Treasuries Decline as Yields at Four-Month Low Deter Investors
By Ron Harui
Sept. 4 (Bloomberg) -- U.S. Treasuries fell on speculation yields near the lowest in four months will fail to attract investors given the Federal Reserve's concern that inflation will accelerate.
"Ten-year notes snapped a two-day gain before speeches today by regional Federal Reserve Bank presidents Richard Fisher of Dallas and Janet Yellen of San Francisco on the U.S. economy. Traders' expectations for inflation over the next decade climbed from a five-year low, according to yields on Treasury Inflation Protected Securities."
"``Yields are too low, given the inflationary risks,'' said Minako Iida, a strategist for non-yen debt in Tokyo at Barclays Capital Japan Ltd., a unit of the U.K.'s third-largest bank. ``Fisher is known to be very hawkish so he's highly likely to warn on inflation.''"
"The yield on the 4 percent note maturing in August 2018 rose 2 basis points to 3.72 percent as of 7:20 a.m. in London, according to BGCantor Market Data. It touched 3.69 percent yesterday, the lowest since May 1. The price fell 5/32, or $1.56 per $1,000 face amount, to 102 10/32. A basis point is 0.01 percentage point."
"The difference in yields between 10-year TIPS and regular Treasuries rose to 2.01 percentage points today from 1.97 percentage points yesterday, the lowest since 2003. The figure reflects the inflation rate traders expect for the next decade."
"Fisher, a voting member of the Fed Open Market Committee, speaks on U.S. economic challenges at 12:40 p.m. in Houston. San Francisco Fed's Yellen, who does not vote this year, speaks on the economic outlook at 12:30 p.m. in Salt Lake City."
Rate Futures
Futures contracts on the Chicago Board of Trade show an 11 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks a quarter-percentage point by year-end. Policy makers next meet Sept. 16.
"The losses in Treasuries may be tempered by speculation an industry report today will show U.S. companies cut jobs last month, adding to signs the economy is slowing."
"Companies in the U.S. reduced an estimated 30,000 positions last month, after adding an estimated 9,000 jobs in July, according to a Bloomberg News survey of economists. ADP Employer Services will release the report at 8:15 a.m. in New York."
"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."
"The yield on 10-year Treasuries may fall to 3.52 percent after declining beyond so-called support at 3.76 percent, according to technical analysts at Citigroup Global Markets Inc."
`Key Day Down'
"The 3.76 percent level represents the lows of July 15, Aug. 25, 27 and 29, based on data compiled by Bloomberg. Support is an area where buy orders may be clustered."
"``Ten-year yields have closed below the support level at 3.76 percent and posted an aggressive key day down,'' Citigroup's New York-based Tom Fitzpatrick and London-based Shyam Devani wrote in a research note yesterday. They said the next significant support levels are 3.52 percent, 3.42 percent and 3.28 percent."
"Support at 3.52 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. The 3.42 percent level is the April 14 low, according to Citigroup."
Treasuries also fell on speculation Japanese investors will repatriate earnings on U.S. government debt before the first half of Japan's fiscal year ends on Sept. 30.
`Incentive to Sell'
"``Japanese who had bought Treasuries at attractive levels may have made a profit on those, so there's an incentive to sell,'' said Toshihiko Sakai, head of trading in foreign- exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. ``This trend may emerge this week or next week.''"
"Japanese investors were net sellers of overseas bonds and notes for a second week, reducing their holdings by 746.5 billion yen ($6.9 billion) during the week ended Aug. 30, according to figures based on reports from designated major investors released by the Ministry of Finance in Tokyo today."
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net.
"Last Updated: September 4, 2008 02:28 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 3 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 may be 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."
"``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
"Crude oil for October delivery fell to $109 a barrel, 26 percent below the record of $147.27 reached on July 11."
"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 02:05 EDT"
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"Australia Company Bond Risk Rises, Paring Decline, Swaps Show "
"Sept. 3 (Bloomberg) -- The cost to protect Australian corporate bonds from default increased, paring yesterday's decline. Default protection costs in Asia also gained."
"The Markit iTraxx Australia credit-default swap index rose 3.5 basis points to 157 at 10:03 a.m. in Sydney, Citigroup Inc. prices show. The rise suggests deteriorating perceptions of credit quality."
"The benchmark index contains default swaps tied to 25 companies including Amcor Ltd. and Australia's biggest banks. It fell 6.5 basis points yesterday, the biggest drop since July 30, Bloomberg data shows."
"Corporate bond protection costs in Asia outside Japan increased, with the Markit iTraxx Asia-ex Japan index of 50 investment-grade borrowers gaining 3 basis points to 161.5, ICAP prices show. The region's index of 20 high-yield, high-risk borrowers rose 2.5 basis points to 552.5."
"The Japan Markit iTraxx index rose 1 basis points to 134, Morgan Stanley prices show. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default."
"Credit-default swaps protect bonds against default, and traders use them to speculate on changes in credit quality."
To contact the reporter on this story: Laura Cochrane in Melbourne at lcochrane3bloomberg.net
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U.K. Pound Drops as Confidence Stays at Lowest in Four Years
By Lukanyo Mnyanda and Andrew MacAskill
"Sept. 3 (Bloomberg) -- The pound traded near the lowest level since April 2006 against the dollar after a private report showed confidence among consumers stayed at the weakest in at least four years, adding to the case for interest-rate cuts."
"The U.K. currency fell for a seventh day against the dollar after Nationwide Building Society said its index of consumer sentiment in August stayed at the weakest since the survey began in May 2004. Britain's services industry shrank last month, separate data showed today, reinforcing evidence the economy is headed toward a recession."
"``This will add to the growing pressure on sterling and we can see it falling further,'' said Christian Lawrence, a strategist in London at Royal Bank of Canada. The pound will drop to $1.73 by year-end, according to Lawrence. The median forecast of analysts and strategists surveyed by Bloomberg is for the currency to end the year at $1.87."
"The pound fell as much as 1 percent to $1.7668, the lowest level in 2 1/2 years, and was at $1.7784 by 4:52 p.m. in London, from $1.7839 yesterday. Against the euro, the pound fell to 81.43 pence per euro, from 81.40 pence yesterday."
"Nationwide's consumer index, based on the responses of 1,000 people, stayed at 52, the country's second-largest mortgage lender said today. The Chartered Institute of Purchasing and Supply said in a separate report an index based on a survey of about 700 service companies rose to 49.2 points last month, from 47.4 in July. That was the fourth consecutive reading below the 50 level that indicates expansion."
Below $1.78
"The pound yesterday traded below $1.78 for the first time since April 2006 even as Prime Minister Gordon Brown announced measures to reverse a plunge in property values. It also fell to a record low against the euro on bets the Bank of England will resist cutting interest rates at a policy meeting tomorrow, delaying an economic recovery."
"Brown yesterday proposed spending 1 billion pounds ($1.79 billion) sooner than planned to help the housing market recover from its worst slump in at least 18 years. Britain's building industry contracted last month, a survey showed yesterday."
"``Rate cuts are approaching,'' Marco Valli, an economist at Unicredit MIB in Milan, wrote in a client note. ``Worsening domestic demand prospects and increasing weakness in the major export markets mean a manufacturing recovery isn't in the cards for the foreseeable future.''"
"Two-year government notes rose while 10-year gilts were little changed, widening the difference in yield, or spread, between the two securities to 7 basis points."
"The 4.75 percent security due June 2010 gained 0.05, or 50 pence per 1,000-pound ($1,778) face amount, to 100.57, sending the yield down 3 basis points to 4.40 percent. The yield on the 10-year note was little changed at 4.49 percent. Yields move inversely to bond prices."
Darling Comment
The pound's depreciation accelerated and bonds rose after Chancellor of the Exchequer Alistair Darling told the Guardian newspaper Aug. 30 the U.K. faces its biggest economic slowdown in 60 years. He said later he was referring to the global economy.
"``We face a unique set of circumstances that we have not seen in a generation,'' Darling said in an interview broadcast on U.K. television channels yesterday. ``I remain optimistic that we can get through it. We will get through it.''"
"BNP Paribas SA, the most accurate currency forecaster in a 2007 Bloomberg survey, yesterday changed its year-end forecast for the pound against the dollar to $1.71, from a previous prediction of $1.88."
"Traders pared bets on higher borrowing costs in the U.K., with the implied yield on the March short-sterling futures contract falling 2 basis points to 5.05 percent today. It was 5.50 percent on Aug. 1."
"U.K. bonds outperformed their German counterparts in the past month, with the difference in yield between 10-year gilts and similar-maturity bunds narrowing 13 basis points to 35 basis points today. The spread with Treasuries was 73 basis points today, from 85 basis points Aug. 4."
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
"Last Updated: September 3, 2008 11:57 EDT"
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Service Industries in U.S. Probably Contracted for Third Month
By Timothy R. Homan
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"Sept. 4 (Bloomberg) -- Service industries in the U.S. probably shrank in August for a third straight month, a sign the economic slowdown is broadening as weak domestic demand and higher costs prevent companies from expanding, economists said before a report today."
"The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, remained unchanged at 49.5 from a month earlier, according to the median of 68 forecasts in a Bloomberg News survey. A reading of 50 is the dividing line between growth and contraction."
"Weakness in the labor market, smaller wage gains and a housing slump in its third year indicate consumer spending may stop growing later this year as the effects of the federal tax rebates fade. Waning demand and stricter lending conditions are leading companies to cut staff and rein in investment in new equipment."
"``Just like manufacturing, the service sector is slowing, but modestly,'' said Russell Price, a senior economist at H&R Block Financial Advisors Inc. in Detroit. ``It's a combination of just a slowdown in the overall demand environment, as well as a contraction in credit availability.''"
"The Tempe, Arizona-based institute's report is scheduled to be released at 10 a.m. New York time. Estimates in the Bloomberg News survey ranged from 48.5 to 52."
A report from the institute earlier this week showed manufacturing shrank in August for the first time in three months as companies slowed production and trimmed payrolls. That report's employment index dropped to 49.7 from 51.9 in July.
Job Cuts
"The U.S. probably lost 75,000 jobs in August, bringing the total decline in non-farm payrolls so far this year to 538,000, economists surveyed by Bloomberg predict a Labor Department report tomorrow will show."
"American job losses have extended beyond manufacturers and construction. Service industries cut 5,000 workers from their payrolls in July, the first decline since March, the Labor Department said last month."
"Business across most of the U.S. was ``slow'' last month and almost all Federal Reserve districts said higher commodity costs pressured companies to raise prices, the central bank said yesterday in its regional economic survey known as the beige book report."
"``Wage pressures were characterized as moderate by most districts amid a general pullback in hiring,'' the report said. The report also said labor markets were ``unchanged or somewhat softer'' across most of the U.S., compared with the previous beige book released July 23."
Weaker Spending
"Companies are cutting jobs to offset losses from a slowdown in consumer spending. Purchases rose 0.2 percent in July, one- third the pace in June, while prices for consumers jumped the most in 17 years, the Commerce Department said last week."
"Oil prices, up about 46 percent from a year ago, have hurt companies including airlines and U.S. automakers as consumers tighten their budgets."
"AMR Corp.'s American Airlines, the world's largest carrier, sent notices to 469 ground and airport workers yesterday saying they may be laid off on Nov. 1. The eight biggest U.S. carriers combined for second-quarter net losses of $5.9 billion."
"``It is quite clear that we can no longer operate our airline at its current levels,'' Mark Burdette, American's vice president for employee relations, said in a letter posted on a Transport Workers Union Web site yesterday. ``We must quickly reduce our operating schedule for the coming months and, as a result, will need fewer people to operate the airline.''"
===============================================================
ISM Non-Manufacturing Index
===============================================================
Date of Release 09/04
Observation Period Aug.
------------------------------------
Median 49.5
Average 49.6
High Forecast 52.0
Low Forecast 48.5
Number of Participants 68
Previous 49.5
------------------------------------
4CAST Ltd. 50.5
Action Economics 50.5
Argus Research Corp. 50.5
Banc of America Securitie 49.0
Bank of Tokyo- Mitsubishi 50.0
Bantleon Bank AG 49.8
Barclays Capital 50.0
BBVA 48.9
BMO Capital Markets 49.3
BNP Paribas 49.0
Briefing.com 50.0
CIBC World Markets 50.0
ClearView Economics 49.0
Commerzbank AG 48.5
Credit Suisse 48.5
Daiwa Securities America 51.0
Danske Bank 50.0
DekaBank 50.0
Desjardins Group 49.0
Deutsche Postbank AG 49.8
Dresdner Kleinwort 49.5
DZ Bank 49.8
First Trust Advisors 48.5
Fortis 50.0
FTN Financial 50.0
Global Insight Inc. 49.5
"Goldman, Sachs & Co. 49.0"
H&R Block Financial Advis 49.0
Helaba 50.0
High Frequency Economics 52.0
HSBC Markets 52.0
IDEAglobal 48.5
Informa Global Markets 48.5
ING Financial Markets 49.0
Insight Economics 49.0
Intesa-SanPaulo 49.5
J.P. Morgan Chase 49.5
Janney Montgomery Scott L 50.6
JPMorgan Private Client 50.0
Landesbank Berlin 48.5
Landesbank BW 49.5
Lehman Brothers 50.3
Lloyds TSB 50.0
Maria Fiorini Ramirez Inc 49.5
Merk Investments 49.0
Merrill Lynch 51.0
MFC Global Investment Man 49.0
Moody's Economy.com 49.0
National Bank Financial 48.5
Natixis 48.5
Newedge 49.2
Nomura Securities Intl. 50.0
Nord/LB 50.0
PNC Bank 48.5
Scotia Capital 49.0
Societe Generale 50.0
Stone & McCarthy Research 48.9
TD Securities 50.0
Thomson Financial/IFR 50.9
Tullett Prebon 49.3
Unicredit MIB 49.5
University of Maryland 50.0
Wachovia Corp. 49.0
Wells Fargo & Co. 50.0
WestLB AG 49.0
Westpac Banking Co. 50.0
Wrightson Associates 49.0
====================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
"Last Updated: September 4, 2008 00:01 EDT"
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Pound Near 2 1/2-Year Low Before Bank of England Rate Decision
By Lukanyo Mnyanda
Sept. 4 (Bloomberg) -- The U.K. pound traded near the lowest level in 2 1/2 years against the dollar before a Bank of England meeting at which policy makers will probably leave interest rates on hold.
"The nine-member Monetary Policy Committee, led by Governor Mervyn King, will keep the benchmark rate at 5 percent, according to all 61 economists surveyed by Bloomberg News. Policy makers are trying to balance the risk of a recession with inflation running at the fastest pace in more than a decade. HBOS Plc will say today house prices fell almost 11 percent last month, according to a separate Bloomberg survey."
"``I don't think it's over for the pound, with the economy facing difficult times,'' said Neil Jones, London-based head of European hedge-fund sales at Mizuho Capital Markets. ``The MPC will become more sympathetic to the growth story.''"
"The pound was at $1.7806 by 8:06 a.m. in London, from $1.7768 yesterday, when it fell as much as 1 percent to $1.7668, the lowest level since April 2006. It was little changed at 81.62 pence per euro, after earlier dropping to a record low of 81.88 pence, from 81.60."
"HBOS, the nation's biggest mortgage lender, will say the average price of a home dropped 10.7 percent in August, a fifth straight month of declines, according to the median forecast of 13 economists polled by Bloomberg. The data is scheduled for release at 9 a.m. in London."
Gilts Decline
"U.K. government bonds fell, with the yield on the 10-year gilt rising 4 basis points to 4.53 percent. The price of the 5 percent security due March 2018 dropped 0.28, or 2.8 pounds per 1,000-pound face amount, to 103.61. The yield on the two-year gilt, which is more sensitive to the outlook for interest rates, rose 3 basis points to 4.44 percent. Bond yields move inversely to prices."
"The pound dropped yesterday after Nationwide Building Society said its shoppers index showed confidence among consumers stayed at the weakest level in at least four years last month. The U.K. services industry shrank, an industry group said, adding to evidence the second-largest economy in Europe is heading toward a recession."
The pound's depreciation accelerated and bonds rose after Alistair Darling told the Guardian newspaper Aug. 30 the U.K. faces its biggest economic slowdown in 60 years. He said later he was referring to the global economy.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
"Last Updated: September 4, 2008 03:19 EDT"
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Latin America Currencies: Colombian Peso Weakens for Eighth Day
By Andrea Jaramillo
"Sept. 3 (Bloomberg) -- Colombia's peso slid for an eighth day, its longest losing streak since March 2006, as a decline in oil slowed dollar inflows."
"The peso weakened 1.4 percent to 2,006 per dollar at 4:25 p.m. in New York, from 1,978.25 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. It earlier touched 2,006.75, its lowest since January."
"``Colombia is moving in accordance to external markets,'' said Eduardo Reyes, chief economist at Tradition brokerage's unit in Colombia. ``Amid the heightened risk aversion, local investors are dropping peso bonds and buying dollars,''"
"Crude oil for October delivery fell as low as $107.22 a barrel today on the New York Mercantile Exchange, from 109.71 yesterday and from a record $147.27 on July 11. Oil is Colombia's biggest export."
"The peso has plunged 12.4 percent since July 15, when the dollar began rising against the euro from an all-time low. The greenback advanced today against most major currencies."
"The yield on the nation's benchmark 11 percent bonds due in July 2020 closed little changed at 11.5 percent. The bonds' price fell 0.002 centavo to 96.783 centavos per peso, according to Colombia's stock exchange. It earlier dropped to 95.835, its lowest since Aug. 26."
"Peru's sol closed little changed, rising 0.03 percent to 2.9645 per dollar, from 2.9655 yesterday."
"Peru's central bank intervened in the currency market for the first time since July, selling $70 million in a bid to ease the sol's slide. The currency has dropped 5.6 percent in the past month."
Inflation Concerns
"``The central bank knows that the sol isn't responding to speculative factors so it will likely continue to intervene although not aggressively,'' said Gonzalo Navarro, head currency trader at Banco Santander Central Hispano SA's unit in Lima. ``The central bank's main worry is inflation and the weaker sol can translate into inflation pressures.''"
"The yield on the nation's 8.6 percent sol-denominated bond due in August 2017 was little changed at 8 percent, according to Citigroup Inc.'s unit in Lima."
"Argentina will buy back as much as 200 million pesos ($66 million) worth of local bonds tomorrow, the Economy Ministry said in a statement. The buyback is a part of a plan the government announced last month after bonds plunged on concern tax revenue growth is slowing and inflation is accelerating."
Chilean Rates
"The government said yesterday it would repay its $6.7 billion of defaulted debt with the Paris Club, an informal association of creditors that works to bail out troubled sovereign debtors. President Cristina Fernandez de Kirchner said she signed a decree allowing Argentina to draw on the central bank's $47.1 billion in international reserves to pay the debt."
"The yield on Argentina's inflation-linked peso bonds due in February 2033 rose 7 basis points to 9.91 percent, according to Citigroup Inc.'s unit in Argentina. The peso advanced 0.03 percent to 3.0370 per dollar, from 3.0380 yesterday."
"In Chile, the peso gained 0.2 percent to 515.26 per dollar, from 516.44 yesterday. The yield for a basket of five-year peso bonds in inflation-linked currency units, called unidades de fomento, fell 8 basis points to 2.97 percent, according to Bloomberg composite prices."
"Banco Central de Chile will raise its overnight lending rate a half-percentage point to 8.25 percent tomorrow, according to 15 of 19 economists surveyed by Bloomberg News. The other four analysts forecast an increase to 8 percent."
"Venezuela's bolivar gained 1.2 percent to 4 per dollar in the black market from 4.05 yesterday, traders said. The government pegs the currency at an official exchange rate of 2.15 per dollar under restrictions imposed in 2003. Venezuelans turn to the parallel market when they can't get government approval to buy dollars at the official rate."
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
"Last Updated: September 3, 2008 16:30 EDT"
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"European Investment, Spending Drop as Economy Shrinks (Update2) "
By Fergal O'Brien
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"Sept. 3 (Bloomberg) -- European company investment, consumer spending and exports declined in the second quarter, dragging the economy into a 0.2 percent contraction and pushing it to the brink of a recession."
"Investment by companies fell 1.2 percent, the first decline in five years, and household expenditure dropped 0.2 percent after stagnating in the previous three months, the European Union statistics office in Luxembourg said today. The 0.2 percent decline in overall gross domestic product matched an initial estimate published on Aug. 14."
"The euro fell today, extending its 7 percent decline over the past month as evidence of Europe's economic slump mounts. Separate figures today show retail sales unexpectedly fell in July and services contracted for a third month in August. The downturn has yet to prompt the European Central Bank to drop its inflation-fighting stance and policy makers will probably keep interest rates at a seven-year high tomorrow."
"``The ECB did the minimum last month and it would make sense for them to acknowledge the downturn a bit more this week,'' said Laurent Bilke, an economist at Lehman Brothers in London, who expects the economy to shrink again in the current quarter. ``But I think they can claim they need a bit more insurance that the price of oil will drop more for them to say inflationary pressures have eased.''"
Company Investment
"The overall contraction in the economy is the first since the introduction of the euro almost a decade ago. The decline in company investment followed a 1.5 percent surge in the first quarter, when mild weather prompted the construction industry to bring forward building projects."
"``If an abrupt GDP slowdown in second quarter had to be expected, the most recent developments certainly suggest that growth weakness goes beyond a technical correction,'' said Aurelio Maccario, chief euro-zone economist at Unicredit MIB in Milan. ``Growth momentum has virtually come to a halt.''"
"The euro fell as much as 0.9 percent to $1.4385 today, its lowest since Jan. 22, and was at $1.4432 as of 12:50 p.m. in London. European government bonds advanced. The yield on the two-year note fell 2 basis points to 4.07 percent and the yield on the 10-year German bund, the region's benchmark government security, also declined 2 basis points, to 4.11 percent."
"The 0.4 percent drop in retail sales followed a 0.9 percent fall in June. Economists had forecast a 0.1 percent increase, based on the median of 25 estimates in a Bloomberg News survey."
Government Spending
"Government spending rose 0.5 percent in the three months through June after a 0.3 percent gain in the previous quarter, according to today's report. Exports fell 0.4 percent. From a year earlier, the economy expanded 1.4 percent, less than the 1.5 percent initial estimate."
"Bertelsmann AG, Europe's largest media company, on Aug. 28 cut its 2008 profit forecast after advertisers slashed marketing budgets to reduce costs amid the slowdown. L'Oreal SA, the world's largest cosmetics maker, a day later reported the slowest profit growth in three years."
"The economic backdrop ``remains difficult across Europe,'' said John Browett, chief executive officer of U.K. consumer- electronics retailer DSG International Plc, which has operations in countries including France, Spain and Germany. Its sales fell 7 percent in the 16 weeks through Aug. 23, DSG said today."
"Even with the weaker economic growth, the ECB in July raised its key rate to 4.25 percent to curb price growth. While inflation eased in August to 3.8 percent from 4 percent, it remains almost twice the ECB's 2 percent limit. The ECB staff projections for inflation in 2008 and 2009 may be raised tomorrow after the governing council meeting, according to Lehman's Bilke."
Benchmark Rate
All but one of 53 economists surveyed by Bloomberg News predict the Frankfurt-based central bank will leave the benchmark rate on hold tomorrow and only five expect a cut this year.
"The economic slowdown isn't confined to the euro area. The U.K. economy unexpectedly stagnated in the second quarter, ending the nation's longest stretch of expansion in more than a century, and Japan's economy contracted on an annualized basis. While the U.S., the world's largest economy, grew faster than forecast in the second quarter, the nation's leading economic indicators suggest growth is likely to weaken this quarter."
"While the stronger euro against the dollar and record oil prices threatened growth this year, those pressures may be fading. The euro, whose gains eroded export competitiveness, has fallen 7.5 percent versus the dollar in the last month, while crude oil has dropped around 25 percent since reaching a record $147.27 a barrel on July 11."
"Still, an index of consumer and executive confidence in the economy dropped more than forecast last month, according to the European Commission. Europe's manufacturing and service industries contracted for a third month in August, according to reports this week."
"``The euro-zone economies are continuing to struggle in the third quarter,'' said Howard Archer, chief European economist at Global Insight in London. ``We expect this to remain the case for some time to come.''"
To contact the reporters on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
"Last Updated: September 3, 2008 08:07 EDT"
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Yuan Advances on Speculation Gains Needed to Curb Trade Surplus
By Judy Chen and Kim Kyoungwha
Sept. 4 (Bloomberg) -- The yuan advanced for the first time in three days on speculation China will strengthen the currency to help shrink the trade surplus and stem inflation.
"The Chinese currency extended gains this year 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 pared early losses and climbed 0.08 percent to 6.8376 a dollar as of 11:07 a.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 from a year earlier, the first gain in four months, customs bureau figures showed on Aug. 11. Consumer prices climbed 6.3 percent in July from a year earlier, exceeding the government's 4.8 percent target for 2008."
"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 7.1 percent against the dollar since the end of July and the pound has fallen 10.4 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.''"
"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."
"The yield on the 4.41 percent bond due June 2018 was little changed at 4.1 percent in Shanghai, according to the China Interbank Bond Market. The price of the security held at 102.49 per 100 yuan face amount."
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
"Last Updated: September 4, 2008 00:01 EDT"
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"Australian, New Zealand Currencies Rise as Investors Seek Yield "
By Lilian Karunungan and Chris Young
Sept. 4 (Bloomberg) -- The Australian and New Zealand currencies rebounded from the lowest in a year on speculation investors will take advantage of those declines to buy the nations' higher-yielding assets.
"The Australian dollar advanced for the first time in five days on speculation its 13 percent slump this quarter was excessive, given limited scope for the Reserve Bank of Australia to cut interest rates. Gains were curbed earlier when a government report showed the trade balance unexpectedly turned to a deficit in July, as oil imports jumped and exports fell."
"``The Australian dollar can bounce a little bit because it is sort of finding some support levels,'' said Richard Grace, chief currency strategist at the Commonwealth Bank of Australia in Sydney. The trade figure ``provided a bit of a headwind to the Australian dollar's appreciation here in the short term,'' he said."
"The Australian dollar bought 83.68 U.S. cents at 4:29 p.m. in Sydney, after falling as low as 82.88 cents after the trade report. The currency was at 82.96 cents in late Asian trading yesterday, when it touched 82.34, the lowest since Sept. 11. Its 14-day relative strength index was 23 versus the dollar yesterday. A level below 30 on the gauge of momentum signals losses may reverse."
"New Zealand's currency advanced 0.8 percent to 68.42 U.S. cents in Wellington, from 67.88 cents late in Asia yesterday when it reached 67.36 cents, the lowest since Aug. 17, 2007. The currency rose to 73.83 yen from 73.80 yen yesterday when it touched 73.24, the weakest since August 2006."
Currency Oversold
"``When currency traders look at the fundamentals of the Australian dollar they'll see growth will be sustained and the RBA won't cut rates by as much as expected,'' said Sydney-based Joshua Williamson, a senior strategist at TD Securities Ltd. ``The Australian dollar is well oversold.''"
"The currency will gain to 85 to 86 cents in coming weeks, Williamson forecast."
"The Reserve Bank cut the overnight cash-rate target by a quarter-percentage point to 7 percent on Sept. 2, its first reduction in seven years. Policy makers will lower the rate by almost 1 percentage point in 12 months, according to a Credit Suisse Group index based on the trading of interest-rate swaps."
"The trade deficit was A$717 million ($596 million) compared with a surplus of A$351 million in June, the Bureau of Statistics said today. The median estimate of 24 economists surveyed by Bloomberg News was for a A$50 million surplus."
New Zealand
"New Zealand's dollar gained for the first time in five days as the difference between three-year New Zealand and U.S. interest-rate swaps widened to 3.54 percentage points, near the most since July 18. The currency, known as the kiwi, was also bolstered as traders bet its 3.7 percent loss in the past five days was overdone."
"``The New Zealand-U.S. three-year swap spreads have widened over the past week, which may be providing a bit of support for the New Zealand dollar,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``Given the extreme moves we've seen over the past few days, we can't help but think the kiwi is overdue a bit of consolidation.''"
The benchmark interest rate of 8 percent in New Zealand compares with 2 percent in the U.S. and 0.5 percent in Japan.
"The New Zealand dollar's 14-day stochastic oscillator, a technical indicator which measures momentum, was at 11.00 against the U.S. dollar yesterday, according to data compiled by Bloomberg. A level below 20 suggests a currency may have weakened too rapidly and is poised to rebound."
Government Bonds
Australian 10-year government bonds yield 2.04 percentage points more than similar-maturity U.S. Treasury notes compared with 1.95 percentage points at the end of last week.
"Benchmark 10-year bonds declined for a second day. The yield on the 5.25 percent note due March 2019 rose 8 basis points, or 0.08 percentage point, to 5.77 percent. The price fell 0.59, or A$5.93 per A$1,000 face amount, to 95.944."
"New Zealand 10-year government bonds advanced for a second day, pushing the yield down 2 basis points to 5.96 percent. The price of the 6 percent security maturing in December 2017 rose 0.130, or NZ$1.30 per NZ$1,000 face amount, to 100.284."
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Chris Young in Sydney at cyoung12@bloomberg.net.
"Last Updated: September 4, 2008 02:49 EDT"
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India's Bonds Advance a Ninth Day on Slump in Crude Oil Prices
By Anil Varma
Sept. 4 (Bloomberg) -- India's 10-year bonds advanced for a ninth day as falling oil prices helped ease concern the rate of inflation will climb from near a 16-year high.
"Benchmark yields dropped to the lowest level in more than two months after crude oil slumped this week, extending the biggest two-month loss in more than five years. Bonds also advanced as a decline in banks' daily borrowings from the central bank suggested they have more spare cash to buy debt."
"``We expect bonds to gain further gradually,'' said Dhawal Dalal, who manages $2.2 billion of Indian debt at DSP Merrill Lynch Investment Management Ltd. in Mumbai. ``Oil prices are declining and liquidity in the banking system is comfortable.''"
"The yield on the benchmark 8.24 percent note due April 2018 fell 6 basis points to 8.54 percent as of 12:20 p.m. in Mumbai, according to the central bank's trading system. That is the lowest since June 19. The price rose 0.41, or 41 paise per 100 rupee face amount, to 98.02. A basis point is 0.01 percentage point."
"Crude oil in New York fell 5.6 percent this week, adding to the 17.5 percent loss in July and August. The commodity has declined 26 percent from an all-time high of $147.27 per barrel touched in July."
"The rate of inflation in Asia's third-largest economy, which imports 70 percent of the oil it uses, has more than tripled this year. The rate measured 12.4 percent in the week ended Aug. 16, down from 12.63 percent in the previous week, according to the government."
"Banks borrowed 78.5 billion rupees ($1.77 billion) at the Reserve Bank of India's securities repurchase auction today, compared with 99.8 billion rupees at the previous auction on Sept. 2."
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
"Last Updated: September 4, 2008 03:12 EDT"
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"Vale, Petrobras Options are Cheap, Goldman Advises (Update1) "
By Jeff Kearns
"Sept. 3 (Bloomberg) -- Investors should buy options on Latin American stocks trading in the U.S. such as Petroleo Brasileiro SA and Cia. Vale do Rio Doce because the contracts are cheap, Goldman Sachs Group Inc. said."
"The average implied volatility for American depositary receipts on Latin American stocks is near a two-year low compared with other companies tracked by Goldman's options strategists, the world's biggest securities firm said in a note published today. Implied volatility is a measure of expected price swings and the key gauge of options prices."
"U.S.-traded options on Vale, the world's biggest iron-ore producer, and Petrobras, as Brazil's state-controlled oil company is known, are attractive because future events may boost the shares or make them more volatile, Goldman options strategists John Marshall and Stuart Kaiser wrote."
"The implied volatility for Latin American stocks trading in the U.S. has dropped ``despite recent concerns about China growth that have pressured natural resources prices and kept investors on the sidelines, and despite a sharp sell-off in shares that has resulted in compelling valuation,'' the New York-based strategists wrote."
"They recommended March $28 calls on Vale, which Goldman stock analyst Marcelo Aguiar has rated at ``buy'' since July 17."
"``Our analyst sees several catalysts that could re-focus investors on Vale fundamentals, including stronger data on the Chinese economy, steel prices, and iron-ore inventories,'' the strategists wrote. ``Given continued concerns we prefer the limited loss of call options to outright share positions.''"
October Catalyst
"They also recommended buying April $55 calls on Petrobras before an analyst day expected in October. The options strategists cited oil stock analyst Arjun Murti, who recommends buying the shares."
"Murti expects ``contract uncertainties will ultimately be resolved in a manner that allows Petrobras to retain its dominant position and earn an acceptable rate of return, while supply constraints and non-OECD demand continue to support high oil prices,'' the strategists wrote."
"Petrobras will become a ``must-own'' stock due to its likely increase in reserves from the so-called pre-salt oil fields, Murti wrote in a separate note published yesterday. Petrobras shares currently reflect the ``minimal value'' for its reserves, Murti wrote."
"Vale's ADRs slipped 1 percent to $24.99 in New York, extending a 24 percent drop this year. Petrobras slipped 2.3 percent to $48.04, extending a 17 percent slide in 2008. Both companies are based in Rio de Janeiro."
"Calls give the right to buy a security for a certain amount, the strike price, by a given date. Puts convey the right to sell."
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
"Last Updated: September 3, 2008 19:30 EDT"
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"Russian Stocks Decline, Led by Steel Stocks on Lower Prices "
By William Mauldin
"Sept. 3 (Bloomberg) -- Russia's Micex Index fell the most in seven days, led by steelmakers on signs global steel prices may retreat."
OAO Magnitogorsk Iron & Steel led the declines. OAO AvtoVAZ fell as sales decreased at Russia's biggest automaker. Energy stocks slumped as crude traded near a five-month low.
"The ruble-denominated Micex dropped 3.2 percent to 1,324.99 at the close in Moscow. The dollar-denominated RTS Index fell 4.3 percent to 1,589.19, near a 23-month low."
"European steelmakers dropped to the lowest in six months a day after ArcelorMittal, the world's biggest steelmaker, said it will cut prices for long-steel products, used in construction, by an average of 5.6 percent in South Africa. U.S. Steel Corp. yesterday lost 10 percent, its biggest drop in two months."
"Magnitogorsk, Russia's fourth-biggest steelmaker, sank 1.487 ruble, or 6.1 percent, to 22.987 rubles today on the Micex Stock Exchange, its biggest decline in six days. OAO Novolipetsk Steel sank 5.04 rubles, or 5.3 percent, to 90.70 rubles."
Russian energy shares sank after crude futures fell for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and as the dollar strengthened.
"OAO Lukoil, Russia's second-biggest oil producer, dropped 3.4 percent to 1,729.84 rubles. OAO Surgutneftegaz, the fourth- biggest producer, slipped 0.586 ruble, or 3.2 percent, to 17.776 rubles."
"``We see downside risks to our earnings assumptions amid a possible correction in commodity prices,'' UniCredit SpA wrote in a note distributed to investors today. Moscow-based analysts at the Italian bank cut their 12-month estimate for the RTS to 2,493 from 2,530 at the beginning of August."
"AvtoVAZ shares retreated 1.176 rubles, or 5.6 percent, to 20.026 rubles, a second day of declines. The Togliatti-based carmaker's sales dropped 30 percent in August compared with a year earlier, Kommersant reported, citing Bank of Moscow analyst Mikhail Lyamin."
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
"Last Updated: September 3, 2008 11:08 EDT"
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Gold Falls for Fourth Day in London as Oil Drops; Silver Slides
By Rachel Graham
"Sept. 3 (Bloomberg) -- Gold declined for a fourth day in London as the dollar strengthened against the euro and crude-oil prices dropped, reducing demand for the metal as an alternative investment and hedge against inflation. Silver also fell."
"The dollar traded at the highest in more than seven months against the euro before reports that may show European consumers are spending less. Crude oil also slid for a fourth day, trading 26 percent below the July 11 record of $147.27 a barrel."
"``Sentiment remains negative on gold, precious metals and commodities in general,'' Walter de Wet, head of commodities research at Standard Bank Group Ltd., said by phone from Johannesburg."
"Gold for immediate delivery fell as much as $15.70, or 2 percent, to $789.65 an ounce. It traded at $798.80 as of 12:01 p.m. in London. Futures for December delivery fell $7.50, or 0.9 percent, to $803 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange."
"Physical demand is helping to stem the decline in the price, de Wet said. According to him, investment demand for gold is more significant. ``Physical demand won't be able to stop the fall if the dollar appreciates,'' he said."
Assets in exchanged-traded bullion funds managed by ETF Securities Ltd. and Zuercher Kantonalbank rose to records last week.
"ETF Securities, which manages ETFS Physical Gold, had a record 1.9 million ounces of gold as of Aug. 29, according to data posted on its Web site. Zuercher Kantonalbank's ZKB Gold ETF jumped to a record 1.66 million ounces last week."
Risky Sales
"The sale of gold held in exchange-traded funds is a risk for the market, said Matthew Turner, a commodity analyst at Virtual Metals in London."
"``There are large ETF holdings which could be liquidated. There is a risk of that,'' Turner said by phone today. ``The more times gold fails to rally significantly the worse it gets as ETF holders could lose heart.''"
"Zuercher Kantonalbank, who manages ZKB Gold ETF and other exchange-traded funds backed by precious metals, expects gold to rise between now and the end of the year, ZKB analyst Susanne Toren said by phone from Zurich. Some investors view gold as a haven for investment against economic weakness."
"``We are not completely over the credit crisis,'' Toren said. ``The economic problems that pushed gold higher haven't disappeared fully.''"
"Gold may rise to $900 an ounce between now and the end of the year, she said. ZKB retains its one-year target of $800 an ounce."
"Among other metals for immediate delivery, silver fell 28 cents, or 2.1 percent, to $12.79 an ounce. Platinum fell $14, or 1 percent, to $1,388 an ounce and palladium fell $2.25, or 0.8 percent, to $287.25 an ounce."
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
"Last Updated: September 3, 2008 07:28 EDT"
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"Copper Trades Little Changed as Investors Look to Dollar, Oil "
By Glenys Sim
"Sept. 4 (Bloomberg) -- Copper was little changed in Asia after advancing for the first day in five yesterday, as the dollar's climb against the euro and crude's decline both paused."
"Copper has fallen 7 percent in the past month as oil tumbled 13 percent while the dollar has gained 7 percent against the euro, eroding demand for investments in commodities."
"``The market is consolidating as the bulls and bears are locked in a tug-of-war,'' Jia Zheng, an analyst at Southwest Futures Co., said today from Shanghai. ``While waiting for the fundamentals to become clearer, investors just have to rely on other cues like the oil price and the dollar for direction.''"
"Copper for delivery in three months stood little changed at $7,345 a metric ton on the London Metal Exchange, after rising 1.2 percent yesterday."
"November-delivery copper gained as much as 1.1 percent to 58,370 ($8,535) a ton on the Shanghai Futures Exchange, and traded at 57,840 yuan at 10:38 a.m. Singapore time."
"Crude oil for October delivery rose as much as 0.6 percent to $110 per barrel before trading littled changed at $109.25 a barrel on the New York Mercantile Exchange. The contract fell 7.5 percent in the past four days, reaching a five-month low Sept. 2."
"The dollar fell to $1.4528 against the euro and last traded at $1.4494 from $1.4498 yesterday in New York. The dollar rose to $1.4385 against the euro yesterday, the highest since Jan. 22."
"Among other LME-traded metals, aluminum was up 0.3 percent at $2,684 a ton and zinc declined 0.2 percent to $1,785. Lead, nickel and tin had not traded as of 10:40 a.m. in Singapore."
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
"Last Updated: September 3, 2008 23:34 EDT"
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OPEC to Pump Record Amounts as $109 Oil Stunts Growth (Update1)
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 1 cent down at $109.34 a barrel on the New York Mercantile Exchange at 12:54 p.m. in Singapore. 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 urged OPEC not to cut back because prices are ``putting a burden on the global economy,'' Executive Director Nobuo Tanaka said in an Aug. 27 interview in Stavanger, Norway."
"``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 01:01 EDT"
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"Economy `Slow' in Most of U.S., Fed's Beige Book Says (Update2) "
By Scott Lanman
"Sept. 3 (Bloomberg) -- Business across most of the U.S. was ``slow'' last month, while almost all Federal Reserve districts reported pressure to raise prices because of higher commodity costs, the central bank said in its regional economic survey."
"Consumer spending was ``slow'' in most of the 12 Fed districts as housing ``weakened or remained soft,'' the Fed said in its Beige Book report, published two weeks before officials meet to set interest rates. A ``general pullback in hiring'' helped keep wage increases ``moderate,'' the Fed said today."
"With the economy weakening under the impact of the yearlong financial crisis and housing recession, and consumer prices rising, most investors anticipate the Fed will keep interest rates unchanged through December. Policy makers have lowered the rate 3.25 percentage points over the past year."
"The picture of the economy ``is a troubling one,'' John Ryding, a former Fed economist who now runs RDQ Economics LLC in New York, said in an interview with Bloomberg Television. ``We could see the economy languishing or move further south and at the same time see inflation pressures remain elevated -- and that's stagflation.''"
"While prices of energy and other commodities have declined recently, the Fed said companies in the San Francisco district, the largest region, reported that ``upward price pressure remained significant,'' while ``price levels remained high'' in three other districts. Philadelphia-area retailers saw ``rising wholesale costs,'' the Fed said."
Hiring `Pullback'
"``The pace of economic activity has been slow in most districts,'' the report said. ``Wage pressures were characterized as moderate by most districts amid a general pullback in hiring.''"
"Today's report was prepared by the Philadelphia Fed, based on information collected on or before Aug. 25."
The survey comes amid a debate among policy makers about the magnitude of the threats posed by inflation and the credit crisis.
"In a speech today, Boston Fed President Eric Rosengren said the U.S. credit crunch has blunted the impact of the Fed's rate cuts, signaling he opposes raising borrowing costs. By contrast, the Fed said yesterday that directors of three other district banks asked to raise the charge on loans to commercial banks at the Aug. 5 policy meeting."
Price Pressures
"The previous Beige Book, released July 23, reported ``elevated or increasing'' price pressures amid slower economic growth. Five districts indicated ``a weakening or softening'' in their economies, and consumer spending was ``sluggish or slowing'' in every region."
"At the last meeting, Fed policy makers agreed that their next change in rates would be an increase, with some officials concerned about inflation favoring an increase earlier than traders expect, according to minutes of their meeting."
"Today's report said labor markets were ``unchanged or somewhat softer'' across most of the country, compared with the last Beige Book. Several districts said the energy industry had worker shortages, the Fed reported."
"About 463,000 Americans have lost jobs since January as the worst housing recession in a quarter century has curtailed spending and bank lending. Economists expect annualized rates of growth of 1 percent in the third quarter and 0.4 percent in the fourth quarter, according to the median estimate in a Bloomberg Survey in early August."
Demand Declined
"Manufacturing ``declined'' in most regions, and demand slowed for home mortgages and consumer loans, the Fed said today."
"Fed Chairman Ben S. Bernanke in an Aug. 22 speech that inflation should ease later this year and in 2009, while warning that policy makers will act if price increases don't slow over the ``medium term.'' He said financial turmoil has ``not yet subsided'' and is contributing to weaker economic growth and higher unemployment."
"The consumer price index rose 5.6 percent for the 12 months ending in July. The Fed's preferred benchmark, the personal consumption expenditures price index, minus food and energy, has been at 2 percent or higher since April 2004."
"``All districts reported continuing upward price pressure from elevated input costs, although several noted recent retreats in some commodity and energy prices,'' the Fed said today."
"The Beige Book's regional anecdotes are gathered through hundreds of telephone calls, news clippings and personal contact by the staff of the 12 Fed banks, whose districts cover all 50 U.S. states. The anecdotes are designed to supplement quantitative forecasts of the Board of Governors staff."
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
"Last Updated: September 3, 2008 17:46 EDT"
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Australia's Trade Balance Turns to Deficit on Imports (Update2)
By Jacob Greber
Sept. 4 (Bloomberg) -- Australia's trade balance unexpectedly turned to a deficit in July as oil imports surged and exports fell.
"The trade deficit was A$717 million ($596 million) compared with a revised surplus of A$351 million in June, the Bureau of Statistics said in Sydney today. The median estimate of 24 economists surveyed by Bloomberg News was for a A$50 million surplus."
"The trade shortfall may slow the economy, which grew at the weakest pace in more than three years in the second quarter as households cut spending. Central bank Governor Glenn Stevens reduced the benchmark interest rate this week from a 12-year high by a quarter point to 7 percent, the first reduction in seven years."
"``The deterioration largely reflected higher oil prices and possibly the impact of an explosion at a key gas producer in Western Australia,'' said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney."
The Australian dollar dropped to 83.26 U.S. cents at 12:17 p.m. in Sydney from 83.35 cents before the report was released.
"The local dollar has slumped almost 14 percent since June 30, the worst performer of the 17 most-active currencies. The two-year government bond yield was unchanged at 5.68 percent."
"The falling dollar is pushing up the cost of imports, including gasoline. Imports climbed 4 percent to A$23.6 billion, today's report showed. Fuel imports surged 29 percent."
Exports Drop
Exports fell 1 percent to A$22.9 billion in July as agricultural shipments dropped 3 percent and coal declined 9 percent.
"The trade balance may return to surplus in coming months as fallout eases from an explosion in Western Australia that cut off almost 30 percent of domestic gas supplied to that state, which generates about a third of the nation's exports."
"Apache Corp.'s Varanus Island plant off the state's coast, which suffered a pipeline explosion on June 3, has resumed 70 percent of the natural gas production, Chief Executive Officer Steven Farris said this week."
The Reserve Bank said on July 15 that the explosion will subtract about a quarter percentage point from gross domestic product.
"Today's figures are ``just a blip in the export story,'' said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. ``The trend is still for positive exports.''"
Chinese Demand
"China's demand for coal and iron ore is helping Australia's A$1 trillion economy outpace other developed nations, which are being buffeted by the global credit squeeze."
"The economy expanded 2.7 percent in the second quarter from a year earlier, a report showed yesterday. That compares with 2.2 percent growth in the U.S., 1.4 percent in the U.K. and 1.7 percent in Germany."
"Australia's terms of trade, a measure of export income, surged 13.1 percent in the three months through June 30, the most in 35 years, yesterday's gross domestic product report showed. By contrast, household spending fell 0.1 percent, the first quarterly drop since 1993."
"BHP Billiton Ltd., the world's largest mining company, last month posted a 30 percent gain in second-half profit."
"Rising exports are ``adding substantially to national income and ability to spend,'' Stevens said on Sept. 2."
Business Investment
"Business investment rose 5.7 percent in the second quarter, more than twice as much as economists forecast, as mining companies bought extra machinery and equipment to meet demand from China for coal and iron ore, a report showed on Aug. 28."
Increased investment by mining companies is also helping offset weaker consumer spending that may prompt Stevens to cut borrowing costs again this year.
"Investors see a 78 percent chance central bank policy makers will cut the benchmark rate by another quarter point at their next meeting on Oct. 7, according to a Credit Suisse Group index based on trading in interest-rate swaps."
"Retail sales dropped in June by the most in six years, home-building approvals slumped 2.3 percent in July, the fourth decline this year, and the unemployment rate has climbed to 4.3 percent as companies including Qantas Airways Ltd. fire workers."
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
"Last Updated: September 3, 2008 22:31 EDT"
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"China's Earnings Growth Outlook Splits JPMorgan, Morgan Stanley "
By Chua Kong Ho and Chen Shiyin
"Sept. 4 (Bloomberg) -- Fears of a ``hard landing'' for China's economy are misplaced as inflation has peaked and government measures to bolster expansion will support profit growth, JPMorgan Chase & Co. said. Morgan Stanley disagrees, saying that earnings estimates are ``still too bullish.''"
"Easing oil prices will reduce the cost pressures on companies, while the slump in the valuations of Chinese stocks suggest that investors have already ``priced in'' the slowdown in global economic growth, Frank Gong, JPMorgan's Hong Kong-based head of China equity research said in a research note today."
"``China has passed a critical turning point of macro uncertainty in the past two months,'' Gong wrote. ``We expect the emerging-market funds flowing into Chinese equities markets to continue to grow in the longer term, as we expect there is very limited downside risks for China's growth story.''"
"The MSCI China Index, which tracks 102 Chinese companies, has declined 36 percent this year as measures to tackle inflation eroded profit and amid concern a global slowdown will cut demand for China-made goods. The index is valued at 13 times reported earnings, the lowest since June 2006, according to Bloomberg data."
"China's economy grew 10.1 percent in the second quarter, the fourth consecutive slowdown, prompting Communist Party leaders to put a bigger emphasis on maintaining expansion and protecting jobs. Government measures and likely easing of monetary policy means that growth in gross domestic product won't slow below 9 percent in the coming quarters, Gong wrote."
"ICBC, PetroChina"
"Cost pressures will ease following the 26 percent drop in crude oil from the July 11 record of $147.27 and a slump in prices of commodities traded on the London Metal Exchange, the JPMorgan note said."
"Gong, whose team was top-ranked for China research in a survey by Institutional Investor last year, reduced his portfolio weighting on raw-materials producers and added to financial companies and oil refiners. His top picks include Industrial & Commercial Bank of China Ltd., the nation's largest bank, and PetroChina Co., the country's biggest oil company."
"Morgan Stanley is advising investors to be ``cautious,'' saying that companies are facing an ``earnings recession'' in 2009, according to a Sept. 3 report by analysts led by Jerry Lou."
"Analysts had on average forecast in August that companies on MSCI's China index could post profit growth of 14 percent this year, Morgan Stanley said. That's 7 percentage points lower than the average consensus forecast in February, the brokerage said, adding that expectations could be cut further."
`Earnings Recession'
"``The danger for corporate China to further decelerate into an earnings recession in 2009 is high,'' the Morgan Stanley analysts wrote. ``The market is still pricing in too much growth optimism, and we think there is plenty of room for downward earnings revisions in the next 12 months.''"
"JPMorgan's more bullish view is shared by Merrill Lynch & Co., which initiated a call to be ``long'' Chinese equities in a Sept. 2 note on leveraged trading strategies."
"``Valuations have dramatically improved,'' wrote Merrill Lynch analysts including London-based Francisco Blanch in the note. ``In our view the only missing ingredient for a decent rally is price momentum.''"
"The brokerage's chief global emerging markets strategist Michael Hartnett on Sept. 2 raised his rating on Chinese shares to ``overweight,'' saying that ``pro-growth policies should prevent China from slowing too sharply.''"
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net.
"Last Updated: September 4, 2008 02:23 EDT"
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Yuan Onshore Forwards More Bullish Than Offshore for First Time
By Belinda Cao
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Sept. 3 (Bloomberg) -- Traders of yuan forward contracts inside China are more bullish than those outside for the first time as overseas investors pared bets on the currency's gains versus the dollar.
"One-year yuan non-deliverable forwards contracts, traded between international banks, yesterday declined 1 percent to 6.7490 per dollar in Tokyo, showing traders are betting on a 1.3 percent gain in the Chinese currency in the next 12 months. That compares with 6.7440 per dollar traded in Shanghai for similar- dated contracts, implying a 1.4 percent advance."
"The reversal occurred after China reined in the yuan on concerns attempts to curb inflation through currency appreciation were hurting exporters. A smaller difference between forward rates reduces incentives for arbitrage by investors able to trade inside and outside of China, said David Mann, a strategist at Standard Chartered Plc in Hong Kong."
"``There's a less obvious one-way bet over the longer term for the yuan,'' Mann said. ``Also the liquidity on the onshore market is rising.''"
"China had allowed the yuan to rise faster in the first half of 2008 as it sought to curb inflation and trim a record trade surplus with a stronger currency. Forward rates on Jan. 2 showed investors expected the yuan to gain 9 percent versus the dollar in one year's time. The currency strengthened 6.6 percent in the first half, following a 6.9 percent advance for the whole of 2007."
"The yuan dropped for a second day against the dollar, sliding along with currencies including the euro and the pound on speculation cheaper crude oil will bolster economic growth in the U.S. China's currency fell 0.12 percent to 6.8476 per dollar as of 12:21 p.m. in Shanghai, from 6.8397 yesterday, according to the China Foreign Exchange Trade System."
Policy Shift
"In August, policy makers switched focus to sustaining growth as well as cooling inflation, after expansion in the world's fourth-biggest economy declined for four straight quarters amid a global slowdown. Inflation slowed to 6.3 percent in July, from a 12-year high of 8.7 percent in February."
"``The central bank may be satisfied with a gaining pace of 2 to 3 percent in a year,'' said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the country's largest foreign currency trader. ``Overseas opinions are divided on the currency's pace of appreciation.''"
"China's currency fell 0.05 percent in August, the first monthly loss since May 2006 and closed at 6.8397 a dollar yesterday."
"``The gap between the two market prices is at historically low levels now as offshore prices tend to move with those onshore,'' Shi said."
Negative Spread
"The yuan's gains have only played a limited role in fighting inflation, said Zhang Xiaojing, director of the institute of economics at the China Academy of Social Sciences. ``The authorities have come to an agreement that they will no longer rely on fast yuan gains to stem inflation,'' he said."
"The yuan spread between the two 12-month contracts today was minus 0.03 as of 1:45 p.m. in Shanghai, data compiled by Bloomberg showed. International traders cut bets on the currency's gains yesterday by the most in almost three months, making rates traded offshore weaker than those onshore."
"The biggest difference this year between offshore and onshore rates was 0.23 yuan, reached in July. Yuan forwards weren't traded between banks in China until August 2005, when the government scrapped the currency's peg to the dollar."
Forwards are agreements to buy and sell assets at current prices for delivery at a specified time and date. Non- deliverable contracts are used for currencies that can't be freely converted and are settled in dollars.
Domestic Influence
"China may need to let domestic banks trade non-deliverable forwards overseas to stress the influence of Chinese institutions in pricing forwards, Tang Liang, a currency trader at the Beijing Branch of Industrial and Commercial Bank of China Ltd., said in an interview."
He said the volume of yuan forwards traded by customers at his bank more than doubled in the first six months of 2008 from a year ago.
"The yuan forward market is becoming more like that of the other currencies where it's normal for the onshore market to be more liquid and have more influence in driving markets, according to Mann at Standard Chartered."
"``It's returning to normality now as it's abnormal previously for the offshore market to have more influence,'' he said."
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
"Last Updated: September 3, 2008 02:52 EDT"
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"Asia Stocks Fall to 2-Year Low on Oil, Gold Drop; Huiyuan Jumps "
By Chua Kong Ho and Shani Raja
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"Sept. 3 (Bloomberg) -- Asian stocks fell, sending the region's benchmark index to a two-year low, after a slump in oil and gold dragged down commodities producers."
"Cnooc Ltd., China's largest offshore oil explorer, and Sumitomo Metal Mining Co., Japan's biggest gold producer, both dropped more than 5 percent. Nippon Steel Corp. declined after ArcelorMittal said it will cut South African steel prices. China Huiyuan Juice Group Ltd. leapt 164 percent in Hong Kong after Coca-Cola Co. offered to buy it."
"``There'll probably be more pain in the near term for commodities,'' said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management in Sydney."
"The MSCI Asia Pacific Index declined 0.4 percent to 120.50 at 7:25 p.m. in Tokyo, the lowest since July 19, 2006. Raw- materials and energy shares had the biggest losses among the index's 10 groups, while utility companies led gains."
The main index has declined 24 percent this year as the global economy slowed and financial companies reported more than $500 billion in writedowns and credit losses.
"Australia's S&P/ASX 200 Index dropped 1.1 percent after the country's economic expansion slowed in the second quarter to 0.3 percent, the weakest pace in two years. Newcrest Mining Ltd. fell."
"Japan's Nikkei 225 Stock Average added 0.6 percent to 12,689.59. Bridgestone Corp., the world's largest tiremaker, advanced as raw-material costs declined. South Korea's Kospi Index rose 1.4 percent, led by Hyundai Motor Co. after workers agreed to a pay increase, signaling an end to stoppages."
Commodities Drop
"Most Asian markets open for trading declined, while India's markets are closed for a holiday. U.S. stocks declined yesterday as a slump in commodity producers overshadowed gains in airlines and consumer companies, sending the Standard & Poor's 500 Index down 0.4 percent. S&P 500 futures added 0.1 percent today."
"Cnooc tumbled 6 percent to HK$10.70 in Hong Kong after the Reuters/Jefferies CRB Index of commodities declined the most since March 19 as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Commodities also slumped after the U.S. dollar jumped to the highest since October against six major currencies, eroding the appeal of raw materials priced in the U.S. currency."
"Inpex Holdings Inc., Japan's largest oil explorer, lost 3.9 percent to 1.025 million yen. Sumitomo Metal sank 6.4 percent to 1,252 yen. Newcrest Mining, Australia's largest gold producer, slumped 9 percent to A$22.60. BHP Billiton Ltd., the world's biggest mining company, dropped 3.4 percent to A$37.95."
Deeper Concerns
"Gasoline futures tumbled 9.2 percent. Oil futures fell as much as 8.7 percent to $105.46, the lowest since April 4, before closing at $109.71 yesterday. Gold futures lost 3 percent, the biggest drop since Aug. 11."
"``Concerns have deepened that commodities and energy prices will drop further,'' said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees $285 million."
"Fuel-dependent companies gained on speculation lower energy costs will bolster earnings. Tokyo Electric Power Co., the world's second-biggest non-state buyer of liquefied natural gas, rose 3.9 percent to 3,230 yen. Korean Air Lines Ltd., South Korea's largest carrier, jumped 12 percent to 34,800 won."
"Bridgestone added 5.6 percent to 1,951 yen. About seven gallons of oil are required to produce a car tire, according to the Rubber Manufacturers Association. Oji Paper Co., Japan's biggest user of high-sulfur fuel oil, climbed 6.9 percent to 586 yen, the highest since Oct. 11, 2007."
"``Relief from falling energy prices provides a significant boost to earnings of fuel-dependent companies,'' said Platypus Asset's Patkar."
Coca-Cola Takeover
"Huiyuan Juice, China's biggest maker of pure fruit juice, jumped 164 percent to HK$10.94. Coca-Cola offered to buy the company for HK$17.9 billion ($2.3 billion), Beijing-based Huiyuan said in a statement."
"Hyundai Motor, South Korea's largest automaker, rose 0.6 percent to 71,100 won, after workers tentatively agreed yesterday to a 5.6 percent increase in basic pay."
"Nippon Steel, the world's second-largest steelmaker, fell 2.9 percent to 503 yen, the most since Aug. 19, after rival ArcelorMittal said it will cut South African steel prices, raising concern prices will drop in Asia."
"JFE Holdings Inc., Japan's No. 2 steelmaker, dropped 4.1 percent to 4,500 yen. South Korea's Posco declined 2.5 percent to 471,500 won. BlueScope Steel Ltd., Australia's largest steelmaker, lost 4.2 percent to A$8.88."
"Komatsu Ltd., the world's second-largest maker of earthmoving equipment, dropped 7.1 percent to 2,095 yen, the most since Feb. 6. Mitsubishi UFJ cut its rating to ``market perform'' from ``outperform,'' citing increased concern that Komatsu may miss its profit forecast due to falling demand for construction machinery globally."
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
"Last Updated: September 3, 2008 06:28 EDT"
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Indonesian Rupiah Holds Near Three-Week Low After Rate Increase
Sept. 4 (Bloomberg) -- Indonesia's rupiah held near a three-week low after the central bank raised its benchmark policy rate for the fifth month to slow inflation. Government bonds fell.
"The currency was little changed after Bank Indonesia increased its policy rate a quarter point to 9.25 percent, as forecast by 23 of 25 economists surveyed by Bloomberg News. Any losses in the rupiah may be minimal as the central bank will stem any weakness to cool inflation near a 22-month high, said Christy Tan, senior currency strategist at Bank of America Corp."
"``The rupiah is stable around current levels and any weakness in the rupiah is likely to be resisted by the central bank,'' Singapore-based Tan said. The rate increase was ``more or less priced into the market.''"
"The rupiah traded at 9,208 per dollar as of 2:10 p.m. in Jakarta, versus 9,212 yesterday, according to data compiled by Bloomberg. It earlier touched 9,225, its weakest since Aug. 11."
"The central bank said it remains ``on alert'' as ``inflationary pressures in the domestic market are still strong especially as a result of aggregate demand which is growing fast,'' according to a statement accompanying the decision."
"Consumer prices rose 11.85 percent in August from a year earlier, compared with an increase of 11.9 percent in July, the government said on Sept. 1. 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."
Bonds Fall
"Ten-year bonds fell, ending three days of gains, after the central bank signaled that it will likely raise interest rates again to contain inflation."
"The yield on the benchmark 10-year note due September 2018 rose 4 basis points to 12 percent, according to mid-day prices from the Inter Dealer Market Association. The price declined 0.2050, or 2,050 rupiah per 1 million face amount, to 82.789. A basis point is 0.01 percentage point."
Bank Indonesia said it would keep evaluating its rate policy as a pickup in consumer spending threatens to stoke inflation already at the fastest in almost two years.
"A policy rate of 9.5 percent is ``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."
To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net
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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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Indonesian Rupiah Holds Near Three-Week Low After Rate Increase
By Patricia Lui
Sept. 4 (Bloomberg) -- Indonesia's rupiah held near a three-week low after the central bank raised its benchmark policy rate for the fifth month to slow inflation. Government bonds fell.
"The currency was little changed after Bank Indonesia increased its policy rate a quarter point to 9.25 percent, as forecast by 23 of 25 economists surveyed by Bloomberg News. Any losses in the rupiah may be minimal as the central bank will stem any weakness to cool inflation near a 22-month high, said Christy Tan, senior currency strategist at Bank of America Corp."
"``The rupiah is stable around current levels and any weakness in the rupiah is likely to be resisted by the central bank,'' Singapore-based Tan said. The rate increase was ``more or less priced into the market.''"
"The rupiah traded at 9,208 per dollar as of 2:10 p.m. in Jakarta, versus 9,212 yesterday, according to data compiled by Bloomberg. It earlier touched 9,225, its weakest since Aug. 11."
"The central bank said it remains ``on alert'' as ``inflationary pressures in the domestic market are still strong especially as a result of aggregate demand which is growing fast,'' according to a statement accompanying the decision."
"Consumer prices rose 11.85 percent in August from a year earlier, compared with an increase of 11.9 percent in July, the government said on Sept. 1. 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."
Bonds Fall
"Ten-year bonds fell, ending three days of gains, after the central bank signaled that it will likely raise interest rates again to contain inflation."
"The yield on the benchmark 10-year note due September 2018 rose 4 basis points to 12 percent, according to mid-day prices from the Inter Dealer Market Association. The price declined 0.2050, or 2,050 rupiah per 1 million face amount, to 82.789. A basis point is 0.01 percentage point."
Bank Indonesia said it would keep evaluating its rate policy as a pickup in consumer spending threatens to stoke inflation already at the fastest in almost two years.
"A policy rate of 9.5 percent is ``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."
To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net
"Last Updated: September 4, 2008 03:12 EDT"
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Eurozone Second Quarter GDP First Estimate: Summary (Table)
By Kristian Siedenburg
Sept. 3 (Bloomberg) -- Following is the summary of the second quarter GDP estimate from Eurostat in Luxembourg:
=========================================================================
2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q
2008 2008 2007 2007 2008 2008 2007 2007
=========================================================================
------------------- Eurozone---------------------
----------QoQ--------- ---------YoY-----------
GDP first estimate -0.2% 0.7% 0.4% 0.6% 1.4% 2.1% 2.1% 2.6%
revised from
GDP flash estimate -0.2% 0.7% 0.4% 0.6% 1.5% 2.1% 2.2% 2.7%
=========================================================================
H'hold spending -0.2% 0.0% 0.2% 0.4% 0.4% 1.2% 1.2% 1.8%
Govt spending 0.5% 0.3% 0.3% 0.5% 1.7% 1.3% 2.1% 2.5%
Gross fixed
capital form. -1.2% 1.5% 1.1% 0.9% 2.4% 3.7% 3.2% 3.7%
Exports -0.4% 1.8% 0.4% 1.8% 3.6% 5.4% 4.1% 7.3%
Imports -0.4% 1.9% -0.4% 2.2% 3.4% 4.7% 4.0% 6.5%
=========================================================================
2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q
2008 2008 2007 2007 2008 2008 2007 2007
=========================================================================
------------------- EU27-------------------------
----------QoQ--------- ----------YoY----------
GDP first estimate -0.1% 0.6% 0.5% 0.6% 1.6% 2.3% 2.5% 2.9%
revised from
GDP flash estimate -0.1% 0.7% 0.7% 0.5% 1.7% 2.3% 2.9% 2.5%
=========================================================================
H'hold spending -0.1% 0.2% 0.3% 0.6% 1.0% 1.7% 1.8% 2.4%
Govt spending 0.5% 0.3% 0.4% 0.5% 1.6% 1.4% 2.1% 2.4%
Gross fixed
capital form. -1.6% 0.9% 1.4% 1.4% 2.0% 3.6% 4.1% 4.5%
Exports -0.4% 1.8% 0.7% 1.8% 3.9% 5.4% 4.3% 6.9%
Imports -0.5% 1.6% -0.3% 2.7% 3.6% 4.7% 4.7% 7.1%
=========================================================================
Notes:
Percentage change compared to the same quarter of the
previous quarter is calculated from seasonally adjusted data.
Percentage change compared to the same quarter of the
previous year is calculated from non-seasonally adjusted data.
SOURCE: Eurostat
To contact the reporter on this story: Kristian Siedenburg in Budapest at ksiedenburg@bloomberg.net
"Last Updated: September 3, 2008 05:00 EDT"
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Mexican Peso Bonds Trade Near 3-Month High on Foreign Purchases
By Valerie Rota
Sept. 3 (Bloomberg) -- Mexico's peso-denominated bonds traded near a three-month high as the widest rate gap in three years between Mexican and U.S. bonds lured foreign investors.
"Foreign holdings of bonds maturing in a year or more surged to a record last month, according to the central bank. Foreign investors held 293 billion pesos ($28 billion) of the securities as of Aug. 25, the last day for which data is available."
"``Foreign investors keep buying,'' said Salvador Orozco, fixed-income strategy head at Banco Santander SA in Mexico City."
"Yields on Mexico's 10 percent bond due in December 2024 were little changed at 8.43 percent at 5 p.m. New York time. They touched 8.42 percent yesterday, the lowest since June 5. The bond's price today fell 0.02 centavo to 113.86 centavos per peso, according to Santander."
"The yield gap between Mexico's 10-year security in pesos and the comparable-maturity U.S. Treasury note touched 5.4 percentage points on July 14, the widest since June 2005. That differential has narrowed 73 basis points to 4.67 percentage points since then as foreign purchases of domestic bonds have pushed down Mexico's bond yields."
"Foreign investors boosted their holdings of Mexico's benchmark security by more than 50 percent this year to about 51 billion pesos as of Aug. 21, central bank data show. Domestic holdings of the Mexican government's most-traded bond declined nearly 30 percent to 36 billion pesos over the same period."
"Expectations the Mexican peso will strengthen by year-end are helping underpin demand for the nation's bonds from foreigners on bets the value of their holdings in dollars will increase by then, Orozco said."
Peso Decline
"Mexico's peso fell today to a two-month low amid declining prices for oil, the nation's biggest export, and as the U.S. dollar rallied against most of the world's major currencies. The peso has fallen 2.5 percent in the past five days amid a slump in all emerging-market currencies against the U.S. dollar."
"The peso dropped 0.3 percent to 10.3952 per dollar from 10.3615 yesterday. It touched 10.4165, its weakest since July 1."
"Oil, which funds more than a third of the Mexican government's spending, sank for a fourth day, dropping as much as 2.3 percent to $107.22 per barrel in trading on the New York Mercantile Exchange. Oil is down 26 percent from a record $147.27 per barrel reached on July 11."
"Mexico's peso will strengthen to 10.32 per dollar by the end of 2008, according to the average estimate of 34 economists surveyed by the central bank between Aug. 19 and Aug. 28. That compares to a forecast of 10.43 per dollar made the previous month, the bank said."
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.
"Last Updated: September 3, 2008 17:46 EDT"
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"Argentina, Chile, Mexico: Latin America Bond, Currency Preview "
By Jamie McGee
Sept. 4 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from a previous session.
"Argentina: The government will buy back as much as 200 million pesos ($66 million) worth of local bonds today, the Economy Ministry said in a statement."
The buyback is a part of a plan the government announced last month after bonds plunged on concern tax revenue growth is slowing and inflation is accelerating.
The peso rose 0.03 percent to 3.0370 per dollar.
"The yield on the country's inflation-linked peso bonds due in December 2033 rose 8 basis points, or 0.08 percentage point, to 9.92 percent, according to Citigroup Inc.'s unit in Argentina."
"Chile: The central bank will raise its overnight lending rate a half percentage point to 8.25 percent at a policy meeting today, according to 17 of 21 economists in a Bloomberg survey. The other four predict a quarter-point increase."
The central bank is scheduled to announce its rate decision at 6 p.m. New York time.
The peso strengthened 0.2 percent to 515.26 per dollar.
"The yield for a basket of five-year peso bonds in inflation- linked currency units fell 8 basis points to 2.97 percent, according to Bloomberg composite prices."
"Mexico: The 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 data at 3:30 p.m. New York time.
The peso fell 0.3 percent to 10.3952 per dollar.
"The yield on Mexico's benchmark 10 percent bonds due December 2024 was little changed at 8.43 percent, according to Banco Santander SA."
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
"Last Updated: September 4, 2008 00:01 EDT"
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Euro Snaps Five-Day Decline Against Dollar Before Rate Decision
By Agnes Lovasz and Stanley White
"Sept. 4 (Bloomberg) -- The euro snapped five days of declines against the dollar, rising from a seven-month low, on speculation the European Central Bank will signal today it will resist cutting interest rates any time soon."
"The 15-nation currency also climbed from near its weakest in five months against the yen before the ECB's decision, at policy makers will keep the key rate at a seven-year high, according to a Bloomberg News survey. ECB President Jean-Claude Trichet will hold a press conference later. The pound traded near its lowest in three years against the yen and a record low versus the euro before the Bank of England's rate decision."
"``Recent ECB rhetoric clearly points to Trichet adopting a hawkish tone, keeping the door on possible rate cuts firmly shut,'' analysts led Russell Jones, the head of global fixed- income and currency research in London at RBC Capital Markets, wrote in a research note. ``Any hint of dovishness would come as a surprise.''"
"The euro rose to $1.4534 as of 8:42 a.m. in London, from $1.4498 yesterday. It touched $1.4385 yesterday, the lowest since Jan. 22. Against Japan's currency, the euro climbed to 157.60 yen after yesterday reaching 156.26, the weakest since March 31. The yen traded at 108.30 per dollar from 108.29."
"The euro has dropped 5.1 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."
"``You can't buy the euro as a long-term investment,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The ECB will acknowledge that the economic outlook has worsened, and that will accelerate the euro's decline.'' The euro may weaken to $1.4410 today, Soma forecast."
"The pound was at $1.7834, from $1.7768 yesterday, when it reached a two-year low of $1.7668. It traded at 193.25 yen, after touching 191.49, the weakest since January 2005."
To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net
"Last Updated: September 4, 2008 03:51 EDT"
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Canada's Dollar Rises Most in 2 Weeks as Bank Leaves Rate at 3%
By Chris Fournier
Sept. 3 (Bloomberg) -- Canada's currency rose the most in almost two weeks after the central bank left borrowing costs unchanged as traders cut bets on an interest-rate reduction.
The Canadian dollar appreciated versus the 16 most-actively traded currencies. The Bank of Canada lowered its key rate four times from December through April.
"``The market had moved to price in more than a full 25- basis-point cut this year, and there was very little in the Bank of Canada statement to validate those expectations,'' said Todd Elmer, currency strategist at Citigroup Global Markets Inc. in New York. ``As interest rates stabilize, there's the potential for the Canadian dollar to drift a bit stronger.''"
"The Canadian dollar rose 0.4 percent to C$1.0630 per U.S. dollar at 2:07 p.m. in Toronto, from C$1.0672 yesterday, the biggest jump since Aug. 21. Canada's dollar earlier weakened to C$1.0777, the lowest since August 2007. One Canadian dollar buys 94.06 U.S. cents."
"The currency declined in the four sessions before today on speculation the central bank would cut interest rates as the economy slowed. Canada's second-quarter gross domestic product expanded at a 0.3 percent annualized rate, half the pace economists on average had predicted, a report showed last week."
"The target rate of 3 percent on overnight loans between commercial banks remains ``appropriately accommodative,'' while global inflationary pressures ``remain elevated,'' the Bank of Canada said today. Policy makers next meet on Oct. 21."
`Stay at 3 Percent'
"``The bank is not giving any sort of signal that they're about to cut rates any time soon,'' said Carlos Leitao, chief economist at Montreal-based Laurentian Bank Securities Inc., a unit of Canada's seventh-largest bank. ``The overnight rate will stay at 3 percent for at least another four months, hence the Canada-U.S. rate spread will remain unchanged and that should be positive for the Canadian dollar.''"
The Federal Reserve's target rate is 2 percent.
"Bankers' acceptances futures contracts for December climbed 10 basis points, or 0.10 percentage point, to 2.93 percent. The futures have settled at a three-month lending rate averaging 16 basis points above the central bank's target since Bloomberg began tracking the data. The contract had declined 24 basis points between Aug. 22 and yesterday."
"``There was some concern in the market that the bank may cut,'' said Dustin Reid, a senior foreign exchange strategist at ABN Amro Bank NV in Chicago. ``We're seeing some relief and buying of Canadian dollars on the back of that.''"
Currency Forecast
"Leitao predicts the central bank will raise rates in the second quarter next year. Canada's dollar will trade at C$1.05 by the end of 2008, he said."
"Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.10 against the U.S. dollar by the end of 2009, according to the median forecast in a Bloomberg News survey of 31 economists."
The yield on Canada's 10-year government bond was little changed at 3.48 percent. The price of the 4.25 percent security maturing in June 2018 rose 2 cents to C$106.31. The yield on the two-year bond advanced 5 basis points to 2.72 percent.
"The 10-year bond yielded 76 basis points more than the two- year security, down from 82 basis points yesterday."
"The two-year bond's yield will rise to 3.09 percent by the end of this year, while the 10-year bond's yield will increase to 3.87 percent, according to the median forecasts of economists surveyed by Bloomberg."
"The yield advantage of the 10-year U.S. Treasury note compared with similar-maturity Canadian government bonds was 23 basis points, compared with 25 basis points yesterday. The Canadian 10-year bond yielded 36 basis points more than its U.S. counterpart on Jan. 22."
"Canadian government bonds returned 5.1 percent so far this year, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 4.4 percent during the same period."
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
"Last Updated: September 3, 2008 14:09 EDT"
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European Two-Year Bonds Fall as ECB May Leave Rates Unchanged
"Sept. 3 (Bloomberg) -- European two-year government notes fell on concern yields are too low to offer value, given that the European Central Bank may leave interest rates unchanged tomorrow."
"Two-year notes fell a second day as 52 out of 53 economists surveyed by Bloomberg forecast the ECB will keep its main refinancing rate at 4.25 percent tomorrow. Bonds also erased gains as regional stocks pared earlier losses, diminishing demand for the safest of assets."
"``We're suffering from altitude sickness,'' said Charles Diebel, the head of European fixed-income strategy in London at Nomura International Plc. ``Yields are low and few people are willing to press the market higher. ``It's a bit of caution ahead of the ECB.''"
"The decline pushed the yield on the two-year note 4 basis points higher to 4.12 percent by 4:40 p.m. in London. The 4.75 percent note due June 2010 fell 0.06, or 60 euro cents per 1,000- euro ($1,446) face amount, to 101.02. The yield on the 10-year German bund, the region's benchmark government security, was little changed at 4.14 percent. Yields move inversely to bond prices."
"Traders pared bets the central bank will lower interest rates by the end of the year, with the implied yield on the December Euribor interest-rate futures contract rising 1 basis point to 5.07 percent."
"The Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 1.4 percent."
"European bonds have outperformed U.S. Treasuries in the second half on speculation the region is entering a recession. German bonds have handed investors a 3.4 percent return since the end of June, compared with a 2.1 percent return for U.S. Treasuries, according to Merrill Lynch & Co. indexes."
Yield Spread
The difference in yields between two-year German notes and U.S. securities of an equivalent maturity rose 3 basis points to 1.87 percentage points today.
"European retail sales fell 0.4 percent in July from a month earlier, according to figures from the European Union's statistics office in Luxembourg, which started to compile the data in 1995. Economists surveyed by Bloomberg expected an increase of 0.1 percent. The previous month's figure was revised to minus 0.9 percent from minus 0.6 percent."
"The region's economy contracted 0.2 percent in the second- quarter, pushing it to the brink of a recession, figures also showed today."
"The central bank projected in June that economic growth will slow to about 1.8 percent this year and 1.5 percent in 2009, from 2.7 percent last year. Inflation will average 3.4 percent this year and 2.4 percent in 2009, the ECB said."
To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net
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Foreigners Sell Brazilian Stocks for Third Month (Update1)
By Paulo Winterstein and Telma Marotto
"Sept. 3 (Bloomberg) -- Foreign investors pulled money out of Brazil's stock market for a third straight month in August, spurred by the steepest plunge in commodities in at least five decades."
"The Bovespa stock exchange recorded a net loss of 2.25 billion reais ($1.36 billion) last month as investors from abroad sold 36.157 billion reais of stocks in August and bought 33.906 billion, the exchange said on its Web site."
"Foreigners' selling of Brazilian stocks slowed last month. In June and July, they sold about 15 billion reais more shares than they bought."
"Slumping commodity prices has led to the decline in the Bovespa index, which has fallen 26 percent from a May 20 record. Almost half of the index is made up of materials companies. A contraction in credit markets due to subprime losses also led investors to sell riskier assets such as emerging markets, said Ures Folchini, who oversees proprietary trading at WestLB AG's Brazilian unit."
"``The fundamentals that led the market to highs has turned upside down, with the dollar strengthening and commodities falling,'' Folchini said. ``Foreign banks that before were a source of funding are now taking back funds. The outflow will likely continue, but at a slower pace, and in the meantime local investors are buying.''"
The Reuters/Jefferies CRB Index of commodities has declined 20 percent over the past two months.
"Institutional investors in August bought 389 million reais more than they sold, while state and private companies added 1.3 billion reais and financial institutions accounted for an inflow of 628 million reais more than they sold."
To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net
"Last Updated: September 3, 2008 10:20 EDT"
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Brazil Stocks Fall as Citigroup Sees Protracted Commodity Slump
By Paulo Winterstein and William Freebairn
"Sept. 3 (Bloomberg) -- Brazilian stocks fell to the lowest in two weeks, led by energy and metal producers, after oil prices dropped and Citigroup Inc. said the slump for commodity shares may worsen."
"Petroleo Brasileiro SA and Cia. Vale do Rio Doce, the two biggest stocks on the Bovespa index, slid as oil prices declined for a fourth day and Citigroup strategist Tobias Levkovich said it's still too early to buy energy, materials, capital goods and industrial producers. Gerdau SA led a retreat for steelmakers after ArcelorMittal, the world's largest producer, cut prices in South Africa."
"``Investors have a lot less appetite for equities, especially when you have such a heavily weighted commodities index,'' said Ures Folchini, head of proprietary trading at WestLB AG's Brazilian unit."
"The Bovespa dropped 877.40, or 1.6 percent, to 53,527.01. Mexico's Bolsa declined 0.2 percent, while Chile's Ipsa index fell 0.9 percent. The MSCI Latin America index dropped 1.9 percent."
"Petrobras, as the state-controlled oil company is known, fell 1.5 percent to 32.60 reais. Crude oil slipped 0.3 percent to $109.35 a barrel as Royal Dutch Shell Plc and ConocoPhillips said that Hurricane Gustav caused no damage to drilling rigs and platforms in the Gulf of Mexico. OGX Petroleo & Gas Participacoes SA, the petroleum exploration company controlled by Brazilian billionaire Eike Batista, fell the most in three weeks, dropped 4.6 percent to 520 reais."
"Vale, the world's biggest iron-ore producer, reversed earlier gains after it said it won't confirm a Steel Business Briefing report that it raised 2008 prices for Chinese customers by about 20 percentage points above the increases agreed to earlier this year. Steel Business Briefing cited an e-mail sent by the Brazilian mining company to customers in its report. Vale slipped 0.7 percent to 36.65 reais."
Steelmakers Decline
"Gerdau, Latin America's biggest steelmaker, dropped 3.8 percent to 28.25 reais. Usinas Siderurgicas de Minas Gerais SA, the second-biggest Brazilian steelmaker, fell 4 percent to 51.18 reais. Cia. Siderurgica Nacional SA, the third-biggest, slid 2.9 percent to 52.16 reais."
"The steelmakers dropped after ArcelorMittal said it will lower prices for long products, used mainly in construction, by an average of 5.6 percent."
The Reuters/Jefferies CRB Index of commodities has declined 20 percent over the past two months. The Bloomberg World Iron/Steel Index of global steel and iron-ore equities today dropped 2.9 percent.
"``More stringent lending standards typically lead broader industrial activity to the downside by about nine months, with related stock prices suffering alongside,'' Chief U.S. Equity Strategist Levkovich wrote in a note to clients today."
Foreigners' Selling
"Foreign investors pulled money out of Brazil's stock market for a third straight month in August, spurred by the steepest plunge in commodities in at least five decades."
"Slumping commodity prices has led to the decline in the Bovespa index, which has fallen 26 percent from a May 20 record. Almost half of the index is made up of materials companies."
"JBS SA, the world's biggest beef producer, tumbled 9.4 percent to 5.80 reais after Moody's Investors Service said it may cut the company's debt rating to B2 from B1 if U.S. antitrust regulators approve pending acquisitions of National Beef Packing Co. and Smithfield Beef Group Inc. this year. In a statement yesterday, Moody's cited concerns about JBS's ability to generate cash to pay debts once the acquisitions are completed."
"Tam SA, Brazil's biggest airline, led gains in the industry as oil fell. Fuel accounts for about 40 percent of Brazilian airlines' costs. Tam added 3 percent to 34.80 reais. Empresa Brasileira de Aeronautica SA, the world's fourth-largest airplane maker, gained 1.4 percent to 14.45 reais."
Bolsa Declines
"Mexico's Bolsa fell for the first time in three days, led by steelmaker Grupo Simec SAB on concern global prices may decline."
"Simec fell to the lowest in four months after ArcelorMittal's South African unit said it would cut prices, sending global steelmakers lower. Simec is a unit of Mexico's largest steelmaker, Industrias CH SAB."
Simec declined 4.2 percent to 43.23 pesos.
"In other Latin America markets, Argentina's Merval advanced less than 0.1 percent, Colombia's IGBC index dropped 0.3 percent and Peru's Lima General dropped 0.5 percent."
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; William Freebairn in Mexico City wfreebairn@bloomberg.net.
"Last Updated: September 3, 2008 16:29 EDT"
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Treasury 10- and 30-Year Securities Gain on Inflation Outlook
By Dakin Campbell and Daniel Kruger
"Sept. 3 (Bloomberg) -- Ten-year Treasury note yields touched a four-month low as falling commodity prices fueled speculation inflation will ease, stoking demand for longer-term government debt."
"The difference in yield between 10- and two-year notes narrowed as shorter-maturity debt underperformed longer-dated securities. Crude oil declined for a fourth day as global growth continued to slow, and traders' expectations for inflation neared a five-year low. Yields on 30-year Treasury bonds were near an all-time low."
"``The bond yield is just stunning,'' said William O'Donnell, U.S. government bond strategist at UBS Securities in Stamford, Connecticut, one of 19 primary dealers that trade with the Federal Reserve. Investors are ``more willing to move out the curve'' to buy longer-dated maturities."
"The benchmark 10-year note's yield fell 3 basis points, or 0.03 percentage point, to 3.70 percent at 4:23 p.m. in New York, according to BGCantor Market Data. It touched 3.69 percent, the lowest since May 1. The 4 percent security due in August 2018 climbed 1/4, or $2.50 per $1,000 face amount, to 102 14/32."
"The 30-year bond's yield declined 4 basis points to 4.32 percent. It was 22 basis points above the 4.10 percent reached on Jan. 23, the lowest yield since February 1977, according to data from Bloomberg and the Treasury Department. The two-year note's yield rose 1 basis point to 2.27 percent."
`Buying Dollar Assets'
Treasuries earlier were little changed after a Commerce Department report showed factory orders gained 1.3 percent in July following a revised 2.1 percent increase in June that was higher than previously estimated. The median forecast in a Bloomberg News survey of 63 economists was for a 1 percent rise.
"Falling commodity prices and a strengthening dollar increased demand for U.S. assets. Most stocks retreated, with the Standard & Poor's 500 Index declining 0.2 percent."
"``It looks like people are buying dollar assets,'' said Michael Franzese, head of government-bond trading for Standard Chartered in New York. ``They don't want to buy equities; they want to go into the Treasury market for the flight to safety.''"
Crude oil fell 0.3 percent to $109.40 as oil companies said Hurricane Gustav caused no damage to drilling rigs and platforms in the Gulf of Mexico. The dollar was near a seven-month high versus the euro.
Inflation Expectations
"Traders' expectations for inflation over the next decade reached a five-year low. The difference in yields between 10- year Treasury Inflation Protected Securities, or TIPS, and regular Treasuries fell to 2.00 percentage points, the lowest since October 2003, from this year's high of 2.68 percentage points in March. The figure reflects the inflation rate traders expect for the next decade."
"``Right now everybody is liquidating TIPS,'' said Carl Lantz, an interest-rate strategist in New York at Credit Suisse Securities USA LLC, another primary dealer. ``The whole energy and commodity complex feels like a falling knife.''"
"Citing a rising danger of inflation, the boards of the Chicago, Dallas and Kansas City Fed banks lobbied in July for a 25 basis-point increase in the central bank's 2.25 percent discount rate, according to minutes released yesterday of officials' discussions prior to the Fed's Aug. 5 policy meeting."
"Boston Fed President Eric Rosengren expressed less concern about inflation in a speech today in Manchester, New Hampshire. The U.S. credit crunch has blunted the effect of the fastest interest-rate cuts in two decades, he said, signaling he opposes raising rates."
"The difference in yields, or spread, between two- and 10- year Treasury notes narrowed to 1.44 percentage points, from 1.48 percentage points yesterday. The so-called flatter yield curve indicates investors are less worried about inflation."
"The spread will widen to 1.58 percentage points in the fourth quarter, according to a Bloomberg survey."
Treasuries Underperform
"U.S. notes have underperformed European bonds in the second half of the year. Treasuries have returned 2.1 percent since the end of June, compared with 3.4 percent from German government bonds, according to Merrill Lynch & Co.'s U.S. Treasury Master and German Federal Governments indexes."
"Business across most of the U.S. was ``slow'' last month, while almost all Fed districts reported pressure to raise prices because of higher commodity costs, the central bank said in the so-called Beige Book, its regional economic survey."
"Portfolio managers maintained a pessimistic market position during the week that ended Sept. 2, according to a survey conducted by Stone & McCarthy Research Associates. The 20 money managers surveyed kept holdings at 96.5 percent of a duration- weighted benchmark index, the same as last week and the shortest since at least the beginning of the year, the Princeton, New Jersey-based firm said. A reading of less than 100 indicates investors favor shorter-maturity debt."
`Buying Time'
"U.S. payrolls likely dropped for an eighth month in August, a Labor Department report Sept. 5 will show, according to a Bloomberg survey of 75 economists."
"Traders and investors are waiting for the report before they make large bets in the Treasury market, said Sean Simko, who oversees $8 billion at SEI Investments Co. in Oaks, Pennsylvania."
"``People are just buying time until Friday to get a better picture of the economy,'' Simko said. ``The uncertainties in the marketplace are keeping Treasuries well bid until we get some direction.''"
"The U.S. economy will probably grow at a 1.5 percent pace in 2008, compared with 2 percent last year, according to the median forecast in a Bloomberg survey."
To contact the reporters on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net
"Last Updated: September 3, 2008 16:34 EDT"
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Bank Bond Risk Rises on Concern of Losses From Oil Price Slump
By Abigail Moses
Sept. 3 (Bloomberg) -- The cost of protecting European bank bonds from default rose on concern oil's decline will trigger losses among financial companies that bought commodities to hedge against inflation.
"Credit-default swaps on the Markit iTraxx Financial index of 25 European banks and insurers climbed 2 basis points to 91, according to JPMorgan Chase & Co. prices at 1:30 p.m. in London. Contracts on the subordinated debt rose 5.5 basis points to 165, JPMorgan prices show."
"``A collapse in commodity prices will lead to stresses in hedge funds and banks,'' said Puneet Sharma, head of investment- grade credit research at Barclays Capital in London. ``Long commodities has been a crowded trade and it shows signs of cracking.'' A long position is a bet prices will rise."
"Oil dropped for a fourth day to $108.30 per barrel, close to a five-month low, after Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico."
"Ospraie Management LLC, once the largest commodity hedge- fund firm, will close its biggest fund after slumping 38.6 percent this year because of bad bets on commodity stocks. The Morgan Stanley Commodity Related Index of 20 mining, energy and agricultural companies declined 13 percent in July and August as the slowing global economy cut demand for raw materials."
"Credit-default swaps on the Markit iTraxx Europe index of 125 companies with investment-grade ratings climbed 2 basis points today to 100, according to JPMorgan."
High-Yield
"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 6 basis points to 544, JPMorgan prices show."
"Credit-default swaps on U.S. government debt fell 1 basis point to 14, the lowest in almost two months, according to CMA Datavision prices."
"UBS AG rose 3 basis points to 127 and HVB Group, UniCredit SpA's German banking unit, increased 3 basis points to 67, CMA prices show. OAO Gazprom, Russia's natural-gas exporter, jumped 7 basis points to 268."
"A basis point on a credit-default swap contract protecting 10 million euros ($14.5 million) of debt from default for five years is equivalent to 1,000 euros a year."
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a decline in the perception of credit quality; a drop signals the opposite."
"Credit-default swaps on the Markit CDX North America Investment Grade index, a benchmark gauge of credit risk linked to the bonds of 125 companies in the U.S. and Canada, rose 1.5 basis points to 144 in New York, according to broker Phoenix Partners Group."
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
"Last Updated: September 3, 2008 08:47 EDT"
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"Gold Rises First Day in Five as Dollar Rally, Oil Losses Pause "
By Feiwen Rong
"Sept. 4 (Bloomberg) -- Gold gained for the first time in five days as the dollar's rally against the euro paused and crude oil's decline stalled, boosting the metal's appeal as a store of value."
Bullion rose as the dollar fell as much as 0.2 percent against the euro after rallying to the highest in more than seven months yesterday. Oil in New York gained as U.S. Gulf oil facilities seemed to have avoided damage from Hurricane Gustav.
"``Investors are trying to work out the valuation price for gold when we face a strong U.S. dollar, slow economic growth and oil coming under pressure,'' Jonathan Barratt, managing director of Commodity Broking Services, said by phone from Sydney today. ``In light of that, gold is holding up quite well.''"
"Bullion for immediate delivery advanced 0.6 percent to $805.82 an ounce at 2:58 p.m. in Singapore. Bullion touched $789.65 an ounce yesterday, the lowest since Aug. 19. Silver for immediate delivery was 0.1 percent lower at $12.90 an ounce."
"Crude oil for October delivery rose as much as 0.6 percent to $110 per barrel before trading at $109.10 a barrel on the New York Mercantile Exchange by 2:56 p.m. in Singapore. The contract fell 7.5 percent in the past four days, reaching a five-month low Sept. 2."
"The dollar fell to $1.4528 against the euro and last traded unchanged from $1.4498 yesterday in New York. The dollar rose to $1.4385 against the euro yesterday, the highest since Jan. 22."
Cheap Gold
"It's likely that bullion can rise even if crude oil resumes its downtrend in the short term, said Greg Canavan, Sydney-based analyst at Fat Prophets Management Ltd."
"``Gold is very cheap relative to oil and it is therefore conceivable that gold could rally while oil continues to struggle from a slowing global economy,'' Canavan said. Gold is trading at an almost all-time low relative to the price of oil, as shown by Bloomberg Data."
"Gold may gain 10 percent by the end of the year driven by demand for jewelry during the Indian wedding and festival season, said JPMorgan Chase & Co."
"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 to December, according to a study by the broker."
December-delivery gold gained 0.2 percent to $809.70 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
December-delivery gold traded in Shanghai gained 0.5 percent to 180.03 yuan a gram ($819 an ounce).
"In Japan, gold for August delivery on the Tokyo Commodity Exchange was 1.1 percent higher at 2,815 yen a gram ($810 an ounce)."
To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net
"Last Updated: September 4, 2008 03:41 EDT"
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Indian Rupee Advances on Speculation Exporters to Buy Currency
By Anoop Agrawal
Sept. 4 (Bloomberg) -- India's rupee strengthened for the first time in six days on speculation exporters will purchase the currency after it slumped to an 18-month low.
"The currency also rebounded 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 11.5 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 0.2 percent to 44.425 a dollar as of 11:40 a.m. in Mumbai, versus 44.49 yesterday, according to data compiled by Bloomberg."
The dollar's 14-day relative strength index rose to as high as 76 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."
Gains in the currency were limited on speculation investors bought the U.S. dollar as it rose to the highest in more than seven months against the euro. It has gained against nine of the 10 most-traded currencies in Asia in the past week.
"``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 euro was at $1.44493 against the dollar after yesterday touching $1.4385, the lowest since Jan. 22. The 15-nation currency fell before a meeting today at which the European Central Bank will keep interest rates on hold, according to a Bloomberg News survey of economists."
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
"Last Updated: September 4, 2008 02:58 EDT"
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Japanese Bonds Advance as Cheaper Oil Eases Inflation Concern
"Sept. 3 (Bloomberg) -- Japan's government bonds rose for a second day after crude oil prices fell to a five-month low, damping speculation the central bank will raise interest rates to combat inflation."
"Ten-year yields also declined from near the highest in more than two weeks after a U.S. report showed construction spending was weaker than economists forecast. Inflation-linked debt yesterday yielded more than conventional bonds for the second time since the securities were introduced in March 2004, signaling investors expect gains in consumer prices to slow."
"``There are concerns over the economic deceleration and credit-market risk,'' said Nobuto Yamazaki, executive fund manager at Diam Asset Management in Tokyo. ``Yields cannot rise as oil prices fell, reducing inflation risk.''"
"The yield on the 1.5 percent bond due September 2018, which was auctioned yesterday, fell 4 basis points to 1.46 percent as of 4:18 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. A basis point is 0.01 percentage point."
Ten-year bond futures for September delivery rose 0.24 to 138.35 as of the afternoon close on the Tokyo Stock Exchange.
"U.S. 10-year yields fell to the lowest since May yesterday after the Commerce Department said construction spending declined by 0.6 percent in July, compared with a 0.4 percent decrease forecast by economists surveyed by Bloomberg News."
"Crude oil for October delivery tumbled 5 percent in the last two days to settle at $109.71 a barrel on the New York Mercantile Exchange, the lowest close since April 8."
`Higher Prices'
"``Bonds are likely to test higher prices given the favorable conditions,'' said Akihiko Inoue, an analyst at Mizuho Investors Securities Co. in Tokyo. ``Because of the fall in oil prices, funds are more likely to flow into the bond market.''"
"Japan's core prices, which exclude fresh food, climbed 2.4 percent in July from a year earlier after rising 1.9 percent the previous month, the government reported last week."
"Ten-year conventional government debt yielded 1 basis point less than similar-maturity inflation-linked bonds, having yielded 8 basis points more a week ago, according to data compiled by Bloomberg."
"``Second-round effects'' of inflation are ``unlikely to emerge in the near term,'' Bank of Japan Governor Masaaki Shirakawa said in a speech yesterday in Nagoya, central Japan. ``Long-term yields are around the mid-1 percent range now because people don't expect inflation to take hold in the Japanese economy.''"
"There is no chance the central bank will reduce interest rates by year-end, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps."
Business Investment
"The gain in bonds was limited on speculation a Ministry of Finance report this week will show local businesses increased investment last quarter, helping the world's second-largest economy avoid a recession."
"Should capital spending figures come out better than expected, it may prompt an upward revision in second-quarter gross domestic product figures to be released next week, according to JPMorgan Securities Japan Co. The economy shrank at an annualized 2.4 percent pace in the three-month period, according to an initial government estimate released last month."
"``Preliminary GDP figures don't have good data to include capital spending, so it usually gets revised up'' with the investment figures, said Hitomi Kimura, a bond strategist at JPMorgan Securities in Tokyo. ``Any positive data would easily push 10-year yields above 1.5 percent.''"
Capital Spending
"Capital spending excluding software 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 economists surveyed by Bloomberg before the Sept. 5 report."
"The potential choice of Taro Aso to succeed ex-Prime Minister Yasuo Fukuda, who resigned on Sept. 1, may lead to higher government spending, damping demand for bonds."
"``If Aso does become prime minister, he probably will increase fiscal spending, which will lead to increased bond issuance,'' JPMorgan's Kimura said. ``In the medium to long term, it's bond negative.''"
"The government should consider postponing its goal of balancing the budget by 2011 because Japan may be in a recession, Aso said last month."
Fukuda's government on Aug. 29 said it would spend about 2 trillion yen ($18 billion) on a program of measures to revive the economy. It also announced a one-off tax cut for low-income earners that may have to be funded by bond sales later this year should tax revenue fall short of projections.
"``Although there is concern of increased public spending due to the political situation, it doesn't outweigh economic 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 won't erase concerns of a global economic slowdown and credit-market losses, nor the retreat in inflation expectations.''"
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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Australia's July Trade Balance: Summary (Table)
By Daniel Petrie
Sept. 4 (Bloomberg) -- Following is a table of Australia's balance of trade figures for July as provided by the Australian Bureau of Statistics in Sydney.
==============================================================================
July June May April March Feb. Jan.
2008 2008 2008 2008 2008 2008 2008
==============================================================================
-------------------- AUD Billion ----------------------
Trade Balance -0.717 0.351 -0.280 0.630 -2.378 -2.997 -2.210
Exports 22.880 23.053 22.554 22.201 19.635 18.648 19.405
Goods 18.308 18.473 18.026 17.830 15.274 14.332 15.147
Agricultural 2.194 2.273 2.361 2.397 2.256 2.128 2.138
Non-agricultural 16.113 16.200 15.665 15.433 13.018 12.205 13.009
Services 4.572 4.580 4.528 4.371 4.361 4.316 4.258
Imports 23.597 22.702 22.834 21.571 22.013 21.646 21.615
Goods 19.356 18.521 18.677 17.468 17.917 17.623 17.573
Consumer 5.113 5.198 5.239 4.935 5.219 5.061 5.129
Capital 4.017 4.216 3.818 3.772 4.226 3.990 3.747
==============================================================================
July June May April March Feb. Jan.
2008 2008 2008 2008 2008 2008 2008
==============================================================================
-------------------- AUD Billion ----------------------
" Intermediate, other 10.226 9.108 9.621 8.761 8.472 8.573 8.697"
Services 4.241 4.181 4.157 4.103 4.097 4.022 4.043
------------- Level Change (AUD Billion) --------------
Trade Balance 0.37 0.07 -0.35 -1.75 -0.62 0.79 0.55
Exports -0.17 0.50 0.35 2.57 0.99 -0.76 0.53
Goods -0.17 0.45 0.20 2.56 0.94 -0.82 0.40
Agricultural -0.08 -0.09 -0.04 0.14 0.13 -0.01 -0.01
Non-agricultural -0.09 0.54 0.23 2.42 0.81 -0.80 0.41
Services -0.01 0.05 0.16 0.01 0.05 0.06 0.13
Imports 0.90 -0.13 1.26 -0.44 0.37 0.03 1.08
Goods 0.84 -0.16 1.21 -0.45 0.29 0.05 0.99
Consumer -0.09 -0.04 0.30 -0.28 0.16 -0.07 0.15
Capital -0.20 0.40 0.05 -0.45 0.24 0.24 -0.10
" Intermediate, other 1.12 -0.51 0.86 0.29 -0.10 -0.12 0.94"
Services 0.06 0.02 0.05 0.01 0.08 -0.02 0.09
==============================================================================
July June May April March Feb. Jan.
2008 2008 2008 2008 2008 2008 2008
==============================================================================
------------------------ MoM% -------------------------
Trade Balance n/a 25.4% -55.6% -73.5% -20.7% 35.6% 33.0%
Exports -0.8% 2.2% 1.6% 13.1% 5.3% -3.9% 2.8%
Goods -0.9% 2.5% 1.1% 16.7% 6.6% -5.4% 2.7%
Agricultural -3.5% -3.7% -1.5% 6.3% 6.0% -0.5% -0.4%
Non-agricultural -0.5% 3.4% 1.5% 18.6% 6.7% -6.2% 3.2%
Services -0.2% 1.1% 3.6% 0.2% 1.0% 1.4% 3.2%
Imports 3.9% -0.6% 5.9% -2.0% 1.7% 0.1% 5.2%
Goods 4.5% -0.8% 6.9% -2.5% 1.7% 0.3% 5.9%
Consumer -1.6% -0.8% 6.2% -5.4% 3.1% -1.3% 3.0%
Capital -4.7% 10.4% 1.2% -10.7% 5.9% 6.5% -2.6%
" Intermediate, other 12.3% -5.3% 9.8% 3.4% -1.2% -1.4% 12.0%"
Services 1.4% 0.6% 1.3% 0.1% 1.9% -0.5% 2.4%
==============================================================================
Note: Data are seasonally adjusted. Percent changes calculated by Bloomberg news from seasonally adjusted data provided by the Australian Bureau of Statistics. Changes may not match those on the ABS press release due to their rounding methodology.
Source: Australian Bureau of Statistics
To contact the reporter on this story: Daniel Petrie in Sydney at dpetrie5@bloomberg.net
"Last Updated: September 3, 2008 21:42 EDT"
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Malaysian Exports Increase at Fastest Pace Since 2004 (Update1)
By Shamim Adam and Michael Munoz
Sept. 4 (Bloomberg) -- Malaysia's exports unexpectedly rose at the fastest pace in almost four years in July as companies increased shipments of electronics goods and commodities.
"Overseas sales increased 25.4 percent from a year earlier to 63.4 billion ringgit ($18.5 billion), after climbing a revised 18.6 percent in June, the Trade Ministry said in a statement in Kuala Lumpur today. That exceeded the 15.4 percent median estimate and all 14 forecasts in a Bloomberg News survey."
"Commodities have held up Malaysian exports, prompting the government to forecast 2008 growth will be 5.7 percent, higher than most economists' estimates. The central bank has kept interest rates unchanged this year to avoid a deeper slowdown after the Southeast Asian economy grew at the slowest pace in a year last quarter on easing manufacturing and domestic spending."
"``The strong demand for electronics and commodities was a boost to exports,'' said Lee Heng Guie, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``We don't think it will continue and exports will come off significantly from this level, especially in the fourth quarter. The U.S. slowdown will continue to be a drag.''"
"Shipments to the U.S. rose 1.9 percent to 7.77 billion ringgit in July from a year earlier on higher sales of palm oil and optical equipment, the trade ministry said. Sales to the European Union jumped 6.6 percent, while exports to China surged 74.1 percent amid an increase in shipments of electrical and electronics goods and crude petroleum."
Palm Oil
"Exports of palm oil jumped 77 percent in July from a year earlier, and gained 21 percent from June. Sales of crude oil climbed 58.8 percent from a year ago, while shipments of liquefied natural gas rose 33.4 percent."
Exports may weaken in the coming months as prices of crude and palm oil ease. Malaysia is Southeast Asia's second-largest oil and gas producer and the world's No. 2 palm oil seller.
"Palm oil has tumbled 45 percent from a record 4,486 ringgit on March 4 amid concerns that global supply may exceed demand. Global crude prices are about 26 percent lower than the record $147.27 a barrel on July 11."
"``Global growth is projected to weaken further with a more protracted slowdown in a number of the developed economies and some moderation in growth in the emerging economies,'' the central bank said last week. ``The domestic economy will be affected by these external developments.''"
"Sales of Unisem Bhd. semiconductors and other electrical and electronics goods rose 12.9 percent from a year earlier, the biggest gain this year. Such goods accounted for more than a third of total exports in July."
"Imports climbed 14.8 percent in July, leaving a trade surplus of 14.51 billion ringgit."
"Exports increased 17 percent in the first seven months from a year earlier. Imports rose 9.4 percent in the same period, leaving a trade surplus of 82 billion ringgit."
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
"Last Updated: September 4, 2008 02:17 EDT"
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European Government Bonds Fall Before ECB's Key Rate Decision
Sept. 4 (Bloomberg) -- European government bonds fell before a meeting of the region's central bank at which policy makers are likely to resist a cut in interest rates to contain inflation running at almost twice its desired pace.
"The Frankfurt-based European Central Bank will keep the main refinancing rate at a seven-year-high of 4.25 percent today, according to all but one of 53 economists surveyed by Bloomberg. The central bank will announce its decision at 1:45 p.m. in Frankfurt and ECB President Jean-Claude Trichet will hold a press conference at 2:30 p.m."
"``The market is bracing itself for what is likely to be some hawkish rhetoric from the ECB,'' said Richard McGuire, a senior fixed-income strategist in London at RBC Capital Markets, part of Royal Bank of Canada. ``The key thing to watch is the 2009 inflation projection, which will be an instant snapshot into where their policy stance will be shifting.''"
"The yield on the two-year note rose 6 basis points to 4.18 percent by 8:33 a.m. in London. The 4.75 percent note due June 2010 fell 0.1, or 1 euro per 1,000-euro ($1,453) face amount, to 100.93. The yield on the 10-year German bund, the region's benchmark government security, climbed 4 basis points to 4.18 percent. Yields move inversely to bond prices."
"The ECB kept its key rate on Aug. 7 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, it said yesterday."
Yield Spread
"German 10-year notes yielded less than 1 basis point than two-year securities, or the least since July 10. The central bank may not lower interest rates until the first quarter of next year, according to the median forecast of 26 economists surveyed by Bloomberg."
"France plans to sell bonds today. The government will auction 3.5 percent notes due in 2015, 4 percent notes maturing in 2018 and 4 percent securities due in 2038. Spain is also due to issue government debt today."
"European bonds have outperformed U.S. Treasuries in the second half of the year on speculation 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
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This week i had some troubles conecting to bloomber 's website. Sorry
for that...
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A blog for global investors, with information about most of the world financial markets. Updated frequently, every day, with my views on these markets. Bear or Bull? Read to discover!
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