"U.S. Stocks Drop, S&P 500 Ends Three-Week Advance as Banks Fall "
By Lynn Thomasson
"Aug. 23 (Bloomberg) -- U.S. stocks fell, sending the Standard & Poor's 500 Index to its first weekly decline since July, as oil prices climbed and concern grew that the government may bail out Fannie Mae and Freddie Mac."
"The steepest one-day drop in oil since December 2004 and speculation Lehman Brothers Holdings Inc. will be taken over helped equity indexes pare losses yesterday. Fannie Mae and Freddie Mac lost more than a third of their value this week on concern a rescue would wipe out shareholders. Ford Motor Co., Coach Inc. and Darden Restaurants Inc. drove consumer stocks to the first decline in three weeks as crude prices jumped."
"``The fear is that we really may be in a long, continuous financial crisis,'' said Stephen Lieber, who oversees $9 billion as co-chief executive officer of Alpine Woods Investments in Purchase, New York. ``When you have no sense of certainty as to what will happen tomorrow, it's nerve-racking.''"
"The S&P 500 slipped 0.5 percent to 1,292.20, extending its loss for the year to 12 percent. The Dow Jones Industrial Average fell 0.3 percent to 11,628.06. The Russell 2000 Index of small- cap stocks declined 2.1 percent, halting a six-week rally."
"Financials fell the most in six weeks for the biggest drop among 10 S&P 500 industries. The group has retreated 29 percent this year as losses from the subprime mortgage collapse exceeded $500 billion. A 5 percent jump in energy stocks, the steepest gain since April, limited the market's decline as oil advanced and Goldman Sachs Group Inc. said the fuel will rise to a record."
"Fannie, Freddie"
Fannie Mae fell 37 percent to $5. Freddie Mac declined 52 percent to $2.81. Freddie paid its highest yields over U.S. Treasuries on record in a debt sale amid concern that credit losses are depleting the capital of the biggest U.S. mortgage- finance companies.
Sovereign Bancorp Inc. lost 19 percent to $8.49. The second- largest U.S. savings and loan had the third-steepest drop in the S&P 500 on speculation its $623 million stake in Fannie Mae and Freddie Mac will be worthless.
"Lehman shares slid 11 percent to $14.41 as the securities firm solicited buyers for its investment-management division, people familiar with the matter said, and analysts predicted greater third-quarter losses. Korea Development Bank said it's considering an investment in the company, sending Lehman and other bank stocks higher yesterday."
"``There's a ton of petro and trade dollars sloshing around the world now looking for a parking spot,'' said Michael Mullaney, a Boston-based portfolio manager at Fiduciary Trust Co., which manages $10 billion. A sale of Lehman to an investor provides ``an orderly way to work their way out of positions, as compared to a fire sale.''"
AIG Slide
"American International Group Inc. fell 14 percent, the most since May, to $19.87. Goldman said the biggest U.S. insurer will be forced to raise money to cover losses on real-estate loans."
"Citigroup Inc.'s Tobias Levkovich cut his year-end forecast for the S&P 500 by 4.8 percent to 1,475, citing the ``unsettled credit environment.''"
"``Credit conditions have gotten worse,'' Levkovich, Citigroup's chief U.S. equity strategist, said in a Bloomberg Television interview this week. ``That's not good for industrial activity. It's not good for capital spending.''"
"Ford, the second-largest U.S. automaker, dropped 13 percent to $4.47 for the second-steepest decline among S&P 500 companies reliant on consumer discretionary spending. Oil finished the week higher at $114.59 a barrel, even after falling more than $6 on Friday."
"Coach, Darden"
"Coach, the largest U.S. maker of luxury leather handbags, slid 9.2 percent to $28.33. Darden, owner of the Olive Garden and Red Lobster chains, declined 6.9 percent to $33.57."
"Macy's Inc. lost the most since July, retreating 6.3 percent to $20.13. Kohl's Corp. sank 3.8 percent to $49.80. A slowdown in consumer spending will hurt sales at department stores, Goldman Sachs said. The firm downgraded both companies to ``neutral'' from ``buy.''"
"Energy producers and mining companies made up nine of the top 10 gains in the S&P 500 this week. Exxon Mobil Corp., the largest U.S. energy company, added 4.2 percent to $80.30 for the steepest gain since May. Chevron Corp. increased 4.6 percent to $88.10, the biggest advance in four months."
"Massey Energy Co. increased 11 percent, the most in two months, to $66.96. UBS AG recommended buying shares of the largest U.S. producer of coal from the Appalachian region, saying declines since June were overdone."
Rival coal companies Consol Energy Inc. and Peabody Energy Corp. rose 13 percent for the biggest gains in the S&P 500.
"Dell Inc., Sears Holdings Corp. and Big Lots Inc. are among the companies scheduled to report earnings next week. Second- quarter profits for S&P 500 companies slumped 22 percent on average, based on Bloomberg data. Fewer than 50 companies in the U.S. stock benchmark have yet to release results."
"Home sales in the U.S. probably teetered near a 10-year low, property values dropped and consumer spending cooled, signaling the economy has taken another turn for the worse, reports next week are expected to show."
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
"Last Updated: August 23, 2008 08:00 EDT"
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Wheat Falls as Demand May Decrease After Price Jump This Week
By Tony C. Dreibus
Aug. 22 (Bloomberg) -- Wheat fell the most in a week on speculation that demand will wane after prices reached a two- month high yesterday.
"The price rose as much as 22 percent this month on signs that importers were stocking up on supplies from the U.S., the world's largest exporter of the grain. A rally in the dollar this month also may make U.S. grain more expensive for purchasers using other currencies."
"``The buyers have their needs covered in the short term, for the next two weeks,'' said Dennis DeLaughter, owner of Progressive Farm Marketing Inc. in Edna, Texas. ``When we had that push up, the buyers just stopped, saying `I'll just wait to see if I can get a better price.'''"
"Wheat futures for December delivery fell 31.75 cents, or 3.4 percent, to $8.905 a bushel on the Chicago Board of Trade, the biggest drop since Aug. 15. Wheat still gained 4.9 percent this week."
"Most-active futures reached $9.595 yesterday, the highest since June 26, and still are up 24 percent in the past year as adverse weather curbed global production in 2007. The commodity reached a record $13.495 on Feb. 27."
"The U.S. Dollar Index, a basket of six major world currencies including the yen and euro, has gained 4.9 percent in August. A stronger dollar makes U.S. supplies more expensive for overseas buyers using other currencies."
Rising Exports
"Exporters sold 916,500 tons of the grain in the week ended Aug. 14, the most for the marketing year that started June 1, the U.S. Department of Agriculture said in a report yesterday. Sales this week may be lower because of the rising price, DeLaughter said."
"``Now the market has to find value,'' DeLaughter said. ``The buyers are happy with what they've got covered, so wheat's going to have to go down and find value. Anywhere under the $9 level, I think we'll find buyers.''"
"Wheat production in Canada, expected by the USDA to be the second-biggest exporter of the grain, may rise to 25.4 million metric tons in the year that began Aug. 1, up 27 percent from the prior year, Statistics Canada said in a report today."
"Production of spring wheat in Canada may rise 18 percent to 16.3 million tons, the durum harvest may increase to 4.9 million tons from 3.7 million, and growers may collect 4.2 million tons of winter wheat, up 68 percent from the prior year, StatsCan said."
"Germany may harvest 24 million tons of wheat this year, Alfred C. Toepfer International GmbH said today in a report. Total grain production may reach 47 million tons, up 16 percent from a year earlier, the German grain trader said in an e-mailed report."
"Still, the German harvest is being delayed by rain and quality may fall to levels that make the wheat unsuitable for use in human food, Toepfer said. Some may be used as animal feed."
"Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show."
To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.
"Last Updated: August 22, 2008 17:10 EDT"
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Libor Signals Tighter Credit as Banks Balk at Lending (Update1)
By Liz Capo McCormick and Gavin Finch
"Aug. 25 (Bloomberg) -- Most of the bond strategists and salesmen that Resolution Investment Management Ltd.'s Stuart Thomson talked to last August expected the credit crunch to be long over by now. Instead, money markets show there's no end in sight, and it may even worsen."
"``It's like an ongoing nightmare and no one is sure when we're going to wake up,'' said Thomson, a money manager in Glasgow at Resolution, which oversees $46 billion in bonds. ``Things are going to get worse before they get better.''"
"In a replay of the last four months of 2007, interest-rate derivatives imply that banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens. Binit Patel, an economist in London at Goldman Sachs Group Inc., said in an Aug. 21 report that nations accounting for half of the world's economy face a recession."
"The premium banks charge for lending short-term cash may approach the record levels set last year, based on trading in the forward markets, where financial instruments are sold for future delivery. Back then, concern about the health of the banking system led investors to shun all but the safest government debt, sparking the biggest end-of-year rally for Treasuries since 2000."
"``These problems going into year-end are likely to be worse this time round because of the amount banks have to refinance in December,'' Thomson said, citing a figure of $88 billion. ``The suspicion is that banks are still hiding losses. The banking system relies on trust and at the minute there quite simply isn't any.''"
Rate Spreads
"Banks are charging each other a premium of 77 basis points over what traders predict the Federal Reserve's daily effective federal funds rate will average over the next three months to lend cash. The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show."
"Former Fed Chairman Alan Greenspan said in June that this spread, which is the difference between the three-month London interbank offered rate for dollars and the overnight indexed swap rate, should serve as a measure for telling when markets have returned to normal."
"A narrowing to 25 basis points in the so-called Libor-OIS spread would be viewed as a positive, he said. Forward markets signal that won't happen until sometime after June 2010. The premium averaged 11 basis points, or 0.11 percentage point, in the 10 years prior to August 2007."
Another 2007
Increased turmoil in the money markets may again serve as a catalyst for a surprise year-end rally in Treasuries like the one in 2007.
"``The trade to do in December will be to get back into the most liquid thing you can find,'' such as Treasury bills or notes, said David Keeble, head of fixed-income strategy in London at Calyon, a unit of Credit Agricole SA, France's second- largest bank by assets. ``We are having a period now of a second round of pressures on banks. It's weak economic growth which is now piling the pain onto the banks.''"
"A year ago, 10-year note yields fell about half a percentage point to 4 percent between September and December, even though the median estimate of 65 economists surveyed by Bloomberg was for a rise to 5 percent. Treasuries returned 3.98 percent, versus 1.92 percent for company debt and a loss of 3.82 percent in the Standard & Poor's 500 Index, according to Merrill Lynch & Co."
Flow of Cash
"And just like last year, economists and strategists are again calling for an increase in yields. The median of 52 estimates in a Bloomberg survey between Aug. 1 and Aug. 8 was for 10-year Treasury yields to rise to 4 percent by the end of 2008."
"The yield on the benchmark 4 percent note due in August 2018 closed at 3.87 percent last week, rising from 3.31 percent after the Fed engineered the bailout of Bear Stearns Cos. in March and inflation accelerated to the highest level in 17 years. The yield was 3.86 percent as of 10:33 a.m. today in Tokyo."
"``The credit crunch remains the centerpiece of our bond strategy,'' said Resolution's Thomas. He said he's bullish on Treasuries maturing in five years or less."
"Banks began to hoard their cash when rising defaults on subprime mortgages led two Bear Stearns hedge funds to seek bankruptcy protection on July 31, 2007, as creditors forced them to liquidate at least $4 billion of securities tied to the loans."
`Systemic' Problems
"Then on Aug. 9, 2007, Paris-based BNP Paribas SA halted withdrawals from three investment funds because it couldn't ``fairly'' value their subprime debt holdings and the European Central Bank took the unprecedented action of offering to pump unlimited cash into the banking system. The BNP funds had about 1.6 billion euros ($2.2 billion) of assets."
"Losses and writedowns on securities related to home loans to people with poor credit now exceed $504 billion at financial institutions. Last month Treasury Secretary Henry Paulson was forced to seek congressional authority to inject unlimited capital into Fannie Mae and Freddie Mac, which are responsible for about 42 percent of the $12 trillion U.S. home loan market, after their shares tumbled about 90 percent, wiping out some $54 billion of stock market value."
"Trust among banks remains low even after the Fed cut its target rate for overnight loans to 2 percent from 5.25 percent in September and created three emergency lending programs, including the Term Auction Facility, or TAF. In total, the Fed has provided almost $1 trillion of emergency loans."
The Fed's most recent lending survey released Aug. 11 said that more banks tightened credit standards for consumers and business borrowers since April as defaults and delinquencies on home loans climbed.
Libor Validity
"``The problem is much more systemic than was widely anticipated a year ago,'' said Michael Darda, chief economist for MKM Partners LLC in Greenwich, Connecticut. ``Not only bank balance sheets but home balance sheets are under pressure due to falling house prices.''"
"The seizure in the credit markets and rise in short-term borrowing costs this year triggered questions over the validity of Libor, a benchmark administered by the London-based British Bankers' Association and used to calculate rates on $360 trillion of financial products worldwide."
"The Bank for International Settlements in Basel, Switzerland, said in March some members of the BBA may have understated their borrowing costs to avoid being seen as having difficulty raising financing."
`Pressure on Liquidity'
"``Libor markets aren't reflective of the entire banking system but of three or four major banks that continue to have pressure on liquidity,'' said Saumil Parikh, a money manager who helps oversee $688 billion at Pacific Investment Management Co., in Newport Beach, California. ``That spreads to the entire system because you are not really sure who you are going to end up lending to through the Libor market.''"
"Restrictive lending makes it harder for growth to accelerate in U.S. economy, where gross domestic product may slow to 1.5 percent this year, according to the median forecast of 76 contributors in a Bloomberg survey that puts a greater weighting on most recent estimates."
"Meanwhile, Europe's GDP unexpectedly fell 0.2 percent in the second quarter, while Japan's economy shrank at an annual rate of 2.4 percent in the same period."
"The crisis is ``not over and I'm not exactly sure when it's going to end,'' Nobel Prize-winning economist Myron Scholes said Aug. 21 at a conference in Lindau, Germany, featuring 14 Nobel laureates in economics."
To contact the reporters on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net
"Last Updated: August 24, 2008 21:53 EDT"
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"Asian Stocks Rise on Crude Decline; Honda, Cathay Pacific Gain "
By Chen Shiyin and Shani Raja
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"Aug. 25 (Bloomberg) -- Asian stocks rallied the most in more than two weeks, led by carmakers and airlines, as oil's biggest plunge in four years eased concern that rising energy costs and faster inflation will erode earnings."
"Honda Motor Co., Japan's second-largest automaker, added 4.4 percent after crude fell more than $6 a barrel on Aug. 22 and Federal Reserve Chairman Ben S. Bernanke said inflation should slow. Cathay Pacific Airways Ltd., Hong Kong's biggest carrier, jumped 5.2 percent. Westpac Banking Corp., Australia's No. 2 by value, led banks higher as Korea Development Bank said it's considering investing in Lehman Brothers Holdings Inc., easing concern financial institutions won't be able to raise enough capital to offset credit losses."
"``The lower oil price will help Asian industry as well as consumers; it also takes the pressure off inflation,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. ``The interest shown by the Korean Development Bank demonstrates that there's still lots of capital around the world looking for a home.''"
"The MSCI Asia Pacific Index gained 1.5 percent to 123.42 as of 5:20 p.m. in Tokyo, rebounding from a four-week, 8.5 percent retreat that sent the gauge to the lowest since July 24, 2006. The index advanced the most since Aug. 6."
The regional measure has dropped 22 percent this year 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 rose 1.7 percent to 12,878.66. Hong Kong's Hang Seng Index, which was closed Aug. 22 because of a typhoon, jumped 3.5 percent, posting the region's biggest gain. Indexes also climbed in most markets open for trading. The Philippines is shut for a holiday today."
"Honda, Nissan"
"U.S. stocks advanced on Aug. 22, lifting the Standard & Poor's 500 Index by 1.1 percent. Financial companies on the S&P 500 index rose the most in two weeks, led by a rally in Lehman. Futures on the S&P 500 dropped 0.4 percent."
"Honda, which gets about half its sales from North America, jumped 150 yen to 3,590, halting a five-day, 8.3 percent slump. Nissan Motor Co., Japan's third-largest automaker, climbed 3.1 percent to 856 yen. Hyundai Motor Co., South Korea's biggest, rose 3.6 percent to 71,800 won."
"Crude oil for October delivery plunged 5.4 percent to $114.59 a barrel, the biggest drop since Dec. 27, 2004, after BP Plc resumed flows through a Caspian pipeline. Futures were at $115.02 today."
Consumer Prices
"The drop in energy prices coincided with comments by Bernanke, who said inflation should ease later this year and in 2009, thanks to a recovery in the dollar and declines in commodity prices. The Fed is ``committed to achieving medium-term price stability,'' Bernanke said in a speech in Jackson Hole, Wyoming."
"The decline in oil ``will help alleviate pessimism among investors about the earnings outlook for exporters,'' said Yoji Takeda, who helps manage the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``A drop in oil shows investors are shifting their money from commodities. Inflation will recede and interest rates will fall.''"
"Airlines climbed on speculation lower oil prices will ease fuel costs. Cathay Pacific advanced 74 cents to HK$14.88, the most two weeks. Qantas Airways Ltd., Australia's largest carrier, jumped 4.9 percent to A$3.66."
"Inpex Holdings Inc., Japan's No. 1 explorer, lost 4.5 percent to 1.137 million yen, its largest retreat since Aug. 1. PTT Pcl, Thailand's biggest oil company, fell 2.3 percent to 258 baht."
Banks Advance
"Westpac rose 4.5 percent to A$22.98. National Australia Bank Ltd., the country's largest bank by assets, rose 2.3 percent to A$24.09. Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by market value, jumped 4.8 percent to 831 yen, its largest rally since May 30."
"A gauge of financial companies on MSCI's Asian index has dropped 27 percent this year, the worst performance among the broader measure's 10 industry groups."
Bank stocks rose today after a Korea Development Bank spokesman said on Aug. 22 the company is considering investments including Lehman. Chief Executive Officer Min Euoo Sung and Lehman spokesman Mark Lane declined to comment. The Maeil Business newspaper reported today Korea Development may resume talks on buying a stake in Lehman if the U.S. company offers a lower stock price.
"A possible investment in Lehman by Korea Development helped drive credit-default swap indexes in Australia, Japan and the rest of Asia to the lowest in about a week."
Bank Earnings
"China Construction Bank Corp., the country's second-largest bank, jumped 3.7 percent to HK$6.19 in Hong Kong after saying first-half profit soared 71 percent from a year earlier on more lucrative lending and increased fee-based services."
"Babcock & Brown Ltd., the worst-performing stock on MSCI's Asian index this year, added 2.8 percent to A$2.55, trimming its 2008 loss to 91 percent. The Australian manager of infrastructure assets may seek a buyer for Irish phone company Eircom Group Plc, the Irish Times reported, citing unidentified people."
"Limiting gains, Maanshan Iron & Steel Co. plunged 7.8 percent to HK$3.18 in Hong Kong, the biggest drop on MSCI's regional index. Goldman Sachs Group Inc. downgraded shares of China's fourth-largest listed steelmaker to ``sell'' from ``buy,'' citing accelerating declines in steel prices and weaker demand amid a property slowdown."
"The brokerage also lowered its share-price estimate for Realtek Semiconductor Corp., a Taiwan chip designer, to NT$60 from NT$67, saying that weakening demand will hurt earnings growth in the third quarter. The shares tumbled 6.9 percent to NT$63.20."
"Goodman Fielder Ltd., Australia's largest baker, plunged 4 percent to A$1.45 as it turned to a second-half loss after taking an A$170 million ($148 million) writedown on its New Zealand dairy unit."
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
"Last Updated: August 25, 2008 04:33 EDT"
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Romanian Second-Quarter Labor Costs Rise 22% on Labor Shortage
By Adam Brown
Aug. 25 (Bloomberg) -- Romanian labor costs rose an annual 21.8 percent in the second quarter as a growing shortage of workers and increased foreign investment forced employers to increase wages.
"Labor costs also rose 9.3 percent from the previous quarter, led by increases in wages, health plan costs and other indirect costs for oil and energy and transport workers, the Bucharest- based National Statistics Institute said in an e-mail today."
"Romania's unemployment rate was at a 16-year low of 3.8 percent in July as increased investment and economic growth boosted demand for labor while European Union entry last year encouraged many Romanian workers to move to western Europe. Average net wages in Romania rose 24.4 percent in the year in June to 1,273 lei ($532)."
"The central bank has warned that labor cost increases are outstripping gains in productivity, slowing export growth and making Romania less competitive compared with other countries."
To contact the reporter on this story: Adam Brown in Bucharest at abrown23@bloomberg.net
"Last Updated: August 25, 2008 03:00 EDT"
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"Hungarian Central Bank to Keep Rates Unchanged, Survey Shows "
By Zoltan Simon
"Aug. 25 (Bloomberg) -- Hungary's central bank will leave its benchmark interest rate unchanged at a three-year high as the strengthening of the forint helps curb inflation, a survey of economists shows."
"The Magyar Nemzeti Bank in Budapest will leave the two-week deposit rate at 8.5 percent, the second-highest in the European Union after Romania, according to all 20 analysts in a Bloomberg survey. The decision will be announced at 2 p.m. local time today."
"The forint was the best-performing European currency in the second quarter, gaining 11 percent against the euro. Policy makers in the past two months left the key rate unchanged after raising it 1 percentage point since March, saying the forint can help control inflation, which has been faster than the central bank's target for two years."
"The central bank is ``firmly in a wait-and-see mode,'' analysts at Intesa Sanpaolo SpA's unit in Budapest, including Mariann Trippon, said in a note to clients."
"The bank will also publish its quarterly updated inflation forecasts, which policy makers have said will guide their rate decisions in the coming months. The current forecast says the inflation rate will average 6.3 percent this year and 4.2 percent in 2009, with rates declining to 3 percent some time in 2010."
The global surge in energy and food prices has led to record inflation around the globe. Consumer price growth was at a 12-year high in France in July and a 30-year high in Pakistan.
Forint Strength
"Since June, Hungarian policy makers have become more convinced that the current key rate of 8.5 percent, coupled with the forint's strength, are enough to keep surging energy prices from pushing up other costs."
"The vote was 6-4 in favor of keeping rates unchanged in June, while by July it was 10-1, minutes from the rate-setting meetings showed. Last month was also the first time since December that central bankers didn't consider raising the rate."
"The bank's move away from further monetary tightening quickly changed analyst expectations. The six-month forward rate dipped to 8.3 percent by Aug. 21, a full percentage point below the level on June 11. Forward rate agreements below the benchmark level show investors are increasingly betting on a rate cut as the next change in monetary policy."
"The central bank's ``bias has clearly shifted from hawkish to dovish over the past two months and we expect the bank to enter an easing cycle over the next six months,'' Radoslaw Bodys, an economist at Merrill Lynch in London, said in a note to clients."
Rate Cut
"The Czech central bank this month lowered its key interest rate for the first time in more than three years, to 3.5 percent from 3.75 percent, as the strengthening koruna and a slowing economy threatened to push inflation below its target."
"In Hungary, by contrast, a stubbornly high level of inflation may persuade the central bank to keep rates on hold for the rest of the year, according to Balazs Csonto, a Budapest-based analyst at ING Groep NV."
"The annual inflation rate was 6.7 percent in July, unchanged from the previous month. Food prices dropped for a second month while the forint helped reduce the price of durable goods and limited growth in household energy costs. Analysts expect the 20 percent drop in crude prices in the past month to begin slowing inflation in August or September."
"Still, uncertainties remain on the outlook for inflation."
"Wages unexpectedly accelerated in June, which according to the central bank is a sign of rising inflation expectations at a time when government austerity measures, aimed at reining in the widest budget deficit in the European Union, crimp corporate profits."
`Uncertain' Outlook
"The forint, the bank's key weapon in taming inflation, has also shown volatility. In the past month, the currency weakened to 239.39 per euro on Aug. 15, from a record 228.49 on July 18. It was trading at 233.9 at 9:44 a.m. on August 22."
"``The inflation outlook is extremely uncertain,'' Neil Shearing, an emerging markets economist at Capital Economics Ltd. in London, said in an e-mail. ``We expect the Council to stay on hold this month and think that rates could stay unchanged for the rest of the year.''"
To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net
"Last Updated: August 25, 2008 02:00 EDT"
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Palm Oil Falls as Crude Drop Erodes Prospect for Biofuel Demand
By Jae Hur
"Aug. 25 (Bloomberg) -- Palm oil futures in Malaysia, the global benchmark, declined for the first day in four after crude oil slumped last week, reducing prospects for biofuel demand made from the commodity and rival soybean oil."
"Crude oil lost 5.4 percent on Aug. 22, the most since Dec. 7, 2004. Palm oil and soybean oil, used mainly in cooking, often follow crude oil prices as they can be used as alternative fuels. Soybean oil fell 2.5 percent on Aug. 22 in Chicago, the biggest drop in a week."
"``Crude's down by $6 a barrel,'' Ben Santoso, a plantation analyst at DBSVickers Securities (Singapore). The decline in palm oil was expected and ``sentiment was too overwhelming'', he said."
"Palm oil for November delivery fell as much as 105 ringgit, or 3.9 percent, to 2,610 ringgit ($774) a metric ton and traded at 2,628 ringgit as of 12:30 p.m. in Kuala Lumpur. Prices gained 10.7 percent last week, after dipping to a 15-month low."
"The price may find a floor of 2,200 ringgit in the next few weeks as a 41 percent plunge from a record 4,486 ringgit on March 4 fuels demand, Dorab Mistry, director at Godrej International Ltd., one of India's biggest buyer of the commodity, said at a conference in Kuala Lumpur today."
"Mistry, who has traded vegetable oils since 1976, said he abandoned his forecast for palm oil reaching 4,500 ringgit by February next year as it was ``over-optimistic.''"
"Malaysia's palm oil exports rose 0.8 percent in the first 25 days of August, compared with the same period the previous month, according to independent surveyor Intertek."
Malaysian Exports
"A total of 1.14 million tons of palm oil were tracked from Aug. 1 to Aug. 25, Intertek said in a report today. Malaysia exported 1.13 million tons in the same period in July, the surveyor said."
"According to forecast for November and December, there should be some drop in palm oil production, Santoso said."
"``The stocks to usage ratio for palm oil should come down to the same level of December 2007,'' he said. ``That should be supportive to the price by then.''"
Oil for October delivery declined as much as 0.5 percent to $114.03 a barrel before trading at $114.55 at 1:23 p.m. Singapore time.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
"Last Updated: August 25, 2008 01:28 EDT"
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Barratt Sees Crude Oil Prices as High as $125 a Barrel: Video
"Aug. 25 (Bloomberg) -- Jonathan Barratt, managing director of Commodity Broking Services Ltd., talks with Bloomberg's Haslinda Amin from Sydney about the outlook for oil prices and the geopolitical risks to global crude oil supplies. (Source: Bloomberg)"
"00:00 Oil price, supply, demand, geopolitical risks"
05:25 Impact of U.S. dollar on commodities
Running time 05:53
"Last Updated: August 25, 2008 01:35 EDT"
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Jim Rogers Says Oil Price Rise to Continue for Decade (Update1)
By Chan Tien Hin
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"Aug. 23 (Bloomberg) -- Jim Rogers, who in April 2006 correctly forecast the oil price would reach $100 a barrel and gold $1,000 an ounce, said he expects oil to continue to increase over the next decade."
"``Over the course of time, it's a bull market,'' the chairman of Rogers Holdings said today after an investor conference in Kuala Lumpur. While the oil price could fall to $75 or rise to $175, the market will continue to increase over the next 10 years, he said."
"Crude oil futures have dropped 22 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983. Oil slid more than $6 a barrel yesterday, falling the most in percentage terms since December 2004, as the rising dollar curbed demand for commodities as an inflation hedge and BP Plc restored shipments on a Caspian Sea pipeline through the former Soviet republic of Georgia to Turkey."
Rogers said Aug. 21 in Bangkok that declines in commodity prices from record highs represented a temporary reversal in a bull market that will last for several years.
"David Cohen, director of Asian forecasting at Action Economics in Singapore, said the rise in the crude oil price ``was a recognition'' of the growing demand of emerging economies like China and India."
"``Those countries will continue with their development process and continue to outpace global growth,'' he said."
Dollar Gains
"Soybeans, copper, platinum and crude oil have dropped from all-time highs after a rally in the dollar curbed demand for raw materials as a hedge against inflation and concerns increased that economic growth will slow. The Reuters/Jefferies CRB Index plunged 10 percent in July, the biggest drop in 28 years."
"Crude-oil futures for October delivery fell $6.59, or 5.4 percent, to $114.59 a barrel on the New York Mercantile Exchange yesterday. Crude oil may rise next week because of a weakening dollar, rising tension between the U.S. and Russia, the world's second-biggest crude exporter after Saudi Arabia, 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."
"`` I can certainly see crude continuing above $100 a barrel for the longer term,'' Cohen said. ``The fundamentals of supply and demand should be supportive'' of prices."
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net
"Last Updated: August 23, 2008 03:23 EDT"
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Renault Says Emerging-Market Growth to Slow in 2009 (Update3)
By Heloiza Canassa
"Aug. 22 (Bloomberg) -- Renault SA, France's second-largest carmaker, expects sales growth in emerging markets to slow to an average of 10 percent next year, about half the expected rate for 2008."
"``There are signs emerging-market sales will keep growing, while at a lower pace,'' Chief Executive Officer Carlos Ghosn told reporters in Curitiba, Brazil, today. ``Emerging markets made up for falling sales in mature countries last year, and this scenario is still the same today.''"
"Renault is releasing new models and increasing production in countries such as Brazil as weaker economic growth and rising unemployment lead to falling demand in Europe and parts of Asia. European auto registrations declined 2 percent in the first half of the year, according to the Brussels-based European Automobile Manufacturers' Association. Brazilian vehicle sales rose 30 percent over the same period."
"Ghosn said he expects sales in China to rise less than 10 percent next year, while demand in Russia and the Middle East should increase at a faster pace."
"Renault rose 2.66 euros, or 4.7 percent, to 59.16 euros in Paris today. The Boulogne-Billancourt, France-based carmaker's stock has dropped 39 percent this year, compared with a 23 percent decline for the Bloomberg Europe Autos Index."
Lower Target
"Rising raw material costs and faltering European auto sales prompted Renault on July 24 to slash its 2009 global sales target by 10 percent and pledge as many as 6,000 job cuts to meet profit goals."
"Ghosn last month outlined plans to scrap some vehicle programs, reduce European production and lower non-production costs by 10 percent amid dwindling sales in Renault's home market. He scaled back the automaker's ambitions in upscale vehicles by shelving development of a range of successors to the aging Espace minivan."
"The company released the fifth of the six models today that it plans to begin selling in Brazil through 2009. The automaker's production is expected to rise to 200,000 vehicles by 2010 from an estimate 156,000 units this year."
"``The global market is still growing, but in very different scenarios,'' Ghosn said today. ``We expect our sales in Brazil to keep rising at a fast pace over the next few years.''"
Brazilian Market
"Brazil' fastest economic growth in four years and record bank loans are fueling demand for durable goods such as vehicles, computers and electronics."
"Anfavea, as the Brazilian automaker association is known, forecasts sales will rise to a record 3.06 million vehicles this year, a 24 percent increase from 2007. At the current pace of growth, ``a slowdown may only occur next year,'' Jackson Schneider, the association's head, said on Aug. 6."
"Renault is investing 1 billion reais ($621 million) in Brazil between 2005 and 2009 to introduce new products and boost production capacity. The company expects sales to total 130,000 vehicles in 2008, above a previous estimate of 106,000 units."
"The carmaker, the fifth largest in Brazil, almost doubled sales in the country in the first seven months of the year. Registrations of Renault models totaled 65,200 units January through July, compared with about 33,100 units in the same period a year earlier, according to Anfavea."
To contact the reporter on this story: Heloiza Canassa in Sao Paulo at hcanassa@bloomberg.net.
"Last Updated: August 22, 2008 18:00 EDT"
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Platinum Declines in N.Y. as Strengthening Dollar Curbs Demand
By Halia Pavliva
"Aug. 22 (Bloomberg) -- Platinum fell in New York as the dollar gained and energy prices slid, cutting demand for the metal as a hedge against inflation. Palladium was steady."
"Crude oil fell for the first time in four days and the U.S. Dollar Index, a gauge that includes the euro and yen among six major currencies, rose the most in two weeks, reducing demand for commodities as an inflation hedge. The UBS Bloomberg Constant Maturity Commodity Index sank for the first time in five days."
"``Today's moves are about oil slipping and the dollar gaining once again,'' said Jon Nadler, a senior analyst at Kitco Minerals & Metals Inc. in Montreal."
"Platinum futures for October delivery fell $17.60, or 1.2 percent, to $1,441.20 an ounce on the New York Mercantile Exchange. The metal still gained 3.8 percent this week, capping five straight weekly declines, including an 11 percent plunge through Aug. 15 that was the biggest for a most-active contract since September 2001."
"Palladium futures for September delivery were little changed, slipping 15 cents, or 0.1 percent, to $289 an ounce. The metal still rose 1.5 percent this week, ending eight straight weekly declines."
"``For the short term, it looks like crude and the U.S. dollar will continue to be leading the precious metals complex ahead of any news,'' Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said in a note."
"The Dollar Index jumped as much as 0.9 percent, the most since Aug. 8, paring yesterday's 1 percent loss. Crude-oil futures fell as much as $7 a barrel, or 5.8 percent, in New York."
Inflation Outlook
"Falling commodity prices and a stable dollar should stem inflation, Federal Reserve Chairman Ben S. Bernanke said today in a speech at a meeting of monetary policy makers in Wyoming. Consumer prices rose the most in the U.S. since 1992 last month."
"``Bernanke spoke. Markets listened. Speculators acted. The public continues to scratch its collective head. How and when will the storm end?'' Kitco's Nadler said in a note to clients. ``We are not sure we would be running out, backing up the truck to load up on additional commodities positions.''"
"Platinum yesterday rose the most in a day since Sept. 17, 2001, as U.S. markets resumed trading following the Sept. 11 terrorist attacks, and palladium gained the most since March 25."
"``Yesterday's spike in commodities brings up the question of whether the move we saw was a massive dead-cat bounce, or the start of something more meaningful,'' Edward Meir, an MF Global Ltd. analyst in Stamford, Connecticut, said today in a report. ``We think the dead-cat bounce theory has more credibility.''"
Auto Sales
"Platinum and palladium are both used in pollution-control devices in vehicles, a major source of demand for platinum. The silvery metal has tumbled 30 percent since the end of June, while palladium plunged 38 percent, on concern that auto industry consumption will slide. Car and light-truck sales in the U.S., the world's largest market, are on a pace to make this year the worst since 1993."
"``While platinum remains reasonably well-supported in the mid $1,300's, hopes for short-term gains of any larger magnitude are based upon perceptions that the return of German automakers from their summer holidays,'' Kitco's Nadler said."
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
"Last Updated: August 22, 2008 15:45 EDT"
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Malaysia May Keep Key Rate Unchanged as Growth Slows (Update1)
By Stephanie Phang
Enlarge Image/Details
"Aug. 25 (Bloomberg) -- Malaysia's central bank may keep its benchmark interest rate unchanged today to avoid exacerbating an economic slowdown, refraining from joining its neighbors who have increased borrowing costs to fight inflation."
"Bank Negara Malaysia will maintain its overnight policy rate at 3.5 percent for a 19th straight meeting, according to 12 of the 20 economists surveyed by Bloomberg News. The other eight expect an increase to 3.75 percent. The decision is due at 6 p.m. in Kuala Lumpur."
"Malaysia has avoided following Thailand, Indonesia, India, Vietnam and the Philippines in raising borrowing costs this year as a deepening global slowdown threatens Asian growth. Central Bank Governor Zeti Akhtar Aziz has said she expects commodity prices, which drove inflation to a 26-year high last month, to ease next year as expansion cools around the world."
"``Although we believe the economic case for modest rate hikes remains intact, policymakers appear to think the growth slowdown will in itself take care of inflation,'' said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. ``Given the difficult political backdrop, it is unlikely the government would appreciate a rate increase that will only add to the woes of households.''"
Voter anger over rising prices contributed to opposition gains in March elections that deprived Prime Minister Abdullah Ahmad Badawi's of his two-thirds majority in parliament. Former deputy premier Anwar Ibrahim will run for a seat in a by- election tomorrow in a bid to return to the legislature for the first time in a decade and oust the government.
Seize Power
"Anwar, now the leader of an alliance of opposition parties, has said he plans to lure enough lawmakers from the ruling coalition to form a new government next month. He has promised to reduce fuel prices should he seize power."
"Bank Negara, which hasn't raised borrowing costs since April 2006, unexpectedly refrained from increasing the overnight policy rate last month, saying its immediate concern is to avoid a ``fundamental economic slowdown'' even as it raised this year's inflation forecast to between 5.5 percent and 6 percent. Slowing growth will cause inflation to ease in the second half of 2009, the central bank said."
Malaysia's inflation accelerated to 8.5 percent in July after the government increased retail gasoline prices 41 percent and diesel rates 63 percent in June to prevent subsidies that keep pump costs artificially low from spiraling amid soaring oil prices. Electricity rates also rose in July.
Tightening Bias
"Malaysia cut fuel prices on Aug. 23 as it hastened a plan to peg gasoline prices at 30 sen (8.9 cents) below market rates per liter, seeking to ease the burden of consumers and reduce inflationary pressure."
"The last time Malaysia's inflation was above 6 percent was June 1998, when the central bank's then benchmark three-month intervention rate was 11 percent. Malaysia's overnight policy rate, introduced in April 2004, is the second lowest in Asia outside Japan, together with Hong Kong's and Thailand's."
"``While we agree that there are significant concerns on growth in the near term, runaway inflation could make matters worse going forward,'' said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. ``It could potentially undermine the longer- term growth potential of the economy. We believe that the policy direction is still biased toward tightening in the near term.''"
"Still, expectations for a Malaysian rate increase have eased along with weakening global economic prospects since last month, when more than half of the 20 economists surveyed by Bloomberg News had expected the central bank to raise borrowing costs at its July 25 meeting."
U.S. Slowdown
"Neighboring Singapore cut its 2008 growth forecast for a second time this year in August, joining other nations in Asia signaling a deeper slowdown. Malaysia's economic expansion probably slowed in the second quarter, a Bloomberg survey of economists shows ahead of an Aug. 29 central bank release."
The effect of a U.S. housing slump last year that sparked about $500 billion in credit-market losses for banks globally is spreading as rising borrowing costs combine with record commodity prices to sap growth in the world's largest economies. The U.S. is close to a recession and Japan contracted in the second quarter.
"Economists at Goldman Sachs Group Inc. said last week countries that account for half of the world economy face recession, and those at JPMorgan Chase & Co. estimate a global expansion of 1 percent this quarter, the weakest in seven years."
The following table gives economist forecasts for Malaysia's benchmark interest rate:
Malaysia Overnight Policy Rate Estimates
==================================================
Observation Period Aug. Oct. Nov.
25 24 24
==================================================
Median 3.50% 3.50% 3.50%
% forecasts at Median 60.0% 58.3% 50.0%
High 3.75% 4.00% 4.00%
Low 3.50% 3.50% 3.25%
Number of Estimates 20 12 12
==================================================
Action Economics 3.75% 3.75% 4.00%
Aseambankers 3.50% 3.50% 3.50%
Bank Islam Malaysia 3.50% 3.50% 3.50%
Barclays Capital 3.50% 3.50% 3.50%
Brown Brothers Harriman 3.75% 4.00% 4.00%
Capital Economics Ltd. 3.75% -- --
CIMB Investment Bank 3.50% 3.50% 3.50%
Citi 3.50% 3.50% 3.50%
Credit Suisse 3.50% 3.50% 3.50%
DBS Group 3.75% 4.00% 4.00%
HSBC 3.75% -- --
IDEAglobal 3.75% -- --
JF Apex Securities Bhd 3.50% -- --
JP Morgan Chase 3.50% -- --
Kenanga Investment Bank 3.75% 4.00% 4.00%
Lehman Brothers 3.50% -- --
Reuters IFR 3.75% 3.75% 4.00%
Standard Chartered 3.50% -- --
Sumitomo Mitsui Banking 3.50% 3.50% 3.25%
Westpac Banking 3.50% -- --
==================================================
To contact the reporter on this story: Stephanie Phang in Singapore at sphang@bloomberg.net
"Last Updated: August 24, 2008 21:57 EDT"
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"China Construction Profit Soars 71% as Lending, Fee Income Rise "
By Chia-Peck Wong and Luo Jun
"Aug. 23 (Bloomberg) -- China Construction Bank Corp., the nation's second-biggest, said first-half profit surged 71 percent as it boosted lending revenue and increased fee-based services."
"Net income soared to 58.7 billion yuan ($8.59 billion), or 0.25 yuan a share, from 34.2 billion yuan or 0.15 yuan a year earlier, the Beijing-based bank said in a statement to the Hong Kong exchange last night. The median estimate of five analysts surveyed by Bloomberg News was for profit of 59 billion yuan."
"CCB, China's largest mortgage provider, increased lending even as the government implemented economic tightening measures to cool credit growth. While Chinese banks are unlikely to repeat the pace of growth for the rest of this year and 2009, they are still attractive investments because asset quality hasn't deteriorated, said an analyst at JPMorgan Chase & Co."
"``If the economy goes for a soft landing, profit growth for Chinese banks should be 17 percent to 18 percent next year,'' JPMorgan analyst Samuel Chen said before the results. ``This is slower, but the de-rating of Chinese banks has already happened and so they are reasonably priced'' compared with U.S. rivals."
"Construction Bank, established in 1954 to fund roads, bridges, dams and other infrastructure, is China's largest mortgage and real-estate lender. It provides 23.1 percent of the nation's mortgages and about 12 percent of overall loans."
Shares Fall
"CCB's shares, traded in Hong Kong, fell 9.7 percent this year, making it the fifth-best performer on the benchmark Hang Seng Index, which has slipped 27 percent. The stock declined 2.3 percent to HK$5.97 on Aug. 21. Hong Kong's bourse was shut yesterday because of a typhoon."
"Chinese banks trade at an average 3.2 times book value with a return on equity of 19.2 percent. That compares with a price- to-book ratio of 1.3 and an average return of 8.8 percent for their U.S. counterparts, according to data compiled by Bloomberg."
"Net interest income rose 25 percent to 111.1 billion yuan, China Construction said in yesterday's statement. The bank's net interest margin widened to 3.29 percent from 3.11 percent a year earlier."
"Chinese banks extended 2.45 trillion yuan of local-currency loans in the first half, taking the total to 28.6 trillion yuan, an increase of 14 percent from a year earlier, even as the economy slowed in the second quarter to 10.1 percent."
"Net fees and commissions from services such as credit cards, custodian services and mutual fund sales, surged 59 percent to 20.2 billion yuan, China Construction Bank said."
"Industrial & Commercial Bank of China Ltd., the nation's biggest bank, became the world's most profitable bank this week as it announced record first-half earnings of 64.5 billion yuan."
`Overweight' Rating
JPMorgan's Chen has an ``overweight'' rating on China Construction shares and a six-month price target of HK$7.80.
China's government clamped down on loan growth after Premier Wen Jiabao identified overheating and inflation as the two major problems facing the economy. The central bank raised interest rates six times last year and has boosted the proportion of deposits lenders must hold as reserves to a record 17.5 percent.
"China's benchmark CSI 300 Index fell 54 percent this year, making it the world's worst-performing primary index."
"China Construction's non-performing loan ratio stood at 2.21 percent at the end of June, down from 2.60 percent on Dec. 31."
"The bank had $3.25 billion of investments at Fannie Mae and Freddie Mac, the two largest U.S. home loan providers. Yields on bonds guaranteed by Fannie and Freddie this week rose to the highest since 1986 relative to Treasuries."
To contact the reporters on this story: Luo Jun in Shanghai jluo6@bloomberg.netChia-Peck Wong in Hong Kong at cpwong@bloomberg.net
"Last Updated: August 22, 2008 22:09 EDT"
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Shanghai Electric Says Profit Under `Pressure' as Costs Rise
By Theresa Tang
"Aug. 25 (Bloomberg) -- Shanghai Electric Group Corp., China's biggest maker of power equipment, said full-year earnings are under ``pressure'' because of higher raw material costs."
"Profit margins on power equipment may narrow 1 to 2 percent this year, Chief Financial Officer Yu Yingui told reporters in Hong Kong today."
"Shanghai Electric announced a 14 percent decline in first- half profit on Aug. 22, prompting JPMorgan Chase & Co. to slash estimates. Full-year net income may be little changed at 2.84 billion yuan ($415 million), according to the mean estimate of four analysts compiled by Bloomberg."
"``The outlook is challenging,'' President Huang Dinan said at the same conference, without giving a specific profit forecast. ``Rising raw material costs, though seeing some retreats recently, may pose pressure on our profit.''"
"Shanghai Electric rose 3.3 percent to HK$3.10 at the 12:30 p.m. break in Hong Kong trading, tracking gains in the benchmark Hang Seng Index. The stock is down 53 percent this year, compared with a 24 percent decline in the index."
"JPMorgan cut its profit estimates for Shanghai Electric by 4-5 percent for 2008-2010 after the lower-than-expected interim earnings, analysts Boris Kan and Edmond Lee said in an Aug. 24 report to clients. The brokerage also lowered its stock price target to HK$3.80 from HK$4.30."
"Power equipment accounts for more than half of the company's sales. Shanghai Electric also produces heavy machinery, diesel engine, crankshaft for ships and rail equipment."
"The average selling price of power equipment orders received in July was higher than in the first half, said Company Secretary Andrew Li, without elaborating. The total value of orders this year should exceed 2007, Li said."
To contact the reporters on this story: Lee Spears in Beijing at lspears2@bloomberg.net; Theresa Tang in Hong Kong at ttang3@bloomberg.net
"Last Updated: August 25, 2008 02:59 EDT"
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"European Government Notes Advance, Snapping Three-Day Decline "
"Aug. 25 (Bloomberg) -- European two-year government notes advanced, snapping a three-day drop, as signs credit-market losses are widening spur demand for the safest assets."
"The declines last week pushed the yield on German notes to the highest level since Aug. 7 as futures traders scaled back bets the European Central Bank will cut its benchmark interest rate. Roskilde Bank A/S will be bought by the Danish Central Bank and a group of financial companies after no buyers were found for the regional operator, which last month became the first bank in the country to be bailed out for 15 years."
"The two-year note yield fell 6 basis points to 4.06 percent by 7:10 a.m. in London, after rising 13 basis points last week to 4.13 percent. The price of the 4.75 percent note climbed 0.11, or 1.1 euros per 1,000-euro ($1,472) face amount, to 101.15."
"The yield on the 10-year German bund, Europe's benchmark government security, slipped 3 basis points to 4.18 percent. Yields move inversely to bond prices."
"The central bank and the group will inject 4.5 billion kroner ($890 million) into Roskilde after no single private bank, domestic or foreign, was willing to buy it, the Copenhagen-based lender of last resort said yesterday."
Gains for bonds may be limited after Asian stock markets rallied the most in four weeks as oil's biggest plunge in four years eased concern higher energy costs and quicker inflation will erode earnings. The MSCI Asia Pacific Index rose 1.6 percent to 123.51 in Tokyo.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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Mexico's Reports $1.08 Billion July Trade Deficit (Update1)
By Thomas Black
"Aug. 22 (Bloomberg) -- Mexico reported an unexpected trade deficit in July, the largest since April, as businesses took advantage of a strong peso to import more machinery and equipment."
"Mexico's trade shortfall was $1.08 billion, according to a preliminary report by the nation's statistics agency, compared with a revised trade surplus of $277 million in June. Economists had forecast a surplus of $55.8 million for last month, according to the median of 14 estimates compiled by Bloomberg."
"``There was an impact from the strong peso, and it shows domestic demand is still growing at a decent rate,'' said Bertrand Delgado, an economist with IDEAglobal Inc. a New York- based research firm."
"The Mexican currency has gained 7.5 percent against the dollar this year, making goods priced in dollars cheaper to buy. The peso weakened 0.5 percent today to 10.1417 pesos per dollar, from 10.0931 pesos yesterday."
"Imports jumped 23 percent from a year ago to $28.76 billion, mostly on increased purchases of equipment and machinery. These imports, known as capital goods, climbed 39 percent to $3.71 billion."
"Imports of intermediate goods, which are unfinished components and materials used for manufacturing and construction, rose 21 percent to $20.9 billion. Consumer-good imports climbed 24 percent to $4.16 billion."
Oil Exports
"Exports rose 22 percent to $27.68 billion. Oil-related exports surged 52 percent as higher crude prices made up for lower export volume. Non-oil exports increased 15.9 percent, the government said."
"Petroleos Mexicanos, the state-owned oil monopoly, reported yesterday that the value of its July crude oil exports increased 49 percent to $5.24 billion even as export volume dropped 22 percent to 1.377 million barrels a day. Oil export prices averaged $122.79 a barrel in July, almost double the $64.54 a barrel a year ago."
"To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net."
"Last Updated: August 22, 2008 16:35 EDT"
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European Notes Post Weekly Decline on Bets ECB Won't Cut Rates
Aug. 22 (Bloomberg) -- European government notes snapped a four-week advance on speculation the region's central bank will delay interest-rate cuts to focus on curbing inflation rather than boosting growth.
"The drop pushed the yield on two-year German notes, 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 gain 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 7 basis points to 4.15 percent by 3:55 p.m. in London, leaving it 15 basis points higher in the week. The 4.75 percent note fell 0.28 this week, or 2.8 euros per 1,000-euro ($1,481) face amount, to 100.99."
"The yield on the 10-year German bund, Europe's benchmark government security, rose 6 basis points to 4.23 percent, extending gains since Aug. 15 to 8 basis points. Yields move inversely to bond prices."
"The difference in yields, or spread, between two- and 10- year notes was the narrowest in almost three weeks as rate- sensitive short-maturity debt underperformed. The spread was at 8 basis points, from 16 basis points a week ago."
Slump in Orders
"Bonds fell even as a report showed European industrial orders dropped the most in more than six years in June, led by a decline in transport equipment such as planes and rail cars."
"Orders at factories in the 15-nation euro area fell an annual 7.4 percent, the most since December 2001, the European Union's statistics office in Luxembourg said today. Excluding transport, orders slipped 1.5 percent. Economists expected a 6.3 percent drop in total orders, according to the median of 10 estimates in a Bloomberg News survey."
ECB policy maker Klaus Liebscher said Aug. 22 the bank must anchor inflation expectations at a ``low level'' to avoid a wage- price spiral.
"``Our central concern is to avoid second-round effects,'' a reference to inflation fueling wage demands, Liebscher said at an event in Vienna. The ECB ``will do what's needed'' to fight inflation."
The bank is concerned that the fastest inflation in 16 years will help unions push through demands for higher wages and prompt companies to lift prices.
Growth Signs
Bunds had their biggest decline in more than a month yesterday after an index of manufacturing in the euro region unexpectedly increased in August.
"Royal Bank of Scotland Group Plc's composite index rose to 48, from 47.8 in July, as the manufacturing component climbed. Economists in a Bloomberg survey forecast a drop to 47.7. The manufacturing index gained to 47.5 from 47.4, while the services index slipped to 48.2 from 48.3."
Traders have reduced bets the ECB will lower interest rates this year to stimulate economic expansion. The implied yield on the December Euribor futures contract has gained 3 basis points this week to 5.07 percent.
The EU 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, when 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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Canada's Dollar Posts Second Weekly Gain as Commodities Rebound
By Chris Fournier
"Aug. 23 (Bloomberg) -- The Canadian dollar gained for a second consecutive week, boosted by a rebound in the price of commodities including crude oil and gold."
"``It's been a good week for commodities and the Canadian dollar has certainly benefited from that,'' said Stefane Marion, assistant chief economist at National Bank Financial in Montreal. ``We've had a significant rebound in prices.''"
"The currency of Canada, which relies on commodities for about half its export revenue, appreciated 1.2 percent since Aug. 15 against its U.S. counterpart. It gained against all of the world's 16 most actively traded currencies in that period except for the South African rand."
"The loonie, named after the aquatic bird on the one-dollar coin, rose 0.4 percent to C$1.047 per U.S. dollar yesterday in Toronto, from C$1.0592 on Aug. 15. One Canadian dollar buys 95.51 U.S. cents."
"The currency surged 17 percent in 2007 as commodity prices soared. The rally 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 a year-low C$1.0728 on Aug. 12."
"``I wonder if there's been a bit of sober second though when you see how far the Canadian dollar had fallen in such a short time span,'' said Eric Lascelles, chief economist at TD Securities Inc. in Toronto. ``It kicked in when oil was appreciating and failed to respond as sharply when oil was depreciating.''"
"Gold, Silver"
"Crude oil climbed $6.20 to $121.18 on Aug. 21 before erasing that advance yesterday. It still posted its first weekly price increase since the start of August. Gold, Silver and copper also gained this week."
"The Reuters/Jefferies CRB Index of 19 commodities rose for four straight sessions before paring gains yesterday. The index posted its first weekly advance in three, and the biggest since the five days ended June 6."
The U.S. dollar has risen against all of the 16 other major currencies this month on speculation the U.S. economic slowdown is spreading to other industrialized countries.
"Lascelles predicts the dollar will trade at C$1.099 against its U.S. counterpart by year-end as commodity markets weaken, while Marion forecasts the currency slumping to C$1.12. The loonie will slip to C$1.10 against the U.S. dollar by the end of 2009, according to the median forecast of economists surveyed by Bloomberg News."
`Not so Bearish'
"June wholesale sales advanced 2 percent, Statistics Canada said Aug. 19, almost triple the median forecast of economists in a Bloomberg survey. Retail sales rose 0.5 percent, while consumer prices increased 0.3 percent from June, less than economists' 0.4 percent forecast."
"``Some of the underlying fundamentals for Canada are pretty good,'' said John Rothfield, senior currency strategist at Banc of America Securities LLC in San Francisco. ``The market's not so bearish anymore on how many rate cuts the Bank of Canada's got to do.''"
"The loonie will approach parity by the end of the year, Rothfield forecasts. He said ``we have C$1.03 and C$1.02 next couple of quarters.''"
"The central bank's policy makers are scheduled to meet on Sept. 3, when they will leave the key rate unchanged at 3 percent, according to all seven economists polled by Bloomberg."
"The yield on the two-year Canadian government bond rose 13 basis points, or 0.138 percentage point, to 2.94 percent. The price of the 2.75 percent security due in December 2010 decreased 27 cents to C$99.59. The 10-year bond's yield increased 5 basis points to 3.62 percent this week."
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 3.86 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 25 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 4.3 percent in 2008, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 3.6 percent this year."
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
"Last Updated: August 23, 2008 08:00 EDT"
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"Japan Bonds May Fall on U.S. GDP, Mitsubishi UFJ Says (Update1) "
By Theresa Barraclough
"Aug. 25 (Bloomberg) -- Investors are likely to ``turn bearish'' toward Japanese government bonds in the next two weeks as reports show the nation's inflation picked up and the U.S. economy improved, according to Mitsubishi UFJ Securities Co."
"A U.S. government report this week will show growth gathered pace in the world's biggest economy in the second quarter, according to a Bloomberg News survey of economists. Japan will announce the fastest inflation in more than a decade, a separate survey showed."
"Data ``on the U.S. economy may be a trigger for the unwinding of Japanese pessimism,'' said Takashi Nishimura, a Tokyo-based analyst at Mitsubishi UFJ, a securities unit of Japan's largest bank by assets. ``We have been too negative about economic trends. This will change and inflation concerns will resurface.''"
"Investors should sell Japan's seven-year bonds, he said today in a telephone interview."
The yield on the seven-year bond dropped 4 basis points to 1.06 percent today as of the 2:21 p.m. in Tokyo. The yield has declined since reaching a 10-month high of 1.71 percent on June 13 as concern about a widening global economic slump prompted investors to favor less risky assets.
"``Seven-year bonds, or similar bond futures, will be the first'' to fall following bearish news for the bond market, Nishimura said."
Ten-year bond futures for September delivery gained 0.30 to 137.99 on the Tokyo Stock Exchange.
"Growth, Inflation"
"A government report on Aug. 13 showed Japan's 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. GDP in the 15 nations that share the euro fell for the first time since the launch of the currency almost a decade ago."
"The U.S. economy grew at a 2.7 percent annualized rate after expanding 0.9 percent in the first quarter, according to the median estimate of 69 economists surveyed by Bloomberg News. Japan's core consumer prices, which exclude fresh food, rose 2.3 percent from a year earlier in July after rising 1.9 percent the previous month, a separate survey indicated."
"``If the economy starts to recover, that puts upward pressure on oil, which then puts upward pressure on CPI,'' Nishimura said. ``That's downward pressure for bonds. Investors should buy inflation bonds.''"
"The extra yield paid by 10-year conventional government debt compared with similar-maturity inflation-linked bonds declined 1 basis points to 14 basis points, according to data compiled by Bloomberg."
The so-called breakeven inflation rate reflects investors' expectations for average annual increases in consumer prices over the next decade.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
"Last Updated: August 25, 2008 01:30 EDT"
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Dollar Rises on Speculation Oil Decline to Support U.S. Economy
By Stanley White
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Aug. 25 (Bloomberg) -- The dollar rose for a second day against the euro on speculation a drop in oil prices will support growth in the world's largest energy consumer.
The currency also traded near a seven-month high versus the yen following the biggest decline in crude costs in more than three years. The euro fell against the yen before a survey tomorrow that may show business confidence in Germany slid to the lowest since 2005.
"``Oil prices have come off the boil and that has done quite a lot to help the dollar,'' said Akio Shimizu, chief manager of foreign exchange trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. ``It does relieve some concern that the economic outlook will deteriorate.''"
"The dollar climbed to $1.4721 per euro at 6:51 a.m. in London from $1.4793 late in New York on Aug. 22, when crude oil tumbled 5.4 percent, the most since December 2004. It may advance to $1.47 per euro today, Shimizu forecast."
"The U.S. currency traded at 110.08 yen from 110.07 at the end of last week. It rose to 110.66 yen on Aug. 15, the highest since Jan. 2. The euro declined to 162.01 yen from 162.83."
"The greenback also rallied against other Asian currencies. The South Korean won fell to 1,074.90 per dollar from 1,062.20 on speculation overseas investors will cut holdings of local shares. The Malaysian ringgit slumped to an eight-month low of 3.3715 versus the dollar on speculation the country's central bank will refrain from raising interest rates today."
"Crude oil for October delivery was at $114.79 a barrel in New York after earlier falling to $114.03, the lowest since Aug. 20. The euro-dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep."
Ifo Survey
The euro weakened against the dollar and the yen on speculation declines in German business confidence will discourage the European Central Bank from raising interest rates.
"The Ifo institute's confidence index probably fell to 97.2 in August, the lowest since September 2005, according to the median estimate of economists surveyed by Bloomberg News before the release of the report tomorrow."
"``The euro has downside risks before the Ifo data,'' said Motonari Ogawa, director of currency trading in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``European growth isn't looking that good, so people are likely to react more to data that support that view.''"
"Futures traders increased their bets that the euro will decline against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 20,364 on Aug. 19, compared with net shorts of 19,427 a week earlier."
Trading Recommendation
"``We put up a recommendation to go short the euro at $1.4858 and targeting $1.4350,'' Nizam Idris, a currency strategist in Singapore at UBS AG, wrote in a research note today. ``Going forward, we expect a trend of deteriorating growth conditions to remain intact, and this will most likely keep the euro in a broad downtrend.''"
"UBS forecasts the ECB will cut its 4.25 percent benchmark rate by 75 basis points, or 0.75 percentage point, over the next one to two months, Nizam wrote."
Gains in the dollar may be limited by speculation data this week will show U.S. home sales were near the lowest in a decade and consumer spending growth slowed as the economy grapples with rising credit losses after the subprime mortgage collapse.
U.S. Housing Market
"Resales of existing homes, reported by the National Association of Realtors today, gained 1 percent to a 4.91 million annual rate, staying near June's 10-year low, according to a Bloomberg News survey of economists. U.S. personal spending grew 0.3 percent in July, compared with 0.6 percent the previous month, according to a separate survey before the Commerce Department report on Aug. 29."
"``Weak economic data are likely to pull the dollar lower,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``We can't be optimistic about the outlook for growth. The subprime problem will also weigh on dollar sentiment well into the future.''"
"The U.S. currency may fall to 109.50 yen and $1.4820 per euro today, he said."
"The pound slid to a two-year low of $1.8406 before data tomorrow that may show U.K. home prices fell 9.6 percent in August from a year earlier, according to a Bloomberg survey."
"The currency may extend declines to $1.8300 in the next two weeks after the currency closed below so-called support at $1.8620 on Aug. 22, said Pak Lai Ng, a technical analyst at Forecast Pte Ltd. in Singapore."
"Support at $1.8620 was a 61.8 percent retracement of the pound's rise from the November 2005 low of $1.7049 to the November 2007 high of $2.1161, based on a series of numbers known as the Fibonacci sequence. Support is where buy orders may be clustered."
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net
"Last Updated: August 25, 2008 02:11 EDT"
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Korean Won Falls the Most in Almost Three Months; Bonds Decline
By Judy Chen
Aug. 25 (Bloomberg) -- South Korea's won fell the most in almost three months to reach the lowest since November 2004 as overseas investors stepped up sales of the nation's shares. Bonds declined.
"The won extended its loss this year to 13 percent, the worst performance among the world's 16 most-traded currencies. UBS AG pared its mid-2009 forecast for the benchmark Kospi index on Aug. 21 by 15 percent to 1,700 as the global economy cooled and consumer prices jumped."
"``The Kospi is not good and foreign investors are selling shares,'' said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. ``That's the main reason for the won's weakness.''"
"Korea's currency dropped 1.5 percent, the most since May 8, to 1,078.9 per dollar as of 3 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It touched 1,079.9. Global fund managers have sold 1.33 trillion won ($1.23 billion) more local shares than they bought since Aug. 18, stock exchange data shows."
"Korea's consumer-price inflation may exceed 7 percent in August, the Seoul Economic Daily reported today, citing a government official it didn't identify. Consumer prices climbed 5.9 percent in July from a year earlier, the fastest pace in almost 10 years."
Government bonds declined on concern that inflation will accelerate in August. The Bank of Korea raised the benchmark interest rate to an eight-year high of 5.25 percent this month.
"``The bond yield is likely to remain high this week as investors are concerned about the weaker currency and inflation,'' said Shin Dong Jun, a fixed-income analyst at Hyundai Securities Co. in Seoul."
"The yield on the 5.5 percent note due September 2017 climbed 12.5 basis points to 6.08 percent, according to Korea Exchange. The price dropped 0.83, or 83 won per 10,000 won face amount, to 98.53. A basis point is 0.01 percentage point."
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net.
"Last Updated: August 25, 2008 03:44 EDT"
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Crude Oil Futures Rise to Trade Above $115 a Barrel in New York
By Ayesha Daya
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"Aug. 25 (Bloomberg) -- Crude oil rose to trade above $115 a barrel in New York, recovering from its earlier losses."
"Crude oil for September delivery advanced as much as 91 cents, or 0.9 percent, to $115.50 a barrel on the New York Mercantile Exchange at 8:25 a.m. London time."
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
"Last Updated: August 25, 2008 03:30 EDT"
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"European Stocks Drop, Led by Total; U.S. Index Futures Decline "
By Alexis Xydias
"Aug. 25 (Bloomberg) -- European stocks fell, led by energy companies, after oil had its steepest retreat in more than three years. U.S. index futures declined, while Asian shares rose."
"Total SA, Europe's third-biggest oil company, lost 1.3 percent after oil dropped more than $6 a barrel on Aug. 22. Saipem SpA, Europe's largest oil-field services contractor by market value, slipped 1.7 percent."
"Europe's Dow Jones Stoxx 600 Index declined 0.3 percent to 283.12 at 8:05 a.m. in London, while futures on the Standard & Poor's 500 Index fell 0.3 percent. The MSCI Asia Pacific Index increased 1.5 percent."
Trading in Europe will probably be below average today as the U.K. is closed for a holiday.
"``The move in the oil market is likely to have an effect, with energy stocks weighing on indexes,'' said David Talbot, a trader at IG Markets Ltd. in Melbourne, Australia, in a phone interview. ``We expect a quiet trading day.''"
"European stocks dropped for a second week last week, as higher oil dimmed the earnings outlook for automakers and retailers and concern deepened that banks will report more losses."
"Concern that rising oil prices, accelerating inflation and more than $500 billion in credit-related losses will deepen a global economic slowdown pushed the Stoxx 600, a pan-European benchmark index, down 22 percent this year."
"Crude fell more than $6 a barrel on Aug. 22, ending 5.4 percent lower in the day, the most since December 2004. The retreat started as European exchanges were open, and deepened after stock trading ended. Oil traded little changed today."
"Total, Eni"
The dollar rose for a second day against the euro today on speculation the drop in oil prices will support growth in the world's largest consumer of the fuel.
"Total, Europe's third-largest oil company, sank 1.3 percent to 48.55 euros. Eni, Italy's biggest energy company, lost 0.8 percnet to 21.54 euros. Saipem fell 1.7 percent to 25.60 euros."
"Allianz SE added 1.2 percent to 109.09 euros. The insurer may be close to an agreement to sell its Dresdner Bank unit to Commerzbank AG, Germany's second-largest bank by assets, for 9 billion euros ($13 billion), Welt am Sonntag and the Sunday Times reported."
NicOx SA tumbled 4.4 percent to 6.69 euros. The French drugmaker developing treatments with Pfizer Inc. said the U.S. pharmaceutical company won't develop an experimental glaucoma medicine after a study in Japan failed to reach its goal.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
"Last Updated: August 25, 2008 03:19 EDT"
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Treasuries Rise; Report May Show Home Sales Near 10-Year Low
By Wes Goodman
Aug. 25 (Bloomberg) -- Treasuries rose for the first time in three days before an industry report that may show U.S. home sales were near a 10-year low last month.
"U.S. government securities headed for a third straight monthly gain, according to Merrill Lynch & Co.'s U.S. Treasury Master index, as forecasts for slowing economic growth and credit-market losses increased demand for the relative safety of government debt. Interest-rate derivatives imply that banks are becoming more hesitant to lend on speculation global credit losses will widen."
"``The housing data are going to be bad,'' said Adam Carr, senior economist in Sydney at ICAP Australia Ltd., part of the world's largest inter-bank broker. ``That should support Treasuries in the early part of the week.''"
"The two-year note yield declined 4 basis points to 2.37 percent by 8:45 a.m. in London, according to bond broker BGCantor Market Data. The 2.75 percent security due July 2010 rose 2/32, or 63 U.S. cents per $1,000 face amount, to 100 23/32. A basis point is 0.01 percentage point."
Ten-year yields slid 3 basis points to 3.85 percent.
The Securities Industry and Financial Markets Association recommended trading close in the U.K. today for a holiday and go on as usual in Japan and the U.S.
"Existing homes sold at an annual pace of 4.91 million units in July, versus 4.86 million the previous month, which was the lowest level in a decade, according to a Bloomberg News survey of economists. The National Association of Realtors will release the figure at 10 a.m. in Washington."
"Treasuries returned 0.9 percent in August, the Merrill index shows. They gained 0.8 percent in June and 0.4 percent in July."
Spread Widens
Banks are charging each other a premium of 77 basis points over what traders predict the Federal Reserve's daily effective federal funds rate will average in the next three months to lend cash. The spread has widened from about 24 basis points in January.
"Losses and writedowns on securities related to home loans to people with poor credit now exceed $500 billion at financial institutions, according to data compiled by Bloomberg."
"Yields will rise as investors prepare to purchase Treasury two-year notes at an auction on Aug. 27 and five-year securities on Aug. 28, said Hidehiko Maejima, international bond strategist in Tokyo at BNP Paribas Securities Japan Ltd., one of the 19 primary dealers that trade directly with the Fed. Stock gains will help push two-year yields toward 2.50 percent, he said."
"``The supply is a negative factor'' for Treasuries, Maejima said. ``Overall stock prices are relatively firm.''"
Record Auction
"The U.S. will probably sell a record $32 billion in two-year notes and $22 billion in five-year debt, according to Stone & McCarthy Research Associates, an economic analysis company in Princeton, New Jersey. The five-year sale would be the most since February 2003. The Treasury Department is scheduled to announce the sizes today."
"MSCI's Asia Pacific Index of regional shares rose as much as 1.8 percent, the most in three weeks. The Dow Jones Stoxx 600 Index of European shares fell 0.4 percent."
"Ried, Thunberg & Co.'s sentiment index for the end of December rose to 49 for the seven days ended Aug. 22 from 48 the week before. A reading below 50 means investors anticipate lower prices. The 31 fund managers surveyed by the company, another ICAP unit, manage a combined $1.40 trillion."
Increased turmoil in the money markets may again serve as a catalyst for a surprise year-end rally in Treasuries like the one in 2007.
`Most Liquid Thing'
"``The trade to do in December will be to get back into the most liquid thing you can find,'' such as Treasury bills or notes, said David Keeble, head of fixed-income strategy in London at Calyon, a unit of Credit Agricole SA, France's second-largest bank by assets. ``We are having a period now of a second round of pressures on banks. It's weak economic growth which is now piling the pain onto the banks.''"
"Japanese government bonds advanced on speculation a slowdown in the local economy will increase demand for debt. The yield on the 1.5 percent bond due June 2018 fell 1 basis points to 1.42 percent, according to Japan Bond Trading Co., the nation's largest interdealer debt broker."
"Futures contracts on the Chicago Board of Trade show the Fed will probably refrain from raising U.S. interest rates this year. The world's largest economy probably grew 2.7 percent in the second quarter, faster than the 1.9 percent pace first reported, according to a Bloomberg survey of economists before the Commerce Department revises the figure on Aug. 28. Growth will slow to 0.45 percent in the fourth quarter, a separate survey showed."
"``Rate hikes are unlikely for the time being,'' Jan Hatzius, the chief U.S. economist at Goldman Sachs & Co., another primary dealer, wrote in a report that he distributed by e-mail in early Asian trading. ``An end to the financial crisis is not yet in sight.''"
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.
"Last Updated: August 25, 2008 04:05 EDT"
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Home Sales Probably Held Near Decade Low: U.S. Economy Preview
By Shobhana Chandra
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"Aug. 24 (Bloomberg) -- Home sales in the U.S. probably teetered near a 10-year low, property values dropped and consumer spending cooled, signaling the economy has taken another turn for the worse, reports this week may show."
"A total of 5.435 million new and existing homes were purchased in July at an annual pace, according to the median estimate of economists polled by Bloomberg News. June's 5.39 million rate was the weakest since at least 1999. Spending probably rose 0.3 percent in July, half the prior month's gain."
"The real-estate recession will persist into next year as stricter lending rules and higher borrowing costs shackle demand. At the same time, equity is disappearing as home prices fall, and wages aren't keeping up with inflation, depriving Americans of the means to maintain spending, the biggest part of the economy."
"``The economy is going down a shaky path,'' said Maxwell Clarke, chief U.S. economist at IDEAGlobal Inc. in New York. ``We're not going to see a rebound in housing anytime soon. Consumers are living hand to mouth, and the outlook for spending is very weak.''"
"Purchases of new houses dropped 0.9 percent to an annual rate of 525,000, according to the median estimate of economists polled ahead of a Commerce Department report on Aug. 26. March's 513,000 pace was the lowest since 1991."
"Resales of existing homes, compiled from closings and reflecting contracts signed weeks or months earlier, will be reported by the National Association of Realtors tomorrow. Purchases gained 1 percent to a 4.91 million annual rate, staying near June's 10-year low, the survey median showed."
Timelier Gauge
"While sales of previously owned homes account for about 85 percent of the U.S. market, new-home purchases are considered a timelier indicator because they are based on contract signings."
"The slump in demand is keeping property values under pressure. The S&P/Case-Shiller index of home prices in 20 metropolitan areas probably fell in June, the survey showed. The figures, due on Aug. 26, would extend a string of declines that began in August 2006."
"Consumers, after getting a temporary lift from the government's tax rebates earlier this year, are focusing on buying necessities and hunting for bargains to stretch their paychecks following the jump in food and fuel costs."
"Home Depot Inc., the world's largest home-improvement retailer, said second-quarter profit fell 24 percent, its eighth straight quarterly drop. The Atlanta-based company forecast a decline in sales and earnings for the year."
Consumer 'Pressure'
"``We continue to see pressure on our market and the consumer,'' Chief Executive Officer Frank Blake said in a statement on Aug. 19."
"Commerce Department figures on Aug. 29 will underscore the dimming outlook for consumer spending, according to the Bloomberg survey."
"The report is also projected to reinforce concern over inflation. The price gauge tied to spending patterns probably rose 4.5 percent in the year ended July, the biggest 12-month gain since 1991."
"The measure that excludes food and energy costs, the one tracked by Federal Reserve policy makers, probably rose 2.4 percent from a year earlier, the biggest gain since February 2007, the survey showed."
"Concerns about slower growth and the pickup in prices led Fed policy makers to hold the benchmark interest rate at 2 percent this month. Minutes of the Aug. 5 meeting, to be released Aug. 26, may shed more light on the debate within the central bank about the future direction of rates."
Exports
"The one bright spot for the economy remains the narrowing of the trade deficit. A surge in exports caused the economy to grow even faster in the second quarter than previously projected. Revised figures from the Commerce Department, due Aug. 28, may show the economy expanded at a 2.7 percent annual rate from April through June, up from an advance estimate of 1.9 percent issued last month, according to the survey median."
"``The data releases this week should illustrate the stark contrast between how well the economy performed in the second quarter and how bad the outlook for the second half of the year is,'' said Paul Ashworth, international economist at Capital Economics Ltd. in London."
"Other reports this week may show orders for durables goods stalled in July and confidence among American consumers was little-changed this month from multiyear lows reached earlier this year, even as gasoline prices retreated."
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Exist Homes Mlns 8/25 July 4.86 4.91
Exist Homes MOM% 8/25 June -2.6% 1.0%
Case Shiller Monthly YO 8/26 June -15.8% -16.2%
Case Shiller Monthly In 8/26 June 168.5 167.2
Consumer Conf Index 8/26 Aug. 51.9 53.0
"New Home Sales ,000's 8/26 July 530 525"
New Home Sales MOM% 8/26 July -0.6% -0.9%
OFHEO HPI MOM% 8/26 June -0.3% -0.4%
OFHEO HPI QOQ% 8/26 #VALUE! -1.3% -1.6%
Durables Orders MOM% 8/27 July 0.8% 0.0%
Durables Ex-Trans MOM% 8/27 July 2.0% -0.6%
GDP Annual QOQ% 8/28 3Q P 1.9% 2.7%
Personal Consump. QOQ% 8/28 3Q P 1.5% 1.6%
GDP Prices QOQ% 8/28 3Q P 1.1% 1.1%
Core PCE Prices QOQ% 8/28 3Q P 2.1% 2.1%
"Initial Claims ,000's 8/28 Aug. 23 432 425"
"Cont. Claims ,000's 8/28 Aug. 16 3362 3380"
Pers Inc MOM% 8/29 July 0.1% -0.2%
Pers Spend MOM% 8/29 July 0.6% 0.3%
PCE Deflator YOY% 8/29 July 4.1% 4.5%
Core PCE Prices MOM% 8/29 July 0.3% 0.3%
Core PCE Prices YOY% 8/29 July 2.3% 2.4%
Chicago PM Index 8/29 Aug. 50.8 50.0
U of Mich Conf. Index 8/29 Aug. F 61.7 62.0
=============================================================================
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
"Last Updated: August 24, 2008 00:01 EDT"
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"China's Stocks Fall for Third Day; Yanzhou Coal, Zijin Decline "
By Zhang Shidong
"Aug. 25 (Bloomberg) -- China's stocks dropped for a third day, led by coal producers and metals shares after crude oil had the biggest slump since December 2004 and prices of commodity retreated."
"Yanzhou Coal Mining Co., the listed unit of China's fourth- biggest coal miner, fell 1.9 percent. Zijin Mining Group Co., China's largest gold producer, retreated 2.9 percent."
"The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, lost 4.38, or 0.2 percent, to 2,400.55 at the close after rising as much as 1.5 percent. Stocks even fell after the securities regulator proposed listed companies pay more dividends."
"``Sentiment is still weak and a big market movement is unlikely in the short term,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million."
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
"Last Updated: August 25, 2008 03:31 EDT"
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"Brazil Stocks Fall as JPMorgan Says Sell Commodities, Oil Drops "
By Paulo Winterstein and William Freebairn
Aug. 22 (Bloomberg) -- Brazilian stocks fell for the first time in four days after commodity prices declined and JPMorgan Chase & Co. strategists said investors should sell energy and raw materials producers.
"The Bovespa was dragged down by the two biggest stocks in the index, Cia. Vale do Rio Doce and Petroleo Brasileiro SA, as the stronger dollar spurred declines for metal and oil prices. Brazil's biggest mobile phone companies, Vivo Participacoes SA and Tim Participacoes SA gained on acquisition speculation, limiting the market's declines."
"The Bovespa dropped 84.56, or 0.2 percent, to 55,850.13, paring its weekly gain to 3 percent. The MSCI Latin America index dropped 0.6 percent. Mexico's Bolsa gained 1.3 percent, while Chile's Ipsa index climbed 1.7 percent."
"``When the dollar strengthens that's negative for commodity prices, and you can see the impact today,'' said Rodrigo Lopes, who helps manage the equivalent of about $615 million at Sao Paulo-based Banif-Nitor Asset Management. ``As a result, oil is falling almost five dollars.''"
"The dollar rose against the euro and the yen as a South Korean bank said it's ``considering'' an investment in Lehman Brothers Holdings Inc., indicating U.S. financial firms may weather credit market turmoil."
Vale Slides
"Vale, the world's biggest iron-ore producer, slid 1.8 percent to 38.10 reais as copper dropped the most in two weeks and nickel lost 3 percent."
"Petrobras, Brazil's state-controlled oil company, fell for the first time in four days."
"Crude oil may tumble to $80 a barrel within 12 months on increasing supplies of alternative energy, said Renee Haugerud, whose hedge fund gained 18 percent this year. The surge in oil has been ``overdone'' by investors seeking holdings in raw materials through the Standard & Poor's GSCI Index, a commodity gauge weighted toward energy, she said."
Materials companies account for half of Brazil's index.
"Real estate companies extended their declines as uncertainty about the U.S. economy led investors to sell the stocks, many of which have listed in the past two years."
"``Investors don't know the companies very well because there's not a history'' as publicly traded companies, said Antonio Emilio Ruiz, real estate analyst at Banco do Brasil Investimentos. ``In moments of uncertainty, foreign investors -- who bought into these stocks with a lot of eagerness -- they end up selling these companies first.''"
"Gafisa SA, Brazil's second-biggest developer, led declines on the index. The company, which sold shares in 2006, fell 4.6 percent to 23.04 reais. Agra Empreendimentos Imobiliarios SA, which sold shares in April 2007, dropped 2.3 percent to 8.70 reais."
Weekly Rally
"Even with today's decline, the Bovespa gained this week, spurred by reports showing inflation in easing in Latin America's largest economy."
"Brazil's inflation through mid-August slowed from the second consecutive month. The inflation rate as measured by the benchmark IPCA-15 index decreased to 0.35 percent from 0.63 percent through mid-July as food prices eased, the national statistics agency said today. It was less than 0.38 percent median estimate in a Bloomberg survey of 35 economists."
"The increasing spread between Tim's voting shares and preferred shares signal possible change in company control, Banif Investimentos analyst Alex Pardellas wrote in a note."
"Vivo ``could purchase Tim Participacoes, which would be very positive for all of the Tim and Vivo shares,'' he wrote."
"Tim voting shares rose 5.1 percent to 5.83 reais, while preferred shares fell 1.1 percent to 3.50 reais. Vivo preferred shares added 3.6 percent, while voting shares rose 1.8 percent."
Vivo didn't immediately return a call from Bloomberg News to its Sao Paulo press office seeking comment.
Duratex Gains
"Building materials company Duratex SA led gains on the index, jumping 7.5 percent to 25.69 reais. UBS analyst Edmo Chagas said the company is ``as cheap as it gets'' and will likely benefit from continued demand for housing in Brazil."
"Mexico's Bolsa index rose for the second time in three days, paring a weekly decline, led by mobile-phone company America Movil SAB."
"America Movil, Latin America's largest wireless company, rose to the highest in a month after it began selling Apple Inc.'s iPhone 3G in 10 Latin American countries today. The device may boost sales per user because of its computer-like functions, analyst Martin Lara of brokerage Vector Casa de Bolsa said in a phone interview from Mexico City."
America Movil gained 2.4 percent to 26.45 pesos.
"In other Latin America markets, Peru's Lima General fell 1.2 percent, Colombia's IGBC eased 0.1 percent and Argentina's Merval rise 0.9 percent."
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
"Last Updated: August 22, 2008 16:49 EDT"
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"Dollar Rises Versus Euro, Yen on Lehman Investment Possibility "
By Ye Xie and Gavin Finch
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"Aug. 22 (Bloomberg) -- The dollar rose against the euro and the yen as a South Korean bank said it's ``considering'' an investment in Lehman Brothers Holdings Inc., indicating U.S. financial firms may weather credit market turmoil."
"The U.S. currency also gained versus the euro on bets yesterday's biggest drop since June was overdone and as crude erased a 5.4 percent increase. Federal Reserve Chairman Ben S. Bernanke said falling commodity prices, a stable dollar and slowing growth should stem inflation."
"``The dollar bottoming is in place,'' said Alan Ruskin, head of currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The euro- dollar is evenly balanced.''"
"Against the euro, the dollar climbed 0.8 percent to $1.4781 at 4:35 p.m. in New York, from $1.4899 yesterday, when it fell 1 percent. The dollar rose 1.5 percent to 110.07 yen, from 108.43. It touched 108.14 yesterday, the lowest since Aug. 5. The yen fell 0.7 percent to 162.69 per euro, from 161.57."
"The dollar has decreased 0.6 percent against the euro this week, the first drop in six weeks. The dollar depreciated 0.4 percent versus Japan's currency, while the euro increased 0.3 percent against the yen."
"Sterling fell 1 percent to $1.8588 today and dropped 0.7 percent to 79.84 pence per euro after a report showed British economic growth stagnated in the second quarter. Sterling has dropped for a fifth week against the dollar, declining 0.4 percent, its longest losing streak since February 2006. The pound decreased 1.3 percent versus the euro this week."
Dollar's Rally
The dollar has gained almost 8 percent versus the euro since touching the all-time low of $1.6038 on July 15 and appreciated 2 percent against the yen this month. The European and Japanese economies shrank in the second quarter and crude oil has fallen 22 percent from a record of $147.27 a barrel set on July 11.
"Dollar stability and price declines in oil and other commodities are ``encouraging,'' Bernanke said in a speech in Jackson Hole, Wyoming. He added that the inflation outlook remains ``highly uncertain'' and the Fed ``is committed to achieving medium-term price stability and will act as necessary'' to achieve that goal."
"Crude oil for October delivery fell 5.4 percent to $114.69 a barrel, the biggest drop since December 2004. It surged by the same amount yesterday and has gained 0.8 percent this week. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations based on value changes. A reading of 1 would mean they move in lockstep."
European Industry
"Industrial orders in the 15 countries that use the euro fell 7.4 percent from a year earlier, the most since December 2001, the European Union statistics office said today. The German economy, Europe's largest, shrank 0.5 percent in the second quarter, the first contraction in four years."
"``The market is caught between the idea that euro-dollar at $1.60 cannot be justified with Europe in dire straits and that fundamentals in the U.S. haven't improved either,'' RBS Greenwich Capital's Ruskin said."
"The yen fell 1.2 percent to 14.32 versus the South African rand and 0.3 percent to 67.57 against Brazil's real today as the possibility of a South Korean acquisition of Lehman Brothers encouraged a resumption of the carry trade, in which investors get funds in a country with low borrowing costs and buy assets where returns are higher."
"Korea Development Bank ``is considering all kinds of options, including Lehman Brothers,'' a spokesman said. The yen gained against other major currencies yesterday after the Financial Times reported the South Korean bank and China's Citic Securities Co. abandoned talks to buy a Lehman stake this month."
BOJ Rate
"The Bank of Japan held its target lending rate at 0.5 percent this week, compared with the 4.25 percent benchmark in Europe, 13 percent in Brazil and 12 percent in South Africa."
"The ICE futures exchange's Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, rose 0.8 percent today to 76.805. It fell 1 percent yesterday, the biggest drop in almost five months. The index touched 77.413 on Aug. 19, the highest this year."
"``I think the dollar rebound is running out of steam,'' said Mike Moran, a senior currency strategist at Standard Chartered in New York. ``The reality is that while the U.S. economy is slightly better than expectation, the financial sector is highly vulnerable to credit problems.''"
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net
"Last Updated: August 22, 2008 16:36 EDT"
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China's Swap Rates Decline on Central Bank Easing (Update1)
By Belinda Cao
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Aug. 25 (Bloomberg) -- China's swap rates fell to a three- month low on speculation the central bank will lower the reserve requirement for lenders to spur economic growth.
"The one-year offshore yuan swap slid 1 basis point to 3.18 percent, the lowest since May 15, as of 12:40 p.m. today in Tokyo, according to data compiled by Bloomberg. It fell 9 basis points last week. The five-year swap rate has declined 20 basis points from a week ago to 3.625 percent on speculation increased money supply will push all borrowing costs lower."
"``The People's Bank of China may cut banks' reserve requirements,'' said Ye Yuzhang, a fixed-income trader in Shanghai at Industrial Bank Co., partly owned by HSBC Holdings Plc. ``Longer-term swap rates dropped faster than the one-year rate on the outlook that fund availability will increase.''"
"Chinese policy makers are switching focus to sustaining growth as well as cooling inflation, after expansion in the world's fourth-biggest economy slowed for four consecutive quarters. The central bank will ``fine-tune'' monetary policy to strike a balance between supporting expansion and fighting inflation, according to its second-quarter report Aug. 15."
"Swaps are derivative contracts used to guard against or gain from interest-rate fluctuations and involve the exchange of floating-rate and fixed-rate payments. Investors betting on rising borrowing costs will seek to pay a fixed rate. Those betting on a decline agree to pay a floating rate, which in these contracts is based on China's seven-day repurchase rate."
`Easy Funding'
"The difference between the one- and five-year offshore swap rates narrowed to 42 basis points, or 0.42 percentage point, on Aug. 22 after the five-year swaps declined from a peak of 4.76 percent on July 4, according to data compiled by Bloomberg. The average gap between the rates was 60 basis points this quarter."
"``Swap rates will continue declining for at least another month to reflect easy funding between banks,'' said Fan Xiulan, a Beijing-based fixed-income analyst with BOC International Holdings, the investment banking arm of Bank of China Ltd."
"The People's Bank of China has kept the benchmark one-year deposit rate unchanged this year at 4.14 percent to avoid attracting speculative capital. In the first half, the central bank ordered lenders to set aside more money as reserves five times, lifting the requirement to a record 17.5 percent of deposits."
"Last month, the central bank increased the 2008 lending quotas for national banks by 5 percent and regional lenders by 10 percent to help finance small and medium-sized companies and agriculture, according to reports by Goldman Sachs Group Inc., BNP Paribas SA, China Merchants Bank Co., and Industrial Bank Co."
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
"Last Updated: August 25, 2008 01:51 EDT"
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China's Swap Rates Decline on Central Bank Easing (Update1)
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Aug. 25 (Bloomberg) -- China's swap rates fell to a three- month low on speculation the central bank will lower the reserve requirement for lenders to spur economic growth.
"The one-year offshore yuan swap slid 1 basis point to 3.18 percent, the lowest since May 15, as of 12:40 p.m. today in Tokyo, according to data compiled by Bloomberg. It fell 9 basis points last week. The five-year swap rate has declined 20 basis points from a week ago to 3.625 percent on speculation increased money supply will push all borrowing costs lower."
"``The People's Bank of China may cut banks' reserve requirements,'' said Ye Yuzhang, a fixed-income trader in Shanghai at Industrial Bank Co., partly owned by HSBC Holdings Plc. ``Longer-term swap rates dropped faster than the one-year rate on the outlook that fund availability will increase.''"
"Chinese policy makers are switching focus to sustaining growth as well as cooling inflation, after expansion in the world's fourth-biggest economy slowed for four consecutive quarters. The central bank will ``fine-tune'' monetary policy to strike a balance between supporting expansion and fighting inflation, according to its second-quarter report Aug. 15."
"Swaps are derivative contracts used to guard against or gain from interest-rate fluctuations and involve the exchange of floating-rate and fixed-rate payments. Investors betting on rising borrowing costs will seek to pay a fixed rate. Those betting on a decline agree to pay a floating rate, which in these contracts is based on China's seven-day repurchase rate."
`Easy Funding'
"The difference between the one- and five-year offshore swap rates narrowed to 42 basis points, or 0.42 percentage point, on Aug. 22 after the five-year swaps declined from a peak of 4.76 percent on July 4, according to data compiled by Bloomberg. The average gap between the rates was 60 basis points this quarter."
"``Swap rates will continue declining for at least another month to reflect easy funding between banks,'' said Fan Xiulan, a Beijing-based fixed-income analyst with BOC International Holdings, the investment banking arm of Bank of China Ltd."
"The People's Bank of China has kept the benchmark one-year deposit rate unchanged this year at 4.14 percent to avoid attracting speculative capital. In the first half, the central bank ordered lenders to set aside more money as reserves five times, lifting the requirement to a record 17.5 percent of deposits."
"Last month, the central bank increased the 2008 lending quotas for national banks by 5 percent and regional lenders by 10 percent to help finance small and medium-sized companies and agriculture, according to reports by Goldman Sachs Group Inc., BNP Paribas SA, China Merchants Bank Co., and Industrial Bank Co."
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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"JPMorgan Recommends Global Banks, Consumer Stocks (Update2) "
By Fabio Alves
Aug. 22 (Bloomberg) -- JPMorgan Chase & Co. strategists recommended that investors increase their holdings of global financial stocks and U.S. companies that rely on discretionary spending by consumers and sell energy and raw material producers.
"We ``urge that investors continue to shift away from the consensus `inflation shock' trade,'' JPMorgan strategists led by Adrian Mowat wrote in a note to clients today."
"The percentage of U.S. companies reporting higher-than- estimated earnings in the second quarter exceeded previous quarters and that trend should continue as inflation slows and the dollar weakens, they said."
The strategists advised investors to ``overweight'' global banks and U.S. consumer discretionary stocks and ``underweight'' commodity shares.
"A group of bank and brokerage shares in the Standard & Poor's 500 index climbed 2.7 percent today, the most among the 10 industries. Lehman Brothers Holdings Inc., the brokerage that lost almost 80 percent of its value this year, surged 15 percent after Reuters reported Korea Development Bank said it's open to purchasing the firm."
"Mounting credit losses, forcing banks globally to write down more than $500 billion in the value of their assets, sent the S&P 500 Financials Index tumbling 31 percent this year through yesterday, compared with a 13 percent drop in the broader measure."
The dollar has gained almost 8 percent versus the euro since touching an all-time low of $1.6038 on July 15 amid concern credit-market losses and a surge in crude oil prices would prolong the U.S. economic slowdown.
"Among emerging stock markets, the strategists said they are bullish on China and ``less constructive'' on Latin America, eastern Europe and Africa, except Mexico and Turkey."
To contact the reporterS on this story: Fabio Alves in New York at falves3@bloomberg.net;
"Last Updated: August 22, 2008 14:32 EDT"
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Brazil's Mid-August Inflation Slows for Second Month (Update2)
By Joshua Goodman
"Aug. 22 (Bloomberg) -- Brazil's inflation through mid- August decelerated to the slowest pace in five months, bolstering confidence that the central bank will bring consumer prices back to target next year."
"The inflation rate as measured by the benchmark IPCA-15 index decreased to 0.35 percent from 0.63 percent through mid- July as food prices eased, the national statistics agency said in a release today on its Web site. It was less than 0.38 percent median estimate in a Bloomberg survey of 35 economists."
"``Clearly the big drop in food inflation is what explained major deceleration in inflation,'' said Tony Volpon, chief economist at Sao Paulo-based brokerage CM Capital Markets, in a telephone interview."
"The central bank has raised interest rates three times since April, to 13 percent from a record low 11.25 percent, in a bid to cool domestic demand and inflation running near the 6.5 percent upper limit of the government's target range. Policy makers are expected to raise the benchmark rate to 14.75 percent by the end of the year, according to an Aug. 15 central bank survey of 100 economists."
Brazil's economy is showing signs of slowing in the face of a tightening monetary cycle and worsening outlook for its commodity exports.
"Unemployment in July rose for the first time in five months, the national statistics agency said yesterday. Retail sales in June grew a less-than-expected 8.2 percent compared to the same period a year ago, slowing from a 11.1 percent in May."
Demand
"Still, economists such as Volpon and Alexandre Lintz, an economist at BNP Paribas in Sao Paulo, think demand remains too robust for the central band to abandon its hawkish stance."
"Price increases for services, which are more indicative of demand, accelerated to 0.52 percent through mid-August versus 0.24 percent last month, Volpon said."
"``If you strip away food, there's nothing in the data suggesting a major downward shift in aggregate demand that policy makers are looking for,'' said Volpon."
Volpon and Lintz expect the bank to raise interest rates by another 0.75 basis points at its next meeting Sept. 10.
"``The monetary authority is not out of the woods yet,'' he wrote in an e-mail to clients."
"Today's report showed that the annual inflation rate for the 12 months through mid-August slowed for the first time in five months to 6.23 percent from 6.30 percent in mid-July. Month-on-Month food prices rose 0.25 percent, their lowest reading since November and down from 1.75 percent in mid-July."
The real weakened 0.6 percent to 1.6181 per dollar at 10:51 a.m. New York time from 1.6090 late yesterday.
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro jgoodman19@bloomberg.net or
"Last Updated: August 22, 2008 10:52 EDT"
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"Taiwan Cuts GDP Forecast, Underscoring Signs of Asia Slowdown "
By Victoria Batchelor and Janet Ong
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"Aug. 23 (Bloomberg) -- Taiwan cut its forecast for 2008 growth as exports and consumer spending cool, the latest sign a slowdown in the world's largest economies is spreading across Asia."
"The economy will expand 4.3 percent this year, the weakest pace since 2003 and down from an estimate of 4.78 percent made three months ago, Taiwan's statistics bureau said yesterday. Growth this quarter will be the slowest in more than three years, it predicted."
"Asia's stocks fell for a fourth week, driving down the region's key index to a two-year low. Taiwan joins governments in Singapore and the Philippines in cutting growth estimates this month as fallout from the global credit squeeze worsens while soaring fuel and food prices damp household spending."
"``The U.S.-led global slowdown is taking a toll on Asian economies,'' said Lim Ji Won, an economist at JPMorgan Chase & Co. in Seoul. ``Demand for the region's electronics exports is easing and, compounding the problem, Asian consumers are struggling with soaring living costs.''"
"Economists at Goldman Sachs Group Inc. on Aug. 21 said countries that account for half of the world economy face recession, while analysts at JPMorgan estimate a global expansion of 1 percent this quarter, the weakest in seven years."
"The benchmark MSCI Asia Pacific Index fell yesterday to its lowest since July 26, 2006, and has slumped 23 percent in 2008."
"Taiwan's Taiex index of shares declined 4 percent this week, the biggest drop in five weeks."
Asian Exporters
"Demand for Toyota Motor Corp.'s cars, Samsung Electronics Corp.'s flat-screen televisions and Acer Inc.'s laptop computers has eased as the U.S. housing recession damps shipments to Asia's largest overseas market."
"Singapore, which lowered its growth estimate on Aug. 8, said this week that exports fell for a third month in July. The island state also reported retail sales declined 3.2 percent in June, the first drop in four months, as consumers bought fewer mobile phones and computers."
"The Philippines this week cut its economic growth forecast for the second time this year. Gross domestic product may expand 5.5 percent to 6.4 percent in 2008, from an earlier forecast of as much as 6.6 percent, Economic Planning Undersecretary Augusto Santos said in an interview from Manila on Aug. 20."
"South Korea's department store sales rose by the least in five months in July as consumers cut purchases of new clothes as their budgets came under pressure from surging living costs, its government said on Aug. 18."
Central Banks
"``Asia is cooling like the rest of the world, and we'll see the region's economies slow further in the second half,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``That's why it's appropriate that central banks are beginning to turn their focus to growth and away from inflation.''"
The Reserve Bank of Australia said on Aug. 19 that it may soon lower interest rates for the first time in seven years to avoid a deeper slowdown. The bank raised borrowing costs twice in 2008.
"The Bank of Japan cut its economic assessment on Aug. 21, saying growth is ``sluggish'' for the first time in a decade. Asia's biggest economy contracted last quarter as exports fell and consumers spent less, bringing Japan to the brink of its first recession in six years."
"``Inflation is close to the peak and central banks have bought into that and, around the region, are really starting to talk more about the need to shore up growth,'' said Tim Condon, chief Asia economist at ING Groep NV in Singapore. ``Inflation is yesterday's story.''"
Chinese Demand
"The economic news hasn't been all bad this week. Demand from China, the world's fastest growing major economy, is still helping to shore up Asia nations."
"A report two days ago showed Japan's exports to China climbed to a record in July, exceeding the value of those sent to the U.S. for the first time since the government began compiling monthly figures in 1950."
"Thailand's overseas shipments surged 43.9 percent in July from a year ago, the fastest growth since at least 1992, figures on Aug. 21 showed."
"Melbourne-based BHP Billiton Ltd., the world's biggest mining company, this week posted a 30 percent gain in fiscal second-half profit after boosting production to benefit from rising prices."
"``Raw-materials demand in China is going to be very strong for decades to come,'' Chief Executive Officer Marius Kloppers said on Aug. 18. While a global economic slowdown may lead to ``higher volatility'' in prices in the short term, China's demand remains ``resilient,'' he said."
To contact the reporter on this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.
"Last Updated: August 22, 2008 12:01 EDT"
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"Treasuries Drop as Haven Demand Eases, Inflation Concern Rises "
By Daniel Kruger and Dakin Campbell
Aug. 23 (Bloomberg) -- Treasury 10-year notes posted the biggest weekly drop in more than a month as the haven appeal of government debt faded as investors grew more confident that the U.S. will support Fannie Mae and Freddie Mac.
Yields on two-year notes rose the most in almost four weeks yesterday after Federal Reserve Chairman Ben S. Bernanke signaled that the central bank is relying on slowing growth to contain inflation. Concern that the fallout from credit market losses will spread also eased after the Korea Development Bank said it's ``considering'' an investment in Lehman Brothers Holdings Inc.
"``There's a little less anxiety in the financial markets,'' said Mark MacQueen, a money manager in Austin, Texas, at Sage Advisory Services, which oversees $6.5 billion. At the same time, ``Bernanke remains highly concerned about inflation but has little willingness to do anything about it.''"
"The yield on the 10-year note rose 4 basis points to 3.87 percent yesterday in New York, according to BGCantor Market Data. The price of the 4 percent security maturing in August 2018 declined 11/32, or $3.44 per $1,000 face amount, to 101 1/32. Yields have dropped 3 basis points since Aug. 15, the biggest weekly change since the five days ended July 18."
"Two-year note yields climbed 10 basis points yesterday to 2.40 percent, and are up 2 basis points on the week."
"Bernanke called dollar stability and price declines in oil and other commodities ``encouraging.'' Still, the inflation outlook remains ``highly uncertain'' and the Fed ``is committed to achieving medium-term price stability and will act as necessary to obtain that objective,'' he said at the Fed Bank of Kansas City's annual symposium in Jackson Hole, Wyoming."
`Status Quo'
"``It's status quo as far as the Fed's concerned,'' said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley's individual-investor clients. ``He's still trying to walk that tightrope between economic and market risk.''"
"Korea Development Bank's Chief Executive Officer Min Euoo Sung declined to comment on a Reuters report that the state-run lender is ``open to'' a potential acquisition of Lehman Brothers Holdings Inc. Reuters, citing an unidentified Korea Development Bank spokesman, said Korea Development is studying a number of options, including buying Lehman."
"Lehman, the largest underwriter of mortgage bonds before the subprime market collapsed, had slumped 77 percent over the past year as it struggled to pare its debt holdings. The bank has reported writedowns and credit losses of $8.2 billion in the past 12 months, according to data compiled by Bloomberg."
Note Auctions
"``The pressure is on the bond market as long as there is a hint that this could be the end of the credit crisis,'' said Michael Franzese, head of government bond trading at Standard Chartered in New York."
"The Treasury Department will probably sell $31 billion of two-year notes on Aug. 27 and $21 billion in five-year notes the following day, according to Wrightson ICAP, a Jersey City, New Jersey-based research firm specializing in government finance. The government will announce the auction sizes on Aug. 25."
"Some traders may be taking advantage of the lack of economic data yesterday to sell Treasuries before next week's auctions in what's called a `concession,' said Sean Murphy, a Treasury trader and strategist in New York at RBC Capital Markets, the investment-banking arm of Canada's biggest bank."
"Crude oil rose 0.9 percent this week and the Reuters/Jeffries CRB Index headed for a weekly gain of 3.3 percent, the first in three weeks."
Spreads
"The difference between yields on 10-year Treasury Inflation Protected Securities, or TIPS, and conventional notes widened to 2.19 percentage points from 2.16 percentage points on Aug. 18. The figure reflects the inflation rate that traders expect for the next decade."
"Treasuries lagged behind debt issued by Fannie Mae and Freddie Mac for a fourth day amid bets the Treasury will pump emergency capital into the two largest mortgage-finance companies. The spread between five-year debt issued by Fannie and similar-maturity Treasury bonds fell 2.4 basis points to 83.1 basis points, down from 104.1 basis points Aug. 18."
"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 reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net; Dakin Campbell in New York at dcampbell27@bloomberg.net
"Last Updated: August 23, 2008 08:00 EDT"
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Belgium's Business Confidence Unexpectedly Increases (Update2)
By Jurjen van de Pol
"Aug. 22 (Bloomberg) -- Belgian business confidence unexpectedly increased in August, led by a rebound in sentiment in the manufacturing industry after the cost of oil and other commodities retreated from record levels."
"The business-sentiment index rose to minus 5.9 this month from minus 7.6 in July, the Brussels-based National Bank of Belgium said today in an e-mailed statement. Economists expected a drop to minus 8, according to the median of 16 forecasts in a Bloomberg News survey."
"Oil prices have fallen 18 percent since reaching an all- time high above $147 a barrel on July 11, easing raw-material costs for companies across the 15 nations that use the euro. At the same time, the euro's retreat from record levels against the dollar is making European goods more competitive abroad."
"``The decline in the oil price and decline in the euro -- that made producers more optimistic,'' said Steven Vanneste, an economist at Fortis Bank in Brussels. Still, ``I don't think we are getting in an optimistic trend,'' he said, noting that ``high input costs'' are ``putting an extra burden on firms.''"
"While the Belgian economy outpaced the contracting euro region in the second quarter, the nation's 0.3 percent expansion from the previous three months was the slowest growth in more than three years. The unemployment rate rose in July for the first time in 15 months, signaling employers' hesitance to hire after the central bank cut its economic-growth forecast."
`Marked Slowdown'
"``The main message of the Belgian business survey is still a marked slowdown in area-wide activity,'' said Maryse Pogodzinski, an economist at JPMorgan Chase & Co. in Paris, said in a note to clients. ``But the bad situation observed in the second quarter is not getting worse.''"
"Business sentiment in Germany, Europe's largest economy, probably declined further this month after plunging in July by the most since the Sept. 11 terrorist attacks in 2001. The Munich-based Ifo institute's business climate index fell to 97.2 from 97.5 in July, according to the median estimate of 35 economists in a Bloomberg News survey. The index, which is based on a survey of 7,000 executives, will be released Aug. 26."
"The Belgian central bank's gauge of confidence in the manufacturing industry increased to minus 5.6 this month from minus 8.1 in July, today's report showed. Construction sentiment rose for a fourth month, with that indicator increasing to 1.3 from minus 0.6 in the previous month."
Five-Year Low
"While sub-indicators for current manufacturing output and orders increased in August, the gauge of sentiment on demand in the coming three months fell to a five-year low, according to today's report. The index for future demand in the wholesale- retail industry dropped to the lowest since the data were first collected in 1980."
"Belgian consumer confidence improved for the first time in six months in August as households worried less about economic growth and personal finances, the central bank said two days ago."
To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net
"Last Updated: August 22, 2008 11:37 EDT"
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"U.S. Stocks Advance on Oil's Plunge, Lehman Buyout Speculation "
By Eric Martin
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"Aug. 22 (Bloomberg) -- U.S. stocks advanced, led by banks and retailers, on oil's biggest plunge in four years and speculation a purchase of Lehman Brothers Holdings Inc. would end the worst slump by financial shares since at least 1962."
"Lehman, which tumbled almost 80 percent this year, rallied 13 percent after Korea Development Bank said it's considering an investment in the brokerage. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. gained more than 3.8 percent, helped by Federal Reserve Chairman Ben S. Bernanke's forecast that inflation will ease. United Airlines parent UAL Corp. rose 12 percent as crude lost 5.4 percent, the most since 2004."
"The Standard & Poor's 500 Index added 14.48 points, or 1.1 percent, to 1,292.20, reducing its first weekly drop since July to 0.5 percent. The Dow Jones Industrial Average advanced 197.85, or 1.7 percent, to 11,628.06. Only 888 million shares changed hands on the New York Stock Exchange, the fewest for a full trading session since Dec. 26. Volume this week was 35 percent less than the year-to-date average."
"``The U.S. financial system is not going down the tubes,'' James Gaul, a money manager at Boston Advisors LLC in Boston, which oversees about $2 billion, told Bloomberg Radio. The Lehman development ``assuages investor fears.''"
"The 54 percent plunge in the S&P 500 Financials Index from its February 2007 record through July 15 of this year was the steepest retreat in at least 46 years, according to data compiled by Birinyi Associates Inc., the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi."
Bear Stearns Collapse
"Financial companies in the S&P 500 dropped 31 percent this year before today after the market for subprime home loans collapsed. Bear Stearns Cos., once the largest underwriter of mortgage bonds after Lehman, was rescued by JPMorgan Chase & Co. in a March takeover brokered by the Federal Reserve."
"Lehman added 69 cents to $14.41 after surging as much as 16 percent. Korea Development Bank is considering investments including Lehman, a KDB spokesman said without elaborating. Chief Executive Officer Min Euoo Sung and Lehman spokesman Mark Lane declined to comment."
"``Lehman Brothers was the next firm likely to fail,'' said Jeffrey Kleintop, who helps oversee $273 billion as chief market strategist at LPL Financial in Boston. ``The market looks at this as a positive in that there have been expectations Lehman would survive in some form. The question was where was the money going to come from.''"
"Citigroup added 67 cents to $18.14, Bank of America rose $1.17 to $30.21 and JPMorgan increased $1.41 to $37.67. The S&P 500 Financials Index jumped 3.1 percent, the most since Aug. 8."
Bernanke on Inflation
"Banks extended their gain after Bernanke said inflation should ease later this year and in 2009 thanks to a recovery in the dollar and declines in commodity prices. The Fed is ``committed to achieving medium-term price stability,'' Bernanke said in a speech in Jackson Hole, Wyoming."
"Freddie Mac dropped the most in the S&P 500, while Fannie Mae swung between gains and losses. Their $36 billion in preferred stock was downgraded to the lowest investment-grade rating by Moody's Investors Service, which said the increased likelihood of ``direct support'' from the U.S. Treasury may devalue the securities. Billionaire investor Warren Buffett told CNBC that the firms ``don't have any net worth.''"
"Fannie Mae added 15 cents to $5. Freddie Mac lost 35 cents, or 11 percent, to $2.81. Both are trading near the lowest prices in two decades."
Stocks fell this week on growing concern shareholder value will be wiped out at the two largest mortgage-finance companies if they are bailed out by the government and commodities surged before today. The S&P 500 has dropped 17 percent from an October record as credit losses at banks topped $500 billion globally and record oil curbed growth.
"Airlines, GM Rise"
"UAL added $1.39 to $12.72 today, US Airways Group Inc. increased $1.06 to $7.86 and Continental Airlines Inc. climbed $1.52 to $15.86. General Motors Corp., the largest U.S. automaker, gained 52 cents to $10.44."
Oil fell as the U.S. dollar strengthened and BP Plc restored shipments on a Caspian Sea pipeline through Turkey. Crude tumbled $6.59 a barrel to $114.59 in New York.
"Gap Inc. climbed to the highest price since April, rising 87 cents to $19.88. The largest U.S. clothing retailer said second- quarter profit rose 51 percent, beating estimates, after it discounted fewer jeans and T-shirts."
JPMorgan Chase & Co. strategists said investors should buy more financial stocks and U.S. companies that rely on discretionary spending by consumers and sell energy and raw- material producers.
Dollar Boosts Profit
"``Weakness in the dollar over the past year should support U.S. earnings in 2008,'' JPMorgan strategists led by Adrian Mowat wrote in a note to clients today."
"The S&P 500 Consumer Discretionary Index rose 2.2 percent, the most among 10 S&P 500 industries after financials. Department-store operator Dillard's Inc. had the biggest gain, rising 77 cents, or 7 percent, to $11.85."
"Crude's retreat drove S&P 500 energy stocks to a 1.6 percent decline. Oil producers Exxon Mobil Corp. and Chevron Corp. were the only decliners in the 30-company Dow average. Exxon slipped 5 cents to $80.30, and Chevron lost 42 cents to $88.10."
"Cabot Oil & Gas Corp. had the second-steepest drop in the S&P 500, losing $2.77, or 6.1 percent, to $42.66. The natural-gas producer was cut to ``neutral'' from ``buy'' at Merrill Lynch & Co. by analysts who reduced their 2008 earnings estimate on a lower price forecast for the fuel."
"Raw-materials producers were the only other industry among 10 to slump, losing 0.4 percent. Copper declined 2.2 percent in New York, the most since Aug. 8. Gold and silver also fell."
"Freeport-McMoRan Copper & Gold Inc., the world's largest publicly traded copper producer, declined $3.06 to $90.60. Newmont Mining Corp., the largest U.S. gold producer, lost 60 cents to $44.29."
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
"Last Updated: August 22, 2008 16:36 EDT"
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Spain Producer Price Inflation Accelerates Most in Two Decades
By Emma Ross-Thomas
Aug. 25 (Bloomberg) -- Producer prices in Spain rose at the fastest pace in almost 24 years in July as record oil prices increased costs for manufacturers.
"The price of goods leaving Spain's factories, refineries and mines rose 10.2 percent from a year earlier after a 9.0 percent increase in June, the National Statistics Institute in Madrid said in an e-mailed statement today. Producer prices rose 1.4 percent from June, the biggest monthly increase in more than two years."
"Crude oil has risen by 60 percent in the last year and touched a record $147.27 a barrel in New York in July. That helped push euro-zone consumer price inflation to more than a 16-year high, making it harder for European Central Bank to cut interest rates, even as the region's economy slows."
"Spain's consumer prices rose 5.3 percent from a year earlier in July, the fastest in more than a decade, previous data showed."
"The increase in producer prices was led by energy as the price of products from oil refineries rose 52 percent from a year earlier. Food and drink products rose 10 percent, the institute said."
To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net
"Last Updated: August 25, 2008 03:03 EDT"
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Indian Bonds Gain on Speculation Drop in Oil Will Cap Inflation
By Anoop Agrawal
"Aug. 25 (Bloomberg) -- India's 10-year bonds advanced, pushing yields to the lowest level in two weeks, on speculation a decline in crude oil prices will help temper inflation."
"Benchmark notes rallied for a second day after crude prices were little changed in New York following their 5.4 percent slump on Aug. 22, the biggest decline since Dec. 27, 2004. The commodity's 59 percent surge in the past year propelled India's inflation rate to the highest level in more than 16 years and prompted the central bank to increase borrowing costs three times starting June."
"``Oil's fall is a relief as it was an important factor in pushing up inflation,'' said Prasanna Patankar, chief bond trader at Securities Trading Corp. of India Ltd. in Mumbai. ``That may help bond yields in sustaining their decline.''"
"The yield on the benchmark 8.24 percent note due April 2018 fell 10 basis points to 8.97 percent as of 11:01 a.m. in Mumbai, according to the central bank's trading system. The price rose 0.59, or 59 paise per 100 rupee face amount, to 95.34. A basis point is 0.01 percentage point."
"Wholesale prices jumped 12.63 percent in the week ended Aug. 9 from a year earlier, the most since June 1992, a government report showed on Aug. 21."
"Central bank Governor Yaga Venugopal Reddy last raised the benchmark overnight lending rate, known as the repurchase rate, on July 29 to a seven-year high of 9 percent. He also increased the cash reserve ratio to 9 percent to prevent money supply from stoking inflation."
"Crude oil prices on the New York Mercantile Exchange have declined more than 22 percent from an all-time high of $147.27 a barrel reached on July 11, Bloomberg data show."
"The cost of benchmark interest-rate swaps, or derivative contracts used to guard against rate fluctuations, fell. The five-year swap rate, a fixed payment made to receive floating rates, declined to 9.34 percent from 9.50 percent on Aug. 22, according to data compiled by Bloomberg."
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
"Last Updated: August 25, 2008 01:49 EDT"
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"Asian Stocks Fall for Fourth Week on Credit, Economic Concerns "
By Kyung Bok Cho
"Aug. 23 (Bloomberg) -- Asian stocks fell for a fourth week, dragging the region's benchmark index to the lowest since July 2006, after technology companies and banks dropped on renewed concern credit-market turmoil and higher oil prices will hurt profits."
"Samsung Electronics Co., the world's biggest computer- memory maker, fell 4 percent after U.S. wholesale prices rose and housing starts decreased. Sumitomo Mitsui Financial Group Inc. lost 6.9 percent after Citigroup Inc. predicted more losses at U.S. banks. Singapore Airlines Ltd., Asia's most profitable carrier, lost 2.5 percent."
"``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 2.6 percent to 121.62 this week, the lowest since July 21, 2006. It's dropped 23 percent this year as soaring food and fuel prices threatened consumer spending and corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion."
Japan's Nikkei 200 Stock Average dropped 2.7 percent. Benchmark indexes declined in most markets.
"Samsung slipped 4 percent to 557,000 won in Seoul. Nintendo Co., the maker of the top-selling video-game console, declined 5.2 percent to 49,200 yen in Osaka."
Banks Decline
"U.S. housing starts slumped 11 percent last month to the lowest level in 17 years, the government said. Prices paid to U.S. producers in July rose 1.2 percent on escalating energy costs, doubling economists' projection of 0.6 percent."
"Sumitomo Mitsui, Japan's second-largest publicly traded bank, fell 6.9 percent to 637,000 yen. The four-week decline is the longest losing streak since the period ended Jan. 4. Commonwealth Bank of Australia, Australia's biggest mortgage lender, lost 5.3 percent to A$41.38."
"Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion in the third quarter, Citigroup analyst Prashant Bhatia said. Separately, HSBC Holdings Plc cut its rating on Sumitomo Mitsui shares to ``underweight'' from ``overweight.''"
"Banks also fell on speculation the U.S. will bail out Freddie Mac and Fannie Mae, the country's biggest home-loan financiers, after Barron's reported the government expects them to fail to raise enough equity to offset credit losses."
Babcock Plunges
"A bailout ``adds to the speculation that no one really knows the extent of assets that were infected by the subprime contagion,'' said Olan Caperina, who helps manage about $6.7 billion at BPI Asset Management Inc. in Manila."
"Singapore Airlines slid 2.5 percent to S$14.88, the biggest weekly loss since July 4. Korean Air Lines Co., the largest South Korean carrier, declined 7.4 percent, to 41,150 won."
Crude oil rose 0.8 percent to $114.59 a barrel in New York this week. Jet fuel is typically the biggest expense for Asian airlines.
"Babcock & Brown Ltd., the worst-performing stock on the regional benchmark this year, tumbled 44 percent to A$2.48, a record low, after the appointment of Chief Executive Officer Michael Larkin failed to convince investors the company can be saved. Babcock is selling assets at a loss to reduce debt after bankers raised interest rates following a slump in the shares."
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
"Last Updated: August 22, 2008 18:45 EDT"
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Shanghai Copper Falls for First Day in Four on Stockpile Gains
By Feiwen Rong
Aug. 25 (Bloomberg) -- Shanghai copper fell for the first time in four days after a jump in global stockpiles damped investor confidence in a rebound in Asian demand.
"Inventories monitored by the London Metal Exchange jumped 4.6 percent to 163,800 metric tons on Aug. 22, the biggest one- day gain since May 9 and the highest total since Feb. 11. Copper, used in plumbing and electrical wiring, dropped 2.5 percent in London that day, trimming its gains for the week to 4.1 percent."
"``Shanghai copper came under pressure because of the increase in London stockpiles,'' Li Ling, analyst at Minmetal StarFutures Co., said by phone from Shanghai today. ``It also seemed quite directionless today with the absence of London trading'' for the summer bank holiday there, he said."
"Copper for November delivery fell as much as 880 yuan, or 1.5 percent, to 59,400 yuan ($8,681) a ton on the Shanghai Futures Exchange. The most-active contract ended the day at 59,740 yuan."
The metal also fell on a stronger dollar. The U.S. currency rose for the second day against the euro on speculation declining oil prices will support growth in the world's largest economy and energy consumer.
"Copper consumption in China, the world's largest user of the metal, is expected to increase as the country resumes work at factories and infrastructure projects that were shut or slowed during the Olympic Games, which ended yesterday."
"``The physical market maintained a premium over the futures prices, Minmetal's Li said. ``Demand isn't weak.''"
"Among other base metals futures traded in Shanghai, aluminum slipped 0.9 percent to close at 18,035 yuan a ton and zinc ended down 2.4 percent at 14,190 yuan."
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
"Last Updated: August 25, 2008 03:50 EDT"
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