By Michael Patterson
Aug. 22 (Bloomberg) -- Colombian stocks deserve a ``closer look'' because President Alvaro Uribe may ease restrictions on equity trading and the central bank will begin cutting interest rates in the first quarter of 2009, JPMorgan Chase & Co. said.
Colombia's equities are trading at an ``attractive'' valuation of 8.9 times estimated 2009 earnings, JPMorgan's Latin America equity strategy team wrote in a research note dated yesterday. They recommended shares of Almacenes Exito SA, saying Colombia's biggest retailer is ``the most geared to the domestic economy and potential removal of capital controls.''
The Colombian government is studying a regulation that would remove restrictions on foreign equity trading in a bid to win an investment-grade debt rating, Portafolio newspaper reported this week, citing Uribe. Colombia's central bank left borrowing costs unchanged this month as policy makers bet 16 interest-rate increases in the past 28 months are enough to stem inflation.
``It is time to take a closer look at Colombia,'' the JPMorgan strategists wrote. ``With the monetary tightening cycle apparently over, it could be the first Latam country to cut rates. Near-term removal of capital controls is a possibility.''
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
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Friday, August 22, 2008
Bematech, CSN, Paranapanema, Telemar: Brazilian Equity Movers
By Paulo Winterstein
Aug. 22 (Bloomberg) -- The following companies are having unusual price changes in Brazil trading. Stock symbols are in parentheses, and share prices are as of 9:28 a.m. New York time. Preferred shares are usually the most-traded class of stock.
The Bovespa index rose 0.9 percent to 56,415.94.
Bematech Industria & Comercios de Equipamentos Eletronicos SA (BEMA3 BS) jumped the most this month, adding 4.6 percent to 7.80 reais. 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.
Cia. Siderurgica Nacional SA (CSNA3 BS) gained to the highest in three weeks, rising 2.7 percent to 56.50 reais. Nippon Steel Corp., JFE Holdings Inc. and a Japanese trading company are bidding for the Namisa iron ore unit of CSN, Reuters reported, citing unidentified people in the industry. The transaction may be worth $10 billion, the report said.
Duratex SA (DURA4 BS) gained to the highest in almost two weeks, adding 3.1 percent to 24.64 reais. The maker of bathroom fixtures and wood products for the construction industry should see ``attractive'' profit growth through 2010, UBS AG said in a note to investors.
Paranapanema SA (PMAM3 BS) gained to the highest in two weeks, advancing 1.8 percent to 5.11 reais. The Brazilian copper and tin producer said Banco UBS Pactual SA and Banco Santander SA each acquired a 12 percent stake. The banks bought 22.2 million voting shares each, following a June 2007 agreement between the companies, Paranapanema said in a statement yesterday.
Telemar Norte Leste SA (TMAR5 BS) rose for a third day, capping its longest rally in a month after rising 1.7 percent to 87.71 reais. 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.
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
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Aug. 22 (Bloomberg) -- The following companies are having unusual price changes in Brazil trading. Stock symbols are in parentheses, and share prices are as of 9:28 a.m. New York time. Preferred shares are usually the most-traded class of stock.
The Bovespa index rose 0.9 percent to 56,415.94.
Bematech Industria & Comercios de Equipamentos Eletronicos SA (BEMA3 BS) jumped the most this month, adding 4.6 percent to 7.80 reais. 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.
Cia. Siderurgica Nacional SA (CSNA3 BS) gained to the highest in three weeks, rising 2.7 percent to 56.50 reais. Nippon Steel Corp., JFE Holdings Inc. and a Japanese trading company are bidding for the Namisa iron ore unit of CSN, Reuters reported, citing unidentified people in the industry. The transaction may be worth $10 billion, the report said.
Duratex SA (DURA4 BS) gained to the highest in almost two weeks, adding 3.1 percent to 24.64 reais. The maker of bathroom fixtures and wood products for the construction industry should see ``attractive'' profit growth through 2010, UBS AG said in a note to investors.
Paranapanema SA (PMAM3 BS) gained to the highest in two weeks, advancing 1.8 percent to 5.11 reais. The Brazilian copper and tin producer said Banco UBS Pactual SA and Banco Santander SA each acquired a 12 percent stake. The banks bought 22.2 million voting shares each, following a June 2007 agreement between the companies, Paranapanema said in a statement yesterday.
Telemar Norte Leste SA (TMAR5 BS) rose for a third day, capping its longest rally in a month after rising 1.7 percent to 87.71 reais. 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.
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
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U.S. Stocks Gain on Speculation Lehman Brothers May Be Acquired
By Eric Martin
Aug. 22 (Bloomberg) -- U.S. stocks advanced, limiting the first weekly drop in the Standard & Poor's 500 Index in a month, on speculation an acquisition of Lehman Brothers Holdings Inc. will end the worst slump by financial shares since at least 1962.
Lehman, the brokerage that lost almost 80 percent of its value this year, surged 11 percent after Reuters reported Korea Development Bank said it's open to purchasing the firm. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. gained more than 3 percent. United Airlines parent UAL Corp. rose 8 percent and General Motors Corp. climbed as crude slipped almost $2 a barrel.
The S&P 500 added 8.74, or 0.7 percent, to 1,286.46 at 9:42 a.m. in New York. The Dow average climbed 104.14, or 0.9 percent, to 11,534.35, and the Nasdaq Composite Index rose 17.89, or 0.8 percent, to 2,398.27. Almost three stocks rallied for each that declined on the New York Stock Exchange.
``Lehman Brothers was the next firm likely to fail,'' said Jeffrey Kleintop, who helps oversee $273 billion as chief market strategist at LPL Financial in Boston. ``The market looks at this as a positive in that there have been expectations Lehman would survive in some form, the question was where was the money going to come from.''
The 54 percent plunge in the S&P 500 Financials Index from its February 2007 record through July 15 of this year was the steepest drop in at least 46 years, according to data compiled by Birinyi Associates Inc., the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi.
Bear Stearns Collapse
Financial companies in the S&P 500 had dropped 31 percent this year after the market for subprime mortgages collapsed. Bear Stearns Cos., once the second-largest underwriter of mortgage bonds after Lehman, was rescued by JPMorgan Chase & Co. in a March takeover brokered by the Federal Reserve.
Lehman jumped $1.44 to $15.16. Lehman spokesman Mark Lane declined to comment. Lehman is the fourth-largest U.S. securities firm. Korea Development Bank, the state-run lender, is examining options including the purchase of Lehman, Reuters quoted a spokesman as saying. Chief Executive Officer Min Euoo Sung declined to comment when contacted by Bloomberg.
``There's a ton of petro and trade dollars sloshing around the world now looking for a parking spot,'' said Michael Mullaney, a Boston-based portfolio manager at Fiduciary Trust Co., which manages $10 billion. A sale of Lehman to a strategic investor provides ``an orderly way to work their way out of positions, as compared to a fire sale.''
The S&P 500 has lost 0.9 percent this week as concern grew shareholder value would be wiped out at Fannie Mae and Freddie Mac if they are nationalized and commodities headed for their biggest weekly gain in 33 years. The stock index has dropped 18 percent from an October record as credit-related losses at banks worldwide topped $500 billion and record oil curbed growth.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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Aug. 22 (Bloomberg) -- U.S. stocks advanced, limiting the first weekly drop in the Standard & Poor's 500 Index in a month, on speculation an acquisition of Lehman Brothers Holdings Inc. will end the worst slump by financial shares since at least 1962.
Lehman, the brokerage that lost almost 80 percent of its value this year, surged 11 percent after Reuters reported Korea Development Bank said it's open to purchasing the firm. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. gained more than 3 percent. United Airlines parent UAL Corp. rose 8 percent and General Motors Corp. climbed as crude slipped almost $2 a barrel.
The S&P 500 added 8.74, or 0.7 percent, to 1,286.46 at 9:42 a.m. in New York. The Dow average climbed 104.14, or 0.9 percent, to 11,534.35, and the Nasdaq Composite Index rose 17.89, or 0.8 percent, to 2,398.27. Almost three stocks rallied for each that declined on the New York Stock Exchange.
``Lehman Brothers was the next firm likely to fail,'' said Jeffrey Kleintop, who helps oversee $273 billion as chief market strategist at LPL Financial in Boston. ``The market looks at this as a positive in that there have been expectations Lehman would survive in some form, the question was where was the money going to come from.''
The 54 percent plunge in the S&P 500 Financials Index from its February 2007 record through July 15 of this year was the steepest drop in at least 46 years, according to data compiled by Birinyi Associates Inc., the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi.
Bear Stearns Collapse
Financial companies in the S&P 500 had dropped 31 percent this year after the market for subprime mortgages collapsed. Bear Stearns Cos., once the second-largest underwriter of mortgage bonds after Lehman, was rescued by JPMorgan Chase & Co. in a March takeover brokered by the Federal Reserve.
Lehman jumped $1.44 to $15.16. Lehman spokesman Mark Lane declined to comment. Lehman is the fourth-largest U.S. securities firm. Korea Development Bank, the state-run lender, is examining options including the purchase of Lehman, Reuters quoted a spokesman as saying. Chief Executive Officer Min Euoo Sung declined to comment when contacted by Bloomberg.
``There's a ton of petro and trade dollars sloshing around the world now looking for a parking spot,'' said Michael Mullaney, a Boston-based portfolio manager at Fiduciary Trust Co., which manages $10 billion. A sale of Lehman to a strategic investor provides ``an orderly way to work their way out of positions, as compared to a fire sale.''
The S&P 500 has lost 0.9 percent this week as concern grew shareholder value would be wiped out at Fannie Mae and Freddie Mac if they are nationalized and commodities headed for their biggest weekly gain in 33 years. The stock index has dropped 18 percent from an October record as credit-related losses at banks worldwide topped $500 billion and record oil curbed growth.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
Read more...
Today's Market Outlook
Daily Forex Technicals | Written by Windsor Brokers Ltd | Aug 22 08 13:27 GMT |
EURUSD
Extended decline from 1.6040 to reach 1.4631 on 19 Aug, ahead of a rebound through 20 Aug lower top at 1.4768 to 1.4807. From subsequent higher low at 1.4672, further recovery slightly exceeded 1.4880/1.4907 target area, reaching 1.4909, ahead of the latest dip. Risk exists of return to 1.4834/07, possibly 1.4785/66, ahead of attempts to resume gains toward 1.4952/80.
Res: 1.4897, 1.4911, 1.4952, 1.4968
Sup: 1.4807, 1.4785, 1.4768, 1.4743
GBPUSD
Extended decline from 2.0162, 15 July peak, to reach 1.8510 on 15 Aug, ahead of bounce to 1.8723. A higher base then formed at 1.8538/40, with push above 1.8680/88 highs, having seen an extension to 1.8792. A sharp dip is now under way, loss of 1.8659/40 has ended immediate upside hopes, in favor of fresh losses targeting 1.8540/38.
Res: 1.8688, 1.8708, 1.8723, 1.8737
Sup: 1.8560, 1.8538, 1.8510, 1.8500
USDJPY
Found a base at 95.77, 2008 low, posted 17 Mar, from where a strong recovery has met 108.59, 16 Jun high. A three legged retrace found strength at 103.77 on 16 July, where the recent upswing began. Holding above 108.59, opens way towards 111.60, 17 Aug 07 low, next. Reversal under 108.35, however, puts in place a daily bearish MACD divergence, warning of further short-term losses, with potential loss of 103.77, to break bull structure
Res: 109.55, 109.86, 109.99, 110.40
Sup: 108.73, 108.55, 108.35, 108.00
USDCHF
Extended gains from 1.0011, 15 July low, to reach 1.1033/42 highs on 19/20 Aug, interrupted by a dip to 1.0897. The retreat from 1.1042 breached 1.0897, to complete a short-term top, losses then reached 1.0842, ahead of latest bounce back through 1.0897. Scope exists for a return towards 1.0973/44, before possibly leaving lower top for fresh wekanes to 1.0779/42.
Res: 1.0944, 1.0973, 1.1001, 1.1020
Sup: 1.0857, 1.0836, 1.0825, 1.0779
Windsor Brokers Ltd
http://www.windsorbrokers.biz
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
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EURUSD
Extended decline from 1.6040 to reach 1.4631 on 19 Aug, ahead of a rebound through 20 Aug lower top at 1.4768 to 1.4807. From subsequent higher low at 1.4672, further recovery slightly exceeded 1.4880/1.4907 target area, reaching 1.4909, ahead of the latest dip. Risk exists of return to 1.4834/07, possibly 1.4785/66, ahead of attempts to resume gains toward 1.4952/80.
Res: 1.4897, 1.4911, 1.4952, 1.4968
Sup: 1.4807, 1.4785, 1.4768, 1.4743
GBPUSD
Extended decline from 2.0162, 15 July peak, to reach 1.8510 on 15 Aug, ahead of bounce to 1.8723. A higher base then formed at 1.8538/40, with push above 1.8680/88 highs, having seen an extension to 1.8792. A sharp dip is now under way, loss of 1.8659/40 has ended immediate upside hopes, in favor of fresh losses targeting 1.8540/38.
Res: 1.8688, 1.8708, 1.8723, 1.8737
Sup: 1.8560, 1.8538, 1.8510, 1.8500
USDJPY
Found a base at 95.77, 2008 low, posted 17 Mar, from where a strong recovery has met 108.59, 16 Jun high. A three legged retrace found strength at 103.77 on 16 July, where the recent upswing began. Holding above 108.59, opens way towards 111.60, 17 Aug 07 low, next. Reversal under 108.35, however, puts in place a daily bearish MACD divergence, warning of further short-term losses, with potential loss of 103.77, to break bull structure
Res: 109.55, 109.86, 109.99, 110.40
Sup: 108.73, 108.55, 108.35, 108.00
USDCHF
Extended gains from 1.0011, 15 July low, to reach 1.1033/42 highs on 19/20 Aug, interrupted by a dip to 1.0897. The retreat from 1.1042 breached 1.0897, to complete a short-term top, losses then reached 1.0842, ahead of latest bounce back through 1.0897. Scope exists for a return towards 1.0973/44, before possibly leaving lower top for fresh wekanes to 1.0779/42.
Res: 1.0944, 1.0973, 1.1001, 1.1020
Sup: 1.0857, 1.0836, 1.0825, 1.0779
Windsor Brokers Ltd
http://www.windsorbrokers.biz
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
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London Session Recap
Daily Forex Fundamentals | Written by Forex.com | Aug 22 08 12:04 GMT |
The greenback was higher in London trading on a bad batch of data across the pond and a small pullback in oil prices. Oil slipped a little more than $1 towards the $120.15/bbl area just as the London session came to a close. Meanwhile, economic data out of Europe dealt the markets a dose of reality and showed that economic deterioration continues there, despite the better than expected numbers of late.
Data in the Euro-zone went back to showing continued weakness. Industrial new orders for June fell -0.3% on the month after a downwardly revised -5.4% decline in May. This took the annual run-rate to a pitiful -7.4% from -4.4% prior and the worst print since December 2001. This helped the buck rally and EUR/USD slipped about 35 pips in the session towards 1.4840 at the close.
UK GDP came in below expectations at -0.1% in the 2Q preliminary release and this took the annual growth rate to a paltry 1.4% from 1.6%. The main takeaway is that private consumption fell -0.1% while the market was looking for an increase of 0.5%. This highlights the deterioration in the UK private sector and keeps the risk of a rate cut from the Bank of England on the table. GBP/USD plunged more than 150 pips on the news towards a close near the 1.8590 mark. We would still be sellers of GBP/USD on strength as we feel that the economic deterioration has not been fully priced in.
Upcoming Economic Data Releases (NY Session) Prior Estimate
* 8/22/2008 14:00 GMT US Fed Chairman Bernanke Speaks at Jackson Hole
Forex.com
http://www.forex.com
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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The greenback was higher in London trading on a bad batch of data across the pond and a small pullback in oil prices. Oil slipped a little more than $1 towards the $120.15/bbl area just as the London session came to a close. Meanwhile, economic data out of Europe dealt the markets a dose of reality and showed that economic deterioration continues there, despite the better than expected numbers of late.
Data in the Euro-zone went back to showing continued weakness. Industrial new orders for June fell -0.3% on the month after a downwardly revised -5.4% decline in May. This took the annual run-rate to a pitiful -7.4% from -4.4% prior and the worst print since December 2001. This helped the buck rally and EUR/USD slipped about 35 pips in the session towards 1.4840 at the close.
UK GDP came in below expectations at -0.1% in the 2Q preliminary release and this took the annual growth rate to a paltry 1.4% from 1.6%. The main takeaway is that private consumption fell -0.1% while the market was looking for an increase of 0.5%. This highlights the deterioration in the UK private sector and keeps the risk of a rate cut from the Bank of England on the table. GBP/USD plunged more than 150 pips on the news towards a close near the 1.8590 mark. We would still be sellers of GBP/USD on strength as we feel that the economic deterioration has not been fully priced in.
Upcoming Economic Data Releases (NY Session) Prior Estimate
* 8/22/2008 14:00 GMT US Fed Chairman Bernanke Speaks at Jackson Hole
Forex.com
http://www.forex.com
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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Mid-Day Report: Yen Soldoff, Dollar Strikes Back, Sterling Hammered
Market Overview | Written by ActionForex.com | Aug 22 08 13:11 GMT |
The Japanese yen is sharply lower into early US session on speculation that Lehman Brothers could be acquired by a group of Korean Development bank. US stock futures jump sharply such such speculation and lure investors back to the stock markets. The Japanese yen is thus sold off sharply on return of risk appetite. Meanwhile, the greenback is also supported by retreat in oil prices and strikes back against majors currencies. Particular weakness is seen in Sterling which is hammered by unexpected downward revision in Q2 GDP to 0% qoq, 1.4% yoy growth.
Technically Speaking, yen crosses should have made a short term bottom and more upside is expected in EUR/JPY and GBP/JPY. Meanwhile, USD/JPY looks set to resume recent rise. Dollar's outlook is still rather mixed. The anticipated stronger rebound in EUR/USD, GBP/USD and AUD/USD didn't occur. And, it now seems that the greenback will have at least one more rise against sterling and aussie before forming a short term top.
Looking ahead, focus will turn to Bernanke's opening speech in Jackson Hole on financial stability. His audience include ECB Trichet and BoJ Nishimura. Note that this is Bernanke's first public appearance since the FOMC monetary policy meeting on Aug. 5.
GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.8660; (P) 1.8725; (R1) 1.8845; More
Cable's failure to stay above 1.8787 minor resistance and subsequent break of 1.8603 minor support argues that decline from 2.0150 is still in progress. Intraday bias is flipped back to the downside for 1.8151 and break will confirm such decline has resumed for 100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360. On the upside, though, above 1.8787 will confirm a short term bottom and bring stronger rebound to 38.2% retracement of 2.0150 to 1.8515 at 1.9140. Though, upside should be limited below 61.8% retracement at 1.9525 and bring fall resumption.
In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress. The developments so far are arguing that whole multi year up trend from 1.3680 (01 low) has also completed too. Those developments include strong break of the long term trend line and 55 months EMA, bearish divergence conditions and trend breaking in monthly MACD and RSI.
Focus is now on cluster support at 1.8303/60 (100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360 and 38.2% retracement of 1.3680 to 2.1161 at 1.8303). Sustained break of which will indicate that whole decline from 2.1161 is probably impulsive in nature and add more credence to the case of long term reversal. This will pave the way to next key support at 1.7047 first. On the upside, while strong rebound might be seen, a break of 2.0158 resistance is still needed to indicate fall from 2.1161 has completed. Otherwise, another fall should still be seen after correction.
Read more...
The Japanese yen is sharply lower into early US session on speculation that Lehman Brothers could be acquired by a group of Korean Development bank. US stock futures jump sharply such such speculation and lure investors back to the stock markets. The Japanese yen is thus sold off sharply on return of risk appetite. Meanwhile, the greenback is also supported by retreat in oil prices and strikes back against majors currencies. Particular weakness is seen in Sterling which is hammered by unexpected downward revision in Q2 GDP to 0% qoq, 1.4% yoy growth.
Technically Speaking, yen crosses should have made a short term bottom and more upside is expected in EUR/JPY and GBP/JPY. Meanwhile, USD/JPY looks set to resume recent rise. Dollar's outlook is still rather mixed. The anticipated stronger rebound in EUR/USD, GBP/USD and AUD/USD didn't occur. And, it now seems that the greenback will have at least one more rise against sterling and aussie before forming a short term top.
Looking ahead, focus will turn to Bernanke's opening speech in Jackson Hole on financial stability. His audience include ECB Trichet and BoJ Nishimura. Note that this is Bernanke's first public appearance since the FOMC monetary policy meeting on Aug. 5.
GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.8660; (P) 1.8725; (R1) 1.8845; More
Cable's failure to stay above 1.8787 minor resistance and subsequent break of 1.8603 minor support argues that decline from 2.0150 is still in progress. Intraday bias is flipped back to the downside for 1.8151 and break will confirm such decline has resumed for 100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360. On the upside, though, above 1.8787 will confirm a short term bottom and bring stronger rebound to 38.2% retracement of 2.0150 to 1.8515 at 1.9140. Though, upside should be limited below 61.8% retracement at 1.9525 and bring fall resumption.
In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress. The developments so far are arguing that whole multi year up trend from 1.3680 (01 low) has also completed too. Those developments include strong break of the long term trend line and 55 months EMA, bearish divergence conditions and trend breaking in monthly MACD and RSI.
Focus is now on cluster support at 1.8303/60 (100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360 and 38.2% retracement of 1.3680 to 2.1161 at 1.8303). Sustained break of which will indicate that whole decline from 2.1161 is probably impulsive in nature and add more credence to the case of long term reversal. This will pave the way to next key support at 1.7047 first. On the upside, while strong rebound might be seen, a break of 2.0158 resistance is still needed to indicate fall from 2.1161 has completed. Otherwise, another fall should still be seen after correction.
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY BOJ minutes Jul
8:00 EUR Eurozone Current account (euro) Jun -1.0B N/A -21.4B -19.6B
8:30 GBP U.K. GDP Q/Q Q2 R 0.00% 0.10% 0.20%
8:30 GBP U.K. GDP Y/Y Q2 R 1.40% 1.50% 1.60%
9:00 EUR Eurozone Industrial orders M/M Jun -0.30% -1.10% -3.50% -5.40%
9:00 EUR Eurozone Industrial orders Y/Y Jun -7.40% -6.30% -4.40%
14:00 USD Fed's Bernanke Speaks on Financial Stability at Jackson Hole
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Daily Report: Dollar Soft, Focus on Bernanke
Market Overview | Written by ActionForex.com | Aug 22 08 06:51 GMT |
Dollar's pull back against major currencies is still in progress on the back of rebound in oil prices. The greenback is showing further indication that a short term top is in place and more pull back is anticipated, in particular if commodity prices rebound further. Nevertheless, the bigger picture is unchanged and more medium term weakness is still expected from the greenback after completing the current pull back. Focus of today will turn to Bernanke's opening speech in Jackson Hole on financial stability. His audience include ECB Trichet and BoJ Nishimura. Note that this is Bernanke's first public appearance since the FOMC monetary policy meeting on Aug. 5.
BoJ minutes of Jul meeting released overnight showed the board members are concerned that global slowdown is starting to affect the Japanese economy. "Second-round effects from the rise in prices of petroleum products and food" is expected to be limited. Yen cross rebounds strongly today back to the pre-plunge levels. Technically speaking the sharp but brief fall yesterday in yen crosses and subsequent strong rebound argues that the yen may be following dollar in confirming a short term top.
Economic data is light today. Eurozone current account and industrial orders as well as UK Q2 GDP revision will be the main feature.
GBP/USD Daily Outlook
Daily Pivots: (S1) 1.8660; (P) 1.8725; (R1) 1.8845; More
Cable's recovery from 1.8515 extends further today and touching of 1.8787 minor resistance, with 4 hours MACD turned positive indicates that a short term bottom is likely in place at 1.8515. At this point, intraday bias is mildly on the upside as long as 1.8603 minor support holds. Further rebound could be seen to 38.2% retracement of 2.0150 to 1.8515 at 1.9140. Though, upside should be limited below 61.8% retracement at 1.9525 and bring fall resumption. On the downside,below 1.8603 will turn intraday bias back to the downside for 1.8515 low. Break will indicate recent fall has resumed for 100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360.
In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress. The developments so far are arguing that whole multi year up trend from 1.3680 (01 low) has also completed too. Those developments include strong break of the long term trend line and 55 months EMA, bearish divergence conditions and trend breaking in monthly MACD and RSI.
Focus is now on cluster support at 1.8303/60 (100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360 and 38.2% retracement of 1.3680 to 2.1161 at 1.8303). Sustained break of which will indicate that whole decline from 2.1161 is probably impulsive in nature and add more credence to the case of long term reversal. This will pave the way to next key support at 1.7047 first. On the upside, while strong rebound might be seen, a break of 2.0158 resistance is still needed to indicate fall from 2.1161 has completed. Otherwise, another fall should still be seen after correction.
Economic Indicators Update
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Dollar's pull back against major currencies is still in progress on the back of rebound in oil prices. The greenback is showing further indication that a short term top is in place and more pull back is anticipated, in particular if commodity prices rebound further. Nevertheless, the bigger picture is unchanged and more medium term weakness is still expected from the greenback after completing the current pull back. Focus of today will turn to Bernanke's opening speech in Jackson Hole on financial stability. His audience include ECB Trichet and BoJ Nishimura. Note that this is Bernanke's first public appearance since the FOMC monetary policy meeting on Aug. 5.
BoJ minutes of Jul meeting released overnight showed the board members are concerned that global slowdown is starting to affect the Japanese economy. "Second-round effects from the rise in prices of petroleum products and food" is expected to be limited. Yen cross rebounds strongly today back to the pre-plunge levels. Technically speaking the sharp but brief fall yesterday in yen crosses and subsequent strong rebound argues that the yen may be following dollar in confirming a short term top.
Economic data is light today. Eurozone current account and industrial orders as well as UK Q2 GDP revision will be the main feature.
GBP/USD Daily Outlook
Daily Pivots: (S1) 1.8660; (P) 1.8725; (R1) 1.8845; More
Cable's recovery from 1.8515 extends further today and touching of 1.8787 minor resistance, with 4 hours MACD turned positive indicates that a short term bottom is likely in place at 1.8515. At this point, intraday bias is mildly on the upside as long as 1.8603 minor support holds. Further rebound could be seen to 38.2% retracement of 2.0150 to 1.8515 at 1.9140. Though, upside should be limited below 61.8% retracement at 1.9525 and bring fall resumption. On the downside,below 1.8603 will turn intraday bias back to the downside for 1.8515 low. Break will indicate recent fall has resumed for 100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360.
In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress. The developments so far are arguing that whole multi year up trend from 1.3680 (01 low) has also completed too. Those developments include strong break of the long term trend line and 55 months EMA, bearish divergence conditions and trend breaking in monthly MACD and RSI.
Focus is now on cluster support at 1.8303/60 (100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360 and 38.2% retracement of 1.3680 to 2.1161 at 1.8303). Sustained break of which will indicate that whole decline from 2.1161 is probably impulsive in nature and add more credence to the case of long term reversal. This will pave the way to next key support at 1.7047 first. On the upside, while strong rebound might be seen, a break of 2.0158 resistance is still needed to indicate fall from 2.1161 has completed. Otherwise, another fall should still be seen after correction.
Economic Indicators Update
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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European Market Update
Daily Forex Fundamentals | Written by Trade The News | Aug 22 08 09:42 GMT |
UK Posts Flat Q/Q Preliminary GDP for Q2
DATA
EU June Current Account: -€8.2B v -€5.5B prior || Prior revised from -€7.3B to -€5.5B
EU June Current Account nsa: -€1.0B v -€19.6B prior || Prior revised form -€21.4B to -€19.6B
UK Q2 Preliminary GDP: Q/Q 0.0% v 0.1%e || Y/Y 1.4% v 1.5%e
UK Q2 Preliminary Private Consumption: 0.0% v 0.1%e
UK Q2 Preliminary Government Spending: 0.4% v 0.5%e
UK Q2 Preliminary Gross Fixed Capital Formation: -5.3% v -1.2%e
UK Q2 Preliminary Exports: -0.5% v 0.4%e
UK Q2 Preliminary Imports: -1.4% v -0.3%e
UK June Index of Services: 0.2% v 0.4%e
EU June Industrial New Orders: M/M -0.3% v -1.1%e || Prior revised from -3.5% to -5.4% |||| Y/Y -7.4% v -6.3%e
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
WPP Group [WPP.UK] reported 1H net income of £208.2M, up from £181.9M a year ago. EBIT came in at £398.5M, above the £366.8M consensus, while revenue of £3.34B was roughly in line with the £3.3B consensus estimate. The company noted that 2009 prospects are less certain as the result of the financial crisis. The company also maintained its long-term operating margin target of 19%. Arriva [ARI.UK] reported 1H net income of £47.3M, up from £35.9M a year ago. Operating profit came in at £76.3M, just below the £78.8M consensus, while revenue of £1.44B was up from £909.2M a year ago. Arriva reaffirmed its FY08 targets, and noted that they are confident of considerable sales and profit growth. Rentokil Initial [RTO.UK] reported 1H net income of £11.9M, down from £65.5M a year ago. Pretax came in at £18.3M, below the £23.1M consensus, while revenue of £1.18B was in line with estimates. Rentokil reiterated its FY08 guidance as well. Bradford & Bingley [BB.UK] reported overnight that underwriters subscribed to 72% of the company's rights offering at 55p/share. Aon Corp (AOC) announced a deal to acquire Benefield Group [BFD.UK] for 350p/shre in cash representing a total value of £738M. The offer representes a 29.2% premium over yesterday's close. Aon expects the deal to be accretive to earnings one year after closing. Metso [MEO1V.FH] upgraded its financial targets overnight. Guiding its outlook for 2009-2012 Metoso forecasted average annual revenue growth of 10%. The company also set an EBITDA margin target of 'over 12%,' and an ROCE target of 'over 25%'. Metso also noted that it targets distributing at least 50% of annual earnings per share as a dividend of in the other forms of repatriation of capital.
In the newspapers the Wall Street Journal reported overnight that Boeing (BA) is mulling pulling out of the bidding for a $40B Air Force tanker contract. The article notes that Boeing may seek to pull out of the bidding unless the Pentagon agrees to give it six months to submit a new bid. The Wall Street Journal looked at Lehman's (LEH) options for its investment management unit in the Heard on the Street column. The article notes that doubts about Lehman have deepened in recent days. The WSJ says that some of the concerns about Lehman are related to the firm's plan to sell a stake in its asset-management unit because it sounds like a last-ditch move. If Lehman sells a stake in its asset-management unit, it might not raise enough cash and it might lower the valuation on the sale because the buyer would not be getting control. If Lehman seeks to sell its entire asset-management unit it could lose a stable earnings source and this could hurt its credit rating. If Lehman received $8B for its asset-management unit it could effectively plug a hole left by taking losses from selling mortgage assets at a discount. If Lehman were able to sell $50B of assets and took $8B of losses on the deal, it would amount to a 16% markdown. According to the Irish Independent KKR has pulled out of bidding for Elan's (ELN) drug delivery unit. The Times speculated overnight that UPS (UPS) could make a possible bid for TNT [TNT.NA] this weekend. The article noted a possible deal value of €34 to €38/share.
NOTES
All was relatively quiet overnight with most of the focus surrounding second quarter GDP in the UK. The Q/Q reading declined to its lowest level since Q2 of 1992, while the Y/Y reading was the lowest since Q1 of 1993. The data weighed on the GBP, pushing the GBP/USD to test the 1.86-handle aided by a bout of USD strength in quiet trading. The weak GDP readings also provided some support to the fixed income futures helping to stem any further decline and push prices back towards the unchanged level for the session. Following the GDP readings the initial chatter, understandably, is that the softer readings will put further pressure on the Bank of England to cut interest rates. Looking ahead focus will rest upon a speech by the Fed's Bernanke due to speak on financial stability at Jackson Hole, Wyoming.
'You exist only in what you do.' - Federico Fellini
Trade The News Staff
Trade The News, Inc.
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.
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UK Posts Flat Q/Q Preliminary GDP for Q2
DATA
EU June Current Account: -€8.2B v -€5.5B prior || Prior revised from -€7.3B to -€5.5B
EU June Current Account nsa: -€1.0B v -€19.6B prior || Prior revised form -€21.4B to -€19.6B
UK Q2 Preliminary GDP: Q/Q 0.0% v 0.1%e || Y/Y 1.4% v 1.5%e
UK Q2 Preliminary Private Consumption: 0.0% v 0.1%e
UK Q2 Preliminary Government Spending: 0.4% v 0.5%e
UK Q2 Preliminary Gross Fixed Capital Formation: -5.3% v -1.2%e
UK Q2 Preliminary Exports: -0.5% v 0.4%e
UK Q2 Preliminary Imports: -1.4% v -0.3%e
UK June Index of Services: 0.2% v 0.4%e
EU June Industrial New Orders: M/M -0.3% v -1.1%e || Prior revised from -3.5% to -5.4% |||| Y/Y -7.4% v -6.3%e
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
WPP Group [WPP.UK] reported 1H net income of £208.2M, up from £181.9M a year ago. EBIT came in at £398.5M, above the £366.8M consensus, while revenue of £3.34B was roughly in line with the £3.3B consensus estimate. The company noted that 2009 prospects are less certain as the result of the financial crisis. The company also maintained its long-term operating margin target of 19%. Arriva [ARI.UK] reported 1H net income of £47.3M, up from £35.9M a year ago. Operating profit came in at £76.3M, just below the £78.8M consensus, while revenue of £1.44B was up from £909.2M a year ago. Arriva reaffirmed its FY08 targets, and noted that they are confident of considerable sales and profit growth. Rentokil Initial [RTO.UK] reported 1H net income of £11.9M, down from £65.5M a year ago. Pretax came in at £18.3M, below the £23.1M consensus, while revenue of £1.18B was in line with estimates. Rentokil reiterated its FY08 guidance as well. Bradford & Bingley [BB.UK] reported overnight that underwriters subscribed to 72% of the company's rights offering at 55p/share. Aon Corp (AOC) announced a deal to acquire Benefield Group [BFD.UK] for 350p/shre in cash representing a total value of £738M. The offer representes a 29.2% premium over yesterday's close. Aon expects the deal to be accretive to earnings one year after closing. Metso [MEO1V.FH] upgraded its financial targets overnight. Guiding its outlook for 2009-2012 Metoso forecasted average annual revenue growth of 10%. The company also set an EBITDA margin target of 'over 12%,' and an ROCE target of 'over 25%'. Metso also noted that it targets distributing at least 50% of annual earnings per share as a dividend of in the other forms of repatriation of capital.
In the newspapers the Wall Street Journal reported overnight that Boeing (BA) is mulling pulling out of the bidding for a $40B Air Force tanker contract. The article notes that Boeing may seek to pull out of the bidding unless the Pentagon agrees to give it six months to submit a new bid. The Wall Street Journal looked at Lehman's (LEH) options for its investment management unit in the Heard on the Street column. The article notes that doubts about Lehman have deepened in recent days. The WSJ says that some of the concerns about Lehman are related to the firm's plan to sell a stake in its asset-management unit because it sounds like a last-ditch move. If Lehman sells a stake in its asset-management unit, it might not raise enough cash and it might lower the valuation on the sale because the buyer would not be getting control. If Lehman seeks to sell its entire asset-management unit it could lose a stable earnings source and this could hurt its credit rating. If Lehman received $8B for its asset-management unit it could effectively plug a hole left by taking losses from selling mortgage assets at a discount. If Lehman were able to sell $50B of assets and took $8B of losses on the deal, it would amount to a 16% markdown. According to the Irish Independent KKR has pulled out of bidding for Elan's (ELN) drug delivery unit. The Times speculated overnight that UPS (UPS) could make a possible bid for TNT [TNT.NA] this weekend. The article noted a possible deal value of €34 to €38/share.
NOTES
All was relatively quiet overnight with most of the focus surrounding second quarter GDP in the UK. The Q/Q reading declined to its lowest level since Q2 of 1992, while the Y/Y reading was the lowest since Q1 of 1993. The data weighed on the GBP, pushing the GBP/USD to test the 1.86-handle aided by a bout of USD strength in quiet trading. The weak GDP readings also provided some support to the fixed income futures helping to stem any further decline and push prices back towards the unchanged level for the session. Following the GDP readings the initial chatter, understandably, is that the softer readings will put further pressure on the Bank of England to cut interest rates. Looking ahead focus will rest upon a speech by the Fed's Bernanke due to speak on financial stability at Jackson Hole, Wyoming.
'You exist only in what you do.' - Federico Fellini
Trade The News Staff
Trade The News, Inc.
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.
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Today's Key Points
Daily Forex Technicals | Written by Danske Bank | Aug 22 08 07:37 GMT |
Danske Daily
* Equities rebounded late yesterday and S&P500 finished up 0.25% driven by energy stocks. Asian stock markets are lower
* Oil prices back up to USD 121 on geo-political tensions. US bond yields have been stable overnight after rising yesterday. EUR/USD has also stabilised overnight after rising to 1.487
* On the agenda today will be a speech by Fed chairman Bernanke at Jackson Hole. In Europe industrial new orders and Belgian business confidence is released. No data in Scandinavia
Markets Overnight
The major drivers in markets continue to be financial news and developments in oil markets. Equity markets started out weak yesterday on the back of more negative news on the situation in the US mortgage giants Fannie Mae and Freddie Mac (see Flash comment on our website). However, a major rebound in oil prices lifted energy related stocks, and the broad indices closed in positive territory with S&P500 up 0.25%. Asian stock markets are soft with Nikkei down 0.5%. Oil prices rose from USD 116 to USD 121 on the back of further geopolitical tensions between the US and Russia. US officials announced a deal to install a missile defence system in Poland, and this made Russia issue a statement that its response to the missile shield 'would go beyond diplomacy'. Markets fear that Russia will reduce oil output in response. Focus in oil the market has thus shifted from 'demand destruction' to supply concerns. The oil price has been stable overnight at USD 121.
Bond yields rose throughout the day yesterday. The rise in oil prices weighs on the bond market as it puts inflation concerns back on the agenda. We have seen signs in recent days also that the decline in yields may have run its course for now. US bond yields have not changed much overnight and 2-year and 10-year bonds are trading around 2.33% and 3.84% respectively. EUR/USD rose throughout the day and has stayed around 1.487 since yesterday. EUR/SEK has fallen further overnight to 9.356. A slightly hawkish speech by Riksbank member Öberg supported SEK. EUR/NOK is unchanged around 7.93 after falling on back of the oil price rally.
Global Daily
Attention in markets should continue to be on oil market developments and financial news. We have very little on the agenda in terms of data, but a speech from Fed chairman Bernanke at Jackson Hole (16.00) will be followed closely. Bernanke is going to speak on financial stability. Given recent events this could give some important insights into Bernanke's thinking on how it may affect the economy. The Fannie Mae and Freddie Mac crisis is a further threat to US housing and increases the risk that the downturn may be longer.
In Europe data for Euroland industrial orders (11.00CET) and Belgian business confidence (15.00CET) is released, but neither are big market movers – especially not in the current environment.
Flash PMI came in broadly in line with expectations yesterday, although Germany surprised to the downside. The market response to the negative surprise from Germany (released prior to the overall Euroland number) was very limited, though, which may suggest that the market is to a wide extent pricing in economic weakness. Oil price rises put inflation back on the agenda, and if this continues it may weigh further on bond markets. Overall we think bond yields are likely to consolidate in the short term after the recent decline. Our forecast is still for yields to come lower on a 3-month horizon, as the global economy should come close to recession by the end of the year.
Bernanke's speech at the Jackson Hole conference can potentially send the USD in any direction. Accordingly, cautiousness is recommended around 16.00CET. The GBP is expected to be affected by the GDP numbers that we receive at 10.30CET. The slowdown has now got its grasp not just on sentiment and survey data, but also on hard data. We are looking for several downbeat UK readings in the next quarters and see little chance that today's numbers may spoil that picture. There is especially downside risk on the private consumption component, where surveys have lately pointed downwards. Chance that EUR/GBP should edge higher today.
Scandi Daily
Today we receive retail sales data and the National Debt Office's forecast in Sweden. On retail sales we expect a recoil after last month's very weak reading, but apparently we are more optimistic on this issue than market consensus suggests. Bearing in mind that this is indeed a rather volatile series our advise is however to refrain from taking any major bets on this particular outcome. The SNDO data shall be interesting since the actual outcomes point toward an excess fiscal balance surplus of SEK 20bn compared to the SNDO's latest forecast. In spite of this we do not expect any major revisions, since this would also entail making a forecast on possible privatisation flows in conjunction to TeliaSonera and France Telecom.
Danske Bank
http://www.danskebank.com/danskeresearch
Disclaimer
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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Danske Daily
* Equities rebounded late yesterday and S&P500 finished up 0.25% driven by energy stocks. Asian stock markets are lower
* Oil prices back up to USD 121 on geo-political tensions. US bond yields have been stable overnight after rising yesterday. EUR/USD has also stabilised overnight after rising to 1.487
* On the agenda today will be a speech by Fed chairman Bernanke at Jackson Hole. In Europe industrial new orders and Belgian business confidence is released. No data in Scandinavia
Markets Overnight
The major drivers in markets continue to be financial news and developments in oil markets. Equity markets started out weak yesterday on the back of more negative news on the situation in the US mortgage giants Fannie Mae and Freddie Mac (see Flash comment on our website). However, a major rebound in oil prices lifted energy related stocks, and the broad indices closed in positive territory with S&P500 up 0.25%. Asian stock markets are soft with Nikkei down 0.5%. Oil prices rose from USD 116 to USD 121 on the back of further geopolitical tensions between the US and Russia. US officials announced a deal to install a missile defence system in Poland, and this made Russia issue a statement that its response to the missile shield 'would go beyond diplomacy'. Markets fear that Russia will reduce oil output in response. Focus in oil the market has thus shifted from 'demand destruction' to supply concerns. The oil price has been stable overnight at USD 121.
Bond yields rose throughout the day yesterday. The rise in oil prices weighs on the bond market as it puts inflation concerns back on the agenda. We have seen signs in recent days also that the decline in yields may have run its course for now. US bond yields have not changed much overnight and 2-year and 10-year bonds are trading around 2.33% and 3.84% respectively. EUR/USD rose throughout the day and has stayed around 1.487 since yesterday. EUR/SEK has fallen further overnight to 9.356. A slightly hawkish speech by Riksbank member Öberg supported SEK. EUR/NOK is unchanged around 7.93 after falling on back of the oil price rally.
Global Daily
Attention in markets should continue to be on oil market developments and financial news. We have very little on the agenda in terms of data, but a speech from Fed chairman Bernanke at Jackson Hole (16.00) will be followed closely. Bernanke is going to speak on financial stability. Given recent events this could give some important insights into Bernanke's thinking on how it may affect the economy. The Fannie Mae and Freddie Mac crisis is a further threat to US housing and increases the risk that the downturn may be longer.
In Europe data for Euroland industrial orders (11.00CET) and Belgian business confidence (15.00CET) is released, but neither are big market movers – especially not in the current environment.
Flash PMI came in broadly in line with expectations yesterday, although Germany surprised to the downside. The market response to the negative surprise from Germany (released prior to the overall Euroland number) was very limited, though, which may suggest that the market is to a wide extent pricing in economic weakness. Oil price rises put inflation back on the agenda, and if this continues it may weigh further on bond markets. Overall we think bond yields are likely to consolidate in the short term after the recent decline. Our forecast is still for yields to come lower on a 3-month horizon, as the global economy should come close to recession by the end of the year.
Bernanke's speech at the Jackson Hole conference can potentially send the USD in any direction. Accordingly, cautiousness is recommended around 16.00CET. The GBP is expected to be affected by the GDP numbers that we receive at 10.30CET. The slowdown has now got its grasp not just on sentiment and survey data, but also on hard data. We are looking for several downbeat UK readings in the next quarters and see little chance that today's numbers may spoil that picture. There is especially downside risk on the private consumption component, where surveys have lately pointed downwards. Chance that EUR/GBP should edge higher today.
Scandi Daily
Today we receive retail sales data and the National Debt Office's forecast in Sweden. On retail sales we expect a recoil after last month's very weak reading, but apparently we are more optimistic on this issue than market consensus suggests. Bearing in mind that this is indeed a rather volatile series our advise is however to refrain from taking any major bets on this particular outcome. The SNDO data shall be interesting since the actual outcomes point toward an excess fiscal balance surplus of SEK 20bn compared to the SNDO's latest forecast. In spite of this we do not expect any major revisions, since this would also entail making a forecast on possible privatisation flows in conjunction to TeliaSonera and France Telecom.
Danske Bank
http://www.danskebank.com/danskeresearch
Disclaimer
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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European stocks tick up as financials rebound
* FTSEurofirst up 0.4 percent
* Banks, insurers rebound after heavy losses
* Oil hovers around $121, geopolitical risk grows
By Sitaraman Shankar
LONDON, Aug 22 (Reuters) - European shares rose by mid-morning on Friday, boosted by a rebound in battered financial stocks, but a robust crude price kept a lid on gains.
At 0900 GMT, the FTSEurofirst 300 index of top European shares gained 0.4 percent to 1,159.75 points after enduring a choppy morning.
Royal Bank of Scotland added most points to the index with a 2.9 percent gain, while BNP Paribas , HSBC , UBS and Santander notched up gains of 0.7-2.7 percent.
Oil CLc1 hovered around $121, a day after its biggest jump in 3 months on mounting tension between the United States and Russia.
Russia, the world's second largest oil exporter, said on Thursday that it would respond with more than just a diplomatic protest to a U.S. deal with Poland to station parts of a U.S. missile defence shield on Polish soil.
"Investors are realising that the bear has put its paw on the pipeline, and geopolitical risk is likely to remain a theme for the next month or so," said Justin Urquhart Stewart, investment director at Seven Investment Management.
The uncertainty kept oil shares volatile, with heavyweights trading down after an initial rise. Total took most points off the index with a 1.5 percent fall, while BP fell 1 percent.
Miner Rio Tinto underperformed after Australia's competition regulator said it had deferred its final decision on an around $128 billion bid by miner BHP Billiton Ltd for Rio.
Rio reversed early losses to tick up 0.3 percent and BHP gained 1 percent.
Britain's FTSE 100 .FTSE was up 0.9 percent, Germany's DAX .GDAXI up 0.6 percent and France's CAC .FCHI up 0.5 percent.
M&A LIFTS INSURERS, BERNANKE EYED
Aon Corp , one of the world's largest insurance brokers, made a recommended cash offer for Benfield that valued the UK-listed broker at 844 million pounds.
Benfield stock rose nearly 30 percent. Prudential gained 3.8 percent and Axa rose 1.5 percent.
Investor focus shifts to a speech on financial stability later in the day from Federal Reserve Chairman Ben Bernanke at the Federal Reserve Bank of Kansas Economic Symposium.
"Bernanke will have to come up with some cuddly words to negate some of the hyperbole of (former IMF chief economist Kenneth) Rogoff," said Seven Investment's Urquhart Stewart.
Rogoff said on Tuesday that the worst of the global financial crisis was yet to come and a large U.S. bank would fail in the next few months as the world's biggest economy hits more trouble.
Global equities have taken a battering over the past year due to the credit crisis originating in the U.S. subprime mortgage market, which has driven banks to make large writedowns on investments and slowed the global economy.
The FTSEurofirst 300 is down 23 percent so far this year, and on track in August for its ninth month of losses in the last 10.
Underlining investor concerns, revised official data showed Britain's economy unexpectedly ground to a halt in the second quarter, its weakest performance since the recession of the early 1990s.
Euro zone June industry orders were down by 0.3 percent month on month. (Editing by Paul Bolding)
Read more...
* Banks, insurers rebound after heavy losses
* Oil hovers around $121, geopolitical risk grows
By Sitaraman Shankar
LONDON, Aug 22 (Reuters) - European shares rose by mid-morning on Friday, boosted by a rebound in battered financial stocks, but a robust crude price kept a lid on gains.
At 0900 GMT, the FTSEurofirst 300 index of top European shares gained 0.4 percent to 1,159.75 points after enduring a choppy morning.
Royal Bank of Scotland added most points to the index with a 2.9 percent gain, while BNP Paribas , HSBC , UBS and Santander notched up gains of 0.7-2.7 percent.
Oil CLc1 hovered around $121, a day after its biggest jump in 3 months on mounting tension between the United States and Russia.
Russia, the world's second largest oil exporter, said on Thursday that it would respond with more than just a diplomatic protest to a U.S. deal with Poland to station parts of a U.S. missile defence shield on Polish soil.
"Investors are realising that the bear has put its paw on the pipeline, and geopolitical risk is likely to remain a theme for the next month or so," said Justin Urquhart Stewart, investment director at Seven Investment Management.
The uncertainty kept oil shares volatile, with heavyweights trading down after an initial rise. Total took most points off the index with a 1.5 percent fall, while BP fell 1 percent.
Miner Rio Tinto underperformed after Australia's competition regulator said it had deferred its final decision on an around $128 billion bid by miner BHP Billiton Ltd for Rio.
Rio reversed early losses to tick up 0.3 percent and BHP gained 1 percent.
Britain's FTSE 100 .FTSE was up 0.9 percent, Germany's DAX .GDAXI up 0.6 percent and France's CAC .FCHI up 0.5 percent.
M&A LIFTS INSURERS, BERNANKE EYED
Aon Corp , one of the world's largest insurance brokers, made a recommended cash offer for Benfield that valued the UK-listed broker at 844 million pounds.
Benfield stock rose nearly 30 percent. Prudential gained 3.8 percent and Axa rose 1.5 percent.
Investor focus shifts to a speech on financial stability later in the day from Federal Reserve Chairman Ben Bernanke at the Federal Reserve Bank of Kansas Economic Symposium.
"Bernanke will have to come up with some cuddly words to negate some of the hyperbole of (former IMF chief economist Kenneth) Rogoff," said Seven Investment's Urquhart Stewart.
Rogoff said on Tuesday that the worst of the global financial crisis was yet to come and a large U.S. bank would fail in the next few months as the world's biggest economy hits more trouble.
Global equities have taken a battering over the past year due to the credit crisis originating in the U.S. subprime mortgage market, which has driven banks to make large writedowns on investments and slowed the global economy.
The FTSEurofirst 300 is down 23 percent so far this year, and on track in August for its ninth month of losses in the last 10.
Underlining investor concerns, revised official data showed Britain's economy unexpectedly ground to a halt in the second quarter, its weakest performance since the recession of the early 1990s.
Euro zone June industry orders were down by 0.3 percent month on month. (Editing by Paul Bolding)
Read more...
Forex Technical Analysis
Daily Forex Technicals | Written by DeltaStock Inc. | Aug 22 08 08:26 GMT |
EUR/USD
Current level-1.4876
EUR/USD is in а downtrend from 1.6039 (15 July 2008). Technical indicators are descending and trading is situated below the 50- and 200-Day SMA, currently projected at 1.5677 and 1.5227.
Still in the broad consolidation since 1.4629 and current target remains 1.4951, but with yesterday's minor top at 1.4906, intraday expect a break below 1.4861 to target 1.4810-16, before the final swing unwinds upwards to 1.4942.
Today's strategy: Stand aside.
Resistance Support
intraday intraweek intraday intraweek
1.4906 1.4950 1.4621 1.4621
1.4950 1.5507 1.4563 1.4438
USD/JPY
Current level - 109.04
The pair is still in the broad consolidation since 95.75 short-term bottom, aiming at 111.03. Trading is situated above the 50- and 200-day SMA, currently projected at 107.09 and 106.62.
After reaching a local bottom at 108.17, the pair entered a larger corrective phase towards 109.55. We expect the trading activity to be limited below that resistance, for renewing the downtrend towards 106.36.
Today's strategy: Stand aside.
Resistance Support
intraday intraweek intraday intraweek
109.51 111.03 108.37 108.37
111.03 112.36 107.65 103.83
GBP/USD
Current level- 1.8724
The pair has finished the broad consolidation above 1.9338 and the general downtrend has been renewed, targeting levels below 1.85+. Trading is situated below the 50- and 200-day SMA, currently projected at 1.9752 and 1.9853.
Our minor target at 1.8803 has almost been reached, so downward phase is likely to follow, towards 1.8681 before one final attempt to 1.8918. Below 1.8539 it will be clear, that the downtrend has been renewed for 1.7932.
Today's strategy : Stand aside.
Resistance Support
intraday intraweek intraday intraweek
1.8803 1.9929 1.8683 1.84+
1.8918 2.0153 1.8539 1.80-sentiment
DeltaStock Inc. - Online Forex & Securities Broker
www.deltastock.com
RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.
Read more...
EUR/USD
Current level-1.4876
EUR/USD is in а downtrend from 1.6039 (15 July 2008). Technical indicators are descending and trading is situated below the 50- and 200-Day SMA, currently projected at 1.5677 and 1.5227.
Still in the broad consolidation since 1.4629 and current target remains 1.4951, but with yesterday's minor top at 1.4906, intraday expect a break below 1.4861 to target 1.4810-16, before the final swing unwinds upwards to 1.4942.
Today's strategy: Stand aside.
Resistance Support
intraday intraweek intraday intraweek
1.4906 1.4950 1.4621 1.4621
1.4950 1.5507 1.4563 1.4438
USD/JPY
Current level - 109.04
The pair is still in the broad consolidation since 95.75 short-term bottom, aiming at 111.03. Trading is situated above the 50- and 200-day SMA, currently projected at 107.09 and 106.62.
After reaching a local bottom at 108.17, the pair entered a larger corrective phase towards 109.55. We expect the trading activity to be limited below that resistance, for renewing the downtrend towards 106.36.
Today's strategy: Stand aside.
Resistance Support
intraday intraweek intraday intraweek
109.51 111.03 108.37 108.37
111.03 112.36 107.65 103.83
GBP/USD
Current level- 1.8724
The pair has finished the broad consolidation above 1.9338 and the general downtrend has been renewed, targeting levels below 1.85+. Trading is situated below the 50- and 200-day SMA, currently projected at 1.9752 and 1.9853.
Our minor target at 1.8803 has almost been reached, so downward phase is likely to follow, towards 1.8681 before one final attempt to 1.8918. Below 1.8539 it will be clear, that the downtrend has been renewed for 1.7932.
Today's strategy : Stand aside.
Resistance Support
intraday intraweek intraday intraweek
1.8803 1.9929 1.8683 1.84+
1.8918 2.0153 1.8539 1.80-sentiment
DeltaStock Inc. - Online Forex & Securities Broker
www.deltastock.com
RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.
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FTSE rises 0.4 pct early as oils and banks gain
* FTSE 100 rises 0.4 pct * Financials rebound; Aon makes offer for Benfield * Energy stocks track higher crude, miners mixed
By Dominic Lau
LONDON, Aug 22 (Reuters) - Britain's leading share index edged up early on Friday as energy stocks tracked higher crude prices, while financials rebounded after recent losses and were boosted by merger and acquisition activity in the sector.
By 0751 GMT, the FTSE 100 .FTSE was up 21.3 points, or 0.4 percent at 5,391.5 after ticking down 1.6 points on Thursday. The UK benchmark is down more than 16 percent for the year. Banks rebounded after recent losses as Barclays , Royal Bank of Scotland , Lloyds TSB , HBOS , HSBC and Standard Chartered gained between 0.2 and 2.3 percent.
The sector was also helped by the announcement from Benfield and Aon Corp , one of the world's largest insurance brokers, that the U.S. firm had made a recommended cash offer for the UK-listed broker.
Mid-cap Benfield leapt nearly 30 percent.
Bradford & Bingley advanced nearly 2 percent after the mid-cap mortgage lender said underwriters and other banks had entered a lock-up agreement under which they have agreed not to dispose of the 426.7 million new shares for 20 days.
Investors are likely to keep an eye on the second reading of the UK GDP figures, due at 0830 GMT, for further clues on the state of the British economy, and on what the U.S. Federal Reserve's Ben Bernanke has to say about the credit market and the financial sector in a speech at 1400 GMT.
"At one point there were some hopes that there could be an easing on inflationary pressure as oil prices were going down. That's now slightly reversed," said Richard Hunter, head of UK equities at Hargreaves Lansdown. "Inflationary pressures remain and the underlying concern is still much the same."
"There is a little bit of a jump in the index. It's slightly exasperated by the fact that there is very thin trading volume at the moment ... It will be probably September when we see some volumes coming back."
Energy stocks were in demand as crude prices CLc1 traded above $121 a barrel. BP , Royal Dutch Shell , BG Group , Tullow Oil and Cairn Energy added 0.3 to 2.3 percent.
Russia-focused Imperial Energy rose 1.8 percent after the Financial Times said the mid-cap firm has made good progress in talks with India's Oil and Natural Gas Corp and is close to agreeing a takeover deal valuing Imperial at about $2.8 billion.
Miners were mixed, with BHP Billiton and Rio Tinto down. Eurasian Natural Resources , Anglo American , Antofagasta , Xstrata , Lonmin , Ferrexpo were up.
WPP slipped 0.3 percent despite the advertising group beating market expectations with its like-for-like sales growth for the first half and raising its interim dividend by 20 percent.
Among those reporting results, mid-cap Rentokil Initial shed 6.1 percent after the services group posted a 55.3 percent fall in first-half pretax profit and said the current rate of losses would continue for the remainder of the year.
Arriva soared 5.6 percent after the bus and train operator reported a 40 percent rise in pretax profit, reflecting rising demand for its bus operations and the first contribution from its UK CrossCountry rail franchise. (Editing by Paul Bolding)
Read more...
By Dominic Lau
LONDON, Aug 22 (Reuters) - Britain's leading share index edged up early on Friday as energy stocks tracked higher crude prices, while financials rebounded after recent losses and were boosted by merger and acquisition activity in the sector.
By 0751 GMT, the FTSE 100 .FTSE was up 21.3 points, or 0.4 percent at 5,391.5 after ticking down 1.6 points on Thursday. The UK benchmark is down more than 16 percent for the year. Banks rebounded after recent losses as Barclays , Royal Bank of Scotland , Lloyds TSB , HBOS , HSBC and Standard Chartered gained between 0.2 and 2.3 percent.
The sector was also helped by the announcement from Benfield and Aon Corp , one of the world's largest insurance brokers, that the U.S. firm had made a recommended cash offer for the UK-listed broker.
Mid-cap Benfield leapt nearly 30 percent.
Bradford & Bingley advanced nearly 2 percent after the mid-cap mortgage lender said underwriters and other banks had entered a lock-up agreement under which they have agreed not to dispose of the 426.7 million new shares for 20 days.
Investors are likely to keep an eye on the second reading of the UK GDP figures, due at 0830 GMT, for further clues on the state of the British economy, and on what the U.S. Federal Reserve's Ben Bernanke has to say about the credit market and the financial sector in a speech at 1400 GMT.
"At one point there were some hopes that there could be an easing on inflationary pressure as oil prices were going down. That's now slightly reversed," said Richard Hunter, head of UK equities at Hargreaves Lansdown. "Inflationary pressures remain and the underlying concern is still much the same."
"There is a little bit of a jump in the index. It's slightly exasperated by the fact that there is very thin trading volume at the moment ... It will be probably September when we see some volumes coming back."
Energy stocks were in demand as crude prices CLc1 traded above $121 a barrel. BP , Royal Dutch Shell , BG Group , Tullow Oil and Cairn Energy added 0.3 to 2.3 percent.
Russia-focused Imperial Energy rose 1.8 percent after the Financial Times said the mid-cap firm has made good progress in talks with India's Oil and Natural Gas Corp and is close to agreeing a takeover deal valuing Imperial at about $2.8 billion.
Miners were mixed, with BHP Billiton and Rio Tinto down. Eurasian Natural Resources , Anglo American , Antofagasta , Xstrata , Lonmin , Ferrexpo were up.
WPP slipped 0.3 percent despite the advertising group beating market expectations with its like-for-like sales growth for the first half and raising its interim dividend by 20 percent.
Among those reporting results, mid-cap Rentokil Initial shed 6.1 percent after the services group posted a 55.3 percent fall in first-half pretax profit and said the current rate of losses would continue for the remainder of the year.
Arriva soared 5.6 percent after the bus and train operator reported a 40 percent rise in pretax profit, reflecting rising demand for its bus operations and the first contribution from its UK CrossCountry rail franchise. (Editing by Paul Bolding)
Read more...
Japan mulling extra budget for economic stimulus
By Yuzo Saeki
TOKYO, Aug 22 (Reuters) - The government is considering an extra budget to finance steps to support Japan's economy against the effects of higher living expenses and costs for businesses.
The move underscores speculation of large-scale public spending, with the junior partner in the ruling coalition calling for steps worth more than 1 trillion yen ($9.19 billion), but has prompted concern about hindering efforts to rein in public debt.
Economics Minister Kaoru Yosano said on Friday that Prime Minister Yasuo Fukuda and senior cabinet members, including Finance Minister Bunmei Ibuki, had agreed to start preparing for a possible extra budget.
Although the size of the package is uncertain, Yosano said measures are likely to be mapped out next week.
The possibility of an extra budget has become an issue because the government could fund it by reallocating existing spending or by tapping into budget reserves rather than issuing more debt, depending on its size.
Akihiro Ota, the leader of the New Komeito party, the junior partner in the ruling coalition, told Reuters on Friday the government should spend more than 1 trillion yen on the measures.
"Emergency measures are necessary and we need to stop the bleeding," Ota said in an interview. "If businesses cannot continue, it would render a further blow to the economy."
The government has said it will compile an economic package this month to help businesses and individuals cope with rising energy and food prices amid heightening fears of a recession in the world's second-biggest economy.
But given Japan's huge public debt, the government has said the package will differ from past measures that focused on stimulating demand through increased public spending.
Ota said the government could use part of reserves held in special accounts to fund the package, and issuing new debt-covering bonds was not a prerequisite.
That echoed remarks by Ibuki, who said on Friday he is not thinking of an issue of government bonds to finance the measures.
The government has transferred 1.8 trillion yen from a special account for foreign currency assets acquired through market intervention to help finance the general account budget for the fiscal year to next March.
In an effort to rein in the debt, Fukuda has reiterated that the government will uphold its aim of achieving by 2012 a "primary balance" under which general spending excluding debt servicing is matched by revenues without new debt issuance.
Ota said the target should be kept, but that the economic situation is different from 2006 when it was set.
"We need to first have an emergency economic policy," Ota said. "Unlike the government's way of thinking that stresses managing finances, we are looking at people's livelihoods."
Tokyo resorted to a series of economic packages featuring large spending on public work projects in the 1990s when the economy was languishing in the aftermath of the bursting of an asset bubble. That led public debt to snowball.
Japan's public debt amounts to about 1-½ times gross domestic product, the highest ratio among industrial nations. ($1=108.86 Yen) (Additional reporting by Linda Sieg; Editing by Michael Watson)
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TOKYO, Aug 22 (Reuters) - The government is considering an extra budget to finance steps to support Japan's economy against the effects of higher living expenses and costs for businesses.
The move underscores speculation of large-scale public spending, with the junior partner in the ruling coalition calling for steps worth more than 1 trillion yen ($9.19 billion), but has prompted concern about hindering efforts to rein in public debt.
Economics Minister Kaoru Yosano said on Friday that Prime Minister Yasuo Fukuda and senior cabinet members, including Finance Minister Bunmei Ibuki, had agreed to start preparing for a possible extra budget.
Although the size of the package is uncertain, Yosano said measures are likely to be mapped out next week.
The possibility of an extra budget has become an issue because the government could fund it by reallocating existing spending or by tapping into budget reserves rather than issuing more debt, depending on its size.
Akihiro Ota, the leader of the New Komeito party, the junior partner in the ruling coalition, told Reuters on Friday the government should spend more than 1 trillion yen on the measures.
"Emergency measures are necessary and we need to stop the bleeding," Ota said in an interview. "If businesses cannot continue, it would render a further blow to the economy."
The government has said it will compile an economic package this month to help businesses and individuals cope with rising energy and food prices amid heightening fears of a recession in the world's second-biggest economy.
But given Japan's huge public debt, the government has said the package will differ from past measures that focused on stimulating demand through increased public spending.
Ota said the government could use part of reserves held in special accounts to fund the package, and issuing new debt-covering bonds was not a prerequisite.
That echoed remarks by Ibuki, who said on Friday he is not thinking of an issue of government bonds to finance the measures.
The government has transferred 1.8 trillion yen from a special account for foreign currency assets acquired through market intervention to help finance the general account budget for the fiscal year to next March.
In an effort to rein in the debt, Fukuda has reiterated that the government will uphold its aim of achieving by 2012 a "primary balance" under which general spending excluding debt servicing is matched by revenues without new debt issuance.
Ota said the target should be kept, but that the economic situation is different from 2006 when it was set.
"We need to first have an emergency economic policy," Ota said. "Unlike the government's way of thinking that stresses managing finances, we are looking at people's livelihoods."
Tokyo resorted to a series of economic packages featuring large spending on public work projects in the 1990s when the economy was languishing in the aftermath of the bursting of an asset bubble. That led public debt to snowball.
Japan's public debt amounts to about 1-½ times gross domestic product, the highest ratio among industrial nations. ($1=108.86 Yen) (Additional reporting by Linda Sieg; Editing by Michael Watson)
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China tells coal exporters to cut back
(Repeating story first published Aug. 21)
By Rujun Shen
SHANGHAI, Aug 21 (Reuters) - China has asked its coal exporters to reduce exports, as it is in the grip of its worst power crisis since 2004, largely caused by a coal shortage and high prices.
The government is eager to keep more supply back for local generators, many of which have been unable or unwilling to buy expensive coal.
But the move, together with the export tax hike, is unlikely to greatly ease the coal and power shortages in China.
The government did not issue a written order, but made the request orally in a meeting held last week just before it hiked export taxes on coal, but the extent of the export reduction sought was not clear, traders said.
All China's coal exports go through four state-owned firms: China Coal Energy Co Ltd , China Shenhua Energy Co Ltd , Shanxi Coal Import & Export Group and Minmetals Corp.
"It was an oral order. I can't comment on the quantity," said an executive at one of the firms.
Traders said the order, together with the imposition of a 10 percent tax on coal exports, could see shipments down by two-thirds in September. China exported an average of 4.3 million tonnes of coal a month in the first seven months of the year.
"Coal exports in September will be greatly reduced," said a trader at a foreign firm who is based in Beijing.
China exported about 53 million tonnes of coal, or about 2 percent of its total coal output, in 2007, according to official data from the National Bureau of Statistics and the customs.
"The supply tightness will not be eased much, even if exports are reduced. Rather, the move shows the attitude of government," said Henry Liu, an analyst at Macquarie Bank in Shanghai.
Falling supplies from China, as well as other coal producing countries, have helped Asia's benchmark coal price surge more than twofold in the past twelve months.
Beijing has raised power tariffs twice in the past two months, in an effort to help power generators who have been squeezed by soaring costs of coal.
Read more...
By Rujun Shen
SHANGHAI, Aug 21 (Reuters) - China has asked its coal exporters to reduce exports, as it is in the grip of its worst power crisis since 2004, largely caused by a coal shortage and high prices.
The government is eager to keep more supply back for local generators, many of which have been unable or unwilling to buy expensive coal.
But the move, together with the export tax hike, is unlikely to greatly ease the coal and power shortages in China.
The government did not issue a written order, but made the request orally in a meeting held last week just before it hiked export taxes on coal, but the extent of the export reduction sought was not clear, traders said.
All China's coal exports go through four state-owned firms: China Coal Energy Co Ltd , China Shenhua Energy Co Ltd , Shanxi Coal Import & Export Group and Minmetals Corp.
"It was an oral order. I can't comment on the quantity," said an executive at one of the firms.
Traders said the order, together with the imposition of a 10 percent tax on coal exports, could see shipments down by two-thirds in September. China exported an average of 4.3 million tonnes of coal a month in the first seven months of the year.
"Coal exports in September will be greatly reduced," said a trader at a foreign firm who is based in Beijing.
China exported about 53 million tonnes of coal, or about 2 percent of its total coal output, in 2007, according to official data from the National Bureau of Statistics and the customs.
"The supply tightness will not be eased much, even if exports are reduced. Rather, the move shows the attitude of government," said Henry Liu, an analyst at Macquarie Bank in Shanghai.
Falling supplies from China, as well as other coal producing countries, have helped Asia's benchmark coal price surge more than twofold in the past twelve months.
Beijing has raised power tariffs twice in the past two months, in an effort to help power generators who have been squeezed by soaring costs of coal.
Read more...
Deutsche Bahn adds banks, eyes Oct 27 launch-source
FRANKFURT, Aug 22 (Reuters) - Deutsche Bahn [DBN.UL] has added several banks to the consortium handling its initial public offering and plans Oct. 27 as the first trading day, a source familiar with the situation said on Friday.
The source said Citigroup , Credit Suisse , ABN AMRO and RBS have been added to the consortium as well as co-managers Commerzbank , DZ Bank, WestLB [WDLG.UL], BNP Paribas and Merrill Lynch ML.N.
In May, Deutsche Bahn had already selected Deutsche Bank , Goldman Sachs , Morgan Stanley and UBS as lead managers.
In addition, Dresdner Bank was selected to handle marketing to retail investors and Daiwa for preparations in the Japanese market.
Deutsche Bahn was not immediately available to comment. (Reporting by Kerstin Leitel)
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The source said Citigroup , Credit Suisse , ABN AMRO and RBS have been added to the consortium as well as co-managers Commerzbank , DZ Bank, WestLB [WDLG.UL], BNP Paribas and Merrill Lynch ML.N.
In May, Deutsche Bahn had already selected Deutsche Bank , Goldman Sachs , Morgan Stanley and UBS as lead managers.
In addition, Dresdner Bank was selected to handle marketing to retail investors and Daiwa for preparations in the Japanese market.
Deutsche Bahn was not immediately available to comment. (Reporting by Kerstin Leitel)
Read more...
U.K. Second Quarter GDP Levels: Summary (Table)
By Mark Evans
Aug. 22 (Bloomberg) -- Following is the summary of second quarter U.K. GDP from the Office for National Statistics in London:
NOTE: Gross Domestic Product (GDP) and its main components incorporate
annual chain linking.
*: At basic prices
SOURCE: National Statistics
To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net
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Aug. 22 (Bloomberg) -- Following is the summary of second quarter U.K. GDP from the Office for National Statistics in London:
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
------------- Quarterly % changes ------------
Chained Volume Indices
GDP market prices 0.0% 0.3% 0.6% 0.6% 0.9%
Gross value added* 0.0% 0.3% 0.6% 0.5% 0.8%
Implied Deflators
Gross domestic expenditure 0.8% 1.1% 0.5% 0.6% 1.0%
GDP market prices 0.6% 0.8% 0.5% 0.6% 1.0%
Gross value added* 0.8% 0.7% 0.7% 0.8% 1.2%
Value Indices at Current Prices
GDP market prices 0.6% 1.1% 1.0% 1.2% 1.9%
Gross value added* 0.8% 1.0% 1.2% 1.3% 2.0%
=============================================================================
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
Final Consumption Expenditure
Households -0.1% 1.1% 0.4% 0.9% 0.7%
General Government 0.4% 0.9% 0.2% 0.3% 0.5%
Gross fixed capital formation -5.3% -1.5% 2.2% 2.7% -1.9%
Exports -0.5% 0.6% -1.3% 1.3% 1.0%
Imports -1.4% -1.2% -0.7% 4.5% -0.9%
-------------- Annual % changes --------------
Chained Volume Indices
GDP market prices 1.4% 2.3% 2.8% 3.1% 3.3%
Gross value added* 1.4% 2.2% 2.7% 3.1% 3.2%
Implied Deflators
Total domestic Expenditure 2.9% 3.2% 2.3% 2.3% 2.9%
GDP market prices 2.6% 3.0% 2.7% 2.6% 3.4%
Gross value added* 3.0% 3.4% 3.1% 2.7% 3.4%
Value Indices at Current Prices
GDP market prices 4.0% 5.3% 5.6% 5.8% 6.7%
Gross value added* 4.4% 5.7% 5.9% 5.9% 6.7%
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
Final Consumption Expenditure
Households 2.3% 3.0% 2.7% 3.6% 2.8%
General Government 1.9% 2.0% 1.7% 2.0% 2.3%
Gross fixed capital formation -2.1% 1.4% 4.4% 4.9% 5.7%
Exports 0.2% 1.6% 0.2% 2.1% -11.3%
Imports 1.0% 1.6% 4.0% 4.6% -10.0%
---------------- Index Level -----------------
Chained Volume Indices
GDP market prices 112.9 112.9 112.6 111.9 111.3
Gross value added* 112.9 112.9 112.6 112.0 111.4
Implied Deflators
Total domestic Expenditure 113.9 113.0 111.8 111.3 110.7
GDP market prices 113.4 112.7 111.8 111.3 110.6
Gross value added* 113.8 113.0 112.1 111.4 110.5
Value Indices at Current Prices
GDP market prices 128.0 127.2 125.8 124.5 123.1
Gross value added* 128.5 127.5 126.3 124.7 123.1
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
---- Chained Volume Measure (GBP/Million) ----
GDP market prices 315,629 315,510 314,662 312,926 311,170
Gross value added* 280,425 280,419 279,663 278,129 276,635
Final Consumption Expenditure
Households 195,910 196,034 193,960 193,224 191,590
General Government 64,981 64,722 64,141 63,990 63,775
Gross fixed capital formation 54,751 57,813 58,669 57,417 55,901
Exports 85,101 85,495 84,945 86,075 84,972
Imports 95,195 96,581 97,767 98,462 94,221
=============================================================================
NOTE: Gross Domestic Product (GDP) and its main components incorporate
annual chain linking.
*: At basic prices
SOURCE: National Statistics
To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net
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European Market Recap: European Bonds Mixed, Equities Higher
European Market Recap: European Bonds Mixed, Equities Higher
22 Agustus 2008 16:18
(CEP News) - European equity markets are trading higher with the Eurostoxx up 14.97 points on the day and the UK FTSE 100 up 62.20 points to 5432.398.
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22 Agustus 2008 16:18
(CEP News) - European equity markets are trading higher with the Eurostoxx up 14.97 points on the day and the UK FTSE 100 up 62.20 points to 5432.398.
Read more...
BRIEF-Seadrill's Seawell wins $468 mln BP contract
OSLO, Aug 22 (Reuters) - The Norwegian unit of BP said:
* It has awarded Seawell, 73.4 percent owned by Norwegian oilfield services group Seadrill , five-year contracts worth 2.5 billion crowns ($468.4 million) for platform drilling and maintenance services off Norway.
* It has also awared Seawell a 125 million crown contract to upgrade the Ula discovery drilling rig, where drilling will commence in 2009. (Reporting by Oslo newsroom)
Read more...
* It has awarded Seawell, 73.4 percent owned by Norwegian oilfield services group Seadrill , five-year contracts worth 2.5 billion crowns ($468.4 million) for platform drilling and maintenance services off Norway.
* It has also awared Seawell a 125 million crown contract to upgrade the Ula discovery drilling rig, where drilling will commence in 2009. (Reporting by Oslo newsroom)
Read more...
Asia-Pacific Market Recap: Fixed Income Gaining, Equities Closed Mixed
Asia-Pacific Market Recap: Fixed Income Gaining, Equities Closed Mixed
22 Agustus 2008 13:18
(CEP News) - Asia-Pacific fixed income markets are declining and equities closed mixed with yields on Australian 10-year bonds up 4.9 bps to 5.78% and Japanese 10-year government bonds up 3.0 bps to 1.45%.
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22 Agustus 2008 13:18
(CEP News) - Asia-Pacific fixed income markets are declining and equities closed mixed with yields on Australian 10-year bonds up 4.9 bps to 5.78% and Japanese 10-year government bonds up 3.0 bps to 1.45%.
Read more...
Paulson Might Weigh Whom to Hurt in Any Fannie, Freddie Rescue
By John Brinsley and Rebecca Christie
Aug. 22 (Bloomberg) -- Treasury Secretary Henry Paulson's response to the sinking fortunes of Fannie Mae and Freddie Mac might boil down to picking which investors get hurt and by how much.
At stake if Paulson does intervene: the fate of worldwide bondholders of $5.2 trillion of agency and mortgage-backed debt and scores of large banks, insurers and pension funds that own the firms' common and preferred shares.
Paulson's choices probably include buying Fannie's and Freddie's bonds, a special class of preferred shares or preferred shares convertible into common stock, analysts and investors said. The terms and conditions of any purchases would put the government ahead of other creditors and stockholders, while ensuring that bondholders are protected, they said.
``He's had zero clarity on this whole issue, and until the market knows where Hank's going to be in the capitalization structure, then it gets worse not better,'' said Paul McCulley, a fund manager at Pacific Investment Management Co., which has the world's largest bond fund.
``The presumption'' is that holders of the government- chartered companies' subordinated bonds ``will be covered,'' McCulley said in an interview on Bloomberg Television from Jackson Hole, Wyoming. Common shareholders would be wiped out, he predicted.
Emergency Power
Paulson got the power to make purchases of the two companies' debt or equity in legislation enacted July 30 that was aimed at shoring up confidence in the beleaguered mortgage- finance companies.
The Treasury chief could also forego using that authority, and wait until Fannie Mae's and Freddie Mac's capital is so eroded that regulators can put them into receivership.
``I don't think they'll do half-measures if it means using taxpayer funds,'' said Andrew Laperriere, managing director at International Strategy & Investment Group, a money management and research firm in Washington.
``That requires steps including complete control,'' said Laperriere, who used to work as chief economic adviser to former Republican House Majority Leader Richard Armey.
Paulson telephoned Senate Banking Committee members this week to tell them the Treasury is closely monitoring the situation and, for now, doesn't plan to inject taxpayer funds, according to a Senate aide who spoke on condition of anonymity.
Assuring Lawmakers
``We are staying on top of the situation and communicating with the companies and their regulators,'' Treasury spokeswoman Jennifer Zuccarelli said.
Meanwhile, ``top executives'' at Freddie Mac ``have been talking with many potential investors this week,'' said Sharon McHale, a spokeswoman for the McLean, Virginia-based company.
Shares in Washington-based Fannie have dropped 60 percent and those of Freddie have lost 64 percent since July 30.
``Private shareholders should be concerned,'' said Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington and a former official at the Treasury and the Federal Reserve. Traders ``will drive the price of the stocks down to nickels and dimes,'' at which point Paulson will step in, he predicted.
Truman forecast the Treasury would end Fannie and Freddie dividend payments, with officials taking over management.
Fannie, the largest mortgage-finance provider, was created in the 1930s and became a publicly owned company in 1968. Freddie was started in 1970. Designed to boost homeownership, the companies issued debt to finance purchases of mortgages and package home loans into bonds sold on to investors.
Banks at Risk
Their debt is held by companies including MetLife Inc., the largest U.S. life insurer, American Equity Investment Life Holding Co., and GE Asset Management Inc. Preferred shares are held by banks from Philadelphia-based Sovereign Bancorp to Frontier Financial Corp. of Everett, Washington.
As mortgage defaults climbed, concern mounted Fannie and Freddie lacked sufficient capital. Paulson asked Congress for emergency powers to shore up support for the firms.
If either company has trouble selling bonds to finance maturing debt, Paulson's hand may be pressed. They have about $20 billion of unsecured debt due on average every week, with more than $220 billion maturing by the end of next month.
A takeover could also be triggered if either company fails to meet its regulatory capital standards, to be released by the Federal Housing Finance Agency next month.
`Act Soon'
``Treasury might be forced to act soon to fight a market- psychology problem instead of being able to act on its own time,'' said Joshua Rosner, an analyst with independent research firm Graham Fisher & Co. in New York.
There's no consensus about how widespread the losses would be in an intervention. Pete Davis, president of Davis Capital Investment, an independent advisory firm in Washington, argued that both equity and subordinated bondholders wouldn't be protected, with owners of mortgage-backed securities and senior debt kept secure.
Davis wrote in a note yesterday that Paulson will probably aim to put off using taxpayer funds as long as Fannie and Freddie are still able to fund the U.S. mortgage market.
``Paulson does not want his legacy to be that he committed $50 billion or more of taxpayer money to bailing out the'' firms, Davis wrote.
To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; John Brinsley in Washington at jbrinsley@bloomberg.net
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Aug. 22 (Bloomberg) -- Treasury Secretary Henry Paulson's response to the sinking fortunes of Fannie Mae and Freddie Mac might boil down to picking which investors get hurt and by how much.
At stake if Paulson does intervene: the fate of worldwide bondholders of $5.2 trillion of agency and mortgage-backed debt and scores of large banks, insurers and pension funds that own the firms' common and preferred shares.
Paulson's choices probably include buying Fannie's and Freddie's bonds, a special class of preferred shares or preferred shares convertible into common stock, analysts and investors said. The terms and conditions of any purchases would put the government ahead of other creditors and stockholders, while ensuring that bondholders are protected, they said.
``He's had zero clarity on this whole issue, and until the market knows where Hank's going to be in the capitalization structure, then it gets worse not better,'' said Paul McCulley, a fund manager at Pacific Investment Management Co., which has the world's largest bond fund.
``The presumption'' is that holders of the government- chartered companies' subordinated bonds ``will be covered,'' McCulley said in an interview on Bloomberg Television from Jackson Hole, Wyoming. Common shareholders would be wiped out, he predicted.
Emergency Power
Paulson got the power to make purchases of the two companies' debt or equity in legislation enacted July 30 that was aimed at shoring up confidence in the beleaguered mortgage- finance companies.
The Treasury chief could also forego using that authority, and wait until Fannie Mae's and Freddie Mac's capital is so eroded that regulators can put them into receivership.
``I don't think they'll do half-measures if it means using taxpayer funds,'' said Andrew Laperriere, managing director at International Strategy & Investment Group, a money management and research firm in Washington.
``That requires steps including complete control,'' said Laperriere, who used to work as chief economic adviser to former Republican House Majority Leader Richard Armey.
Paulson telephoned Senate Banking Committee members this week to tell them the Treasury is closely monitoring the situation and, for now, doesn't plan to inject taxpayer funds, according to a Senate aide who spoke on condition of anonymity.
Assuring Lawmakers
``We are staying on top of the situation and communicating with the companies and their regulators,'' Treasury spokeswoman Jennifer Zuccarelli said.
Meanwhile, ``top executives'' at Freddie Mac ``have been talking with many potential investors this week,'' said Sharon McHale, a spokeswoman for the McLean, Virginia-based company.
Shares in Washington-based Fannie have dropped 60 percent and those of Freddie have lost 64 percent since July 30.
``Private shareholders should be concerned,'' said Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington and a former official at the Treasury and the Federal Reserve. Traders ``will drive the price of the stocks down to nickels and dimes,'' at which point Paulson will step in, he predicted.
Truman forecast the Treasury would end Fannie and Freddie dividend payments, with officials taking over management.
Fannie, the largest mortgage-finance provider, was created in the 1930s and became a publicly owned company in 1968. Freddie was started in 1970. Designed to boost homeownership, the companies issued debt to finance purchases of mortgages and package home loans into bonds sold on to investors.
Banks at Risk
Their debt is held by companies including MetLife Inc., the largest U.S. life insurer, American Equity Investment Life Holding Co., and GE Asset Management Inc. Preferred shares are held by banks from Philadelphia-based Sovereign Bancorp to Frontier Financial Corp. of Everett, Washington.
As mortgage defaults climbed, concern mounted Fannie and Freddie lacked sufficient capital. Paulson asked Congress for emergency powers to shore up support for the firms.
If either company has trouble selling bonds to finance maturing debt, Paulson's hand may be pressed. They have about $20 billion of unsecured debt due on average every week, with more than $220 billion maturing by the end of next month.
A takeover could also be triggered if either company fails to meet its regulatory capital standards, to be released by the Federal Housing Finance Agency next month.
`Act Soon'
``Treasury might be forced to act soon to fight a market- psychology problem instead of being able to act on its own time,'' said Joshua Rosner, an analyst with independent research firm Graham Fisher & Co. in New York.
There's no consensus about how widespread the losses would be in an intervention. Pete Davis, president of Davis Capital Investment, an independent advisory firm in Washington, argued that both equity and subordinated bondholders wouldn't be protected, with owners of mortgage-backed securities and senior debt kept secure.
Davis wrote in a note yesterday that Paulson will probably aim to put off using taxpayer funds as long as Fannie and Freddie are still able to fund the U.S. mortgage market.
``Paulson does not want his legacy to be that he committed $50 billion or more of taxpayer money to bailing out the'' firms, Davis wrote.
To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; John Brinsley in Washington at jbrinsley@bloomberg.net
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South Korea's Prices Will Remain High, Kang Says
By Seyoon Kim
Aug. 22 (Bloomberg) -- South Korea's consumer prices are likely to remain high this month and in September even after oil's recent decline, Finance Minister Kang Man Soo said.
``Oil prices have stabilized somewhat, but the impact on domestic prices is likely to remain through this month and the next,'' Kang said at a weekly government meeting in Gwacheon today.
Consumer prices climbed 5.9 percent in July from a year earlier, the biggest gain since 1998, on costlier oil. Record fuel and food costs have been reducing purchasing power for consumers and hurting corporate profits. The price of Dubai crude, South Korea's benchmark, has fallen 17 percent since July.
The Bank of Korea on Aug. 7 raised interest rates to an eight-year high of 5.25 percent, joining central banks across the region in increasing borrowing costs to stem inflation.
Kang said the government plans to increase shipments of fish and other food ahead of the Chusok Thanksgiving holidays due in September, as rising demand may push up prices. South Koreans buy more food and gifts ahead of the holidays, which fall on Sept. 13- 15 this year.
The government will monitor 21 key food prices and service charges including rice, pork, chicken, eggs, apples, widely consumed ahead of the Chusok holidays.
Kang urged ministers to check price trends and join efforts to stabilize prices. Kang also asked each ministry to implement planned government spending on projects to help the economy.
To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
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Aug. 22 (Bloomberg) -- South Korea's consumer prices are likely to remain high this month and in September even after oil's recent decline, Finance Minister Kang Man Soo said.
``Oil prices have stabilized somewhat, but the impact on domestic prices is likely to remain through this month and the next,'' Kang said at a weekly government meeting in Gwacheon today.
Consumer prices climbed 5.9 percent in July from a year earlier, the biggest gain since 1998, on costlier oil. Record fuel and food costs have been reducing purchasing power for consumers and hurting corporate profits. The price of Dubai crude, South Korea's benchmark, has fallen 17 percent since July.
The Bank of Korea on Aug. 7 raised interest rates to an eight-year high of 5.25 percent, joining central banks across the region in increasing borrowing costs to stem inflation.
Kang said the government plans to increase shipments of fish and other food ahead of the Chusok Thanksgiving holidays due in September, as rising demand may push up prices. South Koreans buy more food and gifts ahead of the holidays, which fall on Sept. 13- 15 this year.
The government will monitor 21 key food prices and service charges including rice, pork, chicken, eggs, apples, widely consumed ahead of the Chusok holidays.
Kang urged ministers to check price trends and join efforts to stabilize prices. Kang also asked each ministry to implement planned government spending on projects to help the economy.
To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
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BOJ Sees Few Signs of Wage-Price Spiral, Minutes Show
By Mayumi Otsuma
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 108.98 per dollar as of 12:39 p.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.
Minutes published from other central banks this week show the difficulties policy makers are facing as economic growth slows and inflation accelerates.
The Bank of England was split three ways in August, with one member arguing for higher rates to tame prices and another voting for a cut to stave off a recession. Australia's central bank said it may soon cut rates for the first time in seven years to avoid a deeper slowdown, after increasing borrowing costs to a 12-year high of 7.25 percent in March to quell inflation.
Japan's economy, the world's second largest, shrank at an annual 2.4 percent pace in the three months ended June 30. Economists surveyed say the nation will grow an annualized 0.6 percent this quarter and some predict a second contraction.
May `Shrink Again'
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 Bank of Japan 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 that keeping rates low for a long time could overstimulate the economy once growth picks up, according to the minutes.
Japan has kept the key rate, the lowest among major economies, unchanged since doubling it to 0.5 percent in February 2007. The U.S. Federal Reserve's benchmark is 2 percent and the European Central Bank raised its rate to 4.25 percent this month.
The central bank began releasing the minutes sooner than previously 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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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 108.98 per dollar as of 12:39 p.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.
Minutes published from other central banks this week show the difficulties policy makers are facing as economic growth slows and inflation accelerates.
The Bank of England was split three ways in August, with one member arguing for higher rates to tame prices and another voting for a cut to stave off a recession. Australia's central bank said it may soon cut rates for the first time in seven years to avoid a deeper slowdown, after increasing borrowing costs to a 12-year high of 7.25 percent in March to quell inflation.
Japan's economy, the world's second largest, shrank at an annual 2.4 percent pace in the three months ended June 30. Economists surveyed say the nation will grow an annualized 0.6 percent this quarter and some predict a second contraction.
May `Shrink Again'
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 Bank of Japan 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 that keeping rates low for a long time could overstimulate the economy once growth picks up, according to the minutes.
Japan has kept the key rate, the lowest among major economies, unchanged since doubling it to 0.5 percent in February 2007. The U.S. Federal Reserve's benchmark is 2 percent and the European Central Bank raised its rate to 4.25 percent this month.
The central bank began releasing the minutes sooner than previously 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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U.K. Economic Growth Stagnated in Second Quarter
By Jennifer Ryan
Aug. 22 (Bloomberg) -- The U.K. economy stagnated unexpectedly in the second quarter, ending the nation's longest stretch of economic growth in more than a century.
Gross domestic product was unchanged from the previous quarter, the Office for National Statistics said, compared with a previous estimate for growth of 0.2 percent. Economists had expected a 0.1 percent expansion, according to the median estimate of 34 economists. Growth was 1.4 percent from a year earlier, the weakest since 1992.
The report adds to pressure on the Bank of England to set aside concerns about inflation and cut interest rates. Policy makers led by Governor Mervyn King left their key rate unchanged for the past four months after the consumer price index surged to 4.4 percent, more than double the government's target.
``There is still worse to come,'' Ross Walker, an economist at Royal Bank of Scotland Group Plc in London, said in a Bloomberg Television interview. ``We may have to wait until early 2009 before we get the first rate cut because the inflation situation still looks pretty forbidding.''
The pound fell 0.7 percent against the dollar to $1.8608, continuing a fall from a peak above $2.11 in November.
Europe's second-largest economy emerged from its last recession in 1991 and then shrank for a single quarter in the three months ending in June 1992. Britain's pace of expansion from a year ago compares with 1 percent in Japan, 1.8 percent in the U.S., and 1.5 percent in the nations using the euro.
Blow for Brown
Today's report is a blow to Prime Minister Gordon Brown, who is battling to regain popularity with voters and quell talk of challenges to his authority from within the ruling Labour Party. He said on Aug. 20 that the government will announce measures to revive the economy next month.
The economy faltered after banks choked off credit following the collapse of the subprime mortgage market in the U.S. Goldman Sachs Group Inc. economists said yesterday tighter credit markets will push half of the world economy into a recession.
``The bank needs to prevent a fairly shallow recession from getting worse,'' said Stewart Robertson, an economist at Morley Fund Management in London, said before the report was published. ``They need to cut rates this year.''
Consumer Contraction
Household spending and construction shrank after the housing market slumped the most in at least a quarter century. Service industries, which range from banks to airlines, grew at the slowest rate since 1995.
Banks worldwide have shed more than 10,000 jobs and suffered $500 billion in writedowns and credit losses after the collapse of the subprime mortgage market in the U.S. last year. A report yesterday by recruitment firm Morgan McKinley showed London job openings in the financial-services industry fell 16 percent in July from a year earlier.
While living costs are rising in Britain, the value of homes is plummeting as banks withhold funding for mortgages. Residential property prices fell 8.8 percent in July from a year earlier, the most in at least a quarter century, mortgage lender HBOS Plc said on Aug. 7.
The bank's inflation forecasts show the consumer price index will fall below the 2 percent target in two years if interest rates remain unchanged. The nine members of the central bank's Monetary Policy Committee split three ways on how to steer interest rates this month, minutes of the meeting showed.
Rates Debate
David Blanchflower voted for a quarter point cut while Timothy Besley wanted an increase of the same amount. The majority of the committee including King opted for no change.
The simultaneous risks to inflation and growth mean that the bank is preparing to cut rates but will wait to do so until next year, said George Buckley, an economist at Deutsche Bank AG in London.
Yesterday, he said he now expects four quarter-point rate reductions next year, starting in February. Previously he was counting on two.
``The bank signaled that inflation is going to stay high for quite some time,'' he said. ``They might want to see evidence that it has come down or is peaking before they opt for a rate cut.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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Aug. 22 (Bloomberg) -- The U.K. economy stagnated unexpectedly in the second quarter, ending the nation's longest stretch of economic growth in more than a century.
Gross domestic product was unchanged from the previous quarter, the Office for National Statistics said, compared with a previous estimate for growth of 0.2 percent. Economists had expected a 0.1 percent expansion, according to the median estimate of 34 economists. Growth was 1.4 percent from a year earlier, the weakest since 1992.
The report adds to pressure on the Bank of England to set aside concerns about inflation and cut interest rates. Policy makers led by Governor Mervyn King left their key rate unchanged for the past four months after the consumer price index surged to 4.4 percent, more than double the government's target.
``There is still worse to come,'' Ross Walker, an economist at Royal Bank of Scotland Group Plc in London, said in a Bloomberg Television interview. ``We may have to wait until early 2009 before we get the first rate cut because the inflation situation still looks pretty forbidding.''
The pound fell 0.7 percent against the dollar to $1.8608, continuing a fall from a peak above $2.11 in November.
Europe's second-largest economy emerged from its last recession in 1991 and then shrank for a single quarter in the three months ending in June 1992. Britain's pace of expansion from a year ago compares with 1 percent in Japan, 1.8 percent in the U.S., and 1.5 percent in the nations using the euro.
Blow for Brown
Today's report is a blow to Prime Minister Gordon Brown, who is battling to regain popularity with voters and quell talk of challenges to his authority from within the ruling Labour Party. He said on Aug. 20 that the government will announce measures to revive the economy next month.
The economy faltered after banks choked off credit following the collapse of the subprime mortgage market in the U.S. Goldman Sachs Group Inc. economists said yesterday tighter credit markets will push half of the world economy into a recession.
``The bank needs to prevent a fairly shallow recession from getting worse,'' said Stewart Robertson, an economist at Morley Fund Management in London, said before the report was published. ``They need to cut rates this year.''
Consumer Contraction
Household spending and construction shrank after the housing market slumped the most in at least a quarter century. Service industries, which range from banks to airlines, grew at the slowest rate since 1995.
Banks worldwide have shed more than 10,000 jobs and suffered $500 billion in writedowns and credit losses after the collapse of the subprime mortgage market in the U.S. last year. A report yesterday by recruitment firm Morgan McKinley showed London job openings in the financial-services industry fell 16 percent in July from a year earlier.
While living costs are rising in Britain, the value of homes is plummeting as banks withhold funding for mortgages. Residential property prices fell 8.8 percent in July from a year earlier, the most in at least a quarter century, mortgage lender HBOS Plc said on Aug. 7.
The bank's inflation forecasts show the consumer price index will fall below the 2 percent target in two years if interest rates remain unchanged. The nine members of the central bank's Monetary Policy Committee split three ways on how to steer interest rates this month, minutes of the meeting showed.
Rates Debate
David Blanchflower voted for a quarter point cut while Timothy Besley wanted an increase of the same amount. The majority of the committee including King opted for no change.
The simultaneous risks to inflation and growth mean that the bank is preparing to cut rates but will wait to do so until next year, said George Buckley, an economist at Deutsche Bank AG in London.
Yesterday, he said he now expects four quarter-point rate reductions next year, starting in February. Previously he was counting on two.
``The bank signaled that inflation is going to stay high for quite some time,'' he said. ``They might want to see evidence that it has come down or is peaking before they opt for a rate cut.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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China Pays Nigeria, Algeria, Egypt Record Prices for July LNG
By Wang Ying and Xiao Yu
Aug. 22 (Bloomberg) -- China paid record prices for three liquefied natural gas spot cargoes last month as demand for the fuel increased in the world's fastest-growing major economy.
The second-largest energy consuming nation paid Nigeria $15.46 per million British thermal units, Egypt $15.37 and Algeria $15.39 for each individual LNG cargo, Bloomberg calculations based on customs figures released in Beijing today show. That exceeds the $14.35 per million Btu China paid Nigeria for LNG in June.
Guangdong Dapeng LNG Corp., which operates one of China's two liquefied natural gas terminals, is buying spot cargoes to supplement deliveries from Australia supplied under a 25-year agreement. The July spot LNG prices China paid are almost five times the $3.15 per million Btu it cost to import Australian LNG.
China paid Nigeria $49.5 million for 61,039 metric tons of LNG for immediate delivery, Egypt $48 million for 59,544 tons, Algeria $52.2 million for 64,679 tons and Australia $30.5 million for 189,430 tons, today's customs figures show.
A spot LNG cargo typically weighs between 55,000 and 60,000 tons. LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 258 degrees Fahrenheit) for transportation by ships to destinations not connected by pipeline.
Only the U.S. uses more energy than China. A British thermal unit is equivalent to the amount of heat generated by a lighted match.
To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net; Xiao Yu in Beijing at yxiao@bloomberg.net
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Aug. 22 (Bloomberg) -- China paid record prices for three liquefied natural gas spot cargoes last month as demand for the fuel increased in the world's fastest-growing major economy.
The second-largest energy consuming nation paid Nigeria $15.46 per million British thermal units, Egypt $15.37 and Algeria $15.39 for each individual LNG cargo, Bloomberg calculations based on customs figures released in Beijing today show. That exceeds the $14.35 per million Btu China paid Nigeria for LNG in June.
Guangdong Dapeng LNG Corp., which operates one of China's two liquefied natural gas terminals, is buying spot cargoes to supplement deliveries from Australia supplied under a 25-year agreement. The July spot LNG prices China paid are almost five times the $3.15 per million Btu it cost to import Australian LNG.
China paid Nigeria $49.5 million for 61,039 metric tons of LNG for immediate delivery, Egypt $48 million for 59,544 tons, Algeria $52.2 million for 64,679 tons and Australia $30.5 million for 189,430 tons, today's customs figures show.
A spot LNG cargo typically weighs between 55,000 and 60,000 tons. LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 258 degrees Fahrenheit) for transportation by ships to destinations not connected by pipeline.
Only the U.S. uses more energy than China. A British thermal unit is equivalent to the amount of heat generated by a lighted match.
To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net; Xiao Yu in Beijing at yxiao@bloomberg.net
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China Squelches Speech the Simple, Ancient Way: Ann Woolner
Commentary by Ann Woolner
Aug. 22 (Bloomberg) -- Say it's your job to quash protest in your country's capital city, even as the whole world is watching. You don't want to look repressive, but you don't want malcontents embarrassing your nation, either.
You've got plenty of work to do, so why not publicly invite any troublemakers out there to turn themselves in?
That way, you don't have to run about the country looking for them. Nor would you have to roll tanks over them if they show up en masse, say, at the central square.
Ah, but how to get them to come?
In the run-up to the Olympics, Chinese officials invited people wanting to protest to come into government offices and fill out forms identifying themselves and listing their complaints against the government, the slogans they intend to use and any other people wishing to join them in dissent.
China lured them by saying it would happily allow peaceful demonstrations during the Olympic Games for those who register ahead of time and confine their protests to certain parks.
True, those sites are far away from Olympic venues, but the plan was sufficiently accommodating of free speech to win approval of the International Olympic Committee.
Another example of the democratizing effect of the Olympics? Not so much.
Of 77 people who signed up, none got permits.
Worse, at least seven people who registered were detained, interrogated, charged, arrested or threatened with a year in a labor camp if they didn't keep quiet, according to human rights groups.
Applying Five Times
Two women in their late 70s applied five times to protest the 2001 demolition of their homes near Tiananmen Square. Like hundreds of thousands of other Chinese, their neighborhoods were razed to make way for modernization or the Olympics. Promises of new housing proved empty as the displaced were shoved into dilapidated flats, often far away from their neighborhoods.
Complaints like those of the two former neighbors, Wu Dianyuan and Wang Xiuying, are common. Perhaps because of that, instead of permits, they were given one-year sentences to ``re- education through labor'' for ``disturbing the public order,'' according to New York-based Human Rights in China and to an account in yesterday's New York Times.
To avoid serving their sentences in a labor camp, they would have to stay away from certain places and, presumably, keep their mouths shut.
That's one way to keep the designated protest zones empty.
Requests Withdrawn
As for the would-be protesters, 74 applicants withdrew their requests after police forwarded them to government agencies, China's official news service, Xianhua, reported this week.
The number sounds suspiciously high. And it would be lovely if the government is working to resolve all those people's problems as it says it is.
But it also sounds like a centuries-old practice at work.
In imperial days, it was called ``capital appeals,'' because people from the countryside unable to get a wrong righted locally would go to the capital. There they hoped to get the emperor's ear, according to Jonathan Ocko, a scholar on imperial China and chairman of North Carolina State University's history department.
``The popular notion was that if injustice was done, you could go to Beijing'' for relief, Ocko says.
There, they could bang on a special drum and announce they had a grievance. They might drop to their knees at the imperial palace gates, or throw themselves in front of an imperial procession and hand the emperor a letter.
No Satisfaction
Most grievances were referred back down the hierarchy to officials who had already offered no satisfaction, Ocko says. But it was a way for the people to let off steam and for authorities to take the pulse of the public.
As time wore on, this system of ``letters and visits,'' as it is called, became so institutionalized that most government agencies on all levels established an office to handle petitions.
In modern times, officials often send the petitioner on an endless treadmill from one office to the next, eventually referring the cases back to local officials. Sometimes, those local officials were the very ones who wronged the petitioner in the first place, perhaps the very police officers whose beatings prompted the petitioner to go to Beijing.
Nonetheless, millions of petitions are filed each year, with rural Chinese streaming into Beijing in hopes they can find someone, somewhere who will do right by them.
They live in squalid settlements for years while pursuing this usually futile hope, according to human rights groups.
Of 2,000 petitioners surveyed in a 2004 study, only three had their cases resolved, according to Human Rights Watch, citing a study by Chinese professor Yu Jianrong of the Chinese Academy of Social Sciences.
Subjected to Beatings
Worse, half the petitioners Yu questioned reported having been beaten by government agents.
Local officials who want to prevent people from complaining to the central government often use force to make sure they never leave their homes, or use ``retrievers'' to kidnap them from Beijing, beat them and force them to return home, Human Rights Watch found.
``Over the years I've been in China, I've never once seen someone win justice through petitioning,'' Susan Jakes, longtime Time correspondent in Beijing, wrote in the magazine's China Blog last year.
``Instead, I've seen it give people unreasonable hope, turn them into vagabonds, get them beaten up and make them homeless,'' she wrote.
Ah, but what an effective way to keep people from protesting in public.
(Ann Woolner is a Bloomberg news columnist. The opinions expressed are her own.)
To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net.
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Aug. 22 (Bloomberg) -- Say it's your job to quash protest in your country's capital city, even as the whole world is watching. You don't want to look repressive, but you don't want malcontents embarrassing your nation, either.
You've got plenty of work to do, so why not publicly invite any troublemakers out there to turn themselves in?
That way, you don't have to run about the country looking for them. Nor would you have to roll tanks over them if they show up en masse, say, at the central square.
Ah, but how to get them to come?
In the run-up to the Olympics, Chinese officials invited people wanting to protest to come into government offices and fill out forms identifying themselves and listing their complaints against the government, the slogans they intend to use and any other people wishing to join them in dissent.
China lured them by saying it would happily allow peaceful demonstrations during the Olympic Games for those who register ahead of time and confine their protests to certain parks.
True, those sites are far away from Olympic venues, but the plan was sufficiently accommodating of free speech to win approval of the International Olympic Committee.
Another example of the democratizing effect of the Olympics? Not so much.
Of 77 people who signed up, none got permits.
Worse, at least seven people who registered were detained, interrogated, charged, arrested or threatened with a year in a labor camp if they didn't keep quiet, according to human rights groups.
Applying Five Times
Two women in their late 70s applied five times to protest the 2001 demolition of their homes near Tiananmen Square. Like hundreds of thousands of other Chinese, their neighborhoods were razed to make way for modernization or the Olympics. Promises of new housing proved empty as the displaced were shoved into dilapidated flats, often far away from their neighborhoods.
Complaints like those of the two former neighbors, Wu Dianyuan and Wang Xiuying, are common. Perhaps because of that, instead of permits, they were given one-year sentences to ``re- education through labor'' for ``disturbing the public order,'' according to New York-based Human Rights in China and to an account in yesterday's New York Times.
To avoid serving their sentences in a labor camp, they would have to stay away from certain places and, presumably, keep their mouths shut.
That's one way to keep the designated protest zones empty.
Requests Withdrawn
As for the would-be protesters, 74 applicants withdrew their requests after police forwarded them to government agencies, China's official news service, Xianhua, reported this week.
The number sounds suspiciously high. And it would be lovely if the government is working to resolve all those people's problems as it says it is.
But it also sounds like a centuries-old practice at work.
In imperial days, it was called ``capital appeals,'' because people from the countryside unable to get a wrong righted locally would go to the capital. There they hoped to get the emperor's ear, according to Jonathan Ocko, a scholar on imperial China and chairman of North Carolina State University's history department.
``The popular notion was that if injustice was done, you could go to Beijing'' for relief, Ocko says.
There, they could bang on a special drum and announce they had a grievance. They might drop to their knees at the imperial palace gates, or throw themselves in front of an imperial procession and hand the emperor a letter.
No Satisfaction
Most grievances were referred back down the hierarchy to officials who had already offered no satisfaction, Ocko says. But it was a way for the people to let off steam and for authorities to take the pulse of the public.
As time wore on, this system of ``letters and visits,'' as it is called, became so institutionalized that most government agencies on all levels established an office to handle petitions.
In modern times, officials often send the petitioner on an endless treadmill from one office to the next, eventually referring the cases back to local officials. Sometimes, those local officials were the very ones who wronged the petitioner in the first place, perhaps the very police officers whose beatings prompted the petitioner to go to Beijing.
Nonetheless, millions of petitions are filed each year, with rural Chinese streaming into Beijing in hopes they can find someone, somewhere who will do right by them.
They live in squalid settlements for years while pursuing this usually futile hope, according to human rights groups.
Of 2,000 petitioners surveyed in a 2004 study, only three had their cases resolved, according to Human Rights Watch, citing a study by Chinese professor Yu Jianrong of the Chinese Academy of Social Sciences.
Subjected to Beatings
Worse, half the petitioners Yu questioned reported having been beaten by government agents.
Local officials who want to prevent people from complaining to the central government often use force to make sure they never leave their homes, or use ``retrievers'' to kidnap them from Beijing, beat them and force them to return home, Human Rights Watch found.
``Over the years I've been in China, I've never once seen someone win justice through petitioning,'' Susan Jakes, longtime Time correspondent in Beijing, wrote in the magazine's China Blog last year.
``Instead, I've seen it give people unreasonable hope, turn them into vagabonds, get them beaten up and make them homeless,'' she wrote.
Ah, but what an effective way to keep people from protesting in public.
(Ann Woolner is a Bloomberg news columnist. The opinions expressed are her own.)
To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net.
Read more...
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