U.S. Economy: Consumer Prices Fall as Energy Drops (Update1)
By Timothy R. Homan
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Sept. 16 (Bloomberg) -- U.S. consumer prices fell in August for the first time in almost two years as fuel costs declined from record levels.
"The consumer price index dropped 0.1 percent after jumping 0.8 percent the prior month, the Labor Department said today in Washington. So-called core prices, which exclude food and energy, rose 0.2 percent, as forecast, after a 0.3 percent gain."
The diminishing threat of inflation may offer scope for Federal Reserve policy makers to eventually lower interest rates to alleviate the collapse in credit that brought down Lehman Brothers Holdings Inc. Central bankers today left the benchmark rate unchanged at 2 percent and said the risk of accelerating prices and slower growth were both a ``significant'' concern.
"The Fed ``shouldn't be worrying about inflation right now,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``Commodity costs are coming down, the economy is clearly weakening. It'll be less possible for consumer-goods companies to pass through commodity costs because their markets will be weaker.''"
"Treasuries were little changed after the Fed action after soaring earlier in the day. Yields on benchmark 10-year notes were 3.40 percent at 2:36 p.m. in New York, from 3.41 percent late yesterday."
Consumer prices matched the median forecast of 75 economists surveyed by Bloomberg News. Estimates ranged from minus 0.3 percent to gains of 0.4 percent.
Annual Change
"Prices increased 5.4 percent in the 12 months to August, after a year-over-year gain of 5.6 percent in July that was the biggest since January 1991."
"The core rate climbed 2.5 percent from August 2007, less than anticipated, after a 2.5 percent year-over-year increase the prior month."
"Energy expenses dropped 3.1 percent, after a 4 percent gain in the prior month, led by the biggest slump in fuel oil since April 2003. Gasoline prices decreased 4.2 percent."
Oil prices have kept coming down this month. Crude oil futures on the New York Mercantile Exchange almost reached $90 a barrel today after averaging $116.69 in August.
The consumer price index is the government's broadest gauge of costs because it includes goods and services. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.
Food Costs
"Food prices, which account for about a fifth of the CPI, increased 0.6 percent after a 0.9 percent gain in July."
"New-vehicle prices dropped 0.6 percent, the most since November 2006, and hotel fares dropped 1.1 percent."
The price of airfares and clothing increased.
"Rents, which make up almost 40 percent of the core CPI, rose at the same pace as in July. A category designed to track rental prices climbed 0.1 percent for a second month."
"Today's figures also showed how lower prices helped American workers last month. Wages increased 0.6 percent after adjusting for inflation, following a decrease of 0.8 percent in July."
"Still, price-adjusted earnings were down 2.5 percent over the last 12 months. The decline in purchasing power is one reason economists forecast consumer spending will slow in the second half of this year."
"Companies are offering incentives as sales slump. J.C. Penney Co., along with American Eagle Outfitters Inc., sold discounted clothes in August amid what could be the worst back- to-school season in seven years for malls and department stores."
"General Motors Corp. cut prices by giving all customers the same discounts offered to employees. The move boosted sales in the second half of August. GM this month said it will extend the incentive through Sept. 30 and has offered 72-month, no-interest financing on some vehicles since late June."
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
"Last Updated: September 16, 2008 14:37 EDT"
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European Bonds Advance as AIG Downgrades Spur Demand for Safety
By Anchalee Worrachate
"Sept. 16 (Bloomberg) -- European government notes rose, extending the biggest one-day advance in six months, as American International Group Inc. had its credit ratings lowered, fueling concern the turmoil in financial markets is spreading."
"The gains sent two-year note yields to the lowest level in five months after Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in history yesterday. Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk because of the deteriorating housing market. Bonds later trimmed gains on speculation that the Federal Reserve will cut interest rates today to shore up confidence and stabilize the banking system."
"``After the U.S. government let Lehman collapse, the question you need to ask is: who is too big to fail?'' said Peter Lucas, chief investment officer at Jersey, Channel Islands-based Ashburton Ltd., which manages about $1.7 billion. ``I don't think they're the last casualty. We're focusing on short-dated maturities. They will benefit the most in the risk- averse environment.''"
"The yield on the two-year note fell by as much as 14 basis points and was 7 basis points lower at 3.66 percent by 5:19 p.m. in London. It declined 28 basis points yesterday, the steepest drop since March 17, the day after the Federal Reserve cut its discount rate. The price of the 4 percent note maturing September 2010 rose 0.12 or 1.2 euros per 1,000-euro ($1,413) face amount, to 100.65."
The yield on the 10-year bund slipped 5 basis points to 3.40 percent. Bond yields move inversely to prices.
Stock Rises
"AIG's credit-rating downgrades by Standard & Poor's and Moody's Investors Service may threaten efforts to raise emergency funds to keep the company afloat. The biggest U.S. insurer by assets is seeking $70 billion to $75 billion in loans arranged by Goldman Sachs Group Inc. and JPMorgan Chase & Co. to replenish capital, according to two people familiar with the situation."
"Lehman, the 158-year-old securities firm that survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan yesterday."
"The cost of borrowing soared today, adding further pressure to the financial sector as it threatened companies' efforts to raise funds to stay solvent."
Borrowing Costs
"The London interbank offered rate, or Libor, that financial companies charge each other to borrow dollars jumped 333 basis points to 6.44 percent today, its biggest one-day increase, according to the British Bankers' Association. The difference between the rate 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 11 basis points to 116 basis points, the most since at least December 2001."
"The collapse of Lehman and the rating downgrade of AIG are also hurting European companies, with costs of turning corporate debt into fixed rates soaring to a record."
"The five-year euro swap spread, or the difference between five-year swap rate and the equivalent maturity European bond yield, widened to 84 basis points from 79 basis points, the most since the euro's debut in 1999. A wider spread suggests traders are betting corporate borrowing costs will rise."
"``The whole of this year is going to be very tough,'' said Padhraic Garvey, head of investment-grade strategy at ING Bank NV in Amsterdam. ``The stress in the financial sector will keep the swap spread wide. It will potentially go wider if the Fed doesn't cut interest rates and the turmoil drags on.''"
European Inflation
"The inflation rate in the euro region fell to 3.8 percent in August from 4 percent, the first drop in four months, the European Union statistics office said today. Consumer prices slipped 0.1 percent from July, compared with a 0.2 percent decline predicted by 43 economists in a Bloomberg survey."
"Inflation expectations, as measured by the difference in yield between nominal and inflation-protected bonds, have declined as crude oil fell to a seven-month low. The so-called breakeven rate on French nine-year debt dropped to 1.96 percentage points, from 2.20 percentage points a month ago."
"Bonds held gains after an industry report showed car sales in Europe slid 16 percent last month as fuel prices, which are still 14 percent higher from the same period last year, and falling consumer confidence curbed demand."
"The ZEW Center for European Economic Research said today its index of German investor and analyst confidence rose to minus 41.1 this month, from minus 55.5 in August. Economists surveyed by Bloomberg had expected a reading of minus 53 forecast."
Economists surveyed by Bloomberg forecast that the ECB will keep its benchmark rate on hold at 4.25 percent this year before cutting it in the first quarter of 2009.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
"Last Updated: September 16, 2008 12:21 EDT"
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"U.K. Stocks Slide to Lowest Since 2005; RBS, HBOS Lead Retreat "
By Adam Haigh
"Sept. 16 (Bloomberg) -- U.K. stocks slumped for a second day, sending the benchmark FTSE 100 Index to a three-year low, as concern grew there may be further capital raisings at financial companies and the falling oil and copper price curbed the earnings outlook for commodity stocks."
"Royal Bank of Scotland Group Plc dropped 10 percent and HBOS Plc tumbled 22 percent after American International Group Inc.'s credit ratings were downgraded by Standard & Poor's and Moody's Investors Service, threatening efforts to raise emergency funds to keep the company afloat. BHP Billiton Ltd. slid 4.5 percent and Rio Tinto Group lost 8 percent as copper retreated in London."
"``There is a lot of uncertainty out there as to how this will unwind and how it will affect the financial system,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion, in a Bloomberg Television interview. ``It seems that nobody is prepared to do any transactions with anyone else again because the counterparty risk is just too high.''"
"The benchmark FTSE 100 Index fell 178.6, or 3.4 percent, to 5,025.6, extending this year's loss to 22 percent. The measure briefly sank below 5,000 earlier in the day. The FTSE All-Share Index dropped 3.4 percent and Ireland's ISEQ Index retreated 3.7 percent, the lowest since April 2003."
"Stocks extended the slide after the British Bankers' Association said the cost of borrowing in dollars overnight more than doubled to 6.44 percent, a record jump."
"Royal Bank, HBOS"
"More than $1.1 trillion has been wiped off the value of U.K. shares this year as banks including Barclays Plc and Royal Bank have been forced to raise capital as losses at financial companies topped $229.5 billion across Europe, eroding profits."
"Royal Bank of Scotland, the U.K.'s second largest bank, slid 10 percent to 189.1 pence. HBOS, Britain's biggest mortgage lender, plummeted 22 percent to 182 pence."
AIG had its ratings cut after two people familiar with the situation said the biggest U.S. insurer by assets is seeking $70 billion to $75 billion in loans to replenish capital.
"``The financial sector is again under the spotlight and AIG is the cumulus nimbus cloud,'' said David Buik, a London-based market analyst at BGC Partners."
"BHP, the world's largest mining company, slipped 4.5 percent to 1,376 pence. Rio Tinto, the third biggest, dropped 7.7 percent to 3,872 pence."
"Copper for delivery in three months slid 1.3 percent in London. Platinum, gold, nickel, lead, zinc and aluminum prices also fell."
To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net
"Last Updated: September 16, 2008 12:30 EDT"
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Dollar Rises Versus Yen on Speculation AIG Will Get Fed Loan
By Ye Xie
Sept. 16 (Bloomberg) -- The dollar advanced the most against the yen in more than three weeks on speculation the Federal Reserve will extend a loan to cash-strapped American International Group Inc.
The U.S. currency dollar rose against the euro for the first time in four days after the Fed left its target lending rate at 2 percent. The yen fell against the Mexican peso and the New Zealand dollar on speculation an AIG rescue will encourage investors to resume taking out low-cost loans in Japan and buying higher-yielding assets elsewhere.
"``Clearly some kind of solution will be very positive,'' said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. ``A bit of risk aversion is going away. But the situation is still very fluid.''"
"The U.S. currency climbed 0.9 percent to 105.61 yen at 3:33 p.m. in New York, from 104.66 yesterday. The dollar advanced 0.7 percent to $1.4149 per euro, from $1.4243 yesterday. The euro increased 0.2 percent to 149.40 yen, from 149.11."
"The Fed is considering extending a ``loan package'' to AIG, according to a person familiar with the negotiations. The stance by federal regulators is a reversal from a position they held as recently as late yesterday, said the person, who declined to be identified because negotiations are confidential. New York Fed spokesman Andrew Williams declined to comment."
"A debt-rating downgrade of AIG by Standard & Poor's and Moody's Investors Service after the collapse of Lehman Brothers Holdings Inc. fueled concern credit markets are seizing up. Money-market rates surged today, with the London interbank offered rate, or Libor, for overnight dollars more than doubling to the highest level in seven years."
Weaker Yen
"The yen decreased 1.4 percent to 9.88 against the Mexican peso and 1.3 percent to 69.90 versus the New Zealand dollar on speculation a Fed bailout of AIG will encourage investors to put on carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.5 percent compares with 8.25 percent in Mexico and 7.5 percent in New Zealand."
"The Fed added $50 billion in temporary reserves to the banking system with overnight repurchase agreements, or repos, today. It injected $70 billion in reserves yesterday, the most since the Sept. 11, 2001, terrorist attacks."
"Chairman Ben S. Bernanke and his colleagues rebuffed calls by some investors for an interest-rate cut after Lehman filed for bankruptcy, signaling they will continue to address market turmoil with emergency lending and aim monetary policy at a longer-term economic forecast that may still show the economy skirting a recession."
Fed Speculation
"Before the Fed's rate decision was announced, futures on the Chicago Board of Trade indicated an 84 percent chance policy makers would reduce the target rate for overnight lending between banks by a quarter-percentage point. Traders saw a 2 percent chance of a rate cut a week ago."
Lehman filed for the biggest bankruptcy in history yesterday after Bank of America Corp. and Barclays Plc pulled out of talks to buy the New York-based firm.
"``It's the end of the world as we know it, at least that is how it feels,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney."
"Implied volatility on one-month euro-dollar options reached 14.80 percent today, the highest since the aftermath of the Sept. 11 terrorist attacks, indicating traders see more price fluctuation in the next month. Volatility on one-month dollar- yen options touched 19.26 percent, the highest since March 17, the day before the Fed cut the target lending rate."
"The dollar has gained about 12 percent since touching an all-time low of $1.6038 per euro on July 15, increasing as the European economy slowed and crude oil dropped 35 percent from its peak of $147.27 a barrel."
"When the U.S. central bank left the target rate at 2 percent at the last policy meeting on Aug. 5, the dollar held at a seven-week high versus the euro."
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
"Last Updated: September 16, 2008 15:34 EDT"
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"Fed Keeps Rate at 2%, Rebuffing Call for Cut to Soothe Markets "
By Scott Lanman and Craig Torres
"Sept. 16 (Bloomberg) -- The Federal Reserve left its main interest rate at 2 percent, rebuffing calls by some investors for a cut after Lehman Brothers Holdings Inc.'s bankruptcy shook markets worldwide."
"``Downside risks to growth and the upside risk to inflation are both of significant concern,'' the Federal Open Market Committee said in a statement in Washington. ``The committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.''"
Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending and aim monetary policy at a longer-term economic forecast that may still show the economy skirting a recession.
"``Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters,'' the statement said. ``Over time, the substantial easing of monetary policy combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.''"
"The decision was unanimous, the first such agreement in a year."
"``The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain,'' the Fed said."
"New York Fed President Timothy Geithner didn't come to Washington today for the meeting, staying in New York, where talks continue at his bank on the crisis at American International Group Inc."
Futures Bets
"Futures traders had put an 80-percent chance on at least a quarter-point rate cut. Three months ago, they saw a 100 percent chance of an increase."
The Fed held rates steady even after the Standard & Poor's 500 Index dropped 4.7 percent yesterday to the lowest level since October 2005. Rate cuts totaling 3.25 percentage points in the past year and emergency Fed loan programs have failed to revive lending among banks.
"``We have a very concentrated problem in housing that's not really a rate problem, and we've got a financial crisis that's really not a rate problem,'' former Dallas Fed President Robert McTeer said in an interview with Bloomberg Radio before the decision. ``I don't think we have a generally weak economy that needs lower rates.''"
Wall Street Upheaval
"Bernanke and Treasury Secretary Henry Paulson refused to offer federal aid to Lehman after its stock plunged last week, pushing the 158-year-old company into bankruptcy early yesterday."
"Merrill Lynch & Co. became engulfed by the turmoil, agreeing to a quick merger with Bank of America Corp. this week, while insurer AIG struggled to stave off collapse after its credit ratings were cut."
The rout sparked by the collapse of the U.S. subprime mortgage market has cost financial institutions worldwide $515 billion in writedowns and losses since the start of 2007. Firms have raised $362 billion of capital in response.
"The New York Fed injected $70 billion of temporary reserves into the banking system today and $70 billion yesterday, the most since the September 2001 terrorist attacks. The central bank has also provided billions of dollars through direct loans of cash and Treasuries, and widened on Sept. 14 widened the collateral accepted for loans to securities firms to include equities."
Credit-Market Seizure
"Still, banks are driving up short-term lending rates on concern AIG will follow Lehman into bankruptcy and leave financial institutions with losses on $441 billion of credit derivatives issued by the biggest U.S. insurer. Central banks around the world pumped more than $210 billion into the financial system as they sought to alleviate the credit-market seizure."
"The cost of borrowing in dollars overnight more than doubled to the highest since 2001. The overnight dollar rate soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The rate was as low as 2.07 percent in June."
"Tumbling commodity prices, including a 38 percent decline in crude oil from a July 11 peak, ease pressure on the Fed to fight against inflation. The consumer price index fell 0.1 percent in August, the Labor Department said today. So-called core prices, which exclude food and energy, rose 0.2 percent after a 0.3 percent gain in July."
Impeding Growth
Lehman's bankruptcy filing came amid signs that losses at financial institutions are impeding U.S. economic growth.
"The economy will slow to a 1.2 percent annual growth rate, or less than half the prior quarter's pace, as consumer spending, the biggest part of the economy, stalls this quarter, according to a Bloomberg survey from Sept. 2 to Sept. 9."
"The decline in consumer spending prompted automakers last month to reduce car output by 12 percent, or the most in a decade, Fed figures showed yesterday. Industrial production in the U.S. fell by 1.1 percent, or the most in almost three years."
"Unemployment rose to a five-year high of 6.1 percent in August and foreclosure filings rose to a record as falling home prices frustrated homeowners' efforts to sell or refinance their homes, RealtyTrac Inc. said."
"``Downside risks to growth have risen significantly,'' Robert DiClemente, chief U.S. economist for Citigroup Global Markets said yesterday in a note to clients in which he predicted a half-point cut. ``Conditions remain hostile to a sustained restoration of economic growth.''"
Lehman Fallout
"Still, Fed officials may prefer to wait a little longer to see how the Lehman fallout affects the broader economy. Former Fed Governor Lyle Gramley compared Fed policy with its approach during the start of the credit crisis in August 2007, when the Fed waited a month to lower the federal funds rate."
"Policy makers have ``tried to make a clear demarcation between setting the funds rate and providing liquidity ever since the beginning of the financial crisis,'' said Gramley, now senior economic adviser at Stanford Group Co. in Washington. He predicted the central bank wouldn't change the benchmark rate."
"A rate cut would have indicated that Fed officials believe the ``turmoil is likely to continue and there may be much deeper repercussions,'' former St. Louis Fed President William Poole said yesterday in an interview with Bloomberg Television. ``The right position is, the market is taking care of this, as painful as that is.''"
"``It seems to me the risks are declining now as the weaker players are eliminated,'' Poole said."
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
"Last Updated: September 16, 2008 14:14 EDT"
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"Gold, Platinum Fall as Investors Sell Commodities to Raise Cash "
By Pham-Duy Nguyen
Sept. 16 (Bloomberg) -- Gold fell as investors sold commodities to raise cash and cover losses in other markets. Silver fell a two-year low and platinum dropped the most since at least 1986.
Equity indexes in Asia and Europe sank on speculation American International Group Inc. will be the next victim of the credit crisis. The cost of borrowing dollars doubled overnight in London as banks hoarded cash after Lehman Brothers Holdings Inc. entered bankruptcy and AIG's ratings were cut. Gold rose 5.6 percent in the previous two sessions as investors sought a haven from market turmoil.
"``It's all related to money flow at this point,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ``Some of this is the need to acquire capital related to margin calls. Gold has a very special quality to it as a monetary asset that silver and platinum lack and that's why it's holding up much better than other commodities.''"
"Gold futures for December delivery fell $6.50, or 0.8 percent, to $780.50 an ounce on the Comex division of the New York Mercantile Exchange. The metal has dropped 6.9 percent this year."
Precious metals with wider industrial applications than gold suffered steeper losses.
"Silver futures for December delivery dropped 61.8 cents, or 5.6 percent, to $10.517 an ounce on the Comex, the lowest closing price for a most-active contract since June 2006."
"Platinum futures for October delivery plummeted $107.70, or 9.2 percent, to $1,068.50 an ounce in New York. Palladium futures for December delivery slid $12, or 5 percent, to $226 an ounce in New York."
Platinum Outlook
"Platinum, used in jewelry and emissions-control parts for car and truck engines, dropped the most since April 1986, according to Bloomberg data. The metal will average $1,999 this year, analysts at Deutsche Bank AG said in a report on Sept. 12."
"The most-active platinum contract has fallen 15 percent in the past five sessions on concern a global slowdown will cut demand. Auto sales are on a pace to reach a 15-year low this year in the U.S., the world's biggest market."
"The Reuters/Jefferies CRB Index of 19 raw materials dropped as much as 2.3 percent to the lowest since December 2007. The index reached a record on July 3 as the dollar headed to the lowest ever against the euro and crude oil climbed toward a record on July 11. Crude fell as much as 5.4 percent to $90.51 a barrel in New York, down from the record of $147.27."
"``All of this de-leveraging is hitting the base metals and grains,'' O'Neill said. ``This is why gold isn't able to make further ground. With oil down and commodity prices down, the inflation threat is also down.''"
Gold Down From Record
"Investors often consider gold a store of value during times of financial uncertainty. The metal reached a record $1,033.90 on March 17 when the U.S. Federal Reserve brokered a deal for JPMorgan Chase & Co. to buy investment bank Bear Stearns Cos."
"Gold reached a previous record of $873 an ounce in January 1980 after the dollar suffered three straight annual declines, inflation was accelerating at a double-digit clip and oil prices were rising after a decade of Middle East instability."
Former Fed Chairman Alan Greenspan said on Sept. 14 that the financial crisis related to the collapse of the subprime- mortgage market ``is probably a once in a century event.''
"Since the second quarter of 2007, banks worldwide have posted $514.2 billion in credit losses and asset writedowns. The Standard & Poor's 500 Index fell as much as 2 percent today before rebounding, and lost 4.7 percent yesterday, the biggest decline since the Sept. 11 terrorist attacks."
Bullion Funds
"Investment in the SPDR Gold Trust, the exchange-traded fund backed by bullion, has remained steady at 614.4 metric tons since Sept. 10. It reached a record 705.9 tons on July 11."
"``At this time more than any other, investors should have a proportion of their assets in gold as an insurance policy against systemic risk or governments inflating their way out of trouble,'' said John Reade, a UBS AG commodities strategist in London. ``This does not mean that the gold price will necessarily go up. Gold could fall and still be a good hedge if everything else falls by more.''"
The Fed added $50 billion in temporary reserves to the U.S. banking system after injecting $70 billion yesterday. Central banks from Tokyo to Frankfurt also added more than $160 billion into the financial system to calm markets.
"``Gold does not have a counterparty risk,'' said James Turk, founder of Goldmoney.com, which held $368 million in gold and silver in storage for investors at the end of August. ``That attribute is becoming increasingly important. Gold is not dependent upon someone's promise or any company's balance sheet.''"
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
"Last Updated: September 16, 2008 14:11 EDT"
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"Corn, Soybeans Tumble as Credit Squeeze Shrinks Global Economy "
By Jeff Wilson
"Sept. 16 (Bloomberg) -- Corn fell the most allowed by the Chicago Board of trade and soybeans dropped the most since March on speculation that a deepening global credit squeeze will slow economic growth, eroding demand for food, feed and fuels made from the two biggest U.S. crops."
"The Reuters/Jefferies CRB Index of 19 raw materials slumped to the lowest since September. Yesterday, the gauge dropped 3.3 percent, erasing its gain for the year, after Lehman Brothers Holdings Inc. filed for bankruptcy. Before today, corn tumbled 30 percent from a June record, and soybeans dropped 28 percent from the all-time high in July."
"``There is no interest in buying stocks, bonds or commodities because of the dramatic deterioration in the banking system,'' said Mark Schultz, a vice president at Northstar Commodity Investments LLC in Minneapolis. ``The markets fear the liquidity crisis will dramatically slow the global economy.''"
"Corn futures for December delivery fell 29.75 cents, or 5.3 percent, to $5.3225 a bushel at 11:45 a.m. on the CBOT. Earlier, the price dropped as much as 30 cents, the exchange's limit. The record high on June 27 was $7.9925 after the worst Midwest flooding in 15 years threatened U.S. production."
"Soybean futures for November delivery dropped 62.25 cents, or 5.3 percent, to $11.1675 a bushel. A close at that price would mark the biggest percentage drop since March 31. Earlier, the most-active contract touched $11.1025, the lowest since April 1. The all-time high on July 3 was $16.3675."
"The shares of American International Group Inc., the largest U.S. insurer by assets, plunged today after the company's credit ratings were cut, threatening efforts to raise funds to stay afloat."
Unwind Bets
"Concern of widening Wall Street turmoil may spur investors and speculators to reduce bets on higher grain prices, said John Roach, the president of Roach Ag Marketing Ltd. in Boca Raton, Florida."
"Hedge-fund managers and other large speculators cut their net-long positions, or bets Chicago corn futures will rise by 4.4 percent to 180,130 contracts in the week ended Sept. 9, Commodity Futures Trading Commission data showed on Sept. 12. Net-long positions are down 53 percent from a one-year high in February."
"Index funds that invest in baskets of commodities cut net- long positions by 2 percent to 341,078 contracts last week, down 25 percent from a record 452,568 contracts in April."
"In soybean futures, speculative funds slashed net-long positions by 21 percent to 53,935 contracts in the week ended Sept. 9. The record for net-long positions was 155,278 contracts in December."
"Index funds that invest in baskets of commodities reduced net-long soybean positions by 2.6 percent to 135,592 contracts in the week ended Sept. 9. That was down 32 percent from a record of 198,707 in February, data show."
`Dire Events'
"``The events that cause the low always seem as dire as the events that cause the high for the year,'' Roach said. ``It remains to be seen if this is the worst we are going to see, or if there is more bad financial news coming.''"
Prices also fell following favorable Midwest weather in the past week.
"About 61 percent of the corn crop was in good or excellent as of yesterday, and 57 percent of soybeans got the top ratings the U.S. Department of Agriculture said yesterday in a report. The figures were unchanged from a week earlier."
"``The ratings suggested that modest rains in the western Corn Belt and Southeast offset the excess moisture and wind damage that occurred in Missouri, Illinois, Indiana and Ohio,'' said Dave Marshall, a farm-marketing consultant for Toay Commodity Futures Group LLC in Nashville, Illinois."
"Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show."
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
"Last Updated: September 16, 2008 12:51 EDT"
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Credit Markets Seize Up on Bets More Banks Will Fail (Update1)
By Shelley Smith and John Glover
Sept. 16 (Bloomberg) -- Credit markets are seizing up on concern more financial institutions will fail after Lehman Brothers Holdings Inc. filed for bankruptcy and American International Group Inc. was downgraded.
"Corporate borrowing costs soared by a record in the U.S. and climbed to an all-time high in Europe, Merrill Lynch & Co. indexes show. The cost of borrowing overnight in dollars more than doubled to the highest since 2001, according to the British Bankers' Association."
"``It's been absolutely shocking,'' said Phil Roantree, a London-based investment manager at New Star Asset Management Group Plc. ``There has been no liquidity in the market and prices are being hammered as people try and sell pretty much everything that isn't a government note, especially financials.''"
"Banks tightened lending as AIG was downgraded by Moody's Investors Service and Standard & Poor's, adding to evidence that the fallout from the collapse of the U.S. mortgage market is spreading. The surge in funding costs came less than a day after Lehman filed for bankruptcy, the biggest in history, and Merrill sold itself to Bank of America Corp."
"The extra yield investors demand to hold U.S. investment- grade bonds advanced 36 basis points to 380, the biggest one-day increase, Merrill indexes based on yesterday's close show. The spread on European financial company debt over government bonds climbed 26 basis points to 268, the highest level since Merrill started compiling the daily data in 1999. Spreads on all European investment-grade debt rose to an all-time high."
Libor Surges
"The London interbank offered rate for overnight loans in dollars, or Libor, rose 333 basis points to 6.44 percent today, the largest increase in its history. The cost of protecting corporate bonds in North America from default advanced to a record."
"``The market is so volatile it's impossible to predict what will happen from one minute to the next,'' said Alex Moss, who oversees the equivalent of about $1.55 billion as head of high- yield bonds and leveraged loans at Insight Investment Management in London. ``With Libor through the roof, it's even more unlikely banks will lend.''"
"Financial institutions have posted more than $514 billion in losses and writedowns since the beginning of 2007 as the credit squeeze worsened. Stock markets worldwide fell today, with AIG dropping as much as 74 percent, taking its decline since the end of 2006 to 93 percent. Lehman canceled an auction of $852 million of high-yield, high-risk loans, according to investors who considered bidding on the debt."
Flight to Quality
"Lehman's bankruptcy has renewed a so-called flight to quality, according to Hank Calenti, a London-based credit analyst at Royal Bank of Canada. U.S. Treasuries rose today as investors sought the relative safety of government debt."
"``The name of the game is likely to be risk aversion over the short-term,'' Calenti wrote in a note to clients on financial debt. ``Economic Darwinism is back.''"
"Credit-default swaps on the Markit CDX North America Investment Grade Index of 125 companies in the U.S. and Canada climbed 9 basis points to 204, after earlier climbing to an all- time high of 220, according to Phoenix Partners Group. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 19 basis points to a six-month high of 146.5, JPMorgan Chase & Co. prices show."
Lehman Fire Sale
"Yields on commercial mortgage-backed bonds relative to benchmark rates rose to a record on concern Lehman's assets will be sold at firesale prices as the bank is wound up. Europe's benchmark index for leveraged loan derivatives fell for a third day. High-yield, or leveraged, loans are those rated below Baa3 by Moody's and BBB- by S&P."
"Average yields on overnight U.S. commercial paper backed by assets such as credit cards and car loans climbed to 3.45 percent, Bloomberg data show, the highest since March 4 and 145 basis points more than the Fed's target lending rate. In August 2007, when the market for the debt first seized up, the spread widened to 93 basis points."
"``We're in the eye of the storm,'' said Ronald Tharun, a money-market trader in Stuttgart at Landesbank Baden- Wuerttemberg, Germany's biggest state-owned lender. ``Everybody is worrying about which bank is going to go bankrupt next. In this environment banks are hoarding cash and are unwilling to lend.''"
"The average spread on European non-financial corporate bonds rose 15 basis points to 174, the most since July 2002, according to Merrill's debt indexes. High-yield bond spreads also advanced 43 basis points to 887, the widest difference versus government debt since March 2003, Merrill data show. A basis point is 0.01 percentage point."
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality."
To contact the reporters on this story: Shelley Smith in London at ssmith118@bloomberg.net; John Glover in London at johnglover@bloomberg.net
"Last Updated: September 16, 2008 11:57 EDT"
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"Canada Stocks Fall, Led by Manulife, Suncor, BCE; Potash Rises "
By John Kipphoff
"Sept. 16 (Bloomberg) -- Canadian stocks fell, sending the main index to a 22-month low, as financial companies and energy producers tumbled on concern that more U.S. institutions will fail, leading to tighter credit and weaker commodity demand."
"Manulife Financial Corp. led a group of finance shares to the lowest in three weeks. Suncor Energy Inc. paced declines among oil and gas producers after the price of crude slid, taking a two-day drop to $10 a barrel. BCE Inc. and Fording Canadian Coal Trust fell on speculation lenders will balk at financing planned takeovers of the companies."
"``Events south of the border are casting a long shadow in Canada,'' said David Cockfield, who helps oversee about $2 billion as a portfolio manager at Leon Frazer & Associates in Toronto. ``Investors are looking at the market and are saying `this could be a long haul.' There's more pain to come in the U.S. banking system.''"
"The Standard & Poor's/TSX Composite Index dropped 1.1 percent to 12,119.36 at 12:19 p.m. in Toronto, the lowest since Nov. 1, 2006. Canada's main equity benchmark, which derives more than three-quarters of its value from energy, materials and financial stocks, has lost about C$214 billion ($200 billion) in value this month through yesterday."
The cost of borrowing in dollars overnight more than doubled to the highest since 2001 as yesterday's collapse of Lehman Brothers Holdings Inc. and credit downgrades of American International Group Inc. led banks to hoard cash.
Pares Loss
"The benchmark fell as much as 2.8 percent today, before paring its loss on speculation that the U.S. will help bail out American International and that the Federal Reserve will lower borrowing costs to shore up the financial system. Potash Corp. of Saskatchewan Inc. gained on speculation that demand for its crop nutrients will outstrip supply."
"Manulife slipped 2.8 percent to C$35.98. Canada's biggest insurer may hold as much C$1.36 billion in debt sold by American International and three other ``troubled'' U.S. financial institutions, according to BMO Capital Markets analyst John Reucassel in Toronto. The other issuers include Lehman, Washington Mutual Inc. and Wachovia Corp., he wrote in a note."
"Royal Bank of Canada, the nation's largest lender by assets, fell 1.8 percent to C$47.25. Toronto-Dominion Bank, the second-biggest, dropped 1.6 percent to C$60.32."
"Oil fell as much as $5.16 to $90.55 a barrel, the lowest since Feb. 8 in New York, after American International had its credit rating cut, threatening efforts to raise funds to keep the insurer afloat. Oil most recently pared its drop to $3.24, trading at $92.47."
Commodities Drop
"Prices of other commodities including copper, gold and corn declined as investors sold commodities to raise cash and cover losses in other markets."
"Suncor, the world's second-largest oil-sands producer, fell 2.9 percent to C$44.89, the lowest since Jan. 23. Petro-Canada, the country's third-largest oil and gas producer, slid 1.4 percent to C$39.36."
"Not all energy producers dropped. Canadian Natural Resources Ltd., the country's second-biggest natural gas company, added 0.8 percent to C$77.59, after falling 7.5 percent yesterday."
"BCE slid 4.3 percent to C$36.22, falling for a second day. A group of investors led by Ontario Teachers' Pension Plan has agreed to buy Canada's biggest phone company for C$52 billion ($48.5 billion), or C$42.75 a share in cash, in the largest leveraged buyout."
Bank Financing
"Banks, led by Citigroup Inc. and Deutsche Bank AG, have agreed to help provide C$34 billion in debt needed to finance the transaction. Merrill Lynch & Co., which sold itself yesterday to Bank of America Corp. for $50 billion, pledged to join the deal."
"Fording Canadian Coal slid 2.7 percent to C$79.60, adding to a 10 percent drop yesterday. Teck Cominco Ltd., the nation's biggest diversified mining company, agreed in July to buy the world's second-largest exporter of coal used to make steel, for C$14.1 billion, or $82 in cash and 0.245 of a Teck share stock."
"The terms of a C$9.8-million syndicated loan co-arranged by Merrill may need restructuring because of the credit market turmoil, said Kerry Smith, a Haywood Securities analyst in Toronto."
Teck Cominco fell 5.6 percent to C$34.58.
"Potash Corp. advanced 3.1 percent to C$168.90. Potash inventories controlled by North America crop-nutrient producers fell 21 percent in August to their lowest in at least 19 years. A strike at three Canadian mines reduced output by 17 percent in August, according to figures published today by the Washington, D.C.-based Fertilizer Institute."
"Research In Motion Ltd., the maker of the BlackBerry e-mail phone, erased an earlier drop and rallied 0.6 percent to C$105.25."
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
"Last Updated: September 16, 2008 13:15 EDT"
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U.S. Stocks Advance on Expectations Fed Will Rescue AIG
By Lynn Thomasson
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"Sept. 16 (Bloomberg) -- U.S. stocks rose, erasing earlier losses, on expectations the Federal Reserve will step in to rescue American International Group Inc. from collapse."
"AIG pared a decline of as much as 74 percent and financial companies in the Standard & Poor's 500 Index rallied more than 3 percent as a person familiar with the discussions said the Fed may extend loans to the largest U.S. insurer. Wells Fargo & Co., the biggest U.S. bank on the West Coast, rallied the most in two months after Credit Suisse Group said Lehman Brothers Holdings Inc.'s bankruptcy will have a ``modest'' effect on the company."
"``This is a market that's not looking at fundamentals,'' said Quincy Krosby, who helps manage $380 billion as chief investment strategist at the Hartford in Hartford, Connecticut. ``It's going back and forth based on rumor and headlines and it has temporarily divorced itself from fundamental analysis.''"
"The Standard & Poor's 500 Index increased 14.92 points, or 1.3 percent, to 1,207.62 at 3:13 p.m. in New York. The Dow Jones Industrial Average added 107.23, or 1 percent, to 11,024.74. Almost three stocks rose for every two that fell on the New York Stock Exchange."
"The S&P 500 swung between gains and losses at least two dozen times. The benchmark index for U.S. equities plunged as much as 2 percent in the morning on concern AIG would be the next major financial institution to fail. Stocks recovered as speculation grew that the Fed would cut interest rates to stabilize markets, only to lose those gains after the central bank left borrowing costs unchanged."
Last-Hour Rally
"The last-hour rally came as federal regulators were said to reverse a decision not to help AIG avoid collapse. People with knowledge of the talks between AIG and the government are ``cautiously optimistic,'' said the person, who declined to be identified because negotiations are confidential."
The S&P 500 plunged 4.7 percent yesterday after Lehman filed for bankruptcy protection and Merrill Lynch & Co. was taken over by Bank of America Corp.
"European and Asian equities slumped today as reductions in AIG's credit rating increased concern that financial turmoil will spread globally, driving the MSCI World Index down 1.6 percent. A 17 percent retreat in Russia's Micex prompted the exchange to halt trading after oil prices tumbled."
Lending Rates
The S&P 500 has fallen 19 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 worst U.S. housing slump since the Great Depression.
"The overnight dollar rate soared 3.33 percentage points to 6.44 percent today, its biggest jump, the British Bankers' Association said. The rate was 2.19 percent a month ago and 2.15 percent last week. Lehman filed for bankruptcy yesterday after succumbing to mounting credit-market losses."
Crude for October delivery lost as much as 5.4 percent to $90.55 a barrel on concern that turmoil on Wall Street may weaken the global economy and cut fuel demand.
The Labor Department said the cost of living in the U.S. dropped in August for the first time in almost two years as falling fuel costs and a slowing economy cooled inflation. The government's consumer price index decreased 0.1 percent.
To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net.
"Last Updated: September 16, 2008 15:14 EDT"
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Fed Funds Rate Declines as Central Bank Adds Reserves (Update2)
By Liz Capo McCormick
"Sept. 16 (Bloomberg) -- The Federal Reserve added $70 billion in temporary reserves to the banking system, pushing down the rate for overnight loans between banks to spur lending and ease a crisis of confidence in financial markets."
"The fed funds rate declined as low as 1.5 percent, after opening at 3.75 percent, according to ICAP Plc, the world's largest inter-dealer broker. The Fed added $50 billion through overnight repurchase, or repo, agreements, as well as its weekly $20 billion in 28-day repos for mortgage-backed securities."
"Policy makers left the target rate for overnight loans between banks today at 2 percent, rebuffing calls by some investors for a cut after Lehman Brothers Holdings Inc.'s bankruptcy shook markets worldwide. Other central banks from Tokyo to Frankfurt also injected more than $160 billion into their financial systems today in a bid to calm markets."
"``The Fed can keep the funds rate down by pumping so much liquidity in regardless of what they do with the target rate,'' said Ian Lyngen, an interest-rate strategist in Greenwich, Connecticut, at RBS Greenwich Capital, one of the 19 primary dealers that trade directly with the central bank. ``People are hoarding cash and unwilling to lend overnight or otherwise to other financial institutions.''"
Highest Since 2001
"Yesterday, the Fed added $70 billion in temporary cash, the most since the September 2001 terrorist attacks, to bring borrowing costs down amid a hoarding of cash. Banks' demand for cash rose after American International Group Inc. had its credit ratings cut by Standard & Poor's and Moody's Investors Service late yesterday, threatening efforts to raise funds to keep the company afloat."
"The cost of borrowing in dollars overnight more than doubled to the highest since 2001. The London interbank offered rate, or Libor, soared 3.33 percentage points to 6.44 percent, according to the British Bankers' Association. The rate was as low as 2.07 percent in June."
"Funds traded to as high as 7 percent yesterday, or 5 percentage points above the Fed's target rate, according to central bank data. That margin was the greatest at least since Bloomberg began tracking the data in 1998. The rate closed at 0.25 percent yesterday, and reached as low as 0.01 percent."
The European Central Bank awarded 70 billion euros ($99.8 billion) in a one-day money-market auction today. The Bank of Japan added a total of 2.5 trillion yen ($24 billion) and the Bank of England pumped in 20 billion pounds ($36 billion). Counterparts in Australia and Switzerland took similar steps.
`Severely Damaged'
"``Banks' balance sheets are severely damaged and therefore the need for cash is very, very high,'' said Piyush Goyal, an interest-rate derivatives strategist at Barclays Capital Inc. in New York. ``The need for cash outstrips anything that the Fed is able to do. These are extraordinary times.''"
"The Fed added the reserves through overnight repurchase, or repo, agreements. They don't signal a policy shift."
"In repos, the Fed buys U.S. Treasury, mortgage-backed and so-called agency debt from its 19 primary dealers for a set period, temporarily raising the amount of money available in the banking system. At maturity, the securities are returned to the dealers, and the cash to the Fed."
"The Fed auctioned $20 billion in 28-day repos for mortgage- backed securities for one-day forward delivery. The forward transactions, done each Tuesday, are part of the Fed's so-called Single-Tranche OMO Program. Under the program announced March 7, the Fed agreed to make up to $100 billion available through weekly 28-day repurchase agreements."
The Fed has $78 billion in repos maturing today.
Overnight Repos: Type of Collateral Submitted Accepted Stop Rate U.S. Treasuries $7.25 billion None N/A Agency $27.2 billion $21.2 billion 2 percent Mortgage-backed $28.8 billion $28.8 billion 2.06 percent TOTAL $63.25 billion $50.0 billion
One-Day Forward Delivery 28-day Repos: Type of Collateral Submitted Accepted Stop Rate Mortgage-backed $68.20 billion $20 billion 2.37 percent
To contact the reporter on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net
"Last Updated: September 16, 2008 15:35 EDT"
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"Fed Keeps Rate at 2%, Rebuffing Call for Reduction (Update2) "
By Scott Lanman and Craig Torres
"Sept. 16 (Bloomberg) -- The Federal Reserve left its main interest rate at 2 percent, rebuffing calls by some investors for a cut after Lehman Brothers Holdings Inc.'s bankruptcy shook markets worldwide."
"``Downside risks to growth and the upside risk to inflation are both of significant concern,'' the Federal Open Market Committee said in a statement in Washington. ``The committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.''"
"Chairman Ben S. Bernanke and his colleagues noted that financial strains have ``increased significantly,'' signaling that they will continue to address the turmoil with emergency lending and aim monetary policy at a longer-term economic forecast."
"Stocks initially fell after the decision, then rallied after a report that the central bank is considering a loan to American International Group Inc. That would be a shift from yesterday, when officials were inclined against providing funds."
"``Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters,'' the FOMC statement said. ``Over time, the substantial easing of monetary policy combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.''"
Vote Tally
"The decision was unanimous, the first such agreement in a year."
"``The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain,'' the Fed said."
"New York Fed President Timothy Geithner didn't come to Washington today for the meeting, staying in New York, where talks continue at his bank on the crisis at AIG, which has slid 78 percent in the past week."
"The Fed is considering a ``loan package'' to AIG, a person familiar with the negotiations said. Two people familiar with the situation yesterday said the New York-based insurer was seeking $70 billion to $75 billion in loans arranged by private banks."
"Futures traders had put an 80 percent chance on at least a quarter-point rate cut today. Three months ago, they saw a 100 percent chance of an increase."
Stock Market
"The Fed held rates steady even after the Standard & Poor's 500 Index dropped 4.7 percent yesterday to the lowest level since October 2005. The index was up 1.1 percent at 1,205.69 at 3:06 p.m. in New York."
Rate cuts totaling 3.25 percentage points in the past year and emergency Fed loan programs have failed to revive lending among banks.
"``We have a very concentrated problem in housing that's not really a rate problem, and we've got a financial crisis that's really not a rate problem,'' former Dallas Fed President Robert McTeer said in an interview with Bloomberg Radio before the decision. ``I don't think we have a generally weak economy that needs lower rates.''"
"Bernanke and Treasury Secretary Henry Paulson refused to offer federal aid to Lehman after its stock plunged last week, pushing the 158-year-old company into bankruptcy early yesterday."
"Merrill Lynch & Co. became engulfed by the turmoil, agreeing to a quick merger with Bank of America Corp. this week, while insurer AIG struggled to stave off collapse after its credit ratings were cut."
Global Losses
The rout sparked by the collapse of the U.S. subprime mortgage market has cost financial institutions worldwide $515 billion in writedowns and losses since the start of 2007. Firms have raised $362 billion of capital in response.
"The New York Fed injected $70 billion of temporary reserves into the banking system today and $70 billion yesterday, the most since the September 2001 terrorist attacks. The central bank has also provided billions of dollars through direct loans of cash and Treasuries, and widened on Sept. 14 widened the collateral accepted for loans to securities firms to include equities."
"Still, banks are driving up short-term lending rates on concern AIG will follow Lehman into bankruptcy and leave financial institutions with losses on $441 billion of credit derivatives issued by the biggest U.S. insurer. Central banks around the world pumped more than $210 billion into the financial system as they sought to alleviate the credit-market seizure."
"The cost of borrowing in dollars overnight more than doubled to the highest since 2001. The overnight dollar rate soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The rate was as low as 2.07 percent in June."
Commodity Prices
"Tumbling commodity prices, including a 38 percent decline in crude oil from a July 11 peak, ease pressure on the Fed to fight against inflation. The consumer price index fell 0.1 percent in August, the Labor Department said today. So-called core prices, which exclude food and energy, rose 0.2 percent after a 0.3 percent gain in July."
Lehman's bankruptcy filing came amid signs that losses at financial institutions are impeding U.S. economic growth.
"The economy will slow to a 1.2 percent annual growth rate, or less than half the prior quarter's pace, as consumer spending, the biggest part of the economy, stalls this quarter, according to a Bloomberg survey from Sept. 2 to Sept. 9."
"The decline in consumer spending prompted automakers last month to reduce car output by 12 percent, or the most in a decade, Fed figures showed yesterday. Industrial production in the U.S. fell by 1.1 percent, or the most in almost three years."
"Unemployment rose to a five-year high of 6.1 percent in August and foreclosure filings rose to a record as falling home prices frustrated homeowners' efforts to sell or refinance their homes, RealtyTrac Inc. said."
"``Downside risks to growth have risen significantly,'' Robert DiClemente, chief U.S. economist for Citigroup Global Markets said yesterday in a note to clients in which he predicted a half-point cut. ``Conditions remain hostile to a sustained restoration of economic growth.''"
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
"Last Updated: September 16, 2008 15:08 EDT"
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Copper Drops to Lowest Since January on Signs Demand to Slide
By Millie Munshi
"Sept. 16 (Bloomberg) -- Copper fell to the lowest price since January as turmoil in financial markets fueled speculation that economic growth will stagnate, eroding demand for raw materials."
"Equity indexes fell in Asia and Europe after a credit downgrade of American International Group Inc., the biggest U.S. insurer by assets, increased risk in global debt markets. The Standard & Poor's GSCI Index of 24 commodities, down as much as 4.4 percent today, has erased this year's gain as tighter credit markets and financial losses threaten economies worldwide."
"``There are worries of a global slowdown brought on by tightening credit conditions around the world,'' Evan Smith, who helps manage $1.68 billion at U.S. Global Investors in San Antonio, said in a telephone interview. ``If we see global growth drop, it's definitely going to have an impact on commodity demand.''"
"Copper futures for December delivery fell 4.75 cents, or 1.5 percent, to $3.089 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $3.02, the lowest for a most-active contract since Jan. 22."
"Yesterday, Lehman Brothers Holdings Inc., the fourth- largest U.S. investment bank, filed for bankruptcy, listing more than $613 billion in debt. Bank of America Corp., the biggest U.S. consumer bank, agreed to buy Merrill Lynch & Co. for about $50 billion in stock as the credit crisis claimed another of America's oldest financial companies."
"The MSCI World Index of equities fell as much as 2.5 percent, after losing 3.6 percent yesterday, on signs that strains on the financial system are intensifying."
Slowdown Concerns
"``In the current environment of financial market woes, macroeconomic concerns and risk reduction, we expect base metals to remain under pressure,'' analysts at Barclays Capital, including Gayle Berry in London, said in a report."
"This year has been the most volatile for raw materials since 1973, with the GSCI tumbling 34 percent from a record on July 3. Global commodity markets will remain in flux for the short term, BHP Billiton Ltd. Chairman Don Argus said today in the mining company's annual report."
"``The interest in commodity markets is clearly coming out,'' Walter ``Bucky'' Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama, said yesterday in an interview. Prices will continue to fall in the short term as demand wanes, he said."
"On the London Metal Exchange, copper for delivery in three months dropped $60, or 0.9 percent, to $6,870 a metric ton ($3.12 a pound). The price has 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 16, 2008 14:35 EDT"
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Angola Crude Oil Exports Will Fall 10% in November (Update1)
By Alexander Kwiatkowski
"Sept. 16 (Bloomberg) -- Angola, which overtook Nigeria as Africa's biggest oil producer this year, will cut daily crude exports in November by 10 percent to the lowest in at least nine months."
"BP Plc, Total SA, Chevron Corp., Exxon Mobil Corp. and other companies will load an average of 1.76 million barrels a day, down from October's revised schedule of 1.96 million barrels a day, according to loading programs. That is the lowest since at least February, when Bloomberg data begin."
"The Organization of Petroleum Exporting Countries, which Angola joined last year, told its members last week to strictly comply with production quotas after oil prices fell about 30 percent from July. Angolan exports have averaged 1.9 million barrels a day since February, which is its OPEC target."
Fifty-five cargoes totaling 52.8 million barrels will load in November compared with 64 cargoes totaling 60.9 million barrels in October. At least one million-barrel cargo has been dropped from the October schedule after production was cut at BP's Plutonio field in August.
"Angola pumped an average of 1.72 million barrels a day in 2007, according to BP's Statistical Review of World Energy. Nigeria pumped 2.36 million barrels a day, BP said. Angolan crude exports have exceeded Nigerian exports since March, according to loading schedules."
"Oil from Angola accounted for about 5 percent of total U.S. crude imports in 2007, or 496,000 barrels a day, according to the Energy Information Administration."
Following is a table showing scheduled loadings of Angolan crude oil in November.
================================================================
Grade Cargoes Total Bbls/Day Previous %Change
"Cabinda 5 4,750,000 158,333 245,161 -35.4"
"Dalia 6 5,700,000 190,000 245,161 -22.5"
"Girassol 6 6,000,000 200,000 258,065 -22.5"
"Hungo 8 7,600,000 253,333 245,161 +3.3"
"Kissanje 8 7,600,000 253,333 245,161 +3.3"
"Kuito 2 1,750,000 58,333 56,452 +3.3"
"Mondo 2 1,900,000 63,333 122,581 -48.3"
"Nemba 7 6,650,000 221,667 214,516 +3.3"
"Palanca 2 1,970,000 65,667 47,903 +37.1"
"Plutonio 6 6,000,000 200,000 161,290 +24.0"
"Saxi-Batuque 3 2,850,000 95,000 91,935 +3.3"
"Xikomba 0 0 0 30,645 n/a"
"Total 55 52,770,000 1,759,000 1,964,032 -10.4"
================================================================
To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net;
"Last Updated: September 16, 2008 11:45 EDT"
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Corporate Bond Risk Rises to Record on AIG Counterparty Concern
By Shannon D. Harrington and Abigail Moses
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Sept. 16 (Bloomberg) -- The cost to protect against a default by Wall Street banks soared as the prospect of a failure by American International Group Inc. seized credit markets.
"Credit-default swaps on Morgan Stanley, Goldman Sachs Group Inc., Wachovia Corp. and Citigroup Inc. all traded at record highs as investors sought to hedge against potential losses on their holdings and to replace hedges they had with Lehman Brothers Holdings Inc., which filed for bankruptcy yesterday. Contracts on AIG, the biggest U.S. insurer, and Washington Mutual Inc., the U.S. savings and loan cut to junk yesterday, traded at distressed levels."
"``We're in a very dangerous situation, and almost anything can happen,'' Roger Altman, chief executive officer of Evercore Partners Inc. and a former U.S. deputy Treasury secretary, said in a Bloomberg Television interview. ``It's entirely possible that we'll see other failures, and the ripple effects from a broad economic view could be quite negative.''"
"A failure by AIG, which sold banks and investors protection on $587.5 billion of fixed-income assets, would add to potentially billions in losses the markets face from Lehman's failure. Investors and dealers in the $62 trillion credit-default swap market already are sifting through their exposures to Lehman while also dealing with contracts linked to Fannie Mae and Freddie Mac which are being settled in the largest technical defaults in the market's decade-long history. The government's takeover this month of the mortgage-finance companies triggered the defaults."
"``Counterparties are being judicious in their actions at this point, given what's happened,'' said J.J. McKoan, who oversees about $65 billion as director of global credit at AllianceBernstein Holding LP in New York. ``Few are willing to take on new risk positions.''"
CDX North America
"Credit-default swaps on the Markit CDX North America Investment Grade Index jumped as much as 34 basis points to a record 229 basis points and were trading at 207 basis points as of 12:35 p.m. in New York, according to broker Phoenix Partners Group."
"An index created by Credit Derivatives Research LLC that tracks credit-default swaps on 15 banks and securities firms, known as the CDR Counterparty Risk Index, jumped 90.8 basis points today to 406.2 basis points. It earlier rose to a record 409 basis points, said Dave Klein, manager of credit indexes at CDR in Walnut Creek, California."
"Buyers of protection on AIG paid a record 54 percent upfront and 5 percent a year, according to Phoenix. That's up from 33 percent yesterday and means it cost $5.4 million in advance and $500,000 a year to protect $10 million in bonds for five years."
"``If AIG goes under, there could be a domino effect,'' said Andrea Cicione, a credit strategist at BNP Paribas SA in London. ``AIG is very connected to the financial system and it is very connected to the real economy.''"
Debt Protection
"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."
"Credit-default swaps on Morgan Stanley jumped 263 basis points to 762 basis points, according to CMA Datavision. They traded as high as 850 basis points, Phoenix prices show."
"Contracts on Wachovia, the fourth-biggest U.S. bank, rose 135 basis points to 753, CMA data show. Goldman Sachs surged 198 to 548. Citigroup jumped 80 basis points to 360 and JPMorgan Chase & Co. climbed 51 to 246."
Bank of America
"Bank of America Corp., which agreed to buy Merrill, the world's biggest brokerage firm, for about $50 billion, increased 52 basis points to 257 basis points, according to CMA. Merrill contracts climbed 202 to 550."
"``If AIG spirals in the same way as Lehman, the ramifications will be much more substantial,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. ``The rating downgrades have accelerated the need for an imminent response.''"
"Contracts on the AAA rated finance arm of General Electric Co., GE Capital, rose 95 basis points to 457 and earlier reached a record 490, according to CMA."
"Credit swap sellers demanded 49.5 percentage points upfront to protect against a default by Seattle-based Washington Mutual, CMA data show. The upfront price rose to as high as 51.5 percentage points earlier. The contracts imply that investors have priced in a more than 89 percent chance the company will default in the next five years, according to a JPMorgan valuation model. WaMu was cut three steps to BB- yesterday by Standard & Poor's."
"In London, credit-default swaps on the Markit iTraxx Europe index of 125 companies with investment-grade ratings climbed 21 basis points to 145, JPMorgan prices show. In Tokyo, the Markit iTraxx Japan index rose the most since 2004, increasing 49 basis points to 179, Morgan Stanley prices show."
To contact the reporters on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net; Abigail Moses in London Amoses5@bloomberg.net
"Last Updated: September 16, 2008 12:44 EDT"
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U.S. Mortgage Rates May Wreak Havoc After Libor Gain (Update1)
By Kathleen M. Howley
Sept. 16 (Bloomberg) -- The biggest jump in the London interbank lending rate in at least seven years could wreak further havoc on the U.S. housing market and there's nothing the Federal Reserve can do about it.
"About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to the London Interbank Offered Rate, or Libor, according to First American CoreLogic in Santa Ana, California. Today's daily rate more than doubled as lenders demanded higher compensation for risk after Lehman Brothers Holdings Inc. collapsed and American International Group Inc. struggled to stave off bankruptcy."
"If the rates stay elevated, gains may follow in the three- to 12-month Libor indexes used to calculate U.S. mortgage resets, said Keith Gumbinger, vice president of Pompton Plains, New Jersey-based mortgage research firm HSH Associates Inc."
"``If this is more than a flare, if the rate remains high, there is no doubt it will have an effect on resetting mortgage contracts in the U.S.,'' Gumbinger said. ``Even a small bump in the one-month rate will be additional stress on the marketplace.''"
"Home loan rates tied to Libor are beyond the reach of Federal Reserve Chairman Ben S. Bernanke and others on the Federal Open Market Committee, which today left its benchmark interest rate unchanged. Libor-indexed loans, including the subprime mortgages that helped spark the global credit crunch, have interest rates that are set by London bankers who report to the British Bankers' Association."
ARM Defaults
"Forty percent of subprime adjustable-rate mortgages were either in foreclosure or had late payments in the second quarter, according to the Mortgage Bankers Association in Washington. For prime adjustable-rate home loans the combined rate was 12 percent and for mortgages of all types it was 9.2 percent, the trade group said in a Sept. 5 report."
"U.S. home prices probably will tumble through 2010, Freddie Mac said in a forecast yesterday. The S&P/Case Shiller Home Price Index likely will drop 13 percent this year, 4.3 percent next year, and 2 percent in 2010, the MacLean, Virginia-based mortgage buyer said. That's on top of an 8.9 percent drop in 2007."
"The U.S. Treasury Department and the Federal Housing Finance Agency this month seized control of Freddie Mac, the world's second-largest mortgage buyer, and Washington-based Fannie Mae, its larger rival, after a surge of foreclosures threatened to topple them. Shares of the companies now trade in pennies after tumbling 99 percent in the last 12 months."
"Combined sales of new and existing homes probably will fall to 4.92 million this year, 34 percent below the all-time high of 7.46 million in 2005, Freddie Mac said in yesterday's forecast."
Mortgage Resets
"The overnight Libor rate in U.S. dollars soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. Many Libor-linked U.S. mortgages don't limit the size of a loan's first adjustment, with caps of 2 percent on subsequent changes. That means a monthly mortgage bill could double or even triple when it first resets."
"``If the Libor market seizes up and stays that way, it's going to complicate everything,'' said Bill Fleckenstein, president of Fleckenstein Capital in Seattle. ``What you are seeing is the unwinding of the financial system as we know it.''"
"Banks tightened lending as AIG was downgraded by Moody's Investors Service and Standard & Poor's, adding to evidence that the fallout from the collapse of the U.S. mortgage market is spreading. The surge in funding costs came less than a day after Lehman's bankruptcy, the biggest in history, and Merrill Lynch & Co.'s sale to Bank of America Corp."
Fed Meeting
"The Federal Reserve left its main interest rate at 2 percent today, its first unanimous decision in a year. The central bankers said they will continue to address market turmoil with emergency lending and use monetary controls with a long-term strategy aimed at promoting growth in the world's largest economy."
"``Tight credit conditions, the ongoing housing contraction and some slowing in export growth are likely to weigh on economic growth over the next few quarters,'' the FOMC said in a statement. ``Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity should help to promote moderate economic growth.''"
"Policy makers have cut rates seven times from September 2007 to April 2008. They suspended the easing five months ago as oil prices surged, increasing inflation concerns."
"Yesterday, the federal funds rate soared as high as 6 percent, triple the Fed's target, as banks hoarded cash. That spurred the Fed to pump $70 billion into money markets through repurchase operations, the most since September 2001."
"Premiums on investment-grade U.S. corporate bonds climbed. The extra yield investors demand to buy such bonds instead of Treasuries with a comparable maturity soared to 3.80 percentage points, the highest since Merrill Lynch began keeping the data in 1996, from 3.44 percentage points on Sept. 12."
To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.
"Last Updated: September 16, 2008 15:41 EDT"
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U.S. Federal Open Market Committee Sept. 16 Statement: Text
Sept. 16 (Bloomberg) -- The following is the full text of the statement released today by the Federal Reserve:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
"Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity should help to promote moderate economic growth."
"Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain."
The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
"Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser, Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner."
"Last Updated: September 16, 2008 14:14 EDT"
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"U.S. Gasoline Demand Falls for 21st Week, MasterCard Says "
By Barbara Powell
"Sept. 16 (Bloomberg) -- U.S. gasoline demand dropped 3.1 percent last week, the 21st consecutive decline, as bad weather reduced driving east of the Mississippi River, a MasterCard Inc. report today showed."
"Motorists bought an average 9.25 million barrels of gasoline a day in the week ended Sept. 12, down from 9.542 million a year earlier, MasterCard, the second-biggest credit-card company, said in its weekly SpendingPulse report."
"Fuel consumption was 0.6 percent higher than the prior week and was down 2.6 percent for the year, the report showed."
"Gasoline demand this year peaked at 9.65 million barrels a day in the week ended Aug. 1, 5.9 percent below the 2007 maximum of 10.25 million barrels in the week ended Aug. 17."
The last time fuel use increased from a year earlier was the week ended April 18.
"The national average pump price for regular gasoline was $3.66 a gallon, unchanged from the prior week. The price touched a record $4.10 the week ended July 18 and is up 23 percent this year."
"The report from Purchase, New York-based MasterCard was assembled by MasterCard Advisors, the company's consulting arm. The data is based on credit card swipes and cash and check payments at about 140,000 U.S. gasoline stations."
Visa Inc. is the biggest credit card company by transactions processed.
To contact the reporter on this story: Barbara Powell in Dallas at Bpowell4@bloomberg.net.
"Last Updated: September 16, 2008 14:01 EDT"
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"Credit Markets Seize Up as Libor Rate Doubles on AIG, Lehman "
By Gavin Finch and Kim-Mai Cutler
Sept. 16 (Bloomberg) -- Credit markets seized up as the collapse of Lehman Brothers Holdings Inc. and downgrades of American International Group Inc. drove the cost of borrowing in dollars overnight to the highest level since 2001.
"The London interbank offered rate, or Libor, that financial institutions charge each other for loans soared 3.33 percentage points to 6.44 percent today, according to the British Bankers' Association. The increase was the biggest in its history. The rate was as low as 2.07 percent in June."
"Banks are raising short-term lending rates on concern that AIG, the biggest U.S. insurer, will follow Lehman into bankruptcy and leave financial institutions with losses on $441 billion of credit derivatives. Central banks around the world pumped more than $210 billion into the financial system today as they sought to alleviate the credit-market seizure."
"``It's fear,'' said Imke Jersch, a senior money-market trader in Hanover at Norddeutsche Landesbank Girozentrale AG, Germany's fourth-biggest state-owned bank. ``You don't know who has exposure and who might not be getting their money anymore. It's a domino effect. You never know who might fall next.''"
"The credit freeze that started in August 2007 when banks became wary of lending to institutions holding securities tied to U.S. subprime mortgages, claimed Lehman as its biggest victim when the fourth-largest U.S. securities firm filed for bankruptcy yesterday."
Figuring Out Losses
"The New York-based company was one of the 10 largest traders of credit derivatives, according to Fitch Ratings. It may take until next year for investors to figure out how much they have lost on derivatives trades with Lehman, said John Jay, a senior analyst at Boston-based Aite Group, a financial- services consulting firm."
"Derivatives are financial instruments linked to stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or weather."
"Standard & Poor's, Moody's Investors Service and Fitch all cut their ratings on AIG yesterday. AIG probably has one day to raise $75 billion to $80 billion, New York Governor David Paterson said today on cable-television channel CNBC. A collapse would be felt beyond the insurance industry, he said."
"``They have tentacles into everything, and they are certainly critical to the ongoing health of the financial markets, or lack of health,'' said Anton Schutz, president of Mendon Capital Advisors Corp. in Rochester, New York, which manages about $150 million in assets."
"AIG tumbled as much as 74 percent in New York trading today, bringing its decline this year to more than 94 percent."
"Losses, Writedowns"
"Since the start of last year, the world's biggest financial institutions posted almost $515 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."
"Libor, set by 16 banks including Citigroup Inc. and UBS AG in a daily survey by the British Bankers' Association, is used to calculate rates on $360 trillion of financial products worldwide from home loans to credit derivatives."
"Concern about turmoil in the financial markets drove investors to the safety of government debt, pushing the yield on the 10-year Treasury note fell to the lowest level in five years. The cost of buying protection against default by Wall Street banks soared, as credit-default swaps on Morgan Stanley, Goldman Sachs Group Inc. and Citigroup all traded at records."
`Like a Heart Attack'
"Other parts of the credit market suffered, with average yields on overnight U.S. commercial paper backed by assets such as credit cards and car loans jumping 54 basis points to 3.45 percent, the highest since March. The extra yield investors demand to hold U.S. investment-grade bonds instead of Treasuries rose 36 basis points yesterday, the biggest one-day increase on record, and the spread on European financial company debt climbed 26 basis points, the most since at least 1999, according to Merrill Lynch & Co. indexes."
"``I have never seen anything remotely like this,'' said Luca Jellinek, head of interest-rate strategy in London at Royal Bank of Scotland Group Plc. ``The money market was the one thing that always worked. It's the cardiovascular system of the financial body. When this happens, it's like a heart attack.''"
"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 12 basis points to 117 basis points, 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."
Cash Injections
"The difference between what banks and the U.S. Treasury pay to borrow for three months, the so-called TED spread, widened almost 49 basis points in the past two days to 201 basis points. It was about 50 basis points before the credit crisis began."
"In the U.S, the overnight rate for loans fell as the Fed added $50 billion in temporary reserves to the banking system today through repurchase agreements, or repos. The fed funds rate declined as low as 2 percent, after opening at 3.75 percent, according to ICAP Plc, the world's largest inter-dealer broker. The rate has climbed back to 4 percent."
Other central banks pumped cash into money markets. The European Central Bank offered 70 billion euros ($100 billion) in a one-day refinancing operation and 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).
`All a Mess'
"Traders raised bets the Fed will cut interest rates at a meeting today to buoy markets. Futures on the Chicago Board of Trade showed a 90 percent chance the central bank will lower its 2 percent target rate by a quarter-percentage point, compared with 68 percent yesterday and no chance a week ago. Policy makers are scheduled to announce their decision at 2:15 p.m. in Washington."
"``It's all a mess out there, it's unbelievable, it's very tough,'' said Padhraic Garvey, head of investment-grade strategy in Amsterdam at ING Bank NV. ``There really is no sign of this going away. If the Fed were to cut rates, it's not necessarily going to solve anything.''"
"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'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, after federal examiners found the companies' capital was too thin and of low quality."
"The Fed declined to offer similar backing to a rescue of Lehman at the weekend, forcing the 158-year-old firm into bankruptcy after both Barclays Plc and Bank of America Corp. pulled out of talks."
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 16, 2008 13:19 EDT"
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Money-Market Rates Double Amid Global Credit Seizure (Update4)
By Gavin Finch and Kim-Mai Cutler
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Sept. 16 (Bloomberg) -- The cost of borrowing in dollars overnight more than doubled to the highest since 2001 as the collapse of Lehman Brothers Holdings Inc. and credit downgrades of American International Group Inc. led banks to hoard cash.
"The London interbank offered rate, or Libor, that financial institutions charge each other to borrow soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The rate was as low as 2.07 percent in June."
"Banks are driving up short-term lending rates on concern that AIG, the biggest U.S. insurer, will follow Lehman into bankruptcy and leave financial institutions with losses on $441 billion of credit derivatives. Central banks around the world pumped more than $210 billion into the financial system as they sought to alleviate the credit-market seizure."
"``It's fear,'' said Imke Jersch, a senior money-market trader in Hanover at Norddeutsche Landesbank Girozentrale AG, Germany's fourth-biggest state-owned bank. ``You don't know who has exposure and who might not be getting their money anymore. It's a domino effect. You never know who might fall next.''"
"The credit freeze started in August 2007 when banks became wary of lending to institutions holding securities tied to U.S. subprime mortgages. Since the start of last year, the world's biggest financial institutions have posted almost $515 billion in losses and writedowns. Eleven U.S. banks have collapsed since January."
Shares Tumble
"AIG tumbled as much as 74 percent today, taking its decline this year to more than 94 percent. Standard & Poor's yesterday cut the insurer's long-term counterparty rating three grades to A-, citing ``reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses.''"
"The reductions occurred after two people familiar with the situation said AIG is seeking $70 billion to $75 billion in loans arranged by Goldman Sachs and JPMorgan Chase & Co. to replenish capital. The insurer may get government assistance to avert a collapse, CNBC reported today, without saying where it got the information."
"The yield on the 10-year Treasury note fell to the lowest level in five years as investors sought the safety of government debt. The cost of buying protection against default by Wall Street banks soared, as credit-default swaps on Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. all traded at records. Average yields on overnight U.S. commercial paper backed by assets such as credit cards and car loans jumped 54 basis points to 3.45 percent, the highest since March."
`Like a Heart Attack'
"``I have never seen anything remotely like this. The money market was typically the one thing that always worked,'' said Luca Jellinek, head of interest-rate strategy in London at Royal Bank of Scotland Group Plc. ``It's the cardiovascular system of the financial body. When this happens, it's like a heart attack.''"
"Libor, set by 16 banks including Citigroup and UBS AG in a daily survey by the British Bankers' Association, is used to calculate rates on $360 trillion of financial products worldwide from home loans to credit derivatives."
"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 12 basis points to 117 basis points, 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."
Cash Injections
"The Fed added $50 billion in temporary reserves to the banking system today through overnight repurchase agreements, or repos. The European Central Bank offered 70 billion euros ($100 billion) in a one-day refinancing operation and 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)."
"Traders raised bets the Fed will cut interest rates at a meeting today to buoy markets. Futures on the Chicago Board of Trade showed a 90 percent chance the central bank will lower its 2 percent target rate by a quarter-percentage point, compared with 68 percent yesterday and no chance a week ago. Policy makers are scheduled to announce their decision at 2:15 p.m. in Washington."
"``It's all a mess out there, it's unbelievable, it's very tough,'' said Padhraic Garvey, head of investment-grade strategy in Amsterdam at ING Bank NV. ``There really is no sign of this going away. If the Fed were to cut rates, it's not necessarily going to solve anything.''"
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 16, 2008 11:19 EDT"
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Crude Oil Tumbles as Wall Street Turmoil Adds to Demand Concern
By Mark Shenk
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Sept. 16 (Bloomberg) -- Crude oil tumbled more than $4 a barrel on concern that turmoil on Wall Street may weaken the global economy and cut fuel demand.
"Oil fell as American International Group Inc. had its credit rating cut, threatening efforts to raise funds, and the Federal Reserve left its main interest rate at 2 percent. Lehman Brothers Holdings Inc. yesterday sought bankruptcy protection. The drop in oil has erased this year's gain."
"``There's no question that the bears are in control of the energy markets,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``The softening economy and the weak demand are the focus right now.''"
"Crude oil for October delivery fell $4.22, or 4.4 percent, to $91.49 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures dropped as much as $5.20, or 5.4 percent, to $90.51 a barrel, the lowest since Feb. 8."
Oil in New York has declined 4.3 percent this year and dropped 38 percent from the record $147.27 a barrel reached on July 11.
"Gasoline for October delivery dropped 14.62 cents, or 5.7 percent, to $2.4152 a gallon in New York. The contract touched $2.4384 a gallon, the lowest since Feb. 13."
"The Fed rebuffed calls by some investors for a cut after the Lehman bankruptcy shook markets worldwide. Futures traders earlier today put an 80 percent chance on at least a quarter- point rate cut. Three months ago, they saw a 100 percent chance of an increase."
Demand Forecast
"The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, lowered its forecast for 2009 oil demand to 87.66 million barrels a day because of the global economic slowdown."
"OPEC needs to study the effects of its production cuts before considering an emergency meeting, Iran's OPEC governor said today."
"``Ministers need at least September and October data to see the impact of OPEC's decision on the market,'' Mohammad Ali Khatibi said in a phone interview from Tehran today. ``We cannot be in a hurry; an emergency meeting would be a judgment in a rush.''"
"OPEC agreed at its meeting in Vienna to a limit for 11 members of 28.8 million barrels a day, about 500,000 barrels a day lower than the group's July output. The group is scheduled to meet on Dec. 17 in Oran, Algeria."
"Brent crude oil for November settlement declined $4.53, or 4.8 percent, to $89.71 a barrel on London's ICE Futures Europe exchange. Futures fell to $88.90 today, the lowest since Feb 8. Prices have dropped 14 straight days, the longest stretch since the contract was introduced in 1988."
Refinery Repairs
Texas oil refiners may need weeks to restore normal operations as utilities struggle to restore power after Hurricane Ike swept through the region.
"U.S. crude-oil inventories probably fell 3.35 million barrels last week because of Ike, a Bloomberg News survey of analysts showed. 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 tomorrow."
"``The market has factored in a substantial drop in tomorrow's report,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``There would have to be a fantastic drop of 10 or 15 million barrels to turn the market around.''"
Nigerian Attacks
Nigerian militants attacked a pipeline operated by a unit of Royal Dutch Shell Plc and a Chevron Corp. oil field as raids against the oil industry in the Niger River delta entered a fourth day. The latest attacks began when Nigerian soldiers and militants clashed south of the oil-industry hub of Port Harcourt.
"Nigeria has Africa's biggest hydrocarbon reserves, with more than 30 billion barrels of crude and 187 trillion cubic feet of gas. The West African country, which has dropped behind Angola as the continent's top oil exporter because of the violence, is the fifth-biggest source of U.S. oil imports."
"``There's been a hurricane, attacks in Nigeria and the inventory data will be very bullish due to shipping disruptions and refinery closures, and yet we're testing $90,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``This shows that energy became intertwined with financial markets. Now that's coming undone.''"
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
"Last Updated: September 16, 2008 14:49 EDT"
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Global Central Banks Pump Money to Soothe Markets (Update3)
By Joshua Gallu and Shamim Adam
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Sept. 16 (Bloomberg) -- Central banks from Tokyo to New York injected more than $200 billion of cash into the financial system in a bid to calm markets roiled by the demise of Lehman Brothers Holdings Inc. and crisis at American International Group Inc.
"The U.S. Federal Reserve added $50 billion in temporary reserves to the banking system, while the European Central Bank awarded 70 billion euros ($99.8 billion) in a one-day money- market auction, more than double yesterday's amount. The Bank of Japan added a total of 2.5 trillion yen ($24 billion) and the Bank of England pumped in 20 billion pounds ($36 billion)."
"Stocks dropped around the world and bonds surged for a second day today after the collapse of Lehman and concern about AIG's survival prompted traders to flee from private assets to government debt. The Fed yesterday pumped $70 billion into the banking system, the most since the September 2001 terrorist attacks, and may cut its benchmark lending rate today."
"``Central banks have to show they are ready to take action to ensure stability,'' said Thomas Lam, an economist at United Overseas Bank Ltd. in Singapore. ``Precautionary steps are high on their list to prevent any significant impact and support their markets.''"
`Chain Reaction'
"Money-market rates may rise further on speculation American International Group Inc. will fail to raise enough cash to stay afloat. The cost of borrowing in dollars overnight more than doubled to 6.44 percent today, its biggest jump, according to the British Bankers' Association. The so-called Libor OIS spread, which measures the availability of funds in the market, widened 11 basis points to 116 basis points, the most since at least December 2001."
"``The authorities are afraid of a chain reaction and a further tightening of financial conditions, which would ultimately have a negative impact on the economy,'' said Tomoko Fujii, head of economics and strategy at Bank of America N.A. in Tokyo. ``They have no choice but to try to calm the markets.''"
"China lowered its interest rate for the first time in six years late yesterday and may do so again to protect growth. While the Fed's policy-setting Open Market Committee hasn't signaled a rate cut and few economists predict one, futures traders put the odds of a reduction at 100 percent, up from 12 percent at the end of last week."
"The Fed added $50 billion to the banking system today when it arranged overnight repurchase agreements, or repos, after adding $70 billion in reserves yesterday, the most since the September 2001 terrorist attacks, to bring borrowing costs down after the Lehman bankruptcy triggered a hoarding of cash."
Overbidding
"The increase in Japanese funds was the first since June 30 and the biggest since March 31, when the central bank added 3 trillion yen. Japanese bonds jumped, sending the yield on the benchmark 10-year bond to its biggest drop in five years on concern the credit crisis will worsen. Unlike its counterparts in Europe, the Bank of Japan didn't act yesterday because its markets were closed for a holiday."
The Bank of England said today financial institutions bid for almost three times as much money as it was offering. It loaned 5 billion pounds for three days yesterday.
"The ECB, which yesterday awarded 30 billion euros for one day, said there were 56 bids at its auction today totaling 102.48 billion euros. In its regular offering of seven-day funds, the ECB said 533 banks bid for a total of 328.7 billion euros, the most since December. It allocated 150 billion euros."
The Frankfurt-based ECB pledged yesterday to ``contribute to orderly conditions'' as needed.
"Australia, Switzerland"
"Among the other central banks, the Reserve Bank of Australia injected A$1.848 billion ($1.5 billion) into the financial system, adding to yesterday's $2.1 billion. The Swiss National Bank offered overnight funds at 1.90 percent, the same rate as yesterday when it released about 8 billion francs ($7.2 billion) into its market."
"The People's Bank of China reduced the one-year lending rate to 7.20 percent from 7.47 percent, effective today. It lowered the reserve-requirement ratio for smaller banks to 16.5 percent from 17.5 percent. Taiwan's government instructed its four major funds and state-owned banks to buy shares to help reverse the stock market's slump. The index closed 4.9 percent lower today in Taipei."
"Taiwan's central bank pumped $3.59 billion into the foreign-currency interbank market today, the monetary authority said."
"Since the credit crisis began in August 2007, major central banks outside the U.S. have lacked the Fed's scope to lower interest rates, preferring instead to fight market tensions with tools that boost liquidity while keeping monetary policy focused on curbing inflation."
U.K. Inflation
"Bank of England Governor Mervyn King said in a letter to Chancellor Alistair Darling today that he expects U.K. inflation will stay ``markedly'' above its target. Inflation in the 15- nation euro area eased for the first time in four months in August, yet at 3.8 percent remained almost double the ECB's 2 percent limit, a report showed today."
"Economists at Morgan Stanley said central banks may start to weigh rate cuts if financial markets become disorderly. ``Central banks may want to counter the implied tightening of financial conditions and cut rates to stabilize confidence and prevent a negative feedback loop between falling asset prices and the real economy,'' the economists said in a report yesterday."
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net; Joshua Gallu in Zurich jgallu@bloomberg.net
"Last Updated: September 16, 2008 09:16 EDT"
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France's Lagarde Says Lehman Collapse to Lift Rates (Update1)
By Sandrine Rastello
"Sept. 16 (Bloomberg) -- The collapse of Lehman Brothers Holdings Inc. and the resulting turmoil in financial markets will likely lift the cost of credit in the coming weeks, French Finance Minister Christine Lagarde said."
"``It's an upheaval in the international financial landscape and it's inevitably going to have consequences, such as tensions on interest rates spreads, which are going to lead to rising credit costs in coming weeks,'' Lagarde told journalists in Paris today."
"World stock markets extended their declines today after Standard & Poor's and Moody's Investors Service cut credit ratings on U.S. insurer American International Group Inc., a day after the Lehman collapse slammed markets. Yesterday the Federal Reserve, the European Central Bank and Bank of England took action to make credit more readily available to help banks being squeezed by the Lehman fallout."
"``Supervisors, central bank governors, coordinate very well to do their job and anticipate consequences in monetary markets,'' Lagarde said. ``Central banks have done their job, liquidity was made available.'"
Lagarde was not concerned that the French banks would suffer from the same type of losses on high-risk mortgages that contributed to Lehman's collapse or that their exposure to Lehman brothers would hurt results.
French Banks
"The bankruptcy ``will have relatively little effect on French banks,'' Lagarde said. ``The direct exposure to the Lehman risk is low compared with what is observed in some other countries. There's no systemic risk, or even any drop in value for these companies,'' she said."
"So far the higher credit costs hasn't led to a drop in corporate lending, Laurence Parisot, head of Medef, France's largest business federation, told reporters today in Paris."
"``We're seeing an increase in credit costs, and no drop in credit to companies in volume, but a drop in real estate loans,'' he said."
"The slump in financial markets may further weigh on economic growth in Europe, which has cooled, leading to a contraction in the French economy in the second quarter. A further slowdown threatens to boost France's jobless rate, which at 7.6 percent is hovering at the lowest in more than a decade."
"``If economic growth continues to slow, we'll see an impact in terms of jobs creaton and unemployment, which I hope will be cushioned by the measures we are taking,'' she said."
"The European Commission on Sept. 10 forecast that France will stagnate in the third quarter and expand just 1 percent this year, the slowest pace since 2002."
"``Almost everywhere, we're seeing investment delays'' and reduction in budgets prepared for 2009, Parisot said. ``We're recording a slowdown in consumption, but not a drop, and a shift of consumption toward the most basic and cheapest products.''"
"Even though the price of crude has fallen about 30 percent from its July 11 peak of $147.11 a barrel, the French transport industry remains the most concerned about the slowdown, Parisot said."
"``The drop in oil prices is only due to a drop in demand,'' he said, meaning the transport business is likely to suffer even with fuel costs declining."
To contact the reporter on this story: Sandrine Rastello in Nice srastello@bloomberg.net
"Last Updated: September 16, 2008 04:26 EDT"
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Russia's Micex Index Falls Most Ever; Exchanges Suspend Trading
By William Mauldin and Bradley Cook
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"Sept. 16 (Bloomberg) -- Russia's Micex Index plunged a record 17 percent, prompting the exchange to halt trading, after the cost of borrowing in dollars overnight more than doubled and oil prices tumbled."
"OAO Sberbank and OAO VTB Group, Russia's two biggest banks, led the decline in Moscow, falling 23 percent and 31 percent respectively. Financial stocks worldwide slid after American International Group Inc., the biggest U.S. insurer, had its credit ratings downgraded. OAO Rosneft, the government-controlled oil producer, lost 22 percent."
"The ruble-denominated Micex fell to 881.17 at the close in Moscow, after trading was suspended for an hour and subsequently reopened for three minutes. Today's decline was the biggest since Bloomberg started tracking the gauge in May 2001, and the largest fluctuation among equity indexes included in global benchmarks."
"``It's panic,'' said Oleg Vorotnitsky, head of equity trading at Uralsib Financial Corp. in Moscow. ``There are problems with liquidity on the market. People are having difficulties with refinancing their positions so they started selling. Concern about AIG'' is adding to the panic, he said."
"The dollar-denominated RTS Index lost 11 percent to 1,131.12, marking a 55 percent retreat from its highest close of 2,487.92, on May 19. The gauge has fallen 51 percent so far this quarter, the worst performance of major world equities indexes."
"The RTS Exchange halted equities trading for the remainder of the day at 5 p.m., while the Micex stopped trading for an hour from 4:42 p.m. Moscow time."
Russian Rates
"The overnight dollar rate soared 333 basis points to 6.44 percent today, its biggest jump, according to the British Bankers' Association. Rates climbed yesterday after Lehman Brothers Holdings Inc. succumbed to mounting credit-market losses and filed for bankruptcy."
"Russia's Mosprime interbank benchmark rate jumped to 10.83 percent today from 8.42 percent yesterday, according to the Web site of Russia's central bank. Rising lending rates may impede Russian investors from borrowing money to buy stocks."
"``It's a market where traditionally leveraged players have been active, and we're seeing a de-leveraging,'' said David Aserkoff, chief strategist at Moscow-based Renaissance Capital."
"Sberbank sank 23 percent to 34.65 rubles. VTB plunged 31 percent to 3.17 kopeks, having erased 77 percent of its value since its May 2007 initial public offering, the world's biggest last year."
"Rosneft, Russia's biggest oil producer, fell 36.9 rubles, or 22 percent, to 132.20 rubles, the lowest since its IPO in 2006. OAO Novatek, Russia's second-biggest natural-gas producer, sank 19.92 rubles, or 15 percent, to 110.09 rubles."
Gazprom Declines
"``Right now the market has taken on a life of its own, and there is no telling at what point this knife stops falling,'' said Ron Smith, chief strategist at Alfa Bank in Moscow. ``The bottom may not be found until some time in October, and the rally may not start until December or even early next year.''"
"OAO Gazprom, Russia's biggest corporate borrower, declined 18 percent to 158.41 rubles, less than half its all-time high of 367.54 rubles on May 19. Gazprom has the biggest weighting in the MSCI Emerging Markets Index and contributed to the benchmark's 5.7 percent drop as of 3:15 p.m. London time."
"Crude oil tumbled, dipping below $91 a barrel and taking its two-day decline to more than $10 on concern that turmoil on Wall Street may weaken the global economy and reduce demand."
"``For now, we expect the oil price and global financials to dictate moves on the Russian market,'' JPMorgan Chase & Co. strategist Peter Westin in Moscow wrote in a note to investors. ``The outlook for Russian equities today is anything but cheerful.''"
To contact the reporters on this story: To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net. Bradley Cook in Moscow at bcook7@bloomberg.net.
"Last Updated: September 16, 2008 10:51 EDT"
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Banks Are Riskiest Companies in `Scary' Markets: Chart of Day
By Mark Gilbert and Abigail Moses
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"Sept. 16 (Bloomberg) -- The risk that European banks won't repay their debts exceeds the chances of non-financial companies defaulting for the first time since March, according to prices in the credit-derivatives market."
"``Perceived risk in the financial sector has risen considerably, which will exacerbate funding difficulties and therefore heighten the danger of a credit squeeze,'' Marco Annunziata, chief economist at Unicredit Markets in London, wrote in a research report today."
"The CHART OF THE DAY illustrates the jump in the Markit iTraxx Financial index of 125 financial companies, shown by the red line, to 143 basis points. It has risen above the Markit iTraxx Europe corporate index, shown in green, after Lehman Brothers Holdings Inc. filed for bankruptcy protection."
"``We are seeing history in the making and it is a scary sight,'' Annunziata wrote. ``The U.S. Treasury's decision to opt for shock therapy, allowing Lehman to go bankrupt, has pushed us into uncharted waters.''"
To contact the reporters on this story: Mark Gilbert in London at magilbert@bloomberg.netAbigail Moses in London at Amoses5@bloomberg.net
"Last Updated: September 16, 2008 06:51 EDT"
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"Natural Gas Futures Drop as Hurricane, Mild Weather Cut Demand "
By Reg Curren
"Sept. 16 (Bloomberg) -- Natural gas futures declined on expectations of lower demand, after Hurricane Ike caused widespread blackouts in Texas and forecasters called for moderate weather across the U.S."
"Almost 4 million homes and businesses in the U.S. were without power as of yesterday after Ike knocked down electricity lines from Texas to Ohio, the government said. Normal to below- normal temperatures are forecast for most of the U.S. between Sept. 23 and Sept. 29, the Climate Prediction Center in Camp Springs, Maryland, said in a 14-day outlook."
"``Extensive power outages in conjunction with evacuations and offline industrial facilities as a result of the hurricane has curtailed demand,'' said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey in Houston."
"Natural gas for October delivery fell 11.2 cents, or 1.5 percent, to $7.262 per million British thermal units at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices have dropped 3.1 percent this year."
Mild weather can cut demand for electricity from gas-fired power plants to run air conditioners.
"Demand for gas may fall by 3.3 billion cubic feet a day this week, SunTrust Robinson said in a report, citing Bentek Energy LLC, a Golden, Colorado-based energy-markets information company. Total supply loss this month from hurricanes Ike and Gustav as of yesterday was 129 billion cubic feet, Bentek said."
"``The Independence Hub ramped up and most of the big platforms seem to have made it through'' the storm, Horwitz said."
Production Gain
"Resumption of some Gulf output, combined with expectations of higher onshore production in the U.S. this year, is helping blunt concern over having sufficient gas in storage for the cold- weather months, when demand jumps, Horwitz said."
"Six offshore pipelines operated by Enbridge Energy Partners LP are closed, the company said on its Web site."
"There is damage to some platforms and there are some pipeline leaks, Enbridge said."
"Domestic gas output is expected to increase by 7.8 percent this year, particularly from fields in Texas and Wyoming, the Energy Department said in its monthly Short-Term Energy Outlook on Sept. 9."
"The Independence Hub, owned by Enterprise Products Partners LP of Houston, indicated it planned to ship 768 million cubic feet of gas today, according to a posting on a Tennessee Gas Pipeline Web site. The Hub has daily capacity of 1 billion cubic feet."
Supply Forecast
"U.S. gas inventories rose 63 billion cubic feet in the week ended Sept. 12, according to the median of seven analyst estimates compiled by Bloomberg. Supplies in the same week over the past five years advanced an average 88 billion cubic feet, according to the Energy Department."
"Lower crude prices and ``general concerns that economic weakness could depress industrial demand'' also weighed on natural gas, according to Horwitz."
"Crude oil fell on concern financial turmoil will weaken the global economy and reduce demand. Oil for October delivery fell $4.36, or 4.6 percent, to $91.35 a barrel in New York."
"The economy may be ``headed down with a bullet and people are looking at that as a hit on demand,'' said Brad Florer, a trader at Kottke Associates Inc. in Louisville, Kentucky."
"Falling crude ``will keep pressure on everything,'' Florer said. ``You can't get around that.''"
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net.
"Last Updated: September 16, 2008 14:39 EDT"
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"German Stocks Fall for Second Day, Led by Commerzbank, Postbank "
By Stefanie Haxel
"Sept. 16 (Bloomberg) -- German stocks fell for a second day after credit rating services downgraded American International Group Inc., heightening concern that the global financial crisis will worsen and push the economy into a recession."
"Commerzbank AG, Germany's second-largest bank, slumped 12 percent to the lowest in four years, and Deutsche Postbank AG slid 8.1 percent. Deutsche Bank AG dropped to a two-month low. Germany's biggest bank is among European companies that investors should avoid, according to JPMorgan Chase & Co."
"The DAX Index plunged 98.99, or 1.6 percent, to 5,965.17. DAX futures expiring in September lost 1.5 percent as of 5:43 p.m. in Frankfurt. The HDAX Index of the country's 110 biggest companies declined 1.6 percent."
"``We are in a downside spiral and the end isn't in sight yet,'' said Matthias Jasper, head of equities at WGZ Bank in Dusseldorf, in a telephone interview. ``Investors fear a domino effect or financial market tsunami.''"
The DAX has fallen 26 percent this year as credit losses and writedowns at financial firms worldwide topped $500 billion and slowing economic growth damped the outlook for earnings.
"AIG had its long-term counterparty rating lowered three grades to A- from AA- by Standard & Poor's, which cited a reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses. AIG's senior unsecured debt rating was downgraded by Moody's to A2 from Aa3."
Commerzbank
"Commerzbank declined 1.94 euros to 13.97, the lowest since September 2004. Postbank, Germany's biggest consumer bank by clients, fell 3.21 euros to 36.55, the biggest drop since its initial public offering in June 2004."
"Deutsche Bank lost 2.475 euros, or 4.6 percent, to 51.735, the lowest since July 16. The company may be counterparty to bankrupt Lehman Brothers Holdings Inc., JPMorgan analysts including Kian Abouhossein wrote in a note to clients. Investors should ``avoid banks with large trading operations,'' he said. Deutsche Bank spokesman Christian Streckert declined to comment."
"Crude oil for October delivery extended its slide, dipping below $91 a barrel, on concern that turmoil on Wall Street may weaken the global economy and reduce demand."
"Deutsche Lufthansa AG added 16.5 cents, or 1.1 percent, to 15 euros. Europe's second-largest airline, which yesterday agreed to purchase 45 percent of Brussels Airlines, may be a preferred buyer for Alitalia SpA, Italian Prime Minister Silvio Berlusconi said during the taping of the ``Porta a Porta'' talk show in Rome."
The following stocks also rose or fell in German markets. Symbols are in parentheses.
"Arbomedia AG (RBX GY) rallied 83 cents, or 9.5 percent, to 9.58 euros, the highest in more than seven years. Goldbach Media AG, Switzerland's biggest seller of online advertising, took control of the marketer of advertising space and offered to pay 9.80 euros per share for the 27 percent it doesn't own."
"Arcandor AG (ARO GY) fell 60 cents, or 15 percent, to 3.50, the steepest one-day drop day drop in more than two years. The owner of Germany's largest department-store chain declined on speculation that banks approached majority investor Madeleine Schickedanz to seek more cash."
"BASF SE (BAS GY) dropped for a second day, losing 1.08 euros, or 3 percent, to 35.16. Moody's Investors Service is reviewing its long-term credit ratings on the world's largest chemical maker for downgrade after the company agreed to buy Switzerland's Ciba Holding AG for 3.45 billion-franc ($3.1 billion)."
"Bestinver, Ciba's largest investor, said it rejects BASF's offer because it undervalues the chemicals maker, the Madrid- based asset manager said in a statement."
"SAP AG (SAP GY) increased 1.45 euros, or 3.8 percent, to 39.60. Credit Suisse Group AG raised its recommendation for the world's largest maker of business-management software to ``outperform'' from ``neutral,'' citing potential for higher profitability."
"Volkswagen AG (VOW GY) climbed for a sixth time in seven days, adding 19.50 euros, or 9.4 percent, to 226.50. Porsche SE said it raised its stake in Europe's largest carmaker to 35.1 percent, acquiring ``de facto control'' of Volkswagen, and plans to bid for the company's Audi luxury unit."
"Porsche (PAH3 GY) plunged 1.48 euros, or 1.8 percent, to 81.90 euros. Audi (NSU GR) jumped 30.49 euros, or 6.6 percent, to 493 euros in German floor trading."
To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
"Last Updated: September 16, 2008 12:59 EDT"
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Wheat Falls as Investors Flee Commodities Amid Credit Crisis
By Tony C. Dreibus
Sept. 16 (Bloomberg) -- Wheat fell the most in a week as investors fled plunging commodities and equities markets to seek stability in cash and government-backed loans.
"The Reuters/Jefferies CRB Index of 19 commodities tumbled as much as 2.1 percent today. The Standard & Poor's 500 Index dropped the most yesterday since the Sept. 11, 2001, terrorist attacks after Lehman Brothers Holdings Inc. sought bankruptcy protection and concern increased that the Federal Reserve won't bail out insurer American International Group Inc."
"``The run to cash is really hurting commodities as much as anything,'' said Darrell Holaday, president of Advanced Market Concepts in Manhattan, Kansas. ``Everybody wants cash and bonds. Anything else carries way too much risk and you can't blame them. Their investments have turned completely sour.''"
"Wheat for December delivery fell 8.5 cents, or 1.2 percent, to $7.185 a bushel at 10:09 a.m. on the Chicago Board of Trade. A close at that price would be the biggest decline since Sept. 9. Most-active contracts have tumbled 20 percent in the past year after global growers increased plantings to take advantage of prices that rose to a record $13.495 a bushel on Feb. 27."
AIG shares plunged as much as 74 percent and the UBS- Bloomberg Constant Maturity Commodity Index of 26 raw materials fell as much as 2.6 percent to the lowest since Jan. 23.
"As equities and commodities prices plummet, many traders liquidate their positions or invest in U.S. Treasuries. Two-year, five-year and 10-year notes all climbed, along with 30-year bonds, as buyers rushed to the safest investments."
`Staple Foods'
"Of all the agriculture commodities, wheat may be affected least by turmoil in the equities markets because it's used to make staple foods including bread and pasta. That means demand for the grain may not slip as much as for livestock or corn, the main ingredient in animal feed, Holaday said."
"``Wheat might be as close to trading world fundamentals as any market out there,'' he said."
"Rain during the past two weeks followed by warm, sunny weather this week may put pressure on wheat as growers begin planting winter varieties. About 11 percent of the U.S. crop was seeded as of Sept. 14, the Department of Agriculture said in a report yesterday."
"Some parts of Kansas and Oklahoma, the largest growers of the grain, and Texas received as much as 10 inches of rain in the past two weeks, six times more than normal. That increases soil moisture and will help root growth for soon-to-be planted crops."
"``These will be the best conditions, I don't know if I can tell you how far back,'' Holaday said. ``There are pockets of dry areas but very small pockets. That'll guarantee the crop will get a good start.''"
"Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show."
To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.
"Last Updated: September 16, 2008 11:20 EDT"
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"Indian Central Bank to Boost Liquidity, Dollar Supply (Update1) "
By Vipin V. Nair
"Sept. 16 (Bloomberg) -- The Reserve Bank of India is taking steps to boost cash in the financial system, joining central banks in Japan and Australia in attempting to calm the markets after the collapse of Lehman Brothers Holdings Inc. and the sale of Merrill Lynch & Co."
"India's central bank will sell U.S. dollars and increase interest rates on some foreign currency deposits to bolster the rupee, which fell the most in a decade, according to a statement issued by the central bank today. Banks can get more funds through an additional repurchase auction everyday and a temporary increase in their eligibility to access funds through the repurchase auction, it said."
"``The market will cool down tomorrow because of these measures and the rupee will also be stronger,'' said Parthasarathi Mukherjee, president, treasury at Axis Bank Ltd. ``There is a huge liquidity problem in the money market now.''"
"The measures are being taken because of the current turmoil in the global financial markets that has put pressure on India's money and foreign-exchange markets, the Reserve Bank said. The Bank of Japan added 2.5 trillion yen ($24 billion) into the financial system, its biggest money-market operation since March, and the Reserve Bank of Australia injected A$1.85 billion ($1.5 billion)."
"``The Reserve Bank is closely monitoring the developments in the global as well as domestic financial markets and stands ready to take such pre-emptive action as may be necessary to contain excess volatility,'' it said."
"The central bank will sell dollars through its agent banks or directly to meet demand-supply gaps. The rupee today dropped to the lowest in more than two years, falling to 46.925 per dollar at the close in Mumbai after sliding as low as 46.975, according to data compiled by Bloomberg."
"The interest rate on some foreign currency deposits is being increased by 50 basis points with immediate effect in a bid to attract dollar inflows. The interest rate ceiling on the so- called foreign currency non-resident (B) deposit is now pegged at Libor/Euribor/Swap rate minus 25 basis points, it said."
"Banks will be allowed to temporarily get additional liquidity from the central bank of up to one percent of their deposits. It will also conduct a second reverse repurchase and repurchase auction every day. Currently, the second auction is scheduled only on alternate Fridays."
To contact the reporter on this story: Vipin V. Nair in Mumbai at Vnair12@bloomberg.net.
"Last Updated: September 16, 2008 11:34 EDT"
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"South Africa's Rand Slips After AIG Downgrades, Equity Declines "
By Garth Theunissen
"Sept. 16 (Bloomberg) -- South Africa's rand dropped for a second day against the dollar after American International Group Inc.'s debt ratings were downgraded and equity markets slid worldwide, prompting investors to pare holdings of higher- yielding assets."
"The rand also fell versus the euro as prices retreated for gold and platinum, the country's biggest export earners. AIG's credit downgrades by Standard & Poor's and Moody's Investors Service may threaten efforts to raise emergency funds to keep the company afloat. The MSCI World Index, a benchmark for stocks, plunged 6 percent, extending yesterday's 3.6 percent drop."
"``The decline in global equities and the associated crisis in credit markets are driving the rand weaker,'' said Robert Beange, an emerging-markets currency strategist in London at JPMorgan Chase & Co. ``The rand is an equity- and commodity- dependent currency and those are the two worst assets to be holding in the current climate of risk aversion.''"
"The rand fell as much as 2.4 percent to 8.2711 per dollar and was at 8.1580 by 5:05 p.m. in Johannesburg, from 8.0750 yesterday. It weakened against 13 of the 16 major currencies monitored by Bloomberg, losing 0.8 percent to 11.5926 per euro."
"AIG, the biggest U.S. insurer by assets is seeking as much as $75 billion in loans arranged by Goldman Sachs Group Inc. and JPMorgan Chase & Co. to replenish capital, according to two people familiar with the situation. It follows yesterday's bankruptcy filing by Lehman Brothers Holdings Inc., the biggest in history."
"The FTSE/JSE Africa All Share Index slipped as much as 4.3 percent, with Europe's Dow Jones Stoxx 600 Index dropping 2.5 percent and the MSCI Asia Pacific Index sinking 3.9 percent. The Standard & Poor's 500 Index lost 0.6 percent."
"Gold declined as much as 1.9 percent to $772.05 an ounce. Platinum plunged 9.2 percent to $1,071 an ounce. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices."
"Government bonds were little changed, with the yield on the benchmark 13.5 percent security due September 2015 at 9.09 percent. Yields move inversely to bond prices."
To contact the reporter on this story: Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net
"Last Updated: September 16, 2008 11:08 EDT"
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"Constellation, Hewlett-Packard, Wells Fargo: U.S. Equity Movers "
By Lu Wang
"Sept. 16 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 1:20 p.m. in New York."
"Energy companies dropped as crude oil tumbled more than 5 percent on speculation turmoil on Wall Street will slow global economic growth, reducing demand for fuel. Hess Corp. (HES US), the fifth-biggest U.S. oil company, lost 7 percent to $75.88. CVR Energy Inc. (CVI US) dropped 4.8 percent to $10.02. InterOil Corp. (IOC US) slipped 6.5 percent to $23.66. Linn Energy LLC (LINE US) fell 11 percent to $15.91. Western Refining Inc. (WNR US) lost 5.2 percent to $10.37."
"Some airlines rose on speculation falling fuel costs may boost earnings. Continental Airlines Inc. (CAL US) jumped 13 percent to $21.26. Delta Air Lines Inc. (DAL US) rallied 23 percent to $9.87. Northwest Airlines Corp. (NWA US) advanced 18 percent to $11.60. AMR Corp. (AMR US), owner of American Airlines, climbed 14 percent to $12.84."
"American International Group Inc. (AIG US) tumbled 36 percent to $3.06, the lowest since April 1985. The biggest U.S. insurer by assets had its credit ratings cut by Standard & Poor's and Moody's Investors Service. New York Governor David Paterson told CNBC that AIG probably has one day to raise $75 billion to $80 billion to keep the company afloat."
Rivals of AIG gained. Axis Capital Holdings Ltd. (AXS US) added 6.4 percent to $33.48. Chubb Corp. (CB US) rose 11 percent to $54.01. Travelers Cos. (TRV US) advanced 11 percent to $48.32.
"Best Buy Co. (BBY US) slid 4.2 percent to $41.85, the lowest since Aug. 7. The largest U.S. electronics retailer said second- quarter earnings fell short of analyst estimates after it spent more to enhance U.S. stores. Profit dropped 19 percent to $202 million, or 48 cents a share, missing the average estimate by 9 cents."
"CBRL Group Inc. (CBRL US) gained the most since July 22, climbing 12 percent to $28.90. The parent of Cracker Barrel Old Country Store restaurants said profit from continuing operations will be as much as $3 a share in fiscal 2009. Analysts, on average, projected $2.87, according to a Bloomberg survey."
"Constellation Energy Group Inc. (CEG US) dropped 29 percent to $34, the lowest since August 2003. The biggest U.S. power marketer plunged on concern Wall Street turmoil will hurt its search for a partner to share the risk of its burgeoning energy- trading business."
"Dell Inc. (DELL US) retreated 10 percent to $16.19, the lowest in a decade. The world's second-biggest personal-computer maker predicted ``further softening'' in global demand this quarter and said it expects to incur costs to cut jobs and realign the business."
"Kroger Co. (KR US) gained 6 percent, the most since June 24, to $28.19. The biggest U.S. supermarket chain said second-quarter profit rose 3.4 percent as the retailer attracted shoppers with lower food prices."
"Goldman Sachs Group Inc. (GS US) fell 3.1 percent to $131.3, the lowest since January 2006. The largest of the two remaining independent U.S. securities firms reported third-quarter profit fell 70 percent, the sharpest decline in its nine years as a public company."
Morgan Stanley (MS US) lost 13 percent to $28.12. The second-biggest securities firm is scheduled to report third- quarter results tomorrow.
"Hewlett-Packard Co. (HPQ US) gained 7.3 percent, the biggest jump since Feb. 20, to $48.63. The world's largest personal- computer maker said it will eliminate 24,600 jobs to save $1.8 billion. Scott Craig, an analyst at Bank of America Corp., said in a note today that Hewlett-Packard's targeted cost savings are bigger than his $1.5 billion estimate. Analysts at Goldman Sachs Group Inc. and Merrill Lynch & Co. raised their price estimates for the stock."
"Lawson Software Inc. (LWSN US) fell 6.7 percent to $6.40, a two-year low. The maker of business-management programs for Safeway Inc. said in a statement that first-quarter profit excluding some items was 4 cents to 5 cents a share. That's short of the 7-cent average estimate from analysts in a Bloomberg survey."
"MannKind Corp. (MNKD US) fell 15 percent, the most since Aug. 7, to $2.86. Study results on the company's experimental inhaled insulin product failed to quell questions about links between a similar treatment and lung cancer."
"Micron Technology Inc. (MU US) tumbled 8.3 percent to $3.98, the lowest since November 1993. The world's fourth-largest producer of memory chips is ``highly'' likely to buy Qimonda AG (QI US), the memory-chip unit of Infineon Technologies AG (IFX US), and an acquisition would be ``highly dilutive,'' UBS AG analyst Uche Orji wrote in a note to clients, cutting the stock's rating to ``neutral'' from ``buy.''"
"Owens-Illinois Inc. (OI US) dropped 18 percent, the most since December 2000, to $29.30. The world's largest maker of glass containers said 2008 free cash flow will be $332 million to $400 million, less than the $500 million forecast earlier this year, because of slowing demand and reduced output."
"Targacept Inc. (TRGT US) dropped the most since its initial public offering in April 2006, sliding 31 percent to $5.81. The biopharmaceutical company said its experimental Alzheimer's drug AZD3480 failed to achieve the desired results in a study. Partner AstraZeneca Plc (AZN LN), the U.K.'s second-largest drugmaker, said it will make a decision on the further development in December."
"Union Drilling Inc. (UDRL US) fell 12 percent to $11.06, the lowest since October 2006. The provider of drilling services was downgraded to ``sector perform'' from ``outperform'' by analyst Victor Marchon at RBC Capital Markets."
Washington Mutual Inc. (WM US) rose 13 percent to $2.26. The biggest U.S. savings and loan said it doesn't expect a ``material'' effect from Standard & Poor's decision to cut the lender's credit rating to junk.
"Wells Fargo & Co. (WFC US) jumped 11 percent to $34.35, the highest since October. Credit Suisse Group said Lehman Brothers Holdings Inc.'s bankruptcy will have a ``modest'' effect on the biggest U.S. West Coast bank."
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
"Last Updated: September 16, 2008 13:39 EDT"
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Theolia Advances in Paris on Takeover Speculation (Update1)
By Tara Patel
"Sept. 16 (Bloomberg) -- Theolia SA, the French wind-power company part-owned by General Electric Co., rose the most in 1 1/2 years in Paris trading on speculation it's a takeover target."
"Theolia climbed 1.22 euros, or 13 percent, to 10.36 euros, the biggest one-day gain since Feb. 15, 2007. Today's increase trimmed the stock's decline this year to 49 percent, valuing the company at 403.5 million euros ($571.1 million)."
"``There is speculation that Theolia may be taken over,'' Tannegui Bujard, a Paris-based analyst at Raymond James, said today by telephone, without identifying any potential buyers."
"Dolores Muniz, a spokeswoman for Aix en Provence-based Theolia, said the company doesn't comment on ``market rumors'' or movements in the share price."
Theolia dropped to its lowest in more than three years on Sept. 12 on concern it may seek to raise cash for expansion.
"A day earlier, BlackRock Investment Management Ltd.'s stake in the French company fell below 5 percent. The shareholder, a unit of BlackRock Inc., the second-biggest U.S. manager of closed-end funds, now has 1.93 million shares in Theolia, market regulator AMF said today in a statement."
Theolia cut its 2008 earnings target this month and forecast lower wind-turbine sales.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
"Last Updated: September 16, 2008 12:23 EDT"
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HBOS of U.K. Extends Decline on Liquidity Concern (Update5)
By Jon Menon
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"Sept. 16 (Bloomberg) -- HBOS Plc, Britain's biggest mortgage lender, lost a fifth of its market value in London trading on concern over its dependence on funding from capital markets."
"HBOS dropped 22 percent to 182 pence, the worst-performer in the pan-European Bloomberg Europe Banks Index. The Edinburgh- based bank has a market value of 9.6 billion pounds ($17 billion) after losing 75 percent this year."
"HBOS continues to gain ``very satisfactory'' access to money market funding, has ``taken a cautious outlook to the securitization market and has taken the appropriate action,'' said spokesman Shane O'Riordain in a telephone interview. ``That is why our objective is to grow deposits faster than assets.''"
"HBOS, which gets almost half its financing from the money markets, fell 18 percent yesterday following the bankruptcy of Lehman Brothers Holdings Inc. The European Central Bank awarded 70 billion euros ($99.8 billion) in a one-day money-market auction today and the Bank of England pumped in 20 billion pounds to try to ease liquidity as demand for short term cash soared."
"Standard & Poor's cut its long- and short-term counterparty credit ratings on HBOS to A+/A-1 from AA-/A-1+, citing ``weaker'' corporate investments, higher funding costs and its provision of ``sizeable'' specialist and high loan-to-value mortgages, compared with its peers. Fitch Ratings cut the bank's long-term issuer-default ratings to ``AA'' from ``AA+.''"
Funding Strength
"HBOS's funding ``strength'' is illustrated by the 10.9 billion pounds of funding it has issued this year, analysts led by London-based James Chappell at Goldman Sachs Group Inc. wrote in a note to investors on Sept. 9. The bank has about 156 billion pounds of debt maturing over the next 12 months, they said."
"``The big concern for them in the short term is confidence,'' said Leigh Goodwin, an analyst at Fox-Pitt Kelton Ltd. in London who has an ``underweight'' rating on the stock. ``If wholesale markets lock HBOS out of funding, they will have to depend more on the central bank,'' he said."
"The Financial Services Authority ``and the Bank of England will monitor the financial system. We do that on a daily basis,'' Chancellor of the Exchequer Alistair Darling told the BBC today. Teresa La Thangue, a spokeswoman at the FSA said the regulator is ``watching the market,'' and declined to comment further. The Bank of England also declined to comment."
`Further Writedowns'
"HBOS has about 6.6 billion pounds of securities backed by so- called Alt-A mortgages, which don't require income verification and are riskier than prime mortgages. The fall of Lehman may force further writedowns of 2 billion pounds on these, which is ``manageable'' for the bank, Simon Adamson, an analyst at debt research firm CreditSights Inc. in London, wrote in a note."
HBOS raised 4 billion pounds in July from investors in a share sale to replenish capital eroded from writedowns and protect against bad loans.
"Credit-default swaps on HBOS rose 51 basis points to a record 356, according to CMA Datavision prices. Contracts on the subordinated debt soared 130 basis points to 680. The swaps are contracts intended to protect bondholders against default. A rise indicates a deterioration in perceived credit quality."
"A basis point on a credit-default swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year."
To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net
"Last Updated: September 16, 2008 13:44 EDT"
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Last Updated:
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"Discounters Aldi, Lidl Gain U.K. Grocery Market Share (Update1) "
By Louisa Nesbitt
"Sept. 16 (Bloomberg) -- German discount retailers Aldi Group and Lidl kept increasing their share of the U.K. grocery market this summer as food inflation accelerated, according to a report from market researcher Taylor Nelson Sofres Plc."
"Aldi's share climbed 0.3 percentage point from a year earlier to 2.9 percent in the 12 weeks ended Sept. 7, while Lidl added 0.1 percentage point to 2.4 percent, London-based TNS said today. Wal-Mart Stores Inc.'s Asda chain also raised its portion of the market by 0.3 percentage point to 17.3 percent, while market leader Tesco Plc's share slipped."
"TNS said prices at grocery stores surged 9 percent from year earlier levels during the 12 weeks, picking up from the 6.8 percent pace on that basis in the 12 weeks to July 13. Inflation has lured more Britons to discounters over Tesco and London- based J Sainsbury Plc, the No. 3 U.K. grocery chain, which are both bolstering their cheaper product ranges. Asda, the second- largest, today said it will cut prices on more than 5,000 goods."
"Shoppers are ``responding to strong low-price messages,'' Ed Garner, director of research at TNS Worldpanel, said in the market-research firm's statement. ``Younger, larger families are responding to the squeeze on their housekeeping by driving discounter turnovers up sharply.''"
"To be sure, food prices are expected to start falling towards the end of the year, TNS said. Asda Chief Executive Officer Andy Bond said in a statement today that ``food price inflation has peaked.''"
"Tesco, based in Cheshunt, England, saw its share of the market fall 0.2 percentage point to 31.5 percent during the 12 weeks, while Sainsbury lost 0.2 percentage point to 15.8 percent, TNS said. William Morrison Supermarkets Plc gained 0.2 percentage point to 11 percent, while Iceland Foods Ltd. added 0.1 percentage point to 1.7 percent."
"Asda's new prices, to be introduced tomorrow, will include 30 pence (53 cents) for a loaf of bread in the Smart Price range and 48 pence for a pack of eight sausages, the company said."
To contact the reporter on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net
"Last Updated: September 16, 2008 12:24 EDT"
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Lehman Cancels Auction of LBO Loans as Prices Plummet (Update2)
By Pierre Paulden and Caroline Hyde
"Sept. 16 (Bloomberg) -- Lehman Brothers Holdings Inc., the securities firm that filed for bankruptcy yesterday, canceled an auction of $852 million of high-yield, high-risk loans, according to investors who considered bidding on the debt."
"Bids for the loans, some of which helped finance leveraged buyouts for First Data Corp. and TXU Corp., were due by 2 p.m. today in New York, said the investors, who declined to be identified because the auction is private."
"The sale was scrapped as Barclays Plc weighs a bid for the bankrupt firm's broker dealer unit. Leveraged loan prices tumbled near record lows in the past week as New York-based Lehman collapsed, stoking concern that other financial companies may fail. The firm has $7.1 billion of high-yield loans and bonds on its books, the bank said Sept. 10."
"``Lehman is probably growing close to a sale of its brokerage business, which prompted the bank to cancel today's auction,'' said Louis Gargour, chief investment officer of LNG Capital, a London-based hedge fund. ``Lehman's leveraged loan book could prove integral to other parts of the business the bank is looking to sell, particularly the brokerage unit.''"
"The price of the average actively traded leveraged loan has fallen from above face value in June 2007 to 86.64 cents on the dollar, compared with a low of 86.3 cents reached in February, according to Standard & Poor's LCD. Prices fell 1.64 cent in the past week."
Loan Losses
"A benchmark credit-default swap index that banks and investors use to hedge against losses on leveraged loans plunged. The Markit LCDX fell 1.4 percentage point to a mid-price of 93.8 of face value as of 12:54 p.m. in New York, according to Goldman Sachs Group Inc. The index falls as credit risk increases."
Lehman spokesman Mark Lane didn't immediately return a call seeking comment.
"Lehman loans that were for sale include those from First Data, which was bought out last year by New York-based Kohlberg Kravis Roberts & Co., and TXU, now Energy Futures Holding Corp., purchased in 2007 by KKR and TPG Inc. of Fort Worth, Texas, the people said."
"Lehman was also selling distressed loans made to Chicago- based Tribune Co., which billionaire investor Sam Zell took private last year, the investors said."
"High-yield, or leveraged, loans are graded below Baa3 by Moody's Investors Service and below BBB- by S&P."
To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net; Caroline Hyde in London chyde3@bloomberg.net
"Last Updated: September 16, 2008 12:45 EDT"
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"Orange Juice Drops as Storm Threats Recede, Commodities Slump "
By Ron Day
"Sept. 16 (Bloomberg) -- Orange juice, the year's biggest loser in the Reuters/Jefferies CRB Index, fell as storm threats to Florida citrus groves subsided and commodities declined."
"Hurricane Ike was among at least six named Atlantic storms this year to miss Florida's groves, the second-most productive in the world. That has helped push futures down 36 percent this year. The CRB Index of 19 raw materials slumped today as financial market turmoil sparked concern that demand may wane."
"``The hurricane season has avoided the South Florida area,'' said Rob Kurzatkowski, a futures analyst at OptionsXpress Holdings Inc. in Chicago. ``It looks like whatever hope we have of sparking a rally has disappeared.''"
"Orange-juice futures for November delivery dropped 3.45 cents, or 3.6 percent, to 92.35 cents a pound at 1:48 p.m. on ICE Futures U.S., the former New York Board of Trade. The price tumbled 15 percent last week."
"Orange juice, which jumped 22 percent between the start of hurricane season on June 1 and July 1 on the prospect of storm damage in Florida, has fallen 30 percent since then. Storms including Fay, Gustav, Hanna, Bertha and Dolly pounded Caribbean islands including Haiti and Cuba, yet mostly skirted Florida."
Brazil is the world's largest orange producer.
The CRB Index has dropped 13 percent this month as the dollar firmed and investors sold commodities to raise cash or buy securities such as U.S. Treasuries. The dollar rose against the yen and euro today on speculation that the Federal Reserve may cut U.S. borrowing costs for the first time since April.
To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.
"Last Updated: September 16, 2008 13:52 EDT"
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"Central European Property Stocks Slump, Led by Orco (Update1) "
By Pawel Kozlowski and Radoslav Tomek
"Sept. 16 (Bloomberg) -- Central European property developers, led by Orco Property Group SA and Immoeast AG, plunged on concern global credit-market turmoil may make it harder for real-estate companies to raise project financing."
"Orco slumped 14 percent in Prague, a record one-day drop, while Immoeast, Austria's largest developer, lost 7.3 percent in Vienna. ECM Real Estate Investments AG, a Czech property developer, also had its biggest-ever decline, losing 32 percent. The stocks closed at record lows."
"The overnight dollar rate soared 333 basis points to 6.44 percent today, its biggest jump, according to the British Bankers' Association. Rates climbed yesterday after Lehman Brothers Holdings Inc. succumbed to mounting credit-market losses and filed for bankruptcy."
"``Banks have radically limited financing of real-estate projects,'' Piotr Zarebski, who helps manage the equivalent of $392 million at BRE Wealth Management SA in Warsaw, said by phone. ``Risk aversion may grow further after what happened to Lehman, as liquidity is on the decline.''"
Orco fell 80.9 koruna to 510.1 on the Prague Stock Exchange. Immoeast sank 0.28 cents to 3.58 euros in Vienna.
ECM Real Estate Investments lost 110.1 koruna to 230 koruna after Mlada Fronta Dnes reported today the Czech developer can't exclude the possibility of another share sale.
Dom Development
"ECM expects to get 4.2 million euros ($6 million) this week from its last share sale, the newspaper reported, citing General Director Milan Janku. Janku said that was part of the company's long-term plan aimed at strengthening its capital, the newspaper reported."
"``The height of the real-estate boom is over,'' said Patrick Vyroubal, an analyst at Atlantik Financial Markets AS, a Prague- based brokerage."
"Dom Development SA and J.W. Construction Holding SA, Poland's biggest homebuilders, sank to record lows in Warsaw trading. Dom tumbled 4.5 percent to 31.8 zloty, falling 83 percent since a record high in April 2007. J.W. Construction declined 3.5 percent to 15.8 zloty, down 78 percent from its initial public offering price last year."
"Warimpex Finanz und Beteiligungs AG, which invests in eastern European property, fell 6.3 percent to 4.35 euros on the Vienna Stock Exchange, extending this year's loss to 34 percent."
To contact the reporter on this story: Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net; Radoslav Tomek in Bratislava at rtomek@bloomberg.net.
"Last Updated: September 16, 2008 11:53 EDT"
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"Goldman Net Drops 70% as Merger Advice, Trading Slow (Update4) "
By Christine Harper
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"Sept. 16 (Bloomberg) -- Goldman Sachs Group Inc., the largest of the remaining independent U.S. securities firms, said third-quarter profit fell a record 70 percent as revenue from advising corporations and trading stocks declined."
"Net income was $845 million, or $1.81 a share, in the three months ended Aug. 29, compared with $2.85 billion, or $6.13, a year earlier. Goldman dropped 3.3 percent in New York as credit- rating downgrades of American International Group Inc. raised concern strains on the financial system are spreading."
"After setting Wall Street profit records in 2006 and 2007, Chief Executive Officer Lloyd Blankfein, 53, is grappling with market convulsions that drove Merrill Lynch & Co. and Bear Stearns Cos. into emergency sales and Lehman Brothers Holdings Inc. into bankruptcy. Goldman shares slumped 12 percent yesterday and its senior notes dropped to a record low on concern no investment bank, even the most profitable, was safe."
"``The business is just not happening and therefore Goldman can't take advantage of what doesn't exist,'' Ladenburg Thalmann & Co. analyst Richard Bove said in a Bloomberg Television interview. ``This is still 50 percent to 60 percent below what the company had been earning a couple years ago. The quarter is really terrible in many respects.''"
Goldman's profit drop was the steepest in its nine years as a public company.
"The shares declined $4.56 to $130.94 in composite trading on the New York Stock Exchange at 1:12 p.m. Morgan Stanley, the second-biggest U.S. securities firm, fell 12 percent. Both companies are based in New York."
Bank Deal
"While Goldman has suffered a fraction of the writedowns on fixed-income assets that New York-based competitors Citigroup Inc. and Merrill have taken, its shares have dropped 40 percent this year as markets tumbled and fees from securities underwriting and providing merger advice dried up."
"Analysts including David Trone at Fox-Pitt Kelton Cochran Caronia Waller have said the credit crisis shows independent securities firms such as Goldman should consider merging with a bank, to provide a more stable source of funding."
Chief Financial Officer David Viniar said today the company isn't interested in doing a deal with a bank. He also said he'd never rule out the possibility entirely.
"``Right now we think our business model works because our business works,'' Viniar, 53, said in a telephone interview. ``Our performance speaks for itself and will continue to speak for itself.''"
Tax Advantage
Analysts surveyed by Bloomberg estimated earnings of $1.71 a share. Goldman has beaten analysts' estimates for 13 straight quarters.
"The firm would have fallen short of estimates in the third quarter if it hadn't been for a lower-than-usual tax rate, according to Jeff Harte, an analyst at Sandler O'Neill & Partners in Chicago."
"``The effective tax rate came in at 12 percent, versus our 29 percent expectation,'' Harte in a note today. ``If the tax rate had come in at our 29 percent estimate, EPS would have been reduced by $0.37 to $1.44.''"
"Return on equity, a measure of how effectively the firm reinvests earnings, fell to 7.7 percent from 20.4 percent in the second quarter."
"Revenue dropped 51 percent from a year ago to $6.04 billion. Fixed-income, currencies and commodities, the company's biggest source of revenue, generated $1.6 billion, down 67 percent. The firm took $275 million in writedowns on leveraged loans and related hedges, $500 million on residential mortgages and securities and $325 million on commercial mortgages and securities."
`Robust' Liquidity
"Goldman held $1.7 billion of subprime mortgage assets, $3.6 billion of so-called Alt-A mortgages, and a bit more than $7 billion of prime mortgages at the end of the quarter, Viniar said in a conference call with analysts. The firm held the Alt-A mortgages at about 50 percent of face value at the end of the quarter, he said."
"The firm cut its holdings of commercial real estate loans to $12.4 billion at the end of the quarter from $15.2 billion three months earlier, mostly through sales, he said."
Viniar said on a conference call with reporters that the firm had reduced its leveraged loan positions to about $8 billion. He said access to market liquidity remains ``robust.''
"Equities trading revenue fell 50 percent to $1.56 billion and revenue from investment banking, which includes providing merger advice and underwriting stock and bond sales, dropped 40 percent to $1.29 billion."
ICBC Gain
"The equities division was affected by a drop in stock prices, less trading by clients and ``very weak results'' from the firm's proprietary traders, Goldman said. Derivative revenue from equities was also lower."
"The principal investments group, which includes the company's stake in Industrial & Commercial Bank of China Ltd., produced a $453 million loss, compared with a gain of $211 million a year earlier. ICBC dropped 17 percent in Hong Kong trading during Goldman's fiscal third quarter. Goldman owns about 5 percent of the company, although about two-thirds of its holding is on behalf of clients."
"Goldman recorded a $106 million gain on the investment, as a quarterly accounting adjustment to the value of the stake on the firm's books outweighed ICBC's stock decline."
"Asset-management revenue fell 6 percent from a year ago to $1.13 billion, partly because the third quarter in 2008 had one fewer week than in 2007, the company said. Assets under management declined $32 billion, of which $25 billion was because the market fell and $7 billion was because clients pulled their money out of Goldman's funds."
"Tier 1, Level 3"
"Goldman's Tier 1 ratio was 11.6 percent, up from 10.8 percent in the second quarter. So-called Level 3 assets, including those to which the firm says it has no economic exposure, totaled $68 billion, or 6 percent of total assets. Level 3 assets are the ones that are hardest to value."
"Lehman last week reported the biggest loss in its 158-year history, and its share price plunged 74 percent as management led by CEO Richard Fuld raced to find a buyer. Negotiations over the weekend at the New York Federal Reserve's downtown Manhattan headquarters failed to assuage the concerns of potential buyers and the company filed for bankruptcy protection yesterday."
"Viniar said the market has mostly factored in the likelihood that Lehman will sell many of its real estate and loan holdings, so the bankruptcy shouldn't weigh on prices. A steep drop in asset values yesterday was more a ``shock reaction'' than an accurate reflection of the prices the investments will fetch, he said."
"Lehman, AIG"
"Lehman's predicament made it clear to Merrill CEO John Thain that his firm's survival could be in jeopardy if he didn't find a buyer soon. Merrill, expected to post its fifth-straight quarterly deficit next month, agreed to be acquired by Charlotte, North Carolina-based Bank of America Corp. in an all- stock deal valued at about $50 billion."
"Merrill considered selling a minority stake to Goldman before agreeing to the Bank of America deal, the Wall Street Journal reported today, citing people familiar with the matter."
"AIG, the biggest U.S. insurer by assets, had its ratings cut yesterday, raising speculation the company needs to find more cash to post collateral. The insurer is trying to arrange loans from Goldman and JPMorgan Chase & Co., according to two people familiar with the situation."
"``Our exposure to AIG is not material,'' Lucas van Praag, a Goldman spokesman, said today in an interview. ``We have always managed our exposure to single names extremely conservatively. That was the case with Bear and Lehman.''"
"Viniar, the CFO, declined to comment on possible financial transactions between Goldman and AIG."
`Adequate Caution'
"Morgan Stanley is scheduled to report third-quarter earnings tomorrow. The firm may post a 44 percent drop in net income to $866 million, according to the average estimate of 10 analysts surveyed by Bloomberg."
"Goldman and Morgan Stanley need to show investors that they've learned from the errors made by Merrill, Lehman and Bear Stearns by selling off some of their holdings of complex, hard- to-trade assets."
"``I would hope they have taken the last few months as an adequate caution to clarify their positions and reduce some of their exposures,'' said John Gutfreund, president of Gutfreund & Co. and the former CEO of Salomon Brothers, in a Bloomberg Television interview yesterday."
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.
"Last Updated: September 16, 2008 13:19 EDT"
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Chambers `Never' More Comfortable With Cisco Outlook (Update3)
By Vivek Shankar
"Sept. 16 (Bloomberg) -- Cisco Systems Inc. Chief Executive Officer John Chambers said he's ``never'' been more comfortable with his long-term forecast, reassuring investors that network- equipment demand will hold up amid an economic slowdown."
"Cisco will meet its target of 12 percent to 17 percent annual revenue growth over the next few years, Chambers told analysts today in San Jose, California. Cisco, which missed that range in the past two quarters, has predicted a sales increase of 8 percent this period and 8.5 percent in the next."
"The comments contrast with a prediction today by Dell Inc., the second-largest personal-computer maker, which expects a ``further softening'' in demand. Cisco, the biggest maker of networking devices, will make more money from its TelePresence videoconferencing system, as well as from phone and cable companies expanding networks to handle video, Chambers said."
"``We've been conservative over the last few quarters,'' said Chambers, 59. ``When we make very aggressive, bold statements -- if you look back three to five years later -- we've almost always achieved those.''"
"Businesses will respond to Cisco's TelePresence videoconferencing system, which costs as much as $299,000, in the same way that consumers reacted to Apple Inc.'s iPhone, boosting sales, Chambers said. TelePresence sales may reach an annual rate of $1 billion by the second half of 2009, said Senior Vice President Marthin De Beer."
"Cisco, based in San Jose, rose 54 cents to $22.92 at 3:28 p.m. New York time in Nasdaq Stock Market trading. The stock had declined 17 percent this year before today."
Beating Estimates
"In August, Cisco reported fourth-quarter profit that beat analysts' estimates by a penny and said sales this quarter and next would be in line with projections. Revenue surpassed $10 billion for the first time."
"Cisco may continue to see economic challenges for the next few quarters, Chambers said at the time. Last November, he said a ``dramatic'' drop in demand from U.S. financial and auto companies had curbed sales growth."
"By 2012, online videoconferencing traffic alone will be five times the amount of Internet data in 2000, Chambers said."
"Half of the network capacity used by Cisco's employees comes from use of TelePresence videoconferencing systems, said De Beer, who heads the emerging technologies group. Cisco has 200 TelePresence customers and has orders for 1,000 more systems, he said."
Router Orders
"The company is now selling 50 of its CRS-1 routers a week, Chambers said. At its introduction in 2004, some analysts had predicted that the product, which allows telephone companies to provide video applications, wouldn't get more than 50 orders in total, Chambers said. The CRS-1 is Cisco's most expensive router."
"Investors consider Cisco to be a barometer for the technology industry because it dominates the market for routers and switches, which direct and control the flow of data over networks."
"The Standard & Poor's 500 Information Technology Index, which consists of 72 technology stocks, fell 3.6 percent yesterday after Lehman Brothers Holdings Inc. filed for bankruptcy and Merrill Lynch & Co. agreed to a merger with Bank of America Corp. The S&P technology index reached a 52-week low of 317.47 today."
"The economy will slow to a 1.2 percent annual growth rate this quarter, or less than half the prior period's pace, according to a Bloomberg survey."
"Almost half of big corporations globally have curbed technology budgets for the next year to help cope with the economic slump, Forrester Research Inc. said last week. About 43 percent of businesses have reduced spending plans, with more cuts taking place in the U.S. than in Europe, the Cambridge, Massachusetts-based researcher said."
To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net
"Last Updated: September 16, 2008 15:38 EDT"
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Brazilian Real Reverses Losses on Speculation of AIG Bailout
By Adriana Brasileiro
"Sept. 16 (Bloomberg) -- Brazil's real reversed losses on speculation the U.S. Federal Reserve will help American International Group Inc. avert collapse, bolstering confidence in financial markets."
"The real was little changed at 1.8144 per dollar at 3:40 p.m. New York time from 1.8149 yesterday. Brazil's currency fell as much as 2.2 percent to 1.8556 per dollar, the weakest since November 2007."
"Brazil's currency is the worst performer among the 16 most- traded currencies against the dollar this month, declining 10.23 percent."
"The yield on Brazil's zero-coupon bonds due in January 2010 was little changed at 14.72 percent, according to Banco Votorantim. The yield on the overnight futures contract for January delivery was unchanged at 14.01 percent."
To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net
"Last Updated: September 16, 2008 15:46 EDT"
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OPEC Cuts 2009 Oil Demand Forecast on Slowing Economy (Update1)
By Alexander Kwiatkowski
"Sept. 16 (Bloomberg) -- The Organization of Petroleum Exporting Countries, the supplier of more than 40 percent of the world's oil, lowered its forecast for 2009 oil demand as the global economic slowdown cuts fuel consumption."
"The 13-member group reduced its forecast for average oil consumption next year to 87.66 million barrels a day, compared with an estimate last month of 87.80 million barrels, according to a monthly oil market report today. OPEC, based in Vienna, also cut its forecast for demand this year by 120,000 barrels a day."
OPEC told its members on Sept. 10 to strictly comply with production quotas after oil prices fell about 30 percent from a record. Prices have continued to tumble and New York crude is now trading 38 percent lower than its July 11 peak of $147.27.
"``The economic slowdown is now spreading beyond the U.S. to Europe and Japan with contagion risks to other regions,'' the report said. ``The weakening economic situation has been reflected in a slowdown in world oil demand growth.''"
"Last week, the International Energy Agency, an adviser to 27 nations, cut its forecast for global oil demand in 2008 and 2009 as high crude prices and the economic slowdown reduce U.S. consumption."
"OPEC left its demand growth forecast for 2009 little changed at 870,000 barrels a day, or 1 percent, with higher consumption from developing countries expected to account for all of the increase, it said."
Call on OPEC
"The call on OPEC's crude next year will average 31.33 million barrels a day, unchanged from its previous estimate as non-OPEC supply rises in line with demand. In 2008, demand for OPEC crude is forecast at 32 million barrels a day, 50,000 barrels lower than last month."
"At a meeting in Vienna last week, the group urged its members to trim production back to target levels in response to falling demand and tumbling prices. The group has recently been pumping about 500,000 barrels a day more than quota limits, according to its secretary-general, Abdalla El-Badri."
"Total OPEC crude production averaged 32.50 million barrels a day in August, a drop of 21,300 barrels a day from July, the report said, citing secondary source estimates that include analysts and news agencies."
"Crude production by the so-called OPEC 11, which excludes Indonesia and Iraq, averaged 29.265 million barrels a day last month. Those 11 countries have an official quota of 28.8 million barrels."
Winter Supply `Adequate'
"Taking into account its pledge to stick to quotas, oil supply from its members will be ``more than adequate to meet demand ahead of the winter season,'' OPEC said in today's report."
"Most of OPEC's extra production has come from Saudi Arabia, the world's largest oil producer, which pledged to raise output by about 500,000 barrels a day in June and July, to calm markets. Saudi output fell by 36,200 barrels a day in August to 9.49 million barrels a day, according to the report."
"OPEC forecast supply from outside the 13-member group to rise by 880,000 barrels a day in 2009 to 50.81 million barrels a day. Last month it forecast 2009 non-OPEC supply to be 50.95 million barrels a day."
"OPEC's 13 members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Indonesia will leave the group on Jan. 1."
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
"Last Updated: September 16, 2008 08:08 EDT"
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"French Stocks Fall, Led by BNP, Renault; France Telecom Gains "
By Sarah Thompson
"Sept. 16 (Bloomberg) -- France's CAC 40 Index dropped 81.57, or 2 percent, to 4,087.4 in Paris. The SBF 120 Index lost 1.8 percent."
The following were among the most active stocks. Symbols are in parentheses.
"BNP Paribas SA (BNP FP) fell 1.8 euros, or 3.1 percent, to 58.09 euros. French banks may see ``limited'' repercussions from the bankruptcy of Lehman Brothers Holdings Inc., the fourth- largest U.S. securities firm, the French finance ministry said. BNP Paribas, France's largest bank by market value, said it has ``manageable'' exposure to Lehman"
"Societe Generale SA, the country's No. 2 bank dropped 2.77 euros, or 4.7 percent, to 55.97 euros. Natixis SA, which is seeking 3.7 billion euros ($5.3 billion) in new capital after subprime-related writedowns, tumbled 48 cents, or 16 percent, to 2.50 euros, its lowest since 2003."
"Eramet SA (ERA FP) lost 14.17 euros, or 4.6 percent, to 293.19 euros. Copper for delivery in three months slumped as much as 3 percent to $6,720 a metric ton in London. Platinum, gold, nickel, lead, zinc and aluminum prices also fell."
"Esker SA (ESK FP) slumped 55 cents, or 13 percent, to 3.79 euros. The French supplier of fax software to Whirlpool Corp. and Adecco SA said its first-half loss widened to 1.5 million euros from 135,000 euros a year earlier."
"France Telecom SA (FTE FP) added 81 cents, or 4.2 percent, to 20.03 euros. Europe's third-largest phone company will focus on English-speaking African countries for future acquisitions, the Financial Times reported, citing an interview with Chief Executive Officer Didier Lombard."
"Lafarge SA (LG FP) added 83 cents, or 1 percent, to 81.43 euros. Groupe Bruxelles Lambert SA, the Brussels-based investment firm jointly controlled by billionaires Albert Frere and Paul Desmarais, bought 57.5 million euros ($81.6 million) of Lafarge shares, raising its stake in the world's largest cement producer to more than 20 percent."
"Renault SA (RNO FP) lost 1.65 euros, or 3.2 percent, to 49.55 euros. PSA Peugeot Citroen (UG FP) slipped 88 cents, or 2.8 percent, to 30.19 euros."
"European car sales tumbled 16 percent last month, the fourth straight decline, as higher fuel prices and slowing economies hurt demand for models from General Motors Corp. and Toyota Motor Corp."
"Veolia Environnement SA (VIE FP) decreased 1.27 euros, or 4 percent, to 30.33 euros. The French water and public transport company was downgraded to ``hold'' from ``buy'' at Royal Bank of Scotland Group Plc, which said it had cut its estimates to below consensus."
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
"Last Updated: September 16, 2008 12:39 EDT"
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Brazilian Stocks Extend Decline After Fed Keeps Rates Steady
By Alexander Ragir
Sept. 16 (Bloomberg) -- Brazilian stocks extended their declines as the Federal Reserve's unexpected decision to leave interest rates unchanged added to concerns about slowing economic growth.
"The Bovespa index fell 1,227.52, or 2.5 percent, to 47,188.81 at 2:20 p.m. New York time. The BM&FBOVESPA MidLarge Cap index dropped 2.2 percent, while the BM&FBOVESPA Small Cap index retreated 5.1 percent."
"The Fed left its main interest rate at 2 percent, rebuffing calls by some investors for a cut after Lehman Brothers Holdings Inc.'s bankruptcy shook markets worldwide."
Stocks declined earlier as credit downgrades at global insurer American International Group Inc. and a slump in commodity prices pulled down banks and steelmakers.
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;
"Last Updated: September 16, 2008 14:31 EDT"
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"European Stocks Tumble on AIG Debt Rating Cuts; UBS, HBOS Drop "
By Adria Cimino
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"Sept. 16 (Bloomberg) -- European stocks fell for a second day, sending the Dow Jones Stoxx 600 Index to the lowest in three years, after the downgrade of American International Group Inc.'s credit rating increased turmoil in global debt markets."
"UBS AG, which reported more than $43 billion of subprime- related losses and writedowns, fell 17 percent after the cost of borrowing in dollars overnight more than doubled as banks hoarded cash. HBOS Plc, Britain's biggest mortgage lender, lost 22 percent. Xstrata Plc, the world's fourth-largest copper producer, dropped 7.4 percent as commodity prices retreated on speculation that the seizure in financial markets will hurt the global economy."
"``We're at the heart of the storm right now,'' said Roland Lescure, who manages the equivalent of $128 billion as chief investment officer of Groupama Asset Management in Paris. ``The downgrade of credit ratings is bad news.''"
"The Stoxx 600 sank 2.6 percent to 263.54, the lowest since May 19, 2005, bringing this year's decline to 28 percent. More than $16 trillion has been erased from global equities in 2008 as the biggest surge in mortgage defaults in at least three decades sparked $514 billion in credit losses and writedowns."
"The cost of borrowing in dollars overnight soared 3.33 percentage points to 6.44 percent, its biggest jump and highest level since 2001, the British Bankers' Association said."
Risk Appetite
"``Banks have adjusted their risk premiums,'' said Peter Jarvis, a London-based director of European equities at F&C Asset Management, which has about $200 billion. ``Until we see clarity in the financial systems and trust between banks, investors' risk appetite for asset classes such as equities is not going to improve.''"
"Traders increased bets the Federal Reserve will cut borrowing costs today. The odds of a quarter point reduction in rates rose to 90 percent, up from 68 percent yesterday."
"National benchmark indexes fell in all of the 18 western European markets except Spain and Portugal. The U.K.'s FTSE 100 sank 3.4 percent. Germany's DAX lost 1.6 percent, while France's CAC 40 declined 2 percent."
"The VStoxx index, which measures the cost of using options as insurance against losses on the Dow Jones Euro Stoxx 50 Index, surged 11 percent to 36.19, the highest since March."
"The Stoxx 600 Banks Index dropped to a two-month low as concern about defaults rose, according to traders of credit- default swaps. In Europe, the Markit iTraxx Financial index of 25 banks and insurers rose 19 basis points to 146.5, the highest in six months, according to JPMorgan prices."
AIG
"AIG, which sold Wall Street's largest firms and other investors protection on $441 billion of fixed-income assets, had its credit ratings downgraded by S&P and Moody's, threatening efforts to raise emergency funds to keep the company afloat. The biggest U.S. insurer fell 61 percent yesterday after failing to present a plan to raise capital and stave off credit downgrades, helping push the Standard & Poor's 500 Index to the steepest drop since the September 2001 terrorist attacks."
"Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by S&P. Lehman Brothers Holdings Inc.'s bankruptcy yesterday fueled speculation credit- related losses will worsen."
"UBS, the largest Swiss bank, plunged 17 percent to 16.64 francs. Natixis SA, France's fourth-biggest bank, slumped 16 percent to 2.50 euros."
"HBOS, the U.K.'s biggest mortgage lender, tumbled 22 percent to 182 pence."
"Barclays, Xstrata"
Barclays Plc retreated 2.5 percent to 308 pence. The U.K.'s third-largest bank said today it's in talks to buy assets from bankrupt Lehman two days after abandoning plans to acquire the entire securities firm.
"Xstrata slid 7.4 percent to 2,105 pence. Anglo American Plc, the world's fourth-biggest diversified mining company, fell 6.3 percent to 2,258 pence."
"BG Group Plc, the U.K.'s third-biggest oil and natural-gas producer, slumped 6.1 percent to 1,029 pence. Total SA, Europe's largest oil refiner, lost 2.7 percent to 42.23 euros."
"Copper dropped to a seven-month low in London. Lead, nickel, tin and zinc also fell."
"Crude oil tumbled, dipping below $91 a barrel and taking its two-day decline to more than $10 on concern that turmoil on Wall Street may weaken the global economy and reduce demand. The contract for October delivery fell as much as 5.4 percent to $90.55 on the New York Mercantile Exchange."
"Technology stocks dropped after Dell Inc., the second- biggest personal-computer maker, predicted ``further softening'' in demand this quarter."
"STMicroelectronics NV, Europe's largest chipmaker, lost 1.7 percent to 8.57 euros. Infineon Technologies AG, the industry's second biggest, retreated 5.1 percent to 5.63 euros."
"Customers showed ``continued conservatism'' in technology spending in the U.S. last quarter, which has spread to Western Europe and some Asian countries, Dell said, reiterating comments made last month."
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
"Last Updated: September 16, 2008 12:15 EDT"
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Canadian Dollar Rises After U.S. Federal Reserve Holds Rate
By Daniel Kruger
"Sept. 16 (Bloomberg) -- The Canadian dollar rose, erasing an earlier decline, after the U.S. Federal Reserve left its target lending rate unchanged at 2 percent and said economic growth appears to have slowed significantly in the world's largest economy."
"Canada's dollar, dubbed the loonie because of the aquatic bird on the one-dollar coin, strengthened 0.1 percent to C$1.0691 per U.S. dollar at 3:10 p.m. in Toronto, from C$1.0706 yesterday. One Canadian dollar buys 93.53 U.S. cents."
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
"Last Updated: September 16, 2008 15:12 EDT"
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Emerging-Market Stocks Tumble as Credit Risk Surges (Update2)
By Fabio Alves and Denis Maternovsky
Enlarge Image/Details
"Sept. 16 (Bloomberg) -- Emerging-market stocks plunged the most in 11 years, currencies fell and bonds slumped as mounting credit losses, higher borrowing costs and tumbling commodities prompted investors to sell riskier assets."
"Every emerging stock market in MSCI indexes except Indonesia retreated. Russia's Micex Index fell the most since Bloomberg began tracking the measure in May 2001, led by financial companies OAO Sberbank and OAO VTB Group, before trading was suspended. Argentina's five-year credit-default swaps rose to the highest since at least June 2005. Brazil's real sank to the lowest since November. South Korea's won dropped 4.4 percent."
"The MSCI Emerging Markets Index fell 5.4 percent to 780.79 at 12:31 p.m. New York time after earlier plunging 6.3 percent, the biggest drop since October 1997. The measure lost 34 percent in 2008 before today, compared with a 19 percent decline for the Standard & Poor's 500 Index. A gauge of energy stocks slipped 6.9 percent to 671.61, its steepest loss since January."
"Banks' borrowing costs in dollars more than doubled to the highest since 2001 after credit downgrades of American International Group Inc. and the collapse of Lehman Brothers Holdings Inc. led banks to hoard cash. Crude oil, copper, silver and sugar tumbled on concern losses in the financial system will further curb global economic growth and cut demand for raw materials."
`Very Poor' Sentiment
"``Sentiment is very poor,'' said Nick Field, who helps oversee $27 billion in emerging-market equities at London-based Schroders Plc. ``Emerging stocks are suffering because of the funding problems in the developing market banking system and also because people have to cover losses elsewhere and they're selling whatever stocks they can.''"
"Russia's Micex index plummeted 17 percent to 881.17, dragged down by a 28 percent plunge in Sberbank and a 31 percent decrease in VTB Group. Korea's Kospi index fell 6.1 percent, while Czech's PX index slumped 5.6 percent."
"Energy shares, including Russian oil producers OAO Gazprom and OAO Rosneft, declined after crude tumbled more than $3 a barrel. Gazprom, the world's biggest natural-gas producer, lost 18 percent to 158.41 rubbles. Rosneft, Russia's largest oil company, sank 22 percent to 132.20 rubbles."
"In Latin America, Brazil's Bovespa dropped 1.9 percent to the lowest since April 2007, while Chile's Ipsa fell 1.5 percent. The MSCI Latin America index slid to a year-low, dropping 1.9 percent."
"Cosan SA Industria & Comercio, the world's biggest sugar- cane processor, lost 6.6 percent to 17.05 reais as sugar dropped 1.9 percent in New York trading."
Yield Gap
"The extra yield investors demand to own emerging-market dollar bonds instead of U.S. Treasuries swelled 30 basis points to 4.1 percentage points, the widest spread since April 2005, according to JPMorgan Chase & Co. Ecuador's bonds were among the biggest decliners, with the country's yield spread soaring 62 basis points to 10.36 percentage points, according to JPMorgan."
"The cost of insuring bonds in emerging markets surged. Argentina's five-year credit-default swaps rose above 1,000 basis points as concern that New York-based AIG may collapse eroded demand for all but the safest investments."
"``Right now the market has taken on a life of its own, and there is no telling at what point this knife stops falling,'' said Ronald Smith, chief strategist at Alfa Bank in Moscow. ``The bottom may not be found until some time in October, and the rally may not start until December or even early next year.''"
To contact the reporters for this story: Fabio Alves in New York at Falves3@bloomberg.net; Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net
"Last Updated: September 16, 2008 13:03 EDT"
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"Italy Stocks Update: Eni, Saipem, Fondiaria, Intesa Sanpaolo "
By Armorel Kenna and Marco Bertacche
"Sept. 16 (Bloomberg) -- Italy's S&P/MIB Index fell for a second day, losing 744, or 2.7 percent, to 26,589, a four-year low. Futures expiring in September dropped 767, or 2.8 percent, to 26,660."
The following were among the most active stocks on the Italian market today. Share symbols are in parentheses.
"Italian energy-related stocks fell as crude oil tumbled below $92 a barrel to a seven-month low on concern that turmoil, after the downgrade of American International Group Inc.'s credit rating, may weaken the global economy and reduce demand for fuels and raw materials. Bank and insurance company stocks also fell."
"Eni SpA (ENI IM), Italy's largest energy company, fell for a second day, declining 92.3 cents, or 4.6 percent, to 19.04 euros. Saipem SpA (SPM IM), Europe's biggest oil-field services contractor by market value, retreated 99 cents, or 4.4 percent, to 21.58 euros."
"Banca Popolare di Milano Scrl, an Italian regional lender that's been looking for a partner for more than a year, fell for a second day, losing 19 cents, or 3 percent, to 6.09 euros. The bank said its risk related to Lehman Brothers Holdings Inc. is less than 10 million euros ($14.3 million)."
"Fondiaria-Sai SpA (FSA IM), Italy's second-largest insurer, retreated 69.4 cents, or 3.9 percent, to 17.23 euros."
"Intesa Sanpaolo SpA (ISP IM), Italy's second-biggest bank, fell 17.9 cents, or 4.7 percent, to 3.61 euros. UniCredit SpA (UCG IM), the country's biggest bank, dropped 16.1 cents, or 4.4 percent, to 3.47 euros."
"Fund-management companies tumbled, after the downgrade of American International Group Inc.'s credit rating increased turmoil in global equity markets."
"Mediolanum SpA (MED IM), the Italian financial-service company partly owned by Prime Minister Silvio Berlusconi, lost 21.2 cents, or 6.6 percent, to 3.03 euros. Azimut Holding SpA (AZM IM), the country's largest independent Italian fund manager, declined 24.9 cents, or 4.3 percent, to 5.49 euros."
To contact the reporters on this story: Armorel Kenna in Milan at akenna@bloomberg.net; Marco Bertacche in Milan at mbertacche@bloomberg.net.
"Last Updated: September 16, 2008 12:01 EDT"
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"Swiss Franc Rises; Stocks, Money Markets Spur Aversion to Risk "
By Lukanyo Mnyanda
Sept. 16 (Bloomberg) -- The Swiss franc rose to a five-month high against the euro and gained versus the dollar as surging money-market rates and the credit downgrade of American International Group Inc. stoked demand for the safest assets.
"The franc climbed to the highest level against the euro since mid-April as a plunge in equities worldwide cut demand for so- called carry trades funded in the Swiss currency. The Japanese yen, also a source of funds for such transactions, increased versus the euro and the dollar. European government bonds and U.S. Treasuries advanced as traders turned to the relative safety of government assets."
"``It's 100 percent about risk aversion,'' said Niels Christensen, a currency strategist in Copenhagen at Nordea Bank AB, the biggest Scandinavian bank by market value. ``You'd need to be very brave to call off the meltdown in stock markets. It all looks very nasty at the moment.''"
"The Swiss currency rose to 1.5752 per euro, the highest level since April 14, and traded at 1.5836 as of 4:19 p.m. in Zurich, from 1.5885 yesterday. The currency may test 1.57 per euro overnight, Christensen said. Against the dollar, the franc advanced to 1.1148, from 1.1159."
"Switzerland's currency stayed higher as the British Bankers' Association said the cost of borrowing in dollars overnight more than doubled to 6.44 percent, its biggest jump in at least seven years. The London interbank offered rate, or Libor, increased 3.33 percentage points from yesterday, the BBA said today."
"The so-called TED spread, the difference between what the U.S. government and banks pay to borrow in dollars for three months, was at 198 basis points, from 201 basis points yesterday, the highest since March 21."
Equities Slide
"AIG sank as much as 74 percent in early New York trading after the insurer's credit ratings were cut, threatening efforts to raise funds to keep the company afloat and roiling global financial markets. The insurance company has one day to reach an agreement to raise $75 billion to $80 billion, New York Governor David Paterson told CNBC today."
"The Swiss Market Index of equities dropped as much as 4 percent, adding to its 3.8 percent slide yesterday. The Dow Jones Stoxx 600 Index of European shares slipped 2.7 percent, pushing its decline the past two days to 6 percent. The MSCI World Index, a global benchmark, retreated 1.8 percent."
"Declining financial-market confidence encouraged investors to seek safer alternatives to carry trades, where they borrow in a currency at a low interest rate and convert the proceeds into one they can lend out for a higher return. They take the risk currency fluctuations will erode their profits."
Yen Gains
The dollar and euro fell a second day against the yen as traders speculated the Federal Reserve may cut interest rates. Futures on the Chicago Board of Trade showed a 100 percent chance the Fed will lower its 2 percent target rate for overnight lending between banks by at least a quarter-percentage point today. The odds on a 25 basis-point decrease were 2 percent a week ago.
"``We're seeing a continuing unwinding of carry trades,'' David Woo, London-based head of foreign-exchange strategy at Barclays Capital, said in a Bloomberg Television interview."
"Switzerland's benchmark rate of 2.75 percent is the industrialized world's third-lowest, and compares with 0.5 percent in Japan and 4.25 percent for the 15 nations using the euro."
"Swiss government bonds climbed, with the yield on the 3 percent note due January 2018 falling 7 basis points to 2.70 percent. A basis point is 0.01 percentage point. Yields move inversely to bond prices."
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
"Last Updated: September 16, 2008 10:48 EDT"
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Latin American Currencies: Chilean Peso Plunges to 19-Month Low
By Andrea Jaramillo and Drew Benson
Sept. 16 (Bloomberg) -- Chile's peso plunged to its weakest since February 2007 as credit markets seized up amid concern American International Group Inc. will collapse a day after Lehman Brothers Holdings Inc. failed.
"A slide in commodity prices including oil and copper, sparked by concern the global economic slowdown will deepen, added to losses in currencies across Latin America. Copper is Chile's biggest export while oil is the biggest source of dollar revenue for Venezuela, Ecuador and Colombia."
"``Panic is on the rise,'' said Alfredo Coutino, a Latin America economist at Moody's Economy.com in West Chester, Pennsylvania. ``Amid the uncertainty, investors prefer to abandon riskier assets.''"
"Chile's peso dropped 1.7 percent to 541.82 per dollar at 3:29 p.m. in New York from 541.82 yesterday. Earlier it touched 546.25, its lowest since Feb. 12, 2007."
"AIG, the biggest U.S. insurer by assets, had its credit rating cut yesterday, jeopardizing its efforts to raise capital amid a credit-market slump. The news comes a day after Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, filed for bankruptcy."
"The Federal Reserve today left its target rate for overnight lending between banks at 2 percent, rebuffing calls by some investors for a rate cut to shore up financial markets."
Copper futures for December delivery fell as much as 3.7 percent to $3.02 a pound on the Comex division of the New York Mercantile Exchange. That's the lowest on a most-active contract since Jan. 22.
Yields Soar
Crude oil for October delivery fell as much as 5.4 percent to $90.51 on the New York Mercantile Exchange today. It's down 39 percent from a record high of $147.27 a barrel on July 11. The UBS Bloomberg CMCI index of 26 raw materials sank 2.8 percent today after dropping 2.5 percent yesterday. The index is down 25 percent from a record reached on July 2.
"Yields on Latin American bonds soared. The yield for a basket of five-year peso bonds in inflation-linked currency units, called unidades de fomento, rose 11 basis points, or 0.11 percentage point, to 3.37 percent, according to Bloomberg composite prices."
"Tumbling oil prices pushed Venezuela's bolivar 5 percent lower to 5.05 per dollar in black market trading today from 4.8 yesterday, traders said. The bolivar has plunged 32 percent from 3.41 two months ago. Oil accounts for about 90 percent of Venezuela's exports."
`Lot of Nervousness'
"``Oil is falling, and secondly, with the problems with the U.S. ambassador, there's a lot of nervousness in the market,'' said Nelson Corrie, a trader at Interacciones Mercado de Capitales in Caracas."
Venezuelan President Hugo Chavez last week ordered the American ambassador to leave and threatened to halt oil exports to the U.S. as a diplomatic row between the two countries deepened.
Venezuela pegs the bolivar at an official exchange rate of 2.15 per dollar under restrictions imposed in 2003. Venezuelans turn to the black market when they can't get government approval to buy dollars at the official rate.
"Argentine debt was among the biggest decliners in the region today, as the nation's five-year credit-default swaps soared above 1,000 basis points."
"The cost of protecting the country's debt against default jumped 62 basis points, or 0.62 percentage point, to 10.04 percentage points per year at 3:19 p.m. in New York, according to Bloomberg data. That means it costs $1,004,000 per year to protect $10 million of Argentine debt."
"Argentina, Colombia"
"The yield on the Argentina's 5.83 percent inflation-linked peso bonds due in December 2033 rose 27 basis points to 11.47 percent, according to Citigroup Inc.'s local unit."
"Argentina's peso fell 0.3 percent to 3.0945 per dollar, from 3.0860 yesterday. The central bank sold about $15 million to bolster the peso, estimated Gustavo Quintana, a currency trader with Lopez Leon Brokers in Buenos Aires. A spokesman for the central bank declined to comment."
"Colombia's peso slid 1.7 percent to 2,104 per dollar from 2,068 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. It earlier touched a year-low of 2,126."
"The yield on Colombia's benchmark 11 percent bonds due in July 2020 rose 8 basis points today to 11.84 percent, according to Colombia's stock exchange."
"Peru's sol dropped 0.02 percent to 2.9742 per dollar from 2.9735 yesterday. Banco Central de Reserva del Peru stepped into the currency market, selling $259 million to stem the sol's slide."
"The yield on Peru's 8.6 percent sol-denominated bond due in August 2017 rose 10 basis points to 8.13 percent, according to Citigroup Inc.'s local unit."
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.netDrew Benson in Buenos Aires at abenson9@bloomberg.net
"Last Updated: September 16, 2008 15:30 EDT"
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Brazil's Retail Sales Growth Accelerated in July (Update3)
By Joshua Goodman and Andre Soliani
"Sept. 16 (Bloomberg) -- Brazil's retail sales accelerated in July, buoying expectations that sustained domestic demand will allow Latin America's largest economy to weather slower global growth."
"Retail sales rose 11 percent in July, up from a 8.2 percent gain in June, the slowest pace in 14 months, the national statistics agency said. The gain was more than the 10.7 percent median forecast in a Bloomberg survey of 21 economists."
Four central bank interest rate increases since April have failed to rein in Brazilian domestic demand that has helped push annual inflation up above the mid-point of the central bank's target range. The prospect of sustained consumer spending against the backdrop of slower growth overseas suggests that the central bank has room to push borrowing costs higher by year-end.
"``Today's retail report confirms that demand is strong,'' said Sergio Goldman, head of Brazilian research for Bulltick Capital Markets in Sao Paulo."
"The central bank last week raised rates to 13.75 percent from 13 percent, in a bid to cool demand and slow inflation. Policy makers are expected to raise the so-called Selic rate to 14.75 percent by year-end, according to a Sept 12 central bank survey of leading economists. The bank targets annual inflation of 4.5 percent plus or minus 2 percentage points."
Retail sales have risen 10 percent or more in five of the first seven months of 2008.
`Fundamentals'
"As for much of the year, sales growth in July was led by home appliances, up 19.6 percent from a year ago, and computer and office equipment, which expanded by 20.6 percent."
"Slower global economic growth and credit market turmoil in the U.S. will weigh on Brazil's economy, though government policies will also help insulate Latin America's biggest economy, said Roberto Padovani, chief economist at WestLB in Sao Paulo"
"The ``economy will suffer the impact of a U.S. crisis, but not as much as in the past as domestic fundamentals are strong after 15 years of responsible economic policy,'' said Padovani."
"The $1.3 trillion economy expanded 6.1 percent in the second quarter, beating all forecasts in a Bloomberg survey of 36 economists whose median estimate was 5.5 percent."
"To be sure, demand has shown signs of easing in the wake of rising rates. Monthly retail sales fell 0.2 percent in July from June, the first drop in five months. When cars and construction materials are added, retail sales rose by 1 percent from June."
"Zeina Latif, chief economist for ING Bank NV in Sao Paulo, said slower growth of car sales in August may be the first sign that higher interest rates are starting to cool demand."
"Vehicle sales rose 4 percent in August from a year ago, the slowest pace in almost two year, after car loan rates jumped."
"``August may be the inflection point, but we still need to wait for bank loan numbers to confirm the slowdown,'' she said."
Departure
"Finance Minister Guido Mantega yesterday said turmoil in U.S. credit markets will slow Brazil's economic growth to about 4.5 percent in 2009 from 5-to-5.5 percent this year. The crisis won't stop Brazil from expanding, he said yesterday in Sao Paulo."
"``In other circumstances, Brazil would be on its knees right now,'' Mantega told reporters yesterday in Sao Paulo."
"Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil's biggest food retailer, said August sales at stores open at least a year climbed for a fourth month, rising 17 percent from the year-earlier period."
"Net sales at all stores rose 29 percent to 1.5 billion reais ($835 million), led by electronic goods and textile goods, Grupo Pao de Acucar said today in a regulatory filing."
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro at Jgoodman19@bloomberg.net; Andre Soliani in Brasilia at asoliani@bloomberg.net
"Last Updated: September 16, 2008 11:28 EDT"
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<<2.630_20080916210215US Economy Consumer Prices Fall as Energy Drops
(Update1) .txt>> <<2.629_20080916205650European Bonds Advance as AIG
Downgrades Spur Demand for Safety .txt>> <<2.627_20080916205731UK
Stocks Slide to Lowest Since 2005 RBS HBOS Lead Retreat .txt>>
<<2.627_20080916205038Dollar Rises Versus Yen on Speculation AIG Will
Get Fed Loan .txt>> <<2.626_20080916210816Fed Keeps Rate at 2%
Rebuffing Call for Cut to Soothe Markets .txt>>
<<2.626_20080916205445Gold Platinum Fall as Investors Sell Commodities
to Raise Cash .txt>> <<2.625_20080916205351Corn Soybeans Tumble as
Credit Squeeze Shrinks Global Economy .txt>>
<<2.624_20080916205603Credit Markets Seize Up on Bets More Banks Will
Fail (Update1) .txt>> <<2.624_20080916204513Canada Stocks Fall Led by
Manulife Suncor BCE Potash Rises .txt>> <<2.624_20080916202814US
Stocks Advance on Expectations Fed Will Rescue AIG .txt>>
<<2.623_20080916212551Fed Funds Rate Declines as Central Bank Adds
Reserves (Update2) .txt>> <<2.623_20080916210735Fed Keeps Rate at 2%
Rebuffing Call for Reduction (Update2) .txt>>
<<2.623_20080916205419Copper Drops to Lowest Since January on Signs
Demand to Slide .txt>> <<2.622_20080916203240Angola Crude Oil Exports
Will Fall 10% in November (Update1) .txt>>
<<2.620_20080916211411Corporate Bond Risk Rises to Record on AIG
Counterparty Concern .txt>> <<2.619_20080916211238US Mortgage Rates
May Wreak Havoc After Libor Gain (Update1) .txt>>
<<2.618_20080916210855Sept 16 (Bloomberg) The following is the full
text of the statement released today b.txt>> <<2.618_20080916203317US
Gasoline Demand Falls for 21st Week MasterCard Says .txt>>
<<2.617_20080916211257Credit Markets Seize Up as Libor Rate Doubles on
AIG Lehman .txt>> <<2.616_20080916212328MoneyMarket Rates Double Amid
Global Credit Seizure (Update4) .txt>> <<2.616_20080916204859Crude Oil
Tumbles as Wall Street Turmoil Adds to Demand Concern .txt>>
<<2.615_20080916210156Global Central Banks Pump Money to Soothe Markets
(Update3) .txt>> <<2.614_20080916204101France's Lagarde Says Lehman
Collapse to Lift Rates (Update1) .txt>> <<2.613_20080916205818Russia's
Micex Index Falls Most Ever Exchanges Suspend Trading .txt>>
<<2.611_20080916210353Banks Are Riskiest Companies in `Scary' Markets
Chart of Day .txt>> <<2.611_20080916205117Natural Gas Futures Drop as
Hurricane Mild Weather Cut Demand .txt>> <<2.610_20080916205755German
Stocks Fall for Second Day Led by Commerzbank Postbank .txt>>
<<2.610_20080916205503Wheat Falls as Investors Flee Commodities Amid
Credit Crisis .txt>> <<2.608_20080916203828Indian Central Bank to
Boost Liquidity Dollar Supply (Update1) .txt>>
<<2.606_20080916205310South Africa's Rand Slips After AIG Downgrades
Equity Declines .txt>> <<2.606_20080916204918Constellation
HewlettPackard Wells Fargo US Equity Movers .txt>>
<<2.605_20080916202838Theolia Advances in Paris on Takeover Speculation
(Update1) .txt>> <<2.604_20080916204250HBOS of UK Extends Decline on
Liquidity Concern (Update5) .txt>> <<2.603_20080916204812Last Updated
.txt>> <<2.599_20080916203606Discounters Aldi Lidl Gain UK Grocery
Market Share (Update1) .txt>> <<2.597_20080916212654Lehman Cancels
Auction of LBO Loans as Prices Plummet (Update2) .txt>>
<<2.597_20080916205541Orange Juice Drops as Storm Threats Recede
Commodities Slump .txt>> <<2.597_20080916204330Central European
Property Stocks Slump Led by Orco (Update1) .txt>>
<<2.595_20080916211317Goldman Net Drops 70% as Merger Advice Trading
Slow (Update4) .txt>> <<2.595_20080916210654Chambers `Never' More
Comfortable With Cisco Outlook (Update3) .txt>>
<<2.672_20080916204840Brazilian Real Reverses Losses on Speculation of
AIG Bailout .txt>> <<2.641_20080916203259OPEC Cuts 2009 Oil Demand
Forecast on Slowing Economy (Update1) .txt>>
<<2.640_20080916204033French Stocks Fall Led by BNP Renault France
Telecom Gains .txt>> <<2.638_20080916205712Brazilian Stocks Extend
Decline After Fed Keeps Rates Steady .txt>>
<<2.636_20080916212239European Stocks Tumble on AIG Debt Rating Cuts UBS
HBOS Drop .txt>> <<2.635_20080916205248Canadian Dollar Rises After US
Federal Reserve Holds Rate .txt>> <<2.634_20080916211341EmergingMarket
Stocks Tumble as Credit Risk Surges (Update2) .txt>>
<<2.634_20080916203729Italy Stocks Update Eni Saipem Fondiaria Intesa
Sanpaolo .txt>> <<2.634_20080916203526Swiss Franc Rises Stocks Money
Markets Spur Aversion to Risk .txt>> <<2.631_20080916205145Latin
American Currencies Chilean Peso Plunges to 19Month Low .txt>>
<<2.631_20080916203625Brazil's Retail Sales Growth Accelerated in July
(Update3) .txt>>
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A blog for global investors, with information about most of the world financial markets. Updated frequently, every day, with my views on these markets. Bear or Bull? Read to discover!
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