"Asian Currencies: Korean Won, Philippine Peso Decline This Week "
By Lilian Karunungan and Judy Chen
Aug. 22 (Bloomberg) -- South Korea's won slumped to a four- year low on speculation government intervention won't halt the currency's slide. The Philippine peso fell this week after the government lowered its economic growth forecast.
"The won fell as much as 0.8 percent to 1,063 against the dollar, the weakest since December 2004, as refiners bought the U.S. currency to import oil and overseas investors sold local stocks. The won rallied as much as 0.6 percent earlier today after the central bank bought the local currency, according to Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second-biggest financial group."
"``The government's action is not strong enough to stop the won's slide,'' said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. ``There have been a lot of purchases of the dollar from the local energy companies.''"
"The won slid 0.7 percent to 1,062.5 per dollar as of 3 p.m. in Seoul, having earlier climbed as high as 1,048, according to Seoul Money Brokerage Services Ltd. It's dropped 4.7 percent this month, the biggest decline among Asia's 10 most-active currencies excluding the yen. The peso fell 0.4 percent to 45.64 per dollar in Manila, according to Tullett Prebon Plc, declining 0.7 percent this week."
"Korea's government continues to ``closely'' monitor the currency for ``drastic'' fluctuations, Vice Finance Minister Kim Dong Soo said on Aug. 20."
"The nation's foreign-currency reserves dropped $10.58 billion in July to $247.52 billion, a fourth straight monthly decline, as policy makers tried to halt a slide in the won. Central banks intervene in the currency market by selling or buying foreign exchange."
Stock Sales
"The won slid 2.2 percent this week, sliding for a fourth consecutive time, the longest stretch in a year. Demand for the currency slumped as overseas investors sold 1,226 billion won ($1.15 billion) more shares than they bought, trimming their holdings on all but one of the five trading days, according to stock exchange data."
"The Kospi index fell every day this week, sliding 4.8 percent to close at 1,496.91. That's the first time it's been below 1,500 since April 2007."
The peso fell for a fourth week and reached the lowest level in more than a month on concern that demand for the nation's exports from its biggest market in the U.S. will decrease.
Rate Meeting
"Slowing economies are ``a global concern of central banks,'' said Roland Avante, treasurer at Chinatrust (Philippines) Commercial Bank in Manila. ``There's a need for currencies to weaken against the dollar. We're still very much reliant on the U.S., they're still one of our major trading partners.''"
"Philippine central bank Governor Amando Tetangco said today that foreign-exchange inflows will increase in the fourth quarter, boosting the peso. The currency is weaker because ``we are in import season,'' he said in an e-mail. ``There's demand for dollars.''"
"Economic Planning Undersecretary Augusto Santos this week said gross domestic product would expand 5.5 percent to 6.4 percent this year, instead of a previously forecast 5.7 percent to 6.6 percent. The U.S. accounts for 16 percent of overseas sales."
Six of the seven economists surveyed by Bloomberg News predict the Philippine central bank will increase borrowing costs next week by a quarter-percentage point to 6 percent. One economist forecast a half-percentage-point increase.
Rupiah Gains
The Indonesian rupiah posted its first weekly gain in three weeks on speculation overseas investors are buying the nation's assets as stocks rise and the government issues Islamic bonds.
The currency made its biggest weekly advance in more than a month on speculation the central bank is seeking a stronger currency to help temper inflation. Foreign investors bought more Indonesian stocks than they sold in two of the past three trading days. The government yesterday closed an offering of 5 trillion rupiah ($546.4 million) of seven- and 10-year sukuk Islamic notes.
"``Funds overall are really positive on the rupiah,'' said Catherine Tan, head of foreign exchange at Thomson Financial Asia in Singapore. ``The central bank has been very pro-active in hiking interest rates to counter inflation. There's also been quite a lot of inflows into the sukuk.''"
"The currency rose 0.2 percent to 9,146 in Jakarta, according to data compiled by Bloomberg. The rupiah, which gained 0.5 percent this week, will strengthen to 9,000 by the end of the year, Tan forecast."
Singapore Dollar Strength
"The central bank raised its benchmark interest rate four times this year to 9 percent after inflation accelerated to 11.9 percent in July, the most in 22 months."
"Singapore's dollar had its best week in two months as the U.S. currency weakened against the euro and the yen, which are part of the trade-weighted basket managed by the Southeast Asian nation's central bank."
"The local dollar was the best performer today among Asia's 10 most-traded currencies outside Japan, rising to a one-week high. The U.S. currency declined this week on concern that widening credit-market losses and a deepening housing recession will prevent the Federal Reserve from raising interest rates."
"``The Singapore dollar's strength'' is because of a drop in the U.S. dollar, said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore. ``There is a pullback in the broader U.S. dollar environment.''"
"The Singapore dollar rose 0.6 percent this week, the most since the five days through June 20, to S$1.4076 against the U.S. dollar. It touched S$1.4028, the strongest level since Aug. 14."
"Elsewhere, the Malaysian ringgit advanced 0.1 percent to 3.3460 compared with 3.3480 last week. The Thai baht fell 0.3 percent to 33.93. Taiwan's dollar declined 0.1 percent to NT$31.370 and Vietnam's dong was at 16,595 per dollar."
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.
"Last Updated: August 22, 2008 04:42 EDT"
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"Commodities Rally, Heading for Biggest Weekly Jump Since 1975 "
By Millie Munshi
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Aug. 21 (Bloomberg) -- Commodities headed for their biggest weekly gain in 33 years as oil rose for a third day and a weakening dollar revived demand for raw materials as alternative assets.
"The Reuters/Jefferies CRB Index of 19 commodities soared 3.7 percent to 405.92 in New York. A settlement tomorrow at that level would mark a 6.2 percent gain for the week, the most since July 1975. The dollar dropped the most against the euro since June today and oil jumped more than $5 a barrel."
The rebound in the CRB and a resumption of the dollar's decline may stall a rout in commodities that has sent the index down 14 percent from a record on July 3. Raw materials priced mostly in dollars often move in the opposite direction of the U.S. currency.
"``The bounce in the dollar had caused people to sell commodities aggressively, and a lot of that selling became overdone,'' said Chip Hanlon, who helps manage $1.5 billion at Delta Global Advisors in Huntington Beach, California. ``This move may tell us that those downtrends are over. Commodities could continue to rally from here.''"
"Every commodity on the CRB except hog futures moved higher today. Nickel jumped 8 percent, cocoa rose 6.8 percent and silver rallied 5.2 percent. Oil and gold had their biggest one- day advances since June. Platinum jumped 6.6 percent, the most since September 2001."
Chinese Demand
"Commodities also gained today on speculation demand will increase from China as the country resumes work at factories and infrastructure projects that were shut or slowed during the Olympics, which end Aug. 24."
"``China's demand is very important to the commodity markets,'' Hanlon said. ``Now that they're ready to start bringing back factories that had been idled, I wouldn't be surprised to see demand start to pick up again there. Their long-term outlook for growth and development hasn't changed.''"
"The CRB has more than doubled since 2001 as demand surged in China, the world's fastest-growing major economy. Mining and oil companies, farmers and other commodity producers have struggled to keep up with rising consumption as harsh weather and labor unrest disrupted supplies."
"``Until either a lot of supply comes on stream or the economy collapses, the bull market will continue,'' said investor Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,100 an ounce."
Top Gainers
Today's gains in the CRB were led by nickel futures that rose to their highest price since July 11.
"Cocoa rose the most since November 2004 in New York. The International Cocoa Organization said a global deficit will be twice as large as previously expected, with output trailing demand by 88,000 metric tons in the year through September, up from an earlier forecast of 41,000 tons."
"``That news, along with dollar weakness, powered strong early-morning gains,'' Dan Vaught, an analyst for Wachovia Securities LLC in St. Louis, said today in a report."
"The UBS-Bloomberg Constant Maturity Commodity Index rose 4 percent to 1,509.546 at 4:45 p.m. A settlement at that price tomorrow would mark a 6.9 percent gain this week, the most since the data starts in 1997."
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
"Last Updated: August 21, 2008 17:10 EDT"
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"German Stocks Gain, Led by Banks; Deutsche Post, Hochtief Climb "
By Stefanie Haxel
"Aug. 22 (Bloomberg) -- German stocks advanced, rebounding from a five-week low, as concern eased that writedowns and credit-related losses in the financial industry will spread."
"Deutsche Postbank AG, Germany's biggest consumer bank by clients, and Commerzbank AG led the gain. Deutsche Post AG rallied the most in two weeks after Goldman Sachs Group Inc. recommended buying shares in Europe's largest mail carrier."
"The benchmark DAX Index added 14.32, or 0.2 percent, to 6,251.28 as of 9:49 a.m. in Frankfurt, trimming this week's decline to 3 percent. DAX futures expiring in September rose 0.2 percent. The HDAX Index of the country's 110 biggest companies advanced 0.3 percent."
"``The situation of financial stocks in the U.S. is slightly calming down,'' Tilmann Galler, a client portfolio manager who helps oversee about $25 billion at JPMorgan Asset Management in Frankfurt, said in a Bloomberg Television interview. ``Although bank shares started very weak, we got first buy recommendations for Lehman Brothers Holdings Inc.''"
"Ladenburg Thalmann & Co. upgraded Lehman shares to ``buy'' from ``neutral'' yesterday and Citigroup Inc. confirmed a ``buy'' recommendation on Aug. 20. Lehman, the largest underwriter of mortgage bonds before the subprime market collapsed, may write down about $4 billion in credit-related investments in the third quarter, JPMorgan Chase & Co. said Aug. 19, triggering a slump in financial stocks."
"Deutsche Postbank gained 59 cents, or 1.5 percent, to 40.78 euros. Commerzbank, Germany's second-biggest bank, rose 27 cents, or 1.4 percent, to 19.885 euros. Larger rival Deutsche Bank AG rose 45 cents, or 0.8 percent, to 56.41 euros."
Deutsche Post
"Deutsche Post increased 36 cents, or 2.3 percent, to 15.40 euros, the steepest advance since Aug. 5. The carrier is among companies looking ``most attractive on both a qualitative and quantitative basis,'' analysts including Keith Hayes wrote in a report to clients today, lifting his recommendation to ``buy'' from ``neutral.''"
"Hochtief AG surged 3.64 euros, or 7.3 percent, to 53.74, the largest gain in almost seven months. The country's biggest construction company may be broken up by its main shareholders, Spanish construction company ACS SA and Russian billionaire Oleg Deripaska, Manager Magazin reported, without saying where it got the information."
"``We don't have any indication that ACS has plans to break up Hochtief,'' Hochtief spokeswoman Jutta Hobbiebrunken said in a telephone interview with Bloomberg News. ``These rumors come up from time to time.''"
To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
"Last Updated: August 22, 2008 04:08 EDT"
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Asian Stocks Set for 4th Week of Losses; Sumitomo Mitsui Drops
By Chen Shiyin and Ian C. Sayson
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"Aug. 22 (Bloomberg) -- Asian stocks fell, driving the region's benchmark index to the lowest since July 2006, after renewed credit-market concerns weighed on financial companies and higher crude prices sent refiners and airlines lower."
"Sumitomo Mitsui Financial Group Inc. slumped 3.6 percent, leading declines among financial shares as Li Ka-shing, Asia's richest man, predicted the credit crunch will worsen. GS Holdings Corp., operator of South Korea's No. 2 refiner, dropped 3.6 percent as Goldman Sachs Group Inc. cut the stock's rating. Korean Air Lines Co., the country's largest carrier, retreated 1.6 percent following the biggest gain in oil in two months."
"``Consumer spending is shrinking from rising oil prices and higher inflation is increasing the costs of companies,'' said Choi Min Jai, who helps manage about $5 billion at KTB Asset Management Co. in Seoul. ``It doesn't help that this is happening while the subprime problem in the U.S. seems to be getting worse.''"
The MSCI Asia Pacific Index lost 0.5 percent to 122.30 as of 4:06 p.m. in Tokyo. Hong Kong is shut as Tropical Storm Nuri approaches the city.
"The Asian benchmark index has dropped 2 percent this week, its fourth-straight retreat. That has taken the gauge's 2008 slump to 22 percent as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion."
"Japan's Nikkei 225 Stock Average fell 0.7 percent to 12,666.04. China's CSI 300 Index lost 1.5 percent, the region's largest retreat. Australia's S&P/ASX 200 Index added 1.2 percent as higher raw-material prices lifted shares of BHP Billiton Ltd."
More Writedowns
U.S. stocks rose yesterday after the biggest three-day advance by energy companies since 2002 overshadowed speculation credit writedowns at financial firms will increase. Standard & Poor's 500 Index futures fell 0.2 percent today.
"A measure of financial shares on the S&P 500 index dropped 1.1 percent yesterday, after Citigroup analyst Prashant Bhatia said Goldman Sachs, Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion in the third quarter."
"Sumitomo Mitsui, Japan's second-largest publicly traded bank by market value, retreated 23,000 yen to 637,000, its lowest close since September 2004. Kookmin Bank, South Korea's No. 1 bank, dropped 6.1 percent to 55,900 won."
"The ``worst is yet to come'' from the global credit crunch, Hong Kong-based Li said yesterday, adding that he has turned ``very conservative about acquisitions.'' His comments echoed those by Nobel Prize-winning economists Myron Scholes and Joseph Stiglitz, who said yesterday the credit squeeze will inflict more pain on global growth."
"Woori Investment & Securities Co., South Korea's fourth- largest brokerage by market value, slipped 2.7 percent to 19,750 won after saying yesterday its July profit tumbled 92 percent from a year earlier."
Worst Is Over?
"``Though the worst period of the financial crisis is probably over, we will still see global financial companies report more losses on asset writedowns,'' said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which manages about $94 billion. ``Given increasing demand in emerging countries, I don't think crude will tumble by a large degree.''"
"Korean Air dropped 650 won to 41,150. Singapore Airlines Ltd., Southeast Asia's biggest carrier, lost 1.9 percent to S$14.72."
"Crude oil for October delivery surged 4.9 percent to $121.18 in New York, the biggest increase since June 6, after a slump in the dollar prompted investors to buy commodities. Oil also rose on increased concern that Russia will disrupt supplies following the signing of a missile-shield agreement between the U.S. and Poland."
"The Reuters/Jeffries CRB Index of 19 commodities soared 3.7 percent, heading towards its biggest weekly gain in 33 years."
"BHP Gains, GS Drops"
"BHP, the world's largest mining company, jumped 3.1 percent to A$40.15, while Rio Tinto Group, the third-biggest, added 1.8 percent to A$121. Woodside Petroleum Ltd., Australia's No. 2 oil and gas explorer, rallied 3.4 percent to A$57."
"GS Holdings fell 1,150 won to 31,250 in Seoul, the lowest close since March 6, 2007. Goldman Sachs cut the stock's recommendation to ``sell'' from ``neutral,'' citing weaker gasoline demand in the U.S. and the prospects of lower diesel imports by China and India. It lowered its rating on the industry to ``cautious'' from ``neutral.''"
"Goldman Sachs also downgraded Macquarie Infrastructure Group, Australia's largest developer of toll roads, to ``sell'' from ``hold,'' after the company said yesterday profit for the year to June 30 fell 55 percent. The shares plunged 10 percent to A$2.23, the largest decline on MSCI's Asian index."
To contact the reporter for this story: Chen Shiyin in Jakarta at schen37@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net
"Last Updated: August 22, 2008 03:38 EDT"
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Copper Heads for First Weekly Gain in Eight on Dollar Weakness
By Glenys Sim
Aug. 22 (Bloomberg) -- Copper headed for its first weekly gain in eight after declines by the U.S. dollar increased investor demand for raw materials.
"The metal, used in plumbing and electrical wiring, also advanced on speculation demand in China, the world's largest consumer, will recover after the Olympic Games. Copper has fallen 3.2 percent the past month, partly on weak seasonal demand."
"``Factories and building projects that were shut during the Olympics will soon resume and this will support prices,'' said Lin Yuhui, research manager at China International Futures Co. in Shenzhen. ``Expectations are for overall demand to slow compared to last year, however it's unlikely to be by much looking at all the construction going on.''"
"Copper for delivery in three months on the London Metal Exchange has risen 6.9 percent this week, the biggest gain since March. The metal gained 0.2 percent to $7,870 a metric ton at 9:30 a.m. in Singapore, after rising 4.5 percent yesterday, the largest advance since January."
"Copper for November delivery rose as much as 1,340 yuan, or 2.3 percent, to 60,690 yuan ($8,867) a ton on the Shanghai Futures Exchange. The most-active contract last traded at 60,570 yuan."
"The dollar traded near the lowest level in more than two weeks against the yen, and headed for its first weekly loss versus the euro ahead of a speech on financial stability by Federal Reserve Chairman Ben S. Bernanke at Jackson Hole, Wyoming."
The currency was at 108.60 yen from 108.43 in New York last yesterday. It also declined to $1.4880 per euro from $1.4899.
"Among other LME-traded metals, aluminum was down 0.3 percent at $2,842 a ton, zinc dropped 3 percent to $1,823 and nickel fell 1.6 percent to $21,150. Lead was unchanged at $1,905 a ton and tin had not traded."
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
"Last Updated: August 21, 2008 22:04 EDT"
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"U.S. Stocks Advance as Chevron, Energy Shares Surge; Banks Fall "
By Eric Martin
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Aug. 21 (Bloomberg) -- U.S. stocks rose for a second day after the biggest three-day advance by energy companies since 2002 overshadowed speculation credit writedowns at financial firms will increase.
Chevron Corp. had the biggest gain in the Dow Jones Industrial Average and Exxon Mobil Corp. climbed 2 percent as oil surged the most in two months. Goldman Sachs Group Inc. and JPMorgan Chase & Co. sent financial shares in the Standard & Poor's 500 Index to a 1.1 percent retreat after Citigroup Inc. predicted more bank losses. Banks and brokers pared their decline by more than half after Ladenburg Thalmann & Co. analyst Richard Bove said Lehman Brothers Holdings Inc. is a takeover candidate.
"The S&P 500 added 3.18 points, or 0.3 percent, to 1,277.72, paring its weekly loss to 1.6 percent. The Dow average increased 12.78, or 0.1 percent, to 11,430.21, and the Nasdaq Composite Index dropped 8.70, or 0.4 percent, to 2,380.38. Seven stocks fell for every five that rallied on the New York Stock Exchange."
"``When you get a couple days of downdraft like we've had, you get a lot of people coming back into the market,'' said Joseph Keating, who helps manage $3 billion as chief investment officer of RBC Bank in Birmingham, Alabama. ``You need to be diversified in the energy space right now.''"
"Energy shares, which led the five-year bull market in stocks that ended in October, have surged 8.1 percent in the past three days. The industry will post third-quarter profit growth of 53 percent, the most among 10 groups in the S&P 500, according to analysts' estimates compiled by Bloomberg."
$500 Billion in Losses
The S&P 500 has dropped 13 percent this year as the worst U.S. housing slump since the Great Depression slowed consumer spending and spurred turmoil in mortgage markets that saddled banks with more than $500 billion of losses.
Oil gained after the signing yesterday of a missile-shield agreement between the U.S. and Poland bolstered concern that Russia may disrupt flow of the fuel. Crude for October delivery added 4.9 percent to $121.23 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange.
"Energy shares in the S&P 500 rose 2.3 percent. Exxon, the largest U.S. oil producer, gained $1.54 to $80.35. Chevron, the second-biggest, advanced $2.06 to $88.52."
"Massey Energy Co. climbed to a three-week high, adding $4.43 to $69.29. UBS AG recommended buying shares of the largest U.S. producer of coal from the Appalachian region, saying its 29 percent slide since a June record was overdone."
Age of Manufacturing
"``We've liked energy for some time,'' Malcolm Polley, who helps oversee about $1 billion as president and chief investment officer at Stewart Capital Advisors, told Bloomberg Television. ``As you get the developing world entering the manufacturing age, their use of energy is going to rise dramatically.'' For the U.S. stock market in 2008, ``the second half probably will look better than the first half.''"
"Goldman Sachs, Morgan Stanley and Lehman will write down a combined $6.4 billion during the third quarter, Citigroup analyst Prashant Bhatia wrote in a report today."
"Lehman may post a third-quarter per-share loss of $3.25, wider than the 41-cent loss Bhatia had predicted earlier. Lehman has the most so-called hard-to-sell assets, at $75.6 billion, followed by Goldman, at $45.2 billion, he said. The hard-to-sell assets include commercial real estate, residential mortgages and leveraged loans."
Lehman Reverses Decline
"Goldman fell $1.83 to $156.42, Morgan Stanley retreated 34 cents to $37.06 and Lehman retreated 1 cent to $13.72. JPMorgan lost 74 cents to $36.26."
Lehman reversed a decline of as much as 8.7 percent after Bove raised the shares to ``buy.''
"Sovereign Bancorp Inc. tumbled on increased concern its Fannie Mae and Freddie Mac stakes, valued at $623 million on June 30, will be wiped out in a government rescue. The second-largest U.S. savings and loan dropped 51 cents to $8.27."
"American International Group Inc., the world's biggest insurer, retreated $1.02, or 4.9 percent, to $19.78, the lowest price since October 1995."
"Financial shares in the S&P 500 lost 1.1 percent, the most among 10 industries, as the cost of protecting bank debt from default rose to a five-week high. Concern grew after the Financial Times reported Lehman failed to sell a 50 percent stake to Korea Development Bank and China's Citic Securities Co. They walked away after deciding Lehman demanded too high a price, the FT said, citing people familiar with the Asian lenders."
`Treading Carefully'
"``Smart investors are treading carefully,'' said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which oversees about $60 billion. ``Investors are confused about the outlook for the economy over the next few months.''"
"Goldman Sachs said countries that account for half of the world's economy face a recession a year after the credit crisis began. The U.S., Japan, the 15-nation euro area and the U.K. are ``either in recession or face significant recession risks in the months ahead,'' Goldman's London-based international economist Binit Patel said in a report to clients."
"Fewer than 913 million shares traded on the NYSE, the least for a full session since Dec. 27 and 34 percent less than the three-month daily average."
"The benchmark index for U.S. stock options fell 2.9 percent to 19.82. The VIX, as the Chicago Board Options Exchange Volatility Index is known, measures the cost of using options as insurance against S&P 500 declines."
Victoria's Secret
"Limited Brands Inc. surged the most since October 2001, jumping $2.31, or 13 percent, to $20.28. The owner of the Victoria's Secret lingerie chain reported profit that fell less than analysts estimated and said full-year profit will exceed its earlier projections. Limited Brands shares gained the most in the S&P 500."
"JDS Uniphase Corp. had the biggest loss in the stock index, falling $1.48, or 12 percent, to $10.42. The maker of phone equipment for companies such as AT&T Inc. posted an unexpected loss because of declining sales of network-testing products."
"Supervalu Inc. and Safeway Inc. retreated after UBS AG said inflation and slower consumer spending will cut into profit at supermarkets. Supervalu, the second-biggest U.S. grocery chain, slumped $1.65 to $24.52. Safeway, the No. 3, slipped 85 cents to $25.67. Kroger Co., their larger competitor, fell 51 cents to $28.03."
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
"Last Updated: August 21, 2008 16:26 EDT"
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"China Stocks Drop for Third Week; China Shipping, Huaneng Fall "
By Zhang Shidong
"Aug. 22 (Bloomberg) -- China's stocks fell for a third week, led by transport and power companies after oil prices jumped, renewing concerns fuel costs will erode earnings."
"China Shipping Development Co., the nation's biggest oil carrier, dropped 3.8 percent to the lowest since March 2007. Huaneng Power International Inc., the listed unit of China's largest power group, sank 7.6 percent and Guangdong Electric Power Development Co. slumped by the maximum daily limit."
"``Fuel costs are still staying at a very high level and that will put a lot of pressure on corporate margins,'' said Lu Yizhen, who oversees the equivalent of $732 million as chief investment officer at Tianhong Asset Management Co. in Beijing. ``At this stage, there isn't a big possibility of a strong rebound or rally in the market.''"
"The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 39.05, or 1.6 percent, to 2,404.93 at the close. The index dropped 1.7 percent this week as investors stayed away to watch the Olympic Games in Beijing."
"The benchmark index has sunk 12 percent since the day the Olympics started. Investors traded a daily average of 57.5 billion yuan ($8.4 billion) on China's two stock markets during the two-week Games, almost half the 101 billion yuan daily average for July."
Speculation
"Stocks jumped 7.9 percent on Aug. 20, the most in four months, after a JPMorgan Chase & Co. report said the government may spend as much as 400 billion yuan to boost growth."
"Speculation that China's government will use foreign- currency reserves for a stock-market stabilization fund is ``seriously flawed,'' said Merrill Lynch & Co. yesterday."
"The CSI 300 is down 55 percent this year, the most among 88 major benchmark indexes tracked by Bloomberg, because of concern measures to cool inflation will damp economic and profit growth."
"China Shipping slid to 14.76 yuan, the lowest since April 2, 2007. China Cosco Holdings Co., the country's largest container line, lost 1.7 percent to 14.72 yuan."
"Crude oil for October delivery yesterday surged 4.9 percent to $121.18, the biggest increase since June 6 on the New York Mercantile Exchange, as the dollar slumped. The Aug. 20 signing of a missile-shield agreement between the U.S. and Poland also heightened concern Russia may disrupt the flow of oil."
"The Reuters/Jeffries CRB Index of 19 commodities soared 3.7 percent, headed for its biggest weekly gain in 33 years."
Guangdong Electric
"Guangdong Electric, the biggest operator of power plants in the southern Chinese province bordering Hong Kong, retreated to 5.94 yuan. Huaneng Power fell to 6.24 yuan. China State Shipbuilding dropped to 61.62 yuan."
"China State Shipbuilding Co., the publicly traded unit of the country's biggest shipbuilder, dropped 5.5 percent even after it said second-quarter profit surged almost 10-fold as rising demand for vessels allowed it to increase contract prices."
"The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, eased 1.1 percent to 2,405.23. The Shenzhen Composite Index lost 1.8 percent to 676.76."
The following companies were among the most active in China's markets. Stock symbols are in brackets after companies' names.
"China International Marine Containers Co. (000039 CH), the world's largest maker of shipping containers, lost 0.18 yuan, or 2 percent, to 8.64, dropping for a second day. The company said first-half profit fell 22 percent to 1.03 billion yuan because of the nation's slowing export growth."
"Dongfang Electric Corp. (600875 CH), China's second-biggest maker of power equipment, retreated 0.83 yuan, or 3 percent, to 26.87, the second day of declines. The company said first-half profit tumbled almost two-thirds after factories and assets were destroyed by the country's worst earthquake in 58 years. Net income plunged 63 percent to 452.5 million yuan."
"Industrial & Commercial Bank of China Ltd. (601398 CH), the nation's biggest listed lender and also known as ICBC, added 0.07 yuan, or 1.5 percent, to 4.83. ICBC earned a record 64.5 billion yuan in the first half to become the world's most profitable bank as a focus on domestic lending helped it avoid the global credit crisis. Net income rose 57 percent in the period."
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
"Last Updated: August 22, 2008 04:53 EDT"
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Mortgage Rates for Best Borrowers Rise as Bonds Slump (Update2)
By Jody Shenn
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"Aug. 21 (Bloomberg) -- A decline in mortgage bond prices is raising interest rates on U.S. home loans, even for borrowers least prone to default."
"Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years, as yields on bonds guaranteed by Fannie Mae and Freddie Mac increased to almost the highest since 1986 relative to Treasuries. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, making them mostly ``prime'' mortgages."
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
"``New home buyers are going to have to get credit at reasonable terms for the decline to stop,'' said Christopher Mayer, a real-estate professor at Columbia University's business school in New York. ``The price issue alone is having a very, very big effect.''"
"As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida."
Record High
"Applications for mortgages fell 34 percent to the lowest level since 2000 in the week ended Aug. 15 from a year earlier, partly because of the increase in loan rates, according to the Washington-based Mortgage Bankers Association."
"Investors were demanding 2.08 percentage points more in yield to own Fannie's current-coupon 30-year fixed-rate mortgage securities rather than 10-year Treasuries as of 4:15 p.m. in New York, according to data compiled by Bloomberg. The spread reached a 22-year high of 2.37 percentage points in March, before narrowing to 1.52 percentage point on May 20."
"About $4.5 trillion of so-called agency mortgage bonds are outstanding, compared with $4.8 trillion of Treasuries. Agency bonds, those guaranteed by Fannie, Freddie and U.S. agency Ginnie Mae, accounted for 94 percent of home-loan securities issued in the first half of this year, up from about 50 percent a year earlier, according to newsletter Inside MBS & ABS."
"By packaging loans into the securities and selling them to investors such as mutual funds, lenders receive cash to make new loans. The yields that investors are willing to accept help determine the rates lenders need to charge borrowers to make the bond sales profitable."
New Deal
"Yields on mortgage-backed debt guaranteed by Washington- based Fannie and Freddie of McLean, Virginia, widened relative to Treasuries as concern escalated that the companies may stop or slow purchases amid concern they don't have enough capital to weather the housing slump. Fannie and Freddie own or guarantee almost half of the $12 trillion of U.S. residential mortgages outstanding."
Paulson received authority from Congress last month to pump unlimited amounts of capital into Fannie and Freddie in an emergency after the debt yields rose and their shares tumbled 90 percent from a year earlier. Freddie paid its highest yields over Treasuries on record in a debt sale Aug. 19.
"Fannie, the largest mortgage-finance provider, was created as part of Franklin D. Roosevelt's New Deal in the 1930s and became a publicly owned company in 1968. Freddie was started in 1970, when the economy was strained by the Vietnam War."
A `Detriment'
"Yield spreads on agency mortgage bonds narrowed in March after the Federal Reserve backed a rescue of Bear Stearns Cos. by JPMorgan Chase & Co., showing the government would act as a backstop against the failure of a large financial institution."
"Spreads widened in the past three months as financial companies reduced purchases as writedowns and credit losses reached more than $500 billion, depleting capital at banks and brokers, said Scott Simon, head of mortgage-bond investing at Newport Beach, California-based Pacific Investment Management Co., the world's largest fixed-income manager."
"``If spreads were to remain wide it would force prices lower,'' said Ben Hough, president of Hatteras Financial Corp., the Winston-Salem, North Carolina-based investment trust that went public in April and owns about $5 billion of agency mortgage securities. ``It's definitely a detriment to the housing recovery.''"
"The economy's growth is forecast to slow to 1.5 percent this year, the slowest since 0.8 percent growth in 2001."
Outside People
"Home foreclosure filings rose 55 percent in July and banks repossessed almost three times as many homes as a year earlier as falling prices made it harder to sell or refinance, according to RealtyTrac Inc., an Irvine, California-based seller of foreclosure data. U.S. home prices fell 15.8 percent in May, the most since at least 2001, according to the S&P/Case-Shiller home- price index."
"Wider yield spreads also reflect increases seen in other debt markets. The extra yield investors demand to own investment- grade corporate bonds rather than Treasuries rose to a record 3.11 percentage points yesterday, according to Merrill Lynch & Co.'s U.S. Corporate Master index."
"Until the relationship between Treasury yields and loan rates improves, a housing recovery may remain elusive, Columbia's Mayer said. With a ``normally'' functioning mortgage market, the cost of owning a home in Los Angeles would look 11 percent more attractive than renting, based on 20-year averages related to monthly payments, tax advantages and potential appreciation, according to a preliminary study he released this month. Instead, it's 6 percent less appealing, he found. In the Washington, D.C. area, the figure goes from 8 percent more, to 5 percent less."
"``What you really need is outside people to come in to make loans that haven't been hit with all the losses that the other people have been hit with,'' Mayer said. ``The problem is those people don't exist, at least today.''"
To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net
"Last Updated: August 21, 2008 16:29 EDT"
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U.K. Economic Growth Stagnated in Second Quarter (Update1)
By Jennifer Ryan
"Aug. 22 (Bloomberg) -- The U.K. economy stagnated unexpectedly in the second quarter, ending the nation's longest stretch of economic growth in more than a century."
"Gross domestic product was unchanged from the previous quarter, the Office for National Statistics said, compared with a previous estimate for growth of 0.2 percent. Economists had expected a 0.1 percent expansion, according to the median estimate of 34 economists. Growth was 1.4 percent from a year earlier, the weakest since 1992."
"The report adds to pressure on the Bank of England to set aside concerns about inflation and cut interest rates. Policy makers led by Governor Mervyn King left their key rate unchanged for the past four months after the consumer price index surged to 4.4 percent, more than double the government's target."
"``There is still worse to come,'' Ross Walker, an economist at Royal Bank of Scotland Group Plc in London, said in a Bloomberg Television interview. ``We may have to wait until early 2009 before we get the first rate cut because the inflation situation still looks pretty forbidding.''"
"The pound fell 0.7 percent against the dollar to $1.8608, continuing a fall from a peak above $2.11 in November."
"Europe's second-largest economy emerged from its last recession in 1991 and then shrank for a single quarter in the three months ending in June 1992. Britain's pace of expansion from a year ago compares with 1 percent in Japan, 1.8 percent in the U.S., and 1.5 percent in the nations using the euro."
Blow for Brown
"Today's report is a blow to Prime Minister Gordon Brown, who is battling to regain popularity with voters and quell talk of challenges to his authority from within the ruling Labour Party. He said on Aug. 20 that the government will announce measures to revive the economy next month."
The economy faltered after banks choked off credit following the collapse of the subprime mortgage market in the U.S. Goldman Sachs Group Inc. economists said yesterday tighter credit markets will push half of the world economy into a recession.
"``The bank needs to prevent a fairly shallow recession from getting worse,'' said Stewart Robertson, an economist at Morley Fund Management in London, said before the report was published. ``They need to cut rates this year.''"
Consumer Contraction
"Household spending and construction shrank after the housing market slumped the most in at least a quarter century. Service industries, which range from banks to airlines, grew at the slowest rate since 1995."
"Banks worldwide have shed more than 10,000 jobs and suffered $500 billion in writedowns and credit losses after the collapse of the subprime mortgage market in the U.S. last year. A report yesterday by recruitment firm Morgan McKinley showed London job openings in the financial-services industry fell 16 percent in July from a year earlier."
"While living costs are rising in Britain, the value of homes is plummeting as banks withhold funding for mortgages. Residential property prices fell 8.8 percent in July from a year earlier, the most in at least a quarter century, mortgage lender HBOS Plc said on Aug. 7."
"The bank's inflation forecasts show the consumer price index will fall below the 2 percent target in two years if interest rates remain unchanged. The nine members of the central bank's Monetary Policy Committee split three ways on how to steer interest rates this month, minutes of the meeting showed."
Rates Debate
David Blanchflower voted for a quarter point cut while Timothy Besley wanted an increase of the same amount. The majority of the committee including King opted for no change.
"The simultaneous risks to inflation and growth mean that the bank is preparing to cut rates but will wait to do so until next year, said George Buckley, an economist at Deutsche Bank AG in London."
"Yesterday, he said he now expects four quarter-point rate reductions next year, starting in February. Previously he was counting on two."
"``The bank signaled that inflation is going to stay high for quite some time,'' he said. ``They might want to see evidence that it has come down or is peaking before they opt for a rate cut.''"
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
"Last Updated: August 22, 2008 04:46 EDT"
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"Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show "
"Aug. 22 (Bloomberg) -- The cost of protecting European corporate bonds from default fell, according to traders of credit-default swaps."
"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings dropped 4 basis points to 563, according to JPMorgan Chase & Co. prices at 7:21 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and a rise indicates deterioration in the perception of credit quality; a decline, the opposite."
"The Markit iTraxx Europe index of 125 companies with investment-grade ratings declined 1.25 basis points to 98.75, JPMorgan prices show."
"A basis point on a credit-default swap contract protecting 10 million euros ($14.8 million) of debt from default for five years is equivalent to 1,000 euros a year."
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements."
"The CDX North America Investment Grade Index closed at 144.75 in New York, according to Lehman Brothers Holdings Inc."
To contact the reporter on this story: Michael Shanahan in London at mshanahan3@bloomberg.net
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Philippine Peso Heads for Fourth Weekly Decline; Bonds Rise
Aug. 22 (Bloomberg) -- The Philippine peso headed for a fourth weekly decline after the government lowered its economic growth forecast for a second time this year. Bonds rose.
"The currency this week reached the lowest in more than a month on concern that demand for the nation's exports from its biggest market in the U.S. will decrease. The central bank, which raised its benchmark interest rate by 25 basis points in June and 50 points in July, next meets on Aug. 28."
"Slowing economies are ``a global concern of central banks,'' said Roland Avante, treasurer at Chinatrust (Philippines) Commercial Bank in Manila. ``There's a need for currencies to weaken against the dollar. We're still very much reliant on the U.S.''"
"The currency fell 0.4 percent to 45.65 per dollar at 11:46 a.m. in Manila, according to Tullett Prebon Plc, heading for a 0.8 percent decline this week. It dropped 2.8 percent in the previous three."
"Economic Planning Undersecretary Augusto Santos on Aug. 20 said gross domestic product would expand 5.5 percent to 6.4 percent this year, instead of a previously forecast 5.7 percent to 6.6 percent. The U.S. accounts for 16 percent of overseas sales."
Bonds Gain
"Second-quarter growth was slower than the 5.2 percent expansion in the first, Manila Times today reported, citing Economic Planning Secretary Ralph Recto."
The central bank last month said second quarter growth was probably 5.6 percent.
All six economists surveyed by Bloomberg News predict the central bank will increase borrowing costs next week by a quarter-percentage point to 6 percent.
"The yield of the benchmark five-year bond fell 25 basis points to 7.681 percent as of the 11:15 a.m. fixing in Manila at Philippine Dealing & Exchange Corp. The price of the 9 percent note due July 2013 rose 1.0190, or 102 pesos per 10,000 pesos face amount, to 105.3654. A basis point is 0.01 percentage point."
To contact the reporter on this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net
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"Italian Stocks Update: Banco Popolare, Telecom Italia, Fiat "
By Francesca Cinelli
"Aug. 22 (Bloomberg) -- Italy's S&P/MIB Index rose for the first time in four sessions, adding 59, or 0.2 percent, to 27,817. Futures expiring in September increased 66, or 0.2 percent, to 27,910."
The following were among the most active stocks on the Italian market today. Share symbols are in parentheses.
"Banco Popolare SC (BP IM), the bank created by Popolare di Verona's purchase of Banca Popolare Italiana, added 29.3 cents, or 2.3 percent, to 12.93 euros. Lehman Brothers upgraded the stock to ``equal weight'' from ``underweight'' because of an improved capital position and a forecast profitability turnaround at Banca Italease SpA (BIL IM). Popolare is Italease's biggest shareholder."
"Italcementi SpA (IT IM) and Buzzi Unicem SpA (BZU IM), Italy's biggest cement makers, increased 2 percent to 9.09 euros and 1.5 percent to 13.32 euros respectively. Construction stocks were the best performers among the 18 industry groups in Europe's Dow Jones Stoxx 60 Index today. UniCredit Markets & Investment Banking cut its price estimate on Buzzi Unicem to 18.2 euros from 18.7 euros and maintained its ``buy.''"
"Fiat SpA (F IM), Italy's biggest manufacturer, added 11.4 cents, or 1.1 percent, to 10.26 euros. Citigroup analyst John Lawson, who rates the stock a ``buy,'' wrote in a report that ``nothing in recent data post-second quarter relevant to Fiat's progress concerns us at this stage,'' suggesting that the shares are underperforming."
"Commerzbank initiated coverage of the stock with a ``reduce'' rating and a price estimate of 9.7 euros, citing increased risk due to exposure to Brazil and Italy and the potential impact of higher raw material prices."
"Pirelli & C SpA (PC IM) increased 0.7 percent to 43.65 cents. Pirelli Tyre SpA, the company's tire unit, announced the acquisition of stakes in two local subsidiaries in Turkey, Pirelli Turk Lastikleri and Celikord, for a total 43 million euros. The company bought a further 1 percent stake in Celikord from other shareholders. ``The operation should slightly reduce the weight of minority interests,'' Marco Cristofori, an analyst at Cheuvreux who rates the stock an ``underperform,'' wrote in a report. Euromobiliare Sim reiterated a ``buy'' rating on the stock."
"Seat Pagine Gialle SpA (PG IM), Italy's largest publisher of phone directories, surged 0.48 cents, or 4.9 percent, to 10.25 cents. ``Reiterating full-year guidance has been a good signal'' to the market, Massimiliano Romano, head of research for Concentric Italy in Milan, told Bloomberg Television. ``We prefer a wait-and-see approach to verify Seat's capacity to deliver on targets.''"
"Telecom Italia SpA (TIT IM), Italy's biggest phone company, declined for a fourth day, losing 0.9 percent to 1.06 euros. The company's mobile unit was fined 300,000 euros ($446,000) for failing to inform clients about costs for a new internet-access offer, the Rome-based authority said on its Web site. ``There is a short-term, small rebound possibility related to the recent share weakness,'' Marco Greco, an analyst at Mediobanca Securities who rates the stock a ``neutral,'' wrote."
To contact the reporters on this story: Francesca Cinelli in Milan at fcinelli@bloomberg.net
"Last Updated: August 22, 2008 04:13 EDT"
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South Korea May Use Price Controls to Cool Inflation (Update1)
By Seyoon Kim
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"July 15 (Bloomberg) -- South Korea's government indicated it may implement price controls to cool decade-high inflation, a day after the central bank warned wage demands could ignite a ``vicious cycle'' of spiraling prices."
"Government ministries should ``restore'' departments that are in charge of controlling prices and devise ways to stabilize costs of products under their responsibility, Vice Finance Minister Kim Dong Soo said at the start of the first of a new weekly meeting of ministries to discuss fighting inflation."
"``In order to minimize the effect on ordinary people's lives, we need to take micro-economic measures'' as well as macro measures such as monetary and liquidity controls to damp inflation, Kim said. If rising prices boost ``inflationary expectations, that can push up wages and add a significant burden on the economy,'' he said."
"President Lee Myung Bak's administration said in March it would monitor the prices of 52 products including rice, pork, milk and shampoo. In the past month the government has turned its focus from sustaining growth to fighting inflation that has sent confidence among consumers to a seven-year low."
"``There will be a limit to what the government can do in terms of prices,'' said Kwon Young Sun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, citing the risk that price controls could distort the market mechanism. ``Still, it's signaling constantly it's focused on stabilizing inflation.''"
Bank of Korea Deputy Governor Kim Byung Hwa yesterday said wage demands could ignite a ``vicious cycle'' of spiraling prices.
Inflationary Expectations
"``Policy makers want to prevent any inflationary expectations from spreading, even though I don't see a sign of those yet,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``If those expectations materialize, it could cause a spiral where people demand more wages because of rising prices and that pushes up consumer prices further.''"
"Record fuel costs and a weaker won drove consumer prices up 5.5 percent in June from a year earlier. In response, policy makers stepped up efforts to stem a drop in the South Korean won that has fanned price pressures by increasing the cost of imported goods including oil."
"The won declined 0.2 percent to 1,006.30 per dollar as of 1:11 p.m. in Seoul. The currency last week advanced 4.8 percent as the finance ministry and central bank said they would use the nation's $258 billion of foreign reserves to support the won. For the year it is down 7 percent against the dollar."
Import Prices
"South Korea's import prices rose 49 percent in June from a year earlier, the most in more than 10 years, the central bank said today. That's hurting the terms of trade, a measure of export prices relative to import prices, and squeezing corporate profit and household income."
"The Bank of Korea kept interest rates unchanged at the highest level in seven years at 5 percent last week, adding it expects inflation to accelerate and economic growth to slow."
To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
"Last Updated: July 15, 2008 00:14 EDT"
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"Goldman, Merrill Lose in Bank Rally Since July 15: Chart of Day "
By Bradley Keoun
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"Aug. 22 (Bloomberg) -- Goldman Sachs Group Inc. and Merrill Lynch & Co. have missed out on the rally in bank and brokerage stocks since July 15, the day Second Curve Capital LLC's Thomas Brown says financial stocks ``made their bottom.''"
"The CHART OF THE DAY shows the divergence between the two brokerage firms and the benchmark Amex Securities Broker/Dealer Index, which climbed almost 11 percent through yesterday since falling to the lowest level in almost four years on July 15. Goldman, the biggest U.S. securities firm by market value, fell 0.9 percent in that period, while Merrill, the third-largest, was down 0.4 percent."
"Lehman Brothers Holdings Inc., the No. 4 firm, gained 3.8 percent even while buffeted by speculation it may be forced to sell shares or businesses to raise capital. Morgan Stanley, the No. 2 investment bank, surged 20 percent. The KBW Bank Index, which tracks 24 commercial bank stocks, is up 28 percent. Its worst-performing member, Bank of New York Mellon Corp., climbed 0.4 percent."
"Brown, who as a Donaldson, Lufkin & Jenrette bank analyst topped Institutional Investor's analyst ranking eight times in the 1980s and '90s, believes financial-stock ``valuations are compelling,'' according to his blog, bankstocks.com. When it comes to Goldman and Merrill, investors aren't so sure."
To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.
"Last Updated: August 22, 2008 00:01 EDT"
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"U.K. Stocks Rise, Led by Tullow Oil on Crude; HBOS Advances "
By Sarah Jones
"Aug. 22 (Bloomberg) -- U.K. stocks climbed, led by energy companies and banks as crude oil headed for its biggest weekly gain in more than two months and investors speculated declines this week were overdone."
"Cairn Energy Plc and Tullow Oil Plc advanced for a third day. HBOS Plc, Britain's biggest mortgage lender, and Lloyds TSB Group Plc led financial companies higher. FirstGroup Plc gained 1.9 percent after rival Arriva Plc reported higher profit."
"The FTSE 100 Index gained 40.4, or 0.8 percent, to 5,410.6 at 9:37 a.m. in London, trimming this week's loss to 0.8 percent. The FTSE All-Share Index added 0.8 percent, while Ireland's ISEQ Index increased 1.6 percent."
"Tullow Oil, the U.K. explorer with the most exploration licenses in Africa, gained 1.1 percent to 808 pence as crude oil headed for its biggest weekly increase in more than two months."
"Cairn Energy, the U.K. explorer operating in India, Tunisia and Albania, added 1.5 percent to 2,920 pence."
"HBOS gained 3.9 percent to 270.25 pence. Lloyds TSB, the U.K.'s largest provider of checking accounts, added 3.3 percent to 289.25 pence. Bradford & Bingley Plc, Britain's biggest lender to landlords, added 1.9 percent to 52.5 pence."
"The Stoxx 600 Banks Index, the worst performer among the region's 18 industries this year, closed yesterday at the lowest in a month and traded at its cheapest relative to earnings in two weeks. The index has dropped 6.2 percent this week, headed for its worst week in seven months."
"FirstGroup, Britain's biggest train operator, added 1.9 percent to 573 pence. Arriva, operator of the U.K.'s longest train route, said first-half profit jumped 32 percent to 47.3 million as the company added buses, won a rail-route franchise and attracted travelers switching to public transit as gasoline prices rose."
The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.
"Collins Stewart Plc (CLST LN), the U.K. stockbroker that's considering a takeover approach, jumped 11 percent to 97.75 pence on speculation Nomura Holdings Inc. may bid for the company."
"``Nomura seems to be popular consensus in terms of the rumored bidder for Collins Stewart, but I'm not so sure,'' Jeremy Grimes, a London-based analyst at Arden Partners Ltd. said."
"Charlotte Kirkham, a London-based spokeswoman for Collins Stewart, declined to comment. Paul Abrahams a spokesman for Nomura wasn't immediately available to comment."
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
"Last Updated: August 22, 2008 04:48 EDT"
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"BOJ Sees Few Signs of Wage-Price Spiral, Minutes Show (Update2) "
By Mayumi Otsuma
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"Aug. 22 (Bloomberg) -- Bank of Japan board members said there are few signs that rising commodity prices will prompt companies to increase wages and fan inflation, minutes show."
"``Many members said that wages had not risen markedly in Japan and to date there had been no sign of second-round effects from the rise in prices of petroleum products and food,'' the minutes of the July 14-15 meeting released today in Tokyo said."
"Rising fuel and food costs are sapping corporate profits and household income, putting a strain on an economy that may already be in a recession. The bank this week described growth as ``sluggish'' for the first time in a decade, indicating it won't raise the key interest rate from 0.5 percent anytime soon."
"``The BOJ is more concerned about growth than inflation as it becomes clearer that Japan is in a recession,'' said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. ``The monetary policy gridlock will continue for a while.''"
The yen traded at 108.98 per dollar as of 12:39 p.m. in Tokyo from 108.48 before the minutes were published.
"Japan's inflation is outstripping gains in wages. Consumer prices excluding fresh fruit, fish and vegetables climbed 1.9 percent in June from a year earlier, the fastest pace in a decade. Average paychecks increased 0.4 percent."
`Restraining Wages'
"Companies will probably keep ``restraining wages for the time being'' because profits are declining, some of the policy board's seven members said at the July meeting."
Central bank Governor Masaaki Shirakawa said this week that inflation isn't spreading because ``the pace of wage increases is weak.'' He said the economy's recovery may be delayed because of the rise in food and fuel costs and weakening exports.
Minutes published from other central banks this week show the difficulties policy makers are facing as economic growth slows and inflation accelerates.
"The Bank of England was split three ways in August, with one member arguing for higher rates to tame prices and another voting for a cut to stave off a recession. Australia's central bank said it may soon cut rates for the first time in seven years to avoid a deeper slowdown, after increasing borrowing costs to a 12-year high of 7.25 percent in March to quell inflation."
"Japan's economy, the world's second largest, shrank at an annual 2.4 percent pace in the three months ended June 30. Economists surveyed say the nation will grow an annualized 0.6 percent this quarter and some predict a second contraction."
May `Shrink Again'
"The economy may ``shrink again in the current quarter and that would mark a technical recession,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``For the reminder of the year, the BOJ's expected to be on hold.''"
"Still, the Bank of Japan also said this week that the economy should eventually resume expanding as global prices ease and overseas economies recover."
"Some board members said the bank should be wary that keeping rates low for a long time could overstimulate the economy once growth picks up, according to the minutes."
"Japan has kept the key rate, the lowest among major economies, unchanged since doubling it to 0.5 percent in February 2007. The U.S. Federal Reserve's benchmark is 2 percent and the European Central Bank raised its rate to 4.25 percent this month."
"The central bank began releasing the minutes sooner than previously this month as part of measures announced in July to improve policy transparency. Minutes are now published after they are approved by the board members at the next meeting. Previously, they were sometimes approved two meetings later."
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
"Last Updated: August 21, 2008 23:42 EDT"
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Platinum-Gold Ratio Ready to Revisit 2001 Low: Chart of the Day
By Rachel Graham
"Aug. 22 (Bloomberg) -- Platinum's price relative to gold is showing a pattern not seen since the economic slowdown in 2001, suggesting the cost of the silver-colored metal may have further to drop, according to Fortis Bank SA/NV and VM Group."
"The CHART OF THE DAY shows the ratio between the two metals has dropped to 1.74 from 2.38 in May as platinum prices plunged 37 percent from the record $2,301.50 an ounce reached March 4. The ratio reached a low of 1.43 in 2001."
"Gold tends to be favored by investors as a haven when growth slows, while platinum is reliant on economic expansion, Fortis and VM Group said in a report published Aug. 20. About half of demand comes from carmakers, who use the metal in autocatalysts, according to Johnson Matthey Plc. The figure takes into account recycling from used autocatalysts."
"A ratio of 1.5 and gold at $800 an ounce would suggest platinum will drop to $1,200, according to the report. That would cut costs for carmakers. Such a price isn't ``obviously absurd'' because that's what people were paying a year ago, Fortis and VM Group said. The World Bank expects global growth to slow to 2.7 percent this year, from 3.7 percent in 2007."
"Gold traded at $833.30 an ounce as of 5:44 p.m. in London yesterday, while platinum was at $1,449.50 an ounce."
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
"Last Updated: August 21, 2008 19:01 EDT"
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European Stocks Advance; U.S. Index Futures Are Little Changed
By Sarah Thompson
"Aug. 22 (Bloomberg) -- European stocks rose, led by banks and construction companies, as investors speculated declines this week were overdone and reports signaled takeovers may increase. U.S. index futures were little changed, while Asian shares retreated."
"UBS AG gained 2.2 percent, and HBOS Plc increased 2.7 percent. Hochtief AG increased 11 percent after Manager Magazin said Germany's biggest builder may be broken up. SSL International Plc climbed 6.1 percent after Goldman Sachs Group Inc. recommended buying shares in the maker of Durex condoms and Scholl shoes on speculation it may be a takeover target."
"Europe's Dow Jones Stoxx 600 Index added 0.5 percent to 279.9 at 9:11 a.m. in London, trimming this week's decline to 2.6 percent. Futures on the Standard & Poor's 500 Index added less than 0.1 percent, while the MSCI Asia Pacific Index fell 0.5 percent."
"``This is a technical rebound after a difficult week,'' said Clemence Bounaix, an analyst at Richelieu Finance in Paris, which oversees $6.2 billion. ``Today, we expect a very mixed trading session. There are still worries about the oil price.''"
"European stocks are set for their worst week in more than a month, as concern spread that banks will post more losses and reports signaled faster-than-forecast inflation in the U.S. and Germany, Europe's biggest economy."
Oil is poised for its biggest weekly rally since June 6 as the dollar slumped and a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil.
National Markets
National benchmark indexes rose in 15 of the 17 western European markets that were open. Germany's DAX added 0.2 percent and France's CAC 40 climbed 0.5 percent. The U.K.'s FTSE 100 gained 0.4 percent.
"UBS, the largest Swiss bank, gained 2.2 percent to 22.3 francs. HBOS, the U.K.'s biggest mortgage bank, increased 2.8 percent to 279.25 pence."
"The Stoxx 600 Banks Index, the worst performer among the region's 18 industries this year, closed yesterday at the lowest in a month and traded at its cheapest relative to earnings in two weeks. The index has dropped 6.2 percent this week, headed for its worst week in seven months."
"More than $13 trillion has been erased from equity markets worldwide in 2008 as accelerating inflation, record oil and $505 billion in writedowns and credit-related losses threaten economic growth."
"Yesterday, crude for October delivery surged $5.62, or 4.9 percent, to settle at $121.18 a barrel, the biggest increase since June 6. Futures are down 18 percent from a record $147.27 reached on July 11."
"Hochtief, SSL"
"Hochtief climbed 11 percent to 55.46 euros. Germany's biggest builder may be broken up by its main investors, Spanish construction company ACS SA and Russian billionaire Oleg Deripaska, Manager Magazin reported, without saying where it got the information."
"``We don't have any indication that ACS has plans to break up Hochtief,'' Hochtief spokeswoman Jutta Hobbiebrunken said in a telephone interview with Bloomberg News."
SSL International gained 6.1 percent to 464.75 pence after Goldman Sachs added the stock to its ``conviction buy'' list.
"``The group could prove an attractive bolt-on deal for a larger group seeking to increase exposure to branded consumer health products,'' London-based analyst Robert Waldschmidt wrote in a note dated yesterday. In addition, a trading update scheduled for Oct. 16 ``could lead to upward revisions to consensus estimates.''"
"Arriva, Dragon Oil"
"Arriva Plc added 5.4 percent to 751.5 pence. The operator of the U.K.'s longest train route said first-half profit jumped 32 percent as the company added buses, won a rail-route franchise and attracted travelers switching to public transit as gasoline prices rose."
Dragon Oil Plc jumped 6.7 percent to 333 pence after the Dubai-based petroleum producer with operations in Turkmenistan said first-half profit gained 34 percent as crude prices rose to a record.
"BHP Billiton Ltd., the world's largest mining company, dropped 1.1 percent to 1,652 pence, Rio Tinto Group, the third- biggest, slipped 2.2 percent to 5,029 pence."
The Australian Competition and Consumer Commission is seeking more information about BHP Billiton's $142 billion hostile takeover bid for Rio Tinto.
"The competition regulator seeks ``further information on certain competition issues which have arisen from the ACCC's market enquiries to date,'' the commission said in a statement to the Australian stock exchange."
SSAB Svenskt Staal AB gained 1 percent to 149 kronor. The world's largest supplier of high-tensile steel said it will invest 5.3 billion kronor ($843 million) to boost the production of quenched and tempered steels in Sweden and the U.S.
Rentokil Initial Plc tumbled 8.1 percent to 67.75 pence. The world's biggest pest-control provider reported a 68 percent plunge in second-quarter profit and said it will take up to five years to turn around sliding earnings.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
"Last Updated: August 22, 2008 04:19 EDT"
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Canada Banks May Post Biggest Profit Drop Since 2002 (Update3)
By Sean B. Pasternak
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Aug. 21 (Bloomberg) -- Canada's six biggest banks may report the steepest profit decline in more than five years as revenue from equity markets slows and costs rise for bad loans.
"Royal Bank of Canada, Toronto-Dominion Bank and four other companies may say that profit before one-time items fell by a median 9 percent in the fiscal third quarter, according to estimates by Andre-Philippe Hardy at RBC Capital Markets. That would be the biggest drop since the fourth quarter of 2002."
"Earnings retreated from the record year-earlier quarter, when profits were buoyed by revenue from capital markets. In the past year, merger and acquisition advice fees among the banks tumbled an average 83 percent, and equity underwriting fell 8 percent, said TD Newcrest analyst Jason Bilodeau."
"``We have a slowing economy around the world,'' said Robert Callander, who helps manage $1.9 billion for Caldwell Securities Ltd. in Toronto and has been buying bank shares. ``I'm not just looking at the quarterly results, but looking out nine months from now.''"
"Canadian Imperial Bank of Commerce, the fifth-biggest bank by assets, may post a 28 percent decline, the largest among the group, Hardy said. The Toronto-based lender may write down about C$1.5 billion ($1.4 billion) for investments tied to the U.S. housing market, adding to C$6.6 billion in the past year."
"``If you're investing to be cautious and defensive, that wouldn't be a pick,'' Callander said."
Stocks Fall
"Bank of Montreal and Scotiabank report results on Aug. 26, followed by CIBC on Aug. 27 and Royal Bank, Toronto-Dominion and National Bank of Canada on Aug. 28."
"The nine-member S&P/TSX Banks Index has dropped 14 percent this year. Bank of Montreal has plunged 21 percent, followed by declines of 17 percent at CIBC, 15 percent for Toronto-Dominion, 11 percent for Royal Bank, and 7.8 percent for National Bank. Scotiabank is down 4.9 percent this year."
"Canadian banks have announced about C$10 billion in writedowns for bad debt since the beginning of 2007, a fraction of the $252.8 billion total announced by North American companies including Citigroup Inc. and Merrill Lynch & Co."
"Subprime holdings comprised less than 5 percent of mortgages at Canada's banks, compared with 20 percent in the U.S., according to the Canadian Association of Accredited Mortgage Professionals."
"The banks probably will almost double the amount set aside for loan losses compared with last year, reflecting fewer recoveries and more loans to the U.S. BMO Capital Markets analyst Ian de Verteuil expects the six banks combined to set aside C$1.21 billion for soured loans, compared with C$716 million a year earlier."
`Tough Backdrop'
"``Outside of the capital market-related writedowns, the combination of weakening operating fundamentals, a softening global economy and the toughest of year-over-year comparisons will conspire to produce a very tough backdrop for the Canadian banks,'' said Merrill Lynch & Co. analyst Sumit Malhotra."
"Royal Bank, Canada's largest lender, may write down C$600 million for its U.S. investments, Hardy said. The Toronto-based bank may report profit before one-time items fell to C$1.06 a share from C$1.08 a year earlier, he said."
"Toronto-Dominion, the second-largest bank by assets, said last month earnings would be reduced C$96 million because a trader in London incorrectly priced credit derivatives. The bank is the only large Canadian lender to avoid debt writedowns."
"Toronto-Dominion, which bought Commerce Bancorp Inc. in March for $7.1 billion to double its U.S. consumer-banking presence, will report profit before one-time items narrowed to C$1.45 a share from C$1.60 a year earlier, according to Hardy."
"Profits, Dividends"
"Bank of Montreal will post profit of C$1.22 a share, a 16 percent decline, while Bank of Nova Scotia may post profit of C$1.04 a share, an increase of less than 1 percent, Hardy said. National Bank of Canada, the smallest of the six, will report a 7.4 percent decline to profit of C$1.37 a share, he said."
"The banks may all keep their dividends unchanged, analysts Hardy and Malhotra said. If so, it would be the first time in six years that none increased quarterly payouts."
"Royal Bank fell 2 cents to C$45.28 at 4:10 p.m. in trading on the Toronto Stock Exchange. Toronto-Dominion fell 44 cents to C$59.29. Scotiabank rose 1 cent to C$47.81. Bank of Montreal fell 46 cents to C$44.33. CIBC fell 90 cents to C$58.43, and National Bank fell 42 cents to C$48.20."
To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.
"Last Updated: August 21, 2008 16:19 EDT"
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Pemex July Oil Output Falls 12% as Cantarell Declines (Update2)
By Thomas Black
"Aug. 21 (Bloomberg) -- Petroleos Mexicanos, the third- largest supplier of oil to the U.S., said production fell 12 percent in July from a year earlier as output declined at Cantarell, the world's largest offshore oil field."
"July's daily output dropped to 2.782 million barrels from 3.166 million barrels in the same month last year, the state- owned oil company, known as Pemex, said today on its Web site. In June, Pemex produced 2.839 million barrels."
"Daily production at Cantarell, which first began pumping oil in 1979, plummeted 36 percent in July to 973,668 barrels from 1.526 million, according to an Energy Ministry Web site."
Faster-than-expected declines at Cantarell prompted Pemex to lower its oil production target in July for the second time in as many months. The Mexico City-based company reduced its 2008 daily production target to 2.8 million barrels from 2.9 million.
"For the first seven months of the year, Pemex produced 2.845 million barrels a day, 10 percent less than a year earlier. Cantarell's daily production was 1.127 million barrels, 472,000 barrels lower than the same period last year, Pemex said."
Crude exports in July fell 22 percent to 1.377 million barrels a day from a year earlier. Daily exports were 1.415 million barrels in June.
"Soaring Exports, Prices"
"Exports jumped to $5.24 billion in July because of higher prices, a 49 percent increase from a year ago. Oil export prices averaged $122.79 a barrel in July, almost double the $64.54 a barrel a year ago."
"Pemex is the third-largest oil supplier to the U.S. Canada and Saudi Arabia are the first- and second-largest suppliers of crude to the U.S., Department of Energy data show."
"Imports of fuels, including gasoline and diesel, more than doubled to $2.73 billion from $1.28 billion a year ago."
"One bright spot for Pemex has been its increase in natural- gas production, which rose 11 percent in July to 6.902 billion cubic feet per day."
"To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net."
"Last Updated: August 21, 2008 15:46 EDT"
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U.K. Second Quarter GDP Levels: Summary (Table)
By Mark Evans
Aug. 22 (Bloomberg) -- Following is the summary of second quarter U.K. GDP from the Office for National Statistics in London:
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
------------- Quarterly % changes ------------
Chained Volume Indices
GDP market prices 0.0% 0.3% 0.6% 0.6% 0.9%
Gross value added* 0.0% 0.3% 0.6% 0.5% 0.8%
Implied Deflators
Gross domestic expenditure 0.8% 1.1% 0.5% 0.6% 1.0%
GDP market prices 0.6% 0.8% 0.5% 0.6% 1.0%
Gross value added* 0.8% 0.7% 0.7% 0.8% 1.2%
Value Indices at Current Prices
GDP market prices 0.6% 1.1% 1.0% 1.2% 1.9%
Gross value added* 0.8% 1.0% 1.2% 1.3% 2.0%
=============================================================================
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
Final Consumption Expenditure
Households -0.1% 1.1% 0.4% 0.9% 0.7%
General Government 0.4% 0.9% 0.2% 0.3% 0.5%
Gross fixed capital formation -5.3% -1.5% 2.2% 2.7% -1.9%
Exports -0.5% 0.6% -1.3% 1.3% 1.0%
Imports -1.4% -1.2% -0.7% 4.5% -0.9%
-------------- Annual % changes --------------
Chained Volume Indices
GDP market prices 1.4% 2.3% 2.8% 3.1% 3.3%
Gross value added* 1.4% 2.2% 2.7% 3.1% 3.2%
Implied Deflators
Total domestic Expenditure 2.9% 3.2% 2.3% 2.3% 2.9%
GDP market prices 2.6% 3.0% 2.7% 2.6% 3.4%
Gross value added* 3.0% 3.4% 3.1% 2.7% 3.4%
Value Indices at Current Prices
GDP market prices 4.0% 5.3% 5.6% 5.8% 6.7%
Gross value added* 4.4% 5.7% 5.9% 5.9% 6.7%
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
Final Consumption Expenditure
Households 2.3% 3.0% 2.7% 3.6% 2.8%
General Government 1.9% 2.0% 1.7% 2.0% 2.3%
Gross fixed capital formation -2.1% 1.4% 4.4% 4.9% 5.7%
Exports 0.2% 1.6% 0.2% 2.1% -11.3%
Imports 1.0% 1.6% 4.0% 4.6% -10.0%
---------------- Index Level -----------------
Chained Volume Indices
GDP market prices 112.9 112.9 112.6 111.9 111.3
Gross value added* 112.9 112.9 112.6 112.0 111.4
Implied Deflators
Total domestic Expenditure 113.9 113.0 111.8 111.3 110.7
GDP market prices 113.4 112.7 111.8 111.3 110.6
Gross value added* 113.8 113.0 112.1 111.4 110.5
Value Indices at Current Prices
GDP market prices 128.0 127.2 125.8 124.5 123.1
Gross value added* 128.5 127.5 126.3 124.7 123.1
=============================================================================
2Q 1Q 4Q 3Q 2Q
2008 2008 2007 2007 2007
=============================================================================
---- Chained Volume Measure (GBP/Million) ----
"GDP market prices 315,629 315,510 314,662 312,926 311,170"
"Gross value added* 280,425 280,419 279,663 278,129 276,635"
Final Consumption Expenditure
" Households 195,910 196,034 193,960 193,224 191,590"
" General Government 64,981 64,722 64,141 63,990 63,775"
" Gross fixed capital formation 54,751 57,813 58,669 57,417 55,901"
" Exports 85,101 85,495 84,945 86,075 84,972"
" Imports 95,195 96,581 97,767 98,462 94,221"
=============================================================================
NOTE: Gross Domestic Product (GDP) and its main components incorporate
annual chain linking.
*: At basic prices
SOURCE: National Statistics
To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net
"Last Updated: August 22, 2008 04:30 EDT"
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Dollar Advances Against Euro After Industrial Output Report
By Gavin Finch
"Aug. 22 (Bloomberg) -- The dollar rose against the euro by the most in a week after a government report showed European industrial orders fell the most in more than six years in June, adding to evidence of a deepening regional economic slowdown."
The U.S. currency's advance pared the biggest weekly decline since July 11 on speculation Federal Reserve Chairman Ben S. Bernanke will today signal he favors keeping borrowing costs low as credit-market losses widen. The yen fell from a two-week high versus the dollar as Japanese investors bought higher-yielding assets abroad.
"``The market is biased towards the dollar at the moment and negative on the outlook for the euro-region economy,'' said Steve Barrow, a currency strategist with Standard Bank in London. ``Overall people are more optimistic on the dollar than pessimistic.''"
"The dollar climbed 0.4 percent to $1.4839 per euro by 10:08 a.m. in London, from $1.4899 yesterday. The U.S. currency rose 0.7 percent to 109.17 yen from 108.43. It was up 1 percent against the pound at $1.8599."
"Industrial orders in the 15-nation euro area fell 7.4 percent from a year earlier, the most since December 2001, the European Union statistics office in Luxembourg said today."
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
"Last Updated: August 22, 2008 05:13 EDT"
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"Canadian Dollar Rises Most Since April as Crude Oil, Gold Surge "
By Chris Fournier
Aug. 21 (Bloomberg) -- Canada's dollar gained the most in four months as commodities including crude oil and gold surged and the U.S. dollar weakened against most major currencies.
The Canadian currency was the biggest gainer versus the greenback as crude oil for October delivery leaped more than $5 a barrel and gold climbed the most in almost two months. The appeal of oil and other commodities as a hedge against inflation grew as the U.S. dollar fell against the euro. Commodities make up about half of Canada's exports.
"``It's this huge move we've had in crude today'' that's driving up the Canadian dollar, said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto. ``Resources generally have flared higher.'' He predicts the Canadian dollar will trade at C$1.05 by year end."
"Canada's dollar increased 1.6 percent to C$1.0427 per U.S. dollar at 4:51 p.m. in Toronto, the third consecutive increase and the largest since April 16, from C$1.0599 yesterday. One Canadian dollar buys 95.91 U.S. cents."
The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials climbed for a fourth straight day. The U.S. dollar fell against all 16 of the most-traded currencies except Taiwan's dollar and the South Korean won.
"Crude oil for October delivery rose for a third day, increasing 5.6 percent to $121.46 a barrel, on bets Russian supplies may be disrupted because of rising tension with the U.S. Gold futures for December delivery advanced 3.2 percent to $842.10 an ounce."
"``The oil price has come back,'' said David Watt, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``That's an environment that's good for the Canadian dollar.''"
Loonie and Oil
"Canada's dollar, dubbed the loonie because of the aquatic bird on the one-dollar coin, surged 17 percent in 2007 as commodity prices soared. It stalled this year as the economy of the U.S., the nation's largest trading partner, cooled and as oil fell from the record high of $147.27 a barrel set July 11. The Canadian currency touched C$1.0728 on Aug. 12, the weakest level since August 2007."
"``We thought the recent sell-off had been a little too violent,'' said Watt. So far this year, the loonie has dropped against all but four of the 16 most-active currencies."
"Watt predicts Canada's dollar will trade at C$1.06 by year end. The currency will slide to C$1.10 by the end of 2009, according to the median forecast of 30 economists surveyed by Bloomberg News."
"Consumer prices rose 3.4 percent from July 2007, Statistics Canada said today in Ottawa, in line with economists' median forecast in a Bloomberg survey. Prices increased 0.3 percent from June, less than economists' 0.4 percent forecast."
Bank of Canada
"``The data is unlikely to influence the Bank of Canada's monetary policy,'' said Jack Spitz, managing director of foreign-exchange trading at National Bank of Canada in Toronto. U.S. dollar flows and commodity prices will determine the direction of the Canadian currency, he said."
Canada's central bank held the overnight lending rate at 3 percent for a second consecutive meeting on July 15. The bank's target for annual inflation is 2 percent.
The U.S. dollar has risen against all of the other major currencies this month on speculation the U.S. economic slowdown is spreading to other industrialized countries.
"The yield on the two-year Canadian government bond rose 6 basis points, or 0.06 percentage point, to 2.85 percent. The price of the 2.75 percent security due in December 2010 decreased 11 cents to C$99.76. The 10-year bond's yield increased 2 basis points to 3.6 percent."
Bond Yield Outlook
"The two-year bond's yield will rise to 3.09 percent by the end of this year, while the 10-year bond's yield will increase to 3.82 percent, according to the median forecasts of economists surveyed by Bloomberg News."
"The yield advantage of the 10-year U.S. Treasury note compared with similar-maturity Canadian government bonds was 23 basis points, down from 36 basis points on Aug. 11. The Canadian 10-year bond yielded 36 basis points more than its U.S. counterpart on Jan. 22."
"Canadian government bonds have returned 4.6 percent in 2008, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 4 percent this year."
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
"Last Updated: August 21, 2008 16:56 EDT"
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European Notes Head for Weekly Loss on Bets ECB Won't Cut Rates
Aug. 22 (Bloomberg) -- European government notes are poised to snap a four-week advance on bets central bank policy makers will delay interest-rate cuts to focus on curbing inflation rather than boosting growth.
"The drop pushed the yield on two-year German notes, the securities most sensitive to interest-rate changes, to the highest level in two weeks as futures traders scaled back expectations the European Central Bank will cut its benchmark rate. Oil headed for its biggest weekly increase in more than two months after rising almost 5 percent yesterday."
"``The rise in oil prices weighs on the bond market,'' said Allan von Mehren, a fixed-income strategist in Copenhagen at Danske Bank AS, the biggest lender in Denmark. ``It puts inflation concerns back on the agenda.''"
"The two-year note yield rose 1 basis point to 4.09 percent by 7:25 a.m. in London, leaving it 10 basis points higher in the week. The price of the 4.75 percent note this week fell 0.15, or 1.5 euros per 1,000-euro ($1,488) face amount, to 101.12."
"The yield on the 10-year German bund, Europe's benchmark government security, was 2 basis points higher in the week at 4.18 percent. Yields move inversely to bond prices."
Bunds had their biggest decline in more than a month yesterday after an index of manufacturing in the 15-nation euro- region economy unexpectedly increased this month.
"Royal Bank of Scotland Group Plc's composite index was at 48, from 47.8 in July, as the manufacturing component climbed, Reuters Plc reported. Economists in a Bloomberg News survey forecast a drop to 47.7."
"The manufacturing index rose to 47.5 from 47.4 in July, while the services index slipped to 48.2 from 48.3."
Futures Trend
Traders have reduced bets the ECB will lower interest rates this year on mounting evidence the slowdown sparked by the collapse of the U.S. housing market is spreading to the region. The implied yield on the December Euribor futures contract has gained 2 basis points this week to 5.06 percent.
The European Union said Aug. 14 gross domestic product fell 0.2 percent in the second quarter. Separate data last week showed the German and French economies shrank.
The central bank left its main interest rate at 4.25 percent on Aug. 7 while ECB President Jean-Claude Trichet said that growth will be ``particularly weak'' through the second and third quarters.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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"Corn, Soybeans Fall as Gains Seen Excessive, U.S. Exports Drop "
By Jae Hur
Aug. 22 (Bloomberg) -- Corn declined for the first day in five and soybeans fell as investors bet their gains early this week were excessive and as U.S. weekly export sales dropped. Wheat also slid.
"Corn had advanced 12.4 percent this week before today and soybeans gained almost 11 percent, heading for a second straight weekly gain on concern the crops were seeded late. Flooding in Iowa and Illinois, the biggest U.S. producers of both crops, delayed spring seeding in May and June, and some fields had to be replanted."
"``It's purely a technical adjustment,'' Kazuhiko Saito, a commodity strategist at Interes Capital Management, said today in Tokyo by telephone. A decline in weekly export sales of U.S. corn and soybeans also put pressure on the market, he said."
Corn for December delivery fell as much as 1.1 percent to $6.1075 a bushel in after-hours electronic trading on the Chicago Board of Trade and traded at $6.1275 as of 2:53 p.m. in Singapore.
"The contract rose 3.8 percent yesterday after touching $6.25, the highest since July 21. The price has soared 69 percent in the past year, reaching a record $7.9925 on June 27."
"Soybeans for November delivery dropped as much as 11.75 cents, or 0.9 percent, to $13.3625 a bushel and last traded at $13.415. Futures gained 3.7 percent yesterday after touching $13.70, the highest since Aug. 1. The most-active contract has surged 59 percent in the past 12 months, reaching a record $16.3675 on July 3."
Late Plantings
Corn and soybeans rose yesterday on speculation that late plantings of U.S. crops have increased the risk of damage from early frosts before the harvests start next month. Frost damage before the harvest would curb yields by damaging corn kernels and soybean pods.
"U.S. export sales of corn almost halved to 196,602 tons for the week ended Aug. 14 from the previous week, the Department of Agriculture said yesterday. The sales were less than the 250,000 tons to 400,000 tons expected by Citigroup."
"Soybean sales experienced net cancellations of 81,131 tons, the second straight week of negative sales, as the crop approaches the end of its marketing year on Aug. 31. Citigroup had expected sales of 100,000 tons to 300,000 tons."
Commodities headed for their biggest weekly gain in 33 years as oil traded near a three-week high and a weakening dollar revived demand for raw materials as alternative assets.
"The Reuters/Jefferies CRB Index of 19 commodities added 3.7 percent to 405.92 in New York yesterday. A settlement at that level today would mark a 6.2 percent gain for the week, the most since July 1975. The dollar headed for its first weekly decline against the euro since July 11, while oil traded near $121 a barrel after jumping more than $5 yesterday."
Bull Market
"``Until either a lot of supply comes on stream or the economy collapses, the bull market will continue,'' according to investor Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel."
"Wheat for December delivery lost as much as 1.7 percent to $9.0625 a bushel and stood at $9.08 as of 3:00 p.m. Singapore time. The contract, which added 2.5 percent yesterday, has gained 26 percent in the past year, touching a record $13.495 on Feb. 27."
"Before today, wheat gained 8.6 percent this week, extending gains for the second week."
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
"Last Updated: August 22, 2008 03:28 EDT"
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Yen Falls Against Dollar as Japan Investors Seek Higher Yields
By Kosuke Goto and Ron Harui
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Aug. 22 (Bloomberg) -- The yen fell from a two-week high against the dollar on speculation Japanese investors took advantage of their currency's gains to buy higher-yielding assets abroad.
The currency also retreated from the strongest in three months versus the euro as more traders bet the Bank of Japan may cut interest rates. The dollar was still headed for its biggest weekly drop against the yen in three months on speculation Federal Reserve Chairman Ben S. Bernanke will today signal he favors keeping borrowing costs low as credit losses widen.
"``Japanese investors are sending money abroad constantly,'' said Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``This is stemming any appreciation of the yen.''"
"The yen fell to 109.03 per dollar by 8:20 a.m. in London, from 108.43 in New York yesterday. It slid to 162.31 per euro from 161.57. The dollar has fallen 1.4 percent versus the yen this week, the biggest decline since May 9, and yesterday reached 108.14, the weakest since Aug. 5. The U.S. currency strengthened to $1.4885 per euro from $1.4899."
"Japan's currency may move between 105 and 110 per dollar this quarter, Umemoto said."
"Japanese investors were net buyers of 769.8 billion yen ($7 billion) in foreign assets in the week ending Aug. 16, the Ministry of Finance said yesterday. The BOJ held its target lending rate at 0.5 percent this week, compared with a 4.25 percent benchmark rate in Europe and 7.25 percent in Australia."
`In a Rush'
"``Japanese institutional investors such as life insurance companies are in a rush to sell the yen,'' said Takeshi Tokita, vice president of foreign-exchange sales in Tokyo at Mizuho Corporate Bank, a unit of Japan's second-largest publicly traded lender by assets. ``The current dollar-yen level is providing them a good opportunity to sell.''"
"There is a 9 percent chance Japan's central bank will reduce its overnight lending rate to 0.25 percent by Dec. 31, according to calculations by JPMorgan Chase & Co. using overnight swaps. The odds were 3 percent on Aug. 12."
"The dollar was set for its first weekly loss versus the euro since July 11 on speculation a deepening housing recession and a rebound in oil prices will prolong the nation's economic slump. Bernanke will speak on financial stability at the Federal Reserve Bank of Kansas City's annual symposium in Jackson Hole, Wyoming at 8 a.m. local time."
"``Since the dollar has been recently heavily bought, the markets are more likely to use Bernanke's bearish comments as an excuse to sell,'' said Tomoko Fujii, head of Japan economics and strategy in Tokyo at Bank of America Corp., the second-largest U.S. bank. It may fall to 107.50 yen and $1.4950 per euro today, Fujii forecast."
Commodities Surge
"The New Zealand and Australian currencies headed for weekly gains on speculation the biggest jump in commodity prices in 33 years will boost exports. The Reuters/Jefferies CRB Index of 19 commodities has surged 6.2 percent since Aug. 15, poised for the biggest weekly gain since July 1975."
"New Zealand's dollar rose 0.4 percent to 71.82 U.S. cents and earlier touched 72.17, the highest level since Aug. 7. Australia's dollar climbed 0.3 percent to 87.86 U.S. cents and earlier reached 88.14, the strongest since Aug. 12."
"``With oil and commodity prices rising, the dollar bearish sentiment is prevailing in the markets,'' said Masaki Fukui, a senior economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd. ``The U.S. will keep facing the financial instability and deteriorating economic fundamentals.''"
"The dollar may fall to 105 yen by Sept. 30, Fukui forecast."
"The ICE futures exchange's Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, fell for a second day to 76.169."
Oil Rebound
"Crude oil prices surged 5.4 percent yesterday to $121.18 a barrel in New York, the biggest increase since June 6. The euro- dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations based on their value changes. A reading of 1 would mean they moved in lockstep."
"The euro may decline before a European report today which may show industrial orders dropped for a second month in June, providing more evidence that growth in the 15-nation economy is faltering."
"Industrial orders in the euro area dropped 1.1 percent in June after a 3.5 percent decline in May, according to a Bloomberg News survey of economists. The European Union statistics office releases the data at 11 a.m. in Luxembourg."
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
"Last Updated: August 22, 2008 03:43 EDT"
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Treasuries Little Changed Before Bernanke's Speech on Stability
By Kim-Mai Cutler and Wes Goodman
Aug. 22 (Bloomberg) -- Treasuries were little changed before a speech by Federal Reserve Chairman Ben S. Bernanke today that may outline plans for stabilizing financial markets.
"Notes fell earlier as economists forecast the government will revise U.S. second-quarter gross domestic product growth to 2.8 percent, from 1.9 percent, in a report Aug. 28. Oil headed for its biggest weekly gain in two months, and traders increased forecasts for inflation, yields indicate."
"``There's a feeling that yields have had a decent run,'' said Padhraic Garvey, head of investment-grade strategy at ING Bank NV in Amsterdam. ``There's a lot of panic priced in. If it gets into the market mindset that a safety bid can be reduced, then bonds can sell off.''"
"The yield on the 10-year note rose 1 basis point to 3.85 percent as of 9:30 a.m. in London, according to BGCantor Market Data. The price of the 4 percent security maturing in August 2018 declined 3/32, or 94 cents per $1,000 face amount, to 101 7/32."
"Bernanke is scheduled to speak about financial stability today as part of Fed Bank of Kansas City's annual symposium in Jackson Hole, Wyoming."
"Ten-year yields will climb to 4.03 percent by year-end, according to a Bloomberg News survey of economists, with the most recent forecasts given the heaviest weightings. They are little changed from seven days ago."
"``There's some possibility that there will be an unwinding of the flight to quality,'' said Yasutoshi Nagai, chief economist in Tokyo at Daiwa Securities SMBC Co., part of Japan's second- largest brokerage. ``This level of yields is too low to buy.''"
TIPS Spread
"The difference between yields on 10-year Treasury Inflation Protected Securities, or TIPS, and conventional notes widened to 2.23 percentage points from 2.16 percentage points on Aug. 18. The figure reflects the inflation rate that traders expect for the next decade."
"Crude oil rallied 6.8 percent this week, the most since the period ended June 6."
"Two-year notes headed for a second weekly gain, as spreading credit-market losses tempered the outlook for an increase in interest rates by the Fed."
"Yields were near the lowest since May as speculation rose that the government will take over mortgage-finance providers Fannie Mae and Freddie Mac. Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm, is a candidate for a hostile takeover, Ladenburg Thalmann & Co. analyst Richard Bove said yesterday."
"``Two-year yields can break below 2 percent again,'' ING's Garvey said. ``We don't think this banking crisis is over. There are still skeletons in the closet that are liable to come out as the economy gets weaker. Inflation will also come off its highs.''"
Two-Year Yields
The two-year yield increased 1 basis point to 2.32 percent. It has fallen 15 basis points in two weeks.
"The Fed will probably raise its 2 percent target for overnight bank lending in January, futures contracts on the Chicago Board of Trade indicate. A month ago, traders predicted a rate increase in December."
Banks and securities companies have reported more than $500 billion of writedowns and credit losses linked to the collapse of the subprime mortgage market since the start of 2007.
"The difference in yield between U.S. two- and 10-year notes widened this week to 1.52 percentage points as investors favored shorter maturities, those more sensitive to Fed interest-rate policy. The spread increased from 1.17 percentage points in June."
"U.S. consumer prices rose 5.6 percent in July from a year before, the fastest pace in 17 years. The increase means that 10- year Treasury notes yield about 1.77 percentage points less than the pace of inflation."
"The notes have yielded about 2 percentage points more than the inflation rate on average over the past decade, according to data compiled by Bloomberg."
To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.
"Last Updated: August 22, 2008 04:36 EDT"
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"Korean Won Slides to Four-Year Low as Refiners, Foreigners Sell "
By Kim Kyoungwha and Judy Chen
Aug. 22 (Bloomberg) -- South Korea's won slumped to the weakest level in almost four years on speculation government intervention won't halt the currency's slide as refiners buy dollars to import oil and overseas investors sell local stocks.
"The won fell as much as 0.8 percent to 1,063 against the dollar, the weakest since December 2004. It rallied as much as 0.7 percent earlier today after the central bank bought the local currency, according to Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second-biggest financial group."
"``The government's action is not strong enough to stop the won's slide,'' said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. ``There have been a lot of purchases of the dollar from the local energy companies.''"
"The won slid 0.72 percent to 1,062.5 per dollar as of 3 p.m. in Seoul, having earlier climbed as high as 1,048, according to Seoul Money Brokerage Services Ltd. It's dropped 4.8 percent this month, the biggest decline among Asia's 10 most-active currencies excluding the yen."
"Korea's government continues to ``closely'' monitor the currency for ``drastic'' fluctuations, Vice Finance Minister Kim Dong Soo said on Aug. 20. The nation's foreign-currency reserves dropped $10.58 billion in July to $247.52 billion, a fourth straight monthly decline, as policy makers tried to halt a slide in the won. Central banks intervene in currency markets by selling or buying foreign exchange."
Stock Losses
"The won slid 2.1 percent this week, declining for a fourth consecutive time. Demand for the currency slumped as overseas investors sold 1,226 billion won ($1.15 billion) more shares than they bought, trimming their holdings on all but one of the five trading days, according to stock exchange data."
"The Kospi index fell every day this week, sliding 4.8 percent to close at 1,496.91. That's the first time it's been below 1,500 since April 2007."
"Crude oil climbed for a fourth straight day to $121.52 a barrel in New York, heading for its biggest weekly increase in more than two months. Higher import costs fueled demand for dollars from refiners. South Korea imports all of the fuel it uses and is the world's fifth-largest buyer of oil. The commodity has rebounded almost 10 percent from a 15-week low of $111.34 it touched on Aug. 15."
"Government bonds fell, ending a three-day gain, after the surge in crude prices spurred concern inflation will quicken."
"The yield on the 5.25 percent note due March 2013 rose 9.4 basis points to 5.85 percent, according to Korea Exchange. The price fell 0.32, or 32 won per 10,000 won face amount, to 100.01. A basis point is 0.01 percentage point."
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net
"Last Updated: August 22, 2008 04:03 EDT"
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"Australian, N.Z. Dollars Heads for Weekly Gain on Commodities "
By Ron Harui and Tracy Withers
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Aug. 22 (Bloomberg) -- The Australian and New Zealand dollars headed for a weekly gain on rising commodity prices and prospects for a prolonged U.S. economic slowdown that may prompt the Federal Reserve to delay raising interest rates.
"The currencies climbed the most in almost a week in Asian trading as commodities were poised for their biggest five-day gain in 33 years, improving the outlook for the South Pacific economies. New Zealand's dollar rose for a second day as traders pared bets that the Reserve Bank of New Zealand will lower borrowing costs in coming months."
"``There have been some voices out there saying the commodities rally isn't over yet and the market is receptive to that,'' said Michael Gordon, strategist at Westpac Banking Corp. in Wellington. ``More likely the gains are a reaction to the weaker U.S. dollar.''"
"Australia's dollar climbed 1.2 percent, the most since Aug. 18, to 87.90 U.S. cents at 4:36 p.m. in Sydney from 86.89 cents in Asia yesterday and 86.61 cents in New York late last week. It touched 88.14 cents, the strongest since Aug. 12. The currency gained 1.4 percent to 95.72 yen from 94.41 yen."
"New Zealand's dollar rose 1.1 percent, the most since Aug. 18, to 71.90 U.S. cents from 71.15 cents late in Asia yesterday and 70.60 cents in New York on Aug. 15. It reached 72.17 cents, the highest since Aug. 7. The currency advanced 1.3 percent to 78.27 yen from 77.30 yen."
"The Reuters/Jefferies CRB Index of 19 commodities rose 3.7 percent. A settlement today at that level would mark a 6.2 percent gain for the week, the most since July 1975."
World's Biggest Economy
"The price of gold, Australia's third most-valuable commodity export, increased 2.9 percent yesterday. Raw materials account for 60 percent of Australia's exports and sales of commodities including lumber make up 70 percent of New Zealand's overseas shipments."
"The U.S. dollar fell after the New York-based Conference Board said yesterday that its index of leading economic indicators dropped by the most since August 2007, adding to signs the world's biggest economy is slowing."
"Fed funds futures on the Chicago Board of Trade show a 75 percent chance that the Fed will keep its overnight lending rate between banks unchanged at 2 percent at its December meeting, up from 65 percent a week ago."
"New Zealand's dollar, known as the kiwi, was set for a second weekly advance versus the yen as commodities gained, buoying investor demand for the nation's higher-yielding assets."
"``The New Zealand dollar should find buying support today on the back of resurgent commodity prices,'' said Khoon Goh, senior markets economist at ANZ National Bank Ltd. in Wellington. ``Further slow grinds up for the kiwi are likely.''"
RBNZ Rate Bets
"Benchmark interest rates are 8 percent in New Zealand and 7.25 percent in Australia, compared with 2 percent in the U.S. and 0.5 percent in Japan, making them favorites for international investors seeking higher returns."
"Traders are betting that the RBNZ will cut its benchmark rate by 1.45 percentage points over the next 12 months, down from 1.53 percentage points a week earlier, according to a Credit Suisse Group index based on interest-rate swaps."
"Australian government bonds declined, pushing the yield on the benchmark 10-year note up 6 basis points, or 0.06 percentage point, to 5.80 percent. The price of the 5.25 percent security maturing in March 2019 fell 0.483, or A$4.83 per A$1,000 face amount, to 95.716."
"New Zealand government debt rose, pushing the yield on the three-year security down 2 basis points to 6.18 percent. The price of the 6 percent note due in November 2011 climbed 0.066, or NZ$0.66 per NZ$1,000 face amount, to 99.485. Yields move inversely to prices."
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net
"Last Updated: August 22, 2008 02:48 EDT"
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"Brazil, Mexico, Peru: Latin America Bond, Currency Preview "
By Jamie McGee
Aug. 22 (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.
"Brazil: Inflation, as measured by the government's IPCA-15 index, slowed to 0.38 percent in the 30-day period through Aug. 15 from 0.63 in the previous 30-day period, according to the median estimate of 35 economists in a Bloomberg survey."
The government's statistics agency is scheduled to release the data at 8 a.m. New York time.
The real rose 0.6 percent to 1.6090 per dollar.
"The yield on the country's zero-coupon bonds due January 2010 rose 4 basis points, or 0.04 percentage point, to 14.74 percent, according to Banco Votorantim SA."
"Mexico: Consumer prices rose 0.26 percent in the first half of August, compared with a 0.38 increase in the first half of July, according to the median estimate of 18 economists in a Bloomberg survey."
The central bank is scheduled to release the data at 10 a.m. New York time.
The peso rose 0.5 percent to 10.0931 per dollar.
"The yield on Mexico's benchmark 10 percent bonds due December 2024 was unchanged at 8.56 percent, according to Banco Santander SA."
"Peru: Inflation will slow over the next 18 months as international commodity prices fall and the government curbs spending, Finance Minister Luis Valdivieso said."
"The government won't take ``traumatic'' anti-inflation measures so as not to hurt economic growth, Valdivieso said yesterday in a presentation to Congress. Inflation will slow to 3.5 percent in 2008 from about 5.8 percent this year, he said."
"``With moderation in public works, inflation should converge within the central bank's target,'' Valdivieso said in his first presentation since taking office on July 14."
The sol rose 0.3 percent to 2.9100 per U.S. dollar.
"The yield on the nation's 8.6 percent sol-denominated bonds due in August 2017 rose 5 basis points to 7.98 percent, according to Citigroup Inc.'s unit in Peru."
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
"Last Updated: August 22, 2008 00:03 EDT"
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Canada Inflation Accelerates to Fastest Since 2003 (Update3)
By Theophilos Argitis
Aug. 21 (Bloomberg) -- Canada's annual inflation rate rose to the highest since 2003 in July because of a surge in gasoline prices for the country's drivers.
"Consumer prices rose 3.4 percent from July 2007, Statistics Canada said today in Ottawa, in line with economists' median forecast in a Bloomberg survey. Prices rose 0.3 percent from June, less than economists' 0.4 percent forecast."
"With most of July's gain tied to energy prices, which have dropped in the past month, the report may not affect the Bank of Canada's ability to cut interest rates to kick start growth. Policy makers signaled in mid-July that borrowing costs would stay put for the foreseeable future, citing slow growth and projecting inflation to peak at 4.3 percent next year, more than double their target."
"``We see this report as a sign the Bank of Canada has room to cut rates,'' Karen Cordes, an economist at Scotia Capital Inc. in Toronto, said by telephone, adding cuts may come later this year."
"Gasoline pump prices rose 5.1 percent to a monthly record of C$1.39 per liter in June, according to data compiled by Bloomberg, and have since dipped to C$1.29 as of last week."
"Canada's dollar rose 1.6 percent, the most in four months, to C$1.0432 per U.S. dollar at 4:20 p.m. in Toronto from C$1.0599 yesterday. One Canadian dollar buys 95.86 U.S. cents."
"Labor and housing markets in Canada have softened in recent months, reviving expectations that the Bank of Canada's next move will be a rate reduction."
"Gasoline, Food"
"Recent gains in bond prices indicate investors are anticipating rate cuts by the end of this year, Avery Shenfeld of CIBC World Markets Inc. said in a note to investors."
"``Markets will dismiss the high headline rate, taking comfort in the drop in oil and gasoline prices since these July readings,'' Shenfeld said."
"Excluding gasoline and seven other volatile items, inflation rose 1.5 percent in July from a year earlier and 0.1 percent from June. Economists predicted the so-called core rate would gain 1.6 percent from a year earlier and 0.2 percent on a monthly basis."
Bank of Canada Governor Mark Carney said June 20 that he may rely less on core inflation as a guide to future trends during what he referred to as a ``super cycle'' of rising commodity prices.
Inflation Target
"Policy makers set interest rates to keep inflation between 1 percent and 3 percent, with an optimal target of 2 percent. The central bank cut interest rates four times between December and April to fend off an export slump before pausing in June and holding again on July 15."
"After the July decision, the central bank said the economy will grow just 1 percent this year, the slowest since 1992 when Canada had its last recession."
"Prices for gasoline were up 29 percent between July 2007 and July 2008, while natural gas costs for consumers rose 25 percent over that period, the agency said."
"Food prices in stores were up 4.3 percent, led by bakery products such as bread. The price index for shelter gained 5.4 percent over the 12-month period, the agency said."
"Falling prices for automobiles helped keep annual inflation from accelerating further, the statistics agency said."
To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.
"Last Updated: August 21, 2008 16:24 EDT"
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"U.K. Pound Extends Losses Against Euro, Dollar on Slower Growth "
By Lukanyo Mnyanda
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"Aug. 22 (Bloomberg) -- The U.K. pound extended losses against the euro and dollar after a government report showed economic growth stagnated in the second-quarter, strengthening the case for lower interest rates."
"The pound headed for a second weekly decline against Europe's common currency as the Office for National Statistics said gross domestic product was unchanged from the previous three months. Inflation risks ``have probably eased a little,'' the minutes of the Bank of England's August rate meeting showed this week."
"``This is a pretty toxic environment for the pound,'' said Lee Hardman, a currency strategist in London at the Bank of Tokyo- Mitsubishi Ltd. ``There's a risk of a rate cut in November if the data continues to deteriorate.''"
"The U.K. currency dropped 0.6 percent to 79.77 pence per euro by 10:24 a.m. in London, from 79.32 yesterday and 78.70 a week ago. It was at $1.8605, from $1.8661 on Aug. 15, when it slipped to $1.8512, the lowest level since July 2006. The pound may drop below $1.80 in 12 months, Hardman forecast."
"Gross domestic product was unchanged from the first quarter, the Office for National Statistics said, compared with a previous estimate for growth of 0.2 percent. Economists had expected a 0.1 percent expansion, according to the median estimate of 34 economists. Growth was 1.4 percent from a year earlier, the weakest since 1992."
"The report adds to pressure on the Bank of England to set aside concerns about inflation and cut its benchmark interest rate, currently at 5 percent."
`Support the Market'
"Deutsche Bank AG changed its U.K. interest-rate forecast yesterday and said the central bank will lower borrowing costs by 1 percentage point next year. The benchmark rate will be cut to 4 percent in the first three quarters of 2009, George Buckley, the bank's chief U.K. economist, wrote in an e-mailed note."
"``The prime focus remains how soon does inflation come off,'' said Simon Derrick, a currency strategist in London at Bank of New York Mellon Corp. ``And how soon can the Bank of England move to get monetary policy down to a level that will help support the market.''"
"Gilts were little changed, with the yield on the 10-year bond at 4.58 percent. The price of the 5 percent security due March 2018 rose 0.07, or 70 pence per 1,000-pound face amount, to 103.29. The yield on the two-year gilt fell 1 basis point to 4.56 percent. Bond yields move inversely to prices."
U.K. bonds have outperformed their European counterparts in the past three months as evidence the economic slowdown is deepening persuaded investors to remove wagers on rate increases. The implied yield on the March short-sterling futures contract dropped 3 basis points to 5.23 percent. It has declined from 5.44 percent at the end of July.
"The nation's bonds have returned 4.3 percent in the past two months, compared with 2.9 percent for their European counterparts, according to Merrill Lynch & Co.'s EMU Direct Government and U.K. Gilts Master indexes."
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
"Last Updated: August 22, 2008 05:26 EDT"
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Brazilian Stocks Rise on Commodity Prices; Eletrobras Gains
By Alexander Ragir and Paulo Winterstein
"Aug. 21 (Bloomberg) -- Brazilian stocks rose for a third day, the longest winning streak in a month, as higher commodity prices and an improved earnings outlook boosted energy and raw material producers."
"Petroleo Brasileiro SA climbed as oil jumped and UBS AG recommended buying the stock. Cia. Vale do Rio Doce, the world's biggest iron ore miner, advanced for a third day as metals prices surged. Centrais Eletricas Brasileiras SA, Latin America's largest utility, gained the most in two weeks after it said it will pay 2.8 billion reais ($1.73 billion) in cash dividends owed to shareholders since the 1970s."
"``The dollar falling has propped up commodities and is really helping Petrobras and Vale after they fell a lot,'' said Luiz Sedrani, head of equity at Sao Paulo-based Banco Votorantim, the financial arm of the largest diversified industrial group."
"The Bovespa index gained 1 percent to 55,934.69, posting its longest winning streak since the three days ended July 16. Mexico's Bolsa dropped 1.2 percent, while Peru's index jumped 3.1 percent. The MSCI Latin America index gained 1.5 percent."
"Brazilian companies, trading at a discount to other emerging markets, will likely continue to report ``strong'' earnings this year after second-quarter profit was above estimates, UBS said."
"Petrochemical companies and real estate companies beat estimates by more than 15 percent, while pulp and paper companies and mining company Cia. Vale do Rio Doce were ``the main disappointment.''"
"``We believe earnings momentum should remain strong, supporting further upward earnings revisions,'' strategist Pedro Batista wrote in a note to investors."
Buy Petrobras
"Petrobras, as the state-controlled oil company is known, gained 3.5 percent to 35.39 reais. Crude oil advanced $5.67 a barrel on speculation that rising tensions between the U.S. and Russia may disrupt the flow of oil, and as a weaker dollar bolstered the appeal of commodities."
"UBS reiterated its ``buy'' rating on the stock, citing oil price prospects and easing concern that the government will raise taxes on the company. Nomura Holdings Inc. analyst Xavier Grunauer raised his rating on the stock to ``buy'' from ``neutral,'' writing in a note that shares had been ``oversold.''"
"The oil gain hurt companies whose costs rise with the price of crude. Braskem SA, Latin America's biggest petrochemical company whose main cost is petroleum products, dropped 2.6 percent to 12.06 reais. Brazil's biggest airline Tam SA fell 3.3 percent to 31.51 reais, while second-biggest Gol Linhas Aereas Inteligentes SA dropped 3.4 percent to 13.82."
Steelmakers Gain
"Usinas Siderurgicas de Minas Gerais SA, Brazil's second- biggest steelmaker, rose 3.4 percent to 56.85 reais, leading gains on the Bovespa on speculation demand for metals will stay strong as prices of copper, nickel, platinum and lead rose more than 4 percent. Gerdau SA, Latin America's biggest steelmaker, rose 3.1 percent. The dollar fell against the euro, buoying demand for metals as an alternative investment."
Vale jumped 2.4 percent to 38.80 reais. The UBS Bloomberg CMCI Industrial Metals Index rose 4.6 percent.
"Eletrobras common shares led gains among utilities, rising 3 percent to 29.40 reais. The state-controlled utility confirmed a Valor Economico story that it will pay 2.8 billion reais ($1.73 billion) of dividends in cash and issue new shares for the remainder. The company owes a total of 8.5 billion reais in dividends. An Eletrobras spokeswoman said there is no date set for when the dividend plan will be completed."
"The dividend payments will be ``very positive'' for the common shares, UBS said. ``At market price, it would imply a dividend yield of about 35 percent'' for common shares, analyst Eduardo Haiama wrote in a note to clients today."
Bolsa Falls
"Mexico's Bolsa retreated for the third time in four days, as phone company Axtel SAB and cement maker Cemex SAB dropped."
"A potential agreement between Telefonos de Mexico SAB and cable and satellite television firms to offer pay-TV may be a ``missed opportunity'' for Axtel, the second-largest Mexican fixed-line telephone company, Banco Santander SA said. The shares lost 1.8 percent to 12.85 pesos."
"Cemex dropped 1.7 percent to 20.57 pesos, the lowest in two weeks, on concern the company's debt load and structure of derivatives arrangements may pull down the shares, and on concern that Venezuela's expropriation of the Cemex unit there will hurt the stock, the Wall Street Journal said in its ``Heard on the Street'' column."
"Peru's Lima General index rose the most in six months, led by copper and tin mining companies as metal prices surged."
"Southern Copper Corp., the country's largest producer of that metal, advanced to the highest this month after Merrill Lynch & Co. upgraded shares to ``neutral'' from ``underperform.''"
"Minsur SA, the world's third-largest tin producer, gained the most in 14 months as tin jumped after Indonesia announced output limits. Southern climbed 8.6 percent to $26.40. Minsur surged 7.7 percent to 6.14 soles."
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
"Last Updated: August 21, 2008 16:40 EDT"
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Japanese 10-Year Bonds Fall on Speculation Yields Unattractive
Aug. 22 (Bloomberg) -- Japanese 10-year government bonds fell for the second day this week as investors shunned the lowest yields since April.
Yields advanced from a four-month low after the biggest jump in crude oil prices in two months fanned concern inflation will gather pace. U.S. Treasuries declined and the difference between yields on Japan's regular bonds and inflation-linked debt widened the most in a week. Accelerating inflation erodes the value of the fixed coupon debt pays.
"Bonds are looking ``pretty expensive,'' said Tatsuo Ichikawa, a senior strategist in Tokyo at RBS Securities Japan Ltd., one of the 26 primary dealers required to bid at government auctions. Also, ``the market is reacting to the weak U.S. bond market.''"
"The yield on the 1.5 percent note due June 2018 rose 3 basis points to 1.44 percent as of 3 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The yield earlier gained by as much as 4.5 basis points, the most since July 21. The price fell 0.261 yen to 100.515. A basis point is 0.01 percentage point."
Ten-year bond futures for September delivery lost 0.34 to 137.69 as of the afternoon close on the Tokyo Stock Exchange.
"Ten-year yields have fallen from an 11-month high of 1.895 percent reached on June 16 on mounting evidence Japan, the world's second-largest economy, is slowing. A government report on Aug. 13 showed gross domestic product shrank an annualized 2.4 percent in the three months ended June 30, bringing the nation to the brink of its first recession in six years."
"Oil, Inflation"
Yields on 10-year Treasuries rose 2 basis points to 3.83 percent yesterday after crude oil for October delivery jumped by 4.9 percent to $121.18 a barrel. The oil price has dropped 18 percent since reaching a record $147.27 on July 11.
"``U.S. bonds were sold on increased inflation concern, so the yen-bond market also started weaker,'' said Naomi Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ Securities Co., a unit of Japan's largest bank by assets, in Tokyo."
"The extra yield paid by 10-year conventional government debt compared with similar-maturity inflation-linked bonds increased 3 basis points, the most since Aug. 14, to 16 basis points today, according to data compiled by Bloomberg."
The so-called breakeven rate reflects investors' expectations for average annual increases in consumer prices over the next decade.
BOJ Minutes
"Bank of Japan board members said there are few signs that rising commodity prices will prompt companies to increase wages and fan inflation, minutes of the July 14-15 meeting released today in Tokyo said."
"``Many members said that wages had not risen markedly in Japan and to date there had been no sign of second-round effects from the rise in prices of petroleum products and food,'' according to the minutes."
Economists say the benchmark interest rate is unlikely to increase from 0.5 percent until next year at the earliest. The rate was last raised in February 2007.
"``Still, market speculation of a BOJ rate cut probably will not vanish in coming months, leaving room for further modest JGB yields declines, as the economic slump likely continues,'' Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp., wrote in a research note on yesterday."
"There is a 9 percent chance the central bank will reduce interest rates to 0.25 percent by year-end, according to calculations by JPMorgan Chase & Co. using overnight interest- rate swaps."
Fibonacci Series
"Bonds also fell as a technical chart that traders use to predict changes in bond futures shows prices may decline, according to Daiwa Securities SMBC Co. The contracts approached 138.14, which is a 61.8 percent reversal of the drop from a high on March 19 of 141.91 to a June 13 low of 132.05, according to the Fibonacci series of numbers."
"``Many people are looking at the 138.14 level as it is a strong resistance level,'' said Keiko Onogi, a debt strategist at Daiwa Securities, another primary dealer. ``People are cautious of this level and we don't have enough factors to drive the market above it.''"
"Japan's government isn't considering selling new bonds to fund an economic stimulus package that will be unveiled next week, Finance Minister Bunmei Ibuki said today."
"``I'm not making the assumption that the government will issue bonds'' to finance the relief measures, Ibuki said at a press conference in Tokyo today. He said the package may be funded by an extra budget for the current fiscal year as well as next year's regular budget."
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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"Yuan Set for Biggest Gain Since May, Helping Address Trade Gap "
By Judy Chen and Belinda Cao
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Aug. 22 (Bloomberg) -- China's yuan was headed for the biggest weekly gain in three months on speculation officials will seek a stronger currency to curb the trade surplus and deter the U.S. from imposing penalties. Bonds rose.
"China needs ``more flexibility'' in the exchange rate to manage its economy amid a global slowdown, John Lipsky, the International Monetary Fund's first deputy managing director, said yesterday in Jackson Hole, Wyoming. This week's advance ends a run of four straight losses and extends the currency's gain this year to 7 percent, more than it rose for all of 2007."
"``The yuan will probably regain appreciation after the Olympics,'' said Li Huiyong, an economist at Shenyin Wanguo Research & Consulting Co., part of China's third-largest brokerage firm, in Shanghai. ``The huge trade surplus is the biggest reason for the medium and long-term appreciation.''"
"The yuan rose 0.6 percent this week to 6.8296 a dollar as of 3 p.m. in Shanghai, from 6.8700 late last week, according to the China Foreign Exchange Trade System. That's the biggest weekly advance since May 23. It climbed 0.21 percent today, the largest one-day gain since July 29."
"China's central bank has managed the yuan's exchange rate against a basket of currencies, including the yen and the euro, since a peg to the dollar was scrapped in 2005. Both currencies rallied more than 1 percent against the dollar yesterday."
Stronger Rate
"The People's Bank of China set a stronger reference rate for yuan trading for a fourth straight day. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the daily rate, which was fixed at 6.8357 today."
"China's trade surplus expanded 4 percent from a year earlier to $25.3 billion in July, the first increase in four months, according to customs bureau figures released last week. U.S. Treasury Secretary Henry Paulson said this week that U.S. proposals to punish China for depressing the value of the currency might spark an unproductive ``trade war.''"
The local currency touched a two-month low of 6.8808 a dollar on Aug. 18 on speculation policy makers would prefer to bolster growth rather than fight inflation on signs a global slowdown crimped demand for the nation's exports. The yuan has declined about 0.1 percent in the past month.
"China's economy expanded 10.1 percent in the second quarter from a year earlier, the slowest pace since 2005. Export growth cooled to 17.2 percent in June from a 28.1 percent gain in May, government data show. It accelerated to a 26.9 percent pace last month."
Growth Scare
"``A post-Olympics growth scare in China is now more probable than we had thought six months ago,'' Stephen Jen, London-based head of research at Morgan Stanley, wrote in a research report yesterday. ``Such a regional growth scare will provide further support to our call'' for Asian currencies to weaken versus the dollar."
"Traders in the forward market have pared bets on how far the yuan will advance. Forward contracts show the yuan will rise 3.2 percent to 6.6175 in a year, compared with around 11 percent appreciation predicted earlier this year."
"Standard Bank in London recommended buying the Chinese currency, playing down chances policy makers will shift focus to supporting the economy and citing global calls for appreciation."
"``We are skeptical that they will see slower appreciation, or even depreciation, as a way to stimulate growth,'' Steve Barrow, a currency strategist with Standard Bank in London, wrote in a report yesterday. ``The renminbi is a buy.''"
Corrected Too Far
"Even as the dollar strengthens against major currencies, like the euro, the U.S. Treasury will ``want to keep pressure on China for renminbi appreciation,'' Barrow said. ``It seems so clear to us it has corrected too far in the other direction.''"
"The Chinese currency has gained 6.5 percent versus the euro and 4 percent against the yen this quarter, compared with a 0.3 percent appreciation versus the dollar."
Barrow said the yuan's annual appreciation of 5 to 10 percent is ``much more appropriate.'' The U.S. is the biggest buyer of China's exports and its trade deficit with the Asian nation ballooned to a record $256 billion last year.
"Government bonds gained for a second week after China said inflation slowed in July, spurring speculation consumer prices will continue to fall and the central bank won't raise interest rates later this year."
"Consumer price increases slowed to 6.3 percent in July, from 7.1 percent a month earlier, the statistics bureau said Aug. 12. The yield on benchmark 10-year bonds dropped 4.4 basis points this week, according to data compiled by the country's biggest debt clearing house. A basis point is 0.01 percentage point."
"``The inflation rate may continue to fall later this year,'' said Dong Dezhi, a bond analyst with Bank of China Trading Center in Shanghai. ``Market sentiment is still optimistic.''"
"The yield on the 4.41 percent bond due June 2018 dropped 1 basis points to 4.35 percent in Shanghai as of 3:22 p.m., according to the China Interbank Bond Market. The price of the security rose 0.08 per 100 yuan face amount to 100.47."
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
"Last Updated: August 22, 2008 03:37 EDT"
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Japan Stocks Extend Weekly Drop on Oil Surge; Tiremakers Slump
By Masaki Kondo
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"Aug. 22 (Bloomberg) -- Japan stocks fell, capping the Nikkei 225 Stock Average's biggest weekly loss in two months, on concern surging oil prices and rising credit costs will reduce earnings at manufacturers and financial companies."
"Sumitomo Rubber Industries Ltd. lost 2.7 percent, leading a decline by makers of rubber products, after crude jumped the most in 11 weeks. Sumitomo Mitsui Financial Group Inc., whose first- quarter profit halved because of bad-loan costs, sank 3.6 percent as Citigroup Inc. said U.S. banks will post more writedowns. Kawasaki Kisen Kaisha Ltd. led shipping lines lower after Mizuho Securities Co. cut its rating."
"``Given supplies of commodities such as crude are limited, higher prices are inevitable as more and more countries join the developed world,'' Yuuki Sakurai, a Tokyo-based general manager at Fukoku Mutual Life Insurance Co., which manages about $54 billion, said in an interview with Bloomberg Television. ``The market is very vulnerable to even the smallest bad news.''"
"The Nikkei 225 retreated 86.17, or 0.7 percent, to close at 12,666.04 in Tokyo, the lowest since April 1. The broader Topix index fell 8.11, or 0.7 percent, to 1,216.42. Almost three stocks fell for every two that rose on the Topix."
"The Nikkei capped a weekly loss of 2.7 percent, the most since June 27, while the Topix fell 2.5 percent. The total value of trading on the Tokyo exchange today was the lowest this year."
"Crude oil futures surged $5.62, or 4.9 percent, to $121.18 a barrel yesterday, the most since June 6, as the depreciation of the dollar raised the appeal of commodities as an inflation hedge. Meanwhile, the Reuters/Jeffries CRB Index of 19 commodities soared 3.7 percent, set for the biggest weekly gain in 33 years."
Tire Costs
"Sumitomo Rubber, Japan's third-largest tiremaker, slumped to 843 yen, while Bridgestone Corp., the world's biggest, dropped 2.4 percent to 1,729 yen. Bridgestone has lost 9.5 percent of its value since Aug. 18, as oil rebounded from a three-month low. About 60 percent of the materials used in tires are oil based, according to the Japan Automobile Tyre Manufacturers Association."
"Inpex Holdings Co., Japan's biggest oil explorer, climbed 2.2 percent to 1.19 million yen, the highest since July 15. Mitsubishi Corp., a trading company that gets more than half its profit from commodities, added 3.2 percent to 3,050 yen, while smaller rival Mitsui & Co. jumped 2.6 percent to 1,799 yen."
"Sumitomo Mitsui, Japan's third-biggest listed bank by assets, slid to 637,000 yen, while market leader Mitsubishi UFJ Financial Group Inc. retreated 2.1 percent to 793 yen. Consumer lender Aiful Corp. plunged 8.6 percent to 997 yen, the lowest on record and the second-worst performer on the MSCI World Index. Banks accounted for a third of the Topix's decline."
`Skittish' Investors
"Citigroup analyst Prashant Bhatia said Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion in the third quarter."
"Japan's economy shrank in the three months to June 30, the first such decline in a year, while bankruptcies rose to a five- year high in July. Increased provisions and writedowns on non- performing loans drove down Sumitomo Mitsui's first-quarter net income by 51 percent and Mitsubishi UFJ's by 66 percent."
"``Investors are skittish,'' said Hideo Arimura, who oversees the equivalent $1.9 billion at Mizuho Asset Management Co. in Tokyo. ``As credit costs at Japan's major financial companies surged, some investors are beginning to expect lenders will cut their full-year earnings targets.''"
"Kawasaki Kisen, Japan's third-largest shipping company, fell 3.8 percent to 752 yen, while Mitsui O.S.K. Lines Ltd., the second biggest, dropped 2 percent to 1,250 yen."
"Satoru Kunieda, a Tokyo-based analyst for Mizuho Securities, yesterday cut his ratings on the companies to ``buy'' from ``strong buy'' and slashed their price estimates on the companies by as much as 31 percent."
Machinery Makers
"Sumitomo Heavy Industries Ltd. tumbled 3.9 percent to 540 yen, while Hitachi Construction Machinery Co. fell 3.6 percent to 2,540 yen. Fanuc Ltd., the world's top industrial-robot maker, slipped 2.5 percent to 8,120 yen."
The Japan Construction Equipment Manufacturers Association yesterday predicted lower shipments of domestically made machinery than it had expected in February. The Japan Machine Tool Builders' Association said the same day tool orders fell 12 percent in Europe last month from a year earlier.
"Nikkei futures expiring in September retreated 0.6 percent to 12,670 in Osaka and slumped 0.4 percent to 12,695 in Singapore."
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
"Last Updated: August 22, 2008 04:53 EDT"
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"Commodities Rally, Head for Biggest Weekly Advance Since 1975 "
By Millie Munshi and Dave McCombs
Enlarge Image/Details
Aug. 22 (Bloomberg) -- Commodities headed for their biggest weekly gain in 33 years as oil traded near its highest for more than two weeks and a weakening dollar revived demand for raw materials as alternative assets.
"The Reuters/Jefferies CRB Index of 19 commodities soared 3.7 percent to 405.92 in New York yesterday. A settlement at that level today would mark a 6.2 percent gain for the week, the most since July 1975. The dollar headed for its first weekly decline against the euro since July 11, while oil climbed past $121 a barrel after jumping more than $5 yesterday."
A rebound in the CRB and a resumption of the dollar's decline may stall a rout in commodities that has sent the index down 14 percent from a record on July 3. Raw materials priced mostly in dollars often move in the opposite direction to the U.S. currency.
"``Speculators' stomachs are nearly empty, so they have the appetite to buy more,'' Bob Takai, general manager of financial services at Sumitomo Corp., said by phone in Tokyo. ``Buyers for oil will emerge from here and the price is going to go up.''"
"Gold for immediate delivery was little changed at $835.99 an ounce, after advancing 2.9 percent yesterday. Every commodity on the CRB except hog futures moved higher yesterday. Nickel was up 8.2 percent, cocoa rose 6.8 percent and silver 5.2 percent."
Commodities are gaining on speculation demand will increase from China as the country resumes work at factories and infrastructure projects that were shut or slowed during the Olympics.
Chinese Demand
"``China's demand is very important to the commodity markets,'' Chip Hanlon, who helps manage $1.5 billion at Delta Global Advisors in Huntington Beach, California. ``They're ready to start bringing back factories that had been idled, I wouldn't be surprised to see demand start to pick up again there.''"
"The CRB has more than doubled since 2001 as demand surged in China, the world's fastest-growing major economy. Mining and oil companies, farmers and other commodity producers have struggled to keep up with rising consumption as harsh weather and labor unrest disrupted supplies."
"``Until either a lot of supply comes on stream or the economy collapses, the bull market will continue,'' said investor Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,100 an ounce."
Yesterday's gains in the CRB were led by nickel futures that rose to their highest since July 11.
Top Gainers
"Cocoa climbed the most since November 2004 in New York. The International Cocoa Organization said a global deficit will be twice as large as previously expected, with output trailing demand by 88,000 metric tons in the year through September, up from an earlier forecast of 41,000 tons."
"The UBS-Bloomberg Constant Maturity Commodity Index rose 4 percent to settle at 1,509.378 yesterday. A settlement at that price today would mark a 6.9 percent gain this week, the most since the data starts in 1997."
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
"Last Updated: August 22, 2008 01:28 EDT"
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"Crude Oil Futures May Rise as Dollar Weakens, Survey Shows "
By Mark Shenk
"Aug. 22 (Bloomberg) -- Crude oil may rise next week because of a weakening dollar, tension between the U.S. and Russia and falling gasoline stockpiles."
"Sixteen of 29 analysts surveyed by Bloomberg News, or 55 percent, said prices will increase through Aug. 29. Seven of the respondents, or 24 percent, said oil will be little changed and six said there would be a drop in prices. Last week 63 percent expected prices to increase."
Energy and metals futures climbed yesterday as the U.S. currency fell the most against the euro in 11 weeks. A falling dollar prompts investors to by hard assets as an inflation hedge. Russia reacted angrily after Poland agreed to host a U.S. anti- missile base two weeks after Russia invaded Georgia.
"``The dollar is correcting, and there are tensions in various parts of the world,'' said Kyle Cooper, an analyst at IAF Advisors in Houston. ``We fell more than $30 from last month's record so it's normal for prices to bounce back.''"
"U.S. gasoline supplies declined 6.2 million barrels to 196.6 million barrels last week, a U.S. Energy Department report on Aug. 20 showed. Inventories have dropped 9.4 percent in the past four weeks as refineries cut operating rates."
"Crude oil for October delivery fell $7.24, or 6.4 percent, to $121.18 a barrel so far this week on the New York Mercantile Exchange. Futures have dropped 18 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983."
The oil survey has correctly predicted the direction of futures 49 percent of the time since its start in April 2004.
" Bloomberg's survey of oil analysts and traders, conducted"
"each Thursday, asks for an assessment of whether crude oil"
"futures are likely to rise, fall or remain neutral in the coming"
week. The results were:
RISE NEUTRAL FALL
16 7 6
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
"Last Updated: August 22, 2008 00:02 EDT"
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"Canada Stocks Rise, Led By Barrick, Suncor; Maple Leaf Falls "
By John Kipphoff
"Aug. 21 (Bloomberg) -- Canadian stocks rose, pushing the main equity index to its biggest two-day gain in almost five months, as rallies in oil, metals and grains lifted commodity producers such as Barrick Gold Corp. and Suncor Energy Inc."
"Maple Leaf Foods Inc. declined after recalling some meat products because of an outbreak of listeria. Other companies that rely on consumer spending slid after Canada's annual inflation rate rose to a five-year high, on a surge in gasoline prices."
"``We're going into the last leg of a massive bull market in commodities,'' said Marty Hibbs, associate futures portfolio manager and commodity broker with Union Securities Ltd. in Kitchener, Ontario. ``Inflation will be rampant. Canada is well- placed with its commodity-driven economy. Stocks based on commodities will mostly do very well.''"
"The Standard & Poor's/TSX Composite Index rose 1.4 percent to 13,539.22 in Toronto, for a 3.6 percent two-day gain, the biggest since March 25. The benchmark has fallen 10 percent from its June 18 record as energy, metals and grain prices fell from peaks on concern credit losses will slow global growth and demand for resources, which make up about half the nation's exports."
"Oil futures in New York rose more than $5 a barrel today, as yesterday's missile-shield agreement between the U.S. and Poland fanned concern that Russia may disrupt the flow of oil."
"Bullion, Grains"
"Gold surged the most in almost two months as a weaker U.S. dollar increased the appeal of commodities. Copper, corn and soybeans rallied. The Reuters/Jefferies CRB Index of 19 commodities soared, heading for its biggest weekly gain in 33 years, after falling 15 percent from a July 3 record."
"Barrick Gold, the largest bullion mining company, climbed 5 percent to C$37.50. Rival Goldcorp Inc. rose 6.3 percent to C$36.51. Teck Cominco, Canada's biggest diversified mining company, advanced 2.2 percent to C$43.60. Potash Corp. of Saskatchewan Inc., the largest maker of crop nutrients by market value, increased 2.9 percent to C$192.65."
"Suncor Energy, the second-biggest oil-sands mining company in the world, jumped 3.2 percent to C$61.78. Petro-Canada, the country's third-largest oil and gas producer, advanced 3.2 percent to C$47.93. Talisman Energy Inc., the oil and gas company with about two-thirds of its reserves in North America or the North Sea, added 3.2 percent to C$19.21."
"Gauges of materials and energy stocks accounting for almost half the S&P/TSX's value advanced 3.9 percent and 2.3 percent, respectively. The energy measure notched its biggest four-day gain since October 2001."
Listeria Concern
"Maple Leaf Foods dropped 3 percent to C$10.27. Canada's largest food processor closed a plant in Toronto that may be the source of an outbreak of listeria linked to 17 cases across Canada, including one death in Ontario."
"Consumer prices rose 3.4 percent from July 2007, Statistics Canada said today in Ottawa, in line with economists' median forecast in a Bloomberg survey. Prices for gasoline were up 29 percent between July 2007 and July 2008."
"Falling prices for automobiles helped keep annual inflation from accelerating further, Statistics Canada also said. Magna International Inc., the nation's largest car-parts maker, dropped 3 percent to C$61."
"Gildan Activewear Inc., North America's biggest T-shirt maker, extended its losing streak to the longest in more than four years, dropping 3.1 percent to C$23.50. Cotton prices rose to the highest in a week after textile mills increased purchases following a price slump and Tropical Storm Fay posed a potential threat to the crop in Georgia, the second-biggest U.S. grower."
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
"Last Updated: August 21, 2008 17:17 EDT"
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India's Rupee Falls a Second Week as Stock Losses Spur Outflows
By Anoop Agrawal
Aug. 22 (Bloomberg) -- India's rupee was set for a second week of losses as declines in the nation's stocks spurred fund outflows.
The currency traded near the lowest in 17 months as a rebound in crude oil prices this week from a 15-week low spurred demand for dollars needed to pay for imports. Overseas funds sold more equities than they bought on eight of the twelve trading days in August as the benchmark stock index was poised for a second week of losses on concern the fastest inflation in more than 16 years will erode the value of the returns from investments.
"``Weaker equity markets are eroding confidence of overseas investors which is why we are seeing capital outflows,'' said Ravindra Babu, a currency trader at state-owned Andhra Bank in Mumbai. ``The outflows are coming at a time when dollar demand from refiners is also persistent. So the rupee will be under pressure to decline further.''"
"The rupee dropped 0.9 percent this week to 43.45 per dollar as of 9:25 in Mumbai, according to data compiled by Bloomberg."
"Funds based abroad have sold $7.1 billion more of Indian shares this year than they bought, according to the Securities and Exchange Board of India. They bought a net $17.2 billion last year, a record, helping the rupee complete its best year since at least 1974."
"Crude for October delivery was at $121.43 a barrel on the New York Mercantile Exchange. Yesterday, the contract surged $5.62 to $121.18 a barrel, the biggest increase since June 6."
"Wholesale prices jumped 12.63 percent in the week to Aug. 9, after increasing 12.44 percent in the previous week, the government said yesterday. That is the fastest pace in more than 16 years."
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net;
"Last Updated: August 22, 2008 00:24 EDT"
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