PARIS, Aug 12 (Reuters) - European stocks trimmed losses by mid-morning on Tuesday after the Kremlin said Russian President Dmitry Medvedev had ordered an end to the military operation in Georgia.
At 0900 GMT, the FTSEurofirst 300 index of top European shares was down 0.3 percent at 1,208.91 points, after falling by as much as 0.8 percent earlier.
Oil prices dropped further CLc1, down $1.63 at $112 a barrel.
Mining and energy stocks were among the biggest losers, falling along with commodity prices. Xtrata (XTA.L: Quote, Profile, Research, Stock Buzz) was down 3 percent and Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) was down 0.4 percent.
(Reporting by Blaise Robinson)
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Tuesday, August 12, 2008
Brazil airline Gol posts wider loss in 2nd quarter
SAO PAULO, Aug 12 (Reuters) - Brazilian airline Gol Linhas Aereas reported on Tuesday a net loss of 171.7 million reais ($106.6 million) for the second quarter versus a loss of 35.37 million reais in the year-earlier period.
In the first quarter of this year, Gol booked a loss of 3.5 million reais. The earnings were reported under U.S. accounting principles. ($1=1.61 reais) (Reporting by Todd Benson; Editing by David Holmes)
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In the first quarter of this year, Gol booked a loss of 3.5 million reais. The earnings were reported under U.S. accounting principles. ($1=1.61 reais) (Reporting by Todd Benson; Editing by David Holmes)
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FACTBOX-Key details of UBS restructuring plans
Aug 12 (Reuters) - UBS AG will separate its wealth management business from investment banking and asset management as the world's biggest banker to the rich acknowledged its one-bank model was flawed. [ID:nLB144790].
Following are the key details of the repositioning of UBS.
* UBS to separate business divisions into three units: Global Wealth Management & Business Banking, Investment Bank and Global Asset Management.
* UBS to invest in and develop its Global Wealth Management business in a bid to strengthen its presence in international growth markets and its position in Switzerland.
* Investment Bank to further reduce balance sheet and risk positions as it repositions towards client-driven growth. This will ensure maximum accountability for creation of shareholder value.
* In Global Asset Management division, incentives for leadership and staff will be aligned with results and investment performance
* The new structure is to result in more transparency on value creation within UBS, impose strict standards on the availability and usage of capital and provide flexibility to capture future shareholder value.
* UBS's position in Switzerland, both as a wealth manager and as the largest retail bank, to remain a cornerstone of the strategy and of sustainable profit growth.
* Executive management of the group to be led by the Chief Executive Officer who will be supported by the Group Executive Board (GEB) and its newly established Executive Committee.
* Executive Committee will be made up of the CEO, Chief Financial Officer, Chief Risk Officer and the General Counsel. (Reporting by Katie Reid; Editing by David Cowell)
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Following are the key details of the repositioning of UBS.
* UBS to separate business divisions into three units: Global Wealth Management & Business Banking, Investment Bank and Global Asset Management.
* UBS to invest in and develop its Global Wealth Management business in a bid to strengthen its presence in international growth markets and its position in Switzerland.
* Investment Bank to further reduce balance sheet and risk positions as it repositions towards client-driven growth. This will ensure maximum accountability for creation of shareholder value.
* In Global Asset Management division, incentives for leadership and staff will be aligned with results and investment performance
* The new structure is to result in more transparency on value creation within UBS, impose strict standards on the availability and usage of capital and provide flexibility to capture future shareholder value.
* UBS's position in Switzerland, both as a wealth manager and as the largest retail bank, to remain a cornerstone of the strategy and of sustainable profit growth.
* Executive management of the group to be led by the Chief Executive Officer who will be supported by the Group Executive Board (GEB) and its newly established Executive Committee.
* Executive Committee will be made up of the CEO, Chief Financial Officer, Chief Risk Officer and the General Counsel. (Reporting by Katie Reid; Editing by David Cowell)
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U.K. July Consumer Prices: Statistical Summary (Table)
By Mark Evans
Aug. 12 (Bloomberg) -- Following is the summary for July CPI from the Office for National Statistics in London:
NOTE: For RPI Jan 13, 1987=100. For CPI 2005 = 100.
*: CPI excluding energy, food, alcohol and tobacco.
**: The taxes excluded are VAT, duties, insurance premium tax,
air passenger duty, stamp duty on share transactions.
***: CPI at constant tax rates.
****: The taxes excluded are council tax, VAT, duties, vehicle excise
SOURCE: National Statistics
To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net
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Aug. 12 (Bloomberg) -- Following is the summary for July CPI from the Office for National Statistics in London:
==============================================================================
July June May April March Feb.
2008 2008 2008 2008 2008 2008
==============================================================================
-------------- Monthly % Change -------------
CPI 0.0% 0.7% 0.6% 0.8% 0.4% 0.7%
Core CPI* -0.2% 0.3% 0.3% 0.5% 0.4% 0.3%
RPI -0.1% 0.8% 0.5% 0.9% 0.3% 0.8%
RPIX -0.2% 0.8% 0.7% 0.9% 0.5% 0.8%
RPIY**** -0.2% 0.9% 0.8% 0.6% 0.6% 0.9%
RPI Ex. Housing -0.2% 1.0% 0.8% 0.7% 0.6% 1.0%
RPI Ex. Seasonal Food -0.1% 0.8% 0.5% 0.8% 0.3% 0.8%
RPI Ex. all Food -0.3% 0.6% 0.4% 0.9% 0.3% 0.8%
==============================================================================
==============================================================================
July June May April March Feb.
2008 2008 2008 2008 2008 2008
==============================================================================
--------------- Yearly % Change -------------
CPI 4.4% 3.8% 3.3% 3.0% 2.5% 2.5%
Core CPI* 1.9% 1.6% 1.5% 1.4% 1.2% 1.2%
CPIY** 4.5% 3.9% 3.3% 3.0% 2.6% 2.5%
CPI-CT*** 4.2% 3.6% 3.1% 2.7% 2.3% 2.3%
RPI 5.0% 4.6% 4.3% 4.2% 3.8% 4.1%
RPIX 5.3% 4.8% 4.4% 4.0% 3.5% 3.7%
RPIY**** 5.4% 4.9% 4.4% 3.9% 3.6% 3.6%
RPI Ex. Housing 5.8% 5.0% 4.3% 3.8% 3.2% 3.3%
RPI Ex. Seasonal Food 4.9% 4.5% 4.2% 4.1% 3.8% 4.1%
RPI Ex. all Food 4.2% 4.0% 3.9% 3.9% 3.5% 3.8%
---------------- Index Levels ---------------
CPI 109.0 109.0 108.3 107.6 106.7 106.3
Core CPI* 104.8 105.0 104.6 104.3 103.8 103.4
CPIY** 109.3 109.3 108.5 107.7 107.0 106.5
CPI-CT*** 108.4 108.5 107.7 107.0 106.3 105.9
==============================================================================
July June May April March Feb.
2008 2008 2008 2008 2008 2008
==============================================================================
RPI 216.5 216.8 215.1 214.0 212.1 211.4
RPIX 210.0 210.4 208.7 207.2 205.3 204.3
RPIY**** 200.4 200.8 199.0 197.5 196.3 195.2
RPI Ex. Housing 192.8 193.2 191.2 189.6 188.2 187.0
RPI Ex. Seasonal Food 217.7 218.0 216.3 215.3 213.5 212.8
RPI Ex. all Food 222.7 223.3 221.9 221.1 219.2 218.5
==============================================================================
NOTE: For RPI Jan 13, 1987=100. For CPI 2005 = 100.
*: CPI excluding energy, food, alcohol and tobacco.
**: The taxes excluded are VAT, duties, insurance premium tax,
air passenger duty, stamp duty on share transactions.
***: CPI at constant tax rates.
****: The taxes excluded are council tax, VAT, duties, vehicle excise
SOURCE: National Statistics
To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net
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FTSE flat as miners drag; ITV rises on bid talk
* FTSE 100 flat
* Miners fall as metal prices drift lower
* ITV tops gainers on bid talk
By Michael Taylor
LONDON, Aug 12 (Reuters) - Britain's leading blue-chip index was flat by midday on Tuesday as mining shares tracked falling metal prices, while ITV gained for a third straight session on persistent bid speculation.
At 1033 GMT the FTSE 100 .FTSE was flat at 5,544.2 points, making good losses earlier in the session after Russia ordered a halt to military operations in Georgia following five days of fighting.
The benchmark index was however, little affected by a report which showed UK consumer price inflation in July rose more than expected.
On the downside, metal prices eased as investors shifted some of their money back to the dollar, which weighed on mining stocks.
Rio Tinto , BHP Billiton , Eurasian Natural Resources , Anglo American , Xstrata , Ferrexpo , Vedanta Resources and Lonmin were down 0.2 to 3.2 percent.
Topping the FTSE 100 leaderboard, British free-to-air broadcaster ITV added 9 percent to reach its highest level in more than six weeks as traders cited lingering market talk of a possible bid from TV producer Endemol.
Such talk had helped ITV rise 6.3 percent in the previous session.
Some analysts doubted whether a takeover was on the cards. "In reality, Endemol is unlikely to be interested in ITV's broadcasting assets from which it would be very difficult to separate the content business," said UBS analysts in a note to clients.
"Endemol would also lose its independent producer status in the UK."
In other sectors, banks were mixed after Switzerland's UBS , which has been Europe's hardest-hit victim of the credit crunch so far, reported a second quarter net loss of 358 million Swiss franc ($332 million), slightly worse than expected.
"It is a bit of a wake up call that we are not out of the woods yet," said Tim Hughes, head of sales trading at IG Index.
Barclays , Royal Bank of Scotland , and HSBC rose 0.5 to 1.7 percent, while HBOS and Lloyds TSB were down 0.1 to 1.3 percent.
Standard Chartered lost 3.6 percent to 1,541 pence, after Citi downgraded the Asia-focused lender to "sell" from "hold" and cut its price target to 1,300 pence from 1,525 pence.
Broker RBS also trimmed its target price on StanChart to 1,660 pence from 1,700 pence and kept a "hold" rating.
The Financial Times said nearly 60 percent of U.S. and European institutional investors surveyed by Greenwich Associates believed another big financial firm would collapse within the next six months in the continued fallout from the credit crunch.
"The UBS loss does make a difference on sentiment," said Howard Wheeldon, senior strategist at BGC Partners.
Also on the economic front, the Royal Institution of Chartered Surveyors said British house prices fell slightly less than expected in the three months to July, but the number of completed sales per surveyor fell to their lowest level in at least 30 years.
Another survey showed commercial building activity in Britain continued to contract sharply in July but property developers were slightly less gloomy about the future than a month earlier.
Marks & Spencer shed 2.1 percent after HSBC downgraded the retailer to "neutral" from "overweight".
InterContinental Hotels gained 2.6 percent after the world's largest hotelier reported a 29 percent rise in first-half operating profits, but said growth had slowed in the second-quarter, particularly in the United States.
"Just a few weeks ago, the FTSE was flirting with 5,000 but now it is 500 or so points higher," said Manoj Ladwa, senior trader at TradIndex. "If the FTSE closes higher today, then it confirms the recent bullish run and suggests the market is happy to shrug off bad news. How long that mood will last remains to be seen."
(Additional reporting by Dominic Lau; editing by Rory Channing)
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* Miners fall as metal prices drift lower
* ITV tops gainers on bid talk
By Michael Taylor
LONDON, Aug 12 (Reuters) - Britain's leading blue-chip index was flat by midday on Tuesday as mining shares tracked falling metal prices, while ITV gained for a third straight session on persistent bid speculation.
At 1033 GMT the FTSE 100 .FTSE was flat at 5,544.2 points, making good losses earlier in the session after Russia ordered a halt to military operations in Georgia following five days of fighting.
The benchmark index was however, little affected by a report which showed UK consumer price inflation in July rose more than expected.
On the downside, metal prices eased as investors shifted some of their money back to the dollar, which weighed on mining stocks.
Rio Tinto , BHP Billiton , Eurasian Natural Resources , Anglo American , Xstrata , Ferrexpo , Vedanta Resources and Lonmin were down 0.2 to 3.2 percent.
Topping the FTSE 100 leaderboard, British free-to-air broadcaster ITV added 9 percent to reach its highest level in more than six weeks as traders cited lingering market talk of a possible bid from TV producer Endemol.
Such talk had helped ITV rise 6.3 percent in the previous session.
Some analysts doubted whether a takeover was on the cards. "In reality, Endemol is unlikely to be interested in ITV's broadcasting assets from which it would be very difficult to separate the content business," said UBS analysts in a note to clients.
"Endemol would also lose its independent producer status in the UK."
In other sectors, banks were mixed after Switzerland's UBS , which has been Europe's hardest-hit victim of the credit crunch so far, reported a second quarter net loss of 358 million Swiss franc ($332 million), slightly worse than expected.
"It is a bit of a wake up call that we are not out of the woods yet," said Tim Hughes, head of sales trading at IG Index.
Barclays , Royal Bank of Scotland , and HSBC rose 0.5 to 1.7 percent, while HBOS and Lloyds TSB were down 0.1 to 1.3 percent.
Standard Chartered lost 3.6 percent to 1,541 pence, after Citi downgraded the Asia-focused lender to "sell" from "hold" and cut its price target to 1,300 pence from 1,525 pence.
Broker RBS also trimmed its target price on StanChart to 1,660 pence from 1,700 pence and kept a "hold" rating.
The Financial Times said nearly 60 percent of U.S. and European institutional investors surveyed by Greenwich Associates believed another big financial firm would collapse within the next six months in the continued fallout from the credit crunch.
"The UBS loss does make a difference on sentiment," said Howard Wheeldon, senior strategist at BGC Partners.
Also on the economic front, the Royal Institution of Chartered Surveyors said British house prices fell slightly less than expected in the three months to July, but the number of completed sales per surveyor fell to their lowest level in at least 30 years.
Another survey showed commercial building activity in Britain continued to contract sharply in July but property developers were slightly less gloomy about the future than a month earlier.
Marks & Spencer shed 2.1 percent after HSBC downgraded the retailer to "neutral" from "overweight".
InterContinental Hotels gained 2.6 percent after the world's largest hotelier reported a 29 percent rise in first-half operating profits, but said growth had slowed in the second-quarter, particularly in the United States.
"Just a few weeks ago, the FTSE was flirting with 5,000 but now it is 500 or so points higher," said Manoj Ladwa, senior trader at TradIndex. "If the FTSE closes higher today, then it confirms the recent bullish run and suggests the market is happy to shrug off bad news. How long that mood will last remains to be seen."
(Additional reporting by Dominic Lau; editing by Rory Channing)
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India's Production Growth Accelerated to 5.4% in June
By Kartik Goyal
Aug. 12 (Bloomberg) -- India's industrial production growth accelerated in June, before higher interest rates had a chance to crimp consumer spending.
Output at factories, utilities and mines rose 5.4 percent from a year earlier after a revised 4.1 percent gain in May, the Central Statistical Organisation said in a statement in New Delhi today. That matched the median forecast in a Bloomberg News survey of 23 economists.
Factory output may slow in coming months after the central bank raised borrowing costs three times since June to tame runaway inflation. Sales growth is already easing at Tata Motors Ltd. and Maruti Suzuki India Ltd., which makes half the cars sold in India.
``Production growth will remain weak this year due to rising interest rates and higher input costs,'' said Sonal Varma, a Mumbai-based economist at Lehman Brothers Inc. ``Weakening overseas sales are also weighing on companies' output.''
The Bombay Stock Exchange's benchmark Sensitive Index, which has declined about 25 percent this year amid concern weaker growth will crimp corporate earnings, fell 2 percent to 15,206.6 at 2:19 p.m. in Mumbai.
The Reserve Bank of India on July 29 raised the repurchase rate to 9 percent from 8.5 percent, after two increases in June. Governor Yaga Venugopal Reddy is grappling with inflation running at 12.01 percent, the fastest pace in 13 years.
Elsewhere in Asia
Reddy isn't the only central banker in Asia who is increasing borrowing costs, with policy makers across the region raising interest rates as higher food and fuel prices threaten inflation targets. Indonesia, Thailand, Pakistan and the Philippines all lifted their benchmark rates last month.
Higher borrowing costs are hurting Asian manufacturers. Japan's industrial production growth halted in June and South Korea's 6.7 percent pace was the slowest in nine months.
Factory output, which accounts for about a quarter of India's $912 billion economy, grew 5.2 percent in three months ended June 30, compared with a 10.3 percent gain in the same period a year ago.
Manufacturing, which accounts for about 80 percent of Indian production, gained 5.9 percent in June, compared with 9.7 percent in June last year, today's report showed. Electricity output rose 2.6 percent in June from 6.8 percent in a year-ago, mining grew 2.9 percent from 1.5 percent and consumer-goods production increased 10 percent.
Cars, Motorcycles
Production growth partly rose in June due to a base effect caused by the index dropping to 255.3 in June 2007, according to economists including Saugata Bhattacharya at Axis Bank Ltd. in Mumbai. The output index rose to 269.1 in June this year, today's report showed.
Higher interest rates have begun to discourage spending by consumers who rely on loans to buy cars and motorbikes. Sales at Maruti Suzuki increased 1.1 percent in July, the slowest pace in four months. Sales at Tata Motors, India's biggest truck maker, fell 3.3 percent in July as demand declined.
The central bank's fight against inflation will result in a ``compromise'' on economic growth, India's Junior Finance Minister Pawan Kumar Bansal said in an interview with Bloomberg News earlier this month.
India's economy, the third-biggest in Asia, is forecast by the central bank to grow 8 percent in the fiscal year that started April 1. That would be the slowest pace in four years.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.
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Aug. 12 (Bloomberg) -- India's industrial production growth accelerated in June, before higher interest rates had a chance to crimp consumer spending.
Output at factories, utilities and mines rose 5.4 percent from a year earlier after a revised 4.1 percent gain in May, the Central Statistical Organisation said in a statement in New Delhi today. That matched the median forecast in a Bloomberg News survey of 23 economists.
Factory output may slow in coming months after the central bank raised borrowing costs three times since June to tame runaway inflation. Sales growth is already easing at Tata Motors Ltd. and Maruti Suzuki India Ltd., which makes half the cars sold in India.
``Production growth will remain weak this year due to rising interest rates and higher input costs,'' said Sonal Varma, a Mumbai-based economist at Lehman Brothers Inc. ``Weakening overseas sales are also weighing on companies' output.''
The Bombay Stock Exchange's benchmark Sensitive Index, which has declined about 25 percent this year amid concern weaker growth will crimp corporate earnings, fell 2 percent to 15,206.6 at 2:19 p.m. in Mumbai.
The Reserve Bank of India on July 29 raised the repurchase rate to 9 percent from 8.5 percent, after two increases in June. Governor Yaga Venugopal Reddy is grappling with inflation running at 12.01 percent, the fastest pace in 13 years.
Elsewhere in Asia
Reddy isn't the only central banker in Asia who is increasing borrowing costs, with policy makers across the region raising interest rates as higher food and fuel prices threaten inflation targets. Indonesia, Thailand, Pakistan and the Philippines all lifted their benchmark rates last month.
Higher borrowing costs are hurting Asian manufacturers. Japan's industrial production growth halted in June and South Korea's 6.7 percent pace was the slowest in nine months.
Factory output, which accounts for about a quarter of India's $912 billion economy, grew 5.2 percent in three months ended June 30, compared with a 10.3 percent gain in the same period a year ago.
Manufacturing, which accounts for about 80 percent of Indian production, gained 5.9 percent in June, compared with 9.7 percent in June last year, today's report showed. Electricity output rose 2.6 percent in June from 6.8 percent in a year-ago, mining grew 2.9 percent from 1.5 percent and consumer-goods production increased 10 percent.
Cars, Motorcycles
Production growth partly rose in June due to a base effect caused by the index dropping to 255.3 in June 2007, according to economists including Saugata Bhattacharya at Axis Bank Ltd. in Mumbai. The output index rose to 269.1 in June this year, today's report showed.
Higher interest rates have begun to discourage spending by consumers who rely on loans to buy cars and motorbikes. Sales at Maruti Suzuki increased 1.1 percent in July, the slowest pace in four months. Sales at Tata Motors, India's biggest truck maker, fell 3.3 percent in July as demand declined.
The central bank's fight against inflation will result in a ``compromise'' on economic growth, India's Junior Finance Minister Pawan Kumar Bansal said in an interview with Bloomberg News earlier this month.
India's economy, the third-biggest in Asia, is forecast by the central bank to grow 8 percent in the fiscal year that started April 1. That would be the slowest pace in four years.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.
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Japan's Wholesale Inflation Rate Reaches 27-Year High
By Mayumi Otsuma
Aug. 12 (Bloomberg) -- Japan's wholesale inflation rate accelerated to a 27-year high in July, squeezing corporate profits, increasing bankruptcies and threatening the economy's longest postwar expansion.
Producer prices, the costs companies pay for energy and raw materials, climbed 7.1 percent from a year earlier after a revised 5.7 percent increase in June, the Bank of Japan said in Tokyo today. The median estimate of 31 economists surveyed by Bloomberg News was for 5.7 percent.
More businesses failed because of rising fuel and raw- material costs in the first half of this year than for all of 2007, according to Teikoku Databank Ltd. Tokyo-based Galaxy Airlines Co. said last week that it will stop air cargo services, and Nippon Paper Group Inc. plans to increase prices for the second time this year.
``Even though oil prices have been coming down in recent weeks, companies will keep trying to raise prices because they've made up for only a fraction of the cost increases they've suffered,'' said Azusa Kato, an economist at BNP Paribas in Tokyo.
The yen traded at 110.15 per dollar as of 11:10 a.m. in Tokyo from 110.14 before the report was published. Japan's currency has fallen 2 percent this month. Government bonds dropped for the first time in five days, causing the yield on 10-year debt to rise 1 basis point to 1.46 percent.
Interest Rates
Faster inflation is unlikely to prompt the Bank of Japan to raise interest rates as the economy teeters on the verge of its first recession since 2001. Governor Masaaki Shirakawa and his colleagues will keep the benchmark overnight lending rate at 0.5 percent for the rest of the year at least, according to 31 of 33 economists surveyed by Bloomberg last month.
The central bank last month raised its inflation forecast and cut its growth estimate, saying higher costs are squeezing companies and households. The world's second-largest economy probably shrank at an annual 2.3 percent pace last quarter, the first contraction in a year, economists estimate a report will show tomorrow.
Nippon Paper, Japan's second-largest paper maker, said last month it will raise prices by 10 percent in September. Fuel and raw materials are ``rising so rapidly that it's too difficult to recover profits with cost-cutting efforts alone,'' the company said on July 30.
Iranian Revolution
The increase in producer prices was the steepest since January 1981. From a month earlier, prices climbed 2 percent, the fastest pace since April 1980, when oil surged in the wake of the 1979 Iranian Revolution.
Higher commodity costs are also feeding into retail inflation. Consumer prices excluding fresh food, fish and vegetables climbed 1.9 percent in June from a year earlier, the most in a decade.
Some 235 companies went bust in the six months ended June because of rising costs, exceeding the 229 bankruptcies recorded for the same reason in all of 2007, Teikoku Databank reported last month. Transport, food and metal companies led the failures.
Galaxy Airlines, an air cargo operator whose shareholders include SG Holdings Co., the holding company of Sagawa Express Co., last week said it will stop operations in October because of rising fuel and maintenance costs. The company was founded three years ago.
``Small and medium-size companies are really suffering under this cost environment,'' Stefan Worrall, vice president of Japan equity sales at Credit Suisse Group in Tokyo, said on Bloomberg Television.
Oil Eases
Producer-price gains will probably ease in coming months as oil falls and a global slowdown reduces demand for raw materials.
Crude oil has dropped 21 percent since reaching a record $147.27 a barrel on July 11. Retail gasoline prices climbed to a record 185.1 yen a liter ($6.39 a gallon) this month.
Wholesale inflation ``will probably stay around 5 percent through the end of this year and then gradually head in the opposite direction next year,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo.
Even so, producer costs will keep fueling consumer prices for a while, economists said. Ajinomoto Co., the country's biggest foodmaker, last week announced plans to raise prices, and McDonald's Holdings Co. Japan said a Big Mac may soon cost Japanese consumers 30 yen more.
``We expect core prices will rise 2.2 percent in July and 2.3 percent in September,'' said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Even though crude oil prices are being adjusted now, the ongoing cost-push inflation won't weaken easily.''
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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Aug. 12 (Bloomberg) -- Japan's wholesale inflation rate accelerated to a 27-year high in July, squeezing corporate profits, increasing bankruptcies and threatening the economy's longest postwar expansion.
Producer prices, the costs companies pay for energy and raw materials, climbed 7.1 percent from a year earlier after a revised 5.7 percent increase in June, the Bank of Japan said in Tokyo today. The median estimate of 31 economists surveyed by Bloomberg News was for 5.7 percent.
More businesses failed because of rising fuel and raw- material costs in the first half of this year than for all of 2007, according to Teikoku Databank Ltd. Tokyo-based Galaxy Airlines Co. said last week that it will stop air cargo services, and Nippon Paper Group Inc. plans to increase prices for the second time this year.
``Even though oil prices have been coming down in recent weeks, companies will keep trying to raise prices because they've made up for only a fraction of the cost increases they've suffered,'' said Azusa Kato, an economist at BNP Paribas in Tokyo.
The yen traded at 110.15 per dollar as of 11:10 a.m. in Tokyo from 110.14 before the report was published. Japan's currency has fallen 2 percent this month. Government bonds dropped for the first time in five days, causing the yield on 10-year debt to rise 1 basis point to 1.46 percent.
Interest Rates
Faster inflation is unlikely to prompt the Bank of Japan to raise interest rates as the economy teeters on the verge of its first recession since 2001. Governor Masaaki Shirakawa and his colleagues will keep the benchmark overnight lending rate at 0.5 percent for the rest of the year at least, according to 31 of 33 economists surveyed by Bloomberg last month.
The central bank last month raised its inflation forecast and cut its growth estimate, saying higher costs are squeezing companies and households. The world's second-largest economy probably shrank at an annual 2.3 percent pace last quarter, the first contraction in a year, economists estimate a report will show tomorrow.
Nippon Paper, Japan's second-largest paper maker, said last month it will raise prices by 10 percent in September. Fuel and raw materials are ``rising so rapidly that it's too difficult to recover profits with cost-cutting efforts alone,'' the company said on July 30.
Iranian Revolution
The increase in producer prices was the steepest since January 1981. From a month earlier, prices climbed 2 percent, the fastest pace since April 1980, when oil surged in the wake of the 1979 Iranian Revolution.
Higher commodity costs are also feeding into retail inflation. Consumer prices excluding fresh food, fish and vegetables climbed 1.9 percent in June from a year earlier, the most in a decade.
Some 235 companies went bust in the six months ended June because of rising costs, exceeding the 229 bankruptcies recorded for the same reason in all of 2007, Teikoku Databank reported last month. Transport, food and metal companies led the failures.
Galaxy Airlines, an air cargo operator whose shareholders include SG Holdings Co., the holding company of Sagawa Express Co., last week said it will stop operations in October because of rising fuel and maintenance costs. The company was founded three years ago.
``Small and medium-size companies are really suffering under this cost environment,'' Stefan Worrall, vice president of Japan equity sales at Credit Suisse Group in Tokyo, said on Bloomberg Television.
Oil Eases
Producer-price gains will probably ease in coming months as oil falls and a global slowdown reduces demand for raw materials.
Crude oil has dropped 21 percent since reaching a record $147.27 a barrel on July 11. Retail gasoline prices climbed to a record 185.1 yen a liter ($6.39 a gallon) this month.
Wholesale inflation ``will probably stay around 5 percent through the end of this year and then gradually head in the opposite direction next year,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo.
Even so, producer costs will keep fueling consumer prices for a while, economists said. Ajinomoto Co., the country's biggest foodmaker, last week announced plans to raise prices, and McDonald's Holdings Co. Japan said a Big Mac may soon cost Japanese consumers 30 yen more.
``We expect core prices will rise 2.2 percent in July and 2.3 percent in September,'' said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Even though crude oil prices are being adjusted now, the ongoing cost-push inflation won't weaken easily.''
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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U.K. House Prices Drop as Loan Squeeze Limits Buyers
By Jennifer Ryan
Aug. 12 (Bloomberg) -- U.K. house prices fell in July as the squeeze on credit locked out buyers and brought the property market to a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said.
The number of real-estate agents and surveyors saying prices dropped exceeded those reporting gains by 83.9 percentage points, the group said today in London. The reading was 94.7 percentage points in April, the most since the series began in 1978.
U.K. banks approved the fewest mortgages since at least 1999 in June and data yesterday showed that they haven't passed on most of the Bank of England's interest-rate cuts since December. The housing-market slump risks pushing the country into a recession that policy makers can do little to prevent as they combat inflation, which reached an 11-year high in July.
``The lack of mortgage finance has brought the housing market to a virtual standstill, with first-time buyers rapidly becoming an endangered species,'' Ian Perry, a spokesman for RICS, said in a statement.
All 11 regions tracked by RICS showed negative price balances on the month, led by the West Midlands, with a reading of minus 93. In London, the balance of prices measured was at minus 72, compared with minus 78 in June.
Credit Squeeze
House prices fell the most in at least a quarter-century from a year earlier in July, according to HBOS Plc. Banks have curbed lending as they nurse losses and writedowns from the U.S. subprime mortgage market collapse totaling almost $500 billion worldwide.
The Department for Communities and Local Government said today house prices rose 0.6 percent in June from a year earlier, the least since at least February 2003, and fell 0.7 percent on the month.
Gross mortgage lending fell 32 percent in June from a year earlier to 23.6 billion pounds ($44.8 billion), the Council of Mortgage Lenders said today. The reading is down 4 percent from May.
``Falling prices and the fear of further reductions yet to come have caused both buyers and the lending institutions to withdraw from the arena,'' RICS cited Andrew Grant, a real- estate agent in Worcester in the West Midlands, as saying.
The average cost of a loan fixed for 24 months with a 25 percent deposit was 6.36 percent last month, down from an eight- year high of 6.6 percent in June, the central bank said yesterday. The bank kept its main interest rate unchanged for a fourth month at 5 percent last week after three cuts since December.
Retail Slump
The squeeze on credit has also prompted consumers to spend less. Sales in U.K. shops open at least a year fell an annual 0.9 percent in July, the British Retail Consortium, which represents 80 percent of stores, said in a separate report. Clothing, footwear, furniture and household goods led the decline.
Accelerating inflation has still prevented the Bank of England from cutting interest rates to stave off a recession. Consumer prices rose 4.4 percent in July from a year earlier, more than double the Bank of England's 2 percent target, the Office for National Statistics said today in London.
``It seems very unlikely that the Bank of England will cut interest rates for some time to come,'' Howard Archer, an economist at Global Insight Inc. in London, said after the report on inflation. ``Indeed, it is very possible that the next move could be to raise interest rates, which would clearly be very bad news for the housing market.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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Aug. 12 (Bloomberg) -- U.K. house prices fell in July as the squeeze on credit locked out buyers and brought the property market to a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said.
The number of real-estate agents and surveyors saying prices dropped exceeded those reporting gains by 83.9 percentage points, the group said today in London. The reading was 94.7 percentage points in April, the most since the series began in 1978.
U.K. banks approved the fewest mortgages since at least 1999 in June and data yesterday showed that they haven't passed on most of the Bank of England's interest-rate cuts since December. The housing-market slump risks pushing the country into a recession that policy makers can do little to prevent as they combat inflation, which reached an 11-year high in July.
``The lack of mortgage finance has brought the housing market to a virtual standstill, with first-time buyers rapidly becoming an endangered species,'' Ian Perry, a spokesman for RICS, said in a statement.
All 11 regions tracked by RICS showed negative price balances on the month, led by the West Midlands, with a reading of minus 93. In London, the balance of prices measured was at minus 72, compared with minus 78 in June.
Credit Squeeze
House prices fell the most in at least a quarter-century from a year earlier in July, according to HBOS Plc. Banks have curbed lending as they nurse losses and writedowns from the U.S. subprime mortgage market collapse totaling almost $500 billion worldwide.
The Department for Communities and Local Government said today house prices rose 0.6 percent in June from a year earlier, the least since at least February 2003, and fell 0.7 percent on the month.
Gross mortgage lending fell 32 percent in June from a year earlier to 23.6 billion pounds ($44.8 billion), the Council of Mortgage Lenders said today. The reading is down 4 percent from May.
``Falling prices and the fear of further reductions yet to come have caused both buyers and the lending institutions to withdraw from the arena,'' RICS cited Andrew Grant, a real- estate agent in Worcester in the West Midlands, as saying.
The average cost of a loan fixed for 24 months with a 25 percent deposit was 6.36 percent last month, down from an eight- year high of 6.6 percent in June, the central bank said yesterday. The bank kept its main interest rate unchanged for a fourth month at 5 percent last week after three cuts since December.
Retail Slump
The squeeze on credit has also prompted consumers to spend less. Sales in U.K. shops open at least a year fell an annual 0.9 percent in July, the British Retail Consortium, which represents 80 percent of stores, said in a separate report. Clothing, footwear, furniture and household goods led the decline.
Accelerating inflation has still prevented the Bank of England from cutting interest rates to stave off a recession. Consumer prices rose 4.4 percent in July from a year earlier, more than double the Bank of England's 2 percent target, the Office for National Statistics said today in London.
``It seems very unlikely that the Bank of England will cut interest rates for some time to come,'' Howard Archer, an economist at Global Insight Inc. in London, said after the report on inflation. ``Indeed, it is very possible that the next move could be to raise interest rates, which would clearly be very bad news for the housing market.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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French July Inflation Stays at 4%, Fastest in at Least 12 Years
By Sandrine Rastello
Aug. 12 (Bloomberg) -- Inflation in France held at the fastest pace in at least 12 years in July, led by rising food and oil costs.
Consumer prices climbed an annual 4.0 percent based on the European Union's methodology, matching the June rate, which was the highest since Insee, the Paris-based statistics office, began reporting the data in 1996. Economists expected the rate to rise to 4.1 percent, a Bloomberg News survey of 20 forecasts showed. Prices fell 0.3 percent from June.
Faster inflation is making it difficult for the European Central Bank to cut borrowing costs even as President Jean- Claude Trichet says growth will be ``particularly weak'' through the third quarter. Crude oil, which reached a record high of $147.27 a barrel on July 11, has since lost more than 20 percent, indicating consumer prices may rise at a slower pace this month.
``We expect the ECB to remain on hold and cut rates in early 2009 because its room for maneuver is very limited,'' said Tullia Bucco, an economist at Unicredit Banca Mobiliare in Milan. ``Growth has slowed dramatically over the past few months.''
The ECB raised its key rate by a quarter point to 4.25 percent last month, and left it unchanged in August as expansion cools. Higher borrowing costs add to constraints on companies already struggling with a euro around $1.50 at a time when an economic slowdown in the U.S. is damping global expansion.
'Worrying Level'
The oil price's 58 percent increase over the past year has eroded consumer spending and hurt industrial production, which dropped 1.4 percent in the second quarter. Sentiment among French manufacturers fell to the lowest in five years in June, the Bank of France said last month.
Inflation in the 15-nation euro region probably accelerated to 4.1 percent in July, according to the median forecast of 38 economists estimates in a Bloomberg survey. Final EU inflation data will be released August 14.
ECB council member Klaus Liebscher said policy makers remain focused on the ``worrying'' level of inflation, Market News reported today, citing an interview.
Still, Eonia forward contracts show investors scaled back bets on higher ECB rates after a slew of data showed the economy may have contracted in the second quarter. The yield on the December contract was 4.28 today, down from 4.37 at the beginning of the month.
Under the French methodology, which differs from the EU one mostly in the way drug costs are taken into account, prices rose 3.6 percent July from a year earlier, matching the previous month's rate.
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net;
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Aug. 12 (Bloomberg) -- Inflation in France held at the fastest pace in at least 12 years in July, led by rising food and oil costs.
Consumer prices climbed an annual 4.0 percent based on the European Union's methodology, matching the June rate, which was the highest since Insee, the Paris-based statistics office, began reporting the data in 1996. Economists expected the rate to rise to 4.1 percent, a Bloomberg News survey of 20 forecasts showed. Prices fell 0.3 percent from June.
Faster inflation is making it difficult for the European Central Bank to cut borrowing costs even as President Jean- Claude Trichet says growth will be ``particularly weak'' through the third quarter. Crude oil, which reached a record high of $147.27 a barrel on July 11, has since lost more than 20 percent, indicating consumer prices may rise at a slower pace this month.
``We expect the ECB to remain on hold and cut rates in early 2009 because its room for maneuver is very limited,'' said Tullia Bucco, an economist at Unicredit Banca Mobiliare in Milan. ``Growth has slowed dramatically over the past few months.''
The ECB raised its key rate by a quarter point to 4.25 percent last month, and left it unchanged in August as expansion cools. Higher borrowing costs add to constraints on companies already struggling with a euro around $1.50 at a time when an economic slowdown in the U.S. is damping global expansion.
'Worrying Level'
The oil price's 58 percent increase over the past year has eroded consumer spending and hurt industrial production, which dropped 1.4 percent in the second quarter. Sentiment among French manufacturers fell to the lowest in five years in June, the Bank of France said last month.
Inflation in the 15-nation euro region probably accelerated to 4.1 percent in July, according to the median forecast of 38 economists estimates in a Bloomberg survey. Final EU inflation data will be released August 14.
ECB council member Klaus Liebscher said policy makers remain focused on the ``worrying'' level of inflation, Market News reported today, citing an interview.
Still, Eonia forward contracts show investors scaled back bets on higher ECB rates after a slew of data showed the economy may have contracted in the second quarter. The yield on the December contract was 4.28 today, down from 4.37 at the beginning of the month.
Under the French methodology, which differs from the EU one mostly in the way drug costs are taken into account, prices rose 3.6 percent July from a year earlier, matching the previous month's rate.
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net;
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U.K. Inflation Reaches 4.4%, More Than Double Target
By Svenja O'Donnell
Enlarge Image/Details
Aug. 12 (Bloomberg) -- U.K. inflation accelerated to more than double the central bank's 2 percent target in July, making it harder for policy makers to cut interest rates as the threat of a recession looms.
Consumer prices rose 4.4 percent from a year earlier, breaching the government's 3 percent upper limit for a third month and the most since comparable records began in 1997, the Office for National Statistics said today in London. That exceeds the 4.2 percent median forecast of 38 economists in a Bloomberg News survey.
House prices fell in July and retail sales dropped as Britain veered closer to a recession, reports showed today. Record oil and food costs have kept inflation above the target for 10 months, prompting Bank of England Governor Mervyn King and his colleagues to refrain from interest-rate reductions since April.
``The risk now is that inflation rises above 5 percent,'' James Knightley, an economist at ING Financial Markets in London, said in an interview on Bloomberg Television. ``There is a risk of a rate hike, but the weakness in activity suggests that they're more likely to stay on hold.''
Knightley predicted that the Bank of England will cut the benchmark interest rate ``quite aggressively'' next year from the current level of 5 percent.
Brown's Woes
The pound rose as much as 0.2 percent against the dollar after the report before erasing its gains and staying close to a 21-month low. The U.K. currency was at $1.9014 as of 10:25 a.m. in London compared with from $1.9108 yesterday. It was at 78.43 pence per euro compared with 78.03 pence.
Rising living costs are deepening the unpopularity of Prime Minister Gordon Brown, whose governing Labour Party trails behind the opposition Conservative Party by 20 percentage points, according to a YouGov Plc survey published on Aug. 10.
Consumer-price increases are also accelerating in the euro region, where the inflation rate rose to 4.1 percent in July, the highest since April 1992 and more than double the European Central Bank's ceiling of 2 percent.
The U.K. inflation rate jumped from 3.8 percent in June. The 0.6 percentage point increase was the biggest since the series began in 1997. Based on a constructed index using retail- price data, it was the largest gain since 1991, the statistics office said.
King will have to write his third letter of explanation to the government unless inflation slows to 3 percent in August, which would require an unprecedented drop in consumer prices.
Letter of Explanation
The letter, setting out how he would return inflation to target, is required under rules established when the bank won rate-setting independence in 1997.
Consumer prices stayed unchanged on the month in July. The inflation rate jumped after the cost of food and non-alcoholic drinks rose 12.3 percent from a year earlier, the most on record, and energy prices increased, the statistics office said.
Oil prices have dropped 19 percent since reaching a record above $147 a barrel on July 11. They are still more than 60 percent higher than a year ago. Producer prices increased in July at the fastest pace since records began in 1986, the statistics office said yesterday.
So-called core inflation, which strips out costs of food, energy, tobacco and alcoholic beverages, accelerated to 1.9 percent in July, the most since June 2007.
Pay Pressure
Retail-price inflation, which pay negotiators use as a measure of the cost of living, quickened to 5 percent, the fastest pace since 1991. Excluding mortgage-interest payments, it reached 5.3 percent, the most since 1992, today's report showed.
Faster inflation has yet to stoke pay pressures. Wage data due tomorrow will probably show salaries including bonuses increased 3.6 percent in the second quarter, the weakest pace in almost a year, according to the median of 30 forecasts.
Slowing economic expansion may curb inflation. The International Monetary Fund last week slashed its forecasts for U.K. growth to 1.4 percent this year and 1.1 percent in 2009. The economy expanded 3 percent in 2007.
House prices fell in July as the squeeze on credit locked out buyers and brought the property market to a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said today. Sales in shops open at least a year fell an annual 0.9 percent, the British Retail Consortium said in a separate report.
Slowing economic growth has pushed up unemployment. Claims for jobless benefits probably climbed for a sixth month, increasing 17,000 from June, according to the median forecast of 31 economists in a Bloomberg News survey. The Office for National Statistics will publish the figures tomorrow.
The Bank of England predicted on May 14 that growth will slow to a 1 percent annual pace in the first quarter of 2009, the weakest since 1992. King said then that there may be ``an odd quarter or two of negative growth,'' while predicting inflation would quicken to more than 4 percent. The bank will release new forecasts tomorrow.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Enlarge Image/Details
Aug. 12 (Bloomberg) -- U.K. inflation accelerated to more than double the central bank's 2 percent target in July, making it harder for policy makers to cut interest rates as the threat of a recession looms.
Consumer prices rose 4.4 percent from a year earlier, breaching the government's 3 percent upper limit for a third month and the most since comparable records began in 1997, the Office for National Statistics said today in London. That exceeds the 4.2 percent median forecast of 38 economists in a Bloomberg News survey.
House prices fell in July and retail sales dropped as Britain veered closer to a recession, reports showed today. Record oil and food costs have kept inflation above the target for 10 months, prompting Bank of England Governor Mervyn King and his colleagues to refrain from interest-rate reductions since April.
``The risk now is that inflation rises above 5 percent,'' James Knightley, an economist at ING Financial Markets in London, said in an interview on Bloomberg Television. ``There is a risk of a rate hike, but the weakness in activity suggests that they're more likely to stay on hold.''
Knightley predicted that the Bank of England will cut the benchmark interest rate ``quite aggressively'' next year from the current level of 5 percent.
Brown's Woes
The pound rose as much as 0.2 percent against the dollar after the report before erasing its gains and staying close to a 21-month low. The U.K. currency was at $1.9014 as of 10:25 a.m. in London compared with from $1.9108 yesterday. It was at 78.43 pence per euro compared with 78.03 pence.
Rising living costs are deepening the unpopularity of Prime Minister Gordon Brown, whose governing Labour Party trails behind the opposition Conservative Party by 20 percentage points, according to a YouGov Plc survey published on Aug. 10.
Consumer-price increases are also accelerating in the euro region, where the inflation rate rose to 4.1 percent in July, the highest since April 1992 and more than double the European Central Bank's ceiling of 2 percent.
The U.K. inflation rate jumped from 3.8 percent in June. The 0.6 percentage point increase was the biggest since the series began in 1997. Based on a constructed index using retail- price data, it was the largest gain since 1991, the statistics office said.
King will have to write his third letter of explanation to the government unless inflation slows to 3 percent in August, which would require an unprecedented drop in consumer prices.
Letter of Explanation
The letter, setting out how he would return inflation to target, is required under rules established when the bank won rate-setting independence in 1997.
Consumer prices stayed unchanged on the month in July. The inflation rate jumped after the cost of food and non-alcoholic drinks rose 12.3 percent from a year earlier, the most on record, and energy prices increased, the statistics office said.
Oil prices have dropped 19 percent since reaching a record above $147 a barrel on July 11. They are still more than 60 percent higher than a year ago. Producer prices increased in July at the fastest pace since records began in 1986, the statistics office said yesterday.
So-called core inflation, which strips out costs of food, energy, tobacco and alcoholic beverages, accelerated to 1.9 percent in July, the most since June 2007.
Pay Pressure
Retail-price inflation, which pay negotiators use as a measure of the cost of living, quickened to 5 percent, the fastest pace since 1991. Excluding mortgage-interest payments, it reached 5.3 percent, the most since 1992, today's report showed.
Faster inflation has yet to stoke pay pressures. Wage data due tomorrow will probably show salaries including bonuses increased 3.6 percent in the second quarter, the weakest pace in almost a year, according to the median of 30 forecasts.
Slowing economic expansion may curb inflation. The International Monetary Fund last week slashed its forecasts for U.K. growth to 1.4 percent this year and 1.1 percent in 2009. The economy expanded 3 percent in 2007.
House prices fell in July as the squeeze on credit locked out buyers and brought the property market to a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said today. Sales in shops open at least a year fell an annual 0.9 percent, the British Retail Consortium said in a separate report.
Slowing economic growth has pushed up unemployment. Claims for jobless benefits probably climbed for a sixth month, increasing 17,000 from June, according to the median forecast of 31 economists in a Bloomberg News survey. The Office for National Statistics will publish the figures tomorrow.
The Bank of England predicted on May 14 that growth will slow to a 1 percent annual pace in the first quarter of 2009, the weakest since 1992. King said then that there may be ``an odd quarter or two of negative growth,'' while predicting inflation would quicken to more than 4 percent. The bank will release new forecasts tomorrow.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Indonesian Rupiah, Philippine Peso to Outperform, JPMorgan Says
By Patricia Lui
Aug. 12 (Bloomberg) -- Indonesia's rupiah and the Philippine peso will outperform the currencies of Singapore, Taiwan and Malaysia in the second half of the year, according to JPMorgan Chase & Co.
Prospects for slower inflation may make Indonesian and Philippine bond yields attractive to overseas investors and domestic demand will help shield them from a global slowdown, according to the third-biggest U.S. bank. By contrast, slower export growth in Malaysia, Singapore and Taiwan will make their currencies the worst performers in the second half of 2008, according to JPMorgan.
A recovery in the U.S. dollar, estimates for slower Asian growth and the central banks' preference for weaker currencies to help revive their economies prompted JPMorgan to cut its forecasts for Singapore and Taiwan's dollars as well as the Malaysian ringgit, the bank's strategists, Claudio Piron and Yen Ping Ho, wrote in a research note today.
``Asian currency weakness in the second half of the year will be focused on the very open industrialized economies of the won, Taiwan and Singapore dollars and Malaysia's ringgit as the electronics cycle takes the brunt of the slowdown in major economies,'' the analysts wrote.
The Indonesian rupiah may strengthen 2 percent to 9,000 against the dollar, JPMorgan forecast. The currency traded at 9,183 as of 2 p.m. in Jakarta, according to data compiled by Bloomberg.
Top Performers
The Philippine peso and the rupiah are among the four top performers of the 10 most-active Asian currencies outside Japan so far in the second half of 2008, Bloomberg data show, as the central banks raised interest rates to fight inflation.
The ``rupiah and peso are expected to outperform Asian currencies due to their domestic demand-driven economies and improving real yields on falling inflation, attracting portfolio inflows,'' Singapore-based Piron and Ho wrote.
Singapore's exports may decline as much as 4 percent this year, the government said yesterday, compared with earlier forecasts for growth of as little as 2 percent. The government last week cut its 2008 growth forecast for a second time this year. The city-state's dollar has retreated 4.7 percent after touching an all-time high of S$1.3450 versus the U.S. currency on July 16.
The local currency, which is the worst performer in the region this month, may extend losses to S$1.43 by year-end, JPMorgan forecast. It last traded at $1.4119, according to data compiled by Bloomberg.
Slowing Exports
Taiwan's dollar declined yesterday to the weakest level in more than five months as the island reported its first trade deficit since February 2006 and export growth slowed to 8 percent in July from 21 percent the previous month.
Malaysia's ringgit fell for an eighth day, the longest losing streak since a peg to the dollar was scrapped in July 2005, as the trade ministry last month cut its forecast for export growth this year to 6 percent from an earlier estimate of 7 percent. Industrial production grew at the slowest pace in 10 months in June, a report showed yesterday.
The ringgit, trading at 3.3360 a dollar, will fall to 3.3800 by year-end, and Taiwan's dollar, trading at NT$31.165, will decline to NT$32.80, the bank said in its note.
``Asian currencies are expected to resume their broad appreciation trend in the first quarter of 2009 when growth expectations recover,'' the research report said.
South Korea's won will remain weak in 2009 due to ``deterioration'' in the balance of payments and exporters who ``overhedged'' by selling dollars in advance, Piron and Ho wrote, predicting the won will fall to 1,050 a dollar by year- end and to 1,100 by end-2009. The currency last traded at 1,034.50, according to Seoul Money Brokerage Services Ltd.
To contact the report on this story: Patricia Lui in Singapore at plui4@bloomberg.net
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Aug. 12 (Bloomberg) -- Indonesia's rupiah and the Philippine peso will outperform the currencies of Singapore, Taiwan and Malaysia in the second half of the year, according to JPMorgan Chase & Co.
Prospects for slower inflation may make Indonesian and Philippine bond yields attractive to overseas investors and domestic demand will help shield them from a global slowdown, according to the third-biggest U.S. bank. By contrast, slower export growth in Malaysia, Singapore and Taiwan will make their currencies the worst performers in the second half of 2008, according to JPMorgan.
A recovery in the U.S. dollar, estimates for slower Asian growth and the central banks' preference for weaker currencies to help revive their economies prompted JPMorgan to cut its forecasts for Singapore and Taiwan's dollars as well as the Malaysian ringgit, the bank's strategists, Claudio Piron and Yen Ping Ho, wrote in a research note today.
``Asian currency weakness in the second half of the year will be focused on the very open industrialized economies of the won, Taiwan and Singapore dollars and Malaysia's ringgit as the electronics cycle takes the brunt of the slowdown in major economies,'' the analysts wrote.
The Indonesian rupiah may strengthen 2 percent to 9,000 against the dollar, JPMorgan forecast. The currency traded at 9,183 as of 2 p.m. in Jakarta, according to data compiled by Bloomberg.
Top Performers
The Philippine peso and the rupiah are among the four top performers of the 10 most-active Asian currencies outside Japan so far in the second half of 2008, Bloomberg data show, as the central banks raised interest rates to fight inflation.
The ``rupiah and peso are expected to outperform Asian currencies due to their domestic demand-driven economies and improving real yields on falling inflation, attracting portfolio inflows,'' Singapore-based Piron and Ho wrote.
Singapore's exports may decline as much as 4 percent this year, the government said yesterday, compared with earlier forecasts for growth of as little as 2 percent. The government last week cut its 2008 growth forecast for a second time this year. The city-state's dollar has retreated 4.7 percent after touching an all-time high of S$1.3450 versus the U.S. currency on July 16.
The local currency, which is the worst performer in the region this month, may extend losses to S$1.43 by year-end, JPMorgan forecast. It last traded at $1.4119, according to data compiled by Bloomberg.
Slowing Exports
Taiwan's dollar declined yesterday to the weakest level in more than five months as the island reported its first trade deficit since February 2006 and export growth slowed to 8 percent in July from 21 percent the previous month.
Malaysia's ringgit fell for an eighth day, the longest losing streak since a peg to the dollar was scrapped in July 2005, as the trade ministry last month cut its forecast for export growth this year to 6 percent from an earlier estimate of 7 percent. Industrial production grew at the slowest pace in 10 months in June, a report showed yesterday.
The ringgit, trading at 3.3360 a dollar, will fall to 3.3800 by year-end, and Taiwan's dollar, trading at NT$31.165, will decline to NT$32.80, the bank said in its note.
``Asian currencies are expected to resume their broad appreciation trend in the first quarter of 2009 when growth expectations recover,'' the research report said.
South Korea's won will remain weak in 2009 due to ``deterioration'' in the balance of payments and exporters who ``overhedged'' by selling dollars in advance, Piron and Ho wrote, predicting the won will fall to 1,050 a dollar by year- end and to 1,100 by end-2009. The currency last traded at 1,034.50, according to Seoul Money Brokerage Services Ltd.
To contact the report on this story: Patricia Lui in Singapore at plui4@bloomberg.net
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Yuan Drops to Seven-Week Low as Inflation Cools; Bonds Decline
By Judy Chen and Belinda Cao
Aug. 12 (Bloomberg) -- The yuan fell, touching a seven-week low, on speculation slowing inflation will prompt policy makers to aid exporters by limiting currency gains. Bonds fell.
The Chinese currency has declined 0.6 percent since China's Politburo, the Communist Party's top decision-making body, said on July 25 that maintaining economic growth is as important as controlling inflation. A government report today showed consumer prices rose in July at the slowest pace in 10 months after the yuan climbed 6.6 percent against the dollar in the first half.
``As inflationary pressure eases, policy makers are more concerned about the effect of yuan appreciation on exports,'' said Wang Qing, chief China economist at Morgan Stanley in Hong Kong. ``The government will slow the appreciation pace, and even let the yuan depreciate for one or two months.''
The yuan dropped 0.08 percent to 6.8632 a dollar as of 5:30 p.m. in Shanghai, from 6.8577 late yesterday, according to the China Foreign Exchange Trade System. It today reached 6.8760 per dollar, the weakest since June 23.
Yuan declines increase the amount of local currency exporters receive for their overseas sales and make Chinese products more competitive in the global market.
Consumer prices rose 6.3 percent from a year earlier last month, after increasing 7.1 percent in June, the statistics bureau said today in Beijing. That's less than the 6.5 percent gain forecast by economists in a Bloomberg News survey.
China has allowed the yuan to decline 0.1 percent since the end of June to help exporters weather a global economic slowdown and deter so-called hot money, speculative funds attracted by anticipated gains in the currency.
Managed Lower
The central bank manages the yuan against a basket of currencies by setting a daily reference rate versus the dollar, around which the local currency is permitted to trade by up to 0.5 percent on either side. The rate, set at 6.8659 per dollar today, has been reduced on each of the past 10 days, the longest stretch of declines since a peg to the dollar ended in 2005.
It'll be especially tough to make money on the yuan during the Olympics, said Sergey Dergachev, one of the emerging-market portfolio managers at Union Investment in Frankfurt, Germany's third-biggest fund manager, with the equivalent of $285 billion in assets.
``For the next two to three weeks, we'll see zero movement because we have the Olympic games there, and all the attention will be to support the events and security issues,'' Dergachev said.
Bonds Fall
China's 10-year government bonds fell on concern inflation will exceed yields for some time to come.
``Even if the inflation rate will drop to 5 percent next year, the current yield, 4.5 percent on 10-year debt, won't be enough to catch up with that,'' said He Xiuhong, a fixed-income analyst at GF Securities Co. in Guangzhou, the nation's third- largest brokerage by revenue.
The central bank sold 62 billion yuan ($9 billion) of one- year sterilization bills, the most of the maturity since April 22, in today's open-market operations. The yield was unchanged at 4.06 percent.
``The central bank has to be more aggressive in absorbing liquidity in the financial system if it's flooded with cash resulting from fast foreign-exchange inflows,'' said Zhao Qingming, an economic researcher in Beijing at China Construction Bank Corp.
The yield on the 4.41 percent bond due June 2018 climbed 2 basis points to 4.49 percent. The price of the security fell 0.16 per 100 yuan face amount to 99.36. A basis point is 0.01 percentage point.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Belinda Cao in Beijing at lcao4@bloomberg.net
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Aug. 12 (Bloomberg) -- The yuan fell, touching a seven-week low, on speculation slowing inflation will prompt policy makers to aid exporters by limiting currency gains. Bonds fell.
The Chinese currency has declined 0.6 percent since China's Politburo, the Communist Party's top decision-making body, said on July 25 that maintaining economic growth is as important as controlling inflation. A government report today showed consumer prices rose in July at the slowest pace in 10 months after the yuan climbed 6.6 percent against the dollar in the first half.
``As inflationary pressure eases, policy makers are more concerned about the effect of yuan appreciation on exports,'' said Wang Qing, chief China economist at Morgan Stanley in Hong Kong. ``The government will slow the appreciation pace, and even let the yuan depreciate for one or two months.''
The yuan dropped 0.08 percent to 6.8632 a dollar as of 5:30 p.m. in Shanghai, from 6.8577 late yesterday, according to the China Foreign Exchange Trade System. It today reached 6.8760 per dollar, the weakest since June 23.
Yuan declines increase the amount of local currency exporters receive for their overseas sales and make Chinese products more competitive in the global market.
Consumer prices rose 6.3 percent from a year earlier last month, after increasing 7.1 percent in June, the statistics bureau said today in Beijing. That's less than the 6.5 percent gain forecast by economists in a Bloomberg News survey.
China has allowed the yuan to decline 0.1 percent since the end of June to help exporters weather a global economic slowdown and deter so-called hot money, speculative funds attracted by anticipated gains in the currency.
Managed Lower
The central bank manages the yuan against a basket of currencies by setting a daily reference rate versus the dollar, around which the local currency is permitted to trade by up to 0.5 percent on either side. The rate, set at 6.8659 per dollar today, has been reduced on each of the past 10 days, the longest stretch of declines since a peg to the dollar ended in 2005.
It'll be especially tough to make money on the yuan during the Olympics, said Sergey Dergachev, one of the emerging-market portfolio managers at Union Investment in Frankfurt, Germany's third-biggest fund manager, with the equivalent of $285 billion in assets.
``For the next two to three weeks, we'll see zero movement because we have the Olympic games there, and all the attention will be to support the events and security issues,'' Dergachev said.
Bonds Fall
China's 10-year government bonds fell on concern inflation will exceed yields for some time to come.
``Even if the inflation rate will drop to 5 percent next year, the current yield, 4.5 percent on 10-year debt, won't be enough to catch up with that,'' said He Xiuhong, a fixed-income analyst at GF Securities Co. in Guangzhou, the nation's third- largest brokerage by revenue.
The central bank sold 62 billion yuan ($9 billion) of one- year sterilization bills, the most of the maturity since April 22, in today's open-market operations. The yield was unchanged at 4.06 percent.
``The central bank has to be more aggressive in absorbing liquidity in the financial system if it's flooded with cash resulting from fast foreign-exchange inflows,'' said Zhao Qingming, an economic researcher in Beijing at China Construction Bank Corp.
The yield on the 4.41 percent bond due June 2018 climbed 2 basis points to 4.49 percent. The price of the security fell 0.16 per 100 yuan face amount to 99.36. A basis point is 0.01 percentage point.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Belinda Cao in Beijing at lcao4@bloomberg.net
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UBS to Split Investment Bank From Wealth Management After Loss
By Elena Logutenkova
Aug. 12 (Bloomberg) -- UBS AG, Switzerland's biggest bank, announced plans to separate its investment banking and wealth management units after a fourth straight quarterly loss caused by subprime-related writedowns.
UBS rose as much as 3.8 percent in Swiss trading after Chairman Peter Kurer said today that the Zurich-based bank will give its three business divisions greater autonomy to increase ``strategic flexibility.'' The decision adds to speculation the company may jettison the securities unit, JPMorgan Chase & Co. analyst Kian Abouhossein said in a note to clients.
Kurer is abandoning his predecessor Marcel Ospel's push to integrate the divisions after record losses at the securities unit led to net withdrawals from the private bank for the first time in almost eight years. UBS, the European bank hardest hit by the collapse of the U.S. subprime mortgage market, has faced calls from investors including former president Luqman Arnold to split off the investment bank.
``They bought themselves some time,'' said Joerg de Vries- Hippen, who oversees about $26 billion, including UBS stock, as chief investment officer for European equities at Allianz Global Investors in Frankfurt. ``By separating the business units they are showing that they are listening to investors but not going as far as breaking up the universal bank business model.''
UBS rose 22 centimes, or 1 percent, to 23.40 francs by 10:31 a.m. The stock is down 49 percent this year, the fourth-worst performance on the 71-company Bloomberg Europe Banks and Financial Services Index.
`New Problems'
The bank reported a second-quarter net loss of 358 million Swiss francs ($329 million), compared with a 5.55 billion-franc profit a year before, and said it doesn't expect the ``adverse economic and financial trends'' to improve in the second half. About 3.8 billion francs in tax credits cushioned the loss.
``There are constantly new problems coming up at the investment bank and this is really taking a toll on the core wealth management franchise,'' said Florian Esterer, who helps oversee about $63 billion at Swisscanto Asset Management.
Rich clients at UBS's wealth management units withdrew 17.3 billion francs more than they added in the quarter, triple the 5 billion-franc estimate of analysts. The division, which oversaw 1.84 trillion francs at the end of March, attracted an average of 37.9 billion francs in each quarter last year.
Pretax profit at the wealth management international and Switzerland unit fell 11 percent to 1.27 billion francs, while wealth management in the U.S. had a pretax loss of 741 million francs on provisions to settle a U.S. probe into auction-rate securities. The investment bank had a loss of 5.23 billion francs after about $5.1 billion in writedowns. The bank said it will continue to reduce staffing, costs and risky assets.
`Pressure' to Continue
``The measures we announced today will not fix our reputational challenges overnight,'' Chief Financial Officer Marco Suter said at a news conference. ``Therefore we expect the pressure on net new money to continue in the short term.''
UBS announced today that John Cryan, currently head of the financial institutions group at the investment bank, will replace Suter, 50, as CFO. The bank hired Markus U. Diethelm from Zurich- based Swiss Reinsurance Co. as group general counsel.
Chief Executive Officer Marcel Rohner, 43, and Kurer, 59, have announced plans to cut 5,500 jobs, including 2,600 at the securities unit. Abouhossein at JPMorgan said last week that UBS should eliminate an additional 15 percent of the investment bank's more than 21,000 employees.
`Talent' Rushing Out
UBS brought in Jerker Johansson, 52, from Morgan Stanley in mid-March to run the division. A mistimed bet on the U.S. mortgage market led to more than $38 billion in writedowns at the securities unit in the nine months through March, and 25.4 billion francs of net losses, the most of any bank. UBS raised more than 30 billion francs from investors to replenish capital eroded by losses.
The company's private banking business has struggled to stem defections among advisers and wealthy clients, even as Zurich- based Credit Suisse Group AG and Julius Baer Holding AG have attracted more funds and stepped up hiring. UBS announced yesterday that five people from its Zurich-based unit that services U.S. clients resigned.
``Talent in private banking is rushing out the door to competitors who are taking advantage of the bank's difficult situation,'' said Bernhard Bauhofer, the founder of Wollerau, Switzerland-based consulting firm Sparring Partners GmbH and author of ``Reputation Management.''
Credit Suisse's wealth management unit added a net 15.4 billion francs in the second quarter, the most in two years, after hiring 120 advisers in three months. Julius Baer said wealthy clients invested 8 billion francs in the first half as 49 new relationship managers joined the firm.
Regulatory Probes
UBS's management has also been grappling with regulatory probes in the U.S. The bank said last week it will buy back as much as $18.6 billion of auction-rate securities and pay $150 million of fines, the largest settlement in a U.S. investigation into whether banks stuck clients with hard-to-sell bonds. The bank set aside about $900 million in the second quarter to account for the settlement.
UBS is also under investigation in the U.S. over whether it helped clients evade American taxes. The bank said last month it will stop servicing accounts for American clients at units that aren't licensed in the U.S., in response to an Internal Revenue Service summons for customer information as part of the tax probe. The Swiss Finance Ministry is evaluating whether UBS should go along with the IRS's request.
Dillon Read
UBS was among the first stung by the subprime contagion when its Dillon Read Capital Management LP hedge fund, run by former investment banking chief John Costas, 51, lost 150 million francs in the first quarter of last year. By May that year, UBS decided to close it, and in July CEO Peter Wuffli, 50, stepped down.
Losses also led to the departures of executives including finance chief Clive Standish, 55, and Huw Jenkins, 50, the head of the investment bank. Ospel, 58, resigned in April after shareholders demanded he take responsibility for the bank's woes.
Financial institutions worldwide have reported about $493 billion of writedowns tied to the collapse of the U.S. subprime market, and turned to investors for $353 billion of capital, data compiled by Bloomberg show.
Kurer, in response to criticism from investors including former Arnold, 58, pledged to review the bank's business model and bring more financial experts onto the board of directors.
UBS today said it will propose the election of Sally Bott, BP Plc's group human resources director, Rainer-Marc Frey, founder and chairman of Horizon21, Bruno Gehrig, chairman of Swiss Life Holding AG and William G. Parrett, former CEO of Deloitte Touche Tohmatsu to the board of directors.
To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net
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Aug. 12 (Bloomberg) -- UBS AG, Switzerland's biggest bank, announced plans to separate its investment banking and wealth management units after a fourth straight quarterly loss caused by subprime-related writedowns.
UBS rose as much as 3.8 percent in Swiss trading after Chairman Peter Kurer said today that the Zurich-based bank will give its three business divisions greater autonomy to increase ``strategic flexibility.'' The decision adds to speculation the company may jettison the securities unit, JPMorgan Chase & Co. analyst Kian Abouhossein said in a note to clients.
Kurer is abandoning his predecessor Marcel Ospel's push to integrate the divisions after record losses at the securities unit led to net withdrawals from the private bank for the first time in almost eight years. UBS, the European bank hardest hit by the collapse of the U.S. subprime mortgage market, has faced calls from investors including former president Luqman Arnold to split off the investment bank.
``They bought themselves some time,'' said Joerg de Vries- Hippen, who oversees about $26 billion, including UBS stock, as chief investment officer for European equities at Allianz Global Investors in Frankfurt. ``By separating the business units they are showing that they are listening to investors but not going as far as breaking up the universal bank business model.''
UBS rose 22 centimes, or 1 percent, to 23.40 francs by 10:31 a.m. The stock is down 49 percent this year, the fourth-worst performance on the 71-company Bloomberg Europe Banks and Financial Services Index.
`New Problems'
The bank reported a second-quarter net loss of 358 million Swiss francs ($329 million), compared with a 5.55 billion-franc profit a year before, and said it doesn't expect the ``adverse economic and financial trends'' to improve in the second half. About 3.8 billion francs in tax credits cushioned the loss.
``There are constantly new problems coming up at the investment bank and this is really taking a toll on the core wealth management franchise,'' said Florian Esterer, who helps oversee about $63 billion at Swisscanto Asset Management.
Rich clients at UBS's wealth management units withdrew 17.3 billion francs more than they added in the quarter, triple the 5 billion-franc estimate of analysts. The division, which oversaw 1.84 trillion francs at the end of March, attracted an average of 37.9 billion francs in each quarter last year.
Pretax profit at the wealth management international and Switzerland unit fell 11 percent to 1.27 billion francs, while wealth management in the U.S. had a pretax loss of 741 million francs on provisions to settle a U.S. probe into auction-rate securities. The investment bank had a loss of 5.23 billion francs after about $5.1 billion in writedowns. The bank said it will continue to reduce staffing, costs and risky assets.
`Pressure' to Continue
``The measures we announced today will not fix our reputational challenges overnight,'' Chief Financial Officer Marco Suter said at a news conference. ``Therefore we expect the pressure on net new money to continue in the short term.''
UBS announced today that John Cryan, currently head of the financial institutions group at the investment bank, will replace Suter, 50, as CFO. The bank hired Markus U. Diethelm from Zurich- based Swiss Reinsurance Co. as group general counsel.
Chief Executive Officer Marcel Rohner, 43, and Kurer, 59, have announced plans to cut 5,500 jobs, including 2,600 at the securities unit. Abouhossein at JPMorgan said last week that UBS should eliminate an additional 15 percent of the investment bank's more than 21,000 employees.
`Talent' Rushing Out
UBS brought in Jerker Johansson, 52, from Morgan Stanley in mid-March to run the division. A mistimed bet on the U.S. mortgage market led to more than $38 billion in writedowns at the securities unit in the nine months through March, and 25.4 billion francs of net losses, the most of any bank. UBS raised more than 30 billion francs from investors to replenish capital eroded by losses.
The company's private banking business has struggled to stem defections among advisers and wealthy clients, even as Zurich- based Credit Suisse Group AG and Julius Baer Holding AG have attracted more funds and stepped up hiring. UBS announced yesterday that five people from its Zurich-based unit that services U.S. clients resigned.
``Talent in private banking is rushing out the door to competitors who are taking advantage of the bank's difficult situation,'' said Bernhard Bauhofer, the founder of Wollerau, Switzerland-based consulting firm Sparring Partners GmbH and author of ``Reputation Management.''
Credit Suisse's wealth management unit added a net 15.4 billion francs in the second quarter, the most in two years, after hiring 120 advisers in three months. Julius Baer said wealthy clients invested 8 billion francs in the first half as 49 new relationship managers joined the firm.
Regulatory Probes
UBS's management has also been grappling with regulatory probes in the U.S. The bank said last week it will buy back as much as $18.6 billion of auction-rate securities and pay $150 million of fines, the largest settlement in a U.S. investigation into whether banks stuck clients with hard-to-sell bonds. The bank set aside about $900 million in the second quarter to account for the settlement.
UBS is also under investigation in the U.S. over whether it helped clients evade American taxes. The bank said last month it will stop servicing accounts for American clients at units that aren't licensed in the U.S., in response to an Internal Revenue Service summons for customer information as part of the tax probe. The Swiss Finance Ministry is evaluating whether UBS should go along with the IRS's request.
Dillon Read
UBS was among the first stung by the subprime contagion when its Dillon Read Capital Management LP hedge fund, run by former investment banking chief John Costas, 51, lost 150 million francs in the first quarter of last year. By May that year, UBS decided to close it, and in July CEO Peter Wuffli, 50, stepped down.
Losses also led to the departures of executives including finance chief Clive Standish, 55, and Huw Jenkins, 50, the head of the investment bank. Ospel, 58, resigned in April after shareholders demanded he take responsibility for the bank's woes.
Financial institutions worldwide have reported about $493 billion of writedowns tied to the collapse of the U.S. subprime market, and turned to investors for $353 billion of capital, data compiled by Bloomberg show.
Kurer, in response to criticism from investors including former Arnold, 58, pledged to review the bank's business model and bring more financial experts onto the board of directors.
UBS today said it will propose the election of Sally Bott, BP Plc's group human resources director, Rainer-Marc Frey, founder and chairman of Horizon21, Bruno Gehrig, chairman of Swiss Life Holding AG and William G. Parrett, former CEO of Deloitte Touche Tohmatsu to the board of directors.
To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net
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West Australia's Canola Crop in `Good' Condition
By Madelene Pearson
Aug. 12 (Bloomberg) -- The canola crop in Western Australia state, the nation's biggest grower of the oilseed, is in ``good'' condition after rain last month, Rabobank Group said.
``July rains have left the Western Australian canola crop in good condition, with a bumper crop now looking more likely,'' the bank said today in a report. ``Canola crops in the eastern states and South Australia have also faired relatively well over the last month.''
Production of the oilseed in Australia, the world's third- largest canola exporter, may rebound 55 percent this harvest, up from last year's drought reduced crop, the Australian Oilseeds Federation said last month. Good conditions will need to continue in the lead-up to the harvest, Rabobank said today.
Canola futures for November delivery rose C$3.40, or 0.7 percent, to C$529.30 a metric ton on ICE Futures Canada, formerly the Winnipeg Commodities Exchange, at 2:17 p.m. in Sydney. Prices are up 29 percent in the past year.
Australia may produce 1.66 million metric tons of canola this harvest, up from 1.07 million tons a year earlier, the Australia Oilseeds Federation forecast on July 15. The nation's farmers start gathering their current crop in about November.
Canola crops in New South Wales, the nation's third-largest grower of the oilseed, are also in good conditions and are at early stages of flowering, GrainCorp Ltd., eastern Australia's largest grain handler, said today in an e-mailed report. It said last week canola crops in Western Australia are in ``excellent'' condition.
``West Australian growers are starting to look at selling'' canola, GrainCorp said today.
Canada is the world's largest canola exporter, followed by Ukraine and Australia, according to the U.S. Department of Agriculture.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Aug. 12 (Bloomberg) -- The canola crop in Western Australia state, the nation's biggest grower of the oilseed, is in ``good'' condition after rain last month, Rabobank Group said.
``July rains have left the Western Australian canola crop in good condition, with a bumper crop now looking more likely,'' the bank said today in a report. ``Canola crops in the eastern states and South Australia have also faired relatively well over the last month.''
Production of the oilseed in Australia, the world's third- largest canola exporter, may rebound 55 percent this harvest, up from last year's drought reduced crop, the Australian Oilseeds Federation said last month. Good conditions will need to continue in the lead-up to the harvest, Rabobank said today.
Canola futures for November delivery rose C$3.40, or 0.7 percent, to C$529.30 a metric ton on ICE Futures Canada, formerly the Winnipeg Commodities Exchange, at 2:17 p.m. in Sydney. Prices are up 29 percent in the past year.
Australia may produce 1.66 million metric tons of canola this harvest, up from 1.07 million tons a year earlier, the Australia Oilseeds Federation forecast on July 15. The nation's farmers start gathering their current crop in about November.
Canola crops in New South Wales, the nation's third-largest grower of the oilseed, are also in good conditions and are at early stages of flowering, GrainCorp Ltd., eastern Australia's largest grain handler, said today in an e-mailed report. It said last week canola crops in Western Australia are in ``excellent'' condition.
``West Australian growers are starting to look at selling'' canola, GrainCorp said today.
Canada is the world's largest canola exporter, followed by Ukraine and Australia, according to the U.S. Department of Agriculture.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Ruble Extends Advance After Medvedev Calls off Georgia Campaign
By Emma O'Brien
Aug. 12 (Bloomberg) -- The ruble extended an advance against its dollar-euro basket after Russian President Dmitry Medvedev called off the country's military operations in Georgia, according to the Kremlin press service.
The currency gained 1.2 percent versus the basket to 29.4602 as of 1 p.m. in Moscow, from 29.8230 yesterday. It rose 1 percent to 24.1802 to the dollar, and climbed 1.3 percent to 35.9597 against the euro. The basket, which is made up of about 55 percent dollars and 45 percent euros, is used by policy makers to contain the ruble's fluctuations.
Russia has secured the safety of Russian peacekeepers and citizens in the disputed Georgian regions of South Ossetia and Abkhazia, Medvedev said in comments released through the Kremlin.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Aug. 12 (Bloomberg) -- The ruble extended an advance against its dollar-euro basket after Russian President Dmitry Medvedev called off the country's military operations in Georgia, according to the Kremlin press service.
The currency gained 1.2 percent versus the basket to 29.4602 as of 1 p.m. in Moscow, from 29.8230 yesterday. It rose 1 percent to 24.1802 to the dollar, and climbed 1.3 percent to 35.9597 against the euro. The basket, which is made up of about 55 percent dollars and 45 percent euros, is used by policy makers to contain the ruble's fluctuations.
Russia has secured the safety of Russian peacekeepers and citizens in the disputed Georgian regions of South Ossetia and Abkhazia, Medvedev said in comments released through the Kremlin.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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U.K. Pound Declines to 21-Month Low as Housing Slump Deepens
By Kim-Mai Cutler
Aug. 12 (Bloomberg) -- The pound slid to its lowest level in almost 21 months against the dollar after an industry report showed U.K. house prices fell in July, adding to evidence the economy is slowing.
The currency snapped a three-day gain versus the euro after the Royal Institution of Chartered Surveyors said the number of real-estate agents and surveyors reporting lower prices exceeded those reporting gains by 83.9 percentage points last month as the credit squeeze brought the market to a ``virtual standstill.''
``The pound is still being swept along by a broader dollar move,'' said Michael Metcalfe, head of macro strategy at State Street Global Markets in London. ``There is also an assumption the Bank of England will have to capitulate and focus on growth rather than inflation.'' Investors should sell the pound versus the dollar, Metcalfe said.
The pound fell as much as 0.7 percent to $1.8970, the weakest level since November 2006, and was at $1.8985 by 9:52 a.m. in London, from $1.9108 yesterday. The British currency has lost 4.8 percent against the dollar in the past month. It slipped to 78.30 pence per euro, from 78.03 pence.
All 11 regions in the U.K. tracked by RICS showed negative price balances on the month, the group said today.
Property values declined by the most in at least a quarter of a century in July, HBOS Plc reported on Aug. 7. Banks have curbed lending as they nurse losses and writedowns from the collapse of the U.S. subprime-mortgage market that have totaled about $493 billion worldwide.
Quicker Inflation
The pound stayed lower after a report showed U.K. inflation accelerated to 4.4 percent in July, more than double the central bank's 2 percent target, according to the Office for National Statistics. That exceeded the 4.2 percent median estimate of 38 economists in a Bloomberg News survey.
Technical indicators suggest the pound's drop may be excessive. The 14-day relative strength index fell to 22.2. A level below 30 suggests that's a currency's decline is extreme and a reversal may be imminent.
Government bonds rose, with the yield on the two-year gilt falling 4 basis points to 4.70 percent. The price of the 4.75 percent security due in June 2010 climbed 0.07, or 70 pence per 1,000-pound ($1,906) face amount, to 100.07.
The yield on the 10-year gilt fell 4 basis points to 4.67 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net
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Aug. 12 (Bloomberg) -- The pound slid to its lowest level in almost 21 months against the dollar after an industry report showed U.K. house prices fell in July, adding to evidence the economy is slowing.
The currency snapped a three-day gain versus the euro after the Royal Institution of Chartered Surveyors said the number of real-estate agents and surveyors reporting lower prices exceeded those reporting gains by 83.9 percentage points last month as the credit squeeze brought the market to a ``virtual standstill.''
``The pound is still being swept along by a broader dollar move,'' said Michael Metcalfe, head of macro strategy at State Street Global Markets in London. ``There is also an assumption the Bank of England will have to capitulate and focus on growth rather than inflation.'' Investors should sell the pound versus the dollar, Metcalfe said.
The pound fell as much as 0.7 percent to $1.8970, the weakest level since November 2006, and was at $1.8985 by 9:52 a.m. in London, from $1.9108 yesterday. The British currency has lost 4.8 percent against the dollar in the past month. It slipped to 78.30 pence per euro, from 78.03 pence.
All 11 regions in the U.K. tracked by RICS showed negative price balances on the month, the group said today.
Property values declined by the most in at least a quarter of a century in July, HBOS Plc reported on Aug. 7. Banks have curbed lending as they nurse losses and writedowns from the collapse of the U.S. subprime-mortgage market that have totaled about $493 billion worldwide.
Quicker Inflation
The pound stayed lower after a report showed U.K. inflation accelerated to 4.4 percent in July, more than double the central bank's 2 percent target, according to the Office for National Statistics. That exceeded the 4.2 percent median estimate of 38 economists in a Bloomberg News survey.
Technical indicators suggest the pound's drop may be excessive. The 14-day relative strength index fell to 22.2. A level below 30 suggests that's a currency's decline is extreme and a reversal may be imminent.
Government bonds rose, with the yield on the two-year gilt falling 4 basis points to 4.70 percent. The price of the 4.75 percent security due in June 2010 climbed 0.07, or 70 pence per 1,000-pound ($1,906) face amount, to 100.07.
The yield on the 10-year gilt fell 4 basis points to 4.67 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net
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Dollar Erases Gains; Traders Judge Gain Versus Euro Excessive
By Anchalee Worrachate
Aug. 12 (Bloomberg) -- The dollar erased gains against the euro before a report that may show the U.S. trade deficit widened in June and as traders speculated the currency's biggest weekly advance in eight years last week was excessive.
The 14-day relative strength index for the euro-dollar fell to 20.10 today, the lowest since the euro's debut in 1999. The trade deficit widened to $62 billion, from $59.8 billion in May, according to economists in a Bloomberg survey. The dollar rose to a 5 1/2-month high against the euro earlier and the strongest in seven months against the yen.
``The risk here is that the dollar has risen too rapidly and my impression is that we are going to see a bit of consolidation,'' said Mitul Kotecha, global head of currency strategy in Hong Kong at Calyon, the investment-banking arm of France's Credit Agricole SA. ``That doesn't change our bigger picture. Overall, we remain bullish on the dollar.''
The dollar traded at $1.4917 per euro as of 10:24 a.m. in London, from $1.4909 yesterday, after rising to $1.4816 earlier, the highest since Feb. 26.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net.
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Aug. 12 (Bloomberg) -- The dollar erased gains against the euro before a report that may show the U.S. trade deficit widened in June and as traders speculated the currency's biggest weekly advance in eight years last week was excessive.
The 14-day relative strength index for the euro-dollar fell to 20.10 today, the lowest since the euro's debut in 1999. The trade deficit widened to $62 billion, from $59.8 billion in May, according to economists in a Bloomberg survey. The dollar rose to a 5 1/2-month high against the euro earlier and the strongest in seven months against the yen.
``The risk here is that the dollar has risen too rapidly and my impression is that we are going to see a bit of consolidation,'' said Mitul Kotecha, global head of currency strategy in Hong Kong at Calyon, the investment-banking arm of France's Credit Agricole SA. ``That doesn't change our bigger picture. Overall, we remain bullish on the dollar.''
The dollar traded at $1.4917 per euro as of 10:24 a.m. in London, from $1.4909 yesterday, after rising to $1.4816 earlier, the highest since Feb. 26.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net.
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Morgan Stanley Auction-Rate Offer Doesn't Satisfy N.Y.'s Cuomo
By Christine Harper and Karen Freifeld
Enlarge Image/Details
Aug. 12 (Bloomberg) -- Morgan Stanley's offer to repurchase about $4.5 billion in auction-rate securities from its retail clients failed to mollify New York Attorney General Andrew Cuomo, who called the proposal ``too little, too late.''
Morgan Stanley, the second-biggest U.S. securities firm by market value, will begin to repurchase notes at par value no later than Sept. 30, the New York-based firm said yesterday. The statement was issued just hours after Cuomo called on Morgan Stanley, JPMorgan Chase & Co. and Wachovia Corp. to begin ``immediate'' settlement talks to resolve probes into how the securities were sold.
``This is too little, too late, and our investigation into Morgan Stanley continues,'' Alex Detrick, a spokesman for Cuomo, said in an e-mail response to the Morgan Stanley proposal.
Regulators have been investigating how banks and Wall Street firms sold auction-rate securities before the $330 billion market collapsed in February. The investments have been frozen in customer accounts since firms backed away from the market, leading to claims by customers and investigations by the U.S. Securities and Exchange Commission, the states of New York and Massachusetts, and a nationwide task force of state securities regulators.
Morgan Stanley is following Merrill Lynch & Co. in trying to pre-empt a regulatory settlement by volunteering to buy back the securities. Merrill Lynch last week proposed that it would buy back about $10 billion in auction-rate securities.
`Positive First Step'
Morgan Stanley said it notified Cuomo's office, as well as the Securities and Exchange Commission and the state regulator in Illinois, about the details of its plan.
``It's a positive first step in resolving the issues,'' said James Nix, senior attorney in the Illinois Secretary of State, Securities Department, which is negotiating on behalf of state securities officials. He wouldn't comment on the status of Morgan Stanley negotiations.
``Major investment banks are trying to protect their business reputations and their credibility by offering these kinds of settlements without regulatory action,'' said William J. Leone, a partner at Faegre & Benson LLP in Denver who is a former U.S. Attorney for Colorado. ``There's a lot of pressure on industry players to follow suit.''
When banks have settled with regulators, they agreed to pay a fine as well as to buy back the securities. Citigroup Inc. will pay a $100 million fine and repurchase about $7.3 billion of the debt under a settlement last week with U.S. and state regulators. UBS AG, Switzerland's biggest bank, is paying a $150 million fine and will buy back $18.6 billion.
Massachusetts
Last week, Morgan Stanley agreed to buy back $1.5 million in auction-rate securities from two municipalities in Massachusetts to settle claims there of improper sales.
Cuomo is demanding that banks create auction-rate securities buyback programs for retail customers, reimburse consumers forced to sell securities at ``below-par'' prices and institute a claims- resolution mechanism.
The offer, which will be extended until Nov. 30, applies to so-called retail clients -- defined as individuals, charities and small- and medium-sized businesses with accounts of $10 million or less -- who bought the securities before Feb. 13.
The firm will reimburse any losses sustained by retail clients from selling auction-rate securities, the firm said in the statement. Morgan Stanley will also provide no-cost loans to clients until the securities are repurchased and will reimburse interest costs incurred under prior loan programs that the firm provided to auction-rate securities holders.
Punishment
Cuomo wants to mete out further punishment, said Richard Bove, an analyst at Ladenburg Thalmann & Co. in Lutz, Florida, who recommends selling shares of Morgan Stanley, Merrill and other brokerage firms.
``If he was looking for equity for the holders of auction- rate securities, he got it,'' Bove said. But ``Cuomo wants another major press conference in which he can say, `We fined this company.'''
``Getting money back into the pockets of investors has been a prime focus throughout SEC's auction-rate securities investigations,'' SEC spokesman John Nester said in an e-mail. He declined to discuss any specific investigation.
Wachovia, the fourth-largest U.S. bank, said yesterday that its second-quarter loss was bigger than reported in July because of costs to settle a probe of auction-rate securities sales. The Charlotte, North Carolina-based bank revised the loss to $9.11 billion, or $4.31 a share, from $8.86 billion, or $4.20, according to a regulatory filing.
``Morgan Stanley is acting responsibly,'' regardless of the status of negotiations with regulators, said attorney Thomas Curran, a partner at Ganfer & Shore in New York. ``It's taking proactive measures and acting to reassure the market generally.''
To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Karen Freifeld in New York State Supreme Court in Manhattan at kfreifeld@bloomberg.net.
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Enlarge Image/Details
Aug. 12 (Bloomberg) -- Morgan Stanley's offer to repurchase about $4.5 billion in auction-rate securities from its retail clients failed to mollify New York Attorney General Andrew Cuomo, who called the proposal ``too little, too late.''
Morgan Stanley, the second-biggest U.S. securities firm by market value, will begin to repurchase notes at par value no later than Sept. 30, the New York-based firm said yesterday. The statement was issued just hours after Cuomo called on Morgan Stanley, JPMorgan Chase & Co. and Wachovia Corp. to begin ``immediate'' settlement talks to resolve probes into how the securities were sold.
``This is too little, too late, and our investigation into Morgan Stanley continues,'' Alex Detrick, a spokesman for Cuomo, said in an e-mail response to the Morgan Stanley proposal.
Regulators have been investigating how banks and Wall Street firms sold auction-rate securities before the $330 billion market collapsed in February. The investments have been frozen in customer accounts since firms backed away from the market, leading to claims by customers and investigations by the U.S. Securities and Exchange Commission, the states of New York and Massachusetts, and a nationwide task force of state securities regulators.
Morgan Stanley is following Merrill Lynch & Co. in trying to pre-empt a regulatory settlement by volunteering to buy back the securities. Merrill Lynch last week proposed that it would buy back about $10 billion in auction-rate securities.
`Positive First Step'
Morgan Stanley said it notified Cuomo's office, as well as the Securities and Exchange Commission and the state regulator in Illinois, about the details of its plan.
``It's a positive first step in resolving the issues,'' said James Nix, senior attorney in the Illinois Secretary of State, Securities Department, which is negotiating on behalf of state securities officials. He wouldn't comment on the status of Morgan Stanley negotiations.
``Major investment banks are trying to protect their business reputations and their credibility by offering these kinds of settlements without regulatory action,'' said William J. Leone, a partner at Faegre & Benson LLP in Denver who is a former U.S. Attorney for Colorado. ``There's a lot of pressure on industry players to follow suit.''
When banks have settled with regulators, they agreed to pay a fine as well as to buy back the securities. Citigroup Inc. will pay a $100 million fine and repurchase about $7.3 billion of the debt under a settlement last week with U.S. and state regulators. UBS AG, Switzerland's biggest bank, is paying a $150 million fine and will buy back $18.6 billion.
Massachusetts
Last week, Morgan Stanley agreed to buy back $1.5 million in auction-rate securities from two municipalities in Massachusetts to settle claims there of improper sales.
Cuomo is demanding that banks create auction-rate securities buyback programs for retail customers, reimburse consumers forced to sell securities at ``below-par'' prices and institute a claims- resolution mechanism.
The offer, which will be extended until Nov. 30, applies to so-called retail clients -- defined as individuals, charities and small- and medium-sized businesses with accounts of $10 million or less -- who bought the securities before Feb. 13.
The firm will reimburse any losses sustained by retail clients from selling auction-rate securities, the firm said in the statement. Morgan Stanley will also provide no-cost loans to clients until the securities are repurchased and will reimburse interest costs incurred under prior loan programs that the firm provided to auction-rate securities holders.
Punishment
Cuomo wants to mete out further punishment, said Richard Bove, an analyst at Ladenburg Thalmann & Co. in Lutz, Florida, who recommends selling shares of Morgan Stanley, Merrill and other brokerage firms.
``If he was looking for equity for the holders of auction- rate securities, he got it,'' Bove said. But ``Cuomo wants another major press conference in which he can say, `We fined this company.'''
``Getting money back into the pockets of investors has been a prime focus throughout SEC's auction-rate securities investigations,'' SEC spokesman John Nester said in an e-mail. He declined to discuss any specific investigation.
Wachovia, the fourth-largest U.S. bank, said yesterday that its second-quarter loss was bigger than reported in July because of costs to settle a probe of auction-rate securities sales. The Charlotte, North Carolina-based bank revised the loss to $9.11 billion, or $4.31 a share, from $8.86 billion, or $4.20, according to a regulatory filing.
``Morgan Stanley is acting responsibly,'' regardless of the status of negotiations with regulators, said attorney Thomas Curran, a partner at Ganfer & Shore in New York. ``It's taking proactive measures and acting to reassure the market generally.''
To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Karen Freifeld in New York State Supreme Court in Manhattan at kfreifeld@bloomberg.net.
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Gold Falls to Lowest This Year in Asian Trading as Dollar Gains
By Glenys Sim
Aug. 12 (Bloomberg) -- Gold dropped to the lowest this year after the dollar rallied, reducing the precious metal's appeal as an alternative investment to the U.S. currency. Gold futures in Shanghai and Tokyo fell by the daily limit.
Gold has erased this year's gains and has dropped 22 percent from its March record of $1,032.70 an ounce amid a global sell- off in commodities. A drop in crude oil to near a 14-week low has lowered bullion's attraction as an inflation hedge.
``The sharp correction in commodity prices and the rally in the U.S. dollar are unwinding the extreme oversold position of global financials,'' Sean Darby, head of regional strategy at Nomura Holdings Inc., said in an e-mail today. ``Acknowledgement of slowing growth and expectations of rate easing in Australia and Europe have eroded support for commodities.''
Bullion for immediate delivery fell $21.55, or 2.6 percent, to $802.27 an ounce, the lowest since Dec. 21, and was at $809.15 at 2:38 p.m. in Singapore. Earlier, prices dropped to within 0.3 percent of $800 an ounce, a crucial support. Silver for immediate delivery declined as much as 4.4 percent to $14.02 an ounce.
So-called support and resistance levels are points where buy or sell orders cluster on charts used by traders to predict price direction.
Technical charts signal further losses in gold as the dollar rallies, analysts at Barclays Capital Inc., led by Jordan Kotick, said in a report today. The dollar traded near a 5 1/2-month high against the euro today.
``In the sessions ahead, we look for greater weakness toward $800 before renewed signs of basing,'' wrote Kotick. ``Bulls need to regain $872 on a closing basis to indicate a turn in the near- term trend.''
Comex Gold
Still, speculative long positions, or bets prices will rise, outnumbered short positions by 163,728 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report Aug. 8.
Gold for December delivery dropped 1.6 percent to $816.30 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 2:40 p.m. in Singapore.
Gold for December delivery on the Shanghai Futures Exchange fell by the 5 percent daily limit to 182.82 yuan a gram ($828 an ounce). This is the lowest for a most-active contract since the exchange started trading gold futures on Jan. 9.
``Compared with international prices, prices in China are still relatively high, which is why the daily limit was hit,'' Steven Zhu, research manager at Shanghai Tonglian Futures Co., said by e-mail today. ``While the domestic market will continue to take direction from the international market, we might see some physical buyers enter at lower levels to limit the losses.''
In Japan, gold for June delivery on the Tokyo Commodity Exchange also fell by the 150 yen daily trading limit to 2,922 yen a gram ($826 an ounce).
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Aug. 12 (Bloomberg) -- Gold dropped to the lowest this year after the dollar rallied, reducing the precious metal's appeal as an alternative investment to the U.S. currency. Gold futures in Shanghai and Tokyo fell by the daily limit.
Gold has erased this year's gains and has dropped 22 percent from its March record of $1,032.70 an ounce amid a global sell- off in commodities. A drop in crude oil to near a 14-week low has lowered bullion's attraction as an inflation hedge.
``The sharp correction in commodity prices and the rally in the U.S. dollar are unwinding the extreme oversold position of global financials,'' Sean Darby, head of regional strategy at Nomura Holdings Inc., said in an e-mail today. ``Acknowledgement of slowing growth and expectations of rate easing in Australia and Europe have eroded support for commodities.''
Bullion for immediate delivery fell $21.55, or 2.6 percent, to $802.27 an ounce, the lowest since Dec. 21, and was at $809.15 at 2:38 p.m. in Singapore. Earlier, prices dropped to within 0.3 percent of $800 an ounce, a crucial support. Silver for immediate delivery declined as much as 4.4 percent to $14.02 an ounce.
So-called support and resistance levels are points where buy or sell orders cluster on charts used by traders to predict price direction.
Technical charts signal further losses in gold as the dollar rallies, analysts at Barclays Capital Inc., led by Jordan Kotick, said in a report today. The dollar traded near a 5 1/2-month high against the euro today.
``In the sessions ahead, we look for greater weakness toward $800 before renewed signs of basing,'' wrote Kotick. ``Bulls need to regain $872 on a closing basis to indicate a turn in the near- term trend.''
Comex Gold
Still, speculative long positions, or bets prices will rise, outnumbered short positions by 163,728 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report Aug. 8.
Gold for December delivery dropped 1.6 percent to $816.30 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 2:40 p.m. in Singapore.
Gold for December delivery on the Shanghai Futures Exchange fell by the 5 percent daily limit to 182.82 yuan a gram ($828 an ounce). This is the lowest for a most-active contract since the exchange started trading gold futures on Jan. 9.
``Compared with international prices, prices in China are still relatively high, which is why the daily limit was hit,'' Steven Zhu, research manager at Shanghai Tonglian Futures Co., said by e-mail today. ``While the domestic market will continue to take direction from the international market, we might see some physical buyers enter at lower levels to limit the losses.''
In Japan, gold for June delivery on the Tokyo Commodity Exchange also fell by the 150 yen daily trading limit to 2,922 yen a gram ($826 an ounce).
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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JPMorgan Loses $1.5 Billion Since July on Debt Prices
By Cathy Chan
Aug. 12 (Bloomberg) -- JPMorgan Chase & Co. will write down the value of mortgage-backed assets by at least $1.5 billion this quarter after credit-market turmoil and the U.S. housing slump deepened.
Trading conditions ``have substantially deteriorated'' since July, and ``sharply widened'' spreads on mortgage-backed securities and loans caused losses, the second-biggest U.S. bank by market value said in a regulatory filing late yesterday. Financial firms have reported more than $492 billion of losses and writedowns on debt securities since the subprime-mortgage market meltdown in 2007.
``The global credit market hasn't much improved,'' said Tim Leung, who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. ``The risk aversion to lending to financial institutions is still high and everyone is still very cautious.''
JPMorgan Chief Executive Officer Jamie Dimon has overseen more than $12 billion of writedowns, losses and credit provisions on mortgage-tainted assets through the second quarter. U.S. bond investors bought Treasury notes and sold debt issued by banks, pushing yields for financial companies to the highest relative to Treasury notes in at least a decade in July amid mounting losses at banks.
The bank held $16.3 billion of ``legacy leveraged loans,'' or unsold high-risk lending it underwrote, and unfunded commitments as of June 30, and $11.6 billion of commercial mortgage-backed securities, the filing showed.
JPMorgan wrote down the value of leveraged loans and mortgage-related assets by $1.1 billion in the second quarter, according to data compiled by Bloomberg.
Falling Profit
It expects the global economy ``to continue to be weak, for capital markets to remain under stress and for a continued decline in U.S. housing prices,'' the filing said. ``These factors have affected, and are likely to continue to adversely impact, the firm's credit losses, overall business volumes and earnings.''
U.S. banks have tightened lending terms on all major loan categories over the previous three months, the Federal Reserve said in its quarterly survey on Aug. 11. Losses from the collapse of the subprime-mortgage market have caused money- market funds to stop buying asset-backed commercial paper and forced funds to unwind holdings, driving up yields.
JPMorgan's second-quarter net income fell 53 percent to $2 billion on mortgage-related writedowns and costs from the takeover of Bear Stearns Cos. It marked down the value of loans promised to fund last year's buyouts by 20 cents on the dollar last quarter.
Home Prices
Dimon, 52, said in a statement that accompanied the earnings last month that while a weakening economy means financial markets will remain ``under stress,'' the New York- based company's capital position is strong. JPMorgan's decision in 2007 to expand in mortgages was `wrong,'' he said.
``For someone as big as JPMorgan, I don't think the number is that material,'' said David Verschoor, a credit trader at BNP Paribas SA in Hong Kong. ``I don't think it really changes much at all. Once the banks take their losses, that is when the market starts recovering.''
Home prices in 20 U.S. metropolitan areas dropped 15.8 percent in May, the biggest decline since record keeping began in 2001, according to the S&P Case-Shiller Home-Price Index.
Prices of high-risk, high-yield loans fell in early July to the lowest levels since April. The average actively traded loan fell to 89.32 cents on the dollar last month, compared with more than 92 cents in mid-June, according to Standard & Poor's LCD.
To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net
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Aug. 12 (Bloomberg) -- JPMorgan Chase & Co. will write down the value of mortgage-backed assets by at least $1.5 billion this quarter after credit-market turmoil and the U.S. housing slump deepened.
Trading conditions ``have substantially deteriorated'' since July, and ``sharply widened'' spreads on mortgage-backed securities and loans caused losses, the second-biggest U.S. bank by market value said in a regulatory filing late yesterday. Financial firms have reported more than $492 billion of losses and writedowns on debt securities since the subprime-mortgage market meltdown in 2007.
``The global credit market hasn't much improved,'' said Tim Leung, who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. ``The risk aversion to lending to financial institutions is still high and everyone is still very cautious.''
JPMorgan Chief Executive Officer Jamie Dimon has overseen more than $12 billion of writedowns, losses and credit provisions on mortgage-tainted assets through the second quarter. U.S. bond investors bought Treasury notes and sold debt issued by banks, pushing yields for financial companies to the highest relative to Treasury notes in at least a decade in July amid mounting losses at banks.
The bank held $16.3 billion of ``legacy leveraged loans,'' or unsold high-risk lending it underwrote, and unfunded commitments as of June 30, and $11.6 billion of commercial mortgage-backed securities, the filing showed.
JPMorgan wrote down the value of leveraged loans and mortgage-related assets by $1.1 billion in the second quarter, according to data compiled by Bloomberg.
Falling Profit
It expects the global economy ``to continue to be weak, for capital markets to remain under stress and for a continued decline in U.S. housing prices,'' the filing said. ``These factors have affected, and are likely to continue to adversely impact, the firm's credit losses, overall business volumes and earnings.''
U.S. banks have tightened lending terms on all major loan categories over the previous three months, the Federal Reserve said in its quarterly survey on Aug. 11. Losses from the collapse of the subprime-mortgage market have caused money- market funds to stop buying asset-backed commercial paper and forced funds to unwind holdings, driving up yields.
JPMorgan's second-quarter net income fell 53 percent to $2 billion on mortgage-related writedowns and costs from the takeover of Bear Stearns Cos. It marked down the value of loans promised to fund last year's buyouts by 20 cents on the dollar last quarter.
Home Prices
Dimon, 52, said in a statement that accompanied the earnings last month that while a weakening economy means financial markets will remain ``under stress,'' the New York- based company's capital position is strong. JPMorgan's decision in 2007 to expand in mortgages was `wrong,'' he said.
``For someone as big as JPMorgan, I don't think the number is that material,'' said David Verschoor, a credit trader at BNP Paribas SA in Hong Kong. ``I don't think it really changes much at all. Once the banks take their losses, that is when the market starts recovering.''
Home prices in 20 U.S. metropolitan areas dropped 15.8 percent in May, the biggest decline since record keeping began in 2001, according to the S&P Case-Shiller Home-Price Index.
Prices of high-risk, high-yield loans fell in early July to the lowest levels since April. The average actively traded loan fell to 89.32 cents on the dollar last month, compared with more than 92 cents in mid-June, according to Standard & Poor's LCD.
To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net
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Oil Falls for Third Day as Dollar Reduces Appeal of Commodities
By Alexander Kwiatkowski
Aug. 12 (Bloomberg) -- Oil fell for a third day as the dollar traded near a 5 1/2-month high against the euro, limiting the appeal of commodities, and Russia called off military action in Georgia, easing concerns about regional supply disruptions.
The dollar also approached a seven-month high against the yen on speculation the economic slowdown that started in the U.S. is spreading. A stronger U.S. currency makes dollar- denominated commodities more expensive for buyers in other currencies. Russian President Dmitry Medvedev ordered a halt to Russia's offensive in Georgia.
``The stronger dollar is playing the major part of the downward movement,'' said Andy Sommer, an analyst with HSH Nordbank in Hamburg. ``We are below $1.50 versus the euro and that is building pressure on oil prices.''
Crude oil for September delivery fell as much as $1.97, or 1.7 percent, to $112.48 a barrel, in after-hours electronic trading on the New York Mercantile Exchange. It was at $113.00 a barrel at 10:05 a.m. London time.
Yesterday, futures fell 75 cents, or 0.7 percent, to settle at $114.45 a barrel, the lowest close since May 1. Oil has declined 23 percent from the record $147.27 reached on July 11.
The dollar traded at $1.4917 per euro as of 10:24 a.m. in London, from $1.4909 yesterday, after rising to $1.4816 earlier, the highest since Feb. 26.
`Safety Secured'
Russia is ending military action in Georgia because it has secured the safety of its peacekeepers and citizens in the disputed Georgian regions of South Ossetia and Abkhazia, Medvedev said in comments released through the Kremlin's press service. Georgia is a key link in a U.S.-backed southern energy corridor that connects the Caspian Sea region with world markets, bypassing Russia.
A fire on the Turkish stretch of the Baku-Tbilisi-Ceyhan pipeline last week halted exports of Azeri Light crude from Azerbaijan via Turkey, forcing the operator BP Plc to divert the oil by alternative routes through Georgia. Five days of clashes between Russia and Georgia had raised concerns that these alternative routes could be disrupted.
Russian warplanes attacked a section of BP Plc's Baku- Tbilisi-Ceyhan pipeline in Georgia today, said Kakha Lomaia, head of Georgia's National Security Council. The damage on the pipeline near the town of Rustavi is unknown, he said by telephone from Tbilisi. It was the second attack on the link during the conflict with Russia, he said.
China Demand
The U.S. economy will grow at an average 0.7 percent annual pace from July through December, half the gain in the first half of the year, a Bloomberg News survey showed. China, the second- largest oil consumer, said yesterday imports fell in July.
``The market focus has shifted to the weakness in demand, and also the firmer U.S. dollar is playing a part as well,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``The Chinese economy isn't growing as strong as last year.''
China's July crude-oil imports fell 7 percent from a year earlier after global prices increased to a record, discouraging refiners from purchasing raw material to process into fuels.
The country's 15 biggest oil refineries increased their operating rates to boost fuel supplies for the Beijing Summer Olympic Games that started on Aug. 8.
Brent crude oil for September settlement fell as much as $2.20, or 2 percent, to $110.47 a barrel on London's ICE Futures Europe exchange. It was at $111.24 a barrel at 10:24 a.m. local time. It declined 66 cents, or 0.6 percent, to settle at $112.67 a barrel yesterday, the lowest close since May 1.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netChristian Schmollinger in Singapore at christian.s@bloomberg.net.
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Aug. 12 (Bloomberg) -- Oil fell for a third day as the dollar traded near a 5 1/2-month high against the euro, limiting the appeal of commodities, and Russia called off military action in Georgia, easing concerns about regional supply disruptions.
The dollar also approached a seven-month high against the yen on speculation the economic slowdown that started in the U.S. is spreading. A stronger U.S. currency makes dollar- denominated commodities more expensive for buyers in other currencies. Russian President Dmitry Medvedev ordered a halt to Russia's offensive in Georgia.
``The stronger dollar is playing the major part of the downward movement,'' said Andy Sommer, an analyst with HSH Nordbank in Hamburg. ``We are below $1.50 versus the euro and that is building pressure on oil prices.''
Crude oil for September delivery fell as much as $1.97, or 1.7 percent, to $112.48 a barrel, in after-hours electronic trading on the New York Mercantile Exchange. It was at $113.00 a barrel at 10:05 a.m. London time.
Yesterday, futures fell 75 cents, or 0.7 percent, to settle at $114.45 a barrel, the lowest close since May 1. Oil has declined 23 percent from the record $147.27 reached on July 11.
The dollar traded at $1.4917 per euro as of 10:24 a.m. in London, from $1.4909 yesterday, after rising to $1.4816 earlier, the highest since Feb. 26.
`Safety Secured'
Russia is ending military action in Georgia because it has secured the safety of its peacekeepers and citizens in the disputed Georgian regions of South Ossetia and Abkhazia, Medvedev said in comments released through the Kremlin's press service. Georgia is a key link in a U.S.-backed southern energy corridor that connects the Caspian Sea region with world markets, bypassing Russia.
A fire on the Turkish stretch of the Baku-Tbilisi-Ceyhan pipeline last week halted exports of Azeri Light crude from Azerbaijan via Turkey, forcing the operator BP Plc to divert the oil by alternative routes through Georgia. Five days of clashes between Russia and Georgia had raised concerns that these alternative routes could be disrupted.
Russian warplanes attacked a section of BP Plc's Baku- Tbilisi-Ceyhan pipeline in Georgia today, said Kakha Lomaia, head of Georgia's National Security Council. The damage on the pipeline near the town of Rustavi is unknown, he said by telephone from Tbilisi. It was the second attack on the link during the conflict with Russia, he said.
China Demand
The U.S. economy will grow at an average 0.7 percent annual pace from July through December, half the gain in the first half of the year, a Bloomberg News survey showed. China, the second- largest oil consumer, said yesterday imports fell in July.
``The market focus has shifted to the weakness in demand, and also the firmer U.S. dollar is playing a part as well,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``The Chinese economy isn't growing as strong as last year.''
China's July crude-oil imports fell 7 percent from a year earlier after global prices increased to a record, discouraging refiners from purchasing raw material to process into fuels.
The country's 15 biggest oil refineries increased their operating rates to boost fuel supplies for the Beijing Summer Olympic Games that started on Aug. 8.
Brent crude oil for September settlement fell as much as $2.20, or 2 percent, to $110.47 a barrel on London's ICE Futures Europe exchange. It was at $111.24 a barrel at 10:24 a.m. local time. It declined 66 cents, or 0.6 percent, to settle at $112.67 a barrel yesterday, the lowest close since May 1.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netChristian Schmollinger in Singapore at christian.s@bloomberg.net.
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Asian Stocks Drop; SingTel, Commodity Producers Lead Declines
By Patrick Rial and Chen Shiyin
Enlarge Image/Details
Aug. 12 (Bloomberg) -- Asian shares declined, led by telephone companies and commodity producers, after Singapore Telecommunications Ltd.'s profit missed estimates and metals prices extended declines.
SingTel, Southeast Asia's largest phone company, sank the most in two months, while China Mobile Ltd. declined after Citigroup Inc. cut its price target. Newcrest Mining Ltd. fell in Sydney after gold dropped to the lowest level since December. JFE Holdings Inc., Japan's No. 2 steelmaker, dropped in Tokyo after Japanese demand fell. Sun Hung Kai Properties Ltd., Hong Kong's largest developer, advanced after China's inflation slowed, boosting speculation regulators will loosen lending curbs.
The MSCI Asia Pacific Index fell 0.5 percent to 127.99 as of 3:56 p.m. in Tokyo, extending this year's decline to 19 percent.
``Inflation concerns may be easing but the broader concern now is with economic growth, especially with signs that even China is slowing down,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets. ``It's possible that you'll see more earnings downgrades.''
Most Asian benchmark indexes retreated. Japan's Nikkei 225 Stock Average dropped 1 percent to 13,303.60. The country's wholesale inflation rate accelerated to a 27-year high as companies raised prices to offset oil and commodity costs. Thailand is shut for a holiday today.
SingTel, China Mobile
BHP Billiton Ltd. led energy producers higher on speculation easing inflation in China will allow the government to boost economic growth, reviving demand for fuel. Consumer prices rose 6.3 percent in July from a year earlier, less than the 6.5 percent increase forecast by economists.
U.S. stocks climbed yesterday, with the Standard & Poor's 500 Index gaining 0.9 percent, after oil's drop below $115 a barrel boosted retailers and credit card companies.
SingTel slumped 3.1 percent to S$3.47, set for its biggest decline since June 16. First-quarter profit fell 5.3 percent to S$878.1 million ($622 million) as a stronger currency eroded overseas earnings, and missed the S$902 million median of analyst estimates in a Bloomberg survey.
China Mobile fell 3.9 percent to HK$95.10. Citigroup lowered its share-price estimate to HK$120 from HK$150, citing ``regulatory headwinds'' and increased competition.
Newcrest, Australia's biggest gold producer, fell 2.1 percent to A$23.49. Sumitomo Metal Mining Co., Japan's biggest nickel maker, declined 3.1 percent to 1,289 yen.
Commodity Prices
Gold dropped 4.2 percent to $828.30, the lowest since Dec. 24. A measure of six metals traded on the London Metal Exchange, including copper and zinc, slid 1 percent yesterday.
Raw-material producers on MSCI's Asian gauge have tumbled 12 percent this month, compared with a 3.4 percent decline on the broader index.
JFE Holdings slumped 6.1 percent to 4,480 yen. Nippon Steel Corp., the world's second-biggest producer of the alloy, declined 4.6 percent to 516 yen.
The Japan Iron and Steel Federation said yesterday June orders for steel fell 0.8 percent from the previous month.
Chinese airlines slumped for a fourth day on concern the government will halt the yuan's 26-month run of gains to help exporters weather a global slowdown. A strengthening local currency cuts the value of dollar-denominated debts when converted into yuan.
China Southern Airlines Co., the largest in China, dropped 3.6 percent to 5.87 yuan, capping a four-day, 24 percent decline. China Southern made a full-year currency gain of 2.83 billion yuan last year, exceeding its net income. Air China Ltd., the country's largest international carrier, tumbled 8.3 percent to 7.17 yuan in Shanghai.
Property Stocks
Sun Hung Kai rose 4.2 percent to HK$115.70. Sino Land rallied 7.8 percent to HK$15.48, the steepest climb since May 2.
China's inflation slowdown may encourage government policies aimed at sustaining growth in the world's fourth-biggest economy rather than fighting higher prices.
BHP, Australia's biggest oil and gas producer, advanced 2 percent to $37.21, reversing a decline of as much as 1.3 percent before China's price report. Inpex Holdings Inc., Japan's biggest oil explorer, jumped 3 percent to 1.103 million yen.
Cathay Pacific Airways Ltd., Hong Kong's biggest carrier, jumped 6.1 percent to HK$14.86, its best performance since July 23, after saying it will cut flights to North America and add more services to Australia to offset higher fuel costs.
Nippon Sheet Glass Co. climbed 6.6 percent to 483 yen. Asia's second-largest glassmaker reported a 17 percent slide in operating profit yesterday as energy costs increased and sales dropped in North America and Japan. The company's results were better than anticipated, Shinya Yamada, an analyst at Credit Suisse Group said in a note to clients.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net.
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Enlarge Image/Details
Aug. 12 (Bloomberg) -- Asian shares declined, led by telephone companies and commodity producers, after Singapore Telecommunications Ltd.'s profit missed estimates and metals prices extended declines.
SingTel, Southeast Asia's largest phone company, sank the most in two months, while China Mobile Ltd. declined after Citigroup Inc. cut its price target. Newcrest Mining Ltd. fell in Sydney after gold dropped to the lowest level since December. JFE Holdings Inc., Japan's No. 2 steelmaker, dropped in Tokyo after Japanese demand fell. Sun Hung Kai Properties Ltd., Hong Kong's largest developer, advanced after China's inflation slowed, boosting speculation regulators will loosen lending curbs.
The MSCI Asia Pacific Index fell 0.5 percent to 127.99 as of 3:56 p.m. in Tokyo, extending this year's decline to 19 percent.
``Inflation concerns may be easing but the broader concern now is with economic growth, especially with signs that even China is slowing down,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets. ``It's possible that you'll see more earnings downgrades.''
Most Asian benchmark indexes retreated. Japan's Nikkei 225 Stock Average dropped 1 percent to 13,303.60. The country's wholesale inflation rate accelerated to a 27-year high as companies raised prices to offset oil and commodity costs. Thailand is shut for a holiday today.
SingTel, China Mobile
BHP Billiton Ltd. led energy producers higher on speculation easing inflation in China will allow the government to boost economic growth, reviving demand for fuel. Consumer prices rose 6.3 percent in July from a year earlier, less than the 6.5 percent increase forecast by economists.
U.S. stocks climbed yesterday, with the Standard & Poor's 500 Index gaining 0.9 percent, after oil's drop below $115 a barrel boosted retailers and credit card companies.
SingTel slumped 3.1 percent to S$3.47, set for its biggest decline since June 16. First-quarter profit fell 5.3 percent to S$878.1 million ($622 million) as a stronger currency eroded overseas earnings, and missed the S$902 million median of analyst estimates in a Bloomberg survey.
China Mobile fell 3.9 percent to HK$95.10. Citigroup lowered its share-price estimate to HK$120 from HK$150, citing ``regulatory headwinds'' and increased competition.
Newcrest, Australia's biggest gold producer, fell 2.1 percent to A$23.49. Sumitomo Metal Mining Co., Japan's biggest nickel maker, declined 3.1 percent to 1,289 yen.
Commodity Prices
Gold dropped 4.2 percent to $828.30, the lowest since Dec. 24. A measure of six metals traded on the London Metal Exchange, including copper and zinc, slid 1 percent yesterday.
Raw-material producers on MSCI's Asian gauge have tumbled 12 percent this month, compared with a 3.4 percent decline on the broader index.
JFE Holdings slumped 6.1 percent to 4,480 yen. Nippon Steel Corp., the world's second-biggest producer of the alloy, declined 4.6 percent to 516 yen.
The Japan Iron and Steel Federation said yesterday June orders for steel fell 0.8 percent from the previous month.
Chinese airlines slumped for a fourth day on concern the government will halt the yuan's 26-month run of gains to help exporters weather a global slowdown. A strengthening local currency cuts the value of dollar-denominated debts when converted into yuan.
China Southern Airlines Co., the largest in China, dropped 3.6 percent to 5.87 yuan, capping a four-day, 24 percent decline. China Southern made a full-year currency gain of 2.83 billion yuan last year, exceeding its net income. Air China Ltd., the country's largest international carrier, tumbled 8.3 percent to 7.17 yuan in Shanghai.
Property Stocks
Sun Hung Kai rose 4.2 percent to HK$115.70. Sino Land rallied 7.8 percent to HK$15.48, the steepest climb since May 2.
China's inflation slowdown may encourage government policies aimed at sustaining growth in the world's fourth-biggest economy rather than fighting higher prices.
BHP, Australia's biggest oil and gas producer, advanced 2 percent to $37.21, reversing a decline of as much as 1.3 percent before China's price report. Inpex Holdings Inc., Japan's biggest oil explorer, jumped 3 percent to 1.103 million yen.
Cathay Pacific Airways Ltd., Hong Kong's biggest carrier, jumped 6.1 percent to HK$14.86, its best performance since July 23, after saying it will cut flights to North America and add more services to Australia to offset higher fuel costs.
Nippon Sheet Glass Co. climbed 6.6 percent to 483 yen. Asia's second-largest glassmaker reported a 17 percent slide in operating profit yesterday as energy costs increased and sales dropped in North America and Japan. The company's results were better than anticipated, Shinya Yamada, an analyst at Credit Suisse Group said in a note to clients.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net.
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Hong Kong's Stocks Fall, Led by Commodity Producers; CLP Slides
By Chua Kong Ho
Aug. 12 (Bloomberg) -- Hong Kong stocks fell, sending the Hang Seng Index to a third-straight decline, as commodity producers retreated on lower prices for copper and gold.
Zijin Mining Group Co., owner of China's largest gold mine, and Jiangxi Copper Co. declined as the metals slumped to their lowest since December. China Mobile Ltd., the world's largest phone carrier by market value, dropped after Citigroup Inc. cut its price estimate. CLP Holdings Ltd., Hong Kong's biggest power supplier, snapped a four-day winning streak after first-half profit decreased.
``Commodity stocks are facing pressure as demand softens,'' said Daphne Roth, Singapore-based head of equity research in Asia at ABN Amro Private Bank, which oversees about $30 billion of Asian assets.
The Hang Seng Index lost 218.45, or 1 percent, to 21,640.89 at the close, after gaining as much as 2.1 percent. Four stocks fell for every three that climbed on the index. Futures slid 1.1 percent to 21,555.
Shimao Property Holdings Ltd. rose 1.4 percent to HK$8.60, pacing gains by real-estate shares after the Standard newspaper said the company is ``confident'' of reaching its 2008 sales target and inflation in China slowed last month, stoking speculation lending curbs may be eased.
Sun Hung Kai Properties Ltd., Hong Kong's largest developer, gained 1.4 percent to HK$112.50. Cheung Kong Holdings Ltd., the developer controlled by billionaire Li Ka-shing, advanced 0.6 percent to HK$109.90.
China Inflation
The Hang Seng Property index rose 0.7 percent, the only one of the four industry groups on the Hang Seng to advance. China's inflation cooled for a third month on slower food-price gains. The consumer price index rose 6.3 percent in July from a year earlier, the statistics bureau said today, after increasing 7.1 percent in June.
Zijin dropped 5.8 percent to HK$4.52, the lowest since June 8, 2007. Zhaojin Mining Industry Co., a Shandong-based gold producer, fell 9.5 percent to HK$5.75. Jiangxi Copper slid 5.1 percent to HK$10.50, the lowest close since April 4, 2007.
Gold fell 2.6 percent to $802.27 an ounce, the lowest since Dec. 21. Copper slid 1.4 percent to close at 56,420 yuan ($8,220) a ton in Shanghai.
China Mobile fell 4.6 percent to HK$94.50. Citigroup lowered its share-price estimate to HK$120 from HK$150, citing ``regulatory headwinds'' and increased competition. CLP dropped 0.8 percent to HK$66.85, after reporting first-half profit dropped 8.5 percent to HK$5.61 billion ($718 million) due to a smaller one-off gain.
The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese mainland companies, declined 1.7 percent to 11,445.55.
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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Aug. 12 (Bloomberg) -- Hong Kong stocks fell, sending the Hang Seng Index to a third-straight decline, as commodity producers retreated on lower prices for copper and gold.
Zijin Mining Group Co., owner of China's largest gold mine, and Jiangxi Copper Co. declined as the metals slumped to their lowest since December. China Mobile Ltd., the world's largest phone carrier by market value, dropped after Citigroup Inc. cut its price estimate. CLP Holdings Ltd., Hong Kong's biggest power supplier, snapped a four-day winning streak after first-half profit decreased.
``Commodity stocks are facing pressure as demand softens,'' said Daphne Roth, Singapore-based head of equity research in Asia at ABN Amro Private Bank, which oversees about $30 billion of Asian assets.
The Hang Seng Index lost 218.45, or 1 percent, to 21,640.89 at the close, after gaining as much as 2.1 percent. Four stocks fell for every three that climbed on the index. Futures slid 1.1 percent to 21,555.
Shimao Property Holdings Ltd. rose 1.4 percent to HK$8.60, pacing gains by real-estate shares after the Standard newspaper said the company is ``confident'' of reaching its 2008 sales target and inflation in China slowed last month, stoking speculation lending curbs may be eased.
Sun Hung Kai Properties Ltd., Hong Kong's largest developer, gained 1.4 percent to HK$112.50. Cheung Kong Holdings Ltd., the developer controlled by billionaire Li Ka-shing, advanced 0.6 percent to HK$109.90.
China Inflation
The Hang Seng Property index rose 0.7 percent, the only one of the four industry groups on the Hang Seng to advance. China's inflation cooled for a third month on slower food-price gains. The consumer price index rose 6.3 percent in July from a year earlier, the statistics bureau said today, after increasing 7.1 percent in June.
Zijin dropped 5.8 percent to HK$4.52, the lowest since June 8, 2007. Zhaojin Mining Industry Co., a Shandong-based gold producer, fell 9.5 percent to HK$5.75. Jiangxi Copper slid 5.1 percent to HK$10.50, the lowest close since April 4, 2007.
Gold fell 2.6 percent to $802.27 an ounce, the lowest since Dec. 21. Copper slid 1.4 percent to close at 56,420 yuan ($8,220) a ton in Shanghai.
China Mobile fell 4.6 percent to HK$94.50. Citigroup lowered its share-price estimate to HK$120 from HK$150, citing ``regulatory headwinds'' and increased competition. CLP dropped 0.8 percent to HK$66.85, after reporting first-half profit dropped 8.5 percent to HK$5.61 billion ($718 million) due to a smaller one-off gain.
The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese mainland companies, declined 1.7 percent to 11,445.55.
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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China Stocks Decline for Fourth Day; Air China, Citic Retreat
By Zhang Shidong and Chua Kong Ho
Aug. 12 (Bloomberg) -- China's stocks, the world's worst performers this year, fell for a fourth day as airlines, stockbrokers and commodities producers retreated on concern faltering growth will hurt profit.
Air China Ltd., the nation's largest international carrier, extended its four-day plunge to 28 percent on speculation the yuan will weaken and boost the cost of paying overseas debt. Citic Securities Co. tumbled on concern a 54 percent slide in stock values will further crimp trading. Zhongjin Gold Corp. and Jiangxi Copper Co. dropped along with prices of the metals.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, fell 12.66, or 0.5 percent, to 2,444.16 at the close, the lowest since Feb. 9, 2007. Equities fell, reversing a gain of as much as 0.7 percent earlier in the day on lower oil futures and consumer prices that rose less than forecast in China.
``Sentiment has deteriorated to a point where the good news is ignored,'' said Simon Hua, head of research at Bank of Communications Schroder Fund Management Co. in Shanghai, which oversees about $3 billion. ``There are buying opportunities in banks and steelmakers at these levels.''
Angang Steel Co. gained after saying first-half profit rose 25 percent on higher product prices.
The gauge, which surged sevenfold in the two years through 2007, became the worst performer among the world's 88 major benchmark indexes this year on concern rising fuel prices and central bank measures to curb inflation will hurt earnings. Inflation cooled for a third month to 6.3 percent in July, the statistics bureau said today.
Airlines Tumble
Airlines tumbled for a third day on concern the government will halt the yuan's 26-month run of gains against the dollar. Local carriers are hurt by any weakening of the local currency because it inflates the value of their dollar-denominated debt when converted into yuan.
Air China plunged 8.2 percent to 7.18 yuan. China Southern Airlines Co., the nation's biggest carrier by fleet size, slid 3.1 percent to 5.90 yuan. China Eastern Airlines Corp., the nation's third-largest, retreated 6.2 percent to 5.79 yuan.
The yuan dropped 0.1 percent to 6.8639 a dollar as of 3:14 p.m. in Shanghai. The local currency has declined 0.7 percent since China's Politburo, the Communist Party's top decision- making body, said on July 25 that maintaining economic growth is as important as controlling inflation.
China Southern made a full-year currency gain of 2.83 billion yuan ($412 million) in 2007. That was more than its 1.87 billion yuan net income. Air China made a gain of 2.03 billion yuan from the appreciation of the yuan last year.
Olympic Games
Airlines also fell on concern the Olympic Games will damp traffic. China has tightened visa regulations and curbed regular Beijing flights to boost security and ease congestion during the games.
Citic Securities, the brokerage unit of China's biggest investment company, dropped 8 percent to 17.99 yuan. Haitong Securities Co., the country's largest listed brokerage by market value, plunged by the 10 percent daily cap to 17.43 yuan.
Shares worth 61.8 billion yuan were traded on the Shanghai and Shenzhen stock markets yesterday, according to data compiled by Bloomberg. That compared with an average daily trading value of 101 billion yuan in July.
Zhongjin Gold, the country's second-largest gold producer, slumped 6.5 percent to 34.55 yuan. Jiangxi Copper Co., China's second-biggest producer of the metal, lost 2.4 percent to 16.91 yuan.
Gold yesterday dropped 4.2 percent to $828.30, the lowest since Dec. 24. A measure of six metals traded on the London Metal Exchange, including copper and zinc, slid 1 percent yesterday.
Oil Falls
Crude oil fell for a third day on signs that a U.S. economic slump will extend into 2009, paring fuel demand in the world's biggest oil consumer. The contract fell 0.8 percent to $113.56 a barrel in after-hours trading.
Angang Steel, China's second-largest steelmaker by market value, gained 5 percent to 10.29 yuan. Net income was 5.99 billion yuan in the first six months, the company said in a statement yesterday, citing international accounting standards. Rising demand from automakers and shipbuilders boosted steel prices in China.
Baoshan Iron & Steel Co., the country's biggest steelmaker, added 2.6 percent to 7.11 yuan. Wuhan Iron & Steel Co., the third-biggest, rose 5.6 percent to 8.26 yuan.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 0.5 percent to 2,457.20. The Shenzhen Composite Index fell 0.6 percent to 694.30.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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Aug. 12 (Bloomberg) -- China's stocks, the world's worst performers this year, fell for a fourth day as airlines, stockbrokers and commodities producers retreated on concern faltering growth will hurt profit.
Air China Ltd., the nation's largest international carrier, extended its four-day plunge to 28 percent on speculation the yuan will weaken and boost the cost of paying overseas debt. Citic Securities Co. tumbled on concern a 54 percent slide in stock values will further crimp trading. Zhongjin Gold Corp. and Jiangxi Copper Co. dropped along with prices of the metals.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, fell 12.66, or 0.5 percent, to 2,444.16 at the close, the lowest since Feb. 9, 2007. Equities fell, reversing a gain of as much as 0.7 percent earlier in the day on lower oil futures and consumer prices that rose less than forecast in China.
``Sentiment has deteriorated to a point where the good news is ignored,'' said Simon Hua, head of research at Bank of Communications Schroder Fund Management Co. in Shanghai, which oversees about $3 billion. ``There are buying opportunities in banks and steelmakers at these levels.''
Angang Steel Co. gained after saying first-half profit rose 25 percent on higher product prices.
The gauge, which surged sevenfold in the two years through 2007, became the worst performer among the world's 88 major benchmark indexes this year on concern rising fuel prices and central bank measures to curb inflation will hurt earnings. Inflation cooled for a third month to 6.3 percent in July, the statistics bureau said today.
Airlines Tumble
Airlines tumbled for a third day on concern the government will halt the yuan's 26-month run of gains against the dollar. Local carriers are hurt by any weakening of the local currency because it inflates the value of their dollar-denominated debt when converted into yuan.
Air China plunged 8.2 percent to 7.18 yuan. China Southern Airlines Co., the nation's biggest carrier by fleet size, slid 3.1 percent to 5.90 yuan. China Eastern Airlines Corp., the nation's third-largest, retreated 6.2 percent to 5.79 yuan.
The yuan dropped 0.1 percent to 6.8639 a dollar as of 3:14 p.m. in Shanghai. The local currency has declined 0.7 percent since China's Politburo, the Communist Party's top decision- making body, said on July 25 that maintaining economic growth is as important as controlling inflation.
China Southern made a full-year currency gain of 2.83 billion yuan ($412 million) in 2007. That was more than its 1.87 billion yuan net income. Air China made a gain of 2.03 billion yuan from the appreciation of the yuan last year.
Olympic Games
Airlines also fell on concern the Olympic Games will damp traffic. China has tightened visa regulations and curbed regular Beijing flights to boost security and ease congestion during the games.
Citic Securities, the brokerage unit of China's biggest investment company, dropped 8 percent to 17.99 yuan. Haitong Securities Co., the country's largest listed brokerage by market value, plunged by the 10 percent daily cap to 17.43 yuan.
Shares worth 61.8 billion yuan were traded on the Shanghai and Shenzhen stock markets yesterday, according to data compiled by Bloomberg. That compared with an average daily trading value of 101 billion yuan in July.
Zhongjin Gold, the country's second-largest gold producer, slumped 6.5 percent to 34.55 yuan. Jiangxi Copper Co., China's second-biggest producer of the metal, lost 2.4 percent to 16.91 yuan.
Gold yesterday dropped 4.2 percent to $828.30, the lowest since Dec. 24. A measure of six metals traded on the London Metal Exchange, including copper and zinc, slid 1 percent yesterday.
Oil Falls
Crude oil fell for a third day on signs that a U.S. economic slump will extend into 2009, paring fuel demand in the world's biggest oil consumer. The contract fell 0.8 percent to $113.56 a barrel in after-hours trading.
Angang Steel, China's second-largest steelmaker by market value, gained 5 percent to 10.29 yuan. Net income was 5.99 billion yuan in the first six months, the company said in a statement yesterday, citing international accounting standards. Rising demand from automakers and shipbuilders boosted steel prices in China.
Baoshan Iron & Steel Co., the country's biggest steelmaker, added 2.6 percent to 7.11 yuan. Wuhan Iron & Steel Co., the third-biggest, rose 5.6 percent to 8.26 yuan.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 0.5 percent to 2,457.20. The Shenzhen Composite Index fell 0.6 percent to 694.30.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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Japan Stocks Fall for First Time in 3 Days, Led by Steelmakers
By Masaki Kondo
Aug. 12 (Bloomberg) -- Japan's stocks fell for the first time in three days on concern steelmakers' earnings will be squeezed and the fastest wholesale inflation in almost three decades will erode profit margins at manufacturers.
JFE Holdings Inc., Japan's second-biggest steelmaker, led producers of the alloy lower on speculation Chinese exports will weigh on prices. Snow Brand Milk Products Co. sank the most in five years as materials costs cut profit. Mitsui Sumitomo Insurance Group Holdings Inc. rose to the highest this month as first-quarter profit reached about half of its annual target.
Losses accelerated in the afternoon after the government said Japanese consumer sentiment fell to the lowest on record.
``Increased exports from China will lead to a drop in steel prices,'' said Mitsushige Akino, who oversees the equivalent of $468 million at Ichiyoshi Investment Management Co. in Tokyo. ``Falling auto sales are cutting revenue at Japanese steelmakers, while production costs remain high.''
The Nikkei 225 Stock Average fell 127.31, or 1 percent, to close at 13,303.60 in Tokyo. The broader Topix index dropped 8.58, or 0.7 percent, to 1,271.42. More than four stocks retreated for each that advanced on the Topix.
China's steel exports climbed 38 percent in July from the previous month, the nation's customs office said yesterday. BHP Billiton Ltd., the world's biggest mining company, raised prices of iron ore by as much as 97 percent this year, while its venture with Japan's Mitsubishi Corp. tripled coking-coal prices.
Japan's producer prices, the costs companies pay for energy and raw materials, climbed 7.1 percent in July from a year earlier, the steepest gain since January 1981, the Bank of Japan said today. Meanwhile, Japanese consumers became the most pessimistic in June since at least 1982 when the government began compiling the figures, the Cabinet Office said today.
Steel, Foods
JFE fell 6.1 percent to 4,480 yen, while bigger rival Nippon Steel Corp. sank 4.6 percent to 516 yen. Sumitomo Metal Industries Ltd. dropped 4.6 percent to 453 yen. Steelmakers fell to the lowest since August 5 and posted the biggest decline among 33 groups on the Topix.
Snow Brand tumbled 13 percent, the most since February 2003, to 356 yen, after net income fell 12 percent. Ajinomoto Co., the nation's largest maker of food additives, lost 4.4 percent to 1,029 yen, after surging materials costs more than halved first- quarter profit. Nikko Citigroup Ltd. lowered its rating on the stock to ``hold'' from ``buy.''
Japan Airlines Corp., Asia's largest carrier, jumped 3.7 percent to 226 yen, the highest since June 20. Rival All Nippon Airways Co. added 1.3 percent to 399 yen.
Kerosene Costs
The price of crude oil has fallen 21 percent from a record on July 14 to its close at $114.45 in New York yesterday. A $1 increase in a barrel of jet kerosene boosts Japan Air's annual costs by about 4 billion yen ($36 million), it said on Aug. 7.
Mitsui Sumitomo Insurance climbed 5.5 percent to 3,440 yen, the highest since July 31. Net income rose 0.2 percent to 23.5 billion yen, the company said yesterday, which was 45 percent of its annual forecast.
``Investors have shied away from insurers on concern they would report writedowns linked to monolines and credit-default swaps,'' said Ichiyoshi's Akino. ``In reality, they had few such losses.''
The Topix Insurance Index fell 21 percent from its June 11 high this year to yesterday, almost double the rate of the overall benchmark.
Nikkei futures expiring in September lost 0.6 percent to 13,310 in Osaka and fell 0.3 percent to 13,325 in Singapore.
To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Aug. 12 (Bloomberg) -- Japan's stocks fell for the first time in three days on concern steelmakers' earnings will be squeezed and the fastest wholesale inflation in almost three decades will erode profit margins at manufacturers.
JFE Holdings Inc., Japan's second-biggest steelmaker, led producers of the alloy lower on speculation Chinese exports will weigh on prices. Snow Brand Milk Products Co. sank the most in five years as materials costs cut profit. Mitsui Sumitomo Insurance Group Holdings Inc. rose to the highest this month as first-quarter profit reached about half of its annual target.
Losses accelerated in the afternoon after the government said Japanese consumer sentiment fell to the lowest on record.
``Increased exports from China will lead to a drop in steel prices,'' said Mitsushige Akino, who oversees the equivalent of $468 million at Ichiyoshi Investment Management Co. in Tokyo. ``Falling auto sales are cutting revenue at Japanese steelmakers, while production costs remain high.''
The Nikkei 225 Stock Average fell 127.31, or 1 percent, to close at 13,303.60 in Tokyo. The broader Topix index dropped 8.58, or 0.7 percent, to 1,271.42. More than four stocks retreated for each that advanced on the Topix.
China's steel exports climbed 38 percent in July from the previous month, the nation's customs office said yesterday. BHP Billiton Ltd., the world's biggest mining company, raised prices of iron ore by as much as 97 percent this year, while its venture with Japan's Mitsubishi Corp. tripled coking-coal prices.
Japan's producer prices, the costs companies pay for energy and raw materials, climbed 7.1 percent in July from a year earlier, the steepest gain since January 1981, the Bank of Japan said today. Meanwhile, Japanese consumers became the most pessimistic in June since at least 1982 when the government began compiling the figures, the Cabinet Office said today.
Steel, Foods
JFE fell 6.1 percent to 4,480 yen, while bigger rival Nippon Steel Corp. sank 4.6 percent to 516 yen. Sumitomo Metal Industries Ltd. dropped 4.6 percent to 453 yen. Steelmakers fell to the lowest since August 5 and posted the biggest decline among 33 groups on the Topix.
Snow Brand tumbled 13 percent, the most since February 2003, to 356 yen, after net income fell 12 percent. Ajinomoto Co., the nation's largest maker of food additives, lost 4.4 percent to 1,029 yen, after surging materials costs more than halved first- quarter profit. Nikko Citigroup Ltd. lowered its rating on the stock to ``hold'' from ``buy.''
Japan Airlines Corp., Asia's largest carrier, jumped 3.7 percent to 226 yen, the highest since June 20. Rival All Nippon Airways Co. added 1.3 percent to 399 yen.
Kerosene Costs
The price of crude oil has fallen 21 percent from a record on July 14 to its close at $114.45 in New York yesterday. A $1 increase in a barrel of jet kerosene boosts Japan Air's annual costs by about 4 billion yen ($36 million), it said on Aug. 7.
Mitsui Sumitomo Insurance climbed 5.5 percent to 3,440 yen, the highest since July 31. Net income rose 0.2 percent to 23.5 billion yen, the company said yesterday, which was 45 percent of its annual forecast.
``Investors have shied away from insurers on concern they would report writedowns linked to monolines and credit-default swaps,'' said Ichiyoshi's Akino. ``In reality, they had few such losses.''
The Topix Insurance Index fell 21 percent from its June 11 high this year to yesterday, almost double the rate of the overall benchmark.
Nikkei futures expiring in September lost 0.6 percent to 13,310 in Osaka and fell 0.3 percent to 13,325 in Singapore.
To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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