclear reactors may produce more than a fifth of global electricity by 2050 as demand for power rises in countries such as China and India, according to a report by the Organization for Economic Cooperation and Development.
At the higher end of forecasts, atomic power output would climb to 22 percent of the total in 2050 from the current 16 percent, according to the study published today by the Paris- based OECD's Nuclear Energy Agency. To reach this level, 54 reactors would need to be built each year between 2030 and 2050, the agency said. There are 439 operating in the world.
Utilities and governments from the U.S. to Abu Dhabi have proposed building reactors to meet increasing energy demand and reduce carbon dioxide emissions, which scientists say cause global warming. More than 90 new plants are approved and in the planning stage, while at least double that are proposed, according to the World Nuclear Association. Applications have been filed for about 20 reactors in the U.S. and China plans to quadruple nuclear capacity from existing and new reactors by 2020.
``The world could construct nuclear power plants at a rate more than sufficient to meet the NEA high scenario projections,'' according to a summary of the report.
The pace of nuclear-generation deals is increasing as atomic power gains prominence amid high crude prices and government targets to reduce reliance on polluting fossil fuels. Total SA is one oil producer that's moving into the industry. The Paris-based company joined forces earlier this year with Areva SA, the world's largest reactor builder, and GDF Suez SA to bid for a planned reactor in Abu Dhabi.
Nuclear `Earthquake'
``It's an earthquake,'' Anne Lauvergeon, chief executive officer of Areva, said Jan. 15. ``For the first time, a Gulf country has decided to start a civil nuclear-energy sector.''
India, where homes and industry suffer chronic power shortages, plans to spend as much as $14 billion to buy reactors from suppliers such as Areva, General Electric Co. and Westinghouse Electric Co. after a U.S.-backed deal helped end a three-decade ban on nuclear generation earlier this month.
Electricite de France SA, the world's biggest reactor operator, last month announced a bid to take over British Energy Plc for 12.5 billion pounds ($21.8 billion) to become the U.K.'s biggest power producer. The French utility, which runs 58 nuclear reactors at home, plans to build four so-called third-generation plants in the U.K., with the first scheduled to start in 2017.
In June, 41 reactors were being built around the world, with an average construction time of 62 months, the OECD said.
Enough Uranium
There is enough uranium, which is used to fuel atomic reactors, to expand the industry ``at least until 2050,'' the report said. ``The current resource-to-consumption ratio is better than that of gas or oil.''
The industry still faces the question of what should be done with high-level radioactive waste, the OECD said. Delays and failures to push through disposal projects ``have a significant negative impact on the image of nuclear energy.''
Quantities of waste are ``relatively small'' and can be stored for extended periods, the agency said, noting that ``no facilities for disposal of spent nuclear fuel and high-level radioactive waste have been licensed.''
To contact the reporter on this story: Tara Patel in Paris at Tpatel2@bloomberg.net
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