By Garth Theunissen
Oct. 20 (Bloomberg) -- South Africa's rand declined against the dollar on speculation the country's importers took advantage of gains that drove the currency to the highest level in three days to buy foreign exchange.
The rand was also hurt as traders bet Finance Minister Trevor Manuel may push the budget into a deficit next year to fund spending on infrastructure and social programs to cushion a slowdown in Africa's biggest economy. The currency earlier rose for a third day versus the dollar, rebounding from a 17 percent plunge on Oct. 15 sparked by concern about a global recession.
``We're seeing strong importer demand below the 10 rand to the dollar level,'' said Ian Martin, a currency strategist at Rand Merchant Bank in Johannesburg. ``Small importers in particular have been rattled by the rand's weakness. Every time the rand strengthens they buy foreign exchange.''
The South African currency fell as much as 2.2 percent to 10.2295 per dollar and traded at 10.2170 as of 4:23 p.m. in Johannesburg, from 10.0126 at the end of last week. Earlier, it strengthened to 9.8250. The rand fell versus all 16 most- actively traded currencies monitored by Bloomberg, slipping 1.5 percent versus the euro to 13.6229, from 13.4260.
South Africa's currency slid 33 percent against the dollar this year, making it the worst-performing major currency in the world, as foreign investors turned net sellers of about 34 billion rand ($3.3 billion) of the country's stocks and bonds. About $30 trillion has been wiped off global stock benchmarks in the past year as the U.S. subprime-mortgage crisis toppled financial institutions and spread to economies around the world.
Precious Metals
The rand declined even as equities gained and gold and platinum prices advanced, boosting the revenue prospects for the world's biggest exporter of precious metals.
``We've definitely seen importer-buying today,'' said Marc Copeland, a currency trader at Investec Capital Markets in Cape Town, where he helps manage about $60 billion in assets. ``People are nervous about further rand weakness. Any deterioration in equity markets will hit the rand hard.''
Copeland said he is ``positioning for further weakness'' in the currency, without giving a trading range. ``It's difficult to say exactly where the rand is going to trade in the current environment,'' he said.
South Africa's benchmark FTSE/JSE Africa All Share Index gained 2.3 percent today, rising for a second day. The equity measure is down 29 percent this year.
Deficit Concern
The country's deficit may be as much as 1 percent of gross domestic product in the year through March 2010, compared with a February estimate of a 0.6 percent surplus, according to Standard Chartered Plc and South Africa's Bureau for Economic Research. Manuel will present his Medium Term Budget Policy Statement at 2 p.m. in Cape Town tomorrow.
``We're one day ahead of a major policy statement, so it stands to reason that investors would hold back on rand positions until they have more certainty,'' said Ian Cruickshanks, head of research at Nedbank Treasury in Johannesburg. Manuel ``may be pushed to send the budget into deficit and that's cause for concern.''
Labor unions and communists have increased their influence over the ruling African National Congress since successfully backing Jacob Zuma to become party president in December. The ANC is pushing to step up spending to boost job creation in the country, where one in four people is unemployed.
Gold climbed for the first time in three days, increasing 1.4 percent to $794.69 an ounce. Platinum snapped a three-day decline, gaining 2.3 percent, to $885.70 an ounce.
South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.
Government bonds fell, with the yield on the 13.5 percent security due September 2015 rising about 1 basis point to 9.31 percent. The yield on the 13 percent note maturing in August 2010 rose 4 basis points to 9.56 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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Monday, October 20, 2008
Ruble Jumps Most Since 1999 as Central Bank Curbs Speculators
By Emma O'Brien
Oct. 20 (Bloomberg) -- The ruble rose the most against the dollar in more than nine years and Russian stocks and bonds rallied after the central bank curbed speculators betting on the currency's decline.
The ruble strengthened against the dollar and the euro after Bank Rossii limited the amount traders can wager through currency swaps, which allow investors to make bets on the exchange rate without having to convert currency upfront. The Micex Index of shares climbed as much as 6.6 percent, and the yield on the benchmark 30-year government bond retreated from a six-year high as the price of oil, Russia's biggest export earner, rose for a second day.
``They're trying to defend the ruble with tooth and nail, though it remains to be seen whether they'll be successful,'' said Peter Westin, a strategist in Moscow with JPMorgan Chase & Co., the largest U.S. bank by market value. ``We have global momentum and strength with the oil price up and that's helping Russia today.''
The central bank will announce a limit on traders' currency-swap operations every day by 10 a.m. in Moscow, it said today in an e-mailed statement. Today's limit is 50 billion rubles ($1.9 billion).
The new policy will prompt banks betting on a ruble decline to reverse those trades, said Mikhail Galkin, head of fixed- income and credit research at MDM Bank in Moscow.
The currency, which the central bank seeks to keep within a trading band against a basket of dollars and euros, rose as much as 1.8 percent to 25.8838 per dollar today, the biggest gain since May 17, 1999. It was at 26.3135 by 4:53 p.m. in Moscow, from 26.3566 last week. The ruble climbed as much as 1.2 percent to 34.9330 per euro, from 35.3415.
Those gains pushed the ruble 0.1 percent higher against the dollar-euro basket to 30.3642.
Citigroup, Goldman
Citigroup Inc. and Goldman Sachs Group Inc. predicted last week the ruble would weaken as much as 5 percent in the next year as investors keep pulling funds out of the country and the price of oil declines.
The ruble slid to a 20-month low versus the dollar on Oct. 16 and the Micex lost 9.1 percent, as Urals crude, Russia's main export blend, fell below $70 a barrel for the first time in more than a year and the global credit crisis dried up lending among Russian banks. Prices dropped to as little as $66.62 a barrel, below the average price needed to balance Russia's budget next year.
BNP Paribas SA, France's largest bank, also advised clients to ``short the ruble,'' according to an e-mailed note today. A short position is a bet that an asset price will fall. JPMorgan said last week the ruble may drop to as low as 32 versus the basket by year-end and 33.40 by the end of 2009.
`Paying With Blood'
``They are paying with their blood for their mistakes,'' said Evgeniy Nadorshin, a senior economist at Trust.
Urals prices had jumped more than fivefold to a July record of $143 since May 2000, when current Prime Minister Vladimir Putin officially succeeded Boris Yeltsin as Russia's president.
Crude rose 2.3 percent to $73.49 a barrel on the New York Mercantile Exchange today.
Russia's foreign-currency reserves, the world's third- largest, shrank by $15.1 billion to $530.6 in the five days to Oct. 10 as Bank Rossii sold dollars to support the ruble. The bank manages the ruble against a basket to prevent currency fluctuations from hurting the competitiveness of exports. The basket rate is calculated by multiplying the ruble's rate to the dollar by 0.55, the euro rate by 0.45, and adding them together.
``If the ruble was to dramatically weaken it would hurt corporate and financial funding costs and lead to a deterioration of household sentiment,'' said Martin Blum, head of emerging market economics and currency strategy at UniCredit in Vienna. ``The average Joe on the street isn't looking at the basket rate, he's looking at where the ruble is to the dollar.''
Bonds Advance
Russian government bonds rose, with the yield on the 7.5 percent bond due 2030 falling 3 basis points to 10.25 percent. The extra yield investors demand to hold two-year Russian notes over U.S. Treasuries of similar maturity narrowed 21 basis points to 390 points today.
The Micex gained 2 percent to 611.80 and the dollar- denominated RTS Index also snapped three days of declines, rising 4.5 percent to 697.49. Markets were led higher by oil producers, including OAO Gazprom Neft and OAO Lukoil.
Gazprom Neft, the oil arm of Russian gas monopoly OAO Gazprom, climbed 1.80 ruble, or 4.2 percent, to 44.82 rubles, while Lukoil, the country's biggest independent crude producer, gained 43.17 rubles, or 5.2 percent, to 870.98 rubles. OAO Novatek, Russia's second-largest natural-gas producer, added 3.33 rubles, or 4.1 percent, to 85.54 rubles, after the nation's gas prices increased by 0.7 percent at an Oct. 15 auction on the Electronic Trading Platform-000 Mezhregiongaz.
Russia's MosPrime rate, the average interest Russian banks charge to lend money to each other, surged to a record 21 percent today, from 9.83 percent on Oct. 17. Lenders are retaining their cash as 200 billion rubles ($7.7 billion) in value-added tax comes due today, said Vladimir Tikhomirov, chief economist in Moscow for UralSib Financial Corp. in Moscow.
``Banks are scrambling for cash to pay VAT on behalf of their clients,'' he said. ``We have a liquidity crisis because of the global situation which makes it more difficult when big payments are due.''
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
Read more...
Oct. 20 (Bloomberg) -- The ruble rose the most against the dollar in more than nine years and Russian stocks and bonds rallied after the central bank curbed speculators betting on the currency's decline.
The ruble strengthened against the dollar and the euro after Bank Rossii limited the amount traders can wager through currency swaps, which allow investors to make bets on the exchange rate without having to convert currency upfront. The Micex Index of shares climbed as much as 6.6 percent, and the yield on the benchmark 30-year government bond retreated from a six-year high as the price of oil, Russia's biggest export earner, rose for a second day.
``They're trying to defend the ruble with tooth and nail, though it remains to be seen whether they'll be successful,'' said Peter Westin, a strategist in Moscow with JPMorgan Chase & Co., the largest U.S. bank by market value. ``We have global momentum and strength with the oil price up and that's helping Russia today.''
The central bank will announce a limit on traders' currency-swap operations every day by 10 a.m. in Moscow, it said today in an e-mailed statement. Today's limit is 50 billion rubles ($1.9 billion).
The new policy will prompt banks betting on a ruble decline to reverse those trades, said Mikhail Galkin, head of fixed- income and credit research at MDM Bank in Moscow.
The currency, which the central bank seeks to keep within a trading band against a basket of dollars and euros, rose as much as 1.8 percent to 25.8838 per dollar today, the biggest gain since May 17, 1999. It was at 26.3135 by 4:53 p.m. in Moscow, from 26.3566 last week. The ruble climbed as much as 1.2 percent to 34.9330 per euro, from 35.3415.
Those gains pushed the ruble 0.1 percent higher against the dollar-euro basket to 30.3642.
Citigroup, Goldman
Citigroup Inc. and Goldman Sachs Group Inc. predicted last week the ruble would weaken as much as 5 percent in the next year as investors keep pulling funds out of the country and the price of oil declines.
The ruble slid to a 20-month low versus the dollar on Oct. 16 and the Micex lost 9.1 percent, as Urals crude, Russia's main export blend, fell below $70 a barrel for the first time in more than a year and the global credit crisis dried up lending among Russian banks. Prices dropped to as little as $66.62 a barrel, below the average price needed to balance Russia's budget next year.
BNP Paribas SA, France's largest bank, also advised clients to ``short the ruble,'' according to an e-mailed note today. A short position is a bet that an asset price will fall. JPMorgan said last week the ruble may drop to as low as 32 versus the basket by year-end and 33.40 by the end of 2009.
`Paying With Blood'
``They are paying with their blood for their mistakes,'' said Evgeniy Nadorshin, a senior economist at Trust.
Urals prices had jumped more than fivefold to a July record of $143 since May 2000, when current Prime Minister Vladimir Putin officially succeeded Boris Yeltsin as Russia's president.
Crude rose 2.3 percent to $73.49 a barrel on the New York Mercantile Exchange today.
Russia's foreign-currency reserves, the world's third- largest, shrank by $15.1 billion to $530.6 in the five days to Oct. 10 as Bank Rossii sold dollars to support the ruble. The bank manages the ruble against a basket to prevent currency fluctuations from hurting the competitiveness of exports. The basket rate is calculated by multiplying the ruble's rate to the dollar by 0.55, the euro rate by 0.45, and adding them together.
``If the ruble was to dramatically weaken it would hurt corporate and financial funding costs and lead to a deterioration of household sentiment,'' said Martin Blum, head of emerging market economics and currency strategy at UniCredit in Vienna. ``The average Joe on the street isn't looking at the basket rate, he's looking at where the ruble is to the dollar.''
Bonds Advance
Russian government bonds rose, with the yield on the 7.5 percent bond due 2030 falling 3 basis points to 10.25 percent. The extra yield investors demand to hold two-year Russian notes over U.S. Treasuries of similar maturity narrowed 21 basis points to 390 points today.
The Micex gained 2 percent to 611.80 and the dollar- denominated RTS Index also snapped three days of declines, rising 4.5 percent to 697.49. Markets were led higher by oil producers, including OAO Gazprom Neft and OAO Lukoil.
Gazprom Neft, the oil arm of Russian gas monopoly OAO Gazprom, climbed 1.80 ruble, or 4.2 percent, to 44.82 rubles, while Lukoil, the country's biggest independent crude producer, gained 43.17 rubles, or 5.2 percent, to 870.98 rubles. OAO Novatek, Russia's second-largest natural-gas producer, added 3.33 rubles, or 4.1 percent, to 85.54 rubles, after the nation's gas prices increased by 0.7 percent at an Oct. 15 auction on the Electronic Trading Platform-000 Mezhregiongaz.
Russia's MosPrime rate, the average interest Russian banks charge to lend money to each other, surged to a record 21 percent today, from 9.83 percent on Oct. 17. Lenders are retaining their cash as 200 billion rubles ($7.7 billion) in value-added tax comes due today, said Vladimir Tikhomirov, chief economist in Moscow for UralSib Financial Corp. in Moscow.
``Banks are scrambling for cash to pay VAT on behalf of their clients,'' he said. ``We have a liquidity crisis because of the global situation which makes it more difficult when big payments are due.''
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Hungarian Forint Falls Versus Euro After Main Rate Kept at 8.5%
By Ewa Krukowska
Oct. 20 (Bloomberg) -- The Hungarian forint fell against the euro after the country's central bank kept its main interest rate at 8.5 percent.
The forint declined to 268.56 versus the euro at 2:06 p.m. in Budapest, from 267.54 at the end of last week. Against the dollar, the forint was little changed at 199.82.
The decision by the Magyar Nemzeti Bank in Budapest was predicted by the median forecast of 15 economists surveyed by Bloomberg. The rate is the second-highest in the European Union, after Romania. The currency lost 10 percent in the past month as investors shunned higher-yielding assets on concern the global financial crisis would entrap Hungary's economy.
Hungary last week became the first East European country to borrow from the European Central Bank to help thaw local markets. The emergency 5 billion-euro ($6.7 billion) financing will only be used if ``all hell breaks loose,'' Andras Simor, the head of the central bank, was quoted as saying by the Wall Street Journal today.
To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net
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Mexico's Peso Gains, Buoyed by Decline in Money-Market Rates
By Jamie McGee
Oct. 20 (Bloomberg) -- Mexico's peso rose as a decline in global money-market rates and a jump in stocks buoyed demand for higher-yielding, emerging-market assets.
The peso rose 0.7 percent to 12.7841 per dollar at 9:28 a.m. New York time, from 12.8760 on Oct. 17.
``We've seen some key metrics of credit and the money market activity improve overnight,'' said Omer Esiner, a foreign-exchange analyst at currency-trading company Ruesch International Inc. ``Higher equity prices tend to signal a rising willingness for investors to take on more risk. We should see the peso continue to benefit.''
The peso has dropped 16.5 percent against the dollar in the past month and has declined against 14 of the 16 most-traded currencies. Only the Australian dollar and the South African rand have weakened against the peso in the last month.
Yields on Mexico's 10 percent bond due in December 2024 fell 1 basis point, or 0.01 percentage point, to 9.39 percent. The bond's price rose 0.11 centavo to 105.02 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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Canada's Dollar Falls on Securities, Wholesale Sales Reports
By Chris Fournier
Oct. 20 (Bloomberg) -- Canada's currency weakened for a second day after reports showed wholesale sales in August fell for the first time since February and foreigners decreased their holdings of Canadian securities for a second month.
The Canadian dollar, known as the loonie because of the aquatic bird on the one-dollar coin, has declined 10.6 percent this month as commodities fell. Traders also sold the currency on speculation the country's central bank will cut borrowing costs tomorrow. The U.S. is Canada's largest trading partner.
``Wholesale sales numbers show there's just not as much economic activity from overseas and the U.S., and people are pulling out of Canadian assets,'' said Tyson Wright, senior currency trader at Custom House in Victoria, British Columbia. ``The Canadian economy is on the slow. That will continue to put pressure on the loonie, especially if the Bank of Canada, as is widely expected, cuts rates tomorrow. We'll see the Canadian dollar struggle to appreciate in the near term.''
Canada's dollar depreciated as much as 0.9 percent to C$1.1921 per U.S. dollar, from C$1.1820 on Oct. 17. It last traded at C$1.1910 at 10:16 a.m. in Toronto. One Canadian dollar buys 83.96 U.S. cents.
Sales fell 1.5 percent to C$45.7 billion ($38.6 billion), Statistics Canada said in Ottawa. Economists surveyed by Bloomberg said sales would drop 0.9 percent, the median of nine estimates, after a 2.7 percent increase in July.
International investors sold a net C$730 million of securities in August.
Three Weeks
Canada's currency has dropped for three straight weeks on speculation that a global recession will crimp demand for commodities such as crude oil, which accounts for about 10 percent of the country's export revenue.
Crude has declined by about half to $73.81 a barrel since reaching a record $147.27 on July 11. The Canadian dollar has weakened by 15 percent since then.
``Over the longer term we will see the demand for U.S. dollars remain in place, and commodity currencies coming under pressure,'' said Ian Stannard, a senior currency strategist in London at BNP Paribas SA, France's biggest bank. ``We are still very bullish on the U.S. dollar.''
The Bank of Canada will cut borrowing costs tomorrow, according to the median forecast of 22 economists surveyed by Bloomberg News. Eleven forecast a half-percentage point reduction to 2 percent, seven predict a quarter-point reduction and four believe policy makers will hold rates unchanged.
`Risks Ahead'
``What's moving the Canadian dollar is short positioning ahead of tomorrow's Bank of Canada decision,'' said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. ``Correlated energy and commodity markets are Canadian-dollar friendly, but are likely to be outweighed by the event and data risks ahead.''
The central bank lowered its key rate to 2.5 percent from 3 percent on Oct. 8 as part of a coordinated effort to ease the economic effects of the financial crisis.
The 10-year note's yield climbed 4 basis points, or 0.04 percentage point, to 3.77 percent. The price of the 4.25 percent security maturing in June 2018 dropped 36 cents to C$103.85.
The yield on the two-year government bond declined 1 basis point to 2.26 percent. The price of the 2.75 percent security due in December 2010 rose 1 cent to C$101.01.
The 10-year bond yielded 151 basis points more than the two- year security, from 158 basis points on Oct. 10, when it was the steepest since September 2004.
`Diminishing Inflation Fears'
The flattening of the yield curve ``does reflect a sense of optimism that perhaps is pervading, or at least a lack of devastating outcomes,'' said Eric Lascelles, a strategist at TD Securities in Toronto. ``We also have the reemergence of the liability-driven investment flows that tend to affect Canada's long end, and that means that pension and insurance companies are really putting money into the long end. We also have diminishing inflation fears that are keeping some pretty good appetite on Canada's long end.''
Canadian government bonds have returned 4.1 percent in 2008, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 4.4 percent this year.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
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Oct. 20 (Bloomberg) -- Canada's currency weakened for a second day after reports showed wholesale sales in August fell for the first time since February and foreigners decreased their holdings of Canadian securities for a second month.
The Canadian dollar, known as the loonie because of the aquatic bird on the one-dollar coin, has declined 10.6 percent this month as commodities fell. Traders also sold the currency on speculation the country's central bank will cut borrowing costs tomorrow. The U.S. is Canada's largest trading partner.
``Wholesale sales numbers show there's just not as much economic activity from overseas and the U.S., and people are pulling out of Canadian assets,'' said Tyson Wright, senior currency trader at Custom House in Victoria, British Columbia. ``The Canadian economy is on the slow. That will continue to put pressure on the loonie, especially if the Bank of Canada, as is widely expected, cuts rates tomorrow. We'll see the Canadian dollar struggle to appreciate in the near term.''
Canada's dollar depreciated as much as 0.9 percent to C$1.1921 per U.S. dollar, from C$1.1820 on Oct. 17. It last traded at C$1.1910 at 10:16 a.m. in Toronto. One Canadian dollar buys 83.96 U.S. cents.
Sales fell 1.5 percent to C$45.7 billion ($38.6 billion), Statistics Canada said in Ottawa. Economists surveyed by Bloomberg said sales would drop 0.9 percent, the median of nine estimates, after a 2.7 percent increase in July.
International investors sold a net C$730 million of securities in August.
Three Weeks
Canada's currency has dropped for three straight weeks on speculation that a global recession will crimp demand for commodities such as crude oil, which accounts for about 10 percent of the country's export revenue.
Crude has declined by about half to $73.81 a barrel since reaching a record $147.27 on July 11. The Canadian dollar has weakened by 15 percent since then.
``Over the longer term we will see the demand for U.S. dollars remain in place, and commodity currencies coming under pressure,'' said Ian Stannard, a senior currency strategist in London at BNP Paribas SA, France's biggest bank. ``We are still very bullish on the U.S. dollar.''
The Bank of Canada will cut borrowing costs tomorrow, according to the median forecast of 22 economists surveyed by Bloomberg News. Eleven forecast a half-percentage point reduction to 2 percent, seven predict a quarter-point reduction and four believe policy makers will hold rates unchanged.
`Risks Ahead'
``What's moving the Canadian dollar is short positioning ahead of tomorrow's Bank of Canada decision,'' said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. ``Correlated energy and commodity markets are Canadian-dollar friendly, but are likely to be outweighed by the event and data risks ahead.''
The central bank lowered its key rate to 2.5 percent from 3 percent on Oct. 8 as part of a coordinated effort to ease the economic effects of the financial crisis.
The 10-year note's yield climbed 4 basis points, or 0.04 percentage point, to 3.77 percent. The price of the 4.25 percent security maturing in June 2018 dropped 36 cents to C$103.85.
The yield on the two-year government bond declined 1 basis point to 2.26 percent. The price of the 2.75 percent security due in December 2010 rose 1 cent to C$101.01.
The 10-year bond yielded 151 basis points more than the two- year security, from 158 basis points on Oct. 10, when it was the steepest since September 2004.
`Diminishing Inflation Fears'
The flattening of the yield curve ``does reflect a sense of optimism that perhaps is pervading, or at least a lack of devastating outcomes,'' said Eric Lascelles, a strategist at TD Securities in Toronto. ``We also have the reemergence of the liability-driven investment flows that tend to affect Canada's long end, and that means that pension and insurance companies are really putting money into the long end. We also have diminishing inflation fears that are keeping some pretty good appetite on Canada's long end.''
Canadian government bonds have returned 4.1 percent in 2008, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 4.4 percent this year.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
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Copper Erases Advance in London as Slower Growth Trims Demand
By Claudia Carpenter
Oct. 20 (Bloomberg) -- Copper and aluminum fell in London on speculation slower economic growth will erode demand for industrial metals.
Industrial production in China, the world's largest copper buyer, expanded at the slowest pace in six years, figures from the statistics bureau in Beijing showed today. Copper, used in pipes and wires, has dropped 28 percent this year.
``The fundamentals for most commodities are not impaired other than on a cyclical demand basis,'' investor Jim Rogers told reporters in London today. ``Everything that is happening ensures there will be even less supply going forward and the bull market in commodities is going to be even bigger and last longer probably.''
Copper for delivery in three months fell $30, or 0.6 percent, to $4,780 a metric ton as of 1:50 p.m. on the London Metal Exchange, after earlier climbing as much $140. The contract slid to a 33-month low last week. Aluminum dropped $48, or 2.1 percent, to $2,157 a ton.
China's industrial production rose 11.4 percent in September from a year earlier. Economists forecast a 13.4 percent increase, the median in a Bloomberg News survey.
Poland's KGHM Polska Miedz SA copper miners voted for a 24- hour strike on Nov. 5, PAP news agency reported today. Copper output growth may stall as mines age and lower prices lead some companies to consider revising investment plans, Chile's Deputy Mining Minister Veronica Baraona said last week.
Stockpiles Rise
Inventories of the metal in warehouses monitored by the LME jumped 950 tons to 212,400 tons, taking this year's increase to 7.6 percent. Stockpiles are climbing in Hamburg for the first time since January 2006 and are the highest since January in St. Louis.
Inventories are falling in South Korea near China, the world's largest consumer of the metal. Growth may accelerate after closures to clear the air for the Olympic and Paralympic Games in August and September, said Peter Fertig, a consultant to Dresdner Kleinwort in Hainburg, Germany.
China's copper production dropped 1 percent in September from August, according to Mainland Marketing Research Co.
Industrial metals including copper and nickel will average less than previously forecast in 2009 as demand declines, Credit Suisse Group AG said, adding that its new estimates may still be too high.
Copper will average $2.50 a pound ($5,878 a ton) in 2009, below a previous forecast of $4, Credit Suisse analysts led by London-based Jeremy Gray wrote in a report e-mailed today.
Nickel will average $5.75 per pound next year, compared with an earlier forecast of $11. Zinc will average 75 cents per pound as against $1 previously, the report said.
``Many of our CEOs are now beginning to reassess their plans to build new capacity, which could in turn see a further hit to industrial production growth, but ironically create the seeds for the next commodity bull market as supply could become further constrained,'' Gray wrote.
Lead declined $30 to $1,410 a ton and nickel fell $350 to $10,450 a ton. Tin gained $50 to $13,050 a ton and zinc dropped $10 to $1,220 a ton.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net
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Brazil's Real Gains for a Third Day as Crude Oil, Stocks Rise
By Drew Benson
Oct. 20 (Bloomberg) -- Brazil's real strengthened for a third day as crude oil increased and global stocks gained, boosting demand for higher-yielding, emerging-market assets.
The real climbed 0.8 percent to 2.1017 per dollar at 9:30 a.m. New York time, from 2.1190 on Oct. 17. The real has plunged 26 percent since it hit a record 1.5545 per dollar on Aug. 1.
``As long as we start to see some reduction in volatility in global markets, and that's something we're starting to see, there is more space for the real to strengthen,'' said Andre Delben Silva, a partner at Advisor Asset Management, a Sao Paulo-based firm with about 600 million reais ($285.4 million) under management. ``The real depreciated too much. The movement was aggregated by derivatives positions that a lot of companies had.''
The Brazilian central bank has taken measures including tapping record reserves, selling dollars and offering dollar loans to exporters.
``We are starting to see signs of improvement, and that the measures taken by the government and central bank are starting to work,'' Delben Silva said.
Brazil's central bank is set to hold its first auction of reserve dollars today, up to $2 billion, in a bid to unfreeze credit lines for exporters. The one-hour auction, which accepts sovereign global bonds as collateral, begins at 2 p.m. New York time.
The Standard & Poor's 500 Index gained 1.5 percent. Crude oil increased 2.7 percent to $73.81 a barrel.
The yield on Brazil's overnight futures contract for January 2009 delivery declined 2 basis points, or 0.02 percentage point, to 13.93 percent. The yield on Brazil's zero-coupon bond due in January 2010 was little changed at 14.79 percent, according to Banco Votorantim.
To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net
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Dollar Rises Against Euro as Bernanke Endorses U.S. Stimulus
By Ye Xie and Daniel Kruger
Oct. 20 (Bloomberg) -- The dollar rose against the euro for a fourth day as Federal Reserve Chairman Ben S. Bernanke endorsed consideration of a fiscal stimulus package.
The greenback rose against the South African rand and the Swiss franc on speculation U.S. government and central-bank efforts will help the world's largest economy recover from a recession before the rest of the world. The South Korean won strengthened versus the greenback as the government guaranteed $100 billion of lenders' foreign-currency debt.
``The U.S. is more actively taking measures to deal with the recession than others,'' said Jessica Hoversen, a currency analyst at MF Global Ltd. in Chicago. ``I am bullish on the dollar versus the euro.''
The dollar gained 0.6 percent to $1.3325 per euro at 10:49 a.m. in New York, from $1.3410 on Oct. 17. It touched $1.3259 on Oct. 10, the strongest since March 2007. The dollar traded at 101.77 yen, compared with 101.69. The yen climbed 0.4 percent to 135.63 per euro, from 136.21.
Interest-rate futures show a 100 percent chance the Fed will lower its 1.5 percent target lending rate by at least a quarter-percentage point when the central bank announces its next policy decision Oct. 29. That compares with no chance of a rate cut one month ago.
Bernanke's remarks in prepared testimony to the House Budget Committee today may give momentum to legislation being proposed by House Democrats. In January before the same panel, he said a stimulus ``could be helpful'' and urged lawmakers to act ``quickly.'' The impact of that $168 billion measure faded by July, and economists anticipate gross domestic product will contract in the current quarter.
India's Rupee
India's rupee fell as much as 0.3 percent to 49.0400 per dollar after the central bank unexpectedly cut its benchmark interest rate by 1 percentage point to 8 percent. It was the Reserve Bank of India's first rate cut since 2004.
The won rose 1.4 percent today to 1,315 per dollar after the Bank of Korea said it will provide $30 billion in U.S. dollars to banks to increase their access to funding as well as guaranteeing foreign-currency debt. On Oct. 16, South Korea's currency had its biggest decline since the International Monetary Fund bailed the nation out in 1997.
Developing-nation currencies tumbled after Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, deepening a freeze in credit markets and prompting investors to turn to the safest, dollar-denominated securities. Zurich-based UBS AG predicts the rupee will weaken 2.2 percent to a record low of 50 per dollar by March, adding to a 19 percent drop this year, while the won will depreciate 6 percent to 1,400, extending a 29 percent slump.
The Conference Board's index of U.S. leading economic indicators increased 0.3 percent in September after a 0.9 percent decline in the prior month that was almost twice as large as previously estimated, the New York-based private research group said today. The index points to the direction of the economy over the next three to six months.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net
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Crude Oil Rises a Second Day on Signs OPEC Will Cut Output
By Mark Shenk
Oct. 20 (Bloomberg) -- Crude oil rose for a second day on signs that the Organization of Petroleum Exporting Countries may cut output to halt a 50 percent drop in prices since July.
OPEC may pare production by 1 million to 2 million barrels a day in stages at an Oct. 24 meeting to stabilize prices, said Chakib Khelil, the group's president. Deutsche Bank AG lowered its 2009 crude-oil price estimate by 35 percent to $60 a barrel, citing the possibility of a ``major world recession.''
``OPEC is the focus,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``We are all waiting to see what OPEC does on Friday. A 1 or 1.5 million barrel cut looks most likely, but as much as 3 million barrels is a possibility, although done in stages.''
Crude oil for November delivery rose $1.69, or 2.4 percent, to $73.54 a barrel at 9:13 a.m. on the New York Mercantile Exchange. Prices are down 17 percent from a year ago.
``Prices only made it to $74.28 today, failing to break through resistance,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``Prices will have to break through Thursday's high of $74.50 to convince me that this is anything other than a temporary bounce.''
China's economy grew 9 percent in the third quarter, the slowest pace in five years, underscoring concern that the spreading financial crisis threatens the biggest contributor to global growth.
Emergency Meeting
OPEC, supplier of about 40 percent of the world's oil, brought forward to this week a Vienna meeting planned for November to discuss output levels.
While there's a consensus among the group's members to cut output, there's no agreement on the size of the reduction, Khelil, who is also Algeria's oil minister, said in an interview on Algerian television yesterday.
Qatari Oil Minister Abdullah bin Hamad al-Attiyah told Al Jazeera TV the cut will probably be 1 million barrels a day. Saudi Arabia, which dominates OPEC proceedings as the group's largest producer, has yet to comment on its intentions.
Goldman Sachs Group Inc. and Merrill Lynch & Co. said a 1 million-barrel cut is possible. Oil may fall below $60 a barrel if OPEC limits the cut to 1 million barrels a day, Goldman analysts said in a report dated Oct. 17. Merrill analysts said OPEC may trim supplies by 2.4 million barrels a day over 12 months if economic conditions deteriorate.
OPEC's 13 members produced 32.2 million barrels a day in September, according to a Bloomberg News survey of analysts and producers.
``The West is going to be angry because the drop in oil prices has been just about the only positive economic news,'' Fitzpatrick said. ``Falling gasoline prices have been a great help to consumers.''
Brent crude oil for December settlement rose $2.25, or 3.2 percent, to $71.85 a barrel on London's ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Oct. 20 (Bloomberg) -- Crude oil rose for a second day on signs that the Organization of Petroleum Exporting Countries may cut output to halt a 50 percent drop in prices since July.
OPEC may pare production by 1 million to 2 million barrels a day in stages at an Oct. 24 meeting to stabilize prices, said Chakib Khelil, the group's president. Deutsche Bank AG lowered its 2009 crude-oil price estimate by 35 percent to $60 a barrel, citing the possibility of a ``major world recession.''
``OPEC is the focus,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``We are all waiting to see what OPEC does on Friday. A 1 or 1.5 million barrel cut looks most likely, but as much as 3 million barrels is a possibility, although done in stages.''
Crude oil for November delivery rose $1.69, or 2.4 percent, to $73.54 a barrel at 9:13 a.m. on the New York Mercantile Exchange. Prices are down 17 percent from a year ago.
``Prices only made it to $74.28 today, failing to break through resistance,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``Prices will have to break through Thursday's high of $74.50 to convince me that this is anything other than a temporary bounce.''
China's economy grew 9 percent in the third quarter, the slowest pace in five years, underscoring concern that the spreading financial crisis threatens the biggest contributor to global growth.
Emergency Meeting
OPEC, supplier of about 40 percent of the world's oil, brought forward to this week a Vienna meeting planned for November to discuss output levels.
While there's a consensus among the group's members to cut output, there's no agreement on the size of the reduction, Khelil, who is also Algeria's oil minister, said in an interview on Algerian television yesterday.
Qatari Oil Minister Abdullah bin Hamad al-Attiyah told Al Jazeera TV the cut will probably be 1 million barrels a day. Saudi Arabia, which dominates OPEC proceedings as the group's largest producer, has yet to comment on its intentions.
Goldman Sachs Group Inc. and Merrill Lynch & Co. said a 1 million-barrel cut is possible. Oil may fall below $60 a barrel if OPEC limits the cut to 1 million barrels a day, Goldman analysts said in a report dated Oct. 17. Merrill analysts said OPEC may trim supplies by 2.4 million barrels a day over 12 months if economic conditions deteriorate.
OPEC's 13 members produced 32.2 million barrels a day in September, according to a Bloomberg News survey of analysts and producers.
``The West is going to be angry because the drop in oil prices has been just about the only positive economic news,'' Fitzpatrick said. ``Falling gasoline prices have been a great help to consumers.''
Brent crude oil for December settlement rose $2.25, or 3.2 percent, to $71.85 a barrel on London's ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Gold Rebounds as Decline Below $800 Spurs Buyers; Silver Gains
By Pham-Duy Nguyen
Oct. 20 (Bloomberg) -- Gold rose after the lowest price in more than a month attracted investors. Silver also gained.
Gold dropped 8.3 percent last week, touching $772.20 an ounce, the lowest price since Sept. 15. UBS AG said gold will trade at $800 in one and three months, compared with previous forecasts of $925 and $975.
``After the recent declines, gold has found some support from Indian physical demand,'' said John Reade, a UBS metals strategist in London. ``Other Asian demand has picked up, too. Although safe-haven buying of gold continues at a good pace, this buying is insufficient to counter financial flows.''
Gold futures for December delivery rose $9.80, or 1.2 percent, to $797.50 an ounce at 9:06 a.m. on the Comex division of the New York Mercantile Exchange. The metal reached a record $1,033.90 on March 17.
Silver futures for December delivery climbed 22.5 cents, or 2.4 percent, to $9.56 an ounce. The price dropped 12 percent last week.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Oct. 20 (Bloomberg) -- Gold rose after the lowest price in more than a month attracted investors. Silver also gained.
Gold dropped 8.3 percent last week, touching $772.20 an ounce, the lowest price since Sept. 15. UBS AG said gold will trade at $800 in one and three months, compared with previous forecasts of $925 and $975.
``After the recent declines, gold has found some support from Indian physical demand,'' said John Reade, a UBS metals strategist in London. ``Other Asian demand has picked up, too. Although safe-haven buying of gold continues at a good pace, this buying is insufficient to counter financial flows.''
Gold futures for December delivery rose $9.80, or 1.2 percent, to $797.50 an ounce at 9:06 a.m. on the Comex division of the New York Mercantile Exchange. The metal reached a record $1,033.90 on March 17.
Silver futures for December delivery climbed 22.5 cents, or 2.4 percent, to $9.56 an ounce. The price dropped 12 percent last week.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Emcore, Halliburton, Hormel, Landry's, NRG: U.S. Equity Movers
By Elizabeth Campbell and Whitney Kisling
Oct. 20 (Bloomberg) -- The following companies are having unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 9:35 a.m. in New York.
Emcore Corp. (EMKR US) rose 22 percent to $4.49 and gained 30 percent earlier for the biggest rally since Sept. 18. The solar-power company may rise to $10 a share in two years if its plan to build a more efficient solar cell catches on, Barron's said, citing Chris Chaney, an analyst at Stanford Financial Group Co.
Halliburton Co. (HAL US) climbed 15 percent to $21 and advanced 24 percent earlier for the biggest gain since Oct. 13. The world's second-largest oilfield-services provider reported per-share profit, excluding some items, of 76 cents, 2 cents higher than the average of 24 analyst estimates compiled by Bloomberg. Cuts in spending by producers will lead to lower rig counts than expected, Chief Executive Officer David Lesar said in a statement. This may lead to lower gas supplies and more favorable conditions for the company.
Other oil shares rose. Exxon Mobil Corp. (XOM US), the world's largest oil company, advanced 3.1 percent to $70.14. ConocoPhillips (COP US) rose 2.9 percent to $54.48. Chevron Corp. (CVX US) added 4.3 percent to $65.05. Hess Corp.(HES US) gained 7.2 percent to $54.20. Suncor Energy Inc. (SU US) climbed 5.4 percent to $23.08.
Hormel Foods Corp. (HRL US) fell 12 percent to $29.85 and dropped 16 percent earlier for the biggest plunge since October 1987. The maker of Spam luncheon meat cut its 2008 earnings forecast to $2.03 to $2.09 a share from an earlier prediction of $2.22 to $2.28 because of higher costs and the decline in global financial markets.
Landry's Restaurants Inc. (LNY US) rose 16 percent to $10.55 and climbed 21 percent earlier for the biggest gain since April 4. The owner of The Crab House and Rainforest Cafe chains said it approved a lowered, $13.50-a-share takeover offer from Chief Executive Officer Tilman Fertitta due to instability in the credit markets.
NRG Energy Inc. (NRG US) rose 25 percent to $24.07 and surged 27 percent earlier for the steepest gain since it began trading in December 2003. Exelon Corp. (EXC US), the biggest U.S. operator of nuclear power plants, made an unsolicited all-stock offer to buy NRG for $6.2 billion, the second attempted nuclear power acquisition in North America in five weeks as asset prices tumble amid the credit freeze. Exelon lost 3.9 percent to $52.39.
Prudential Financial Inc. (PRU US) lost 5.8 percent to $39.36. The second-biggest U.S. life insurer was added to the conviction sell list from ``neutral'' at Goldman Sachs Group Inc., which cited the company's ``significant exposure'' to the mortgage crisis.
MetLife Inc. (MET US) slipped 3.8 percent to $29.95. The biggest U.S. life insurer was lowered to ``neutral'' from ``buy'' at Goldman on the possibility of asset writedowns.
Syneron Medical Ltd. (ELOS US) slid 11 percent to $10.14 and dropped to $9.65 earlier, the lowest price since August 2004. The maker of medical products said third-quarter profit was as low as 11 cents a share, or 59 percent less than the average analyst estimate in a Bloomberg survey.
To contact the reporters on this story: Elizabeth Campbell in New York at ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
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Oct. 20 (Bloomberg) -- The following companies are having unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 9:35 a.m. in New York.
Emcore Corp. (EMKR US) rose 22 percent to $4.49 and gained 30 percent earlier for the biggest rally since Sept. 18. The solar-power company may rise to $10 a share in two years if its plan to build a more efficient solar cell catches on, Barron's said, citing Chris Chaney, an analyst at Stanford Financial Group Co.
Halliburton Co. (HAL US) climbed 15 percent to $21 and advanced 24 percent earlier for the biggest gain since Oct. 13. The world's second-largest oilfield-services provider reported per-share profit, excluding some items, of 76 cents, 2 cents higher than the average of 24 analyst estimates compiled by Bloomberg. Cuts in spending by producers will lead to lower rig counts than expected, Chief Executive Officer David Lesar said in a statement. This may lead to lower gas supplies and more favorable conditions for the company.
Other oil shares rose. Exxon Mobil Corp. (XOM US), the world's largest oil company, advanced 3.1 percent to $70.14. ConocoPhillips (COP US) rose 2.9 percent to $54.48. Chevron Corp. (CVX US) added 4.3 percent to $65.05. Hess Corp.(HES US) gained 7.2 percent to $54.20. Suncor Energy Inc. (SU US) climbed 5.4 percent to $23.08.
Hormel Foods Corp. (HRL US) fell 12 percent to $29.85 and dropped 16 percent earlier for the biggest plunge since October 1987. The maker of Spam luncheon meat cut its 2008 earnings forecast to $2.03 to $2.09 a share from an earlier prediction of $2.22 to $2.28 because of higher costs and the decline in global financial markets.
Landry's Restaurants Inc. (LNY US) rose 16 percent to $10.55 and climbed 21 percent earlier for the biggest gain since April 4. The owner of The Crab House and Rainforest Cafe chains said it approved a lowered, $13.50-a-share takeover offer from Chief Executive Officer Tilman Fertitta due to instability in the credit markets.
NRG Energy Inc. (NRG US) rose 25 percent to $24.07 and surged 27 percent earlier for the steepest gain since it began trading in December 2003. Exelon Corp. (EXC US), the biggest U.S. operator of nuclear power plants, made an unsolicited all-stock offer to buy NRG for $6.2 billion, the second attempted nuclear power acquisition in North America in five weeks as asset prices tumble amid the credit freeze. Exelon lost 3.9 percent to $52.39.
Prudential Financial Inc. (PRU US) lost 5.8 percent to $39.36. The second-biggest U.S. life insurer was added to the conviction sell list from ``neutral'' at Goldman Sachs Group Inc., which cited the company's ``significant exposure'' to the mortgage crisis.
MetLife Inc. (MET US) slipped 3.8 percent to $29.95. The biggest U.S. life insurer was lowered to ``neutral'' from ``buy'' at Goldman on the possibility of asset writedowns.
Syneron Medical Ltd. (ELOS US) slid 11 percent to $10.14 and dropped to $9.65 earlier, the lowest price since August 2004. The maker of medical products said third-quarter profit was as low as 11 cents a share, or 59 percent less than the average analyst estimate in a Bloomberg survey.
To contact the reporters on this story: Elizabeth Campbell in New York at ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
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Canadian Stocks Advance, Led by EnCana, Potash, Royal Bank
By John Kipphoff
Oct. 20 (Bloomberg) -- Canadian stocks advanced for a second day, led by EnCana Corp. and Potash Corp. of Saskatchewan Inc., as the cost of interbank borrowing declined and oil prices rose.
The Standard & Poor's/TSX Composite Index rose 2.1 percent to 9,762.41 at 9:43 a.m. in Toronto.
EnCana, the nation's largest energy company by market value, gained 4.5 percent to C$52.12.
Potash Corp., the world's biggest maker of crop nutrients, advanced 6.6 percent to C$94.59.
Royal Bank of Canada, the nation's largest lender by assets, rose 1.8 percent to C$47.08.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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Oct. 20 (Bloomberg) -- Canadian stocks advanced for a second day, led by EnCana Corp. and Potash Corp. of Saskatchewan Inc., as the cost of interbank borrowing declined and oil prices rose.
The Standard & Poor's/TSX Composite Index rose 2.1 percent to 9,762.41 at 9:43 a.m. in Toronto.
EnCana, the nation's largest energy company by market value, gained 4.5 percent to C$52.12.
Potash Corp., the world's biggest maker of crop nutrients, advanced 6.6 percent to C$94.59.
Royal Bank of Canada, the nation's largest lender by assets, rose 1.8 percent to C$47.08.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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Stock Manipulation Probe Launched After Prices Spike
By Edgar Ortega and Jeff Kearns
Oct. 20 (Bloomberg) -- U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings.
These gaps, which caused the Dow Jones Industrial Average to swing as much as 104 points this month in the final minute of trading, suggest investment firms faced with client redemptions and plunging markets may be gaming the closing-auction system. The discrepancies spurred the Financial Industry Regulatory Authority, which oversees 5,000 brokerages, to look for evidence that investors are improperly swaying prices.
General Electric Co., McDonald's Corp. and the 28 other Dow companies swung 0.6 percent on average at the close the last two weeks, according to data compiled by Bloomberg. That's almost eight times greater than the average three months ago. Because of the swings, the New York Stock Exchange plans to distribute information on the closing auction more often to help mitigate volatility.
``Investors don't ever want to see manipulation because it shows that they are exposed to a different kind of risk than just the fundamentals of companies,'' said Peter Henning, a former federal prosecutor and Securities and Exchange Commission lawyer who now teaches at Wayne State University Law School in Detroit. ``That hurts trust in the market.''
`Inflated Price'
The final minute of stock trading is the busiest at U.S. exchanges after the open. The NYSE and Nasdaq Stock Market hold special auctions that intensify 20 minutes before the 4 p.m. close to collect orders and smooth out price changes. Nasdaq tells brokers as frequently as every 5 seconds whether there are more buyers than sellers and broadcasts a likely range for the closing price. At the NYSE, traders known as specialists manage the process.
Brokers are barred from canceling orders as the auction approaches. Still, traders could send small buy orders leading up to the close to prop up the price, only to place a larger sell order in the final trade.
``If you push the price up by buying 100 shares to sell 10,000, the people who get hurt are the ones who buy at an inflated price,'' said John Coffee, a securities law professor at Columbia University in New York.
Investors pulled a record $43 billion from hedge funds in September, according to TrimTabs Investment Research. In the week ended Oct. 8, an all-time high of $43.3 billion was removed from stock mutual funds as the Standard & Poor's 500 Index headed for the steepest weekly drop since the 1930s, data compiled by the Sausalito, California-based firm show.
`Mark Up the Close'
``If markets are declining, people are going to try to mark up the close,'' said Thomas Gira, executive vice president for market regulation at Finra in Washington. ``We want to make sure that closing prices are not artificial prices.''
Closing prices are often used as benchmarks to value the collateral a client has set aside to guarantee a loan to invest in stock. They also influence the settlement of options and futures contracts, executive pay and the price of takeovers. Funds that track benchmark stock indexes typically rely on the exchange's closing auctions to complete trades.
In the past month, the NYSE delayed the close of several stocks to damp price swings and made it easier for floor brokers to submit late orders that narrow imbalances.
Aggregating Liquidity
``The goal is to aggregate as much liquidity as possible to reduce price dislocations,'' Joseph Mecane, head of U.S. markets for NYSE Euronext, said in an Oct. 17 interview at the Security Traders Association conference in Boca Raton, Florida. ``This is definitely something on our project list.''
The SEC settled a lawsuit last week with San Francisco-based hedge fund MedCap Management & Research LLC for driving up the value of a stock to mask losses in 2006. In May, the NYSE's regulatory unit opened a review of brokerages' procedures for handling large orders at the close that could have an ``adverse, manipulative effect,'' according to a letter sent to firms.
Manipulating prices for anything but small companies that trade infrequently would be too costly and difficult, said Richard Parker, director of institutional trading at New York- based Stanford Group Co.
``It would be a big task to move names that are very liquid, and it would leave fingerprints,'' he said. ``You could be better off banging your head against the wall.''
Stock hedge funds fell an average 8.6 percent in September, the biggest one-month loss since Chicago-based Hedge Fund Research Inc. began collecting the data in 1990.
Hedge Fund Redemptions
``Hedge funds are liquidating to meet redemptions and some stocks are being sold on a distressed basis to meet margin calls,'' Byron Wien, a former Morgan Stanley strategist who now helps oversee $7 billion at Westport, Connecticut-based Pequot Capital Management Inc., wrote in an Oct. 15 report.
Fairfield, Connecticut-based GE, the world's fifth-biggest company by market value, closed at $21.50 on Oct. 10, up 4.3 percent from the midpoint of the last bid and ask quotes. Before 2008, the stock hadn't gained or lost that much in a full day of trading since March 2003, according to Bloomberg data.
Also on Oct. 10, Oak Brook, Illinois-based McDonald's rallied 14 percent in the final hour of trading, climbing from $50.55 to peak at $57.78 as orders poured into the NYSE's closing auction. Even though the stock was last quoted at about $55.55, the shares fell in the final trade to close at $53.35 for a daily gain of 2.4 percent.
``If you see unstable prices, it makes you not want to invest,'' said Barry Savitz, senior managing partner at Stamford, Connecticut-based Greenwich Prime Trading Group, which trades for hedge funds. ``That's not investing, it's gambling.''
To contact the reporters on this story: Edgar Ortega in New York at ebarrales@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.
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Europe Stocks Climb on Earnings, Oil; Ericsson, ING, Shell Gain
By Adam Haigh
Oct. 20 (Bloomberg) -- European stocks rose after Ericsson AB reported better-than-estimated earnings, higher oil boosted energy shares and the Netherlands stepped up efforts to ease the financial crisis.
The Dow Jones Stoxx 600 Index extended its biggest weekly gain since March 2007, rising 3 percent as all 18 western European markets advanced except Greece. Ericsson, the world's largest maker of wireless phone networks, jumped 17 percent, the most in six years. ING Groep NV rallied 27 percent after receiving a 10 billion-euro ($13.4 billion) lifeline from the Dutch government. Money-market rates declined.
``We have probably seen the bottom of the market,'' said Christian Dargnat, chief investment officer of BNP Paribas Asset Management, who helps oversee about $446 billion in Paris. ``The authorities have taken the right steps. The measures are going in a good direction to solve the problems of liquidity and solvency.''
The U.K.'s FTSE 100 added 3.6 percent as of 3:02 p.m. in London, and France's CAC 40 advanced 2.8 percent as Royal Dutch Shell Plc and Total SA both gained more than 7 percent following crude's second straight daily advance. Germany's DAX Index rose 1.2 percent.
Prudential Plc climbed 15 percent on a report the U.K.'s second-biggest insurer is in advanced talks to sell a stake.
The Standard & Poor's 500 Index advanced 2.5 percent as Halliburton Co.'s better-than-estimated profit boosted the earnings outlook for energy companies.
Stocks extended gains after the index of U.S. leading economic indicators unexpectedly rose in September and Federal Reserve Chairman Ben S. Bernanke endorsed consideration of a fiscal stimulus package.
The MSCI Asia Pacific Index rose 3.7 percent after South Korea's government guaranteed $100 billion of lenders' foreign- currency debts and provided $30 billion to banks.
$30 Trillion Erased
About $30 trillion has been erased from the value of global equities since October 2007 as credit-related losses and asset writedowns topped $661 billion in the worst financial crisis since the Great Depression. The Stoxx 600, which slumped 40 percent this year, rebounded 4.5 percent last week after governments injected $2 trillion to bail out banks and help restore investor confidence.
The London interbank offered rate, or Libor, for three-month loans in dollars dropped to 4.06 percent from 4.42 percent, the British Bankers' Association said. That is the steepest drop since Jan. 23. It declined 40 basis points last week.
The euro interbank offered rate, or euribor, for three- month loans fell for a seventh day, dropping 5 basis points to 5 percent, according to the European Banking Federation. Hong Kong's three-month interbank rate tumbled the most in 10 years, by 53 basis points, to 3.66 percent, after the city's Monetary Authority injected HK$4 billion ($515 million).
`Path to Normalization'
European Central Bank President Jean-Claude Trichet said banks should start lending again after policy makers put them on ``the path'' of recovery.
``I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said in an interview on French radio RTL late yesterday. The banking system is ``on the path to normalization,'' he said.
Ericsson surged 17 percent to 58.50 kronor after reporting third-quarter net income of 2.8 billion Swedish kronor ($380 million) which beat the 2.34 billion-kronor estimate of analysts surveyed by Bloomberg. Citigroup Inc. reiterated its ``buy'' recommendation on the shares with a price estimate of 68 kronor after the report.
``It was a great surprise,'' said Mauritz Redin, Stockholm- based head of Swedish equities at Alfred Berg AB, which manages $27 billion in Nordic stocks, including Ericsson shares. ``Expectations were very low ahead of the report.''
Bond Risk
Ericsson's earnings come as the cost of protecting European corporate bonds from default rose to a record on concern the economic slump will deepen.
``The real deterioration in the economy is only just beginning,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. The focus will now be on how earnings hold up, he said.
Analysts have cut profit forecasts this year as the credit turmoil spread, threatening economic growth. Earnings for companies in the Stoxx 600 will decline 4.4 percent in 2008, down from 11 percent growth predicted the start of the year, according to estimates compiled by Bloomberg. Before Lehman Brothers Holdings Inc.'s collapse last month deepened the freeze in credit markets, analysts expected profit would decline 2.2 percent this year, the data show.
The Stoxx 600 was valued at 8.9 times earnings of companies at the close of last week, near the cheapest on record. The MSCI World Index traded at 11.6 times the earnings of its 1,730 companies, and the S&P 500 was valued at 18.5 times profit, near the lowest in more than a year.
`Breathing Space'
ING jumped 22 percent to 8.97 euros. The Dutch government will buy non-voting preferred shares in the financial and insurance company and appoint two representatives to the board of ING, which will scrap this year's final dividend. ING fell a record 27 percent on Oct. 17 after predicting a 500 million-euro loss for the third quarter.
``It shows the Dutch government is ready to inject some confidence and this gives it some breathing space,'' said Matt Buckland, a trader at CMC Markets in London.
Shell, Europe's largest oil producer, added 9.2 percent to 19.645 euros, while Total, the region's third-biggest, gained 7.8 percent to 39.29 euros.
Crude oil rose in New York on speculation OPEC will lower output in an attempt to halt a slide in prices, which have fallen more than 50 percent from July's record.
Prudential, SocGen
Prudential rose 15 percent to 311 pence after the Sunday Times reported the insurer is in advanced talks with investment funds in China and the Middle East to take a 20 percent stake in and help finance a $15 billion offer for the Asian business of American International Group Inc. The newspaper did not say where it got the information.
Prudential spokesman Jon Bunn declined to comment yesterday.
Societe Generale SA slumped 7.2 percent to 42.06 euros on speculation France's second-biggest bank may have to raise new capital. Spokeswoman Stephanie Carson-Parker was not immediately available for comment.
``Rumors of a capital increase persist,'' Yann Azuelos, a fund manager at Meeschaert Asset Management in Paris, said in a phone interview today.
European banks led by Deutsche Bank and UniCredit SpA may need to raise a combined 73 billion euros, Merrill Lynch & Co. analysts said in a note today. Societe Generale may have to raise 6.5 billion euros, the analysts said.
Iberia, Veolia
Iberia Lineas Aereas de Espana SA, which plans to merge with British Airways Plc, soared by a record 21 percent to 1.70 euros after Spanish newswire Efe said the U.K. carrier's pension deficit won't harm negotiations.
Veolia Environnement SA tumbled 21 percent to 18.24 euros after the world's biggest water company said its water and waste management businesses have slowed, and that it is expects total investments to fall 34 percent to 4 billion euros ($5.4 billion) this year.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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U.K. Stocks Climb for Second Day; Xstrata, Shell, BP Lead Gains
By Sarah Jones
Oct. 20 (Bloomberg) -- U.K. stocks rose for a second day after a rally in base metals and oil prices boosted shares of commodity producers.
Xstrata Plc, the fourth-largest copper producer, and Royal Dutch Shell Plc climbed at least 3.2 percent as copper rebounded from a three-year low and crude oil advanced. Prudential Plc surged 12 percent after The Sunday Times said it is in advanced talks to sell investors a 20 percent stake.
The FTSE 100 Index gained 94.96, or 2.3 percent, to 4,157.97 at 11:47 a.m. in London. The FTSE All-Share Index added 2 percent and Ireland's ISEQ Index increased 2.7 percent.
The benchmark index climbed 3.3 percent last week as European leaders agreed to guarantee new bank debt and money- market rates declined. The FTSE is still down 36 percent this year as credit losses and asset writedowns at financial firms worldwide reached $660 billion.
``The long term story for commodities remains in tact, in terms of demand for metals,'' said Richard Hunter, head of U.K. Equities at Hargreaves Lansdown Stockbrokers in London. ``The market is looking a bit perkier today. We are not out of the woods yet but this is probably a bit of a relief rally.''
Xstrata increased 3.2 percent to 980.5 pence after copper climbed in London as a lower dollar spurred demand for the metal from buyers using other currencies. Lead also advanced.
Anglo American Plc, the world's fourth-biggest diversified mining company, added 3.2 percent to 1,337 pence. BHP Billiton Ltd., the largest, jumped 5 percent to 940.5 pence.
Copper rose 3.9 percent in Shanghai and advanced as much as 2.9 percent in London.
Shell, BP Advance
Shell, Europe's largest oil company, added 5.4 percent to 1,477 pence. BP Plc, the second-biggest, increased 6.3 percent to 458.75 pence. BG Group Plc, the U.K.'s third-largest oil and natural-gas producer, increased 5.4 percent to 762.5 pence.
Crude oil rose for a second day in New York on speculation OPEC will lower output in an attempt to halt a slide in prices, which have fallen more than 50 percent from July's record.
Prudential jumped 12 percent to 303 pence after the Sunday Times reported it is in advanced talks with investment funds in China and the Middle East to take a 20 percent stake in the U.K.'s second-biggest insurer and help finance a $15 billion offer for the Asian business of American International Group Inc.
The newspaper did not say where it got the information.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Barratt Developments Plc (BDEV LN) retreated 7.25 pence, or 11 percent, to 56. Taylor Wimpey Plc (TW/ LN) lost 1.25 pence, or 10 percent, to 10.75. Collins Stewart rated the homebuilders ``sell'' in new coverage saying buyers are unlikely to return in new large numbers until prices fall by ``at least'' 30 percent.
Cable & Wireless Plc (CW/ LN) lost 5.1 pence, or 3.6 percent, to 137. The U.K.'s second-biggest phone company has postponed plans for splitting up its British and international businesses until next year because of the economic climate, the Sunday times reported, without saying where it got the information.
JJB Sports Plc (JJB LN) soared 4.25 pence, or 13 percent, to 37. The second-largest U.K. sporting goods retailer said it raised 3.4 million pounds ($5.9 million) by selling a 5 percent stake to larger competitor Sports Direct International Plc (SPD LN). Separately, The Sunday Telegraph reported JJB may consider selling its chain of fitness clubs worth 100 million pounds.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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Brazil Stocks Rise Most in Week, Led by Homebuilders, Petrobras
By Alexander Ragir
Oct. 20 (Bloomberg) -- Brazilian stocks gained the most in a week on speculation the government will take measures to boost the economy and ease the credit crisis including providing support to the country's battered homebuilders.
Rossi Residencial SA led a rally in real estate companies after Banco Santander SA said the government may demand that banks increase mortgage lending and give tax breaks to homebuilders. Banks and retailers rallied after Finance Minister Guido Mantega told Folha de S. Paulo that Brazil's economy will grow 4 percent next year. Petroleo Brasileiro SA, Brazil's state- controlled oil company, surged more than 6 percent after its monthly oil production rose to a record.
The Bovespa gained for the first time in four days, rising 4.8 percent to 38,144.54 at 10:03 a.m. New York time. The BM&FBovespa MidLarge Cap index added 3.7 percent, while the BM&FBovespa Small Cap index gained 2.1 percent. Mexico's Bolsa Index climbed 1.8 percent and Chile's Ipsa rose 3.1 percent.
Rossi jumped 6.9 percent to 3.90 reais. Statements by Finance Minister Guido Mantega and Cabinet Chief of Staff Dilma Rousseff show that the government is studying measures to support real estate development, Santander analyst Marcello Milman wrote. The government may increase the amount that banks must use from their savings deposits to finance home acquisition, Milman wrote. The current level is at 65 percent of savings deposits, he wrote.
Mantega said gross domestic product may expand as much as 4.5 percent in 2009, the Sao Paulo-based newspaper Folha de S. Paulo reported.
Petrobras rose 1.44 to 24.43 reais. Crude oil for November delivery climbed 2.4 percent to $73.54 a barrel.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
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U.S. Stocks Gain, Led by Energy Shares on Halliburton Earnings
By Elizabeth Stanton
Oct. 20 (Bloomberg) -- U.S. stocks rose, adding to the Dow Jones Industrial Average's best weekly gain in five years, after Halliburton Co.'s profit topped estimates and Federal Reserve Chairman Ben S. Bernanke endorsed an economic stimulus package.
Halliburton, the world's second-largest oilfield-services provider, jumped 14 percent, while Exxon Mobil Corp. added 4.9 percent as crude rallied above $74 a barrel. Bank of America Corp. and Goldman Sachs Group Inc. advanced after three-month interest rates slid the most in nine months. NRG Energy Inc. surged 25 percent, the most since the company reorganized in 2003, on Exelon Corp.'s offer to buy the power producer.
``Whenever somebody reports numbers that exceed expectations, that's a positive not only for the individual stock but the broader market,'' said Dean Gulis, who helps manage about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. ``In a case like Halliburton, it carries over to its sector. You have a good number of attractively valued opportunities out there.''
The Standard & Poor's 500 Index gained 21.8, or 2.3 percent, to 962.35 at 10:12 a.m. in New York. The Dow Jones Industrial Average added 193.46, or 2.2 percent, to 9,045.68. The Nasdaq Composite Index increased 27.56, or 1.6 percent, to 1,738.85. About six stocks rose for each that fell on the New York Stock Exchange.
Bernanke, LEI
The Dow average added to last week's 4.8 percent gain, its best since 2003. Benchmark indexes extended gains after the Conference Board's index of leading economic indicators unexpectedly rose in September and Bernanke said lawmakers should consider new measures to improve access to credit for consumers, homebuyers and businesses.
U.S. stocks climbed last week on the U.S. government's plan to inject $250 billion into financial companies. The Dow is still down more than 30 percent this year and the S&P 500 is off almost 35 percent as credit losses and asset writedowns stemming from the collapse of the subprime mortgage market top $660 billion at financial firms worldwide.
Europe's Dow Jones Stoxx 600 Index added 1.8 percent, while the MSCI Asia Pacific Index rose 3.8 percent after ING Groep NV received a 10 billion-euro ($13.4 billion) lifeline from the Dutch government and South Korea guaranteed $100 billion of lenders' foreign-currency debts.
Halliburton Earnings
Halliburton jumped $2.58 to $20.84. Excluding an acquisition charge and $693 million in costs related to redemption of convertible bonds, per-share profit was 76 cents, 2 cents higher than the average of 24 analyst estimates compiled by Bloomberg.
Exxon gained $3.36 to $71.40. Crude oil for November delivery climbed as much as 3.4 percent to $74.28 a barrel in New York on speculation OPEC will cut production to halt a 50 percent slide in prices from July's record.
NRG Energy soared $4.77 to $24.10 after Exelon offered to buy the second-biggest electricity generator in Texas. Exelon, the biggest U.S. operator of nuclear power plans, slid 2.8percent to $53.
Money-market rates fell in Europe and Asia today, extending last week's declines, as central banks around the world intensified efforts to combat a collapse in bank lending. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell by 36 basis points to 4.06 percent today, according to the British Bankers' Association.
`Stabilizing the System'
``The bailout plans are stabilizing the system,'' said Benoit de Broissia, an analyst at KBL Richelieu, which oversees $5.4 billion in Paris. ``We're pushing away the possibility of the systemic risk that we feared.''
Bank of America climbed 2.5 percent to $23.83, while Goldman rose 3.8 percent to $118.66.
At least 139 S&P 500 companies will report third-quarter earnings this week, including Apple Inc., Caterpillar Inc. and McDonald's Corp. Wall Street analysts forecast an 11 percent drop in third-quarter earnings in a Bloomberg survey.
American Express Co., the biggest U.S. credit-card company by purchases, and Texas Instruments Inc., the second-largest U.S. chipmaker, are scheduled to report after the market closes today.
Profits for companies in the S&P 500 are forecast to decline 5 percent this year, compared with a 2.7 percent drop predicted a month ago, data compiled by Bloomberg show.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net
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Sales at risk if retailers slash holiday hires
By Nicole Maestri
NEW YORK (Reuters) - U.S. retailers have shed tens of thousands of jobs this year and some are scaling back plans to hire extra help this holiday season, but cutting too deeply could put sales at risk during the crucial year-end rush.
Retailers often begin hiring seasonal workers in September, ramping up staff in time for the November and December sales crush. But the worst financial crisis since the Great Depression hit the United States in mid-September, roiling markets and stoking fears of a recession.
Before the crisis hit, Challenger, Gray & Christmas had forecast retail hiring for the upcoming holiday season would be the weakest since 2001, as consumers pull back and retail profits get squeezed by higher costs and weak sales.
"We're still going with that it's going to be lower than last year," said Challenger spokesman James Pedderson of the forecast. But given the recent turmoil, he added: "It may be much lower."
Retailers such as consumer electronics retailer Best Buy Co Inc (BBY.N: Quote, Profile, Research, Stock Buzz) and mid-tier department store chain J.C. Penney Co Inc (JCP.N: Quote, Profile, Research, Stock Buzz) have indicated the weak sales environment means holiday staffing could be scaled back.
But in shunning extra hires, retailers run the risk of alienating cash-strapped shoppers, analysts said. Consumers may need to spend more time hunting for bargains this year, but will have little patience for waiting in extra-long lines or facing check-out hassles.
"Convenience, ease of check out, availability of stock, all are going to play a huge role in where people are going to shop this year," said Marshal Cohen, chief industry analyst at market research firm NPD Group.
"If you've really limited the amount of staff on the floor, the retailer is going to put themselves at a little bit of a loss."
WANING DEMAND, WANING HELP
Retailers have shed roughly 251,000 jobs year to date, according to government data on October 3, as volatile energy costs, high food prices, a crumbling housing market and tighter access to credit curb the ability of shoppers to spend.
Retailers are now headed into the all-important holiday season, which can account for 25 to 40 percent of annual revenue.
While the outlook for the holiday was bleak, with some economists forecasting the weakest growth since 1991, the fresh financial turmoil has thrown even those forecasts into doubt.
Government data released on Wednesday showed that September sales at U.S. retailers posted their biggest monthly decline in more than three years. Retailers are now trying to determine how to staff their stores in an environment where consumer spending has become nearly impossible to predict.
Best Buy has said that, while holiday hiring should top 2007 levels, it will add fewer workers than originally planned because sales growth in the second half of the year is expected to slow from the first half.
Target Corp (TGT.N: Quote, Profile, Research, Stock Buzz) said it continues to experience a "soft" sales environment, so it is planning all areas of its business accordingly -- including hiring seasonal workers.
J.C. Penney says it will staff its stores according to customer traffic, which has weakened this year.
Retailers are caught between a rock and a hard place when it comes to holiday hiring, said Craig Rowley, retail practice leader at human resources consulting firm Hay Group.
"On one hand, sales are going to be hard to get this year, so if you follow your budget, you're going to have less staff," he said. "But you also need to move the merchandise."
While retailers may be tempted to slash staffing to match depressed sales, doing so could mean lost business if it results in messy stores, empty shelves or long lines.
EASIER TO HIRE?
One advantage of having the U.S. unemployment rate at a five-year high means retailers can delay hiring seasonal help, said Jonas Prising, president of North American operations at staffing services firm Manpower Inc (MAN.N: Quote, Profile, Research, Stock Buzz).
"They will have more talent available on the market, which means they can make hiring decisions much closer to the time than they would normally," he said.
Toys "R" Us said it plans to hire about the same number of employees as it did last year, roughly 35,000 nationwide. To avoid being short staffed if demand is greater than expected closer to Christmas, the toy retailer offers "flex" time.
"If we get closer to the season and the stores get busier, employees will have the opportunity to take on more hours," said spokeswoman Jennifer Albano.
Linda Shea, global managing director of customer strategies at market research firm Opinion Research Corp, said if stores are easy to navigate and marked with clear signs, it could ease the need to have extra staff available to guide shoppers.
But retailers should not scrimp on hiring where it will count, especially at the check-out line.
"If I'm spending more time shopping and searching, I won't have any more time to give you standing in line," she added.
(Additional reporting by Sarah Coffey and Aarthi Sivaraman; Editing by Andre Grenon)
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Interbank dollar pressures ease as banks lend
* US dollar funding pressures ease as banks lend dollars
* 2-yr dollar swap spread falls to lowest in a month
* Libor expected to fix lower as c.banks gain traction
By Jamie McGeever
LONDON, Oct 20 (Reuters) - The rate at which banks lend dollars to each other fell on Monday as dealers reported U.S. banks starting to lend rather than simply hoard cash, a sign central banks are gaining traction in their quest to unclog frozen money markets.
Two-year dollar swap spreads fell to their lowest in a month, while euro and sterling interbank rates were also indicated lower in European trading on Monday.
Dealers on Friday had said one large U.S. bank lent up to $20 billion in one-month dollar funds, bringing one-month interbank rates down to 3.95 percent from around 5 percent.
"They fall into the category (very small) of quality banks where everyone has put their cash," said the head of rates trading at one bank, referring to the U.S. bank in question.
"They are very long cash," he said.
Interbank activity was quiet early on Monday, dealers said. But that shouldn't stop London interbank offered rates (Libor), especially dollars, from continuing their broad fall since U.S. and European authorities undertook sweeping measures over a week ago to shore up their banks and financial systems.
"The fixings continue to come off quite a bit. Perhaps if equity markets recover for a few weeks from this point we might see the first bits of real confidence returning to the markets," said a money markets trader in The Netherlands.
A fall in dollar interbank rates is critical to getting gummed up global money markets functioning again.
A particularly acute shortage of dollars in European and Asian trading hours since the collapse of Lehman Brothers in mid-September exacerbated the global credit crunch as banks hoarded dollars to bolster their own balance sheets rather than take the risk of lending it out.
But government and central bank efforts, including huge injections of public funds into banks, cross-border currency swap lines and relaxation of collateral rules have eased some of the tight liquidity conditions caused by the credit crisis.
In London trading on Monday interbank rates for overnight dollar deposits were indicated in a range of between 0.5 and 1.5 percent
Three-month dollar deposit rates on Monday were indicated in a narrower range of 3.4-4.25 percent versus 4.25-4.8 percent
LIBOR SEEN FALLING FURTHER
Three-month sterling rates were indicated down around the 5 percent area
The Bank of England on Monday acted to make it easier for commercial banks to get short-term funding, implementing new measures announced last week to free up UK money markets. For more, see [ID:nLK227951].
There is typically a premium on deposit rates over Libor fixings because Libor is taken from a smaller sample of large banks in the market.
Deposit and Libor rates are only indicative prices of where banks are lending to each other, not necessarily the levels at which lending is actually being carried out.
Many Libor rates were fixed sharply lower on Friday -- particularly short-dated rates -- and market participants expect further declines at Monday's fix from the British Bankers Association between 1000 and 1100 GMT.
Estimates from two European banks on Monday put one-month dollar Libor fixing around 3.75-80 percent compared with 4.18125 percent on Friday, three-month Libor around 4.05-15 percent versus 4.41875 percent and one-year Libor at 3.65-70 percent compared with 3.97250 percent on Friday.
"Based on strong dollar term flows, the BoE money market reform and the (European Central Bank's) easing of lending conditions last week, we expect more rapid declines in Libor rates over the coming days," said Lena Komileva, head of G7 strategy at Tullet Prebon.
"In contrast to earlier weeks, increased interbank liquidity means the declines in Libor are more than just a symbolic feature of an improved risk environment," she said.
In further signs interbank strains are easing, two-year dollar swap spreads narrowed on Monday to a one-month low of 106 basis points
Swaps spreads measure the difference between the cost to exchange fixed for floating rate interest payments in the swaps market, and government borrowing costs over the same time frame. Narrowing spreads are generally considered a sign of improving financial market conditions.
South Korea was the latest government to join the global drive to support the banking system, unveiling a package worth over $130 billion of state guarantees on foreign debt and a promise to recapitalise financial firms if necessary. See [ID:nSEO366228].
Governments around the world have pledged about $3.3 trillion -- about equal to the economic output of Germany -- aimed at boosting interbank lending and shoring up their economies amid the global credit crisis.
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Nikkei up 3.6 pct on soft yen, Panasonic jumps
*Nikkei up 3.6 pct after gain of 5 pct in previous week *Nikkei still down 20 pct so far this month
*Panasonic, steelmakers jump on upbeat earnings prospects
*Soft yen pushes up exporters (Adds comments, stocks)
By Aiko Hayashi
TOKYO, Oct 20 (Reuters) - The Nikkei average climbed 3.6 percent on Monday as a softer yen and upbeat earnings reports about electronics maker Panasonic (6752.T: Quote, Profile, Research, Stock Buzz) and steelmakers helped buoy battered shares in exporters.
Panasonic soared nearly 9 percent after the Nikkei business daily said the firm was likely to beat its profit forecast. Nippon Steel (5401.T: Quote, Profile, Research, Stock Buzz) and JFE Holdings (5411.T: Quote, Profile, Research, Stock Buzz) also jumped after the paper said they were likely to raise their annual earnings outlooks due to lower costs and price hikes. [ID:nT279037] [ID:nT293153]
"Coupled with receding fears over the financial crisis for the time being, the news about Nippon Steel and Panasonic helped spread a sense of relief in the Japanese market," said Katsuhiko Kodama, a senior strategist at Toyo Securities.
"The market will likely raise its floor for the Nikkei little by little after the recent extreme sell-off."
Analysts said a softer yen helped push up the market, but gains were mostly due to short-covering.
"The firm dollar is leading investors to pick up cyclical stocks that were sold off last week," said Takahiko Murai, general manager of equities at Nozomi Securities.
"But the gains probably won't last. The deterioration of the real economy is happening much faster than expected. We need comprehensive counter-measures, rather than just those only for the financial system."
The Nikkei average .N225 added 311.77 points to 9,005.59, after ending the previous week up 5 percent. Still, it has lost 20 percent so far this month.
The broader Topix gained 3.7 percent to 927.37.
The dollar rose 0.3 at 101.95 yen
Japanese stocks also tracked gains in U.S. stock futures SPc1, which rose more than 2 percent, pointing to a higher opening in the U.S. market.
Technical indicators now show Japanese stocks have been oversold, with the dividend yield on the Nikkei at 2.5 percent, about a full percentage point above the 10-year government bond yield and the price to book value at 1.01, but that alone will probably not prompt active buying, market analysts said.
"In a normal economic situation, this would be a time to buy if you were just looking at the price to book value figure," said Mitsushige Akino, chief fund manager at Ichiyoshi Management.
"But market sentiment has already worsened to a level that investors are unable to decide their trading based on valuations. It is an abnormal situation."
PANASONIC JUMPS, EXPORTERS GAIN
Shares of Panasonic jumped 8.9 percent to 1,633 yen after the Nikkei business daily reported that the electronics maker, which had predicted a drop in operating profit for the first half, is now seen beating its forecast by more than 20 billion yen ($197 million).
Panasonic said in a statement that the report was not something the company had officially announced, and it will report its first half results on Oct. 28.
Nippon Steel added 4.4 percent to 330 yen and JFE Holdings gained 9.2 percent to 2,430 yen.
The weaker yen helped exporters climb, with Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) rising 5.6 percent to 3,610 yen and Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) jumping 7.6 percent to 2,625 yen.
But defensive stocks such as drugmakers continued to be popular amid worries about the global economy. Takeda Pharmaceutical Co (4502.T: Quote, Profile, Research, Stock Buzz) climbed 3.3 percent to 4,640 yen and Astellas Pharma (4503.T: Quote, Profile, Research, Stock Buzz) surged 7 percent to 4,130 yen.
"That defensive stocks are up means no one is buying proactively. We are not seeing buying other than short-covering," said Yutaka Miura, a senior technical analyst at Shinko Securities.
Trade was light on the Tokyo exchange's first section, with 2.2 billion shares changing hands, below last week's daily average of 2.4 billion.
Advancing stocks outpaced declining ones by nearly 6 to 1. (Additional reporting by Kaori Kaneko; Editing by Edwina Gibbs)
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