Market Data
Japanese Stocks Drop Most in a Week on U.S. Financial Concern
By Patrick Rial
"July 15 (Bloomberg) -- Japanese stocks fell the most in a week, led by financial companies, after a rescue package for U.S. mortgage lenders renewed concern that credit-market losses will spread and banks will fail because of a lack of capital."
"Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by market value, fell the most in four months, while Mizuho Financial Group Inc., the third largest, dropped for the first time in five days. The U.S. government's plan to rescue Fannie Mae and Freddie Mac failed to stem a drop in their shares yesterday, while regional American banks plunged as investors fretted the failure of IndyMac Bancorp Inc. may be repeated."
"The Nikkei 225 Stock Average sank 255.60, or 2 percent, to 12,754.56 at the close of trading in Tokyo, the sharpest drop since July 8 and the lowest level since April 1. The broader Topix index slumped 27.60, or 2.2 percent, to 1,253.12. Only two of the 33 industry groups in the gauge rose."
"``The troubles of financial companies are making investors skittish -- it's like ghosts are wailing in their ears,'' said Masaru Hamasaki, a senior strategist in Tokyo at Toyota Asset Management Co., which manages the equivalent of $3.3 billion. ``Worsening sentiment is practically the only thing that's moving the market today.''"
"Mazda Motor Corp. extended its decline in the afternoon as the dollar weakened against the yen and shares in China, Japan's largest export market, slumped the most in two weeks."
"Mitsubishi UFJ fell 5.3 percent to 926 yen, the biggest decline since March 13, and Mizuho lost 5 percent to 511,000 yen. Sumitomo Mitsui Financial Group Inc., the No. 2 bank by value, plunged 6.1 percent to 784,000, leading declines on the Topix Bank Index."
U.S. Banks
"Japan's three biggest lenders today said they held 4.7 trillion yen ($44 billion) in debt securities issued by U.S. government-backed mortgage finance companies, including Fannie Mae and Freddie Mac, and by U.S. federal agency Ginnie Mae, as of March 31. Treasury Secretary Henry Paulson's rescue proposal signals a shift toward an explicit guarantee of their debt, reducing the risk of default."
"Fannie Mae fell 5.1 percent yesterday, and Freddie Mac plunged 8.3 percent amid concern any bailout package will wipe out shareowners even as it saves debt holders. Japan's financial regulator said today it needs to step up scrutiny of those securities on banks' balance sheets."
The Standard & Poor's 500 Financials Index fell to a level not seen since October 1998 yesterday as investors sold shares of regional banks on concern they may be running out of capital. IndyMac last week became the second-biggest federally insured financial company to be seized by regulators after a run by depositors on the California-based mortgage lender.
`Concerns Spreading'
"``It's not just Fannie Mae and Freddie Mac; credit-market fears have become extremely deep-rooted,'' said Yoshihiro Ito, senior strategist at Okasan Asset Management Co. in Tokyo, which oversees the equivalent of $9.3 billion. ``Concerns are spreading that regional bank bankruptcies will be the next shoe to drop.''"
"Mazda, which exports about 80 percent of its domestic production, dropped 3 percent to 586 yen. Toshiba Corp., the world's second-biggest maker of flash memory chips, declined 3 percent to 737 yen."
"The yen strengthened to as much as 105.75 versus the dollar, from 106.54 at the close of market trading yesterday. China's benchmark CSI 300 Index slumped 4.1 percent, reversing an advance."
"Sumitomo Realty & Development Co., Japan's third-largest developer, led real estate companies lower as troubles among banks heightened speculation funds will be cut off for property investments. Its shares lost 6.5 percent to 2,095 yen. Mitsubishi Estate Co., the biggest developer by market value, fell 3.7 percent to 2,365."
"Matsui Securities Co., Japan's second-biggest Internet- based brokerage, surged 3.6 percent to 639 yen after Nikkei Inc. said it will add the stock to its Nikkei 225 index on July 28. Orix Corp. and SBI Holdings Inc., which brokerages had cited as possible candidates for addition, both slumped more than 7 percent after being passed over."
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net
"Last Updated: July 15, 2008 05:46 EDT"
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"Copper Climbs in Asia on Peru Strike Threat, Dollar Decline "
By Glenys Sim
"July 16 (Bloomberg) -- Copper rose for a fifth time in six days in Asia, on expectations of a strike in Peru and as the dollar traded near a record low against the euro, raising the appeal of raw materials as an alternative investment."
"Copper gained as workers at Freeport-McMoRan Copper & Gold Inc.'s Peruvian copper-mine, the nation's third largest, failed to reach an agreement over issues including better working conditions and may walk out on July 16, a union official said on July 11. The metal has jumped 23 percent this year, partly boosted by supply concerns."
"``Fresh reports of mine strike activity in South America and a weak U.S. dollar'' may offset ``concerns about slowing global growth,'' Mark Pervan, a senior commodity strategist with Australia and New Zealand Banking Group Ltd. in Melbourne, said yesterday in an e-mail. ``Copper may be the best supported on expectation Freeport-McMoRan's copper mine workers in Peru will strike.''"
"Copper for delivery in three months rose $39, or 0.5 percent, to $8,184 a ton on the London Metal Exchange at 3:20 p.m. in Singapore, after falling as much as 2.1 percent yesterday."
"Copper for September delivery lost as much as 530 yuan, or 0.9 percent, to 62,010 yuan ($9,103) a metric ton on the Shanghai Futures Exchange. The most-active contract closed at 62,280 yuan."
"The dollar traded at $1.5927 per euro at 3:21 p.m. in Singapore, after touching $1.6038 yesterday, the weakest since the 15-nation currency's 1999 debut on speculation U.S. banks will report further losses this week, eroding confidence in the financial system of the world's largest economy."
Gains Limited
Limiting copper's gains were concerns about waning demand on falling Chinese imports and a weakening outlook for the U.S. economy. Copper has dropped 8 percent from a July 2 record on speculation a slowdown in global economic growth may erode consumption.
"China's imports of copper and alloys slumped 19 percent in June from a year earlier, according to customs data yesterday. U.S. Federal Reserve Chairman Ben S. Bernanke said risks to U.S. growth and inflation have increased."
Other LME-traded metals were also lifted by the weak dollar and as crude oil gained after its biggest one-day decline yesterday.
"Aluminum rose 0.9 percent to $3,243 a ton, zinc was up 1.4 percent at $1,866, nickel gained 0.2 percent to $20,900, and tin added 2.4 percent to $23,800 a ton. Lead fell 0.5 percent to $1,980 as of 3:22 p.m. in Singapore."
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
"Last Updated: July 16, 2008 03:38 EDT"
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"French Stocks: Alstom, BNP Paribas, Natixis, Societe Generale "
By Adria Cimino
"July 16 (Bloomberg) -- France's CAC 40 Index slid 22.56, or 0.6 percent, to 4,038.59 at 12:08 p.m. in Paris, its lowest level since 2005. The SBF 120 Index lost 0.7 percent."
The following stocks rose or fell in Paris. Symbols are in parentheses.
"Financial shares dropped after a report that Natixis SA may raise capital. Natixis retreated 67 cents, or 13 percent, to 4.38 euros. France's fourth-biggest bank is considering raising capital after more than 1 billion euros ($1.59 billion) in additional writedowns in the second quarter, the Les Echos reported, citing unidentified people familiar with the matter. Natixis didn't immediately return calls seeking comment."
"Societe Generale SA, France's third-largest bank by assets, slid 2.92 euros, or 5.7 percent, to 47.92. Dresdner Kleinwort lowered its recommendation on the shares to ``hold'' from ``buy.''"
"Axa SA, Europe's second-largest insurer, sank 75 cents, or 4.4 percent, to 16.47 euros."
"BNP Paribas SA, France's biggest bank by assets, dropped 2.34 euros, or 4.3 percent, to 51.75. ING cut its share-price estimate on BNP to 65 euros from 73.6 euros."
"Alstom SA (ALO FP) jumped 3.07 euros, or 4.6 percent, to 69.17, its biggest gain since March. The world's third-largest power-plant builder said first-quarter sales advanced 11 percent to 4.5 billion euros, fueled by orders for trains and turbines. Analysts had expected revenue of 4.57 billion euros, according to the median estimate of seven surveyed by Bloomberg."
"Auplata SA (ALAUP FP) plunged 22 cents, or 6.3 percent, to 3.27 euros, the biggest drop in a month. The gold mining company said first-half revenue dropped 47 percent to 4.2 million euros, as output fell to 226 kilograms from 502 kilograms a year earlier. The company plans to save 4 million euros a year by cutting jobs."
"Cap Gemini SA (CAP FP) advanced the most in a week, gaining 87 cents, or 2.5 percent, to 35.90 euros. UBS AG raised its recommendation on shares of Europe's largest computer-services company to ``buy'' from ``neutral,'' saying the company may be ``emboldened'' to increase its earnings forecast."
"Dane-Elec Memory SA (DAN FP) retreated 10 cents, or 13 percent, to 67 cents, the biggest drop since January. The distributor of computer memory devices said second-quarter revenue fell 32 percent to 36.2 million euros. The company said it expects to meet its announced full-year targets."
"Lafuma SA (LAF FP) lost 96 cents, or 3.5 percent, to a record low of 26.20. The owner of the Millet mountaineering clothing brand reported nine-month revenue of 170.3 million euros, unchanged from year-earlier levels. The company said it expects to report a ``small increase'' in full-year sales."
"Ubisoft Entertainment SA (UBI FP), Europe's second-largest video-game maker, jumped 2.66 euros, or 4.7 percent, to 59.02, its biggest gain in more than a month. Activision Blizzard Inc., the world's largest video-game publisher, reported sales and profit that topped company forecasts."
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
"Last Updated: July 16, 2008 06:18 EDT"
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Gold Falls for First Time in Six Sessions as Crude Oil Drops
By Marianne Stigset
July 16 (Bloomberg) -- Gold fell for the first time in six trading sessions in London as weaker crude-oil prices eroded the appeal of the metal as a hedge against inflation.
"Crude oil traded below $137 a barrel in New York, extending its biggest one-day slide in more than 18 years yesterday, as slowing economic growth reduces demand. Federal Reserve Chairman Ben S. Bernanke yesterday said risks to growth and inflation have risen in the U.S."
"``The market is a bit uncertain and is watching what oil is going to do,'' Walter de Wet, head of commodities research at Standard Bank Group Ltd., said by phone from Johannesburg. ``The market remains fairly bullish due to the financial uncertainties.''"
"Gold for immediate delivery fell $2.57, or 0.3 percent, to $974.93 an ounce as of 12:06 p.m. in London. Futures for August delivery dropped $2.4, or 0.2 percent, to $975.11 on the Comex division of the New York Mercantile Exchange."
"The metal may also be declining as some investors sell gold to raise cash, James Moore, an analyst at TheBullionDesk.com in London, wrote in a report today."
Harmony Gold Mining Co. and Gold Fields Ltd.'s mining operations in South Africa's Free State province were closed by a one-day strike over power prices. South Africa is the world's the second-biggest gold producer.
ETF Securities Ltd. said investors added $265 million to its exchange-traded gold products yesterday. U.S. financial shares fell to the lowest in a decade yesterday on speculation a shortage of capital will cause some banks to collapse.
"``Gold is a safe-haven asset and the only asset class that is not someone else's liability and this is why it is thriving in the current environment,'' Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd., said in a report."
Gold Fixing
"Gold fell to $974 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $986 at the previous afternoon fixing."
"Silver for immediate delivery fell 13.99 cents, or 0.7 percent, to $18.78 an ounce in London."
"Hochschild Mining Ltd., Peru's second-largest silver producer, said second-quarter output rose 24 percent. The company remains ``very bullish'' on gold and silver prices as investors seek refuge during ``difficult economic times,'' Chief Executive Officer Miguel Aramburu said."
"Among other metals for immediate delivery, platinum dropped $20.75, or 1.1 percent, to $1,958.75 an ounce. Palladium declined $4.50, or 1 percent, to $440.75 an ounce."
"Platinum fell to $1,956 an ounce in the morning ``fixing'' in London from $1,987 at the previous afternoon fixing. Palladium declined to $438.00 an ounce, from $450.00."
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
"Last Updated: July 16, 2008 07:32 EDT"
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"Commodities Stocks Are a `Sell', Merrill and Morgan Stanley Say "
By Fabio Alves
"July 15 (Bloomberg) -- Investors should sell commodities stocks because a slowing global economy will cut demand for raw materials such as copper, nickel and corn, according to strategists at Merrill Lynch & Co. and Morgan Stanley."
"``Given forecasts of slowing global growth and terrible stock market performance from the emerging markets, we believe we may have witnessed the peak in this commodity cycle,'' Merrill U.S. sector strategist Brian Belski wrote in a note to clients dated yesterday. ``A combination of deteriorating pricing power, a U.S. dollar that has found its footing against major currencies and rising interest rates for risky borrowers is providing significant macroeconomic headwind for materials.''"
"Belski, based in New York, reiterated his ``underweight'' rating on the materials industry."
"The 19 commodities in the Reuters/Jefferies CRB Index gained 29 percent in the first half of the year, the most since 1973, according to Bloomberg data. The index has fallen 2.8 percent since reaching a high for the year on July 2. Copper prices have lost 8.3 percent from their peak this year, while zinc has tumbled 30 percent."
"The decline in commodities prices isn't enough of a reason to buy raw material stocks, Morgan Stanley chief U.S. equity strategist Abhijit Chakrabortti wrote in a note to clients, keeping his ``underweight'' recommendation on the industry. He maintained gold as ``overweight,'' saying the bullion is a best option as a ``crisis hedge'' than oil."
"``The materials sector has gone from pricing in an outlook of persistently strong growth and tight inventory/supply conditions to one that now recognizes the risk of sizeable demand destruction,'' New York-based Chakrabortti wrote."
To contact the reporter on this story: Fabio Alves in New York at falves3@bloomberg.net
"Last Updated: July 15, 2008 10:19 EDT"
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Canada Keeps Rate at 3%; Says Price Risks `Balanced' (Update1)
By Greg Quinn
"July 15 (Bloomberg) -- The Bank of Canada left its key interest rate unchanged, saying economic risks are ``balanced'' between inflation that may double policy makers' target and the slowest growth since the country's last recession."
"Governor Mark Carney and his five deputies left the rate on overnight loans between commercial banks at 3 percent, the lowest since December 2005. All 28 economists in a Bloomberg survey predicted the decision, the second straight time policy makers have held borrowing costs steady after four reductions between December and April."
"Carney may be able to stay on hold even as high oil and gas costs spark inflation, because slowing factory sales to the U.S. may lead to the weakest economic growth since 1992. Policy makers pared their 2008 growth forecast to 1 percent today from 1.4 percent in April, while forecasting inflation will return to their 2 percent target in the second half of 2009 after rising past 4 percent."
"``Against this backdrop, the bank judges that the current level of the target for the overnight rate remains appropriate,'' the Ottawa-based central bank said today in a statement, using a phrase similar to one with its June decision which called the rate ``appropriately accommodative.''"
"The Canadian dollar gained 0.6 percent to C$1.0004 at 9:08 a.m. in Toronto from C$1.0064 yesterday. Earlier today, the currency exceeded parity with the U.S. dollar for the first time in six weeks."
Faster Inflation
Inflation hasn't reached 4 percent since March 2003. Carney last month said higher energy costs would push consumer prices above 3 percent this year. The Bank of Canada sets rates to keep inflation at 2 percent as often as possible and always between 1 percent and 3 percent.
"Policy makers also said today that inflation will exceed 4 percent just ``temporarily,'' and that the economy will build up more ``excess supply'' over the rest of this year because of weak U.S. demand and volatile global financial markets."
"``Inflation is a growing concern for the bank, but the bank's growth worries will keep a hold on rates for the time being,'' said Meny Grauman, a senior economist at CIBC World Markets in Toronto."
"The Federal Reserve and the Bank of England kept borrowing rates unchanged at their last decisions even as they highlighted inflation risks, taking pressure off of Carney to tighten before he's sure such a move would benefit the economy."
Better Record
"Canada's inflation record this year is better than other Group of Seven industrialized nations: consumer prices advanced 2.2 percent in May from a year earlier, compared with 4.2 percent in the U.S. and 3.3 percent in the U.K."
"Still, on a monthly basis, Canada's inflation quickened at the fastest pace since 1991 in May as gasoline prices surged."
"Air Canada, the country's largest airline, said July 10 it will eliminate 632 flight-attendant jobs, 9 percent of the total, as it scales back because of rising fuel prices."
"Canada's last rate increase was July 2007 and the bank may not tighten again until the first quarter of next year, according to economists surveyed by Bloomberg."
"Plunging automobile exports caused the economy to shrink for the first time in almost five years in the first quarter. Most cars and trucks made or assembled in Canada are shipped to the U.S., where consumers' ability to buy expensive items has been sapped by a housing-market recession and job losses."
"Canada's high dollar has also made exports less competitive. The currency hit a record 90.58 Canadian cents per U.S. dollar on Nov. 7 and has traded near parity all year, bolstered by demand for commodities. Canada is home to the second-biggest crude oil reserves behind Saudi Arabia, and is the No. 2 wheat exporter."
"Last week, reports showed Canadian employers trimmed payrolls in June for the first time this year, while the country's trade surplus with the U.S. and home prices stalled the month before, according to Statistics Canada."
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.
"Last Updated: July 15, 2008 09:23 EDT"
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"Argentina, Brazil: Latin America Bond and Currency Preview "
By Jamie McGee
July 16 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from a previous session.
"Argentina: The economy expanded 7.5 percent in May from the year-earlier period after growing 9 percent in April, according to the median estimate of three economists in a Bloomberg survey. The National Institute of Statistics is scheduled to release the data at 3 p.m. New York time."
The peso was unchanged at 3.0227 per dollar.
"The yield on the country's inflation-linked peso bonds due in December 2033 rose 9 basis points, or 0.09 percentage point, to 10.31 percent, according to Citigroup Inc.'s unit in Argentina."
"Brazil: Inflation, as measured by the Rio de Janeiro-based Getulio Vargas Foundation's IGP-10 Index, slowed to 1.86 percent in the month through July 10 from 1.96 percent in the previous 30 days, according to the median estimate of 23 economists in a Bloomberg survey."
The institute is slated to release the report at 7 a.m. New York time.
"Brazil's central bank will act for as long as it takes to ensure that inflation next year is in line with the country's 4.5 percent target, bank President Henrique Meirelles said yesterday in testimony to the Senate."
"``The central bank is committed to doing what it takes for as long as it takes to ensure inflation converges to the midpoint of the target in 2009,'' Meirelles said."
The real rose 0.1 percent to 1.5931 per dollar.
"The yield on the country's zero-coupon bonds due January 2010 fell 12 basis points, or 0.12 percentage point, to 15.05 percent, according to Banco Votorantim."
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
"Last Updated: July 16, 2008 00:04 EDT"
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U.K. Stocks Decline as Banks Shares Slump to 10-Year Low
By Sarah Jones
"July 15 (Bloomberg) -- U.K. stocks retreated to the lowest since 2005, led by Royal Bank of Scotland Plc and Barclays Plc as bank shares tumbled to a 10-year low."
"RBS shares lost more than 5 percent, sending the FTSE 350 Banks Index to the lowest since October 1998 following a slump in U.S. financial firms yesterday. Kazakhmys Plc led a retreat by mining companies after the copper producer said it isn't considering a reverse takeover and base metals fell in London."
"The FTSE 100 declined 76.7, or 1.5 percent, to 5,223.7 in London at 9:05 a.m. The benchmark has fallen 22 percent since a June 2007 high, the common definition of a bear market, led by financial companies as global credit losses topped $415 billion."
"``Wider concerns about the credit squeeze are certainly weighing on the market,'' said James Hughes, market analyst at CMC Markets in London. ``Although much of this is U.S. driven, the impact is certainly being felt worldwide.''"
"The FTSE All-Share Index sank 1.4 percent, while the FTSE 350 Banks Index dropped 3.2 percent. Ireland's ISEQ Index fell to a 2003 low, down 2.9 percent."
"RBS, Britain's second-largest bank, lost 5.4 percent to 170.3 pence, falling for a fourth day. Barclays Plc, the U.K.'s second-bank, retreated 3.7 percent to 259.75 pence."
The U.S.-based Standard & Poor's 500 Banks Index yesterday had its worst one-day decline since it was created in 1989 after the collapse of IndyMac Bancorp Inc. spurred concerns more lenders are vulnerable to bad home loans.
`Credit Crunch'
"Allied Irish Banks Plc lost 5 percent to 7.22 euros in Dublin, the lowest since 1997. Credit Suisse Group AG slashed its price estimate to 9.50 euros from 15 euros. Anglo Irish Bank Plc fell 4.9 percent to 4.15 euros, the lowest since 2003. Credit Suisse cut its price target for the shares 47 percent to 6 euros."
"``The impact of the credit crunch is yet to filter through to the housing market, with the weakness so far driven by reduced demand,'' London-based analyst Abigail Webb wrote in a note today. ``We see mortgage affordability decreasing and house price declines accelerating.''"
"Kazakhmys, which said yesterday it was in talks about a possible merger with an unidentified company, fell 3 percent to 1,470 pence."
Kazakhstan's biggest copper producer said it isn't planning a transaction that would be classified as a reverse takeover. The company yesterday confirmed it was in ``preliminary'' takeover discussions after the Financial Times reported Russia's OAO Metalloinvest may buy a controlling stake.
"BHP Billiton Ltd., the world's largest mining company, fell 2.6 percent to 1,702 pence. Rio Tinto Group, the world's third- biggest mining company, dropped 2.1 percent to 5,342 pence."
"Aluminum fell for a second trading day on the London Metal Exchange. Zinc, copper and lead also declined."
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
"Last Updated: July 15, 2008 04:21 EDT"
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