By Shani Raja
Aug. 22 (Bloomberg) -- The S&P/ASX 200 Index rose 56.20 points, or 1.2 percent, to 4,931.40 at the close in Sydney. The broader All Ordinaries Index climbed 60.60 points, or 1.2 percent, to 5,010.20, while the futures index expiring in September advanced 1.2 percent to 4,900.
Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, gained A$1.20, or 3.1 percent, to A$40.15, the highest since July 11. Rio Tinto Group (RIO AU), the third largest, rose A$2.10, or 1.8 percent, to A$121, the highest since Aug. 1.
Equinox Minerals Ltd. (EQN AU), the developer of Africa's largest copper mine, soared 50 cents, or 14 percent, to A$4.18, the index's second-biggest gainer. Newcrest Mining Ltd. (NCM AU), Australia's biggest gold producer, advanced A$1.01, or 3.9 percent, to A$27.01, the highest since Aug. 4. Coeur d'Alene Mines Corp. (CXC AU), a silver producer, jumped 26 cents, or 13 percent, to A$2.28, a record gain.
A measure of six metals traded on the London Metal Exchange rose 4.9 percent. Zinc advanced 7.4 percent, copper 4.5 percent and nickel 7.9 percent.
Meanwhile, gold jumped the most in almost two months and silver had its biggest gain since 2006 as rising energy costs and a decline in the value of the dollar boosted the appeal of precious metals as hedges against inflation.
Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, advanced A$1.85, or 3.4 percent, to A$57, the highest since July 22. Santos Ltd. (STO AU) rose 72 cents, or 4 percent, to A$18.90, extending yesterday's 5.7 percent gain.
Crude oil for October delivery rose $5.62, or 4.9 percent, to settle at $121.18 a barrel yesterday in New York, and 0.2 percent to $121.37 at 3:49 p.m. Sydney time in Asian trading.
Australian Worldwide Exploration Ltd. (AWE AU), operator of the $269 million Tui oil project in New Zealand, climbed 19 cents, or 6.1 percent, to A$3.30, the most since Aug. 8. The company said full-year profit jumped more than sevenfold on returns from the venture.
Babcock & Brown Ltd. (BNB AU) surged 26 cents, or 12 percent, to A$2.48, the most since June 30. Babcock reversed some of yesterday's 35 percent decline after Standard & Poor's affirmed its ``BB+/B'' rating on its Babcock & Brown International subsidiary, saying the unit's outlook was stable.
Babcock & Brown Wind Partners (BBW AU) rose 10 cents, or 8.3 percent, to A$1.25, the most since Aug. 7. Fomento de Construcciones y Contratas SA, Spain's third-biggest builder, agreed to pay 190 million euros ($283 million) for the company's wind energy assets in the country.
Billabong International Ltd. (BBG AU), the world's largest surfwear maker by market value, rose 55 cents, or 5.1 percent, to A$11.30, the most in almost five months, after posting annual profit that beat analyst estimates.
Kagara Ltd. (KZL AU), the Australian mining company that supplies to Korea Zinc Co., jumped 39 cents, or 14 percent, to A$3.27, the benchmark's third-biggest gainer, after saying an initial resource estimate for the Admiral Bay deposit confirmed it was one ``of world significance.''
Macquarie Infrastructure Group (MIG AU), Australia's largest developer of toll roads, plunged 26 cents, or a record 10 percent, to A$2.23. The company's rating was cut to ``sell' at Goldman Sachs Group Inc., after yesterday reporting that net profit for the year to June 30 fell to A$767.3 million from A$1.7 billion.
Macquarie Communications Infrastructure Group (MCG AU) tumbled 59 cents, or 18 percent, to A$2.72, a record loss, after announcing changes to its capital structure. The changes include the sale of its 28.7 percent stake in Global Tower Partners and a partial tender offer for exchangeable bonds.
OZ Minerals Ltd. (OZL AU), the world's second-largest zinc mining company, surged 19 cents, or 12 percent, to A$1.88, the most since January. The company may seek to buy uranium mines to diversify output after a slump in metal prices, Chief Executive Officer Andrew Michelmore said today.
Virgin Blue Holdings Ltd., the Australian airline being spun off from Toll Holdings Ltd., slumped for the third day this week. Its shares tumbled 11 cents, or 19 percent, to 48 cents, after posting a loss on Aug. 19, and Aug. 20 being downgraded to ``sell'' at UBS AG.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Friday, August 22, 2008
Europe Takeovers Show Appeal of Stocks, Goldman Says
By Adam Haigh and Alexis Xydias
Aug. 22 (Bloomberg) -- A surge in European takeovers this month draws a ``line in the sand'' for asset valuations and represents a turning point for the market, Goldman Sachs Group Inc. said.
London-based analysts at the U.S. brokerage forecast mergers and acquisitions will support stocks as it shows executives are drawn to historically cheap share prices and proves that banks are willing to lend. Goldman highlighted more than 80 companies, including Repsol YPF SA and Hays Plc, whose businesses and finances make them takeover candidates.
``Either the market is pricing in a 1970s period of low growth and high inflation, or it has become relatively more attractive,'' Goldman Managing Director Anthony Ling and a team of analysts wrote in a report to clients dated yesterday. ``The recent outbreak of activity -- 33 deals in Europe this month -- marks a significant turning point for the market.''
Europe's Dow Jones Stoxx 600 Index trades at 11.71 times its members' current earnings, according to weekly Bloomberg data. That's near the lowest valuation since at least 2002. The measure added 0.72, or 0.3 percent, to 279.16 as of 8:42 a.m. in London.
Aon Corp. said today it agreed to buy Benfield Group Ltd., a London-based reinsurance broker, for 844 million pounds ($1.6 billion), including new shares. Lonmin Plc, a platinum producer also based in the British capital, received an unsolicited $10 billion takeover bid by Xstrata Plc earlier this month.
``With further earnings downgrades and negative revisions to key macro indicators, the market is likely to remain volatile,'' the analysts wrote. ``However, we expect continued mergers and acquisitions activity to provide support and upside potential to a number of stocks.''
To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.
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Aug. 22 (Bloomberg) -- A surge in European takeovers this month draws a ``line in the sand'' for asset valuations and represents a turning point for the market, Goldman Sachs Group Inc. said.
London-based analysts at the U.S. brokerage forecast mergers and acquisitions will support stocks as it shows executives are drawn to historically cheap share prices and proves that banks are willing to lend. Goldman highlighted more than 80 companies, including Repsol YPF SA and Hays Plc, whose businesses and finances make them takeover candidates.
``Either the market is pricing in a 1970s period of low growth and high inflation, or it has become relatively more attractive,'' Goldman Managing Director Anthony Ling and a team of analysts wrote in a report to clients dated yesterday. ``The recent outbreak of activity -- 33 deals in Europe this month -- marks a significant turning point for the market.''
Europe's Dow Jones Stoxx 600 Index trades at 11.71 times its members' current earnings, according to weekly Bloomberg data. That's near the lowest valuation since at least 2002. The measure added 0.72, or 0.3 percent, to 279.16 as of 8:42 a.m. in London.
Aon Corp. said today it agreed to buy Benfield Group Ltd., a London-based reinsurance broker, for 844 million pounds ($1.6 billion), including new shares. Lonmin Plc, a platinum producer also based in the British capital, received an unsolicited $10 billion takeover bid by Xstrata Plc earlier this month.
``With further earnings downgrades and negative revisions to key macro indicators, the market is likely to remain volatile,'' the analysts wrote. ``However, we expect continued mergers and acquisitions activity to provide support and upside potential to a number of stocks.''
To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.
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S. Korea Stocks Fall to Lowest Since April 2007; Builders Drop
By Kyung Bok Cho and Eunhwan Kim
Aug. 22 (Bloomberg) -- South Korea's Kospi index tumbled to its lowest since April 2007. LG Display Co. fell on concern a cooling global economy will cut demand, while GS Engineering & Construction Corp. led builders lower after government plans to spur the property market failed to impress investors.
LG Display dropped to the lowest since February 2007 after Citigroup Inc. predicted more losses at U.S. banks, triggering concern financial-industry troubles will prolong a global economic slowdown. GS Engineering slid 5.3 percent after Morgan Stanley said housing-market deregulation won't help improve earnings. Brokerages led by Daewoo Securities Co. fell after UBS AG cut its price estimates for some stocks.
``Investor sentiment is souring quickly, and inflow into local funds has dried up, making institutions unable to buy,'' said Kang Shin Woo, who oversees the equivalent of $8 billion as chief investment officer at Korea Investment Trust Management Co. in Seoul. ``People are selling construction stocks out of disappointment about the housing-market measures. There's a lack of confidence in government policy.''
The Kospi fell 15.68, or 1 percent, to close at 1,496.91 in Seoul. The measure dropped every day this week, capping a 4.8 percent decline.
LG Display, the world's second-largest maker of liquid- crystal displays, lost 600 won, or 2.1 percent, to 27,900, the lowest since Feb. 5, 2007. Hyundai Motor Co., which ships three out of five of its cars overseas, retreated 700 won, or 1 percent, to 69,300, the lowest since Aug. 4.
Builders Fall
Citigroup analyst Prashant Bhatia said yesterday that Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion during the third quarter.
Losses at financial institutions in the world's largest economy have triggered a contraction of credit, contributing to the slowdown of economies across the globe. Exports account for two-fifths of South Korea's economy.
Hyundai Development Co., which gets more than half of its sales from residential homes, retreated 1,050 won, or 2.3 percent, to 44,300, the lowest since Aug. 7. GS Engineering, the nation's fourth-largest builder, declined 5,300 won, or 5.3 percent, to 94,700, the lowest since Aug. 5.
There are ``more downside risks'' to construction companies' earnings in the second half despite government plans for stimulating the property market that were announced yesterday, Morgan Stanley said in a report. ``We do not believe the government's deregulation effort will be able to turn fundamentals around in the next six to nine months,'' the brokerage said.
Daewoo Securities, South Korea's third-biggest brokerage by market value, lost 400 won, or 2.3 percent to 16,950, the lowest since Aug. 5. Samsung Securities Co., the largest, fell 900 won, or 1.4 percent, to 61,400, the lowest since Aug. 4.
Insurers Fall
UBS AG cut its price estimates for Daewoo Securities, Samsung Securities and Woori Investment & Securities Co., in a report. The industry faces ``macro headwinds'' and a ``challenging'' business environment, the brokerage said.
Woori Investment, South Korea's fourth-largest brokerage by market value, dropped 550 won, or 2.7 percent, to 19,750, the lowest since Aug. 5. Separately, the company said yesterday its July profit tumbled 92 percent from a year earlier to 5 billion won.
The following were among the most-active stocks in South Korean markets.
Companies affected by fuel prices: Korean Air Lines Co., (003490 KS), the nation's biggest carrier, fell 650 won, to 1.6 percent, to 41,150, the lowest since July 15. Hanjin Shipping Co. (000700 KS), the largest South Korean shipping line, slid 850 won, or 2.8 percent, to 29,900, the lowest since Feb. 5, 2007.
Crude oil gained 4.9 percent to $121.18 a barrel yesterday in New York, the biggest increase since June 6. It recently rose further to $121.62 in after-hours trading.
Ssangyong Motor Co. (003620 KS), which got about two-thirds of last year's sales from sport-utility vehicles, slid 60 won, or 2.2 percent, to 2,700, the lowest since Jul 9.
Insurers: Samsung Fire & Marine Insurance Co. (000810 KS), South Korea's biggest insurer by market value, dropped 6,500 won, or 3.2 percent, to 197,500, the most since July 21. Hyundai Marine & Fire Insurance Co. (001450 KS), the third-largest, slipped 1,600 won, or 8.4 percent, to 17,500, the most since Jan. 20, 2006.
BNP Paribas SA cut its recommendations for Samsung Fire and Hyundai Marine to ``hold,'' from ``buy,'' in a report today. ``We believe insurers are entering a down-cycle of auto insurance underwriting,'' the brokerage said. It also cut its price estimates for LIG Insurance Co. (002550 KS) and Meritz Fire & Marine Insurance Co. (000060 KS).
LIG fell 1,800 won, or 8.3 percent, to 19,850, the lowest since April 23. Meritz Fire retreated 290 won, or 3 percent, to 9,250, the lowest since July 22.
Telecommunication companies: KT Corp. (030200 KS), South Korea's largest phone and Internet company, climbed 1,050 won, or 2.6 percent, to 42,250, the most since Aug. 4. KT Freetel Co. (032390 KS), the second-largest South Korean wireless service provider, added 350 won, or 1.3 percent, to 26,850, the highest since Aug. 6.
South Korea will review ways to help telecom companies reduce their marketing expenses, Woori Investment & Securities Co. said in a report. The news ``will help the market gain confidence marketing costs will come down,'' the brokerage said.
Daewoo Shipbuilding & Marine Engineering Co. (042660 KS), the world's third-largest maker of ships, rose 300 won, or 0.8 percent, to 36,200, gaining for the first time in five days. Kuwait Oil Tanker Co. S.A.K., a unit of state-owned Kuwait Petroleum Corp., said yesterday it signed a $708 million contract with Daewoo Shipbuilding for four crude carriers.
DC Chemical Co. (010060 KS), a maker of petrochemicals and solar-power components, added 3,000 won, or 1 percent, to 318,000, rising for the first time in six days. The company said it received a 169.2 billion won ($160.6 million) polysilicon order from Motech Industries Inc. of Taiwan.
Kyobo Securities Co. (030610 KS), a brokerage, retreated 450 won, or 3.6 percent, to 12,150, the lowest since April 23, 2007. The company said yesterday its July net income plunged 82 percent from a year earlier to 2.28 billion won.
GS Holdings Corp. (078930 KS), which operates the nation's second-biggest oil refiner, dropped 1,150 won, or 3.6 percent, to 31,250, the lowest since March 6, 2007. Goldman, Sachs & Co. cut its recommendation to ``sell,'' from ``buy,'' in a report, citing ``significant headwinds'' to refining margins and GS's plans to bid for Daewoo Shipbuilding & Marine Engineering Co.
Maniker Co. (027740 KS), South Korea's second-largest poultry processor, gained 50 won, or 7.2 percent, to 745, the most since June 13. Maniker will report record operating profit in the third quarter, benefiting from higher chicken prices and declining corn costs, SK Securities Co. said in a report.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Eunhwan Kim in Seoul at ekim65@bloomberg.net.
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Aug. 22 (Bloomberg) -- South Korea's Kospi index tumbled to its lowest since April 2007. LG Display Co. fell on concern a cooling global economy will cut demand, while GS Engineering & Construction Corp. led builders lower after government plans to spur the property market failed to impress investors.
LG Display dropped to the lowest since February 2007 after Citigroup Inc. predicted more losses at U.S. banks, triggering concern financial-industry troubles will prolong a global economic slowdown. GS Engineering slid 5.3 percent after Morgan Stanley said housing-market deregulation won't help improve earnings. Brokerages led by Daewoo Securities Co. fell after UBS AG cut its price estimates for some stocks.
``Investor sentiment is souring quickly, and inflow into local funds has dried up, making institutions unable to buy,'' said Kang Shin Woo, who oversees the equivalent of $8 billion as chief investment officer at Korea Investment Trust Management Co. in Seoul. ``People are selling construction stocks out of disappointment about the housing-market measures. There's a lack of confidence in government policy.''
The Kospi fell 15.68, or 1 percent, to close at 1,496.91 in Seoul. The measure dropped every day this week, capping a 4.8 percent decline.
LG Display, the world's second-largest maker of liquid- crystal displays, lost 600 won, or 2.1 percent, to 27,900, the lowest since Feb. 5, 2007. Hyundai Motor Co., which ships three out of five of its cars overseas, retreated 700 won, or 1 percent, to 69,300, the lowest since Aug. 4.
Builders Fall
Citigroup analyst Prashant Bhatia said yesterday that Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion during the third quarter.
Losses at financial institutions in the world's largest economy have triggered a contraction of credit, contributing to the slowdown of economies across the globe. Exports account for two-fifths of South Korea's economy.
Hyundai Development Co., which gets more than half of its sales from residential homes, retreated 1,050 won, or 2.3 percent, to 44,300, the lowest since Aug. 7. GS Engineering, the nation's fourth-largest builder, declined 5,300 won, or 5.3 percent, to 94,700, the lowest since Aug. 5.
There are ``more downside risks'' to construction companies' earnings in the second half despite government plans for stimulating the property market that were announced yesterday, Morgan Stanley said in a report. ``We do not believe the government's deregulation effort will be able to turn fundamentals around in the next six to nine months,'' the brokerage said.
Daewoo Securities, South Korea's third-biggest brokerage by market value, lost 400 won, or 2.3 percent to 16,950, the lowest since Aug. 5. Samsung Securities Co., the largest, fell 900 won, or 1.4 percent, to 61,400, the lowest since Aug. 4.
Insurers Fall
UBS AG cut its price estimates for Daewoo Securities, Samsung Securities and Woori Investment & Securities Co., in a report. The industry faces ``macro headwinds'' and a ``challenging'' business environment, the brokerage said.
Woori Investment, South Korea's fourth-largest brokerage by market value, dropped 550 won, or 2.7 percent, to 19,750, the lowest since Aug. 5. Separately, the company said yesterday its July profit tumbled 92 percent from a year earlier to 5 billion won.
The following were among the most-active stocks in South Korean markets.
Companies affected by fuel prices: Korean Air Lines Co., (003490 KS), the nation's biggest carrier, fell 650 won, to 1.6 percent, to 41,150, the lowest since July 15. Hanjin Shipping Co. (000700 KS), the largest South Korean shipping line, slid 850 won, or 2.8 percent, to 29,900, the lowest since Feb. 5, 2007.
Crude oil gained 4.9 percent to $121.18 a barrel yesterday in New York, the biggest increase since June 6. It recently rose further to $121.62 in after-hours trading.
Ssangyong Motor Co. (003620 KS), which got about two-thirds of last year's sales from sport-utility vehicles, slid 60 won, or 2.2 percent, to 2,700, the lowest since Jul 9.
Insurers: Samsung Fire & Marine Insurance Co. (000810 KS), South Korea's biggest insurer by market value, dropped 6,500 won, or 3.2 percent, to 197,500, the most since July 21. Hyundai Marine & Fire Insurance Co. (001450 KS), the third-largest, slipped 1,600 won, or 8.4 percent, to 17,500, the most since Jan. 20, 2006.
BNP Paribas SA cut its recommendations for Samsung Fire and Hyundai Marine to ``hold,'' from ``buy,'' in a report today. ``We believe insurers are entering a down-cycle of auto insurance underwriting,'' the brokerage said. It also cut its price estimates for LIG Insurance Co. (002550 KS) and Meritz Fire & Marine Insurance Co. (000060 KS).
LIG fell 1,800 won, or 8.3 percent, to 19,850, the lowest since April 23. Meritz Fire retreated 290 won, or 3 percent, to 9,250, the lowest since July 22.
Telecommunication companies: KT Corp. (030200 KS), South Korea's largest phone and Internet company, climbed 1,050 won, or 2.6 percent, to 42,250, the most since Aug. 4. KT Freetel Co. (032390 KS), the second-largest South Korean wireless service provider, added 350 won, or 1.3 percent, to 26,850, the highest since Aug. 6.
South Korea will review ways to help telecom companies reduce their marketing expenses, Woori Investment & Securities Co. said in a report. The news ``will help the market gain confidence marketing costs will come down,'' the brokerage said.
Daewoo Shipbuilding & Marine Engineering Co. (042660 KS), the world's third-largest maker of ships, rose 300 won, or 0.8 percent, to 36,200, gaining for the first time in five days. Kuwait Oil Tanker Co. S.A.K., a unit of state-owned Kuwait Petroleum Corp., said yesterday it signed a $708 million contract with Daewoo Shipbuilding for four crude carriers.
DC Chemical Co. (010060 KS), a maker of petrochemicals and solar-power components, added 3,000 won, or 1 percent, to 318,000, rising for the first time in six days. The company said it received a 169.2 billion won ($160.6 million) polysilicon order from Motech Industries Inc. of Taiwan.
Kyobo Securities Co. (030610 KS), a brokerage, retreated 450 won, or 3.6 percent, to 12,150, the lowest since April 23, 2007. The company said yesterday its July net income plunged 82 percent from a year earlier to 2.28 billion won.
GS Holdings Corp. (078930 KS), which operates the nation's second-biggest oil refiner, dropped 1,150 won, or 3.6 percent, to 31,250, the lowest since March 6, 2007. Goldman, Sachs & Co. cut its recommendation to ``sell,'' from ``buy,'' in a report, citing ``significant headwinds'' to refining margins and GS's plans to bid for Daewoo Shipbuilding & Marine Engineering Co.
Maniker Co. (027740 KS), South Korea's second-largest poultry processor, gained 50 won, or 7.2 percent, to 745, the most since June 13. Maniker will report record operating profit in the third quarter, benefiting from higher chicken prices and declining corn costs, SK Securities Co. said in a report.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Eunhwan Kim in Seoul at ekim65@bloomberg.net.
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European Stocks Advance; U.S. Index Futures Are Little Changed
By Sarah Thompson
Aug. 22 (Bloomberg) -- European stocks rose, led by banks and construction companies, as investors speculated declines this week were overdone and reports signaled takeovers may increase. U.S. index futures were little changed, while Asian shares retreated.
UBS AG gained 2.2 percent, and HBOS Plc increased 2.7 percent. Hochtief AG increased 11 percent after Manager Magazin said Germany's biggest builder may be broken up. SSL International Plc climbed 6.1 percent after Goldman Sachs Group Inc. recommended buying shares in the maker of Durex condoms and Scholl shoes on speculation it may be a takeover target.
Europe's Dow Jones Stoxx 600 Index added 0.5 percent to 279.9 at 9:11 a.m. in London, trimming this week's decline to 2.6 percent. Futures on the Standard & Poor's 500 Index added less than 0.1 percent, while the MSCI Asia Pacific Index fell 0.5 percent.
``This is a technical rebound after a difficult week,'' said Clemence Bounaix, an analyst at Richelieu Finance in Paris, which oversees $6.2 billion. ``Today, we expect a very mixed trading session. There are still worries about the oil price.''
European stocks are set for their worst week in more than a month, as concern spread that banks will post more losses and reports signaled faster-than-forecast inflation in the U.S. and Germany, Europe's biggest economy.
Oil is poised for its biggest weekly rally since June 6 as the dollar slumped and a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil.
National Markets
National benchmark indexes rose in 15 of the 17 western European markets that were open. Germany's DAX added 0.2 percent and France's CAC 40 climbed 0.5 percent. The U.K.'s FTSE 100 gained 0.4 percent.
UBS, the largest Swiss bank, gained 2.2 percent to 22.3 francs. HBOS, the U.K.'s biggest mortgage bank, increased 2.8 percent to 279.25 pence.
The Stoxx 600 Banks Index, the worst performer among the region's 18 industries this year, closed yesterday at the lowest in a month and traded at its cheapest relative to earnings in two weeks. The index has dropped 6.2 percent this week, headed for its worst week in seven months.
More than $13 trillion has been erased from equity markets worldwide in 2008 as accelerating inflation, record oil and $505 billion in writedowns and credit-related losses threaten economic growth.
Yesterday, crude for October delivery surged $5.62, or 4.9 percent, to settle at $121.18 a barrel, the biggest increase since June 6. Futures are down 18 percent from a record $147.27 reached on July 11.
Hochtief, SSL
Hochtief climbed 11 percent to 55.46 euros. Germany's biggest builder may be broken up by its main investors, Spanish construction company ACS SA and Russian billionaire Oleg Deripaska, Manager Magazin reported, without saying where it got the information.
``We don't have any indication that ACS has plans to break up Hochtief,'' Hochtief spokeswoman Jutta Hobbiebrunken said in a telephone interview with Bloomberg News.
SSL International gained 6.1 percent to 464.75 pence after Goldman Sachs added the stock to its ``conviction buy'' list.
``The group could prove an attractive bolt-on deal for a larger group seeking to increase exposure to branded consumer health products,'' London-based analyst Robert Waldschmidt wrote in a note dated yesterday. In addition, a trading update scheduled for Oct. 16 ``could lead to upward revisions to consensus estimates.''
Arriva, Dragon Oil
Arriva Plc added 5.4 percent to 751.5 pence. The operator of the U.K.'s longest train route said first-half profit jumped 32 percent as the company added buses, won a rail-route franchise and attracted travelers switching to public transit as gasoline prices rose.
Dragon Oil Plc jumped 6.7 percent to 333 pence after the Dubai-based petroleum producer with operations in Turkmenistan said first-half profit gained 34 percent as crude prices rose to a record.
BHP Billiton Ltd., the world's largest mining company, dropped 1.1 percent to 1,652 pence, Rio Tinto Group, the third- biggest, slipped 2.2 percent to 5,029 pence.
The Australian Competition and Consumer Commission is seeking more information about BHP Billiton's $142 billion hostile takeover bid for Rio Tinto.
The competition regulator seeks ``further information on certain competition issues which have arisen from the ACCC's market enquiries to date,'' the commission said in a statement to the Australian stock exchange.
SSAB Svenskt Staal AB gained 1 percent to 149 kronor. The world's largest supplier of high-tensile steel said it will invest 5.3 billion kronor ($843 million) to boost the production of quenched and tempered steels in Sweden and the U.S.
Rentokil Initial Plc tumbled 8.1 percent to 67.75 pence. The world's biggest pest-control provider reported a 68 percent plunge in second-quarter profit and said it will take up to five years to turn around sliding earnings.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
Read more...
Aug. 22 (Bloomberg) -- European stocks rose, led by banks and construction companies, as investors speculated declines this week were overdone and reports signaled takeovers may increase. U.S. index futures were little changed, while Asian shares retreated.
UBS AG gained 2.2 percent, and HBOS Plc increased 2.7 percent. Hochtief AG increased 11 percent after Manager Magazin said Germany's biggest builder may be broken up. SSL International Plc climbed 6.1 percent after Goldman Sachs Group Inc. recommended buying shares in the maker of Durex condoms and Scholl shoes on speculation it may be a takeover target.
Europe's Dow Jones Stoxx 600 Index added 0.5 percent to 279.9 at 9:11 a.m. in London, trimming this week's decline to 2.6 percent. Futures on the Standard & Poor's 500 Index added less than 0.1 percent, while the MSCI Asia Pacific Index fell 0.5 percent.
``This is a technical rebound after a difficult week,'' said Clemence Bounaix, an analyst at Richelieu Finance in Paris, which oversees $6.2 billion. ``Today, we expect a very mixed trading session. There are still worries about the oil price.''
European stocks are set for their worst week in more than a month, as concern spread that banks will post more losses and reports signaled faster-than-forecast inflation in the U.S. and Germany, Europe's biggest economy.
Oil is poised for its biggest weekly rally since June 6 as the dollar slumped and a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil.
National Markets
National benchmark indexes rose in 15 of the 17 western European markets that were open. Germany's DAX added 0.2 percent and France's CAC 40 climbed 0.5 percent. The U.K.'s FTSE 100 gained 0.4 percent.
UBS, the largest Swiss bank, gained 2.2 percent to 22.3 francs. HBOS, the U.K.'s biggest mortgage bank, increased 2.8 percent to 279.25 pence.
The Stoxx 600 Banks Index, the worst performer among the region's 18 industries this year, closed yesterday at the lowest in a month and traded at its cheapest relative to earnings in two weeks. The index has dropped 6.2 percent this week, headed for its worst week in seven months.
More than $13 trillion has been erased from equity markets worldwide in 2008 as accelerating inflation, record oil and $505 billion in writedowns and credit-related losses threaten economic growth.
Yesterday, crude for October delivery surged $5.62, or 4.9 percent, to settle at $121.18 a barrel, the biggest increase since June 6. Futures are down 18 percent from a record $147.27 reached on July 11.
Hochtief, SSL
Hochtief climbed 11 percent to 55.46 euros. Germany's biggest builder may be broken up by its main investors, Spanish construction company ACS SA and Russian billionaire Oleg Deripaska, Manager Magazin reported, without saying where it got the information.
``We don't have any indication that ACS has plans to break up Hochtief,'' Hochtief spokeswoman Jutta Hobbiebrunken said in a telephone interview with Bloomberg News.
SSL International gained 6.1 percent to 464.75 pence after Goldman Sachs added the stock to its ``conviction buy'' list.
``The group could prove an attractive bolt-on deal for a larger group seeking to increase exposure to branded consumer health products,'' London-based analyst Robert Waldschmidt wrote in a note dated yesterday. In addition, a trading update scheduled for Oct. 16 ``could lead to upward revisions to consensus estimates.''
Arriva, Dragon Oil
Arriva Plc added 5.4 percent to 751.5 pence. The operator of the U.K.'s longest train route said first-half profit jumped 32 percent as the company added buses, won a rail-route franchise and attracted travelers switching to public transit as gasoline prices rose.
Dragon Oil Plc jumped 6.7 percent to 333 pence after the Dubai-based petroleum producer with operations in Turkmenistan said first-half profit gained 34 percent as crude prices rose to a record.
BHP Billiton Ltd., the world's largest mining company, dropped 1.1 percent to 1,652 pence, Rio Tinto Group, the third- biggest, slipped 2.2 percent to 5,029 pence.
The Australian Competition and Consumer Commission is seeking more information about BHP Billiton's $142 billion hostile takeover bid for Rio Tinto.
The competition regulator seeks ``further information on certain competition issues which have arisen from the ACCC's market enquiries to date,'' the commission said in a statement to the Australian stock exchange.
SSAB Svenskt Staal AB gained 1 percent to 149 kronor. The world's largest supplier of high-tensile steel said it will invest 5.3 billion kronor ($843 million) to boost the production of quenched and tempered steels in Sweden and the U.S.
Rentokil Initial Plc tumbled 8.1 percent to 67.75 pence. The world's biggest pest-control provider reported a 68 percent plunge in second-quarter profit and said it will take up to five years to turn around sliding earnings.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
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Goldman, Merrill Lose in Bank Rally Since July 15: Chart of Day
By Bradley Keoun
More Photos/Details
Aug. 22 (Bloomberg) -- Goldman Sachs Group Inc. and Merrill Lynch & Co. have missed out on the rally in bank and brokerage stocks since July 15, the day Second Curve Capital LLC's Thomas Brown says financial stocks ``made their bottom.''
The CHART OF THE DAY shows the divergence between the two brokerage firms and the benchmark Amex Securities Broker/Dealer Index, which climbed almost 11 percent through yesterday since falling to the lowest level in almost four years on July 15. Goldman, the biggest U.S. securities firm by market value, fell 0.9 percent in that period, while Merrill, the third-largest, was down 0.4 percent.
Lehman Brothers Holdings Inc., the No. 4 firm, gained 3.8 percent even while buffeted by speculation it may be forced to sell shares or businesses to raise capital. Morgan Stanley, the No. 2 investment bank, surged 20 percent. The KBW Bank Index, which tracks 24 commercial bank stocks, is up 28 percent. Its worst-performing member, Bank of New York Mellon Corp., climbed 0.4 percent.
Brown, who as a Donaldson, Lufkin & Jenrette bank analyst topped Institutional Investor's analyst ranking eight times in the 1980s and '90s, believes financial-stock ``valuations are compelling,'' according to his blog, bankstocks.com. When it comes to Goldman and Merrill, investors aren't so sure.
To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.
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More Photos/Details
Aug. 22 (Bloomberg) -- Goldman Sachs Group Inc. and Merrill Lynch & Co. have missed out on the rally in bank and brokerage stocks since July 15, the day Second Curve Capital LLC's Thomas Brown says financial stocks ``made their bottom.''
The CHART OF THE DAY shows the divergence between the two brokerage firms and the benchmark Amex Securities Broker/Dealer Index, which climbed almost 11 percent through yesterday since falling to the lowest level in almost four years on July 15. Goldman, the biggest U.S. securities firm by market value, fell 0.9 percent in that period, while Merrill, the third-largest, was down 0.4 percent.
Lehman Brothers Holdings Inc., the No. 4 firm, gained 3.8 percent even while buffeted by speculation it may be forced to sell shares or businesses to raise capital. Morgan Stanley, the No. 2 investment bank, surged 20 percent. The KBW Bank Index, which tracks 24 commercial bank stocks, is up 28 percent. Its worst-performing member, Bank of New York Mellon Corp., climbed 0.4 percent.
Brown, who as a Donaldson, Lufkin & Jenrette bank analyst topped Institutional Investor's analyst ranking eight times in the 1980s and '90s, believes financial-stock ``valuations are compelling,'' according to his blog, bankstocks.com. When it comes to Goldman and Merrill, investors aren't so sure.
To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.
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German Stocks Gain, Led by Banks; Deutsche Post, Hochtief Climb
By Stefanie Haxel
Aug. 22 (Bloomberg) -- German stocks advanced, rebounding from a five-week low, as concern eased that writedowns and credit-related losses in the financial industry will spread.
Deutsche Postbank AG, Germany's biggest consumer bank by clients, and Commerzbank AG led the gain. Deutsche Post AG rallied the most in two weeks after Goldman Sachs Group Inc. recommended buying shares in Europe's largest mail carrier.
The benchmark DAX Index added 14.32, or 0.2 percent, to 6,251.28 as of 9:49 a.m. in Frankfurt, trimming this week's decline to 3 percent. DAX futures expiring in September rose 0.2 percent. The HDAX Index of the country's 110 biggest companies advanced 0.3 percent.
``The situation of financial stocks in the U.S. is slightly calming down,'' Tilmann Galler, a client portfolio manager who helps oversee about $25 billion at JPMorgan Asset Management in Frankfurt, said in a Bloomberg Television interview. ``Although bank shares started very weak, we got first buy recommendations for Lehman Brothers Holdings Inc.''
Ladenburg Thalmann & Co. upgraded Lehman shares to ``buy'' from ``neutral'' yesterday and Citigroup Inc. confirmed a ``buy'' recommendation on Aug. 20. Lehman, the largest underwriter of mortgage bonds before the subprime market collapsed, may write down about $4 billion in credit-related investments in the third quarter, JPMorgan Chase & Co. said Aug. 19, triggering a slump in financial stocks.
Deutsche Postbank gained 59 cents, or 1.5 percent, to 40.78 euros. Commerzbank, Germany's second-biggest bank, rose 27 cents, or 1.4 percent, to 19.885 euros. Larger rival Deutsche Bank AG rose 45 cents, or 0.8 percent, to 56.41 euros.
Deutsche Post
Deutsche Post increased 36 cents, or 2.3 percent, to 15.40 euros, the steepest advance since Aug. 5. The carrier is among companies looking ``most attractive on both a qualitative and quantitative basis,'' analysts including Keith Hayes wrote in a report to clients today, lifting his recommendation to ``buy'' from ``neutral.''
Hochtief AG surged 3.64 euros, or 7.3 percent, to 53.74, the largest gain in almost seven months. The country's biggest construction company may be broken up by its main shareholders, Spanish construction company ACS SA and Russian billionaire Oleg Deripaska, Manager Magazin reported, without saying where it got the information.
``We don't have any indication that ACS has plans to break up Hochtief,'' Hochtief spokeswoman Jutta Hobbiebrunken said in a telephone interview with Bloomberg News. ``These rumors come up from time to time.''
To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
Read more...
Aug. 22 (Bloomberg) -- German stocks advanced, rebounding from a five-week low, as concern eased that writedowns and credit-related losses in the financial industry will spread.
Deutsche Postbank AG, Germany's biggest consumer bank by clients, and Commerzbank AG led the gain. Deutsche Post AG rallied the most in two weeks after Goldman Sachs Group Inc. recommended buying shares in Europe's largest mail carrier.
The benchmark DAX Index added 14.32, or 0.2 percent, to 6,251.28 as of 9:49 a.m. in Frankfurt, trimming this week's decline to 3 percent. DAX futures expiring in September rose 0.2 percent. The HDAX Index of the country's 110 biggest companies advanced 0.3 percent.
``The situation of financial stocks in the U.S. is slightly calming down,'' Tilmann Galler, a client portfolio manager who helps oversee about $25 billion at JPMorgan Asset Management in Frankfurt, said in a Bloomberg Television interview. ``Although bank shares started very weak, we got first buy recommendations for Lehman Brothers Holdings Inc.''
Ladenburg Thalmann & Co. upgraded Lehman shares to ``buy'' from ``neutral'' yesterday and Citigroup Inc. confirmed a ``buy'' recommendation on Aug. 20. Lehman, the largest underwriter of mortgage bonds before the subprime market collapsed, may write down about $4 billion in credit-related investments in the third quarter, JPMorgan Chase & Co. said Aug. 19, triggering a slump in financial stocks.
Deutsche Postbank gained 59 cents, or 1.5 percent, to 40.78 euros. Commerzbank, Germany's second-biggest bank, rose 27 cents, or 1.4 percent, to 19.885 euros. Larger rival Deutsche Bank AG rose 45 cents, or 0.8 percent, to 56.41 euros.
Deutsche Post
Deutsche Post increased 36 cents, or 2.3 percent, to 15.40 euros, the steepest advance since Aug. 5. The carrier is among companies looking ``most attractive on both a qualitative and quantitative basis,'' analysts including Keith Hayes wrote in a report to clients today, lifting his recommendation to ``buy'' from ``neutral.''
Hochtief AG surged 3.64 euros, or 7.3 percent, to 53.74, the largest gain in almost seven months. The country's biggest construction company may be broken up by its main shareholders, Spanish construction company ACS SA and Russian billionaire Oleg Deripaska, Manager Magazin reported, without saying where it got the information.
``We don't have any indication that ACS has plans to break up Hochtief,'' Hochtief spokeswoman Jutta Hobbiebrunken said in a telephone interview with Bloomberg News. ``These rumors come up from time to time.''
To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
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Bancolombia, Bematech, Cemex, Telemar: Latin Equity Preview
By Paulo Winterstein and [bn:PRSN=1] William Freebairn []
Aug. 22 (Bloomberg) -- The following companies may have unusual price changes in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index rose 1.3 percent to 4,027.4.
Brazil
Bematech Industria & Comercios de Equipamentos Eletronicos SA (BEMA3 BS): The Brazilian maker of business software and hardware plans to repurchase up to 2.7 million voting shares, or 8.6 percent of outstanding stock, during the next year, Sao Jose dos Pinhais-based Bematech said in a regulatory filing yesterday. Bematech rose 2.2 percent, to 7.46 reais.
Telemar Norte Leste SA (TMAR5 BS): The operating unit of Brazil's biggest fixed-line phone company will pay stockholders 3.9 billion reais ($2.42 billion) in extraordinary dividends by Sept. 19. The dividend payment will be discussed in a board meeting on Aug. 28, the Rio de Janeiro-based company said in a filing posted yesterday on the Web site of Brazil's securities agency. Telemar was little changed, adding 2 centavos to 86.21 reais.
Colombia
Bancolombia SA (BCOLO CB): The country's biggest lender placed 600 billion pesos ($322 million) in bonds. Demand for the issue totaled 1.64 trillion pesos, it wrote in an e-mailed statement yesterday. Bancolombia rose 0.7 percent to 14,800 pesos.
Mexico
Cemex SAB (CEMEXCP MM): The local unit of the largest cement maker in the Americas polluted the environment and did not re- invest profits, Venezuelan President Hugo Chavez said yesterday in a televised appearance. Venezuela seized Cemex's local unit this week as part of a plan to nationalize key industries. Cemex has said it is seeking arbitration over the seizure, saying Venezuela offered less for its unit than for cement operations of competitors in the country. Mexico City-based Cemex fell 1.7 percent to 20.57 pesos.
Consocio Hogar SAB (HOGARB MM): The Zapopan, Mexico-based homebuilder had its issuer credit rating lowered two levels to Ba2 by Moody's Investors Services. The builder has had a ``substantial decline'' in sales and losses in the first half of this year, Moody's said in a statement yesterday, adding that it could lower the rating further. Hogar rose 3.6 percent to 3.15 pesos.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
Read more...
Aug. 22 (Bloomberg) -- The following companies may have unusual price changes in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index rose 1.3 percent to 4,027.4.
Brazil
Bematech Industria & Comercios de Equipamentos Eletronicos SA (BEMA3 BS): The Brazilian maker of business software and hardware plans to repurchase up to 2.7 million voting shares, or 8.6 percent of outstanding stock, during the next year, Sao Jose dos Pinhais-based Bematech said in a regulatory filing yesterday. Bematech rose 2.2 percent, to 7.46 reais.
Telemar Norte Leste SA (TMAR5 BS): The operating unit of Brazil's biggest fixed-line phone company will pay stockholders 3.9 billion reais ($2.42 billion) in extraordinary dividends by Sept. 19. The dividend payment will be discussed in a board meeting on Aug. 28, the Rio de Janeiro-based company said in a filing posted yesterday on the Web site of Brazil's securities agency. Telemar was little changed, adding 2 centavos to 86.21 reais.
Colombia
Bancolombia SA (BCOLO CB): The country's biggest lender placed 600 billion pesos ($322 million) in bonds. Demand for the issue totaled 1.64 trillion pesos, it wrote in an e-mailed statement yesterday. Bancolombia rose 0.7 percent to 14,800 pesos.
Mexico
Cemex SAB (CEMEXCP MM): The local unit of the largest cement maker in the Americas polluted the environment and did not re- invest profits, Venezuelan President Hugo Chavez said yesterday in a televised appearance. Venezuela seized Cemex's local unit this week as part of a plan to nationalize key industries. Cemex has said it is seeking arbitration over the seizure, saying Venezuela offered less for its unit than for cement operations of competitors in the country. Mexico City-based Cemex fell 1.7 percent to 20.57 pesos.
Consocio Hogar SAB (HOGARB MM): The Zapopan, Mexico-based homebuilder had its issuer credit rating lowered two levels to Ba2 by Moody's Investors Services. The builder has had a ``substantial decline'' in sales and losses in the first half of this year, Moody's said in a statement yesterday, adding that it could lower the rating further. Hogar rose 3.6 percent to 3.15 pesos.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
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Analysts' Accuracy Forecasting U.S. Profits Worst in 16 Years
By Lynn Thomasson
Aug. 22 (Bloomberg) -- Analysts' accuracy in predicting U.S. profits dropped to the lowest level in at least 16 years last quarter, adding to a worsening track record since regulators forced companies to stop leaking information to Wall Street.
Earnings estimates from analysts matched results for 6.7 percent of companies in the Standard & Poor's 500 Index that reported second-quarter profit, the fewest since Bloomberg began compiling the data in 1992. Accuracy peaked at 30 percent in the fourth quarter of 2000, the year Regulation Fair Disclosure, known as Reg FD, was adopted, and has fallen for six of the seven years since.
``They're winging it,'' said John Kornitzer, who oversees $5 billion as chief investment officer of Kornitzer Capital Management in Shawnee Mission, Kansas. ``They can't find out the stuff they want to find out, and they've got so much to do because there have been so many cuts.''
The Securities and Exchange Commission's law stripped analysts of their edge in forecasting earnings by making companies release information that affects profits to the public. More than $500 billion of bank losses from the collapse of the subprime mortgage market has made predicting company results even harder.
Second-quarter earnings declined 22 percent for the 459 companies in the S&P 500 that released results so far, according to data compiled by Bloomberg. That's twice the drop analysts projected in the first week of July, before the reports began.
Missing the Mark
Analysts are increasingly likely to miss the mark because companies are more cautious with information following the SEC's rule, said John Wilson, co-director of equity strategy and chief market technician for Morgan Keegan, which manages $120 billion in Memphis, Tennessee.
``You no longer have that favored guy who gets the wink and the nod before everyone else,'' Wilson said. ``Unless you've got an analyst with a really good handle on an industry, it just gets tougher and tougher in an environment like this.''
Not all research has gotten worse, said Jerome Dodson, a fund manager who oversees $1.7 billion at San Francisco-based Parnassus Investments.
``Often an individual analyst knows the company better than we do because they follow it on a daily basis,'' said Dodson. ``Good analysts will bring a company to our attention that's not getting a lot of attention on Wall Street.''
Citigroup, Bear Stearns
Meredith Whitney, the bank analyst at Oppenheimer & Co., predicted Citigroup Inc. would cut its dividend two months before it did. Wachovia Corp.'s Douglas Sipkin lowered his recommendation on Bear Stearns Cos. in May 2007, when it was trading at $150. JPMorgan Chase & Co. later bought the company $9.43 a share, the deal's value when it closed in May.
Job cuts and a decline in analysts' pay after government efforts to prevent research operations from mingling with investment banking may have exacerbated the drop in the quality of research, according to Morgan Asset Management's Walter ``Bucky'' Hellwig. The SEC requires banks to separate research and investment banking divisions to prevent the leaking of nonpublic information about corporate transactions.
Bank of America Corp., the second-biggest U.S. bank, fired about a quarter of the stock analysts in its New York-based securities unit in January. Newark, New Jersey-based Prudential Financial Inc., the second-largest U.S. life insurer, shut its 420-person stock research and trading unit last year because it wasn't making money.
Lower Profits
``It's not the high-profit, high-dollar profession that it used to be,'' said Hellwig, who helps oversee $30 billion in Birmingham, Alabama. ``In the wake of all the regulation to separate investment banking from analysis, the job of the analyst became just that, often just watching the stocks and checking the estimates.''
Accuracy in the second quarter worsened as complex, illiquid securities caused unexpected losses, said Sean Ryan, a New York- based analyst with Sterne, Agee & Leach Inc.
American International Group Inc.'s report was among the biggest misses of all companies in the S&P 500 after the world's largest insurer wrote down more than $11 billion of holdings. The adjusted loss was 51 cents a share, compared with analysts' estimate for a 77-cent profit. New York-based AIG's shares plunged 18 percent Aug. 7, the day after the report, for the steepest drop since the company went public in 1969.
National City Corp., the Cleveland-based bank whose market fell by 70 percent this year, reported a loss that was more than twice what analysts estimated, as did Seattle-based Washington Mutual, the biggest U.S. savings and loan, and New York-based Merrill Lynch & Co., the largest U.S. stock brokerage.
Morgan Keegan's Wilson, who uses technical and quantitative analysis to make investment decisions, says investors can't rely only on analyst reports because ``nobody knows right now how bad it could be'' as the U.S. economy slows and banks' credit losses continue to climb.
``You've got to do lots of other things beside read an analyst report and take an earnings estimate at face value,'' he said. ``Schmoozing the company doesn't help anymore.''
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Aug. 22 (Bloomberg) -- Analysts' accuracy in predicting U.S. profits dropped to the lowest level in at least 16 years last quarter, adding to a worsening track record since regulators forced companies to stop leaking information to Wall Street.
Earnings estimates from analysts matched results for 6.7 percent of companies in the Standard & Poor's 500 Index that reported second-quarter profit, the fewest since Bloomberg began compiling the data in 1992. Accuracy peaked at 30 percent in the fourth quarter of 2000, the year Regulation Fair Disclosure, known as Reg FD, was adopted, and has fallen for six of the seven years since.
``They're winging it,'' said John Kornitzer, who oversees $5 billion as chief investment officer of Kornitzer Capital Management in Shawnee Mission, Kansas. ``They can't find out the stuff they want to find out, and they've got so much to do because there have been so many cuts.''
The Securities and Exchange Commission's law stripped analysts of their edge in forecasting earnings by making companies release information that affects profits to the public. More than $500 billion of bank losses from the collapse of the subprime mortgage market has made predicting company results even harder.
Second-quarter earnings declined 22 percent for the 459 companies in the S&P 500 that released results so far, according to data compiled by Bloomberg. That's twice the drop analysts projected in the first week of July, before the reports began.
Missing the Mark
Analysts are increasingly likely to miss the mark because companies are more cautious with information following the SEC's rule, said John Wilson, co-director of equity strategy and chief market technician for Morgan Keegan, which manages $120 billion in Memphis, Tennessee.
``You no longer have that favored guy who gets the wink and the nod before everyone else,'' Wilson said. ``Unless you've got an analyst with a really good handle on an industry, it just gets tougher and tougher in an environment like this.''
Not all research has gotten worse, said Jerome Dodson, a fund manager who oversees $1.7 billion at San Francisco-based Parnassus Investments.
``Often an individual analyst knows the company better than we do because they follow it on a daily basis,'' said Dodson. ``Good analysts will bring a company to our attention that's not getting a lot of attention on Wall Street.''
Citigroup, Bear Stearns
Meredith Whitney, the bank analyst at Oppenheimer & Co., predicted Citigroup Inc. would cut its dividend two months before it did. Wachovia Corp.'s Douglas Sipkin lowered his recommendation on Bear Stearns Cos. in May 2007, when it was trading at $150. JPMorgan Chase & Co. later bought the company $9.43 a share, the deal's value when it closed in May.
Job cuts and a decline in analysts' pay after government efforts to prevent research operations from mingling with investment banking may have exacerbated the drop in the quality of research, according to Morgan Asset Management's Walter ``Bucky'' Hellwig. The SEC requires banks to separate research and investment banking divisions to prevent the leaking of nonpublic information about corporate transactions.
Bank of America Corp., the second-biggest U.S. bank, fired about a quarter of the stock analysts in its New York-based securities unit in January. Newark, New Jersey-based Prudential Financial Inc., the second-largest U.S. life insurer, shut its 420-person stock research and trading unit last year because it wasn't making money.
Lower Profits
``It's not the high-profit, high-dollar profession that it used to be,'' said Hellwig, who helps oversee $30 billion in Birmingham, Alabama. ``In the wake of all the regulation to separate investment banking from analysis, the job of the analyst became just that, often just watching the stocks and checking the estimates.''
Accuracy in the second quarter worsened as complex, illiquid securities caused unexpected losses, said Sean Ryan, a New York- based analyst with Sterne, Agee & Leach Inc.
American International Group Inc.'s report was among the biggest misses of all companies in the S&P 500 after the world's largest insurer wrote down more than $11 billion of holdings. The adjusted loss was 51 cents a share, compared with analysts' estimate for a 77-cent profit. New York-based AIG's shares plunged 18 percent Aug. 7, the day after the report, for the steepest drop since the company went public in 1969.
National City Corp., the Cleveland-based bank whose market fell by 70 percent this year, reported a loss that was more than twice what analysts estimated, as did Seattle-based Washington Mutual, the biggest U.S. savings and loan, and New York-based Merrill Lynch & Co., the largest U.S. stock brokerage.
Morgan Keegan's Wilson, who uses technical and quantitative analysis to make investment decisions, says investors can't rely only on analyst reports because ``nobody knows right now how bad it could be'' as the U.S. economy slows and banks' credit losses continue to climb.
``You've got to do lots of other things beside read an analyst report and take an earnings estimate at face value,'' he said. ``Schmoozing the company doesn't help anymore.''
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Polish Rate Cut Bets Sprout as Growth Slows: Chart of the Day
By Ewa Krukowska
Aug. 22 (Bloomberg) -- Investors are starting to switch their bets on Polish interest rates to cuts from increases, on signs economic growth is slowing and inflation is about to peak.
The CHART OF THE DAY shows the three-month Polish Forward Rate Agreement dropped below the three-month WIBOR interbank rate for the first time in more than two years, suggesting the central bank's monetary tightening cycle is nearing its end. The main rate is currently 6 percent, after the bank raised it by 2 points since April 2007.
``Forward rate agreements suggest that investors are starting to price in potential rate cuts as soon as this year,'' said Piotr Kalisz, economist at Citigroup in Warsaw. ``The move in prices was quite aggressive.''
The FRA, which settles to the three-month interbank offered rate for the zloty, traded at 6.34 percent yesterday, or 16 basis points below the WIBOR level of 6.50 percent. The contract has averaged 20 basis points above WIBOR since the central bank began its monetary tightening cycle.
The spread between the contract and the National Bank of Poland's main rate narrowed to 34 basis points yesterday, compared with an average 68 basis points in the past 17 months.
The Warsaw-based central bank may still increase borrowing costs by a quarter point this year to strengthen its anti- inflation credibility, Kalisz said. He forecast the reduction of borrowing costs will start next year, when he predicts rates will fall by 75-100 basis points.
To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net;
Read more...
Aug. 22 (Bloomberg) -- Investors are starting to switch their bets on Polish interest rates to cuts from increases, on signs economic growth is slowing and inflation is about to peak.
The CHART OF THE DAY shows the three-month Polish Forward Rate Agreement dropped below the three-month WIBOR interbank rate for the first time in more than two years, suggesting the central bank's monetary tightening cycle is nearing its end. The main rate is currently 6 percent, after the bank raised it by 2 points since April 2007.
``Forward rate agreements suggest that investors are starting to price in potential rate cuts as soon as this year,'' said Piotr Kalisz, economist at Citigroup in Warsaw. ``The move in prices was quite aggressive.''
The FRA, which settles to the three-month interbank offered rate for the zloty, traded at 6.34 percent yesterday, or 16 basis points below the WIBOR level of 6.50 percent. The contract has averaged 20 basis points above WIBOR since the central bank began its monetary tightening cycle.
The spread between the contract and the National Bank of Poland's main rate narrowed to 34 basis points yesterday, compared with an average 68 basis points in the past 17 months.
The Warsaw-based central bank may still increase borrowing costs by a quarter point this year to strengthen its anti- inflation credibility, Kalisz said. He forecast the reduction of borrowing costs will start next year, when he predicts rates will fall by 75-100 basis points.
To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net;
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Merkel Sticks to Deficit-Cutting Agenda as Recession Risk Rises
By Rainer Buergin
Aug. 22 (Bloomberg) -- Hans Wormser has taken 15 of his company's 200 trucks off German roads as he struggles with a 28 percent jump in diesel-fuel prices. Next year, he also faces a 60 percent increase in truck tolls.
He blames Chancellor Angela Merkel, who is rejecting calls to ease the pain as she fulfills her pledge to cut the budget deficit despite a slowing economy -- a stance that may cost her votes in next year's national election.
``The economy is shifting into reverse,'' said Wormser, who is also head of the Bavarian LBT truckers' association. ``People are worried about their jobs. Not only are we not getting any help from Berlin, they're even adding to our woes.''
Deficit-reduction is the signal achievement of Merkel's three years at the head of a ``Grand Coalition'' government that includes her Christian Democratic Union and the rival Social Democratic Party, or SPD. The deficit, 31.2 billion euros ($46.4 billion) the year she took office, declined to 14.3 billion euros last year; it is projected to disappear entirely after 2010 -- unless falling tax revenues from the economic slowdown, or increased spending, drive it back up.
``I don't think she's going to cave in,'' Gerd Langguth, a politics professor at the University of Bonn and Merkel biographer, said in a telephone interview. ``Her hands are tied, and an economic-stimulus package costs money she doesn't have.''
Germany's gross domestic product, which accounts for about a third of the euro region's economy, shrank 0.5 percent in 2008's second quarter after expanding 1.3 percent in the first three months.
Recession Risk
There is a ``50-50'' chance of a recession this year, Roland Doehrn of the Essen-based RWI economic institute said in an Aug. 19 interview; the BGA association of wholesalers and exporters says the economy may grow less than 1 percent next year.
Merkel's deficit-reduction hand is strengthened by her alliance with SPD Finance Minister Peer Steinbrueck. The SPD, gearing up to oppose her in the September 2009 election, has blocked her plans to overhaul a health-insurance system that the IW economic institute says fails to reduce costs and an income- tax system that generates bestselling books with titles like ``1000 Perfectly Legal Tax Tricks.''
But the chancellor, 54, and Steinbrueck, 61, ``apparently don't want to expose themselves to accusations they have abandoned one of the key goals of the Grand Coalition: to stabilize and consolidate public finances,'' Hans-Juergen Hoffmann, managing director of polling company Psephos in Berlin, said in an interview.
Ammunition
Their fiscal focus hands ammunition to Oskar Lafontaine, the former SPD finance minister who is now co-leader of the Left Party. Lafontaine, 64, told a party convention in May that the Left, an alliance of former East German communists and labor unionists, plans to campaign by appealing to those who feel let down by Merkel's coalition.
The Left already is the most popular of three main opposition parties, with 11 percent support, according to a poll by FG Wahlen published Aug. 15. That compared with 25 percent for the SPD and 40 percent for Merkel's CDU.
``Strengthening the incomes of the masses'' and ``higher public spending'' are needed to bolster growth, Lafontaine said in an e-mailed statement. The government, through its tax and spending policies, has ``reached deep into people's pockets.''
Even Merkel's camp is seeing growing opposition to giving deficit reduction priority over tax cuts.
`Markedly Pessimistic'
``A clear majority of people in Germany has a markedly pessimistic view of the future'' because high taxes are eroding their purchasing power, said Josef Schlarmann, a Christian Democrat who heads a business lobby representing 40,000 business owners and managers that is allied with the party. ``CDU voters are enormously disappointed.''
Concern is especially high in the Christian Social Union, the CDU's Bavarian sister party. Faced with polls suggesting it may lose its majority in a state election scheduled for Sept. 28, the CSU in May proposed a package of tax cuts and commuter subsidies worth 28 billion euros.
Economy Minister Michael Glos, a CSU member, also favors the plan, to no avail. The commuter-subsidy proposal is ``the only matter of difference'' she has with the CSU, Merkel said in a speech last month to its convention in Nuremberg.
``Wherever there's leeway, we're willing to give something back to the people, as long as we can afford it,'' Merkel said. ``Reliability has to remain one of our core principles. We have to stay our course.''
For Wormser, whose trucking company is based near Nuremberg, that course risks ``hundreds of thousands more unemployed and thousands of insolvent companies, with all the family tragedies involved.'' The chancellor's response ``is going to be decisive for the election,'' he said.
To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.
Read more...
Aug. 22 (Bloomberg) -- Hans Wormser has taken 15 of his company's 200 trucks off German roads as he struggles with a 28 percent jump in diesel-fuel prices. Next year, he also faces a 60 percent increase in truck tolls.
He blames Chancellor Angela Merkel, who is rejecting calls to ease the pain as she fulfills her pledge to cut the budget deficit despite a slowing economy -- a stance that may cost her votes in next year's national election.
``The economy is shifting into reverse,'' said Wormser, who is also head of the Bavarian LBT truckers' association. ``People are worried about their jobs. Not only are we not getting any help from Berlin, they're even adding to our woes.''
Deficit-reduction is the signal achievement of Merkel's three years at the head of a ``Grand Coalition'' government that includes her Christian Democratic Union and the rival Social Democratic Party, or SPD. The deficit, 31.2 billion euros ($46.4 billion) the year she took office, declined to 14.3 billion euros last year; it is projected to disappear entirely after 2010 -- unless falling tax revenues from the economic slowdown, or increased spending, drive it back up.
``I don't think she's going to cave in,'' Gerd Langguth, a politics professor at the University of Bonn and Merkel biographer, said in a telephone interview. ``Her hands are tied, and an economic-stimulus package costs money she doesn't have.''
Germany's gross domestic product, which accounts for about a third of the euro region's economy, shrank 0.5 percent in 2008's second quarter after expanding 1.3 percent in the first three months.
Recession Risk
There is a ``50-50'' chance of a recession this year, Roland Doehrn of the Essen-based RWI economic institute said in an Aug. 19 interview; the BGA association of wholesalers and exporters says the economy may grow less than 1 percent next year.
Merkel's deficit-reduction hand is strengthened by her alliance with SPD Finance Minister Peer Steinbrueck. The SPD, gearing up to oppose her in the September 2009 election, has blocked her plans to overhaul a health-insurance system that the IW economic institute says fails to reduce costs and an income- tax system that generates bestselling books with titles like ``1000 Perfectly Legal Tax Tricks.''
But the chancellor, 54, and Steinbrueck, 61, ``apparently don't want to expose themselves to accusations they have abandoned one of the key goals of the Grand Coalition: to stabilize and consolidate public finances,'' Hans-Juergen Hoffmann, managing director of polling company Psephos in Berlin, said in an interview.
Ammunition
Their fiscal focus hands ammunition to Oskar Lafontaine, the former SPD finance minister who is now co-leader of the Left Party. Lafontaine, 64, told a party convention in May that the Left, an alliance of former East German communists and labor unionists, plans to campaign by appealing to those who feel let down by Merkel's coalition.
The Left already is the most popular of three main opposition parties, with 11 percent support, according to a poll by FG Wahlen published Aug. 15. That compared with 25 percent for the SPD and 40 percent for Merkel's CDU.
``Strengthening the incomes of the masses'' and ``higher public spending'' are needed to bolster growth, Lafontaine said in an e-mailed statement. The government, through its tax and spending policies, has ``reached deep into people's pockets.''
Even Merkel's camp is seeing growing opposition to giving deficit reduction priority over tax cuts.
`Markedly Pessimistic'
``A clear majority of people in Germany has a markedly pessimistic view of the future'' because high taxes are eroding their purchasing power, said Josef Schlarmann, a Christian Democrat who heads a business lobby representing 40,000 business owners and managers that is allied with the party. ``CDU voters are enormously disappointed.''
Concern is especially high in the Christian Social Union, the CDU's Bavarian sister party. Faced with polls suggesting it may lose its majority in a state election scheduled for Sept. 28, the CSU in May proposed a package of tax cuts and commuter subsidies worth 28 billion euros.
Economy Minister Michael Glos, a CSU member, also favors the plan, to no avail. The commuter-subsidy proposal is ``the only matter of difference'' she has with the CSU, Merkel said in a speech last month to its convention in Nuremberg.
``Wherever there's leeway, we're willing to give something back to the people, as long as we can afford it,'' Merkel said. ``Reliability has to remain one of our core principles. We have to stay our course.''
For Wormser, whose trucking company is based near Nuremberg, that course risks ``hundreds of thousands more unemployed and thousands of insolvent companies, with all the family tragedies involved.'' The chancellor's response ``is going to be decisive for the election,'' he said.
To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.
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BOJ Sees Few Signs of Wage-Price Spiral, Minutes Show
By Mayumi Otsuma
Enlarge Image/Details
Aug. 22 (Bloomberg) -- Bank of Japan board members said there are few signs that rising commodity prices will prompt companies to increase wages and fan inflation, minutes show.
``Many members said that wages had not risen markedly in Japan and to date there had been no sign of second-round effects from the rise in prices of petroleum products and food,'' the minutes of the July 14-15 meeting released today in Tokyo said.
Rising fuel and food costs are sapping corporate profits and household income, putting a strain on an economy that may already be in a recession. The bank this week described growth as ``sluggish'' for the first time in a decade, indicating it won't raise the key interest rate from 0.5 percent anytime soon.
``The BOJ is more concerned about growth than inflation as it becomes clearer that Japan is in a recession,'' said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. ``The monetary policy gridlock will continue for a while.''
The yen traded at 108.67 per dollar as of 9:52 a.m. in Tokyo from 108.48 before the minutes were published.
Japan's inflation is outstripping gains in wages. Consumer prices excluding fresh fruit, fish and vegetables climbed 1.9 percent in June from a year earlier, the fastest pace in a decade. Average paychecks increased 0.4 percent.
`Restraining Wages'
Companies will probably keep ``restraining wages for the time being'' because profits are declining, some of the policy board's seven members said at the July meeting.
Central bank Governor Masaaki Shirakawa said this week that inflation isn't spreading because ``the pace of wage increases is weak.'' He said the economy's recovery may be delayed because of the rise in food and fuel costs and weakening exports.
The world's second-largest economy shrank at an annual 2.4 percent pace in the three months ended June 30. Economists surveyed by Bloomberg say the nation will grow at a 0.6 percent pace this quarter and some predict a second contraction.
The economy may ``shrink again in the current quarter and that would mark a technical recession,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``For the reminder of the year, the BOJ's expected to be on hold.''
Still, the central bank also said this week that the economy should eventually resume expanding as global prices ease and overseas economies recover.
Some board members said the bank should be wary of the risk that keeping rates low for a long time could overstimulate the economy once growth picks up, according to the minutes. Japan's benchmark rate, the lowest among major economies, was last raised in February 2007.
The central bank began releasing the minutes earlier this month as part of measures announced in July to improve policy transparency. Minutes are now published after they are approved by the board members at the next meeting. Previously, they were sometimes approved two meetings later.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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Enlarge Image/Details
Aug. 22 (Bloomberg) -- Bank of Japan board members said there are few signs that rising commodity prices will prompt companies to increase wages and fan inflation, minutes show.
``Many members said that wages had not risen markedly in Japan and to date there had been no sign of second-round effects from the rise in prices of petroleum products and food,'' the minutes of the July 14-15 meeting released today in Tokyo said.
Rising fuel and food costs are sapping corporate profits and household income, putting a strain on an economy that may already be in a recession. The bank this week described growth as ``sluggish'' for the first time in a decade, indicating it won't raise the key interest rate from 0.5 percent anytime soon.
``The BOJ is more concerned about growth than inflation as it becomes clearer that Japan is in a recession,'' said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. ``The monetary policy gridlock will continue for a while.''
The yen traded at 108.67 per dollar as of 9:52 a.m. in Tokyo from 108.48 before the minutes were published.
Japan's inflation is outstripping gains in wages. Consumer prices excluding fresh fruit, fish and vegetables climbed 1.9 percent in June from a year earlier, the fastest pace in a decade. Average paychecks increased 0.4 percent.
`Restraining Wages'
Companies will probably keep ``restraining wages for the time being'' because profits are declining, some of the policy board's seven members said at the July meeting.
Central bank Governor Masaaki Shirakawa said this week that inflation isn't spreading because ``the pace of wage increases is weak.'' He said the economy's recovery may be delayed because of the rise in food and fuel costs and weakening exports.
The world's second-largest economy shrank at an annual 2.4 percent pace in the three months ended June 30. Economists surveyed by Bloomberg say the nation will grow at a 0.6 percent pace this quarter and some predict a second contraction.
The economy may ``shrink again in the current quarter and that would mark a technical recession,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``For the reminder of the year, the BOJ's expected to be on hold.''
Still, the central bank also said this week that the economy should eventually resume expanding as global prices ease and overseas economies recover.
Some board members said the bank should be wary of the risk that keeping rates low for a long time could overstimulate the economy once growth picks up, according to the minutes. Japan's benchmark rate, the lowest among major economies, was last raised in February 2007.
The central bank began releasing the minutes earlier this month as part of measures announced in July to improve policy transparency. Minutes are now published after they are approved by the board members at the next meeting. Previously, they were sometimes approved two meetings later.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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Here's to Hoping Nouriel Roubini Is Proven Wrong: William Pesek
Commentary by William Pesek
Aug. 22 (Bloomberg) -- It's hard to forget your first Nouriel Roubini experience.
Fifteen months ago, I watched an Asian Development Bank audience in Kyoto squirm and fidget as the chairman of Roubini Global Economics LLC gave his bleak, contrarian opinion that the global financial system was about to hit a wall.
``After listening to you, I feel like a need a drink or a hug or something,'' I joked to him afterward. Roubini gets a lot of such quips, and as his direst predictions about a once-in-a- lifetime bust in the U.S. economy come ever closer to reality I find myself hoping he'll be proven wrong.
Hats off to Roubini. How many times in the past year did we hear people say ``this credit crisis is containable'' or ``the worst is over'' or ``subprime-loan problems won't spread to other asset classes,'' and the like?
Roubini didn't waver, and he took considerable flack for it.
That said, Asia had better hope Roubini's economic fears are proven wrong. Ditto for the gloomy predictions of Oppenheimer & Co. analyst Meredith Whitney, who recently was toasted on the cover of Fortune magazine.
Perhaps the magazine-cover curse will kick in and the attention being tossed at Roubini, profiled last week by the New York Times, and Whitney means the worst really is over. Of course, they might say it's just a matter of public perception catching up with the reality -- a financial system in tatters.
Subprime System
One reason to think Roubini won't be proven wrong is his argument that the problem isn't the subprime mortgage market -- it's a subprime U.S. financial system. Fixing the problems sending financial contagion around the globe will require tough decisions in Washington and reforms in Wall Street's securitization system. And that's hardly happening.
How far Wall Street's reputation has fallen since the collapse of Bear Stearns Cos. was revealed by the Aiful Corp. saga. Japan's biggest consumer lender by assets threatened to sue Lehman Brothers Holdings Inc. in June after analyst Walter Altherr called Aiful ``arguably insolvent'' in a report.
Lehman retracted the report earlier this month, yet not before Japan's investment community had a good chuckle. The fourth-largest U.S. securities firm, with a share price down 79 percent this year, calling another institution shaky? Talk about the proverbial pot calling the kettle black.
`Muddle Along'
Even the best-case scenario for Asia looks gloomy. As analysts like Mark Matthews of Merrill Lynch & Co. in Hong Kong point out, the next few years will see Asia-Pacific markets excluding Japan ``muddle along.'' Wasn't it just a year ago that investors were claiming Asia had decoupled from the U.S. economy?
The reasons Asia should hope Roubini eats some crow are many.
For one, the region remains too reliant on exports. While Asia made some progress boosting domestic demand, slowing U.S. growth will chip away at living standards from Seoul to Jakarta. For another, emerging markets may slide further if global investors become even more risk adverse.
Mark Mobius, executive chairman of Templeton Asset Management, may indeed be right to call the decline in emerging- market stocks ``overdone.'' Still, a deep recession in the world's biggest economy could accelerate those losses.
Asia central banks amassed trillions of dollars of currency reserves in recent years, a move that won't seem illogical if Roubini is proved correct. That cash will be needed to provide insurance to global investors that the region won't see a repeat of its 1997 crisis.
U.S. Contagion
A decade ago, Asia was exporting financial contagion potent enough to send the Dow Jones Industrial Average down hundreds of points here and there. These days, the U.S. is returning the favor, just as Diwa Guinigundo, deputy governor of the Philippine central bank, predicted to me a year ago. Hats off to Guinigundo; he was absolutely right.
Where do we stand now? ``One year later, in the U.S. the lack of improvement in the money markets is still taking center stage,'' Roubini said yesterday. And the Federal Reserve, on top of cutting its benchmark interest rate 325 basis points, continues to expand its liquidity facilities ``without significant impact on credit creation.''
That's affecting emerging markets. For example, Roubini said, ``the global credit crisis has exacerbated home-grown liquidity squeezes in countries like South Korea.''
The question is how Asia would weather further weakness in the U.S. China's boom has provided some cushion, yet officials in Beijing are busily working to tame inflation. It also would be a mistake to think a U.S. recession won't slam China.
So here's to Roubini for having a good couple of years of economic prognosticating. And here's to hoping he'll be less right in the future. Asia's prosperity may depend on it.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
Read more...
Aug. 22 (Bloomberg) -- It's hard to forget your first Nouriel Roubini experience.
Fifteen months ago, I watched an Asian Development Bank audience in Kyoto squirm and fidget as the chairman of Roubini Global Economics LLC gave his bleak, contrarian opinion that the global financial system was about to hit a wall.
``After listening to you, I feel like a need a drink or a hug or something,'' I joked to him afterward. Roubini gets a lot of such quips, and as his direst predictions about a once-in-a- lifetime bust in the U.S. economy come ever closer to reality I find myself hoping he'll be proven wrong.
Hats off to Roubini. How many times in the past year did we hear people say ``this credit crisis is containable'' or ``the worst is over'' or ``subprime-loan problems won't spread to other asset classes,'' and the like?
Roubini didn't waver, and he took considerable flack for it.
That said, Asia had better hope Roubini's economic fears are proven wrong. Ditto for the gloomy predictions of Oppenheimer & Co. analyst Meredith Whitney, who recently was toasted on the cover of Fortune magazine.
Perhaps the magazine-cover curse will kick in and the attention being tossed at Roubini, profiled last week by the New York Times, and Whitney means the worst really is over. Of course, they might say it's just a matter of public perception catching up with the reality -- a financial system in tatters.
Subprime System
One reason to think Roubini won't be proven wrong is his argument that the problem isn't the subprime mortgage market -- it's a subprime U.S. financial system. Fixing the problems sending financial contagion around the globe will require tough decisions in Washington and reforms in Wall Street's securitization system. And that's hardly happening.
How far Wall Street's reputation has fallen since the collapse of Bear Stearns Cos. was revealed by the Aiful Corp. saga. Japan's biggest consumer lender by assets threatened to sue Lehman Brothers Holdings Inc. in June after analyst Walter Altherr called Aiful ``arguably insolvent'' in a report.
Lehman retracted the report earlier this month, yet not before Japan's investment community had a good chuckle. The fourth-largest U.S. securities firm, with a share price down 79 percent this year, calling another institution shaky? Talk about the proverbial pot calling the kettle black.
`Muddle Along'
Even the best-case scenario for Asia looks gloomy. As analysts like Mark Matthews of Merrill Lynch & Co. in Hong Kong point out, the next few years will see Asia-Pacific markets excluding Japan ``muddle along.'' Wasn't it just a year ago that investors were claiming Asia had decoupled from the U.S. economy?
The reasons Asia should hope Roubini eats some crow are many.
For one, the region remains too reliant on exports. While Asia made some progress boosting domestic demand, slowing U.S. growth will chip away at living standards from Seoul to Jakarta. For another, emerging markets may slide further if global investors become even more risk adverse.
Mark Mobius, executive chairman of Templeton Asset Management, may indeed be right to call the decline in emerging- market stocks ``overdone.'' Still, a deep recession in the world's biggest economy could accelerate those losses.
Asia central banks amassed trillions of dollars of currency reserves in recent years, a move that won't seem illogical if Roubini is proved correct. That cash will be needed to provide insurance to global investors that the region won't see a repeat of its 1997 crisis.
U.S. Contagion
A decade ago, Asia was exporting financial contagion potent enough to send the Dow Jones Industrial Average down hundreds of points here and there. These days, the U.S. is returning the favor, just as Diwa Guinigundo, deputy governor of the Philippine central bank, predicted to me a year ago. Hats off to Guinigundo; he was absolutely right.
Where do we stand now? ``One year later, in the U.S. the lack of improvement in the money markets is still taking center stage,'' Roubini said yesterday. And the Federal Reserve, on top of cutting its benchmark interest rate 325 basis points, continues to expand its liquidity facilities ``without significant impact on credit creation.''
That's affecting emerging markets. For example, Roubini said, ``the global credit crisis has exacerbated home-grown liquidity squeezes in countries like South Korea.''
The question is how Asia would weather further weakness in the U.S. China's boom has provided some cushion, yet officials in Beijing are busily working to tame inflation. It also would be a mistake to think a U.S. recession won't slam China.
So here's to Roubini for having a good couple of years of economic prognosticating. And here's to hoping he'll be less right in the future. Asia's prosperity may depend on it.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
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South Korea's July LNG Imports Rise 23.1% to 1.76 Million Tons
By Shinhye Kang
Aug. 22 (Bloomberg) -- South Korea, the world's second- biggest buyer of liquefied natural gas, increased imports of the fuel by 23.1 percent to 1.76 million metric tons in July from a year earlier, a government report shows.
The cost of importing the fuel jumped by 65.3 percent a ton, the Korea International Trade Association said on its Web site today.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net;
Read more...
Aug. 22 (Bloomberg) -- South Korea, the world's second- biggest buyer of liquefied natural gas, increased imports of the fuel by 23.1 percent to 1.76 million metric tons in July from a year earlier, a government report shows.
The cost of importing the fuel jumped by 65.3 percent a ton, the Korea International Trade Association said on its Web site today.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net;
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Caltex Australia Profit Falls 4% on Plant Shutdowns
By Angela Macdonald-Smith
Aug. 22 (Bloomberg) -- Caltex Australia Ltd., the nation's biggest oil refiner, said first-half profit fell 4 percent as unplanned plant maintenance cut returns and margins on processing crude weakened.
Net income dropped to A$354 million ($311 million) in the six months ended June 30, from A$368 million, a year earlier, Sydney-based Caltex said today in a statement. Operating profit excluding the effect of changes in oil prices on the value of stockpiles fell 33 percent to A$196 million from A$294 million, it said. That beat the company's June forecast.
Shutdowns at Caltex's two refineries in Queensland and New South Wales states in the first half reduced production of gasoline, diesel and jet fuel by 13 percent and crimped average operating rates. A gain in the Australian dollar cut margins from refining crude in local currency terms by 16 percent.
``Refiner margins are expected to be volatile, but remain robust overall,'' Caltex Australia Managing Director Des King said in the statement, sent to the Australian stock exchange. ``Continued strength in diesel and jet fuel margins will likely compensate for the expected weakening in petrol demand.''
Caltex Australia, half-owned by Chevron Corp., rose as much as 33 cents, or 2.8 percent to A$12.08 in Sydney and traded at A$12.01 at 10:10 a.m.
Sales gained 34 percent to A$12.1 billion. Caltex declared an interim dividend of 36 cents a share.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Aug. 22 (Bloomberg) -- Caltex Australia Ltd., the nation's biggest oil refiner, said first-half profit fell 4 percent as unplanned plant maintenance cut returns and margins on processing crude weakened.
Net income dropped to A$354 million ($311 million) in the six months ended June 30, from A$368 million, a year earlier, Sydney-based Caltex said today in a statement. Operating profit excluding the effect of changes in oil prices on the value of stockpiles fell 33 percent to A$196 million from A$294 million, it said. That beat the company's June forecast.
Shutdowns at Caltex's two refineries in Queensland and New South Wales states in the first half reduced production of gasoline, diesel and jet fuel by 13 percent and crimped average operating rates. A gain in the Australian dollar cut margins from refining crude in local currency terms by 16 percent.
``Refiner margins are expected to be volatile, but remain robust overall,'' Caltex Australia Managing Director Des King said in the statement, sent to the Australian stock exchange. ``Continued strength in diesel and jet fuel margins will likely compensate for the expected weakening in petrol demand.''
Caltex Australia, half-owned by Chevron Corp., rose as much as 33 cents, or 2.8 percent to A$12.08 in Sydney and traded at A$12.01 at 10:10 a.m.
Sales gained 34 percent to A$12.1 billion. Caltex declared an interim dividend of 36 cents a share.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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Taiwan's GDP Growth Probably Slowed on Spending, U.S. Exports
By Janet Ong and Chinmei Sung
Aug. 22 (Bloomberg) -- Taiwan's economy probably grew at the slowest pace in more than a year last quarter as consumer spending cooled and U.S. customers bought fewer laptops, flat- screen televisions and mobile phones.
Gross domestic product expanded 4.54 percent from a year earlier, easing from a 6.06 percent gain in the first quarter, according to the median of 14 economists surveyed by Bloomberg News. The report is due about 4:30 p.m. in Taipei today.
The weakest economic growth since the start of 2007 may have driven up the jobless rate to a three-month high in July as companies pared hiring. Easing U.S. demand has slowed sales for Acer Inc. and Taiwan Semiconductor Manufacturing Co., while Marks & Spencer Group Plc said it will close three Taiwan stores as rising living costs damp spending by the island's consumers.
``The economy is facing growing headwinds and will slow sharply over the rest of this year,'' Rob Subbaraman, chief Asia economist at Lehman Brothers Holdings Inc. in Hong Kong, wrote in a report. ``There are growing signs of weakness in the tech sector, the linchpin of the economy. Consumption is weakening.''
The Taiex Index of stocks has declined 17 percent this year on concern slowing global growth will erode corporate earnings. Exports are equivalent to about 50 percent of the island's GDP.
Taiwan follows South Korea, Singapore and Japan in reporting a deteriorating economy because of faltering demand in the U.S., the region's largest overseas market.
Japan's economy, Asia's largest, shrank in the second quarter by the most since 2001. Singapore posted the weakest growth in five years and South Korea's economy expanded at the slowest rate in more than a year.
Rising Unemployment
Taiwan's unemployment rate rose to 3.9 percent in July after some companies halted operations, according to the median estimate of 12 economists surveyed by Bloomberg. The statistics bureau releases the jobless report at 4 p.m. today.
The island's intercity bus operator Dragon Bus Corp. suspended its services for a year because of high oil prices. Marks & Spencer last month said it will shut three Taiwan stores it runs with President Chain Store Corp., less than 18 months after the U.K.'s largest clothing retailer entered the market.
``Downside risks have intensified. The economy will likely continue decelerating in the second half,'' said Cheng Cheng- mount, chief economist at Citibank in Taipei. ``We expect policy makers to shift focus from upside inflation risk to downside growth risk in the second half.''
The central bank raised its interest rate to a seven-year high of 3.625 percent on June 26 to damp inflation. That marked the 16th consecutive quarterly increase in borrowing costs.
Inflation accelerated to 4.97 percent in June, the fastest pace in eight months, as fuel and food costs climbed.
Last Increase
Citibank's Cheng forecasts the central bank will raise its rate by 12.5 basis points in September and that will be the last increase for the year as policy makers turn their attention to the slowing economy.
Export orders grew at the weakest pace in 16 months in June as demand cooled in the U.S. and Europe. Orders are an indication of shipments over the next one to three months.
``Electronics shipments across the region have slowed and we expect further weakness to come through,'' said Frederic Neumann, an economist at HSBC Global Markets in Hong Kong.
Taiwan Semiconductor, the world's largest custom-chip maker, and computer maker Acer both reported slower sales in the U.S. in the second quarter.
As global demand eases, rising living costs and declining share prices have damp confidence and discouraged Taiwanese consumers from spending. Retail sales fell 0.4 percent in June from a year earlier, the first decline since January 2007.
The Taiwan government in July announced subsidies for low- income families to alleviate the impact of rising prices and help bolster domestic demand.
The following is a table of economists' estimates for economic growth in the second quarter from a year earlier, and growth over 2008:
To contact the reporters on this story: Janet Ong in Taipei at jong3@bloomberg.net; Chinmei Sung in Taipei at csung4@bloomberg.net.
Read more...
Aug. 22 (Bloomberg) -- Taiwan's economy probably grew at the slowest pace in more than a year last quarter as consumer spending cooled and U.S. customers bought fewer laptops, flat- screen televisions and mobile phones.
Gross domestic product expanded 4.54 percent from a year earlier, easing from a 6.06 percent gain in the first quarter, according to the median of 14 economists surveyed by Bloomberg News. The report is due about 4:30 p.m. in Taipei today.
The weakest economic growth since the start of 2007 may have driven up the jobless rate to a three-month high in July as companies pared hiring. Easing U.S. demand has slowed sales for Acer Inc. and Taiwan Semiconductor Manufacturing Co., while Marks & Spencer Group Plc said it will close three Taiwan stores as rising living costs damp spending by the island's consumers.
``The economy is facing growing headwinds and will slow sharply over the rest of this year,'' Rob Subbaraman, chief Asia economist at Lehman Brothers Holdings Inc. in Hong Kong, wrote in a report. ``There are growing signs of weakness in the tech sector, the linchpin of the economy. Consumption is weakening.''
The Taiex Index of stocks has declined 17 percent this year on concern slowing global growth will erode corporate earnings. Exports are equivalent to about 50 percent of the island's GDP.
Taiwan follows South Korea, Singapore and Japan in reporting a deteriorating economy because of faltering demand in the U.S., the region's largest overseas market.
Japan's economy, Asia's largest, shrank in the second quarter by the most since 2001. Singapore posted the weakest growth in five years and South Korea's economy expanded at the slowest rate in more than a year.
Rising Unemployment
Taiwan's unemployment rate rose to 3.9 percent in July after some companies halted operations, according to the median estimate of 12 economists surveyed by Bloomberg. The statistics bureau releases the jobless report at 4 p.m. today.
The island's intercity bus operator Dragon Bus Corp. suspended its services for a year because of high oil prices. Marks & Spencer last month said it will shut three Taiwan stores it runs with President Chain Store Corp., less than 18 months after the U.K.'s largest clothing retailer entered the market.
``Downside risks have intensified. The economy will likely continue decelerating in the second half,'' said Cheng Cheng- mount, chief economist at Citibank in Taipei. ``We expect policy makers to shift focus from upside inflation risk to downside growth risk in the second half.''
The central bank raised its interest rate to a seven-year high of 3.625 percent on June 26 to damp inflation. That marked the 16th consecutive quarterly increase in borrowing costs.
Inflation accelerated to 4.97 percent in June, the fastest pace in eight months, as fuel and food costs climbed.
Last Increase
Citibank's Cheng forecasts the central bank will raise its rate by 12.5 basis points in September and that will be the last increase for the year as policy makers turn their attention to the slowing economy.
Export orders grew at the weakest pace in 16 months in June as demand cooled in the U.S. and Europe. Orders are an indication of shipments over the next one to three months.
``Electronics shipments across the region have slowed and we expect further weakness to come through,'' said Frederic Neumann, an economist at HSBC Global Markets in Hong Kong.
Taiwan Semiconductor, the world's largest custom-chip maker, and computer maker Acer both reported slower sales in the U.S. in the second quarter.
As global demand eases, rising living costs and declining share prices have damp confidence and discouraged Taiwanese consumers from spending. Retail sales fell 0.4 percent in June from a year earlier, the first decline since January 2007.
The Taiwan government in July announced subsidies for low- income families to alleviate the impact of rising prices and help bolster domestic demand.
The following is a table of economists' estimates for economic growth in the second quarter from a year earlier, and growth over 2008:
==================================================
8/20/2008 GDP GDP
2Q
YoY% 2008
==================================================
Date of Release 22-Aug 22-Aug
--------------------------------------------------
Median 4.5% 4.6%
Average 4.7% 4.5%
High Forecast 5.6% 5.1%
Low Forecast 4.0% 3.5%
Number of Participants 14 12
--------------------------------------------------
Action Economics 4.5% 4.5%
CFC Seymour 4.5% 4.3%
Chinatrust Commercial Bank 5.0% 4.9%
DBS Group 4.5% 4.7%
HSBC 4.6% 4.9%
Ideaglobal 4.8% ---
Japan Center for Intl Finance 5.1% 4.9%
KGI Securities 4.5% 4.4%
Reuters IFR 5.6% 5.1%
SinoPac Holdings 4.6% 4.6%
Standard Chartered Bank 4.1% 3.5%
Sumitomo Mitsui Banking 4.0% 3.9%
Taiwan Securities Investment 4.1% 4.3%
UBS 5.4% ---
==================================================
To contact the reporters on this story: Janet Ong in Taipei at jong3@bloomberg.net; Chinmei Sung in Taipei at csung4@bloomberg.net.
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Japan's Yen, Ringgit, Hong Kong Dollar: Asia Currency Preview
By Aaron Pan
Aug. 22 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Bank of Japan will release the minutes of its July 14-15 policy meeting at 8:50 a.m. The central bank unanimously decided to keep its key overnight lending rate at 0.5 percent at the meeting.
Finance Minister Bunmei Ibuki, Economic and Fiscal Policy Minister Kaoru Yosano and Chief Cabinet Secretary Nobutaka Machimura will hold briefings after a cabinet meeting this morning.
The yen was at 108.72 a dollar as of 7 a.m. in New York.
Taiwan dollar: The economy expanded 4.54 percent in the second quarter from a year earlier, slowing from a 6.06 percent pace in the first, economists in a Bloomberg News survey said before a government report at 4:30 p.m. in Taipei.
The seasonally-adjusted unemployment rate rose to 3.9 percent in July, from 3.88 percent in June, another survey showed before a separate report at 4 p.m. local time.
The island's dollar was at NT$31.389.
Malaysia's ringgit: Consumer prices rose 7.8 percent in July from a year earlier, economists said in a Bloomberg News survey before the government reports the data at 5 p.m. in Kuala Lumpur. Prices jumped 7.7 percent in June, the most in 26 years.
The ringgit was at 3.3405.
Hong Kong dollar: The government has no plans to change the city's fixed exchange rate system, Hong Kong Monetary Authority Chief Executive Joseph Yam said yesterday.
Inflation unexpectedly accelerated in July to 6.3 percent, matching the fastest pace in more than a decade, a government report showed yesterday.
The Hong Kong dollar was at HK$7.8076.
To contact the reporter on this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net.
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Aug. 22 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Bank of Japan will release the minutes of its July 14-15 policy meeting at 8:50 a.m. The central bank unanimously decided to keep its key overnight lending rate at 0.5 percent at the meeting.
Finance Minister Bunmei Ibuki, Economic and Fiscal Policy Minister Kaoru Yosano and Chief Cabinet Secretary Nobutaka Machimura will hold briefings after a cabinet meeting this morning.
The yen was at 108.72 a dollar as of 7 a.m. in New York.
Taiwan dollar: The economy expanded 4.54 percent in the second quarter from a year earlier, slowing from a 6.06 percent pace in the first, economists in a Bloomberg News survey said before a government report at 4:30 p.m. in Taipei.
The seasonally-adjusted unemployment rate rose to 3.9 percent in July, from 3.88 percent in June, another survey showed before a separate report at 4 p.m. local time.
The island's dollar was at NT$31.389.
Malaysia's ringgit: Consumer prices rose 7.8 percent in July from a year earlier, economists said in a Bloomberg News survey before the government reports the data at 5 p.m. in Kuala Lumpur. Prices jumped 7.7 percent in June, the most in 26 years.
The ringgit was at 3.3405.
Hong Kong dollar: The government has no plans to change the city's fixed exchange rate system, Hong Kong Monetary Authority Chief Executive Joseph Yam said yesterday.
Inflation unexpectedly accelerated in July to 6.3 percent, matching the fastest pace in more than a decade, a government report showed yesterday.
The Hong Kong dollar was at HK$7.8076.
To contact the reporter on this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net.
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N.Z., Australian Dollars Headed for Weekly Gain on Commodities
By Ron Harui and Tracy Withers
Aug. 22 (Bloomberg) -- The New Zealand and Australian dollars headed for a weekly gain on rising commodity prices and prospects for a prolonged U.S. economic slowdown that may prompt the Federal Reserve to delay raising interest rates.
The currencies climbed the most in almost a week in Asian trading as commodities were poised for their biggest five-day gain in 33 years, improving the outlook for the South Pacific economies. New Zealand's dollar advanced for a second day as traders pared bets that the Reserve Bank of New Zealand will lower borrowing costs in coming months.
``The New Zealand dollar should find buying support today on the back of resurgent commodity prices,'' said Khoon Goh, senior markets economist at ANZ National Bank Ltd. in Wellington. ``Further slow grinds up for the kiwi are likely.''
New Zealand's dollar rose 1 percent, the most since Aug. 18, to 71.91 U.S. cents at 12:22 p.m. in Wellington from 71.15 cents late in Asia yesterday and 70.60 cents in New York on Aug. 15. It reached 72.17 cents, the highest since Aug. 7. The currency advanced 1 percent to 78.06 yen from 77.30 yen.
Australia's dollar climbed 1.1 percent, the most since Aug. 18, to 87.87 U.S. cents from 86.89 cents in Asia yesterday and 86.61 cents in New York late last week. It touched 88.14 cents, the strongest since Aug. 12. The currency gained 1 percent to 95.38 yen from 94.41 yen.
The Reuters/Jefferies CRB Index of 19 commodities rose 3.7 percent. A settlement today at that level would mark a 6.2 percent gain for the week, the most since July 1975.
`Commodities Rally'
The price of gold, Australia's third most-valuable commodity export, increased 2.9 percent yesterday. Raw materials account for 60 percent of Australia's exports and sales of commodities including lumber make up 70 percent of New Zealand's overseas shipments.
The U.S. dollar fell after the New York-based Conference Board said yesterday that its index of leading economic indicators dropped by the most since August 2007, adding to signs that the slowdown in the world's biggest economy will deepen in the second half.
``There have been some voices out there saying the commodities rally isn't over yet and the market is receptive to that,'' said Michael Gordon, market strategist at Westpac Banking Corp. in Wellington. ``More likely the gains are a reaction to the weaker U.S. dollar.''
Fed funds futures on the Chicago Board of Trade show a 10 percent chance that the Fed will raise the 2 percent overnight lending rate between banks by a quarter-percentage point at its September meeting, down from 14 percent a week ago.
Government Bonds
Traders are betting that the RBNZ will cut its 8 percent official cash rate by 1.44 percentage points over the next 12 months, down from 1.53 percentage points at the end of last week, according to a Credit Suisse Group index based on interest-rate swaps.
Australian government bonds declined, pushing the yield on the benchmark 10-year note up 5 basis points, or 0.05 percentage point, to 5.79 percent. The price of the 5.25 percent bond maturing in March 2019 fell 0.407, or A$4.07 per A$1,000 face amount, to 95.792.
New Zealand government debt were little changed. The yield on the benchmark 10-year note was at 6.09 percent and the yield on the three-year security was 6.20 percent. Yields move inversely to prices.
For Related News:
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net
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Aug. 22 (Bloomberg) -- The New Zealand and Australian dollars headed for a weekly gain on rising commodity prices and prospects for a prolonged U.S. economic slowdown that may prompt the Federal Reserve to delay raising interest rates.
The currencies climbed the most in almost a week in Asian trading as commodities were poised for their biggest five-day gain in 33 years, improving the outlook for the South Pacific economies. New Zealand's dollar advanced for a second day as traders pared bets that the Reserve Bank of New Zealand will lower borrowing costs in coming months.
``The New Zealand dollar should find buying support today on the back of resurgent commodity prices,'' said Khoon Goh, senior markets economist at ANZ National Bank Ltd. in Wellington. ``Further slow grinds up for the kiwi are likely.''
New Zealand's dollar rose 1 percent, the most since Aug. 18, to 71.91 U.S. cents at 12:22 p.m. in Wellington from 71.15 cents late in Asia yesterday and 70.60 cents in New York on Aug. 15. It reached 72.17 cents, the highest since Aug. 7. The currency advanced 1 percent to 78.06 yen from 77.30 yen.
Australia's dollar climbed 1.1 percent, the most since Aug. 18, to 87.87 U.S. cents from 86.89 cents in Asia yesterday and 86.61 cents in New York late last week. It touched 88.14 cents, the strongest since Aug. 12. The currency gained 1 percent to 95.38 yen from 94.41 yen.
The Reuters/Jefferies CRB Index of 19 commodities rose 3.7 percent. A settlement today at that level would mark a 6.2 percent gain for the week, the most since July 1975.
`Commodities Rally'
The price of gold, Australia's third most-valuable commodity export, increased 2.9 percent yesterday. Raw materials account for 60 percent of Australia's exports and sales of commodities including lumber make up 70 percent of New Zealand's overseas shipments.
The U.S. dollar fell after the New York-based Conference Board said yesterday that its index of leading economic indicators dropped by the most since August 2007, adding to signs that the slowdown in the world's biggest economy will deepen in the second half.
``There have been some voices out there saying the commodities rally isn't over yet and the market is receptive to that,'' said Michael Gordon, market strategist at Westpac Banking Corp. in Wellington. ``More likely the gains are a reaction to the weaker U.S. dollar.''
Fed funds futures on the Chicago Board of Trade show a 10 percent chance that the Fed will raise the 2 percent overnight lending rate between banks by a quarter-percentage point at its September meeting, down from 14 percent a week ago.
Government Bonds
Traders are betting that the RBNZ will cut its 8 percent official cash rate by 1.44 percentage points over the next 12 months, down from 1.53 percentage points at the end of last week, according to a Credit Suisse Group index based on interest-rate swaps.
Australian government bonds declined, pushing the yield on the benchmark 10-year note up 5 basis points, or 0.05 percentage point, to 5.79 percent. The price of the 5.25 percent bond maturing in March 2019 fell 0.407, or A$4.07 per A$1,000 face amount, to 95.792.
New Zealand government debt were little changed. The yield on the benchmark 10-year note was at 6.09 percent and the yield on the three-year security was 6.20 percent. Yields move inversely to prices.
For Related News:
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net
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Dollar Trades Near Two-Week Low Before Fed's Bernanke Speaks
By Kosuke Goto
Aug. 22 (Bloomberg) -- The dollar traded near the lowest level in more than two weeks against the yen on speculation Federal Reserve Chairman Ben S. Bernanke will signal he favors keeping interest rates low as credit-market losses widen.
The U.S. currency was set for its first weekly loss versus the euro since July 11 and slid against the yen a deepening housing recession and a rebound in oil prices will prolong the nation's economic slump. The New Zealand and Australian currencies headed for weekly gains on speculation the biggest jump in commodity prices in 33 years will boost exports.
``Since the dollar has been recently heavily bought, the markets are more likely to use Bernanke's bearish comments as an excuse to sell,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo, the second-largest U.S. bank. ``The dollar will be on the soft side today.''
The dollar traded at 108.65 yen at 9:40 a.m. in Tokyo from 108.43 in New York yesterday, when it fell to 108.14, the weakest since Aug. 5. It has fallen 1.7 percent this week, the biggest decline since May 9. The U.S. currency was at $1.4882 per euro from $1.4899 yesterday and down 1.3 percent from the end of last week.
Japan's currency traded at 161.68 per euro from 161.57 yesterday, when it rose to 160.20, the highest since May 13. The dollar may fall to 107.50 yen and $1.4950 a euro today, Fujii forecast.
Bernanke will speak on financial stability at the Federal Reserve Bank of Kansas City's annual symposium in Jackson Hole, Wyoming at 8 a.m. local time. A text and no questions are expected.
Commodities Surge
New Zealand's dollar rose 1 percent to 71.89 U.S. cents and earlier touched 72.17, the highest since Aug. 7. Australia's dollar climbed 1.1 percent to 87.83 U.S. cents and reached 88.14, the strongest since Aug. 12.
Gold jumped the most in almost two months yesterday on the Comex division of the New York Mercantile Exchange and silver had its biggest gain since 2006. The Reuters/Jefferies CRB Index of 19 commodities surged 6.2 percent since Aug. 15, poised for the biggest weekly gain since July 1975.
``Commodities are taking off,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ``Rising commodities reinforced the momentum of dollar selling.''
The ICE futures exchange's Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, fell for a second day to 76.120, after yesterday tumbling the most since March 26.
Oil Rebound
Crude oil prices surged 5.4 percent yesterday to $121.18 a barrel in New York, the biggest increase since June 6. The benchmark contract, which recently traded at $121.41, touched a 15-week low of $111.34 on Aug. 15.
The euro-dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations based on their value changes. A reading of 1 would mean they moved in lockstep.
The dollar has gained almost 7 percent versus the euro since touching an all-time low of $1.6038 on July 15 and appreciated 0.6 percent against the yen this month as reports showed the European and Japanese economies shrank in the second quarter.
``We are in a state of consolidation,'' said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world's largest custodial bank. ``Our own flow data shows an element of dollar bullishness is still in place.''
Rate Expectations
The yield on two-year U.S. Treasury notes was 2.02 percentage points less than that of similar-maturity German bunds yesterday, the widest since July 21, making U.S. securities less attractive to investors.
``Rate expectations have consolidated some, and oil has rebounded,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``There's not as much oxygen for the dollar as there once was.'' He still favors the dollar on evidence growth in Europe is slowing.
Europe's gross domestic product fell 0.2 percent in the second quarter, the first contraction since the 15-nation common currency was introduced in 1999, the European Union statistics office said last week. Japan's economy shrank at an annual rate of 2.4 percent in the second quarter, the Cabinet Office said.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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Aug. 22 (Bloomberg) -- The dollar traded near the lowest level in more than two weeks against the yen on speculation Federal Reserve Chairman Ben S. Bernanke will signal he favors keeping interest rates low as credit-market losses widen.
The U.S. currency was set for its first weekly loss versus the euro since July 11 and slid against the yen a deepening housing recession and a rebound in oil prices will prolong the nation's economic slump. The New Zealand and Australian currencies headed for weekly gains on speculation the biggest jump in commodity prices in 33 years will boost exports.
``Since the dollar has been recently heavily bought, the markets are more likely to use Bernanke's bearish comments as an excuse to sell,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo, the second-largest U.S. bank. ``The dollar will be on the soft side today.''
The dollar traded at 108.65 yen at 9:40 a.m. in Tokyo from 108.43 in New York yesterday, when it fell to 108.14, the weakest since Aug. 5. It has fallen 1.7 percent this week, the biggest decline since May 9. The U.S. currency was at $1.4882 per euro from $1.4899 yesterday and down 1.3 percent from the end of last week.
Japan's currency traded at 161.68 per euro from 161.57 yesterday, when it rose to 160.20, the highest since May 13. The dollar may fall to 107.50 yen and $1.4950 a euro today, Fujii forecast.
Bernanke will speak on financial stability at the Federal Reserve Bank of Kansas City's annual symposium in Jackson Hole, Wyoming at 8 a.m. local time. A text and no questions are expected.
Commodities Surge
New Zealand's dollar rose 1 percent to 71.89 U.S. cents and earlier touched 72.17, the highest since Aug. 7. Australia's dollar climbed 1.1 percent to 87.83 U.S. cents and reached 88.14, the strongest since Aug. 12.
Gold jumped the most in almost two months yesterday on the Comex division of the New York Mercantile Exchange and silver had its biggest gain since 2006. The Reuters/Jefferies CRB Index of 19 commodities surged 6.2 percent since Aug. 15, poised for the biggest weekly gain since July 1975.
``Commodities are taking off,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ``Rising commodities reinforced the momentum of dollar selling.''
The ICE futures exchange's Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, fell for a second day to 76.120, after yesterday tumbling the most since March 26.
Oil Rebound
Crude oil prices surged 5.4 percent yesterday to $121.18 a barrel in New York, the biggest increase since June 6. The benchmark contract, which recently traded at $121.41, touched a 15-week low of $111.34 on Aug. 15.
The euro-dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations based on their value changes. A reading of 1 would mean they moved in lockstep.
The dollar has gained almost 7 percent versus the euro since touching an all-time low of $1.6038 on July 15 and appreciated 0.6 percent against the yen this month as reports showed the European and Japanese economies shrank in the second quarter.
``We are in a state of consolidation,'' said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world's largest custodial bank. ``Our own flow data shows an element of dollar bullishness is still in place.''
Rate Expectations
The yield on two-year U.S. Treasury notes was 2.02 percentage points less than that of similar-maturity German bunds yesterday, the widest since July 21, making U.S. securities less attractive to investors.
``Rate expectations have consolidated some, and oil has rebounded,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``There's not as much oxygen for the dollar as there once was.'' He still favors the dollar on evidence growth in Europe is slowing.
Europe's gross domestic product fell 0.2 percent in the second quarter, the first contraction since the 15-nation common currency was introduced in 1999, the European Union statistics office said last week. Japan's economy shrank at an annual rate of 2.4 percent in the second quarter, the Cabinet Office said.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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Oil Is Steady After Rising $5 on Dollar Drop, Russian Tensions
By Mark Shenk
Aug. 22 (Bloomberg) -- Crude oil was little changed after rising more than $5 yesterday as the dollar slumped and the Aug. 20 signing of a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil.
Energy and metals futures climbed as the U.S. currency fell the most against the euro in more than a month. The missile shield has ``a real anti-Russian potential,'' the Foreign Ministry said in Russia, the second-biggest oil producer.
``The fall of the dollar is sending a huge investor flow into commodities,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``The tensions between Russia and the West were supposed to be simmering down, but they are now ratcheting up because of Poland's agreement with the U.S.''
Crude oil for October delivery rose 9 cents, or 0.1 percent, to $121.27 a barrel at 8:17 a.m. Sydney time on the New York Mercantile Exchange. Futures are down 18 percent from a record $147.27 reached on July 11. Prices are up 75 percent from a year ago. Yesterday, futures surged $5.62, or 4.9 percent, to settle at $121.18 a barrel, the biggest increase since June 6.
Brent crude oil for October settlement rose $5.80, or 5.1 percent, to settle at $120.16 a barrel on London's ICE Futures Europe exchange.
``The dollar has been the big driver of both the rally and the pullback,'' said Kevin Kerr, president of Kerr Trading International in Wilton, Connecticut.
Dollar Slump
The dollar traded at $1.4904 per euro at 6:16 a.m. in Tokyo, after dropping 1 percent yesterday and touching $1.4903, the weakest level since Aug. 14 and the biggest drop since June. The dollar has risen 4.8 percent versus the euro in August, which would be the biggest monthly gain since May 2001.
``The dollar's rise was too swift to have faith in,'' said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. ``The resumption of the currency's fall has increased the appeal of hard assets.''
The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, gained 3.9 percent to 1508.967 yesterday, the highest since Aug. 1. Gold futures for December delivery rose $22.70, or 2.8 percent, to $839 an ounce on the Comex division of Nymex.
Russia has defied calls by U.S. President George W. Bush and other Western leaders for an immediate withdrawal from Georgia since a cease-fire agreement last week ended five days of fighting.
Baku-Supsa
The Baku-Supsa pipeline, which pumps more than 100,000 barrels of oil a day from Azerbaijan to the Georgian port of Supsa on the Black Sea coast, is still shut on security concerns following fighting between Georgian and Russian troops, Toby Odone, a London-based spokesman for BP, said yesterday by telephone. Railway transportation to Georgia's Black Sea ports has also been suspended because of a damaged bridge.
The Baku-Tbilisi-Ceyhan pipeline, which transports oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, will be fully operational this week and tanker loading will resume next week, officials said. The pipeline has a capacity of 1 million barrels a day.
``I've been waiting for the gathering geopolitical worries to pump up the security premium,'' Kilduff said. ``The increase in tension with Russia will probably spell the end of cooperation on the Iran nuclear front.''
The U.S. and its European allies are trying to persuade Iran to halt its uranium enrichment program, saying it's a cover for developing nuclear weapons. Iran is the world's fourth- biggest oil producer.
Delayed Imports
U.S. gasoline supplies fell 6.2 million barrels last week, the U.S. Energy Department said in a report yesterday, more than double analysts' predictions. Crude-oil stockpiles rose 9.39 million barrels to 305.9 million barrels, the biggest gain since March 2001, the report showed. Stockpiles fell the previous week when Tropical Storm Edouard hit Texas.
Refineries operated at 85.7 percent of capacity in the week ended Aug. 15, the lowest since the week ended May 2, yesterday's report showed.
``The market shrugged off the big crude build because they attributed it to delayed imports that couldn't arrive during the week of Edouard,'' McGillian said. ``More attention was paid to the drop in gasoline stocks and refinery runs. If refiners continue to operate at this level we won't be able to build product inventories.''
Gasoline for September delivery rose 13.49 cents, or 4.6 percent, yesterday to settle at $3.0452 a gallon in New York, the biggest gain since.
Pump prices haven't increased since July 19, according to the AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 1.5 cents to $3.702 a gallon, the AAA said today on its Web site. Prices reached a record $4.114 a gallon on July 17.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Aug. 22 (Bloomberg) -- Crude oil was little changed after rising more than $5 yesterday as the dollar slumped and the Aug. 20 signing of a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil.
Energy and metals futures climbed as the U.S. currency fell the most against the euro in more than a month. The missile shield has ``a real anti-Russian potential,'' the Foreign Ministry said in Russia, the second-biggest oil producer.
``The fall of the dollar is sending a huge investor flow into commodities,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``The tensions between Russia and the West were supposed to be simmering down, but they are now ratcheting up because of Poland's agreement with the U.S.''
Crude oil for October delivery rose 9 cents, or 0.1 percent, to $121.27 a barrel at 8:17 a.m. Sydney time on the New York Mercantile Exchange. Futures are down 18 percent from a record $147.27 reached on July 11. Prices are up 75 percent from a year ago. Yesterday, futures surged $5.62, or 4.9 percent, to settle at $121.18 a barrel, the biggest increase since June 6.
Brent crude oil for October settlement rose $5.80, or 5.1 percent, to settle at $120.16 a barrel on London's ICE Futures Europe exchange.
``The dollar has been the big driver of both the rally and the pullback,'' said Kevin Kerr, president of Kerr Trading International in Wilton, Connecticut.
Dollar Slump
The dollar traded at $1.4904 per euro at 6:16 a.m. in Tokyo, after dropping 1 percent yesterday and touching $1.4903, the weakest level since Aug. 14 and the biggest drop since June. The dollar has risen 4.8 percent versus the euro in August, which would be the biggest monthly gain since May 2001.
``The dollar's rise was too swift to have faith in,'' said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. ``The resumption of the currency's fall has increased the appeal of hard assets.''
The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, gained 3.9 percent to 1508.967 yesterday, the highest since Aug. 1. Gold futures for December delivery rose $22.70, or 2.8 percent, to $839 an ounce on the Comex division of Nymex.
Russia has defied calls by U.S. President George W. Bush and other Western leaders for an immediate withdrawal from Georgia since a cease-fire agreement last week ended five days of fighting.
Baku-Supsa
The Baku-Supsa pipeline, which pumps more than 100,000 barrels of oil a day from Azerbaijan to the Georgian port of Supsa on the Black Sea coast, is still shut on security concerns following fighting between Georgian and Russian troops, Toby Odone, a London-based spokesman for BP, said yesterday by telephone. Railway transportation to Georgia's Black Sea ports has also been suspended because of a damaged bridge.
The Baku-Tbilisi-Ceyhan pipeline, which transports oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, will be fully operational this week and tanker loading will resume next week, officials said. The pipeline has a capacity of 1 million barrels a day.
``I've been waiting for the gathering geopolitical worries to pump up the security premium,'' Kilduff said. ``The increase in tension with Russia will probably spell the end of cooperation on the Iran nuclear front.''
The U.S. and its European allies are trying to persuade Iran to halt its uranium enrichment program, saying it's a cover for developing nuclear weapons. Iran is the world's fourth- biggest oil producer.
Delayed Imports
U.S. gasoline supplies fell 6.2 million barrels last week, the U.S. Energy Department said in a report yesterday, more than double analysts' predictions. Crude-oil stockpiles rose 9.39 million barrels to 305.9 million barrels, the biggest gain since March 2001, the report showed. Stockpiles fell the previous week when Tropical Storm Edouard hit Texas.
Refineries operated at 85.7 percent of capacity in the week ended Aug. 15, the lowest since the week ended May 2, yesterday's report showed.
``The market shrugged off the big crude build because they attributed it to delayed imports that couldn't arrive during the week of Edouard,'' McGillian said. ``More attention was paid to the drop in gasoline stocks and refinery runs. If refiners continue to operate at this level we won't be able to build product inventories.''
Gasoline for September delivery rose 13.49 cents, or 4.6 percent, yesterday to settle at $3.0452 a gallon in New York, the biggest gain since.
Pump prices haven't increased since July 19, according to the AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 1.5 cents to $3.702 a gallon, the AAA said today on its Web site. Prices reached a record $4.114 a gallon on July 17.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Australia Stocks: Babcock Wind, Coeur, Equinox, Rio, Woodside
By Shani Raja
Aug. 22 (Bloomberg) -- The S&P/ASX 200 Index rose 29.60 points, or 0.6 percent, to 4,904.80 at 10:20 a.m. in Sydney. The broader All Ordinaries Index climbed 34.10 points, or 0.7 percent, to 4,983.70, while the futures index expiring in September advanced 0.7 percent to 4,879.
Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, gained A$1.01, or 2.6 percent, to A$39.96, the highest since July 11. Rio Tinto Group (RIO AU), the third largest, rose A$4.16, or 3.5 percent, to A$123.06, the highest since July 31.
Equinox Minerals Ltd. (EQN AU), the developer of Africa's largest copper mine, soared 41 cents, or 11 percent, to A$4.09, the index's biggest gainer. Newcrest Mining Ltd. (NCM AU), Australia's biggest gold producer, advanced A$1, or 3.9 percent, to A$27, the highest since Aug. 4. Coeur d'Alene Mines Corp. (CXC AU), a silver producer, jumped 19 cents, or 9.4 percent, to A$2.21, a record gain.
A measure of six metals traded on the London Metal Exchange rose 4.9 percent. Zinc advanced 7.4 percent, copper 4.5 percent and nickel 7.9 percent.
Meanwhile, gold jumped the most in almost two months and silver had its biggest gain since 2006 as rising energy costs and a decline in the value of the dollar boosted the appeal of precious metals as hedges against inflation.
Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, advanced A$1.75, or 3.2 percent, to A$56.90, the highest since July 22. Santos Ltd. (STO AU) rose 68 cents, or 3.7 percent, to A$18.86, extending yesterday's 5.7 percent gain.
Crude oil for October delivery rose $5.62, or 4.9 percent, to settle at $121.18 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the biggest increase since June 6.
Australian Worldwide Exploration Ltd. (AWE AU), operator of the $269 million Tui oil project in New Zealand, climbed 38 cents, or 12 percent, to A$3.49, the most since December 2001. The company said full-year profit jumped more than sevenfold on returns from the venture.
Babcock & Brown Ltd. (BNB AU) slumped for a second day, losing 8 cents, or 3.6 percent, to A$2.14, a record low. The appointment of a new chief executive officer yesterday failed to convince investors the company can be saved as it sells assets at a loss to reduce debt.
Babcock & Brown Wind Partners (BBW AU) declined 4 cents, or 3.5 percent, to a record low A$1.11. Fomento de Construcciones y Contratas SA, Spain's third-biggest builder, agreed to pay 190 million euros ($283 million) for the company's wind energy assets in the country.
Macquarie Infrastructure Group (MIG AU), Australia's largest developer of toll roads, plunged 20 cents, or 8 percent, to A$2.29, the most since June 19. The company's rating was cut to ``sell' at Goldman Sachs Group Inc., after yesterday reporting net profit for the year to June 30 fell to A$767.3 million from A$1.7 billion.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Aug. 22 (Bloomberg) -- The S&P/ASX 200 Index rose 29.60 points, or 0.6 percent, to 4,904.80 at 10:20 a.m. in Sydney. The broader All Ordinaries Index climbed 34.10 points, or 0.7 percent, to 4,983.70, while the futures index expiring in September advanced 0.7 percent to 4,879.
Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, gained A$1.01, or 2.6 percent, to A$39.96, the highest since July 11. Rio Tinto Group (RIO AU), the third largest, rose A$4.16, or 3.5 percent, to A$123.06, the highest since July 31.
Equinox Minerals Ltd. (EQN AU), the developer of Africa's largest copper mine, soared 41 cents, or 11 percent, to A$4.09, the index's biggest gainer. Newcrest Mining Ltd. (NCM AU), Australia's biggest gold producer, advanced A$1, or 3.9 percent, to A$27, the highest since Aug. 4. Coeur d'Alene Mines Corp. (CXC AU), a silver producer, jumped 19 cents, or 9.4 percent, to A$2.21, a record gain.
A measure of six metals traded on the London Metal Exchange rose 4.9 percent. Zinc advanced 7.4 percent, copper 4.5 percent and nickel 7.9 percent.
Meanwhile, gold jumped the most in almost two months and silver had its biggest gain since 2006 as rising energy costs and a decline in the value of the dollar boosted the appeal of precious metals as hedges against inflation.
Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, advanced A$1.75, or 3.2 percent, to A$56.90, the highest since July 22. Santos Ltd. (STO AU) rose 68 cents, or 3.7 percent, to A$18.86, extending yesterday's 5.7 percent gain.
Crude oil for October delivery rose $5.62, or 4.9 percent, to settle at $121.18 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the biggest increase since June 6.
Australian Worldwide Exploration Ltd. (AWE AU), operator of the $269 million Tui oil project in New Zealand, climbed 38 cents, or 12 percent, to A$3.49, the most since December 2001. The company said full-year profit jumped more than sevenfold on returns from the venture.
Babcock & Brown Ltd. (BNB AU) slumped for a second day, losing 8 cents, or 3.6 percent, to A$2.14, a record low. The appointment of a new chief executive officer yesterday failed to convince investors the company can be saved as it sells assets at a loss to reduce debt.
Babcock & Brown Wind Partners (BBW AU) declined 4 cents, or 3.5 percent, to a record low A$1.11. Fomento de Construcciones y Contratas SA, Spain's third-biggest builder, agreed to pay 190 million euros ($283 million) for the company's wind energy assets in the country.
Macquarie Infrastructure Group (MIG AU), Australia's largest developer of toll roads, plunged 20 cents, or 8 percent, to A$2.29, the most since June 19. The company's rating was cut to ``sell' at Goldman Sachs Group Inc., after yesterday reporting net profit for the year to June 30 fell to A$767.3 million from A$1.7 billion.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Asian Stocks Set for 4th Week of Losses; Sumitomo Mitsui Drops
By Chen Shiyin
Aug. 22 (Bloomberg) -- Asian stocks fell, driving the region's key index to its lowest since July 2006, after renewed credit-market concerns weighed on financial companies and a jump in crude oil prices sent airlines and refiners lower.
Sumitomo Mitsui Financial Group Inc. fell 2.1 percent, leading financial shares lower after Citigroup Inc. predicted more losses at U.S. banks. Korean Air Lines Co., South Korea's largest carrier, dropped 3.6 percent after oil futures jumped more than $5 in New York. GS Holdings Corp., which operates South Korea's second-largest refiner, fell 1.9 percent after Goldman Sachs Group Inc. cut its rating on the stock.
The MSCI Asia Pacific Index lost 0.3 percent to 122.55 as of 9:15 a.m. in Tokyo, set for its lowest since July 26, 2006. Almost three stocks retreated for each that gained.
The Asian benchmark index has dropped 1.9 percent this week, its fourth-straight retreat. Losses this week took the gauge's 2008 slump to 22 percent as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.
Japan's Nikkei 225 Stock Average slipped 0.7 percent to 12,662.63. Australia's S&P/ASX 200 Index climbed 0.6 percent, the only gainer among Asia's markets that are open for trading.
U.S. stocks rose yesterday after the biggest three-day advance by energy companies since 2002 overshadowed speculation credit writedowns at financial firms will increase.
Crude oil for October delivery surged 4.9 percent to $121.18, the biggest increase since June 6, as the dollar slumped and the Aug. 20 signing of a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil. The Reuters/Jeffries CRB Index of 19 commodities soared 3.7 percent, heading towards its biggest weekly gain in 33 years.
To contact the reporter for this story: Chen Shiyin in Jakarta at schen37@bloomberg.net
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Aug. 22 (Bloomberg) -- Asian stocks fell, driving the region's key index to its lowest since July 2006, after renewed credit-market concerns weighed on financial companies and a jump in crude oil prices sent airlines and refiners lower.
Sumitomo Mitsui Financial Group Inc. fell 2.1 percent, leading financial shares lower after Citigroup Inc. predicted more losses at U.S. banks. Korean Air Lines Co., South Korea's largest carrier, dropped 3.6 percent after oil futures jumped more than $5 in New York. GS Holdings Corp., which operates South Korea's second-largest refiner, fell 1.9 percent after Goldman Sachs Group Inc. cut its rating on the stock.
The MSCI Asia Pacific Index lost 0.3 percent to 122.55 as of 9:15 a.m. in Tokyo, set for its lowest since July 26, 2006. Almost three stocks retreated for each that gained.
The Asian benchmark index has dropped 1.9 percent this week, its fourth-straight retreat. Losses this week took the gauge's 2008 slump to 22 percent as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.
Japan's Nikkei 225 Stock Average slipped 0.7 percent to 12,662.63. Australia's S&P/ASX 200 Index climbed 0.6 percent, the only gainer among Asia's markets that are open for trading.
U.S. stocks rose yesterday after the biggest three-day advance by energy companies since 2002 overshadowed speculation credit writedowns at financial firms will increase.
Crude oil for October delivery surged 4.9 percent to $121.18, the biggest increase since June 6, as the dollar slumped and the Aug. 20 signing of a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil. The Reuters/Jeffries CRB Index of 19 commodities soared 3.7 percent, heading towards its biggest weekly gain in 33 years.
To contact the reporter for this story: Chen Shiyin in Jakarta at schen37@bloomberg.net
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Japan Stocks Fall on Higher Oil Costs; Yokohama Rubber Slumps
By Masaki Kondo
Aug. 22 (Bloomberg) -- Japan stocks fell for a fourth day after oil jumped the most in more than two months, boosting concern higher fuel costs will erode company earnings.
Yokohama Rubber Co., the nation's second-largest tiremaker, lost 1.5 percent, leading a decline by makers of rubber products, while oil explorer Inpex Holdings Inc. jumped 2.5 percent. Sumitomo Mitsui Financial Group Inc., Japan's third-biggest publicly traded bank, fell 2.1 percent after Citigroup Inc. said U.S. financial companies will report more writedowns.
The Nikkei 225 Stock Average declined 103.84, or 0.8 percent, to 12,648.37 as of 9:09 a.m. in Tokyo, set for the biggest weekly drop since June 27. The broader Topix index fell 6.24, or 0.5 percent, to 1,218.29. Twenty-seven of 33 industry groups on the Topix slumped.
Crude oil for October delivery surged 4.9 percent yesterday, the most since June 6, as the depreciation of the dollar raised the appeal of commodities as an inflation hedge.
Nikkei futures expiring in September retreated 0.7 percent to 12,660 in Osaka and slumped 0.8 percent to 12,650 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Aug. 22 (Bloomberg) -- Japan stocks fell for a fourth day after oil jumped the most in more than two months, boosting concern higher fuel costs will erode company earnings.
Yokohama Rubber Co., the nation's second-largest tiremaker, lost 1.5 percent, leading a decline by makers of rubber products, while oil explorer Inpex Holdings Inc. jumped 2.5 percent. Sumitomo Mitsui Financial Group Inc., Japan's third-biggest publicly traded bank, fell 2.1 percent after Citigroup Inc. said U.S. financial companies will report more writedowns.
The Nikkei 225 Stock Average declined 103.84, or 0.8 percent, to 12,648.37 as of 9:09 a.m. in Tokyo, set for the biggest weekly drop since June 27. The broader Topix index fell 6.24, or 0.5 percent, to 1,218.29. Twenty-seven of 33 industry groups on the Topix slumped.
Crude oil for October delivery surged 4.9 percent yesterday, the most since June 6, as the depreciation of the dollar raised the appeal of commodities as an inflation hedge.
Nikkei futures expiring in September retreated 0.7 percent to 12,660 in Osaka and slumped 0.8 percent to 12,650 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Economic Calendar Eco Data 8/22/08
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY BOJ minutes Jul
08:00 EUR Eurozone Current account (euro) Jun N/A -21.4B
08:30 GBP U.K. GDP Q/Q Q2 R 0.10% 0.20%
08:30 GBP U.K. GDP Y/Y Q2 R 1.50% 1.60%
09:00 EUR Eurozone Industrial orders M/M Jun -1.10% -3.50%
09:00 EUR Eurozone Industrial orders Y/Y Jun -6.30% -4.40%
14:00 USD Fed's Bernanke Speaks on Financial Stability at Jackson Hole
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Thursday's News Recap: Canadian Inflation Rate Picks Up, Crude Oil Stages Rally
Thursday's News Recap: Canadian Inflation Rate Picks Up, Crude Oil Stages Rally
22 Agustus 2008 3:22
(CEP News) - Data released Thursday showed a rapidly rising annual rate of inflation in Canada, while in the U.S., the Philadelphia Fed's manufacturing index fell for the ninth straight month. Meanwhile, commodities staged a rally on fears of decreased Russian crude oil supply.
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22 Agustus 2008 3:22
(CEP News) - Data released Thursday showed a rapidly rising annual rate of inflation in Canada, while in the U.S., the Philadelphia Fed's manufacturing index fell for the ninth straight month. Meanwhile, commodities staged a rally on fears of decreased Russian crude oil supply.
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Closing Market Recap: U.S. Dollar Slumps as Oil Surges
Closing Market Recap: U.S. Dollar Slumps as Oil Surges
22 Agustus 2008 3:34
(CEP News) - Economic data was pushed aside on Thursday, as markets reacted to a surge in oil prices by selling the U.S. dollar and boosting the Canadian stock market.
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22 Agustus 2008 3:34
(CEP News) - Economic data was pushed aside on Thursday, as markets reacted to a surge in oil prices by selling the U.S. dollar and boosting the Canadian stock market.
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