Trichet Says ECB `Resolute' in Fighting Inflation (Update2)
By Gabi Thesing
Sept. 10 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said the euro-region economy is likely to recover from the current slump toward the end of the year and that bringing down inflation remains the bank's primary focus.
"``The current episode of weak growth should be followed by a gradual recovery,'' Trichet told lawmakers at the European Parliament in Brussels today. ``The ECB is resolute in its determination to keep medium- to long-term inflation expectations in line with price stability''"
"Policy makers remain concerned that past oil-price increases will prompt companies to raise prices and workers to demand higher wages to compensate for the increase in the cost of living. The ECB kept interest rates at a seven-year high of 4.25 percent last week. Inflation is running at 3.8 percent, almost twice the bank's limit. At the same time, the economy is struggling to recover from a second-quarter contraction."
Trichet said the 28 percent drop in oil prices from a July 11 record of $147.27 a barrel ``will help strengthen real disposable income.'' A barrel of oil traded around $104 today. That's still 61 percent more expensive than two years ago.
"``There is a very strong concern in the Governing Council that higher energy and food prices may lead to the emergence of broad-based second-round effects,'' Trichet said."
"Germany's IG Metall labor union, representing 3.2 million workers, said Sept. 8 it will demand the biggest pay increase in at least 16 years. The union, Germany's biggest, seeks a raise of between 7 percent and 8 percent, according to Chairman Berthold Huber."
"The bank raised rates in July after inflation accelerated to 4 percent, the fastest pace in 16 years. Trichet said ``upside risks to price stability over the medium-term have continued to prevail.''"
"Even though Trichet's comments are almost identical to his introductory statement delivered last week after the bank's rate-setting meeting, ``his slightly more robust delivery gives the impression that he has stepped up his rhetoric,'' said James Nixon, an economist at Societe Generale SA in London."
"The ECB raised its inflation projections last week to around 3.5 percent for 2008 and 2.6 percent for 2009. The bank aims to keep inflation just below 2 percent. At the same time, ECB staff lowered the growth forecasts for this year and next to about 1.4 percent and 1.2 percent respectively."
`In a Trough'
The European Commission today also lowered its euro-area growth forecast and raised its prediction for inflation.
"The economy shrank 0.2 percent between March and June and the third quarter is ``weak,'' Trichet said. ``We're in a trough,'' he said. After that the governing council expects a ``gradual recovery,'' and ``2010 will be a better year'' than 2009, he said."
"For now, ``the current monetary policy stance will contribute to achieving this objective over the medium-term,'' Trichet said, signaling that the bank is in no hurry to change borrowing costs any time soon."
To contact the reporter on this story: Gabi Thesing in Frankfurt at email@example.com.
"Last Updated: September 10, 2008 05:33 EDT"
Brazil's Real Weakens to Seven-Month Low on Commodity Decline
By Adriana Brasileiro
"Sept. 10 (Bloomberg) -- Brazil's real fell to a seven-month low as commodity prices declined for a ninth straight day, curbing dollar inflows from the country's exports of products such as soybeans, coffee and crude oil."
"The real fell 0.4 percent to 1.7845 per dollar at 10:50 a.m. New York time, from 1.7770 yesterday. The currency earlier touched 1.7950, the weakest since Jan. 28, and has slid 12.3 percent since the end of July."
"The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials dropped 0.5 percent today, extending its decline from a record high on July 2 to 22 percent."
"The yield on Brazil's zero-coupon bonds due in January 2010 rose 1 basis point, or 0.01 percentage point, to 14.89 percent, according to Banco Votorantim. The yield on the overnight futures contract for January delivery rose 2 basis points to 13.97 percent, leaving it almost 1 percentage point above the central bank's overnight rate."
To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at firstname.lastname@example.org
"Last Updated: September 10, 2008 10:56 EDT"
"Banco do Brasil, Brascan Residential: Brazilian Equity Movers "
By Alexander Ragir
"Sept. 10 (Bloomberg) -- The following companies are having unusual price changes in Brazil trading. Stock symbols are in parentheses, and share prices are as of 9:35 a.m. New York time. Preferred shares are usually the most-traded class of stock."
"The Bovespa index gained 1.6 percent to 49,190.44."
"Brazilian meat producers gained after the Agriculture Ministry said yesterday that the U.S., the biggest buyer of Brazil's processed beef, will resume imports of meat products from the South American country after officials from the two governments inspected plants."
"JBS SA (JBSS3 BS) jumped the most in almost two weeks, gaining 4.6 percent to 5.47 reais. Marfrig Frigorificos e Comercio de Alimentos SA (MRFG3 BS) gained 1 percent to 15.50 reais. Minerva SA (BEEF3 BS) rose 5.1 percent to 7.25 reais."
"Banco do Brasil SA (BBAS3 BS) gained the most in almost three weeks, rising 1.8 percent to 21.88 reais. Banco do Brasil, Latin America's biggest bank by assets, and Uniao de Bancos Brasileiros SA (UBBR11 BS), Brazil's third-largest non-government bank, are Deutsche Bank AG's top picks among Brazilian banks because of their cheaper prices and earnings growth potential. Banco do Brasil trades at a price 8 times estimated 2009 earnings, and Unibanco trades at 7.5 times estimated earnings, compared with more than 9 times estimated profit for Banco Itau Holding Financeira SA and Banco Bradesco SA, analyst Mario Pierry wrote in a note. Unibanco gained 1.3 percent to 18.52 reais."
"Brascan Residential Properties SA (BISA3 BS) gained for the second time in three days, rising 3.3 percent to 6.20 reais. Real estate developer Brascan agreed to buy rival Company SA (CPNY3 BS) for 681.9 million reais ($381 million) in cash and stock. Company shareholders will receive 200 million reais in cash and about 77 million Brascan shares, Sao Paulo-based Brascan said in a statement on the securities regulator's Web site. Company fell 5.8 percent to 9.49 reais."
"Klabin SA (KLBN4 BS) gained the most in almost three weeks, rising 1.8 percent to 4.46 reais. Corrugated paper sales in August likely rose 1 percent from the year-ago period, the Brazilian Corrugated Paper Association said in a preview, Fator Corretora strategist Lika Takahashi wrote in a note yesterday."
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at email@example.com;
"Last Updated: September 10, 2008 09:43 EDT"
Mexico Bond Yields Rise for Third Day on Accelerating Inflation
By Valerie Rota
"Sept. 10 (Bloomberg) -- Mexico's bonds fell, pushing yields up for a third day, after a central bank report yesterday showed inflation quickened for a seventh straight month in August."
"Yields on the 10 percent security due December 2024 rose 1 basis point, or 0.01 percentage point, to 8.52 percent at 9 a.m. New York time. The price fell 0.11 centavo to 112.95 centavos per peso, according to Banco Santander SA."
"Annual inflation surged to 5.57 percent last month, a five- year high, from 5.39 percent in July, Banco de Mexico said yesterday. The central bank targets inflation between 2 percent and 4 percent."
To contact the reporter on this story: Valerie Rota in Mexico City at firstname.lastname@example.org.
"Last Updated: September 10, 2008 09:12 EDT"
"Soybeans Fall After Oil Decline; Wheat, Corn Rebound From Lows "
By Jae Hur and Sungwoo Park
"Sept. 10 (Bloomberg) -- Soybeans dropped after a tumble in crude oil yesterday reduced demand prospects for biofuels made from the crop, while wheat gained after touching a one-year low. Corn also gained from a four-week low."
"Oil plunged as much as 4.3 percent yesterday to the lowest since April 2. Before today, oil had fallen 30 percent from its record on July 11, while corn dropped 32 percent from an all- time high in June and soybeans fell 27 percent from a July record."
"``A weaker crude oil price has put pressure on corn and soybeans today,'' Hiroyuki Kikukawa, general manager of research at IDO Securities Co., said from Tokyo. ``Fundamentals for the two U.S. crops have not changed much as they are close to harvest, but external factors such as the dollar and crude oil are dictating their direction in recent trading.''"
"Soybeans for November delivery declined as much as 18.75 cents, or 1.6 percent, to $11.8225 a bushel, before trading at at $11.9975 at 5:10 p.m. in Singapore. The contract touched $11.57 yesterday, the lowest since April 1."
"Corn for December delivery lost as much as 6.75 cents, or 1.2 percent, to $5.3775 a bushel in after-hours electronic trading on the Chicago Board of Trade before rebounding 0.6 percent to $5.4775. The contract yesterday touched $5.31, the lowest since Aug. 13."
"``Most investors will stay on the sidelines before the U.S. Department of Agriculture's monthly report on Friday,'' Kikukawa said. The U.S. government is to release its second survey-based production forecasts for corn and soybeans on Sept. 12."
"The dollar traded at $1.4151 per euro at 5:13 p.m. in Singapore after reaching $1.4047 yesterday, the strongest since Oct. 9. Crude oil for October delivery traded up 0.7 percent at $103.95 a barrel after falling as low as $101.74 yesterday."
"Wheat for December delivery rose 1.1 percent to $7.385 a bushel after earlier falling by the same amount to $7.2275. Yesterday it fell as low as $7.19, the lowest for a most-active contract since Aug. 29, 2007."
"In the physical market, Egypt plans to buy at least 55,000 metric tons of wheat today and Japan is seeking 107,000 tons of U.S. milling wheat at a tender tomorrow."
To contact the reporters responsible for this story: Jae Hur in Singapore at email@example.com; Sungwoo Park at firstname.lastname@example.org
"Last Updated: September 10, 2008 05:23 EDT"
Canadian Dollar Erases Gains as Oil Falls on Inventory Decline
By Daniel Kruger
Sept. 10 (Bloomberg) -- Canada's dollar erased earlier gains as oil retreated after a U.S. government report showed a decline in inventories of crude and fuels.
"The Canadian currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, was little changed at C$1.0726 per U.S. dollar at 11:43 a.m. in Toronto, from C$1.0713 yesterday. Earlier it rose as high as C$1.0657. One Canadian dollar buys 93.23 U.S. cents."
Crude oil futures dropped 1 percent on the New York Mercantile Exchange to $102.24 a barrel after advancing earlier as high as $104.97.
"The two-year Canadian government bond's yield rose 2 basis points, or 0.02 percentage point, to 2.72 percent. The price of the 2.75 percent security maturing in December 2010 fell 4 cents to C$100.07."
To contact the reporter on this story: Daniel Kruger in New York at email@example.com
"Last Updated: September 10, 2008 11:46 EDT"
Gold Falls on Reduced Demand for Inflation Hedge; Silver Drops
By Pham-Duy Nguyen
Sept. 10 (Bloomberg) -- Gold tumbled to the lowest price since October on speculation a drop in commodity costs and a stronger dollar will reduce demand for the precious metal as a hedge against inflation. Silver also declined.
The Reuters/Jefferies CRB Index of 19 raw materials dropped for a ninth straight session and is down as much as 24 percent from a record reached in July. Gold has declined 26 percent from an all-time high in March and the euro is trading 13 percent below its July peak against the dollar.
"``Gold's diseased,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. ``A lot of the inflationary fear has eased because we've seen energy and commodity prices come spiraling down. The dollar has not given up a lot of its gains. That's leaving traders up in the air about what to do with gold. I wouldn't want to touch it with at 10-foot pole.''"
"Gold futures for December delivery plunged $24.80, or 3.1 percent, to $767.20 an ounce at 11:20 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $766.70, the lowest for a most-active contract since Oct. 25."
"Silver futures for December delivery plummeted 81.5 cents, or 7 percent, to $10.90 an ounce. Before today, silver fell 21 percent this year, while gold dropped 5.5 percent."
"Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has fallen 11 percent to 631.2 metric tons from a record 705.6 tons on July 11."
"From mid-July to Sept. 2, commodity index investors sold $39 billion of oil futures, said Michael Masters, president of Capital Management hedge fund. Ospraie Management LLC, the hedge-fund firm run by Dwight Anderson, last month said it will shut down its commodities fund after losing 39 percent this year on wrong-way bets on energy and mining stocks."
"Lehman Brothers Holdings Inc., which today reported the biggest loss in its 158-year history, bought a 20 percent stake in Ospraie in 2005."
"``Commodity funds are getting out,'' said Joel Crane, a metals strategist at Deutsche Bank AG. ``Ospraie is indicative of what's happening across these markets.''"
"Funds are unwinding bets on a gain in raw materials and so- called commodity currencies, along with wagers on a falling dollar, Crane said."
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at firstname.lastname@example.org.
"Last Updated: September 10, 2008 11:24 EDT"
Canadian Productivity Declines for Longest Stretch Since 1990
By Greg Quinn
"Sept. 10 (Bloomberg) -- Canadian labor productivity fell for a third straight quarter, the longest decline since 1990, as falling exports curbed production."
"Productivity, a measure of how much an employee produces in an hour of work, dropped 0.2 percent between April and June, Statistics Canada said today in Ottawa. Economists anticipated a 0.3 percent gain, the median of 12 estimates. The agency also doubled the estimated first-quarter decrease to 0.6 percent."
"Productivity in Canada has lagged the U.S. this decade as factories struggle with a high currency that makes their goods more expensive abroad and which has led to closures and job losses. Industries such as mining and energy that are expanding have been less productive, reflecting higher development costs."
"Productivity has averaged 1 percent between 2000 and 2007, behind the U.S. pace of 2.5 percent, Statistics Canada said."
"Canada's second-quarter drop came as the gross domestic product of businesses fell 0.2 percent, while the number of hours worked rose 0.1 percent."
To contact the reporter on this story: Greg Quinn in Ottawa at email@example.com.
"Last Updated: September 10, 2008 08:30 EDT"
Emerging-Market Yield Spreads Narrow as Lehman Concerns Ease
By Lester Pimentel
"Sept. 10 (Bloomberg) -- Emerging-market bond yields relative to Treasuries narrowed after Lehman Brothers Holdings Inc. announced steps to shore up capital, easing speculation about an imminent collapse."
"The extra yield investors demand to own developing-nation debt rather than Treasuries shrank 3 basis points, or 0.03 percentage point, to 3.26 percentage points at 10:04 a.m. in New York, according to JPMorgan Chase & Co. The so-called spread swelled 14 basis points yesterday to the biggest since June 2005."
Emerging markets are rebounding after Lehman Brothers said it will sell a majority stake in its asset management unit and cut its dividend. The securities tumbled yesterday on concern the company may not survive a crisis of confidence.
"``The markets are doing better,'' said Igor Arsenin, an emerging-market fixed-income strategist at Credit Suisse Group in New York. ``It looks like we're taking a breather.''"
"Venezuela paced gains, with the spread on the country's bonds narrowing 8 basis points to 6.92 percentage points. The Organization of Petroleum Exporting Countries decided yesterday to limit production, effectively cutting output by about 500,000 barrels a day."
"The risk of owning Venezuela's bonds declined. Five-year credit-default swaps based on the country's debt slipped 3 basis points to 6.31 percentage points, according to Bloomberg data. That means it costs $631,000 to protect $10 million of the country's debt from default."
"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent."
To contact the reporter on this story: Lester Pimentel in New York at firstname.lastname@example.org
"Last Updated: September 10, 2008 10:05 EDT"
Yuan Is Little Changed as Easing Prices May Allow Slower Gains
By Bob Chen and Belinda Cao
"Sept. 10 (Bloomberg) -- The yuan was little changed, following yesterday's gain, amid speculation cooling inflation will give China's central bank more leeway to slow the currency's appreciation and boost export growth. Bonds advanced."
"The currency's advance has stalled this quarter after a 4.2 percent rise in the first three months and 2.3 percent in the second quarter. Consumer prices climbed 4.9 percent in August from a year ago, the slowest pace since June 2007, China's statistics bureau said today. Currency gains hurt exporters by making their products more expensive and reducing demand in overseas markets."
"``Inflation coming off will ease the pressure on China to appreciate the yuan,'' said Daniel Soh, an economist at Forecast Pte in Singapore. ``China is concerned about a spike in the unemployment rate in the export sector.''"
"The currency traded at 6.8385 a dollar as of the 5:30 p.m. close in Shanghai, versus 6.8381 yesterday, according to the China Foreign Exchange Trade System. The yuan is the best performer this year among the 10 most-active Asian currencies outside Japan."
"In a sign of weaker growth ahead, China's passenger-car sales fell in August for the first time in more than three years, the China Association of Automobile Manufacturers said yesterday."
Focus on Growth
"China's trade surplus unexpectedly widened in August to $28.69 billion from $25.28 billion the previous month, a government report showed today. Economists in a Bloomberg News survey had forecast the surplus would shrink to $23.55 billion. Exports growth in August slowed less than expected while imports growth weakened more than expected."
"``The Chinese government has already shifted its focus on growth,'' said Jerry Yoshikoshi, a market analyst with Sumitomo Mitsui Banking Corp. in Singapore. ``We'll continue to see a slower appreciation or flat movement in the yuan.''"
"China's economy expanded 10.1 percent in the three months ended June 30 from a year earlier, slowing for a fourth straight quarter as exports cooled. Weaker overseas demand, rising costs and a strengthening currency have put pressure on exporters of shoes, toys and clothes."
Non-deliverable forwards contracts indicate the yuan will gain 0.8 percent to 6.7852 per dollar in the next six months. Forwards are agreements in which assets are bought and sold at current prices for future delivery.
"Government bonds rose, pushing 10-year yields to the lowest in more than two months, as inflation slowed."
"The yield on the 4.07 percent note due March 2018 fell 1 basis point to 4.09 percent, the lowest since July 1, according to the China Interbank Bond Market. The price rose 0.08 per 100 yuan face amount to 99.85. A basis point is 0.01 percentage point."
"``This is good news for the bond market,'' said Nie Shuguang, a fixed-income trader at Industrial Bank Co. in Shanghai. Inflation erodes the fixed payments from debt."
"Food prices rose 10.3 percent in August from a year earlier after gaining 14.4 percent in July, the statistics bureau said. Non-food prices increased 2.1 percent, the same as in July. Food costs account for about a third of China's consumer price index."
"China Development Bank sold 30 billion yuan ($4.39 billion) of 10-year bonds at a 4.28 percent yield today, less than the 4.5 percent some traders had estimated, Nie said. Investors have the option to sell the securities back to the bank at face value after three years. The lender increased the offer size by 50 percent from 20 billion yuan."
"The sale drew bids worth 4.03 times the amount on offer, according to a note posted online by the bank."
To contact the reporters on this story: Bob Chen in Hong Kong at email@example.com; Belinda Cao in Beijing at firstname.lastname@example.org
"Last Updated: September 10, 2008 06:01 EDT"
India's 10-Year Bond Yield Falls to 3-Month Low on Commodities
By Anil Varma
"Sept. 10 (Bloomberg) -- India's 10-year government bonds gained for a second day, pushing yields to the lowest in almost three months, as falling commodity prices tempered concern that inflation will accelerate."
"Benchmark notes rallied after crude oil in New York fell to the lowest since April. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials has declined 21 percent from a July peak. A government report may show tomorrow that inflation slowed for a third week to 12.01 percent in the seven- day period through Aug. 30, according to the median estimate in a Bloomberg News survey."
"``The gains in bonds are driven mainly by the slide in commodity prices,'' said Baljinder Singh, a trader at state- owned Andhra Bank in Mumbai. ``People have started expecting crude to fall below $100 per barrel. The moderation in inflation may continue.''"
"The yield on the 8.24 percent note due April 2018 fell 2 basis points to 8.37 percent at the 5:30 p.m. close in Mumbai, according to the central bank's trading system. The price rose 0.11, or 11 paise per 100-rupee face amount, to 99.14. A basis point is 0.01 percentage point."
Crude oil has fallen almost 30 percent from a record high of $147.27 per barrel reached in July. Asia's third-largest economy imports almost three-quarters of the oil it uses.
"``Yesterday's central bank comments also suggested policy makers are in no hurry to take further monetary measures to curb inflation,'' Andhra Bank's Singh said."
"Reserve Bank of India governor Duvvuri Subbarao, who took office last week, said that ``inflation momentum'' is decreasing. The central bank has raised its key repurchase rate by 300 basis points since 2004 to curb price gains."
"``I'm not sure whether we can say inflation is softening consistently but the decline in the wholesale price index is satisfying,'' Subbarao told reporters in Mumbai yesterday."
Bonds also rose as banks probably bought the securities to cover rising deposits. Local lenders are required by law to invest at least 25 percent of their deposits in government debt or other low-risk securities approved by the central bank.
"``Banks are buying bonds to meet mandated investment requirements,'' Andhra Bank's Singh said. Bank deposits in India increased 21.6 percent in the 12 months ended Aug. 15, central bank data show."
"The cost of benchmark interest-rate swaps, or derivative contracts used to guard against rate fluctuations, declined. The five-year swap rate, a fixed payment made to receive floating rates, fell 1 basis point to 8.71 percent."
To contact the reporter on this story: Anil Varma in Mumbai at email@example.com.
"Last Updated: September 10, 2008 08:10 EDT"
"Brazil 2nd-Quarter GDP Surges 6.1%, Beating Estimates (Update2) "
By Joshua Goodman
"Sept. 10 (Bloomberg) -- Brazil's economy had its second fastest expansion in four years in the April-through-June period, cementing expectations policy makers will raise interest rates to the highest in two years when they meet later today."
"Gross domestic product, the broadest measure of a country's production of goods and services, grew 6.1 percent from a year earlier, beating all forecasts in a Bloomberg survey of 36 economists whose median estimate was 5.5 percent. Growth accelerated from the revised 5.9 percent pace in the first quarter, the national statistics agency said."
"Policy makers led by bank President Henrique Meirelles are expected to raise interest rates for a fourth time since April later today in a bid to cool Latin America's largest economy, which is in the midst of its fastest economic expansion since 1995. The central bank is expected to raise rates to 13.75 percent from 13 percent, according to 40 of 41 economists surveyed by Bloomberg."
"``The central bank still has some work to do,'' Marcelo Carvalho, chief economist for Brazil at Morgan Stanley, wrote in an e-mail following the announcement. ``Today's 75 basis point hike looks like a foregone conclusion.''"
"Falling food and commodity prices that pushed inflation lower last month to 6.17 percent, from a three-year high of 6.37 percent in July, have done little to ease central bank concerns about Brazil's heated $1.3 trillion economy."
"Capital investment in the second quarter jumped 6.2 percent on an annual basis, its fastest pace since the second quarter of 1995."
"Household spending grew 6.7 percent, up from 6.6 percent in the first quarter. The volume of exports expanded 5.1 percent in the period, reversing a 21 percent decline in the first quarter."
"``Today's number shoots down any argument that the central bank doesn't need to adjust rates further because the economy is slowing down,'' Jankiel Santos, chief economist at Banco Espirito Santo de Investimento SA, said in a phone interview from Sao Paulo. ``We won't see the effects of monetary tightening until the end of the year.''"
"The Bovespa stock index rose 2.5 percent to 48,621.33 at 10:10 a.m. New York time, while the real rose for the first time in three days, gaining 0.3 percent to 1.7712 per dollar at 10:10 a.m. from 1.7770 late yesterday."
"Finance Minister Guido Mantega, who has criticized past central bank rate increases, insisted this week that economic growth wasn't stoking inflation, adding that supply ``was growing in line with demand.''"
"There are signs that the economy has begun to slow in the face of restricted credit and a tougher external environment. Vehicle sales grew 4 percent in August from a year ago, the slowest pace in almost two years, after car loan costs jumped, the industry association said Sept. 4."
"``No doubt the Brazilian economy is on a tear, but the timing is lousy,'' Tony Volpon, chief economist at Sao Paulo- based brokerage CM Capital Markets, said in an e-mail to clients. ``This is happening just as things outside sour in a big way.''"
The second quarter growth rate was the second highest since the second quarter of 2004 when the economy grew 7.5 percent. Brazil's GDP grew 6.2 percent in the last quarter of 2007.
"From the first quarter of 2008, the economy expanded 1.6 percent, the statistics agency said."
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro at firstname.lastname@example.org.
"Last Updated: September 10, 2008 10:14 EDT"
"Consumer Spending in U.S. to Stall, Hurting Growth (Update1) "
By Shobhana Chandra and Andy Burt
"Sept. 10 (Bloomberg) -- A record spending spree by U.S. consumers will come to an abrupt end this quarter as job losses cause Americans to restrain purchases, a Bloomberg News survey predicts."
"Personal spending, the biggest part of the economy, will stall from July to September, three months earlier than predicted last month, according to the median estimate of 49 economists polled from Sept. 2 to Sept. 9. The slump will slow growth to less than half the prior quarter's pace."
"``The seemingly resilient U.S. consumer is finally buckling,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York, who cut spending forecasts for this quarter and the next. ``We're getting pretty close to a full-blown recession.''"
"Eight months of job cuts, wages that haven't kept up with inflation, falling property values and restricted access to credit are likely to depress spending into 2009, the survey showed. The bailout of Fannie Mae and Freddie Mac will, at best, only prevent growth from slowing even more, economists said."
Yields on benchmark 10-year Treasuries today approached their lowest level in more than four months amid concern the economy will slow. Ten-year notes yielded 3.63 percent at 8:35 a.m. in New York after reaching 3.57 percent earlier in the day.
"The world's largest economy will expand at a 1.2 percent annual pace this quarter after growing 3.3 percent from April to June. Last quarter was boosted by a narrowing of the trade gap and a rise in spending propelled by the government's tax rebates. Growth will slow to a 0.7 percent rate in the last three months of 2008, the survey showed."
"After stagnating this quarter, consumer spending will grow at a 0.4 percent pace to end the year, and expand at a 1 percent rate in the first three months of 2009, the survey showed. Purchases grew 3 percent per quarter on average in the previous five years and have been rising since 1992, the longest string on record."
"The job market is sending the surest signal the economy is contracting. Payrolls have shrunk by more than 600,000 workers so far this year and the jobless rate shot up 1.1 percentage points from May to August, the biggest four-month jump in almost 27 years, the Labor Department reported last week."
"``There will shortly be a sea change in the consensus economic outlook for early next year, and it won't be an upward revision,'' said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, who forecast spending would drop this quarter and next and the economy would shrink in the last three months of 2008. ``Too many households are just one job loss away from default and foreclosure.''"
"Foreclosures accelerated in the second quarter to the fastest pace in 29 years and the share of loans with one or more payments overdue rose to the highest since records began in 1979, the Mortgage Bankers Association reported last week."
"The government's takeover on Sept. 7 of Fannie Mae and Freddie Mac, which make up almost half the $12 trillion U.S. mortgage market, may ease borrowing costs. That would prevent the housing downturn from deepening and further restricting growth."
"``It takes away one of the worst-case scenarios for the economy,'' Lehman's Harris said."
Big-ticket items like automobiles have been the hardest hit by the surge in food and fuel costs. Vehicle sales over the last three months were the weakest since 1993.
"``Not only is the U.S. in a recession, but the rest of the world is slowing down,'' Ford Motor Co. Chief Executive Officer Alan Mulally said in a speech this week in Dearborn, Michigan. ``I've never seen anything quite like it.''"
"The jobless rate will reach 6.3 percent by mid-2009, according to this month's survey median, matching the peak reached in 2003 following the last recession and higher than previously anticipated. The rate rose to a five-year high of 6.1 percent in August."
"``The consumer is more cautious, more concerned,'' said John Lonski, chief economist at Moody's Investors Service Inc. in New York. ``There's far more reason to worry than reason to expect the economy will be improving by 2009.''"
"Exports are likely to remain a bright spot, even as the U.S. slowdown spreads overseas, softening demand for American-made goods."
"``Strength in exports is helping economic growth keep its head above water,'' Lonski said."
"The odds that the U.S. is, or will soon be, in a recession remained at 51 percent in the latest survey."
"Economists also predicted inflation pressures will cool as the economy slows. Consumer prices will rise 2.7 percent over the 12 months to June 2009 after peaking at a 5.3 percent gain in the year ending this month, according to the survey median."
"The slowdown in growth and inflation will prompt Federal Reserve policy makers to keep the benchmark interest rate unchanged at 2 percent through the first three months of 2009, according to the median forecast. Central bankers will probably start raising the rate in next year's second quarter."
To contact the reporters for this story: Shobhana Chandra in Washington at email@example.com; Andy Burt in Washington at firstname.lastname@example.org
"Last Updated: September 10, 2008 08:43 EDT"
"German Stocks Recover Losses; Postbank, Deutsche Boerse Gain "
By Henrietta Rumberger
"Sept. 10 (Bloomberg) -- Germany's DAX Index recovered earlier losses as Deutsche Postbank AG, Deutsche Boerse AG and Daimler AG increased."
"The benchmark DAX Index declined 3.35, or 0.1 percent, to 6,230.06 as of 3:30 p.m. in Frankfurt after losing as much as 1.2 percent earlier. DAX futures expiring in September fell 0.1 percent, to 6,231.5. The HDAX Index of the country's 110 biggest companies sank 0.2 percent."
"Deutsche Postbank, Germany's biggest consumer bank by clients, gained 1.33 euros, or 3 percent, to 46.03. Deutsche Boerse, operator of the Frankfurt Exchange, increased 2.45 euros, or 4 percent, to 64.20. Daimler, the world's second- largest luxury carmaker gained 64 cents, or 1.6 percent, to 41.24 euros."
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at email@example.com.
"Last Updated: September 10, 2008 09:41 EDT"
Rupee Weakens Past 45 Versus Dollar for First Time in 22 Months
By Anil Varma
Sept. 10 (Bloomberg) -- India's rupee weakened past 45 against the dollar for the first time since November 2006 on concern equity sales by global funds and the nation's current- account deficit will result in capital outflows.
The currency declined for a second day after data from the capital markets regulator showed funds based abroad sold more Indian equities than they bought on nine of the past 14 trading days. The rupee also slid as the U.S. currency strengthened globally. The dollar advanced against all of the 16 most-active currencies tracked by Bloomberg in the past three months.
"``The rupee has some more room to weaken before the end of the year due to India's balance of payments weakness,'' said Sebastien Barbe, a strategist in Hong Kong at Calyon, the investment banking unit of Credit Agricole SA. ``The rupee's weakness also reflects the dollar's stronger-than-expected recent rally.''"
"The rupee declined 0.7 percent to 45.1375 per dollar at the 5:30 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency is the third-worst performer among the 10 most-active Asian currencies outside Japan this year, with a 12.7 percent decline."
"The currency may fall as low as 45.5 by the end of the year, Barbe said."
"Global investors sold a net $7.3 billion of local shares this year, according to the Securities and Exchange Board of India. India's current-account deficit, a measure of trade and investment flows, widened to $17.4 billion in the financial year ended March 31 from $9.8 billion in the previous year, central bank data show."
"India's balance of payments fell to $36.6 billion in the year ended March 31 from $92.2 billion the previous year, according to the central bank."
"``India's external balance is quite bad as the current account has fallen quite sharply,'' said Nizam Idris, a currency strategist at UBS AG in Singapore."
To contact the reporters on this story: Anil Varma in Mumbai at firstname.lastname@example.org.
"Last Updated: September 10, 2008 08:00 EDT"
European Government Bonds Fall as Lehman Plan Spurs Stock Gains
By Gavin Finch and Kim-Mai Cutler
"Sept. 10 (Bloomberg) -- European government bonds fell after Lehman Brothers Holdings Inc. announced plans to shore up its finances and restore investor confidence, sending stocks higher and damping demand for the safest assets."
"Ten-year German bunds paced the drop as most U.S. stocks rose and European equities pared declines. Lehman, the fourth-largest U.S. securities firm, said it plans to sell a majority stake of its asset-management unit and spin off commercial real-estate holdings as it reported a wider-than-expected $3.9 billion third- quarter loss."
"Stocks are ``sapping demand for bonds,'' said Nick Stamenkovic, a fixed-income strategist in Edinburgh at RIA Capital Markets Ltd. ``Bonds are also looking pretty expensive at this juncture.''"
"The yield on the German bund, Europe's benchmark government security, rose 2 basis points to 4.06 percent by 4:16 p.m. in London. The 4.25 percent note due July 2018 fell 0.13, or 1.3 euros per 1,000-euro ($1,405) face amount, to 101.50."
The yield on the two-year note was little changed at 4.01 percent. Yields move inversely to bond prices.
"Bonds fell earlier as European Central Bank President Jean- Claude Trichet said inflation will stay high and the European Commission raised its consumer-price forecast, indicating interest rates may not be lowered anytime soon."
"Trichet said inflation will moderate ``only gradually'' next year and the ECB is concerned that energy and food prices may spark a ``wage-price spiral.'' The commission said inflation will reach 3.8 percent this year, compared with an earlier prediction of 3.1 percent."
"``There seems to be some resistance to yields heading lower as economic weakness is already priced into the market,'' said Cyril Beuzit, head of interest-rate strategy at BNP Paribas SA in London. ``In the medium term, we expect yields to be higher than current levels.''"
"Medium-term inflation expectations, as measured by the so- called five-year breakeven rate, rose 1 basis point to 2.02 percentage points. It fell to a 1 1/2 year low of 1.96 percentage points earlier today. A breakeven rate, a gauge of market expectations of price increases, is derived from a yield spread between a nominal bond and its inflation-linked equivalent."
"Traders pared bets the ECB will lower borrowing costs in the next six months, with the implied yield on the March Euribor interest-rate futures contract rising 1 basis point to 4.74 percent today."
"Germany sold 6.473 billion euros of new 4 percent notes due in 2010 today, also helping to send prices lower. The securities yielded an average of 3.91 percent, and the bid-to-cover ratio, a measure of demand, fell to 1.4 from 1.5 at a July 9 sale of similar notes. Portugal sold 750 million euros of 4.95 percent bonds maturing in 2023."
"The ``overall supply environment remains a tough one,'' Padhraic Garvey, head of investment-grade strategy at ING Bank NV in Amsterdam, wrote in an investor report."
"European bonds have outperformed Treasuries in the second half of the year on speculation the region is entering a recession. German bonds have handed investors a 4 percent return since the end of June, compared with 2.9 percent for U.S. debt, according to Merrill Lynch & Co.'s German Federal Governments and U.S. Treasury Master indexes."
To contact the reporter on this story: Kim-Mai Cutler in London at email@example.com; Gavin Finch in London at firstname.lastname@example.org
"Last Updated: September 10, 2008 11:41 EDT"
French Industrial Output Increased More Than Forecast (Update1)
By Francois de Beaupuy and [bn:PRSN=1] Helene Fouquet 
"Sept. 10 (Bloomberg) -- French industrial production rose more than expected in July on gains in output of consumer goods and cars, signaling that Europe's third-biggest economy may avoid slipping into recession."
"Output from factories and utilities climbed 1.2 percent from June, when it fell a revised 0.6 percent, said Insee, the national statistics office, in Paris today. Economists expected an increase of 0.2 percent, according to the median of 20 forecasts in a survey by Bloomberg News."
"The European Commission today cut its euro-area growth estimate for this year to 1.3 percent, from an April prediction of 1.7 percent, after the economies of Germany, France and Italy contracted in the second quarter. Consumer spending and exports may pick up in the coming months as inflation slows and the euro's decline from a July record buoys sales of European goods."
"``The evolution of the French industrial sector is rather good news for growth in the euro zone,'' Jennifer McKeown, European economist at Capital Economics said in a note to investors after the French report. ``However, this should not be seen as an early recovery since the economic outlook remains fragile. Overall, this provides some evidence that a technical recession could be avoided in the euro zone.''"
"Output of cars increased 5.1 percent in July from a month earlier, Insee said. The French car producers association said that truck sales rose 5.2 percent in July from a year before and climbed 19.3 percent in the seven months through July. Production of consumer goods increased 1.3 percent in the month, Insee said."
"``The figures are rather encouraging, in a difficult global economic environment,'' government spokesman Luc Chatel said today in Paris. ``Things are more complicated than we think.''"
"Still, avoiding recession doesn't mean that growth will pick up this year as slowing growth in the U.S. and Asia weighs on Europe. The commission today forecast that the French economy will stagnate in the third quarter and expand 1 percent this year, down from its April forecast of 1.6 percent."
"``This rebound should not make us forget that the French economy is just going to avoid recession and we don't expect it to grow more than 1 percent this year,'' said Cedric Thellier, an economist at Natixis, in an interview with Bloomberg Television."
"L'Oreal SA, the world's largest cosmetics maker, said on Aug. 28 that first-half profit rose 6.8 percent, the slowest pace in three years, after European and U.S. shoppers pared spending on makeup and perfumes."
"Growth may get some support in the second half from the decline in oil prices and the euro. Crude prices have fallen almost 30 percent from their peak of $147.27 on July 11, which has begun to reduce inflation rates in the euro zone, leaving consumers more to spend. The euro has declined 12 percent from its July 15 peak, underpinning exports."
"The June decline in French industrial output was revised to 0.6 percent from 0.4 percent and production declined 2.3 percent from a year earlier, Insee said."
"Weaker growth helped narrow the country's trade deficit in July, a separate report said today. The shortfall fell 4.83 billion euros ($6.8 billion) from a record 5.36 billion euros in June as imports declined."
To contact the reporters on this story: Francois de Beaupuy in Paris at email@example.com.
"Last Updated: September 10, 2008 07:05 EDT"
CIBC Cuts Estimate for Canada's S&P/TSX by 9% on Weak Growth
By John Kipphoff
"Sept. 10 (Bloomberg) -- Canada's main equity index will fall this year for the first time since 2002 as the world economy slows, the U.S. dollar rallies and oil stays below a record, CIBC World Markets chief strategist Jeffrey Rubin said."
"Rubin, based in Toronto, cut his yearend 2008 target for the Standard & Poor's/TSX Composite Index by 9 percent to 13,000 from 14,300, implying a 6 percent drop from the close on Dec. 31, 2007. He also reduced his 2009 forecast by 8.2 percent to 14,000."
"The S&P/TSX, which derives more than two-fifths of its value from energy and raw-materials stocks has tumbled 19 percent from its July 18 record to 12,146.76 yesterday in Toronto."
"A reenergized U.S. dollar is ``bad news for the resource- laden'' S&P/TSX, Rubin, 54, wrote in the report. Still, most of crude oil decline of about 30 percent from a July 11 peak of $147.27 a barrel is likely to be reversed over the next few months, with world growth of above 3 percent in 2009 still strong enough to avert a bear market in commodities, said Rubin, who correctly predicted $100-a-barrel oil in July 2007."
"Rubin lowered his 2009 forecast for average crude-oil prices by $20 a barrel to $130 and recommended investors reduce holdings of energy stocks by 2.5 percentage points relative to their weight in the S&P/TSX, to a 5 percentage point overweight position. Rubin brought his holding in Canadian financial shares to market weight by adding 2.5 percentage points in his model portfolio."
To contact the reporter on this story: John Kipphoff in Toronto at firstname.lastname@example.org.
"Last Updated: September 10, 2008 09:05 EDT"
China Inflation Cools to 4.9% as Export Growth Slows (Update2)
By Nipa Piboontanasawat and Li Yanping
"Sept. 10 (Bloomberg) -- China's inflation weakened to the slowest pace since June 2007 and export growth cooled, stoking speculation the government will cut taxes and ease loan restrictions to spur the world's fourth-largest economy."
"Consumer prices rose 4.9 percent in August from a year earlier, less than economists estimated, after gaining 6.3 percent in July, the National Bureau of Statistics said today. Exports rose 21.1 percent in August, down from July's 26.9 percent gain, the Customs Bureau said."
"Stocks rose, erasing earlier losses, on expectations China may lower taxes, slow the yuan's gains and ease lending restrictions to protect jobs at exporters after four quarters of slowing economic growth. Cooling inflation also leaves room for the government to counter power shortages by raising energy prices, encouraging refiners and generators to boost output."
"``The good news is that the price pressures that have been bothering China over the past 18 months have been decisively subdued,'' said Tao Dong, chief Asia economist at Credit Suisse Group AG in Hong Kong. ``The bad news is that perhaps this reflects the economy has slowed more than the government bargained for.''"
"The CSI 300 Index of stocks closed 0.2 percent higher on speculation that company profits may benefit from measures to stimulate growth. Officials are working on a plan for as much as 400 billion yuan ($58 billion) of tax cuts and spending to prevent an economic slump, according to economists and reports in domestic news media."
The yuan rose to close at 6.8385 against the dollar in Shanghai from 6.8404 immediately before the report was released. The currency has climbed only 0.2 percent against the dollar this quarter after a 6.5 percent advance in the first half. Gains hurt exporters by making their products more expensive.
"Inflation across Asia may peak in the fourth quarter and fall ``sharply'' in 2009 as oil prices decline and economic growth slows, Rob Subbaraman, a Hong Kong-based economist at Lehman Brothers Holdings Inc. said last month. Crude oil has fallen 30 percent from a record on July 11."
"Consumer prices in Japan rose 2.3 percent in July, the fastest pace in more than a decade, while Malaysia's inflation accelerated to 8.5 percent, the quickest in more than 26 years."
"China's producer prices climbed 10.1 percent, the fastest pace since at least 1996, after rising 10 percent in July, today's data showed."
"That may be a peak reflecting past commodity-price increases, said Ha Jiming, a Hong Kong-based chief economist at China International Capital Corp., adding that the government may have ``more room for domestic energy-price adjustments.''"
The government has already raised energy prices this year to improve refiners' and generators' margins and ease the nation's sixth year of power shortages.
"August's trade surplus climbed to a record $28.7 billion as import growth weakened to 23.1 percent from a year earlier, the slowest pace in almost a year, on falling commodity prices. Foreign direct investment pumped another $7 billion into the financial system last month, the commerce ministry said today."
"``Priority will now return to solely focusing on supporting growth,'' said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong."
"Consumer-price inflation has slowed for four months, edging closer to the central bank's target of 4.8 percent for the year. February's 8.7 percent pace was the fastest in 12 years. Food prices rose 10.3 percent in August from a year earlier after gaining 14.4 percent in July. Non-food prices increased 2.1 percent, the same as in July."
"The expansion in factory and property spending, one of the key drivers of the economy, maintained its pace in the eight months through August. Urban fixed-asset investment rose 27.4 percent to 8.49 trillion yuan from a year earlier, the statistics bureau said today. That compared with a 27.3 percent gain for the first seven months."
China's economy expanded 10.1 percent in the second quarter. The pace of growth remains the fastest of the world's 20 biggest economies.
"Weaker overseas demand, rising costs and a higher currency have put pressure on exporters of shoes, toys and clothes."
"In July, the central bank eased restrictions on how much banks can lend by raising 2008 loan quotas for national banks by 5 percent and regional lenders by 10 percent, according to reports by Goldman Sachs Group Inc., BNP Paribas SA, and China Merchants Bank Co."
"The central bank may increase loan quotas by another 5 percent to 10 percent no later than November, according to Sun Mingchun, an economist at Lehman in Hong Kong. The government may cut income tax and, from early 2009, allow tax deductions connected with companies' capital expenditure, he said."
The People's Bank of China has kept interest rates unchanged at a decade high this year. It hasn't increased the reserve ratio for banks -- the proportion of deposits that lenders are required to set aside -- since pushing it to a record 17.5 percent in June.
The record trade surplus may force the central bank to make extra efforts to prevent excess cash in the financial system from stoking inflation. Its main tools for freezing or soaking up money have been bill sales and the bank reserve requirements.
To contact the reporters on this story: Nipa Piboontanasawat in Hong Kong at email@example.com; Li Yanping in Beijing at firstname.lastname@example.org
"Last Updated: September 10, 2008 05:54 EDT"
IEA Lowers Oil Demand Forecast as U.S. Curbs Spending (Update1)
By Alexander Kwiatkowski
"Sept. 10 (Bloomberg) -- 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."
"The IEA lowered its 2008 forecast by 100,000 barrels to 86.8 million barrels a day, and the 2009 estimate by 140,000 barrels to 87.6 million barrels a day, the Paris-based agency said today in its monthly report. Declining consumption in developed economies is partly offset by higher fuel demand forecasts for China, India and Iran."
"``A combination of weak economic prospects and persistently high prices appears to be having an impact on consumer behavior and choices,'' David Fyfe, the head of the IEA's oil industry and markets division, said in a telephone interview."
"Oil prices have fallen about 29 percent since reaching a record $147.27 in New York in July, as drivers in the U.S., the world's biggest gasoline consumer, switch to smaller cars and make fewer journeys. Slower demand led the Organization of Petroleum Exporting Countries today to limit production at levels below current output. The IEA warned that the drop in U.S. consumption may last longer than previously expected."
"``The demand impact of weaker economic conditions and high prices during the summer, when oil prices reached an all-time peak, was more marked than expected, notably in the U.S.,'' the report said. There is evidence of a ``marked shift to more efficient vehicles, changing mobility and driving habits, signs that suburban living is gradually losing its appeal and ongoing modifications in business practices,'' it said."
"As consumption in the most industrialized countries slows, fuel demand in developing nations such as China and India is increasing, the IEA said. The group forecasts demand from countries outside the Organization for Economic Cooperation and Development to rise 4 percent, or 1.5 million barrels a day, in 2008 to 38.3 million barrels a day. That's 50,000 barrels a day more than forecast last month."
"In 2009, non-OECD demand is forecast to rise 3.7 percent, or 1.4 million barrels a day, to 39.8 million barrels a day, 20,000 barrels a day higher than previously expected, the IEA said."
"The IEA still expects oil demand to increase in 2008 by 0.8 percent, or 700,000 barrels a day compared with 2007, and by 1 percent, or 900,000 barrels a day in 2009."
"OPEC pumped 32.5 million barrels a day last month, 195,000 barrels a day less than in July because of field and pipeline outages in Iraq, Angola, Libya and Nigeria, according to IEA estimates."
"Global oil supply fell about 1 million barrels a day to 86.8 million barrels a day because of North Sea field maintenance and the shutdown of the BTC pipeline from Azerbaijan to Europe, according to the report."
"OPEC, which supplies more than 40 percent of the world's oil, will need to provide about 31.8 million barrels a day this year to balance world supply and demand, the report showed. That's about 100,000 barrels a day more than it estimated last month. Next year, the so-called ``call on OPEC crude'' will be 31.1 million barrels a day, the same level the IEA forecast last month."
"OPEC has increased production this year, taking output above its agreed targets, to balance shortfalls elsewhere and satisfy the developing world's thirst for crude. Most of the increase has come from Saudi Arabia, which pledged to raise output by 500,000 barrels a day through June and July to calm prices."
"Members of the producer group today agreed to adhere more strictly to its 11-member target of 28.8 million barrels a day, about 520,000 barrels lower than its July output. Iran and Venezuela were among members that favored action to support falling prices, with the Venezuelan Oil Minister Rafael Ramirez calling on the group to defend an oil price of $100 a barrel."
"OPEC's decision to remove barrels from the market could prove to be ``counterproductive'' in the current environment, the IEA's Fyfe said. ``High oil prices are still hurting.''"
Crude oil for October delivery traded at $104.08 on the New York Mercantile Exchange at 9:55 a.m. London time.
"The IEA also trimmed its projections for supply from outside OPEC this year by 180,000 barrels a day to 49.9 million barrels after hurricanes caused the shutdown of production in the Gulf of Mexico. Non-OPEC oil supply for 2009 will be 50.7 million barrels a day, 85,000 barrels a day less than forecast last month because of lower Russian, Norwegian, Australian and Chinese production, the IEA said."
To contact the reporter on this story: Alexander Kwiatkowski in London at email@example.com
"Last Updated: September 10, 2008 05:23 EDT"
Yen Weakens as Lehman's Plan Boosts Demand for Higher Yields
By Ye Xie
Sept. 10 (Bloomberg) -- The yen fell the most in more than two weeks against the euro and the dollar as Lehman Brothers Holdings Inc.'s plan to sell assets encouraged investors to take out loans in Japan and buy higher-yielding assets elsewhere.
Japan's currency also decreased versus the Australian and New Zealand dollars on speculation carry trades will resume on the Wall Street firm's attempt to shore up capital. The euro dropped to an 11-month low against the dollar as the European Commission cut its growth forecast and crude oil and gold fell.
"``The currency market is taking its cue from equities,'' said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York."
"The yen declined 0.4 percent to 151.56 per euro at 11:43 a.m. in New York, from 150.94 yesterday. It earlier touched 150.16, the strongest level since August 2007. The yen dropped 1 percent to 107.88 per dollar, from 106.81. The dollar increased 0.6 percent to $1.4049 per euro, from $1.4133 yesterday, and reached $1.4012, the strongest level since October 2007."
Japan's currency dropped 1.4 percent to 86.88 against the Australian dollar and the Swiss franc decreased 0.7 percent to 1.3192 versus the New Zealand dollar on bets investors will add to 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 and Switzerland's 2.75 percent benchmark compare with 7 percent in Australia and 8 percent in New Zealand.
"Lehman advanced 12 percent, rebounding from yesterday's record plunge, on a plan to sell a majority stake in its asset- management unit, spin off commercial real estate and slash its annual dividend 93 percent. The Standard & Poor's 500 Index increased 0.4 percent."
"S&P futures initially fell 0.5 percent and the yen touched a 13-month high versus the euro on Lehman's $3.9 billion quarterly loss, the biggest in its 158-year history, and writedowns of $5.6 billion. The New York firm moved its third- quarter earnings announcement up a week after talks with state- owned Korea Development Bank about a possible investment ended."
"The yen has gained almost 10 percent versus the euro this quarter on concern credit market losses are deepening and the global economy is slowing. It touched 85.03 against the Australian dollar and 69.90 versus New Zealand dollar on Sept. 5, the strongest levels since July 2006."
"The euro's 14-day relative strength index against the yen, a comparison of the magnitude of gains and losses, was 20.38. A reading below 30 typically signals a change in price direction is imminent."
`Take a Break'
"``People have been wondering when the markets were going to take a break,'' said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo. ``A bout of risk aversion led to a massive reversal in many trades that pushed down the euro and caused the yen to rise. This move has clearly gone too far.''"
The U.S. currency has gained almost 12 percent versus the euro from the all-time low of $1.6038 on July 15 on evidence the European economy is slowing.
"The 15-nation euro region's economy will probably stagnate this quarter after shrinking in the previous three months for the first time since the euro was introduced in 1999, the European Commission said today. The Brussels-based commission cut its forecast for the region's economic growth to 1.3 percent this year, from 1.7 percent earlier, and signaled the 2009 outlook may also be lowered."
"Luxembourg Finance Minister Jean-Claude Juncker said today Europe's currency is still ``overvalued.'' Juncker, who spoke at a hearing before the European Parliament's economic and monetary affairs committee in Brussels, also said Europe faces ``a risk of a technical recession.''"
`In Favor' of Dollar
"``The underlying trend is still in favor of the dollar, even if we're in for a period of consolidation,'' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York."
"The greenback is likely to extend its gains, and the Australia and New Zealand currencies are still attractive, said Jim Rogers, an investor who correctly predicted the start of the commodities rally in 1999."
"``The dollar recovery is certainly taking place and has ways to go -- a few weeks, a few months, maybe another year or so,'' Rogers said. ``I'm waiting for the dollar to continue to rally so I can sell dollars.''"
"Implied volatility on the dollar versus the most actively traded currencies fell to 11.5 percent today after touching 12 percent yesterday, the highest since April. The gauge of perceived price fluctuation in the dollar among investors reached 9.27 percent on Aug. 4, the lowest this year."
"Crude oil for October fell 1.4 percent to $101.85 a barrel, while fold futures for December delivery dropped 3.1 percent to $767.20 an ounce. The euro-dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep."
To contact the reporter on this story: Ye Xie in New York at firstname.lastname@example.org
"Last Updated: September 10, 2008 11:48 EDT"
Ruble Drops to One-Year Low Against Dollar as Stocks Decline
By Emma O'Brien
Sept. 10 (Bloomberg) -- The ruble dropped to its lowest level in more than a year against the dollar as stocks dropped for a second day after a report showed economic growth slowed in the second quarter.
"The currency weakened as the Micex stock index slid 5.3 percent. Investors pulled about $113 million out of Russia in the two weeks to Sept. 3 following oil's slump from a record and the country's five-day war with Georgia, according to Alfa Bank. Economic growth slowed to 7.5 percent in the three months through June, from 8.5 percent in the first quarter, the Federal Statistics Service said today."
"``The world has changed the way it looks at Russia and that's resulting in a stock market under pressure and the flow side of the story not being as positive as it used to be,'' said Lars Rasmussen, an emerging-markets analyst in Copenhagen at Danske Bank A/S, whose subsidiary the Helsinki-based Sampo Bank Plc is among the top five traders of the ruble in the world. ``The prospects for the ruble have deteriorated.''"
"Russia's currency dropped to 25.6423 per dollar, the lowest level since Sept. 7, 2007, before trading at 25.6321 by 2:22 p.m. in Moscow. It was little changed at 36.1572 per euro, from 36.1597 yesterday."
"Bank Rossii, Russia's central bank, buys and sells the ruble regularly to keep it within a trading band against a basket made up of dollars and euros to limit fluctuations that hurt the competitiveness of Russian exports."
"The ruble held at 30.3723 versus the basket today, from 30.3431 yesterday. The basket rate is calculated by multiplying the rate to the dollar by 0.55 and the euro rate by 0.45, then adding the two together."
Central Bank Sales
"The currency has weakened about 2.3 percent against the basket since Russia invaded Georgia on Aug. 8, sliding to 30.4045, its lowest closing price in more than two years, on Sept. 4. Bank Rossii First Deputy Chairman Alexei Ulyukayev said a day later that the bank sold a ``significant'' amount of foreign currency to arrest the ruble's slide."
"``Worries over Russia's domestic economy'' will dog equities, analysts led by Peter Weston at JPMorgan Chase & Co. in Moscow wrote in a note today, reiterating its ``underweight'' recommendation on the country's stocks."
"The dollar-denominated RTS index slid 4.5 percent today, after dropping 7.5 percent yesterday."
"Bank Rossii has been expanding the ruble's trading band to the basket since mid-May to deter speculators from betting above-target inflation will force them to let the ruble appreciate this year. The central bank has no plans to expand the ruble's current trading band to the basket ``over the coming months,'' Ulyukayev said two days ago."
Credit Suisse Goes Long
"Investors should reinstate long positions on the ruble, or bets it's going to rise, because of Ulyukayev's comments, Credit Suisse Group analysts led by Kasper Bartholdy in London wrote in a client note yesterday. ``The downside for the ruble is limited,'' the analysts wrote."
"Russian bonds dropped, with the yield on the benchmark 7.5 percent note due 2030 gaining 6 basis points to 5.89 percent. The two-year note yield advanced 14 basis points, to 6.16 percent, the biggest jump since Aug. 8. The difference in yield between Russian and U.S. two-year debt was at 392 basis points today, the widest since March."
To contact the reporter on this story: Emma O'Brien in Moscow at email@example.com
"Last Updated: September 10, 2008 06:43 EDT"
"European Stocks Fall on Growth Concern; Carnival, Banks Drop "
By Sarah Jones
Sept. 10 (Bloomberg) -- European stocks fell for a second day after the European Commission cut its forecast for the region's economic growth and concern deepened bank losses will increase.
"Carnival Plc, the world's largest cruise-line company, sank 3.5 percent, while GDF Suez SA, France's biggest utility, lost 3.2 percent after the commission said the euro-area economy will expand 1.3 percent this year, down from an earlier forecast of 1.7 percent. Credit Agricole SA dropped 4.7 percent and UBS AG declined 2.8 percent. Lehman Brothers Holdings Inc. reported a $3.9 billion loss in the third quarter."
"Europe's Dow Jones Stoxx 600 Index slipped 0.9 percent to 277.16 at 4:30 p.m. in London, extending this year's decline to 24 percent. More than $15 trillion has been erased from global equities in 2008 as accelerating inflation and $512 billion in bank writedowns and losses threaten economic growth."
"``The worries are multiple,'' said Sebastien Korchia, a fund manager at Meeschaert Asset Management in Paris, which oversees about $2.8 billion. ``There's the problem of growth coupled with inflation. The market also has other worries about the rest of the banking system.''"
"Cie. Financiere Richemont SA tumbled 6.3 percent after the world's largest jewelry maker said U.S. sales are slowing. RSA Insurance Group Plc slumped 5.6 percent after JPMorgan Chase & Co. recommended selling shares of the U.K's second-largest non- life insurer, saying takeover prospects were limited."
"National benchmark indexes dropped in all 18 western European markets except Norway. Germany's DAX declined 0.6 percent, and the U.K.'s FTSE 100 lost 0.9 percent. France's CAC 40 fell 0.4 percent."
"Carnival slipped 3.5 percent to 2,026 pence. Ryanair Holdings Plc, Europe's biggest discount airline, slid 2.9 percent to 2.72 euros. GDF Suez retreated 3.2 percent to 34.525 euros."
"``Developments in the global economy seem to suggest a significant downward revision for 2009,'' the European Commission said today, referring to forecasts it plans to publish in November."
"Separately, the National Institute for Economic and Social Research said the U.K. economy is contracting for the first time in at least a decade."
"Analysts slashed earnings estimates this year as the global economy cooled and the biggest surge in mortgage defaults in at least three decades forced banks to write down assets. Profit for companies in the Stoxx will slump 2.1 percent in 2008, down from 11 percent growth forecast at the end last year, according to data compiled by Bloomberg."
"Credit Agricole, France's third-largest bank, fell 4.7 percent to 14.06 euros. UBS, the European bank hardest hit by subprime-related losses, declined 2.8 percent to 23.56 francs. Barclays Plc lost 4.2 percent to 350.5 pence."
"Lehman had $5.6 billion of writedowns and said it plans to sell a majority stake in its ass-management unit, spin off commercial real-estate holdings and cut its dividend to shore up capital. The fourth-largest U.S. securities firm was expected to post a $2.2 billion loss, according to analysts' predictions."
"``Lehman still faces challenges to earnings given a lower capital markets environment for the next several quarters and further writedowns to its risks exposures,'' Oppenheimer & Co. analyst Meredith Whitney wrote in a note to investors. ``The announced initiatives are a step in the right direction.''"
"Richemont, the world's largest jewelry maker, fell 6.3 percent to 60.55 francs after saying all but the most expensive luxury goods face ``difficult'' conditions. Total sales rose by 11 percent from April through August, down from the 13 percent pace in the first quarter."
"RSA, Old Mutual"
"RSA declined 5.6 percent to 153.3 pence after JPMorgan cut the insurer to ``underweight'' from ``overweight'' as analysts said they see limited prospects for mergers and acquisitions at current levels. Separately, Royal Bank of Scotland Group Plc lowered its recommendation for the shares to ``hold'' from ``buy.''"
"Old Mutual Plc dropped 2.3 percent to 98.6 pence after South Africa's biggest insurer named Julian Roberts as chief executive officer to replace Jim Sutcliffe, who has resigned as the company added to writedowns related to its U.S. business."
"EasyJet Plc, Europe's second-biggest discount airline, lost 2.8 percent to 365 pence. UBS downgraded the shares to `sell'' from ``neutral,'' which said gains in the stock don't reflect challenges it faces next year."
Sanofi-Aventis SA gained 5.8 percent to 50.25 euros after the drugmaker named GlaxoSmithKline Plc's Chris Viehbacher as chief executive officer. Current chief Gerard Le Fur will continue to advise management.
To contact the reporter on this story: Sarah Jones in London at firstname.lastname@example.org.
"Last Updated: September 10, 2008 11:35 EDT"
"Copper Drops in New York, Erasing Gains, as Crude Oil Declines "
By Millie Munshi
"Sept. 10 (Bloomberg) -- Copper fell in New York, extending a seven-month low and erasing earlier gains, as a decline in energy costs reduced demand for commodities as a hedge against inflation."
"Crude oil dropped as much as 1.5 percent, reversing an earlier advance. Before today, oil had plunged 30 percent since touching a record in July, spurring a rout in raw-material prices. Copper lost 7.5 percent in August, the second straight monthly slide."
"``Everybody's looking at oil,'' said Matthew Zeman, a metals trader at LaSalle Futures Group in Chicago. ``It's really driving copper, and the other commodities.''"
"Copper futures for December delivery fell 2.75 cents, or 0.9 percent, to $3.0595 a pound at 11:29 a.m. on the Comex division of the New York Mercantile Exchange. The price touched $3.04, the lowest for a most-active contract since Jan. 22."
"Earlier, copper rose as much as 0.9 percent after Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded producer of the metal, reported a disruption at its Grasberg mine in Indonesia."
"Freeport, based in Phoenix, lowered its near-term sales outlook, citing a ``small-scale failure'' at Grasberg, the world's second-largest copper mine. The price of the metal has more than tripled in the past five years, partly because of supply disruptions."
"``The fear premium over supplies will support prices, putting a floor in,'' Zeman said."
"Still, concerns about global growth may outweigh ``fear'' related to the supply situation and prevent large price gains, Zeman said."
"The European Commission cut its growth outlook for the euro area for the rest of the year and predicted a recession for Germany, the region's largest economy. Before today, copper had tumbled 28 percent from a record in May on speculation a slowing global expansion would reduce demand."
"``The copper market now focuses on demand,'' said Dan Brebner, a metals analyst at UBS AG, said today by phone from London. ``The Grasberg incident will lend support to prices, but the overall driver remains the near-term demand outlook, which remains negative.''"
"On the London Metal Exchange, copper for delivery in three months rose $4.75, or 0.1 percent, to $6,834.75 a metric ton ($3.10 a pound)."
To contact the reporter on this story: Millie Munshi in New York at email@example.com
"Last Updated: September 10, 2008 11:45 EDT"
"French Stocks: Credit Agricole, Dexia, Sanofi-Aventis, Vivendi "
By Adria Cimino
"Sept. 10 (Bloomberg) -- France's CAC 40 Index retreated 42.15, or 1 percent, to 4,251.19 at 2:09 p.m. in Paris, declining for a second day. The SBF 120 Index lost 1 percent."
Bank stocks fell after Lehman Brothers Holdings Inc. reported a $3.9 billion third-quarter loss and cut its dividend to 5 cents a share from 68 cents. Lehman also said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence.
"Societe Generale SA, France's third-largest bank by assets, slid 3 euros, or 4.4 percent, to 65.50. Credit Agricole SA, the second-biggest, sank 56 cents, or 3.8 percent, to 14.19 euros."
"Dexia SA, the world's largest lender to local governments, retreated 50 cents, or 4.6 percent, to 10.51 euros. Oddo Securities cut its recommendation on the shares to ``reduce'' from ``add.''"
The following were among the most active stocks in Paris. Symbols are in parentheses.
"Akka Technologies SA (AKA FP) surged 85 cents, or 6.1 percent, to 14.75 euros, the highest in more than a year. The technology consulting company said first-half net income rose 85 percent to 7.2 million euros ($10 million) and forecast full-year sales will climb to more than 380 million euros."
"Groupe Partouche SA (PARP FP) slid 76 cents, or 11 percent, to 5.99 euros, dropping the most since January. France's biggest casino operator said fiscal third-quarter revenue fell 9.5 percent to 116.4 million euros."
"Sanofi-Aventis SA (SAN FP) jumped 2.18 euros, or 4.6 percent, to 49.68, rising for a third day. France's biggest drugmaker said Chief Executive Officer Gerard Le Fur will be replaced by GlaxoSmithKline Plc's Chris Viehbacher."
"Vivendi SA (VIV FP), owner of France's second-largest wireless company, lost 27 cents, or 1.1 percent, to 25.12 euros, falling for the first time this week. Lehman Brothers Holdings Inc. cut its recommendation on the stock to ``equal weight'' from ``overweight.''"
To contact the reporter on this story: Adria Cimino in Paris at firstname.lastname@example.org.
"Last Updated: September 10, 2008 08:26 EDT"
Yen Falls as Lehman Speculation Boosts Demand for Higher Yields
By Agnes Lovasz and Stanley White
"Sept. 10 (Bloomberg) -- The yen weakened on speculation Lehman Brothers Holdings Inc. will survive a credit-market slump, prompting investors to increase holdings of higher- yielding assets funded in the Japanese currency."
The yen fell against the euro for the first time in three days and slid versus the dollar as Lehman rose in German share trading before the bank reports results today. The euro fell against the dollar after Luxembourg Finance Minister Jean-Claude Juncker said the single currency is ``overvalued.''
"``We have the Lehman numbers coming out and one expects that they may have something concrete in terms of restructuring or sell-off news,'' said Jeremy Stretch, senior strategist in London at Rabobank International, the third-largest Dutch bank. ``As the news ebbs and flows, the yen seems to be reflecting the change in sentiment.''"
"The yen weakened to 151.51 per euro at 7:01 a.m. in New York, from a one-year high of 150.52 earlier and 150.94 yesterday. It depreciated to 107.44 per dollar from 106.81. The dollar was at $1.4132 per euro from $1.4093 after reaching $1.4047 yesterday, the strongest since October 2007."
"Lehman, the fourth-largest U.S. securities firm, said yesterday it will disclose ``key strategic initiatives'' when it reports third-quarter earnings at 7:30 a.m. in New York today, a week earlier than planned. Korea Development Bank is in talks to buy more than 25 percent of Lehman for about $6 billion, Yonhap reported today, citing an executive at KDB it didn't identify. The yen pared its declines after KDB said in a subsequent statement it has terminated talks with Lehman."
`Never Say Never'
"``It looks at this juncture that the Korean deal is dead but one should never say never in this environment,'' said Stretch."
Lehman rose 32 percent in German share trading today. It dropped 45 percent yesterday to the lowest level in a decade as a person familiar with the matter said talks with the Korean firm had broken down.
"The yen typically falls when demand for higher-risk assets increases, as traders put on so-called carry trades. In such transactions, investors get funds in a country with low borrowing costs and put them into one with higher interest rates. The risk is that currency market moves erase those profits. Japan's 0.5 percent target lending rate compares with 7 percent in Australia and 8 percent in New Zealand."
"Juncker, who spoke at a hearing before the European Parliament's economic and monetary affairs committee in Brussels, also said Europe faces ``a risk of a technical recession.''"
`Doesn't Take Much'
"``Those comments from Juncker were enough to see some renewed weakness to feed through to the euro,'' said Ian Stannard, a London-based currency strategist for BNP Paribas SA. ``It doesn't take very much to put the euro back under pressure.'' The euro may fall to as low as $1.4050 today, Stannard forecast."
The Australian dollar fell to the lowest in more than a year as declines in gold weighed on the outlook for the commodities exporter.
"Australia's currency dropped to below 80 U.S. cents for the first time since August 2007 before trading at 80.54 cents, from 80.24 cents yesterday, as the price of gold, the nation's fourth most-valuable export commodity, declined to a 10-month low. Gold futures for immediate delivery fell as much as 1.8 percent to $763.20 an ounce, its lowest intraday price since Oct. 27."
"``The decline in gold is causing a lot of problems for people who were betting on further gains,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth-largest publicly traded lender by assets. ``Investors are closing out a lot of bets, and it seems that money is flowing from other currencies into the U.S. dollar.''"
"The Australian dollar will likely recover after the unwinding of the carry trade ends, said investor Jim Rogers, who correctly predicted the start of the commodities rally in 1999."
"``I still own the Australian dollar,'' Rogers told Bloomberg Television. ``I'm not thinking of selling it because if I'm right, the reversal of the carry trade is not going to last forever, it will last for a while.''"
"Against the yen, the euro rose as technical analysis showed its 9.4 percent decline this quarter was overdone, according to Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo."
"The euro's 14-day relative strength index against the yen, a comparison of the magnitude of gains and losses, was 20.38. A reading below 30 typically signals a change in price direction is imminent."
`Gone Too Far'
"``People have been wondering when the markets were going to take a break,'' said Suzuki. ``A bout of risk aversion led to a massive reversal in many trades that pushed down the euro and caused the yen to rise. This move has clearly gone too far.''"
"The yen also declined against the dollar on speculation Japanese importers sold it for foreign currencies to pay their bills. Many Japanese companies close their accounts on the fifth, the 10th, the 15th, the 20th, the 25th and the last business day of every month. These days are known as ``Gotobi'' in Japanese."
"``There were orders from Japanese importers that weighed on the yen,'' said Katsunori Kitakura, chief treasury dealer in Tokyo at Chuo Mitsui Trust & Banking Co., Japan's seventh- largest publicly listed lender. ``The market had been moving in one direction for some time, and it seems some people were waiting to sell into the yen's rally.''"
"The yen may fall to 107.50 versus the dollar today, he said."
To contact the reporters on this story: Agnes Lovasz in London at email@example.com; Stanley White in Tokyo at firstname.lastname@example.org
"Last Updated: September 10, 2008 07:09 EDT"
Slovak Inflation Rate Rose to 2-Year High in August (Update2)
By Radoslav Tomek
"Sept. 10 (Bloomberg) -- Slovakia's inflation rate rose in August to the highest in two years, driven by the rising costs of running a household."
"The rate advanced to 5 percent from 4.8 percent in the previous month, the Bratislava-based Slovak Statistics Office said in a statement today. On a monthly basis, consumer prices rose 0.2 percent. The annual rate was above the 4.7 percent median estimate of seven economists surveyed by Bloomberg."
"The east European country is trying to keep inflation, which has exceeded the central bank's year-end forecast of 3.8 percent since February, under control ahead of euro adoption in January. Still, the data won't prompt a change in borrowing costs since the central bank's key two-week interest rate already matches the 4.25 percent benchmark rate in the euro region, economists said."
"``A significant increase in imputed rent kept inflation from falling, even as food prices posted an expected seasonal drop,'' said Michal Musak, an economist at Slovenska Sporitelna AS in Bratislava. He expects the rate to rise to 5.2 percent by the end due to higher cigarette prices."
"The costs of running a household rose 1.3 percent in the month, driven by so-called imputed rent, a statistical gauge of homeowner's maintenance costs. Health-care and restaurant prices both advanced 0.4 percent."
"Food and fuel prices, which drove inflation up earlier this year, declined in August. Food prices dropped 0.9 percent, while falling oil pushed transportation prices down 0.5 percent in month."
"The central bank expects inflation to gradually slow, Governor Ivan Sramko told reporters on the sidelines of a government meeting in Bratislava."
"``I expect that inflation has reached a peak,'' he said."
To contact the reporter on this story: Radoslav Tomek in Bratislava at email@example.com.
"Last Updated: September 10, 2008 07:23 EDT"
"German Stocks Pare Losses; Postbank, Deutsche Boerse Advance "
By Daniela Silberstein
"Sept. 10 (Bloomberg) -- German stocks pared earlier declines, led by Deutsche Postbank AG as Deutsche Bank AG's Chief Executive Officer Josef Ackermann said Germany's biggest consumer bank by clients would fit ``strategically.''"
"Deutsche Post AG, Europe's biggest postal service, and Deutsche Boerse AG also advanced."
"The DAX Index slipped 4.25, or 0.1 percent, to 6,229.16 at 1:23 p.m. in Frankfurt after dropping as much as 0.9 percent. DAX Index futures expiring in June lost 0.1 percent to 6,230. The HDAX Index of Germany's 110 biggest companies fell 0.1 percent."
"Postbank climbed 1.31 euros, or 2.9 percent, to 46.01. Ackermann said the company would strengthen Germany's largest bank. Such an acquisition would depend on the price and strategy, Ackermann said at a banking conference in Frankfurt today."
"Deutsche Post, the owner of Postbank, added 22 cents, or 1.4 percent, to 15.98 euros. FedEx Corp., the largest air-parcel shipper, said it will report a profit of $1.23 a share for the quarter ended Aug. 31, exceeding an earlier forecast."
"Deutsche Boerse rallied 2.05 euros, or 3.3 percent, to 63.80. The operator of the Frankfurt stock exchange said it will ask its board to rebuff pressure from the company's two biggest investors to sell the equities unit, or merge with another European exchange."
To contact the reporter on this story: Daniela Silberstein in Zurich at firstname.lastname@example.org.
"Last Updated: September 10, 2008 07:31 EDT"
El-Badri Says OPEC Is Cutting `Huge Oversupply' (Update1)
By Fred Pals and Alexander Kwiatkowski
"Sept. 10 (Bloomberg) -- OPEC Secretary-General Abdalla El- Badri said the group's decision to adhere to production quotas means it is cutting output by about 500,000 barrels a day."
"OPEC members are reducing a ``huge oversupply'' of oil on the market, El-Badri said today during a press briefing at OPEC headquarters in Vienna. Before the cut, the group was producing 900,000 barrels a day above its quota, he said."
"The Organization of Petroleum Exporting Countries, the producer of 40 percent of the world's oil, earlier urged members to cut production to comply with output quotas after prices fell to a five-month low."
"Ministers from OPEC agreed at a meeting in Vienna to a total production limit for 11 members of 28.8 million barrels a day, unchanged from their previous targets. OPEC President Chakib Khelil said the group pumped 520,000 barrels a day above its quota in July."
"``Those that overproduce should go back immediately to their production quota as of September 2007,'' El-Badri said. Such a move would help curb oil price volatility caused by speculators in recent months, he said."
"El-Badri declined to say whether OPEC informally agreed to defend a price of $100 a barrel as its floor. ``The market is going back to its fundamentals,'' he said."
"Iran and Venezuela were among members that urged OPEC to take action to support prices that slid 29 percent from July's record as slower global economic growth curbed demand. Brent, a benchmark to price two-thirds of the world's crude oil, fell below $100 a barrel in London for the first time in five months yesterday."
"Indonesia's ``suspension'' of OPEC membership will come into effect on Jan. 1, El-Badri added."
To contact the reporters on this story: Fred Pals in Amsterdam at email@example.comAlexander Kwiatkowski in London at firstname.lastname@example.org
"Last Updated: September 10, 2008 08:10 EDT"
Pimco Total Return Fund Gained $1.7 Billion on Housing Rescue
By John Glover
"Sept. 10 (Bloomberg) -- Bill Gross's Pimco Total Return Fund made a $1.7 billion gain after the U.S. seized control of mortgage-finance companies Fannie Mae and Freddie Mac, data compiled by Bloomberg show."
"The fund's assets rose 1.3 percent to more than $134 billion on Sept. 8, according to Bloomberg calculations. About 65 percent of Gross's holdings were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or government agency Ginnie Mae, according to Allianz Global Investors' Web site. Pimco is a unit of Allianz SE, Europe's biggest insurer."
"Gross, the chief investment officer of Pacific Investment Management Co. in Newport Beach, California, said in February he was taking advantage of slumping prices for ``high quality'' assets as financial companies sell holdings to cover losses triggered by the collapse of U.S. subprime mortgages."
"The U.S. government stepped in to prevent a collapse of Washington-based Fannie and Freddie in McLean, Virginia on Sept. 7, protecting investors owning more than $5 trillion of the companies' corporate debt and mortgage-backed securities while potentially sacrificing shareholders."
"Reuters reported earlier that the jump in the valuation of Pimco's Total Return Fund was its biggest one-day gain against its benchmark index. The fund fell 0.2 percent yesterday, Bloomberg data shows."
To contact the reporter on this story: John Glover in London at email@example.com
"Last Updated: September 10, 2008 06:07 EDT"
Treasuries Decline as U.S. Stocks Gain on Lehman Announcement
By Sandra Hernandez
"Sept. 10 (Bloomberg) -- Treasuries declined after Lehman Brothers Holdings Inc. announced plans to shed assets to survive a crisis of investor confidence, boosting stocks and damping demand for government debt."
Two-year notes erased most of a rally yesterday that was triggered by Lehman's plunge to a 10-year low. Ten-year notes extended a retreat from what technical indicators showed were the most overbought levels since January as traders prepared for the Treasury's auction of the securities tomorrow.
"``There's a wide feeling that a lot of the news is out now and there's the chance we can turn this thing around,'' said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee."
"The yield on the two-year note rose 9 basis points to 2.25 percent as of 9:44 a.m. in New York, according to BGCantor Market Data. It fell as much as 17 basis points yesterday, the biggest drop since Feb. 29. The 2.375 percent security due in August 2010 fell 6/32, or $1.88 per $1,000 face amount, to 100 8/32. The 10-year note's yield rose 8 basis points to 3.65 percent, recouping most of yesterday's 11-basis-point drop."
"The Standard & Poor's 500 Index gained 0.6 percent in early trading. Lehman advanced as much as 19 percent on its plan to sell a majority stake in its asset-management unit, spin off commercial real estate and slash its annual dividend 93 percent. The company reported a $3.9 billion loss that was bigger than analysts forecast."
`Way Too Far'
"``You've had this enormous safe haven bid because of Lehman and other financial firms' viability,'' said Tom di Galoma, head of U.S. Treasury trading at Jefferies & Co., a brokerage for institutional investors in New York. ``Prices are a little too high here given you have a 10-year auction tomorrow. The market's run up way too far.''"
"A technical indicator used by some traders to predict changes in the direction of prices indicated 10-year notes were poised to fall after they reached the most overbought levels in almost nine months. The 14-day relative strength index for December 10-year note futures contracts fell to 59 today from 70 on Sept. 4. A reading above 70 indicates the notes are ``overbought,'' while one below 30 indicates oversold conditions."
The Treasury tomorrow will sell $12 billion in 10-year notes.
"Korea Development Bank said today in an e-mail it ended talks with Lehman, citing failure to agree on terms. Ten-year notes fell as much as 19/32 after South Korea's Yonhap news earlier reported KDB may buy more than 25 percent of the firm for about $6 billion."
"Treasuries have gained since the start of the quarter as writedowns and credit-market losses at financial firms worldwide reached $506 billion. Government bonds of all maturities has returned 2.9 percent since June 30, according to Merrill Lynch & Co.'s U.S. Treasury Master Index. So far this year, they have returned 5.2 percent, versus 9.06 percent for all of 2007."
To contact the reporters on this story: Sandra Hernandez in New York at firstname.lastname@example.org;
"Last Updated: September 10, 2008 09:47 EDT"
"Sugar Declines as Dollar Resumes Rally, Curbs Commodity Demand "
By Ron Day
"Sept. 10 (Bloomberg) -- Sugar fell for a fourth straight day as the dollar resumed a rally that began in July, damping demand for raw materials priced in the U.S. currency."
"The dollar gained against the euro for the ninth day out of 10, boosting the costs of commodities for buyers using the European currency. The euro slid after the European Commission cut its growth estimate for this year and predicted a recession for the German economy, the region's largest."
"Raw-sugar futures for March delivery, which became the most-active contract today, fell 0.07 cent, or 0.5 percent, to 13.78 cents a pound at 8:50 a.m. on ICE Futures U.S., the former New York Board of Trade."
"Sugar for October delivery, previously the most-active contract, fell 0.01 cent, or 0.1 percent, to 12.09 cents a pound, after earlier reaching 11.98 cents, the contract's lowest price since July 24."
To contact the reporter on this story: Ron Day in New York at email@example.com.
"Last Updated: September 10, 2008 08:51 EDT"
Russia's Economic Expansion Slowed in Second Quarter (Update3)
By Maria Levitov
Sept. 10 (Bloomberg) -- Russia's economy expanded at a slower pace in the second quarter as lower investment and the strong ruble hurt domestic producers.
"Gross domestic product grew 7.5 percent, compared with 8.5 percent in the previous three-month period, the Moscow-based Federal Statistics Service reported in an e-mailed statement. The figure is not seasonally adjusted. The median forecast of 10 economists surveyed by Bloomberg was for growth of 7.6 percent. The economy grew 8.1 percent in the second quarter of 2007."
"Eastern Europe's economic outlook is deteriorating because of spillover problems from the global slowdown and high inflation, with average growth in the region set to slow to a six-year low of 5.8 percent this year from 6.9 percent in 2007, according to Fitch Ratings."
"``Lower capital inflows have already played a role. Their effect on growth will be felt more in the coming months,'' Yaroslav Lissovolik, chief economist at Deutsche Bank AG in Moscow, said by telephone today. ``High raw materials prices, high salaries'' and other rising costs for companies also slowed expansion, he said."
"Russia's growth may slip to 7.8 percent this year from 8.1 percent in 2007, according to the Economy Ministry, as accelerating inflation saps domestic demand and erodes gains in average wages. Industrial output rose in June at the slowest pace in 5 1/2 years and a gauge of manufacturing output compiled by VTB Bank Europe declined throughout the second quarter."
"Growth lagged behind India and China, at 7.9 percent and 10.1 percent respectively, though it was more than five times higher than in the euro region, which had a 1.4 percent economic expansion in the second quarter."
"Vladimir Osakovsky, an economist at UniCredit SpA in Moscow, said ``an influx of imports also hit producers'' because the strong ruble made it harder for them to compete."
"The ruble gained 5.22 percent against the dollar this year through July 1, according to Bloomberg data. Foreign direct investment totaled $11.1 billion in the first half, a 30 percent decline from last year, according to the statistics office."
"The managed currency was little changed against the dollar and the euro. The ruble was at 25.5908 per dollar by 2 p.m. in Moscow, from 25.5841 yesterday, when it fell to 25.6301, the lowest level since September 2007. The ruble was at 36.1645 per euro, from 36.1597."
"Accelerating consumer and producer-price inflation alongside slowing real income and investment growth are ``dangerous'' signs of an economic slowdown, said Petr Aven, the president of Russia's Alfa Bank."
"Producer-price growth surged an annual 33.7 percent in July and the inflation rate rose to 15 percent in August, close to a 5- year high. Real wage growth declined from an average rate of 16.2 percent last year to 12.8 percent this year."
"``This could be a change of trend,'' Aven told an investment conference yesterday."
"OAO Wimm-Bill-Dann, Russia's largest dairy company, cut its annual revenue and earnings forecasts last month because of rising raw material costs and lower sales volumes."
"OAO Lukoil, Russia's biggest independent oil company, also said that a stronger ruble and higher operating expenses ate into profit in the first half. A significant part of Lukoil's revenue is denominated in U.S. dollars, while most of its costs are settled in rubles."
"Still, even with a slower pace of expansion in the second quarter, GDP will probably increase 7.8 percent this year, according to Lissovolik."
"Growth ``is still high'' and the recent decline of the ruble will help domestic producers, UniCredit's Osakovsky said."
"Russia's central bank sold foreign currency last week to prop up the ruble, which was slumping because of investors pulling money out after the conflict with Georgia, the dollar's rally and a drop in commodities prices. Net capital outflow reached $4.6 billion in August, according to the central bank's preliminary estimates."
"Finance Minister Alexei Kudrin said today that Russia must create a more stable environment to provide access to cheaper loans and help ``the ruble become a currency to invest in and not to flee, which is what's happening now.''"
"``We still haven't ensured macroeconomic stability,'' he said."
To contact the reporter on this story: Maria Levitov in Moscow at firstname.lastname@example.org
"Last Updated: September 10, 2008 06:19 EDT"
Platinum Declines to 18-Month Low in London as Car Sales Slow
By Stuart Wallace
"Sept. 10 (Bloomberg) -- Platinum fell to an 18-month low in London and palladium reached its lowest since November 2005 on concern that slowing car sales will sap demand for the metals, used in autocatalysts. Gold and silver were little changed."
"U.S. auto sales dropped to a 15-year low in July and Toyota Motor Corp., the world's second-largest carmaker, is cutting production in Europe. Passenger car sales in China fell for the first time in three years last month, the China Association of Automobile Manufacturers said yesterday."
"``The precious complex continues to be hard hit by aggressive fund liquidation,'' James Moore, an analyst at TheBullionDesk.com in London, wrote in a report today."
"Platinum for immediate delivery fell as much as $33, or 2.7 percent, to $1,202.50 an ounce in London, the lowest compared with intraday prices since March 2007. The metal traded down $22.75 at $1,212.75 as of 11:17 a.m. local time. Platinum has dropped 47 percent from a record $2,301.50 reached March 4."
"Prices jumped as much as 46 percent in the first two months of the year after South Africa restricted power supplies to mines to cope with an energy shortage. South Africa accounts for about three-quarters of world platinum supply, according to Johnson Matthey Plc."
"About half of demand comes from carmakers, taking into account recycling from used autocatalysts. Jewelry and the chemical and electrical industries make up most of the rest of consumption."
"``Platinum and palladium are clearly underestimated,'' Michael Blumenroth, a commodity strategist at Deutsche Bank AG in Frankfurt, said in an interview. ``Only if GM and Daimler stop producing cars would I worry about the price for platinum and palladium.''"
Platinum May Gain
"Blumenroth expects platinum to reach $1,600 by the end of the year and palladium $300."
"Palladium for immediate delivery fell as much as $10.25, or 4.4 percent, to $222.75 an ounce, the lowest since Nov. 4, 2005. The metal traded down $3 at $230 as of 11:22 a.m. local time. Palladium traded as high as $595 on March 4, still below its record $1,125 in January 2001."
Platinum and palladium futures on the Tokyo Commodity Exchange plunged by the exchange-imposed daily limits.
"Gold for immediate delivery in London fell $3.25, or 0.4 percent, to $774 an ounce, after earlier trading at $763.20, the lowest since October 2007."
"The metal declined as the dollar strengthened against currencies such as the euro, diminishing the appeal of gold as a hedge against a weaker U.S. currency."
"Gold fell to $774.25 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $781.75 at the previous afternoon fixing."
"Assets in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, fell 1.7 percent to 631.2 metric tons yesterday, according to figures on the company's Web site."
"Silver fell 4 cents, or 0.4 percent, to $11.23 an ounce."
To contact the reporter on this story: Stuart Wallace in London at email@example.com
"Last Updated: September 10, 2008 06:48 EDT"
Crude Oil Rises After OPEC Agrees to Trim Excess Production
By Margot Habiby and Alexander Kwiatkowski
"Sept. 10 (Bloomberg) -- Crude oil rose after OPEC urged its members to comply with output quotas, a move that would reduce supplies by 500,000 barrels a day."
"The Organization of Petroleum Exporting Countries agreed at a meeting in Vienna to a total production limit for 11 members of 28.8 million barrels a day, unchanged from previous targets. OPEC Secretary-General Abdalla El-Badri said this means it will trim ``oversupply'' by about 500,000 barrels a day."
"``The OPEC announcement is kind of bullish,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``On the other hand, I'm waiting to see if the Saudis make a comment. If the Saudis cut back, that will certainly be bullish.''"
"Crude oil for October delivery rose 66 cents, or 0.6 percent, to $103.92 a barrel at 9:30 a.m. on the New York Mercantile Exchange."
"Oil has fallen about 30 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduced demand for fuels. Crude in New York yesterday reached its lowest level since April 2, while Brent oil traded in London fell as low as $99 a barrel."
"``They will do whatever they can to maintain prices above this $80-$100 range,'' Johannes Benigni, managing director of JBC Energy, said of OPEC in a Bloomberg television interview today. ``If the market slides lower, you will hear more from them.''"
"Brent crude oil for October settlement rose 84 cents, or 0.8 percent, to $101.18 a barrel."
"OPEC said a declining global economy and resultant falloff in oil demand along with more crude supply and the gains in the U.S. dollar had lowered prices. This means ``a shift in market sentiment causing downside risks,'' according to their statement after the meeting."
"``Since the market is oversupplied, the conference agreed to abide by September 2007 production allocation (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq) totaling 28.8 million barrels a day,'' OPEC said. These are levels ``with which members committed to strictly comply.''"
"OPEC has increased production this year, taking output above its agreed targets, to balance shortfalls elsewhere and satisfy the developing world's thirst for crude. Most of the increase has come from Saudi Arabia, which pledged to raise output by 500,000 barrels a day through June and July to calm prices."
"OPEC's decision ``took the market by surprise,'' said Andrey Kryuchenkov, an analyst at London-based Sucden (U.K.) Ltd. ``OPEC was already oversupplying the market this summer after oil futures reached record highs.''"
"The group's secretary-general, Abdalla El-Badri, said its decision to adhere to production quotas means it is cutting output by about 500,000 barrels a day."
"OPEC members are reducing a ``huge oversupply'' of oil on the market, El-Badri said today during a press briefing at OPEC headquarters in Vienna. Before the cut, the group was producing 900,000 barrels a day above its quota, he said."
"Saudi Arabia is not planning to reduce its oil production even as the group urged members to lower output, a Saudi oil official said today."
"There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an oil official of the country said today."
"The International Energy Agency, an adviser to 27 nations, cut its forecast for global oil demand in 2008 and 2009 as high prices and the economic slowdown reduce U.S. consumption."
`Weak Economic Prospects'
"The International Energy Agency lowered its 2008 forecast by 100,000 barrels to 86.8 million barrels a day, and the 2009 estimate by 140,000 barrels to 87.6 million barrels a day, the Paris-based agency said today in its monthly report."
"``A combination of weak economic prospects and persistently high prices appears to be having an impact on consumer behavior and choices,'' David Fyfe, the head of the IEA's oil industry and markets division, said in a telephone interview today."
"OPEC's decision to curb supply may be ``counterproductive,'' Fyfe said. ``High oil prices are still hurting.''"
"Hurricane Ike started to strengthen as it entered the Gulf of Mexico and headed in the direction of Texas, after leaving more than 170 people dead when it lashed Cuba and Haiti."
"Ike's eye was 145 miles (230 kilometers) north of the western tip of Cuba and moving west-northwest at 8 miles per hour at about 8 a.m. Miami time today, according to the U.S. National Hurricane Center. Ike's winds strengthened to 85 miles per hour from 80 mph earlier."
"The storm is forecast to make landfall between Corpus Christi, Texas, and Houston, according to a chart from the Hurricane Center."
To contact the reporters on this story: Margot Habiby in Dallas at firstname.lastname@example.org; Alexander Kwiatkowski in London at email@example.com
"Last Updated: September 10, 2008 09:44 EDT"
"U.K. Stocks Decline; Barclays, Alliance & Leicester Retreat "
By Sarah Thompson
"Sept. 10 (Bloomberg) -- U.K. stocks fell for a second day after Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, reported a $3.9 billion third-quarter loss."
"Barclays Plc, the U.K.'s third-biggest bank, slid 6.8 percent. Alliance & Leicester retreated 4 percent. Old Mutual Plc plunged 4.4 percent after South Africa's biggest insurer said it will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac."
"The FTSE 100 Index retreated 48.7, or 0.9 percent, to 5,366.9 at 1:48 p.m. in London. The FTSE All-Share Index lost 1 percent, while Ireland's ISEQ Index decreased 2.6 percent."
Lehman said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence. The company also said it would cut its dividend.
"Barclays sank 24.75 pence to 341. Alliance & Leicester, the bank that agreed to a takeover by Banco Santander SA, dropped 13.25 pence to 297.25."
Stocks in Europe extended declines after the European Commission cut its growth estimate for the euro area this year and signaled it may also lower its 2009 forecast as the U.S. and Asian economies cool.
"The U.K. economy is contracting for the first time in at least a decade, the National Institute for Economic and Social Research said."
"Gross domestic product dropped 0.2 percent in the June to August period and fell 0.1 percent in the three months through July, the group, whose clients include the Bank of England and the U.K. Treasury, said in an e-mailed statement today."
"Old Mutual decreased 4 pence to 96.9. The company will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac and increase reserves by $155 million for guarantees on policies in the U.S. Old Mutual will also set aside $250 million to support its operation in Bermuda, it said."
The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.
"EasyJet Plc (EZJ LN) lost 10.25 pence, or 2.7 percent, to 365.25. Europe's second-biggest discount airline had its share recommendation downgraded by UBS AG, which said gains in the stock don't reflect challenges it faces next year."
"Enterprise Inns Plc (ETI LN) lost 29 pence, or 11 percent, to 236. Britain's second-biggest pub landlord fell to its lowest price since 2003 after the Financial Times said the stock is poised to exit the FTSE 100 Index and Morgan Stanley downgraded the shares."
"Kesa Electricals Plc (KESA LN) plunged 13.4 pence, or 8.7 percent, to 141. The owner of Darty electronics shops in France and the U.K. Comet chain said first-quarter sales dropped after higher living costs hurt demand for flat-screen televisions and laptop computers."
"Next Plc (NXT LN) decreased 12 pence, or 1.1 percent, to 1,131. The U.K.'s second-largest clothes retailer said first-half profit fell 13 percent as higher living costs left Britons with less to spend on fashions."
"RSA Insurance Group Plc (RSA LN) slipped 9.4 pence, or 5.8 percent, to 152.9. The U.K.'s second-largest non-life insurer was cut to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which said M&A is ``unlikely at current levels.''"
"Thorntons Plc (THT LN) gained 4 pence, or 3.6 percent, to 116. The U.K. chocolate maker founded in 1911 said full-year profit rose 15 percent on commercial sales."
"Ryanair Holdings Plc (RYA ID) decreased 10.1 cents, or 3.6 percent, to 2.70 euros. Europe's biggest discount airline postponed the opening of its Edinburgh base after a strike by Boeing Co. machinists delayed the delivery of planes."
To contact the reporter on this story: Sarah Thompson in London at firstname.lastname@example.org.
"Last Updated: September 10, 2008 08:50 EDT"
"EU Cuts Growth Forecasts, Sees Recession in Germany (Update1) "
By Fergal O'Brien
"Sept. 10 (Bloomberg) -- The European Commission cut its growth outlook for the euro area for the rest of this year and predicted a recession for Germany, the region's largest economy."
"The 15-nation euro region's economy will probably stagnate this quarter after shrinking in the previous three months for the first time since the euro was introduced in 1999, the Brussels-based commission said today. The commission lowered its full-year growth forecast to 1.3 percent, from 1.7 percent earlier, and signaled the 2009 outlook may also be cut."
"With recessions forecast for Germany and Spain, Jean-Claude Juncker, who leads a group of euro-area finance ministers, today said there is a ``risk of a technical recession'' for the euro area as a whole. The region's manufacturing and services industries contracted in August and confidence fell to the lowest in more than five years. The EU also forecast a recession in the U.K., which is outside the euro area."
"``We expect economic activity to be essentially stagnant across the region in the second half of 2008,'' said Howard Archer, chief European economist at Global Insight in London. He sees growth slowing to 0.8 percent next year from 1.2 percent this year."
"The EU forecast the euro-area economy will expand 0.1 percent in the final three months of 2008 after an estimate of no growth this quarter. Both projections are down from earlier forecasts of 0.4 percent growth for both periods. The German economy will probably shrink 0.2 percent in the current quarter after contracting 0.5 percent in the previous three months, and Spain's economy will also shrink in the third and fourth quarters, according to today's projections."
"Outside the euro area, the commission sees U.K. output ``contracting slightly'' in the second half of the year."
"``Economic activity has slowed down considerably'' in recent months, Juncker, who is Luxembourg's premier and finance minister, said in Brussels today. A technical recession is defined as two consecutive quarters of economic contraction."
"While the commission raised its inflation forecast for 2008 to 3.6 percent from 3.1 percent, it said consumer-price growth ``may be at a turning point'' after oil prices fell from a record and as past increases in food and energy costs ``gradually fade in the coming months.'' The recent declines in commodity prices and the euro also ``have provided some relief,'' Almunia said."
"Since reaching a record $1.6038 against the dollar on July 15, the currency has dropped around 12 percent. Oil prices have fallen almost 30 percent in the last two months to $103.84 a barrel. The euro slipped 0.1 percent to $1.4115 as of 1:44 p.m. in London. Bonds fell, with the yield on the 10-year bund, Europe's benchmark government security, increasing 5 basis points to 4.09 percent."
"Still, the euro's advance over the past year and the surge in energy prices have already taken a toll. Paris-based L'Oreal SA, the world's largest cosmetics maker, on Aug. 29 reported the slowest profit growth in three years. Stora Enso Oyj and UPM- Kymmene Oyj, Europe's largest papermakers, today said they will close unprofitable production lines as raw-material and energy costs have outpaced their ability to raise prices."
"Banks including Amsterdam- and Brussels-based Fortis and Irish Life & Permanent Plc of Ireland have suffered due to writedowns, losses or increased funding costs related to the credit crisis. Credit Agricole SA, France's third-largest bank, today said it will eliminate about 500 jobs at its Calyon corporate- and investment-banking unit to rein in costs following three consecutive quarterly losses."
"``The continuation of the turmoil in the financial markets one year on, the near doubling of energy prices over the same period and the correction in some housing markets have had an impact on the economy,'' Economic and Monetary Affairs Commissioner Joaquin Almunia said in today's report."
The commission said it expects a ``marked deceleration'' in most Asian economies and predicts the effect of a U.S. tax rebate that boosted second-quarter growth there will fade.
"The ECB last week lowered its euro-region growth outlook and raised its inflation projections for this year and next. ECB President Jean-Claude Trichet said today in Brussels that inflation ``is likely to remain high for quite some time, moderating only gradually during the course of 2009.''"
"Some companies have tried to offset falling European and U.S. orders by expanding in Asia and oil-exporting countries. Volkswagen AG, Europe's biggest carmaker, on Sept. 8 said emerging markets will provide the fastest growth in worldwide sales over the next 10 years, led by economic expansion in Asia and Russia."
"``The deceleration of growth will gain momentum in the second part of the year,'' Almunia said. ``The way the European economies will start'' next year ``will not be very good.''"
To contact the reporter on this story: Fergal O'Brien in Dublin at email@example.com
"Last Updated: September 10, 2008 09:15 EDT"
Italian Spending and Exports Fall as Recession Looms (Update1)
By Flavia Krause-Jackson and Steve Scherer
"Sept. 10 (Bloomberg) -- Italian consumer spending and exports, which account for almost 90 percent of Europe's fourth- biggest economy, declined in the second quarter, pushing the country closer to a recession."
"Household spending fell 0.3 percent and sales of Italian goods overseas dropped 0.7 percent from the previous three months, Istat, the Rome-based statistics office, said today in its final report on gross domestic product. The economy shrank 0.3 percent in the quarter, matching Istat's initial report, leaving Italy on the brink of a fourth recession in a decade."
"Italian families, saddled with higher mortgage payments and energy bills, have cut back on spending, while businesses have struggled to stay competitive as the stronger euro and rising production costs hurt earnings. The European Central Bank raised its key interest rate to a seven-year high of 4.25 percent in July to combat inflation, showing little inclination to cut borrowing costs even as growth slows."
"`` We expect a technical recession by the end of 2008,'' said Lavinia Santovetti, an economist at Lehman Brothers Holdings Inc. in London. ``Consumers probably cut spending as suggested by poor growth in retail sales and new car registrations.''"
The outlook in the rest of Europe is also becoming gloomier. The European Commission today cut its economic-growth forecast for the countries sharing the euro to 1.3 percent for this year from an April estimate of 1.7 percent. The ECB last week lowered its prediction for growth in the region to 1.4 percent from 1.8 percent and cut next year's forecast to 1.2 percent from 1.5 percent.
"Italian year-on-year GDP shrank a revised 0.1 percent in the second quarter, the first time growth has contracted on a yearly basis since the third quarter of 2003, an Istat spokesman said. The fall in exports outpaced rising imports, shaving 0.3 of a percentage point from quarterly growth, while inventories added 0.2 of a percentage point, Istat said."
"Italy is set to be the slowest-growing economy in the region this year and has lagged behind the EU average for more than a decade. The economy will grow 0.1 percent this year, a fraction of the rate of its biggest trading partners, France and Germany, which will expand 1 percent and 1.8 percent respectively, the EU predicted today."
"The slowing growth is weighing on sales of the country's biggest manufacturers. Fiat SpA, Italy's biggest carmaker, posted a 23 percent drop in car sales in Italy last month. Indesit SpA, Europe's third-largest home appliance maker, said on July 30 that full-year earnings before interest and taxes may be 10 percent to 20 percent less than in 2007."
"Italian household optimism is hovering near a 15-year low and retail sales declined in August for an 18th month. Consumers' purchasing power has been eroded by the rising inflation rate, which reached a six-year high in August buoyed by the jump in oil prices and a surge in the cost of staple foods such as pasta and bread."
"Consumers and manufacturers may be getting some relief. Crude oil prices have dropped 28 percent since a July 11 record. The euro has also dropped 8 percent against the dollar in the past six months, which may help lift exports."
"Prime Minister Silvio Berlusconi, who took office in May, moved to boost consumer confidence and spending by abolishing the country's main property tax and offering to freeze mortgage payments for homeowners at risk of default. His government will also tax more of oil company profit, a measure dubbed the ``Robin Hood'' tax, and use the proceeds to increase welfare spending."
To contact the reporter on this story: Flavia Krause-Jackson in Rome at firstname.lastname@example.org
"Last Updated: September 10, 2008 06:24 EDT"
Saudi Policy Remains Unchanged After OPEC Decision (Update1)
By Ayesha Daya
"Sept. 10 (Bloomberg) -- Saudi Arabia isn't planning to reduce its oil production even as OPEC urged members to lower output and return to their official targets, a Saudi oil official said today."
"There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an official from the world's biggest oil producer said today, speaking on condition of anonymity."
"The Organization of Petroleum Exporting Countries, whose members supply more than 40 percent of the world's oil, urged members to adhere more strictly to production quotas after prices for Brent crude fell below $100 a barrel yesterday for the first time in five months."
"Iran, Venezuela and Libya were among members that pressured OPEC to take action to support prices that have fallen more than 30 percent from July's record as slower global economic growth curbs demand."
"OPEC agreed at a meeting in Vienna to a total production limit for 11 members of 28.8 million barrels a day, some 500,000 barrels a day lower than the group's actual July production. The target excludes Indonesia which has suspended its membership of the organization, and Iraq."
"Most of the excess oil has come from Saudi Arabia, which raised output by 500,000 barrels a day in June and July to calm prices that doubled from a year earlier to reach a record $147.27 a barrel on July 11. It hosted an emergency meeting of global oil producers and consumers in Jeddah in June to discuss how to stabilize markets."
"``Saudi Arabia may not have to bear the brunt of the production cut,'' said OPEC research head Hasan Qabazard after the OPEC meeting. ``There are countries that are under-producing, such as Nigeria, so the Saudis can take part of their quota.''"
"Crude oil in New York traded at $104 a barrel, up 74 cents, or 0.7 percent, on the New York Mercantile Exchange at 12:57 p.m. London time. It earlier rose as much as $1.56, or 1.5 percent, to $104.82 a barrel."
"``The market is in a very healthy position,'' Saudi Arabian Oil Minister Ali al-Naimi said before the closed- door meeting began yesterday at OPEC's headquarters. ``Demand for Saudi crude is very healthy.''"
To contact the reporter on this story: Ayesha Daya in Vienna at email@example.com.
"Last Updated: September 10, 2008 08:25 EDT"
OPEC Calls on Members to Cut Output to Reduce `Huge Oversupply'
By Fred Pals and Ayesha Daya
"Sept. 10 (Bloomberg) -- OPEC, which supplies more than 40 percent of the world's oil, urged members to cut production to comply with output quotas after prices fell to a five-month low."
"The Organization of Petroleum Exporting Countries agreed at a meeting in Vienna earlier today to a total production limit for 11 members of 28.8 million barrels a day, unchanged from their previous targets. OPEC Secretary-General Abdalla El-Badri said an output cut of about 500,000 barrels a day would reduce a ``huge oversupply'' of oil on the market."
"Iran and Venezuela were among members that called on OPEC to take action to support prices that slid 29 percent from July's record as slower global economic growth curbed demand. Brent, a benchmark to price two-thirds of the world's crude oil, fell below $100 a barrel in London for the first time in five months yesterday."
"``They will do whatever they can to maintain prices above this $80-$100 range,'' Johannes Benigni, managing director of JBC Energy in Vienna, said in a Bloomberg television interview today. ``If the market slides lower you will hear more from them.''"
"Oil prices rallied after OPEC's announcement, rising as much as 1.5 percent to $104.82 in electronic trading on the New York Mercantile Exchange. Crude for October delivery traded at $104.40 a barrel as of 12:34 p.m. London time."
"OPEC's quota was adjusted after Indonesia withdrew from the group. The target, set in September 2007, had been 29.673 million barrels a day including Indonesia's production target of 865,000 barrels a day, according to Bloomberg data."
"OPEC's decision to remove barrels from the market could prove to be ``counterproductive,'' according to David Fyfe, who heads the oil industry and markets division at the International Energy Agency."
"The IEA, an adviser to 27 nations, cut its forecast for global oil demand next year by 140,000 barrels to 87.6 million barrels a day because of slower U.S. consumption."
"``High oil prices are still hurting,'' Fyfe said in a telephone interview from Paris."
"Before the cut, OPEC was producing 900,000 barrels a day above its quota, El-Badri told a press conference in Vienna today."
Oil rose to a record $147.27 a barrel in July. Most analysts polled by Bloomberg had expected the group to keep production quotas unchanged and production near record levels.
"Saudi Arabia isn't planning to reduce its own production even after OPEC told members to return to their official targets, a Saudi oil official said today."
"There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an oil official of the country said today."
"Airlines, including Canada's Zoom Airlines and Oasis Hong Kong Airlines Ltd., went out of business and many cut back on routes as oil prices surged to records and inflation accelerated, prompting people to drive less, lowering demand for gasoline."
"The global economy may slow to about 3 percent in late 2008 from 5 percent in the previous year before re-accelerating toward 4 percent in 2009, said John Lipsky, first deputy managing director of the Washington-based International Monetary Fund, on Sept. 9."
The global economy is cooling after the U.S. housing slump sparked a lending squeeze while a surge in food and oil prices eroded the spending power of companies and consumers.
"OPEC's decision is ``definitely a defensive measure to keep prices above $100,'' said Jonathan Kornafel, a director for Asia at Hudson Capital Energy. ``They don't want to see us go back to $140 or $150 but they want us over $100. It's a bit of a shock to the market and that's why we're up.''"
"OPEC members have increased production this year as Saudi Arabia, the world's largest producer, sold more barrels to balance shortfalls elsewhere and slake the developing world's growing thirst for crude. That pushed output above the group's agreed targets."
"``Since the market is oversupplied, the conference agreed to abide by September 2007 production allocation (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq) totaling 28.8 million barrels a day,'' OPEC's communiqué said. ``Levels with which members committed to strictly comply.''"
"``We should do what we can to keep prices at the level of around $100 a barrel,'' Venezuelan Oil Minister Rafael Ramirez told reporters yesterday. ``We are concerned about the drop of demand by the end of the year.''"
"Most of the increase in OPEC production in the past few months has come from Saudi Arabia, which pledged to raise output by 500,000 barrels a day through June and July to calm prices. It hosted an emergency meeting of global oil producers and consumers in Jeddah in June to discuss how to stabilize markets."
"The market is ``well supplied'' and ``the market is in a very healthy position,'' Saudi Arabian Oil Minister Ali al- Naimi, who sets policy for the world's largest oil producer, told reporters before ministers started closed-door talks at OPEC's Vienna headquarters yesterday."
"The opinion of Saudi Arabia, OPEC's biggest and most influential producer, differed from that of Iran and Venezuela, who wanted production to be trimmed to official quota levels as they said the market was oversupplied."
To contact the reporter on this story: Maher Chmaytelli in Vienna at firstname.lastname@example.org; Fred Pals in Vienna at email@example.com
"Last Updated: September 10, 2008 07:36 EDT"
<<2.614_20080910170159Trichet Says ECB `Resolute' in Fighting Inflation
<<2.670_20080910165030Brazil's Real Weakens to SevenMonth Low on
Commodity Decline .txt>> <<2.659_20080910165101Banco do Brasil Brascan
Residential Brazilian Equity Movers .txt>> <<2.658_20080910155533Mexico
Bond Yields Rise for Third Day on Accelerating Inflation .txt>>
<<2.652_20080910165540Soybeans Fall After Oil Decline Wheat Corn Rebound
From Lows .txt>> <<2.641_20080910165400Canadian Dollar Erases Gains as
Oil Falls on Inventory Decline .txt>> <<2.639_20080910165510Gold Falls
on Reduced Demand for Inflation Hedge Silver Drops .txt>>
<<2.639_20080910164804Canadian Productivity Declines for Longest Stretch
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Narrow as Lehman Concerns Ease .txt>> <<2.636_20080910165451Yuan Is
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<<2.635_20080910164125India's 10Year Bond Yield Falls to 3Month Low on
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<<2.632_20080910164300German Stocks Recover Losses Postbank Deutsche
Boerse Gain .txt>> <<2.632_20080910164027Rupee Weakens Past 45 Versus
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<<2.631_20080910165714European Government Bonds Fall as Lehman Plan
Spurs Stock Gains .txt>> <<2.631_20080910164402French Industrial Output
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<<2.629_20080910164732CIBC Cuts Estimate for Canada's S&PTSX by 9% on
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<<2.626_20080910165344Yen Weakens as Lehman's Plan Boosts Demand for
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Against Dollar as Stocks Decline .txt>> <<2.625_20080910165815European
Stocks Fall on Growth Concern Carnival Banks Drop .txt>>
<<2.625_20080910165525Copper Drops in New York Erasing Gains as Crude
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Dexia SanofiAventis Vivendi .txt>> <<2.624_20080910171144Yen Falls as
Lehman Speculation Boosts Demand for Higher Yields .txt>>
<<2.624_20080910164601Slovak Inflation Rate Rose to 2Year High in August
(Update2) .txt>> <<2.623_20080910165846German Stocks Pare Losses
Postbank Deutsche Boerse Advance .txt>> <<2.623_20080910165151ElBadri
Says OPEC Is Cutting `Huge Oversupply' (Update1) .txt>>
<<2.622_20080910171356Pimco Total Return Fund Gained $17 Billion on
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<<2.621_20080910171324Russia's Economic Expansion Slowed in Second
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<<2.617_20080910155656Italian Spending and Exports Fall as Recession
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<<2.614_20080910171112OPEC Calls on Members to Cut Output to Reduce
`Huge Oversupply' .txt>>