Economic Summary:
For the first time in recent memory, the financial markets reacted to
stronger-than expected economic data. An unexpected 0.3% rise in retail sales
kicked off an equity rally. Also, a forecast by Applied Materials of stronger
orders helped boost tech stocks. Treasuries were mixed, with the long end
selling off on the retail sales data and the equity rally. The dollar edged
higher versus the euro and made large gains against the yen
Retail sales rose 0.3% in January, a stronger result than the 0.3% decline
expected by the consensus. Rising prices of such inelastic goods as food and
gasoline led to higher nominal sales of those goods, +0.6% and +2.0%,
respectively. Excluding gasoline sales, retail sales would have been up just
+0.1%. Sales of motor vehicles (+0.6%) were stronger than anticipated, given
the weak unit sales in January. Despite the strongerthan- consensus headline
gain, retail sales in real terms are still in a slowing trend and are
consistent with our call for a significant slowdown in real personal
consumption in Q1.
Business inventories rose 0.6% in December, thanks mainly to a
petroleum-priceinduced 1.1% jump in wholesale inventories. Retail inventories
were reported down 0.1% in December, following a 0.3% decline in November.
Factoring in the data recently reported for Q4, including today's retail sales
and inventory figures, it looks like the "preliminary" Q4 GDP report (due out
on Feb 28) will show a +0.2% growth rate, downwardly revised from the
"advance" report of +0.6%. We caution, however, that a big missing piece of
this puzzle, December international trade, is due out tomorrow. Trade has the
potential of altering the picture significantly.
Economic Outlook:
Initial unemployment claims for the week ended February 9 will be released on
Thursday at 8:30 (Consensus 347k). Claims in the previous week fell by a
less-than expected 22k to 356k. The latest two-week average of 367k has not
been that high since the spike in claims that occurred in 2005 in the
aftermath Hurricane Katrina. These data tentatively suggest that the labor
market may have taken a turn for the worse.
The December Trade Balance will also be reported at 8:30 (Forecast -$62.2bn,
Consensus -$61.5bn). The cost of imported oil dropped slightly in December.
This should limit the increase in the nominal cost of imports. Exports of
agricultural products are benefiting from price increases. Meanwhile,
non-agricultural exports are getting a boost from a lower dollar and have been
increasing at close to a 10% rate for most of 2007. For December, we expect an
improvement in the trade balance of about $1bn, bringing the deficit down to
$62.2bn.
Federal Reserve Chairman Bernanke will be testifying on the economy before the
Senate Banking Committee at 10:00 on Thursday. He will likely make the case
that economic activity has slowed significantly, due in part to the housing
market contraction and to tighter credit conditions in general. But he is
likely to hold out hope that the Fed's 225bp in easing since September, and
the tax rebates starting in May, will serve to keep the economy out of
recession.
Thursday, February 14, 2008
US Markets Closing Comments - 12th Feb 2008
Economic Summary:
The equity markets were cheered by news that Warren Buffett's firm, Berkshire
Hathaway, offered to reinsure roughly $800bn of municipal bonds. Also, a plan
announced by Treasury Secretary Paulson to prevent (or at least forestall)
home foreclosures didn't hurt. Treasuries fell on the same news, and the
dollar was mixed.
The January Treasury budget balance was reported at +$17.8bn versus +$38.2bn
in January 2007. A fall off in corporate profits late in 2007 helped to lower
the surplus compared to a year ago. The budget balance for fiscal 2008 to date
(October through January) is -$87.7bn versus -$42.2bn for the same four months
in fiscal 2007. The federal government posted a deficit of $163bn in fiscal
2007. Factoring in the upcoming fiscal stimulus package, we expect the deficit
to balloon to $381bn this fiscal year.
Economic Outlook:
Retail sales for January will be reported at 8:30 on Wednesday (Forecast
+0.2%/+0.5%, Consensus -0.3%/+0.2%). Retail sales may be positive in January
but mainly because of rising prices of such inelastic goods as food and
gasoline. Sales of autos and homerelated goods like furniture and building
materials probably declined in the month. We put overall retail sales up 0.2%
in January and expect a 0.5% rise excluding autos. Our forecast incorporates a
1.0% decline in auto sales and a 2.5% increase in gasoline sales. Excluding gas
sales alone, we put retail sales down 0.1% in January.
December business inventories are due out at 10:00 (Forecast +0.4%, Consensus
+0.5%). Business inventories is composed of factory inventories, wholesale
inventories, and retail inventories. Factory inventories were up 0.8% for
December, and wholesale inventories jumped 1.1%, boosted by higher prices --
particularly higher prices for petroleum goods. This larger-than-expected
wholesale inventories figure suggests that our forecast of +0.4% for December
business inventories may be too low.
Market Summary:
The Fed reported that Monday's $30bn 28-day TAF auction had a stop-out rate of
3.01%, 15bp above the minimum bid-rate of 2.86%. The bid-to-cover was 1.95,
above the 1.55 average of the two previous auctions. There were 66 bidders
this time around, above the 54 average of the two January auctions. One
possible reason for the more aggressive bidding in yesterday's auction was the
fact $30bn in TAF loans were maturing from 28- days ago. Previous TAF auctions
had provided $10-to-$20bn of net new reserves.
The equity markets were cheered by news that Warren Buffett's firm, Berkshire
Hathaway, offered to reinsure roughly $800bn of municipal bonds. Also, a plan
announced by Treasury Secretary Paulson to prevent (or at least forestall)
home foreclosures didn't hurt. Treasuries fell on the same news, and the
dollar was mixed.
The January Treasury budget balance was reported at +$17.8bn versus +$38.2bn
in January 2007. A fall off in corporate profits late in 2007 helped to lower
the surplus compared to a year ago. The budget balance for fiscal 2008 to date
(October through January) is -$87.7bn versus -$42.2bn for the same four months
in fiscal 2007. The federal government posted a deficit of $163bn in fiscal
2007. Factoring in the upcoming fiscal stimulus package, we expect the deficit
to balloon to $381bn this fiscal year.
Economic Outlook:
Retail sales for January will be reported at 8:30 on Wednesday (Forecast
+0.2%/+0.5%, Consensus -0.3%/+0.2%). Retail sales may be positive in January
but mainly because of rising prices of such inelastic goods as food and
gasoline. Sales of autos and homerelated goods like furniture and building
materials probably declined in the month. We put overall retail sales up 0.2%
in January and expect a 0.5% rise excluding autos. Our forecast incorporates a
1.0% decline in auto sales and a 2.5% increase in gasoline sales. Excluding gas
sales alone, we put retail sales down 0.1% in January.
December business inventories are due out at 10:00 (Forecast +0.4%, Consensus
+0.5%). Business inventories is composed of factory inventories, wholesale
inventories, and retail inventories. Factory inventories were up 0.8% for
December, and wholesale inventories jumped 1.1%, boosted by higher prices --
particularly higher prices for petroleum goods. This larger-than-expected
wholesale inventories figure suggests that our forecast of +0.4% for December
business inventories may be too low.
Market Summary:
The Fed reported that Monday's $30bn 28-day TAF auction had a stop-out rate of
3.01%, 15bp above the minimum bid-rate of 2.86%. The bid-to-cover was 1.95,
above the 1.55 average of the two previous auctions. There were 66 bidders
this time around, above the 54 average of the two January auctions. One
possible reason for the more aggressive bidding in yesterday's auction was the
fact $30bn in TAF loans were maturing from 28- days ago. Previous TAF auctions
had provided $10-to-$20bn of net new reserves.
Financials Daily - 14th Feb 2008
US: U.S. stocks rose for a third day, the longest stretch of gains in 2008, after increased demand at Applied Materials Inc. spurred a technology rally and energy shares advanced on higher gas-station sales.
Europe: European stocks erased their earlier gains. ABB Ltd., the world's largest maker of power networks, and software maker Dassault Systemes SA dropped.
Asia: Asian stocks rose for a second day, led by commodity producers and shipping lines, on speculation demand for fuel and metals will outstrip supply after recent storms in China toppled power lines and cut output.
Commodities: Crude oil rose after government reports showed that U.S. retail sales unexpectedly climbed and gasoline demand increased. Gold, little changed in New York, may decline on speculation a rally in equities will reduce the appeal of the precious metal as alternative investment. Silver gained.
Currencies: The pound climbed to a two-week high against the euro after the Bank of England raised its inflation forecast, prompting traders to pare bets on interest-rate cuts.
Source: Bloomberg
Europe: European stocks erased their earlier gains. ABB Ltd., the world's largest maker of power networks, and software maker Dassault Systemes SA dropped.
Asia: Asian stocks rose for a second day, led by commodity producers and shipping lines, on speculation demand for fuel and metals will outstrip supply after recent storms in China toppled power lines and cut output.
Commodities: Crude oil rose after government reports showed that U.S. retail sales unexpectedly climbed and gasoline demand increased. Gold, little changed in New York, may decline on speculation a rally in equities will reduce the appeal of the precious metal as alternative investment. Silver gained.
Currencies: The pound climbed to a two-week high against the euro after the Bank of England raised its inflation forecast, prompting traders to pare bets on interest-rate cuts.
Source: Bloomberg
Wednesday, February 13, 2008
Commodities Daily - 13th Feb 2008
Spotlight: Oil fell on forecasts U.S. inventories gained for a fifth week. Wheat fell, capping the biggest two-day loss since 2003. Cocoa extended a rally to the highest since 1985 as U.K. pound rose. Gold, silver, platinum and palladium fell.
Energy: Crude oil fell for the first time in four days on forecasts that a government report tomorrow will show U.S. stockpiles increased for a fifth week. Natural gas fell, amid speculation higher temperatures may pare demand of the fuel for heating. Gasoline futures fell before a government report that's expected to show a 14th consecutive rise in U.S. inventories.
Agriculture: Wheat fell, capping the biggest two-day loss since 2003, on speculation that farmers will increase planting to take advantage of prices that have doubled to a record in the past year. Corn fell on speculation overseas grain demand is slowing after prices surged to a record. Notably, soybeans fell, erasing an earlier gain, on speculation investors will sell commodities and buy more stocks.
Sugar prices fell the most in a week on speculation that a global surplus and lower crude oil futures may slow demand. Cocoa extended a rally to the highest since 1985 on speculation the U.K. pound's rise against the U.S. dollar is boosting purchases of futures in New York. Coffee rose to the highest since 1998 as exchange inventories dropped.
Precious Metals: Gold fell the most in a week as a rally in equities reduced the appeal of the precious metal as an alternative investment. Besides, platinum fell from a record on concern that industrial demand for the metal may ease after prices rose 27 percent this year. Silver and palladium fell.
Industrial Metals: Copper rose for the fifth straight session on concern supplies will trail demand for the metal used.
Energy: Crude oil fell for the first time in four days on forecasts that a government report tomorrow will show U.S. stockpiles increased for a fifth week. Natural gas fell, amid speculation higher temperatures may pare demand of the fuel for heating. Gasoline futures fell before a government report that's expected to show a 14th consecutive rise in U.S. inventories.
Agriculture: Wheat fell, capping the biggest two-day loss since 2003, on speculation that farmers will increase planting to take advantage of prices that have doubled to a record in the past year. Corn fell on speculation overseas grain demand is slowing after prices surged to a record. Notably, soybeans fell, erasing an earlier gain, on speculation investors will sell commodities and buy more stocks.
Sugar prices fell the most in a week on speculation that a global surplus and lower crude oil futures may slow demand. Cocoa extended a rally to the highest since 1985 on speculation the U.K. pound's rise against the U.S. dollar is boosting purchases of futures in New York. Coffee rose to the highest since 1998 as exchange inventories dropped.
Precious Metals: Gold fell the most in a week as a rally in equities reduced the appeal of the precious metal as an alternative investment. Besides, platinum fell from a record on concern that industrial demand for the metal may ease after prices rose 27 percent this year. Silver and palladium fell.
Industrial Metals: Copper rose for the fifth straight session on concern supplies will trail demand for the metal used.
Financials Daily - 13th Feb 2008
US: U.S. stocks rose for a second day, led by financial shares, on expectations Warren Buffett, the world's No. 1 investor, will help stem credit losses by offering to shore up the municipal bond market.
Europe: European stocks advanced the most in two weeks after Warren Buffett offered to assume liabilities of some bond insurers and investors speculated a plan to help U.S. borrowers will shore up the economy.
Asia: Asian stocks advanced for the first time in three days, led by BHP Billiton Ltd. and Inpex Holdings Inc. after oil and metals prices climbed.
Commodities: Crude oil was little changed in New York after falling yesterday for the first time in four days on forecasts that a government report will show U.S. stockpiles increased for a fifth week. Gold futures fell the most in a week as a rally in equities reduced the appeal of the precious metal as an alternative investment. Silver also declined.
Currencies: The dollar may fall for a fourth day against the euro on speculation a government report will show U.S. retail sales dropped in January, bolstering speculation the economy is headed for a recession.
Source: Bloomberg
Europe: European stocks advanced the most in two weeks after Warren Buffett offered to assume liabilities of some bond insurers and investors speculated a plan to help U.S. borrowers will shore up the economy.
Asia: Asian stocks advanced for the first time in three days, led by BHP Billiton Ltd. and Inpex Holdings Inc. after oil and metals prices climbed.
Commodities: Crude oil was little changed in New York after falling yesterday for the first time in four days on forecasts that a government report will show U.S. stockpiles increased for a fifth week. Gold futures fell the most in a week as a rally in equities reduced the appeal of the precious metal as an alternative investment. Silver also declined.
Currencies: The dollar may fall for a fourth day against the euro on speculation a government report will show U.S. retail sales dropped in January, bolstering speculation the economy is headed for a recession.
Source: Bloomberg
Tuesday, February 12, 2008
Commodities Daily - 12th Feb 2008
Spotlight: Oil rose to one-month high on refinery shutdown, natural gas and heating oil advanced on the back of colder weather. Wheat fell from a record in Chicago after the exchange expanded daily pricing limits. Gold and silver rose on demand for inflation hedge.
Energy: Crude oil rose to a one-month high after Valero Energy Corp. shut its Delaware refinery because of a power failure yesterday and cold weather swept across the northern U.S. Natural gas and heating oil soared on the back of colder weather will linger into next week.
Agriculture: Wheat fell from a record in Chicago after the exchange expanded daily pricing limits, clearing the way for sales that had been halted during the 16 percent rally last week, the biggest ever. Notably, corn fell and soybeans dropped the most in two weeks on speculation rains will help harvests in Brazil and Argentina, the biggest exporters of the crops after the U.S.
Cotton fell to a six-week low on signs global demand will slow. However, coffee rose to its highest in almost a decade as Colombia and Vietnam harvested less, tightening supplies. Cocoa rose on speculation that investors are betting commodities will outpace stocks again this year.
Precious Metals: Gold futures rose to a one-week high after energy costs climbed. Platinum rose to record on supply concerns. Silver and palladium rose.
Industrial Metals: Copper rose to the highest in more than three months as falling production and slumping inventories heightened speculation that metal supplies will trail demand.
Energy: Crude oil rose to a one-month high after Valero Energy Corp. shut its Delaware refinery because of a power failure yesterday and cold weather swept across the northern U.S. Natural gas and heating oil soared on the back of colder weather will linger into next week.
Agriculture: Wheat fell from a record in Chicago after the exchange expanded daily pricing limits, clearing the way for sales that had been halted during the 16 percent rally last week, the biggest ever. Notably, corn fell and soybeans dropped the most in two weeks on speculation rains will help harvests in Brazil and Argentina, the biggest exporters of the crops after the U.S.
Cotton fell to a six-week low on signs global demand will slow. However, coffee rose to its highest in almost a decade as Colombia and Vietnam harvested less, tightening supplies. Cocoa rose on speculation that investors are betting commodities will outpace stocks again this year.
Precious Metals: Gold futures rose to a one-week high after energy costs climbed. Platinum rose to record on supply concerns. Silver and palladium rose.
Industrial Metals: Copper rose to the highest in more than three months as falling production and slumping inventories heightened speculation that metal supplies will trail demand.
Financials Daily - 12th Feb 2008
US: U.S. stocks rose as a rally in oil prices boosted energy shares, outweighing concern that financial companies face more writedowns after American International Group Inc. said it overstated the value of some assets.
Europe: European stocks fell after the Group of Seven said financial-market turmoil will hurt the economy and auditors found a ``material weakness'' in how American International Group Inc. values its credit-default swap portfolio.
Asia: Asian stocks fell, led by Commonwealth Bank of Australia and Kookmin Bank, after the Group of Seven policy makers said financial-market turmoil will sap global economic growth.
Commodities: Crude oil rose to a one-month high after Valero Energy Corp. shut its Delaware refinery because of a storm-related power failure yesterday and cold weather moved across the northern U.S. Gold futures rose to a one-week high after energy costs climbed, boosting the appeal of the precious metal as a hedge against inflation. Silver extended a rally to the highest since 1980.
Currencies: The yen rose the most this month against the dollar after the Group of Seven nations warned of further financial-market turmoil, spurring investors to reduce holdings of higher-yielding assets bought with loans from Japan.
Source: Bloomberg
Europe: European stocks fell after the Group of Seven said financial-market turmoil will hurt the economy and auditors found a ``material weakness'' in how American International Group Inc. values its credit-default swap portfolio.
Asia: Asian stocks fell, led by Commonwealth Bank of Australia and Kookmin Bank, after the Group of Seven policy makers said financial-market turmoil will sap global economic growth.
Commodities: Crude oil rose to a one-month high after Valero Energy Corp. shut its Delaware refinery because of a storm-related power failure yesterday and cold weather moved across the northern U.S. Gold futures rose to a one-week high after energy costs climbed, boosting the appeal of the precious metal as a hedge against inflation. Silver extended a rally to the highest since 1980.
Currencies: The yen rose the most this month against the dollar after the Group of Seven nations warned of further financial-market turmoil, spurring investors to reduce holdings of higher-yielding assets bought with loans from Japan.
Source: Bloomberg
Wednesday, February 6, 2008
Commodities Daily -6th Feb 2008
Spotlight: Commodity prices dropped on concern the U.S. is headed for a recession. Gold and platinum fell. Monsanto Co. said Japan, the Philippines and Taiwan have approved imports of its new genetically modified soybeans.
Energy: Crude oil fell more than $1 a barrel after a report showed that U.S. service industries contracted in January, a sign of a slowing economy and reduced energy demand. BP Plc, Europe's second-biggest oil company, posted a 53 percent jump in fourth-quarter profit and increased its dividend after production rose for the first time since 2005.
Agriculture: Wheat futures limit up in early trade yesterday on shrinking supplies of high-protein spring varieties from the U.S. and Canada, the two largest exporters. Wheat jumped 30 cents, or 3.1 percent, to $10.03 a bushel in Chicago. Corn and soybeans fell on speculation that declining energy costs will reduce demand for biofuels made from crops. Corn fell 1.25 cents, or 0.2 percent, to $5.0925 a bushel in Chicago. Soybeans fell 3 cents, or 0.2 percent, to $13.23 a bushel in Chicago.
Precious Metals: Gold futures fell to the lowest in more than a week after the dollar rose against the euro, eroding the appeal of the precious metal as an alternative investment. Gold tumbled $19.10, or 2.1 percent, to $890.30 an ounce in New York. Silver dropped 43.5 cents, or 2.6 percent, to $16.345 an ounce.
Industrial Metals: Copper dropped the most in almost two weeks after a report showed U.S. services industries unexpectedly shrank last month, renewing concern that the world's largest economy is slipping into a recession. LME copper for three-month fell $130 and settled at $7,130 a tonne.
(Source: Bloomberg)
Energy: Crude oil fell more than $1 a barrel after a report showed that U.S. service industries contracted in January, a sign of a slowing economy and reduced energy demand. BP Plc, Europe's second-biggest oil company, posted a 53 percent jump in fourth-quarter profit and increased its dividend after production rose for the first time since 2005.
Agriculture: Wheat futures limit up in early trade yesterday on shrinking supplies of high-protein spring varieties from the U.S. and Canada, the two largest exporters. Wheat jumped 30 cents, or 3.1 percent, to $10.03 a bushel in Chicago. Corn and soybeans fell on speculation that declining energy costs will reduce demand for biofuels made from crops. Corn fell 1.25 cents, or 0.2 percent, to $5.0925 a bushel in Chicago. Soybeans fell 3 cents, or 0.2 percent, to $13.23 a bushel in Chicago.
Precious Metals: Gold futures fell to the lowest in more than a week after the dollar rose against the euro, eroding the appeal of the precious metal as an alternative investment. Gold tumbled $19.10, or 2.1 percent, to $890.30 an ounce in New York. Silver dropped 43.5 cents, or 2.6 percent, to $16.345 an ounce.
Industrial Metals: Copper dropped the most in almost two weeks after a report showed U.S. services industries unexpectedly shrank last month, renewing concern that the world's largest economy is slipping into a recession. LME copper for three-month fell $130 and settled at $7,130 a tonne.
(Source: Bloomberg)
Financials Daily - 6th Feb 2008
US: U.S. stocks tumbled, pushing the Standard & Poor's 500 Index down the most in 11 months, after the first contraction in service industries since 2002 reinforced concern the economy is in a recession.
Europe: European stocks fell the most in two weeks after a service-industries report strengthened speculation the U.S. is in a recession and National Semiconductor Corp. and Heidelberger Druckmaschinen AG cut their forecasts.
Asia: Asian stocks fell for the first time in four days as lower profit forecasts from Yamaha Motor Corp. and Olympus Corp. and downgrades of Posco and South Korean shipbuilders fueled concern regional earnings growth will slow.
Commodities: Crude oil fell more than $1 a barrel after a report showed that U.S. service industries contracted in January, a sign of a slowing economy and reduced energy demand. Gold futures fell to the lowest in more than a week after the dollar rose against the euro, eroding the appeal of the precious metal as an alternative investment.
Currencies: The euro declined the most against the dollar in almost two months after Europe's service industries weakened and raised concern that Jean-Claude Trichet's reluctance to cut interest rates will hamper growth.
Europe: European stocks fell the most in two weeks after a service-industries report strengthened speculation the U.S. is in a recession and National Semiconductor Corp. and Heidelberger Druckmaschinen AG cut their forecasts.
Asia: Asian stocks fell for the first time in four days as lower profit forecasts from Yamaha Motor Corp. and Olympus Corp. and downgrades of Posco and South Korean shipbuilders fueled concern regional earnings growth will slow.
Commodities: Crude oil fell more than $1 a barrel after a report showed that U.S. service industries contracted in January, a sign of a slowing economy and reduced energy demand. Gold futures fell to the lowest in more than a week after the dollar rose against the euro, eroding the appeal of the precious metal as an alternative investment.
Currencies: The euro declined the most against the dollar in almost two months after Europe's service industries weakened and raised concern that Jean-Claude Trichet's reluctance to cut interest rates will hamper growth.
US Markets Closing Comments - 5th Feb 2008
Economic Summary:
There was only one monthly indicator reported today, the ISM non-manufacturing
index, but it had an outsized impact on the markets. A sharp decline in this
index, while somewhat suspicious, unsettled equities and drove Treasuries
higher. Concerned words from normally-hawkish Richmond Fed President Lacker
about the increased likelihood of recession exacerbated the market moves in
the early afternoon. And Fitch's decision to put MBIA on negative watch,
announced just before the market close, pushed equities to the lows of the
session. While off its intraday highs, the dollar rose despite the news,
partly because Europe posted surprisingly weak service industry data of its
own.
The Institute for Supply Management's Non-manufacturing Index (NMI) for
January fell to a below neutral 44.6 from 53.2 in December. Like its
manufacturing counterpart, a reading of below 50 on the NMI indicates a
contraction in activity. January's was the first sub-50 reading for the
non-manufacturing sector since March 2003. Moreover, 44.6 was the lowest
reading since the ISM began surveying non-manufacturing activity in July 1997.
While a deterioration in the ISM non-manufacturing index was not particularly
surprising, the severity of the decline reported for January was hard to
believe, especially as it came amid an annual revision to the seasonal factors
and a new methodology for compiling the data. Nevertheless, the data
reinforced the general impression given by other data that the economy is weak.
Economic Outlook:
The preliminary readings on Q4 Productivity and Unit Labor Costs will be
released at 8:30 on Wednesday (Forecast +1.0%/+2.5%, Consensus +0.5%/+3.5%).
Given the tepid annualized growth rate of 0.6% reported for Q4 GDP, it appears
that productivity grew at only about 1.0% last quarter. This rate would
represent a substantial deceleration from the 6.3% growth in productivity
reported for Q3. With productivity growth slowing, ULC probably accelerated,
rising about 2.5% after a 2.0% drop in Q3. That would translate into a year
over-year ULC growth rate of +1.1% for Q4, down from +3.0% YoY through Q3.
Market Summary
The broad equity indexes were weak from the opening bell after disappointing
service sector news in Europe drove down stocks abroad. A record drop in the
newly-calculated ISM non-manufacturing index added momentum to the decline,
and Richmond Fed President Lacker didn't help by mentioning the "R" word.
Fitch placed MBIA's AAA insurer financial strength reading on negative watch
17 minutes before the market close, and that was the final straw. The major
indexes closed down some 3% at or very close to their intraday lows. (DJ INDU
12265, -370; S&P500 1337, -44; NASDAQ 2310, -73)
There was only one monthly indicator reported today, the ISM non-manufacturing
index, but it had an outsized impact on the markets. A sharp decline in this
index, while somewhat suspicious, unsettled equities and drove Treasuries
higher. Concerned words from normally-hawkish Richmond Fed President Lacker
about the increased likelihood of recession exacerbated the market moves in
the early afternoon. And Fitch's decision to put MBIA on negative watch,
announced just before the market close, pushed equities to the lows of the
session. While off its intraday highs, the dollar rose despite the news,
partly because Europe posted surprisingly weak service industry data of its
own.
The Institute for Supply Management's Non-manufacturing Index (NMI) for
January fell to a below neutral 44.6 from 53.2 in December. Like its
manufacturing counterpart, a reading of below 50 on the NMI indicates a
contraction in activity. January's was the first sub-50 reading for the
non-manufacturing sector since March 2003. Moreover, 44.6 was the lowest
reading since the ISM began surveying non-manufacturing activity in July 1997.
While a deterioration in the ISM non-manufacturing index was not particularly
surprising, the severity of the decline reported for January was hard to
believe, especially as it came amid an annual revision to the seasonal factors
and a new methodology for compiling the data. Nevertheless, the data
reinforced the general impression given by other data that the economy is weak.
Economic Outlook:
The preliminary readings on Q4 Productivity and Unit Labor Costs will be
released at 8:30 on Wednesday (Forecast +1.0%/+2.5%, Consensus +0.5%/+3.5%).
Given the tepid annualized growth rate of 0.6% reported for Q4 GDP, it appears
that productivity grew at only about 1.0% last quarter. This rate would
represent a substantial deceleration from the 6.3% growth in productivity
reported for Q3. With productivity growth slowing, ULC probably accelerated,
rising about 2.5% after a 2.0% drop in Q3. That would translate into a year
over-year ULC growth rate of +1.1% for Q4, down from +3.0% YoY through Q3.
Market Summary
The broad equity indexes were weak from the opening bell after disappointing
service sector news in Europe drove down stocks abroad. A record drop in the
newly-calculated ISM non-manufacturing index added momentum to the decline,
and Richmond Fed President Lacker didn't help by mentioning the "R" word.
Fitch placed MBIA's AAA insurer financial strength reading on negative watch
17 minutes before the market close, and that was the final straw. The major
indexes closed down some 3% at or very close to their intraday lows. (DJ INDU
12265, -370; S&P500 1337, -44; NASDAQ 2310, -73)
Tuesday, February 5, 2008
Yen Near Three-Week Low Versus Australian Dollar as RBA Meets
By Kosuke Goto and David McIntyre
Feb. 5 (Bloomberg) -- The yen traded near a three-week low against the Australian dollar on speculation the central bank of the southern hemisphere nation will raise its benchmark interest rate today.
The currency may weaken for a fourth day against the New Zealand dollar as a decline in expectations for price swings encourages investors to purchase higher-yielding assets funded in Japan. Volatility fell to the lowest level in almost a month, improving confidence in so-called carry trades.
``You expect the yen to weaken on the back of carry trades rallying,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``There's a bit more to go for the Australian dollar on the confirmation of a rate hike.''
The yen traded at 96.82 against the Australian dollar at 9:11 a.m. in Tokyo from 96.91 late in New York yesterday, when it fell to 97.21 yen, the lowest since Jan. 15. The Australian dollar was at 90.71 U.S. cents after reaching an almost three- month high of 91.01 cents.
Japan's currency was little changed at 106.68 per dollar and 158.18 a euro, from 106.71 and 158.26 in New York yesterday, respectively. The dollar traded at $1.4825 per euro from $1.4830.
Australian Interest Rate
All 27 economists surveyed by Bloomberg News forecast the Australian central bank will raise its benchmark rate a quarter- percentage point to 7 percent, the highest level since 1996. Policy makers will announce their decision at 2:30 p.m. in Sydney.
In carry trades, speculators get funds in a country with low borrowing costs such as Japan and invest in one with higher returns, earning the spread between the two. Japan's benchmark rate is 0.5 percent, the lowest among industrialized nations.
One-month implied volatility for the yen fell to 11.48 percent today, the lowest since Jan. 10. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options.
Service Growth
Gains in the dollar may be limited before a U.S. report today that is likely to show service industries expanded in January at the slowest pace in almost a year. The Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 percent of the economy, dropped to 53 from 54.4, according to the median estimate of economists in a Bloomberg News survey.
``The dollar is an unreliable currency now,'' said Yuuki Sakurai, a Tokyo-based investment manager at Fukoku Mutual Life Insurance Co., which manages the equivalent of $41.5 billion in assets. ``The U.S. housing markets will remain sluggish, buffeting the economy.''
The U.S. currency may fall to 105.80 yen this week, Sakurai said.
ECB
The euro may strengthen for the second day as traders cut bets that the European Central Bank will reduce borrowing costs this year. ECB policy maker Klaus Liebscher said the central bank will do what is needed to prevent a price-wage spiral from boosting inflation, according to a statement published by the Austrian central bank.
The ECB will leave its benchmark interest rate at a six- year high of 4 percent on Feb. 7, all 55 economists surveyed by Bloomberg forecast. Interest-rate futures show the implied rate on the June Euribor contract rose to 4.03 percent yesterday, from 3.96 percent on Feb. 1. The rate averaged 18 basis points more than the ECB's benchmark from 1999 until August, when the collapse of the U.S. subprime-mortgage market sparked a squeeze on credit.
The dollar will trade at $1.48 per euro by the end of this quarter and $1.40 by year-end, according to the median forecast of 44 analysts in a Bloomberg News survey.
Feb. 5 (Bloomberg) -- The yen traded near a three-week low against the Australian dollar on speculation the central bank of the southern hemisphere nation will raise its benchmark interest rate today.
The currency may weaken for a fourth day against the New Zealand dollar as a decline in expectations for price swings encourages investors to purchase higher-yielding assets funded in Japan. Volatility fell to the lowest level in almost a month, improving confidence in so-called carry trades.
``You expect the yen to weaken on the back of carry trades rallying,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``There's a bit more to go for the Australian dollar on the confirmation of a rate hike.''
The yen traded at 96.82 against the Australian dollar at 9:11 a.m. in Tokyo from 96.91 late in New York yesterday, when it fell to 97.21 yen, the lowest since Jan. 15. The Australian dollar was at 90.71 U.S. cents after reaching an almost three- month high of 91.01 cents.
Japan's currency was little changed at 106.68 per dollar and 158.18 a euro, from 106.71 and 158.26 in New York yesterday, respectively. The dollar traded at $1.4825 per euro from $1.4830.
Australian Interest Rate
All 27 economists surveyed by Bloomberg News forecast the Australian central bank will raise its benchmark rate a quarter- percentage point to 7 percent, the highest level since 1996. Policy makers will announce their decision at 2:30 p.m. in Sydney.
In carry trades, speculators get funds in a country with low borrowing costs such as Japan and invest in one with higher returns, earning the spread between the two. Japan's benchmark rate is 0.5 percent, the lowest among industrialized nations.
One-month implied volatility for the yen fell to 11.48 percent today, the lowest since Jan. 10. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options.
Service Growth
Gains in the dollar may be limited before a U.S. report today that is likely to show service industries expanded in January at the slowest pace in almost a year. The Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 percent of the economy, dropped to 53 from 54.4, according to the median estimate of economists in a Bloomberg News survey.
``The dollar is an unreliable currency now,'' said Yuuki Sakurai, a Tokyo-based investment manager at Fukoku Mutual Life Insurance Co., which manages the equivalent of $41.5 billion in assets. ``The U.S. housing markets will remain sluggish, buffeting the economy.''
The U.S. currency may fall to 105.80 yen this week, Sakurai said.
ECB
The euro may strengthen for the second day as traders cut bets that the European Central Bank will reduce borrowing costs this year. ECB policy maker Klaus Liebscher said the central bank will do what is needed to prevent a price-wage spiral from boosting inflation, according to a statement published by the Austrian central bank.
The ECB will leave its benchmark interest rate at a six- year high of 4 percent on Feb. 7, all 55 economists surveyed by Bloomberg forecast. Interest-rate futures show the implied rate on the June Euribor contract rose to 4.03 percent yesterday, from 3.96 percent on Feb. 1. The rate averaged 18 basis points more than the ECB's benchmark from 1999 until August, when the collapse of the U.S. subprime-mortgage market sparked a squeeze on credit.
The dollar will trade at $1.48 per euro by the end of this quarter and $1.40 by year-end, according to the median forecast of 44 analysts in a Bloomberg News survey.
Commodities Daily - 5th Feb 2008
Spotlight: Gold and silver fell while platinum surged to a record. Oil rose as dense sea fog slowed crude imports into the Houston Ship Channel. Wheat limit up on Monday as demand for spring wheat strengthened while inventories remained at a low.
Energy: Crude oil rose after Turkish planes attacked suspected Kurdish insurgent bases and the Houston Ship Channel reopened following an 18-hour shutdown for fog. Oil rebounded more than a $1 to over $90 a barrel on Monday as dense sea fog slowed crude imports into the Houston Ship Channel, the waterway to the busiest U.S. petrochemical port. President George W. Bush is asking Congress to fund a 4.7 percent increase for the Energy Department's budget, the largest request for the department in five years.
Agriculture: Wheat in CBOT soared on Monday as demand for spring wheat has been strong of late, with inventories hovering at 30-year lows. CBOT wheat limit-up 30 cents and settled at $9.73 a bushel. Soybean futures also soared yesterday amid beginning of the year fund-buying, Brazilian crop concerns and spillover buying from soyoil. Soyoil futures hit record highs yesterday amid a strong showing from vegetable oils. Crude Palm Oil rose 3.5 percent on Monday after Indonesia said it will impose a 20-25 percent export tax on CPO and its by-products if international prices hit $1,200 and $1,300 a tonne.
Precious Metals: Gold futures extended Friday’s losses but finished off the low as profit-taking and technical weakness led investors to sell. Active month gold contract settled at $909.40 an ounce, down $4.10 from the previous day. Platinum futures on the other hand scaled to fresh record highs above $1,800 an ounce as power outages in South Africa disrupted mine production in the country. Platinum settled at $1,797.60 an ounce, up $27.40 from a day ago.
Industrial Metals: Copper prices firmed on Monday on signs of stronger demand and as the market feared about supply disruptions in China. Copper for three-month delivery in LME settled at $7,260 a tonne. Copper supply in China has been quite tight as the country battles its worst winter in five decades. Aluminium also closed higher as production of the metal used in power, packaging and construction is energy intensive and speculators watching the power problems in China and South Africa have been betting on higher prices. Aluminium closed at $2,665 a tonne.
(Source: Bloomberg)
Energy: Crude oil rose after Turkish planes attacked suspected Kurdish insurgent bases and the Houston Ship Channel reopened following an 18-hour shutdown for fog. Oil rebounded more than a $1 to over $90 a barrel on Monday as dense sea fog slowed crude imports into the Houston Ship Channel, the waterway to the busiest U.S. petrochemical port. President George W. Bush is asking Congress to fund a 4.7 percent increase for the Energy Department's budget, the largest request for the department in five years.
Agriculture: Wheat in CBOT soared on Monday as demand for spring wheat has been strong of late, with inventories hovering at 30-year lows. CBOT wheat limit-up 30 cents and settled at $9.73 a bushel. Soybean futures also soared yesterday amid beginning of the year fund-buying, Brazilian crop concerns and spillover buying from soyoil. Soyoil futures hit record highs yesterday amid a strong showing from vegetable oils. Crude Palm Oil rose 3.5 percent on Monday after Indonesia said it will impose a 20-25 percent export tax on CPO and its by-products if international prices hit $1,200 and $1,300 a tonne.
Precious Metals: Gold futures extended Friday’s losses but finished off the low as profit-taking and technical weakness led investors to sell. Active month gold contract settled at $909.40 an ounce, down $4.10 from the previous day. Platinum futures on the other hand scaled to fresh record highs above $1,800 an ounce as power outages in South Africa disrupted mine production in the country. Platinum settled at $1,797.60 an ounce, up $27.40 from a day ago.
Industrial Metals: Copper prices firmed on Monday on signs of stronger demand and as the market feared about supply disruptions in China. Copper for three-month delivery in LME settled at $7,260 a tonne. Copper supply in China has been quite tight as the country battles its worst winter in five decades. Aluminium also closed higher as production of the metal used in power, packaging and construction is energy intensive and speculators watching the power problems in China and South Africa have been betting on higher prices. Aluminium closed at $2,665 a tonne.
(Source: Bloomberg)
Financials Daily - 5th Feb 2008
US: U.S. stocks declined for the first time in three days after analysts told investors to sell American Express Co., Wells Fargo & Co. and Wachovia Corp. on concern a recession will worsen defaults among consumers.
Europe: European stocks pared gains as shares of Societe Generale SA and Vodafone Group Plc declined.
Asia: Asian stocks rose after Aluminum Corp. of China Ltd. bought a stake in Rio Tinto Group and Fortescue Metals Group Ltd. said it had held talks about selling shares.
Commodities: Crude oil was little changed in New York after rising more than $1 a barrel yesterday as Turkish planes attacked suspected Kurdish insurgent bases and the Houston Ship Channel reopened after an 18-hour shutdown for fog. Gold futures fell on speculation the dollar will rally later this year, eroding the appeal of the precious metal as an alternative to the U.S. currency. Silver also declined.
Currencies: The yen may weaken for a fourth day against the dollar as a decline in volatility is prompting investors to purchase higher-yielding assets funded by low-cost loans in Japan.
Source: Bloomberg
Europe: European stocks pared gains as shares of Societe Generale SA and Vodafone Group Plc declined.
Asia: Asian stocks rose after Aluminum Corp. of China Ltd. bought a stake in Rio Tinto Group and Fortescue Metals Group Ltd. said it had held talks about selling shares.
Commodities: Crude oil was little changed in New York after rising more than $1 a barrel yesterday as Turkish planes attacked suspected Kurdish insurgent bases and the Houston Ship Channel reopened after an 18-hour shutdown for fog. Gold futures fell on speculation the dollar will rally later this year, eroding the appeal of the precious metal as an alternative to the U.S. currency. Silver also declined.
Currencies: The yen may weaken for a fourth day against the dollar as a decline in volatility is prompting investors to purchase higher-yielding assets funded by low-cost loans in Japan.
Source: Bloomberg
Gold Increases in Asia on U.S. Negative Real Interest Rates
By Feiwen Rong
Feb. 4 (Bloomberg) -- Gold rose in Asia after the biggest decline in 11 weeks as negative real interest rates in the U.S. increased demand for the metal as an alternative investment.
The Federal Reserve cut borrowing costs by 1.25 percentage point to 3 percent in January. The three-month U.S. dollar London interbank offered rate, a lending benchmark that fluctuates depending on how willing banks are to lend to each other, fell below 3.1 percent on Feb. 1, the lowest since 2005, according to the British Bankers' Association.
The rate cuts pushed the ``real 3-month Libor rate even further into negative territory'' which has ``serious implications for the gold prices,'' analysts at Credit Suisse said in a report Feb. 1. ``Since gold is a non-yielding asset, its price should benefit, particularly in an environment of negative real rates.''
Bullion for immediate delivery gained as much as $7.42, or 0.8 percent, to $912.90 an ounce and traded at $909.45 at 3:56 p.m. Singapore time. The metal rose to a record $936.92 Feb. 1, before closing down 2.2 in the biggest one-day drop since Nov. 15. Silver for immediate delivery was little changed at $16.80 an ounce.
U.S. consumer prices rose 4.1 percent in the 12 months ended Dec. 31.
Gold also benefited from a rising euro against the dollar on speculation the European Central Bank will keep interest rates at a six-year high this week.
South Africa
Power shortages in South Africa also drove bullion's rally last week. Miners including Anglo Platinum Ltd. and Gold Fields Ltd. were raising electricity consumption to 90 percent of normal levels on Feb. 1 to boost output after cuts last week.
``The situation remains shaky,'' the Credit Suisse report said. Eskom Holdings Ltd., South Africa's state-owned power utility, said a generator at its Tutuka power station tripped late Feb. 2, reducing power supply by a further 640 megawatts.
Bullion for December delivery on the Tokyo Commodity Exchange fell 1.5 percent to 3,146 yen a gram ($916 an ounce) at the 5 p.m. local time.
Bullion for June delivery on the Shanghai Futures Exchange, the most active contract, closed down 3.15 yuan, or 1.4 percent, to 215.6 yuan a gram ($933 an ounce).
Gold for April delivery was little changed at $914.30 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at the same time.
Feb. 4 (Bloomberg) -- Gold rose in Asia after the biggest decline in 11 weeks as negative real interest rates in the U.S. increased demand for the metal as an alternative investment.
The Federal Reserve cut borrowing costs by 1.25 percentage point to 3 percent in January. The three-month U.S. dollar London interbank offered rate, a lending benchmark that fluctuates depending on how willing banks are to lend to each other, fell below 3.1 percent on Feb. 1, the lowest since 2005, according to the British Bankers' Association.
The rate cuts pushed the ``real 3-month Libor rate even further into negative territory'' which has ``serious implications for the gold prices,'' analysts at Credit Suisse said in a report Feb. 1. ``Since gold is a non-yielding asset, its price should benefit, particularly in an environment of negative real rates.''
Bullion for immediate delivery gained as much as $7.42, or 0.8 percent, to $912.90 an ounce and traded at $909.45 at 3:56 p.m. Singapore time. The metal rose to a record $936.92 Feb. 1, before closing down 2.2 in the biggest one-day drop since Nov. 15. Silver for immediate delivery was little changed at $16.80 an ounce.
U.S. consumer prices rose 4.1 percent in the 12 months ended Dec. 31.
Gold also benefited from a rising euro against the dollar on speculation the European Central Bank will keep interest rates at a six-year high this week.
South Africa
Power shortages in South Africa also drove bullion's rally last week. Miners including Anglo Platinum Ltd. and Gold Fields Ltd. were raising electricity consumption to 90 percent of normal levels on Feb. 1 to boost output after cuts last week.
``The situation remains shaky,'' the Credit Suisse report said. Eskom Holdings Ltd., South Africa's state-owned power utility, said a generator at its Tutuka power station tripped late Feb. 2, reducing power supply by a further 640 megawatts.
Bullion for December delivery on the Tokyo Commodity Exchange fell 1.5 percent to 3,146 yen a gram ($916 an ounce) at the 5 p.m. local time.
Bullion for June delivery on the Shanghai Futures Exchange, the most active contract, closed down 3.15 yuan, or 1.4 percent, to 215.6 yuan a gram ($933 an ounce).
Gold for April delivery was little changed at $914.30 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at the same time.
Bernanke Makes Bulls From Dollar Bears Seeing Growth (Update)
By Bo Nielsen
Feb. 4 (Bloomberg) -- Ben S. Bernanke's decision to lower interest rates 1.25 percentage points last month will end the dollar's two-year slide, according to the world's biggest currency traders.
For the first time since 2003, investors are focused on relative growth prospects rather than absolute borrowing costs, according to Geoffrey Yu, a London-based strategist with UBS AG, the No. 2 trader. The steepest cuts by a Federal Reserve chairman in seven years will support economic growth in the U.S. as Europe slows, said BNP Paribas SA, the most accurate currency forecaster Bloomberg tracks. The dollar will gain at least 9 percent against the euro this year, UBS and BNP predict.
``We're not chasing dollar weakness any lower,'' said Robert Robis, a fixed-income manager in New York at OppenheimerFunds Inc., which oversees $260 billion. ``The Fed's actions have avoided a long recession and we may start to see a recovery later this year.''
Robis has reduced the share of euro-denominated assets versus those linked to the dollar in his $9 billion portfolio. It now holds less than the benchmark index because he expects the U.S. currency to outperform. As recently as November, he was ``overweight'' the euro against the dollar.
Futures traders cut the value of contracts benefiting from a drop in the dollar to $13.9 billion as of Jan. 29, according to Charlotte, North Carolina-based Bank of America Corp., the second-largest U.S. bank by assets. That's down from a record $32.3 billion in November.
Yield Advantage
The dollar has gained 1.1 percent versus the euro to $1.4802 since sinking to an all-time low of $1.4967 on Nov. 23. The currency appreciated even as the yield advantage on a two- year German bund more than doubled to 1.28 percentage points over a comparable Treasury note, making bunds more appealing to international investors. The last time the spread was so large was 2002, when the euro surged 18 percent against the dollar.
Paris-based BNP, the most accurate of 31 firms surveyed about their currency predictions for the second half of 2007, is among the most bullish on the dollar in 2008 with its forecast of $1.36 per euro by yearend. Zurich-based UBS predicts $1.35. The median estimate calls for a 5.4 percent increase to $1.40 by the end of this year and a 6 percent gain to $1.32 in 2009. The dollar weakened 10.6 percent in 2007 and 11.4 percent in 2006 after strengthening 12.6 percent in 2005.
Fed Versus ECB
While two Fed cuts slashed the target rate for overnight loans between banks to 3 percent in nine days, the European Central Bank kept its benchmark rate unchanged at a seven-year high of 4 percent in an attempt to curb inflation. The ECB will keep rates unchanged at its Feb. 7 meeting, according to all 55 economists surveyed by Bloomberg News.
``If aggressive cuts by the Fed can stimulate the economy, then the U.S. will definitely lead the way in terms of economic recovery,'' Yu said. ``The ECB is behind the curve, so it's time to move back'' into the dollar, he said.
Deutsche Bank AG, the world's largest currency trader, predicts an 8 percent gain in the dollar this year as the euro- zone economy expands 1.6 percent, lagging behind the 1.9 percent growth projected for the U.S. For 2009, Frankfurt-based Deutsche Bank puts growth at 2.6 percent in the U.S. and 1.9 percent in Europe.
Maxime Tessier, head of foreign exchange at Caisse de Depot et Placement in Montreal, isn't counting on Bernanke. It may be too late for lower borrowing costs to keep the U.S. out of a recession, he said. The Labor Department said Feb. 1 that payrolls fell by 17,000 in January, the first decline since August 2003.
2001 Reprisal
``From our vantage point it doesn't look very good and every week we re-evaluate the U.S. economy, it has deteriorated,'' said Tessier, whose firm manages $143 billion. ``It's too early to position your portfolio for a dollar rebound because a month from now the currency could be in rally mode, but it could also be a lot lower.''
The U.S. is entering the ``worst consumer recession since 1980,'' and the dollar will fall to $1.57 by the end of March before recovering to its current $1.48 by yearend, according to David Rosenberg, chief economist for North America in New York at Merrill Lynch & Co. The firm is the world's largest brokerage.
The dollar has benefited from Fed rate cuts before. During the first six months of 2001, the currency gained 10 percent against the euro as the central bank slashed its target 2.75 percentage points to below the ECB's benchmark refinance rate following the bursting of the technology bubble.
``We still believe the U.S. promises good returns,'' Sultan bin Sulayem, the chairman of state-owned investment group Dubai World, said Jan. 25 at the World Economic Forum in Davos, Switzerland. Dubai World agreed in August to invest as much as $5.1 billion in Kirk Kerkorian's Las Vegas-based casino group MGM Mirage.
Foreign Holdings
Middle Eastern and Asian investors have poured up to $39 billion into U.S. banks since August, according to Bloomberg calculations. Foreign holdings of U.S. securities rose a net $149.9 billion in November, the most in 22 months, the Treasury Department said last month in Washington. In October, the gain was $92.2 billion.
Investors say there are encouraging signs that business investment will hold up. Last week the House and Senate Finance Committees approved a fiscal stimulus package of as much as $157 billion proposed by President George W. Bush. The same day the Labor Department said the economy was shedding jobs, the Institute for Supply Management said its manufacturing index rose in January.
``A lot of the people are finding this is a good time to get back in the dollar,'' said Scott Ainsbury, a money manager who helps oversee $12 billion in currencies at FX Concepts Inc., a New York-based hedge fund.
Feb. 4 (Bloomberg) -- Ben S. Bernanke's decision to lower interest rates 1.25 percentage points last month will end the dollar's two-year slide, according to the world's biggest currency traders.
For the first time since 2003, investors are focused on relative growth prospects rather than absolute borrowing costs, according to Geoffrey Yu, a London-based strategist with UBS AG, the No. 2 trader. The steepest cuts by a Federal Reserve chairman in seven years will support economic growth in the U.S. as Europe slows, said BNP Paribas SA, the most accurate currency forecaster Bloomberg tracks. The dollar will gain at least 9 percent against the euro this year, UBS and BNP predict.
``We're not chasing dollar weakness any lower,'' said Robert Robis, a fixed-income manager in New York at OppenheimerFunds Inc., which oversees $260 billion. ``The Fed's actions have avoided a long recession and we may start to see a recovery later this year.''
Robis has reduced the share of euro-denominated assets versus those linked to the dollar in his $9 billion portfolio. It now holds less than the benchmark index because he expects the U.S. currency to outperform. As recently as November, he was ``overweight'' the euro against the dollar.
Futures traders cut the value of contracts benefiting from a drop in the dollar to $13.9 billion as of Jan. 29, according to Charlotte, North Carolina-based Bank of America Corp., the second-largest U.S. bank by assets. That's down from a record $32.3 billion in November.
Yield Advantage
The dollar has gained 1.1 percent versus the euro to $1.4802 since sinking to an all-time low of $1.4967 on Nov. 23. The currency appreciated even as the yield advantage on a two- year German bund more than doubled to 1.28 percentage points over a comparable Treasury note, making bunds more appealing to international investors. The last time the spread was so large was 2002, when the euro surged 18 percent against the dollar.
Paris-based BNP, the most accurate of 31 firms surveyed about their currency predictions for the second half of 2007, is among the most bullish on the dollar in 2008 with its forecast of $1.36 per euro by yearend. Zurich-based UBS predicts $1.35. The median estimate calls for a 5.4 percent increase to $1.40 by the end of this year and a 6 percent gain to $1.32 in 2009. The dollar weakened 10.6 percent in 2007 and 11.4 percent in 2006 after strengthening 12.6 percent in 2005.
Fed Versus ECB
While two Fed cuts slashed the target rate for overnight loans between banks to 3 percent in nine days, the European Central Bank kept its benchmark rate unchanged at a seven-year high of 4 percent in an attempt to curb inflation. The ECB will keep rates unchanged at its Feb. 7 meeting, according to all 55 economists surveyed by Bloomberg News.
``If aggressive cuts by the Fed can stimulate the economy, then the U.S. will definitely lead the way in terms of economic recovery,'' Yu said. ``The ECB is behind the curve, so it's time to move back'' into the dollar, he said.
Deutsche Bank AG, the world's largest currency trader, predicts an 8 percent gain in the dollar this year as the euro- zone economy expands 1.6 percent, lagging behind the 1.9 percent growth projected for the U.S. For 2009, Frankfurt-based Deutsche Bank puts growth at 2.6 percent in the U.S. and 1.9 percent in Europe.
Maxime Tessier, head of foreign exchange at Caisse de Depot et Placement in Montreal, isn't counting on Bernanke. It may be too late for lower borrowing costs to keep the U.S. out of a recession, he said. The Labor Department said Feb. 1 that payrolls fell by 17,000 in January, the first decline since August 2003.
2001 Reprisal
``From our vantage point it doesn't look very good and every week we re-evaluate the U.S. economy, it has deteriorated,'' said Tessier, whose firm manages $143 billion. ``It's too early to position your portfolio for a dollar rebound because a month from now the currency could be in rally mode, but it could also be a lot lower.''
The U.S. is entering the ``worst consumer recession since 1980,'' and the dollar will fall to $1.57 by the end of March before recovering to its current $1.48 by yearend, according to David Rosenberg, chief economist for North America in New York at Merrill Lynch & Co. The firm is the world's largest brokerage.
The dollar has benefited from Fed rate cuts before. During the first six months of 2001, the currency gained 10 percent against the euro as the central bank slashed its target 2.75 percentage points to below the ECB's benchmark refinance rate following the bursting of the technology bubble.
``We still believe the U.S. promises good returns,'' Sultan bin Sulayem, the chairman of state-owned investment group Dubai World, said Jan. 25 at the World Economic Forum in Davos, Switzerland. Dubai World agreed in August to invest as much as $5.1 billion in Kirk Kerkorian's Las Vegas-based casino group MGM Mirage.
Foreign Holdings
Middle Eastern and Asian investors have poured up to $39 billion into U.S. banks since August, according to Bloomberg calculations. Foreign holdings of U.S. securities rose a net $149.9 billion in November, the most in 22 months, the Treasury Department said last month in Washington. In October, the gain was $92.2 billion.
Investors say there are encouraging signs that business investment will hold up. Last week the House and Senate Finance Committees approved a fiscal stimulus package of as much as $157 billion proposed by President George W. Bush. The same day the Labor Department said the economy was shedding jobs, the Institute for Supply Management said its manufacturing index rose in January.
``A lot of the people are finding this is a good time to get back in the dollar,'' said Scott Ainsbury, a money manager who helps oversee $12 billion in currencies at FX Concepts Inc., a New York-based hedge fund.
Bank of England May Cut Interest Rate a Quarter Point to 5.25%
By Jennifer Ryan
Feb. 4 (Bloomberg) -- The Bank of England will probably cut its key interest rate for the second time in three months this week, setting aside concern that inflation will accelerate as economic growth slows, a survey showed.
The nine-member Monetary Policy Committee will lower the rate by a quarter point to 5.25 percent on Feb. 7, according to 58 of the 61 economists in a Bloomberg News survey. Two expect a half-point cut and one forecasts no change.
Falling house prices and higher market lending rates have put the U.K. economy on course for its worst performance since the end of the last recession in 1992. At the same time, Governor Mervyn King has indicated inflation pressures will keep the bank from following the Federal Reserve and slashing rates further in coming months.
``There is clearly a sense at the bank that rates are restrictive and need to come down,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. ``Worries about inflation mean there won't be the same kind of aggressive easing as we've been seeing from the Fed.''
King, reappointed by Prime Minister Gordon Brown on Jan. 30, says the Bank of England faces a ``difficult balancing act'' in 2008. House prices fell the most since 2000 in the fourth quarter, mortgage approvals dropped to a nine-year low and the threat of a U.S. recession is dragging down global growth prospects.
U.K. manufacturing expanded at the slowest pace in more than two years last month, a survey by the Chartered Institute of Purchasing and Supply showed.
Constraints
Growth is slowing as pricing pressures increase. King said Jan. 22 that oil and food prices may drive inflation above 3 percent this year from 2.1 percent in December, matching the fastest pace in a decade. Consumers' inflation expectations for the next 12 months jumped to the highest since at least 2005, a report commissioned by Citigroup Inc. showed.
``There are constraints on how many reductions they can make,'' said Alan Castle, an economist at Lehman Brothers Holdings Inc. in London.
The Bank of England has been slower than the Fed in cutting rates. The Fed has reduced its benchmark by one-and-a-quarter percentage points since Jan. 22, its fastest easing of policy since 1990, after banks including Goldman Sachs Group Inc. and Citigroup Inc. forecast the first U.S. recession since 2001 and global equity markets tumbled.
The slowdown was sparked by a slump in U.S. house prices that's forced banks worldwide to post more than $133 billion in asset writedowns and credit losses. The U.S. economy unexpectedly lost jobs in January for the first time in more than four years, the Labor Department said Feb. 1.
`Relatively Soft'
Some economists say contagion from the U.S. slowdown will force the Bank of England to ignore inflation risks again and cut rates further after next week's move.
``Economic growth and expectations of growth are relatively soft,'' said George Buckley, an economist at Deutsche Bank AG in London. ``We see a cut at the next meeting and then another in April or May. The risks are that they move earlier.''
The Bank of England will reduce its benchmark to 4.5 percent by the end of the year, according to the median forecast of 44 economists in a Bloomberg News survey.
King says the circumstances are presenting the bank with its biggest dilemma since it was given rate-setting independence in 1997. The bank will probably have to write at least one letter to Chancellor of the Exchequer Alistair Darling this year explaining why it can't keep inflation below the government's 3 percent limit, he says.
``It will be harder this time for the bank to be confident that inflation will fall back to target,'' said Castle. ``But if growth deteriorates further, we'll see deeper rate cuts.''
Feb. 4 (Bloomberg) -- The Bank of England will probably cut its key interest rate for the second time in three months this week, setting aside concern that inflation will accelerate as economic growth slows, a survey showed.
The nine-member Monetary Policy Committee will lower the rate by a quarter point to 5.25 percent on Feb. 7, according to 58 of the 61 economists in a Bloomberg News survey. Two expect a half-point cut and one forecasts no change.
Falling house prices and higher market lending rates have put the U.K. economy on course for its worst performance since the end of the last recession in 1992. At the same time, Governor Mervyn King has indicated inflation pressures will keep the bank from following the Federal Reserve and slashing rates further in coming months.
``There is clearly a sense at the bank that rates are restrictive and need to come down,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. ``Worries about inflation mean there won't be the same kind of aggressive easing as we've been seeing from the Fed.''
King, reappointed by Prime Minister Gordon Brown on Jan. 30, says the Bank of England faces a ``difficult balancing act'' in 2008. House prices fell the most since 2000 in the fourth quarter, mortgage approvals dropped to a nine-year low and the threat of a U.S. recession is dragging down global growth prospects.
U.K. manufacturing expanded at the slowest pace in more than two years last month, a survey by the Chartered Institute of Purchasing and Supply showed.
Constraints
Growth is slowing as pricing pressures increase. King said Jan. 22 that oil and food prices may drive inflation above 3 percent this year from 2.1 percent in December, matching the fastest pace in a decade. Consumers' inflation expectations for the next 12 months jumped to the highest since at least 2005, a report commissioned by Citigroup Inc. showed.
``There are constraints on how many reductions they can make,'' said Alan Castle, an economist at Lehman Brothers Holdings Inc. in London.
The Bank of England has been slower than the Fed in cutting rates. The Fed has reduced its benchmark by one-and-a-quarter percentage points since Jan. 22, its fastest easing of policy since 1990, after banks including Goldman Sachs Group Inc. and Citigroup Inc. forecast the first U.S. recession since 2001 and global equity markets tumbled.
The slowdown was sparked by a slump in U.S. house prices that's forced banks worldwide to post more than $133 billion in asset writedowns and credit losses. The U.S. economy unexpectedly lost jobs in January for the first time in more than four years, the Labor Department said Feb. 1.
`Relatively Soft'
Some economists say contagion from the U.S. slowdown will force the Bank of England to ignore inflation risks again and cut rates further after next week's move.
``Economic growth and expectations of growth are relatively soft,'' said George Buckley, an economist at Deutsche Bank AG in London. ``We see a cut at the next meeting and then another in April or May. The risks are that they move earlier.''
The Bank of England will reduce its benchmark to 4.5 percent by the end of the year, according to the median forecast of 44 economists in a Bloomberg News survey.
King says the circumstances are presenting the bank with its biggest dilemma since it was given rate-setting independence in 1997. The bank will probably have to write at least one letter to Chancellor of the Exchequer Alistair Darling this year explaining why it can't keep inflation below the government's 3 percent limit, he says.
``It will be harder this time for the bank to be confident that inflation will fall back to target,'' said Castle. ``But if growth deteriorates further, we'll see deeper rate cuts.''
Commodities Daily - 4th Feb 2008
Spotlight: OPEC said that it would not raise oil output in its meeting on Friday as the market is well-supplied. Wheat rose on limited supplies in the U.S. while gold fell by 1.5 percent on profit-taking.
Energy: Crude oil may fall this week on speculation that U.S. fuel demand will drop as consumers respond to the slowing economy and high prices. Crude oil for March delivery fell $1.75 last week, or 1.9 percent, to $88.96 a barrel on the New York Mercantile Exchange. Futures reached a record $100.09 a barrel on Jan. 3. OPEC said in its meeting on Friday that it would leave output unchanged as the market is well-supplied and it’s not necessary to raise output.
Agriculture: Wheat rallied on Friday on signs of rising demand for limited U.S. supplies of high-protein spring varieties. Wheat futures for March delivery rose 13.5 cents, or 1.4 percent, to $9.43 a bushel on the Chicago Board of Trade. Soybeans rose on signs that declining shipping costs and a falling dollar are boosting overseas demand for supplies from the U.S., even after prices reached a record last month. Soybean futures for March delivery rose 12.75 cents, or 1.1 percent, to $12.8725 a bushel. Corn settled almost unchanged on Friday.
Precious Metals: Gold fell sharply on Friday as investors booked profits after prices rose to a record high on earlier reduction in interest rates. COMEX gold fell 1.5% or $14.50 to $913.50 an ounce in late week. Platinum, on the other hand, climbed to a record on concern that a power shortage in South Africa, which accounts for about 80 percent of world supply, would cut output.
Industrial Metals: Copper prices fell by 1.6 percent on Friday after the U.S. unexpectedly lost jobs in January; renewing concern demand will fall in the world's largest economy. U.S. payrolls fell by 1,000 last month, the first drop in more than four years, the Labor Department said on Friday.
(Source: Bloomberg)
Energy: Crude oil may fall this week on speculation that U.S. fuel demand will drop as consumers respond to the slowing economy and high prices. Crude oil for March delivery fell $1.75 last week, or 1.9 percent, to $88.96 a barrel on the New York Mercantile Exchange. Futures reached a record $100.09 a barrel on Jan. 3. OPEC said in its meeting on Friday that it would leave output unchanged as the market is well-supplied and it’s not necessary to raise output.
Agriculture: Wheat rallied on Friday on signs of rising demand for limited U.S. supplies of high-protein spring varieties. Wheat futures for March delivery rose 13.5 cents, or 1.4 percent, to $9.43 a bushel on the Chicago Board of Trade. Soybeans rose on signs that declining shipping costs and a falling dollar are boosting overseas demand for supplies from the U.S., even after prices reached a record last month. Soybean futures for March delivery rose 12.75 cents, or 1.1 percent, to $12.8725 a bushel. Corn settled almost unchanged on Friday.
Precious Metals: Gold fell sharply on Friday as investors booked profits after prices rose to a record high on earlier reduction in interest rates. COMEX gold fell 1.5% or $14.50 to $913.50 an ounce in late week. Platinum, on the other hand, climbed to a record on concern that a power shortage in South Africa, which accounts for about 80 percent of world supply, would cut output.
Industrial Metals: Copper prices fell by 1.6 percent on Friday after the U.S. unexpectedly lost jobs in January; renewing concern demand will fall in the world's largest economy. U.S. payrolls fell by 1,000 last month, the first drop in more than four years, the Labor Department said on Friday.
(Source: Bloomberg)
Financials Daily - 4th Feb 2008
US: U.S. stocks rose, capping their best weekly gain in five years, after Microsoft Corp.'s $44.6 billion bid for Yahoo! Inc. and a plan to rescue bond insurers overshadowed the first decrease in jobs since 2003.
Europe: European stocks climbed after Alcoa Inc. and Aluminum Corp. of China Ltd. challenged BHP Billiton Ltd.'s bid for Rio Tinto Group and Microsoft Corp. offered to buy Yahoo! Inc. for $44.6 billion.
Asia: Asian stocks fell for a fifth week, completing their longest losing streak in more than three years, on concern the U.S. and Japan are sinking into recessions. Mizuho Financial Group Inc. led a decline among financial stocks after reporting losses from subprime-related investments
Commodities: Crude oil fell for a third day in New York, extending a 1.9 percent decline last week, on signs growth in the U.S. economy, the world's largest oil user, may be slowing. Gold may rise on speculation the U.S. Federal Reserve's interest-rate cuts last month will erode the value of the dollar and boost the appeal of the precious metal.
Currencies: The dollar fell for a second straight week against the euro after the Federal Reserve lowered its benchmark lending rate by a half-percentage point to 3 percent and indicated further cuts in borrowing costs may be needed.
Source: Bloomberg
Europe: European stocks climbed after Alcoa Inc. and Aluminum Corp. of China Ltd. challenged BHP Billiton Ltd.'s bid for Rio Tinto Group and Microsoft Corp. offered to buy Yahoo! Inc. for $44.6 billion.
Asia: Asian stocks fell for a fifth week, completing their longest losing streak in more than three years, on concern the U.S. and Japan are sinking into recessions. Mizuho Financial Group Inc. led a decline among financial stocks after reporting losses from subprime-related investments
Commodities: Crude oil fell for a third day in New York, extending a 1.9 percent decline last week, on signs growth in the U.S. economy, the world's largest oil user, may be slowing. Gold may rise on speculation the U.S. Federal Reserve's interest-rate cuts last month will erode the value of the dollar and boost the appeal of the precious metal.
Currencies: The dollar fell for a second straight week against the euro after the Federal Reserve lowered its benchmark lending rate by a half-percentage point to 3 percent and indicated further cuts in borrowing costs may be needed.
Source: Bloomberg
Saturday, February 2, 2008
Commodities Daily 1st Feb 2008
Spotlight: Crude oil fell on signs slowing U.S. economy would curb demand. Natural gas rose while gasoline fell after a 12th consecutive weekly supply rose. Cocoa soared to the highest in almost five years. Gold gained, capping the biggest monthly increase since April 2006. Platinum rose to a record. Copper jumped, capping the biggest monthly gain since April.
Energy: Crude oil fell on concern that the U.S. is on the verge of a recession, curbing fuel demand in the world's biggest energy- consuming country. Natural gas advanced on speculation colder weather would boost demand. However, gasoline fell after a 12th consecutive weekly supplies were adequate.
Agriculture: Wheat rose, as demand for U.S. supplies increased after prices declined 3.1 percent last week. Corn rose for the first time in three days, on speculation that a weakening dollar is boosting overseas demand for supplies from the U.S.. However, soybeans fell as rains in South America may boost crop.
Cocoa soared to the highest price in almost five years because dry weather in West Africa, the biggest producer of the commodity, threatened supplies as well as the U.K. pound rose against the dollar. Besides, coffee rose to a two-week high as inventories dropped. Separately, cotton fell on speculation that U.S. exports may fall short of forecast. Sugar fell as recession concerns spurred declined in oil.
Precious Metals: Gold rose, capping the biggest monthly gain since April 2006, platinum rose to a record too on concern the dollar may weaken further, boosting the appeal of the metal as an alternative investment. Notably, silver rose to the highest since 1980. Palladium rose.
Industrial Metals: Copper rose in New York, capping the biggest monthly gain since April, on speculation lower U.S. borrowing costs will bolster economic growth and spurring demand.
(Source: Bloomberg)
Energy: Crude oil fell on concern that the U.S. is on the verge of a recession, curbing fuel demand in the world's biggest energy- consuming country. Natural gas advanced on speculation colder weather would boost demand. However, gasoline fell after a 12th consecutive weekly supplies were adequate.
Agriculture: Wheat rose, as demand for U.S. supplies increased after prices declined 3.1 percent last week. Corn rose for the first time in three days, on speculation that a weakening dollar is boosting overseas demand for supplies from the U.S.. However, soybeans fell as rains in South America may boost crop.
Cocoa soared to the highest price in almost five years because dry weather in West Africa, the biggest producer of the commodity, threatened supplies as well as the U.K. pound rose against the dollar. Besides, coffee rose to a two-week high as inventories dropped. Separately, cotton fell on speculation that U.S. exports may fall short of forecast. Sugar fell as recession concerns spurred declined in oil.
Precious Metals: Gold rose, capping the biggest monthly gain since April 2006, platinum rose to a record too on concern the dollar may weaken further, boosting the appeal of the metal as an alternative investment. Notably, silver rose to the highest since 1980. Palladium rose.
Industrial Metals: Copper rose in New York, capping the biggest monthly gain since April, on speculation lower U.S. borrowing costs will bolster economic growth and spurring demand.
(Source: Bloomberg)
Friday, February 1, 2008
Nonfarm Payrolls Sank 17,000 in January, First Drop in Four Years
U.S. employment unexpectedly tumbled last month for the first time in more than four years, fueling worries that the U.S. economy, which already limped into 2008, might soften further or even slip into recession in coming months. Nonfarm payrolls fell 17,000 in January, the Labor Department said Friday, the first drop since August 2003, when payrolls slid 42,000. Gains in services like health care, retail trade and leisure offset declines in other sectors including manufacturing, construction, financial services and government. The unemployment rate fell, as expected, to 4.9% from 5%.
Microsoft Makes $44.6 Billion Bid for Yahoo
Microsoft said it has made a cash-and-stock offer to buy Yahoo for $31 a share, in a deal valuing the company at $44.6 billion.
"We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," said Microsoft Chief Executive Steve Ballmer. "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."
"We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," said Microsoft Chief Executive Steve Ballmer. "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."
Thursday, January 31, 2008
MBIA Reports $2.3 Billion Loss in Fourth Quarter
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.
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.
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.
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