By Liu Shanshan (chinadaily.com.cn)
Facing a housing market lull which could drag China's economy further in the backdrop of a worldwide financial crisis, Beijing is probing possibilities to loosen its macro control to activate the real estate sector.
As many as 18 Chinese cities, including Shanghai,Guangzhou,Hangzhou and Xi'an, have announced detailed policies to boost their property market, which have seen at least four months of consecutive drops in housing prices.
Propelled by the local governments' measures, the central government is believed to be studying market trends. Analysts predict that Beijing is expected to jump on the bandwagon by rectifying its strict regulatory decrees of higher taxation, and removing draconian control on bank lending to anyone buying second homes.
Speaking on the sidelines of a press conference Thursday in Beijing, Du Ying, deputy minister of the National Development and Reform Commission, told reporters that the real estate industry, a major sector of China's fixed-asset investment, that a major drive behind the country's past rapid economic rise is declining, and the government is "closely watching developments".
Some Chinese economists caution that a worsening slump in the real estate market in China would not only undermine the healthy growth of the economy, but also put the country's financial system at risk.
The worsening financial crisis, now sweeping the world and hardening the lives of many, originated from the subprime debacle in mid 2007 in the United States. Because of the sudden bust of a 10-year American housing boom, a rocketing number of American homeowners were unable to pay mortgages, and the banks were troubled by mountain-high bad debts.
To prevent the same scenario from happening, the 18 Chinese cities have resorted to measures, including doling out subsidies to private homebuyers, unprecedented since former Prime Minister Zhu Rongji launched privatization policies of housing; cutting taxes on housing deeds, and even giving permanent urban residents permits to lure outside homebuyers, in Hangzhou's case.
Shanghairaised the mortgage ceiling of the housing accumulation fund by one-fifth, into which employees and employers deposit money every month in return for lower mortgage rates, a move expected to encourage city residents to apply for a larger housing loan.
Regulatory Macro Control
Like the United States and Europe,China also witnessed a sizzling real estate sector since 2000, led by Shanghai,Guangzhou, and other relatively developed coastal cities, that benefited from the reform and opening-up policies. Buoyed by increasing incomes, a rising number of well-off urban residents purchased their own homes, in addition to cars and other luxuries, and become China's middle-class.
However, the laissez-faire development of the property market has led to skyrocketing prices, which resulted in many grievances from homebuyers. At one time, the selling price of per square meter for a downtown Shanghai plush apartment was reported at more than 120,000 yuan (US$17.60). The housing price hikes also created run away inflation in 2007.
This led to Beijing putting on the brakes in August 2007 by introducing higher taxes on housing prices, collecting more fees, and imposing 110 percent mortgage rates on second apartments, effectively controlling hoarding and speculation. As a result, housing prices began to decline.
Waning Property Market
In Shenzhen, China's first special economic zone, housing prices have declined more than 40 percent from its peak last year. Sales in Beijing, Shanghai and all other major cities have reported a substantive drop.
Statistics released by the state media, Xinhua, show the housing sales volume in Beijing during the National Day holiday decreased by 72 percent, compared with the same period last year. This period is traditionally a sales peak time for real estate transactions. Despite the deep price cuts made by property developers, only 69 apartments on average were sold per day during that week.
As the backbone of China's state revenues, the weakening property demand may hit the country's public coffers and fiscal policies as well.
The fall in property sales market will lead to a reduced demand for construction materials like steel, cement and lumber, and at the same time trigger slumps in China's fixed-asset investment sector. Combined with a sharp drop in exports initiated by Wall Street's stock plunge and global financial turmoil, China may face big risks in a slowdown of GDP growth rates and even an economic downturn.
The sluggish property market has also sparked concerns over the country's capital safety, mainly from the banks. There are fears that domestic financial institutions may be caught in the same dilemma as their US counterparts, some of whom went belly up due to the subprime crisis.
Wait-and-see Homebuyers
The 18 Chinese cities used many measures to stimulate their real estate markets: extending the length of time homeowners can pay back mortgages, reducing property taxes of private house owners and canceling restrictions on buying a second home. These policies were a great impetus for Chinese salary earners who took out all their savings to buy a home a year ago, but in the current bleak housing market, more and more potential homebuyers would rather wait and see regardless of those favorable policies.
Many potential buyers believe there is still room for further price adjustments and think it is too risky to buy homes now, given the instability of the global economy. "I will not open my purse until April or May next year, when I believe housing prices may undergo a 30 percent drop," said a Beijing resident surnamed Yu, who wants to buy a home in the Chinese capital.
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Saturday, October 18, 2008
Asian Currencies: Won Rebounds After Biggest Drop in a Decade
By Lilian Karunungan
Oct. 18 (Bloomberg) -- South Korea's won rebounded yesterday, following the biggest drop in a decade on Oct. 16, on speculation the government will prop up confidence in financial markets. Indonesia's rupiah and Thailand's baht gained.
The won snapped a two-day slide, paring this year's loss to 29 percent after the Bank of Korea said it will trade directly with banks in the swap market to help boost foreign currency liquidity. The government needs to raise spending and cut taxes to shelter the economy from the global turmoil, Finance Minister Kang Man Soo said yesterday.
``The move by the central bank provided a psychological boost to the currency market,'' said Kim Sung Soon, a currency dealer with state-run Industrial Bank of Korea in Seoul. ``The unrest remains though, as we all are not sure of how this global turmoil will pan out in the months ahead.''
The won rose 2.9 percent to 1,334 per dollar in Seoul yesterday, according to Seoul Money Brokerage Services Ltd. The rupiah advanced 0.7 percent to 9,810 in Jakarta, from 9,875 Oct. 16, according to data compiled by Bloomberg.
The won has lost 8.3 percent this month as banks and companies scramble for dollars to service debt, while global turmoil in financial markets makes overseas borrowings even more expensive.
Gains Limited
The change in the trading system will ``help ease the recent market jitters in the foreign-currency money market,'' the Seoul-based Bank of Korea said in a statement yesterday. Currently, the central bank trades first with intermediary banks, which then trade with local banks.
Kang and other policy makers held an emergency summit yesterday, seeking steps to restore confidence in the economy after stocks plunged to a three-year low. The Kospi share index tumbled 2.7 percent yesterday, extending this year's loss to 38 percent.
South Korea's foreign reserves fell for a sixth month in September to $239.7 billion, from $243.2 billion in August, after authorities provided dollars in the swap market to boost liquidity and help stem the won's drop.
``Further gains in the won may be limited as heavy foreign stock sales in the past few days will spur some demand for the dollar,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. Still, ``exporters are willing to sell dollars on dips in the won, which will provide some buffer.''
Indonesia's rupiah posted its first weekly gain in a month as the central bank sold dollars to limit losses stemming from a slump in the stock market.
Indonesia approved on Oct. 16 a plan giving authorities power to rescue troubled banks and insurance companies. The nation's benchmark share index fell 4.7 percent yesterday for a fourth weekly drop.
Intervention Caution
``Market players are cautious about central bank intervention,'' said Tetsuo Yoshikoshi, a market analyst at Sumitomo Mitsui Banking Corp. in Singapore.
The currency, which declined past 10,000 last week for the first time in three years, advanced 1.4 percent this week. Central banks arrange sales or purchases of currencies to influence exchange rates.
Thailand's baht ended a two-week drop on speculation cooperation among Asian governments will boost confidence among investors. Indonesia's President Susilo Bambang Yudhoyono wrote to counterparts in the region, proposing a meeting with Japan, China and South Korea to find ways to weather the credit crisis.
``We are seeing some resilience in the baht,'' said Carl Rajoo, a regional economist at Forecast Singapore Pte Ltd. ``Fundamentally, Thailand is still quite robust although politics will continue to weigh on the currency.''
The baht rose to 34.26 a dollar from 34.27 on Oct. 16, according to data compiled by Bloomberg.
Elsewhere, the Philippine peso was little changed at 48.085 a dollar, according to Tullett Prebon Plc. The Malaysian ringgit was at 3.5261 versus 3.5265 on Oct. 16. Taiwan's dollar was little changed at NT$32.550 and Vietnam's dong fell 0.1 percent to 16,605.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net;
Read more...
Oct. 18 (Bloomberg) -- South Korea's won rebounded yesterday, following the biggest drop in a decade on Oct. 16, on speculation the government will prop up confidence in financial markets. Indonesia's rupiah and Thailand's baht gained.
The won snapped a two-day slide, paring this year's loss to 29 percent after the Bank of Korea said it will trade directly with banks in the swap market to help boost foreign currency liquidity. The government needs to raise spending and cut taxes to shelter the economy from the global turmoil, Finance Minister Kang Man Soo said yesterday.
``The move by the central bank provided a psychological boost to the currency market,'' said Kim Sung Soon, a currency dealer with state-run Industrial Bank of Korea in Seoul. ``The unrest remains though, as we all are not sure of how this global turmoil will pan out in the months ahead.''
The won rose 2.9 percent to 1,334 per dollar in Seoul yesterday, according to Seoul Money Brokerage Services Ltd. The rupiah advanced 0.7 percent to 9,810 in Jakarta, from 9,875 Oct. 16, according to data compiled by Bloomberg.
The won has lost 8.3 percent this month as banks and companies scramble for dollars to service debt, while global turmoil in financial markets makes overseas borrowings even more expensive.
Gains Limited
The change in the trading system will ``help ease the recent market jitters in the foreign-currency money market,'' the Seoul-based Bank of Korea said in a statement yesterday. Currently, the central bank trades first with intermediary banks, which then trade with local banks.
Kang and other policy makers held an emergency summit yesterday, seeking steps to restore confidence in the economy after stocks plunged to a three-year low. The Kospi share index tumbled 2.7 percent yesterday, extending this year's loss to 38 percent.
South Korea's foreign reserves fell for a sixth month in September to $239.7 billion, from $243.2 billion in August, after authorities provided dollars in the swap market to boost liquidity and help stem the won's drop.
``Further gains in the won may be limited as heavy foreign stock sales in the past few days will spur some demand for the dollar,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. Still, ``exporters are willing to sell dollars on dips in the won, which will provide some buffer.''
Indonesia's rupiah posted its first weekly gain in a month as the central bank sold dollars to limit losses stemming from a slump in the stock market.
Indonesia approved on Oct. 16 a plan giving authorities power to rescue troubled banks and insurance companies. The nation's benchmark share index fell 4.7 percent yesterday for a fourth weekly drop.
Intervention Caution
``Market players are cautious about central bank intervention,'' said Tetsuo Yoshikoshi, a market analyst at Sumitomo Mitsui Banking Corp. in Singapore.
The currency, which declined past 10,000 last week for the first time in three years, advanced 1.4 percent this week. Central banks arrange sales or purchases of currencies to influence exchange rates.
Thailand's baht ended a two-week drop on speculation cooperation among Asian governments will boost confidence among investors. Indonesia's President Susilo Bambang Yudhoyono wrote to counterparts in the region, proposing a meeting with Japan, China and South Korea to find ways to weather the credit crisis.
``We are seeing some resilience in the baht,'' said Carl Rajoo, a regional economist at Forecast Singapore Pte Ltd. ``Fundamentally, Thailand is still quite robust although politics will continue to weigh on the currency.''
The baht rose to 34.26 a dollar from 34.27 on Oct. 16, according to data compiled by Bloomberg.
Elsewhere, the Philippine peso was little changed at 48.085 a dollar, according to Tullett Prebon Plc. The Malaysian ringgit was at 3.5261 versus 3.5265 on Oct. 16. Taiwan's dollar was little changed at NT$32.550 and Vietnam's dong fell 0.1 percent to 16,605.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net;
Read more...
Asia Stocks Rise for First Week in Seven on Government Measures
By Chua Kong Ho
Oct. 18 (Bloomberg) -- Asian stocks rose for the first week in seven after money market rates fell as governments in the region stepped up efforts to unlock credit markets.
Mitsubishi UFJ Financial Group Inc. and Westpac Banking Corp. rose more than 6 percent as Singapore and Malaysia joined Hong Kong and Australia in guaranteeing bank deposits. Tokyo Electric Power Co. climbed 16 percent as oil prices traded at half their July record and investors sought companies whose earnings are sheltered from a slowdown in overseas markets. The decline in oil and metals prices dragged BHP Billiton Ltd., the world's largest mining company, down 11 percent.
``The focus is on what the next policy response will be and the movements of the short-term money markets,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. ``Long-term investors are sitting on the sidelines waiting out this period.''
The MSCI Asia Pacific Index climbed 1.6 percent to 87.29 this week, its first weekly gain since August. A measure of utility companies had the biggest gains among the index's 10 industry groups, with raw-materials producers posting the largest decline.
The MSCI Asian index had its biggest-ever advance and decline this week, as investors weighed the likelihood that governments will succeed in preventing a financial industry collapse and limit the severity of a global economic slowdown.
Japan's Nikkei 225 Stock Average surged the most in its 59- year history on Oct. 14 after U.S. and European governments said they will take stakes in banks. The measure had its biggest slump since 1987 on Oct. 16 after U.S. retail sales declined, finishing the week with a 5 percent gain.
Perceived Risk
Hong Kong's Hang Seng Index fell 1.6 percent in the week, the seventh weekly decline and the longest losing streak since October 2002, as the city's Chief Executive Donald Tsang said he doesn't rule out a recession.
Mitsubishi UFJ, Japan's largest listed bank, gained 7 percent to 760 yen. Commonwealth Bank of Australia Ltd. added 4.7 percent to A$41.41 in Sydney. Westpac Banking advanced 6.4 percent to A$21.48.
The Singaporean and Malaysian deposit guarantees on Oct. 16 followed central banks in the U.S. and Europe earlier in the week committing $2 trillion to rescue financial companies from the credit crisis. The pledges drove the MSCI Asia Pacific index up 12 percent on Oct. 13-14. Institutions worldwide have posted $660 billion of losses related to U.S. mortgage investments.
The rate Australian banks charge each other for three-month loans fell to 5.66 percent from 6.2 percent a week ago. Hong Kong's three-month interbank offered rate for local dollar loans dropped the most since Sept. 26, down 0.15 percentage point to 4.2 percent. Perceived default risk in the region also declined, with measures of credit-default swaps falling in Japan and Australia.
Crude Oil Declines
Tokyo Electric, Asia's largest power producer, climbed 16 percent to 2,585 yen. Kansai Electric Power Co. gained 17 percent to 2,250 yen. Both companies use heavy oil in some of their plants.
Crude oil futures dropped to $71.85 a barrel in New York this week, bringing its plunge from a July peak to more than 50 percent. A measure of six metals traded on the London Metal Exchange, including copper and zinc, fell for a fifth week on concern demand for base metals will drop as economic activity slows.
BHP slumped 11 percent to A$24.59. Rio Tinto Group tumbled 14 percent to A$62.62, while Jiangxi Copper Co. sank 10 percent to 10.43 yuan in Shanghai.
MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever. Shares on the index were valued at 9.8 times earnings yesterday, near a record low reached on Oct. 10.
``Valuations at the moment are pretty reasonable. What I am worried about is that earnings will have to be downgraded,'' said Hans Goetti, who oversees $10 billion in Asia as chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. ``When you have an oversold situation, you can buy almost anything because it's a snap-back rally.''
To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
Read more...
Oct. 18 (Bloomberg) -- Asian stocks rose for the first week in seven after money market rates fell as governments in the region stepped up efforts to unlock credit markets.
Mitsubishi UFJ Financial Group Inc. and Westpac Banking Corp. rose more than 6 percent as Singapore and Malaysia joined Hong Kong and Australia in guaranteeing bank deposits. Tokyo Electric Power Co. climbed 16 percent as oil prices traded at half their July record and investors sought companies whose earnings are sheltered from a slowdown in overseas markets. The decline in oil and metals prices dragged BHP Billiton Ltd., the world's largest mining company, down 11 percent.
``The focus is on what the next policy response will be and the movements of the short-term money markets,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. ``Long-term investors are sitting on the sidelines waiting out this period.''
The MSCI Asia Pacific Index climbed 1.6 percent to 87.29 this week, its first weekly gain since August. A measure of utility companies had the biggest gains among the index's 10 industry groups, with raw-materials producers posting the largest decline.
The MSCI Asian index had its biggest-ever advance and decline this week, as investors weighed the likelihood that governments will succeed in preventing a financial industry collapse and limit the severity of a global economic slowdown.
Japan's Nikkei 225 Stock Average surged the most in its 59- year history on Oct. 14 after U.S. and European governments said they will take stakes in banks. The measure had its biggest slump since 1987 on Oct. 16 after U.S. retail sales declined, finishing the week with a 5 percent gain.
Perceived Risk
Hong Kong's Hang Seng Index fell 1.6 percent in the week, the seventh weekly decline and the longest losing streak since October 2002, as the city's Chief Executive Donald Tsang said he doesn't rule out a recession.
Mitsubishi UFJ, Japan's largest listed bank, gained 7 percent to 760 yen. Commonwealth Bank of Australia Ltd. added 4.7 percent to A$41.41 in Sydney. Westpac Banking advanced 6.4 percent to A$21.48.
The Singaporean and Malaysian deposit guarantees on Oct. 16 followed central banks in the U.S. and Europe earlier in the week committing $2 trillion to rescue financial companies from the credit crisis. The pledges drove the MSCI Asia Pacific index up 12 percent on Oct. 13-14. Institutions worldwide have posted $660 billion of losses related to U.S. mortgage investments.
The rate Australian banks charge each other for three-month loans fell to 5.66 percent from 6.2 percent a week ago. Hong Kong's three-month interbank offered rate for local dollar loans dropped the most since Sept. 26, down 0.15 percentage point to 4.2 percent. Perceived default risk in the region also declined, with measures of credit-default swaps falling in Japan and Australia.
Crude Oil Declines
Tokyo Electric, Asia's largest power producer, climbed 16 percent to 2,585 yen. Kansai Electric Power Co. gained 17 percent to 2,250 yen. Both companies use heavy oil in some of their plants.
Crude oil futures dropped to $71.85 a barrel in New York this week, bringing its plunge from a July peak to more than 50 percent. A measure of six metals traded on the London Metal Exchange, including copper and zinc, fell for a fifth week on concern demand for base metals will drop as economic activity slows.
BHP slumped 11 percent to A$24.59. Rio Tinto Group tumbled 14 percent to A$62.62, while Jiangxi Copper Co. sank 10 percent to 10.43 yuan in Shanghai.
MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever. Shares on the index were valued at 9.8 times earnings yesterday, near a record low reached on Oct. 10.
``Valuations at the moment are pretty reasonable. What I am worried about is that earnings will have to be downgraded,'' said Hans Goetti, who oversees $10 billion in Asia as chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. ``When you have an oversold situation, you can buy almost anything because it's a snap-back rally.''
To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
Read more...
U.S. Economy: Sentiment Drops by Record; Starts Fall
By Shobhana Chandra and Bob Willis
Enlarge Image/Details
Oct. 17 (Bloomberg) -- Confidence among Americans fell by the most on record and single-family housing starts hit a 26-year low, posing an increasing threat to consumer spending that accounts for more than two-thirds of the economy.
The Reuters/University of Michigan preliminary index of consumer sentiment fell to 57.5 this month from 70.3 in September. The measure averaged 85.6 last year. Construction of single-family homes dropped 12 percent last month to a 544,000 annual rate, the Commerce Department said in Washington.
Today's figures show that the tightening credit crunch has spurred a further step down in the three-year real-estate recession. Falling property values, along with the crash in stocks, threaten to cause the first decline in consumer spending since 1991, and put pressure on the Federal Reserve to cut interest rates again this month.
``Even gasoline-price decreases were overpowered by the massive destruction of wealth,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who used to work at the Fed. ``Things are pretty awful in the economy and that should make itself felt through weaker consumer spending.''
Treasuries rose and stocks dropped. Benchmark 10-year note yields fell to 3.91 percent at 4:10 p.m. in New York. The Standard & Poor's 500 Stock Index fell 0.6 percent to close at 940.55.
Economists' Forecasts
The confidence index was forecast to fall to 65, according to the median of 61 economists surveyed by Bloomberg News.
Starts on all residential properties, including condominiums, slid to a 817,000 annual pace, below all 74 forecasts in a Bloomberg News survey.
Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made it harder to qualify for a mortgage. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.
``Builders have stopped building in large measure, but they waited too long to stop building,'' Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University, said in a Bloomberg Television interview. ``At this point they've got to clear the inventory.''
Recovery Delayed
The biggest housing slump in a generation was showing signs of nearing a bottom when financial markets began to implode in September, leading to the government takeover of mortgage finance companies Freddie Mac and Fannie Mae, the failure of banks and a $700 billion government rescue plan this month.
``These things are putting a new nail'' in the real-estate market's coffin, David Seiders, chief economist at the National Association of Homebuilders, said in an interview on Bloomberg Television yesterday. ``This sort of vicious feedback loop is still in play.''
Building permits, a sign of future construction, dropped 8.3 percent to a 786,000 pace, matching the lowest level since November 1981.
Starts of single-family homes dropped to record lows in three of four regions in September, led by a 24 percent slump in the Midwest.
The University of Michigan's index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 56.7 from 67.2.
Record Low
Its gauge of current conditions, which reflects Americans' perceptions of their financial situations and whether it is a good time to buy big-ticket items like cars, slumped to 58.9, the lowest level ever, from 75.
There was mixed news on price expectations. Consumers said they projected an inflation rate of 4.5 percent over the next 12 months, compared with 4.3 percent in the September survey. Over the next five years, the figures tracked by Fed policy makers, Americans expected a 2.8 percent rate of inflation, down from the prior month and the slowest estimate in a year.
Regular unleaded gasoline prices slid to an average $3.08 a gallon at the pump on Oct. 15, from $3.63 on Sept. 30, according to AAA.
Shoppers are paring expenses. Sales at U.S. stores open at least a year rose 1 percent last week from a year earlier, slowing for the eighth time in nine weeks, the International Council of Shopping Centers and Goldman Sachs Group Inc. said in a statement on Oct. 14.
Wal-Mart Stores Inc., the world's largest retailer, reaffirmed its profit forecast for the third quarter after shoppers seeking discounted groceries and household goods helped to boost the Bentonville, Arkansas-based company's September sales.
Consumers ``continue to look for basics for their families,'' Eduardo Castro-Wright, Wal-Mart's U.S. stores chief, said in an Oct. 8 statement.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Read more...
Enlarge Image/Details
Oct. 17 (Bloomberg) -- Confidence among Americans fell by the most on record and single-family housing starts hit a 26-year low, posing an increasing threat to consumer spending that accounts for more than two-thirds of the economy.
The Reuters/University of Michigan preliminary index of consumer sentiment fell to 57.5 this month from 70.3 in September. The measure averaged 85.6 last year. Construction of single-family homes dropped 12 percent last month to a 544,000 annual rate, the Commerce Department said in Washington.
Today's figures show that the tightening credit crunch has spurred a further step down in the three-year real-estate recession. Falling property values, along with the crash in stocks, threaten to cause the first decline in consumer spending since 1991, and put pressure on the Federal Reserve to cut interest rates again this month.
``Even gasoline-price decreases were overpowered by the massive destruction of wealth,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who used to work at the Fed. ``Things are pretty awful in the economy and that should make itself felt through weaker consumer spending.''
Treasuries rose and stocks dropped. Benchmark 10-year note yields fell to 3.91 percent at 4:10 p.m. in New York. The Standard & Poor's 500 Stock Index fell 0.6 percent to close at 940.55.
Economists' Forecasts
The confidence index was forecast to fall to 65, according to the median of 61 economists surveyed by Bloomberg News.
Starts on all residential properties, including condominiums, slid to a 817,000 annual pace, below all 74 forecasts in a Bloomberg News survey.
Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made it harder to qualify for a mortgage. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.
``Builders have stopped building in large measure, but they waited too long to stop building,'' Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University, said in a Bloomberg Television interview. ``At this point they've got to clear the inventory.''
Recovery Delayed
The biggest housing slump in a generation was showing signs of nearing a bottom when financial markets began to implode in September, leading to the government takeover of mortgage finance companies Freddie Mac and Fannie Mae, the failure of banks and a $700 billion government rescue plan this month.
``These things are putting a new nail'' in the real-estate market's coffin, David Seiders, chief economist at the National Association of Homebuilders, said in an interview on Bloomberg Television yesterday. ``This sort of vicious feedback loop is still in play.''
Building permits, a sign of future construction, dropped 8.3 percent to a 786,000 pace, matching the lowest level since November 1981.
Starts of single-family homes dropped to record lows in three of four regions in September, led by a 24 percent slump in the Midwest.
The University of Michigan's index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 56.7 from 67.2.
Record Low
Its gauge of current conditions, which reflects Americans' perceptions of their financial situations and whether it is a good time to buy big-ticket items like cars, slumped to 58.9, the lowest level ever, from 75.
There was mixed news on price expectations. Consumers said they projected an inflation rate of 4.5 percent over the next 12 months, compared with 4.3 percent in the September survey. Over the next five years, the figures tracked by Fed policy makers, Americans expected a 2.8 percent rate of inflation, down from the prior month and the slowest estimate in a year.
Regular unleaded gasoline prices slid to an average $3.08 a gallon at the pump on Oct. 15, from $3.63 on Sept. 30, according to AAA.
Shoppers are paring expenses. Sales at U.S. stores open at least a year rose 1 percent last week from a year earlier, slowing for the eighth time in nine weeks, the International Council of Shopping Centers and Goldman Sachs Group Inc. said in a statement on Oct. 14.
Wal-Mart Stores Inc., the world's largest retailer, reaffirmed its profit forecast for the third quarter after shoppers seeking discounted groceries and household goods helped to boost the Bentonville, Arkansas-based company's September sales.
Consumers ``continue to look for basics for their families,'' Eduardo Castro-Wright, Wal-Mart's U.S. stores chief, said in an Oct. 8 statement.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Read more...
Platinum Drops to Lowest Close in Three Years on Demand Concern
By Halia Pavliva
Oct. 17 (Bloomberg) -- Platinum, used in jewelry and car parts, plunged in New York to the lowest closing price since July 2005 on concern that an economic slump may curb demand for goods ranging from vehicles to wristwatches. Palladium gained.
Confidence among U.S. consumers sank more than forecast this month as job losses and financial-market turmoil raised the risk that spending will slump. Building started on the fewest U.S. single-family homes in 26 years, indicating that a three- year housing-market slump hasn't ended. A collapse in U.S. subprime-mortgage lending sparked a global financial crisis.
``The markets are still dealing with heaps of raw emotion, and greed is conspicuously absent from the mix of fear, panic, desperation, and even capitulation, that is flooding the average institution's or investor's psyche these days,'' Jon Nadler, a senior analyst at Kitco Metals & Minerals Inc. in Montreal, said today in a note to clients. U.S. consumer confidence and homebuilding data ``show more gloom in the system.''
Platinum futures for January delivery fell $10.30, or 1.2 percent, to $881 an ounce on the New York Mercantile Exchange, the lowest closing price for a most-active contract since July 20, 2005. The price fell 12 percent for the week.
``Fund liquidation remains the name of this game, and it appears that no amount of individual investor interest has been thus far able to stem the declines,'' Nadler said. ``One of these days, the noble metals will have to snap back from these oversold conditions.''
The price is down 62 percent from a record $2,308.80 in March. The most-active contract has fallen 42 percent this year.
Auto Sales
Prices collapsed partly because auto sales have plunged in the U.S., the world's biggest market. More than 60 percent of global platinum consumption is for parts in exhaust-emissions filtering components for car and truck engines, according to London-based metals trader Johnson Matthey Plc.
Platinum lost 50 percent in the third quarter and 31 percent last month, the worst such declines since at least 1986.
``Many assets are undergoing distress liquidation, as investors rush for the door,'' John Reade, the head of metals strategy at UBS AG in London, said today in a research report. ``This deleveraging has become self re-enforcing and has the potential to push individual commodity prices to silly levels -- just look at platinum, now trading only 10 percent above gold on a spot basis and at a discount a few years forward.''
Palladium futures for December delivery rose $1.40, or 0.8 percent, to $174.50 an ounce in New York. The price plummeted 56 percent in the third quarter and 34 percent last month, the biggest declines since at least 1986. Most-active futures have dropped 54 percent this year.
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
Read more...
Oct. 17 (Bloomberg) -- Platinum, used in jewelry and car parts, plunged in New York to the lowest closing price since July 2005 on concern that an economic slump may curb demand for goods ranging from vehicles to wristwatches. Palladium gained.
Confidence among U.S. consumers sank more than forecast this month as job losses and financial-market turmoil raised the risk that spending will slump. Building started on the fewest U.S. single-family homes in 26 years, indicating that a three- year housing-market slump hasn't ended. A collapse in U.S. subprime-mortgage lending sparked a global financial crisis.
``The markets are still dealing with heaps of raw emotion, and greed is conspicuously absent from the mix of fear, panic, desperation, and even capitulation, that is flooding the average institution's or investor's psyche these days,'' Jon Nadler, a senior analyst at Kitco Metals & Minerals Inc. in Montreal, said today in a note to clients. U.S. consumer confidence and homebuilding data ``show more gloom in the system.''
Platinum futures for January delivery fell $10.30, or 1.2 percent, to $881 an ounce on the New York Mercantile Exchange, the lowest closing price for a most-active contract since July 20, 2005. The price fell 12 percent for the week.
``Fund liquidation remains the name of this game, and it appears that no amount of individual investor interest has been thus far able to stem the declines,'' Nadler said. ``One of these days, the noble metals will have to snap back from these oversold conditions.''
The price is down 62 percent from a record $2,308.80 in March. The most-active contract has fallen 42 percent this year.
Auto Sales
Prices collapsed partly because auto sales have plunged in the U.S., the world's biggest market. More than 60 percent of global platinum consumption is for parts in exhaust-emissions filtering components for car and truck engines, according to London-based metals trader Johnson Matthey Plc.
Platinum lost 50 percent in the third quarter and 31 percent last month, the worst such declines since at least 1986.
``Many assets are undergoing distress liquidation, as investors rush for the door,'' John Reade, the head of metals strategy at UBS AG in London, said today in a research report. ``This deleveraging has become self re-enforcing and has the potential to push individual commodity prices to silly levels -- just look at platinum, now trading only 10 percent above gold on a spot basis and at a discount a few years forward.''
Palladium futures for December delivery rose $1.40, or 0.8 percent, to $174.50 an ounce in New York. The price plummeted 56 percent in the third quarter and 34 percent last month, the biggest declines since at least 1986. Most-active futures have dropped 54 percent this year.
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
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Mexico's Peso Has Biggest Weekly Advance in Almost Two Years
By Michael J. Moore
Oct. 17 (Bloomberg) -- Mexico's peso had its biggest weekly gain since December 2006 amid speculation a global credit crisis may ease soon and as the central bank bought the currency to stem a two-month rout.
The peso gained 1.7 percent in the week, rebounding from a 14 percent tumble last week that was the biggest weekly decline since the Mexican government abandoned a currency peg in December 1994. The central bank bought $2.3 billion worth of pesos, following purchases of $8.9 billion worth last week that drew down foreign reserves from a near-record $84 billion.
``People are regaining some calm after these past couple weeks have been quite a roller coaster,'' said Mario Correa, an economist at Grupo Financiero Scotiabank Inverlat SA in Mexico City. ``It helps to know that Banco de Mexico seems to be willing to keep selling some more dollars to keep the exchange rate checked or behaving in an ordinate fashion.''
The peso fell 0.3 percent today to 12.8760 per dollar today, from 12.8343 yesterday. Mexico's currency traded at 13.0930 a week ago.
The central bank may stop using its foreign reserves to prop up the peso soon, central bank Governor Guillermo Ortiz said in an interview on the Televisa network yesterday. He said new peso purchases wouldn't be as large as last week's interventions.
The bank bought $6.4 billion worth of pesos on Oct. 10 alone. Reserves reached a record $86.9 billion on July 18, up 52 percent from three years earlier as a rally in oil, Mexico's biggest export, buoyed dollar inflows.
`Worse and Worse'
The central bank held its benchmark overnight lending rate at 8.25 percent today. A rate cut would have worked against the bank's efforts to prop up the peso, said Rafael Camarena, an economist at Banco Santander SA.
Concern that the economic slowdown in the U.S., the buyer of 80 percent of Mexico's exports, will lead to weaker growth in Mexico has pushed the peso down 23 percent from a six-year high on Aug. 4. U.S. reports on housing, consumer confidence and industrial production this week all signaled that the world's biggest economy is deteriorating faster than expected.
Mexican President Felipe Calderon plans to boost public spending next year to create jobs and spur growth, buffering the economy against the global slowdown. Lawmakers approved a bill Oct. 14 for part of the 2009 budget that proposes the largest deficit since 1990.
``The fact that the U.S. economy and therefore the Mexican economy will contract has largely been priced in,'' said Benito Berber, a strategist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``People are not looking at the Mexican data, but at the U.S. data, and it keeps getting worse and worse, so that validates a lot of the level that we're at.''
Bonds Fall
Higher-yielding, emerging-market currencies such as the peso have been hammered over the past month as investors pulled out of carry trades amid the worst financial crisis since the Great Depression. In the carry trade, investors fund themselves with low-cost loans in countries such as Japan and invest in countries with higher interest rates.
The yield on Mexico's benchmark 10 percent peso bonds due in 2024 rose 31 basis points, or 0.31 percentage point, this week to 9.42 percent. The bond's price fell 2.69 centavos to 104.75 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
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Oct. 17 (Bloomberg) -- Mexico's peso had its biggest weekly gain since December 2006 amid speculation a global credit crisis may ease soon and as the central bank bought the currency to stem a two-month rout.
The peso gained 1.7 percent in the week, rebounding from a 14 percent tumble last week that was the biggest weekly decline since the Mexican government abandoned a currency peg in December 1994. The central bank bought $2.3 billion worth of pesos, following purchases of $8.9 billion worth last week that drew down foreign reserves from a near-record $84 billion.
``People are regaining some calm after these past couple weeks have been quite a roller coaster,'' said Mario Correa, an economist at Grupo Financiero Scotiabank Inverlat SA in Mexico City. ``It helps to know that Banco de Mexico seems to be willing to keep selling some more dollars to keep the exchange rate checked or behaving in an ordinate fashion.''
The peso fell 0.3 percent today to 12.8760 per dollar today, from 12.8343 yesterday. Mexico's currency traded at 13.0930 a week ago.
The central bank may stop using its foreign reserves to prop up the peso soon, central bank Governor Guillermo Ortiz said in an interview on the Televisa network yesterday. He said new peso purchases wouldn't be as large as last week's interventions.
The bank bought $6.4 billion worth of pesos on Oct. 10 alone. Reserves reached a record $86.9 billion on July 18, up 52 percent from three years earlier as a rally in oil, Mexico's biggest export, buoyed dollar inflows.
`Worse and Worse'
The central bank held its benchmark overnight lending rate at 8.25 percent today. A rate cut would have worked against the bank's efforts to prop up the peso, said Rafael Camarena, an economist at Banco Santander SA.
Concern that the economic slowdown in the U.S., the buyer of 80 percent of Mexico's exports, will lead to weaker growth in Mexico has pushed the peso down 23 percent from a six-year high on Aug. 4. U.S. reports on housing, consumer confidence and industrial production this week all signaled that the world's biggest economy is deteriorating faster than expected.
Mexican President Felipe Calderon plans to boost public spending next year to create jobs and spur growth, buffering the economy against the global slowdown. Lawmakers approved a bill Oct. 14 for part of the 2009 budget that proposes the largest deficit since 1990.
``The fact that the U.S. economy and therefore the Mexican economy will contract has largely been priced in,'' said Benito Berber, a strategist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``People are not looking at the Mexican data, but at the U.S. data, and it keeps getting worse and worse, so that validates a lot of the level that we're at.''
Bonds Fall
Higher-yielding, emerging-market currencies such as the peso have been hammered over the past month as investors pulled out of carry trades amid the worst financial crisis since the Great Depression. In the carry trade, investors fund themselves with low-cost loans in countries such as Japan and invest in countries with higher interest rates.
The yield on Mexico's benchmark 10 percent peso bonds due in 2024 rose 31 basis points, or 0.31 percentage point, this week to 9.42 percent. The bond's price fell 2.69 centavos to 104.75 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
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U.S. Banks Asks Paulson to Clarify Case for Rescue
By Rebecca Christie
Oct. 17 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson needs to better explain why his $700 billion rescue program will benefit the economy, not just the banking industry, the American Bankers Association told him in a letter.
Paulson has made $250 billion available for purchasing preferred shares in banks so they can increase lending to businesses and consumers. Nine of the biggest institutions agreed to take $125 billion; the remainder will be available to ``thousands'' of others, federal regulators say.
Banks that sign up for capital injections shouldn't automatically be branded as troubled, Edward Yingling, the ABA's president, wrote in the letter today. Conflicting messages from officials, coupled with calls from some policy makers for more restrictions on participants, may be discouraging community bankers from signing up, Yingling said.
Lenders would be interested ``but not if they are going to run the risk of being labeled -- falsely -- as needing government support, or of appearing to be asking for a handout, or of being subjected to additional unknown government requirements or restrictions in the future,'' Yingling said.
Yingling said many banks aren't undercapitalized, even though current conditions make it tough to raise new funds. These banks could lend more if they take part in the Treasury's program, he wrote.
``There is simply no reason for these banks to run these risks to their reputations or their economic futures,'' Yingling said.
`Clarify' Details
``ABA requests that the Treasury and regulators clarify for the banking industry, the media, other policymakers, and most importantly, the American public the purpose of these programs and what they mean for and about the banks that participate,'' he said.
Treasury spokeswoman Brookly McLaughlin didn't respond immediately to a request for comment.
Big banks already have agreed to participate in the capital injection program. Citigroup, JPMorgan, Bank of America, Goldman Sachs Group Inc., Wells Fargo & Co., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp. will get the initial $125 billion, said John Dugan, head of the Office of the Comptroller of the Currency.
The $250 billion will alleviate credit losses and build confidence in the banking system, while the guarantee removes uncertainty that has eroded a willingness to fund balance sheets, said Dugan, who oversees more than 1,500 banks including Citigroup, Bank of America and JPMorgan Chase.
``What the government just did, particularly with the guarantee but also with the capital, is relieve that intense funding pressure, that intense run risk that can lead suddenly to a bank failing that's otherwise solvent,'' Dugan said today in an interview in his Washington office.
To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net.
Read more...
Oct. 17 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson needs to better explain why his $700 billion rescue program will benefit the economy, not just the banking industry, the American Bankers Association told him in a letter.
Paulson has made $250 billion available for purchasing preferred shares in banks so they can increase lending to businesses and consumers. Nine of the biggest institutions agreed to take $125 billion; the remainder will be available to ``thousands'' of others, federal regulators say.
Banks that sign up for capital injections shouldn't automatically be branded as troubled, Edward Yingling, the ABA's president, wrote in the letter today. Conflicting messages from officials, coupled with calls from some policy makers for more restrictions on participants, may be discouraging community bankers from signing up, Yingling said.
Lenders would be interested ``but not if they are going to run the risk of being labeled -- falsely -- as needing government support, or of appearing to be asking for a handout, or of being subjected to additional unknown government requirements or restrictions in the future,'' Yingling said.
Yingling said many banks aren't undercapitalized, even though current conditions make it tough to raise new funds. These banks could lend more if they take part in the Treasury's program, he wrote.
``There is simply no reason for these banks to run these risks to their reputations or their economic futures,'' Yingling said.
`Clarify' Details
``ABA requests that the Treasury and regulators clarify for the banking industry, the media, other policymakers, and most importantly, the American public the purpose of these programs and what they mean for and about the banks that participate,'' he said.
Treasury spokeswoman Brookly McLaughlin didn't respond immediately to a request for comment.
Big banks already have agreed to participate in the capital injection program. Citigroup, JPMorgan, Bank of America, Goldman Sachs Group Inc., Wells Fargo & Co., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp. will get the initial $125 billion, said John Dugan, head of the Office of the Comptroller of the Currency.
The $250 billion will alleviate credit losses and build confidence in the banking system, while the guarantee removes uncertainty that has eroded a willingness to fund balance sheets, said Dugan, who oversees more than 1,500 banks including Citigroup, Bank of America and JPMorgan Chase.
``What the government just did, particularly with the guarantee but also with the capital, is relieve that intense funding pressure, that intense run risk that can lead suddenly to a bank failing that's otherwise solvent,'' Dugan said today in an interview in his Washington office.
To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net.
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Gold Drops Most in Week Since August on Ebbing Inflation Fears
By Halia Pavliva
Oct. 17 (Bloomberg) -- Gold fell in New York, ending its worst week in two months, as a report showed single-family home construction sank to the slowest pace in 26 years, easing inflation concerns as the economy cools. Silver also slid.
Last month, building began on the fewest U.S. single-family homes since February 1982, fueling concerns that an economic slump may deepen. Some investors sell gold and other precious metals to raise cash when the cost of credit rises and slowing economic growth reduces inflation pressures.
Gold fell ``on the back of drastically trimmed inflation expectations and the nauseating volatility in the global equity markets,'' Jon Nadler, a senior analyst at Kitco Metals & Minerals Inc. in Montreal, said today in a note to clients. The Dow Jones Industrial Average's trading range has exceeded 500 points for seven straight New York Stock Exchange sessions.
Gold futures for December delivery dropped $16.80, or 2.1 percent, to $787.70 an ounce on the Comex division of the New York Mercantile Exchange. The price slid 8.3 percent from last week, the biggest such decline for a most-active contract since Aug. 15.
Silver futures for December delivery declined 30 cents, or 3.1 percent, to $9.335 an ounce on the Comex. The price earlier sank to $9.09, the lowest for a most-active contract since Feb. 16, 2006. The price has dropped 37 percent this year, while gold is down 6 percent.
`Under Pressure'
``The lack of jewelry demand and ongoing deleveraging is likely to keep gold and other precious metals under pressure in the near term,'' John Reade, the head of metals strategy at UBS AG in London, said earlier today in a research report. ``Deleveraging may present some fantastic opportunities for long-term value investors that can live with negative short-term marks on their portfolio.''
UBS will review its short-term forecasts for gold and other precious metals on Oct. 20, Reade said.
Building began on 6.3 percent fewer U.S. homes last month from August, falling to an annual rate of 817,000 units, the Commerce Department said today in Washington. Building permits, a sign of future construction, dropped 8.3 percent to the lowest annual pace since November 1981.
Construction starts on single-family houses slid 12 percent to a 544,000 annual rate last month, the slowest since 1982.
U.S. stock indexes rose, indicating the Standard & Poor's 500 Index was headed for the biggest weekly gain since March 2003, as investors buoyed by Google Inc.'s strong earnings followed Warren Buffett's advice to get greedy in times of fear.
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
Read more...
Oct. 17 (Bloomberg) -- Gold fell in New York, ending its worst week in two months, as a report showed single-family home construction sank to the slowest pace in 26 years, easing inflation concerns as the economy cools. Silver also slid.
Last month, building began on the fewest U.S. single-family homes since February 1982, fueling concerns that an economic slump may deepen. Some investors sell gold and other precious metals to raise cash when the cost of credit rises and slowing economic growth reduces inflation pressures.
Gold fell ``on the back of drastically trimmed inflation expectations and the nauseating volatility in the global equity markets,'' Jon Nadler, a senior analyst at Kitco Metals & Minerals Inc. in Montreal, said today in a note to clients. The Dow Jones Industrial Average's trading range has exceeded 500 points for seven straight New York Stock Exchange sessions.
Gold futures for December delivery dropped $16.80, or 2.1 percent, to $787.70 an ounce on the Comex division of the New York Mercantile Exchange. The price slid 8.3 percent from last week, the biggest such decline for a most-active contract since Aug. 15.
Silver futures for December delivery declined 30 cents, or 3.1 percent, to $9.335 an ounce on the Comex. The price earlier sank to $9.09, the lowest for a most-active contract since Feb. 16, 2006. The price has dropped 37 percent this year, while gold is down 6 percent.
`Under Pressure'
``The lack of jewelry demand and ongoing deleveraging is likely to keep gold and other precious metals under pressure in the near term,'' John Reade, the head of metals strategy at UBS AG in London, said earlier today in a research report. ``Deleveraging may present some fantastic opportunities for long-term value investors that can live with negative short-term marks on their portfolio.''
UBS will review its short-term forecasts for gold and other precious metals on Oct. 20, Reade said.
Building began on 6.3 percent fewer U.S. homes last month from August, falling to an annual rate of 817,000 units, the Commerce Department said today in Washington. Building permits, a sign of future construction, dropped 8.3 percent to the lowest annual pace since November 1981.
Construction starts on single-family houses slid 12 percent to a 544,000 annual rate last month, the slowest since 1982.
U.S. stock indexes rose, indicating the Standard & Poor's 500 Index was headed for the biggest weekly gain since March 2003, as investors buoyed by Google Inc.'s strong earnings followed Warren Buffett's advice to get greedy in times of fear.
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
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Copper Rebounds on Bets Demand to Increase After Price Slump
By Millie Munshi
Oct. 17 (Bloomberg) -- Copper rose, rebounding from the lowest price since January 2006, on speculation that a plunge in the past five months may encourage buyers to step up purchases as mine disruptions threaten supply.
Workers demanding higher wages at Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded producer, threatened to resume a strike at a mine in Peru next week. Copper has lost almost half its value from a record in May on concern that slowing global growth will erode demand.
``Copper has gone lower than I thought it would, and it has fallen very quickly,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. ``There has been a lot of liquidation already, so a lot of people have hit the sidelines now and are trying to figure out the next move.''
Copper futures for December delivery rose 9.4 cents, or 4.5 percent, to $2.1795 a pound on the Comex division of the New York Mercantile Exchange. Yesterday, the metal touched $2.0405, the lowest for a most-active contract since Jan. 6, 2006. The price reached a record $4.2605 on May 5.
Union members have gone on strike twice this year at Freeport's Cerro Verde, the third-largest copper mine in Peru. Leoncio Amudio, the general secretary of the mine's union, said on Oct. 15 that workers are pressing for an 11 percent wage increase.
Copper also rose as gains in global equity markets renewed investor confidence. Industrial metals have the highest correlation of all commodities to shares, according to Deutsche Bank AG.
``The stock market rally carried on into this morning and helped to boost metals prices,'' Mike Rapson, an analyst at MF Global Ltd. in New York, said in a report.
Weaker Demand
This week, copper climbed 1.6 percent, ending a four-week slide that drove prices down 33 percent.
Last month, building started on the fewest U.S. single- family homes in 26 years, dropping 12 percent from August to a 544,000 annual rate, the Commerce Department said today. Builders are the biggest users of copper, accounting for about 46 percent of demand.
``The numbers were lousy, and it shows that there won't be a turnaround in housing anytime soon,'' Zeman said. ``Copper will continue to suffer until we stop seeing all of this extremely lousy economic data.''
On the London Metal Exchange, copper for delivery in three months rose $160, or 3.4 percent, to $4,810 a metric ton ($2.18 a pound).
JPMorgan Securities Ltd. this week forecast 2009 copper prices will average 30 percent lower than an August estimate, citing slowing global growth.
The metal will average $4,888 a ton next year, London-based analyst Michael Jansen said in a report. That compared with the earlier estimate of $6,950.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
Read more...
Oct. 17 (Bloomberg) -- Copper rose, rebounding from the lowest price since January 2006, on speculation that a plunge in the past five months may encourage buyers to step up purchases as mine disruptions threaten supply.
Workers demanding higher wages at Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded producer, threatened to resume a strike at a mine in Peru next week. Copper has lost almost half its value from a record in May on concern that slowing global growth will erode demand.
``Copper has gone lower than I thought it would, and it has fallen very quickly,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. ``There has been a lot of liquidation already, so a lot of people have hit the sidelines now and are trying to figure out the next move.''
Copper futures for December delivery rose 9.4 cents, or 4.5 percent, to $2.1795 a pound on the Comex division of the New York Mercantile Exchange. Yesterday, the metal touched $2.0405, the lowest for a most-active contract since Jan. 6, 2006. The price reached a record $4.2605 on May 5.
Union members have gone on strike twice this year at Freeport's Cerro Verde, the third-largest copper mine in Peru. Leoncio Amudio, the general secretary of the mine's union, said on Oct. 15 that workers are pressing for an 11 percent wage increase.
Copper also rose as gains in global equity markets renewed investor confidence. Industrial metals have the highest correlation of all commodities to shares, according to Deutsche Bank AG.
``The stock market rally carried on into this morning and helped to boost metals prices,'' Mike Rapson, an analyst at MF Global Ltd. in New York, said in a report.
Weaker Demand
This week, copper climbed 1.6 percent, ending a four-week slide that drove prices down 33 percent.
Last month, building started on the fewest U.S. single- family homes in 26 years, dropping 12 percent from August to a 544,000 annual rate, the Commerce Department said today. Builders are the biggest users of copper, accounting for about 46 percent of demand.
``The numbers were lousy, and it shows that there won't be a turnaround in housing anytime soon,'' Zeman said. ``Copper will continue to suffer until we stop seeing all of this extremely lousy economic data.''
On the London Metal Exchange, copper for delivery in three months rose $160, or 3.4 percent, to $4,810 a metric ton ($2.18 a pound).
JPMorgan Securities Ltd. this week forecast 2009 copper prices will average 30 percent lower than an August estimate, citing slowing global growth.
The metal will average $4,888 a ton next year, London-based analyst Michael Jansen said in a report. That compared with the earlier estimate of $6,950.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
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Corn, Soybeans Rise as Export Demand Climbs After Price Slump
By Jeff Wilson
Oct. 17 (Bloomberg) -- Corn rose the most in five weeks and soybeans gained for a second straight day on signs that a price slump this month will revive demand for shipments from the U.S., the world's largest exporter of the crops.
U.S. export sales of corn jumped 68 percent the week ended Oct. 2, the Department of Agriculture said today. Soybean sales were double the previous four-week average, and sales of soybean meal, an animal feed, were the most since May, agency data show. Yesterday, corn dropped to an 11-month low, and soybeans touched the lowest since August 2007.
``The export sales were a surprise to the trade because of all the talk about declining demand,'' said Roy Huckabay, an executive vice president at the Linn Group in Chicago. ``The market feels sold out with the price drop beginning to stir some buying.''
Corn futures for December delivery rose 18.5 cents, or 4.8 percent, to $4.03 a bushel on the Chicago Board of Trade, the biggest percentage gain for a most-active contract since Sept. 12. Yesterday, corn fell to $3.71, the lowest since Nov. 2. Before today, the price dropped 21 percent this month.
Soybean futures for January delivery climbed 26.5 cents, or 3 percent, to $9.0675 a bushel. Yesterday, the price gained 0.9 percent after touching $8.38, the lowest since Aug. 27, 2007. Before today, soybeans dropped 16 percent in October.
This week, corn dropped 1.3 percent, and January soybeans were down 2 percent, extending slides to three weeks.
Corn rose to a record $7.9925 on June 27, and soybeans reached an all-time high of $16.3675 on July 3. The U.S. is the biggest producer of both crops.
Soybean Sales Climb
Cumulative soybean sales for delivery before Aug. 31 were 12.07 million metric tons, up 6.7 percent from a year earlier, the USDA said. The largest sales last week were to unnamed buyers, with China the second-biggest.
U.S. sales for delivery to China, the biggest global importer of the oilseed, are up 2.5 percent to 5.82 million tons, or 48 percent of planned shipments.
``Export commitments are 446 million bushels versus 423 million a year ago and a record for this date,'' William Tierney, the head of North American research at LMC International in Washington, said in an e-mail. ``The USDA is underestimating exports by 75 million to 100 million bushels,'' based on sales today relative to the historical pace, he said.
Billionaire investor Warren Buffett recommended buying equities, boosting stocks and sending commodities higher.
``The stock-market rally and Buffett's endorsements lifted market confidence across the board,'' said Thomas Uhlmann, a floor broker at Penson GHCO in Chicago. ``The export sales were a big story because they showed that grain demand is still elastic.''
The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 3.1 percent. Yesterday, the measure dropped to the lowest in four years.
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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Oct. 17 (Bloomberg) -- Corn rose the most in five weeks and soybeans gained for a second straight day on signs that a price slump this month will revive demand for shipments from the U.S., the world's largest exporter of the crops.
U.S. export sales of corn jumped 68 percent the week ended Oct. 2, the Department of Agriculture said today. Soybean sales were double the previous four-week average, and sales of soybean meal, an animal feed, were the most since May, agency data show. Yesterday, corn dropped to an 11-month low, and soybeans touched the lowest since August 2007.
``The export sales were a surprise to the trade because of all the talk about declining demand,'' said Roy Huckabay, an executive vice president at the Linn Group in Chicago. ``The market feels sold out with the price drop beginning to stir some buying.''
Corn futures for December delivery rose 18.5 cents, or 4.8 percent, to $4.03 a bushel on the Chicago Board of Trade, the biggest percentage gain for a most-active contract since Sept. 12. Yesterday, corn fell to $3.71, the lowest since Nov. 2. Before today, the price dropped 21 percent this month.
Soybean futures for January delivery climbed 26.5 cents, or 3 percent, to $9.0675 a bushel. Yesterday, the price gained 0.9 percent after touching $8.38, the lowest since Aug. 27, 2007. Before today, soybeans dropped 16 percent in October.
This week, corn dropped 1.3 percent, and January soybeans were down 2 percent, extending slides to three weeks.
Corn rose to a record $7.9925 on June 27, and soybeans reached an all-time high of $16.3675 on July 3. The U.S. is the biggest producer of both crops.
Soybean Sales Climb
Cumulative soybean sales for delivery before Aug. 31 were 12.07 million metric tons, up 6.7 percent from a year earlier, the USDA said. The largest sales last week were to unnamed buyers, with China the second-biggest.
U.S. sales for delivery to China, the biggest global importer of the oilseed, are up 2.5 percent to 5.82 million tons, or 48 percent of planned shipments.
``Export commitments are 446 million bushels versus 423 million a year ago and a record for this date,'' William Tierney, the head of North American research at LMC International in Washington, said in an e-mail. ``The USDA is underestimating exports by 75 million to 100 million bushels,'' based on sales today relative to the historical pace, he said.
Billionaire investor Warren Buffett recommended buying equities, boosting stocks and sending commodities higher.
``The stock-market rally and Buffett's endorsements lifted market confidence across the board,'' said Thomas Uhlmann, a floor broker at Penson GHCO in Chicago. ``The export sales were a big story because they showed that grain demand is still elastic.''
The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 3.1 percent. Yesterday, the measure dropped to the lowest in four years.
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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Coffee Price Gains as Equity Indexes Rise; Cocoa Futures Fall
By Shruti Date Singh
Oct. 17 (Bloomberg) -- Coffee prices climbed the most in almost four weeks in New York as U.S. equities headed for the first weekly gains in a month. Cocoa futures fell.
The Standard & Poor's 500 Index is heading for a 5.9 percent increase after plunging 18 percent last week. The declines in equities prompted investors to sell commodities to generate cash and to protect themselves from a slower economy that might cut demand for raw materials, including coffee. The Reuters/Jefferies CRB Index of 19 commodities gained as much as 3.1 percent today.
``The big thing that happened was stocks held their lows,'' said Jack Scoville, a vice president for Price Futures Group in Chicago. ``That's kind of allowed the selling pressure to ease. A broad range of commodities are putting in positive performances.''
Arabica coffee futures for December delivery rose 2.65 cents, or 2.3 percent, to $1.156 a pound on ICE Futures U.S. in New York. The gain is the biggest for a most-active contract since Sept. 22.
On Oct. 8, coffee dropped to the lowest price since July 2007 as investors reduced stakes in commodities amid falling liquidity and a slowing economy.
In London, robusta coffee futures for January delivery rose $33, or 1.9 percent, to $1,794 a metric ton on the Liffe exchange.
Cocoa Market
Cocoa futures for December delivery fell $2 to $2,122 a metric ton in New York. The price yesterday reached $2,093, the lowest for a most-active contract since Jan. 22.
Cocoa may approach $2,000 if equities slide again and on concern a slowing economy may reduce demand, said Hector Galvan, a trading consultant for RJO Futures in Chicago.
Prices may slump amid ``a potentially weaker demand outlook for chocolate, which is generally viewed as a luxury item,'' Standard Chartered Bank said in a report on Oct. 9. Cocoa will average $2,438 a ton in New York next year, down from a projected average of $2,567 in 2008, the bank said.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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Oct. 17 (Bloomberg) -- Coffee prices climbed the most in almost four weeks in New York as U.S. equities headed for the first weekly gains in a month. Cocoa futures fell.
The Standard & Poor's 500 Index is heading for a 5.9 percent increase after plunging 18 percent last week. The declines in equities prompted investors to sell commodities to generate cash and to protect themselves from a slower economy that might cut demand for raw materials, including coffee. The Reuters/Jefferies CRB Index of 19 commodities gained as much as 3.1 percent today.
``The big thing that happened was stocks held their lows,'' said Jack Scoville, a vice president for Price Futures Group in Chicago. ``That's kind of allowed the selling pressure to ease. A broad range of commodities are putting in positive performances.''
Arabica coffee futures for December delivery rose 2.65 cents, or 2.3 percent, to $1.156 a pound on ICE Futures U.S. in New York. The gain is the biggest for a most-active contract since Sept. 22.
On Oct. 8, coffee dropped to the lowest price since July 2007 as investors reduced stakes in commodities amid falling liquidity and a slowing economy.
In London, robusta coffee futures for January delivery rose $33, or 1.9 percent, to $1,794 a metric ton on the Liffe exchange.
Cocoa Market
Cocoa futures for December delivery fell $2 to $2,122 a metric ton in New York. The price yesterday reached $2,093, the lowest for a most-active contract since Jan. 22.
Cocoa may approach $2,000 if equities slide again and on concern a slowing economy may reduce demand, said Hector Galvan, a trading consultant for RJO Futures in Chicago.
Prices may slump amid ``a potentially weaker demand outlook for chocolate, which is generally viewed as a luxury item,'' Standard Chartered Bank said in a report on Oct. 9. Cocoa will average $2,438 a ton in New York next year, down from a projected average of $2,567 in 2008, the bank said.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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Wheat Rises on Bets U.S. Exports to Climb Following Price Slide
By Jeff Wilson
Oct. 17 (Bloomberg) -- Wheat rose for the first time in four sessions on speculation that demand will increase for supplies from the U.S., the biggest seller of the grain, after prices touched a 16-month low yesterday.
The export price of soft red-winter wheat in New Orleans has dropped 58 percent from the record in March, increasing the appeal of U.S. supplies to purchasers including Egypt, the biggest global buyer, said Jerry Gidel, a market analyst at North American Risk Management Services Inc. in Chicago. A gauge of transportation expenses has dropped to a six-year low.
``U.S. wheat is very competitively priced on the world export market,'' Gidel said. ``The drop in shipping costs should help to boost sales.''
Wheat futures for December delivery rose 11 cents, or 2 percent, to $5.6625 a bushel on the Chicago Board of Trade, advancing 0.5 percent for the week, the first such gain in eight weeks. Yesterday, the price touched $5.43, the lowest for a most-active contract since June 11, 2007. Wheat is down 58 percent from a record $13.495 in late February.
U.S. export sales of wheat totaled 435,573 metric tons for the week ended Oct. 9, down 15 percent from the previous week, the Department of Agriculture said today.
Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, government data show. Corn is the largest at $52.1 billion last year, followed by soybeans and hay.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.
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JPMorgan Picks 16 U.S. Stocks to Hold in a Recession
By Elizabeth Stanton
Oct. 17 (Bloomberg) -- JPMorgan Chase & Co. recommended 16 companies, including McDonald's Corp. and Merck & Co., that may outperform the U.S. stock market during the ``global recession'' it expects to unfold during the next two years.
The ``Franchise 16'' list merges the strongest convictions of its 78 stock analysts with a ``top-down'' view that the banking crisis threatens global growth, said Thomas J. Lee, chief U.S. equity strategist at the New York-based bank.
``There is growing demand from clients for core holdings that outperform in a global recession,'' Lee said in a phone interview. ``Every week that passes that credit markets remain challenged, there's incremental damage to the macro economy.''
The group of companies rose 1.2 percent today, compared with a 0.6 percent drop in the Standard & Poor's 500 Index. Lee lowered his 2009 earnings estimate for companies in the index and his year-end forecast for the benchmark.
The 16 companies, including Dow Jones Industrial Average components 3M Co., Hewlett-Packard Co., McDonald's and Merck score high in three criteria, JPMorgan said. The requirements are low debt levels, return of cash to investors in the form of dividends or buybacks, and profitability. In addition, they're viewed by the bank's analysts as having the ability to prosper in a global slowdown.
JPMorgan, the largest U.S. bank by market value, this week said the world economy is already in a recession and cut its global growth forecast for 2009 to 0.9 percent from 2.1 percent.
Lee said the decision to compile the list was made two weeks ago, after the moved to fresh lows for the year that extended its year-to-date loss to 25 percent on Oct. 3. Since then, the main benchmark for U.S. equities has fallen a further 14 percent, deepening the loss to 36 percent.
`No Risk Appetite'
``We did it to provide something for clients to focus on beyond the distractions of current market conditions,'' Lee said. Fundamental analysis of stocks in the past two weeks has been ``overwhelmed by de-leveraging, the seizure in the credit markets, and the fact that there's almost no risk appetite.''
Lee cut his 2009 earnings estimate for the S&P 500 to $75 from $88, after lowering it from $93 on Oct. 3. He reduced his year-end forecast for the benchmark to 1,125 from 1,375. That represents a 20 percent gain from today's close.
The Franchise 16 list is distinct from JPMorgan's U.S. Analyst Focus List of researchers' favorite companies among the 1,200 they cover.
The new list includes 16 companies because only that many met the criteria established for it, Lee said.
``Maybe the number will change,'' he said.
The companies are:
3M Co.
Baxter International Inc.
Colgate-Palmolive Co.
CA Inc.
Devon Energy Corp.
General Mills Inc.
Gilead Sciences Inc.
Google Inc.
Hewlett-Packard Co.
McDonald's Corp.
Merck & Co.
Monsanto Co.
Nucor Corp.
Philip Morris International Inc.
Union Pacific Corp.
Visa Inc
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net
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Brazil Stocks Fall on Earnings Growth Concern; Bolsa Retreats
By Alexander Ragir
Oct. 17 (Bloomberg) -- Brazilian stocks fell, narrowing the Bovespa index's gains for the week, as concern that slowing global growth and currency-related losses will hurt earnings overshadowed a rebound in commodity prices.
Aracruz Celulose SA, the world's biggest eucalyptus-pulp maker, tumbled almost 10 percent after posting its first quarterly loss in six years on a $1 billion charge from bad currency bets. BM&FBovespa SA, Latin America's biggest securities exchange, led a retreat in financial stocks after Citigroup Inc. said earnings growth next year may drop to 1 percent from 24 percent this year. Cia. Vale do Rio Doce and Petroleo Brasileiro SA gained, limiting the Bovespa index's losses today.
The Bovespa slid 42.63, or 0.1 percent, to 36,399.09. The index gained 2.2 percent this week, the first five-day gain in a month. The BM&FBovespa MidLarge Cap index slipped 0.1 percent, while the BM&FBovespa Small Cap index rose 1.6 percent. Mexico's Bolsa fell 0.7 percent today. Chile's Ipsa rose 1.5 percent for a five-day gain of 16 percent, the biggest among 89 global indexes.
``All the volatility is coming because there's a lot of big investors re-allocating money in different asset classes and deleveraging,'' said Milton Milioni, president of MM Milioni Investimentos in Sao Paulo. ``That brings the risk that what is cheap today, may be cheaper tomorrow.''
Aracruz dropped 9.8 percent to 3.33 reais today. The third- quarter net loss of 1.64 billion reais ($764 million) compares with net income of 260.9 million reais a year earlier. The losses sparked speculation other companies may face the same troubles. The Brazilian real has lost 26 percent against the U.S. dollar since reaching a nine-year high of 1.5545 per dollar Aug. 1.
Solvency Concerns
Losses from Brazil's 60 billion reais ($28 billion) derivatives market threaten the solvency of several businesses after the real's unexpected drop against the dollar since Aug. 1, said Paulo Vieira da Cunha, a hedge fund manager and former Brazilian central bank deputy governor.
BM&FBovespa fell 3 percent to 6.50 reais. Banco do Brasil SA, Latin America's biggest bank, slid 1.7 percent to 15.09.
The global economic slowdown will ensure ``much weaker earnings growth in coming quarters'' in Latin America, wrote Citigroup equity strategist Geoffrey Dennis in a note to clients.
Vale advanced 3.6 percent to 23.15 reais.
``Vale has shown the market it's ready to grow, and is carrying forward its several growth opportunities with a disciplined approach,'' wrote Credit Suisse Group analyst Roger Downey. ``Furthermore, Vale confirmed its bullish view on the long-term fundamentals of the industry.'' The Reuters/Jefferies CRB Index of 19 raw materials gained 2.4 percent to 282.14.
Petroleo Brasileiro SA, Brazil's state-controlled oil company, gained 3.6 percent to 22.99 reais as oil rose $2.
The Bovespa jumped 15 percent on Oct. 13, the most in nine years, after the government injected as much as $46 billion in the financial system and Europe, the U.S. and Asia agreed to support banks. Uniao de Industrias Petroquimicas SA, a Brazilian petrochemicals company which said it earned 465 million reais ($214 million) from the sale of a port terminal unit that day, rose 34 percent this week for the biggest gain in the Bovespa.
Bolsa Falls
Mexico's Bolsa index fell for a third day, led by homebuilders on speculation they would produce profits from government-backed mortgages even as Mexico's economy slows.
Urbi Desarrollos Urbanos SAB, Mexico's largest seller of low-income housing, had the biggest gain in four years after IXE Grupo Financiero SA advised buying shares on the outlook for earnings. Urbi gained 19 percent to 16.7 pesos.
For the week, the Bolsa gained 2.1 percent.
In Chile, Lan Airlines SA rose 5.8 percent to 5,500 pesos, extending a weekly gain to 17 percent, the steepest since May 2003. The biggest air carrier probably will benefit from lower fuel costs, helping offset a global economic slowdown, said Patricio Hernandez, who covers the stock for Banchile Inversiones.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
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Canada Stocks Have Best Week Since '02; Royal Bank, EnCana Gain
By Whitney Kisling and John Kipphoff
Oct. 17 (Bloomberg) -- Canadian stocks rose, sending the main index to its biggest weekly gain in six years, as financial shares climbed on accounting rule changes and energy companies advanced on higher oil prices.
EnCana Corp. led the rally among energy shares as crude rebounded from a 13-month low and Royal Bank of Canada paced the biggest weekly gain among banks and insurers in a decade, after Canada's Accounting Standards Board said it will give financial companies the flexibility to delay potential debt writedowns stemming from ``fair value,'' or ``mark-to-market'' accounting.
``That doesn't hurt. During the crash, mark-to-market exacerbated the panic liquidation,'' said Gavin Graham, director of investments at BMO Asset Management in Toronto, which manages about $45.3 billion. ``We've probably seen the bottom in the market, though we won't know for sure until later.''
The Standard & Poor's/TSX Composite Index climbed 3.2 percent to 9,562.49 in Toronto. Canada's benchmark gained 5.5 percent this week, the most since October 2002, after U.S. and European governments injected $2 trillion to rescue banks teetering amid the worst financial crisis since the 1930s. It was the first weekly gain in a month.
The S&P/TSX, which derives three-quarters of its value from commodity producers and financial companies, has still fallen 37 percent from its June 18 record after commodity prices slumped on concern that more than $660 million in credit losses at global financial institutions worldwide will cause a recession.
Record Advance
Royal Bank added 1.3 percent to C$46.47 today. Canada's largest lender notched a 13 percent advance this week, the best such rally since at least 1983, when Bloomberg's record begin.
Canadian Imperial Bank of Commerce gained 6.6 percent today to C$58. The fifth-biggest lender, whose writedowns of $6.3 billion account for two-thirds of Canadian lenders' total, climbed 18 percent this week, also the most since at least 25 years. Bank of Montreal climbed 5.5 percent to C$43.75. The 17 percent gain for the week was another record.
A measure of financial shares in the S&P/TSX added 1.6 percent today and had a weekly advance of 9.9 percent, the steepest since October 1998.
Crude oil for November delivery rose 2.9 percent to $71.85 a barrel after the Organization of Petroleum signaled it will announce a production cut at a meeting next week. Oil has tumbled more than 50 percent since reaching a record $147.27 in July on speculation that a world recession will curb fuel use.
`Enormous' Volatility
``The volatility remains enormous. We may revisit the lows as people figure out how deep the recession will be,'' said Graham. The world's governments and central bankers ``won't allow the 1930s to happen again. Banks are starting to outperform. Oil stocks were only pricing in $60 oil anyway.''
Encana, Canada's biggest energy company by market value, gained 7.3 percent to C$49.88 and added 15 percent for the week, the most since January 2002.
Suncor Energy Inc., the second-largest oil-sands mining company, climbed 8.4 percent to C$26.22. Husky Energy Inc. rallied 11 percent to C$32.90, the most since February 2002. Enbridge Inc., Canada's biggest pipeline company, added 7 percent to C$37.46. Oilexco Inc. surged 22 percent to C$4.37 after dropping 80 percent in a year before today.
A gauge of energy shares added 6.6 percent today, the most among the 10 industries in the S&P/TSX. Up 9.9 percent this week, the energy group is still trading 49 percent below its June 18 record.
``When you drop that fast and furious, it's natural to have some sort of snapback rally,'' said Andrew Martyn, who helps manage about C$450 million at Toronto-based Davis-Rea Ltd. ``It looks like people are doing a little bit of bargain hunting.''
Raw-materials producers dropped 11 percent this week, led lower by bullion mining companies, as gold tumbled the most in two months on easing inflation concerns, and copper touched the lowest since 2006 as U.S. house construction extended a slump.
Barrick Gold Corp., the world's biggest bullion miner, dropped 3.6 percent to C$28.01 today and fell 20 percent for the week, the most since the week of the October 1987 ``Black Monday'' crash. Goldcorp Inc. slid 5 percent to C$23.51 and slid 21 percent this week.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net
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BB&T, Constellation, Unica, Weis Markets: U.S. Equity Preview
By Whitney Kisling
Oct. 17 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading on Oct. 20. Stock symbols are in parentheses, and share prices are as of 6:20 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December lost 0.8 percent to 933.5. Dow Jones Industrial Average futures slid 2.2 percent to 8,771. Nasdaq-100 Index futures dropped 0.9 percent to 1,311.
BB&T Corp. (BBT US): The Winston-Salem, North Carolina- based company is one of three regional banks that may join nine large U.S. banks that have agreed to sell stakes to the government. The shares fell 1.2 percent to $33.14.
Marshall & Isley Corp. (MI US), Wisconsin's largest bank, and PNC Financial Services Group Inc. (PNC US), based in Pittsburgh, are the other two companies weighing the government's offer to purchase preferred shares. Marshall & Isley slid 0.4 percent to $19.64 in regular trading, and PNC dropped 5.6 percent to $57.94 in regular trading.
Constellation Energy Partners LLC (CEG US): The fuel and energy distributor filed a statement for a proposed merger with MidAmerican Energy Holdings Inc. The two companies agreed to a ``definitive merger'' on Sept. 19. Constellation shares lost 1.1 percent to $24.06 in regular trading.
Unica Corp. (UNCA US): The Waltham, Massachusetts-based provider of software products that's lost 36 percent this year said it's cutting about 4 percent of its workforce in its fiscal first quarter. The shares rose 9.2 percent to $6.50 in late trading.
Weis Markets Inc. (WMK US): The food market operator for the Northeastern U.S. said third-quarter earnings dropped to $8.1 million, or 30 cents a share, compared with $10.8 million, or 40 cents, a year earlier. Weis recorded a $1.7 million pretax impairment charge from closing a store in the fourth quarter and said rising costs hurt earnings. The shares dropped 8.9 percent to $31.30 in regular trading.
To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net
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U.S. Stocks Drop as Housing, Consumer Data Offset Buffett Buys
By Eric Martin
Oct. 17 (Bloomberg) -- U.S. stocks fell, capping a day that sent the Standard & Poor's 500 Index swinging between gains and losses at least 28 times, as worsening consumer confidence and housing data overshadowed Warren Buffett's advice to buy shares.
Caterpillar Inc., the largest maker of bulldozers, and homebuilder D.R. Horton Inc. slumped more than 7 percent on a Commerce Department report that construction of single-family homes plunged to the lowest level in a quarter century. The Dow Jones Industrial Average climbed more than 300 points before surrendering gains in the final hour of trading.
The S&P 500, which rose as much as 4 percent, ended down 5.88 points, or 0.6 percent, at 940.55, trimming its best weekly advance since February. The Dow retreated 127.04, or 1.4 percent, to 8,852.22 to cap its best week since 2003. The Nasdaq Composite Index slipped 0.4 percent to 1,711.29. Four stocks fell for every three that gained on the New York Stock Exchange.
``The market's a discounting mechanism and it's discounting a very dire scenario,'' said Gus Scacco, a money manager at AG Asset Management in New York, which oversees $1.8 billion. ``You're factoring in risks that go beyond earnings.''
The expiration of options added to trading swings today, sending the Chicago Board Options Exchange Volatility Index, or VIX, to a record. The S&P 500 climbed 4.6 percent this week, rebounding from its worst weekly drop in 75 years. The index is down 36 percent in 2008 as losses and writedowns from mortgage- related investments at banks worldwide swelled to $660 billion. The Dow added 4.8 percent this week.
Whipsawed
Investors were whipsawed this week as governments injected $2 trillion to bail out banks amid growing signs the credit crisis will spur a contraction in the global economy. The S&P 500 posted its biggest gain since the 1930s on Oct. 13, rallying 12 percent, before plunging the most since the crash of 1987 on Oct. 15 as retail sales had their steepest drop in three years.
Europe's Dow Jones Stoxx 600 Index added 3.8 percent today, while the MSCI Asia Pacific Index rose 0.4 percent.
The S&P 500 is valued at 11.5 times estimated profit for its companies. When that price-to-earnings ratio sank to 10.9 on Oct. 10, the index was the cheapest compared with the multiple using trailing profit since June 1985.
Caterpillar lost $3.05, or 7.2 percent, to $39.32, the steepest drop in the Dow average. The company had its share- price estimate lowered to $46 from $66 at Credit Suisse Group AG.
Housing Slump
D.R. Horton slid 8.3 percent to $6.77 and helped lead an S&P index of homebuilders to a 2.4 percent retreat. Housing starts slid to an 817,000 annual pace last month, down 6.3 percent from August's 872,000 level that was lower than previously estimated, the Commerce Department said. Building permits, a sign of future construction, dropped 8.3 percent to a 786,000 pace, matching the lowest level since November 1981.
Wal-Mart Stores Inc., the largest retailer in the world, slumped 1.6 percent to $53.77. Confidence among Americans fell by the most on record, with the Reuters/University of Michigan preliminary index of consumer sentiment losing to 57.5 this month from 70.3 in September.
American International Group Inc. tumbled 33 cents, or 14 percent, to $2.10 as the Federal Reserve said it needed to tap two-thirds of its $122.8 billion credit line. The company, once the world's biggest insurer, has borrowed $82.9 billion in the month since it agreed to a U.S. takeover, the Fed said yesterday, up from $70.3 billion a week ago.
JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. each dropped at least 2.8 percent, sending the S&P 500 Financials Index to a 2.3 percent loss.
Robotic Surgery
Intuitive Surgical Inc. dropped 12 percent to $189.13. Next year's profit estimates for the maker of robotic systems for surgeries are too high because spending by hospitals likely will slow, Oppenheimer & Co. analyst Amit Hazan wrote in a note today.
The VIX, which measures the cost of using options as insurance against further declines in the S&P 500, jumped 4 percent to a record close of 70.33 as almost 80 million options expired. The most widely owned S&P 500 options expiring this week were October 1,150 puts.
The S&P 500's 18 percent retreat from that strike price through yesterday rewarded buyers of those contracts, which increased almost sixfold in value this month. Even after yesterday's 4.3 percent surge, the index had slumped 22 percent in three weeks through yesterday.
`Buying Opportunities'
The S&P 500 has slumped 40 percent from its record last October, while the Dow has lost 38 percent from its peak the same month.
``Bear markets create great buying opportunities,'' William Latimer, who helps oversee $9.5 billion as director of research at O'Shaughnessy Asset Management Inc. in Stamford, Connecticut, said in a Bloomberg Television interview. ``We don't run screaming from stores when we see sale signs in the window, we go looking for something to buy and that's exactly what investors need to be doing here.''
Stocks rose earlier after Buffett, the world's second- richest person, recommended buying U.S. shares.
``I've been buying American stocks,'' Buffett wrote in a New York Times column. ``A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread.''
Recession Picks
JPMorgan recommended 16 companies, including Monsanto Co. and Merck & Co., that may outperform the U.S. stock market during the ``global recession'' it expects to unfold during the next two years. Monsanto, the world's biggest seed producer, added $1.75, or 2.2 percent, to $80. Merck gained 31 cents to $28.50. An index of the 16 companies added 1.2 percent.
Google rallied $19.52, or 5.5 percent, to $372.54. The company reported third-quarter profit, excluding some items, of $4.92 a share as customers continued to buy Web ads even as the economy slows. That beat the $4.75 average analyst estimate in a Bloomberg survey.
Gilead Sciences Inc. rose $1.64, or 4 percent, to $43.03. Third-quarter profit for the largest U.S. maker of AIDS medications topped analysts' estimates by 3 cents on rising demand for its combination drugs.
The S&P 500 fell in 11 of the past 13 trading days as the earnings outlook for companies in the index deteriorated. Profits fell 33 percent on average for the 69 companies that reported third-quarter results since Oct. 7, according to Bloomberg data.
Wall Street analysts forecast a 7.5 percent drop in earnings in the third quarter in a Bloomberg survey last week and widened their estimates to a decrease of 11 percent today.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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Friday, October 17, 2008
Norilsk Nickel halts output at Cawse nickel operation
LONDON, Oct 17 (Reuters) - Norilsk Nickel said on Friday it will halt production at its Cawse laterite nickel operation in Western Australia because of higher costs and lower metal prices.
The facility, which has been put on indefinite care and maintenance, has been operating under increasing cost pressures for some time, the world's biggest nickel producer said in a statement.
"Significant increases in the cost of inputs coupled with a steep decline in nickel prices have lead to the decision to stop production indefinitely," it said.
The company will examine disposing of the operation as one of its options and said it is considering a range of alternatives for its workers.
A number of mining companies have been forced to reduce output and delay future projects as nickel prices fell close to or below marginal costs.
London Metal Exchange three-month nickel MNI3 has slumped almost 80 percent since reaching a record high of $51,800 a tonne in May 2007, amid falling demand from stainless steel producers, and prices have been below $20,000 since Sept. 2.
Production at Cawse was suspended in June because of a disruption in gas and sulphuric acid supplies.
Norilsk Nickel said the decision does not affect its other Australian nickel operations at Black Swan, Lake Johnston and Waterloo which continue to perform well, in line with expectations.
(Reporting by Julie Crust; editing by Peter Blackburn)
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The facility, which has been put on indefinite care and maintenance, has been operating under increasing cost pressures for some time, the world's biggest nickel producer said in a statement.
"Significant increases in the cost of inputs coupled with a steep decline in nickel prices have lead to the decision to stop production indefinitely," it said.
The company will examine disposing of the operation as one of its options and said it is considering a range of alternatives for its workers.
A number of mining companies have been forced to reduce output and delay future projects as nickel prices fell close to or below marginal costs.
London Metal Exchange three-month nickel MNI3 has slumped almost 80 percent since reaching a record high of $51,800 a tonne in May 2007, amid falling demand from stainless steel producers, and prices have been below $20,000 since Sept. 2.
Production at Cawse was suspended in June because of a disruption in gas and sulphuric acid supplies.
Norilsk Nickel said the decision does not affect its other Australian nickel operations at Black Swan, Lake Johnston and Waterloo which continue to perform well, in line with expectations.
(Reporting by Julie Crust; editing by Peter Blackburn)
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EMERGING MARKETS-Central bank moves lift LatAm currencies
* Mexico peso gains after cenbank leaves rates unchanged
* LatAm stocks rise but investors show little conviction
* Emerging-market bond spreads flat
* Argentina bonds fall on swap of guaranteed loans
By Walter Brandimarte
NEW YORK, Oct 17 (Reuters) - Latin American currencies recovered part of their recent losses on Friday, supported by a series of central bank actions across the region, while stocks rose in a market still plagued by global recession fears.
Among the actions supporting regional currencies were Mexico's central bank decision to keep interest rates unchanged, Brazil's further selling of currency swaps, and direct sales of dollars on the spot foreign-exchange market by Peru and Argentina.
The Mexican peso strengthened 1.7 percent to 12.84 per dollar after the central bank held its key interest rate at 8.25 percent, supporting demand for its currency.
Some analysts expected policy-makers to cut rates to protect the Mexican economy from an expected U.S. recession. For details.
"This will help stabilize the peso and the interest- rate differential may take the exchange rate to 12.50 pesos per dollar until the end of the year," said Bartosz Pawlowski, an analyst with Toronto Dominion Bank.
The Brazilian real BRBY gained 1.1 percent to 2.135 per dollar as investors awaited an additional sale of dollar swaps, which are similar to a sale of dollars in futures markets, later in the day.
"The central bank is giving liquidity to the market, and providing hedging to investors," said Gerson da Nobrega, manager of the currency desk at Sao Paulo-based Alfa Investimento bank.
In Peru, the sol was little changed at 3.069 per dollar. It had closed at 3.065 per dollar on Wednesday after the central bank sold about $153.2 million in the foreign-exchange market. Since the beginning of the month, Peruvian policy-makers have spent $2.133 billion to support the currency.
Latin American stocks also rose, with the MSCI stock index for the region .MILA00000PUS gaining 6.05 percent, amid a very volatile session on Wall Street.
Confidence is still shaky among equity investors, who fear commodity prices might fall more and corporate profits may be severely hurt in Latin America during an expected global recession.
The Brazilian benchmark Bovespa index .BVSP rose 1.8 percent supported by gains of iron ore producer Vale and oil firm Petrobras , which had posted strong losses on Thursday on the back of falling commodity prices.
Mexico's IPC stock index .MXX rose 1.6 percent, Chile's blue-chip IPSA index .IPSA rose 1.59 percent, while Colombia's IGBC index .IGBC climbed 2.4 percent and Argentina's MerVal was up 1.48 percent.
In debt markets, yield spreads between emerging-market bonds and US Treasuries were flat at 623 basis points, according to the benchmark JP Morgan EMBI+ index 11EMJ. The indicator is seen as a key gauge of investors' aversion to risk.
Argentina's sovereign bonds were lower, with total returns declining 0.88 percent on the EMBI+, as investors feared they might be forced by the government to participate in a swap of guaranteed loans coming due between 2009 and 2012. (Additional reporting by Luis Rojas Mena and Lorena Segura in Mexico City, with Jenifer Correa in Sao Paulo; Editing by Jan Paschal)
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* LatAm stocks rise but investors show little conviction
* Emerging-market bond spreads flat
* Argentina bonds fall on swap of guaranteed loans
By Walter Brandimarte
NEW YORK, Oct 17 (Reuters) - Latin American currencies recovered part of their recent losses on Friday, supported by a series of central bank actions across the region, while stocks rose in a market still plagued by global recession fears.
Among the actions supporting regional currencies were Mexico's central bank decision to keep interest rates unchanged, Brazil's further selling of currency swaps, and direct sales of dollars on the spot foreign-exchange market by Peru and Argentina.
The Mexican peso
Some analysts expected policy-makers to cut rates to protect the Mexican economy from an expected U.S. recession. For details.
"This will help stabilize the peso and the interest- rate differential may take the exchange rate to 12.50 pesos per dollar until the end of the year," said Bartosz Pawlowski, an analyst with Toronto Dominion Bank.
The Brazilian real BRBY gained 1.1 percent to 2.135 per dollar as investors awaited an additional sale of dollar swaps, which are similar to a sale of dollars in futures markets, later in the day.
"The central bank is giving liquidity to the market, and providing hedging to investors," said Gerson da Nobrega, manager of the currency desk at Sao Paulo-based Alfa Investimento bank.
In Peru, the sol was little changed at 3.069 per dollar. It had closed at 3.065 per dollar on Wednesday after the central bank sold about $153.2 million in the foreign-exchange market. Since the beginning of the month, Peruvian policy-makers have spent $2.133 billion to support the currency.
Latin American stocks also rose, with the MSCI stock index for the region .MILA00000PUS gaining 6.05 percent, amid a very volatile session on Wall Street.
Confidence is still shaky among equity investors, who fear commodity prices might fall more and corporate profits may be severely hurt in Latin America during an expected global recession.
The Brazilian benchmark Bovespa index .BVSP rose 1.8 percent supported by gains of iron ore producer Vale and oil firm Petrobras , which had posted strong losses on Thursday on the back of falling commodity prices.
Mexico's IPC stock index .MXX rose 1.6 percent, Chile's blue-chip IPSA index .IPSA rose 1.59 percent, while Colombia's IGBC index .IGBC climbed 2.4 percent and Argentina's MerVal was up 1.48 percent.
In debt markets, yield spreads between emerging-market bonds and US Treasuries were flat at 623 basis points, according to the benchmark JP Morgan EMBI+ index 11EMJ. The indicator is seen as a key gauge of investors' aversion to risk.
Argentina's sovereign bonds were lower, with total returns declining 0.88 percent on the EMBI+, as investors feared they might be forced by the government to participate in a swap of guaranteed loans coming due between 2009 and 2012. (Additional reporting by Luis Rojas Mena and Lorena Segura in Mexico City, with Jenifer Correa in Sao Paulo; Editing by Jan Paschal)
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US STOCKS-Market edges up on bargain hunting, Google
NEW YORK, Oct 17 (Reuters) - U.S. stocks gained slightly in skittish trade on Friday, with the Nasdaq briefly rising 1 percent as investors scoured the market for beaten-down shares, offsetting mounting concerns about recession.
A report showing that construction starts on U.S. homes slid to a new 17-1/2-year low increased recession fears, but reassuring profits from such bellwethers as Google Inc , up more than 7 percent, encouraged investors seek bargains.
Sentiment got a lift from billionaire investor Warren Buffett, writing in the New York Times, who said he is buying U.S. stocks. That gave investors yet another reason to wade back into the market, albeit cautiously. For details.
The Dow Jones industrial average .DJI was up 1 point, or 0.01 percent at 8,980.26. The Standard & Poor's 500 Index .SPX was up 0.50 point, or 0.05 percent, at 946.93. The Nasdaq Composite Index .IXIC was up 7.01 points, or 0.41 percent, at 1,724.72, after gaining 1 percent to a session high at 1,734.88.. (Reporting by Ellis Mnyandu; Editing by Jan Paschal)
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A report showing that construction starts on U.S. homes slid to a new 17-1/2-year low increased recession fears, but reassuring profits from such bellwethers as Google Inc , up more than 7 percent, encouraged investors seek bargains.
Sentiment got a lift from billionaire investor Warren Buffett, writing in the New York Times, who said he is buying U.S. stocks. That gave investors yet another reason to wade back into the market, albeit cautiously. For details.
The Dow Jones industrial average .DJI was up 1 point, or 0.01 percent at 8,980.26. The Standard & Poor's 500 Index .SPX was up 0.50 point, or 0.05 percent, at 946.93. The Nasdaq Composite Index .IXIC was up 7.01 points, or 0.41 percent, at 1,724.72, after gaining 1 percent to a session high at 1,734.88.. (Reporting by Ellis Mnyandu; Editing by Jan Paschal)
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Daily Market Commentary - Fundamental Outlook
Daily Forex Fundamentals | Written by GCI Financial | Oct 17 08 15:42 GMT |
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3515 level and was supported around the $1.3385 level. Interbank lending rates continued to normalize today as overnight euro Libor rates fell below the European Central Bank's target rate and overnight dollar rates were fixed near the Federal Reserve's target rate. Data released in the U.S. today saw September housing starts off 6.3% to an annualized 817,000 rate while building permits fell 8.3%. Additionally, the mid-October University of Michigan consumer sentiment indicator fell to 56.7, far below consensus estimates. In eurozone news, ECB member Nowotny said he expects further downward revisions to economic growth projections for the eurozone. ECB's Gonzalez-Paramo sees inflation below 2% in H2 2009. Data released in the eurozone today the EMU-15 August trade deficit print at -€9.3 billion. Euro bids are cited around the US$ 1.3320 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥100.60 level and was capped around the ¥101.80 level. Finance minister Nakagawa said the government is not ruling out a Group of Eight meeting about the global crisis but Prime Minister Aso is known to want some firm commitments about additional capital injections from countries. Bank of Japan Governor Shirakawa cautiously said "We must be mindful of how recent global financial market turmoil could, through worsening world economic conditions, affect Japan's economy." Data released in Japan overnight saw the August tertiary index decline 1.4% m/m while August wages were up +0.1% y/y. The Nikkei 225 stock index climbed 2.78% to close at ¥8,693.82. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥134.80 level and was capped around the ¥137.40 level. The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥173.90 and ¥88.55 levels, respectively. The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8340 in the over-the-counter market, up from CNY 6.8297.
₤
The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.7220 level and was capped around the $1.7380 level. Overnight sterling LIBOR rates fell nearly 50bps as they continue to normalize. Bank of England will unveil a new liquidity provision scheme on Monday to help stabilize the financial system. Cable bids are seen around the $1.7115 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7810 level and was supported around the ₤0.7745 level.
GCI Financial
http://www.gcitrading.com
DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
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€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3515 level and was supported around the $1.3385 level. Interbank lending rates continued to normalize today as overnight euro Libor rates fell below the European Central Bank's target rate and overnight dollar rates were fixed near the Federal Reserve's target rate. Data released in the U.S. today saw September housing starts off 6.3% to an annualized 817,000 rate while building permits fell 8.3%. Additionally, the mid-October University of Michigan consumer sentiment indicator fell to 56.7, far below consensus estimates. In eurozone news, ECB member Nowotny said he expects further downward revisions to economic growth projections for the eurozone. ECB's Gonzalez-Paramo sees inflation below 2% in H2 2009. Data released in the eurozone today the EMU-15 August trade deficit print at -€9.3 billion. Euro bids are cited around the US$ 1.3320 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥100.60 level and was capped around the ¥101.80 level. Finance minister Nakagawa said the government is not ruling out a Group of Eight meeting about the global crisis but Prime Minister Aso is known to want some firm commitments about additional capital injections from countries. Bank of Japan Governor Shirakawa cautiously said "We must be mindful of how recent global financial market turmoil could, through worsening world economic conditions, affect Japan's economy." Data released in Japan overnight saw the August tertiary index decline 1.4% m/m while August wages were up +0.1% y/y. The Nikkei 225 stock index climbed 2.78% to close at ¥8,693.82. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥134.80 level and was capped around the ¥137.40 level. The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥173.90 and ¥88.55 levels, respectively. The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8340 in the over-the-counter market, up from CNY 6.8297.
₤
The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.7220 level and was capped around the $1.7380 level. Overnight sterling LIBOR rates fell nearly 50bps as they continue to normalize. Bank of England will unveil a new liquidity provision scheme on Monday to help stabilize the financial system. Cable bids are seen around the $1.7115 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7810 level and was supported around the ₤0.7745 level.
GCI Financial
http://www.gcitrading.com
DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
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U.S. Market Update
Daily Forex Fundamentals | Written by Trade The News | Oct 17 08 15:44 GMT |
Dow -65 S&P -4 NASDAQ -5
Slumping housing data and the lower-than-expected University of Michigan confidence data held back equity markets in early trading, but optimism has retuned mid-morning as markets push back into positive territory. Libor has continued its incremental declines, and the US three-month TED spread has fallen back towards 380 basis points, well off the all time highs above 470. The oil majors are down as crude sustains its one-year lows around $70, although CVX and XOM are off their worst levels. SLB-8% is also off its lows this morning as declines in crude obscure the company's in-line earnings report. The oil services leader hedged its view of 2009, saying that while it anticipates slowing spending due to the economic downturn, the weakness of the existing supply base and historically falling reserve replacement could make up for any slowdown in business. In any case, it believes it will take 18 months for supply and demand to return to balance, given flat demand. The major financials are jumpy in early action, with the XLF swinging in and out of negative territory as traders consider the long-term implications of the "partial nationalization." None other than President Bush addressed the controversy himself this morning, insisting in a pre-market address that the Treasury's stakes did not amount to nationalization. As the majors grapple with the government, smaller financial companies are struggling with the realities of crisis. Regional banks First Horizon National and Zions Bancorp offered disappointing quarterly results, characterized by worse-than-expected earnings and revenue, sharply declining ROE, and climbing charge-offs and loan loss provisions. Both names were down 8-10% before the bell; FHN-2% has recovered nicely while multiple downgrades overnight are weighing on ZION-10%. Quarterly revenue was well below expectations at COF+6%, which reported troubling metrics yesterday after the close, including rising charge-offs and delinquencies in its credit cart and auto finance units. On the conference call, the CFO said he believes charge-offs will rise through the end of the year, but injected some optimism by insisting the firm can reach its sales growth targets for the year. CMA+2% is bucking the trend, blowing out earnings and revenue estimates and actually reporting lower loan-loss provisions. Recession fears are hitting industrial conglomerate HON-7% after the firm cut its full-year outlook before the open. On the conference call the CFO said he expects recession in 2009 and slowing growth in emerging markets. JCI-7% is down as well on the news. Tech heavyweights Google and AMD offered more-or-less positive earnings after the close yesterday. GOOG+6% reported strong growth metrics, with CEO Schmidt saying that search traffic is growing across the board. AMD+8% reported a loss that was one quarter the expected amount and trounced revenue estimates, showing gross margins 8% higher q/q.
Treasury yields have experienced a tight correlation to equity markets during the first half of the session. As US stock indices moved into positive territory the yield on the ten-year moved back towards 4% and the two-year has regained the 1.6% mark. Again there has been some thawing of credit markets visible, as the three-month LIBOR fixing improved another 9 basis points and the yield on the three-month T-bill has climbed back above 0.6%. In currencies some of the dollar safe haven buying was unwound when stocks went green, but both the euro and cable are struggling to hold onto positive territory.
Trade The News Staff
Trade The News, Inc.
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.
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Dow -65 S&P -4 NASDAQ -5
Slumping housing data and the lower-than-expected University of Michigan confidence data held back equity markets in early trading, but optimism has retuned mid-morning as markets push back into positive territory. Libor has continued its incremental declines, and the US three-month TED spread has fallen back towards 380 basis points, well off the all time highs above 470. The oil majors are down as crude sustains its one-year lows around $70, although CVX and XOM are off their worst levels. SLB-8% is also off its lows this morning as declines in crude obscure the company's in-line earnings report. The oil services leader hedged its view of 2009, saying that while it anticipates slowing spending due to the economic downturn, the weakness of the existing supply base and historically falling reserve replacement could make up for any slowdown in business. In any case, it believes it will take 18 months for supply and demand to return to balance, given flat demand. The major financials are jumpy in early action, with the XLF swinging in and out of negative territory as traders consider the long-term implications of the "partial nationalization." None other than President Bush addressed the controversy himself this morning, insisting in a pre-market address that the Treasury's stakes did not amount to nationalization. As the majors grapple with the government, smaller financial companies are struggling with the realities of crisis. Regional banks First Horizon National and Zions Bancorp offered disappointing quarterly results, characterized by worse-than-expected earnings and revenue, sharply declining ROE, and climbing charge-offs and loan loss provisions. Both names were down 8-10% before the bell; FHN-2% has recovered nicely while multiple downgrades overnight are weighing on ZION-10%. Quarterly revenue was well below expectations at COF+6%, which reported troubling metrics yesterday after the close, including rising charge-offs and delinquencies in its credit cart and auto finance units. On the conference call, the CFO said he believes charge-offs will rise through the end of the year, but injected some optimism by insisting the firm can reach its sales growth targets for the year. CMA+2% is bucking the trend, blowing out earnings and revenue estimates and actually reporting lower loan-loss provisions. Recession fears are hitting industrial conglomerate HON-7% after the firm cut its full-year outlook before the open. On the conference call the CFO said he expects recession in 2009 and slowing growth in emerging markets. JCI-7% is down as well on the news. Tech heavyweights Google and AMD offered more-or-less positive earnings after the close yesterday. GOOG+6% reported strong growth metrics, with CEO Schmidt saying that search traffic is growing across the board. AMD+8% reported a loss that was one quarter the expected amount and trounced revenue estimates, showing gross margins 8% higher q/q.
Treasury yields have experienced a tight correlation to equity markets during the first half of the session. As US stock indices moved into positive territory the yield on the ten-year moved back towards 4% and the two-year has regained the 1.6% mark. Again there has been some thawing of credit markets visible, as the three-month LIBOR fixing improved another 9 basis points and the yield on the three-month T-bill has climbed back above 0.6%. In currencies some of the dollar safe haven buying was unwound when stocks went green, but both the euro and cable are struggling to hold onto positive territory.
Trade The News Staff
Trade The News, Inc.
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.
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U.S.: Housing Starts and Permits Plummet in September
Daily Forex Fundamentals | Written by TD Bank Financial Group | Oct 17 08 15:17 GMT |
* U.S. housing starts declined to their lowest since 1991.
* Building permits were also very weak, falling 8.3% M/M.
* The retrenchment in building activity means that housing will remain a drag on economic activity.
U.S. housing starts declined by a whopping 6.3% M/M in September, following the upwardly revised 8.1% M/M drop in August (previously reported as -6.2% M/M). The drop brought new residential construction to 817K, which is the lowest level of new construction activity since 1991. Residential permit approvals were also weak, falling by 8.3% M/M, following the 8.5% M/M drop in the prior month. And at 786K, permits are at their lowest level since 1991. On a year ago basis, residential starts and permits are now down 34.8% Y/Y and 36.2% Y/Y, respectively.
The details of the report were downright sour. The important single-family units construction declined by its largest margin in two years, posting a whopping 12.0% M/M drop in September, bringing the number of new single-family homes built to 544K - its lowest level since late 1981. On the other hand, the construction of condos rose by 7.5% M/M, with the number of multi-units homes built rising to 273K.
This housing sector report was simply awful, as it suggests that the U.S. housing market correction may have quickened in recent months. And with the U.S. economy appearing to have softened considerably in recent months, and the labour market remaining in a very depressing state, there is little to suggest that a turnaround in activity will occur any time soon. Nevertheless, while the retrenchment in residential building activity will mean that the U.S. housing sector will remain a source of drag for economic activity, it is nonetheless one important step in facilitating a turnaround in the sector as it will slow the pace of inventory accumulation of unsold new homes.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
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* U.S. housing starts declined to their lowest since 1991.
* Building permits were also very weak, falling 8.3% M/M.
* The retrenchment in building activity means that housing will remain a drag on economic activity.
U.S. housing starts declined by a whopping 6.3% M/M in September, following the upwardly revised 8.1% M/M drop in August (previously reported as -6.2% M/M). The drop brought new residential construction to 817K, which is the lowest level of new construction activity since 1991. Residential permit approvals were also weak, falling by 8.3% M/M, following the 8.5% M/M drop in the prior month. And at 786K, permits are at their lowest level since 1991. On a year ago basis, residential starts and permits are now down 34.8% Y/Y and 36.2% Y/Y, respectively.
The details of the report were downright sour. The important single-family units construction declined by its largest margin in two years, posting a whopping 12.0% M/M drop in September, bringing the number of new single-family homes built to 544K - its lowest level since late 1981. On the other hand, the construction of condos rose by 7.5% M/M, with the number of multi-units homes built rising to 273K.
This housing sector report was simply awful, as it suggests that the U.S. housing market correction may have quickened in recent months. And with the U.S. economy appearing to have softened considerably in recent months, and the labour market remaining in a very depressing state, there is little to suggest that a turnaround in activity will occur any time soon. Nevertheless, while the retrenchment in residential building activity will mean that the U.S. housing sector will remain a source of drag for economic activity, it is nonetheless one important step in facilitating a turnaround in the sector as it will slow the pace of inventory accumulation of unsold new homes.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
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Mid-Day Report: Markets Stay in Tight Range after Poor US Data
Market Overview | Written by ActionForex.com | Oct 17 08 14:08 GMT |
Dollar continues to stay in tight range in early US session as poor economic data from US fails to trigger much price action in the financial markets. New residential construction data showed housing market is still in deep recession. Housing starts dropped by -6.3% to 26 years low of 0.82m annualized rate in Sep. Building permits dropped by -8.3% to 27 years low of 0.786m annualized rate. Preliminary reading of U of Michigan consumer sentiments tumbled sharply to 57.5 in Sep. But after all, dollar index remains in tight range above 82 level while most forex pairs are bounded in sideway consolidation. DOW opens lower of lack follow though selling. Crude continues to struggle around above 70 as consolidation continues too even though gold dropped below 800 level again and reached as low as 779.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 99.98; (P) 100.84; (R1) 102.43; More.
Intraday outlook in USD/JPY remains neutral for the moment as choppy sideway trading continues. Though, note that as long as 103.49/54 resistance holds, the fall from 110.66 should still be in progress. Below 99.27 will bring retest of 97.91 low and break confirm recent decline has resumed for retesting 95.77 low. However, sustained break of 103.54 will argue that fall from 110.66 has completed and focus will turn to 106.14 resistance for confirmation.
In the bigger picture, medium term rise from 95.77 has completed at 110.66 with bearish divergence condition in daily MACD. Also, the three wave structure of such rise argues that it's just correction, or part of the consolidation to the down trend from 124.13. Hence, deeper fall is now expected to retest 95.77 low. Break will confirm that whole down trend from 124.13 has resumed and should target 61.8% projection of 124.13 to 95.77 from 110.66 at 93.13 first. On the upside, above 106.14 resistance will indicate that fall from 110.66 has completed. This will suggest that medium term consolidation from 95.77 is still in progress. In such case, another test of 110.66 could be seen before resuming the down trend from 124.13.
Economic Indicators Update
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Dollar continues to stay in tight range in early US session as poor economic data from US fails to trigger much price action in the financial markets. New residential construction data showed housing market is still in deep recession. Housing starts dropped by -6.3% to 26 years low of 0.82m annualized rate in Sep. Building permits dropped by -8.3% to 27 years low of 0.786m annualized rate. Preliminary reading of U of Michigan consumer sentiments tumbled sharply to 57.5 in Sep. But after all, dollar index remains in tight range above 82 level while most forex pairs are bounded in sideway consolidation. DOW opens lower of lack follow though selling. Crude continues to struggle around above 70 as consolidation continues too even though gold dropped below 800 level again and reached as low as 779.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 99.98; (P) 100.84; (R1) 102.43; More.
Intraday outlook in USD/JPY remains neutral for the moment as choppy sideway trading continues. Though, note that as long as 103.49/54 resistance holds, the fall from 110.66 should still be in progress. Below 99.27 will bring retest of 97.91 low and break confirm recent decline has resumed for retesting 95.77 low. However, sustained break of 103.54 will argue that fall from 110.66 has completed and focus will turn to 106.14 resistance for confirmation.
In the bigger picture, medium term rise from 95.77 has completed at 110.66 with bearish divergence condition in daily MACD. Also, the three wave structure of such rise argues that it's just correction, or part of the consolidation to the down trend from 124.13. Hence, deeper fall is now expected to retest 95.77 low. Break will confirm that whole down trend from 124.13 has resumed and should target 61.8% projection of 124.13 to 95.77 from 110.66 at 93.13 first. On the upside, above 106.14 resistance will indicate that fall from 110.66 has completed. This will suggest that medium term consolidation from 95.77 is still in progress. In such case, another test of 110.66 could be seen before resuming the down trend from 124.13.
Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY Japan Tertiary industry index Aug -1.40% -0.80% 1.20%
00:30 AUD Australia Imports Prices Q3 5.00% 0.50% 1.40%
09:00 EUR Eurozone Trade balance (euro) Aug -9.03B -6.0B -2.3B -2.0B
12:30 USD U.S. Housing starts Sep 0.82M 0.88M 0.89M 0.87M
12:30 USD U.S. Housing starts M/M Sep -6.30% N/A -8.50%
12:30 USD U.S. Building permits Sep 0.79M 0.85M 0.85M 0.86M
12:30 USD U.S. Building permits M/M Sep -8.30% N/A -6.20%
13:55 USD U.S. U. Michigan survey Prel. Sep 57.5 65.5 70.3
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The Close of the Week and Trading Remains of Low Volume!
Daily Forex Fundamentals | Written by Crown Forex | Oct 17 08 15:14 GMT |
A fundamental free calendar with calm trading was witnessed today after the USD was able to gain against majors with the rebound seen in stock markets. Yet even with the fundamentals concerning the housing sector being released from the US today, the dollar is still able to find its way to the upside with the exception for the yen.
US President Bush also made a speech in front of the Chamber of Commerce today saying that the actions taken by the government should help ease the credit freeze as he tried to restore confidence in the markets.
The 15 nation currency after falling against the dollar was able to slightly rebound from the 1.3408 support level as it is currently being limited by the 14 day moving average on the four hour charts at 1.3475. A breach of the mentioned resistance will open the way for the pair to target the 1.35 levels and 1.3530 respectively. Direction indicators are supporting the upside direction yet momentum indicators show a neural trend could continue to dominate movements.
As for the Royal pound, it continued to trade within narrow ranges between the resistance level at 1.7344 after the 20 day moving average was able to halt further gains at 1.7380s, and the support level at 1.7221. Even with the ADX indicator on the weekly chart pointing to the upside, it has adjusted on an intraday basis to show that the pair will continue to trade with low volatility in a sideways channel.
Similar to the pound, the USD/JPY pair is consolidating within the 100.90 support level and the 101.46 resistance level as it lacks momentum to specify a clear trend. The upside direction on the indicators have weakened and as the pair is currently finding difficulties in breaching the minor resistance level at 101.20 which is also the 20 day moving average on the four hour chart we expect the pair to continue to move sideways with low volumes as pointed out by the relative strength indicator.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
Read more...
A fundamental free calendar with calm trading was witnessed today after the USD was able to gain against majors with the rebound seen in stock markets. Yet even with the fundamentals concerning the housing sector being released from the US today, the dollar is still able to find its way to the upside with the exception for the yen.
US President Bush also made a speech in front of the Chamber of Commerce today saying that the actions taken by the government should help ease the credit freeze as he tried to restore confidence in the markets.
The 15 nation currency after falling against the dollar was able to slightly rebound from the 1.3408 support level as it is currently being limited by the 14 day moving average on the four hour charts at 1.3475. A breach of the mentioned resistance will open the way for the pair to target the 1.35 levels and 1.3530 respectively. Direction indicators are supporting the upside direction yet momentum indicators show a neural trend could continue to dominate movements.
As for the Royal pound, it continued to trade within narrow ranges between the resistance level at 1.7344 after the 20 day moving average was able to halt further gains at 1.7380s, and the support level at 1.7221. Even with the ADX indicator on the weekly chart pointing to the upside, it has adjusted on an intraday basis to show that the pair will continue to trade with low volatility in a sideways channel.
Similar to the pound, the USD/JPY pair is consolidating within the 100.90 support level and the 101.46 resistance level as it lacks momentum to specify a clear trend. The upside direction on the indicators have weakened and as the pair is currently finding difficulties in breaching the minor resistance level at 101.20 which is also the 20 day moving average on the four hour chart we expect the pair to continue to move sideways with low volumes as pointed out by the relative strength indicator.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
Read more...
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