from The Wall Street Journal
Jan. 31, 2008
MBIA lost $2.3 billion in the fourth quarter of 2007, compared with net income of $181 million a year earlier. The substantial loss amounted to $18.61 a share, compared with net income of $1.32 a share in the final quarter of 2006. The bond insurer, which released the results shortly after midnight, said writedowns in its credit-derivatives portfolio rose to $3.5 billion -- more than 10 times as large as its writedown in the third quarter, a sign of the rapidly worsening effects of the U.S. housing-market downturn.
Earlier, MBIA announced it a deal with Warburg Pincus in which the private-equity fund agreed to buy $500 million worth of the bond insurer's shares at $31 each.
Thursday, January 31, 2008
FOMC Cuts Fed-Funds Rate by 1/2 Point
from The Wall Street Journal
Jan. 30, 2008
The Federal Reserve lowered its key federal-funds rate by one-half percentage point, to 3%, capping an unprecedented eight-day period in which officials slashed rates massively to ward off recession risks. Officials signaled they're willing to ease still further in coming weeks - a reflection of the risk management approach to policy that officials have now embraced. But they also suggested that the recent cuts may be enough to keep the economy on track. The vote was 9-1; Dallas Fed President Richard Fisher dissented, preferring no rate change.
Jan. 30, 2008
The Federal Reserve lowered its key federal-funds rate by one-half percentage point, to 3%, capping an unprecedented eight-day period in which officials slashed rates massively to ward off recession risks. Officials signaled they're willing to ease still further in coming weeks - a reflection of the risk management approach to policy that officials have now embraced. But they also suggested that the recent cuts may be enough to keep the economy on track. The vote was 9-1; Dallas Fed President Richard Fisher dissented, preferring no rate change.
Yen Falls on Speculation Japanese Importers Selling Currency
By Kosuke Goto and Ron Harui
Jan. 31 (Bloomberg) -- The yen fell against the dollar, paring gains for the month, on speculation Japanese importers are selling the currency to pay month-end bills.
The yen declined most against the South African rand and the Brazilian real as Asian stocks reversed earlier losses, giving Japanese investors confidence to buy higher-yielding assets. The dollar traded near a two-week low versus the euro after the Federal Reserve cut its benchmark interest rate half a percentage point and indicated further reductions may be needed.
``Japanese importers are selling the yen and buying the dollar,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender by assets. ``There is special demand for the dollar at the end of the month.''
The Japanese currency fell to 106.46 per dollar at 11:25 a.m. in Tokyo, from 106.27 yesterday in New York, paring its monthly advance to 4.7 percent. It traded at 157.95 against the euro from 157.93. The yen may fall to 107 per dollar today, Hayashi said.
The yen declined 1.1 percent to 14.5805 against the rand from 14.4295 in New York yesterday. It also slid 0.4 percent to 60.5575 against the real and 0.2 percent to 211.73 versus the pound. The MSCI Asia Pacific Index of regional shares gained 0.9 percent after falling as much as 0.6 percent.
The dollar traded at $1.4842 per euro after reaching $1.4907 yesterday, the weakest since Jan. 15.
Since 2001
The yen still headed for its biggest monthly gain against the dollar since August 2001 as the Asian equity benchmark was set to suffer the worst performance since September 2001, discouraging investors from buying higher-yielding currencies funded by cheap loans in Japan. It has gained against all the major currencies in January.
The currency rose the most versus South Africa's rand this month, as the Federal Reserve's benchmark interest rate cut failed to ease concern over a U.S. recession.
``Investors are taking money out of riskier assets like stocks and buying back yen,'' said Hiroshi Yoshida, a foreign- exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth- largest publicly traded lender by assets. ``Equity markets show no sign of stabilizing.''
The yen may rise to 156.50 per euro and 105.70 against the dollar today, Yoshida forecast.
One-month implied volatility for the yen rose to 13.45 percent today, from 13.25 percent yesterday. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Higher volatility may discourage carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them. The risk is that currency moves erase those profits.
Fed Rate
The dollar has declined against 14 of the 16 most traded currencies this month as the Fed lowered the target for the overnight lending rate between banks to 3 percent.
``I am dollar-bearish,'' said Takeshi Kabe, a senior currency dealer at Mizuho Corporate Bank Ltd. in Tokyo, a unit of Japan's second-largest publicly traded lender by assets. ``The dollar will be sold after the Fed's rate cut. The U.S. economy is worsening.''
The U.S. currency may fall to as low as 105.50 yen and $1.4920 per euro today, Kabe said.
The U.S. currency has dropped 6.6 percent against the euro since the Fed began cutting the target rate for overnight lending between banks in September to prevent the housing slump from plunging the world's largest economy into recession.
Weighing on Dollar
``The weak dollar trend will continue,'' said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank. ``Concern over the U.S. recession was not excessive. It's becoming real. We expect the Fed to cut rates again by a half percent in March and a quarter percent in April.''
The dollar may fall to 104 yen and $1.52 per euro by March 31, Yamamoto said.
The dollar fell to $1.4967 on Nov. 23, the lowest since the European currency debuted in 1999, as falling U.S. interest rates made dollar-denominated assets less attractive to international investors.
When the Fed made an emergency reduction last week, the dollar dropped 1.2 percent against the euro, the most in more than two years. The fed funds target fell below the European Central Bank's main refinancing rate, currently 4 percent, for the first time since November 2004.
Jan. 31 (Bloomberg) -- The yen fell against the dollar, paring gains for the month, on speculation Japanese importers are selling the currency to pay month-end bills.
The yen declined most against the South African rand and the Brazilian real as Asian stocks reversed earlier losses, giving Japanese investors confidence to buy higher-yielding assets. The dollar traded near a two-week low versus the euro after the Federal Reserve cut its benchmark interest rate half a percentage point and indicated further reductions may be needed.
``Japanese importers are selling the yen and buying the dollar,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender by assets. ``There is special demand for the dollar at the end of the month.''
The Japanese currency fell to 106.46 per dollar at 11:25 a.m. in Tokyo, from 106.27 yesterday in New York, paring its monthly advance to 4.7 percent. It traded at 157.95 against the euro from 157.93. The yen may fall to 107 per dollar today, Hayashi said.
The yen declined 1.1 percent to 14.5805 against the rand from 14.4295 in New York yesterday. It also slid 0.4 percent to 60.5575 against the real and 0.2 percent to 211.73 versus the pound. The MSCI Asia Pacific Index of regional shares gained 0.9 percent after falling as much as 0.6 percent.
The dollar traded at $1.4842 per euro after reaching $1.4907 yesterday, the weakest since Jan. 15.
Since 2001
The yen still headed for its biggest monthly gain against the dollar since August 2001 as the Asian equity benchmark was set to suffer the worst performance since September 2001, discouraging investors from buying higher-yielding currencies funded by cheap loans in Japan. It has gained against all the major currencies in January.
The currency rose the most versus South Africa's rand this month, as the Federal Reserve's benchmark interest rate cut failed to ease concern over a U.S. recession.
``Investors are taking money out of riskier assets like stocks and buying back yen,'' said Hiroshi Yoshida, a foreign- exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth- largest publicly traded lender by assets. ``Equity markets show no sign of stabilizing.''
The yen may rise to 156.50 per euro and 105.70 against the dollar today, Yoshida forecast.
One-month implied volatility for the yen rose to 13.45 percent today, from 13.25 percent yesterday. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Higher volatility may discourage carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them. The risk is that currency moves erase those profits.
Fed Rate
The dollar has declined against 14 of the 16 most traded currencies this month as the Fed lowered the target for the overnight lending rate between banks to 3 percent.
``I am dollar-bearish,'' said Takeshi Kabe, a senior currency dealer at Mizuho Corporate Bank Ltd. in Tokyo, a unit of Japan's second-largest publicly traded lender by assets. ``The dollar will be sold after the Fed's rate cut. The U.S. economy is worsening.''
The U.S. currency may fall to as low as 105.50 yen and $1.4920 per euro today, Kabe said.
The U.S. currency has dropped 6.6 percent against the euro since the Fed began cutting the target rate for overnight lending between banks in September to prevent the housing slump from plunging the world's largest economy into recession.
Weighing on Dollar
``The weak dollar trend will continue,'' said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank. ``Concern over the U.S. recession was not excessive. It's becoming real. We expect the Fed to cut rates again by a half percent in March and a quarter percent in April.''
The dollar may fall to 104 yen and $1.52 per euro by March 31, Yamamoto said.
The dollar fell to $1.4967 on Nov. 23, the lowest since the European currency debuted in 1999, as falling U.S. interest rates made dollar-denominated assets less attractive to international investors.
When the Fed made an emergency reduction last week, the dollar dropped 1.2 percent against the euro, the most in more than two years. The fed funds target fell below the European Central Bank's main refinancing rate, currently 4 percent, for the first time since November 2004.
Asian Stocks Advance, Led by Electronics Companies, Automakers
By Chua Kong Ho and Shiyin Chen
Jan. 31 (Bloomberg) -- Asian stocks rose, led by electronics companies and carmakers, after Seiko Epson Corp. and Daihatsu Motor Co. posted higher profits.
Seiko Epson, the world's third-largest maker of inkjet printers, surged the most in three years. Daihatsu, Japan's biggest minicar maker, had its steepest advance in five months. Hyundai Heavy Industries Co. rebounded from its worst plunge since Sept. 12, 2001, on speculation the sell-off was excessive.
``Our strategy is to stay defensive and pick up selective shares that look cheap and whose earnings look resilient,'' said Teo Chon Kiat, who helps manage the equivalent of $16 billion at DBS Asset Management in Singapore. ``Investors are still concerned about a slowdown in the U.S. and the impact on export growth in the region.''
The MSCI Asia Pacific Index gained 0.7 percent to 142.16 at 11:49 a.m. in Tokyo, reversing an earlier loss of 0.6 percent. The measure is headed for its worst month since September 2001. Eight of the benchmark's 10 industry groups rose today.
Japan's Nikkei 225 Stock Average added 0.6 percent to 13,417.98. South Korea's Kospi Index climbed 0.8 percent.
The Standard & Poor's 500 Index retreated 0.5 percent yesterday in the U.S., after the Federal Reserve reduced its benchmark rate to 3 percent from 3.5 percent to help the economy avert a recession.
Terumo Corp., a Japanese medical-equipment maker, surged the most in six months after the company posted a profit gain and Merrill Lynch & Co. recommended investors buy the stock. Yahoo Japan Corp., which operates the country's most visited Web site, jumped 11 percent after saying third-quarter earnings increased on online advertisement sales.
Canon Inc., the world's largest camera maker, tumbled the most in more than five months after its profit forecast missed analyst estimates. The stock was the single biggest contributor to declines in the Nikkei 225 index.
Jan. 31 (Bloomberg) -- Asian stocks rose, led by electronics companies and carmakers, after Seiko Epson Corp. and Daihatsu Motor Co. posted higher profits.
Seiko Epson, the world's third-largest maker of inkjet printers, surged the most in three years. Daihatsu, Japan's biggest minicar maker, had its steepest advance in five months. Hyundai Heavy Industries Co. rebounded from its worst plunge since Sept. 12, 2001, on speculation the sell-off was excessive.
``Our strategy is to stay defensive and pick up selective shares that look cheap and whose earnings look resilient,'' said Teo Chon Kiat, who helps manage the equivalent of $16 billion at DBS Asset Management in Singapore. ``Investors are still concerned about a slowdown in the U.S. and the impact on export growth in the region.''
The MSCI Asia Pacific Index gained 0.7 percent to 142.16 at 11:49 a.m. in Tokyo, reversing an earlier loss of 0.6 percent. The measure is headed for its worst month since September 2001. Eight of the benchmark's 10 industry groups rose today.
Japan's Nikkei 225 Stock Average added 0.6 percent to 13,417.98. South Korea's Kospi Index climbed 0.8 percent.
The Standard & Poor's 500 Index retreated 0.5 percent yesterday in the U.S., after the Federal Reserve reduced its benchmark rate to 3 percent from 3.5 percent to help the economy avert a recession.
Terumo Corp., a Japanese medical-equipment maker, surged the most in six months after the company posted a profit gain and Merrill Lynch & Co. recommended investors buy the stock. Yahoo Japan Corp., which operates the country's most visited Web site, jumped 11 percent after saying third-quarter earnings increased on online advertisement sales.
Canon Inc., the world's largest camera maker, tumbled the most in more than five months after its profit forecast missed analyst estimates. The stock was the single biggest contributor to declines in the Nikkei 225 index.
Financials Daily - 31st Jan 2008
US: U.S. stocks fell for the first time this week on concern that bond insurers guaranteeing $2.4 trillion in securities will lose AAA credit ratings, erasing a rally spurred by the Federal Reserve's interest-rate cut.
Europe: European stocks fell after BNP Paribas SA's earnings missed analyst estimates and Goldman Sachs Group Inc. slashed profit forecasts for the region's carmakers.
Asia: Asian stocks fell, led by South Korean shipbuilders on concern slowing global growth and rising fuel costs will erode earnings.
Commodities: Crude oil fell for the first time in six days as U.S. stocks declined after the Federal Reserve cut its benchmark interest rate to bolster the economy of the world's biggest energy-consuming country. Gold rose to a record after the Federal Reserve lowered interest rates for the second time in nine days, weakening the dollar and boosting the appeal of the precious metal as an alternative investment.
Currencies: The yen gained against 15 of the 16 most-active currencies as credit-market losses prompted investors to sell higher-yielding assets funded in Japan.
Source: Bloomberg
Europe: European stocks fell after BNP Paribas SA's earnings missed analyst estimates and Goldman Sachs Group Inc. slashed profit forecasts for the region's carmakers.
Asia: Asian stocks fell, led by South Korean shipbuilders on concern slowing global growth and rising fuel costs will erode earnings.
Commodities: Crude oil fell for the first time in six days as U.S. stocks declined after the Federal Reserve cut its benchmark interest rate to bolster the economy of the world's biggest energy-consuming country. Gold rose to a record after the Federal Reserve lowered interest rates for the second time in nine days, weakening the dollar and boosting the appeal of the precious metal as an alternative investment.
Currencies: The yen gained against 15 of the 16 most-active currencies as credit-market losses prompted investors to sell higher-yielding assets funded in Japan.
Source: Bloomberg
Australian, N.Z. Dollars Rise to Two-Week Highs on Fed Rate Cut
By David McIntyre and Emma O'Brien
Jan. 31 (Bloomberg) -- The Australian and New Zealand dollars rose to the highest level in more than two weeks after the Federal Reserve cut its benchmark interest rate, attracting investors to the countries' higher yielding bonds.
Australia's rate advantage increased to a three-year high and New Zealand's to the widest in almost 15 years after the Fed cut rates by a half percentage point to 3 percent. Australia's dollar has gained 6.9 percent and New Zealand's jumped 11 percent since Sept. 18, when the Fed cut borrowing costs for the first time in four years in a bid to reignite growth.
``The Australian and New Zealand dollars were boosted by the Fed rate cut,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``The U.S. dollar is weak right across the board with the Fed leaving the door wide open for further rate cuts.''
The Australian dollar, known as the Aussie, traded as high as 90.16 U.S. cents, the strongest since Jan. 15. It bought 89.13 cents at 10:06 a.m. in Sydney compared with 88.87 cents late in Asia yesterday.
The New Zealand dollar, dubbed the kiwi, climbed 0.5 percent to 78.26 U.S. cents and touched 79.16 cents, the strongest since Jan. 16.
Australia's dollar may reach 90.20 cents and New Zealand's may touch 79.35 cents today, which are resistance levels for the currencies, Trinh said. Resistance is where orders to sell a currency may be clustered.
Trade Deficit
New Zealand's dollar held gains after a government report showed the country's annual trade deficit narrowed to the smallest in two years as soaring prices for dairy products drove exports to a record. Rising overseas shipments, which make up 30 percent of the economy, may drive New Zealand's growth and generate demand for the currency.
The shortfall shrank to NZ$5.31 billion ($4.2 billion) in 2007 from NZ$5.69 billion in the 12 months through Nov. 30, Statistics New Zealand said in Wellington today. That beat the median estimate of NZ$5.5 billion in a Bloomberg News survey of nine economists.
The Fed said in a statement that downside risks to growth remain, suggesting policy makers may reduce rates again.
Australia's rate premium has increased to 3.75 percentage points, the highest since September 2004. New Zealand's rate advantage widened to 5.25 points, the most since February 1993.
The kiwi has gained the most among the 16 most-traded currencies since the Fed started cutting in September as investors were attracted to the country's 8.25 percent rate, one of the highest among developed economies. The Aussie has also benefited because of Australia's 11-year high 6.75 percent rate, which traders are betting will be raised next week.
Australian government bonds strengthened, pushing the yield on the 10-year note down 2 basis points to 6.04 percent. New Zealand's equivalent yield rose 2 basis points to 6.30 percent. A basis point equals 0.01 percentage point.
Jan. 31 (Bloomberg) -- The Australian and New Zealand dollars rose to the highest level in more than two weeks after the Federal Reserve cut its benchmark interest rate, attracting investors to the countries' higher yielding bonds.
Australia's rate advantage increased to a three-year high and New Zealand's to the widest in almost 15 years after the Fed cut rates by a half percentage point to 3 percent. Australia's dollar has gained 6.9 percent and New Zealand's jumped 11 percent since Sept. 18, when the Fed cut borrowing costs for the first time in four years in a bid to reignite growth.
``The Australian and New Zealand dollars were boosted by the Fed rate cut,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``The U.S. dollar is weak right across the board with the Fed leaving the door wide open for further rate cuts.''
The Australian dollar, known as the Aussie, traded as high as 90.16 U.S. cents, the strongest since Jan. 15. It bought 89.13 cents at 10:06 a.m. in Sydney compared with 88.87 cents late in Asia yesterday.
The New Zealand dollar, dubbed the kiwi, climbed 0.5 percent to 78.26 U.S. cents and touched 79.16 cents, the strongest since Jan. 16.
Australia's dollar may reach 90.20 cents and New Zealand's may touch 79.35 cents today, which are resistance levels for the currencies, Trinh said. Resistance is where orders to sell a currency may be clustered.
Trade Deficit
New Zealand's dollar held gains after a government report showed the country's annual trade deficit narrowed to the smallest in two years as soaring prices for dairy products drove exports to a record. Rising overseas shipments, which make up 30 percent of the economy, may drive New Zealand's growth and generate demand for the currency.
The shortfall shrank to NZ$5.31 billion ($4.2 billion) in 2007 from NZ$5.69 billion in the 12 months through Nov. 30, Statistics New Zealand said in Wellington today. That beat the median estimate of NZ$5.5 billion in a Bloomberg News survey of nine economists.
The Fed said in a statement that downside risks to growth remain, suggesting policy makers may reduce rates again.
Australia's rate premium has increased to 3.75 percentage points, the highest since September 2004. New Zealand's rate advantage widened to 5.25 points, the most since February 1993.
The kiwi has gained the most among the 16 most-traded currencies since the Fed started cutting in September as investors were attracted to the country's 8.25 percent rate, one of the highest among developed economies. The Aussie has also benefited because of Australia's 11-year high 6.75 percent rate, which traders are betting will be raised next week.
Australian government bonds strengthened, pushing the yield on the 10-year note down 2 basis points to 6.04 percent. New Zealand's equivalent yield rose 2 basis points to 6.30 percent. A basis point equals 0.01 percentage point.
Corn Falls on Concern U.S. Economic Slump to Reduce Demand
By Jeff Wilson
Jan. 30 (Bloomberg) -- Corn dropped on concern an interest- rate cut by the U.S. Federal Reserve won't keep the economy out of a recession, reducing global demand for food, fuel and animal feed.
U.S. economic growth slowed to an annual rate of 0.6 percent in the fourth quarter, half the rate forecast, Commerce Department data showed today. The Federal Open Market Committee cut its benchmark interest rate by half a percentage point to 3 percent following the Jan. 22 emergency rate reduction, the fastest 1.25 percent easing of monetary policy since 1990.
``A global slowdown will have an impact on demand,'' said Sid Love, a grain analyst for Kropf and Love Consulting in Overland Park, Kansas. ``Prices are likely to hold firm into February'' the month that federal crop insurance rates are set based on average futures prices in Chicago, Love said.
Corn futures for March delivery fell 2.5 cents, or 0.5 percent, to $4.985 a bushel on the Chicago Board of Trade. The price still has climbed 9.4 percent in January, heading for the fifth straight monthly gain.
The most-active contract reached a record $5.1925 on Jan. 15. Futures climbed 17 percent last year on record demand for grain used to make ethanol and feed livestock.
Corn also fell on speculation import demand from Mexico, the second-biggest buyer of the crop, will decline.
Mexican economic growth will slow to 2.8 percent in 2008, the lowest in three years, from an estimated 3.2 percent in 2007, the Finance Ministry said today. The government had forecast 3.7 percent expansion.
Near Recession
The U.S. economy edged closer to recession in the fourth quarter as home construction fell the most in 26 years and Americans cut back on spending, government data showed.
``If these recession fears are realized, we could see a slowdown in global demand,'' said Marty Foreman, a grain analyst for Doane Agricultural Services Co. in St. Louis. ``A slowdown doesn't change things immediately, but for now, we can say prices are high enough.''
Corn prices also fell on speculation U.S.-produced ethanol may face increased competition from Brazilian supplies, which are made from sugar, said Chad Henderson, a market analyst for Prime-Ag Consulting Inc. in Brookfield, Wisconsin.
Ethanol import tariffs that have ``helped protect'' U.S. ethanol producers will be addressed in the 2009 budget set for release Feb. 4, Energy Secretary Samuel Bodman said yesterday. The U.S. industry ``is pretty close to being able to stand on its own,'' Bodman said after giving a speech in Washington.
``The elimination of the ethanol import tariff could change the outlook for corn demand,'' Henderson said. ``Imports could reduce demand for Midwestern ethanol'' on the East Coast and West Coast, where imports would be cheaper, Henderson said.
Corn is the biggest U.S. crop, valued at a record $33.8 billion in 2006, followed by soybeans at $19.7 billion, government figures show.
Jan. 30 (Bloomberg) -- Corn dropped on concern an interest- rate cut by the U.S. Federal Reserve won't keep the economy out of a recession, reducing global demand for food, fuel and animal feed.
U.S. economic growth slowed to an annual rate of 0.6 percent in the fourth quarter, half the rate forecast, Commerce Department data showed today. The Federal Open Market Committee cut its benchmark interest rate by half a percentage point to 3 percent following the Jan. 22 emergency rate reduction, the fastest 1.25 percent easing of monetary policy since 1990.
``A global slowdown will have an impact on demand,'' said Sid Love, a grain analyst for Kropf and Love Consulting in Overland Park, Kansas. ``Prices are likely to hold firm into February'' the month that federal crop insurance rates are set based on average futures prices in Chicago, Love said.
Corn futures for March delivery fell 2.5 cents, or 0.5 percent, to $4.985 a bushel on the Chicago Board of Trade. The price still has climbed 9.4 percent in January, heading for the fifth straight monthly gain.
The most-active contract reached a record $5.1925 on Jan. 15. Futures climbed 17 percent last year on record demand for grain used to make ethanol and feed livestock.
Corn also fell on speculation import demand from Mexico, the second-biggest buyer of the crop, will decline.
Mexican economic growth will slow to 2.8 percent in 2008, the lowest in three years, from an estimated 3.2 percent in 2007, the Finance Ministry said today. The government had forecast 3.7 percent expansion.
Near Recession
The U.S. economy edged closer to recession in the fourth quarter as home construction fell the most in 26 years and Americans cut back on spending, government data showed.
``If these recession fears are realized, we could see a slowdown in global demand,'' said Marty Foreman, a grain analyst for Doane Agricultural Services Co. in St. Louis. ``A slowdown doesn't change things immediately, but for now, we can say prices are high enough.''
Corn prices also fell on speculation U.S.-produced ethanol may face increased competition from Brazilian supplies, which are made from sugar, said Chad Henderson, a market analyst for Prime-Ag Consulting Inc. in Brookfield, Wisconsin.
Ethanol import tariffs that have ``helped protect'' U.S. ethanol producers will be addressed in the 2009 budget set for release Feb. 4, Energy Secretary Samuel Bodman said yesterday. The U.S. industry ``is pretty close to being able to stand on its own,'' Bodman said after giving a speech in Washington.
``The elimination of the ethanol import tariff could change the outlook for corn demand,'' Henderson said. ``Imports could reduce demand for Midwestern ethanol'' on the East Coast and West Coast, where imports would be cheaper, Henderson said.
Corn is the biggest U.S. crop, valued at a record $33.8 billion in 2006, followed by soybeans at $19.7 billion, government figures show.
Japanese Stocks Fall After U.S. Growth Slows, S&P Ratings
By Masaki Kondo and Patrick Rial
Jan. 31 (Bloomberg) -- Japanese stocks dropped after growth slowed in the U.S., the world's biggest economy, and Standard & Poor's slashed ratings on subprime mortgage securities, raising concern banks will be forced to report more investment losses.
Canon Inc., which forecast its slowest annual profit growth this decade, plunged by the most in five months. Mitsubishi UFJ Financial Group Inc. fell for second day.
The U.S. economy grew 0.6 percent in the fourth quarter, falling from 4.9 percent in the prior three months and the slowest since the first quarter of last year. S&P lowered its credit rating on $270.1 billion of subprime mortgage bonds and said it may cut an equivalent amount of collateralized debt obligations.
``Investors were jolted back to the reality that economic growth is weakening,'' said Yoji Takeda, who oversees $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``There's no end in sight yet to the subprime problem and it's unclear to what extent banks will post losses.''
The Nikkei 225 Stock Average lost 169.27, or 1.3 percent, to 13,175.76 as of 9:51 a.m. in Tokyo, while the broader Topix index retreated 21.36, or 1.6 percent, to 1,298.75.
Shares of companies relying on overseas sales also fell after the yen strengthened against the dollar to as high as 106.03 from 106.84 yesterday, after the U.S. Federal Reserve cut its benchmark interest rate by half a point to 3 percent.
The Nikkei has lost 14 percent in January and the Topix has dropped 12 percent, the worst month for both since Aug. 1998.
Nikkei futures expiring in March slumped 1.6 percent to 13,200 in Osaka and fell 1.5 percent to 13,200 in Singapore.
Jan. 31 (Bloomberg) -- Japanese stocks dropped after growth slowed in the U.S., the world's biggest economy, and Standard & Poor's slashed ratings on subprime mortgage securities, raising concern banks will be forced to report more investment losses.
Canon Inc., which forecast its slowest annual profit growth this decade, plunged by the most in five months. Mitsubishi UFJ Financial Group Inc. fell for second day.
The U.S. economy grew 0.6 percent in the fourth quarter, falling from 4.9 percent in the prior three months and the slowest since the first quarter of last year. S&P lowered its credit rating on $270.1 billion of subprime mortgage bonds and said it may cut an equivalent amount of collateralized debt obligations.
``Investors were jolted back to the reality that economic growth is weakening,'' said Yoji Takeda, who oversees $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``There's no end in sight yet to the subprime problem and it's unclear to what extent banks will post losses.''
The Nikkei 225 Stock Average lost 169.27, or 1.3 percent, to 13,175.76 as of 9:51 a.m. in Tokyo, while the broader Topix index retreated 21.36, or 1.6 percent, to 1,298.75.
Shares of companies relying on overseas sales also fell after the yen strengthened against the dollar to as high as 106.03 from 106.84 yesterday, after the U.S. Federal Reserve cut its benchmark interest rate by half a point to 3 percent.
The Nikkei has lost 14 percent in January and the Topix has dropped 12 percent, the worst month for both since Aug. 1998.
Nikkei futures expiring in March slumped 1.6 percent to 13,200 in Osaka and fell 1.5 percent to 13,200 in Singapore.
Wheat Falls as Argentina Eliminates Restrictions on Exports
By Tony C. Dreibus
Jan. 30 (Bloomberg) -- Wheat fell for the second straight day after Argentina, the world's fourth-largest exporter of the grain, planned to end temporary limits on shipments next month.
The lifting of restrictions will free up about 2 million metric tons of wheat for sale overseas, eroding demand for supplies from the U.S., the biggest exporter, analysts said. Argentina halted registrations in November to curb rising domestic food prices.
``That's business that we would've gotten if Argentina wouldn't have allowed those exports,'' said Larry Glenn, owner of Glenn Commodities in Wichita, Kansas. ``That's five weeks worth of export business if we sold 400,000 a week.''
Wheat for March delivery fell 21.5 cents, or 2.3 percent, to $9.225 a bushel on the Chicago Board of Trade. The announcement yesterday in Buenos Aires that shipments would resume by Feb. 15 sent wheat tumbling 19 cents, or 2 percent, after the price earlier rose the exchange's 30-cent limit, or 3.1 percent.
Wheat futures still have doubled in the past year and reached a record $10.095 on Dec. 17 after importers began buying U.S. grain on concern supplies would fall short of demand.
Higher prices have hurt profit at Kellogg Co., the largest cereal maker in the U.S. Fourth-quarter earnings dropped 3.3 percent, partly because of higher wheat costs, the company said today. Net income fell to $176 million, or 44 cents a share, from $182 million, or 45 cents, a year earlier. Sales increased 8.1 percent to $2.79 billion.
Minneapolis Rally
On the Minneapolis Grain Exchange, contracts for high- protein spring wheat extended a rally, reaching a record in overnight trading on concern farmers in the U.S. and Canada may not seed enough acres in April and May.
Inventories of spring varieties are low after drought curbed yields in southern Canada and the northern U.S. in 2007. With corn and soybean prices at or near records, farmers may sow more of those crops rather than wheat, analysts said.
``Things are awful tight for spring-wheat supplies and demand's been high for quality wheat,'' Glenn said.
Wheat for March delivery in Minneapolis rose 16 cents, or 1.2 percent, to $13.43 a bushel after reaching $13.55, the highest ever. The price has jumped the 30-cent limit in six of the past nine sessions. Futures have surged 30 percent this month and more than doubled in the past year.
Futures for delivery in September and December fell the exchange limit on speculation stockpiles of spring wheat will rise as record prices encourage growers to plant more of the grain. Spring wheat is harvested starting in August.
Wheat was the fourth-biggest U.S. crop in 2006, valued at $7.7 billion, behind corn, soybeans and hay, government data show.
Jan. 30 (Bloomberg) -- Wheat fell for the second straight day after Argentina, the world's fourth-largest exporter of the grain, planned to end temporary limits on shipments next month.
The lifting of restrictions will free up about 2 million metric tons of wheat for sale overseas, eroding demand for supplies from the U.S., the biggest exporter, analysts said. Argentina halted registrations in November to curb rising domestic food prices.
``That's business that we would've gotten if Argentina wouldn't have allowed those exports,'' said Larry Glenn, owner of Glenn Commodities in Wichita, Kansas. ``That's five weeks worth of export business if we sold 400,000 a week.''
Wheat for March delivery fell 21.5 cents, or 2.3 percent, to $9.225 a bushel on the Chicago Board of Trade. The announcement yesterday in Buenos Aires that shipments would resume by Feb. 15 sent wheat tumbling 19 cents, or 2 percent, after the price earlier rose the exchange's 30-cent limit, or 3.1 percent.
Wheat futures still have doubled in the past year and reached a record $10.095 on Dec. 17 after importers began buying U.S. grain on concern supplies would fall short of demand.
Higher prices have hurt profit at Kellogg Co., the largest cereal maker in the U.S. Fourth-quarter earnings dropped 3.3 percent, partly because of higher wheat costs, the company said today. Net income fell to $176 million, or 44 cents a share, from $182 million, or 45 cents, a year earlier. Sales increased 8.1 percent to $2.79 billion.
Minneapolis Rally
On the Minneapolis Grain Exchange, contracts for high- protein spring wheat extended a rally, reaching a record in overnight trading on concern farmers in the U.S. and Canada may not seed enough acres in April and May.
Inventories of spring varieties are low after drought curbed yields in southern Canada and the northern U.S. in 2007. With corn and soybean prices at or near records, farmers may sow more of those crops rather than wheat, analysts said.
``Things are awful tight for spring-wheat supplies and demand's been high for quality wheat,'' Glenn said.
Wheat for March delivery in Minneapolis rose 16 cents, or 1.2 percent, to $13.43 a bushel after reaching $13.55, the highest ever. The price has jumped the 30-cent limit in six of the past nine sessions. Futures have surged 30 percent this month and more than doubled in the past year.
Futures for delivery in September and December fell the exchange limit on speculation stockpiles of spring wheat will rise as record prices encourage growers to plant more of the grain. Spring wheat is harvested starting in August.
Wheat was the fourth-biggest U.S. crop in 2006, valued at $7.7 billion, behind corn, soybeans and hay, government data show.
Crude Oil Follows Equities Lower After Fed Cuts Interest Rates
By Margot Habiby and Mark Shenk
Jan. 31 (Bloomberg) -- Crude oil fell for the first time in six days as U.S. stocks declined after the Federal Reserve cut its benchmark interest rate to bolster the economy of the world's biggest energy-consuming country.
Oil gained the past five sessions in anticipation of the Fed reducing interest rates by half a percentage point to 3 percent. The move yesterday, coupled with the Jan. 22 emergency cut of three-quarters of a point, is the fastest easing of monetary policy since 1990.
``The market has rallied in both equities and oil over the past few days on the assumption that we were going to get a 50 basis point cut,'' said Jeff Spittel, an analyst at Natixis Bleichroeder Inc. in Houston. ``We got it, and I think there are people trying to square off positions.''
Crude oil for March delivery dropped as much as $1.28, or 1.4 percent, to $91.05 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $91.16 at 8:15 a.m. in Singapore.
The contract rose 69 cents, or 0.8 percent, to $92.33 yesterday, the highest settlement since Jan. 14. Prices slumped in later trading with share prices gave up their gains.
U.S. stocks fell for the first time this week on concern that bond insurers guaranteeing $2.4 trillion in securities will lose AAA credit ratings. The Standard & Poor's 500 index fell 6.49, or 0.5 percent, to 1,355.81 and is down 7.7 percent this year. The Dow Jones Industrial Average lost 37.47, or 0.3 percent, to 12,442.83.
Economy
``The bottom-line is that people are worried about the economy,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. The Fed ``is probably going to have to lower rates again'' and that will push the dollar lower and hold oil in a trading range $86 and $95, he said.
Brent crude for March settlement yesterday rose 53 cents, or 0.6 percent, to $92.53 a barrel on London's ICE Futures Europe exchange yesterday, the highest close since Jan. 14.
A U.S. Energy Department report yesterday showed that oil stockpiles rose a for a third time last week, and by more than analysts expected. Gasoline stockpiles increased for a 12th week.
Refineries operated at 85 percent of capacity, the lowest since March 2006, according to the department.
``You're probably going to see more builds from here but that's because refinery runs are coming down and that's because of normal seasonal maintenance,'' Excel's Waggoner said. ``Imports are high and demand is still pretty strong.''
The Organization of Petroleum Exporting Countries will keep its output target unchanged at 29.67 million barrels a day when it meets in Vienna tomorrow, according to 29 of 32 analysts surveyed between Jan. 24 and 28 by Bloomberg News. The 13-member group produces more than 40 percent of the world's oil.
``The world has sufficient supply, even oversupplied in some places,'' Qatar's Abdullah bin Hamad al-Attiyah said in a Bloomberg Television interview in Doha yesterday. ``So to increase, I don't think this is on the agenda.''
Jan. 31 (Bloomberg) -- Crude oil fell for the first time in six days as U.S. stocks declined after the Federal Reserve cut its benchmark interest rate to bolster the economy of the world's biggest energy-consuming country.
Oil gained the past five sessions in anticipation of the Fed reducing interest rates by half a percentage point to 3 percent. The move yesterday, coupled with the Jan. 22 emergency cut of three-quarters of a point, is the fastest easing of monetary policy since 1990.
``The market has rallied in both equities and oil over the past few days on the assumption that we were going to get a 50 basis point cut,'' said Jeff Spittel, an analyst at Natixis Bleichroeder Inc. in Houston. ``We got it, and I think there are people trying to square off positions.''
Crude oil for March delivery dropped as much as $1.28, or 1.4 percent, to $91.05 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $91.16 at 8:15 a.m. in Singapore.
The contract rose 69 cents, or 0.8 percent, to $92.33 yesterday, the highest settlement since Jan. 14. Prices slumped in later trading with share prices gave up their gains.
U.S. stocks fell for the first time this week on concern that bond insurers guaranteeing $2.4 trillion in securities will lose AAA credit ratings. The Standard & Poor's 500 index fell 6.49, or 0.5 percent, to 1,355.81 and is down 7.7 percent this year. The Dow Jones Industrial Average lost 37.47, or 0.3 percent, to 12,442.83.
Economy
``The bottom-line is that people are worried about the economy,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. The Fed ``is probably going to have to lower rates again'' and that will push the dollar lower and hold oil in a trading range $86 and $95, he said.
Brent crude for March settlement yesterday rose 53 cents, or 0.6 percent, to $92.53 a barrel on London's ICE Futures Europe exchange yesterday, the highest close since Jan. 14.
A U.S. Energy Department report yesterday showed that oil stockpiles rose a for a third time last week, and by more than analysts expected. Gasoline stockpiles increased for a 12th week.
Refineries operated at 85 percent of capacity, the lowest since March 2006, according to the department.
``You're probably going to see more builds from here but that's because refinery runs are coming down and that's because of normal seasonal maintenance,'' Excel's Waggoner said. ``Imports are high and demand is still pretty strong.''
The Organization of Petroleum Exporting Countries will keep its output target unchanged at 29.67 million barrels a day when it meets in Vienna tomorrow, according to 29 of 32 analysts surveyed between Jan. 24 and 28 by Bloomberg News. The 13-member group produces more than 40 percent of the world's oil.
``The world has sufficient supply, even oversupplied in some places,'' Qatar's Abdullah bin Hamad al-Attiyah said in a Bloomberg Television interview in Doha yesterday. ``So to increase, I don't think this is on the agenda.''
Gold Rises to Record After Fed Cuts Rates, Sending Dollar Lower
By Pham-Duy Nguyen
Jan. 30 (Bloomberg) -- Gold rose to a record after the Federal Reserve lowered interest rates for the second time in nine days, weakening the dollar and boosting the appeal of the precious metal as an alternative investment.
The Fed cut the federal funds rate by half a percentage point to 3 percent, the lowest since June 2005, after an emergency reduction of 0.75 percentage point on Jan. 22. Fed cuts in 2007 totaled 1 percentage point, sending the dollar 9.5 percent lower against the euro, while gold gained 31 percent in 2007, the most since 1979.
``Gold will continue to rise,'' said Stuart Flerlage, who helps manage more than $600 million at NuWave Investment Corp. in New York. ``U.S. interest-rate cuts continue to underpin the fiat-currency play. Investors will continue to seek safe haven in one of the primary traditional stores of value.''
Gold futures for April delivery rose $7.40, or 0.8 percent, to $933.70 an ounce at 3:36 p.m. in after-hours trading on the Comex division of the New York Mercantile Exchange. Earlier, gold touched $942.20, the highest ever for a most-active contract. Before the Fed announcement, the contract had fallen $4.50 to close at $926.30.
Gold for immediate delivery also rose to a record $936.61 an ounce.
The euro rallied as much as 0.9 percent against the dollar after the announcement. Policy makers said that ``downside risks to growth remain.''
Housing Slump, Mortgage Losses
Before today's rate reduction, gold had gained 28 percent since Sept. 18, when the Fed began cutting borrowing costs because a housing slump and mounting losses in the subprime- mortgage market threatened to push the U.S. economy into a recession. The Fed had held rates steady since June 2006 before the Sept. 18 cut.
Economic growth slowed to an annual rate of 0.6 percent in the fourth quarter, compared with a 4.9 percent pace in the previous three months, the Commerce Department said today. The U.S. House of Representatives yesterday approved a $146 billion economic stimulus plan. Consumer prices last year rose 4.1 percent, the most since 1990.
``Gold is going higher on the liquidity that's being flooded into the market,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. ``It's going to continue the stagflation scenario we've had for the past six months.''
Stagflation occurs when costs accelerate while growth slows.
Jan. 30 (Bloomberg) -- Gold rose to a record after the Federal Reserve lowered interest rates for the second time in nine days, weakening the dollar and boosting the appeal of the precious metal as an alternative investment.
The Fed cut the federal funds rate by half a percentage point to 3 percent, the lowest since June 2005, after an emergency reduction of 0.75 percentage point on Jan. 22. Fed cuts in 2007 totaled 1 percentage point, sending the dollar 9.5 percent lower against the euro, while gold gained 31 percent in 2007, the most since 1979.
``Gold will continue to rise,'' said Stuart Flerlage, who helps manage more than $600 million at NuWave Investment Corp. in New York. ``U.S. interest-rate cuts continue to underpin the fiat-currency play. Investors will continue to seek safe haven in one of the primary traditional stores of value.''
Gold futures for April delivery rose $7.40, or 0.8 percent, to $933.70 an ounce at 3:36 p.m. in after-hours trading on the Comex division of the New York Mercantile Exchange. Earlier, gold touched $942.20, the highest ever for a most-active contract. Before the Fed announcement, the contract had fallen $4.50 to close at $926.30.
Gold for immediate delivery also rose to a record $936.61 an ounce.
The euro rallied as much as 0.9 percent against the dollar after the announcement. Policy makers said that ``downside risks to growth remain.''
Housing Slump, Mortgage Losses
Before today's rate reduction, gold had gained 28 percent since Sept. 18, when the Fed began cutting borrowing costs because a housing slump and mounting losses in the subprime- mortgage market threatened to push the U.S. economy into a recession. The Fed had held rates steady since June 2006 before the Sept. 18 cut.
Economic growth slowed to an annual rate of 0.6 percent in the fourth quarter, compared with a 4.9 percent pace in the previous three months, the Commerce Department said today. The U.S. House of Representatives yesterday approved a $146 billion economic stimulus plan. Consumer prices last year rose 4.1 percent, the most since 1990.
``Gold is going higher on the liquidity that's being flooded into the market,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. ``It's going to continue the stagflation scenario we've had for the past six months.''
Stagflation occurs when costs accelerate while growth slows.
Fed Cuts Interest Rate to 3% as U.S. Growth Falters
By Craig Torres
The Federal Reserve lowered its benchmark interest rate by half a point to 3 percent, the second cut in nine days, and indicated its willingness to do so again to prevent a U.S. recession.
``Downside risks to growth remain,'' the Federal Open Market Committee said in a statement after meeting today in Washington. In a reference to the volatility of the past five months, the Fed added that ``financial markets remain under considerable stress and credit has tightened further for some businesses and households.''
The dollar tumbled and two-year Treasury notes rose after the decision as traders anticipated another reduction at the Fed's March meeting, if not before. The cumulative reduction in rates since Jan. 22 is the fastest easing of monetary policy since 1990. The Standard & Poor's 500 Index closed 0.5 percent lower and is down 7.7 percent this year.
``They're going full-bore trying to keep the economy from recession,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``Conditions in the market place are the driving force right now.''
Hours before the decision was announced, the Commerce Department reported that gross domestic product grew at an annual pace of 0.6 percent in the fourth quarter.
``The Fed has gotten religion and is going do what they need to do,'' said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina.
Readiness to Respond
Fed officials said they will continue to assess financial markets and the economy ``and will act in a timely manner as needed.''
``Recent information indicates a deepening of the housing contraction as well as some softening in labor markets,'' the central bank's statement also noted.
Chairman Ben S. Bernanke and the Fed's Board of Governors also voted to cut the discount rate, the cost of direct loans from the central bank, to 3.5 percent from 4 percent.
Dallas Fed President Richard Fisher dissented from today's decision, preferring no change.
Policy makers presented revised three-year economic forecasts at this week's gathering. The Fed will release the projections along with minutes of the meeting on Feb. 20.
Today's Commerce Department figures showed the Fed's preferred inflation gauge rose at a 2.7 percent annualized rate last quarter. Fed officials in October forecast the personal consumption expenditures price index minus food and energy would rise 1.6 percent to 1.9 percent in 2010, offering a measure of their longer-term inflation objective.
Inflation
``The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully,'' the Fed said in today's statement.
Wall Street firms including Morgan Stanley, Merrill Lynch & Co., Goldman Sachs Group Inc. and Citigroup Inc. are forecasting the first recession since 2001 this year. Still, executives at firms such as Dow Chemical Co. said they don't detect a downturn yet, while risks remain.
This year ``will be slower than 2007,'' Andrew Liveris, the chairman and chief executive officer of Dow Chemical, said yesterday. ``It is an inconvenience, not a catastrophe.''
United Parcel Service Inc., Caterpillar Inc. and General Electric Co. are relying on gains overseas to counter slower growth at home.
Evolution Since August
Fed policy makers have struggled since August to contain the economic damage sparked by the worst housing recession in a quarter-century. The world's largest banks and securities firms have recorded more than $133 billion in asset writedowns and credit losses since the beginning of 2007, which analysts blamed on weak and fragmented supervision and poor credit analysis.
``The Fed's move lowers the cost of financing for Wall Street which is struggling to raise capital after being hit with writedowns not seen since the Great Depression,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
Foreclosure rates rose 75 percent in 2007 as a record amount of adjustable-rate loans to borrowers with weak or limited credit histories reset to higher rates, RealtyTrac Inc. data show. Home prices in 20 U.S. metropolitan areas fell 7.7 percent in November from a year earlier, the 11th consecutive decline, the S&P/Case-Shiller home-price index showed yesterday.
``We are in a historic housing bust right now, comparable to that of the Great Depression,'' said Robert Shiller, chief economist of MacroMarkets LLC in Madison, New Jersey, who co- founded the house-price index. ``The unraveling of that has unpredictable consequences.''
Delay in 2007
Fed officials waited until September to cut the benchmark lending rate, even though premiums on corporate bonds and lower- rated securities began to climb in late June.
By December, Fed policy makers had cut the benchmark lending rate 1 percentage point, yet still described the policy rate as ``somewhat restrictive'' as they deliberated whether to cut again that month, minutes show.
The government's December payroll report, which showed a loss of 13,000 private sector jobs, the first decline since July 2003, began to reshape Fed officials' views about risks.
Bernanke used a Jan. 10 speech to update the public. ``The baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced,'' he said, breaking with the Fed's statement a month earlier which only expressed ``uncertainty'' about the outlook. He pledged ``substantive additional action as needed.''
The Federal Reserve lowered its benchmark interest rate by half a point to 3 percent, the second cut in nine days, and indicated its willingness to do so again to prevent a U.S. recession.
``Downside risks to growth remain,'' the Federal Open Market Committee said in a statement after meeting today in Washington. In a reference to the volatility of the past five months, the Fed added that ``financial markets remain under considerable stress and credit has tightened further for some businesses and households.''
The dollar tumbled and two-year Treasury notes rose after the decision as traders anticipated another reduction at the Fed's March meeting, if not before. The cumulative reduction in rates since Jan. 22 is the fastest easing of monetary policy since 1990. The Standard & Poor's 500 Index closed 0.5 percent lower and is down 7.7 percent this year.
``They're going full-bore trying to keep the economy from recession,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``Conditions in the market place are the driving force right now.''
Hours before the decision was announced, the Commerce Department reported that gross domestic product grew at an annual pace of 0.6 percent in the fourth quarter.
``The Fed has gotten religion and is going do what they need to do,'' said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina.
Readiness to Respond
Fed officials said they will continue to assess financial markets and the economy ``and will act in a timely manner as needed.''
``Recent information indicates a deepening of the housing contraction as well as some softening in labor markets,'' the central bank's statement also noted.
Chairman Ben S. Bernanke and the Fed's Board of Governors also voted to cut the discount rate, the cost of direct loans from the central bank, to 3.5 percent from 4 percent.
Dallas Fed President Richard Fisher dissented from today's decision, preferring no change.
Policy makers presented revised three-year economic forecasts at this week's gathering. The Fed will release the projections along with minutes of the meeting on Feb. 20.
Today's Commerce Department figures showed the Fed's preferred inflation gauge rose at a 2.7 percent annualized rate last quarter. Fed officials in October forecast the personal consumption expenditures price index minus food and energy would rise 1.6 percent to 1.9 percent in 2010, offering a measure of their longer-term inflation objective.
Inflation
``The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully,'' the Fed said in today's statement.
Wall Street firms including Morgan Stanley, Merrill Lynch & Co., Goldman Sachs Group Inc. and Citigroup Inc. are forecasting the first recession since 2001 this year. Still, executives at firms such as Dow Chemical Co. said they don't detect a downturn yet, while risks remain.
This year ``will be slower than 2007,'' Andrew Liveris, the chairman and chief executive officer of Dow Chemical, said yesterday. ``It is an inconvenience, not a catastrophe.''
United Parcel Service Inc., Caterpillar Inc. and General Electric Co. are relying on gains overseas to counter slower growth at home.
Evolution Since August
Fed policy makers have struggled since August to contain the economic damage sparked by the worst housing recession in a quarter-century. The world's largest banks and securities firms have recorded more than $133 billion in asset writedowns and credit losses since the beginning of 2007, which analysts blamed on weak and fragmented supervision and poor credit analysis.
``The Fed's move lowers the cost of financing for Wall Street which is struggling to raise capital after being hit with writedowns not seen since the Great Depression,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
Foreclosure rates rose 75 percent in 2007 as a record amount of adjustable-rate loans to borrowers with weak or limited credit histories reset to higher rates, RealtyTrac Inc. data show. Home prices in 20 U.S. metropolitan areas fell 7.7 percent in November from a year earlier, the 11th consecutive decline, the S&P/Case-Shiller home-price index showed yesterday.
``We are in a historic housing bust right now, comparable to that of the Great Depression,'' said Robert Shiller, chief economist of MacroMarkets LLC in Madison, New Jersey, who co- founded the house-price index. ``The unraveling of that has unpredictable consequences.''
Delay in 2007
Fed officials waited until September to cut the benchmark lending rate, even though premiums on corporate bonds and lower- rated securities began to climb in late June.
By December, Fed policy makers had cut the benchmark lending rate 1 percentage point, yet still described the policy rate as ``somewhat restrictive'' as they deliberated whether to cut again that month, minutes show.
The government's December payroll report, which showed a loss of 13,000 private sector jobs, the first decline since July 2003, began to reshape Fed officials' views about risks.
Bernanke used a Jan. 10 speech to update the public. ``The baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced,'' he said, breaking with the Fed's statement a month earlier which only expressed ``uncertainty'' about the outlook. He pledged ``substantive additional action as needed.''
Tuesday, January 29, 2008
The Monkeys Market ( Satire )
Once upon a time in a village, a man appeared and announced to the villagers
that he would buy monkeys at $10 each.
The villagers, seeing that there were many monkeys around,
went into the forest and started catching them.
The man very gentlemanly bought thousands of monkeys at $10 each,
but as supply started to diminish,
the villagers slowed down and eventually stopped their efforts.
The man then announced that he would now buy at $20.
This renewed the energy and efforts of the villagers
and they started catching monkeys again.
Soon the supply diminished even further, and people started going back to their farms.
The offer was then increased to $25 each, but the supply of monkeys became so little
that it was a almost a miracle to even spot a monkey, let alone catch one.
The man now announced that he would buy monkeys at $50 !
However, since he had to go to the city on some business,
his assistant would transact on his behalf.
In the absence of the man, the assistant assembled the villagers and told them :
“ Look at all these monkeys in the big cages that the man has collected.
I will sell them to you at $35 each, and when the man returns from the city,
you can in turn sell them to him at $50 each.
Deal or no deal ? ”
The excited villagers, smelling a quick-profit killer opportunity,
immediately rounded up all their savings and bought all the monkeys.
Then they never saw the man nor his assistant again,
and there were just monkeys everywhere!
Ladies and gentlemen :
Now you have a better understanding of how the stock market works.
that he would buy monkeys at $10 each.
The villagers, seeing that there were many monkeys around,
went into the forest and started catching them.
The man very gentlemanly bought thousands of monkeys at $10 each,
but as supply started to diminish,
the villagers slowed down and eventually stopped their efforts.
The man then announced that he would now buy at $20.
This renewed the energy and efforts of the villagers
and they started catching monkeys again.
Soon the supply diminished even further, and people started going back to their farms.
The offer was then increased to $25 each, but the supply of monkeys became so little
that it was a almost a miracle to even spot a monkey, let alone catch one.
The man now announced that he would buy monkeys at $50 !
However, since he had to go to the city on some business,
his assistant would transact on his behalf.
In the absence of the man, the assistant assembled the villagers and told them :
“ Look at all these monkeys in the big cages that the man has collected.
I will sell them to you at $35 each, and when the man returns from the city,
you can in turn sell them to him at $50 each.
Deal or no deal ? ”
The excited villagers, smelling a quick-profit killer opportunity,
immediately rounded up all their savings and bought all the monkeys.
Then they never saw the man nor his assistant again,
and there were just monkeys everywhere!
Ladies and gentlemen :
Now you have a better understanding of how the stock market works.
Financials Daily - 29th Jan 2008
US: U.S. stocks rose, extending the market's first weekly gain of the year, as odds increased that the Federal Reserve will cut its benchmark lending rate by half a percentage point this week to prop up the economy.
Europe: European stocks retreated, led by commodity producers and banks, on growing concern global economic growth is slowing and companies may report more losses linked to subprime mortgages.
Asia: Asian stocks fell, with the region's benchmark set for its biggest monthly decline since September 2001, on concern the world's two largest economies are slowing. Mitsubishi UFJ Financial Group Inc. led Japanese banks lower after Goldman, Sachs & Co. said the nation is probably in a recession.
Commodities: Crude oil was little changed amid speculation that the U.S. Federal Reserve will cut interest rates this week to spur economic growth in the world's biggest energy consuming country. Gold rose to a record $929.80 an ounce in New York as the dollar fell against the euro, enhancing the metal's appeal as an alternative investment.
Currencies: The dollar fell to the lowest level against the euro in almost two weeks as traders increased bets that the Federal Reserve will cut the target lending rate by a half-percentage point on Jan. 30 to prevent a U.S. recession.
Source: Bloomberg
Europe: European stocks retreated, led by commodity producers and banks, on growing concern global economic growth is slowing and companies may report more losses linked to subprime mortgages.
Asia: Asian stocks fell, with the region's benchmark set for its biggest monthly decline since September 2001, on concern the world's two largest economies are slowing. Mitsubishi UFJ Financial Group Inc. led Japanese banks lower after Goldman, Sachs & Co. said the nation is probably in a recession.
Commodities: Crude oil was little changed amid speculation that the U.S. Federal Reserve will cut interest rates this week to spur economic growth in the world's biggest energy consuming country. Gold rose to a record $929.80 an ounce in New York as the dollar fell against the euro, enhancing the metal's appeal as an alternative investment.
Currencies: The dollar fell to the lowest level against the euro in almost two weeks as traders increased bets that the Federal Reserve will cut the target lending rate by a half-percentage point on Jan. 30 to prevent a U.S. recession.
Source: Bloomberg
Economic Releases for week of 28 Jan 07
US
Date Time Event Survey Prior Revised
Monday
1/28/2008 23:00 New Home Sales DEC 645K 647K - -
1/28/2008 23:00 New Home Sales MoM DEC -0.30% -9.00% - -
Tuesday
1/29/2008 21:30 Durable Goods Orders DEC 1.90% 0.10% -0.10%
1/29/2008 21:30 Durables Ex Transportation DEC 0.00% -0.70% -0.80%
1/29/2008 22:00 S&P/CS Composite-20 YoY NOV -7.10% -6.10% - -
1/29/2008 22:00 S&P/CaseShiller Home Price Ind NOV - - 192.9 - -
1/29/2008 23:00 Consumer Confidence JAN 87 88.6 - -
Wednesday
1/30/2008 3:15 U.S. Federal Reserve Open Market Committee Meeting
1/30/2008 6:00 ABC Consumer Confidence 28-Jan - - -23 - -
1/30/2008 20:00 MBA Mortgage Applications 26-Jan - - 8.30% - -
1/30/2008 21:15 ADP Employment Change JAN 40K 40K - -
1/30/2008 21:30 GDP Annualized 4Q A 1.20% 4.90% - -
1/30/2008 21:30 Personal Consumption 4Q A 2.70% 2.80% - -
1/30/2008 21:30 GDP Price Index 4Q A 2.60% 1.00% - -
1/30/2008 21:30 Core PCE QoQ 4Q A 2.50% 2.00% - -
Thursday
1/31/2008 3:15 FOMC Rate Decision 31-Jan 3.00% 3.50% - -
1/31/2008 21:30 Personal Income DEC 0.40% 0.40% - -
1/31/2008 21:30 Personal Spending DEC 0.10% 1.10% - -
1/31/2008 21:30 PCE Deflator (YoY) DEC 3.50% 3.60% - -
1/31/2008 21:30 PCE Core (MoM) DEC 0.20% 0.20% - -
1/31/2008 21:30 PCE Core (YoY) DEC 2.20% 2.20% - -
1/31/2008 21:30 Initial Jobless Claims 27-Jan 320K 301K - -
1/31/2008 21:30 Continuing Claims 20-Jan 2688K 2672K - -
1/31/2008 21:30 Employment Cost Index 4Q 0.80% 0.80% - -
1/31/2008 22:45 Chicago Purchasing Manager JAN 52.1 56.6 56.4
1/31/2008 23:00 Help Wanted Index DEC 20 21 - -
1/31/2008 23:00 NAPM-Milwaukee JAN - - 62 - -
Friday
2/1/2008 21:30 Change in Nonfarm Payrolls JAN 65k 18k - -
2/1/2008 21:30 Unemployment Rate JAN 5.00% 5.00% - -
2/1/2008 21:30 Change in Manufact. Payrolls JAN -20K -31K - -
2/1/2008 21:30 Average Hourly Earnings MoM JAN 0.30% 0.40% - -
2/1/2008 21:30 Average Hourly Earnings YoY JAN 3.90% 3.70% - -
2/1/2008 21:30 Average Weekly Hours JAN 33.8 33.8 - -
2/1/2008 22:00 RPX Composite 28dy YoY NOV - - -3.4285 - -
2/1/2008 22:00 RPX Composite 28dy Index NOV - - 255.5 - -
2/1/2008 23:00 U. of Michigan Confidence JAN F 79 80.5 - -
2/1/2008 23:00 ISM Manufacturing JAN 47.2 47.7 - -
2/1/2008 23:00 ISM Prices Paid JAN 68 68 - -
2/1/2008 23:00 Construction Spending MoM DEC -0.50% 0.10% - -
2-Feb Total Vehicle Sales JAN 16.0M 16.3M - -
2-Feb Domestic Vehicle Sales JAN 12.3M 12.5M - -
UK
Date Time Event Survey Prior
Tuesday
1/29/2008 19:00 U.K. CBI January Distributive Trades Reported Sales
Wednesday
1/30/2008 17:30 M4 Money Supply (MoM) DEC F - - 1.50%
1/30/2008 17:30 M4 Money Supply (YoY) DEC F - - 12.30%
1/30/2008 17:30 M4 Sterling Lending (BP) DEC F - - 17.3B
1/30/2008 17:30 Net Consumer Credit DEC 1.1B 1.1B
1/30/2008 17:30 Net Lending Sec. on Dwellings DEC 7.5B 7.8B
1/30/2008 17:30 Mortgage Approvals DEC 79K 83K
Thursday
1/31/2008 15:00 Nat'wide House prices sa (MoM) JAN -0.40% -0.50%
1/31/2008 15:00 Nat'wide House prices nsa(YoY) JAN 4.20% 4.80%
1/31/2008 18:30 GfK Consumer Confidence Survey JAN -15 -14
Friday
2/1/2008 17:30 PMI Manufacturing JAN 52.5 52.9
Germany
Date Time Event Survey Prior
Tuesday
1/29/2008 21:00 IFO Dec. Business Climate Survey by Industry (Table)
Wednesday
1/30/2008 17:00 Bloomberg Germany Retail PMI JAN - - 44
Thursday
1/31/2008 15:00 Retail Sales (MoM) DEC 1.70% -1.30%
1/31/2008 15:00 Retail Sales (YoY) DEC -4.20% -3.20%
1/31/2008 15:00 ILO Unemployment Rate DEC 7.80% 7.90%
1/31/2008 16:55 Unemployment Rate (s.a) JAN 8.30% 8.40%
1/31/2008 16:55 Unemployment Change (000's) JAN -43K -78K
31-Jan No German Jan. State CPI Released Due to Base Year Change
31-Jan Consumer Price Index (MoM) JAN P -0.30% 0.50%
31-Jan Consumer Price Index (YoY) JAN P 2.70% 2.80%
31-Jan CPI - EU Harmonised (MoM) JAN P -0.30% 0.70%
31-Jan CPI - EU Harmonised (YoY) JAN P 2.90% 3.10%
Friday
2/1/2008 16:55 PMI Manufacturing JAN 53.6 53.6
Japan
Date Time Event Survey Prior Revised
Monday
1/28/2008 7:50 Corp Service Price (YoY) DEC 1.40% 1.40% - -
Tuesday
1/29/2008 7:30 Jobless Rate DEC 3.90% 3.80% - -
1/29/2008 7:30 Job-To-Applicant Ratio DEC 0.99 0.99 - -
1/29/2008 7:30 Overall Hhold Spending (YoY) DEC -0.40% -0.60% - -
1/29/2008 7:50 Large Retailers' Sales DEC -2.00% 0.40% - -
1/29/2008 7:50 Retail Trade YoY DEC 0.10% 1.60% - -
1/29/2008 7:50 Retail Trade MoM SA DEC -0.70% 0.30% 0.40%
Wednesday
1/30/2008 7:50 Industrial Production (MoM) DEC P 2.00% -1.60% - -
1/30/2008 7:50 Industrial Production (YoY) DEC P 1.60% 2.90% - -
1/30/2008 12:00 Vehicle Production (YoY) DEC - - 3.80% - -
Thursday
1/31/2008 7:15 Nomura/JMMA Manufacturing PMI JAN 51.9 52.3 - -
1/31/2008 7:50 Foreign Buying Japan Stocks 25-Jan - - -¥367.6B - -
1/31/2008 7:50 Foreign Buying Japan Bonds 25-Jan - - ¥297.4B - -
1/31/2008 7:50 Japan Buying Foreign Stocks 25-Jan - - ¥188.1B - -
1/31/2008 7:50 Japan Buying Foreign Bonds 25-Jan - - ¥927.2B - -
1/31/2008 9:30 Labor Cash Earnings YoY DEC -0.10% -0.20% 0.10%
1/31/2008 13:00 Housing Starts (YoY) DEC -19.20% -27.00% - -
1/31/2008 13:00 Annualized Housing Starts DEC 1.051M 0.971M - -
1/31/2008 13:00 Construction Orders (YoY) DEC -9.40% -3.80% - -
1/31/2008 13:00 Small Business Confidence JAN - - 44.5 - -
1- 7 FEB Official Reserve Assets JAN - - $973.4B - -
Friday
2/1/2008 13:00 Vehicle Sales (YoY) JAN - - -7.10% - -
Singapore
Date Time Event Survey Prior
Thursday
31-Jan Unemployment Rate (sa) 4Q - - 1.70%
1/31/2008 10:00 M1 Money Supply (YoY) DEC - - 23.80%
1/31/2008 10:00 M2 Money Supply (YoY) DEC - - 16.50%
1/31/2008 10:00 Bank Loans & Advances (YoY) DEC - - 16.30%
1/31/2008 10:00 Credit Card Billings DEC - - 2096.3M
1/31/2008 10:00 Credit Card Bad Debts DEC - - 9.2M
HongKong
Date Time Event Survey Prior
Thursday
1/31/2008 16:15 Retail Sales - Value (YoY) DEC - - 19.50%
1/31/2008 16:15 Retail Sales - Volume (YoY) DEC - - 15.30%
1/31/2008 17:00 Money Supply M3 - in HK$ (YoY) DEC - - 21.90%
1/31/2008 17:00 Money Supply M2 - in HK$ (YoY) DEC - - 22.10%
1/31/2008 17:00 Money Supply M1 - in HK$ (YoY) DEC - - 33.70%
1/31/2008 17:00 Govt Mthly Budget Surp/Def HK$ DEC - - 32.4B
Friday
1-Feb Brunswick PMI JAN - - 55.5
Energy
Date Time Event Survey Prior
Wednesday
1/30/2008 23:30 DOE U.S. Crude Oil Inventories 26-Jan - - 2297K
1/30/2008 23:30 DOE U.S. Gasoline Inventories 26-Jan - - 5085K
1/30/2008 23:30 DOE U.S. Distillate Inventory 26-Jan - - -1302K
1/30/2008 23:30 DOE U.S. Refinery Utilization 26-Jan - - -0.60%
1/30/2008 23:30 API U.S. Crude Oil Inventories 26-Jan - - 1495K
1/30/2008 23:30 API U.S. Gasoline Inventories 26-Jan - - 2469K
1/30/2008 23:30 API U.S. Distillate Inventory 26-Jan - - -362K
Thursday
1/31/2008 23:30 EIA Natural Gas Storage Change 26-Jan - - -155
Saturday
2/2/2008 2:00 Baker Hughes U.S. Rig Count 2-Feb - - 1747
Agriculture
Date Time Event Survey Prior
Tuesday
1/29/2008 0:00 Export Inspections - Corn 25-Jan - - 45.82
1/29/2008 0:00 Export Inspections - Soybeans 25-Jan - - 32.24
1/29/2008 0:00 Export Inspections - Wheat 25-Jan - - 17.93
1/29 2/ 1 US DOE Monthly Ethanol Stocks NOV - - 11423K
1/29 2/ 1 US DOE Monthly Ethanol Prod NOV - - 14018K
Wednesday
1/30/2008 6:00 Chicago Merc. Inventories PB 26-Jan - - 42907
Thursday
1/31/2008 21:30 Export Sales - Cotton 25-Jan - - 108.4
1/31/2008 21:30 Export Sales - Soy Oil 25-Jan - - 58.8
1/31/2008 21:30 Export Sales - Wheat 25-Jan - - 422.7
1/31/2008 21:30 Export Sales - Soy Meal 25-Jan - - 162.4
1/31/2008 21:30 Export Sales - Corn 25-Jan - - 1595.2
1/31/2008 21:30 Export Sales - Soybeans 25-Jan - - 663
Source: Bloomberg
Date Time Event Survey Prior Revised
Monday
1/28/2008 23:00 New Home Sales DEC 645K 647K - -
1/28/2008 23:00 New Home Sales MoM DEC -0.30% -9.00% - -
Tuesday
1/29/2008 21:30 Durable Goods Orders DEC 1.90% 0.10% -0.10%
1/29/2008 21:30 Durables Ex Transportation DEC 0.00% -0.70% -0.80%
1/29/2008 22:00 S&P/CS Composite-20 YoY NOV -7.10% -6.10% - -
1/29/2008 22:00 S&P/CaseShiller Home Price Ind NOV - - 192.9 - -
1/29/2008 23:00 Consumer Confidence JAN 87 88.6 - -
Wednesday
1/30/2008 3:15 U.S. Federal Reserve Open Market Committee Meeting
1/30/2008 6:00 ABC Consumer Confidence 28-Jan - - -23 - -
1/30/2008 20:00 MBA Mortgage Applications 26-Jan - - 8.30% - -
1/30/2008 21:15 ADP Employment Change JAN 40K 40K - -
1/30/2008 21:30 GDP Annualized 4Q A 1.20% 4.90% - -
1/30/2008 21:30 Personal Consumption 4Q A 2.70% 2.80% - -
1/30/2008 21:30 GDP Price Index 4Q A 2.60% 1.00% - -
1/30/2008 21:30 Core PCE QoQ 4Q A 2.50% 2.00% - -
Thursday
1/31/2008 3:15 FOMC Rate Decision 31-Jan 3.00% 3.50% - -
1/31/2008 21:30 Personal Income DEC 0.40% 0.40% - -
1/31/2008 21:30 Personal Spending DEC 0.10% 1.10% - -
1/31/2008 21:30 PCE Deflator (YoY) DEC 3.50% 3.60% - -
1/31/2008 21:30 PCE Core (MoM) DEC 0.20% 0.20% - -
1/31/2008 21:30 PCE Core (YoY) DEC 2.20% 2.20% - -
1/31/2008 21:30 Initial Jobless Claims 27-Jan 320K 301K - -
1/31/2008 21:30 Continuing Claims 20-Jan 2688K 2672K - -
1/31/2008 21:30 Employment Cost Index 4Q 0.80% 0.80% - -
1/31/2008 22:45 Chicago Purchasing Manager JAN 52.1 56.6 56.4
1/31/2008 23:00 Help Wanted Index DEC 20 21 - -
1/31/2008 23:00 NAPM-Milwaukee JAN - - 62 - -
Friday
2/1/2008 21:30 Change in Nonfarm Payrolls JAN 65k 18k - -
2/1/2008 21:30 Unemployment Rate JAN 5.00% 5.00% - -
2/1/2008 21:30 Change in Manufact. Payrolls JAN -20K -31K - -
2/1/2008 21:30 Average Hourly Earnings MoM JAN 0.30% 0.40% - -
2/1/2008 21:30 Average Hourly Earnings YoY JAN 3.90% 3.70% - -
2/1/2008 21:30 Average Weekly Hours JAN 33.8 33.8 - -
2/1/2008 22:00 RPX Composite 28dy YoY NOV - - -3.4285 - -
2/1/2008 22:00 RPX Composite 28dy Index NOV - - 255.5 - -
2/1/2008 23:00 U. of Michigan Confidence JAN F 79 80.5 - -
2/1/2008 23:00 ISM Manufacturing JAN 47.2 47.7 - -
2/1/2008 23:00 ISM Prices Paid JAN 68 68 - -
2/1/2008 23:00 Construction Spending MoM DEC -0.50% 0.10% - -
2-Feb Total Vehicle Sales JAN 16.0M 16.3M - -
2-Feb Domestic Vehicle Sales JAN 12.3M 12.5M - -
UK
Date Time Event Survey Prior
Tuesday
1/29/2008 19:00 U.K. CBI January Distributive Trades Reported Sales
Wednesday
1/30/2008 17:30 M4 Money Supply (MoM) DEC F - - 1.50%
1/30/2008 17:30 M4 Money Supply (YoY) DEC F - - 12.30%
1/30/2008 17:30 M4 Sterling Lending (BP) DEC F - - 17.3B
1/30/2008 17:30 Net Consumer Credit DEC 1.1B 1.1B
1/30/2008 17:30 Net Lending Sec. on Dwellings DEC 7.5B 7.8B
1/30/2008 17:30 Mortgage Approvals DEC 79K 83K
Thursday
1/31/2008 15:00 Nat'wide House prices sa (MoM) JAN -0.40% -0.50%
1/31/2008 15:00 Nat'wide House prices nsa(YoY) JAN 4.20% 4.80%
1/31/2008 18:30 GfK Consumer Confidence Survey JAN -15 -14
Friday
2/1/2008 17:30 PMI Manufacturing JAN 52.5 52.9
Germany
Date Time Event Survey Prior
Tuesday
1/29/2008 21:00 IFO Dec. Business Climate Survey by Industry (Table)
Wednesday
1/30/2008 17:00 Bloomberg Germany Retail PMI JAN - - 44
Thursday
1/31/2008 15:00 Retail Sales (MoM) DEC 1.70% -1.30%
1/31/2008 15:00 Retail Sales (YoY) DEC -4.20% -3.20%
1/31/2008 15:00 ILO Unemployment Rate DEC 7.80% 7.90%
1/31/2008 16:55 Unemployment Rate (s.a) JAN 8.30% 8.40%
1/31/2008 16:55 Unemployment Change (000's) JAN -43K -78K
31-Jan No German Jan. State CPI Released Due to Base Year Change
31-Jan Consumer Price Index (MoM) JAN P -0.30% 0.50%
31-Jan Consumer Price Index (YoY) JAN P 2.70% 2.80%
31-Jan CPI - EU Harmonised (MoM) JAN P -0.30% 0.70%
31-Jan CPI - EU Harmonised (YoY) JAN P 2.90% 3.10%
Friday
2/1/2008 16:55 PMI Manufacturing JAN 53.6 53.6
Japan
Date Time Event Survey Prior Revised
Monday
1/28/2008 7:50 Corp Service Price (YoY) DEC 1.40% 1.40% - -
Tuesday
1/29/2008 7:30 Jobless Rate DEC 3.90% 3.80% - -
1/29/2008 7:30 Job-To-Applicant Ratio DEC 0.99 0.99 - -
1/29/2008 7:30 Overall Hhold Spending (YoY) DEC -0.40% -0.60% - -
1/29/2008 7:50 Large Retailers' Sales DEC -2.00% 0.40% - -
1/29/2008 7:50 Retail Trade YoY DEC 0.10% 1.60% - -
1/29/2008 7:50 Retail Trade MoM SA DEC -0.70% 0.30% 0.40%
Wednesday
1/30/2008 7:50 Industrial Production (MoM) DEC P 2.00% -1.60% - -
1/30/2008 7:50 Industrial Production (YoY) DEC P 1.60% 2.90% - -
1/30/2008 12:00 Vehicle Production (YoY) DEC - - 3.80% - -
Thursday
1/31/2008 7:15 Nomura/JMMA Manufacturing PMI JAN 51.9 52.3 - -
1/31/2008 7:50 Foreign Buying Japan Stocks 25-Jan - - -¥367.6B - -
1/31/2008 7:50 Foreign Buying Japan Bonds 25-Jan - - ¥297.4B - -
1/31/2008 7:50 Japan Buying Foreign Stocks 25-Jan - - ¥188.1B - -
1/31/2008 7:50 Japan Buying Foreign Bonds 25-Jan - - ¥927.2B - -
1/31/2008 9:30 Labor Cash Earnings YoY DEC -0.10% -0.20% 0.10%
1/31/2008 13:00 Housing Starts (YoY) DEC -19.20% -27.00% - -
1/31/2008 13:00 Annualized Housing Starts DEC 1.051M 0.971M - -
1/31/2008 13:00 Construction Orders (YoY) DEC -9.40% -3.80% - -
1/31/2008 13:00 Small Business Confidence JAN - - 44.5 - -
1- 7 FEB Official Reserve Assets JAN - - $973.4B - -
Friday
2/1/2008 13:00 Vehicle Sales (YoY) JAN - - -7.10% - -
Singapore
Date Time Event Survey Prior
Thursday
31-Jan Unemployment Rate (sa) 4Q - - 1.70%
1/31/2008 10:00 M1 Money Supply (YoY) DEC - - 23.80%
1/31/2008 10:00 M2 Money Supply (YoY) DEC - - 16.50%
1/31/2008 10:00 Bank Loans & Advances (YoY) DEC - - 16.30%
1/31/2008 10:00 Credit Card Billings DEC - - 2096.3M
1/31/2008 10:00 Credit Card Bad Debts DEC - - 9.2M
HongKong
Date Time Event Survey Prior
Thursday
1/31/2008 16:15 Retail Sales - Value (YoY) DEC - - 19.50%
1/31/2008 16:15 Retail Sales - Volume (YoY) DEC - - 15.30%
1/31/2008 17:00 Money Supply M3 - in HK$ (YoY) DEC - - 21.90%
1/31/2008 17:00 Money Supply M2 - in HK$ (YoY) DEC - - 22.10%
1/31/2008 17:00 Money Supply M1 - in HK$ (YoY) DEC - - 33.70%
1/31/2008 17:00 Govt Mthly Budget Surp/Def HK$ DEC - - 32.4B
Friday
1-Feb Brunswick PMI JAN - - 55.5
Energy
Date Time Event Survey Prior
Wednesday
1/30/2008 23:30 DOE U.S. Crude Oil Inventories 26-Jan - - 2297K
1/30/2008 23:30 DOE U.S. Gasoline Inventories 26-Jan - - 5085K
1/30/2008 23:30 DOE U.S. Distillate Inventory 26-Jan - - -1302K
1/30/2008 23:30 DOE U.S. Refinery Utilization 26-Jan - - -0.60%
1/30/2008 23:30 API U.S. Crude Oil Inventories 26-Jan - - 1495K
1/30/2008 23:30 API U.S. Gasoline Inventories 26-Jan - - 2469K
1/30/2008 23:30 API U.S. Distillate Inventory 26-Jan - - -362K
Thursday
1/31/2008 23:30 EIA Natural Gas Storage Change 26-Jan - - -155
Saturday
2/2/2008 2:00 Baker Hughes U.S. Rig Count 2-Feb - - 1747
Agriculture
Date Time Event Survey Prior
Tuesday
1/29/2008 0:00 Export Inspections - Corn 25-Jan - - 45.82
1/29/2008 0:00 Export Inspections - Soybeans 25-Jan - - 32.24
1/29/2008 0:00 Export Inspections - Wheat 25-Jan - - 17.93
1/29 2/ 1 US DOE Monthly Ethanol Stocks NOV - - 11423K
1/29 2/ 1 US DOE Monthly Ethanol Prod NOV - - 14018K
Wednesday
1/30/2008 6:00 Chicago Merc. Inventories PB 26-Jan - - 42907
Thursday
1/31/2008 21:30 Export Sales - Cotton 25-Jan - - 108.4
1/31/2008 21:30 Export Sales - Soy Oil 25-Jan - - 58.8
1/31/2008 21:30 Export Sales - Wheat 25-Jan - - 422.7
1/31/2008 21:30 Export Sales - Soy Meal 25-Jan - - 162.4
1/31/2008 21:30 Export Sales - Corn 25-Jan - - 1595.2
1/31/2008 21:30 Export Sales - Soybeans 25-Jan - - 663
Source: Bloomberg
Monday, January 28, 2008
Market Commentaries
U.S: U.S. stocks posted the first weekly gain of 2008 after a surprise interest-rate cut and government plan to revive growth improved prospects the economy may skirt a recession, helping shares rebound from their worst yearly start.
Europe: European stocks fell for a seventh week on concern efforts by U.S. policy makers and regulators to stem credit-market losses won't be enough to keep the world's largest economy from sliding into a recession. Societe Generale SA dropped the most in more than five years after saying bets on stock-index futures by a rogue trader caused a 4.9 billion-euro ($7.1 billion) trading loss, the biggest in banking history.
Asia: Asian stocks fell for a fourth week, on concern the global economy was slowing, sending the region, along with Europe, into a bear market. Sony Corp. and Hon Hai Precision Industry Co. paced declines among exporters.
Source: Bloomberg
Europe: European stocks fell for a seventh week on concern efforts by U.S. policy makers and regulators to stem credit-market losses won't be enough to keep the world's largest economy from sliding into a recession. Societe Generale SA dropped the most in more than five years after saying bets on stock-index futures by a rogue trader caused a 4.9 billion-euro ($7.1 billion) trading loss, the biggest in banking history.
Asia: Asian stocks fell for a fourth week, on concern the global economy was slowing, sending the region, along with Europe, into a bear market. Sony Corp. and Hon Hai Precision Industry Co. paced declines among exporters.
Source: Bloomberg
Friday, January 25, 2008
Commodities Daily - 25th Jan 2008
Spotlight: Crude oil rose on the back of economic stimulus =
package with expected rate cut to prevent U.S falling into a recession. =
Commodities gained the most in a month, led by increases in metals, =
grains and energy, on speculation Chinese expansion and lower borrowing =
costs will support global growth and buoy demand for raw materials. Soft =
commodities: cocoa, cotton, coffee and sugar rose due to a global =
rebound in equities has eased selling of commodities by investors.=20
Energy: Crude oil surged after the House lawmakers announced =
agreement on an economic stimulus package to avoid recession in the =
world's biggest energy consuming country. Natural gas rose on =
speculation the U.S. will avoid a recession and fuel demand will =
increase. Besides, heating oil futures rose after a government report =
showed that inventories declined last week.
Agriculture: Corn and soybeans surged as overseas buyers =
increase purchases of U.S. supplies after prices dropped about 9 percent =
from record highs last week. Notably, the world's second-largest =
exporter of the grain, Argentina corn production may fall 4.5 percent on =
the back of unfavourable weather. Wheat rose for the first time this =
week on signs U.S. exports may gain as a falling dollar makes the grain =
cheaper for buyers using other currencies.=20
Cocoa jumped the most in three weeks as the U.K. pound gained against =
the dollar. Besides, cotton and coffee rose as a result of a global =
rebound in equities has eased selling of commodities by investors.=20
Precious Metals: Gold topped $900 an ounce in New York for the =
first time in a week after the dollar dropped against the euro. Silver, =
platinum and palladium rose.
Industrial Metals: Copper gained the most in three weeks after =
a report showed China's economy expanded more than 11 percent for the =
fourth straight quarter, easing concern the global economy may sag.
package with expected rate cut to prevent U.S falling into a recession. =
Commodities gained the most in a month, led by increases in metals, =
grains and energy, on speculation Chinese expansion and lower borrowing =
costs will support global growth and buoy demand for raw materials. Soft =
commodities: cocoa, cotton, coffee and sugar rose due to a global =
rebound in equities has eased selling of commodities by investors.=20
Energy: Crude oil surged after the House lawmakers announced =
agreement on an economic stimulus package to avoid recession in the =
world's biggest energy consuming country. Natural gas rose on =
speculation the U.S. will avoid a recession and fuel demand will =
increase. Besides, heating oil futures rose after a government report =
showed that inventories declined last week.
Agriculture: Corn and soybeans surged as overseas buyers =
increase purchases of U.S. supplies after prices dropped about 9 percent =
from record highs last week. Notably, the world's second-largest =
exporter of the grain, Argentina corn production may fall 4.5 percent on =
the back of unfavourable weather. Wheat rose for the first time this =
week on signs U.S. exports may gain as a falling dollar makes the grain =
cheaper for buyers using other currencies.=20
Cocoa jumped the most in three weeks as the U.K. pound gained against =
the dollar. Besides, cotton and coffee rose as a result of a global =
rebound in equities has eased selling of commodities by investors.=20
Precious Metals: Gold topped $900 an ounce in New York for the =
first time in a week after the dollar dropped against the euro. Silver, =
platinum and palladium rose.
Industrial Metals: Copper gained the most in three weeks after =
a report showed China's economy expanded more than 11 percent for the =
fourth straight quarter, easing concern the global economy may sag.
Thursday, January 24, 2008
Societe Generale to Seek EU5.5 Billion After Fraud, Writedowns
By Gregory Viscusi
Jan. 24 (Bloomberg) -- Societe Generale SA said it will seek 5.5 billion euros ($8.1 billion) in new capital after discovering a case of trading fraud and taking further writedowns linked to the U.S. subprime mortgage market crash.
The bank discovered last weekend that a trader in Paris had secretly set up positions that will cost the company 4.9 billion euros before tax, Societe Generale said in an e-mailed statement today. The trader, who wasn't identified, went beyond permitted limits on futures linked to European stock indexes.
Societe Generale will also take 2.05 billion euros in writedowns related to credit market turbulence. The bank said it will still make a profit of between 600 million euros and 800 million euros for 2007. An offer by Chairman Daniel Bouton to resign was rejected by the board, the bank said.
Societe Generale yesterday fell 4.1 percent to 79.08 euros, its lowest since May 2005, valuing the bank at 36 billion euros. The shares have fallen 20 percent since the start of the year, hurt by expectations of further writedowns.
The company said it plans to raise the capital by selling shares in a rights offer underwritten by JPMorgan Chase & Co. and Morgan Stanley.
Jan. 24 (Bloomberg) -- Societe Generale SA said it will seek 5.5 billion euros ($8.1 billion) in new capital after discovering a case of trading fraud and taking further writedowns linked to the U.S. subprime mortgage market crash.
The bank discovered last weekend that a trader in Paris had secretly set up positions that will cost the company 4.9 billion euros before tax, Societe Generale said in an e-mailed statement today. The trader, who wasn't identified, went beyond permitted limits on futures linked to European stock indexes.
Societe Generale will also take 2.05 billion euros in writedowns related to credit market turbulence. The bank said it will still make a profit of between 600 million euros and 800 million euros for 2007. An offer by Chairman Daniel Bouton to resign was rejected by the board, the bank said.
Societe Generale yesterday fell 4.1 percent to 79.08 euros, its lowest since May 2005, valuing the bank at 36 billion euros. The shares have fallen 20 percent since the start of the year, hurt by expectations of further writedowns.
The company said it plans to raise the capital by selling shares in a rights offer underwritten by JPMorgan Chase & Co. and Morgan Stanley.
Monday, January 21, 2008
FI/EQ- China Discovers $119 Billion Banking `Irregularities'
Check out below 2 stories.. 860 billion yuan of " irregularities " in chinese banks. This 3x the combined profits of the major banks. ( makes the US problem pale in comparision). Combined with news this am of BOC (3988) potential substantial write down on US subprime. Question is whether " China Financial System " is as robust as the current market pricing suggest.
(Adds chairman's comment in second paragraph.)
By Josephine Lau
Jan. 18 (Bloomberg) -- China discovered 860 billion yuan
($119 billion) in banking ``irregularities'' last year, almost
triple the profits by Industrial & Commercial Bank of China Ltd.
and other ``major'' Chinese commercial banks, the regulator said.
``We must strengthen our regulatory capacity and nip these
risks in the bud,'' said Liu Mingkang, chairman of the China
Banking Regulatory Commission, at the watchdog's annual planning
meeting, according to a statement posted on its Web site today.
China's ``major'' commercial banks posted combined profits of
299 billion yuan in 2007, the statement said, without providing a
year-earlier figure. A July 5 report said the banks earned an
aggregate pretax profit of 240.9 billion yuan in 2006.
ICBC, the world's biggest bank by market value, Bank of China,
China Construction Bank Corp. and Bank of Communications Co. had
average returns of 1.1 percent on their assets last year, while
their mean non-performing loan ratio stood at 2.87 percent,
according to the statement.
China's banking watchdog uncovered ``irregularities'' in its
investigation of 79,200 domestic banks, the statement said,
without defining the term.
Domestic banks had a total of $267.4 billion in overseas
assets as at the end of last year, which included their
investments and branches abroad, the Chinese regulator said.
China will draft regulations on project finance and loans for
acquisitions, fixed assets, working capital and personal use in
2008, said the watchdog.
The Bank of China (SEHK: 3988) is expected to announce a significant write-down of its failed investments in US subprime mortgage securities in the fourth quarter when it reveals its full-year results in April, mainland banking sources say.
The bank may post drastically lower profits, or even a loss, if it writes down the US$7.95 billion it holds in securities backed by loans to less-credit-worthy borrowers. In August, BOC surprised the markets by announcing it held US$9.65 billion in subprime-related securities, the most of any Asian company. In September, it revealed it had trimmed its subprime portfolio to US$7.95 billion in the third quarter and set aside US$322 million to account for potential losses.
The bank reported a net profit of 45.47 billion yuan in the first three quarters, up 40 per cent year on year.
However, the market value for subprime securities took another severe dive in the fourth quarter, forcing leading US banks, including Citigroup and Merrill Lynch, to post record losses for the period.
Banking analysts and sources said it was inevitable that BOC would greatly increase provisions for its subprime portfolio in the fourth quarter.
BNP Paribas analyst Dorris Chen said judging from the market slump in the quarter, the bank needed to set aside at least US$300 million against possible losses in the period.
But sources said senior banking regulators had already warned the mainland leadership that BOC and two other state banks - the Industrial and Commercial Bank of China (SEHK: 0349) and China Construction Bank (SEHK: 0939, announcements, news) - would have to make provisions for all of their exposed subprime-related assets.
ICBC announced in August it had subprime exposure of US$1.23 billion, for which it made a provision of 1.624 billion yuan before the end of September, while CCB had US$1.06 billion, for which a provision of 336 million yuan was made.
Although ICBC and CCB are believed to have increased write-downs for their subprime exposure in the fourth quarter, the impact on their bottom lines should be small.
Caijing Magazine reported yesterday that ICBC was expected to increase provisions to account for 30 per cent of its subprime portfolio, while CCB would increase its write-downs to 40 per cent of the portfolio in the fourth quarter.
Last week, both ICBC and CCB announced profit forecasts for the full year, expecting their profits to rise by at least 60 and 48 per cent respectively. However, the same cannot be said about BOC, which was aggressive in investing in US subprime-related securities.
Fox-Pitt Kelton analyst Warren Blight said that given losses from the US subprime market were starting to spill over to other assets, BOC would be hardest hit as it had a high concentration in foreign exchange business.
Sources said although the central government had maintained a calm stance towards the state banks' holdings of US subprime paper, the top leaders had privately expressed serious concern about the size of the holdings and had urged the banks to strengthen controls over investment in overseas financial derivatives.
Caijing yesterday quoted an unnamed banking regulator as saying one big state bank did not list overseas investments under its riskcontrol mechanism and that its chief risk officer was not aware of, and had no power over, the investments.
(Adds chairman's comment in second paragraph.)
By Josephine Lau
Jan. 18 (Bloomberg) -- China discovered 860 billion yuan
($119 billion) in banking ``irregularities'' last year, almost
triple the profits by Industrial & Commercial Bank of China Ltd.
and other ``major'' Chinese commercial banks, the regulator said.
``We must strengthen our regulatory capacity and nip these
risks in the bud,'' said Liu Mingkang, chairman of the China
Banking Regulatory Commission, at the watchdog's annual planning
meeting, according to a statement posted on its Web site today.
China's ``major'' commercial banks posted combined profits of
299 billion yuan in 2007, the statement said, without providing a
year-earlier figure. A July 5 report said the banks earned an
aggregate pretax profit of 240.9 billion yuan in 2006.
ICBC, the world's biggest bank by market value, Bank of China,
China Construction Bank Corp. and Bank of Communications Co. had
average returns of 1.1 percent on their assets last year, while
their mean non-performing loan ratio stood at 2.87 percent,
according to the statement.
China's banking watchdog uncovered ``irregularities'' in its
investigation of 79,200 domestic banks, the statement said,
without defining the term.
Domestic banks had a total of $267.4 billion in overseas
assets as at the end of last year, which included their
investments and branches abroad, the Chinese regulator said.
China will draft regulations on project finance and loans for
acquisitions, fixed assets, working capital and personal use in
2008, said the watchdog.
The Bank of China (SEHK: 3988) is expected to announce a significant write-down of its failed investments in US subprime mortgage securities in the fourth quarter when it reveals its full-year results in April, mainland banking sources say.
The bank may post drastically lower profits, or even a loss, if it writes down the US$7.95 billion it holds in securities backed by loans to less-credit-worthy borrowers. In August, BOC surprised the markets by announcing it held US$9.65 billion in subprime-related securities, the most of any Asian company. In September, it revealed it had trimmed its subprime portfolio to US$7.95 billion in the third quarter and set aside US$322 million to account for potential losses.
The bank reported a net profit of 45.47 billion yuan in the first three quarters, up 40 per cent year on year.
However, the market value for subprime securities took another severe dive in the fourth quarter, forcing leading US banks, including Citigroup and Merrill Lynch, to post record losses for the period.
Banking analysts and sources said it was inevitable that BOC would greatly increase provisions for its subprime portfolio in the fourth quarter.
BNP Paribas analyst Dorris Chen said judging from the market slump in the quarter, the bank needed to set aside at least US$300 million against possible losses in the period.
But sources said senior banking regulators had already warned the mainland leadership that BOC and two other state banks - the Industrial and Commercial Bank of China (SEHK: 0349) and China Construction Bank (SEHK: 0939, announcements, news) - would have to make provisions for all of their exposed subprime-related assets.
ICBC announced in August it had subprime exposure of US$1.23 billion, for which it made a provision of 1.624 billion yuan before the end of September, while CCB had US$1.06 billion, for which a provision of 336 million yuan was made.
Although ICBC and CCB are believed to have increased write-downs for their subprime exposure in the fourth quarter, the impact on their bottom lines should be small.
Caijing Magazine reported yesterday that ICBC was expected to increase provisions to account for 30 per cent of its subprime portfolio, while CCB would increase its write-downs to 40 per cent of the portfolio in the fourth quarter.
Last week, both ICBC and CCB announced profit forecasts for the full year, expecting their profits to rise by at least 60 and 48 per cent respectively. However, the same cannot be said about BOC, which was aggressive in investing in US subprime-related securities.
Fox-Pitt Kelton analyst Warren Blight said that given losses from the US subprime market were starting to spill over to other assets, BOC would be hardest hit as it had a high concentration in foreign exchange business.
Sources said although the central government had maintained a calm stance towards the state banks' holdings of US subprime paper, the top leaders had privately expressed serious concern about the size of the holdings and had urged the banks to strengthen controls over investment in overseas financial derivatives.
Caijing yesterday quoted an unnamed banking regulator as saying one big state bank did not list overseas investments under its riskcontrol mechanism and that its chief risk officer was not aware of, and had no power over, the investments.
Financials Daily - 21st Jan 2008
US: U.S. stocks posted the steepest weekly drop since July 2002 after lower-than-estimated home construction, retail sales and manufacturing reinforced speculation that the economy is entering a recession.
Europe: European stocks declined for a sixth week after economic reports and earnings from the U.S. deepened concern the world's largest economy is sliding into a recession.
Asia: Asian stocks fell for a third week, on concern the world's largest economy will enter a recession. Sony Corp. and LG Electronics Inc. led losses among companies relying on U.S. sales after Citigroup Inc. and Merrill Lynch & Co. posted record losses.
Commodities: Crude oil rose for the first day in four in New York after President George W. Bush said a package of about $150 billion is needed ``as soon as possible'' to keep the economy growing. Gold rose for the first time in four days on speculation a U.S. recession will boost demand for the precious metal as an alternative investment. Silver also gained.
Currencies: The yen reached the strongest since May 2005 against the dollar as concern mounted that the U.S. is headed for recession, prompting investors to sell higher-yielding assets funded by loans made in Japan.
Europe: European stocks declined for a sixth week after economic reports and earnings from the U.S. deepened concern the world's largest economy is sliding into a recession.
Asia: Asian stocks fell for a third week, on concern the world's largest economy will enter a recession. Sony Corp. and LG Electronics Inc. led losses among companies relying on U.S. sales after Citigroup Inc. and Merrill Lynch & Co. posted record losses.
Commodities: Crude oil rose for the first day in four in New York after President George W. Bush said a package of about $150 billion is needed ``as soon as possible'' to keep the economy growing. Gold rose for the first time in four days on speculation a U.S. recession will boost demand for the precious metal as an alternative investment. Silver also gained.
Currencies: The yen reached the strongest since May 2005 against the dollar as concern mounted that the U.S. is headed for recession, prompting investors to sell higher-yielding assets funded by loans made in Japan.
Sing unit seeks to join appeal over en bloc ruling
Sing Holdings – Said its joint venture vehicle is filing an intervention application with the High Court to be added as a party to the appeal made by majority owners of Finland Gardens in Siglap against the ruling that dismissed their en bloc transaction. Finland Gardens Pte Ltd (FGPL) is the 70-30 joint venture between Sing Holdings and Eastern Summer - the wholly-owned unit of US-based fund Forum Asian Realty Income II LP. The Strata Titles Board (STB) threw out the collective sale application of Finland Gardens in Siglap last November after it failed to meet statutory requirements. Sing Holdings said the High Court has adjourned the appeal hearing and the intervention application to Feb 15. Sing Holdings proposed to buy the freehold site in November 2006 for $49.5m. The owners of each unit would stand to reap about $1m to $1.27m, depending on the size of the unit.
E3, Jade buy 49% of Jilin refinery for 241m yuan
E3 Holdings – The company and Jade Technologies are together buying a 49% stake in an oil refinery in China's Jilin province for about RMB241m (S$47.8m). A statement from Jade Technologies said that plans to extend the oil refinery are expected to involve development costs of RMB20bn. Jade said that over a three-year period, its total investment and loan are estimated to be about RMB6.89bn. Venture capitalist Dr Anthony Soh is the controlling shareholder of Jade Technologies and is also the single largest shareholder in E3, formerly known as Ei-Nets Holdings. E3 will take a 15% stake in the oil refinery while Jade will hold 34%, both through wholly owned subsidiaries. The two companies are creating a consortium to acquire the entire refinery, which has an annual capacity of 1m tonnes, and are looking for local partners to take up the remaining 51% stake. Under Chinese law, foreign investors cannot hold more than 49% of an existing refinery.
Sunday, January 20, 2008
US Markets Closing Comments - 17th Jan 2008
Economic Summary:
Stocks opened higher, but soft economic data, disappointing financial news,
and a somber testimony by Fed Chairman Bernanke brought a quick end to the
fledgling rally. The broad equity indexes slid by some 2.5%. Treasury prices
took another step higher, and the dollar fell on the day.
Housing starts plunged 14.2% to a 16-year-low level of 1.006mn in December.
This weaker-than-expected decline followed a net downward revision of 1.1% to
previous months. The drop was concentrated in multi-family starts, but this
does not minimize the weakness in this report. Building permits fell 8.1% to
the lowest level since March 1993. The decline in home construction should
subtract from GDP growth through 2008.
Initial claims for unemployment benefits fell 21k in the latest week, bringing
the 4-week average to 329k from 340k. The improvement is a surprise since
claims had been trending higher through Q4'07. Now claims have fallen steeply
for three weeks from 357k to 301k. The data are volaltile so not too much
should be made of this decline, but for the moment, the data are not
signalling a significant derterioration in labor market conditions.
Asset-backed commercial paper outstanding was up for third consecutive week
(+$26.3bn in week ended January 16), though it is still down 33% from its peak
in the week ended August 8. Total CP outstanding rose $35.5bn in the latest
week.
The Philadelphia Fed manufacturing index plunged to -20.9 in January from -1.6
in December. The consensus was looking for a decidedly less negative reading
of -1.0. January's was the lowest headline level since the -23.2 posted for
October 2001, during the last recession. The report details also signalled a
manufacturing contraction. They pointed to a sub-50 reading on the January
manufacturing ISM index.
In testimony, Fed Chairman Ben Bernanke reiterated the view he expressed last
week that "in light of recent changes in the outlook...for growth, additional
easing may well be necessary." Since a 50bp rate cut now appears to be the
least that the FOMC will do, the possibility of a steeper rate cut, of say
75bp, is open. In addition, Bernanke endorsed the drive for a fiscal stimulus
package that has gripped Washington in recent weeks. Some sort of package in
the next month or two is very likely to be passed by the Congress.
Weekly reserve data showed that daily average borrowing from the discount
window in the week ended January 16 fell to $1.2bn from $1.5bn the previous
week. Borrowing on January 16 alone was $5.6bn, with banks in the New York and
Richmond Fed districts tapping the window for loans. Fed funds did trade as
tight as 5% last night, rising above the current 4.75% discount rate.
Economic Outlook
The preliminary January Consumer Sentiment index will be released at 10:00 on
Friday (Forecast 74.5, Consensus 74.5). Consumer attitudes have been depressed
by tight credit, falling home prices, volatile equities, and elevated food and
energy prices. To these negative factors we can add a rising unemployment rate.
We look for a preliminary January reading of 74.5.
Stocks opened higher, but soft economic data, disappointing financial news,
and a somber testimony by Fed Chairman Bernanke brought a quick end to the
fledgling rally. The broad equity indexes slid by some 2.5%. Treasury prices
took another step higher, and the dollar fell on the day.
Housing starts plunged 14.2% to a 16-year-low level of 1.006mn in December.
This weaker-than-expected decline followed a net downward revision of 1.1% to
previous months. The drop was concentrated in multi-family starts, but this
does not minimize the weakness in this report. Building permits fell 8.1% to
the lowest level since March 1993. The decline in home construction should
subtract from GDP growth through 2008.
Initial claims for unemployment benefits fell 21k in the latest week, bringing
the 4-week average to 329k from 340k. The improvement is a surprise since
claims had been trending higher through Q4'07. Now claims have fallen steeply
for three weeks from 357k to 301k. The data are volaltile so not too much
should be made of this decline, but for the moment, the data are not
signalling a significant derterioration in labor market conditions.
Asset-backed commercial paper outstanding was up for third consecutive week
(+$26.3bn in week ended January 16), though it is still down 33% from its peak
in the week ended August 8. Total CP outstanding rose $35.5bn in the latest
week.
The Philadelphia Fed manufacturing index plunged to -20.9 in January from -1.6
in December. The consensus was looking for a decidedly less negative reading
of -1.0. January's was the lowest headline level since the -23.2 posted for
October 2001, during the last recession. The report details also signalled a
manufacturing contraction. They pointed to a sub-50 reading on the January
manufacturing ISM index.
In testimony, Fed Chairman Ben Bernanke reiterated the view he expressed last
week that "in light of recent changes in the outlook...for growth, additional
easing may well be necessary." Since a 50bp rate cut now appears to be the
least that the FOMC will do, the possibility of a steeper rate cut, of say
75bp, is open. In addition, Bernanke endorsed the drive for a fiscal stimulus
package that has gripped Washington in recent weeks. Some sort of package in
the next month or two is very likely to be passed by the Congress.
Weekly reserve data showed that daily average borrowing from the discount
window in the week ended January 16 fell to $1.2bn from $1.5bn the previous
week. Borrowing on January 16 alone was $5.6bn, with banks in the New York and
Richmond Fed districts tapping the window for loans. Fed funds did trade as
tight as 5% last night, rising above the current 4.75% discount rate.
Economic Outlook
The preliminary January Consumer Sentiment index will be released at 10:00 on
Friday (Forecast 74.5, Consensus 74.5). Consumer attitudes have been depressed
by tight credit, falling home prices, volatile equities, and elevated food and
energy prices. To these negative factors we can add a rising unemployment rate.
We look for a preliminary January reading of 74.5.
Commodities Daily -18th Jan 2008
Spotlight: Crude oil falls to 1-month low on signs U.S. may slip into recession. Corn and soybeans fell for the same reason while wheat, sugar and cocoa rose. Coffee fell to a one-week low. Notably, gold fell to a one-week low, platinum and palladium dropped on concern slowing global economic growth will reduce demand for the metals used. Silver rose.
Energy: Crude oil fell to the lowest in more than a month on concern the U.S. economy may slip into recession, cutting fuel demand in the world's biggest energy consumer. Natural gas fell after a government report showed that U.S. inventories are probably ample for cold-weather heating needs. Heating oil futures also fell for a third day amid concern the U.S. economy may slow, reducing demand for oil products.
Agriculture: Corn and soybeans tumbled on speculation that a slowing U.S. economy will trigger a decline in global demand for fuel, food and animal feed made from crops. Wheat rose on signs of increased overseas demand for U.S. supplies.
Sugar rose to the highest price since October 2006 on speculation investors are boosting stakes in the commodity before a drop in production in India, the world's second-largest source of the sweetener. Cocoa rose $17 a metric ton in New York, on speculation a renewed strike by workers who process bean shipments in Ivory Coast, the world's biggest producer, will halt exports and cut supplies. Coffee fell to a one-week low on renewed concern that global bean production will outpace consumption next year.
Precious Metals: Gold fell to a one-week low as a decline in the cost of oil and gasoline eroded demand for the precious metal as a hedge against inflation. Platinum and palladium declined on concern slowing global economic growth will reduce demand for the metals used in cars. Silver rose.
Energy: Crude oil fell to the lowest in more than a month on concern the U.S. economy may slip into recession, cutting fuel demand in the world's biggest energy consumer. Natural gas fell after a government report showed that U.S. inventories are probably ample for cold-weather heating needs. Heating oil futures also fell for a third day amid concern the U.S. economy may slow, reducing demand for oil products.
Agriculture: Corn and soybeans tumbled on speculation that a slowing U.S. economy will trigger a decline in global demand for fuel, food and animal feed made from crops. Wheat rose on signs of increased overseas demand for U.S. supplies.
Sugar rose to the highest price since October 2006 on speculation investors are boosting stakes in the commodity before a drop in production in India, the world's second-largest source of the sweetener. Cocoa rose $17 a metric ton in New York, on speculation a renewed strike by workers who process bean shipments in Ivory Coast, the world's biggest producer, will halt exports and cut supplies. Coffee fell to a one-week low on renewed concern that global bean production will outpace consumption next year.
Precious Metals: Gold fell to a one-week low as a decline in the cost of oil and gasoline eroded demand for the precious metal as a hedge against inflation. Platinum and palladium declined on concern slowing global economic growth will reduce demand for the metals used in cars. Silver rose.
Financials Daily - 18th Jan 2008
US: Growing conviction that the U.S. is in a recession sent stocks plunging in their worst three-day decline since 2002. Exxon Mobil Corp., General Electric Co. and Bank of America Corp. led the drop after the Federal Reserve said manufacturing in the Philadelphia region slid to a six-year low and Merrill Lynch & Co. posted a loss double analysts' estimates.
Europe: European stocks fell for a third day, led by mining companies and carmakers, after a regional gauge of U.S. manufacturing declined more than forecast.
Asia: Asian stocks outside Japan fell, led by raw-materials companies and food suppliers, on concern China's economic growth will slow at the same time as the U.S. slides into a recession.
Commodities: Crude oil fell to the lowest in more than a month on concern the U.S. economy may slip into recession, cutting fuel demand in the world's biggest energy consumer. Gold fell to a one-week low as a decline in the cost of oil and gasoline eroded demand for the precious metal as a hedge against inflation. Silver rose.
Currencies: The dollar approached a 2 1/2-year-low against the yen after Federal Reserve Chairman Ben S. Bernanke said the bank is ready ``to take substantive additional action'' to help the economy, while a manufacturing index sank.
Europe: European stocks fell for a third day, led by mining companies and carmakers, after a regional gauge of U.S. manufacturing declined more than forecast.
Asia: Asian stocks outside Japan fell, led by raw-materials companies and food suppliers, on concern China's economic growth will slow at the same time as the U.S. slides into a recession.
Commodities: Crude oil fell to the lowest in more than a month on concern the U.S. economy may slip into recession, cutting fuel demand in the world's biggest energy consumer. Gold fell to a one-week low as a decline in the cost of oil and gasoline eroded demand for the precious metal as a hedge against inflation. Silver rose.
Currencies: The dollar approached a 2 1/2-year-low against the yen after Federal Reserve Chairman Ben S. Bernanke said the bank is ready ``to take substantive additional action'' to help the economy, while a manufacturing index sank.
Thursday, January 17, 2008
Merrill Lynch loses $9.8 billion in Q4
Merrill Lynch & Co Inc on Thursday said it took a $14.1 billion write-down in the fourth quarter on bad subprime mortgage bets plus other charges that have forced the brokerage to sell pieces of the company to foreign investors to raise capital.
Merrill Lynch reported a fourth-quarter net loss of $9.8 billion, or $12.01 a share, the largest in the company's history. That eclipses the company's $2.3 billion loss in the previous quarter.
Merrill Lynch reported a fourth-quarter net loss of $9.8 billion, or $12.01 a share, the largest in the company's history. That eclipses the company's $2.3 billion loss in the previous quarter.
Keppel Land International (Keppel Land) and Bellingham Marine Industries partnership
Keppel Land International (Keppel Land) and Bellingham Marine Industries
(Bellingham) have signed a Memorandum of Understanding (MOU) to enter
into a strategic partnership where Bellingham will design and construct premier
marinas within Keppel Land's Waterfront properties in the region, where
appropriate. Under the agreement, Bellingham will provide Keppel Land with design, project management and
construction expertise for world-class marinas, the first being Marina at Keppel Bay, located within the Keppel Bay
Precinct.
(Bellingham) have signed a Memorandum of Understanding (MOU) to enter
into a strategic partnership where Bellingham will design and construct premier
marinas within Keppel Land's Waterfront properties in the region, where
appropriate. Under the agreement, Bellingham will provide Keppel Land with design, project management and
construction expertise for world-class marinas, the first being Marina at Keppel Bay, located within the Keppel Bay
Precinct.
latest news of Cosco
COSCO Corporation announced that its 51%-owned COSCO Shipyard Group
(“CSG”) had signed an investment agreement with Jiangsu Qidong Municipal
Government (Nantong, Jiangsu Province) for the expansion of the offshore
construction base of COSCO (Nantong) Shipyard Co. Ltd (“COSCO
Nantong”), CSG’s subsidiary. The new yard is located at the entrance of
Yangtze River and covers an area of 2 million square meters along 2km of
coastline. It will focus on offshore projects including the construction of oil &
gas related equipments such as semi-submersible rig, jack-up rig and other
floaters.
(“CSG”) had signed an investment agreement with Jiangsu Qidong Municipal
Government (Nantong, Jiangsu Province) for the expansion of the offshore
construction base of COSCO (Nantong) Shipyard Co. Ltd (“COSCO
Nantong”), CSG’s subsidiary. The new yard is located at the entrance of
Yangtze River and covers an area of 2 million square meters along 2km of
coastline. It will focus on offshore projects including the construction of oil &
gas related equipments such as semi-submersible rig, jack-up rig and other
floaters.
Singapore Dollar to Reach 27-Year High on MAS Policy, UBS Says
By Lilian Karunungan and David Yong
Jan. 17 (Bloomberg) -- The Singapore dollar will gain to the strongest in at least 27 years in 2008 as the central bank curbs inflation and investors seek to profit from the city-state's economic growth, according to UBS AG.
The currency will climb 4.2 percent this year to S$1.38 against the U.S. dollar, UBS, the world's second-biggest trader of foreign exchange, forecast in a research report. Singapore's dollar has advanced 2.8 percent since the central bank said in its semi-annual review on Oct. 10 that it would allow ``slightly'' faster appreciation in the currency.
Singapore's inflation reached the highest in 25 years in November as prices of food, housing and transportation costs rose. Fixed-asset investment in Southeast Asia's fourth-largest economy reached a record last year as property developers built new office towers and condominiums and companies such as Exxon Mobil Corp. set up new factories.
Asia's domestic-driven growth stories such as Singapore's will lure global investors to safer assets and boost fund inflows, Chiou Yi Chang, a UBS economist based in Singapore, said in an interview yesterday. ``Expectations of currency appreciation have further incurred strong money inflows.''
The local dollar traded at S$1.4309 against the U.S. currency as of 1 p.m. in Singapore, according to data compiled by Bloomberg. It reached S$1.4263 on Jan. 11, the highest since June 1997. The currency has risen 0.5 percent this year, adding to a 6.7 percent advance in 2007.
Inflation Context
The Monetary Authority of Singapore uses the exchange rate instead of interest rates to guide monetary policy, allowing the local dollar to move within an undisclosed band against a basket of currencies of the island's biggest trading partners.
``In the current context of high inflation, we would be expecting the exchange rate to remain at the top of the policy band until mid-2008,'' UBS said in a Jan. 15 research report.
Singapore's dollar rose 3.4 percent in the three months ended December, the best quarterly gain of 2007, and the second- fastest pace among Southeast Asian currencies following the October MAS review. Only the Philippine peso did better.
The central bank seeks to prevent the dollar from rising or falling outside of the band, raising speculation the MAS buys and sells its currency to control the exchange rate. The currency gained 2.6 percent in October, before slowing to 0.2 percent and 0.6 percent in November and December, respectively.
Singapore has almost $163 billion in foreign-exchange reserves, the seventh-biggest in the Asia-Pacific region and the most among Southeast Asian countries.
Singapore's consumer price index rose 4.2 percent in November from a year earlier, versus 3.6 percent in October, the statistics department said on Dec. 24.
Inflation may accelerate to 5 percent in the first half, before averaging out at 3.5 percent for 2008, Chang said.
Jan. 17 (Bloomberg) -- The Singapore dollar will gain to the strongest in at least 27 years in 2008 as the central bank curbs inflation and investors seek to profit from the city-state's economic growth, according to UBS AG.
The currency will climb 4.2 percent this year to S$1.38 against the U.S. dollar, UBS, the world's second-biggest trader of foreign exchange, forecast in a research report. Singapore's dollar has advanced 2.8 percent since the central bank said in its semi-annual review on Oct. 10 that it would allow ``slightly'' faster appreciation in the currency.
Singapore's inflation reached the highest in 25 years in November as prices of food, housing and transportation costs rose. Fixed-asset investment in Southeast Asia's fourth-largest economy reached a record last year as property developers built new office towers and condominiums and companies such as Exxon Mobil Corp. set up new factories.
Asia's domestic-driven growth stories such as Singapore's will lure global investors to safer assets and boost fund inflows, Chiou Yi Chang, a UBS economist based in Singapore, said in an interview yesterday. ``Expectations of currency appreciation have further incurred strong money inflows.''
The local dollar traded at S$1.4309 against the U.S. currency as of 1 p.m. in Singapore, according to data compiled by Bloomberg. It reached S$1.4263 on Jan. 11, the highest since June 1997. The currency has risen 0.5 percent this year, adding to a 6.7 percent advance in 2007.
Inflation Context
The Monetary Authority of Singapore uses the exchange rate instead of interest rates to guide monetary policy, allowing the local dollar to move within an undisclosed band against a basket of currencies of the island's biggest trading partners.
``In the current context of high inflation, we would be expecting the exchange rate to remain at the top of the policy band until mid-2008,'' UBS said in a Jan. 15 research report.
Singapore's dollar rose 3.4 percent in the three months ended December, the best quarterly gain of 2007, and the second- fastest pace among Southeast Asian currencies following the October MAS review. Only the Philippine peso did better.
The central bank seeks to prevent the dollar from rising or falling outside of the band, raising speculation the MAS buys and sells its currency to control the exchange rate. The currency gained 2.6 percent in October, before slowing to 0.2 percent and 0.6 percent in November and December, respectively.
Singapore has almost $163 billion in foreign-exchange reserves, the seventh-biggest in the Asia-Pacific region and the most among Southeast Asian countries.
Singapore's consumer price index rose 4.2 percent in November from a year earlier, versus 3.6 percent in October, the statistics department said on Dec. 24.
Inflation may accelerate to 5 percent in the first half, before averaging out at 3.5 percent for 2008, Chang said.
SembCorp Marine Ltd: Uncertainty still looms
As of 1 Nov 07, all of SembCorp Marine’s (SMM) forex positions had
been closed. The total potential realized loss announced was US$303m (or
S$439m), of which US$83m had been paid out to an undisclosed bank. On
account of the ongoing investigations, management has not indicated whether
they would be making a provision for forex losses in 2007. This aside, FY07
was an outstanding year for the group due to strong order momentum as well
as the expansion of its operations. The group will be releasing its FY07
results in the coming weeks and we are maintaining our FY07 and FY08
estimates for now.
been closed. The total potential realized loss announced was US$303m (or
S$439m), of which US$83m had been paid out to an undisclosed bank. On
account of the ongoing investigations, management has not indicated whether
they would be making a provision for forex losses in 2007. This aside, FY07
was an outstanding year for the group due to strong order momentum as well
as the expansion of its operations. The group will be releasing its FY07
results in the coming weeks and we are maintaining our FY07 and FY08
estimates for now.
Financials Daily - 17th Jan 2008
US: Technology and energy shares sent the Standard & Poor's 500 Index to its lowest level in 14 months on Intel Corp.'s worse-than-estimated sales forecast and a drop in oil prices.
Europe: European stocks slumped, led by commodity producers and chipmakers, for the biggest two-day decline since August after oil and metals prices fell and Intel Corp. forecast sales that missed analysts' estimates.
Asia: Asian stocks fell, extending a global rout, after an unexpected drop in U.S. retail sales added to concern the world's largest economy will enter a recession.
Commodities: Crude oil fell to a four-week low after a U.S. Energy Department report showed that supplies rose more than expected. Gold futures tumbled the most in almost nine weeks after prospects for an emergency interest-rate cut by the Federal Reserve faded, reducing the appeal of the precious metal as hedge against inflation. Silver also declined.
Europe: European stocks slumped, led by commodity producers and chipmakers, for the biggest two-day decline since August after oil and metals prices fell and Intel Corp. forecast sales that missed analysts' estimates.
Asia: Asian stocks fell, extending a global rout, after an unexpected drop in U.S. retail sales added to concern the world's largest economy will enter a recession.
Commodities: Crude oil fell to a four-week low after a U.S. Energy Department report showed that supplies rose more than expected. Gold futures tumbled the most in almost nine weeks after prospects for an emergency interest-rate cut by the Federal Reserve faded, reducing the appeal of the precious metal as hedge against inflation. Silver also declined.
Wednesday, January 16, 2008
Inflation Accelerated Last Year, but Jump Is Unlikely to Deter Fed
NEWS ALERT
from The Wall Street Journal
Jan. 16, 2008
The consumer price index rose 0.3% in December, the Labor Department said, as higher energy, food and medical bills took a toll on consumers. The core CPI, which excludes volatile food and energy prices, advanced 0.2%. Consumer prices soared at their fastest rate in almost two decades last year, rising 4.1% from a year earlier. Underlying prices crept 2.4% higher for 2007, suggesting some spillover from food and energy. Still, the inflation data aren't alarming enough to prevent the Fed from carrying out a fourth straight interest-rate reduction later this month amid signs that the housing slump has spread to the broader economy.
from The Wall Street Journal
Jan. 16, 2008
The consumer price index rose 0.3% in December, the Labor Department said, as higher energy, food and medical bills took a toll on consumers. The core CPI, which excludes volatile food and energy prices, advanced 0.2%. Consumer prices soared at their fastest rate in almost two decades last year, rising 4.1% from a year earlier. Underlying prices crept 2.4% higher for 2007, suggesting some spillover from food and energy. Still, the inflation data aren't alarming enough to prevent the Fed from carrying out a fourth straight interest-rate reduction later this month amid signs that the housing slump has spread to the broader economy.
Dollar Declines to 2 1/2-Year Low Against Yen on Credit Losses
By Lukanyo Mnyanda and Ron Harui
. 16 (Bloomberg) -- The dollar fell to a 2 1/2-year low against the yen as losses in credit markets widened and the U.S. showed more signs of sinking into recession.
The U.S. currency fell the most versus the yen and the Swiss franc on expectations Merrill Lynch & Co. and JPMorgan Chase & Co. will follow Citigroup Inc. in writing down the value of investments linked to U.S. mortgages. The yen climbed against Canadian dollar and the South Korean won as a slump in global stocks prompted investors to repay loans in the currency used to buy higher-yielding assets.
``Further weakness is in store for the dollar as financial companies underperform,'' said Kamal Sharma, a London-based currency strategist at Bank of America Corp. ``The equity markets are shaky and the yen should remain robust.''
The dollar dropped to 106.11 yen as of 9:35 a.m. in London, from 106.78 yesterday in New York. It touched 105.97, its first time below 106 since May 2005. The U.S. currency also traded at $1.4816 per euro from $1.4804 yesterday, when the euro reached $1.4922, the strongest since the record high of $1.4967 in November. The Swiss franc reached an all-time high of 1.0838 per dollar.
The yen rose to 157.21 per euro after reaching 157.20, the strongest since Sept. 11, from 158.08 yesterday. It also climbed 0.8 percent to 93.32 versus Australia's dollar and 1.25 percent to 81.93 against New Zealand's dollar. The MSCI Asia-Pacific Index of regional shares fell 3.6 percent.
Merrill will post a fourth-quarter loss of $3.23 billion tomorrow, while JPMorgan will report today a 29 percent drop in earnings to $3.21 billion, analysts estimate.
Fed Rate Bets
Bank of America Corp. lowered its forecast for the dollar in a research note yesterday because of market expectations for a recession. The second-largest U.S. bank cut its outlook for March 31 to $1.48 from $1.45 previously and to 109 yen from 112.
Fed funds futures contracts on the Chicago Board of Trade show a 100 percent likelihood the Fed will lower the target overnight lending rate between banks by at least a half- percentage point to 3.75 percent on Jan. 30. The chance of a cut to 3.5 percent is 40 percent, compared with zero a week ago.
The Fed may say today that industrial production fell 0.2 percent in December, after a 0.3 percent increase in November, according to a Bloomberg News survey of economists before the report due at 9:15 a.m. in Washington.
The Japanese currency reached the highest in four months versus the euro as rising volatility spurred investors to sell higher-yielding assets. Japan's benchmark interest rate of 0.5 percent compares with 4 percent in the 15-nation euro region and 8.25 percent in New Zealand.
`Cutting Foreign Assets'
``Investors don't want to take risks at this stage, with some of them probably cutting foreign assets,'' said Seiichiro Muta, director of foreign exchange in Tokyo at UBS AG, the world's second-largest currency trader. The yen may advance to 157 per euro today, he forecast.
Volatility implied by one-month dollar-yen options rose to 14.75 percent, the highest since Nov. 27, from 13.65 percent yesterday. An increase in volatility may discourage carry trades as it implies greater exchange-rate fluctuation risk.
In carry trades, investors borrow in countries with lower interest rates and invest in those with higher borrowing costs, earning the spread between the two.
The euro extended this month's gain versus the dollar to 1.6 percent before a European report that may show inflation stayed at the highest in more than six years in December, backing the European Central Bank's case for higher interest rates.
ECB `Hawkish'
``The commentary from ECB officials in the past week has clearly been on the hawkish side,'' said John Horner, a currency strategist at Deutsche Bank AG in Sydney, in an interview with Bloomberg television. ``The risk that they see is rates may need to go up further. That should push the euro against the dollar through the $1.50 mark.''
The European Union's statistics office will say at 11 a.m. in Luxembourg the inflation rate in the euro area was 3.1 percent in December, unchanged from the preliminary estimate, according to a Bloomberg News survey of economists.
. 16 (Bloomberg) -- The dollar fell to a 2 1/2-year low against the yen as losses in credit markets widened and the U.S. showed more signs of sinking into recession.
The U.S. currency fell the most versus the yen and the Swiss franc on expectations Merrill Lynch & Co. and JPMorgan Chase & Co. will follow Citigroup Inc. in writing down the value of investments linked to U.S. mortgages. The yen climbed against Canadian dollar and the South Korean won as a slump in global stocks prompted investors to repay loans in the currency used to buy higher-yielding assets.
``Further weakness is in store for the dollar as financial companies underperform,'' said Kamal Sharma, a London-based currency strategist at Bank of America Corp. ``The equity markets are shaky and the yen should remain robust.''
The dollar dropped to 106.11 yen as of 9:35 a.m. in London, from 106.78 yesterday in New York. It touched 105.97, its first time below 106 since May 2005. The U.S. currency also traded at $1.4816 per euro from $1.4804 yesterday, when the euro reached $1.4922, the strongest since the record high of $1.4967 in November. The Swiss franc reached an all-time high of 1.0838 per dollar.
The yen rose to 157.21 per euro after reaching 157.20, the strongest since Sept. 11, from 158.08 yesterday. It also climbed 0.8 percent to 93.32 versus Australia's dollar and 1.25 percent to 81.93 against New Zealand's dollar. The MSCI Asia-Pacific Index of regional shares fell 3.6 percent.
Merrill will post a fourth-quarter loss of $3.23 billion tomorrow, while JPMorgan will report today a 29 percent drop in earnings to $3.21 billion, analysts estimate.
Fed Rate Bets
Bank of America Corp. lowered its forecast for the dollar in a research note yesterday because of market expectations for a recession. The second-largest U.S. bank cut its outlook for March 31 to $1.48 from $1.45 previously and to 109 yen from 112.
Fed funds futures contracts on the Chicago Board of Trade show a 100 percent likelihood the Fed will lower the target overnight lending rate between banks by at least a half- percentage point to 3.75 percent on Jan. 30. The chance of a cut to 3.5 percent is 40 percent, compared with zero a week ago.
The Fed may say today that industrial production fell 0.2 percent in December, after a 0.3 percent increase in November, according to a Bloomberg News survey of economists before the report due at 9:15 a.m. in Washington.
The Japanese currency reached the highest in four months versus the euro as rising volatility spurred investors to sell higher-yielding assets. Japan's benchmark interest rate of 0.5 percent compares with 4 percent in the 15-nation euro region and 8.25 percent in New Zealand.
`Cutting Foreign Assets'
``Investors don't want to take risks at this stage, with some of them probably cutting foreign assets,'' said Seiichiro Muta, director of foreign exchange in Tokyo at UBS AG, the world's second-largest currency trader. The yen may advance to 157 per euro today, he forecast.
Volatility implied by one-month dollar-yen options rose to 14.75 percent, the highest since Nov. 27, from 13.65 percent yesterday. An increase in volatility may discourage carry trades as it implies greater exchange-rate fluctuation risk.
In carry trades, investors borrow in countries with lower interest rates and invest in those with higher borrowing costs, earning the spread between the two.
The euro extended this month's gain versus the dollar to 1.6 percent before a European report that may show inflation stayed at the highest in more than six years in December, backing the European Central Bank's case for higher interest rates.
ECB `Hawkish'
``The commentary from ECB officials in the past week has clearly been on the hawkish side,'' said John Horner, a currency strategist at Deutsche Bank AG in Sydney, in an interview with Bloomberg television. ``The risk that they see is rates may need to go up further. That should push the euro against the dollar through the $1.50 mark.''
The European Union's statistics office will say at 11 a.m. in Luxembourg the inflation rate in the euro area was 3.1 percent in December, unchanged from the preliminary estimate, according to a Bloomberg News survey of economists.
STX Pan jumps on news of share migration
Shares of South Korean shipping firm STX Pan Ocean <028670.KS> rose as much as 13.1 percent to S$2.77 with 49.4 million shares traded after the company announced details on the migration of its shares between Singapore and Seoul.
Shares of STX Pan Ocean, which is also listed on the Seoul exchange, is trading in Singapore at around a 34 percent discount to its Korean counterpart.
By 0425 GMT, STX Pan Ocean shares were trading down 2.77 percent on the Korea Exchange, at 2,455 won.
A STX Pan Ocean spokeswoman said she could not give an exact timeline for the migration of shares, but a local dealer told Reuters it will take about two weeks.
Shares of STX Pan Ocean, which is also listed on the Seoul exchange, is trading in Singapore at around a 34 percent discount to its Korean counterpart.
By 0425 GMT, STX Pan Ocean shares were trading down 2.77 percent on the Korea Exchange, at 2,455 won.
A STX Pan Ocean spokeswoman said she could not give an exact timeline for the migration of shares, but a local dealer told Reuters it will take about two weeks.
SGX FALLS ON NEGATIVE BROKER CALLS
Shares of Singapore Exchange (SGX) tumbled as much as 7 percent to S$9.30, its lowest level in four and a half months, with 1.4 million traded after brokers downgraded the stock citing a potential slowdown in the market's turnover value.
Morgan Stanley has cut the target price for shares of SGX to S$10.50 from S$15, keeping its "equal weight" rating on the stock.
Goldman Sachs lowered its target share price to S$15.30 from S$18.40 and Macquarie Research cut the stock's target price to S$10.20 from S$11.10, but raised investor rating to "neutral" from "underperform".
"We believe a murkier U.S. outlook will likely dampen sentiment/turnover in the near term and lower the supportable valuation of SGX," Goldman Sachs analyst Darwin Lam wrote in a research note.
Singapore Exchange said its quarterly net profit almost doubled to beat expectations on a surge in stock and derivative trading, and said it will continue focusing on foreign listings in the city-state.
Morgan Stanley has cut the target price for shares of SGX to S$10.50 from S$15, keeping its "equal weight" rating on the stock.
Goldman Sachs lowered its target share price to S$15.30 from S$18.40 and Macquarie Research cut the stock's target price to S$10.20 from S$11.10, but raised investor rating to "neutral" from "underperform".
"We believe a murkier U.S. outlook will likely dampen sentiment/turnover in the near term and lower the supportable valuation of SGX," Goldman Sachs analyst Darwin Lam wrote in a research note.
Singapore Exchange said its quarterly net profit almost doubled to beat expectations on a surge in stock and derivative trading, and said it will continue focusing on foreign listings in the city-state.
Financials Daily-16th Jan 2008
US: The U.S. stock market resumed its January tumble after Citigroup Inc. reported a record loss, retail sales unexpectedly dropped and falling oil prices dragged down energy shares.
Europe: European stocks declined the most in almost eight weeks after Tesco Plc reported sales that trailed estimates, Hypo Real Estate Holding AG's profit dropped and reports signaled slowing regional and U.S. economic growth.
Asia: Asian stocks fell, led by Toyota Motor Corp. and Honda Motor Co., after the yen strengthened to the highest in seven weeks, eroding the value of the Japanese carmakers' overseas sales when converted into their home currency.
Commodities: Crude oil fell more than $2 a barrel in New York after a U.S. government report showed that retail sales unexpectedly declined last month and Saudi Arabia's oil minister said OPEC is ready to increase production. Gold futures fell from a record after the dollar rebounded against the euro and energy costs eased, reducing the appeal of the precious metal as an alternative investment. Silver also declined.
Currencies: The dollar fell to the lowest level since 2005 against the yen after U.S. retail sales dropped in December, bolstering speculation the economy is headed for recession.
Europe: European stocks declined the most in almost eight weeks after Tesco Plc reported sales that trailed estimates, Hypo Real Estate Holding AG's profit dropped and reports signaled slowing regional and U.S. economic growth.
Asia: Asian stocks fell, led by Toyota Motor Corp. and Honda Motor Co., after the yen strengthened to the highest in seven weeks, eroding the value of the Japanese carmakers' overseas sales when converted into their home currency.
Commodities: Crude oil fell more than $2 a barrel in New York after a U.S. government report showed that retail sales unexpectedly declined last month and Saudi Arabia's oil minister said OPEC is ready to increase production. Gold futures fell from a record after the dollar rebounded against the euro and energy costs eased, reducing the appeal of the precious metal as an alternative investment. Silver also declined.
Currencies: The dollar fell to the lowest level since 2005 against the yen after U.S. retail sales dropped in December, bolstering speculation the economy is headed for recession.
Tuesday, January 15, 2008
U.S. Retail Sales Unexpectedly Declined in December (Update)
By Bob Willis
Jan. 15 (Bloomberg) -- Sales at U.S. retailers unexpectedly fell in December, capping the weakest year since 2002.
Sales dropped 0.4 percent, the first decline since June, following a revised 1 percent gain in November, the Commerce Department said today in Washington. Purchases excluding automobiles also decreased 0.4 percent.
Treasury notes rose and stock-index futures dropped as the figures underscored Federal Reserve Chairman Ben S. Bernanke's concern that risks to growth are intensifying. A sustained slump in consumer spending brought on by falling property values and rising unemployment would mean the end of the six-year expansion, economists say.
``Consumer spending slowed down pretty dramatically'' in the fourth quarter, said Brian Bethune, director of financial economics at Global Insight Inc. in Lexington, Massachusetts, who correctly forecast the drop in sales. ``We are kind of flying very close to a stall speed.''
Economists forecast retail sales would be unchanged, according to the median of 74 estimates. Projections ranged from a decline of 0.8 percent to a gain of 0.5 percent.
Yields on benchmark 10-year notes dropped to 3.72 percent at 8:55 a.m. in New York, from 3.77 percent late yesterday. Futures contracts on the Standard & Poor's 500 stock index expiring in March declined 1.1 percent to 1,404.40.
Producer Prices
Producer prices in the U.S. also dropped in December, against economists' forecasts for an increase. Wholesale prices fell 0.1 percent after a 3.2 percent surge in November that was the biggest in 34 years, a Labor Department report showed.
For all of 2007, retailers posted a 4.2 percent sales increase, the smallest in five years. Purchases rose 5.9 percent in 2006.
``Growth stalled out at the end of the fourth quarter and into the new year,'' Joshua Feinman, chief U.S. economist at Deutsche Asset Management in New York, said before the report. ``The economy will narrowly be able to avoid recession.''
Sales excluding automobiles were forecast to decrease 0.1 percent from the prior month, according to the survey median.
The drop in sales was led by a 2.9 percent decline at building-material stores, the biggest since February 2003, reflecting the slump in housing. Sales at clothing, electronics and sporting-goods stores were among those that also decreased.
Gas Stations
Purchases at service stations dropped 1.7 percent, which economists said reflected lower gasoline prices. The price of a gallon of regular gasoline in December averaged $3.01, down from $3.07 the previous month, according to AAA, a group representing motorists. Excluding gas, retail sales fell 0.2 percent.
Auto dealers saw a 0.4 percent decline in sales.
AutoNation Inc., the largest publicly traded U.S. car dealer, doesn't expect the nation's auto market to pull out of its slump until 2009, Chief Executive Officer Michael Jackson said from Fort Lauderdale, Florida.
The drop in housing and the slowing economy usually take ``30 to 40 months to work through,'' Jackson said in a Bloomberg Radio interview yesterday. ``So we've had declines in 2006, 2007 and 2008, but I'm feeling pretty good about 2009.''
Excluding autos, gasoline and building materials, the figures the government uses to calculate gross domestic product, sales increased 0.1 percent, following a 0.7 percent gain the month before. The government uses data from other sources to calculate the contribution from the three categories excluded.
Spending Outlook
Consumer spending, which accounts for more than two-thirds of the economy, is likely to cool rather than collapse in coming months as the housing slump worsens and hiring slows, according to the median estimate of economists surveyed by Bloomberg News earlier this month.
Spending will grow at an annual rate of 1.6 percent this quarter, down from an estimated 2.6 percent pace in the last three months of 2007, according to the median estimate of economists surveyed by Bloomberg News this month. Spending expanded at an average 3.5 percent pace per quarter over the past decade.
The continued gains, together with increasing exports, will help the economy avoid recession, economists said. Fed rate cuts will ensure a short downturn should one occur, they said.
Bernanke on Jan. 10 pledged ``substantive additional action'' to insure against ``downside risks'' to the economic expansion.
Investors are certain the Fed will lower the benchmark interest rate by at least a half percentage point following two days of meetings of Jan. 29-30.
Wal-Mart
Discount retailers are benefiting as Americans rein in spending. Wal-Mart Stores Inc., the world's largest retailer, said Jan. 10 that its December sales were within its forecast after it lured shoppers with price cuts on more holiday items.
Purchases at chain stores in November-December rose at the slowest pace in five years, according to the International Council of Shopping Centers.
An early Thanksgiving boosted holiday shopping in November at the expense of December sales, economists such as Peter Kretzmer of Bank of America Corp. said. Additionally, gift cards bought over the last two months won't be reflected in the sales figures until they're redeemed in January or later.
The biggest housing recession in 16 years is reverberating across the economy as access to credit tightens, consumer and corporate demand weaken and job growth slows. Unemployment rose to 5 percent in December, a 0.3 point jump from November and a highest in two years, according to Labor Department figures.
The magnitude of the gain from a recent 4.4 percent trough prompted economists including Jan Hatzius of Goldman Sachs Group Inc. to warn that the economy may have already entered a recession.
``Recession has now arrived, or will very shortly,'' Hatzius wrote in a note to clients last week.
Jan. 15 (Bloomberg) -- Sales at U.S. retailers unexpectedly fell in December, capping the weakest year since 2002.
Sales dropped 0.4 percent, the first decline since June, following a revised 1 percent gain in November, the Commerce Department said today in Washington. Purchases excluding automobiles also decreased 0.4 percent.
Treasury notes rose and stock-index futures dropped as the figures underscored Federal Reserve Chairman Ben S. Bernanke's concern that risks to growth are intensifying. A sustained slump in consumer spending brought on by falling property values and rising unemployment would mean the end of the six-year expansion, economists say.
``Consumer spending slowed down pretty dramatically'' in the fourth quarter, said Brian Bethune, director of financial economics at Global Insight Inc. in Lexington, Massachusetts, who correctly forecast the drop in sales. ``We are kind of flying very close to a stall speed.''
Economists forecast retail sales would be unchanged, according to the median of 74 estimates. Projections ranged from a decline of 0.8 percent to a gain of 0.5 percent.
Yields on benchmark 10-year notes dropped to 3.72 percent at 8:55 a.m. in New York, from 3.77 percent late yesterday. Futures contracts on the Standard & Poor's 500 stock index expiring in March declined 1.1 percent to 1,404.40.
Producer Prices
Producer prices in the U.S. also dropped in December, against economists' forecasts for an increase. Wholesale prices fell 0.1 percent after a 3.2 percent surge in November that was the biggest in 34 years, a Labor Department report showed.
For all of 2007, retailers posted a 4.2 percent sales increase, the smallest in five years. Purchases rose 5.9 percent in 2006.
``Growth stalled out at the end of the fourth quarter and into the new year,'' Joshua Feinman, chief U.S. economist at Deutsche Asset Management in New York, said before the report. ``The economy will narrowly be able to avoid recession.''
Sales excluding automobiles were forecast to decrease 0.1 percent from the prior month, according to the survey median.
The drop in sales was led by a 2.9 percent decline at building-material stores, the biggest since February 2003, reflecting the slump in housing. Sales at clothing, electronics and sporting-goods stores were among those that also decreased.
Gas Stations
Purchases at service stations dropped 1.7 percent, which economists said reflected lower gasoline prices. The price of a gallon of regular gasoline in December averaged $3.01, down from $3.07 the previous month, according to AAA, a group representing motorists. Excluding gas, retail sales fell 0.2 percent.
Auto dealers saw a 0.4 percent decline in sales.
AutoNation Inc., the largest publicly traded U.S. car dealer, doesn't expect the nation's auto market to pull out of its slump until 2009, Chief Executive Officer Michael Jackson said from Fort Lauderdale, Florida.
The drop in housing and the slowing economy usually take ``30 to 40 months to work through,'' Jackson said in a Bloomberg Radio interview yesterday. ``So we've had declines in 2006, 2007 and 2008, but I'm feeling pretty good about 2009.''
Excluding autos, gasoline and building materials, the figures the government uses to calculate gross domestic product, sales increased 0.1 percent, following a 0.7 percent gain the month before. The government uses data from other sources to calculate the contribution from the three categories excluded.
Spending Outlook
Consumer spending, which accounts for more than two-thirds of the economy, is likely to cool rather than collapse in coming months as the housing slump worsens and hiring slows, according to the median estimate of economists surveyed by Bloomberg News earlier this month.
Spending will grow at an annual rate of 1.6 percent this quarter, down from an estimated 2.6 percent pace in the last three months of 2007, according to the median estimate of economists surveyed by Bloomberg News this month. Spending expanded at an average 3.5 percent pace per quarter over the past decade.
The continued gains, together with increasing exports, will help the economy avoid recession, economists said. Fed rate cuts will ensure a short downturn should one occur, they said.
Bernanke on Jan. 10 pledged ``substantive additional action'' to insure against ``downside risks'' to the economic expansion.
Investors are certain the Fed will lower the benchmark interest rate by at least a half percentage point following two days of meetings of Jan. 29-30.
Wal-Mart
Discount retailers are benefiting as Americans rein in spending. Wal-Mart Stores Inc., the world's largest retailer, said Jan. 10 that its December sales were within its forecast after it lured shoppers with price cuts on more holiday items.
Purchases at chain stores in November-December rose at the slowest pace in five years, according to the International Council of Shopping Centers.
An early Thanksgiving boosted holiday shopping in November at the expense of December sales, economists such as Peter Kretzmer of Bank of America Corp. said. Additionally, gift cards bought over the last two months won't be reflected in the sales figures until they're redeemed in January or later.
The biggest housing recession in 16 years is reverberating across the economy as access to credit tightens, consumer and corporate demand weaken and job growth slows. Unemployment rose to 5 percent in December, a 0.3 point jump from November and a highest in two years, according to Labor Department figures.
The magnitude of the gain from a recent 4.4 percent trough prompted economists including Jan Hatzius of Goldman Sachs Group Inc. to warn that the economy may have already entered a recession.
``Recession has now arrived, or will very shortly,'' Hatzius wrote in a note to clients last week.
Citigroup cuts dividend, and is raising $14.5 bln
Citigroup Inc on Tuesday cut its quarterly dividend 41 percent, and said it is raising $14.5 billion from offerings of convertible preferred securities.
The bank also posted its first quarterly loss since its creation in 1998, hurt by $18.1 billion of write-downs for exposure to subprime mortgages and other risky debt. The net loss for the largest U.S. bank totaled $9.83 billion, or $1.99 per share.
Citigroup reduced its quarterly dividend to 32 cents per share from 54 cents.
(Reporting by Jonathan Stempel; Editing by Derek Caney)
The bank also posted its first quarterly loss since its creation in 1998, hurt by $18.1 billion of write-downs for exposure to subprime mortgages and other risky debt. The net loss for the largest U.S. bank totaled $9.83 billion, or $1.99 per share.
Citigroup reduced its quarterly dividend to 32 cents per share from 54 cents.
(Reporting by Jonathan Stempel; Editing by Derek Caney)
Merrill Gets Capital Injections From Foreign Investors
NEWS ALERT
from The Wall Street Journal
Jan. 15, 2008
Merrill Lynch reached agreements for investments totaling $6.6 billion from investors including Korea Investment Corp., Kuwait Investment Authority, and Japan's Mizuho Corporate Bank. Merrill is only the latest Wall Street firm to seek funding from big, well-capitalized sources overseas. Citigroup, Morgan Stanley, Bear Stearns and Switzerland's UBS have each received cash injections from foreign investors.
"One of my main priorities over the last several weeks has been to ensure Merrill Lynch's balance sheet is strong, and these transactions make certain that Merrill Lynch is well-capitalized," said Merrill CEO John Thain.
from The Wall Street Journal
Jan. 15, 2008
Merrill Lynch reached agreements for investments totaling $6.6 billion from investors including Korea Investment Corp., Kuwait Investment Authority, and Japan's Mizuho Corporate Bank. Merrill is only the latest Wall Street firm to seek funding from big, well-capitalized sources overseas. Citigroup, Morgan Stanley, Bear Stearns and Switzerland's UBS have each received cash injections from foreign investors.
"One of my main priorities over the last several weeks has been to ensure Merrill Lynch's balance sheet is strong, and these transactions make certain that Merrill Lynch is well-capitalized," said Merrill CEO John Thain.
Commodities Daily 15th Jan 2008
Spotlight: Gold reached yet another record high as a declining dollar and expectations of further interest rate cuts spurred buying. Corn rose to the highest ever in Chicago while soybeans and feeder cattle fell. U.S. steel prices may rise more quickly than anticipated to $600 a ton. Cocoa rose to the highest price since 2003.
Energy: Crude oil rose for the first time in four days after the dollar fell to within a cent of its all-time low against the euro, prompting investors to buy energy and metals futures as an inflation hedge. The euro settled at 1.4869 against the dollar yesterday. A 2 percent gain in heating prices also prompted traders to buy oil as colder weather shut schools and cancelled flights in Boston. In a survey of analysts, crude oil inventories probably gained 1.3 million barrels last week as refiners reduced output from a four-month high and imports rose. Gasoline and distillate inventories also gained, according to the survey.
Agriculture: Corn soared to record high levels yesterday as investors bought on speculation that global demand for feed and biofuel will exceed production for the seventh time in the past eight years. Corn futures for the active month March settled at 512 cents a bushel, up 17 cents from the previous limit-up session on Friday. Wheat futures ended slightly higher as traders continue to buy the new crop months July, narrowing the old/new crop spread. March wheat rose 7.75 cents to 917 cents a bushel while July limit-up for a second straight session, settling at 836 cents a bushel. Soybeans fell from a record high as U.S. and South American farmers increased sales to benefit from prices that rose 78 percent last year.
Precious Metals: Gold futures set new record highs yesterday, reaching a high of $915.90 an ounce before settling lower in earlier trade as a declining dollar increased demand for precious metals. The dollar fell as traders increased bets that the Federal Reserve will lower U.S. interest rates to avoid a recession. Fed funds futures contracts on the Chicago Board of Trade show 54 percent odds the Fed will cut its 4.25 percent target rate for overnight bank loans to 3.75 percent at its Jan. 30 meeting.
Industrial Metals: Copper rose for a second straight session as a weaker dollar increased the demand for raw materials as a hedge against inflation. Copper however, remains weighed down by increasing stockpiles and a stabilizing U.S. demand. Stockpiles monitored by the Comex have plunged 61 percent in the last year. Inventories tallied by the London Metal Exchange have dropped 0.4 percent in the past 12 months.
Energy: Crude oil rose for the first time in four days after the dollar fell to within a cent of its all-time low against the euro, prompting investors to buy energy and metals futures as an inflation hedge. The euro settled at 1.4869 against the dollar yesterday. A 2 percent gain in heating prices also prompted traders to buy oil as colder weather shut schools and cancelled flights in Boston. In a survey of analysts, crude oil inventories probably gained 1.3 million barrels last week as refiners reduced output from a four-month high and imports rose. Gasoline and distillate inventories also gained, according to the survey.
Agriculture: Corn soared to record high levels yesterday as investors bought on speculation that global demand for feed and biofuel will exceed production for the seventh time in the past eight years. Corn futures for the active month March settled at 512 cents a bushel, up 17 cents from the previous limit-up session on Friday. Wheat futures ended slightly higher as traders continue to buy the new crop months July, narrowing the old/new crop spread. March wheat rose 7.75 cents to 917 cents a bushel while July limit-up for a second straight session, settling at 836 cents a bushel. Soybeans fell from a record high as U.S. and South American farmers increased sales to benefit from prices that rose 78 percent last year.
Precious Metals: Gold futures set new record highs yesterday, reaching a high of $915.90 an ounce before settling lower in earlier trade as a declining dollar increased demand for precious metals. The dollar fell as traders increased bets that the Federal Reserve will lower U.S. interest rates to avoid a recession. Fed funds futures contracts on the Chicago Board of Trade show 54 percent odds the Fed will cut its 4.25 percent target rate for overnight bank loans to 3.75 percent at its Jan. 30 meeting.
Industrial Metals: Copper rose for a second straight session as a weaker dollar increased the demand for raw materials as a hedge against inflation. Copper however, remains weighed down by increasing stockpiles and a stabilizing U.S. demand. Stockpiles monitored by the Comex have plunged 61 percent in the last year. Inventories tallied by the London Metal Exchange have dropped 0.4 percent in the past 12 months.
Economic Outlook 15th Jan 2008
Better-than-anticipated earnings news from IBM got equities off to a strong
start today. Optimism that the Fed will not let inflation fears keep it from
easing added fuel to the stock rally. Treasuries were mixed and little changed,
while the dollar took another step lower versus the euro and the yen.
Retail Sales and sales ex-autos for December will be released at 8:30
(Forecast +0.2%/+0.2%, Consensus unch/-0.1%). Retail sales surprised to the
upside in November, jumping 1.2% overall and 1.8% excluding autos. We estimate
the gains in December were much more modest, with the pace of holiday spending
petering out as the season progressed. We put December retail sales up 0.2%
both with and without motor vehicles. Gasoline sales are not likely to be a
large factor; we see the same 0.2% gain when gasoline is excluded.
The December Producer Price Index and core PPI are also due out at 8:30
(Forecast +0.1%/+0.1%, Consensus +0.2%/+0.2%). The December PPI should look
nothing like November's, when the index posted an energy-related rise of 3.2%.
Wholesale energy prices, which surged by 14.1% in November, probably edged up
only 0.2% last month. We put the headline December PPI at +0.1%. Excluding
food and energy, the core PPI should also be contained, rising an estimated 0.
1% in December after November's 0.4% gain. This would leave the core PPI
unchanged at +2.0% YoY through December.
January's Empire State Manufacturing Survey is also scheduled for 8:30
(Forecast +7.0, Consensus +10.0). This survey of manufacturers from the New
York region fell to 10.3 in December after posting strong readings above 25 in
five of the previous six months. Its average for all of 2007 was +17.1. For
January, we look for a further deterioration in the index to a nine-month low
of +7.0.
Business Inventories for November are due out at 10:00 (Forecast +0.4%,
Consensus +0.4%). Factory inventories jumped 0.8% in November, and we estimate
wholesale inventories rose 0.4%. We put retail inventories up 0.2% for the
month. These estimates leave us with an expected increase of 0.4% for total
business inventories in November. Looking forward, slowing inventory
accumulation is expected to subtract from GDP growth throughout the first half
of 2008.
start today. Optimism that the Fed will not let inflation fears keep it from
easing added fuel to the stock rally. Treasuries were mixed and little changed,
while the dollar took another step lower versus the euro and the yen.
Retail Sales and sales ex-autos for December will be released at 8:30
(Forecast +0.2%/+0.2%, Consensus unch/-0.1%). Retail sales surprised to the
upside in November, jumping 1.2% overall and 1.8% excluding autos. We estimate
the gains in December were much more modest, with the pace of holiday spending
petering out as the season progressed. We put December retail sales up 0.2%
both with and without motor vehicles. Gasoline sales are not likely to be a
large factor; we see the same 0.2% gain when gasoline is excluded.
The December Producer Price Index and core PPI are also due out at 8:30
(Forecast +0.1%/+0.1%, Consensus +0.2%/+0.2%). The December PPI should look
nothing like November's, when the index posted an energy-related rise of 3.2%.
Wholesale energy prices, which surged by 14.1% in November, probably edged up
only 0.2% last month. We put the headline December PPI at +0.1%. Excluding
food and energy, the core PPI should also be contained, rising an estimated 0.
1% in December after November's 0.4% gain. This would leave the core PPI
unchanged at +2.0% YoY through December.
January's Empire State Manufacturing Survey is also scheduled for 8:30
(Forecast +7.0, Consensus +10.0). This survey of manufacturers from the New
York region fell to 10.3 in December after posting strong readings above 25 in
five of the previous six months. Its average for all of 2007 was +17.1. For
January, we look for a further deterioration in the index to a nine-month low
of +7.0.
Business Inventories for November are due out at 10:00 (Forecast +0.4%,
Consensus +0.4%). Factory inventories jumped 0.8% in November, and we estimate
wholesale inventories rose 0.4%. We put retail inventories up 0.2% for the
month. These estimates leave us with an expected increase of 0.4% for total
business inventories in November. Looking forward, slowing inventory
accumulation is expected to subtract from GDP growth throughout the first half
of 2008.
Financials Daily 15th Jan 2008
US: U.S. stocks rallied, sending the Dow Jones Industrial Average and Nasdaq Composite Index to their biggest gains this year, after International Business Machines Corp.'s earnings beat forecasts.
Europe: European stocks rose for the first time in four days, led by technology companies, after sales for SAP AG and International Business Machines Corp. topped analysts' estimates.
Asia: Asian stocks fell to a three-week low, led by shipbuilders and oil producers, after Goldman Sachs Group Inc. cut its forecasts for regional growth on expectations the U.S. will fall into recession.
Commodities: Crude oil rose for the first time in four days after the dollar fell to within a cent of its all-time low against the euro, prompting investors to buy energy and metals futures as an inflation hedge. Gold and platinum rose to records and cotton and corn surged as a declining dollar increased demand for precious metals and farm products as alternatives to stocks and bonds.
Currencies: The dollar fell to within a cent of its all-time low versus the euro on speculation U.S. interest rates will drop below those of the 15 nations that share the single European currency for the first time in three years.
Europe: European stocks rose for the first time in four days, led by technology companies, after sales for SAP AG and International Business Machines Corp. topped analysts' estimates.
Asia: Asian stocks fell to a three-week low, led by shipbuilders and oil producers, after Goldman Sachs Group Inc. cut its forecasts for regional growth on expectations the U.S. will fall into recession.
Commodities: Crude oil rose for the first time in four days after the dollar fell to within a cent of its all-time low against the euro, prompting investors to buy energy and metals futures as an inflation hedge. Gold and platinum rose to records and cotton and corn surged as a declining dollar increased demand for precious metals and farm products as alternatives to stocks and bonds.
Currencies: The dollar fell to within a cent of its all-time low versus the euro on speculation U.S. interest rates will drop below those of the 15 nations that share the single European currency for the first time in three years.
Citigroup Is Expected to Slash Dividend, Announce Write-Down
Citigroup is expected to announce a sizable dividend cut, cash infusion of at least $10 billion and write-down of as much as $20 billion in mortgage-related investments as part of its fourth-quarter earnings report, people familiar with the plans said.
Monday, January 14, 2008
Citigroup's Deal With China Development Bank May Be in Jeopardy
Citigroup Inc.'s plans to raise capital by selling a stake of about $2 billion to China Development Bank could be in jeopardy because of opposition from China's government, according to a person familiar with the situation. Citigroup is hoping to announce a capital injection from investors when it reports fourth-quarter earnings Tuesday.
Wall Street's $35 Billion Writedown Puts Squeeze on '08 Profits
By Bradley Keoun and Elizabeth Hester
Jan. 14 (Bloomberg) -- Citigroup Inc., Bank of America Corp. and Merrill Lynch & Co. may report their worst-ever quarter, beset by $35 billion of writedowns that threaten to crimp profit through 2008.
The losses have depleted the banks' capital, forcing New York-based Citigroup and Merrill to seek more than $13 billion from foreign investors, and hobbled their ability to make new loans. Other sources of fees, including credit cards, are also in jeopardy as the U.S. economy slows, said CreditSights Inc. analyst David Hendler, who estimates Citigroup, Bank of America and Merrill won't earn more this year than they did in 2006.
``The banks are already operating like they're in a recession,'' by ratcheting back on trading and lending, said Adam Compton, who helps oversee $150 billion at San Francisco- based RCM Capital, which holds shares of Citigroup, Bank of America and Merrill. ``Everybody has tightened up tremendously.''
Citigroup may report a fourth-quarter loss tomorrow of $4 billion, the first for the largest U.S. bank since its commercial real estate holdings plummeted in value during the early 1990s, according to a survey of 8 analysts by Bloomberg. The company also may announce that it received a new cash infusion of as much as $10 billion from investors in China and the Middle East, the Wall Street Journal reported on Jan. 11, citing people familiar with the matter.
Merrill, the world's biggest brokerage, probably will post a loss of $3.23 billion on Jan. 17, topping the record $2.24 billion loss reported in the third quarter, Stan O'Neal's last as chief executive officer, analysts estimate.
New CEOs
John Thain, O'Neal's replacement, may use the quarter's earnings to write down most remaining investments infected by subprime defaults, said Sandler O'Neill & Partners analyst Jeffrey Harte. Citigroup replaced CEO Charles O. ``Chuck'' Prince III with Vikram Pandit, who turns 51 today, a former investment banker with a Ph.D. in finance who has formed a dedicated task force to mitigate losses in the bank's subprime investments.
Prince, 58, resigned in early November when the bank said it might have $8 billion to $11 billion of subprime writedowns, based on a slide in prices for mortgage-related securities during October.
In a Nov. 15 interview, Thain, 52, said that in many market declines, ``asset prices tend to go much lower than they ultimately are worth, and it takes longer to work out of them than people think.''
Writedown Estimates
The loss at Citigroup may include almost $19 billion of writedowns on holdings of mortgage-related securities known as collateralized debt obligations, according to Goldman Sachs Group Inc. analyst William Tanona. Merrill was battered by $11.5 billion of writedowns, Tanona estimates.
Bank of America's fourth-quarter net income probably fell 79 percent to $1.08 billion, the biggest drop in at least a decade, according to a Bloomberg survey. Sanford C. Bernstein & Co. analyst Howard Mason estimates the bank had $5.5 billion of writedowns on mortgage-related securities.
Earnings per share would be 23 cents, the lowest since the Charlotte, North Carolina-based company was formed from the 1998 merger of BankAmerica and NationsBank, according to analysts' estimates. Citigroup was put together the same year through the combination of Travelers Group Inc. and Citicorp.
Bank of America, the second-biggest U.S. bank, increased its bet on the U.S. housing market last week when it agreed to acquire unprofitable mortgage lender Countrywide Financial Corp. of Calabasas, California, for about $4 billion.
JPMorgan's Outlook
Bank of America, led by 60-year-old CEO Ken Lewis, may face writedowns caused by the declining value of Countrywide's loan portfolio, said Sean Egan, managing director of Egan-Jones Rating Co. in Philadelphia. A 5 percent writedown on the portfolio would be more than $10 billion, or about half of Bank of America's 2006 profit of $21 billion, he said.
Even New York-based JPMorgan Chase & Co., the least damaged by the subprime losses, faces ``a challenging credit environment mired by further asset write-offs'' of $3.4 billion, Tanona wrote in a Dec. 26 report. JPMorgan's fourth-quarter earnings may drop 29 percent to $3.21 billion, the first decline in three years, analysts estimate.
JPMorgan fell 15 percent during the past 12 months in New York Stock Exchange composite trading, compared with Citigroup's 47 percent, Bank of America's 28 percent and Merrill's 43 percent.
Great Depression
Banks haven't lost this much money, in relative terms, since the Great Depression, said Richard Sylla, a professor of the history of financial institutions and markets at New York University's Stern School of Business.
U.S. banks, insurers and real-estate companies earned about $1 billion a year during the 1920s until the stock market crash of October 1929. The industry lost about $500 million in 1930, $1.7 billion in 1931, and $2 billion in 1932, Sylla said.
Within days of being inaugurated in March 1933, President Franklin Roosevelt issued an emergency order declaring a ``bank holiday'' to stem a run on deposits. About 7,000 banks, or a third of the U.S. total, failed and financial companies didn't return to profitability until 1936, Sylla said.
Last year's collapse of the subprime mortgage market was worse than the third-world debt crisis of the early 1980s, when soaring oil prices and surging interest rates pushed Mexico and other developing countries into default on their loans, said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, and author of ``100 Years of Wall Street.''
Abu Dhabi
``This is the classic credit crunch,'' Geisst said. ``It might not have gotten to credit cards, it might not have gotten to car loans, but it's coming.''
Citigroup, Bank of America and Merrill probably were profitable in 2007, earning about $23 billion on a combined basis, even after the second-half writedowns, according to Bloomberg data. The banks earned about $50 billion in 2006. They may earn $44.8 billion this year, analyst surveys by Bloomberg show.
Citigroup, which in November had to seek a $7.5 billion capital infusion from the ruling family of oil-rich Middle Eastern emirate Abu Dhabi, may have to cut shareholder dividends to maintain the capital cushion it keeps to absorb loan losses, Tanona wrote in a Dec. 26 note.
Even with the Abu Dhabi investment, Citigroup's so-called Tier 1 capital ratio, which regulators monitor to assess banks' ability to withstand loan losses, may fall to 7 percent by the end of this year, he estimated. While above the 6 percent needed to maintain its ``well-capitalized'' status from federal regulators, the capital ratio is below Citigroup's own target of 7.5 percent.
Fed Data
Bank of America's Tier 1 ratio fell to 8.22 percent in the third quarter, from 8.52 percent in the second quarter and 8.48 percent a year earlier. JPMorgan's ratio was 8.4 percent in the third quarter, down from 8.6 percent a year earlier.
The resulting tightfistedness at the banks may help push the U.S. economy toward recession, RCM's Compton said. In the third quarter, less than a tenth of U.S. bank loan officers witnessed ``substantially'' higher demand for commercial loans, down from more than 50 percent in the second quarter of 2005, CreditSights reported, citing data from the Federal Reserve.
The banks' ``willingness and ability to lend remain the leading issues for the risk and extent to which current turmoil in the financial credit markets spreads to the broader economy,'' wrote Jeffrey Rosenberg, Bank of America's senior debt-investing analyst, in a Dec. 20 report.
Loss Ratios
Profits may suffer as banks set aside higher reserves for bad loans, Sanford Bernstein's Mason wrote in a Dec. 31 report. Bank of America's net loss ratio on commercial loans this year may average 0.7 percent, compared with 0.42 percent in the third quarter and more than triple the rate of the fourth quarter of 2006, Mason estimated. Citigroup's losses on credit-card loans may climb to $7.6 billion this year from $6.4 billion last year and $5.8 billion in 2006.
``A lot of these banks have large consumer portfolios in addition to the subprime side,'' said Malcolm Polley, who helps oversee $1 billion at Stewart Capital Advisors in Pittsburgh, including Bank of America shares. ``As we sink closer to recession, consumer delinquencies are going to tick up.''
U.S. construction loans that were 30 days to 89 days overdue represented 0.7 percent of those outstanding in the third quarter, more than double the rate of a year earlier, according to analysts at Arlington, Virginia-based Friedman, Billings, Ramsey & Co. Delinquent commercial loans climbed to 0.36 percent from 0.3 percent in the same period.
Default Rates
The default rate on U.S. junk-grade corporate loans may reach 2 percent to 3 percent this year, compared with about 0.9 percent in 2007, according to Bank of America's Rosenberg.
``Credit deterioration will continue to pressure industry valuations well into 2008,'' Friedman Billings analysts James Abbott, David Rochester and Scott Cottrell wrote in the Jan. 3 report. ``Even modest upticks in delinquencies can drive lower returns.''
The banks misjudged how bad the home-loan market would get, and they accumulated more than $100 billion of AAA-rated securities they thought were safe. This quarter's writedowns may acknowledge that prices for mortgage bonds and collateralized debt obligations, which repackage assets such as buyout loans and mortgage bonds into new debt with varying risks, probably won't recover anytime soon, RCM's Compton said.
Asset Markdowns
Under U.S. accounting rules, banks and other financial firms have to take losses to ``mark'' the value of tradeable securities to current market prices. Morgan Stanley marked down some AAA-rated securities last month to as little as 30 cents on the dollar, while Zurich-based UBS AG, Switzerland's biggest bank, took marks as low as 22 cents, Credit Suisse analyst Susan Roth Katzke said in a Jan. 3 report.
Any holdings remaining after the fourth quarter may have to be written down further, said Andrew Seibert, who helps oversee $400 million at Nextier Wealth Management in Pittsburgh. He sold his bank stocks during the first half of 2007. Even after writing down subprime holdings by $11.5 billion in the fourth quarter, Merrill would have about $8 billion left, Tanona said.
``I don't think these guys actually know the total of the losses they have on the books,'' Seibert said. ``They're still digging through it all trying to figure out what's there.''
Jan. 14 (Bloomberg) -- Citigroup Inc., Bank of America Corp. and Merrill Lynch & Co. may report their worst-ever quarter, beset by $35 billion of writedowns that threaten to crimp profit through 2008.
The losses have depleted the banks' capital, forcing New York-based Citigroup and Merrill to seek more than $13 billion from foreign investors, and hobbled their ability to make new loans. Other sources of fees, including credit cards, are also in jeopardy as the U.S. economy slows, said CreditSights Inc. analyst David Hendler, who estimates Citigroup, Bank of America and Merrill won't earn more this year than they did in 2006.
``The banks are already operating like they're in a recession,'' by ratcheting back on trading and lending, said Adam Compton, who helps oversee $150 billion at San Francisco- based RCM Capital, which holds shares of Citigroup, Bank of America and Merrill. ``Everybody has tightened up tremendously.''
Citigroup may report a fourth-quarter loss tomorrow of $4 billion, the first for the largest U.S. bank since its commercial real estate holdings plummeted in value during the early 1990s, according to a survey of 8 analysts by Bloomberg. The company also may announce that it received a new cash infusion of as much as $10 billion from investors in China and the Middle East, the Wall Street Journal reported on Jan. 11, citing people familiar with the matter.
Merrill, the world's biggest brokerage, probably will post a loss of $3.23 billion on Jan. 17, topping the record $2.24 billion loss reported in the third quarter, Stan O'Neal's last as chief executive officer, analysts estimate.
New CEOs
John Thain, O'Neal's replacement, may use the quarter's earnings to write down most remaining investments infected by subprime defaults, said Sandler O'Neill & Partners analyst Jeffrey Harte. Citigroup replaced CEO Charles O. ``Chuck'' Prince III with Vikram Pandit, who turns 51 today, a former investment banker with a Ph.D. in finance who has formed a dedicated task force to mitigate losses in the bank's subprime investments.
Prince, 58, resigned in early November when the bank said it might have $8 billion to $11 billion of subprime writedowns, based on a slide in prices for mortgage-related securities during October.
In a Nov. 15 interview, Thain, 52, said that in many market declines, ``asset prices tend to go much lower than they ultimately are worth, and it takes longer to work out of them than people think.''
Writedown Estimates
The loss at Citigroup may include almost $19 billion of writedowns on holdings of mortgage-related securities known as collateralized debt obligations, according to Goldman Sachs Group Inc. analyst William Tanona. Merrill was battered by $11.5 billion of writedowns, Tanona estimates.
Bank of America's fourth-quarter net income probably fell 79 percent to $1.08 billion, the biggest drop in at least a decade, according to a Bloomberg survey. Sanford C. Bernstein & Co. analyst Howard Mason estimates the bank had $5.5 billion of writedowns on mortgage-related securities.
Earnings per share would be 23 cents, the lowest since the Charlotte, North Carolina-based company was formed from the 1998 merger of BankAmerica and NationsBank, according to analysts' estimates. Citigroup was put together the same year through the combination of Travelers Group Inc. and Citicorp.
Bank of America, the second-biggest U.S. bank, increased its bet on the U.S. housing market last week when it agreed to acquire unprofitable mortgage lender Countrywide Financial Corp. of Calabasas, California, for about $4 billion.
JPMorgan's Outlook
Bank of America, led by 60-year-old CEO Ken Lewis, may face writedowns caused by the declining value of Countrywide's loan portfolio, said Sean Egan, managing director of Egan-Jones Rating Co. in Philadelphia. A 5 percent writedown on the portfolio would be more than $10 billion, or about half of Bank of America's 2006 profit of $21 billion, he said.
Even New York-based JPMorgan Chase & Co., the least damaged by the subprime losses, faces ``a challenging credit environment mired by further asset write-offs'' of $3.4 billion, Tanona wrote in a Dec. 26 report. JPMorgan's fourth-quarter earnings may drop 29 percent to $3.21 billion, the first decline in three years, analysts estimate.
JPMorgan fell 15 percent during the past 12 months in New York Stock Exchange composite trading, compared with Citigroup's 47 percent, Bank of America's 28 percent and Merrill's 43 percent.
Great Depression
Banks haven't lost this much money, in relative terms, since the Great Depression, said Richard Sylla, a professor of the history of financial institutions and markets at New York University's Stern School of Business.
U.S. banks, insurers and real-estate companies earned about $1 billion a year during the 1920s until the stock market crash of October 1929. The industry lost about $500 million in 1930, $1.7 billion in 1931, and $2 billion in 1932, Sylla said.
Within days of being inaugurated in March 1933, President Franklin Roosevelt issued an emergency order declaring a ``bank holiday'' to stem a run on deposits. About 7,000 banks, or a third of the U.S. total, failed and financial companies didn't return to profitability until 1936, Sylla said.
Last year's collapse of the subprime mortgage market was worse than the third-world debt crisis of the early 1980s, when soaring oil prices and surging interest rates pushed Mexico and other developing countries into default on their loans, said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, and author of ``100 Years of Wall Street.''
Abu Dhabi
``This is the classic credit crunch,'' Geisst said. ``It might not have gotten to credit cards, it might not have gotten to car loans, but it's coming.''
Citigroup, Bank of America and Merrill probably were profitable in 2007, earning about $23 billion on a combined basis, even after the second-half writedowns, according to Bloomberg data. The banks earned about $50 billion in 2006. They may earn $44.8 billion this year, analyst surveys by Bloomberg show.
Citigroup, which in November had to seek a $7.5 billion capital infusion from the ruling family of oil-rich Middle Eastern emirate Abu Dhabi, may have to cut shareholder dividends to maintain the capital cushion it keeps to absorb loan losses, Tanona wrote in a Dec. 26 note.
Even with the Abu Dhabi investment, Citigroup's so-called Tier 1 capital ratio, which regulators monitor to assess banks' ability to withstand loan losses, may fall to 7 percent by the end of this year, he estimated. While above the 6 percent needed to maintain its ``well-capitalized'' status from federal regulators, the capital ratio is below Citigroup's own target of 7.5 percent.
Fed Data
Bank of America's Tier 1 ratio fell to 8.22 percent in the third quarter, from 8.52 percent in the second quarter and 8.48 percent a year earlier. JPMorgan's ratio was 8.4 percent in the third quarter, down from 8.6 percent a year earlier.
The resulting tightfistedness at the banks may help push the U.S. economy toward recession, RCM's Compton said. In the third quarter, less than a tenth of U.S. bank loan officers witnessed ``substantially'' higher demand for commercial loans, down from more than 50 percent in the second quarter of 2005, CreditSights reported, citing data from the Federal Reserve.
The banks' ``willingness and ability to lend remain the leading issues for the risk and extent to which current turmoil in the financial credit markets spreads to the broader economy,'' wrote Jeffrey Rosenberg, Bank of America's senior debt-investing analyst, in a Dec. 20 report.
Loss Ratios
Profits may suffer as banks set aside higher reserves for bad loans, Sanford Bernstein's Mason wrote in a Dec. 31 report. Bank of America's net loss ratio on commercial loans this year may average 0.7 percent, compared with 0.42 percent in the third quarter and more than triple the rate of the fourth quarter of 2006, Mason estimated. Citigroup's losses on credit-card loans may climb to $7.6 billion this year from $6.4 billion last year and $5.8 billion in 2006.
``A lot of these banks have large consumer portfolios in addition to the subprime side,'' said Malcolm Polley, who helps oversee $1 billion at Stewart Capital Advisors in Pittsburgh, including Bank of America shares. ``As we sink closer to recession, consumer delinquencies are going to tick up.''
U.S. construction loans that were 30 days to 89 days overdue represented 0.7 percent of those outstanding in the third quarter, more than double the rate of a year earlier, according to analysts at Arlington, Virginia-based Friedman, Billings, Ramsey & Co. Delinquent commercial loans climbed to 0.36 percent from 0.3 percent in the same period.
Default Rates
The default rate on U.S. junk-grade corporate loans may reach 2 percent to 3 percent this year, compared with about 0.9 percent in 2007, according to Bank of America's Rosenberg.
``Credit deterioration will continue to pressure industry valuations well into 2008,'' Friedman Billings analysts James Abbott, David Rochester and Scott Cottrell wrote in the Jan. 3 report. ``Even modest upticks in delinquencies can drive lower returns.''
The banks misjudged how bad the home-loan market would get, and they accumulated more than $100 billion of AAA-rated securities they thought were safe. This quarter's writedowns may acknowledge that prices for mortgage bonds and collateralized debt obligations, which repackage assets such as buyout loans and mortgage bonds into new debt with varying risks, probably won't recover anytime soon, RCM's Compton said.
Asset Markdowns
Under U.S. accounting rules, banks and other financial firms have to take losses to ``mark'' the value of tradeable securities to current market prices. Morgan Stanley marked down some AAA-rated securities last month to as little as 30 cents on the dollar, while Zurich-based UBS AG, Switzerland's biggest bank, took marks as low as 22 cents, Credit Suisse analyst Susan Roth Katzke said in a Jan. 3 report.
Any holdings remaining after the fourth quarter may have to be written down further, said Andrew Seibert, who helps oversee $400 million at Nextier Wealth Management in Pittsburgh. He sold his bank stocks during the first half of 2007. Even after writing down subprime holdings by $11.5 billion in the fourth quarter, Merrill would have about $8 billion left, Tanona said.
``I don't think these guys actually know the total of the losses they have on the books,'' Seibert said. ``They're still digging through it all trying to figure out what's there.''
Subscribe to:
Posts (Atom)