"Gold Rises in London as Physical Demand Gains, Crude Oil Climbs "
By Rachel Graham
Sept. 4 (Bloomberg) -- Gold climbed for the first time in five sessions in London as buyers replenished stockpiles and rising crude-oil prices buoy demand for the metal as a hedge against inflation. Platinum posted its first gain this week.
"India, the world's biggest buyer of bullion, increased imports of the metal in August for the first time in 11 months as prices dropped 9 percent, according to the Bombay Bullion Association Ltd. Crude rose as Hurricane Ike gained force in the Atlantic, sparking concern that supplies face disruption."
"``Physical demand is still very strong in gold,'' Narayan Gopalakrishnan, a Geneva-based trader at MKS Finance, one of Switzerland's four bullion refiners, wrote in an e-mail. ``Today's news of Hurricane Ike strengthening is lending further support on crude and gold.''"
"Gold for immediate delivery gained $10.32, or 1.3 percent, to $811.61 an ounce as of 1:09 p.m. in London. Gold futures for December rose $8.30, or 1 percent, to $816.50 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange."
"Gold may gain 10 percent by the end of the year, driven by demand for jewelry during the Indian wedding and festival season, according to JPMorgan Chase & Co. data."
"The season has boosted prices every year since 2002 with September the strongest buying month, JPMorgan analysts led by Brendan James said in a report. Over the past decade, gold has risen by an average of 10.1 percent from September through December, according to a study by the broker."
"Dresdner Bank AG expects gold to decline to $750 by the end of the year, commodity research analyst Bayram Dincer said today by phone from Zurich."
Dollar Strength
"The metal will weaken because of ``easing inflation concerns, continuing dollar strength and falling crude prices,'' Dincer said. ``Headline inflation will come down as commodity prices fall.''"
"The UBS Bloomberg CMCI Index of 26 commodities has dropped 18 percent since the beginning of July, while the dollar has climbed 8 percent against the euro in the same period."
"Gold rose to $810.50 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $803.50 at the previous afternoon fixing."
"Assets in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, fell 1.4 percent yesterday, the first drop in more than two weeks. Gold held by the company fell 9.19 metric tons to 642.18 tons yesterday, according to figures on the company's Web site."
"Silver for immediate delivery rose 15 cents, or 1.2 percent, to $13.06 an ounce."
"Assets in Barclays Plc's iShares Silver Trust, the largest exchange-traded fund backed by the metal, fell from a record on Sept. 2. Silver held by the company fell to 6,471 tons from a record 6,474 tons, according to data on the company's Web site."
"Among other metals for immediate delivery, platinum gained $23.50, or 1.7 percent, to $1,412 an ounce and palladium rose $5, or 1.7 percent, to $292 an ounce."
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
"Last Updated: September 4, 2008 08:41 EDT"
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Indian Rupee Rises From 18-Month Low as Exporters Buy Currency
By Anoop Agrawal
Sept. 4 (Bloomberg) -- India's rupee rebounded from an 18- month low on speculation exporters purchased the currency following its slump this week.
"The currency ended a five-day slide after the U.S. dollar's relative strength index, a technical chart used to measure potential turning points in prices, rose to a level that signals a reversal in direction is due. The local currency has dropped 11.2 percent this year as accelerating inflation and slowing economic growth prompted global funds to dump local equities."
"``The rupee may benefit as exporters are taking the opportunity to convert some of their receivables,'' said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. ``They probably will sell dollars as it has gained rapidly.''"
"The rupee rose 0.3 percent to 44.375 a dollar at the 5 p.m. close in Mumbai, from 44.49 yesterday, according to data compiled by Bloomberg."
The dollar's 14-day relative strength index was at 71.33 against the rupee. A level above 70 suggests dollar purchases may have peaked.
"Overseas investors sold $7.3 billion more Indian shares than they bought this year, following a record $17.2 billion in net purchases in 2007, data provided by the Securities & Exchange Board of India show."
"Asia's third-biggest economy expanded 7.9 percent in the three months through June, the slowest pace since the last quarter of 2004, a government report showed last week."
Dollar Rally
The rupee has weakened in six of the eight months this year as the U.S. dollar rose to the highest in more than seven months against the euro. It gained against eight of the 10 most-traded currencies in Asia today.
"``The dollar is showing resilience worldwide and that is having an adverse impact on the rupee,'' said Sanjay Arya, treasurer at state-owned Bank of Maharashtra in Mumbai. ``The dollar will continue to exert pressure in the near term.''"
"The Dollar Index traded on ICE futures exchange, which gauges the greenback against the currencies of six major U.S. trading partners, was near a 10-month high."
"India's external debt climbed 30.4 percent to $221.2 billion in the fiscal year ended March 31, the Finance Ministry said today. That was due to a 39.5 percent rise in overseas borrowings by companies and a 34.8 percent jump in short-term debt, the ministry said."
The central bank today said it gave 193.3 billion rupees ($4.4 billion) of foreign currency to refiners against the so- called oil bonds to help them meet rising cost of crude oil.
"The Reserve Bank of India bought the securities between June 5 and Aug. 8, it said in its Report on Currency and Finance. The oil bonds were issued by the government to state- owned refiners as compensation for selling fuels below cost."
"India's average oil import costs increased to $8.2 billion a month this year, from $5.5 billion in 2007, trade ministry data show."
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
"Last Updated: September 4, 2008 07:58 EDT"
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OPEC to Pump Record Amounts as $109 Oil Stunts Growth (Update2)
By Grant Smith and Ayesha Daya
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"Sept. 4 (Bloomberg) -- OPEC, the supplier of 40 percent of the world's oil, will probably keep producing at a record pace as $109-a-barrel crude squeezes the global economy."
"The 13-nation Organization of Petroleum Exporting Countries will reject calls from Venezuela and Iran to trim supplies at its Sept. 9 meeting in Vienna, according to 29 of the 32 energy analysts surveyed by Bloomberg."
"``They want to prevent a build-up of crude stocks, which rules out an increase, but don't want to send prices skyrocketing by announcing a cut,'' said Mike Wittner, head of oil research at Societe Generale SA in London. ``OPEC won't take any formal action.''"
"Oil plunged $38 a barrel, or 26 percent, from its record $147.27 on July 11 as economies slowed, the dollar halted a three-year slide against the euro and Hurricane Gustav caused almost no damage to drilling platforms and refineries in the Gulf of Mexico. Demand for crude will increase 1 percent in 2009, the slowest growth in seven years, according to an Aug. 15 OPEC forecast."
"Record oil prices spurred European inflation to 4 percent in July and contributed to the first quarterly contraction in the region's economy since the euro was introduced almost a decade ago. In the U.S., gasoline demand fell for 19 consecutive weeks, according to MasterCard Inc., with fuel now near $3.70 a gallon."
"The world economy is ``precariously close'' to a recession in 2009, UBS AG said last month as it cut next year's global growth forecast to 2.9 percent. It considers a 2.5 percent rate as one that is consistent with a recession."
Exceeding Limit
"Oil for October delivery was trading 35 cents higher at $109.70 a barrel on the New York Mercantile Exchange at 1:38 p.m. London time. Yesterday, the contract fell 36 cents to $109.35 a barrel, the lowest settlement price since April 8."
"The OPEC members with quotas produced about 592,000 barrels a day more than their official limit of 29.673 million last month, according to Bloomberg estimates. Iraq has no quota. All the countries except Saudi Arabia are pumping at close to capacity to meet rising demand and compensate for declining supplies from Nigeria, Iran and Venezuela."
"While leaving quotas unchanged, the group may curtail production to prevent inventories from swelling, said Adam Sieminski, Deutsche Bank AG's chief energy economist in Washington."
"``If prices are rising they will leave production alone, and if they are falling they will trim a little,'' he said."
"Oil stockpiles, excluding government reserves, were above average in July and enough to meet 54 days of demand, according to the International Energy Agency in Paris."
Economic Burden
"The agency's Executive Director Nobuo Tanaka recommended during an interview Brussels today that OPEC maintain output levels, adding that recent price declines reflect ``the slowdown of the economy.''"
"``If stocks were ballooning then you could see pressure mounting within the cartel for a cut,'' said Harry Tchilinguirian, senior oil analyst at BNP Paribas SA."
"Most extra pumping came from Saudi Arabia, the world's largest oil producer, which raised output by 500,000 barrels a day in June and July to calm markets."
"Venezuela and Iran, OPEC's second- and third-largest producers, want the group to consider reducing supply to keep prices from falling below $100 a barrel."
"``Returning to quotas does not mean a production cut, it's a return to previous output commitments,'' Iranian OPEC Governor Mohammad Ali Khatibi said in a Sept. 1 telephone interview in Tehran. ``The result will be a decrease in output, but it's different from a cut in the ceiling.''"
Prices `Fair'
"Prices of just over $100 a barrel are ``fair,'' Venezuelan President Hugo Chavez said on Aug. 27."
Nigerian Petroleum Minister of State Odein Ajumogobia and Ecuadorean Oil Minister Galo Chiriboga said in the past week that OPEC should maintain current production.
"OPEC ``probably doesn't want to see another run at $150,'' said Societe Generale's Wittner. ``But they're worried the $35 downward correction will continue.''"
The group meets again Dec. 17 in Algeria.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net; Ayesha Daya in Dubai adaya1@bloomberg.net
"Last Updated: September 4, 2008 09:27 EDT"
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"German Orders Unexpectedly Drop, Extend Losing Streak (Update2) "
By Gabi Thesing
"Sept. 4 (Bloomberg) -- German factory orders unexpectedly fell in July, extending their longest-ever declining streak and increasing the likelihood that Europe's largest economy is heading for a recession."
"Orders, adjusted for seasonal swings and inflation, slid 1.7 percent from June, the Economy Ministry in Berlin said today. Economists expected a gain of 0.3 percent, the median of 35 forecasts in a Bloomberg News survey showed. Orders slid 0.7 percent from a year earlier."
"Germany's economy contracted 0.5 percent in the second quarter and may not recover in the third as exports falter and consumer spending slumps. Even though oil prices have retreated 24 percent since a July record, business confidence declined to a three-year low last month and consumer optimism fell to the lowest level in five years."
"``Orders declining for eight straight months is unprecedented and a frightening prospect,'' said Sebastian Wanke, an economist at Dekabank AG in Frankfurt. ``We expect that the economy will contract in the third quarter as Germany's main export markets are slowing and consumer spending is unlikely to pick up.'' Wanke expects a ``marginal'' recovery in the fourth quarter."
Defying Expectations
The euro fell as low as $1.4466 from $1.4529 before the report was released. It's the sixth month in a row that orders defied economists' expectations of a gain. The ministry revised June's decline to 2.6 percent from an initially reported 2.9 percent.
"This month's drop was led by a 3.6 percent slump in domestic orders. Foreign sales increased 0.3 percent, with orders from the euro area rising 8.1 percent. Demand from outside the region fell 5.7 percent."
The ministry said there was ``an unusually large volume of big ticket orders'' in the month.
"European Aeronautic, Defense & Space Co. the German-French aerospace manufacturer, said July 30 it won 60 percent of $64 billion in orders at the U.K.'s Farnborough air show that month, including an order of five freighters form Italy's cargo startup Alis Aerolinee Italiane."
"The VDMA lobby said last week that plant and machine orders declined for a third straight month in July, as a stronger euro and slowing global economic growth curbed demand for exports."
Party's Over
"``The party in Germany's industrial sector is over,'' said Aline Schuiling, an economist at Fortis Bank in Amsterdam. ``In fairness, it has come down from unusually high levels. But still, there is now a danger that companies will start cutting jobs.''"
"The price of oil rose to a record $147.27 a barrel on July 11, pushing inflation in the euro area to a 16-year high of 4 percent and sapping consumer's purchasing power and boosting company's bills."
"Car sales declined 10 percent in August from a month earlier, Germany's Federal Vehicle Administration organization said earlier this week. German retail sales fell in July and August, data from the Federal Statistics Office and the Bloomberg Retail PMI showed last week."
"Automakers are not only hit by weakening domestic demand. Bayerische Motoren Werke AG Chief Executive Officer Norbert Reithofer said on Aug. 1 that 2009 would be ``another difficult year'' for the world's largest maker of luxury cars as falling U.S. sales, the stronger euro and rising costs for plastics, steel and oil hurt profit."
Still High
"While the price of oil and the euro's exchange rate against the dollar have both fallen from their peak, they are still up 46 percent and 6 percent respectively from a year ago."
"Adding to the pressures on companies, the cost of borrowing is likely to remain at a seven-year high and may even increase."
"European Central Bank Governing Council member Axel Weber, who also heads Germany's Bundesbank, said last week he doesn't ``expect inflation to come down necessarily just with weaker growth'' and that once the ``economic outlook brightens somewhat,'' interest borrowing costs may have to be increased."
The ECB kept the benchmark lending rate at 4.25 percent at its monthly policy meeting in Frankfurt today.
Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in the previous month. That's still almost twice the ECB's 2 percent limit.
"The 15-nation euro area, which takes just over 40 percent of Germany's exports, is also teetering on the brink of a recession after contracting 0.2 percent between April and June."
"Some German companies seek to cushion the decline in orders from Europe by expanding in emerging markets. Hochtief AG, Germany's largest builder, reported a jump in second quarter profit on Aug. 14 and increased its full-year forecasts on rising demand for construction and mining work in Australia and Asia."
"Earlier this week, the company said it secured orders worth 221 million euros ($320 million) in Australia."
"German consumer spending may also receive a boost as oil prices decline and the country's labor market holds up. German unemployment fell more than economists expected in August, pushing the jobless rate to the lowest level in 16 years."
"Still, the ``peak in economic growth is likely to be behind us,'' Weber told Bloomberg News in an interview published Aug. 27."
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
"Last Updated: September 4, 2008 07:46 EDT"
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Canadian Dollar Gains for Second Day as Crude Oil Increases
By Cordell Eddings
"Sept. 4 (Bloomberg) -- Canada's currency advanced for a second day after crude oil rose as Hurricane Ike gained force in the Atlantic, spurring concern it may disrupt U.S. oil supplies."
"``Oil and commodities in general are going to be the main driver going forward today and in the next few months,'' said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto."
"The Canadian dollar appreciated 0.3 percent to C$1.0595 per U.S. dollar at 8:37 a.m. in Toronto, from C$1.0627 yesterday. One Canadian dollar buys 94.38 U.S. cents."
"Crude oil rose as much as $1.25 today, or 1.1 percent, touching $110.60 a barrel. The price reached a record $147.27 a barrel on July 11."
"The Bank of Canada left its benchmark interest rate unchanged yesterday at 3 percent. The rate is ``appropriately accommodative,'' while inflationary pressures ``remain elevated,'' the central bank said. It didn't hint that slow growth may lead to a rate reduction."
"``The less dovish remarks yesterday gave'' Canada's currency ``a big lift when it seemed to be on a one-way streak down,'' Porter said. ``Now it's managing to hold on to its gains.''"
"Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.11 against the U.S. dollar by the end of 2009, according to the median forecast of economists surveyed by Bloomberg News."
To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net
"Last Updated: September 4, 2008 08:46 EDT"
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French Jobless Rate Stays at 7.6% as Economy Shrinks (Update1)
By Sandrine Rastello
Sept. 4 (Bloomberg) -- France's unemployment rate failed to decline in the second quarter for the first time in 15 months as the euro region's second-biggest economy contracted.
"The jobless rate stayed at 7.6 percent in the April-June period, Paris-based Insee, the country's economic statistics office, said today. Not including France's overseas territories, the unemployment rate was 7.2 percent, a 25-year low."
"Companies are becoming more reluctant to hire as consumer spending wanes, the 46 percent rise in oil prices in the past year adds to costs and the euro's gain hinders exports. Gross domestic product fell 0.3 percent in the second quarter, and Prime Minister Francois Fillon now sees the economy growing about 1 percent this year, down from a previous forecast of as much as 2 percent."
"``The slowdown shows in the job market,'' said Laurence Boone, an economist at Barclays Capital in Paris. ``This is going to maintain a strain on consumer spending.''"
"Renault SA, France's second-largest carmaker said Sept. 1 it will cut 4,000 jobs in the country as it faces flagging demand in Europe and soaring raw-material costs. Societe Generale, France's second-largest bank, said Aug. 26 it plans to hire 8 percent fewer employees than in 2007 in France."
European Contraction
"Bonds fell after the unemployment report, with the yield on the 4 percent bond due April 2018 gaining 4 basis points to 4.38 percent. The euro rose 0.3 percent to $1.4538 at 9.32 a.m. in Paris."
"Company investment, consumer spending and exports all declined in the euro region in the second quarter, pushing the economy closer to a recession. The 0.2 percent economic contraction in the three months through June was the first since the introduction of the euro almost a decade ago."
Companies are also facing tighter credit conditions as the European Central Bank keeps interest rates at a seven-year high and banks remain reluctant to lend in the wake of the U.S. subprime mortgage market collapse.
"``The current environment, with difficulties in getting financing, and the economic slowdown, is not favorable to job creation,'' said Gerard de La Martiniere, who heads the financial committee at Medef, France's biggest business lobby, in an interview."
Inflation Accelerating
"The French economy destroyed jobs for the first time in more than four years in the second quarter, Insee said Aug. 14."
"``Employment is normally a lagged indicator, and we believe it is a question of time before weaker output growth is translated into a higher jobless rate,'' Diego Iscaro, an economist at Global Insight in London, said in an e-mailed note today."
"The deterioration in the labor market comes at a time when inflation is accelerating at the fastest pace in 12 years, weakening consumer spending and aggravating the slowdown."
"The rise in unemployment threatens to erase the rebound in President Nicolas Sarkozy's popularity, which rose to its highest level since January last month."
"Lawmakers last month passed measures proposed by the government to boost retail competition, toughen jobseekers' benefit rules and increase work hours. Those efforts came after Sarkozy pushed through 8 billion euros ($11.6 billion) of tax cuts this year that failed to stave off the economic contraction."
"Insee revised up the unemployment rate for the first quarter to 7.6 percent from the 7.5 percent initially reported. Economists expected a reading for the second quarter of 7.5 percent, according to the median of eight forecasts in a Bloomberg survey."
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net; Helene Fouquet in Paris at hfouquet1@bloomberg.net;
"Last Updated: September 4, 2008 04:09 EDT"
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"European Stocks Drop for Second Day; BMW, Siemens, Saab Retreat "
By Adam Haigh
Sept. 4 (Bloomberg) -- European stocks declined for a second day after European Central Bank President Jean-Claude Trichet said policy makers remain focused on inflation even as the economy slows.
"Bayerische Motoren Werke AG lost 2.2 percent and Renault SA sank 3.3 percent, leading declines among carmakers. Siemens AG, Europe's biggest engineering company, slipped 4 percent as German factory orders unexpectedly fell. Saab AB tumbled 19 percent after the Swedish maker of the Gripen fighter plane cut its profit forecast."
"The Stoxx 600 lost 1.5 percent to 281.36 at 3:36 p.m. in London after the ECB and the Bank of England kept borrowing costs on hold. The measure is down 22 percent this year as the global economy cooled, financial firms posted writedowns and credit- related losses of more than $500 billion, and record commodity prices spurred inflation."
"``I have remained doubtful that the central banks have any appetite to cut rates, especially the ECB at the moment,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``The ECB has always maintained this stance, unlike the U.S. they see inflation as their main mandate.''"
"The ECB kept its benchmark interest rate at a seven-year high of 4.25 percent, while the BOE held borrowing costs at 5 percent, as inflation concerns made it harder for policy makers to respond to the risk of recession. Trichet said today ``upside risks to price stability prevail.''"
Economy Watch
"German factory orders unexpectedly fell 1.7 percent in July, extending their longest ever declining streak and increasing the likelihood that Europe's largest economy is heading for a recession. Reports yesterday showed consumer spending, company investment and exports fell in the second quarter, dragging the European economy into a 0.2 percent contraction."
"``The general sentiment is that we are heading lower for equity markets,'' said Joshua Raymond, market strategist at City Index Ltd. in London. ``Concerns over growth remain in focus.''"
"National benchmark indexes decreased in all 18 western European markets except Luxembourg. France's CAC 40 lost 2.1 percent, and Germany's DAX sank 2.3 percent. The U.K.'s FTSE 100 slipped 1.5 percent."
"BMW, the world's largest maker of luxury cars, sank 2.2 percent to 28.42 euros. Renault, France's second-biggest carmaker, retreated 2.5 percent to 57.34 euros."
"Siemens, Saab"
"Siemens fell 4 percent to 71.35 euros. ThyssenKrupp AG, Germany's biggest steelmaker, slipped 2.9 percent to 30.85 euros. Industrial-goods companies were among the worst performers in the Stoxx 600 today."
"Saab lowered its full-year earnings outlook, citing order delays and a slowdown in Swedish defense spending. The shares slumped 19 percent to 129.75 kronor."
"TUI AG, owner of the region's largest tourism company, fell 4.7 percent to 13.28 euros. The stock will be replaced by K+S AG in Germany's benchmark DAX Index as of Sept. 22, Deutsche Boerse AG said yesterday after the close of trading."
"Unilever rallied 5.6 percent to 1,573 pence. The world's second-largest consumer-products maker said it plans to appoint Nestle SA's Paul Polman as chief executive officer to succeed Patrick Cescau."
Informa Plc slumped 7.8 percent to 415 pence after Hellman & Friedman LLC dropped out of a group that may buy the U.K. publisher and City AM newspaper said the remaining private-equity firms may lower a joint offer.
"Spokespeople for Informa, Providence Equity Partners Ltd. and The Carlyle Group declined to comment on acquisition talks when contacted today by Bloomberg News."
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
"Last Updated: September 4, 2008 10:41 EDT"
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"Korea, Pakistan, Thai Currencies May Fall, Morgan Stanley Says "
By Bob Chen
"Sept. 4 (Bloomberg) -- Slides in foreign-exchange reserves in South Korea, Pakistan and Thailand reflect the ``negative fundamental outlook'' for those nations' currencies, Morgan Stanley said."
"The Bank of Korea sold 8 percent of its dollar reserves, or $21 billion, in the five months through August as the won declined 9.1 percent versus the dollar, according to data compiled by Bloomberg. Pakistan's rupee slumped 11 percent from end-October through June as its foreign-exchange holdings tumbled 39 percent and Thailand's baht lost 5.2 percent in the four months through July as reserves declined 4.9 percent."
"``All these central banks have intervened consistently in each of the past five months and have depleted more than 5 percent of their reserves,'' Stewart Newnham, an analyst at Morgan Stanley in Hong Kong, wrote in a research note sent to clients today. The declines ``confirm our negative fundamental outlook on the respective currencies,'' he said."
"The Korean won, which yesterday reached a four-year low of 1,159 per dollar, climbed 1.7 percent today to 1,129. The Pakistan rupee was little changed at 76.975 a dollar, having yesterday touched a record low of 77.050. The baht rose 0.1 percent to 34.44 against the U.S. currency, near a one-year low of 34.54 set this week."
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
"Last Updated: September 4, 2008 05:16 EDT"
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Yuan Advances on Speculation Gains Needed to Curb Trade Surplus
By Judy Chen and Belinda Cao
Sept. 4 (Bloomberg) -- The yuan advanced for the first time in three days on speculation China will strengthen the currency to help shrink the nation's trade surplus and stem inflation.
"The Chinese currency extended this year's gain to 6.8 percent, almost matching the advance for all of 2007. Shrinking the trade surplus remains a mission China must carry out, Zhu Baoliang, chief economist at the State Information Center, a government research agency, said Sept. 2."
"``The capital inflows from the trade surplus are still a threat to inflation,'' said Yang Shengkun, a currency analyst in Beijing at China Citic Bank Co., a unit of China's biggest state investment company. ``When the government is trying to boost exports to sustain growth, the surplus will widen further.''"
"The yuan climbed 0.1 percent to 6.8365 a dollar as of 5:30 p.m. in Shanghai, from 6.8434 yesterday, according to the China Foreign Exchange Trade System."
"China's trade surplus swelled 4 percent to $25.3 billion in July from a year earlier, the first gain in four months, customs bureau figures showed on Aug. 11. Consumer prices climbed 6.3 percent from a year earlier, exceeding the government's 4.8 percent target for 2008."
German Finance Minister Peer Steinbrueck said today Chinese officials didn't pledge a faster appreciation of the yuan during discussions in Beijing this week.
"``I didn't get any commitment and if I would have gotten one I wouldn't tell you because I would influence the markets,'' Steinbrueck said in an interview with Bloomberg Television. ``We have to prevent disorderly adjustments and exchange rates should follow economic fundamentals.''"
Steinbrueck said on Sept. 1 that the yuan's exchange rate with the euro doesn't reflect fundamentals of the Chinese and European economies.
"The yuan's 0.1 percent depreciation as the dollar rallied last month shows ``China is the last remaining bastion of strong currency fundamentals in Asia,'' Richard Yetsenga, a currency strategist at HSBC Holdings Plc in Hong Kong, wrote in a research note today."
The euro has declined 7 percent against the dollar since the end of July and the pound has fallen 10 percent.
Bonds Little Changed
Government bonds maturing in 10 years and more were little changed after rising for more than three weeks.
"``The yields on long-term debt slid too fast in the past few days and tended to stabilize,'' said Zhang Yige, a bond trader with Industrial Bank Co. Ltd. in Shanghai. ``Market sentiment is still bullish about debt, as shown in the advance of higher-yielding corporate debt.''"
"The yield on the 4.94 percent bond due August 2028 was little changed at 4.596 percent in Shanghai, according to the China Interbank Bond Market. The price of the security held at 104.46 per 100 yuan face amount."
"Investors could have made a return of 1 percent on China's bonds since Aug. 13, based on Bloomberg calculations. The yield on the 10-year government debt declined 37 basis points, or 0.37 percentage point since then."
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Belinda Cao in Beijing at lcao4@bloomberg.net.
"Last Updated: September 4, 2008 05:56 EDT"
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"Asian Currencies Rise, Led by Won, on Support From Authorities "
By Anil Varma and Kim Kyoungwha
"Sept. 4 (Bloomberg) -- Asian currencies gained, with South Korea's won rebounding from a four-year low, as policy makers allayed concerns that the region is facing capital flight."
"The won, Asia's worst performer this year, climbed the most in two months after Finance Minister Kang Man Soo said there was ``no need to worry about a crisis'' similar to the 1997 financial meltdown. Kang said on KBS TV in Seoul late yesterday that the government ``hasn't lost credibility'' on policy. The currency also advanced after the government said it will sell $1 billion in foreign-currency bonds this month."
"A 17 percent drop in the won this year sparked speculation South Korea may be headed for a repeat of 1997, when the nation turned to the International Monetary Fund for a $57 billion bailout to help companies repay debt. The economy is ``much stronger'' than a decade ago with profitable companies, well- capitalized banks and larger reserves, the IMF said yesterday."
"Speculation of a crisis ``is exaggerated,'' said Edgar Chuan, managing director with Descartes Investment Management Ltd. in Hong Kong. ``When you look at the overall economic situation, it's definitely very different from what happened in 1997. The Korean government will have no problem.''"
"The currency rose 1.7 percent to 1,129 against the dollar at the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. Nine of the 10 most-active Asian currencies outside of Japan strengthened."
Technical Chart
"India's rupee and the Malaysian ringgit advanced on speculation some investors judged their recent losses excessive as technical charts used to measure potential turning points in prices showed a reversal is due. The dollar's 14-day relative strength index against the two currencies rose past 70, indicating purchases of the dollar may have peaked."
"The rupee rebounded from an 18-month low, snapping a five- day decline, to trade at 44.285 a dollar in Mumbai, according to data compiled by Bloomberg. The ringgit rose for the first time in six days, gaining 0.3 percent to 3.426. It yesterday touched 3.4430, its weakest level since September 2007."
Taiwan's dollar rose from a six-month low on speculation the central bank will sell some of its $291 billion foreign- exchange reserves to support the currency.
The island's currency gained for the first time in five days after the Commercial Times reported the Central Bank of the Republic of China (Taiwan) sold about $500 million yesterday. The Taiwan dollar in August had its biggest monthly drop in seven years as government reports showed exports slowed.
"``Given the volatility in Asia the last few days, the CBC was also in the market,'' said Emmanuel Ng, an economist at Overseas-Chinese Banking Corp. in Singapore."
"Taiwan's currency strengthened 0.2 percent to NT$31.761 per dollar, according to Taipei Forex Inc."
Stemming Volatility
Thailand's baht snapped a four-day loss on speculation the central bank was supporting the currency to help temper inflation and support economic growth.
"Bank of Thailand Governor Tarisa Watanagase yesterday reiterated earlier comments saying the bank will ``act if necessary'' to stem volatility in the baht. The currency slumped 2.5 percent in the past month as anti-government protests escalated, prompting Prime Minister Samak Sundaravej to declare a state of emergency this week."
"``Even with the Bank of Thailand holding the dollar-baht down, given the political environment, it will be premature to call for a reversal,'' said Vishnu Varathan, an economist at Forecast Singapore Pte."
"The baht rose 0.1 percent to 34.44 against the dollar, Bloomberg data show. The currency may weaken to 35.50 over the next 12 months, Varathan said."
"Elsewhere, the Singapore dollar advanced 0.8 percent to S$1.4287 against the U.S. currency and the Philippine peso climbed 0.4 percent to 46.53. Vietnam's dong rose 0.2 percent to 16,585."
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
"Last Updated: September 4, 2008 05:20 EDT"
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U.S. Initial Jobless Claims Climb More Than Forecast (Update2)
By Bob Willis and Shobhana Chandra
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"Sept. 4 (Bloomberg) -- First-time claims for unemployment insurance climbed more than forecast, and benefit rolls reached a five-year high, underscoring a deteriorating job market that threatens to erode consumer spending."
"Initial jobless claims rose to 444,000 in the week ended Aug. 30, while the number of Americans continuing to collect benefits increased to 3.435 million in the prior week, the Labor Department said today in Washington. A private report indicated separately that U.S. companies cut 33,000 jobs in August."
"The figures reinforce projections for tomorrow's August employment report from the Labor Department to show an eighth straight month of payroll declines. Households may cut spending as employment prospects dim, property values decline and credit becomes harder to get."
"``We're continuing to get sort of a grinding slackening in the labor markets,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. ``Businesses are becoming more cautious about hiring and layoffs continue. At some point this begins to weigh increasingly heavily on the consumer.''"
"ADP Employer Services said the 33,000 decline in private payrolls followed a revised gain of 1,000 for the prior month that was lower than previously estimated."
"Treasuries, Stocks"
"Treasuries rose, sending benchmark 10-year note yields to 3.68 percent at 9:37 a.m. in New York, from 3.70 percent late yesterday. The Standard & Poor's 500 Stock Index dropped 0.6 percent to 1,266.81."
"Economists had forecast initial claims would fall to 420,000 from a previously reported 425,000 in the prior week, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from 405,000 to 435,000."
"``We're still in an uncomfortable situation with respect to job growth,'' Richard DeKaser, chief economist at National City Corp. in Cleveland, said in a Bloomberg Television interview. ``The underlying trend here is not a good one for August.''"
"Economists forecast the Labor Department will report tomorrow that nonfarm payrolls fell by 75,000 in August, following a drop of 51,000 the prior month, bringing the total decline this year to 538,000. The jobless rate stayed at 5.7 percent, the survey indicates."
Four-Week Average
"The four-week moving average of initial claims, a less volatile measure than the weekly figure, fell to 438,000 from 441,250, today's report showed."
"So far this year, weekly claims have averaged 378,000, compared with 321,000 for all of 2007, when the economy generated 91,000 new jobs each month on average. Monthly job losses have averaged 66,000 in 2008, according to Labor data. Monthly payrolls tend to fall as claims rise."
The surge in claims that began in the middle of July can be at least partly attributed to the government's extension of jobless benefits under legislation signed by President George W. Bush in June. The government hasn't been able to quantify the program's impact on initial claims.
"``The claims data has been clouded over the past month by the extension of unemployment benefits,'' said Ellen Zentner, U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York."
"The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.6 percent. Thirty states and territories reported an increase in claims, while 23 had a decrease. These data are reported with a one-week lag."
"Automakers, homebuilders and banks have been leading the cutbacks in employment."
GM Incentives
"General Motors Corp., the largest U.S. automaker, is offering early retirement incentives to about 9,000 U.S. salaried employees, or 28 percent of that workforce, people familiar with the plan said last week."
"Superior Industries International Inc., the world's second- largest maker of automotive wheels, plans to trim 29 percent of its U.S. workforce and shut a Kansas plant because of lower sales of pickups and sport-utility vehicles."
"The Pittsburg, Kansas, factory will close in December, accounting for about 600 job cuts, the Van Nuys, California- based company said Aug. 19."
Companies in the oil and mining industries continue to hire after prices surged to records.
"Halliburton Co., the second-largest U.S. provider of oilfield services, said it will hire 13,000 to 14,000 workers this year to meet rising demand from customers seeking to tap new sources of petroleum production."
To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.netBob Willis in Washington at bwillis@bloomberg.net
"Last Updated: September 4, 2008 09:44 EDT"
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"Italian Stocks Update: Amplifon, Cobra, Ipi, Parmalat, Rcs, STM "
By Francesca Cinelli
"Sept. 4 (Bloomberg) -- Italy's S&P/MIB Index declined 160, or 0.6 percent, to 28,901. Futures expiring in September fell 168, or 0.6 percent, to 28,970."
The following were among the most active stocks on the Italian market today. Share symbols are in parentheses.
"Amplifon SpA (AMP IM), the world's largest hearing-aid distributor, surged for a sixth session, increasing 15.7 cents, or 7.2 percent, to 2.34 euros. The stock will start trading on the Star segment of the Italian Exchange beginning Sept. 10."
"Banca Italease SpA (BIL IM), an Italian leasing company that was probed for alleged irregularities in selling derivatives contracts, declined 9.7 cents, or 1.7 percent, to 5.73 euros. Deutsche Bank AG yesterday cut its price estimate on the stock to 6.4 euros from 6.9 euros, citing a weak economy."
The company said deputy auditor Luigi Papetti resigned for personal reasons.
"Buzzi Unicem SpA (BZU IM), Italy's second-biggest cement maker, fell 2.1 percent to 14.07 euros. Credit Suisse kept its ``underweight'' stance on the building materials industry. ``As the effects of the credit crunch spread into the region, we now see rising risks of a slowdown of the construction sector in eastern Europe,'' analysts Arnaud Lehmann and Harry Goad wrote in a research report. Buzzi Unicem, rated ``outperform'' at Credit Suisse, is among the companies facing risks in the region, the brokerage said."
"Italcementi SpA (IT IM), Italy's largest cement maker, dropped 36.4 cents, or 3.4 percent, to 10.25 euros. Construction stocks were the third-worst performers among the 18 industry groups in the Dow Jones Stoxx 60 Index today."
"Banco Popolare SC (BP IM), the bank created by Popolare di Verona's purchase of Banca Popolare Italiana, declined 33.2 cents, or 2/5 percent, to 12.92 euros. Popolare has never considered a deal with Unione di Banche Italiane SCPA (UBI IM), Italy's fourth-biggest bank by branches, Chief Executive Officer Fabio Innocenzi told Corriere della Sera. Innocenzi said there's no plan to sell Popolare subsidiaries Credito Bergamasco SpA (BERG IM), Banca Popolare di Crema SpA and Banca Popolare di Cremona Scrl."
"Credito Bergamasco shares rose 1.11 euros, or 4.1 percent, to 27.98 euros. UBI shares slid 1 percent to 15.18 euros."
"Cobra Automotive Technologies SpA (COB IM), the Italian maker of electronic security systems for cars, advanced 14.65 cents, or 3.8 percent, to 4.01 euros. The company said yesterday it purchased from Continental Automotive a parking systems business in Asia. The deal has ``positive implications from a strategic point of view,'' Euromobiliare Sim analysts wrote in a note. Berenberg Bank increased its price estimate on the stock to 5.5 euros from 5.2 euros."
"Eni SpA (ENI IM), Italy's largest oil company, added 0.8 percent to 21.5 euros. Oil stocks gained in Europe as Thomas D. O'Malley, chairman of Petroplus Holdings AG, Europe's biggest independent refiner by capacity, said OPEC won't let oil prices trade below $100 a barrel in the next quarter."
"Saipem SpA (SPM IM), Europe's largest oil-field services contractor by market value, rose 48 cents, or 2 percent, to 24.94 euros."
"IPI SpA (IPI IM), the Italian real estate company controlled by Danilo Coppola, was suspended for an excessive decline after losing 2.2 percent to 3.42 euros. The shares resumed trading today following their suspension in April."
"``Before IPI's suspension in April, buyers were betting on a bid,'' said Alessandro Valentinis, head of trading at Cassa Lombarda in Milan. ``While someone could think that the lifting of the suspension would make it easier to attract new shareholders, it's nevertheless easier getting rid of the investment,'' he said."
"Parmalat SpA (PLT IM), Italy's biggest food company, dropped 3.9 cents, or 2 percent, to 1.93 euros. ``We cannot see the operational strains at Parmalat improving in the next 18 months,'' Lehman Brothers analysts including David Hayes wrote in a research report. ``This creates risks to the current full- year guidance,'' the brokerage said. Lehman downgraded the stock to ``equal-weight'' from ``overweight.'' Dresdner Kleinwort initiated coverage with an ``add'' and a price estimate of 2.2 euros, citing value tied to the possible resolution of its pending litigation."
"RCS MediaGroup SpA (RCS IM), the publishers of Italy's largest dailies, surged 8.9 cents, or 5.2 percent, to 1.82 euros. ``Some short covering helped media stocks in the past few days,'' said Giuseppe Mauti, head of professional investor sales at AbaxBank in Milan."
"Stefanel SpA (STEF IM), an Italian clothing maker, rose for a third session, adding 1.22 cents, or 3.5 percent, to 36.5 cents. President and Chief Executive Officer Giuseppe Stefanel bought 610,000 shares in the company, according to a regulatory filing Sept. 2."
"STMicroelectronics NV (STM IM), Europe's largest semiconductor maker, retreated 31.1 cents, or 3.4 percent, to 8.84 euros. Technology stocks fell in Europe after Corning Inc., the biggest maker of glass for flat-panel displays, cut sales and earnings forecasts amid a slump in orders for television screens. Morgan Stanley downgraded its view on the U.S. semiconductor capital equipment to ``in-line'' from ``attractive.''"
"EEMS Italia SpA (EEMS IM), which assembles and tests memory chips, fell 5.3 cents, or 2.3 percent, to 2.24 euros."
"Telecom Italia SpA (TIT IM), Italy's biggest phone company, slid 1.5 cents, or 1.4 percent, to 1.1 euros. Bernstein cut its price estimate on the stock to 1.4 euros from 1.6 euros."
"UniCredit SpA (UCG IM), Italy's largest bank, pared losses, adding 2.9 cents, or 0.7 percent, to 3.8 euros. ``We find the stock's discount to the banking sector unjustified,'' Natixis Securities analysts including Pascal Decque wrote in a note. The brokerage kept a ``buy'' recommendation on the stock."
To contact the reporters on this story: Francesca Cinelli in Milan at fcinelli@bloomberg.net
"Last Updated: September 4, 2008 08:02 EDT"
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"U.S. Must Buy Assets to Prevent `Tsunami,' Gross Says (Update2) "
By Jody Shenn
"Sept. 4 (Bloomberg) -- The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund."
"Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in commentary posted on the firm's Web site today. Since financial markets seized up a year ago as the subprime-mortgage market collapsed, the Standard & Poor's 500 Index has fallen 13 percent and home prices are down more than 15 percent."
"``Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,'' Gross said. ``If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.''"
"The government needs to replace private investors who either don't have the money to buy new assets or have been burned by losses, Gross said. Pimco, sovereign wealth funds and central banks are growing reluctant to fund financial firms after losses on investments they made to support the companies, Gross said. The world's biggest banks and brokers are retreating after more than $500 billion in writedowns and credit losses since the start of 2007 and have raised $364.4 billion in new capital."
"Yields on investment-grade corporate bonds, debt backed by commercial mortgages as well as credit cards reached record highs last month relative to benchmark rates."
`Mom and Pop'
"Treasury should support not only mortgage finance providers Fannie Mae and Freddie Mac, but also ``Mom and Pop on Main Street U.S.A.,'' by subsidizing rates on home loans guaranteed by the Federal Housing Administration and other government institutions, Gross said. A new version of the Resolution Trust Corp., which bought assets from failing institutions during the savings-and-loan crisis of the 1980s, may also work, he said."
"U.S. Treasury Secretary Henry Paulson arranged a rescue package for Washington-based Fannie and Freddie of McLean, Virginia as concern escalated the government-chartered companies didn't have capital to withstand the housing slump. Treasury pledged to pump unlimited debt or equity into the companies should they need it."
`Anorexic' Appetite
"As Fannie and Freddie, banks, securities firms and hedge funds shrink, yields on all debt assets will rise compared with benchmark rates and volatility will increase, Gross said. The declines will end once sellers have depleted their assets and sufficient capital has been raised, Gross said. Unless ``new balance sheets'' emerge, prices of almost all assets will drop, even those of ``impeccable'' quality, he said."
"``There is an increasing reluctance on the part of the private market to risk any more of its own capital,'' Gross said. ``Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning.''"
"The extra yield demanded on Ginnie Mae's 30-year, current- coupon mortgage-backed securities over 10-year Treasuries has climbed to 1.75 percentage points, from 0.87 percentage points at the start of last year, according to data compiled by Bloomberg. Bonds guaranteed by the U.S. agency are backed by the U.S. government. Spreads on 2-year AAA rated bonds composed of federally backed student loans have climbed to 0.95 percentage points over benchmark rates, from 0.01 percentage points below, Deutsche Bank AG data show."
Home Prices
"Pimco, a unit of Munich-based Allianz SE, is seeking to take advantage of declines in home-loan bonds. The firm is raising as much as $5 billion to buy mortgage-backed debt that has plunged in value, according to two investors with knowledge of the matter. The Distressed Senior Credit Opportunities Fund will invest in securities backed by commercial and residential mortgages, said the people, who asked not to be identified because the fund is private."
"The decline in home prices hasn't been seen since the Great Depression, Gross said. That drop translates to an even bigger decline in overall wealth as the effects ripple through markets, Gross said. Home prices in 20 of the largest U.S. metropolitan areas fell 15.9 percent in June from a year earlier, according to an S&P/Case-Shiller index."
`Rare Diamonds'
"Fannie and Freddie 30-year fixed-rate mortgage bond yields, which influence the rates on most new home loans, have probably risen 75 basis points because of the waning demand, Gross said. A basis point is 0.01 percentage point."
"About 61 percent of the holdings of Gross's Pimco Total Return Fund were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or Ginnie Mae, according to data on Pimco's Web site."
"The fund returned 9.8 percent in the past 12 months, beating 97 percent of its peers in the government and corporate bond fund category as of Sept. 3, according to Bloomberg data. The returns are 5.76 percent annually over five years. Pimco has about $830 billion of assets under management."
"``In a global financial marketplace in the process of delevering, assets that go up in price are rare diamonds as opposed to grains of sand,'' Gross said."
To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net
"Last Updated: September 4, 2008 10:22 EDT"
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"U.S. Must Buy Assets to Prevent `Tsunami,' Gross Says (Update2) "
By Jody Shenn
"Sept. 4 (Bloomberg) -- The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund."
"Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in commentary posted on the firm's Web site today. Since financial markets seized up a year ago as the subprime-mortgage market collapsed, the Standard & Poor's 500 Index has fallen 13 percent and home prices are down more than 15 percent."
"``Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,'' Gross said. ``If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.''"
"The government needs to replace private investors who either don't have the money to buy new assets or have been burned by losses, Gross said. Pimco, sovereign wealth funds and central banks are growing reluctant to fund financial firms after losses on investments they made to support the companies, Gross said. The world's biggest banks and brokers are retreating after more than $500 billion in writedowns and credit losses since the start of 2007 and have raised $364.4 billion in new capital."
"Yields on investment-grade corporate bonds, debt backed by commercial mortgages as well as credit cards reached record highs last month relative to benchmark rates."
`Mom and Pop'
"Treasury should support not only mortgage finance providers Fannie Mae and Freddie Mac, but also ``Mom and Pop on Main Street U.S.A.,'' by subsidizing rates on home loans guaranteed by the Federal Housing Administration and other government institutions, Gross said. A new version of the Resolution Trust Corp., which bought assets from failing institutions during the savings-and-loan crisis of the 1980s, may also work, he said."
"U.S. Treasury Secretary Henry Paulson arranged a rescue package for Washington-based Fannie and Freddie of McLean, Virginia as concern escalated the government-chartered companies didn't have capital to withstand the housing slump. Treasury pledged to pump unlimited debt or equity into the companies should they need it."
`Anorexic' Appetite
"As Fannie and Freddie, banks, securities firms and hedge funds shrink, yields on all debt assets will rise compared with benchmark rates and volatility will increase, Gross said. The declines will end once sellers have depleted their assets and sufficient capital has been raised, Gross said. Unless ``new balance sheets'' emerge, prices of almost all assets will drop, even those of ``impeccable'' quality, he said."
"``There is an increasing reluctance on the part of the private market to risk any more of its own capital,'' Gross said. ``Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning.''"
"The extra yield demanded on Ginnie Mae's 30-year, current- coupon mortgage-backed securities over 10-year Treasuries has climbed to 1.75 percentage points, from 0.87 percentage points at the start of last year, according to data compiled by Bloomberg. Bonds guaranteed by the U.S. agency are backed by the U.S. government. Spreads on 2-year AAA rated bonds composed of federally backed student loans have climbed to 0.95 percentage points over benchmark rates, from 0.01 percentage points below, Deutsche Bank AG data show."
Home Prices
"Pimco, a unit of Munich-based Allianz SE, is seeking to take advantage of declines in home-loan bonds. The firm is raising as much as $5 billion to buy mortgage-backed debt that has plunged in value, according to two investors with knowledge of the matter. The Distressed Senior Credit Opportunities Fund will invest in securities backed by commercial and residential mortgages, said the people, who asked not to be identified because the fund is private."
"The decline in home prices hasn't been seen since the Great Depression, Gross said. That drop translates to an even bigger decline in overall wealth as the effects ripple through markets, Gross said. Home prices in 20 of the largest U.S. metropolitan areas fell 15.9 percent in June from a year earlier, according to an S&P/Case-Shiller index."
`Rare Diamonds'
"Fannie and Freddie 30-year fixed-rate mortgage bond yields, which influence the rates on most new home loans, have probably risen 75 basis points because of the waning demand, Gross said. A basis point is 0.01 percentage point."
"About 61 percent of the holdings of Gross's Pimco Total Return Fund were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or Ginnie Mae, according to data on Pimco's Web site."
"The fund returned 9.8 percent in the past 12 months, beating 97 percent of its peers in the government and corporate bond fund category as of Sept. 3, according to Bloomberg data. The returns are 5.76 percent annually over five years. Pimco has about $830 billion of assets under management."
"``In a global financial marketplace in the process of delevering, assets that go up in price are rare diamonds as opposed to grains of sand,'' Gross said."
To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net
"Last Updated: September 4, 2008 10:22 EDT"
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"French Stocks: Air France, Club Mediterranee, EADS, Natixis "
By Stefanie Haxel and Adria Cimino
"Sept. 4 (Bloomberg) -- France's CAC 40 Index dropped for a second day, losing 39.97, or 0.9 percent, to 4,407.16 as of 12:12 p.m. in Paris. The SBF 120 Index also slipped 0.9 percent."
The following shares rose or fell in Paris. Stock symbols are in parentheses.
"Air France-KLM Group (AF FP), Europe's biggest airline, slid 50 cents, or 2.8 percent, to 17.52 euros. European Aeronautic, Defence & Space Co. (EAD FP), owner of planemaker Airbus SAS, sank 50 cents, or 3.1 percent, to 15.63 euros. Michelin & Cie. (ML FP), the world's second-biggest tiremaker, dropped 1.47 euros, or 2.9 percent, to 48.70."
"Crude oil rose for the first time in five days as Hurricane Ike strengthened in the Atlantic and the dollar declined, boosting the appeal of commodities as a hedge. The contract for October delivery rose as much as 1.1 percent to $110.60 on the New York Mercantile Exchange."
"Club Mediterranee SA (CU FP) fell 1.15 euros, or 3.7 percent, to 30, the steepest decline in about a month. Europe's largest resort company said reservations slowed over the summer because of a ``deepening lull'' in Europe."
"Environnement SA (ALTEV FP) rallied 2.09 euros, or 9.5 percent, to 24.14, the most since December. Gilbert Dupont raised its recommendation on the company to ``buy'' from ``reduce.''"
"Natixis SA (KN FP) added 29 cents, or 5 percent, to 6.13 euros after gaining as much as 13 percent earlier today. The stock pared gains after Caisse des Depots et Consignations rejected an offer to buy a stake in the bank, which is seeking to raise 3.7 billion euros in a rights offer, Le Monde reported. A spokesman for state-owned CDC, France's largest institutional investor, had no immediate comment on the report."
"Scor SE (SCR FP) climbed 34 cents, or 2.1 percent, to 16.48 euros, rising for a third time this week. France's biggest reinsurer had its financial-strength rating placed on review for a possible upgrade by Moody's Investors Service, citing the completion of recent acquisitions and an improvement in profit."
"STMicroelectronics NV (STM FP), Europe's largest semiconductor maker, retreated 36 cents, or 4 percent, to 8.77 euros, dropping for a second day. Technology stocks retreated in Europe after Corning Inc., the biggest maker of glass for flat- panel displays, cut sales and earnings forecasts amid a slump in orders for television screens."
"Theolia SA (TEO FP), the French wind-power company part- owned by General Electric Co., sank 70 cents, or 5.1 percent, to 13.10 euros, extending yesterday's 1.8 percent decline after reporting a first-half loss on higher costs and cutting a target for full-year operating profit. The stock is down for a fourth day."
"Veolia Environnement SA (VIE FP), the world's biggest water company, lost 1.39 euros, or 3.9 percent, to 34.62, declining a second day. Merrill Lynch & Co. cut its share-price forecast by 15 percent to 40 euros, citing ``limited visibility on short- term earnings momentum.''"
To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
"Last Updated: September 4, 2008 06:30 EDT"
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"Siemens, 11 European Peers Downgraded at Dresdner on Outlook "
By Scott Hamilton
"Sept. 4 (Bloomberg) -- Siemens AG, Europe's largest engineering company, and 11 other European components makers were downgraded by Dresdner Kleinwort on a potential ``collapse'' of sales growth in Europe and the U.S."
"Siemens was cut to ``add'' from ``buy'' by London-based Dresdner analyst Colin Grant in a note to clients today. France's Alstom SA, Schneider Electric SA and Legrand SA also had their ratings cut, along with Swedish companies Atlas Copco AB, Sandvik AB, SKF AB, Assa Abloy AB and Volvo AB. Germany's Heidelberger Druckmaschinen AG and MAN AG also had their recommendations lowered, as well as U.S.-based Emerson Electric Co., which also trades in Germany."
Dresdner cut its share price target for all the companies except Heidelberger Druck.
To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net.
"Last Updated: September 4, 2008 10:03 EDT"
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"Crude Oil Rises as Hurricane Ike Strengthens, U.S. Dollar Drops "
By Grant Smith
"Sept. 4 (Bloomberg) -- Crude oil rose for the first time in five days as Hurricane Ike strengthened in the Atlantic and the dollar declined, boosting the appeal of commodities as a hedge."
"Crude oil for October delivery rose as much as $1.25, or 1.1 percent, to $110.60 a barrel on the New York Mercantile Exchange, trading for $110.41 at 10:07 a.m. London time."
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
"Last Updated: September 4, 2008 05:07 EDT"
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Bank Indonesia `On Alert' After Fifth Rate Increase (Update2)
By Aloysius Unditu and Arijit Ghosh
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Sept. 4 (Bloomberg) -- Indonesia's central bank said it remains ``on alert'' to fight inflation after increasing its benchmark interest rate for a fifth straight month.
"Governor Boediono and his seven colleagues raised the policy rate by a quarter point to 9.25 percent, according to a statement in Jakarta today. The move was forecast by 23 of 28 economists in a Bloomberg News survey."
"Bank Indonesia said it would keep evaluating its interest- rate policy as a pickup in consumer spending threatens to stoke inflation that's already near the fastest in two years. Indonesia's economic growth unexpectedly accelerated in the second quarter, easing concern that higher borrowing costs will damage Southeast Asia's biggest economy."
"``We think inflation has not reached a peak and some indications suggest that demand may be contributing to the current inflationary pressures,'' said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. Based on its previous actions, the central bank will pause only when inflation peaks, she said."
"Bank Indonesia sold 20.46 trillion rupiah ($2.2 billion) of one-month bills at 9.36 percent after the rate decision, compared with 9.28 percent a week earlier."
"A 1.4 percent decline in the rupiah in the past month also prompted the central bank to increase borrowing costs and attract overseas investors to Indonesian assets. The currency dropped 0.03 percent to 9,215 per dollar at 2:47 p.m. in Jakarta."
`Still Strong'
"Consumer prices in Indonesia rose 11.85 percent in August from a year earlier, after increasing 11.9 percent in July. Wholesale-price inflation accelerated to 34.7 percent in June, the fastest pace in nine years."
"``Inflationary pressures in the domestic market are still strong especially as a result of aggregate demand which is growing fast,'' Bank Indonesia said in a statement today."
Prices may increase further this month as the country with the largest Muslim population prepares to celebrate Id-ul-Fitr in October to mark the end of the fasting month of Ramadan.
"Indonesia's $365 billion economy expanded 6.4 percent in the second quarter from a year earlier, after growing 6.3 percent in the previous three months. That was more than the 6.1 percent pace expected by economists."
Elsewhere in Asia
Central banks across Asia have been raising borrowing costs as higher food and commodity prices stoke inflation in the region. The Bank of Thailand increased its benchmark rate for a second consecutive month on Aug. 27 to 3.75 percent. Bangko Sentral ng Pilipinas has raised the rate it pays banks for overnight deposits three times in 12 weeks.
"``Bank Indonesia is fighting hard to improve its anti- inflationary credentials,'' said Robert Prior-Wandesforde, an economist with HSBC Holdings Plc in Singapore. It ``is doing a better job than some of its counterparts in Asia.''"
Bank Indonesia in May was the first central bank in Southeast Asia after Vietnam to raise borrowing costs this year. Vietnam increased its benchmark rate in January.
"A policy rate of 9.5 percent would be ``adequate'' to keep price gains within the central bank's inflation target of 6.5 percent to 7.5 percent next year, Deputy Governor Hartadi Sarwono said in an interview on Aug. 8."
"Still, a decline in commodity prices since the end of the second quarter may slow economic growth. Palm oil futures have tumbled 44 percent from a record 4,486 ringgit ($1,303) a metric ton in March amid concerns that global supply may exceed demand and as funds cut commodity investments."
Overseas sales from Indonesia rose 25.5 percent in July from a year earlier to $12.55 billion. That compares with a 34.9 percent increase a month earlier.
To contact the reporters on this story: Aloysius Unditu in Jakarta at aunditu@bloomberg.net; Arijit Ghosh in Jakarta at aghosh@bloomberg.net
"Last Updated: September 4, 2008 04:57 EDT"
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ECB Leaves Rate at Seven-Year High to Fight Inflation (Update1)
By Simone Meier
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Sept. 4 (Bloomberg) -- The European Central Bank kept interest rates at a seven-year high to fight inflation even as the euro-region economy teeters on the brink of a recession.
"ECB policy makers meeting in Frankfurt today left the benchmark lending rate at 4.25 percent, as predicted by all but one of 53 economists in a Bloomberg News survey. The bank will wait until at least March next year to lower borrowing costs, another survey shows."
"The ECB wants to prevent a wage-price spiral as workers demand compensation for higher food and energy costs. It raised rates in July and council members Axel Weber and Lucas Papademos said last week another increase may be necessary if inflation risks increase. At the same time, the economy contracted in the second quarter and inflation slowed after oil prices retreated from a record."
"``Inflation might remain at a higher level for longer than many people think,'' Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt, said in an interview with Bloomberg Television. Still, ``the phase of economic weakness will probably push the balance in the ECB Governing Council toward a rate cut in 2009.''"
"President Jean-Claude Trichet holds a press conference at 2:30 p.m. to explain today's decision. In addition to commenting on monetary policy, Trichet may announce changes to the ECB's collateral requirements for lending to banks. Separately, the Bank of England kept its key rate at 5 percent."
Wage Threat
"While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in July. The ECB aims to keep the rate below 2 percent."
"Some labor unions are already pushing through bigger wage increases to compensate workers for the higher cost of living. Deutsche Lufthansa AG, Europe's second-largest airline, last month agreed to a 5.1 percent raise for some ground staff and cabin crew after a strike forced the cancellation of hundreds of flights."
"In Italy, hourly wages rose 4.3 percent in July from a year earlier, the biggest increase in a decade. IG Metall, Germany's biggest union, starts wage negotiations this month for 3.2 million metal, electronics and car workers. The union has said it will demand a bigger pay increase than the 6.5 percent it asked for last year."
"``IG Metall usually sets a benchmark for wage demands in other industries,'' said Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich. ``It's too early to give the all clear on inflation.''"
New Forecasts
ECB Vice President Papademos on Aug. 27 said the emergence of a wage-price spiral would ``require a stronger degree of monetary tightening.''
"While the ECB will raise its inflation estimates when it publishes new economic projections today, it will lower its outlook for growth, said Laurent Bilke, an economist at Lehman Brothers in London who used to work as a forecaster at the central bank. He predicts the ECB will be forced to cut rates in January."
"In June, the bank forecast growth of about 1.8 percent this year and 1.5 percent in 2009. It projected inflation would average 3.4 percent this year and 2.4 percent next year."
"Since then, Europeans' confidence in the economic outlook plunged to a five-year low and the manufacturing and service industries contracted for a third consecutive month, indicating the economy may have entered a recession."
"German factory orders slumped 1.7 percent in July from June, the Economy Ministry in Berlin said today, extending their longest ever losing streak to eight consecutive months."
One Cut `Insufficient'
"``The possibility of a rate hike by the end of the year has vanished,'' said Bilke. ``The situation has already deteriorated enough for a single rate cut to be insufficient.''"
"Investors are less certain and have scaled back bets on lower ECB rates, Eonia forward contracts show. The yield on the May contract was at 4.18 percent today, up from 4.03 percent before Papademos and Weber spoke."
"In an interview published Aug. 27, Bundesbank President Weber said ``the discussion about declining rates in Europe is premature.'' The ECB may have to raise rates further ``if the economic outlook brightens,'' he said."
"The euro's 9 percent decline from its peak of $1.60 on July 15 may help to bolster European exports, while lower oil prices should eventually leave consumers with more money to spend."
"The ECB ``is not yet persuaded that growth will be weak enough over the next 18 months to more than outweigh second-round effects stemming from prior increases in commodity prices,'' David Mackie, chief European economist at JPMorgan in London, wrote in a research note to clients. ``It will take a while for the central bank to come around to the idea of easing.''"
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
"Last Updated: September 4, 2008 08:03 EDT"
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Sweden Raises Key Rate to 4.75% as Prices Accelerate (Update3)
By Johan Carlstrom
Sept. 4 (Bloomberg) -- Sweden's central bank raised its benchmark interest rate to a 12-year high to head off faster inflation and said it expects to keep rates steady for the remainder of the year as the economy slows.
"The Stockholm-based bank increased the one-week repo rate by a quarter point to 4.75 percent today, as forecast by 15 of 23 economists surveyed by Bloomberg. The others expected no change."
"The Riksbank is concerned high oil and food prices will start to push up the cost of other products, making it harder to bring inflation back to the 2 percent target. Prices rose an annual 4.4 percent in July, the most in 14 years, even as the economy grew at the slowest pace in seven years in the second quarter."
"``The Riksbank has clearly signaled that it has finished hiking rates,'' said Torbjoern Isaksson, an economist at Nordea Bank AB in Stockholm. ``We stick to our forecast that they will cut the rate in April next year but it could happen as early as February.''"
"The Riksbank said it expects the benchmark interest rate to stay at 4.75 percent this year and that it will average 4.5 percent in the fourth quarter of next year, indicating it will cut the rate by a quarter point by the end of 2009."
"``We expect that the rate will have to be lowered'' next year, Governor Stefan Ingves said at a press conference in Stockholm."
Slowing Down
"The Swedish krona fell 0.2 percent to 9.4960 against the euro by 12:26 p.m. in Stockholm, from 9.4792 yesterday. Government bonds were flat, with the yield on the 5.25 percent note due March 2011 trading at 4.23 percent."
"The prospect of a rate cut next year ``is partly because the oil price and other commodity prices have fallen,'' the bank said. ``Growth has slowed down more than expected both in Sweden and abroad.''"
"The central bank kept its forecast for this year's headline inflation at 3.9 percent and cut the estimate for 2009 to 3.2 percent from 3.5 percent. Inflation won't reach the 2 percent target until 2010, it predicted."
"Consumers' expectations of how much prices will rise in the next 12 months fell to 2.9 percent in August from 3.7 percent in July, Sweden's National Institute of Economic Research said last month. Consumer confidence was near a 13-year low in August."
Growth Forecast
The Riksbank cut its economic growth forecast for this year to 1.4 percent from 2.1 percent and to 0.8 percent for 2009 from 1.2 percent.
"``There is a cooling down of the labor market on the way,'' said Deputy Governor Irma Rosenberg at the press conference."
"The minutes from the Riksbank's meeting in July showed that the board was split on the need to raise its benchmark lending rate further this year as economic growth slowed, after unanimously increasing the rate to 4.5 percent on July 2. The bank will publish the minutes from this month's meeting on Sept. 17."
"Gross domestic product grew an annual 0.7 percent in the second quarter, down from 2.1 percent in the previous three months. It may have continued to weaken in the third quarter, with unemployment rising to 5.8 percent in July from 5.4 percent a year earlier."
To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.
"Last Updated: September 4, 2008 06:53 EDT"
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Chile's De Gregorio May Raise Rate for Fourth Month (Update1)
By Sebastian Boyd
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Sept. 4 (Bloomberg) -- Chile's central bank will probably increase its benchmark interest rate by half a percentage point for the fourth straight month as policy makers seek to slow the fastest inflation in more than a decade.
"The bank's five-member board will raise the key rate to 8.25 percent at its meeting today, according to 17 of 21 economists surveyed by Bloomberg. The others predict an increase to 8 percent."
"Bank President Jose De Gregorio indicated his willingness to raise rates last week, saying that postponing action on inflation would make returning to price stability more costly later on. The central bank's policy-making committee considered a 75 basis- point increase at its last meeting, before settling on 50 basis points, and said more increases are likely."
"``They have told us that more monetary tightening will have to be forthcoming and that they're not happy with inflation expectations,'' said Rafael de la Fuente, senior Latin American economist at BNP Paribas SA in New York. ``It's a case of how much, not whether, they'll raise.''"
"De la Fuente predicts the bank will increase the rate by half a percentage point, putting borrowing costs at the highest since 1998. The decision is scheduled to be announced after 6 p.m. New York time today."
"The central bank has increased its target overnight interest rates by 6 percentage points in the past four years and 2.25 percentage points in the past 12 months. After its last meeting, the bank said ``in the most likely scenario, further adjustments will be necessary'' to ensure inflation slows to the target of 3 percent."
Rate Outlook
"The bank may repeat that language today, said Aldo Lema, an economist at Banco Security in Santiago."
"``We're pretty confident it will be 50 basis points with a warning of further rises,'' he said. Lema expects another half- point increase in October and a further 25 basis points in November, he said. A basis point is 0.01 percentage point."
"Annual inflation in Chile accelerated to 9.5 percent in June, the fastest since September 1994, and held at that pace in July before slowing last month, Chile's National Statistics Institute said today in Santiago."
"The August inflation report published today showed that consumer prices in the 12 months through August rose 9.3 percent, less than the 9.4 percent median estimate of 20 economists surveyed by Bloomberg."
Inflation Risk
"Chile's Monetary Policy Group, an independent team of five academics that monitors the central bank's policies, yesterday recommended that the bank should increase the target rate to 8.25 percent and urged it to stop its $50 million a day in currency purchases."
The group's members expect annual inflation of 8 percent in December.
"``We still see external inflationary risk factors that tend to slow the convergence of inflation with its target range, especially the rise seen in international food prices and increases in the cost of energy,'' said Juan Eduardo Coeymans, a professor at the Pontificia Universidad Catolica de Chile in Santiago and a member of the group."
The peso strengthened 0.2 percent to 515.26 per dollar at 8:39 a.m. New York time from 516.44 late yesterday.
To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net
"Last Updated: September 4, 2008 08:41 EDT"
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"ADP Says U.S. Companies Cut 33,000 Jobs in August (Update1) "
By Courtney Schlisserman
"Sept. 4 (Bloomberg) -- Companies in the U.S. cut an estimated 33,000 jobs in August, a private report based on payroll data showed today."
"The decrease followed a revised gain of 1,000 for the prior month that was lower than previously estimated, ADP Employer Services said."
"The extended housing slump, high raw material costs and weaker demand are prompting employers to cut staff. Economists forecast the Labor Department will report tomorrow that the U.S. lost jobs for an eighth straight month last month."
"``The labor market seems to be a slow-bleeding thing,'' Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. ``There doesn't appear to be an avalanche of enormous job losses but it's enough and it appears to be continuing and there doesn't appear to be a let up.''"
"The ADP report was forecast to show a decline of 30,000 jobs, after an increase of 9,000 in July, according to the median projection in a Bloomberg News survey."
ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.
Labor Report
"Economists expect the government to report tomorrow that the U.S. lost 75,000 jobs in August, according to the median of 76 forecasts in a Bloomberg News survey. The unemployment rate probably stayed at 5.7 percent, the survey indicates."
"In the first seven months of this year, the government figures showed private payrolls dropped by an average 93,000 a month. By comparison, the ADP estimate showed gains of an average 9,400 over that period."
"Companies employing more than 499 workers pared their workforces by 28,000 jobs last month. Medium-sized businesses, with 50 to 499 employees, eliminated 25,000 jobs and small companies increased payrolls by 20,000, today's ADP figures showed."
"The ADP report is based on data from 399,000 businesses with about 24 million workers on payrolls."
"Companies are cutting back as the economy slows and the weaker labor market forces consumers to rein in their purchases. Adjusted for inflation, consumer spending fell in June and July, the Commerce Department said on Aug. 29."
"Marvell Technology Group Ltd., the maker of chips for phones such as the Blackberry, last week provided sales projections that missed analysts' estimates for this quarter."
Marvell's Outlook
"``If you look at the housing situation, the debt situation and gas prices, it adds up to something unfavorable,'' Clyde Hosein, chief financial officer of Marvell, which is based in Hamilton, Bermuda, and is run from Santa Clara, California, said in an interview on Aug. 28."
"Consumer confidence remains at low levels. The Conference Board said Aug. 26 that while its consumer confidence gauge for August rose, the share of people saying jobs were hard to get reached the highest level since October 2003 and those categorizing jobs as plentiful declined."
"UAL Corp.'s United Airlines, the world's second-largest carrier, will eliminate 1,550 flight attendant jobs, the Association of Flight Attendants-CWA said on Aug. 27. The cuts don't include 290 of the most-senior attendants who accepted buyout offers made in June, airline spokesman Jeff Kovick said in an interview."
ADP began keeping records in January 2001 and started publishing its numbers in 2006.
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net.
"Last Updated: September 4, 2008 08:37 EDT"
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"ECB, Bank of England Keep Rates Unchanged on Inflation Concern "
By Svenja O'Donnell and Simone Meier
Sept. 4 (Bloomberg) -- The European Central Bank and the Bank of England kept interest rates unchanged to fight inflation as their economies teetered on the brink of a recession.
"ECB policy makers meeting in Frankfurt kept the benchmark lending rate at 4.25 percent, a seven-year high. The U.K. central bank's Monetary Policy Committee left the bank rate at 5 percent today in London."
"The euro-region economy contracted in the second quarter. Growth stalled in Britain, which may face the worst conditions since World War II, according to U.K. Chancellor of the Exchequer Alistair Darling. The Bank of England has still refrained from cutting borrowing costs and the ECB raised its rate in July on concern higher pay demands may entrench faster inflation."
"``They're both inflation-fighting central banks and inflation is well above their targets,'' said Stewart Robertson, an economist at Morley Fund Management in London, which manages the equivalent of $271 billion. ``Growth has weakened a lot and is likely to stay weak. The Bank of England seems to have owned up to this but the ECB hasn't quite yet.''"
ECB President Jean-Claude Trichet began a press conference at 2:30 p.m. in Frankfurt to explain today's decision.
Inflation Risks
The ECB decision today was predicted by all but one of 53 economists in a Bloomberg News survey. ECB council members Axel Weber and Lucas Papademos said last week that another rate increase may be necessary if inflation risks increase.
"While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in July. The ECB aims to keep the rate below 2 percent."
"Some labor unions are already pushing through bigger wage increases to compensate workers for the higher cost of living. IG Metall, Germany's biggest union, starts wage negotiations this month for 3.2 million metal, electronics and car workers. The union has said it will demand a bigger pay increase than the 6.5 percent it asked for last year."
"``IG Metall usually sets a benchmark for wage demands in other industries,'' said Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich. ``It's too early to give the all clear on inflation.''"
King's Forecast
"In Britain, inflation reached 4.4 percent in July, the fastest in at least a decade. While the bank aims to get the rate down to 2 percent, Governor Mervyn King said on Aug. 13 it will reach about 5 percent later this year and ``a reasonable person'' would expect price increases to stay high ``for a while.''"
"``Until there is some indication of relief on the inflation front, they are stuck,'' said Neil Mackinnon, chief economist at ECU Group Plc in London and a former U.K. Treasury official. ``But the economy is already in recession and interest rates will have to come down. It's purely a matter of timing.''"
"The pound fell to a record low against the euro this week after Darling said in an interview with the Guardian newspaper that the U.K. economy may face the worst crisis for 60 years. Gross domestic product was unchanged in the second quarter from the first three months of the year, ending the nation's longest stretch of growth in more than a century."
Difficult `Challenges'
"``Looking at it in terms of the challenges facing the authorities, it is as difficult as at any time I can remember,'' former Bank of England Governor Edward George said at an event in London yesterday. He said that Britain and other industrialized nations may face a ``technical recession,'' meaning two consecutive quarters of economic contraction."
"U.K. mortgage approvals dropped to the lowest since at least 1999 in July, while surveys by the Chartered Institute of Purchasing and Supply show that services and manufacturing industries contracted for a fourth month in August. House prices dropped 12.7 percent in August from a year earlier, the most since at least 1983, HBOS Plc said today."
"In the euro region, confidence in the economic outlook plunged to a five-year low and the manufacturing and service industries contracted for a third consecutive month, indicating the economy may have entered a recession."
"While the euro-region economy is weakening, ``it may take the ECB longer to accept that inflation problems have dissipated,'' said Morley's Robertson, who predicts the bank will cut its benchmark rate by 1 percentage point next year. ``They may need to do more,'' he said."
To contact the reporters on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.
"Last Updated: September 4, 2008 08:44 EDT"
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"Platinum, Palladium Rise as Crude Gains, Boosting Hedge Demand "
By Halia Pavliva
"Sept. 4 (Bloomberg) -- Platinum and palladium gained for the first time this week as crude oil rose, boosting demand for the metals as hedges against inflation."
"Oil rose for the first time in a week as Hurricane Ike strengthened in the Atlantic, spurring concern that U.S. production may be disrupted. Before today, platinum tumbled 40 percent from a record $2,308.80 an ounce on March 4. Some investors buy platinum to hedge against inflation when oil gains."
"``Metals are broadly higher today as an uptick in energy prices is giving the complex some upside breathing room,'' Edward Meir, an analyst at MF Global Ltd. in Stamford, Connecticut, said in a report. ``However, we remain cautious about the advance, and would rather be selling into rallies as opposed to buying the dips.''"
"Platinum futures for October delivery rose $30.40, or 2.2 percent, to $1,422.6 an ounce at 9:39 a.m. on the New York Mercantile Exchange. The price tumbled 6.6 percent in the past two sessions."
"Palladium futures for December delivery increased $4.55, or 1.6 percent, to $292.95 an ounce. The metal fell 6 percent in the previous two sessions."
"Crude-oil futures for October delivery rose 20 cents, or 0.2 percent, to $109.55 a barrel in New York. Earlier, the contract gained as much as 1.1 percent."
"Platinum dropped 8.7 percent this year before today, and palladium was down 24 percent, partly on concerns that demand may decline as U.S. auto sales fell 16 percent last month from a year earlier. The metals are used in emission-control parts for engines and in making jewelry."
Demand Concerns
"``The moves lower in platinum-group metals have had some fundamental justification in the weakness in car demand,'' John Reade, the head of metals strategy at UBS AG in London, said today in a report. ``We continue to forecast gold and the other precious metals will trade higher on a one- and three-month view, but we recognize that strong performance will need support from a weaker U.S. dollar.''"
"The three biggest U.S. automakers reported a 10th straight monthly sales decline yesterday, a sign of weakening demand for catalytic converters used in exhaust systems. Platinum consumption by automakers accounts for more than 60 percent of global platinum demand, according to Johnson Matthey Plc, which makes about a third of the world's auto catalysts."
"The August annual selling rate for vehicles in the U.S. was 13.7 million, according to Autodata Corp. in Woodcliff Lake, New Jersey. That's the lowest figure for August since 1993."
"The euro fell as much as 0.4 percent against the dollar after European Central Bank President Jean-Claude Trichet said the region is undergoing an ``episode of weak activity.'' A stronger dollar impedes precious-metals price gains, said analysts including Reade."
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
"Last Updated: September 4, 2008 09:47 EDT"
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Trichet Focuses on Inflation Even as Growth Slows (Update2)
By Fergal O'Brien and Simone Meier
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Sept. 4 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the bank remains focused on fighting inflation even after cutting its economic growth forecasts.
"``Upside risks to price stability prevail,'' Trichet said at a press conference in Frankfurt today after keeping the benchmark rate at 4.25 percent, a seven-year high. ``We're resolute in our determination to keep inflation expectations in line with price stability.''"
"The ECB, which raised rates in July, wants to prevent a wage- price spiral as workers demand compensation for higher food and energy costs that pushed inflation to a 16-year high. While the economy is teetering on the brink of a recession, having contracted in the second quarter, ECB council members Axel Weber and Lucas Papademos said last week another rate increase may be necessary if the inflation outlook deteriorates."
"Trichet said current interest rates will help to bring inflation back below 2 percent -- the ECB's definition of price stability -- during 2010. While the bank has ``no bias'' on future rates, policy makers ``will do what is necessary to achieve that goal,'' he said."
The euro nevertheless fell a cent to $1.4403 as traders focused on Trichet's comment that Europe's economy is experiencing an ``episode of weak activity'' and growth risks are on the ``downside.'' European government bonds advanced and stocks declined.
Growth Forecasts Cut
The ECB today lowered its 2008 economic growth forecast to 1.4 percent from 1.8 percent and its 2009 prediction to 1.2 percent from 1.5 percent.
"``If the economy continues to disappoint in coming quarters, which we think is likely, then the option of lowering rates will become more practicable,'' said Simon Barry, an economist at Ulster Bank Ltd. in Dublin. ``However, for the time being, there is little prospect of a cut.''"
"While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Inflation in the euro area slowed to 3.8 percent last month from 4 percent in July."
The ECB raised its inflation forecast for this year to 3.5 percent from 3.4 percent and for next to 2.6 percent from 2.4 percent.
`Very Strong Concern'
"``There is particularly a very strong concern that the emergence of broad-based second-round effects in price and wage- setting behavior could add significantly to inflationary pressures,'' Trichet said. The ECB is watching wage talks ``with particular attention.''"
"Some labor unions are already pushing through bigger pay increases to compensate workers for the higher cost of living. Deutsche Lufthansa AG, Europe's second-largest airline, last month agreed to a 5.1 percent raise for some ground staff and cabin crew after a strike forced the cancellation of hundreds of flights."
"In Italy, hourly wages rose 4.3 percent in July from a year earlier, the biggest increase in a decade."
"IG Metall, Germany's biggest union, starts wage negotiations this month for 3.2 million metal, electronics and car workers. The union has said it will demand a bigger pay increase than the 6.5 percent it asked for last year."
To contact the reporters on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net
"Last Updated: September 4, 2008 10:49 EDT"
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U.S. Second Quarter Productivity and Costs: Summary (Table)
By Kristy Scheuble
Sept. 4 (Bloomberg) -- Following is a summary of the second quarter productivity report from the Labor Department.
==============================================================================
2Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q
2008 Prev. 2008 2007 2007 2007 2007 2006
==============================================================================
------------Quarterly Annualized Percent------------
Nonfarm output per hour 4.3% 2.2% 2.6% 0.8% 5.8% 4.1% 0.0% 0.2%
Output 3.4% 1.7% 0.9% -0.7% 5.5% 5.8% -0.9% 1.4%
Employee hours -0.8% -0.5% -1.7% -1.6% -0.3% 1.6% -0.8% 1.2%
Compensation per hour 3.7% 3.6% 3.8% 5.3% 3.3% 0.8% 4.9% 9.3%
Real compensation -1.3% -1.4% -0.4% 0.3% 0.5% -3.6% 1.2% 11.0%
Unit labor costs -0.5% 1.3% 1.2% 4.5% -2.4% -3.2% 4.9% 9.1%
Unit non-labor costs 3.3% -0.9% 3.6% -1.5% 6.3% 9.4% 0.9% -9.5%
Price deflator 0.9% 0.5% 2.1% 2.1% 0.9% 1.5% 3.4% 1.5%
---------------Year Over Year Percent---------------
Nonfarm output per hour 3.4% 2.8% 3.3% 2.7% 2.5% 0.5% 0.0% 0.6%
Output 2.2% 1.8% 2.8% 2.4% 2.9% 1.6% 0.9% 2.6%
==============================================================================
2Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q
2008 Prev. 2008 2007 2007 2007 2007 2006
==============================================================================
Employee hours -1.1% -1.0% -0.5% -0.3% 0.4% 1.1% 1.0% 2.0%
Compensation per hour 4.0% 4.3% 3.3% 3.6% 4.5% 4.2% 4.2% 4.3%
Real compensation -0.2% 0.1% -0.8% -0.4% 2.1% 1.5% 1.7% 2.2%
Unit labor costs 0.6% 1.5% 0.0% 0.9% 2.0% 3.7% 4.2% 3.6%
Unit non-labor costs 2.9% 1.3% 4.3% 3.7% 1.5% -0.2% -0.2% 0.5%
Price deflator 1.5% 1.4% 1.6% 2.0% 1.8% 2.1% 2.5% 2.4%
==============================================================================
NOTE: Figures are seasonally adjusted.
To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net
"Last Updated: September 4, 2008 08:30 EDT"
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Mexican Peso Falls to Three-Month Low Amid Slumping Oil Prices
By Jamie McGee
"Sept. 4 (Bloomberg) -- Mexico's peso fell to a three-month low as oil, the country's biggest export, sank for a fifth day."
"The peso dropped 0.7 percent to 10.4712 per dollar at 10:58 a.m. New York time, from 10.3952 yesterday. Earlier, it touched 10.4987, the weakest since May 14."
"``It's slower oil prices,'' said Gerardo Margolis, vice president of foreign exchange and money markets at TD Securities Inc. in Toronto. ``On the positive side, there is still a very attractive carry accompanying the U.S. and Mexico interest rates.''"
Crude oil for October delivery fell 1.1 percent to $108.13 per barrel on the New York Mercantile Exchange. Oil has slid 27 percent from a record high of $147.27 on July 11. Oil funds more than a third of Mexican government spending.
"Banco de Mexico last raised its key lending rate in August, by a quarter-percentage-point to 8.25 percent. The Fed's benchmark rate is 2 percent. The difference between the rates is the widest since 2005."
"Yields on Mexico's 10 percent bond due December 2024 rose 5 basis points, or 0.05 percentage point, to 8.45 percent. The bond's price fell 0.53 centavo to 113.63 centavos per peso, according to Banco Santander SA."
"Mexico's consumer confidence index fell to 87.2 in August from 88.4 in July, according to the median estimate of 11 economists in a Bloomberg survey. The National Institute of Statistics is scheduled to release the report at 3:30 p.m. New York time."
More Declines
"``The peso should continue to weaken if it is lower than expected,'' said Francisco Diez, director of emerging-market trading at RBC Capital Markets in Toronto."
"Diez forecasts the peso will trade at 10.50 per dollar at year-end. The peso will reach 10.50 per dollar in the first quarter of 2009, according to the median estimate of 18 economists in a Bloomberg survey."
"The peso has declined 5.9 percent in the past month, paring its advance this year to 4.1 percent. Only the Brazilian real, up 5.2 percent, has gained more among the 16 currencies that trade the most against the dollar."
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
"Last Updated: September 4, 2008 11:06 EDT"
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Crude Oil Falls After Report of U.S. Natural Gas Supply Gain
By Mark Shenk
"Sept. 4 (Bloomberg) -- Crude oil fell more than $1 a barrel after a government report showed that U.S. inventories of natural gas, a competing fuel, rose last week."
"Natural gas supplies increased 90 billion cubic feet last week, the Energy Department said today. Analysts were split over whether another report from the department will show that U.S. supplies of crude oil rose or fell last week."
"Crude oil for October delivery fell $1.22, or 1.1 percent, to $108.13 a barrel at 10:52 a.m. on the New York Mercantile Exchange. Futures are down 27 percent from the record $147.27 reached on July 11. Prices are up 44 percent from a year ago."
"The Energy Department is scheduled to release its weekly report today at 11 a.m. in Washington, a day later than usual because of the Labor Day holiday on Sept. 1."
"Brent crude oil for October settlement fell $1.34, or 1.2 percent, to $107.72 a barrel on London's ICE Futures Europe exchange."
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
"Last Updated: September 4, 2008 10:54 EDT"
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European Bonds Advance as ECB's Trichet Says Economy Is `Weak'
By Kim-Mai Cutler
Sept. 4 (Bloomberg) -- European government bonds advanced after European Central Bank President Jean-Claude Trichet said the region's economy is undergoing an ``episode of weak activity.''
"The gains pushed the yield on the two-year note down from its highest level in a month as the European Central Bank kept its main refinancing rate at 4.25 percent, in line with the predictions of 52 out of 53 economists surveyed by Bloomberg. Trichet said ``uncertainty'' about economic growth is ``particularly high'' and ``downside risks prevail,'' in comments made after the bank's rate decision."
"``With respect to growth, Trichet's comments are bit more dovish than expected,'' said Daniel Pfaendler, head of interest- rate strategy at Dresdner Bank AG, the investment bank recently sold to Commerzbank AG. ``This should remain a positive environment for government bonds.''"
"The yield on the two-year note fell 4 basis points to 4.08 percent by 2 p.m. in London, after earlier rising to 4.20 percent, the highest level since Aug. 7. The 4.75 percent note due June 2010 rose 0.06, or 60 euro cents per 1,000-euro ($1,447) face amount, to 101.10."
"The yield on the 10-year German bund, the region's benchmark government security, fell 4 basis points to 4.09 percent. Yields move inversely to bond prices."
"The ECB kept rates unchanged in the face of signs an economic slowdown is deepening as inflation runs at almost twice its desired rate. Consumer-price growth eased to 3.8 percent in August from 4.1 percent in July, according to a report from the European Union statistics office in Luxembourg on Aug. 29."
"The region's economy contracted 0.2 percent in the second quarter, the statistics office said yesterday."
Factory Orders
"Bunds were also buoyed after a report showed German factory orders unexpectedly fell in July, extending their longest sequence of declines and increasing the likelihood Europe's largest economy will enter a recession."
"Orders, adjusted for seasonal swings and inflation, slid 1.7 percent from June, the Economy Ministry in Berlin said today. The median of 35 forecasts in a Bloomberg News survey was for a gain of 0.3 percent. Orders fell 0.7 percent from a year earlier."
"``The data has been weakening sharply so they will have to acknowledge growth risks,'' said Charles Diebel, the head of European fixed-income strategy in London at Nomura International Plc. ``We're expecting the market to enter a bullish phase through the end of this year.''"
"Traders raised bets the central bank will cut borrowing costs in the next six months, interest-rate futures showed. The implied yield on the March Euribor interest-rate futures contract fell 2 basis points to 4.76 percent today."
Yield Spread
"The difference in yield, or spread, between German two-year notes, which are more sensitive to the outlook for borrowing costs, and 10-year bonds, rose to 4 basis points as traders raised bets policy makers may begin lowering rates. The ECB may not cut the key rate until the first quarter of 2009, according to the median forecast of 26 economists surveyed by Bloomberg."
"Government debt also fell as France and Spain sold bonds. The French government auctioned 1.2 billion euros of 3.5 percent notes due 2015, almost 3 billion euros of 4 percent bonds maturing in 2018 and 1.1 billion euros of 4 percent securities expiring 2038. Spain sold almost 2 billion euros of 4.1 percent notes due 2011."
"``Demand for the bonds has been quite muted,'' said Orlando Green, a fixed-income strategist at Calyon, the investment- banking arm of Credit Agricole SA, France's second-biggest bank. ``We have a massive overhang in terms of supply.''"
"European bonds have outperformed U.S. Treasuries in the second half of the year on bets the region is entering a recession. German bonds have handed investors a 3.4 percent return since the end of June, compared with a 2.4 percent return for U.S. Treasuries, according to Merrill Lynch & Co.'s German Federal Governments and U.S. Treasury Master indexes."
"Ten-year yields may rise to 4.25 percent before the third quarter and end the year at 4.20 percent, according to the median forecast of 14 strategists surveyed by Bloomberg."
To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net
"Last Updated: September 4, 2008 09:18 EDT"
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Emerging-Market Bonds Decline on Concern Global Growth Slowing
By Lester Pimentel
"Sept. 4 (Bloomberg) -- Emerging-market bonds fell, sending yields relative to Treasuries to their widest since March, on concern an economic slowdown in the U.S. and Europe will spread to developing nations."
"The extra yield investors demand to own emerging-market debt rather than Treasuries widened 3 basis points, or 0.03 percentage point, to 3.16 percentage points at 9:57 a.m. in New York, according to JPMorgan Chase & Co. The so-called spread is the biggest since March 17."
"Investors shunned higher-yielding assets after a Labor Department report showed the number of Americans filing first- time claims for unemployment benefits increased by 15,000 to 444,000 in the week ended Aug. 30. The number of people staying on jobless rolls in the prior week rose to 3.435 million, the highest since November 2003."
"``Slower growth in the Europe and the U.S. is going to affect emerging markets,'' said Igor Arsenin, an emerging-market fixed-income strategist at Credit Suisse Group in New York. ``The jobless data is another reminder that growth in the U.S. is quite weak. We can see risk reduction across the board.''"
"Argentine bonds led declines, with the yield on the country's benchmark 8.28 percent notes climbing 12 basis points to 11.46 percent, according to Bloomberg data. The bond's price fell 0.8 cent on the dollar to 72.55 cents."
"The risk of owning Brazil's bonds, among the most widely traded emerging-market securities, increased for a third day. Five-year credit-default swaps based on the country's debt rose 2 basis points to 1.40 percentage points, the highest since April, according to Bloomberg data. That means it costs $140,000 to protect $10 million of the country's debt from default."
"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."
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
"Last Updated: September 4, 2008 09:59 EDT"
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Euro Falls Against Dollar After ECB Keeps Interest Rate on Hold
By Agnes Lovasz
"Sept. 4 (Bloomberg) -- The euro fell against the dollar on speculation the European Central Bank will signal the risk of a recession in the region has increased, boosting the prospect of interest-rate cuts."
"Europe's common currency stayed lower after policy makers left the main refinancing rate at a seven-year high of 4.25 percent today, as forecast by all but one of 53 economists surveyed by Bloomberg News. The bank will lower its key rate twice in the first half next year to 3.75 percent, a separate survey indicated. ECB President Jean-Claude Trichet will brief reporters on today's decision at 2:30 p.m. in Frankfurt."
"``We expect to see ECB easing beginning in the first quarter of 2009 as the economy continues to turn down,'' analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist at UBS AG, the world's second-largest currency trader, wrote in a research note. ``We remain of the view that the euro will weaken further, mainly versus the greenback.''"
"The euro dropped to $1.4470 as of 12:46 p.m. in London, from $1.4498 yesterday in New York. The single currency has fallen about 9 percent against the dollar since reaching a record high $1.6038 on July 15. It was at 156.80 yen, from 157.01."
The ECB raised rates in July by a quarter point after inflation accelerated to twice its 2 percent limit. Reports in the past month showed the euro-region economy contracted in the second quarter and inflation slowed to 3.8 percent in August. Trichet said on Aug. 7 economic growth will be ``particularly weak'' through the third quarter.
Dollar Index
"The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, rose 0.1 percent to 78.153. It touched 78.310 this week, the highest level since October, on speculation a decline in oil prices will support economic growth in the world's largest energy consumer."
Gains in the dollar may be limited by speculation a deteriorating labor market will restrain consumer spending.
"U.S. nonfarm payrolls fell by 75,000 jobs in August, more than the previous month's decline of 51,000, according to a Bloomberg survey before the Labor Department report due tomorrow."
"Business across most of the U.S. was ``slow'' last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book."
Technical Indicators
"The South Korean won climbed the most of any currency in the world, rising to 1,129.02 per dollar from 1,148.60 yesterday, when it touched a four-year low of 1,159.05. South Korea doesn't face a crisis similar to the 1997 meltdown, Finance Minister Kang Man Soo said yesterday on KBS TV in Seoul. The won is Asia's worst- performing currency this year."
"Technical analysis shows the euro may fall to $1.4360 in the next few days, said Masashi Hashimoto, a currency analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed bank."
"The common European currency is poised to decline as its average price over the past 200 days is starting to fall, he said. First support at $1.4360 is a 38.2 percent retracement of the euro's rise from its low of $1.1640 on Nov. 15, 2005, to its record high of $1.6038 reached on July 15, according to a series of numbers known as the Fibonacci sequence."
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
"Last Updated: September 4, 2008 07:50 EDT"
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"Wheat Extends Gains on U.S. Export Demand; Corn, Soybeans Drop "
By Jae Hur
Sept. 4 (Bloomberg) -- Wheat climbed for a second day amid speculation the recent price drop to the lowest in about a month will attract overseas buyers. Corn and soybeans declined.
"Wheat rallied 1 percent yesterday, ending the longest slide in more than two years. Japan bought 76,000 metric tons of milling wheat today and Bangladesh has been seeking 100,000 tons of wheat for October delivery. Egypt bought 120,000 tons of U.S. wheat yesterday, part of a purchase that included Canadian and Ukrainian grain."
"``The price decline to a one-month low earlier this week has encouraged buying interest,'' said Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co. Wheat is relatively cheaper than corn for animal feed, he said."
"Wheat for December delivery was up 0.4 percent to $7.775 a bushel as of 3:15 p.m. Singapore time in after-hours electronic trading on the Chicago Board of Trade. Prices fell 17 percent in seven sessions to Sept. 2, the longest slide since April 2006."
The futures have fallen 42 percent below the record $13.495 set on Feb. 27 after farmers globally increased acreage to take advantage of a 77 percent price rally in 2007.
"The world's growers are expected to harvest a record 670.8 million tons in the year that ends on May 31, up 9.9 percent from the previous year, the U.S. Department of Agriculture said on Aug. 12. Stockpiles may climb 18 percent to 136.2 million tons, the USDA said."
"``The U.S. government is expected to revise its output forecast for Australia in the next monthly supply and demand report following drought in August,'' Shigemoto said."
Australian Drought
"Dry weather in August in Australia, forecast to be the world's third-largest wheat supplier, had raised concern production may be limited in some areas."
"The USDA's projection for wheat harvest in Australia was 25 million tons for 2008-09, up from 13 million tons in the previous year, according to government data issued on Aug. 12."
"Corn for December delivery fell 5.25 cents, or 0.9 percent, to $5.57 a bushel as of 3:14 p.m. Singapore time. It lost 1.2 percent yesterday after touching $5.50, the lowest since Aug. 15. The price has fallen 30 percent from a record $7.9925 on June 27."
"Soybeans for November delivery declined 9.5 cents, or 0.8 percent, to $12.42 a bushel after declining 3.6 percent yesterday, the most since Aug. 15. Futures have slid 24 percent from a record $16.3675 on July 3."
"``More rain is forecast for the Midwest in coming days,'' Toby Hassall, an analyst at Commodity Warrants Australia in Sydney, said by e-mail. ``After last week's deterioration in the condition of the corn and soybean crops, good rains would boost topsoil moisture, which would in turn benefit corn and soybean yield prospects.''"
"In addition to weather, investors will keep an eye on the direction of the dollar, Hassall said. A weaker dollar often boosts demand for U.S. supplies from overseas buyers holding other currencies."
``I think in the near term we could see the dollar rally take a breather.''
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
"Last Updated: September 4, 2008 03:59 EDT"
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Treasury Note Yields Drop to Lowest Since April as Claims Rise
By Dakin Campbell
Sept. 4 (Bloomberg) -- Treasury 10-year note yields dropped to the lowest in almost five months after a government report showed unemployment rolls in the U.S. rose to the highest level in almost five years amid a weakening economy.
"Yields dropped for a third day after the report said last week's initial claims for jobless benefits exceeded forecasts. Bill Gross, manager of the world's biggest bond fund, said the U.S. government needs to start buying assets to stem a bourgeoning ``financial tsunami.''"
"``Employment has been weak and it is continuing to weaken,'' said Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, one of 19 primary dealers that trade with the U.S. central bank. ``Weaker data means the long end of the curve can do a little better.''"
"The yield on the 10-year note fell 1 basis points to 3.69 percent at 10:13 a.m. in New York, according to BGCantor Market Data. Earlier it touched 3.67 percent, the lowest since April 17. The price of the 4 percent security maturing in August 20018 rose 1/32, or 31 cents per $1,000 face value, to 102 16/32."
The yield on the two-year note fell 2 basis points to 2.24 percent.
"The yield spread between two- and 10-year Treasury notes was 145 basis points, near the flattest in a month. The spread has narrowed from 149 basis points since Aug. 28, when the government said the economy expanded at a faster-than-forecast 3.3 percent annual pace in the second quarter."
"The number of Americans collecting unemployment insurance rose to 444,000 in the week ending Aug. 30, according to the U.S. Department of Labor. Forty economists surveyed by Bloomberg News forecast 420,000 claims. In a separate report, companies in the U.S. reduced 33,000 positions last month, after adding a revised 1,000 jobs in July, according to ADP Employer Services."
`Historic Proportions'
"A process of ``delevering,'' where banks are shrinking and cutting off lending, is sapping demand for loans, bonds, stocks and commodities, driving down prices of assets of even ``impeccable quality,'' Gross said. The decline may continue until the government steps in as a buyer, he said."
"``Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,'' Gross of Newport Beach, California-based Pacific Investment Management Co. said in commentary posted on the firm's Web site today. ``If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.''"
U.S. Payrolls
"Traders have increased bets the Federal Reserve will cut rates by the end of the year after Boston Fed chief Eric Rosengren yesterday said the credit crunch has blunted the effect of the fastest interest rate cuts in two decades. Chances are 3.4 percent the Fed will reduce rates, up from no possibility a week ago. Policy makers next meet Sept. 16."
Futures contracts on the Chicago Board of Trade show a 14 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks a quarter-point by year-end.
"The Labor Department may say tomorrow that U.S. payrolls dropped by 75,000 in August, the eighth straight month of declines, according to a separate Bloomberg survey."
"ADP has overstated the change in U.S. payrolls every time this year, by an average of 78,000 private sector jobs, wrote David Ader, head of U.S. government bond strategy at RBS Greenwich Capital in Greenwich, Connecticut, in a note to clients."
Inflation Expectations
"The 10-year note has rallied by almost 60 basis points since reaching a high of 4.27 percent on June 13. Economic data will have to do more to support these lower yield levels, said Lawrence Dyer, an interest-rate strategist in New York at HSBC Securities USA Inc., a primary dealer."
"``The data has to do more to support and justify those levels than it would have last month when yields were higher,'' Dyer said. ``We have been recommending that investors reduce holdings and take profits.''"
"The difference in yields between 10-year TIPS and regular Treasuries was little changed at 2 percentage points today, the lowest since September 2003. The figure reflects the inflation rate traders expect for the next decade."
"Support at 3.62 percent is a 76.4 percent retracement of the advance in 10-year Treasury yields from the March 17 low of 3.28 percent to the June 13 high of 4.27 percent, based on a series of numbers known as the Fibonacci sequence."
"Treasuries underperformed European bonds as the European Central Bank today kept benchmark interest rates unchanged at 4.25 percent to fight inflation, even as the euro-region economy teeters on the brink of recession. The difference in yield between the bunds and similarly dated Treasuries fell to 41 basis points, as the yield on the 10-year German bund, used as a benchmark for the region, fell 5 basis points to 4.09 percent."
To contact the reporters on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net
"Last Updated: September 4, 2008 10:18 EDT"
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U.S. Productivity Gain Exceeds Previous Estimate (Update1)
By Shobhana Chandra
"Sept. 4 (Bloomberg) -- U.S. worker productivity in the second quarter increased more than previously estimated and labor costs unexpectedly declined, as employers trimmed payrolls without sacrificing production."
"Productivity, a measure of employee output per hour, rose at a 4.3 percent annual rate, the Labor Department said today in Washington. In August, the government estimated a 2.2 percent gain, following a 2.6 percent increase in the first quarter."
"Companies, after eliminating jobs for seven straight months and trimming staff hours to reduce expenses, are trying to get more out of the workers who remain. Gains in efficiency will help contain inflation and bolster the Federal Reserve's forecast that prices will moderate."
"``Businesses are finding ways to improve productivity, and achieving it at very low labor costs,'' Julia Coronado, senior economist at Barclays Capital Inc. in New York, said before the report. ``There's no imminent threat of inflation pressures coming from wages.''"
"Labor costs dropped at a 0.5 percent pace, compared with the government's earlier projection of a 1.3 percent gain and following a first-quarter increase of 1.2 percent."
"Another Labor Department report showed total unemployment rolls in the U.S. rose to the highest level in almost five years, and last week's initial claims for jobless benefits exceeded forecasts."
Jobless Claims
"The number of Americans filing first-time claims for unemployment benefits increased by 15,000 to 444,000 in the week ended Aug. 30, the Labor Department said. The number of people staying on rolls rose to 3.435 million, the highest since November 2003, in the prior week."
"Treasuries rose, sending benchmark 10-year note yields to 3.68 percent at 8:41 a.m. in New York, from 3.70 percent late yesterday. Futures on the Standard & Poor's 500 Stock Index dropped 0.6 percent to 1,268."
"Economists had forecast productivity would rise at a 3.5 percent pace in the second quarter, according to the median of 67 forecasts in a Bloomberg News survey. Estimates ranged from gains of 0.7 percent to 3.6 percent."
"Unit labor costs, which are adjusted for efficiency gains, were projected to stay unchanged, the survey median showed."
"Hours worked fell at a 0.8 percent pace, the fourth consecutive decline. That compared with a prior estimate of a 0.5 percent drop. Output rose at a 3.4 percent rate, up from a 1.7 percent gain previously projected."
Compensation Rose
"Compensation for each hour worked climbed at a 3.7 percent annual pace, also revised up from last month's estimate and following a revised 3.8 percent gain in the first quarter."
"Among manufacturers, productivity fell at a 2.2 percent pace, down more than the prior estimate of a 1.4 percent drop."
"Productivity at non-financial corporations, a measure watched by the Fed, rose at a 5.6 percent rate in the second quarter after a decline in the first quarter."
"Compared with the second quarter of 2007, productivity rose 3.4 percent, up from the prior estimate of 2.8 percent."
"Even with reduced staff, businesses managed to get more output. The economy expanded at a 3.3 percent pace last quarter, faster than the government previously estimated. Growth will weaken to an average 0.7 percent annual pace from July through December, according to a Bloomberg survey conducted in August."
"Efforts to trim labor costs, which account for about two- thirds of the cost of producing a product or service, have continued this quarter. In the first seven months of 2008, employers eliminated 463,000 jobs. The number of hours worked by Americans fell in July, matching the shortest workweek since records began in 1964."
August Payrolls
"The August payrolls report, due from Labor tomorrow, may show another month of job cuts, according to a Bloomberg survey."
"Pharmaceuticals maker Abbott Laboratories said on Aug. 21 it plans to eliminate 1,000 jobs and transfer manufacturing of some medical diagnostics products to Europe to trim expenses. The moves will ``further strengthen the business and improve its profitability,'' spokeswoman Kelly Morrison said in an interview."
"In the 1990s, former Fed Chairman Alan Greenspan was one of the first to recognize productivity was accelerating because of the increased use of computers and the Internet, and that the improvement would contain inflation even as the economy gained strength and unemployment stayed low. That allowed the Fed to keep interest rates little changed from 1996 to 1999."
"The risks of weakening growth and rising inflation may lead central bankers to keep the benchmark rate unchanged at 2 percent through the end of the year, economists predict."
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
"Last Updated: September 4, 2008 09:12 EDT"
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U.S. Service Industries Unexpectedly Grew in August (Update1)
By Timothy R. Homan
"Sept. 4 (Bloomberg) -- Service industries in the U.S. unexpectedly expanded in August, spurred by the biggest drop in prices in almost two years."
"The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, increased to 50.6 from 49.5 in July, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction."
"Some companies are benefiting from the dollar's past decline that helped export demand and a retreat in oil prices. Still, Federal Reserve officials said yesterday that growth and consumer spending across most of the U.S. was slow last month, preventing most services firms from expanding further."
"``Companies are going to have to see a trend of upward movement in business activity and new orders to really feel comfortable with hiring in any kind of sustained fashion,'' Anthony Nieves, chairman of ISM's non-manufacturing survey, told reporters on a conference call. ``It looks like a mixed bag.''"
"Economists forecast the index would remain unchanged at 49.5, according to the median of 68 projections in a Bloomberg News survey. Estimates ranged from 48.5 to 52."
Inflation Signs
"The institute's measure of prices paid by non-manufacturing businesses fell to 72.9, the second straight drop from a record high reached in June, from 80.8 a month earlier, the report showed. New orders climbed to 49.7 from 47.9 in July."
"Energy costs in August receded from record highs in July. The average price for a barrel of crude oil last month was $117.02, compared with $133.77 a month earlier, when a barrel reached $147.27 on July 11."
"The ISM's measure for backorders dropped to 49, from 52. Supplier deliveries increased to 55.5 from 53.5 a month earlier. The ISM's inventory measure for non-manufacturers declined to 53.5 from 54.5."
"The ISM employment measure weakened to 45.4, the fourth straight month of contraction, from 47.1."
"The ISM report ``is consistent with very slow growth in the economy,'' said Brian Bethune, chief financial economist at Global Insight Inc. in Lexington, Massachusetts, in an interview with Bloomberg Television. The decline in the employment gauge is ``an indication that services sector employment, particularly in the private sector, is still declining.''"
Other reports released today showed the labor market is deteriorating.
Job Market
"Companies in the U.S. cut an estimated 33,000 jobs in August, the ADP Employer Services survey showed."
"The Labor Department said total unemployment rolls in the U.S. rose to the highest level in almost five years, and last week's initial claims for jobless benefits exceeded forecasts."
"The number of Americans filing first-time claims for unemployment benefits increased by 15,000 to 444,000 in the week ended Aug. 30, the Labor Department said. The number of people staying on rolls rose to 3.435 million, the highest since November 2003, in the prior week."
An ISM report earlier on manufacturing showed a contraction in August for the first time in three months as companies slowed production and trimmed payrolls. The report's employment index dropped to 49.7 from 51.9 in July.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
"Last Updated: September 4, 2008 10:34 EDT"
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Japan's Government Bonds Decline Before Capital-Spending Report
By Theresa Barraclough
Sept. 4 (Bloomberg) -- Japanese government bonds declined for the first time in three days before a Ministry of Finance report tomorrow economists estimate will show capital spending rose in the second quarter.
"Ten-year yields climbed to the highest in four weeks on speculation the report may prompt an upward revision in second- quarter gross domestic product next week, according to Takashi Nishimura, an analyst in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan's largest bank by assets. Demand for bonds was also limited on concern Taro Aso will succeed ex-Prime Minister Yasuo Fukuda and increase government borrowing."
"``The yield is too low and vulnerable to any positive shock,'' Nishimura said. ``At these yield levels everybody is expecting a recession, so if there is any sign of an economic recovery, yields will rise.''"
"The yield on the 1.5 percent bond due September 2018 rose 5 basis points to 1.51 percent as of 4:33 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.435 yen to 99.913 yen. The yield earlier gained as much as 6 basis points to 1.52 percent, the highest since Aug. 7. A basis point is 0.01 percentage point."
"Five-year yields added 7.5 basis points to 1.08 percent, after gaining as much as 9 basis points, the largest increase since June 11."
Ten-year bond futures for September delivery dropped 0.85 to 137.50 at the Tokyo Stock Exchange.
"The decline in bonds accelerated today on speculation foreign holders sold before Japan's September future contracts, which stop trading on Sept. 10 because of the switch to December contracts, according to Daiwa Securities SMBC Co."
Roll Over
"``It seems like foreign funds are selling the futures in large amounts,'' said Keiko Onogi, a debt strategist at Daiwa Securities SMBC Co. in Tokyo. ``There may be some trading before the futures roll over.''"
"Capital spending rose 0.9 percent in the three months ended June 30 from a year earlier, after falling 4.9 percent in the first quarter, according to the median estimate of 10 economists surveyed by Bloomberg News. The economy shrank at an annualized 2.4 percent pace in the second quarter, according to an initial government estimate released last month."
"Aso is the most popular candidate to become Japan's next prime minister following the resignation of Fukuda this week, according to an Asahi newspaper survey. Thirty percent of respondents support Aso, the secretary-general of the Liberal Democratic Party. Ichiro Ozawa, the leader of the main opposition party, is next with the support of 8 percent."
Premier Favorite
"``Aso-san, who is the closest to succeed Fukuda-san, makes a point of expenditure, so there's a risk of more bond issuance,'' said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. in Tokyo and the top-rated debt analyst in Japan according to Nikkei Veritas newspaper."
"The drop in bonds was limited after a decline in oil caused inflation expectations in Japan to fall to the lowest since March, easing concerns that higher consumer prices will erode the value of the fixed interest debt pays. Crude oil for October delivery fell to $109.38 a barrel, 26 percent below the record of $147.27 reached on July 11."
"``The fall in oil prices has caused a retreat in inflation concerns,'' said Makoto Yamashita, chief debt strategist in Tokyo at Lehman Brothers Japan Inc., a unit of the fourth- largest U.S. securities firm. ``It's an environment where yields cannot rise easily.''"
Drop in Oil
"Japan's core prices climbed 2.4 percent in July from a year earlier, the statistics bureau said Aug. 29."
"The yield on Japan's regular 10-year bond was 1 basis point below the yield on inflation-linked debt yesterday, suggesting investors expect inflation to slow in the next 10 years. So- called breakeven rates reflect expectations for average annual increases in the consumer price index over the next decade."
Ten-year yields have fallen from an 11-month high of 1.895 percent reached June 16 on speculation the world's second- largest economy will enter a recession.
"Further yield declines will be limited unless the Bank of Japan reduces its target rate, BNP's Shimamoto said."
"For 10-year yields to fall below 1.4 percent, ``the market needs to factor in a BOJ cut,'' he said. ``It's hard for the market to keep low yields.''"
"There is no chance the central bank will reduce interest rates by Dec. 31, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps. The odds were 9 percent two weeks ago."
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
"Last Updated: September 4, 2008 04:15 EDT"
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"Pound Rises Against Dollar, Euro as Bank of England Holds Rate "
By Lukanyo Mnyanda
"Sept. 4 (Bloomberg) -- The pound rose, rebounding from near the lowest level in 2 1/2 years against the dollar, after the Bank of England kept its main interest rate unchanged."
"The nine-member Monetary Policy Committee, led by Governor Mervyn King, held the benchmark rate at 5 percent, matching the forecast of all 61 economists surveyed by Bloomberg, as it seeks to balance the risk of a recession with the fastest inflation in more than a decade. The pound rose against the euro after the European Central Bank also kept interest rates unchanged and its president, Jean-Claude Trichet, said the region is undergoing an ``episode of weak activity.''"
"``They're not willing to ease monetary policy yet given the elevated levels of inflation,'' said Lee Hardman, a currency strategist in London at the Bank of Tokyo-Mitsubishi Ltd. ``The pound got an initial boost, but we're still looking for it to trend lower.''"
"The pound was at $1.7817 by 2:38 p.m. in London, from $1.7768 yesterday, when it fell as much as 1 percent to $1.7668, the lowest level in almost 2 1/2 years. It was at 81.23 pence per euro, from 81.60 yesterday. Earlier, it slipped to 81.88 pence, the weakest level since the single European currency debuted in 1999."
"The pound's trade-weighted index, a broader gauge of the currency's performance against Britain's major trade partners, rose for the first time since Aug. 15, climbing to 85.22, from 84.99, according to Deutsche Bank AG. The measure slid to the lowest level since at least 2000 yesterday."
Deepening Slowdown
"Before today, the pound fell for seven days as reports showing the economic slowdown is deepening prompted investors to reduce bets the central bank will cut rates. House prices declined for a fifth month, HBOS Plc said today. The pound is still 8.5 percent lower against the dollar in the past month, the second-worst performance of the 16 most actively-traded currencies. It has fallen 2.9 percent versus the euro."
The currency's slide accelerated after Chancellor of the Exchequer Alistair Darling told the Guardian newspaper on Aug. 30 the U.K. faces its biggest economic slowdown in 60 years. He later said he was referring to the world economy.
"``If you've made money shorting the pound, it's probably a good idea to make sure your profit isn't eaten away,'' said Divyang Shah, chief strategist in London at CBA Europe Ltd., a unit of Commonwealth Bank of Australia. A short position is a bet the price of an asset or currency will drop."
"Britain's central bank is seeking to bring inflation, which accelerated to 4.4 percent in July, below its 2 percent target. It has cut the benchmark rate three times since the end of November."
House Prices Slip
"Government bonds were little changed, with the 10-year yield at 4.49 percent. The price of the 5 percent security due March 2018 fell 0.02, or 20 pence per 1,000-pound face amount, to 103.88. The yield on the two-year note was at 4.41 percent. Yields move inversely to bond prices."
"The pound pared gains after HBOS said British house prices fell a more-than-expected 10.9 percent in August, further evidence of the nation's worst housing slump since the early 1990s. Prices were forecast to decline 10.7 percent, according to the median forecast of 13 economists surveyed by Bloomberg."
"``Sterling is still in over-valued territory,'' David Bloom, the London-based global head of currency strategy at HSBC Plc, Europe's biggest bank by market value, said in an interview on Bloomberg Television. ``Everyone is expecting rates to come down and the economy is in a terrible position.''"
Traders have increased bets the Bank of England will cut rates. The implied yield on the March short-sterling futures contract dropped 12 basis points since the end of August to 5.07 percent today.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
"Last Updated: September 4, 2008 09:50 EDT"
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Euro Drops Against Dollar as ECB Says Economic Activity `Weak'
By Agnes Lovasz
"Sept. 4 (Bloomberg) -- The euro fell against the dollar after European Central Bank President Jean-Claude Trichet said the region is undergoing an ``episode of weak activity,'' signaling policy makers aren't inclined to lift interest rates soon."
"The European single currency dropped for a sixth day as Trichet said downside risks to growth prevail. The ECB kept its main rate at a seven-year high of 4.25 percent today. The central bank cut its own economic growth projection for 2008 and 2009, according to staff forecasts."
"Trichet ``sounded a touch more dovish than many in the market expected, and that triggered some sell-offs,'' said Neil Jones, the head of European hedge-fund sales at Mizuho Capital Markets in London. ``People in the market expected a tough stance on inflation, but his emphasis on downside risks on the economy might have surprised some investors.''"
"The euro fell to $1.4476 at 2:47 p.m. in London, from $1.4498 yesterday. It was at 81.25 British pence per pound, from 81.60 pence. The European currency slipped to 156.41 Japanese yen, from 157.01. The dollar was at 108.04 yen, from 108.29."
The bank's rate decision was predicted by all but one of 53 analysts surveyed by Bloomberg. The euro recovered some of its losses after Trichet said the ECB's current stance on interest rates will help deliver price stability.
"The Bank of England kept its target rate at 5 percent today, as predicted by all 61 economists surveyed by Bloomberg."
"The euro has dropped 5.5 percent versus the dollar since Aug. 7, when Trichet said growth in the countries using the euro will be ``particularly weak'' through the third quarter."
Factory Orders
"The ECB kept its key rate on hold that day to curb inflation running at the fastest pace in more than 16 years even amid signs of a deepening economic slowdown. Inflation eased to 3.8 percent last month from 4.1 percent in July, the European Union's statistics office said Aug. 29. The economy contracted by 0.2 percent in the second quarter, the office said yesterday."
"German factory orders unexpectedly fell in July, extending their longest sequence of declines and increasing the likelihood that Europe's largest economy will enter a recession, a report showed today. Orders slid 1.7 percent from June, the Economy Ministry in Berlin said. The median of 35 forecasts in a Bloomberg News survey was for a gain of 0.3 percent."
"The ECB today lowered its 2008 economic growth forecast to about 1.4 percent from 1.8 percent, and its 2009 prediction to 1.2 percent from 1.5 percent. It raised the inflation forecast for this year and next to about 3.5 percent and 2.6 percent from 3.4 percent and 2.4 percent, respectively."
Forecast Cut
The bank's forecasts for growth and inflation are staff projections and are published as a range around a mid-point.
"``Trichet has been talking about the weakening growth picture,'' said Ian Stannard, a London-based currency strategist for BNP Paribas SA. ``The euro is coming under pressure on the back of the deteriorating growth picture.''"
"The euro may approach the seven-month low of $1.4385 reached yesterday, Stannard said."
"``We're looking at upticks in the euro as a chance to sell,'' Mike Moran, a senior currency strategist at Standard Chartered Plc in New York, said in an interview with Bloomberg Television. ``The rest of the world is catching up with a U.S. slowdown.''"
"The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, was at 78.093. It touched 78.310 this week, the highest level since October, on speculation a decline in oil prices will support economic growth in the world's largest energy consumer."
Payrolls Report
Gains in the dollar may be limited by speculation a deteriorating labor market will restrain consumer spending.
"Companies in the U.S. cut an estimated 33,000 jobs in August, a private report based on payroll data showed today. The decrease followed a revised gain of 1,000 for the prior month that was lower than previously estimated, ADP Employer Services said."
"U.S. nonfarm payrolls fell by 75,000 jobs in August, more than the previous month's decline of 51,000, according to a Bloomberg survey before the Labor Department report due tomorrow."
"Business across most of the U.S. was ``slow'' last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book."
"The South Korean won climbed the most of any currency in the world, rising to 1,129.02 per dollar from 1,148.60 yesterday, when it touched a four-year low of 1,159.05. South Korea doesn't face a crisis similar to the 1997 meltdown, Finance Minister Kang Man Soo said yesterday on KBS TV in Seoul. The won is Asia's worst- performing currency this year."
"Technical analysis shows the euro may fall to $1.4360 in the next few days, said Masashi Hashimoto, a currency analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed bank."
"The common European currency is poised to decline as its average price over the past 200 days is starting to fall, he said. First support at $1.4360 is a 38.2 percent retracement of the euro's rise from its low of $1.1640 on Nov. 15, 2005, to its record high of $1.6038 reached on July 15, according to a series of numbers known as the Fibonacci sequence."
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
"Last Updated: September 4, 2008 09:54 EDT"
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"Sweden's Krona Falls as Riksbank Lowers Forecasts, Lifts Rates "
By Bo Nielsen
"Sept. 4 (Bloomberg) -- Sweden's krona fell against the dollar after the central bank said growth and inflation will slow in Scandinavia's largest economy, suggesting its next move will be a reduction in interest rates."
"The Stockholm-based Riksbank today raised interest rates by a quarter-point to 4.75 percent, as forecast by 15 of 23 economists surveyed by Bloomberg, and said it expects to keep borrowing costs steady for the rest of 2008 as the economy falters. It expects the main rate to average 4.5 percent in the fourth quarter of next year, indicating it will cut the rate 25 basis points by the end of 2009."
"``Despite the rate hike, the market is taking the downward revisions to the forecasts as confirmation the next step will be a cut,'' said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt. ``The Swedish krona can't benefit from that.''"
"The Swedish currency fell 0.4 percent to 6.5616 against the dollar by 3:10 p.m. in Stockholm, from 9.4792 yesterday. It also traded at 9.4800 per euro, compared with 9.4792."
"The Riksbank lifted rates to a 12-year high to head off inflation after the rate of price growth climbed to 4.4 percent in July, the highest in 15 years and more than double the 2 percent central bank target. The economy grew an annual 0.7 percent in the three months through June, the slowest pace in seven years."
`Increase is Necessary'
"``Inflation has continued to rise in Sweden and the rate increase is necessary to prevent high inflation from becoming entrenched,'' the Riksbank said in a statement on its Web site. ``Economic activity will continue to slow and the labor market situation will slacken.''"
"The central bank kept this year's inflation forecast at 3.9 percent. It changed its forecast for 2009 to 3.2 percent from 3.5 percent. Consumer-price growth won't reach its target until 2010, it said."
"Policy makers also cut their economic-growth forecast to 1.4 percent this year from 2.1 percent, and to 0.8 percent in 2009 from 1.2 percent."
"Looking ahead ``Riksbank expectations for slower growth and weaker labor markets suggest this hike marks the peak of the tightening cycle,'' Thomas Stolper, a London-based Goldman Sachs Group Inc. analyst, wrote in a note to clients."
The European Central Bank and the Bank of England kept interest rates at 4.25 percent and 5 percent respectively to curb inflation even as growth in their economies slowed.
"Swedish government bonds rose, with the yield on Sweden's 5.25 percent note due March 2011 losing 1 basis point to 4.21 percent. Yields move inversely to bond prices."
"In other trading, Norway's krone fell to 5.5438 per dollar, from 5.5299 yesterday, and was at 8.0153 per euro, from 8.0175. A report tomorrow is forecast to show industrial production grew at an unadjusted annual rate of 4 percent in July, according to the median estimate of a Bloomberg survey of seven economists."
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
"Last Updated: September 4, 2008 09:37 EDT"
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Brazil's Car Sales Grow at Slowest Pace in Two Years (Update1)
By Heloiza Canassa
"Sept. 4 (Bloomberg) -- Brazilian domestic vehicle sales grew in August at the slowest pace in almost two years as central bank increases in interest rates this year boosted car loan costs, sapping demand."
"Vehicle registrations rose 4 percent to 244,800 units last month after surging 28.2 percent in July, the country's Automakers Association said in Sao Paulo today. That was the smallest increase since June 2006. Domestic sales fell 15 percent from the previous month."
The slowdown highlights how government measures to cool the economy and lower inflation from a 3-year high of 6.4 percent are starting to take hold. Central bankers raised the benchmark lending rate three times since April to 13 percent from a record low of 11.25 percent.
"``This is the first sign of a slowdown in the Brazilian economy,'' said Alexandre Andrade, an economist at Tendencias Consultoria in Sao Paulo. ``Demand is slowing because of the monetary tightening and, even more important, because banks are more cautious to grant loans.''"
"Vehicle production rose 12.6 percent last month from a year earlier to 314,700 units, the association said."
To contact the reporter on this story: Heloiza Canassa in Sao Paulo at hcanassa@bloomberg.net
"Last Updated: September 4, 2008 10:24 EDT"
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