By James Attwood and Alexander Ragir
Aug. 8 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares fell 1 percent to 4,124.17 yesterday. Colombian markets were closed yesterday for a holiday. In Brazil, preferred shares are the most commonly traded class of stock.
Argentina
Grupo Financiero Galicia SA (GGAL AF): The holding company for Argentina's biggest non-government bank said second-quarter profit more than tripled. Net income rose to 42.1 million ($13.8 million), or 3.4 centavos a share, from 12.6 million pesos, or 1 centavo, a year earlier, the Buenos Aires-based company wrote in a statement posted on the regulator's Web site yesterday. That beat Grupo SBS's estimate of 27.6 million pesos, the brokerage wrote in a note to clients. Galicia fell 6.2 percent to 1.37 peso.
Brazil
Cia. de Bebidas das Americas (AMBV4 BS): Brazil's tax authority will raise taxes on alcoholic beverages by 30 percent beginning in October, state-run Agencia Brasil reported. The increase in the tax on industrialized products, known as IPI, excludes beer, the news wire said. Consumers should see a price rise of 5 percent, according to the report. Ambev, Brazil's largest beverage company, fell 2.3 percent to 100.55 reais.
Banco Itau Holding Financeira SA (ITAU4 BS): Brazil's second-biggest non-government bank was cut to ``hold'' from ``buy'' at Banco Santander SA on the outlook for slower loan growth and shrinking margins. Itau will likely report 2008 profit of $1.52 per ADR, down from a previous estimate of $1.85. In 2009, profit will likely reach $1.86, down from $2.23, analyst Boris Molina wrote in a note yesterday. Itau fell 1.8 percent to 33.20 reais.
Empresa Brasileira de Aeronautica SA (EMBR3 BS): The fourth- largest aircraft maker fired 500 workers in a restructuring process, Folha de S. Paulo reported yesterday. The Sao Jose dos Campos, Brazil-based company dismissed workers on Aug. 4 and Aug. 5, according to the report that cited the city's metalworkers union. Embraer fell 3.7 percent to 11.46 reais.
Lojas Americanas SA (LAME4 BS): Brazil's biggest discount retailer posted an unexpected second-quarter loss of 14.5 million reais ($9.11 million), compared with profit of 2.3 million reais a year earlier, the Rio de Janeiro-based company said today in a statement. Analysts had anticipated profit of 6.6 million reais, based on the average of four estimates compiled by Bloomberg. Lojas Americanas fell 1.5 percent to 11.70 reais.
Petroleo Brasileiro SA (PETR4 BS): Brazil's state-controlled oil company found light oil in its BM-S-11 offshore exploration block, it said in a statement e-mailed yesterday. The block is being explored by Petrobras, as the Rio de Janeiro-based company is known, Portugal's Galp Energia SGPS SA and U.K.-based BG Group Plc. Petrobras rose 1.7 percent to 33.86 reais.
Chile
Cencosud SA (CENCOSUD CC): Chile's biggest retailer had inferred second-quarter profit of 45.7 billion pesos ($89.4 million), down from 67.6 billion pesos a year earlier, according to Bloomberg calculations based on first-half results. That compares with the 44.7 billion peso average forecast of five analysts surveyed by Bloomberg. First-half net income declined to 69 billion pesos from 135 billion pesos a year earlier, Cencosud wrote in a statement posted on the Chilean regulator's Web site yesterday. The stock was little changed at 1,560 pesos.
Empresas CMPC SA (CMPC CC): The wood-pulp producer owned by Chile's Matte Group reported inferred second-quarter profit that beat analysts' estimates. Quarterly net income fell to 54.6 billion pesos ($107 million) from 66.7 billion pesos a year earlier, according to Bloomberg calculations based on first-half results reported yesterday. That beat the 51.6 billion peso average forecast of five analysts surveyed by Bloomberg. CMPC rose less than 0.1 percent to 16,799 pesos.
Colombia
Bancolombia SA (PFBCOLO CB): The country's biggest lender fell 2.5 percent in New York trading yesterday when local markets were closed for a holiday. Bancolombia's preferred shares slid 1.7 percent to 14,640 pesos when they last traded on Aug. 6.
Cia. Colombiana de Inversiones SA (COLINV CB): The Medellin- based holding company known as Colinversiones plans to buy at least 51 percent of Generar SA ESP as part of a push to boost its energy assets. Colinversiones will offer 1,675 pesos per ordinary share and 1,800 pesos per ``privileged'' share, it wrote in an Aug. 6 regulatory filing. Colinversiones closed unchanged at 22,400 pesos.
Ecopetrol SA (ECOPETL CB): Crude oil for September delivery rose for the first time in four days yesterday when Colombian trading was closed. Ecopetrol, the nation's state oil producer, fell 0.4 percent to 2,465 pesos.
Mexico
America Movil SAB (AMXL MM): Latin America's largest mobile- phone company bought Nicaraguan cable television company Estesa Holding Corp. Terms weren't disclosed in a statement e-mailed yesterday. America Movil fell 2 percent to 25.14 pesos.
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net.
Read more...
Friday, August 8, 2008
Beazer, Deckers Outdoor, MBIA, Fannie Mae: U.S. Equity Preview
By Lynn Thomasson
Aug. 8 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets. Stock symbols are in parentheses after company names, and prices are as of 8:15 a.m. in New York, unless stated otherwise.
Beazer Homes USA Inc. (BZH US): The U.S. homebuilder under investigation by federal regulators reported its seventh consecutive quarterly loss amid rising foreclosures and the shrinking availability of mortgages. The third-quarter net loss of $2.85 a share was 11 percent worse than the average analyst estimate from a Bloomberg survey. The stock added 1 percent to $5.93 yesterday.
Deckers Outdoor Corp. (DECK US) increased 1.6 percent to $117. The maker of Ugg boots and Teva sandals reported profit excluding some items of 39 cents a share, topping the average analyst estimate from a Bloomberg survey by 65 percent.
EnerNoc Inc. (ENOC US): The Boston-based company that helps power-grid operators cut electricity use when demand is highest boosted its 2008 sales forecast and reported second-quarter results that topped analysts' expectations. The shares were unchanged yesterday at $14.08.
Fannie Mae (FNM US) dropped 13 percent to $8.70. The largest U.S. mortgage-finance company posted a fourth straight quarterly loss and cut its dividend as record delinquencies pushed up credit costs. The second-quarter loss, excluding a one-time gain, was $2.51 a share, compared with the 72-cent average estimate from analysts polled by Bloomberg.
MBIA Inc. (MBI US) climbed 5.1 percent to $8.70. The company, once the largest provider of municipal bond insurance, reported second-quarter profit, excluding accounting adjustments, and decided against taking additional reserves for mortgage- related guarantees. Analysts polled by Bloomberg expected a loss for the quarter.
Par Pharmaceutical Cos. (PRX US): The maker of the anorexia drug Megace ES reported a second-quarter loss from continuing operations of 59 cents a share. Analysts had expected profit of 13 cents a share, the average of two estimates in a Bloomberg survey. The stock lost 1.3 percent to $16.74 yesterday.
Windstream Corp. (WIN US): The phone company serving rural areas in 16 states said second-quarter profit fell 12 percent as more customers cut their land-lines. Sales declined 3.2 percent to $799.9 million, missing the average estimate of analysts surveyed by Bloomberg. The shares were unchanged yesterday at $12.13.
World Fuel Services Corp. (INT US): The seller of fuel to airlines and ships reported second-quarter profit of 73 cents a share. Analysts had expected 53 cents, the average of four estimates in a Bloomberg survey. The stock dropped 3.1 percent to $25.15 yesterday.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Aug. 8 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets. Stock symbols are in parentheses after company names, and prices are as of 8:15 a.m. in New York, unless stated otherwise.
Beazer Homes USA Inc. (BZH US): The U.S. homebuilder under investigation by federal regulators reported its seventh consecutive quarterly loss amid rising foreclosures and the shrinking availability of mortgages. The third-quarter net loss of $2.85 a share was 11 percent worse than the average analyst estimate from a Bloomberg survey. The stock added 1 percent to $5.93 yesterday.
Deckers Outdoor Corp. (DECK US) increased 1.6 percent to $117. The maker of Ugg boots and Teva sandals reported profit excluding some items of 39 cents a share, topping the average analyst estimate from a Bloomberg survey by 65 percent.
EnerNoc Inc. (ENOC US): The Boston-based company that helps power-grid operators cut electricity use when demand is highest boosted its 2008 sales forecast and reported second-quarter results that topped analysts' expectations. The shares were unchanged yesterday at $14.08.
Fannie Mae (FNM US) dropped 13 percent to $8.70. The largest U.S. mortgage-finance company posted a fourth straight quarterly loss and cut its dividend as record delinquencies pushed up credit costs. The second-quarter loss, excluding a one-time gain, was $2.51 a share, compared with the 72-cent average estimate from analysts polled by Bloomberg.
MBIA Inc. (MBI US) climbed 5.1 percent to $8.70. The company, once the largest provider of municipal bond insurance, reported second-quarter profit, excluding accounting adjustments, and decided against taking additional reserves for mortgage- related guarantees. Analysts polled by Bloomberg expected a loss for the quarter.
Par Pharmaceutical Cos. (PRX US): The maker of the anorexia drug Megace ES reported a second-quarter loss from continuing operations of 59 cents a share. Analysts had expected profit of 13 cents a share, the average of two estimates in a Bloomberg survey. The stock lost 1.3 percent to $16.74 yesterday.
Windstream Corp. (WIN US): The phone company serving rural areas in 16 states said second-quarter profit fell 12 percent as more customers cut their land-lines. Sales declined 3.2 percent to $799.9 million, missing the average estimate of analysts surveyed by Bloomberg. The shares were unchanged yesterday at $12.13.
World Fuel Services Corp. (INT US): The seller of fuel to airlines and ships reported second-quarter profit of 73 cents a share. Analysts had expected 53 cents, the average of four estimates in a Bloomberg survey. The stock dropped 3.1 percent to $25.15 yesterday.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
U.S. Stocks Rise, Led by Retailers, Airlines; Home Depot Gains
By Elizabeth Stanton
Aug. 8 (Bloomberg) -- U.S. stocks rose, helping the Standard & Poor's 500 Index post the first back-to-back weekly gain since May, as retailers and airlines rallied on speculation lower commodity prices will boost earnings.
Home Depot Inc., Macy's Inc. and Gap Inc. climbed as the dollar's biggest advance against the euro in four years pushed crude oil to a three-month low. General Motors Corp. rallied, while United Airlines parent UAL Corp. jumped almost 10 percent. Fannie Mae dropped after joining Freddie Mac in posting a bigger- than-estimated loss and slashing its dividend.
The S&P 500 added 15.68 points, or 1.2 percent, to 1,281.75 at 10:20 a.m. in New York. The Dow Jones Industrial Average rose 182.06, or 1.6 percent, to 11,613.49. The Nasdaq Composite Index climbed 40.22, or 1.7 percent, to 2,395.95, the highest level in a month. More than three stocks gained for each that fell on the New York Stock Exchange.
``The break in commodity prices has changed consumer and investor sentiment,'' said Eric Green, Cherry Hill, New Jersey- based director of research at Penn Capital Management, which manages $4.5 billion. ``That's critically positive.''
The S&P 500 added 1.7 percent this week as Cisco Systems Inc. and Procter & Gamble Co. joined the majority of companies in beating estimates, the Federal Reserve predicted inflation will ease through next year and crude oil declined 7 percent.
Fuel Costs
After falling to a 2 1/2-year low on July 15, the benchmark for U.S. equities rebounded 5.5 percent. It's still down 13 percent this year as record fuel costs and bank losses stemming from the U.S. mortgage crisis prompted analysts to lower profit estimates.
Crude oil dropped 3.1 percent to $116.32 a barrel in New York, heading for its fourth decline in five weeks. Oil, metal and crop prices fell as the dollar jumped to a five-month high against the euro.
Consumer stocks rose as crude slipped. Home Depot, the world's largest home-improvement retailer, rose 4.4 percent to $25.56 for the biggest gain in the Dow average. Macy's, the second-largest U.S. department store chain, rose 5 percent to $19.86. Gap, the largest U.S. clothing retailer, climbed 3.7 percent to $17.55, the highest since June 19.
GM, the biggest U.S. automaker, added 3 percent to $10.04. UAL gained 94 cents to $10.55.
Earnings at companies in the S&P 500 will advance 2.3 percent this year, according to data compiled by Bloomberg. That compares with expectations for a 15 percent increase at the end of last year.
Earnings Watch
Second-quarter earnings at S&P 500 companies that have released results since July 8 are down 21 percent on average from a year earlier, according to data compiled by Bloomberg. Profits at consumer discretionary companies have declined 80 percent as higher fuel and food costs crimp household budgets. Financial earnings are lower by 86 percent.
Fannie Mae fell 4.3 percent to $9.52. The government- sponsored company, whose shares closed at a 17-year low of $7.07 on July 15, reported a second-quarter net loss of $2.3 billion, or $2.54 a share. Before a one-time gain, the loss was $2.51 a share, compared with the 72-cent average estimate of 10 analysts in a Bloomberg survey.
While three-quarters of S&P 500 companies that have reported results beat or met the average analyst estimates, the misses have been larger in size, chiefly at automobile companies and consumer finance companies. In aggregate, results at the 422 companies that have reported fell short of analyst estimates by 6.8 percent. That's worse than in the first quarter, when aggregate profit missed the estimates by 2.7 percent.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
Read more...
Aug. 8 (Bloomberg) -- U.S. stocks rose, helping the Standard & Poor's 500 Index post the first back-to-back weekly gain since May, as retailers and airlines rallied on speculation lower commodity prices will boost earnings.
Home Depot Inc., Macy's Inc. and Gap Inc. climbed as the dollar's biggest advance against the euro in four years pushed crude oil to a three-month low. General Motors Corp. rallied, while United Airlines parent UAL Corp. jumped almost 10 percent. Fannie Mae dropped after joining Freddie Mac in posting a bigger- than-estimated loss and slashing its dividend.
The S&P 500 added 15.68 points, or 1.2 percent, to 1,281.75 at 10:20 a.m. in New York. The Dow Jones Industrial Average rose 182.06, or 1.6 percent, to 11,613.49. The Nasdaq Composite Index climbed 40.22, or 1.7 percent, to 2,395.95, the highest level in a month. More than three stocks gained for each that fell on the New York Stock Exchange.
``The break in commodity prices has changed consumer and investor sentiment,'' said Eric Green, Cherry Hill, New Jersey- based director of research at Penn Capital Management, which manages $4.5 billion. ``That's critically positive.''
The S&P 500 added 1.7 percent this week as Cisco Systems Inc. and Procter & Gamble Co. joined the majority of companies in beating estimates, the Federal Reserve predicted inflation will ease through next year and crude oil declined 7 percent.
Fuel Costs
After falling to a 2 1/2-year low on July 15, the benchmark for U.S. equities rebounded 5.5 percent. It's still down 13 percent this year as record fuel costs and bank losses stemming from the U.S. mortgage crisis prompted analysts to lower profit estimates.
Crude oil dropped 3.1 percent to $116.32 a barrel in New York, heading for its fourth decline in five weeks. Oil, metal and crop prices fell as the dollar jumped to a five-month high against the euro.
Consumer stocks rose as crude slipped. Home Depot, the world's largest home-improvement retailer, rose 4.4 percent to $25.56 for the biggest gain in the Dow average. Macy's, the second-largest U.S. department store chain, rose 5 percent to $19.86. Gap, the largest U.S. clothing retailer, climbed 3.7 percent to $17.55, the highest since June 19.
GM, the biggest U.S. automaker, added 3 percent to $10.04. UAL gained 94 cents to $10.55.
Earnings at companies in the S&P 500 will advance 2.3 percent this year, according to data compiled by Bloomberg. That compares with expectations for a 15 percent increase at the end of last year.
Earnings Watch
Second-quarter earnings at S&P 500 companies that have released results since July 8 are down 21 percent on average from a year earlier, according to data compiled by Bloomberg. Profits at consumer discretionary companies have declined 80 percent as higher fuel and food costs crimp household budgets. Financial earnings are lower by 86 percent.
Fannie Mae fell 4.3 percent to $9.52. The government- sponsored company, whose shares closed at a 17-year low of $7.07 on July 15, reported a second-quarter net loss of $2.3 billion, or $2.54 a share. Before a one-time gain, the loss was $2.51 a share, compared with the 72-cent average estimate of 10 analysts in a Bloomberg survey.
While three-quarters of S&P 500 companies that have reported results beat or met the average analyst estimates, the misses have been larger in size, chiefly at automobile companies and consumer finance companies. In aggregate, results at the 422 companies that have reported fell short of analyst estimates by 6.8 percent. That's worse than in the first quarter, when aggregate profit missed the estimates by 2.7 percent.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
Read more...
Canadian Employment Plummets - Unemployment Rate Falls
Daily Forex Fundamentals | Written by RBC Financial Group | Aug 08 08 14:23 GMT |
Employment in Canada has for most of this year surprised on the upside though this was quickly reversed with this morning's numbers for July. Hiring was much weaker than expected, plummeting 55,000 in the month. Expectations had been for a modest increase of 5,000 that would have reversed a similar-sized drop in employment in June. Surprisingly, the increase was paired with a fall in the unemployment rate to 6.1% from 6.2% in June. However, the reason behind the fall was that there was a sizeable 74,000 outflow of individuals from the labour force, mainly among youth workers. The weakening job market contributed to annual growth in wages for permanent workers dropping to 3.8% in July from 4.3% in June.
The fall in employment was skewed to part-time workers which dropped 48,000 and was mainly concentrated in adult women workers. Full-time employment fell as well though by a more moderate 7,000. On the basis of private versus public sector, the weakness was solidly concentrated in the former which saw jobs plummeting 95,000 with public sector jobs rising 29,000. There was also an 11,000 increase in self-employment. On an industry basis , the weakness was relatively broadly based with both goods-producing and service-producing industries showing weakness. Manufacturing jobs dropped 32,000 with business services jobs off 30,000 and educational services employment dropping 27,000. The only significant offset was in accommodation and food services where employment rose 22,000.
The weakness in manufacturing likely contributed to employment declines in both Ontario (-19,000) and Quebec (-30,000). The report also showed a surprising 4,000 drop in employment in Saskatchewan where most other indicators are showing robust economic activity.
Today's report provides strong evidence that labour markets are starting to succumb to weakening GDP growth. Although the Bank of Canada has recently put greater emphasis on the risk of inflation pressures taking hold in the economy, today's report will re-establish the downside risks to growth as of equal concern. These offsetting risks will likely result in the central bank holding interest rates steady near term with the central bank monitoring the data for signs that one or the other risk has come to dominate. Our forecast assumes that the current 3.00% overnight rate will prove sufficient to eventually revive growth. As this becomes evident in 2009, the Bank of Canada is expected to very gradually remove this stimulus allowing interest rates to move higher.
Next week in the U.S.
There are no economic releases scheduled for review today. Next week will be a busy one with the Trade Balance figures due on Tuesday. The June trade deficit is expected to deteriorate to $61.5 billion from May's unexpectedly small deficit of $59.8 billion.
Wednesday brings the Advance Retail Sales numbers. Retail sales growth is expected to decline 0.2% in July following the minimal 0.1% rise in June and the 0.8% surge in May.
On Thursday the Consumer Price Index announcements will be released and we expect that overall consumer prices in July will rise 0.4%, down sharply from the 1.1% surge that occurred in June.
Friday data includes the Industrial Production and Capacity Utilization figures. We are assuming that industrial production will be down 0.1% in July largely reflecting indications that manufacturing activity was likely down in the month, given the drop in employment in that sector.
RBC Financial Group
http://www.rbc.com
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
Read more...
Employment in Canada has for most of this year surprised on the upside though this was quickly reversed with this morning's numbers for July. Hiring was much weaker than expected, plummeting 55,000 in the month. Expectations had been for a modest increase of 5,000 that would have reversed a similar-sized drop in employment in June. Surprisingly, the increase was paired with a fall in the unemployment rate to 6.1% from 6.2% in June. However, the reason behind the fall was that there was a sizeable 74,000 outflow of individuals from the labour force, mainly among youth workers. The weakening job market contributed to annual growth in wages for permanent workers dropping to 3.8% in July from 4.3% in June.
The fall in employment was skewed to part-time workers which dropped 48,000 and was mainly concentrated in adult women workers. Full-time employment fell as well though by a more moderate 7,000. On the basis of private versus public sector, the weakness was solidly concentrated in the former which saw jobs plummeting 95,000 with public sector jobs rising 29,000. There was also an 11,000 increase in self-employment. On an industry basis , the weakness was relatively broadly based with both goods-producing and service-producing industries showing weakness. Manufacturing jobs dropped 32,000 with business services jobs off 30,000 and educational services employment dropping 27,000. The only significant offset was in accommodation and food services where employment rose 22,000.
The weakness in manufacturing likely contributed to employment declines in both Ontario (-19,000) and Quebec (-30,000). The report also showed a surprising 4,000 drop in employment in Saskatchewan where most other indicators are showing robust economic activity.
Today's report provides strong evidence that labour markets are starting to succumb to weakening GDP growth. Although the Bank of Canada has recently put greater emphasis on the risk of inflation pressures taking hold in the economy, today's report will re-establish the downside risks to growth as of equal concern. These offsetting risks will likely result in the central bank holding interest rates steady near term with the central bank monitoring the data for signs that one or the other risk has come to dominate. Our forecast assumes that the current 3.00% overnight rate will prove sufficient to eventually revive growth. As this becomes evident in 2009, the Bank of Canada is expected to very gradually remove this stimulus allowing interest rates to move higher.
Next week in the U.S.
There are no economic releases scheduled for review today. Next week will be a busy one with the Trade Balance figures due on Tuesday. The June trade deficit is expected to deteriorate to $61.5 billion from May's unexpectedly small deficit of $59.8 billion.
Wednesday brings the Advance Retail Sales numbers. Retail sales growth is expected to decline 0.2% in July following the minimal 0.1% rise in June and the 0.8% surge in May.
On Thursday the Consumer Price Index announcements will be released and we expect that overall consumer prices in July will rise 0.4%, down sharply from the 1.1% surge that occurred in June.
Friday data includes the Industrial Production and Capacity Utilization figures. We are assuming that industrial production will be down 0.1% in July largely reflecting indications that manufacturing activity was likely down in the month, given the drop in employment in that sector.
RBC Financial Group
http://www.rbc.com
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
Read more...
The Week Has Come to an End and a Strong Dollar Sentiment Prevails
Daily Forex Fundamentals | Written by Crown Forex | Aug 08 08 14:21 GMT |
It's the end of another busy week and with the release of three different rate decisions from major economies with all deciding to hold rates steady, the sentiment in the market continues as all favor the dollar against majors in the markets. Companies continue to release earnings reports from the US including Fannie Mae and AIG who have reported losses for the second quarter but nothing has stopped the dollar as many believe that the Feds might hike their interest rates as soon as the next meeting.
Mr. Jean Claude Trichet was quite neutral during press conference after the release of the rate decision not being hawkish or dovish as he also added the Euro Zone is to expect sluggish growth in the second and third quarter of this year and with Italy contracting 0.3 percent, this just assured the fact. The Euro failed to find any support as it broke all trends and initiated a new medium term bearish channel now targeting the 1.50 figure after successfully breaching the support level at 1.5060 where if the currency continues to extend losses against the dollar, it is possible to see it reach the 1.4950s where this marks the sharpest drop in four years. The pair is ignoring the fact that it is heavily oversold and continues to travel the trend it set to the downside. The pair recorded a low of 1.5016 after starting the day at a high of 1.55314.
Following the same footsteps as the Euro and still impacted by a stronger dollar, the pound continues to depreciate as it is currently trading at the 1.9150s level targeting the 1.9070 and then the 1.9 figure. The BoE did not release any statements after their decision to hold rates steady at 5.00%. The currency recorded a high of 1.9433 before slumping to hit a low at 1.9145.
As for the Japanese Yen, it is currently testing the resistance level at 110.30s where if broken the next target will be at 110.60 before soaring to reach the 111.00. These levels are possible as investors are now targeting the dollar and especially after a report from the Japanese government showed that the economy's longest post war expansion has come to an end and that the Eco watchers survey indicated that the current and future outlook for the economy in July has slipped. After recording a low at 109.30, the USD/JPY pair hit a high at 110.35.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
Read more...
It's the end of another busy week and with the release of three different rate decisions from major economies with all deciding to hold rates steady, the sentiment in the market continues as all favor the dollar against majors in the markets. Companies continue to release earnings reports from the US including Fannie Mae and AIG who have reported losses for the second quarter but nothing has stopped the dollar as many believe that the Feds might hike their interest rates as soon as the next meeting.
Mr. Jean Claude Trichet was quite neutral during press conference after the release of the rate decision not being hawkish or dovish as he also added the Euro Zone is to expect sluggish growth in the second and third quarter of this year and with Italy contracting 0.3 percent, this just assured the fact. The Euro failed to find any support as it broke all trends and initiated a new medium term bearish channel now targeting the 1.50 figure after successfully breaching the support level at 1.5060 where if the currency continues to extend losses against the dollar, it is possible to see it reach the 1.4950s where this marks the sharpest drop in four years. The pair is ignoring the fact that it is heavily oversold and continues to travel the trend it set to the downside. The pair recorded a low of 1.5016 after starting the day at a high of 1.55314.
Following the same footsteps as the Euro and still impacted by a stronger dollar, the pound continues to depreciate as it is currently trading at the 1.9150s level targeting the 1.9070 and then the 1.9 figure. The BoE did not release any statements after their decision to hold rates steady at 5.00%. The currency recorded a high of 1.9433 before slumping to hit a low at 1.9145.
As for the Japanese Yen, it is currently testing the resistance level at 110.30s where if broken the next target will be at 110.60 before soaring to reach the 111.00. These levels are possible as investors are now targeting the dollar and especially after a report from the Japanese government showed that the economy's longest post war expansion has come to an end and that the Eco watchers survey indicated that the current and future outlook for the economy in July has slipped. After recording a low at 109.30, the USD/JPY pair hit a high at 110.35.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
Read more...
DailyFX Analysts Trading The Commodity Currencies On Dollar's Distortion
Daily Forex Technicals | Written by DailyFX | Aug 08 08 14:17 GMT |
The US dollar has had a dramatic impact on the wide currency market and the trading opportunities are clear. Not only are the DailyFX Analysts looking to the greenback-denominated AUDUSD and NZDUSD, but they are also looking to the disjointed commodity crosses for potential setups. See where DailyFX is looking below:
Chief Strategist - Antonio Sousa
My picks: Sell NZD/USD
Expertise: Fundamentals, Volatility and Sentiment.
Average Time Frame of Trades: 1 Day to 1 Year
I expect the New Zealand dollar to remain weak, on speculation the Reserve Bank of New Zealand could have to cut interest rates by 150 bps over the next 12 months. Indeed, with the world economy slowing down is reasonable to think that the demand for commodities will also begin to slow down. As a result of this, commodity currencies like AUD, NZD and CAD will be particularly vulnerable.
Senior Currency Strategist - Jaime Saettle
My picks: GBPNZD Short (limit entry at 2.7375, stop at 2.7750, target 1 at 2.685, target 2 at 2.6615)
Expertise: Technical
Average Time Frame of Trades: 1 month (this one is probably a few weeks)
The GBPNZD spiked through the top of a channel this morning and has come off significantly since. Expectations are for price to come back to the 2.68 area before continuing higher. Move to breakeven at 2.70. This is a short term countertrend trade. Sometimes, it is necessary to stand in front of a train
Currency Strategist - John Kicklighter
My picks: Short AUDCAD
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
The commodity crosses are an interesting group of currencies to trade today. Momentum presents good opportunities in the dollar crosses, but my risk/reward and money management rules would be difficult to parlay into such an aggressive move with few signs of good resistance and the potential for a reversal as the weekend encourages traders to square their books. However, there other trade setups across the majors - though everything seems to be effected by the distortion of the selling against the world's most liquid currency (the US dollar). In fact, this distortion may be offering a good trading opportunity in AUDCAD. The pair broke a major rising trend channel just last week, and the move has only hit a major hitch today with a massive retracement.
As the interest rate outlook between the two pairs still favors the downside and the major technicals are still in place, a retracement in the medium-term downtrend seems like a good jumping point. The high for today's bar is near a confluence of important fib levels. There is also a decent falling trend on the 240-minute time frame. This will allow a good entry on a trade with strong risk/reward and clear levels for stops. I am looking to enter near the highs of today's bar and put a stop loss above 0.9560. The most threatening market influence to turn this trade against me is any ongoing distortion with the dollar-based pairs. If the currency sustains its momentum, fundamentals and technicals in AUDCAD will be forfeit.
Currency Strategist - Terri Belkas
My picks: Short AUD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 - 3 Days
Given the weakness in carry trades and commodity currencies, I think short AUD/JPY is still a decent bet. While the pair is down approximately 600 pips from its July high, AUD/JPY is prone to 1200-1500 pip declines in a matter of weeks when risk aversion is high. Immediate support sits at the S2 monthly pivot point at 97.88, but I think we'll could see price drop closer to the 50% fib of 88.15 - 104.46 at 96.36 in the near-term.
Currency Analyst - Ilya Spivak
My picks: Short NZDUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
Having fallen substantiall in recent weeks along with broadly improving US dollar sentiment and the prospect of 200bp in RBNZ rate cuts, NZDUSD now finds itself squarely above support at the 76.4% Fibonacci retracement of the 08/17/07-02/27/08 rally at 0.7013. A close below this level opens the door to substantially more downside. Initial target is 0.6870, with a secondary target at 0.6638.
Currency Analyst - John Rivera
My picks: Short AUDUSD
Expertise: Comvining Fundamentals With Technicals
Average Time Frame of Trades: 1-2 Weeks
There is no reason to think that the AUDUSD will not continuing its move lower. The economy is fast approaching a recession. The dollar continues to grow stronger as the outlook for Asian and Europe economies decline. Oil prices have fallen below $118 a barrel and gold at a eight week low and falling. The next technical support level is 0.8775 with 0.8500, the Fibo levels of the 0.7674-0.9851 rally are the only barriers from the pair falling below 0.8000.My target is the 0.8511 the 1/22 low.
DailyFX
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
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The US dollar has had a dramatic impact on the wide currency market and the trading opportunities are clear. Not only are the DailyFX Analysts looking to the greenback-denominated AUDUSD and NZDUSD, but they are also looking to the disjointed commodity crosses for potential setups. See where DailyFX is looking below:
Chief Strategist - Antonio Sousa
My picks: Sell NZD/USD
Expertise: Fundamentals, Volatility and Sentiment.
Average Time Frame of Trades: 1 Day to 1 Year
I expect the New Zealand dollar to remain weak, on speculation the Reserve Bank of New Zealand could have to cut interest rates by 150 bps over the next 12 months. Indeed, with the world economy slowing down is reasonable to think that the demand for commodities will also begin to slow down. As a result of this, commodity currencies like AUD, NZD and CAD will be particularly vulnerable.
Senior Currency Strategist - Jaime Saettle
My picks: GBPNZD Short (limit entry at 2.7375, stop at 2.7750, target 1 at 2.685, target 2 at 2.6615)
Expertise: Technical
Average Time Frame of Trades: 1 month (this one is probably a few weeks)
The GBPNZD spiked through the top of a channel this morning and has come off significantly since. Expectations are for price to come back to the 2.68 area before continuing higher. Move to breakeven at 2.70. This is a short term countertrend trade. Sometimes, it is necessary to stand in front of a train
Currency Strategist - John Kicklighter
My picks: Short AUDCAD
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
The commodity crosses are an interesting group of currencies to trade today. Momentum presents good opportunities in the dollar crosses, but my risk/reward and money management rules would be difficult to parlay into such an aggressive move with few signs of good resistance and the potential for a reversal as the weekend encourages traders to square their books. However, there other trade setups across the majors - though everything seems to be effected by the distortion of the selling against the world's most liquid currency (the US dollar). In fact, this distortion may be offering a good trading opportunity in AUDCAD. The pair broke a major rising trend channel just last week, and the move has only hit a major hitch today with a massive retracement.
As the interest rate outlook between the two pairs still favors the downside and the major technicals are still in place, a retracement in the medium-term downtrend seems like a good jumping point. The high for today's bar is near a confluence of important fib levels. There is also a decent falling trend on the 240-minute time frame. This will allow a good entry on a trade with strong risk/reward and clear levels for stops. I am looking to enter near the highs of today's bar and put a stop loss above 0.9560. The most threatening market influence to turn this trade against me is any ongoing distortion with the dollar-based pairs. If the currency sustains its momentum, fundamentals and technicals in AUDCAD will be forfeit.
Currency Strategist - Terri Belkas
My picks: Short AUD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 - 3 Days
Given the weakness in carry trades and commodity currencies, I think short AUD/JPY is still a decent bet. While the pair is down approximately 600 pips from its July high, AUD/JPY is prone to 1200-1500 pip declines in a matter of weeks when risk aversion is high. Immediate support sits at the S2 monthly pivot point at 97.88, but I think we'll could see price drop closer to the 50% fib of 88.15 - 104.46 at 96.36 in the near-term.
Currency Analyst - Ilya Spivak
My picks: Short NZDUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
Having fallen substantiall in recent weeks along with broadly improving US dollar sentiment and the prospect of 200bp in RBNZ rate cuts, NZDUSD now finds itself squarely above support at the 76.4% Fibonacci retracement of the 08/17/07-02/27/08 rally at 0.7013. A close below this level opens the door to substantially more downside. Initial target is 0.6870, with a secondary target at 0.6638.
Currency Analyst - John Rivera
My picks: Short AUDUSD
Expertise: Comvining Fundamentals With Technicals
Average Time Frame of Trades: 1-2 Weeks
There is no reason to think that the AUDUSD will not continuing its move lower. The economy is fast approaching a recession. The dollar continues to grow stronger as the outlook for Asian and Europe economies decline. Oil prices have fallen below $118 a barrel and gold at a eight week low and falling. The next technical support level is 0.8775 with 0.8500, the Fibo levels of the 0.7674-0.9851 rally are the only barriers from the pair falling below 0.8000.My target is the 0.8511 the 1/22 low.
DailyFX
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
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Morning Market Recap: U.S. Equities Up, U.S. Dollar Rallying Against Majors
Market Updates | Written by CEP News | Aug 08 08 13:47 GMT |
(CEP News) - North American fixed income markets and equities are mixed with yields on U.S. 10-year Treasury notes down 0.9 bps to 3.91% and Canadian 10-year CGBs down 6.2 bps to 3.58%. The Dow Jones industrial average is up 22 points to 11453 and the S&P TSX Composite Index is down 79 points to 13306. The Canadian dollar is down 0.0119 cents to 0.9377 USD and the euro is down 0.0265 to 1.5059 USD.
U.S. two-year yields are up 0.7 bps to 2.43%, with five-year yields up 0.6 bps to 3.15%, and 30-year yields down 1.6 bps to 4.54%. The Eurodollar March 09 contract is down 0.5 ticks to 96.96. The yield curve is flatter, with the 10/2-year spread down 1.4 bps to 146.55 bps.
The Canadian 10-year note is yielding 32.76 bps less than the U.S. 10-year note.
Yields on two-year Canadian government bonds are down 13.7 bps to 2.63%, with five-year yields down 9.9 bps to 3.03% and 30-year yields down 2.6 bps to 4.05%. The December 08 BAX contract is up 14.0 ticks to 97.34.
In Germany, returns on two-year German bonds are down 3.6 bps to 4.05%, with five-year yields down 2.4 bps to 4.07%, 10-year yields down 1.6 bps to 4.25% and 30-year yields up 1.4 bps to 4.67%.
Yields on UK two-year bonds are up 1.6 bps to 4.65%, with five-year yields down 0.5 bps to 4.61%, 10-year yields down 0.9 bps to 4.68% and 30-year yields flat at 4.45%.
In U.S. equities, the S&P 500 is up 2 points to 1268 and the Nasdaq is up 11 points to 2367. European stock markets are lower, with the Eurostoxx down 15 points to 2897, the UK FTSE 100 down 45 points to 5433 and the German DAX down 67 points to 6476.
The Canadian dollar is down 0.83 to 103.10 against the yen. The U.S. dollar is up 0.49 to 109.93 against the yen and the Dollar Index is up 1.068 to 75.615.
The euro is down 0.0079 to 1.6057 against the Canadian dollar, down 0.0043 to 0.7840 against the pound sterling and is lower by 2.16 to 165.54 against the yen.
The pound sterling is down 0.0230 to 1.9210 against the U.S. dollar and up 0.0011 to 2.0483 against the Canadian dollar.
WTI crude oil is down $2.28 to $117.74. The front month gold contract at the Chicago Board of Trade is down $15.60 to $862.30 per ounce.
All data taken at 9:42 a.m. EDT.
Generated by CEP Newswires, edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) - North American fixed income markets and equities are mixed with yields on U.S. 10-year Treasury notes down 0.9 bps to 3.91% and Canadian 10-year CGBs down 6.2 bps to 3.58%. The Dow Jones industrial average is up 22 points to 11453 and the S&P TSX Composite Index is down 79 points to 13306. The Canadian dollar is down 0.0119 cents to 0.9377 USD and the euro is down 0.0265 to 1.5059 USD.
U.S. two-year yields are up 0.7 bps to 2.43%, with five-year yields up 0.6 bps to 3.15%, and 30-year yields down 1.6 bps to 4.54%. The Eurodollar March 09 contract is down 0.5 ticks to 96.96. The yield curve is flatter, with the 10/2-year spread down 1.4 bps to 146.55 bps.
The Canadian 10-year note is yielding 32.76 bps less than the U.S. 10-year note.
Yields on two-year Canadian government bonds are down 13.7 bps to 2.63%, with five-year yields down 9.9 bps to 3.03% and 30-year yields down 2.6 bps to 4.05%. The December 08 BAX contract is up 14.0 ticks to 97.34.
In Germany, returns on two-year German bonds are down 3.6 bps to 4.05%, with five-year yields down 2.4 bps to 4.07%, 10-year yields down 1.6 bps to 4.25% and 30-year yields up 1.4 bps to 4.67%.
Yields on UK two-year bonds are up 1.6 bps to 4.65%, with five-year yields down 0.5 bps to 4.61%, 10-year yields down 0.9 bps to 4.68% and 30-year yields flat at 4.45%.
In U.S. equities, the S&P 500 is up 2 points to 1268 and the Nasdaq is up 11 points to 2367. European stock markets are lower, with the Eurostoxx down 15 points to 2897, the UK FTSE 100 down 45 points to 5433 and the German DAX down 67 points to 6476.
The Canadian dollar is down 0.83 to 103.10 against the yen. The U.S. dollar is up 0.49 to 109.93 against the yen and the Dollar Index is up 1.068 to 75.615.
The euro is down 0.0079 to 1.6057 against the Canadian dollar, down 0.0043 to 0.7840 against the pound sterling and is lower by 2.16 to 165.54 against the yen.
The pound sterling is down 0.0230 to 1.9210 against the U.S. dollar and up 0.0011 to 2.0483 against the Canadian dollar.
WTI crude oil is down $2.28 to $117.74. The front month gold contract at the Chicago Board of Trade is down $15.60 to $862.30 per ounce.
All data taken at 9:42 a.m. EDT.
Generated by CEP Newswires, edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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Canadian Employment Falls As Manufacturers Cut Payrolls
Daily Forex Fundamentals | Written by DailyFX | Aug 08 08 11:36 GMT |
The Canadian economy unexpectedly gave back jobs for a second month as manufacturers reduced payrolls as they battle declining demand for exports. The 55,200 drop in employment was the largest in over six years and followed a 5,000 loss in June. Cuts were made across manufacturing and service industries which lost 32,300 and 37,300 jobs respectively. Employers dropped 48,100 part time workers, which reversed the recent trend of replacing longer term hires with them. Despite the historic job loss, the unemployment rate actually fell to 6.1% from 6.2% after 74,100 Canadians left the work force. Despite the weakening labor market the BoC is expected to keep rates un hold for the near term as inflationary pressure have caught up with the commodity driven economy.
DailyFX
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
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The Canadian economy unexpectedly gave back jobs for a second month as manufacturers reduced payrolls as they battle declining demand for exports. The 55,200 drop in employment was the largest in over six years and followed a 5,000 loss in June. Cuts were made across manufacturing and service industries which lost 32,300 and 37,300 jobs respectively. Employers dropped 48,100 part time workers, which reversed the recent trend of replacing longer term hires with them. Despite the historic job loss, the unemployment rate actually fell to 6.1% from 6.2% after 74,100 Canadians left the work force. Despite the weakening labor market the BoC is expected to keep rates un hold for the near term as inflationary pressure have caught up with the commodity driven economy.
DailyFX
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
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Overnight News Recap: Italian GDP Weakens; USD Surges Against Majors
| News Recap | Written by CEP News | Aug 08 08 10:26 GMT | | |
| (CEP News) - A weaker-than-expected GDP report from Italy, the European Central Bank's credit lending survey and comments from Dutch Central Banker Nout Wellink were the highlights of the European in the absence of no major macroeconomic data from the UK. Meanwhile, the USD is much strong against majors with crude oil taking another plunge on Friday morning. The Italian economy saw no growth in the second quarter of 2008 year-over-year, despite expectations of a 0.3% rise, according to preliminary estimates from the National Institute of Statistics (ISTAT). Q1 had seen a growth rate of 0.3%. In quarterly terms, the economy contracted by 0.3% following Q1's 0.5% gain. Economists, however, had expected a flat reading for the period. The European Central Bank released the results of its July bank lending survey and noted a lower net tightening of credit standards for loans to enterprises in the second quarter compared to the first. The survey also noted that the most important factor regarding the tightening of credit continued to be the growing pessimism regarding the economic outlook. The respondents of the ECB survey also reported that net tightening of household loans for house purchases was also diminishing. However, it was noted that the standards for consumer credit and household borrowing for other purposes was tightening further. In an interview with Dutch broadcast channel RTL Z on Friday, European Central Bank Governing Council member Nout Wellink noted that food and energy prices were rising sharply and stressed that the ECB is very concerned about accelerating inflation in Europe. He also conceded that the council broadly agreed to leave the main refinancing rate unchanged at 4.25% during its meeting on August 7. In the aftermath of what many called a dovish press conference from European Central Bank President Jean-Claude Trichet on Thursday, the euro has lost nearly two cents on the session, trading a low as 1.5113 USD. Meanwhile, the Canadian dollar is also weaker against the USD at 0.9448, just ahead of the employment report, and crude oil is down over two dollars, trading at just above $118 per barrel. According to the Central Statistics Office (CSO), Irish industrial output rose 6.2% year-over-year in June following the 9.7% gain in May, which was revised up from +9.3%. On a monthly basis, output slipped 5.3%, down notably from the 13.8% jump seen in the previous period. May's increase had been revised up from an initial figure of +13.3%. A report released by the State Secretariat for Economic Affairs on Friday indicates the Swiss unemployment rate remained unchanged at 2.3% in July as expected. In numerical terms, 92,163 individuals who consider Switzerland to be their primary place of residence are currently actively searching for work, up slightly from June's 91,477 figure. In seasonally adjusted terms, the unemployment rate came in at 2.5%, reflecting 99,819 persons actively looking for employment, also unchanged from the previous month's rate and in line with the consensus. The French Ministry of Economy, Finance and Industry reported that the central government deficit contracted to €32.8 billion in June from May's €50.1 billion level. Disaggregating the data, the general budget balance showed a deficit of €17.3 billion in the year-to-date for June, reflected in expenditures coming in at €138.13 billion and revenues at €120.5 billion. According to data released by National Board of Customs, the Finnish trade balance rose to a surplus of €720 million in June, up from the €365 million recorded in the previous month. Disaggregating the data, the customs board noted that Finland's trade surplus within the euro zone increased substantially to €160 million in the month from May's €5 million level, while trade outside the monetary union rose to €275 million from €135 million in May. On Friday, the Statistical Office of the Slovak Republic reported that industrial production rose 6.2% in June 2008 compared to the same month one year ago, up from May's 3.3% annualized rate, but down from the 7.3% gain expected. Meanwhile, May's figure was revised down from an initial reading of 4.0%. According to the Statistical Office of the Republic of Slovenia (SORS), industrial production in the country rose 1.9% on a yearly basis in June, up from May's 1.2% growth rate. In monthly terms, industrial output rebounded and grew 2.5%, overshadowing the 1.5% decline seen in May. The Statistical Office of the Republic of Slovenia (SORS) reported that the external trade deficit contracted to €234 million in June from the previous month's €323 million level. Meanwhile, May's reading was revised up from an initial deficit figure of €307 million. On Friday, Statistics Netherlands reported that Dutch industrial output rose 1.2% in June on an annualized basis, unchanged from the previous month's growth rate. Meanwhile, May's increase was revised up from an initial reading of +0.6%. On a monthly basis, industrial production in the Netherlands rebounded strongly and rose 0.8% in June following May's 0.5% fall, which was revised up from -0.7%. In Australian dollar terms, the country's foreign reserve holdings increased to A$37.4 billion in July versus the A$35.9 billion reported in June, according to a report from the Reserve Bank of Australia on Friday. According to a report from the Bank of Japan on Friday, new loans made to individuals for the purchase of a home declined 21.9% quarter-over-quarter in Q2 compared to a 29.3% increase previously, while annualized loans advanced 8.5% compared to the previous quarter's 1.6% contraction. Meanwhile, outstanding loans for housing expanded 3.9% on the year. The Bank of Japan also reported an annual increase of 1.8% of bank lending including trusts for July, short of expectations for a 2.0% increase and June's 1.8% rise. Excluding trusts, lending advanced 2.0% on the year, matching the previous month's gain, and adjusted bank lending rose 2.5%, in line with forecasts and above the previous month's 2.4% gain. According to Tokyo Shoko Research, the number of bankruptcy cases in July rose an annual 12.9% in July compared to the 11.7% reading reported in June. The Japanese Eco-Watchers current conditions index for Japan declined to 29.3 in July, above expectations for a 28.9. In June, the index was 29.5. Meanwhile, the outlook fell to 30.8 compared to June's 32.1 level. JP Loans Individual Hfund (Y/Y) Q2 +3.9% vs. Revised: +3.6% Prior: +3.7% JP Japan Money Stock M3 (Y/Y) July +0.8% vs. Exp: +1.0% Prior: +0.9% JP Japan Money Stock M2 (Y/Y) July +2.1% vs. Exp: +2.4% Revised: +2.2% Prior: +2.3% JP Bank Lending including Trusts(Y/Y) July +1.8% vs. Exp: +2.0% Prior: +1.8% JP Bank Lending Banks ex-Trust (Y/Y) +2.0% vs. Prior: +2.0% JP Bank Lending Banks Adjust (Y/Y) July +2.5% vs. Exp:+2.5% Prior: +2.4% JP Bankruptcies (Y/Y) July +12.9% vs. Prior: +11.7% JP Eco Watchers Survey: Current July 29.3 vs. Exp: 28.9 Prior: 29.5 JP Eco Watchers Survey: Outlook July 30.8 vs. Prior: 32.1 AU Foreign Reserves July A$37.4B vs. Prior: A$35.9B FR Central Govt. Balance June Prior: -€50.1B IT GDP (Q/Q) (SA WDA) Q2 Preliminary Exp: 0.0% Prior: +0.5% IT GDP (Y/Y) (SA WDA) Q2 Preliminary Exp: +0.3% Prior: +0.3% By Erik Kevin Franco, efranco@economicnews.ca and By Todd Wailoo, twailoo@economicnews.ca, edited by Nancy Girgis, ngirgis@economicnews.ca CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer. | |
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Egypt Raises Key Rate for Fifth Time to 11 Percent
By Mahmoud Kassem
Aug. 8 (Bloomberg) -- Egypt's central bank increased its benchmark interest rate for a fifth time this year and warned it will ``not hesitate'' to raise it again to combat the highest inflation rate in the Middle East.
Policy makers increased the benchmark overnight deposit rate by half a percentage point to 11 percent and the overnight lending rate by the same amount to 13 percent, the central bank said in a statement on its Web site today. The Cairo-based bank has raised the deposit rate by a total of 2.25 points this year.
``Inflation expectations are still high,'' said Simon Kitchen, an economist at Cairo-based EFG-Hermes Holding SAE, the biggest publicly traded investment bank in the Arab world. ``There are still inflationary risks that warrant raising rates.''
Emerging markets, including Turkey, Brazil, South Africa and India, have increased interest rates in past months to fight inflation fueled by rising global oil and food costs. Egypt's inflation rate rose to 20.2 percent in June, the highest since the government began regularly releasing records to the public in 1998.
``The monetary policy committee remains concerned about possible propagation of food inflation to non-food inflation,'' Rania Al-Mashat, division chief of the monetary policy unit, said in the statement. ``The monetary policy committee will not hesitate to adjust the key central bank rates to ensure price stability over the medium term.''
Wheat Imports
Egypt is the world's largest wheat importer. The country bought 7 million tons of wheat from abroad, half of its annual consumption, in the year ending June 30, according to U.S. and Egyptian government statistics.
Accelerating inflation has promoted the government to cut customs duties on imported poultry, ban exports of cement and rice, increase food subsidies and authorize 18 million additional people to receive subsidized food. Public discontent and protests against rising wages led the government to increase the wage of state workers by 30 percent in May.
The economy in Egypt, the Arab world's most populous nation, will probably expand 7.1 percent in 2009 compared with 7 percent in 2008, the International Monetary Fund said in its latest report on its Web site.
To contact the reporter on this story: Mahmoud Kassem in Cairo at mkassem1@bloomberg.net.
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Aug. 8 (Bloomberg) -- Egypt's central bank increased its benchmark interest rate for a fifth time this year and warned it will ``not hesitate'' to raise it again to combat the highest inflation rate in the Middle East.
Policy makers increased the benchmark overnight deposit rate by half a percentage point to 11 percent and the overnight lending rate by the same amount to 13 percent, the central bank said in a statement on its Web site today. The Cairo-based bank has raised the deposit rate by a total of 2.25 points this year.
``Inflation expectations are still high,'' said Simon Kitchen, an economist at Cairo-based EFG-Hermes Holding SAE, the biggest publicly traded investment bank in the Arab world. ``There are still inflationary risks that warrant raising rates.''
Emerging markets, including Turkey, Brazil, South Africa and India, have increased interest rates in past months to fight inflation fueled by rising global oil and food costs. Egypt's inflation rate rose to 20.2 percent in June, the highest since the government began regularly releasing records to the public in 1998.
``The monetary policy committee remains concerned about possible propagation of food inflation to non-food inflation,'' Rania Al-Mashat, division chief of the monetary policy unit, said in the statement. ``The monetary policy committee will not hesitate to adjust the key central bank rates to ensure price stability over the medium term.''
Wheat Imports
Egypt is the world's largest wheat importer. The country bought 7 million tons of wheat from abroad, half of its annual consumption, in the year ending June 30, according to U.S. and Egyptian government statistics.
Accelerating inflation has promoted the government to cut customs duties on imported poultry, ban exports of cement and rice, increase food subsidies and authorize 18 million additional people to receive subsidized food. Public discontent and protests against rising wages led the government to increase the wage of state workers by 30 percent in May.
The economy in Egypt, the Arab world's most populous nation, will probably expand 7.1 percent in 2009 compared with 7 percent in 2008, the International Monetary Fund said in its latest report on its Web site.
To contact the reporter on this story: Mahmoud Kassem in Cairo at mkassem1@bloomberg.net.
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Money Market `Plagued' by Libor That Fed Can't Reduce
By Gavin Finch
Aug. 8 (Bloomberg) -- A year after central banks started to pump trillions of dollars into the financial system to end a seizure in credit markets caused by subprime mortgages, cash is about as tight as it's ever been.
The U.S. market for commercial paper, or short-term IOUs, backed by assets such as mortgages has shrunk 40 percent from its peak in July 2007. The amount borrowed in pounds between banks in the U.K. fell by 70 percent in June from a record in February 2007. The European Central Bank received $100 billion of bids for the $25 billion it offered to financial institutions on July 29, the most since the sales began in December.
Efforts by the Federal Reserve, ECB and Swiss National Bank to shore up the world's biggest banks and promote lending have had limited success. The London interbank offered rate, the basis for at least $150 trillion of financial products, is within 0.06 percent of the highest since November 1999 compared with the Fed's benchmark interest rate. The largest financial companies have lost almost $500 billion from subprime-linked securities.
``The key issue that has plagued money markets is the continued high level of borrowing rates,'' said George Goncalves, chief Treasury and agency debt strategist in New York at Morgan Stanley, the second-biggest U.S. securities firm. ``This time last year no one could have imagined the levels they are at now. We've seen a fundamental re-assessment of risk in this new world of tighter credit.''
`Significant' Premiums
The premiums banks charge each other for three-month cash relative to the overnight indexed swap rate, an indirect measure of the availability of funds in the money market, rose to 74 basis points as of 12:10 p.m. today in Tokyo from 10 basis points on July 31, 2007, before the credit crunch began. A basis point is 0.01 percentage point.
``Money markets are quite clearly still in a pretty bad way and that's not going to change in the foreseeable future,'' said Jan Misch, a money-market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany's biggest state-owned bank. ``Banks are having to pay significant premiums to borrow cash.''
Credit markets seized up a year ago as banks suddenly became wary of lending to each other because BNP Paribas SA halted withdrawals from three investment funds on Aug. 9 after the French bank couldn't value their holdings of securities linked to U.S. subprime mortgages. That same day the ECB made the unprecedented move of offering unlimited cash as losses spread.
Collateralized Debt Obligations
Securities firms are only now realizing how little the securities are worth. Last week, New York-based Merrill Lynch & Co. said it sold collateralized debt obligations with a face value of $30.6 billion for 22 cents on the dollar.
CDOs are securities that package pools of bonds and loans and divide their cash flow into notes of varying risk and returns.
Three-month dollar Libor soared to 2.40 percentage points above yields on Treasury bills on Aug. 20, the widest margin since December 1987. While the so-called TED spread, which measures the difference between the rate banks pay to borrow and the U.S. government's costs, declined to 1.13 percentage points, it averaged 0.5 percentage point over the previous five years.
The world's biggest banks and brokerages have reported $497 billion of writedowns since the start of 2007, according to data compiled by Bloomberg. Losses may rise to $1 trillion, Bill Gross, who manages the world's biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said last month.
Commercial Paper
Commercial paper, typically due in nine months or less, has tumbled, especially for debt backed by assets such as mortgages and car loans. The U.S. asset-backed commercial paper market shrank to a seasonally adjusted $729.7 billion in the week ended Aug. 6, from a high of $1.22 trillion on Aug. 8, 2007, according to the Fed.
Credit markets have remained under stress even after the Fed cut its target rate seven times between September and April, to 2 percent from 5.25 percent, and cycled $2.58 trillion through U.S. money markets since December, Bloomberg data show.
In response to the turmoil, the Fed said July 30 it would give securities dealers access to its existing loan facilities. It also will start offering 84-day loans to commercial banks beginning next month under the Term Auction Facility, known as TAF, in addition to 28-day loans.
An arrangement with the Fed that allowed the ECB to offer dollar-denominated funding to the region's banks was boosted to $55 billion from $50 billion.
``The money markets have ceased to function as they should, as nothing has been resolved with regards to the lack of trust between banks,'' said Marius Daheim, a senior bond strategist in Munich at Bayerische Landesbank, Germany's second-biggest state- owned bank. ``This is why you're seeing such demand for central bank money 12 months on from the start of the crunch. These measures were only supposed to be temporary, and they're looking increasingly permanent.''
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
Read more...
Aug. 8 (Bloomberg) -- A year after central banks started to pump trillions of dollars into the financial system to end a seizure in credit markets caused by subprime mortgages, cash is about as tight as it's ever been.
The U.S. market for commercial paper, or short-term IOUs, backed by assets such as mortgages has shrunk 40 percent from its peak in July 2007. The amount borrowed in pounds between banks in the U.K. fell by 70 percent in June from a record in February 2007. The European Central Bank received $100 billion of bids for the $25 billion it offered to financial institutions on July 29, the most since the sales began in December.
Efforts by the Federal Reserve, ECB and Swiss National Bank to shore up the world's biggest banks and promote lending have had limited success. The London interbank offered rate, the basis for at least $150 trillion of financial products, is within 0.06 percent of the highest since November 1999 compared with the Fed's benchmark interest rate. The largest financial companies have lost almost $500 billion from subprime-linked securities.
``The key issue that has plagued money markets is the continued high level of borrowing rates,'' said George Goncalves, chief Treasury and agency debt strategist in New York at Morgan Stanley, the second-biggest U.S. securities firm. ``This time last year no one could have imagined the levels they are at now. We've seen a fundamental re-assessment of risk in this new world of tighter credit.''
`Significant' Premiums
The premiums banks charge each other for three-month cash relative to the overnight indexed swap rate, an indirect measure of the availability of funds in the money market, rose to 74 basis points as of 12:10 p.m. today in Tokyo from 10 basis points on July 31, 2007, before the credit crunch began. A basis point is 0.01 percentage point.
``Money markets are quite clearly still in a pretty bad way and that's not going to change in the foreseeable future,'' said Jan Misch, a money-market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany's biggest state-owned bank. ``Banks are having to pay significant premiums to borrow cash.''
Credit markets seized up a year ago as banks suddenly became wary of lending to each other because BNP Paribas SA halted withdrawals from three investment funds on Aug. 9 after the French bank couldn't value their holdings of securities linked to U.S. subprime mortgages. That same day the ECB made the unprecedented move of offering unlimited cash as losses spread.
Collateralized Debt Obligations
Securities firms are only now realizing how little the securities are worth. Last week, New York-based Merrill Lynch & Co. said it sold collateralized debt obligations with a face value of $30.6 billion for 22 cents on the dollar.
CDOs are securities that package pools of bonds and loans and divide their cash flow into notes of varying risk and returns.
Three-month dollar Libor soared to 2.40 percentage points above yields on Treasury bills on Aug. 20, the widest margin since December 1987. While the so-called TED spread, which measures the difference between the rate banks pay to borrow and the U.S. government's costs, declined to 1.13 percentage points, it averaged 0.5 percentage point over the previous five years.
The world's biggest banks and brokerages have reported $497 billion of writedowns since the start of 2007, according to data compiled by Bloomberg. Losses may rise to $1 trillion, Bill Gross, who manages the world's biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said last month.
Commercial Paper
Commercial paper, typically due in nine months or less, has tumbled, especially for debt backed by assets such as mortgages and car loans. The U.S. asset-backed commercial paper market shrank to a seasonally adjusted $729.7 billion in the week ended Aug. 6, from a high of $1.22 trillion on Aug. 8, 2007, according to the Fed.
Credit markets have remained under stress even after the Fed cut its target rate seven times between September and April, to 2 percent from 5.25 percent, and cycled $2.58 trillion through U.S. money markets since December, Bloomberg data show.
In response to the turmoil, the Fed said July 30 it would give securities dealers access to its existing loan facilities. It also will start offering 84-day loans to commercial banks beginning next month under the Term Auction Facility, known as TAF, in addition to 28-day loans.
An arrangement with the Fed that allowed the ECB to offer dollar-denominated funding to the region's banks was boosted to $55 billion from $50 billion.
``The money markets have ceased to function as they should, as nothing has been resolved with regards to the lack of trust between banks,'' said Marius Daheim, a senior bond strategist in Munich at Bayerische Landesbank, Germany's second-biggest state- owned bank. ``This is why you're seeing such demand for central bank money 12 months on from the start of the crunch. These measures were only supposed to be temporary, and they're looking increasingly permanent.''
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
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Philippines to Reduce Foreign Borrowing Next Year
By Francisco Alcuaz Jr.
Aug. 8 (Bloomberg) -- The Philippine government plans to reduce overseas borrowing next year as it relies more on domestic funds to finance its budget deficit.
The government will raise 117 billion pesos ($2.6 billion) in foreign-denominated debt compared with 126.6 billion pesos this year, according to a Department of Finance document obtained by Bloomberg News. Local borrowing will increase 2.5 percent to 319.5 billion pesos.
The U.S. subprime crisis that caused global credit markets to seize up a year ago has made it harder for Asian companies and governments to raise funds overseas. Philippine money supply rose to a record 3.13 trillion pesos in December after remittances from overseas workers increased and the government reduced its deficit, lowering demand for funds.
``It's awfully liquid, that's why a lot of companies are issuing bonds,'' said Jojo Gonzales, an economist at Philippine Equity Partners Inc. in Manila. ``Both corporates and the government are taking advantage of domestic liquidity.''
Ten-year bonds fell today, ending five days of gains. The yield on the 5.875 percent note due January 2018 rose 11 basis points to 8.5 percent at Philippine Dealing & Exchange Corp. A basis point is 0.01 percentage point.
The government sold $500 million of foreign bonds in January. In May, Finance Secretary Gary Teves said the Philippines may raise $750 million more of such debt this year, as President Gloria Arroyo abandoned her plan to balance the budget in 2008.
Rice Subsidies
Arroyo, who is boosting spending this year on rice subsidies and payouts to the poor to help Filipinos cope with soaring food and energy prices, plans to narrow the budget deficit to 40 billion pesos in 2009 from as much as 75 billion pesos this year before balancing the budget in 2010.
As much as 67.5 billion pesos of next year's foreign borrowing will be in bonds, more than the 54 billion pesos budgeted for this year, according to the Department of Finance document. The rest of the overseas debt will be loans, which will decline.
The document is dated July 18, before the government sold 70 billion pesos of bonds aimed at retail investors.
Bond sales in dollars, euros and yen by Asian borrowers outside Japan plunged 60 percent in the first six months of the year as accelerating inflation and slowing economic growth doused credit demand.
To contact the reporter on this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net
Read more...
Aug. 8 (Bloomberg) -- The Philippine government plans to reduce overseas borrowing next year as it relies more on domestic funds to finance its budget deficit.
The government will raise 117 billion pesos ($2.6 billion) in foreign-denominated debt compared with 126.6 billion pesos this year, according to a Department of Finance document obtained by Bloomberg News. Local borrowing will increase 2.5 percent to 319.5 billion pesos.
The U.S. subprime crisis that caused global credit markets to seize up a year ago has made it harder for Asian companies and governments to raise funds overseas. Philippine money supply rose to a record 3.13 trillion pesos in December after remittances from overseas workers increased and the government reduced its deficit, lowering demand for funds.
``It's awfully liquid, that's why a lot of companies are issuing bonds,'' said Jojo Gonzales, an economist at Philippine Equity Partners Inc. in Manila. ``Both corporates and the government are taking advantage of domestic liquidity.''
Ten-year bonds fell today, ending five days of gains. The yield on the 5.875 percent note due January 2018 rose 11 basis points to 8.5 percent at Philippine Dealing & Exchange Corp. A basis point is 0.01 percentage point.
The government sold $500 million of foreign bonds in January. In May, Finance Secretary Gary Teves said the Philippines may raise $750 million more of such debt this year, as President Gloria Arroyo abandoned her plan to balance the budget in 2008.
Rice Subsidies
Arroyo, who is boosting spending this year on rice subsidies and payouts to the poor to help Filipinos cope with soaring food and energy prices, plans to narrow the budget deficit to 40 billion pesos in 2009 from as much as 75 billion pesos this year before balancing the budget in 2010.
As much as 67.5 billion pesos of next year's foreign borrowing will be in bonds, more than the 54 billion pesos budgeted for this year, according to the Department of Finance document. The rest of the overseas debt will be loans, which will decline.
The document is dated July 18, before the government sold 70 billion pesos of bonds aimed at retail investors.
Bond sales in dollars, euros and yen by Asian borrowers outside Japan plunged 60 percent in the first six months of the year as accelerating inflation and slowing economic growth doused credit demand.
To contact the reporter on this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net
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Italy's Economy Unexpectedly Shrinks; Nears Recession
By Flavia Krause-Jackson
Aug. 8 (Bloomberg) -- Italy's economy unexpectedly shrank in the second quarter, edging it closer to the fourth recession in a decade as households and businesses struggle to cope with more expensive oil.
The economy, the fourth largest in Europe, contracted 0.3 percent after expanding 0.5 percent in the first quarter, the Rome-based statistics office Istat said today. Economists expected stagnation, according to the median of 22 forecasts in a Bloomberg News survey. From the same period a year earlier, the economy didn't grow at all.
European Central Bank President Jean-Claude Trichet yesterday said economic growth will be ``particularly weak'' through the third quarter after policy makers left borrowing costs at 4.25 percent. As the first of the three biggest economies in the euro region to report second-quarter growth, Italy acts as a bellwether for the effect record oil prices are having on the region.
``It's hard to imagine Italy doing better in the coming quarters,'' David Mackie, an economist at JPMorgan Chase & Co in London, said in a note. ``It is difficult to escape the conclusion that Italy will experience a recession.''
Confidence Slump
Consumer confidence slumped to the lowest since 1993 as rising energy prices drove the inflation rate to the highest level in six years and borrowing costs rose. Manufacturing also stalled.
The price of crude, down by a fifth from a July record of $147.27 a barrel, is 65 percent more expensive than a year ago.
``The outlook for the euro zone isn't good at all,'' Neil Mackinnon, chief economist at ECU Group Plc in London, said on Bloomberg Television. ``Higher interest rates aren't on the agenda, and I think the next ECB move is down. A recession is looming.''
Gross domestic product in Germany, the region's biggest economy, declined 0.8 percent in the second quarter, according to the median forecast of 11 economists surveyed by Bloomberg. That would be the country's first contraction in four years. The GDP report is due Aug. 14.
Italy's economy will expand a mere 0.4 percent this year, the slowest pace since 2003, the Bank of Italy and the Isae research institute said last month.
Lucky Escape?
Some economists, such as Morgan Stanley's Vladimir Pillonca, predicted the country would enter a recession as soon as the first quarter after a contraction in the final three months of 2007. That didn't happen, though predictions are still gloomy.
The government and the European Commission forecast growth of 0.5 percent, which would make Italy the laggard among the Group of Seven leading industrial countries and the 15 nations sharing the euro. Italy's expansion has already trailed the European Union average for more than a decade.
``The outlook for the Italian economy has deteriorated at an alarming pace,'' Jonathan Loynes, an analyst at London-based Capital Economics, said in a research note. ``Unless Italy can quickly implement much-needed economic reforms it may start to lose ground to the rest of the euro zone.''
To stimulate growth, Prime Minister Silvio Berlusconi has pledged unpopular measures such as reducing the state bureaucracy and raising the average pension age from 58.
Italian industrial production stagnated in June as oil prices were edging toward an all-time high. Indesit Co., a maker of washing machines, said on July 30 that 2008 earnings will be lower than last year's and Fiat SpA, the country's biggest automaker, idled four car factories last month in the face of slowing demand.
On the consumer side, Italians are cutting back on spending on everything from new cars to clothes. New auto sales fell for a seventh month in July. Italian retail sales declined for the 17th month in July, the Bloomberg purchasing managers index showed.
Italy has slipped to 46th in the World Economic Forum's 2007- 2008 competitiveness ranking, trailing Latvia and Bahrain. The country came last in terms of labor productivity -- a key measure of economic growth and competitiveness -- among the 30-member Organization for Economic Cooperation and Development.
The Italian statistics office didn't provide a breakdown of the GDP figure. Istat will release its final report on Sept. 10.
To contact the reporter on this story: Flavia Krause-Jackson in Rome at fjackson@bloomberg.net
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Czech July Inflation Quickens to 6.9% on Gas, Tobacco
By Marketa Fiserova
Aug. 8 (Bloomberg) -- Czech inflation accelerated in July for the first time in six months on higher prices for natural gas, cigarettes and vacation packages.
The annual rate climbed to 6.9 percent from June's 6.7 percent, the Prague-based statistics office said on its Web site today. The figure was in line with the median estimate of 13 economists surveyed by Bloomberg. Consumer prices rose a monthly 0.5 percent, compared with 0.2 percent in June and a 0.6 percent median forecast.
The central bank yesterday cut the benchmark interest rate, the lowest in the European Union, for the first time in three years even though inflation has been above the central bank's 3 percent target since October. Policy makers are counting on the koruna's 16 percent annual jump against the euro, sluggish economic growth and the waning effect of higher taxes and commodity costs to return inflation to its goal in early 2009.
``While the inflation rate moved up after months of decline, nothing suggests this should be a new trend,'' said Patrik Rozumbersky, an economist at UniCredit Bank Czech Republic AS. ``For the coming months, we expect stability or a slight drop in the inflation rate, which will be followed by a steeper decline at the end of this year and in early 2009.''
Market Reaction
The koruna fell to 24.343 as of 10:08 a.m. in Prague, from 24.198 late yesterday, extending its declines from the past two weeks following the central bank's rate-cut warning. The ask yield on the government bond due 2018 fell 1 basis point to a one-year low of 4.462 percent. A basis point is 0.01 of a percentage point.
Monthly price growth was led by administered price increases or seasonal effects. Household natural gas prices were raised 9.7 percent as of July 1, while cigarette prices rose 2.1 percent as producers began to run out of stocks built up before the excise tax on tobacco was raised in January. Vacation packages were 13.1 percent more expensive in the month, when the travel season peaks.
The price of motor fuels fell 0.6 percent in the month, the first drop after four months of increases, the office said, reflecting a drop of global oil prices. New York crude futures have fallen 19 percent from a record $147.27 a barrel on July 11 as an economic slowdown made motorists drive less.
Food costs were on average 0.4 percent cheaper from June while being 10.4 percent more expensive in the year.
Inflation Forecast
The central bank expects inflation at 6.3 percent in the July-September period before it slides to 3 percent in the first quarter of next year and to 2 percent in the last three months of 2009.
The forecast has created room for additional rate reductions for the rest of this year, along with economic growth projected to slow to 4.1 percent in 2008 and to 3.6 percent a year later, compared with 6.6 percent expansion rate last year, according to the central bank's new forecast released yesterday.
That outlook was supported by today's report showing an unexpected slowdown in June industrial production growth to 2.2 percent, and a ump in the unemployment rate to four-month high of 5.3 percent.
``We will not see inflation falling to below 3 percent as fast as projected earlier,'' central bank Governor Zdenek Tuma said yesterday when presenting a new inflation forecast. ``Once the one-time changes fade away, we should get back toward our goal very fast'' though.
For related news: Czech central bank news: NSE CZECH CEN Czech inflation news: CZCPYOY CN Top economic news: TOP ECO
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Aug. 8 (Bloomberg) -- Czech inflation accelerated in July for the first time in six months on higher prices for natural gas, cigarettes and vacation packages.
The annual rate climbed to 6.9 percent from June's 6.7 percent, the Prague-based statistics office said on its Web site today. The figure was in line with the median estimate of 13 economists surveyed by Bloomberg. Consumer prices rose a monthly 0.5 percent, compared with 0.2 percent in June and a 0.6 percent median forecast.
The central bank yesterday cut the benchmark interest rate, the lowest in the European Union, for the first time in three years even though inflation has been above the central bank's 3 percent target since October. Policy makers are counting on the koruna's 16 percent annual jump against the euro, sluggish economic growth and the waning effect of higher taxes and commodity costs to return inflation to its goal in early 2009.
``While the inflation rate moved up after months of decline, nothing suggests this should be a new trend,'' said Patrik Rozumbersky, an economist at UniCredit Bank Czech Republic AS. ``For the coming months, we expect stability or a slight drop in the inflation rate, which will be followed by a steeper decline at the end of this year and in early 2009.''
Market Reaction
The koruna fell to 24.343 as of 10:08 a.m. in Prague, from 24.198 late yesterday, extending its declines from the past two weeks following the central bank's rate-cut warning. The ask yield on the government bond due 2018 fell 1 basis point to a one-year low of 4.462 percent. A basis point is 0.01 of a percentage point.
Monthly price growth was led by administered price increases or seasonal effects. Household natural gas prices were raised 9.7 percent as of July 1, while cigarette prices rose 2.1 percent as producers began to run out of stocks built up before the excise tax on tobacco was raised in January. Vacation packages were 13.1 percent more expensive in the month, when the travel season peaks.
The price of motor fuels fell 0.6 percent in the month, the first drop after four months of increases, the office said, reflecting a drop of global oil prices. New York crude futures have fallen 19 percent from a record $147.27 a barrel on July 11 as an economic slowdown made motorists drive less.
Food costs were on average 0.4 percent cheaper from June while being 10.4 percent more expensive in the year.
Inflation Forecast
The central bank expects inflation at 6.3 percent in the July-September period before it slides to 3 percent in the first quarter of next year and to 2 percent in the last three months of 2009.
The forecast has created room for additional rate reductions for the rest of this year, along with economic growth projected to slow to 4.1 percent in 2008 and to 3.6 percent a year later, compared with 6.6 percent expansion rate last year, according to the central bank's new forecast released yesterday.
That outlook was supported by today's report showing an unexpected slowdown in June industrial production growth to 2.2 percent, and a ump in the unemployment rate to four-month high of 5.3 percent.
``We will not see inflation falling to below 3 percent as fast as projected earlier,'' central bank Governor Zdenek Tuma said yesterday when presenting a new inflation forecast. ``Once the one-time changes fade away, we should get back toward our goal very fast'' though.
For related news: Czech central bank news: NSE CZECH CEN
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China Trade Surplus Likely to Narrow for Fourth Month
By Nipa Piboontanasawat
Aug. 8 (Bloomberg) -- China's trade surplus probably fell for a fourth straight month, increasing the likelihood of more government measures to sustain the economy's expansion rather than stamp out inflation.
The gap narrowed 17 percent to $20.25 billion in July from a year earlier, according to the median estimate of 16 economists surveyed by Bloomberg News.
China has loosened bank lending quotas, raised tax rebates for some exports and halted gains by the yuan to help manufacturers and small businesses as the world's fastest- growing major economy shifts down a gear. President Hu Jintao, hosting the Olympic Games from tonight, said Aug. 1 that the country needs to maintain ``steady and fast'' growth.
``The government has little choice but to loosen policies to protect company profits and employment,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``China will probably keep slowing the pace of currency appreciation in the second half and announce more measures to help businesses.''
Inflation may have cooled to the slowest pace in seven months in July, allowing policy makers to put a bigger emphasis on stimulating the economy.
Consumer prices rose 6.5 percent, less than the 7.1 percent increase in June, according to the median estimate of 17 economists. The government is due to release the trade and inflation figures next week.
Export Growth May Slow
Exports may have climbed 16.8 percent in July from a year earlier, the least in five months, as the U.S. housing recession and global credit squeeze crimped demand.
Imports gained 27.2 percent, the Bloomberg News survey showed, down from 31 percent in June.
Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong, said yesterday that a plunge in the growth of Taiwan's shipments to China may signal a looming Asian export slowdown. Shipments from the island to the mainland rose 4 percent in July after a 25.5 percent increase in June.
China's economy slowed for a fourth straight quarter in the three months to June 30, expanding 10.1 percent. GDP growth below 9 percent would be ``unacceptable'' for a government targeting 10 million new jobs a year, according to a Credit Suisse Group report this month.
Statements last month by the central bank and the Politburo, the Communist Party's top decision making body, suggested a shift toward growth rather than taming inflation that climbed to a 12-year high of 8.7 percent in February. Neither used the previous language of a ``tight'' monetary policy.
`Tilting Toward Growth'
``As the Chinese economy moderates, official priorities are tilting towards maintaining growth and employment,'' said Jing Ulrich, JPMorgan's chairwoman of China equities. China will use fiscal policies to support exporters and smaller companies during the rest of the year, she said.
A government research report published today was more optimistic.
GDP growth may accelerate in the third quarter to 10.2 percent as industrial production quickens and Sichuan province rebuilds after the May 12 earthquake, the State Information Center said.
The yuan's gains against the dollar slowed from 4.2 percent in the first quarter to 2.3 percent in the three months through June. The currency has fallen 0.1 percent this quarter and was headed today for its third weekly loss, trading at 6.8622 against the dollar as of 11:27 a.m.
A weaker yuan makes China's products cheaper for overseas buyers, while boosting the cost of imports.
Textile, Garment Exports
China raised tax rebates on exports of textiles and garments to 13 percent from 11 percent from Aug. 1 to aid manufacturers also facing rising labor and raw-material costs. Textile exporters Jiangsu Sunshine Co. and Luthai Textile Co. said this month that the change will boost profits.
The People's Bank of China increased commercial banks' lending quotas for 2008 by 5 percent last month to aid small and medium-sized businesses and farmers, according to a central bank official and a bond trader briefed by the central bank. Neither would be identified because they weren't authorized to comment.
The central bank has kept interest rates unchanged at a decade high this year, while ratcheting up the proportion of deposits that banks must set aside as reserves to a record 17.5 percent.
The key one-year lending rate is 7.47 percent.
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net
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Swiss July Unemployment Rate Holds at Six-Year Low
By Joshua Gallu
Aug. 8 (Bloomberg) -- Swiss unemployment fell in July as new orders from Asia prompted manufacturers to hire, keeping the jobless rate at the lowest level since 2002 for a sixth month.
The seasonally adjusted number of unemployed decreased by 110 to 99,819, the State Secretariat for Economic Affairs in Bern said today. The jobless rate was unchanged at 2.5 percent, matching the median forecast of 15 economists in a Bloomberg News survey.
Swiss companies are boosting their workforces as emerging- market countries post new orders for machines and power grids. Orders from China and India are spurring companies like Zurich- based ABB Ltd., the world's biggest builder of power networks, and Winterthur, Switzerland-based Sulzer AG, the world's second- largest maker of pumps, to step up production.
``This is more or less full employment,'' said David Marmet, an economist at Zuercher Kantonalbank in Zurich. ``Companies are still saying they need workers, but the qualifications of the job seekers don't match the needs of the jobs being advertised. The adjusted rate probably can't go any lower.''
Swiss companies are reporting a ``pronounced shortage of skilled workers'' and ``recruitment difficulties'', the Swiss National Bank said in a report published July 3, citing a survey.
Without adjusting for seasonal changes, the number of people unemployed in Switzerland totals 92,163. Of these, 56,229 have been without work for between 1 month and half a year, while just 15,180 have been jobless for more than one year.
Wages, Prices
The average pay increase across 21 branches of the economy is 2.2 percent this year. Inflation accelerated to 3.1 percent in July, the fastest pace in almost 15 years and more than economists expected, led by rising energy costs.
The central bank, which left interest rates unchanged at its last policy meeting in June, faces a dilemma as it tries to balance the risk of inflation against slower economic growth.
Swiss companies from banks to industrial producers may scale back their workforces in the coming months as a U.S.-led global economic slowdown threatens earnings and foils expansion plans. UBS, the European bank with the highest losses from the subprime crisis, is cutting 200 jobs in Switzerland as part of a plan to eliminate 5,500 jobs across the company.
Factory Jobs
A gauge measuring employment growth in Switzerland's manufacturing sector dropped to the lowest level since April 2006 last month, a survey showed. The measure indicates job growth will slow in the coming months. The number of registered open jobs fell by 632 from the month before, today's release showed.
``It's still too early for slowing growth to affect the labor market,'' said Reto Huenerwadel, senior economist at UBS AG in Zurich. ``The momentum is going to shift. Sometime in the second or third quarter of next year we'll see the effect of slowing growth on the labor market.''
Switzerland's economic expansion slowed to 0.3 percent in the first quarter from the fourth, the weakest pace in 3 1/2 years, as sales abroad declined and companies curbed construction spending. The Swiss economy will probably expand between 1.5 percent and 2 percent this year after growing by 3.1 percent last year, according to the central bank.
To contact the reporters on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net
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Aug. 8 (Bloomberg) -- Swiss unemployment fell in July as new orders from Asia prompted manufacturers to hire, keeping the jobless rate at the lowest level since 2002 for a sixth month.
The seasonally adjusted number of unemployed decreased by 110 to 99,819, the State Secretariat for Economic Affairs in Bern said today. The jobless rate was unchanged at 2.5 percent, matching the median forecast of 15 economists in a Bloomberg News survey.
Swiss companies are boosting their workforces as emerging- market countries post new orders for machines and power grids. Orders from China and India are spurring companies like Zurich- based ABB Ltd., the world's biggest builder of power networks, and Winterthur, Switzerland-based Sulzer AG, the world's second- largest maker of pumps, to step up production.
``This is more or less full employment,'' said David Marmet, an economist at Zuercher Kantonalbank in Zurich. ``Companies are still saying they need workers, but the qualifications of the job seekers don't match the needs of the jobs being advertised. The adjusted rate probably can't go any lower.''
Swiss companies are reporting a ``pronounced shortage of skilled workers'' and ``recruitment difficulties'', the Swiss National Bank said in a report published July 3, citing a survey.
Without adjusting for seasonal changes, the number of people unemployed in Switzerland totals 92,163. Of these, 56,229 have been without work for between 1 month and half a year, while just 15,180 have been jobless for more than one year.
Wages, Prices
The average pay increase across 21 branches of the economy is 2.2 percent this year. Inflation accelerated to 3.1 percent in July, the fastest pace in almost 15 years and more than economists expected, led by rising energy costs.
The central bank, which left interest rates unchanged at its last policy meeting in June, faces a dilemma as it tries to balance the risk of inflation against slower economic growth.
Swiss companies from banks to industrial producers may scale back their workforces in the coming months as a U.S.-led global economic slowdown threatens earnings and foils expansion plans. UBS, the European bank with the highest losses from the subprime crisis, is cutting 200 jobs in Switzerland as part of a plan to eliminate 5,500 jobs across the company.
Factory Jobs
A gauge measuring employment growth in Switzerland's manufacturing sector dropped to the lowest level since April 2006 last month, a survey showed. The measure indicates job growth will slow in the coming months. The number of registered open jobs fell by 632 from the month before, today's release showed.
``It's still too early for slowing growth to affect the labor market,'' said Reto Huenerwadel, senior economist at UBS AG in Zurich. ``The momentum is going to shift. Sometime in the second or third quarter of next year we'll see the effect of slowing growth on the labor market.''
Switzerland's economic expansion slowed to 0.3 percent in the first quarter from the fourth, the weakest pace in 3 1/2 years, as sales abroad declined and companies curbed construction spending. The Swiss economy will probably expand between 1.5 percent and 2 percent this year after growing by 3.1 percent last year, according to the central bank.
To contact the reporters on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net
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Crude Oil May Fall Next Week Amid Waning Demand, Survey Shows
By Margot Habiby
Aug. 8 (Bloomberg) -- Crude oil may fall next week amid weakening demand caused by a global economic slowdown.
Thirteen of 35 analysts surveyed by Bloomberg News, or 37 percent, said prices will drop through Aug. 15. Twelve of the respondents, or 34 percent, said oil will rise and 10 forecast little change. Last week 45 percent expected a decline.
``Growing evidence of weak demand should discourage buying,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
U.S. fuel demand averaged 20.1 million barrels a day during the four weeks ended Aug. 1, down 2.6 percent from a year earlier, the Energy Department said Aug. 6.
U.S. gasoline demand fell for a 15th consecutive week as high prices caused motorists to drive less, a MasterCard Inc. report Aug. 5 showed. Demand last week dropped 3.4 percent from a year earlier, MasterCard, the second-biggest credit-card company, said in a weekly report.
U.S. gasoline supplies fell 4.34 million barrels, or 2 percent, to 209.2 million barrels in the week ended Aug. 1, the biggest drop since April, according to Energy Department data released Aug. 6. Those figures and a 20 percent drop in crude prices since a record $147.27 a barrel set July 11 have other analysts forecasting prices will rise.
``The gasoline number was a little surprising, and we maybe moved down a little too fast too soon to the downside,'' said Ryan McCabe, director of trading at Haly Oil & Acquisition in Malvern, Pennsylvania.
Higher Production
The Organization of Petroleum Exporting Countries increased oil production 0.7 percent in July, as Saudi Arabian output reached a three-year high and Nigerian production rose to the highest since March, a Bloomberg News survey showed.
Crude oil for September delivery fell $5.08, or 4.1 percent, to $120.02 a barrel so far this week on the New York Mercantile Exchange. Futures reached $147.27 a barrel on July 11, the highest since trading began in 1983. Oil touched $117.11 a barrel on Aug. 6, down more than 20 percent from the record, a threshold often seen as the start of a bear market.
The oil survey has correctly predicted the direction of futures 48 percent of the time since its start in April 2004.
Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:
RISE NEUTRAL FALL
12 10 13
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
Read more...
Aug. 8 (Bloomberg) -- Crude oil may fall next week amid weakening demand caused by a global economic slowdown.
Thirteen of 35 analysts surveyed by Bloomberg News, or 37 percent, said prices will drop through Aug. 15. Twelve of the respondents, or 34 percent, said oil will rise and 10 forecast little change. Last week 45 percent expected a decline.
``Growing evidence of weak demand should discourage buying,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
U.S. fuel demand averaged 20.1 million barrels a day during the four weeks ended Aug. 1, down 2.6 percent from a year earlier, the Energy Department said Aug. 6.
U.S. gasoline demand fell for a 15th consecutive week as high prices caused motorists to drive less, a MasterCard Inc. report Aug. 5 showed. Demand last week dropped 3.4 percent from a year earlier, MasterCard, the second-biggest credit-card company, said in a weekly report.
U.S. gasoline supplies fell 4.34 million barrels, or 2 percent, to 209.2 million barrels in the week ended Aug. 1, the biggest drop since April, according to Energy Department data released Aug. 6. Those figures and a 20 percent drop in crude prices since a record $147.27 a barrel set July 11 have other analysts forecasting prices will rise.
``The gasoline number was a little surprising, and we maybe moved down a little too fast too soon to the downside,'' said Ryan McCabe, director of trading at Haly Oil & Acquisition in Malvern, Pennsylvania.
Higher Production
The Organization of Petroleum Exporting Countries increased oil production 0.7 percent in July, as Saudi Arabian output reached a three-year high and Nigerian production rose to the highest since March, a Bloomberg News survey showed.
Crude oil for September delivery fell $5.08, or 4.1 percent, to $120.02 a barrel so far this week on the New York Mercantile Exchange. Futures reached $147.27 a barrel on July 11, the highest since trading began in 1983. Oil touched $117.11 a barrel on Aug. 6, down more than 20 percent from the record, a threshold often seen as the start of a bear market.
The oil survey has correctly predicted the direction of futures 48 percent of the time since its start in April 2004.
Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:
RISE NEUTRAL FALL
12 10 13
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
Read more...
Indonesia Says Rate at 9.5% `Adequate' for Inflation
By Aloysius Unditu and Arijit Ghosh
Aug. 8 (Bloomberg) -- Indonesia's central bank may increase interest rates to as much as 9.5 percent and prevent the rupiah from depreciating too fast to slow inflation, Deputy Governor Hartadi Sarwono said.
A benchmark rate that's 2 percentage points above Bank Indonesia's 2009 inflation target is ``adequate'' to keep price gains between 6.5 percent and 7.5 percent next year, Sarwono said in an interview in Jakarta today. ``We are not stopping'' after raising the key rate to 9 percent this week, he added.
Higher borrowing costs may attract investors to Indonesian assets and help prevent a rapid depreciation in the rupiah as prices for the nation's commodity exports decline. A sudden weakening of the currency could prompt manufacturers to pass on prices of imported raw materials, stoking inflation that reached a 22-month high of 11.9 percent in July.
Bank Indonesia on Aug. 5 raised its benchmark rate for a fourth straight meeting, increasing borrowing costs by a quarter point from 8.75 percent. Inflation may accelerate further before the world's most populous Islamic nation celebrates Id-ul-Fitr, which marks the end of the holy fasting month of Ramadan.
``The Muslim festival of Id-ul-Fitr in October will add to inflationary pressures, so Bank Indonesia needs to raise rates again,'' said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. ``A policy rate at 9.5 percent is the correct assessment.''
Currency Market
The central bank will also ensure Indonesia's currency doesn't appreciate past 9,000 to the dollar on average this year, Sarwono said. The rupiah, the third-best performing among Asia's 10 most-traded currencies outside Japan in the past three months, has averaged 9,239 per dollar in 2008.
The rupiah fell 0.6 percent to 9,158 against the U.S. currency at 1:33 p.m. in Jakarta, heading for its biggest drop since March. Bank Indonesia will buy or sell the currency to keep the exchange rate stable, the central banker said.
``Intervention is still important,'' Sarwono said. ``We see the demand from Pertamina is very high. It's not fair for the central bank to let the market fulfill that demand because a big part of oil and gas revenue is placed with the central bank.''
PT Pertamina, Indonesia's state oil company, needs to buy U.S. currency to import oil products as its refineries don't produce enough fuel to meet local demand. The company imported an estimated 12.1 million barrels of oil products in June.
Wholesale-price inflation accelerated to 34.7 percent in June, the fastest pace in nine years. About 70 percent of the raw materials used by manufacturers in Indonesia are imported.
Should manufacturers perceive the rupiah weakening to 9,400 against the dollar ``it could trigger them to pass on the cost'' to consumers, Sarwono said. ``A big part of production costs comes from imported inflation.''
To contact the reporters on this story: Aloysius Unditu in Jakarta at aunditu@bloomberg.netArijit Ghosh in Jakarta at aghosh@bloomberg.net
Read more...
Aug. 8 (Bloomberg) -- Indonesia's central bank may increase interest rates to as much as 9.5 percent and prevent the rupiah from depreciating too fast to slow inflation, Deputy Governor Hartadi Sarwono said.
A benchmark rate that's 2 percentage points above Bank Indonesia's 2009 inflation target is ``adequate'' to keep price gains between 6.5 percent and 7.5 percent next year, Sarwono said in an interview in Jakarta today. ``We are not stopping'' after raising the key rate to 9 percent this week, he added.
Higher borrowing costs may attract investors to Indonesian assets and help prevent a rapid depreciation in the rupiah as prices for the nation's commodity exports decline. A sudden weakening of the currency could prompt manufacturers to pass on prices of imported raw materials, stoking inflation that reached a 22-month high of 11.9 percent in July.
Bank Indonesia on Aug. 5 raised its benchmark rate for a fourth straight meeting, increasing borrowing costs by a quarter point from 8.75 percent. Inflation may accelerate further before the world's most populous Islamic nation celebrates Id-ul-Fitr, which marks the end of the holy fasting month of Ramadan.
``The Muslim festival of Id-ul-Fitr in October will add to inflationary pressures, so Bank Indonesia needs to raise rates again,'' said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. ``A policy rate at 9.5 percent is the correct assessment.''
Currency Market
The central bank will also ensure Indonesia's currency doesn't appreciate past 9,000 to the dollar on average this year, Sarwono said. The rupiah, the third-best performing among Asia's 10 most-traded currencies outside Japan in the past three months, has averaged 9,239 per dollar in 2008.
The rupiah fell 0.6 percent to 9,158 against the U.S. currency at 1:33 p.m. in Jakarta, heading for its biggest drop since March. Bank Indonesia will buy or sell the currency to keep the exchange rate stable, the central banker said.
``Intervention is still important,'' Sarwono said. ``We see the demand from Pertamina is very high. It's not fair for the central bank to let the market fulfill that demand because a big part of oil and gas revenue is placed with the central bank.''
PT Pertamina, Indonesia's state oil company, needs to buy U.S. currency to import oil products as its refineries don't produce enough fuel to meet local demand. The company imported an estimated 12.1 million barrels of oil products in June.
Wholesale-price inflation accelerated to 34.7 percent in June, the fastest pace in nine years. About 70 percent of the raw materials used by manufacturers in Indonesia are imported.
Should manufacturers perceive the rupiah weakening to 9,400 against the dollar ``it could trigger them to pass on the cost'' to consumers, Sarwono said. ``A big part of production costs comes from imported inflation.''
To contact the reporters on this story: Aloysius Unditu in Jakarta at aunditu@bloomberg.netArijit Ghosh in Jakarta at aghosh@bloomberg.net
Read more...
Japan Economy Probably Shrank as Recession Looms
By Jason Clenfield
Aug. 8 (Bloomberg) -- Japan's economy probably contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.
Gross domestic product shrank an annualized 2.3 percent in the three months ended June 30, according to the median estimate of 25 economists surveyed by Bloomberg News. The Cabinet Office will release the report on Aug. 13 at 8:50 a.m. in Tokyo.
Prime Minister Yasuo Fukuda, who last week replaced his economic ministers in a bid to boost his popularity, is planning relief measures to help companies and consumers cope with record energy costs. Toyota Motor Corp. yesterday reported the biggest drop in earnings in five years as U.S. sales slumped.
``What you're going to see is a long, slow, modestly painful recession,'' said Robert Feldman, head of economic research at Morgan Stanley in Tokyo. ``It's going to fall heavily on both workers and stock holders who are suffering lower returns as profits come down.''
Exports probably fell 2.4 percent last quarter, robbing Japan of the engine that drove growth over the past six years, according to economists surveyed. Shipments abroad increased every quarter except one since the most recent recession in 2001.
The economy probably shrank 0.6 percent from the first quarter, when it grew 1 percent, about twice the average pace of the expansion that began in 2002. Net exports -- the difference between exports and imports -- subtracted 0.1 percentage point from growth, economists said.
Toyota Cuts Forecast
Toyota, Japan's biggest company, yesterday cut its sales forecast for the year ending March 2009 by 3.5 percent to 8.7 million vehicles. Since June, Toyota has fired 800 workers at a Kyushu-based subsidiary, where the company is cutting production of sport-utility vehicles and Lexus sedans bound for the U.S.
``The Toyota story is totally consistent with the macro data,'' said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo. ``Companies have been quick to get rid of workers in response to slowdowns in some sectors.''
The unemployment rate jumped to 4.1 percent in June from 3.8 percent three months earlier. Wage growth is also slowing.
Summer bonuses at the country's biggest companies, which tend to pay more than their smaller counterparts, dropped this year for the first time since 2002, according to a survey by the Keidanren business lobby.
Bank of Japan
Domestic demand, which includes company and consumer spending, probably accounted for 0.5 percentage point of the economy's quarter-on-quarter contraction. The figures for household spending will probably exaggerate the decline from the first quarter, when the leap year gave consumers an extra shopping day in February, economists said.
The government yesterday said the economy is ``weakening'' for the first time since 2001. The worsening economy and the fastest inflation in a decade will compel the Bank of Japan to keep its benchmark interest rate at 0.5 percent for the rest of the year at least, according to economists surveyed last month.
Still, analysts say the current slowdown is unlikely to be as severe as past recessions because the corporate sector is better able to handle higher costs and weakening U.S. demand. Businesses have trimmed excess debt, workers and capacity, Economic and Fiscal Policy Minister Kaoru Yosano said yesterday.
``Most of the measures suggest that things aren't as good as they were 12 months ago, but it's nothing like 2001, 1998, or 1993,'' said Richard Jerram, chief Japan economist at Macquarie Securities Ltd. in Tokyo.
Capital Investment
Companies plan to increase capital investment by 4.1 percent in the year ending March, according to a survey released this week by the Tokyo-based Development Bank of Japan. While that's slower than last fiscal year's 7.7 percent, it's better than the 10 percent decline recorded during the 2001 recession.
The Bank of Japan's most recent business survey showed that labor demand is close to a 16-year high. The jobs-to-applicants ratio was at 0.91 in June, meaning almost every person who wants a job can get one. During the previous recession seven years ago, there were two applicants competing for every position.
``When you say recession, it triggers images of 1998 or 1993,'' Jerram said. ``You're having a period of sub-par growth, but it's not the sort of downturn we saw three times during the previous 15 years.''
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
Read more...
Australian Carbon Market May Face Supply `Squeeze,' Lawyer Says
By Angela Macdonald-Smith
Aug. 8 (Bloomberg) -- Australia's carbon-trading market could be vulnerable to a ``squeeze'' in supply in the early months of operation unless constraints are put in place to limit purchases, a lawyer at Baker & McKenzie LLP said.
A few buyers could purchase ``very large'' volumes of permits in auctions at the outset of the trading system, driving up the price, Martijn Wilder, a partner at the law firm, said at a seminar in Sydney today.
The Australian government last month outlined plans for an emissions-trading system to start up July 1, 2010, that will cover about 1,000 businesses each producing more than 25,000 metric tons of carbon dioxide a year. Companies other than the 1,000 will be able to buy permits in auctions.
``The reality is that it is an open market,'' Wilder said. ``There is the opportunity for people to go in and buy large numbers of permits and trade them'' unless regulatory constraints are put in place, he said.
The Trade Practices Act should help prevent ``gaming'' of the market, while the government may also consider restricting ``banking'' of permits in the first year, Wilder said. The government may put in place regulations that prevent purchases by companies outside Australia or require Foreign Investment Review Board approval, he said.
``Banking'' of permits involves buying and hoarding permits for use in future years.
Lower Prices
Initial over-the-counter trading in Australian carbon permits started in May at a price of A$19 ($17.01) a ton in a transaction between AGL Energy Ltd., the nation's biggest electricity and gas retailer, and Westpac Banking Corp. Trades have since been done at prices of as much as A$21.50 a ton, still less than half the price of similar contracts in the European Union market on London's European Climate Exchange.
A price cap in the early years of the trading system, as proposed by a government Green Paper last month, and the ability to carry forward any shortfall of permits into future years should help prevent a squeeze, said Craig McBurnie, environmental markets director at ABN Amro Holding NV's Australian unit.
The Australian Financial Markets Association proposes that no single party should be able to accumulate more than 25 percent of an auction amount, McBurnie said.
``We see that as potentially being a short-term circumstance that might run for a couple of years, but just to make sure that the scheme and the activity is bedded down and the market goes on and behaves in a somewhat predictable manner,'' he said.
The ability for companies in Australia to purchase United Nations certified emission-reduction credits, or CERs, to help meet their carbon commitments may help cap prices of Australian carbon permits, Wilder said. CERs, generated by UN-accredited emission-reduction projects in developing countries, are trading at about 19-20 euros ($28.94-$30.47), he said.
``If the Australian price is A$19 there will be no incentive to buy those, but if the Australian price is up above that there may be some incentive,'' Wilder said.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net.
Read more...
Aug. 8 (Bloomberg) -- Australia's carbon-trading market could be vulnerable to a ``squeeze'' in supply in the early months of operation unless constraints are put in place to limit purchases, a lawyer at Baker & McKenzie LLP said.
A few buyers could purchase ``very large'' volumes of permits in auctions at the outset of the trading system, driving up the price, Martijn Wilder, a partner at the law firm, said at a seminar in Sydney today.
The Australian government last month outlined plans for an emissions-trading system to start up July 1, 2010, that will cover about 1,000 businesses each producing more than 25,000 metric tons of carbon dioxide a year. Companies other than the 1,000 will be able to buy permits in auctions.
``The reality is that it is an open market,'' Wilder said. ``There is the opportunity for people to go in and buy large numbers of permits and trade them'' unless regulatory constraints are put in place, he said.
The Trade Practices Act should help prevent ``gaming'' of the market, while the government may also consider restricting ``banking'' of permits in the first year, Wilder said. The government may put in place regulations that prevent purchases by companies outside Australia or require Foreign Investment Review Board approval, he said.
``Banking'' of permits involves buying and hoarding permits for use in future years.
Lower Prices
Initial over-the-counter trading in Australian carbon permits started in May at a price of A$19 ($17.01) a ton in a transaction between AGL Energy Ltd., the nation's biggest electricity and gas retailer, and Westpac Banking Corp. Trades have since been done at prices of as much as A$21.50 a ton, still less than half the price of similar contracts in the European Union market on London's European Climate Exchange.
A price cap in the early years of the trading system, as proposed by a government Green Paper last month, and the ability to carry forward any shortfall of permits into future years should help prevent a squeeze, said Craig McBurnie, environmental markets director at ABN Amro Holding NV's Australian unit.
The Australian Financial Markets Association proposes that no single party should be able to accumulate more than 25 percent of an auction amount, McBurnie said.
``We see that as potentially being a short-term circumstance that might run for a couple of years, but just to make sure that the scheme and the activity is bedded down and the market goes on and behaves in a somewhat predictable manner,'' he said.
The ability for companies in Australia to purchase United Nations certified emission-reduction credits, or CERs, to help meet their carbon commitments may help cap prices of Australian carbon permits, Wilder said. CERs, generated by UN-accredited emission-reduction projects in developing countries, are trading at about 19-20 euros ($28.94-$30.47), he said.
``If the Australian price is A$19 there will be no incentive to buy those, but if the Australian price is up above that there may be some incentive,'' Wilder said.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net.
Read more...
Oil Falls as Stronger U.S. Dollar Cuts Demand for Commodities
By Nesa Subrahmaniyan and Grant Smith
Aug. 8 (Bloomberg) -- Crude oil fell, heading for its fourth decline in five weeks, as the dollar gained, reducing the appeal of commodities as a currency hedge.
Oil, metal and crop prices fell as the dollar jumped to a five-month high against the euro. A stronger U.S. currency tends to spark sales by investors who bought commodities as an alternative to holding the dollar. Crude has fallen almost $30 from its July record amid speculation that slower global economic growth and high prices will cut demand for fuel.
``Oil is following the euro-dollar and that's keeping pressure to the downside,'' said Gerrit Zambo, an oil trader at BayernLB in Munich. ``There are worries about the economic situation with expectations of flat demand.''
Crude oil for September delivery fell as much as $1.85, or 1.5 percent, to $118.17 a barrel on the New York Mercantile Exchange. The contract traded at $118.46 at 9:54 a.m. London time. Price have fallen 4.8 percent this week.
Futures dropped to $117.11 a barrel this week after U.S. inventories crude unexpectedly increased. That's more than 20 percent below the record $147.27 on July 11, a threshold commonly seen as the start of a bear market.
Crude oil may fall next week amid weakening demand caused by a global economic slowdown. Thirteen of 35 analysts surveyed by Bloomberg News, or 37 percent, said prices will drop through Aug. 15. Last week 45 percent expected a decline.
Dollar Gains
The dollar headed for its biggest weekly gain against the yen in two months. The euro was on course for its fourth weekly decline, its worst losing streak since May 2007, after European Central Bank President Jean-Claude Trichet said risks to economic growth are ``materializing,'' reducing expectations policy makers will raise interest rates.
The euro fell to $1.5195, the lowest since March 5, before trading at $1.5234. It headed for a 2 percent decline this week.
A fire on BP Plc's oil pipeline in eastern Turkey may keep burning today and tomorrow, delaying the start of damage assessment, Turkey's Energy Ministry said today.
The fire has shut down the pipeline that carries as much as a million barrels of oil a day from Azerbaijan to Turkey, and halted crude exports from the Turkish port of Ceyhan. The Kurdistan Workers' Party, or PKK, said it bombed the pipeline as part of its campaign for autonomy in southeast Turkey.
Output from Russia and the other former Soviet states averaged 12.8 million barrels a day in 2007, including 868,000 barrels a day from Azerbaijan, according to the BP Statistical Review of World Energy. The U.S. imported 68,000 barrels a day from Azerbaijan in May, the latest data from the Energy Department shows.
Brent crude for September delivery fell as much as $1.97, or 1.7 percent, to $115.89 a barrel on ICE Futures Europe exchange. It traded at $116.20 at 9:44 a.m. London time.
U.S. crude-oil supplies rose 1.61 million barrels, or 0.6 percent, last week, the U.S. Energy Department said on Aug. 6. Gasoline supplies fell 4.34 million barrels, or 2 percent, to 209.2 million barrels, the biggest drop since April.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net.
Read more...
Aug. 8 (Bloomberg) -- Crude oil fell, heading for its fourth decline in five weeks, as the dollar gained, reducing the appeal of commodities as a currency hedge.
Oil, metal and crop prices fell as the dollar jumped to a five-month high against the euro. A stronger U.S. currency tends to spark sales by investors who bought commodities as an alternative to holding the dollar. Crude has fallen almost $30 from its July record amid speculation that slower global economic growth and high prices will cut demand for fuel.
``Oil is following the euro-dollar and that's keeping pressure to the downside,'' said Gerrit Zambo, an oil trader at BayernLB in Munich. ``There are worries about the economic situation with expectations of flat demand.''
Crude oil for September delivery fell as much as $1.85, or 1.5 percent, to $118.17 a barrel on the New York Mercantile Exchange. The contract traded at $118.46 at 9:54 a.m. London time. Price have fallen 4.8 percent this week.
Futures dropped to $117.11 a barrel this week after U.S. inventories crude unexpectedly increased. That's more than 20 percent below the record $147.27 on July 11, a threshold commonly seen as the start of a bear market.
Crude oil may fall next week amid weakening demand caused by a global economic slowdown. Thirteen of 35 analysts surveyed by Bloomberg News, or 37 percent, said prices will drop through Aug. 15. Last week 45 percent expected a decline.
Dollar Gains
The dollar headed for its biggest weekly gain against the yen in two months. The euro was on course for its fourth weekly decline, its worst losing streak since May 2007, after European Central Bank President Jean-Claude Trichet said risks to economic growth are ``materializing,'' reducing expectations policy makers will raise interest rates.
The euro fell to $1.5195, the lowest since March 5, before trading at $1.5234. It headed for a 2 percent decline this week.
A fire on BP Plc's oil pipeline in eastern Turkey may keep burning today and tomorrow, delaying the start of damage assessment, Turkey's Energy Ministry said today.
The fire has shut down the pipeline that carries as much as a million barrels of oil a day from Azerbaijan to Turkey, and halted crude exports from the Turkish port of Ceyhan. The Kurdistan Workers' Party, or PKK, said it bombed the pipeline as part of its campaign for autonomy in southeast Turkey.
Output from Russia and the other former Soviet states averaged 12.8 million barrels a day in 2007, including 868,000 barrels a day from Azerbaijan, according to the BP Statistical Review of World Energy. The U.S. imported 68,000 barrels a day from Azerbaijan in May, the latest data from the Energy Department shows.
Brent crude for September delivery fell as much as $1.97, or 1.7 percent, to $115.89 a barrel on ICE Futures Europe exchange. It traded at $116.20 at 9:44 a.m. London time.
U.S. crude-oil supplies rose 1.61 million barrels, or 0.6 percent, last week, the U.S. Energy Department said on Aug. 6. Gasoline supplies fell 4.34 million barrels, or 2 percent, to 209.2 million barrels, the biggest drop since April.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net.
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India's $10 Billion Share Sales to Lead IPO Revival
By M.C. Govardhana Rangan
Aug. 8 (Bloomberg) -- Bharat Sanchar Nigam Ltd., India's biggest telephone company, and NHPC Ltd. plan to raise more than $10 billion in share sales, leading a revival in offerings as stocks rebound from the worst start to the year in three decades.
The government plans to sell as much as 10 percent of Bharat Sanchar, Chairman Kuldeep Goyal said yesterday. State-run NHPC, India's largest generator of electricity from water, on Aug. 6 sought regulatory approval for a sale.
Finance Minister Palaniappan Chidambaram said July 24 the government will resume asset sales to raise funds for former oil, power and telecoms monopolies. Indian companies have completed the fewest IPOs in three years in 2008 as owners including billionaire Anil Ambani scrapped offers.
``Investors do find comfort with public sector IPOs since most of the companies are long standing and price reasonably,'' said Ravi Sardana, senior vice president at ICICI Securities Ltd. ``Names like BSNL and Oil India are quite well known.''
Bharat Sanchar, known as BSNL, is valued at about $100 billion, finance director S.D. Saxena said yesterday. That's a third more than the combined market value of Bharti Airtel Ltd., Reliance Communications Ltd., and Idea Cellular Ltd., India's largest listed telecommunications companies.
The government revived plans today to sell shares in Punjab & Sind Bank, a state-owned lender based in India's northern region. The timing of the sale will be decided later, cabinet spokesman Kapil Sibal said in New Delhi.
Canceled Offerings
Reliance Infratel Ltd., a telecommunications tower company controlled by Ambani, and real estate developer Emaar MGF Land Ltd. were among companies that canceled offerings in the first six months as the benchmark Sensitive Index slumped 34 percent, the biggest first-half drop since it was created in 1979.
Ambani's Reliance Power Ltd. has declined 41 percent since the utility sold shares in January. Reliance Power gave additional shares to investors after the stock sank on debut.
The Bharat Sanchar offer may be the biggest by an Indian company and eclipse the $2.4 billion raised by the government in March 2004 by selling Oil & Natural Gas Corp. shares, a record for a state-run company.
``Investor appetite is all in the pricing,'' said S. Subramanian, head of investment banking at Enam Financial Consultants Ltd. ``Going by the past, the government should be able to give attractive pricing.''
Prime Minister Manmohan Singh is reviving sales after winning a confidence vote in parliament triggered by the withdrawal of support of communist parties. The communists had opposed asset sales and the opening up of banking, insurance and pensions to foreign investment.
Secure Approval
Still, the government will need to secure approval from unions to complete the offerings. Bharat Sanchar's labor groups have rejected an offer that would have given each of the company's 300,000 employees 500 shares at 10 rupees apiece, the Economic Times reported earlier today.
Communications Minister Andimuthu Raja said yesterday the government would give the shares to employees to secure support, as it needs to complete the offer before Singh's term ends in May. The government also plans to sell shares in exploration firm Oil India and Rites Ltd., the company involved in transport and infrastructure technology.
``We have done enough issues in the past in a short time and we can do it again,'' said Enam's Subramanian, who plans to bid to manage the state-run companies' share sales.
To contact the reporters on this story: M.C. Govardhana Rangan in Mumbai at grangan@bloomberg.net.
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Aug. 8 (Bloomberg) -- Bharat Sanchar Nigam Ltd., India's biggest telephone company, and NHPC Ltd. plan to raise more than $10 billion in share sales, leading a revival in offerings as stocks rebound from the worst start to the year in three decades.
The government plans to sell as much as 10 percent of Bharat Sanchar, Chairman Kuldeep Goyal said yesterday. State-run NHPC, India's largest generator of electricity from water, on Aug. 6 sought regulatory approval for a sale.
Finance Minister Palaniappan Chidambaram said July 24 the government will resume asset sales to raise funds for former oil, power and telecoms monopolies. Indian companies have completed the fewest IPOs in three years in 2008 as owners including billionaire Anil Ambani scrapped offers.
``Investors do find comfort with public sector IPOs since most of the companies are long standing and price reasonably,'' said Ravi Sardana, senior vice president at ICICI Securities Ltd. ``Names like BSNL and Oil India are quite well known.''
Bharat Sanchar, known as BSNL, is valued at about $100 billion, finance director S.D. Saxena said yesterday. That's a third more than the combined market value of Bharti Airtel Ltd., Reliance Communications Ltd., and Idea Cellular Ltd., India's largest listed telecommunications companies.
The government revived plans today to sell shares in Punjab & Sind Bank, a state-owned lender based in India's northern region. The timing of the sale will be decided later, cabinet spokesman Kapil Sibal said in New Delhi.
Canceled Offerings
Reliance Infratel Ltd., a telecommunications tower company controlled by Ambani, and real estate developer Emaar MGF Land Ltd. were among companies that canceled offerings in the first six months as the benchmark Sensitive Index slumped 34 percent, the biggest first-half drop since it was created in 1979.
Ambani's Reliance Power Ltd. has declined 41 percent since the utility sold shares in January. Reliance Power gave additional shares to investors after the stock sank on debut.
The Bharat Sanchar offer may be the biggest by an Indian company and eclipse the $2.4 billion raised by the government in March 2004 by selling Oil & Natural Gas Corp. shares, a record for a state-run company.
``Investor appetite is all in the pricing,'' said S. Subramanian, head of investment banking at Enam Financial Consultants Ltd. ``Going by the past, the government should be able to give attractive pricing.''
Prime Minister Manmohan Singh is reviving sales after winning a confidence vote in parliament triggered by the withdrawal of support of communist parties. The communists had opposed asset sales and the opening up of banking, insurance and pensions to foreign investment.
Secure Approval
Still, the government will need to secure approval from unions to complete the offerings. Bharat Sanchar's labor groups have rejected an offer that would have given each of the company's 300,000 employees 500 shares at 10 rupees apiece, the Economic Times reported earlier today.
Communications Minister Andimuthu Raja said yesterday the government would give the shares to employees to secure support, as it needs to complete the offer before Singh's term ends in May. The government also plans to sell shares in exploration firm Oil India and Rites Ltd., the company involved in transport and infrastructure technology.
``We have done enough issues in the past in a short time and we can do it again,'' said Enam's Subramanian, who plans to bid to manage the state-run companies' share sales.
To contact the reporters on this story: M.C. Govardhana Rangan in Mumbai at grangan@bloomberg.net.
Read more...
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