Ruble Trades Near 1 1/2-Week Low as Russia Offers Loan to Banks
By Ewa Krukowska
"Sept. 17 (Bloomberg) -- Russia's ruble was little changed, holding near a 1 1/2-week low against the dollar-euro basket, after the Finance Ministry pumped $44 billion into its three largest banks and halted stock trading for a second day."
"The ruble fell versus the euro as the Micex Index of stocks sank 3.1 percent when trading was suspended indefinitely, bringing its three-day drop to 25 percent. Investors sold emerging-market assets after the collapse of Lehman Brothers Holdings Inc. and the U.S. government rescued insurer American International Group Inc. The Russian currency gained against the dollar."
"``Now the epicenter is global credit markets and in Russia it is the same too,'' said Martin Blum, the head of emerging-markets economics and strategy in Vienna at UniCredit MIB. ``So far there hasn't been a huge change in sentiment, only some stabilization following the morning announcement about the loan to banks.''"
"The ruble was at 30.3789 versus the basket at 6:37 p.m. in Moscow, from 30.3808 yesterday and near 30.3898 reached two days ago, the lowest since Sept. 4."
"The currency declined to 36.2825 per euro, from 36.2048 yesterday. Against the dollar, the ruble rose to 25.5558, from 25.6158, as the Federal Reserve's $85 billion bailout of AIG failed to quell concern credit-market losses will deepen."
"The ruble may advance to 29.9 against the basket at the end of this year, according to Blum."
"The central bank, Bank Rossii, keeps the currency within a trading band against the basket to limit the effect of its fluctuations on the competitiveness of Russian exports."
Government Loan
"The Finance Ministry extended the repayment period on loans available to OAO Sberbank, VTB Group and OAO Gazprombank to three months from one week."
"Russia's markets are facing the biggest test since the government defaulted in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation's stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman prompted a flight from emerging markets."
"The government yesterday injected $20 billion into the interbank lending market via central bank and Finance Ministry auctions in a bid to contain soaring borrowing rates as credit dried up. The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand, leapt 25 basis points to a record 11.08 percent."
To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net
"Last Updated: September 17, 2008 11:13 EDT"
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UBI Banca Risk Related to Lehman Is `Very Contained' (Update2)
By Elisa Martinuzzi
"Sept. 17 (Bloomberg) -- Unione di Banche Italiane Scpa, Italy's fourth-largest bank by branches, said its risks related to Lehman Brothers Holdings Inc., which filed for bankruptcy on Sept. 15, are ``very contained.''"
"The Bergamo-based bank owns 11.3 million euros ($16.1 million) of Lehman bonds and is losing about 7 million euros on derivatives, it said in a stock-exchange statement today. UBI also has a cash deposit of 7.6 million euros with Lehman."
"Financial institutions around the world are being asked to disclose their holdings of assets related to Lehman, after the U.S. investment bank filed the biggest bankruptcy in history. Lehman bondholders may lose more than $111 billion following the collapse, Bank of America Corp. analysts said."
"UniCredit SpA and Assicurazioni Generali SpA, Italy's biggest bank and largest insurer, also said their liabilities linked to Lehman are limited."
UniCredit said in a statement today it has 12 million euros of drawn credit lines and ``net mark to market replacement risks'' of 26 million euros related to Lehman. It also has bonds and certificates with a nominal value of 120 million euros. Generali has a maximum of 110 million euros of ``net exposure'' to the U.S. firm's debt.
"Intesa Sanpaolo SpA, UniCredit's biggest rival, has on-balance sheet loans of about 51 million euros with Lehman and bonds with a nominal value in the region of 166 million euros. Banca Monte dei Paschi di Siena SpA, Italy's No. 3 bank, has about 50 million euros of ``exposure'' to Lehman, Il Sole 24 Ore reported today."
"Mediobanca SpA, the country's largest publicly traded investment bank, ``has no exposure either in shares or debt.''"
To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net
"Last Updated: September 17, 2008 09:56 EDT"
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Latin American Currencies: Colombian Peso Drops to One-Year Low
By Andrea Jaramillo
"Sept. 17 (Bloomberg) -- Colombia's peso declined to a one- year low as concern credit market losses will deepen depressed demand for higher-yielding, emerging-market assets."
"``Latin American currencies are adjusting to the continued uneasiness in the market,'' said Benito Berber, a strategist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut."
"The currency slid 2.1 percent to 2,148 per dollar at 11:45 a.m. in New York, from 2,104 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. It earlier touched 2,149.50, the weakest level since Sept. 18, 2007, the day the Federal Reserve began cutting its target lending rate from 5.25 percent to contain the credit market crisis."
"The Colombian peso has plunged 4.5 percent this week following the record bankruptcy filing by Lehman Brothers Holdings Inc. The Fed's $85 billion bailout of insurer American International Group Inc. late yesterday failed to ease risk aversion, according to Berber."
"The peso has also weakened as crude oil fell 35 percent from a record $147.27 a barrel reached on July 11. Oil is the biggest source of Colombian export revenue, accounting for about 25 percent of sales abroad. Crude oil for October delivery rose for the first time in three days today, increasing to $92.65 a barrel on the New York Mercantile Exchange."
Peso `Vulnerable'
"``The Colombian peso is among the most vulnerable currencies in the region because of its dependence on oil and the fact that it's not investment-grade,'' Berber said."
"Colombia's foreign debt is rated BB+, one level below investment grade, by Standard & Poor's and Fitch Ratings. Moody's Investors Service in June raised Colombia to Ba1, also one grade below investment quality."
"Earlier this year, S&P and Fitch boosted Brazil's and Peru's long-term foreign currency debt to BBB-, the lowest investment-grade rating."
"Oil prices have an impact on demand for Colombian exports to Venezuela, the nation's second-biggest trade partner after the U.S., Berber and colleague Flavia Cattan-Naslausky wrote in an RBS report today."
"``When oil prices are low, this decreases Venezuela's ability to buy goods from Colombia,'' the strategists wrote. Oil accounts for about 90 percent of Venezuela's exports."
"The yield on Colombia's benchmark 11 percent bonds due in July 2020 rose 23 basis points, or 0.23 percentage point, to 12 percent, according to Colombia's stock exchange. The bond's price plunged 1.367 centavo to 93.763 centavos per peso."
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
"Last Updated: September 17, 2008 11:50 EDT"
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U.S. Builders Began Work in August on Fewer Homes Than Forecast
By Bob Willis
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"Sept. 17 (Bloomberg) -- Builders in the U.S. broke ground on fewer houses than forecast in August, signaling the worst housing recession in a generation will continue to weigh on growth in coming months."
"Housing starts fell 6.2 percent in August to an annual rate of 898,000, the fewest since January 1991, the Commerce Department said in Washington. Building permits, a sign of future construction, dropped 8.9 percent to a 854,000 pace."
Builders are scaling back as stricter lending and record foreclosures swell the number of properties on the market. The housing and credit meltdowns that led to the collapse of Lehman Brothers Holdings Inc. may continue to subtract from economic growth for the rest of the year and into next.
"``The overall environment for housing remains weak, and we won't see any bounce-back in activity,'' Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, said before the report. ``A lot of people are finding it hard to get loans, and the pain continues to ratchet.''"
"Starts were projected to fall to a 950,000 annual pace from a previously estimated 965,000 million in July, according to the median forecast of 74 economists polled by Bloomberg News. Estimates ranged from 893,000 to 1.04 million."
The decrease in permits was also larger than anticipated.
"Compared to August 2007, work began on 33 percent fewer homes."
"Construction of single-family homes declined 1.9 percent to a 630,000 rate, today's report showed. Work on multifamily homes, such as townhouses and apartment buildings, dropped 15 percent from the prior month to an annual rate of 265,000."
Regional Breakdown
"Starts decreased in three of four regions, led by a 15 percent slump in the Northeast. Construction was down 14 percent in the Midwest and 7.4 percent in the South. The West showed an 11 percent gain."
"Builders completed 961,000 homes at an annual rate last month, the fewest since September 1982."
"Combined existing and new-home sales have declined 36 percent from their 2005 peaks. Nationwide, home prices have fallen 19 percent on average from their peak in July 2006, according to the S&P/Case Shiller index of 20 cities."
"The credit crunch spawned by the subprime mortgage crisis forced Lehman Brothers Holdings Inc. this week to file for bankruptcy, just a week after the government took over Fannie Mae and Freddie Mac, the two biggest buyers of mortgages."
Federal Reserve policy makers yesterday left the benchmark interest rate unchanged at 2 percent for a third consecutive meeting. Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending.
Less Lending
"As banks tighten lending standards and confidence slumps, consumer spending is faltering. Retail sales in August dropped for a second month, Commerce reported last week."
Homebuilders remain gloomy. A report yesterday from the National Association of Home Builders/Wells Fargo showed confidence among U.S. homebuilders this month held near the lowest level since records began in 1985.
"As home prices continue to fall, more and more Americans a forced into foreclosure as they owe more than their homes are worth. Stricter lending rules also limit opportunities to refinance out of adjustable-rate mortgages before they reset higher."
"Foreclosure filings rose to a record in August, RealtyTrac Inc. said Sept. 12. One in 416 U.S. households got a default notice, was warned of a pending auction or was foreclosed upon."
"Toll Brothers Inc., the largest U.S. luxury homebuilder, o Sept. 4 reported a fourth straight quarterly loss."
"``Explosive energy price increases, rising unemployment an severe mortgage and credit'' conditions cut demand, Chief Executive Officer Robert Toll said on a conference call. ``Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers' market.''"
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.
"Last Updated: September 17, 2008 08:30 EDT"
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U.S. Builders Began Work on Fewer Homes Than Forecast (Update3)
By Bob Willis
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"Sept. 17 (Bloomberg) -- Builders in the U.S. broke ground on fewer houses than forecast in August, signaling the worst housing recession in a generation will continue to weigh on growth in coming months."
"Housing starts fell 6.2 percent in August to an annual rate of 895,000, the fewest since January 1991, from a revised 954,000 pace in July, the Commerce Department said in Washington. Building permits, a sign of future construction, dropped 8.9 percent to an 854,000 pace."
Builders are scaling back as stricter lending and record foreclosures swell the number of properties on the market. The housing and credit meltdowns that led to the collapse of Lehman Brothers Holdings Inc. may continue to subtract from economic growth for the rest of the year and into next.
"``The home-construction industry is still in a deep recession and will remain there probably for the rest of the year,'' said Patrick Newport, an economist at Global Insight Inc. in Lexington, Massachusetts, who forecast a decline to 893,000. ``There are just too many houses on the market.''"
"Treasuries rose after the report, with 10-year notes yielding 3.39 percent at 9:35 a.m. in New York, down from 3.44 percent late yesterday. Stocks dropped after the government took control of American International Group Inc., the nation's largest insurer by assets. The Standard & Poors' 500 index was down 2.2 percent to 1187.27"
"Starts were projected to fall to a 950,000 annual pace, according to the median forecast of 74 economists polled by Bloomberg News. Estimates ranged from 893,000 to 1.04 million."
Larger Than Expected
The decrease in permits was also larger than anticipated.
"Compared with August 2007, work began on 33 percent fewer homes."
"Construction of single-family homes declined 1.9 percent to a 630,000 rate, today's report showed. Work on multifamily homes, such as townhouses and apartment buildings, dropped 15 percent from the prior month to an annual rate of 265,000."
"Starts decreased in three of four regions, led by a 15 percent slump in the Northeast. Construction was down 14 percent in the Midwest and 7.4 percent in the South. The West showed an 11 percent gain."
"Builders completed 961,000 homes at an annual rate last month, the fewest since September 1982."
"Combined existing and new-home sales have declined 36 percent from their 2005 peaks. Nationwide, home prices have fallen 19 percent on average from their peak in July 2006, according to the S&P/Case Shiller index of 20 cities."
Credit Crunch
"The credit crunch spawned by the subprime mortgage crisis forced Lehman Brothers Holdings Inc. this week to file for bankruptcy, just a week after the government took over Fannie Mae and Freddie Mac, the two biggest buyers of mortgages."
Federal Reserve policy makers yesterday left the benchmark interest rate unchanged at 2 percent for a third consecutive meeting. Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending.
"As banks tighten lending standards and confidence slumps, consumer spending is faltering. Retail sales in August dropped for a second month, Commerce reported last week."
Homebuilders remain gloomy. A report yesterday from the National Association of Home Builders/Wells Fargo showed confidence among U.S. homebuilders this month held near the lowest level since records began in 1985.
Forced Into Foreclosure
"As home prices continue to fall, more and more Americans a forced into foreclosure as they owe more than their homes are worth. Stricter lending rules also limit opportunities to refinance out of adjustable-rate mortgages before they reset higher."
"Foreclosure filings rose to a record in August, RealtyTrac Inc. said Sept. 12. One in 416 U.S. households got a default notice, was warned of a pending auction or was foreclosed upon."
"Toll Brothers Inc., the largest U.S. luxury homebuilder, o Sept. 4 reported a fourth straight quarterly loss."
"``Explosive energy price increases, rising unemployment an severe mortgage and credit'' conditions cut demand, Chief Executive Officer Robert Toll said on a conference call. ``Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers' market.''"
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.
"Last Updated: September 17, 2008 09:41 EDT"
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"Money-Market Rate Jumps, TED Spread Soars on Squeeze (Update1) "
By Gavin Finch and Kim-Mai Cutler
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Sept. 17 (Bloomberg) -- The cost of borrowing in dollars for three months jumped the most since 1999 as banks hoarded cash amid concern more financial institutions will fail.
"The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said today. The increase was the biggest since Sept. 29, 1999, during the run-up to the new millennium. The difference between what banks and the Treasury pay to borrow, the so-called TED spread, widened 70 basis points to 289 basis points. That's the biggest spread since Oct. 20, 1987, when stocks collapsed around the world on what became known as Black Monday."
"``This is the second leg of the liquidity crisis,'' said Guillaume Baron, a fixed-income strategist who specializes in money markets for Societe Generale SA in Paris. ``We're having another round of problems plus higher bank risk. This is what happened in August 2007 when the crisis started.''"
The freeze in credit markets deepened this week as Lehman Brothers Holdings Inc.'s bankruptcy and the U.S. government's bailout of American International Group Inc. spurred concern more financial companies may collapse.
"The overnight dollar rate soared 3.33 percentage points yesterday, the largest increase in its history. It fell 1.41 percentage points to 5.03 percent today."
No Trust
"HBOS Plc, the U.K.'s biggest mortgage lender, slid as much as 52 percent today on speculation it may not have access to funding. The shares pared declines after the company said it's in ``advanced'' takeover talks with Lloyds TSB Group Plc."
"``Everybody is worrying about which bank is going to go bankrupt next,'' said Ronald Tharun, a money-market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany's biggest state-owned bank. ``There's almost nothing being traded in the money markets. Nobody trusts anyone else.''"
"The cost of borrowing in euros for three months rose more than half a basis point today, to 4.97 percent, the BBA said. That's the highest level since Dec. 5, 2000."
The surge in borrowing costs defied efforts by central banks from the U.S. to Japan to revive lending through emergency-cash offerings. Central banks refrained from pumping cash into money markets today after injecting more than $230 billion yesterday.
"AIG averted the worst financial collapse in history yesterday by accepting an $85 billion federal rescue and ceding control to the government. The Federal Reserve saved AIG, while refusing aid to Lehman, which filed for bankruptcy two days ago, because financial markets were more prepared for a Lehman failure, a Fed staff official said."
`Break the Buck'
"Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman. Losses on the securities firm's debt forced the fund to break the buck, meaning its net asset value fell below the $1 a share price paid by investors, New York-based Reserve Management Corp., its closely held owner, said yesterday in a statement."
"Since the start of last year, the world's biggest financial institutions posted almost $516 billion in subprime-related losses and writedowns. Eleven U.S. banks collapsed since January. Corporate bond sales in the U.S. and Europe have slumped 42 percent from a year ago, according to data compiled by Bloomberg."
Bear Stearns
"Banks began to hoard cash when rising defaults on subprime mortgages led two Bear Stearns Cos. hedge funds to seek bankruptcy protection on July 31, 2007. To avert further money- market dislocations the Fed in March backed JPMorgan Chase & Co.'s takeover of Bear Stearns, which was on the verge of collapse. On Sept. 7, the Treasury seized control of Fannie Mae and Freddie Mac, the two biggest U.S. mortgage-finance companies."
"Libor, set by 16 banks including Citigroup Inc. and UBS AG in a daily survey by the BBA, is used to calculate rates on $360 trillion of financial products worldwide, ranging from home loans to credit derivatives."
"The last time three-month dollar Libor climbed so much was nine years ago, when the rate surged 57 basis points as banks stockpiled cash before year-end on concern the switchover to the year 2000 would disrupt computer systems."
"The difference between the Libor for three-month dollar loans and the overnight indexed swap rate, the Libor-OIS spread that measures the availability of funds in the market, widened 31 basis points to 132 basis points today, the most since at least December 2001. That compares with an average of 8 basis points in the 12 months to July 31, 2007, before the credit squeeze started."
"The Fed added $70 billion in temporary reserves yesterday, while the European Central Bank offered 70 billion euros ($100 billion) in a one-day refinancing operation. The Bank of England injected 20 billion pounds ($36 billion), the Bank of Japan added 2.5 trillion yen ($24 billion) and the Reserve Bank of Australia injected A$1.85 billion ($1.5 billion)."
To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
"Last Updated: September 17, 2008 11:13 EDT"
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U.S. Government Debt Risk Jumps to Record After AIG Bailout
By Abigail Moses
Sept. 17 (Bloomberg) -- The cost to hedge against losses on U.S. government debt rose to a record after the Federal Reserve rescued American International Group Inc. to avert the worst financial collapse in history.
"Benchmark 10-year credit-default swaps on Treasuries increased 4 basis points to 30, according to BNP Paribas SA prices at 6:45 a.m. in New York. The contracts have risen from below 2 basis points at the start of the credit crisis in July 2007 and are more than double those on government bonds sold by Austria, Finland or Sweden."
"The U.S. Treasury pledged an $85 billion loan for AIG just 10 days after committing as much as $200 billion to prevent a collapse of mortgage companies Fannie Mae and Freddie Mac. The U.S. budget deficit will grow next year to $438 billion, the Congressional Budget Office said Sept. 9, making it harder for President George W. Bush's successor to either cut taxes or increase spending."
"``The latest bailout comes at the expense of the U.S. taxpayer,'' Tim Brunne, a Munich-based credit strategist at UniCredit SpA, wrote in a research note today. ``It cannot be expected that AIG will survive in its present form.''"
"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 country or company fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality; a decline, the opposite."
"Contracts on Treasuries are quoted in euros and a basis point on a credit-default swap protecting 10 million euros ($14.2 million) of debt from default for five years is equivalent to 1,000 euros a year."
"The cost of protecting corporate bonds from default fell with contracts on the Markit CDX North America Investment Grade index of 125 companies in the U.S. and Canada declining 13 basis points to 187 in New York, according to broker Phoenix Partners Group."
"In Europe, the Markit iTraxx Financial Index of 25 European banks and insurers declined 3 basis points to 132, according to JPMorgan Chase & Co. The Markit iTraxx Europe index of 125 companies with investment-grade ratings fell 6 basis points to 132."
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
"Last Updated: September 17, 2008 07:02 EDT"
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"Canada Stocks Decline, Led by Manulife, Nortel; Goldcorp Gains "
By John Kipphoff
"Sept. 17 (Bloomberg) -- Canadian stocks fell a third day, entering a bear market as financial firms, led by Manulife Financial Corp., slid on concern that they face losses related to investments in U.S. banks and insurers."
"Manulife dropped the most in six weeks after saying that it will have unspecified costs tied to American International Group Inc., the U.S. insurer that's seeking to avert collapse with an emergency loan from the Federal Reserve, as well as Lehman Brothers Holdings Inc., which filed for bankruptcy this week, and Washington Mutual Inc."
"Nortel Networks Corp. plunged the most in 25 years after it cut its sales and profit margin forecasts. Goldcorp Inc. rose, pacing a rally in raw-materials producers, after the price of the precious metal increased as investors sought a haven."
"The Standard & Poor's/TSX Composite Index dropped 1.5 percent to 12,043.88 at 10:43 a.m. in Toronto. A close at this level would put the S&P/TSX more than 20 percent below its June 18 record, meeting the common definition of a bear market."
"Canada's main equity benchmark derives more than three- quarters of its value from financial, energy and materials stocks. It's lost about C$214.9 billion ($201 billion) in value in September through yesterday as it extended a slide from its peak three months ago to 19 percent."
"Manulife dropped 3.1 percent to C$34.89 for its steepest fall since Aug. 7. Canada's biggest insurance company said late yesterday that it expects to record costs in the third quarter related to investments in American International and other U.S. financial institutions. The amount of the writedown isn't yet known. The investments in the three firms represent less than 1 percent of its C$164 billion in assets, Manulife said."
Taking a Charge
"Sun Life Financial Inc. fell 4.8 percent to C$37.06, the most in seven weeks. The nation's third-biggest insurer said on Sept. 15 that it would take a charge in the third quarter. Sun Life had C$334 million ($312.7 million) in bonds and about C$15 million in derivatives contracts tied to Lehman."
"Royal Bank of Canada slid 1 percent to C$46.05, falling for a second day. The country's biggest lender said yesterday that it limits its investments with any one firm and in any one security."
"AIG, the biggest U.S insurer, sank 44 percent in New York after the government took control in an $85 billion rescue."
"Nortel slumped 40 percent to C$3.45, the most since at least 1983. The maker of phone gear cut its forecasts for sales and profit margins, saying customers are curbing spending as the economy slumps."
"Measures of computer-related and financial shares fell 2.8 percent and 1.4 percent, respectively. A gauge of raw-materials stocks added 1.5 percent. The energy group fell 1.2 percent even as crude-oil prices rebounded from two days of losses."
Gold futures for December delivery gained 3 percent to $804 an ounce in New York. Silver jumped almost 4 percent.
"Goldcorp, the second-largest bullion producer by market value, added 7.8 percent to C$31.94. Larger rival Barrick Gold Corp. climbed 6.2 percent to C$32.79."
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
"Last Updated: September 17, 2008 10:52 EDT"
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Nishimatsu Construction Gains on Credit Suisse Rating (Update2)
By Akiko Ikeda
Sept. 17 (Bloomberg) -- Nishimatsu Construction Co. advanced the most in more than a week in Tokyo trading after Credit Suisse Group lifted its rating on the contractor to ``neutral.''
"Nishimatsu Construction rallied 13 yen, or 6.1 percent, to close at 225 yen, on the Tokyo Stock Exchange, the biggest gain since Sept. 8."
"``It appears that Nishimatsu Construction is advancing in line with its targets,'' Credit Suisse analyst Yoji Otani wrote in a report dated yesterday. ``That said, as they include a first-half operating profit target of 0 yen, we could see somewhat of a revision, either up or down.''"
"Otani boosted his rating on the Tokyo-based company from ``underperform'' yesterday, as the share price has fallen below his 12-month price estimate of 230 yen, first set in June and which he maintained, according to the report."
To contact the reporter on the story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.
"Last Updated: September 17, 2008 03:17 EDT"
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Gold May Rise to $950 an Ounce as Miners Lower Output (Update1)
By Claudia Carpenter
"Sept. 17 (Bloomberg) -- Gold may rise to $950 an ounce by the end of year as central banks and miners hold back sales and investors buy the metal as a haven against falling stock prices, London-based researcher GFMS Ltd. said."
"Central bank sales will drop 46 percent in 2008, while mine supply will decline for a third year, a GFMS report showed today. Demand from investors worldwide will soar 38 percent to 778 metric tons, with purchases in east Asia more than doubling."
"``We're expecting gold to stage a powerful rally in the fourth quarter,'' GFMS Chairman Philip Klapwijk said at a conference in London today. There will be ``significant declines in stocks, which compete with gold.''"
Gold for immediate delivery rose 0.3 percent to $782.25 an ounce as of 2 p.m. in London.
"Prices have dropped 6.2 percent this year, heading for the first annual drop in eight as dollar gains erode demand for the metal as an alternative to the U.S. currency and investors sell commodities to raise cash and cover losses in other markets."
"``People are liquidating assets and trying to raise cash,'' Klapwijk said. ``Once the dust settles, we will see some allocation back into gold, and gold will benefit.''"
The metal rose 5.4 percent on Sept. 12 and Sept. 15 as investors sought a haven from market turmoil after Lehman Brothers Holdings Inc. filed for bankruptcy protection.
"Vietnam's net investment demand was 71 tons in the first half, surpassing India as the world's largest market. Investors in Vietnam sought gold to hedge against inflation, falling equities and a drop in the value of their currency, GFMS said."
Mine Output
"Global mine production will drop 2.3 percent this year to 2,422 tons, the lowest since 1996. Recycled metal output will rise 9.3 percent, it said. South Africa, the world's second- biggest gold producer, reported a 16 percent decline in production in July from a year earlier."
"Gold purchases by jewelers will rebound in the second half this year, rising 6 percent from a year earlier to 1,184 tons and accounting for 64 percent of total demand, GFMS said."
"Annual jewelry demand will fall 9.9 percent to 2,164 tons, led by a 16 percent drop in North America and 15 percent decline in the Indian subcontinent, according to the report. The only market to show growth will be in the former Soviet states."
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
"Last Updated: September 17, 2008 09:06 EDT"
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Russian Ruble Drops Against Central Bank's Dollar-Euro Basket
By Ewa Krukowska
Sept. 17 (Bloomberg) -- Russia's ruble fell against the central bank's dollar-euro basket as trading in equities in Moscow was suspended after a slump in prices.
"The currency was at 30.4002 versus the basket at 4:05 p.m. in Moscow, from 30.3808 yesterday. The Moscow-based Bank Rossii keeps the currency within a trading band against the basket to limit the impact of its fluctuations on the competitiveness of Russian exports."
"The ruble rose to 25.5325 per dollar, from 25.6158, and declined to 36.3340 versus the euro, from 36.2048."
"Russia's Micex Index of stocks slipped as much as 10 percent, declining for a third day, as investors sold emerging- market assets after the collapse of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc. The Micex halted trading at 12:10 p.m. in Moscow."
The Finance Ministry today pledged to lend 1.13 trillion rubles ($44 billion) in emergency funds to the country's three biggest banks.
To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net
"Last Updated: September 17, 2008 08:19 EDT"
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"German Stocks Fall for Third Day; ThyssenKrupp, Daimler Decline "
By Stefanie Haxel
Sept. 17 (Bloomberg) -- German stocks declined for a third day as a U.S. government report signaled the housing slump in the world's largest economy is deepening and a rebound in oil prices weighed on consumer companies.
"ThyssenKrupp AG sank to a two-year low, leading a drop in steelmakers after rival ArcelorMittal predicted ``softness'' in the market in the fourth quarter. Bayerische Motoren Werke AG and Daimler AG, the world's biggest luxury carmakers, fell more than 2 percent as crude climbed in New York. Deutsche Bank AG and Allianz SE led financial shares lower as the bailout of American International Group Inc. failed to ease concern that credit losses will subside."
"``We've got a crisis of confidence, everybody is waiting for the next horror news,'' said Philipp Musil, who helps oversee about $24 billion at Constantia Privatbank AG in Vienna. ``The bailout of AIG was helpful in the short run, but no-one know what will happen tomorrow.''"
"The DAX Index lost 41.76, or 0.7 percent, to 5,923.41 as of 3:34 p.m. in Frankfurt after rising as much as 1.2 percent earlier. DAX futures expiring in September slipped 0.4 percent to 5,927.5. The HDAX Index of the country's 110 biggest companies decreased 0.7 percent."
"Housing starts dropped 6.2 percent in August to an annual rate of 898,000, the fewest since January 1991, the Washington- based Commerce Department said. Starts were projected to decline to a 950,000 annual pace, according to a Bloomberg News survey."
Steelmakers
"ThyssenKrupp, Germany's biggest steelmaker, retreated 1.27 euros, or 5 percent, to 24.05, the lowest since June 2006. Salzgitter AG, the second-largest, declined 2.25 euros, or 2.7 percent, to 80.85."
ArcelorMittal also said it can cut production by 15 percent in Europe and the U.S. to support prices as global growth slows.
"BMW, the world's biggest maker of luxury cars, retreated 56 cents, or 2 percent, to 27.26 euros. Daimler, the second-largest, slipped 92 cents, or 2.4 percent, to 37.72 euros."
"Crude oil for October delivery climbed as much as $3.85, or 4.2 percent, to $95 a barrel in New York."
"Deutsche Bank, Germany's largest bank by assets, declined 77.5 cents, or 1.5 percent, to 50.96 euros. Allianz, Europe's biggest insurer, sank 98 cents, or 1 percent, to 97.08 euros."
"The Federal Reserve took control of AIG, the largest U.S. insurer, with a two-year $85 billion loan to avert the worst financial collapse in history. AIG shares dropped as much as 43 percent in New York on speculation the government's takeover will wipe out shareholders."
The following stocks also rose or fell in German markets. Symbols are in parentheses.
"Centrotherm Photovoltaics AG (CTN GY) rallied 1.96 euros, or 5.9 percent, to 35.02, the steepest gain in seven weeks. DZ Bank raised its recommendation for the solar-cell machinery company to ``buy'' from ``neutral,'' saying its diversified business model will help Centrotherm weather declining demand for solar products in Spain and possible industry overcapacity next year."
"Gildemeister AG (GIL GY) gained 35 cents, or 2.8 percent, to 12.97 euros, snapping a two-day drop. Equinet AG raised its recommendation for the machine-tool maker founded in 1870 to ``buy'' from ``sell.''"
"Merck KGaA (MRK GY) declined for a fourth day, slipping 1.23 euros, or 1.6 percent, to 74.83. Morgan Stanley cut its share- price estimate for the maker of the Erbitux cancer drug 6.5 percent to 72 euros."
"Singulus Technologies AG (SNG GY) tumbled 42 cents, or 6.8 percent, to 5.79 euros, the lowest in more than five weeks. The maker of machines that replicate compact discs said it will have a one-time write-offs of 41.2 million ($58.4 million) as part of an overhaul."
"Software AG (SOW GY) plunged 5.61 euros, or 11 percent, to 44.39, the lowest since July. WestLB AG cut its recommendation for Germany's second- largest software maker to ``hold'' from ``add.''"
"Volkswagen AG (VOW GY), Europe's largest carmaker, surged for a second day, adding 18.21 euros, or 8 percent, to 244.71. Porsche SE yesterday renewed its commitment to carry on with its acquisition of a majority stake in Volkswagen, quashing concerns that the plan might be derailed by opposition from Volkswagen workers and supervisory board chairman Ferdinand Piech."
To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
"Last Updated: September 17, 2008 10:12 EDT"
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Asian Policy Makers Downplay Concern of Repeat of 1997 Crisis
By Shamim Adam
Sept. 17 (Bloomberg) -- Asian policy makers from Japan to Thailand downplayed concern that the demise of Lehman Brothers Holdings Inc. and the crisis at American International Group Inc. will trigger a repeat of the 1997 meltdown in the region.
"``I don't think a financial crisis will take place in Asia,'' Bank of Japan Governor Masaaki Shirakawa said in Tokyo today. ``The situation of Asian economies is different from the time of the 1997-1998 crisis. They have plenty of foreign reserves.''"
"The Asian financial crisis, set off by plunging currencies, led to the collapse of companies as they buckled under billions of dollars of debt, forcing Indonesia, Thailand and South Korea to turn to the International Monetary Fund for bailouts. The region has since accumulated more than $3.3 trillion of reserves, about half of the global total."
"``It's clear that Asia isn't going to have an exchange rate or economic crisis,'' said Venkatraman Anantha-Nageswaran, head of research at Bank Julius Baer & Co. Ltd. in Singapore. ``It won't be immune to the global slowdown, but it isn't as vulnerable.''"
"Lehman's filing for bankruptcy and the government's $85 billion bailout of AIG, the U.S.'s biggest insurer, sparked concern that the credit crisis may worsen and cause more financial failures. Still, the exposure of Asian banks to Lehman's debt is relatively low and may not cause damage to financial systems, analysts said."
Japanese Banks
"Potential losses of Japanese banks ``seem to be within the levels that can be covered by their profits,'' Shirakawa said today. ``There's no concern that the latest events will threaten the stability of Japan's financial system.''"
"Japan's banks and insurers, including Mitsubishi UFJ Financial Group Inc., have announced a combined 245 billion yen ($2.3 billion) of potential losses tied to the collapse of Lehman."
"``Japanese banks have the largest absolute exposure to Lehman, but nonetheless they generally appear manageable relative to earnings and balance-sheet size,'' said Scott Wilson, head of Asian credit research at Royal Bank of Scotland in Singapore."
"Thailand, which triggered the Asian financial crisis with the devaluation of its baht in July 1997, faces no shortage of capital, central bank Governor Tarisa Watanagase said today, adding that the central bank is ready to inject funds if needed."
Thailand's Tarisa
"``Capital outflows may continue in line with the region as U.S. companies repatriate funds,'' Tarisa said. ``But it may be short term because the Fed had already taken action, so the problems should be solved faster and the stock market will return to normal.''"
"During Asia's 1997 financial crisis, Indonesia, Thailand and South Korea spent most of their currency reserves attempting to prop up their exchange rates after investors abandoned them. The IMF arranged more than $100 billion of loans to the three countries after their currencies collapsed."
"South Korea may use its foreign-exchange reserves to provide liquidity to the financial system when needed, Vice Finance Minister Kim Dong Soo said today."
"Reserve Bank of Australia Governor Glenn Stevens said today the nation's financial system ``is weathering the storm well'' and corporate balance sheets are ``very strong,'' even if there are some exceptions involving companies with higher leverage and complexity."
Temporary Effect
"In the Philippines, Finance Secretary Gary Teves said any effect on its markets is expected to be ``temporary.''"
"``Our domestic financial markets are fairly stable and should be able to withstand these external shocks,'' Teves said. ``The country's resilience and stronger macroeconomic fundamentals due to the fiscal and economic reforms that we have been undertaking'' may attract investors when markets calm down."
"Indonesia's economy can weather the credit crisis that has hit the U.S., President Susilo Bambang Yudhoyono said yesterday."
"``We shouldn't panic as if this crisis will lead to a situation like in 1997, because now our fundamentals are good and well managed,'' Yudhoyono said."
"Still, slowing demand for goods from Asia's biggest markets of the U.S. and Europe will weigh on the region's growth and economic prospects. The euro-area economy contracted 0.2 percent last quarter, while the U.S. has lost 605,000 jobs this year."
"``Asia has the benefit of not being as exposed to the problems in the U.S., and Asian banks are generally in good shape,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``The bottom line is that the credit crunch is deflationary and it's going to be negative for economic activity.''"
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net;
"Last Updated: September 17, 2008 08:01 EDT"
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"U.K. Unemployment Increases, Adding to Brown's Woes (Update1) "
By John Fraher and Jennifer Ryan
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"Sept. 17 (Bloomberg) -- U.K. unemployment rose the most in 16 years in August, adding to Prime Minister Gordon Brown's woes as falling house prices and the global financial crisis push Britain toward a recession."
"Claims for jobless benefits rose 32,500 to 904,900 from a month earlier, the Office for National Statistics said today in London. Economists predicted an increase of 23,000, according to the median of 25 forecasts in a Bloomberg News survey. Separately, the Bank of England said its Monetary Policy Committee voted 8-1 on Sept. 4 to keep interest rates unchanged."
"Brown, who is losing the support of his own Labour Party, is struggling to avert Britain's first recession since 1991 as the slowdown erodes government coffers and record inflation makes it harder for the central bank to cut rates. At the same time, turmoil in U.S. financial markets is exacerbating a property slump and forced lender HBOS Plc into talks to be acquired by Lloyds TSB Group Plc to avoid a funding shortage."
"``Our economy is going to experience a sharp downturn and we will see a sharp rise in unemployment to boot,'' said Paul Dales, an economist at Capital Economics in London. ``It's not great news for Brown, who has sold himself as someone who creates economic stability. This puts quite a dent in his armor.''"
The pound weakened to $1.7831 from $1.7875 before the report.
Economic Turmoil
"The U.K.'s slowdown may worsen just as Brown faces calls from his own lawmakers to step aside. The economic turmoil has sent Labour to its lowest ebb in opinion polls in two decades and David Cairns, a junior member of the government, yesterday became the first minister to walk out in protest at his leadership."
"Financial firms worldwide have cut more than 113,000 jobs after the collapse of the U.S. subprime mortgage market. Lehman Brothers Holdings Inc., which filed for bankruptcy-court protection Sept. 15, has about 6,000 employees in Europe and mergers in the industry may lead to further reductions."
"Lloyds, the U.K.'s biggest provider of checking accounts, is in ``advanced talks'' to buy British mortgage lender HBOS, Edinburgh-based HBOS said today."
"``The U.K. economy and the labor market are deteriorating at an increasingly rapid rate, and it looks as if a recession is a certainty,'' said James Knightley, an economist at ING Financial Markets in London. ``The Bank of England is going to shift to rate cuts, but not until next year as it is facing near-term inflation concerns.''"
Claimant Unemployment
"Claimant unemployment has risen for seven months in a row. It gained a revised 27,800 in July, compared with a previous estimate of 20,100."
"A Confederation of British Industry index of U.K. factory orders fell to the lowest in 2 1/2 years in September, adding to signs that the economy has entered a recession. A measure of orders was at minus 26, the lowest since January 2006, down from minus 13 in August, Britain's biggest business lobby said today."
"The U.K. economy will shrink in the third and fourth quarters, fulfilling the technical definition of a recession as two straight quarters of contraction, the European Commission, the European Union's executive arm, said Sept. 10."
"While the Bank of England kept its benchmark rate at 5 percent this month, the balance on its nine-member Monetary Policy Committee may tip toward a cut in coming months. Timothy Besley dropped a call made in August for a rate increase and David Blanchflower argued for a half-point reduction, the most since 2001, minutes published by the central bank showed today."
"``The signal is, they're turning more dovish,'' said Alan Clarke, an economist at BNP Paribas in London. ``There's a sporting chance of a cut in October but it's more likely to come in November.''"
To contact the reporters on this story: John Fraher in London at jfraher@bloomberg.net; Jennifer Ryan in London at Jryan13@bloomberg.net.
"Last Updated: September 17, 2008 10:28 EDT"
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U.S. Stocks Drop as Lending Freezes Up Following AIG Takeover
By Lynn Thomasson and Elizabeth Stanton
Sept. 17 (Bloomberg) -- U.S. stocks tumbled as bank lending seized up in the wake of the government's takeover of American International Group Inc. and investors fled to the relative safety of Treasuries.
"Goldman Sachs Group Inc. and Morgan Stanley, the two largest U.S. securities firms, plunged more than 14 percent after Oppenheimer & Co. analyst Meredith Whitney cut profit estimates. General Electric Co., the world's third-biggest company, fell 7.7 percent and U.S. Steel Corp. slid 11 percent. Yields on three-month bills sank to a 54-year low and a measure of corporate borrowing costs surged to the highest since the crash of 1987."
"``It's ugly,'' said Michael Mullaney, a Boston-based money manager for Fiduciary Trust Co., which oversees $10 billion in stocks and bonds. ``It's about the worst I've seen it in 25 years. You have to have free-flowing credit to lubricate the system. That's not happening right now.''"
"The S&P 500 lost 36.6, or 3 percent, to 1,176.99 at 11:24 a.m. in New York, its lowest in almost three years. The Dow Jones Industrial Average decreased 275.36, or 2.5 percent, to 10,783.66. The Nasdaq Composite Index sank 69.71, or 3.2 percent, to 2,138.19. More than 10 stocks retreated for each that rose on the New York Stock Exchange."
"About $2.8 trillion of market value was erased from global stocks this week, triggered by Lehman Brothers Holdings Inc.'s bankruptcy. Russia halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the worst financial crisis in a decade."
`Protracted' Battle
"Morgan Stanley slid $6.88, or 24 percent, to $21.82 after Whitney and Merrill Lynch & Co.'s Guy Moszkowski reduced their fourth-quarter profit estimates, citing the rise in financing costs. The lowered forecasts come a day after Morgan Stanley reported profit that beat estimates."
"``We believe Morgan Stanley, along with its peers, will battle a protracted period of negative operating leverage,'' Whitney wrote in a note to clients."
"Goldman slid $19.02, or 14 percent, to $113.99. Oppenheimer cut its fourth-quarter earnings estimate to $2.60 a share from $3.45."
TED Spread
"The three-month London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said."
"U.S. Treasury three-month bill rates dropped to as low as 0.233 percent and the so-called TED spread, the difference between what the Treasury pays to borrow for three months and the amount banks charge each other for loans, widened by 0.70 percentage point to 2.89."
"All 10 industry groups in the S&P 500 dropped by at least 1 percent except for health-care stocks, which lost 0.6 percent."
"AIG lost $1.71, or 46 percent, to $2.04 and extended its decline over the past year to 97 percent, after the government said it will receive a 79.9 percent stake in return for an $85 billion loan that analysts said will be repaid by liquidating the company."
"``A disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a central bank statement yesterday."
The S&P 500 Financials Index slumped 6.9 percent as 85 of its 86 companies retreated.
"Banks and brokerages also fell after the Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman. Investor redemptions will be delayed as long as seven days, the fund said."
`Massive Retrenchment'
"``There's just a massive retrenchment in risk appetite,'' said Robert Stimpson, a money manager at Oak Associates Ltd. in Akron, Ohio, which oversees $1.1 billion. ``We've seen three cornerstones of Wall Street fall by the wayside in the last six months. Is anyone safe? It's a legitimate question.''"
The Securities and Exchange Commission stiffened regulations against manipulative short-selling after the routs in AIG and Lehman. The new rules force traders to borrow shares before selling them short and make it a fraud for investors to lie to their broker about locating stock to close positions.
Homebuilders across S&P industries slumped 6.3 percent after the government reported a 6.2 percent drop in housing starts to a 17-year low.
The S&P 500 gained 1.8 percent yesterday as expectations grew the Federal Reserve would rescue AIG and spare financial institutions from more losses.
The benchmark index for American equities started the week with a 4.7 percent tumble after credit losses forced to file for bankruptcy protection and Merrill to agree to be taken over by Bank of America Corp.
Yearly Slump
The S&P 500 has fallen almost 20 percent this year and is poised to post its first yearly retreat since 2002 after global banks racked up $516 billion in credit losses and asset writedowns stemming from the collapse of the subprime mortgage market.
"Financial shares in the S&P 500 have lost 36 percent as a group this year, led by the tumble in AIG, an 84 percent drop for Washington Mutual Inc. and a 78 percent retreat in National City Corp."
"The Federal Reserve kept its benchmark interest rate at 2 percent yesterday, citing risks to growth and inflation. Hours after yesterday's meeting, the central bank agreed to the AIG loan."
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
"Last Updated: September 17, 2008 11:24 EDT"
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"Ukrainian Hryvnia Rebounds Versus Dollar, Snapping Two-Day Drop "
By Yon Pulkrabek
"Sept. 17 (Bloomberg) -- Ukraine's hryvnia rebounded against the dollar, snapping a two-day decline."
"The hryvnia, which the central bank manages through sales and purchases on the foreign-exchange market, strengthened 0.6 percent to 4.78 per dollar as of 6:34 p.m. in Kiev, from 4.81 yesterday. The currency had fallen as much as 2.9 percent to 4.9506."
To contact the reporter on this story: Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net
"Last Updated: September 17, 2008 11:38 EDT"
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Petro-Canada Sees Surging Costs at Oil Sands Project (Update1)
By Stephen Bierman
"Sept. 17 (Bloomberg) -- Petro-Canada, the country's second largest refiner, estimated costs to develop its Fort Hills oil- sands project in Alberta, Canada, have increased by 50 percent since a memorandum in June 2007."
"The increase stems from the price of construction materials, labor, project management and engineering, Petro-Canada said in a statement today. An investment decision will be made in the fourth quarter after completion of the engineering and design plan, the company said."
"Calgary-based Petro-Canada, which holds a 60 percent stake, and its partners UTS Energy Corp. and Teck Cominco Ltd., which both hold 20 percent, had forecast spending C$14.1 billion ($13.1 billion) on the project's first stage, Petro-Canada said."
UTS fell as much as 53 percent and was down 83 cents at C$1.57 as of 10:41 a.m. in Toronto trading. Petro-Canada dropped 1.9 percent to C$38.93. Teck Cominco fell 1 cent to C$37.62.
"Petro-Canada plans to produce 140,000 barrels a day of synthetic crude from the fields, with initial output from the Sturgeon upgrader in the second quarter of 2012."
"It estimates associated bitumen production of 160,000 barrels a day with initial production in the fourth quarter of 2011, Petro-Canada said in the statement."
Imperial Oil Ltd. is the country's largest refiner.
To contact the reporter on this story: Stephen Bierman in London ext 4139 sbierman1@bloomberg.net.
"Last Updated: September 17, 2008 10:48 EDT"
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Russian Emergency Funding Fails to Halt Stock Rout (Update3)
By Alex Nicholson and William Mauldin
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Sept. 17 (Bloomberg) -- Russia poured $44 billion into its three largest banks and halted stock trading for a second day in a bid to stem the worst financial crisis since the devaluation and default a decade ago.
"The Finance Ministry extended the repayment period on loans available to OAO Sberbank, VTB Group and OAO Gazprombank to three months from one week. The benchmark Micex stock index plunged as much as 10 percent, bringing its three-day decline to 25 percent. The KIT Finance brokerage said it's in talks with investors to sell a stake after failing to meet obligations."
"Russia's markets are facing the biggest test since the government defaulted in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation's stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman Brothers Holdings Inc. and American International Group Inc. prompted a flight from emerging markets."
"``I will tell my clients today to continue to abstain from buying Russian assets'' until economic problems are solved, said Zina Psiola, who manages a $1 billion Russian equities fund at Clariden Leu AG in Zurich."
"The cost of lending has soared to a record, with the MosPrime overnight rate reaching 11.1 percent today, deterring speculative bets in equities. Russian stocks have lost more than $425 billion in value since reaching an all-time high May 17."
`Effectively Closed'
"``The bond market remains effectively closed and banks are reluctant to lend to one another,'' said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. ``The problems experienced by KIT Finance have heightened counterparty risk and reduced liquidity further.''"
Moscow-based KIT today said it is seeking to sell a stake after failing to meet some financial obligations related to repurchase agreements.
"``Every day Russia falls due to people not being able to meet margin calls,'' said Marina Akopian manager of the Hexam EMEA Absolute Return Fund in London."
"The cost of protecting bonds sold by Sberbank from default jumped 60 basis points to 3.55 percentage points, according to CMA Datavision prices at 3 p.m. in London. Credit-default swaps on OAO Gazprom, the gas export monopoly, fell 38 basis points to 421. Contracts on VTB Group declined 35 basis points from an all-time high to 6.53 percentage points, according to CMA."
Necessary Measures
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline signals the opposite."
"A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year."
President Dmitry Medvedev met Prime Minister Vladimir Putin today to discuss developments surrounding the economy.
"``The situation is being followed very closely,'' Putin's spokesman, Dmitry Peskov, said in a phone interview. ``Necessary measures are being taken.''"
"The ruble has lost 4.8 percent against the dollar since Aug. 8, when Russia sent troops and warplanes into Georgia for a military campaign that led to the worst relations with NATO since the Cold War. Investors have pulled at least $35 billion out of the country since the war, according to BNP Paribas SA estimates."
Economic Woes
"Oil production, the government's biggest source of revenue, and accelerating inflation are adding to concerns for investors. Crude output is falling for the first time since 1998 and the inflation rate advanced more than expected in August, to near a five year high of 15 percent."
Industrial output grew more slowly than economists expected in August and economic growth in the second quarter slowed to an annual 7.5 percent from 8.5 percent in the previous period.
"Still, unlike 1998, Russia is ``pretty well prepared'' to weather the turmoil, the World Bank's chief representative in Russia, Klaus Rohland, said today. The economy has grown every year for a decade and its international reserves have surged in the period by almost 50 times to $574 billion, more than any other country except China and Japan."
"International banks have entered the Russian market in recent years. Societe Generale, France's second-largest bank, owns OAO Rosbank, a top 10 retail bank. Commerzbank AG, Germany's second- biggest lender by assets, owns a 15 percent stake in Promsvyazbank and Unicredit SpA, Europe's fourth-biggest bank, recently purchased Moscow International Bank. Raiffeisen International Bank-Holding AG is the largest foreign bank by assets in Russia."
`Calm Nervousness'
The Finance Ministry yesterday's added $20 billion to the interbank lending market.
"Sberbank, VTB and Gazprombank ``are market-making banks capable of insuring the liquidity of the banking system,'' the ministry said in a statement today. The government and central bank will take more measures to improve liquidity this week, the ministry said."
"Finance Minister Alexei Kudrin said the measures should ``smooth over the shock changes'' in the markets. ``With foreign borrowing stopping, we must soften the impact with additional funds, then the situation will stabilize,'' he said on state television."
"The ruble-denominated Micex Stock Exchange suspended trading indefinitely at 12:10 p.m. after its index erased a 7.6 percent gain and plunged as much as 10 percent within an hour. The benchmark fell 17 percent yesterday, the biggest decline of the 88 indexes tracked by Bloomberg. The dollar-denominated RTS halted trading after similar declines."
Sberbank is down 32 percent and VTB Group 47 percent this week.
"``The primary objective of these measures is to inject liquidity to calm nervousness,'' Alexander Morozov, chief economist at HSBC Bank in Moscow, said by telephone. ``Hopefully other banks will be able to get this money via the interbank market and this should prevent the rise of rates,'' he said."
To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net
"Last Updated: September 17, 2008 10:12 EDT"
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"Inditex Signals Sales Growth Recovery on Asia, Eastern Europe "
By Thomas Mulier
"Sept. 17 (Bloomberg) -- Inditex SA, Europe's largest clothing retailer, indicated sales growth will recover from the slowest pace in five years as new stores in Asia and eastern Europe offset slumping demand in Spain."
"The company sees ``strong growth potential'' in those regions, Chief Executive Officer Pablo Isla said on a call that followed today's first-half earnings report. Arteixo, Spain- based Inditex said it expects 4 percent sales growth for 2010 at stores open more than 12 months, even as its sagging home market cut first-half growth on that basis to 1 percent this year."
"Inditex rose as much as 4.6 percent in Madrid trading. The owner of the Zara and Bershka chains got 17 percent of sales from Asia and eastern Europe in the six months through July, compared with 11 percent two years ago, and Inditex is expanding in Asia at twice the rate of its total store growth. The retailer has shops in China and South Korea, and it plans to open its 4,000th store this weekend with a shop in Tokyo."
"``They're starting to have success in China and they already have proven it in Japan,'' said Francisco Ruiz, an analyst at Fortis Bank in Madrid with a ``buy'' rating on the stock. ``It's a pretty universal concept.''"
"Shares of Inditex, which missed analysts' earnings estimates, erased an early drop and were up 1.29 euros, or 4.5 percent, to 30.06 euros at 11:36 a.m. local time. The stock has slid 28 percent in 2008, more than its largest rivals, Hennes & Mauritz AB and Gap Inc."
Spanish Slowdown
"Second-quarter profit fell to 188 million euros ($267 million) from 193 million euros in the year-earlier period, the company said today. Sales rose 12 percent to 2.34 billion euros, accelerating from 8.8 percent in the first quarter. Same-store sales growth of 1 percent for the half was the slowest pace in five years."
"Net income was below the 196 million-euro median estimate of 16 analysts surveyed by Bloomberg. Profit in the first quarter increased 10 percent. First-half profit rose 3.4 percent to 406.2 million euros, while sales gained 11 percent to 4.56 billion euros, the company said."
"Inditex chains from Zara to Bershka get 40 percent of their sales in Spain, where construction companies are cutting jobs as the housing market collapses and higher food and energy prices are draining consumer spending power. The economy will shrink in the current and next quarters, the definition of a recession, under European Commission forecasts released last week."
"``Spain is one of the worst markets for consumption right now, with the problems in the construction industry,'' said Guillaume Duchesne, a strategist at Fortis Private Banking in Geneva. ``Consumption is going to be impacted by the economic slowdown.''"
The company said sales in the first six weeks of the third quarter have continued at a similar rate to the first half and its fall-winter collection has been ``well received.''
To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net.
"Last Updated: September 17, 2008 06:11 EDT"
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Treasury 3-Month Bill Rates Drop to Lowest Since at Least 1954
By Sandra Hernandez
Sept. 17 (Bloomberg) -- U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 as a loss of confidence in credit markets prompted investors to abandon higher-yielding assets for the safety of the shortest-term government securities.
Investors pushed the rate as low as 0.233 percent on concern that credit market losses will widen after the bankruptcy of Lehman Brothers Holdings Inc. and the federal takeover of American International Group Inc. The rate banks charge each other for short-term loans relative to Treasury bills rose to the highest since the stock market crash of 1987.
"``People are extremely cautious with respect to who they're lending money to at the moment,'' said Richard Bryant, a Treasury trader at Citigroup Global Markets Inc., one of the primary dealers that trade government securities with the Federal Reserve. ``They're willing to buy very short-dated Treasury instruments and forgo returns and in some cases pay for the privilege of knowing their money is safe.''"
"Three-month bill rates fell 32 basis points to 0.38 percent at 10:26 a.m. in New York. They had dropped to 0.3867 percent on March 20, after the Fed and Treasury engineered the takeover of Bear Stearns Cos."
Bills pared their gains after the Treasury said it will sell $40 billion in 35-day securities through a series of special auctions at the request of the Fed so the central bank can expand its balance sheet after the takeover of AIG. The securities will be similar to cash management bills.
Money Markets
"Reserve Primary Fund, the oldest U.S. money-market fund, yesterday became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman."
"Shareholders in Reserve Primary Fund pulled more than 60 percent of the fund's $64.8 billion in assets in the two days since Lehman folded. Losses on the securities firm's debt forced the fund to break the buck, meaning its net asset value fell below the $1 a share price paid by investors."
"``The panic going round the money market world is what they've been investing in is not as safe as they thought it would be,'' said Dominic Konstam, the head of interest-rate strategy in New York at Credit Suisse Securities USA LLC, another primary dealer. ``If the banks don't want to lend to each other they don't want to lend to the banks. That means where else are they going to put their money -- they're going to put it in T-bills for safety.''"
Borrowing in Dollars
"The cost of borrowing in dollars for three months jumped the most since 1999 as banks hoard cash. The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said today. The increase is the biggest since Sept. 29, 1999, during the run-up to the new millennium."
"The difference between what the U.S. government and banks pay to borrow in dollars for three months, the so-called TED spread, widened to the most since the October 1987 stock-market crash as bill rates tumbled. The spread widened as much as 64 basis points to 283 basis points. It was as low as 75 basis points on May 27."
"``I'm extremely worried about what is happening to the money market mutual funds that have announced they've broken the buck,'' said Ajay Rajadhyaksha, head of fixed income strategy at Barclays Capital Inc. in New York. ``That unfortunately can spiral in the sense that it makes it more difficult for all companies to raise short term money because the money-market funds tend to be buyers of short term debt.''"
`Under the Carpet'
"Treasuries had declined earlier as the Fed's $85 billion loan to AIG allayed concern that a collapse of the insurer would destabilize the financial system. Barclays Plc, the U.K.'s third-biggest bank, will acquire Lehman's North American investment-banking business for $1.75 billion, three days after abandoning plans to buy the entire firm."
"Central banks around the world pumped more than $280 billion into the financial system this week as they sought to ease a credit-market seizure. The Fed made the loan to AIG, the biggest U.S. insurer by assets, in exchange for control."
"The AIG rescue ``smacks of sweeping the problem under the carpet rather than solving it in a structural sense,'' said Padhraic Garvey, head of investment-grade debt strategy at ING Bank NV in Amsterdam, in a note to clients. ``At least the Lehman saga has gone some way toward a clean-up. We are still in the midst of the flight-to-quality environment.''"
"HBOS Plc, the U.K.'s biggest mortgage lender, slid as much as 52 percent today on speculation it may not have access to funding. The shares rebounded, surging as much as 18 percent, as HBOS said it's in ``advanced'' takeover talks with Lloyds TSB Group Plc."
To contact the reporters on this story: Sandra Hernandez in New York at shernandez4@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net
"Last Updated: September 17, 2008 10:29 EDT"
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VeraSun Energy Plunges on Expected Loss on Hedging (Update1)
By Mario Parker
"Sept. 17 (Bloomberg) -- VeraSun Energy Corp., the largest U.S. ethanol producer, lost more than half its market value after the company said it may report a third-quarter net loss of as much as $103 million because of bad hedging bets."
"VeraSun fell as much as $3.05, or 58 percent, to $2.24, a record low, and was down 57 percent at 10:57 a.m. in New York Stock Exchange composite trading. The shares have fallen 85 percent this year."
"The company said it locked in corn costs as the price reached almost $8 a bushel after floods threatened Midwest crops. Prices for the grain fell under $5 by mid-August, Brookings, South Dakota-based VeraSun said yesterday in a filing with the Securities and Exchange Commission."
"The company expects a net loss ``between $63 million and $103 million'' in the quarter, VeraSun said. In a separate statement, the company said it plans to sell 20 million shares of common stock for ``general corporate purposes.''"
"``This underscores the fact that managing spreads between two very different commodities, ethanol being an energy and corn an agriculture, is never easy,'' said Pavel Molchanov, an analyst at Raymond James & Associates Inc. in Houston, who rates the company ``market perform'' and owns none."
"Analysts expected the company to break even on a per-share basis, based on the average of five estimates compiled by Bloomberg. VeraSun said it may lose as much as 65 cents a share."
Biofuel Losses
"Last month, Biofuel Energy Corp. said that it had $46 million in combined corn, ethanol and natural gas hedge and mark-to-market losses and may reorganize."
"``In the case of VeraSun, because it's a much larger company, there's no liquidity crunch,'' Molchanov said. ``Still, when you lose money on hedges, it ain't coming back. It's still a loss to shareholders.''"
"There are 170 ethanol distilleries in the U.S., with the capacity to produce 10.1 billion gallons of ethanol, annually, according to the Renewable Fuels Association in Washington."
"Closely held Poet LLC, based in Sioux Falls, South Dakota, is the second-largest producer."
To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net.
"Last Updated: September 17, 2008 11:10 EDT"
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Mexico's Benchmark Bond Drops Most in 7 Weeks on Credit Concern
By Valerie Rota
"Sept. 17 (Bloomberg) -- Mexican peso-denominated bonds fell, pushing up yields on the benchmark security by the most in seven weeks, as mounting concern that credit-market losses will deepen sapped demand for higher-yielding securities."
"Yields on Mexico's bond due in December 2024 headed for their first monthly increase in three months. Foreigners, the biggest owners of Mexico's long-term bonds, had cut holdings by 2.9 percent to 288 billion pesos ($26.6 billion) as of Sept. 4 from a record high last month, central-bank data show."
"Investors want to ``sell assets to be liquid in dollars,'' said Alejandro Martinez, a fixed-income strategist at HSBC Mexico SA in Mexico City. They're ``looking for liquidity.''"
"The yield on the 10 percent bond due December 2024 rose 13 basis points, or 0.13 percentage point, to 8.66 percent at 11:17 a.m. New York time. Yields on the most-traded bond advanced the greatest amount since July 29. The bond's price fell 1.26 centavos to 111.61 centavos per peso, according to Banco Santander SA."
A credit crunch rooted in the default of debt backed by home loans to borrowers with poor credit ratings led the U.S. government to take over insurer American International Group Inc. yesterday after seizing control of mortgage lenders Fannie Mae and Freddie Mac last week. It prompted Lehman Brothers Holdings Inc. to file for bankruptcy Sept. 15. Global credit- market losses have swelled to more than $515 billion.
Mexico's Interest Rate
"The decision by the U.S. Federal Reserve to leave borrowing costs unchanged at 2 percent yesterday quelled speculation Mexican central bankers may reduce lending rates when they next meet on Sept. 19, Martinez said."
"Mexico's central bank will keep its target interest rate at 8.25 percent this week, according to the estimate of 21 of 22 economists surveyed by Bloomberg News. One economist, Gray Newman at Morgan Stanley, forecast Banco de Mexico will raise the rate to 8.5 percent."
"``Mexico's economy is solid, but that doesn't mean that it's exempt from foreign crosswinds,'' Finance Minister Agustin Carstens said today in an interview on Radio Formula."
"Mexico's peso weakened 1.3 percent to 10.8595 per dollar, compared with 10.7188 per dollar yesterday. The peso has lost 10 percent against the dollar since touching a six-year high on Aug. 4."
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.
"Last Updated: September 17, 2008 11:22 EDT"
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Canadian Bonds Gain on Concern Financial Crisis Hurts Growth
By Daniel Kruger
"Sept. 17 (Bloomberg) -- Canada's two-year government bond yield fell, erasing an earlier gain, amid speculation the U.S. government's second rescue package for cash-strapped financial companies this month signals continued economic weakness."
"The spread between yields on two- and 10-year Canadian government debt was 88 basis points, near the most since April shortly after Bear Stearns Cos. collapsed."
"``Folks aren't yet convinced the worst is over,'' said Michael Herring, debt strategist at BMO Nesbitt Burns Inc. in Toronto. ``You can layer on to today's price action some expectation for further economic weakness.''"
"The yield on the two-year note declined 2 basis points, or 0.02 percentage point, to 2.55 percent at 10:16 a.m. in Toronto. It has fallen 57 basis points in the past two months. The price of the 2.75 percent security maturing in December 2010 rose 5 cents to C$100.43."
"The 10-year government note's yield dropped 2 basis points to 3.43 percent. The price of the 4.25 percent note maturing in June 2018 increased 18 cents to C$106.70. The yield reached 3.34 percent yesterday, the lowest since at least 1989, when Bloomberg began collecting the data."
"Canada's dollar, dubbed the loonie because of the aquatic bird on the one-dollar coin, fell 0.8 percent to C$1.0766 per U.S. dollar, from C$1.0682 yesterday. One Canadian dollar buys 92.91 U.S. cents."
"``The credit crunch is adding to the potential'' for a greater slowdown in the global economy, said Maria Jones, currency strategist at TD Securities Canada Inc. in Toronto. ``Markets are punishing the growth-linked currencies. We've seen this in all the commodity-linked currencies.''"
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
"Last Updated: September 17, 2008 10:20 EDT"
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Europe Trade Deficit Widens to Record on Energy Costs (Update1)
By Fergal O'Brien
Sept. 17 (Bloomberg) -- Europe's trade gap widened to a record in July as a cooling global economy damped exports and crude oil's advance to a record boosted the energy deficit.
"The 15-nation euro region had a seasonally adjusted deficit of 6.4 billion euros ($9.1 billion), compared with a 3.5 billion-euro trade gap in June, the European Union's statistics office in Luxembourg said today. The July deficit is the largest since the euro was introduced in 1999."
"Euro-area exports to the U.S., the second-biggest buyer of the region's goods, have fallen the most since 2003 this year as economic expansion there has eased. At the same time, record oil prices pushed up spending on imported fuels such as gasoline and heating oil by 41 percent, further widening the trade gap."
"``On the one side, you're getting weakness in exports and that then is feeding through to weaker industrial production,'' said Marco Valli, an economist at Unicredit MIB in Milan. ``On the other side, there is the oil prices and in July we will see the maximum impact of that, as oil peaked in early July.''"
"Crude oil reached a record $147.27 a barrel on July 11 and the euro region's energy imports soared 41 percent to 151 billion euros in the first half, according to today's report. The detailed data are published with a one-month lag."
"The soaring energy costs boosted imports from Russia, which supplies 34 percent of Europe's imported oil and 40 percent of its imported gas. Overall imports from Russia, home of OAO Gazprom, the world's biggest gas producer, soared 22 percent in the first half and the euro area's trade gap with the nation soared 25 percent to 20.4 billion euros, today's report showed."
First-Half Decline
"The detailed data for the January-June period also showed exports to the U.S., the world's largest economy, fell 4 percent from a year earlier. That is the biggest first-half decline since a 9 percent drop in 2003. Shipments to the U.K., the euro area's biggest trading partner, rose 1 percent."
"The euro reached a record above $1.60 to the dollar in July, taking its gain over the previous 12 months to 15 percent. The euro's strength undermines the competitiveness of European goods sold abroad. The currency was at $1.4224 today, down 11 percent from its record."
"A slowdown in overseas sales has curbed production at Europe's factories and dragged the region's economy into its first contraction in almost a decade in the second quarter. Manufacturing activity has contracted for the last three months, according to a monthly survey of purchasing managers, while export orders have fallen for five months."
`Mightily Relieved'
"``Euro-zone exporters will be mightily relieved by the recent marked retreat in the euro from its July peak,'' said Howard Archer, chief European economist at Global Insight in London. ``However, this is being countered by slowing global growth and a very uncertain outlook.''"
Some companies have tried to offset falling U.S. orders by expanding in Asia and oil-exporting countries. Asian sales at French skin-creams maker Clarins SA rose 3 percent in the second quarter as North American sales fell by the same percentage.
"Volkswagen AG, Europe's biggest carmaker, on Sept. 8 said emerging markets will provide the fastest growth in worldwide sales over the next 10 years, led by economic expansion in Asia and Russia."
"Europe's trade deficit with China, which last year overtook the U.K. to become the euro area's biggest supplier, narrowed by 1.2 percent to 49.9 billion euros in the six months through June. Exports to Asia's second biggest economy rose 15 percent."
"Economists had expected the euro region to show a trade deficit of 3.5 million euros in July, compared with an initially reported 3 billion-euro deficit in June, according to the median of nine estimates in a Bloomberg News survey."
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
"Last Updated: September 17, 2008 06:46 EDT"
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"Brazilian Stocks Drop on Credit Concerns, Risk Aversion "
By Alexander Ragir
Sept. 17 (Bloomberg) -- Brazilian stocks dropped to the lowest since August 2007 as global investors resumed their selling of emerging-market equities and the U.S. government's takeover of American International Group Inc. failed to ease concerns about the health of the financial system.
"Uniao de Bancos Brasileiros SA led financial shares to the lowest in five months, as global banks began to report losses related to investments tied to the collapse of Lehman Brothers Holdings Inc. Cia. Vale do Rio Doce led a retreat in metals producers on speculation demand may wane as a 6.2 percent slump in U.S. home starts signaled a worsening of the economy."
"The Bovespa index fell 780.43, or 1.6 percent, to 48,448.49 at 9:45 a.m. New York time. The BM&FBOVESPA MidLarge Cap index dropped 1.4 percent, while the BM&FBOVESPA Small Cap index retreated 1.6 percent. Mexico's Bolsa Index lost 0.6 percent."
"Unibanco, as the third-biggest non-state Brazilian bank is known, fell 2.4 percent to 17.71 reais. Banco do Brasil SA, Latin America's biggest bank, dropped 3.1 percent to 21.15 reais."
"The Federal Reserve said yesterday it will lend as much as $85 billion to AIG, giving the government a 79.9 percent stake in the company. A ``disorderly failure'' could compound declines in financial markets, lead to higher borrowing costs and dent economic growth, the Fed said. AIG's collapse would have threatened more financial companies and cost them $180 billion in losses, according to RBC Capital Markets. AIG shares dropped 43 percent today."
"Credit concerns prompted investors to flee global stocks to the relative safety of U.S. Treasuries, driving the yield on three-month bills to the lowest in 54 years."
BRICs
"Russia, one of the so-called BRICs, halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the biggest financial crisis since its devaluation and debt default a decade ago. China's stocks fell to the lowest in almost 21 months after China Merchants Bank Co. said it held $70 million of debt issued by bankrupt Lehman Brothers Holdings Inc."
"Investors turned the most negative in emerging-markets equities since 2001, a monthly survey by Merrill Lynch & Co. showed. Emerging markets are the least favorable place to invest in equities, with the survey showing a net 14 percent of those surveyed would most like to underweight the region over the next 12 months. The MSCI Emerging Markets Index dropped 0.7 percent today for a 37 percent loss this year."
"Vale dropped 2.7 percent to 33.93 reais. Usinas Siderurgicas de Minas Gerais SA, Brazil's second-biggest steelmaker, fell 3.6 percent to 39.82 reais."
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;
"Last Updated: September 17, 2008 10:10 EDT"
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Brazil Real Has Biggest Drop in 13 Months as U.S. Slump Spreads
By Adriana Brasileiro
Sept. 17 (Bloomberg) -- Brazil's real dropped the most in 13 months on concern the U.S. takeover of insurer American International Group Inc. will fail to stem financial market losses in the world's biggest economy.
"The real sank 3.3 percent to 1.8667 per dollar at 11:07 a.m. New York time, from 1.8080 yesterday. It earlier touched 1.8847 per dollar, its weakest since September 2007. The real is the biggest decliner among the 16 major currencies this month, having plunged 12.6 percent against the dollar. It is down 17 percent from a nine-year high of 1.5545 reached Aug. 1."
"``The market is in a frenzy,'' said Vanderlei Arruda, who manages the foreign-exchange trading desk at Sao Paulo-based Corretora Souza Barros. ``There is more tension every day and this is making investors, especially foreigners, pull their money from here.''"
"The real led a tumble in currencies across Latin America as investors piled into the safety of Treasuries after the U.S. took control of American International Group Inc. yesterday following the collapse of Lehman Brothers Holdings Inc. Rates on U.S. Treasury three-month bills dropped to as low as 0.233 percent, the lowest since at least 1954."
"Mexico's peso sank 1.3 percent to 10.8581 per dollar and Colombia's peso declined 1.4 percent to 2,133 per dollar."
"``After Lehman, we entered a new phase in which the positive effects of good news are very short-lived,'' said Marcelo Voss, chief economist at brokerage Liquidez Corretora in Sao Paulo. ``Investors will stay away from risk as much as possible.''"
`Very Small Risk'
"The real's decline today is the biggest since July 27, 2007, when concern began to build that subprime mortgage losses would weaken the U.S. financial industry and erode demand for higher- yielding, emerging-market assets. The real's 14 percent loss over the past 30 days is the biggest monthly decline in six years."
"Brazilian Finance Minister Guido Mantega sought to shore up confidence in the currency, telling reporters in Brasilia today that there's a ``very small risk'' that the U.S. financial crisis will spread to Latin America's biggest economy."
"Mantega called the local financial system ``solid'' and said the government may take steps to encourage lending to fund investments, exports and the agriculture industry if the U.S. crisis doesn't abate."
"The yield on Brazil's zero-coupon bonds due in January 2010 jumped 32 basis points, or 0.32 percentage point, to 15.04 percent, according to Banco Votorantim. The yield on the overnight futures contract for January delivery rose 1 basis point to 14.02 percent."
To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net
"Last Updated: September 17, 2008 11:36 EDT"
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"Gold, Silver Climb as Credit Turmoil Spurs Demand for Haven "
By Pham-Duy Nguyen
Sept. 17 (Bloomberg) -- Gold climbed as some investors sought safety in precious metals on concern more financial institutions will fail as the credit crisis deepens. Silver jumped almost 4 percent.
"The U.S. government took control of American International Group Inc. in an $85 billion bailout to prevent the biggest financial collapse ever. The cost of borrowing dollars for three months jumped the most since 1999 as banks hoarded cash. Gold reached a record $1,033.90 an ounce in March after the Federal Reserve steered JPMorgan Chase & Co. to buy Bear Stearns Cos."
"``Gold is going to be the beneficiary of a global move toward a safe haven,'' said John Licata, the chief investment strategist at Blue Phoenix Inc. in New York. ``There's a gigantic fear factor. Most people are concerned another bank is going to fail.''"
"Gold futures for December delivery gained $8.10, or 1 percent, to $788.60 an ounce at 9:40 a.m. on the Comex division of the New York Mercantile Exchange."
"Silver futures for December delivery rose 41.3 cents, or 3.9 percent, to $10.93 an ounce."
"Before today, gold fell 6.9 percent this year, while silver tumbled 30 percent."
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
"Last Updated: September 17, 2008 09:41 EDT"
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U.S. MBA's Mortgage Applications Index Jumped 33.4% Last Week
By Bob Willis
Sept. 17 (Bloomberg) -- Mortgage applications in the U.S. jumped last week as refinancing soared on falling interest rates.
"The Mortgage Bankers Association's index of applications to buy a home or refinance a loan increased 33.4 percent to 661.7 in the week ended Sept. 12, the highest level since May. The group's refinancing gauge climbed 88 percent, the biggest gain since 2001, and the purchase index rose 2.4 percent."
"Homeowners are taking advantage of falling rates to refinance out of adjustable-rate mortgages in favor of longer- term fixed loans. The government's takeover last week of mortgage financers Fannie Mae and Freddie Mac may make mortgages more accessible, helping to form a floor for sales after three years of declines."
"``Lower rates should boost refinancing and new-purchase mortgages,'' Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. ``Mortgage rates have fallen on the bailout of Fannie and Freddie and this is increasing demand for mortgage financing.''"
The refinancing measure surged to 2300 last week from 1222.9 the prior week. The purchase index rose to 380.4 from 371.5 the prior week.
"The share of applicants seeking to refinance loans rose to 51.6 percent of total applications, the most since April, from 36.3 percent the week ended Sept. 5. The fixed-rate index jumped 37 percent, while the measure for adjustable loans fell 17 percent."
Federal Reserve policy makers yesterday left the benchmark interest rate unchanged at 2 percent for a third consecutive meeting. Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending.
Rates Drop
"The average rate on a 30-year fixed loan fell to 5.82 percent last week, a five-month low, from 6.06 percent, today's report showed."
"At the current rate, monthly borrowing costs for each $100,000 of a loan would be $588.03. That is still up about $20 from mid-January, when the fixed rate reached a three-year low of 5.5 percent."
"A report later today from the Commerce Department may show housing starts in August fell to the lowest level in 17 years, according to economists surveyed by Bloomberg, as homebuilders scaled back projects to work off inventory."
"Combined existing and new-home sales have declined 36 percent from their 2005 peaks. Nationwide, home prices have fallen 19 percent on average from their peak in July 2006, according to the S&P/Case Shiller index of 20 cities."
"The average rate on a 15-year fixed mortgage decreased to 5.54 percent from 5.73 percent, today's report showed. The rate on a one-year adjustable loan fell to 6.95 percent from 7 percent."
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
"Last Updated: September 17, 2008 07:00 EDT"
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"U.K. Stocks Retreat, Led by Banks; HBOS, Anglo American Plunge "
By Sarah Jones
"Sept. 17 (Bloomberg) -- U.K. stocks pared gains, led by HBOS Plc, Britain's largest mortgage lender. Anglo American Plc led mining companies lower."
"The FTSE 100 Index dropped 19, or 0.4 percent, to 5,006.6 at 2:22 p.m. in London. The measure at one point fell below the 5,000 level for a second day, having earlier rallied as much as 2 percent. The FTSE All-Share Index declined 0.2 percent, while Ireland's ISEQ Index lost 3.5 percent."
"HBOS dropped 14 percent to 157.2 pence after climbing as much as 18 percent. Kazakhmys Plc, Kazakhstan's biggest cooper producer, lost 4.8 percent to 672 pence."
"Anglo American, the world's fourth-largest diversified mining company, lost 5.8 percent to 2,128 pence."
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
"Last Updated: September 17, 2008 09:32 EDT"
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European Two-Year Government Notes Rebound as Stocks Decline
By Anchalee Worrachate
"Sept. 17 (Bloomberg) -- European government two-year notes rose, reversing declines, as investors sought the safest assets after stocks fell amid concern the financial crisis may deepen."
"The gain pushed the yield back toward a five-month low as Goldman Sachs Group Inc. and Morgan Stanley, the two largest U.S. securities firms, plunged more than 20 percent after Oppenheimer & Co. cut profit estimates. Bonds advanced after borrowing costs surged, sparking speculation more banks may falter due to lack of funding. The Federal Reserve yesterday provided an $85 billion loan to American International Group Inc. to avert a collapse in financial markets."
"``I've never seen anything quite like this in my entire career, and I'm in this market for 38 years,'' said Stephen Lewis, chief economist at Monument Securities in London. ``We thought the rescue of AIG would give the market some confidence, but that doesn't seem to be the case. People don't know how big the overhang is. The bond market is being driven by risk aversion.''"
"The yield on the two-year note dropped 5 basis points to 3.62 percent as of 4.30 p.m. in London, after earlier rising as high as 3.81 percent. The 4.25 percent note maturing September 2010 rose 0.10, or 1 euro per 1,000-euro ($1,411) face amount to 101.71."
"The two-year yield declined 29 basis points in the previous two sessions, the steepest two-day drop since March 17, the day after the Fed cut its discount rate. Bond yields move inversely to prices."
"The yield on the 10-year German bund, Europe's benchmark government-debt security, was little changed at 3.99 percent after rising by as much as 8 basis points earlier."
Borrowing Costs
"The cost of borrowing in dollars for three months jumped the most since 1999. The difference between what banks and the Treasury pay to borrow, the so-called TED spread, widened 75 asis points to 293 basis points, the most since the Oct. 20, 1987 stock-market crash."
U.S. stocks tumbled after housing starts slid to a 17-year low and bank lending seized up in the wake of the government's takeover of AIG. The Standard & Poor's 500 Index lost 4 percent.
"AIG, until recently the biggest U.S. insurer by assets, accepted a proposal to cede control in exchange for a loan. The agreement will keep the New York-based company in business, averting a failure that may have threatened more firms and added to declines in stock valuations."
"Barclays will acquire the Lehman assets for $1.75 billion, two days after abandoning plans to buy the entire firm. Concern that financial turmoil will worsen caused money markets to seize up and prompted central banks around the world to inject more than $210 billion of emergency cash."
HBOS Concern
"HBOS Plc, the U.K.'s biggest mortgage lender, dropped as much as 52 percent today amid concern it may not have access to funding. Lloyds TSB Group Plc is ``advanced'' talks to buy HBOS, the Edinburgh-based mortgage lender said."
"The difference in yield between two- and 10-year German notes widened to 37 basis points, from 32 basis points yesterday."
"The rescue of AIG prompted Deutsche Bank AG, one of the world's top 10 bond traders, to drop its Sept. 5 recommendation for so-called steepeners, or bets the difference in yield between two- and 10-year notes would widen."
"Investors should now exit such trades on a ``tactical'' basis, London-based strategists Ralf Preusser and Francis Yared wrote in a client note."
European Slowdown
"``The euro front-end doesn't fully price in the extent of the slowdown in Europe,'' they said. ``Thus, beyond today's move in reaction to the AIG bailout, we will seek to reinstate these positions.''"
Further declines in bonds may be limited on speculation the credit crisis that drove Lehman into bankruptcy and resulted in Bank of America Corp. buying Merrill Lynch & Co. will drag on.
"``I don't think we're near the bottom yet,'' said Gregor MacIntosh, portfolio manager in Edinburgh at Standard Life Investments Ltd., which has about $265 billion in assets. ``There's room for bond yields to fall further as it seems the market is convinced interest rates will come down at some point.''"
The implied yield on the December Euribor contract rose 14 basis points to 5.12 as traders pared bets on interest-rate cuts by the European Central Bank.
"The five-year euro swap spread, or the difference between the five-year swap rate and the equivalent maturity European bond yield, held near a record 97 basis points reached yesterday. A wider spread suggests traders are betting corporate borrowing costs will increase."
"European bonds handed investors a 4.2 percent return in the third quarter, compared with 3.7 percent on Treasuries, according to Merrill Lynch & Co.'s German Federal Governments and U.S. Treasury Master indexes."
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
"Last Updated: September 17, 2008 12:11 EDT"
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U.K. Two-Year Notes Pare Drop; Concern Credit Losses Spreading
By Lukanyo Mnyanda and Andrew MacAskill
Sept. 17 (Bloomberg) -- U.K. two-year notes pared losses as European stock markets reversed gains on speculation credit- market losses will widen.
"Gilts fell earlier after the Bank of England said inflation may stay above target for longer than forecast, making interest- rate cuts less likely. Investors switched to the safest assets as the so-called TED spread, a measure of banks' willingness to led to each other, surged to the highest since the October 1987 stock market crash and U.S. Treasury three-month bill rates dropped to the lowest since at least 1954."
"The two-year yield rose 1 basis point to 4.24 percent as of 2:42 p.m. in London. The 5 percent security due March 2018 slipped 0.02, or 20 pence per 1,000-pound ($1,789) face amount, to 100.82. The yield on the 10-year gilt was unchanged at 4.41 percent. Bond yields move inversely to prices."
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 17, 2008 09:47 EDT"
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Yuan Forwards Predict Depreciation on Growth Concern (Update1)
By Judy Chen
Sept. 17 (Bloomberg) -- Offshore traders are betting the yuan will weaken against the dollar as the government reins in currency gains to protect exporters amid a global economic slump.
"The currency was at 6.8370 per dollar as of the 5:30 p.m. close in Shanghai and non-deliverable forwards contracts indicate it will decline to 6.8429 per dollar in three months. Six months ago, the contracts showed traders were expecting gains of more than 4 percent in that timeframe."
"China has halted the yuan's appreciation this quarter, after it gained 6.6 percent in the first half of the year, as policy makers stress the need to maintain ``stable and relatively fast growth.'' The nation's gross domestic product rose 10.1 percent in the second quarter, the smallest increase since 2005."
"``China is slowing the pace as the government realized fast yuan gains in the first half gave exporters a hard time,'' said Ken Peng, an economist with Citigroup Inc. in Shanghai. ``The recent weakness in yuan forwards reflects the policy adjustments.''"
Forwards are agreements in which assets are bought and sold at current prices for settlement at a later-specified time and date. Non-deliverable forwards are settled in dollars rather than the underlying asset.
Further Appreciation
"The People's Bank of China this week trimmed its benchmark one-year lending rate for the first time in six years and reduced the amount of money banks have to set aside, encouraging spending to help the economy. Property prices climbed in August at the slowest pace in 18 months and industrial output expanded by the least in six years, official figures show."
"Goldman Sachs Group Inc., the world's biggest securities firm by market value, said on Aug. 29 investors should buy three-month non-deliverable forwards as a widening trade surplus would support the trend of appreciation. Exports exceeded imports by a record $28.7 billion in August, official data shows."
"China has managed the yuan's exchange rate against a basket of currencies that includes the euro, the yen and the pound since a peg to the dollar ended in 2005."
"The Chinese currency has gained 11 percent against the euro, 0.5 percent against the yen and 12 percent against the pound in the third quarter. The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, has risen 8.8 percent."
"``The temporarily observed weakness against the dollar was merely a reflection of broader dollar strength in a managed basket context,'' Goldman's currency strategists led by London- based Thomas Stolper wrote in a research note."
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net.
"Last Updated: September 17, 2008 06:18 EDT"
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"Yen Bears Capitulate, Dollar May Rally as Investors Flee Risk "
By Lester Pimentel
"Sept. 17 (Bloomberg) -- The yen will rally in the next six months as a deepening credit crisis prompts investors to shun higher-yielding assets, a survey of Bloomberg users showed."
"Investors are the most bullish on Japan's currency since March as the credit losses that led to the collapse of Lehman Brothers Holdings Inc. mount, according to 3,470 respondents from New York to Paris and Tokyo in the monthly Bloomberg Professional Global Confidence Index. Participants became the most optimistic on the outlook for the dollar since the survey began in November as growth slowed in Europe."
"``The Japanese yen is the best place to be,'' said Chris Low, chief economist at FTN Financial in New York and a survey participant."
"Of the 16 most-widely traded currencies, only the yen appreciated against the dollar in the past month, gaining 4.51 percent to 105.80 yen. The yen typically gains in times of crisis as traders exit so-called carry trades by selling high- risk assets and repaying loans in countries where interest rates are low. Japan's 0.5 percent target rate compares with 4.25 percent in Europe, 7 percent in Australia and in 13.75 percent in Brazil."
The index of expectations on the yen rose to 64.75 for September from 49.19 in August. A reading above 50 indicates participants expect the currency to appreciate.
Wall Street Turmoil
"The survey was taken before Lehman filed the largest bankruptcy in history on Sept. 15 and Merrill Lynch & Co. sold itself to Bank of America Corp. for about $50 billion, triggering the biggest decline in U.S. stocks since the September 2001 terrorist attacks. American International Group Inc.'s credit ratings were cut on Sept. 15, prompting the U.S. government yesterday to take control of the world's biggest insurer in an $85 billion bailout. All the firms are based in New York."
Only the outlook for the dollar exceeds that for the yen. The index measuring sentiment toward the greenback rose to 68.86 from 57.48. The currency has gained about 11 percent to $1.4202 per euro since touching an all-time low of $1.6038 on July 15.
"The dollar is attracting more investors and traders as the European economy slows. The Euro-zone economy may grow 1.5 percent this year, compared with 1.7 percent in the U.S., according to the median estimate of strategists surveyed by Bloomberg."
"The index for the euro declined to 37.85 from 42.88, while U.K. users increased bets against the pound, with that index falling to 28.67 from 37.73. Both levels are the lowest for those currencies recorded by the survey."
`Holds Up'
"``The fact that the dollar holds up relatively well amidst the market turmoil in the U.S. speaks for itself,'' said Jack Spitz, a managing director of foreign exchange at National Bank of Canada in Toronto and a survey participant. ``It's not a domestic U.S. problem any more; this is a global growth problem. Risk aversion and repatriation flows currently dominate the currency market.''"
The Federal Reserve left its target rate for overnight loans between banks at 2 percent yesterday and said ``downside risks to growth and the upside risk to inflation are both of significant concern.''
"Lower short-term deposit rates can make a country's fixed- income holdings less attractive to international investors, eroding demand for the currency. The dollar depreciated 12 percent against the euro between Sept. 18 and April 30 as the Fed cut its target rate for overnight loans between banks to 2 percent from 5.25 percent and the European Central Bank kept its equivalent unchanged at 4 percent."
"The outlook for the Brazilian real tumbled to 40.76, the lowest since the survey began, from 56.25 as investors avoided all but the safest securities. The real is the worst performer among the 16 most-traded currencies against the dollar this month, falling 9.4 percent."
Bond Outlook
"Users became less certain 10-year Treasury yields will rise as the sentiment index fell to 59.96, the lowest since April, from 65.26. The yield on the benchmark 10-year note touched a seven-year low of 3.27 percent after Lehman filed for bankruptcy."
"In Germany, the index measuring bund yields declined to 46.73 from 53.85, meaning users expect the nation's fixed-income securities to rally. Users in Japan expect yields there to fall, as the index dropped to 47.13 to 50.41. U.K. users became more bullish on gilts, with the index falling to 39.33 from 48.93."
Participants in Switzerland forecast the Swiss National Bank will cut its benchmark rate from 2.75 percent for the first time since April. The index that measures expectations for short-term borrowing costs fell to 42.01 in September from 55.42.
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
"Last Updated: September 17, 2008 07:00 EDT"
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Goldman Sachs Slashes Oil Forecast on Credit Concern (Update3)
By Jane Lee and Alexander Kwiatkowski
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Sept. 17 (Bloomberg) -- Goldman Sachs Group Inc. slashed its forecast for crude oil prices in New York as concerns the global credit crisis may lead to weaker demand outweigh supply constraints.
"The most profitable U.S. securities firm cut its three-month benchmark West Texas Intermediate crude oil estimate to $115 a barrel from $149, and its six-month target to $125 from $142. Still, it said the crude market was ``substantially oversold'' and current prices present ``compelling buying opportunities.''"
"``We will stand by our bullish view on oil but just think it will now take longer to get to our previous price targets,'' Goldman analysts, led by Jeffrey Currie, said in a Sept. 16 report. ``The supply side of the market still remains severely constrained.''"
"Lehman Brothers Holdings Inc.'s bankruptcy and the U.S. government takeover of American International Group Inc. have roiled financial markets, raising concern global economic growth will slow. Crude oil futures have fallen 36 percent from the record $147.27 a barrel reached on July 11."
"Goldman lowered its 2009 average oil price forecast to $123 a barrel from $148. Until now, Goldman had the highest WTI forecasts for 2009 among 35 analysts' estimates compiled by Bloomberg."
Hurricane Disruption
"Oil could fall as low as $75 a barrel should a global recession take place, and could jump as much as $15 above Goldman's targets because of shortages after plants restart from hurricane shutdowns, the securities firm said."
"The Goldman analysts closed out a spread trading recommendation they'd started four months ago after the bet made a loss of $4.73 a barrel, the report said."
In May Goldman recommended buying summer 2008 Brent crude futures and selling winter delivery contracts on the expectation that oil for delivery in the near term would increase in value relative to oil for delivery five months in the future.
"Fluctuations in the quality of North Sea crude meant the opposite happened and resulted in the bet losing money, Goldman said."
"The bank opened a new recommendation: to buy November Nymex gasoline futures and sell November crude, in the expectation that hurricane-led refinery disruptions will keep U.S. gasoline supplies tight, widening the fuel's price premium to crude oil."
"Goldman said oil will rebound in the fourth quarter because of strong demand as U.S. refineries restart operations, speculators return to the market, OPEC cuts output and China purchases more crude after running down stockpiles."
"Hurricanes Gustav and Ike disrupted oil field operations and refinery production this month. The Organization of Petroleum Exporting Countries agreed at its Sept. 9 meeting in Vienna to stick to its limit for 11 members of 28.8 million barrels a day, about 500,000 barrels a day lower than the group's July output."
"Crude oil in New York rose today, snapping its worst two- day decline in almost four years. Oil for October delivery gained as much as $3.85 a barrel, or 4.2 percent, to $95 a barrel. Prices were at $94.112 at 3:21 p.m. Singapore time."
To contact the reporter on this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.netAlexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
"Last Updated: September 17, 2008 10:25 EDT"
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India's Bonds Decline as Central Bank Measures May Damp Demand
By Anil Varma
Sept. 17 (Bloomberg) -- India's 10-year bonds fell the most in more than a month on speculation demand for the notes will decline after policy makers eased norms that require banks to pledge securities to borrow from the central bank.
"Benchmark yields rose from a three-month low after the Reserve Bank of India said yesterday banks can borrow funds equivalent to as much as 1 percent of their deposits without pledging bonds. The measure reduces lenders' need to buy debt in order to raise cash via the central bank's daily repurchase auctions, said Baljinder Singh, a trader at state-owned Andhra Bank in Mumbai."
"``The central bank's announcement effectively cuts banks' need to accumulate bonds for using them as collateral and borrowing money,'' Singh said. ``This is going to weaken demand for debt.''"
"The yield on the benchmark 8.24 percent note due April 2018 climbed 10 basis points to 8.19 percent as of the 5:30 p.m. close in Mumbai, according to the central bank's trading system. The price fell 0.68, or 68 paise per 100-rupee face amount, to 100.30. A basis point is 0.01 percentage point."
"Banks have borrowed from the central bank on every trading day of this month, indicating they are short of funds. Such borrowings rose to a record 575.65 billion rupees ($12.4 billion) yesterday, according to the Reserve Bank. The rate at which banks lend to each other overnight rose to a four-month high of 16 percent yesterday."
Global central banks from Tokyo to Frankfurt have added more than $200 billion since the beginning of the week as the U.S. credit-market losses roiled financial markets and pushed Lehman Brothers Holdings Inc. into bankruptcy.
Federal Reserve
Bonds also fell after the U.S. Federal Reserve left borrowing costs unchanged for a third consecutive policy meeting yesterday.
"``There was widespread speculation that the Fed would cut rates, given the turmoil on Wall Street,'' Andhra Bank's Singh said. ``Traders who bet on that yesterday were disappointed.''"
"Traders bet on an 84 percent likelihood the Fed would reduce its target rate for overnight lending between banks before the decision, futures on the Chicago Board of Trade showed. The probability was 2 percent a week earlier."
"The cost of benchmark Indian interest-rate swaps, or derivative contracts used to guard against rate fluctuations, rose. The five-year swap rate, a fixed payment made to receive floating rates, climbed to 8.03 percent from 7.91 percent yesterday."
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
"Last Updated: September 17, 2008 08:25 EDT"
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Rupee Rebounds From Two-Year Low as India Says It'll Intervene
By Anil Varma
"Sept. 17 (Bloomberg) -- India's rupee rebounded from a two- year low, gaining the most in almost two months, after the central bank announced measures to boost dollar supply and curb exchange-rate swings."
The currency snapped a six-day decline after the Reserve Bank of India said yesterday it will sell dollars and raise interest rates on locally-held foreign-currency deposits to attract money from abroad. The central bank said it plans to sell dollars through its agent banks or directly to meet demand- supply gaps after the rupee fell the most in a decade yesterday.
"``The rupee is likely to recover part of its losses because it's a certainty now that the central bank will supply dollars in the spot market,'' said Krishnamurthy Harihar treasurer at Development Credit Bank Ltd. in Mumbai."
"The rupee rose 1.2 percent to 46.37 per dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It fell 1.9 percent yesterday, the most since May 1998. The Indian currency is Asia's second-worst performer this year after South Korea's won, with a 15.1 percent loss."
"Implied volatility on one-month dollar-rupee options rose today to 16 percent, the most in at least nine years, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices."
The central bank increased the interest rate on some foreign-currency deposits by 0.5 percentage point with an aim to attract dollar inflows. The rate ceiling on the so-called foreign currency non-resident (B) deposit is now pegged at 25 basis points below the London interbank offered rate.
Dollar Sales
"Dollar sales by the Reserve Bank in June exceeded purchases for the first time in 20 months, the bank reported last month. The monetary authority sold a net $5.23 billion during the month. India's foreign-exchange reserves have declined by more than $27 billion from a record high of $316.2 billion reached in May, indicating it sold dollars."
"The rupee also gained on speculation growth in Asia's third-biggest economy may attract investors at a time when the U.S., Europe and Japan are slowing."
"``Economic fundamentals don't warrant the sort of steep rupee depreciation we've witnessed in recent days,'' said Seshagiri Rao, chief financial officer of JSW Steel Ltd., India's third-largest producer. ``India's economy is relatively strong and is still among the fastest growing.''"
"India's $912 billion economy may expand 8 percent this year, according to the central bank. Factory output rose 7.1 percent in July, the biggest increase in five months."
Exotic Options
"Overseas investors should buy so-called exotic rupee options that offer limited protection at a lower price to guard against the Indian currency's losses, according to Barclays Plc."
"Traders should avoid the costlier and more common ``vanilla'' options because the rupee's rising volatility is raising derivative prices, said Peter Redward, head of research for emerging Asia at the U.K.'s third-biggest bank."
"``It's much better to use structured options to hedge than simple vanilla contracts, which are too expensive,'' Singapore- based Redward said."
"Investors should buy so-called reverse knock-out rupee put options due in a month, which grant the right to sell the currency against the dollar as long as its losses don't exceed a set limit, Redward said. Barclays recommends a strike price of 47.15, equal to the price of one-month rupee-dollar contracts in the overseas non-deliverable forward market, with a knock-out trigger at 49."
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
"Last Updated: September 17, 2008 08:08 EDT"
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"Dollar Money-Market Rate Falls From Seven-Year High, BBA Says "
By Gavin Finch and Kim-Mai Cutler
"Sept. 17 (Bloomberg) -- The cost of borrowing in dollars overnight fell from the highest level since 2001, the British Bankers' Association said."
"The London interbank offered rate, or Libor, dropped 1.41 percentage points to 5.03 percent today. It soared 3.33 percentage points yesterday, the biggest increase in its history. It was at 2.14 percent a week ago."
To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
"Last Updated: September 17, 2008 07:03 EDT"
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Crude Oil Rises as AIG Rescue Plan Eases Economic Slowdown Risk
By Mark Shenk
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"Sept. 17 (Bloomberg) -- Crude oil rebounded from the biggest two-day decline in almost four years after the Federal Reserve agreed to rescue American International Group Inc., easing concern of a further economic slowdown in the U.S."
Oil rose as the Fed bailout prevented the bankruptcy of the nation's biggest insurer and Morgan Stanley announced that third- quarter profit fell less than estimated. Prices also advanced after a U.S. government report showed that crude oil and fuel stockpiles dropped because of Hurricane Ike.
"``Prices began to rise when it became clear that there would be an AIG rescue and we got word that Morgan had decent earnings,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York."
"Crude oil for October delivery rose $1.84, or 2 percent, to $92.99 a barrel at 11:13 a.m. on the New York Mercantile Exchange. Oil in New York has declined 3.2 percent this year and 37 percent from the record $147.27 a barrel reached on July 11."
Oil futures tumbled more than $10 a barrel in the first two days of the week on concern financial-market disruptions may weaken the global economy and cut fuel consumption.
"Goldman Sachs Group Inc. cut its three-month forecast for crude oil to $115 a barrel from $149, citing the global credit crisis and demand weakness. Goldman Sachs said oil prices have ``overshot to the downside'' and the securities firm remains ``bullish'' that they will move higher."
Inventories Decline
"U.S. crude-oil stockpiles fell 6.33 million barrels to 291.7 million barrels last week, according to the Energy Department. It was the fourth-straight inventory decline. A drop of 3.5 million barrels was forecast, according to the median of responses by 11 analysts surveyed by Bloomberg News."
"U.S. fuel demand averaged 19.9 million barrels a day during the past four weeks, down 4.4 percent from a year earlier, the department said. Gasoline consumption averaged 9.21 million barrels a day over the period, down 2.6 percent."
"Gasoline supplies declined 3.31 million barrels to 184.6 million barrels, the lowest since at least 1990, according to department figures. Analysts forecast that stockpiles of the fuel would drop 3.5 million barrels last week. Inventories have fallen 15 percent in eight weeks."
"Gasoline for October delivery fell 2.48 cents, or 1 percent, to $2.376 a gallon in New York. Futures touched $2.3576, the lowest since Feb. 13."
"``People are focused on the fact that demand is off by 2.6 percent rather than on inventories,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The refineries that were shut because of Hurricane Ike will be restarting soon.''"
Nigerian Attacks
Nigeria's main militant group in the Niger River delta said it destroyed an oil-pumping station operated by a unit of Royal Dutch Shell Plc and a pipeline as its raids against the oil industry entered a fifth day.
"The Movement for the Emancipation of the Niger Delta said it destroyed the Orubiri oil-pumping station operated by a unit of Shell, and an oil pipeline operated by units of Shell and Eni SpA. A Nigerian military spokesman confirmed the raid."
"Nigeria, which sits on Africa's largest hydrocarbon reserves, has lost about one-fifth of its output since February 2006 as a result of attacks."
"Brent crude oil for November settlement rose $1.33, or 1.5 percent, to $90.55 a barrel on London's ICE Futures Europe exchange. Prices dropped the past 14 days, the longest stretch since the contract was introduced in 1988."
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
"Last Updated: September 17, 2008 11:38 EDT"
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Dollar Falls Versus Yen as AIG Rescue Fails to Quell Concern
By Ye Xie and Bo Nielsen
Sept. 17 (Bloomberg) -- The dollar declined against the yen as the Federal Reserve's $85 billion bailout of insurer American International Group Inc. failed to quell concern credit market losses will deepen.
Japan's currency increased versus the Brazilian real while the Swiss franc gained against the Australian dollar on speculation investors will reduce holdings of higher-yielding assets and pay back loans in Japan and Switzerland. The pound fell versus the euro on concern British home-loan provider HBOS Plc may not have access to funding.
"``Currencies reacting well to the volatile environment, namely the yen and Swiss franc, will continue to be favored,'' said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. ``Despite the government's takeover of AIG, concerns about financial institutions and credit markets are still with us.''"
"The yen climbed 1 percent to 104.62 per dollar at 11:53 a.m. in New York, from 105.65 yesterday, when it touched 103.54, the strongest level since May 27. It rose 1 percent to 147.89 per euro, from 149.33 yesterday, when it touched 147.04, the strongest since August 2006. The dollar traded at $1.4136 per euro, compared with $1.4129."
"Japan's currency increased 4.6 percent to 55.74 versus the real while the franc rose 2.4 percent to 1.1401 Australian dollars as stocks fell, encouraging investors to reduce trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Benchmark interest rates of 13.75 percent in Brazil and 7 percent in Australia compare with 0.5 percent in Japan and 2.75 percent in Switzerland."
Lehman Bankruptcy
"The yen jumped the most in a decade against the dollar on Sept. 15 as Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in history, sparking a global stock market rout and a surge in bank loan costs."
"The Standard & Poor's 500 Index lost 1.5 percent today, and the rate on the three-month U.S. Treasury bill dropped as much as 0.48 percentage point to 0.21 percent, the lowest since at least 1954. The oldest U.S. money-market fund, Reserve Primary Fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman."
"``It's hard to think a bottom is coming around this time,'' said Adam Fazio, a currency strategist at CIBC World Markets Inc. in New York."
"The yen will rally in the next six months, a survey of Bloomberg users showed. Investors are the most bullish on the currency since March, according to 3,470 respondents from New York to Paris and Tokyo in the monthly Bloomberg Professional Global Confidence Index."
Weaker Pound
"The pound weakened 0.2 percent to 79.43 pence per euro as HBOS, Britain's biggest mortgage bank, fell as much as 52 percent in London trading. Lloyds TSB Group Plc, the U.K.'s biggest provider of checking accounts, is in talks to buy the lender. Sterling stayed lower after a government report showed unemployment claims rose in August by the most since 1992."
"The Fed will provide AIG with a two-year loan, take 79.9 percent of the New York-based company's stock and replace its management. The central bank kept its target rate for overnight lending between banks at 2 percent yesterday, rebuffing calls by some investors for an interest-rate cut."
"``The Fed is monetizing debt on an unprecedented scale, and I can't see how that can be dollar-positive,'' said Michael Klawitter, a currency strategist at Dresdner Kleinwort in Frankfurt. ``Nothing is solved.''"
Dollar's Gains
"The dollar has gained 12 percent since touching an all-time low of $1.6038 per euro on July 15, gaining as reports showed the European economy shrank in the second quarter and crude oil dropped more than a third from its peak of $147.27 a barrel."
"``We're in this battle between the return to macroeconomic- driven currency markets and the focus on risk reduction and position squaring,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``There are hints that weaker economic news in the U.S. is starting to negatively impact the dollar. The capitulation selling of euros against the dollar and the yen may be over.''"
"U.S. housing starts fell 6.2 percent in August to an annual rate of 895,000, the lowest since January 1991, the Commerce Department said in Washington. Building permits, a sign of future construction, dropped 8.9 percent to an 854,000 pace."
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
"Last Updated: September 17, 2008 11:56 EDT"
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"Stock Investors Most Bearish in U.K., Spain Before Lehman Crash "
By Michael Patterson
"Sept. 17 (Bloomberg) -- Investors were the most bearish about stocks in the U.K., Spain and the U.S. before Lehman Brothers Holdings Inc.'s bankruptcy roiled financial markets, a survey of Bloomberg users showed."
"The Standard & Poor's 500 Index, the FTSE 100 Index, the IBEX 35 Index, France's CAC 40 Index, Italy's S&P/MIB Index, the Swiss Market Index, Germany's DAX Index, Japan's Nikkei 225 Stock Average and Mexico's Bolsa will drop in the next six months, according to the Bloomberg Professional Global Confidence Survey of 3,043 investors from New York to Tokyo. Only in Brazil did they predict gains."
"The MSCI World Index tumbled 19 percent this year through Sept. 12, and Lehman's collapse helped push the benchmark for global equities down another 3.8 percent this week. The U.K.'s FTSE 100, Spain's IBEX 35 and the S&P 500 dropped more than 22 percent from their 2007 peaks after more than $500 billion of subprime-related losses at banks pushed the global economy toward a recession."
"``Earnings expectations are being downgraded all the time, and as we get deeper into this credit crisis, people are getting more pessimistic,'' said Lawrence Peterman, an investment director who participated in the survey at Eden Financial Ltd., which oversees about $1.4 billion in London. ``Housing is a massive issue.''"
"The poll was conducted Sept. 8 to 12, before credit-market losses drove Lehman into the biggest bankruptcy in history Sept. 15."
Lehman's Collapse
"The Bloomberg stock confidence index in the U.K. fell to 22 from 23.77 in August, while the measure for Spain climbed to 32.65 from 26.21. The U.S. gauge, the third-lowest among the 10 nations surveyed this month, rose to 35.18 from 34.15."
"In Brazil, the index advanced to 61.68 from 60.76. A reading below 50 indicates investors expect stocks to retreat in the next six months while a reading above 50 signifies a potential rally."
"The MSCI World posted its biggest jump since July last week on speculation the U.S. government's takeover of Fannie Mae and Freddie Mac, the largest mortgage-finance companies, would stabilize the global financial system. The gains were erased this week after Lehman filed for Chapter 11 bankruptcy."
"``Given the added uncertainty surrounding the liquidation of Lehman's positions and concerns about other financials following the same path, why would you invest now?'' said Ioan Smith, a vice president at Knight Equity Markets International Ltd. in London."
"HBOS, Citigroup"
"Benchmark stock indexes in all 10 countries have tumbled at least 16 percent this year, led by a 30 percent retreat in Italy's S&P/MIB. Equities dropped as the worst U.S. housing slump since the Great Depression reduced earnings at financial companies and spurred speculation banks will rein in lending."
"HBOS Plc, Britain's biggest mortgage lender, declined 75 percent this year. Grupo Ferrovial SA, a Madrid-based construction company, dropped 31 percent. Citigroup Inc., the biggest U.S. bank by assets, is down 47 percent."
"Economists predict gross domestic product will expand at a weaker pace this year than in 2007 in all 10 countries in the survey, according to forecasts compiled by Bloomberg."
"``In most of the global economy, growth is slowing compared to where it was a year ago,'' said Paul Kandel, who helps oversee about $5 billion as a senior portfolio manager at Sentinel Asset Management in New York. ``Where do you hide out? That's what has people worried, and that's why you see the negativity.''"
Peterman of Eden Financial says an increase in bearishness may signal that many investors already sold shares and prices are poised to rebound as buyers enter the market.
"``When everyone is pessimistic, it's generally a good time to buy,'' he said."
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
"Last Updated: September 17, 2008 07:00 EDT"
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Copper Declines as Fewer Housing Starts Signal Drop in Demand
By Millie Munshi
"Sept. 17 (Bloomberg) -- Copper fell for a third day after a report showed U.S. housing starts slumped to a 17-year low, increasing speculation a cooling global economy will slash demand for metals."
"Housing starts fell 6.2 percent to an annual rate of 895,000 from July, the fewest since January 1991, the Commerce Department said today. Builders are the biggest users of copper in the U.S. Before today, the metal had plunged 27 percent since touching a record in May on speculation financial turmoil, a slumping U.S. housing market and the global credit crisis would stifle growth."
"``Copper is going to be under significant pressure during this economic downturn,'' said Frank McGhee, the head metals trader at Integrated Brokerage Services LLC in Chicago. ``The housing report is adding to bearish sentiment.''"
"Copper futures for December delivery fell 4.55 cents, or 1.5 percent, to $3.0435 a pound at 11:44 a.m. on the Comex division of the New York Mercantile Exchange. The metal lost 3.3 percent in the previous two sessions."
"Building permits, a sign of future construction, dropped 8.9 percent to an 854,000 pace. The credit crunch spawned by the subprime mortgage crisis forced Lehman Brothers Holdings Inc. this week to file for bankruptcy, just a week after the government took over Fannie Mae and Freddie Mac, the two biggest U.S. buyers of mortgages."
"``A lot of the other problems in the economy right now come back to housing and mortgages,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. ``Housing is the key to everything. Until you see a turnaround in housing, you won't get a better picture for the economy and commodities are going to continue to suffer.''"
Credit Crisis
Raw-materials markets have been roiled this week as the credit crisis claimed some of the oldest U.S. financial companies.
"Bank of America Corp., the biggest U.S. consumer bank, agreed to buy Merrill Lynch & Co. for about $50 billion on Sept. 15 after the securities firm posted subprime-related losses. American International Group Inc., the country's largest insurer by assets, was taken over yesterday in an $85 billion deal by the government."
"The Standard & Poor's GSCI Index, up today for the first time this week, still has lost 6.8 percent since Sept. 12. The gauge, which tracks 24 commodities, has erased its gain for the year this week and is down 2.3 percent in 2008."
"On the London Metal Exchange, copper for delivery in three months dropped $110, or 1.6 percent, to $6,760 a metric ton ($3.07 a pound). Before today, the price had declined 9 percent in the past year."
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
"Last Updated: September 17, 2008 12:01 EDT"
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"Italian Stocks: Atlantia, Gemina, Saipem, Telecom Italia Move "
By Francesca Cinelli
"Sept. 17 (Bloomberg) -- Italy's S&P/MIB Index gained for the first time this week, adding 311, or 1.2 percent, to 26,900 at 2.07 p.m. local time. Futures expiring in September increased 141, or 052 percent, to 26,930."
The following are among the most active stocks on the Italian market today. Share symbols are in parentheses.
"A2A SpA (A2A IM), Italy's largest municipal utility, declined to the lowest since in almost two months, losing 3.8 percent to 1.87 euros. ``Corporate governance problems are set to weigh on the stock'' while ``the consensus is too high,'' Cheuvreux analyst Francesca Pezzoli wrote in a note. The brokerage downgraded the stock to ``underperform'' from ``outperform.''"
"Arnoldo Mondadori Editore SpA (MN IM), the publisher controlled by Prime Minister Silvio Berlusconi, fell to the lowest since July 17, losing 2.9 percent to 3.67 euros Italian advertising spending fell 3.7 percent to 478.7 million euros ($682.3 million) in July, Nielsen Media Research said yesterday. ``The market is confirming signs of weakness,'' Mediobanca Securities analyst Fabio Pavan wrote in a note. ``Magazines are suffering more than the other media.''"
"Assicurazioni Generali SpA (G IM), Italy's biggest insurer, rose for the first time in five days, adding 1.5 percent to 21.57 euros. The stock has lost 31 percent this year."
"``Generali's valuation has become more attractive over the last months and is now in line with the sector'' and ``we are gradually warming up to the story,'' wore Merrill Lynch & Co. analysts in a note."
"Atlantia SpA (ATL IM), Italy's biggest toll-road operator, dropped 3.9 percent to 15.3 euros, a third day of declines. ``The shares suffer from market speculation that Lehman Brothers Holdings Inc. may own a stake in the company,'' said Alberto Magnani, who manages the equivalent of about 220 million euros at Abbacus Sim SpA in Genoa, Italy."
"Banca Monte dei Paschi di Siena SpA (BMPS IM), Italy's third-largest bank, surged 2 percent to 1.74 euros, the first gain in three days. The lender has about 50 million euros ($71 million) of ``exposure'' to Lehman Brothers Holdings Inc., the U.S. investment bank that filed for bankruptcy this week, Il Sole 24 Ore reported."
"Enel SpA (ENEL IM), Italy's largest utility, advanced for the first time this week, up 1.6 percent to 5.8 euros. The company is close to reaching an agreement to sell power lines to Terna SpA (TRN IM), the owner of the country's electricity grid."
"``The asset disposals and the cash flows generated should help Enel to reach its 2012 debt target,'' Dario Michi, an analyst at Banca Akros, wrote in a note."
Terna shares added 0.2 percent to 2.56 euros.
"Fiat SpA (F IM), Italy's largest manufacturer, declined 2 percent to 10.54 euros, the lowest since September 5. ``The downside trend'' of the European car market ``gained momentum during the summer with registration in freefall,'' Exane BNP Paribas analysts wrote in a note on the European automobile industry. ``In light of a weak domestic market, the performance of Fiat Group is not that bad but marked a slowdown compared to previous months.''"
"Gemina SpA (GEM IM), owner of Italy's largest airport manager, slumped 6.1 percent to 70 cents, a fourth day of falls. ``Aeroporti di Roma SpA has no visibility on the Fenice rescue- plan and is waiting for the outcome of the negotiation between CAI,'' the investors group bidding for Alitalia SpA (AZA IM), ``and Unions,'' Mediobanca Securities analysts wrote in a note."
"IT Holding SpA (ITH IM) fell for a third day, losing 0.8 percent to 44.05 cents. The owner of the Gianfranco Ferre SpA brand had its credit rating outlook changed to ``negative'' by Moody's Investors Service on concern a decline in consumer spending is hurting earnings."
"``The same worries justifies our neutral view in spite of the theoretical upside implicit in our valuation and of apparently cheap multiples,'' Euromobiliare Sim analysts wrote in a note. The brokerage has a price estimate on the stock of 54 cents."
"Iride SpA (IRD IM), the utility serving the cities of Turin and Genoa, gained the most in almost three weeks, adding 3.7 percent to 1.59 euros. ``Should the merger'' with Hera SpA (HER IM) and Enia SpA (EN IM) ``fail, Iride would be the safest thanks to its upstream strength,'' Claudia Introvigne, an analyst at Gruppo Banca Leonardo, wrote in a note."
Hera shares declined 2.2 percent to 2.05 euros. Enia shares increased 0.4 percent to 6.66 euros.
"Maire Tecnimont SpA (MT IM), an Italian energy-services company, surged 8.2 percent, to 2.92 euros, the steepest increase since March. ``The company expects mega-projects to be assigned in 2009 in Middle East and Latin America (3 billion euros each) and the company has good chances to gain material stakes of these,'' Mediobanca Securities analysts wrote in a note."
"Mediolanum SpA (MED IM), the Italian financial-service company partly owned by Prime Minister Silvio Berlusconi, sank to the lowest since August, down 1.1 percent, to 2.99 euros. Mediolanum's net profit ``would halve if it fully reimburses the index-linked products issued by Lehman,'' Cheuvreux analysts wrote in a note on the Italian insurance industry."
"Saipem SpA (SPM IM), Europe's biggest oil-field services contractor by market value, advanced 3.2 percent to 22.26 euros, the first rise this week. ``Valuation looks interesting again,'' analysts at UniCredit Markets & Investment Banking, wrote in a note."
Goldman Sachs increased its price estimate on the stock to 29 euros from 28 euros.
"Seat Pagine Gialle SpA (PG IM), Italy's largest publisher of phone directories, dropped 6.7 percent to 8.63 cents before being suspended for excessive loss. ``We rate Seat as a `sell' against Yell Group Plc (buy) due to a significant valuation gap despite a similar negative outlook for both companies,'' Goldman Sachs analysts wrote in a note."
"Telecom Italia SpA (TIT IM), Italy's biggest phone company, climbed 3.5 cents, or 3.3 percent, to 1.1 euros, the first gain this week. JPMorgan Chase & Co. upgraded the stock to ``neutral'' from ``underweight'' because of ``an increasing momentum towards a sustainable recovery.''"
To contact the reporter on this story: Francesca Cinelli in Milan at fcinelli@bloomberg.net
"Last Updated: September 17, 2008 08:11 EDT"
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Global Confidence Declines as Financial-Market Turmoil Worsens
By Ben Sills
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"Sept. 18 (Bloomberg) -- Confidence in the global economy declined in September as the financial turmoil in the U.S. worsened, a survey of Bloomberg users on five continents showed."
"The Bloomberg Professional Global Confidence Index fell to 11.3 from August's 14.1. Confidence among U.S. respondents fell to 10.6 from 18.2, while the Western European measure was at 12.6 after 12.9. A reading below 50 indicates pessimism."
"The yearlong credit squeeze has in the past two weeks led to the bankruptcy of Lehman Brothers Holdings Inc. and the takeover of Fannie Mae, Freddie Mac and American International Group Inc. Overnight borrowing costs soared as banks hoarded cash."
"``We're heading for a prolonged slowdown almost everywhere starting from the U.S.,'' said Aurelio Maccario, chief euro-region economist of UniCredit Group in Milan, who took part in the survey. ``Given the ongoing financial weakness, the slowdown may gather speed.''"
"The MSCI index of financial shares has fallen 10 percent since early last week. The Federal Reserve said Sept. 16 it would lend the country's biggest insurer, American International Group Inc., $85 billion to avert the worst financial collapse on record. A day earlier, Lehman Brothers filed for bankruptcy and Merrill Lynch & Co. agreed to be taken over by Bank of America Corp."
"About 3,500 Bloomberg users from Tokyo to New York responded between Sept. 8 and Sept. 12 as investors absorbed U.S. Treasury Secretary Henry Paulson's bailout of Fannie Mae and Freddie Mac, which own or guarantee $12 trillion of U.S. mortgages."
"``We moved from Fannie and Freddie to Lehman to AIG, and even today, one question is: who is going to be next?'' said Simon Barry, an economist at Ulster Bank in Dublin, another participant."
Credit Losses
"Banks worldwide have tallied more than $500 billion in losses and writedowns since credit markets seized up a year ago. Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. securities firms, tumbled the most ever in New York after the AIG rescue failed to ease the credit contraction."
"``We haven't experienced anything like this since 1929,'' Former European Central Bank chief economist Otmar Issing, 72, said in a Bloomberg Television interview Sept.16. ``Global growth will slow and is already slowing. But overall, the risks have mostly been confined to a few industrialized countries.''"
"Bloomberg users increased expectations that lower oil prices will allow central bankers to pare interest rates as the economic outlook deteriorates. In Germany, the measure for central bank- rate expectations fell to 34.1 from 42.7, signaling respondents in Europe's biggest economy now anticipate that the European Central Bank may cut its key rate in the coming six months. The gauges also declined in the U.S., Japan, and the rest of the euro region."
Timing of Recovery
The price of oil fell by a third since touching a record $147.27 in July and traded at $92.70 a barrel in New York today.
"``For global business confidence to improve two things are needed: the U.S. housing market to bottom out and a sign that the financial turmoil is nearing an end,'' said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. ``That won't be until around the second quarter in 2009.''"
"The cost of borrowing in dollars for three months jumped the most in nine years yesterday as banks hoarded cash amid speculation more financial institutions will fail. The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said."
"The euro region and the Japanese economies shrank in the second quarter, while the European Union says the U.K. will suffer a recession in the second half of the year. The U.S. unemployment rate jumped to 6.1 percent in August, the highest in five years."
"Respondents in Japan were the most pessimistic about the global outlook. Participants in Spain, which the EU says faces its first recession in 15 years, were the gloomiest about their economy, with a reading of 4.1, followed by the U.K. Participants in Brazil remained the most optimistic about their economy, at 58.2."
To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net
"Last Updated: September 17, 2008 13:08 EDT"
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"Morgan Stanley, Goldman Default Swaps Rise Amid Market Seizure "
By Abigail Moses and Shannon D. Harrington
Sept. 17 (Bloomberg) -- The cost to protect against a default by Morgan Stanley and Goldman Sachs Group Inc. rose to a record as the credit-market seizure triggered by the collapse of Lehman Brothers Holdings Inc. continued.
"Credit-default swaps on Morgan Stanley and Goldman rose for the third day following Lehman's bankruptcy. Contracts on Charlotte, North Carolina-based Wachovia Corp. approached a record reached yesterday. Contracts on American International Group Inc., the insurer bailed out by the U.S. government, plunged."
"Credit markets have been locked up since New York-based Lehman, which was the fourth-largest U.S. securities firm, filed for bankruptcy protection on Sept. 15, raising concern that other financial companies may fail. Investors have been unwilling to take on new debt risk and overnight lending rates have soared."
"``Liquidity in credit completely dries up when things are widening,'' said Puneet Sharma, the head of investment-grade credit strategy at Barclays Capital in London. ``Low liquidity exaggerates spread movements.''"
"Credit-default swaps on Morgan Stanley rose 220 basis points to 900 basis points, and earlier traded at 925, according to broker Phoenix Partners Group in New York. Contracts on Goldman climbed 110 basis points to 530 basis points, Phoenix data show. Morgan Stanley and Goldman are based in New York."
"``We need these markets to normalize,'' Morgan Stanley Chief Financial Officer Colm Kelleher said yesterday on a conference call with analysts. ``What we need is confidence. We are confident. The regulators are doing a lot and, frankly, I believe this nonsense will end.''"
"Morgan Stanley released its third-quarter earnings yesterday, a day ahead of schedule, to help ease investor concerns. The company said profit fell 3 percent to $1.43 billion, or $1.32 per share, a smaller drop than analysts had estimated."
"Wachovia, Washington Mutual"
"Contracts on Wachovia, the fourth-largest U.S. bank, increased 21 basis points to 721, according to CMA Datavision. Contracts on Citigroup Inc., the biggest U.S. bank by assets, rose 13 basis points to 323 basis points, and JPMorgan Chase & Co. was little changed at 203 basis points."
"Sellers of credit-default swaps on Seattle-based Washington Mutual Inc. demanded 47.5 percentage points upfront and 5 percent a year to protect against a default for five years. That's down from 48.5 percentage points yesterday and means it would cost $4.75 million upfront and $500,000 a year to protect $10 million."
"The upfront price on AIG contracts dropped by half to 20.5 percentage points, according to CMA."
"In a sign that banks are hesitant to lend to each other, the three-month London interbank offered rate in U.S. dollars jumped the most since 1999, climbing 19 basis points to 3.06 basis points, the British Bankers' Association said. A basis point is 0.01 percentage point."
CDX North America
"Contracts 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 including AIG, fell 2 basis points to 198 basis points as of 10:22 a.m. in New York, according to Phoenix. It reached a record 229 basis points yesterday."
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline signals the opposite."
"A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year."
To contact the reporters on this story: Abigail Moses in London Amoses5@bloomberg.net; Shannon D. Harrington in New York at sharrington6@bloomberg.net
"Last Updated: September 17, 2008 11:22 EDT"
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"Brazil Central Bank May Lift Rate Further, Vieira da Cunha Says "
By Joshua Goodman
"Sept. 17 (Bloomberg) -- Brazil's central bank will increase interest rates further as rising domestic demand threatens inflation targets and offsets concerns that the deepening U.S. financial crisis will spread, former deputy governor Paulo Vieira da Cunha said."
"Vieira da Cunha, who served as director for international affairs until January, said the board led by central bank President Henrique Meirelles is correct to try and cool domestic demand that remains ``fairly strong.''"
"``This financial crisis isn't something you would hope for, but it does at the margins help the central bank fight inflation,'' said Vieira da Cunha, who is a partner in New York- based Tandem Global Partners, a hedge fund."
"The Brazilian central bank last week raised its benchmark interest rate for the fourth time since April, to 13.75 percent from 13 percent, in a bid to cool Brazil's fastest economic expansion since 1995. Vieira da Cunha expects prices for Brazilian soy, beef and other commodity exports to continue to decline, allowing policy makers to reduce the pace of tightening to a half-point increase at its next meeting Oct. 29."
Vieira da Cunha said Brazilian banks have enough liquidity to resist tightening credit conditions. He said domestic lending has ``been so profitable in recent years that Brazilian banks had little incentive to do business abroad.''
"``Brazilian banks don't depend on access to external credit at all, other than very short-term lines,'' he said in a telephone interview. ``The central bank runs regular stress tests and if something was happening it would probably already be registering.''"
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro at Jgoodman19@bloomberg.net;
"Last Updated: September 17, 2008 09:12 EDT"
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Das Says Reserves `Silver Lining' in Russian Bank Crisis: Video
"Sept. 17 (Bloomberg) -- Arnab Das, global head of emerging markets at Dresdner Kleinwort, talks with Bloomberg's Nina de Roy in London about the impact of financial market turmoil and lower oil prices on emerging markets such as Russia, Brazil and China. Russia poured $44 billion into its three biggest banks and halted stock trading for a second day in a bid to stem the biggest financial crisis since its devaluation and debt default a decade ago. (Source: Bloomberg)"
"00:00 Decoupling theory ""is being debunked"""
"00:44 Emerging market equities and credit ""exposed"""
"01:43 Effect of oil price decline, Russia, Brazil"
"03:50 China: rate cuts, stocks, valuation of yuan"
Running time 05:11
"Last Updated: September 17, 2008 08:46 EDT"
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U.S. Stock Futures Extend Drop as Home Starts Trail Estimates
By Lynn Thomasson
"Sept. 17 (Bloomberg) -- U.S. stock-index futures extended declines after housing starts trailed economists' estimates in August, spurring concern that the real-estate slump will continue to weigh on growth."
American International Group Inc. sank 41 percent in early New York trading after the government took control of the nation's largest insurer by assets in an $85 billion rescue. Futures extended declines after the Commerce Department said housing starts slumped 6.2 percent last month to the fewest since January 1991.
"Standard & Poor's 500 Index futures expiring in December lost 17.4, or 1.4 percent, to 1,198.8 as of 8:36 a.m. in New York. Dow Jones Industrial Average futures decreased 128 to 10,917 and Nasdaq-100 Index futures sank 16.25 to 1,716.75."
The S&P 500 gained 1.8 percent yesterday as expectations grew the Federal Reserve would rescue AIG from collapse and spare financial institutions from losses on the investments the company insures.
The benchmark index for American equities started the week with a 4.7 percent tumble after credit losses forced Lehman Brothers Holdings Inc. to file for bankruptcy protection and Merrill Lynch & Co. to agree to be taken over by Bank of America Corp.
The S&P 500 has fallen 17 percent this year and is poised to post its first yearly retreat since 2002 after global banks racked up more than $514 billion in credit losses and asset writedowns stemming from the collapse of the subprime mortgage market.
Financials Slump
"Financial shares in the S&P 500 have lost 32 percent as a group this year, led by a 94 percent tumble in AIG, an 83 percent drop for Washington Mutual Inc. and a 76 percent retreat in National City Corp."
"A gauge of homebuilders in S&P indexes is up 4.3 percent this year after the government's rescue of AIG and mortgage- finance companies Fannie Mae and Freddie Mac boosted optimism that the housing market will recover. All 15 companies in the index advanced yesterday, sending it to a 4 percent rally. The group lost 56 percent in 2007 amid the collapse of the subprime mortgage market."
"The Federal Reserve kept its benchmark interest rate at 2 percent yesterday, citing risks to growth and inflation. Hours after yesterday's meeting, the central bank agreed to the AIG loan."
"AIG slumped $1.52 to $2.23. The Fed will provide a two-year loan, take 79.9 percent of the New York-based company's stock and replace its management because ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a central bank statement yesterday."
"Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman. Investor redemptions will be delayed as long as seven days, the fund said in a statement."
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
"Last Updated: September 17, 2008 08:38 EDT"
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"European Stocks Fall on Growth Concern; Hochtief, Xstrata Drop "
By Adria Cimino
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"Sept. 17 (Bloomberg) -- European stocks posted the steepest three-day slide since 2002 after U.S. housing starts trailed forecasts and banks' borrowing costs jumped the most since 1999, deepening concern the real-estate slump and credit- market turmoil will push the region's economy into a recession."
"Hochtief AG, Germany's biggest builder, dropped 4.5 percent after the Commerce Department said housing starts sank to the lowest level in 17 years. Fortis and Royal Bank of Scotland Group Plc retreated for a third day, leading financial shares lower as the cost of borrowing in dollars for three months surged. Anglo American Plc slid 10 percent and Xstrata Plc fell 9.7 percent on concern the economic slump will hurt demand for metals."
"The Dow Jones Stoxx 600 Index lost 2.1 percent to 258.12 at 4:46 p.m. in London, bringing its three-day drop to 8 percent. The index rallied as much as 1.9 percent earlier today as investors speculated the U.S. government's $85 billion loan to American International Group Inc. late yesterday would avert the worst financial collapse in history."
"``The world economy didn't instantly recover last night,'' said Roland Lescure, who manages the equivalent of $128 billion as chief investment officer of Groupama Asset Management in Paris. ``We remain cautious on financial stocks. There still will be damage.''"
"The Stoxx 600 has tumbled 29 percent this year, led by banks, after more than $500 billion of subprime-related losses roiled credit markets and threatened to prolong the global economic slowdown. The Bank of England said today it will extend its Special Liquidity Scheme to provide extra funds to banks ``in view of the current disorderly market conditions.''"
"British Airways, TUI"
"Travel companies dropped as crude oil rebounded from the biggest two-day decline in almost four years. British Airways Plc, Europe's third-biggest airline, lost 6.1 percent, and TUI AG, the German owner of Europe's largest travel company, slipped 8.1 percent."
National benchmark indexes dropped in all 18 western European markets except Greece. The U.K.'s FTSE 100 dropped 2.3 percent. Germany's DAX lost 1.8 percent and France's CAC retreated 2.1 percent.
"Fortis, the financial-services firm that announced plans in June to raise 8.3 billion euros ($11.8 billion), slid 9.8 percent to 6.709 euros. Royal Bank, the second-largest U.K. bank, retreated 13 percent to 164.5 pence."
"The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said today. The increase is the biggest since Sept. 29, 1999, during the run-up to the new millennium."
"The difference between what banks and the Treasury pay to borrow, the so-called TED spread, widened 64 basis points to 283 basis points. That's the biggest spread since Oct. 20, 1987, when stocks collapsed around the world on what became known as Black Monday."
Money-Market Losses
"In another sign of stress in credit markets, Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman Brothers Holdings Inc., the U.S. investment bank that filed for Chapter 11 bankruptcy protection this week."
"The U.S. government bailed out AIG, the nation's biggest insurer by assets, after private efforts failed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a Fed statement."
"Hochtief lost 4.5 percent to 41.54 euros. Lafarge SA, the world's biggest cement producer, slid 4.7 percent to 77.575 euros."
"Housing starts fell in August to an annual rate of 895,000, the fewest since January 1991, from a revised 954,000 pace in July. Building permits, a sign of future construction, dropped 8.9 percent to an 854,000 pace."
Borrowers Struggle
Bank of Ireland Plc sank 14 percent to 3.96 euros. The country's second-biggest bank cut its dividend after posting a drop in first-half profit as borrowers struggle to repay loans amid slowing economic growth.
"Anglo American, the world's fourth-largest diversified mining company, dropped 10 percent to 2,033 pence. Xstrata, the world's fourth-biggest producer of copper, sank 9.7 percent to 2,894 pence."
British Airways dropped 6.1 percent to 243 pence. TUI lost 8.1 percent to 10.685 euros.
Crude oil for October delivery rose 1.8 percent to $92.80 a barrel in New York.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
"Last Updated: September 17, 2008 11:50 EDT"
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"Buy Exotic, Not Vanilla, Rupee Options, Barclays Says (Update1) "
By Anil Varma
"Sept. 17 (Bloomberg) -- Overseas investors should buy so- called exotic rupee options that offer limited protection at a lower price to guard against the Indian currency's steepest slide in 17 years, according to Barclays Plc."
"Traders should avoid the costlier and more common ``vanilla'' options because the rupee's rising volatility is raising derivative prices, said Peter Redward, head of research for emerging Asia at the U.K.'s third-biggest bank. Money managers should buy partial defense against rupee weakness as India stems the currency's slide, he said. The currency plunged 1.9 percent yesterday, the most in a decade, and jumped as much as 1.4 percent today."
"``The balance of risks tilts toward more rupee losses,'' Singapore-based Redward said in an interview. ``It's much better to use structured options to hedge than simple vanilla contracts, which are too expensive.''"
"India's rupee is headed for its biggest slide since 1991, when a balance-of-payments crisis forced the nation to pawn its gold with the International Monetary Fund to pay for imports. It is poised for the first annual loss since 2005 as overseas investors pulled out a record $8.1 billion from local stocks this year."
"The rupee has slumped 15 percent this year, the second- worst among Asia's 10 most-active currencies outside Japan. It traded at 46.37 at 5 p.m. in Mumbai, after falling to a two-year low of 46.975 yesterday, according to data compiled by Bloomberg."
Reverse Knock-Out
"Implied volatility on one-month dollar-rupee options rose today to 16 percent, the most in at least nine years, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices."
Options are derivative contracts that give the holder the right to buy or sell an asset without the obligation to do so. Exotic options have features that allow investors to cut costs and brace for more probabilities than one. India doesn't allow local trading in exotic options. The strike price is the rate at which an option holder may buy or sell a currency.
"Investors should buy so-called reverse knock-out rupee put options due in a month, which grant the right to sell the currency against the dollar as long as its losses don't exceed a set limit, Redward said. The option ceases to exist, or gets ``knocked out,'' should the rupee fall past the limit, or trigger, within a month. An ordinary put option allows sales of the currency without setting any limits."
"Barclays recommends a strike price of 47.15, equal to the price of one-month rupee-dollar contracts in the overseas non- deliverable forward market, and a knock-out trigger of 49. The option would cost less than a tenth of a contract that doesn't limit rupee losses, Redward said, using prices before the market opened today."
Reducing Costs
"``Vanilla options are extremely costly due to strong demand and high volatility in the rupee,'' he said. ``Paying so much doesn't look viable, particularly because the central bank may curb currency losses. One can express a bearish rupee view more comfortably using structured options.''"
"Redward also recommends buying a rupee put option with a strike price of 47.15 and selling another one at 49 to partly offset the price of the first contract. The trade, called a rupee put spread, reduces the cost of protection against a rupee slide by a third, compared with an ordinary option, he said."
The Reserve Bank of India said yesterday it will sell dollars and increase interest rates on foreign-currency deposits held by local banks to bolster the rupee. The bank said it will sell dollars through its agent banks or directly to meet the demand-supply gap.
"India's foreign-exchange reserves have declined by more than $27 billion from a record high of $316.2 billion reached in May, indicating it sold dollars."
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
"Last Updated: September 17, 2008 07:39 EDT"
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"Investors Favor `Defensive' U.S. Stocks, Merrill Says (Update1) "
By Adam Haigh
"Sept. 17 (Bloomberg) -- A record number of investors favored U.S. shares before Lehman Brothers Holdings Inc.'s bankruptcy filing and Merrill Lynch & Co. was bought by Bank of America Corp., a monthly survey by Merrill showed."
"Investors turned the most negative in emerging-markets equities since 2001 and became ``overweight'' government bonds for the first time in a decade, the survey conducted Sept. 5 to 11 of money managers who oversee $641 billion showed."
"U.S. stocks rose last week, ending a three-week slide for the Standard & Poor's 500 Index, on speculation the government's takeover of Fannie Mae and Freddie Mac would stabilize the global financial system. The seizure in credit markets and more than $500 billion of losses at the world's largest banks drove Lehman into Chapter 11 bankruptcy protection on Sept. 15 and also spurred Merrill's takeover by Bank of America."
"``In times of fear the U.S. market tends to be treated as a defensive market,'' said Karen Olney, the London-based head of European equity strategy at Merrill, at a press conference in London."
"The S&P 500 index today fell 2.1 percent to 1,186.25 as of 10:32 a.m. in New York, bringing its loss this year to 19 percent, as the worst U.S. housing slump since the Great Depression reduced earnings at financial companies and spurred speculation banks will rein in lending."
Least Favorable
On Sept. 15 the S&P 500 sank the most since the Sept. 2001 terrorist attacks in New York as Lehman's bankruptcy filing and slumping commodities prices heightened speculation credit-market losses and the economic slowdown will worsen.
"Earnings for U.S. companies are the most favorable relative to other regions, according to 45 percent of respondents to the survey, up from 30 percent in August. A net 43 percent believe the dollar remains undervalued."
"Profits for companies in the S&P 500 are expected to climb 25 percent in 2009, compared with a 13 percent rise forecast for earnings in the Dow Jones Stoxx 600 Index, a benchmark for European equities, according to Bloomberg data."
"Emerging markets are the least favorable place to invest in equities, with the survey showing a net 14 percent of those surveyed would most like to underweight the region over the next 12 months. The MSCI Emerging Markets Index has slid 37 percent this year."
"``We are still waiting for the moment to say now is a very, very good time to get into emerging markets,'' said Merrill chief emerging markets equity strategist Michael Hartnett on the phone from New York."
`Most Bearish'
"Investors were overweight in bonds for the first time since 2001 as they continued to switch out of equities. Healthcare, consumer staples and telecommunication shares were favored as money managers moved out of energy, industrials and technology companies, the data show."
"``It's a massive sell-off of risk,'' said Olney. ``This has to be the most bearish survey that we have ever seen.''"
"In the U.K., 100 percent of investors now see the economy falling into a recession in the next 12 months, which has risen from 50 percent last month."
"``We are coming around to a point where a lot of that is in the price and a lot of that is in expectations,'' Olney added."
For Related News:
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.
"Last Updated: September 17, 2008 10:44 EDT"
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Crude Oil Rebounds From a Two-Day Decline on AIG Rescue Plan
By Grant Smith
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"Sept. 17 (Bloomberg) -- Crude oil rebounded from its biggest two-day decline in almost four years after the Federal Reserve agreed to rescue American International Group Inc., easing concerns of a further economic slowdown in the U.S."
"Oil also recovered before a U.S. government report forecast to show that Hurricanes Gustav and Ike caused crude stockpiles to fall a fourth week, while rebel raids against oil facilities in Nigeria entered a fifth day. Goldman Sachs Group Inc. cut its three-month forecast for crude oil to $115 a barrel from $149, citing the global credit crisis and demand weakness."
"``It's feasible we've found a floor after the heavy sell- off as the Fed has brought a sense of security,'' said Robert Montefusco, a broker at Sucden (U.K.) Ltd. in London. ``While demand is slowing, action in Nigeria and expectations for inventory draws are injecting some support. Nevertheless, extreme volatility will prevail.''"
"Crude oil for October delivery rose as much as $3.85, or 4.2 percent, to $95 a barrel in electronic trading on the New York Mercantile Exchange. It was at $93.85 a barrel at 1:48 p.m. London time."
Crude futures declined more than $10 a barrel in the first two days of the week on concern financial market disruptions may weaken the global economy and cut fuel consumption.
Prices have dropped 2.2 percent this year and declined 36 percent from the record $147.27 a barrel reached on July 11.
Goldman Sachs said oil prices have ``overshot to the downside'' and the securities firm remains ``bullish'' that they will move higher.
Nigerian Attacks
"The Movement for the Emancipation of the Niger Delta, the area's main militant group, said it destroyed the Orubiri oil- pumping station operated by a unit of Royal Dutch Shell Plc, and an oil pipeline operated by units of Shell and Eni SpA."
"Nigeria, which sits on Africa's largest hydrocarbon reserves, has lost about a fifth of its output since February 2006 as a result of sabotage attacks."
The Federal Reserve Board invoked emergency powers to lend as much as $85 billion to AIG to save the insurance firm from collapse.
"U.S. crude-oil inventories probably fell 3.5 million barrels last week as production platforms and refineries on the Gulf of Mexico shut because of Hurricanes Gustav and Ike, a Bloomberg News survey of analysts showed."
"``It's hard to believe U.S. demand data is going to be bearish at these price levels,'' said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. ``Fundamentals justify prices of $110, so we don't expect it to go down much further.''"
Heating Oil
"Supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, probably also dropped. The Energy Department is scheduled to release its weekly petroleum supply report at 10:35 a.m. Washington time today."
"Gasoline for October delivery rose as much as 7.92 cents, or 3.3 percent, to $2.48 a gallon in New York."
"A total of 14 Texas and Louisiana refineries with combined crude-oil processing capacity of 3.57 million barrels a day are shut because of Ike, the U.S. Energy Department said."
"U.S. energy producers have idled about 97 percent of oil production in the Gulf of Mexico after Ike and Gustav moved through the region, the Minerals Management Service said yesterday in a statement on its Web site. Gulf fields produce 1.3 million barrels oil a day, about one-quarter of U.S. output."
"Brent crude oil for November settlement rose as much as $3.99, or 4.5 percent, to $93.21 a barrel on London's ICE Futures Europe exchange. It was at $91.85 a barrel at 1:48 p.m. London time. It was the first rise in fifteen days."
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
"Last Updated: September 17, 2008 09:01 EDT"
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<<2.623_20080917172050Ruble Trades Near 1 12Week Low as Russia Offers
Loan to Banks .txt>> <<2.622_20080917164535UBI Banca Risk Related to
Lehman Is `Very Contained' (Update2) .txt>>
<<2.621_20080917171940Latin American Currencies Colombian Peso Drops to
OneYear Low .txt>> <<2.620_20080917174339US Builders Began Work in
August on Fewer Homes Than Forecast .txt>> <<2.620_20080917173957US
Builders Began Work on Fewer Homes Than Forecast (Update3) .txt>>
<<2.620_20080917172445MoneyMarket Rate Jumps TED Spread Soars on Squeeze
(Update1) .txt>> <<2.620_20080917172424US Government Debt Risk Jumps
to Record After AIG Bailout .txt>> <<2.618_20080917172620Canada Stocks
Decline Led by Manulife Nortel Goldcorp Gains .txt>>
<<2.616_20080917170605Nishimatsu Construction Gains on Credit Suisse
Rating (Update2) .txt>> <<2.615_20080917172244Gold May Rise to $950 an
Ounce as Miners Lower Output (Update1) .txt>>
<<2.615_20080917165922Russian Ruble Drops Against Central Bank's
DollarEuro Basket .txt>> <<2.615_20080917165037German Stocks Fall for
Third Day ThyssenKrupp Daimler Decline .txt>>
<<2.614_20080917170523Asian Policy Makers Downplay Concern of Repeat of
1997 Crisis .txt>> <<2.614_20080917165859UK Unemployment Increases
Adding to Brown's Woes (Update1) .txt>> <<2.614_20080917162907US
Stocks Drop as Lending Freezes Up Following AIG Takeover .txt>>
<<2.611_20080917172020Ukrainian Hryvnia Rebounds Versus Dollar Snapping
TwoDay Drop .txt>> <<2.609_20080917171218PetroCanada Sees Surging
Costs at Oil Sands Project (Update1) .txt>>
<<2.607_20080917173656Russian Emergency Funding Fails to Halt Stock Rout
(Update3) .txt>> <<2.607_20080917163202Inditex Signals Sales Growth
Recovery on Asia Eastern Europe .txt>> <<2.606_20080917173535Treasury
3Month Bill Rates Drop to Lowest Since at Least 1954 .txt>>
<<2.604_20080917163109VeraSun Energy Plunges on Expected Loss on Hedging
(Update1) .txt>> <<2.644_20080917170626Mexico's Benchmark Bond Drops
Most in 7 Weeks on Credit Concern .txt>>
<<2.642_20080917170300Canadian Bonds Gain on Concern Financial Crisis
Hurts Growth .txt>> <<2.639_20080917173120Europe Trade Deficit Widens
to Record on Energy Costs (Update1) .txt>>
<<2.639_20080917172554Brazilian Stocks Drop on Credit Concerns Risk
Aversion .txt>> <<2.639_20080917171906Brazil Real Has Biggest Drop in
13 Months as US Slump Spreads .txt>> <<2.638_20080917172139Gold Silver
Climb as Credit Turmoil Spurs Demand for Haven .txt>>
<<2.637_20080917184439US MBA's Mortgage Applications Index Jumped 334%
Last Week .txt>> <<2.635_20080917172736UK Stocks Retreat Led by Banks
HBOS Anglo American Plunge .txt>> <<2.635_20080917172507European
TwoYear Government Notes Rebound as Stocks Decline .txt>>
<<2.634_20080917172529UK TwoYear Notes Pare Drop Concern Credit Losses
Spreading .txt>> <<2.634_20080917172113Yuan Forwards Predict
Depreciation on Growth Concern (Update1) .txt>>
<<2.631_20080917171845Yen Bears Capitulate Dollar May Rally as Investors
Flee Risk .txt>> <<2.630_20080917173555Goldman Sachs Slashes Oil
Forecast on Credit Concern (Update3) .txt>>
<<2.630_20080917165013India's Bonds Decline as Central Bank Measures May
Damp Demand .txt>> <<2.630_20080917164813Rupee Rebounds From TwoYear
Low as India Says It'll Intervene .txt>> <<2.629_20080917184410Dollar
MoneyMarket Rate Falls From SevenYear High BBA Says .txt>>
<<2.629_20080917173355Crude Oil Rises as AIG Rescue Plan Eases Economic
Slowdown Risk .txt>> <<2.629_20080917171824Dollar Falls Versus Yen as
AIG Rescue Fails to Quell Concern .txt>> <<2.628_20080917172710Stock
Investors Most Bearish in UK Spain Before Lehman Crash .txt>>
<<2.627_20080917172209Copper Declines as Fewer Housing Starts Signal
Drop in Demand .txt>> <<2.627_20080917164556Italian Stocks Atlantia
Gemina Saipem Telecom Italia Move .txt>> <<2.626_20080917184347Global
Confidence Declines as FinancialMarket Turmoil Worsens .txt>>
<<2.626_20080917172359Morgan Stanley Goldman Default Swaps Rise Amid
Market Seizure .txt>> <<2.626_20080917164348Brazil Central Bank May
Lift Rate Further Vieira da Cunha Says .txt>>
<<2.625_20080917171749Sept 17 (Bloomberg) Arnab Das global head of
emerging markets at Dresdner Kleinwort .txt>> <<2.624_20080917174226US
Stock Futures Extend Drop as Home Starts Trail Estimates .txt>>
<<2.624_20080917172645European Stocks Fall on Growth Concern Hochtief
Xstrata Drop .txt>> <<2.623_20080917174420Buy Exotic Not Vanilla Rupee
Options Barclays Says (Update1) .txt>> <<2.623_20080917174247Investors
Favor `Defensive' US Stocks Merrill Says (Update1) .txt>>
<<2.623_20080917174143Crude Oil Rebounds From a TwoDay Decline on AIG
Rescue Plan .txt>>
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