By Gavin Evans
Jan. 14 (Bloomberg) -- Crude oil traded near a three-week low in New York on concern slowing global economic growth will trim demand.
Oil dropped 5.3 percent last week as U.S. stocks posted their longest losing streak since August and reports from China, the world's second-biggest energy consumer, showed rising interest rates slowed growth in exports and money supply last month. A U.S. Commerce Department report tomorrow will probably show retail sales growth stalled last month.
``With the stock market falling, it's really very hard to make much of an argument that there's going to be enough demand further out'' to support prices, said Rowan Menzies, strategist at Commodity Warrants Australia Pty in Sydney.
Crude oil for February delivery was at $92.67 a barrel, down 2 cents, in after-hours electronic trading on the New York Mercantile Exchange at 10:55 a.m. in Singapore.
The contract fell $1.02, or 1.1 percent, to $92.69 on Jan. 11, the lowest close since Dec. 20. Prices today are 7.4 percent lower than the record $100.09 a barrel reached on Jan. 3.
Brent crude for February settlement traded at $91.21 a barrel, up 14 cents, on London's ICE Futures Europe exchange at 10:53 a.m. Singapore time. On Jan. 11, the contract fell $1.15, or 1.3 percent, to close at $91.07 a barrel.
Oil Consumers
The U.S., China and Japan, the three biggest oil consumers, are responsible for almost 40 percent of global demand. Last week, Goldman Sachs Group Inc. said the U.S. and Japan are at risk of recession.
While the demand outlook is poor, near-term prices are likely to be supported by the weak U.S. dollar and a flow of investment into rising commodities, Menzies said.
``There just seems to be an enormous amount of fresh capital to allocate into these markets,'' he said.
Hedge fund managers and other large speculators have increased their bets on rising oil prices the past three weeks, according to U.S. Commodity Futures Trading Commission data.
The net-long position in New York oil futures, the difference between contracts to buy and sell the commodity, rose 9 percent to 94,923 contracts in the week ended Jan. 8, the commission said last week.
Open interest in oil contracts reached 1.41 million contracts the same date, the highest since mid-November.
Monday, January 14, 2008
Goldman Sachs Cuts Asia Growth Forecast on Slowing U.S. Economy
By Shamim Adam
Jan. 14 (Bloomberg) -- An expected recession in the U.S. this year will curb economic growth in Asia excluding Japan, according to Goldman Sachs Group Inc., which reduced its forecasts for the region's expansion.
The economies will grow 8.3 percent in 2008, down from an earlier estimate of 8.6 percent, Hong Kong-based economist Michael Buchanan said in a report today. Next year's growth will be 8.5 percent, compared with a prior prediction of 8.6 percent.
Goldman Sachs last week joined Morgan Stanley and Merrill Lynch & Co. in forecasting that the world's largest economy will slip into recession this year for the first time since 2001 amid fallout from the subprime mortgage crisis. The U.S. is the biggest market for most of Asia's export-dependent economies.
``There could be a `tipping point' at which the U.S. slowdown has a more significant impact on Asia than before,'' Buchanan wrote. ``The further deterioration in the U.S. economy comes as Japan is also teetering on the edge of recession.''
Goldman is predicting a 50 percent chance of a recession in Japan, the world's second-largest economy. It lowered its growth forecasts for all 10 Asian economies that it covered in the report, including reductions to China and India.
East Asia's exports are forecast to climb 15.2 percent this year, after jumping 17.8 percent in 2007, the World Bank said in its Global Economic Prospects 2008 report released last week.
The region is almost twice as reliant on exports as the rest of the world, with 60 percent of shipments abroad ultimately destined for the U.S., Europe and Japan.
China will expand 10 percent this year, from an earlier forecast of 10.3 percent, Goldman predicted. It cut Indian's growth estimate to 7.8 percent from 8 percent.
``Overall, these forecast reductions are meaningful but not disastrous,'' Buchanan said. ``The impact on currencies is in general likely to be contained, although equity markets could be in for more volatility.''
Jan. 14 (Bloomberg) -- An expected recession in the U.S. this year will curb economic growth in Asia excluding Japan, according to Goldman Sachs Group Inc., which reduced its forecasts for the region's expansion.
The economies will grow 8.3 percent in 2008, down from an earlier estimate of 8.6 percent, Hong Kong-based economist Michael Buchanan said in a report today. Next year's growth will be 8.5 percent, compared with a prior prediction of 8.6 percent.
Goldman Sachs last week joined Morgan Stanley and Merrill Lynch & Co. in forecasting that the world's largest economy will slip into recession this year for the first time since 2001 amid fallout from the subprime mortgage crisis. The U.S. is the biggest market for most of Asia's export-dependent economies.
``There could be a `tipping point' at which the U.S. slowdown has a more significant impact on Asia than before,'' Buchanan wrote. ``The further deterioration in the U.S. economy comes as Japan is also teetering on the edge of recession.''
Goldman is predicting a 50 percent chance of a recession in Japan, the world's second-largest economy. It lowered its growth forecasts for all 10 Asian economies that it covered in the report, including reductions to China and India.
East Asia's exports are forecast to climb 15.2 percent this year, after jumping 17.8 percent in 2007, the World Bank said in its Global Economic Prospects 2008 report released last week.
The region is almost twice as reliant on exports as the rest of the world, with 60 percent of shipments abroad ultimately destined for the U.S., Europe and Japan.
China will expand 10 percent this year, from an earlier forecast of 10.3 percent, Goldman predicted. It cut Indian's growth estimate to 7.8 percent from 8 percent.
``Overall, these forecast reductions are meaningful but not disastrous,'' Buchanan said. ``The impact on currencies is in general likely to be contained, although equity markets could be in for more volatility.''
Hang Seng may see rebound in afternoon trading...
Broke downtrend resistance of 26844.32 on 5 min chart.
Watch out for rebound.
Get ready my bullets to short at high price later on Uniasia, ChinaAElec and China HongXing.
Missed the first 2 counters earlier when they are coming down, due to slow response of CFD.
Cannot miss them this time.
Watch out for rebound.
Get ready my bullets to short at high price later on Uniasia, ChinaAElec and China HongXing.
Missed the first 2 counters earlier when they are coming down, due to slow response of CFD.
Cannot miss them this time.
Friday, January 11, 2008
Commodities daily 11th Jan 2008
Spotlight: Crude oil fell for the first time in more than two weeks after Goldman Sachs said Japan is at risk of recession. Cotton dropped the most since August on slowing U.S. exports. Cocoa closed at the highest price since February 2003. Gold rose to a new record high, silver advances to the highest in 27 years. Copper fell.
Energy: Crude oil fell below $94 fort the first time in more than two weeks after Goldman Sachs Group said Japan is at risk of recession, cutting energy consumption. JPMorgan raised its 2008 oil prices forecast by 12 percent to $76.50 a barrel on expectations investments in commodities will increase.
Agriculture: Wheat fell on speculation that a government report will show U.S. farmers planted more than forecast to benefit from a three-year rally that drove pries to a record. Besides, corn fell the most this month as U.S. farmers increased sales of last year’s record harvest to profit from the highest prices for Chicago futures in 11 years. Notably. Soybeans also fell on signs that a price rally to a 34-year high is reducing overseas demand for U.S. supplies.
Precious Metals: Gold rose to a record high of $893.60 an ounce in New York, and silver reached the highest in 27 years to $16.275 an ounce as the slumping dollar boosted the appeal of precious metals as alternative investments. Besides, demand for Platinum surged after Federal Reserve Chairman Ben S. Bernanke suggested more interest-rate cuts may be made. However, Palladium falls.
Industrial Metals: Copper fell for a second straight day on speculation that declining consumption will lead to a surplus of the metal used.
(Source: Bloomberg)
Energy: Crude oil fell below $94 fort the first time in more than two weeks after Goldman Sachs Group said Japan is at risk of recession, cutting energy consumption. JPMorgan raised its 2008 oil prices forecast by 12 percent to $76.50 a barrel on expectations investments in commodities will increase.
Agriculture: Wheat fell on speculation that a government report will show U.S. farmers planted more than forecast to benefit from a three-year rally that drove pries to a record. Besides, corn fell the most this month as U.S. farmers increased sales of last year’s record harvest to profit from the highest prices for Chicago futures in 11 years. Notably. Soybeans also fell on signs that a price rally to a 34-year high is reducing overseas demand for U.S. supplies.
Precious Metals: Gold rose to a record high of $893.60 an ounce in New York, and silver reached the highest in 27 years to $16.275 an ounce as the slumping dollar boosted the appeal of precious metals as alternative investments. Besides, demand for Platinum surged after Federal Reserve Chairman Ben S. Bernanke suggested more interest-rate cuts may be made. However, Palladium falls.
Industrial Metals: Copper fell for a second straight day on speculation that declining consumption will lead to a surplus of the metal used.
(Source: Bloomberg)
Market Highlights 11th Jan 2008
US: U.S. stocks posted their first back-to-back gains of the year after Federal Reserve Chairman Ben S. Bernanke signaled he may cut interest rates further and investors speculated Countrywide Financial Corp. will be bought.
Europe: European stocks declined for the sixth time in seven days, led by chemical makers, metal producers and engineering companies, on speculation inflation may keep central banks from cutting interest rates.
Asia: Asian stocks fell for the first time in three days, led by developers and banks, on concern U.S. credit-market losses will spread.
Commodities: Crude oil fell below $94 for the first time in more than two weeks after Goldman Sachs Group Inc. said Japan is at risk of recession, cutting energy consumption. Gold rose to a record, and silver reached the highest in 27 years as the slumping dollar boosted the appeal of precious metals as alternative investments.
Currencies: The dollar fell the most against the euro in almost two months after Federal Reserve Chairman Ben S. Bernanke signaled the central bank may cut borrowing costs this month to offset ``downside risks'' to U.S. economic expansion.
Source: Bloomberg
Europe: European stocks declined for the sixth time in seven days, led by chemical makers, metal producers and engineering companies, on speculation inflation may keep central banks from cutting interest rates.
Asia: Asian stocks fell for the first time in three days, led by developers and banks, on concern U.S. credit-market losses will spread.
Commodities: Crude oil fell below $94 for the first time in more than two weeks after Goldman Sachs Group Inc. said Japan is at risk of recession, cutting energy consumption. Gold rose to a record, and silver reached the highest in 27 years as the slumping dollar boosted the appeal of precious metals as alternative investments.
Currencies: The dollar fell the most against the euro in almost two months after Federal Reserve Chairman Ben S. Bernanke signaled the central bank may cut borrowing costs this month to offset ``downside risks'' to U.S. economic expansion.
Source: Bloomberg
Gold Reaches Record, Silver 27-Year High on Declining Dollar
By Glenys Sim
Jan. 11 (Bloomberg) -- Gold rose to a record and silver matched its highest level since 1980 as a weakening dollar increased the allure of the metals as alternative investments.
The dollar was headed for a third weekly loss against the euro on bets benchmark borrowing costs in the U.S. will fall below those in Europe for the first time in more than three years this month. The currency declined after Federal Reserve Chairman Ben S. Bernanke suggested policy makers will have to cut interest rates to counter risks to the economy.
``The lift in the gold price followed a softening of the U.S. dollar against major currencies, after both the Bank of England and the ECB decided to leave interest rates unchanged,'' David Moore, a commodity strategist at Commonwealth Bank of Australia, said by e-mail from Sydney.
Gold climbed 31 percent in 2007, its seventh straight year of gains and the longest rally since at least the end of World War II. Prices soared as record oil costs drove up inflation and supplies from South Africa, the world's biggest producer, dropped to the lowest in 84 years.
Investors are switching to gold because of credit market turmoil. The market for collateralized debt obligations, loans packaged into new securities, dried up after surging subprime mortgage defaults led to rating downgrades and convinced many investors to buy only the safest debt.
The world's biggest financial institutions have written off about $100 billion in subprime losses.
More Gains
Bullion for immediate delivery climbed as much as $4.60, or 0.5 percent, to a record $897.90 an ounce today, and traded at $891.22 at 10:02 a.m. Singapore time.
Gold for February delivery rose as much as $6.30, or 0.7 percent, to $899.90 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange, its highest ever. The contract traded at $893.10 an ounce at the same time.
The $900 level for gold is a psychological round number that investors are aiming for, said Burg.
``We may see some selling as it approaches $900, which may bring prices back down, but gold definitely has the potential to cross that mark on the euro-dollar relationship, a weakening U.S. economy and oil prices,'' he said.
Rising energy costs have fueled the rally as the metal is traditionally viewed as a hedge against inflation, Gerard Burg, minerals and energy consultant at National Australia Bank Ltd., said by phone from Melbourne.
Oil Prices
Oil rose 59 cents, or 0.6 percent, to $94.30 a barrel in after-hours trading on the New York Mercantile Exchange at 10:03 a.m. in Singapore. The dollar fell the most against the euro in almost two months yesterday and traded at $1.4790 per euro at 10:05 a.m. in Singapore after $1.4804 late yesterday in New York.
Silver for immediate delivery rose as much as 10 cents, or 0.6 percent, to $16.24 an ounce, to match its highest level since December 1980, according to Bloomberg data. The metal traded at $16.13 an ounce at 10:05 a.m. in Singapore.
Jan. 11 (Bloomberg) -- Gold rose to a record and silver matched its highest level since 1980 as a weakening dollar increased the allure of the metals as alternative investments.
The dollar was headed for a third weekly loss against the euro on bets benchmark borrowing costs in the U.S. will fall below those in Europe for the first time in more than three years this month. The currency declined after Federal Reserve Chairman Ben S. Bernanke suggested policy makers will have to cut interest rates to counter risks to the economy.
``The lift in the gold price followed a softening of the U.S. dollar against major currencies, after both the Bank of England and the ECB decided to leave interest rates unchanged,'' David Moore, a commodity strategist at Commonwealth Bank of Australia, said by e-mail from Sydney.
Gold climbed 31 percent in 2007, its seventh straight year of gains and the longest rally since at least the end of World War II. Prices soared as record oil costs drove up inflation and supplies from South Africa, the world's biggest producer, dropped to the lowest in 84 years.
Investors are switching to gold because of credit market turmoil. The market for collateralized debt obligations, loans packaged into new securities, dried up after surging subprime mortgage defaults led to rating downgrades and convinced many investors to buy only the safest debt.
The world's biggest financial institutions have written off about $100 billion in subprime losses.
More Gains
Bullion for immediate delivery climbed as much as $4.60, or 0.5 percent, to a record $897.90 an ounce today, and traded at $891.22 at 10:02 a.m. Singapore time.
Gold for February delivery rose as much as $6.30, or 0.7 percent, to $899.90 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange, its highest ever. The contract traded at $893.10 an ounce at the same time.
The $900 level for gold is a psychological round number that investors are aiming for, said Burg.
``We may see some selling as it approaches $900, which may bring prices back down, but gold definitely has the potential to cross that mark on the euro-dollar relationship, a weakening U.S. economy and oil prices,'' he said.
Rising energy costs have fueled the rally as the metal is traditionally viewed as a hedge against inflation, Gerard Burg, minerals and energy consultant at National Australia Bank Ltd., said by phone from Melbourne.
Oil Prices
Oil rose 59 cents, or 0.6 percent, to $94.30 a barrel in after-hours trading on the New York Mercantile Exchange at 10:03 a.m. in Singapore. The dollar fell the most against the euro in almost two months yesterday and traded at $1.4790 per euro at 10:05 a.m. in Singapore after $1.4804 late yesterday in New York.
Silver for immediate delivery rose as much as 10 cents, or 0.6 percent, to $16.24 an ounce, to match its highest level since December 1980, according to Bloomberg data. The metal traded at $16.13 an ounce at 10:05 a.m. in Singapore.
Crude Oil Rises in New York on Threats of Attacks in Nigeria
By Angela Macdonald-Smith
Jan. 11 (Bloomberg) -- Crude oil rose for the first day in three in New York on heightened concern about the threat of attacks on facilities in Nigeria that may cut supplies from Africa's biggest producer.
The Movement for the Emancipation of the Niger Delta yesterday threatened fresh assaults after claiming it backed fighters that attacked oil vessels the previous day. Militant action has halted as much as 20 percent of the nation's crude production since early 2006.
``It looks as if Nigeria is warming up again,'' said Rowan Menzies, a commodity market analyst at Commodity Warrants Australia Pty in Sydney. ``The militants are angry their wealth is being taken away, and if oil has doubled in price in the last year maybe they're twice as angry.''
Crude oil for February delivery rose as much as 62 cents, or 0.7 percent, to $94.33 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $94.23 at 8:20 a.m. in Singapore.
Yesterday prices fell $1.96, or 2.1 percent, to $93.71 a barrel, falling below $94 for the first time in two weeks after Goldman Sachs Group Inc. said Japan is at risk of recession. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 82 percent from a year ago.
Brent crude for February settlement yesterday fell $2.15, or 2.3 percent, to $92.22 a barrel on London's ICE Futures Europe exchange, the lowest close since Dec. 20. Futures touched $98.50 on Jan. 3, the highest intraday price since trading began in 1988.
While a slowdown in economic growth could hurt demand, it could also spur investment in commodities as a hedge against inflation and a weak dollar, JPMorgan analyst Katherine Spector said in a report in which she raised her 2008 oil forecast by 12 percent to $76.50 a barrel.
``One lingering risk to our view is that investor allocations to commodities broadly and oil specifically could exceed expectations,'' Spector said in the Jan. 9 report.
Jan. 11 (Bloomberg) -- Crude oil rose for the first day in three in New York on heightened concern about the threat of attacks on facilities in Nigeria that may cut supplies from Africa's biggest producer.
The Movement for the Emancipation of the Niger Delta yesterday threatened fresh assaults after claiming it backed fighters that attacked oil vessels the previous day. Militant action has halted as much as 20 percent of the nation's crude production since early 2006.
``It looks as if Nigeria is warming up again,'' said Rowan Menzies, a commodity market analyst at Commodity Warrants Australia Pty in Sydney. ``The militants are angry their wealth is being taken away, and if oil has doubled in price in the last year maybe they're twice as angry.''
Crude oil for February delivery rose as much as 62 cents, or 0.7 percent, to $94.33 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $94.23 at 8:20 a.m. in Singapore.
Yesterday prices fell $1.96, or 2.1 percent, to $93.71 a barrel, falling below $94 for the first time in two weeks after Goldman Sachs Group Inc. said Japan is at risk of recession. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 82 percent from a year ago.
Brent crude for February settlement yesterday fell $2.15, or 2.3 percent, to $92.22 a barrel on London's ICE Futures Europe exchange, the lowest close since Dec. 20. Futures touched $98.50 on Jan. 3, the highest intraday price since trading began in 1988.
While a slowdown in economic growth could hurt demand, it could also spur investment in commodities as a hedge against inflation and a weak dollar, JPMorgan analyst Katherine Spector said in a report in which she raised her 2008 oil forecast by 12 percent to $76.50 a barrel.
``One lingering risk to our view is that investor allocations to commodities broadly and oil specifically could exceed expectations,'' Spector said in the Jan. 9 report.
Bernanke Says More Interest-Rate Cuts May Be Needed (Update)
By Craig Torres and Scott Lanman
(Bloomberg) -- Federal Reserve Board Chairman Ben S. Bernanke said more interest-rate cuts ``may well be necessary'' after 1 percentage point of reductions since September to buttress economic growth.
``We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks,'' Bernanke said today in his first speech on the economy since the Fed's Dec. 11 meeting. Recent figures suggested the outlook for ``2008 has worsened and the downside risks to growth have become more pronounced,'' he said.
The comments increased speculation that the Federal Open Market Committee will cut its benchmark rate by half a percentage point, to 3.75 percent, this month. Wall Street analysts say the odds of a recession have increased after a report last week showed a jump in unemployment.
``A number of factors, including higher oil prices, lower equity prices, and softening home values, seem likely to weigh on consumer spending'' this year, Bernanke said in remarks to the Women in Housing and Finance and Exchequer Club in Washington.
The Fed isn't forecasting a recession, the Fed chief said in response to a question after the speech. ``We are forecasting slow growth, but there are downside risks,'' he added. ``It is important to take substantive action against those risks.''
Bigger Reduction
``From the tone of the speech, a 50-basis point cut seems likely,'' Lawrence Lindsey, a former economic adviser to President George W. Bush and ex-Fed governor, said from New York. Though it's ``unlikely'' the U.S. is in recession, Bernanke ``is quite right to take precautionary measures right now,'' he said.
The dollar extended declines and shorter-dated Treasuries rallied after Bernanke's remarks, while stocks initially rose before dropping. Yields on two-year Treasuries fell to 2.65 percent at 2:13 p.m. in New York, from 2.72 percent late yesterday. The dollar dropped 0.9 percent to $1.48 per euro.
``The committee must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability,'' Bernanke said.
Futures prices indicate the odds of a half-point rate cut on Jan. 30 jumped to 90 percent today from 76 percent yesterday and 34 percent a week ago. Futures show a 100 percent chance of at least a quarter-point reduction.
`Clear Signal'
``It is a clear signal of a changing economic forecast at the Federal Reserve,'' said Richard Hoey, chief economist at Bank of New York Mellon Corp.
The FOMC has cut the benchmark rate 1 percentage point to 4.25 percent since September to offset the drag from tighter lending conditions and prolonged housing slump.
Goldman Sachs Group Inc. economists yesterday predicted the Fed will lower the rate to 2.5 percent by year-end. The bank joined Merrill Lynch & Co. and Morgan Stanley in projecting a recession.
Residential investment has declined for seven consecutive quarters, and Fed officials say it may take at least six more months before housing markets turn. Delinquency rates on subprime mortgages climbed to 16.3 percent in the third quarter, the highest in at least a decade.
``The demand for housing seems to have weakened further, in part reflecting ongoing problems in mortgage markets,'' Bernanke said. ``We also see considerable evidence that banks have come more restrictive in their lending to firms and households.''
Unemployment Rises
Payrolls rose by 18,000 last month, capping the worst year for job creation since 2003. The unemployment rate rose to 5 percent from 4.7 percent the previous month.
Bernanke called the December jobs report ``disappointing,'' while cautioning that it would be ``a mistake to read too much into any one report.''
``However, should the labor market deteriorate, the risks to consumer spending would rise,'' he added.
Bernanke said the Fed's new tool to alleviate bank funding strains may be made permanent. The Fed last month introduced the so-called Term Auction Facility to auction funds to banks beyond the overnight horizon in the federal funds market. The central bank sold $40 billion in two auctions last month and plans $60 billion in two operations in January.
The TAF may ``become a useful permanent addition to the Fed's toolbox,'' Bernanke said. He also said the TAF operations and the ``passage'' of a jump in year-end funding demands caused financial strains to ease ``significantly,'' though spreads remain above the levels before August.
Inflation Pressure
The Fed chairman said higher oil costs were likely to lift inflation measures, including those excluding food and fuel.
The Fed's preferred gauge of consumer prices rose 2.2 percent in November from a year before, the most since March.
Inflation expectations measured by yield differences on 10- year Treasuries and government inflation-indexed bonds have remained between 2.2 percent and 2.4 percent over the past year, a sign that investors have confidence the central bank will maintain price stability.
``Any tendency of inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank's policy flexibility to counter shortfalls in growth in the future,'' Bernanke said.
Fed officials predict the personal consumption expenditures price index, minus food and energy, to rise 1.7 percent to 1.9 percent this year. Crude oil futures reached a record $100.09 barrel on Jan. 3. Oil prices are up 72 percent from a year ago.
(Bloomberg) -- Federal Reserve Board Chairman Ben S. Bernanke said more interest-rate cuts ``may well be necessary'' after 1 percentage point of reductions since September to buttress economic growth.
``We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks,'' Bernanke said today in his first speech on the economy since the Fed's Dec. 11 meeting. Recent figures suggested the outlook for ``2008 has worsened and the downside risks to growth have become more pronounced,'' he said.
The comments increased speculation that the Federal Open Market Committee will cut its benchmark rate by half a percentage point, to 3.75 percent, this month. Wall Street analysts say the odds of a recession have increased after a report last week showed a jump in unemployment.
``A number of factors, including higher oil prices, lower equity prices, and softening home values, seem likely to weigh on consumer spending'' this year, Bernanke said in remarks to the Women in Housing and Finance and Exchequer Club in Washington.
The Fed isn't forecasting a recession, the Fed chief said in response to a question after the speech. ``We are forecasting slow growth, but there are downside risks,'' he added. ``It is important to take substantive action against those risks.''
Bigger Reduction
``From the tone of the speech, a 50-basis point cut seems likely,'' Lawrence Lindsey, a former economic adviser to President George W. Bush and ex-Fed governor, said from New York. Though it's ``unlikely'' the U.S. is in recession, Bernanke ``is quite right to take precautionary measures right now,'' he said.
The dollar extended declines and shorter-dated Treasuries rallied after Bernanke's remarks, while stocks initially rose before dropping. Yields on two-year Treasuries fell to 2.65 percent at 2:13 p.m. in New York, from 2.72 percent late yesterday. The dollar dropped 0.9 percent to $1.48 per euro.
``The committee must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability,'' Bernanke said.
Futures prices indicate the odds of a half-point rate cut on Jan. 30 jumped to 90 percent today from 76 percent yesterday and 34 percent a week ago. Futures show a 100 percent chance of at least a quarter-point reduction.
`Clear Signal'
``It is a clear signal of a changing economic forecast at the Federal Reserve,'' said Richard Hoey, chief economist at Bank of New York Mellon Corp.
The FOMC has cut the benchmark rate 1 percentage point to 4.25 percent since September to offset the drag from tighter lending conditions and prolonged housing slump.
Goldman Sachs Group Inc. economists yesterday predicted the Fed will lower the rate to 2.5 percent by year-end. The bank joined Merrill Lynch & Co. and Morgan Stanley in projecting a recession.
Residential investment has declined for seven consecutive quarters, and Fed officials say it may take at least six more months before housing markets turn. Delinquency rates on subprime mortgages climbed to 16.3 percent in the third quarter, the highest in at least a decade.
``The demand for housing seems to have weakened further, in part reflecting ongoing problems in mortgage markets,'' Bernanke said. ``We also see considerable evidence that banks have come more restrictive in their lending to firms and households.''
Unemployment Rises
Payrolls rose by 18,000 last month, capping the worst year for job creation since 2003. The unemployment rate rose to 5 percent from 4.7 percent the previous month.
Bernanke called the December jobs report ``disappointing,'' while cautioning that it would be ``a mistake to read too much into any one report.''
``However, should the labor market deteriorate, the risks to consumer spending would rise,'' he added.
Bernanke said the Fed's new tool to alleviate bank funding strains may be made permanent. The Fed last month introduced the so-called Term Auction Facility to auction funds to banks beyond the overnight horizon in the federal funds market. The central bank sold $40 billion in two auctions last month and plans $60 billion in two operations in January.
The TAF may ``become a useful permanent addition to the Fed's toolbox,'' Bernanke said. He also said the TAF operations and the ``passage'' of a jump in year-end funding demands caused financial strains to ease ``significantly,'' though spreads remain above the levels before August.
Inflation Pressure
The Fed chairman said higher oil costs were likely to lift inflation measures, including those excluding food and fuel.
The Fed's preferred gauge of consumer prices rose 2.2 percent in November from a year before, the most since March.
Inflation expectations measured by yield differences on 10- year Treasuries and government inflation-indexed bonds have remained between 2.2 percent and 2.4 percent over the past year, a sign that investors have confidence the central bank will maintain price stability.
``Any tendency of inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank's policy flexibility to counter shortfalls in growth in the future,'' Bernanke said.
Fed officials predict the personal consumption expenditures price index, minus food and energy, to rise 1.7 percent to 1.9 percent this year. Crude oil futures reached a record $100.09 barrel on Jan. 3. Oil prices are up 72 percent from a year ago.
Economic Summary 11th Jan 2008
Strong signals from Fed Chairman Bernanke that the FOMC will be cutting rates
further propelled equities into positive territory while simultaneously
boosting short-term Treasuries. Longer-term Treasuries and the dollar sold off
on the chairman's remarks.
Initial claims for unemployment insurance for the week ended January 5 fell by
a sharper-than-expected 15k to 322k. Continuing claims, while still a concern,
did turn lower. Continuing claims fell 52k in the week ended December 29 after
a combined 161k jump higher in the previous four weeks. The continuing claims
data still bear watching as their four-week average of 2.7mn is the highest
seen since mid November 2005.
Commercial paper outstanding for the week ended January 9 rose by $14.5bn, its
largest gain since late July. Asset-backed CP outstanding rose $4.8bn,
building upon a $26.3bn jump the previous week. These were the first gains in
ABCP since the subprime mortgage-related credit crisis hit full force in early
August.
Annual revisions to Philadelphia Fed index seasonal factors were released this
morning. With the new seasonals, the December index was revised up to -1.6
from -5.7. November was revised down to +7.5 from +8.2. January's Philadelphia
Fed index is scheduled for release next Thursday, January 17.
Little attention was paid to the stronger-than-expected 0.6% gain in November
wholesale inventories. The consensus forecast was +0.4%. In general, inventory
accumulation probably provided less of a boost to GDP growth in Q4 than it did
in Q3, and we forecast it will subtract from growth throughout the first half
of 2008.
In a speech today, Fed Chairman Bernanke all but announced that more easing is
on the way. The chairman, well aware that markets had already priced in
several fed funds rate cuts over the next few months, used strong language in
his prepared text that validated the markets' expectations. Moreover, he
suggested that the additional policy moves could be aggressive: "...we stand
ready to take substantive additional action as needed to support growth and to
provide adequate insurance against downside risks." Before the speech, we were
forecasting another 100bp in rate cuts by mid-year, bringing the funds target
to 3.25%. The chairman's speech raised the likelihood that the bulk of the
easing moves will be front-loaded into Q1.
Weekly reserve data showed that daily average borrowing from the discount
window in the week ended January 9 fell to $1.5bn from $5.8bn the previous
week. Borrowing on January 9 alone was $1.0bn, split between the New York and
San Francisco districts.
Economic Outlook
The December Import Price Index will be released at 8:30 on Friday (Forecast
-0.4%, Consensus +0.1%). A drop in petroleum prices in December probably
tipped the entire import price index into negative territory that month. We
estimate prices of imported goods fell 0.4% in December after their 2.7%
petroleum-related surge in November. The imported petroleum index increased by
9.8% in November, and we estimate it fell back by 2.0% in December. Excluding
all imported fuel prices, including those for natural gas, we estimate import
prices rose by 0.1% after a 0.5% jump in November.
further propelled equities into positive territory while simultaneously
boosting short-term Treasuries. Longer-term Treasuries and the dollar sold off
on the chairman's remarks.
Initial claims for unemployment insurance for the week ended January 5 fell by
a sharper-than-expected 15k to 322k. Continuing claims, while still a concern,
did turn lower. Continuing claims fell 52k in the week ended December 29 after
a combined 161k jump higher in the previous four weeks. The continuing claims
data still bear watching as their four-week average of 2.7mn is the highest
seen since mid November 2005.
Commercial paper outstanding for the week ended January 9 rose by $14.5bn, its
largest gain since late July. Asset-backed CP outstanding rose $4.8bn,
building upon a $26.3bn jump the previous week. These were the first gains in
ABCP since the subprime mortgage-related credit crisis hit full force in early
August.
Annual revisions to Philadelphia Fed index seasonal factors were released this
morning. With the new seasonals, the December index was revised up to -1.6
from -5.7. November was revised down to +7.5 from +8.2. January's Philadelphia
Fed index is scheduled for release next Thursday, January 17.
Little attention was paid to the stronger-than-expected 0.6% gain in November
wholesale inventories. The consensus forecast was +0.4%. In general, inventory
accumulation probably provided less of a boost to GDP growth in Q4 than it did
in Q3, and we forecast it will subtract from growth throughout the first half
of 2008.
In a speech today, Fed Chairman Bernanke all but announced that more easing is
on the way. The chairman, well aware that markets had already priced in
several fed funds rate cuts over the next few months, used strong language in
his prepared text that validated the markets' expectations. Moreover, he
suggested that the additional policy moves could be aggressive: "...we stand
ready to take substantive additional action as needed to support growth and to
provide adequate insurance against downside risks." Before the speech, we were
forecasting another 100bp in rate cuts by mid-year, bringing the funds target
to 3.25%. The chairman's speech raised the likelihood that the bulk of the
easing moves will be front-loaded into Q1.
Weekly reserve data showed that daily average borrowing from the discount
window in the week ended January 9 fell to $1.5bn from $5.8bn the previous
week. Borrowing on January 9 alone was $1.0bn, split between the New York and
San Francisco districts.
Economic Outlook
The December Import Price Index will be released at 8:30 on Friday (Forecast
-0.4%, Consensus +0.1%). A drop in petroleum prices in December probably
tipped the entire import price index into negative territory that month. We
estimate prices of imported goods fell 0.4% in December after their 2.7%
petroleum-related surge in November. The imported petroleum index increased by
9.8% in November, and we estimate it fell back by 2.0% in December. Excluding
all imported fuel prices, including those for natural gas, we estimate import
prices rose by 0.1% after a 0.5% jump in November.
Thursday, January 10, 2008
Bernanke May Be Forced to Lower Interest Rates by Half Point
By Scott Lanman
Jan. 10 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be forced to reduce interest rates by half a percentage point this month, validating investor concern that he hasn't been aggressive enough to avert recession.
Economists lowered growth forecasts and traders doubled the size of the rate cut they anticipate after reports showed a decline in manufacturing and a jump in unemployment. A cut in the benchmark rate to 3.75 percent from 4.25 percent would mean Fed officials setting aside inflation concerns from higher oil and food prices.
``In hindsight, if we're moving into a recessionary period or in one, it certainly would suggest the Fed's been too tight for too long,'' said Keith Hembre, who helps oversee $105 billion as chief economist at FAF Advisors Inc. in Minneapolis.
Bernanke, 54, will give fresh clues to the Fed's thinking today in a speech in Washington. Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Capital Inc. are all predicting a reduction in the main rate to 3.75 percent this month, largely because the U.S. jobless rate jumped to 5 percent in December from 4.7 percent in November.
The word ``recession'' is increasingly rolling off the tongues of prominent economists: Goldman, Merrill Lynch & Co. and Morgan Stanley are among large banks whose research teams are predicting an end to the U.S. expansion, now in its seventh year. At the same time, crude oil is trading near $100 a barrel and inflation is above the comfort level of many Fed officials.
Overcoming Reluctance
While some Fed officials may be reluctant to approve such a move, they would ``happily'' vote for it if they were convinced a recession was imminent, said Bank of America Corp. economist Peter Kretzmer, a former Fed staffer who this week predicted an even chance of a half-point or quarter-point rate cut on Jan. 30.
``They don't want to be backed into a corner by the markets,' said Stephen Cecchetti, a professor at Brandeis University in Waltham, Massachusetts, and former head of research at the Fed's New York branch. At the same time, ``why do something that's halfway? You want to make sure that consumer and business confidence doesn't tank.''
The last time Bernanke spoke, the Fed used the speech to signal a change in the central bank's views, Vice Chairman Donald Kohn said last week.
Bernanke said Nov. 29 that market ``turbulence'' had ``importantly affected'' the economic outlook. He declined to repeat the Federal Open Market Committee's October statement that inflation and growth risks were about equal.
Script Changes
The Fed then cut rates on Dec. 11, replacing its ``balance of risks'' with a line saying ``uncertainty'' had increased. Minutes of the meeting showed that Fed officials said economic growth in 2008 would fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.
Since the Fed met Dec. 11, reports have indicated a rising threat of recession. The unemployment rate rose 0.3 percentage point in December, a magnitude that has historically augured economic contractions. The Institute of Supply Management said Jan. 2 its index of manufacturing fell to the lowest level since April 2003.
The reports spurred traders to bet on deeper rate cuts. Futures prices indicate a 78 percent chance of a half-point move, with 100 percent odds of at least a quarter-point reduction.
``Additional evidence of a weaker economy makes a stronger case to take bolder actions than they have so far,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. He forecasts a 3.5 percent federal funds rate by the end of March. ``Conditions have changed more than the Fed may have expected.''
Risks to Growth
Four Fed officials so far this week flagged risks to economic growth, without directly indicating their preference for this month's rate decision.
Prospects of a recession might not be the only problem for the Fed. When officials come to the next meeting on Jan. 29-30 with revised forecasts, the second iteration of the Fed's expanded quarterly economic projections, they will lack some key tools, said Henry Kaufman, the former chief economist at Salomon Brothers Inc. who is now president of Henry Kaufman & Co. in New York.
Instead, the Fed should provide an ``assessment of developments for the next three years'' as well as the change in interest rates required to achieve economic goals, Kaufman wrote Jan. 3 in the Wall Street Journal.
``The Fed would have keener insight as to what's going on in the financial markets and in financial institutions,'' Kaufman said in an interview. ``Eventually that would bring back a somewhat more stable environment, rather than a volatile environment which we've had up to now.''
Central bankers rejected one of Kaufman's proposals as part of their communications review last year that ended in the decision to expand forecasts. Fed officials decided not to report members' assumptions of the ``appropriate'' path of interest rates because of concern that investors would ``infer more of a commitment to following the implied path than would be appropriate for good policy,'' Kohn said Jan. 5.
Jan. 10 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be forced to reduce interest rates by half a percentage point this month, validating investor concern that he hasn't been aggressive enough to avert recession.
Economists lowered growth forecasts and traders doubled the size of the rate cut they anticipate after reports showed a decline in manufacturing and a jump in unemployment. A cut in the benchmark rate to 3.75 percent from 4.25 percent would mean Fed officials setting aside inflation concerns from higher oil and food prices.
``In hindsight, if we're moving into a recessionary period or in one, it certainly would suggest the Fed's been too tight for too long,'' said Keith Hembre, who helps oversee $105 billion as chief economist at FAF Advisors Inc. in Minneapolis.
Bernanke, 54, will give fresh clues to the Fed's thinking today in a speech in Washington. Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Capital Inc. are all predicting a reduction in the main rate to 3.75 percent this month, largely because the U.S. jobless rate jumped to 5 percent in December from 4.7 percent in November.
The word ``recession'' is increasingly rolling off the tongues of prominent economists: Goldman, Merrill Lynch & Co. and Morgan Stanley are among large banks whose research teams are predicting an end to the U.S. expansion, now in its seventh year. At the same time, crude oil is trading near $100 a barrel and inflation is above the comfort level of many Fed officials.
Overcoming Reluctance
While some Fed officials may be reluctant to approve such a move, they would ``happily'' vote for it if they were convinced a recession was imminent, said Bank of America Corp. economist Peter Kretzmer, a former Fed staffer who this week predicted an even chance of a half-point or quarter-point rate cut on Jan. 30.
``They don't want to be backed into a corner by the markets,' said Stephen Cecchetti, a professor at Brandeis University in Waltham, Massachusetts, and former head of research at the Fed's New York branch. At the same time, ``why do something that's halfway? You want to make sure that consumer and business confidence doesn't tank.''
The last time Bernanke spoke, the Fed used the speech to signal a change in the central bank's views, Vice Chairman Donald Kohn said last week.
Bernanke said Nov. 29 that market ``turbulence'' had ``importantly affected'' the economic outlook. He declined to repeat the Federal Open Market Committee's October statement that inflation and growth risks were about equal.
Script Changes
The Fed then cut rates on Dec. 11, replacing its ``balance of risks'' with a line saying ``uncertainty'' had increased. Minutes of the meeting showed that Fed officials said economic growth in 2008 would fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.
Since the Fed met Dec. 11, reports have indicated a rising threat of recession. The unemployment rate rose 0.3 percentage point in December, a magnitude that has historically augured economic contractions. The Institute of Supply Management said Jan. 2 its index of manufacturing fell to the lowest level since April 2003.
The reports spurred traders to bet on deeper rate cuts. Futures prices indicate a 78 percent chance of a half-point move, with 100 percent odds of at least a quarter-point reduction.
``Additional evidence of a weaker economy makes a stronger case to take bolder actions than they have so far,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. He forecasts a 3.5 percent federal funds rate by the end of March. ``Conditions have changed more than the Fed may have expected.''
Risks to Growth
Four Fed officials so far this week flagged risks to economic growth, without directly indicating their preference for this month's rate decision.
Prospects of a recession might not be the only problem for the Fed. When officials come to the next meeting on Jan. 29-30 with revised forecasts, the second iteration of the Fed's expanded quarterly economic projections, they will lack some key tools, said Henry Kaufman, the former chief economist at Salomon Brothers Inc. who is now president of Henry Kaufman & Co. in New York.
Instead, the Fed should provide an ``assessment of developments for the next three years'' as well as the change in interest rates required to achieve economic goals, Kaufman wrote Jan. 3 in the Wall Street Journal.
``The Fed would have keener insight as to what's going on in the financial markets and in financial institutions,'' Kaufman said in an interview. ``Eventually that would bring back a somewhat more stable environment, rather than a volatile environment which we've had up to now.''
Central bankers rejected one of Kaufman's proposals as part of their communications review last year that ended in the decision to expand forecasts. Fed officials decided not to report members' assumptions of the ``appropriate'' path of interest rates because of concern that investors would ``infer more of a commitment to following the implied path than would be appropriate for good policy,'' Kohn said Jan. 5.
Bernanke May Be Forced to Lower Interest Rates by Half Point
By Scott Lanman
Jan. 10 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be forced to reduce interest rates by half a percentage point this month, validating investor concern that he hasn't been aggressive enough to avert recession.
Economists lowered growth forecasts and traders doubled the size of the rate cut they anticipate after reports showed a decline in manufacturing and a jump in unemployment. A cut in the benchmark rate to 3.75 percent from 4.25 percent would mean Fed officials setting aside inflation concerns from higher oil and food prices.
``In hindsight, if we're moving into a recessionary period or in one, it certainly would suggest the Fed's been too tight for too long,'' said Keith Hembre, who helps oversee $105 billion as chief economist at FAF Advisors Inc. in Minneapolis.
Bernanke, 54, will give fresh clues to the Fed's thinking today in a speech in Washington. Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Capital Inc. are all predicting a reduction in the main rate to 3.75 percent this month, largely because the U.S. jobless rate jumped to 5 percent in December from 4.7 percent in November.
The word ``recession'' is increasingly rolling off the tongues of prominent economists: Goldman, Merrill Lynch & Co. and Morgan Stanley are among large banks whose research teams are predicting an end to the U.S. expansion, now in its seventh year. At the same time, crude oil is trading near $100 a barrel and inflation is above the comfort level of many Fed officials.
Overcoming Reluctance
While some Fed officials may be reluctant to approve such a move, they would ``happily'' vote for it if they were convinced a recession was imminent, said Bank of America Corp. economist Peter Kretzmer, a former Fed staffer who this week predicted an even chance of a half-point or quarter-point rate cut on Jan. 30.
``They don't want to be backed into a corner by the markets,' said Stephen Cecchetti, a professor at Brandeis University in Waltham, Massachusetts, and former head of research at the Fed's New York branch. At the same time, ``why do something that's halfway? You want to make sure that consumer and business confidence doesn't tank.''
The last time Bernanke spoke, the Fed used the speech to signal a change in the central bank's views, Vice Chairman Donald Kohn said last week.
Bernanke said Nov. 29 that market ``turbulence'' had ``importantly affected'' the economic outlook. He declined to repeat the Federal Open Market Committee's October statement that inflation and growth risks were about equal.
Script Changes
The Fed then cut rates on Dec. 11, replacing its ``balance of risks'' with a line saying ``uncertainty'' had increased. Minutes of the meeting showed that Fed officials said economic growth in 2008 would fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.
Since the Fed met Dec. 11, reports have indicated a rising threat of recession. The unemployment rate rose 0.3 percentage point in December, a magnitude that has historically augured economic contractions. The Institute of Supply Management said Jan. 2 its index of manufacturing fell to the lowest level since April 2003.
The reports spurred traders to bet on deeper rate cuts. Futures prices indicate a 78 percent chance of a half-point move, with 100 percent odds of at least a quarter-point reduction.
``Additional evidence of a weaker economy makes a stronger case to take bolder actions than they have so far,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. He forecasts a 3.5 percent federal funds rate by the end of March. ``Conditions have changed more than the Fed may have expected.''
Risks to Growth
Four Fed officials so far this week flagged risks to economic growth, without directly indicating their preference for this month's rate decision.
Prospects of a recession might not be the only problem for the Fed. When officials come to the next meeting on Jan. 29-30 with revised forecasts, the second iteration of the Fed's expanded quarterly economic projections, they will lack some key tools, said Henry Kaufman, the former chief economist at Salomon Brothers Inc. who is now president of Henry Kaufman & Co. in New York.
Instead, the Fed should provide an ``assessment of developments for the next three years'' as well as the change in interest rates required to achieve economic goals, Kaufman wrote Jan. 3 in the Wall Street Journal.
``The Fed would have keener insight as to what's going on in the financial markets and in financial institutions,'' Kaufman said in an interview. ``Eventually that would bring back a somewhat more stable environment, rather than a volatile environment which we've had up to now.''
Central bankers rejected one of Kaufman's proposals as part of their communications review last year that ended in the decision to expand forecasts. Fed officials decided not to report members' assumptions of the ``appropriate'' path of interest rates because of concern that investors would ``infer more of a commitment to following the implied path than would be appropriate for good policy,'' Kohn said Jan. 5.
Jan. 10 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be forced to reduce interest rates by half a percentage point this month, validating investor concern that he hasn't been aggressive enough to avert recession.
Economists lowered growth forecasts and traders doubled the size of the rate cut they anticipate after reports showed a decline in manufacturing and a jump in unemployment. A cut in the benchmark rate to 3.75 percent from 4.25 percent would mean Fed officials setting aside inflation concerns from higher oil and food prices.
``In hindsight, if we're moving into a recessionary period or in one, it certainly would suggest the Fed's been too tight for too long,'' said Keith Hembre, who helps oversee $105 billion as chief economist at FAF Advisors Inc. in Minneapolis.
Bernanke, 54, will give fresh clues to the Fed's thinking today in a speech in Washington. Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Capital Inc. are all predicting a reduction in the main rate to 3.75 percent this month, largely because the U.S. jobless rate jumped to 5 percent in December from 4.7 percent in November.
The word ``recession'' is increasingly rolling off the tongues of prominent economists: Goldman, Merrill Lynch & Co. and Morgan Stanley are among large banks whose research teams are predicting an end to the U.S. expansion, now in its seventh year. At the same time, crude oil is trading near $100 a barrel and inflation is above the comfort level of many Fed officials.
Overcoming Reluctance
While some Fed officials may be reluctant to approve such a move, they would ``happily'' vote for it if they were convinced a recession was imminent, said Bank of America Corp. economist Peter Kretzmer, a former Fed staffer who this week predicted an even chance of a half-point or quarter-point rate cut on Jan. 30.
``They don't want to be backed into a corner by the markets,' said Stephen Cecchetti, a professor at Brandeis University in Waltham, Massachusetts, and former head of research at the Fed's New York branch. At the same time, ``why do something that's halfway? You want to make sure that consumer and business confidence doesn't tank.''
The last time Bernanke spoke, the Fed used the speech to signal a change in the central bank's views, Vice Chairman Donald Kohn said last week.
Bernanke said Nov. 29 that market ``turbulence'' had ``importantly affected'' the economic outlook. He declined to repeat the Federal Open Market Committee's October statement that inflation and growth risks were about equal.
Script Changes
The Fed then cut rates on Dec. 11, replacing its ``balance of risks'' with a line saying ``uncertainty'' had increased. Minutes of the meeting showed that Fed officials said economic growth in 2008 would fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.
Since the Fed met Dec. 11, reports have indicated a rising threat of recession. The unemployment rate rose 0.3 percentage point in December, a magnitude that has historically augured economic contractions. The Institute of Supply Management said Jan. 2 its index of manufacturing fell to the lowest level since April 2003.
The reports spurred traders to bet on deeper rate cuts. Futures prices indicate a 78 percent chance of a half-point move, with 100 percent odds of at least a quarter-point reduction.
``Additional evidence of a weaker economy makes a stronger case to take bolder actions than they have so far,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. He forecasts a 3.5 percent federal funds rate by the end of March. ``Conditions have changed more than the Fed may have expected.''
Risks to Growth
Four Fed officials so far this week flagged risks to economic growth, without directly indicating their preference for this month's rate decision.
Prospects of a recession might not be the only problem for the Fed. When officials come to the next meeting on Jan. 29-30 with revised forecasts, the second iteration of the Fed's expanded quarterly economic projections, they will lack some key tools, said Henry Kaufman, the former chief economist at Salomon Brothers Inc. who is now president of Henry Kaufman & Co. in New York.
Instead, the Fed should provide an ``assessment of developments for the next three years'' as well as the change in interest rates required to achieve economic goals, Kaufman wrote Jan. 3 in the Wall Street Journal.
``The Fed would have keener insight as to what's going on in the financial markets and in financial institutions,'' Kaufman said in an interview. ``Eventually that would bring back a somewhat more stable environment, rather than a volatile environment which we've had up to now.''
Central bankers rejected one of Kaufman's proposals as part of their communications review last year that ended in the decision to expand forecasts. Fed officials decided not to report members' assumptions of the ``appropriate'' path of interest rates because of concern that investors would ``infer more of a commitment to following the implied path than would be appropriate for good policy,'' Kohn said Jan. 5.
Market Highlights 10th Jan 2008
Spotlight: Wheat fell on speculation of increased plantings. Copper fell on concern of an economic slump. Oil fell after the weekly energy report showed that distillate and gasoline stockpiles increased last week. Gold rose on speculation of a weakening dollar.
Energy: Crude oil fell after an Energy Department report showed that U.S. fuel stockpiles surged last week as refineries bolstered operating rates. Gasoline inventories rose 5.22 million barrels to 213.1 million barrels, the Energy Department said yesterday, the biggest gain since December 2006 and three-times the increase forecast by analysts in a Bloomberg News survey. Crude oil supplies in the world's largest energy consumer fell 6.74 million barrels to 282.8 million on Jan. 4, having shed 31.8 million barrels in the past eight weeks, the report showed. Supplies fell as refiners increased operating rates to 91.3 percent of their plant capacity, the highest since August. Distillate fuel stockpiles, including heating oil and diesel, rose 1.52 million barrels to 128.7 million.
Agriculture: Wheat fell, erasing earlier gains, as hedge-fund and index-fund managers bet corn and soybeans will outperform the grain this year after farmers sowed more wheat to capitalize on higher prices. About 48.5 million acres of winter wheat were planted from September through November, as prices rose toward a record in December, according to a Bloomberg survey of analysts and traders. That's almost an 8 percent increase from the previous year and the most in 12 years.
Coffee output in Brazil, the world's biggest producer and exporter of the commodity, will fall short of demand this year, driving up prices, a research agency said. Domestic and overseas demand for Brazilian coffee will likely reach 46 million bags in 2008, exceeding estimated output of 41.2 million to 44.1 million bags, the University of Sao Paulo's agricultural commodities research agency, known as Cepea,
Precious Metals: Gold rose on speculation the Federal Reserve will continue to cut interest rates, weakening the dollar and boosting the investment appeal of the precious metal. Interest-rate futures show a 78 percent chance the Fed will lower the overnight lending rate 0.5 percentage point to 3.75 percent by Jan. 30, compared with a 24 percent chance a week ago.
Industrial Metals: Copper declined from a two-month high on renewed concern the U.S. economy will slump, slowing global growth and curbing metals demand. The U.S. is probably slipping into a recession, Goldman Sachs Group Inc. said. Global economic growth will slow for a second straight year in 2008, the World Bank said.
(Source: Bloomberg)
(Source: Bloomberg)
Energy: Crude oil fell after an Energy Department report showed that U.S. fuel stockpiles surged last week as refineries bolstered operating rates. Gasoline inventories rose 5.22 million barrels to 213.1 million barrels, the Energy Department said yesterday, the biggest gain since December 2006 and three-times the increase forecast by analysts in a Bloomberg News survey. Crude oil supplies in the world's largest energy consumer fell 6.74 million barrels to 282.8 million on Jan. 4, having shed 31.8 million barrels in the past eight weeks, the report showed. Supplies fell as refiners increased operating rates to 91.3 percent of their plant capacity, the highest since August. Distillate fuel stockpiles, including heating oil and diesel, rose 1.52 million barrels to 128.7 million.
Agriculture: Wheat fell, erasing earlier gains, as hedge-fund and index-fund managers bet corn and soybeans will outperform the grain this year after farmers sowed more wheat to capitalize on higher prices. About 48.5 million acres of winter wheat were planted from September through November, as prices rose toward a record in December, according to a Bloomberg survey of analysts and traders. That's almost an 8 percent increase from the previous year and the most in 12 years.
Coffee output in Brazil, the world's biggest producer and exporter of the commodity, will fall short of demand this year, driving up prices, a research agency said. Domestic and overseas demand for Brazilian coffee will likely reach 46 million bags in 2008, exceeding estimated output of 41.2 million to 44.1 million bags, the University of Sao Paulo's agricultural commodities research agency, known as Cepea,
Precious Metals: Gold rose on speculation the Federal Reserve will continue to cut interest rates, weakening the dollar and boosting the investment appeal of the precious metal. Interest-rate futures show a 78 percent chance the Fed will lower the overnight lending rate 0.5 percentage point to 3.75 percent by Jan. 30, compared with a 24 percent chance a week ago.
Industrial Metals: Copper declined from a two-month high on renewed concern the U.S. economy will slump, slowing global growth and curbing metals demand. The U.S. is probably slipping into a recession, Goldman Sachs Group Inc. said. Global economic growth will slow for a second straight year in 2008, the World Bank said.
(Source: Bloomberg)
(Source: Bloomberg)
Goldman Says Japan Recession Risk at `Danger Level' (Update)
By Jason Clenfield
Jan. 10 (Bloomberg) -- Goldman Sachs Group said there's a 50 percent chance Japan will slip into recession and cut its 2008 growth estimate for the world's second-largest economy.
``We estimate the probability of a recession in Japan has risen to the `danger level,''' Tetsufumi Yamakawa, chief Japan economist at Goldman, said in a report to clients today. ``We project weaker-than-expected growth in Japan especially in the first half of 2008 owing to an inevitable, moderate slowdown among emerging economies.''
Bank of Japan Deputy Governor Toshiro Muto said today he expects the economy to keep slowing ``for the time being'' and the central bank will conduct policy ``with discretion.'' Goldman said yesterday the U.S. economy is falling into recession.
Yamakawa cut his 2008 growth estimate to 1 percent from 1.2 percent and said the central bank may have to forego raising rates this year.
Sluggish spending by consumers has left Japan more dependant on overseas markets, just as cooling U.S. demand threatens to spread to Asia, where Japan sells half its exports.
Stocks including Mitsubishi Estate Co. declined today after Credit Suisse Group said the defaults in U.S. subprime mortgages may prompt overseas investors to sell their property holdings in Japan.
Losing Momentum
The cycle of rising corporate profits feeding into wages and consumer spending is losing momentum, Muto said today.
``The greatest challenge for the Japanese economy, needless to say, is a recovery in personal consumption, which has remained in an extended slump,'' Goldman's Yamakawa said. ``Innumerable obstacles stand in the way.''
Falling wages, which have dropped about 10 percent in the last decade, and rising food and energy prices have sent consumer confidence to a near four-year low. Paychecks are unlikely to rise this year as rising oil prices crimp profits.
With domestic consumption flat, the economy is more dependent on foreign demand. Exports contributed almost of Japan's growth in the third quarter, as demand from Asia helped make up for slowing orders from the U.S.
The risk is that demand from Asia will also dry up.
``A U.S. slowdown affects Asia, beginning with China, and via that route it affects Japan,'' Ota said this week. ``The extent to which Japan is hurt depends on the severity of the U.S. slowdown.''
Jan. 10 (Bloomberg) -- Goldman Sachs Group said there's a 50 percent chance Japan will slip into recession and cut its 2008 growth estimate for the world's second-largest economy.
``We estimate the probability of a recession in Japan has risen to the `danger level,''' Tetsufumi Yamakawa, chief Japan economist at Goldman, said in a report to clients today. ``We project weaker-than-expected growth in Japan especially in the first half of 2008 owing to an inevitable, moderate slowdown among emerging economies.''
Bank of Japan Deputy Governor Toshiro Muto said today he expects the economy to keep slowing ``for the time being'' and the central bank will conduct policy ``with discretion.'' Goldman said yesterday the U.S. economy is falling into recession.
Yamakawa cut his 2008 growth estimate to 1 percent from 1.2 percent and said the central bank may have to forego raising rates this year.
Sluggish spending by consumers has left Japan more dependant on overseas markets, just as cooling U.S. demand threatens to spread to Asia, where Japan sells half its exports.
Stocks including Mitsubishi Estate Co. declined today after Credit Suisse Group said the defaults in U.S. subprime mortgages may prompt overseas investors to sell their property holdings in Japan.
Losing Momentum
The cycle of rising corporate profits feeding into wages and consumer spending is losing momentum, Muto said today.
``The greatest challenge for the Japanese economy, needless to say, is a recovery in personal consumption, which has remained in an extended slump,'' Goldman's Yamakawa said. ``Innumerable obstacles stand in the way.''
Falling wages, which have dropped about 10 percent in the last decade, and rising food and energy prices have sent consumer confidence to a near four-year low. Paychecks are unlikely to rise this year as rising oil prices crimp profits.
With domestic consumption flat, the economy is more dependent on foreign demand. Exports contributed almost of Japan's growth in the third quarter, as demand from Asia helped make up for slowing orders from the U.S.
The risk is that demand from Asia will also dry up.
``A U.S. slowdown affects Asia, beginning with China, and via that route it affects Japan,'' Ota said this week. ``The extent to which Japan is hurt depends on the severity of the U.S. slowdown.''
Asian Stocks Fall for First Time in Three Days; Developers Drop
By Chen Shiyin and Patrick Rial
Jan. 10 (Bloomberg) -- Asian stocks fell for the first time in three days led by developers and banks on concern U.S. credit- market losses will spread.
Mitsubishi Estate Co. declined after Credit Suisse Group said defaults on U.S. subprime mortgages may prompt overseas investors to sell their property holdings in Japan. Commonwealth Bank of Australia led the drop among banks after Morgan Stanley cut the stock's rating.
``Global investors are reducing their real-estate investments across the board,'' said Hitoshi Yamamoto, who manages the equivalent of $5.5 billion in Japanese equities as chief executive officer of Fortis Asset Management in Tokyo.
The MSCI Asia Pacific Index fell 0.5 percent to 154.16 as of 12:05 p.m. in Tokyo, snapping a two-day, 1.3 percent advance. A measure of financial stocks including property developers and banks was the biggest drag on the benchmark.
Japan's Nikkei 225 Stock Average lost 0.8 percent to 14,482.22. Australia's S&P/ASX 200 Index retreated 0.6 percent, paced by BHP Billiton Ltd., after Alumina Ltd. reported profit that missed its own forecast and the price of metals and crude oil declined.
U.S. stocks rose yesterday, helping the Standard & Poor's 500 Index to its biggest gain in more than two weeks. Hewlett- Packard Co., the largest personal-computer maker, climbed after predicting that its earnings will withstand an economic slowdown.
Property Shares Fall
Mitsubishi Estate, Japan's biggest property developer by market value, fell 3.2 percent to 2,390 yen. Sumitomo Realty & Development Co., Japan's third-largest developer, slumped 4.4 percent to 2,505 yen. Urban Corp., which specializes in real estate securitization, dropped 4.8 percent to 1,376 yen.
``Foreign investors who actively invested in Japanese real estate could decide to sell their Japanese real estate holdings,'' Yoji Otani, an analyst at Credit Suisse, wrote in a note to clients. ``In 2008, we are likely to see a situation in which only real estate firms with a genuine understanding of real estate survive.''
Centro Properties Group, the Australian owner of U.S. malls, plunged after the Australian newspaper said the country's securities regulator questioned the company about accounting for its debt.
The stock dropped 19 percent to A$0.90, the biggest decliner on the MSCI World Index by percentage.
Cheung Kong (Holdings) Ltd., Hong Kong's second-biggest developer by market value, slipped 3.7 percent to HK$140.60, set for its biggest drop since Dec. 17. Shareholders are seeking to sell 33.5 million shares at HK$140.50 apiece, according to an e- mail from UBS AG, the sale's arranger.
Commonwealth Bank
Commonwealth Bank, Australia's second-largest bank, declined 1.2 percent to A$56.16. Richard Wiles, an analyst at Morgan Stanley, cut the stock to ``equal-weight'' from ``overweight.''
The stock also fell after the Australian newspaper said Commonwealth Bank and three other banks in the nation invested A$850 million ($750 million) in Countrywide Financial Corp., the biggest U.S. mortgage lender. Countrywide's shares have slumped in New York after the company denied speculation it will file for bankruptcy amid a rise in foreclosures and late payments.
National Australia Bank Ltd., the country's second-biggest provider of mortgages, lost 1 percent to A$35.24. Westpac Banking Corp., declined 1.3 percent to A$26.62, while Australia & New Zealand Banking Group Ltd. slid 0.6 percent to A$26.20.
Declining Commodity Prices
BHP Billiton, the world's biggest mining company and Australia's largest oil producer, slid 0.7 percent to A$38.92. Rio Tinto Group, the No. 3 mining company, declined 0.3 percent, its fourth straight drop.
Alumina, partner in the world's biggest producer of the material used to make aluminum, said full-year profit excluding one-time items fell to A$405 million, compared with its July forecast of about A$490 million. The stock dropped 2.4 percent to A$6.16.
Copper declined 0.5 percent yesterday from a two-month high in New York on concern slowing global economic growth will curb demand for metals. Crude oil slipped 0.7 percent yesterday to $95.67 a barrel.
Korea Zinc Co., the world's second-biggest zinc refiner, dropped 4.4 percent to 141,500 won, snapping a five-day, 20 percent surge. The company said yesterday it expects net income of 311.9 billion won this year as the price of zinc may fall by a third. The projection is 30 percent lower than analysts' estimates for 2007 profit.
In Tokyo, shares of Casio Computer Co. surged 7.2 percent to 1,272 yen after Mizuho Securities Co. raised its rating on the stock to ``buy'' from ``neutral,'' saying earnings will recover next fiscal year.
Jan. 10 (Bloomberg) -- Asian stocks fell for the first time in three days led by developers and banks on concern U.S. credit- market losses will spread.
Mitsubishi Estate Co. declined after Credit Suisse Group said defaults on U.S. subprime mortgages may prompt overseas investors to sell their property holdings in Japan. Commonwealth Bank of Australia led the drop among banks after Morgan Stanley cut the stock's rating.
``Global investors are reducing their real-estate investments across the board,'' said Hitoshi Yamamoto, who manages the equivalent of $5.5 billion in Japanese equities as chief executive officer of Fortis Asset Management in Tokyo.
The MSCI Asia Pacific Index fell 0.5 percent to 154.16 as of 12:05 p.m. in Tokyo, snapping a two-day, 1.3 percent advance. A measure of financial stocks including property developers and banks was the biggest drag on the benchmark.
Japan's Nikkei 225 Stock Average lost 0.8 percent to 14,482.22. Australia's S&P/ASX 200 Index retreated 0.6 percent, paced by BHP Billiton Ltd., after Alumina Ltd. reported profit that missed its own forecast and the price of metals and crude oil declined.
U.S. stocks rose yesterday, helping the Standard & Poor's 500 Index to its biggest gain in more than two weeks. Hewlett- Packard Co., the largest personal-computer maker, climbed after predicting that its earnings will withstand an economic slowdown.
Property Shares Fall
Mitsubishi Estate, Japan's biggest property developer by market value, fell 3.2 percent to 2,390 yen. Sumitomo Realty & Development Co., Japan's third-largest developer, slumped 4.4 percent to 2,505 yen. Urban Corp., which specializes in real estate securitization, dropped 4.8 percent to 1,376 yen.
``Foreign investors who actively invested in Japanese real estate could decide to sell their Japanese real estate holdings,'' Yoji Otani, an analyst at Credit Suisse, wrote in a note to clients. ``In 2008, we are likely to see a situation in which only real estate firms with a genuine understanding of real estate survive.''
Centro Properties Group, the Australian owner of U.S. malls, plunged after the Australian newspaper said the country's securities regulator questioned the company about accounting for its debt.
The stock dropped 19 percent to A$0.90, the biggest decliner on the MSCI World Index by percentage.
Cheung Kong (Holdings) Ltd., Hong Kong's second-biggest developer by market value, slipped 3.7 percent to HK$140.60, set for its biggest drop since Dec. 17. Shareholders are seeking to sell 33.5 million shares at HK$140.50 apiece, according to an e- mail from UBS AG, the sale's arranger.
Commonwealth Bank
Commonwealth Bank, Australia's second-largest bank, declined 1.2 percent to A$56.16. Richard Wiles, an analyst at Morgan Stanley, cut the stock to ``equal-weight'' from ``overweight.''
The stock also fell after the Australian newspaper said Commonwealth Bank and three other banks in the nation invested A$850 million ($750 million) in Countrywide Financial Corp., the biggest U.S. mortgage lender. Countrywide's shares have slumped in New York after the company denied speculation it will file for bankruptcy amid a rise in foreclosures and late payments.
National Australia Bank Ltd., the country's second-biggest provider of mortgages, lost 1 percent to A$35.24. Westpac Banking Corp., declined 1.3 percent to A$26.62, while Australia & New Zealand Banking Group Ltd. slid 0.6 percent to A$26.20.
Declining Commodity Prices
BHP Billiton, the world's biggest mining company and Australia's largest oil producer, slid 0.7 percent to A$38.92. Rio Tinto Group, the No. 3 mining company, declined 0.3 percent, its fourth straight drop.
Alumina, partner in the world's biggest producer of the material used to make aluminum, said full-year profit excluding one-time items fell to A$405 million, compared with its July forecast of about A$490 million. The stock dropped 2.4 percent to A$6.16.
Copper declined 0.5 percent yesterday from a two-month high in New York on concern slowing global economic growth will curb demand for metals. Crude oil slipped 0.7 percent yesterday to $95.67 a barrel.
Korea Zinc Co., the world's second-biggest zinc refiner, dropped 4.4 percent to 141,500 won, snapping a five-day, 20 percent surge. The company said yesterday it expects net income of 311.9 billion won this year as the price of zinc may fall by a third. The projection is 30 percent lower than analysts' estimates for 2007 profit.
In Tokyo, shares of Casio Computer Co. surged 7.2 percent to 1,272 yen after Mizuho Securities Co. raised its rating on the stock to ``buy'' from ``neutral,'' saying earnings will recover next fiscal year.
Economic Summary 10th Jan 2008
In another day with no major economic releases, the markets spent a good part
of the trading session worrying about just how bad next week's Q4 earnings
reports will look. But equities turned higher in the middle of the afternoon,
encouraged in part by Berkshire Hathaway's announcement that it may invest in
municipal bond insurers. Treasuries peaked about the same time equities
bottomed out and closed the day with losses across the board. The foreign
exchange value of the dollar rose.
The Mortgage Bankers Association's weekly mortgage applications index for the
week ended January 4 surged by some 32%, breaking a three-week string of
declines. The purchase index rose 15%, and the refinancing index shot up by
54%. Mortgage applications probably overstate the underlying demand for
housing since mortgage brokers are submitting multiple applications in the
face of tight lending standards. Also, these data, while seasonally adjusted,
are particularly volatile around the holidays.
Economic Outlook
Initial claims for unemployment insurance for the week ended January 5 are due
out at 8:30 (Consensus 340k). While initial claims are slowly trending higher,
continuing claims for unemployment insurance are particularly concerning. The
latest four-week average reading of 2.7mn was the highest for continuing
claims in over two years. The data suggest that those who are already laid off
are having trouble finding new jobs.
Little attention will likely be paid to the November wholesale inventories
release at 10:00 (Consensus +0.4%). Wholesale inventories are a componenet of
business inventories, which will be released on January 15. In general,
inventory accumulation probably provided less of a boost to GDP growth in Q4
than it did in Q3, and we forecast it will subtract from growth throughout the
first half of 2008.
Market Summary
St. Louis Fed President Poole, a nonvoting member of the FOMC this year, said
that "the uncertainties are probably greater" for growth than for inflation,
and he added the risks of a recession are "high enough to worry about."
Tomorrow, Fed Chairman Bernanke will speak at 1:00 about the economic outlook.
We expect that his comments will also signal the Fed's concern about a more
pronounced slowdown in growth than expected.
of the trading session worrying about just how bad next week's Q4 earnings
reports will look. But equities turned higher in the middle of the afternoon,
encouraged in part by Berkshire Hathaway's announcement that it may invest in
municipal bond insurers. Treasuries peaked about the same time equities
bottomed out and closed the day with losses across the board. The foreign
exchange value of the dollar rose.
The Mortgage Bankers Association's weekly mortgage applications index for the
week ended January 4 surged by some 32%, breaking a three-week string of
declines. The purchase index rose 15%, and the refinancing index shot up by
54%. Mortgage applications probably overstate the underlying demand for
housing since mortgage brokers are submitting multiple applications in the
face of tight lending standards. Also, these data, while seasonally adjusted,
are particularly volatile around the holidays.
Economic Outlook
Initial claims for unemployment insurance for the week ended January 5 are due
out at 8:30 (Consensus 340k). While initial claims are slowly trending higher,
continuing claims for unemployment insurance are particularly concerning. The
latest four-week average reading of 2.7mn was the highest for continuing
claims in over two years. The data suggest that those who are already laid off
are having trouble finding new jobs.
Little attention will likely be paid to the November wholesale inventories
release at 10:00 (Consensus +0.4%). Wholesale inventories are a componenet of
business inventories, which will be released on January 15. In general,
inventory accumulation probably provided less of a boost to GDP growth in Q4
than it did in Q3, and we forecast it will subtract from growth throughout the
first half of 2008.
Market Summary
St. Louis Fed President Poole, a nonvoting member of the FOMC this year, said
that "the uncertainties are probably greater" for growth than for inflation,
and he added the risks of a recession are "high enough to worry about."
Tomorrow, Fed Chairman Bernanke will speak at 1:00 about the economic outlook.
We expect that his comments will also signal the Fed's concern about a more
pronounced slowdown in growth than expected.
Revamped Straits Times Index (STI)
The revamped Straits Times Index (STI) as well as the other 18 new indices of the FTSE ST Index Series, expected to go live on 10 January 2008, will not be displayed on the poems internet platform with effect from 10 January 2008 until further notice. This is the same for all local broking houses in Singapore.
The reasons:
a) SGX will stop disseminating the STI through its normal Price Feed wef 10 January 2008.
b) The infrastructure required to distribute the STI through the trading system (industry-wide) will not be ready by 10 January 2008.
Meanwhile, the FTSE STI data can be obtained from other sources such as Reuters, Bloomberg, Nextview and the SGX website. Will update you on further development.
The reasons:
a) SGX will stop disseminating the STI through its normal Price Feed wef 10 January 2008.
b) The infrastructure required to distribute the STI through the trading system (industry-wide) will not be ready by 10 January 2008.
Meanwhile, the FTSE STI data can be obtained from other sources such as Reuters, Bloomberg, Nextview and the SGX website. Will update you on further development.
Wednesday, January 9, 2008
LIAN BENG TO PARTNER LASALLE INVESTMENT IN S$148M EMERALD HILL PROJECT
LIAN BENG TO PARTNER LASALLE INVESTMENT IN
S$148M EMERALD HILL PROJECT
Group awarded S$34m construction contract, and will hold 10% of development
SINGAPORE, 9 January 2008 – Singapore’s major homegrown construction firm, Lian
Beng Group Ltd (“Lian Beng” or “the Group”), today announced a second strategic
partnership with LaSalle Investment Management (“LaSalle”) to jointly purchase and
redevelop a freehold luxury residential site at Emerald Hill Road in District 9.
The 29,811 sq ft site which is presently occupied by Emerald Mansion, was purchased for
S$148m. Based on a gross floor area of approximately 78,689 sq ft, the purchase price of
the site works out to about S$1,880 psf per plot ratio.
Under the terms of agreement, LaSalle will acquire a 85% interest while LB Land Pte.
Ltd. (“LB Land”), a subsidiary of Lian Beng will take up the remaining 15% equity stake.
With 67% interest in the capital of LB Land, Lian Beng effectively holds a 10% equity
stake in this project.
Leveraging its expertise and experience in its core business of building construction, Lian
Beng will be the main contractor for this project, which is worth approximately S$34
million. Work is expected to commence in April 2008 and is due to be completed by
September 2010.
Mr Ong Pang Aik, Managing Director of Lian Beng Group Limited said, “Our strengths in
building construction will complement LaSalle’s strengths in property development and
marketing. We are very excited about this second joint-venture with LaSalle, and we look
forward to building a successful partnership with them.”
S$148M EMERALD HILL PROJECT
Group awarded S$34m construction contract, and will hold 10% of development
SINGAPORE, 9 January 2008 – Singapore’s major homegrown construction firm, Lian
Beng Group Ltd (“Lian Beng” or “the Group”), today announced a second strategic
partnership with LaSalle Investment Management (“LaSalle”) to jointly purchase and
redevelop a freehold luxury residential site at Emerald Hill Road in District 9.
The 29,811 sq ft site which is presently occupied by Emerald Mansion, was purchased for
S$148m. Based on a gross floor area of approximately 78,689 sq ft, the purchase price of
the site works out to about S$1,880 psf per plot ratio.
Under the terms of agreement, LaSalle will acquire a 85% interest while LB Land Pte.
Ltd. (“LB Land”), a subsidiary of Lian Beng will take up the remaining 15% equity stake.
With 67% interest in the capital of LB Land, Lian Beng effectively holds a 10% equity
stake in this project.
Leveraging its expertise and experience in its core business of building construction, Lian
Beng will be the main contractor for this project, which is worth approximately S$34
million. Work is expected to commence in April 2008 and is due to be completed by
September 2010.
Mr Ong Pang Aik, Managing Director of Lian Beng Group Limited said, “Our strengths in
building construction will complement LaSalle’s strengths in property development and
marketing. We are very excited about this second joint-venture with LaSalle, and we look
forward to building a successful partnership with them.”
Monday, January 7, 2008
Market Highlights
US: U.S. stocks had the steepest weekly loss since July after unemployment increased to a two-year high and manufacturing declined, bolstering speculation that a recession will stymie profit growth.
Europe: European stocks had their worst week in five months after reports showed U.S. hiring and manufacturing slowed the most since 2003, deepening concern the region's largest trading partner may slide into recession.
Asia: Asian stocks fell this week, led by exporters such as Toyota Motor Corp. and Samsung Electronics Co., after reports showed that some Asian countries' growth and the U.S. economy are slowing.
Commodities: Crude oil fell more than $1 a barrel in New York after a government report showed U.S. unemployment jumped to a two-year high, raising concern of a recession that would curb energy demand. Gold futures fell in New York on speculation a rally to the highest price since 1980 was overdone.
Currencies: The dollar posted its biggest decline against the yen in almost two months as a slowdown in hiring raised concern that U.S. economic weakness will spread globally.
Source: Bloomberg
Europe: European stocks had their worst week in five months after reports showed U.S. hiring and manufacturing slowed the most since 2003, deepening concern the region's largest trading partner may slide into recession.
Asia: Asian stocks fell this week, led by exporters such as Toyota Motor Corp. and Samsung Electronics Co., after reports showed that some Asian countries' growth and the U.S. economy are slowing.
Commodities: Crude oil fell more than $1 a barrel in New York after a government report showed U.S. unemployment jumped to a two-year high, raising concern of a recession that would curb energy demand. Gold futures fell in New York on speculation a rally to the highest price since 1980 was overdone.
Currencies: The dollar posted its biggest decline against the yen in almost two months as a slowdown in hiring raised concern that U.S. economic weakness will spread globally.
Source: Bloomberg
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