By Chua Kong Ho and Chan Tien Hin
Nov. 4 (Bloomberg) -- Asian stocks rose, led by Japanese and financial companies, as lending costs tumbled the most in almost a decade in Japan and Australia's central bank cut interest rates.
Mizuho Financial Group Inc. jumped more than 7 percent as Japan's three-month interbank rate fell and trading resumed after yesterday's holiday, when other Asian markets advanced. Westpac Banking Corp. added 3.9 percent following the Reserve Bank's three-quarter percentage point rate cut. Cnooc Ltd. fell 5.5 percent after crude prices slumped, while Nissan Motor Co. sank 11 percent after slashing its profit forecast by 53 percent.
The MSCI Asia Pacific Index gained 2.4 percent to 89.88 as of 3:51 p.m. in Tokyo. All 10 industry groups climbed, with financial stocks contributing the most to the advance. About two stocks rose for every one that declined.
``Markets turned around after a deeper-than-expected rate cut in Australia, emphasizing once again the determination of governments globally to bring down the cost of capital,'' said Howard Wang, who oversees $10 billion at JF Asset Management in Hong Kong.
Japan's Nikkei 225 Stock Average gained 6.3 percent to 9,114.60, rebounding from its worst monthly slump on record. Panasonic Corp. climbed 6.8 percent on speculation it will buy Sanyo Electric Co. Japan's markets were shut yesterday, when the MSCI Asia Pacific excluding Japan Index advanced 5.2 percent. Markets around the region were mixed, with the biggest declines in China, Singapore and Philippines.
Cnooc, Mizuho
Futures on the Standard & Poor's 500 Index added 0.2 percent. U.S. stocks declined yesterday, with the S&P 500 dropping 0.3 percent, on the worst contraction in manufacturing since 1982 and forecasts that the sagging economy will reduce profits.
Mizuho, Japan's second-largest bank by revenue, gained 7.1 percent to 248,400 yen. Mitsubishi UFJ Financial Group Inc., Japan's largest bank, climbed 4.9 percent to 627 yen. The Tokyo interbank offered rate, or Tibor, fell 9.8 basis points to 0.791 percent around noon, the most since December 1999, according to the Japanese Bankers Association.
Shinhan Financial Group Ltd., which controls South Korea's third-biggest bank, gained 11 percent to 36,800 won.
Westpac, Australia's second-biggest bank by market value, rose 3.9 percent to A$22.30. National Australia Bank Ltd. added 1.7 percent to A$25.52.
Australian Rate Cut
Australian central bank Governor Glenn Stevens lowered the overnight cash rate target to 5.25 percent from 6 percent in Sydney today, adding to last month's 1 percentage point reduction. Fifteen of 16 economists surveyed by Bloomberg News forecast a half-point cut and one expected a quarter-point drop.
The Markit iTraxx Australia index of credit-default swaps declined 10 basis points to trade at 235 as of 2:40 p.m. in Sydney, Citigroup Inc. data show.
``The stability of financial markets has been restored somewhat,'' said Hideyuki Ookoshi, who helps oversee about $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``Investors are keeping a keen eye on government efforts to shore up banks' capital, which is the key to the recovery of global economies.''
Borrowing costs fell last week in Asia and Europe after central banks slashed rates and governments pledged as much as $3 trillion of emergency funds to reverse a collapse in trust among banks. Financing dried up after Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, shattering lenders' confidence they would be repaid.
Panasonic, Tokyo Electric
Panasonic, the world's largest consumer-electronics maker, gained 6.8 percent to 1,614 yen on its plan to buy control of Sanyo Electric. Panasonic will make a formal acquisition proposal soon to Goldman Sachs Group Inc., Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co., a company official familiar with the negotiations said Nov. 1. The three banks hold preferred shares equal to 70 percent of Sanyo.
Cnooc Ltd., China's largest offshore oil producer, fell 5.5 percent to HK$6.25 in Hong Kong. Crude oil fell 5.8 percent to $63.91 a barrel yesterday in New York, the biggest drop since Oct. 22.
Nissan Motor Co., which cut its profit forecast by 52 percent, dropped 11 percent to 441 yen. The fixed dividend payments Nissan Chief Executive Officer Carlos Ghosn promised to shareholders for the next three years will be reviewed, the carmaker said on Oct. 31.
Tokyo Electric Power Co., Asia's biggest utility, gained 4.3 percent to 2,890 yen after forecasting a narrower loss. The company said on Oct. 31 it expects an annual net loss of 220 billion yen ($2.2 billion), compared with an earlier guidance for a 280 billion yen loss. Tokyo Gas Co., Japan's largest natural gas distributor, advanced 6 percent to 445 yen after predicting a full-year profit, reversing an earlier loss forecast.
Singtel, Hynix
NTT DoCoMo Inc., Japan's largest mobile-phone operator, climbed 2.7 percent to 149,200 yen, after reporting second- quarter profit rose 40 percent to 173.1 billion yen.
Dividend yields on companies in the Nikkei reached 2.52 percent on Oct. 31, higher than the 1.48 percent yields on Japanese government 10-year bonds. The stock yields exceeded 2 percent on Oct. 3 for the first time since at least July 1989.
Singapore Telecommunications Ltd., which gets more than half its profit from its overseas unit, fell 6.8 percent to S$2.34. The phone company said second-quarter earnings will be hurt by currency movements, without providing specific figures.
Hynix Semiconductor Inc., the world's second-largest computer-memory maker, lost 6.8 percent to 10,250 won in Seoul after Moody's Investors Service cut its debt rating one level to Ba3, citing the company's weaker credit profile and earnings. Goldman, Sachs & Co. lowered its price estimate by 29 percent.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
Read more...
Tuesday, November 4, 2008
Bigben, Eurotunnel, Gameloft, Imerys: French Stocks Preview
By Laurence Frost
Nov. 4 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.
France's CAC 40 Index advanced for a fifth day, climbing 40.9, or 1.2 percent, to 3,527.97 in Paris. The SBF 120 Index gained 1.2 percent.
Bigben Interactive SA (BIG FP): The video-game designer reported a 27 percent rise in second-quarter sales to 20.9 million euros and said it expects to raise its full-year operating profit target. The shares added 12 cents, or 1.9 percent, to 6.59 euros.
Groupe Eurotunnel SA (GET FP): The operator of the undersea rail link between England and France said it spent 10.1 million euros buying back 1.67 million of its own shares in October. The shares fell 5 cents, or 0.9 percent, to 5.30 euros.
Gameloft (GFT FP): Europe's biggest maker of games for mobile phones said third-quarter revenue rose 8.3 percent to 26.2 million euros and forecast a ``strong spurt'' in fourth- quarter sales. The company also announced a licensing accord for mobile games based on the Spider-Man and Iron Man 2 franchises. The shares rose 4 cents, or 1.5 percent, to 2.69 euros.
Imerys SA (NK FP): The world's biggest producer of minerals used to whiten paper and add colors to paint reports third- quarter earnings before the market opens in Paris. Operating profit may have fallen 5 percent to 113 million euros, according to the median of seven analyst estimates, on higher energy costs. The shares closed unchanged at 35.50 euros.
M6-Metropole Television SA (MMT FP): France's second- largest commercial broadcaster reports third-quarter revenue after the market close in Paris. Sales may have slipped 1.1 percent to 270.9 million euros, according to the median of six analyst estimates, as advertising revenue declined for its main television channel. The shares gained 44 cents, or 3.6 percent, to 12.74 euros.
Osiatis SA (OSA FP): The computer services company reported a 2.7 percent increase in third-quarter revenue and said it expects full-year sales to rise from 2007 levels. The shares rose 11 cents, or 6.3 percent, to 1.86 euros.
SeLoger.com SA (SLG FP): France's largest provider of online real-estate advertisements hired Roland Tripard as chief executive, replacing Jean-Fabrice Mathieu who will leave the group at the end of the year. The shares dropped 5 cents, or 0.3 percent, to 14.65 euros.
SA des Ciments Vicat (VCT FP): The cement maker said nine- month revenue fell 3.1 percent to 1.58 billion euros and forecast a sharper-than-expected decline in its full-year operating profit margin. The shares gained 1.50 euros, or 5.6 percent, to 28.50 euros.
To contact the reporter on this story: Laurence Frost in Paris at lfrost4@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.
France's CAC 40 Index advanced for a fifth day, climbing 40.9, or 1.2 percent, to 3,527.97 in Paris. The SBF 120 Index gained 1.2 percent.
Bigben Interactive SA (BIG FP): The video-game designer reported a 27 percent rise in second-quarter sales to 20.9 million euros and said it expects to raise its full-year operating profit target. The shares added 12 cents, or 1.9 percent, to 6.59 euros.
Groupe Eurotunnel SA (GET FP): The operator of the undersea rail link between England and France said it spent 10.1 million euros buying back 1.67 million of its own shares in October. The shares fell 5 cents, or 0.9 percent, to 5.30 euros.
Gameloft (GFT FP): Europe's biggest maker of games for mobile phones said third-quarter revenue rose 8.3 percent to 26.2 million euros and forecast a ``strong spurt'' in fourth- quarter sales. The company also announced a licensing accord for mobile games based on the Spider-Man and Iron Man 2 franchises. The shares rose 4 cents, or 1.5 percent, to 2.69 euros.
Imerys SA (NK FP): The world's biggest producer of minerals used to whiten paper and add colors to paint reports third- quarter earnings before the market opens in Paris. Operating profit may have fallen 5 percent to 113 million euros, according to the median of seven analyst estimates, on higher energy costs. The shares closed unchanged at 35.50 euros.
M6-Metropole Television SA (MMT FP): France's second- largest commercial broadcaster reports third-quarter revenue after the market close in Paris. Sales may have slipped 1.1 percent to 270.9 million euros, according to the median of six analyst estimates, as advertising revenue declined for its main television channel. The shares gained 44 cents, or 3.6 percent, to 12.74 euros.
Osiatis SA (OSA FP): The computer services company reported a 2.7 percent increase in third-quarter revenue and said it expects full-year sales to rise from 2007 levels. The shares rose 11 cents, or 6.3 percent, to 1.86 euros.
SeLoger.com SA (SLG FP): France's largest provider of online real-estate advertisements hired Roland Tripard as chief executive, replacing Jean-Fabrice Mathieu who will leave the group at the end of the year. The shares dropped 5 cents, or 0.3 percent, to 14.65 euros.
SA des Ciments Vicat (VCT FP): The cement maker said nine- month revenue fell 3.1 percent to 1.58 billion euros and forecast a sharper-than-expected decline in its full-year operating profit margin. The shares gained 1.50 euros, or 5.6 percent, to 28.50 euros.
To contact the reporter on this story: Laurence Frost in Paris at lfrost4@bloomberg.net.
Read more...
Petrobras, TGS, Itau, Cementos Argos: Latin Equity Preview
By James Attwood
Nov. 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 rose 1.9 percent yesterday to 2,182.43. Colombian markets were closed yesterday for a holiday.
Argentina
Petrobras Energia Participaciones SA (PBE AF): The unit of Brazil's state-controlled oil company said it will start to pay the Ecuadorian government 70 percent of revenue over an agreed ``base price'' for its Pata and Palo Azul oil fields in the South American country. Ecuador will take 40 percent ownership of Pata and 60 percent of Palo Azul through the accord. Petrobras Energia Participaciones rose 5.1 percent to 2.47 pesos.
Transportadora de Gas del Sur SA (TGSU2 AF): The natural gas processor and transporter reported a 10-fold increase in third- quarter profit. Net income rose to 37 million pesos ($10.9 million) from 3 million pesos a year earlier. That beat Grupo SBS's estimate of 34.5 million pesos, the brokerage wrote. TGS rose 4.7 percent to 1.35 pesos.
Brazil
Banco Itau Holding Financeira SA (ITAU4 BS): Itau's estimated 26.5 billion real ($12.5 billion) purchase of Uniao de Bancos Brasileiros SA (UBBR11 BS) will provide ``muscle'' to help the banks compete globally, said Aloisio Mercadante, a senator from Brazil's Sao Paulo state and a leading member of Brazilian President Luiz Inaco Lula da Silva's Workers' Party. Itau rose 16 percent to 27.09 reais. Unibanco gained 9 percent to 14.97 reais.
Colombia
Bancolombia SA (BCOLO CB): The American depositary receipts (CIB US) of Colombia's biggest lender rose 7.1 percent in New York yesterday when local trading was closed for a public holiday. Bancolombia rose 4.3 percent to 12,100 pesos when it last traded Oct. 31.
Cementos Argos SA (CEMARGOS CB): Colombia's biggest cement market is facing a ``weaker'' domestic construction industry next year, Banco Santander SA analysts including Alonso Aramburu wrote in a note yesterday. Cementos Argos rose 2.6 percent to 6,000 pesos.
Mexico
Grupo Mexico SAB (GMEXICOB MM): The country's largest mining company said it will pay its third-quarter dividend with stock instead of cash. Current shareholders will be paid one share for every 35 they already hold, the company said. Grupo Mexico fell 3.8 percent to 10.53 pesos.
To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net.
Read more...
Nov. 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 rose 1.9 percent yesterday to 2,182.43. Colombian markets were closed yesterday for a holiday.
Argentina
Petrobras Energia Participaciones SA (PBE AF): The unit of Brazil's state-controlled oil company said it will start to pay the Ecuadorian government 70 percent of revenue over an agreed ``base price'' for its Pata and Palo Azul oil fields in the South American country. Ecuador will take 40 percent ownership of Pata and 60 percent of Palo Azul through the accord. Petrobras Energia Participaciones rose 5.1 percent to 2.47 pesos.
Transportadora de Gas del Sur SA (TGSU2 AF): The natural gas processor and transporter reported a 10-fold increase in third- quarter profit. Net income rose to 37 million pesos ($10.9 million) from 3 million pesos a year earlier. That beat Grupo SBS's estimate of 34.5 million pesos, the brokerage wrote. TGS rose 4.7 percent to 1.35 pesos.
Brazil
Banco Itau Holding Financeira SA (ITAU4 BS): Itau's estimated 26.5 billion real ($12.5 billion) purchase of Uniao de Bancos Brasileiros SA (UBBR11 BS) will provide ``muscle'' to help the banks compete globally, said Aloisio Mercadante, a senator from Brazil's Sao Paulo state and a leading member of Brazilian President Luiz Inaco Lula da Silva's Workers' Party. Itau rose 16 percent to 27.09 reais. Unibanco gained 9 percent to 14.97 reais.
Colombia
Bancolombia SA (BCOLO CB): The American depositary receipts (CIB US) of Colombia's biggest lender rose 7.1 percent in New York yesterday when local trading was closed for a public holiday. Bancolombia rose 4.3 percent to 12,100 pesos when it last traded Oct. 31.
Cementos Argos SA (CEMARGOS CB): Colombia's biggest cement market is facing a ``weaker'' domestic construction industry next year, Banco Santander SA analysts including Alonso Aramburu wrote in a note yesterday. Cementos Argos rose 2.6 percent to 6,000 pesos.
Mexico
Grupo Mexico SAB (GMEXICOB MM): The country's largest mining company said it will pay its third-quarter dividend with stock instead of cash. Current shareholders will be paid one share for every 35 they already hold, the company said. Grupo Mexico fell 3.8 percent to 10.53 pesos.
To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net.
Read more...
Babcock Infrastructure to Sell 50% of Powerco to QIC
By Angela Macdonald-Smith
Nov. 4 (Bloomberg) -- Babcock & Brown Infrastructure Group, owner of ports and energy transmission lines in Australia, Europe and the U.S., agreed to sell 50 percent of Powerco Ltd.'s New Zealand operations as it seeks to reduce debt.
The sale, to funds held by investment manager QIC, values the New Zealand business at NZ$2.05 billion ($1.2 billion), including debt, Sydney-based Babcock Infrastructure, or BBI, said today in a statement. It will retain Powerco's gas distribution unit in Tasmania, valued at NZ$200 million.
BBI, whose shares have slumped 81 percent in the past six months, said in August it may sell as much as half of three of its main businesses, Powerco, WestNet Rail and BBI Euroports, to cut borrowing and provide funds for investment. The NZ$2.25 billion valuation of the whole of Powerco, including debt, is 25 percent higher than the NZ$1.8 billion price BBI paid in 2004.
``Powerco is a core regulated utility,'' Ross Israel, head of global infrastructure at Brisbane, Queensland-based QIC, which has more than A$80 billion ($54 billion) under management, said today in the statement, sent to the Australian stock exchange. ``As a mature business we expect it to provide stable, long-term returns.'
Net proceeds from the sale, due to be completed in the first quarter of 2009, are expected to be about NZ$400 million, BBI said. Talks are continuing on the sale of stakes in BBI Euroports and WestNet Rail, it said.
Babcock Infrastructure yesterday gained 13 percent to 21.5 Australian cents on the exchange.
Powerco is New Zealand's second-biggest electricity and gas distributor, with more than 400,000 customers across more than 39,000 square kilometers of New Zealand's North Island.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Nov. 4 (Bloomberg) -- Babcock & Brown Infrastructure Group, owner of ports and energy transmission lines in Australia, Europe and the U.S., agreed to sell 50 percent of Powerco Ltd.'s New Zealand operations as it seeks to reduce debt.
The sale, to funds held by investment manager QIC, values the New Zealand business at NZ$2.05 billion ($1.2 billion), including debt, Sydney-based Babcock Infrastructure, or BBI, said today in a statement. It will retain Powerco's gas distribution unit in Tasmania, valued at NZ$200 million.
BBI, whose shares have slumped 81 percent in the past six months, said in August it may sell as much as half of three of its main businesses, Powerco, WestNet Rail and BBI Euroports, to cut borrowing and provide funds for investment. The NZ$2.25 billion valuation of the whole of Powerco, including debt, is 25 percent higher than the NZ$1.8 billion price BBI paid in 2004.
``Powerco is a core regulated utility,'' Ross Israel, head of global infrastructure at Brisbane, Queensland-based QIC, which has more than A$80 billion ($54 billion) under management, said today in the statement, sent to the Australian stock exchange. ``As a mature business we expect it to provide stable, long-term returns.'
Net proceeds from the sale, due to be completed in the first quarter of 2009, are expected to be about NZ$400 million, BBI said. Talks are continuing on the sale of stakes in BBI Euroports and WestNet Rail, it said.
Babcock Infrastructure yesterday gained 13 percent to 21.5 Australian cents on the exchange.
Powerco is New Zealand's second-biggest electricity and gas distributor, with more than 400,000 customers across more than 39,000 square kilometers of New Zealand's North Island.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Read more...
Clark Prepared to Borrow to Protect New Zealand Jobs, Economy
By Tracy Withers
Nov. 4 (Bloomberg) -- New Zealand Prime Minister Helen Clark, trailing in opinion polls four days before a general election, will borrow if necessary to protect jobs and bolster the economy.
``I'm prepared to borrow for investment,'' Clark said in a Radio New Zealand interview today. There's no point watching ``unemployment go through the roof if you have the capacity in the short-term to invest for the future and get your people productively engaged.''
Clark, who has led the country since 1999, is seeking re- election on Nov. 8 as the economy struggles to emerge from its first recession in 10 years. Turmoil in financial markets has crimped business confidence and hiring, adding to signs the jobless rate will rise to a six-year high.
``We've had a slow year, our main trading partners have had a slow year and they will have a slow year next year,'' Clark said. ``We have to keep our nerve and manage through this.''
A report today showed the government's budget deficit was unexpectedly in deficit in the three months ended Sept. 30 amid a decline in the value of investments and less tax income from financial institutions affected by the market turmoil.
The government last month forecast full-year deficits for the next five years as economic growth slows.
About 30 percent of New Zealand companies surveyed last month expected to fire workers in the next year as demand slows, according to an ANZ National Bank Ltd. survey.
Jobless Rate
The jobless rate probably rose to a four-year high of 4.3 percent in the third quarter, according to the median forecast of 12 economists surveyed by Bloomberg News. The employment report is released on Nov. 6.
Last month, the Treasury Department said the jobless rate may rise to 5.1 percent by late 2009.
Clark plans a mini-budget in December, which will outline her plans to kick-start the economy. She has promised an early start to previously announced programs to refurbish state-owned houses and to build roads and other infrastructure.
``We have budgets for a number of things we can bring forward to get us through a slow patch,'' she said. ``We have to be pro-active about the things we can do which are very job rich.''
Clark pledged she won't cut public spending although there is scope to review the ``mix of spending to see what we can reprioritize.''
The government will also reduce immigration to ensure New Zealanders get the first chance at jobs. The government granted 181,000 permits to foreign workers in the year ended June.
``We have a capacity to move Kiwis into those jobs,'' Clark said, referring to New Zealanders by their nickname.
Last week, Clark said the government will pay an allowance to workers who lose their jobs because of factory closures or staff cuts.
Labour had 35 percent support in a Colmar Brunton poll of 1,000 voters published Oct. 27. The main opposition National party had 47 percent support.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- New Zealand Prime Minister Helen Clark, trailing in opinion polls four days before a general election, will borrow if necessary to protect jobs and bolster the economy.
``I'm prepared to borrow for investment,'' Clark said in a Radio New Zealand interview today. There's no point watching ``unemployment go through the roof if you have the capacity in the short-term to invest for the future and get your people productively engaged.''
Clark, who has led the country since 1999, is seeking re- election on Nov. 8 as the economy struggles to emerge from its first recession in 10 years. Turmoil in financial markets has crimped business confidence and hiring, adding to signs the jobless rate will rise to a six-year high.
``We've had a slow year, our main trading partners have had a slow year and they will have a slow year next year,'' Clark said. ``We have to keep our nerve and manage through this.''
A report today showed the government's budget deficit was unexpectedly in deficit in the three months ended Sept. 30 amid a decline in the value of investments and less tax income from financial institutions affected by the market turmoil.
The government last month forecast full-year deficits for the next five years as economic growth slows.
About 30 percent of New Zealand companies surveyed last month expected to fire workers in the next year as demand slows, according to an ANZ National Bank Ltd. survey.
Jobless Rate
The jobless rate probably rose to a four-year high of 4.3 percent in the third quarter, according to the median forecast of 12 economists surveyed by Bloomberg News. The employment report is released on Nov. 6.
Last month, the Treasury Department said the jobless rate may rise to 5.1 percent by late 2009.
Clark plans a mini-budget in December, which will outline her plans to kick-start the economy. She has promised an early start to previously announced programs to refurbish state-owned houses and to build roads and other infrastructure.
``We have budgets for a number of things we can bring forward to get us through a slow patch,'' she said. ``We have to be pro-active about the things we can do which are very job rich.''
Clark pledged she won't cut public spending although there is scope to review the ``mix of spending to see what we can reprioritize.''
The government will also reduce immigration to ensure New Zealanders get the first chance at jobs. The government granted 181,000 permits to foreign workers in the year ended June.
``We have a capacity to move Kiwis into those jobs,'' Clark said, referring to New Zealanders by their nickname.
Last week, Clark said the government will pay an allowance to workers who lose their jobs because of factory closures or staff cuts.
Labour had 35 percent support in a Colmar Brunton poll of 1,000 voters published Oct. 27. The main opposition National party had 47 percent support.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
Read more...
Australia May Cut Benchmark Interest Rate to 5.5%
By Jacob Greber
Nov. 4 (Bloomberg) -- Australia's central bank will probably cut its benchmark interest rate by half a percentage point, the third reduction in as many months, amid increasing evidence global financial turmoil is buffeting the economy.
Governor Glenn Stevens will lower the overnight cash rate target to 5.5 percent from 6 percent at 2:30 p.m. in Sydney today, adding to last month's 1 percentage point reduction, according to 15 of 16 economists surveyed by Bloomberg News. One forecast a quarter point cut.
Falling house prices and retail sales plus October's 14 percent slump in the All Ordinaries Index of stocks, the biggest drop since 1987, has prompted businesses and households to scrap spending plans, driving up unemployment and eroding earnings at companies such as retailer Harvey Norman Holdings Ltd. The U.S., China, India, Japan and South Korea all cut rates in the past week on signs global growth is stalling.
``The sooner interest rates are cut the better,'' said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. ``After such a courageous policy move in October, it would be extremely worrying if the Reserve Bank now lost its nerve and paused. That would send a very bad message to consumers, who are clearly very nervous.''
Stevens and his board cut borrowing costs by a quarter point in September, the first reduction since 2001, and followed with another 100 basis points a month later amid signs growth is slowing faster than forecast.
House Prices
The Australian dollar fell to 67.87 U.S. cents at 8:19 a.m. in Sydney from 68.06 cents in late Asian trading yesterday. The currency has tumbled 31 percent since hitting a 25-year high of 98.49 cents on July 16.
``The economy is definitely slowing as a consequence of the global financial crisis,'' Treasurer Wayne Swan said yesterday.
Gross domestic product rose 0.3 percent in the second quarter, the weakest pace in more than three years, as consumers cut spending for the first time since 1993.
House prices fell 1.8 percent in the third quarter, the biggest drop since the late 1970s, according to economists at Australia & New Zealand Banking Group Ltd. in Melbourne. Retail sales tumbled in October by the most in three years and job advertisements slid for a sixth month, reports showed yesterday
An index of manufacturing slumped in October to the lowest level since the Australian Industry Group began measuring output in 1992, a report showed yesterday.
Unemployment Rises
Harvey Norman, Australia's biggest furniture and electronics retailer, said sales weakened last month as slumping consumer sentiment curbed demand for televisions and sofas. Revenue from stores open at least a year fell 5.8 percent in the 28 days ending Oct. 19.
Unemployment, which fell to a three-decade low of 3.9 percent in February amid a China-fueled mining boom, probably rose to 4.4 percent last month from 4.3 percent in September, according to the median estimate of 13 economists surveyed by Bloomberg News ahead of a Nov. 6 report.
There is a ``very good chance'' the economy may already be contracting given the ``slew of negative industry anecdotes and early indications of a recession-like drop in business conditions,'' said Kieran Davies, chief economist at ABN Amro Australia Ltd. in Sydney.
``These downside risks should see the Reserve Bank cut rates further, especially when the resources boom appears increasingly under threat, given collapsing spot prices for coal and iron ore and a steep decline in Chinese steel production.''
Inflation Fight
Rio Tinto Group Chief Executive officer Tom Albanese said this week the economic slowdown in China, which buys 17 percent of the company's production, is quickening and demand won't rebound until 2009.
Still, Reserve Bank Deputy Governor Ric Battellino said last week Australia will avoid a recession and still has ``a big task ahead to slow inflation, and this could limit room for maneuvering on monetary policy.''
Policy makers aim to ensure Australia repeats its experience of 2001, when it sidestepped a global recession, Battellino said on Oct. 30. ``That is certainly what we're aiming for, and there is nothing in the data to suggest that we are off track,'' he added.
Battellino's comments prompted investors to pare bets on the size of today's potential interest-rate reduction, according to a Credit Suisse index based on overnight swaps trading. The chance of a 75 basis point cut fell to 38 percent on Oct. 31 from 91 percent at the start of last week.
Loan Repayments
Policy makers raised the benchmark rate 12 times between 2002 and March this year to a 12-year high of 7.25 percent to curb inflation that has surged to 5 percent.
The Reserve Bank in August said inflation will probably peak in the fourth quarter, before falling back within its target range of between 2 percent and 3 percent in 2010.
``Looking forward to next year, forces seem now to be building that will start to dampen pressures on prices, even though we won't have evidence of that for a good six months,'' Stevens said on Oct. 21.
A half-point cut in mortgage rates would reduce repayments on an average A$250,000 ($169,000) home loan by A$90 a month, according to the Real Estate Institute.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Nov. 4 (Bloomberg) -- Australia's central bank will probably cut its benchmark interest rate by half a percentage point, the third reduction in as many months, amid increasing evidence global financial turmoil is buffeting the economy.
Governor Glenn Stevens will lower the overnight cash rate target to 5.5 percent from 6 percent at 2:30 p.m. in Sydney today, adding to last month's 1 percentage point reduction, according to 15 of 16 economists surveyed by Bloomberg News. One forecast a quarter point cut.
Falling house prices and retail sales plus October's 14 percent slump in the All Ordinaries Index of stocks, the biggest drop since 1987, has prompted businesses and households to scrap spending plans, driving up unemployment and eroding earnings at companies such as retailer Harvey Norman Holdings Ltd. The U.S., China, India, Japan and South Korea all cut rates in the past week on signs global growth is stalling.
``The sooner interest rates are cut the better,'' said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. ``After such a courageous policy move in October, it would be extremely worrying if the Reserve Bank now lost its nerve and paused. That would send a very bad message to consumers, who are clearly very nervous.''
Stevens and his board cut borrowing costs by a quarter point in September, the first reduction since 2001, and followed with another 100 basis points a month later amid signs growth is slowing faster than forecast.
House Prices
The Australian dollar fell to 67.87 U.S. cents at 8:19 a.m. in Sydney from 68.06 cents in late Asian trading yesterday. The currency has tumbled 31 percent since hitting a 25-year high of 98.49 cents on July 16.
``The economy is definitely slowing as a consequence of the global financial crisis,'' Treasurer Wayne Swan said yesterday.
Gross domestic product rose 0.3 percent in the second quarter, the weakest pace in more than three years, as consumers cut spending for the first time since 1993.
House prices fell 1.8 percent in the third quarter, the biggest drop since the late 1970s, according to economists at Australia & New Zealand Banking Group Ltd. in Melbourne. Retail sales tumbled in October by the most in three years and job advertisements slid for a sixth month, reports showed yesterday
An index of manufacturing slumped in October to the lowest level since the Australian Industry Group began measuring output in 1992, a report showed yesterday.
Unemployment Rises
Harvey Norman, Australia's biggest furniture and electronics retailer, said sales weakened last month as slumping consumer sentiment curbed demand for televisions and sofas. Revenue from stores open at least a year fell 5.8 percent in the 28 days ending Oct. 19.
Unemployment, which fell to a three-decade low of 3.9 percent in February amid a China-fueled mining boom, probably rose to 4.4 percent last month from 4.3 percent in September, according to the median estimate of 13 economists surveyed by Bloomberg News ahead of a Nov. 6 report.
There is a ``very good chance'' the economy may already be contracting given the ``slew of negative industry anecdotes and early indications of a recession-like drop in business conditions,'' said Kieran Davies, chief economist at ABN Amro Australia Ltd. in Sydney.
``These downside risks should see the Reserve Bank cut rates further, especially when the resources boom appears increasingly under threat, given collapsing spot prices for coal and iron ore and a steep decline in Chinese steel production.''
Inflation Fight
Rio Tinto Group Chief Executive officer Tom Albanese said this week the economic slowdown in China, which buys 17 percent of the company's production, is quickening and demand won't rebound until 2009.
Still, Reserve Bank Deputy Governor Ric Battellino said last week Australia will avoid a recession and still has ``a big task ahead to slow inflation, and this could limit room for maneuvering on monetary policy.''
Policy makers aim to ensure Australia repeats its experience of 2001, when it sidestepped a global recession, Battellino said on Oct. 30. ``That is certainly what we're aiming for, and there is nothing in the data to suggest that we are off track,'' he added.
Battellino's comments prompted investors to pare bets on the size of today's potential interest-rate reduction, according to a Credit Suisse index based on overnight swaps trading. The chance of a 75 basis point cut fell to 38 percent on Oct. 31 from 91 percent at the start of last week.
Loan Repayments
Policy makers raised the benchmark rate 12 times between 2002 and March this year to a 12-year high of 7.25 percent to curb inflation that has surged to 5 percent.
The Reserve Bank in August said inflation will probably peak in the fourth quarter, before falling back within its target range of between 2 percent and 3 percent in 2010.
``Looking forward to next year, forces seem now to be building that will start to dampen pressures on prices, even though we won't have evidence of that for a good six months,'' Stevens said on Oct. 21.
A half-point cut in mortgage rates would reduce repayments on an average A$250,000 ($169,000) home loan by A$90 a month, according to the Real Estate Institute.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
EU Ministers Rule Out Joint Stimulus, Back `Coordinated' Action
By Fergal O'Brien
Nov. 4 (Bloomberg) -- European finance ministers ruled out a joint stimulus package to revive the region's economy and vowed instead to coordinate national policies as they try to limit the fallout from a recession on consumers and companies.
``We do not believe that in the euro area we need a general revival package, a sort of traditional program designed to stimulate the economy,'' Luxembourg Finance Minister Jean-Claude Juncker told a press conference after leading a meeting of euro- area counterparts in Brussels yesterday.
Euro-area finance chiefs met hours after the European Commission slashed its growth forecasts and predicted that the economy would stagnate next year. While French President Nicolas Sarkozy has called for a joint package to help the region combat the economic slump, the ministers indicated they favor a looser system of ``coordinated'' measures.
European Union countries have already begun planning measures to jumpstart their own economies, with Germany preparing a two-year program of investments and incentives to provide a 50 billion-euro ($64 billion) stimulus. EU Monetary Affairs Commissioner Joaquin Almunia said such plans weren't at odds with the EU approach.
``I don't think adopting measures at the national level is inconsistent with the need to coordinate actions, provided the national decisions are integrated in an adequate framework,'' he said at the press conference in Brussels late yesterday. ``What I want to avoid is the negative spillover of some decisions that can create problems for the good functioning of the internal market.''
Financial Rules
Both Sarkozy and U.K. Prime Minister Gordon Brown have called for a redrawing of global financial rules under a ``new Bretton Woods,'' referring to the 1944 conference that created the modern global economic system as well as institutions including the International Monetary Fund and World Bank.
French Finance Minister Christine Lagarde may continue to push for an EU-wide plan when ministers from all 27 EU nations meet today. European heads of state are set to meet later this week before a Nov. 15 summit of the so-called Group of 20 industrialized and developing nations in Washington.
``It's a goal the president never gave up on, so I'm not going to give up on it either,'' Lagarde said in an interview with Bloomberg News before yesterday's meeting, referring to Sarkozy. ``We must tackle it collectively.''
Juncker and Almunia both said any measures must not be introduced at the expense of the EU's Stability and Growth Pact, which sets a budget-deficit limit of 3 percent of gross domestic product.
`Exceptional Circumstances'
``We don't intend to change the rules of the Stability and Growth Pact,'' Juncker said. Almunia said countries could ``draw on the flexibility provided by the pact,'' which allows temporary breaches in ``exceptional circumstances.''
As well as cutting its economic-growth outlook, the Brussels-based commission yesterday forecast that the euro area's average budget deficit will widen to 1.8 percent in 2009, which would be the biggest since 2005, from 1.3 percent this year. The euro region's economy will grow just 0.1 percent next year, the worst performance since 1993, after shrinking for three consecutive quarters this year, it said in its autumn forecasts.
``Some of the countries are technically in recession,'' said Slovenian Finance Minister Andrej Bajuk. ``We are in a very strong slowdown.''
The European Central Bank, which has already offered unlimited dollars to unfreeze credit markets, cut interest rates last month for the first time since 2003 as part of a global coordinated move. The ECB and the Bank of England both will probably cut their key rates by another 50 basis points this week, surveys of economists show.
`Downside Risks'
The commission's forecast ``reflects the downside risks'' to the economy, said German Finance Minister Peer Steinbrueck. ``We are facing a very serious and problematic year.''
Europe's manufacturing industry is already shrinking at a record pace, according to data published yesterday, while executive and consumer confidence has plunged to the lowest in 15 years. Still, inflation is easing as oil prices drop, giving the ECB room to cut interest rates more.
While the EU's outlook includes a technical recession this year and little growth in 2009, it may still be too optimistic, said economists at Citigroup Inc. and BNP Paribas, both of which have forecast a contraction next year.
The forecasts ``are a dramatic shift for the commission,'' said Luigi Speranza, an economist at BNP in London. ``But there is more downside to come.''
To contact the reporter on this story: Fergal O'Brien in Brussels at fobrien@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- European finance ministers ruled out a joint stimulus package to revive the region's economy and vowed instead to coordinate national policies as they try to limit the fallout from a recession on consumers and companies.
``We do not believe that in the euro area we need a general revival package, a sort of traditional program designed to stimulate the economy,'' Luxembourg Finance Minister Jean-Claude Juncker told a press conference after leading a meeting of euro- area counterparts in Brussels yesterday.
Euro-area finance chiefs met hours after the European Commission slashed its growth forecasts and predicted that the economy would stagnate next year. While French President Nicolas Sarkozy has called for a joint package to help the region combat the economic slump, the ministers indicated they favor a looser system of ``coordinated'' measures.
European Union countries have already begun planning measures to jumpstart their own economies, with Germany preparing a two-year program of investments and incentives to provide a 50 billion-euro ($64 billion) stimulus. EU Monetary Affairs Commissioner Joaquin Almunia said such plans weren't at odds with the EU approach.
``I don't think adopting measures at the national level is inconsistent with the need to coordinate actions, provided the national decisions are integrated in an adequate framework,'' he said at the press conference in Brussels late yesterday. ``What I want to avoid is the negative spillover of some decisions that can create problems for the good functioning of the internal market.''
Financial Rules
Both Sarkozy and U.K. Prime Minister Gordon Brown have called for a redrawing of global financial rules under a ``new Bretton Woods,'' referring to the 1944 conference that created the modern global economic system as well as institutions including the International Monetary Fund and World Bank.
French Finance Minister Christine Lagarde may continue to push for an EU-wide plan when ministers from all 27 EU nations meet today. European heads of state are set to meet later this week before a Nov. 15 summit of the so-called Group of 20 industrialized and developing nations in Washington.
``It's a goal the president never gave up on, so I'm not going to give up on it either,'' Lagarde said in an interview with Bloomberg News before yesterday's meeting, referring to Sarkozy. ``We must tackle it collectively.''
Juncker and Almunia both said any measures must not be introduced at the expense of the EU's Stability and Growth Pact, which sets a budget-deficit limit of 3 percent of gross domestic product.
`Exceptional Circumstances'
``We don't intend to change the rules of the Stability and Growth Pact,'' Juncker said. Almunia said countries could ``draw on the flexibility provided by the pact,'' which allows temporary breaches in ``exceptional circumstances.''
As well as cutting its economic-growth outlook, the Brussels-based commission yesterday forecast that the euro area's average budget deficit will widen to 1.8 percent in 2009, which would be the biggest since 2005, from 1.3 percent this year. The euro region's economy will grow just 0.1 percent next year, the worst performance since 1993, after shrinking for three consecutive quarters this year, it said in its autumn forecasts.
``Some of the countries are technically in recession,'' said Slovenian Finance Minister Andrej Bajuk. ``We are in a very strong slowdown.''
The European Central Bank, which has already offered unlimited dollars to unfreeze credit markets, cut interest rates last month for the first time since 2003 as part of a global coordinated move. The ECB and the Bank of England both will probably cut their key rates by another 50 basis points this week, surveys of economists show.
`Downside Risks'
The commission's forecast ``reflects the downside risks'' to the economy, said German Finance Minister Peer Steinbrueck. ``We are facing a very serious and problematic year.''
Europe's manufacturing industry is already shrinking at a record pace, according to data published yesterday, while executive and consumer confidence has plunged to the lowest in 15 years. Still, inflation is easing as oil prices drop, giving the ECB room to cut interest rates more.
While the EU's outlook includes a technical recession this year and little growth in 2009, it may still be too optimistic, said economists at Citigroup Inc. and BNP Paribas, both of which have forecast a contraction next year.
The forecasts ``are a dramatic shift for the commission,'' said Luigi Speranza, an economist at BNP in London. ``But there is more downside to come.''
To contact the reporter on this story: Fergal O'Brien in Brussels at fobrien@bloomberg.net.
Read more...
Britain Can't Spend Its Way Out of This Recession: Matthew Lynn
Commentary by Matthew Lynn
Nov. 4 (Bloomberg) -- The British could be forgiven for feeling gloomy right now with a tumbling currency, a shrinking economy, rising unemployment and a financial system that needed a government bailout.
Still, help is at hand. The government is now planning to spend its way out of recession.
In the past week, Prime Minister Gordon Brown has made clear his response to the most serious economic decline the U.K. has faced in more than a generation. In homage to economist John Maynard Keynes, Brown plans to spend and spend, casting aside his own rules on debt and launching big infrastructure projects.
By stoking demand, the aim is to avert a long recession.
He will be disappointed. At best, the final splurge of government spending will prove to be irrelevant. At worst, it risks turning a bad situation into a catastrophe.
The U.K. depends on the global capital markets to stay afloat. Scare away international investors and the country could turn very quickly into another Iceland. There is no doubt the U.K. is slipping into deep trouble.
``The prospects for the U.K. economy are grim, with a fairly severe recession starting to unfold,'' Michael Saunders, an economist at Citigroup Inc. in London, said in a note to investors last month. He predicts the economy will contract by 1 percent next year. Yesterday the European Commission made the same forecast.
Arbitrary Rules
The government is getting out its checkbook. Last week, Chancellor of the Exchequer Alistair Darling said the rule that limits public debt to less than 40 percent of gross domestic product would be waived.
``To apply these rules rigidly in today's changed conditions would be perverse,'' he said.
Maybe so. But once you start picking and choosing when the rules apply, they aren't rules anymore.
``The responsible course of action is more borrowing for the investment that is necessary both now and for the longer term,'' Brown told an audience of economists and businessmen last week.
But is more spending really ``responsible''?
Interest rates in the U.K. are still 4.5 percent, higher than in the euro area and the U.S. There is still plenty of scope for monetary policy to stimulate demand. There is no reason interest rates shouldn't be cut to 1 percent, or lower if necessary. There's a case for a public-spending increase when borrowing costs are close to zero, and can't go any lower. Yet Britain is a long way from that point. If you use that weapon now, you won't have it if you need it later.
Nervous About Future
Next, people know that borrowing today has to be repaid tomorrow. That means taxes will soar. As debt levels rise, consumers and companies will save more to help pay for higher taxes down the track. Whatever boost you get from higher government spending will be lost. And if it makes businesses nervous about the future, and encourages even more of them to quit the U.K. for countries with lower corporate taxes such as Ireland, it could turn a mild recession into a depression.
Worse, all that extra spending will hurt the currency. The pound fell as low as $1.53 on Oct. 24 compared with more than $2 earlier in the year. The U.K. is dependent on foreign finance since it runs huge trade and public-sector deficits. If public finances spiral out of control, global investors may take flight, and bail out of sterling. If that happens, Britain could end up like Iceland. It is hardly a risk worth taking, particularly when confidence in world capital markets is already so fragile.
Tax Cuts
Finally, this is a global recession. The U.K. relies more than most countries on world trade, so it will be one of the most affected. An extra few billion pounds spent on roads or other public works won't make any difference.
The polls suggest many British have already seen through the arguments for more public spending. The Taxpayers' Alliance said last week in a poll that 59 percent of voters would rather have lower taxes than higher public spending. Only 18 percent wanted the government to increase its outlays.
The U.K. spent its way into trouble. It can't spend its way out again. Taxes have risen too high, and debt has soared out of control. The nation needs to pay down its obligations and lessen its dependence on financial services. There is no reason it can't make that transition with hard work and some belt-tightening.
A final splurge of public spending will only postpone that adjustment and create a real risk of economic disaster.
(Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- The British could be forgiven for feeling gloomy right now with a tumbling currency, a shrinking economy, rising unemployment and a financial system that needed a government bailout.
Still, help is at hand. The government is now planning to spend its way out of recession.
In the past week, Prime Minister Gordon Brown has made clear his response to the most serious economic decline the U.K. has faced in more than a generation. In homage to economist John Maynard Keynes, Brown plans to spend and spend, casting aside his own rules on debt and launching big infrastructure projects.
By stoking demand, the aim is to avert a long recession.
He will be disappointed. At best, the final splurge of government spending will prove to be irrelevant. At worst, it risks turning a bad situation into a catastrophe.
The U.K. depends on the global capital markets to stay afloat. Scare away international investors and the country could turn very quickly into another Iceland. There is no doubt the U.K. is slipping into deep trouble.
``The prospects for the U.K. economy are grim, with a fairly severe recession starting to unfold,'' Michael Saunders, an economist at Citigroup Inc. in London, said in a note to investors last month. He predicts the economy will contract by 1 percent next year. Yesterday the European Commission made the same forecast.
Arbitrary Rules
The government is getting out its checkbook. Last week, Chancellor of the Exchequer Alistair Darling said the rule that limits public debt to less than 40 percent of gross domestic product would be waived.
``To apply these rules rigidly in today's changed conditions would be perverse,'' he said.
Maybe so. But once you start picking and choosing when the rules apply, they aren't rules anymore.
``The responsible course of action is more borrowing for the investment that is necessary both now and for the longer term,'' Brown told an audience of economists and businessmen last week.
But is more spending really ``responsible''?
Interest rates in the U.K. are still 4.5 percent, higher than in the euro area and the U.S. There is still plenty of scope for monetary policy to stimulate demand. There is no reason interest rates shouldn't be cut to 1 percent, or lower if necessary. There's a case for a public-spending increase when borrowing costs are close to zero, and can't go any lower. Yet Britain is a long way from that point. If you use that weapon now, you won't have it if you need it later.
Nervous About Future
Next, people know that borrowing today has to be repaid tomorrow. That means taxes will soar. As debt levels rise, consumers and companies will save more to help pay for higher taxes down the track. Whatever boost you get from higher government spending will be lost. And if it makes businesses nervous about the future, and encourages even more of them to quit the U.K. for countries with lower corporate taxes such as Ireland, it could turn a mild recession into a depression.
Worse, all that extra spending will hurt the currency. The pound fell as low as $1.53 on Oct. 24 compared with more than $2 earlier in the year. The U.K. is dependent on foreign finance since it runs huge trade and public-sector deficits. If public finances spiral out of control, global investors may take flight, and bail out of sterling. If that happens, Britain could end up like Iceland. It is hardly a risk worth taking, particularly when confidence in world capital markets is already so fragile.
Tax Cuts
Finally, this is a global recession. The U.K. relies more than most countries on world trade, so it will be one of the most affected. An extra few billion pounds spent on roads or other public works won't make any difference.
The polls suggest many British have already seen through the arguments for more public spending. The Taxpayers' Alliance said last week in a poll that 59 percent of voters would rather have lower taxes than higher public spending. Only 18 percent wanted the government to increase its outlays.
The U.K. spent its way into trouble. It can't spend its way out again. Taxes have risen too high, and debt has soared out of control. The nation needs to pay down its obligations and lessen its dependence on financial services. There is no reason it can't make that transition with hard work and some belt-tightening.
A final splurge of public spending will only postpone that adjustment and create a real risk of economic disaster.
(Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net.
Read more...
Azerbaijan Plays Russia Off Against Europe in Contest Over Gas
By Celestine Bohlen
More Photos/Details
Nov. 4 (Bloomberg) -- It is boom time in Baku, the capital of Azerbaijan: The skyline is dense with cranes and high-rise buildings, and the streets of the port city on the Caspian Sea are clogged with luxury shops and traffic.
Oil revenue has fueled the country's growth, and even as prices have plummeted, Azerbaijan's energy resources remain a valuable prize. Evidence of this is the tug-of-war between Russia and Europe over natural gas from the next phase of a project that's expected to at least double current production when it moves from the planning stage to completion.
The competition is testing the former Soviet republic's ability to maintain its political balance in the months since Russia's invasion of Georgia heightened tensions between East and West.
``As always, Azerbaijan is trying to find common ground with all sides,'' says Fariz Ismailzade, director of the Advanced Foreign Service Program at the Azerbaijan Diplomatic Academy in Baku.
Over the past two months, Russia and the U.S., acting with the Europeans, have stepped up their attentions to this mostly Muslim nation of 8.5 million people. In addition to selling its gas, Azerbaijan wants to parlay the international interest into the resolution of its conflict over the separatist region of Nagorno-Karabakh, occupied by Armenia since a bloody ethnic war ended in 1994.
Easing Tensions
It inched toward that goal in a Nov. 2 meeting, where the two countries agreed to resolve the dispute under Russian, U.S. and French mediation, easing tensions in the South Caucasus after two Azerbaijani oil-export routes were disrupted by the Georgian war.
``This is our neighborhood and everything that happens here worries us,'' says Novruz Mammadov, head of President Ilham Aliyev's foreign-policy department.
Given its strategic location between the Caspian and Black seas, Azerbaijan is used to being in the middle. Since becoming independent in 1991, it has sought to minimize reliance on Soviet-era pipelines that go through Russia, a major trading partner and home to 2 million Azeris. At the same time, it has maintained neighborly relations.
``We have a strategic partnership with Russia and with the U.S., and we don't see any contradiction,'' says Khazar Ibrahim, spokesman for Azerbaijan's Foreign Ministry.
One-Day Visit
U.S. Vice President Dick Cheney visited Baku in September, followed a month later by Deputy Secretary of State John Negroponte. In between, Aliyev, 46, was invited to Moscow for a one-day visit with Russian President Dmitry Medvedev. The European Union's energy commissioner, Andris Piebalgs, is due in Baku this month.
One topic of discussion is Shah Deniz II, with natural-gas reserves estimated to at least equal the 9 billion cubic meters produced by the project's first phase. That gas is now sold at home and to Turkey and Georgia.
Once the second phase is developed, Moscow-based Gazprom OAO, which holds a monopoly on Russian exports, wants to buy the gas to boost reserves for future contractual commitments. The U.S. and EU want the new supplies sent directly to Europe through the proposed Nabucco pipeline, an $8 billion venture at the center of the region's efforts to reduce dependence on Russia.
Diversification of sources and routes has been a European priority since January 2006, when Russia, which accounts for 25 percent of EU gas imports, briefly halted shipments over a price dispute with Ukraine, a transit country.
Waiting for Europe
Azerbaijan has yet to decide when it will develop Shah Deniz II and says it's waiting for the Europeans to make an offer. Azerbaijan can bide its time, Mammadov says.
``We have said no to the Russians, for now,'' he says. ``To the Europeans, we have said we are ready to be good partners: for oil, for gas, for transit; but they need this, not us.''
In trying to strike a balance between East and West, Aliyev is following in the footsteps of his father, whom he succeeded as president in 2003. Heydar Aliyev, a former KGB general, played a key role in securing one link with Europe that bypasses Russia: a $4 billion pipeline that, by 2005, was carrying Azeri oil from the Caspian region through Georgia to Turkey's Mediterranean coast.
Operated by London-based BP Plc, Europe's second-largest oil company, the pipeline now exports a million barrels of oil a day on average -- roughly one percent of the world's supply.
Shrinking Revenue
The International Monetary Fund predicts Azerbaijan's gross domestic product will total $53.2 billion this year, compared with $8.6 billion in 2004. Revenue will likely shrink in 2009 as declining economic growth worldwide slows demand for crude oil. Prices have fallen 57 percent to about $64 a barrel Nov. 3 from a record $147.27 on July 11.
For now, though, the signs of oil wealth are everywhere in Baku. In its old city, tycoons have rebuilt modern villas on narrow, winding streets in the style of the mansions of their 19th-century predecessors. Oil has always been key to the fortunes of Baku: Marco Polo spotted a gusher here in the 14th century. In the 1800s, it drew European families, including the Rothschilds and the Nobels, who rushed to profit from the region's hydrocarbons.
Still, the dangers to Azerbaijan's thriving energy business from festering conflicts are all too evident. On Aug. 5, the BP pipeline was temporarily closed after an explosion on its Turkish portion, allegedly the work of Kurdish terrorists. That was followed by the closing of two oil-transit routes that cross Georgia because of its five-day war with Russia over the separatist region of South Ossetia.
Azerbaijan has been able to leverage some of the interest in its energy resources to try to end its own ``frozen conflict'' over Nagorno-Karabakh, which has cost it 20 percent of its territory. Medvedev arranged the Nov. 2 meeting in Moscow at which Aliyev and Armenian President Serzh Sargsyan agreed to seek a resolution -- signaling Russia's willingness to play mediator in this dispute.
``We have to find a way to have a peaceful, stable region,'' Ibrahim says.
To contact the reporter on this story: Celestine Bohlen in Baku, Azerbaijan, at cbohlen1@bloomberg.net
Read more...
More Photos/Details
Nov. 4 (Bloomberg) -- It is boom time in Baku, the capital of Azerbaijan: The skyline is dense with cranes and high-rise buildings, and the streets of the port city on the Caspian Sea are clogged with luxury shops and traffic.
Oil revenue has fueled the country's growth, and even as prices have plummeted, Azerbaijan's energy resources remain a valuable prize. Evidence of this is the tug-of-war between Russia and Europe over natural gas from the next phase of a project that's expected to at least double current production when it moves from the planning stage to completion.
The competition is testing the former Soviet republic's ability to maintain its political balance in the months since Russia's invasion of Georgia heightened tensions between East and West.
``As always, Azerbaijan is trying to find common ground with all sides,'' says Fariz Ismailzade, director of the Advanced Foreign Service Program at the Azerbaijan Diplomatic Academy in Baku.
Over the past two months, Russia and the U.S., acting with the Europeans, have stepped up their attentions to this mostly Muslim nation of 8.5 million people. In addition to selling its gas, Azerbaijan wants to parlay the international interest into the resolution of its conflict over the separatist region of Nagorno-Karabakh, occupied by Armenia since a bloody ethnic war ended in 1994.
Easing Tensions
It inched toward that goal in a Nov. 2 meeting, where the two countries agreed to resolve the dispute under Russian, U.S. and French mediation, easing tensions in the South Caucasus after two Azerbaijani oil-export routes were disrupted by the Georgian war.
``This is our neighborhood and everything that happens here worries us,'' says Novruz Mammadov, head of President Ilham Aliyev's foreign-policy department.
Given its strategic location between the Caspian and Black seas, Azerbaijan is used to being in the middle. Since becoming independent in 1991, it has sought to minimize reliance on Soviet-era pipelines that go through Russia, a major trading partner and home to 2 million Azeris. At the same time, it has maintained neighborly relations.
``We have a strategic partnership with Russia and with the U.S., and we don't see any contradiction,'' says Khazar Ibrahim, spokesman for Azerbaijan's Foreign Ministry.
One-Day Visit
U.S. Vice President Dick Cheney visited Baku in September, followed a month later by Deputy Secretary of State John Negroponte. In between, Aliyev, 46, was invited to Moscow for a one-day visit with Russian President Dmitry Medvedev. The European Union's energy commissioner, Andris Piebalgs, is due in Baku this month.
One topic of discussion is Shah Deniz II, with natural-gas reserves estimated to at least equal the 9 billion cubic meters produced by the project's first phase. That gas is now sold at home and to Turkey and Georgia.
Once the second phase is developed, Moscow-based Gazprom OAO, which holds a monopoly on Russian exports, wants to buy the gas to boost reserves for future contractual commitments. The U.S. and EU want the new supplies sent directly to Europe through the proposed Nabucco pipeline, an $8 billion venture at the center of the region's efforts to reduce dependence on Russia.
Diversification of sources and routes has been a European priority since January 2006, when Russia, which accounts for 25 percent of EU gas imports, briefly halted shipments over a price dispute with Ukraine, a transit country.
Waiting for Europe
Azerbaijan has yet to decide when it will develop Shah Deniz II and says it's waiting for the Europeans to make an offer. Azerbaijan can bide its time, Mammadov says.
``We have said no to the Russians, for now,'' he says. ``To the Europeans, we have said we are ready to be good partners: for oil, for gas, for transit; but they need this, not us.''
In trying to strike a balance between East and West, Aliyev is following in the footsteps of his father, whom he succeeded as president in 2003. Heydar Aliyev, a former KGB general, played a key role in securing one link with Europe that bypasses Russia: a $4 billion pipeline that, by 2005, was carrying Azeri oil from the Caspian region through Georgia to Turkey's Mediterranean coast.
Operated by London-based BP Plc, Europe's second-largest oil company, the pipeline now exports a million barrels of oil a day on average -- roughly one percent of the world's supply.
Shrinking Revenue
The International Monetary Fund predicts Azerbaijan's gross domestic product will total $53.2 billion this year, compared with $8.6 billion in 2004. Revenue will likely shrink in 2009 as declining economic growth worldwide slows demand for crude oil. Prices have fallen 57 percent to about $64 a barrel Nov. 3 from a record $147.27 on July 11.
For now, though, the signs of oil wealth are everywhere in Baku. In its old city, tycoons have rebuilt modern villas on narrow, winding streets in the style of the mansions of their 19th-century predecessors. Oil has always been key to the fortunes of Baku: Marco Polo spotted a gusher here in the 14th century. In the 1800s, it drew European families, including the Rothschilds and the Nobels, who rushed to profit from the region's hydrocarbons.
Still, the dangers to Azerbaijan's thriving energy business from festering conflicts are all too evident. On Aug. 5, the BP pipeline was temporarily closed after an explosion on its Turkish portion, allegedly the work of Kurdish terrorists. That was followed by the closing of two oil-transit routes that cross Georgia because of its five-day war with Russia over the separatist region of South Ossetia.
Azerbaijan has been able to leverage some of the interest in its energy resources to try to end its own ``frozen conflict'' over Nagorno-Karabakh, which has cost it 20 percent of its territory. Medvedev arranged the Nov. 2 meeting in Moscow at which Aliyev and Armenian President Serzh Sargsyan agreed to seek a resolution -- signaling Russia's willingness to play mediator in this dispute.
``We have to find a way to have a peaceful, stable region,'' Ibrahim says.
To contact the reporter on this story: Celestine Bohlen in Baku, Azerbaijan, at cbohlen1@bloomberg.net
Read more...
Won Falls After Biggest Reserves Drop in a Decade; Bonds Slide
By Kim Kyoungwha
Nov. 4 (Bloomberg) -- South Korea's won fell after the nation's foreign-exchange reserves slid by the most since its $57 billion bailout by the International Monetary Fund in 1997. Government bonds declined.
The currency, Asia's worst performer this year, jumped 16 percent in the past week as the Federal Reserve agreed on a $30 billion swap deal to ease a shortage of dollars. Foreign- exchange reserves plunged to $212.3 billion in October from $239.7 billion in September, the Bank of Korea said in Seoul today, as authorities provided dollars to help banks struggling to access overseas funds.
``Traders are probably having a decrease in reserves in mind even as that's already been known for a while,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``Nevertheless, the market has found some stability, which will reduce wild swings in movements.''
Korea's currency fell 1.1 percent to 1,275.70 against the dollar as of 9:54 a.m. local time, according to Seoul Money Brokerage Services Ltd. It's declined 27 percent since the start of the year, the worst among the 10 most-traded Asian currencies outside of Japan. Won said the currency is likely to trade between 1,230 and 1,290 this week.
The finance ministry yesterday announced a 14 trillion won ($11 billion) stimulus plan to prevent the economy from sliding into a recession. South Korea is in talks to expand its $4 billion swap deal with China to as much as $30 billion, Yonhap news agency reported today, citing unidentified officials at Korea's finance ministry and the central bank.
Reserves Drop
Policy makers around the world are adding funds to their financial systems to help calm markets roiled by the global credit crisis. South Korea provided almost $20 billion last month and is injecting an additional $30 billion to local lenders in the currency-swap market and via a state bank.
Korea's local-currency bonds fell for a third day on speculation that the government will increase the supply of debt to finance its stimulus package to shore up growth in Asia's fourth-largest economy.
The yield on the 5.5 percent note due June 2011 rose 3 basis points, or 0.03 percentage point, to 4.66 percent, according to the Korea Stock Exchange. The price of the security fell 0.08, or 8 won per 10,000 won face amount, to 104.24.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- South Korea's won fell after the nation's foreign-exchange reserves slid by the most since its $57 billion bailout by the International Monetary Fund in 1997. Government bonds declined.
The currency, Asia's worst performer this year, jumped 16 percent in the past week as the Federal Reserve agreed on a $30 billion swap deal to ease a shortage of dollars. Foreign- exchange reserves plunged to $212.3 billion in October from $239.7 billion in September, the Bank of Korea said in Seoul today, as authorities provided dollars to help banks struggling to access overseas funds.
``Traders are probably having a decrease in reserves in mind even as that's already been known for a while,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``Nevertheless, the market has found some stability, which will reduce wild swings in movements.''
Korea's currency fell 1.1 percent to 1,275.70 against the dollar as of 9:54 a.m. local time, according to Seoul Money Brokerage Services Ltd. It's declined 27 percent since the start of the year, the worst among the 10 most-traded Asian currencies outside of Japan. Won said the currency is likely to trade between 1,230 and 1,290 this week.
The finance ministry yesterday announced a 14 trillion won ($11 billion) stimulus plan to prevent the economy from sliding into a recession. South Korea is in talks to expand its $4 billion swap deal with China to as much as $30 billion, Yonhap news agency reported today, citing unidentified officials at Korea's finance ministry and the central bank.
Reserves Drop
Policy makers around the world are adding funds to their financial systems to help calm markets roiled by the global credit crisis. South Korea provided almost $20 billion last month and is injecting an additional $30 billion to local lenders in the currency-swap market and via a state bank.
Korea's local-currency bonds fell for a third day on speculation that the government will increase the supply of debt to finance its stimulus package to shore up growth in Asia's fourth-largest economy.
The yield on the 5.5 percent note due June 2011 rose 3 basis points, or 0.03 percentage point, to 4.66 percent, according to the Korea Stock Exchange. The price of the security fell 0.08, or 8 won per 10,000 won face amount, to 104.24.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
Read more...
New Zealand Dollar to Drop 8% on Rate Cuts, CBA Europe Says
By Lukanyo Mnyanda
Nov. 4 (Bloomberg) -- The New Zealand dollar may drop 8 percent by April on speculation the central bank will cut interest rates, extending its longest losing run since the Asian financial crisis more than a decade ago, CBA Europe Ltd. said.
The Reserve Bank of New Zealand will probably lower its benchmark lending rate one percentage point by March to revive the economy, reducing the currency's yield as a slowing global economy boosts demand for U.S. dollars, according to Divyang Shah, chief strategist in London at CBA Europe, a unit of Commonwealth Bank of Australia. The currency may drop to 55 U.S. cents by the end of the first quarter, from 59.07 as of 11:42 a.m. in Auckland.
``There's further easing to come from the RBNZ,'' Shah said in a telephone interview today. ``Demand for safety and liquidity will continue to dominate and that should support the dollar and mean a weaker kiwi along the way,'' Shah said, referring to the currency by its nickname. The analyst's forecast is more bearish than the median prediction of 60 U.S. cents from 22 analysts and strategists surveyed by Bloomberg.
New Zealand's dollar fell against the U.S. currency in each of the past five months, its longest losing streak since 1997, as tumbling equity markets prompted investors to dump high-yielding assets for safer holdings in the U.S. and Japanese currencies. The kiwi slumped 23 percent this year against the dollar. It hasn't lost more than 20 percent since 1984.
The central bank, led by Governor Alan Bollard, reduced the main interest rate by 1.75 percentage points to 6.5 percent since July after the economy contracted in the first half. Policy makers will probably cut another half a point in early December, according to eight of 10 economists surveyed by Bloomberg. That may be followed by two cuts of 0.25 percentage point each by March, Shah said.
High-yielding currencies including the Kiwi, the Australian dollar and the South African rand dropped as concern the world economy is headed for recession slashed prices for commodities from gold to oil. Raw materials make up 70 percent of New Zealand's overseas shipments. The Baltic Dry Index, a measure of shipping costs for commodities, has slumped more than 90 percent since Jan. 2.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Read more...
Nov. 4 (Bloomberg) -- The New Zealand dollar may drop 8 percent by April on speculation the central bank will cut interest rates, extending its longest losing run since the Asian financial crisis more than a decade ago, CBA Europe Ltd. said.
The Reserve Bank of New Zealand will probably lower its benchmark lending rate one percentage point by March to revive the economy, reducing the currency's yield as a slowing global economy boosts demand for U.S. dollars, according to Divyang Shah, chief strategist in London at CBA Europe, a unit of Commonwealth Bank of Australia. The currency may drop to 55 U.S. cents by the end of the first quarter, from 59.07 as of 11:42 a.m. in Auckland.
``There's further easing to come from the RBNZ,'' Shah said in a telephone interview today. ``Demand for safety and liquidity will continue to dominate and that should support the dollar and mean a weaker kiwi along the way,'' Shah said, referring to the currency by its nickname. The analyst's forecast is more bearish than the median prediction of 60 U.S. cents from 22 analysts and strategists surveyed by Bloomberg.
New Zealand's dollar fell against the U.S. currency in each of the past five months, its longest losing streak since 1997, as tumbling equity markets prompted investors to dump high-yielding assets for safer holdings in the U.S. and Japanese currencies. The kiwi slumped 23 percent this year against the dollar. It hasn't lost more than 20 percent since 1984.
The central bank, led by Governor Alan Bollard, reduced the main interest rate by 1.75 percentage points to 6.5 percent since July after the economy contracted in the first half. Policy makers will probably cut another half a point in early December, according to eight of 10 economists surveyed by Bloomberg. That may be followed by two cuts of 0.25 percentage point each by March, Shah said.
High-yielding currencies including the Kiwi, the Australian dollar and the South African rand dropped as concern the world economy is headed for recession slashed prices for commodities from gold to oil. Raw materials make up 70 percent of New Zealand's overseas shipments. The Baltic Dry Index, a measure of shipping costs for commodities, has slumped more than 90 percent since Jan. 2.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Read more...
Australian, New Zealand Dollars Decline as U.S. Stocks Slide
By Candice Zachariahs
Nov. 4 (Bloomberg) -- The Australian and New Zealand dollars fell as U.S. stocks declined, reducing investor appetite for higher-yielding assets.
Australia's currency also retreated amid speculation the Reserve Bank of Australia will today reduce borrowing costs for the third straight month. The RBA will cut interest rates 0.5 percentage point to 5.5 percent, according to 15 of 16 economists surveyed by Bloomberg News.
``For the Aussie to continue to recover the ground that was lost, particularly in the last couple of weeks, we would need to see stocks trading higher,'' said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. ``For the next couple of sessions the Aussie will trade in a 67 to 70 U.S. cent range,'' he said, referring to the currency by its nickname.
Australia's currency fell 0.6 percent to 67.63 U.S. cents as of 9:06 a.m. in Sydney from 68.06 cents late in Asia yesterday. The currency was 0.8 percent lower at 67.05 yen. The Australian dollar has dropped 13 percent in the past month against the greenback and 18 percent versus the yen.
New Zealand's dollar declined 0.1 percent to 59.19 U.S. cents from 59.23 cents in Asia yesterday. It bought 58.67 yen from 58.81.
The Australian dollar declined as stocks in the U.S. fell on the worst contraction in manufacturing since 1982 and forecasts that the sagging economy will reduce profits. About 1 billion shares changed hands on the floor of the New York Stock Exchange, the slowest trading day since August. The S&P 500 lost 2.45 points, or 0.3 percent, to 966.3.
``At present, everyone seems in a holding pattern with equities moving sideways,'' said Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. ``If you're looking 12- 13 months out, the kiwi dollar is going to be weaker,'' he said, referring to the currency by its nickname.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Read more...
Nov. 4 (Bloomberg) -- The Australian and New Zealand dollars fell as U.S. stocks declined, reducing investor appetite for higher-yielding assets.
Australia's currency also retreated amid speculation the Reserve Bank of Australia will today reduce borrowing costs for the third straight month. The RBA will cut interest rates 0.5 percentage point to 5.5 percent, according to 15 of 16 economists surveyed by Bloomberg News.
``For the Aussie to continue to recover the ground that was lost, particularly in the last couple of weeks, we would need to see stocks trading higher,'' said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. ``For the next couple of sessions the Aussie will trade in a 67 to 70 U.S. cent range,'' he said, referring to the currency by its nickname.
Australia's currency fell 0.6 percent to 67.63 U.S. cents as of 9:06 a.m. in Sydney from 68.06 cents late in Asia yesterday. The currency was 0.8 percent lower at 67.05 yen. The Australian dollar has dropped 13 percent in the past month against the greenback and 18 percent versus the yen.
New Zealand's dollar declined 0.1 percent to 59.19 U.S. cents from 59.23 cents in Asia yesterday. It bought 58.67 yen from 58.81.
The Australian dollar declined as stocks in the U.S. fell on the worst contraction in manufacturing since 1982 and forecasts that the sagging economy will reduce profits. About 1 billion shares changed hands on the floor of the New York Stock Exchange, the slowest trading day since August. The S&P 500 lost 2.45 points, or 0.3 percent, to 966.3.
``At present, everyone seems in a holding pattern with equities moving sideways,'' said Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. ``If you're looking 12- 13 months out, the kiwi dollar is going to be weaker,'' he said, referring to the currency by its nickname.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Read more...
Yen Rises on Speculation Global Rate Cuts May Curb Carry Trades
By Stanley White
Nov. 4 (Bloomberg) -- The yen rose against higher-yielding currencies on speculation a series of global interest-rate cuts will make it less attractive to purchase overseas assets using funds from Japan.
The yen gained against the Australian dollar as economists forecast the Reserve Bank of Australia will lower borrowing costs by half a percentage point to 5.5 percent today. It also advanced versus the euro and the British pound, before expected rate reductions by the European Central Bank and the Bank of England this week.
``The RBA could be the catalyst for the yen to strengthen,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``We can't rule out a larger-than- expected rate cut, which would damage sentiment for carry trades.''
The yen rose to 66.44 per Australian dollar at 10:10 a.m. in Tokyo from 67.04 late yesterday in New York. Japan's currency strengthened to 124.71 against the euro from 125.33, and 156.23 versus the pound from 156.84. It was quoted at 98.99 per dollar from 99.12.
The euro bought $1.2601 from $1.2643. The yen may advance to 117 per euro and 94 against the dollar this week, Amikura said.
The RBA, which lowered its benchmark interest rate at each of the past two monthly policy meetings, will announce its decision at 2:30 p.m. today in Sydney. The Japanese currency is popular in carry trades, where purchases of higher-yielding assets are funded in nations with lower interest rates. Japan's key rate is 0.3 percent, the lowest among major economies.
U.S. Election
Foreign-exchange markets may be ``distracted'' by the U.S. presidential elections starting later today, according to UBS AG, the world's second-largest currency trader.
Democratic nominee Barack Obama held a 54 percent to 43 percent lead among likely voters over Republican candidate John McCain in the presidential campaign, according to a Washington Post-ABC News tracking poll.
``With the result largely priced in, we are not expecting a significant impact on the currency markets,'' wrote Geoff Kendrick, a senior currency strategist in London at UBS, in a research note yesterday.
The euro fell for a fourth day against the dollar on speculation the European Central Bank will lower rates to cushion the impact of a slowing economy. The ECB will trim its benchmark rate by half a percentage point to 3.25 percent when it announces a policy decision on Nov. 6, according to a Bloomberg survey.
ECB Rates
The Euro-zone economy probably entered a recession this year and will stagnate in 2009, the European Commission said yesterday. European manufacturing contracted at a record pace in October and faster than initially estimated, data showed yesterday.
``The trend is for the euro to weaken,'' said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan's second-largest publicly traded lender. ``Recession has reared its head in Europe, and that's fairly negative for sentiment.''
The euro may decline to $1.2450 today, he said.
The Bank of England will lower its key interest rate to 4 percent from 4.5 percent at a meeting ending Nov. 6, according to economists surveyed by Bloomberg. The Federal Reserve reduced its target lending rate by a half-percentage point to 1 percent on Oct. 29. Central banks in China, Taiwan, Hong Kong, India and the Middle East also cut borrowing costs in the past week as policy makers race to avert a global recession.
Global Slump
The U.S. economy, the world's biggest, shrank at a 0.3 percent annual pace in the third quarter and an industry report yesterday showed manufacturing contracted in October at the fastest pace in 26 years. In Japan, the world's second-largest economy, the Nikkei 225 Stock Average last month reached its lowest level since 1982.
The ICE's Dollar Index, which tracks the greenback versus the currencies of six major U.S. trading partners, rose 0.8 percent to 86.35 yesterday. It touched 87.88 on Oct. 28, the highest level since April 2006.
``The dollar has been forced up,'' said Jim Rogers, chairman of Singapore-based Rogers Holdings, who correctly predicted the start of the commodities rally in 1999, in an interview on Bloomberg Television yesterday. ``There's a period of forced liquidation. My plan is to get out of the dollar sometime in the next few months.''
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net
Read more...
Nov. 4 (Bloomberg) -- The yen rose against higher-yielding currencies on speculation a series of global interest-rate cuts will make it less attractive to purchase overseas assets using funds from Japan.
The yen gained against the Australian dollar as economists forecast the Reserve Bank of Australia will lower borrowing costs by half a percentage point to 5.5 percent today. It also advanced versus the euro and the British pound, before expected rate reductions by the European Central Bank and the Bank of England this week.
``The RBA could be the catalyst for the yen to strengthen,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``We can't rule out a larger-than- expected rate cut, which would damage sentiment for carry trades.''
The yen rose to 66.44 per Australian dollar at 10:10 a.m. in Tokyo from 67.04 late yesterday in New York. Japan's currency strengthened to 124.71 against the euro from 125.33, and 156.23 versus the pound from 156.84. It was quoted at 98.99 per dollar from 99.12.
The euro bought $1.2601 from $1.2643. The yen may advance to 117 per euro and 94 against the dollar this week, Amikura said.
The RBA, which lowered its benchmark interest rate at each of the past two monthly policy meetings, will announce its decision at 2:30 p.m. today in Sydney. The Japanese currency is popular in carry trades, where purchases of higher-yielding assets are funded in nations with lower interest rates. Japan's key rate is 0.3 percent, the lowest among major economies.
U.S. Election
Foreign-exchange markets may be ``distracted'' by the U.S. presidential elections starting later today, according to UBS AG, the world's second-largest currency trader.
Democratic nominee Barack Obama held a 54 percent to 43 percent lead among likely voters over Republican candidate John McCain in the presidential campaign, according to a Washington Post-ABC News tracking poll.
``With the result largely priced in, we are not expecting a significant impact on the currency markets,'' wrote Geoff Kendrick, a senior currency strategist in London at UBS, in a research note yesterday.
The euro fell for a fourth day against the dollar on speculation the European Central Bank will lower rates to cushion the impact of a slowing economy. The ECB will trim its benchmark rate by half a percentage point to 3.25 percent when it announces a policy decision on Nov. 6, according to a Bloomberg survey.
ECB Rates
The Euro-zone economy probably entered a recession this year and will stagnate in 2009, the European Commission said yesterday. European manufacturing contracted at a record pace in October and faster than initially estimated, data showed yesterday.
``The trend is for the euro to weaken,'' said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan's second-largest publicly traded lender. ``Recession has reared its head in Europe, and that's fairly negative for sentiment.''
The euro may decline to $1.2450 today, he said.
The Bank of England will lower its key interest rate to 4 percent from 4.5 percent at a meeting ending Nov. 6, according to economists surveyed by Bloomberg. The Federal Reserve reduced its target lending rate by a half-percentage point to 1 percent on Oct. 29. Central banks in China, Taiwan, Hong Kong, India and the Middle East also cut borrowing costs in the past week as policy makers race to avert a global recession.
Global Slump
The U.S. economy, the world's biggest, shrank at a 0.3 percent annual pace in the third quarter and an industry report yesterday showed manufacturing contracted in October at the fastest pace in 26 years. In Japan, the world's second-largest economy, the Nikkei 225 Stock Average last month reached its lowest level since 1982.
The ICE's Dollar Index, which tracks the greenback versus the currencies of six major U.S. trading partners, rose 0.8 percent to 86.35 yesterday. It touched 87.88 on Oct. 28, the highest level since April 2006.
``The dollar has been forced up,'' said Jim Rogers, chairman of Singapore-based Rogers Holdings, who correctly predicted the start of the commodities rally in 1999, in an interview on Bloomberg Television yesterday. ``There's a period of forced liquidation. My plan is to get out of the dollar sometime in the next few months.''
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net
Read more...
Oil Is Steady After Falling on U.S. Manufacturing Contraction
By Christian Schmollinger
Nov. 4 (Bloomberg) -- Crude oil was little changed after falling more than $3 a barrel yesterday on a report showing manufacturing in the U.S. contracted in October at the fastest pace in 26 years, a signal that fuel consumption will decline.
Oil prices have tumbled the past four months as the weak U.S. economy curbed fuel use in the word's biggest oil-consuming country. Futures also dropped because reduced imports by Asian refiners reinforced concern that a demand slowdown is spreading to emerging markets.
``You must remember that the U.S. is the single largest consumer of crude oil and one where there has been a large shift in consumption, so these numbers matter,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``The mood of the market is one of worry about demand- side weakness.''
Crude oil for December delivery was at $63.79 a barrel, down 12 cents, at 9:22 a.m. Singapore time on the New York Mercantile Exchange. Prices, which have slumped 57 percent since reaching a record $147.27 on July 11, are down 32 percent from a year ago.
Yesterday, futures lost $3.90, or 5.8 percent, to $63.91 a barrel, the biggest drop since Oct. 22. Oil futures declined 33 percent in October, a monthly record, amid a global economic slowdown. The previous record-price drop was in February 1986.
The Institute for Supply Management's factory index fell to 38.9, worse than anticipated by economists surveyed by Bloomberg News and the lowest level since September 1982, the Tempe, Arizona-based group reported yesterday.
Declining Demand
China Petroleum & Chemical Corp., Asia's biggest refiner, will process less oil at units because of falling demand, its parent said yesterday. South Korea lowered imports by 1.4 percent in October. China and South Korea are the second- and ninth- biggest oil consuming countries.
Oil production by members of the Organization of Petroleum Exporting Countries averaged 32.18 million barrels a day last month, down 70,000 barrels a day from September, a Bloomberg News survey of oil companies, producers and analysts showed yesterday. September output was revised higher by 60,000 barrels a day.
OPEC ministers agreed Oct. 24 in Vienna to cut supply by 1.5 million barrels a day starting in November. The reduction is from the existing daily quota for 11 members of 28.8 million barrels.
The United Arab Emirates has notified customers that they will receive less crude as a result of OPEC's Oct. 24 resolution to cut production by 1.5 million barrels a day, Oil Minister Mohamed al-Hamli told reporters in Abu Dhabi yesterday.
Iran-Total
Iran will reduce crude-oil sales to Total SA, Europe's third-largest oil company, by about 70,000 barrels per day, Iranian oil minister, Gholamhossein Nozari, said on Nov. 2. Nigeria's national oil company announced shipment cuts of 5 percent in November and December last week.
Saudi Arabia, the world's biggest oil producer, hasn't yet notified customers of any reduction in shipments.
``Saudi is important of course because it's the largest,'' said Commonwealth Bank's Moore. ``But you've got 10 other members and the more that keep to the targets, the more that the compliance will hold.''
OPEC, producer of more than 40 percent of the world's crude, is next due to meet on Dec. 17 in Algeria.
Brent crude oil for December settlement declined $4.84, or 7.4 percent yesterday, to settle at $60.48 a barrel on London's ICE Futures Europe exchange.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- Crude oil was little changed after falling more than $3 a barrel yesterday on a report showing manufacturing in the U.S. contracted in October at the fastest pace in 26 years, a signal that fuel consumption will decline.
Oil prices have tumbled the past four months as the weak U.S. economy curbed fuel use in the word's biggest oil-consuming country. Futures also dropped because reduced imports by Asian refiners reinforced concern that a demand slowdown is spreading to emerging markets.
``You must remember that the U.S. is the single largest consumer of crude oil and one where there has been a large shift in consumption, so these numbers matter,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``The mood of the market is one of worry about demand- side weakness.''
Crude oil for December delivery was at $63.79 a barrel, down 12 cents, at 9:22 a.m. Singapore time on the New York Mercantile Exchange. Prices, which have slumped 57 percent since reaching a record $147.27 on July 11, are down 32 percent from a year ago.
Yesterday, futures lost $3.90, or 5.8 percent, to $63.91 a barrel, the biggest drop since Oct. 22. Oil futures declined 33 percent in October, a monthly record, amid a global economic slowdown. The previous record-price drop was in February 1986.
The Institute for Supply Management's factory index fell to 38.9, worse than anticipated by economists surveyed by Bloomberg News and the lowest level since September 1982, the Tempe, Arizona-based group reported yesterday.
Declining Demand
China Petroleum & Chemical Corp., Asia's biggest refiner, will process less oil at units because of falling demand, its parent said yesterday. South Korea lowered imports by 1.4 percent in October. China and South Korea are the second- and ninth- biggest oil consuming countries.
Oil production by members of the Organization of Petroleum Exporting Countries averaged 32.18 million barrels a day last month, down 70,000 barrels a day from September, a Bloomberg News survey of oil companies, producers and analysts showed yesterday. September output was revised higher by 60,000 barrels a day.
OPEC ministers agreed Oct. 24 in Vienna to cut supply by 1.5 million barrels a day starting in November. The reduction is from the existing daily quota for 11 members of 28.8 million barrels.
The United Arab Emirates has notified customers that they will receive less crude as a result of OPEC's Oct. 24 resolution to cut production by 1.5 million barrels a day, Oil Minister Mohamed al-Hamli told reporters in Abu Dhabi yesterday.
Iran-Total
Iran will reduce crude-oil sales to Total SA, Europe's third-largest oil company, by about 70,000 barrels per day, Iranian oil minister, Gholamhossein Nozari, said on Nov. 2. Nigeria's national oil company announced shipment cuts of 5 percent in November and December last week.
Saudi Arabia, the world's biggest oil producer, hasn't yet notified customers of any reduction in shipments.
``Saudi is important of course because it's the largest,'' said Commonwealth Bank's Moore. ``But you've got 10 other members and the more that keep to the targets, the more that the compliance will hold.''
OPEC, producer of more than 40 percent of the world's crude, is next due to meet on Dec. 17 in Algeria.
Brent crude oil for December settlement declined $4.84, or 7.4 percent yesterday, to settle at $60.48 a barrel on London's ICE Futures Europe exchange.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
Read more...
Australia Stocks: Babcock, BHP Billiton, James Hardie, Woodside
By Ian C. Sayson and Malcolm Scott
Nov. 4 (Bloomberg) -- The S&P/ASX 200 Index decreased 65.50 points, or 1.6 percent, to 4,156 as of 10:33 a.m. in Sydney, after a four-day, 11 percent rally. The S&P/ASX 200 Index futures contract expiring in December fell 0.6 percent to 4,151, while the All Ordinaries Index dropped 63.60, or 1.5 percent, to 4,109.40.
The following is a list of companies whose shares are among the most active in Australian trading. Stocks symbols are in parentheses after company names.
Oil companies: BHP Billiton Ltd. (BHP AU), Australia's biggest oil and gas producer, decreased 91 cents, or 3 percent, to A$28.99 after oil prices slumped on concern that demand for the fuel will decline. Woodside Petroleum Ltd. (WPL AU), Australia's second-biggest oil producer, dropped 82 cents, or 1.9 percent, to A$41.59.
Crude oil fell more than $3 a barrel yesterday after a report showed that manufacturing in the U.S. contracted in October at the fastest pace in 26 years, a signal that fuel consumption will decline.
U.S.-Related Stocks: Westfield Group (WDC AU), the world's biggest shopping mall owner by market value, lost 46 cents, or 2.8 percent, to A$15.71 on speculation that earnings at its U.S. malls will slump after manufacturing contracted. James Hardie Industries NV (JHX AU), the biggest seller of home siding in the U.S., dropped 22 cents, or 4.6 percent, to A$4.60.
Manufacturing in the U.S. contracted in October at the fastest pace in 26 years, the Institute for Supply Management said. James Hardie separately said that it's suspending production at its South Carolina and California plants because of the housing slump.
Asciano Ltd. (AIO AU), an Australian port and railroad, fell 5 cents, or 2.3 percent, to A$2.15 after the Australian Financial Review reported the company will likely reject an offer by a group led by TPG Capital to buy a stake in Asciano through the purchase of A$1.25 billion ($850 million) in convertible notes. Asciano lost half of its market value since it rejected a A$2.9 billion buyout three months ago.
Babcock & Brown Infrastructure Group (BBI AU), owner of ports and energy transmission lines in Australia, Europe and the U.S., climbed 5 cents, or 23 percent, to 26.5 Australian cents. The company agreed to sell 50 percent of Powerco Ltd.'s New Zealand operations as it seeks to reduce debt.
Sunland Group Ltd. (SDG AU), an Australian property company, added 4 cents, or 3.9 percent, to A$1.075 after announcing a new joint venture partner to help it build its A$2.2 billion Atrium tower development in Dubai.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
Read more...
Nov. 4 (Bloomberg) -- The S&P/ASX 200 Index decreased 65.50 points, or 1.6 percent, to 4,156 as of 10:33 a.m. in Sydney, after a four-day, 11 percent rally. The S&P/ASX 200 Index futures contract expiring in December fell 0.6 percent to 4,151, while the All Ordinaries Index dropped 63.60, or 1.5 percent, to 4,109.40.
The following is a list of companies whose shares are among the most active in Australian trading. Stocks symbols are in parentheses after company names.
Oil companies: BHP Billiton Ltd. (BHP AU), Australia's biggest oil and gas producer, decreased 91 cents, or 3 percent, to A$28.99 after oil prices slumped on concern that demand for the fuel will decline. Woodside Petroleum Ltd. (WPL AU), Australia's second-biggest oil producer, dropped 82 cents, or 1.9 percent, to A$41.59.
Crude oil fell more than $3 a barrel yesterday after a report showed that manufacturing in the U.S. contracted in October at the fastest pace in 26 years, a signal that fuel consumption will decline.
U.S.-Related Stocks: Westfield Group (WDC AU), the world's biggest shopping mall owner by market value, lost 46 cents, or 2.8 percent, to A$15.71 on speculation that earnings at its U.S. malls will slump after manufacturing contracted. James Hardie Industries NV (JHX AU), the biggest seller of home siding in the U.S., dropped 22 cents, or 4.6 percent, to A$4.60.
Manufacturing in the U.S. contracted in October at the fastest pace in 26 years, the Institute for Supply Management said. James Hardie separately said that it's suspending production at its South Carolina and California plants because of the housing slump.
Asciano Ltd. (AIO AU), an Australian port and railroad, fell 5 cents, or 2.3 percent, to A$2.15 after the Australian Financial Review reported the company will likely reject an offer by a group led by TPG Capital to buy a stake in Asciano through the purchase of A$1.25 billion ($850 million) in convertible notes. Asciano lost half of its market value since it rejected a A$2.9 billion buyout three months ago.
Babcock & Brown Infrastructure Group (BBI AU), owner of ports and energy transmission lines in Australia, Europe and the U.S., climbed 5 cents, or 23 percent, to 26.5 Australian cents. The company agreed to sell 50 percent of Powerco Ltd.'s New Zealand operations as it seeks to reduce debt.
Sunland Group Ltd. (SDG AU), an Australian property company, added 4 cents, or 3.9 percent, to A$1.075 after announcing a new joint venture partner to help it build its A$2.2 billion Atrium tower development in Dubai.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
Read more...
Japan Stocks Rally From Record Monthly Loss; Sanyo Set to Surge
By Masaki Kondo
Nov. 4 (Bloomberg) -- Japan stocks rose, rebounding from the Nikkei 225 Stock Average's worst monthly slump on record, after lower interest rates charged between banks raised speculation lending may rebound as credit markets ease.
Mizuho Financial Group Inc., which last week more than halved its full-year earnings forecast, jumped 8.2 percent. NTT DoCoMo Inc., Japan's biggest mobile-phone carrier, added 3.6 percent after posting a profit gain. Sanyo Electric Co. was set to soar after the Nikkei newspaper said bigger rival Panasonic Corp. agreed to buy the company. Nissan Motor Co. sank 7.5 percent after the carmaker cut it profit target and dividend.
The Nikkei climbed 384.60, or 4.5 percent, to 8,961.58 as of 9:34 a.m. in Tokyo. The broader Topix index rose 35.48, or 4.1 percent, to 902.60. Japan's markets were closed yesterday for a national holiday. On Oct. 31, the Nikkei lost 5 percent, capping a 24 percent drop for the month, the worst on record.
``An excessive decline the other day will prompt investors to buy in the market today,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in U.S. currency slid 0.17 percentage point to 2.86 percent yesterday, according to the British Bankers' Association. That's the lowest level since the failure of Lehman Brothers Holdings Inc. on Sept. 15.
Dividend Yield
Dividend yields on the Nikkei's constituents reached 2.52 percent on Oct. 31, higher than the 1.48 percent yields on Japanese government 10-year bonds. The stock yields exceeded 2 percent on Oct. 3 for the first time since at least July 1989.
Mizuho, Japan's second-largest listed bank, climbed 8.2 percent to 251,000 yen, while market leader Mitsubishi UFJ Financial Group Inc. rose 5.2 percent to 629 yen. Resona Holdings Inc., Japan's fourth-biggest bank, advanced 6.6 percent to 106,200 yen even after cutting annual profit forecast by a third.
DoCoMo, Japan's most profitable wireless carrier, jumped 3.6 percent to 160,500 yen, while parent Nippon Telegraph & Telephone Corp. gained 6.4 percent to 417,000 yen. DoCoMo's net income rose to 173.1 billion yen ($1.75 billion) in the second quarter from 123.7 billion yen a year earlier, as lower handset subsidies reduced costs.
Sanyo wasn't traded as orders to buy outnumbered those to sell, while Panasonic leapt 8.3 percent to 1,637 yen. The companies will hold a press conference on Nov. 7 to announce details of Panasonic's plan to buy Sanyo, Nikkei said, without saying where it obtained the information.
A company official familiar with the negotiations earlier said Panasonic will seek to buy control of Sanyo from its biggest shareholders Goldman Sachs Group Inc., Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co.
Nissan, Japan's third-largest carmaker, tumbled 7.5 percent to 456 yen after the company more halved its profit forecast and eliminated its dividend. The company expects net income of 160 billion yen for the year ending March 31, compared with its May estimate of 340 billion yen, it said on Oct. 31.
Nikkei futures expiring in December added 6 percent to 8,960 in Osaka and gained 6.6 percent to 8,950 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- Japan stocks rose, rebounding from the Nikkei 225 Stock Average's worst monthly slump on record, after lower interest rates charged between banks raised speculation lending may rebound as credit markets ease.
Mizuho Financial Group Inc., which last week more than halved its full-year earnings forecast, jumped 8.2 percent. NTT DoCoMo Inc., Japan's biggest mobile-phone carrier, added 3.6 percent after posting a profit gain. Sanyo Electric Co. was set to soar after the Nikkei newspaper said bigger rival Panasonic Corp. agreed to buy the company. Nissan Motor Co. sank 7.5 percent after the carmaker cut it profit target and dividend.
The Nikkei climbed 384.60, or 4.5 percent, to 8,961.58 as of 9:34 a.m. in Tokyo. The broader Topix index rose 35.48, or 4.1 percent, to 902.60. Japan's markets were closed yesterday for a national holiday. On Oct. 31, the Nikkei lost 5 percent, capping a 24 percent drop for the month, the worst on record.
``An excessive decline the other day will prompt investors to buy in the market today,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in U.S. currency slid 0.17 percentage point to 2.86 percent yesterday, according to the British Bankers' Association. That's the lowest level since the failure of Lehman Brothers Holdings Inc. on Sept. 15.
Dividend Yield
Dividend yields on the Nikkei's constituents reached 2.52 percent on Oct. 31, higher than the 1.48 percent yields on Japanese government 10-year bonds. The stock yields exceeded 2 percent on Oct. 3 for the first time since at least July 1989.
Mizuho, Japan's second-largest listed bank, climbed 8.2 percent to 251,000 yen, while market leader Mitsubishi UFJ Financial Group Inc. rose 5.2 percent to 629 yen. Resona Holdings Inc., Japan's fourth-biggest bank, advanced 6.6 percent to 106,200 yen even after cutting annual profit forecast by a third.
DoCoMo, Japan's most profitable wireless carrier, jumped 3.6 percent to 160,500 yen, while parent Nippon Telegraph & Telephone Corp. gained 6.4 percent to 417,000 yen. DoCoMo's net income rose to 173.1 billion yen ($1.75 billion) in the second quarter from 123.7 billion yen a year earlier, as lower handset subsidies reduced costs.
Sanyo wasn't traded as orders to buy outnumbered those to sell, while Panasonic leapt 8.3 percent to 1,637 yen. The companies will hold a press conference on Nov. 7 to announce details of Panasonic's plan to buy Sanyo, Nikkei said, without saying where it obtained the information.
A company official familiar with the negotiations earlier said Panasonic will seek to buy control of Sanyo from its biggest shareholders Goldman Sachs Group Inc., Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co.
Nissan, Japan's third-largest carmaker, tumbled 7.5 percent to 456 yen after the company more halved its profit forecast and eliminated its dividend. The company expects net income of 160 billion yen for the year ending March 31, compared with its May estimate of 340 billion yen, it said on Oct. 31.
Nikkei futures expiring in December added 6 percent to 8,960 in Osaka and gained 6.6 percent to 8,950 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
Australian Shares Fall on Oil; Japanese Stock Futures Advance
By Masaki Kondo
Nov. 4 (Bloomberg) -- Australian shares fell after oil dropped by almost $4 a barrel, clouding the earnings outlook for crude producers. Japanese stock futures advanced.
Woodside Petroleum Ltd., Australia's second-biggest oil producer, dropped 1.6 percent. U.S.-traded receipts of Mizuho Financial Group Inc., which slid 48 percent last month, soared 11 percent from the closing share price in Tokyo on Oct. 31. Those of Panasonic Corp. added 3.8 percent after the Nikkei newspaper reported it agreed to buy smaller rival Sanyo Electric Co.
Australia's S&P/ASX 200 Index slumped 2 percent to 4,138.20 as of 10:15 a.m. in Sydney. New Zealand's NZX 50 Index added 0.5 percent to 2,869.99 in Wellington.
Nikkei 225 Stock Average futures expiring in December closed at 9,080 in Chicago, higher than 8,450 in Osaka on Oct. 31 and 8,500 in Singapore. Japan's markets closed yesterday for a national holiday. On Oct. 31, the Nikkei lost 5 percent, capping a 24 percent drop for the month, the worst on record.
``An excessive decline the other day will prompt investors to buy in the market today,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. ``Though the stock market calmed down somewhat, we're in a tunnel with no exit in sight.''
Oil Demand
U.S. manufacturing contracted last month at the fastest pace in 26 years, the Institute for Supply Management said yesterday, signaling fuel consumption will decrease. Crude oil for December delivery dropped 5.8 percent to $63.91 a barrel in New York yesterday, having fallen 57 percent from a record on July 11.
U.S. auto sales tumbled in October, extending the longest slide in 17 years. Toyota Motor Corp. posted a 23 percent decline, while smaller rivals Honda Motor Co. and Nissan Motor Co. reported 25 percent and 33 percent falls, respectively.
Panasonic will hold a press conference on Nov. 7 to announce details of its plan to buy Sanyo, the Nikkei said, without saying where it obtained the information. Panasonic plans to make Sanyo a subsidiary by around April next year by buying preferred shares owned by Sumitomo Mitsui Banking Corp., Daiwa Securities SMBC Co. and Goldman Sachs Group Inc., the newspaper said.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
Nov. 4 (Bloomberg) -- Australian shares fell after oil dropped by almost $4 a barrel, clouding the earnings outlook for crude producers. Japanese stock futures advanced.
Woodside Petroleum Ltd., Australia's second-biggest oil producer, dropped 1.6 percent. U.S.-traded receipts of Mizuho Financial Group Inc., which slid 48 percent last month, soared 11 percent from the closing share price in Tokyo on Oct. 31. Those of Panasonic Corp. added 3.8 percent after the Nikkei newspaper reported it agreed to buy smaller rival Sanyo Electric Co.
Australia's S&P/ASX 200 Index slumped 2 percent to 4,138.20 as of 10:15 a.m. in Sydney. New Zealand's NZX 50 Index added 0.5 percent to 2,869.99 in Wellington.
Nikkei 225 Stock Average futures expiring in December closed at 9,080 in Chicago, higher than 8,450 in Osaka on Oct. 31 and 8,500 in Singapore. Japan's markets closed yesterday for a national holiday. On Oct. 31, the Nikkei lost 5 percent, capping a 24 percent drop for the month, the worst on record.
``An excessive decline the other day will prompt investors to buy in the market today,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. ``Though the stock market calmed down somewhat, we're in a tunnel with no exit in sight.''
Oil Demand
U.S. manufacturing contracted last month at the fastest pace in 26 years, the Institute for Supply Management said yesterday, signaling fuel consumption will decrease. Crude oil for December delivery dropped 5.8 percent to $63.91 a barrel in New York yesterday, having fallen 57 percent from a record on July 11.
U.S. auto sales tumbled in October, extending the longest slide in 17 years. Toyota Motor Corp. posted a 23 percent decline, while smaller rivals Honda Motor Co. and Nissan Motor Co. reported 25 percent and 33 percent falls, respectively.
Panasonic will hold a press conference on Nov. 7 to announce details of its plan to buy Sanyo, the Nikkei said, without saying where it obtained the information. Panasonic plans to make Sanyo a subsidiary by around April next year by buying preferred shares owned by Sumitomo Mitsui Banking Corp., Daiwa Securities SMBC Co. and Goldman Sachs Group Inc., the newspaper said.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Read more...
Wheat Rises on Speculation Demand to Climb After October Plunge
By Tony C. Dreibus
Nov. 3 (Bloomberg) -- Wheat rose for the first time in three sessions on speculation that demand for U.S. supplies will increase after a 21 percent price decline in October.
Futures in Chicago had their biggest monthly drop in 22 years last month as a deepening global financial crisis curbed commodity demand. Lower prices may encourage overseas buyers to purchase U.S. inventories, analysts said.
``If you're a buyer, you can afford to sit on the sidelines to see how low things will go,'' said Jacquie Voeks, a risk manager at Stewart-Peterson Advisory Group in West Bend, Wisconsin. ``We may start to see some demand on the Asian side.''
Wheat futures for December delivery rose 25.75 cents, or 4.8 percent, to $5.62 a bushel on the Chicago Board of Trade. The most-active contract still is down 58 percent from a record $13.495 on Feb. 27. Farmers around the world increased seeding to take advantage of prices that soared 77 percent in 2007.
Global wheat consumption is expected to rise to 655.6 million metric tons in the year that ends on May 31, up 6.1 percent from the previous year, the U.S. Department of Agriculture said on Oct. 10. Still, production may jump to 11 percent to a record 680.2 million tons, according to the USDA.
As of Oct. 23, overseas buyers committed to purchase 18.9 million tons of U.S. supplies since June 1, down 29 percent, government data show. Lower prices should spur orders, analysts said.
``There's somewhat of a realization that the world is not going to stop eating, and wheat is a staple,'' Voeks said. ``We'll see some more demand out of Iraq again and out of Egypt.''
Australia, Argentina
Wheat also climbed on speculation dry weather in the Southern Hemisphere will hurt production. Australian farmers may collect 19.5 million tons this season, Commonwealth Bank of Australia said today. The USDA forecast 21.5 million on Oct. 10.
``The chance for significant rain in the drought areas of South Australia and Victoria is still low,'' Minneapolis-based DTN Meteorlogix LLC said in a report. ``Rains in northern New South Wales during the weekend were unfavorable for mature wheat and wheat harvests.''
Argentine production may drop to 9.5 million tons, the lowest since 1995, after dry weather and lower fertilizer use hurt crops, the Agriculture Secretariat said on Oct. 15. Growers collected 16 million tons a year earlier.
``People started looking at the supply side of wheat instead of just demand, seeing what the lack of rain has done to Argentina and Australia's crops,'' said Mike Zuzolo, the chief analyst at Risk Management Commodities in Lafayette, Indiana.
Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.
To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.
Read more...
Nov. 3 (Bloomberg) -- Wheat rose for the first time in three sessions on speculation that demand for U.S. supplies will increase after a 21 percent price decline in October.
Futures in Chicago had their biggest monthly drop in 22 years last month as a deepening global financial crisis curbed commodity demand. Lower prices may encourage overseas buyers to purchase U.S. inventories, analysts said.
``If you're a buyer, you can afford to sit on the sidelines to see how low things will go,'' said Jacquie Voeks, a risk manager at Stewart-Peterson Advisory Group in West Bend, Wisconsin. ``We may start to see some demand on the Asian side.''
Wheat futures for December delivery rose 25.75 cents, or 4.8 percent, to $5.62 a bushel on the Chicago Board of Trade. The most-active contract still is down 58 percent from a record $13.495 on Feb. 27. Farmers around the world increased seeding to take advantage of prices that soared 77 percent in 2007.
Global wheat consumption is expected to rise to 655.6 million metric tons in the year that ends on May 31, up 6.1 percent from the previous year, the U.S. Department of Agriculture said on Oct. 10. Still, production may jump to 11 percent to a record 680.2 million tons, according to the USDA.
As of Oct. 23, overseas buyers committed to purchase 18.9 million tons of U.S. supplies since June 1, down 29 percent, government data show. Lower prices should spur orders, analysts said.
``There's somewhat of a realization that the world is not going to stop eating, and wheat is a staple,'' Voeks said. ``We'll see some more demand out of Iraq again and out of Egypt.''
Australia, Argentina
Wheat also climbed on speculation dry weather in the Southern Hemisphere will hurt production. Australian farmers may collect 19.5 million tons this season, Commonwealth Bank of Australia said today. The USDA forecast 21.5 million on Oct. 10.
``The chance for significant rain in the drought areas of South Australia and Victoria is still low,'' Minneapolis-based DTN Meteorlogix LLC said in a report. ``Rains in northern New South Wales during the weekend were unfavorable for mature wheat and wheat harvests.''
Argentine production may drop to 9.5 million tons, the lowest since 1995, after dry weather and lower fertilizer use hurt crops, the Agriculture Secretariat said on Oct. 15. Growers collected 16 million tons a year earlier.
``People started looking at the supply side of wheat instead of just demand, seeing what the lack of rain has done to Argentina and Australia's crops,'' said Mike Zuzolo, the chief analyst at Risk Management Commodities in Lafayette, Indiana.
Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.
To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.
Read more...
Canada Stocks Fall, Led by Oil Shares, Suncor; Manulife Gains
By Whitney Kisling and John Kipphoff
Nov. 3 (Bloomberg) -- Canadian stocks fell for a second day, adding to the main index's worst monthly drop in a decade, as energy producers slid along with oil prices on expectations that a recession will hurt commodity demand and profits.
Suncor Energy Inc. and Canadian Natural Resources Ltd. each dropped more than five percent. Losses were limited as banks and insurers advanced, led by Manulife Financial Corp., after global borrowing costs fell and the Bank of Canada announced plans to make additional injections of money to ease the credit crisis.
``Today was a day of consolidation,'' said Rick Hutcheon, who manages about $140 million as chief investment officer at RKH Financial in Toronto. ``The recession is now pretty much priced in. I wouldn't be surprised if oil goes to a new low.''
The Standard & Poor's/TSX Composite Index slipped 0.4 percent to 9,721.26 in Toronto after rising as much as 1.2 percent earlier. Canada's main equity benchmark slid 17 percent in October as the price of oil and other raw materials slumped on expectations that the credit contraction and slower economic growth will cut demand for commodities.
Suncor Energy, the world's second-largest oil-sands mining company, dropped 6.2 percent to C$27.17. Canadian Natural, the country's second-biggest natural-gas producer, declined 5.4 percent to C$57.51. EnCana Corp., the nation's largest energy company by market value, fell 4.5 percent to C$58.50. Petro- Canada retreated 4.6 percent to C$28.74
Crude oil for December delivery fell 5.8 percent to $63.91 a barrel in New York, after manufacturing in the U.S. contracted in October at the fastest pace in 26 years, suggesting that fuel consumption will decline. Prices tumbled 33 percent in October, a record, amid the global economic slowdown.
Market Breakdown
A measure of energy shares dropped 3.1 percent while a gauge of financial stocks added 1.2 percent. The two groups account for about three-fifths of the S&P/TSX's value.
Manulife, North America's biggest insurance company by assets, gained for the first time in three days, adding 8.2 percent to C$26.11.
Sun Life Financial Inc., the country's third-largest insurance company, advanced 4.1 percent today to C$29.50. Power Corp. of Canada, owner of the country's biggest mutual fund company and second-largest insurer, rose 4.4 percent to C$27.35.
``The Canadian stock market is really about two sectors: energy and financials,'' Vincent Delisle, chief strategist at Scotia Capital Inc. in Montreal. ``Financials will always do much, much better when energy is going lower''
Key Interest Rate
The London interbank offered rate, or Libor, that banks charge for three-month loans in dollars dropped to its lowest level since the Sept. 15 collapse of Lehman Brothers Holdings Inc., falling 17 basis points to 2.86 percent. The Bank of Canada plans to increase the total amount of money it's putting in the banking system to deal with the credit crisis to C$27 billion by the end of the year.
The decline in Libor ``shows there's a little more optimism that we're coming through the credit crisis,'' said Laura Wallace, who helps oversee about $300 million as managing director at Coleford Investment Management Ltd. in Toronto.
Bank of Nova Scotia fell 2.9 percent to C$39.03. Canada's third-largest bank by assets was cut to ``neutral'' from ``buy'' by Sumit Malhotra at Merrill Lynch & Co. The Toronto-based analyst cut his earnings estimate for next year, saying in a note that loan growth may slow and credit losses may increase.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
Read more...
Nov. 3 (Bloomberg) -- Canadian stocks fell for a second day, adding to the main index's worst monthly drop in a decade, as energy producers slid along with oil prices on expectations that a recession will hurt commodity demand and profits.
Suncor Energy Inc. and Canadian Natural Resources Ltd. each dropped more than five percent. Losses were limited as banks and insurers advanced, led by Manulife Financial Corp., after global borrowing costs fell and the Bank of Canada announced plans to make additional injections of money to ease the credit crisis.
``Today was a day of consolidation,'' said Rick Hutcheon, who manages about $140 million as chief investment officer at RKH Financial in Toronto. ``The recession is now pretty much priced in. I wouldn't be surprised if oil goes to a new low.''
The Standard & Poor's/TSX Composite Index slipped 0.4 percent to 9,721.26 in Toronto after rising as much as 1.2 percent earlier. Canada's main equity benchmark slid 17 percent in October as the price of oil and other raw materials slumped on expectations that the credit contraction and slower economic growth will cut demand for commodities.
Suncor Energy, the world's second-largest oil-sands mining company, dropped 6.2 percent to C$27.17. Canadian Natural, the country's second-biggest natural-gas producer, declined 5.4 percent to C$57.51. EnCana Corp., the nation's largest energy company by market value, fell 4.5 percent to C$58.50. Petro- Canada retreated 4.6 percent to C$28.74
Crude oil for December delivery fell 5.8 percent to $63.91 a barrel in New York, after manufacturing in the U.S. contracted in October at the fastest pace in 26 years, suggesting that fuel consumption will decline. Prices tumbled 33 percent in October, a record, amid the global economic slowdown.
Market Breakdown
A measure of energy shares dropped 3.1 percent while a gauge of financial stocks added 1.2 percent. The two groups account for about three-fifths of the S&P/TSX's value.
Manulife, North America's biggest insurance company by assets, gained for the first time in three days, adding 8.2 percent to C$26.11.
Sun Life Financial Inc., the country's third-largest insurance company, advanced 4.1 percent today to C$29.50. Power Corp. of Canada, owner of the country's biggest mutual fund company and second-largest insurer, rose 4.4 percent to C$27.35.
``The Canadian stock market is really about two sectors: energy and financials,'' Vincent Delisle, chief strategist at Scotia Capital Inc. in Montreal. ``Financials will always do much, much better when energy is going lower''
Key Interest Rate
The London interbank offered rate, or Libor, that banks charge for three-month loans in dollars dropped to its lowest level since the Sept. 15 collapse of Lehman Brothers Holdings Inc., falling 17 basis points to 2.86 percent. The Bank of Canada plans to increase the total amount of money it's putting in the banking system to deal with the credit crisis to C$27 billion by the end of the year.
The decline in Libor ``shows there's a little more optimism that we're coming through the credit crisis,'' said Laura Wallace, who helps oversee about $300 million as managing director at Coleford Investment Management Ltd. in Toronto.
Bank of Nova Scotia fell 2.9 percent to C$39.03. Canada's third-largest bank by assets was cut to ``neutral'' from ``buy'' by Sumit Malhotra at Merrill Lynch & Co. The Toronto-based analyst cut his earnings estimate for next year, saying in a note that loan growth may slow and credit losses may increase.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
Read more...
BRICs See No Relief Even as Rally Lures Stock Bulls
By Michael Tsang and Michael Patterson
Nov. 3 (Bloomberg) -- Forget last week’s record 20 percent gain in emerging-market stocks. Hard times are ahead for equities in Brazil, Russia, India and China, some of the world’s biggest money managers say.
Even with developing-nation shares trading at their cheapest levels in a decade, financial crises in Hungary and Pakistan that required international rescue packages and concern that economies from Turkey to Argentina are also teetering prompted investors to pull out of emerging-market funds at a record pace.
RBC Capital Markets cut its estimates on Oct. 23 for 2009 economic growth in Brazil to 2.5 percent from 4 percent and Russia to 4 percent from 6 percent. That may undermine analysts’ forecasts for a 14.5 percent increase in earnings at a time when the global credit crunch seized up lending from Sao Paulo to Seoul and a slump in 24 of 25 developing-nation currencies last month inflated the costs of repaying dollar-denominated debt.
“I’m not brave enough to jump on to the bandwagon,” said Franz Wenzel, deputy director for investment strategy at Axa Investment Managers, which oversees $655 billion in Paris. “We have seen the first dominos to fall with Hungary and Turkey, and we might see other shoes to drop.”
As bank losses and writedowns tied to the collapse of U.S. subprime mortgages grew to more than $680 billion and the American economy began to shrink, investors pulled a record $40 billion from emerging-market stock funds this year, including $7.1 billion last month, according to EPFR Global, a Cambridge, Massachusetts-based fund research firm.
Back to Zero
Forced sales by hedge funds and other money managers that piled into emerging-market stocks exacerbated the decline, which wiped out all the gains generated by developing countries this decade, said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, which oversees $260 billion.
“Their economies have been shown to be far more linked than people were hoping,” said Mark Konyn, Hong Kong-based chief executive officer at RCM Asia Pacific Ltd., which oversees $15 billion. “The massive boom in international capital overseas has come to a crashing end.”
No doubt emerging-market stocks look attractive. Equity valuations in China and India fell by more than 70 percent over the past year as plunging commodity prices and recession concerns erased $9 trillion from developing-nation shares. PetroChina Co., which became the world’s first $1 trillion company in November 2007, lost 79 percent of its value through last week.
One-Week Wonder
Depressed prices sparked a 20 percent rise in the MSCI Emerging Markets Index last week, part of a global rebound that lifted the Standard & Poor’s 500 Index by 10 percent and Europe’s Dow Jones Stoxx 600 Index by 12 percent. The developing-nation index is still down 56 percent from its peak in October 2007.
The MSCI Emerging Markets Index climbed 2.4 percent to 584.36 at 4:31 p.m. in New York today. India’s Bombay Stock Exchange Sensitive Index added 5.6 percent as the central bank lowered its benchmark interest rate for the second time in two weeks. South Korea’s Kospi Index advanced 1.4 percent on the government’s 14 trillion won ($10.8 billion) plan to boost to the sagging economy. China’s CSI 300 Index lost 0.6 percent.
One year ago, the MSCI Emerging Markets Index stood at an all-time high of 1,338.49 after a five-year rally produced a more than fivefold increase and added $12 trillion to the value of developing-nation markets.
Safest Assets
As emerging economies grew a record 8 percent in 2007, investors pushed stock valuations above industrialized nations for the first time in more than seven years on speculation their equities would be insulated from the fallout of the worst U.S. housing slump since the Great Depression.
It also lifted six companies from emerging markets into the ranks of the world’s 10 largest by value.
Since then, developing-nation shares tumbled as much as 66 percent. Investors sold everything but the safest assets as credit markets froze and banks hoarded cash after Bear Stearns Cos. and Lehman Brothers Holdings Inc. collapsed.
Chinese stocks in the MSCI fell to 6.55 times profit last week, the lowest since August 1998 and an 80 percent drop from a year ago. Investors in Brazilian and Indian stocks tracked by MSCI were willing to pay an average $6.69 and $9.29 per dollar of profit respectively, the least for both since at least 1995.
At the beginning of the year, shares of companies in the MSCI India Index commanded more than $35 per dollar of profit.
Fire Sale Prices
Peter Schiff, who oversees $1 billion as president of Darien, Connecticut-based Euro Pacific Capital, says the collapse in valuations makes this an even better buying opportunity than in 1998 -- the last time emerging-market stocks were this cheap.
Less-developed economies have a record $785 billion in current-account surpluses this year, compared with deficits of $109 billion in 1998, data from Washington-based International Monetary Fund show. Foreign debt fell to 24 percent of the gross domestic product, compared with 40 percent a decade ago.
China’s economy, which has increased by at least 7.5 percent in each year in the past decade, may grow 9.3 percent next year, according to IMF data. In the U.S., where concern the economy is in a recession helped Barack Obama widen his lead over John McCain in national polls before the presidential election tomorrow, growth may slip to just 0.1 percent.
“You’ve got fire-sale prices,” Schiff said. “Once you take America out of the equation, you’re going to see the biggest economic boom that we’ve ever seen.”
Not Convinced
That optimism helped emerging markets break out of a so- called bear market, as the MSCI index surged 26 percent in four days last week.
David Cornell, a London-based money manager at New Star Asset Management, which oversees about $30 billion, isn’t convinced the gains herald a bull market in developing countries. Even with emerging-market economies forecast to rise at the fastest rates in the world, the IMF’s prediction for 6.1 percent growth in 2009 would be the slowest in six years.
ICICI Bank Ltd., India’s second-largest lender, last week reported quarterly profit that missed analysts’ estimates as deposits fell and it set aside more money for bad loans and investment losses. The Mumbai-based bank is 72 percent below its January share-price peak, even with last week’s 29 percent jump.
“The needle has really hardly budged at all” after last week, he said. “We wouldn’t say that we’ve turned the corner.”
Domino Theory
The Federal Reserve agreed last week to provide $30 billion each to the central banks of Brazil, Mexico and South Korea to help alleviate the credit freeze in emerging nations.
Hungary secured a 20 billion euro ($25.5 billion) rescue package from the IMF, the European Union and the World Bank last week as its currency plunged 14 percent in October. Turkey is in talks with the fund, while Pakistan expects to get money to cover its balance of payments deficit for the next two years, Ashfaque Hasan Khan, an adviser at the finance ministry, said Oct. 31.
The same day, S&P lowered its rating on Argentina’s foreign- currency debt for the second time since August on concern the worsening financial crisis will lead to a default.
Morgan Stanley said today that its bear case for emerging market equities now incorporates a “hard landing” scenario that would drag the benchmark index down to 415 by the end of June, or a 27 percent decline from last week’s closing price.
“The recession is going to be fierce and it will have a dire outlook for earnings,” said Axa Investment’s Wenzel. “That isn’t yet in the prices.”
To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net
Read more...
Nov. 3 (Bloomberg) -- Forget last week’s record 20 percent gain in emerging-market stocks. Hard times are ahead for equities in Brazil, Russia, India and China, some of the world’s biggest money managers say.
Even with developing-nation shares trading at their cheapest levels in a decade, financial crises in Hungary and Pakistan that required international rescue packages and concern that economies from Turkey to Argentina are also teetering prompted investors to pull out of emerging-market funds at a record pace.
RBC Capital Markets cut its estimates on Oct. 23 for 2009 economic growth in Brazil to 2.5 percent from 4 percent and Russia to 4 percent from 6 percent. That may undermine analysts’ forecasts for a 14.5 percent increase in earnings at a time when the global credit crunch seized up lending from Sao Paulo to Seoul and a slump in 24 of 25 developing-nation currencies last month inflated the costs of repaying dollar-denominated debt.
“I’m not brave enough to jump on to the bandwagon,” said Franz Wenzel, deputy director for investment strategy at Axa Investment Managers, which oversees $655 billion in Paris. “We have seen the first dominos to fall with Hungary and Turkey, and we might see other shoes to drop.”
As bank losses and writedowns tied to the collapse of U.S. subprime mortgages grew to more than $680 billion and the American economy began to shrink, investors pulled a record $40 billion from emerging-market stock funds this year, including $7.1 billion last month, according to EPFR Global, a Cambridge, Massachusetts-based fund research firm.
Back to Zero
Forced sales by hedge funds and other money managers that piled into emerging-market stocks exacerbated the decline, which wiped out all the gains generated by developing countries this decade, said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, which oversees $260 billion.
“Their economies have been shown to be far more linked than people were hoping,” said Mark Konyn, Hong Kong-based chief executive officer at RCM Asia Pacific Ltd., which oversees $15 billion. “The massive boom in international capital overseas has come to a crashing end.”
No doubt emerging-market stocks look attractive. Equity valuations in China and India fell by more than 70 percent over the past year as plunging commodity prices and recession concerns erased $9 trillion from developing-nation shares. PetroChina Co., which became the world’s first $1 trillion company in November 2007, lost 79 percent of its value through last week.
One-Week Wonder
Depressed prices sparked a 20 percent rise in the MSCI Emerging Markets Index last week, part of a global rebound that lifted the Standard & Poor’s 500 Index by 10 percent and Europe’s Dow Jones Stoxx 600 Index by 12 percent. The developing-nation index is still down 56 percent from its peak in October 2007.
The MSCI Emerging Markets Index climbed 2.4 percent to 584.36 at 4:31 p.m. in New York today. India’s Bombay Stock Exchange Sensitive Index added 5.6 percent as the central bank lowered its benchmark interest rate for the second time in two weeks. South Korea’s Kospi Index advanced 1.4 percent on the government’s 14 trillion won ($10.8 billion) plan to boost to the sagging economy. China’s CSI 300 Index lost 0.6 percent.
One year ago, the MSCI Emerging Markets Index stood at an all-time high of 1,338.49 after a five-year rally produced a more than fivefold increase and added $12 trillion to the value of developing-nation markets.
Safest Assets
As emerging economies grew a record 8 percent in 2007, investors pushed stock valuations above industrialized nations for the first time in more than seven years on speculation their equities would be insulated from the fallout of the worst U.S. housing slump since the Great Depression.
It also lifted six companies from emerging markets into the ranks of the world’s 10 largest by value.
Since then, developing-nation shares tumbled as much as 66 percent. Investors sold everything but the safest assets as credit markets froze and banks hoarded cash after Bear Stearns Cos. and Lehman Brothers Holdings Inc. collapsed.
Chinese stocks in the MSCI fell to 6.55 times profit last week, the lowest since August 1998 and an 80 percent drop from a year ago. Investors in Brazilian and Indian stocks tracked by MSCI were willing to pay an average $6.69 and $9.29 per dollar of profit respectively, the least for both since at least 1995.
At the beginning of the year, shares of companies in the MSCI India Index commanded more than $35 per dollar of profit.
Fire Sale Prices
Peter Schiff, who oversees $1 billion as president of Darien, Connecticut-based Euro Pacific Capital, says the collapse in valuations makes this an even better buying opportunity than in 1998 -- the last time emerging-market stocks were this cheap.
Less-developed economies have a record $785 billion in current-account surpluses this year, compared with deficits of $109 billion in 1998, data from Washington-based International Monetary Fund show. Foreign debt fell to 24 percent of the gross domestic product, compared with 40 percent a decade ago.
China’s economy, which has increased by at least 7.5 percent in each year in the past decade, may grow 9.3 percent next year, according to IMF data. In the U.S., where concern the economy is in a recession helped Barack Obama widen his lead over John McCain in national polls before the presidential election tomorrow, growth may slip to just 0.1 percent.
“You’ve got fire-sale prices,” Schiff said. “Once you take America out of the equation, you’re going to see the biggest economic boom that we’ve ever seen.”
Not Convinced
That optimism helped emerging markets break out of a so- called bear market, as the MSCI index surged 26 percent in four days last week.
David Cornell, a London-based money manager at New Star Asset Management, which oversees about $30 billion, isn’t convinced the gains herald a bull market in developing countries. Even with emerging-market economies forecast to rise at the fastest rates in the world, the IMF’s prediction for 6.1 percent growth in 2009 would be the slowest in six years.
ICICI Bank Ltd., India’s second-largest lender, last week reported quarterly profit that missed analysts’ estimates as deposits fell and it set aside more money for bad loans and investment losses. The Mumbai-based bank is 72 percent below its January share-price peak, even with last week’s 29 percent jump.
“The needle has really hardly budged at all” after last week, he said. “We wouldn’t say that we’ve turned the corner.”
Domino Theory
The Federal Reserve agreed last week to provide $30 billion each to the central banks of Brazil, Mexico and South Korea to help alleviate the credit freeze in emerging nations.
Hungary secured a 20 billion euro ($25.5 billion) rescue package from the IMF, the European Union and the World Bank last week as its currency plunged 14 percent in October. Turkey is in talks with the fund, while Pakistan expects to get money to cover its balance of payments deficit for the next two years, Ashfaque Hasan Khan, an adviser at the finance ministry, said Oct. 31.
The same day, S&P lowered its rating on Argentina’s foreign- currency debt for the second time since August on concern the worsening financial crisis will lead to a default.
Morgan Stanley said today that its bear case for emerging market equities now incorporates a “hard landing” scenario that would drag the benchmark index down to 415 by the end of June, or a 27 percent decline from last week’s closing price.
“The recession is going to be fierce and it will have a dire outlook for earnings,” said Axa Investment’s Wenzel. “That isn’t yet in the prices.”
To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net
Read more...
Mastercard, Principal Financial, Viacom: U.S. Equity Preview
By Whitney Kisling
Nov. 3 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:20 p.m. in New York, unless otherwise specified.
Standard & Poor's 500 Index futures expiring in December slid 1.10, or 0.1 percent, to 966.4. Dow Jones Industrial Average futures gained 34, or 0.4 percent, to 9,332. Nasdaq-100 Index futures lost 1.50, or 0.1 percent, to 1,340.
Automatic Data Processing Inc. (ADP US) rallied 2.8 percent to $34.20. The world's biggest payroll manager posted fiscal first-quarter profit of 54 cents a share, exceeding the average analyst estimate from a Bloomberg survey. The company also reaffirmed its 2009 earnings forecast.
Blackbaud Inc. (BLKB US) rose 1.4 percent to $15.45. The designer of software programs for nonprofit organizations posted third-quarter profit excluding some items of 26 cents a share, beating the average analyst estimate by 4 percent.
Coldwater Creek Inc. (CWTR US) slid 5.9 percent to $3.21. The clothing retailer for women 35 and older cut its forecast for the third quarter and withdrew its fourth-quarter forecasts, citing the ``unprecedented consumer environment.'' The company also lowered the number of stores it plans to open in 2009 to 15 from 40.
Herbalife Ltd. (HLF US) fell 12 percent to $22.45. The seller of nutritional and weight-loss supplements lowered its forecast for the year to below analyst estimates, citing foreign exchange rates. The company also forecast 2009 earnings below estimates.
Mastercard Inc. (MA US) rallied 6.6 percent to $153.36. The world's second-biggest credit-card network posted third-quarter profit excluding some items of $2.47 a share, exceeding the average analyst estimate by 11 percent. The settlement with Discover Financial Services allows Mastercard to focus on expanding credit and debit-card revenue amid the economic slowdown.
Principal Financial Group Inc. (PFG US): The life insurer that cut its dividend in half last month said third-quarter profit fell by 59 percent as turmoil in global credit markets caused the value of investments to plunge. The shares rallied 18 percent to $22.39 in regular trading.
Viacom Inc. (VIA/B US): The media company controlled by Sumner Redstone posted third-quarter profit excluding some items of 55 cents a share, beating the average analyst estimate. The company also reiterated its forecast for full-year adjusted earnings. The shares fell 1.1 percent to $19.99 in regular trading.
To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net
Read more...
Commodities Send Sell Signal Before Long Recession
By Millie Munshi
Nov. 3 (Bloomberg) -- A record plunge in commodities may signal the U.S. is headed for the longest recession since 1981, just after Ronald Reagan became president and the economy began a 16-month slump.
Industrial raw materials measured by the Journal of Commerce fell at an annual rate of as much as 56 percent last week, the most since 1949 and worse than the declines before every recession since then. Crude oil, copper and wheat tumbled more than 50 percent from records this year as the U.S. economy declined in the third quarter by the most since 2001.
``The industrial sector, which was helping to keep the recession relatively mild, has completely given way and now we need to be prepared for a much more severe recession,'' said Lakshman Achuthan, managing director at the Economic Cycle Research Institute in New York, which compiles the Journal of Commerce data. ``It's at least going to look something like what we saw in the early 1980s, but it could be worse.''
Goldman Sachs Group Inc., once among the biggest commodity proponents, said on Oct. 23 that the risk of a ``sharp global economic slowdown'' may send prices even lower. Codelco, the world's largest copper miner, said this year's price collapse signals the end of a ``supercycle'' for the metal.
`Defensive Holdings'
The commodity slump is ``indicative of a global growth scenario with slower growth than what we've seen in more recent recessions,'' said Walter ``Bucky'' Hellwig, who manages $30 billion at Morgan Asset Management in Birmingham, Alabama. ``It's probably best to be underweight commodities now. Where the money goes is into defensive holdings, like consumer staples and stocks that benefit from lower commodity prices.''
Equities outperformed industrial commodities in each of the past three downturns.
During the 16-month recession from July 1981 to November 1982, the Dow Jones Industrial Average gained 6.4 percent as the Standard & Poor's GSCI Index of 24 commodities fell 9.9 percent. Then, among the biggest winners in the 30-company Dow index were Wal-Mart Stores Inc., the world's biggest retailer; Pfizer Inc., the biggest drugmaker; General Electric Co.; and Procter & Gamble Co., the biggest consumer-products company.
The MSCI World Index of stocks rose 9.8 percent last week, the biggest gain since January 1970, as markets rallied in Russia, Africa, Brazil, Mexico, Europe and the U.S. The gauge advanced 0.4 percent today, after earlier climbing as much as 0.9 percent. The S&P GSCI index fell 3.3 percent.
Recession Not Certain
Not everyone expects a protracted decline in global growth. Federal Reserve Chairman Ben S. Bernanke has been reluctant to label the current slide a recession. In an on Oct. 8 forecast, the International Monetary Fund said global growth would drop to 3 percent next year, which the lender calls the dividing line between world recession and expansion.
``What you're seeing here is liquidation by hedge funds,'' said Stuart Flerlage, who helps manage $600 million at New York- based NuWave Investment Corp. ``That's a meaningful piece of what's going on out there in the commodity markets, in the equity markets, in the fixed-income markets. You're in a fear cycle now. My overall economic view is it's not as bad as people think.''
The Journal of Commerce Industrial Commodity Price Index measures 18 raw materials, including steel, burlap and plywood. It was started in 1985 by Geoffrey Moore, founder of the Economic Cycle Research Institute and once a mentor to former Fed chairman Alan Greenspan. Half of the commodities aren't traded on U.S. exchanges.
`Scared to Death'
The gauge correctly predicted the past two U.S. recessions, falling about 8 percent from peaks in October 1989 and September 2000. The index dropped about 8.4 percent during the 1990 downturn and 17 percent in 2001. That compares with a 42 percent drop from this year's high on July 14.
``People say that copper is the commodity with a Ph.D. in economics, but really all you have to do is look at the price of any commodity right now to realize that the world is definitely in a recession,'' said Michael K. Smith, president of T&K Futures & Options in Port St. Lucie, Florida. ``Anyone paying attention to these markets is scared to death right now.''
Declines in raw-materials prices are linked to manufacturing slumps that compound economic slowdowns.
Incumbents Lose
During the eight-month recession that began in March 2001, the Reuters-Jefferies CRB Index of Raw Industrials, a gauge of the cost of 22 items including scrap copper, cotton and hogs, fell 8.7 percent as U.S. industrial production dropped as much as 5.7 percent. The industrial-commodity index fell 19 percent during the recession that began in July 1981, as factory production plunged as much as 7.1 percent.
The turn in the U.S. economy may spell trouble for Senator John McCain, who has fallen further behind Illinois Senator Barack Obama in his bid to succeed President George W. Bush as the financial crisis intensified.
In the last 60 years, there have been three instances where a presidential election followed a negative third quarter. In two of these, Bush in 2000 and Reagan in 1980, the incumbent party lost the White House. In the third, Dwight D. Eisenhower in 1956, the incumbent party kept the presidency. Bush and McCain are Republicans.
Signs of Slowdown
While the National Bureau of Economic Research, the Cambridge, Massachusetts-based official arbiter of U.S. economic cycles, has yet to call a recession, the CRB raw-materials index has plunged 31 percent since its peak in May. During the same period, U.S. factory production declined for three straight months, ending five years of gains.
Spending by U.S. consumers dropped the most in four years in September, capping the weakest quarter in three decades, government data show. Unemployment is at a five-year high of 6.1 percent, and U.S. consumer confidence in October dropped to the lowest level on record, according to the Conference Board.
U.S. manufacturing contracted in October at the fastest pace in 26 years, an industry group said today.
The commodity decline coupled with economic data signal the current slowdown will last at least 16 months and spur slowdowns globally, not just in the U.S. and Europe, ECRI's Achuthan said. The slumps of 1990 and 2001 each lasted eight months, according to NBER data.
``As is usually the case, the commodity index is ahead of consensus right now and indicating just how deep and how long this global recession will be,'' Achuthan said.
Consensus View
During the 1982 recession, U.S. gross domestic product declined 2.7 percent in the third quarter, government data show. Economists aren't yet predicting that big of a slowdown. They expect 1.1 percent growth next year, down from 1.6 percent this year and the slowest pace since 2001, according to the median of 75 forecasts in a Bloomberg News survey. In the third quarter, the economy suffered its biggest decline since 2001, contracting 0.3 percent, the Commerce Department said Oct. 30.
Slumping growth in emerging-market economies will send commodities lower as demand drops in China, before resuming a multiyear rally, said John Brynjolfsson at Armored Wolf LLC, a hedge fund in Aliso Viejo, California.
``There will be a collapse'' in prices, followed by a ``long-term supercycle'' spurred by ``a depleting global base of supply and a huge, growing population,'' Brynjolfsson said.
Commodity producers are curbing output and delaying projects in anticipation of weaker demand.
Companies Cut Back
Roger Agnelli, chief executive officer of Cia. Vale de Rio Doce, the world's largest iron-ore producer and second-largest for nickel, said the economy is facing ``a very deep recession'' and the company plans to reduce output. Dow Chemical Co. Chief Executive Officer Andrew Liveris said a global recession will prevent the U.S.'s largest chemical maker from meeting its earnings forecast for the lowest point of the industry cycle.
Tom Albanese, the CEO of mining company Rio Tinto Group, said in an interview yesterday that the economic slowdown in China, the world's biggest consumer of metals, was quickening and demand wouldn't rebound until 2009.
Investors should sell commodity holdings and buy equities because raw-materials prices will fall further, said John Wilson, a co-director of equity research and chief market technician for Morgan Keegan, which manages $120 billion in Memphis, Tennessee.
``Commodities aren't the place to be any more,'' Wilson said. ``They did outperform equities for some years, but it's difficult to make the case for commodities now until we see the trough of a recession.''
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
Read more...
Nov. 3 (Bloomberg) -- A record plunge in commodities may signal the U.S. is headed for the longest recession since 1981, just after Ronald Reagan became president and the economy began a 16-month slump.
Industrial raw materials measured by the Journal of Commerce fell at an annual rate of as much as 56 percent last week, the most since 1949 and worse than the declines before every recession since then. Crude oil, copper and wheat tumbled more than 50 percent from records this year as the U.S. economy declined in the third quarter by the most since 2001.
``The industrial sector, which was helping to keep the recession relatively mild, has completely given way and now we need to be prepared for a much more severe recession,'' said Lakshman Achuthan, managing director at the Economic Cycle Research Institute in New York, which compiles the Journal of Commerce data. ``It's at least going to look something like what we saw in the early 1980s, but it could be worse.''
Goldman Sachs Group Inc., once among the biggest commodity proponents, said on Oct. 23 that the risk of a ``sharp global economic slowdown'' may send prices even lower. Codelco, the world's largest copper miner, said this year's price collapse signals the end of a ``supercycle'' for the metal.
`Defensive Holdings'
The commodity slump is ``indicative of a global growth scenario with slower growth than what we've seen in more recent recessions,'' said Walter ``Bucky'' Hellwig, who manages $30 billion at Morgan Asset Management in Birmingham, Alabama. ``It's probably best to be underweight commodities now. Where the money goes is into defensive holdings, like consumer staples and stocks that benefit from lower commodity prices.''
Equities outperformed industrial commodities in each of the past three downturns.
During the 16-month recession from July 1981 to November 1982, the Dow Jones Industrial Average gained 6.4 percent as the Standard & Poor's GSCI Index of 24 commodities fell 9.9 percent. Then, among the biggest winners in the 30-company Dow index were Wal-Mart Stores Inc., the world's biggest retailer; Pfizer Inc., the biggest drugmaker; General Electric Co.; and Procter & Gamble Co., the biggest consumer-products company.
The MSCI World Index of stocks rose 9.8 percent last week, the biggest gain since January 1970, as markets rallied in Russia, Africa, Brazil, Mexico, Europe and the U.S. The gauge advanced 0.4 percent today, after earlier climbing as much as 0.9 percent. The S&P GSCI index fell 3.3 percent.
Recession Not Certain
Not everyone expects a protracted decline in global growth. Federal Reserve Chairman Ben S. Bernanke has been reluctant to label the current slide a recession. In an on Oct. 8 forecast, the International Monetary Fund said global growth would drop to 3 percent next year, which the lender calls the dividing line between world recession and expansion.
``What you're seeing here is liquidation by hedge funds,'' said Stuart Flerlage, who helps manage $600 million at New York- based NuWave Investment Corp. ``That's a meaningful piece of what's going on out there in the commodity markets, in the equity markets, in the fixed-income markets. You're in a fear cycle now. My overall economic view is it's not as bad as people think.''
The Journal of Commerce Industrial Commodity Price Index measures 18 raw materials, including steel, burlap and plywood. It was started in 1985 by Geoffrey Moore, founder of the Economic Cycle Research Institute and once a mentor to former Fed chairman Alan Greenspan. Half of the commodities aren't traded on U.S. exchanges.
`Scared to Death'
The gauge correctly predicted the past two U.S. recessions, falling about 8 percent from peaks in October 1989 and September 2000. The index dropped about 8.4 percent during the 1990 downturn and 17 percent in 2001. That compares with a 42 percent drop from this year's high on July 14.
``People say that copper is the commodity with a Ph.D. in economics, but really all you have to do is look at the price of any commodity right now to realize that the world is definitely in a recession,'' said Michael K. Smith, president of T&K Futures & Options in Port St. Lucie, Florida. ``Anyone paying attention to these markets is scared to death right now.''
Declines in raw-materials prices are linked to manufacturing slumps that compound economic slowdowns.
Incumbents Lose
During the eight-month recession that began in March 2001, the Reuters-Jefferies CRB Index of Raw Industrials, a gauge of the cost of 22 items including scrap copper, cotton and hogs, fell 8.7 percent as U.S. industrial production dropped as much as 5.7 percent. The industrial-commodity index fell 19 percent during the recession that began in July 1981, as factory production plunged as much as 7.1 percent.
The turn in the U.S. economy may spell trouble for Senator John McCain, who has fallen further behind Illinois Senator Barack Obama in his bid to succeed President George W. Bush as the financial crisis intensified.
In the last 60 years, there have been three instances where a presidential election followed a negative third quarter. In two of these, Bush in 2000 and Reagan in 1980, the incumbent party lost the White House. In the third, Dwight D. Eisenhower in 1956, the incumbent party kept the presidency. Bush and McCain are Republicans.
Signs of Slowdown
While the National Bureau of Economic Research, the Cambridge, Massachusetts-based official arbiter of U.S. economic cycles, has yet to call a recession, the CRB raw-materials index has plunged 31 percent since its peak in May. During the same period, U.S. factory production declined for three straight months, ending five years of gains.
Spending by U.S. consumers dropped the most in four years in September, capping the weakest quarter in three decades, government data show. Unemployment is at a five-year high of 6.1 percent, and U.S. consumer confidence in October dropped to the lowest level on record, according to the Conference Board.
U.S. manufacturing contracted in October at the fastest pace in 26 years, an industry group said today.
The commodity decline coupled with economic data signal the current slowdown will last at least 16 months and spur slowdowns globally, not just in the U.S. and Europe, ECRI's Achuthan said. The slumps of 1990 and 2001 each lasted eight months, according to NBER data.
``As is usually the case, the commodity index is ahead of consensus right now and indicating just how deep and how long this global recession will be,'' Achuthan said.
Consensus View
During the 1982 recession, U.S. gross domestic product declined 2.7 percent in the third quarter, government data show. Economists aren't yet predicting that big of a slowdown. They expect 1.1 percent growth next year, down from 1.6 percent this year and the slowest pace since 2001, according to the median of 75 forecasts in a Bloomberg News survey. In the third quarter, the economy suffered its biggest decline since 2001, contracting 0.3 percent, the Commerce Department said Oct. 30.
Slumping growth in emerging-market economies will send commodities lower as demand drops in China, before resuming a multiyear rally, said John Brynjolfsson at Armored Wolf LLC, a hedge fund in Aliso Viejo, California.
``There will be a collapse'' in prices, followed by a ``long-term supercycle'' spurred by ``a depleting global base of supply and a huge, growing population,'' Brynjolfsson said.
Commodity producers are curbing output and delaying projects in anticipation of weaker demand.
Companies Cut Back
Roger Agnelli, chief executive officer of Cia. Vale de Rio Doce, the world's largest iron-ore producer and second-largest for nickel, said the economy is facing ``a very deep recession'' and the company plans to reduce output. Dow Chemical Co. Chief Executive Officer Andrew Liveris said a global recession will prevent the U.S.'s largest chemical maker from meeting its earnings forecast for the lowest point of the industry cycle.
Tom Albanese, the CEO of mining company Rio Tinto Group, said in an interview yesterday that the economic slowdown in China, the world's biggest consumer of metals, was quickening and demand wouldn't rebound until 2009.
Investors should sell commodity holdings and buy equities because raw-materials prices will fall further, said John Wilson, a co-director of equity research and chief market technician for Morgan Keegan, which manages $120 billion in Memphis, Tennessee.
``Commodities aren't the place to be any more,'' Wilson said. ``They did outperform equities for some years, but it's difficult to make the case for commodities now until we see the trough of a recession.''
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
Read more...
Pemex Gulf Accident Investigators Blocked From Site
By Andres R. Martinez
Nov. 3 (Bloomberg) -- The Mexican attorney general's office blocked investigators from visiting the site of the Gulf of Mexico's deadliest offshore oil accident for more than two months, limiting the scope of a Petroleos Mexicanos study into the incident, a report says.
By the time the group was allowed to inspect the platform and rig involved in an Oct. 23, 2007, accident that killed 22 workers, the platform had shifted and site conditions had deteriorated, the Battelle Memorial Institute said in an estimated 1,000-page report prepared for Pemex, as the Mexico City-based oil company is known.
``The simultaneous investigation by the attorney general's office was one of the principal barriers that impeded the critical direction of this project,'' the report said. ``The delay complicated, in a significant manner, the efforts and deeds necessary to meet the expectations for this report.''
Battelle concluded in its report that to prevent accidents Pemex needs better worker training, risk models for disasters and weather forecasts. Mexico's comptroller and attorney general are still investigating whether any criminal actions occurred.
The delay in access was done to preserve any evidence on the platform and rig, the attorney general's office said in an e-mail response today.
The platform and rig were located 47 miles (75.6 kilometers) from Ciudad del Carmen in Mexico's Campeche state.
Pipeline Corrosion
The Battelle report also said Pemex was aware of leaks in a safety valve since 2003 and corrosion that led to problems at the site. Corrosion may have played a part in the Pemex leak that led to the platform evacuation, though Battelle was unable to inspect the valves and wells, according to the report.
``This is going to raise doubts as to whether we have all the information we need,'' George Baker, an independent energy analyst who covers Mexico, said today in an interview. ``If they closed their case this is all we are ever going to know.''
The Battelle report was the last of three studies released Oct. 31, all concluding that Pemex had not properly trained its workers for offshore accidents. The trio of reports cleared the company of wrongdoing.
A BP Plc Texas City refinery had an explosion that killed 15 workers in 2005. BP was fined $21 million and hit by more than 1,750 lawsuits.
Training Investment
Pemex was fined at least 3 million pesos ($233,918) for environmental damage from the accident. The company has spent more than 2 billion pesos on safety equipment, training and weather analysis since the accident.
``Historically, accidents at Pemex have not been cleared up adequately,'' said David Shields, an independent energy analyst who covers Mexico, today in an interview.
Pipeline corrosion also produced an oil leak and subsequent shutdown for four months of BP's Prudhoe Bay oilfield in Alaska, the nation's largest. BP in 2006 curtailed oil shipments from Prudhoe Bay, which pushed up the price of oil when it shut down.
A U.S. government official said the causes of BP's oil spill on Alaska's North Slope shared similarities with the problems that led to the Texas City refinery explosion. Cost cutting, production pressures and a failure to invest in the Texas City refinery left the plant ``vulnerable to a catastrophe,'' said a report by Carolyn Merritt, chief executive officer of the U.S. Chemical Safety Board.
House Energy Testimony
Merritt testified on May 16, 2007, at a subcommittee hearing of the House Energy and Commerce Committee.
Category 1 hurricane conditions knocked Pemex's Usumacinta platform into a rig, prompting 73 workers to evacuate. Panic and confusion ensued during the evacuation after two oil leaks were reported, the report said.
Twenty-two of the workers drowned after they opened hatches in the escape vessel, which let in water and capsized the boats, according to the report.
A Category 1 hurricane on the Saffir-Simpson starts at 75 miles-per-hour.
The Mexican attorney general's office did not let Battelle see the escape vessels until April, or board the Usumacinta platform until January, according to the report.
By then, platform operator Compania Perforadora la Central had done its own inspection and repairs. More than 30 storms hit the platform by the time Battelle was able to review the site, shifting the platform and damaging it further, the report said.
-- With reporting by Hugh Collins in Mexico City. Editor: Robin Saponar, Joe Link
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
Read more...
Nov. 3 (Bloomberg) -- The Mexican attorney general's office blocked investigators from visiting the site of the Gulf of Mexico's deadliest offshore oil accident for more than two months, limiting the scope of a Petroleos Mexicanos study into the incident, a report says.
By the time the group was allowed to inspect the platform and rig involved in an Oct. 23, 2007, accident that killed 22 workers, the platform had shifted and site conditions had deteriorated, the Battelle Memorial Institute said in an estimated 1,000-page report prepared for Pemex, as the Mexico City-based oil company is known.
``The simultaneous investigation by the attorney general's office was one of the principal barriers that impeded the critical direction of this project,'' the report said. ``The delay complicated, in a significant manner, the efforts and deeds necessary to meet the expectations for this report.''
Battelle concluded in its report that to prevent accidents Pemex needs better worker training, risk models for disasters and weather forecasts. Mexico's comptroller and attorney general are still investigating whether any criminal actions occurred.
The delay in access was done to preserve any evidence on the platform and rig, the attorney general's office said in an e-mail response today.
The platform and rig were located 47 miles (75.6 kilometers) from Ciudad del Carmen in Mexico's Campeche state.
Pipeline Corrosion
The Battelle report also said Pemex was aware of leaks in a safety valve since 2003 and corrosion that led to problems at the site. Corrosion may have played a part in the Pemex leak that led to the platform evacuation, though Battelle was unable to inspect the valves and wells, according to the report.
``This is going to raise doubts as to whether we have all the information we need,'' George Baker, an independent energy analyst who covers Mexico, said today in an interview. ``If they closed their case this is all we are ever going to know.''
The Battelle report was the last of three studies released Oct. 31, all concluding that Pemex had not properly trained its workers for offshore accidents. The trio of reports cleared the company of wrongdoing.
A BP Plc Texas City refinery had an explosion that killed 15 workers in 2005. BP was fined $21 million and hit by more than 1,750 lawsuits.
Training Investment
Pemex was fined at least 3 million pesos ($233,918) for environmental damage from the accident. The company has spent more than 2 billion pesos on safety equipment, training and weather analysis since the accident.
``Historically, accidents at Pemex have not been cleared up adequately,'' said David Shields, an independent energy analyst who covers Mexico, today in an interview.
Pipeline corrosion also produced an oil leak and subsequent shutdown for four months of BP's Prudhoe Bay oilfield in Alaska, the nation's largest. BP in 2006 curtailed oil shipments from Prudhoe Bay, which pushed up the price of oil when it shut down.
A U.S. government official said the causes of BP's oil spill on Alaska's North Slope shared similarities with the problems that led to the Texas City refinery explosion. Cost cutting, production pressures and a failure to invest in the Texas City refinery left the plant ``vulnerable to a catastrophe,'' said a report by Carolyn Merritt, chief executive officer of the U.S. Chemical Safety Board.
House Energy Testimony
Merritt testified on May 16, 2007, at a subcommittee hearing of the House Energy and Commerce Committee.
Category 1 hurricane conditions knocked Pemex's Usumacinta platform into a rig, prompting 73 workers to evacuate. Panic and confusion ensued during the evacuation after two oil leaks were reported, the report said.
Twenty-two of the workers drowned after they opened hatches in the escape vessel, which let in water and capsized the boats, according to the report.
A Category 1 hurricane on the Saffir-Simpson starts at 75 miles-per-hour.
The Mexican attorney general's office did not let Battelle see the escape vessels until April, or board the Usumacinta platform until January, according to the report.
By then, platform operator Compania Perforadora la Central had done its own inspection and repairs. More than 30 storms hit the platform by the time Battelle was able to review the site, shifting the platform and damaging it further, the report said.
-- With reporting by Hugh Collins in Mexico City. Editor: Robin Saponar, Joe Link
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
Read more...
Mexico's Peso Rises on Investor Appetite for High-Yield Assets
By Valerie Rota
Nov. 3 (Bloomberg) -- Mexico's peso rose as falling global money-market rates boosted demand for higher-yielding assets.
The peso was the second-biggest gainer among Latin American currencies today after Chile's peso, and has risen 5 percent since touching a record low on Oct. 23. Money-market rates fell in Europe and Asia on speculation central banks will keep reducing lending rates to shore up growth.
``There is greater optimism that liquidity has made a comeback,'' said Mario Copca, a currency strategist in Mexico City at Metanalisis SA. This is making ``investors' confidence flow back toward emerging markets.''
The peso advanced 0.4 percent to 12.7775 per U.S. dollar at 5 p.m. New York time, from 12.8259 on Oct. 31, amid a rally in 15 of the 26 most-traded emerging-market currencies.
Today's advance comes after the peso posted a 15 percent decline in October, its worst monthly performance since December 1994, when the country abandoned a currency peg to keep from depleting its foreign reserves.
The peso has weakened 23 percent from a six-year high reached on Aug. 4 as the credit crisis drives the global economy toward recession. Banco de Mexico last month bought $13.1 billion worth of pesos to stem losses in the peso. The purchases have pushed down the central bank's reserves to $76.6 billion on Oct. 24 from a record $86.9 billion on July 18.
Peso Forecasts
Mexico's currency will trade at 12.42 pesos per dollar by the end of this year, according the average forecast of 33 economists surveyed by the central bank between Oct. 24-30. The monthly poll published today showed economists expect the peso to trade at 12.29 pesos per dollar by the end of 2009. In last month's survey, economists had forecast the peso to end this year at 10.67 per dollar and depreciate to 11.07 per dollar in 2009.
Mexico's inflation rate will surge to 5.84 percent by the end of this year before falling to 4.34 by the end of 2009, today's survey showed. That compares to previous year-end estimates of 5.63 percent and 4.07 percent for 2008 and 2009, respectively.
Mexico's benchmark peso-denominated bonds fell today after last week posting their biggest weekly advance since they were issued in 2005. Yields on the 10 percent security due in December 2024 rose 9 basis points, or 0.09 percentage point, to 8.96 percent. The bond's price fell 0.82 centavo to 108.81 centavos per peso, according to Banco Santander SA.
Foreign investors, the biggest holders of fixed-rate Mexican government bonds maturing in a year or more, trimmed their holdings of the securities by 5 percent to 269 billion pesos ($21 billion) as of Oct. 23 from a month earlier, according to the latest data posted on the central bank's Web site.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net
Read more...
Nov. 3 (Bloomberg) -- Mexico's peso rose as falling global money-market rates boosted demand for higher-yielding assets.
The peso was the second-biggest gainer among Latin American currencies today after Chile's peso, and has risen 5 percent since touching a record low on Oct. 23. Money-market rates fell in Europe and Asia on speculation central banks will keep reducing lending rates to shore up growth.
``There is greater optimism that liquidity has made a comeback,'' said Mario Copca, a currency strategist in Mexico City at Metanalisis SA. This is making ``investors' confidence flow back toward emerging markets.''
The peso advanced 0.4 percent to 12.7775 per U.S. dollar at 5 p.m. New York time, from 12.8259 on Oct. 31, amid a rally in 15 of the 26 most-traded emerging-market currencies.
Today's advance comes after the peso posted a 15 percent decline in October, its worst monthly performance since December 1994, when the country abandoned a currency peg to keep from depleting its foreign reserves.
The peso has weakened 23 percent from a six-year high reached on Aug. 4 as the credit crisis drives the global economy toward recession. Banco de Mexico last month bought $13.1 billion worth of pesos to stem losses in the peso. The purchases have pushed down the central bank's reserves to $76.6 billion on Oct. 24 from a record $86.9 billion on July 18.
Peso Forecasts
Mexico's currency will trade at 12.42 pesos per dollar by the end of this year, according the average forecast of 33 economists surveyed by the central bank between Oct. 24-30. The monthly poll published today showed economists expect the peso to trade at 12.29 pesos per dollar by the end of 2009. In last month's survey, economists had forecast the peso to end this year at 10.67 per dollar and depreciate to 11.07 per dollar in 2009.
Mexico's inflation rate will surge to 5.84 percent by the end of this year before falling to 4.34 by the end of 2009, today's survey showed. That compares to previous year-end estimates of 5.63 percent and 4.07 percent for 2008 and 2009, respectively.
Mexico's benchmark peso-denominated bonds fell today after last week posting their biggest weekly advance since they were issued in 2005. Yields on the 10 percent security due in December 2024 rose 9 basis points, or 0.09 percentage point, to 8.96 percent. The bond's price fell 0.82 centavo to 108.81 centavos per peso, according to Banco Santander SA.
Foreign investors, the biggest holders of fixed-rate Mexican government bonds maturing in a year or more, trimmed their holdings of the securities by 5 percent to 269 billion pesos ($21 billion) as of Oct. 23 from a month earlier, according to the latest data posted on the central bank's Web site.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net
Read more...
Monday, November 3, 2008
Risk Aversion Ebbs this Morning... Comdol Time?
| Daily Forex Fundamentals | Written by Black Swan Capital | Nov 03 08 13:24 GMT | | |
Key News
Key Reports Due (WSJ):
Quotable"Historically, economists have evaluated the economy's overall leverage in terms of nonfinancial debt. The theory for this is that the financial sector takes on debt in order to make loans for the nonfinancial sector; thus, to include financial debt would result in double counting. The logic of that approach is not valid in the current situation. The leverage in the financial system, including the financial intermediaries and government sponsored entities like Fannie and Freddie, is clearly excessive and the source of much distress in the economy. When viewed on this more comprehensive basis, total leverage of the U.S. economy surged to an all time peak for the past 92 years that records have been kept. Total U.S. debt in the second quarter jumped to 357% of GDP, up from an average of 195% from 1916 to the present. In less than five years, the total debt to GDP ratio jumped more than 50%. "As the chart indicates, 300% was the 1933 high of the total debt to GDP ratio. The current peak, however, was reached due to a surge in debt, while the 1933 peak reflected a dramatic fall of nominal GDP, the denominator of the ratio. The new record level of debt in the second quarter reflected the worsening situation among corporations, both financial and nonfinancial. Clearly the magnitude of the debt problem is unprecedented and years, not months or quarters, will be required to bring debt into some reasonable relationship with economic activity. As long as this situation persists, the U.S. faces a difficult economic environment. This is due to the fact that over the past four decades every additional dollar of debt created 86 cents worth of GDP, and with debt shrinking, GDP will struggle to generate positive growth." Hoisington Management Third Quarter Review & Outlook FX Trading - Risk Aversion Ebbs this Morning... Comdol Time?Gold is sharply higher this morning... up $20 bucks. Stocks globally are doing well and premarket SPU is bidding a bit higher. Oil is trying to turn higher. Ebb in risk aversion means a flow of risk appetite by definition. And risk appetite may mean it's time for commodities, which have been body slammed, to make a decent correction; maybe of the multi-week variety. Thus, maybe it's time to own some Comdols again i.e. commodity dollars, fist three letters of each word, for those not yet super-fx-trader slang literate. The chart above is a 240-min chart of oil, gold, and Aussie. All have broken above their nasty down trends of late on this near-term basis. Jack Crooks Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html | |
Read more...
Subscribe to:
Posts (Atom)
Posts
