Weber Says Higher Rates May Be Needed After Recovery (Update3)
By Christian Vits and Andreas Scholz
Aug. 27 (Bloomberg) -- European Central Bank council member Axel Weber said there's no scope for interest-rate cuts and policy makers may need to raise borrowing costs once the economy emerges from its slump.
"``Monetary policy at the moment is roughly where it should be and I think the discussion about declining rates in Europe is premature,'' Weber, 51, said in an interview in his office in Frankfurt yesterday. ``If the economic outlook brightens somewhat again towards the end of the year and next year, which I still expect, we'll have to see if action is necessary.''"
"Europe's economy contracted in the second quarter and may not recover in the third, raising the risk of the region's first recession since the euro was introduced in 1999. Weber said the ECB, which increased its benchmark rate by a quarter point to 4.25 percent in July, remains focused on fighting inflation. Bond yields and the euro jumped."
"``I don't expect inflation to come down necessarily just with weaker growth,'' Weber said. ``Inflation is still the No. 1 worry for central bankers in the euro region.''"
"``Weber wants to keep the option open to raise rates next year,'' said Holger Schmieding, chief European economist at Bank of America Corp. in London. ``He wants to choke any rate-cut debate.''"
"This morning, Eonia forward contracts showed investors had fully priced in a cut in the ECB's benchmark rate to 4 percent by May. The yield on the May contract rose 9 basis points to 4.09 percent after Weber's remarks were published. The euro gained half a cent to $1.4773 and yields on two-year government bonds increased 4 basis points to 4.03 percent."
"Weber said while current rates are ``roughly adequate'' for ``the imminent period of cyclical weakness,'' they are ``still more on the accommodative side than being neutral.''"
Inflation at 4 percent is running at twice the ECB's definition of price stability of just less than 2 percent.
"Inflation will remain in breach of the ECB's price-stability goal next year and ``we're not even sure that inflation on average will be below 2 percent in 2010,'' Weber said."
"``If inflation risks further materialize and if we come to the conclusion that the inflation outlook has deteriorated, we'll have to re-examine our monetary-policy stance,'' he said."
"``His views will not be shared across the ECB Governing Council,'' said Ken Wattret, an economist at BNP Paribas SA in London. ``Keeping a consensus opinion together in this environment is going to be quite a challenge for'' ECB President Jean-Claude Trichet."
"Business confidence in Germany plunged to a three-year low this month, heightening concern that Europe's largest economy is slipping into a recession."
"While oil prices have receded from a record $147.27 a barrel, they're still up more than 60 percent over the past year, crimping companies' spending power just as the euro's appreciation and the U.S. housing slump weigh on exports."
"In June, ECB staff projected growth would slow to about 1.8 percent this year and 1.5 percent in 2009 from 2.7 percent in 2007. The bank will publish new growth and inflation forecasts on Sept. 4, when it announces its next rate decision."
"Weber said he expects ``a slight downward correction'' of the growth estimates for this year and next. ``The European economy, in my opinion, will be robust once we're through this dry spell,'' he said."
"Inflation forecasts may be revised ``slightly higher'' from the current 3.4 percent and 2.4 percent for this year and next. The ECB is concerned that long-term inflation expectations are above 2 percent, Weber said."
"The long-term inflation expectation, defined as through 2013, rose to 2.03 percent in August, according to the ECB's quarterly survey of forecasters published Aug. 14. That's the highest since the survey started in 1999 and up from 1.95 percent three months ago. Expectations measured by the breakeven rate on French five- year inflation-indexed bonds were at 2.19 percent today."
"``We observe with concern that the majority of market watchers don't expect us to meet our stability norm at the 6 to 10-year horizon,'' Weber said. ``For a central bank this puts in question its credibility and this can't be tolerated.''"
To contact the reporter on this story: Christian Vits in Frankfurt email@example.com; Andreas Scholz in Frankfurt at firstname.lastname@example.org.
"Last Updated: August 27, 2008 09:19 EDT"
Russian Stocks Fall for Fourth Straight Day; Sberbank Slumps
By William Mauldin
Aug. 27 (Bloomberg) -- Russia's Micex Index fell for a fourth day on concern that the government's decision to recognize Georgia's breakaway regions will deepen a rift with the West and shake investor confidence.
"OAO Sberbank, Russia's biggest bank, slid to the lowest in almost two years amid speculation losses in the value of its government ruble-denominated bonds will erode its capital."
"The ruble-denominated Micex Index lost 1.1 percent to 1,278.72 at 2:22 p.m. in Moscow, after earlier climbing as much as 2.4 percent on a rally in oil prices. The dollar-denominated RTS Index dropped 0.7 percent to 1,567.53, extending its third- quarter decline to 32 percent."
"Investors pushed the RTS to this quarter's steepest retreat among the world's biggest stock markets as Russia invaded Georgia, tumbling oil prices sent energy producers lower and the government probed steel producer OAO Mechel. Russia's decision to unilaterally recognize the independence of South Ossetia and Abkhazia yesterday drew condemnation from world leaders, with U.S. President George W. Bush asking Russian President Dmitry Medvedev to ``reconsider this irresponsible decision.''"
"UBS AG today cut its price estimates for 74 Russian stocks, citing Medvedev's move."
"``The decision seems to risk further deterioration in the relationships between Russia and the West,'' UBS analysts Dmitry Vinogradov, Clemens Grafe and Bella Rabinovich wrote."
"Moves in the RTS Index are growing more disconnected from oil as the equity benchmark suffers its worst monthly decline in eight years. Before August, the RTS posted an 11-fold gain this decade while crude climbed almost fivefold."
"``We could be in for a volatile period until there is a resolution to what's going on in Georgia,'' said Vlad Milev, an analyst at Metzler Payden, which oversees $1 billion in East European stocks. ``We are not trading on economic fundamentals or company earnings. We are trading on headline news, and the headlines have been largely negative since the events in Georgia started.''"
"The RTS has lost 15 percent since Russia invaded Georgia on Aug. 8, leaving it 37 percent below its record high of 2,487.92 in May."
"Sberbank fell for a third day, sinking 1.91 rubles, or 3.4 percent, to 54.10 rubles, the lowest level since September 2006."
"The bank holds $10 billion in ruble-denominated Russian government bonds, according to Natalia Orlova, banking analyst at Moscow-based Alfa Bank. The yield on Russia's benchmark 30- year 6.9 percent ruble bond has jumped 106 basis points to 8.81 percent since Aug. 7. Bond yields move inversely to prices."
"``If they decide to sell a portion of their portfolio, these losses will become material,'' Orlova said by telephone."
To contact the reporter on this story: William Mauldin in Moscow at email@example.com.
"Last Updated: August 27, 2008 06:28 EDT"
South African Bonds Advance on Bets Inflation Will Peak at 13%
By Garth Theunissen
Aug. 27 (Bloomberg) -- South African government bonds advanced as traders bet consumer-price growth in the continent's largest economy is nearing a peak.
"The gains pushed two-year yields to the lowest level in six days after a government report showed inflation accelerated in July at the fastest pace since the measure was introduced in 1998. The CPIX rate, which excludes mortgages, quickened to an annual 13 percent from 11.6 percent in June, Pretoria-based Statistics South Africa said today. It was the 15th consecutive month that it exceeded the central bank's 6 percent ceiling and higher than the 12.9 percent median estimate of 22 economists surveyed by Bloomberg News."
"``The market is of the view interest rates have peaked, while inflation is very near to topping out,'' said George Glynos, managing director of Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions in Johannesburg. ``People are looking through the current spike in inflation.''"
"The yield on the 13 percent note due August 2010, which is more sensitive to interest-rate expectations, fell 18 basis points to 9.74 percent by 1:21 p.m. in Johannesburg. The yield on South Africa's benchmark 13.5 percent security due September 2015 extended its decline, dropping 14 basis points to 9.15 percent. Yields move inversely to bond prices."
"Inflation, which has exceeded the central bank's 3 percent to 6 percent target range since April 2007, may begin to slow as a 17 percent plunge in oil prices since the start of July helps ease price pressures. The Reserve Bank left its main interest rate at 12 percent on Aug. 14, after six increases since June last year curbed consumer spending."
"The inflation rate will probably average 13 percent this quarter and slow ``significantly'' by the first quarter of 2009, central bank Governor Tito Mboweni said at the Aug. 14 monetary policy committee meeting."
"South Africa's rand rose 0.4 percent to 7.7825 per dollar in Johannesburg, compared with 7.8112 yesterday. It slipped 0.3 percent against the euro to 11.4788, from 11.4458 yesterday."
To contact the reporter on this story: Garth Theunissen in Johannesburg firstname.lastname@example.org
"Last Updated: August 27, 2008 07:40 EDT"
Polish Central Bank Leaves Benchmark Rate Unchanged (Update1)
By Monika Rozlal
Aug. 27 (Bloomberg) -- Poland's central bank left the benchmark interest rate unchanged for a second month as it assesses whether eight increases in the past 16 months were enough to keep inflation at bay.
"The Narodowy Bank Polski in Warsaw kept its seven-day reference rate unchanged at 6 percent, in line with expectations of all 17 economists in a Bloomberg survey. The bank will comment on the decision at a press conference at 4 p.m. in Warsaw."
"Slowing industrial output and retail sales indicate economic growth is slowing, easing pressure on inflation after the rate rose to an eight-year high of 4.8 percent in July. The economy may have grown an annual 5.6 percent in the second quarter, the weakest pace since the end of 2005, according to the median forecast of 10 economists."
"`There is clearly no majority on the Monetary Policy Council to support the policy tightening as central bankers can't see enough arguments to raise rates,'' said Jacek Wisniewski, the chief economist at Raiffeisen Bank in Warsaw. ``We believe that interest rates will remain unchanged until the end of this year.''"
"The zloty stayed lower against the euro after the decision at 3.3275 as of 2:05 p.m. in Warsaw, from 3.3274 yesterday. The yield on the government's bond maturing in April 2013 dropped 3.3 basis points to 6.015 percent."
Struggling With Wages
"Central banker Jan Czekaj said that statistical reports of economic developments through August won't be enough for policy makers to make a decision, though the latest report on wages, which have been growing by more than 10 percent almost each month in the past year, support an increase."
"Rate setters have been struggling for 10 months to bring the inflation rate, close to a 7-year high of 4.8 percent in July, down to its 2.5 percent target. Inflation has sped up because of rising global fuel and food prices and consumer demand."
"``Central bankers are likely to await the August peak inflation figure as well as the second-quarter GDP data before making the next move,'' said Jaroslaw Janecki, the chief economist at Societe Generale in Warsaw."
"Janecki said July's inflation rate and an expected 5 percent rate for August, along with double-digit wage growth and lower productivity, ``set the tone for future rate hikes.''"
Hot Labor Market
"Still, rate setter Andrzej Wojtyna said the central bank shouldn't delay higher rates because the economy is unlikely to slow significantly and there are no signs of a cooling in the labor market."
"Industrial output rose at a slower pace for a second month in July after the zloty's strength hurt exports, while accelerating inflation curbs demand. The Finance Ministry reiterated a 5.5 percent economic growth forecast for this year."
"Post rate-decision statements by the central bank ``won't be less hawkish than they were a month ago,'' said Maciej Reluga, the chief economist at Bank Zachodni WBK in Warsaw."
"Reluga expects at least one more interest rate increase this year, with the first one to come no earlier than in September, while other economists agreed that evidence is not persuasive enough to indicate an easing of monetary policy."
"``The Monetary Policy Council will not step back from its restrictive bias, as inflation is far above the central bank's 2.5 percent target and risks coming from the global economy are still at hand,'' said Ryszard Petru, chief economist at Bank BPH in Warsaw."
"The Lombard rate, which the central bank charges to commercial banks borrowing overnight with government securities as collateral, was kept at 7.5 percent. The discount rate, a reference rate for some bank loans, was also left unchanged at 6.25 percent."
To contact the reporter on this story: Monika Rozlal in Warsaw at email@example.com.
"Last Updated: August 27, 2008 08:32 EDT"
Canadian Imperial Profit Falls on Debt Writedowns (Update1)
By Doug Alexander
"Aug. 27 (Bloomberg) -- Canadian Imperial Bank of Commerce, the country's fifth-largest bank, said third-quarter profit fell 91 percent, missing analysts' estimates, on writedowns tied to the U.S. mortgage market."
"Net income for the quarter ended July 31 was C$71 million ($68 million), or 11 cents a share, compared with profit of C$835 million, or C$2.31 a share, a year earlier, the Toronto- based bank said today in a statement. Revenue fell 36 percent to C$1.91 billion."
"Canadian Imperial had C$885 million in pretax writedowns linked to the U.S. mortgage market, adding to C$6.66 billion in debt-related costs since the third quarter of 2007. The writedowns and the slowest economic growth in Canada since 1992 will probably lead to the steepest profit decline in five years for Canada's biggest banks."
"``We all know about the writeoffs that are coming, but anybody owning the stock wants to make sure that their underlying Canadian business is still doing okay,'' said Todd Johnson at BCV Asset Management in Winnipeg, Manitoba, which manages C$75 million and doesn't own Canadian Imperial."
"Canadian Imperial earned C$1.65 a share before one-time items, said National Bank Financial analyst Robert Sedran, missing his per-share estimate of C$1.72 on that measure. Canadian Imperial is the third Canadian bank to miss analysts' estimates this quarter, following Bank of Montreal and Bank of Nova Scotia."
"Chief Executive Officer Gerald McCaughey, 52, has sought to reduce risk at the bank after it recorded more writedowns and losses than any other Canadian bank from investments tied to the U.S. housing market. In the past year, he sold off most of the U.S. investment-banking business, exited debt-related activities, replaced senior executives, and raised C$2.94 billion to repair the bank's balance sheet."
"The bank was expected to take between C$750 million and C$2.2 billion in debt writedowns in the third quarter, analysts estimated."
"Canadian Imperial fell 85 cents, or 1.5 percent, to C$57.06 on the Toronto Stock Exchange yesterday. The shares have fallen 19 percent this year, compared with a 14 percent decline for the nine-member S&P/TSX Banks Index."
"Consumer-banking profit fell 4 percent to C$572 million from a year earlier. CIBC set aside C$203 million for bad loans, up 25 percent from a year earlier."
"The investment-banking unit had a loss of C$538 million in the quarter, compared with profit of C$220 million a year earlier, as mergers and stock sales plunged and writedowns eroded earnings."
"CIBC World Markets advised on seven completed takeovers worth $1.04 billion in the quarter, compared with 17 deals worth $5.82 billion a year earlier, according to Bloomberg data. The firm managed $567.1 million in equity sales, down from $897 million a year earlier."
"Bank of Nova Scotia, the No. 3 bank by assets, said yesterday that profit fell 1.9 percent to C$$1.01 billion, while Bank of Montreal, the fourth-biggest bank, said profit fell 21 percent to C$521 million."
"Royal Bank of Canada, the country's largest bank, Toronto- Dominion Bank, the second-biggest lender, and No. 6-ranked National Bank of Canada report results tomorrow."
(Canadian Imperial Bank of Commerce will hold an earnings conference call at 4:30 p.m. Toronto-time at +1-416-340-8010 or +1-866-540-8136 or at www.cibc.com.)
To contact the reporter on this story: Doug Alexander in Toronto at firstname.lastname@example.org
"Last Updated: August 27, 2008 09:09 EDT"
Hong Kong Stocks Advance to 2-Week High; China Mobile Rises
By Hanny Wan
"Aug. 27 (Bloomberg) -- Hong Kong stocks rose to the highest in two weeks after earnings increased at China Mobile Ltd. and Jiangxi Copper Co., boosting speculation that profits will withstand slowing growth."
"China Mobile, the world's biggest phone company by users, advanced 3.5 percent on second-quarter profit that beat analysts' estimates. Jiangxi Copper surged 9.5 percent. China's second- biggest smelter of the metal boosted first-half profit by 32 percent."
"After positive earnings reports, ``markets are getting a technical rebound in the short-term,'' said Carmen Au-Yeung, a portfolio manager at Comgest (Far East) Ltd. in Hong Kong, which manages the equivalent of $12 billion in global equities. ``There are many stocks that are becoming attractive.''"
"The Hang Seng Index added 408.06, or 1.9 percent, to 21,464.72, its highest close since Aug. 12. The measure has fallen 23 percent this year on concern soaring inflation and $500 billion in writedowns and credit losses at global financial companies will slow economic and profit growth."
"Credit Suisse Group lifted its 12-month estimate for the Hang Seng Index to 27,600, Peggy Chan and Vincent Chan, analysts at the brokerage, wrote in a report today. Credit Suisse's end- 2008 estimate for the gauge was previously 26,100, according to a July 23 research note."
"The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, rose 3.3 percent to 11,780.91, its highest close since Aug. 7."
"China Mobile advanced 3.5 percent to HK$96.55, its highest close since Aug. 11 and the Hang Seng Index's biggest gainer today. The company increased second-quarter profit 51 percent after price cuts helped attract subscribers. Net income jumped to a record 30.8 billion yuan ($4.5 billion), according to figures derived from first-half earnings reported by the company. That's higher than the 28.3 billion yuan median estimate of analysts in a Bloomberg survey."
"Jiangxi Copper soared 9.5 percent to HK$12.64, its sharpest jump since Feb. 4. The company said yesterday it increased first- half profit by 32 percent to 2.77 billion yuan because of a surge in byproduct prices."
"China Cosco Holdings Co., Asia's largest shipping company by market value, jumped 8.2 percent to HK$15.78, its biggest advance since April 24. The company said yesterday it more than doubled first-half earnings to 15.1 billion yuan after buying the world's largest dry-bulk fleet to ship China's surging imports of iron ore and coal."
"Cnooc Ltd., China's third-largest oil company, climbed 3.8 percent to HK$11.62. The company posted an 89 percent increase in first-half profit after increasing its crude reserves and production as prices climbed to records. Net income rose to 27.54 billion yuan, it said after the market closed. That beats a median estimate of 22.1 billion yuan in a Bloomberg News survey of five analysts."
Crude oil futures climbed 1 percent to $116.27 a barrel in New York yesterday. The contract was recently at $116.85 in after-hours trading.
PetroChina Co. advanced 3.4 percent to HK$10.30. The world's second-biggest company by market value said first-half profit fell 35 percent to 53.6 billion yuan as refining losses and taxes eroded gains from record crude oil prices.
"All but eight stocks on the 43-member Hang Seng Index advanced. August futures climbed 1.5 percent to 21,411."
"The following stocks were among the biggest winners and losers, or were suspended. Stock symbols are in parenthesis after company names."
"Aluminum Corp. of China Ltd. (2600 HK), known as Chalco, climbed 43 cents, or 6.3 percent, to HK$7.29, its largest jump since Aug. 14. Rio Tinto Group may form joint ventures with its biggest shareholder Aluminum Corp. of China, the Financial Times reported, citing Rio Tinto Chairman Paul Skinner. Chinalco, as the Chinese company is known, is the parent of Chalco."
"Citic International Financial Holdings Ltd. (183 HK) was suspended from trading, pending an announcement from its parent, China's biggest state-owned investment company, on its plan to buy out minority shareholders. Trading was halted because of a ``price sensitive'' announcement on the Citic Group offer, the Hong Kong unit said. The stock climbed 7 cents, or 1.2 percent, to HK$6.07 yesterday."
"Dah Chong Hong Holdings Ltd. (1828 HK) surged 17 cents, or 8.4 percent, to HK$2.20, the sharpest jump since its Oct. 17 debut. The Hong Kong-based car and food distributor said yesterday first-half profit climbed 38 percent to HK$289 million. The company said it plans to buy stakes in Toyota Motor Corp. and Lexus brand dealers in China."
"Jiangsu Expressway Co. (177 HK), China's largest toll-road operator by market value, climbed 42 cents, or 7.2 percent, to HK$6.22, its biggest jump since Jan. 23 after China Everbright Research Ltd. recommended buying the shares on expected profit growth. Full-year net income will likely climb 10 percent this year to 1.81 billion yuan, followed by a 15 percent increase next year, according to a report."
"Ports Design Ltd. (589 HK) tumbled HK$2.64, or 12 percent, to HK$19.36, its biggest slump since Aug. 17, 2007. The Hong Kong clothing designer and retailer may buy a European company and open stores in Japan to expand business outside China. Ports will use its cash to make the acquisition, which Chief Executive Officer Alfred Chan said will be a ``cost-effective investment.''"
"Sinofert Holdings Ltd. (297 HK), China's biggest fertilizer importer, added 28 cents, or 6.4 percent, to HK$4.68 after saying yesterday first-half profit may double as it increased sales and raised prices. The company didn't provide the profit figure."
To contact the reporter on this story: Hanny Wan in Hong Kong at email@example.com.
"Last Updated: August 27, 2008 05:42 EDT"
PetroChina Net Falls 35% on Refining; Cnooc Jumps 89% (Update1)
By Wang Ying and Winnie Zhu
"Aug. 27 (Bloomberg) -- PetroChina Co., China's largest oil company, posted a 35 percent drop in first-half profit as refining losses eroded gains from record crude oil prices that drove better-than-estimated earnings at Cnooc Ltd."
"Net income at PetroChina declined to 53.6 billion yuan ($7.8 billion), lower than the 54 billion yuan median forecast of analysts in a Bloomberg News survey. Cnooc, China's third- largest oil producer, posted an 89 percent increase to 27.5 billion yuan, compared with an estimate of 22.1 billion yuan."
"PetroChina, overtaken by Exxon Mobil Corp. as the world's most valuable company in the first half, was hurt by government fuel-price caps that undermined gains from a 46 percent jump in oil prices. Cnooc, which doesn't run refineries, increased crude reserves and production at home to post more than triple the earnings growth of Exxon and Royal Dutch Shell Plc."
"``With global crude prices expected to decline, we expect PetroChina to perform better in the second half, while Cnooc will have stable growth,'' Yin Xiaodong, an analyst at Citic Securities Co., said by telephone from Beijing today."
Crude prices reached a record of $147.27 a barrel on July 11. Prices have dropped 19 percent since then and are still 63 percent higher than a year ago.
"PetroChina, China Petroleum & Chemical Corp. and Cnooc are increasing output to meet the needs of the world's fastest- growing major economy, which has expanded by more than 10 percent for the past 5 years. China's oil consumption jumped 88 percent to 7.9 million barrels a day in 2007 compared with a decade ago, according to the BP Statistical Review."
"Chinese oil companies have been criticized by the U.S. and Western European countries for sourcing supplies from Sudan, Iran and Myanmar, which face trade sanctions."
"China's refineries are still losing money even though the government raised gasoline and diesel prices by at least 17 percent in June, China National Petroleum Corp., the parent company of PetroChina, said on June 28."
"PetroChina's second-quarter profit fell 38 percent to 24.7 billion yuan, according to Bloomberg calculations made by deducting earnings for the first three months from today's figures. Cnooc doesn't report quarterly results."
"PetroChina's sales rose 40 percent to 549.5 billion yuan in the first six months. The company, 88 percent owned by the Chinese government through China National Petroleum Corp., will pay a first-half dividend of 0.131827 yuan a share."
"``PetroChina was unable to fully pass on costs to gasoline and diesel users,'' said Charles Chen, who helps manage the equivalent of $3.7 billion at JF Asset Management Co. in Taipei. ``Cnooc doesn't have this problem.''"
"Cnooc's oil and gas sales rose 64 percent to 54 billion yuan from 33.2 billion yuan a year earlier. Total oil and gas production gained 8 percent to the equivalent of 92 million barrels of oil. The average price Cnooc got for its oil surged 74 percent to $102.5 a barrel, the company said."
"Cnooc plans to increase crude oil and natural gas output by as much as 18 percent this year as economic growth spurs energy demand, the Beijing-based company said Jan. 29. Cnooc started production at two oil fields and announced two discoveries in the first half."
"``Production will continue rapid growth in the next two years,'' David Johnson, a Hong Kong-based energy analyst at Macquarie Bank Ltd., said today."
"PetroChina has a market value of $337.8 billion. The stock advanced 3.4 percent to close at HK$10.3, before the earnings announcement, while Cnooc gained 3.8 percent to HK$11.62."
"Exxon's earnings climbed 16 percent in the first six months while Shell's profit rose 29 percent, according to data compiled by Bloomberg. Both companies struggled to boost output as countries from Kazakhstan to Venezuela cut access to oil."
"The government paid PetroChina and China Petroleum & Chemical Corp., the nation's largest refiners, rebates of 75 percent on the 17 percent value-added tax levied on crude imports in the second quarter."
"The two companies will get about 40 percent rebate on the tax for crude imported between July and September, the South China Morning Post reported yesterday, citing people it didn't identify."
"PetroChina will expedite overseas oil and gas projects to meet the country's rising energy demand, President Zhou Jiping said today. Annual capital spending will remain above 200 billion yuan in the coming years, and about 70 percent of that will be plowed into exploration and development, he told reporters in Hong Kong."
"The Beijing-based company said today it will acquire a 52 percent stake in parent China National Petroleum Corp.'s unit, CNPC Hong Kong, for HK$7.6 billion to boost natural gas sales."
"PetroChina has agreed to buy the China National's 50 percent stake in CNPC Exploration & Development Co., the Wall Street Journal reported yesterday, citing a person familiar with the matter. Zhou said the company needs more time to complete the purchase."
"PetroChina also plans to set up a ``world-class'' oil refining operation, Zhou said. China's current refining capacity isn't enough to meet rising demand for oil products, he said."
"The oil producer plans to boost its annual refining capacity by 14 percent to more than 160 million metric tons by 2010, Vice President Shen Diancheng said in May."
To contact the reporter on this story: Wang Ying in Hong Kong at firstname.lastname@example.org; Winnie Zhu in Hong Kong at email@example.com
"Last Updated: August 27, 2008 08:03 EDT"
Bank of China May Post Slowest Profit Growth Among China Banks
By Luo Jun
"Aug. 27 (Bloomberg) -- Bank of China Ltd. may report the slowest profit growth among the nation's biggest lenders as losses on U.S. subprime mortgages erode earnings from loans, credit cards and insurance policies."
"Net income at China's third-largest bank climbed 40 percent to 41.2 billion yuan ($6 billion) in the six months to June 30 from a year earlier, according to the average of seven analyst estimates compiled by Bloomberg. The firm reports tomorrow, the last among 14 publicly traded Chinese banks to publish earnings."
"Bank of China held $4.4 billion of securities tied to U.S. subprime mortgages at March 31, and Citigroup Inc. estimates it may have to set aside 6 billion yuan against losses on home-loan investments. Chairman Xiao Gang's push into overseas securities backfired when credit markets seized up, leaving financial firms with more than $500 billion of writedowns and credit losses over the past year."
"``Bank of China's foreign-exchange investment is a black box that nobody knows what it consists of and really makes investors jittery,'' said Victor Wang, a Hong Kong-based analyst at UBS AG. ``Its domestic business is doing fine.''"
"China's 13 other publicly traded banks posted an average 96 percent increase in first-half profit, according to data compiled by Bloomberg. The bank, with the highest ratio of overseas investments among Chinese lenders at 44 percent, also was hurt as a stronger yuan eroded the value of its holdings, analysts said."
"Beijing-based Bank of China may set aside 5 billion yuan for losses on subprime-mortgage investments in the second quarter, according to analysts Simon Ho and Franco Lam at Citigroup. The lender may book another 1 billion yuan of provisions for securities tied to so-called Alt-A mortgages, the analysts said in an Aug. 14 note."
Bank of China reported $203 million in first-quarter losses from mortgage investments. The company's shares have dropped 46 percent in Shanghai and 13 percent in Hong Kong this year.
"The following table shows consensus forecasts for Bank of China's net interest income, net fee income and net income."
(Bln Yuan) 1H 2007 1H2008 Percent Change
Net Interest Income 71.03 82.07 15.5%
Net Fee Income 11.76 18.3 55.6%
Net Income 29.5 41.2 39.7%
To contact the reporters on this story: Luo Jun in Shanghai at at firstname.lastname@example.org
"Last Updated: August 26, 2008 20:45 EDT"
European Stocks Pare Earlier Losses; U.S. Index Futures Advance
By Adria Cimino
Aug. 27 (Bloomberg) -- European stocks pared earlier losses and U.S. index futures advanced after a report showed orders for U.S. durable goods unexpectedly increased in July.
"ABB Ltd., the world's largest builder of power networks, jumped 2.2 percent, and BAE Systems Plc, Europe's biggest defense contractor, climbed 2.1 percent."
"Europe's Dow Jones Stoxx 600 Index slipped 0.2 percent to 282.32 at 1:40 p.m. in London, after earlier dropping 1 percent. The index has fallen 23 percent this year as rising oil prices, higher inflation and more than $500 billion in credit-related losses by the world's largest banks threatened global economic growth."
The unexpected gain in durable goods last month indicated growing demand from abroad is helping companies weather a slump in consumer spending.
"``This gives a bit of air to the market,'' said Vafa Ahmadi, a Paris-based fund manager at CPR Asset Management, which oversees the equivalent of $39 billion."
"The 1.3 percent advance in bookings of goods meant to last several years matched the previous month's rise, which was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders climbed 0.7 percent after a 2.4 percent increase a month earlier."
"Futures on the Standard & Poor's 500 Index rebounded, rising 0.3 percent after the report. The MSCI Asia Pacific Index increased 0.8 percent after earnings at China Mobile Ltd. and Woodside Petroleum Ltd. beat estimates."
The European Central Bank council member Axel Weber said earlier there's no scope for interest-rate cuts and the bank may even need to raise borrowing costs again once the economy emerges from its slump. The ECB raised its benchmark rate by a quarter point to 4.25 percent in July.
National benchmark indexes gained in seven of the 18 western European markets. Germany's DAX sank 0.5 percent and France's CAC 40 lost 0.3 percent. The U.K.'s FTSE 100 added 0.5 percent.
"ABB climbed 2.2 percent to 26.14 Swiss francs, while BAE Systems rallied 2.1 percent to 470.75 pence."
Natixis SA sank 5 percent to 5.68 euros after La Tribune said the French bank may sell shares at a discount in its 3.7 billion-euro ($5.4 billion) rights offer to replenish capital.
"The bank may offer new shares at a discount of between 30 percent and 40 percent in its rights offer, La Tribune reported, citing an unidentified person. The discount may even be higher to ensure the success of the offer, which may begin next week, the French daily said."
A Natixis spokeswoman declined to comment on the report.
"UBS AG, the European bank hardest hit by the subprime contagion, sank 2 percent to 22.68 francs. Credit Suisse Group AG, the second-biggest Swiss bank, fell 1.4 percent to 48.62 francs."
"The U.S. Federal Deposit Insurance Corp., which provides cover for the nation's bank deposits, may have to tap Treasury Department funds to carry it through an anticipated wave of bank failures, the Wall Street Journal reported, citing chairman Sheila Bair. Bair told the Journal the borrowing wouldn't be to cover any FDIC losses, instead it would provide short-term liquidity to cover bank failures."
"The FDIC yesterday said its ``problem list'' of banks increased 30 percent in the second quarter to 117, the highest total in five years, as more commercial real-estate loans were overdue. Nine banks have failed this year, including California- based mortgage lender IndyMac Bancorp Inc., which the FDIC is running as a successor institution, IndyMac Federal Bank FSB."
"The Stoxx 600 is little changed in August even after rebounding 5.3 percent from its low of the year on July 15. All 18 of the main industry groups in the index have declined this year, led by a 34 percent tumble in bank shares."
"Analysts estimate earnings among companies in the Stoxx 600 will decline 2 percent on average in 2008, according to weekly Bloomberg data. That compares with 11 percent growth forecast at the beginning of the year. Profits at financial companies will slump 26 percent, the data show."
`Level of Earnings'
"``What's most on investors' minds is the level of earnings and growth,'' Salah Seddik, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion, said in a television interview. ``We could have disappointments in the months ahead.''"
"Air France-KLM Group lost 2 percent to 16.08 euros. Daimler, the world's second-biggest maker of luxury cars, fell 2.2 percent to 39.80 euros."
"Crude oil rose in New York on forecasts Tropical Storm Gustav will strengthen as it enters the Gulf of Mexico, home to 26 percent of U.S. production. The contract for October delivery rose as much as $2.26, or 1.9 percent, to $118.53 on the New York Mercantile Exchange."
"Baloise Holding AG, Switzerland's third-biggest insurer, fell 7.8 percent to 92.9 francs. Profit dropped 42 percent in the first half to 268.2 million Swiss francs ($244.9 million) after income from its life business and investments fell. That missed analysts' estimates."
To contact the reporter on this story: Adria Cimino in Paris at email@example.com.
"Last Updated: August 27, 2008 08:56 EDT"
"Questerre, Transeuro Jump in Oslo After Testing Gas Shale Well "
By Jakob Lindstroem
"Aug. 27 (Bloomberg) -- Questerre Energy Corp., the Calgary- based oil explorer whose stock has tripled this year, rose in Oslo trading after starting tests on a gas shale well in western Canada's Liard Basin with Transeuro Energy Corp."
"Questerre climbed as much as 1.35 kroner, or 11 percent, to 13.5 kroner, snapping three days of losses. The shares were at 13.45 kroner as of 9:46 a.m. local time. Transeuro rallied 0.18 krone, or 12 percent, to 1.68 kroner, valuing the Vancouver-based explorer at 349.3 million kroner ($64.9 million)."
"The ``very high'' gas reserves and ``promising'' production from two earlier wells make the test ``very interesting,'' the companies said today in a statement to the Oslo exchange. ``Expertise we have gained from our Quebec shale play has allowed us to re-evaluate our past efforts,'' they wrote in the release. ``We believe we have developed a predictive model which allows us to better target our completions to productive shales.''"
To contact the reporter on this story: Jakob Lindstroem in Stockholm at firstname.lastname@example.org.
"Last Updated: August 27, 2008 04:00 EDT"
"Asian Stocks Gain, Led by China Mobile, Woodside After Earnings "
By Chen Shiyin
"Aug. 27 (Bloomberg) -- Asian stocks advanced after earnings at China Mobile Ltd. and Woodside Petroleum Ltd. beat estimates, bolstering optimism the region will weather slowing global growth."
"China Mobile, the world's biggest phone company by users, rallied 3.5 percent in Hong Kong after posting record profit. Woodside, Australia's No. 2 oil and gas producer, jumped 3.4 percent as a new project and higher prices boosted income. China Cosco Holdings Co., Asia's largest shipping company by market value, climbed 8.2 percent after surging Chinese demand for raw materials helped earnings more than double."
"``We're positive on commodities companies in the longer term as emerging-market usage of raw materials continues to grow,'' said Michael Foo, Singapore-based head of Asian portfolio management at Clariden Leu AG, which manages the equivalent of $126 billion in assets globally."
"The MSCI Asia-Pacific Index gained 0.8 percent to 123.38 as of 8:00 p.m. in Tokyo, rebounding from a loss of as much as 0.2 percent. The regional measure has dropped 22 percent this year as the world's largest financial companies posted writedowns and credit losses of more than $500 billion, and inflation soared."
"Japan's Nikkei 225 Stock Average slipped 0.2 percent to 12,752.96, paced by Mitsubishi Estate Co., after rival developer Sohken Homes Co. filed for bankruptcy. Hong Kong's Hang Seng Index jumped 1.9 percent, the region's largest advance. About half the stock indexes in Asia gained."
"Macquarie Group Ltd. dropped to the lowest in almost four years as UBS AG downgraded Australia's biggest securities firm, saying the operating environment remains ``difficult.'' Hyundai Heavy Industries Co., the world's No. 1 shipbuilder, fell after saying it plans to bid for a stake in Daewoo Shipbuilding & Marine Engineering Co."
"U.S. stocks advanced yesterday, rebounding from the biggest drop in a month. Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, jumped after Citigroup Inc. analysts said the companies have enough capital to last the year. Futures for the Standard & Poor's 500 Index slipped 0.1 percent today."
"China Mobile gained HK$3.25 to HK$96.55, the biggest contributor to gains on MSCI's Asian index. The company said net income jumped 51 percent to a record 30.8 billion yuan after price cuts helped to attract subscribers, beating the median estimate of 28.3 billion yuan in a Bloomberg survey of analysts."
"Woodside gained A$1.92 to A$58.42, its highest close since July 17. The company posted first-half profit of A$1.02 billion ($874 million) on record prices, topping the median forecast of A$939.3 million in a Bloomberg survey of analysts."
"Cnooc, China Cosco"
"The shares also gained after crude oil for October delivery rose 1 percent to $116.27 a barrel in New York yesterday on forecasts showing that Hurricane Gustav may enter the Gulf of Mexico, home to more than a fifth of U.S. oil production. Futures were at $116.60 today."
"Cnooc Ltd., China's No. 1 offshore oil company, rose 3.8 percent to HK$11.62 in Hong Kong. The company may say today first-half net income rose 52 percent to 22.1 billion yuan ($3.2 billion), according to the median estimate of five analysts surveyed by Bloomberg."
"China Cosco climbed HK$1.20 to HK$15.78 in Hong Kong. Net income rose to 15.1 billion yuan ($2.2 billion) in the first half from 7.2 billion yuan a year earlier, the shipping line said."
"Jiangxi Copper Co., China's biggest smelter of the metal, surged 9.5 percent to HK$12.64, its largest gain since Feb. 4. First-half profit rose 32 percent to 2.77 billion yuan ($404 million) because of a surge in byproduct prices, the company said."
"Macquarie plunged 9.6 percent to A$41.61, its lowest close since November 2004, after UBS cut its rating to ``neutral'' from ``buy,'' saying that slower stock and commodities trading and fewer investment bank deals will hurt earnings. The company also has ``less capital flexibility'' amid the global credit crunch, UBS said."
"Also in Sydney, Westfield Group, the world's biggest shopping center owner by market value, slumped 3.4 percent to A$16.10 after a 35 percent drop in first-half profit."
"``People are expecting another reasonably large round of write-offs to come out of the investment banks,'' said Angus Gluskie, who helps oversee $500 million at White Funds Management in Sydney. ``It's been a weak time for the property market. We're expecting to see continued downward revaluations on property assets over upcoming periods.''"
"Mitsubishi Estate, Japan's second-biggest property developer, dropped 2.1 percent to 2,375 yen. Sumitomo Realty & Development Co., the third-largest, fell 2.9 percent to 2,180 yen."
"The deteriorating Japanese property market and difficulty refinancing debt have been exacerbated by failures of other developers, Sohken said yesterday after markets shut. The company filed for court protection from creditors with liabilities of 33.9 billion yen ($309 million). The shares plunged 12 percent to 14,100 yen."
"Bankruptcies among Japanese property companies more than doubled to 60 in July from a year earlier, according to Tokyo Shoko Research Ltd."
"In South Korea, Hyundai Heavy dropped 2.9 percent to 237,000 won after the world's largest shipbuilder said it plans to bid for a controlling stake in Daewoo Shipbuilding & Marine Engineering Co. It's competing with Posco, GS Group and Hanwha Group to acquire a 50.4 percent holding being sold by state-run Korea Development Bank and Korea Asset Management Corp."
"``We question Hyundai Heavy's rationale in buying another shipbuilder at this point in the cycle amid its own capacity expansion,'' Sanjeev Rana, an analyst at Merrill Lynch & Co., wrote in a report today. Hyundai Heavy's bid ``is likely to intensify the bidding war,'' said Rana, who rates the shipbuilder's stock ``underperform.''"
"Daewoo Shipbuilding, the world's third-largest maker of ships, rose 1.9 percent to 35,350 won."
To contact the reporter for this story: Chen Shiyin in Singapore at email@example.com
"Last Updated: August 27, 2008 07:03 EDT"
East European Currencies: Hungarian Forint Drops Against Euro
By Ewa Krukowska
Aug. 27 (Bloomberg) -- Hungary's forint fell against the euro after Prime Minister Ferenc Gyurcsany told state radio he would resign if lawmakers don't approve his tax plan and next year's budget proposals. The Polish zloty declined.
"The government wants to cut taxes by as much as 1.2 trillion forint ($7.4 billion) over the next four years to stimulate the weakest economic growth since 1993 last year, Gurcsany wrote in an article published in Nepszabadsag newspaper. The premier is reversing some of the tax increases he pushed through in 2006 as part of a plan to trim a record budget deficit and meet euro- adoption terms next year."
"``Hungary has a minority government, which doesn't make it easy for pushing legislation through parliament,'' said Michal Dybula, central European economist at BNP Paribas SA in Warsaw. ``Gurcsany's statement today boosted political uncertainty.''"
"The forint fell as much as 0.4 percent to 236.83 per euro, and was at 236.10 by 2:55 p.m. in Budapest, from 235.84 yesterday."
"The forint is the best emerging-markets performer in the past six months, rising almost 10 percent versus Europe's common currency as the central bank raised interest rates to the highest level in more than three years to curb inflation."
"In other trading, the Polish zloty fell 0.2 percent to 3.3342 per euro as the central bank kept interest rates on hold at 6 percent, in line with analysts' expectations."
"The zloty is the worst-performing emerging-market currency in the region this month, falling 3.6 percent on rising risk aversion and as traders bet the central bank's rate-increase cycle is nearing an end amid slowing economic growth."
The central bank's Monetary Policy Council raised interest rates eight times in the past 16 months to quell inflation. Policy makers will hold a news briefing at 4 p.m. in Warsaw to comment on today's decision.
"``We continue to expect the MPC to hike rates once again this year, probably in October, and it will probably be the last rise in the cycle,'' Piotr Kalisz, an economist at Citigroup Inc. in Warsaw, wrote in a client note."
"The Czech koruna was little changed at 24.574 against the euro, from 24.572 yesterday, after a report by the Prague-based statistics office showed second-quarter real wages grew at the slowest pace in almost 10 years."
"The average salary rose 1.1 percent when adjusted for 6.8 percent inflation, compared with revised growth of 2.6 percent in the first three months."
"The Romanian leu gained 0.2 percent to 3.5451 per euro as CEZ AS, a Czech utility, said today it will invest 1.1 billion euros ($1.6 billion) in a 600-megawatt wind farm in Romania."
"``The size of the investment is substantial given total net foreign direct investment reached 8.4 billion euro in the 12- month period ended in June,'' Bartosz Pawlowski, a strategist at TD Securities in London, wrote in a client note. ``Even though we don't expect the Romanian current account deficit to decline from around 14 percent of GDP last year, we think the situation on the financing side should continue to improve.''"
"The Slovak koruna was little changed at 30.309 per euro, as was the Turkish lira at 1.1902 against the dollar."
To contact the reporter on this story: Ewa Krukowska at firstname.lastname@example.org
"Last Updated: August 27, 2008 09:04 EDT"
Lead Rises in London as Investors Take Advantage of Lower Price
By Chanyaporn Chanjaroen
Aug. 27 (Bloomberg) -- Lead rose for the first time in three days on the London Metal Exchange as industry and investors took advantage of recent declines to buy at cheaper prices. Copper and zinc also gained.
"Lead, mostly used in car batteries, fell 27 percent this year through yesterday, the worst performer among metals traded on the exchange. The decline to about $1,600 a metric ton attracted buyers, according to Triland Metals Ltd., one of 12 companies trading on the floor of the LME."
"``Whenever prices drop towards $1,600 you see buying interest from consumers and funds,'' Michael Khosrowpour, a trader at Triland, said today by phone."
"The contract for delivery in three months advanced $70, or 3.8 percent, to $1,925 a ton as of 11:59 a.m. in London. The metal traded at an 18-month low of $1,531 a ton on July 4."
"Increased output in China, the world's largest miner and consumer of the metal, contributed to price declines this year. Chinese miners boosted production by 23 percent last month from a year earlier, according to the National Bureau of Statistics."
"The dollar's slide today also buoyed LME metals, increasing their appeal as an alternative investment. The LME index tracking six metals closed down 1.4 percent yesterday as the U.S. currency gained to a six-month high against the euro."
"LME-tracked lead inventories fell 3,050 tons, or 3.5 percent, to 83,375 tons, according to a daily exchange report, the lowest since June 16. Stocks have more than tripled in the past year. Lead's implied volatility rose to 53.10 last week, the highest in about a year, suggesting wider swings in prices. It was at 52.73 today."
"Copper rose $35, or 0.5 percent, to $7,615 a ton. A deficit of concentrate that's smelted and refined into the metal has supported prices, countering weaker demand for copper, Chilean miner Antofagasta Plc said today in a statement."
"Jiangxi Copper Co., the second-biggest smelter in China, said some competitors are losing money and may close because of low processing fees being paid by miners, Chairman Li Yihuang said today at a press conference in Hong Kong."
"Among other metals traded on the LME, aluminum added $15 to $2,783 a ton, and nickel advanced $370, or 1.9 percent, to $20,400. Zinc rose $11.50 to $1,800.50 a ton and tin declined $100, or 0.5 percent, to $20,600."
"-- With reporting by Xiao Yu in Beijing. Editors: Tony Barrett, M. Shankar"
To contact the reporter on this story: Chanyaporn Chanjaroen in London at email@example.com
"Last Updated: August 27, 2008 07:10 EDT"
Tiscali Rises on Possible Telecom Italia Interest (Update1)
By Francesca Cinelli
"Aug. 27 (Bloomberg) -- Tiscali SpA, the Italian Internet provider that's for sale, gained the most in almost five months in Milan trading on speculation Telecom Italia SpA may be interested in buying some of its assets."
"Tiscali surged as much as 15.6 cents, or 11.2 percent, to 1.55 euros, its biggest gain since March 31, and traded at 1.5 euros, up 7.1 percent, as of 12:05 p.m. Shares of Telecom Italia, Italy's biggest phone company, gained 1 percent to 1.08 euros."
"``The market is speculating on interest Telecom Italia may have in assets after selling Alice France,'' said Alessandro Frigerio, a fund manager at RMJ Sgr in Milan. A spokesman for Telecom Italia was not immediately available for comment."
"Iliad SA yesterday acquired Telecom Italia's French Internet business for 775 million euros ($1.1 billion), leapfrogging Vivendi SA as France's second-largest provider of broadband Web access."
"``In our opinion Tiscali is better than Alice, with penetration of over 10 percent in the UK and 5 percent in Italy,'' Alberto Francese, an analyst at Banca Imi who rates Tiscali a ``hold,'' wrote in a report. Francese has a target price of 1.61 euros on Tiscali."
"A breakup value for Tiscali would suggest a fair value per share of some 1.9 euros, UBS AG said in a report released on Aug. 18. The brokerage rates Tiscali a ``buy'' with a price estimate of 2.2 euros."
To contact the reporter on this story: Francesca Cinelli in Milan at firstname.lastname@example.org
"Last Updated: August 27, 2008 06:14 EDT"
"America Movil, MMX, Southern Copper, Tam: Latin Equity Preview "
By [bn:PRSN=1] William Freebairn  and Alexander Ragir
"Aug. 27 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil."
"The MSCI Latin America Index fell 0.9 percent yesterday to 3,875.43."
MMX Mineracao e Metalicos SA (MMXM3 BS): The iron-ore producer controlled by Brazilian billionaire Eike Batista bought about 1 million cubic meters of pine forest to provide fuel for pig-iron output. The company did not give a price for the transaction in a statement sent via Market Wire yesterday. MMX fell 8.4 percent to 14.20 reais.
"Petroleo Brasileiro SA (PETR4 BS): Petrobras' Chief Executive Officer Jose Sergio Gabrielli proposed that Brazil's government increase its stake in the state-controlled oil company to provide capital for expansion, Folha de S. Paulo reported, without saying where it got the information. Petrobras rose 1.1 percent to 34.19 reais."
"Tam SA (TAMM4 BS): Brazil's largest airline boosted its 2008 plans for expanding its fleet and adding international flights. Tam expects to end the year with 125 planes, compared with a previous projection of 123, according to an e-mailed statement. Tam fell 2.6 percent to 31.75 reais."
"Vivo Participacoes SA (VIVO4 BS): Brazil's largest mobile- phone company plans a 1-for-4 reverse stock split. The transaction must be approved by shareholders, Vivo said in a regulatory filing yesterday. Vivo rose 0.1 percent to 8.03 reais."
"America Movil SAB (AMXL MM): Latin America's largest mobile phone company paid $289 million upfront for a new 15-year operating license in Ecuador. The company will pay the remaining $191 million owed over five years, Daniel Bernal, legal representative of America Movil's Ecuador unit, told reporters yesterday in Quito. America Movil declined 1.5 percent to 25.49 pesos."
"Southern Copper Corp. (PCU/C PE): Peru's largest copper producer must rehire workers fired for taking part in a strike, Cabinet Chief Jorge del Castillo told reporters yesterday in Lima. Southern Copper and two other mining companies must rehire the 31 workers who took part in a June national strike, the government ordered. Southern Copper rose 0.6 percent to $25.06."
To contact the reporter on this story: William Freebairn in Mexico City at email@example.com. Alexander Ragir in Rio de Janeiro at firstname.lastname@example.org;
"Last Updated: August 27, 2008 08:50 EDT"
Nordic Currencies: Norway's Krone Rises After Unemployment Data
By Bo Nielsen
"Aug. 27 (Bloomberg) -- Norway's krone advanced versus the dollar, snapping three days of declines, after the country's jobless rate kept near the lowest level in two decades."
"The Norwegian krone climbed to 5.3662 at 2:24 p.m. in Oslo from 5.4143 yesterday and traded at 7.9257 per euro, from 7.9346. A report yesterday showed business confidence in Germany, Europe's biggest economy, dropped to a three-year low in August."
"Norway's seasonally adjusted unemployment rate rose to 2.6 percent in the three months ending July, a report from Statistics Norway showed today, higher than the 2.5 percent median estimate of 15 economists in a Bloomberg survey. The rate touched a two- decade low of 2.4 percent in April."
"``Relative to most of Europe, the situation is still strong'' in Norway, said Arne Lohmann Rasmussen, senior economist at Danske Bank A/S in Copenhagen."
"The price of crude oil, Norway's biggest export, rose to $118.27 a barrel from $116.27 yesterday. Prices have retreated from a record $147.27 last month."
"Sweden's krona rose against the dollar, ending a three-day decline, after a report showed consumer confidence rose in August from a 13-year low. The krona strengthened to 6.3600 per dollar from 6.4003 yesterday. It fell to 9.3899 per euro from 9.3790."
"The consumer confidence index increased to minus 16.5 from minus 18.2 in July, the Stockholm-based National Institute of Economic Research said on its Web site today. The gauge was expected to rise to minus 17, according to the median estimate of 13 economists in a Bloomberg survey. The manufacturing confidence index fell to minus 12 in August from minus 11 in July."
"In other trading, Iceland's krona rose to 82.63 per dollar, from 82.89 yesterday, after a report from Statistics Iceland showed consumer prices increased 14.5 percent in the year ended August, up from 13.6 percent in July and in line with analysts' estimates in a Bloomberg survey."
"Nordic government bonds were mixed, with the yield on Sweden's 5.25 percent note due March 2011 falling 2 basis points, or 0.02 percentage point, to 4.26 percent. The yield on Norway's 6 percent government note maturing May 2011 rose 1 basis point to 5.01 percent. Yields move inversely to bond prices."
To contact the reporter on this story: Bo Nielsen in Copenhagen at email@example.com
"Last Updated: August 27, 2008 08:31 EDT"
European Bonds Decline; Weber Says No Scope for Rate Reductions
By Agnes Lovasz
Aug. 27 (Bloomberg) -- European government notes declined after European Central Bank council member Axel Weber said there's no scope for interest-rate cuts as inflation remains the bank's main concern.
"The drop in prices pushed the yield on the 10-year bund, Europe's benchmark debt security, up from near the lowest since mid-May. Weber said investors' expectations of lower rates were ``premature'' and the bank may even need to raise borrowing costs again once the economy emerges from its slump."
"``Weber was hawkish as ever,'' said Marius Daheim, a senior bond strategist in Munich at Bayerische Landesbank, Germany's second-biggest state-owned bank. ``It does strike me how strongly the market reacted to these comments. The market has recently traded quite one-sidedly on the recession story. Weber probably wanted to counter overly optimistic expectations for rate cuts.''"
"The 10-year note yield climbed 6 basis points to 4.17 percent as of 1:37 p.m. in London. The 4.25 percent note due July 2018 fell 0.48, or 4.8 euros per 1,000-euro ($1,473) face amount, to 100.61."
The yield on the two-year note rose 10 basis points to 4.08 percent. Yields move inversely to bond prices.
"Bonds extended their drop after a U.S. report showed durable goods orders unexpectedly rose in the world's largest economy. The 1.3 percent gain in bookings of goods meant to last several years matched the previous month's revised increase, the Commerce Department said today in Washington."
Traders have reduced bets the ECB will lower interest rates next year to spur economic expansion. The implied yield on the March Euribor futures contract rose 6 basis point to 4.76 percent. It has declined 24 basis points in the past month.
"The difference in yield, or spread, between two- and 10-year notes narrowed to 9 basis points, from 12 basis points yesterday, as short-maturity debt underperformed longer-dated bunds."
Two-year notes rose earlier before a report that may show inflation in Germany slowed in August as energy prices eased.
"Inflation probably reached 3.4 percent, from 3.5 percent in July, using a harmonized European Union method, according to a Bloomberg survey. Consumer prices in four German states fell this month as oil prices retreated from a record."
"``The consumer-price index for the whole of Germany is expected to show a decline,'' said Jens Peter Soerensen, chief bond analyst in Copenhagen at Danske Bank A/S. ``Inflation is likely to have peaked as commodity prices have leveled off. In the short run we may see some range trading before the next leg down in bond yields.''"
The inflation figures for all of Germany will be released later today by the Federal Statistics Office in Wiesbaden. Oil prices have retreated 20 percent from a record of $147.27 a barrel while a faltering economy makes it more difficult for companies to boost prices.
"European bonds returned 3.7 percent this quarter, compared with a 1.8 percent gain for U.S. Treasuries, according to Merrill Lynch & Co.'s EMU Direct Government and U.S. Treasury Master indexes."
"``Monetary policy at the moment is roughly where it should be,'' Weber, 51, said in an interview in his office in Frankfurt yesterday. ``I don't expect inflation to come down necessarily just with weaker growth. Inflation is still the No. 1 worry for central bankers in the euro region.''"
Bonds were supported earlier even after separate reports showed import-price inflation in Germany accelerated to the fastest pace in almost eight years in July and Italian consumer confidence rebounded from a 15-year low in August.
"Import prices rose 9.3 percent in the year, the statistics office said. That's the biggest gain since November 2000. The Rome-based Isae Institute's index, calculated from a survey of 2,000 families, climbed to 99.5, from 95.8 in July."
"Bonds rallied yesterday after a report showed business confidence in Germany fell to the lowest level in three years in August, increasing the likelihood the European Central Bank will lower interest rates. The German economy, Europe's largest, contracted in the second quarter, according to a separate report."
"``The euro-region economy is struggling at the moment and downside risks are intensifying,'' said Soerensen. ``This should continue to put downward pressure on yields.''"
Policy makers left the main interest rate at 4.25 percent on Aug. 7 while ECB President Jean-Claude Trichet said growth will be ``particularly weak.''
"Gains for bonds may be limited before Italy sells 1.5 billion euros of inflation-linked bonds due September 2012 and September 2023 at an auction today. The country also plans to sell 2 billion euros of floating-rate notes maturing in 2015, 4 billion euros of 4.25 percent notes due 2011 and 2.5 billion euros of 4.5 percent bonds expiring 2018 tomorrow."
To contact the reporter on this story: Agnes Lovasz in London at firstname.lastname@example.org
"Last Updated: August 27, 2008 08:48 EDT"
Pound Drops Versus Euro on Bets Economy Heading for a Recession
By Lukanyo Mnyanda
Aug. 27 (Bloomberg) -- The U.K. pound fell for a second day against the euro on speculation a deepening slump in the nation's housing market may force the central bank to cut interest rates.
"The pound was near a two-year low versus the dollar as Taylor Wimpey Plc., the largest U.K. homebuilder, reported a first-half loss of 1.4 billion pounds ($2.6 billion), adding to concern the economy is entering a recession. Nationwide Building Society will tomorrow say house prices fell for a ninth month, according to economists surveyed by Bloomberg News. The difference in yield between 10-year gilts and German bunds slipped to the narrowest in seven months."
"``There are a variety of broader negative stories floating around that are sterling negative,'' said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. ``That's not helping the cause.'' The currency may drop to $1.80 versus the dollar in a month, he predicted."
"The U.K. currency fell to 79.98 pence per euro by 1 p.m. in London, from 79.65 yesterday. It dropped to 80.04 pence on Aug. 25, the lowest level since Aug. 14. The pound was at $1.8456, paring its loss this month to 6.6 percent. It's headed for the biggest monthly drop since October 1992, when it fell 12 percent."
"Taylor Wimpey and other builders are being forced to cut operations and shed jobs as the economy, Europe's second-largest, reels from the most widespread housing slump in 30 years. Bank of England Governor Mervyn King said this month the U.K. faces a ``difficult and painful adjustment'' as falling house prices and rising inflation hurt consumer spending."
"The pound dropped versus the dollar in each of the past five weeks, the longest losing run since February 2006. It slipped last week after a government report showed economic growth stagnated in the second quarter, adding to pressure on the central bank to cut interest rates to revive the economy."
Gilts Reverse Gains
"Gilts dropped with Treasuries and European bonds, reversing an earlier gain that pushed the yield on the 10-year bond to the lowest level since April 16."
"The 10-year yield rose 2 basis points to 4.51 percent. The 5 percent security due March 2018 fell 0.15, or 1.5 pounds per 1,000-pound face amount, to 103.76. Two-year gilt yields, which are more sensitive to interest-rate expectations, climbed 3 basis points to 4.51 percent. Bond yields move inversely to prices."
"Two-year gilts advanced the most in two weeks yesterday as an industry report showed mortgage approvals held near the weakest level in a decade. The number of mortgages approved last month slumped 65 percent in the year and their value fell to the least since 1998, the British Bankers' Association said."
"The spread between 10-year gilts and their German equivalent narrowed 4 basis points to 34 basis points, the least since Jan. 11. The gap was 69 basis points on Feb. 25, which was the widest this year."
"``The economic situation in the U.K. is getting worse and we expect gilts to remain supported as a result,'' said Giuseppe Maraffino, a bond strategist in Milan at UniCredit Markets & Investment Banking, a unit of Italy's largest bank. Investors should favor shorter-dated notes and two-year gilt yields may drop to 4 percent by year-end, he predicted."
To contact the reporter on this story: Lukanyo Mnyanda in London at email@example.com
"Last Updated: August 27, 2008 08:23 EDT"
U.S. MBA Mortgage Applications Index for Aug. 22 (Table)
By Alex Tanzi
Aug. 27 (Bloomberg) -- Following is a summary of U.S. mortgage activity from the Mortgage Bankers Association.
Aug. 22 Aug. 15 Aug. 8 Aug. 1 July 25
2008 2008 2008 2008 2008 YoY%
-----Weekly Change (seasonally adjusted)--- -NSA-
Market index 0.5% -1.5% -1.5% 2.8% -14.1% -31.2%
Purchases 0.6% -0.4% 0.0% 1.8% -7.8% -25.2%
Refinancing 0.3% -3.7% -4.2% 4.4% -22.9% -40.0%
Fixed rate 0.7% -2.3% -2.0% 3.3% -12.9% -25.4%
Adjustable rate -1.6% 7.9% 5.1% -2.9% -26.3% -63.8%
---------- Contract Interest Rates -------- Yr. ago
FRM 30-year 6.44% 6.47% 6.58% 6.40% 6.46% 6.41%
FRM 15-year 5.94% 5.99% 6.17% 6.02% 5.98% 6.10%
ARM 1-yr Treasury 7.15% 7.07% 7.15% 7.17% 7.25% 6.52%
FHA 203(b) 6.43% 6.43% 6.56% 6.43% 6.47% 6.66%
Aug. 22 Aug. 15 Aug. 8 Aug. 1 July 25 July 18
2008 2008 2008 2008 2008 2008
------------ Applications (unadjusted)------------
Avg. loan size $216.9 $219.3 $216.7 $219.8 $221.9 $221.9
Number change -0.9% -2.6% -2.2% 2.4% -13.7% -6.1%
$ volume change -2.0% -1.5% -3.6% 1.5% -13.7% -6.2%
Avg. loan size $225.1 $227.4 $227.7 $230.5 $230.7 $229.5
Number change -1.6% -2.0% -1.0% 1.4% -7.7% -6.4%
$ volume change -2.6% -2.2% -2.2% 1.3% -7.2% -6.6%
Avg. loan size $201.8 $204.0 $196.4 $200.7 $205.5 $210.2
Number change 0.3% -3.7% -4.2% 4.4% -22.9% -5.6%
$ volume change -0.8% 0.0% -6.3% 2.0% -24.6% -5.6%
Aug. 22 Aug. 15 Aug. 8 Aug. 1 July 25 July 18
2008 2008 2008 2008 2008 2008
Refi's as a % of
total # of loans 35.2% 34.8% 35.2% 35.9% 35.2% 39.4%
Refi's as a % of
total $ of loans 32.8% 32.4% 31.9% 32.8% 32.6% 37.3%
ARM's as a % of
total # of loans 7.9% 8.0% 7.3% 6.9% 7.3% 8.5%
ARM's as a % of
total $ of loans 13.3% 13.8% 12.2% 12.2% 12.8% 14.6%
---------- Indexes (seasonally adjusted) ---------
Market index level 421.6 419.3 425.9 432.6 420.8 489.6
Purchases 315.9 314.0 315.2 315.2 309.5 335.6
Refinancings 1038.0 1034.5 1074.6 1121.8 1074.4 1392.7
Fixed rate 407.2 404.2 413.8 422.4 409.1 469.8
Adjustable rate 727.7 739.2 685.3 652.3 671.8 911.1
Conventional Index 450.3 456.1 465.3 477.6 473.8 563.8
Conv. Purchase 366.0 368.2 370.7 375.3 376.5 405.2
Aug. 22 Aug. 15 Aug. 8 Aug. 1 July 25 July 18
2008 2008 2008 2008 2008 2008
---------- Indexes (seasonally adjusted) ---------
Conv. Refinance 793.9 815.2 853.1 897.7 874.1 1213.9
Conv. FRMs 435.3 439.1 451.7 466.0 462.3 539.3
Conv. ARMs 759.3 804.8 744.9 716.3 711.1 1066.7
Government Index 373.6 357.8 360.3 357.6 332.4 365.9
Government Purchas 243.8 236.0 235.5 228.8 213.4 235.7
Government Refi 2355.1 2218.5 2270.6 2332.1 2157.4 2363.1
Government FRMs 360.0 345.7 350.3 349.4 320.1 353.6
Government ARMs 674.6 626.4 582.7 541.8 605.1 640.0
"NOTE: March, 16 1990=100. Contract interest rates assume a 20% down payment. Average loan size is in thousands."
To contact the reporter on this story: Alex Tanzi in Washington at firstname.lastname@example.org
"Last Updated: August 27, 2008 07:00 EDT"
"Treasuries Fall Before Record Two-Year Auction, Five-Year Sale "
By Dakin Campbell and Lukanyo Mnyanda
"Aug. 27 (Bloomberg) -- Treasuries declined before the government sells a record $32 billion of two-year notes today and $22 billion of five-year securities tomorrow, the biggest amount since 2003."
"Two-year notes yield 39 basis points, or 0.39 percentage point, more than the Federal Reserve's 2 percent target for overnight bank lending, almost half the spread in June and offering investors less compensation for the risk of higher interest rates. The minutes of the Fed's Aug. 5 meeting showed policy makers agreed the next move will be an increase, although not on the timing."
"``We're moving into $54 billion in two- and five-year supply, and that will capture the market's attention,'' said Martin Mitchell, head government bond trader at the Baltimore unit of Stifel Nicolaus & Co. ``The auctions are big so it will take some demand to place them.''"
"The yield on the two-year note rose 6 basis points to 2.39 percent at 8:59 a.m. in New York, according to BGCantor Market Data. The price of the 2.75 percent security due in July 2010 fell 4/32, or $1.25 per $1,000 face amount, to 100 21/32. The 10-year note's yield advanced 6 basis points to 3.83 percent."
"Government securities fell after orders for U.S. durable goods unexpectedly increased in July, the Commerce Department said. The 1.3 percent gain in bookings of goods meant to last several years matched the previous month's rise, which was larger than previously estimated. Excluding transportation equipment, orders climbed 0.7 percent after a 2.4 percent increase a month earlier."
"``That's surprisingly strong,'' said Matthew Moore, an interest-rate strategist in New York at Banc of America Securities LLC, one of 19 primary dealers that trade with the Federal Reserve. ``Usually you get a decline in the ex- transportation in the first month of a quarter.''"
"Treasury-trading volume rose yesterday from a three-month low reached Aug. 25. An average of $242.4 billion in Treasuries has changed hands daily so far this month, down from an average of $315.5 billion a day during the same period in July, according to ICAP Plc, the world's largest inter-dealer broker."
Futures on the Chicago Board of Trade show a 58 percent chance the Fed will increase its target rate by at least a quarter-percentage point in January. Policy makers next meet Sept. 16.
Investors bid for 2.42 times the amount of debt on offer at the previous Treasury two-year sale on July 23. The average for the past 10 auctions is 2.38.
"U.S. government securities headed for a third monthly gain, driven by forecasts for slowing U.S. economic growth and a 20 percent decline in oil costs from July's all-time high."
`Good for Bonds'
"Treasuries have returned 1.3% so far this month, and 4 percent since the start of the year, according to Merrill Lynch & Co.'s U.S. Treasury Master Index. Two-year notes have returned 0.5 percent so far this year, Merrill indexes show. Two-year yields will increase to 2.44 percent by year-end, according to a Bloomberg News survey of economists, with the most recent forecasts given the heaviest weightings."
"``The market will rally because you'll see inflation start drifting lower,'' said Felix Stephen, senior investment strategist at Advance Asset Management Ltd. in Sydney, whose International Fixed Interest bond fund returned 5.2 percent so far this year, beating 95 percent of its competitors. ``Oil has come down. This is going to be good for bonds.''"
"Inflation expectations have declined since the start of July, yields indicate. The difference between rates on 10-year Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, was 2.17 percentage points, down from 2.60 on July 4."
"The difference in yields between U.S. government two-year debt and similarly dated German bunds, used as a benchmark for European debt, rose to 1.70 percentage points from 1.66 percentage points yesterday. Bunds declined after European Central Bank council member Axel Weber said in an interview with Bloomberg News that there's no scope for interest-rate cuts and the bank may need to raise borrowing costs."
"The U.S. economy may have expanded 2.7 percent in the second quarter, faster than the 1.9 percent pace first reported, a separate Bloomberg survey showed before the Commerce Department revises the figure tomorrow."
"Growth will slow to 0.45 percent in the fourth quarter, another survey showed."
To contact the reporters on this story: Dakin Campbell in New York at email@example.com; Lukanyo Mnyanda in London at firstname.lastname@example.org
"Last Updated: August 27, 2008 09:02 EDT"
Brazil's Aug. IGP-M Drops for First Time in Two Years (Update2)
By Joshua Goodman
"Aug. 27 (Bloomberg) -- Brazil's broadest measure of inflation fell for the first time in more than two years, led by a larger-than-expected drop in food prices."
"Consumer, construction and wholesale prices, as measured by the IGP-M price index, decreased 0.32 percent, more than all estimates, and the 0.20 percent median forecast in a Bloomberg survey of 28 analysts, the Rio de Janeiro-based Getulio Vargas Foundation said today."
"A global drop in commodity prices won't be enough to prompt the central bank to ease up on its bid to contain inflation. Policy makers have raised interest rates three times since April, to 13 percent from a record low 11.25 percent, to slow inflation running near the 6.5 percent upper limit of its target range."
"``This helps ease concerns, but inflation expectations for next year remain pretty rigid,'' said Zeina Latif, chief economist for ING Bank NV in Sao Paulo. ``As long as food prices remain volatile and demand robust there's not much room for monetary policy to change.''"
"Policy makers, led by bank President Henrique Meirelles, are expected to raise the key rate 0.75 percentage point for the second consecutive time at the Sept. 10 meeting, according to an Aug. 22 bank survey of 100 economists. The bank will raise the rate to 14.75 percent by the end of the year, the survey showed."
"A 30 percent monthly drop in the wholesale price of tomatoes led all food items lower, helping reverse a 1.76 percent increase in the IGP-M in July."
"Consumer, construction and wholesale prices climbed 13.63 percent from a year-ago, less than the 5-year high of 15.12 percent in July, the Getulio Vargas Foundation said. The country's benchmark index that track consumer prices was 6.23 percent for the 12 months through mid-August, the central bank said last week."
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro email@example.com
"Last Updated: August 27, 2008 08:04 EDT"
"Euro Rises From Six-Month Low Against Dollar on Weber, Oil Gain "
By Ye Xie and Gavin Finch
Aug. 27 (Bloomberg) -- The euro rose from a six-month low versus the dollar as European Central Bank council member Axel Weber said there's no scope for interest-rate cuts and crude oil prices increased for a third straight day.
The greenback fell against the yen on concern credit-market losses will widen after the Federal Deposit Insurance Corp. said the number of problem banks increased to the most in five years. The dollar pared its losses against the yen and the euro as a government report showed orders for U.S. durable goods unexpectedly rose last month.
"``The euro is getting some support from Weber,'' said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``Clearly we are not likely to see a rate cut in the near future.''"
"The 15-nation euro climbed 0.6 percent to $1.4741 at 9:17 a.m. in New York, from $1.4653 yesterday, when it touched $1.4571, the lowest level since Feb. 14. The dollar depreciated 0.1 percent to 109.49 yen, from 109.60. The euro advanced 0.5 percent to 161.41 yen, from 160.64."
"The euro advanced as traders reduced bets that the ECB will cut its 4.25 percent main refinancing rate next year. The implied yield on the Euribor futures contract expiring in September 2009 rose 13 basis points, or 0.13 percentage point, to 4.45 percent, after falling 6 basis points yesterday. The yield averaged 18 basis points above the ECB's benchmark from 1999 to August 2007."
"Discussion about an ECB rate cut is ``premature,'' said Weber, who heads Germany's Bundesbank, in an interview in Frankfurt. Policy makers may need to raise borrowing costs once the economic outlook ``brightens'' toward the end of the year and next year, he said."
"Crude oil for October delivery rose 1.8 percent to $118.30 a barrel on forecasts Tropical Storm Gustav will strengthen as it enters the Gulf of Mexico, home to 26 percent of U.S. production. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep."
The euro has fallen 8 percent from a record high of $1.6038 set on July 15 as the European economy shrank in the second quarter and crude oil declined 20 percent from its all-time high reached last month. The euro depreciated yesterday to a six- month low after a report showed German business confidence dropped in August to the lowest level in three years.
U.S. Durable Goods
"Bookings for U.S. goods made to last several years increased 1.3 percent in July after a revised gain of the same amount in the previous month, the Commerce Department said today in Washington. The median forecast of 76 economists in a Bloomberg News survey was for no change in durable goods orders."
"Federal Reserve policy makers agreed that their next move will be a rate increase, although they didn't indicate the timing, minutes of their Aug. 5 meeting showed yesterday."
"Futures on the Chicago Board of Trade show a 17 percent chance the Fed will increase its 2 percent target rate for overnight lending between banks by at least a quarter-point in December, compared with 70 percent odds a month ago. Policy makers next meet Sept. 16."
"The Dollar Index's chart is forming a double top, a ``catalyst'' that may push the U.S. currency lower, said Toru Tokoyoda, head of foreign-exchange sales in Tokyo at Lehman Brothers Holdings Inc."
"A double top occurs when a security makes two successive peaks and often indicates the reversal of a trend. The distance between the peaks and the lowest point of the double top may indicate the next support level, where buy orders are concentrated."
"The ICE futures exchange's Dollar Index, which compares the greenback against the currencies of six U.S. trading partners, fell 0.4 percent to 76.933, from 77.251 yesterday. It rose to 77.413 on Aug. 19, fell to 76.022 on Aug. 21 and then rose yesterday to a second peak, the eight-month high of 77.619."
"``Some players are taking their cue from this chart formation,'' said Tokoyoda, who predicts the dollar may fall to $1.4750 versus the euro today."
"The FDIC said yesterday its ``problem list'' of banks increased 30 percent in the second quarter to 117 banks, the highest total in five years, as more commercial real-estate loans were overdue."
"The agency, which provides cover for U.S. bank deposits, may have to tap Treasury Department funds to carry it through an anticipated wave of bank failures, the Wall Street Journal reported, citing chairman Sheila Bair. Bair told the Journal the borrowing wouldn't be to cover any FDIC losses. Instead, it would provide short-term liquidity to cover bank failures."
To contact the reporters on this story: Ye Xie in New York at firstname.lastname@example.org; Gavin Finch in London at email@example.com;
"Last Updated: August 27, 2008 09:21 EDT"
Crude Oil Rises a Third Day on Storm Threat in Gulf of Mexico
By Grant Smith and Christian Schmollinger
"Aug. 27 (Bloomberg) -- Crude Oil rose for a third day on forecasts Tropical Storm Gustav will strengthen as it enters the Gulf of Mexico, home to 26 percent of U.S. production."
"Gustav is expected to return to hurricane status before reaching Gulf platforms, according to Jim Rouiller, a senior energy meteorologist with Planalytics Inc., a forecaster based in Pennsylvania. U.S. gasoline inventories probably fell a fifth week, dropping 2.45 million barrels, according to a Bloomberg survey before today's Energy Department report."
"``The threat of storms like Gustav will prevent oil prices falling further, so we see the market supported above $110 until the end of the hurricane season,'' said Ingrid Angermann, an economist at Dresdner Bank AG in Frankfurt."
"Crude oil for October delivery rose as much as $2.26, or 1.9 percent, to $118.53 a barrel on the New York Mercantile Exchange. It was trading at $118.13 at 1:40 p.m. London time. Prices are up 63 percent from a year ago."
"Futures have dropped 21 percent from a record $147.27 a barrel reached on July 11. Yesterday, oil rose $1.16, or 1 percent, to settle at $116.27 a barrel."
"OPEC, the producer of 42 percent of the world's oil, should maintain output when it meets in Vienna next month to help curb prices, International Energy Agency Executive Director Nobuo Tanaka said."
"``We wish producers will maintain the current level of production,'' Tanaka told Bloomberg News in an interview at an oil conference in Stavanger, Norway. ``The current price level is putting a burden on the global economy.''"
"The dollar fell from a six-month high against the euro, bolstering the appeal of commodities as a hedge. The dollar declined to $1.4764 per euro at 1:16 p.m. in London from $1.4653 in New York yesterday, when it touched $1.4571, the strongest since Feb. 14."
"Gustav was about 80 miles (125 kilometers) west of the Haitian capital, Port-au-Prince, and forecast to head into the central Gulf of Mexico by Aug. 31, the National Hurricane Center said in an advisory at 5 a.m. Miami time."
"Gustav has the potential to grow to a Category 4 hurricane with winds of at least 131 miles per hour by the time it enters the Gulf, said Planalytics's Rouiller, whose clients include oil companies."
"Offshore fields in the Gulf of Mexico accounted for 26 percent of total U.S. crude production and 12 percent of natural gas output in April, according to data on the Web site of the government's Energy Information Administration."
"Royal Dutch Shell Plc and Transocean Inc., the world's largest offshore oil driller, have started to scale back operations in the area before the storm approaches."
"U.S. crude-oil inventories probably rose probably rose 1.1 million barrels last week from 305.9 million, according to the median of responses by five analysts."
The Energy Department is scheduled to release its weekly report today at 10:35 a.m. in Washington.
"Brent crude oil for October settlement rose as much as $1.35 cents, or 1.2 percent, to $115.98 a barrel on London's ICE Futures Europe exchange. It was at $115.70 a barrel at 11:53 a.m. London time."
For Related News: News on oil markets: NI OILMARKET <GO> News on oil inventories: TNI OIL INV <GO>
"Last Updated: August 27, 2008 08:43 EDT"
"Gold Advances on Investor Demand for Haven, Falling U.S. Dollar "
By Claudia Carpenter
Aug. 27 (Bloomberg) -- Gold rose in London on demand for precious metals as a haven from housing-related financial losses and an alternative investment to the declining dollar.
"Gold extended its rebound from a nine-month low reached on Aug. 15. Demand for 1-kilo (2.2-pound) gold bars at the European refineries of Heraeus Holding GmbH has outstripped supply, with customers waiting as long as two weeks for delivery of orders, said Wolfgang Wrzesniok-Rossbach, head of marketing and sales."
"``We had these housing problems three months ago but the price was still high,'' Wrzesniok-Rossbach said from Hanau, Germany. ``The problems are still there but the prices are much lower. This is why people have come in and invested their money in gold.''"
"Gold for immediate delivery gained $7.44, or 0.9 percent, to $832.34 an ounce as of 12:27 p.m. in London. The metal fell to $772.98 on Aug. 15, the lowest since Oct. 26, after reaching a record high of $1,032.70 on March 17."
The dollar fell from a six-month high against the euro today on speculation U.S. economic data will suggest the Federal Reserve will hold off raising interest rates.
"Gold inflows of $306 million since the middle of July have led funds moving into the exchange-traded commodities of ETF Securities Ltd., the Jersey-based company said today in an e- mailed report. ``The consistently strong inflows into the gold ETCs highlights investors' continuing interest in buying safe haven assets as global economic and financial conditions deteriorate and inflation remains high,'' it said."
"Silver for immediate delivery rose 15 cents to $13.74 an ounce, platinum gained $14, or 1 percent, to $1,434 an ounce, and palladium increased $7.50 to $293.50."
"Rhodium, used in autocatalysts, led the rebound in precious metals, gaining $200 to $6,200 an ounce, Johnson Matthey Plc said. Prices have climbed 61 percent in five trading sessions."
"Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by gold, was unchanged since Aug. 19 at 651.37 metric tons."
To contact the reporter on this story: Claudia Carpenter in London at firstname.lastname@example.org
"Last Updated: August 27, 2008 07:40 EDT"
Orders for Durable Goods in U.S. Unexpectedly Gain (Update2)
By Timothy R. Homan
"Aug. 27 (Bloomberg) -- Orders for U.S. durable goods unexpectedly increased in July, indicating that growing demand from abroad is still helping companies weather a slump in domestic spending."
"The 1.3 percent gain in bookings of goods meant to last several years matched the previous month's rise, which was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders rose 0.7 percent after a 2.4 percent increase a month earlier."
"The boost to the U.S. from trade, which was the biggest in almost 28 years last quarter, may wane after figures this month showed shrinking economies in the euro region and Japan. ``Many'' Federal Reserve officials anticipate export gains will fade, minutes of their Aug. 5 meeting showed yesterday."
"``The impact from global weakening so far on U.S. manufacturers remains modest,'' Aaron Smith an economist at Moody's Economy.com, said in an interview with Bloomberg Television. Because of domestic weakness, the economy may still slow or contract ``while simultaneously still having very modest weakness in manufacturing and capital spending,'' he said."
"Treasuries fell after the report and stock futures gained. The benchmark 10-year note yielded 3.82 percent as of 8:40 a.m. in New York, up 4 basis points from yesterday."
"Economists projected orders would be unchanged after a previously reported 0.8 percent increase in June, according to the median of 76 forecast in a Bloomberg News survey. Estimates ranged from a drop of 2.1 percent to a gain of 2.2 percent."
Forecast to Drop
"Excluding transportation equipment, orders were projected to fall 0.7 percent, after an originally reported 2 percent gain in June, according to the Bloomberg survey. Estimates ranged from a decline of 2.9 percent to an increase of 0.6 percent."
"Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, increased 2.6 percent, the most since April. Shipments of those items, used in calculating gross domestic product, rose 0.6 percent following a 0.4 percent gain that was smaller than previously estimated."
"Today's revisions will probably have little impact on economists' forecasts for growth in the second quarter. Revised gross domestic product figures from the Commerce Department, due tomorrow, may show the economy expanded at a 2.7 percent annual rate from April through June, up from an advanced estimate of 1.9 percent reported last month as exports jumped, according to a Bloomberg survey."
"Business spending on new equipment and software dropped at a 3.4 percent annual pace last quarter, the second consecutive decline and the biggest since the first three months of 2004, according to the government's advance estimate issued last month."
"Growth in coming quarters probably will slow as the effects of the federal tax rebates wear off and consumer spending weakens. Retail sales in July fell 0.1 percent, the first decline in five months, the Commerce Department reported Aug. 13."
"``An increasingly strained consumer, deepening woes for the housing sector and a desire to pare inventories will all weigh on manufacturing output,'' Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report."
"Factories are faring better than in past downturns, helped in part by a weak dollar that has helped boost exports. The Institute for Supply Management's manufacturing index for July fell to 50, the dividing line between growth and contraction, from 50.2 a month earlier. During the 2001 recession it averaged 43.5."
"Manufacturing ``declined or remained weak in most districts,'' even as ``demand for exports remained generally high,'' the Fed said last month in its regional economic known as the Beige Book. Bank lending ``was generally reported to be restrained.''"
"Regional reports this month offered mixed impressions. The New York Fed's general economic index rose in August to 2.8, the highest level since January, from minus 4.9 a month earlier. The Philadelphia Fed said last week that manufacturing in the region shrank in August for a ninth straight month."
"Gains in orders for metals, machinery, communications gear, automobiles and aircraft all contributed to the increase in demand last month."
"Orders for transportation equipment rose 3.1 percent, led by a 28 percent jump in airplane bookings. Demand for automobiles climbed 1.2 percent."
"The gain in autos may have reflected a continued rebound following the end of a strike at American Axle & Manufacturing Holdings Inc., the largest axle supplier for General Motors Corp. GM said June 16 it had returned to full production."
"Such gains are unlikely to continue as sales slump. Auto- industry figures this month showed purchases of cars and light trucks in the U.S. fell in July to a 12.5 million annual rate, the lowest level since March 1993, as consumers faced record gas prices."
"Some manufacturers are trimming staff to offset high energy costs. Alcoa Inc., the world's third largest aluminum producer, said last week that it will lay off 300 employees in Texas starting Aug. 31. The cuts come as a result of ``uneconomical power prices,'' the New York-based company said in a statement."
"Commodity costs have subsided since mid-July, easing cost pressures. Crude oil futures dropped below $112 a barrel on Aug. 15 after peaking at $147 on July 11."
To contact the reporter on this story: Timothy R. Homan in Washington at email@example.com
"Last Updated: August 27, 2008 09:16 EDT"
Indian Rupee Rises on Speculation Central Bank Will Seek Gains
By Anoop Agrawal
"Aug. 27 (Bloomberg) -- India's rupee rose, ending two days of losses, on speculation the central bank will seek gains in the currency to curb the fastest price increases in 16 years."
"Asia's third-largest economy, which meets three-quarters of its energy needs from overseas, is grappling with inflation at the fastest since July 1992. The rupee climbed from yesterday's 17- month low, gaining for the first time this week."
"``The rupee's fall this week has increased speculation the central bank will intervene and stabilize the markets,'' said Ravindra Babu, a currency trader at state-owned Andhra Bank in Mumbai. ``I think the rupee will halt its slide.''"
"The rupee strengthened 0.2 percent to 43.75 a dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg."
"A government report tomorrow may say India's benchmark wholesale-price growth rate accelerated to 12.8 percent in the week ended Aug. 16, the fastest since June 1992, according to the median estimate in a Bloomberg News survey."
"India's foreign-exchange reserves fell for a fifth week through Aug. 15, the longest stretch of declines since November 2000, indicating the central bank sold dollars to support the rupee. Central banks intervene in currency markets by arranging the sale or purchase of foreign exchange."
"The Reserve Bank of India doesn't comment on daily rupee movements and operations, its Mumbai-based spokeswoman, Alpana Killawala, said."
"India's foreign-currency reserves dropped to $286 billion in the week ended Aug. 15 from a record $306.2 billion in May, according to data provided by the central bank."
To contact the reporter on this story: Anoop Agrawal in Mumbai at firstname.lastname@example.org.
"Last Updated: August 27, 2008 07:50 EDT"
Lockhart Says Fed's Rate Is `Consistent' With Slower Inflation
By Scott Lanman and Steve Matthews
"Aug. 27 (Bloomberg) -- Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank's interest-rate stance is ``consistent'' with slowing inflation, while signaling readiness to raise borrowing costs if needed."
"``Current Fed policy is consistent with an easing in overall inflation given the dynamics of the economy,'' Lockhart said in the prepared text of a speech today in Atlanta. At the same time, ``I am mindful of today's elevated risks and am prepared at any point to change tactics to ensure inflation expectations do not become unanchored.''"
"Policy makers agreed on Aug. 5 that their next change in rates would be an increase, according to minutes of their meeting released yesterday. A number of officials concerned at rising risks of inflation favored an increase earlier than traders expected, the minutes also showed. Lockhart will vote on rates for the first time in 2009."
"``Although recent measures of inflation are higher than I would like to see, I would say that recent price increases are more likely to be transitory than persistent,'' Lockhart said in the speech at Georgia State University's economic forecasting conference. Inflation expectations ``may have risen modestly -- but not by a material degree,'' he said."
"The Fed left its benchmark lending rate unchanged at 2 percent for the second straight meeting on Aug. 5, after 3.25 points of reductions over the past year. Traders see a 79 percent chance the central bank won't raise rates again this year, based on futures prices. A month ago, traders were placing 75 percent odds on an increase."
"Fed Chairman Ben S. Bernanke said last week inflation should ease later this year and in 2009, while warning that policy makers will act if price increases don't slow over the ``medium term.''"
"Lockhart said in an Aug. 15 interview he prefers to keep interest rates unchanged for now, while policy makers will likely debate whether to raise them in coming months."
"Lockhart, 61, joined the Atlanta Fed in March 2007 and previously worked at Citigroup Inc. for 17 years."
"His prepared speech today focused on inflation without giving a broader economic outlook. Economists expect annualized rates of growth of 1.2 percent in the third quarter, according to the median estimate in a Bloomberg Survey."
"The consumer price index rose 5.6 percent for the 12 months ending in July, which Lockhart said was a ``high and worrisome number.''"
"The Fed's preferred benchmark, the personal consumption expenditures price index, minus food and energy, has been at 2 percent or higher since March 2004. Adjusted for the so-called core PCE rate, the real federal funds rate is slightly below zero, the lowest since November 2004."
"While core-inflation measures ``can be useful tools,'' Lockhart said that ``I ultimately care about the trend rate of overall inflation, which I believe is ultimately the appropriate object of monetary policy.''"
"``No matter how you measure it, the aggregate inflation we are experiencing in the United States at the moment is uncomfortably high,'' Lockhart said."
"Crude oil has dropped to $117.62 a barrel from its record $147.27 on July 11. The decline will help reduce broader inflation pressures, Lockhart said. ``But the underlying global supply pressures remain tight, and demand pressures remain relatively high,'' he said. ``As such, any relief will likely be only partial.''"
"The Fed shouldn't raise interest rates in response to higher energy prices because monetary policy can't affect supply and demand in global oil markets, and such actions would probably do more harm by reducing Americans' real incomes, Lockhart said."
To contact the reporter on this story: Scott Lanman in Washington at email@example.com; Steve Matthews in Atlanta at firstname.lastname@example.org.
"Last Updated: August 27, 2008 08:32 EDT"
"Dollar Falls Against Euro, Yen Before U.S. Durable Goods Report "
By Gavin Finch and Stanley White
Aug. 27 (Bloomberg) -- The dollar fell from a six-month high against the euro and retreated versus the yen before a government report that may show U.S. durable goods orders stalled in July.
"The U.S. currency also declined from a two-year high against the British pound on concern credit-market losses will spread after the Federal Deposit Insurance Corp. said the number of problem banks increased 30 percent to the most in five years. The dollar, which has advanced 8 percent from a record versus the euro on July 15, also slid as oil rose for a third day."
"``The dollar looks overbought given its recent sharp gains,'' said Michael Klawitter, a currency strategist in Frankfurt at Dresdner Kleinwort, the investment bank owned by Allianz SE, Europe's biggest insurer. ``The market has also become too complacent about dollar risks and the FDIC's warning on further bank failures serves as a reminder that the outlook for the economy isn't so great.''"
"The dollar declined to $1.4757 per euro by 7:47 a.m. in New York, from $1.4653 yesterday, when it touched $1.4571, the highest level since Feb. 14. The dollar fell to 108.88 yen from 109.60. The euro was at 160.66 yen, from 160.64. The dollar slid to $1.8471 versus the pound, from $1.8400 yesterday, when it rose to $1.8331, its strongest level since July 2006."
"The euro may rise to between $1.4800 and $1.4850 over the next couple of days, Klawitter said."
The euro extended gains versus the dollar after European Central Bank council member Axel Weber said in an interview in Frankfurt there's no scope for interest-rate cuts and the bank may even need to raise borrowing costs again once the economy emerges from its slump.
"Bookings for U.S. goods made to last several years were unchanged in July, compared with a gain of 0.8 percent in June, according to a Bloomberg News survey of economists. The Commerce Department releases the figures at 8:30 a.m. in Washington. Personal spending rose 0.2 percent, less than half the 0.6 percent increase in June, a report may show Aug. 29, according to a separate survey."
"``The prospects for the U.S. economy are still poor and it will continue to slow,'' said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``There's not a lot of reasons to own dollars.''"
The euro pared its gains after government reports showed consumer prices in five German states fell in August.
"Prices in North Rhine-Westphalia declined 0.4 percent from July and inflation slowed to 2.9 percent, the state's statistics office in Dusseldorf said today. Prices in Brandenburg, Hesse, Bavaria and Saxony also fell. Economists expect German inflation to slow to 3.4 percent from 3.5 percent under a harmonized European Union method, the median of 23 forecasts in a Bloomberg News survey showed."
"The U.S. currency rallied yesterday after German business confidence declined this month to the lowest level in three years and the minutes of the Fed's last meeting showed policy makers agreed that their next move will be a rate increase, although they didn't indicate the timing."
"Futures on the Chicago Board of Trade show a 17 percent chance the Fed will increase its 2 percent target rate for overnight lending between banks by at least a quarter-point in December, compared with 70 percent odds a month ago. Policy makers next meet Sept. 16."
"The dollar's declines against the euro, the yen and the pound accelerated on signs the Dollar Index is forming a double top on its chart, said Toru Tokoyoda, head of foreign-exchange sales in Tokyo at Lehman Brothers Holdings Inc."
A double top is when a security makes two successive peaks and often indicates the reversal of a trend. The distance between the peaks and the lowest point of the double top may indicate the next support level a security will fall to.
"The ICE futures exchange's Dollar Index, which compares the greenback against the currencies of six U.S. trading partners, fell to 76.83, from 77.251 yesterday. It rose to 77.413 on Aug. 19, fell to 76.022 on Aug. 21 and then rose yesterday to a second peak at 77.619."
"``The double top in the Dollar Index was a catalyst to push the dollar lower,'' Tokoyoda said. ``Some players are taking their cue from this chart formation.''"
"The dollar may fall to $1.4750 versus the euro today, he forecast."
"The FDIC, which provides cover for U.S. bank deposits, may have to tap Treasury Department funds to carry it through an anticipated wave of bank failures, the Wall Street Journal reported, citing chairman Sheila Bair. Bair said the borrowing wouldn't be to cover any FDIC losses, instead it would provide short-term liquidity to cover bank failures."
"The yen rose against all of the most-active currencies tracked by Bloomberg as European and Asian stocks fell on concern that bank losses will spread, prompting traders to pare so-called carry trades."
"One-month implied volatility for the yen rose to 10.68 percent today, from 10.32 percent yesterday and 10.01 percent at the end of last week. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Higher volatility may discourage carry trades."
"In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the rates. The risk is that currency market moves can erase those profits."
"The yen advanced the most against the Brazilian real, climbing 0.8 percent to 66.78 yen. Against the Mexican peso it rose 0.5 percent to 10.73 yen."
"Brazil's benchmark interest rate is 13 percent while Mexico's is 8.25 percent, compared with 0.5 percent in Japan."
To contact the reporters on this story: Gavin Finch in London at email@example.com; Stanley White in Tokyo at firstname.lastname@example.org
"Last Updated: August 27, 2008 07:52 EDT"
"Fannie, Freddie Mortgage Profit Reaches 10-Year High (Update1) "
By Jody Shenn
Aug. 27 (Bloomberg) -- The crisis of confidence that sent Fannie Mae and Freddie Mac debt costs to record highs above U.S. Treasuries is also providing the mortgage-finance companies with the biggest profits on new investments since at least 1998.
"The current-coupon mortgage bonds Fannie and Freddie buy yield about 40 basis points, or 0.40 percentage point, more than what they pay to borrow by selling benchmark bonds, according to Citigroup Inc. The difference exceeded 20 basis points only twice in the 10 years through 2007 -- in 1998 and 2003."
"The gap enables the government-chartered companies to offset some of the credit losses on mortgages they own or guarantee and eases pressure on U.S. Treasury Secretary Henry Paulson to step in with a bailout. The companies, which profit from their $1.6 trillion of mortgage investments, have tumbled more than 85 percent this year in New York Stock Exchange trading as mortgage delinquencies grow and the cost of debt rises."
"``From Fannie and Freddie's perspective, there's actually better investments now,'' said Moshe Orenbuch, an analyst at Credit Suisse Group in New York, adding that their interest margin is likely to continue to widen. ``It's ironic.''"
"Congress created Fannie and Freddie to expand homeownership and provide market stability. They make money by buying mortgages from banks, funding their purchases with low-cost debt, and by guaranteeing home-loan securities."
"Washington-based Fannie said last month net interest income rose to $2.1 billion in the second quarter, from $1.7 billion in the first quarter. The company's profit on its investments expanded to 100 basis points from 82 basis points, according to Credit Suisse."
Freddie's net interest income jumped 92 percent to $1.5 billion. The annualized profit per dollar of investments rose to 80 basis points from 48 basis points.
"``They, at the increment, are very, very profitable,'' said Dan Fuss, vice chairman of Loomis Sayles & Co. in Boston and co- manager of the $17 billion Loomis Sayles Bond Fund. ``If they can continue to do anything close to business as usual, they are immensely profitable.''"
"``Our funding costs remain attractive, particularly based on the opportunities to purchase mortgage assets at attractive spreads,'' Freddie spokesman Michael Cosgrove said. A Fannie spokesman, Jason Lobo, declined to comment."
Fannie and Freddie shares fell this year and their borrowing costs rose amid concern they don't have enough capital to weather the biggest housing downturn since the Great Depression. The companies had $14.9 billion of losses in the past four quarters as late payments on mortgages rose to the highest on record.
Most in 10 Years
"Freddie on Aug. 19 sold $3 billion of five-year reference notes to yield 113 basis points more than similar-maturity Treasuries, the most in at least 10 years. Fannie sold $3.5 billion of three-year notes at a record spread of 122.5 basis points on Aug. 13."
The crisis of confidence prompted Paulson to draw up a rescue plan last month giving him authority to inject unlimited amounts of capital into the companies.
"Fannie and Freddie rose in Europe, extending yesterday's New York gains. Fannie climbed 7 cents, or 1.2 percent, to $5.69 by 10:41 a.m. in Frankfurt, while Freddie added 19 cents, or 4.8 percent, to $4.16."
"The mortgage companies led advances in the Standard & Poor's 500 Index yesterday as analysts said they have enough capital to last the year, with Fannie jumping 8.3 percent and Freddie surging 21 percent."
"While the difference between Fannie and Freddie's cost to borrow and the returns they get on new investments has widened, losses are depleting capital and causing the companies to rein in their purchases of securities."
"Both said they plan to limit growth to preserve capital, after boosting holdings by $115 billion in the first seven months of this year. Their reluctance to purchase is contributing to higher yields on mortgage assets."
"Fewer purchases by Fannie and Freddie means the companies' debt costs are having little influence on mortgage bond prices and home-loan rates, according to some analysts. Yields in the $4.5 trillion market for agency mortgage bonds, those issued by Fannie, Freddie and Ginnie Mae, guide rates on new home loans."
`Make a Difference'
"``It would make a difference if they were increasing their portfolios,'' said UBS AG mortgage analyst Laurie Goodman in New York, whose team was ranked No. 1 in a 2007 poll by Institutional Investor magazine for ``pass-through'' agency mortgage bonds."
"Fannie and Freddie's holdings are shrinking at a monthly rate of about $20 billion because of refinancings, home sales and borrower defaults, according to an Aug. 21 report from New York-based Citigroup analysts Scott Peng, Brad Henis, and Brett Rose. That money can be reinvested into higher yielding securities."
"That is one reason ``there is no pressing need'' for a bailout, they wrote in the report, titled ``All That Sound and Fury, Signifying Nothing New.''"
"The companies are also boosting fees to guarantee home-loan securities, off-balance-sheet obligations for which they don't need to borrow. Fannie plans on Oct. 1 it will double to 50 basis points an upfront ``adverse market delivery charge,'' introduced this year for every mortgage the company buys or guarantees."
To contact the reporter on this story: Jody Shenn in New York at email@example.com.
"Last Updated: August 27, 2008 04:49 EDT"
"Asia Currency Weakness Has Just Started, Morgan Stanley Says "
By Patricia Lui
"Aug. 27 (Bloomberg) -- Slides in Asian currencies will gather pace as demand cools in the world's biggest economies and investors shift funds out of the region into dollars, according to Morgan Stanley."
"All of Asia's 10 most-active currencies excluding the yen have weakened against the U.S. currency in the past month amid concern a deepening global economic slump will hurt exports from the region. Hong Kong's economy shrank in the second quarter for the first time in five years, while Singapore's contracted at the fastest pace of the period, official figures show. Taiwan's export orders grew last month at the slowest pace in that time."
"``Asian assets, including currencies, will take a major hit in the period ahead as the world downshifts,'' Stephen Jen, the London-based head of currency research at Morgan Stanley, wrote in a note yesterday. ``The most vulnerable markets are in Asia ex-Japan, partly because of how Asian economies behave when OECD countries slow, and partly because investor sentiment is still too bullish and sanguine.''"
"The Korean won and the Indian rupee may post the biggest declines, he said, noting a ``mental target'' of 47 to 48 for the Indian currency, a slide of about 8 percent from current levels against the dollar. He didn't give a timeframe."
"The won has tumbled 7 percent to 1,084.10 per dollar in the past month, the worst performance in the region, while the rupee is 3.4 percent lower at 43.8325, according to data compiled by Bloomberg."
"There are more investors who are upbeat on Asia than the reverse, even as recent data shows signs of slowing growth in the region, Jen wrote."
"``This is a bad sign as it tells me dollar-Asians have a long way to go particularly from equity investors who have, over the years, accumulated pretty sizable exposures to the Asia-ex- Japan equity markets,'' the note read."
"The region's currencies are also likely to weaken as Asian central banks ease monetary policies to favor growth as the global economic slowdown helps check inflation, Jen said. Malaysia's central bank this week kept its benchmark interest rate at 3.5 percent for a 19th straight meeting, after inflation accelerated to a 26-year high of 8.5 percent in July."
To contact the report on this story: Patricia Lui in Singapore at firstname.lastname@example.org.
"Last Updated: August 27, 2008 04:49 EDT"
ECB's Weber Says Expectations of Rate Cuts `Premature': Video
"Aug. 27 (Bloomberg) -- European Central Bank council member Axel Weber talked with Bloomberg's Andreas Scholz in Frankfurt yesterday about the outlook for German economic growth, the impact of oil prices on inflation and ECB monetary policy. Weber also heads Germany's Bundesbank. (Source: Bloomberg)"
"00:00 Sees ""slower"" German economic growth in 2009"
"01:32 Outlook for inflation, impact of oil prices"
"03:37 European Central Bank rates ""data dependent"""
Running time 05:34
"Last Updated: August 27, 2008 06:26 EDT"
Canadian Dollar Rises the Most in a Week as U.S. Dollar Drops
By Chris Fournier
Aug. 27 (Bloomberg) -- Canada's dollar climbed the most in almost a week as its U.S. counterpart fell against all of the world's major currencies.
"The Canadian dollar appreciated 0.4 percent to C$1.0439 per U.S. dollar at 8:11 a.m. in Toronto, from C$1.0485 yesterday. The currency gained 1.6 percent on Aug. 21. One Canadian dollar buys 95.79 U.S. cents."
"``This is more just a big dollar sell-off,'' said Jonathan Gencher, director of currency sales in Toronto at BMO Capital Markets. ``Canada is just being tagged along.''"
"The currency 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."
To contact the reporter on this story: Chris Fournier in Montreal at email@example.com
"Last Updated: August 27, 2008 08:14 EDT"
"Corn, Soybeans Advance as Dollar's Gain Stalls, Crude Oil Rises "
By Jae Hur
Aug. 27 (Bloomberg) -- Corn and soybeans rallied as a drop in the dollar boosted the appeal of U.S. supplies for overseas importers and rising energy costs increased demand prospects for biofuel. Wheat gained for the first time in four days.
"Futures rose as the dollar declined against the euro after rising as much as 1.2 percent yesterday to $1.4571, the strongest since Feb. 14. A stronger U.S. currency erodes the purchasing power of overseas buyers. Crude oil climbed as much as 1.4 percent after rising 1 percent yesterday."
"``The halt of the dollar's advance and rising crude oil prices helped grains and other commodities rebound,'' Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank, said today from Seoul. ``For corn, it's also a technical correction after declining in the past three days.''"
"Corn for December delivery advanced as much as 10.5 cents, or 1.8 percent, to $6.045 a bushel in after-hours electronic trading on the Chicago Board of Trade and traded at $5.9925 as of midday in London. The price has risen 70 percent in the past 12 months, reaching a record $7.9925 on June 27."
"Soybeans for November delivery added as much as 23.75 cents, or 1.8 percent, to $13.6825 a bushel and was at $13.63 as of midday in London. Futures have gained 59 percent in a year, reaching a record $16.3675 on July 3."
"Production of soybeans in Argentina and Brazil, which account for more than half the world's output of the oilseed, may be hurt this year by dry weather and a campaign to end farming on deforested Amazon land, said Thomas Mielke, an analyst at Oil World, a Hamburg-based forecaster."
"Parts of Argentina are facing the worst drought in 40 years, Mielke said yesterday. Planting in Brazil may be little changed as the government cuts aid to farmers who can't prove that their land was obtained legally."
"Reduced output in South America combined with a dry spell that is threatening crops in the U.S., the world's largest soybean grower, could drive global prices of the oilseed higher, said Mielke."
"In China, soybeans for January delivery on the Dalian Commodity Exchange rose as much as 2.9 percent on concern that dry weather in the biggest soybean-producing area may have damaged crops, reducing the harvest starting next month."
"Northeastern Heilongjiang got 45 percent less rain than average between Aug. 1 and Aug. 24, the China National Grain and Oils Information Center said. It's unclear if forecast rains in parts of the region today and tomorrow would offer relief, the center said. China is the world's top importer of the oilseed."
"Wheat for December delivery rose 2.25 cents, or 0.3 percent, to $8.5675 a bushel as of midday in London after trading between $8.52 and $8.65. The contract has gained 19 percent in a year, reaching a record $13.495 on Feb. 27."
"Farmers in Argentina, the fourth-largest wheat exporter last year, may harvest 20 percent less wheat this year because of drought and a conflict over taxes, the Buenos Aires Cereals Exchange said."
"The crop may total 12.5 million metric tons, down from 15.6 million tons a year earlier, Eduardo Anchubidart, head of the exchange's forecasting department, said yesterday. The crop is harvested starting in December."
To contact the reporter on this story: Jae Hur in Singapore at firstname.lastname@example.org
"Last Updated: August 27, 2008 07:17 EDT"
German August Inflation Probably Slowed More Than Expected
By Simone Meier and Gabi Thesing
"Aug. 27 (Bloomberg) -- Inflation in Germany, Europe's largest economy, probably slowed more than economists expected after oil prices retreated from a record, data from six states shows."
"Inflation in Baden-Wuerttemberg eased to 3.2 percent in August from 3.3 percent, the statistics office in Stuttgart said. In the month, prices fell 0.3 percent. Prices in North Rhine- Westphalia Brandenburg, Hessen, Bavaria and Saxony also declined from July. Economists expect German inflation to slow to 3.4 percent from 3.5 percent under a harmonized European Union method, the median of 23 forecasts in a Bloomberg News survey shows."
"A 21 percent decline in the price of oil from a July record has eased pressure on companies to pass on higher costs and left consumers with more money to spend. Still, the European Central Bank earlier this month kept its benchmark interest rate at 4.25 percent and President Jean-Claude Trichet said inflation will moderate ``only gradually'' next year."
"Lower oil prices may have even pushed the inflation rate to about 3.3 percent, according to Nick Kounis, an economist at Fortis Bank in Amsterdam. At the same time ``this will not provide any sort of relief to the ECB,'' he said. ``Core inflation has actually risen, providing some further signs of the second round effects that the ECB continues to worry about.''"
"Excluding energy, consumer prices were unchanged in Bavaria while they increased in the five other states."
"In the economy of the 15 euro nations, inflation probably held at 4 percent, twice the ECB's limit, a Bloomberg survey shows. The European Union's statistics office in Luxembourg will release an initial estimate on Aug. 29."
"The ECB this month kept its key rate at a seven-year high to fight so-called second-round effects, or consumers and companies seeking compensation for higher costs by pushing up salaries and prices. The Frankfurt-based bank aims to keep inflation just below 2 percent."
"``I don't expect inflation to come down necessarily just with weaker growth,'' ECB council member Weber said in an interview with Bloomberg published today. ``Inflation is still the number one worry for central bankers in the euro region.''"
The ECB will publish its latest projections on growth and inflation on Sept. 4.
"Crude oil prices are still up 57 percent from a year earlier, sapping the spending power of companies and consumers. The euro's 6.9 percent gain against the dollar over the same period has helped soften the impact of surging energy costs by making imports more affordable."
"With the economy cooling, companies may find it more difficult to pass on higher costs. German business confidence declined to a three-year low in August. Consumer optimism slumped to the lowest level in five years, Nuremberg-based GfK AG market research company said yesterday."
The Federal Statistics Office in Wiesbaden is scheduled to report pan-German inflation figures for August later today.
Saxony -0.4% (0.6%) 3.3% (3.6%)
Hesse -0.4% (0.5%) 3.4% (3.7%)
Bavaria -0.3% (0.6%) 3.1% (3.3%)
Brandenburg -0.3% (0.5%) 3.1% (3.2%)
North Rhine-Westphalia -0.4% (0.6%) 2.9% (3.3%)
Baden-Wuerttemberg -0.3% (0.6%) 3.2% (3.3%)
To contact the reporter on this story: Simone Meier in Frankfurt at email@example.com; Gabi Thesing in Frankfurt at firstname.lastname@example.org.
"Last Updated: August 27, 2008 06:32 EDT"
"French Stocks Fall; Bourbon, CNP Assurances, Natixis Drop "
By Sarah Jones
"Aug. 27 (Bloomberg) -- France's CAC 40 Index slipped 38.86, or 0.9 percent, to 4,329.69 at 1:25 p.m. in Paris, as all but five stocks fell. The SBF 120 Index shed 0.8 percent."
The following shares climbed or fell in the local market. Stock symbols are in parentheses.
"Air-France KLM Group (AF FP) lost 43 cents, or 2.6 percent, to 15.97 euros. Europe's largest airline fell with carmakers including Renault SA (RNO FP) after crude oil climbed for a third day. Renault shares dropped 1.37 euros, or 2.4 percent, to 56.34."
"Alcatel-Lucent SA, (ALU FP) rallied for a second day, rising 15 cents, or 3.7 percent, to 4.25 euros on speculation the world's largest supplier of fixed-line phone networks will hire former executive Mike Quigley to head it."
"The nomination committee of the Alcatel-Lucent board wants to name Quigley as chief executive officer, replacing Patricia Russo, according to Le Canard Enchaine, a Paris-based weekly newspaper. Russo and Chairman Serge Tchuruk said last month they're leaving Alcatel-Lucent."
"Bourbon SA (GBB FP) lost 1.15 euros, or 3 percent, to 37, the steepest loss in more than a month. The owner of the world's biggest fleet of supply ships for deep-water oil exploration said first-half profit fell 21 percent to 78.2 million euros. The results reflected a gain in the year-ago period from the sale of a sugar business in Vietnam."
"Without the gain, earnings were unchanged despite a weaker dollar."
"CNP Assurances SA (CNP FP) declined for the first day in four. The shares fell 2.02 euros, or 2.5 percent, to 78.96 after France's biggest life insurer said first-half profit rose 1.1 percent to 574 million euros as the company took back reserves to offset the impact of slumping stock markets."
"Effiage SA (FGR FP) gained 1.43 euros, or 3.2 percent, to 46.46. Credit Suisse Group rated France's third-largest construction company ``outperform'' in new coverage"
"Havas SA (HAV FP) jumped 11 cents, or 4.4 percent, to 2.59 euros after Goldman Sachs Group Inc. upgraded its recommendation for the owner of the Euro RSCG Worldwide advertising agency to ``buy'' from ``neutral.''"
"Natixis SA (KN FP) sank 31 cents, or 5.2 percent, 5.67 euros, a one-week low. The bank may offer new shares at a discount of between 30 percent and 40 percent in its 3.7 billion-euro rights offer, La Tribune reported, citing an unidentified person."
"Scor SE (SCR FP) gained 30 cents, or 1.9 percent, to 15.82 euros, the highest in almost two weeks. France's biggest reinsurer reported second-quarter profit fell 2.9 percent, less than analysts estimated, to 102 million euros as a tax gain offset most of the costs related to the acquisition of Switzerland's Converium Holding AG."
To contact the reporter on this story: Sarah Jones in London at email@example.com.
"Last Updated: August 27, 2008 07:31 EDT"
Vietnam Cuts Fuel Prices to Ease Inflation From 28.3% (Update3)
By Nguyen Kieu Giang
Aug. 27 (Bloomberg) -- Vietnam lowered gasoline prices for a second time this month to ease Asia's fastest inflation after crude oil declined.
"The Southeast Asian nation cut the price of the most commonly used grade of gasoline to 17,000 dong ($1) a liter from 18,000 dong to ``reduce the cost of production and reflect the price globally,'' Deputy Minister of Finance Tran Xuan Ha said today in Hanoi. The new prices are effective immediately."
"``The move is good as it reflects the recent drop in international prices,'' said Hoang Thach Lan, chief analyst at Ho Chi Minh City-based SME Securities Co. ``It has boosted trading volume in the stock market today.''"
"The reduction may add to investor expectations that Vietnam's inflation is close to peaking at 28.3 percent. The benchmark stock index is poised for the biggest monthly gain since January 2007, recouping more than a third of its losses this year."
"The VN Index gained 0.03 percent to close at 561.85, the highest since March 20. Trading volume was 31 million shares, compared with 18 million yesterday, according to the exchange."
"The measure has gained more than 24 percent this month, the world's best performer, after the government reduced fuel prices and widened the daily trading limit for stocks."
"The government today also lowered kerosene prices to 18,000 dong from 19,000 dong, according to a joint statement by the ministries of finance and trade."
"Crude oil futures have fallen 21 percent from a record $147.27 a barrel on July 11. Contracts for October delivery rose as much as 1.58 cents, or 1.4 percent, to $117.85 a barrel on the New York Mercantile Exchange today."
"``If the international price falls below $100 per barrel, we will further reduce the domestic price,'' Ha said. Should oil decline below $110, Vietnam will introduce a 5 percent fuel import tax to cover losses for diesel companies, he said."
"Inflation quickened this month after the government in July raised fuel costs by about a third, a record amount. Even taking into account the first reduction on Aug. 14, prices of 92-RON gasoline are still about 17 percent higher."
"Gains in consumer prices accelerated from 27 percent in July. Prices in the category including transport led the index higher, rising 9.1 percent month-on-month after gains of 0.6 percent in July. From a year earlier, transport costs were up 25.6 percent, compared with 15.3 percent last month."
"Inflation may peak next month at about 29 percent and lose pace in coming months as the economy slows, JPMorgan Chase & Co. said after the figures were released. Gains in consumer prices will probably reach their height at 28.4 percent next month, according to HSBC Holdings Plc."
To contact the reporter on this story: Nguyen Kieu Giang in Hanoi at firstname.lastname@example.org
"Last Updated: August 27, 2008 06:24 EDT"
U.S. Stocks Advance as Durable Goods Orders Top Forecasts
By Eric Martin
Aug. 27 (Bloomberg) -- U.S. stocks rose for a second day after orders for durable goods unexpectedly advanced in July and a jump in oil prices boosted energy shares.
"Alcoa Inc. and AT&T Inc. each climbed about 1 percent after the Commerce Department report bolstered expectations that the economy is recovering. Fannie Mae and Freddie Mac rallied more than 9 percent on a Citigroup analyst's report that new investments will boost profits, while Chevron Corp. and Exxon Mobil Corp. each climbed at least 0.8 percent as oil advanced for a third day."
"``As long as businesses are optimistic, we have a good chance of pulling out of this weak period in the economy in fairly short order,'' said Peter Jankovskis, who helps manage $1.5 billion at OakBrook Investments in Lisle, Illinois. The durable goods data ``was a very strong report, and the market has acted appropriately.''"
"Thee Standard & Poor's 500 Index added 2.3 points, or 0.2 percent, to 1,273.81 at 9:48 a.m. in New York. The Dow Jones Industrial Average climbed 2.2 to 11,415.07. The Nasdaq Composite Index rose 2.44 to 2,364.41."
"The 1.3 percent gain in durable goods orders defied economist forecasts for an unchanged reading in July. Stock futures fell before the Commerce Department report as a third day of gains in oil spurred concern that a rebound in crude from a more than 20 percent tumble will threaten profits at consumer, transportation and technology companies."
"Fannie Mae added 55 cents to $6.17, while Freddie Mac gained 56 cents to $4.54. The mortgage-finance companies may get the biggest profits on new investments since at least 1998. The current-coupon mortgage bonds Fannie and Freddie buy yield about 40 basis points, or 0.40 percentage point, more than what they pay to borrow by selling benchmark bonds, Citigroup said. The difference exceeded 20 basis points only twice in the 10 years through 2007 -- in 1998 and 2003."
"Merrill Lynch & Co. gained 40 cents to $24.50. Temasek Holdings Pte, Singapore's $130 billion sovereign wealth fund, said it has ``great confidence'' in Merrill's Chief Executive Officer John Thain and plans to raise its stake."
"Temasek, the U.S. bank's biggest shareholder, received U.S. antitrust approval yesterday to raise its stake to between 13 percent and 14 percent."
"Goldman Sachs Group Inc. dropped $1.91, or 1.2 percent, to $154. Morgan Stanley analyst Patrick Pinschmidt cut his estimate for Goldman's third-quarter earnings to $1.65 a share from his earlier $3 estimate. The New York-based bank may mark down so- called principal investments by $525 million, he said in a note to clients."
"Exxon rose 49 cents to $80.44, while Chevron climbed 74 cents to $86.53. Crude oil rose for a third day on forecasts Tropical Storm Gustav will strengthen as it enters the Gulf of Mexico, home to 26 percent of U.S. production."
"Amylin Pharmaceuticals Inc. lost $3.59, or 13 percent, to $23.65 after four more patients taking the diabetes drug Byetta died from pancreatitis. Byetta, available in the U.S. since June 2005, is Amylin's leading product, with global sales that rose 25 percent in the second quarter to $194.7 million from a year earlier."
"No definite relationship between Byetta and the additional deaths has been proved, and the Food and Drug Administration was aware of them when it made its announcement last week, Amylin Chief Executive Officer Dan Bradbury said by telephone yesterday."
"Motorola Inc., the largest U.S. mobile-phone maker, slipped 15 cents to $9.41 after Gartner Inc. said the company's share of the market declined to 10 percent from 14.5 percent in the second quarter."
The S&P 500 is little changed in August after falling in June and July. The benchmark index for U.S. equities has posted only two monthly gains since reaching a record in October and is down more than 13 percent this year.
"The S&P 500 Consumer Discretionary Index, which includes retailers and hotel and restaurant chains, has rallied 5.3 percent this month for the best gain among 10 industries as of the close of trading yesterday."
"The group was helped by a 21 percent retreat in oil prices from a July record. Limited Brands Inc., owner of the Victoria's Secret lingerie chain, has led the advance with a 23 percent gain after posting profit that topped analysts' estimates and predicting full-year earnings will exceed its earlier projections."
"An index of technology shares in the S&P 500 has had the second-best return in August with a 2.9 percent gain, led by a 41 percent jump in Advanced Micro Devices Inc."
Banks' August Slump
"Banks, brokerages and insurers have fared the worst in August, with the S&P 500 Financials Index down 6.6 on concern that a government bailout of Fannie Mae and Freddie Mac will wipe out shareholders. The two largest U.S. mortgage-finance companies fell more than 50 percent each in August through yesterday."
"The U.S. Federal Deposit Insurance Corp., which provides cover for the nation's bank deposits, may have to tap Treasury Department funds to carry it through an anticipated wave of bank failures, the Wall Street Journal reported, citing chairman Sheila Bair. Bair told the Journal the borrowing wouldn't be to cover any FDIC losses, instead it would provide short-term liquidity to cover bank failures."
"The FDIC said yesterday its ``problem list'' of banks increased 30 percent in the second quarter to 117 banks, the highest total in five years, as more commercial real-estate loans were overdue."
"U.S. stocks advanced yesterday, rebounding from the biggest drop in a month, as higher oil prices boosted energy shares and analysts said Fannie Mae and Freddie Mac have enough capital to last the year."
For Related News:
To contact the reporter on this story: Eric Martin in New York at email@example.com.
"Last Updated: August 27, 2008 09:40 EDT"
"Asian Currencies Gain, Led by Korean Won, on Intervention Sign "
By Aaron Pan and Kim Kyoungwha
"Aug. 27 (Bloomberg) -- Asian currencies rose, led by South Korea's won, after a finance ministry official said the government will act to stem a decline. The Philippine peso climbed before a central bank meeting tomorrow."
"Policy makers in Korea, concerned that a falling currency will raise the cost of imports, have spent billions of dollars in reserves to stem the won's loss. All the 10-most active Asian currencies advanced today as the dollar weakened. Malaysia's ringgit gained after opposition leader Anwar Ibrahim won a seat in parliament after a local by-election."
"``Caution in Korea set in after the verbal intervention,'' said Chu In Young, a currency dealer with state-run Korea Development Bank in Seoul. ``Sales from offshore players who have heavily built up dollar positions were notable.''"
"The won rose 0.5 percent to 1,084 against the dollar as of the 3 p.m. local close in Seoul, according to Seoul Money Brokerage Services Ltd. The ringgit climbed 0.2 percent to 3.3845 and the peso gained 0.6 percent to 45.725."
The Korean won is the worst performing regional currency this year and in August. Central banks intervene by selling or buying foreign exchange.
"Korea's ``government cannot but worry about the recent won decline,'' Choi Jong Ku, director general of the ministry's international finance bureau, said at a briefing in Gwacheon today. ``We will continue to closely monitor the market status and take measures when needed.''"
The Philippine peso snapped a two-day loss as economists predict policy makers will increase the benchmark interest rate to a one-year high.
"The central bank will raise borrowing costs by at least 0.25 percentage point to 6 percent, according to all 15 economists surveyed by Bloomberg News. Governor Amando Tetangco said Aug. 5 that the bank will maintain a ``tight'' monetary policy after a report showed inflation accelerated to a 16-year high of 12.2 percent."
"Traders are ``lightening up their long-dollar positions ahead of the meeting,'' said Paul Joseph Garcia, chief investment officer at the Manila unit of ING Investment Management Ltd. who oversees $1.5 billion in funds. ``Everyone was caught long last time'' when the central bank unexpectedly raised its benchmark interest rate by 50 basis points last month."
An investor who is long purchases a currency seeking to benefit from its rise.
"The peso will likely trade between 45.60 and 46 for the remainder of the month, Garcia said."
"Singapore Dollar, UBS"
"Elsewhere, Indonesia's rupiah added 0.2 percent to 9,167 and Thailand's baht gained 0.5 percent to 34.07 after the central bank raised interest rates to 3.75 percent from 3.5 percent. Singapore's currency advanced 0.5 percent to S$1.4181 per U.S. dollar, according to data compiled by Bloomberg."
"Singapore's dollar will rise 1.2 percent in three months to reach S$1.40 as persistent inflation prevents the central bank from stalling the currency's appreciation, UBS AG said."
"Singapore's inflation slowed in July by less than economists had estimated, after holding at 26-year highs in each of the three previous months. The trade ministry urged policy makers to maintain vigilance on inflation while ensuring the currency doesn't hurt exports by appreciating too sharply."
"``It remains too early for the central bank to contemplate a move to a neutral bias, much less an outright easing by shifting the policy band lower, although we do not rule out a more gradual appreciation at the October meeting,'' New York-based analyst Benedikt Germanier wrote in a research note yesterday."
Malaysia's ringgit rose on speculation the currency's slump to a nine-month low this week was excessive as investor concern surrounding the by-election receded.
"The ringgit snapped a two-day loss as Anwar yesterday regained a seat in parliament after a 10-year hiatus, boosting his chances of ousting Prime Minister Abdullah Ahmad Badawi."
"``People are selling back dollars,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``The way I see it, people are discounting the short-term risk premium now that the by-election is out of the way.''"
"Taiwan's dollar traded near a six-month low after reports yesterday showed business confidence in Germany, Europe's biggest economy, dropped to a three-year low and mortgage approvals in the U.K. held close to the lowest in 11 years."
Taiwan this week reported the slowest growth in export orders in five years and overseas investors were net sellers of the island's stocks on nine of the last 10 trading days.
"``Emerging markets are now the underdogs,'' said Dong Tao, chief Asia economist at Credit Suisse Group AG in Hong Kong. ``Export demand is slowing down, especially for Asian countries such as Taiwan.''"
"The currency was little changed at NT$31.481 against the dollar, according to Taipei Forex Inc. It yesterday touched NT$31.571, the weakest since Feb. 21."
To contact the reporters on this story: Aaron Pan in Hong Kong at firstname.lastname@example.org; Kim Kyoungwha in Beijing at email@example.com.
"Last Updated: August 27, 2008 04:36 EDT"
"German Stocks Retreat as Oil Gains; Daimler, Lufthansa Drop "
By Stefanie Haxel
"Aug. 27 (Bloomberg) -- German stocks declined as oil advanced for a third day, damping the earnings outlook for automakers and airlines."
"Daimler AG, the world's second-largest maker of luxury cars, and Deutsche Lufthansa AG led a retreat among shares sensitive to swings in crude prices. Meteorologists forecast that Tropical Storm Gustav will enter the Gulf of Mexico, home to more than a fifth of U.S. oil production. TUI AG fell 1.6 percent after CA Cheuvreux cut its share-price estimate for Europe's biggest travel company."
"The DAX Index slipped 25.66, or 0.4 percent, to 6,314.86 as of 2:53 p.m. in Frankfurt. DAX futures expiring in September lost 0.7 percent. The HDAX Index of the country's 110 biggest companies retreated 0.3 percent."
"``Storm Gustav is certainly a factor weighing on the market today, however, the trading volume is still very low therefore volatility is still very high,'' Oliver Opgen-Rhein, a trader at HSBC Trinkaus & Burkhardt in Dusseldorf, said in a Bloomberg Television interview."
"Germany's benchmark index for equities has swung between gains and losses in the past week, falling three times in five days. Stock prices may drop further, according to options traders on the Eurex derivatives exchange. The VDAX-New Index, which measures the cost of insuring against declines in Germany's benchmark index for equities, added 2.6 percent to 22.28."
"Stocks recouped some losses after a report showed orders for U.S. durable goods unexpectedly increased in July, indicating growing demand from abroad is still helping companies weather a slump in consumer spending."
"Hurricane, Gulf Platforms"
"The DAX Index is down 22 percent this year on concern high oil prices, accelerating inflation and more than $500 billion in credit-related losses worldwide will slow global economic growth."
"Daimler dropped 57 cents, or 1.4 percent, to 40.14 euros. Lufthansa, Europe's second-largest airline, sank 17 cents, or 1.2 percent, to 14.37 euros. Henkel AG & Co. KGaA, the producer of Loctite glue and Persil detergent, lost 60 cents, or 2.4 percent, to 24.14 euros."
"Crude oil climbed for a third day in New York, trading above $118 a barrel. Gustav is expected to increase back to a hurricane before reaching the Gulf platforms. Jet-fuel prices in northwest Europe have risen 26 percent this year, Bloomberg data shows."
"TUI declined 21 cents, or 1.6 percent, to 13.37 euros. Cheuvreux cut its price projection 19 percent to 12.50 euros. The market for Singapore's Neptune Orient Lines Ltd., which is considering a bid for TUI's Hapag-Lloyd shipping unit, is deteriorating, Frankfurt-based analyst Juergen Kolb wrote in a report today."
"Declining container volume on North American routes and falling freight rates on Asian routes are ``in any case no good news,'' he added. Kolb rates TUI shares ``underperform.''"
The following stocks also rose or fell in German markets. Symbols are in parentheses.
"Deutsche Forfait AG (DE6 GY) increased 20 cents, or 3.2 percent, to 6.50 euros, the steepest gain in almost two weeks. The financial services company said first-half net income climbed 46 percent to 3.2 million euros ($4.7 million)."
"GfK AG (GFK GY) rallied 1.03 euros, or 4.4 percent, to 24.25, the biggest advance in more than three weeks. Germany's largest market researcher will pursue alternatives to a takeover offer for Taylor Nelson Sofres Plc, Chief Executive Officer Klaus Wuebbenhorst said."
"``We didn't want TNS at any price,'' Wuebbenhorst said in a telephone interview today. ``There are alternatives and we will pursue them, acquiring in markets we consider interesting for an expansion.''"
"Heidelberger Druckmaschinen AG (HDD GY) dropped 20 cents, or 1.5 percent, to 13.57 euros, the lowest in almost a week. Kepler Equities cut its recommendation for the world's largest printing- press maker to ``reduce'' from ``buy.''"
"ProSiebenSat.1 Media AG (PSM GY) rallied 45 cents, or 7 percent, to 6.76 euros, the highest in more than a week. Goldman Sachs Group Inc. upgraded shares of the country's biggest private broadcaster to ``buy'' from ``neutral.''"
"Rhoen-Klinikum AG (RHK GY) fell 48 cents, or 2.1 percent, to 22.16 euros, the steepest decline in more than four weeks. Piper Jaffray Cos. reduced its recommendation for the country's biggest publicly traded hospital operator to ``sell'' from ``neutral.''"
To contact the reporters on this story: Stefanie Haxel in Frankfurt at firstname.lastname@example.org.
"Last Updated: August 27, 2008 09:11 EDT"
Sberbank Falls on Concern Over Losses on Government Ruble Bonds
By William Mauldin and Denis Maternovsky
"Aug. 27 (Bloomberg) -- OAO Sberbank, Russia's biggest bank, fell to the lowest in almost two years on concern losses in the value of its government ruble-denominated bonds may erode capital."
"The bank holds $10 billion in ruble-denominated Russian government bonds, according to Natalia Orlova, banking analyst at Moscow-based Alfa Bank. The yield on Russia's benchmark 30-year 6.9 percent ruble bond has jumped 106 basis points to 8.81 percent since Aug. 7. Bond yields move inversely to prices."
"``If they decide to sell a portion of their portfolio, these losses will become material,'' Orlova said by telephone. ``This is a problem for the bank's liquidity.''"
"Sberbank fell for a third day, sinking 1.91 rubles or 3.4 percent, to 54.10 rubles, the lowest since September 2006. The shares dropped 6.4 percent yesterday and 4.9 percent on Aug. 25."
To contact the reporter on this story: William Mauldin in Moscow at email@example.com; Denis Maternovsky in Moscow at firstname.lastname@example.org
"Last Updated: August 27, 2008 05:57 EDT"
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