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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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 by a record 23 percent as Morgan Stanley and HBOS Plc sought buyers. 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 1.7 percent to 108.74 as of 7:39 p.m. in Tokyo, the lowest since Sept. 16, 2005. The index trimmed an earlier 4.3 percent drop after the Federal Reserve, the European Central Bank and the Bank of Japan moved to pump dollars into the financial system. Hong Kong's Hang Seng Index rallied from a 7.7 percent loss to close little changed."
"Most benchmark indexes in the region fell. 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 recommendation.. Taiwan's Taiex index lost 2.7 percent, prompting the government to announce it may buy shares to help prop up the market."
Bank Takeovers
"Today's central bank action, which was announced after Japanese and South Korean markets closed, is aimed at heading off the credit crisis that has caused Lehman Brothers Holdings Inc.'s bankruptcy and the takeover of American International Group Inc. by the U.S. government."
"Futures on the Standard & Poor's 500 Index rose 1.4 percent in after-hours trading. U.S. stocks slumped to the lowest in three years yesterday, with the Standard & Poor's 500 Index sliding 4.7 percent."
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.
"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."
Exuberance Over
"Macquarie slid 23 percent to A$26.05, taking its loss from a high in May 2007 to 73 percent. Babcock & Brown Ltd., Australia's second-biggest investment bank, lost 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."
"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
"Sumitomo Mitsui Financial Group Inc., Japan's No. 3 listed bank, slumped 6.6 percent to 582,000 yen. HSBC Holdings Plc, which CNBC reported as being a possible bidder for Morgan Stanley, lost 0.2 percent to HK$114.90. The stock trimmed an earlier 7.6 percent slump."
"``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, Australia's largest gold producer climbed 15 percent to A$24.50, the biggest gain since September 1999, after the price of gold surged the most in 26 years and silver rose the most since 1979 yesterday. Lihir Gold Ltd. jumped 16 percent to A$2.48. Zijin Mining Group Co., China's largest gold miner by market value, rallied 21 percent to HK$3.90."
"Sony, the maker of the PlayStation 3 game console, lost 8.7 percent to 3,270 yen, the steepest fall since April 28, 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 06:44 EDT"
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"Brazil Plans 60-Strong Staff for New Oil Company, Estado Says "
By Jim Silver
"Sept. 18 (Bloomberg) -- Brazil's plans for a new state oil company to control the country's ``pre-salt'' fields include a 60-strong staff, O Estado de S. Paulo reported, citing President Luiz Inacio Lula da Silva."
"The government is seeking to create ``a fund, a small company,'' rather than ``another Petrobras,'' Lula said in comments recorded for TV Brasil, according to the newspaper. Petroleo Brasileiro SA, or Petrobras, is Brazil's state- controlled oil producer."
"Lula said the general functions of the new company -- selling and negotiating the price of oil -- are already defined, according to Estado."
"The government may also use some of the oil in the pre-salt fields, deposits located in waters as deep as 3,000 meters (9,840 feet) and beneath as much as 7,000 meters of seabed, to increase its stake in Petrobras, Estado reported, citing the president."
To contact the reporter on this story: Jim Silver in Lisbon at jsilver@bloomberg.net.
"Last Updated: September 18, 2008 05:13 EDT"
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Japan's Government Bonds Fall as Demand Cools at Debt Auction
"Sept. 18 (Bloomberg) -- Japanese 20-year government bonds fell, 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 today announced coordinated measures with other central banks to ease tensions in financial markets."
"``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 4:26 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 6 basis points, or 0.06 percentage point, to 1.125 percent. Ten-year bond futures for December delivery fell 0.39 to 138.34 as of the afternoon close at the Tokyo Stock Exchange."
Coordinated Action
"The BOJ said it reached a U.S. dollar-swap agreement with its U.S. counterpart to supply the currency to investors in Japan. The agreement to supply up to $60 billion will be conducted ``in view of the prevailing market conditions,'' the Japanese central bank said in a statement."
"The agreement was made as part of a coordinated action with the Fed, the Bank of Canada, Bank of England, European Central Bank and Swiss National Bank."
"``The market will remain skeptical,'' said Tatsuo Ichikawa, a senior strategist in Tokyo at RBS Securities Japan Ltd., one of the 24 primary dealers required to bid at government auctions. ``But it is a strong message from central banks around the world, supporting the financial markets. In the long run, this is negative for bonds.''"
Auction Demand
"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."
"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."
Stock Slump
"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 half a basis point to 1.485 percent. The Dow Jones Industrial Average lost 4.1 percent yesterday and 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."
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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Korea Gas Shares Rise on State Subsidies Speculation (Update2)
By Shinhye Kang
"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 on speculation parliament will approve around $1 billion in subsidies for state-controlled utilities."
"The shares advanced 2.6 percent to 63,500 won, after rising as much as 5.8 percent, the most since May 2. Korea Electric Power Corp., which generates almost all of the country's electricity, fell 4.6 percent to 29,050 won, extending a 27 percent drop this year on a poor earnings outlook."
"The ruling and opposition parties agreed yesterday to pass a 4.6 trillion-won supplementary budget, including subsidies to help cover the losses of Korea Gas and Korea Electric caused by government price caps. The National Assembly approved the additional spending after the stock market close today, with the utilities to receive 1 trillion won ($868 million) in subsidies."
"``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 20 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 05:02 EDT"
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European Bonds Decline After Central Banks Offer $180 Billion
By Anchalee Worrachate
"Sept. 18 (Bloomberg) -- European government bonds fell, erasing earlier gains, after central banks worldwide offered $180 billion to money markets in an effort to ease the worst financial crisis since the 1920s."
The decline pushed two-year note yields up from their lowest level in five months. The Federal Reserve said on its Web site it authorized central banks including the European Central Bank and the Bank of Japan to auction the dollar funds to financial institutions. Money market costs jumped yesterday as banks hoarded cash in the wake of Lehman Brothers Holdings Inc.'s bankruptcy.
"``It's a good sign central banks are aware of the problem, but it's no cure,'' said Christoph Kind, head of asset allocation at Frankfurt Trust Investment GmbH. ``This is not the first time they did this. The risk we are facing is systemic risk. We continue to stick to the safest assets.''"
"The yield on the German two-year note rose 4 basis points to 3.67 percent as of 10:59 a.m. in London. The 4 percent note maturing in September 2010 declined 0.07, or 70 euro cents per 1,000-euro ($1,452) face amount, to 100.61."
"The yield on the 10-year bund, Europe's benchmark government- debt security, climbed 3 basis points to 4.05 percent. Yields move inversely to bond prices."
"The central bank joint release said that the Bank of England, the Bank of Canada and the Swiss National Bank also participated."
Bond Auctions
"France and Spain sold bonds today, the first countries in the euro region to sell debt after the collapse of Lehman and the U.S. government's takeover of insurer American International Group Inc."
"The 4.10 percent Spanish bond maturing in 2018 drew bids for 1.3 times the amount of securities on offer. The French 4.5 percent security due 2013 sold at ``perhaps the largest discount'' to market prices since the inception of the euro in 1999, said Sean Maloney, a fixed-income strategist in London at Nomura International Plc."
"``French and Spanish offerings afforded a very cool reception,'' said Maloney. ``The reality is that this remains an extremely stressed and dislocated market such that even in the most liquid of core instruments, normal operation and hedging procedures have gone by the wayside.''"
Morgan Stanley is considering a merger after its shares slumped 42 percent this week. The U.K.'s Lloyds TSB Group Plc said today it agreed to buy HBOS Plc for 12.2 billion pounds ($22.2 billion) in a deal that rescues the mortgage lender from a squeeze on funds. Merrill Lynch & Co. was bought this week by Bank of America Corp.
"Bonds have gained from a so-called flight to safety as more than $19 trillion has been wiped off global stock-market values since Oct. 31 amid the fallout from the worst U.S. housing recession since the Great Depression. Financial institutions have posted $518 billion in losses and writedowns since the beginning of last year as the crisis deepened, according to data compiled by Bloomberg."
"The auctions are ``a litmus test'' as demand for safe assets may be countered by scarcity of funds and banks' shrinking balance sheets, said Richard McGuire, a senior fixed-income strategist in London at RBC Capital Markets."
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
"Last Updated: September 18, 2008 06:17 EDT"
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"U.K. Stocks Rise, Led by HBOS on Lloyds Deal; Barclays Advances "
By Sarah Jones
Sept. 18 (Bloomberg) -- U.K. stocks rebounded from the steepest three-day drop in six years after Lloyds TSB Group Plc agreed to buy HBOS Plc for 12.2 billion pounds ($22.2 billion). HBOS shares surged 37 percent.
Barclays Plc and Royal Bank of Scotland Group Plc paced the advance as central banks worldwide took coordinated action to ease tensions in financial markets. Kingfisher Plc led retailers higher after earnings topped analysts' estimates and a report showed British retail sales unexpectedly rose last month.
"The FTSE 100 Index rose 67.6, or 1.4 percent, to 4,980 at 10:11 a.m. in London, rebounding from the biggest three-day drop since July 2002, triggered by the bankruptcy of Lehman Brothers Holdings Inc. The FTSE All-Share Index added 1.3 percent, while Ireland's ISEQ Index fell 1.6 percent."
"More than $1.1 trillion has been wiped off the value of U.K. shares this year as banks as losses at financial companies topped $228 billion across Europe, eroding profits."
"HBOS surged 39 percent to 204.75 pence, the steepest advance since at least 2001, after Lloyds TSB agreed to buy Britain's largest mortgage lender for 232 pence a share in stock. Lloyds TSB added less than 1 percent to 280 pence."
"Barclays led a rally in banks as the Federal Reserve, the European Central Bank and the Bank of Japan united with their counterparts around the world including the Bank of England to pump an additional $180 billion dollars into markets facing their worst crisis since the 1920s."
"Barclays, the third-largest U.K. bank, gained 7.6 percent to 341.75 pence. Royal Bank of Scotland, Britain's second-largest, added 9 percent to 184.7 pence. Bradford & Bingley Plc jumped 4.3 percent to 30.25 pence."
Tops Estimates
"Kingfisher rallied 9.1 percent to 130.7 pence. Europe's largest home-improvement retailer said pretax profit climbed 23 percent to 217 million pounds before one-time items in the six months ended Aug. 2, beating the 205.5 million-pound median estimate of eight analysts surveyed by Bloomberg. Sales from continuing operations also topped estimates."
"DSG International Plc, Europe's second-largest consumer- electronics retailer, gained 7.2 percent to 56 pence. Marks & Spencer Plc, the U.K.'s largest clothing retailer, added 2.3 percent to 232."
"A report today showed British retail sales unexpectedly increased in August for a second month, climbing 1.2 percent, the Office for National Statistics said today in London. Economists forecast a 0.5 percent decline, according to the median of 27 estimates in a Bloomberg News survey."
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
"Last Updated: September 18, 2008 05:14 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 3 percent this week and soybeans has fallen 6.5 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 as much as 13 cents, or 2.4 percent, to $5.41 a bushel in after-hours trading on the Chicago Board of Trade and was at $5.4625 by 3:00 p.m. Singapore time. Futures are down 32 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 as much as 20 cents, or 1.8 percent, to $11.19 a bushel and last traded at $11.24. The contract dropped 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 0.9 percent at $7.195 a bushel as of 3:05 p.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."
"Grain crops in Western Australia, the nation's biggest grower, need more rain before the harvest begins in coming weeks, the state's largest grain handler said. Wheat growing regions got between 1 millimeter and 10 millimeters (0.4 inch) of rain today, Michael Musgrave, operations manager for Perth-based CBH Group, said by phone."
"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 18, 2008 04:41 EDT"
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Brazil's Minerva to Sell About $160 Million of Debt (Correct)
By Carlos Caminada
"(Corrects amount of debt in headline, first and second paragraphs in story originally published Sept. 17.)"
"Sept. 17 (Bloomberg) -- Minerva SA, Brazil's third-largest beef producer by market value, said it will sell about $160 million of debt backed by export receipts to eight banks."
"Banco Santander SA, Banco Votorantim SA, Uniao de Bancos Brasileiros SA and three other lenders will buy 120 million reais ($63 million) and $20 million of securities backed by export revenue, Barretos, Brazil-based Minerva said in statement to Brazil's stock regulator. Santander, Banco Bradesco SA and HSBC Bank Brasil SA will lend another $77 million backed by export pre-payment contracts, Minerva said."
"Minerva today fell the most since it started trading in Sao Paulo on July 19 of last year, loosing 9.1 percent to 5.2 reais, its lowest ever."
To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net
"Last Updated: September 18, 2008 06:52 EDT"
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"Argentina, Brazil: Latin America Bond and Currency Preview "
By Lester Pimentel
Sept. 18 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.
Argentina: Economy Minister Carlos Fernandez sent the country's 2009 budget to Congress for approval yesterday.
"Fernandez, speaking in Buenos Aires, said the 2009 budget forecasts a trade surplus of $12 billion and tax revenue growth of 17 percent."
The peso fell 0.3 percent to 3.1045 per dollar.
"The yield on Argentina's inflation-linked peso bonds due in February 2033 rose 59 basis points, or 0.59 percentage point, to 12.04 percent, according to Citigroup Inc.'s local unit."
"Brazil: Finance Minister Guido Mantega said the government may take measures to encourage lending to fund investments, exports and agriculture if the U.S. financial crisis is prolonged."
"Mantega, speaking to reporters in Brasilia yesterday, said there's a ``very small risk'' of crisis contagion in Brazil and that inflation will be below the 6.5 percent upper end of the target band."
The real fell 4.1 percent to 1.8866 per dollar.
"The yield on the zero-coupon, real-denominated bond due in January 2010 rose 22 basis points to 14.94 percent, according to Banco Votorantim."
Chile: Central bank President Jose De Gregorio said yesterday it was ``too early to quantify the magnitude and extension of the international financial crisis.''
"``The Chilean economy is not immune to what is occurring in the rest of the world, but we are convinced that we have never been better prepared to face financial turbulence,'' De Gregorio said."
The peso slid 1.1 percent to 547.59 per dollar.
"The yield for a basket of Chilean five-year peso bonds in inflation-linked currency units, called unidades de fomento, declined 8 basis points to 3.30 percent, according to Bloomberg composite prices."
Mexico: Finance Minister Agustin Carstens said economic growth will be reduced by the financial crisis in the U.S. and the fall in global oil prices may have a ``serious'' effect on Mexico.
"Gross domestic product may have expanded 4 percent this year without the problems with the U.S. housing and credit markets, compared with the government's forecast of 2.4 percent growth, Carstens said in an interview on the Televisa network yesterday."
The peso weakened 1 percent to 10.8262 per dollar.
"The yield on the 10 percent bond due December 2024 rose 22 basis points to 8.75 percent. The bond's price fell 2.10 centavos to 110.76 centavos per peso, according to Banco Santander SA."
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
"Last Updated: September 18, 2008 01:00 EDT"
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"Oil Rises as Dollar Extends Loss, Boosts Appeal of Commodities "
By Grant Smith
"Sept. 18 (Bloomberg) -- Crude oil rose, recouping earlier losses, as the dollar extended losses against the euro, enhancing the appeal of commodities as a currency hedge."
"Oil for October delivery rose as much as $1.41. or 1.5 percent, to $98.57 a barrel on the New York Mercantile Exchange. It traded for $98.16 at 11:04 a.m. in London."
"Earlier, it fell as much as $1.43, or 1.5 percent, to $95.73 a barrel."
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net. Grant Smith in London at gsmith52@bloomberg.net
"Last Updated: September 18, 2008 06:07 EDT"
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Gold May Extend Biggest Gain in 26 Years on Demand for Haven
By Marianne Stigset
"Sept. 18 (Bloomberg) -- Gold may advance for a second day, extending its biggest jump in 26 years, as investors seek a haven from plunging equity markets and concern that the credit crisis will deepen, causing more financial institutions to fail."
"Gold rose almost 11 percent yesterday after the U.S. government took over of American International Group Inc. About $3.6 trillion of value was erased from global stocks this week as financial turmoil intensified with the bankruptcy of Lehman Brothers Holdings Inc. The dollar index, a weighted measure against six major currencies, fell for a second day."
"``There's a big mess going on out there and no sure investment as such, except for the safe haven that is gold,'' Afshin Nabavi, a senior vice president at MKS Finance SA, one of Switzerland's four bullion refiners, said by phone from Geneva. ``Take possession of it and keep it under your mattress.''"
"Gold for immediate delivery was little changed as of 10:36 a.m. in London, down 76 cents at $863.09 an ounce. Futures for December climbed $15.90, or 1.9 percent, to $866.40 in electronic trading on the Comex division of the New York Mercantile Exchange. Futures climbed 9 percent yesterday, the biggest advance since September 1999."
"``We've been breaking all sorts of technical levels,'' pushing gold higher, Nabavi said, adding that ``there is no reason why we shouldn't see gold hit $1,000 rather quickly.''"
Central bankers are struggling to restore confidence in markets as banks hoard money on concern that more will follow Lehman into bankruptcy. The cost of borrowing dollars for three months jumped the most since 1999. Lloyds TSB Group Plc agreed to buy U.K. mortgage lender HBOS Plc today and Russia poured $44 billion into its three biggest banks.
Credit Spreads
"``Financial market liquidity conditions worsened despite a marginal tightening in credit spreads,'' Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, said in a report. ``This is an indication of the high degree of investor risk aversion in current market conditions -- which should ultimately support fund flows into precious metals.''"
"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."
Gold mining companies advanced.
"Newcrest Mining Ltd., Australia's largest producer of the metal, climbed 14 percent and Sino Gold Mining Ltd. gained the most on record, adding 32 percent, in Sydney, while Harmony Gold Mining Co. rose to the highest since July 31 in Johannesburg."
"Among other metals for immediate delivery, silver climbed 63 cents, or 5.3 percent, to $12.59 an ounce, palladium fell $7.75, or 3.1 percent, to $239.75 an ounce. Platinum for immediate delivery dropped $4.75, or 0.4 percent, to $1,125 an ounce."
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
"Last Updated: September 18, 2008 05:47 EDT"
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Morgan Stanley Leads Decline in Bond Risk on Merger Speculation
By Abigail Moses
"Sept. 18 (Bloomberg) -- Morgan Stanley led a decline in the cost of protecting corporate bonds from default on speculation it may merge with Wachovia Corp., the fourth-biggest U.S. lender, according to credit-default swap traders."
"Contracts on Morgan Stanley dropped 160 basis points to 838, according to CMA Datavision prices at 7:30 a.m. in New York. Wachovia fell 32 to 715 basis points. The Markit CDX North America Investment Grade Index decreased 10.5 basis points to 188, broker Phoenix Partners Group said."
"``Morgan Stanley could get too-big-to-fail status instantly,'' said Andrea Cicione, a credit strategist at BNP Paribas SA in London. ``Strategically it makes a lot of sense.''"
"Morgan Stanley shares dropped 42 percent yesterday as the deepening credit crunch fueled investor concern about its ability to raise funds. John Mack, Morgan Stanley's chief executive officer, was called by Charlotte, North Carolina-based Wachovia indicating interest, said a person with knowledge of the matter, declining to be identified because the talks are private."
"In Europe, credit-default swaps on the Markit iTraxx Financial index of 25 banks and insurers fell 20 basis points to 130, the biggest drop since March 25, according to JPMorgan Chase & Co. prices. The Markit iTraxx Europe index of 125 companies with investment-grade ratings declined 17.5 basis points to 132.5."
Markets were also buoyed after central banks offered extra funds to calm money markets and Edinburgh-based HBOS Plc agreed to be bought by Lloyds TSB Group Plc in London after it lost almost half its market value this week amid funding concerns.
Federal Reserve
The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a fresh coordinated bid to ease financial markets facing their worst crisis since the 1920s.
"Credit-default swaps on HBOS dropped 148 basis points to 280, according to CMA Datavision prices. Contracts on HBOS traded as high as 725 basis points this week. Contracts on London-based Lloyds TSB rose 12 basis points to a record 210, CMA prices show."
"Contracts on Goldman Sachs Group Inc. fell 40 basis points to 580, CMA prices show."
"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. A rise indicates deterioration in the perception of credit quality; a decline signals the opposite."
"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."
"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings dropped 24.5 basis points to 610.5, JPMorgan prices show."
"In New York, the CDX North America Investment Grade Index fell 10.5 basis points to 188, according to broker Phoenix Partners Group."
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
"Last Updated: September 18, 2008 07:48 EDT"
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Morgan Stanley Deal Speculation Triggers Drop in Bank Bond Risk
"Sept. 18 (Bloomberg) -- The cost of protecting bank bonds from default fell the most in six months on speculation Morgan Stanley is considering merging with Wachovia Corp., the fourth- biggest U.S. lender, according to credit-default swap traders."
"Contracts on Morgan Stanley dropped 160 basis points to 838, according to CMA Datavision prices at 6:30 a.m. in New York. Wachovia fell 27 to 720, CMA prices show."
"``Morgan Stanley could get too-big-to-fail status instantly,'' said Andrea Cicione, a credit strategist at BNP Paribas SA in London. ``Strategically it makes a lot of sense.''"
"Morgan Stanley shares dropped 42 percent yesterday as the deepening credit crunch fueled investor concerns about its ability to raise funds. John Mack, Morgan Stanley's chief executive officer, was called by Charlotte, North Carolina-based Wachovia indicating interest, said a person with knowledge of the matter, declining to be identified because the talks are private."
"Credit-default swaps on the Markit iTraxx Financial index of 25 European banks and insurers fell 18 basis points to 132, the biggest drop since March 25, according to JPMorgan Chase & Co. prices. The Markit iTraxx Europe index of 125 companies with investment-grade ratings declined 12.5 basis points to 132.5."
Markets were also buoyed after central banks offered extra funds to calm money markets and Edinburgh-based HBOS Plc agreed to be bought by Lloyds TSB Group Plc in London after it lost almost half its market value this week amid funding concerns.
Federal Reserve
The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a fresh coordinated bid to ease financial markets facing their worst crisis since the 1920s.
"Credit-default swaps on HBOS dropped 148 basis points to 280, according to CMA Datavision prices. Contracts on HBOS traded as high as 725 basis points this week on investor concern the Edinburgh-based lender may not have access to funding. Contracts on London-based Lloyds TSB rose 12 basis points to a record 210, CMA prices show."
"Contracts on Goldman Sachs Group Inc. fell 14 basis points to 606, CMA prices show."
"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. A rise indicates deterioration in the perception of credit quality; a decline signals the opposite."
"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."
"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings dropped 24.5 basis points to 610.5, JPMorgan prices show."
"The CDX North America Investment Grade Index fell 1.5 basis points to 198.5 at the close of trading yesterday in New York, according to broker Phoenix Partners Group."
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
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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 and European Central Bank joined with their counterparts around the world in a coordinated drive to reverse the seizure in credit markets. 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 weakened to 105.02 per dollar as of 10:31 a.m. in London, from 104.66 yesterday in New York. The U.S. currency was at $1.4414 per euro from $1.4326. The yen dropped to 151.38 per euro, from 149.88."
"The Fed said in a statement on its Web site it authorized other central banks to auction $180 billion in dollar funds to financial institutions. The ECB will offer up to $40 billion for one day today and increase the amount of dollars provided to European banks in existing longer term auctions, it said."
The yen typically falls when appetite for higher-yielding currencies rises as traders put on so-called carry trades that take advantage of interest-rate differentials. The Japanese currency fell 2 percent to 70.53 per New Zealand dollar and 1.9 percent to 84.34 against the Australian dollar.
`Modest Rebound'
"``We're seeing a modest rebound in risk appetite,'' said Adam Cole, head of global currency strategy at RBC Capital Markets in London. The joint intervention ``signals that they will do what they can to help us through this situation,'' he said."
"The Swiss franc, another popular funding source for the carry trade, dropped 0.2 percent to 1.1053 against the dollar. Japan's key interest rate is 0.5 percent, compared with 4.25 percent in Europe, 7 percent in Australia and 7.5 percent in New Zealand."
"The Swiss National Bank will keep its benchmark rate at 2.75 percent today, according to all 19 economists in a Bloomberg survey. The central bank will announce the decision at 2 p.m. in Zurich."
Stocks and Bonds
The dollar fell versus the euro as investor demand for U.S. government bonds waned and stocks rose. The yield on the two- year Treasury note rose 9 basis points to 1.73 percent. Yields move inversely to bond prices. The Dow Jones Euro Stoxx 50 index advanced 0.6 percent and December futures on the Standard & Poor's 500 Stock Index climbed 1.4 percent.
"``The dollar's greatest vulnerability is that if we were to see a base in equities, it could be a major loser from that as the money flows back out into the world,'' Cole said."
"The yen jumped 3 percent against the dollar on Sept. 15, the most in a decade, as Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in history, sparking a global stock- market rout. The U.S. government's rescue of American International Group Inc. failed to calm investors."
"The central banks acted after the three-month London interbank offered rate, or Libor, for dollars rose 19 basis points to 3.06 percent yesterday. Central banks in Japan and Australia injected $16.8 billion into money markets to keep a credit crisis from spreading beyond the U.S. and Europe."
"Asian central banks are giving up efforts to stop their currencies from falling, allowing faster depreciation, as investors sell assets in those markets, 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's foreign-exchange reserves fell by $7.9 billion, London-based HSBC said."
The South Korean won lost 3.3 percent against the dollar this month while the Indian rupee is down 5.3 percent.
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
"Last Updated: September 18, 2008 05:51 EDT"
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Most German Stocks Gain as Oil Declines; Allianz Shares Fall
By Stefanie Haxel
"Sept. 18 (Bloomberg) -- Most German stocks rose as oil pared yesterday's $6-a-barrel jump. Henkel AG & Co. KGaA, the maker of Persil detergent, and Bayerische Motoren Werke AG led gains among companies sensitive to fuel costs."
"Allianz SE, Europe's largest insurer, dropped on speculation the sale of its Dresdner Bank unit may falter and MAN AG lost 5.9 percent."
"The DAX Index added 23.94, or 0.4 percent, to 5,884.92 as of 10:30 a.m. in Frankfurt, as 19 stocks gained and 11 fell, after falling as much as 0.7 percent earlier. DAX futures expiring in September rose 0.8 percent. The HDAX Index of the country's 110 biggest companies advanced 0.2 percent."
"Oil for October delivery fell as much as $1.43, or 1.5 percent, to $95.73 a barrel in New York on concern the fallout from the global credit crunch may lead to an economic slowdown and limit fuel demand."
"Henkel advanced 85 cents, or 3.1 percent, to 28.04 euros. BMW, the world's biggest luxury carmaker, rose 52 cents, or 1.9 percent, to 27.84 euros."
"Continental AG, Europe's second-largest car-parts maker, advanced for a second day, adding 1.96 euros, or 2.7 percent, to 74.98. Natural rubber futures in Tokyo fell to a near five-month low."
"Allianz retreated for a seventh day, losing 4.31 euros, or 4.6 percent, to 90.32. The insurer reiterated that market turmoil doesn't put the sale of its Dresdner Bank unit to Commerzbank AG at risk, repudiating market speculation that the deal may collapse."
"Commerzbank, the country's second-largest bank, sank 25 cents, or 1.9 percent, to 13.225 euros."
"MAN, Europe's third-largest truckmaker, dropped 2.15 euros, or 4.4. percent, to 46.97 euros."
To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
"Last Updated: September 18, 2008 04:50 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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"European Stocks, U.S. Index Futures Climb; Asian Shares Fall "
By Adam Haigh
"Sept. 18 (Bloomberg) -- European stocks and U.S. futures rose after the largest central banks in Europe, the Federal Reserve and the Bank of Japan took coordinated action to ease tensions in financial markets. Asian shares pared their drop."
"HBOS Plc rallied 27 percent as Lloyds TSB Group Plc agreed to acquire the mortgage lender at 58 percent above yesterday's close, or about 12.2 billion pounds ($22.2 billion), to create a company that controls more than a quarter of the U.K. mortgage market. UBS AG, Switzerland's biggest bank, climbed for the first time in four days."
Europe's Dow Jones Stoxx 600 Index gained 0.4 percent to 258.98 at 8:48 a.m. in London. Futures on the Standard & Poor's 500 Index added 1.3 percent. The MSCI Asia Pacific Index dropped 2.2 percent.
"More than $19 trillion has been wiped off global stock- market value since 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."
"``We are finally getting to see the unraveling of the casualties,'' said Mike Lenhoff, who helps oversee about $36.4 billion as chief strategist at Brewin Dolphin Securities Ltd. in London. ``We have reached the point which could hopefully be the final phase of this,'' he said in a Bloomberg Television interview."
Overnight Loans
"The Bank of England said it will offer financial institutions $40 billion in overnight loans daily. The first loan will be today and the amount will be reviewed ``on a regular basis,'' the U.K. central bank said in a statement."
"HBOS soared 27 percent to 187.3 pence. Lloyds TSB, the bank that considered buying Northern Rock Plc, agreed to acquire HBOS Plc for 232 pence a share. Lloyds fell 8.1 percent to 257 pence."
"UBS added 4.3 percent to 16.37 francs. Barclays Plc, the U.K.'s third-largest bank, climbed 6.7 percent to 339 pence."
"The cost of protecting European corporate bonds from default fell, according to traders of credit-default swaps."
"Hays Plc, Britain's largest recruitment company, gained 3.9 percent to 79.75 pence after Royal Bank of Scotland Group Plc upgraded the shares to ``buy'' from ``hold,'' saying the current price is already discounting a global recession."
"Pernod-Ricard SA sank 5.1 percent to 58.86 euros after reporting an annual sales gain of 8.7 percent excluding currency movements and acquisitions, below the 9.3 percent growth in the year's first nine months."
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
"Last Updated: September 18, 2008 03:59 EDT"
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U.S. Treasuries Decline as Central Banks Announce Joint Action
By Agnes Lovasz and Wes Goodman
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"Sept. 18 (Bloomberg) -- Treasuries fell as central banks around the world injected emergency funds to revive lending in the financial system, boosting demand for stocks."
U.S. two-year yields stayed near the lowest level since April as lenders hoarded cash amid concern more banks will follow Lehman Brothers Inc. into bankruptcy. The cost of protecting corporate bonds from default also dropped after the Federal Reserve and major central banks united to offer $247 billion to markets facing the worst crisis since the 1920s.
"``Central banks are trying to address distortions and it gives people a backstop,'' said Luca Jellinek, a strategist in London at Royal Bank of Scotland Group Plc. ``The underlying problems remain but at least they're trying to smooth out operations. They obviously could do a lot more.''"
"The declines pushed the yield on the two-year note 6 basis points higher to 1.70 percent by 7:38 a.m. in New York. The 2.375 percent security maturing July 2010 dropped 3/32, or 94 cents per $1,000 face amount, to 101 9/32."
The yield on the 10-year note climbed 3 basis points to 3.45 percent. Yields move inversely to bond prices.
"The three-month U.S. Treasury bill yield, which was at 1.47 percent at the end of last week, was little changed today at 0.07 percent, near the lowest level since World War II."
"The Fed authorized central banks to auction the funds to ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' Policy makers ``continue to work together closely and will take appropriate steps to address the ongoing pressures,'' a joint release said. The central banks in the euro region, Japan, Canada, the U.K. and Switzerland participated."
`No Solution'
"``People were getting very panicky about funding,'' said Charles Diebel, head of European rate strategy in London at Nomura International Plc. ``Previously that was generating a safe-haven bid. This is not a solution and I don't think it changes much.''"
"Central bankers last joined forces to revive the credit markets in December after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending."
"Today's announcement boosted European shares and U.S. stock-index futures, which had extended this year's losses this week as contagion spread through the financial markets. Europe's Dow Jones Stoxx 600 Index rose 1.4 percent and futures on the Standard & Poor's 500 Index gained 1 percent."
Default Risk
"Credit-default swaps on the Markit iTraxx Financial index of 25 European banks and insurers fell 15 basis points to 135 and the subordinated index dropped 30 to 265, according to JPMorgan Chase & Co. prices in London. The Markit iTraxx Europe index of 125 companies with investment-grade ratings declined 10 basis points to 135."
"Yields indicate banks are more reluctant to lend than ever amid concern that more financial companies will fail. Morgan Stanley is considering merging with Wachovia Corp. to regain investor confidence, people familiar with the matter said, and the U.K.'s Lloyds TSB Group Plc said today it agreed to buy HBOS Plc, the U.K.'s largest mortgage lender."
"``I wouldn't be surprised to see whatever selling we're seeing in Treasuries now reverse during the course of today or tomorrow,'' said Marius Daheim, a senior bond strategist in Munich at Bayerische Landesbank, Germany's second-biggest state-owned bank. ``We're still in a very, very shaky situation. It doesn't take long before bad news about the next name emerges. For the time being, Treasuries will remain supported by safe-haven flows.''"
Money Markets
Yields are ``close to the bottom'' and have little scope to decline further said Daheim. Two-year yields may fall to 1.50 percent and 10-year yields to 3.25 percent if more financial companies are threatened by bankruptcy.
"The U.S. three-month bill rate, which dropped 65 basis points yesterday as investors sought the most liquid assets, 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 overnight tumbled today after the central banks' cash injection into money markets.
"The London interbank offered rate, or Libor, fell 1.19 percentage points to 3.84 percent, according to the British Bankers' Association. It dropped 1.41 percentage points yesterday after jumping 3.33 points the day before. It was at 2.15 percent last week."
TED Spread
"The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, widened 11 basis points to 313 basis points today, indicating that banks remain reluctant to lend to each other. That's higher than the 300 basis-point spread reached Oct. 20, 1987, when stocks collapsed around the world on what became known as Black Monday."
"The three-month dollar rate, which rose yesterday the most since 1999, climbed a further 14 basis points today to 3.20 percent, the highest since January, according to BBA data."
"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 Fed said Sept. 16 it 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.''"
"-- With reporting by Kim-Mai Cutler in London, Jon Menon and Ben Livesey in London. Editors: Ralph Johnston, Justin Carrigan"
To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net;
"Last Updated: September 18, 2008 07:41 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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"Asian Currencies: Won, Taiwan Dollar Weaken as Stocks Decline "
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 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 3.2 percent to 1,153.30 against the dollar as of the 3 p.m. close 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 Taiwan dollar fell 0.4 percent to NT$32.218 against the U.S. currency, according to Taipei Forex Inc."
"The won slumped 19.1 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."
"Japan, Australia, Hong Kong and South Korea today injected about $30 billion into money markets to keep the credit crisis from spreading beyond the U.S. and Europe."
"Taiwan's dollar dropped to near an eight-month low as the Taiex index fell 2.7 percent, extending this week's losses to 10.6 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.''"
Risk Aversion
"Overseas investors sold $2.8 billion more Taiwan shares than they bought this month, stock exchange figures show."
"India's rupee traded near the lowest in more than two years as 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 0.6 percent to 46.625 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 7.7 percent versus the dollar. South Korea's won slumped 9.2 percent."
"Elsewhere, the Singapore dollar gained 0.2 percent to S$1.4322 against the U.S. currency and the Thai baht rose 0.7 percent to 34.11. The Philippine peso was little changed at 46.96, according to Tullett Prebon Plc. The Malaysian ringgit weakened 0.1 percent to 3.4595, 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 04:56 EDT"
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Russia Reserves Fall on Ruble Support; Bonds Decline (Update2)
By Maria Levitov
"Sept. 18 (Bloomberg) -- Russia's international reserves, the world's third largest, fell to the lowest in three months last week as the dollar strengthened and the central bank sold currency to support the ruble. Government bonds slumped to a four-year low."
"The value of the reserves declined by $13.3 billion to $560.30 billion in the week ended Sept. 12, after falling $8.9 billion in the previous week, Moscow-based Bank Rossii said in an e-mailed statement today."
"``The euro and the pound declined against the dollar, accounting for about $10 billion of the drop,'' said Evgeniy Nadorhsin, a senior economist at Trust Investment Bank in Moscow.. ``The central bank also sold more currency than we expected to prop up the ruble.'' The central bank has a policy of not commenting on its day-to-day activities in the market."
Central bank Chairman Sergey Ignatiev yesterday pledged to keep the ruble steady within a trading band against a basket of euros and dollars. Russia halted stock trading for a second day yesterday after the biggest rout in a decade and the central bank relaxed restrictions on lenders because of what Ignatiev termed an ``acute liquidity shortage.''
"The ruble-denominated Micex Stock Exchange and the dollar- denominated RTS, which both halted trading yesterday, will re-open tomorrow, Russian Finance Minister Alexei Kudrin said today."
`Result of Panic'
"The ruble rose to 25.4148 per dollar, from 25.4353, and was little changed against the euro, trading at 36.4378. The currency was at 30.3852 versus the basket by 10:27 a.m. in Moscow."
"The decline in the government's 30-year dollar bonds pushed the yield 32 basis points higher to 7.3 percent, the highest level in four years, at 1:02 p.m. in Moscow, according to prices on Bloomberg. The cost to protect the debt against default jumped 17 basis points to 300 basis points, the highest since May 2004, BNP Paribas SA prices for credit-default swaps show."
"The cost of protecting bonds sold by Sberbank, the country's biggest bank, from default jumped 30 basis points to 435 basis points, according to CMA Datavision prices at 8:30 a.m. in London. Credit-default swaps on VTB rose 50 basis points to 750, an all- time high."
"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. A rise indicates deterioration in the perception of credit quality; a decline signals the opposite."
Reserves to Fall
"A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year."
"The central bank sold approximately $3 billion last week, according to Nadorshin's estimates. Euros account for about 40 percent of the reserves."
"``The reserves will likely continue to decline this week as the central bank supports the ruble,'' Nadorshin said. Still, a dollar rally is still possible, which would boost the value of the reserves, he said."
"About 47 percent of the reserves were held in U.S. dollars, 42 percent in euros, 10 percent in pounds and 1 percent in yen on June 30, 2007, according to the most recent figures released by the central bank. The share of the reserves held in Swiss francs is ``insignificant,'' the bank said."
"The reserves have climbed from $12.3 billion in 1998. China has the world's largest foreign currency reserves, totaling $1.7 trillion at the end of March, according to Bloomberg data, followed by Japan with $970 billion at the end of May."
To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net
"Last Updated: September 18, 2008 05:31 EDT"
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U.K. August Retail Sales by Volume Percentage Changes (Table)
By Ainhoa Goyeneche
Sept. 18 (Bloomberg) -- Following are seasonally adjusted retail sales by volume changes for August from the Office for National Statistics in London:
=============================================================================
3 Mths vs MoM YoY
Prev. 3 Mths % %
=============================================================================
------------ Volume of Retail Sales -------------
All Retailers -0.8% 1.2% 3.3%
Predominantly Food Stores -1.3% -0.2% -0.8%
-------- Predominantly Non-Food Stores ----------
Total -0.7% 2.1% 5.3%
Non-specialised Stores -0.4% 1.4% -1.0%
"Textile, Clothing 1.1% 4.1% 8.8%"
& Footwear
Household Goods Stores -2.2% 1.7% 2.2%
Other Stores -1.3% 0.9% 8.3%
-------- Non-store Retailing and repair ---------
Total 0.8% 2.4% 13.2%
=============================================================================
NOTE: These are the percentage changes for the seasonally adjusted
volume indices.
" The monthly periods consist of 4 weeks except for March, June,"
September and December which are 5 weeks.
January 2008 is also a 5 week period.
The August Sales period was the 4 weeks from August 3 to August 30.
SOURCE: National Statistics
To contact the reporter on this story: Ainhoa Goyeneche in London at agoyenechecu@bloomberg.net
"Last Updated: September 18, 2008 04:34 EDT"
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"European Stocks, U.S. Index Futures Climb on Central Bank Plan "
By Adam Haigh
Sept. 18 (Bloomberg) -- European stocks and U.S. index futures climbed and Asian shares pared declines after the world's largest central banks said they will pump $247 billion into the financial system.
HBOS Plc rallied 51 percent as Lloyds TSB Group Plc agreed to acquire the U.K.'s biggest mortgage lender. UBS AG and Barclays Plc advanced more than 4 percent. Washington Mutual Inc. soared 18 percent in German trading on speculation of a sale for parts of the largest U.S. savings and loan. Volkswagen AG increased 13 percent as investors speculated that Porsche SE will make a full takeover.
"Europe's Dow Jones Stoxx 600 Index added 1.5 percent to 261.97 at 12:05 p.m. in London, rebounding from its steepest three-day slide since 2002. Futures on the Standard & Poor's 500 Index climbed 1.7 percent. The MSCI Asia Pacific Index declined 1.6 percent, paring an earlier drop of as much as 4.3 percent."
"``The central banks are aware of the problems, which is good, and they are being as proactive as they possibly can,'' Julian Chillingworth, who oversees about $2.5 billion as chief investment officer at Rathbone Unit Trust Management, said in an interview on Bloomberg Television. ``You could see the market have a knee-jerk reaction. It is positive, but it also underlines the level of the problem.''"
More than $19 trillion has been wiped off global stock- market value since Oct. 31 as the worst U.S. housing recession since the Great Depression and more than $500 billion in credit losses and writedowns at banks slowed the world economy.
Dollar Funds
The S&P 500's slump from its October record has now reached 26 percent after Lehman Brothers Holdings Inc. filed for bankruptcy this week and the government had to take over American International Group Inc. The benchmark for U.S. equities has erased half its advance from the five-year bull market that ended last year.
"Stocks in Europe extended gains after a report showed retail sales in the U.K. rose 1.2 percent in August. Economists had forecast a 0.5 percent drop, according to the median in a Bloomberg News survey. Kingfisher Plc led retailers higher, climbing 9 percent."
The Fed said today it authorized other central banks to auction $247 billion in dollar funds to financial institutions in a coordinated bid to ease the worst crisis facing financial markets since the 1920s. The Bank of Canada and the Swiss National Bank also participated.
HBOS Takeover
"HBOS soared 51 percent to 222.75 pence. Lloyds, the bank that considered buying Northern Rock Plc, agreed to acquire HBOS for 232 pence a share, or about 12.2 billion pounds ($22.2 billion), to create a company that controls more than a quarter of the U.K. mortgage market. Lloyds shares rose 4.7 percent to 293 pence."
"``We are finally getting to see the unraveling of the casualties,'' said Mike Lenhoff, who helps oversee about $36.4 billion as chief strategist at Brewin Dolphin Securities Ltd. in London. ``We have reached the point which could hopefully be the final phase of this,'' he said in a Bloomberg Television interview."
"UBS AG, Switzerland's biggest bank, added 13 percent to 17.71 francs. Barclays Plc, the U.K.'s third-largest bank, climbed 4.6 percent to 332.25 pence."
"The cost of borrowing in dollars overnight declined. The London interbank offered rate, or Libor, fell 1.19 percentage points to 3.84 percent today, according to the British Bankers' Association. It was at 2.15 percent last week."
Credit-Default Swaps
"The cost of protecting European corporate bonds from default dropped today, according to traders of credit-default swaps."
"Washington Mutual rallied 18 percent to $2.37 in Germany. JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. may bid for the company, three people with knowledge of the discussion said. Buyers may be interested only in pieces of Seattle-based WaMu, said the people, who asked not to be identified because the talks are private."
"Brad Russell, a spokesman for Washington Mutual, declined to comment yesterday, as did JPMorgan spokesman Joseph Evangelisti and Wells Fargo spokeswoman Julia Tunis Bernard. Officials at Citigroup and Bank of America in London also declined to comment."
"Volkswagen advanced 13 percent to 272.38 euros, climbing for a third straight day."
"``The current share-price development shows that the market believes in a full takeover,'' Frankfurt-based Commerzbank AG analyst Gregor Claussen wrote to investors today. ``A further increase to above 50 percent is likely to happen around October/November.'' Claussen recommends selling the stock."
"Kingfisher, Hays"
"Kingfisher rose 9 percent to 130.8 pence. Less discounts helped first-half profit at Europe's biggest home-improvement retailer to top analysts' estimates even as U.K., Irish and Spanish house prices declined."
"Hays Plc, Britain's largest recruitment company, gained 12 percent to 86.25 pence after Royal Bank of Scotland Group Plc upgraded the shares to ``buy'' from ``hold,'' saying the current price is already discounting a global recession."
Ryanair Holdings Plc rallied 7.8 percent to 2.76 euros. Europe's biggest discount carrier said it will break even this fiscal year following the recent decline in oil prices. Crude futures traded for below $100 a barrel for a fourth straight.
"Pernod-Ricard SA, the world's second-largest liquor maker, declined 6.4 percent to 58.03 euros after reporting the smallest profit increase in three years and saying weaker economies will hamper growth."
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
"Last Updated: September 18, 2008 07:17 EDT"
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"French Stocks: BNP, Dexia, Eurazeo, Pernod, Societe Generale "
By Adria Cimino
"Sept. 18 (Bloomberg) -- France's CAC 40 Index gained 38.59, or 1 percent, to 4,038.70 at 12:05 p.m. in Paris, rebounding after three days of losses. The SBF 120 Index increased 0.8 percent."
"Banks rose after the Federal Reserve, Europe's biggest central banks and the Bank of Japan said they are taking coordinated action to ease tensions in financial markets."
"Dexia SA, the world's biggest lender to local governments, advanced 69 cents, or 8.5 percent, to 8.92 euros. BNP Paribas SA, France's biggest bank by assets, increased 3.06 euros, or 5.5 percent, to 59.25. Societe Generale SA, the country's third largest, jumped 2.6 euros, or 4.9 percent, to 57.02."
The following shares rose or fell in Paris. Stock symbols are in parentheses.
"Audika (ADI FP) lost 82 cents, or 3.1 percent, to 25.70 euros, falling a fourth day. Goldman Sachs Group Inc. rated shares of Europe's second-largest distributor of hearing aids ``sell'' in new coverage."
"Cegedim SA (CGM FP) slid 2.80 euros, or 5.1 percent, to 52.20, after two days of gains. The company, which supplies sales-tracking software for drugmakers including Pfizer Inc., said first-half profit fell 52 percent after restructuring and integration costs."
"Eurazeo SA (RF FP) added 84 cents, or 1.5 percent, to 55.84, gaining a second day. The investment company asked France's market regulator to investigate a 19 percent drop in its share price on Sept. 16. The fall may be linked to the unwinding of a loan operation linked to Eurazeo shares to which Lehman Brothers was a counterparty, Eurazeo said in a statement. The company plans to continue buying back its own shares."
"Natixis SA (KN FP) slipped 3 cents, or 1.2 percent, to 2.46 euros, dropping a fourth day. The bank, which today completes taking orders for 3.7 billion euros ($5.4 billion) of stock, fell as much as 7.6 percent to a record low. Natixis needs to replenish reserves after about 3 billion euros of subprime-related writedowns and provisions since the start of 2007."
"Pernod Ricard SA (RI FP) lost 3.05 euros, or 4.9 percent, to 58.95, dropping for a fourth day. The world's second-largest liquor company reported the smallest profit increase in three years and said weaker economies will hamper growth. Net income rose 1 percent to 840 million euros in the year through June, held back by costs to buy the Absolut vodka brand and slowing demand for premium spirits."
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
"Last Updated: September 18, 2008 06:13 EDT"
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"Newcrest, Zijin Jump After Bullion Prices Surge (Update3) "
By Jesse Riseborough and Madelene Pearson
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"Sept. 18 (Bloomberg) -- Newcrest Mining Ltd. rose the most in almost nine years, pacing gains in Australian and Chinese gold stocks after the price of bullion surged as the deepening global financial crisis prompted investors to seek a haven."
"Newcrest, Australia's largest gold producer, climbed 15 percent to close at $24.50 on the Australian stock exchange, the biggest gain since Sept. 28, 1999. Zijin Mining Group Co., China's biggest producer, jumped 21 percent, the most since December 2003, to close at HK$3.90 in Hong Kong trading."
Gold had the biggest advance in 26 years and silver climbed the most since 1979 yesterday as stocks tumbled after the U.S. government took control of American International Group Inc. in an $85 billion bailout to stop the largest financial collapse in history. Investors buy bullion to hedge against market turmoil.
"``When there's uncertainty in the market, particularly uncertainty in the financial area, people do turn to safer stores of value and of course gold has always had that characteristic,'' Michael Heffernan, a client adviser with Austock Securities Ltd., said today from Melbourne. ``In this environment, gold stocks are the place to be.''"
"Gold for immediate delivery climbed 1.5 percent to $876.45 an ounce at 4:39 p.m. Hong Kong time. The metal jumped 11 percent yesterday, its biggest gain since Sept. 3, 1982."
Flight to Safety
"``It's pretty clearly a flight to safety,'' Toby Hassall, an analyst at Commodity Warrants Australia, said by phone from Sydney. Gold may reach $900 an ounce by week's end, he said. ``As long as sentiment continues to worsen, it's likely we'll see upward pressure on gold prices.''"
"About $3.6 trillion of market value has been erased from global stocks this week, triggered by the bankruptcy of Lehman Brothers Holdings Inc. In March, gold reached a record as the U.S. steered JPMorgan Chase & Co. to buy Bear Stearns Cos."
Lihir Gold Ltd. jumped 16 percent to A$2.48 and Sino Gold Mining Ltd. rose 23 percent to A$4.35 in Australia.
"Zhongjin Gold Corp., China's second-largest producer, and Shandong Gold Mining Co., the third-largest, rose by the daily 10 percent limit in Shanghai trading."
Zhongjin Gold advanced to 26.42 yuan and Shandong Gold jumped to 30.69 yuan.
To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net; Madelene Pearson in Melbourne on mpearson1@bloomberg.net
"Last Updated: September 18, 2008 05:19 EDT"
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Asian Currencies Retreat After Interventions Falter (Update3)
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 19 percent this year and the rupee slid 16 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 3.2 percent to 1,153.3 against the dollar as of 3 p.m. in Seoul. The rupee slid 0.7 percent to 46.68 per dollar, close to a two-year low. The baht closed at 34.09, near the lowest in a year, while the Philippine peso ended at 46.96."
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."
"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."
"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 and is now revising those forecasts lower."
`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 05:57 EDT"
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U.S. Stock Futures Advance; Washington Mutual Gains in Europe
By Henrietta Rumberger
"Sept. 18 (Bloomberg) -- U.S. stock-index futures advanced as the Federal Reserve, Europe's biggest central banks and the Bank of Japan said they will pump $180 billion into financial markets facing their worst crisis since the Great Depression."
"Washington Mutual Inc., the largest U.S. savings and loan, surged 14 percent in Europe on speculation JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. may bid for parts of WaMu. Wells Fargo advanced 3.8 percent after the action by global central banks pushed the cost of protecting corporate bonds from default lower."
"``The compounded action helps the market,'' Wolfgang Matejka, who oversees about $3 billion as chief investment officer at Vienna-based Meinl Bank AG, said in a Bloomberg Television Interview today."
"Standard & Poor's 500 Index futures expiring in December added 15, or 1.3 percent, to 1,177.9 as of 11:22 a.m. in London. Dow Jones Industrial Average futures gained 91 to 10,755 and Nasdaq-100 Index futures increased 16.25 to 1,663.25."
"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."
"U.S. stocks tumbled yesterday as bank lending seized up in the wake of the government's takeover of American International Group Inc., raising concern that more of the nation's biggest financial companies will fail. The 26 percent drop in the S&P 500 since its October peak erased half its gain from the five- year bull market that began in 2002."
2008 Retreat
The S&P 500 is poised to post its first yearly retreat since 2002 after global banks racked up $518 billion in credit losses and asset writedowns stemming from the first nationwide decline in home prices since the 1930s.
The Fed today said it authorized central banks to auction funds to ``to address the continued elevated pressures in U.S. dollar short-term funding markets.''
"Finance officials have struggled to restore confidence in markets as concern mounted more banks will follow Lehman into bankruptcy. The cost to hedge against losses on U.S. government debt climbed to a record yesterday, the U.K. government was forced to sponsor a rescue of mortgage lender HBOS Plc and Russia poured money into its banks."
"Washington Mutual rose 29 cents to $2.30 in Germany. Buyers may be interested only in pieces of WaMu, three people with knowledge of the discussions said, who asked not to be identified because the talks are private."
"JPMorgan, Citigroup"
"JPMorgan rose $1.55 to $37.32, Citigroup advanced 61 cents to $14.64 and Bank of America gained 76 cents to $27.95 in Germany. Wells Fargo climbed $1.27 to $34.70."
Morgan Stanley added $1.03 to $22.78 in Germany. The investment bank is considering a merger with a bank to revive investor confidence after its shares sank 42 percent this week following the collapse of Lehman.
"John Mack, Morgan Stanley's chief executive officer, got a call from Wachovia Corp. yesterday indicating interest, said a person with knowledge of the matter, declining to be identified because the talks aren't public and may end without an agreement. The New York-based firm is also seeking ways to limit short sales of its stock, the person said."
The Securities and Exchange Commission stiffened regulations against manipulative short-selling after the routs in AIG and Lehman. The new rules force traders to borrow shares before selling them short and make it a fraud for investors to lie to their broker about locating stock to close positions.
Economic Reports
"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. The leading index, due at 10 a.m. from the New York-based Conference Boars, may have dropped 0.2 percent."
"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. In addition, 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."
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net
"Last Updated: September 18, 2008 06:28 EDT"
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U.K. Retail Sales Unexpectedly Rise for Second Month (Update2)
By Jennifer Ryan
Sept. 18 (Bloomberg) -- U.K. retail sales unexpectedly increased in August for a second month as stores attracted shoppers with discounts on clothing and footwear.
"Sales climbed 1.2 percent after rising 0.9 percent in July, the Office for National Statistics said today in London. Economists forecast a 0.5 percent decline, according to the median of 27 estimates in a Bloomberg News survey. On the year, sales increased 3.3 percent."
"Unemployment rose the most in 16 years in August and the housing slump deepened as the credit squeeze intensified enough to prompt HBOS Plc, the nation's biggest mortgage lender, to agree to a takeover today. The Bank of England has still refrained from cutting interest rates since April as policy makers count on slowing growth to help control inflation."
"``Some of this is the usual volatility in the data, but overall the picture for the consumer is very weak,'' said Nick Kounis, chief European economist at Fortis in Amsterdam and a former U.K. Treasury official. ``The Bank of England will want to see inflation risks ease before it starts cutting rates.''"
"The pound was little changed against the dollar after the report, trading at $1.8203 as of 10:57 a.m. in London."
"Food sales fell 0.2 percent on the month, while non-food sales increased 2.1 percent, the statistics office said. For the three months through August, sales dropped 0.8 percent, the most since 1991. Statistics officials said that this decline should be interpreted with caution because of the record monthly increase reported in May."
"Clothing, Footwear"
"Sales of textiles, clothing, and footwear increased 4.1 percent from July, the statistics office said. Prices of those items dropped 2.5 percent from a year earlier and have shown an annual decline in every month since July 2007. Sales at household goods stores also rose, with a gain of 1.7 percent."
"Kingfisher Plc, Europe's largest home-improvement retailer, rose the most since 2000 in London trading today after reduced discounting helped first-half profit to top analysts' estimates even as U.K., Irish and Spanish house prices slid."
"Claims for unemployment benefits rose by 32,500 in August, the most since 1992, the statistics office said yesterday, as companies from banks to homebuilders cut jobs while the global credit squeeze worsened. House prices fell 12.7 percent from a year earlier, HBOS said on Sept. 4."
Recession Forecast
"The U.K. economy will shrink in the third and fourth quarters, according to a Sept. 10 forecast by the European Commission. Growth stalled in the second quarter as consumer spending dropped for the first time in three years."
"Lloyds TSB Group Plc agreed to buy HBOS today to rescue it from the worsening credit crisis. The Bank of England joined the Federal Reserve, European Central Bank and counterparts around the world in offering an additional $180 billion today to markets facing their worst crisis since the 1920s."
"Bank of England Governor Mervyn King said in a letter to Chancellor of the Exchequer Alistair Darling on Sept. 16 that policy makers are determined to tame consumer prices inflation jumped to 4.7 percent in August, more than double the bank's 2 percent target."
"The annual retail price deflator, which shows cost changes in stores, rose 0.9 percent on the year as food prices increased 6.6 percent, the most since 1991, the statistics office said."
"German discount retailers Aldi Group and Lidl kept increasing their share of the U.K. grocery market this summer as food inflation accelerated, according to a Sept. 16 report from market researcher Taylor Nelson Sofres Plc."
"The rate-setting Monetary Policy Committee has ``become firmer in its belief that a period of muted economic growth is necessary to dampen pressures on prices and wages and return inflation to the target in the medium term,'' King said."
"Eight of the nine-member rate-setting panel voted to keep borrowing costs at 5 percent, minutes of the Sept. 4 decision published yesterday show. David Blanchflower wanted a half-point cut, the biggest since 2001."
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
"Last Updated: September 18, 2008 06:06 EDT"
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Money-Market Rate Slides After Central Bank Action (Update1)
By Gavin Finch and Kim-Mai Cutler
Sept. 18 (Bloomberg) -- The cost of borrowing in dollars overnight tumbled after central banks worldwide pumped $247 billion into money markets.
"The three-month rate rose for a third day, to the highest since January, signaling that banks are still wary of more failures among financial institutions after Lehman Brothers Holding Inc. collapsed and the U.S. government bailed out American International Group Inc."
"``It has already had an effect in the interbank lending market,'' said Richard McGuire, a senior fixed-income strategist in London at RBC Capital Markets. ``It has improved or taken some of the pressure off liquidity concerns. There are still clear signs of strain.''"
"The Federal Reserve, the European Central Bank and the Bank of Japan joined with counterparts in Switzerland, the U.K. and Canada to inject cash into the money markets in a coordinated bid to ease the worst financial-market crisis since the 1920s."
"The London interbank offered rate, or Libor, for overnight loans fell 1.19 percentage points to 3.84 percent today, according to the British Bankers' Association. It dropped 1.41 percentage points yesterday after jumping 3.33 points the day before. The three-month rate, which rose yesterday the most since 1999, climbed a further 14 basis points to 3.20 percent today, according to BBA data."
Working Together
"The Fed said on its Web site that it authorized other central banks to auction the dollar funds to financial institutions. A joint release said that the Bank of England, the Bank of Canada and the Swiss National Bank also participated. The ECB, Bank of England and Swiss National Bank allotted a combined $64 billion for one day today."
"``The action is designed to address the continued elevated pressures in U.S. dollar short-term funding markets,'' the central banks said in the statement. ``The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.''"
"The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, widened 11 basis points to 313 basis points today. That's higher than the 300 basis-point spread reached Oct. 20, 1987, when stocks collapsed around the world on what became known as Black Monday."
To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
"Last Updated: September 18, 2008 07:16 EDT"
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Central Banks Offer Extra Funds to Calm Money Markets (Update5)
By John Fraher and Simon Kennedy
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Sept. 18 (Bloomberg) -- The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s.
"The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' The Bank of England, the Bank of Canada and the Swiss National Bank also participated."
"Finance officials have struggled to restore confidence in markets this week as investors stockpiled money amid mounting concern more banks will follow Lehman Brothers Holdings Inc. into bankruptcy. The cost to hedge against losses on U.S. government debt climbed to a record yesterday, the U.K. government was forced to sponsor a rescue of mortgage lender HBOS Plc and Russia poured money into its banks."
"``There's a complete lack of faith in the markets,'' said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. ``There's a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.''"
Financial markets welcomed the announcement by pushing the cost of borrowing in dollars overnight to 3.84 percent from 5.03 percent yesterday. It was 2.15 percent last week and reached its highest since 2001 on Sept. 15.
Limit Doubled
"The Fed will spray the dollars around the world via swap lines with other central banks who can then auction them in their own markets. The ECB, Bank of England and Swiss National Bank allotted a total of $64 billion for one day today."
"Under the new arrangements, the ECB doubled its limit of dollars it can get from the Fed to $110 billion and Switzerland's central bank can offer $27 billion, an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively. The arrangements are authorized until Jan. 30."
The ECB said it would offer $40 billion ``for as long as needed'' in overnight funds to the region's banks. It will also increase by $5 billion the amount it lends for 28 days and 84 days to $25 billion and $15 billion. The Swiss National Bank will boost its 28-day auctions to $8 billion and the 84-day offering to $9 billion. Both were previously $6 billion.
Use as Needed
"The Bank of Canada said it has decided not to draw on its $10 billion swap facility at this time. The Bank of Japan, whose policy board held an emergency meeting today, said it will use its $60 billion as required by market conditions."
"In auctions of their own currencies, the ECB today lent 25 billion euros in one-day money and the Bank of England 66.2 billion pounds in one-week loans."
"The action is the latest attempt by central bankers to coordinate their response to the financial crisis which deepened this week after Lehman tumbled into bankruptcy, Merrill Lynch & Co. was sold and the U.S. government bailed out insurer American International Group Inc. Central bankers had this week pushed more than $200 billion into markets with those in Japan and Australia doing so again today."
"Swap lines were first established in December when officials joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending. The Fed increased its link with the ECB in July."
Share Prices Gain
"The announcement today boosted European shares and U.S. futures, which have been pummeled this week as contagion spread through financial markets. Europe's Dow Jones Stoxx 600 Index, which has dropped 8 percent, gained 0.8 percent to 260.15. Futures on the Standard & Poor's 500 Index added 1.2 percent. More than $19 trillion has been wiped off the value of global stock markets since Oct. 31."
"Failure to calm markets will see central banks inject even more cash, said Robert Barrie, an economist at Credit Suisse Group in London. Other options central banks could take include accepting greater collateral denominated in foreign currencies and increasing lending to banks abroad."
"``The lack of dollars has been making the financial crisis worse around the world, which is why we now have this coordinated response,'' Barrie said."
"Since the credit squeeze began in August 2007, central banks have sought to keep apart the need to soothe markets and to combat inflation. They argue that interest rates are a blunt tool for helping markets and that price pressures prevent them from cutting rates. While the Fed slashed its key lending rate to 2 percent it has left it there since April. The Bank of Japan kept its at 0.5 percent this week and the European Central Bank increased its benchmark to a seven year high in July."
"If the spasms in the markets continue and threaten to derail growth the central bankers may shift, although for now they will want to wait, said Kevin Gaynor, head of economics at Royal Bank of Scotland Group Plc in London."
"``Partly this is to keep powder dry and partly because cutting interest rates won't make much difference,'' he said."
To contact the reporters on this story: John Fraher in London at jfraher@bloomberg.net; Simon Kennedy in Paris at Skennedy4@bloomberg.net
"Last Updated: September 18, 2008 07:15 EDT"
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A blog for global investors, with information about most of the world financial markets. Updated frequently, every day, with my views on these markets. Bear or Bull? Read to discover!
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