By Caroline Binham
Sept. 4 (Bloomberg) -- Neel Uberoi, a dentist from south London, stands trial today for insider trading as the U.K. financial regulator pursues a tougher line on market abuse.
Uberoi and a relative, Matthew Uberoi, are charged with 17 counts of insider trading by London police, according to an indictment filed at the City of Westminster Magistrates Court. His trial is one of three criminal cases the Financial Services Authority has brought this year. Defendants include two retirees and a former general counsel at TTP Communications Plc.
The collapse last year of mortgage lender Northern Rock Plc and the failure to bring charges over false speculation that erased 17 percent from HBOS Plc's share price in March has prompted criticism from lawmakers that the London-based regulator is powerless to prevent insider trading. While the authority should also take on higher-profile cases, such individual prosecutions may help the FSA rebuild its reputation, said Chris Brennan, a lawyer at the London firm Barlow Lyde & Gilbert.
``It's inevitable that a few enforcement actions do change perceptions,'' said Brennan, a former FSA official. ``It's one thing to arrest a little old lady for insider trading. What they've got to crack down on is the HBOS-type stuff.''
Margaret Cole, the FSA's enforcement director, was unavailable for an interview and the regulator declined to comment, said spokeswoman Abi Jones.
`Right Message'
FSA Chief Executive Officer Hector Sants told the Treasury committee in May that criminal cases send the ``right message.'' ``We are determined to remove the misconception that somehow or other we are light-touch,'' he said.
Finding proof of gossip intended to depress shares in HBOS, the U.K.'s biggest mortgage bank, is difficult in an industry that lives off rumors, said Carlos Conceicao, a former official at the FSA and now a regulatory lawyer in London at Clifford Chance LLP.
In the case against the Uberois, the FSA alleges they received inside information that NeuTec Pharma Plc would be sold, and bought shares on 11 separate occasions in May and June 2006. Novartis AG bought NeuTec a month later for 305 million pounds ($541 million).
The Uberois also made six separate investments in Gulf Keystone Petroleum Ltd. in August 2006, acting on inside information that the company would form a joint venture with an energy company, the regulator says.
Gemma Tombs, the Uberois' lawyer, declined to comment. Voicemails at the Uberois' home and office weren't answered.
FSA Raids
Before 2008, there were no FSA arrests for insider trading. Since January, the regulator has brought the court cases and arrested eight men, including a ``junior'' employee at UBS AG and a sub-contractor at JPMorgan Cazenove Ltd., as part of an investigation into insider trading.
Spokeswomen at both firms said in July that the men were no longer providing services during the FSA investigation.
``Why bother with these individuals?'' said Justin Urquhart Stewart, London-based director of 7 Investment Managers. ``The answer is because they can. It's also important to create precedent for when they do have enough evidence to go after bigger individuals.''
The FSA was formed in 1997 to help stop financial scandals such as the 1995 collapse of Barings Plc.
``Historically, the British authorities have had little success in prosecuting any form of market abuse,'' said Andrew Clare, a finance professor at London's Cass Business School. ``That's just because it's a hard crime to prove and to try.''
SEC
The U.S. Securities and Exchange Commission's record is different. In 2007, the SEC, which can only file civil claims, brought 47 insider trading cases, said spokesman John Nester.
``The U.K. financial system is probably one of the lowest- staffed relative to the market it supervises,'' said David Green, the FSA's former international head of policy and author of a book on global financial regulation. The FSA has 98 enforcement agents compared with the SEC's 1,175.
Cole has more than doubled her criminal prosecutions team, to 30, since last year. FSA Chairman Callum McCarthy told a Treasury Select Committee in May that criminal cases became a priority three years ago, when Cole joined the regulator.
The court cases the FSA filed this year involved trades at least two years old. Former Cazenove & Co. partner Malcolm Calvert, charged on July 24, is accused of insider trading dating back to 2003 and was arrested two years ago. Calvert's lawyers have said he intends to plead not guilty.
Cole told the select committee in May that while the burden of proof was for practical purposes the same in civil and criminal cases, criminal prosecutions are more of a deterrent.
Philippe Jabre Case
The agency's most famous civil case was against Philippe Jabre, then managing director at hedge fund GLG Partners LP. In 2006, he was fined 750,000 pounds.
Jabre ``then went on to make millions the next year,'' Brennan said. ``I mean, what's the point?'' Criminal cases carry a sentence of as much as seven years in prison.
In the U.K. in 2006 and 2007, suspicious trades occurred before 29 percent of takeovers, up from 24 percent in 2005, according to FSA statistics. While the New York Stock Exchange doesn't release comparable data, an analysis by MeasuredMarkets Inc. and the New York Times found that suspicious trades occurred before 41 percent of takeovers over $1 billion in 2006.
``It's a very different relationship that firms have with the FSA than with the SEC,'' said Jonathan Herbst, a former FSA official who's now a lawyer at Norton Rose LLP. ``You wouldn't dream of calling up the SEC to bounce off ideas or offer information.''
Eighteen months ago, London's flexible regulatory approach was seen as something positive.
``The perception was that the U.S. was a rules-based system that was unwieldy and expensive, and that was a reason for firms moving to London,'' said Clare. ``London had principles-based regulation, which is now seen as light touch.''
To contact the reporter on this story: Caroline Binham in London at cbinham@bloomberg.net
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Thursday, September 4, 2008
European Stocks Fall on Economic Concern; Asian Shares Decline
By Adam Haigh
Sept. 4 (Bloomberg) -- European stocks fell on concern slowing economic growth will curb earnings at consumer companies and as Citigroup Inc. said there's ``plenty more pain ahead'' for Spanish banks. Asian shares and U.S. futures also retreated.
Ryanair Holdings Plc and Carrefour SA led declines among travel and retail companies. Banco Espanol de Credito SA dropped 1.8 percent as Citigroup recommended selling the stock. Unilever rallied 6.3 percent after naming Nestle SA's Paul Polman as chief executive officer. The European Central Bank and the Bank of England will release their decision on interest rates today.
The Dow Jones Stoxx 600 Index lost 0.4 percent to 284.57 at 9:49 a.m. in London. The MSCI Asia Pacific Index decreased 1.2 percent. Futures on the Standard & Poor's 500 Index expiring in September slipped 0.4 percent.
``People are sticking to their guns ahead of the rate decisions,'' said Joshua Raymond, market strategist at City Index Ltd. in London. ``The general sentiment is that we are heading lower for equity markets. Concerns over growth remain in focus.''
The MSCI World Index fell for a fourth straight day in August, bringing the loss this year to 17 percent as the global economy cooled and financial firms posted writedowns and credit- related losses of more than $500 billion.
Both the ECB and the BOE will probably maintain current levels for borrowing costs as inflation concerns make it harder for policy makers to respond to the risk of recession. Reports yesterday showed consumer spending, company investment and exports fell in the second quarter, dragging the European economy into a 0.2 percent contraction.
Rate Estimates
The ECB will leave rates at 4.25 percent when the decision is announced at 1:45 p.m. in Frankfurt, according to all but one of 53 economists in a Bloomberg News survey. The BOE will leave its key rate at 5 percent at 12 p.m. in London today, according to all 61 economists in a Bloomberg News survey.
The Stoxx 600 extended losses after crude oil rebounded, climbing above $110 a barrel in New York.
Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping company, slid 7.3 percent while Newcrest Mining Ltd. lost 6.5 percent, leading a drop in Asia after marine rates slumped on concern demand for raw materials will slow.
Ryanair, Europe's biggest discount airline, sank 2.1 percent to 2.70 euros. Travel and leisure companies were among the biggest decliners in the Stoxx 600, with a measure for the industry dropping 1 percent.
Retailers
TUI AG, owner of the region's largest tourism company, fell 2.8 percent to 13.55 euros. The stock will be replaced by K+S AG in Germany's benchmark DAX Index as of Sept. 22, Deutsche Boerse AG said yesterday after the close of trading.
Carrefour, the world's second-largest retailer, slipped 1.7 percent to 35.78 euros. DSG International Plc, the U.K.'s biggest consumer electronics retailer, dropped 2.6 percent to 55.5 pence.
Banco Espanol de Credito, known as Banesto, lost 1.8 percent to 9.27 euros after Citigroup downgraded the shares to ``sell'' from ``hold.''
``For a number of reasons, we believe that there is plenty more pain ahead,'' London-based analyst Ronit Ghose wrote in a note to clients today. Citigroup slashed its price estimate on the shares by 17 percent to 8.3 euros.
Bankinter SA, the Spanish lender whose biggest shareholder is Credit Agricole SA, fell 1.1 percent to 7.29 euros. Citigroup reduced its share-price projection 16 percent to 4.60 euros.
Bank Losses
Banks have led losses among the 18 industry groups in the Stoxx 600 this year, falling 30 percent as mounting credit- related losses have forced companies from Royal Bank of Scotland to UBS AG to raise capital. Analysts now expect earnings at European banks to shrink 24 percent, compared with forecasts for a 2.1 percent drop at the end of last year, Bloomberg data shows.
Unilever added 6.3 percent to 1,584 pence. The world's second-largest consumer-products maker said it plans to appoint Polman as chief executive officer to succeed Patrick Cescau.
BP Plc advanced 4.4 percent to 528 pence. Europe's second- largest oil producer and its billionaire partners in Russian oil venture TNK-BP signed an accord to resolve a management dispute.
Stan Polovets, who heads up the company that represents the Russian billionaire shareholders, known collectively as AAR, said in a phone interview the partners agreed to settle the disagreement, preserving investors' value in the venture. BP and AAR each own 50 percent of TNK-BP Ltd.
Mitsui O.S.K. declined 7.3 percent to 1,116 yen, the most since Feb. 6, after the Baltic Dry Index, a measure of commodity shipping rates, tumbled 5 percent yesterday on concern China's demand for imports of iron ore will weaken.
UBS AG cut its outlook today for container shipping stocks to ``negative,'' citing ``decelerating demand growth, excessive supply, and aggressive price competition.''
Newcrest Mining, Australia's largest gold mining company, slumped 6.5 percent to A$21.14, the lowest since July 4, 2007.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- European stocks fell on concern slowing economic growth will curb earnings at consumer companies and as Citigroup Inc. said there's ``plenty more pain ahead'' for Spanish banks. Asian shares and U.S. futures also retreated.
Ryanair Holdings Plc and Carrefour SA led declines among travel and retail companies. Banco Espanol de Credito SA dropped 1.8 percent as Citigroup recommended selling the stock. Unilever rallied 6.3 percent after naming Nestle SA's Paul Polman as chief executive officer. The European Central Bank and the Bank of England will release their decision on interest rates today.
The Dow Jones Stoxx 600 Index lost 0.4 percent to 284.57 at 9:49 a.m. in London. The MSCI Asia Pacific Index decreased 1.2 percent. Futures on the Standard & Poor's 500 Index expiring in September slipped 0.4 percent.
``People are sticking to their guns ahead of the rate decisions,'' said Joshua Raymond, market strategist at City Index Ltd. in London. ``The general sentiment is that we are heading lower for equity markets. Concerns over growth remain in focus.''
The MSCI World Index fell for a fourth straight day in August, bringing the loss this year to 17 percent as the global economy cooled and financial firms posted writedowns and credit- related losses of more than $500 billion.
Both the ECB and the BOE will probably maintain current levels for borrowing costs as inflation concerns make it harder for policy makers to respond to the risk of recession. Reports yesterday showed consumer spending, company investment and exports fell in the second quarter, dragging the European economy into a 0.2 percent contraction.
Rate Estimates
The ECB will leave rates at 4.25 percent when the decision is announced at 1:45 p.m. in Frankfurt, according to all but one of 53 economists in a Bloomberg News survey. The BOE will leave its key rate at 5 percent at 12 p.m. in London today, according to all 61 economists in a Bloomberg News survey.
The Stoxx 600 extended losses after crude oil rebounded, climbing above $110 a barrel in New York.
Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping company, slid 7.3 percent while Newcrest Mining Ltd. lost 6.5 percent, leading a drop in Asia after marine rates slumped on concern demand for raw materials will slow.
Ryanair, Europe's biggest discount airline, sank 2.1 percent to 2.70 euros. Travel and leisure companies were among the biggest decliners in the Stoxx 600, with a measure for the industry dropping 1 percent.
Retailers
TUI AG, owner of the region's largest tourism company, fell 2.8 percent to 13.55 euros. The stock will be replaced by K+S AG in Germany's benchmark DAX Index as of Sept. 22, Deutsche Boerse AG said yesterday after the close of trading.
Carrefour, the world's second-largest retailer, slipped 1.7 percent to 35.78 euros. DSG International Plc, the U.K.'s biggest consumer electronics retailer, dropped 2.6 percent to 55.5 pence.
Banco Espanol de Credito, known as Banesto, lost 1.8 percent to 9.27 euros after Citigroup downgraded the shares to ``sell'' from ``hold.''
``For a number of reasons, we believe that there is plenty more pain ahead,'' London-based analyst Ronit Ghose wrote in a note to clients today. Citigroup slashed its price estimate on the shares by 17 percent to 8.3 euros.
Bankinter SA, the Spanish lender whose biggest shareholder is Credit Agricole SA, fell 1.1 percent to 7.29 euros. Citigroup reduced its share-price projection 16 percent to 4.60 euros.
Bank Losses
Banks have led losses among the 18 industry groups in the Stoxx 600 this year, falling 30 percent as mounting credit- related losses have forced companies from Royal Bank of Scotland to UBS AG to raise capital. Analysts now expect earnings at European banks to shrink 24 percent, compared with forecasts for a 2.1 percent drop at the end of last year, Bloomberg data shows.
Unilever added 6.3 percent to 1,584 pence. The world's second-largest consumer-products maker said it plans to appoint Polman as chief executive officer to succeed Patrick Cescau.
BP Plc advanced 4.4 percent to 528 pence. Europe's second- largest oil producer and its billionaire partners in Russian oil venture TNK-BP signed an accord to resolve a management dispute.
Stan Polovets, who heads up the company that represents the Russian billionaire shareholders, known collectively as AAR, said in a phone interview the partners agreed to settle the disagreement, preserving investors' value in the venture. BP and AAR each own 50 percent of TNK-BP Ltd.
Mitsui O.S.K. declined 7.3 percent to 1,116 yen, the most since Feb. 6, after the Baltic Dry Index, a measure of commodity shipping rates, tumbled 5 percent yesterday on concern China's demand for imports of iron ore will weaken.
UBS AG cut its outlook today for container shipping stocks to ``negative,'' citing ``decelerating demand growth, excessive supply, and aggressive price competition.''
Newcrest Mining, Australia's largest gold mining company, slumped 6.5 percent to A$21.14, the lowest since July 4, 2007.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Read more...
Germany Stocks Update: DAX Index Little Changed at 6,471.83
By Daniel Hauck
Sep. 4 (Bloomberg) -- Germany's benchmark stock index, the DAX Index, rose 0.07 percent at 9:05 a.m.
The index of 30 companies traded on the Frankfurt Stock Exchange rose 4.34 to 6,471.83. Among the stocks in the index, 16 rose, 13 fell and 1 was unchanged.
Gains in the DAX were led by E.on Ag, Siemens Ag and Allianz Se. About 1.78 million shares traded in the DAX.
Read more...
Sep. 4 (Bloomberg) -- Germany's benchmark stock index, the DAX Index, rose 0.07 percent at 9:05 a.m.
The index of 30 companies traded on the Frankfurt Stock Exchange rose 4.34 to 6,471.83. Among the stocks in the index, 16 rose, 13 fell and 1 was unchanged.
Gains in the DAX were led by E.on Ag, Siemens Ag and Allianz Se. About 1.78 million shares traded in the DAX.
Read more...
Merrill May Fail to Sell Bad Loans to Korea Asset
By Bomi Lim
Sept. 4 (Bloomberg) -- Merrill Lynch & Co.'s talks to sell a ``significant'' amount of bad loans to Korea Asset Management Corp. are faltering because of a dispute over price, the Korean firm's chief executive officer said.
``We have yet to reach an agreement because of differences in assessing the value of assets,'' Lee Chol Hwi said yesterday in an interview in Seoul. ``We have been seeking to buy a significant amount, but a deal may be difficult at this rate.''
Failure to strike a deal may indicate Merrill, the third- largest U.S. securities firm, and Lehman Brothers Holdings Inc. might have to cut prices for assets they're trying to sell as mortgage-related losses widen. Lee, 55, said state-run Korea Asset can afford to be patient because the U.S. financial crisis will probably push prices lower.
Merrill CEO John Thain, who took over in December, has sold assets and subprime-linked investments as the third-largest U.S. securities firm was battered by more than $50 billion of credit market losses.
``The U.S. companies including Merrill need whatever capital they can get, even at the cost of making deals that may be less favorable to them,'' said Yun Chang Hyun, professor of business administration at University of Seoul. ``Those with money definitely have the upper hand right now.''
Korea Asset, created in 1962 to help clean up delinquent loans, set up a 1 trillion won ($871 million) fund with local partners to buy bad debts in the U.S., Lee said. The firm made its first overseas investment in December last year, leading a group of South Korean companies in buying 133.4 billion won worth of bad debts in China.
CDOs at Discount
Lee also said Korea Asset may buy non-performing loans from Lehman and other companies. Yi Kyung Ju, a spokesman for the fund, subsequently said there have been no formal talks with Lehman. Merrill spokesman Rob Stewart declined to comment, as did Lehman spokesman Matthew Russell.
Korea Development Bank said Sept. 2 it's in talks about buying a stake in Lehman, as the country's companies seize on a collapse in stock prices to purchase U.S. assets on the cheap. Korea Investment Corp., the nation's sovereign fund, put $2 billion into Merrill this year.
Lee declined to give the size of the potential transaction, which would be Korea Asset's first U.S. deal. It will be within the 1 trillion won fund, he said.
`Buyer's Market'
Merrill sold $30.6 billion of collateralized debt obligations, the mortgage-linked securities that caused the bulk of its losses, at a fifth of their face value in July to Lone Star Funds, a Dallas-based investment manager. Thain, 53, at the time said the sale was necessary to reduce Merrill's risk.
The credit crunch has produced more than $500 billion of credit losses and writedowns at the world's biggest banks and securities firms. Merrill, with $51.8 billion, ranks second after Citigroup Inc.'s $55.1 billion, data compiled by Bloomberg show.
The calamity has created opportunities for Asian firms with deep pockets. Temasek Holdings Pte, Singapore's $130 billion sovereign wealth fund, plans to boost its stake in Merrill to between 13 percent and 14 percent from 9.4 percent. Citigroup and Morgan Stanley are among other U.S. firms that have gotten cash infusions from Asian companies and sovereign funds.
``The U.S. market desperately needs capital,'' Lee said. ``It's practically a buyer's market there.''
Lee said he's also considering investing in Japan. He worked at the Finance Ministry before joining Korea Asset in January. His key posts at the ministry included a position at the South Korean embassy in Japan between 1997 and 2001.
The return on the investment in China ``has been much higher than expected,'' Lee said, declining to elaborate.
Daewoo Sale
Korea Asset played a key role in liquidating distressed assets in South Korea in the aftermath of the 1997-98 Asian financial crisis, when the government sought $57 billion in loans from the International Monetary Fund to help businesses repay overseas debts.
The agency has so far recouped 42.8 trillion won by selling stakes in assets bailed out since the crisis, more than the 39.3 trillion won it paid for those holdings. Korea Asset expects to earn at least 3 trillion won more by 2012 by selling stakes in companies like Daewoo International Corp.
Preparations for selling Daewoo International, a Seoul-based trading company, may begin as early as this year, Lee said. Daewoo International was created from a former trading arm of Daewoo Group, which collapsed under swelling debt after the 1997- 98 crisis.
``We will watch the market conditions to sell Daewoo International soon,'' Lee said. Korea Asset owns 35.5 percent of the company.
To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net
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Bombardier, First Calgary, Reitmans: Canadian Equity Preview
By John Kipphoff
Sept. 4 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading tomorrow. Stock symbols are in parentheses, and share prices are from the previous close.
The Standard & Poor's/TSX Composite Index fell 1.2 percent to 13,137.72.
Bombardier Inc. (BBD/B CN): The world's third-largest maker of commercial aircraft is scheduled to report fiscal second- quarter results. Analysts are forecasting a profit of 11 cents a share, based the average of 11 estimates compiled by Bloomberg. The shares rose 4.5 percent to C$8.40.
First Calgary Petroleums Ltd. (FCP CN): The Canadian developer of a $1.3 billion natural gas project in Algeria soared before reporting that it received proposals for the sale of all or parts of the company. First Calgary jumped 41 percent to C$3.32 before trading was halted ahead of the announcement.
Reitmans (Canada) Ltd. (RET/A CN): The owner of its namesake and Smart Set women's clothing may say that second- quarter profit was 44 cents a share before one-time items, the average estimate of five analysts surveyed by Bloomberg. The shares fell 0.6 percent to C$15.95.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading tomorrow. Stock symbols are in parentheses, and share prices are from the previous close.
The Standard & Poor's/TSX Composite Index fell 1.2 percent to 13,137.72.
Bombardier Inc. (BBD/B CN): The world's third-largest maker of commercial aircraft is scheduled to report fiscal second- quarter results. Analysts are forecasting a profit of 11 cents a share, based the average of 11 estimates compiled by Bloomberg. The shares rose 4.5 percent to C$8.40.
First Calgary Petroleums Ltd. (FCP CN): The Canadian developer of a $1.3 billion natural gas project in Algeria soared before reporting that it received proposals for the sale of all or parts of the company. First Calgary jumped 41 percent to C$3.32 before trading was halted ahead of the announcement.
Reitmans (Canada) Ltd. (RET/A CN): The owner of its namesake and Smart Set women's clothing may say that second- quarter profit was 44 cents a share before one-time items, the average estimate of five analysts surveyed by Bloomberg. The shares fell 0.6 percent to C$15.95.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
Read more...
Ecopetrol, ICA, Mirgor, OGX, Petrobras: Latin Equity Preview
By William Freebairn and Paulo Winterstein
Sept. 4 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 1.7 percent yesterday to 3,787.65.
Argentina
Mirgor Sacifia (MIRG AF): Argentine automakers increased production 8.5 percent in August from a year earlier, the country's Automakers Association said yesterday in an e-mailed statement. Mirgor, which makes climate-control systems for vehicles, fell 0.2 percent to 170.45 pesos.
Brazil
EZ Tec Empreendimentos & Participacoes SA (EZTC3 BS): The Brazilian real-estate developer plans to repurchase as many as 2.5 million voting shares, or 6 percent of outstanding stock, over the next year. EZ Tec spent about 16.6 million reais ($9.88 million) to acquire 4.45 million shares in a previous buyback plan announced on April 15, according to a statement posted yesterday on Brazil's securities regulator Web site. Sao Paulo- based EZ Tec added 3.1 percent to 3.03 reais.
OGX Petroleo e Gas Participacoes SA (OGXP3 BS): Brazil will hold two auctions of onshore oil fields in December, Mines and Energy Minister Edison Lobao told reporters yesterday. He had said in May the auction might be delayed to 2009. OGX, the oil company controlled by Brazilian billionaire Eike Batista, was the largest winner at Brazil's oil auction last year, agreeing to pay about $1.2 billion to develop 21 offshore oil areas. Rio de Janeiro-based OGX fell 4.6 percent to 520 reais.
Petroleo Brasileiro SA (PETR4 BS): Brazil's state-controlled oil company found oil in two onshore wells in northeastern Brazil, the country's oil agency said yesterday on its Web site. The 3BRSA648RN well, part of Petrobras's BT-POT-4 block, is located in the Brazilian state of Rio Grande do Norte, and the SEAL-T-462 well is located in the state of Sergipe. Petrobras holds 70 percent of the Sergipe block. Rio de Janeiro-based Petrobras fell 1.5 percent to 32.60 reais.
Colombia
Ecopetrol SA (ECOPETL CB): Colombia's state oil company reiterated plans to start trading American depositary receipts in New York this year, La Republica reported. The ADR listing, which awaits approval by the U.S. Securities and Exchange Commission, continues to be scheduled for some time in the second half of this year, the newspaper wrote, citing Ecopetrol President Javier Gutierrez. Ecopetrol fell 0.6 percent to 2,660 pesos.
Mexico
Empresas ICA SAB (ICA* MM): Mexico's biggest construction company will improve profit margins this quarter and increase revenue 20 percent next year, Banco Santander SA said. The shares may rise to 23 pesos by the end of 2009, analyst Gonzalo Fernandez wrote in a research note e-mailed yesterday in which he reiterated his ``buy'' rating on the shares. ICA fell 1.1 percent to 47.60 pesos.
To contact the reporter on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 1.7 percent yesterday to 3,787.65.
Argentina
Mirgor Sacifia (MIRG AF): Argentine automakers increased production 8.5 percent in August from a year earlier, the country's Automakers Association said yesterday in an e-mailed statement. Mirgor, which makes climate-control systems for vehicles, fell 0.2 percent to 170.45 pesos.
Brazil
EZ Tec Empreendimentos & Participacoes SA (EZTC3 BS): The Brazilian real-estate developer plans to repurchase as many as 2.5 million voting shares, or 6 percent of outstanding stock, over the next year. EZ Tec spent about 16.6 million reais ($9.88 million) to acquire 4.45 million shares in a previous buyback plan announced on April 15, according to a statement posted yesterday on Brazil's securities regulator Web site. Sao Paulo- based EZ Tec added 3.1 percent to 3.03 reais.
OGX Petroleo e Gas Participacoes SA (OGXP3 BS): Brazil will hold two auctions of onshore oil fields in December, Mines and Energy Minister Edison Lobao told reporters yesterday. He had said in May the auction might be delayed to 2009. OGX, the oil company controlled by Brazilian billionaire Eike Batista, was the largest winner at Brazil's oil auction last year, agreeing to pay about $1.2 billion to develop 21 offshore oil areas. Rio de Janeiro-based OGX fell 4.6 percent to 520 reais.
Petroleo Brasileiro SA (PETR4 BS): Brazil's state-controlled oil company found oil in two onshore wells in northeastern Brazil, the country's oil agency said yesterday on its Web site. The 3BRSA648RN well, part of Petrobras's BT-POT-4 block, is located in the Brazilian state of Rio Grande do Norte, and the SEAL-T-462 well is located in the state of Sergipe. Petrobras holds 70 percent of the Sergipe block. Rio de Janeiro-based Petrobras fell 1.5 percent to 32.60 reais.
Colombia
Ecopetrol SA (ECOPETL CB): Colombia's state oil company reiterated plans to start trading American depositary receipts in New York this year, La Republica reported. The ADR listing, which awaits approval by the U.S. Securities and Exchange Commission, continues to be scheduled for some time in the second half of this year, the newspaper wrote, citing Ecopetrol President Javier Gutierrez. Ecopetrol fell 0.6 percent to 2,660 pesos.
Mexico
Empresas ICA SAB (ICA* MM): Mexico's biggest construction company will improve profit margins this quarter and increase revenue 20 percent next year, Banco Santander SA said. The shares may rise to 23 pesos by the end of 2009, analyst Gonzalo Fernandez wrote in a research note e-mailed yesterday in which he reiterated his ``buy'' rating on the shares. ICA fell 1.1 percent to 47.60 pesos.
To contact the reporter on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
Read more...
Forex Technical Update
| Daily Forex Technicals | Written by Rcpl Forex | Sep 04 08 06:25 GMT | | |
| Euro: Euro plunged to 1.4385 levels in yesterday's session witnessing a move of 144 pips. However, it recovered almost 115 pips from 100 Weekly EMA to close at 1.4498. The 4-hourly and hourly chart is moving towards overbought whereas the daily chart is showing buying pressure. The immediate cluster resistance is seen at 1.4545 (21 4hourly EMA & 38.2% retracement from the recent low) where intraday shorts can be initiated. Primary focus is on the ECB rate decision. (Eur/Usd: 1.4512). Pound: Cable has been crushed against the greenback as it further weakened to mark a low of 1.7666 in yesterday's session. Although Cable has recovered slightly and is trading around 1.7750 levels (21 Hourly EMA) currently with the hourly & 4-hourly charts indicating selling pressure. On the other hand the Daily & Weekly stochastic remain extremely oversold. Intraday bias remains on the downside. BoE interest rate decision is expected today and could be a vital factor for Sterling. (Gbp/Usd: 1.7753). Yen: The USD/JPY pair witnessed a sideways trading of 100 pips yesterday and took support at the 55 Daily EMA at 108.09. Currently, the pair is hovering around the same support zone with the charts heading towards the oversold region. Next immediate support comes in at 107.35 levels (100 daily EMA). Initiating longs there for 60 pips can be considered. (Usd/Jpy: 108.07). Rupee: Rupee market was closed yesterday on account of a holiday. After a volatile trading session on Tuesday where RBI intervention could not provide much respite to the falling rupee, the domestic currency has weakened almost 10 paisa today from its opening at 44.43 levels. Further weakness could be expected on global USD strength. (Usd/Inr: 44.53). Swiss Franc: Usd/Chf pair surged to a high of 1.1171 before closing little lower at 1.1061. The hourly and the daily chart are showing selling pressure whereas the 4-hourly chart is highly oversold. Immediate support comes in at 1.1005 (55 4-hourly EMA) where opportunities to initiate cautious long can be considered. (Usd/Chf-1.1058). Australian Dollar: Aussie dipped to a low of 0.8231 yesterday, however recovered taking support at the long term trendline and closed at 0.8358. The hourly and 4-hourly charts are indicating further selling pressure whereas the daily is turning oversold. Immediate resistance is at 0.8399 (21 4-hourly EMA) where opportunities to go short for 70-80 pips can be considered. (Aud/Usd-0.8338). Gold: Gold traded within $30 in yesterday's session touching a low of $788. The daily chart is moving towards oversold region whereas 4-hourly signals further selling. Immediate resistance comes in at $809 (21 4-hourly EMA). Downside could be curbed around $770. (Gold: $802.50). Dollar index : Dollar index continues to trade above 78 levels with the stochastic in the overbought region poised at 81.21%. RCPL FOREX DISCLAIMER These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsible for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved. | |
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FX Technical Analysis
| Daily Forex Technicals | Written by Mizuho Corporate Bank | Sep 04 08 06:26 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||
EURUSDComment: Working within a downward-sloping 'wedge' formation with a small 'hammer' candle yesterday. We continue to watch warily for signs of basing this week, the deeper we drop initially the sharper the reversal later on. The Euro is still very oversold and at-the-money implied volatility remains well bid. Strategy: Attempt longs at 1.4500/1.4470; stop below 1.4365. Short term target 1.4550, then 1.4650. Direction of Trade: → Chart Levels:
GBPUSDComment: In a mere six weeks the British authorities have managed to oversee the biggest collapse in Cable since 1992, giving back almost 50% of the rally that started in 2001, dropping a whopping 35 cents from last year's peak. This is obviously unsustainable but who only knows where this chaos will end up. Stand aside if possible and wait until you see the whites in their eyes, probably somewhere between 1.7700 and 1.7500. Strategy: Possibly attempt the tiny longs at 1.7795; stop below 1.7665. Short term target 1.7900, then 1.8100. Direction of Trade: → Chart Levels:
USDJPYComment: Over the last month the Japanese Yen has gained against every major currency, bar none. Quite a feat considering the sudden new fashion for holding US dollars. Two consecutive days where candles have formed small 'spike highs' against 9 and 26-day moving averages at 108.97. This might add to current bearish momentum for a re-test of the 107.50 area, with a break below 107.25 adding quite a bit more downside pressure. Strategy: Attempt shorts at 108.15, adding to 108.45; stop well above 109.25. Short term target 107.55/107..25 then 106.40. Direction of Trade: → Chart Levels:
EURJPYComment: One of many Yen crosses testing of dropping towards key very long term support. As and when these levels give way, we remind that we take no prisoners and moves are likely to be faster than anything seen since 1997 and 1998. One-month at-the-money implied volatility should move higher, probably sharply so on a break below 154.00. For this morning expect cautious consolidation above 157.00 with rallies to 160.00 seen as selling opportunities for further big declines this month. Strategy: Sell at 157.00, adding to 158.00; stop above 159.0. Short term target 156.00, then 154.00. Direction of Trade: → Chart Levels:
Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy. | |||||||||||||||||||||||||||||||||||||||||||||||||
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Asia Session Recap
| Daily Forex Fundamentals | Written by Forex.com | Sep 04 08 05:57 GMT | | ||||||||||||||||||||||||||||||||||||||||||||||||||
| This session, EUR/USD took a wild ride in a fifty pip range, but ultimately ended the session only a little lower from where it started off. The pair hit an early high of 1.4527, and then fell to a low of 1.4471; the net result was a session exit of around 1.4490, a little lower than the open. A good deal of the trading could be position squaring ahead of both the ECB and BoE interest decisions which are a little later in early NY. The general consensus is that both central banks leave rates unchanged. Most believe the ECB could begin to raise rates early neat year and the BoE could begin its cycle as early as the end of 2008. GBP/USD was as bouncy as the Euro, and as the Euro, really went nowhere. The market began the session near the high of 1.7765, slid to lows near 1.7714, and hit all the points in between before closing out near, 1.7755. Both the Euro and Pound have had a horrible run versus the dollar over the past month or so as traders see the economy of Europe slowing down as the US economy may have been the first in trouble, but will also be the first out of it. EUR/GBP hit another record high of 0.8188 this session as the drive North for this pair continues with great vigor. In Australia, the Trade Balance data disappointed, and the AUD/USD pair suffered for it, as it collapsed from 0.8355 to lows of 0.8302….once again, a level not seen in about a year. The pair eventually regained its footing to end up near 0.8320. AUD/JPY followed the same path, falling from 90.57 to levels of 89.25. The key, and pretty much only things you should be cognizant of in the coming hours is the above mentioned BoE and ECB rate decisions. As usual, its not always the rate decision that moves a pair, but the statements that follow the decision…… Upcoming Economic Data Releases (London Session):
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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Australia Stocks: AWB, AGL Energy, Pacific Brands, Woodside
By Malcolm Scott
Sept. 4 (Bloomberg) -- The S&P/ASX 200 Index was little changed, dropping 0.1 percent to 5,053.8 at 10:24 a.m. in Sydney. The broader All Ordinaries Index fell 6.40 points, or 0.1 percent, to 5,122.40, while the futures index expiring in September declined 0.6 percent to 5,051.
AGL Energy Ltd. (AGK AU), Australia's biggest power and gas retailer, fell 68 cents, or 4.4 percent, to A$14.87. The shares were cut to ``sell'' from ``hold'' at Goldman Sachs JBWere Ltd. and to ``neutral'' from ``overweight'' at JPMorgan Chase & Co.
AWB Ltd. (AWB AU), Australia's largest wheat exporter, added 12 cents, or 4 percent, to A$3.09, after the shares were raised to ``buy'' from ``hold'' at ABN Amro Holdings NV.
Pacific Brands Ltd. (PBG AU), Australia's largest clothing maker, fell 3 cents, or 1.3 percent, to A$2.27 after its shares were cut to ``neutral'' from ``overweight'' at JPMorgan.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, added 66 cents, or 1.2 percent, to A$57.16. Crude oil added 0.6 percent to $109.99 in after hours trading.
To contact the reporter on this story: Malcolm Scott in Sydney at Mscott23@bloomberg.net.
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Sept. 4 (Bloomberg) -- The S&P/ASX 200 Index was little changed, dropping 0.1 percent to 5,053.8 at 10:24 a.m. in Sydney. The broader All Ordinaries Index fell 6.40 points, or 0.1 percent, to 5,122.40, while the futures index expiring in September declined 0.6 percent to 5,051.
AGL Energy Ltd. (AGK AU), Australia's biggest power and gas retailer, fell 68 cents, or 4.4 percent, to A$14.87. The shares were cut to ``sell'' from ``hold'' at Goldman Sachs JBWere Ltd. and to ``neutral'' from ``overweight'' at JPMorgan Chase & Co.
AWB Ltd. (AWB AU), Australia's largest wheat exporter, added 12 cents, or 4 percent, to A$3.09, after the shares were raised to ``buy'' from ``hold'' at ABN Amro Holdings NV.
Pacific Brands Ltd. (PBG AU), Australia's largest clothing maker, fell 3 cents, or 1.3 percent, to A$2.27 after its shares were cut to ``neutral'' from ``overweight'' at JPMorgan.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, added 66 cents, or 1.2 percent, to A$57.16. Crude oil added 0.6 percent to $109.99 in after hours trading.
To contact the reporter on this story: Malcolm Scott in Sydney at Mscott23@bloomberg.net.
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Bank of England May Keep Rate at 5% After Inflation Accelerated
By Brian Swint
Sept. 4 (Bloomberg) -- The Bank of England will keep its benchmark interest rate unchanged today as the fastest inflation in more than a decade makes it harder for policy makers to respond to the risk of a recession, a survey of economists showed.
Governor Mervyn King's nine-member Monetary Policy Committee will leave its key rate at 5 percent at 12 p.m. in London today, according to all 61 economists in a Bloomberg News survey.
The decision would leave Prime Minister Gordon Brown to his own devices for now after he unveiled proposals this week to prop up the economy and revive his flagging popularity. While King himself has indicated a recession is possible, his room for action is constrained by an inflation rate that's more than double the bank's 2 percent target and likely to accelerate further.
``The bank would be keen to respond to the weakness in the economy, but it can't,'' said Dominic White, an economist at ABN Amro Holding NV in London. ``The government's measures may provide a small incentive to buy houses now rather than in a few months, but the economy could still feel rather grim. Brown will have to grin and bear it.''
Support for Brown's ruling Labour Party has slumped in the past year as the global credit squeeze dragged down the economy.
Brown has responded by trying to help the housing market as prices fall the most since the last recession in the early 1990s. The government this week suspended the tax on home purchases of less than 175,000 pounds ($311,000) and said it plans a package of measures to help consumers cope with the credit crunch.
Refusing to Cut
King's Bank of England is, for now, refusing to add to its three rate cuts since December after surging oil and food prices pushed inflation to 4.4 percent in July. The bank's August forecasts showed inflation could accelerate to 5 percent.
Seven of the bank's rate setters opted to keep the benchmark rate at 5 percent last month, with David Blanchflower voting for a cut and Timothy Besley saying rates should be increased.
``You can take your eye off this hump in inflation only when activity slows enough,'' said Amit Kara, an economist at UBS AG in London. ``Inflation expectations that feed through into wages are still the big concern.''
At the same time, economists say opposition to rate cuts will wane in coming months as the slowdown and falling energy costs ease inflation pressures. Growth ground to a halt in the second quarter, ending the U.K.'s longest stretch of expansion in more than a century.
The pound dropped to a record against the euro on Sept. 2 and has fallen 12 percent against the dollar since July 12.
Oil prices have dropped 26 percent since touching a record $147 a barrel on July 11 and the central bank said in minutes of the August meeting that the inflation outlook may have ``eased a little.''
More than half of the 51 economists in a Bloomberg News survey from Aug. 29 said the benchmark interest rate will fall by a quarter-point to 4.75 percent by the end of the year.
``The MPC cannot ignore the mounting threats of falling U.K. house prices and worsening pressures on the global banking system,'' said David Kern, economic advisor to the British Chambers of Commerce today. ``The MPC must start cutting rates in October or November, as soon as inflation peaks.''
To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net;
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Clinton, Sarah Palin Have Soul Sister in Tokyo: William Pesek
Commentary by William Pesek
Sept. 4 (Bloomberg) -- For all the sexist stereotypes about Japan, it may get a female leader before the U.S.
It's a distant possibility, mind you. Tokyo politics really are as male-dominated as you will find in the developed world. If you think Hillary Clinton got a raw deal in her U.S. presidential campaign, check out Japan. It ranks among the lowest nations in female participation in politics and business.
Undeterred, Yuriko Koike, 56, reportedly is considering a run to replace Prime Minister Yasuo Fukuda, who resigned this week. Well, good for her if she decides to try.
Japan needs more such trailblazers. This is, after all, a nation that until a few years ago was still naming men to oversee gender-equality issues. Yet this isn't really about gender. Koike may be the closest thing the ruling Liberal Democratic Party has to a charismatic agent of change.
The one-time television anchorwoman has served as Japan's defense and environment minister. A legislator since 1992, Koike was among the candidates then-Prime Minister Junichiro Koizumi chose in 2005 to oppose conservative lawmakers in elections.
Koizumi is widely thought to be championing her behind the scenes to succeed Fukuda, who lasted just 11 months as premier. Fukuda replaced the equally forgettable Shinzo Abe, who stayed in the job only a year after Koizumi stepped down in 2006.
Thatcher Fan
Unlike Fukuda and Abe, Koike is a self-described passionate advocate of the kinds of pro-market and smaller-government ideas that foreign investors desire. Koike is an admirer of Margaret Thatcher, the U.K. prime minister who helped shake up the economy in the 1980s.
Japan's increasingly uncompetitive business culture could use a dose of Thatcherism. It got a small taste during Koizumi's five-year tenure. He brushed the broad strokes, reducing public- works spending and selling Japan Post.
Koizumi was more talk than action, and his successors had less interest in improving the economy. Japan's push for change has fizzled out just as the nation is sliding toward a recession.
Most observers expect former Foreign Minister Taro Aso to replace Fukuda. He favors the old-school fiscal policies that left Japan with the world's largest public debt. The gaffe-prone Aso is likely to spend more time clarifying his clumsy comments than making the economy more international.
Welcome Step
Koike might be a welcome step in the right direction. ``She represents within the LDP an economic school that is the successor to Mr. Koizumi and that is antagonistic to Mr. Aso,'' says LDP member Dan Harada.
It's am important point. Koike thinks bigger than the average Koizumian. She wants Japan to be an environmental leader that will create jobs as the nation exports its green technologies. Koike also is a Middle East expert who studied in Cairo and speaks Arabic.
Not a bad skill to have at a time when Japan is in talks with sovereign wealth funds in the Middle East to raise as much as 100 billion yen ($927 million) to boost foreign investment.
Gender is perhaps the main attribute working against Koike as LDP bigwigs settle on a new leader. While no one is saying it, the conservative greybeards who run Japan aren't big on putting women in high places.
Of course, the U.S. also is a gender battleground these days. Democratic Senator Clinton came the closest any woman ever has to winning a major party's nomination. Republican John McCain's move to tap Alaska Governor Sarah Palin as his running mate also made 2008 an historic year for American women.
Common Quest
It's instructive, though, to remember that India, Indonesia, Mozambique, Nicaragua, Pakistan and the Philippines had -- or still have -- female leaders long before more developed nations, including the U.S. and Japan. In that sense, Koike, Clinton and Palin have a common quest to pump more diversity into their nations' top offices.
Another Japanese woman, Consumer Affairs Minister Seiko Noda, 48, may run for prime minister.
A female Japanese leader would be nothing short of revolutionary. It's also the feminist boost that Japan's economy needs.
Women account for just 12 percent of Japan's 722 parliamentary members. Japan doesn't have a monopoly on sexism. Yet how often does the Organization for Economic Cooperation and Development call on a nation to increase female labor participation to boost growth? In July, the OECD called it a ``waste of valuable human resources.''
Koike's Promise
Analysts such as Naomi Fink of Bank of Tokyo-Mitsubishi UFJ Ltd. say women are underemployed even though they are more highly educated than the OECD average. Reasons for the disparity include insufficient child-care support and labor practices that nudge women into low-paying temporary jobs. Japan's anti-discrimination laws also lag behind other OECD countries.
Discrimination feeds into Japan's low birthrate because having children tends to be a career-ending decision, so many women put off motherhood.
A female leader may have more interest in addressing Japan's inequities than male ones. Perhaps the sight of a woman running Asia's biggest economy will inspire Japanese girls to aim higher and demand more of politicians.
Irrespective of her sex, Koike may just be the best person for a job that has been done all too poorly for years.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
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ECB May Leave Key Rate at Seven-Year High to Fight Inflation
By Simone Meier
Sept. 4 (Bloomberg) -- The European Central Bank will keep interest rates at a seven-year high to fight inflation even as the euro-region economy teeters on the brink of a recession, a survey of economists shows.
ECB policy makers meeting in Frankfurt will leave the benchmark lending rate at 4.25 percent, according to all but one of 53 economists in a Bloomberg News survey. The bank will wait until at least March next year to lower borrowing costs, another survey shows.
The ECB wants to prevent a wage-price spiral as workers demand compensation for higher food and energy costs. It raised rates in July and council members Axel Weber and Lucas Papademos said last week another increase may be necessary if inflation risks increase. At the same time, the economy contracted in the second quarter and inflation slowed after oil prices retreated from a record.
``We remain skeptical that slowing growth and retreating oil prices will open the door for rate cuts,'' said Nick Kounis, chief European economist at Fortis Bank in Amsterdam. ``The concerns about inflation are very real.''
The ECB will announce its decision at 1:45 p.m. and President Jean-Claude Trichet holds a press conference 45 minutes later. In addition to commenting on monetary policy, Trichet may announce changes to the ECB's collateral requirements for lending to banks.
Separately, the Bank of England will probably keep its key rate at 5 percent, a Bloomberg survey shows.
Wage Threat
While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in July. The ECB aims to keep the rate below 2 percent.
Some labor unions are already pushing through bigger wage increases to compensate workers for the higher cost of living. Deutsche Lufthansa AG, Europe's second-largest airline, last month agreed to a 5.1 percent raise for some ground staff and cabin crew after a strike forced the cancellation of hundreds of flights.
IG Metall, Germany's biggest union, starts wage negotiations this month for 3.2 million metal, electronics and car workers. The union has said it will demand a bigger pay increase than the 6.5 percent it asked for last year.
ECB Vice President Papademos on Aug. 27 said the emergence of a wage-price spiral would ``require a stronger degree of monetary tightening.''
New Forecasts
While the ECB will raise its inflation estimates when it publishes new economic projections today, it will lower its outlook for growth, said Laurent Bilke, an economist at Lehman Brothers in London who used to work as a forecaster at the central bank. He predicts the ECB will be forced to cut rates in January.
In June, the bank forecast growth of about 1.8 percent this year and 1.5 percent in 2009. It projected inflation would average 3.4 percent this year and 2.4 percent next year.
Since then, Europeans' confidence in the economic outlook plunged to a five-year low and the manufacturing and service industries contracted for a third consecutive month, indicating the economy may have entered a recession.
``The possibility of a rate hike by the end of the year has vanished,'' said Bilke. ``The situation has already deteriorated enough for a single rate cut to be insufficient.''
Investors are less certain and have scaled back bets on lower ECB rates, Eonia forward contracts show. The yield on the May contract was at 4.10 percent yesterday, up from 4.03 percent before Papademos and Weber spoke.
Speculation `Premature'
In an interview published Aug. 27, Bundesbank President Weber said ``the discussion about declining rates in Europe is premature.'' The ECB may have to raise rates further ``if the economic outlook brightens,'' he said.
The euro's 9 percent decline from its peak of $1.60 on July 15 may help to bolster European exports, while lower oil prices should eventually leave consumers with more money to spend.
The ECB ``is not yet persuaded that growth will be weak enough over the next 18 months to more than outweigh second-round effects stemming from prior increases in commodity prices,'' David Mackie, chief European economist at JPMorgan in London, wrote in a research note to clients. ``It will take a while for the central bank to come around to the idea of easing.''
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
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Sept. 4 (Bloomberg) -- The European Central Bank will keep interest rates at a seven-year high to fight inflation even as the euro-region economy teeters on the brink of a recession, a survey of economists shows.
ECB policy makers meeting in Frankfurt will leave the benchmark lending rate at 4.25 percent, according to all but one of 53 economists in a Bloomberg News survey. The bank will wait until at least March next year to lower borrowing costs, another survey shows.
The ECB wants to prevent a wage-price spiral as workers demand compensation for higher food and energy costs. It raised rates in July and council members Axel Weber and Lucas Papademos said last week another increase may be necessary if inflation risks increase. At the same time, the economy contracted in the second quarter and inflation slowed after oil prices retreated from a record.
``We remain skeptical that slowing growth and retreating oil prices will open the door for rate cuts,'' said Nick Kounis, chief European economist at Fortis Bank in Amsterdam. ``The concerns about inflation are very real.''
The ECB will announce its decision at 1:45 p.m. and President Jean-Claude Trichet holds a press conference 45 minutes later. In addition to commenting on monetary policy, Trichet may announce changes to the ECB's collateral requirements for lending to banks.
Separately, the Bank of England will probably keep its key rate at 5 percent, a Bloomberg survey shows.
Wage Threat
While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in July. The ECB aims to keep the rate below 2 percent.
Some labor unions are already pushing through bigger wage increases to compensate workers for the higher cost of living. Deutsche Lufthansa AG, Europe's second-largest airline, last month agreed to a 5.1 percent raise for some ground staff and cabin crew after a strike forced the cancellation of hundreds of flights.
IG Metall, Germany's biggest union, starts wage negotiations this month for 3.2 million metal, electronics and car workers. The union has said it will demand a bigger pay increase than the 6.5 percent it asked for last year.
ECB Vice President Papademos on Aug. 27 said the emergence of a wage-price spiral would ``require a stronger degree of monetary tightening.''
New Forecasts
While the ECB will raise its inflation estimates when it publishes new economic projections today, it will lower its outlook for growth, said Laurent Bilke, an economist at Lehman Brothers in London who used to work as a forecaster at the central bank. He predicts the ECB will be forced to cut rates in January.
In June, the bank forecast growth of about 1.8 percent this year and 1.5 percent in 2009. It projected inflation would average 3.4 percent this year and 2.4 percent next year.
Since then, Europeans' confidence in the economic outlook plunged to a five-year low and the manufacturing and service industries contracted for a third consecutive month, indicating the economy may have entered a recession.
``The possibility of a rate hike by the end of the year has vanished,'' said Bilke. ``The situation has already deteriorated enough for a single rate cut to be insufficient.''
Investors are less certain and have scaled back bets on lower ECB rates, Eonia forward contracts show. The yield on the May contract was at 4.10 percent yesterday, up from 4.03 percent before Papademos and Weber spoke.
Speculation `Premature'
In an interview published Aug. 27, Bundesbank President Weber said ``the discussion about declining rates in Europe is premature.'' The ECB may have to raise rates further ``if the economic outlook brightens,'' he said.
The euro's 9 percent decline from its peak of $1.60 on July 15 may help to bolster European exports, while lower oil prices should eventually leave consumers with more money to spend.
The ECB ``is not yet persuaded that growth will be weak enough over the next 18 months to more than outweigh second-round effects stemming from prior increases in commodity prices,'' David Mackie, chief European economist at JPMorgan in London, wrote in a research note to clients. ``It will take a while for the central bank to come around to the idea of easing.''
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
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OPEC to Pump Record Amounts of Crude as $109 Oil Stunts Growth
By Grant Smith and Ayesha Daya
Sept. 4 (Bloomberg) -- OPEC, the supplier of 40 percent of the world's oil, will probably keep producing at a record pace as $109-a-barrel crude squeezes the global economy.
The 13-nation Organization of Petroleum Exporting Countries will reject calls from Venezuela and Iran to trim supplies at its Sept. 9 meeting in Vienna, according to 29 of the 32 energy analysts surveyed by Bloomberg.
``They want to prevent a build-up of crude stocks, which rules out an increase, but don't want to send prices skyrocketing by announcing a cut,'' said Mike Wittner, head of oil research at Societe Generale SA in London. ``OPEC won't take any formal action.''
Oil plunged $38 a barrel, or 26 percent, from its record $147.27 on July 11 as economies slowed, the dollar halted a three-year slide against the euro and Hurricane Gustav caused almost no damage to drilling platforms and refineries in the Gulf of Mexico. Demand for crude will increase 1 percent in 2009, the slowest growth in seven years, according to an Aug. 15 OPEC forecast.
Record oil prices spurred European inflation to 4 percent in July and contributed to the first quarterly contraction in the region's economy since the euro was introduced almost a decade ago. In the U.S., gasoline demand fell for 19 consecutive weeks, according to MasterCard Inc., with fuel now near $3.70 a gallon.
The world economy is ``precariously close'' to a recession in 2009, UBS AG said last month as it cut next year's global growth forecast to 2.9 percent. It considers a 2.5 percent rate as one that is consistent with a recession.
Exceeding Limit
Oil for October delivery fell 0.3 percent yesterday to $109.35 a barrel on the New York Mercantile Exchange, the lowest settlement price since April 8. It was the fourth straight decline.
The OPEC members with quotas produced about 592,000 barrels a day more than their official limit of 29.673 million last month, according to Bloomberg estimates. Iraq has no quota. All the countries except Saudi Arabia are pumping at close to capacity to meet rising demand and compensate for declining supplies from Nigeria, Iran and Venezuela.
While leaving quotas unchanged, the group may curtail production to prevent inventories from swelling, said Adam Sieminski, Deutsche Bank AG's chief energy economist in Washington.
``If prices are rising they will leave production alone, and if they are falling they will trim a little,'' he said.
Oil stockpiles, excluding government reserves, were above average in July and enough to meet 54 days of demand, according to the International Energy Agency in Paris.
Economic Burden
The agency urged OPEC not to cut back because prices are ``putting a burden on the global economy,'' Executive Director Nobuo Tanaka said in an Aug. 27 interview in Stavanger, Norway.
``If stocks were ballooning then you could see pressure mounting within the cartel for a cut,'' said Harry Tchilinguirian, senior oil analyst at BNP Paribas SA.
Most extra pumping came from Saudi Arabia, the world's largest oil producer, which raised output by 500,000 barrels a day in June and July to calm markets.
Venezuela and Iran, OPEC's second- and third-largest producers, want the group to consider reducing supply to keep prices from falling below $100 a barrel.
``Returning to quotas does not mean a production cut, it's a return to previous output commitments,'' Iranian OPEC Governor Mohammad Ali Khatibi said in a Sept. 1 telephone interview in Tehran. ``The result will be a decrease in output, but it's different from a cut in the ceiling.''
Prices of just over $100 a barrel are ``fair,'' Venezuelan President Hugo Chavez said on Aug. 27.
Nigerian Petroleum Minister of State Odein Ajumogobia and Ecuadorean Oil Minister Galo Chiriboga said in the past week that OPEC should maintain current production.
OPEC ``probably doesn't want to see another run at $150,'' said Societe Generale's Wittner. ``But they're worried the $35 downward correction will continue.''
The group meets again Dec. 17 in Algeria.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net; Ayesha Daya in Dubai adaya1@bloomberg.net
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Indonesia May Increase Benchmark Rate for Fifth Straight Month
By Arijit Ghosh and Michael Munoz
Sept. 4 (Bloomberg) -- Indonesia's central bank may raise its benchmark interest rate for a fifth straight month to tame the fastest inflation in almost two years.
Governor Boediono and his seven colleagues will increase the policy rate by a quarter point to 9.25 percent, according to 23 of 28 economists in a Bloomberg News survey. Five expect no change. The board of governors meets in Jakarta today.
Indonesia's economic growth unexpectedly accelerated in the second quarter amid rising overseas sales by the world's largest palm oil producer and thermal coal exporter. That may ease policy makers' concerns that higher borrowing costs will damage Southeast Asia's biggest economy.
Improving domestic consumption is ``likely to give some comfort to Bank Indonesia to have higher interest rates,'' said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore. ``The rupiah will continue to be a subject of close surveillance in order to keep imported inflation from seeping further into the economy.''
A 1.3 percent decline in the rupiah in the past month may also prompt the central bank to increase borrowing costs and attract overseas investors to Indonesian assets. The currency rose 0.1 percent to 9,207 against the dollar yesterday.
Consumer prices rose 11.85 percent from a year earlier last month, after increasing 11.9 percent in July. Wholesale-price inflation accelerated to 34.7 percent in June, the fastest pace in nine years.
Festival Season
Central banks across Asia have been raising borrowing costs as higher food and commodity prices stoke inflation in the region. The Bank of Thailand increased its benchmark rate for a second consecutive month on Aug. 27 to 3.75 percent. Bangko Sentral ng Pilipinas has raised the rate it pays banks for overnight deposits three times in 12 weeks.
Prices in Indonesia may rise this month as the country with the largest Muslim population prepares to celebrate Id-ul-Fitr in October to mark the end of the fasting month of Ramadan.
The sources of inflationary pressures have shifted ``to the demand side of the economy'' as the festival season approaches, said Alexander Sugandi, an economist at Standard Chartered Plc in Jakarta.
A policy rate of 9.5 percent is ``adequate'' to keep price gains within the central bank's inflation target of 6.5 percent to 7.5 percent next year, Deputy Governor Hartadi Sarwono said in an interview on Aug. 8.
Still, a decline in commodity prices since the end of the second quarter may slow economic growth. Palm oil futures have tumbled 44 percent from a record 4,486 ringgit ($1,303) a metric ton in March amid concerns that global supply may exceed demand and as funds cut commodity investments.
Overseas sales from Indonesia rose 25.5 percent in July from a year earlier to $12.55 billion. That compares with a 34.9 percent increase a month earlier.
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Sept. 4 (Bloomberg) -- Indonesia's central bank may raise its benchmark interest rate for a fifth straight month to tame the fastest inflation in almost two years.
Governor Boediono and his seven colleagues will increase the policy rate by a quarter point to 9.25 percent, according to 23 of 28 economists in a Bloomberg News survey. Five expect no change. The board of governors meets in Jakarta today.
Indonesia's economic growth unexpectedly accelerated in the second quarter amid rising overseas sales by the world's largest palm oil producer and thermal coal exporter. That may ease policy makers' concerns that higher borrowing costs will damage Southeast Asia's biggest economy.
Improving domestic consumption is ``likely to give some comfort to Bank Indonesia to have higher interest rates,'' said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore. ``The rupiah will continue to be a subject of close surveillance in order to keep imported inflation from seeping further into the economy.''
A 1.3 percent decline in the rupiah in the past month may also prompt the central bank to increase borrowing costs and attract overseas investors to Indonesian assets. The currency rose 0.1 percent to 9,207 against the dollar yesterday.
Consumer prices rose 11.85 percent from a year earlier last month, after increasing 11.9 percent in July. Wholesale-price inflation accelerated to 34.7 percent in June, the fastest pace in nine years.
Festival Season
Central banks across Asia have been raising borrowing costs as higher food and commodity prices stoke inflation in the region. The Bank of Thailand increased its benchmark rate for a second consecutive month on Aug. 27 to 3.75 percent. Bangko Sentral ng Pilipinas has raised the rate it pays banks for overnight deposits three times in 12 weeks.
Prices in Indonesia may rise this month as the country with the largest Muslim population prepares to celebrate Id-ul-Fitr in October to mark the end of the fasting month of Ramadan.
The sources of inflationary pressures have shifted ``to the demand side of the economy'' as the festival season approaches, said Alexander Sugandi, an economist at Standard Chartered Plc in Jakarta.
A policy rate of 9.5 percent is ``adequate'' to keep price gains within the central bank's inflation target of 6.5 percent to 7.5 percent next year, Deputy Governor Hartadi Sarwono said in an interview on Aug. 8.
Still, a decline in commodity prices since the end of the second quarter may slow economic growth. Palm oil futures have tumbled 44 percent from a record 4,486 ringgit ($1,303) a metric ton in March amid concerns that global supply may exceed demand and as funds cut commodity investments.
Overseas sales from Indonesia rose 25.5 percent in July from a year earlier to $12.55 billion. That compares with a 34.9 percent increase a month earlier.
The following is a table of economists' estimates:
Indonesia BI Rate Estimates
---------------------------------------------------------
Sept. Oct. Nov. Dec.
Firm 4 8 6 4
---------------------------------------------------------
Median 9.25% 9.50% 9.50% 9.50%
% Estimates at Median 82% 74% 75% 70%
Average 9.21% 9.38% 9.39% 9.43%
High 9.25% 9.50% 9.50% 9.75%
Low 9.00% 9.00% 9.00% 9.00%
Number of Estimates 28 19 20 20
---------------------------------------------------------
ATR-Kim Eng Capital 9.00% 9.00% 9.00% 9.00%
Bahana Securities 9.25% 9.25% 9.25% 9.50%
Bank Central Asia 9.25% 9.50% 9.50% 9.50%
Bank Danamon 9.25% 9.50% 9.50% 9.50%
Bank Intl Indonesia 9.25% 9.50% 9.50% 9.50%
BNI Securities 9.25% 9.50% 9.50% 9.75%
Capital Economics Ltd. 9.25% -- -- --
Citi 9.25% 9.50% 9.50% 9.50%
Credit Suisse 9.25% -- -- --
Danareksa Securities 9.00% 9.00% 9.00% 9.00%
DBS Group 9.25% -- -- --
Forecast Ltd. 9.25% -- -- --
HSBC 9.25% -- 9.50% 9.75%
Ideaglobal 9.00% 9.00% 9.00% 9.00%
Indo Premier Securities 9.25% 9.50% 9.50% 9.50%
ING Groep NV 9.00% -- -- --
Lehman Brothers 9.25% -- -- --
LippoBank 9.00% 9.00% 9.00% 9.00%
Macquarie Capital Securit 9.25% 9.50% 9.50% 9.50%
Moody's Economy.com 9.25% 9.50% 9.50% 9.50%
Morgan Stanley 9.25% -- -- --
OCBC Bank 9.25% 9.50% 9.50% 9.50%
PT. Mega Capital 9.25% 9.50% 9.50% 9.50%
Reuters IFR 9.25% 9.50% 9.50% 9.50%
Standard Chartered 9.25% 9.50% 9.50% 9.50%
UBS 9.25% -- -- --
UOB Group 9.25% 9.50% 9.50% 9.50%
Westpac Banking 9.25% 9.50% 9.50% 9.50%
-----------------------------------------------------------
To contact the reporters on this story: Arijit Ghosh in Jakarta at aghosh@bloomberg.net
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Japanese Yen, South Korean Won, Ringgit: Asia Currency Preview
By Bob Chen
Sept. 4 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Finance Ministry releases weekly portfolio flows data at 8:50 a.m. in Tokyo. Chief Cabinet Secretary Nobutaka Machimura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Vice Finance Minister Kazuyuki Sugimoto is scheduled to give a press conference at 5 p.m.
The yen traded at 108.68 as of 6:23 p.m. in Tokyo.
South Korean won: The central bank will release a report on economic growth for the second quarter tomorrow. Currency, bond and stock markets will stabilize as investor concerns that the nation is facing a financial crisis subside, Deputy Finance Minister Shin Je Yoon said yesterday.
The won was at 1,148.50.
Malaysian ringgit: Exports rose 15 percent in July from a year earlier, economists forecast in a Bloomberg News survey before the government reports the data at 12:01 p.m. local time. Overseas sales climbed 18.4 percent in June, the slowest pace in three months.
The ringgit was at 3.4415.
Indonesian rupiah: The central bank will raise its benchmark interest rate today for a fifth straight month by a quarter-percentage point to 9.25 percent, according to 23 of the 28 economists surveyed by Bloomberg. Five forecast no change.
The central bank is scheduled to report the nation's foreign-exchange reserves as of Aug. 31 either today or tomorrow. They climbed to $60.56 billion in July from $59.45 billion the previous month.
The rupiah was at 9,212.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Finance Ministry releases weekly portfolio flows data at 8:50 a.m. in Tokyo. Chief Cabinet Secretary Nobutaka Machimura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Vice Finance Minister Kazuyuki Sugimoto is scheduled to give a press conference at 5 p.m.
The yen traded at 108.68 as of 6:23 p.m. in Tokyo.
South Korean won: The central bank will release a report on economic growth for the second quarter tomorrow. Currency, bond and stock markets will stabilize as investor concerns that the nation is facing a financial crisis subside, Deputy Finance Minister Shin Je Yoon said yesterday.
The won was at 1,148.50.
Malaysian ringgit: Exports rose 15 percent in July from a year earlier, economists forecast in a Bloomberg News survey before the government reports the data at 12:01 p.m. local time. Overseas sales climbed 18.4 percent in June, the slowest pace in three months.
The ringgit was at 3.4415.
Indonesian rupiah: The central bank will raise its benchmark interest rate today for a fifth straight month by a quarter-percentage point to 9.25 percent, according to 23 of the 28 economists surveyed by Bloomberg. Five forecast no change.
The central bank is scheduled to report the nation's foreign-exchange reserves as of Aug. 31 either today or tomorrow. They climbed to $60.56 billion in July from $59.45 billion the previous month.
The rupiah was at 9,212.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
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Australian Dollar Rebounds From One-Year Low Before Trade Data
By Chris Young
Sept. 4 (Bloomberg) -- The Australian dollar rebounded from the lowest in a year on speculation its 13 percent slump this quarter has been excessive given the yield advantage investors can still earn for holding the nation's bonds.
The Australian dollar also gained before a government report that economists say will show exports exceeded imports in July for a second month, the first back-to-back monthly trade surplus since 2001. The currency advanced for the first time in five days on speculation traders are likely to pare bets on how much the Reserve Bank of Australia will cut interest rates, said Joshua Williamson, a senior strategist at TD Securities Ltd.
``When currency traders look at the fundamentals of the Australian dollar they'll see growth will be sustained and the RBA won't cut rates by as much as expected,'' Sydney-based Williamson said. ``The Australian dollar is well oversold. Yield won't be a drag on the currency.''
The Australian dollar bought 83.55 U.S. cents at 9:50 a.m. in Sydney, compared with 82.96 cents in late Asian trading yesterday when it touched 82.34, the lowest level since Sept. 11. It will gain to 85 to 86 cents in coming weeks, Williamson said.
The Reserve Bank cut the overnight cash-rate target by a quarter-percentage point to 7 percent on Sept. 2, its first reduction in seven years. Policy makers will lower the rate by almost 1 percentage point in 12 months, according to a Credit Suisse Group index based on the trading of interest-rate swaps.
The trade surplus was A$50 million ($41.8 million) in July compared with A$411 million in June, according to the median estimate of economists surveyed by Bloomberg News before the Bureau of Statistics releases the report at 11:30 a.m. in Sydney.
Australian 10-year government bonds yield 2.03 percentage points more than similar-maturity U.S. Treasury notes compared with 1.95 percentage points at the end of last week.
Benchmark 10-year bonds declined for a second day. The yield on the 5.25 percent note due March 2019 rose 3 basis points, or 0.03 percentage point, to 5.73 percent, according to data compiled by Bloomberg. The price fell 0.25, or A$2.50 per A$1,000 face amount, to 96.287.
To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- The Australian dollar rebounded from the lowest in a year on speculation its 13 percent slump this quarter has been excessive given the yield advantage investors can still earn for holding the nation's bonds.
The Australian dollar also gained before a government report that economists say will show exports exceeded imports in July for a second month, the first back-to-back monthly trade surplus since 2001. The currency advanced for the first time in five days on speculation traders are likely to pare bets on how much the Reserve Bank of Australia will cut interest rates, said Joshua Williamson, a senior strategist at TD Securities Ltd.
``When currency traders look at the fundamentals of the Australian dollar they'll see growth will be sustained and the RBA won't cut rates by as much as expected,'' Sydney-based Williamson said. ``The Australian dollar is well oversold. Yield won't be a drag on the currency.''
The Australian dollar bought 83.55 U.S. cents at 9:50 a.m. in Sydney, compared with 82.96 cents in late Asian trading yesterday when it touched 82.34, the lowest level since Sept. 11. It will gain to 85 to 86 cents in coming weeks, Williamson said.
The Reserve Bank cut the overnight cash-rate target by a quarter-percentage point to 7 percent on Sept. 2, its first reduction in seven years. Policy makers will lower the rate by almost 1 percentage point in 12 months, according to a Credit Suisse Group index based on the trading of interest-rate swaps.
The trade surplus was A$50 million ($41.8 million) in July compared with A$411 million in June, according to the median estimate of economists surveyed by Bloomberg News before the Bureau of Statistics releases the report at 11:30 a.m. in Sydney.
Australian 10-year government bonds yield 2.03 percentage points more than similar-maturity U.S. Treasury notes compared with 1.95 percentage points at the end of last week.
Benchmark 10-year bonds declined for a second day. The yield on the 5.25 percent note due March 2019 rose 3 basis points, or 0.03 percentage point, to 5.73 percent, according to data compiled by Bloomberg. The price fell 0.25, or A$2.50 per A$1,000 face amount, to 96.287.
To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.
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New Zealand Dollar Advances as Investors Seek Higher Yields
By Ron Harui
Sept. 4 (Bloomberg) -- The New Zealand dollar rose from its lowest level in almost a year on speculation investors will take advantage of the currency's decline to buy the nation's higher- yielding assets.
New Zealand's dollar gained for the first time in five days as the difference between three-year New Zealand and U.S. interest-rate swaps widened to 3.58 percentage points, the most since July 17. The currency, known as the kiwi, was also bolstered as traders bet its 2.3 percent loss in the past five days was overdone.
``The New Zealand-U.S. three-year swap spreads have widened over the past week, which may be providing a bit of support for the New Zealand dollar,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``Given the extreme moves we've seen over the past few days, we can't help but think the kiwi is overdue a bit of consolidation.''
New Zealand's currency advanced 0.8 percent to 68.41 U.S. cents as of 11:10 a.m. in Wellington, from 67.88 cents late in Asia yesterday when it reached 67.36 cents, the lowest since Aug. 17, 2007 The currency also climbed to 74.14 yen from 73.80 yen yesterday when it touched 73.24, the weakest since August 2006.
The benchmark interest rate of 8 percent in New Zealand compares with 2 percent in the U.S. and 0.5 percent in Japan, making the currency a favorite for investors seeking higher returns.
The New Zealand dollar's 14-day stochastic oscillator, a technical indicator which measures momentum, was at 11.00 against the U.S. dollar yesterday, according to data compiled by Bloomberg. A level below 20 suggests a currency may have weakened too rapidly and is poised to rebound.
New Zealand 10-year government bonds advanced for a second day, pushing the yield down 2 basis points, or 0.02 percentage point, to 5.96 percent. The price of the 6 percent security maturing in December 2017 rose 0.152, or NZ$1.52 per NZ$1,000 face amount, to 100.306. Yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net;
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Euro Trades Near 7-Month Low Versus Dollar Before ECB Meeting
By Stanley White and Ye Xie
Sept. 4 (Bloomberg) -- The euro traded near the lowest level against the dollar in more than seven months on speculation the European Central Bank will signal it's concerned about growth while keeping interest rates on hold.
The 15-nation currency traded near a five-month low against the yen before an ECB policy meeting later today. The British pound was close to a 3 1/2-year low versus the yen and reached a record low against the euro on speculation the Bank of England will keep interest rates unchanged today as it battles slowing growth and accelerating inflation.
``You can't buy the euro as a long-term investment,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The ECB will acknowledge that the economic outlook has worsened, and that will accelerate the euro's decline.''
The euro traded at $1.4510 at 8:34 a.m. in Tokyo from $1.4498 yesterday, when it touched $1.4385, the lowest since Jan. 22. The yen was little changed at 157.18 per euro after yesterday reaching 156.26, the strongest since March 31. Japan's currency traded at 108.31 per dollar. The euro may decline to $1.4410 today, Soma forecast.
The pound was at $1.7754 from $1.7768 yesterday, when it reached a two-year low of $1.7668. It fell 0.2 percent to 192.13 yen, near 191.95 yen, the strongest since January 2005.
Sterling also dropped to an all-time low of 81.88 per euro today. British consumer confidence stayed at a four-year low in August, a Nationwide Building Society survey showed yesterday, adding to the case for interest rate cuts. The Bank of England will keep its target lending rate at 5 percent today, according to all 61 economists surveyed by Bloomberg News.
`Particularly Weak'
ECB President Jean-Claude Trichet and his colleagues will hold the main refinancing rate at 4.25 percent today, according to all but one of the 53 analysts surveyed by Bloomberg. The euro has dropped 5.4 percent versus the dollar since Aug. 7, when Trichet said growth in the countries using the euro will be ``particularly weak'' through the third quarter.
European retail sales decreased 0.4 percent in July, the European Union's statistics office said in Luxembourg yesterday. The median forecast of 25 economists surveyed by Bloomberg was for a 0.1 percent increase. Investment by companies slid 1.2 percent, the first decline in five years.
Economic Slowdown
``There has been nervousness that the slowdown in the U.S. is spreading to the rest of the world, including Europe,'' said Rebecca Patterson, global head of foreign exchange in New York at J.P. Morgan's Private Bank, a JPMorgan Chase & Co. unit that helps wealthy clients manage their assets.
Japan's currency increased 1.8 percent yesterday to 13.72 against South Africa's rand and as much as 0.9 percent to 191.95 versus the pound, as investors pared carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark interest rate compares with 12 percent in South Africa and 5 percent in the U.K.
``Investors are exiting large carry positions,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online trading firm Gain Capital in Bedminster, New Jersey. ``People are reallocating assets away from high yielders.''
Dollar Index
The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, touched 78.651 yesterday, the highest level since October, on speculation a decline in oil prices will support economic growth in the world's largest energy consumer.
Crude oil for October delivery decreased 0.3 percent to $109.36 a barrel yesterday after reaching a five-month low of $105.46 on Sept. 2. Gold for December delivery reached the two- week low of $793.70 an ounce.
Business across most of the U.S. was ``slow'' last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book.
U.S. nonfarm payrolls fell by 75,000 jobs in August, faster than the previous month's decline of 51,000, according to the median forecast of 74 economists surveyed by Bloomberg News. The report from the Labor Department is due tomorrow.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net;
Read more...
Sept. 4 (Bloomberg) -- The euro traded near the lowest level against the dollar in more than seven months on speculation the European Central Bank will signal it's concerned about growth while keeping interest rates on hold.
The 15-nation currency traded near a five-month low against the yen before an ECB policy meeting later today. The British pound was close to a 3 1/2-year low versus the yen and reached a record low against the euro on speculation the Bank of England will keep interest rates unchanged today as it battles slowing growth and accelerating inflation.
``You can't buy the euro as a long-term investment,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The ECB will acknowledge that the economic outlook has worsened, and that will accelerate the euro's decline.''
The euro traded at $1.4510 at 8:34 a.m. in Tokyo from $1.4498 yesterday, when it touched $1.4385, the lowest since Jan. 22. The yen was little changed at 157.18 per euro after yesterday reaching 156.26, the strongest since March 31. Japan's currency traded at 108.31 per dollar. The euro may decline to $1.4410 today, Soma forecast.
The pound was at $1.7754 from $1.7768 yesterday, when it reached a two-year low of $1.7668. It fell 0.2 percent to 192.13 yen, near 191.95 yen, the strongest since January 2005.
Sterling also dropped to an all-time low of 81.88 per euro today. British consumer confidence stayed at a four-year low in August, a Nationwide Building Society survey showed yesterday, adding to the case for interest rate cuts. The Bank of England will keep its target lending rate at 5 percent today, according to all 61 economists surveyed by Bloomberg News.
`Particularly Weak'
ECB President Jean-Claude Trichet and his colleagues will hold the main refinancing rate at 4.25 percent today, according to all but one of the 53 analysts surveyed by Bloomberg. The euro has dropped 5.4 percent versus the dollar since Aug. 7, when Trichet said growth in the countries using the euro will be ``particularly weak'' through the third quarter.
European retail sales decreased 0.4 percent in July, the European Union's statistics office said in Luxembourg yesterday. The median forecast of 25 economists surveyed by Bloomberg was for a 0.1 percent increase. Investment by companies slid 1.2 percent, the first decline in five years.
Economic Slowdown
``There has been nervousness that the slowdown in the U.S. is spreading to the rest of the world, including Europe,'' said Rebecca Patterson, global head of foreign exchange in New York at J.P. Morgan's Private Bank, a JPMorgan Chase & Co. unit that helps wealthy clients manage their assets.
Japan's currency increased 1.8 percent yesterday to 13.72 against South Africa's rand and as much as 0.9 percent to 191.95 versus the pound, as investors pared carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark interest rate compares with 12 percent in South Africa and 5 percent in the U.K.
``Investors are exiting large carry positions,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online trading firm Gain Capital in Bedminster, New Jersey. ``People are reallocating assets away from high yielders.''
Dollar Index
The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, touched 78.651 yesterday, the highest level since October, on speculation a decline in oil prices will support economic growth in the world's largest energy consumer.
Crude oil for October delivery decreased 0.3 percent to $109.36 a barrel yesterday after reaching a five-month low of $105.46 on Sept. 2. Gold for December delivery reached the two- week low of $793.70 an ounce.
Business across most of the U.S. was ``slow'' last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book.
U.S. nonfarm payrolls fell by 75,000 jobs in August, faster than the previous month's decline of 51,000, according to the median forecast of 74 economists surveyed by Bloomberg News. The report from the Labor Department is due tomorrow.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net;
Read more...
Crude Oil Is Little Changed After U.S. Gulf Avoids Storm Damage
By Mark Shenk and Samantha Zee
Sept. 4 (Bloomberg) -- Crude oil was little changed after Royal Dutch Shell Plc and ConocoPhillips said that Hurricane Gustav caused no damage to platforms in the Gulf of Mexico.
Exxon Mobil Corp. said workers are returning to facilities that weren't in the direct path of Gustav. Oil fell yesterday as the euro dropped to a seven-month low against the dollar. Prices rebounded from the session's lows on forecasts that tropical storms were forming in the Atlantic.
``The next number we are going to test is $100,'' said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. ``One hedge fund has shut down and the demand picture here has been ugly, so the market will remain under downward pressure.''
Crude oil for October delivery was unchanged at $109.35 a barrel at 8:59 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, oil fell 36 cents, or 0.3 percent, to settle at $109.35 a barrel. Prices, which are up 46 percent from a year ago, are 26 percent down from the record $147.27 reached July 11.
Tropical Storm Hanna expanded as it lashed Haiti and the Bahamas with torrential rains, laying a course that forecasters say may take it away from the Gulf and toward South Carolina as a hurricane by the end of the week, the U.S. National Hurricane Center said as of 5 p.m. Miami time.
Farther out to sea, Hurricane Ike's winds strengthened to 70 miles per hour. Tropical Storm Josephine in eastern Atlantic Ocean, packed winds of about 60 mph that are forecast to weaken later this week, the center said.
`Reassuring' News
``Most of the news about damage has been reassuring,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``I think the market would be falling out of bed if it weren't for Hanna, Josephine and Ike. There's a line of storms forming in the Atlantic that has got to have traders worried.''
Shell said in an e-mailed statement earlier this week that initial reports indicate no major damage to the oil producer's onshore facilities in Louisiana. ConocoPhillips said there was no ``significant damage'' to its Magnolia platform in the Gulf.
Anadarko Petroleum Corp. restarted production at its Nansen and Boomvang platforms in the Gulf on Sept. 2 and is returning workers to offshore facilities that were outside the path of Gustav. Anadarko was producing the equivalent of about 150,000 barrels a day of oil from the region before output was shut in preparation for the storm.
Gulf Shutdowns
About 96 percent of crude-oil production in the Gulf and 92 percent of natural-gas output remains halted because of Gustav, the U.S. government said. Producers reported that 91 rigs and 599 platforms are evacuated due to the storm, the Minerals Management Service said yesterday in a statement on its Web site.
About 1.2 million barrels of daily oil production remain shut-in, along with 6.7 billion cubic feet of gas.
The euro fell to the lowest in more than seven months against the dollar after reports showed business investment, exports and retail sales declined, adding to evidence of an economic slump in the single-currency region.
The dollar's recovery will cause the decline in oil prices to continue, OPEC President Chakib Khelil said yesterday in a phone interview, adding that he expects supply to outstrip demand by as much as 1 million barrels a day in the first half of 2009.
The Organization of Petroleum Exporting Countries will meet on Sept. 9 in Vienna to review production targets.
``There is going to be a lot of talk from OPEC because of the drop in prices,'' Hodge said. ``Iran and Venezuela will want to defend high prices at all costs because they need the funds, given all of their social spending. The Saudis might actually want to see prices fall a bit more.''
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- Crude oil was little changed after Royal Dutch Shell Plc and ConocoPhillips said that Hurricane Gustav caused no damage to platforms in the Gulf of Mexico.
Exxon Mobil Corp. said workers are returning to facilities that weren't in the direct path of Gustav. Oil fell yesterday as the euro dropped to a seven-month low against the dollar. Prices rebounded from the session's lows on forecasts that tropical storms were forming in the Atlantic.
``The next number we are going to test is $100,'' said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. ``One hedge fund has shut down and the demand picture here has been ugly, so the market will remain under downward pressure.''
Crude oil for October delivery was unchanged at $109.35 a barrel at 8:59 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, oil fell 36 cents, or 0.3 percent, to settle at $109.35 a barrel. Prices, which are up 46 percent from a year ago, are 26 percent down from the record $147.27 reached July 11.
Tropical Storm Hanna expanded as it lashed Haiti and the Bahamas with torrential rains, laying a course that forecasters say may take it away from the Gulf and toward South Carolina as a hurricane by the end of the week, the U.S. National Hurricane Center said as of 5 p.m. Miami time.
Farther out to sea, Hurricane Ike's winds strengthened to 70 miles per hour. Tropical Storm Josephine in eastern Atlantic Ocean, packed winds of about 60 mph that are forecast to weaken later this week, the center said.
`Reassuring' News
``Most of the news about damage has been reassuring,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``I think the market would be falling out of bed if it weren't for Hanna, Josephine and Ike. There's a line of storms forming in the Atlantic that has got to have traders worried.''
Shell said in an e-mailed statement earlier this week that initial reports indicate no major damage to the oil producer's onshore facilities in Louisiana. ConocoPhillips said there was no ``significant damage'' to its Magnolia platform in the Gulf.
Anadarko Petroleum Corp. restarted production at its Nansen and Boomvang platforms in the Gulf on Sept. 2 and is returning workers to offshore facilities that were outside the path of Gustav. Anadarko was producing the equivalent of about 150,000 barrels a day of oil from the region before output was shut in preparation for the storm.
Gulf Shutdowns
About 96 percent of crude-oil production in the Gulf and 92 percent of natural-gas output remains halted because of Gustav, the U.S. government said. Producers reported that 91 rigs and 599 platforms are evacuated due to the storm, the Minerals Management Service said yesterday in a statement on its Web site.
About 1.2 million barrels of daily oil production remain shut-in, along with 6.7 billion cubic feet of gas.
The euro fell to the lowest in more than seven months against the dollar after reports showed business investment, exports and retail sales declined, adding to evidence of an economic slump in the single-currency region.
The dollar's recovery will cause the decline in oil prices to continue, OPEC President Chakib Khelil said yesterday in a phone interview, adding that he expects supply to outstrip demand by as much as 1 million barrels a day in the first half of 2009.
The Organization of Petroleum Exporting Countries will meet on Sept. 9 in Vienna to review production targets.
``There is going to be a lot of talk from OPEC because of the drop in prices,'' Hodge said. ``Iran and Venezuela will want to defend high prices at all costs because they need the funds, given all of their social spending. The Saudis might actually want to see prices fall a bit more.''
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.
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Japan's Stocks Decline, Led by Glassmakers, Shipping Lines
By Masaki Kondo
Sept. 4 (Bloomberg) -- Japan's stocks fell, led by glassmakers and shipping lines, after slumping orders for television screens prompted U.S.-based Corning Inc. to cut its forecast and freight rates for commodities plunged.
Asahi Glass Co. dropped 4.2 percent while Sharp Corp., Japan's biggest maker of liquid-crystal display televisions, declined 1.7 percent. Mitsui O.S.K. Lines Ltd., Japan's second- biggest shipper, slumped 4.5 percent. Bridgestone Corp., the world's biggest tiremaker, jumped 2.5 percent after UBS AG and Goldman Sachs Group Inc. recommended the stock.
The Nikkei 225 Stock Average declined 92.45, or 0.7 percent, to 12,597.14 as of 9:07 a.m. in Tokyo. The broader Topix index fell 7.35, or 0.6 percent, to 1,213.20. All but three of 33 industry groups on the Topix slumped.
``I expect Japan's stock market to be slightly bearish and to largely stay flat today,'' Juichi Wako, a Tokyo-based strategist at Nomura Holdings Inc., said in an interview with Bloomberg Television. ``It's hard to find trading cues with a lack of market-moving news.''
Corning, the biggest maker of glass for flat-panel displays, reduced its third-quarter earnings and sales estimates because television-set makers trimmed orders. Sony Corp. said last month the company's business is struggling in the U.S. and Western Europe though it kept its annual TV sales target of 17 million units.
The Baltic Dry Index, a measure of shipping costs for commodities, fell the most in almost three months on weaker Chinese demand for materials such as iron ore.
Nikkei futures expiring in September retreated 0.6 percent to 12,610 in Osaka and slumped 0.6 percent to 12,605 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Economic Calendar Eco Data 9/4/08
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