Crude Oil Drops as Credit Market Turmoil May Slow Fuel Demand
By Christian Schmollinger
"Sept. 18 (Bloomberg) -- Crude oil declined in New York, paring yesterday's $6-a-barrel jump, on concern the fallout from the global credit crunch may lead to an economic slowdown and limit fuel demand."
"U.S. fuel demand the past four weeks was down 4.4 percent from a year earlier, the Energy Department said yesterday. Asian stock markets tumbled to their lowest in three years as investors were unconvinced an $85 billion bailout of American Insurance Group Inc. would ease the financial crisis and speculation that more banking firms might collapse."
"``The concerns that these bank failures may lead to a worldwide global recession, negatively impacting oil demand, has put downward pressure on prices,'' said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. ``You can't blame investors for being risk averse.''"
"Oil for October delivery fell as much as $1.43, or 1.5 percent, to $95.73 a barrel on the New York Mercantile Exchange. It was trading at $96.05 at 2:58 p.m. in Singapore. It earlier rose as much as 98 cents, or 1 percent, to $98.14 a barrel."
"Yesterday, oil jumped $6.01, or 6.6 percent, to $97.16 a barrel, the biggest one-day gain since June 6. Oil futures tumbled more than $10 a barrel in the first two days of the week on concern financial-market disruptions may weaken the global economy and cut fuel consumption."
"Brent crude oil for November settlement fell as much as $1.44, or 1.5 percent, to $93.40 a barrel and was trading at $93.65 at 2:58 p.m. Singapore time on London's ICE Futures Europe exchange. It earlier rose as much as 67 cents, or 0.7 percent, to $95.51 a barrel."
Banks Decline
"Macquarie Group Ltd., Australia's largest investment bank, plunged 17 percent after Goldman Sachs Group Inc. and Morgan Stanley, the only remaining independent brokerages on Wall Street, fell the most ever."
"The MSCI Asia Pacific Index dropped 3.6 percent to 106.64 as of 2:21 p.m. in Tokyo, the lowest since September 2005."
"More than $19 trillion has been wiped off global stock market value since a high on Oct. 31 as the worst U.S. housing recession since the Great Depression and a resulting global credit crisis slowed the world economy. This week, Lehman Brothers Holdings Inc. filed for bankruptcy and the U.S. government had to take over American International Group Inc."
"U.S. stocks slumped to the lowest in three years yesterday, with the Standard & Poor's 500 Index sliding 4.7 percent."
Fuel Consumption Falls
Oil prices rose yesterday after a U.S. government report showed that crude oil stockpiles dropped the most since May because of disruptions from Hurricane Ike.
"U.S. crude-oil stockpiles fell 6.33 million barrels to 291.7 million barrels last week, according to the Energy Department. It was the fourth-straight inventory decline. A drop of 3.5 million barrels was forecast, according to the median of responses by 11 analysts surveyed by Bloomberg News."
"The total products supplied by refiners for the past four weeks averaged 19.9 million barrels a day. Gasoline consumption averaged 9.21 million barrels a day over the period, down 2.6 percent."
"Nigerian militants stepped up attacks on oil companies, raising concern supply may be disrupted. Nigeria lost 280,000 barrels daily of its crude output to attacks launched by armed militants in the Niger Delta oil region in the past five days, bringing currently shut output to about 1 million barrels a day, the state-run oil company said."
"``Current shut-in production stands at about 1 million barrels a day, but it's not necessarily due to militant attacks,'' Levi Ajuonuma, spokesman for the Nigerian National Petroleum Corp., said by phone from the country's capital, Abuja. ``Only 28 percent is because of militant action.''"
"The Movement for the Emancipation of the Niger Delta, the main militant group in the oil region, said it declared an ``oil war'' in the southern delta that accounts for nearly all of the country's oil after the military launched an offensive on Sept. 13 on its positions."
"In the last five days the militant group, also known as MEND, has attacked pipelines and oil pumping stations run by units of Royal Dutch Shell Plc, Chevron Corp. and Eni SpA."
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
"Last Updated: September 18, 2008 03:04 EDT"
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Australia Dollar Trades Near Three-Year Low; N.Z. Dollar Rises
By Candice Zachariahs
Sept. 18 (Bloomberg) -- The Australian dollar traded near the lowest in more than three years against the yen as the U.S. takeover of American International Group Inc. failed to restore investor confidence. New Zealand's currency rose.
"The Australian currency fell as the Standard & Poor's 500 Index lost 4.7 percent, extending its decline from an October record to 26 percent. Goldman Sachs Group Inc. and Morgan Stanley plunged the most ever. That prompted investors to sell Australian assets bought in so-called carry trades using money borrowed in countries with lower interest rates."
"``Fear and negative sentiment is driving the market right now,'' said Joshua Williamson, senior strategist at TD Securities in Sydney. ``We expect to see more volatility.''"
"The Australian dollar was at 84.05 yen at 5:17 p.m. in Sydney from 84.00 yen in late Asian trading yesterday. It touched 81.61, close to the three-year low of 81.45 yen reached on Sept. 16. The Aussie, as the currency is called, rose 0.6 percent to 79.84 U.S. cents from 79.34 cents yesterday."
New Zealand's dollar rose 1 percent to 70.40 yen from 69.68 yen late in Asia yesterday. It gained 1.6 percent to 66.88 U.S. cents from 65.83 cents.
Asian stocks tumbled to the lowest in three years as Morgan Stanley weighed a merger with banks including Wachovia Corp. to regain investor confidence amid concerns more financial firms will collapse after the AIG takeover.
Joint Action
"The Australian dollar pared losses after central banks in Japan, the U.S., Europe and Canada announced coordinated measures to ease the stress in global financial markets."
"``The action is designed to address the continued elevated pressures in U.S. dollar short-term funding markets,'' the central banks said in a statement today."
Lloyds TSB Group Plc agreed to buy HBOS Plc for 12.2 billion pounds ($22.2 billion) after Britain's biggest mortgage lender lost half its market value in the past week.
"The Australian currency fell versus the yen as the VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to 36.22 yesterday, the highest since October 2002."
Carry Trades
The Australian dollar has dropped 19 percent against the greenback since touching a 25-year high on July 16 and the kiwi has lost 13.5 percent as concerns about global growth reduced investor appetite for the currencies.
"What's moving currencies now is ``just transactional flows being put through, no one really wants to hold on to the parcel,'' said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. ``The fundamental direction is still weaker,'' for the kiwi."
"The Bank of Japan kept its overnight lending rate at 0.5 percent yesterday and the U.S. Federal Reserve kept its benchmark rate at 2 percent Sept. 16. Interest rates are 7 percent in Australia and 7.5 percent in New Zealand, making them favorites with investors seeking higher returns."
"In carry trades, investors get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the two. The risk is that currency market moves can erase those profits."
"Australian government bonds rose. The yield on the 10-year note fell 4 basis points, or 0.04 percentage point, to 5.531 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.302, or A$3.02 per A$1,000 face amount, to 97.787. Bond yields move inversely to prices."
"New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 6.865 percent, from 6.89 percent yesterday."
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
"Last Updated: September 18, 2008 03:22 EDT"
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Ruble Little Changed Against Central Bank's Dollar-Euro Basket
By Ewa Krukowska
Sept. 18 (Bloomberg) -- Russia's ruble was little changed against the central bank's dollar-euro basket.
"The currency was at 30.3852 versus the basket by 10:27 a.m. in Moscow, from 30.3868 yesterday. Bank Rossii keeps the currency within a trading band against the basket to limit the effect of its fluctuations on the competitiveness of Russian exports."
"The ruble rose to 25.4148 per dollar, from 25.4353, and was little changed against the euro, trading at 36.4378."
The Russian currency was near a 1 1/2-week low versus the basket yesterday as the Finance Ministry pumped $44 billion into the three largest banks and halted stock trading a second day.
"The Micex Index of stocks sank 3.1 percent when trading was suspended indefinitely, bringing its three-day drop to 25 percent. Investors sold emerging-market assets after the collapse of Lehman Brothers Holdings Inc. and the U.S. government rescued insurer American International Group Inc."
Russia's central bank Chairman Sergey Ignatiev said yesterday the bank cut its reserve requirements for banks to spur lending amid ``an acute liquidity shortage.'' The rate will be cut by four percentage points today and will be in effect until Feb. 1.
To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net
"Last Updated: September 18, 2008 02:42 EDT"
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European Bonds Trim Gains After Joint Action By Central Banks
By Anchalee Worrachate
Sept. 18 (Bloomberg) -- European government bonds pared gains after the world's biggest central banks announced coordinated action to ease tension in financial markets.
"The yield on the two-year notes was little changed at 3.63 percent by 8:20 a.m. in London after falling by as much as 9 basis points earlier. The 4 percent security maturing in September 2010 rose 0.02, or 20 euro cents per 1,000-euro ($1,429) face amount, to 100.68."
"Yields on 10-year bunds, Europe's benchmark-government security, were steady at 4.01 percent."
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
"Last Updated: September 18, 2008 03:21 EDT"
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Gold Extends Biggest Rise in 26 Years as Haven Demand Gains
By Glenys Sim and Madelene Pearson
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"Sept. 18 (Bloomberg) -- Gold advanced for a second day, extending its biggest jump in 26 years, as investors sought a haven from the credit crisis that's sent equity markets tumbling. Silver also rose."
Gold gained as much as 3.4 percent to $892.93 an ounce after jumping 11 percent yesterday in the wake of the U.S. government's takeover of American International Group Inc. About $3.6 trillion of market value has been erased from global stocks this week as financial market turmoil intensified with the bankruptcy of Lehman Brothers Holdings Inc.
"``The conditions are still supportive for gold and it's very possible to see gold over $1,000 again,'' said Wallace Ng, chief trader for precious metals in Asia-Pacific at Fortis Bank."
"Gold for immediate was 0.8 percent higher at $870.65 an ounce at 1:53 p.m. in Singapore. The metal had earlier declined as much as 0.9 percent as oil fell, reducing its appeal as an inflation hedge, and as some investors sold the metal following yesterday's 11 percent jump, its biggest gain since Sept. 3, 1982. Silver was unchanged at $11.96 an ounce."
"``After the big run-up last night, we're seeing some people take the opportunity to cash out,'' Ng said."
"The U.S. Federal Reserve this week agreed to lend American International Group Inc., the nation's biggest insurer by assets, $85 million in return for an 80 percent stake in the group, while Lehman filed the biggest bankruptcy in history Sept. 15. U.S. stocks slumped to the lowest in three years yesterday, with the Standard & Poor's 500 Index sliding 4.7 percent"
`Unprecedented'
"``These are conditions we've not seen before,'' said Mark Pervan, a commodity strategist at Australia and New Zealand Banking Corp. in Melbourne. ``When you've got major financial institutions falling over, this is unprecedented.''"
Bullion's jump drove gold mining companies higher on the Australian stock exchange.
"Newcrest Mining Ltd., Australia's largest producer of the metal, climbed 14 percent, to A$24.35 at 3:57 p.m. in Sydney. Lihir Gold Ltd. jumped 16 percent and Sino Gold Mining Ltd. gained the most on record, adding 32 percent."
"Gold also rose as the VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose yesterday to its highest since October 2002, ANZ's Pervan said."
"``That rising series highlights a high risk to be playing equities,'' he said. ``The heightened uncertainty in U.S. financial markets has seen a switch out of equities and they've played oil and gold.''"
"Gold futures for December delivery advanced 2.5 percent to $871.90 an ounce in after-hours trading on the Comex Division of the New York Mercantile Exchange at 1:59 p.m. Singapore time. Bullion futures gained 9 percent yesterday, the most in 9 years."
To contact the reporters on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.netGlenys Sim in Singapore at gsim4@bloomberg.net
"Last Updated: September 18, 2008 02:32 EDT"
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"Barclays Likely to Buy Monte Paschi Branches, Corriere Reports "
By Armorel Kenna
"Sept. 18 (Bloomberg) -- Barclays Plc. and its Italian partners are the favorites to buy branches put up for sale by Banca Monte dei Paschi di Siena SpA, daily Il Messaggero reported, without saying where it got the information."
"Monte Paschi's advisers, Goldman Sachs Group Inc. and Rothschild, have received preliminary offers from at least three bidding groups, according to the Italian newspaper."
"Barclays wants to buy as many as 100 branches of the 150 that Monte Paschi needs to sell to comply with a ruling by Italy's competition regulator, Il Messaggero reported. Banca Popolare di Milano Scrl is among the partners of Barclays."
"Deutsche Bank AG is also interested in Monte Paschi's branches, while Unione di Banche Italiane Scpa decided not to present an offer, according to the newspaper."
To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net
"Last Updated: September 18, 2008 02:09 EDT"
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Japan's Stocks Tumble to Four-Year Low on Bank Failure Concern
By Masaki Kondo
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Sept. 18 (Bloomberg) -- Japanese stocks tumbled to a near four-year low on concern more global financial firms will fail after the U.S. government took over American International Group Inc. and Morgan Stanley was said to be seeking a buyer.
"Nomura Holdings Inc., Japan's biggest brokerage, dived 6.4 percent to the lowest in five years, while Nipponkoa Insurance Co. sank 10 percent. Sony Corp. lost the most in five years after Goldman Sachs Group Inc. cut its rating. Sumitomo Metal Mining Co., the nation's biggest gold producer, jumped 7.2 percent after gold prices surged the most in nine years."
"The Topix index fell 23.75, or 2.1 percent, to close at 1,097.68 in Tokyo, the lowest since December 2004. The Nikkei 225 Stock Average declined 260.49, or 2.2 percent, to 11,489.30, a level not seen since June 2005. All but six of 33 industry groups on the Topix retreated."
"``What we're seeing is the end of the age of speculation,'' said Hisakazu Amano, who helps oversee about $39 billion at T&D Asset Management Co. in Tokyo. ``With the rescue of AIG, we managed to avoid the worst possible scenario, but I don't think that's the end of global financial turmoil.''"
"This week the Federal Reserve bailed out AIG, the largest U.S. insurer, and Lehman Brothers Holdings Inc., once the fourth- largest U.S. brokerage filed for bankruptcy. Morgan Stanley, a brokerage that fell by a record yesterday in New York, is weighing a merger with a bank, people familiar with the matter said. That would follow the sale this week of rival brokerage Merrill Lynch & Co. to Bank of America Corp."
More than $19 trillion has been wiped off global stock market values since a high on Oct. 31 as the worst U.S. housing recession since the Great Depression and a resulting global credit crisis slowed the world economy.
"Brokerages, Insurers"
"Nomura plummeted 6.4 percent to 1,191 yen, the lowest since May 2003, and led brokerages to the biggest slump among the Topix's 33 industry groups. Sumitomo Mitsui Financial Group Inc., Japan's third-biggest listed bank, lost 6.6 percent to 582,000 yen, while Nipponkoa, the nation's fourth-largest casualty insurer, declined 10 percent to 518 yen, the steepest slide since December 2003."
"Goldman today lowered its view on Japan's banking industry to ``underweight'' from ``neutral,'' and that on insurance companies to ``neutral'' from ``overweight.'' The U.S. brokerage reiterated its ``overweight'' recommendation on consumer staples, saying so-called defensive stocks will probably continue outperforming the benchmark in the short term."
"Sapporo Holdings Ltd., Japan's third-largest beermaker, surged 7.7 percent to 800 yen, the sharpest advance since Oct. 31, while Ito En Ltd., Japan's biggest maker of green-tea beverages, added 3.4 percent to 1,440 yen. Kikkoman Corp., Japan's biggest maker of soy sauce, rose 3.5 percent to 1,447 yen."
No Upturn
"Sony retreated 8.7 percent, the most since April 2003, to 3,270 yen. Goldman analyst Yuji Fujimori cut his rating on the electronics maker to ``neutral'' from ``buy.''"
"``We see few signs of an upturn in fundamentals,'' Fujimori wrote in a note to clients today. Risks related to televisions, digital cameras and mobile phones are rising, he said."
"The deepening credit crisis spurred investors to seek the relative safety of commodities. Gold futures for December delivery surged 9 percent yesterday, the most since September 1999, while crude oil for October delivery soared 6.6 percent, the biggest gain since June 6, to $97.16 a barrel."
"Sumitomo Metal Mining soared 7.2 percent to 1,119 yen. Mitsui Mining & Smelting Co., Japan's biggest producer of nonferrous metals, climbed 6.4 percent to 268 yen, the sharpest advance since Jan. 25."
"Nikkei futures expiring in December retreated 2.7 percent to 11,410 in Osaka and slumped 2.2 percent to 11,435 in Singapore."
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
"Last Updated: September 18, 2008 03:36 EDT"
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Latin American Currencies: Colombian Peso Drops to One-Year Low
By Andrea Jaramillo and Drew Benson
"Sept. 17 (Bloomberg) -- Colombia's peso declined to a one- year low as concern credit market losses will deepen depressed demand for higher-yielding, emerging-market assets."
"``Latin American currencies are adjusting to the continued uneasiness in the market,'' said Benito Berber, a strategist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut."
"The peso slid 3 percent to 2,166.1 per dollar at 4:39 p.m. in New York, from 2,104 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET- FX. The currency reached its weakest level since mid-September 2007, when the Federal Reserve began cutting its benchmark interest rate to 2 percent from 5.25 percent amid a weakening economy."
The Colombian peso has plunged 5.6 percent this week following the record bankruptcy filing by Lehman Brothers Holdings Inc. The Fed's $85 billion bailout of insurer American International Group Inc. late yesterday failed to shore up demand for higher-yielding assets.
"The peso has also weakened as crude oil fell 33 percent from a record $147.27 a barrel reached on July 11. Oil is the biggest source of Colombian export revenue, accounting for about 25 percent of sales abroad. Crude oil for October delivery rose for the first time in three days today, increasing 6.8 percent to $97.35 per barrel at the close of floor trading on the New York Mercantile Exchange."
"``The Colombian peso is among the most vulnerable currencies in the region because of its dependence on oil and the fact that it's not investment-grade,'' Berber said."
Venezuelan-Colombian Trade
"Colombia's foreign debt is rated BB+, one level below investment grade, by Standard & Poor's and Fitch Ratings. Moody's Investors Service in June raised Colombia to Ba1, also one grade below investment quality."
"Earlier this year, S&P and Fitch boosted Brazil's and Peru's long-term foreign currency debt to BBB-, the lowest investment-grade rating."
"Oil swings also have weakened demand for Colombian exports in Venezuela, the nation's second-biggest trade partner after the U.S., Berber and colleague Flavia Cattan-Naslausky wrote in an RBS report today."
"``When oil prices are low, this decreases Venezuela's ability to buy goods from Colombia,'' the strategists wrote."
Oil accounts for about 90 percent of Venezuela's exports.
"The yield on Colombia's benchmark 11 percent bonds due in July 2020 rose 22 basis points, or 0.22 percentage point, to 11.99 percent, according to Colombia's stock exchange. The bond's price plunged 1.308 centavo to 93.822 centavos per peso."
"In Chile, the peso reached a 19-month low. The currency slid 1.1 percent to 547.59 per dollar, from 541.82 yesterday. The currency touched 549.40, its weakest point since Feb. 8, 2007."
U.S. Slowdown
"This week's slide among emerging market currencies and bonds is a reaction to ``what until now has been a financial problem in the U.S.,'' said Rodrigo Aravena, the head of economic research at Banchile Inversiones in Santiago. ``There is a very strong risk that economic activity will contract sharply in the U.S. and in Europe,'' leading to a drop in demand for emerging-market commodities exports, he said."
"The yield for a basket of Chilean five-year peso bonds in inflation-linked currency units, called unidades de fomento, declined 1 basis point to 3.32 percent, according to Bloomberg composite prices."
Chilean markets closed early today ahead of a two-day independence holiday. Markets reopen Sept. 22.
"Argentina, Peru, Venezuela"
"The yield on the Argentina's 5.83 percent inflation-linked peso bonds due in December 2033 rose 59 basis points to 12.04 percent, according to Citigroup Inc.'s local unit."
"Argentina's peso fell 0.3 percent to 3.1045 per dollar, from 3.0945 yesterday, to its lowest point since May 30. The central bank sold about $120 million to ease the peso's slide, said Hector Blanco, a currency trader with ABC Mercado de Cambio in Buenos Aires. A central bank spokesman did not immediately return a call for comment by Bloomberg News."
"Peru's sol weakened 0.2 percent to 2.9085 per dollar. Peru's central bank sold $42 million dollars to curb the sol's slide, down from $259 million in dollar sales yesterday."
"The yield on Peru's 8.6 percent sol-denominated bond due in August 2017 rose 35 basis points to 8.48 percent, according to Citibank Peru."
"Venezuela's bolivar strengthened 3 percent to 4.8 per dollar in black market trading, traders said. Venezuela officially pegged the bolivar at 2.15 per dollar in 2003. Residents turn to the black market when they can't get dollars at the official rate."
To contact the reporters on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.netDrew Benson in Buenos Aires at abenson9@bloomberg.net
"Last Updated: September 17, 2008 16:52 EDT"
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Global Confidence Declines as Financial-Market Turmoil Worsens
By Ben Sills
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"Sept. 18 (Bloomberg) -- Confidence in the global economy declined in September as the financial turmoil in the U.S. worsened, a survey of Bloomberg users on five continents showed."
"The Bloomberg Professional Global Confidence Index fell to 11.3 from August's 14.1. Confidence among U.S. respondents fell to 10.6 from 18.2, while the Western European measure was at 12.6 after 12.9. A reading below 50 indicates pessimism."
"The yearlong credit squeeze has in the past two weeks led to the bankruptcy of Lehman Brothers Holdings Inc. and the takeover of Fannie Mae, Freddie Mac and American International Group Inc. Overnight borrowing costs soared as banks hoarded cash."
"``We're heading for a prolonged slowdown almost everywhere starting from the U.S.,'' said Aurelio Maccario, chief euro-region economist of UniCredit Group in Milan, who took part in the survey. ``Given the ongoing financial weakness, the slowdown may gather speed.''"
"The MSCI index of financial shares has fallen 10 percent since early last week. The Federal Reserve said Sept. 16 it would lend the country's biggest insurer, American International Group Inc., $85 billion to avert the worst financial collapse on record. A day earlier, Lehman Brothers filed for bankruptcy and Merrill Lynch & Co. agreed to be taken over by Bank of America Corp."
"About 3,500 Bloomberg users from Tokyo to New York responded between Sept. 8 and Sept. 12 as investors absorbed U.S. Treasury Secretary Henry Paulson's bailout of Fannie Mae and Freddie Mac, which own or guarantee $12 trillion of U.S. mortgages."
"``We moved from Fannie and Freddie to Lehman to AIG, and even today, one question is: who is going to be next?'' said Simon Barry, an economist at Ulster Bank in Dublin, another participant."
Credit Losses
"Banks worldwide have tallied more than $500 billion in losses and writedowns since credit markets seized up a year ago. Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. securities firms, tumbled the most ever in New York after the AIG rescue failed to ease the credit contraction."
"``We haven't experienced anything like this since 1929,'' Former European Central Bank chief economist Otmar Issing, 72, said in a Bloomberg Television interview Sept.16. ``Global growth will slow and is already slowing. But overall, the risks have mostly been confined to a few industrialized countries.''"
"Bloomberg users increased expectations that lower oil prices will allow central bankers to pare interest rates as the economic outlook deteriorates. In Germany, the measure for central bank- rate expectations fell to 34.1 from 42.7, signaling respondents in Europe's biggest economy now anticipate that the European Central Bank may cut its key rate in the coming six months. The gauges also declined in the U.S., Japan, and the rest of the euro region."
Timing of Recovery
The price of oil fell by a third since touching a record $147.27 in July and traded at $92.70 a barrel in New York today.
"``For global business confidence to improve two things are needed: the U.S. housing market to bottom out and a sign that the financial turmoil is nearing an end,'' said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. ``That won't be until around the second quarter in 2009.''"
"The cost of borrowing in dollars for three months jumped the most in nine years yesterday as banks hoarded cash amid speculation more financial institutions will fail. The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said."
"The euro region and the Japanese economies shrank in the second quarter, while the European Union says the U.K. will suffer a recession in the second half of the year. The U.S. unemployment rate jumped to 6.1 percent in August, the highest in five years."
"Respondents in Japan were the most pessimistic about the global outlook. Participants in Spain, which the EU says faces its first recession in 15 years, were the gloomiest about their economy, with a reading of 4.1, followed by the U.K. Participants in Brazil remained the most optimistic about their economy, at 58.2."
To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net
"Last Updated: September 17, 2008 13:08 EDT"
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"Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show "
"Sept. 18 (Bloomberg) -- The cost of protecting European corporate bonds from default fell, according to traders of credit-default swaps."
"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings dropped 6 basis points to 629, according to JPMorgan Chase & Co. prices at 7:15 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and a rise indicates deterioration in the perception of credit quality; a decline signals the opposite."
"The Markit iTraxx Europe index of 125 companies with investment-grade ratings declined 6 basis points to 139, JPMorgan prices show."
"A basis point on a credit-default swap contract protecting 10 million euros ($14.4 million) of debt from default for five years is equivalent to 1,000 euros a year."
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements."
"The CDX North America Investment Grade Index fell 1.5 basis points to 198.5 at the close of trading in New York, according to Phoenix Partners Group."
To contact the reporter on this story: Michael Shanahan in London at mshanahan3@bloomberg.net
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"France Stocks Update: CAC 40 Rises 4.41 to 4,004.52 "
By Daniel Hauck
"Sep. 18 (Bloomberg) -- France's benchmark stock index, the CAC 40, rose 0.11 percent at 9:05 a.m."
"The index of 39 companies traded on the Paris Bourse rose 4.41 to 4,004.52. Among the stocks in the index, 23 rose and 16 fell."
"Gains in the CAC 40 were led by Axa Sa, Bnp Paribas and Total Sa. About 5.98 million shares traded in the CAC 40."
"Last Updated: September 18, 2008 03:05 EDT"
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Asian Money Market Rates Jump Even After Central Banks Add Cash
By Candice Zachariahs and David Yong
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Sept. 18 (Bloomberg) -- Money market rates surged in Asia's biggest financial centers as the collapse of Lehman Brothers Holdings Inc. and American International Group Inc. made banks reluctant to lend even after cash injections by central banks.
"One-month interbank rates in Hong Kong more than doubled to near the highest in a year and the rate for three-month dollar loans in Singapore surged to an eight-month high. Lenders in Australia turned the most cautious since the week preceding the collapse of Bear Stearns & Cos in March. Japan, Australia and Hong Kong today injected $26.6 billion into money markets to keep a credit crisis from spreading beyond the U.S. and Europe."
"``Banks are unwilling to deal with each other in the interbank market,'' said Sean Keane, regional head of short-term interest rates in Singapore at Credit Suisse Group. ``Everybody is extremely nervous about counterparty risks. The premium for cash will remain very high.''"
"The Bank of Japan pumped in 2.5 trillion yen ($24 billion) today and the Reserve Bank of Australia added A$3.02 billion ($2.4 billion) to ease a credit crisis. Yesterday's injection of $33 billion by both nations and similar measures across Asia failed to prevent rate increases in some major markets as U.S., European and Australian lenders hoarded cash."
"Hong Kong's one-month interbank rate jumped to 4.829 percent from 2.234 percent yesterday, the highest since October 2007. The Hong Kong Monetary Authority injected HK$1.556 billion ($200 million) into the banking system today, it said. Singapore's three-month dollar loan rate surged 50 basis points to 3.525 percent at today's fixing, according to the Association of Banks in Singapore."
Interbank Rates
"In Australia, the difference between the rate banks charge each other for three-month loans and the overnight indexed swap rate, which measures the availability of funds in the market, rose to 80.8 basis points, or 0.808 percentage point, at 5 p.m. in Sydney, from 59.67 basis points yesterday."
"The spread stood at 78.25 on March 11, after Bear Stearns Chief Executive Officer Alan Schwartz denied the firm lacked sufficient capital. JPMorgan Chase & Co. agreed to buy Bear Stearns a week later."
"The RBA injection ``does suggest that there are liquidity problems and the cost of funding is going up,'' said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. ``There isn't a drying up of credit here, but the Reserve Bank is making sure that doesn't happen by pumping in liquidity.''"
"The London interbank offered rate, or Libor, yesterday rose 19 basis points to 3.06 percent, the British Bankers' Association said, the biggest increase since September 1999. The jump in Libor widened the TED spread, or the gap between what the U.S. and banks pay to borrow in dollars for three months, to 3.02 percentage point, the most since Bloomberg began compiling the data in 1984."
Bank Losses
Japan's overnight loan rate rose to 0.655 percent before the central bank's injections and was at 0.2 percent as of 3.54 p.m. in Tokyo. The BOJ's target rate is 0.5 percent.
"``There is a credit crunch everywhere, even in Japan, but it's relatively better here as Japanese banks are still okay,'' said Susumu Kato, chief economist in Tokyo at Calyon Securities, a primary dealer required to bid at government debt sales. ``Domestic institutions don't want to give money to foreign institutions, so the BOJ stepped in to stabilize the market.''"
Nomura Holdings Inc. and Macquarie Group Ltd. led declines in Asia-Pacific financial stocks after Morgan Stanley and Goldman Sachs Group Inc. plunged on speculation more U.S. banks will fail. Global banks have set aside $511 billion in losses tied to the collapse of the U.S. subprime mortgage market as the Federal Reserve offered $85 billion of emergency loan to bail out the nation's biggest insurer American International Group Inc.
Repricing Risk
"``This is a function of the global scenario and that there is a re-pricing of bank risk going on globally,'' said Damien McColough, head of fixed-income research at Westpac Banking Corp. in Sydney. `There is a lot of uncertainty.''"
Bank of Japan Governor Masaaki Shirakawa downplayed concern that the U.S. banking crisis will hurt the world's second- largest economy and said Japan's financial system remains stable.
"``Most lending to Lehman Brothers was made by major Japanese banks and their potential losses seem to be within the levels that can be covered by their profits,'' Shirakawa told reporters in Tokyo yesterday."
"The Federal Reserve added $70 billion in temporary reserves yesterday, while the European Central Bank offered 70 billion euros ($100 billion) in a one-day refinancing operation. The Bank of England injected 20 billion pounds ($36 billion) and Taiwan added $3.6 billion."
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.
"Last Updated: September 18, 2008 03:13 EDT"
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India Bonds Fall a 2nd Day on Speculation Policy Damping Demand
By Anil Varma
Sept. 18 (Bloomberg) -- India's bonds fell for a second day on speculation demand for debt will decline after policy makers eased norms that require banks to pledge securities to borrow from the central bank.
Benchmark 10-year yields reached the week's high after the Reserve Bank of India said Sept. 16 that banks may borrow funds equivalent to as much as 1 percent of their deposits without pledging bonds. The measure may reduce lenders' need to buy debt in order to raise cash via the central bank's daily repurchase auctions. Bonds also fell as higher money-market rates made it more expensive to buy debt with borrowed funds.
"``The market anticipates that the central-bank measure could cause a slowing of banks' demand for debt,'' said Anoop Verma, a fixed-income trader at Development Credit Bank Ltd. in Mumbai. ``Tight liquidity and high overnight rates too are dragging bonds lower.''"
"The yield on the benchmark 8.24 percent note due April 2018 rose 12 basis points to 8.31 percent as of 12:24 p.m. in Mumbai, according to the central bank's trading system. The price fell 0.75, or 75 paise per 100 rupee face amount, to 99.55. A basis point is 0.01 percentage point."
"Banks have borrowed from the central bank on every trading day of this month, indicating they are short of funds. Such borrowings rose to a record 575.65 billion rupees ($12.4 billion) on Sept. 16, according to the Reserve Bank. Lenders raised 489.5 billion rupees from the central bank today."
Overnight Rate
"The rate at which banks lend to each other overnight has averaged 10.5 percent this week, compared with 8.5 percent last week, according to data compiled by Bloomberg. It touched a four-month high of 16 percent on Sept. 16."
"``Overnight rates may stay in double digits in the immediate term because this week's corporate tax outflows have drained money from the system,'' Verma said."
Local firms paid this week the third quarterly installment of advance taxes for the financial year that began April 1.
"The cost of benchmark Indian interest-rate swaps, or derivative contracts used to guard against rate fluctuations, rose. The five-year swap rate, a fixed payment made to receive floating rates, climbed to 8.06 percent from 8 percent yesterday."
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
"Last Updated: September 18, 2008 03:08 EDT"
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"Asian Currencies: South Korean Won, Peso Decline as Stocks Fall "
By Lilian Karunungan and Kim Kyoungwha
"Sept. 18 (Bloomberg) -- Asian currencies fell, led by South Korea's won, on speculation turmoil in global financial markets will worsen, prompting investors to shun emerging-market assets."
"Seven dropped among Asia's 10 most-active currencies outside Japan as stocks in the region tumbled to the lowest in almost three years. Morgan Stanley is considering a merger with Wachovia Corp. and other banks as the securities firm seeks to regain investor confidence after its shares sank 42 percent this week, according to people familiar with the situation."
"``A lot of investors will keep pulling out because liquidity is a problem in the U.S. and to a certain extent in Japan,'' said Nikhilesh Bhattacharyya, a Sydney-based economist at Moody's Economy.com Inc. ``This has a lot to do with sentiment and stocks will keep going down.''"
"Korea's currency fell 1.9 percent to 1,137.30 against the dollar as of 12:39 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The won surged 3.9 percent yesterday, the most since March 1998, after the biggest post-Asian crisis drop of 4.4 percent one day earlier. The Philippine peso weakened 0.7 percent to 47.270 in Manila, according to Tullett Prebon Plc."
"The won slumped 17.8 percent this year, making it Asia's worst performer, as foreign investors sold more Korean equities than they bought every day except seven since Aug. 1."
Dollar Shortage
"``The U.S. credit crisis is still under way and the won will remain under depreciation pressure due to a shortage of dollars,'' said Chun Chong Woo, an economist with Standard Chartered First Bank Korea Ltd. in Seoul. ``For the time being, the currency market will see big volatility.''"
Vice Finance Minister Kim Dong Soo said yesterday that South Korea may use its foreign-exchange reserves to provide liquidity to the financial system when needed.
"``We will actively consider providing foreign currency liquidity to financial institutions through the swap market if necessary by using our currency reserves of more than $240 billion,'' Kim said on KBS radio, adding that the U.S. financial turmoil will have a limited impact on South Korea."
The Bank of Japan added 1.5 trillion yen ($14.4 billion) to the financial system in its third day of fund injections to ease a global credit crisis.
The Philippine peso fell against the dollar on speculation overseas investors will reduce their local holdings in favor of safer U.S. Treasuries.
Safe Haven
"``It's risk-aversion time and there's flight to safe haven,'' said Arlene Tanjuaquio-Agustin, treasurer at GE Money Bank in Manila. ``Asian currencies including the peso are affected as people go back to U.S. Treasuries.''"
"Fund managers sold $209.5 million more Philippine bonds and stocks than they bought during the first eight months of the year, compared with net purchases of $3.4 billion in the same period in 2007, the central bank said on Sept. 11."
U.S. Treasury three-month bill rates are trading near the lowest level since World War II.
"Taiwan's dollar dropped to near an eight-month low as the Taiex index fell 3.1 percent, extending this week's losses to 10.9 percent."
"``I expect further upside in the U.S. dollar against Taiwan's currency,'' said Irene Cheung, who supports regional trading at ABN Amro Bank NV in Singapore. ``The Asian stock markets continue to be vulnerable because of extreme risk aversion among investors. They're not sure if even their banks and insurance companies are safe.''"
"The Taiwan dollar fell 0.6 percent to NT$32.277 against the U.S. currency, according to Taipei Forex Inc."
"Overseas investors sold $2.8 billion more Taiwan shares than they bought this month, stock exchange figures show."
"Elsewhere, the Singapore dollar gained 0.2 percent to S$1.4332 against the U.S. currency and the Thai baht rose 0.4 percent to 34.22. The Malaysian ringgit ringgit weakened 0.2 percent to 3.4620, while Vietnam's dong dropped 0.2 percent to 16,640."
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
"Last Updated: September 18, 2008 00:05 EDT"
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Barrick Leads Surge in Gold Stocks as Crisis Deepens (Update1)
By Stewart Bailey
"Sept. 17 (Bloomberg) -- Barrick Gold Corp., the world's largest gold miner, led a surge in gold producers' stocks after a deepening financial crisis drove bullion prices to the biggest intraday percentage gain in nine years."
"Toronto-based Barrick jumped C$4.44, or 14 percent, to C$35.31 at 4:36 p.m. in Toronto Stock Exchange trading, the best- performing gold stock on the 16-member Philadelphia Stock Exchange Gold & Silver Index, which climbed 8.6 percent. Newmont Mining Corp., the largest U.S. gold producer, rose $3.70, or 9.4 percent, to $43.25."
"The U.S. government took control of American International Group Inc. in an $85 billion bailout to prevent the biggest financial collapse in history. The bankruptcy of Lehman Brothers Holdings Inc. and the federal takeover of mortgage companies Fannie Mae and Freddie Mac also have driven investors to buy bullion, often used as a hedge against market turmoil."
"``When you see the U.S. backstopping insurance companies you're saying, `Where do I want to be? In the dollar?' That's why gold is catching the bid,'' Greg Orrell, who manages the OCM Mutual Fund at Orrell Capital Management Inc. in Livermore, California, said in an interview. With bullion rising, ``people are more comfortable buying the gold shares.''"
"Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce on the Comex division of the New York Mercantile Exchange, the biggest gain since Sept. 28, 1999."
"Johannesburg-based Harmony Gold Mining Co.'s American depositary receipts, each equivalent to one South African share, gained $1, or 12 percent, to $9.17 in New York."
The benchmark Standard & Poor's 500 Index dropped 4.7 percent today.
To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.
"Last Updated: September 17, 2008 17:29 EDT"
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Corporate Bond Risk Rises to a Record on Bank Collapse Concern
Sept. 18 (Bloomberg) -- Corporate bond default risk rose to a record in Asia as concern of more bank failures after Lehman Brothers Holdings Inc.'s collapse triggered a plunge in global stocks and shuttered credit markets.
Credit-default swap indexes in Australia and Asia outside Japan traded at all-time highs after the cost to protect against a default by Morgan Stanley or Goldman Sachs Group Inc. rose to records in New York yesterday. Default swaps rise as perceptions of credit quality deteriorate.
"``We are in uncharted waters,'' said Mark Bayley, a director of credit at ABN Amro Holding NV in Sydney. ``The incredibly weak equity markets, especially the financial sector, have people concerned about counterparty risk and what potential outcomes we will see. It's the fear of the unknown.''"
"Credit markets have been locked up since New York-based Lehman, the fourth-largest U.S. securities firm until last week, filed for bankruptcy protection on Sept. 15, raising concern other financial companies may fail and become unable to honor their debts. Morgan Stanley is weighing a merger with Wachovia Corp., according to a person with knowledge of the matter, while Edinburgh-based HBOS Plc agreed to sell itself to Lloyds TSB Group Plc for 12.2 billion pounds ($22.2 billion)."
"The MSCI Asia Pacific Index fell to the lowest in three years, dropping 3.5 percent to 106.74 as of 12:00 p.m. in Tokyo. Macquarie Group Ltd., Australia's largest investment bank, plunged 16 percent and its credit-default swaps yesterday traded at a record high."
Default Indexes Rise
"In a sign that banks are hesitant to lend to each other, the three-month London interbank offered rate in U.S. dollars jumped the most since 1999 yesterday, climbing 19 basis points to 3.06 percent, the British Bankers' Association said. A basis point is 0.01 percentage point."
"``The whole market is in a mood of a funeral at Lehman's demise,'' Atul Sodhi, Calyon's head of Asia-Pacific loan syndication, said in a phone interview from Hong Kong today. ``The liquidity situation is bad at the moment, as reflected in Libor.''"
The cost to protect against a default by Morgan Stanley rose to levels typical of companies in distress and the company's share price sank 42 percent this week after a U.S. government rescue of American International Group Inc. failed to stem the global credit crisis.
"The difference between the rate Australian banks charge each other for three-month loans and the overnight indexed swap rate, which measures the availability of funds in the market, rose to 77.83 basis points at 12:58 p.m. in Sydney, from 59.67 basis points yesterday. A basis point is 0.01 percentage point."
Macquarie Risk
"The Markit iTraxx Australia Series 9 credit-default swap index traded 40 basis points higher at a record 235 basis points today and was at 225 basis points at 12:15 in Sydney, JPMorgan Chase & Co. prices show."
"Macquarie credit-default swaps traded at a record 630 basis points yesterday and were quoted about 120 basis points higher today at around 750 basis points. A basis point is worth $1,000 on a swap that protects $10 million of debt."
"The Asian benchmark that tracks 50 investment-grade borrowers outside Japan jumped as much as 30 basis points to a record 240, ICAP Plc prices show. The region's index of 20 high- yield, high-risk borrowers jumped about 70 basis points to a record 760."
The Markit iTraxx Japan index increased 31 basis points to 200 according to prices from Morgan Stanley. Credit-default swaps 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.
To contact the reporter on this story: Laura Cochrane in Melbourne at lcochrane3@bloomberg.net.
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Canada Stocks Fall 21% From Peak as Oil Drop Spurs Bear Market
By John Kipphoff
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"Sept. 18 (Bloomberg) -- Canadian stocks fell more than 20 percent from their June peak, becoming the last of the world's developed countries to enter a bear market, as the biggest two- month drop in commodities dragged down oil and mining companies."
"Canada's Standard & Poor's/TSX Composite Index slipped 2.9 percent to 11,877.69 yesterday, extending its three-month retreat to 21 percent. Energy, metals and chemicals producers led the decline, falling more than 26 percent as the U.S. housing slump heightened speculation that global economic growth will slow."
"The S&P/TSX's 14 percent retreat this year remains the best performance among countries in the MSCI World Index of developed markets. Canadian stocks are more than double their level at the start of the last bull market in 2002 after falling 14 percent so far in September, the worst two-week decline in seven years."
"``The party's run its course,'' said Mike Lenhoff, who helps oversee about $36.4 billion as chief strategist at Brewin Dolphin Securities Ltd. in London. ``The commodities boom will probably not turn into an outright bust, but for the time being, the excitement is over.''"
"Oil fell 34 percent from a record $147.27 a barrel reached on July 3 on concern more than $500 billion of global bank losses will weaken growth and cut worldwide fuel consumption. The Reuters Jefferies/CRB Index of 19 commodities decreased 15 percent in July and August, led by a 12 percent slide in copper and a 10 percent retreat in gold."
Oil Fallout
"EnCana Corp., the country's biggest energy producer, slid 29 percent from its June peak. The Calgary-based company said on July 24 that second-quarter profit fell 16 percent on lower values for contracts to lock in commodity prices."
"Potash Corp. of Saskatchewan Inc., the largest producer of the food nutrient, has fallen 30 percent from a record on June 17. The Saskatoon, Saskatchewan-based company lost 7.1 percent on July 23 after receiving strike notices from three unions."
"Technology stocks dropped the most in S&P/TSX since its record, led by a 32 percent plunge in BlackBerry-maker Research in Motion Ltd., which accounts for 83 percent of the industry's weighting."
"Research in Motion, based in Waterloo, Ontario, fell 11 percent on June 26 after saying first-quarter profit trailed estimates on higher spending to compete with Apple Inc.'s iPhone."
"Nortel Networks Corp., North America's largest maker of phone gear, fell the most in at least 25 years yesterday, losing more than half its value. The Toronto-based company cut sales and profit margin forecasts, saying customers are curbing spending as the economy slumps."
Bank Stocks
"Canadian financial shares decreased 18 percent this year, putting them on pace for their worst retreat since 1990. Banks and brokerages in the S&P/TSX tumbled 9.4 percent in September after the U.S. government seized mortgage finance companies Fannie Mae and Freddie Mac on Sept. 7 and investment bank Lehman Brothers Holdings Inc. filed for bankruptcy a week later."
"Sun Life Financial Inc., the country's third-biggest insurer, fell 8.1 percent yesterday to C$35.77. The Toronto-based company said it will record a writedown on investments with Lehman and American International Group Inc., which was seized by regulators."
"``What we have right now is a crisis of confidence,'' said Juliette John, a portfolio manager at Bissett Investment Management in Calgary, which oversees about C$16 billion. ``We really need to see some element of confidence in the financial system return, because until we get that no one's going to be comfortable.''"
"Royal Bank of Canada, the nation's biggest lender by assets, slumped 9 percent this week, the Toronto-based company's steepest three-day drop in a decade. An index of banks in Canada fell 4.9 percent yesterday, the most in eight years."
Canadian Finance Minister Jim Flaherty said the country's banks and insurers are ``well capitalized'' and the economy is handling strains in global financial markets.
"``After AIG, people's imaginations are running wild,'' said Ian Nakamoto, who manages $4.5 billion at MacDougall, MacDougall & MacTier Inc. in Toronto. ``Canadian financials are acting much better than those in the U.S., but they're not immune. The baby's being thrown out with the bathwater.''"
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
"Last Updated: September 18, 2008 00:32 EDT"
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Corporate Bond Risk Rises to a Record on Bank Collapse Concern
By Laura Cochrane
Sept. 18 (Bloomberg) -- Corporate bond default risk rose to a record in Asia as concern of more bank failures after Lehman Brothers Holdings Inc.'s collapse triggered a plunge in global stocks and shuttered credit markets.
Credit-default swap indexes in Australia and Asia outside Japan traded at all-time highs after the cost to protect against a default by Morgan Stanley or Goldman Sachs Group Inc. rose to records in New York yesterday. Default swaps rise as perceptions of credit quality deteriorate.
"``We are in uncharted waters,'' said Mark Bayley, a director of credit at ABN Amro Holding NV in Sydney. ``The incredibly weak equity markets, especially the financial sector, have people concerned about counterparty risk and what potential outcomes we will see. It's the fear of the unknown.''"
"Credit markets have been locked up since New York-based Lehman, the fourth-largest U.S. securities firm until last week, filed for bankruptcy protection on Sept. 15, raising concern other financial companies may fail and become unable to honor their debts. Morgan Stanley is weighing a merger with Wachovia Corp., according to a person with knowledge of the matter, while Edinburgh-based HBOS Plc agreed to sell itself to Lloyds TSB Group Plc for 12.2 billion pounds ($22.2 billion)."
"The MSCI Asia Pacific Index fell to the lowest in three years, dropping 3.5 percent to 106.74 as of 12:00 p.m. in Tokyo. Macquarie Group Ltd., Australia's largest investment bank, plunged 16 percent and its credit-default swaps yesterday traded at a record high."
Default Indexes Rise
"In a sign that banks are hesitant to lend to each other, the three-month London interbank offered rate in U.S. dollars jumped the most since 1999 yesterday, climbing 19 basis points to 3.06 percent, the British Bankers' Association said. A basis point is 0.01 percentage point."
"``The whole market is in a mood of a funeral at Lehman's demise,'' Atul Sodhi, Calyon's head of Asia-Pacific loan syndication, said in a phone interview from Hong Kong today. ``The liquidity situation is bad at the moment, as reflected in Libor.''"
The cost to protect against a default by Morgan Stanley rose to levels typical of companies in distress and the company's share price sank 42 percent this week after a U.S. government rescue of American International Group Inc. failed to stem the global credit crisis.
"The difference between the rate Australian banks charge each other for three-month loans and the overnight indexed swap rate, which measures the availability of funds in the market, rose to 77.83 basis points at 12:58 p.m. in Sydney, from 59.67 basis points yesterday. A basis point is 0.01 percentage point."
Macquarie Risk
"The Markit iTraxx Australia Series 9 credit-default swap index traded 40 basis points higher at a record 235 basis points today and was at 225 basis points at 12:15 in Sydney, JPMorgan Chase & Co. prices show."
"Macquarie credit-default swaps traded at a record 630 basis points yesterday and were quoted about 120 basis points higher today at around 750 basis points. A basis point is worth $1,000 on a swap that protects $10 million of debt."
"The Asian benchmark that tracks 50 investment-grade borrowers outside Japan jumped as much as 30 basis points to a record 240, ICAP Plc prices show. The region's index of 20 high- yield, high-risk borrowers jumped about 70 basis points to a record 760."
The Markit iTraxx Japan index increased 31 basis points to 200 according to prices from Morgan Stanley. Credit-default swaps 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.
To contact the reporter on this story: Laura Cochrane in Melbourne at lcochrane3@bloomberg.net.
"Last Updated: September 18, 2008 02:18 EDT"
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GE Falls to Lowest Since 2003 Amid Market Turmoil (Update1)
By Edmond Lococo
"Sept. 17 (Bloomberg) -- General Electric Co., which got about half its profit from financial units in 2007, fell to a five-year low in New York trading amid turmoil in U.S. credit markets."
"GE dropped $1.67, or 6.7 percent, to $23.39 at 4:01 p.m. in New York Stock Exchange composite trading. It was the lowest closing price for the Fairfield, Connecticut-based company's stock since March 11, 2003."
"The broader market declined amid investor concern that a government rescue plan for American International Group Inc. may not be enough to ease the credit contraction following the bankruptcy this week of 158-year-old Lehman Brothers Holdings Inc. GE Capital will face ``fundamental challenges'' next year, Stephen Tusa, a New York-based analyst with JPMorgan Chase & Co., wrote in a report today."
"``We see the potential for another year of material decline at GE Capital,'' Tusa wrote. ``We recently updated our model for GE Capital. We see the potential for a 5-10 percent decline, on top of the 10 percent decline expected this year.''"
"Tusa, who rates GE shares ``neutral'' cut his forecast for the company's 2009 per-share profit to $2.25, from $2.30. GE issued a statement to investors Sept. 14 saying its financial services units don't need to raise external capital and that its consumer-finance division, GE Money, has ``adequate reserves.''"
`Boring Stuff'
"GE Capital earned $5.2 billion in the first half of the year and does basic financial services that are less risky, Jeffrey Immelt, chief executive officer, said during a presentation today to announce a partnership with AES Corp. and Google Inc. on energy-related projects."
"``We do boring stuff,'' Immelt said of the unit. ``I'm proud of that.''"
Immelt praised authorities' handling of the crisis and emphasized the importance to the economy of nursing the U.S. financial industry back to good health.
"``So far, the Fed and Treasury have been doing the right things,'' he said. ``This needs to be worked through and resolved because I do think it's hard to have a springboard to do other things when everything intersects through financial services.''"
"GE's finance-related businesses, collectively known as GE Capital, accounted for 53 percent of profit from continuing operations last year. GE also is the world's biggest maker of power-plant turbines, jet engines, locomotives and medical imaging equipment, and owns NBC Universal."
To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net.
"Last Updated: September 17, 2008 17:00 EDT"
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"Buy Swiss Franc Versus Australian Dollar, Morgan Stanley Says "
By Candice Zachariahs
"Sept. 18 (Bloomberg) -- Investors should buy the Swiss franc against the Australian dollar as risk aversion boosts demand for the currencies of nations running current-account surpluses, Morgan Stanley said."
"A Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to 36.22 yesterday, the highest since October 2002."
"``Risk aversion and deleveraging are key market drivers,'' Sophia Drossos, a New York-based currency strategist at Morgan Stanley, wrote in a research note yesterday. Commodity-linked currencies including the Australian and Canadian dollars ``are likely to be pressured.''"
"Drossos recommended that investors buy the Swiss franc at 0.8787 per Australian dollar with a target of 0.78. Investors should exit the position if the Swiss franc falls to 0.90 per Australian dollar. The Swiss franc traded at 0.8709 at 9:36 a.m. in Sydney, from 0.8899 in late Asian trading yesterday."
Morgan Stanley also closed its recommendation that traders buy the Australian dollar against the New Zealand currency.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
"Last Updated: September 17, 2008 21:35 EDT"
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Latin American Leaders Seek to Bolster Confidence (Update1)
By Joshua Goodman
Sept. 17 (Bloomberg) -- Latin American leaders are seeking to bolster confidence that the region's economies can withstand a prolonged U.S. slowdown as investors sent stocks tumbling.
"Brazilian finance minister Guido Mantega told reporters today there's a ``very small risk'' the U.S. financial crisis will spread to Latin America's largest economy. Mexican Finance Minister Agustin Carstens said his country would have been harder hit earlier in the decade. In Argentina, which recovered from its own economic meltdown in 2001, President Cristina Fernandez de Kirchner said the economy was ``holding fast'' while the U.S. is ``collapsing like a bubble.''"
"Latin American stock markets this week saw their sharpest sell-off since Brazil devalued its currency in January, 1999. The MSCI EM Latin America Index plunged 14 percent to its lowest level in more than a year. Brazil's Bovespa Index, the region's largest, fell 6.74 percent today to its lowest level in more than a year. The country's currency has weakened 12.5 percent this month against the dollar, more than all 16 major currencies tracked by Bloomberg. Together with currencies from Colombia and Chile, all are also trading at one-year lows."
`Ask Bush'
Brazilian President Luiz Inacio Lula da Silva took the sell- off in stride. When asked about the crisis yesterday by reporters he joked: ``What crisis? Go ask Bush.''
"Economists such as Rodrigo Valdes, chief Latin American economist at Barclay's Capital, said governments have good reason to believe they can weather the current crisis."
"``Clearly, Latin America has been dealt an important shock, but its countries are better prepared than in the past to confront the problems that are coming,'' he said in telephone interview from New York."
"Mantega, speaking to reporters, said the government may take steps to encourage lending for investments, exports and agriculture should companies be unable to access external credit for very long. Foreign banks suspended more than $12 billion in syndicated loans in the works to Brazilian companies, Valor Economico newspaper reported today."
"``Maybe it's a temporary situation that will be solved,'' Mantega told reporters in Brasilia. ``But if there's a lack of lending, the government will take the measures to provide it.''"
Brazil Reserves
"Brazil is benefiting from record reserves of $208 billion, falling debt levels and robust economy that expanded 6.1 percent in the second quarter from a year ago. The central bank last week raised interest rates for the fourth time since April, to 13.75 percent from 13 percent, in a bid to cool domestic demand that has kept inflation above the government's 4.5 percent target since January."
"In Mexico, low levels of external public debt and abundant bank liquidity would limit the impact of a U.S. credit crunch on financial markets, Carstens said in an interview today on the Televisa network."
"Still, he said the forecast of 2.4 percent economic growth this year may be lowered if trade with the U.S., destination for 80 percent of its exports, slows more than expected. The government may also have to revise its 2009 budget after crude prices fell, he said. Oil sales account for about 40 percent of Mexico's budget."
Stabilization Fund
"Chile, South America's most open economy, is betting a record budget surplus and economic stabilization fund that rose to $19.8 billion on July 31 will help it get past a drop of about 17 percent in the price of copper, the country's chief export. The central bank has been buying dollars since April as insurance against a possible U.S. financial collapse. Finance Minister Andres Velasco said today that the spread on the country's credit default swaps was the ``most stable'' in the world among developing countries."
"``We are better prepared to face the convulsions in the international economy today than ever in the history of Chile,'' Velasco told reporters today after meeting with central bank president Jose De Gregorio."
"Argentina's Kirchner said her country was continuing to create jobs, build reserves and boost industrial production even as the country's five-year credit default swaps rose yesterday to more than a three-year high. The cost of protecting the country's debt against default surged 173 basis points to 11.85 percentage points today, according to Bloomberg data. That means it costs $1,185,000 per year to protect $10 million of Argentine debt."
"Venezuelan President Hugo Chavez said yesterday he's not worried about a sharp drop in prices of crude oil, which accounts for 90 percent of the country's exports. He reveled in the irony of seeing Wall Street's ``giants crashing.''"
"``We should go look for all the Lehman reports from the past 5 years on Venezuela,'' Chavez said on national television. ``They were always producing negative reports about Venezuela. They forgot about themselves.''"
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro at Jgoodman19@bloomberg.net;
"Last Updated: September 17, 2008 18:18 EDT"
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U.S. Economy: Housing Starts Slide to 17-Year Low (Update1)
By Bob Willis
"Sept. 17 (Bloomberg) -- Builders in the U.S. broke ground on the fewest new homes since 1991 last month, signaling that the economy will continue to erode in coming months."
"Housing starts fell 6.2 percent in August to an annual rate of 895,000, the fewest since January 1991, the Commerce Department said in Washington. Building permits, a sign of future construction, dropped 8.9 percent to an 854,000 pace."
"``The home-construction industry is still in a deep recession and will remain there probably for the rest of the year,'' said Patrick Newport, an economist at Global Insight Inc. in Lexington, Massachusetts, who forecast a decline to 893,000. ``There are just too many houses on the market.''"
"Stocks slid as banks hoarded cash, sending money market rates higher and threatening to worsen the credit crunch that has made it tougher for homebuyers to get loans. The housing and credit meltdowns that led to the collapse of Lehman Brothers Holdings Inc. may continue to subtract from growth for the rest of the year and into next."
"Starts were projected to fall to a 950,000 annual pace from a previously estimated 965,000 in July, according to the median forecast of 74 economists polled by Bloomberg News. Compared with August 2007, housing starts were down 33 percent."
"Stocks tumbled as bank lending seized up in the wake of the government's takeover of American International Group Inc. The Standard & Poor's 500 Stock Index lost 4.7 percent to close at 1156.39 in New York. Benchmark 10-year Treasury notes rose, pulling the yields down to 3.41 percent at 4:31 p.m. in New York."
"Condos, Townhouses"
"Construction of single-family homes declined 1.9 percent to a 630,000 rate, today's report showed. Work on multifamily homes, such as townhouses and apartment buildings, dropped 15 percent from the prior month to an annual rate of 265,000."
"Starts decreased in three of four regions, led by a 15 percent slump in the Northeast. Construction was down 14 percent in the Midwest and 7.4 percent in the South. The West showed an 11 percent gain."
"Builders completed 961,000 homes at an annual rate last month, the fewest since September 1982."
"Combined existing and new-home sales have declined 36 percent from their 2005 peaks. Nationwide, home prices have fallen 19 percent on average from their peak in July 2006, according to the S&P/Case-Shiller index of 20 cities."
"The credit crunch spawned by the subprime mortgage crisis forced Lehman Brothers Holdings Inc. this week to file for bankruptcy, just a week after the government took over Fannie Mae and Freddie Mac, the two biggest buyers of mortgages."
Rate Decision
Federal Reserve policy makers yesterday left the benchmark interest rate unchanged at 2 percent for a third consecutive meeting. Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending.
"As banks tighten lending standards and confidence slumps, consumer spending is faltering. Retail sales in August dropped for a second month, Commerce reported last week."
Homebuilders remain gloomy. A report yesterday from the National Association of Home Builders/Wells Fargo showed confidence among U.S. homebuilders this month held near the lowest level since records began in 1985.
"As home prices continue to fall, more and more Americans a forced into foreclosure as they owe more than their homes are worth. Stricter lending rules also limit opportunities to refinance out of adjustable-rate mortgages before they reset higher."
"Foreclosure filings rose to a record in August, RealtyTrac Inc. said Sept. 12. One in 416 U.S. households got a default notice, was warned of a pending auction or was foreclosed upon."
"Toll Brothers Inc., the largest U.S. luxury homebuilder, on Sept. 4 reported a fourth straight quarterly loss."
"``Explosive energy price increases, rising unemployment an severe mortgage and credit'' conditions cut demand, Chief Executive Officer Robert Toll said on a conference call. ``Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers' market.''"
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.
"Last Updated: September 17, 2008 16:33 EDT"
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"Germany Stocks Update: DAX Index Little Changed at 5,865.06 "
By Daniel Hauck
"Sep. 18 (Bloomberg) -- Germany's benchmark stock index, the DAX Index, rose 0.07 percent at 9:05 a.m."
"The index of 30 companies traded on the Frankfurt Stock Exchange rose 4.08 to 5,865.06. Among the stocks in the index, 17 rose and 13 fell."
"Gains in the DAX were led by Deutsche Telekom Ag, Daimler Ag and Muenchener Rueckversicherungs Ag. About 6.08 million shares traded in the DAX."
"Last Updated: September 18, 2008 03:05 EDT"
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Indian Rupee Falls on Concern Credit Losses Will Spur Outflows
By Anoop Agrawal
Sept. 18 (Bloomberg) -- India's rupee fell on concern a global stocks rout and seizing up of credit markets will prompt overseas funds to favor safer bets than emerging-market assets.
"The currency traded at the lowest in more than two years as reports that securities firm Morgan Stanley was considering a merger heightened concern that credit losses are mounting in the U.S., the world's largest economy. Net sales of local equities by funds based abroad this month through Sept. 16 were four times as large as in the whole of August, according to data from the Indian stock market regulator."
"``Risk aversion is increasing as investors are foreseeing a more difficult situation in the near term,'' said Sanjay Arya, treasurer at state-owned Bank of Maharashtra in Mumbai. ``Indian assets are clearly not the priority and so a further decline in the rupee is inevitable.''"
"The rupee fell 0.7 percent to 46.7125 per dollar as of 11:40 a.m. in Mumbai, according to data compiled by Bloomberg. It fell as low as 46.975 on Sept. 16, the weakest since July 24, 2006. The rupee may fall to 47 in the near term, Arya said."
"The Indian currency is Asia's second-worst performer this quarter, having dropped 8 percent versus the dollar. South Korea's won slumped 9.2 percent."
"Credit losses have prompted Morgan Stanley to consider a merger with Wachovia Corp. and several other banks, people familiar with the matter said. CNBC reported New York-based Morgan Stanley is in talks to be acquired by China's Citic Group."
Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in history this week. Merrill Lynch & Co. on Sept. 15 agreed to be sold for about $50 billion to Bank of America Corp.
Central Bank
The rupee pared losses on speculation the central bank sold dollars to stem swings in the exchange rate.
"``Indications are that the central bank will support the rupee,'' said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. ``That is preventing investors from taking any speculative positions against the rupee.''"
"The rupee, which earlier today touched 46.7925 per dollar, may rise to 46.5 this week, Babu said."
"The Reserve Bank doesn't comment on daily rupee movements and its foreign-exchange operations, spokeswoman Alpana Killawala said."
The Reserve Bank of India on Sept. 16 said it will sell dollars and raise interest rates on locally-held foreign- currency deposits to bolster dollar supply. The central bank said it plans to sell dollars through its agent banks or directly to meet demand-supply gaps after the rupee fell the most in a decade on that day.
"Implied volatility on one-month dollar-rupee options rose today to 16.41 percent, the most in at least nine years, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices."
"The Reserve Bank's sales of the dollar in June exceeded purchases for the first time in 20 months, it said in a monthly last month. The bank sold a net $5.23 billion during in July."
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
"Last Updated: September 18, 2008 02:35 EDT"
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Asian Currencies Retreat After Interventions Falter (Update2)
By Patricia Lui and Wes Goodman
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Sept. 18 (Bloomberg) -- Asian central banks are giving up efforts to stop their currencies falling after an investor exodus overwhelmed the largest intervention in a decade.
"Policy makers are reducing their support for South Korean won and the Philippine Peso, allowing faster depreciation across Asia, according to HSBC Holdings Plc estimates and data compiled by Bloomberg. That's a change from two months ago, when the Bank of Korea sold a record $20.9 billion and the Reserve Bank of India reduced foreign exchange reserves by $7.9 billion, London- based HSBC said."
The shift prompted ING Investment Management and Daiwa SB Investments Ltd. to bet on declines even after the won slumped 16 percent this year and the rupee slid 15 percent. A slowdown in the region's economies is causing investors to flee and putting Asian stocks on course for their worst year since 1990. Foreigners sold $32 billion more shares than they bought in South Korea and $8.6 billion in India.
"``The willingness to intervene and burn reserves to maintain a specific level versus the dollar is a lot less,'' said Joel Kim, head of Asian debt in Hong Kong for ING Investment, which oversees $12 billion in assets and is part of the largest Dutch financial services company. ``We've been selling across the board.''"
Shifting Strategy
"Central bankers say they will accept weaker currencies. South Korea's Vice Finance Minister Bae Kook Hwan said on Sept. 11 that authorities will only buy or sell to influence exchange rates when won moves are ``volatile.'' Two months ago, when the won was 7 percent stronger, the Finance Ministry pledged ``stern action'' to prevent excessive price swings."
"The Bank of Thailand isn't planning to use its more than $100 billion in reserves to hold back the baht's slide, Bank of Thailand Governor Tarisa Watanagase said today in Bangkok. ``We will just move with the market,'' Tarisa said in a Bloomberg Television interview when asked about the baht."
Reserve Bank of India Governor Duvvuri Subbarao said on Sept. 9 in Mumbai that the central bank will be ``flexible'' and focus on managing price swings.
"South Korea's reserves slid 8 percent in five months to $243.2 billion, heading for the first annual decline in a decade. Last month, they dropped 1.8 percent, less than half the pace in August, a sign the central bank was spending less to prop up the won. India's cash reserves dropped 7.4 percent this quarter to $280 billion and Thailand's fell 5 percent to $101 billion."
Crisis of 1997
"The last time South Korea's reserves declined this fast was during the Asian financial crisis of 1997, when the won dropped 50 percent and 15,000 companies went bankrupt. Seoul-based Samsung Group and Daewoo Group asked employees to sell gold rings, necklaces and coins to help the country raise foreign currency."
"The slower decline in reserves ``appears to reflect decisions to intervene less, rather than reflecting less pressure on currencies,'' Daniel Hui, a strategist at HSBC in Hong Kong, wrote in a Sept 12 report. Europe's biggest bank expects the won will weaken to 1,185 within a year, from 1,116 yesterday."
Emerging-market currencies including the Russian ruble and the Brazilian real are also tumbling as the failure of banks including New York-based Lehman Brothers Holdings Inc. boosts demand for the safest assets.
"The South Korean won fell 2.9 percent to 1,149.40 against the dollar as of 11:10 a.m. in Seoul. The Philippine peso weakened 0.7 percent to 47.270 in Manila. The rupee slid 0.7 percent to 46.675 per dollar in Mumbai, close to a two-year low. The baht rose 0.4 percent to 34.22, near the lowest in a year."
Surprised Strategists
"This year's declines surprised strategists, who predicted in January that Asian economies would withstand a U.S. economic slowdown. At that time, they forecast the won would end 2008 at 890 per dollar, the rupee at 38 and the baht at 31.38, according to Bloomberg News surveys of economists."
"Barclays Plc, the third-biggest currency trader, predicts the won will fall to 1,200 by year-end, the baht to 37 and the rupiah to 9,450. It is now revising those forecasts lower."
"The won will climb to 1,090 in 12 months because South Korea's economy is strong enough for the Bank of Korea to raise interest rates, said Kwon Goohoon, an economist in Seoul at Goldman Sachs Group Inc. The economy will expand 4.3 percent this year and 4.6 percent in 2009, according to the median estimate of 9 strategists by Bloomberg."
"``We continue to believe that the recent spike to around 1,150 is an overshoot,'' he said."
"To avoid a repeat of the 1997 crisis, nations in the region have built up more than $4 trillion in reserves and set up an $80 billion pool among 13 Asian countries that can be used to protect currencies. South Korea has the sixth-biggest store of reserves in the world."
`Extremely Large' Reserves
"``Korea's reserves are extremely large and there's no immediate danger'' that they'll be depleted, said Phillip Blackwood, head of emerging-markets in Aabenraa at Sydbank A/S, Denmark's third-largest bank, who oversees $5 billion of bonds."
"Even so, he predicts the won will weaken 5 percent or more by year-end because speculation that growth in Asia and the U.S. would decouple is ``well and truly dead.''"
"Asia's economies will slow as demand from the U.S. and Europe weakens, New York-based Merrill Lynch & Co. said in a Sept. 12 report. The region will expand 7.7 percent this year, less than an earlier forecast of 7.9 percent, Merrill said."
"South Korea's $970 billion economy grew 4.8 percent in the second quarter from the same period in 2007, the slowest pace in more than a year. Household spending fell for the first time in four years as rising living costs prompted consumers to save."
`Selling Asia'
"``There might be an exodus for a prolonged period, which is not a very nice scenario,'' said Wee-Ming Ting, head of Asian fixed income in Singapore at Pictet Asset Management Ltd., part of Switzerland's largest privately held bank for the wealthy. Pictet, which overseas $109 billion, has been ``selling Asia for a few months,'' he said."
"The credit-market slump is complicating efforts by central banks to defend their currencies. South Korea canceled a $1 billion sale of bonds to finance intervention on Sept. 12, as Lehman's share collapse drove up funding costs."
"Some of Asia's ``humongous'' reserves are in bonds of Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, the mortgage finance companies taken over by the U.S. government this month, said Frank Engels, a senior money manager in Frankfurt for Union Investment Privatfonds GmbH, which oversees about $250 billion. That makes the funds less accessible to support currencies, he said."
"The won will drop to 1,150 by year-end, said Kei Katayama, who oversees $1.6 billion of non-yen debt as leader of the foreign fixed-income group in Tokyo at Daiwa, part of Japan's second-biggest investment bank."
"``Defending currencies won't help,'' he said. ``The U.S. economy led the current world recession. Now it's spreading to Europe, the U.K., and Asia.''"
To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.
"Last Updated: September 18, 2008 01:58 EDT"
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Japan Service Demand Rises for First Time Since April (Update1)
By Toru Fujioka
"Sept. 18 (Bloomberg) -- Japan's demand for services rose for the first time in three months in July, led by retail sales."
"The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, rose 1.2 percent from June, the Trade Ministry said today in Tokyo. The median estimate of 31 economists surveyed by Bloomberg News was for a 0.5 percent gain."
The increase may not be enough to alleviate concern about the outlook for an economy that is on the brink of a recession. Consumer confidence is at a record low as higher prices for food and energy diminish spending power.
"``Today's number certainly rose more than expected, but as a trend, demand for services isn't at all strong,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. ``Higher prices are weighing on consumer spending.''"
"The world's second-largest economy contracted at the fastest pace in seven years in the second quarter, as consumers and companies pared spending and exports declined. Personal outlays make up more than half of gross domestic product."
"``Consumers are pessimistic because of the slowing economy and inflation,'' Shigeru Sugihara, deputy director-general at the Cabinet Office, said this week. ``It doesn't look like households are going to increase spending anytime soon.''"
"Wages grew 0.3 percent in July, when the cost of daily necessities rose 3.6 percent."
Hot Weather
"The gain in service demand, which makes up 60 percent of the economy, was driven by hot weather, according to Katsuya Shimura, a spokesman at the Trade Ministry. Warmer temperatures increased sales for air conditioning and prompted people to use more electricity and water, he said."
"``The increase in July was led by special factors and we shouldn't think this is a reflection of solid consumer spending,'' Shimura said. He added that the average temperature of eight major cities in July was 2.5 degrees Celsius (36.5 degrees Fahrenheit) higher than a year earlier."
"Department store sales fell for a fifth month in July. Takashimaya Co., Japan's third-biggest department store chain, cut its profit forecast for the year ending February 2009, citing weak sales on clothes and luxury goods."
"``Growth in profits slowed more than we expected because consumer sentiment worsened abruptly against the backdrop of the economic slowdown,'' the department store said in a statement last week."
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
"Last Updated: September 17, 2008 21:34 EDT"
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Japan's Government Bonds Slump as Demand Cools at Debt Auction
"Sept. 18 (Bloomberg) -- Japanese 20-year government bonds slumped, driving yields to a six-week high, after a government sale of 800 billion yen ($7.7 billion) in the securities drew the least demand in two years."
"Demand cooled after Lehman Brothers Holdings Inc. was suspended as a primary dealer in the wake of its bankruptcy. The finance ministry won't issue 128.7 billion yen in debt that Lehman successfully bid for at previous auctions, Nikkei English News reported. The Bank of Japan pumped funds into the financial system for a third day, adding 2.5 trillion yen."
"``The sentiment is quite bad,'' said Takashi Nishimura, an analyst at Mitsubishi UFJ Securities Co., a unit of Japan's largest bank by assets, in Tokyo. ``This is the first auction after the collapse of Lehman, which had a high presence in 20- years. It's still a concern.''"
"The yield on the 2.1 percent bond due June 2028 rose 2.5 basis points to 2.125 percent as of 3:01 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.348 yen to 99.652 yen. The yield earlier rose to 2.175 percent, the highest since Aug. 6."
"Five-year yields gained 5.5 basis points, or 0.055 percentage point, to 1.12 percent. Ten-year bond futures for December delivery fell 0.39 to 138.34 as of the afternoon close at the Tokyo Stock Exchange."
"The auction of 20-year debt bearing a 2.1 percent coupon attracted bids worth 2.36 times the amount offered, down from a so-called bid-to-cover ratio of 3.41 times in August. The ratio is the lowest since a ratio of 2.17 times in August 2006."
"The lowest price at the sale was 0.55 yen below the average price, compared with a difference of 0.04 yen in August."
"The so-called tail is the difference between the lowest and the average price. The longer the tail, the fewer bids are clustered around the average price. An increase in the tail may signal that demand at the auction declined."
Lehman Suspension
"The Ministry of Finance on Sept. 16 suspended Lehman Brothers as a primary dealer, cutting to 24 the number of firms obliged to bid at government debt sales."
"The ministry ``needs to finance the amount of JGBs purchased by Lehman, otherwise there will be a shortage of funds,'' said Susumu Kato, chief economist in Tokyo at Calyon Securities, one of the remaining primary dealers. ``An increase in supply will deteriorate the demand and supply conditions in the market, especially with the supplementary budget.''"
"The government may issue as much as 500 billion yen of so- called construction bonds to fund some of the extra spending for an economic stimulus package, two finance ministry officials told Bloomberg News on Sept. 5 on condition of anonymity."
"An earlier drop in 10-year bonds was reversed on speculation investors favored the safe haven of government debt as stocks in the U.S., Europe and Asia plunged. Ten-year yields declined 0.5 basis point to 1.485 percent."
Stock Slump
The Dow Jones Industrial Average lost 4.1 percent yesterday after Lehman Brother's bankruptcy and the government takeover of AIG fanned concern of credit-market losses widening. The Nikkei 225 Stock Average fell 2.2 percent today.
"``Government bonds are the only choice for those who want to avoid risk until turbulence in the global financial market dies down,'' said Hisakazu Amano, who helps oversee about $39 billion as head of fund management at T&D Asset Management Co. in Tokyo. ``It's not really investment but more like evacuation.''"
"Japan's bonds often move in the opposite direction to stocks. Benchmark 10-year yields had a correlation of 0.88 with the Nikkei this month, according to Bloomberg data. A value of 1 means the two moved in lockstep."
`Extreme Tensions'
"The Federal Reserve will lend up to $85 billion to AIG, the biggest U.S. insurer by assets, in exchange for control. Barclays Plc, the U.K.'s third-biggest bank, will acquire Lehman's North American investment-banking business for $1.75 billion, three days after abandoning plans to buy the entire firm."
"``It could take some time yet to see how the extreme tensions in the U.S. financial markets will ultimately move towards resolution,'' Chotaro Morita, head of fixed-income strategy research at Barclays Capital Japan Ltd., wrote in a research report today. Ten-year yields could test the 1.4 percent level again, he said."
Central banks in Japan and Australia injected $33 billion yesterday amid ongoing efforts to calm markets roiled by the demise of Lehman and crisis at AIG.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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Mexico's Benchmark Peso Bond Yields Increase Most in Two Years
By Valerie Rota
"Sept. 17 (Bloomberg) -- Mexican peso-denominated bonds tumbled, pushing up benchmark yields by the most in two years, as concern that credit-market losses will deepen sapped demand for emerging-market securities."
"Yields on Mexico's bond due in December 2024 headed for their first monthly increase since June. Foreigners, the biggest owners of Mexico's long-term bonds, cut holdings by 2.9 percent to 288 billion pesos ($26.6 billion) as of Sept. 4 from a record high last month, central-bank data show."
"Foreigners ``are getting out of Mexico and other emerging markets,'' said Alonso Madero, who oversees 43 billion pesos in assets in Mexico City at Actinver SA, the country's biggest independent money manager. ``It's a flight to quality.''"
"The yield on the 10 percent bond due December 2024 rose 22 basis points, or 0.22 percentage point, to 8.75 percent at 5 p.m. New York time. It was the biggest increase since July 5, 2006. The bond's price fell 2.12 centavos to 110.75 centavos per peso, according to Banco Santander SA."
"Mexican bonds also declined in the aftermath of the explosion of two grenades at an Independence Day celebration in Michoacan state on Sept. 15, Madero said. The attack killed eight people and injured more than 100 others."
"The perpetrators were most likely part of the drug gangs that plague the state, Governor Leonel Godoy said in an interview with the Televisa network yesterday. Mexican drug cartels have carried out a series of high-profile attacks in recent months in response to a crackdown ordered by President Felipe Calderon."
`Social Instability'
"``On top of the generalized panic, if you see social instability, then with more reason you are going to want to get out'' of Mexican investments, Madero said."
"Mexico's peso weakened 1.1 percent to 10.8387 per dollar, compared with 10.7188 per dollar yesterday. Brazil's real slumped 4.5 percent, while Colombia's peso declined 3 percent."
"The Mexican peso has lost 9.9 percent against the dollar since touching a six-year high on Aug. 4 as the credit crisis widened, with the U.S. government taking over insurer American International Group Inc. yesterday. Global credit-market losses have swelled to more than $517 billion."
"Investors want to ``sell assets to be liquid in dollars,'' said Alejandro Martinez, a fixed-income strategist at HSBC Mexico SA in Mexico City. They're ``looking for liquidity.''"
"The decision by the U.S. Federal Reserve to leave borrowing costs unchanged at 2 percent yesterday quelled speculation Mexican central bankers may reduce lending rates when they next meet on Sept. 19, Martinez said."
"Banco de Mexico will keep its target interest rate at 8.25 percent this week, according to the estimate of 21 of 22 economists surveyed by Bloomberg News. One economist, Gray Newman at Morgan Stanley, forecast policy makers will raise the rate to 8.5 percent."
"``Mexico's economy is solid, but that doesn't mean that it's exempt from foreign crosswinds,'' Finance Minister Agustin Carstens said today in an interview on Radio Formula."
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.
"Last Updated: September 17, 2008 17:46 EDT"
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Natural Gas Futures Gain as AIG Rescue Spurs Commodity Buying
By Reg Curren
"Sept. 17 (Bloomberg) -- Natural gas futures rose 8.7 percent, the biggest increase in more than a year, as commodities gained after the Federal Reserve's rescue of American International Group Inc."
Investors turned to commodities as an alternative investment as equities declined. Gas also gained as production disruptions from hurricanes Gustav and Ike may leave supplies of the heating fuel lower than forecast before colder weather spurs demand.
"``Commodities have come off so far that if you want exposure it's a good time to get back in,'' said Chris Jarvis, president of Caprock Risk Management in Hampton Falls, New Hampshire. ``I expect natural gas to be a leader.''"
"Natural gas for October delivery gained 63.1 cents, or 8.7 percent, to settle at $7.91 per million at 3:13 p.m. on the New York Mercantile Exchange, the biggest one-day gain since advancing 12 percent on Jan. 30, 2007."
"A decline in gas output from the Gulf of Mexico caused by the hurricanes has slowed the rebuilding of stockpiles for the cold-weather season, Jarvis said."
"U.S. gas inventories rose 63 billion cubic feet in the week ended Sept. 12, according to the median of 16 analyst estimates compiled by Bloomberg. Supplies in the same week over the past five years advanced an average 88 billion cubic feet, according to the Energy Department."
Supply Estimates
"Inventories are probably going to be near the five-year average of 3.4 trillion cubic feet for the coming winter, Jarvis said. Supplies rose to a record 3.545 trillion last Nov. 1."
"``The sentiment in the market is maybe we'll fall a little behind on storage, with a gain in the high 50s or low 60s'' last week, said Tom Orr, director of research at Weeden & Co. in Greenwich, Connecticut. ``We might find ourselves 150 billion cubic feet less than where we were last year in the next couple of weeks because of shut-ins.''"
"Gulf production has been mostly shut this month because of the recent storms, boosting expectations that winter inventories will be pinched. Supplies normally gain before November, when demand for the heating fuel begins its rise to a winter peak."
"About 82 percent of the Gulf's daily production of 7.4 billion cubic feet was shut in as of noon today, down from 84 percent yesterday, the U.S. Minerals Management Service said."
"Investors seeking alternative investments to equities, which have declined with the credit crisis, snapped up ``hard assets'' like gold and oil, said Orr."
"``In times like this, people go back to gold, then perhaps crude,'' Orr said. ``At least you know you have 42 gallons in a barrel.''"
"Oil gained $6.01, or 6.6 percent, to settle at $97.16 a barrel in New York."
Doing the Math
"``People are starting to do the arithmetic'' on lost output, said Martin King, an analyst at FirstEnergy Capital Corp. in Calgary. ``We've started drifting back toward $8 to $8.50 for gas, which is much more reasonable for gas heading into winter.''"
"Buyers are taking a look at fundamentals instead of the ``financial morass'' and realizing people will still need to heat their homes this winter, he said."
"Technical analysis of the natural gas price chart also suggests a ``more constructive'' outlook for the heating and industrial fuel, Orr said."
"``Gas is hanging in there and has been building a base at $7 for close to a month,'' said Orr. ``If you go back and look at the chart last year it ground down in November and December to that $7 level and then started to shoot up. You need time and price to set a bottom.''"
"Technical traders watch for patterns on daily charts for clues to price direction, and will sell or buy commodities or equities based on those indicators."
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net.
"Last Updated: September 17, 2008 16:48 EDT"
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Korea Gas Shares Rise on Subsidies Speculation (Update1)
By Shinhye Kang
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"Sept. 18 (Bloomberg) -- Korea Gas Corp., the world's biggest buyer of liquefied natural gas, gained the most in more than four months in Seoul trading on speculation parliament will approve $1.1 billion in subsidies for state-controlled utilities."
"The shares advanced as much as 5.8 percent, or 3,600 won, to 65,500 won, the most since May 8, and were at 64,800 won as of 12:29 p.m. local time. Korea Electric Power Corp., which generates almost all of the country's power, fell 3.9 percent, extending a 25 percent drop this year on a poor earnings outlook."
"Lawmakers from the ruling and opposition parties agreed yesterday to pass a 4.57 trillion-won supplementary budget, including 1.3 trillion won in subsidies to help cover the losses of state-controlled Korea Gas and Korea Electric caused by government price caps. The National Assembly will approve the additional spending today, Korea Economic Daily reported."
"``The extra budget will ease concerns over the cash-flow of Korea Gas,'' Joo Ick Chan, an analyst at Hana Daetoo Securities Co., said in a report today. He maintained a `buy' rating on the stock with a price target of 100,000 won."
"The government has capped gas prices since November last year to ease inflation that has reached a 10-year high, while electricity rates have been unchanged since a 2.1 percent increase on Jan. 15, 2007."
"``The subsidies will be positive for Korea Electric, but the company still needs a big increase in power tariffs,'' Joo said in a separate report today."
No Dividends
"The shares of Korea Gas have also advanced because their recent decline has been excessive, said Lee Chang Mok, an analyst at Woori Investment & Securities Co."
Korea Gas has fallen 19 percent since Sept. 8 when Knowledge Economy Minister Lee Youn Ho said the utility and Korea Electric are unlikely to pay dividends this year because they may post losses.
"Fuel prices and a weakening won will continue to weigh on Korea Electric's earnings and share price, Joo said. The 2009 contract prices for coal, burned to generate 41 percent of the utility's power, may increase as much as 40 percent, according to Hana Daetoo Securities."
"Korea Electric may post a loss of 1.9 trillion won in 2008 because of higher fuel prices, Yonhap News reported on Sept. 9, citing a company document it obtained. The won has dropped 19 percent against the dollar this year, Asia's worst performer, as regional shares tumbled."
"Korea Gas recorded a second-quarter loss of 4.4 billion won, narrower than analysts expected, after margins increased and the weaker won boosted gains from gas contracts."
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.
"Last Updated: September 18, 2008 01:08 EDT"
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SNB May Leave Rate at 7-Year High to Fight Inflation (Update1)
By Joshua Gallu
Sept. 18 (Bloomberg) -- The Swiss central bank will probably leave its main lending rate at a seven-year high today to ensure inflation will slow below its 2 percent limit.
"The Swiss National Bank's Governing Board, led by Jean- Pierre Roth, will keep the three-month Libor target at 2.75 percent for a fifth quarter, all 19 economists surveyed by Bloomberg said."
"``Monetary policy in Switzerland is at a crossroad,'' said Guillaume Menuet, a senior European economist at Merrill Lynch International in London. ``There are obvious downside risks to the economy as we've seen in recent data, but it would be premature to ease monetary policy given the inflation outlook.''"
"Financial-market fallout from the U.S. housing crisis has hammered banks' profits and is a drag on economic growth. The SNB joined central banks around the globe today to provide extra money to calm markets spooked by the collapse of Lehman Brothers Holdings Inc. At the same time, the 35 percent drop in the price of oil since mid-July may give the SNB room to lower borrowing costs this year without sparking inflation."
"The SNB has left its target interest rate unchanged since September 2007 after record defaults on U.S. home mortgages led to losses at the country's two biggest banks, UBS AG and Credit Suisse Group. The Swiss financial industry accounts for about 15 percent of the economy and contributed about 50 percent to growth in recent years."
The SNB will announce its rate decision at 2 p.m. in Zurich.
Financial Turmoil
"Global stocks plummeted and bonds surged this week as traders sought the safest investments after Lehman Brothers went bankrupt, Merrill Lynch was bought and American International Group Inc. was rescued by the Federal Reserve. UBS, the European bank hardest hit by the U.S. mortgage crisis, has already booked more than $43 billion in writedowns and had to raise almost $28 billion in fresh capital from investors."
"The SNB joined with the Federal Reserve, the European Central Bank, the Bank of Japan and other central banks around the world to pump dollars into the financial system and head off a deepening crisis."
"``The action is designed to address the continued elevated pressures in U.S. dollar short-term funding markets,'' the banks said. ``The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.''"
Exports Ease
"With financial markets rattled and exports slowing, two of Switzerland's main economic engines are stalling. Export growth may slow to about 3 percent this year from about 10 percent in each of the two previous years, the government said in June."
"``The SNB shouldn't ignore weak growth,'' said Jan Amrit Poser, chief economist at Bank Sarasin in Zurich. ``We need a rate cut as a cushion against this downturn. The SNB will either cut by the end of the year or not at all, because March may be the bottom of the cycle.''"
"The economy is still ``in line'' with the SNB's forecast for expansion between 1.5 percent and 2 percent this year, Roth said on Sept. 5. While the economy will weaken further, Switzerland's won't suffer as much as other countries, he said. The Swiss economy grew 0.4 percent in the second quarter even as the economies of neighboring France and Germany shrank."
`Getting Close'
"``Europe is currently closer to recession than Switzerland is,'' Poser said. ``But if you look at the pace at which leading indicators are deteriorating, they're getting increasingly close to recession territory.''"
"Switzerland's leading economic indicators fell to the lowest level in five years in August and a measure of manufacturing growth slid to a three-year low. At the same time, price increases have eroded households' purchasing power and threaten consumption, the largest part of the economy."
"Record prices for oil and food have triggered a surge in inflation worldwide, prompting central banks from Asia to North America to shelve plans to cut rates."
"Roth said Aug. 26 in an interview with Finanz und Wirtschaft that he ``hopes'' inflation peaked this summer and that it would be ``absurd'' to use monetary policy to counter rising costs for oil and food. Inflation eased to 2.9 percent in August from 3.1 percent in July, the fastest pace in 15 years."
"While the ECB raised its rate in July on concern excessive pay demands may entrench faster inflation, Switzerland faces limited risks of so-called second-round effects as the Swiss economy is ``flexible'' and wage negotiations are decentralized, Roth said."
To contact the reporter on this story: Joshua Gallu in Geneva at jgallu@bloomberg.net
"Last Updated: September 18, 2008 03:50 EDT"
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U.S. Bill Rate Near Lowest Since World War II as Stocks Plunge
By Wes Goodman and Sandra Hernandez
Sept. 18 (Bloomberg) -- Treasury bill rates were near the lowest level since World War II as plunging stocks led investors to seek the relative safety of short-term government securities.
Yields indicate banks are more reluctant to lend than ever as Morgan Stanley considers merging with Wachovia Corp. and the U.K.'s Lloyds TSB Group Plc buys HBOS Plc. The cost to protect holdings of corporate bonds against default surged to an all-time high in Asia.
"``People want to avoid any type of risk,'' said Satoshi Okumoto, a general manager in Tokyo at Fukoku Mutual Life Insurance Co., with $54.6 billion in assets. ``I've never seen this kind of crisis before,'' said Okumoto, who has been in the financial-services industry for 23 years."
Three-month bill rates were 0.071 percent as of 7:40 a.m. in London. They dropped 65 basis points yesterday to close at 0.04 percent after reaching 0.02 percent and down from 1.47 percent at the end of last week.
"The yield on the 10-year note fell 3 basis points to 3.39 percent, according to BGCantor Market Data. The price of the 4 percent security maturing in August 2018 rose 11/32, or $3.44 per $1,000 face amount, to 105 5/32."
"Fukoku Mutual is buying Japanese government securities to avoid currency risk, Okumoto said."
"Three-month bills in Japan yield 0.605 percent, or 53 basis points more than their U.S. counterparts, close to the most since Bloomberg data on the figures began in 1999. A basis point is 0.01 percentage point."
Central banks in Japan and Australia added $16.8 billion into money markets to keep the credit crisis from spreading. Australian 10-year yields dropped 9 basis points to 5.48 percent.
`Massive Withdrawals'
"The MSCI Asia Pacific Index fell 2.9 percent to its lowest in three years, extending a rout in global stocks that sent the Standard & Poor's 500 Index down 4.7 percent. Gold climbed for a second day, extending its biggest jump in 26 years."
"Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman Brothers Holdings Inc., which has filed for bankruptcy."
"``This is absolutely the worst any of us have seen in our lifetimes,'' said T.J. Marta, a fixed-income strategist at RBC Capital Markets in New York, the investment-banking arm of Canada's biggest lender, speaking yesterday on Bloomberg Television. ``We heard anecdotal evidence of massive withdrawals from money market funds.''"
"Morgan Stanley is weighing a merger with banks including Wachovia to regain investor confidence after the securities firm's shares sank 42 percent this week, people familiar with the matter said."
"Lloyds, HBOS"
"Lloyds TSB Group Plc will acquire HBOS Plc to create a lender that controls more than a quarter of the U.K. mortgage market, two people with knowledge of the decision said."
"The U.S. three-month bill rate touched 0.01 percent in January 1940, monthly figures on the Fed Board of Governors' Web site show. Daily figures only go back to 1954."
"The cost of borrowing in dollars for three months jumped the most yesterday since 1999. The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said. The increase was the biggest since Sept. 29, 1999, during the run-up to the new millennium."
"The jump in Libor and rising demand for bills widened the gap between what the U.S. and banks pay to borrow in dollars for three months to the most since Bloomberg began compiling the data in 1984. The so-called TED spread soared 83 basis points to 3.02 percentage points yesterday. It was 2.99 percentage points today, rising from as low as 75 basis points on May 27."
`Maximum Pessimism'
"Daniel Fuss, vice chairman at Loomis Sayles & Co. in Boston, said he has been buying."
"``The point of maximum pessimism is right now,'' said Fuss, who co-manages the $17.4 billion Loomis Sayles Bond Fund. ``If you have cash on the sidelines, what I'm doing is getting some of that into the market each day.''"
"Some Morgan Stanley debt fell to 71 cents or 72 cents on the dollar yesterday, Fuss said, speaking yesterday on Bloomberg Radio. ``I know it traded because we bought it. What are those Morgan Stanley bonds worth? Probably 100.''"
"The cost to protect corporate bonds in the Asia-Pacific region from default rose to a record, credit-default swaps show. The Markit iTraxx Australia Series 9 credit-default swap index climbed 40 basis points to 2.35 percentage points."
"The price of protecting against a default by Wall Street firms Morgan Stanley, Goldman Sachs Group Inc., Wachovia and Citigroup Inc. approached or surpassed record highs in the U.S., the swaps indicate."
`It's Scary'
"Credit-default swaps, contracts to protect against or speculate on default, pay the buyer face value if a company fails to adhere to its debt agreements."
"The Fed will loan up to $85 billion to AIG, the biggest U.S. insurer, in exchange for control. The central bank this week also widened the collateral it accepts for loans to securities firms and increased its program for lending Treasuries to bond dealers."
"``It's scary,'' E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York and started trading bonds in 1969, said yesterday. ``Systemic risk is here and there and everywhere.''"
To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Sandra Hernandez in New York at shernandez4@bloomberg.net.
"Last Updated: September 18, 2008 02:44 EDT"
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"Asian Reserves `Diversified,' Central Bankers Say: Chart of Day "
By Lee J. Miller
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"Sept. 18 (Bloomberg) -- Southeast Asia's five biggest economies, at the epicenter of the 1997-98 Asian financial crisis, have amassed about $500 billion of international reserve assets, which provide a cushion from turmoil in the U.S., central bankers said."
"Thailand, where excessive lending to real estate projects and a currency devaluation triggered the crisis, now has more than $100 billion of reserves, central bank Governor Tarisa Watanagase said. Those reserves are ``well diversified'' and include no debt of U.S. mortgage finance companies Fannie Mae or Freddie Mac, she said in a Bloomberg Television interview today."
"The CHART OF THE DAY shows the reserves of Thailand, Indonesia, the Philippines, Singapore and Malaysia since July 1997, according to monthly data compiled by Bloomberg. Assets are typically held in government bonds that partly mirror international trade payments as well as gold."
"``If you don't trust U.S. Treasuries, it means you don't trust the U.S. government and you think they are going to announce a debt moratorium,'' Tarisa said. ``That is a very serious statement. It is very different from agency debts like Fannie and Freddie, which don't have explicit guarantees.''"
"Thailand, Indonesia and the Philippines were among several countries that took emergency loans through the International Monetary Fund in 1997-98 to boost reserves. South Korea, Russia and Mexico also received hard-currency aid at the time."
"``Gold will remain an integral part of our reserves as it provides security and diversification,'' Maria Ramona Gertrudes Santiago, managing director of the treasury at the Philippines central bank, said at a conference in London yesterday. ``As a hedge, it moves against the U.S. dollar. It's a perfect hedge.''"
To contact the reporter on this story: Lee J. Miller in Bangkok at lmiller@bloomberg.net
"Last Updated: September 18, 2008 00:52 EDT"
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Asia Stocks Tumble to 3-Year Low on Bank Woes; Macquarie Slumps
By Patrick Rial and Shani Raja
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"Sept. 18 (Bloomberg) -- Asian stocks tumbled, pushing the region's benchmark index to the lowest level in three years, as credit markets seized up and concerns grew that more financial companies will collapse."
"Macquarie Group Ltd., Australia's largest investment bank, plunged a record 23 percent as Morgan Stanley and HBOS Plc sought buyers to avoid becoming victims of the financial crisis. Newcrest Mining Ltd. rose as gold extended its biggest jump in 26 years. U.S. three-month Treasury yields traded near the lowest since World War II as investors fled stocks for safer havens."
"``Confidence has been shattered,'' said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $108 billion. ``The market is worried about a domino effect in the financial sector, with no one sure who's going to fall next.''"
"The MSCI Asia Pacific Index dropped 2.5 percent to 107.89 as of 3:34 p.m. in Tokyo, the lowest since September 2005. The gauge has lost 7.1 percent so far this week, headed for the biggest weekly tumble since August 2007."
"Japan's Nikkei 225 Stock Average lost 2.2 percent to 11,489.30, led by Sony Corp. after Goldman Sachs Group Inc. cut its rating on the shares. All benchmark indexes in the region fell. Taiwan shares lost 2.7 percent, prompting the government to announce it may buy shares to help prop up the market."
Hong Kong's main index posted the steepest slump in Asia with a 7.4 percent drop as Industrial & Commercial Bank of China Ltd. lost its spot as the world's largest bank by market cap.
Bank Lending Freezes
"More than $19 trillion has been wiped off global stock market value since a high on Oct. 31 as the worst U.S. housing recession since the Great Depression and a resulting global credit crisis slowed the world economy. This week, Lehman Brothers Holdings Inc. filed for bankruptcy and the U.S. government had to take over American International Group Inc."
"U.S. stocks slumped to the lowest in three years yesterday, with the Standard & Poor's 500 Index sliding 4.7 percent. Futures on the gauge rose 0.7 percent to 1,170.80 in after-hours trading."
"Morgan Stanley, the investment house that fell by a record yesterday, started weighing a merger with Wachovia Corp., according to people familiar with the matter. Lloyds TSB Group Plc agreed to buy HBOS, the No. 1 mortgage lender in Britain which has been faced with a shortage of funds."
"Macquarie slid 23 percent to A$26.05, taking its loss since a May 2007 high to 73 percent. The outlook on Macquarie's credit rating was yesterday lowered to negative from stable by Standard & Poor's, implying a one-in-three chance of a cut to the rating."
"Babcock & Brown Ltd., Australia's second-biggest investment bank, retreated 17 percent to 76 cents. Babcock has plunged 97 percent this year, making it the third-largest loser in 2008 on the MSCI World Index behind Fannie Mae and Freddie Mac."
Exuberance Over
"``Babcock and Macquarie's business models relate to a previous era of irrational exuberance which no longer exists,'' Clifford Bennett, chief economist at Sonray Capital Markets Ltd. in Sydney said. ``Babcock & Brown is going to come very close to the edge.''"
"ICBC lost its top ranking to HSBC Holdings Plc as it fell 6.7 percent to HK$3.74. HSBC retreated 3.9 percent as CNBC reported that it was a possible suitor for Morgan Stanley. Sumitomo Mitsui Financial Group Inc., Japan's No. 3 listed bank, slumped 6.6 percent to 582,000 yen."
"In a sign that banks have lost confidence in the solvency of their competitors, the London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent yesterday, the biggest advance since Sept. 29, 1999. Corporate bond default risk indexes rose to records in the Asia-Pacific region today."
"The perceived risk of U.S. government debt, long held to be absent of any default risk, also climbed to a record yesterday as the government's involvement in bailing out financial markets weighed on its own balance sheet."
Unprecedented
"``People want to avoid any type of risk,'' said Satoshi Okumoto, a general manager in Tokyo at Fukoku Mutual Life Insurance Co., with $54.6 billion in assets. ``I've never seen this kind of crisis before,'' said Okumoto, who has been in the financial-services industry for 23 years."
"U.S. Treasury three-month bill rates were 0.071 percent as of 11:58 a.m. in Tokyo. They dropped 65 basis points yesterday to close at 0.04 percent, a level not seen since 1940. Two-year yields were 1.65 percent, near the lowest since April."
"Newcrest paced gains in gold stocks after the price of gold surged the most in 26 years and silver rose the most since 1979 yesterday. Australia's largest gold producer climbed 15 percent to A$24.50, the biggest gain since September 1999, while Lihir Gold Ltd. jumped 16 percent. Zijin Mining Group Co., China's largest gold miner by market value, rallied 13 percent."
Sony Downgrade
"Inner Mongolia Yili Industrial Group Co. plunged 10 percent and Bright Dairy & Food Co. lost 2.1 percent, extending declines from yesterday, after the two companies were found to have produced powdered milk contaminated with a dangerous chemical."
"Sony, the maker of the PlayStation 3 game console, lost 8.7 percent to 3,270 yen, the steepest fall since April 2003. Goldman's Yuji Fujimori cut his rating on the company, citing rising risks for the company's mobile phone, television and digital camera divisions."
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
"Last Updated: September 18, 2008 02:56 EDT"
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Australian Banks Reluctance to Lend Nears Bear Stearns Highs
By Laura Cochrane and Candice Zachariahs
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"Sept. 18 (Bloomberg) -- Australian banks are less willing to lend to each other than at any time since Bear Stearns Cos. collapsed six months ago, money market rates show, amid concern the Wall Street credit crisis is spreading."
"The difference between the rate banks charge each other for three-month loans and the overnight indexed swap rate, which measures the availability of funds in the market, rose to 77.83 basis points, or 0.7783 percentage point, at 12:58 p.m. in Sydney, from 59.67 basis points yesterday. The spread stood at 78.25 on March 11, after Bear Stearns Chief Executive Officer Alan Schwartz denied the firm lacked sufficient capital. JPMorgan Chase & Co. agreed to buy Bear Stearns a week later."
"``This is a function of the global scenario and that there is a re-pricing of bank risk going on globally,'' said Damien McColough, head of fixed-income research at Westpac Banking Corp. in Sydney. `There is a lot of uncertainty.''"
"Macquarie Group Ltd., Australia's biggest investment bank, dropped by a record in Sydney as funding costs soared globally after the government takeover of American International Group Inc. failed to ease the credit crunch. The cost of borrowing in dollars for three months jumped the most in London since 1999 and central banks in Japan and Australia injected $16.8 billion into money markets to ameliorate the crisis."
"The Reserve Bank of Australia added A$3.015 billion ($2.4 billion) to the financial system today, heading for its biggest week of injections in more than a year as speculation Morgan Stanley and HBOS Plc will be acquired heightens concern of further financial failures."
Pumping in Cash
Global central banks pumped in more than $230 billion into their financial systems this week.
"The rate Australian banks charge each other for loans also rose, with the Australian three-month bank bill swap rate increasing 5 basis points to 7.3 percent, the highest since Aug. 22, Bloomberg data show."
"The cost to protect Macquarie's senior debt from default, as measured by credit-default swaps, traded at a record high 630 basis points yesterday and were quoted about another 120 basis points higher today at around 750 basis points, according to JPMorgan Chase & Co prices."
"The price of the contracts, which rise as perceptions of credit quality deteriorate, means it costs $750,000 to protect $10 million of Macquarie Group's debt from default for five years."
"Macquarie, Australia's largest investment bank, plunged by a record 17 percent to A$28.03 at 1:28 p.m. in Sydney trading."
"Babcock & Brown Ltd., the nation's second-largest investment company, dropped 23 percent to 71 cents."
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.netLaura Cochrane in Melbourne at lcochrane3@bloomberg.net.
"Last Updated: September 18, 2008 00:47 EDT"
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Asian Policy Makers Predict No Repeat of 1997 Financial Crisis
By Shamim Adam
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"Sept. 18 (Bloomberg) -- Asian policy makers see little risk their countries will be hit by a crisis similar to the economic meltdown of 1997, downplaying concern the U.S. turmoil will infect the region's financial system."
"``This is nothing'' compared with 1997, Bank of Thailand Governor Tarisa Watanagase said on Bloomberg Television in Bangkok today. ``The direct impact is very limited, although we may see some slowdown through the trade channel later on.''"
"Central banks continued to pump money into their financial systems to ensure liquidity as investors sold shares of Australia's Macquarie Group Ltd. and Kookmin Bank, South Korea's biggest lender. Asian banks have limited exposure to Lehman Brothers Holdings Inc., which filed for bankruptcy earlier this week, officials say."
"``The risk to Asian banks is more from the impending economic slowdown and market turmoil than from direct exposure to the distressed U.S. financial institutions,'' said Ritesh Maheshwari, a Standard & Poor's analyst in Singapore. Their ``strengthened balance sheets as a result of healthy profits can withstand the impact of likely losses from direct exposure.''"
"The Asian financial crisis, set off by plunging currencies, led to the collapse of companies as they buckled under billions of dollars of debt, forcing Indonesia, Thailand and South Korea to turn to the International Monetary Fund for bailouts. The region has since accumulated more than $3.3 trillion of reserves, about half of the global total."
BOJ's Shirakawa
"``I don't think a financial crisis will take place in Asia,'' Bank of Japan Governor Masaaki Shirakawa said yesterday. ``The situation of Asian economies is different from the time of the 1997-1998 crisis. They have plenty of foreign reserves.''"
"The Japanese central bank today added 2.5 trillion yen ($23.9 billion) to its financial system in its third day of fund injections, while Reserve Bank of Australia pumped in A$3.015 billion ($2.4 billion)."
"``There is a credit crunch everywhere, even in Japan, but it's relatively better here as Japanese banks are still okay,'' said Susumu Kato, chief economist in Tokyo at Calyon Securities, a primary dealer required to bid at government debt sales. ``Domestic institutions don't want to give money to foreign institutions, so the BOJ stepped in to stabilize the market.''"
"Lehman's bankruptcy, the sale of Merrill Lynch & Co. to Bank of America Corp. and the U.S. government bailout of American International Group Inc. this week has sparked concern of more financial failures, sending the cost of short-term credit higher in the U.S. and Europe. In Asia, money market rates have remained relatively low."
Asia Vs U.S.
"The difference between what the Japanese government and banks pay to borrow yen for three months reached its lowest in six months. By contrast, the so-called U.S. TED spread expanded to the widest since Bloomberg began compiling the data in 1984."
"The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said yesterday. The increase was the biggest since Sept. 29, 1999."
"Japan's banks and insurers, including Mitsubishi UFJ Financial Group Inc., have announced a combined 245 billion yen of potential losses tied to the collapse of Lehman, while lenders in China said they have about $384 million of exposure to the U.S. securities firm."
"Potential losses of Japanese banks ``seem to be within the levels that can be covered by their profits,'' Bank of Japan's Shirakawa said. ``There's no concern that the latest events will threaten the stability of Japan's financial system.''"
"Thailand, which triggered the Asian financial crisis with the devaluation of its baht in July 1997, has no shortage of capital and the nation's lenders are ``strong and resilient,'' Tarisa said today."
Thailand's Tarisa
"The banking industry is ``a lot more cautious and risk adverse ever since the 1997 crisis,'' she said. ``We had learnt from the crisis. I don't think there is any chance at all that one of our banks will come into problems.''"
"The exposure of local banks in the Philippines to Lehman is between 0.3 percent and 0.4 percent of their total assets, central bank Governor Amando Tetangco said in a Bloomberg Television interview today. Losses stemming from the holdings may hurt bank earnings though won't damage their capital, he said."
"Australia's bank regulatory system is strong enough to give customers ``certainty'' about the state of their lenders, Prime Minister Kevin Rudd said even as he warned that it was a serious time for the nation's financial institutions."
IMF Bailouts
"During Asia's 1997 financial crisis, Indonesia, Thailand and South Korea spent most of their currency reserves attempting to prop up their exchange rates after investors abandoned them. The IMF arranged more than $100 billion of loans to the three countries after their currencies collapsed."
"``Emerging Asia should be relieved that, unlike the 2001 tech bubble burst and the 1997-98 financial crisis, the `action' has started elsewhere for a change,'' said Paul Gruenwald, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. ``As a result, the region seems likely to pass through the current credit crisis relatively well.''"
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
"Last Updated: September 18, 2008 00:51 EDT"
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"Sumitomo Mitsui, ICBC Lead Drop in Asia Financials (Update2) "
By Takahiko Hyuga and Bomi Lim
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"Sept. 18 (Bloomberg) -- Sumitomo Mitsui Financial Group Inc. and Industrial and Commercial Bank of China Ltd. led declines in Asian financial stocks after Morgan Stanley and Goldman Sachs Group Inc. plunged in the U.S., fueling concern more financial firms will collapse."
"Sumitomo Mitsui, Japan's third-biggest bank by revenue, fell 8.2 percent to 572,000 yen, the lowest since February 2004, as of 2:22 p.m. in Tokyo. ICBC, China's biggest lender, dropped a record 12 percent to $HK3.54 in Hong Kong trading."
"Morgan Stanley and Goldman Sachs tumbled the most ever after a government rescue of insurer American International Group Inc. failed to ease the credit crisis. Morgan Stanley is weighing a merger with Wachovia Corp. and several other banks to regain investor confidence after its shares sank 42 percent this week, according to people familiar with the matter."
"``There are more fiascos to come from the U.S., and it's hard to say the markets have hit bottom,'' said Kim Sung Kwang, who helps manage the equivalent of $1 billion at Hanwha Investment Trust Management Co. in Seoul. ``It's really difficult to forecast when the markets will finally make a rebound.''"
"Sumitomo Mitsui's decline was the biggest among 84 stocks in an index tracking Japanese banks, which dropped 4.3 percent. Mitsubishi UFJ Financial Group Inc., the nation's biggest lender, fell 4.9 percent."
`A Lot of Fear'
"Nomura Holdings Inc., Japan's biggest brokerage, declined 6.9 percent to the lowest since May 2003, the month before Japan injected public funds to halt a banking crisis."
"``There's a lot of fear in the market and uncertainty,'' said Sevanth Sebastian, an equities economist at Commonwealth Bank of Australia in Sydney. ``It's no surprise that financials are bearing the brunt of losses today.''"
"Japanese banks' potential losses due to the Sept. 15 collapse of Lehman Brothers Holdings Inc. are ``manageable'' and won't affect their credit ratings, Standard & Poor's said in a statement today. The nation's lenders disclosed a total of 202.5 billion yen ($1.9 billion) in potential Lehman-related losses as of yesterday, according to data compiled by Bloomberg News. Most of the assets at risk are in the form of loans and bonds."
"``The direct exposures of rated banks in Asia ex-Japan to Lehman Brothers are not expected to be significant enough to materially damage their credit profiles,'' S&P said in a separate statement."
"The company revised its outlook on the ratings of 12 Asian financial firms today to ``stable'' from ``positive,'' including Chinatrust Commercial Bank, Citic Group and Philippine National Bank."
Bank of China Drops
"Chinese banks dropped for a third day, led by ICBC, which said yesterday it had $151.8 million at risk from Lehman's bankruptcy, the most among local lenders. Bank of China Ltd. lost 9.7 percent in Hong Kong trading."
"In Shanghai, China Life Insurance Co., the nation's largest, fell by 9.9 percent."
"In South Korea, Kookmin Bank, the country's biggest, declined 8 percent while Woori Finance Holdings Co., which controls the second-largest lender, tumbled 11 percent."
"ICICI Bank Ltd., India's second-largest, dropped 4.4 percent in Mumbai trading to its lowest in two months. The stock lost 18 percent this week after reporting it may have to set aside additional funds to cover losses on investments in Lehman securities."
"State Bank of India, the nation's largest, fell 1.8 percent while the Bombay Stock Exchange's Bankex index slid 3.7 percent."
To contact the reporters on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net; Bomi Lim in Seoul at blim30@bloomberg.net
"Last Updated: September 18, 2008 01:55 EDT"
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Treasuries Little Changed; 10-Year Yield Slips to 3.41 Percent
By Agnes Lovasz
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"Sept. 18 (Bloomberg) -- U.S. Treasuries were little changed, erasing earlier declines."
"The yield on the 10-year note fell 1 basis point to 3.41 percent by 8:47 a.m. in London. The 4 percent security maturing August 2018 rose 3/32, or 94 cents per $1,000 face amount, to 104 29/32."
The yield on the two-year note gained 3 basis points to 1.68 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
"Last Updated: September 18, 2008 03:50 EDT"
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"Corn, Soybeans Drop as Credit Turmoil May Slow Growth, Demand "
By Jae Hur
"Sept. 18 (Bloomberg) -- Corn and soybeans slumped on speculation that the global credit crisis that has sent equity markets tumbling will stifle economic growth, reducing demand for food and alternative fuel."
"About $3.6 trillion of market value has been erased from global stocks this week, triggered by the largest-ever bankruptcy filing by Lehman Brothers Holdings Inc., once the fourth-largest U.S. securities firm. Corn has lost 2.7 percent this week and soybeans has fallen 6.1 percent."
"``Market sentiment is very weak because of plunging stock markets, which will hurt growth and demand,'' Kazuhiko Saito, strategist at Interes Capital Management Co., said today. ``Investors will stay away from risky assets and markets for the time being until the credit-market crisis cools down.''"
"Corn for December delivery fell 5.75 cents, or 1 percent, to $5.4825 a bushel in after-hours trading on the Chicago Board of Trade by 11:13 a.m. Singapore time. Futures are down 31 percent from a record $7.9925 on June 27."
"The contract gained 4.1 percent yesterday on speculation flooding and wind damage from remnants of Hurricane Ike will reduce yields of corn and soybeans, the biggest U.S. crops."
"Soybeans for November delivery declined 10.75 cents, or 0.9 percent, to $11.2825 a bushel. The contract declined yesterday as low as $11.07, the lowest since April 1. The oilseed has lost 31 percent from a record $16.3675 on July 3."
"``Unlike wheat, there are still speculative positions in the corn and soybean markets and that's why the two markets are under influence from the financial woes,'' said Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo."
Wheat Crop
"Wheat for December delivery was down 0.8 percent at $7.20 a bushel as of 11:15 a.m. Singapore time after trading as high as $7.3625. The price touched $6.86 yesterday, the lowest since August 21, 2007. Futures have lost 47 percent from a record $13.495 on Feb. 27."
"The contract climbed 5.2 percent yesterday, the most since Aug. 13, as dry weather threatened crops in Australia and Argentina, among the world's top five wheat exporters."
"Japan, Asia's largest wheat importer, canceled today's tender to buy 55,000 metric tons of U.S. milling wheat as sales of tainted foreign rice sparked criticism of the ministry's handling of grain imports."
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
"Last Updated: September 17, 2008 23:43 EDT"
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Brazilian Banks Drop Most Since 2002 as Credit Seizes (Update2)
By Alexander Ragir
"Sept. 17 (Bloomberg) -- Brazilian banks tumbled, capping the biggest three-day decline in almost six years, as a seizure in credit markets spurred concern the lenders' growth may be stifled even though profits are increasing."
"``We're moving very quickly into a global liquidity trap, where you could very well have years in which you may not grow as much because of the excess in leverage we've had in the system,'' said Simon Nocera, co-founder of San Francisco-based hedge fund Lumen Advisors LLC. ``As long as there is reducing of leverage you're going to see this environment and as long as you do, banks in Brazil are going to suffer.''"
"The MSCI Brazil Financials Index slid 7.6 percent to the lowest since March 2007. The drop extended this week's plunge to 16 percent, the steepest three-day drop since September 2002, amid a global bank selloff triggered by the bankruptcy of Lehman Brothers Holdings Inc. and the near-collapse of American International Group Inc."
"Brazilian banks have lost almost half of their value since May as worldwide losses from the credit crisis topped $517 billion and a drop in commodities prices fueled concern that economic growth may slow. While the nation's lenders continue to increase profit, concerns about global liquidity and the selling of riskier emerging-market assets may send the shares down further, said Nocera, a former International Monetary Fund economist."
Loss of Confidence
The U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 today as a loss of confidence in credit markets worldwide prompted investors to seek the safety of the shortest-term government securities. The cost of borrowing in dollars for three months jumped the most since 1999 as banks hoarded cash amid concern more financial institutions will fail.
"Banco do Brazil SA, Brazil's biggest bank, dropped 8.8 percent to 19.90 reais. Banco Bradesco SA, Brazil's largest non- state lender, fell 5.1 percent to 26.48 reais. Banco Itau Holding Financeira SA, Brazil's second biggest non-state bank, retreated 5.6 percent to 27.68 reais."
"Brazil's Bovespa index lost 6.7 percent, pushing its decline from a May high to 38 percent as commodity prices tumbled and investors sold high-yielding emerging-market assets."
"``As long as you have people selling risky assets you're going to have Brazil being vulnerable, value really doesn't mean very much,'' said Nocera. Brazilian banks' ``value is fantastic but in this global environment you could fall into a value trap, as long as you have a flight to safety.''"
Buying Banks
"Will Landers, who manages $7 billion of Latin American stocks at BlackRock Inc. in Plainsboro, New Jersey, said he purchased Brazilian bank shares in the past few weeks."
"``As people were looking to reduce their exposure to financials, they sold off whatever was liquid and hadn't gotten destroyed yet and Brazilian banks kind of got caught in the cross-fire,'' said Landers. ``The actual exposure they have to all the problems in the U.S. is narrow, if not zero.''"
"Brazil's biggest banks have ``strong'' deposit bases and loan growth and are not dependent on foreign lending to grow, said Landers."
"Second-quarter profit for companies in the MSCI Brazil Financial Index climbed 41 percent, compared with a 74 percent decline for U.S. companies on the Standard and Poor's 500 Financials Index, according to Bloomberg data. Lending by Brazilian banks rose 33 percent in June from a year earlier to a record 1.07 trillion reais."
"Nocera also said there is no direct link between Brazilian banks and the global credit problems triggered by defaults of subprime mortgages. Banks may be hurt by slowing economic growth in Brazil if commodity prices continue to fall, he said."
The Reuters/Jefferies Commodities index has tumbled 26 percent from its July 2 high.
"``There is no question, the banking system in Brazil is definitely one of the most profitable in the world,'' said Nocera. ``But the problem is, they're in Brazil. The growth the past years in Brazil came with the commodity rally and when you have a country growing primarily because of one factor, that growth is not sustainable.''"
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;
"Last Updated: September 17, 2008 17:17 EDT"
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Brazil Real Has Biggest Drop in 13 Months as U.S. Slump Spreads
By Adriana Brasileiro
Sept. 17 (Bloomberg) -- Brazil's real dropped the most in 13 months on concern the U.S. takeover of insurer American International Group Inc. will fail to stem financial market losses in the world's biggest economy.
"The real sank 3.2 percent to 1.8650 per dollar at 3:15 p.m. New York time, from 1.8080 yesterday. It earlier dropped as much as 4.5 percent to 1.8892, its weakest since September 2007. The real is the biggest decliner among the 16 major currencies this month, having plunged 12.5 percent against the dollar. It is down 16.6 percent from a nine-year high of 1.5545 reached Aug. 1."
"``The market is in a frenzy,'' said Vanderlei Arruda, who manages foreign-exchange trading at Sao Paulo-based Corretora Souza Barros, the second-biggest interbank currency brokerage in Brazil. ``There is more tension every day and this is making investors, especially foreigners, pull their money from here.''"
"The real led a tumble in currencies across Latin America as investors piled into the safety of Treasuries after the U.S. took control of American International Group Inc. yesterday following the collapse of Lehman Brothers Holdings Inc. Rates on U.S. Treasury three-month bills dropped to as low as 0.0203 percent, the lowest since World War II."
"Mexico's peso fell 0.9 percent to 10.8142 per dollar and Colombia's peso sank 3 percent to 2,166.1 per dollar."
"``After Lehman, we entered a new phase in which the positive effects of good news are very short-lived,'' said Marcelo Voss, chief economist at brokerage Liquidez Corretora in Sao Paulo. ``Investors will stay away from risk as much as possible.''"
`Very Small Risk'
"The real's decline today is the biggest since July 27, 2007, when it dropped 3.4 percent as concern began to build that subprime mortgage losses would weaken the U.S. financial industry and erode demand for higher-yielding, emerging-market assets."
The real's 12 percent loss over the past 30 days is the biggest monthly decline in six years. The slide has also been fueled by a drop in the price of the country's commodity exports. The UBS Bloomberg CMCI index of 26 raw materials has slumped 24 percent from a record high on July 2. The index rebounded 2.2 percent today.
"Brazilian Finance Minister Guido Mantega sought to shore up confidence in the real, telling reporters in Brasilia today that there's a ``very small risk'' that the U.S. financial crisis will spread to Latin America's biggest economy."
"Mantega called the local financial system ``solid'' and said the government may take steps to encourage lending to fund investments, exports and the agriculture industry if the U.S. crisis doesn't abate."
"Bonds, Stocks Slide"
"The yield on Brazil's zero-coupon bonds due in January 2010 jumped 22 basis points, or 0.22 percentage point, to 14.94 percent, according to Banco Votorantim. The yield on the overnight futures contract for January delivery rose 1 basis point to 14.02 percent."
"Brazilian stocks also tumbled. The benchmark Bovespa index dropped 4 percent, further crimping demand for reais."
"The central bank may start selling dollars to bolster ``liquidity'' in the currency market, bank president Henrique Meirelles said in a Sept. 15 interview with Globo TV."
Banco Central do Brasil last sold dollars in January 2003 and has bought the U.S. currency for much of the past five years to slow a rally in the real that was fueled by record commodity exports. Foreign reserves climbed to a record $208.5 billion on Sept. 16 from $39.7 billion six years earlier.
"``This is a very serious crisis; it's affecting emerging markets in a big way,'' said Luiz Carlos Barroso Simao, partner and chief strategist at Mandarim Investimentos, an asset- management firm in Rio de Janeiro. ``But Brazil is also a different country now.''"
To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net
"Last Updated: September 17, 2008 16:02 EDT"
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Nippon Steel Raises Domestic Wholesale Prices From November
By Yoshifumi Takemoto
"Sept. 18 (Bloomberg) -- Nippon Steel Corp., the world's second-biggest maker, will raise domestic wholesale spot prices from November, the third increase since April, to pass on higher raw material costs."
"The Tokyo-based steelmaker will increase prices by 5,000 yen ($47.82) a metric ton to 110,000 to 120,000 yen after increases in April and July that totaled 30,000 yen per ton."
"Soaring costs for iron ore and coal prompted Nippon Steel and Sumitomo Metal Industries Ltd., Japan's largest- and third-biggest producers, to forecast declines in profit this fiscal year. The industry needs to raise prices to make up for a near doubling in the cost of iron ore this fiscal year and a more than tripling in coking coal."
"The steel price increase was reported in the Tekko newspaper earlier today. Executive Vice President Kiichiro Masuda said gains in material prices are adding 3.5 trillion yen in costs for the Japanese steel industry, that's equivalent to 35,000 yen a ton."
Nippon Steel dropped 5.2 percent to 399 yen as of 10:23 a.m. on the Tokyo Stock Exchange. It's fallen 42 percent this year.
To contact the reporter for this story: Yoshifumi Takemoto in Tokyo at ytakemoto@bloomberg.net.
"Last Updated: September 17, 2008 21:37 EDT"
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Canadian Bonds Gain on Concern Financial Crisis Hurts Growth
By Daniel Kruger
"Sept. 17 (Bloomberg) -- Canada's two-year government bond yield fell, erasing an earlier gain, amid speculation the U.S. government's second rescue package for cash-strapped financial companies this month signals continued economic weakness."
"The spread between yields on two- and 10-year Canadian government debt was 88 basis points, near the most since April shortly after Bear Stearns Cos. collapsed."
"``Folks aren't yet convinced the worst is over,'' said Michael Herring, debt strategist at BMO Nesbitt Burns Inc. in Toronto. ``You can layer on to today's price action some expectation for further economic weakness.''"
"The yield on the two-year note declined 3 basis points, or 0.03 percentage point, to 2.55 percent at 2:55 p.m. in Toronto. It has fallen 57 basis points in the past two months. The price of the 2.75 percent security maturing in December 2010 rose 6 cents to C$100.44."
"The 10-year government note's yield dropped 3 basis points to 3.43 percent. The price of the 4.25 percent note maturing in June 2018 increased 22 cents to C$106.74. The yield reached 3.34 percent yesterday, the lowest since at least 1989, when Bloomberg began collecting the data."
Worst Financial Collapse
American International Group Inc. avoided the worst financial collapse in history by accepting a rescue that provides an $85 billion loan from the federal government in return for a majority stake. It comes less than two weeks after the U.S. took over Fannie Mae and Freddie Mac as rising mortgage defaults threatened the companies.
The Standard & Poor's/TSX Composite Index declined 1.5 percent today in Toronto. The S&P 500 lost 2.6 percent.
"The two-year Canadian government note yield fell the most in 11 years on Sept. 15 after the U.S. Treasury and Federal Reserve declined to participate in a bailout for Lehman Brothers Holdings Inc., once the fourth-largest U.S. investment bank."
"The two-year bond's yield will increase to 3.15 percent by year-end, while the 10-year bond's yield will gain to 3.83 percent, according to the median forecasts of economists surveyed by Bloomberg."
"Canadian government bonds have returned 5.6 percent in 2008, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 6 percent this year."
"Canada's dollar, dubbed the loonie because of the aquatic bird on the one-dollar coin, was little changed at C$1.0686 per U.S. dollar, from C$1.0682 yesterday. It earlier declined as low as C$1.0809. One Canadian dollar buys 93.57 U.S. cents."
"The Canadian currency will slip to C$1.12 against the U.S. dollar by the end of 2009, according to the median forecast of 34 economists surveyed by Bloomberg News."
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
"Last Updated: September 17, 2008 14:58 EDT"
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"U.K. Stocks Update: FTSE 100 Rises 7.50 to 4,919.90 "
By Daniel Hauck
"Sep. 18 (Bloomberg) -- The U.K.'s benchmark stock index, the FTSE 100, rose 0.15 percent at 8:05 a.m."
"The index of 102 stocks traded on the London Stock Exchange rose 7.50 to 4,919.90. Among the stocks in the index, 47 rose, 51 fell and 4 were unchanged."
"Gains in the FTSE 100 were led by Royal Bank Of Scotland Group Plc (Rbs Ln), Rio Tinto Plc (Rio Ln) and Barclays Plc (Barc Ln). About 23.28 million shares traded in the FTSE 100."
"Last Updated: September 18, 2008 03:05 EDT"
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Brazil Stocks Plunge on Global Credit Concerns; Bolsa Declines
By Alexander Ragir and William Freebairn
"Sept. 17 (Bloomberg) -- Brazilian stocks tumbled, sending the Bovespa Index to the lowest since April 2007, on concern the seizing up of global credit may raise borrowing costs and slow growth in Latin America's largest economy."
"Uniao de Bancos Brasileiros SA and Banco do Brasil SA led financial shares to the lowest in six months. Rossi Residential SA paced declines for homebuilders on rising concern tighter credit and higher interest rates will damp demand for homes. Usinas Siderurgicas de Minas Gerais SA, the biggest provider of steel for the Brazilian auto industry, fell the most in four years."
"``When the price of accessing capital and risk aversion rises, it brings into question whether banks will want to keep up the pace of loan growth for the real estate and auto industries,'' said Guilherme Sand, who helps manage the equivalent of $420 million in Brazilian stocks at Solidus Brokerage in Porto Alegre. ``The bankers may begin to get risk averse and if the economy slows, banks will also get hit.''"
"The Bovespa index fell 3,320.41, or 6.7 percent, to 45,908.51. The BM&FBovespa MidLarge Cap index dropped 6.1 percent, while the BM&FBovespa Small Cap index retreated 6.8 percent. Brazil's real dropped the most in 13 months and the S&P 500 index in the U.S. fell to the lowest in three years."
"The MSCI Latin America Index dropped 6.7 percent, led by Mexican homebuilder Corporacion Geo SAB. Mexico's Bolsa Index lost 4.7 percent."
Capital Concerns
"Unibanco, as the third-biggest non-state Brazilian bank is known, fell 6.6 percent to 16.95 reais. Banco do Brasil, Latin America's biggest bank, dropped 8.8 percent to 19.90 reais."
"Rossi paced declines for homebuilders, dropping 17 percent to 6.52 reais."
"Banco Fator analyst Eduardo Silveira said that he sees increased risk for developers due to increased capital needs, ``capital and credit markets becoming more expensive and selective'' and ``the greater pressure from inflation and interest rates on demand for homes.''"
"Consumer discretionary stocks plunged the most in the MSCI Brazil Index, falling 9.5 percent."
"Petroleo Brasileiro SA, Brazil's state-controlled oil company, may have difficulties financing offshore projects if the U.S. financial crisis worsens, O Estado de S. Paulo reported, citing Chief Executive Officer Jose Sergio Gabrielli. The shares dropped 4.8 percent to 29.80 reais."
"``Risk aversion is clearly happening in the stock market but it will probably also feed through to lending practices,'' said John Ditierri, who helps manage $20 billion at Emerging Markets Management LLC at Arlington, Virginia. ``With everything falling and all the crises in the U.S. going on, we don't think there are screaming buys out there yet.''"
AIG Rescue
"The Federal Reserve said yesterday it will lend as much as $85 billion in the wake of the government's takeover of global insurer American International Group Inc., giving the government a 79.9 percent stake in the company. A ``disorderly failure'' could compound declines in financial markets, lead to higher borrowing costs and dent economic growth, the Fed said."
"The three-month London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the biggest increase since 1999, the British Bankers' Association said. Credit concerns prompted investors to flee global stocks to the relative safety of U.S. Treasuries, driving the yield on three-month bills to the lowest in 54 years."
BRICs
"Russia, one of the so-called BRICs, halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the biggest financial crisis since its devaluation and debt default a decade ago. China's stocks fell to the lowest in almost 21 months after China Merchants Bank Co. said it held $70 million of debt issued by bankrupt Lehman Brothers Holdings Inc."
"Investors turned the most negative in emerging-markets equities since 2001, a monthly survey by Merrill Lynch & Co. showed. Emerging markets are the least favorable place to invest in equities, with the survey showing a net 14 percent of those surveyed would most like to underweight the region over the next 12 months. The MSCI Emerging Markets Index dropped 2.2 percent today for a 38 percent loss this year."
"Miner Cia. Vale do Rio Doce dropped 7.7 percent to 32.20 reais. Usinas Siderurgicas de Minas Gerais SA, Brazil's second- biggest steelmaker, fell 9.8 percent to 37.99 reais."
"Some Mexican homebuilders fell on concern the global credit crisis will curb lending and raise the cost of issuing bonds. Corporacion Geo, the country's second-largest homebuilder, declined the most in almost eight years, falling 17 percent to 20.56consor pesos. Consorcio Ara SAB, the fourth-largest builder, dropped 10 percent to 6.90 pesos. Urbi Desarrollos Urbanos SAB, the third-largest homebuilder by sales, slipped 4.3 percent to 23.01 pesos."
"In Argentina, the Merval slid 5.1 percent, Chile's Ipsa dropped 2.6 percent, Peru's Lima General index declined 3.6 percent and Colombia's IGBC slipped 2 percent."
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; William Freebairn in Mexico City wfreebairn@bloomberg.net
"Last Updated: September 17, 2008 16:43 EDT"
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Leading Economic Indicators in the U.S. Probably Fell in August
By Bob Willis
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"Sept. 18 (Bloomberg) -- The index of U.S. leading economic indicators probably fell in August for a third month, signaling the growth outlook darkened even before the latest collapse in financial markets, economists said before reports today."
"The Conference Board's gauge, a measure of the economy's direction over the next three to six months, fell 0.2 percent, according to the median forecast in a Bloomberg News survey. Another report may show manufacturing in the Philadelphia region contracted in September for a 10th month."
"The three-year housing slump that triggered the credit- market crisis, a loss of jobs and slowdown in spending may bring an end to the economic expansion. Plunging stock markets this month following the collapse of Lehman Brothers Holdings Inc. and federal takeover of American International Group Inc. reflect a breach of confidence that is likely to deepen the downturn."
"``Odds are high that the economy will post a negative quarter or two through the first half of next year,'' said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. ``The financial system is in turmoil.''"
The leading index is due at 10 a.m. from the New York-based research group. Estimates in the survey of 57 economists ranged from a drop of 0.6 percent to a gain of 0.2 percent. The measure fell 0.7 percent in July.
"Also at 10 a.m., the Federal Reserve Bank of Philadelphia's factory gauge is projected to come in at minus 10, following a reading of minus 12.7 in August. Negative numbers signal contraction. Forecasts ranged from minus 15 to minus 5. The measure averaged 5.1 last year."
Jobless Claims
"A Labor Department report at 8:30 a.m. may show initial jobless claims were little changed last week at a level that indicates the labor market is deteriorating. First-time applications for unemployment benefits decreased by 5,000 to 440,000, according to a Bloomberg survey median."
"Seven of the 10 components of the leading index are known ahead of time: jobless claims, stock prices, building permits, consumer expectations, the yield curve, supplier delivery times and factory hours."
"The Conference Board estimates the remaining three -- new orders for consumer goods, bookings for capital equipment and the money supply adjusted for inflation."
"Economists surveyed by Bloomberg in the first week of September anticipated the longest expansion in consumer spending on record will come to an end this quarter. Purchases will probably stall, according to the survey median, the weakest reading since the last three months of 1991."
Housing Slump
"The housing slump is deepening, threatening the financial system and leading to this week's government takeover of AIG and Lehman's bankruptcy."
"Building permits, a sign of future construction, fell 8.9 percent in August, while work began on the fewest houses in 17 years, the Commerce Department reported yesterday."
"In a sign of weakness in manufacturing, the average factory employee worked 40.9 hours a week in August, the fewest in more than a year, the Labor Department reported this month. The economy has lost 605,000 jobs so far this year and the jobless rate reached a five-year high of 6.1 percent in August."
More dismissals may be on the way. Chrysler LLC's Chief Executive Officer Bob Nardelli said the automaker may need to cut more jobs and trim other costs should U.S. lawmakers fail to approve $25 billion in loans to help the industry develop fuel- efficient vehicles.
"Nardelli said he hadn't ``seen any signs'' of a U.S. economic recovery, during a Sept. 12 interview. ``It's critically important that we get this economy re-fired, that we get the energy back into this economy, that we get consumer confidence back in,'' he said."
"Higher stock prices in August prevented the leading index from dropping even more, an underpinning unlikely to be repeated this month, economists said. The Standard & Poor's 500 index averaged 1,234.96 in the first 17 days of September, down 3.6 percent from 1281.47 in August."
Bloomberg Survey
================================================================
Initial Philly LEI
Claims Fed
" ,000's Index MOM%"
================================================================
Date of Release 09/18 09/18 09/18
Observation Period Sept. 6 Sept. Aug.
----------------------------------------------------------------
Median 440 -10.0 -0.2%
Average 439 -10.3 -0.2%
High Forecast 450 -5.0 0.2%
Low Forecast 420 -15.0 -0.6%
Number of Participants 38 56 57
Previous 445 -12.7 -0.7%
----------------------------------------------------------------
4CAST Ltd. 450 -10.0 -0.2%
Action Economics 445 -8.0 -0.2%
Aletti Gestielle SGR --- -15.0 ---
Argus Research Corp. --- -5.0 0.0%
Banc of America Securitie --- -11.0 -0.2%
Bank of Tokyo- Mitsubishi --- -9.7 -0.5%
Bantleon Bank AG --- -13.0 -0.2%
Barclays Capital 440 -9.0 ---
BMO Capital Markets 440 -10.0 -0.2%
BNP Paribas 440 -10.0 -0.2%
Briefing.com 440 -10.0 -0.2%
Calyon --- -9.0 ---
CFC Group 442 -10.5 -0.2%
Citi 435 -9.0 -0.6%
Commerzbank AG 435 -10.0 -0.2%
Credit Suisse 430 --- -0.2%
Daiwa Securities America --- --- -0.3%
Danske Bank --- -9.0 ---
DekaBank --- -9.0 -0.2%
Desjardins Group 449 -10.0 -0.2%
Deutsche Bank Securities 445 -13.0 -0.2%
Deutsche Postbank AG --- --- -0.4%
Dresdner Kleinwort --- -7.0 -0.3%
DZ Bank --- -14.0 -0.2%
First Trust Advisors 441 -10.6 -0.1%
Fortis --- -10.0 ---
FTN Financial --- -11.0 -0.5%
"Goldman, Sachs & Co. --- --- -0.2%"
H&R Block Financial Advis 440 -8.0 -0.2%
Helaba --- -9.0 -0.4%
High Frequency Economics 445 -10.0 -0.2%
HSBC Markets 430 -12.0 -0.2%
IDEAglobal 435 -10.0 -0.2%
Informa Global Markets --- -9.0 -0.2%
ING Financial Markets 440 -13.0 -0.3%
Insight Economics 435 -10.0 -0.3%
Intesa-SanPaulo --- -10.0 ---
J.P. Morgan Chase 445 -12.0 ---
Janney Montgomery Scott L --- --- -0.3%
JPMorgan Private Client --- -10.0 0.2%
Landesbank Berlin 430 -12.0 -0.5%
Landesbank BW --- -11.5 -0.2%
Lehman Brothers 440 -9.9 0.0%
Lloyds TSB 440 -10.0 -0.3%
Maria Fiorini Ramirez Inc 440 --- -0.3%
Merk Investments 440 -10.0 -0.2%
Merrill Lynch 432 -10.0 -0.5%
Moody's Economy.com 450 -12.0 -0.4%
Morgan Stanley & Co. --- --- -0.2%
National City Corporation --- -13.6 0.1%
Nomura Securities Intl. --- -10.0 -0.4%
PNC Bank --- --- 0.0%
RBS Greenwich Capital --- --- -0.4%
"Ried, Thunberg & Co. 435 -12.5 ---"
Schneider Trading Associa 420 -8.0 -0.3%
Societe Generale 440 -12.0 ---
Standard Chartered --- -12.0 ---
Stone & McCarthy Research 440 -7.7 -0.4%
TD Securities 430 -10.0 -0.3%
Thomson Financial/IFR 440 -9.2 -0.1%
UBS Securities LLC 445 -15.0 -0.2%
Unicredit MIB --- --- -0.5%
University of Maryland 429 --- -0.2%
Wachovia Corp. --- --- -0.1%
Wells Fargo & Co. 425 -8.0 -0.2%
WestLB AG --- -10.0 -0.2%
Westpac Banking Co. 450 -5.0 -0.4%
Wrightson Associates 435 -12.5 ---
================================================================
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
"Last Updated: September 18, 2008 00:01 EDT"
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Copper Rebounds From Near 9-Month Low as Plunge May Be Overdone
By Li Xiaowei
Sept. 18 (Bloomberg) -- Copper rebounded in London from the lowest in almost nine months as some investors judge the recent plunge may be overdone.
"Copper declined for nine in the past 11 weeks on the London Metal Exchange, falling 24 percent from the July peak of $8,940 a ton before today, on concern global credit woes may reduce demand for industrial metals."
"``The metal has lost so much in the past weeks that a rebound like today is no surprise,'' said Li Ye, an analyst at Minmetals StarFutures Co., by phone from Shenzhen today. ``The rebound may be short-lived as the global credit woes seem far from over.''"
"Copper for three-month delivery rose as much as 1.6 percent to $6,855 a metric ton on the London Metal Exchange and traded at $6,786 at 10:26 a.m. in Shanghai. The contract closed at $6,750 a ton, the lowest since Dec. 20, 2007."
"Copper for December delivery was down 0.7 percent at $53,000 yuan ($7,746) a ton on the Shanghai Futures Exchange after rising as much as 1.1 percent earlier."
"``Shanghai copper has less room to fall further than its London counterpart as it's supported by improving demand in China,'' said Li. Low prices have encouraged physical buying."
"Asian stocks tumbled to the lowest in three years while gold and U.S. Treasuries surged as concerns mounted more financial firms, following Lehman Brothers Holdings Ltd., will collapse. The MSCI Asia Pacific Index dropped 3.18 percent to 107.08 as of 10:39 a.m. in Shanghai, the lowest since October 2005."
"Among LME-traded metals, aluminum was 1 percent higher at $2,525 a ton, zinc dropped 0.6 percent to $1,710, nickel rose 0.6 percent to $17,100, lead added 0.6 percent to $1,790.25 and tin was 0.7 percent higher at $17,750."
To contact the reporter for this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net
"Last Updated: September 17, 2008 23:14 EDT"
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Yen Falls Against Dollar as Central Banks Announce Joint Action
By Bo Nielsen
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Sept. 18 (Bloomberg) -- The yen fell against the dollar and the euro after the world's biggest central banks said they will act jointly to revive the financial markets.
"The yen dropped versus the most-traded currencies after the Federal Reserve, Bank of Japan, European Central Bank, Swiss National Bank and Bank of England said they are taking coordinated action to ease the freeze in bank lending. The cost of borrowing in dollars for three months jumped yesterday by the most since 1999 on concern losses and bankruptcies among financial institutions will spread."
"``Intervention by central banks helps to reduce risk aversion and will weaken the yen in a knee-jerk reaction,'' said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi Ltd. in London. ``But we still believe it will take more to turn this market around and are bullish on the yen.''"
"The yen traded at 105.24 per dollar as of 8:19 a.m. in London, from 104.66 yesterday in New York. The U.S. currency was at $1.4291 per euro from $1.4326. The yen also dropped to 150.47 per euro, from 149.88."
To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
"Last Updated: September 18, 2008 03:31 EDT"
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Pound Little Changed Against Euro Before Retail Sales Report
By Andrew MacAskill and Lukanyo Mnyanda
"Sept. 18 (Bloomberg) -- The pound was little changed against the euro before a government report that may show U.K. retail sales slid in August, adding to evidence the economy is tipping into a recession."
"Sales probably fell 0.5 percent last month, according to the median estimate of economists surveyed by Bloomberg. That would follow an unexpected 0.8 increase in July as a lending squeeze by banks curbed consumer spending. Lloyds TSB Group Plc said today it agreed to buy HBOS Plc for about 12.2 billion pounds ($22.2 billion) in a takeover that rescues the U.K.'s biggest mortgage lender after it faced a lack of funds."
"``We are expecting a poor set of numbers,'' said Christian Lawrence, a currency strategist in London at Royal Bank of Canada Capital Markets. ``The outlook for the U.K. economy in terms of growth and sales is pretty bleak, which is negative for sterling.''"
"The British currency traded at 78.89 pence per euro as of 7:08 a.m. in London, from 78.83 yesterday. Against the dollar, the pound rose to $1.8229, from $1.8173."
"The pound's trade-weighted index, a gauge of the currency's performance against Britain's major trade partners, climbed to 87.55, according to Deutsche Bank AG. The measure is down 7.5 percent this year."
The Office for National Statistics is scheduled to release the retail sales data at 9:30 a.m. local time.
Interest Rates
"HBOS, which lost almost half its market value this week, has been hurt by a shortage of funds to back its mortgages, leaving the company in the same predicament that led to the government- backed bailout of Northern Rock Plc a year ago."
"The Edinburgh-based company, which gets about half its funding from capital markets, has been under pressure since Lehman Brothers Holdings Inc. filed the biggest bankruptcy in history on Sept. 15 and insurer American International Group Inc. needed an $85 billion loan from the U.S. government to avoid failing."
"Bank of England policy makers kept interest rates at 5 percent on Sept. 4, as they weighed the risk of accelerating inflation with the danger that mounting bank losses will push Europe's second biggest economy into its first recession since 1991. Governor Mervyn King voted with seven other members of the Monetary Policy Committee to keep interest rates on hold, minutes of the meeting showed yesterday."
"U.K. government bonds rose yesterday, with the 10-year yield falling 1 basis point to 4.41 percent. The 5 percent security due March 2018 increased 0.09, or 90 pence per 1,000-pound ($1,822) face amount, to 104.55."
"The yield on the two-year note also declined 1 basis point, to 4.24 percent. Bond yields move inversely to prices."
To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.netLukanyo Mnyanda in London at lmnyanda@bloomberg.net
"Last Updated: September 18, 2008 02:10 EDT"
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"Lynch Sees $80 Oil as Gulf Recovers, Demand Remains Weak: Video "
"Sept. 17 (Bloomberg) -- Michael Lynch, president of Strategic Energy & Economic Research, talks with Bloomberg's Monica Bertran about factors affecting crude oil prices, supply and demand, and outlook for hedge fund investing. (Source: Bloomberg)"
00:00 Factors affecting oil prices; hedge funds
Running time 02:12
"Last Updated: September 17, 2008 11:43 EDT"
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<<2.629_20080918093113Crude Oil Drops as Credit Market Turmoil May Slow
Fuel Demand .txt>> <<2.629_20080918092421Australia Dollar Trades Near
ThreeYear Low NZ Dollar Rises .txt>> <<2.629_20080918085559Ruble Little
Changed Against Central Bank's DollarEuro Basket .txt>>
<<2.629_20080918085051European Bonds Trim Gains After Joint Action By
Central Banks .txt>> <<2.628_20080918095817Gold Extends Biggest Rise in
26 Years as Haven Demand Gains .txt>> <<2.628_20080918090613Barclays
Likely to Buy Monte Paschi Branches Corriere Reports .txt>>
<<2.627_20080918091044Japan's Stocks Tumble to FourYear Low on Bank
Failure Concern .txt>> <<2.627_20080918084957Latin American Currencies
Colombian Peso Drops to OneYear Low .txt>> <<2.626_20080918095059Global
Confidence Declines as FinancialMarket Turmoil Worsens .txt>>
<<2.626_20080918093027Sept 18 (Bloomberg) The cost of protecting
European corporate bonds from default fel.txt>>
<<2.625_20080918091256France Stocks Update CAC 40 Rises 441 to 400452
.txt>> <<2.624_20080918092442Asian Money Market Rates Jump Even After
Central Banks Add Cash .txt>> <<2.624_20080918090827India Bonds Fall a
2nd Day on Speculation Policy Damping Demand .txt>>
<<2.624_20080918090435Asian Currencies South Korean Won Peso Decline as
Stocks Fall .txt>> <<2.623_20080918092135Barrick Leads Surge in Gold
Stocks as Crisis Deepens (Update1) .txt>> <<2.623_20080918090527Sept 18
(Bloomberg) Corporate bond default risk rose to a record in Asia as
concern .txt>> <<2.622_20080918101040Canada Stocks Fall 21% From Peak
as Oil Drop Spurs Bear Market .txt>> <<2.622_20080918100651Corporate
Bond Risk Rises to a Record on Bank Collapse Concern .txt>>
<<2.622_20080918094753GE Falls to Lowest Since 2003 Amid Market Turmoil
(Update1) .txt>> <<2.622_20080918085536Buy Swiss Franc Versus
Australian Dollar Morgan Stanley Says .txt>>
<<2.621_20080918085930Latin American Leaders Seek to Bolster Confidence
(Update1) .txt>> <<2.621_20080918084219US Economy Housing Starts Slide
to 17Year Low (Update1) .txt>> <<2.620_20080918091151Germany Stocks
Update DAX Index Little Changed at 586506 .txt>>
<<2.620_20080918090913Indian Rupee Falls on Concern Credit Losses Will
Spur Outflows .txt>> <<2.619_20080918095955Asian Currencies Retreat
After Interventions Falter (Update2) .txt>> <<2.619_20080918090551Japan
Service Demand Rises for First Time Since April (Update1) .txt>>
<<2.619_20080918090456Sept 18 (Bloomberg) Japanese 20year government
bonds slumped driving yields to a six.txt>>
<<2.618_20080918092957Mexico's Benchmark Peso Bond Yields Increase Most
in Two Years .txt>> <<2.618_20080918084741Natural Gas Futures Gain as
AIG Rescue Spurs Commodity Buying .txt>> <<2.617_20080918100241Korea
Gas Shares Rise on Subsidies Speculation (Update1) .txt>>
<<2.617_20080918094953SNB May Leave Rate at 7Year High to Fight
Inflation (Update1) .txt>> <<2.616_20080918085624US Bill Rate Near
Lowest Since World War II as Stocks Plunge .txt>>
<<2.615_20080918100324Asian Reserves `Diversified' Central Bankers Say
Chart of Day .txt>> <<2.615_20080918090805Asia Stocks Tumble to 3Year
Low on Bank Woes Macquarie Slumps .txt>>
<<2.614_20080918100442Australian Banks Reluctance to Lend Nears Bear
Stearns Highs .txt>> <<2.614_20080918100350Asian Policy Makers Predict
No Repeat of 1997 Financial Crisis .txt>>
<<2.613_20080918100016Sumitomo Mitsui ICBC Lead Drop in Asia Financials
(Update2) .txt>> <<2.653_20080918092839Treasuries Little Changed 10Year
Yield Slips to 341 Percent .txt>> <<2.647_20080918085027Corn Soybeans
Drop as Credit Turmoil May Slow Growth Demand .txt>>
<<2.643_20080918090039Brazilian Banks Drop Most Since 2002 as Credit
Seizes (Update2) .txt>> <<2.641_20080918092910Brazil Real Has Biggest
Drop in 13 Months as US Slump Spreads .txt>>
<<2.641_20080918090353Nippon Steel Raises Domestic Wholesale Prices From
November .txt>> <<2.639_20080918092220Canadian Bonds Gain on Concern
Financial Crisis Hurts Growth .txt>> <<2.639_20080918090743UK Stocks
Update FTSE 100 Rises 750 to 491990 .txt>> <<2.638_20080918085952Brazil
Stocks Plunge on Global Credit Concerns Bolsa Declines .txt>>
<<2.635_20080918095014Leading Economic Indicators in the US Probably
Fell in August .txt>> <<2.635_20080918093157Copper Rebounds From Near
9Month Low as Plunge May Be Overdone .txt>> <<2.633_20080918093239Yen
Falls Against Dollar as Central Banks Announce Joint Action .txt>>
<<2.633_20080918085515Pound Little Changed Against Euro Before Retail
Sales Report .txt>> <<2.630_20080918084656Sept 17 (Bloomberg) Michael
Lynch president of Strategic Energy & Economic Research .txt>>
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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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