Forex News

U.S. Stocks Climb, Pushing Dow Average to Highest Close of 2009

2009-10-11T23:13:00.000-07:00

U.S. stocks gained, sending the Dow Jones Industrial Average above its highest close in a year, after Alcoa Inc. unexpectedly reported a profit and economic data signaled the U.S. recession is ending.
Alcoa jumped 11 percent, the most since June, after the largest U.S. aluminum producer cut jobs and raw-material costs faster than analysts projected. Newmont Mining Corp. and Freeport-McMoRan Copper & Gold Inc. rallied more than 10 percent on record gold prices. Macy’s Inc., the second-biggest department-store chain, soared 10 percent as U.S. retailers said same-store sales rose for the first time in 13 months.
“If we can get the retail numbers to keep going up, then the stock market will go up,” said Jerome Dodson, who oversees $2.5 billion at Parnassus Investments in San Francisco. “By the end of the year, I expect the market to be somewhat higher than we are today.”
The Standard & Poor’s 500 Index climbed 4.5 percent to 1,071.49 for the biggest weekly advance in three months. The Dow average rose 377.27 points, or 4 percent, to 9,864.94. The Nasdaq Composite Index added 4.5 percent to 2,139.28.
Equities advanced as economic data showed first-time jobless claims slid to the lowest level since January and the U.S. service industries grew after 11 months of contraction. The S&P 500, up 58 percent in the past seven months, posted the first five-day rally for a week since November 2006.
Rising P/E’s
The gains have driven the index’s valuation to 20.3 times reported operating income for its companies, the most since 2004. The VIX, as the Chicago Board Options Exchange Volati Index is known, tumbled 19 percent to 23.12 for the steepest weekly decline since November. The index measures the cost of using options as insurance against S&P 500 declines.
The number of Americans filing first-time claims for unemployment benefits slid to 521,000 in the week ended Oct. 3, Labor Department data showed. That was below the median estimate for 540,000 claims from a Bloomberg survey of economists. The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy, rose to 50.9, above the line between expansion and contraction.
Alcoa rose to $14.24, the highest price since October. The company reported a profit of 4 cents a share, exceeding the average analysts’ estimate for a 9-cent loss.
Newmont, the largest U.S. gold producer, advanced to $46.50. Freeport-McMoRan, which operates the world’s biggest gold mine, climbed 13 percent to $74.34.
Gold Gain
Gold, which has climbed for seven of the past eight weeks, reached a record $1,062.70 on Oct. 8. Australia’s monetary- policy makers unexpectedly raised borrowing costs this week, triggering a decline in the dollar and a rally in bullion prices.
The Dollar Index, which tracks the currency against the yen, euro, Swiss franc, pound, Swedish krona and Canadian dollar, slid 0.9 percent to 76.35 for the week.
The Federal Reserve will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently,” Chairman Ben S. Bernanke said at a Board of Governors conference in Washington on Oct. 8.
“Accommodative policies will likely be warranted for an extended period,” Bernanke said. “At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem.”
Macy’s rose to $19.15. Limited Brands Inc., which owns the Victoria’s Secret stores, soared 13 percent to $18.26.
Same Store
Data from Retail Metrics Inc. showed sales at U.S. chain stores open at least a year climbed 1.1 percent last month as discounts drew shoppers. Seventy percent of retailers reported sales results that exceeded the average of estimates compiled by the Swampscott, Massachusetts-based research firm.
“Even though the market has had a very big move off the bottom, there are still a lot of stocks out there that aren’t fully valued,” said Matthew Kaufler, who helps oversee $2 billion at Federated Clover Investment Advisors in Rochester, New York, in a Bloomberg Television interview.
Johnson & Johnson, Goldman Sachs Group Inc. and Google Inc. are among the 31 companies in the S&P 500 scheduled to release quarterly results next week. The index is projected to post a ninth straight period of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates show.
Retail sales in the U.S. probably fell in September as dealer showrooms emptied out following the expiration of “cash for clunkers,” economists said before a report next week.

American Incomes Head Down, Threatening Recovery in Spending

2009-08-04T22:54:00.001-07:00

August 05 Household income in the U.S. is weakening as the influence of the government’s stimulus plan wanes, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may struggle.
“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.”
Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released yesterday. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.
Personal incomes, which include interest income, dividends, rents and other payments as well as wages, tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, yesterday’s Commerce report showed. Excluding the effects of the stimulus plan, June incomes would have dropped 0.1 percent after no change in May, according to the report. In May, one-time additional payments to Social Security recipients boosted incomes 1.3 percent.
One of every 10 American workers will be without a job by early 2010, economists project, shaking the confidence of those still on payrolls and discouraging spending. It may take as long as 15 years for consumers to fully repair finances battered by the decline in home values, stocks and employment, said Edmund Phelps, winner of the Nobel prize in economics in 2006.
Shrinking Net Worth
Decreasing pay is not the only hurdle for consumers. Plunging home prices and stocks reduced household net worth by a record $13.9 trillion from the third quarter of 2007 through this year’s first quarter, according to figures from the Fed.
“Households are going to have to do an awful lot of rebuilding of their wealth,” Phelps, a professor at Columbia University in New York, said this week in an interview on Bloomberg Television. “Even if that rebuilding goes on at a pretty good clip, it will take 12 or 15 years for households to get to the wealth level that they had several years ago. Consumer demand is going to take a long time to rebuild to normal levels.”
In the second half, incomes and spending will be hurt by the loss of transitory factors such as lower fuel prices, decreased tax rates and the one-time payment to retirees, William Dudley, president of the Fed Bank of New York, said in a speech last week.
Save More
“Consumer spending is unlikely to rise much faster than income” because of the need to boost savings, he said. “Weak income growth will be an effective constraint on the pace of consumer spending.”
Companies continue to trim expenses, threatening further cuts in pay and benefits. Tenneco Inc., the world’s largest maker of vehicle-exhaust systems, temporarily lowered pay and hours worked to reduce labor costs by 10 percent. Earlier this year, the Lake Forest, Illinois-based company suspended contributions to employees’ 401(k) retirement accounts and cut pay for the top 50 executives.
Government assistance such as the “cash-for-clunkers” program will help postpone the inevitable increase in savings and slowdown in spending as more baby boomers approach retirement, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.
“Spending is in desperate need of gimmicks like cash-for- clunkers in order to grow on a short-term basis,” he said.
Lifting Auto Sales
The program, which offers as much as $4,500 for trading in older, less fuel-efficient cars, ran through its $1 billion fund in about a week, and Congress is considering adding $2 billion. Auto industry data this week showed sales jumped to an 11.3 million annual pace last month, the highest level since September.
Mounting joblessness is among reasons that economists such as Rosenberg say will prompt Americans to save more. Unemployment, already at a 26-year high of 9.5 percent in June, may top 10 percent by early next year, according to the median estimate of economists surveyed by Bloomberg last month.
Economists estimate that a Labor Department report at the end of the week will show employers cut an additional 328,000 workers from payrolls in July. That would bring the total loss of jobs since the recession began in December 2007 to 6.8 million.
The savings rate in June fell to 4.6 percent as incomes dropped, yesterday’s Commerce Department report showed. The rate, which reached a 14-year high of 6.2 percent the previous month, is likely to keep climbing, Rosenberg said. A rate as high as 15 percent can’t be ruled out, he said.
“This is a different consumer than we had in the past 20 years,” Rosenberg said. “People are going to increasingly be putting more money into cookie jars, rather than into buying more cookie jars.”

Oil Trades Little Changed Ahead of U.S. Crude Inventories Data

2009-08-04T22:51:00.000-07:00

August 05 Oil traded little changed ahead of official figures expected to show U.S. crude inventories rose and as the dollar gained against the euro, reducing the investment appeal of dollar-denominated commodities.
An Energy Department report today will probably show U.S. crude stockpiles increased 600,000 barrels, according to analysts surveyed by forex news-4all.blogspot.com, in contrast to the 1.52 million barrel decline reported yesterday by the industry-funded American Petroleum Institute. Crude had risen as much as 0.6 percent after the API data, which has moved in the same direction as the government figures 76 percent of the time over the past four years, Bloomberg data show.
“The last few weeks, the API report was not in agreement with the DOE report, and there is some caution in the market on it,” said Victor Shum, a senior principal at consultant Purvin & Gertz Inc. in Singapore.
Crude oil for September delivery traded at $71.28 a barrel, down 14 cents, on the New York Mercantile Exchange at 1:21 p.m. in Singapore. Earlier, it rose 45 cents to $71.87 a barrel. Yesterday, oil dropped 16 cents, or 0.2 percent, to settle at $71.42 a barrel.
The dollar rose to $1.4395 per euro at 1:17 p.m. in Singapore from $1.4408 in New York yesterday. The U.S. currency declined to $1.4445 on Aug. 3, the lowest since Dec. 18.
Gasoline Supplies
U.S. gasoline inventories increased 2.1 million barrels to 215.7 million in the week ended July 31, the API report showed. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines.
“The API numbers seemed to provide a little bit of mild strength to prices,” Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney, said by phone. “This rally has been sentiment driven and it is largely dependent on equities maintaining momentum if oil is going to make new highs for 2009.”
The Energy Department is scheduled to release its report on crude stockpiles for the week ended July 31 at 10:30 a.m. in Washington.
Gasoline for September delivery fell 1.02 cents, or 0.5 percent, to $2.0465 a gallon in New York at 1:19 p.m. Singapore time. Yesterday, it declined 1.26 cents, or 0.6 percent, to end at $2.0567.
Brent crude oil for September settlement was trading at $74.35 a barrel on London’s ICE Futures Europe Exchange at 1:22 p.m. in Singapore, having earlier risen as much as 53 cents, or 0.7 percent, to $74.81. Yesterday, the contract rose 73 cents, or 1 percent, to $74.28.

Yen Strengthens as Asian Stock Declines Spur Demand for Safety

2009-08-04T22:47:00.001-07:00

August 05 The yen rose for a second day versus the dollar and the euro as regional equities and U.S. stock futures fell, spurring demand for the relative safety of Japanese assets.
The yen gained versus all of the 16 most-traded currencies as the MSCI Asia Pacific Index of regional shares declined for a second day and Standard & Poor 500 Index futures dropped 0.2 percent. Japan’s currency strengthened against the Australian dollar for the first time in five days amid speculation Japanese trusts will raise less cash to buy securities in higher-yielding nations.
“Players are looking at equity markets for direction, so when stocks fall, the yen rises,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There’s a strong inverse relationship between the two.”
Japan’s currency rose to 94.96 per dollar as of 1:56 p.m. in Tokyo, from 95.23 yesterday in New York. The yen fetched 136.82 per euro from 137.21. The dollar traded at $1.4407 per euro from $1.4408 in New York yesterday. It declined to $1.4445 on Aug. 3, the weakest since Dec. 18.

Payrolls Probably Declined at Slower Pace: U.S. Economy Preview

2009-08-02T00:26:00.000-07:00

Aug. 2 -- Employers cut jobs in July at a slower pace and the factory slump eased, indicating the end of the worst U.S. recession since the Great Depression is getting closer, economists said before reports this week.
Payrolls fell by 325,000 workers after dropping by 467,000 in June, according to the median on 56 estimates in a Bloomberg News survey ahead of an Aug. 7 Labor Department report. The jobless rate probably rose to a 26-year high of 9.6 percent.
The figures will be a reminder that, even as Obama administration stimulus efforts gain traction, hiring will take longer to pick up as companies such as Deere & Co. and US Airways Group Inc. continue to cut costs. Estimates that the jobless rate will exceed 10 percent by early 2010 signal consumer spending will lag behind an economic recovery.
“The labor market will remain a headwind,” said Conrad DeQuadros, senior economist and a partner at RDQ Economics in New York. “The pace of layoffs has slowed, but that’s not enough. Given an environment where growth is likely to be extremely sluggish, unemployment will still go higher.”
The U.S. has lost 6.5 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era. June’s unemployment rate of 9.5 percent was the highest since 1983.
Households see few signs the job market will improve. Tempe, Arizona-based US Airways said last month it will cut 600 jobs after the peak summer travel season ends in September. Moline, Illinois-based Deere, the world’s largest maker of agricultural equipment, said about 800 salaried employees will leave as part of a voluntary program.
Fewer Paychecks
Automatic Data Processing Inc., the world’s largest payroll processor, last week forecast full-year sales and profit that trailed analysts’ projections as the recession curbed customers’ spending. It gets about three-quarters of its sales from paycheck, tax and benefits processing.
“Our guidance reflects the uncertainty about the depth and length of the downturn,” Chief Financial Officer Chris Reidy said in an interview on July 30. “The pipeline of activity has picked up significantly, but CEOs and CFOs are still hesitant to make these investments.”
A report last week from the Commerce Department underscored estimates that the economy will pick up this quarter. Gross domestic product shrank at a 1 percent annual pace from April to June, less than forecast, after plunging 6.4 percent the prior three months.
Obama on Jobs
“We are still continuing to lose far too many jobs,” President Barack Obama said in a news conference on July 31 following the GDP release. “As far as I’m concerned, we won’t have a recovery as long as we keep losing jobs,” he said, and added that a rebound in hiring “won’t happen overnight.”
A record reduction in inventories over the first half of the year sets the stage for production to rebound, economists said. Companies including General Motors Co. and Chrysler Group LLC, both out of bankruptcy, may benefit from higher sales and a boost to output from the government’s “cash for clunkers” effort.
The House of Representatives on July 31 approved an emergency measure to add $2 billion to the automobile purchase program after a burst of demand exhausted most of the initial $1 billion in less than a week.
Sales figures from the auto industry are due tomorrow. Increasing demand will contribute to the stabilization in manufacturing already taking place.
Manufacturing, Services
The Institute for Supply Management may report tomorrow that its manufacturing index climbed to 46.5 in July, the highest level in almost year, according to the survey median. Readings below 50 signal contraction.
The slump in service industries, which make up almost 90 percent of the economy, is also waning. The Tempe, Arizona-based ISM’s gauge of non-manufacturing businesses probably increased to 48 last month from 47 in June, according to the Bloomberg survey. The report is due on Aug. 5.
The GDP report last week showed consumer spending, which makes up about 70 percent of the economy, has dropped 2 percent since it peaked at the end of 2007 -- the most since the 1980 recession. A Commerce report on June 4 will give the month-by- month breakdown on spending and incomes for the quarter.
Economists project the economy will grow at an average 1.5 percent pace from July to December, according to a Bloomberg survey taken in early July. The survey also showed they forecast the jobless rate will reach 10.1 percent in the first quarter of 2010.
In other reports this week, orders placed with factories fell in June, economists predicted ahead of Commerce figures due on Aug. 5. A day earlier, the National Association of Realtors may report the number of Americans signing contracts to buy previously owned homes rose in June for a fifth straight month.

Dollar Weakens to Year Low on Signs Global Recession May End

2009-08-02T00:19:00.000-07:00

The dollar declined to the lowest level this year against six major U.S. trading partners as optimism that a global recovery is near reduced demand for the greenback as a refuge.
The Swedish krona advanced against the euro to the strongest level since November after a government report yesterday showed the contraction in the Scandinavian country slowed last quarter. Federal Reserve Chairman Ben S. Bernanke told Congress last month that policy makers will maintain a “highly accommodative” monetary policy for an extended period.
“It’s clear that the economy is recovering,” said Adam Boyton, a strategist in New York at Deutsche Bank AG, the world’s largest currency trader. “Ben Bernanke is making it clear that although he has an exit strategy, he’s not going to use it any time soon. That’s probably been a small negative for the dollar.”
The dollar fell 1.6 percent last month to $1.4257 per euro in New York, from $1.4033 on June 30. The U.S. currency fell 1.7 percent to 94.68 yen, from 96.36 yen a month earlier. The Japanese currency gained 0.2 percent this month to 134.99 per euro, the first advance in three months.
The Dollar Index, which the ICE futures exchange uses to track the currency against counterparts including the yen, pound and Swedish krona, touched 78.22 yesterday, the lowest since Dec. 18. The index dropped 2.3 percent in July.
The dollar declined 1.3 percent versus the euro yesterday, the biggest loss in a month, as a report showing the U.S. economy shrank less than economists forecast added to signs the global recession may be ending, encouraging investors to buy higher-yielding assets overseas.
‘Some Restraint’
U.S. gross domestic product contracted at a less-than- projected 1 percent annual rate after shrinking a revised 6.4 percent in the prior three months, the most in 27 years, the Commerce Department said. Inventories dropped at a record $141.1 billion annual pace, after a $113.9 billion decline.
“The inventories data shows stunning drawdowns in both Q1 and Q2,” wrote Alan Ruskin, head of international currency strategy in North America at RBS Securities Inc. in Greenwich, Connecticut. “This bodes very well for H2 GDP data since the change of inventories should be very positive. Obviously there will be some restraint to this trade because of month-end flows, but I expect players will buy risk trades again early next week.”
‘Signs of Stabilization’
Bernanke told the House Financial Services Committee on July 21 that while the economy is showing “tentative signs of stabilization,” the central bank intends to keep interest rates low. The Fed’s benchmark target rate for overnight loans has been set at a range of zero and 0.25 percent since December.
A government report next week will probably show the U.S. lost 325,000 jobs in July, after reducing 467,000 the previous month, according to the median forecast of 56 economists surveyed by News. The report is due Aug. 7.
The Dow Jones Industrial Average index advanced 8.6 percent in July, the biggest monthly gain since 2002.
The Canadian dollar was the best performer among the major currencies, rising 7.9 percent versus the greenback, as stock gains and higher crude oil prices burnished the appeal of currencies linked to growth.
Canada’s currency touched C$1.075 against the greenback on July 28, the strongest level since Oct. 3, as crude oil reached $69 a barrel. Commodities, such as oil and gold, account for more than half of Canada’s exports. The currency ended the month at C$1.078 after a government report showed the nation’s economy shrank a more-than-forecast 0.5 percent in May.
‘Ahead of Fundamentals’
“There’s a disconnect between market optimism and numbers on the ground,” said Steven Englander, chief U.S. currency strategist at Barclays Plc in New York. “The Canadian dollar is running ahead of fundamentals. We had some pretty nasty number out of Canada recently.”
The Canadian currency will decline to C$1.13 in a month, according to Barclays.
The Swedish krona touched 10.237 per euro yesterday, the strongest since Dec. 1, after Statistics Sweden said the country’s gross domestic product contracted an annual, work-day adjusted 6.2 percent, from a decline of 6.5 percent in the previous quarter.
The krona gained 5.4 percent against the euro last month and 7.1 percent against the dollar. It was the second best performer among the 16 major currencies after the Canadian dollar, which rose 6 percent against the euro in July.
Moving Sideways
The euro-dollar exchange rate swung less than 3 cents above and below $1.40 in July. Implied volatility on seven major currencies against the dollar dropped to 12.73 yesterday, the lowest since October, indicating traders expect less price fluctuation in the foreign-exchange market in coming months.
“We are moving sideways until September when gradual improvement in macro data adds to fresh momentum for dollar shorts,” said Mike Moran, a senior currency strategist at Standard Chartered in New York. A short position is a bet a currency will decline.
Investors should buy the U.S. currency against the yen, with a target above 105 per dollar, as Japan’s trade and investment flows deteriorates, Goldman Sachs Group Inc. said yesterday in an e-mailed note.
The yen is the most overvalued currency in the Group of 10 major currencies, and “neutral” market positioning allows investors to add more bets against the Japanese currency, according to Goldman. Trade and investment flows to Japan have turned from a surplus of 6 percent of its GDP, to a deficit of 5 percent of the economy, according to Goldman.
“We could be getting closer to the tipping point for the yen,” Mark Tan, a Goldman analyst in New York wrote.

U.S. Stocks Advance for Third Week as Earnings Beat Estimates

2009-08-02T00:16:00.000-07:00

U.S. stocks rose for a third week, completing the Dow Jones Industrial Average’s best month since 2002, as companies from Motorola Inc. to MasterCard Inc. topped analysts’ profit estimates.
Amgen Inc., the world’s largest biotechnology company, and Dow Chemical Co., the largest U.S. chemical maker, gained after earnings beat projections. General Electric Co. surged 11 percent on speculation new banking rules will allow it to keep its finance unit. Yahoo! Inc. slumped after terms of an Internet-search accord with Microsoft Corp. were less favorable than analysts predicted.
“What’s been driving the market is the idea that maybe this recession isn’t going to be as severe or prolonged as we thought,” said Samuel Stewart, president of Wasatch Funds, which manages $5 billion in Salt Lake City. “The market is now behaving as though the credit crisis was a blip on the radar.”
The S&P 500 rose 0.8 percent to 987.48, the highest since Nov. 4, capping its fifth straight monthly advance. The main benchmark for American equity has rebounded 46 percent from a 12-year low on March 9. The Dow Jones Industrial Average rose 78.37 points, or 0.9 percent, to 9,171.61, extending its monthly advance to 8.6 percent, the biggest since October 2002. The Russell 2000 Index of small companies added 1.5 percent to 556.71.
Earnings Top Estimates
About three-quarters of the 148 companies in the S&P 500 that released second-quarter results this week topped estimates, according to data compiled by Bloomberg. Companies slated to report next week include Kraft Foods Inc., Procter & Gamble Co. and Cisco Systems Inc.
Companies in the S&P 500 are still headed for a record eighth consecutive decline in quarterly profits. Per-share earnings have tumbled 32 percent for the 352 companies in the S&P 500 that have reported results since June 17. Analyst estimates compiled by call for a 31 percent drop in the second quarter and a 22 percent third-quarter decline. While earnings are falling, results have topped projections by an average 10 percent.
“There is a broader sense that the decline is over,” said Stephen Lieber, chief investment officer of Alpine Mutual Funds in Purchase, New York, which manages $6 billion. “Corporate earnings in the last week have been singular in importance.”
Motorola climbed 8.8 percent to $7.16. The biggest U.S. mobile-phone maker posted a narrower second-quarter loss than analysts projected, helped by job cuts and a recovery in handset shipments.
MasterCard Climbs
MasterCard rose 4.6 percent to $194.03. The world’s second- biggest payment-card network reported earnings excluding some items of $2.68 a share, 11 percent higher than the average analyst estimate. MasterCard raised fees, slashed expenses and processed more transactions during the quarter.
Amgen added 2.3 percent to $62.31. The world’s largest biotechnology company raised its full-year earnings forecast after second-quarter profit excluding some items beat the average analyst estimate by 11 percent. Amgen cut research costs and increased sales of its arthritis drug Enbrel.
Dow Chemical advanced 4.9 percent to $21.17. The largest U.S. chemical maker posted an unexpected second-quarter profit as demand for its products stabilized. The average analyst estimate was for a loss.
GE Gains
General Electric, the world’s biggest non-bank financial company, advanced 11 percent to $13.40. U.S. Representative Barney Frank said manufacturers that already own finance businesses should be allowed under revised banking rules to retain them without being subject to Federal Reserve oversight of their manufacturing operations. Frank heads the U.S. House Financial Services Committee.
Financial stocks in the S&P 500 climbed 4.4 percent, the steepest among 10 industries. Old National Bancorp, an Indiana- based financial-service company, reported second-quarter profit excluding some items that was more than four times the average analyst estimate, sparking a rally in regional banks.
Marshall & Ilsley Corp., Wisconsin’s largest lender, led gains, surging 26 percent to $6.04. Old National climbed 15 percent to $11.30 and Zions Bancorp., the Utah lender that operates in 10 Western states, rose 21 percent to $13.58.
Yahoo fell 18 percent to $14.32. The owner of the second- most popular U.S. Internet search engine will use Microsoft’s search engine on its Web sites and sell ads that appear next to search results. The agreement with Microsoft, the world’s largest software maker, didn’t include an upfront payment for Yahoo, which some analysts had estimated could be as much as $3 billion.
Recession Saps Demand
Exxon Mobil Corp. led energy companies to the second- biggest decline among the S&P 500’s 10 main industry groups. The world’s largest energy company fell 2.6 percent to $70.39 after reporting its lowest profit in more than five years as the recession sapped fuel demand.
Masco Corp. rose 26 percent to $13.93 for the biggest gain in the S&P 500. The insulation installer forecast a loss this year of as little as 5 cents a share, compared with the average analyst loss estimate of 26 cents.
Akamai Technologies Inc. fell 22 percent to $16.44 for the biggest drop in the S&P 500. The provider of software that makes Web sites load faster reported profit excluding some items of 40 cents a share in the second quarter, missing the average analyst estimate by 1.5 percent.
Reports next week will probably show employers cut jobs at a slower pace in July and the factory slump eased, according to economists’ forecasts, suggesting the recession is ending.

Dollar Weakens to Year Low as U.S. Economic Contraction Slows

2009-07-31T09:55:00.000-07:00

The dollar declined to the lowest level this year against six major U.S. trading partners after a report showed the U.S. economy shrank less than economists forecast, reducing the demand for the greenback as a refuge.
The Swedish krona advanced against the euro to the strongest level since December after a government report showed the economic contraction in the Scandinavian country slowed in the second quarter. The U.S. currency headed for a fifth month of declines against the pound, its longest run in five years, after a U.K. survey showed consumer confidence held at the highest level since April 2008.
“The typical pattern is that good economic news is bad for the dollar,” said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “Equities are marching up. We had a better than expected GDP, which set the stage for all this.”
The dollar fell 1.4 percent 1.4271 per euro as of 12:29 p.m. in New York, from $1.4075 yesterday, and was at 94.58 yen from 95.56 yen. The Japanese currency weakened 0.3 percent to 134.95 per euro.
The Dollar Index, which the ICE futures exchange uses to track the currency against counterparts including the yen, pound and Swedish krona, touched 78.22, the lowest since Dec. 18.
The dollar’s decline versus the yen accelerated after running into stops, or pre-set orders, to sell the greenback, above 95 yen, according to Shaun Osborne, a currency strategist at TD Securities Inc. in Toronto.
‘Some Restraint’
U.S. gross domestic product contracted at a less-than- projected 1 percent annual rate after shrinking 6.4 percent in the prior three months, the most in 27 years, Commerce Department figures showed. Inventories dropped at a record $141.1 billion annual pace, after a $113.9 billion decline.
“The inventories data shows stunning drawdowns in both Q1 and Q2,” wrote Alan Ruskin, head of international currency strategy in North America at RBS Securities Inc. in Greenwich, Connecticut. “This bodes very well for H2 GDP data since the change in the change of inventories should be very positive. Obviously there will be some restraint to this trade because of month-end flows, but I expect players will buy risk trades again early next week.”
The Swedish krona touched 10.3 per euro, the strongest since Dec. 1 after Statistics Sweden said the country’s gross domestic product contracted an annual, work-day adjusted 6.2 percent, from a decline of 6.5 percent in the previous quarter.
The krona has gained 4.8 percent against the euro this month and 5.6 percent against the dollar. It is the second best performer among the 16 major currencies after the Canadian dollar, which rose 7.6 percent against the dollar in July.
‘Ahead of Fundamentals’
Canada’s dollar traded at C$1.081 against the greenback, near the strongest since October, even after a government report showed the nation’s economy shrank a more-than-forecast 0.5 percent in May. The currency, known as loonie, touched C$1.075 on July 28, the strongest level since Oct. 3.
“There’s disconnection between market optimism and numbers on the ground,” said Steven Englander, chief U.S. currency strategist at Barclays Plc in New York. “The Canadian dollars running ahead of fundamentals. We had some pretty nasty number out of Canada recently.”
The Canadian currency will decline to C$1.13 in a month, according to Barclays.
Sterling gained 0.4 percent to $1.6557 after GfK NOP said that an index of consumer sentiment in the U.K. was unchanged in July at minus 25. The reading is up from minus 39 a year earlier, adding to signs that the U.K.’s worst slump in a generation is easing. The currency was up 0.5 percent in July.
Implied Volatility
The Polish zloty advanced a record 8 percent this month to 2.93 per euro, as the country posted the only positive first- quarter growth rate among European Union’s 10 eastern members. The currency was the biggest gainer among 26 emerging-market counterparts tracked.
The dollar dropped against 14 of 16 most actively traded currencies this month, losing 1 percent against the euro. The yen gained 1.2 percent versus the dollar and 0.2 percent against the European currency.
The euro-dollar exchange rate swung less than 3 cents above and below $1.40 this month. Implied volatility on seven major currencies against the dollar dropped to 12.73 today, the lowest since October, indicating traders expect less price frustration in the foreign-exchange market in coming months.
Moving Sideways
“We are moving to sideways until September when gradual improvement in macro data adds to fresh momentum for dollar shorts,” said Mike Moran, a senior currency strategist at Standard Chartered in New York. A short position is a bet a currency will decline.
Investors should buy the U.S. currency against the yen, with a target above 105 per dollar, as Japan’s trade and investment flows deteriorates, Goldman Sachs Group Inc. said today in an e-mailed note.
The yen is the most overvalued currencies in the Group of 10 major currencies, and “neutral” market positioning allows investors to add more bets against the Japanese currency, according to Goldman. Trade and investment flows to Japan have turned from a surplus of 6 percent of its GDP, to a deficit of 5 percent of the economy, according to Goldman.

India Leaves Rates Unchanged on Inflation Concerns

2009-07-28T23:30:00.000-07:00

India’s central bank kept borrowing costs unchanged, signaling an end to its deepest round of interest-rate cuts on concern that inflation will “creep up” from October.
The Reserve Bank of India held its reverse repurchase rate at 3.25 percent, according to a statement in Mumbai today. The central bank raised its inflation forecast for the year to March 31 to “around 5 percent” from an April estimate of 4 percent, citing “elevated” food and commodity prices.
Inflation risks increased after Finance Minister Pranab Mukherjee this month unveiled plans to raise spending and widen the budget deficit to a 16-year high to bolster growth. Policy makers from Tokyo to London, who in some cases cut interest rates to close to zero, have started to discuss when they will exit from the emergency measures put in place to ease a global credit freeze.
“Central banks need to put in place now a timely, smooth and systematic exit from the monetary easing,” said Siddhartha Sanyal, an economist at Edelweiss Capital Ltd. in Mumbai. “For India, it would be difficult to continue pursuing the current low-rate regime beyond six to nine months.”
Stocks narrowed losses after the central bank decision, which was expected by 20 of 23 economists in a survey. The Sensitive stock index fell 0.4 percent to 15,312.63 on the Bombay Stock Exchange at 11:20 a.m. The benchmark 10-year government bond yields rose 1 basis point to 6.96 percent while the rupee was little changed at 48.225 against the dollar.
Consumer Prices
India, which releases final inflation numbers after a two- month lag, raised its estimate for the benchmark wholesale price index in the week ended May 16 to 1.65 percent from 0.61 percent, indicating that price gains are gathering pace.
Consumer price indexes that measure the cost of living for industrial and farm workers were running at between 7 percent and 10 percent in May, driven by high food costs.
“The continuation of the monetary-fiscal stimuli is now hitting the danger zone,” S. S. Tarapore, a former deputy governor of the central bank, said in Mumbai on July 16. “Given the budget is strongly expansionary, the RBI has little option but to gradually withdraw the monetary accommodation.”
Mukherjee on July 6 announced plans to borrow a record 4.51 trillion rupees ($94 billion) to fund spending on roads, power and aid for the poor. The budget shortfall is forecast at 6.8 percent of GDP in the year to March 2010.
‘Immediate Challenge’
The central bank today estimated its policy measures since September including lower interest rates and a reduced cash reserve ratio were worth 6 trillion rupees. It said a prolonged budget deficit can “crowd out” private investments and trigger inflation, and urged the government to lay out a roadmap to trim the budget shortfall, including details on revenue and expenditure targets.
The “immediate challenge” before the central bank is to provide ample cash in the banking system for companies and government borrowings to support growth, while at the same time control the “potential build-up of inflationary pressures on the way forward,” Subbarao said in today’s statement.
“In the din created in the name of growth, the RBI has to realize that if inflation accelerates, the blame will rest squarely on it,” Tarapore said.
The Organization for Economic Cooperation and Development said June 24 that GDP in its 30 industrialized member countries will increase 0.7 percent next year after shrinking 4.1 percent in 2009. The U.K. inflation rate will be the highest in the G-7 next year, OECD said.
Growth Forecast
Subbarao today also raised the central bank’s growth forecast for India in the year to March 2010 to 6 percent “with an upward bias” from the 6 percent estimated in April because of favorable funding conditions for companies and a revival in industrial production.
He said an “uptrend in growth momentum” is unlikely before September and that less-than-adequate monsoonal rainfall could reduce farm output. The rains, which start in June and last until September, were 17 percent deficient as of July 24.
India’s $1.2 trillion economy, Asia’s third-largest, expanded 6.7 percent in the year ended March 31, the weakest since 2003.
Subbarao also backed Mukherjee’s goal to boost growth to a 9 percent pace each year and sustain that momentum to cut poverty in the South Asian nation.
Fiscal Stimulus
The finance minister said July 14 that the monetary and fiscal stimulus measures have shown positive results, though the economy is still “not out of the woods.”
Reliance Industries Ltd., India’s most valuable company, on July 24 reported an 11 percent fall in net income in the three months to June 30 as the global recession curbed fuel demand.
Saumitra Chaudhuri, a member of the planning agency that sets India’s development agenda, said formulating monetary policy for the next three to six months will be difficult, as it will be hard to decide when rates should be increased to check inflation.
“Demand isn’t so strong. Inflation has picked up a head of steam -- though it’s not alarming, it certainly can’t be ignored,” said Chaudhuri, a former adviser to Prime Minister Manmohan Singh. “At this point to try and switch to a tighter policy may not be prudent.”
Subbarao said the central bank will maintain an “accommodative monetary stance” until there are “definite and robust” signs of recovery.
“This accommodative monetary stance is, however, not the steady state stance,” Subbarao said. “On the way forward, the Reserve Bank will have to reverse the expansionary measures to subdue inflationary pressures while preserving the growth momentum.”

Dollar Falls Toward Seven-Week Low Against Euro on Stock Rally

2009-07-28T00:05:00.001-07:00

July 28 -- The dollar fell toward its lowest level in seven weeks against the euro as Asian stocks extended a global rally, adding to evidence investors are shifting to higher-yielding assets.
The Australian dollar rose for a third day against the greenback after the Reserve Bank of Australia said the South Pacific nation’s economy may rebound faster than it forecast six months ago. The euro approached a three-week high against the yen after Deutsche Bank AG said second-quarter profit rose 68 percent, beating analysts’ estimates, on increased revenue from trading bonds and stocks.
“Rising share prices will make it easier for investors to take more risks,” said Toshiya Yamauchi, manager of the foreign-exchange margin trading department in Tokyo at Ueda Harlow Ltd. “Under such circumstances, the dollar and the yen will weaken, especially against the currencies of resource-rich nations and emerging markets.”
The dollar declined to $1.4275 per euro as of 7:05 a.m. in London from $1.4232 in New York yesterday, when it touched $1.4298, the lowest level since June 3. The U.S. currency was at 95.13 yen from 95.18 yen.
The euro rose to 135.80 yen from 135.48 yen yesterday, when it reached 136.10 yen, the strongest since July 2. The U.S. dollar fell to as low as C$1.0761 today, its weakest versus Canada’s dollar since Oct. 3.
MSCI’s Asia Pacific index of regional shares rose for an 11th day, the longest winning streak since January 2004, adding to evidence investor risk-appetite is increasing. The index climbed 0.9 percent today.
Dollar Index
The Dollar Index was near the lowest level this year before a report that economists said will show U.S. home prices fell at a slower pace in May, indicating that the American economy is recovering and demand for safe haven currencies will fall.
The S&P/Case Shiller index of 20 major metropolitan areas, scheduled for release today, will show property values fell 17.9 percent in May from a year earlier, according to a Bloomberg News survey of economists. The measure was down 18.1 percent in the 12 months ended April.
The Dollar Index, which the ICE uses to track the greenback against currencies including the yen, pound and Swedish krona, was at 78.476 from 78.626 yesterday, near this year’s low of 78.334 on June 2
The Australian dollar climbed after RBA Governor Glenn Stevens said it appears “that the downturn we are having may turn out not to be one of the more serious ones of the postwar era, in contrast to the experiences of so many other countries.”
Upside Risks
“We can much more easily imagine upside risks to the outlook, to balance out the downside ones, than was the case six month ago,” the Reserve Bank chief said in Sydney today.
Stevens left the benchmark lending rate at 3 percent on July 7 for a third month amid signs the lowest borrowing costs in half a century and government spending helped the nation skirt a recession.
“With Australia’s economy apparently doing well, there may be no more scope for interest-rate cuts,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest publicly traded bank. “Higher-yielding currencies such as Australia’s dollar will likely be popular, with demand from people in countries with low yields such as Japan.”
Benchmark interest rates of 8.75 percent in Brazil and 0.25 percent in Sweden compare with 0.1 percent in Japan and as low as zero in the U.S.
The Australian dollar rose to 83.02 U.S. cents from 82.27 cents yesterday, and advanced to 78.97 yen from 78.31 yen.
Deutsche Earnings
The euro gained for a fourth day against the yen after Germany’s largest bank said in a statement today net income rose to 1.09 billion euros ($1.55 billion), or 1.64 euros a share, from 649 million euros, or 1.27 euros, a year earlier. Deutsche Bank’s earnings exceeded the 944 million-euro median estimate of 13 analysts surveyed.
“The bank’s results were better than expected,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “The latest upmove in the euro could be due to this.”
Deutsche Bank’s Chief Executive Officer Josef Ackermann said the banking industry and financial markets stabilized in the quarter, propelling a fourfold gain in income from debt sales and an improvement in equity trading.
Losses in the yen against the dollar were tempered on speculation Japanese exporters are taking advantage of the currency’s drop in the past week to repatriate earnings from overseas assets before the month-end.
Japanese Exporters
“Exporters are prone to buy the yen, given that the end of the month is near,” said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale, France’s third- largest bank.
Japanese companies forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.
Adding to pressure on the dollar, China’s Assistant Finance Minister Zhu Guangyao said on the first day of bilateral talks with U.S. officials that his government remains “concerned” about the value of its U.S. assets.
Zhu’s remarks come after repeated public assurances by Treasury Secretary Timothy Geithner that the U.S. is committed to reining in a record budget deficit once an economic recovery is secured. China is the biggest foreign investor in U.S. government debt, and any decline in demand could push up borrowing costs.
“China has massive holdings of Treasuries, so it is obviously worried,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Any diversification away from the dollar could be gradual, and the greenback may weaken a bit.”

British Pound Extends Gains Against U.S. Dollar, Japanese Yen

2009-07-28T00:03:00.000-07:00

July 28 -- The pound extended gains against the dollar and the yen.
The British currency rose 0.3 percent to $1.6540 as of 7:09 a.m. in London. Against the yen, the pound advanced 0.3 percent to 157.33.

Colombia Peso Set to Drop as Rally Prompts Central Bank Concern

2009-07-27T23:59:00.000-07:00

july 28 Colombia’s peso, the world’s best- performing currency in the past four months, will weaken by year-end as the central bank’s commitment to “carefully monitor” the rally discourages investors from betting on further gains, Barclays Plc and RBC Capital Markets said.
The peso has surged 25 percent against the dollar since March 27, the biggest gain among the 176 currencies tracked by Bloomberg, as a jump in oil, the country’s top export, and rising demand for higher-yielding assets lured international investment to Latin America’s fifth-largest economy.
Policy makers said July 24 they were “aware of the risks associated with the peso’s appreciation” after it strengthened more than they expected. Agriculture Minister Andres Fernandez and exporters such as coffee growers are urging Banco de la Republica to buy dollars to weaken the peso.
The central bank’s “verbal intervention will put an end to the peso’s appreciating trend,” said Jimena Zuniga, a Latin America economist at Barclays in New York. The comments “will cause some concern with investors,” she said.
Zuniga forecasts the peso will slide 5 percent to 2,100 per U.S. dollar by yearend, from 1,994.52 yesterday. Paul Biszko, an emerging-markets strategist with RBC Capital Markets in Toronto, predicts the peso will drop to as low as 2,250 in the third quarter and end the year at 2,150.
The central bank’s attempt to reverse the peso’s gains may fail as rising crude oil prices propel the currency further, said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. He forecasts the peso may rise to 1,850 by yearend.
Peso to Extend Rally
“Oil is higher, commodities are higher, risk appetite is coming back and people like emerging markets, so the Colombian peso and other emerging market currencies can see values go up toward the end of the year,” Thin said.
Crude oil has jumped 53 percent this year to $68.02 a barrel on the New York Mercantile Exchange. The peso fell 0.5 percent to 1,994.52 yesterday.
Rising political tension with neighboring Venezuela and Ecuador may also derail the Colombian’s peso rally, said Fernando Losada, an economist at Deutsche Bank Securities Inc. in New York.
Venezuelan President Hugo Chavez said July 23 his government may curb commercial ties with Colombia after President Alvaro Uribe announced plans to allow the U.S. to use its air bases for anti-narcotics combat missions. Venezuela is Colombia’s second-biggest trading partner.
‘Commercial War’
Ecuadorean President Rafael Correa this month imposed tariffs on Colombian goods including meat, clothing and machinery, saying the depreciation of the peso earlier this year hurt his country’s economy. Ecuador, Colombia’s third-largest trade partner, uses the U.S. dollar as its currency. Venezuela and Ecuador account for about 20 percent of Colombia’s exports, according to Deutsche Bank.
“The commercial war between Colombia and Ecuador has already started,” Losada said in comments sent by e-mail. If Chavez follows through on a threat to replace Colombian imports with those from other countries, “the impact on the peso could be important,” he said.
Deutsche Bank estimates the peso will weaken to 2,200 in six months, according to a report yesterday.

Asian stock rise for 11th day

2009-07-27T23:53:00.000-07:00

July 28 Asian stocks climbed, lifting the MSCI Asia Pacific Index for an 11th day, as brokerages upgraded banks and steelmakers ahead of earnings announcements.
Sumitomo Mitsui Financial Group Inc., Japan’s third-largest lender, rose 3.9 percent as Nomura Holdings Inc. recommended investors buy the shares. JFE Holdings Inc., Japan’s No. 2 steelmaker, jumped 7.3 percent after Goldman Sachs Group Inc. said earnings are set to improve from this quarter. James Hardie Industries NV, the biggest seller of home siding in the U.S., added 2.2 percent in Sydney after new-home purchases in America surged the most in eight years.
“Investors have been taking comfort that the reporting season hasn’t been horrific,” said Chris Hall, who helps manage $2.6 billion at Argo Investments Ltd. in Adelaide. “The market’s looking like fair value right now, but definitely not what I’d call cheap.”
The MSCI Asia Pacific Index rose 0.9 percent to 110 as of 3:47 p.m. in Tokyo. An acceleration in China’s economic growth and better-than-expected U.S. earnings have helped drive a 12 percent climb in the past 11 days. That’s the longest winning streak since January 2004.
Hong Kong’s Hang Seng Index gained 0.6 percent, while Taiwan’s Taiex Index rose 1.6 percent. Compal Electronics Inc., the world’s No.2 maker of notebook computers, climbed 3.2 percent in Taipei after the Commercial Times said the company will supply laptops to Acer Inc. India’s Tata Motors Ltd. jumped 5.7 percent after the company reported a jump in profit.
Fluctuating Stocks
Japan’s Nikkei 225 Stock Average swung between gains and losses closed little changed. China’s Shanghai Composite Index fell 0.4 percent, its first drop in a week. Sichuan Expressway Co. slumped 10 percent after tripling in value in its trading debut yesterday.
Futures on the Standard & Poor’s 500 Index slipped 0.2 percent today. The gauge climbed 0.3 percent yesterday as a government report showed sales of new homes jumped 11 percent last month from May, the most in eight years and higher than every economist forecast in a survey.
Sumitomo Mitsui, Japan’s No. 3 listed bank, climbed 3.9 percent to 3,990 yen. The company had its investment rating lifted to “buy” from “neutral” at Nomura with a price estimate of 4,500 yen. Improved capital ratios boost the bank’s growth prospects, Nomura analyst Keisuke Moriyama wrote in a Japanese-language report yesterday.
Mitsubishi UFJ Financial Group Inc., the country’s biggest lender by value, rose 0.4 percent to 555 yen, while smaller rival Mizuho Financial Group Inc. added 0.5 percent to 212 yen. The three banks all report first-quarter earnings this week.
Stimulus Policies
Analysts have boosted estimates since the beginning of April for companies in Asia outside Japan, according to data compiled by Bloomberg. Profit forecasts have actually declined within Japan, the data show.
“Earnings season is kicking into high gear this week, so investors are focusing on the individual winners and losers,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo.
JFE climbed 7.3 percent to 3,550 yen, while Sanyo Special Steel Co. surged 13 percent to 395 yen after Goldman lifted shares of both companies to “buy.” JFE reported a first- quarter net loss of 41.6 billion yen ($437 million) an hour before the close of trading.
“We believe that the outlook for 2010-11 is beginning to improve markedly from our previous assumptions, based on the coordinated policy response from governments around the globe,” analysts led by Rajeev Das wrote in a report. “We also believe the end of the June quarter marks a trough for the current cycle.”
U.S. Economy
James Hardie climbed 2.2 percent to A$5.12 following the U.S. home sales report. Nissan Motor Co., which gets 34 percent of its sales in North America, gained 1.6 percent to 626 yen.
The MSCI Asia Pacific Index has climbed 56 percent from a more than five-year low on March 9 on speculation stimulus policies worldwide will revive the global economy. Stocks on the gauge are valued at an average 24.5 times estimated net income, the most expensive level since March 31.
U.S. companies including Intel Corp. and Apple Inc. this month reported better-then-expected results. Government figures due July 31 may show that the contraction in the U.S. economy narrowed to a 1.5 percent pace in the second quarter, following a 5.5 percent drop in the first three months of 2009, economists surveyed by Bloomberg News predicted.
Compal, which gets 31 percent of its sales in America, rose 3.2 percent to NT$33.50. Acer will contract out the production of 20 million laptops in the first phase of contracts, and Compal will be the largest supplier, the Commercial Times reported today.
Beating Estimates
Sapporo Holdings Ltd. rose 5.5 percent to 600 yen in Tokyo after the brewer said it will post a smaller-than-expected net loss for the six months ended in June.
Tata Motors climbed 5.7 percent to 395.55 rupees. The company posted a 58 percent increase in net income for the quarter ended in June as a change in accounting rules and lower commodity prices helped mask a fall in demand.
In Shanghai, Sichuan Expressway, which operates toll roads, sank 10 percent to 9.81 yuan. The stock soared 203 percent in its first day of trading yesterday.
China’s Shanghai Composite Index has climbed 88 percent this year, as government stimulus, record bank lending and an economic rebound spurs demand for equities. Companies in the benchmark are valued at 26 times estimated earnings, up from 13 times on Nov. 4, when the gauge fell to a two-year low.
“While it’s obvious that the market is in a bubble, the rally could still go on as the government hasn’t stopped the liquidity,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million. “If a correction starts, that will be powerful.”

Bank of Israel May Hold Interest Rate at Record Low

2009-07-26T01:19:00.001-07:00

The Bank of Israel will probably hold its benchmark interest rate at a record low tomorrow as the economy contracts and unemployment climbs, a survey showed.
The rate will remain at 0.5 percent for a fifth month, according to eight of the nine economists surveyed. One economist predicted it would rise to 0.75 percent. The Jerusalem-based central bank will announce its decision at 5:30 p.m. tomorrow.
Governor Stanley Fischer has lowered the base rate by 3.75 percentage points since October to mitigate the effects of the global financial crisis. The economy contracted an annualized 3.7 percent in the first quarter and unemployment rose to 8.4 percent in May, its highest in almost three years.
“The Bank of Israel won’t rush to raise the interest rate due to the uncertainty regarding the degree of recovery in the global market and the worsening in the labor market,” Rafael Gozlan, chief economist at Leader Capital Markets, said by phone from Tel Aviv.
While inflation accelerated to an annual 3.6 percent in June from 2.8 percent the previous month it is likely to moderate beginning in September, Gozlan said. The government’s target range for inflation is 1 percent to 3 percent.
“We believe that the restrained global inflationary environment, together with the weakening of the domestic labor market, will support inflation of about 1 percent or 1.5 percent in the coming year,” Gozlan said.
Inflation Outlook
Inflation will reach 2.5 percent over the next year, according to a Bank of Israel poll of economists released on July 16, up from the 2.4 percent expected in the previous survey.
The shekel traded at 3.8678 late on July 23, compared with 3.8882 on July 17.
Last week, Israel’s benchmark 5.5 percent Mimshal Shiklit bond due in 2017 rose 0.2 shekel to 105.55, with the yield falling 1 basis point to 4.97 percent. The Tel Aviv Stock Exchange’s benchmark TA-25 Index rose 4.7 percent to 915.44
The following is a list of important events in Israel next week

Oil Climbs

2009-07-26T01:16:00.001-07:00

Crude oil climbed to a three-week high on optimism that the U.S. economy is strengthening and that fuel consumption will rebound later this year.
Oil increased 7.1 percent this week, the biggest gain since May, as companies such as EBay Inc. and Ford Motor Co. posted better-than-expected earnings. Yesterday, the Standard & Poor’s 500 Index rose to the highest level since President Barack Obama was elected on Nov. 4. Stocks fluctuated today.
“We continue to look to the S&P 500 to interpret any economic data,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “It doesn’t matter if it’s earnings, employment or consumer sentiment, oil seems to follow what the S&P does these days.”
Crude oil for September delivery rose 89 cents, or 1.3 percent, to $68.05 a barrel at 2:50 p.m. on the New York Mercantile Exchange, the highest settlement since July 1. Futures are up 53 percent this year and down 54 percent from a record $147.27 reached on July 11, 2008.
Gasoline for August delivery increased 0.27 cent to end the session at $1.9159 a gallon in New York, the highest settlement since June 29. Heating oil for August delivery climbed 1.69 cents, or 1 percent, to $1.7813 a gallon, the highest close since June 29.
Federal Reserve Chairman Ben S. Bernanke said at a House Financial Services Committee hearing today that the central bank is “winding down” emergency measures established to end the financial crisis.
Correlation With Equities
“There’s a belief that any signs of economic growth are good for both fuel demand and equities,” said Bill O’Grady, the chief market strategist for Confluence Investment Management in St. Louis. “We are seeing a correlation between oil and equities, which is not the norm historically.”
Oil has increasingly moved in tandem with benchmark stock indexes. The Dow Jones Industrial Average and U.S. crude futures showed a correlation of 0.7 the past month, up from 0.06 in December, according to data compiled by Bloomberg. A correlation of 1 means the two moved in lockstep.
“We will probably see a decoupling of the oil and equity markets, with oil moving lower,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant. “We don’t usually see a strong correlation between the stock market, oil and the dollar, but that’s been the case this year.”
U.S. Stockpiles
Crude-oil supplies dropped 1.8 million barrels to 342.7 million last week, an Energy Department report on July 22 showed. The reduction left nationwide crude stockpiles 7.3 percent higher than the five-year average for the period.
Gasoline inventories climbed 813,000 barrels to 215.4 million last week, the sixth-straight gain, according to the report. Stockpiles of distillate fuel rose 1.22 million barrels to 160.5 million, the highest since January 1985.
“This week’s rally has been primarily based on bubbling sentiment that the economy will recover,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Some of the earnings this week point to a recovery. The oil-market fundamental picture, though, isn’t looking supportive.”
Brent crude for September settlement on London’s ICE Futures Europe exchange rose $1.07, or 1.5 percent, to end the session at $70.32 a barrel. It was the highest settlement price since June 29.
OPEC Shipments
The Organization of Petroleum Exporting Countries will trim shipments by 1.7 percent in the four weeks ending Aug. 8 as refinery maintenance and faltering demand encourage members to implement supply cuts, consultant Oil Movements said yesterday.
OPEC will reduce exports in the period to 22.39 million barrels a day from 22.78 million a day in the month ended July 11, the tanker-tracker said. It’s the sixth consecutive drop reported in Oil Movements’ weekly reports.
Oil may decline next week because of fuel-supply increases and demand that trails earlier years. Twenty-two of 42 analysts surveyed by Bloomberg News, or 52 percent, said futures will fall through July 31. Nine respondents, or 21 percent, forecast that prices will be little changed, and 11 expected a gain.
Total U.S. daily fuel demand averaged 18.6 million barrels in the past four weeks, down 4.8 percent from a year earlier, the July 22 Energy Department report showed.
Crude oil volume in electronic trading on the Nymex was 350,396 contracts as of 2:58 p.m. in New York. Volume totaled 608,957 contracts yesterday, 20 percent higher than the average over the past three months. Open interest was 1.18 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.

Dollar Drops to Seven-Week Low as Earnings Pare Safety Demand

2009-07-26T01:14:00.000-07:00

The dollar declined to a seven-week low versus the euro and the yen dropped as U.S. company results beat analysts’ estimates, reducing demand for safety.
The euro advanced for a second week after reports showed yesterday that the contraction in European manufacturing and services slowed more than forecast and German business confidence rose. The Canadian dollar reached the highest level since June 2 as oil prices gained and the central bank said the nation’s recession is ending.
“There’s slightly more economic optimism,” said Warren Naphtal, who overseas $870 million in assets as chief investment officer at P/E Investments in Waltham, Massachusetts. “What we are seeing is commodity-sensitive currencies, such as the Canadian dollar, are attracting capital. The main backdrop is improvement in outlook in general and the increase of the negative dollar view.”
The dollar declined 0.7 percent to $1.4202 per euro yesterday from $1.4102 on July 17. It touched $1.4291 on July 23, the weakest level since June 3. The yen slid 1.3 percent to 134.63 against the euro from 132.85. Japan’s currency depreciated 0.6 percent to 94.79 versus the dollar from 94.19.
Brazil’s real added 1.6 percent this week to 1.8957 per dollar and touched 1.8824 on July 23, the strongest level since Sept. 29. Brazil’s policy makers signaled a day earlier that they may stop lowering the target lending rate after cutting it by a half-percentage point to a record low of 8.75 percent.
The yen declined against all of its 16 most-traded counterparts tracked by Bloomberg, dropping 5.2 percent to 12.716 versus Sweden’s krona and declining 4.5 percent to 12.251 against the South African rand.
Rising Stocks
The Dow Jones Industrial Average rose above 9,000 for the first time since January on better-than-expected results from companies including Apple Inc. and Intel Corp., encouraging investors to borrow in Japan and buy higher-yielding assets elsewhere. Japan’s 0.1 percent target lending rate is among the lowest in the developed world.
Among Standard & Poor’s 500 Index companies that have posted second-quarter results, 75 percent beat the average analyst forecast, according to data compiled by Bloomberg. That would be the highest rate for a full quarter, Bloomberg data going back to 1993 show. About 300 S&P 500 companies have yet to report for the period.
The Norwegian krone and Canadian dollar were two of the best performers against the dollar among major currencies as crude oil prices rallied 5.4 percent this week to more than $68 a barrel. Oil is the biggest export for both countries.
Krone Versus Dollar
The krone advanced 2.5 percent to 6.2361 per dollar and reached 6.2190 yesterday, the strongest since June 3.
Canada’s currency, known as the loonie, appreciated 2.8 percent this week to C$1.0826 and touched C$1.0795 yesterday, the strongest level since early June.
The Bank of Canada said in a report this week that output will expand at a 1.3 percent annualized pace July through September, replacing a forecast of a 1 percent contraction.
The loonie’s 12 percent rally this year is an “important brake” on growth, and the central bank is watching it “very closely,” Bank of Canada Governor Mark Carney told reporters in Ottawa after releasing the economic outlook.
The euro advanced versus the dollar as Markit Economics said yesterday a composite index of the region’s manufacturing and services industries increased in July more than economists forecast to 46.8, representing the slowest pace of contraction in almost a year. A reading below 50 indicates a decline. The Ifo Institute in Munich said its German business climate index rose to 87.3 this month, a nine-month high.
U.S. Economy
The U.S. economy probably contracted at a 1.5 percent annual rate in the second quarter, after shrinking 5.5 percent in the previous three months, according to the median forecast of 66 economists surveyed by Bloomberg News. The report from the Commerce Department is due on July 31.
Citigroup Inc. recommended its clients “take profit” on a bet that the Canadian dollar will gain further against the yen yesterday. The Canadian currency gained 10 percent to 87.85 yen in the past two weeks.
“It’s difficult to sustain the risk rally in light of the lack of pickup in economic data,” said Todd Elmer, a currency strategist at Citigroup in New York, in an interview.
Investors should look to re-enter the Canadian dollar-yen trade at “better levels” on renewed capital outflow from Japanese investors, strategists including Elmer wrote in a note to clients yesterday.
Polish Zloty
Eastern European currencies such as the Polish zloty will advance in the next two weeks as “hot money” flows into the region on signs of global economic recovery, according to David Woo, global head of foreign-exchange strategy at Barclays Capital in London. The zloty gained 3.1 percent this week to 4.1966 per euro in one of the best performances among emerging- market currencies.
“A lot of investors still sit on a lot of cash on the sideline,” said Woo in an interview on Bloomberg Television this week. “What you are seeing is basically people being forced to essentially put money to work.”
Federal Reserve Chairman Ben S. Bernanke told the House Financial Services Committee this week that while the U.S. economy is showing “tentative signs of stabilization,” the central bank intends to maintain a “highly accommodative” monetary policy for an extended period.

Everbright Bank Said to Plan $1.7 Billion Stock Sale

2009-07-21T23:23:00.001-07:00

China Everbright Bank Co., the Chinese lender preparing for an initial public offering, plans to raise 11.4 billion yuan ($1.7 billion) in a private placement of shares, a person familiar with the matter said.
Everbright Bank will sell 5.2 billion shares at 2.20 yuan each to institutional investors including Shanghai Chengtou Holding Co. and Guangdong Provincial Expressway Development Co., the person said, declining to be identified. The company said in a statement today it reached agreements with a number of major state-owned companies to raise more than 11 billion yuan.
Beijing-based Everbright Bank, the nation’s 11th-largest by assets, said the sale will boost its capital adequacy ratio to above the 10 percent regulatory minimum. The lender, whose public offering in Shanghai has been delayed for more than a year, said last month its capital ratio may have dropped below 9 percent after paying its first dividend in six years.
“The sale will remove the capital bottleneck that has constrained our expansion for a long period of time,” the bank said in the statement, adding that it plans to increase holdings of riskier assets to bolster profit. The release didn’t give details on pricing.
Shanghai Chengtou, the city’s water supplier, said in an exchange filing late yesterday that it will pay 792 million yuan for 360 million new shares in Everbright Bank. Guangdong Expressway said in a separate statement it will buy 240 million shares for 528 million yuan.
Shareholders
Everbright Bank aims to grow assets by 11.5 percent this year to 950 billion yuan, according to its 2008 annual report. The bank forecast 2009 profit would be little changed at 7.3 billion yuan and targeted a 10.5 percent capital adequacy ratio by the end of the year.
Central Huijin Investment Co., a unit of China’s $200 billion sovereign wealth fund, controls 71 percent of Everbright Bank. Everbright Group and its affiliate own 13.8 percent, and other corporate investors hold the balance.
Everbright Bank, which received a 20 billion yuan cash injection in November 2007, last month paid a 2.2 billion yuan dividend to investors after boosting profit by 45 percent in 2008. The company is still awaiting approval for a plan to sell between 10 percent and 20 percent of its equity to the public after submitting a sale document to regulators on June 6, 2008.
China’s securities regulator resumed approvals of IPOs last month after halting sales last September following a stock market rout. The benchmark Shanghai Composite Index has rallied 79 percent this year, making it the second-best performer among the world’s primary indices.
Everbright Securities Co., another affiliate of parent China Everbright Group, is also awaiting final approval for its IPO from the China Securities Regulatory Commission.

Oil Falls After Industry Report Shows Gain in Crude Inventories

2009-07-21T23:21:00.000-07:00

Oil for September delivery in New York fell for the first time in six days after a report showed crude supplies rose in the U.S., the largest energy user.
U.S. stockpiles rose last week for the first time since April, the industry-funded American Petroleum Institute reported late yesterday. A Bloomberg News survey of analysts is expecting a government report today to show crude inventories dropped 2.1 million barrels. Oil imports by China, the world’s second- largest consumer, fell 2.8 percent in June from May, customs data showed.
“Inventories should be going down because this is the demand season for the U.S.,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Instead, the inventories are up. This implies that the demand isn’t as strong as expected.”
Crude oil for September delivery dropped as much as 86 cents, or 1.3 percent, to $64.75 a barrel on the New York Mercantile Exchange, and was at $65.22 at 1:05 p.m. Singapore time. Yesterday, it rose 32 cents to end the session at $65.61. The August contract expired at $64.72 a barrel yesterday.
Crude prices climbed 8.7 percent from July 14 to July 21 as investors bought futures on expectations of higher fuel demand. Optimism that the worst of the global recession is over followed gains in U.S. leading economic indicators and as financial service companies said earnings climbed.
China’s crude imports in June fell to 16.6 million tons, or about 4.1 million barrels a day, from 17.1 million tons in May, the customs data showed.
‘Weak Fundamentals’
U.S. crude supplies climbed 3.1 million barrels to 349.9 million barrels in the week ending July 17, the API said. The group also reported that refinery utilization fell to 84 percent of capacity from 86 percent.
Oil-supply figures from the institute and the energy department moved in the same direction for the past six weeks and 76 percent of the time in the past four years, according to data compiled by Bloomberg.
“It is going to be difficult for oil to forge higher if we continue to get indications of weak fundamentals,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. If the API report is “any indication of how the DOE numbers are going to come in tonight, it’s a pretty bearish picture,” he said.
Inventories of gasoline rose 1.3 million barrels to 213.6 million, the API report said. The Energy Department is expected to say supplies increased by 650,000 barrels in the week ended July 17, according to the analyst survey.
Gasoline Prices
“Rising product inventories don’t bode well for demand for crude,” Hassall said. “Sixty dollars to $65 is a probable range for the short term.”
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the energy Department for its weekly survey.
Gasoline for August delivery dropped as much as 2.19 cents, or 1.2 percent, to $1.7901 a gallon. Yesterday, it climbed 2.26 cents, or 1.3 percent, to $1.812, the highest settlement since July 1.
U.S. stockpiles of distillate fuel, a category that includes diesel and heating oil, probably rose 1.5 million barrels, according to the analyst survey.
The department is scheduled to release its Weekly Petroleum Status Report today at 10:30 a.m. in Washington.
Brent crude for September settlement fell as much as 61 cents, or 0.9 percent, to $66.26 a barrel, on London’s ICE Futures Europe Exchange. It was at $66.60 a barrel at 12:46 p.m. Singapore time.

Yen, Dollar Rise as CIT Bankruptcy Concern Spurs Safety Demand

2009-07-21T23:18:00.000-07:00

The yen and the dollar strengthened for a second day against the euro on renewed concern U.S. commercial lender CIT Group Inc. will file for bankruptcy, boosting demand for safer assets.
The yen rose against 15 out of 16 major currencies after CIT said it expected to post a loss of more than $1.5 billion and its “existing liquidity” is not enough to repay maturing notes. The pound weakened after an industry group said the U.K. house-price slump will persist, backing the case for the central bank to keep borrowing costs low. The Australian and New Zealand dollars declined after Federal Reserve Chairman Ben S. Bernanke said dangers to the U.S. economy remain.
“Worries over a possible insolvency of CIT appear to be returning,” said Akifumi Uchida, a Tokyo-based deputy general manager of the marketing unit at Sumitomo Trust & Banking Co., Japan’s fifth-largest bank. “This is a minus for sentiment and may cause buying of the yen versus the dollar and the dollar against European currencies.”
The yen strengthened to 133.01 per euro as of 1:14 p.m. in Tokyo from 133.36 in New York yesterday, when it gained 0.5 percent. Japan’s currency climbed to 93.68 versus the dollar from 93.73. The dollar rose to $1.4197 per euro from $1.4226.
The pound dropped to $1.6407 from $1.6459. Australia’s dollar fell 0.3 percent to 76.48 yen and slipped 0.3 percent to 81.61 U.S. cents. New Zealand’s dollar lost 0.3 percent to 65.57 cents and slid 0.4 percent to 61.44 yen.
Bernanke Comments
The Australian and New Zealand dollars dropped for the first time in three days against the greenback after Bernanke said yesterday financial markets remained “stressed,” encouraging demand for safer assets.
Household spending is an “important” risk to the outlook because of continued job losses and declines in home values, Bernanke said on the first day of a two-day congressional testimony in Washington.
“A bit of risk aversion is creeping back into the market,” said Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore. Bernanke “was more dovish on the economy and on the economic recovery and a little bit of risk has been taken off the table which is weakening the Aussie.”
The pound dropped against 13 of the 16 major currencies after the National Institute of Economic and Social Research said today that home values will resume their decline because recent gains were driven by a lack of available homes.
The institute also predicted gross domestic product will keep falling until the final quarter of this year. It forecast GDP will shrink 0.4 percent in the second quarter. The median estimate of 32 economists in a Bloomberg News survey is for a 0.3 percent drop. The Office for National Statistics will release the data on July 24.
‘Not Good News’
“All of this is not good news for Britain,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “This is leading to selling of the pound.”
The pound also fell after the Telegraph reported that Barclays Plc will need another 12.8 billion pounds ($21 billion) and Royal Bank of Scotland Group Plc will require an additional 8.5 billion pounds to expand under new regulatory rules. The U.K. newspaper cited Carla Antunes da Silva, a banking analyst at JPMorgan Securities Ltd., as saying. She said HSBC Holdings Plc had a 3 billion pound shortfall.
“The Telegraph story came as a reminder that the financial crisis is not fully over,” said Shuzo Kakuta, senior foreign exchange advisor at Tokyo Tomin Bank Ltd. “This kind of topic is positive for the yen both against the dollar and cross- currencies” such as the Australian dollar.
Equities Gain
Gains in the Japanese and U.S. currencies were tempered on speculation an advance in Asian stocks will spur investors to increase holdings of higher-yielding assets. The Nikkei 225 Stock Average rose 1 percent and the MSCI Asia-Pacific Index of regional shares climbed 0.5 percent.
“Rising equities are likely to lead to selling of the yen,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The stock markets are considered to be a barometer of risk appetite.”
Australia’s dollar may advance toward a 10-month high after the currency climbed above a “pivotal resistance” point at 81.55 U.S. cents, BNP Paribas SA said, citing trading patterns.
The so-called Aussie dollar has slipped 1.2 percent from this year’s high of 82.63 U.S. cents on June 3 as investors sold higher-yielding assets on concern that the second-quarter corporate earnings season would disappoint. The break above 81.55 cents suggests the recent “corrective pullback” is over, Andrew Chaveriat, a technical strategist at BNP Paribas in New York, wrote in a note to clients yesterday.
“Aussie should make a new cycle high,” Chaveriat wrote. Weekly momentum is expected to turn bullish, which “would increase the odds of hitting 83.80-85.20 cents.”

U.S. Stocks Advance on Caterpillar Earnings, Bernanke Remarks

2009-07-21T23:12:00.000-07:00

U.S. stocks rose, extending the Dow Jones Industrial Average’s longest rally in two years, as Caterpillar Inc.’s earnings tripled analyst estimates and Federal Reserve Chairman Ben S. Bernanke said there are signs the economy is stabilizing.
Caterpillar, the biggest maker of bulldozers, jumped 7.7 percent to lead the Dow to a seventh straight gain. Merck & Co. added 6.1 percent as job cuts helped it post better-than- estimated earnings. Banks slid, limiting the market’s advance, after CIT Group Inc. said it may need to file for bankruptcy if a plan to repurchase debt fails and Regions Financial Corp. and Zions Bancorporation posted quarterly losses on bad loans.
The Standard & Poor’s 500 Index added 0.4 percent to 954.58 at 4:05 p.m. in New York, maintaining its highest level in more than eight months. The Dow Jones Industrial Average rallied 67.79 points, or 0.8 percent, to 8,915.94 to extend its gain since July 10 to 9.4 percent. The MSCI World Index increased 0.9 percent to the highest level since Nov. 4.
“Beating expectations shows they are in slightly better shape than most investors thought,” said Eric Thorne, who helps oversee $2.5 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pa. “The fact that numbers are slightly above estimates is a sign to us that we are in the beginning stages of an economic recovery.”
Earnings Top Estimates
Per-share earnings beat analysts’ projections by an average of 14 percent for the 70 companies in the S&P 500 that reported quarterly results since July 8, according to data compiled by Bloomberg. Analysts forecast profits fell an average 33 percent in the second quarter and will decrease 20 percent from July through September, according to Bloomberg data.
The S&P 500 rallied 1.1 percent yesterday as a gauge of future economic growth topped projections. The benchmark for U.S. equities advanced 7 percent last week as companies from Goldman Sachs Group Inc. to Intel Corp. reported results that topped estimates.
Treasuries climbed the most in almost two weeks today, sending the 10-year note yield down 13 basis points to 3.48 percent, as Bernanke said “limited inflation pressures” will allow policy makers to keep interest rates near zero for an “extended period.” Bernanke, in his semi-annual testimony before the House Financial Services Committee, also said the economy is showing “tentative signs of stabilization.”
Caterpillar Rallies
Caterpillar, the world’s largest maker of bulldozers and excavators, rallied 7.7 percent to $39.46 after government stimulus programs and improved credit markets helped stabilize demand for the world’s largest maker of bulldozers and excavators. Profit excluding some costs was 72 cents a share, surpassing the 22-cent average estimate of 20 analysts surveyed by Bloomberg. The company also raised its full-year forecast. Merck rose 6.1 percent to $29.65 after the drugmaker that is buying rival Schering-Plough Corp. said second-quarter earnings were 83 cents a share, surpassing the 77-cent average estimate of analysts.
Exxon Mobil Corp., the largest U.S. oil company, added 2.2 percent to $70.47 as oil futures erased an earlier loss and gained 1.2 percent to $64.72 a barrel in New York. Chevron Corp., the second-largest U.S. oil producer, added 61 cents $66.25.
International Paper Co. gained 6.4 percent to $17.55, the highest price since Oct. 29, after the largest U.S. maker of cardboard shipping boxes was raised to “buy” from “hold” at Deutsche Bank AG, which said containerboard pricing was stable in June.
New York Times Co. advanced 5.6 percent to $6.42 after the Boston Globe’s largest union approved a contract for $10 million in annual cuts in a decision that may reduce losses at the newspaper and help its owner negotiate a sale.
Credit Suisse Says to Buy
Credit Suisse Group AG today advised investors to buy equities and trim their holdings of government bonds, reversing a recommendation from June. The bank raised its estimate for the S&P 500 by 14 percent to 1,050 by the end of the year, citing improving economic indicators and earnings. Goldman Sachs yesterday boosted its year-end estimate for the measure to 1,060, implying a 15 percent surge between June 30 and Dec. 31. That would be the steepest second-half rally since 1982.
The S&P 500 has rallied 41 percent from a 12-year low on March 9 amid speculation the economy and companies are recovering from the worst recession in more than half a century and the longest slump in quarterly earnings on record.
More Gains Predicted
U.S. stocks will likely continue to advance, according to John Murphy, chief technical analyst at StockCharts.com. The S&P 500 rose to a new high for the year today on an intraday basis, touching 956.53. Since the index exceeded 956, it’s likely to advance to about 1,000, for a gain of 50 percent from the 12- year intraday low of 666.79 on March 6, Murphy said.
Indications that the S&P 500’s run is likely to continue include the performance of the cumulative advance-decline line for securities listed on the New York Stock Exchange, Murphy said. The index, which tallies the number of daily gains for individual securities minus the number of declines since its August 1996 inception, rose 4.2 percent to a 10-month high of 39,961 yesterday.
“Most people missed the lows and continue to treat this as a rally in a bear market,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which manages $222 billion. “Hey folks, every bull market that I’ve seen began being called a short-term rally in a bear market.”
CIT Slumps
CIT, the 101-year-old commercial lender, fell 22 percent to 98 cents after saying its “existing liquidity” isn’t enough to repay $1 billion of floating-rate notes maturing on Aug. 17. The lender, which announced a $3 billion rescue financing from its bondholders yesterday, has asked holders of the August notes to swap their claims for 82.5 cents on the dollar.
A gauge of financial shares was the largest drag on the S&P 500 among 10 industry groups as Regions dropped 15 percent to $3.42, Zions declined 13 percent to $10.68 and Comerica Inc. lost 10 percent $20.51.
Lexmark International Inc. had the second-biggest drop in the S&P 500 after CIT, losing 20 percent to $15.08, after the second-largest U.S. printer maker said third-quarter profit may be as low as 40 cents a share, below the 52-cent average of analyst estimates compiled by news.
Lockheed Martin Corp., the world’s largest defense company, lost 8.5 percent to $75.13 after the company posted its largest profit drop in more than five years and the U.S. Senate voted to end funds for its F-22 jet.

RBA Says Australian Rate Cuts Helping Stoke Demand

2009-07-21T02:28:00.001-07:00

Australia’s benchmark interest rate at a half-century low of 3 percent is helping drive economic growth amid signs domestic demand is more resilient than expected, the central bank said.
“Members judged the current stance of monetary policy to be consistent with fostering sustainable growth and low inflation,” while still giving the bank scope to cut borrowing costs “at a later stage” if needed, policy makers said in minutes of their July 7 meeting released in Sydney today.
The full impact of Reserve Bank of Australia Governor Glenn Stevens’ decision to slash the overnight cash rate target by a record 4.25 percentage points between September and April will “still be coming through for some time,” the minutes said. Australia’s economy has survived the most dangerous phase of the global recession and will expand faster than the government forecasts, research company Access Economics said today.
“The Reserve Bank seems to be tentatively saying the worst is over,” said Annette Beacher, senior fixed-income strategist at TD Securities Ltd. in Singapore. “I got the impression that if they are going to ease, that would be at a later stage.”
The Australian dollar traded at 81.33 U.S. cents at 2:50 p.m. in Sydney from 81.22 cents before the minutes were released. The two-year government bond yield was unchanged at 4.02 percent.
Rate Unchanged
Policy makers left the benchmark rate unchanged two weeks ago for a third month after a report showed gross domestic product unexpectedly grew 0.4 percent in the three months through March 31 after shrinking 0.6 percent in the fourth quarter. Economists had forecast a 0.2 percent contraction.
“The early and substantial easing of both monetary and fiscal policy had been effective in supporting demand, which, if anything, had been more resilient than expected,” today’s minutes said.
Further signs that the economy isn’t as weak as expected include “surprisingly strong” exports, helped by demand from China, reports that some mining companies and ports are “again operating close to capacity,” rising household spending, car sales and demand for homes, the minutes said.
The number of cars sold in June rose 5.7 percent, the third month of gains, to the highest level since August 2008, a government report showed today.
Global Economy
There are “further signs of stabilization in the world economy,” the central bank said today. “In Japan, recent data had been more encouraging than they had been for some time.”
The Bank of Japan last week raised its economic assessment for a third month, citing an increase in government spending and rebounds in factory output and exports. The economy has “stopped worsening,” the BOJ said, while adding that the economic outlook is “uncertain.”
China’s economy grew a stronger-than-expected 7.9 percent in the second quarter from a year earlier, a report showed last week. Singapore’s GDP also expanded faster than anticipated.
For Australia, “the outlook remained for a gradual recovery to begin later in the year,” the Reserve Bank said.
While the labor market is likely to remain “soft for some time,” there are signs employers are trying to limit job cuts.
“The current inflation outlook afforded scope for some further easing of monetary policy, if that were to be needed to give further support to demand at a later stage,” the bank said.
Consumer Prices
Consumer prices probably rose 1.5 percent in the second quarter from a year earlier, slowing from an annual 2.5 percent gain in the first quarter, according to the median estimate of 19 economists surveyed. The consumer price index will be released at 11:30 a.m. in Sydney tomorrow.
The economy will expand 0.4 percent in the 12 months through June 2010, compared with the Treasury department’s prediction of a 0.5 percent contraction, Chris Richardson, head of Canberra-based Access Economics said in a report today. Three months ago, Access forecast a 0.2 percent decline.
“Australia made it through the most dangerous phase of the global recession with only collateral damage,” Richardson said.
Investors have increased bets Australia’s benchmark interest rate will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading.
Traders forecast the key rate will be 76 basis points higher in a year, the index showed at 2:43 p.m. in Sydney. At the start of June, they forecast 3 basis points of reductions. A basis point is 0.01 percentage point.
“We appear to be getting to the bottom end of the interest rate cycle,” Westpac Banking Corp. Chief Executive Officer Gail Kelly said at a business lunch in Sydney today.

Dollar May Weaken Against Euro, Yen, Citigroup Says

2009-07-21T02:23:00.000-07:00

July 21 The U.S. dollar may weaken against the euro, the yen and the Australian dollar as global sentiment turns against the greenback, according to Citigroup Inc.
The euro may extend this month’s gains versus the dollar as buying by sovereign wealth managers and central banks bolsters the 16-nation currency, Citigroup said in a monthly note on its foreign-exchange forecasts. The yen may strengthen against the dollar as Japan’s economy begins to rebound, attracting investors to the Asian nation’s assets, the bank said.
“We detect evidence that underlying sentiment remains U.S. dollar negative,” Citigroup analysts including Jeremy Hale, London-based head of macro strategy, wrote in the note to clients yesterday.
The euro will climb to $1.43 in three months and reach $1.45 in six to 12 months, Citigroup said in the note. The yen will rise to 93 per dollar in three months and strengthen to 90 in six to 12 months, the company said.
The dollar traded at $1.4200 per euro and 93.94 yen as of 8:28 a.m. in London.
The Australian dollar is likely to lead gains among so- called commodity currencies, the analysts wrote.
Australia’s currency will advance to 83 U.S. cents in six to 12 months and New Zealand’s currency will rise to 66 cents, the company said. The so-called Aussie traded at 81.21 U.S. cents and New Zealand’s dollar was at 65.30 cents.

U.S. Stocks Gain, S&P 500 Jumps to Highest Level Since November

2009-07-21T02:18:00.000-07:00

U.S. stocks rose, sending the Standard & Poor’s 500 Index to its highest level since November, as a gauge of future economic growth topped projections and speculation grew that CIT Group Inc. will avoid bankruptcy.
Caterpillar Inc. and Alcoa Inc. rallied at least 3.7 percent as the Conference Board’s gauge of the economic outlook increased for a third straight month. CIT Group jumped 79 percent as a person briefed on the board’s deliberations said the lender has reached a financing agreement with bondholders. Hasbro Inc. and Eaton Corp. gained at least 4.2 percent on earnings that beat analysts’ estimates.
The S&P 500 added 1.1 percent to 951.13 at 4:05 p.m. in New York, its best close since Nov. 5. The Dow Jones Industrial Average rallied 104.21 points, or 1.2 percent, to 8,848.15, erasing its loss for the year and closing at a six-month high. Europe’s Dow Jones Stoxx 600 Index climbed 1.2 percent and the MSCI Asia-Pacific Index increased 1.4 percent.
“Given the general weakness of the economy and concerns over corporate profitability going into the second quarter, reports to date have been a pleasant surprise,” said Dean Gulis, part of a group that manages $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. “This week it’s going to continue to rally. The worm has turned a little bit. People are feeling better about the economy.”
Forecast Raised
All 10 industry groups in the S&P 500 rose today, led by consumer, commodity and industrial shares. Goldman Sachs boosted its forecast for the index, saying improving earnings will spur the steepest second-half rally since 1982. The bank raised its year-end target for the S&P 500 to 1,060, a 15 percent increase from strategist David Kostin’s projection of 940 on June 30.
Earnings topped analysts’ estimates by an average of 15 percent for S&P 500 companies that reported quarterly results since July 8, according to data compiled by Bloomberg, with 35 out of 43, or 81 percent, beating estimates. Analysts forecast profits fell an average 33 percent in the second quarter and will decrease 20 percent from July through September, according to data.
The S&P 500 jumped 7 percent last week as companies from Goldman Sachs Group Inc. to Intel Corp. and Johnson & Johnson reported results that topped analysts’ estimates. The benchmark index has rebounded 41 percent from its 12-year low on March 9 amid speculation the economy is recovering.
Stocks rallied today after the index of leading U.S. indicators reinforced signs the economy may be emerging from the worst recession in five decades. The Conference Board’s gauge of the outlook for the next three to six months increased 0.7 percent, more than forecast, and climbed three straight months for the first time since 2004.
Anticipating Cash Return
U.S. equities are rallying as the market anticipates cash coming back into equities, Laszlo Birinyi president of Birinyi Associates Inc., wrote in a note to clients today.
“We would argue that the most critical element was simply that we are in a bull market,” wrote Birinyi, who helps oversee $200 million for the Westport, Connecticut firm. “When one has an oversold market with liquidity, negative investors, and obvious and articulated concerns, the market will rally.”
Alcoa, the largest U.S. aluminum producer, rose 3.7 percent to $10.60, while Freeport-McMoRan Copper & Gold Inc., the biggest publicly traded copper producer, added 2.7 percent to $57.
Metals Rally
Copper prices rose to a nine-month high in New York on speculation that metals consumption will gain as the global economy recovers. Gold, silver, zinc and tin also led a rally in metals.
CIT Group surged 55 cents to $1.25. The 101-year-old commercial-finance company seeking to ward off bankruptcy agreed to a $3 billion loan for 2.5 years from a group of its bondholders, according to people who declined to be identified because the negotiations are private. The New York-based lender needed to strike a deal with bondholders to reduce debt after the U.S. declined to give the firm a second bailout.
“Its importance for the small-business sector is dramatic,” Kevin Shacknofsky, who manages $2 billion for Alpine Mutual Funds in Purchase, New York, said of CIT. “The rest of the financial industry sees the importance of CIT and they didn’t’ let it fail. That gives the market confidence.”
Caterpillar, the world’s largest maker of construction equipment, surged 7.8 percent to $36.65 after being upgraded to “buy” from “hold” by Bank of America Corp., which cited a bottom in the construction market.
Hasbro, Eaton Jump
Hasbro Inc., the world’s second-largest toymaker, gained 4.2 percent to $26.45 after second-quarter profit rose from sales of toys based on “Transformers” and “G.I. Joe.” Net income increased to $39.3 million, or 26 cents a share, from $37.5 million, or 25 cents, a year earlier. Analysts projected profit of 23 cents a share on average.
Eaton Corp., the maker of circuit breakers and fuel pumps, jumped 8.9 percent to $48.94 after posting second-quarter earnings, excluding some items, of 23 cents a share that beat the average analyst estimate in a Bloomberg survey by 50 percent.
Human Genome Sciences Inc., the producer of gene-based therapies, more than tripled to $12.51. GlaxoSmithKline Plc and Human Genome said their experimental lupus drug reduced patients’ symptoms in a yearlong study. U.S. shares of Glaxo, the U.K.’s largest drugmaker, gained 4 percent to $37.81. CBS Corp. jumped 10 percent to $7.43 after the owner of the most-watched TV network was raised to “overweight” at Morgan Stanley, which said investors may be drawn to its local advertising business in 2010.
Wynn, Halliburton
Wynn Resorts Ltd., the casino company founded by Stephen Wynn, surged 10 percent to $39.83 for the second-best advance in the S&P 500 after CIT. Las Vegas Sands Corp. said it plans to apply for an initial public offering of shares in its Macau casinos. Wynn reported 61 percent of its revenue from Macau in the most-recent quarter, according to Bloomberg data. Las Vegas Sands jumped 15 percent to $9.86.
Halliburton Co. the world’s second-largest oilfield- services provider, gained 4.4 percent to $22.33 after posting second-quarter earnings, excluding some items, of 30 cents a share to surpass the average analyst estimate in a Bloomberg survey by 13 percent.
The cheapest valuations in at least 14 years are making energy companies too alluring to pass up for UBS AG and Guggenheim Partners LLC, even though earnings in the industry may fall 48 percent this year. Oil and gas producers in the MSCI World Index traded at $7.84 per dollar of profit this month, less than half the average of $17.10 in the gauge of developed markets and the widest gap since at least 1995, data compiled by Bloomberg show.
Bank of America, Tyson Slump
Bank of America lost 5 percent to $12.24 after FBR Capital Markets said the largest U.S. lender by assets may post further losses in the second half as the job market deteriorates. The lender was also downgraded to “in-line” from “outperform” at Fox-Pitt Kelton Cochran Caronia Waller. Tyson Foods Inc. sank 9.3 percent to $11.47. The largest meat producer was downgraded to “hold” from “buy” at Deutsche Bank and cut to “market perform” from “outperform” by BMO Capital Markets.

Yen, Dollar Advance on CIT Bankruptcy Concern, Jakarta Blasts

2009-07-17T03:25:00.001-07:00

July 17 The yen and the dollar rose as speculation CIT Group Inc. will file for bankruptcy and blasts in Indonesia spurred demand for the currencies as a refuge.
The yen climbed more than 1 percent against the South African rand and the Swedish krona after New-York based CIT, the lender facing insolvency because it failed to obtain guarantees for its bonds, said it’s trying to secure financing. Indonesia’s rupiah fell the most in more than three weeks against the dollar after explosions tore through two hotels in Jakarta.
“In the short term, the Indonesian and CIT concerns will cause some knee-jerk risk aversion,” said Derek Halpenny, European head of global currency research at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “It’s an obvious first reaction.”
The yen strengthened to 131.99 per euro as of 9:07 a.m. in London, from 132.89 yesterday in New York, and appreciated to 93.70 per dollar, from 93.93. The U.S. currency rose to $1.4086 per euro, from $1.4148. The Indonesian rupiah weakened 0.5 percent to 10,175 per dollar, after dropping as much as 1 percent, the most since June 23.
Japan’s new top currency official said today the government would consider stepping into the foreign-exchange market only if abrupt yen moves hurt the economy.
“We’ll make judgments based on whether excessive movements in the currency market will adversely affect the economy,” Rintaro Tamaki, vice finance minister for international affairs, said in a group interview in Tokyo today.
The yen appreciated against all 16 most-actively traded currencies in the past month, while it’s weaker against the same group this year.
CIT Funds
Futures on the Standard & Poor’s 500 Index declined 0.2 percent, signaling U.S. stocks may open lower today. The Dollar Index, which the ICE uses to track the currency against those of six major U.S. trading partners such as the euro and the yen, rose 0.4 percent to 79.528.
CIT may need as much as $6 billion to avoid bankruptcy, CreditSights Inc. analysts said yesterday. CIT executives are seeking $2 billion to $3 billion in financing from the private sector, the Wall Street Journal reported, citing unidentified people familiar with the situation.
The yen gained for a second day against the euro and the British pound as bombs tore through the Ritz Carlton and the JW Marriott hotels in the Jakarta, killing at least nine people and injuring 42 others, police said.
Jakarta Explosions
The blasts in the two hotels were caused by “high explosives,” said Crisnanda, a spokesman for the police. A New Zealander was among those killed, the government in Wellington said.
“The explosions in Indonesia added to the buying of the yen on risk aversion,” said Takao Yahata, senior manager of foreign exchange and financial-products trading in Tokyo at Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s largest publicly traded lender by assets.
The yen also gained against the dollar on speculation Japanese exporters bought the currency to convert their foreign- exchange earnings before the three-day holiday. Monday is a national holiday in Japan.
“Yen buying by Japanese investors, including exporters, picked up as the yen fell back toward 94 per dollar and beyond,” said Kosei Fujita, a foreign currency dealer in Tokyo at SBI Liquidity Markets Co., a unit of SBI Holdings Inc.
Japanese companies forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey on corporate sentiment and business plans released on July 1.
Dollar Index
The Dollar Index also rose for the first time in three days after U.S. Treasury Secretary Timothy Geithner repeated that the Obama administration is committed to a “strong” dollar and curbing record budget deficits to achieve that objective.
Geithner said the dollar’s role in international finance places “special responsibilities” on the U.S. to sustain confidence in its financial system, according to an Internet chat with Les Echos newspaper yesterday.
“This was similar to well-timed comments by top U.S. officials to hold up confidence whenever U.S. stocks looked fragile,” Philip Wee, senior currency economist in Singapore at DBS Group Holdings Ltd., wrote in a research note today. “If so, U.S. officials may find further dollar weakness from here a threat to their efforts to dig the economy out of recession.”
The dollar and the yen still headed for their biggest weekly loss in two months against the euro as stocks advanced worldwide, reducing demand for the U.S. and Japanese currencies as a haven from the global recession.
Emerging Markets
“The currencies of emerging markets and resource-rich nations fare well against the dollar and the yen when stocks are on the rising trend, reflecting optimism about the economy,” said Yuji Kameoka, a strategist in Tokyo at Daiwa Institute of Research Ltd., a unit of Japan’s second-largest brokerage group. “The recent retreat in optimism and the re-emergence of risk- aversion may be a blip.”
The Nikkei 225 Stock Average rose 0.6 percent and the MSCI World Index climbed 0.3 percent, having gained 6.7 percent this week, the most since March.
The Canadian dollar appreciated the most of the 16 major currencies against the yen this week, climbing 5.4 percent to 83.80 yen. The Australian dollar advanced 4.1 percent over the past five days to 75 yen.

Canadian Dollar Drops for First Time in 4 Days on Risk Aversion

2009-07-17T03:17:00.001-07:00

Canada’s dollar depreciated after outperforming all other Group of 10 currencies this week as investors shied away from riskier assets such as commodity- linked currencies.
The loonie, as Canada’s dollar is known, weakened for the first time in four days amid speculation New York-based CIT Group Inc., once the biggest independent commercial lender, may go bankrupt. The currency rose 4.6 percent versus the U.S. dollar from July 10 through yesterday as corporate earnings and commodity price gains whetted investor risk appetite. Raw materials account for more than half of Canada’s export revenue.
“The CIT situation is helping a subtext of risk aversion make itself felt even during what has been a rather positive earnings season,” said Sacha Tihanyi, a currency strategist in Toronto at Scotia Capital Inc., a unit of Canada’s third-largest bank. “This is putting some pressure on” the loonie.
The currency weakened 0.5 percent to C$1.1181 per U.S. dollar at 4:05 p.m. in Toronto, from C$1.1126 yesterday, when it reached C$1.1118, the strongest since June 12. One Canadian dollar buys 89.43 U.S. cents.
Investors should buy the Canadian dollar against the yen because risk appetite is improving and Japan’s currency may suffer from political uncertainty, according to Citigroup Inc.
The New York-based bank entered a long Canadian-dollar position against the yen and expects the cross trade will reach 90 yen per loonie, a team of strategists wrote in a research note today. The Canadian currency traded at 83.90 yen. Going long a currency is betting it will rise. That would be a 7.3 percent gain.
‘On the Mend’
“Risk appetite remains clearly on the mend,” the Citigroup analysts wrote. “Since equities, yields and commodities are all tracking higher in the wake of this improvement in sentiment, we suspect that the Canadian dollar may be among the biggest beneficiaries.”
The loonie outperformed all of the 16 most-traded currencies tracked by Bloomberg so far this month, gaining 4 percent. It was the worst performer in June amid concern an economic recovery would be delayed. Australia’s and New Zealand’s currencies, the loonie’s commodity-linked peers, are down 0.1 percent and up 0.3 percent this month, respectively.
“The prospects for the Canadian economy are improving, but if you look at some of the incoming contemporaneous numbers, they’re still pretty weak,” Steve Englander, chief currency strategist at Barclays Capital Inc., said today in a Bloomberg Television interview. “I don’t think the bank of Canada really feels given the current state of the economy that the Canadian dollar should appreciate anywhere close to parity.”
Consumer Prices
Canadian consumer prices fell 0.3 percent last month from a year ago, according to the median forecast of 22 economists surveyed by Bloomberg. The nation’s statistics agency is due to release the data tomorrow at 7 a.m. in Ottawa. Gross domestic product contracted in April for a ninth month, declining 0.1 percent, Statistics Canada reported June 30.
The Bank of Canada is scheduled to meet July 21 on interest rates. The key rate has been at a record low of 0.25 percent since April. Bank Governor Mark Carney halved the key rate to a record low of 0.25 percent in April. In June he said at least twice the “rapid rise” of the nation’s currency, which gained the most in May since 1950, could threaten the economy.
CIT Group said yesterday the U.S. government wouldn’t rescue the company. Talks with regulators broke off and “there is no appreciable likelihood of additional government support being provided over the near term,” CIT said in a statement.
Bonds Rise
Canada’s dollar will weaken to C$1.13 by the end of the third quarter and C$1.14 by year-end, according to the median forecast of 35 economists surveyed by Bloomberg News. Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, predicted the currency will weaken to C$1.15 by October before bouncing back to C$1.10 by January.
Government debt rose, with the 10-year Canadian bond’s yield falling eight basis points, or 0.08 percentage point, to 3.41 percent. The price of the 3.75 percent security due in June 2019 gained 71 cents to C$102.85. Canada’s government bonds have lost investors 2.5 percent this year, according to a Merrill Lynch & Co. index.
The nation may need to run budget deficits for a decade if Prime Minister Stephen Harper chooses not to raise taxes or cut spending to erase fiscal shortfalls, Dale Orr, an Economic Insight economist, said today.
Harper told reporters July 10 his government would post budget deficits as long as needed to spur growth, pledging not to adhere to a five-year timetable to balance the budget if that required tax increases or reducing spending.
“There has been quite a roller coaster ride in foreign exchange markets over the course of the last several weeks, and today was no different,” Bank of New York Mellon’s Woolfolk said in an interview. “Even though Canada has a fiscal deficit right now because they’re struggling with a recession, by comparison it’s far smaller than any other of the Group of Seven countries.”

Oil Falls From Highest in a Week Before Unemployment Report

2009-07-17T03:12:00.000-07:00

Crude oil fell from its highest in a week before a report forecast to show the U.S. shed more jobs, spurring concern that a recovery in fuel demand will be delayed.
The Labor Department is likely to say later today that 553,000 people made initial claims for unemployment benefits in the week ended July 11, according to a survey. U.S. gasoline and heating oil supplies increased last week, the government said yesterday. Prices will fall to $20 a barrel this year, former government adviser Philip Verleger predicted.
“The OECD economies are still deep in recession,” said Andy Sommer, an analyst at Elektrizitaets-Gesellschaft Laufenburg in Dietikon, Switzerland. “The Asian countries are coming out of the worst, but warning voices persist that growth is not stable yet.”
Crude oil for August delivery fell as much as 79 cents, or 1.3 percent, to $60.75 a barrel on the New York Mercantile Exchange, trading for $60.96 at 12:14 p.m. in London. Prices have increased 37 percent this year and jumped 3.4 percent yesterday to $61.54, the highest close since July 7.
China’s gross domestic product grew 7.9 percent in the second quarter. The nation overtook Japan as the world’s second- largest stock market by value for the first time in 18 months, as government spending and record bank lending boosted share prices. China’s industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months excluding seasonal distortions. Retail sales climbed 15 percent.
Lower Refinery Runs
“The economic situation is not getting better,” said Verleger, a professor at the University of Calgary and head of consultant PKVerleger LLC, in a telephone interview yesterday. “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating.”
A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.
U.S. crude inventories fell 2.81 million barrels to 344.5 million last week, the Energy Department said yesterday.
“The huge rally across the board in equities helped boost crude oil,” said Mike Sander, an investment adviser with Sander Capital in Seattle. “The weekly EIA report showed a drop in crude oil inventories by 2.8 million barrels, which lent support to higher crude prices as well.”
Growing Gasoline Stockpiles
Crude stockpiles were forecast to decline 2.1 million barrels, according to analysts surveyed by Bloomberg News. Refineries operated at 87.9 percent of capacity, the highest since August.
Gasoline inventories climbed 1.44 million barrels to 214.6 million, the highest since April, the Energy Department report showed. Supplies were forecast to increase 875,000 barrels.
Supplies of distillate fuel increased 553,000 barrels to 159.3 million in the week ended July 10, the highest since January 1985, the report showed.
Brent crude for August settlement was at $62.22 a barrel, down 87 cents, on London’s ICE Futures Europe Exchange at 12:15 p.m. in London. The more-actively traded contract for September, which becomes the front month tomorrow, slipped 50 cents to $62.08.

China's Economic Growth Quickens to 7.9% on Record Loan Volume, Investment

2009-07-16T13:53:00.000-07:00

July 16 China’s gross domestic product grew 7.9 percent in the second quarter as the nation became the first of the major economies to rebound from the global recession.
The figure, announced by the statistics bureau in Beijing today, exceeded the 7.8 percent median forecast of 20 economists in a survey and a 6.1 percent gain in the first quarter that was the slowest in almost a decade.
China, the biggest contributor to global growth, overtook Japan as the world’s second-largest stock market by value yesterday after a 4 trillion yuan ($585 billion) stimulus package spurred record lending and boosted share prices. The first-half expansion laid the foundation for meeting the year’s 8 percent growth target for creating jobs and maintaining social stability, the statistics bureau said today.
“The pace of the recovery is even quicker and stronger than we initially expected,” said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong, who raised his growth forecast after today’s report. “There’s clear evidence that this infrastructure-led recovery is going to be more sustainable than many people expected.”
The yuan traded at 6.8312 against the dollar as of 5:30 p.m. in Shanghai, from 6.8315 before the data were released. The Shanghai Composite Index closed 0.2 percent lower.
‘Not Yet Firm’
The foundation of China’s recovery is “not yet firm” and the government will stick to its “moderately loose” monetary policy and “proactive” fiscal stance, statistics bureau spokesman Li Xiaochao said.
China accounted for a third of global expansion last year, according to International Monetary Fund data using purchasing- power-parity calculations to account for exchange-rate differences.
The global economy will shrink 1.4 percent this year, including a 2.6 percent contraction in the U.S. and a 6 percent decline in Japan, the IMF said in a July 8 report. Emerging economies, led by China, are set to regain growth momentum in the remainder of this year, helping the world to recover from the worst slump since World War II, the IMF said.
“China’s growth is getting back on track after being pulled down by the global export slump,” said David Cohen, an economist with Action Economics in Singapore. “It’s leading the turnaround in the global economy.”
Urban Spending
Urban fixed-asset investment surged 35.3 percent in June from a year earlier, the statistics bureau said. The 33.6 percent gain for the first half was the biggest in five years. Industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months excluding seasonal distortions. Retail sales climbed 15 percent.
An infrastructure spending boom is helping companies from China Southern Power Grid Co. to China Merchants Property Development Co.
“China still faces difficulties including shrinking external demand, falling corporate profits and declining fiscal revenue,” Li said. “We’re still facing great pressure in generating jobs.”
China’s economy is the only one of the world’s 10 biggest still expanding. The People’s Bank of China sold today one-year and three-month bills at the highest yields this year, guiding money-market rates higher to slow record growth in money supply.
$2 Trillion Reserves
The nation’s foreign-exchange reserves, the world’s biggest, rose to a record $2.132 trillion last quarter as the central bank sold yuan to prevent an appreciation that would make the country’s exports more expensive.
Tim Condon, chief Asia economist at ING Groep NV, said the central bank may raise the one-year lending rate as early as the first quarter of next year.
“Growth may accelerate to near 9 percent in the third quarter and 10 percent in the fourth quarter,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “The government won’t tighten policies too early but it should tell banks not to lend without limit.”
The government must prevent abnormal growth in loans as they could trigger inflation and financial risks, the financial and economic affairs committee of the National People’s Congress said, the official Xinhua news agency reported.
Morgan Stanley, JPMorgan Chase & Co., Royal Bank of Scotland and UBS AG raised growth forecasts for China today. The economy will expand 9 percent in 2009 and 10 percent in 2010, Morgan Stanley said in an e-mailed note.
Social Stability
China is targeting faster growth to maintain stability after the loss of millions of migrant workers’ jobs and ahead of the 60th anniversary of Communist Party rule in October. Ethnic riots in Urumqi in the northwestern Xinjiang province on July 5 left at least 192 people dead.
The GDP rebound snaps a two-year run of progressively slower growth. Shanghai’s benchmark stock index has climbed almost 90 percent from last year’s low, led by PetroChina Co. and Industrial & Commercial Bank of China Ltd.
The economy grew 7.1 percent in the first half from a year earlier. Consumption contributed 3.8 percentage points and investment accounted for 6.2 percentage points, with a decline in the trade surplus shaving off 2.9 percentage points.
Consumer prices fell 1.7 percent in June from a year earlier, the fifth monthly decline and the biggest drop since 1999, today’s data showed. Producer prices slid a record 7.8 percent.

China Overtakes Japan as World's Second-Biggest Stock Market on Stimulus

2009-07-16T13:46:00.000-07:00

July 16 China overtook Japan as the world’s second-largest stock market by value for the first time in 18 months, after government stimulus spending and record bank lending boosted share prices this year.
The Shanghai Composite Index rose 1.4 percent yesterday, sending the value of China’s domestic stock market to $3.21 trillion, compared with Japan’s $3.20 trillion, according to data compiled by Bloomberg. The Shanghai index has gained 75 percent this year, the best-performing major market, against a 5.5 percent advance in the Nikkei 225 Stock Average. The U.S. has the biggest equities market worth $10.8 trillion.
“China is just entering its stride and is still very much in a growth phase, while Japan is already a developed economy,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion.
China last surpassed Japan in stock-market capitalization from Jan. 4 to Jan. 24, 2008, data compiled by Bloomberg show. The Shanghai Composite tripled in the two years leading to its record on Oct. 16, 2007, before tumbling 72 percent to its trough the following November.
The Shanghai Composite fell 0.2 to 3,183.74 at the close, while the Nikkei 225 advanced 0.8 percent to 9,344.16.
Government Stimulus
A government-led 4 trillion yuan ($585 billion) stimulus package and record bank lending has shielded the Chinese economy against a plunge in exports. Foreign-exchange reserves topped $2 trillion for the first time, while money supply rose a record 28.5 percent in June, the central bank said July 15. The economy expanded 7.9 percent in the second quarter, the statistics bureau said in Beijing today, more than the 7.8 percent median estimate of 20 economists surveyed by News.
New loans rose fivefold in June from a year earlier to 1.53 trillion yuan, increasing concern that attempts to revive the world’s third-largest economy will lead to bad debts and asset bubbles. Rapid credit growth poses risks for lenders and the financial system, Wang Huaqing, the disciplinary secretary of the China Banking Regulatory Commission, said on July 7.
BNP Paribas Securities (Asia) Ltd. last month cut its rating on China to “neutral” from “overweight,” citing valuations. Stocks on the benchmark index are trading at 33.2 times earnings, almost triple the 12.9 multiple on Nov. 4, when the measure dropped to its lowest since the financial crisis. Earnings per share declined 7 percent last year and will probably remain “flat” this year, the brokerage said.
Overvalued
“We share concerns that the corporate earnings recovery is not going to be very strong,” Erwin Sanft, head of China and Hong Kong equities research at BNP Paribas said in an interview with Bloomberg Television today. Some Chinese shares have soared by “1,000 percent from the bottom, so they’re pricing in a very strong rebound in earnings,” he said.
In Japan, nagging deflation and an aging population have sapped strength from what was once the world’s largest market by capitalization. During the 1990s, Japan spent 135 trillion yen on 10 economic stimulus plans and lowered interest rates to zero, none of which succeeded in promoting sustainable growth.
Japan’s economy shrank at a 14.2 percent annual rate in the first quarter, the most since data began in 1955. The country’s gross domestic output will shrink 3.4 percent in the year ending March 2010, the central bank predicted. The contraction coincided with a drop to a more-than 25-year low by the Topix index.
Japan’s Problems
“Japan has two main problems; the enormous public debt handicaps the government’s ability to spend additional money to boost the economy and we are too reliant on exports,” said Takashi Kamiya, chief economist at T&D Asset Management Co. in Tokyo, which helps oversee some $16 billion. “There’s no way to expect the emergence of a domestic growth driver that can propel us out of this funk.”
Chinese companies account for four of the 10 biggest companies when measured by market value, according to Bloomberg data. Toyota Motor Corp. is the top-ranked Japanese company, at 25th, worth about one third the capitalization of PetroChina Co., the world No. 1

Thai Central Bank May Keep Rate as Stimulus Kicks In

2009-07-15T00:18:00.000-07:00

July 15 -- Thailand’s central bank will probably keep its benchmark interest rate unchanged at a second straight meeting amid signs government spending has helped moderate the pace of the nation’s economic contraction.
The Bank of Thailand will hold the one-day bond repurchase rate at 1.25 percent, according to 17 of 18 economists surveyed by ___ News. One economist expects a 25 basis-point cut. The central bank decision is due today at 2:30 p.m. in Bangkok.
“Government stimulus measures have picked up the slack so the pressure to respond with monetary support has eased,” said Radhika Rao, an economist at IDEAglobal Ltd. in Singapore. “We expect the rate to be left unchanged for the rest of the year.”
Thailand’s consumer confidence rose for the first time in five months in June after the seven-month-old government said it would spend more than 1.4 trillion baht ($41 billion) by the end of 2012. Policy makers in the Southeast Asian nation have begun saying the economy may be past the worst after declines in exports and manufacturing stabilized.
Thailand’s benchmark SET Index rose 0.7 percent as of 10:42 a.m. local time. The gauge has climbed 42 percent from this year’s lowest level on March 9. The baht, the second-biggest gainer among Asia’s 10 most-traded currencies outside Japan in the past three months, added 0.1 percent to 34.13 per dollar.
Sri Lanka
The Central Bank of Sri Lanka this week kept its key rate unchanged as it waits to see if three reductions this year are enough to stoke an economic revival. South Korea’s central bank held borrowing costs at a record low for a fifth month on July 9 as the economy recovers, and Malaysia refrained from lowering its overnight policy rate for a second meeting on May 26.
The Bank of Thailand’s interest rate of 1.25 percent is at its lowest since July 2004 after being cut by a total of 2.50 percentage points over four meetings between December and April. Consumer prices have been falling since January.
“The central bank may decide to refrain from cutting rates further for political reasons,” said Jotika Savanananda, president of Bangkok-based SCB Asset Management Co., which manages about 420 billion baht of assets. “Too low a rate will hurt pensioners and savers.”
Thailand’s government last month won parliamentary approval to borrow 800 billion baht locally to fund its three-year investment plans involving transportation, water distribution, health and education projects. That’s in addition to a 116.7 billion-baht stimulus package of training programs, cash handouts and public works.
Industrial Production
The central bank on June 30 said economic conditions stabilized in April and May. Industrial production fell 10 percent in May, compared with a 9.7 percent decline a month earlier. Exports, which are equivalent to about 60 percent of the Thai economy, slid 26.5 percent in May, after a 25.2 percent drop in April.
Southeast Asia’s second-largest economy shrank 7.1 percent in the first quarter, a second consecutive quarterly decline that pushed the nation into recession. The contraction will lessen in subsequent quarters and growth will resume in the last three months of the year, the government predicts

Yen Falls for Third Day as Stocks Rise Before U.S. Factory Output Report

2009-07-15T00:10:00.000-07:00

July 15 The yen and the dollar weakened against the euro before a U.S. report today that economists said will show the contraction in industrial production slowed, damping demand for safer assets.
Asian currencies strengthened, led by South Korea’s won and Indonesia’s rupiah, as regional stocks gained and foreign- exchange and equity-market volatility declined, spurring investors to buy higher-yielding assets. The yen declined against 13 of the 16 major currencies after the Bank of Japan lowered its forecasts for the economy, reducing the appeal of the currency.
“U.S. data may spur hopes for an economic recovery,” said Shinichi Hayashi, a Tokyo-based foreign-exchange dealer at Shinkin Central Bank, the central institution for Japan’s financial co-operatives. “Rising equities will certainly lead to risk taking. The bias is for selling the yen.”
The yen declined to 131.37 per euro as of 7:50 a.m. in London from 130.62 yesterday in New York, after earlier dropping to 131.40, the lowest since July 8. The dollar weakened to $1.4060 per euro from $1.3967. The yen was at 93.42 versus the dollar from 93.50.
The won rose for second day, climbing 1.2 percent to 1,278.35 per dollar, the rupiah advanced 0.8 percent to 10,130 and Malaysia’s ringgit climbed 0.5 percent to 3.560.
Asian Currencies
Asian currencies gained after a JPMorgan Chase & Co. gauge showed implied volatility on options for major exchange rates fell to 13.69 percent yesterday from 14.05 percent the previous day. Lower volatility indicates a lesser risk of currency fluctuations that may erode profit on riskier investments.
The VIX Index, a measure of stock-market volatility known as Wall Street’s fear gauge, fell as low as 24.99 yesterday, the least since July 1.
The MSCI Asia Pacific Index of regional shares climbed 0.9 percent after the Standard & Poor’s 500 Index advanced 0.5 percent yesterday, when a U.S. report showed retail sales increased last month more than economists expected. U.S. factory production fell 0.6 percent in June after a 1.1 percent drop in May, according to a Bloomberg News survey of economists before the Federal Reserve report today.
The yen fell for a third day against the euro after the Bank of Japan forecast the economy will shrink 3.4 percent in the year ending March 2010, more than the 3.1 percent predicted in April. That would outstrip last fiscal year’s 3.3 percent contraction as the worst in the postwar era. GDP will increase 1 percent in the following fiscal year, less than the 1.2 percent predicted three months ago.
Intel, Goldman
The yen and the dollar also weakened after Intel Corp.’s revenue forecast beat estimates yesterday and Goldman Sachs Group Inc. reported higher-than-expected earnings, damping demand for safer assets.
Intel predicted sales would reach as much as $8.9 billion in the current quarter, surpassing the $7.86 billion estimated by analysts surveyed by Bloomberg. Goldman Sachs said net income in the three months ended June 26 was $3.44 billion, or $4.93 a share, the bank said. That surpassed the $3.65 per-share average estimate of analysts.
“There is a sense that optimism-driven trading is re- emerging,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “The forecast-beating results from Goldman Sachs and Intel suggest the yen will weaken and stocks will advance.”
JPMorgan and International Business Machines Corp. are among other companies in the Standard & Poor’s 500 Index due to report results this week.
‘Less Negative’
Losses in the dollar were tempered after Tsutomu Okubo, who is a director of the upper house’s financial committee and a member of the opposition Democratic Party of Japan, said in an interview published today that enhancing trust in the U.S. currency and Treasuries is beneficial for Japan.
“The comments at least show DPJ politicians are not strongly agreed to pressure the U.S., and thus are less negative for the dollar in the near term,” Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo, wrote in an e-mail today.
Masaharu Nakagawa, the shadow finance minister in the DPJ, said on July 9 that Japan should consider diversifying its foreign reserves away from the dollar.
China said today its foreign-exchange reserves topped $2 trillion for the first time, highlighting the difficulty the nation faces in finding places to invest the world’s largest holdings. The reserves rose a record $178 billion in the second quarter to $2.132 trillion, the People’s Bank of China said on its Web site. That compares with a $7.7 billion gain in the previous three months.
BOJ Rates
The Bank of Japan kept its target interest rate at 0.1 percent at the end of a two-day policy meeting today, as forecast by all the 25 economists surveyed by blognews.The central bank extended its emergency-credit programs to Dec. 31 from Sept. 30, it said in a statement.
“With the interest-rate differentials virtually non- existent among Japan, the U.S. and Europe, the market may pay less attention to the advantage or disadvantage of yields,” said Shigeki Muramatsu, deputy general manager of securities investment section at Mizuho Trust & Banking Co. “Falling rate differentials may lock the yen in a relatively tight trading range against major pairs.”

Oil Falls on Forecast of Increase in U.S. Fuel Inventories

2009-07-14T13:07:00.001-07:00

Crude oil fell on speculation that a government report will show U.S. fuel inventories climbed as the recession curbed consumption.
An Energy Department report tomorrow may show that gasoline stockpiles gained for a fifth week, according to a Bloomberg News survey. Prices rose earlier today as earnings from Goldman Sachs Group Inc. topped analysts’ estimates and a report showed that U.S. retail sales grew.
“Prices were up earlier but just couldn’t hold on,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant. “This reinforces my view that the market is headed for fresh lows unless it gets a lot of help” from inventory data.
Crude oil for August delivery declined 28 cents, or 0.5 percent, to $59.41 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures increased as much as $1.77, or 3 percent, earlier today.
Supplies of distillate fuel, a category that includes diesel and heating oil, probably rose 2 million barrels last week, according to the median of 14 responses in a Bloomberg news survey. Stockpiles climbed 3.74 million barrels to 158.7 million in the week ended July 3, the highest since January 1985, according to the department.
The Energy Department is scheduled to release its weekly petroleum supply report tomorrow at 10:30 a.m. in Washington. The American Petroleum Institute is scheduled to release its weekly report at 4:30 p.m. today in Washington.
“The fundamentals of the oil market are very bearish right now,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “There’s not enough traction from either the equity or currency markets to supersede this fundamental weakness.”
Global Demand
Daily crude-oil consumption worldwide will increase by 500,000 barrels, or 0.6 percent, to 84.3 million in 2010 as industrial production gradually picks up after this year’s recession, the Organization of Petroleum Exporting Countries said today in a report.
The International Energy Agency forecast that global demand will increase by 1.4 million barrels a day, or 1.7 percent, to 85.2 million next year, in a July 10 report.
Brent crude oil for August settlement declined 1 cent to $60.68 a barrel on London’s ICE Futures Europe Exchange

Stocks in Europe, Asia Advance; BHP, Rio, Deutsche Bank Climb

2009-07-14T12:27:00.001-07:00

Stocks in Europe, Asia Advance; BHP, Rio, Deutsche Bank Climb

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Dollar’s Fall Versus Yen May Stall, Reverse: Technical Analysis

2009-07-14T01:50:00.000-07:00

July 14 -- The dollar’s decline against the yen may stall before it reaches so-called support at 91.30, Standard Chartered Plc said, citing trading patterns.
The 91.30 yen support level is the dollar’s high set on Jan. 19, according to a chart compiled by Standard Chartered. The Jan. 19 high is a previous level of resistance, which has become support since it has been breached. Support is where buy orders may be clustered. Resistance is where there may be sell orders.
“The dollar-yen breakdown is expected to be short-lived ahead of 91.30 support,” Callum Henderson, global head of currency strategy at Standard Chartered in Singapore, wrote in a research note yesterday. “Clients should close short dollar-yen positions and look to buy into this dip ahead of 91.30.” A short position is a bet an asset will fall.
The dollar traded at 93.12 yen as of 7:55 a.m. in Tokyo after weakening to 91.74 yen yesterday, the lowest level since Feb. 17. The U.S. currency slumped 3.6 percent against the yen last week, the biggest drop since the five days ended Oct. 24.
“Look for a push back above 95 to follow,” Henderson wrote. Should the greenback rise beyond “congestive resistance” at 95 yen, the dollar may extend its rally to 99 and then to 101.45 or higher, he said.
The 95 yen level was last seen on July 7, 99 yen is near the June 5 high of 98.89 yen, and 101.45 yen represents the April 6 high, according to data compiled by Bloomberg.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index

Yen Declines for a Second Day Against Euro as Stocks Advance

2009-07-14T01:47:00.000-07:00

July 14 -- The yen fell for a second day against the euro as stocks rose amid speculation Goldman Sachs Group Inc. will report stronger earnings today, spurring investors to increase holdings of higher-yielding assets.
The yen declined against all of the 16 major currencies after New Zealand’s Reserve Bank Governor Alan Bollard said “early signs of a global recovery have emerged” and an Australian report showed business sentiment turned positive. South Korea’s won climbed the most in two months against the greenback after a rally in U.S. stocks bolstered demand for emerging-market investments. The pound advanced against the dollar after a report showed the U.K. housing market improved.
“Today it’s going to be all about Goldman’s earnings,” said Jeremy Stretch, a senior strategist at Rabobank International in London. “The market is expecting some pretty bumper numbers.”
The yen weakened to 130.18 per euro as of 8:44 a.m. in London from 129.95 yesterday in New York. It fell 0.7 percent to 73.36 per Australian dollar, and weakened 0.6 percent to 59.10 per New Zealand dollar. The yen traded at 93.04 per dollar from 92.97. The euro rose to $1.3995 from $1.3978.
The yen weakened as the MSCI World Index climbed 0.8 percent in a second day of gains. Standard & Poor’s 500 Index futures advanced.
Goldman Sachs
Goldman Sachs will probably say it earned $2.2 billion in the three months through June when it reports second-quarter earnings today, according to the average estimate of analysts surveyed by Bloomberg. Goldman, JPMorgan Chase & Co. and International Business Machines Corp. are among more than 30 companies in the Standard & Poor’s 500 Index due to report results this week.
The S&P Index rose the most in six weeks yesterday after analyst Meredith Whitney gave Goldman Sachs the only “buy” recommendation among the eight companies she covers. She told CNBC the New York-based financial institution is going to “surprise big.”
The New Zealand dollar rose for a second day against the yen after the central bank governor said the nation’s economy is likely to start recovering earlier than many of its trading partners.
“We hope that in the next phase of recovery in financial- market sentiment and return to risk seeking, the markets will be more discriminating about New Zealand,” Bollard said in notes for a speech delivered today in Napier.
Sentiment Index
Australian business sentiment index rose 6 points to 4, after holding below zero for the previous 17 months, according to a National Australia Bank Ltd. survey released in Sydney today. A figure above zero shows optimists outnumber pessimists.
Benchmark interest rates are 2.5 percent in New Zealand and 3 percent in Australia, compared with as low as zero in the U.S. and 0.1 percent in Japan, attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency moves can erase profits.
The won rebounded from a two-month low as the Kospi index climbed for the first time in a week. The South Korean government will report preliminary second-quarter gross domestic product figures on July 24.
“Most of the markets are a little higher today, after the rebound on Wall Street overnight,” said David Cohen, an economist with Action Economics in Singapore. “A lot of the GDP reports coming out over the next month will be positive. The mood is a little relieved.”
The won closed 1.8 percent higher at 1,293.25 versus the dollar, the biggest advance since April 30. The Kospi index advanced 0.5 percent.
Singapore Dollar
The Singapore dollar rose the most in two weeks after the government said gross domestic product rose an annualized 20.4 percent last quarter from the previous three months. Economists surveyed by Bloomberg forecast a 13.4 percent expansion.
“We treat this number as a positive,” said Chia Woon Khien, a strategist at Royal Bank of Scotland Group Plc in Singapore. “The central bank is very unlikely to weaken the Singapore dollar any further and the next move will be up, but that may not be till 2010.”
GDP will shrink 4 percent to 6 percent this year, less than an earlier forecast for a contraction of as much as 9 percent, the trade ministry said in a statement today.
Singapore’s dollar gained 0.4 percent versus the U.S. currency to S$1.4592 from late in Asia yesterday.
Britain’s pound gained 0.4 percent to $1.6285 and strengthened to 85.87 pence per euro, from 86.14 yesterday, after the Royal Institution of Chartered Surveyors said London real-estate agents and surveyors said home values increased rather than fell for the first time in 20 months.
German Sentiment
The euro rose for a second day against the dollar before a German report that economists said will show investor confidence climbed to a three-year high.
Sentiment increased to 47.8 this month from 44.8 in June, according to a Bloomberg News survey of economists. The reading would be the highest since May 2006. The ZEW Center for European Economic Research releases its index of investor and analyst expectations today.
“Risk appetite is recovering,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “The bias is for the yen to be sold.”

Stocks in Europe, Asia Advance; BHP, Rio, Deutsche Bank Climb

2009-07-14T01:18:00.000-07:00

July 14 -- European and Asian stocks rose, sending the MSCI World Index higher for a second day, as mining companies climbed with commodities and investors speculated Goldman Sachs Group Inc will report stronger earnings.

BHP Billiton Ltd. and Rio Tinto Group added more than 2.4 percent in London as base metals advanced. Deutsche Bank AG and Credit Suisse Group AG gained more than 2 percent on optimism Goldman Sachs will post the largest profit since it set earnings records in 2007.

The MSCI World increased 0.8 percent at 8:43 a.m. in London. The gauge of 23 developed countries has still fallen 5.8 percent since June 2 on speculation share prices have outpaced the outlook for the economy after a three-month rally pushed valuations to the highest level since 2004.

standard and poors 500 index futures fluctuated between gains and losses after the benchmark gauge for U.S. equities posted its steepest advance in six weeks yesterday.

Europe’s dow jones stock 600 index rose 1.1 percent today, while the mcsi asia pacific index added 2.4 percent.

JPMorgan Chase & Co., Citigroup Inc. and International Business Machines Corp. are among more than 30 companies in the S&P 500 due to report earnings this week. Analysts estimate profits at S&P 500 companies fell an average 35 percent in the second quarter and will drop 21 percent from July through September, according to data compiled by Bloomberg.

Goldman Sachs Earnings

Goldman Sachs, which jumped 5.3 percent in New York trading yesterday, will probably say it earned $2.2 billion in the three months through June, according to the average estimate of analysts surveyed by Blog record. The shares added 1 percent to $150.87 in German trading today.

deutche bank, Germany’s largest bank, rose 2.4 percent to 46.59 euros. Credit Suisse, Switzerland’s biggest bank by market value, increased 2 percent to 49.66 Swiss francs.

BHP, the world’s largest mining company, jumped 2.4 percent to 1,368.5 pence as copper led base metals higher on the London Metal Exchange. Rio Tinto, the third-biggest, rallied 3.1 percent to 1,981.5 pence.

Dell Inc. slipped 3.8 percent to $12.52 in German trading. The second-largest maker of personal computers said profitability may suffer this quarter on higher costs.

Competitive pricing and the higher cost of components will cause a “modest decline” in second-quarter gross margin, the company said yesterday. Demand has stabilized and sales probably rose from the first quarter, Dell said.

Vodafone Group Plc fell 1.7 percent to 113.1 pence. UBS AG downgraded the world’s largest mobile-phone company to netural from “buy” and gave a “short-term sell” rating.

“We believe deteriorating fundamentals and earnings momentum could result in Vodafone being the classic value trap,” UBS analysts wrote in a report.

Sri Lanka Central Bank Keeps Interest Rates Unchanged (Update2)

2009-07-13T11:18:00.000-07:00

Sri Lanka kept its benchmark interest rates unchanged, waiting to see if three reductions in borrowing costs this year are enough to stoke an economic revival after the end of almost three decades of civil war.
The Central Bank of Sri Lanka held the reverse repurchase rate at 11 percent and maintained the repurchase rate at 8.5 percent, according to a statement on the Colombo-based bank’s Web site today.
“The main reason for standing pat was that market interest rates have started showing a pronounced decline in response to all the easing undertaken by the Central Bank of Sri Lanka,” said Prakriti Sofat, an economist at HSBC Holdings Plc in Singapore. “Further easing is looking less likely” as inflation accelerates.
Sri Lanka’s $32 billion economy is expected to grow as much as 4.5 percent this year, up from an April forecast of 2.5 percent, as the government rebuilds after the war, Central Bank Governor Nivard Cabraal said July 1. Inflation is likely to “gradually pick up” from this month while staying below 10 percent in 2009, the central bank said today.
“The decision is for growth as the central bank wants cheap credit to be made available,” said Bimanee Meepagala, an analyst at Eagle NDB Fund Management Co. in Colombo. “Going forward, there will be less opportunity for easing rates with inflation picking up.”
‘Moral-Suasion’
As inflation eased to a five-year low, Cabraal this year reduced the repurchase rate by 2 percentage points and cut the reverse repurchase rate from 12 percent to spur credit demand and consumer spending.
The central bank said today it expects financial institutions to continue reducing borrowing costs in response to monetary policy easing. The bank will use “moral-suasion” to encourage lending, Cabraal said June 17.
“The lower interest-rate regime would enable a rebounding of private-sector activity,” helping the economy to “pick up” during the second half of 2009, according to today’s statement. “The pressure on the exchange rate has also eased.”
The Sri Lankan rupee has been little changed about 114.92 per dollar since June, after rising 4.3 percent in May with the end of the civil war.
The government declared victory over the Liberation Tigers of Tamil Eelam separatist rebels on May 16 after driving them from their northern stronghold and killing their chief Velupillai Prabhakaran.
Consumer prices in Colombo rose 0.9 percent in June from a year earlier, after gaining 3.3 percent in May.
The island’s economy grew 1.5 percent in the first quarter from a year earlier, the slowest pace in at least six years, as the global recession slashed demand for exports.

U.S. Stocks Advance, Led by Banks, as Whitney Says Buy Goldman

2009-07-13T11:09:00.000-07:00

U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding following four weeks of losses, as analyst Meredith Whitney recommended buying shares of Goldman Sachs Group Inc. and said banks may advance 15 percent.
Goldman Sachs gained 5.3 percent as Whitney gave the firm the only “buy” rating among the eight companies she covers. Bank of America Corp. climbed the most in a month after the analyst told CNBC the shares were the “cheapest” among U.S. banks. JPMorgan Chase & Co. and Wells Fargo & Co. each rose at least 5 percent. All 10 industries in the S&P 500 and 29 of 30 Dow Jones Industrial Average companies increased.
The S&P 500 advanced 1.9 percent to 895.72 at 1:20 p.m. in New York, the biggest gain in more than two weeks. The Dow average added 144.72 points, or 1.8 percent, to 8,291.24. More than five stocks gained for each that fell on the New York Stock Exchange.
“We need to have a healthy banking sector for this economy to work properly,” said Keith Wirtz, who helps oversee $19.8 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. “Any positive commentary or news will be good for the banking stocks, will be good for the psychology of the market.”
U.S. stocks capped a fourth straight week of declines on July 10, matching the longest losing streak in a year, as consumer sentiment dropped more than estimated and oil’s steepest retreat since January dragged down energy shares. Investors this week will be looking at reports on retail sales and factory production to gauge the strength of the economy after a $787 billion stimulus bill passed in February.
Earnings Watch
Goldman Sachs, JPMorgan Chase & Co., International Business Machines Corp. and Google Inc. are among more than 30 companies in the S&P 500 Index scheduled to report results this week. Analysts estimate the group’s profits fell an average 35 percent in the second quarter and will decrease 21 percent from July through September, according to data compiled by Bloomberg.
“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” Treasury Secretary Timothy Geithner said, according to the transcript of an interview with “CNN’s Fareed Zakaria GPS” show broadcast yesterday.
Goldman Sachs climbed 5.3 percent to $149.32, helping lift a gauge of financial shares up 4.5 percent, the most among 10 industries in the S&P 500 and the group’s steepest advance since May 18. Whitney, founder of Meredith Whitney Advisory Group, upgraded the shares to “buy,” her first such rating on a U.S. bank since she started her own firm. Whitney created the firm earlier this year after correctly predicting in 2007 that Citigroup Inc. would cut its dividend, a call that triggered the steepest drop in the shares since September 2002.
‘Surprise Big’
Goldman Sachs will post “enormous” revenue from its fixed-income, currencies and commodities business, she told CNBC. “Goldman is going to surprise big on the upside,” she said. Whitney also told CNBC that she could see a 15 percent rise in the banks she covers.
Goldman Sachs may post the largest profit since it set earnings records in 2007 when it reports second-quarter results tomorrow. The company will probably say it earned $2.2 billion, or $3.65 a share, excluding some items in the three months through June, according to the average estimate of analysts surveyed by Bloomberg. The stock may reach $186 from $141.87 on July 10, Whitney said in a note to clients.
‘All Eyes’ on Goldman
“People are questioning the strength of the recovery and whether there is need for a second stimulus package,” said Alberto Espelosin, who helps manage the equivalent of $10.5 billion at Zaragoza, Spain-based Ibercaja Gestion. “All eyes will be on Goldman’s earning’s tomorrow.”
American International Group Inc. rose the most in the S&P 500, rallying 25 percent to $14.71, after the Commercial Times reported that Primus Financial Holdings Ltd. will make a $2 billion bid for the U.S. insurer’s Taiwan life insurance unit, citing unidentified industry people. The insurer bailed out four times by the U.S. government has gained 49 percent in the past two days, trimming its loss this year to 55 percent.
Best Buy Co., the world’s largest electronics retailer, rose 4.3 percent to $34.17. The shares were raised to “outperform” from “perform” at Oppenheimer & Co., which said investors were too quick to dismiss benefits from Circuit City Stores Inc.’s liquidation.
Bets against the S&P 500 rose to the highest since April last month as investors shorted more shares of health-care, technology and financial companies, according to data compiled by U.S. exchanges and news of last week.
CIT Slides
CIT Group Inc. lost 20 percent to $1.22. The century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.
Expeditors International of Washington Inc., the manager of cargo ships in 70 countries, dropped the most since May, losing 5.3 percent to $29.99, after saying second-quarter earnings would be 24 cents to 26 cents a share, less than the 30-cent average estimate of analysts surveyed by my Blog news Record.
CapitalSource Inc. fell 6.6 percent to $4.22. The loan provider to small and mid-sized businesses said it plans a public offering of about 17.5 million shares of its common stock.

SA rand slides against dollar

2009-07-12T23:54:00.000-07:00

South Africa’s currency, the rand weakened against the dollar in early Monday trade and looked likely to stay under pressure, influenced mainly by equity markets in the absence of market-moving local data. Rand was down 0.97 percent at 8.2950 to the dollar compared with Friday's New York close of 8.2150.
Government bonds were also weaker in early trade and yields crept higher as a result, with the 2015 bond adding 2 basis points to 8.665 percent while the yield on the 2036 bond was up one basis point at 8.805 percent.

Ericsson to Invest $1.5 Billion in South Korea

2009-07-12T11:50:00.001-07:00

Ericsson AB, the world’s largest maker of wireless networks, plans to invest $1.5 billion in South Korea over the next five years.
The company will set up a research center in the Asian nation to develop environmentally friendly and so-called fourth- generation wireless technologies, Chief Executive Officer Carl- Henric Svanberg said in a meeting in Stockholm with South Korean President Lee Myung Bak, according to an e-mailed statement today from the presidential Blue House.
Stockholm-based Ericsson also plans to increase the number of employees at its South Korean unit to 1,000 from 80, the statement said.
Lee, who is visiting Sweden from July 11 to 13, said South Korea’s government is determined to provide a level playing field for foreign businesses to compete with local rivals, according to the presidential office.
The investment is expected to help boost South Korea’s competitiveness in the market for long-term evolution, or LTE, high-speed wireless technology, backed by Ericsson, the statement said. AT&T Inc. and Verizon Communications Inc. are also opting for the standard.
Verizon Wireless, the biggest U.S. mobile-phone company, aims to begin offering a high-speed network in all U.S. regions by 2015 using LTE, which is scheduled to reach 30 markets by next year.
LG Electronics Inc., Asia’s second-largest mobile-phone maker, said in December it developed a faster wireless chip used in mobile phones based on the technology. The LTE market will be bigger than that of the rival WiMax technology, Skott Ahn, president of LG’s mobile-phone business, said at the time.
Samsung Backs WiMax
Samsung Electronics Co., the world’s second-largest mobile- phone maker, said last month it expects to increase network- equipment sales as more operators begin deploying the mobile WiMax wireless high-speed Internet service.
The Suwon, South Korea-based company has a share of about 35 percent of the mobile WiMax-equipment market, Executive Vice President Kim Woon Sub, who heads Samsung’s network business, said in a June 24 interview.
WiMax is competing with LTE to replace third-generation technology.
“Mobile WiMax will outpace LTE over the next few years due to its head start on deployments,” researcher In-Stat said in February. “Mobile WiMax already has commercial deployments, while LTE won’t be commercially available until late 2009.”

IEA Sees Oil Demand Rising in 2010 After 2-Year Drop

2009-07-12T11:43:00.000-07:00

The International Energy Agency predicts global oil demand will rebound next year, recovering from the fastest drop since the early 1980s as the world economy emerges from its slump.
Worldwide consumption of crude oil will increase by 1.4 million barrels a day, or 1.7 percent, to 85.2 million barrels a day next year, the adviser said in its first monthly report to include a forecast for 2010. The growth will be concentrated in emerging economies outside the Organization for Economic Cooperation and Development.
Oil prices have advanced 34 percent this year on optimism that government stimulus will lift countries out of the worst global recession in six decades. Crude traded at less than $60 a barrel today in New York, a day before the July 11 anniversary when prices reached a record $147.27 last year.
“We expect demand to rebound based on the forecasts of major institutions,” David Fyfe, head of the IEA’s oil industry and markets division, said in an interview from Paris. “There’s still a strong note of caution. Demand data coming in for 2009 is still weak on a trend basis.”
The International Monetary Fund, in a forecast before the IEA prepared its outlook, estimated that the world economy will expand by 2.5 percent in 2010. The IEA said its 2010 view may remain “broadly unchanged” once it includes the revised IMF forecast, whose changes mainly reflected developed economies, where crude use is less intense.
‘Higher GDP Scenario’
The projection for 2010 is about 850,000 barrels day higher than the “higher GDP scenario” included in the agency’s Medium-Term Oil Market Report published on June 29. The Medium- Term report was prepared over a longer period than the monthly bulletin, forecasting through to 2014.
The agency revised up its assessments of 2008 and 2009 global demand by 400,000 barrels a day each, to 86.2 million barrels a day and 83.8 million a day, respectively.
Daily supplies from outside the Organization of Petroleum Exporting Countries will increase by 410,000 barrels to 51.2 million barrels next year as a result of projects in Azerbaijan, Brazil and Canada, as well as growing use of biofuels, the agency said. Non-OPEC nations account for about 60 percent of world oil output.
The anticipated supply increase may be canceled if the recession persists, the agency said.
‘Anemic Demand’
“A weaker economic prognosis for 2010 implies more anemic demand and cash-flow expectations, and could further erode upstream capex, knocking 300,000 to 400,000 barrels a day off non-OPEC supply from the levels shown here,” the report said.
The adviser also changed its forecast for non-OPEC production this year, predicting it will increase by 190,000 barrels a day to 50.8 million day. The IEA forecast a decline for the year in its last monthly report. Non-OPEC supply was revised higher because of stronger-than-expected Russian output.
“There is arguably more potential upside to Russian oil production than in many other countries currently experiencing a plateauing of output,” the report said.
Daily supplies from Russia this year will expand by 30,000 barrels to 10.3 million a day, according to the agency, which had previously forecast a decline. The IEA raised its estimates for Russia by 110,000 barrels a day this year and 260,000 barrels a day in 2010. The revisions follow government tax incentives for developing new fields.
Thaw in Russia
There “might be a thawing in the attitude towards international oil companies gaining access in Russia,” the report said. The recession is driving Russian producers to seek out foreign investment to help offset declining output rates.
“Much of the increase in demand may be gobbled up by rising non-OPEC output and OPEC natural gas-to-liquid, so there may not be much room next year for a huge rise in OPEC output,” Fyfe added. Natural gas liquids, or NGLS, are liquids separated from natural gas such as propane.
OPEC boosted production for a second month in June, straying further from its official quotas. The 11 members bound by targets raised output to 26.2 million barrels a day.
That lowers the organization’s compliance rate with record supply cuts announced last year to 68 percent, compared with an estimate of 74 percent in last month’s report. Those 11 members have an agreed ceiling of 24.845 million barrels a day.
All 12 OPEC nations, including Iraq, will need to provide 27.1 million barrels a day this year and 27.4 million day next year, the IEA said.

Obama Says Economic Stimulus Plan Worked as Intended

2009-07-12T11:40:00.000-07:00

President Barack Obama said his $787 billion stimulus bill “has worked as intended” as he pushed back against Republican criticism that his recovery program has failed to rescue the economy.
“It has already extended unemployment insurance and health insurance to those who have lost their jobs in this recession,” Obama, who is traveling today in Ghana, said in his weekly Saturday radio and Web address. “It has delivered $43 billion in tax relief to American working families and business.”
Obama spoke after stocks fell for a fourth week on concern that an economic recovery will be delayed. A government report last week showed that employers cut 467,000 jobs in June and the unemployment rate rose to 9.5 percent, the highest since 1983.
The weakening labor market is taking a toll on Obama’s popularity. A survey by Hamden, Connecticut-based Quinnipiac University released July 7 showed 49 percent of Ohio voters approved of Obama’s job performance, down from 62 percent in a May 6 poll. The disapproval figure for Obama was 44 percent, up from 31 percent in May.
Obama, in his speech, said the stimulus program is helping state governments save jobs. Were it not for the program, the president said, “state deficits would be nearly twice as large as they are now, resulting in tens of thousands of additional layoffs -- layoffs that would affect police officers, teachers, and firefighters.”
Republican Response
In the weekly Republican response, House Minority Whip Eric Cantor of Virginia said the stimulus bill was “full of pork- barrel spending, government waste and massive borrowing cleverly called ‘stimulus.’”
“The plain truth is that President Obama’s economic decisions have not produced jobs, have not produced prosperity, and have not worked,” Cantor said.
He said the Republicans want reductions in tax rates that he said would help middle-class families.
In asking for public patience, Obama said the recovery act “wasn’t designed to restore the economy to full health on its own, but to provide the boost necessary to stop the free fall.”
Enacted in February, the bill “was designed to spur demand and get people spending again and cushion those who had borne the brunt of the crisis,” the president said.
Obama said the measure “was not designed to work in four months -- it was designed to work over two years.”
The spending plan will “accelerate greatly” through the summer and autumn, creating “thousands more infrastructure projects” that will lead to additional jobs, he said.
‘Right Direction’
“We’re moving in the right direction,” Obama said. “We must let it work the way it’s supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity.”
The Standard & Poor’s 500 dropped 1.9 percent this week to 879.13, the lowest level since May 1. The measure has now retreated 7.1 percent since June 12. The Dow Jones Industrial Average fell 134.22 points, or 1.6 percent, to 8,146.52.
Sears Holdings Corp., the largest U.S. department-store chain based in Hoffman Estates, Illinois, lost 8.2 percent after an index of consumer confidence dropped more than forecast. Exxon Mobil Corp., the world’s biggest oil company based in Irving, Texas, slid 4.9 percent as crude tumbled on concern the recession will keep sapping demand.
In a Bloomberg interview last month, the president said he expected unemployment rates to exceed 10 percent.
In his radio address, Obama also renewed his commitment to comprehensive health-care legislation that expands insurance coverage while cutting costs. He also vowed to address long-term entitlement overhaul.
Earlier this week, Vice President Joe Biden also defended the Obama administration’s efforts to rebuild America’s economy, while expressing frustration with those who say progress is too slow.
“Remember, we’re only 140 days into this deal,” Biden said in a speech in Cincinnati. “It’s supposed to take 18 months.”

China's World-Record Currency Reserves May Top $2 Trillion for First Time

2009-07-12T01:40:00.000-07:00

China’s foreign-exchange reserves probably topped $2 trillion for the first time, drawing attention to the difficulty the government faces in finding places to invest the world’s largest holdings.
The reserves climbed $67.8 billion to $2.022 trillion as of June 30 from three months earlier, according to the median estimate of six economists surveyed by Bloomberg News. That would compare with a $7.7 billion gain in the previous quarter. The central bank may release the number today or next week, based on the timing of previous announcements.
Central bank Governor Zhou Xiaochuan ruled out any sudden change in the management of the reserves last month after proposing that governments investigate setting up a supranational currency. Premier Wen Jiabao is concerned that China’s $763.5 billion of Treasury holdings may fall in value as the U.S. sells record amounts of debt to fund stimulus spending.
“There’s no obvious alternative for China to U.S. Treasury bills,” said Stephen Green, head of China research at Standard Chartered Plc in Shanghai. “The alternatives are limited for that much money.”
China’s reserves more than doubled in two and a half years as the trade surplus pumped cash into the economy, fueling claims that the nation’s currency is kept artificially low to help exporters. The International Monetary Fund may describe the yuan as “substantially undervalued” in a pending report, according to a person who has seen the draft.
Obama, Geithner
President Barack Obama is counting on China’s support as he sells debt to fund his $787 billion economic stimulus plan. Treasury Secretary Timothy Geithner said during a visit to Beijing on June 2 that Chinese officials expressed “justifiable confidence” in the strength of America’s economy.
China will continue to buy Treasuries because alternatives are too risky or won’t soak up enough money, said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong.
Kowalczyk also highlighted political opposition around the world to Chinese investment, citing miner Rio Tinto Group’s rejection of Aluminum Corp. of China’s proposed $19.5 billion investment. The scrapping of the deal was followed by Chinese allegations that Rio staff stole state secrets.
China Petrochemical Corp. is spending $7 billion to acquire Geneva-based Addax Petroleum Corp. and secure oil reserves in Iraq’s Kurdistan region and West Africa. China’s sovereign wealth fund, meanwhile, has lost money on investments in Blackstone Group LP and Morgan Stanley.
‘Hot Money’ Inflows
The latest gain in the reserves was probably driven by the trade surplus, higher valuations for non-dollar assets because of the U.S. currency’s weakness, and inflows of speculative capital, or so-called “hot money,” Kowalczyk said, adding that investors are attracted by an economy that’s growing when others are shrinking.
China’s benchmark Shanghai Composite Index has soared more than 80 percent from last year’s low on Nov. 4. The government kept the yuan stable in the past year after the currency gained 21 percent against the dollar between July 2005 and July 2008.

Saudi Banks May Post Lower Profit on Tight Lending, Provisions

2009-07-12T01:26:00.000-07:00

Saudi Arabian banks may report declines in second-quarter profit after they tightened lending rules and increased provisions for bad loans.
Net income at the 10 biggest Saudi banks probably dropped by an average of 19 percent, according to EFG-Hermes Holding SAE, the largest Egyptian investment bank by market value. Dubai-based Al Mal Capital PSC forecasts that profit at the five Banks it tracks declined an average of 11 percent.
Saudi banks have been hurt by falling oil prices, which slowed growth in the biggest Arab economy and forced some of the kingdom’s biggest family-owned companies to restructure debts. The International Monetary Fund forecast in May that the Saudi economy would shrink 0.9 percent this year amid the first global recession since World War II.
“The global credit crisis reduced demand from corporate borrowers and in some cases Saudi banks have taken a more cautious attitude toward lending,” Aybek Islamov, an analyst at HSBC Holdings Plc in Riyadh, said July 9 in a telephone interview. “Weak lending volumes, a decline in net interest margins and higher loan-loss provision expenses will slow down net income growth.”
Al-Rajhi Bank, Saudi Arabia’s biggest lender by market value, may say net income declined 2.4 percent to 1.70 billion riyals ($450 million), according to the average estimate from three analysts surveyed by Bloomberg. Samba Financial Group, the second-largest bank in the kingdom, may say profit dropped 9.1 percent, according to the average of four estimates.
Riyad Bank, the kingdom’s third-largest by market value, may report a 30 percent drop in net income, according to the average of three analyst estimates. Saudi British Bank, the fourth-largest, may post a 21 percent decline in net income, according to the average of three estimates.
Algosaibi, Saad Loans
The Algosaibi and Saad groups, two of Saudi Arabia’s biggest family-owned companies, have announced plans to restructure their debts in the past two months. Together they have borrowed at least $15.7 billion from more than 100 international and regional banks, according to documents prepared by some of the lenders.
Saudi banks have probably loaned the groups between $4 billion and $7 billion Algosaibi and Saad, HSBC said in a July 7 report.
“The true extent and scope of the problem has not yet been clarified by the individual banks,” Al Mal analyst Deepak Tolani wrote in the report. “The impact this quarter will be smaller and major repercussions probably will not be seen till the second half of the year.”
Other family-held businesses in Saudi Arabia are also struggling to repay loans. Al-Tuwairqi Group has hired HSBC to help it restructure as much as 7 billion riyals in debt after the Saudi steelmaker was hurt by falling metal prices. The company’s loans came from Samba, al-Rajhi Bank and Saudi Hollandi Bank, al-Watan newspaper reported last month.
Banks Pull Back
Banks provided at least $64 billion to Saudi borrowers in the past five years as record oil prices spurred economic growth in the kingdom, according to data compiled by Bloomberg. Crude oil dropped to $60.41 a barrel on July 9, from a record $147.27 in July 2008.
Saudi bank lending was down 1 percent in the first five months of the year, according to HSBC. The decline has forced some Saudi companies to seek government loans.
Al Abdullatif Industrial Investment Co., a Saudi carpet maker, said this month it will borrow 91 million riyals from the Saudi Industrial Development Fund to expand production.
“Saudi banks aren’t giving out as many loans,” Murad Ansari, an analyst in Riyadh with EFG-Hermes, said July 9 in a telephone interview. “Banks are channeling more liquidity to non-risky assets.”

Oil Rebounds From Seven-Week Low as Slump Is Viewed as Overdone

2009-07-09T01:51:00.000-07:00

July 9 Crude oil rebounded from a seven-week low as traders took the view that the decline in prices during the longest losing streak this year was overdone.
Oil snapped a six-day slump as traders bought contracts based on technical indicators. Crude has fallen below $62.55 a barrel yesterday, the lower resistance level of the Bollinger Band, indicating it was oversold.
“In the short term, $60 may be the intraday support level, but in the longer term we have to go back to fundamentals, which are weak,” said Clarence Chu, an options trader at Hudson Capital Energy in Singapore.
Crude oil for August delivery gained as much as 85 cents, or 1.4 percent, to $60.99 a barrel on the New York Mercantile Exchange, and traded at $60.81 at 3:30 p.m. Singapore time. Futures touched $60.01 yesterday before closing down 4.4 percent at $60.14, the lowest settlement since May 19. Crude has fallen 15 percent since June 29.
Oil “got very close to $60 and probably attracted a bit of buying support around that level,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.
Crude also gained as the Washington-based International Monetary Fund said in a revised forecast yesterday that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth. A contraction this year will be 1.4 percent, worse than an April forecast for a 1.3 percent drop, the IMF said.
China’s passenger-vehicle sales rose 48 percent in June, the biggest jump since February 2006, as government stimulus spending spurred a revival in the world’s third-largest economy.
Gasoline Supplies
U.S. oil inventories dropped 2.9 million barrels to 347.3 million last week, the lowest since January, an Energy Department report showed yesterday. Refineries operated at 86.8 percent of capacity, down 0.2 percentage point from the previous week, the department said.
Gasoline stockpiles climbed 1.9 million barrels to 213.1 million in the week ended July 3, more than twice the increase forecast in a Bloomberg News survey, the Energy Department said. Motor fuel inventories were forecast to increase 900,000 barrels last week, according to the median of 16 responses in News survey.
Gasoline for August delivery rose as much as 2.47 cents, or 1.5 percent, to $1.6580 a gallon in New York. Yesterday, it declined 5.7 percent to settle at $1.6333, the lowest settlement since May 6 and the biggest one-day drop since March 30.
Inventories of distillate fuel, a category that includes heating oil and diesel, rose to the highest since 1985 as consumption dropped to a 10-year low.
Distillate Overhang
Distillate fuel inventories rose 3.74 million barrels to 158.7 million, the biggest gain since January, the report showed. The increase left supplies last week 30 percent higher than the five-year average for the period. Supplies were estimated to rise 1.83 million barrels.
“We may see further price drops, especially for distillates as we have an acute overhang in the U.S. and Europe,” Antoine Halff, head of energy research at Newedge USA LLC in New York, said in an interview.
Total U.S. daily fuel demand averaged 18.4 million barrels in the past four weeks, down 5.9 percent from a year earlier, the report showed. Distillate consumption fell 12 percent to 3.27 million over the period, the lowest since July 1999.
Brent crude for August settlement rose as much as 94 cents, 1.6 percent, to $61.37 a barrel on London’s ICE Futures Europe exchange and was at $61 at 3:06. p.m. in Singapore. Yesterday, it declined $2.80, or 4.4 percent, to $60.43, the lowest settlement since May 25.
Brent is trading at a 32 cent premium to crude oil offered in New York. The West Texas Intermediate contract traded on Nymex is typically priced higher than its European counterpart.

India Wholesale Prices Fall for Fourth Straight Week

2009-07-09T01:40:00.000-07:00

July 9 India’s wholesale prices fell for a fourth straight week, ahead of a government increase in fuel costs that may rekindle inflation pressures in coming months.
The benchmark wholesale-price index declined 1.55 percent in the week to June 27 from a year earlier after tumbling 1.30 percent in the previous week, the government said today. Prices plunged 1.61 percent in the first week of June, the biggest drop since December 1978, according to central bank data.
Declines won’t last for long after last week’s first increase in fuel prices in more than a year. The reemergence of inflationary pressures may prompt the central bank to start raising interest rates from a record low by early 2010, according to economist Indranil Sen Gupta.
“Rising inflation risks buttress our expectation of the Reserve Bank of India reversing its easy money policy by January-April 2010,” said Gupta, an economist at Bank of America-Merrill Lynch in Mumbai. “We continue to expect wholesale-price inflation to turn up after September.”
Other gauges of inflation, which India’s central bank also monitor when determining the direction of monetary policy, remain high.
Consumer prices paid by farm and rural workers jumped 10.21 percent in May from a year earlier and have averaged gains of more than 10 percent for the past 12 months. Consumer prices paid by industrial workers rose 8.63 percent in May from a year earlier, according to the latest government data.
Consumer Prices
India has four consumer price indices and uses the wholesale-price index as the benchmark as the other inflation measures don’t capture the aggregate price picture.
The difference between the wholesale and consumer-price indexes can be attributed to the weighting given to food items. Food accounts for as much as 70 percent of the consumer-price index, compared with just 27 percent of the wholesale-price index, according to the central bank.
“Such divergences in alternative inflation measures complicate the conduct of monetary policy in India,” central bank Governor Duvvuri Subbarao said on July 2. The Reserve Bank of India, which last cut borrowing costs on April 21, next meets to set interest rates in Mumbai on July 28.
The yield on the 6.07 percent note due May 2014 held at 6.34 percent as of 11:55 a.m. in Mumbai, unchanged from before the release of the inflation report, according to the central bank’s trading system.
No Deflation
The government is working on creating two new consumer price indexes for rural and urban areas, Finance Minister Pranab Mukherjee said July 3.
India is not in the grip of deflation as food-price inflation continues to be in double-digits, according to Governor Subbarao. The bank will review its 4 percent wholesale- price inflation target for the year to March 2010 when it meets later this month, he said.
Prime Minister Manmohan Singh’s government last week raised retail fuel costs for the first time in more than a year, making gasoline in the capital New Delhi 9.8 percent more expensive. Cooking gas and kerosene prices were left unchanged.
The index of fuel prices declined 12.42 percent from a year earlier in the week to June 27, following a similar fall in the previous week, today’s report showed. Prices of eggs, tea, corn, oilseeds, sugar, edible oils and fertilizers rose in the week.
Faster economic growth may also stoke inflation pressures in India and could force the central bank to start unwinding the interest-rate cuts commenced in October last year.
‘Bottoming Out’
India’s $1.2 trillion economy may expand as much as 7.75 percent in the year ending March 2010 amid signs of a “bottoming out” in the U.S. and harvests benefiting from monsoon rains, the Finance Ministry said July 2. Asia’s third- largest economy grew 6.7 percent in the previous 12 months.
Signs of economic recovery across Asia have prompted central banks in the region to stop cutting rates. The Bank of Korea kept its benchmark interest rate unchanged for a fifth month today on signs the economy is recovering from the worst global recession since the Great Depression. Australia’s central bank kept interest rates unchanged for a third month this week.
The International Monetary Fund said yesterday the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes, predicting the world economy will grow 2.5 percent in 2010.
India’s wholesale-price index published today may be revised in two months, after the government receives additional data. The commerce ministry today revised the rate for the week ended May 2 to 1.48 percent from 0.48 percent.

Australian Employers Cut 21,400 Jobs as Exports Slow (Update3)

2009-07-09T01:35:00.000-07:00

July 9 Australian employment fell in June, pushing the jobless rate to the highest in almost six years, as the global recession reduced demand for iron ore and coal exports and prompted mining companies to fire workers.
The number of people employed dropped 21,400 from May, the statistics bureau said in Sydney today. The median estimate of 21 economists surveyed by Bloomberg was for a decline of 20,000. The jobless rate rose to 5.8 percent from 5.7 percent.
Central bank Governor Glenn Stevens left borrowing costs at a half-century low of 3 percent this week for a third month to help stem firings at companies including BHP Billiton Ltd. Advertisements for job vacancies tumbled in June for a 14th month, a sign unemployment may rise in coming months.
“Full-time employment continues to fall so there is weakness there,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. Still, the “rate of deterioration hasn’t increased as most people thought.”
The number of full-time jobs dropped 21,900 in June and part-time employment increased 400, today’s report showed.
The Australian dollar traded at 78.11 U.S. cents at 12:28 p.m. in Sydney from 78.04 cents before the report was released. The currency has jumped 8.5 percent in the past three months, making it the second-best performer against the U.S. dollar among the currencies of the major industrialized nations.
Consumer Confidence
Australia’s economy has so far skirted the worst global recession since the Great Depression. Gross domestic product rose 0.4 percent in the first quarter, making it one of the few major economies including China and India to expand.
Consumer confidence jumped to the highest level since December 2007 and home-loan approvals rose for an eighth month, reports showed yesterday.
“Leading indicators suggest we should be losing around 30,000 to 40,000 jobs per month, so the Reserve Bank would be happy with the recent performance of the labor market where trend losses are just 5,000 per month,” said Spiros Papadopoulos, an economist at National Australia Bank Ltd. in Melbourne.
To help boost employment and cushion the economy against slower global demand for natural resources, central bank policy makers slashed the overnight cash rate target by a record 4.25 percentage points to 3 percent between September and April.
Cash Handouts
Prime Minister Kevin Rudd’s government has also distributed A$12 billion ($9.4 billion) in cash handouts to households this year and is spending A$22 billion to upgrade roads, railways, hospitals and ports.
BHP Billiton, the world’s biggest mining company, is shedding 3,400 workers in Australia after shuttering a nickel mine in January and reducing coking coal output. Qantas Airways, the nation’s largest carrier, said in April that it will cut 1,750 jobs as demand for business and first-class travel wanes.
ANZ Bank said today it will scrap 248 jobs as it closes mortgage administration offices in cities including Sydney, Brisbane and Perth. The bank is Australia’s fourth largest.
“Weaker demand for labor is leading to lower growth in labor costs,” Reserve Bank Governor Glenn Stevens said on July 7. That gives policy makers “some scope for further easing of monetary policy, if needed,” he added.
Reports this month showed the construction industry shrank in June at a faster pace, exports slumped 5 percent in May from April and home-building approvals tumbled 12.5 percent, the biggest drop since November 2002.
Job Advertisements
Jobs advertisements dropped 6.7 percent last month from May and 51.4 percent from a year earlier, the largest annual decline since ANZ Bank began recording the figures in 1998.
Still, other reports suggest Australia’s economy will continue expanding this year. An index of consumer sentiment published yesterday by Westpac Banking Corp. climbed 23.2 percent in June and July, the largest two-month gain since the survey began in 1975.
The International Monetary Fund said the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates.
The Washington-based lender said in a revised forecast released yesterday that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth.
Woolworths, Australia’s biggest retailer, has said it expects to add 7,000 workers and reaffirmed its forecast for an increase in annual profit of as much as 12 percent.
Rate Outlook
David Jones Ltd., Australia’s second-biggest department store chain, said last week that earnings after tax will rise by between 20 percent and 30 percent in the six months ending July 25. “The stimulus package has been good for confidence,” Chief Executive Officer Mark McInnes told reporters on June 30.
Investors expect Australia’s overnight cash rate target will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading. Traders forecast the key interest rate will be 44 basis points higher in a year, the index showed at 12:22 p.m. in Sydney from 46 basis points just before the report was released and 48 basis points late yesterday.
The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.3 percent in June from a revised 65.4 percent, today’s report showed.

BOE Should Seek Darling’s Consent to Print More Money,

2009-07-06T21:50:00.001-07:00

july7

The Bank of England should ask the government for permission to start a further phase in its money- printing program because a recovery from the recession “is not guaranteed,” the British Chambers of Commerce said.
While Britain will return to growth in the final quarter, a recovery “is not yet secure,” the lobby group said in a report in London today. The central bank should extend its asset- purchase program to the full 150 billion pounds authorized by Chancellor of the Exchequer Alistair Darling and it should seek permission to spend even more, the BCC said.
Economists say the Bank of England may this week stick with its current plan to print 125 billion pounds ($202 billion) in new money as policy makers assess its effect in pulling Britain out of recession. The BCC’s survey of 5,600 companies showed today that manufacturing and services companies’ confidence improved in the three months through June.
“The worst of the recession is over, but the recovery is not guaranteed,” David Kern, the lobby group’s chief economic adviser, told reporters in London yesterday. “Policy is not yet effective and that has to change. They should go beyond 150 billion pounds.”
The Bank of England should print up to 200 billion pounds to spend in U.K. debt markets, Kern estimates. In a Bloomberg News survey of 36 economists, 20 said the bank will keep its current plan at the Monetary Policy Committee meeting on July 9, while the remainder said it will extend the program.
GDP Forecast
Gross domestic product will probably shrink between 0.1 percent and 0.4 percent in the second quarter before stagnating in the third quarter and growing as much as 0.5 percent in the final three months of the year, the BCC said.
While the economy shrank 2.4 percent in the first quarter, the most since 1958, there are signs that the recession is easing. U.K. manufacturing probably rose for a third month in May by 0.2 percent, according to the median of 26 economists in a Bloomberg survey. The Office for National Statistics will release the figures at 9:30 a.m. in London today.
Job losses in manufacturing remain a concern and unemployment in the U.K. will rise to 3.2 million by the middle of next year, Kern said. British carmakers have benefited from the government’s scrappage plan giving consumers a 2,000-pound subsidy to trade in old cars for new ones, and more programs of the kind are needed, he said.
A total of 29,796 vehicles have been registered under the scrappage plan since it was implemented on May 16, giving carmakers “a much needed boost,” the Society of Motor Manufacturers and Traders said yesterday.
“We should have more schemes that support businesses that are basically viable and are being forced to discard skilled labor,” Kern said. “The pressure on jobs is still very serious. It’s an area which has serious implications

Australia May Keep Key Rate at 3% for Third Month (Update1)

2009-07-06T21:47:00.000-07:00

july7 Australia’s central bank may leave interest rates unchanged for a third month amid signs the lowest borrowing costs in half a century and government spending are helping the economy skirt the global recession.
Reserve Bank Governor Glenn Stevens will keep the overnight cash rate target at 3 percent at 2:30 p.m. in Sydney today, according to all 20 analysts surveyed by Bloomberg News.
Australia was one of few major economies including China and India to grow in the first quarter as government cash handouts and rate cuts stoked consumer spending. Growth may slow after reports recently showed exports dropped to a 14-month low, bank lending fell, home building approvals declined by the most since 2002 and job advertisements tumbled for a 14th month.
“The bank has been in ‘watch-and-wait’ mode, assessing the impact of previous aggressive rate cuts,” said Bill Evans, chief economist at Westpac Banking Corp. in Sydney. “The bank is unlikely to see an immediate need for additional stimulus.”
Governor Stevens, who slashed borrowing costs by a record 4.25 percentage points in six moves between September and April, said last month he has scope to cut rates further if needed.
Australia’s “smaller downturn than most countries” reflects the nation’s limited exposure to “financial excesses that have been the problem in some other countries, as well as the good fortune of our position in relation to China,” Stevens said on June 4.
Economic Growth
Gross domestic product rose 0.4 percent in the first quarter from the previous three months, in contrast to a 3.8 percent decline in Japan and a 1.4 percent contraction in the U.S.
Retail sales increased 1 percent in May, twice as much as economists estimated, buoyed by spending at department stores and restaurants. The services industry expanded for the first time in 15 months in June.
The surge in spending is boosting earnings at companies including David Jones Ltd. The nation’s second-largest department store chain said last week that earnings after tax will rise by between 20 percent and 30 percent in the six months ending July 25.
Prime Minister Kevin Rudd’s government has distributed A$12 billion ($9.6 billion) in cash handouts to households this year and is spending A$22 billion to upgrade roads, railways, ports and schools.
Mortgage Repayments
“The combined impact of fiscal and monetary policy easing has been more effective in boosting spending and confidence than even the optimists had hoped,” said Richard Gibbs, a senior economist at Macquarie Group Ltd. in Sydney.
“While recent reports suggest there is no urgent need for lower mortgage interest rates, they nevertheless will need to be kept low for an extended period.”
Households with an average A$250,000 home loan are paying A$7,000 a year less than they were at the start of September, which is equal to about 8 percent of family incomes, according to Reserve Bank calculations.
“Our expectation remains that the economy will be well placed for expansion toward the end of this year,” Stevens said on June 4.
Policy makers in the U.S., Europe and the U.K. are also keeping borrowing costs unchanged to spur their economies. The European Central Bank left its benchmark rate at a record low of 1 percent on July 3, and the Bank of England will keep its rate at 0.5 percent on July 9, economists predict. The U.S. Federal Reserve has held the overnight lending rate at between zero and 0.25 percent since December.
Asia Recovery The cash rate is “all but certain to be left on hold,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “Conditions in the Australian economy have improved, with confidence, spending and housing lending markedly stronger, while V-shaped recoveries are emerging in Asia.”
China’s manufacturing expanded for a fourth month in June, Japan’s industrial output rose for a third month in May and South Korean manufacturers’ confidence reached a nine-month high in July, recent reports show.
Signs of a pickup in Australia’s economy have prompted investors to increase bets the benchmark interest rate will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading.
Traders forecast the key rate will be 55 basis points higher in a year, the index showed at 12:19 p.m. in Sydney. After the bank’s June 2 meeting, they tipped 26 points of gains.

Mexico’s Peso, Stocks Fall as Calderon’s Party Loses Election

2009-07-06T21:44:00.001-07:00

Mexico’s peso and stocks fell to a two-week low after President Felipe Calderon’s party lost congressional seats in midterm elections, adding to concern the government will struggle to implement tax increases that economists say are needed to narrow a budget gap.
The peso weakened 0.1 percent to 13.24 per U.S. dollar at 5 p.m. New York time. It touched 13.3755, the weakest since June 23. Mexico’s Bolsa, the nation’s benchmark stock index, tumbled 1.3 percent to 23,742.49.
“This is not a market-friendly result,” said Jaime Ascencio, a fixed-income strategist at Actinver SA, Mexico’s biggest independent money manager, in Mexico City. “This result makes it very likely that Mexico’s credit rating will be cut.”
Calderon will need “a lot of negotiation” to pass changes to tax laws through a divided congress, Standard & Poor’s analyst Lisa Schineller said in an interview from New York. The loss by Calderon’s party raises the odds that legislation to buoy tax revenue may be “diluted” by lawmakers before being passed, said Shelly Shetty, an analyst at Fitch Ratings.
S&P cut the outlook on Mexico’s foreign debt to negative from stable in May, six months after Fitch did. S&P and Fitch both rate Mexico’s foreign debt BBB+, the third-lowest investment grade level.
Calderon’s National Action Party, or PAN, took 28 percent of the votes in the July 5 election to renew all 500 lower house seats while the opposition Institutional Revolutionary Party, or PRI, won 36.7 percent of the vote, according to 99.5 percent of all votes counted by the Federal Electoral Institute.
The PAN currently has 41 percent of lower house seats and the PRI has 21 percent in the outgoing congress.
‘Reform Momentum’
“The election result is not the one that would induce significant reform momentum in Mexico,” Shetty said in an interview from New York. “We cannot completely rule out that some sort of fiscal reform is going to be passed. But we have to see whether it’s diluted or whether it will make a dent on improving public finances.”
PRI’s victory will be “negative” for the markets because of the potential for legislative gridlock, UBS AG said.
“Congressional dynamics are set to make for the passing of a reform agenda that much harder,” analysts led by Tomas Lajous wrote in a note. “The results are negative for markets, but only marginally.”
Grupo Simec SAB, a unit of Mexico’s largest steelmaker, and Banco Compartamos SA, a Mexican bank that lends to low-income customers, led declines on the Bolsa index.
Recession
Calderon’s setback comes after the economy sank into its first recession in eight years as the slump in the U.S. curbed demand for exports and trimmed flows from remittances, foreign direct investment and tourism. Mexico’s economy will contract 5.5 percent this year, according to the government.
That contraction has swelled the budget deficit and exposed the government’s dependence on oil income. The Finance Ministry is projecting the public sector deficit may grow to 3 percent of gross domestic product this year form 2.1 percent in 2008.
The government collects 37 percent of its revenue from oil, whose production dropped 6.5 percent in May from a year earlier after falling 9.2 percent in 2008.
“Mexico has a serious fiscal challenge that the whole world is waiting to see resolved,” said Luis Garcia Pena, chief executive of Investra Consultores SA in Monterrey, Mexico, which manages $750 million in assets. Investors are “waiting for the messages from the PRI, which has re-conquered congress, to see how much attention they’ll pay to issues like fiscal reform.”
Polls before the elections predicted the loss by Calderon’s party. Mexico City-based Consulta Mitofsky forecast the PAN would get 29 percent of the vote and that the PRI would take 34 percent, according to the poll of 2,000 people conducted June 25-28 with a margin of error of 3.1 percentage points.
Further Peso Weakening
“We saw this coming,” said Antonio Magana, head of the foreign-exchange trading desk at Grupo Financiero Interacciones SA in Mexico City. That limited declines in the peso, he said.
Today’s peso drop extended a slide last week fueled by concern surging unemployment in the U.S. will delay an economic recovery. Mexico sends 80 percent of its exports to the U.S.
The peso may continue to weaken, said Win Thin, senior currency strategist at Brown Brothers Harriman & Co.
“The fundamentals and the politics are all lining up against the peso now, especially with the U.S. data being weak,” said Thin, who is based in New York.
Yields on Mexico’s 10 percent bond due December 2024 fell six basis points, or 0.06 percentage point, to 8.37 percent. The bond’s price rose 0.55 centavo to 114.02 centavos per peso, according to Banco Santander SA

Pound Falls on Report of BOE Purchases, Waning Earnings Outlook

2009-07-06T21:40:00.000-07:00

July 6 The pound tumbled and 10-year gilt yields fell the most in more than two weeks on speculation the Bank of England plans further action to boost the economy and as forecasts for weakening company earnings hurt stocks.
The British currency extended its first weekly drop against the dollar in a month after the Sunday Times said the central bank may increase its program of asset purchases by 25 billion pounds ($40 billion) amid signs that the economic recovery is petering out. Government bonds rose as the FTSE 100 Index slid to the lowest level in more than two months, boosting demand for the safety of fixed-income assets.
“We’re going to see this sterling move coming further as the market gets increasingly nervous about this recovery,” said Ian Stannard, a currency strategist at BNP Paribas SA in London. “Green shoots might be premature and sterling is going to be vulnerable given its cyclical characteristics.”
The pound dropped 1.5 percent to $1.6096, the lowest level since June 9, before trading at $1.6225 as of 5:12 p.m. in London. It fell 1.7 percent to 154.23 yen and lost 0.3 percent to 85.86 pence per euro.
The U.K. currency gained 11 percent against the dollar and the euro this year. In the past two weeks, it dropped more than any of the 16 major currencies as the prospects of an early revival in Europe’s second-largest economy diminish. Gross domestic product will shrink 4.3 percent this year, the Organization for Economic Cooperation and Development said June 24.
Expanded Plan
The Shadow Monetary Policy Committee, a group of economists organized by the London-based Institute of Economic Affairs, called for the government to raise the 150-billion-pound limit on the Bank of England’s asset-purchase plan, the Sunday Times reported yesterday. The newspaper didn’t say where it got the information on the Bank of England’s plans.
“Sterling is coming under increasing pressure as the market focuses on this week’s MPC announcement and the potential expansion of the quantitative-easing program,” Paul Day, chief market analyst at MIG Investments SA in Neuchatel, Switzerland, wrote in an e-mail today. “I continue to favor sterling to underperform after its recent good run.”
Gilts extended gains after the Bank of England paid above- market prices when buying 3.5 billion pounds of gilts maturing between 2020 and 2032 as part of its asset-purchase plan. The bank said it paid an average of 109.52 for 1.1 billion pounds of the 4.75 percent security due March 2020, compared with a market price of 109.21 before the results were announced, according to my blog calulation.
Quantitative Easing
The central bank will buy a further 3 billion pounds of gilts maturing between 2015 and 2019 on July 8, the day before its next interest-rate decision. The Bank of England pledged to spend 125 billion pounds buying bonds in its so-called quantitative-easing program.
Stocks fell around the world and government bonds advanced amid growing concern earnings at the biggest companies will keep falling in the coming three months. The FTSE fell as much as 1.5 percent to 4172.33, its lowest level since April 30.
The year-over-year decline in profit for Standard & Poor’s 500 Index members may narrow to 21 percent from July through September, after declines of an estimated 34 percent in the second quarter and about 60 percent in the year’s first three months, according to data compiled by S&P and Bloomberg.
The yield on the 10-year gilt declined six basis points to 3.67 percent after falling as low as 3.64 percent. The 4.5 percent security due March 2019 rose 0.51, or 5.1 pounds per 1,000-pound face amount, to 106.74. The yield on the two-year note fell six basis points to 1.18 percent.
U.K. government bonds lost investors 0.3 percent this month, compared with a gain of 0.3 percent for U.S. debt and 0.4 percent for German securities, according to Merrill Lynch & Co.’s U.K. Gilts, U.S. Treasury Master and German Federal Governments indexes.

Yen as ‘Winner’ Currency Makes Little Sense, Commerzbank Says

2009-07-06T21:38:00.000-07:00

July 6 Commerzbank AG said it’s skeptical the yen will emerge as the “winner” against the dollar and the euro because the economic slump in Japan is as severe as it is in Europe and the U.S.
“In the current situation this makes particularly little sense,” a team led by Ulrich Leuchtmann in Frankfurt wrote today in a report. “The fundamental situation in Japan is at least as depressed as in the U.S. and in the euro zone. The green shoots in Japan are much more fragile.”
The yen rose 1.3 percent to 132.49 per euro as of 12:26 p.m. in London and strengthened 0.7 percent against the dollar to 95.34.

U.S., Europe Stocks Fall, Commodities Drop on Recession Concern

2009-06-22T14:15:00.000-07:00

U.S. and European stocks tumbled, sending the Standard & Poor’s 500 Index down the most in two months, as the World Bank said the recession will be deeper than previously forecast. Treasuries rose, while oil fell below $67 a barrel and metals slumped.
Freeport-McMoRan Copper & Gold Inc. and Alcoa Inc. sank at least 8.9 percent, while BP Plc and Occidental Petroleum Corp. lost more than 3.8 percent amid the biggest retreat in the Reuters/Jefferies CRB Index of 19 raw materials in almost three weeks. Bank of America Corp. dropped 9.7 percent as two board members resigned. Both the S&P 500 and Dow Jones Industrial Average erased their gains for the year.
“The worries are still out there,” said John Wilson, who helps oversee $120 billion as chief market technician at Morgan Keegan & Co. in Memphis, Tennessee. “Nobody is ready to get the trumpets out and herald the end of the recession.”
The S&P 500 slid 3.1 percent to 893.04 at 4:05 p.m. in New York following last week’s 2.6 percent slump. The Dow average sank 200.72 points, or 2.4 percent, to 8,339.01. Europe’s Dow Jones Stoxx 600 fell 2.8 percent and the MSCI World Index decreased 2.7 percent. Almost 14 stocks fell for each rising on the New York Stock Exchange, the broadest sell-off since May 13.
Stocks and commodities slid as the World Bank said unemployment and poverty will rise in developing nations and predicted a 2.9 percent contraction in the global economy this year. That compares with a prior estimate of a 1.7 percent decline. Growth is expected to return in 2010 at 2 percent, less than the 2.3 percent forecast about three months ago.
Rebound Pared
While the S&P 500 is still up 32 percent from a 12-year low on March 9, the index has fallen 5.6 percent since June 12. Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago. Insiders of S&P 500 companies were net sellers for 14 straight weeks as the market rallied, according to data compiled by InsiderScmaore.com.
The S&P 500 today slid below 900.77, its average level over the past 200 days, in a bearish signal to analysts who study charts to predict market movements.
Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said the global economy may suffer another slump due to higher oil prices and widening budget deficits.
“I see the worry of a double whammy” from energy costs and fiscal burdens, increasing the risk of a setback in the economic recovery, Roubini told a conference in Paris today. Oil may rise to $100 a barrel, he said.
Commodities Slump
Freeport-McMoRan, the world’s largest publicly traded copper producer, plunged 11 percent to $45.18 for the biggest decline since March 2. U.S. Steel sank 9.2 percent to $34.12. Alcoa decreased 8.9 percent to $10.02. The strengthening dollar dulled the appeal of commodities as an alternative investment, helping send copper, gasoline and oil prices lower.
Exxon Mobil Corp. retreated the most in three months, losing 3.1 percent to $68.84. BP, Europe’s second-largest oil company, lost 3.8 percent to 478 pence in London. Crude oil fell for a second straight day in New York, sliding 3.8 percent to $66.93, on concern that fuel demand will remain depressed.
Commodity shares declined even as Anglo American Plc rallied 4.6 percent in London after Xstrata Plc proposed a “merger of equals” with the mining company.
Banks Slide
Bank of America tumbled 9.7 percent to $11.94, the steepest decline in more than a month. The lender that took $45 billion in U.S. aid said board members Tommy Franks and Joseph Prueher resigned, pushing the total of departing directors to seven since April.
Wells Fargo & Co. and JPMorgan Chase & Co. lost more than 6 percent, dragging a measure of financial stocks down 6.2 percent for the biggest slump among the 10 industry groups.
Mortgage originations in the U.S. may total $2.03 trillion this year, 27 percent less than earlier forecast, as rising interest rates reduce home refinancings, the Mortgage Bankers Association said.
Walgreen Co. lost 5.7 percent to $29.64. The company reported profit of 53 cents a share, missing the average analyst estimate by 6 percent, according to Bloomberg data.
CarMax Inc. declined 8.3 percent to $14.04. The biggest U.S. used-car dealer was cut to “hold” from “buy” at Deutsche Bank AG, which said the risk-reward ratio for the company’s stock is more balanced after its recent rally.
‘Remain Weak’
Federal Reserve officials on June 24, at the conclusion of their two-day meeting, may say the U.S. is showing signs of emerging from the worst recession in a half century. Following their last meeting in April, policy makers said the economy will “remain weak for a time.” The central bankers will also keep the benchmark interest rate in the range of zero to 0.25 percent, economists said.
Apple Inc. slipped 1.5 percent to $137.37. Apple Chief Executive Officer Steve Jobs had a liver transplant about two months ago, a person familiar with the matter said. Jobs, a cancer survivor, went on medical leave in January after saying he wanted to take himself out of the limelight and focus on his health. Apple should disclose whether he had a liver transplant if he returns to work this month in the role of CEO, corporate governance experts said.
Apple slipped even after saying it sold more than 1 million iPhone 3G S units in the device’s opening weekend. Piper Jaffray & Co. predicted sales of about 750,000 after initially forecasting 500,000 in the debut weekend. Apple also said 6 million people have downloaded its new iPhone 3.0 software in the five days it’s been out.
Bonds Gain
Treasuries advanced for a second day as the World Bank forecast made it more likely the Fed will keep interest rates near zero for longer. Traders reduced bets the central bank will raise borrowing costs by the end of the year, according to futures on the Chicago Board of Trade.
Today’s slide extended losses from the S&P 500’s 2.6 percent drop last week, its first weekly decline in more than a month. Last week’s retreat came as lower crude oil hurt fuel producers and S&P downgraded the credit ratings of 18 banks.
The benchmark index for U.S. stock options jumped the most since April 20 today. The VIX, as the Chicago Board Options Exchange Volatility Index is known, increased 11 percent to 31.17. The index, which measures the cost of using options as insurance against declines in the S&P 500, is down from a record 80.86 in November yet above its 20 average over its 19-year history.
The S&P 500 has risen or fallen by more than 3 percent on 23 trading days this year, the third-most in the benchmark’s 81- year history after 1932 and 1933, according to Howard Silverblatt, the senior index analyst at S&P in New York.

Dollar Falls Most Against Yen in Month on Fed Rate Outlook

2009-06-20T15:51:00.001-07:00

The dollar dropped the most versus the yen in a month as traders pared bets that the Federal Reserve will increase its target lending rate, making U.S. assets less attractive.
The yen gained this week versus all of its major counterparts, rallying against Sweden’s krona and Brazil’s real as the Bank of Japan raised its assessment of the economy for a second month. The dollar weakened as Fed officials considered using their June 24 policy statement to suppress speculation they’re prepared to raise interest rates as soon as this year.
“The Fed will try to tell the market that they won’t withdraw monetary stimulus unless they see a sustained recovery,” said Alan Kabbani, a senior currency trader at Wachovia Corp. in Charlotte, North Carolina.
The dollar fell 2.2 percent this week to 96.27 yen, from 98.43 yen on June 12. It was the biggest decrease since the five days ended May 15, when the greenback slid 3.3 percent. The yen gained 2.7 percent to 134.18 per euro from 137.89 a week earlier. The dollar appreciated 0.6 percent to $1.3937 versus the euro from $1.4016.
Interest-rate futures indicated a 44 percent chance the central bank will boost its target rate to at least 0.5 percent by December, down from 55 percent odds a week ago.
Fed staff examined the Bank of Canada’s public intention of forgoing an increase until 2010 without concluding the statement proved effective, said a person familiar with the matter.
The greenback will remain “on defensive” before the Federal Open Market Committee’s policy meeting next week, wrote Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi Ltd. in London, in a research note yesterday.
‘Bearish Development’
“It is notable that between August 2003 to January 2004, when the Fed committed to maintaining policy accommodation for a ‘considerable’ period, the Dollar Index trended lower,” wrote Hardman. “We believe that the adoption of a similar approach by the FOMC next week to dampen tightening expectations before year-end will ultimately prove a similarly bearish development for the dollar this time around.”
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, lost almost 10 percent from August 2003 to January 2004. The gauge of the dollar increased 0.2 percent to 80.264 this week.
The yen gained 4.9 percent to 12.18 versus the krona and 4.5 percent to 48.86 against the real as the Bank of Japan said this week the world’s second-largest economy has “begun to stop worsening.”
BOJ’s Target Rate
Speculation the worst is over doesn’t mean the Bank of Japan is preparing to raise the key overnight lending rate, which stayed at 0.1 percent after this week’s meeting.
The Bank of Japan should consider whether to stop pumping extra cash into the banking system by evaluating trends in corporate financing and the economy, some policy board members said last month.
They said whether to keep buying corporate debt from banks and providing them with unlimited loans after Sept. 30 “should be determined based on close examination of developments in financial markets and corporate financing,” according to minutes of the May 20-21 meeting published in Tokyo yesterday.
Brazil, China, Russia and India said in a joint statement on June 16 after conducting a summit, in Yekaterinburg, Russia, that emerging economies should have a “greater voice and representation in international financial institutions.”
The first BRIC summit was held after the nations announced plans in recent weeks to shift some foreign reserves into International Monetary Fund bonds, causing the dollar and U.S. Treasuries to fall. The BRIC nations have combined reserves of $2.8 trillion and are among the biggest holders of U.S. government debt.
Aussie Versus Yen
The Australian dollar increased 0.6 percent to 77.48 yen and the New Zealand currency advanced 1 percent to 61.96 yen yesterday as bets the global recession is easing prompted investors to sell assets where interest rates are low and buy where returns are higher. The gains pared the Aussie’s weekly loss to 3.1 percent and the kiwi’s to 2.1 percent.
The Fed’s target lending rate of zero to 0.25 percent and the Bank of Japan’s benchmark compare with 3 percent in Australia and 2.5 percent in New Zealand.
European Union leaders saw the first signs of a “sustainable” economic recovery, making additional stimulus unnecessary, according to a statement from yesterday’s summit in Brussels. The World Bank raised on the previous day its growth forecast for China this year.
‘Positive’ Picture
“The broader picture is turning more positive, and risk appetite is returning,” said Ian Stannard a foreign-exchange strategist in London at BNP Paribas SA. “This is providing support for the pro-cyclical currencies such as the Australian dollar, while the yen is coming under pressure.”
Chile’s peso was the biggest winner against the dollar among all of the world’s currencies after the government announced plans to extend its dollar sales in the foreign- exchange market to fund an additional $4 billion in stimulus spending.
The peso jumped 5.1 percent this week to 535.75 per dollar, its biggest gain since February. It advanced to 534.70 yesterday, the strongest level since Sept. 24.

Obama Says Proposed Agency Will Protect Financial Consumers

2009-06-20T15:46:00.001-07:00

President Barack Obama said a new agency he proposed this week as part of an overhaul of U.S. financial regulations will protect consumers from deceptive lending practices.
The Consumer Financial Protection Agency would oversee products from mortgages to credit cards and require companies to plainly state the terms of financial products while banning “the most unfair practices,” Obama said in his weekly address on the radio and Internet.
“We’re going to level the playing field for consumers,” he said.
Obama proposed on June 17 changes to government oversight of the financial industry that he said would correct a “cascade of mistakes” that helped cause the first global recession since World War II.
The changes, much of which must be approved by Congress, would add an additional layer of regulation for the biggest financial firms. Obama’s plan would make the Federal Reserve the overseer of companies deemed too big to fail and bring hedge and private equity funds under federal scrutiny.
“This crisis may have started on Wall Street,” Obama said in his radio address. “But its impacts have been felt by ordinary Americans who rely on credit cards, home loans, and other financial instruments.”
Obama said some consumers bear responsibility for the financial crisis by taking on too much debt and loans they could not afford. More people, though, were misled by financial companies, he said.
‘No Coincidence’
“It’s no coincidence that the lack of strong consumer protections led to abuses against consumers,” Obama said. “The lack of rules to stop deceptive lending practices led to abuses against borrowers.”
The new agency, Obama said, would prevent unscrupulous financial companies from taking advantage of consumers in the future.
While Obama’s proposals won support from Democrats who control the House and Senate, it is likely to face a lobbying assault from the financial industry. The American Bankers Association said in a statement after Obama announced his plan that the Consumer Financial Protection Agency may “go well beyond consumer protection” in its mandate and add a new regulatory layer for community banks.
Republican Address
In the Republican address, Senate Minority Leader Mitch McConnell of Kentucky said Democrat proposals to overhaul health care would drive up costs and lead to the rationing of care. McConnell also said Democratic congressional leaders are moving ahead too quickly with legislation.
“Americans want health-care reform, but they want the right health-care reform,” said McConnell. “That means taking the time and the care necessary to get it right.”

McConnell said the Obama administration’s claims that its health-care overhaul proposals would save the government money are the same as claims that passage of the $787 billion economic stimulus bill in February would prevent job losses. The current jobless rate of 9.4 percent is at a 25-year high.
“If the stimulus bill taught us anything, it’s that we should be wary anytime someone in Washington says the sky’s going to fall unless Congress approves trillions of dollars immediately,” McConnell said. “Yet once again in the health- care debate, it’s rush and spend.”

Unemployment of 10% Spreads, Risking U.S. Recovery

2009-06-20T15:41:00.000-07:00

More than one-quarter of American states now have unemployment rates higher than 10 percent, and all but two saw a further job-market deterioration in May.
Tennessee and Indiana joined the rank of states, now 13, that have jobless rates exceeding 10 percent, and eight states - - including California, Florida and Georgia -- reached their highest level of joblessness in May since records began in 1976, the Labor Department reported today in Washington.
The figures make it likely President Barack Obama, whose home state of Illinois also passed 10 percent for the first time since 1983, was correct this week in forecasting the national unemployment rate will reach that level this year. With no region escaping the rout, consumers across the country will probably curtail their spending, preventing any boom out of the deepest recession in half a century, analysts said.
“It’s tough everywhere,” said Mark Vitner a senior economist at Wachovia Corp. in Charlotte, North Carolina. “Nobody’s really been spared.” The biggest increases in unemployment will be in states most dependent on manufacturing, construction and financial services, he said.
For the country, “unless hiring magically picks up, a 10 percent unemployment rate is pretty much baked in,” Vitner said.
Jump in Michigan
Michigan’s jobless rate, at 14.1 percent, showed the biggest jump from April and remained the highest in the nation. The bankruptcy of General Motors Corp. and Chrysler LLC is likely to deepen the labor-market slump in the Midwest and ripple through other areas and industries.
Kentucky and Florida were the other two states that passed the 10 percent mark last month. Those remaining on the list included California, Ohio, Oregon, Rhode Island, Nevada and North and South Carolina.
Overall, 48 states and the District of Columbia posted increases in their unemployment rates in May from the prior month. Nebraska was the only one to post a drop, to 4.4 percent from 4.5 percent; Vermont held at 7.3 percent, the Labor Department said.
Payrolls decreased in 12 states in May, led by California with a 68,900 loss, and Florida, where 61,000 workers were dismissed. North Dakota and Alaska reported gains in employment.
Six Million
Nationwide, payrolls fell by 345,000 in May after a 504,000 decline in April, government figures showed earlier this month. The economy has lost 6 million jobs since the recession began in December 2007. The jobless rate reached a 25-year high of 9.4 percent last month.
“It’s different times,” said Stephanie Moyna-Gilbert, a 36-year-old mother of three from Fishers, Indiana. “This is absolutely the longest time I’ve been unemployed.”
She lost her job as a recruiter and human-resource manager for Interactive Intelligence Inc., an Indianapolis-based telephone software maker, in December, and is finding it hard to find a full-time position for herself after four years of hiring and training staff.
Moyna-Gilbert is doing some consulting work to expand her professional contacts and try to bring home some cash. Still, “the income isn’t there until I place people,” she said. “Being without benefits isn’t a good thing.”
Employers remain reluctant to hire even as there are signs that the worst of the job cuts are over. A Bloomberg News survey this month showed economists project the jobless rate will reach 10 percent by year-end and average almost that rate in 2010.
Obama, in a June 16 interview with Bloomberg News, said he couldn’t predict when unemployment will start to decline because it was a “lagging indicator.”
“As soon as this economy has stabilized, we want the market to do what it does best, and that is produce jobs, invest,” he said

EU Backs New Financial Agencies to Unify Oversight

2009-06-20T15:34:00.000-07:00

European Union leaders agreed to their most sweeping overhaul of financial regulation, sharpening scrutiny of banks and risks after spending more than half a trillion dollars propping up lenders in the credit crisis.
The heads of the 27 countries backed the creation of an economic-risk watchdog led by central bankers, plus agencies to unify oversight of banks, insurers, investment firms and credit- rating companies. The U.K. won a compromise trimming the power of the new authorities to make decisions involving national money.
The accord gives the EU its most centralized power over financial firms, after national supervision failed to contain the crisis sparked in the U.S. housing market. The region’s governments and central banks are on the hook for more than 3.7 trillion euros ($5.2 trillion) of guarantees and funding.
“For the first time you will have a place where the most powerful” central bankers and regulators “sit down together to discuss common issues,” David Green, former head of international affairs at the U.K. Financial Services Authority and a former Bank of England official, said in a Bloomberg Television interview.
In a statement, the leaders said closing gaps in oversight will prevent future crises, boost confidence and help spur recovery from the deepest recession since World War II.
The new regulatory agencies will have authority to ensure EU market laws are implemented the same in every country. They also may gain a greater role in crisis management in the future, the leaders said.
U.K. Sovereignty
At the U.K.’s insistence, the EU scaled back the agencies’ proposed powers to override national regulators and order changes to capital or other measures that could put government funds at risk.
“Stronger cross-border supervision is in our interest,” British Prime Minister Gordon Brown said in a news conference at the summit meeting. “I’ve ensured that our taxpayers will be protected.”
Under political pressure at home, Brown cannot afford “to be seen to have U.K. regulators bending to the decisions of an EU body,” Philip Whyte, senior research fellow at the Centre for European Reform, said in a telephone interview from London. “There’s a perception that the other countries don’t always have the best interests of the City at heart.”
Britain still supported the goal of creating a unified EU rulebook to benefit the cross-border businesses run from the City of London, Europe’s largest financial center with some 600 foreign banks plus the bulk of the domestic industry.
Evolving Powers
“Getting identical supervisory practices is something that London has been pressing for, for a long time, and that’s probably the most important thing here,” said Green, who is now an adviser to the U.K. Financial Reporting Council.
The agencies may evolve into a greater role through future practice and legal developments, French President Nicolas Sarkozy said after the meeting.
“It’s a starting point,” Sarkozy told reporters. “We may still be able to expand the scope.”
While industry groups have largely lined up behind initiatives for more uniform regulation, some bankers voiced doubts over the proposal to give new agencies binding powers to mediate disputes between regulators.
Executives from Credit Suisse Group AG, HSBC Holdings Plc and Royal Bank of Scotland Group Plc dissented from a statement of support this week by the European Financial Services Round Table. The proposal was backed by others members of the Brussels-based group, including leaders of BNP Paribas SA, Deutsche Bank AG and UniCredit SpA.
Systemic Risk Board
The EU overhaul also creates a European Systemic Risk Board of central bankers and financial regulators to share information and monitor hazards that cut across borders and industries. While its recommendations won’t be legally binding, the body is designed to flag problems such as the build-up of investments in U.S. subprime mortgages -- the issue that sparked the turmoil in which banks have absorbed almost $1.5 trillion of losses and writedowns.
In another compromise pushed by the U.K., the EU agreed for the board’s chairman to be elected by the general council of the European Central Bank, instead of always handing it to the ECB president as proposed by the EU’s executive arm.
The EU initiative is one of several shakeups around the world, almost two years since the collapse of two Bear Stearns Cos. hedge funds marked the outbreak of the crisis. President Barack Obama this week proposed to revamp U.S. oversight along different lines, giving more power to the Federal Reserve.
Hedge-Fund Regulation
The European leaders also called for action on separate proposals to regulate hedge funds and rewrite bank-capital standards.
The agreement by the prime ministers doesn’t guarantee easy passage for the regulatory revamp. The EU’s executive arm, the European Commission, will propose legislation to enact it in the second half of the year, setting off further debate among the governments and members of the European Parliament. Both those groups must agree for the initiative to become law.

Pound May Drop to 1-Week Low Against Dollar: Technical Analysis

2009-06-18T13:40:00.000-07:00

June 18 - The pound may drop to the lowest level in more than a week against the dollar if it closes below its 20-day moving average, Brown Brothers Harriman & Co. said.

Britain’s currency may fall to $1.60, the weakest since June 9, Marc Chandler, global head of currency strategy in New York, said today in an e-mail. The pound slid 1.1 percent to $1.6226 as of 1:16 p.m. in London. It earlier fell through the 20-day moving average of $1.6223.

The worst recession since at least 1979 led Standard & Poor’s to revise its outlook for the U.K. to negative from stable last month, saying a AAA credit rating is incompatible with debt heading for 100 percent of gross domestic product. The Treasury expects to sell an unprecedented 220 billion pounds ($358 billion) of gilts in the year that began in April to revive the economy.

“The concern about the U.K. debt position is something that may come back, and that’s going to stay here in the near term,” Audrey Childe-Freeman, a senior currency strategist at Brown Brothers in London, said yesterday in an interview. “We’ve seen the dollar doing better in the context where we’ve seen a shaky environment in the equity markets and risk appetite. Sterling is very much influenced by such forces.”

U.K. stocks fell for a second day after retail sales unexpectedly declined in May. The FTSE 100 Index dropped 0.6 percent to the lowest level since May 1.

The pound will fall to $1.61 by year-end, according to the median forecast of 41 strategists surveyed by Bloomberg News.

A moving average is a technical indicator that displays the average value of an index or security over a period of time. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Canada Currency Little Changed as Stocks, Oil, U.S. Dollar Rise

2009-06-18T13:38:00.000-07:00

June 18 - Canada’s dollar was little changed as gains in crude oil and stocks offset pressure from a U.S. dollar that was strengthened by speculation it will be made more attractive by changes to the way the London interbank offered rate is set.

Canada’s currency, known as the loonie, traded at C$1.1331 per U.S. dollar at 3:59 p.m. in Toronto, from C$1.1318 yesterday. It earlier climbed as much as 0.7 percent, then depreciated 0.4 percent. One Canadian dollar purchases 88.26 U.S. cents.

“Oil and equities are the main pushers for the Canadian dollar,” said Michael Leavitt, a Montreal-based institutional- derivatives broker at MF Global Canada Co.

The British Bankers’ Association said it may allow more institutions to take part in the daily survey that sets Libor, the rate banks say they charge each other for loans in dollars and the benchmark for more than $360 trillion of financial products around the world. The dollar also gained today as investors abandoned bets the euro would rise further after failing to appreciate beyond $1.40.

Bank of Canada Governor Mark Carney, in a speech today in Regina, Saskatchewan, said the nation’s households face rising “stresses” that could lead to losses for banks. He reiterated a pledge to keep interest rates unchanged for a year and repeated comments from a speech last week last week that the global economy will not rebound quickly from recession.

Pound May Drop to 1-Week Low Against Dollar: Technical Analysis

2009-06-18T13:36:00.000-07:00

June 18 -- The pound may drop to the lowest level in more than a week against the dollar if it closes below its 20-day moving average, Brown Brothers Harriman & Co. said.

Britain’s currency may fall to $1.60, the weakest since June 9, Marc Chandler, global head of currency strategy in New York, said today in an e-mail. The pound slid 1.1 percent to $1.6226 as of 1:16 p.m. in London. It earlier fell through the 20-day moving average of $1.6223.

The worst recession since at least 1979 led Standard & Poor’s to revise its outlook for the U.K. to negative from stable last month, saying a AAA credit rating is incompatible with debt heading for 100 percent of gross domestic product. The Treasury expects to sell an unprecedented 220 billion pounds ($358 billion) of gilts in the year that began in April to revive the economy.

“The concern about the U.K. debt position is something that may come back, and that’s going to stay here in the near term,” Audrey Childe-Freeman, a senior currency strategist at Brown Brothers in London, said yesterday in an interview. “We’ve seen the dollar doing better in the context where we’ve seen a shaky environment in the equity markets and risk appetite. Sterling is very much influenced by such forces.”

U.K. stocks fell for a second day after retail sales unexpectedly declined in May. The FTSE 100 Index dropped 0.6 percent to the lowest level since May 1.

The pound will fall to $1.61 by year-end, according to the median forecast of 41 strategists surveyed by Bloomberg News.

A moving average is a technical indicator that displays the average value of an index or security over a period of time. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Asian Stocks Fall for Third Day on Growth Concern; BHP Drops

2009-06-16T23:51:00.000-07:00

Asian stocks fell for a third day, led by mining companies and banks, after U.S. President Barack Obama said unemployment in the world’s largest economy may reach 10 percent.
Jiangxi Copper Co., China’s biggest producer of the metal, sank 3.3 percent as metal prices dropped amid concern demand will decline. Westpac Banking Corp., Australia’s biggest lender by market value, dropped 2.6 percent after a government official said it’s too soon to say the economy avoided a recession. Sekisui House Ltd. jumped 3.9 percent in Tokyo, pacing gains by developers as the central bank raised its assessment of the economy for a second month.
“We’re probably more into a grinding period for the economy rather than a rapid recovery,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State, which holds about $102 billion. “We’ve avoided the Armageddon scenario, but it doesn’t mean we’re back to the brave new world that we were all in a few years ago.
The MSCI Asia Pacific Index lost 0.3 percent to 101.74 at 2:46 p.m. in Tokyo, having swung between gains and losses at least seven times. Japan’s Nikkei 225 Stock Average added 1 percent, while the Topix Index gained 0.9 percent as a weaker yen boosted prospects for export earnings.
Hong Kong’s Hang Seng Index lost 1.3 percent, with China Resources Gas Group Ltd. tumbling 13 percent as Credit Suisse Group AG and Morgan Stanley offered to sell their stakes in the company. Australia’s S&P/ASX 200 Index dropped 1.3 percent, led by ports and rail operator Asciano Group, which slumped 12 percent after it increased the size of a share sale. The Philippines Composite Index sank 2.9 percent.
The MSCI Asia Pacific Index’s 3.4 percent drop in the past three days pared its rally from a five-year low on March 9 to 44 percent. The rally drove the average valuation of companies in the gauge to 1.5 times the book value of assets, the highest level since September, according to Bloomberg data.
Copper Drop
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge slid 1.3 percent yesterday as Best Buy Co., the world’s largest electronics retailer, posted disappointing sales.
In an interview with Bloomberg News, U.S. President Obama predicted a 10 percent unemployment rate even as he said the “engines” of an economic recovery have begun to turn. Obama is due to unveil his plan to revamp financial market regulation later today.
Jiangxi Copper slipped 3.3 percent to HK$12.74. Mitsubishi Corp., which gets more than half of its profit from commodities, slipped lost 1.3 percent to 1,857 in Tokyo. Alumina Ltd. sank 4.9 percent to A$1.45 in Sydney.
Copper prices in New York sank 1.4 percent yesterday as the U.S. Federal Reserve said industrial production sank in May. In London, a gauge of six metals dipped for a third day, the longest losing stretch since February.
Australian Banks
BHP Billiton Ltd. the world’s biggest mining company, sank 3 percent to A$35.36 in Sydney. Its credit-default swaps, the cost of protecting its debt, had their biggest gain since Oct. 22 on speculation it is planning an acquisition.
Westpac dropped 2.6 percent to A$19.34. Australia & New Zealand Banking Group Ltd. fell 2.1 percent to A$16.45. Commonwealth Bank of Australia, the nation’s largest mortgage lender, lost 1.3 percent to A$37.60.
The MSCI Asia Pacific Index slumped as much as 51 percent in the past year as the financial crisis dragged economies including Japan into recession. Australia’s economy unexpectedly grew 0.4 percent in the first quarter after contracting a 0.6 percent in previous three months, government figures released on June 3 showed.
“Celebration would be premature,” David Gruen, executive director of the Australian Treasury Department’s Macroeconomic Group, said in a speech late yesterday. “The global recession, and its Australian counterpart, still has some way to run.”
Taking Profit
The MSCI gauge climbed more than 10 percent for a second month in May, which hasn’t happened since the two months ended 1993. Stocks on the index trade at 23 times estimated profit, more than the MSCI World Index’s 15 times, Bloomberg data show.
“Some people are taking profit as the market has risen too fast,” said Naoki Fujiwara, who oversees the equivalent of $3.7 billion at Shinkin Asset Management Co. in Tokyo. “Investors’ appetite for bargain hunting is surprisingly strong.”
Japan’s Sumitomo Forestry Co. surged 12 percent to 777 yen, while Sekisui House jumped 3.9 percent to 989 yen. Morgan Stanley upgraded the stocks to “overweight” and lifted its outlook on the country’s real estate sector to “attractive,” saying home orders probably bottomed in the first quarter and should benefit from tax breaks.
Daiwa Investment
Daiwa Securities Group Inc. gained 0.6 percent to 651 yen. The company will invest 10 billion yen ($104 million) in DA Office Investment Corp., the Nikkei newspaper reported today, without citing anyone. Daiwa said it is not the source of the Nikkei report. DA Office, which denied the report, wasn’t traded as orders to buy outnumbered those to sell.
In Hong Kong, China Resources Gas plunged 13 percent to HK$5.10. Credit Suisse and Morgan Stanley are offering a combined 166 million existing shares at HK$4.30 to HK$4.60 each, according to an e-mail sent to fund managers yesterday.
Asciano slumped 12 percent to A$1.28 after the Australian ports and rail operator increased a share sale by 18 percent to A$2.35 billion ($1.86 billion) to slash debt.

Obama Sees 10% Unemployment Rate, Chides Wall Street Critics

2009-06-16T23:44:00.000-07:00

June 17

President Barack Obama offered stern words for Wall Street and a prediction of 10 percent U.S. unemployment even as he said the “engines” of an economic recovery have begun to turn.
“Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected,” Obama said, referring to criticism of the government’s growing role in the economy and markets.
Obama, in an interview with Bloomberg News on the eve of the release of his plan to revamp financial-market regulation, voiced confidence the economy would recover soon, while warning that robust growth was needed if the U.S. is to rein in its budget deficit without raising taxes on most Americans.
“You’re starting to see the engines of the economy turn,” Obama said. Still, he said, “It’s going to take a long time” for a full-fledged recovery as households work off the debt accumulated during the real estate boom.
The jobless rate will continue to climb from its current 25-year high of 9.4 percent as employers are slow to take on new workers, the president said. “Jobs are a lagging indicator,” he said, while adding that he didn’t have “a crystal ball” to predict when unemployment will start to decline.
Praise for Bernanke
Obama, 47, gave high marks to Federal Reserve Chairman Ben S. Bernanke for his role in fighting the financial crisis. Bernanke “has done an extraordinary job under extraordinary circumstances,” the president said during the interview in the East Room of the White House. He declined to say whether he would nominate Bernanke, 55, for another four-year term when his tenure runs out in January.
Ahead of today’s regulatory announcement expected at 12:50 p.m. in Washington, Obama pledged to make the derivatives market, which he called a system of “enormous risk,” more transparent. He also said it is important for the U.S. to maintain fiscal discipline to ensure investors in China and around the world keep buying U.S. government debt.
“The No. 1 risk of the next crisis would be that the foreign lenders take a look at this situation and decide it’s too risky,” said Peter G. Peterson, senior chairman of Blackstone Group International Ltd.
While expressing confidence in the long-term prospects for the economy, the president stressed the necessity of making tough reforms, including overhauling the health-care system, to generate the growth needed to reduce thGrowth and Taxes
He left open the possibility he would have to raise taxes on most Americans to decrease the deficit if growth were too weak. He also indicated he might tax the most-expensive employer-provided benefits to help pay for his health-care revamp. Both would reverse pledges he made during the campaign.
“If we are growing at a robust rate, then we can pay for the government that we need without having to raise taxes,” Obama said. “If we’ve got anemic growth, if we don’t have a strategy for recovery without bubbles, which is essentially what we’ve had over the last couple of recovery cycles, then we’re going to continue to have problems.”
The president has repeatedly said he would keep his presidential campaign pledge to cut taxes for 95 percent of working Americans while rolling back tax breaks for households making more than $250,000 a year.
During the campaign, Obama opposed taxing employer-provided health-care benefits, a proposal gaining traction among Senate Democrats to pay for a $1 trillion health-care plan.
He said he preferred other means of funding the legislation, including reducing itemized deductions for the wealthiest Americans and focusing on cutting health-care costs.
Vigorous Debate’
Still, he said, “Congress is having a vigorous debate on the Hill, and I don’t want to predetermine the best way to do this.”
“I’ve already put forward what I think is the best way, but let me see what comes out of the Hill,” Obama said.
Only five months into a presidency that inherited the worst financial meltdown since the 1930s, Obama’s self-described “extraordinary” actions to stem the crisis have reached a critical juncture. He will now be tested less on his crisis- management skills and more on the policies that have extended the government’s reach into private industry.
Obama is assuming ownership of his bank-bailout plan, $787 billion economic-stimulus package, auto-industry restructuring and proposals to revise financial-market regulations.
New Terrain
He is also navigating new terrain as a steward of some of the best-known corporations, from General Motors Corp. to Citigroup Inc., asserting the kind of control unseen since former president Harry Truman tried to force action on the steel industry in 1952.
Obama has set a goal by the end of this year to complete legislation to curb climate change as well as overhaul health care. On foreign policy, he is picking up where past presidents have failed -- to reignite an Israeli-Palestinian peace deal, as he confronts foreign policy crises from Iran to North Korea to Pakistan.
The president comes at these challenges with a 67 percent approval rating, putting him above former presidents George W. Bush and Bill Clinton at the same point in their presidencies, according to the latest Gallup polling.
In a sign of the high stakes, Obama stepped up his sales pitch. Yesterday’s series of interviews as well as a Rose Garden press conference on North Korea that also touched on Iran and his regulatory, economic and health-care proposals followed his June 15 address before the American Medical Association in Chicago and a June 11 Wisconsin town hall on health care.
Financial Regulations
The president today will announce his proposal for revamping financial regulation. Many of the changes must be approved by Congress, where jurisdictional and ideological clashes may shape the final legislation.
Crafted by Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers, the plan would put the Federal Reserve in charge of regulating companies whose collapse could damage the entire financial system. It would also create a new agency to oversee consumer financial products, such as mortgages and credit cards.
The proposal encompasses areas ranging from derivatives to executive pay to the mortgage-backed securities that helped fuel the housing boom and touch off the credit crisis.
“Derivatives are a huge potential risk to the system,” he said. “We are going to make sure that they have to register, that they are regulated, that you have clearinghouses.”
Derivatives are contracts whose values are tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.
Role in Economy
The president also said he would like the government to get out of the economy when it can.
“As soon as this economy has stabilized, we want the market to do what it does best, and that is produce jobs, invest,” he said.
He brushed aside concerns that the rise in Treasury bond yields would stifle an economic recovery by pushing up borrowing costs for homebuyers. The 10-year Treasury note yield has increased 0.57 percentage point since May 14.
Obama said Treasury yields are rising because investors have grown “more confident that we may have avoided the very worst scenarios” for the economy and are putting their money into investments with higher returns.
Skittish Investors
Still, he warned that long-term deficits would deter international investors, including China, which holds $767.9 billion of U.S. debt. China has already shifted purchases of Treasuries into shorter-maturity securities amid concern about unprecedented debt sales.
“There’s no doubt that, at some point, you know, whether it’s the Chinese, the Koreans, the Japanese, whoever else has been snatching up Treasuries are going to decide that this is too much of a risk,” Obama said.
The Standard & Poor’s 500 Index has gained 15 percent since Obama’s Jan. 20 inauguration, compared with a decline of 9.6 percent in the first five months of the Bush administration and an increase of 3 percent under Clinton. Corporate bonds have returned 11.5 percent, according to Merrill Lynch & Co. index data, and companies have sold about $680 billion of debt, a record pace, Bloomberg data show.
The president said his plan to re-regulate markets would include a “systemic regulator” to oversee the “entire financial system” and catch risky activity “before the crisis occurs.”
His toughest language was reserved for those on Wall Street who criticize his administration for putting too many restrictions on aid, including limits on executive compensation.
“When I hear some of the commentary that’s been creeping up about, “You know, it’s time for government to get out of the economy. And what’s the Obama administration doing?’ I have to try to remind them -- all we’re doing is cleaning up after the mess that was made,” Obama said.

Economists see end to US downturn

2009-06-16T23:35:00.000-07:00

The US economy should emerge from recession by the late summer, according to economists from some of the country's top banks.
The American Bankers Association's Economic Advisory Committee has said it expects economic activity to increase by 0.5% between July and September.
But committee head Bruce Kasman said the economy would "return to growth [in the quarter] but not to health".
The bankers also said US unemployment would hit 10% early next year.
Separately, the secretary-general of the Organisation for Economic Co-operation and Development (OECD) has said that economic recovery within the group's 30 countries will begin at the end of this year.
Speaking in Mexico, Angel Gurria added that the US would be one of the first countries to come out of recession.
Housing recovery
US consumer spending, which accounts for about two-thirds of economic growth in the US, should increase in the second half of the year and help to moderate lay-offs and cuts in investment spending, the Economic Advisory Committee said.
"Coupled with support from policy stimulus and an improvement in financial market conditions, these developments have made it likely that the overall economy will expand in the second half of the year," it predicted.
Mr Kasman, chief economist for JP Morgan Chase, also said that a recovery in the housing market would be an "important contributor" to economic growth.
But he cautioned against too much optimism.
"Growth in the coming quarters is likely to gather momentum but will not prove sufficiently robust to undo much of the severe damage done to our labour markets and public finances," he said.
This means that growth would not return to "trend pace" until the middle of 2010, he added.
For this reason, unemployment would remain at or above 9.5% for the whole of next year.
The current unemployment rate in the US is 9.4%, the highest since 1983.
Mixed messages
The US economy contracted by an annual rate of 5.7% in the first three months of 2009.
It has shrunk for three consecutive quarters - the first time that has happened since 1975.
And recent figures have sent out mixed messages about the timing of any recovery.
Earlier on Tuesday, figures showed that the number of new houses being built in the US in May bounced from record lows in April.
But separate figures showed that industrial production fell by more than analysts had expected.

California running out of $10,000 tax credits

2009-06-13T12:56:00.000-07:00

Time is running out for California residents wanting to take advantage of a $10,000 tax credit. The state set aside $100 million to help home buyers purchasing newly built homes, hoping to jump start the moribund residential-construction market. But only about 20% of the pot is left.
"We're less than four months into it, and all the tax credits authorized are gone, or practically gone," said Tim Coyle, a senior VP with the California Building Industry Association (CBIA).
The program launched in March and by June 3 nearly $24 million in tax credit certificates had already been issued, according to the state's Franchise Tax Board.
That leaves nearly $76 million in credit available - but there are already numerous claims on that money. In fact, if all the submitted applications are approved, only $17.5 million will be left in the fund. And it has a run rate of about $10 million per week.
"The program is working better than intended," said Coyle. "It's really pushing people off the fence."
The credit is available on a first-come first-served basis and was supposed to last through March 2010. Almost any newly built home qualifies, as long as it's an owner-occupied, principal residence on which property tax is paid. It could be a single-family home, a condo, a coop, a manufactured home or mobile home -- even a houseboat. Only owner-built housing does not qualify. There is no cap on the home price or buyer's income.
The credit reduces taxes dollar-for-dollar up to $3,333 a year for three years, or 5% of the purchase price of a home, whatever is less. Unlike the federal first-time homebuyers tax credit, which is $8,000 or 10% of the home price, whichever is less, the California credit is not refundable. That means the credit will only wipe out taxes up to the full amount paid or owed but no more.
For example, if the buyer's tax bill came to $2,000 for the year, a buyer claiming the full $3,333 would owe nothing but couldn't claim the extra $1,333 back from the state.
First-time, new-home buyers in California can claim both the federal credit and the state if they qualify. That could reduce taxes by $11,333 for the first year of ownership
More money coming?
Because the money has gone so quickly, the state legislature is considering adding another $200 million to the program. That may be difficult to accomplish right now, however: The state is worse than flat-broke; it's running a $24 billion budget deficit and has the lowest bond rating of any state.
But Coyle argues that the credit is a net win for state coffers and it puts people to work. "Every time you build a home in California, you're generating $16,000 in taxes," he said.
During the boom years, developers were building about 200,000 housing units annually and supported about a half million jobs. Now, only about 50,000 new homes will go up this year and industry employment has shrunk to a fraction of its peak. From 2006 to 2007 alone, industry employment dropped by about 220,000 jobs, according to the CBIA.
Passage of an extension of the program has a good chance, according to Assemblywoman Anna Caballero (D-Salinas), who supports a new bill that already won Assembly approval and has gone to the state Senate.
There has been little opposition, she said, but the program has to be "revenue neutral," which could limit how much is made available as funds would have to be cut from other areas to pay for it.
There is also one big change from the original offering: People buying homes under construction - not just those already finished - will qualify, which should help put projects back on track.
"It creates a reservation system that was absent in the first bill," said Caballero. "Buyers only received a credit when they closed escrow. Now, they would get it with a signed contract."
"Contractors in Southern California were reporting no housing starts last January," she added. "Now, they have new crews out on the job. That's significant for California

US Confidence at 9-mth High, USD Mixed

2009-06-12T23:09:00.000-07:00

The greenback received a boost ahead of this weekend’s G8 Finance Minister’s meeting, with Japan’s FinMin Yosano jawboning the currency higher. In light of recent speculation among Chinese and Russian government officials touting the need for a new global currency given the deteriorating US fiscal outlook, Japan’s Yosano expressed confidence in US Treasuries – calling his nation’s trust in US debt “absolutely unshakeable”.The University of Michigan consumer confidence survey, released earlier today climbed to its highest level in 9-months but was largely mixed against consensus estimates. The June preliminary conditions index sharply beat expectations, printing at 74.5, versus calls for an improvement to 68.5 from 67.7. The expectations component disappointed, slipping to 65.4 and missing estimates for a gain to 72.0 from 69.4 in May while sentiment survey edged up by less than forecast to 69.0 from 68.7 previously

Oil retreats after 3-day climb

2009-06-12T10:21:00.000-07:00

Crude prices turn around after reaching an eight-month high as investors think the recent run-up may have gone too far.

Oil fell on Friday, a day after reaching a near eight-month high, pressured by a firmer dollar and views that prices have risen too far despite improving economic sentiment.

The market on Thursday settled at $72.68, the highest since Oct. 20 after a three-day rally, making it look overvalued to some analysts. The dollar gained, reducing the investment appeal of oil and commodities.
"Most commodity markets are still quite overbought and could be subject to a modest sell-off next week," said Edward Meir, analyst at MF Global. "We are getting to a stage where the steep run-up in prices has arguably over discounted the modest brightening we are seeing in the U.S. macro picture."
U.S. crude fell 59 cents to $72.09 a barrel, after reaching a 2009 intra-day high of $73.23 on Thursday.
The Organization of the Petroleum Exporting Countries on Friday further reduced its forecast for world oil consumption this year, but said the worst appears to be over for the oil market.
"As the world economy stabilizes, the world oil demand appears to be settling down," OPEC said in its Monthly Oil Market Report. "There are no significant downward revisions to our previous oil demand forecasts."
Two other closely watched forecasters, the U.S. Energy Information Administration and the International Energy Agency, slightly raised their demand estimates this week, after months of downward revisions.
Stronger-than-expected Chinese economic data helped support prices.
Official figures showed a rebound in China's industrial growth and retail sales in May, following on from U.S. data on Thursday showing an increase in retail sales and a slowdown in weekly jobless claims.
Data also showed refinery output in the world's number two energy user rose 10.7% in May versus a year earlier, in its third monthly rise in seven months to a fresh record high.
Concerns over tightening gasoline supplies have given oil an extra boost this week.
U.S. energy firm Valero (VLO, Fortune 500) said on Thursday it will shut its refinery on the Caribbean island of Aruba for the summer due to weak profit margins. The U.S. has already been hit by a spate of refinery outages in recent weeks.

Dollar moves higher after trouncing

2009-06-12T10:15:00.000-07:00

Dour reading on European industrial production weighs on the euro, giving the dollar a leg up at the end of a down week.

NEW YORK (Reuters) -- The dollar rose Friday, rebounding from vicious selling earlier this week, while data showing a plunge in euro-zone industrial production highlighted economic weakness in the region and pushed the euro lower.
Other recent top performers, including sterling and the Canadian and Australian dollars, also fell as oil prices dipped and G8 finance ministers prepared to start a meeting in Italy.
The dollar had spent most of the week under pressure as investors betting on a global recovery bought higher-yielding currencies and assets such as stocks and commodities, and traders said investors were largely taking profits on Friday.
"We're seeing a classic correction," said Brown Brothers Harriman currency strategist Meg Browne. "The top performers on the week are the worst performers today, suggesting the move is largely corrective in nature and will not be sustained."
The euro was down 0.9% at $1.3973 while sterling fell 1.1% to $1.6388 after having moved above $1.66 on Thursday. The dollar was up 0.6% at 98.18 yen and surged 1.7% against the Canadian dollar to to 1.1208.
Profit-taking on the euro accelerated after data showed industrial production in the 16-country euro zone plunged 21.6% in the year to April, a record fall that was steeper than economists' forecasts.
"I'm not surprised the figures are poor. The euro zone .... will suffer more than the rest of the world, ergo my view that the euro will underperform for quite some time," said Maurice Pomery, managing director at Strategic Alpha in London
Exchange rates are not on the agenda at a two-day G8 meeting that starts on Friday, but analysts said they may come up in light of the dollar's recent slide, which has undermined euro-zone exports by making them more costly.
A French official told Reuters on Thursday that authorities were watching currency fluctuations closely. "What is damaging for the economy is the volatility of the currency markets."
Safe-haven demand boosted the dollar during the bleakest days of the financial crisis last year, but the euro rose 7% last month and is up 5.5% this quarter.
0:00 /1:04Recession easing in U.K.
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An index that measures the dollar against six major currencies is down 6% in the second quarter, reversing a 5% rise in the first three months of 2009.
"We wouldn't be surprised if the weekend meeting concluded with the finance ministers singing the merits of a strong dollar, partly to shore up any lingering worries over demand for U.S. assets ... but also to provide (euro zone) economies some support," strategists at Calyon wrote in a research note.
Some analysts, though, said the dollar's rally may gather steam. Matt Esteve, a strategist at Washington-based Tempus Consulting, said investors see the United States as likely to emerge from recession before the euro zone and are starting to reward the dollar for this.
Indeed, the dollar extended gains after a survey showed U.S. consumer sentiment rose to a nine-month high in June while inflation expectations ticked higher.
Last week, better-than-expected U.S. employment data even prompted markets to bet the Federal Reserve would hike rates by year end, though Esteve said that's unlikely before 2010.
"The theme emerging is that the U.S. is best positioned for economic recovery," Esteve said.

Forex Market Update: U.S. Dollar Advances Across the Board as Risk Appetite Wanes

2009-06-11T23:01:00.001-07:00

EUR/USD consolidated around 1.4100 much of the Asian session, before slumping to session lows of 1.4069, with the stronger dollar led by the commodity block with both AUD and CAD coming under pressure before EUR and GBP began to lose ground. On AUD, EUR/AUD buying and AUD/NZD selling weighed on the currency. Also seen bearish for AUD and CAD were the comments from the chairman of the China Banking Regulatory Commission, asking whether positive signs in the economy are for real, noting that the incongruity between the Chinese stock market gains while corporate profits are falling. Despite EUR gains, the economic outlook for the Eurozone remains grim with German Chancellor Merkel stating that that she does not expect a speedy economic recovery and that the crisis is not over with a long and difficult road ahead. Reports from both the ECB and IFW released on Thursday do not anticipate a recovery until mid-2010. And while the IMF raised their global growth forecast on Thursday, the World Bank lowered their estimate to -3% from -1.75% for this year. Offers on EUR/USD are reported at 1.4180 and 1.4200 and as high as 1.4260 with buyers reported at 1.4050, 1.400 and 1.3900.

Australian unemployment rate up

2009-06-11T14:25:00.001-07:00

Australian unemployment has surged to a seven-year high as the global downturn continued to hit companies.
The unemployment rate jumped to 5.7% in May, after an unexpected fall to a revised 5.5% in April.
"We've always said we were not immune from the global recession," said Employment Minister Julia Gillard.
But the number of people employed fell by just 1,700 from April, far less than the drop of 30,000 that many economists had been predicting.
While unemployment measures the number of people looking for jobs, the employment rate is based on surveys from employers and reflects net hirings and dismissals..
Avoiding recession
Recent data has convinced many observers that the worst of the slump may be over for Australia.
Total employment in Australia has fallen by 9,400 so far in 2009, compared with a drop of 2.9 million in the US. The US unemployment rate is now at a 25-year high of 9.4%.
On Wednesday, a survey showed Australian consumers swung to optimism for the first time in 17 months.
The Australian government said earlier this month that it had unexpectedly avoided falling into recession. The economy grew by 0.4% in the first three months of 2009.
Australian Prime Minister Kevin Rudd said the country was now the only advanced economy not in recession.

Greater oil demand seen for 2009

2009-06-11T14:15:00.000-07:00

Oil prices have surged since hitting a low of $32 a barrel in December

Demand for oil this year will be more than previously expected, according to the International Energy Agency (IEA).
The IEA said in its monthly survey that oil consumption would now drop by 2.9% to 83.3 million barrels a day.
The body had expected a 3% annual decline this year, the biggest drop since 1981.
The higher forecast, the first increase in the IEA's expectations in 10 months, may add to signs that the worst of the global recession is over.
"These revisions do not necessarily imply the beginnings of a global economic recovery, and may only signal the bottoming out of the recession," the IEA said.
The report came as oil prices rose above $72 a barrel, close to an eight-month high.
US light sweet crude rose as much as 1.4% to $72.05, before falling back slightly. London Brent crude rose 0.7% to $71.32.
The price of oil has more than doubled this year.
It touched lows of about $32 a barrel in December, but is still nowhere near the all-time high of $147 reached in July last year.
On Tuesday, the US Energy Department's Energy Information Administration predicted that oil prices would average $67 a barrel in the second half of 2009. A month ago, its forecast was $55

Pound hits 2009 high against euro

2009-06-11T14:13:00.000-07:00

Sterling has reached its highest level against the euro since the start of the year after data suggested the UK recession may be over.
One pound was worth 1.1758 euros in early afternoon trading, having closed the previous day at 1.1672 euros.
On Wednesday the National Institute of Economic and Social Research estimated that the economy grew in April and May.
The pound was also boosted by data showing industrial output rose in April - the first monthly rise in 14 months.
In addition, the pound's rise was aided by a survey on attitudes to inflation by the Bank of England, which showed inflation expectations for the coming year rose to 2.4% in May from 2.1% in February, the first rise since August.
Sterling was also up against the dollar, rising one cent to $1.6429.
The pound had fallen against both the euro and the dollar last week and at the beginning of this week amid concerns about possible challenges to the leadership of Gordon Brown.
However, in the past couple of days the political situation appears to have stabilised.

Dollar On Pause Ahead of Retail Sales

2009-06-11T14:06:00.001-07:00

The dollar was steady versus other majors Thursday morning in New York ahead of the the release of pivotal retail sales and jobless claims data.
Its been a choppy week for the dollar, which has shown signs of stabilizing after coming under intense pressure last month. With traders on the fence about the Federal Reserve's stance on interest rates, the dollar has managed to avoid setting new multi-month lows.
Today's retail sales data will be the primary focus, with traders looking for indications that the consumer can help lead the economy out of the doldrums.
Retail sales for May are expected to rise to 0.5 percent from last month's negative 0.4 percent. The Commerce Department report will be especially closely watched, as traders will look to see if improved consumer sentiment has translated to spending.
Trading is also likely to be driven by the Labor Department's jobless claims data for the week ended June 6th. Economists expect first time claims to come in at 625,000 compared to 621,000 the previous week.
The dollar held its ground versus the euro, staying near 1.4000. Against the sterling, the buck edged to a weekly low of 1.6491. With the modest loss, the dollar inched closer to a 6-month low of 1.6662 from earlier in June.
The dollar continued to consolidate its recent gains versus the yen, staying near 98.30. Earlier in the week, the dollar hit a monthly high of 98.87.
Petro-linked currencies could be in play after the the International Energy Agency raised global oil demand estimate for 2009 by 120,000 barrels a day, following a stronger-than-expected first quarter OECD data. Crude rose above $72 on the news. The dollar was holding near C$1.1000 versus the loonie, after seeing big losses over the course of May.

Jobless Claims Decrease Last Week

2009-06-11T14:04:00.000-07:00

The number of people filing first-time unemployment claims dropped last week to the lowest level in more than four months, reinforcing hope that the labor market has begun to stabilize.
Still, while layoffs appear to be slowing down, there are signs that people who have lost their jobs are having problems finding new ones. The government's unemployment roll once again set a new record high, rising above 6.8 million.
The U.S. Labor Department revealed Thursday that initial jobless claims, a closely-watched gauge of layoffs, came in at 601,000 for the week ended at June 6th. This was down 24,000 from the previous week's revised level of 625,000.
The result marked the lowest total for initial jobless claims since the week of January 24th.
Claims have been edging lower since hitting a cycle high of 674,000 in late March. Since then, the statistic has only risen twice over the past 10 weeks, though the totals have remained well in the range that economists consider recessionary.
The 4-week moving average for initial claims, a statistic that flattens out week-to-week fluctuations in the data, dipped to 621,750.
Continuing claims, which measures people receiving ongoing unemployment help, pushed further higher, setting yet another record by rising 59,000 to 6.816 million.
A report that came out last Thursday initially showed a drop in continuing claims, but revised information contained in this week's report changed that to a rise of 6,000. So with the revised data and the new reading, continuing claims have been up for 21 consecutive weeks.
The drop in jobless claims further encourages the hope that the labor market has been stabilizing lately.
Chris Low, chief economist at FTN Financial, said of the data, "Claims continue to suggest recovery is imminent." He also noted that "claims are the best leading indicator of recovery there is."Last Friday, the government said that the economy lost 345,000 in May - significantly less than the 520,000 that economists were predicting. Still the unemployment rate jumped more than expected, rising to 9.4 percent after coming in at 8.9 percent in the previous month.

Crude Oil Extends Best Close Since October After IEA Report

2009-06-11T14:01:00.000-07:00

Crude oil added to its best close since October as the International Energy Agency raised its demand expectations for the year. A weaker dollar also boosted the precious metal's hedge appeal.
Light sweet crude oil for July delivery settled at $72.68 per barrel, up $1.35 for the day, extending its highest close since October. Earlier in the day, oil reached as high as $73.23.
This morning, the IEA announced it raised its 2009 demand estimate to 83.3 million barrels per day, up 120,000 barrels from last month's forecast.
Tomorrow, the Organization of Petroleum Exporting Countries is expected to announce its Monthly Oil Market Report.
Earlier this week, the Energy Information Administration boosted its expectations for the price of West Texas Intermediate crude oil to an average of $67 per barrel for the second half of 2009. This is up about $16 compared with the first half of the year.
EIA data released Wednesday showed U.S. commercial crude oil inventories decreased by 4.4 million barrels in the week ended June 5. Total motor gasoline inventories decreased by 1.6 million barrels last week.
The dollar saw weakness against its major rivals on Thursday in New York. The buck turned to the downside against the euro and crossed the 1.4000 mark again. The buck also fell against the sterling and tested a seven-month low.
In economic news on Thursday, the U.S. Labor Department revealed that initial jobless claims came in at 601,000 for the week ended at June 6, down down 24,000 from last week.
Meanwhile, a Commerce Department report showed that retail sales rose 0.5 percent in May following a revised 0.2 percent decrease in April. Economists had expected sales to increased by 0.5 percent.
Later in the morning, a Commerce Department report showed that business inventories fell 1.1 percent in April following a revised 1.3 percent decrease in March. Economists had expected the drop in inventories to match the 1.0 percent decrease originally reported for the previous month.

For Latvia, it has been a pretty dramatic fall from grace.

2009-06-08T02:58:00.000-07:00

Until recently, the tiny Baltic state was a star performer in Eastern Europe.
Its picturesque capital was a destination for tourists, it attracted floods of capital from Swedish banks and its growth rate was high.
Fast forward a few years and it is a very different picture. The economy is forecast to shrink 18% this year, unemployment is rising and the lat, its currency, is in danger of devaluation.
The government has denied it will devalue the lat, but if it does, fears exist that it will have an impact far beyond the borders of this tiny state, home to just over two million people.

Seeds of destruction
Latvia is, to a large degree, a victim of the global financial crisis, but the seeds of its downfall were planted well before the current slowdown.
Not that long ago, "the Baltics were star performers in Eastern Europe," said Ed Parker at Fitch Ratings.
When Latvia joined the EU, expectations were high that the country could soon join the euro and living conditions would improve. It fixed the lat to the euro, allowing it to move within a small band.
A small and open country, Latvia quickly attracted investment. The big Swedish banks established subsidiaries and an influx of foreign capital helped sustain a real estate boom.
Rising domestic consumption, a thriving property market and capital inflows all helped spur growth.

Latvian Prime Minister Valdis Dombrovskis(l), has tried to reassure investors
But says Fitch's Parker, "one of the problems was that a lot of this foreign capital was directed to real estate development and mortgages rather than building an export oriented manufacturing base".

"[This was] in contrast to countries like Poland, where a lot of [foreign direct investment] FDI was used to set up manufacturing plants. A lot of the development [in Latvia] went into the real estate sector."
At the same time, its fast growth and a fixed exchange rate pushed prices higher. Latvia became an expensive place to do business.
"This excessive optimism plus the entry and aggressive lending policies of foreign banks, led to a huge credit boom and huge current account deficit," said Fitch's Parker.
When the capital stopped flooding in, as the credit crunch forced banks to tighten lending, the economy froze.
These figures make grim reading . The economy is forecast to shrink by up to 18% this year, the latest budget proposes a 40% cut in spending and pay cuts of 20% for state workers.
Last December, Latvia sealed a 7.5bn euro bailout from the IMF and the EU. If it is to continue to draw down on this money, it needs to make further cuts, likely to be painful for Latvians, already adjusting to a new economic reality.
When a government bond auction failed, fears rose that the government may have to devalue its currency, possibly abandoning its peg with the euro.
Could it spread
A devaluation would have serious consequences for Estonia and Lithuania, its two biggest trading partners.
"The moment you devalue Latvia, their products become more competitive at the expense of Lithuania and Estonia. These two countries are Latvia's two biggest trading partners," said Barclay Capital's Christian Keller.
For banks which have invested in Latvia, a devaluation also has serious consequences.
"If we look at the Swedish bank exposure, it is relatively large," said Mr Keller.
"Swedish banks have six per cent of their assets in the Baltics. If you take the stress-test of Riksbank, forty per cent of the losses they estimate are coming from the Baltics.
"There is a disproportionate impact from the Baltics on Swedish banks' financial performance."
More worryingly for some analysts is psychological contagion - where investors look at countries which have common characteristics and wonder if they have similar problems.
This means that if other countries with currency pegs - countries such as Lithuania, Estonia and Bulgaria - may come under pressure to abandon them.
If Latvia doesn't devalue, its alternative is to struggle to maintain the current peg and impose large wage cuts to try to restore competitiveness.

Dollar Climbs on Interest Rates Raise Speculations

2009-06-08T02:55:00.001-07:00

June 8th, 2009

The dollar gained versus the main currencies as speculations that the U. S. Government will raise its interest rates by the end of the year, consequently causing a bearish day in equities markets around the world.

Eur/usd - jun 4

2009-06-03T23:47:00.000-07:00

Eur/usd - 1.4166...Despite y'day's selloff fm 1.4339 to 1.4109 after traders unwound their long positions vs dlr n yen, euro has rebounded after finding buying interest abv a rumoured option barrier at 1.4100. A mixture of offers n stops is tipped at 1.4200/10 with more selling interest likely to emerge at 1.4230. Stops are now noted at 1.4120 n 1.4090/00 with bids found further out at 1.4050/60...

Usd/jpy - 96.18...Dlr rose to 96.37 earlier in part due to comments fm the Fitch ratings agency

2009-06-03T23:41:00.000-07:00

who said that there was no evidence that China was diversifying away fm U.S. debt. Offers at 96.40 are in focus with more selling interest tipped further out at 96.90/00. On the downside, bids fm various accounts (incl. Japanese investors) are seen fm 95.80 down to 95.60 with stops likely to emerge below latter lvl...

Gbp/usd - 1.6231...Cable declined to 1.6210 (

2009-06-03T23:36:00.000-07:00

on active cross selling vs yen n euro in part due to speculation that PM Gordon Brown wud be forced to step down as a result of the expenses claims scandal. A mixture of bids n stops at 1.6190/00 is in focus with more bids likely to emerge at 1.6150/60 (for profit taking purposes). On the upside, fresh offers

Sale-and-rent-back is regulated

2009-06-03T23:28:00.001-07:00

Sale-and-rent-back schemes which target people in danger of repossession will be regulated by the Financial Services Authority (FSA) from 1 July.

Last year the Office of Fair Trading (OFT) found they could cause "serious harm" to vulnerable homeowners.
Some homeowners have found themselves being evicted soon after selling their homes cheaply to new landlords, despite assurances to the contrary.
The FSA said sale-and-rent-back firms must treat their clients fairly.
"We know that some consumers enter into sale and rent back arrangements without understanding the costs and risks involved," said Ed Harley, FSA head of mortgage policy.
"This can be a source of real distress for people in already difficult circumstances.
"Firms entering our regime will need to run their business in a way that means customers are treated fairly," he added.

'Fit and proper'
The FSA's new rules mean that firms in this line of business will have to tell customers how long they can stay in their properties before they enter a deal.
A more comprehensive regulatory regime will be introduced in June 2010.
Firms who are involved in buying homes and them letting them to their former owners will have to be run by people who are, in the FSA's view, "fit and proper".
They will also have to apply for authorisation to carry on this line of business.
Last year, an OFT investigation found there were about 1,000 firms offering sale-and-rent-back schemes.
In January, it told 16 companies offering these deals to substantiate the claims they were making in their adverts.
The OFT said the doubtful claims in the advertisements included suggestions that customers could stay in properties after they were sold, by renting them back for as long as they wished, at fair market rates.
Clients were also told that they could buy back properties at an agreed point in the future, and in the meantime would have flexible rental terms with periods of low rent.
Andrea Rozario, director general of the equity release trade body Safe Home Income Plans (SHIP), said: "This is a natural step to protect consumers as economic conditions worsen and more people need to release equity from their homes."

Interest rates set to remain held

2009-06-03T23:18:00.000-07:00

The Bank of England's interest rate setters are expected to keep the cost of borrowing unchanged at 0.5% for the third month in a row.
The European Central Bank is also likely to keep its own rate unchanged at 1% following last month's cut.
What may be of more interest is what either bank says about its other policies for getting money circulating.
Last month, the Bank of England announced it would be injecting an extra £50bn into the economy.
But the members of its Monetary Policy Committee (MPC) may feel that it is not yet time to extend the programme of quantitative easing.

Purchasing managers' indexes in the past few days have suggested the recovery may be coming faster than expected.
The pound has hit a seven-month high against the US dollar, which may suggest that traders think that UK rates could begin to rise again sooner rather than later.
However, John Higgins, market economist at Capital Economics, said that the cost of borrowing was likely to remain at the current level until the end of 2010.
"Amid all the excitement about the green shoots of economic recovery, markets have not altered their expectations for the path of monetary policy much in recent months," he said.
Future problems?
The Bank of England is due to complete its £125bn spending on quantitative easing in July.

The Treasury has said it can spend up to £150bn, so if the MPC members want to extend the programme significantly, they might decide to ask for permission to do so this month instead of waiting until July.
Under the quantitative easing programme, the Bank of England prints money and uses it to buy government and corporate bonds to increase the amount of money in circulation and stimulate economic activity.
The European Central Bank announced last month that it would also be buying bonds - about £60bn of them - and more details of that programme are expected later.
On Tuesday, German Chancellor Angela Merkel made a speech supporting the ECB's more conservative approach, suggesting that other central banks taking a more aggressive approach were storing up problems for the future.
"The independence of the European Central Bank must be preserved and the things that the other central banks are doing now must be reversed," she said.

yen is weakening against counterparts

2009-06-03T10:22:00.001-07:00

Early on Wednesday during European Deals, the Japenese unit tumbled to new multi-month lows against the European currency, the British Pound and the Swiss Franc as a rise in stock Prices prompted investors to buy higher-yielding assets with money borrowed from Japan. The yen also lost ground against its US counterpart.
The Nikkei 225 Average opened higher by 20 points at 9,724 compared to its previous close at 9,704, mirroring the gains on Wall Street. The index traded in a narrow range between 9718 and 9774 amid alternate bouts of buying and selling before finally closing at 9,742, a gain of 37.36 points, or 0.38%. The broader Topix Index of all first section issues edged up 0.94 points or 0.10% to close at 915.
During early deals on Wednesday the Japanese yen edged down versus the US dollar, falling to a low of 96.40 at about 4:45 am ET, with 97.0 seen as the next downside target level. Late Tuesday in New York USD/JPY rally was worth as much as 95.77.
The Japanese unit also showed weakness against the European and Swiss rivals, moving down to 138.01 and 90.79, respectively, by about 2:50 am ET Wednesday, setting the lowest points for the yen since mid-October. That may be compared to Tuesday’s close at 136.98 and 90.23. On the downside, yen was likely to slip to 147.5 against euro and to 93.1 versus franc.

Against the British pound, the Japanese currency slid to 160.51 at 3:20 am ET Wednesday, setting the lowest point for the yen since November 5, 2008, with 176.5 seen as the near term support. GBP/JPY rally closed Tuesday’s New York deals at the level of 158.77.

NZ dollar slides to 2-day low against euro, yen and greenback

2009-06-03T05:36:00.000-07:00

The New Zealand dollar lost further ground against its major counterparts in early trading on Wednesday. The kiwi dropped to a 2-day low of 0.644 against the US dollar, 61.79 versus the Japanese yen and 2.2063 against the euro around 7:25 am ET. The New Zealand currency closed yesterday's deals at 0.6569 against the buck, 62.92 versus the yen and 2.1798 per euro.

Stocks Looking To Grind Out Gains Wednesday; Bernanke On Capital Hill

2009-06-03T05:28:00.000-07:00

US stocks were poised for a lackluster start Wednesday morning in New York following modest gains in the previous session. The markets were in wait and see mode ahead of comments from Fed Chairman Ben Bernanke and a key reading on private sector payrolls. As of 6 am ET, the Dow Futures were down...

More US banks seek to raise funds

2009-06-02T14:12:00.000-07:00

JPMorgan Chase and American Express have become the latest US banks to announce share issues as they aim to raise funds to repay the government.
JPMorgan said it planned to raise $5bn (£3bn) to help repay the $25bn it was awarded from the Troubled Asset Relief Program (Tarp) rescue plan for lenders.
At the same time, American Express said it hoped to raise $500m to start to repay the $3.4bn it has received.
The largest 19 US banks have been given $229bn under the Tarp scheme so far.
This is out of the total $700bn that was available at the launch of the programme.
Industry-wide moves
JPMorgan Chase and American Express' announcements follow similar share issue plans to start repaying the government announced by BB&T, US Bancorp, Capital One Financial and Bank of New York Mellon.
Meanwhile, Goldman Sachs this week sold $1.9bn worth of shares in Chinese bank Industrial and Commercial Bank of China.
All these banks last month passed the so called "stress tests" held by the Treasury Department and Federal Reserve, which determined that they do not require any more Tarp funds to improve their capital base.
By contrast, 10 of the 19 largest US banks that have gained Tarp funding failed the tests, including Bank of America, Citigroup, Morgan Stanley and Wells Fargo.
These have also announced share issues, but in their case it is to strengthen their finances rather than pay back the government.
The Fed has ruled that banks must prove they have sufficient financial reserves before they can start to repay their Tarp funds.

Oil prices reach seven month-high

2009-06-02T14:06:00.000-07:00

Oil prices jumped more than 3% on Monday to a nearly seven-month high above $68 a barrel.
US light sweet crude settled $2.27 higher at $68.58 while Brent crude rose by $2.45 to $67.97.
Gains in global stock markets and data showing modest growth in Chinese manufacturing appeared to be driving up prices, continuing a recent rally.
Oil prices climbed by 30% in May, which was the largest gain in a single month since 1999.
But oil is still trading well below the record high of $147 a barrel seen last July.

Warning

Some analysts fear that the oil market may be moving ahead of reality, and warn that prices could fall as investors face up to the reality of a glut of supplies and weak global demand.
"Most of the commodity markets, the base metals as well as oil, have moved to factor in economic recovery," said David Moore, commodity strategist at Commonwealth Bank of Australia.
"There is a risk that if economic data does not continue to support this view of the world that markets become disappointed with the pace of economic recovery, leading to price setbacks."
Last week, ministers from the Opec group of oil-producing countries said that they would keep output unchanged, with the Saudi oil minister Ali al-Naimi predicting prices will reach $75 this year.

Europe Roundup - Eurozone Jobless Rate Climbs To Near Decade High

2009-06-02T12:33:00.000-07:00

Tuesday, official statistics showed that unemployment in the Eurozone rose to its highest level in nearly ten years in April as the global economic downturn left several Europeans without work.
In other important news from the region, the Swiss economy contracted the most since 1992 as sluggish global demand continued to hurt the country's exports.
Eurozone
The Luxembourg-based statistical office Eurostat said the seasonally adjusted jobless rate rose to 9.2% in April from 8.9% recorded in March. This is the highest rate since September 1999 and a touch higher than the 9.1% expected. The number of unemployed persons increased by 396,000 to 14.58 million in April from 14.18 million in March.
The jobless rate for the EU27 stood at 8.6% in April, the highest since January 2006 and up from 8.4% in March. The rate was 6.8% in April 2008.
Elsewhere, a report by Spain's labor ministry said the number of unemployed persons decreased by 24,741 to 3.6 million in May from the preceding month, representing the first decline in 14 months.
The French statistical office INSEE announced that industrial producer prices for the domestic market declined 6.4% year-over-year in April, compared with a 5.5% fall in the previous month. The April producer prices came in line with economists' expectations.
The Statistical Service of the Republic of Cyprus revealed that the general government deficit stood at 0.8% of GDP in the first quarter, compared to a surplus, which was 0.5% of GDP in the previous year.
Irish consumer confidence dropped in May to 45.5 from 46.8 in April, results of a survey conducted by KBC Bank Ireland and the Economic and Social Research Institute showed
Rest of Europe
U.K.'s Select Committee on Economic Affairs of the House of Lords urged the government to return the responsibility for macro-prudential supervision to the Bank of England as the current tripartite framework of regulation and supervision failed to mitigate the financial crisis.
On the data front, the Bank of England said the number of loans approved for house purchases in the U.K. increased to 43,201 in April from 40,038 in March. The April level was higher than the previous six months average of 33,845 and 41,000 expected by economists.
Further, the British central bank upwardly revised UK's M4 money supply growth for April to 0.2% from 0.1% reported initially. In March, money supply had grown 0.3%.
The Confederation of British Industry said shortage of trade credit insurance remains a worry. However, deterioration in credit conditions slowed further over the last three months and expects it to stabilize in the months ahead, a survey by the industry lobby found.
Data released by the State Secretariat for Economic Affairs or SECO showed that the Swiss gross domestic product or GDP fell 0.8% sequentially in the first quarter following a downwardly revised 0.6% contraction in the fourth quarter. That was the worst performance since the final quarter of 1992. Meanwhile, economists had forecast the economy to shrink 1.5%. GDP declined for the third straight quarter, while two consecutive quarters of negative GDP defines a recession.
The Credit Suisse said the SVME purchasing managers' index for Switzerland rose to 39.8 in May from 34.7 in April, the strongest increase since September 2005. Economists had forecast a reading of 36.5.
The number of Norwegian business leaders expecting their companies' profitability to increase over the next 12 months increased in the second quarter compared to the first quarter, results of a quarterly survey carried out by the Perduco for the Norges Bank showed.
Norway's consumer confidence index rose to minus 3.7 in the second quarter from a revised minus 8.3 in the first quarter, the Saving Banks Association said. Economists had expected the index to rise to minus 5 from the initial first quarter reading of minus 11.1.
Statistics Norway said the twelve-month growth in the C2 credit indicator was 8% in April, down from 8.8% in March.
The Financial Stability Report from the Riksbank said the loan losses of major Swedish banks would increase over the coming years and the loan losses in 2009 and 2010 would total SEK 170 billion.
Statistics Denmark said the retail sales volume fell a seasonally adjusted 0.6% month-on-month in April, after a 0.1% rise in the previous month.
Romania's National Institute of Statistics said in a report that the producer price index or PPI rose 2.5% year-over-year in April, slower than the 3.9% increase in the previous month

Career In The Forex

2009-05-12T08:38:00.003-07:00

Market Traders Institute specializes in developing partnerships with international individuals and institutions. We have the technological expertise, around-the-clock facilities, administrative back-up, materials, intellectual property and flexible attitude that enables us to provide and grant authority to Investor partners to market proprietary technical analysis and foreign currency exchange course material, including all study-at-home material, introductory course and class room based instructional material. Of course we provide a very thorough business and intellectual property orientation and training program . In other words, we provide you with all the necessary tools.

Market traders offers two great licensee plans:

Join the MTI winning team. Income generating activities for the Licensee include Forex education, web based Forex subscription services, Forex product sales and Forex trading revenue.
We expect a strong commitment to provide our combined services to the client base and to position the services geographically in your marketing approach.

Forex VS Stocks Market

2009-05-12T08:36:00.003-07:00

Foreign currency exchange (Forex) market and stocks market work quite differently. Neither Forex market or stock market is greater than each other but the investing concept in them differs quite a lot.
However, by comparing their differences, we wish to give you a clearer picture on these two markets thus help you to select the market type that suits you the best. Fact is you might want to get involved in both market to diversify your on hand capital.

The Explosion of the Euromarket

2009-05-08T12:23:00.003-07:00

A major catalyst to the acceleration of Forex trading was the rapid development of the eurodollar market; where US dollars are deposited in banks outside the US. Similarly, Euromarkets are those where assets are deposited outside the currency of origin. The Eurodollar market first came into being in the 1950s when Russia’s oil revenue-- all in dollars -- was deposited outside the US in fear of being frozen by US regulators. That gave rise to a vast offshore pool of dollars outside the control of US authorities.
The US government imposed laws to restrict dollar lending to foreigners. Euromarkets were particularly attractive because they had far less regulations and offered higher yields.
From the late 1980s onwards, US companies began to borrow offshore, finding Euromarkets a beneficial center for holding excess liquidity, providing short-term loans and financing imports and exports.London was, and remains the principal offshore market.
In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. London’s convenient geographical location (operating during Asian and American markets) is also instrumental in preserving its dominance in the Euromarket.

Learn Forex

2009-05-06T11:47:00.003-07:00

How do I begin? Please give it to me SIMPLY.
1. The best advice on how to learn to trade profitably is to learn from experts with proven track records. Many learning styles are available to beginners at all levels: books, CDs, online courses, group seminars, even one-on-one mentors who will come right your home for a few days. We outline our Forex-Trader picks in Learning Forex Trading. Learning to trade from experts is worth every penny and has saved us untold thousands in mistakes.We would not recommend starting forex trading without any training. It is not hard to learn, nor difficult to trade successfully, but you must first provide yourself with a basic functioning knowledge of ’the game you’re in’.

2. While you are learning you will need charting software to practice reading the Market. Charting is an indispensable tool that shows you in real-time data what the market is doing moment by moment and also what the market has done in the past. As you learn to analyze these charts you can determine what trades to enter and exit, where to set your stop losses, limits etc. There are several good charting software services that you can subscribe to online monthly. See our Forex-Trader tested Charting Software picks in Tools of The Trade.

3. Then, to perform your actual trades online you need a real-time ’trading platform’ to execute your ’buys’ and ’sells’ directly in the Foreign Currency Market. You obtain a trading platform from a Forex Clearinghouse that is connected real-time to the interbank market. There are many good Clearinghouses (also confusingly called Brokerage Firms, Market Makers, etc.) that provide you with the trading platform to trade the funds in the account you have opened with them. Before you begin trading your ’real’ money, while you are learning, you will practice on your own ’demo account’ with play-money in it, which will be provided to you by the clearinghouse you plan to trade through. The contractual relationship you enter into with your Clearinghouse is a very important one because the Clearinghouse you choose determines many trading features and financial advantages to you both as a trader and as an investor. Forex-Trader tested Clearinghouses are reviewed in Tools of The Trade.

We have outlined a Getting Started path with uncomplicated steps. This is the path that we would take if we were beginning trading over again today with ’what we know now’. The products and services we mention in these steps are all ones that we have personally used for some time with consistent success. As always you are free to forge your own path, and if you do, happy hiking. There is a mountain of products and services try out, and if you find ones you like better we would love to compare notes with you.

Explain More About Charting Services
To trade successfully you also must have good charting software and instantaneous data feeds critical to helping you analysis and interpret the movement of currencies moment to moment so you know when/why to buy or sell — this you subscribe to monthly. You can get a 2 week or more demo to familiarize yourself with one that has the features you like. The costs also vary, and some companies require a year commitment. There are some free charting services offered through the clearinghouses, but they tend to lack the tools to be truly useful. There are also some costly proprietary Specialty Software charting ’hybrids’ which are market forecasters tools that look more like video games than charts.

Explain More About How Clearinghouses Work
A good clearinghouse (i.e.. your computer access/link to the live Forex Exchange Market) is the partner with which you trade the money you have deposited with them in your trading account. After trying and demo-ing many we have found a small handful that are truly excellent for the beginner (and continue to be excellent as you grow) — meaning user friendly, legally accountable to regulatory bodies, and offering fair costs (spreads) for their services/trading software platforms. There still are many worrisome ones practicing in this closing era of unregulated forex trading (new Commodities laws are imminent).

The topic of matching the right clearinghouse for your needs is discussed more in Tools of the Trade, because it depends on a number of factors — how much you can open an account with, how much the clearinghouse profit spread, what your liquidity needs are, your minimum/maximum stop loss and margin requirements, even where you live and how much time you have to give to trading in a 24 hr. day.

How Much Does it Cost to Begin to Trade?
Learning to trade will entail the cost of books and whatever traiining method you choose. It will also include a reliable computer with a minimum 128 Mb of memory to run the charting software and trading platform. Ongoing ’costs of operation’ include the monthly costs of high-speed internet, charting software, the email forecasting subscriptions — plan on spending $150./mo. up for ongoing costs.

What about Pooled Clearinghouse Accounts to Trade with More Leverage?
We strongly do not recommend pooled accounts in any circumstance. Perhaps you are considering self-trading a pooled- together family account because it would give you a perceived advantage of more leveraged funds to trade (50:1 up to 100:1 leverage) — any risks of loss represent a potential risk to family relationships, and for this reason alone we do not recommend aggregating with family or friends.
However much worse are the too-numerous negative experiences of people allowing their investment funds to leave their control to become part of a ’managed’ pooled account. Not only is it a very risky investment idea, it is illegal for anyone to ’pool’ accounts without compliance with SEC (a USA Securities Exchange Commission) or international equivalent license. Never relinquish direct control over your money/trading account to anyone (i.e.. the ability to make withdrawals, deposits etc. directly by your own authority into your own account).
A good fund manager, if you do choose to go the (legitimate) Managed Account route rather than the Self-Trader route, will make certain you have your own ’segregated account’ in your own name in a bank or brokerage firm. These individual segregated accounts can still be traded together as though they were in a single account by a designated trader as long as the clearing house uses a trading platform that allows it. You, as the investor/account holder, have direct access online to your account activity at all times, and direct control over your own account in your own name (just like a bank account). The importance of this, for the safety of your funds, cannot be over emphasized.

Fibonacci Trading Techniques

2009-05-06T11:44:00.003-07:00

Introduction to Fibonacci trading techniques.
First, a few words about Fibonacci himself…
Leonardo Pisano (nickname Fibonacci) was a mathematician, born in 1170, in Pisa (now Italy). His father was Guilielmo, of the Bonacci family. His father was a diplomat, as a result Fibonacci was educated in North Africa, where he learned "accounting" and "mathematics".
Fibonacci also contributed to the science of numbers, and introduced the "Fibonacci sequence"
The Fibonacci sequence is the sequence 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, introduced in his work "Liber abaci" in a problem involving the growth of a population of rabbits.
Aside from this sequence of number where every next number is the sum of the proceeding two, 0, 1 (0+1), 2 (1+1), 3 (2+1), 5 (3+2), 8 (5+3), 13 (8+5), etc.
There are the "Fibonacci ratios".. By comparing the relationship between each number, and each alternate number, and even each number to the one four places to the right, we arrive at some fairly consistent ratios.. The important ones are .236, 50, .382, .618, .764, 1.382, 1.618, 2.618, 4.236, and for good measure we include 1.00 ..
It turns out that the ratios are mathematical principles prevalent in nature around us, and is also in man-made objects. There are many interesting, entertaining, and poetic observations about Fibonacci numbers and ratios in the universe (see the reference section below). Fibonacci numbers appear in ancient buildings, in plants, planets, molecules, the dimensions of human bodies, and of course snails… But of what use is all that to the lowly trader?

What really interests you, the application of Fibonacci techniques in the trading environment.. Traders usually study charts! Fibonacci ratios may be applied to the Price scale, and also to the time scale of charts. I study the price scale. My focus here will be on the price scale for now, perhaps in the future I’ll add some time-scale studies.
Prices never move in a straight line. Look at any chart, you will see many wiggles, as price advances and retraces.. Stocks, Futures, Forex, all instruments which are liquid, will often retrace in Fibonacci proportions, and advance in Fibonacci proportions. Not always, and not precisely to the penny. But very often, and reasonably close! This happens often enough that profitable trades can result. I will show you some examples below.
I used Fibonacci ratios with a few simple indicators to help determine probable price turning points, optimum entry, exit and stop-loss levels. My complete techniques are available in on-line video seminars, in-person seminars, and via my real-time on-line chat facility. For more details, see the this web page
The application of Fibonacci to trading can be very complex, and take much time and experience to perfect. Many traders enjoy making the process as difficult and as complex as they can tolerate.. I do the opposite, I try to simplify, try to bring clarity.

Interest Rates Table

2009-05-01T00:46:00.003-07:00

Central bank interest rate is the rate at which country's central banking institutions lend short-term money to the country's commercial banks. Interest rates also play an important role in Forex market. Because the currencies bought via broker are not delivered to the buyer, broker should pay trader an interest based on the difference between "short" currency interest rate and "long" currency interest rate.

In the interest rates table you can not only find the current interest rates of 20 different countries, but also scroll back in time and see how and when interest rates were changed by the central banks.

Interest rates of the following countries are covered in this interest rates table: United States of America, United Kingdom, European Union, Japan, Switzerland, Canada, Australia, New Zealand, Norway, Denmark, Chile, South Africa, Sweden, Brazil, South Korea, Russia, Poland, Latvia, Hungary and Czech Republic.

Click the small green arrows above and below the table to see the past rates decisions.

Federal Reserve System 1.25% on 2009-04-02 by 0.25%
European Central Bank 0.50% on 2009-04-09 by 0%
Bank of England 0.10% on 2009-04-07 by 0%
Bank of Japan 0.25% on 2009-04-21 by 0.25%
Bank of Canada 3.00% on 2009-04-07 by 0.25%
Reserve Bank of Australia 3.00% on 2009-03-12 by 0.50%
Reserve Bank of New Zealand 0.375% on 2009-03-12 by 0.125%
Swiss National Bank 9.50% on 2009-03-25 by 1.00%
South African Reserve Bank 1.75% on 2009-04-09 by 0.50%
Central Bank of Chile 2.00% on 2009-04-03 by 0.25%
Danmarks Nationalbank 2.00% on 2009-03-26 by 0.50%
Norges Bank 0.50% on 2009-04-22 by 0.50%
Riksbank 11.25% on 2009-03-19 by 1.50%
Banco Central do Brasil 1.75% on 2009-02-06 by 0.50%
Czech National Bank 9.50% on 2009-01-20 by 0.50%
Magyar Nemzeti Bank 5.00% on 2009-03-24 by 1.00%
Bank of Latvia 3.75% on 2009-03-26 by 0.25%
National Bank of Poland 12.50% on 2009-04-24 by 0.50%
Bank of Russia 2.00% on 2009-04-09 by 0%

French April Business Confidence Rises More Than Expected

2009-04-23T03:00:00.002-07:00

The International Monetary Fund (IMF) warned Tuesday that total losses from the ongoing global economic downturn could reach $4 trillion and the global financial system "remains under severe stress".

Though the IMF had predicted total losses from the credit crunch to hit $1 trillion a year ago, the lender in its latest Global Financial Stability Report (GFSR) estimates losses incurred by banks alone would be over $2.7 trillion.

"In this GFSR, estimates for write-downs have been extended to include other mature market-originated assets and, while the information underpinning these scenarios is more uncertain, such estimates suggest write-downs could reach a total of around $4 trillion, about two-thirds of which would be incurred by banks," the IMF said in its Global Financial Stability Report.

The IMF report blamed the worsening base-case scenario for economic growth for losses suffered by banks, adding that the shrinking economic activity has put further pressure on banks' balance sheets as asset values continue to degrade, threatening their capital adequacy and further discouraging fresh lending.

Dollar Falls against Yen

2009-04-22T04:15:00.002-07:00

U.S. dollar has already entered the Christmas flat market zone and is trading on the very low volumes. During the Asian session today it managed to lose just 0.1% to Japanese yen as the latter gained from the good news from Merrill Lynch.

Yesterday USD/JPY hit its monthly maximum level at 114.48 - the rate that hasn’t been seen since November 7. Today USD/JPY touched 113.92 and then retreated up slightly- to 114.15 and is trading very slowly now.

The news that Merrill Lynch is going to receive about $6.2 billion funds from two investment groups added a much needed optimism to the U.S. financial sector. In its turn the positive reactions on this news added confidence to the carry traders strengthening yen against major high-yielders.

There is really no much to expect out of the currency rates movement during the holidays period. But it is worth to mention that dollar is ending this year with bullish trend wave and the first half of January 2008 will probably set the mood for the next year’s Forex trading.