U.S. Consumer Spending Probably Slowed in July as Rebates Faded
By Shobhana Chandra
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"Aug. 29 (Bloomberg) -- Consumer spending in the U.S. probably slowed in July as the impact of the tax rebates faded, economists said ahead of a report today."
"The 0.2 percent increase in purchases would follow a 0.6 percent rise in June, according to the median forecast of 75 economists surveyed by Bloomberg News. Another report may show consumer confidence improved this month as gasoline prices fell."
"Americans, faced with rising unemployment, the largest increase in prices in 17 years and falling home values, are cutting back on big-ticket items like automobiles and furniture. The federal tax rebates, the bulk of which have already gone out, will no longer keep the biggest part of the economy going."
"``Consumers hit a wall in July,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``The rebate boost is fading fast. The road ahead will be extremely bumpy.''"
The Commerce Department's report is due at 8:30 a.m. in Washington. Spending estimates in the Bloomberg survey ranged from a gain of 0.8 percent to a drop of 0.1 percent.
"The survey also projects incomes fell 0.2 percent in July, the first drop since August 2005, reflecting the diminishing impact of the rebates."
"At 10 a.m., a report from Reuters/University of Michigan may show the consumer sentiment index rose to 62 in August, compared with 61.2 last month, according to the survey median."
More Inflation
"The income and spending report is also likely to show inflation is eroding American's purchasing power. The price gauge tied to spending patterns probably rose 4.5 percent in the year ended July, the biggest 12-month gain since 1991, according to the survey median."
"The measure that excludes food and energy costs, the one tracked by the Federal Reserve, probably rose 2.4 percent from a year earlier, the most since February 2007, the survey showed."
Concern over both slower growth and rising prices led Fed policy makers to hold the benchmark interest rate at 2 percent this month.
"Rising unemployment, falling stock and house prices and stricter lending rules ``were viewed as pointing towards weak growth in personal consumption expenditures during the second half of 2008,'' minutes of the Fed's Aug. 5 meeting released this week showed."
"Purchases of big-ticket items are weakening. Sales of autos and light trucks plunged in July to a 12.5 million annual pace, the lowest since 1993, according to Bloomberg calculations based on industry data."
Housing Slump
"The real-estate slump in also hurting purchases of household goods. Williams-Sonoma Inc., the biggest U.S. gourmet- cookware chain, said yesterday that second-quarter earnings dropped 29 percent and reduced its annual sales forecast."
"Weakening trends continued through August and are worst in cities most affected by the housing slump, Chief Executive Officer Howard Lester said on a conference call. At Pottery Barn and West Elm, for example, purchases have suffered in Southern California, Nevada and south Florida, he said."
"``It is extremely difficult to know how the consumer will respond in the back half of the year,'' Lester said in a statement. ``We are also looking forward to 2009 with a very cautious outlook.''"
"The longest expansion in consumer spending on record will probably end this year, according to economists surveyed by Bloomberg earlier this month. Retail sales fell in July for the first time in five months, led by a slump in auto purchases, according to Commerce data."
Bloomberg Survey
================================================================
Pers Pers PCEU of Mich
Inc Spend Deflator Conf.
MOM% MOM% YOY% Index
================================================================
Date of Release 08/29 08/29 08/29 08/29
Observation Period July July July Aug. F
----------------------------------------------------------------
Median -0.2% 0.2% 4.5% 62.0
Average -0.2% 0.3% 4.4% 62.0
High Forecast 0.6% 0.8% 4.6% 63.7
Low Forecast -1.0% -0.1% 4.0% 60.5
Number of Participants 73 75 16 57
Previous 0.1% 0.6% 4.1% 61.7
----------------------------------------------------------------
4CAST Ltd. -0.2% 0.4% --- 62.5
Action Economics -0.4% 0.2% --- 63.0
AIG Investments -0.5% 0.4% --- 61.0
Aletti Gestielle SGR 0.1% 0.3% 4.5% 62.2
Argus Research Corp. 0.2% 0.5% --- 63.0
Banc of America Securitie 0.0% 0.3% --- ---
Bank of Tokyo- Mitsubishi -0.3% 0.0% --- 63.7
Barclays Capital -0.4% 0.2% 4.5% 62.0
BBVA -0.2% 0.2% --- ---
BMO Capital Markets -0.2% 0.2% --- 62.0
BNP Paribas -0.2% 0.3% --- 62.0
Briefing.com -0.5% 0.3% --- 63.0
Calyon -0.2% 0.2% --- 62.3
CFC Group -0.3% 0.2% 4.5% 62.2
CIBC World Markets -0.4% 0.3% --- ---
Citi -0.4% 0.4% --- 61.7
ClearView Economics 0.2% 0.3% --- ---
Commerzbank AG 0.1% 0.3% --- ---
Credit Suisse -1.0% 0.2% 4.6% 62.0
Daiwa Securities America -0.5% 0.1% --- ---
Danske Bank -0.4% -0.1% 4.4% 62.2
DekaBank -0.1% 0.2% --- 62.0
Desjardins Group -0.3% 0.4% 4.5% 61.7
Deutsche Bank Securities -0.5% 0.2% --- 62.0
Deutsche Postbank AG --- 0.2% --- 62.0
Dresdner Kleinwort --- 0.4% --- 61.7
DZ Bank 0.1% 0.2% --- 61.9
First Trust Advisors 0.2% 0.2% --- 63.0
Fortis --- 0.3% --- ---
FTN Financial -0.2% 0.3% 4.5% 62.0
Global Insight Inc. -0.5% 0.2% --- 62.2
"Goldman, Sachs & Co. -0.3% 0.2% --- ---"
H&R Block Financial Advis 0.0% 0.1% 4.0% 61.5
HBOS Treasury Services 0.0% 0.2% 4.5% 62.0
Helaba 0.0% 0.2% 4.5% 62.0
High Frequency Economics 0.2% 0.2% --- 61.7
Horizon Investments -0.1% 0.2% --- 61.5
HSBC Markets 0.0% 0.4% --- 63.0
IDEAglobal 0.1% 0.3% 4.3% 62.5
Informa Global Markets -0.3% 0.1% --- 61.5
ING Financial Markets 0.1% 0.2% --- 61.0
Insight Economics 0.1% 0.2% --- 62.0
Intesa-SanPaulo 0.0% 0.4% --- 62.5
J.P. Morgan Chase -0.7% --- --- 62.0
Janney Montgomery Scott L 0.0% 0.8% 4.2% ---
Landesbank Berlin -1.0% 0.3% --- 60.5
Landesbank BW 0.1% 0.3% --- 62.0
Lehman Brothers -0.5% 0.3% --- 62.0
Lloyds TSB 0.1% 0.3% --- 62.0
Maria Fiorini Ramirez Inc -0.5% 0.2% --- ---
Merk Investments -0.2% 0.3% --- 61.7
Merrill Lynch 0.6% 0.2% --- 61.9
Moody's Economy.com 0.1% 0.2% --- 63.0
Morgan Keegan & Co. -0.7% 0.2% --- ---
Morgan Stanley & Co. -0.3% 0.3% --- ---
National Bank Financial --- --- --- 62.5
Natixis 0.2% 0.5% 4.4% ---
Newedge 0.1% 0.3% --- 61.8
Nomura Securities Intl. -0.5% 0.4% --- ---
Nord/LB 0.3% 0.3% --- 61.5
PNC Bank -0.3% 0.3% --- ---
RBS Greenwich Capital -0.9% 0.2% --- 62.0
"Ried, Thunberg & Co. --- 0.2% --- ---"
Schneider Trading Associa -0.3% 0.5% 4.6% 62.5
Scotia Capital -0.1% 0.0% 4.4% ---
Societe Generale -0.4% 0.2% --- ---
Stone & McCarthy Research 0.1% 0.4% --- 60.7
TD Securities 0.2% 0.4% --- 61.7
Thomson Financial/IFR 0.2% 0.1% --- 62.0
Tullett Prebon 0.0% 0.3% --- 62.0
UBS Securities LLC -1.0% 0.2% --- 62.0
Unicredit MIB -0.7% --- --- ---
University of Maryland 0.2% 0.4% --- 61.7
Wachovia Corp. 0.4% 0.4% 4.4% ---
Wells Fargo & Co. -0.4% 0.2% --- ---
WestLB AG 0.0% 0.2% --- 62.0
Westpac Banking Co. -0.2% 0.1% --- 62.5
Wrightson Associates -0.5% 0.2% --- 62.0
================================================================
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
"Last Updated: August 29, 2008 00:01 EDT"
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"Australia, New Zealand Dollars Log Monthly Drop on Rate Outlook "
By Aaron Pan and Tracy Withers
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"Aug. 29 (Bloomberg) -- The Australian dollar headed for its biggest monthly loss in 22 years, on speculation the nation's interest-rate advantage over the U.S. will narrow. New Zealand's dollar was poised for a third monthly loss."
"The currencies weakened after a government report showed yesterday the U.S. economy grew faster than economists expected in the second quarter. Australia's dollar, known as the Aussie, is the worst performer of the 16 most-traded currencies in August as traders bet the central bank will lower interest rates next week for the first time in seven years and the yield premium of the nation's bonds shrank."
"``The central bank is on a dovish stance and has left the door open for future rate cuts,'' said Craig Chan, a currency strategist at Lehman Brothers Holdings Inc. in Singapore. ``There's been a shift in expectations and the Aussie dollar is looking very overvalued.''"
"The Australian dollar declined to 86.19 U.S. cents as of 4:50 p.m. in Sydney, compared with 86.65 cents in late Asian trading yesterday and 94.23 cents at the end of July for an 8.7 percent monthly decline, the most since July 1986."
"New Zealand's currency, know as the kiwi, bought 70.31 U.S. cents from 70.49 cents yesterday and 73.43 at the end of July."
`Difficult' Conditions
"The Australian currency fell today after separate reports showed sales of newly built homes declined last month to the lowest since November 2006 and lending to Australian consumers and businesses rose at the slowest annual pace in six years in July, reinforcing the central bank's view that the economy is cooling enough to cut borrowing costs."
Australian Prime Minister Kevin Rudd said today the economy faces ``difficult'' conditions and will pick up in 2009.
"Australia's dollar has tumbled 12 percent since reaching a 25-year high of 98.49 cents on July 16. Policy makers said they may cut rates soon to avoid a ``deeper and more persistent'' economic slowdown, according to minutes of this month's rate meeting released Aug. 19. The currency has also weakened as the prices of commodities the country exports slumped on concern global growth is slowing."
"Australia's benchmark borrowing cost is 7.25 percent, New Zealand's 8 percent while the U.S. Federal Reserve's target is 2 percent. Traders expect the Reserve Bank of Australia to cut rates by a quarter-percentage point on Sept. 2 and lower the benchmark to at least 6.25 percent in the next year, according to Credit Suisse Group indexes based on interest-rate swaps."
"The Reserve Bank of New Zealand, which cut the rate by a quarter-percentage point on July 24, will lower borrowing costs to at least 6.75 percent within a year, a similar index shows."
New Zealand Dollar
"New Zealand's dollar had its longest monthly losing streak in three years after a U.S. government report showed a 3.3 percent annualized increase in gross domestic product from April through June that was higher than previously estimated. New Zealand's $104 billion economy probably contracted in the first two quarters, the Treasury Department said this month."
"Investors also bought U.S. assets after Nationwide Building Society said house prices in Britain fell this month at the fastest annual pace in almost 20 years, and Bank of England policy maker David Blanchflower said U.K. interest rates need to decline to help the economy out of a recession."
"``A rebound in the U.S. dollar amid a mix of strong GDP and dovish comments from the Bank of England, knocked the New Zealand dollar back,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``We can't help but think the U.S. dollar will come off looking the best of a bad bunch.''"
"Australian 10-year government bonds advanced this week, pushing the yield down 3 basis points to 5.76 percent. The price of the 5.25 percent bond maturing in March 2019 gained 0.256, or A$2.56 per A$1,000 face amount, to 96.017. The yield was 6.22 percent at the end of last month."
New Zealand's benchmark 10-year bond yield fell 2 basis points to 5.99 percent. It has fallen 14 basis points this month. A basis point is 0.01 percentage point.
To contact the reporters on this story: Chris Young in Sydney at cyoung12@bloomberg.net; Aaron Pan in Hong Kong at Apan8@bloomberg.net.
"Last Updated: August 29, 2008 03:11 EDT"
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"Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show "
"Aug. 29 (Bloomberg) -- The cost of protecting European corporate bonds from default fell, according to traders of credit-default swaps."
"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings decreased 6 basis points to 544, the lowest in three weeks, according to JPMorgan Chase & Co. prices at 11:20 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and a rise indicates a deterioration in the perception of credit quality; a decline signals the opposite."
"The Markit iTraxx Europe index of 125 companies with investment-grade ratings fell 1.25 basis points to 98.75, JPMorgan prices show."
"A basis point on a credit-default swap contract protecting 10 million euros ($14.7 million) of debt from default for five years is equivalent to 1,000 euros a year."
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements."
"Credit-default swaps on the Markit CDX North America Investment Grade index, a benchmark gauge of credit risk linked to the bonds of 125 companies in the U.S. and Canada, dropped 2.75 basis points to 142, according to CMA Datavision."
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
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"Rupee Set for Monthly Drop as Importers Buy Dollars, Funds Sell "
By Anoop Agrawal
Aug. 29 (Bloomberg) -- India's rupee was set for a monthly loss as importers bought dollars to pay month-end bills.
The currency fell to the lowest level in more than 17 months this week on concern slowing growth and inflation near a 16-year high may prompt overseas investors to dump more local shares. A government report today may show Asia's third-biggest economy expanded at the slowest pace in almost three years in the second quarter.
"``Sentiment is not supportive of buying the local currency because of widespread dollar demand,'' said Shashi Ranjan Giri, a trader with state-owned Allahabad Bank in Mumbai. ``The equity market trend is suggesting we may see some more stock sales by overseas investors.''"
"The rupee weakened 2.8 percent this month to 43.755 against the dollar as of 9:25 a.m. in Mumbai, according to data compiled by Bloomberg. It was little changed today."
"The economy expanded 8 percent in the quarter ended June 30, the slowest since September 2005, according to the median forecast of economists in a Bloomberg survey. The report is due at noon in New Delhi."
"The government yesterday said wholesale prices jumped 12.4 percent in the week ended Aug. 16 from a year earlier, after increasing 12.63 percent in the previous week, which was the biggest gain since June 1992."
"India's average oil import costs increased to $8 billion a month this year, from $5.5 billion in 2007, trade ministry data show."
Overseas investors sold $7.2 billion more local shares than they bought this year as the benchmark stock index slumped 31 percent. They were net sellers of local stocks on all but five of the 16 trading days this month.
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
"Last Updated: August 29, 2008 00:27 EDT"
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"Japan Inflation Accelerates, Households Cut Spending (Update1) "
By Mayumi Otsuma
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"Aug. 29 (Bloomberg) -- Japan's inflation rate exceeded 2 percent for the first time in a decade as prices of food and gasoline surged, sapping household budgets in an economy that may already be in a recession."
"Core prices, which exclude fresh food, climbed 2.4 percent in July from a year earlier after rising 1.9 percent in June, the statistics bureau said today in Tokyo. Household spending fell 0.5 percent from a year earlier, a fifth monthly decline."
"The government announced it will spend 2 trillion yen ($18 billion) to help businesses and individuals cope with rising energy and material costs. Prices of daily necessities such as noodles, milk and gasoline are rising faster than wages, making it unlikely consumers at home will revive growth as the global slowdown reduces demand for Japanese goods abroad."
"``Price increases without wage growth have devastated confidence of Japanese consumers and it's hard to anticipate consumption picking up anytime soon,'' said Hiroshi Shiraishi, an economist at Lehman Brothers Inc. in Tokyo. ``The government's package is unlikely to provide much of a boost to the economy.''"
"The ratio of jobs available to applicants slid for a sixth month to 0.89, the lowest since October 2004, the Labor Ministry said. The jobless rate fell to 4 percent from 4.1 percent."
"Industrial production unexpectedly rose 0.9 percent from June, when it fell 2.2 percent, the trade ministry said. The increase wasn't enough to revise the government's assessment that output is weakening as export growth slows."
Bonds Rise
"Government bonds rose, capping a third month of gains, on signs growth in the world's second-largest economy is slowing. The yield on the 10-year bond fell 1.5 basis point to 1.405 percent at the close today."
"July's increase in core prices was the steepest since October 2007, when they were boosted by a sales tax increase. Excluding the tax, prices last climbed that much 16 years ago."
"The gains are unlikely to prompt the Bank of Japan to raise interest rates anytime soon because the economy is weakening and Governor Masaaki Shirakawa expects inflation will moderate as commodity costs ease. There are few signs inflation is spreading from food and fuel products because wage growth is weak, Shirakawa, 58, said this week."
"``The Bank of Japan places more focus on economic growth than inflation now,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. ``The central bank will probably hold off raising rates until the third quarter of next year.''"
Hitting Consumers
"Economic and Fiscal Policy Minister Kaoru Yosano said faster inflation is ``directly hitting consumers'' and wages need to increase for spending to pick up. Prices of goods purchased at least 15 times a year climbed 3.6 percent in July, today's report showed. Wages rose 0.4 percent in June."
"Households' inflation expectations are rising. Consumers expect prices to be 9 percent higher by June 2009, according to a central bank survey released last month."
"Today's economic package included reductions in highway tolls, projects to help temporary workers find permanent jobs, and financial support for transport companies. The government also said it plans to cut taxes for low-income earners."
"``Households are tightening their belts as they can't be confident about the outlook for income and employment,'' said Kyohei Morita, chief economist at Barclays Capital in Tokyo. ``The government should encourage spending by consumers and companies to prop up growth, but those sorts of measures are just missing.''"
"Energy, Food"
"Energy-related products accounted for more than half of the increase in core prices, and food goods contributed one-third. Excluding food and energy, prices rose for only the third time since 1998, climbing 0.2 percent from a year earlier after increasing 0.1 percent in June."
"McDonald's Holdings Co. Japan raised the price of a Big Mac this month. Nichirei Corp., a Tokyo-based food maker, plans to increase prices of some frozen foods next month."
"Inflation in Tokyo slowed in August for the first time since prices resumed rising in November. Core prices in the capital, a harbinger of nationwide inflation, advanced 1.5 percent, less than the 1.6 percent increase in July."
"``Japan's inflation may be close to the peak as oil prices are easing and weak consumption is preventing companies from passing on costs as much as they had hoped,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp."
"Bank of Japan policy makers have said they consider core prices to be stable between zero and 2 percent and they focus on inflation trends over the long term. ``Unless core prices breach the range for a year at least, the Bank of Japan will regard any deviations just as temporary,'' Daiwa SMBC's Iwashita said."
"The central bank has kept the key overnight lending rate at 0.5 percent since doubling it in February 2007. It shelved a policy of gradual rate increases in April, and last week said the economy was ``sluggish'' for the first time in a decade after a report showed gross domestic product fell an annualized 2.4 percent in the second quarter."
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
"Last Updated: August 29, 2008 05:54 EDT"
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"U.S. Stock Futures Fall After Oil Rises, Dell Sees Weak Demand "
By Michael Patterson
"Aug. 29 (Bloomberg) -- U.S. stock-index futures retreated, signaling the Standard & Poor's 500 Index may pare its steepest monthly gain since April, after oil climbed and Dell Inc. said the slump in technology spending is spreading."
"General Motors Corp., the biggest U.S. automaker, and Wal- Mart Stores Inc., the largest retailer, fell in Europe as crude headed for its steepest weekly advance in almost two months and gasoline climbed. Dell, the second-biggest personal-computer maker, tumbled 10 percent on profit that missed analysts' estimates. Marvell Technology Group Ltd. dropped on a lower-than- projected sales forecast."
"Futures on the S&P 500 expiring in September declined 2.8 to 1,295.3 as of 11:34 a.m. in London. Dow Jones Industrial Average futures lost 19 to 11,676. Nasdaq-100 Index futures retreated 3 to 1,902.5."
"``We still have a lot of rough water ahead of us,'' Andrew Seibert, a senior portfolio manager at Nextier Wealth Management in Pittsburgh, said in an interview on Bloomberg Radio. ``Consumers have somewhat tightened their belts. They've had to because of gasoline prices.''"
"The S&P 500 has gained 2.6 percent in August, snapping a two-month retreat that sent the measure to an almost three-year low on July 15. The rally was fueled by the 22 percent drop in oil from a record, a jump in the dollar and growing speculation that the worst of banks' mortgage losses are over. Reports today on consumer spending and confidence may help investors gauge the outlook for profits at retailers, automakers and hotel chains."
"GM, Wal-Mart"
The S&P 500 has gained 0.7 percent this week and the Dow average has increased 0.8 percent. The Nasdaq Composite Index has slipped 0.1 percent as Amylin Pharmaceuticals Inc. and Broadcom Corp. retreated.
"U.S. and European stocks jumped yesterday and Asian shares rallied today on a government report showing the U.S. economy expanded faster than previously estimated in the second quarter, helped by a surge in exports. Gross domestic product increased at a 3.3 percent annual pace, the Commerce Department said."
GM lost 8 cents to $10.26 in Germany and Wal-Mart fell 40 cents to $59.48 today on deepening concern higher fuel bills may restrain consumers' disposable income.
Crude oil for October delivery rose as much as 1.4 percent today and futures for gasoline and natural gas climbed as producers evacuated rigs on forecasts that Gustav will be the worst Gulf of Mexico hurricane since Katrina.
Dell Drops
Dell sank $2.52 to $22.69 in Germany. The company said ``continued conservatism'' from some customers in the U.S. is spreading to western Europe and some Asian countries. Sales growth in those areas slowed last quarter and profit missed analysts' projections after Dell reduced prices.
"Hewlett-Packard Co., the biggest PC maker, lost 30 cents to $47.03 in Germany. Intel Corp., the largest maker of semiconductors, retreated 20 cents to $23.39."
"Marvell fell 43 cents to $14.33 in Germany after the maker of chips for Apple Inc.'s iPhone predicted sales in the current quarter of $860 million to $880 million, missing the $889.2 million estimated by analysts in a Bloomberg survey."
Boeing Co. added 3 cents to $66.37 in Germany. The world's second-biggest commercial-aircraft maker gave its largest union a final contract offer that would increase base pay by 11 percent over three years in an effort to avoid a strike next week.
"PetSmart Inc. may rise after the largest U.S. pet-store chain said second-quarter profit fell less than analysts estimated, helped by increased boarding and grooming sales for dogs and cats. The shares didn't trade in Europe."
Economy Watch
"Consumer spending in the U.S. probably slowed in July as the impact of the tax rebates faded, economists said ahead of a Commerce Department report at 8:30 a.m. in Washington today. The 0.2 percent increase in purchases would follow a 0.6 percent rise in June, according to the median forecast of 75 economists surveyed by Bloomberg News."
"At 10 a.m., a report from Reuters/University of Michigan may show the consumer sentiment index climbed to 62 in August, compared with 61.2 last month, according to the survey median."
U.S. markets will be closed on Sept. 1 for the Labor Day holiday.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
"Last Updated: August 29, 2008 06:41 EDT"
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Japan Industrial Production Unexpectedly Rises 0.9% on Exports
By Keiko Ujikane
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Aug. 29 (Bloomberg) -- Japan's industrial production unexpectedly rebounded in July as demand in Asia helped exporters withstand a slump in shipments to the U.S.
"Factory output gained 0.9 percent from June, when it fell 2.2 percent, the Trade Ministry said today in Tokyo. The median estimate of 37 economists surveyed by Bloomberg News was for a 0.3 percent decline."
"Today's figure may not be strong enough to alleviate concern that the U.S. slowdown is spreading around the world, threatening Japan's longest postwar expansion. Both the Bank of Japan and the government cut their economic assessments this month after sluggish exports and weak consumer spending caused gross domestic product to contract last quarter."
"``There is no change to our assessment that production is on a gradual downward trend,'' said Mamoru Yamazaki, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. ``The economy entered a downturn and we forecast this will continue until mid- 2009.''"
"Japan's exports rebounded in July as China replaced the U.S. as the nation's largest customer. Exports to China climbed to a record, while shipments to the U.S. slumped for an 11th month."
"The Bank of Japan last week described growth as ``sluggish'' for the first time in a decade, citing weakening exports as well as higher commodity costs. Japan's economy shrank at an annual 2.4 percent pace in the second quarter shipments abroad dropped the most in seven years."
Hino's SUVs
Weakening U.S. demand and rising raw-material costs have squeezed profits and forced companies to pare production.
"Hino Motors Ltd., Japan's largest maker of heavy trucks, said yesterday that it will make fewer sport-utility vehicles as higher gasoline prices damp North American sales. Toyota yesterday lowered its 2009 sales forecast to 9.7 million vehicles from 10.4 million as record fuel prices damp demand."
"``Manufacturers are being cautious about production because the slowdown in the global economy is cooling demand,'' said Susumu Kato, chief economist at Calyon Securities in Tokyo. ``The economic downturn in Japan will probably continue for another six to nine months.''"
"Still, Japan's economy may be more resilient now than it was during the three recessions since 1990 because companies have shed excess workers, factories and debt, economists and policy makers say."
"The economy is unlikely to suffer a ``major deterioration'' because companies don't have excess capacity and labor, Bank of Japan Governor Masaaki Shirakawa said last week."
"``This current expansion hasn't been characterized any degree of excess,'' said Glenn Maguire, chief Asia-Pacific economist at Societe Generale in Hong Kong. ``We're just looking purely at a cyclical slowing in the economy, so it's unlikely that any recession will be deep or long lasting.''"
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
"Last Updated: August 28, 2008 19:53 EDT"
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Brazil Stocks Gain as Steelmakers Rally; Mexico's Bolsa Rises
By Alexander Ragir
Aug. 28 (Bloomberg) -- Brazilian stocks gained for a second day as higher-than estimated profit for some of the world's biggest steel companies bolstered the earnings outlook for domestic producers while banks rallied on speculation the government won't seek to curb credit growth.
Gerdau SA paced advances for steelmakers after the biggest Indian and Chinese producers reported profit gains. Banco Itau Holding Financeira SA led a rally in banks after a newspaper cited Finance Minister Guido Mantega as saying that it's not the right time to take more steps to slow a credit expansion that has fueled Latin America's largest economy.
"``On top of Mantega's comments and good results from steelmakers you're seeing stronger growth in the U.S., '' said Valmir Celestino, who oversees the equivalent of $2.5 billion at Banco Safra de Investimentos in Sao Paulo. ``The fear of a really strong U.S. slowdown is distancing itself.''"
"The Bovespa index advanced 862.98, or 1.6 percent, to 56,382.22. Most Latin America markets rose after the U.S. economy grew more than estimated in the second quarter. The MSCI Latin America index rose 0.6 percent. Mexico's Bolsa gained 1.2 percent. Chile's Ipsa eased 0.1 percent."
"Gerdau, Latin America's biggest steelmaker, added 2.3 percent to 30.35 reais. Cia. Siderurgica Nacional SA, Brazil's third-biggest steelmaker, climbed 2.4 percent to 56.85 reais."
"India's Tata Steel Ltd. reported a better-than-expected 60 percent gain in profit on higher prices, while Baoshan Iron & Steel Co., China's biggest, posted a 20 percent profit gain."
Banks Gain
"Financial shares led gains in the MSCI Brazil Index, climbing 2.9 percent, the biggest among 10 industry groups. Itau, Brazil's second-biggest non-state bank, rose 3.7 percent to 31.65 reais. Uniao de Bancos Brasileiros SA, Brazil's third-largest non-state bank, jumped 2.8 percent to 19.90 reais."
"The central bank considered measures to reduce the pace of Brazil's credit growth, which the finance minister called ``excessive,'' and decided to raise interest rates instead, Mantega told the newspaper today."
"``The measure taken still haven't had an impact, so there's concern by some investors that the government will take other measures yet,'' said Aloisio Lemos, analyst at Agora Corretora. ``When Mantega says these things, it calms down investors a bit.''"
Inflation Easing
"Valor reported Aug. 15 that the government planned to impose a tax of 3.38 percent on lease contracts, which are normally offered as a type of loan to buy new cars in the country, to curb consumer demand. The measure would target car leases, it said, without saying where it obtained the information."
"In February, the central bank took measures to try to slow inflation by controlling credit growth. Banks operating in the country will have to make compulsory deposits in an account with the central bank, according to a statement. They will be held in government bonds, the bank said."
Inflation data released yesterday showed the first drop in the IGP-M price index in two years.
"Tam SA, Brazil's biggest airline, rose the most on the Bovespa as analysts said falling oil prices and recovering demand may boost earnings."
"Tam gained 5.8 percent to 32.28 reais, the steepest gain since Aug. 5. Crude oil fell more than $2 a barrel today."
"Cia. de Concessoes Rodoviarias, Brazil's biggest toll-road operator, and Banco do Brasil SA, the largest bank, jumped after JPMorgan Chase & Co. said these companies will benefit from Brazil's growing agriculture production."
Agriculture Leader
"``Brazil is a leader in global agriculture and should be key to future supply growth,'' wrote JPMorgan analysts Debbie Bobovnikova and Diogo Miura in a note to clients, which cited CCR and Banco do Brasil as beneficiaries of this growth."
"CCR, as the toll-road company is known, gained 4.7 percent to 30.80 reais. Banco do Brasil jumped 3.4 percent to 24.20."
Eletropaulo Metropolitana SA gained 2.2 percent to 30.50 reais after the utility won a court decision that allowed them to pay out a 360 million reais ($223 million) dividend.
"Most Latin America markets climbed after the U.S. economy expanded at a faster pace than previously estimated in the second quarter, helped by surging exports."
"The 3.3 percent annualized increase in gross domestic product from April through June was higher than forecast and compares with an advance estimate of 1.9 percent issued last month, the Commerce Department said. The world's biggest economy grew 0.9 percent in the first quarter."
Bolsa Gains
Mexico's Bolsa index rose the most in a week.
"Mexichem SAB, Latin America's biggest maker of plastic pipe, gained the most in two months as shares split and investors speculated a joint venture the company has said it is negotiating may be completed soon. The company's plan to sell shares in September may be a sign the negotiations are nearing fruition, analyst Raquel Moscoso of IXE Grupo Financiero said."
Mexichem rose 3.6 percent to 22.82 pesos. The company split shares 3-for-1 on Aug. 26.
"Grupo Aeroportuario del Sureste SAB advanced for the first time in four days, gaining 3.4 percent to 48.31 pesos. Mexico's biggest non-government airport operator rose. Lower fuel prices help airlines boost passenger traffic, the largest source of revenue for the airport companies."
Argentina's Merval slipped 0.2 percent and Colombia's IGBC gained 2.1 percent.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
"Last Updated: August 28, 2008 17:08 EDT"
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"Stocks in Europe, Asia Rise on Earnings; U.S. Futures Decline "
By Adam Haigh
Aug. 29 (Bloomberg) -- Stocks in Europe and Asia rose as better-than-estimated earnings from Carrefour SA and PPR SA and a higher forecast from Nintendo Co. overcame concern that rising oil will hurt carmakers. U.S. index futures declined.
"Carrefour, the world's second-biggest retailer, jumped 5.4 percent as demand in emerging markets boosted first-half profit. PPR climbed 4.9 percent after profit more than doubled, helped by higher revenue at the Gucci luxury-goods brand. Nintendo soared 6.3 percent as the maker of the Wii video-game console lifted its profit forecast by 26 percent."
"Europe's Dow Jones Stoxx 600 Index added 0.4 percent to 288.46 at 10:50 a.m. The index has climbed 1.6 percent in August, headed for its first advance in four months."
"``There's a lot of hesitation in the market today with the price of oil rising,'' said Oumkaltoum El Ouarti, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion. ``We've still had good earnings, which have comforted investors.''"
Futures on the Standard & Poor's 500 Index fell 0.2 percent as Dell Inc. retreated after saying the U.S. slump in technology spending is moving abroad and Novell Inc. reported a wider loss.
"The MSCI Asia Pacific Index climbed 2 percent, with JFE Holdings Inc., Japan's No. 2 steelmaker, rallying 4.7 percent after the nation's trade ministry said industrial production unexpectedly rebounded."
The Stoxx 600 yesterday erased this month's losses after a U.S. economic report signaled companies are weathering higher inflation and $512 billion in credit-related losses. U.S. stocks climbed the most in three weeks yesterday following the data.
"Bouygues, L'Oreal"
Bouygues SA gained as earnings topped estimates and the world's second-biggest builder predicted construction markets will improve in the second-half of 2009. L'Oreal SA fell after sales growth slowed.
"Vietnam was the world's best-performing equity market this month on speculation the fastest inflation in Asia may be under control after consumer price increases slowed this month. The benchmark VN Index climbed 19 percent, the biggest advance among the 89 indexes monitored by Bloomberg during August."
"Ukraine stocks led declines worldwide this month on concern tensions with Russia may escalate after President Dmitry Medvedev recognized Georgia's breakaway regions. The PFTS Index slumped 22 percent, surpassing Russia's RTS Index, the second- worst performing market worldwide, which retreated 17 percent."
"The MSCI World Index has fallen 0.9 percent this month, led by a 6.4 percent slide among material stocks. A drop in commodity prices including copper and gold has undermined the earnings outlook for raw-material producers."
National Markets
"National benchmark indexes rose in 13 of the 17 western European markets that were open. The U.K.'s FTSE 100 gained 0.5 percent, and France's CAC 40 climbed 0.4 percent. Germany's DAX Index was little changed."
"Carrefour jumped 5.4 percent to 35.53 euros. First-half net income from recurring operations totaled 750 million euros, beating the 743 million-euro median of seven analysts in a Bloomberg survey."
"PPR climbed 4.9 percent to 80.19 euros after saying first- half profit more than doubled on demand for luxury goods and a gain from selling YSL Beaute. Net income climbed to 779 million euros ($1.15 billion), beating the 327 million-euro median estimate of six analysts surveyed by Bloomberg."
"Profit among companies in the Stoxx 600 will decline 2 percent on average in 2008, according to data compiled by Bloomberg. That's down from 11 percent growth forecast at the start of 2008, the data show."
"Nintendo, JFE"
"Nintendo jumped 3,000 yen to 50,800 in Osaka, extending gains after the company raised its full-year net income estimate by 26 percent."
"JFE Holdings jumped 4.7 percent to 4,660 yen. Japan's factory output increased 0.9 percent in July from the previous month, when it fell 2.2 percent, the government said. The median estimate of 37 economists surveyed by Bloomberg News was for a 0.3 percent decline."
"Daimler AG, the world's second-largest luxury carmaker, lost 1 percent to 40.02 euros. PSA Peugeot Citroen, Europe's second-biggest carmaker, sank 1.3 percent to 32.92 euros"
"Merrill Lynch & Co. downgraded Peugeot to ``underweight'' from ``neutral,'' saying the company may have to reduce its 2008 operating profit targets as growth slows."
"Crude oil is headed for its biggest weekly gain in almost two months as producers evacuated rigs ahead of Gustav, forecast to become the worst Gulf of Mexico hurricane since Katrina. Crude today climbed as much as $1.58, or 1.4 percent, to $117.17 in New York."
"Dell, ASML"
"Technology stocks declined after Dell, the world's second- biggest maker of personal computers, said the U.S. slump in technology spending has moved to Western Europe and some Asian countries."
"ASML Holding NV, Europe's largest manufacturer of semiconductor equipment, fell 2 percent to 16.28 euros. Dell dropped 10 percent to $22.67 in German trading."
Novell fell 0.7 percent to $5.97 after the second-largest U.S. seller of Linux software reported a wider third-quarter loss because of costs to write down investments.
"Bouygues added 1.3 percent to 41.69 euros after reporting second-quarter profit net income of 477 million, more than the 466 million euros estimated in a Bloomberg survey. Bouygues raised its full-year sales target to 32.5 billion euros, from 32.4 billion euros previously."
"L'Oreal fell 3.7 percent to 67.26 euros. The world's largest cosmetics maker said first-half profit rose 6.8 percent, the slowest growth in three years, as European and U.S. shoppers pared spending on makeup and perfumes."
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
"Last Updated: August 29, 2008 05:59 EDT"
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Japan's Bonds Advance for Third Month as Economic Growth Slows
"Aug. 29 (Bloomberg) -- Japan's government bonds rose for a third month, the longest stretch since March, on signs growth in the world's second-largest economy is slowing."
"Ten-year debt advanced for a fifth week, the longest winning run since May 2003, on speculation the Bank of Japan will refrain from raising borrowing costs. Traders bet the BOJ will increase its 0.5 percent benchmark interest rate by 5 basis points over the next year, down from 16 basis points at the end of July, according to a Credit Suisse Group index based on overnight swaps."
"``The economic slowdown is the main focus for the JGB market from a longer-term perspective,'' said Takashi Nishimura, an analyst in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan's largest bank by assets."
"The yield on the 1.5 percent bond due in June 2018 fell to 1.405 percent as of 5 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker, from 1.53 percent at the end of July. The price rose 0.129 yen to 100.817 today. The yield reached 1.4 percent, the lowest since April 18."
Ten-year bond futures for September delivery rose to 138.37 as of the 3 p.m. close at the Tokyo Stock Exchange from 137.69 on Aug. 22 and from 136.41 on July 31.
"Japan's conventional bonds handed investors a return of 0.79 percent in August, compared with a gain of 1.35 percent for U.S. Treasuries and a loss of 0.01 percent for holders of Japanese inflation-linked securities, according to indexes compiled by Merrill Lynch & Co."
Government Reports
"Domestic debt was supported after the Labor Ministry said in Tokyo today that Japan's unemployment rate stayed near the highest level since 2006 and job prospects worsened, backing the case for the Bank of Japan to keep borrowing costs unchanged in coming months."
"The jobless rate fell to 4 percent in July, the statistics bureau said in Tokyo. The ratio of jobs available to each applicant fell for a sixth month to 0.89, the lowest since October 2004."
"Japan will compile a 1.8 trillion yen ($16 billion) extra budget this fiscal year to help pay for an economic stimulus program, Finance Minister Bunmei Ibuki said today. Ibuki, along with Prime Minister Yasuo Fukuda, said the government won't issue new bonds to finance the supplementary budget."
"Longer-maturity bonds also gained as Nomura Securities Co. will increase the average duration of its Bond Performance Index by 0.16 year to 6.25 years in September, according to the company's Web site."
`Long-Dated Bonds'
"``Money managers such as Japan's Government Pension Investment Fund are buying the super-long-dated bonds due to the coming redemption,'' said Kazuya Ito, who helps oversee the equivalent of $47.7 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo."
"The Government Pension Investment Fund, which runs the world's largest pool of retirement wealth, uses Nomura's index to help decide its holdings. Duration is a gauge of how much a change in yields affects the price of a bond or debt portfolio."
Gains in local notes were curbed as separate Japanese reports showed today that consumer-price inflation exceeded 2 percent for the first time in a decade and industrial production unexpectedly rebounded in July.
"``Most of the data were seen as good for the economy, so there's a selling bias for bonds,'' said Tatsuo Ichikawa, senior rates strategist in Tokyo at RBS Securities Japan Ltd., one of the 26 primary dealers required to bid at government auctions. ``The data may reinforce views in the market and at the Bank of Japan that the downturn may be shallow.''"
"Inflation, Industrial Production"
"Japan's core prices excluding fresh food climbed 2.4 percent in July from a year earlier after rising 1.9 percent in June, the government said. Expectations were for a 2.3 percent increase, according to the median estimate of 38 economists surveyed by Bloomberg News."
"Industrial production climbed 0.9 percent in July from the previous month, a separate report showed. The median estimate in a separate Bloomberg survey was for a 0.3 percent decline."
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
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Asian Currencies Decline in Month as Funds Dump Local Assets
By Aaron Pan and Kim Kyoungwha
"Aug. 29 (Bloomberg) -- Asian currencies declined this month, led by South Korea's won, as overseas funds dumped stocks on concern that slowing global growth will damp demand for Asian exports just as central banks grapple with quickening inflation."
"The won posted its biggest monthly decline since August 1998, Malaysia's ringgit had its worst month since the end of a dollar link in 2005 and Taiwan's dollar posted its biggest loss in seven years. Weakening currencies threaten to push up the cost of imports and accelerate inflation while decreasing demand for exports puts pressure on trade and current-account balances."
"``It's been a bad environment for stocks with persistent inflation eroding the value of assets and people have been disappointed with the growth numbers coming out of the region,'' said Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney. ``With that comes a fading of confidence in currencies in the region as well.''"
"South Korea's currency dropped 0.7 percent to 1,089 against the dollar as of the 3 p.m. local close, according to Seoul Money Brokerage Services Ltd., taking the decline in August to 7.1 percent, Asia's worst performer. The ringgit, the second- biggest loser in the region, fell 4.1 percent this month and Taiwan's dollar 2.6 percent."
"Overseas investors sold more stocks than they bought this month in Korea, Thailand, the Philippines, Taiwan and Indonesia, according to data compiled by Bloomberg. Global funds were so- called net sellers of Korean shares today for a ninth day, stock exchange data showed."
Korea Intervention
"Korea's central bank said today that the current-account balance returned to a deficit in July as a weaker currency and rising oil prices increased the import bill. Policy makers have intervened in the market to curb losses in the currency, depleting the nation's foreign-exchange reserves."
"Attempts by officials to halt the won's slide failed to keep the currency from reaching its lowest since 2004, said Kim Sung Soon, a dealer at Industrial Bank of Korea in Seoul."
"``Demand for the dollar from foreign stock sales and importers is still high,'' Kim said. ``The market is on the lookout for the government's intervention.''"
Central banks intervene in the currency market by buying or selling foreign exchange.
Malaysia's ringgit fell to near the lowest in 11 months on speculation heightened political turmoil will prompt investors to sell the country's stocks.
Malaysia Politics
"The currency declined this week, extending a monthly slump. The Kuala Lumpur Composite Index of shares dropped 6.2 percent in August for a fourth month of losses. Malaysia doesn't reveal numbers on stocks transactions by foreigners."
"The ringgit traded at 3.3935 per dollar versus 3.3400 a week ago, according to data compiled by Bloomberg. It reached 3.3975 on Aug. 27, the weakest since October."
Opposition leader Anwar Ibrahim was yesterday sworn in as a lawmaker after winning a by-election on Aug. 26. He has said defections from ruling lawmakers will unseat Prime Minister Abdullah Ahmad Badawi's government by Sept. 16.
Second Finance Minister Nor Mohamed Yakcop said on Aug. 4 the government won't achieve its target of narrowing its fiscal deficit to 3.2 percent of gross domestic product.
"``There are crosswinds in the ringgit market because the political risks could turn for the worse in September,'' said Goh Puay Yeong, a currency strategist at Barclays Capital Plc in Singapore. ``Sentiment is weak and economic policies could come to a standstill'' amid a power struggle, he said."
Thai Protests
"Malaysia's second-quarter GDP expanded 6 percent, the slowest in a year, according to the median forecast in a Bloomberg News survey before Bank Negara Malaysia reports the figure at 6 p.m. in Kuala Lumpur. The economy expanded 7.1 percent in the first quarter."
"Thailand's baht dropped, posting a sixth month of losses. The currency fell as oil climbed for a second week and protesters led by opposition leaders occupied the office of Prime Minister Samak Sundaravej in Bangkok for a fourth day to force his resignation."
"A government report today showed the nation posted a current-account deficit in July. Inflation accelerated to 9.2 percent last month, the fastest pace since 1998."
"The baht fell 0.4 percent to 34.20, according to data compiled by Bloomberg. The currency has declined 2 percent in August, reaching 34.29 on Aug. 26, the lowest since September 2007."
"Taiwan's dollar fell on concern that cooling demand in the U.S. and Europe will hurt the island's exports, which account for half of the gross domestic product. The government cut its economic growth forecast and reported the smallest increase in export orders in five years."
"The Taiwan dollar declined 0.1 percent to NT$31.520 per U.S. dollar, according to Taipei Forex Inc. The currency, which touched a six-month low of NT$31.571 on Aug. 26, has dropped 0.5 percent this week and 2.6 percent since the end of July."
"Elsewhere, Singapore's dollar lost 3.4 percent this month, and Indonesia's rupiah dropped 0.6 percent. The Philippine peso declined 3.8 percent. Vietnam's dong has gained 1.4 percent since the end of July."
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
"Last Updated: August 29, 2008 05:25 EDT"
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Chile's Industrial Output Rebounds Less Than Expected (Update2)
By Sebastian Boyd
Aug. 28 (Bloomberg) -- Chile's industrial production rose less than economists expected in July as metal manufacturing fell on lower output from mines.
"Production expanded 3 percent last month, after contracting in June and May, the National Statistics Institute said today. The median forecast of 12 economists in a Bloomberg survey had expected a 4.3 percent increase."
"Chilean industries are recovering from high electricity costs and a cheap dollar in the first quarter of the year, which cut margins and restricted exports. Domestic demand has risen on the back of an expanding labor force and rise in employment."
"``This shows the difference between productive sectors such as industry and mining, which is still shrinking, and internal demand,'' said Rodrigo Aravena, an economist at Banchile Inversiones in Santiago. ``Internal demand is supporting growth in Chile.''"
"Last month's turnaround in output was led by a 5.8 percent rise in consumer goods production from a year earlier, helping push up an index of retail sales by 9.1 percent. Food, pulp and paper production rose."
"Mining contracted 6.1 percent in July from a year earlier as output of copper and silver shrank. Output of molybdenum, a metal found in copper deposits, was 26 percent lower."
"Metal manufacturing slumped 13 percent in July, because mines produced less raw material, the Statistics Institute said."
"Industrial sales rose 2.1 percent in the same period, less than the median estimate of a 4.1 percent rise in a Bloomberg survey."
Job Creation
"Chile's jobless rate was unchanged in July at 8.4 percent, obscuring a 5.6 percent increase in salaried employment, the National Statistics Institute said today."
"Unemployment is rising as more women enter the workforce, Finance Minister Andres Velasco said last night."
"``Our economy is creating jobs at a good rate and, not only that, it is creating formal jobs with contracts, pensions: good quality jobs,'' Velasco told a conference in Santiago."
"Unemployment hasn't fallen, Velasco said, ``because people are entering the workforce like never before. And especially, as never before in Chile, there are more women joining the work force. This is very good news.''"
"The expansion of formal employment may help Chile become a developed country sooner than expected, Velasco said. Chileans may achieve the $22,000 per person purchasing power enjoyed today by the Portuguese as soon as 2015, he said."
"Shift, Outlook"
"Overall, the economy probably expanded 4.9 percent in July from a year earlier, down from 5.0 percent in June, according to a Bloomberg survey of six economists. The July economic activity report is published Sept. 5."
"Internal demand grew 11 percent in the second quarter of the year, driven by investment and consumer spending, the central bank said Aug. 25."
"``Mining and industry are the areas that are slowing the Chilean economy,'' Aravena said."
"Chile's gross domestic product will expand 4.2 percent this year and 5.0 percent next year, the United Nations economic commission for Latin America and the Caribbean said yesterday."
"Chile's peso strengthened 0.6 percent to 516.95 per dollar at 12:25 p.m. New York time, from 519.82 yesterday. It earlier touched 514.95, the highest since Aug. 14."
To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net
"Last Updated: August 28, 2008 12:27 EDT"
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Philip Morris Leads 16.6 Billion Euros of Bond Sales in Europe
"Aug. 29 (Bloomberg) -- Philip Morris International Inc., the world's largest publicly traded tobacco company, and utility E.ON AG led 16.6 billion euros ($24.5 billion) of European corporate bond sales this week, the most in two months."
"Sales jumped from 6.8 billion euros last week and from 6.5 billion euros the week before, according to data compiled by Bloomberg. New York-based Philip Morris raised a total of 1.75 billion euros in its first sale in the common European currency, prompted by concern credit conditions may deteriorate."
"``We wanted to be ahead of the game and issue a smaller- sized transaction at current market spreads,'' Marco Kuepfer, vice-president and treasurer of Philip Morris, said in an interview. ``Credit spreads generally have been widening quite considerably. We could have issued in early November but if we look at the market, it's not really looking that great.''"
"The extra yield over government debt investors are demanding from treasurers at investment-grade companies beat a decade high of 191 basis points recorded on March 17 this week. The average spread rose 8 basis points since the beginning of August to 194 basis points today, Merrill Lynch & Co. indexes show."
"Sales in Europe are the second-highest of any August, after the record 33.8 billion euros raised in the same month last year, Bloomberg data show."
"Non-financial companies raised more money this month than any other August since at least 2001, according to Societe Generale SA's London-based strategist Suki Mann. Companies raised 10.5 billion euros, up from 2 billion euros in August 2007 and 5.4 billion euros in the same month the previous year, Mann wrote in a note to clients yesterday."
Currency Hedge
"Philip Morris sold 1 billion euros of three-year bonds priced to yield 98 basis points more than the benchmark mid-swap rate and 750 million euros of seven-year bonds yielding 135 basis points over midswaps, Bloomberg data show."
"Proceeds will help refinance bank loans and act as a hedge against currency risk, Kuepfer said."
"E.ON, based in Duesseldorf, raised 2 billion euros from three- and seven-year bonds. Germany's biggest utility sold 1.25 billion euros of seven-year bonds priced to yield 72 basis points more than the mid-swap rate and 750 million euros of three-year bonds yielding 45 basis points over benchmark rates. That compares with 75 basis points that E.ON agreed to pay on May 27 to sell 1 billion euros of six-year bonds, according to Bloomberg data."
"In other sales this week, Daimler AG, the world's largest truckmaker, issued 1.5 billion euros of three-year bonds priced to pay 110 basis points more than midswaps and 750 million euros of seven-year bonds yielding 155 basis points more than benchmark rates, Bloomberg data show."
"RTE EDF Transport SA, Europe's largest power network, raised 1 billion euros of 10-year bonds priced to yield 52 basis points more than midswaps, compared with 48 basis points RTE agreed to pay to sell 1.25 billion euros of seven-year bonds in April, according to Bloomberg data."
To contact the reporter on this story: Shelley Smith in London at ssmith118@bloomberg.net
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Michael R. Sesit
Trichet's Price Phobia Stymies Growth Chances: Michael R. Sesit
Commentary by Michael R. Sesit
Aug. 29 (Bloomberg) -- Cut rates or be damned.
"The European Central Bank last month raised its benchmark lending rate a quarter point to a seven-year high of 4.25 percent, boosting its strong inflation-fighting credentials."
Since then the dollar has rallied against the euro. The price of oil has plummeted 20 percent from a record $147.27 on July 11. And the euro-area economy has been in a funk.
"Now it's time for ECB President Jean-Claude Trichet to leverage the bank's credibility, shake off its inflation phobia and do some good for mankind -- or, at the very least, Europe- kind -- by supporting a rate reduction."
"Lower interest rates will buoy growth by reducing borrowing costs for consumers and businesses, make banks more willing to lend by increasing their margins and bolster European exports by weakening the euro. Meanwhile, falling commodity prices and slow growth should go a long way to alleviating inflation pressures."
"If it doesn't lower rates soon, the central bank risks being blamed for contributing to a debilitating recession."
"When it raised them in early July, the ECB was confident the euro area was in the midst of an ``ongoing moderate economic expansion,'' says Holger Schmieding, chief European economist at Bank of America in London. ``The data since then have been much worse than that,'' he says. ``The available evidence shows ever more clearly that the euro-zone economy has fallen into semi- stagnation or worse.''"
Euro-Area Contraction
"Squeezed by a strong euro, high interest rates, slowing global growth, expensive energy and tightening credit conditions, the economy of the 15 countries that share Europe's common currency contracted for the first time since it was introduced on Jan. 1, 1999. Gross domestic product fell 0.2 percent in the second quarter from the first, when it increased 0.7 percent."
France's economy shrank for the first time in more than five years. Germany's declined for the first time in almost four years. The Italian economy also contracted; Dutch growth stalled; and Spain's grew at its slowest pace since 1993.
"European industrial production was unchanged in June after tumbling the most in almost 16 years the preceding month, while orders declined the most in more than six years. June retail sales dropped the most in 13 years. Europe's manufacturing and service industries each contracted for a third consecutive month in August. Meanwhile, German business confidence fell in August to a three-year low."
"``Without quick policy relief, more economic calamity in the euro area is likely,'' Chen Zhao, head of global strategy at BCA Research Ltd. in Montreal, said in a recent report."
`Man-Made Disaster'
"``In our humble opinion, an economic recession in Europe would be a man-made disaster that would have much to do with the European Central Bank's relentless pursuit of unreasonable monetary policy,'' Chen added."
"At the start of the year, economists were predicting that Europe would be able to escape the fallout from a slowing American economy. That so-called decoupling theory, however, has since been debunked."
"Regardless of the dismal economic data, the ECB is pursuing a hard line on inflation, which in July accelerated to 4 percent, the fastest pace in more than 16 years. The ECB's goal is to hold consumer inflation to just below 2 percent annually, something it has failed to achieve in each of the past eight years."
"``It's premature to hold up the equation `weaker growth is equal to less inflation,''' Axel Weber, head of the Bundesbank and an ECB council member, said in an Aug. 26 interview with Bloomberg News reporter Andreas Scholz."
"``I see the considerable risk that we won't just be significantly above 2 percent, our stability norm, in 2009, but that it's not yet likely we'll fall below it in 2010,'' he said."
Tough Talk
There's nothing wrong with anti-inflation talk. It reminds markets that rising prices remain an ECB concern and maintains pressure on labor unions and industry to keep wage settlements reasonable. It can also help keep deficit spending in check.
"If the ECB believes that inflation's so-called second-round effects are an issue, the bank should negotiate a deal with the region's political, business and labor leaders offering lower interest rates in exchange for reduced wage settlements."
"Still, weaker energy prices and slowing economic growth should help harness the inflation bugaboo. Euro-area GDP growth will be a meager, recession-skirting 0.1 percent in the third and fourth quarters of 2008 and 0.5 percent in 2009, Michael Saunders, chief Western European economist at Citigroup Inc. in London, said in an Aug. 22 report. Inflation will fall to below 2.5 percent year-over-year in mid-2009, he said."
Declining commodity prices and decelerating inflation give the ECB a measure of monetary-policy flexibility that neither it nor many economists and investors anticipated.
"Instead of rigidly sticking to its price-stability mandate, the bank shouldn't pass up the opportunity to lower rates and give growth a chance."
(Michael R. Sesit is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Michael R. Sesit in Paris at at msesit@bloomberg.net
"Last Updated: August 28, 2008 19:01 EDT"
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"Italian Stocks Update: Fiat, Isagro, STMicro, Tod's, UBI Shares "
By Francesca Cinelli
"Aug. 29 (Bloomberg) -- Italy's S&P/MIB Index was little changed, adding less than 0.1 percent to 28,635. Futures expiring in September slid 44, or 0.2 percent, to 28,700."
The following were among the most active stocks on the Italian market today. Share symbols are in parentheses.
"Azimut Holding SpA (AZM IM) gained 0.5 percent to 5.9 euros, extending gains of 6.4 percent yesterday. ``We remain positive on the core fundamentals of the business and the group's ability to continue to attract incremental assets,'' Luca Della Santa and Kemide Sanbanjo, analysts at Goldman Sachs, wrote in a report."
"Italy's biggest independent fund manager, Banca Popolare di Vicenza and Societa Cattolica di Assicurazioni Scrl (CASS IM) announced they started a project to create a new independent asset management company, owned in equal measure by the three promoting institutions. Azimut shares gained 6.4 percent to 5.87 euros. Cattolica shares surged 25 cents, or 0.8 percent, to 32.6 euros."
"Banca Italease SpA (BIL IM), the Italian leasing company that was investigated for alleged irregularities in selling derivatives contracts, added 0.4 percent to 5.91 euros. The company said it may not meet full-year earnings targets as it swung to a first-half profit. ``It is clear that the stock catalyst is M&A and in particular the negotiations with Germany's DZ Bank for a joint venture,'' Banca Akros analyst Marco Cavalleri wrote in a note. The brokerage downgraded the stock to ``accumulate'' from ``buy.''"
"``The stock already embeds a relevant consolidation premium on the fair value,'' Carlo Tommaselli, an analyst at Cheuvreux who rates Italease an ``underperform,'' wrote in a research report."
"Banca Monte dei Paschi di Siena SpA (BMPS IM), Italy's third-biggest bank, increased 1.2 cents, or 0.7 percent, to 1.8 euros. The lender said second-quarter profit rose 28 percent on higher income from lending. Fist-half results were milder than expected, Mediobanca Securities analysts wrote in a report. The brokerage rates the stock a ``neutral.''"
"Bulgari SpA (BUL IM), the world's third-largest jeweler, surged 3.7 cents, or 0.5 percent, to 6.96 euros. PPR SA, the French retailer that owns Gucci, said first-half profit more than doubled on higher luxury goods sales and a gain from selling YSL Beaute."
"Digital Multimedia Technologies SpA (DMT IM), the Italian maker of television transmission systems, advanced 1.52 euros, or 11 percent, to 21.36 euros. Cheuvreux upgraded the stock to ``outperform'' from ``underperform'' because of better visibility. Landsbanki Kepler maintained its ``buy'' recommendation."
"Fiat SpA (F IM), Italy's largest manufacturer, dropped 16.2 cents, or 1.5 percent, to 10.56 euros. Automobile stocks were the second-worst performers among the 18 industry groups in the Dow Jones Stoxx 60 Index today. PSA Peugeot Citroen, Europe's second-biggest carmaker, was lowered to ``underweight'' from ``neutral'' at Merrill Lynch & Co."
"Intesa Sanpaolo SpA (ISP IM), Italy's second-biggest bank, advanced 5.5 cents, or 1.5 percent, to 3.7 euros. Credit Suisse upgraded the stock to ``outperform'' from ``neutral,'' while lowering its price estimate to 4.8 euros from 5 euros. Lehman Brothers and Merrill Lynch cut their price estimates on the stock to 5.4 euros from 5.45 euros and to 4.4 euros from 4.9 euros respectively."
"Isagro SpA (ISG IM), Italy's biggest maker of agricultural chemicals, climbed 41.5 cents, or 8.9 percent, to 5.07 euros. The company said profit rose to 1.1 million euros in the first half compared with 0.2 million euros a year earlier."
"Parmalat SpA (PLT IM), Italy's largest dairy company, dropped 0.6 percent to 1.86 euros. The company said first-half profit rose 83 percent after legal settlements won from banks offset surging costs and said that slowing global economic growth was weighing on earnings. ``We expect that management will be quizzed on their intentions in Australia now that Dairy Farmers is to be acquired by the market leader, National Foods,'' Rob Mann, an analyst at Collins Stewart, wrote in a report."
"Poltrona Frau SpA (PFG IM), the maker of Cappellini and Cassina furniture, gained 2.4 percent to 1.16 euros. Revenue was encouraging and margin was weak as expected, Euromobiliare analysts wrote in a report. They maintained their ``buy'' rating. Cheuvreux cut its price estimate to 1.15 euros from 1.3 euros."
"STMicroelectronics NV (STM IM), Europe's largest semiconductor maker, declined 1.2 percent to 8.98 euros. Technology stocks were the worst performers among the 18 industry groups in the Dow Jones Stoxx 60 Index today. Dell Inc., the world's second-biggest personal-computer maker, fell as much as 11 percent in late trading after saying the U.S. slump in technology spending has moved abroad."
"Telecom Italia Media SpA (TME IM), the television unit of Italy's biggest phone company, added 0.9 percent to 12.66 cents. The company signed a deal with the Italian soccer association for exclusive rights to broadcast the Serie B championship."
"Tod's SpA (TOD IM), the Italian luxury-goods maker known for its rubber-studded Driving Shoe, gained 1.41 euros, or 3.5 percent, to 41.75 euros. Citigroup increased its price estimate on the stock to 42.5 euros from 38 euros. Deutsche Bank AG and Merrill Lynch increased their price projections to 45 euros from 42 euros and to 34 euros from 31.5 euros respectively."
"Unione di Banche Italiane SCPA (UBI IM) Italy's fourth- biggest bank by branches, fell 23.2 cents, or 1.5 percent, to 15.27 euros. ING Wholesale Banking downgraded the stock to ``hold'' from ``buy'' after second-quarter results disappointed ``due to growth in fixed costs, an early rebound of loan provisions and unexciting revenue mix,'' analyst Roberto Marchesi wrote."
To contact the reporter on this story: Francesca Cinelli in Milan at fcinelli@bloomberg.net
"Last Updated: August 29, 2008 04:43 EDT"
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"Toyota, Nissan Lead Rise in Japan Output on Exports (Update1) "
By Makiko Kitamura
"Aug. 29 (Bloomberg) -- Toyota Motor Corp. and Nissan Motor Co., Japan's largest and third-largest automakers, led a rise in domestic production last month, as overseas demand for fuel- efficient vehicles boosted exports."
"Output by the country's 12 automakers rose 24 percent to 1.09 million vehicles in July from a year earlier, the Japan Automobile Manufacturers Association said in a release today. Exports rose 20 percent to 619,174 vehicles."
Rising demand for Japanese cars in emerging markets prompted automakers to increase production at home as well as overseas. The increase was amplified due to lower production in the year-ago period stemming from earthquake damage at a supplier.
"``Demand for Japanese brands in countries like China and India is still growing,'' said Yokoi Hirofumi, a Tokyo-based analyst at auto consulting company CSM Worldwide."
"Exports to Asia rose 42 percent, and shipments to the Middle East soared 41 percent."
"Japan auto exports have risen every month for the past three years. That's the longest streak since a rally that began September 1975 and ended October 1978, according to the auto manufacturers association."
Toyota
"Toyota boosted domestic production 19 percent to 370,572 units in July and exports rose 15 percent, led by a 41 percent jump in shipments to China."
"Nissan Motor Co. raised output at home by 50 percent to 129,103 units, as exports to the U.S. more than doubled on the popularity of its Rogue and Murano sport-utility vehicles. Shipments to Asia, Latin America and other emerging markets rose 62 percent."
"Japan production rose 15 percent at Honda Motor Co., Japan's second-largest carmaker, after the company added two days of production at its Suzuka factory in western Japan. Exports fell 6.9 percent on a 30 percent drop to the U.S., while shipments to Asia surged 53 percent."
"Suzuki Motor Corp., Japan's second-largest minicar maker, raised output at home by 48 percent. Domestic output rose 30 percent at Mazda Motor Corp., which exports almost 80 percent of its Japan production. Shipments to Asia and the Middle East gained on the popularity of its revamped Demio compact car and Atenza sedan."
"Mitsubishi Motors Corp., maker of the Outlander SUV and Eclipse sports car, raised production 11 percent to 74,909 vehicles as exports rose 5 percent last month. The company is adding production in Russia and China after exports soared 41 percent last year."
"Toyota shares rose 160 yen, or 3.4 percent, to 4,930 yen on the Tokyo Stock Exchange. Honda rose 90 yen, or 2.6 percent to 3,580 yen, while Nissan gained 3.3 percent to 841 yen."
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
"Last Updated: August 29, 2008 03:26 EDT"
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U.S. Economy: GDP Exceeds Initial Estimate on Exports (Update2)
By Courtney Schlisserman and Timothy R. Homan
"Aug. 28 (Bloomberg) -- The U.S. economy expanded faster than previously estimated in the second quarter, helped by a surge in exports that will probably wane as Europe and Japan head toward recessions."
"Gross domestic product increased at a 3.3 percent annual pace, compared with the initial estimate of 1.9 percent, the Commerce Department said today in Washington. Trade contributed the most to U.S. growth in almost three decades."
The expansion is likely to weaken in the second half as consumers burdened with falling home values and dwindling job prospects rein in spending. Separate figures today showed the number of Americans collecting unemployment benefits reached a five-year high last week.
"``Outside of trade, the economy is considerably weaker,'' said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. ``When you look at the spending, it looks terrible for the second half of the year.''"
The increase in GDP last quarter was bigger than the median estimate of a 2.7 percent gain in a Bloomberg News survey of 78 forecasters. The expansion was the fastest since the third quarter of 2007 and followed growth of 1.9 percent in the first three months of the year.
"Treasuries dropped after today's reports, sending benchmark 10-year note yields up to 3.78 percent at 4:14 p.m. in New York, from 3.77 percent late yesterday. The Standard & Poor's 500 Stock Index rose 1.5 percent to close at 1,300.68."
Jobless Claims
"The Labor Department said initial jobless claims dropped to 425,000 last week, matching economists' forecasts, from 435,000 the previous week. The level remains well above the 321,000 average of last year. The number of people staying on unemployment rolls rose to 3.423 million, the highest since November 2003."
"``The labor market may continue to weaken,'' said Russell Price, a senior economist at H&R Block Financial Advisors Inc. in Detroit. ``It's become clear that second-half growth isn't going to be as strong as the first half, so businesses are going to finally start to trim payrolls a little more.''"
"The smallest trade deficit in eight years was the biggest contributor to growth last quarter. The trade gap narrowed to a $376.6 billion annual pace and added 3.1 percentage points to growth, the most since 1980. Excluding trade, the economy would have expanded at a 0.2 percent pace after growing 0.1 percent in the first three months of the year."
Tiffany's Sales Gains
"Tiffany & Co., the world's second-largest luxury-jewelry retailer, today posted profit and sales gains that exceeded analysts' forecast, helped by strength in Europe. The company has accelerated its international expansion, planning to increase worldwide locations by 13 percent through early 2009. It had 196 stores and boutiques, including 72 in the U.S., 95 in Asia Pacific and 19 in Europe, as of July 31."
"Total sales were ``strong'' in Europe and Asia-Pacific, Tiffany said in a statement."
"Other companies are looking to Asia, Europe and the Middle East to offset slowing demand in North America. Caterpillar Inc.'s order books for large machines are full through the end of next year, and its factories in Asia are running at full capacity to meet demand in China, Chief Executive Officer Jim Owens said today at a press briefing in Beijing."
Caterpillar Investment
"Caterpillar, the world's biggest maker of earthmoving equipment, will invest more than $100 million to triple capacity at its Shandong SEM Machinery Co. unit in northern China, Owens said. It will put another $20 million in the first of three building phases of a new research and development center in the eastern Chinese city of Wuxi to test engines, materials and electronics for manufacturing operations in the Asia-Pacific region."
The boost from trade may wane in the rest of the year as growth among some of the U.S.'s biggest trading partners slows. Europe and Japan both shrank last quarter.
"Today's GDP report is ``kind of the last hurrah'' for the U.S. economy, Martin Regalia, chief economist for the U.S. Chamber of Commerce, said at a press conference today. ``We've begun the process of slipping into a good old-fashioned recession.''"
"Private economists aren't the only ones taking a dimmer view. Federal Reserve staff also ``marked down'' the central bank's forecast for growth in the second half of 2008, according to minutes of the Federal Open Market Committee's Aug. 5 meeting released this week."
Softer Export Demand
"Fed policy makers also said recent reports pointed to ``softer export demand,'' according to the minutes."
"Consumer spending, which accounts for more than two-thirds of the economy, grew at a revised 1.7 percent annual rate in the second quarter, compared with the 1.5 percent estimated last month and 0.9 percent for the first three months of the year."
"The longest expansion in consumer spending on record will probably end this year, according to economists surveyed by Bloomberg earlier this month. Retail sales fell in July for the first time in five months, led by a slump in auto purchases, according to Commerce data."
"``We are in a recession,'' Farooq Kathwari, chief executive officer at Ethan Allen Interiors Inc., said in an interview with Bloomberg Television this week. ``Our industry has been impacted. Conditions are still tough.''"
"The Danbury, Connecticut-based home-furnishings retailer said last month that sales fell 8.7 percent in the second quarter compared with the same period last year."
"Jobs, Spending"
"A weakening labor market is one reason consumer spending is likely to slow after the government sent out about $92 billion in tax rebate checks. The U.S. has lost 463,000 jobs so far this year and wages haven't kept up with inflation, according to Labor Department data."
"``We don't have a lot of demand out there on the part of consumers, so there is a worry,'' Joel Naroff, chief economist at Commerce Bancorp Inc. in Holland, New Jersey, said in a Bloomberg Radio interview. ``What we're looking at is an economy that's bouncing around, but when you really average it out we're just muddling along -- still some growth but nothing special.''"
"Smaller increases in paychecks are another reason Americans are likely to cut back. Wages and salaries increased by $52.5 billion in the first three months of the year, $20.2 billion less than previously estimated, according to today's revised estimates."
"The reduction caused total personal income to grow at a 3 percent annual pace in the first quarter, compared with a previous estimate of 3.7 percent."
Housing Slump
"Today's revisions showed housing continued to slump and companies invested less in new equipment. Residential construction decreased at a 15.7 percent pace, more than previously estimated."
"The slide in residential construction has continued this quarter. Housing starts last month fell 11 percent and building permits also declined, the government said Aug. 19."
"A smaller decline in stockpiles contributed to the larger- than-forecast gain in growth. Inventories fell at a $49.4 billion annual rate from April through June, down from a $62.2 billion first estimate. Still, the draw-down subtracted 1.44 percentage points from growth."
"Today's report also included a first look at corporate profits for the second quarter. Earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, decreased 2.4 percent to an annual rate of $1.56 trillion. Earnings were down 7 percent from the same time last year, the biggest decrease since the 2001 recession."
To contact the report on this story: Courtney Schlisserman in Washington Cschlisserma@bloomberg.net
"Last Updated: August 28, 2008 16:21 EDT"
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U.S. Stocks Rally as Economic Growth Tops Estimates; Banks Gain
By Lynn Thomasson
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"Aug. 28 (Bloomberg) -- U.S. stocks climbed the most in three weeks, led by manufacturers and financial companies, after growth in exports helped the economy expand faster than estimated in the second quarter."
"American International Group Inc., Caterpillar Inc. and AT&T Inc. rose more than 3 percent each and helped lead gains in nine of ten industry groups in the Standard & Poor's 500 Index after the Commerce Department said gross domestic product grew at a 3.3 percent annual rate. Tiffany & Co., the world's second-largest luxury jewelry retailer, jumped the most in three years on profit that topped analysts' estimates. Energy shares erased an early advance, and consumer companies rallied, as oil prices slipped more than $2 a barrel following three days of gains."
"``The bears ran away for the weekend,'' Frederic Dickson, who helps oversee $23 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, told Bloomberg Radio. The GDP report ``was a lift. We haven't had much positive news and that provided it.''"
"The S&P 500 gained 19.02 points, or 1.5 percent, to 1,300.68, capping its biggest three-day advance in a month. The Dow Jones Industrial Average increased 212.67, or 1.9 percent, to 11,715.18. The Nasdaq Composite Index added 29.18 to 2,411.64. More than five stocks rose for each that fell on the New York Stock Exchange."
August Advance
The S&P 500 extended its August gain to 2.6 percent and wiped out losses from earlier in the week as the GDP report showed businesses are weathering rising inflation and more than $500 billion in subprime-related bank losses. The government's initial estimate of economic growth was 1.9 percent last month and economists in a Bloomberg survey on average projected 2.7 percent. The data follows an unexpected advance in durable goods orders that helped boost stocks yesterday.
"The Dow average's 3 percent gain so far in August makes it the third-best-performing stock measure in the world this month, in dollar terms, and the S&P 500's advance is No. 4., according to data compiled by Bloomberg."
"AIG, the largest U.S. insurer, rose the most in three weeks, adding 7.6 percent to $21.51. Caterpillar, the biggest maker of bulldozers, increased 3.1 percent to $71.68. AT&T, the top U.S. phone company, added 3.3 percent to $32.23. All 15 homebuilders in S&P indexes advanced, leading a group of the stocks to its second day of gains exceeding 5 percent."
"``You're getting stronger growth, and that is conceivably good for equities,'' said Alan Gayle, the Richmond, Virginia- based senior investment strategist at Ridgeworth Capital Management, which oversees about $70 billion. GDP growth above 3 percent ``suggests that the economy is not as bad as a lot of the recent commentary has suggested,'' he said."
Fannie Mae Rallies
"Fannie Mae, the biggest U.S. mortgage-finance company, gained 23 percent to $7.95, paring its 2008 tumble to 80 percent. Chief Executive Officer Daniel Mudd replaced three top deputies in an effort to restore investor confidence after record losses and a 90 percent drop in the shares. Smaller rival Freddie Mac jumped 11 percent and is down 85 percent since the start of the year."
"The S&P 500 Financials Index rallied 4.5 percent, capping its first three-day advance since the middle of July, as 88 of 89 companies in the group climbed. Bank of America Corp., the second-largest bank, increased 6 percent to $31.43, contributing the most to the rise in the benchmark measure of banks, brokerages and insurance companies. Merrill Lynch & Co. increased 8.9 percent to $27.52 for the biggest increase in three weeks."
Bond Insurance Deal
MBIA jumped 35 percent to $16.15 for the biggest gain since January. The largest bond insurer agreed to reinsure municipal bonds for Financial Guaranty Insurance Co. MBIA led bond insurers posting record losses after straying from the business of backing municipal bonds to guaranteeing collateralized debt obligations that have tumbled in value.
"Ambac Financial Group Inc., the bond insurer that lost about three-fourths of its market value this year, increased 42 percent to $7.42."
"Lehman Brothers Holdings Inc. added 7.4 percent, the most since Aug. 5, to $15.87. The investment bank that's trying to shed mortgage assets and raise capital is preparing to eliminate as many as 1,000 jobs in what would be the firm's fourth round of cuts this year, people familiar with the matter said. The cuts may be announced when Lehman, the fourth-largest U.S. securities firm, releases third-quarter financial results next month, according to the people, who declined to be identified because the plan hasn't been completed."
Retail Rally
"Tiffany had the steepest gain since 2005, rising 11 percent to $43.85. The retailer posted profit that exceeded analysts' estimates on better-than-expected sales and predicted higher annual earnings than previously estimated."
"Zale Corp., the biggest U.S. jewelry chain with 2,130 stores, rose 21 percent to $27.92 for the biggest gain in at least 15 years after projecting full-year profit that exceeds analysts' estimates."
"Sears Holdings Corp. advanced 4.2 percent to $90.62. The biggest U.S. department-store company said earnings in the second half of the year may rise. Inventory reductions will help profit excluding some costs climb even as sales are ``pressured'' and the U.S. economic slump persists, Sears said."
"Occidental Petroleum Corp. and EOG Resources Inc. led a gauge of energy shares to the only retreat among 10 industries in the S&P 500 as crude fell more than $2 a barrel. The reversal in oil came after the International Energy Agency said it would tap strategic stockpiles, if needed, as Tropical Storm Gustav threatens production in the Gulf of Mexico. Occidental Petroleum dropped the most in the S&P 500, slumping 4.3 percent to $80.57. EOG lost 3.5 percent to $105.34."
Coca-Cola Slumps
"Coca-Cola Co. lost 1.3 percent to $53.12 for the only decline in the 30-stock Dow average. The world's biggest sodamaker was cut to ``neutral'' from ``outperform'' at Credit Suisse Group AG, which said rival PepsiCo Inc. is a better bet because it's further along with a restructuring."
"Brown-Forman Corp. fell the most in two months, with the company's Class B shares losing 3.7 percent to $74.17. The maker of Jack Daniel's and Southern Comfort whiskey reported a profit decline and trailed analysts' estimates after writing down the value of dead agave plants used for making tequila."
The S&P 500 is poised to complete only its third monthly advance since reaching a record in October. It is still down 11 percent this year.
"The S&P 500's August gain has been led by so-called consumer discretionary companies, which include retailers and hotel and restaurant chains. The S&P 500 Consumer Discretionary Index rallied 8.1 percent this month for the best gain among 10 industries. The gauge climbed another 2.3 percent today as all but one of its 82 companies advanced."
"An index of technology shares in the S&P 500 has had the second-best return in August with a 4.6 percent rally through, led by a 48 percent jump in Advanced Micro Devices Inc."
About 956.3 million shares changed hands on the NYSE as volume picked up after setting new lows for the year for five straight days. Trading was still 35 percent below the year's average on the Big Board.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
"Last Updated: August 28, 2008 16:54 EDT"
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"China's Stocks Climb for a Second Day; Baoshan, Banks Advance "
By Chua Kong Ho
"Aug. 29 (Bloomberg) -- China stocks rose, paring a fifth weekly decline, as steelmakers and banks climbed after Baoshan Iron & Steel Co. and Bank of China Ltd. posted profit that beat analysts' estimates."
"Baoshan, China's largest steelmaker, jumped almost 4 percent, the biggest gain in a week, and Bank of China, the nation's No. 3 lender, added 1.4 percent. Shandong Chenming Paper Holdings Ltd. rose 3.3 percent after forecasting nine-month earnings may double on increased production and prices."
"The CSI 300 Index, which tracks yuan-denominated shares traded in Shanghai and Shenzhen, added 55.77, or 2.4 percent, to 2,391.64, shaving this week's loss to 0.4 percent."
"The CSI 300, down 55 percent this year, is the second-worst performer among the 89 primary indexes tracked by Bloomberg, as government measures to tackle inflation and record oil and commodity prices eroded profits."
"``It's probably still too early to buy aggressively into the market but after the declines this year, there's not as much downside,'' said Michelle Qi, Shanghai-based portfolio manager at Bank of Communications Schroder Fund Management, which oversees about $790 million."
"Chinese corporate profits rose 23 percent in the first half, excluding oil and power companies, JPMorgan Chase & Co. said in a report yesterday. That compares with a 31 percent growth in profits in 2007."
"Baoshan, Chenming"
"Baoshan gained 0.24 yuan to 6.52 yuan, the biggest contributor to the CSI 300's advance. The Shanghai-based steelmaker said second-quarter profit rose 20 percent to 5.39 billion yuan ($790 million), according to figures derived from first-half numbers reported yesterday. That compares with a median forecast of 4.9 billion yuan in a Bloomberg survey. Shanxi Taigang Stainless Steel Co., China's biggest maker of the rust- resistant alloy, gained 4.7 percent to 7.80 yuan."
"Bank of China advanced 0.05 yuan to 3.70. Second-quarter profit rose 15 percent to 20.5 billion yuan, the lender said. That beat the 41.2 billion yuan average estimate of seven analysts compiled by Bloomberg."
"Bank of Communications Co., which reported a record gain in first-half income this week, rose 1.7 percent to 7.59 yuan. Financial companies accounted for 35 percent of the index's advance today."
"Shandong Chenming rose 3.3 percent to 9.05 yuan, the most since Aug. 20. First-half profit more than doubled to 947.4 million yuan, the company said."
"The Shanghai Composite Index added 2 percent to 2,397.37 and the Shenzhen Composite Index gained 2.6 percent to 659.18."
The following stocks also rose in China. Stock symbols are in parentheses after company names:
"Sichuan New Hope Agribusiness Co. (000876 CH), an animal- feed producer, rose 0.71 yuan, or 9.5 percent, to 8.19, the most since Aug. 20, after first-half profit climbed 12 percent to 239.1 million yuan."
"Youngor Group Co. (600177 CH), a shirt maker, gained 0.22 yuan, or 2.3 percent, to 9.73, after first-half profit rose 49 percent to 1.94 billion yuan."
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net.
"Last Updated: August 29, 2008 05:14 EDT"
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"Mosaid Technologies, Tundra Semiconductor: Canada Stock Preview "
By John Kipphoff
"Aug. 29 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading tomorrow. Stock symbols are in parentheses, and share prices are from the previous close."
"The Standard & Poor's/TSX Composite Index added 1.6 percent to 13,750.48."
"Mosaid Technologies Inc. (MSD CN): The Ottawa-based semiconductor designer forecast fiscal second-quarter 2009 profit in the range of 29 cents to 33 cents a share before one- time items, 26 percent less than estimated by four analysts in a Bloomberg survey. The shares rose 1.7 percent to C$15.85."
"Tundra Semiconductor Corp. (TUN CN): The company, another Ottawa-based Canadian semiconductor maker, forecast 38 percent less adjusted second-quarter per-share profit than analysts in a Bloomberg poll. The shares added 0.3 percent to C$3.70."
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
"Last Updated: August 29, 2008 00:02 EDT"
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"Mexico Inflationary Pressures Are Easing, Ortiz Says (Update2) "
By Thomas Black
"Aug. 28 (Bloomberg) -- Inflationary pressures in Mexico are abating and consumer price increases will peak by next year, central bank Governor Guillermo Ortiz said."
"``We're seeing the end of the inflation theme and pressures because of supply shocks,'' Ortiz said today at a conference in Monterrey. Wages haven't been affected by inflation, and a slowing economy will help keep prices from accelerating, he said."
"Ortiz's remarks and Economy Minister Gerardo Ruiz Mateos' comment earlier this week that inflation may have peaked underscore confidence that the bank's three rate increases in as many months have helped tame the fastest inflation in almost four years. Ortiz is signaling the bank may stop raising interest rates, said Bertrand Delgado, an economist at research firm IDEAglobal Inc."
"``It's a clear message that they're almost done, if not done already,'' said Delgado, who is based in New York. ``There's a higher chance they will remain on hold than hike.''"
"Mexico's peso weakened on Ortiz's comments, dropping 0.9 percent, the most in almost three weeks, to 10.2336 per dollar at 3:28 p.m. New York time. The currency had gained 7.4 percent this year through yesterday on the widening gap between benchmark lending rates in the U.S. and Mexico."
"``The combination of moderate economic activity going forward and lower raw material prices, and the fact that there hasn't been significant contamination in the formation of prices and salaries, make us think that the inflation forecast by the Banco de Mexico will be reached,'' Ortiz said today."
Inflation Target
"The Banco de Mexico, like central banks in most countries, has struggled to keep inflation in check amid steeper costs for energy, food and commodities. The bank targets annual inflation of 3 percent, a goal it doesn't expect to reach until 2010."
"The central bank seems to be shifting from a hawkish into a more dovish stance, said Juan Trevino, an economist at HSBC Mexico SA."
"``It's a bit risky to say that the risks have diminished substantially, which is apparently the message governor Ortiz wants to send,'' he said in an interview."
"The annual inflation rate accelerated to 5.53 percent in the first half of August, according to data compiled by Bloomberg. July's annual rate of 5.39 percent was the highest level since November 2004."
"Ortiz said today that Mexico will have a low growth rate next year. His comment comes after the bank signaled earlier this month that easing commodity prices and slower economic growth may reduce the need for further rate tightening. Banco de Mexico said in a statement Aug. 15 that the risks of an economic slowdown have increased, and that food and energy prices may ease soon."
Economic Outlook
Finance Minister Agustin Carstens said today that a global credit crunch and the resulting economic slowdown reduced Mexico's gross domestic product growth by 1.5-to-2 percentage points.
"``We're seeing a transitory period of a deceleration of the economy,'' Carstens said in Monterrey. ``Next year our economy will begin to accelerate with much more vigor.''"
"Carstens predicted economic expansion of 4 percent by the fourth quarter of next year, up from 2.8 percent in this year's second quarter. Growth may reach more than 5 percent in 2011 and 2012, he said."
"To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net."
"Last Updated: August 28, 2008 17:02 EDT"
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"Australian Home Sales Fall to 2-Year Low, Lending Growth Slows "
By Jacob Greber
"Aug. 29 (Bloomberg) -- Australian new home sales fell to a two-year low in July and lending to consumers and businesses rose at the slowest annual pace since 2002, reinforcing speculation the central bank will cut interest rates next week."
"Sales of newly built homes dropped 7.2 percent from June, the Housing Industry Association reported in Canberra today. Total credit provided by banks and other finance companies climbed 11.2 percent from a year earlier, the smallest gain since August 2002, the Reserve Bank of Australia said in Sydney."
Slower credit growth and declining demand for property is further cooling an economy that expanded at the weakest pace in almost two years in the first quarter. The central bank said last week it may soon cut interest rates from a 12-year high to avoid a ``deeper and more persistent'' economic slowdown.
"``Today's data do confirm that a 25-basis-point rate cut is on the way next Tuesday,'' said Alex Joiner, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``Consumers are pulling back on spending as pressures on household budgets build.''"
"Reserve Bank Governor Glenn Stevens and his board meet on Sept. 2 and will lower the benchmark rate by at least a quarter- point to 7 percent, the first cut in seven years, according to all 20 economists surveyed by Bloomberg News today."
"The Australian dollar fell to 86.37 U.S. cents at 12:44 p.m. in Sydney from 86.43 cents before the lending report was released. The two-year government bond yield dropped 1 basis points, or 0.01 percentage point, to 5.73 percent."
Consumer Borrowing
"Credit provided to consumers for purchases other than housing dropped 0.7 percent in July from a month earlier, the biggest decline since December 1992, the central bank report showed. That type of lending rose 3 percent from a year earlier, the smallest annual gain in 14 years."
"Harvey Norman Holdings Ltd., Australia's largest furniture and electronics retailer, today posted a 43 percent decline in second-half earnings as consumers reined in purchases."
"``The last six months have been challenging,'' Chairman Gerry Harvey said in a report. Higher interest rates, rising fuel prices and increasing living costs are ``negatively impacting consumer sentiment,'' he said."
"Sales of detached homes slumped 7.5 percent in July and sales of apartments declined 5.2 percent last month, according to the Housing Industry Association's figures."
"The report reinforces ``industry evidence that home building conditions hit the wall in early July,'' said Harley Dale, chief economist at the association, which represents building companies."
``The imminent move to lower interest rates is a welcome first step to a much-needed home building recovery.''
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
"Last Updated: August 28, 2008 23:32 EDT"
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"Japan Stocks Rise, Cap Weekly Gain, on Factory Output, U.S. GDP "
By Masaki Kondo
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"Aug. 29 (Bloomberg) -- Japan's stocks jumped, capping a weekly gain and sending the Topix index to its sharpest increase in five months, after factory output unexpectedly rose and the U.S. economy grew faster than estimated."
"Nippon Steel Corp., the second-largest maker of the alloy, surged 5.4 percent, the most in three months. Matsushita Electric Industrial Co., the world's largest maker of consumer electronics, rose 2.7 percent after the U.S. economy expanded and slower consumer price gains in Tokyo suggested inflation may slow. Nintendo Co. soared 8.4 percent, the most in nine months, after lifting its profit forecast by a quarter."
"``Investors like the domestic economic stats,'' said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. ``Inflationary pressure on households should ease, helping demand for goods and services to recover.''"
"The Nikkei 225 Stock Average climbed 304.62, or 2.4 percent, to close at 13,072.87 in Tokyo. The broader Topix index surged 35.18, or 2.9 percent, to 1,254.71, its sharpest gain since April 2. All 33 industry groups on the Topix ."
"Both gauges rose 3.2 percent on the week, paring losses in August to 2.1 percent for the Topix and 0.7 percent on the Nikkei."
"Factory output advanced 0.9 percent in July from the previous month, Japan's trade ministry said today before markets opened, while economists had expected a decline. Inflation in Tokyo, a harbinger of nationwide inflation, slowed in August for the first time since November, the government said in a separate report. Inflation across Japan exceeded 2 percent this month for the first time in a decade."
Fueling Optimism
"The U.S. Commerce Department said yesterday gross domestic product climbed at a 3.3 percent annualized pace in the second quarter, while economists had estimated a 2.7 percent increase."
"Nippon Steel jumped 27 yen to 523, the most since May 15. Closest rival JFE Holdings Inc. leapt 4.7 percent to 523 yen. Steelmakers were the second-biggest winner among industry groups on the Topix."
"``July industry production figures showed that output and shipments at steelmills increased while inventories fell,'' said Yoshihisa Okamoto, a fund manager at Mizuho Asset Management Co., which oversees about $26 billion in Tokyo. ``That fueled optimism about their earnings outlook.''"
Stimulus Package
"Matsushita Electric gained 50 yen to 2,265 yen. Mazda Motor Corp. which exports 80 percent of its domestic production, added 3.4 percent to 587 yen, the most since Aug. 6. Fuji Heavy Industries Ltd., maker of Subaru cars, climbed 3.5 percent to 630 yen. Makers of electronics and cars accounted for a fifth of the Topix's advance."
"Stocks extended gains after Japanese Finance Minister Bunmei Ibuki said at midday the government will take measures to prop up the economy. Japan will spend about 2 trillion yen ($18 billion) this fiscal year for an economic stimulus program, the government said after markets shut."
"Nintendo soared 8.4 percent in Osaka trading to 51,800 yen, the sharpest gain since Nov. 14. The company, whose shares had fallen 17 percent since it left its profit target unchanged on July 30, lifted its full-year forecast by 26 percent because of higher sales of Wii and DS game players."
"Tecmo Ltd., creator of the Dead or Alive video-game series, surged by its trading limit, or 14 percent, to 806 yen. Square Enix Co., which makes the Final Fantasy line of video games, today offered to pay 920 yen ($8.40) a share for more than half of Tecmo. Square Enix added 2.6 percent to 3,610 yen."
Lower Target
"Fujifilm Holdings Corp., the world's biggest maker of liquid-crystal display film, plunged 12 percent to 3,030 yen, the sharpest drop since September 1981. The company, today's biggest loser on the Nikkei, cut its annual net income target by 27 percent owing to rising material costs, prompting UBS AG and Mizuho Securities Co. to reduce their ratings on the shares."
"Nikkei futures expiring in September fell 0.2 percent to 13,030 in Osaka and 0.1 percent to 13,030 in Singapore."
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
"Last Updated: August 29, 2008 04:52 EDT"
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"Eurozone Aug. Consumer, Business Confidence: Summary (Table) "
By Kristian Siedenburg
Aug. 29 (Bloomberg) -- Following is a summary of August eurozone economic sentiment from the European Commission in Brussels:
================================================================================
Aug. July June May April March Feb. Jan. Dec.
2008 2008 2008 2008 2008 2008 2008 2008 2007
================================================================================
------------------------- Eurozone --------------------------
Eco sentiment 88.8 89.5 94.8 97.6 97.1 99.6 100.2 101.7 103.4
--------------------------------------------------------------------------------
Business conf. -10 -8 -5 -2 -2 0 0 1 2
Future product. -4 1 5 7 8 8 10 12 11
Orders -14 -13 -9 -5 -5 -1 -2 -1 0
Inventories 12 11 10 8 9 7 7 7 7
Past production -4 -5 -2 5 0 6 3 3 4
Exports -14 -12 -9 -6 -5 -2 -2 -2 1
Employment -8 -7 -4 -3 -2 -1 -1 0 3
Selling prices 17 20 16 13 13 13 14 14 13
-------------------------------------------------------------------------------
================================================================================
Aug. July June May April March Feb. Jan. Dec.
2008 2008 2008 2008 2008 2008 2008 2008 2007
================================================================================
Consumer conf. -19 -20 -17 -15 -12 -12 -12 -12 -9
---------------Situation Over Next 12 Months---------------
Financial -12 -13 -12 -10 -8 -7 -7 -7 -5
General economic -28 -30 -25 -21 -19 -17 -18 -17 -12
Savings -14 -16 -16 -15 -12 -13 -12 -11 -10
Unemployment 23 20 14 13 11 11 12 11 8
Major purchases -22 -21 -21 -20 -19 -19 -18 -18 -18
Price trends 22 30 31 28 28 26 28 28 28
---------------Situation Over Past 12 Months---------------
Financial -22 -23 -21 -19 -17 -17 -16 -15 -15
General economic -44 -44 -40 -36 -32 -30 -29 -25 -21
Major purchases(* -36 -36 -35 -29 -23 -25 -23 -22 -23
Price trends 71 74 73 70 65 66 61 60 59
--------------------------------------------------------------------------------
Services conf. 3 1 9 8 7 9 10 13 14
Bus. situation -3 -8 4 4 1 2 3 6 9
Recent demand 3 4 10 9 7 11 13 12 13
================================================================================
Aug. July June May April March Feb. Jan. Dec.
2008 2008 2008 2008 2008 2008 2008 2008 2007
================================================================================
Expected demand 9 7 14 13 12 13 13 19 19
Recent employ. 6 6 7 10 6 10 7 8 9
Expected employ. 5 3 7 10 8 9 10 12 13
--------------------------------------------------------------------------------
Retail confidence -11 -9 -4 -1 -5 1 1 -3 1
Present business -9 -10 -3 3 -4 5 5 -2 4
Inventories 20 17 17 14 18 15 16 18 17
Expect business -5 1 7 8 6 11 14 10 15
Placing orders -11 -8 -4 1 -5 5 0 2 6
Employment 2 1 2 5 5 8 9 10 8
--------------------------------------------------------------------------------
Construction -13 -14 -11 -9 -12 -9 -7 -6 -5
Orders -20 -23 -19 -16 -18 -15 -13 -13 -11
Employment -6 -6 -4 -2 -6 -3 -2 1 2
Activity/recent -8 -9 -5 0 -5 6 6 1 4
Prices 4 5 11 6 2 2 4 7 9
================================================================================
NOTE: Economic sentiment is weighted as follows: industrial
"confidence (40%), service confidence (30%), consumer confidence"
"(20%), construction confidence (5%) and retail confidence (5%)."
Average 1990 to 2007 equals 100. All figures are seasonally adjusted.
* at present
SOURCE: European Commission
To contact the reporter on this story: Kristian Siedenburg in Budapest at ksiedenburg@bloomberg.net
"Last Updated: August 29, 2008 05:00 EDT"
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"Canada's Dollar Drops as Oil Reverses Gain, U.S. Dollar Rises "
By Chris Fournier
Aug. 28 (Bloomberg) -- Canada's dollar dropped for the first time in three days after crude oil reversed early gains and the U.S. dollar rallied versus most of the world's major currencies.
The Canadian dollar fell versus 14 of the 16 most-actively traded currencies. Commodities account for more than half of the nation's export revenue. The U.S. is Canada's largest trading partner.
"The currency is falling on ``oil and the U.S. dollar,'' said David Watt, a senior currency strategist in Toronto at RBC Capital Markets Inc."
"The Canadian currency declined 0.5 percent to C$1.0515 per U.S. dollar at 3:03 p.m. in Toronto, from C$1.0459 yesterday. One Canadian dollar buys 95.10 U.S. cents."
"Crude oil fell 2.1 percent to $115.63 per barrel, after earlier climbing above $120."
The Commerce Department in Washington said U.S. gross domestic product expanded at a 3.3 percent annual rate last quarter. The median estimate of economists surveyed by Bloomberg anticipated growth of 2.7 percent.
"``U.S. growth has certainly scaled back recession concerns, leading to dollar gains across the board,'' said Tyson Wright, senior currency trader at Custom House in Victoria, British Columbia. The Canadian dollar ``is falling on the broader U.S. dollar sentiment and oil paring gains.''"
Canada's currency surged 17 percent in 2007 as commodity prices soared. The rally stalled this year as the economy of the U.S. cooled and as oil fell from the record high of $147.27 set July 11. The Canadian currency touched a 12-month low of C$1.0728 on Aug. 12.
Currency Forecast
"Canada's dollar 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."
"The yield on the two-year Canadian government bond fell 1 basis point, or 0.01 percentage point, to 2.74 percent. The price of the 2.75 percent security due in December 2010 rose 3 cents to C$100.03. The yield on the 10-year bond dropped 2 basis points to 3.51 percent."
"The two-year bond's yield will rise to 3.09 percent by the end of this year, while the 10-year bond's yield will increase to 3.86 percent, according to the median forecasts of economists surveyed by Bloomberg News."
"The yield advantage of the 10-year U.S. Treasury note compared with similar-maturity Canadian government bonds was 28 basis points, up from 23 basis points yesterday. The Canadian 10-year bond yielded 36 basis points more than its U.S. counterpart on Jan. 22."
"Canadian government bonds have returned 4.8 percent in 2008, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 4.1 percent this year."
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
"Last Updated: August 28, 2008 15:05 EDT"
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European Bonds Head for Monthly Gain on Signs Growth Is Slowing
"Aug. 29 (Bloomberg) -- European government bonds rose, headed for a second monthly advance, on bets slowing economic growth will curb the risk of inflation and allow the region's central bank to lower interest rates next year."
The gains pushed benchmark 10-year German bund yields down almost a quarter-point this month on concern the euro-region economy is entering a recession. Reports today showed economic sentiment in the 15-nation bloc region worsened and the inflation rate fell from a 16-year high by more than economists forecast.
"``The fundamental picture is bond-market friendly,'' said David Schnautz, a fixed-income strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``The economy in the euro zone is deteriorating and there are signs we have already passed the peak in inflation.''"
"The yield on the 10-year bund fell 4 basis points to 4.14 percent by 10:29 a.m. in London, leaving it 21 basis points lower this past month. The price of the 4.25 percent note rose 0.34, or 3.4 euros per 1,000-euro ($1,473) face amount, to 100.90."
"The yield on the two-year German note fell 3 basis points to 4.12 percent, down 14 basis points since the end of July. Yields move inversely to bond prices."
"Two-year yields will slip to 3.8 percent and 10-year yields to 4 percent by the end of September, Schnautz predicted."
Confidence Slipping
"European consumers and executives became more pessimistic about the economic outlook, a confidence survey showed. An index measuring optimism in the euro region fell to 88.8 from 89.5 in July, the European Commission in Brussels said."
"The inflation rate fell to 3.8 percent in August, from 4.1 percent a month ago, the European Union's statistics office said."
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.''
"European bonds have returned 2.7 percent since June 27, compared with 3.9 percent for gilts and 1.9 percent on Treasuries, according to Merrill Lynch & Co.'s EMU Direct Government, U.K. Gilts and U.S. Treasury Master indexes."
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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"Gold Gains on Dollar's Drop, Higher Oil Prices; Platinum Falls "
By Claudia Carpenter
"Aug. 29 (Bloomberg) -- Gold gained in London, heading for its second weekly advance as declines in the dollar and higher oil prices spurred demand for the precious metal. Platinum fell."
"Demand for gold as a hedge against inflation may accelerate as Gustav, forecast to become the worst Gulf of Mexico hurricane since Katrina, heads for Louisiana next week, threatening to disrupt a quarter of U.S. petroleum production. Gold has climbed for seven years as the dollar dropped 39 percent against the euro and oil jumped to a record."
"``Given the storm situation and fears of a spike in oil, people may be taking positions in gold,'' said James Moore, an analyst at TheBullionDesk.com in London. ``It certainly seems the market has regained more bullish sentiment.''"
"Gold for immediate delivery gained $2.20, or 0.3 percent, to $836.25 an ounce as of 9:09 a.m. in London, for a 1.6 percent increase this week. Prices rose 4.5 percent last week, the most in six months. The dollar dropped against the euro and yen."
Crude oil gained $1.41 to $117 a barrel.
"Silver for immediate delivery rose 9.13 cents to $13.78 an ounce, platinum dropped $9.75 to $1,467.75 an ounce and palladium increased $3.50 to $297.25."
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
"Last Updated: August 29, 2008 04:50 EDT"
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Dollar Declines Against Yen on Speculation U.S. Spending Slowed
By Gavin Finch and Stanley White
Enlarge Image/Details
"Aug. 29 (Bloomberg) -- The dollar fell against the yen, headed for its biggest weekly drop in almost four months, on speculation a U.S. government report will show growth in consumer spending slowed."
"The greenback also declined versus the euro, paring its biggest monthly gain since the debut of the European single currency in 1999, as oil prices climbed on signs a storm will disrupt production in the Gulf of Mexico. The U.K. pound slid to near a record low against the euro after a central bank policy maker said lower interest rates are needed to avoid a recession."
"``We've seen the dollar rally running out of steam this week as oil prices have started to firm up again, hurting the currency,'' said Ian Stannard, a London-based currency strategist for BNP Paribas SA. ``It's not surprising that the dollar has weakened given the extent of its recent gains. We see some upside potential for the euro.''"
"The U.S. currency declined to 108.78 yen by 6:35 a.m. in New York, from 109.50 yesterday and 110.07 on Aug. 22. The dollar fell to $1.4731 per euro, compared with $1.4706. The euro was at 160.24 yen, from 161.04 yesterday. The dollar may drop to $1.4850 per euro in the coming week, Stannard forecast."
"The dollar is set for a 5.5 percent gain against the euro this month, supported by a 5.7 percent decline in crude and a government report showing the U.S. economy grew faster than estimated in the second quarter."
"The euro is 4.8 percent lower against the yen this month, the largest drop since March 2004, as a slump in German business confidence added to concern European economies will fall into a recession."
U.S. Spending
"U.S. personal spending rose 0.2 percent in July after climbing 0.6 percent in June, according to a Bloomberg News survey of economists. Personal income fell 0.2 percent following a 0.1 percent gain, a separate survey showed. The Commerce Department will release the data at 8:30 a.m. in Washington."
"Futures on the Chicago Board of Trade show a 17 percent chance that the Fed will increase its 2 percent target rate for overnight lending between banks by at least a quarter-point at a Dec. 16 meeting, compared with 69 percent odds a month ago. Policy makers next meet Sept. 16."
"Crude oil for October delivery rose 1.1 percent to $116.82 a barrel on concern a tropical storm threatening U.S. oil rigs in the Gulf of Mexico will strengthen into the worst hurricane since Katrina. 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."
"Dollar, Oil"
"``The recent rally in the dollar has likely come to an end,'' said Masahiro Sato, joint general manager of the treasury division at Mizuho Trust & Banking Co. in Tokyo. ``Traders are inclined to sell the dollar today as oil prices inch higher.''"
"The U.S. currency may fall to 108.50 yen today, he said."
"The ICE futures Exchange's Dollar Index, which compares the greenback against the currencies of six U.S. trading partners, fell 0.3 percent to 76.925, cutting its monthly advance to 5.1 percent. It reached 77.619 on Aug. 26, the highest level this year."
"The yen advanced against all 16 most-active currencies tracked by Bloomberg after the Japanese government said consumer- price growth exceeded 2 percent for the first time in a decade as food and oil prices surged. A separate report showed industrial production rose 0.9 percent last month, counter to economists' expectations for a decline."
"The pound headed for a 2.5 percent monthly decline versus the euro, the largest since March, after Bank of England policy maker David Blanchflower said yesterday in an interview with Reuters rates need to fall. It was at 80.60 pence per euro from 80.37. It reached a record low of 80.99 pence on April 16."
"The pound last stood at $1.8277, on course for a 7.9 percent decline this month, the most since October 1992. The average value of a home in the U.K. fell 10.5 percent in August from a year earlier, Nationwide Building Society said yesterday."
`Bad To Worse'
The implied yield on the March short-sterling futures contract fell 20 basis points this month to 5.22 percent. The BOE's benchmark rate is 5 percent.
"``The news for sterling has gone from bad to worse,'' analysts led by Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, France's biggest bank, wrote in a research note yesterday. ``Moreover, BOE member Blanchflower delivered dovish comments.''"
"Investors should sell the pound with a target of $1.82, according to the report."
"Traders have pared bets the European Central Bank will raise its 4.25 percent benchmark rate. The implied yield on the Euribor futures contract expiring September 2009 fell to 4.51 percent, from 4.63 percent on July 31."
"``The euro will continue to depreciate,'' said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital, Britain's third-biggest lender. ``A slowdown in European economies is becoming quite evident. We expect the ECB to keep rates on hold until the second quarter of next year.''"
"The euro may decline to $1.45 within a month, he said."
To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net
"Last Updated: August 29, 2008 06:39 EDT"
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"European Economic Confidence Drops, Inflation Eases (Update1) "
By Fergal O'Brien
Aug. 29 (Bloomberg) -- Europeans' confidence in the economic outlook fell more than economists forecast this month as the economy teetered on the brink of a recession. Inflation unexpectedly slowed.
"An index of executive and consumer sentiment dropped to 88.8 from 89.5 in July, the European Commission in Brussels said today. That is below the 89.3 median estimate of 26 economists surveyed by Bloomberg News. Inflation fell to 3.8 percent from 4 percent last month and consumers' outlook on prices plunged."
"The euro pared gains after the reports, which signaled the slump in economic growth is extending through the third quarter and a 20 percent drop in oil prices from a record $147.27 a barrel last month is easing inflation pressures. Consumer-price increases are still above the European Central Bank's limit, prompting policy makers including Axel Weber to indicate they are in no hurry to cut interest rates even as expansion slows."
"``The euro-zone economic situation is deteriorating markedly,'' said Carsten Brzeski, an economist at ING Group in Brussels. ``Therefore, it is somewhat striking that some central bankers still consider interest rates to be accommodative.''"
"Economists had forecast that inflation would remain at 4 percent, a 16-year high, in August, according to the median estimate of 31 economists in a Bloomberg News survey. National data this week showed inflation in Germany, Europe's largest economy, Spain and Belgium eased this month."
European Bonds
"The euro was up 0.2 percent to $1.4731 against the dollar as of 10:12 a.m. in London, having been as high as $1.4767 earlier. European bonds extended gains, with the yield on the German 1-year bund falling 4 basis points to 4.14 percent today. It's down 21 basis points since the start of the month."
"The ECB, which aims to keep inflation just below 2 percent, raised its key interest rate to 4.25 percent on July 3, a seven- year high. While the central bank left the rate on hold this month, ECB Executive Board member Lorenzo Bini Smaghi said in a Bloomberg Television interview broadcast today that inflation is ``too high'' and must be brought below the bank's ceiling."
"Still, most investors have pared bets on the ECB raising rates again as the economic outlook worsens, Eonia forward contracts show. The May contract yielded 4.15 percent today, down from 4.44 percent a month ago."
The 15-nation euro-area economy shrank in the second quarter while the region's manufacturing and service industries contracted in August. Factory orders in Germany have dropped for the past seven months.
Consumer Confidence
"Confidence among euro-area manufacturers fell more than economists forecast to minus 10 this month from minus 8 in July, while sentiment among retailers also declined, according to today's report from the commission. Consumer confidence rose 1 point from July's minus 20, staying close to a 5 1/2-year low. In the U.K., consumer confidence stayed near a record low in August, GfK NOP said today in a separate report."
"In the euro area, unemployment remained at 7.3 percent in July, another report showed."
"European companies and consumers see less chance of prices rising, the data indicate. A measure of companies' selling-price expectations fell to 17 in August from 20 in July. Consumers' outlook for prices dropped to 22 from 30, below its average reading for the past 18 years."
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
"Last Updated: August 29, 2008 05:38 EDT"
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Treasuries Decline as Stock Gains Sap Demand for Safest Assets
By Anchalee Worrachate and Wes Goodman
"Aug. 29 (Bloomberg) -- U.S. Treasuries fell for a second day as global stocks headed for their best week in more than three months and the risk of owning corporate bonds declined, reducing demand for the relative safety of government securities."
"Two-year yields were near the highest level in a week after MBIA Inc., the world's largest bond insurer, rallied 35 percent yesterday and Fannie Mae, the biggest U.S. mortgage-finance company, gained 23 percent. Treasuries are still poised for a third monthly gain amid forecasts for slowing economic growth and as companies' mortgage-related credit losses exceed $512 billion."
"``With shares of Fannie Mae rallying, you aren't going to buy Treasuries,'' said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. ``People are unwinding flight-to-quality trades. But there's unlikely to be a massive sell-off in Treasuries, given the uncertainty in the growth outlook.''"
"The two-year note yield rose 2 basis points to 2.38 percent as of 11:10 a.m. in London, according to bond broker BGCantor Market Data. The 2.375 percent security due August 2010 fell 1/32, or 31.25 cents per $1,000 face amount, to 99 31/32. A basis point is 0.01 percentage point."
Ten-year yields increased 1 basis point to 3.79 percent.
"The MSCI World Index of shares advanced 1.3 percent this week, its biggest gain since the period ending May 16. MBIA shares jumped as the company said it won new business after losing its top AAA credit rating."
Bond Risk Drops
"The cost of protecting European corporate bonds from default fell. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings decreased 6 basis points to 544, near the lowest level in three weeks, according to JPMorgan Chase & Co."
The index is a benchmark for the cost of protecting bonds against default and a decline indicates improvement in the perception of credit quality; a rise signals the opposite.
"Further declines may be limited. U.S. economic growth is poised to slow in the final months of 2008, making Treasuries attractive, said Hiromasa Nakamura, senior fund investor in Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $36.5 billion as part of Japan's second-largest bank."
"Personal income in the U.S. declined 0.2 percent in July, following a 0.1 percent gain in the previous month, while personal spending growth probably slowed to 0.2 percent, according to the median forecast of 73 economists surveyed by Bloomberg News before the Commerce Department data today. Another report may show consumer confidence improved this month."
"``It's a good situation for the Treasury bond market,'' said Nakamura. ``House prices are declining. U.S. consumer spending will slow down.''"
Rising Returns
"Two-year yields will fall to 1.6 percent by year-end, said Nakamura, who correctly forecast a rally in Treasuries last year."
"U.S. government securities returned 1.4 percent in August, the most since January, according to Merrill's U.S. Treasury Master index. They are up 4 percent this year, versus 9.06 percent for all of 2007."
"``The outlook for Treasuries is quite constructive,'' David Rosenberg, Merrill's North American economist in New York, wrote in a report yesterday."
Treasuries also fell after the U.S. completed $54 billion in note sales this week and a government report showed the economy grew faster than forecast in the second quarter.
"Gross domestic product increased at an annual rate of 3.3 percent, with the Commerce Department revising the figure yesterday from 1.9 percent."
"Futures on the Chicago Board of Trade show a 65 percent chance Federal Reserve will raise its target for overnight bank loans, now 2 percent, at least 25 basis points by the end of the first quarter next year. Policy makers next meet Sept. 16."
"The difference between two- and 10-year yields shrank to 1.41 percentage points, the narrowest since July 25. Two-year notes, more sensitive to changes in interest rates, lagged behind longer maturities."
The so-called flatter yield curve indicates investors have become less pessimistic about the near-term economic outlook.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.
"Last Updated: August 29, 2008 06:33 EDT"
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Nordic Currencies: Norway's Krone Climbs Against Euro on Sales
By Bo Nielsen
"Aug. 29 (Bloomberg) -- Norway's krone headed for its second monthly advance versus the euro as a report showed retail sales rebounded in July, strengthening the case for the Norges Bank to increase interest rates next month."
"The krone is set for its biggest monthly gain since April after Statistics Norway said sales climbed an annual 1.5 percent, after rising 0.1 percent in June, The median estimate in a Bloomberg survey of economists was for a 2.6 percent increase. It is also poised for its steepest monthly drop in 3 1/2 years versus the dollar as the price of oil, the country's biggest export earner, slipped in August."
"``Norges Bank is expected to hike at its September meeting due to strong underlying inflation,'' Geoffrey Yu, a currency strategist in London at UBS AG, the second-biggest foreign- exchange trading bank, wrote in a client note. ``We expect krone strength to be tempered if oil fails to rally and the policy outlook turns dovish.''"
"The Norwegian krone was at 7.9306 per euro by 11:16 a.m. in Oslo, from 7.9202 yesterday and 8.0078 on July 31. It was at 5.3827 versus the dollar from 5.3855 yesterday, leaving it 4.9 percent lower since the end of July."
"The krone fell against the dollar after a government report yesterday showed the U.S. economy expanded at a 3.3 percent rate in the second quarter, beating the 1.9 percent estimate in a Bloomberg survey."
"Norges Bank, which has raised its key interest rate twice this year, to 5.75 percent, indicated in June it may deliver one more increase by December. It meets on rates Sept. 24."
"Oil climbed to $116.64 a barrel from $115.59 yesterday, paring its decline to 6 percent this month."
"In other trading, Sweden's krona was at 6.4044 per dollar, heading for a 5.9 monthly drop, the biggest since March 2001."
"The country's current account narrowed to 38.8 billion kronor ($6.1 billion) in the second quarter from a revised 77.6 billion kronor in the prior period, the Riksbank said today. The Riksbank meets to set rates on Sept. 4."
"Iceland's krona advanced to 82.64 per dollar, from 82.73 yesterday."
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
"Last Updated: August 29, 2008 05:52 EDT"
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Canada Current Account Surplus Widens on Commodities (Update2)
By Alexandre Deslongchamps
"Aug. 28 (Bloomberg) -- Canada's current account, the broadest measure of international trade, grew to the highest in a year in the second quarter as prices for exported commodities such as oil and natural gas rose."
"Receipts from outside Canada exceeded payments sent abroad by C$6.76 billion ($6.42 billion), after a revised C$4.46 billion first-quarter surplus, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast an C$8 billion surplus from April to June, the median of 20 estimates, after the initially reported first-quarter surplus of C$5.6 billion."
"The report indicates commodity exports are helping the economy weather slower growth in the U.S., Canada's main trading partner, lessening the need for the central bank to cut interest rates to stimulate spending. Economic growth in Canada will be 1 percent this year, the slowest since 1992, the central bank said last month."
"The surplus in goods trade grew to C$16.4 billion, the most since the fourth quarter of 2005, Statistics Canada said. Natural gas appreciated 33 percent during the quarter, and oil gained 25 percent, boosting the value of sales even as they declined in volume terms. Sales of coal more than doubled on high global demand."
The Canadian dollar fell 0.6 percent to C$1.0523 per U.S. dollar at 4:29 p.m. in Toronto from C$1.046 yesterday. One Canadian dollar buys 95.55 U.S. cents.
Auto Exports
"Canadian automotive exports fell for a fifth straight three-month period to the lowest since the fourth quarter of 1996, Statistics Canada said."
"While companies' sales abroad continue to be crimped by Canada's high currency, the so-called loonie has weakened about 11 percent from a record 90.58 Canadian cents per U.S. dollar reached on Nov. 7."
"The deficit in travel narrowed for a second straight quarter to C$3.15 billion, as Canadians took fewer trips across the U.S. border."
"The deficit in investment income widened for a second straight quarter to C$3.39 billion, the agency said."
"Canada's current account -- the most complete measure of trade because it includes exports and imports of goods and services, transfers and investment income -- has slumped from a record C$12.3 billion surplus two years ago."
To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.
"Last Updated: August 28, 2008 16:31 EDT"
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Pound Set for Monthly Loss as Confidence Holds Near Record Low
By Lukanyo Mnyanda and Andrew MacAskill
Aug. 29 (Bloomberg) -- The pound fell to the lowest level in more than four months against the euro after a private report showing consumer confidence held near a record low in August strengthened the case for lower interest rates.
"The pound is also headed for the biggest monthly drop in almost 16 years versus the dollar after a confidence index based on a survey of 2,001 people rose 3 points from July's minus 39, the weakest since the data began in 1974, GfK NOP said today. Gilts extended gains, pushing the yield on the 10-year gilt to near the lowest level since April, after a report yesterday showed house prices had their biggest annual drop in almost two decades."
"``This is more bad news for sterling,'' said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``It underlines the picture we have that the U.K. economy is heading for a recession.'' The pound may drop to 81 pence per euro by year-end, he forecast."
"The U.K. currency fell as much as 0.4 percent to 80.69 pence per euro, the weakest level since April 16, and was at 80.63 by 9:10 a.m. in London. It has dropped 2.4 percent in August, set for the steepest monthly loss since March. The pound was at $1.8298, headed for its biggest one-month drop since sinking 12 percent in October 1992."
"Gilts headed for a second monthly gain, with the yield on the 10-year note falling 3 basis points to 4.45 percent, from 4.81 percent on July 31. The yield on the two-year gilt, which is more sensitive to interest-rate expectations, also dropped 3 basis points, to 4.47 percent, from 4.8 percent. Yields move inversely to bond prices."
Higher Rates
"The confidence data, together with a report showing luxury- home values registered their first annual fall in five years this month, reinforce speculation economic growth may slow enough for the Bank of England to cut its 5 percent benchmark interest rate."
"The average value of houses and apartments in London's nine most expensive neighborhoods dropped 1.6 percent from August 2007, broker Knight Frank LLP said today in a statement. Values fell 1.3 percent from July, a fourth monthly decline."
"Investors have been paring bets on higher rates, with the implied yield on the March short-sterling futures contract dropping 31 basis points in the past month to 5.25 percent today. That's helped gilts outperform Treasuries and European bonds in the past two months."
"Gilts have returned 3.9 percent since June 27, compared with 2.7 percent on European bonds and 1.9 percent on Treasuries, according to Merrill Lynch & Co.'s EMU Direct Government, U.K. Gilts and U.S. Treasury Master indexes."
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
"Last Updated: August 29, 2008 04:13 EDT"
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"Petrobras, Potash Added to Goldman Hedge Fund List (Update1) "
By Paulo Winterstein
"Aug. 28 (Bloomberg) -- Petroleo Brasileiro SA, Brazil's state-controlled oil company, and Potash Corp. of Saskatchewan Inc., the world's largest producer of the crop nutrient, were added to Goldman Sachs Group Inc.'s list of the most popular stocks among hedge fund managers."
"The addition of the companies to the so-called VIP list, which includes the 50 stocks that are the most common holdings in hedge fund portfolios, is a sign of ``strong interest in non- U.S. markets by U.S.-based hedge funds,'' strategist David Kostin wrote in note to clients."
"The VIP has outperformed the Standard & Poor's 500 Index during the past 12 months, falling 6 percent as the S&P 500 lost 9.2 percent. It is the first time Petrobras, as the Brazil company is known, or Potash Corp. appeared in the index."
"Petrobras' American depositary receipts rose to an all-time high in May, spurred by record oil prices and investor interest in the offshore Tupi oil field, which the company said in November may hold 8 billion barrels of crude."
"Among hedge funds, Boston-based Wellington Management Company LLP owns the most U.S.-listed shares. Wellington had 21.9 million ADRs as of the end of June, Bloomberg data showed."
"Billionaire investor George Soros bought an $811 million stake in the Rio de Janeiro-based company in the second quarter, making the oil company his investment fund's largest holding. Soros Fund Management LLC has the second-biggest stake in Petrobras among hedge funds, according to Bloomberg data."
Biggest Holder
"Petrobras fell 20 percent so far this year in Sao Paulo, more than the 12 percent drop in Brazil's Bovespa index. The shares surged 78 percent in 2007, compared with a 44 percent gain in the Bovespa."
"Speculation the government may keep some oil profits instead of channeling them through Petrobras may have hurt the shares, Mark Mobius, the executive chairman of Templeton Asset Management Ltd. in Singapore, said an Aug. 20 Bloomberg radio interview. Mobius oversees about $40 billion in emerging-market equities."
Tupi Field
"In November, Petrobras announced the discovery of Tupi, a field with as much as 8 billion barrels of crude, making it the largest find in the Americas since 1976. Tupi is part of a new deepwater offshore region known as the pre-salt that may contain as much as 50 billion barrels, according to Peter Wells, oil analyst with the U.K.'s Neftex Petroleum Consultants Ltd."
"Saskatoon, Canada-based Potash has gained 23 percent this year after tripling in value in 2007. Wellington and Soros also are the two largest holders of Potash."
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
"Last Updated: August 28, 2008 17:59 EDT"
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China's Yuan Heads for Monthly Loss Against Dollar; Bonds Rise
By Judy Chen and Kim Kyoungwha
Aug. 29 (Bloomberg) -- China's yuan headed for its first monthly loss against the dollar since May 2006 on speculation weaker global demand will prompt the government to limit currency gains to protect exporters. Government bonds rose.
"Slower growth worldwide will weigh on China's exports in the second half of 2008, Vice Commerce Minister Gao Hucheng said yesterday. The yuan's 6.6 percent gain in the first half, which almost matched the advance for the whole of 2007, crimped profits at exporters and cooled sales abroad."
"``It's obvious that the government is adjusting the pace of yuan appreciation against the dollar to make sure it won't do more harm to exports,'' said Liu Dongliang, a foreign-exchange analyst in Shenzhen at China Merchants Bank Co., the country's sixth largest lender. ``Most foreign trade transactions are settled in dollars.''"
"The yuan fell 0.08 percent this month to 6.8370 a dollar as of 12:12 p.m. in Shanghai, according to the China Foreign Exchange Trade System. It weakened 0.14 percent today, halting three days of gains."
"China's exports may increase in the second half at the same pace as in the first six months of the year, Gao said at a press conference in Beijing yesterday. Overseas shipments rose 21.8 percent in the first half of 2008, slower than the 27.6 percent growth a year earlier."
"The yuan is allowed to trade by up to 0.5 percent against the dollar either side of a daily reference rate, which was set at 6.8345 per dollar today."
"The Chinese currency will end this year at 6.66 per dollar, according to the median estimate of 25 analysts surveyed by Bloomberg news."
Bonds Gain
Government bonds rose on concern slowing exports will stall economic growth.
"The yield on the 3.92 percent note due July 2011 fell 1 basis point to 3.76 percent, according to the China Interbank Bond Market. The price rose 0.02 per 100 yuan face amount to 100.42. A basis point is 0.01 percentage point."
"``The growth will probably decline, easing pressure for the central bank to raise interest rates,'' said Jiang Chao, a fixed-income analyst at Guotai Junan Securities Co. in Shanghai. ``Yields may keep going down.''"
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
"Last Updated: August 29, 2008 00:37 EDT"
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Korea Won Completes Biggest Monthly Loss Since 1998; Bonds Gain
By Kim Kyoungwha and Judy Chen
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Aug. 29 (Bloomberg) -- South Korea's won completed its biggest monthly loss since the Asian financial crisis of 1998 as overseas investors sold local stocks and refiners bought dollars to pay import bills. Government bonds rose.
"This month's 7.1 percent decline was the worst since August 1998, when a region wide crisis drove South Korea to the brink of a national default and almost halved the value of the local currency. The won was the worst-performing currency in Asia outside Japan today as the central bank said the current-account balance returned to a deficit last month due to costlier crude- oil prices."
"``Demand for the dollar from foreign stock sales and importers is still high,'' said Kim Sung Soon, a dealer at Industrial Bank of Korea in Seoul. ``The market is on the lookout for the government's intervention.''"
"The won fell 0.7 percent today to 1,089 per dollar as of the 3 p.m. close of trading, according to Seoul Money Brokerage Services Ltd. The currency has fallen 14 percent this year, also the worst performer in Asia."
"Attempts by officials to halt the won's slide failed to keep the currency from falling to a 3 1/2-year low of 1,092.50 on Aug. 27. Central banks intervene in currency markets by buying or selling foreign exchange."
"Global funds sold more Korean shares than they bought for a ninth day, according to data from the stock exchange. The benchmark Kospi stock index tumbled 7.6 percent this month."
"The current account was in deficit by $2.45 billion in July, the largest shortfall in six months, following a surplus of $1.82 billion in June, the Bank of Korea said in Seoul. The current account is the broadest measure of trade, tracking goods, services and investment income."
Bonds Advance
Five-year government bonds gained for a fourth day after Finance Minister Kang Man Soo said inflation is likely to stop accelerating in coming months.
"Prices in August ``will stabilize compared with July due to the fall in oil costs,'' Kang said today at a government meeting in Gwacheon. Consumer prices climbed 5.9 percent in July from a year earlier, the fastest increase in almost 10 years. Inflation erodes the purchasing power of the fixed payments from debt."
"``Investors jumped in, heartened by the minister's comments on inflation,'' said Yang Jin Mo, a fixed-income strategist at SK Securities Co. in Seoul. ``Some expectations are forming that yields will decline further.''"
"Bonds erased some of their gains after a government report showed industrial production rose more than economists expected last month. Production grew 9.1 percent from a year earlier, after rising 6.8 percent in June, the statistics office said in Gwacheon. Economists expected a gain of 7.9 percent, according to a Bloomberg News survey."
"The yield on the 5.25 percent note due March 2013 fell 1 basis point to 5.84 percent, according to Korea Exchange. The price rose 0.09, or 9 won per 10,000 won face amount, to 100.14. A basis point is 0.01 percentage point."
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.
"Last Updated: August 29, 2008 02:48 EDT"
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"Colombia, Venezuela: Latin America Bond, Currency Preview "
By Andrea Jaramillo
Aug. 29 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.
"Chile: The central bank will publish minutes of its Aug. 14 meeting at 8:30 a.m. New York time. Policy makers lifted the target lending rate by a half-percentage point at each of the last three monthly meetings, bringing it to 7.75 percent."
The peso climbed 1 percent to 514.73 per dollar.
"The yield for a basket of five-year peso bonds in inflation-linked currency units, called unidades de fomento, rose 4 basis points to 2.91 percent, according to Bloomberg composite prices."
"Colombia: Banco de la Republica will publish minutes of its Aug. 15 meeting. The central bank left its key lending rate unchanged at 10 percent, a seven-year high."
"Colombia's jobless rate likely fell to 11.5 percent in July from 11.7 percent the previous month, according to the median estimate of 11 economists surveyed by Bloomberg News. The national statistics agency is set to announce the unemployment figures at around 11 a.m. New York time."
"The peso slipped 1 percent to 1,92 per dollar, from 1,900.90 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX."
"The yield on Colombia's benchmark 11 percent bonds due July 2020 fell 24 basis points to 11.25 percent, according to Colombia's stock exchange."
"Venezuela: The government is considering plans to repurchase debt, as well as the possible issuance of new securities, Finance Minister Ali Rodriguez said yesterday at a news conference."
"The bolivar weakened 5 percent to 4.05 per dollar in the black market from 3.85 yesterday, traders said."
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
"Last Updated: August 29, 2008 00:00 EDT"
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"Yuan's Gain to `Halt' After 5 Percent Advance, Barclays Says "
By Patricia Lui
"Aug. 29 (Bloomberg) -- China's yuan will gain another 5 percent on a trade-weighted basis in the next 12 months before coming to a ``halt'' when the government changes its policy of allowing the currency to strengthen, said Barclays Plc."
"The yuan, also known as the renminbi, is heading for its first monthly loss against the dollar since May 2006, triggering speculation that the government has already abandoned its policy for currency strength to curb inflation to focus on supporting exports with a weaker currency. A trade-weighted index for the yuan that includes the euro and yen reached a record this month, indicating the government's policy for a stronger yuan remains intact, according to Barclays."
"``The change in policy focus is yet to come,'' Peng Wensheng, Barclays' chief China economist in Hong Kong, said in an interview yesterday. ``The pace of effective exchange-rate appreciation has remained strong in recent weeks at an annualized rate of above 10 percent in contrast with the depreciation of the renminbi versus the dollar,'' he wrote in a research note today."
"China's yuan has gained 0.2 percent against the dollar in the third quarter compared with 7.3 percent against the euro. In the first half of the year, the yuan rose 6.6 percent against the U.S. currency while falling 0.7 percent against the euro."
"The yuan fell 0.2 percent to 6.8431 a dollar as of 2:38 p.m. in Shanghai, according to the China Foreign Exchange Trade System, snapping three days of gains. China's currency traded little changed at 10.0835 per euro."
`Biggest in History'
"The yuan's advance will come to an end as growth slows and the trade surplus narrows, according to Peng. ``By then, we would have had real effective appreciation of 27 percent since late 2004, the biggest in the history of any major currency,'' he said."
"The extent of this appreciation will reduce China's trade surplus from 9.5 percent of gross domestic product in 2007 to 5 percent, Peng wrote in the note."
"The yuan will appreciate to ``around 6.6 to the dollar'' in the next 12 months, the research note read, which is already reflected in the offshore non-deliverable forwards."
"The one-year offshore non-deliverable forward trades at 6.6550 to the dollar, according to data compiled by Bloomberg. Forwards are agreements in which assets are bought and sold at current prices for settlement at a later specified time and date. Non-deliverable forwards are settled in dollars."
To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net
"Last Updated: August 29, 2008 03:08 EDT"
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SK Energy Shares Fall After Merrill Lynch Cuts Price Target
By Shinhye Kang
"Aug. 29 (Bloomberg) -- SK Energy Co., South Korea's biggest oil refiner, fell for a seventh day in Seoul trading after Merrill Lynch & Co. cut its target price for the stock by 12.5 percent, citing concern overseas oil output may be delayed."
"SK Energy dropped as much as 2.6 percent to 86,800 won, the lowest price and the longest losing streak since the stock started trading in July last year. The benchmark Kospi index gained 0.5 percent."
"Merrill cut its estimates of SK Energy's daily oil production for the next three years by between 12 and 23 percent, reflecting anticipated delays on projects in Brazil and Vietnam, analysts including Sonia Song, said in a report today. The Seoul-based refiner has targeted an increase in crude output to 150,000 barrels a day by 2015 from 23,000 barrels now to secure supplies for Asia's fourth-largest economy as energy prices rise."
"Estimated output was trimmed to 24,000 barrels a day this year, 34,000 barrels in 2009, and 44,000 barrels the year after that, Merrill said. It cut the target price on SK Energy's stock to 140,000 won from 160,000 won."
"SK Energy's net debt surged 68 percent in the first six months of this year to 6.9 trillion won, the investment bank said. In May, Moody's Investors Service cut its credit-rating outlook on SK Energy to negative from stable, citing the company's increased spending."
"SK Energy, which traded at 86,900 won at 11:38 a.m., has dropped more than 50 percent in Seoul this year, compared with the 22 percent decline in Kospi."
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.
"Last Updated: August 28, 2008 22:53 EDT"
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"Germany's DAX Is Little Changed; Carmakers Drop, Adidas Gains "
By Stefanie Haxel
"Aug. 29 (Bloomberg) -- German stocks were little changed as higher oil prices weighed on carmakers, offsetting better-than- estimated earnings from European consumer companies."
"Daimler AG and Bayerische Motoren Werke AG, the world's biggest luxury carmakers, led declines as crude headed for its biggest weekly gain in almost two months. Adidas AG, the second- largest sporting goods maker, and Hugo Boss AG rose to the highest in more than a week after Carrefour SA and Gucci-owner PPR SA reported profit that beat analysts' projections."
"The DAX Index was little changed at 6,420.81 as of 10:35 a.m. in Frankfurt. DAX futures expiring in September slipped less than 0.1 percent. The HDAX Index of the country's 110 biggest companies fell 0.1 percent."
"The benchmark index for German equities is on course for a 0.9 percent decline in August, bringing this year's loss to 21 percent, on concern higher oil prices, accelerating inflation and more than $500 billion in credit-related losses will curb consumer spending and slow global economic growth."
"Crude oil for October delivery climbed as much as 1.4 percent to $117.17 a barrel in New York as producers evacuated rigs ahead of Gustav, forecast to become the worst Gulf of Mexico hurricane since Katrina."
"Daimler slipped 57.5 cents, or 1.4 percent, to 39.84 euros. UniCredit Markets & Investment Banking removed the second-largest maker of luxury vehicles from its ``recommended list.''"
"BMW, the biggest luxury carmaker, lost 32 cents, or 1.1 percent, to 27.94 euros. Volkswagen AG, Europe's largest automaker, fell 2.08 euros, or 1 percent, to 202.96."
Consumer Companies
"Adidas added 43 cents, or 1.1 percent, to 39.82 euros. Puma AG, Europe's second-biggest sporting-goods maker, advanced for a second day, gaining 7.06 euros, or 3.3 percent, to 218.50."
"Carrefour SA, the world's second-largest retailer, said first-half net income climbed to 750 million euros ($1.1 billion) on stronger grocery demand in emerging markets. Analysts estimated profit of 743 million euros in a Bloomberg survey. PPR SA said income from continuing operations in the period gained 17 percent to 344 million euros, exceeding the 327 million-euro median estimate."
"Hugo Boss, Germany's largest clothing maker, climbed for a fourth day, adding 41 cents, or 1.8 percent, to 22.81 euros."
The following stocks also rose or fell in German markets. Symbols are in parentheses.
"Indus Holding AG (INH GY) advanced 45 cents, or 2.5 percent, to 18.38 euros, the steepest gain in more than three weeks. The company that owns businesses including steel and information technology said second-quarter profit rose 44 percent to 18.8 million euros as cost cuts offset higher charges for raw-material and energy."
"Krones AG (KRN GY) rose for a second day, adding 83 cents, or 1.7 percent, to 50.40 euros. Goldman Sachs Group Inc. raised its share-price estimate for the maker of bottling and packaging equipment 6.4 percent to 58.50 euros."
"Norddeutsche Affinerie AG (NDA GY) dropped for a third time this week, falling 52 cents, or 1.6 percent, to 31.43 euros. Europe's largest copper refiner reported fiscal third-quarter net income of 48 million euros, missing the 54.6 million-euro median estimate of six analysts in a Bloomberg News survey."
"Stada Arzneimittel AG (SAZ GY) increased 1 euro, or 2.8 percent, to 37.40 euros, the highest in a month. Equinet AG raised its recommendation for Germany's third-largest generic- drug maker to ``hold'' from ``accumulate.''"
"Stratec Biomedical Systems AG (SBS GY) rallied 39 cents, or 2.1 percent, to 18.64 euros, the highest in almost seven months. Goldman Sachs lifted its share-price projection for the maker of laboratory equipment for diagnostics companies 2.1 percent to 19.7 euros."
To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net
"Last Updated: August 29, 2008 04:39 EDT"
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A blog for global investors, with information about most of the world financial markets. Updated frequently, every day, with my views on these markets. Bear or Bull? Read to discover!
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