By Shobhana Chandra
Dec. 23 (Bloomberg) -- Sales of previously owned homes in the U.S. fell more than forecast in November and prices dropped by the most on record, indicating the real estate slump will extend into a fourth year and worsen the recession.
Purchases declined 8.6 percent to an annual rate of 4.49 million, from a 4.91 million rate in October that was less than previously estimated, the National Association of Realtors said today in Washington. The median price dropped 13.2 percent from a year earlier, the biggest decline since records started in 1968. Separately, the Commerce Department reported today that new-home sales fell 2.9 percent last month to a 17-year low.
Prices will plunge further as job losses sap demand, foreclosures add to the property glut and prospective buyers get turned away by mortgage lenders. The Federal Reserve this month cut its benchmark interest rate target to as low as zero and said it would take more steps to ease borrowing as the longest postwar recession looms.
“November sales just collapsed,” said Chris Low, chief economist at FTN Financial in New York. “Price declines are accelerating. As bad as this is, it’s going to be considerably worse in a month’s time.”
Resales were forecast to fall to a 4.93 million annual rate from an originally reported 4.98 million in October, according to the median estimate of 63 economists in a Bloomberg News survey. Projections ranged from 3.98 million to 5.2 million.
Sales dropped 10.6 percent compared with a year earlier. Resales averaged 5.67 million in 2007 and before today’s report, fluctuated around a 4.96 million rate this year.
The number of previously-owned unsold homes on the market at the end of November represented 11.2 months’ worth at the current sales pace, up from 10.3 months’ at the end of the prior month.
Historic Price Decline
The median price of an existing home fell to $181,300, and the percentage drop from a year ago was “probably the largest price decline since the Great Depression,” although records don’t go back that far, said NAR Chief Economist Lawrence Yun.
Foreclosures and short sales accounted for 45 percent of last month’s home purchases, Yun said.
Resales of single-family homes fell 8 percent to an annual rate of 4.02 million. Sales of condos and co-ops declined 13 percent to a 470,000 rate.
Regional Breakdown
Purchases declined in all regions of the country, led by drops of 12 percent in the Northeast and 10.9 percent in the South. Sales fell 7.4 percent in the Midwest and 4.3 percent in the West. Prices also fell throughout the country, led by a decline of 25.5 percent in the West.
Resales account for about 90 percent of the market. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
New-home sales, recorded when a contract is signed, are considered by economists to be a more timely barometer.
The Federal Reserve on Dec. 16 cut its benchmark interest rate target to a range of zero to 0.25 percent, and said it stands ready to expand purchases of Fannie Mae, Freddie Mac and Federal Home Loan Bank debt under a program aimed at reducing mortgage costs.
The average rate on a 30-year fixed-rate loan fell to 5.18 percent in the week ended Dec. 12, the lowest in more than five years, according to the Mortgage Bankers Association.
President-elect Barack Obama on Dec. 13 said he will develop plans to limit foreclosures and “dramatically increase the number of families who can stay in their homes.” One tenth of U.S. families who own a home are in financial distress, Obama said.
Homebuilders’ Shares
The S&P Supercomposite Homebuilding Index is down a third so far this year, reflecting the plight of homebuilders.
Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., New Jersey’s biggest homebuilder, called on the government to provide an economic stimulus for the housing industry.
“If government wants to get to the root of the problem they need to fix housing first,” Hovnanian said in a conference call on Dec. 17. Hovnanian, whose company reported a fiscal fourth quarter loss, didn’t specify what type of government intervention he wants in the housing market
Tuesday, December 23, 2008
Wednesday, December 17, 2008
Australia Stocks, Japan Futures Slump on Falling Oil, Currency
By Masaki Kondo and Shani Raja
Dec. 18 (Bloomberg) -- Australia shares and Japan’s stock futures slumped after tumbling crude prices and the surging yen dimmed earnings prospects for oil explorers and automakers.
Roc Oil Co., which explores for petroleum in China, Mauritania and Angola, retreated 1.6 percent in Sydney as crude fell below $40 a barrel for the first time in more than four years even after OPEC agreed to reduce production. U.S.-traded receipts of Toyota Motor Corp. dropped 0.7 percent from the closing price in Tokyo as the yen traded at a 13-year high against the dollar. Honda Motor Co. sank 0.6 percent after cutting its annual earnings forecast by two-thirds.
Australia’s S&P/ASX 200 Index fell 0.8 percent to 3,541.90 as of 10:17 a.m. in Sydney. New Zealand’s NZX 50 Index lost 0.2 percent to 2,689.73 in Wellington. In New York, the Standard & Poor’s 500 Index swung between gains and losses at least 26 times before closing 1 percent lower.
“The oil market’s telling us that even with production cuts, demand is exceptionally weak,” said Philip Schwartz, who directly manages $750 million at International Value Equities in New York. “The concern in Japan is that the yen is strengthening way beyond any previous expectation. It’s hurting exporters tremendously.”
The Bank of New York Mellon Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 1.9 percent. Nikkei 225 Stock Average futures expiring in March closed at 8,815 in Chicago, 1.9 percent higher than 8,650 in Osaka and 1.7 percent up from 8,670 in Singapore.
Yen Climbs
Crude oil for January delivery tumbled 8.1 percent to $40.06 a barrel in New York yesterday, the lowest settlement since July 2004, after touching $39.88. Prices have plunged 73 percent from a record on July 11.
The Organization of Petroleum Exporting Countries yesterday agreed to trim current production by 2.46 million barrels to 24.845 million barrels a day, OPEC President Chakib Khelil said after the meeting in Algeria.
The yen appreciated against the dollar to as much as 87.14, the strongest level since July 1995, from 88.76 at the close of stock trading in Tokyo yesterday. The Japanese currency traded at 111.76 against the dollar at the beginning of this year.
Honda chopped its annual operating-profit target by 67 percent to 180 billion yen ($2.06 billion) and halved its third- quarter dividend, citing the surging yen and dwindling demand. Every 1 yen gain against the dollar cuts Honda’s full-year earnings by 18 billion yen.
“Honda’s earnings revision is likely to affect shares throughout the auto sector,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management, said in an interview with Bloomberg Television.
Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, had its rating raised by UBS AG to “buy” from “neutral.” A sounder capital base allows the lender to expand lending and investment, UBS analyst Nana Otsuki wrote in a report dated yesterday.
Dec. 18 (Bloomberg) -- Australia shares and Japan’s stock futures slumped after tumbling crude prices and the surging yen dimmed earnings prospects for oil explorers and automakers.
Roc Oil Co., which explores for petroleum in China, Mauritania and Angola, retreated 1.6 percent in Sydney as crude fell below $40 a barrel for the first time in more than four years even after OPEC agreed to reduce production. U.S.-traded receipts of Toyota Motor Corp. dropped 0.7 percent from the closing price in Tokyo as the yen traded at a 13-year high against the dollar. Honda Motor Co. sank 0.6 percent after cutting its annual earnings forecast by two-thirds.
Australia’s S&P/ASX 200 Index fell 0.8 percent to 3,541.90 as of 10:17 a.m. in Sydney. New Zealand’s NZX 50 Index lost 0.2 percent to 2,689.73 in Wellington. In New York, the Standard & Poor’s 500 Index swung between gains and losses at least 26 times before closing 1 percent lower.
“The oil market’s telling us that even with production cuts, demand is exceptionally weak,” said Philip Schwartz, who directly manages $750 million at International Value Equities in New York. “The concern in Japan is that the yen is strengthening way beyond any previous expectation. It’s hurting exporters tremendously.”
The Bank of New York Mellon Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 1.9 percent. Nikkei 225 Stock Average futures expiring in March closed at 8,815 in Chicago, 1.9 percent higher than 8,650 in Osaka and 1.7 percent up from 8,670 in Singapore.
Yen Climbs
Crude oil for January delivery tumbled 8.1 percent to $40.06 a barrel in New York yesterday, the lowest settlement since July 2004, after touching $39.88. Prices have plunged 73 percent from a record on July 11.
The Organization of Petroleum Exporting Countries yesterday agreed to trim current production by 2.46 million barrels to 24.845 million barrels a day, OPEC President Chakib Khelil said after the meeting in Algeria.
The yen appreciated against the dollar to as much as 87.14, the strongest level since July 1995, from 88.76 at the close of stock trading in Tokyo yesterday. The Japanese currency traded at 111.76 against the dollar at the beginning of this year.
Honda chopped its annual operating-profit target by 67 percent to 180 billion yen ($2.06 billion) and halved its third- quarter dividend, citing the surging yen and dwindling demand. Every 1 yen gain against the dollar cuts Honda’s full-year earnings by 18 billion yen.
“Honda’s earnings revision is likely to affect shares throughout the auto sector,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management, said in an interview with Bloomberg Television.
Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, had its rating raised by UBS AG to “buy” from “neutral.” A sounder capital base allows the lender to expand lending and investment, UBS analyst Nana Otsuki wrote in a report dated yesterday.
Friday, December 12, 2008
ECB Signals Reluctance to Cut Rates Much Further, May Pause
By Gabi Thesing
Dec. 12 (Bloomberg) -- European Central Bank policy makers signaled they’re reluctant to cut the benchmark interest rate much further after three reductions to 2.5 percent since October, and may not trim borrowing costs again next month.
“We have dealt with the economy to some extent because we took an extraordinary measure,” ECB council member Yves Mersch said in Luxembourg today. His colleague Axel Weber said last night he “would like to avoid” taking the rate below 2 percent. Both questioned whether the bank will have enough new information in January to act again on rates.
The ECB has lowered borrowing costs by an unprecedented 1.75 percentage points since the global financial crisis pushed the euro region into recession. European industrial production plunged the most in 15 years in October as orders weakened and the region’s biggest companies scaled back investment, the European Union statistics office in Luxembourg said today.
Investors are betting the deepening economic slump will force the ECB to slice another 50 basis points off the benchmark rate in January, Eonia forward contracts show.
“They will be forced to go to 1 percent or lower by June,” said Juergen Michels chief euro-area economist at Citigroup Inc in London. “The rhetoric at the moment is to justify their forecasts, which are too optimistic.”
The ECB predicted last week that the economy will contract about 0.5 percent next year before recovering to expand around 1 percent in 2010. Economists at UniCredit Group estimate gross domestic product will drop 1.3 percent next year.
Behind The Curve?
French manufacturing confidence fell to a 21-year low in November, suggesting the region’s second-largest economy will suffer a bigger contraction in the fourth quarter than previously anticipated, the Bank of France said today.
“The ECB should refrain from considering any pause in the easing cycle to avoid falling again behind the curve,” said Marco Valli, an economist at UniCredit in Milan.
Mersch said there may “not be considerable and significant information available before February, March.”
The euro rose more than half a cent to $1.3389 after the remarks as evidence mounts that some ECB policy makers are reluctant to continue easing monetary policy aggressively.
The bank last week lowered the key rate by 75 basis points, the biggest reduction in its ten-year history.
ECB Executive Board member Juergen Stark said on Dec. 10 that scope for further rate cuts is “very limited, potentially allowing for small steps only.”
While Weber and Mersch said the ECB still has “room to maneuver” on rates, Weber added: “We should be cautious when our rates approach territory we haven’t explored before. Our lowest level so far was 2 percent.”
Investors are betting the Federal Reserve will halve its benchmark rate to 0.5 percent at its Dec. 15-16 policy meeting. The Swiss National Bank made the same shift yesterday.
Dec. 12 (Bloomberg) -- European Central Bank policy makers signaled they’re reluctant to cut the benchmark interest rate much further after three reductions to 2.5 percent since October, and may not trim borrowing costs again next month.
“We have dealt with the economy to some extent because we took an extraordinary measure,” ECB council member Yves Mersch said in Luxembourg today. His colleague Axel Weber said last night he “would like to avoid” taking the rate below 2 percent. Both questioned whether the bank will have enough new information in January to act again on rates.
The ECB has lowered borrowing costs by an unprecedented 1.75 percentage points since the global financial crisis pushed the euro region into recession. European industrial production plunged the most in 15 years in October as orders weakened and the region’s biggest companies scaled back investment, the European Union statistics office in Luxembourg said today.
Investors are betting the deepening economic slump will force the ECB to slice another 50 basis points off the benchmark rate in January, Eonia forward contracts show.
“They will be forced to go to 1 percent or lower by June,” said Juergen Michels chief euro-area economist at Citigroup Inc in London. “The rhetoric at the moment is to justify their forecasts, which are too optimistic.”
The ECB predicted last week that the economy will contract about 0.5 percent next year before recovering to expand around 1 percent in 2010. Economists at UniCredit Group estimate gross domestic product will drop 1.3 percent next year.
Behind The Curve?
French manufacturing confidence fell to a 21-year low in November, suggesting the region’s second-largest economy will suffer a bigger contraction in the fourth quarter than previously anticipated, the Bank of France said today.
“The ECB should refrain from considering any pause in the easing cycle to avoid falling again behind the curve,” said Marco Valli, an economist at UniCredit in Milan.
Mersch said there may “not be considerable and significant information available before February, March.”
The euro rose more than half a cent to $1.3389 after the remarks as evidence mounts that some ECB policy makers are reluctant to continue easing monetary policy aggressively.
The bank last week lowered the key rate by 75 basis points, the biggest reduction in its ten-year history.
ECB Executive Board member Juergen Stark said on Dec. 10 that scope for further rate cuts is “very limited, potentially allowing for small steps only.”
While Weber and Mersch said the ECB still has “room to maneuver” on rates, Weber added: “We should be cautious when our rates approach territory we haven’t explored before. Our lowest level so far was 2 percent.”
Investors are betting the Federal Reserve will halve its benchmark rate to 0.5 percent at its Dec. 15-16 policy meeting. The Swiss National Bank made the same shift yesterday.
Global Stocks, Dollar Tumble as Auto Bailout Fails; GM Slumps
By Chen Shiyin and Adam Haigh
Dec. 12 (Bloomberg) -- Stocks tumbled around the world and the dollar slumped after the Senate rejected a bailout for American automakers, threatening to deepen the global recession. Treasuries rallied and yields fell to record lows.
The MSCI World Index lost 1.8 percent to 876.62 as of 8:06 p.m. in New York after senators voted down a bill to provide $14 billion of emergency funds for General Motors Corp. and Chrysler LLC. GM plunged 37 percent, while Honda Motor Co. and Daimler AG sank more than 8 percent. The dollar fell to a 13-year low against the yen and the cost of protecting corporate bonds against default soared. Metals and crude oil slumped.
“The markets are in a very dire situation and are in a very risk-averse situation,” said Robert Drijkoningen, The Hague-based head of the multi-asset group at ING Investment Management, which has $488 billion under management. “The short-term is bleak,” he said on Bloomberg Television.
Standard & Poor’s 500 Index futures sank 4 percent, indicating the benchmark for U.S. equities will extend yesterday’s 2.9 percent drop. Europe’s Dow Jones Stoxx 600 Index lost 4.5 percent, while the MSCI Asia Pacific Index fell 3.7 percent.
“It’s over with,” Senate Majority Leader Harry Reid said on the Senate floor in Washington last night. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”
The dollar headed for a sixth week of declines versus the yen, while investors sought the safety of government bonds in the U.S., Europe and Japan. The cost of default protection climbed throughout the European auto industry.
‘Betrayed Again’
The MSCI Emerging Markets Index lost 3.6 percent, extending its 2008 drop to 56 percent. China’s CSI 300 Index sank 4.2 percent after a government official said growth will slow more sharply next quarter.
The MSCI World Index of 23 developed markets has slid 45 percent this year as almost $1 trillion in bank losses and writedowns froze credit markets and pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II. Spending plans by governments from the U.S. to Australia spurred a 14 percent rally in the index since Nov. 20.
The S&P 500 earlier this week had marked a technical end to a 14-month bear market, extending its rebound from an 11-year low last month to as much as 21 percent, as President-elect Barack Obama stepped up efforts to pull the economy out of a recession.
“Investors have been betrayed again by U.S. politicians,” said Yasuhiro Miyata, who helps manage about $109 billion at DIAM Co. in Tokyo. “Even with the knowledge that we are in the midst of a crisis, they were unable to come to an agreement and investors have decided to abandon ship.”
GM, Ford, BMW
GM slid 37 percent to $2.65, while Ford Motor Co. lost 25 percent to $2.18 in pre-market trading in New York. Daimler sank 8.5 percent to 22.98 euros and Bayerische Motoren Werke AG fell 3.8 percent to 21.595 euros.
The U.S. is the No. 1 market for BMW and the second-biggest for Daimler’s Mercedes-Benz. Both carmakers have factories there, and while they and other German brands control about 7 percent of the American market, they compete more with each other than with GM and Ford.
A collapse of GM and Chrysler “is worrisome for the U.S. in particular, but we are in a synchronized world so it will have an impact elsewhere,” said Franz Wenzel, Paris-based deputy director for investment strategy at Axa Investment Managers, which oversees $770 billion. “It puts into question any chance of a U.S. recovery that we had expected from mid-2009 onwards.”
Nokian Renkaat Oyj slumped 13 percent to 7.99 euros. The Nordic region’s biggest tiremaker said fourth-quarter sales have been weaker than expected.
Honda, Japan’s second-largest automaker, tumbled 12 percent to 1,921 yen, the largest drop since Oct. 31. Hyundai Motor Co., South Korea’s No. 1 automaker, fell 9.3 percent to 42,000 won.
‘Potential Failure’
“A potential failure in U.S. automakers will have immediate reverberations throughout the U.S. economy, which will affect demand for Asian products and add to recessionary pressures,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which has $81 billion.
Denso Corp., the world’s biggest listed auto-parts maker, plunged 12 percent to 1,430 yen. Aisin Seiki Co., Japan’s largest maker of car transmissions, sank 13 percent to 1,116 yen.
The U.S. dollar weakened to 88.53 against the yen, the lowest since Aug. 2, 1995, before trading at 90.35 in New York. Credit-default swaps, contracts conceived to protect bondholders against default, on the Markit iTraxx Europe index of 125 companies with investment-grade ratings increased 11.5 basis points to 211, according to JPMorgan Chase & Co. prices in London. That’s up from about 50 basis points at the start of the year.
Credit-default swaps on Volkswagen AG, Europe’s biggest carmaker, climbed 81.5 basis points to 383, CMA Datavision prices show.
Platinum, Oil
Platinum, used to make catalytic converters for car and truck exhaust systems, fell as much as 3.4 percent in London, while gold slipped from its highest in more than two weeks. Crude oil dropped as much as 7.2 percent, trimming yesterday’s 10 percent rally.
Yields on 10-year Treasury notes declined to 2.48 percent, the lowest level since 1954.
“Treasuries are clearly showing signs of flight to quality as people generally expected the bailout to succeed,” said Kevin Yang, who helps oversee about $1 billion of U.S. bonds in Taipei at Shinkong Life Insurance Co. “Yields will go lower in the very short-term as stocks test new lows.”
Canon Inc., the world’s biggest digital-camera maker, declined 5.8 percent to 2,590 yen. The number of Americans filing first-time claims for unemployment benefits surged to the highest level since November 1982, a report showed yesterday.
‘Lose Your Job’
“If you lose your job, you don’t spend. If you see others lose their jobs, you don’t spend either,” said Daphne Roth, the Singapore-based head of equity research at ABN Amro Private Bank, which manages about $27 billion of Asian assets.
China’s growth will slow more sharply in the first quarter of 2009 before stabilizing and then recovering, Liu He, vice minister of the Central Leading Group on Financial and Economic Affairs said in Beijing today. China Mobile, the world’s biggest phone company by value, lost 4.7 percent to HK$78.50.
Today’s drop left the MSCI World trading at 11.4 times the earnings of its 1,694 companies, compared with this decade’s average ratio of 26.5. The worst global financial crisis since the Great Depression pushed the gauge’s value down to 10.5 times profit on Oct. 27, the cheapest in at least 13 years, data compiled by Bloomberg show.
The S&P 500 currently trades at 18.9 times earnings, while the Stoxx 600 is valued at 8.9.
Bank stocks led today’s drop in the European benchmark, losing 8.4 percent. HBOS Plc slumped 22 percent to 68.5 pence after the U.K. bank that is being taken over by Lloyds TSB Group Plc said this year’s charge for bad loans rose to 5 billion pounds ($7.5 billion), led by an increase in corporate delinquencies that was worse than analysts forecast. Lloyds decreased 17 percent to 131.8 pence.
Dec. 12 (Bloomberg) -- Stocks tumbled around the world and the dollar slumped after the Senate rejected a bailout for American automakers, threatening to deepen the global recession. Treasuries rallied and yields fell to record lows.
The MSCI World Index lost 1.8 percent to 876.62 as of 8:06 p.m. in New York after senators voted down a bill to provide $14 billion of emergency funds for General Motors Corp. and Chrysler LLC. GM plunged 37 percent, while Honda Motor Co. and Daimler AG sank more than 8 percent. The dollar fell to a 13-year low against the yen and the cost of protecting corporate bonds against default soared. Metals and crude oil slumped.
“The markets are in a very dire situation and are in a very risk-averse situation,” said Robert Drijkoningen, The Hague-based head of the multi-asset group at ING Investment Management, which has $488 billion under management. “The short-term is bleak,” he said on Bloomberg Television.
Standard & Poor’s 500 Index futures sank 4 percent, indicating the benchmark for U.S. equities will extend yesterday’s 2.9 percent drop. Europe’s Dow Jones Stoxx 600 Index lost 4.5 percent, while the MSCI Asia Pacific Index fell 3.7 percent.
“It’s over with,” Senate Majority Leader Harry Reid said on the Senate floor in Washington last night. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”
The dollar headed for a sixth week of declines versus the yen, while investors sought the safety of government bonds in the U.S., Europe and Japan. The cost of default protection climbed throughout the European auto industry.
‘Betrayed Again’
The MSCI Emerging Markets Index lost 3.6 percent, extending its 2008 drop to 56 percent. China’s CSI 300 Index sank 4.2 percent after a government official said growth will slow more sharply next quarter.
The MSCI World Index of 23 developed markets has slid 45 percent this year as almost $1 trillion in bank losses and writedowns froze credit markets and pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II. Spending plans by governments from the U.S. to Australia spurred a 14 percent rally in the index since Nov. 20.
The S&P 500 earlier this week had marked a technical end to a 14-month bear market, extending its rebound from an 11-year low last month to as much as 21 percent, as President-elect Barack Obama stepped up efforts to pull the economy out of a recession.
“Investors have been betrayed again by U.S. politicians,” said Yasuhiro Miyata, who helps manage about $109 billion at DIAM Co. in Tokyo. “Even with the knowledge that we are in the midst of a crisis, they were unable to come to an agreement and investors have decided to abandon ship.”
GM, Ford, BMW
GM slid 37 percent to $2.65, while Ford Motor Co. lost 25 percent to $2.18 in pre-market trading in New York. Daimler sank 8.5 percent to 22.98 euros and Bayerische Motoren Werke AG fell 3.8 percent to 21.595 euros.
The U.S. is the No. 1 market for BMW and the second-biggest for Daimler’s Mercedes-Benz. Both carmakers have factories there, and while they and other German brands control about 7 percent of the American market, they compete more with each other than with GM and Ford.
A collapse of GM and Chrysler “is worrisome for the U.S. in particular, but we are in a synchronized world so it will have an impact elsewhere,” said Franz Wenzel, Paris-based deputy director for investment strategy at Axa Investment Managers, which oversees $770 billion. “It puts into question any chance of a U.S. recovery that we had expected from mid-2009 onwards.”
Nokian Renkaat Oyj slumped 13 percent to 7.99 euros. The Nordic region’s biggest tiremaker said fourth-quarter sales have been weaker than expected.
Honda, Japan’s second-largest automaker, tumbled 12 percent to 1,921 yen, the largest drop since Oct. 31. Hyundai Motor Co., South Korea’s No. 1 automaker, fell 9.3 percent to 42,000 won.
‘Potential Failure’
“A potential failure in U.S. automakers will have immediate reverberations throughout the U.S. economy, which will affect demand for Asian products and add to recessionary pressures,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which has $81 billion.
Denso Corp., the world’s biggest listed auto-parts maker, plunged 12 percent to 1,430 yen. Aisin Seiki Co., Japan’s largest maker of car transmissions, sank 13 percent to 1,116 yen.
The U.S. dollar weakened to 88.53 against the yen, the lowest since Aug. 2, 1995, before trading at 90.35 in New York. Credit-default swaps, contracts conceived to protect bondholders against default, on the Markit iTraxx Europe index of 125 companies with investment-grade ratings increased 11.5 basis points to 211, according to JPMorgan Chase & Co. prices in London. That’s up from about 50 basis points at the start of the year.
Credit-default swaps on Volkswagen AG, Europe’s biggest carmaker, climbed 81.5 basis points to 383, CMA Datavision prices show.
Platinum, Oil
Platinum, used to make catalytic converters for car and truck exhaust systems, fell as much as 3.4 percent in London, while gold slipped from its highest in more than two weeks. Crude oil dropped as much as 7.2 percent, trimming yesterday’s 10 percent rally.
Yields on 10-year Treasury notes declined to 2.48 percent, the lowest level since 1954.
“Treasuries are clearly showing signs of flight to quality as people generally expected the bailout to succeed,” said Kevin Yang, who helps oversee about $1 billion of U.S. bonds in Taipei at Shinkong Life Insurance Co. “Yields will go lower in the very short-term as stocks test new lows.”
Canon Inc., the world’s biggest digital-camera maker, declined 5.8 percent to 2,590 yen. The number of Americans filing first-time claims for unemployment benefits surged to the highest level since November 1982, a report showed yesterday.
‘Lose Your Job’
“If you lose your job, you don’t spend. If you see others lose their jobs, you don’t spend either,” said Daphne Roth, the Singapore-based head of equity research at ABN Amro Private Bank, which manages about $27 billion of Asian assets.
China’s growth will slow more sharply in the first quarter of 2009 before stabilizing and then recovering, Liu He, vice minister of the Central Leading Group on Financial and Economic Affairs said in Beijing today. China Mobile, the world’s biggest phone company by value, lost 4.7 percent to HK$78.50.
Today’s drop left the MSCI World trading at 11.4 times the earnings of its 1,694 companies, compared with this decade’s average ratio of 26.5. The worst global financial crisis since the Great Depression pushed the gauge’s value down to 10.5 times profit on Oct. 27, the cheapest in at least 13 years, data compiled by Bloomberg show.
The S&P 500 currently trades at 18.9 times earnings, while the Stoxx 600 is valued at 8.9.
Bank stocks led today’s drop in the European benchmark, losing 8.4 percent. HBOS Plc slumped 22 percent to 68.5 pence after the U.K. bank that is being taken over by Lloyds TSB Group Plc said this year’s charge for bad loans rose to 5 billion pounds ($7.5 billion), led by an increase in corporate delinquencies that was worse than analysts forecast. Lloyds decreased 17 percent to 131.8 pence.
Wednesday, December 10, 2008
U.S. Stock Futures Gain; General Motors, Ford Climb in Europe
By Adria Cimino
Dec. 10 (Bloomberg) -- U.S. stock-index futures rose on speculation lawmakers will approve a $15 billion bailout to keep automakers afloat, the government’s latest effort to boost the economy. Asian shares climbed, while Europe’s Dow Jones Stoxx 600 Index was little changed.
General Motors Corp., the biggest U.S. carmaker, and Ford Motor Co. gained more than 2 percent in Germany. Democrats reached a tentative agreement with the Bush administration that calls for the appointment of a so-called car czar who could force GM and Chrysler LLC into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31, according to a senior Bush administration official who requested anonymity.
The Standard & Poor’s 500 Index this week marked a technical end to a 14-month bear market as President-elect Barack Obama stepped up efforts to pull the economy out of a recession, pledging the biggest public-works spending since the 1950s. The index has lost 43 percent from its 2007 record as the collapse of subprime mortgages curbed earnings for five straight quarters.
“Strong and radical measures by the government lead us to believe that the economy won’t be as difficult as we thought,” Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees about $117 billion, said in a Bloomberg television interview. “It gives the market hope.”
S&P 500 futures expiring in December added 1.5 percent to 902.4 at 12:25 p.m. in London. Dow Jones Industrial Average futures rose 1.4 percent to 8,840. Nasdaq-100 Index futures increased 1.4 percent to 1,234.5.
Rallies by Honda Motor Co. and Hyundai Motor Co. helped send the MSCI Asia Pacific Index up 3.3 percent. Europe’s Stoxx 600 added 0.1 percent as Rio Tinto Group surged on plans to eliminate 14,000 jobs and cut capital spending by more than half.
GM, Ford
GM jumped 4.9 percent to $4.93. Ford advanced 2.2 percent to $3.30. Congress will vote as early as today on the plan.
A report scheduled for 10 a.m. Washington time may show wholesale inventories in October fell 0.2 percent, according to a Bloomberg survey of economists. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan is set for release at 7 a.m.
Electronic Arts Inc. lost 8.1 percent to $17.78. The world’s second-largest maker of video games predicted fiscal 2009 revenue and profit will be lower than previously forecast because of slow holiday sales in North America and Europe. The company said it will reduce costs by making fewer games and increasing job cuts.
Praxair, Nike
Praxair Inc., the largest producer of industrial gases in the Americas, reduced its fourth-quarter profit forecast and said it will cut 1,600 jobs because the recession is causing an “unprecedented” drop in demand. The shares didn’t trade in Europe.
Nike Inc., the world’s largest athletic-shoe maker, was downgraded to “neutral” from “buy” at Bank of America Corp., which cited a slowdown in demand. The stock didn’t trade in Europe.
The 497 companies in the S&P 500 that reported third-quarter results saw an average 18.3 percent decline in profits, prompting analysts to cut estimates for next year. They now project profit growth of 8.2 percent for S&P 500 companies in 2009, about one- third of their forecast of 23 percent at the end of the third quarter, according to data compiled by Bloomberg.
The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News.
Household spending will drop 1 percent in 2009, the biggest decline since after the attack on Pearl Harbor, according to the median estimate of 51 economists surveyed Dec. 4 through Dec. 9. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey showed.
Dec. 10 (Bloomberg) -- U.S. stock-index futures rose on speculation lawmakers will approve a $15 billion bailout to keep automakers afloat, the government’s latest effort to boost the economy. Asian shares climbed, while Europe’s Dow Jones Stoxx 600 Index was little changed.
General Motors Corp., the biggest U.S. carmaker, and Ford Motor Co. gained more than 2 percent in Germany. Democrats reached a tentative agreement with the Bush administration that calls for the appointment of a so-called car czar who could force GM and Chrysler LLC into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31, according to a senior Bush administration official who requested anonymity.
The Standard & Poor’s 500 Index this week marked a technical end to a 14-month bear market as President-elect Barack Obama stepped up efforts to pull the economy out of a recession, pledging the biggest public-works spending since the 1950s. The index has lost 43 percent from its 2007 record as the collapse of subprime mortgages curbed earnings for five straight quarters.
“Strong and radical measures by the government lead us to believe that the economy won’t be as difficult as we thought,” Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees about $117 billion, said in a Bloomberg television interview. “It gives the market hope.”
S&P 500 futures expiring in December added 1.5 percent to 902.4 at 12:25 p.m. in London. Dow Jones Industrial Average futures rose 1.4 percent to 8,840. Nasdaq-100 Index futures increased 1.4 percent to 1,234.5.
Rallies by Honda Motor Co. and Hyundai Motor Co. helped send the MSCI Asia Pacific Index up 3.3 percent. Europe’s Stoxx 600 added 0.1 percent as Rio Tinto Group surged on plans to eliminate 14,000 jobs and cut capital spending by more than half.
GM, Ford
GM jumped 4.9 percent to $4.93. Ford advanced 2.2 percent to $3.30. Congress will vote as early as today on the plan.
A report scheduled for 10 a.m. Washington time may show wholesale inventories in October fell 0.2 percent, according to a Bloomberg survey of economists. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan is set for release at 7 a.m.
Electronic Arts Inc. lost 8.1 percent to $17.78. The world’s second-largest maker of video games predicted fiscal 2009 revenue and profit will be lower than previously forecast because of slow holiday sales in North America and Europe. The company said it will reduce costs by making fewer games and increasing job cuts.
Praxair, Nike
Praxair Inc., the largest producer of industrial gases in the Americas, reduced its fourth-quarter profit forecast and said it will cut 1,600 jobs because the recession is causing an “unprecedented” drop in demand. The shares didn’t trade in Europe.
Nike Inc., the world’s largest athletic-shoe maker, was downgraded to “neutral” from “buy” at Bank of America Corp., which cited a slowdown in demand. The stock didn’t trade in Europe.
The 497 companies in the S&P 500 that reported third-quarter results saw an average 18.3 percent decline in profits, prompting analysts to cut estimates for next year. They now project profit growth of 8.2 percent for S&P 500 companies in 2009, about one- third of their forecast of 23 percent at the end of the third quarter, according to data compiled by Bloomberg.
The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News.
Household spending will drop 1 percent in 2009, the biggest decline since after the attack on Pearl Harbor, according to the median estimate of 51 economists surveyed Dec. 4 through Dec. 9. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey showed.
Sunday, December 7, 2008
Asian Stocks Rise on U.S., India Stimulus Plans; Tata Climbs
By Chua Kong Ho and Ian C. Sayson
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Asian Stocks Rise on U.S., India Stimulus Plans; Tata Climbs
By Chua Kong Ho and Ian C. Sayson
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Friday, December 5, 2008
Trichet Under Pressure to Outline Plan for Deflation (Update1)
By Simon Kennedy
Dec. 5 (Bloomberg) -- European Central Bank President Jean- Claude Trichet is under pressure to outline a plan to revive the euro region’s economy should he be “trapped” into pushing interest rates closer to zero.
Even as Trichet delivers the largest round of rate cuts in the ECB’s history, he hasn’t spelled out a specific approach should conventional tools fail to head off deflation. While he yesterday acknowledged for the first time that unorthodox measures are an option, economists say the lack of detail is a concern.
“The ECB should lean against the wind as deflation talk inevitably becomes widespread,” said Marco Annunziata, chief economist at Unicredit MIB in London. “This would be best achieved by taking the deflation risk seriously, and outlining a contingency plan against it.”
The absence of a public strategy leaves Trichet lagging Federal Reserve Chairman Ben S. Bernanke, who said Dec. 1 he may turn to alternative policies such as buying Treasuries after cutting the benchmark rate to 1 percent. Bank of England Governor Mervyn King conceded last month that he may have to coordinate policies with the government if U.K. rates fall to zero.
Trichet instead stresses the need to hold on to as much ammunition as possible before discussing other approaches. At 2.5 percent, the ECB’s main rate is still the highest in the Group of Seven nations even after yesterday’s 75 basis point cut.
Deflation Dismissed
“We have to beware of being trapped at nominal levels that would be much too low,” Trichet told reporters. He dismissed the likelihood of deflation and said only that buying assets was a possibility for the ECB, without elaborating further.
“We are looking at the situation as cautiously and attentively as possible,” Trichet said. “At this stage I have no further indications to give.”
That’s a concern to economists at Royal Bank of Scotland Group Plc and Goldman Sachs Group Inc. who fret that without a road map for recovery, banks may continue to limit loans to consumers and companies. Seventeen months into the financial crisis, the interbank lending market remains strained, restricting the flow of credit through the economy and stifling growth.
‘Transparency and Predictability’
“Transparency and predictability are needed from the ECB,” said Erik Nielsen, chief European economist at Goldman Sachs in London. “We need to know as much as possible about what could be done even if it’s not likely.”
One step the ECB could consider is buying commercial paper and then government debt, said Royal Bank of Scotland economist Jacques Cailloux. It could even begin buying private assets before rates approach zero, given that monetary policy is less effective when the financial system is frozen, he said.
Bernanke has already started purchasing corporate paper and said this week that the Fed could also “buy longer-term Treasury or agency securities on the open market in substantial quantities.” Fed policy makers may decide at their next meeting Dec. 15-16 on the details of such a shift, which might resemble the “quantitative easing” strategy the Bank of Japan adopted in 2001-2006 when its key rate neared zero.
New Approach
“It’s hugely important that the ECB clarifies what it can and cannot do if the crisis continues,” said Cailloux. “Doing so would send a big confidence signal to markets that the ECB is willing to use unconventional methods to help the economy.”
The purpose of buying securities would be to reduce long- term rates, making it less attractive to hoard cash and more likely that companies and consumers start to stimulate the economy by spending, said Axel Botte, a fund manager at Axa Investment Managers in Paris, which has about $800 billion in assets under management.
“When rates near zero you need to look to alternative methods to get people to spend,” he said.
Trichet and his colleagues still have more time than their counterparts in the U.S., where deflation could emerge in 2010 and interest rates are already on the cusp of zero, said Dario Perkins, an economist at ABN Amro Holding NV in London.
Deflation, or a prolonged decline in prices, is less likely in the euro region because labor market regulations and a lack of competition mean wages and prices are “sticky” and so slower to retreat than those in the U.S., he said.
One reason for not mapping out what more it could do is that the bank’s 21-member Governing Council is split, said Stuart Thomson, who helps oversee $46 billion in bonds at Resolution Investment Management Ltd. in Glasgow, Scotland.
Trichet declined to say whether yesterday’s decision to cut rates by three quarters of a percentage point had been unanimous and council member Yves Mersch said quarter-point cuts are more likely in future.
“I’d like to see the ECB take more leadership but they continue to be a lagging and reactive central bank,” said Thomson.
Dec. 5 (Bloomberg) -- European Central Bank President Jean- Claude Trichet is under pressure to outline a plan to revive the euro region’s economy should he be “trapped” into pushing interest rates closer to zero.
Even as Trichet delivers the largest round of rate cuts in the ECB’s history, he hasn’t spelled out a specific approach should conventional tools fail to head off deflation. While he yesterday acknowledged for the first time that unorthodox measures are an option, economists say the lack of detail is a concern.
“The ECB should lean against the wind as deflation talk inevitably becomes widespread,” said Marco Annunziata, chief economist at Unicredit MIB in London. “This would be best achieved by taking the deflation risk seriously, and outlining a contingency plan against it.”
The absence of a public strategy leaves Trichet lagging Federal Reserve Chairman Ben S. Bernanke, who said Dec. 1 he may turn to alternative policies such as buying Treasuries after cutting the benchmark rate to 1 percent. Bank of England Governor Mervyn King conceded last month that he may have to coordinate policies with the government if U.K. rates fall to zero.
Trichet instead stresses the need to hold on to as much ammunition as possible before discussing other approaches. At 2.5 percent, the ECB’s main rate is still the highest in the Group of Seven nations even after yesterday’s 75 basis point cut.
Deflation Dismissed
“We have to beware of being trapped at nominal levels that would be much too low,” Trichet told reporters. He dismissed the likelihood of deflation and said only that buying assets was a possibility for the ECB, without elaborating further.
“We are looking at the situation as cautiously and attentively as possible,” Trichet said. “At this stage I have no further indications to give.”
That’s a concern to economists at Royal Bank of Scotland Group Plc and Goldman Sachs Group Inc. who fret that without a road map for recovery, banks may continue to limit loans to consumers and companies. Seventeen months into the financial crisis, the interbank lending market remains strained, restricting the flow of credit through the economy and stifling growth.
‘Transparency and Predictability’
“Transparency and predictability are needed from the ECB,” said Erik Nielsen, chief European economist at Goldman Sachs in London. “We need to know as much as possible about what could be done even if it’s not likely.”
One step the ECB could consider is buying commercial paper and then government debt, said Royal Bank of Scotland economist Jacques Cailloux. It could even begin buying private assets before rates approach zero, given that monetary policy is less effective when the financial system is frozen, he said.
Bernanke has already started purchasing corporate paper and said this week that the Fed could also “buy longer-term Treasury or agency securities on the open market in substantial quantities.” Fed policy makers may decide at their next meeting Dec. 15-16 on the details of such a shift, which might resemble the “quantitative easing” strategy the Bank of Japan adopted in 2001-2006 when its key rate neared zero.
New Approach
“It’s hugely important that the ECB clarifies what it can and cannot do if the crisis continues,” said Cailloux. “Doing so would send a big confidence signal to markets that the ECB is willing to use unconventional methods to help the economy.”
The purpose of buying securities would be to reduce long- term rates, making it less attractive to hoard cash and more likely that companies and consumers start to stimulate the economy by spending, said Axel Botte, a fund manager at Axa Investment Managers in Paris, which has about $800 billion in assets under management.
“When rates near zero you need to look to alternative methods to get people to spend,” he said.
Trichet and his colleagues still have more time than their counterparts in the U.S., where deflation could emerge in 2010 and interest rates are already on the cusp of zero, said Dario Perkins, an economist at ABN Amro Holding NV in London.
Deflation, or a prolonged decline in prices, is less likely in the euro region because labor market regulations and a lack of competition mean wages and prices are “sticky” and so slower to retreat than those in the U.S., he said.
One reason for not mapping out what more it could do is that the bank’s 21-member Governing Council is split, said Stuart Thomson, who helps oversee $46 billion in bonds at Resolution Investment Management Ltd. in Glasgow, Scotland.
Trichet declined to say whether yesterday’s decision to cut rates by three quarters of a percentage point had been unanimous and council member Yves Mersch said quarter-point cuts are more likely in future.
“I’d like to see the ECB take more leadership but they continue to be a lagging and reactive central bank,” said Thomson.
Tuesday, November 25, 2008
Yen Rises on Speculation Stock Losses Will Curb Carry Trades
By Ron Harui and Stanley White
Nov. 26 (Bloomberg) -- The yen rose against the euro on speculation declines in Asian stocks prompted investors to pare holdings of higher-yielding assets funded in Japan.
The currency also gained versus the Australian dollar and the British pound on concern that the Federal Reserve’s $800 billion plan to unfreeze credit markets won’t prevent a protracted global slump. The U.S. economy, the world’s biggest, shrank in the third quarter as consumer spending plunged the most in almost three decades, according to figures released yesterday.
“The yen should remain supported,” said Osao Iizuka, head of foreign-exchange trading at Sumitomo Trust & Banking Co. in Tokyo. “There was a bounce in sentiment after the Fed’s announcement of its latest measures. This has faded because there are still a lot of problems to work out.”
The yen rose to 123.82 per euro at 11:10 a.m. in Tokyo from 124.43 late yesterday in New York. It traded at 95.10 versus the dollar from 95.22. The euro fell to $1.3017 from $1.3064. The pound declined to $1.5393 from $1.5472. The yen may rise to 94.80 per dollar today, Iizuka said.
Against the yen, Australia’s dollar fell to 61.49 from 61.82 in New York late yesterday. The pound dropped 0.6 percent to 146.52 yen.
The MSCI Asia Pacific Index of regional shares slid 0.4 percent, while the Nikkei 225 Stock Average fell 1.3 percent.
Japan’s benchmark interest rate of 0.3 percent compares with 5.25 percent in Australia and 3 percent in the U.K.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.
Implied volatility on one-month euro-yen options rose to 34.74 percent today from 34.25 percent yesterday, indicating greater exchange-rate fluctuation risk that may erode profit on carry trades.
‘Fed’s Balance Sheet’
The Fed will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements yesterday in Washington.
The U.S. currency may weaken should the Fed lose money on the debt and asset-backed securities it plans to buy. The dollar reached a 2 1/2-year high against an index of the currencies of six major U.S. trading partners last week as investors sought refuge from deepening credit losses.
“We may see the Fed’s balance sheet deteriorate because it’s taking on all these assets,” said Akio Shimizu, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest publicly listed lender. “This is a latent risk for the dollar that could weaken it over the long term.”
OECD Cuts Forecast
The Organization for Economic Cooperation and Development cut its forecast for global growth in 2009. The economies of the organization’s 30 members will contract 0.4 percent next year, after expanding 1.4 percent this year. Gross domestic product in the U.S. shrank at a 0.5 percent annual rate from July through September, the most since the 2001 recession, according to revised figures from the Commerce Department in Washington.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, traded at 85.005 from 85.000 yesterday, when it fell 1.3 percent. The index rose to 88.463 on Nov. 21, the highest level since April 2006.
The euro fell, snapping a three-day winning stretch versus the dollar, after a technical chart that some traders use to predict price movements signaled its 4.2 percent gain in the past five days was excessive.
Euro’s Rise ‘Overdone’
“The euro’s surge over the last few days seems overdone, so we may see some selling of the currency,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker.
Europe’s single currency may decline to $1.2950 and 123.30 yen today, Ishikawa said.
The euro’s 14-day stochastic oscillator versus the dollar was around 91, according to data compiled by Bloomberg. A level above 80 suggests a reversal may occur.
Nov. 26 (Bloomberg) -- The yen rose against the euro on speculation declines in Asian stocks prompted investors to pare holdings of higher-yielding assets funded in Japan.
The currency also gained versus the Australian dollar and the British pound on concern that the Federal Reserve’s $800 billion plan to unfreeze credit markets won’t prevent a protracted global slump. The U.S. economy, the world’s biggest, shrank in the third quarter as consumer spending plunged the most in almost three decades, according to figures released yesterday.
“The yen should remain supported,” said Osao Iizuka, head of foreign-exchange trading at Sumitomo Trust & Banking Co. in Tokyo. “There was a bounce in sentiment after the Fed’s announcement of its latest measures. This has faded because there are still a lot of problems to work out.”
The yen rose to 123.82 per euro at 11:10 a.m. in Tokyo from 124.43 late yesterday in New York. It traded at 95.10 versus the dollar from 95.22. The euro fell to $1.3017 from $1.3064. The pound declined to $1.5393 from $1.5472. The yen may rise to 94.80 per dollar today, Iizuka said.
Against the yen, Australia’s dollar fell to 61.49 from 61.82 in New York late yesterday. The pound dropped 0.6 percent to 146.52 yen.
The MSCI Asia Pacific Index of regional shares slid 0.4 percent, while the Nikkei 225 Stock Average fell 1.3 percent.
Japan’s benchmark interest rate of 0.3 percent compares with 5.25 percent in Australia and 3 percent in the U.K.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.
Implied volatility on one-month euro-yen options rose to 34.74 percent today from 34.25 percent yesterday, indicating greater exchange-rate fluctuation risk that may erode profit on carry trades.
‘Fed’s Balance Sheet’
The Fed will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements yesterday in Washington.
The U.S. currency may weaken should the Fed lose money on the debt and asset-backed securities it plans to buy. The dollar reached a 2 1/2-year high against an index of the currencies of six major U.S. trading partners last week as investors sought refuge from deepening credit losses.
“We may see the Fed’s balance sheet deteriorate because it’s taking on all these assets,” said Akio Shimizu, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest publicly listed lender. “This is a latent risk for the dollar that could weaken it over the long term.”
OECD Cuts Forecast
The Organization for Economic Cooperation and Development cut its forecast for global growth in 2009. The economies of the organization’s 30 members will contract 0.4 percent next year, after expanding 1.4 percent this year. Gross domestic product in the U.S. shrank at a 0.5 percent annual rate from July through September, the most since the 2001 recession, according to revised figures from the Commerce Department in Washington.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, traded at 85.005 from 85.000 yesterday, when it fell 1.3 percent. The index rose to 88.463 on Nov. 21, the highest level since April 2006.
The euro fell, snapping a three-day winning stretch versus the dollar, after a technical chart that some traders use to predict price movements signaled its 4.2 percent gain in the past five days was excessive.
Euro’s Rise ‘Overdone’
“The euro’s surge over the last few days seems overdone, so we may see some selling of the currency,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker.
Europe’s single currency may decline to $1.2950 and 123.30 yen today, Ishikawa said.
The euro’s 14-day stochastic oscillator versus the dollar was around 91, according to data compiled by Bloomberg. A level above 80 suggests a reversal may occur.
Sunday, November 23, 2008
Citigroup, Fed Said to Weigh Plan to Limit Losses (Update1)
By Bradley Keoun and Alison Vekshin
Nov. 23 (Bloomberg) -- Citigroup Inc. and U.S. regulators are in talks to limit the bank’s potential losses on more than $100 billion of toxic assets after the stock’s plunge last week sparked concerns about the company’s fate, four people familiar with the matter said.
The Federal Reserve and Treasury Department were locked in discussions with Citigroup and other regulators throughout the weekend and a deal may be reached as soon as today, according to the people, who declined to be identified because the negotiations are confidential. The assets would remain at Citigroup, with the government agreeing to assume losses beyond a specified amount, two of the people said.
The holdings that may be guaranteed are a portion of the $400 billion pile of mortgages, bonds, auto loans and corporate loans that Chief Executive Officer Vikram Pandit pledged in May to shed within three years, the two people said. While the amount to be covered under the plan is under discussion, the talks are focused on about $100 billion to $200 billion of the assets, they said.
“If anybody’s too big to fail from the financial system’s point of view, it’s Citi,’” said Brian Barish, president of Cambiar Investments LLC in Denver, which manages about $6 billion and doesn’t own Citigroup stock. “The government doesn’t need to be in this to make money. If they lose a few bucks on this, but save the system, it’ll be worth it.”
Share Decline
Citigroup lost 60 percent of its market value last week as investor confidence in the New York-based company’s prospects faltered after four consecutive quarterly losses. Unless the bank takes steps to halt the slide, the share-decline may rattle Citigroup’s customers, counterparties and employees, threatening the operations of the second-biggest U.S. bank by assets, according to a report by David Hendler, an analyst at CreditSights Inc. in New York.
“We sense that Citi’s board will also recognize the difficult chain of events which can be brought about by its low stock price, and prefer to take action in the next few days or weeks,” Hendler wrote in the report yesterday.
Federal Reserve Board spokeswoman Michelle Smith and Citigroup spokesman Michael Hanretta declined to comment today. Citigroup Chief Financial Officer Gary Crittenden and Chief Risk Officer Brian Leach are leading the negotiations for the bank, one person familiar with the matter said.
Pandit, 51, told employees on a Nov. 21 conference call that he doesn’t plan to break up the company. He and Crittenden said they don’t expect to sell the Smith Barney brokerage unit, two people who listened to the call said at the time.
Intervention
Citigroup’s board, led by Chairman Win Bischoff and independent director Richard Parsons, met the same day to discuss the bank’s options.
Citigroup issued a statement last week saying the company has “a very strong capital and liquidity position and a unique global franchise.”
The proposal under consideration is a variation on a theme that has played out in government interventions during the past year, including JPMorgan Chase & Co.’s purchase of Bear Stearns Cos., Citigroup’s failed effort to buy Wachovia Corp. and the Swiss government’s rescue financing of UBS AG. In each case, the government required the bank to absorb initial losses and agreed to guarantee deficits beyond that amount.
JPMorgan took the first $1.15 billion of losses on a $30 billion portfolio of Bear Stearns’ devalued assets, with the Federal Reserve agreeing to finance the rest.
Wachovia, UBS
In September, Citigroup agreed to suffer the first $42 billion of losses on Wachovia’s loan porfolio, with the FDIC taking the rest, in a deal that was canceled after Wells Fargo & Co. stepped in to buy Wachovia.
The Swiss government required UBS in October to inject 6 billion Swiss francs ($4.91 billion) into a special purpose vehicle backed with $54 billion of central bank loans to allow the bank to carve off about $60 billion of assets.
To help shore up Citigroup, the Federal Deposit Insurance Corp. could provide loan-loss support or the U.S. Treasury could contribute money from the $700 billion Troubled Asset Relief Program passed by Congress in October, Hendler’s report said.
“The FDIC does not comment on open and operating institutions,” Andrew Gray, a spokesman for the agency, said in an e-mailed statement today.
Citigroup’s debt remains on review for downgrade by both Moody’s Investors Service and Standard & Poor’s. Moody’s rates Citigroup’s senior unsecured debt Aa3, while S&P has an AA- rating. A downgrade to A1 by Moody’s or to A+ by S&P is possible as the bank’s falling stock price could be deemed to hamper the company’s “financial flexibility,” the report said.
A single-A rating at the parent-company level should be manageable as long as the company’s banking subsidiaries maintain double-A ratings, CreditSights said. JPMorgan, now the biggest U.S. bank by assets, managed to endure with single-A ratings earlier in the decade, the report notes.
Nov. 23 (Bloomberg) -- Citigroup Inc. and U.S. regulators are in talks to limit the bank’s potential losses on more than $100 billion of toxic assets after the stock’s plunge last week sparked concerns about the company’s fate, four people familiar with the matter said.
The Federal Reserve and Treasury Department were locked in discussions with Citigroup and other regulators throughout the weekend and a deal may be reached as soon as today, according to the people, who declined to be identified because the negotiations are confidential. The assets would remain at Citigroup, with the government agreeing to assume losses beyond a specified amount, two of the people said.
The holdings that may be guaranteed are a portion of the $400 billion pile of mortgages, bonds, auto loans and corporate loans that Chief Executive Officer Vikram Pandit pledged in May to shed within three years, the two people said. While the amount to be covered under the plan is under discussion, the talks are focused on about $100 billion to $200 billion of the assets, they said.
“If anybody’s too big to fail from the financial system’s point of view, it’s Citi,’” said Brian Barish, president of Cambiar Investments LLC in Denver, which manages about $6 billion and doesn’t own Citigroup stock. “The government doesn’t need to be in this to make money. If they lose a few bucks on this, but save the system, it’ll be worth it.”
Share Decline
Citigroup lost 60 percent of its market value last week as investor confidence in the New York-based company’s prospects faltered after four consecutive quarterly losses. Unless the bank takes steps to halt the slide, the share-decline may rattle Citigroup’s customers, counterparties and employees, threatening the operations of the second-biggest U.S. bank by assets, according to a report by David Hendler, an analyst at CreditSights Inc. in New York.
“We sense that Citi’s board will also recognize the difficult chain of events which can be brought about by its low stock price, and prefer to take action in the next few days or weeks,” Hendler wrote in the report yesterday.
Federal Reserve Board spokeswoman Michelle Smith and Citigroup spokesman Michael Hanretta declined to comment today. Citigroup Chief Financial Officer Gary Crittenden and Chief Risk Officer Brian Leach are leading the negotiations for the bank, one person familiar with the matter said.
Pandit, 51, told employees on a Nov. 21 conference call that he doesn’t plan to break up the company. He and Crittenden said they don’t expect to sell the Smith Barney brokerage unit, two people who listened to the call said at the time.
Intervention
Citigroup’s board, led by Chairman Win Bischoff and independent director Richard Parsons, met the same day to discuss the bank’s options.
Citigroup issued a statement last week saying the company has “a very strong capital and liquidity position and a unique global franchise.”
The proposal under consideration is a variation on a theme that has played out in government interventions during the past year, including JPMorgan Chase & Co.’s purchase of Bear Stearns Cos., Citigroup’s failed effort to buy Wachovia Corp. and the Swiss government’s rescue financing of UBS AG. In each case, the government required the bank to absorb initial losses and agreed to guarantee deficits beyond that amount.
JPMorgan took the first $1.15 billion of losses on a $30 billion portfolio of Bear Stearns’ devalued assets, with the Federal Reserve agreeing to finance the rest.
Wachovia, UBS
In September, Citigroup agreed to suffer the first $42 billion of losses on Wachovia’s loan porfolio, with the FDIC taking the rest, in a deal that was canceled after Wells Fargo & Co. stepped in to buy Wachovia.
The Swiss government required UBS in October to inject 6 billion Swiss francs ($4.91 billion) into a special purpose vehicle backed with $54 billion of central bank loans to allow the bank to carve off about $60 billion of assets.
To help shore up Citigroup, the Federal Deposit Insurance Corp. could provide loan-loss support or the U.S. Treasury could contribute money from the $700 billion Troubled Asset Relief Program passed by Congress in October, Hendler’s report said.
“The FDIC does not comment on open and operating institutions,” Andrew Gray, a spokesman for the agency, said in an e-mailed statement today.
Citigroup’s debt remains on review for downgrade by both Moody’s Investors Service and Standard & Poor’s. Moody’s rates Citigroup’s senior unsecured debt Aa3, while S&P has an AA- rating. A downgrade to A1 by Moody’s or to A+ by S&P is possible as the bank’s falling stock price could be deemed to hamper the company’s “financial flexibility,” the report said.
A single-A rating at the parent-company level should be manageable as long as the company’s banking subsidiaries maintain double-A ratings, CreditSights said. JPMorgan, now the biggest U.S. bank by assets, managed to endure with single-A ratings earlier in the decade, the report notes.
Thursday, November 20, 2008
U.S. Economy: Jobless Claims Near Highest Since 1982 (Update1)
By Bob Willis and Shobhana Chandra
Nov. 20 (Bloomberg) -- The number of Americans filing for unemployment benefits approached a 26-year high, and a gauge of the economy's future performance dropped, sending yields on benchmark Treasuries to record lows.
Initial jobless claims climbed to a higher-than-forecast 542,000 in the week ended Nov. 15, the Labor Department said today in Washington. The Conference Board's index of leading economic indicators declined 0.8 percent, and a measure of manufacturing in the Philadelphia region fell to an 18-year low.
The U.S. stock market's benchmark index headed for its biggest annual decline on record, and yields on two-, five- and 30-year Treasuries posted historic lows as confidence in the economic outlook evaporated. The turmoil may intensify pressure on the Federal Reserve and incoming President Barack Obama's administration to take fresh steps to shore up the economy.
``The economic contraction appears to be worsening,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``The stock markets are plunging, people are retrenching and manufacturing activity is virtually falling off a cliff. The increase in layoffs can only worsen the economic downturn.''
First-time jobless claims last week were the highest since 1982, with the exception of a one-week jump in filings in July 1992 caused by temporary layoffs at General Motors Corp. The number of people staying on benefit rolls rose to 4.012 million, the most since December 1982, in the week to Nov. 8.
Economists' Forecasts
Economists surveyed by Bloomberg News had anticipated a reading of 505,000 for last week, based on the median of 40 projections. Claims for the prior week were revised to 515,000 from 516,000.
``This is a reflection of the level of caution that hit the economy in October,'' said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. He added that payroll losses, already totaling 1.2 million this year, will likely ``get worse before they get better.''
The Standard & Poor's 500 Stock Index plunged 6.7 percent to close at 752.44, its lowest level in 11 years, extending its decline for the year to 49 percent. Ten-year Treasury yields dropped to 2.99 percent, a record low, from 3.32 percent late yesterday, and two-year yields slid below 1 percent.
Companies are trimming staff as consumer spending is forecast to fall through at least March, according to economists surveyed by Bloomberg early this month. Banks, faced with mounting losses and write-offs as the financial crisis spread over the past year, have been sacking thousands of workers.
Citigroup Losses
Citigroup Inc., the fourth-largest U.S. bank, will eliminate 52,000 jobs over the next year, twice the target announced last month, as loan losses surge and the economy shrinks, the company said Nov. 17. The company's shares today reached the lowest level since 1994.
``We thought last year the bottom had been reached, but it hasn't,'' Citigroup Chairman Win Bischoff said in a conference in Dubai. ``Most responsible companies are getting into a planning cycle with more pessimistic budgets than they have been in the past.''
Carmakers are also firing workers. Ford Motor Co. plans temporary shutdowns at nine North American plants this quarter, idling as many as 23,000 workers, as it slashes production after an 18 percent drop in U.S. sales this year, the company said Nov. 12.
Forty-three states and territories reported an increase in new claims, while 10 reported a decrease. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3 percent, the highest since June 2003. These data are reported with a one-week lag.
Initial jobless claims averaged 416,000 a week during the last recession, from March 2001 to November 2001.
Philadelphia Index
The Federal Reserve Bank of Philadelphia's general economic index was minus 39.3 this month, weaker than forecast and the lowest reading since October 1990, from minus 37.5 in October, the bank said today. Negative readings signal contraction. The index averaged 5.1 last year.
The deepening credit crisis and economic slump are forcing companies to trim payrolls, investment and production. Slowing global demand is weighing on manufacturing, which accounts for about 12 percent of the U.S. economy.
``Manufacturers are getting hit by several different forces,'' Dean Maki, co-chief global economist at Barclays Capital Markets in New York, said in an interview with Bloomberg Television. ``Exports are being hit pretty hard because the slowdown is heading abroad as well.''
Component Measures
Six of the 10 indicators in today's Conference Board report dragged the index down, led by plunging stock prices, which subtracted 0.89 percentage point. The Standard & Poor's 500 index dropped 20 percent last month from September.
The index was forecast to decline 0.6 percent, according to the median of 56 forecasts. The reading for September was revised to a gain of 0.1 percent, less than the 0.3 percent increase previously reported.
The index is also made up of jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times, new orders for consumer goods, bookings for capital goods and money supply adjusted for inflation.
Housing subtracted 0.35 percentage point from the index in October. The pace of housing starts and building permits, a sign of future construction, both plunged to record lows last month, indicating the industry's downturn may extend into a fourth year.
Lowe's Cos., the second-largest home-improvement retailer, reduced its full-year profit forecast following a slowdown in remodeling projects.
Federal Reserve policy makers ``generally expected the economy to contract moderately in the second half of 2008 and the first half of 2009 and agreed that the downside risks to growth had increased,'' according to minutes of their Oct. 28-29 meeting released yesterday.
The economy contracted 0.3 percent in the third quarter and economists surveyed by Bloomberg forecast negative growth of about 1 percent for the next six months.
Nov. 20 (Bloomberg) -- The number of Americans filing for unemployment benefits approached a 26-year high, and a gauge of the economy's future performance dropped, sending yields on benchmark Treasuries to record lows.
Initial jobless claims climbed to a higher-than-forecast 542,000 in the week ended Nov. 15, the Labor Department said today in Washington. The Conference Board's index of leading economic indicators declined 0.8 percent, and a measure of manufacturing in the Philadelphia region fell to an 18-year low.
The U.S. stock market's benchmark index headed for its biggest annual decline on record, and yields on two-, five- and 30-year Treasuries posted historic lows as confidence in the economic outlook evaporated. The turmoil may intensify pressure on the Federal Reserve and incoming President Barack Obama's administration to take fresh steps to shore up the economy.
``The economic contraction appears to be worsening,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``The stock markets are plunging, people are retrenching and manufacturing activity is virtually falling off a cliff. The increase in layoffs can only worsen the economic downturn.''
First-time jobless claims last week were the highest since 1982, with the exception of a one-week jump in filings in July 1992 caused by temporary layoffs at General Motors Corp. The number of people staying on benefit rolls rose to 4.012 million, the most since December 1982, in the week to Nov. 8.
Economists' Forecasts
Economists surveyed by Bloomberg News had anticipated a reading of 505,000 for last week, based on the median of 40 projections. Claims for the prior week were revised to 515,000 from 516,000.
``This is a reflection of the level of caution that hit the economy in October,'' said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. He added that payroll losses, already totaling 1.2 million this year, will likely ``get worse before they get better.''
The Standard & Poor's 500 Stock Index plunged 6.7 percent to close at 752.44, its lowest level in 11 years, extending its decline for the year to 49 percent. Ten-year Treasury yields dropped to 2.99 percent, a record low, from 3.32 percent late yesterday, and two-year yields slid below 1 percent.
Companies are trimming staff as consumer spending is forecast to fall through at least March, according to economists surveyed by Bloomberg early this month. Banks, faced with mounting losses and write-offs as the financial crisis spread over the past year, have been sacking thousands of workers.
Citigroup Losses
Citigroup Inc., the fourth-largest U.S. bank, will eliminate 52,000 jobs over the next year, twice the target announced last month, as loan losses surge and the economy shrinks, the company said Nov. 17. The company's shares today reached the lowest level since 1994.
``We thought last year the bottom had been reached, but it hasn't,'' Citigroup Chairman Win Bischoff said in a conference in Dubai. ``Most responsible companies are getting into a planning cycle with more pessimistic budgets than they have been in the past.''
Carmakers are also firing workers. Ford Motor Co. plans temporary shutdowns at nine North American plants this quarter, idling as many as 23,000 workers, as it slashes production after an 18 percent drop in U.S. sales this year, the company said Nov. 12.
Forty-three states and territories reported an increase in new claims, while 10 reported a decrease. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3 percent, the highest since June 2003. These data are reported with a one-week lag.
Initial jobless claims averaged 416,000 a week during the last recession, from March 2001 to November 2001.
Philadelphia Index
The Federal Reserve Bank of Philadelphia's general economic index was minus 39.3 this month, weaker than forecast and the lowest reading since October 1990, from minus 37.5 in October, the bank said today. Negative readings signal contraction. The index averaged 5.1 last year.
The deepening credit crisis and economic slump are forcing companies to trim payrolls, investment and production. Slowing global demand is weighing on manufacturing, which accounts for about 12 percent of the U.S. economy.
``Manufacturers are getting hit by several different forces,'' Dean Maki, co-chief global economist at Barclays Capital Markets in New York, said in an interview with Bloomberg Television. ``Exports are being hit pretty hard because the slowdown is heading abroad as well.''
Component Measures
Six of the 10 indicators in today's Conference Board report dragged the index down, led by plunging stock prices, which subtracted 0.89 percentage point. The Standard & Poor's 500 index dropped 20 percent last month from September.
The index was forecast to decline 0.6 percent, according to the median of 56 forecasts. The reading for September was revised to a gain of 0.1 percent, less than the 0.3 percent increase previously reported.
The index is also made up of jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times, new orders for consumer goods, bookings for capital goods and money supply adjusted for inflation.
Housing subtracted 0.35 percentage point from the index in October. The pace of housing starts and building permits, a sign of future construction, both plunged to record lows last month, indicating the industry's downturn may extend into a fourth year.
Lowe's Cos., the second-largest home-improvement retailer, reduced its full-year profit forecast following a slowdown in remodeling projects.
Federal Reserve policy makers ``generally expected the economy to contract moderately in the second half of 2008 and the first half of 2009 and agreed that the downside risks to growth had increased,'' according to minutes of their Oct. 28-29 meeting released yesterday.
The economy contracted 0.3 percent in the third quarter and economists surveyed by Bloomberg forecast negative growth of about 1 percent for the next six months.
Wednesday, November 19, 2008
BOE Saw Need for Rate Reduction of More Than 2 Points (Update2)
By Svenja O'Donnell
Nov. 19 (Bloomberg) -- Bank of England policy makers considered an even bigger reduction in the benchmark interest rate than the 1.5 percentage-point cut announced on Nov. 6 as their forecasts pointed to a deepening recession.
The possible need for a cut to less than 2.5 percent was discussed at the Monetary Policy Committee's meeting, according to minutes published today by the central bank in London. Governor Mervyn King and his colleagues vote 9-0 to lower the rate to 3 percent from 4.5 percent.
The U.K.'s inflation rate had the biggest drop in at least 11 years in October as the economy shrank, data showed yesterday. King said last week that Britain probably faces a recession and the central bank is ready to cut the interest rate as much as needed to prevent deflation from taking hold.
``The projections in the inflation report implied that a very significant reduction in bank rate -- possibly in excess of 200 basis points -- might be required in order to meet the inflation target in the medium term,'' the committee said.
Policy makers limited the reduction to 1.5 percentage points because they wanted to wait for details of government tax plans and see the effects of the state rescue of financial institutions.
Inflation Credibility
They also said that a bigger cut may surprise financial markets and damage the credibility of their inflation target. Some policy makers said that limiting the reduction gave room for further cuts to bolster confidence in future, the minutes showed.
``The facts have changed to such a degree that, not only did we require 150 basis points, but more is in the pipeline,'' said Philip Shaw, chief economist at Investec Securities in London. ``They clearly believe more aggressive action on interest rates is likely to be required.''
Consumer prices rose 4.5 percent from a year earlier, compared with 5.2 percent the previous month, the statistics office said yesterday. The slowing economy is fuelling concerns of deflation, as manufacturers' raw material costs and output prices fell at the fastest pace in 22 years last month.
Policy maker Timothy Besley said yesterday that the weakness of the pound, which has dropped more than 24 percent against the dollar this year, probably won't be enough to prevent inflation from slowing below the 2 percent target in 2009. The pound traded at $1.5006 as of 10:29 a.m. in London today.
``Inflation is likely to fall below target next year, notwithstanding upward pressure on inflation from the continued fall in the value of the pound,'' Besley said in a speech at the Royal Economic Society in London.
King said on Nov. 12 the bank is ``prepared to cut bank rate to whatever level is necessary,'' to keep inflation at the target and didn't rule out putting the benchmark at zero. The Bank of England's forecasts, published on Nov. 12, show inflation may slow ``well below'' the 2 percent goal in 2009.
Nov. 19 (Bloomberg) -- Bank of England policy makers considered an even bigger reduction in the benchmark interest rate than the 1.5 percentage-point cut announced on Nov. 6 as their forecasts pointed to a deepening recession.
The possible need for a cut to less than 2.5 percent was discussed at the Monetary Policy Committee's meeting, according to minutes published today by the central bank in London. Governor Mervyn King and his colleagues vote 9-0 to lower the rate to 3 percent from 4.5 percent.
The U.K.'s inflation rate had the biggest drop in at least 11 years in October as the economy shrank, data showed yesterday. King said last week that Britain probably faces a recession and the central bank is ready to cut the interest rate as much as needed to prevent deflation from taking hold.
``The projections in the inflation report implied that a very significant reduction in bank rate -- possibly in excess of 200 basis points -- might be required in order to meet the inflation target in the medium term,'' the committee said.
Policy makers limited the reduction to 1.5 percentage points because they wanted to wait for details of government tax plans and see the effects of the state rescue of financial institutions.
Inflation Credibility
They also said that a bigger cut may surprise financial markets and damage the credibility of their inflation target. Some policy makers said that limiting the reduction gave room for further cuts to bolster confidence in future, the minutes showed.
``The facts have changed to such a degree that, not only did we require 150 basis points, but more is in the pipeline,'' said Philip Shaw, chief economist at Investec Securities in London. ``They clearly believe more aggressive action on interest rates is likely to be required.''
Consumer prices rose 4.5 percent from a year earlier, compared with 5.2 percent the previous month, the statistics office said yesterday. The slowing economy is fuelling concerns of deflation, as manufacturers' raw material costs and output prices fell at the fastest pace in 22 years last month.
Policy maker Timothy Besley said yesterday that the weakness of the pound, which has dropped more than 24 percent against the dollar this year, probably won't be enough to prevent inflation from slowing below the 2 percent target in 2009. The pound traded at $1.5006 as of 10:29 a.m. in London today.
``Inflation is likely to fall below target next year, notwithstanding upward pressure on inflation from the continued fall in the value of the pound,'' Besley said in a speech at the Royal Economic Society in London.
King said on Nov. 12 the bank is ``prepared to cut bank rate to whatever level is necessary,'' to keep inflation at the target and didn't rule out putting the benchmark at zero. The Bank of England's forecasts, published on Nov. 12, show inflation may slow ``well below'' the 2 percent goal in 2009.
Tuesday, November 18, 2008
U.S. Stocks Rally, Led by Energy, Computer Shares; Exxon Gains
By Eric Martin
Nov. 18 (Bloomberg) -- U.S. stocks gained in the last hour of trading as a rally in energy and technology shares overpowered earlier declines spurred by a drop in homebuilder confidence to the lowest level on record.
Hewlett-Packard Co. jumped 14 percent as earnings topped analysts' estimates, while Exxon Mobil Corp. climbed more than 4 percent. The advance in equities accelerated near the close as investors tracking the Standard & Poor's 500 Index bought shares to replace Anheuser-Busch Cos., which was removed from the gauge following its takeover by InBev NV.
The S&P 500 added 1 percent to 859.12, the first advance in three days. The Dow Jones Industrial Average increased 151.17 points, or 1.8 percent, to 8,424.75. The Nasdaq Composite Index rose less than 0.1 percent to 1,483.27. About six stocks retreated for every five that advanced on the New York Stock Exchange.
``A number of industries' and sectors' stocks have fallen by huge percentages over the past year and appear to be at pretty attractive valuations based on historical measures,'' said Dean Gulis, part of a group that manages about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. ``There can be some small-scale buying done in this market environment.''
The S&P 500 earlier slid below its lowest closing level since 2003 after the National Association of Home Builders/Wells Fargo index of builder confidence decreased to a worse-than- forecast reading of 9, the lowest level since record-keeping began in 1985.
Worst Year Since '31
The benchmark index for U.S. equities is down more than 41 percent in 2008, poised for its worst year since 1931, as credit losses and asset writedowns at global financial firms approach $1 trillion. Profits slumped 17 percent on average at companies in the index that have reported third-quarter results, according to Bloomberg data. Analysts expect an 8.5 percent drop in full-year earnings, based on estimates compiled by Bloomberg.
The S&P 500 erased a drop of as much as 2.8 percent in the final hour of the trading session as managers of funds that mimic the index prepared for the replacement of Anheuser-Busch by Stericycle Inc. Anheuser-Busch, with a market value of about $50 billion, was set to be removed following the close of its acquisition by InBev NV of Belgium.
Index funds, which represent about 10 percent of the stock market, ``got $5 billion from owning BUD,'' said Michael Buek, a principal at Vanguard Group Inc. in Valley Forge, Pennsylvania, manager of the biggest S&P 500 index fund. BUD is the ticker symbol for Anheuser-Busch, brewer of Budweiser beer.
`Put to Work'
``The stock that was added was a $500 million weight, so about $4.5 billion has to be put to work,'' said Buek. ``That money was spent across the other 499 names. To perfectly track the close, you'd want to put the $4.5 billion to work on the close.''
The earlier retreat in the S&P 500 pushed its dividend yield above the yield on 10-year Treasury notes for the first time since 1958 today, according to data compiled by Bloomberg and Peter Bernstein, the financial author and president of Peter L. Bernstein Inc. Dividends paid by S&P 500 companies were 3.57 percent of the index's price as of 1:13 p.m., compared with the 10-year note's yield of 3.54 percent.
``It's something I've been watching for quite some time,'' said Fritz Meyer, the Denver-based senior market strategist at Invesco Aim, which manages about $358 billion. ``It speaks to the opportunity in stocks. By comparison to Treasuries, every asset class is on sale.''
Tech Rally
Hewlett-Packard added $4.25, or 14 percent, to $33.59. The computer maker reported fourth-quarter earnings of $1.03 a share, excluding reorganizing expenses and other costs, exceeding the $1 average analyst estimate. The results signal Hewlett-Packard is withstanding an economic crisis that has sapped sales at other technology companies, including Cisco Systems Inc. and Intel Corp.
Hewlett-Packard led the S&P 500 Information Technology Index to a 1.9 percent advance. The gains came after the group's valuation slid to less than 12 times earnings, the cheapest since Bloomberg began tracking the data in 1995.
Yahoo! Inc. jumped 8.7 percent to $11.55 after Chief Executive Officer Jerry Yang agreed to step down, opening the door for a fresh bid from Microsoft Corp. The company's market value has dropped by more than $20 billion since Yang took over as CEO in June 2007 as discussions with Microsoft ended in failure, an ad partnership with Google Inc. was derailed and talks with Time Warner Inc.'s AOL stalled. Yahoo ``might be worth $21'' a share to an acquirer, Goldman Sachs Group Inc. said.
Energy companies climbed 3.3 percent as a group, the most among 10 industries in the S&P 500, as they also traded close to their lowest price-to-earnings valuation on record. Exxon Mobil Corp., the largest U.S. energy company, gained $2.95, or 4 percent, to $76.33.
Home Depot Beats
Home Depot Inc., the world's largest home-improvement retailer, added 71 cents, or 3.6 percent, to $20.71 after profit declined less than analysts estimated and the company repeated its earnings forecast for the year. As U.S. consumers cut back on renovations and cabinet purchases, Home Depot has slashed corporate expenses and closed stores to help remain profitable.
Walt Disney Co. gained 4.7 percent to $20.67 for the biggest jump in the Dow average after Hewlett-Packard. The biggest theme- park operator was raised to ``buy'' from ``neutral'' by Pali Capital LLC, which predicted a ``modest positive'' rebound in attendance at the company's resorts in 2010.
Citigroup, CIT Tumble
Citigroup Inc. dropped 53 cents, or 6 percent, to $8.36 and traded below $8 for the first time since 1995. The bank that yesterday announced plans to cut 52,000 jobs may post a loss of 30 cents per share next year, compared with a previous estimate of a $1.50 profit, Deutsche Bank AG analyst Mike Mayo wrote in a note.
CIT Group Inc. fell the most in the S&P 500, losing 89 cents, or 26 percent, to $2.60. The commercial lender's stock- price forecast was reduced to $11 from $13 by Barclays Plc, which said its share sale will dilute earnings.
Corning Inc. declined 62 cents, or 6.9 percent, to $8.39. The biggest maker of glass for flat-panel televisions said fourth-quarter sales will miss its forecast as demand for TVs and computer monitors wanes.
Medtronic Inc. dropped $4.82, or 13 percent, to $31.60. The world's second-biggest maker of medical devices said fiscal second-quarter profit fell 14 percent, missing analysts' estimates, on legal costs.
`Far From Normal'
The cost of borrowing in dollars for three months in London fell for the first time in four days ahead of Congressional testimony from Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson. The London interbank offered rate, or Libor, that banks say they charge each other for three- month loans declined two basis points to 2.22 percent today, according to the British Bankers' Association.
Bernanke said lending in the U.S. is ``still far from normal,'' even after emergency federal programs helped reduce interest rates for some borrowers.
``There are some signs that credit markets, while still quite strained, are improving,'' Bernanke told the House Financial Services Committee. ``However, overall, credit conditions are still far from normal.''
Nov. 18 (Bloomberg) -- U.S. stocks gained in the last hour of trading as a rally in energy and technology shares overpowered earlier declines spurred by a drop in homebuilder confidence to the lowest level on record.
Hewlett-Packard Co. jumped 14 percent as earnings topped analysts' estimates, while Exxon Mobil Corp. climbed more than 4 percent. The advance in equities accelerated near the close as investors tracking the Standard & Poor's 500 Index bought shares to replace Anheuser-Busch Cos., which was removed from the gauge following its takeover by InBev NV.
The S&P 500 added 1 percent to 859.12, the first advance in three days. The Dow Jones Industrial Average increased 151.17 points, or 1.8 percent, to 8,424.75. The Nasdaq Composite Index rose less than 0.1 percent to 1,483.27. About six stocks retreated for every five that advanced on the New York Stock Exchange.
``A number of industries' and sectors' stocks have fallen by huge percentages over the past year and appear to be at pretty attractive valuations based on historical measures,'' said Dean Gulis, part of a group that manages about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. ``There can be some small-scale buying done in this market environment.''
The S&P 500 earlier slid below its lowest closing level since 2003 after the National Association of Home Builders/Wells Fargo index of builder confidence decreased to a worse-than- forecast reading of 9, the lowest level since record-keeping began in 1985.
Worst Year Since '31
The benchmark index for U.S. equities is down more than 41 percent in 2008, poised for its worst year since 1931, as credit losses and asset writedowns at global financial firms approach $1 trillion. Profits slumped 17 percent on average at companies in the index that have reported third-quarter results, according to Bloomberg data. Analysts expect an 8.5 percent drop in full-year earnings, based on estimates compiled by Bloomberg.
The S&P 500 erased a drop of as much as 2.8 percent in the final hour of the trading session as managers of funds that mimic the index prepared for the replacement of Anheuser-Busch by Stericycle Inc. Anheuser-Busch, with a market value of about $50 billion, was set to be removed following the close of its acquisition by InBev NV of Belgium.
Index funds, which represent about 10 percent of the stock market, ``got $5 billion from owning BUD,'' said Michael Buek, a principal at Vanguard Group Inc. in Valley Forge, Pennsylvania, manager of the biggest S&P 500 index fund. BUD is the ticker symbol for Anheuser-Busch, brewer of Budweiser beer.
`Put to Work'
``The stock that was added was a $500 million weight, so about $4.5 billion has to be put to work,'' said Buek. ``That money was spent across the other 499 names. To perfectly track the close, you'd want to put the $4.5 billion to work on the close.''
The earlier retreat in the S&P 500 pushed its dividend yield above the yield on 10-year Treasury notes for the first time since 1958 today, according to data compiled by Bloomberg and Peter Bernstein, the financial author and president of Peter L. Bernstein Inc. Dividends paid by S&P 500 companies were 3.57 percent of the index's price as of 1:13 p.m., compared with the 10-year note's yield of 3.54 percent.
``It's something I've been watching for quite some time,'' said Fritz Meyer, the Denver-based senior market strategist at Invesco Aim, which manages about $358 billion. ``It speaks to the opportunity in stocks. By comparison to Treasuries, every asset class is on sale.''
Tech Rally
Hewlett-Packard added $4.25, or 14 percent, to $33.59. The computer maker reported fourth-quarter earnings of $1.03 a share, excluding reorganizing expenses and other costs, exceeding the $1 average analyst estimate. The results signal Hewlett-Packard is withstanding an economic crisis that has sapped sales at other technology companies, including Cisco Systems Inc. and Intel Corp.
Hewlett-Packard led the S&P 500 Information Technology Index to a 1.9 percent advance. The gains came after the group's valuation slid to less than 12 times earnings, the cheapest since Bloomberg began tracking the data in 1995.
Yahoo! Inc. jumped 8.7 percent to $11.55 after Chief Executive Officer Jerry Yang agreed to step down, opening the door for a fresh bid from Microsoft Corp. The company's market value has dropped by more than $20 billion since Yang took over as CEO in June 2007 as discussions with Microsoft ended in failure, an ad partnership with Google Inc. was derailed and talks with Time Warner Inc.'s AOL stalled. Yahoo ``might be worth $21'' a share to an acquirer, Goldman Sachs Group Inc. said.
Energy companies climbed 3.3 percent as a group, the most among 10 industries in the S&P 500, as they also traded close to their lowest price-to-earnings valuation on record. Exxon Mobil Corp., the largest U.S. energy company, gained $2.95, or 4 percent, to $76.33.
Home Depot Beats
Home Depot Inc., the world's largest home-improvement retailer, added 71 cents, or 3.6 percent, to $20.71 after profit declined less than analysts estimated and the company repeated its earnings forecast for the year. As U.S. consumers cut back on renovations and cabinet purchases, Home Depot has slashed corporate expenses and closed stores to help remain profitable.
Walt Disney Co. gained 4.7 percent to $20.67 for the biggest jump in the Dow average after Hewlett-Packard. The biggest theme- park operator was raised to ``buy'' from ``neutral'' by Pali Capital LLC, which predicted a ``modest positive'' rebound in attendance at the company's resorts in 2010.
Citigroup, CIT Tumble
Citigroup Inc. dropped 53 cents, or 6 percent, to $8.36 and traded below $8 for the first time since 1995. The bank that yesterday announced plans to cut 52,000 jobs may post a loss of 30 cents per share next year, compared with a previous estimate of a $1.50 profit, Deutsche Bank AG analyst Mike Mayo wrote in a note.
CIT Group Inc. fell the most in the S&P 500, losing 89 cents, or 26 percent, to $2.60. The commercial lender's stock- price forecast was reduced to $11 from $13 by Barclays Plc, which said its share sale will dilute earnings.
Corning Inc. declined 62 cents, or 6.9 percent, to $8.39. The biggest maker of glass for flat-panel televisions said fourth-quarter sales will miss its forecast as demand for TVs and computer monitors wanes.
Medtronic Inc. dropped $4.82, or 13 percent, to $31.60. The world's second-biggest maker of medical devices said fiscal second-quarter profit fell 14 percent, missing analysts' estimates, on legal costs.
`Far From Normal'
The cost of borrowing in dollars for three months in London fell for the first time in four days ahead of Congressional testimony from Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson. The London interbank offered rate, or Libor, that banks say they charge each other for three- month loans declined two basis points to 2.22 percent today, according to the British Bankers' Association.
Bernanke said lending in the U.S. is ``still far from normal,'' even after emergency federal programs helped reduce interest rates for some borrowers.
``There are some signs that credit markets, while still quite strained, are improving,'' Bernanke told the House Financial Services Committee. ``However, overall, credit conditions are still far from normal.''
Sunday, November 16, 2008
Pound to Plummet 13% to Lowest Level Since 1985, JPMorgan Says
By Candice Zachariahs
Nov. 17 (Bloomberg) -- The pound will drop 13 percent against the dollar and 8 percent versus the euro as U.K. banks shrink foreign borrowings and the country's policy makers favor a weaker currency, JPMorgan & Chase Co. said.
The pound will ``trough'' at $1.28, a level not seen since 1985, and sink to a record low of 92 pence per euro in early 2009 as Britain's banks shrink foreign currency borrowings and demand for safety strengthens the U.S. dollar, JPMorgan said. U.K. banks' total foreign-currency borrowings equaled 276 percent of gross domestic product as of June 30, JPMorgan said.
``The U.K. may not be Iceland but the temperature is certainly dropping,'' wrote London-based Paul Meggyesi, a currency strategist at JPMorgan, in a research note dated Nov. 14. ``We take an axe to our pound forecasts to reflect the risk of continued bank deleveraging.''
The pound fell for a sixth day to $1.4682 as of 10:04 a.m. in Tokyo from $1.4740 on Nov. 14. It traded at 85.31 pence per euro, after a record decline last week.
The median estimate of 30 analysts in a Bloomberg News survey is for the pound to trade at $1.56 and at 80 pence per euro in the first quarter. JPMorgan had previously said the pound would bottom at $1.48 and in ``the low 0.80s'' against the euro.
Foreign Borrowings
Britain's banks had gross foreign borrowings of $6 trillion at the end of the second quarter of 2008, Meggyesi wrote. Their net exposure was $381 billion, or 18 percent of GDP, with U.S. dollar and yen borrowings making up the largest share, he wrote.
The Bank of England is expected to cut interest rates after forecasting on Nov. 12 that the U.K. economy will contract by an annual 1.8 percent in the first three months of next year.
``We are certainly prepared to cut the bank rate if that proves to be necessary,'' Bank of England Governor Mervyn King said that day.
The BOE slashed rates by an unexpected 150 basis points to the lowest since 1955 on Nov. 6. The U.K. central bank will bring the main rate to 2 percent from the current 3 percent at the next scheduled decision on Dec. 4, BNP Paribas SA, Barclays Capital and JPMorgan said in e-mailed notes on Nov. 12.
``In welcoming the boost to growth and downplaying the inflationary consequences of a falling exchange rate, the Bank confirmed that the authorities regard currency weakness as a net economic benefit,'' Meggyesi wrote on Nov. 14.
Nov. 17 (Bloomberg) -- The pound will drop 13 percent against the dollar and 8 percent versus the euro as U.K. banks shrink foreign borrowings and the country's policy makers favor a weaker currency, JPMorgan & Chase Co. said.
The pound will ``trough'' at $1.28, a level not seen since 1985, and sink to a record low of 92 pence per euro in early 2009 as Britain's banks shrink foreign currency borrowings and demand for safety strengthens the U.S. dollar, JPMorgan said. U.K. banks' total foreign-currency borrowings equaled 276 percent of gross domestic product as of June 30, JPMorgan said.
``The U.K. may not be Iceland but the temperature is certainly dropping,'' wrote London-based Paul Meggyesi, a currency strategist at JPMorgan, in a research note dated Nov. 14. ``We take an axe to our pound forecasts to reflect the risk of continued bank deleveraging.''
The pound fell for a sixth day to $1.4682 as of 10:04 a.m. in Tokyo from $1.4740 on Nov. 14. It traded at 85.31 pence per euro, after a record decline last week.
The median estimate of 30 analysts in a Bloomberg News survey is for the pound to trade at $1.56 and at 80 pence per euro in the first quarter. JPMorgan had previously said the pound would bottom at $1.48 and in ``the low 0.80s'' against the euro.
Foreign Borrowings
Britain's banks had gross foreign borrowings of $6 trillion at the end of the second quarter of 2008, Meggyesi wrote. Their net exposure was $381 billion, or 18 percent of GDP, with U.S. dollar and yen borrowings making up the largest share, he wrote.
The Bank of England is expected to cut interest rates after forecasting on Nov. 12 that the U.K. economy will contract by an annual 1.8 percent in the first three months of next year.
``We are certainly prepared to cut the bank rate if that proves to be necessary,'' Bank of England Governor Mervyn King said that day.
The BOE slashed rates by an unexpected 150 basis points to the lowest since 1955 on Nov. 6. The U.K. central bank will bring the main rate to 2 percent from the current 3 percent at the next scheduled decision on Dec. 4, BNP Paribas SA, Barclays Capital and JPMorgan said in e-mailed notes on Nov. 12.
``In welcoming the boost to growth and downplaying the inflationary consequences of a falling exchange rate, the Bank confirmed that the authorities regard currency weakness as a net economic benefit,'' Meggyesi wrote on Nov. 14.
Crude Oil Falls as Global Slowdown Cuts Demand in China, Japan
By Gavin Evans and Christian Schmollinger
Nov. 17 (Bloomberg) -- Oil fell for a second day in New York on signs the global slowdown is limiting demand in China and Japan, the world's second- and third-largest crude users.
Japan entered the first recession since 2001 as its gross domestic product fell an annualized 0.1 percent in the three months ended Sept. 30 after shrinking 3.7 percent in the previous period. China National Petroleum Corp., the country's biggest oil producer, said demand has contracted ``sharply'' since September because of the global credit crisis.
``There doesn't seem to be much out there to stop the fall in prices,'' said Toby Hassall, research analyst at Commodity Warrants Pty in Sydney. ``Weak demand and a pretty bleak demand outlook'' may push oil prices as low as $50 this week, he said.
Crude oil for December delivery dropped as much as $1.44, or 2.5 percent, to $55.60 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $55.73 at 9:35 a.m. in Singapore.
The contract slumped 2.1 percent to settle at $57.04 on Nov. 14, having touched $54.67 the previous day, the lowest since Jan. 30, 2007. Prices declined 6.6 percent last week as world equity markets dropped, Germany entered its worst recession in 12 years and U.S. retail sales fell for a fourth straight month.
Economists had predicted Japan's economy would rebound 0.1 percent in the September quarter. Japan used 5.1 million barrels a day in 2007, according to the BP Statistical Review of Energy. China used 7.9 million barrels a day.
IEA Cuts Forecast
The slowdown in demand because of the credit crisis caused stockpiles in the country to increase ``significantly,'' China National Petroleum said in a statement on its Web site.
``As the impact of the financial crisis on China's economy deepens, the company's operations have also been affected adversely,'' the statement said.
The International Energy Agency last week slashed its global oil consumption forecast for 2009 by 670,000 barrels a day. Demand will rise 0.4 percent to 86.5 million barrels a day, with growth in emerging nations partly offsetting a 1.6 percent contraction in fuel use in developed economies, the Paris-based agency said.
Brent crude oil for January settlement fell as much as 99 cents, or 1.8 percent, to $53.25 a barrel on London's ICE Futures Europe exchange. It was at $53.32 a barrel at 9:37 a.m. Singapore time. The contract fell 3.6 percent to $54.24 a barrel on Nov. 14.
Traders Net-Short
Hedge-fund managers and other large speculators increased their net-short position in New York crude-oil futures in the week ended Nov. 11, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 52,984 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-short positions rose by 42,441 contracts, or 403 percent, from a week earlier.
OPEC is likely to wait until December before cutting output again, the group's president, Chakib Khelil, said in Algeria yesterday.
Saudi Arabia, the world's biggest oil producer and the largest member in OPEC, will help alleviate global financial stress by maintaining stable oil markets, King Abdullah said after a meeting of Group of 20 leaders in Washington Nov. 15.
Iran Seeks Cuts
Iran, OPEC's second-largest producer, may seek a production cut of as much as 1.5 million barrels a day when the group meets in Cairo later this month, the Associated Press reported Nov. 15, citing televised comments by the nation's OPEC Governor Mohammad Ali Khatibi.
The group, which pumps about 40 percent of the world's oil, cut output by 1.5 million barrels a day last month. It will have more information on which to make a decision on further cuts at the Dec. 17 meeting in Oran, Algeria, Khelil said yesterday.
``We have yet to see the full cut from the previous meeting implemented at this stage,'' Commodity Warrants' Hassall said. ``Compliance is always going to be an issue.''
Nov. 17 (Bloomberg) -- Oil fell for a second day in New York on signs the global slowdown is limiting demand in China and Japan, the world's second- and third-largest crude users.
Japan entered the first recession since 2001 as its gross domestic product fell an annualized 0.1 percent in the three months ended Sept. 30 after shrinking 3.7 percent in the previous period. China National Petroleum Corp., the country's biggest oil producer, said demand has contracted ``sharply'' since September because of the global credit crisis.
``There doesn't seem to be much out there to stop the fall in prices,'' said Toby Hassall, research analyst at Commodity Warrants Pty in Sydney. ``Weak demand and a pretty bleak demand outlook'' may push oil prices as low as $50 this week, he said.
Crude oil for December delivery dropped as much as $1.44, or 2.5 percent, to $55.60 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $55.73 at 9:35 a.m. in Singapore.
The contract slumped 2.1 percent to settle at $57.04 on Nov. 14, having touched $54.67 the previous day, the lowest since Jan. 30, 2007. Prices declined 6.6 percent last week as world equity markets dropped, Germany entered its worst recession in 12 years and U.S. retail sales fell for a fourth straight month.
Economists had predicted Japan's economy would rebound 0.1 percent in the September quarter. Japan used 5.1 million barrels a day in 2007, according to the BP Statistical Review of Energy. China used 7.9 million barrels a day.
IEA Cuts Forecast
The slowdown in demand because of the credit crisis caused stockpiles in the country to increase ``significantly,'' China National Petroleum said in a statement on its Web site.
``As the impact of the financial crisis on China's economy deepens, the company's operations have also been affected adversely,'' the statement said.
The International Energy Agency last week slashed its global oil consumption forecast for 2009 by 670,000 barrels a day. Demand will rise 0.4 percent to 86.5 million barrels a day, with growth in emerging nations partly offsetting a 1.6 percent contraction in fuel use in developed economies, the Paris-based agency said.
Brent crude oil for January settlement fell as much as 99 cents, or 1.8 percent, to $53.25 a barrel on London's ICE Futures Europe exchange. It was at $53.32 a barrel at 9:37 a.m. Singapore time. The contract fell 3.6 percent to $54.24 a barrel on Nov. 14.
Traders Net-Short
Hedge-fund managers and other large speculators increased their net-short position in New York crude-oil futures in the week ended Nov. 11, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 52,984 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-short positions rose by 42,441 contracts, or 403 percent, from a week earlier.
OPEC is likely to wait until December before cutting output again, the group's president, Chakib Khelil, said in Algeria yesterday.
Saudi Arabia, the world's biggest oil producer and the largest member in OPEC, will help alleviate global financial stress by maintaining stable oil markets, King Abdullah said after a meeting of Group of 20 leaders in Washington Nov. 15.
Iran Seeks Cuts
Iran, OPEC's second-largest producer, may seek a production cut of as much as 1.5 million barrels a day when the group meets in Cairo later this month, the Associated Press reported Nov. 15, citing televised comments by the nation's OPEC Governor Mohammad Ali Khatibi.
The group, which pumps about 40 percent of the world's oil, cut output by 1.5 million barrels a day last month. It will have more information on which to make a decision on further cuts at the Dec. 17 meeting in Oran, Algeria, Khelil said yesterday.
``We have yet to see the full cut from the previous meeting implemented at this stage,'' Commodity Warrants' Hassall said. ``Compliance is always going to be an issue.''
Sunday, November 2, 2008
New Zealand Wages Rise 3.5% as Fuel, Food Costs Soar (Update1)
By Tracy Withers
Nov. 3 (Bloomberg) -- New Zealand wages rose at a record pace in the year ended Sept. 30 as workers demanded pay increases to meet rising food and fuel costs.
Wages for non-government workers, excluding overtime, increased 3.5 percent in the 12 months to September, according to Statistics New Zealand's labor cost index released in Wellington today. Wages rose 1.2 percent from the second quarter.
About 43 percent of companies surveyed said they increased wages because of a higher cost of living as fuel and food costs soared. Annual wage inflation may slow as consumer spending and business investment decline after the economy fell into its first recession since 1998.
``The vast majority of workers are secure in their jobs and worried about the spiraling cost of living,'' Brendan O'Donovan, chief economist at Westpac Banking Corp. in Wellington, said before the report was released. Still, ``the cracks in New Zealand's strong labor market are widening.''
The median estimate of 11 economists surveyed by Bloomberg News was for wages to rise 0.8 percent in the quarter and 3.4 percent from a year earlier. Wages also rose 3.5 percent in the year to June.
The agriculture and mining industries posted record quarterly increases, the statistics agency said. Both sectors said the main reason was to reflect the higher cost of living.
Including overtime, wages for non-government workers rose 1.1 percent from the second quarter, for a record annual increase of 3.7 percent, today's report showed.
Recession
The economy contracted in the first half of this year and probably shrank in the third quarter, the central bank and Treasury Department said in forecasts published in September.
Reserve Bank Governor Alan Bollard has reduced the benchmark interest rate by 1.75 percentage points since July and will probably cut another half point in early December, according to eight of 10 economists surveyed by Bloomberg.
Wages may slow as unemployment rises, increasing the supply of workers. Company hiring intentions slumped to a 20- year low in October, according to a survey by ANZ National Bank Ltd.
Business confidence fell by the most on record as an inability to obtain credit made firms unwilling to hire workers or start new projects.
The jobless rate probably rose to 4.3 percent in the third quarter, the highest since 2003, according to a survey of 12 economists. The employment report is published on Nov. 6.
Hourly Wage Rate
A separate series based on reported salary and ordinary- time wage rates of non-government workers rose 1.5 percent in the third quarter and 5.4 percent from a year earlier, Statistics New Zealand said.
Average hourly ordinary time wages of non-government workers climbed 1.1 percent in the quarter for an annual gain of 5.2 percent.
Statistics New Zealand also released indicators showing the demand for labor slowed in the third quarter.
The number of full-time equivalent employees declined 0.9 percent from the second quarter. The number of total filled jobs fell 0.6 percent.
Total paid hours fell 0.3 percent, seasonally adjusted, from the second quarter.
Nov. 3 (Bloomberg) -- New Zealand wages rose at a record pace in the year ended Sept. 30 as workers demanded pay increases to meet rising food and fuel costs.
Wages for non-government workers, excluding overtime, increased 3.5 percent in the 12 months to September, according to Statistics New Zealand's labor cost index released in Wellington today. Wages rose 1.2 percent from the second quarter.
About 43 percent of companies surveyed said they increased wages because of a higher cost of living as fuel and food costs soared. Annual wage inflation may slow as consumer spending and business investment decline after the economy fell into its first recession since 1998.
``The vast majority of workers are secure in their jobs and worried about the spiraling cost of living,'' Brendan O'Donovan, chief economist at Westpac Banking Corp. in Wellington, said before the report was released. Still, ``the cracks in New Zealand's strong labor market are widening.''
The median estimate of 11 economists surveyed by Bloomberg News was for wages to rise 0.8 percent in the quarter and 3.4 percent from a year earlier. Wages also rose 3.5 percent in the year to June.
The agriculture and mining industries posted record quarterly increases, the statistics agency said. Both sectors said the main reason was to reflect the higher cost of living.
Including overtime, wages for non-government workers rose 1.1 percent from the second quarter, for a record annual increase of 3.7 percent, today's report showed.
Recession
The economy contracted in the first half of this year and probably shrank in the third quarter, the central bank and Treasury Department said in forecasts published in September.
Reserve Bank Governor Alan Bollard has reduced the benchmark interest rate by 1.75 percentage points since July and will probably cut another half point in early December, according to eight of 10 economists surveyed by Bloomberg.
Wages may slow as unemployment rises, increasing the supply of workers. Company hiring intentions slumped to a 20- year low in October, according to a survey by ANZ National Bank Ltd.
Business confidence fell by the most on record as an inability to obtain credit made firms unwilling to hire workers or start new projects.
The jobless rate probably rose to 4.3 percent in the third quarter, the highest since 2003, according to a survey of 12 economists. The employment report is published on Nov. 6.
Hourly Wage Rate
A separate series based on reported salary and ordinary- time wage rates of non-government workers rose 1.5 percent in the third quarter and 5.4 percent from a year earlier, Statistics New Zealand said.
Average hourly ordinary time wages of non-government workers climbed 1.1 percent in the quarter for an annual gain of 5.2 percent.
Statistics New Zealand also released indicators showing the demand for labor slowed in the third quarter.
The number of full-time equivalent employees declined 0.9 percent from the second quarter. The number of total filled jobs fell 0.6 percent.
Total paid hours fell 0.3 percent, seasonally adjusted, from the second quarter.
Thursday, October 30, 2008
Oil Is Poised for Worst Month Ever on Concern Over Demand Drop
By Mark Shenk and Margot Habiby
Oct. 31 (Bloomberg) -- Crude oil in New York was poised for its biggest monthly drop since trading began in 1983 on concern that the decline in the U.S. economy will further curb fuel demand in the world's largest energy consuming country.
Oil retreated after the U.S. Commerce Department said yesterday that gross domestic product contracted at a 0.3 percent annual pace in the third quarter, the most since 2001. UBS AG cut its oil-price forecast for next year by 43 percent to $60 a barrel from $105 because the global economic slowdown may reduce demand.
``Views about the economy have been the primary movers of the energy market since July,'' said Adam Sieminski, Deutsche Bank's chief energy economist, in Washington. ``Just about everyone agrees that the U.S. is in a recession. What is contestable is how bad it will be.''
Crude oil for December delivery lost 76 cents, or 1.2 percent, to $65.20 a barrel at 10:37 a.m. Sydney time on the New York Mercantile Exchange. Oil has slumped 35 percent this month and may pass February 1986 as the worst month ever, when it dropped 30 percent to $13.26 a barrel.
Prices, which have tumbled 56 percent since reaching a record $147.27 on July 11, are down 31 percent from a year ago. Futures dropped $1.54, or 2.3 percent, yesterday to settle at $65.96 a barrel, after touching $70.60, the highest since Oct. 22, in intraday trading.
Rate Cuts
Oil climbed more than $4 a barrel Oct. 29, the biggest gain in a month, after the U.S. and China, the two biggest energy consumers, cut interest rates to spur economic growth. Prices also rose because the dollar fell the most against the currencies of six major U.S. trading partners since 1998.
``The GDP number is a reminder that the economy, and with it energy demand, won't be recovering anytime soon,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. After the rally, ``the focus is returning to fears about demand destruction.''
U.S. fuel demand during the past four weeks averaged 18.9 million barrels a day, down 7.8 percent from a year ago, an Energy Department report showed Oct. 29.
``It took a while before we felt the full impact of high prices on demand, there's usually a six-month lag,'' Sieminski said. ``Now, we are waiting to see what the full impact of falling incomes will be.''
The Organization of Petroleum Exporting Countries increased oil supplies 0.5 percent this month because of higher exports from Iraq, according to provisional data from Geneva-based consultants PetroLogistics Ltd.
OPEC Supplies
The group supplied 31.85 million barrels of oil a day in October, up 150,000 barrels a day from September, PetroLogistics founder Conrad Gerber said in a telephone interview yesterday. Higher Iraqi output countered declines from Saudi Arabia, Kuwait and the United Arab Emirates.
OPEC may curb only 850,000 barrels a day of oil supply by January, PFC Energy said in a report yesterday. PFC expects Saudi Arabia to cut 600,000 barrels a day, the Washington-based oil consultant said. OPEC reduced its target by 1.5 million barrels a day after an emergency meeting Oct. 24.
Brent crude oil for December settlement declined $1.76, or 2.7 percent, to settle at $63.71 a barrel yesterday on London's ICE Futures Europe exchange. Futures earlier touched $68.35, the highest since Oct. 22.
Exxon Mobil Corp. and Royal Dutch Shell Plc, the world's biggest oil companies, posted gains in third-quarter earnings after crude oil's surge to a record made up for slumping output.
Exxon Mobil netted $14.8 billion, up 58 percent from a year earlier, according to a statement yesterday by the Irving, Texas-based company. Profit excluding one-time costs and gains was the highest ever for a U.S. corporation. Shell, based in the Hague, said its net income rose 22 percent to $8.45 billion. Both companies exceeded analyst earnings estimates.
Oct. 31 (Bloomberg) -- Crude oil in New York was poised for its biggest monthly drop since trading began in 1983 on concern that the decline in the U.S. economy will further curb fuel demand in the world's largest energy consuming country.
Oil retreated after the U.S. Commerce Department said yesterday that gross domestic product contracted at a 0.3 percent annual pace in the third quarter, the most since 2001. UBS AG cut its oil-price forecast for next year by 43 percent to $60 a barrel from $105 because the global economic slowdown may reduce demand.
``Views about the economy have been the primary movers of the energy market since July,'' said Adam Sieminski, Deutsche Bank's chief energy economist, in Washington. ``Just about everyone agrees that the U.S. is in a recession. What is contestable is how bad it will be.''
Crude oil for December delivery lost 76 cents, or 1.2 percent, to $65.20 a barrel at 10:37 a.m. Sydney time on the New York Mercantile Exchange. Oil has slumped 35 percent this month and may pass February 1986 as the worst month ever, when it dropped 30 percent to $13.26 a barrel.
Prices, which have tumbled 56 percent since reaching a record $147.27 on July 11, are down 31 percent from a year ago. Futures dropped $1.54, or 2.3 percent, yesterday to settle at $65.96 a barrel, after touching $70.60, the highest since Oct. 22, in intraday trading.
Rate Cuts
Oil climbed more than $4 a barrel Oct. 29, the biggest gain in a month, after the U.S. and China, the two biggest energy consumers, cut interest rates to spur economic growth. Prices also rose because the dollar fell the most against the currencies of six major U.S. trading partners since 1998.
``The GDP number is a reminder that the economy, and with it energy demand, won't be recovering anytime soon,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. After the rally, ``the focus is returning to fears about demand destruction.''
U.S. fuel demand during the past four weeks averaged 18.9 million barrels a day, down 7.8 percent from a year ago, an Energy Department report showed Oct. 29.
``It took a while before we felt the full impact of high prices on demand, there's usually a six-month lag,'' Sieminski said. ``Now, we are waiting to see what the full impact of falling incomes will be.''
The Organization of Petroleum Exporting Countries increased oil supplies 0.5 percent this month because of higher exports from Iraq, according to provisional data from Geneva-based consultants PetroLogistics Ltd.
OPEC Supplies
The group supplied 31.85 million barrels of oil a day in October, up 150,000 barrels a day from September, PetroLogistics founder Conrad Gerber said in a telephone interview yesterday. Higher Iraqi output countered declines from Saudi Arabia, Kuwait and the United Arab Emirates.
OPEC may curb only 850,000 barrels a day of oil supply by January, PFC Energy said in a report yesterday. PFC expects Saudi Arabia to cut 600,000 barrels a day, the Washington-based oil consultant said. OPEC reduced its target by 1.5 million barrels a day after an emergency meeting Oct. 24.
Brent crude oil for December settlement declined $1.76, or 2.7 percent, to settle at $63.71 a barrel yesterday on London's ICE Futures Europe exchange. Futures earlier touched $68.35, the highest since Oct. 22.
Exxon Mobil Corp. and Royal Dutch Shell Plc, the world's biggest oil companies, posted gains in third-quarter earnings after crude oil's surge to a record made up for slumping output.
Exxon Mobil netted $14.8 billion, up 58 percent from a year earlier, according to a statement yesterday by the Irving, Texas-based company. Profit excluding one-time costs and gains was the highest ever for a U.S. corporation. Shell, based in the Hague, said its net income rose 22 percent to $8.45 billion. Both companies exceeded analyst earnings estimates.
Sunday, October 26, 2008
U.S. Stock Futures Advance as Traders Increase Rate-Cut Bets
By Jeff Kearns
Oct. 27 (Bloomberg) -- U.S. stock-index futures advanced, indicating the market may pare the worst monthly plunge in 70 years, as speculation the Federal Reserve will cut interest rates outweighed concern the global economic slowdown is deepening.
Traders increased bets that the Fed will cut its target for overnight loans between banks in half to 0.75 percent this week. Reports may show the U.S. economy shrank last quarter for the second time in a year as consumers and companies retrenched. More than 40 heads of state at a government meeting in Beijing called for an overhaul of World War II-era banking rules.
Standard & Poor's 500 Index futures expiring in December added 3.40 points, or 0.4 percent, to 869.40 at 7:37 a.m. in Tokyo. U.S. stocks tumbled last week, driving the S&P 500 toward the steepest monthly loss since 1938, on concern the global economy is sliding into a recession.
``A cut would send a positive signal that the Fed remains vigilant in keeping the financial system fluid and flooded with money as the credit markets thaw,'' said Mark Luschini, who oversees $1 billion as chief investment officer at Parker Hunter Asset Management in Pittsburgh.
The S&P 500 retreated 6.8 percent to 876.77 last week, the lowest level since April 2003. The benchmark index for U.S. equities plunged 25 percent in October. The Dow average fell 5.4 percent to 8,378.95 last week. The MSCI World Index of 23 developed markets lost 8.3 percent, while Brazil, Russia and India drove a gauge of 25 emerging markets to a 17 percent slump.
Alcoa, Citigroup Plunge
Alcoa Inc., Citigroup Inc. and Hewlett-Packard Co. retreated the most in the Dow Jones Industrial Average last week, losing more than 18 percent, on speculation the financial crisis spread beyond banks to industrial companies and computer makers. General Motors Corp. approached the lowest price since the 1950s, and Ford Motor Co. plunged 17 percent.
``There are forced sellers and no one willing to stick their neck out,'' said Henry Herrmann, Overland Park, Kansas-based president of Waddell & Reed Financial Inc., which manages $70 billion.
Futures showed odds increased the Fed will cut its rate target by 0.75 percent. Traders are assigning a 26 percent chance of a three-quarter-point cut, up from no chance a week ago, while odds of a half-point cut are 74 percent.
``While things may be really ugly, the sense now is that we've looked into the abyss and we've seen the worst of it,'' said Scott Nations, president of Fortress Trading Inc. in Chicago.
`Very Tough Times'
Gross domestic product contracted at a 0.5 percent annual rate from July to September, the biggest drop since the 2001 recession, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Oct. 30. Consumer spending, the biggest part of the economy, probably dropped by the most in almost two decades as job losses mounted, stock prices sank and property values plummeted.
Jack Welch, General Electric Co.'s former chief executive officer, said that the U.S. economy will start to improve in late 2009 after struggling for the next three quarters.
``We are going to have some very tough times,'' Welch said yesterday on the ABC News ``This Week'' program. ``The fourth quarter of this year could have negative growth in the 3-to-4 percent range.''
Leaders meeting in Beijing this weekend ``pledged to undertake effective and comprehensive reform of the international monetary and financial systems,'' according to a statement. The two-day summit was the first meeting of Asian and European Union chiefs since calls for coordinated action mounted along with bank failures and plunging stock prices that began last month.
$10 Trillion Lost
More than $10 trillion has been erased from the market value of shares worldwide this month as earnings decreased. The 236 companies in the S&P 500 that have reported third-quarter results posted a 23 percent decline on average. Reports yesterday showed the U.K. economy contracted for the first time since 1992 and growth in South Korea was the slowest in four years.
All 48 of the developed and emerging markets tracked by MSCI have declined in 2008, with 22 losing at least half their value. The 73 percent plunge by Russia's Micex Index is the steepest. Benchmark indexes for China, Greece, Ireland, Peru and Austria retreated more than 60 percent. The S&P 500 dropped 40 percent. Morocco and Jordan have done the best, falling 6.4 percent and 19.2 percent, respectively.
It's ``panic creating a freefall as investors simply liquidate anything and everything,'' said Walter Gerasimowicz, the New York-based chief executive officer at Meditron Asset Management, which manages $1.1 billion. ``The market seems to be very overdone, almost pricing for a depression.''
The Chicago Board Options Exchange Volatility Index, or VIX, a gauge of how much investors are paying for insurance against S&P 500 declines, rose 13 percent to a record 79.13 last week.
Cheap Stocks
Treasuries rallied, pushing the yield on the 30-year bond to the lowest in more than three decades. It sank as low as 3.8676 percent yesterday.
``The U.S. and European markets have blown out to record levels of attractiveness versus bonds,'' Barton Biggs, a former Morgan Stanley strategist who now runs the hedge fund Traxis Partners LLC, said during a Bloomberg Television interview. Stocks are at ``very, very cheap levels.''
Last week, 245 of the 500 companies that make up the S&P 500 dropped to the lowest price in a year or more. Russian equities are the cheapest in the world, trading for 2.5 times estimated 2008 profit. The 27 nations with price-to-earnings ratios of 8 or less include Germany, Turkey, South Africa, the U.K. and Indonesia. The S&P 500's multiple is 11.
``There is an extreme level of pessimism and almost despair,'' said Biggs, 75. ``As long as I have been in the business, those have always been good signs.''
Alcoa fell 20 percent to a 13-year low of $9.41. Citigroup lost 18 percent to $12.14, the lowest price since October 1996. Hewlett-Packard declined 18 percent to $32.44. GM decreased 7.5 percent to $5.95, remaining above the five-decade low of $4.76 reached two weeks ago. Ford slipped 17 percent to $2.01.
Oct. 27 (Bloomberg) -- U.S. stock-index futures advanced, indicating the market may pare the worst monthly plunge in 70 years, as speculation the Federal Reserve will cut interest rates outweighed concern the global economic slowdown is deepening.
Traders increased bets that the Fed will cut its target for overnight loans between banks in half to 0.75 percent this week. Reports may show the U.S. economy shrank last quarter for the second time in a year as consumers and companies retrenched. More than 40 heads of state at a government meeting in Beijing called for an overhaul of World War II-era banking rules.
Standard & Poor's 500 Index futures expiring in December added 3.40 points, or 0.4 percent, to 869.40 at 7:37 a.m. in Tokyo. U.S. stocks tumbled last week, driving the S&P 500 toward the steepest monthly loss since 1938, on concern the global economy is sliding into a recession.
``A cut would send a positive signal that the Fed remains vigilant in keeping the financial system fluid and flooded with money as the credit markets thaw,'' said Mark Luschini, who oversees $1 billion as chief investment officer at Parker Hunter Asset Management in Pittsburgh.
The S&P 500 retreated 6.8 percent to 876.77 last week, the lowest level since April 2003. The benchmark index for U.S. equities plunged 25 percent in October. The Dow average fell 5.4 percent to 8,378.95 last week. The MSCI World Index of 23 developed markets lost 8.3 percent, while Brazil, Russia and India drove a gauge of 25 emerging markets to a 17 percent slump.
Alcoa, Citigroup Plunge
Alcoa Inc., Citigroup Inc. and Hewlett-Packard Co. retreated the most in the Dow Jones Industrial Average last week, losing more than 18 percent, on speculation the financial crisis spread beyond banks to industrial companies and computer makers. General Motors Corp. approached the lowest price since the 1950s, and Ford Motor Co. plunged 17 percent.
``There are forced sellers and no one willing to stick their neck out,'' said Henry Herrmann, Overland Park, Kansas-based president of Waddell & Reed Financial Inc., which manages $70 billion.
Futures showed odds increased the Fed will cut its rate target by 0.75 percent. Traders are assigning a 26 percent chance of a three-quarter-point cut, up from no chance a week ago, while odds of a half-point cut are 74 percent.
``While things may be really ugly, the sense now is that we've looked into the abyss and we've seen the worst of it,'' said Scott Nations, president of Fortress Trading Inc. in Chicago.
`Very Tough Times'
Gross domestic product contracted at a 0.5 percent annual rate from July to September, the biggest drop since the 2001 recession, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Oct. 30. Consumer spending, the biggest part of the economy, probably dropped by the most in almost two decades as job losses mounted, stock prices sank and property values plummeted.
Jack Welch, General Electric Co.'s former chief executive officer, said that the U.S. economy will start to improve in late 2009 after struggling for the next three quarters.
``We are going to have some very tough times,'' Welch said yesterday on the ABC News ``This Week'' program. ``The fourth quarter of this year could have negative growth in the 3-to-4 percent range.''
Leaders meeting in Beijing this weekend ``pledged to undertake effective and comprehensive reform of the international monetary and financial systems,'' according to a statement. The two-day summit was the first meeting of Asian and European Union chiefs since calls for coordinated action mounted along with bank failures and plunging stock prices that began last month.
$10 Trillion Lost
More than $10 trillion has been erased from the market value of shares worldwide this month as earnings decreased. The 236 companies in the S&P 500 that have reported third-quarter results posted a 23 percent decline on average. Reports yesterday showed the U.K. economy contracted for the first time since 1992 and growth in South Korea was the slowest in four years.
All 48 of the developed and emerging markets tracked by MSCI have declined in 2008, with 22 losing at least half their value. The 73 percent plunge by Russia's Micex Index is the steepest. Benchmark indexes for China, Greece, Ireland, Peru and Austria retreated more than 60 percent. The S&P 500 dropped 40 percent. Morocco and Jordan have done the best, falling 6.4 percent and 19.2 percent, respectively.
It's ``panic creating a freefall as investors simply liquidate anything and everything,'' said Walter Gerasimowicz, the New York-based chief executive officer at Meditron Asset Management, which manages $1.1 billion. ``The market seems to be very overdone, almost pricing for a depression.''
The Chicago Board Options Exchange Volatility Index, or VIX, a gauge of how much investors are paying for insurance against S&P 500 declines, rose 13 percent to a record 79.13 last week.
Cheap Stocks
Treasuries rallied, pushing the yield on the 30-year bond to the lowest in more than three decades. It sank as low as 3.8676 percent yesterday.
``The U.S. and European markets have blown out to record levels of attractiveness versus bonds,'' Barton Biggs, a former Morgan Stanley strategist who now runs the hedge fund Traxis Partners LLC, said during a Bloomberg Television interview. Stocks are at ``very, very cheap levels.''
Last week, 245 of the 500 companies that make up the S&P 500 dropped to the lowest price in a year or more. Russian equities are the cheapest in the world, trading for 2.5 times estimated 2008 profit. The 27 nations with price-to-earnings ratios of 8 or less include Germany, Turkey, South Africa, the U.K. and Indonesia. The S&P 500's multiple is 11.
``There is an extreme level of pessimism and almost despair,'' said Biggs, 75. ``As long as I have been in the business, those have always been good signs.''
Alcoa fell 20 percent to a 13-year low of $9.41. Citigroup lost 18 percent to $12.14, the lowest price since October 1996. Hewlett-Packard declined 18 percent to $32.44. GM decreased 7.5 percent to $5.95, remaining above the five-decade low of $4.76 reached two weeks ago. Ford slipped 17 percent to $2.01.
Friday, October 24, 2008
Global Stocks Tumble on Economic Concern; Oil Falls, Yen Rises
By Lynn Thomasson and Sarah Jones
Oct. 24 (Bloomberg) -- Global stocks from Seoul to Stockholm tumbled to the lowest since August 2003 on concern the deepening economic slump will damage earnings. Oil dropped to a 16-month low and the yen reached the highest since 1995 against the dollar.
The Standard & Poor's 500 Index lost 3.5 percent, a smaller decline than European and Asian equities, even after futures on the U.S. measure fell so far that trading was curbed. The U.K.'s FTSE 100 Index sank 5 percent and the pound had the biggest drop versus the dollar since 1971 following a government report showing the economy shrank for the first time in sixteen years. South Korea's economy grew at the slowest pace in four years, driving the Kospi Index down 11 percent.
``There's a worldwide fear of a worldwide recession,'' said Michael Binger, Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $70 billion. ``The concern has moved to being about which banks and companies will fail to which countries could fail, with Iceland and some of the smaller countries around the world being on life support.''
The MSCI World Index of developed markets declined 4.3 percent to 871.64. MSCI's emerging-markets benchmark fell 7.8 percent to 473.98, completing eight straight weeks of losses, the longest stretch since 1998. The MSCI index covering both regions slumped to the lowest since August 2003. Russia's Micex Stock Exchange halted trading until next week following today's 14 percent retreat.
$10 Trillion
More than $10 trillion has been erased from the market value of equities so far this month. That accounts for about one-third of the total value wiped off world equities this year. MSCI's measure tracking both developed and emerging markets is heading for the worst year on record, plunging 47 percent in 2008, amid $660 billion in global credit-related losses and the biggest financial crisis since the Great Depression.
The Chicago Board Options Exchange Volatility Index surged to 79.13, the highest in its 18-year history. The VIX measures the cost of using options as insurance against S&P 500 declines.
``We're getting very close to the emotional blow-off where everybody says, `I don't care; I want out,''' said E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York. ``Everybody seems to be saying `I want to be in cash or Treasuries.'''
More than 200 companies in the S&P 500 have reported quarterly results since the start of October, posting an average profit slump of 23 percent, according to Bloomberg data.
Auto Sales Slump
Toyota Motor Corp., Japan's biggest carmaker, tumbled 6.4 percent to 3,200 yen after saying quarterly sales fell for the first time in seven years.
U.S. auto sales this month may fall to the lowest rate in at least 25 years as tighter credit and falling home values decrease demand, said analysts at Deutsche Bank AG.
American International Group Inc. declined 19 percent to $1.70. The insurer said it has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount exceeding the original loan meant to save the company.
Europe's Dow Jones Stoxx 600 Index slid 4.7 percent. The MSCI Asia Pacific Index fell 5.7 percent.
Air France-KLM Group slid 3.1 percent to 11.50 euros. The region's biggest airline said it will be ``very difficult'' to meet full-year earnings targets as the global credit crisis and slowing economic growth undermine demand for travel.
Yields on 30-year bonds touched the lowest in more than three decades amid speculation a global slowdown will drive U.S. policy makers to cut borrowing costs. Its yield rose 4 basis points to 4.09 percent, following a plunge as low as 3.8676 percent shortly before 6 a.m. in New York as stocks fell.
`Not Buying'
``The issue that drives prices now are the margin calls, redemptions and sales,'' said George Feiger, chief executive officer of Contango Capital Advisors, which oversees about $2 billion in Berkeley, California. ``I'm not buying now.''
Iceland secured an emergency bailout loan of $2 billion from the International Monetary Fund after the collapse of the island's banking system paralyzed much of its foreign exchange market, Prime Minister Geir Haarde said in Reykjavik.
Futures on the S&P 500 lost 6.6 percent before U.S. markets officially opened, triggering a Chicago Mercantile Exchange measure meant to limit losses.
Home Resales Jump
Pulte Homes Inc. gained 4.8 percent to $8.50 after home resales in the U.S. rose more than forecast in September. Cheaper prices on foreclosed property lifted purchases of existing homes up 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said in Washington.
Oil tumbled 5.4 percent to $64.15 a barrel even after OPEC's decision to slash production by 1.5 million barrels a day. Energy stocks in the S&P 500 lost 3.9 percent. Exxon Mobil Corp. retreated 1.9 percent to $69.04.
National City Corp. plunged 25 percent to $2.07. PNC Financial Services Group Inc., Pennsylvania's largest bank, plans to buy the lender, Ohio's largest bank, for about $5.2 billion in stock with funds from the U.S. Treasury. The offer of $2.23 a share is 19 percent less than National City's closing price yesterday.
Fifth Third Bancorp had the biggest loss in the S&P 500, sliding 29 percent to $8.07. Ohio's second-biggest bank was cut to ``sell'' from ``neutral'' at Goldman Sachs Group Inc.
Extreme Pessimism
``There is an extreme level of pessimism and almost despair,'' said Barton Biggs, managing partner at hedge fund Traxis Partners LLC. ``We're at very, very cheap levels.''
The yen climbed to a 13-year high against the dollar as stock-market losses prompted investors to dump higher-yielding assets funded by low-cost loans in Japan.
Japan's currency rose 8.6 percent this week against the dollar, the biggest gain since October 1998. It surged 13 percent versus the euro, the greatest weekly advance. The euro headed for a 5.1 percent decline versus the dollar.
The pound depreciated as much as 5.9 percent to below $1.53. Sterling's intraday decline surpassed that on Black Wednesday in September 1992, when the U.K. was driven out of Europe's exchange-rate mechanism.
Oct. 24 (Bloomberg) -- Global stocks from Seoul to Stockholm tumbled to the lowest since August 2003 on concern the deepening economic slump will damage earnings. Oil dropped to a 16-month low and the yen reached the highest since 1995 against the dollar.
The Standard & Poor's 500 Index lost 3.5 percent, a smaller decline than European and Asian equities, even after futures on the U.S. measure fell so far that trading was curbed. The U.K.'s FTSE 100 Index sank 5 percent and the pound had the biggest drop versus the dollar since 1971 following a government report showing the economy shrank for the first time in sixteen years. South Korea's economy grew at the slowest pace in four years, driving the Kospi Index down 11 percent.
``There's a worldwide fear of a worldwide recession,'' said Michael Binger, Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $70 billion. ``The concern has moved to being about which banks and companies will fail to which countries could fail, with Iceland and some of the smaller countries around the world being on life support.''
The MSCI World Index of developed markets declined 4.3 percent to 871.64. MSCI's emerging-markets benchmark fell 7.8 percent to 473.98, completing eight straight weeks of losses, the longest stretch since 1998. The MSCI index covering both regions slumped to the lowest since August 2003. Russia's Micex Stock Exchange halted trading until next week following today's 14 percent retreat.
$10 Trillion
More than $10 trillion has been erased from the market value of equities so far this month. That accounts for about one-third of the total value wiped off world equities this year. MSCI's measure tracking both developed and emerging markets is heading for the worst year on record, plunging 47 percent in 2008, amid $660 billion in global credit-related losses and the biggest financial crisis since the Great Depression.
The Chicago Board Options Exchange Volatility Index surged to 79.13, the highest in its 18-year history. The VIX measures the cost of using options as insurance against S&P 500 declines.
``We're getting very close to the emotional blow-off where everybody says, `I don't care; I want out,''' said E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York. ``Everybody seems to be saying `I want to be in cash or Treasuries.'''
More than 200 companies in the S&P 500 have reported quarterly results since the start of October, posting an average profit slump of 23 percent, according to Bloomberg data.
Auto Sales Slump
Toyota Motor Corp., Japan's biggest carmaker, tumbled 6.4 percent to 3,200 yen after saying quarterly sales fell for the first time in seven years.
U.S. auto sales this month may fall to the lowest rate in at least 25 years as tighter credit and falling home values decrease demand, said analysts at Deutsche Bank AG.
American International Group Inc. declined 19 percent to $1.70. The insurer said it has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount exceeding the original loan meant to save the company.
Europe's Dow Jones Stoxx 600 Index slid 4.7 percent. The MSCI Asia Pacific Index fell 5.7 percent.
Air France-KLM Group slid 3.1 percent to 11.50 euros. The region's biggest airline said it will be ``very difficult'' to meet full-year earnings targets as the global credit crisis and slowing economic growth undermine demand for travel.
Yields on 30-year bonds touched the lowest in more than three decades amid speculation a global slowdown will drive U.S. policy makers to cut borrowing costs. Its yield rose 4 basis points to 4.09 percent, following a plunge as low as 3.8676 percent shortly before 6 a.m. in New York as stocks fell.
`Not Buying'
``The issue that drives prices now are the margin calls, redemptions and sales,'' said George Feiger, chief executive officer of Contango Capital Advisors, which oversees about $2 billion in Berkeley, California. ``I'm not buying now.''
Iceland secured an emergency bailout loan of $2 billion from the International Monetary Fund after the collapse of the island's banking system paralyzed much of its foreign exchange market, Prime Minister Geir Haarde said in Reykjavik.
Futures on the S&P 500 lost 6.6 percent before U.S. markets officially opened, triggering a Chicago Mercantile Exchange measure meant to limit losses.
Home Resales Jump
Pulte Homes Inc. gained 4.8 percent to $8.50 after home resales in the U.S. rose more than forecast in September. Cheaper prices on foreclosed property lifted purchases of existing homes up 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said in Washington.
Oil tumbled 5.4 percent to $64.15 a barrel even after OPEC's decision to slash production by 1.5 million barrels a day. Energy stocks in the S&P 500 lost 3.9 percent. Exxon Mobil Corp. retreated 1.9 percent to $69.04.
National City Corp. plunged 25 percent to $2.07. PNC Financial Services Group Inc., Pennsylvania's largest bank, plans to buy the lender, Ohio's largest bank, for about $5.2 billion in stock with funds from the U.S. Treasury. The offer of $2.23 a share is 19 percent less than National City's closing price yesterday.
Fifth Third Bancorp had the biggest loss in the S&P 500, sliding 29 percent to $8.07. Ohio's second-biggest bank was cut to ``sell'' from ``neutral'' at Goldman Sachs Group Inc.
Extreme Pessimism
``There is an extreme level of pessimism and almost despair,'' said Barton Biggs, managing partner at hedge fund Traxis Partners LLC. ``We're at very, very cheap levels.''
The yen climbed to a 13-year high against the dollar as stock-market losses prompted investors to dump higher-yielding assets funded by low-cost loans in Japan.
Japan's currency rose 8.6 percent this week against the dollar, the biggest gain since October 1998. It surged 13 percent versus the euro, the greatest weekly advance. The euro headed for a 5.1 percent decline versus the dollar.
The pound depreciated as much as 5.9 percent to below $1.53. Sterling's intraday decline surpassed that on Black Wednesday in September 1992, when the U.K. was driven out of Europe's exchange-rate mechanism.
U.S. Economy: Home Resales Rose More Than Forecast (Update1)
By Bob Willis
Oct. 24 (Bloomberg) -- Home resales in the U.S. rose more than forecast in September, aided by foreclosure-driven declines in prices that indicated the market was stabilizing before the latest slump in financial markets.
Purchases of existing homes jumped 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said today in Washington. The median price dropped 9 percent.
Economists said sales figures for this month and next will be critical in determining whether sales have reached a bottom as predicted by the Realtors' group. Federal Reserve Chairman Ben S. Bernanke earlier this month said even households with ``good credit'' were finding it tough to get mortgages.
``This may be a temporary bump as we clear out these foreclosed properties,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``As the meltdown really hits these figures in late October and November, that's when we could see some retracement.''
Stocks tumbled as concern grew that the credit crisis has infected the broader economy. The Standard & Poor's 500 index dropped down 3.5 percent to close at 876.8. Treasuries rose.
Resales were forecast to rise to a 4.95 million annual rate from a 4.91 million pace in August, according to the median estimate of 66 economists in a Bloomberg News survey. Projections ranged from 4.7 million to 5.11 million.
One-Year Increase
Sales rose 1.4 percent compared with a year earlier, the first year-over-year increase since November 2005. Resales totaled 5.65 million in 2007.
Today's figures compare with the 4.86 million level reached in June, the lowest in a decade and 33 percent down from the record reached in September 2005.
Foreclosure-related sales accounted for 35 percent to 40 percent of last month's total, the agents' group said. Of those, about 80 percent were for primary residence, higher than the average of about 75 percent and signaling that investors are not a primary reason for the jump, said Lawrence Yun, the group's chief economist.
``In terms of sales, I think we have bottomed out,'' Yun said in a press conference. ``The first step to housing-market stabilization is rising home sales. Hopefully, this trend can continue.''
Less Supply
The number of previously owned unsold homes on the market at the end of September represented 9.9 months' worth at the current sales pace, the fewest since February and down from 10.6 months' at the end of the prior month.
Inventories need to continue dropping in order to stabilize prices, and that will take more time, Yun also said. In the past, the Realtors' group has said a five to six month's supply represents a stable market.
The median price of an existing home dropped from a year ago to $191,600, the lowest since April 2004. Falling home prices make it harder to refinance mortgages, pushing up foreclosures in the third quarter to the highest since record-keeping began in 2005, according to Realtytrac.com.
Resales account for about 90 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
Today's report showed resales of single-family homes climbed 6.2 percent to an annual rate of 4.62 million. Sales of condos and co-ops were unchanged at a 560,000 rate.
Purchases increased in three of four regions, led by a 17 percent surge in the West as distressed sales jumped in California and Nevada. In the Northeast, sales fell 1.2 percent.
Less Equity
Declines in home equity have undermined consumer spending as owners have less cash to tap. A cascade of bank losses and failures has led to the most severe financial crisis in seven decades. Most economists are forecasting a recession in the U.S. and a global slowdown.
As home sales shrank, builders scaled back construction projects by 64 percent through September from a peak in January 2006, the biggest decline since at least 1959. Work began last month on the fewest single-family homes in 26 years, the Commerce Department reported last week. The number of building permits issued also fell, a sign that declines in construction will continue to hurt the economy.
``The housing downswing is really not exactly even nearing a bottom at this point,'' David Seiders, chief economist at the National Association of Homebuilders said Oct. 17 in an interview with Bloomberg Television. ``The core problem in the economy is still housing, and house prices are decimating the financial markets.''
Construction companies continue to struggle. Pulte Homes Inc., the third-largest U.S. builder, this week reported a net loss of $280.4 million for the third quarter, more than double what analysts had projected.
``A bottom in the housing market may not come for some time,'' Chief Executive Officer Richard Dugas said on a conference call yesterday.
Oct. 24 (Bloomberg) -- Home resales in the U.S. rose more than forecast in September, aided by foreclosure-driven declines in prices that indicated the market was stabilizing before the latest slump in financial markets.
Purchases of existing homes jumped 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said today in Washington. The median price dropped 9 percent.
Economists said sales figures for this month and next will be critical in determining whether sales have reached a bottom as predicted by the Realtors' group. Federal Reserve Chairman Ben S. Bernanke earlier this month said even households with ``good credit'' were finding it tough to get mortgages.
``This may be a temporary bump as we clear out these foreclosed properties,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``As the meltdown really hits these figures in late October and November, that's when we could see some retracement.''
Stocks tumbled as concern grew that the credit crisis has infected the broader economy. The Standard & Poor's 500 index dropped down 3.5 percent to close at 876.8. Treasuries rose.
Resales were forecast to rise to a 4.95 million annual rate from a 4.91 million pace in August, according to the median estimate of 66 economists in a Bloomberg News survey. Projections ranged from 4.7 million to 5.11 million.
One-Year Increase
Sales rose 1.4 percent compared with a year earlier, the first year-over-year increase since November 2005. Resales totaled 5.65 million in 2007.
Today's figures compare with the 4.86 million level reached in June, the lowest in a decade and 33 percent down from the record reached in September 2005.
Foreclosure-related sales accounted for 35 percent to 40 percent of last month's total, the agents' group said. Of those, about 80 percent were for primary residence, higher than the average of about 75 percent and signaling that investors are not a primary reason for the jump, said Lawrence Yun, the group's chief economist.
``In terms of sales, I think we have bottomed out,'' Yun said in a press conference. ``The first step to housing-market stabilization is rising home sales. Hopefully, this trend can continue.''
Less Supply
The number of previously owned unsold homes on the market at the end of September represented 9.9 months' worth at the current sales pace, the fewest since February and down from 10.6 months' at the end of the prior month.
Inventories need to continue dropping in order to stabilize prices, and that will take more time, Yun also said. In the past, the Realtors' group has said a five to six month's supply represents a stable market.
The median price of an existing home dropped from a year ago to $191,600, the lowest since April 2004. Falling home prices make it harder to refinance mortgages, pushing up foreclosures in the third quarter to the highest since record-keeping began in 2005, according to Realtytrac.com.
Resales account for about 90 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
Today's report showed resales of single-family homes climbed 6.2 percent to an annual rate of 4.62 million. Sales of condos and co-ops were unchanged at a 560,000 rate.
Purchases increased in three of four regions, led by a 17 percent surge in the West as distressed sales jumped in California and Nevada. In the Northeast, sales fell 1.2 percent.
Less Equity
Declines in home equity have undermined consumer spending as owners have less cash to tap. A cascade of bank losses and failures has led to the most severe financial crisis in seven decades. Most economists are forecasting a recession in the U.S. and a global slowdown.
As home sales shrank, builders scaled back construction projects by 64 percent through September from a peak in January 2006, the biggest decline since at least 1959. Work began last month on the fewest single-family homes in 26 years, the Commerce Department reported last week. The number of building permits issued also fell, a sign that declines in construction will continue to hurt the economy.
``The housing downswing is really not exactly even nearing a bottom at this point,'' David Seiders, chief economist at the National Association of Homebuilders said Oct. 17 in an interview with Bloomberg Television. ``The core problem in the economy is still housing, and house prices are decimating the financial markets.''
Construction companies continue to struggle. Pulte Homes Inc., the third-largest U.S. builder, this week reported a net loss of $280.4 million for the third quarter, more than double what analysts had projected.
``A bottom in the housing market may not come for some time,'' Chief Executive Officer Richard Dugas said on a conference call yesterday.
Wednesday, October 22, 2008
U.S. Stocks Tumble, S&P 500 Drops to Lowest Level Since 2003
By Elizabeth Stanton
Oct. 22 (Bloomberg) -- U.S. stocks sank and the Standard & Poor's 500 Index dropped to the lowest level since April 2003 on concern a worsening global economic slump will damp profits.
Exxon Mobil Corp. tumbled 9.7 percent and Freeport-McMoRan Copper & Gold Inc. plunged 18 percent as crude fell more than $5 a barrel and an index of commodity prices dropped to four-year low. Coventry Health Care Inc. tumbled 51 percent as the health insurer's earnings were hurt by bad investments and rising medical costs. SanDisk Corp. sank 32 percent after Samsung Electronics Co. abandoned its takeover bid. European and Asian shares fell, while an index of emerging market stocks slumped 8.3 percent on concern Argentina may default on its debt.
The S&P 500 lost 58.27 points, or 6.1 percent, to 896.78. The Dow Jones Industrial Average plunged 514.45, or 5.7 percent, to 8,519.21 as all 30 of its companies dropped. The Nasdaq Composite Index lost 80.93, or 4.8 percent, 1,615.75. About 24 stocks fell for each that rose on the New York Stock Exchange.
``The question is: Is any money at all flowing towards equities?'' said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $16 billion. ``Dividend yields alone should be providing support for some of these stocks, but if everyone's selling and no one is buying, it's hard to overcome that.''
The S&P 500 extended its 2008 retreat to 39 percent, poised for its worst yearly performance since 1931. The benchmark index for U.S. equities has fallen 43 percent from its peak last October. Companies in the index are paying 3.2 percent of their stock price in dividends, near the highest yield since Bloomberg began tracking the data in 1995.
Economic Concern
Growing concern over the fate of the global economy overshadowed another decrease in money-market rates. The three- month London interbank offered rate for dollars dropped for an eighth straight day to 3.54 percent after the U.S. government's latest initiative to resuscitate bank lending, a $540 billion commitment to buy troubled assets from money-market mutual funds.
The U.S. dollar traded for less than $1.28 against the euro for the first time since November 2006 and the pound tumbled to a five-year low on speculation European central banks will cut interest rates to bolster their economies.
About 1.6 billion shares changed hands on the floor of the NYSE, 6.8 percent more than the three-month daily average.
Credit Concern
Today's drop came as a U.S. House panel released e-mails showing employees at Moody's Investors Service and Standard & Poor's privately questioned the value of some mortgage-backed securities that were given creditworthy ratings. Banks worldwide reported more than $660 billion of mortgage-related writedowns and credit losses in the past year.
Exxon Mobil, the largest oil company, lost $6.93 to $64.57 and helped send the S&P 500 Energy Index to a 10.4 percent tumble, the steepest among 10 industries.
Crude for December delivery declined $5.28, or 7.3 percent, to $66.90 a barrel. Futures touched $66.20, the lowest since June 2007. The Reuters/Jefferies CRB index of 19 metals and chemicals slid 4 percent to 276.4, the lowest since July 2004.
ConocoPhillips slid 9.1 percent to $49.06 despite reporting third-quarter profit that exceeded the average analyst estimate.
Freeport-McMoRan, the largest publicly traded copper producer, lost $5.82 to $26.92 and led a gauge of raw-material companies in the S&P 500 to an 8.3 percent decline. Alcoa Inc., the largest U.S. aluminum producer, slid 13 percent to $10.50 for the biggest drop in the Dow average.
SanDisk tumbled $4.67 to $10.09. South Korea's Samsung withdrew its $26-a-share offer for the world's largest maker of memory cards used in digital cameras, saying losses at the U.S. company may worsen as a glut forces chipmakers to cut prices.
Earnings Watch
Coventry Health slumped $14.56 to $13.93. The insurer said third-quarter profit fell to 58 cents a share. That's half the average analyst estimate of $1.06, according to a Bloomberg survey.
Profits retreated 27 percent on average for the 141 companies in the S&P 500 that released results as of this morning, according to data compiled by Bloomberg. The group has trailed analysts' earnings estimates by an average of 2.6 percent.
Wall Street analysts forecast an 11 percent drop in third- quarter earnings in a Bloomberg survey. That would mark the fifth straight quarter of declining profits.
For the fourth quarter, analysts estimate a 24.2 percent increase in profits. For fiscal 2009, they project growth of 18 percent to a combined $95.70 a share for the S&P 500, according to estimates gathered by Bloomberg.
Inflated Estimates?
``Everyone's got to lower their expectations,'' Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, said on Bloomberg Television. ``This year we're looking at operating earnings somewhere in the mid-$90 range for S&P 500 companies. Who knows what next year might be. It might be somewhere in the mid-$70s.''
Boeing Co., the second-largest maker of commercial airplanes, reported a 38 percent decline in earnings after a strike by machinists shuttered factories and halted deliveries. Net income decreased to $695 million, or 96 cents a share. Analysts had estimated earnings of $1.01 a share. The shares slid $3.49, or 7.5 percent, to $42.91.
AT&T Inc., the largest U.S. phone company, lost $1.95 to $23.78. The company posted third-quarter profit that trailed analysts' projections on costs to subsidize Apple Inc.'s iPhone 3G and declines in corporate spending.
Apple advanced 5.9 percent to $96.87. The company reached a goal of selling 10 million iPhones three months ahead of schedule.
The S&P 500's 23 percent drop so far in October is bigger than any monthly loss since May 1940. It hasn't advanced for two straight days since Sept. 25-26.
`Doesn't Pay to Rush'
``To make people feel better you need at least a couple of consecutive up days,'' said Paul Kandel, a New York-based money manager at Sentinel Asset Management, which oversees $5 billion. ``The market's rotating so quickly that it doesn't pay to rush into anything.''
The S&P 500 has moved more than 1 percent on 13 of the 16 trading days this month, making it the most volatile by that measure since September 1932, according to S&P analyst Howard Silverblatt.
Stocks fell yesterday after companies from Texas Instruments Inc. to Freeport-McMoRan posted results that failed to meet analysts' estimates.
At least 139 S&P 500 companies are scheduled to report third-quarter earnings this week.
Rebound Halted
Yesterday's drop halted a rebound in the S&P 500 from an almost 5 1/2-year low on Oct. 10. The benchmark index for U.S. equities climbed 9.6 percent from that date through Oct. 20 as borrowing costs declined, the government planned to buy stakes in banks and Federal Reserve Chairman Ben S. Bernanke endorsed another economic-stimulus package.
VMware Inc. added 7.1 percent to $20.06. The biggest maker of programs that let computers run multiple operating systems earned 24 cents a share in the third quarter, excluding some items. That topped the average estimate in a Bloomberg survey by 18 percent. EMC Corp., the majority owner of VMware, climbed 3 percent to $9.98.
C.H. Robinson Worldwide Inc. rose 9.5 percent to $43.89. The largest U.S. arranger of freight shipments was raised to ```buy'' from ``neutral'' at Merrill Lynch & Co., which cited increased truckloads in the third quarter.
Yahoo! Inc. gained 2.7 percent to $12.39. The Internet company that rejected a takeover offer from Microsoft Corp. said it plans to cut at least 10 percent of its staff after advertising spending slowed.
Broadcom Corp. climbed 6.5 percent to $14.70. The maker of chips for the iPhone and Nintendo Co.'s Wii game console said third-quarter profit increased almost sixfold, topping estimates, on wireless product sales and a technology royalty payment.
Amazon.com Inc. tumbled 13 percent to $43.28 in trading after U.S. exchanges closed. The world's largest Internet retailer said its full-year forecast for sales and operating income would be lower than it originally projected.
Oct. 22 (Bloomberg) -- U.S. stocks sank and the Standard & Poor's 500 Index dropped to the lowest level since April 2003 on concern a worsening global economic slump will damp profits.
Exxon Mobil Corp. tumbled 9.7 percent and Freeport-McMoRan Copper & Gold Inc. plunged 18 percent as crude fell more than $5 a barrel and an index of commodity prices dropped to four-year low. Coventry Health Care Inc. tumbled 51 percent as the health insurer's earnings were hurt by bad investments and rising medical costs. SanDisk Corp. sank 32 percent after Samsung Electronics Co. abandoned its takeover bid. European and Asian shares fell, while an index of emerging market stocks slumped 8.3 percent on concern Argentina may default on its debt.
The S&P 500 lost 58.27 points, or 6.1 percent, to 896.78. The Dow Jones Industrial Average plunged 514.45, or 5.7 percent, to 8,519.21 as all 30 of its companies dropped. The Nasdaq Composite Index lost 80.93, or 4.8 percent, 1,615.75. About 24 stocks fell for each that rose on the New York Stock Exchange.
``The question is: Is any money at all flowing towards equities?'' said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $16 billion. ``Dividend yields alone should be providing support for some of these stocks, but if everyone's selling and no one is buying, it's hard to overcome that.''
The S&P 500 extended its 2008 retreat to 39 percent, poised for its worst yearly performance since 1931. The benchmark index for U.S. equities has fallen 43 percent from its peak last October. Companies in the index are paying 3.2 percent of their stock price in dividends, near the highest yield since Bloomberg began tracking the data in 1995.
Economic Concern
Growing concern over the fate of the global economy overshadowed another decrease in money-market rates. The three- month London interbank offered rate for dollars dropped for an eighth straight day to 3.54 percent after the U.S. government's latest initiative to resuscitate bank lending, a $540 billion commitment to buy troubled assets from money-market mutual funds.
The U.S. dollar traded for less than $1.28 against the euro for the first time since November 2006 and the pound tumbled to a five-year low on speculation European central banks will cut interest rates to bolster their economies.
About 1.6 billion shares changed hands on the floor of the NYSE, 6.8 percent more than the three-month daily average.
Credit Concern
Today's drop came as a U.S. House panel released e-mails showing employees at Moody's Investors Service and Standard & Poor's privately questioned the value of some mortgage-backed securities that were given creditworthy ratings. Banks worldwide reported more than $660 billion of mortgage-related writedowns and credit losses in the past year.
Exxon Mobil, the largest oil company, lost $6.93 to $64.57 and helped send the S&P 500 Energy Index to a 10.4 percent tumble, the steepest among 10 industries.
Crude for December delivery declined $5.28, or 7.3 percent, to $66.90 a barrel. Futures touched $66.20, the lowest since June 2007. The Reuters/Jefferies CRB index of 19 metals and chemicals slid 4 percent to 276.4, the lowest since July 2004.
ConocoPhillips slid 9.1 percent to $49.06 despite reporting third-quarter profit that exceeded the average analyst estimate.
Freeport-McMoRan, the largest publicly traded copper producer, lost $5.82 to $26.92 and led a gauge of raw-material companies in the S&P 500 to an 8.3 percent decline. Alcoa Inc., the largest U.S. aluminum producer, slid 13 percent to $10.50 for the biggest drop in the Dow average.
SanDisk tumbled $4.67 to $10.09. South Korea's Samsung withdrew its $26-a-share offer for the world's largest maker of memory cards used in digital cameras, saying losses at the U.S. company may worsen as a glut forces chipmakers to cut prices.
Earnings Watch
Coventry Health slumped $14.56 to $13.93. The insurer said third-quarter profit fell to 58 cents a share. That's half the average analyst estimate of $1.06, according to a Bloomberg survey.
Profits retreated 27 percent on average for the 141 companies in the S&P 500 that released results as of this morning, according to data compiled by Bloomberg. The group has trailed analysts' earnings estimates by an average of 2.6 percent.
Wall Street analysts forecast an 11 percent drop in third- quarter earnings in a Bloomberg survey. That would mark the fifth straight quarter of declining profits.
For the fourth quarter, analysts estimate a 24.2 percent increase in profits. For fiscal 2009, they project growth of 18 percent to a combined $95.70 a share for the S&P 500, according to estimates gathered by Bloomberg.
Inflated Estimates?
``Everyone's got to lower their expectations,'' Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, said on Bloomberg Television. ``This year we're looking at operating earnings somewhere in the mid-$90 range for S&P 500 companies. Who knows what next year might be. It might be somewhere in the mid-$70s.''
Boeing Co., the second-largest maker of commercial airplanes, reported a 38 percent decline in earnings after a strike by machinists shuttered factories and halted deliveries. Net income decreased to $695 million, or 96 cents a share. Analysts had estimated earnings of $1.01 a share. The shares slid $3.49, or 7.5 percent, to $42.91.
AT&T Inc., the largest U.S. phone company, lost $1.95 to $23.78. The company posted third-quarter profit that trailed analysts' projections on costs to subsidize Apple Inc.'s iPhone 3G and declines in corporate spending.
Apple advanced 5.9 percent to $96.87. The company reached a goal of selling 10 million iPhones three months ahead of schedule.
The S&P 500's 23 percent drop so far in October is bigger than any monthly loss since May 1940. It hasn't advanced for two straight days since Sept. 25-26.
`Doesn't Pay to Rush'
``To make people feel better you need at least a couple of consecutive up days,'' said Paul Kandel, a New York-based money manager at Sentinel Asset Management, which oversees $5 billion. ``The market's rotating so quickly that it doesn't pay to rush into anything.''
The S&P 500 has moved more than 1 percent on 13 of the 16 trading days this month, making it the most volatile by that measure since September 1932, according to S&P analyst Howard Silverblatt.
Stocks fell yesterday after companies from Texas Instruments Inc. to Freeport-McMoRan posted results that failed to meet analysts' estimates.
At least 139 S&P 500 companies are scheduled to report third-quarter earnings this week.
Rebound Halted
Yesterday's drop halted a rebound in the S&P 500 from an almost 5 1/2-year low on Oct. 10. The benchmark index for U.S. equities climbed 9.6 percent from that date through Oct. 20 as borrowing costs declined, the government planned to buy stakes in banks and Federal Reserve Chairman Ben S. Bernanke endorsed another economic-stimulus package.
VMware Inc. added 7.1 percent to $20.06. The biggest maker of programs that let computers run multiple operating systems earned 24 cents a share in the third quarter, excluding some items. That topped the average estimate in a Bloomberg survey by 18 percent. EMC Corp., the majority owner of VMware, climbed 3 percent to $9.98.
C.H. Robinson Worldwide Inc. rose 9.5 percent to $43.89. The largest U.S. arranger of freight shipments was raised to ```buy'' from ``neutral'' at Merrill Lynch & Co., which cited increased truckloads in the third quarter.
Yahoo! Inc. gained 2.7 percent to $12.39. The Internet company that rejected a takeover offer from Microsoft Corp. said it plans to cut at least 10 percent of its staff after advertising spending slowed.
Broadcom Corp. climbed 6.5 percent to $14.70. The maker of chips for the iPhone and Nintendo Co.'s Wii game console said third-quarter profit increased almost sixfold, topping estimates, on wireless product sales and a technology royalty payment.
Amazon.com Inc. tumbled 13 percent to $43.28 in trading after U.S. exchanges closed. The world's largest Internet retailer said its full-year forecast for sales and operating income would be lower than it originally projected.
Subscribe to:
Posts (Atom)