World stock markets retreated this week against a backdrop of rising oil prices and fresh uncertainty about the outlook for US growth, inflation and interest rates.
A further blow to Wall Street came late on Friday as the US said it was imposing duties on coated paper imported from China, reversing its policy of not applying duties to subsidised goods from “non-market economies”. The news also sent the dollar lower against the euro and the yen.
But a continued wave of merger and acquisition activity helped limit the downside in share prices and analysts remained optimistic about the prospects for equities going into the second quarter of the year.
Oil prices reached their highest levels for six months this week as tensions in the Middle East heightened over Iran’s capture of 15 UK naval personnel. West Texas Intermediate gained more than 4 per cent over the week to $65.67. That is nearly a third up from an eight-month low of $49.90 recorded in January.
Edward Meir at MAN Financial Energy said WTI could near $70 if the UK/Iran situation drags unresolved into next week.
But he added: “By the same token, the market’s overwhelming fixation on this one issue could also set the stage for a substantial correction if and when the Iranians finally decide to throw in the towel.”
Geopolitical concerns also came to the fore on Friday as Treasury bond prices briefly surged on rumours that US business interests had been asked to leave Bahrain and that another US aircraft carrier was heading to the Persian Gulf. The White House said it had heard nothing about such a move.
Meanwhile, there were mixed signals about the outlook for the US economy from a raft of figures this week. Weak data on new home sales and durable goods orders heightened investor fears about a sharp slowdown in economic growth. And although there was an upward revision to fourth-quarter gross domestic product figures, analysts pointed out that US economic growth had been below trend in the last three quarters of 2006.
Even more unsettling, Federal Reserve chairman Ben Bernanke warned this week that uncertainties surrounding the US economic outlook “had increased somewhat in recent weeks” and that inflation remained “uncomfortably high”.
The latter point was emphasised on Friday as the February PCE price deflator – an inflation measure closely watched by the Fed – rose more than expected. Rob Carnell, economist at ING, said the data had dealt a blow to expectations for an early cut in US interest rates. “The Fed may still cut rates at some point, but it is going to take longer for easing to materialise, with core inflation likely to remain higher for longer,” he said.
Ian Harwood at Dresdner Kleinwort said the robustness of the US economy this year would be absolutely central to the global investment outlook.
“Our own view remains that the US economy will in coming months seriously underperform expectations, a development likely to relieve current inflation angst and generate a further improvement in interest rate expectations,” he said. Mike Lenhoff, chief strategist at Brewin Dolphin Securities, remained positive about the equity outlook, saying he felt the global economy was probably strong enough to withstand a US slowdown. “The background is not negative for equities. Valuations look very satisfactory and there is no reason to feel we are entering a bear market.”
On Wall Street, the S&P 500 was down 1.1 per cent over the week, while the Dow Jones Industrial Average fell 1 per cent In Europe, the FTSE Eurofirst 300 index fell 0.5 per cent while the Nikkei 225 Average in Tokyo shed 1.1 per cent. The weekly declines capped a turbulent first quarter for equity markets.
Equity indices endured sharp losses at the end of February as risk aversion increased sharply. But the re-emergence of M&A activity helped stocks recoup most of their losses. For the quarter as a whole, the S&P 500 was up just 0.18 per cent, while the Eurofirst 300 rose 2.2 per cent and the Nikkei edged up 0.4 per cent.
Saturday, March 31, 2007
Bush says Iran must release British "hostages"
CAMP DAVID, Maryland (Reuters) - President Bush said on Saturday that Iran's detention of 15 British sailors and marines was inexcusable and called on Tehran to release "the hostages" immediately.
The standoff, which has helped push oil prices to six-month highs at a time of heightened Middle East tensions over Iran's nuclear program, showed no signs of easing.
Iranian President Mahmoud Ahmadinejad accused London of mishandling the aftermath of the March 23 capture of the British personnel in the northern Gulf after Britain expressed concern over Iranian "saber rattling."
Iran's ambassador to Moscow said the 15 Britons could face punishment if found guilty of illegally entering the Islamic republic's territorial waters.
Britain, the biggest ally of the United States in the war in Iraq, insists its sailors were seized well within Iraqi waters while on a U.N.-backed mission to search for smugglers.
Bush said he supported British Prime Minister Tony Blair's efforts to resolve the matter peacefully and rejected the idea of swapping Iranians held by the United States in Iraq for the detained Britons.
"The Iranians must give back the hostages. They're innocent," Bush told a news conference at the Camp David presidential retreat with visiting Brazilian President Luiz Inacio Lula da Silva
"The Iranians took these people out of Iraqi waters. It's inexcusable behavior."
Britain's Sunday Telegraph newspaper quoted a defense official as saying London was prepared to give Iran a guarantee that Royal Navy ships would never knowingly enter Iranian waters without permission.
But it would not apologize or say that the British boats were in Iranian waters, the paper said.
'NOT THE LEGAL AND LOGICAL WAY'
Suggesting no solution was imminent, Ahmadinejad underlined Iranian displeasure that Britain turned to the U.N. Security Council and the European Union for support.
"The British government, instead of apologizing and expressing regret over the action taken, started to claim that we are in their debt and shouted in different international councils," state radio quoted Ahmadinejad as saying.
"But this is not the legal and logical way for this issue."
After a meeting of EU foreign ministers in Germany, Britain's Margaret Beckett said she was worried by the Moscow ambassador's words about potential punishment.
It is not the first person to have made sabre-rattling noises," she told reporters in Bremen. "The message I want to send is I think everyone regrets that this position has arisen. What we want is a way out of it."
Beckett said Britain had sent Iran a written reply to its diplomatic note on the detention of the sailors but had received no response.
Iranian Foreign Ministry spokesman Mohammad Ali Hosseini said Tehran was "waiting for the British government to correct its behavior," the state broadcaster's Web site reported.
He also defended showing some of the detainees on television -- a move sharply criticized by London -- and said Iran's aim was to reassure their families, the official IRNA news agency reported.
Iran's Moscow ambassador, Gholamreza Ansari, told Vesti-24 television on Friday, according to a Reuters translation from the original Farsi, "If there is no guilt they will be freed but the legal process is going on and has to be completed and if they are found guilty they will face the punishment."
It was not clear on what authority Ansari was speaking and IRNA said on Saturday he had denied making the comments.
Foreign Minister Manouchehr Mottaki said on March 25 Iran might charge the sailors with illegally entering its waters.
Iran displayed three of the Britons on television on Friday and released a letter from one saying she was being held because of "oppressive" British and U.S. behavior in Iraq
London and Washington accuse Iran of allowing sophisticated weapons used to target their forces to be brought into Iraq.
The standoff, which has helped push oil prices to six-month highs at a time of heightened Middle East tensions over Iran's nuclear program, showed no signs of easing.
Iranian President Mahmoud Ahmadinejad accused London of mishandling the aftermath of the March 23 capture of the British personnel in the northern Gulf after Britain expressed concern over Iranian "saber rattling."
Iran's ambassador to Moscow said the 15 Britons could face punishment if found guilty of illegally entering the Islamic republic's territorial waters.
Britain, the biggest ally of the United States in the war in Iraq, insists its sailors were seized well within Iraqi waters while on a U.N.-backed mission to search for smugglers.
Bush said he supported British Prime Minister Tony Blair's efforts to resolve the matter peacefully and rejected the idea of swapping Iranians held by the United States in Iraq for the detained Britons.
"The Iranians must give back the hostages. They're innocent," Bush told a news conference at the Camp David presidential retreat with visiting Brazilian President Luiz Inacio Lula da Silva
"The Iranians took these people out of Iraqi waters. It's inexcusable behavior."
Britain's Sunday Telegraph newspaper quoted a defense official as saying London was prepared to give Iran a guarantee that Royal Navy ships would never knowingly enter Iranian waters without permission.
But it would not apologize or say that the British boats were in Iranian waters, the paper said.
'NOT THE LEGAL AND LOGICAL WAY'
Suggesting no solution was imminent, Ahmadinejad underlined Iranian displeasure that Britain turned to the U.N. Security Council and the European Union for support.
"The British government, instead of apologizing and expressing regret over the action taken, started to claim that we are in their debt and shouted in different international councils," state radio quoted Ahmadinejad as saying.
"But this is not the legal and logical way for this issue."
After a meeting of EU foreign ministers in Germany, Britain's Margaret Beckett said she was worried by the Moscow ambassador's words about potential punishment.
It is not the first person to have made sabre-rattling noises," she told reporters in Bremen. "The message I want to send is I think everyone regrets that this position has arisen. What we want is a way out of it."
Beckett said Britain had sent Iran a written reply to its diplomatic note on the detention of the sailors but had received no response.
Iranian Foreign Ministry spokesman Mohammad Ali Hosseini said Tehran was "waiting for the British government to correct its behavior," the state broadcaster's Web site reported.
He also defended showing some of the detainees on television -- a move sharply criticized by London -- and said Iran's aim was to reassure their families, the official IRNA news agency reported.
Iran's Moscow ambassador, Gholamreza Ansari, told Vesti-24 television on Friday, according to a Reuters translation from the original Farsi, "If there is no guilt they will be freed but the legal process is going on and has to be completed and if they are found guilty they will face the punishment."
It was not clear on what authority Ansari was speaking and IRNA said on Saturday he had denied making the comments.
Foreign Minister Manouchehr Mottaki said on March 25 Iran might charge the sailors with illegally entering its waters.
Iran displayed three of the Britons on television on Friday and released a letter from one saying she was being held because of "oppressive" British and U.S. behavior in Iraq
London and Washington accuse Iran of allowing sophisticated weapons used to target their forces to be brought into Iraq.
Friday, March 30, 2007
Gulf tensions keep oil prices high
Oil prices Friday reached their highest level this year capping a strong week that saw prices rise more than 8 per cent. The increase was driven by increased tensions between Iran and the West and tighter conditions in the US petrol market.
The capture of British sailors last week by Iran has created nervousness in oil markets. This was underlined by the $5 surge in oil prices on Tuesday after rumours that a conflict had started between Iran and the US. Once the rumours were denied, prices eased, but they still moved higher over the rest of the week.
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The price for Brent crude, the European oil benchmark, hit its highest level for the year Friday when it touched $69.14 a barrel, before easing to $68.52, up 60 cents on the day and surpassing the $69.0 level reached on Tuesday after rising $5 within a number of minutes. Brent rose more than 8 per cent last week, adding to the 4 per cent rise from the previous week.
The US benchmark, the West Texas Intermediate, gained 5 cents to $66.08 a barrel in late morning trade on the New York Mercantile Exchange, and was up almost 6 per cent on the week. The WTI price reached its high for the year on Tuesday of $68.09 a barrel after the $5 price surge.
One reason for the difference between the WTI and Brent prices is the tightness in the US storage market. Energy analysts said storage capacity is near full in the Midwest area where WTI is physically delivered, largely due to the high number of refineries that are either in maintenance or have halted production because of a fire or accident.
Analysts estimate that about 8 per cent of US refinery capacity is down due to fires and accidents.This has meant more crude is going into storage as it cannot be processed. Meanwhile, the reduced refinery activity is boosting petrol prices.
Nymex benchmark gasoline futures touched $2.1488 a gallon Friday, up one cent on the day, but up more than seven per cent on the week, and up more than 58 per cent from its low for the year in mid-January. The rise in petrol prices has boosted refiner margins, which analysts say will stimulate further petrol production in the coming weeks when some refineries are expected to come back on line.
Gold prices added $2 to $663.50/$664.00 a troy ounce Friday, and were up about 1 per cent on the week.
Copper prices also hit their highest level for the year when they reached $6,935 a tonne on the London Metal Exchange, before easing to $6,870 in late trade, up $115 on the day, and more than 2 per cent on the week.
The copper industry gathered in Santiago this week for its annual gathering when contract prices between miners and smelters are negotiated. CRU, the metals consultants, also held a copper meeting in the Chilean capital this week.
Huang Guoping, vice-president of China Minmetals, said copper demand in China, the metal’s biggest consumer, is expected to grow 21 per cent to between 4.5m and 4.7m tonnes by 2010 from 3.8m. Chinese copper demand rose 5.6 per cent in 2006, compared with 9.1 per cent growth in 2005.
Copper prices have also risen sharply over the past two months on forecasts of a deficit during the second quarter, the strongest period of the year for copper. This was not anticipated at the start of the year when copper prices suffered a large slide.
Nickel prices rose steadily last week after two weeks of wild swings. The three-month LME nickel price eased $50 to $43,800 a tonne Friday, but was up more than 3 per cent on the week.
Corn and wheat prices fell sharply Friday after a bigger than expected increase in US corn planting estimates. Soybean prices also eased in spite of a bigger-than-expected fall in soybean acreages.
London cocoa prices ended near a four-year high on concerns over west African mid-crops from dry weather. London cocoa futures ended at £1,058 a tonne, up £4 on the day.
The capture of British sailors last week by Iran has created nervousness in oil markets. This was underlined by the $5 surge in oil prices on Tuesday after rumours that a conflict had started between Iran and the US. Once the rumours were denied, prices eased, but they still moved higher over the rest of the week.
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The price for Brent crude, the European oil benchmark, hit its highest level for the year Friday when it touched $69.14 a barrel, before easing to $68.52, up 60 cents on the day and surpassing the $69.0 level reached on Tuesday after rising $5 within a number of minutes. Brent rose more than 8 per cent last week, adding to the 4 per cent rise from the previous week.
The US benchmark, the West Texas Intermediate, gained 5 cents to $66.08 a barrel in late morning trade on the New York Mercantile Exchange, and was up almost 6 per cent on the week. The WTI price reached its high for the year on Tuesday of $68.09 a barrel after the $5 price surge.
One reason for the difference between the WTI and Brent prices is the tightness in the US storage market. Energy analysts said storage capacity is near full in the Midwest area where WTI is physically delivered, largely due to the high number of refineries that are either in maintenance or have halted production because of a fire or accident.
Analysts estimate that about 8 per cent of US refinery capacity is down due to fires and accidents.This has meant more crude is going into storage as it cannot be processed. Meanwhile, the reduced refinery activity is boosting petrol prices.
Nymex benchmark gasoline futures touched $2.1488 a gallon Friday, up one cent on the day, but up more than seven per cent on the week, and up more than 58 per cent from its low for the year in mid-January. The rise in petrol prices has boosted refiner margins, which analysts say will stimulate further petrol production in the coming weeks when some refineries are expected to come back on line.
Gold prices added $2 to $663.50/$664.00 a troy ounce Friday, and were up about 1 per cent on the week.
Copper prices also hit their highest level for the year when they reached $6,935 a tonne on the London Metal Exchange, before easing to $6,870 in late trade, up $115 on the day, and more than 2 per cent on the week.
The copper industry gathered in Santiago this week for its annual gathering when contract prices between miners and smelters are negotiated. CRU, the metals consultants, also held a copper meeting in the Chilean capital this week.
Huang Guoping, vice-president of China Minmetals, said copper demand in China, the metal’s biggest consumer, is expected to grow 21 per cent to between 4.5m and 4.7m tonnes by 2010 from 3.8m. Chinese copper demand rose 5.6 per cent in 2006, compared with 9.1 per cent growth in 2005.
Copper prices have also risen sharply over the past two months on forecasts of a deficit during the second quarter, the strongest period of the year for copper. This was not anticipated at the start of the year when copper prices suffered a large slide.
Nickel prices rose steadily last week after two weeks of wild swings. The three-month LME nickel price eased $50 to $43,800 a tonne Friday, but was up more than 3 per cent on the week.
Corn and wheat prices fell sharply Friday after a bigger than expected increase in US corn planting estimates. Soybean prices also eased in spite of a bigger-than-expected fall in soybean acreages.
London cocoa prices ended near a four-year high on concerns over west African mid-crops from dry weather. London cocoa futures ended at £1,058 a tonne, up £4 on the day.
US Stock index futures rise after data on spending
March 30 (Bloomberg) -- U.S. stock-index futures advanced after a report showed personal spending and incomes increased more than economists forecast, bolstering speculation consumer spending will continue to power the economy.
Red Hat Inc., the biggest distributor of Linux software, climbed after its annual profit forecast topped analysts' estimates. Crude oil traded near a six-month high, lifting Exxon Mobil Corp. and Chevron Corp. shares.
``The consumer has been the driving force for the most part behind this economy,'' said Robert Pavlik, who helps manage $325 million as chief investment officer of Oaktree Asset Management in New York. ``It's more about maintaining growth right now than pretty much anything else.''
Standard & Poor's 500 Index futures expiring in June added 3 to 1434.5 at 9:01 a.m. in New York. Dow average futures climbed 14 to 12,430 and Nasdaq-100 Index futures gained 2.25 to 1790.25.
For the week, the S&P 500 has dropped 1 percent and the Dow average has declined 1.1 percent. The Nasdaq Composite Index has lost 1.3 percent.
Today is also the last trading day of the first quarter. The S&P 500 has gained 0.3 percent in the first three months of 2007, and the Nasdaq has risen 0.1 percent. The Dow has declined 0.9 percent.
Spending, Incomes
Both consumer spending and incomes gained 0.6 percent in February, the Commerce Department said. The average economist estimate compiled by Bloomberg for both was a 0.3 percent increase. Spending accounts for two-thirds of the economy. The Federal Reserve's preferred measure of inflation rose 0.3 percent. Economists expected a 0.2 percent gain.
The Reuters/University of Michigan's final reading for consumer sentiment, set for release at 10 a.m. Washington time, probably fell to 88.5 this month from 91.3 in February.
Red Hat advanced $1.41 to $24.55 after saying it expects to earn 67 cents to 72 cents a share, excluding some items, in the next fiscal year ending in February. That average analyst estimate in a Bloomberg survey was 63 cents.
Oil traded near a six-month high as 15 British sailors and marines seized in the Persian Gulf remained in Iranian custody for an eighth day. Crude futures rose 42 cents to $66.46 a barrel in London.
Exxon, the world's biggest energy company, added 18 cents to $76.38. Chevron, the largest refiner in the U.S. West, rose 5 cents to $75.
Dell Inc. retreated 69 cents to $22.70. The world's second- biggest personal-computer maker said it found evidence of misconduct and accounting errors as part of an investigation into its financial results.
Dendreon Soars
Dendreon Corp. soared $13.43 to $18.65. A Food and Drug Administration advisory panel voted 17-0 yesterday that the company's prostate cancer drug is safe, and 13-4 that it's ``substantially effective'' based on clinical trials. The FDA usually follows the advice of its advisory committees, although it isn't required to do so.
PMC-Sierra Inc. increased 38 cents to $6.68. The maker of chips for telecommunications equipment said it will close two research centers and cut about 175 jobs, or 15 percent of its workforce.
Tribune Co., the owner of the Chicago Tribune and the Cubs baseball team, added 97 cents to $32.50. Ron Burkle and Eli Broad increased their bid for the company to $8.2 billion, or $34 a share, said a person familiar with the situation. A rival offer from Sam Zell, a Chicago-based real-estate billionaire, is valued at $33 a share.
Nymex Holdings Inc. gained $2.28 to $138. The owner of the world's largest energy market was upgraded to ``buy'' from ``neutral'' at Banc of America Securities, which cited rising trading and volatility in the oil market
Red Hat Inc., the biggest distributor of Linux software, climbed after its annual profit forecast topped analysts' estimates. Crude oil traded near a six-month high, lifting Exxon Mobil Corp. and Chevron Corp. shares.
``The consumer has been the driving force for the most part behind this economy,'' said Robert Pavlik, who helps manage $325 million as chief investment officer of Oaktree Asset Management in New York. ``It's more about maintaining growth right now than pretty much anything else.''
Standard & Poor's 500 Index futures expiring in June added 3 to 1434.5 at 9:01 a.m. in New York. Dow average futures climbed 14 to 12,430 and Nasdaq-100 Index futures gained 2.25 to 1790.25.
For the week, the S&P 500 has dropped 1 percent and the Dow average has declined 1.1 percent. The Nasdaq Composite Index has lost 1.3 percent.
Today is also the last trading day of the first quarter. The S&P 500 has gained 0.3 percent in the first three months of 2007, and the Nasdaq has risen 0.1 percent. The Dow has declined 0.9 percent.
Spending, Incomes
Both consumer spending and incomes gained 0.6 percent in February, the Commerce Department said. The average economist estimate compiled by Bloomberg for both was a 0.3 percent increase. Spending accounts for two-thirds of the economy. The Federal Reserve's preferred measure of inflation rose 0.3 percent. Economists expected a 0.2 percent gain.
The Reuters/University of Michigan's final reading for consumer sentiment, set for release at 10 a.m. Washington time, probably fell to 88.5 this month from 91.3 in February.
Red Hat advanced $1.41 to $24.55 after saying it expects to earn 67 cents to 72 cents a share, excluding some items, in the next fiscal year ending in February. That average analyst estimate in a Bloomberg survey was 63 cents.
Oil traded near a six-month high as 15 British sailors and marines seized in the Persian Gulf remained in Iranian custody for an eighth day. Crude futures rose 42 cents to $66.46 a barrel in London.
Exxon, the world's biggest energy company, added 18 cents to $76.38. Chevron, the largest refiner in the U.S. West, rose 5 cents to $75.
Dell Inc. retreated 69 cents to $22.70. The world's second- biggest personal-computer maker said it found evidence of misconduct and accounting errors as part of an investigation into its financial results.
Dendreon Soars
Dendreon Corp. soared $13.43 to $18.65. A Food and Drug Administration advisory panel voted 17-0 yesterday that the company's prostate cancer drug is safe, and 13-4 that it's ``substantially effective'' based on clinical trials. The FDA usually follows the advice of its advisory committees, although it isn't required to do so.
PMC-Sierra Inc. increased 38 cents to $6.68. The maker of chips for telecommunications equipment said it will close two research centers and cut about 175 jobs, or 15 percent of its workforce.
Tribune Co., the owner of the Chicago Tribune and the Cubs baseball team, added 97 cents to $32.50. Ron Burkle and Eli Broad increased their bid for the company to $8.2 billion, or $34 a share, said a person familiar with the situation. A rival offer from Sam Zell, a Chicago-based real-estate billionaire, is valued at $33 a share.
Nymex Holdings Inc. gained $2.28 to $138. The owner of the world's largest energy market was upgraded to ``buy'' from ``neutral'' at Banc of America Securities, which cited rising trading and volatility in the oil market
Air Asia X to buy long haul Airbus jets
AirAsia X, the new Malaysian long-haul low-cost airline, is expected to announce next month that it will buy up to 15 Airbus A330-300 aircraft, according to people familiar with the order.
AirAsia X is also planning to start service in the fourth quarter of 2007 by leasing several aircraft until it takes delivery of the new Airbus aircraft.
AirAsia to lend name to new long-haul airline
AirAsia, Malaysia's biggest budget carrier, is to lend its name to a new long-distance low-cost airline to be launched by its founder but is unlikely to take an equity stake in the venture.
Separately both Virgin Atlantic and EasyJet denied speculation that they would be participating as partners in the project.
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EasyJet said: "We are not in talks and we have no plans to be in any talks with AirAsia. We do not do alliances."
Virgin Atlantic said: "They approached us about being a minority investor in the past. There are not any conversations taking place at the moment."
The prospect of an alliance between AirAsia and Virgin Atlantic sent AirAsia's share price 7.3 per cent higher to close at M$1.62 yesterday in the first day of trading after reports of a possible link.
Tony Fernandes, AirAsia's founder, is expected to announce on Friday that FlyasianXpress (Fax), a domestic Malaysian carrier he and other AirAsia executives control, will serve as the airline for the long-haul business, with flights to the UK.
However, Fax executives are hopeful that Virgin might later form an alliance with the carrier, which operates domestic Malaysian routes formerly served by state-run Malaysian Airlines.
Fax is expected to launch long-distance flights in mid-2007, using two Airbus A330 aircraft or two Boeing 777s. The size of the operation would be similar to that of Oasis Hong Kong Airlines, which began low-fare flights between Hong Kong and London last year in the first such venture linking the two regions.
The Malaysian government is keen to support the venture in the hope of attracting more European tourists to Malaysia, which has launched an extensive Visit Malaysia campaign this year.
Malaysia wants to establish Kuala Lumpur as the main hub for budget carriers in south-east Asia in competition with Singapore.
AirAsia X is also planning to start service in the fourth quarter of 2007 by leasing several aircraft until it takes delivery of the new Airbus aircraft.
AirAsia to lend name to new long-haul airline
AirAsia, Malaysia's biggest budget carrier, is to lend its name to a new long-distance low-cost airline to be launched by its founder but is unlikely to take an equity stake in the venture.
Separately both Virgin Atlantic and EasyJet denied speculation that they would be participating as partners in the project.
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EasyJet said: "We are not in talks and we have no plans to be in any talks with AirAsia. We do not do alliances."
Virgin Atlantic said: "They approached us about being a minority investor in the past. There are not any conversations taking place at the moment."
The prospect of an alliance between AirAsia and Virgin Atlantic sent AirAsia's share price 7.3 per cent higher to close at M$1.62 yesterday in the first day of trading after reports of a possible link.
Tony Fernandes, AirAsia's founder, is expected to announce on Friday that FlyasianXpress (Fax), a domestic Malaysian carrier he and other AirAsia executives control, will serve as the airline for the long-haul business, with flights to the UK.
However, Fax executives are hopeful that Virgin might later form an alliance with the carrier, which operates domestic Malaysian routes formerly served by state-run Malaysian Airlines.
Fax is expected to launch long-distance flights in mid-2007, using two Airbus A330 aircraft or two Boeing 777s. The size of the operation would be similar to that of Oasis Hong Kong Airlines, which began low-fare flights between Hong Kong and London last year in the first such venture linking the two regions.
The Malaysian government is keen to support the venture in the hope of attracting more European tourists to Malaysia, which has launched an extensive Visit Malaysia campaign this year.
Malaysia wants to establish Kuala Lumpur as the main hub for budget carriers in south-east Asia in competition with Singapore.
Thursday, March 29, 2007
Japanese stocks rise on industry output,weak Yen
March 30 (Bloomberg) -- Japanese stocks rose after the yen weakened against the dollar and the U.S. economy expanded at a faster-than-expected pace. Honda Motor Co. paced advances.
Stocks also advanced after a measure of industrial production fell less than expected, boosting confidence in the outlook for Japan's economy.
``With the weaker yen, it's reasonable to expect shares to gain,'' said Mitsushige Akino, who oversees $468 million in assets at Ichiyoshi Investment Management Co. in Tokyo. ``The February industrial production figure today is a big focus point for investors.''
The Nikkei 225 Stock Average climbed 55.04, or 0.3 percent, to 17,321.98 as of 9:55 a.m. in Tokyo. The broader Topix index added 8.21, or 0.5 percent, to 1718.89. In March, the Nikkei has dropped 1.5 percent, while the Topix has fallen 1.8. Both gauges are set to snap three months of advances. For the quarter the Nikkei has advanced 0.7 percent and the Topix has risen 2.4 percent.
Mitsubishi Estate Co. led gains by property developers after consumer prices excluding fresh food fell, indicating the Bank of Japan will not be able to lift interest rates soon.
Honda, Japan's No. 2 automaker, jumped 90 yen, or 2.2 percent to 4,160. Sony Corp., the second-largest consumer electronics maker globally, advanced 50 yen, or 0.8 percent, to 6,030. Kyocera Corp., the world's biggest maker of ceramic packaging for chips, climbed 70 yen, or 0.6 percent, to 11,150.
Weaker Yen
The yen fell 1 percent to 118.07 per dollar in New York yesterday, the biggest slide since Oct.7. The Japanese currency weakened 1.2 percent, the most since March 6, to 157.40 against the euro. The yen recently changed hands at 118.17 against the dollar and 157.41 versus the euro.
A weaker yen increases the value of Japanese exporters' dollar-denominated sales when converted back into local currency, while their products become more competitive abroad.
U.S. gross domestic product expanded at a 2.5 percent annualized rate last quarter, the Commerce Department said yesterday in its final reading of the figure. That was more than the median estimate of 2.2 percent growth by 75 economists in a Bloomberg survey.
Adding to investor confidence in the U.S. economy, jobless claims dropped more than forecast to 308,000, while core personal consumption, a price gauge, was revised lower to 1.8 percent from a previous reading of 1.9 percent.
In Japan, industrial production fell a seasonally adjusted 0.2 percent in February from the previous month, the trade ministry said today. Economists surveyed by Bloomberg had forecast a 0.7 percent drop. Inventories dropped 0.4 percent.
Economic Data
Domestic demand-related companies advanced following the report. Mizuho Financial Group Inc., the nation's No. 2 bank, climbed 12,000 yen, or 1.6 percent to 756,000. Nippon Telegraph & Telephone Corp., the country's largest telephone company, jumped 13,000 yen, or 2.1 percent, to 623,000.
Real estate companies advanced after consumer prices declined, suggesting the Bank of Japan will not be able to raise rates. Lower interest rates benefit property developers because they borrow to fund new building projects.
Mitsubishi Estate, the nation's No. 2 property developer, advanced 30 yen, or 0.8 percent, to 3,850. Sumitomo Realty & Development Co., the third largest, added 50 yen, or 1.1 percent, to 4,450.
Consumer prices excluding fresh food dropped 0.1 percent in February, the statistics bureau said 30 minutes before the start of trading in Tokyo. That was the first decline since April 2006 and in-line with the median estimate of economists surveyed by Bloomberg News. Japan's central bank has said it will closely monitor prices in determining interest rate policy.
Eight Days
Household spending rose a higher-than-estimated 1.3 percent, a second month of increases, the statistics bureau said, while the unemployment rate remained unchanged at 4 percent, in-line with economist estimates.
Oil-related companies advanced after the price of crude climbed for an eighth day. Inpex Holdings Inc., Japan's biggest oil explorer, jumped 22,000 yen, or 2.2 percent, to 1.02 million. Japan Petroleum Exploration Co., the second largest, climbed 140 yen, or 1.7 percent, to 8,640.
Crude oil for May delivery surged 3 percent to $66.03 a barrel in New York, the highest since Sept. 8. Futures rose for eight straight trading days for the first time since June.
Rakuten Inc., Japan's biggest online retailer, gained 1,000 yen, or 1.8 percent, to 57,000. The company is considering acquiring more shares in Tokyo Broadcasting System Inc., the Asahi newspaper reported.
Sumitomo Corp. rose 130 yen, or 1.5 percent, to 8,630. Japan's third-largest trading company will pay 30 billion yen ($254 million) for a 5 percent stake in Westinghouse Electric Co., the nuclear-plant builder owned by Toshiba Corp., Nikkei English News said.
Nikkei futures expiring in June rose 0.7 percent to 17,370 in Osaka in advanced 0.5 percent to 17,375 in Singapore.
Stocks also advanced after a measure of industrial production fell less than expected, boosting confidence in the outlook for Japan's economy.
``With the weaker yen, it's reasonable to expect shares to gain,'' said Mitsushige Akino, who oversees $468 million in assets at Ichiyoshi Investment Management Co. in Tokyo. ``The February industrial production figure today is a big focus point for investors.''
The Nikkei 225 Stock Average climbed 55.04, or 0.3 percent, to 17,321.98 as of 9:55 a.m. in Tokyo. The broader Topix index added 8.21, or 0.5 percent, to 1718.89. In March, the Nikkei has dropped 1.5 percent, while the Topix has fallen 1.8. Both gauges are set to snap three months of advances. For the quarter the Nikkei has advanced 0.7 percent and the Topix has risen 2.4 percent.
Mitsubishi Estate Co. led gains by property developers after consumer prices excluding fresh food fell, indicating the Bank of Japan will not be able to lift interest rates soon.
Honda, Japan's No. 2 automaker, jumped 90 yen, or 2.2 percent to 4,160. Sony Corp., the second-largest consumer electronics maker globally, advanced 50 yen, or 0.8 percent, to 6,030. Kyocera Corp., the world's biggest maker of ceramic packaging for chips, climbed 70 yen, or 0.6 percent, to 11,150.
Weaker Yen
The yen fell 1 percent to 118.07 per dollar in New York yesterday, the biggest slide since Oct.7. The Japanese currency weakened 1.2 percent, the most since March 6, to 157.40 against the euro. The yen recently changed hands at 118.17 against the dollar and 157.41 versus the euro.
A weaker yen increases the value of Japanese exporters' dollar-denominated sales when converted back into local currency, while their products become more competitive abroad.
U.S. gross domestic product expanded at a 2.5 percent annualized rate last quarter, the Commerce Department said yesterday in its final reading of the figure. That was more than the median estimate of 2.2 percent growth by 75 economists in a Bloomberg survey.
Adding to investor confidence in the U.S. economy, jobless claims dropped more than forecast to 308,000, while core personal consumption, a price gauge, was revised lower to 1.8 percent from a previous reading of 1.9 percent.
In Japan, industrial production fell a seasonally adjusted 0.2 percent in February from the previous month, the trade ministry said today. Economists surveyed by Bloomberg had forecast a 0.7 percent drop. Inventories dropped 0.4 percent.
Economic Data
Domestic demand-related companies advanced following the report. Mizuho Financial Group Inc., the nation's No. 2 bank, climbed 12,000 yen, or 1.6 percent to 756,000. Nippon Telegraph & Telephone Corp., the country's largest telephone company, jumped 13,000 yen, or 2.1 percent, to 623,000.
Real estate companies advanced after consumer prices declined, suggesting the Bank of Japan will not be able to raise rates. Lower interest rates benefit property developers because they borrow to fund new building projects.
Mitsubishi Estate, the nation's No. 2 property developer, advanced 30 yen, or 0.8 percent, to 3,850. Sumitomo Realty & Development Co., the third largest, added 50 yen, or 1.1 percent, to 4,450.
Consumer prices excluding fresh food dropped 0.1 percent in February, the statistics bureau said 30 minutes before the start of trading in Tokyo. That was the first decline since April 2006 and in-line with the median estimate of economists surveyed by Bloomberg News. Japan's central bank has said it will closely monitor prices in determining interest rate policy.
Eight Days
Household spending rose a higher-than-estimated 1.3 percent, a second month of increases, the statistics bureau said, while the unemployment rate remained unchanged at 4 percent, in-line with economist estimates.
Oil-related companies advanced after the price of crude climbed for an eighth day. Inpex Holdings Inc., Japan's biggest oil explorer, jumped 22,000 yen, or 2.2 percent, to 1.02 million. Japan Petroleum Exploration Co., the second largest, climbed 140 yen, or 1.7 percent, to 8,640.
Crude oil for May delivery surged 3 percent to $66.03 a barrel in New York, the highest since Sept. 8. Futures rose for eight straight trading days for the first time since June.
Rakuten Inc., Japan's biggest online retailer, gained 1,000 yen, or 1.8 percent, to 57,000. The company is considering acquiring more shares in Tokyo Broadcasting System Inc., the Asahi newspaper reported.
Sumitomo Corp. rose 130 yen, or 1.5 percent, to 8,630. Japan's third-largest trading company will pay 30 billion yen ($254 million) for a 5 percent stake in Westinghouse Electric Co., the nuclear-plant builder owned by Toshiba Corp., Nikkei English News said.
Nikkei futures expiring in June rose 0.7 percent to 17,370 in Osaka in advanced 0.5 percent to 17,375 in Singapore.
Wednesday, March 28, 2007
Bernanke plays down need for rate cuts??
Ben Bernanke challenged market expectations of early US interest rate cuts on Wednesday, saying he remained comfortable with rates on hold in spite of recent adverse economic data.
However, the Federal Reserve chairman said the risks to both inflation and growth had increased in the past few weeks and the US central bank would be flexible in responding to future economic news.
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Mr Bernanke told the joint economic committee of Congress: “To date the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation.”
The Fed’s recent policy statement – which baffled markets when it was released a week ago – was not intended to signal that the Fed now had a neutral policy stance, he said.
“I want to emphasise that we have not shifted away from an inflation bias,” he said.
Mr Bernanke said changes to the Fed statement were intended to give it greater scope to respond quickly if the outlook for either growth or inflation deteriorated significantly. “We are looking for a bit more flexibility given the uncertainty we face.”
Mr Bernanke also brushed aside comments by Alan Greenspan, his predecessor, that the expansion looked to be ageing, raising the possibility of a recession. Expansions did not “die of old age”, he said.
Mr Bernanke played down the threat from the subprime mortgage market and highlighted a new risk to growth from weak business investment. His comments came as the Department of Commerce released figures showing that durable goods orders bounced back weakly in February after a plunge in January.
“The possibility that the recent weakness in business spending will persist is an additional downside risk,” he said.
The Fed chairman hinted that the weakness had been a surprise: “The magnitude of the slowdown has been somewhat greater than would be expected given the normal evolution of the business cycle.”
But he added: “Despite the recent weak readings, we expect business investment in equipment and software to grow at a moderate pace this year.”
He was less alarmed than many investors by the distress in the subprime mortgage market.
“At this juncture...the impact on the broader economy and financial markets of the problems in the subprime market seem likely to be contained,” he said.
He recognised the risk that the housing market correction “could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector”. Overall, he indicated that the US central bank remained relatively upbeat about prospects for growth.
He said consumer spending “has continued to be well maintained so far this year” and said consumption “should continue to support the economic expansion in the coming quarters”.
Mr Bernanke added “the economy appears likely to continue to expand at a moderate pace over the coming quarters”.
He reiterated a series of reasons for the Fed to remain concerned about inflation. “The high level of resource utilisation remains an important upside risk to continued progress on reducing inflation,” Mr Bernanke said.
However, the Federal Reserve chairman said the risks to both inflation and growth had increased in the past few weeks and the US central bank would be flexible in responding to future economic news.
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Mr Bernanke told the joint economic committee of Congress: “To date the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation.”
The Fed’s recent policy statement – which baffled markets when it was released a week ago – was not intended to signal that the Fed now had a neutral policy stance, he said.
“I want to emphasise that we have not shifted away from an inflation bias,” he said.
Mr Bernanke said changes to the Fed statement were intended to give it greater scope to respond quickly if the outlook for either growth or inflation deteriorated significantly. “We are looking for a bit more flexibility given the uncertainty we face.”
Mr Bernanke also brushed aside comments by Alan Greenspan, his predecessor, that the expansion looked to be ageing, raising the possibility of a recession. Expansions did not “die of old age”, he said.
Mr Bernanke played down the threat from the subprime mortgage market and highlighted a new risk to growth from weak business investment. His comments came as the Department of Commerce released figures showing that durable goods orders bounced back weakly in February after a plunge in January.
“The possibility that the recent weakness in business spending will persist is an additional downside risk,” he said.
The Fed chairman hinted that the weakness had been a surprise: “The magnitude of the slowdown has been somewhat greater than would be expected given the normal evolution of the business cycle.”
But he added: “Despite the recent weak readings, we expect business investment in equipment and software to grow at a moderate pace this year.”
He was less alarmed than many investors by the distress in the subprime mortgage market.
“At this juncture...the impact on the broader economy and financial markets of the problems in the subprime market seem likely to be contained,” he said.
He recognised the risk that the housing market correction “could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector”. Overall, he indicated that the US central bank remained relatively upbeat about prospects for growth.
He said consumer spending “has continued to be well maintained so far this year” and said consumption “should continue to support the economic expansion in the coming quarters”.
Mr Bernanke added “the economy appears likely to continue to expand at a moderate pace over the coming quarters”.
He reiterated a series of reasons for the Fed to remain concerned about inflation. “The high level of resource utilisation remains an important upside risk to continued progress on reducing inflation,” Mr Bernanke said.
Tuesday, March 27, 2007
Baht Falls as Bank of Thailand Suggests Lenders Sell Currency
March 27 (Bloomberg) -- The Thai baht dropped against the dollar as the Bank of Thailand suggested domestic lenders sell the currency after it climbed to a nine-year high.
Deputy Governor Atchana Waiquamdee said today that banks should switch foreign-exchange positions to the level they held on Dec. 31, which proceeded a two-week decline in the baht. The currency has climbed since then, eroding exports that account for about 60 percent of Thailand's gross domestic product.
``The central bank's comments probably caused people who had a speculative position on the appreciation in the baht to close such positions,'' said Hideki Hayashi, a Tokyo-based foreign-exchange strategist at Shinko Securities Co. ``However, in the long term, it is difficult to stop such a move.''
Thailand's currency dropped 0.7 percent to 35.08 to the dollar in onshore trading as of 1:00 p.m. in Bangkok, according to data compiled by Bloomberg. That pared its gain to 1.8 percent this year. It may rise beyond 34.50 by the end of June, Hayashi said.
The baht last year advanced 16 percent against the dollar, prompting Thailand to impose restrictions on Dec. 18 that included penalties for withdrawing funds invested in the country for less than a year. Limits on trading have reduced the supply of currency outside of Thailand, creating two exchange rates. In the offshore market, the baht gained 2 percent to 32.40, after a 4 percent decline yesterday.
Current Account Surplus
The Bank of Thailand today also asked lenders to report holdings of currencies every day, Deputy Governor Atchana said in an interview with Business Radio. The cooperation was sought through trade associations of commercial banks, she said.
Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore, said there's a March 27 deadline for banks to reposition their dollar holdings to year-end levels, although that has yet to be officially announced.
``We seek cooperation from the associations of banks to monitor their members and to stop those who try to speculate on the exchange rate,'' Bank of Thailand Governor Tarisa Watanagase said in Bangkok yesterday. ``We saw information that some banks have been manipulating on the baht.''
She denied market speculation that the central bank may fix the baht at 36 to the dollar.
``There are lots of rumors floating around, including the Bank of Thailand might consider a currency peg,'' said Philip Wee, senior currency strategist at DBS Bank in Singapore. ``We are more cautious this week in terms of selling the dollar.''
March 27 Deadline
Gains in the baht have been driven by a slowdown in imports that has widened the nation's trade advantage.
A central bank report on March 30 will probably show the current account surplus held at or above $1 billion in January for a third month, according to the median forecast of seven economists surveyed by Bloomberg News. The surplus rose above $1 billion in November for the first time since December 2004.
``The baht's strength will have a greater impact on exports in the second quarter, as a number of exporters have complained of lower overseas orders because they cannot compete with producers in other countries,'' Thanavath Phonvichai, an economist at the University of Thai Chamber of Commerce, said on March 26.
The Asian Development Bank today raised its growth forecast for Asia excluding Japan. Asia's developing economies will expand 7.6 percent in 2007, faster than the 7.1 percent estimate in September, the Manila-based lender said. Political uncertainties and conflicts in Thailand and Sri Lanka may hurt expansion, the ADB said.
Thai Bonds Fall
Thai government bonds fell on concerns the central bank's efforts to weaken the baht may prompt overseas investors to reduce their holdings.
``We are afraid foreign investors may close their positions if measures cause the baht the fall sharply,'' said Pannarat Bhanpato, who helps manage the equivalent of $2 billion in fixed-income assets at MFC Asset Management in Bangkok. Investors are also concerned about the supply of new bonds, she said.
Bank of Thailand will sell 20 billion baht of two-year notes today and 10 billion baht worth of two-, 10- and 12-year bonds tomorrow.
The yield on the 5.4 percent bond due July 2016 rose 4 basis points, or 0.04 percentage point, to 4.21 percent as of 11:15 a.m. in Bangkok, according to prices from Deutsche Bank. The price fell 0.28173 to 109.1511. Bond yields move inversely to prices.
Deputy Governor Atchana Waiquamdee said today that banks should switch foreign-exchange positions to the level they held on Dec. 31, which proceeded a two-week decline in the baht. The currency has climbed since then, eroding exports that account for about 60 percent of Thailand's gross domestic product.
``The central bank's comments probably caused people who had a speculative position on the appreciation in the baht to close such positions,'' said Hideki Hayashi, a Tokyo-based foreign-exchange strategist at Shinko Securities Co. ``However, in the long term, it is difficult to stop such a move.''
Thailand's currency dropped 0.7 percent to 35.08 to the dollar in onshore trading as of 1:00 p.m. in Bangkok, according to data compiled by Bloomberg. That pared its gain to 1.8 percent this year. It may rise beyond 34.50 by the end of June, Hayashi said.
The baht last year advanced 16 percent against the dollar, prompting Thailand to impose restrictions on Dec. 18 that included penalties for withdrawing funds invested in the country for less than a year. Limits on trading have reduced the supply of currency outside of Thailand, creating two exchange rates. In the offshore market, the baht gained 2 percent to 32.40, after a 4 percent decline yesterday.
Current Account Surplus
The Bank of Thailand today also asked lenders to report holdings of currencies every day, Deputy Governor Atchana said in an interview with Business Radio. The cooperation was sought through trade associations of commercial banks, she said.
Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore, said there's a March 27 deadline for banks to reposition their dollar holdings to year-end levels, although that has yet to be officially announced.
``We seek cooperation from the associations of banks to monitor their members and to stop those who try to speculate on the exchange rate,'' Bank of Thailand Governor Tarisa Watanagase said in Bangkok yesterday. ``We saw information that some banks have been manipulating on the baht.''
She denied market speculation that the central bank may fix the baht at 36 to the dollar.
``There are lots of rumors floating around, including the Bank of Thailand might consider a currency peg,'' said Philip Wee, senior currency strategist at DBS Bank in Singapore. ``We are more cautious this week in terms of selling the dollar.''
March 27 Deadline
Gains in the baht have been driven by a slowdown in imports that has widened the nation's trade advantage.
A central bank report on March 30 will probably show the current account surplus held at or above $1 billion in January for a third month, according to the median forecast of seven economists surveyed by Bloomberg News. The surplus rose above $1 billion in November for the first time since December 2004.
``The baht's strength will have a greater impact on exports in the second quarter, as a number of exporters have complained of lower overseas orders because they cannot compete with producers in other countries,'' Thanavath Phonvichai, an economist at the University of Thai Chamber of Commerce, said on March 26.
The Asian Development Bank today raised its growth forecast for Asia excluding Japan. Asia's developing economies will expand 7.6 percent in 2007, faster than the 7.1 percent estimate in September, the Manila-based lender said. Political uncertainties and conflicts in Thailand and Sri Lanka may hurt expansion, the ADB said.
Thai Bonds Fall
Thai government bonds fell on concerns the central bank's efforts to weaken the baht may prompt overseas investors to reduce their holdings.
``We are afraid foreign investors may close their positions if measures cause the baht the fall sharply,'' said Pannarat Bhanpato, who helps manage the equivalent of $2 billion in fixed-income assets at MFC Asset Management in Bangkok. Investors are also concerned about the supply of new bonds, she said.
Bank of Thailand will sell 20 billion baht of two-year notes today and 10 billion baht worth of two-, 10- and 12-year bonds tomorrow.
The yield on the 5.4 percent bond due July 2016 rose 4 basis points, or 0.04 percentage point, to 4.21 percent as of 11:15 a.m. in Bangkok, according to prices from Deutsche Bank. The price fell 0.28173 to 109.1511. Bond yields move inversely to prices.
Monday, March 26, 2007
Crude oil rises to 3 mths high on heightened Iran tension
March 26 (Bloomberg) -- Crude oil rose to its highest in three months after Iran took 15 British servicemen captive and the United Nations imposed new sanctions on the country, heightening concern supplies from the Middle East will be disrupted.
The capture of the British marines in the Persian Gulf was described as ``a very serious situation'' by U.K. Prime Minister Tony Blair. The UN gave Iran 60 days to suspend uranium enrichment and voted to freeze assets of a state-owned bank on March 24.
``The build-up of offensive force will continue in coming weeks and tensions will increase further,'' said Olivier Jakob, the managing director at Zug, Switzerland-based Petromatrix GmbH. ``All segments of our radar screen are positive'' for keeping oil prices supported.
Crude oil for May delivery climbed as much as 61 cents, or 1 percent, to $62.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since Dec. 26. It was at $62.77 at 11:10 a.m. in London.
In London, Brent crude oil for May settlement increased as much as 73 cents, or 1.2 percent, to $63.91 a barrel in electronic trading on the ICE Futures exchange. It was at $63.70 at 11:10 a.m. London time.
The New York-traded contract gained 4.5 percent last week on speculation U.S. demand for motor fuel will set records this summer. Oil prices have gained 2.4 percent this year.
Gasoline futures for April delivery rose 1.47 cents, or 0.7 percent, to $2.01 a gallon in after-hours trading on Nymex at 11:11 a.m. London time. Prices are up 25 percent this year.
Iranian Tension
Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. The captured marines were members of an Anglo- American task force patrolling Iraqi territorial waters in the Gulf and protecting its oil terminals. They had just searched a merchant vessel in Iraqi waters when they were seized, Britain's Ministry of Defence said last week. Iran said they had entered its territory.
``Everybody is rattling his saber,'' said Anthony Nunan, the assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``The fact that the sanctions are ratcheted up is a bullish factor, because it keeps delaying the day that investments in the Iranian upstream can take off.''
The International Atomic Energy Agency referred Iran to the UN Security Council in February 2006. Iran will reduce its cooperation with the agency in response to the new sanctions, Agence France- Presse reported, citing a government statement to the state-owned news service.
Oil reached a record $78.40 a barrel on July 14 after Israeli troops invaded Lebanon to attack Iranian-backed Hezbollah militia operating there. It had fallen as low as $50.48 on January 18 and was trading between $61 and 62 a barrel on March 23, before the marines were seized.
Gasoline Market
The more widely held May gasoline contract was trading for $1.97 a gallon at 11:13 a.m. London time after rising 4.2 percent last week.
``The market is a little concerned about adequate gasoline supplies as U.S. inventories have been declining for several weeks and we're near the beginning of the driving season,'' said Andy Sommer, an analyst at HSH Nordbank AG in Hamburg.
U.S. gasoline pump prices rose 6 cents during the past two weeks to an average $2.61 a gallon, the highest price since September, according to Trilby Lundberg, a U.S.-based analyst who surveys 7,000 filling stations nationwide.
Gasoline stockpiles in the U.S., the world's largest oil consumer, have fallen for six weeks. Demand, which usually peaks between the Memorial Day holiday in late May and Labor Day in early September, was 2.1 percent higher than a year earlier in the four weeks ended March 16, the Energy Department said last week.
Bets on rising oil prices held by hedge fund managers and other large speculators reached the highest in almost seven months last week as investors reduced contracts to sell oil.
Contracts to buy oil outnumbered contracts to sell by 44,366 contracts on March 20, up 20 percent from a week earlier, according to U.S. Commodity Futures Trading Commission data. The net-long positioned jumped as investors cut their bets on falling prices for a fifth straight week.
The capture of the British marines in the Persian Gulf was described as ``a very serious situation'' by U.K. Prime Minister Tony Blair. The UN gave Iran 60 days to suspend uranium enrichment and voted to freeze assets of a state-owned bank on March 24.
``The build-up of offensive force will continue in coming weeks and tensions will increase further,'' said Olivier Jakob, the managing director at Zug, Switzerland-based Petromatrix GmbH. ``All segments of our radar screen are positive'' for keeping oil prices supported.
Crude oil for May delivery climbed as much as 61 cents, or 1 percent, to $62.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since Dec. 26. It was at $62.77 at 11:10 a.m. in London.
In London, Brent crude oil for May settlement increased as much as 73 cents, or 1.2 percent, to $63.91 a barrel in electronic trading on the ICE Futures exchange. It was at $63.70 at 11:10 a.m. London time.
The New York-traded contract gained 4.5 percent last week on speculation U.S. demand for motor fuel will set records this summer. Oil prices have gained 2.4 percent this year.
Gasoline futures for April delivery rose 1.47 cents, or 0.7 percent, to $2.01 a gallon in after-hours trading on Nymex at 11:11 a.m. London time. Prices are up 25 percent this year.
Iranian Tension
Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. The captured marines were members of an Anglo- American task force patrolling Iraqi territorial waters in the Gulf and protecting its oil terminals. They had just searched a merchant vessel in Iraqi waters when they were seized, Britain's Ministry of Defence said last week. Iran said they had entered its territory.
``Everybody is rattling his saber,'' said Anthony Nunan, the assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``The fact that the sanctions are ratcheted up is a bullish factor, because it keeps delaying the day that investments in the Iranian upstream can take off.''
The International Atomic Energy Agency referred Iran to the UN Security Council in February 2006. Iran will reduce its cooperation with the agency in response to the new sanctions, Agence France- Presse reported, citing a government statement to the state-owned news service.
Oil reached a record $78.40 a barrel on July 14 after Israeli troops invaded Lebanon to attack Iranian-backed Hezbollah militia operating there. It had fallen as low as $50.48 on January 18 and was trading between $61 and 62 a barrel on March 23, before the marines were seized.
Gasoline Market
The more widely held May gasoline contract was trading for $1.97 a gallon at 11:13 a.m. London time after rising 4.2 percent last week.
``The market is a little concerned about adequate gasoline supplies as U.S. inventories have been declining for several weeks and we're near the beginning of the driving season,'' said Andy Sommer, an analyst at HSH Nordbank AG in Hamburg.
U.S. gasoline pump prices rose 6 cents during the past two weeks to an average $2.61 a gallon, the highest price since September, according to Trilby Lundberg, a U.S.-based analyst who surveys 7,000 filling stations nationwide.
Gasoline stockpiles in the U.S., the world's largest oil consumer, have fallen for six weeks. Demand, which usually peaks between the Memorial Day holiday in late May and Labor Day in early September, was 2.1 percent higher than a year earlier in the four weeks ended March 16, the Energy Department said last week.
Bets on rising oil prices held by hedge fund managers and other large speculators reached the highest in almost seven months last week as investors reduced contracts to sell oil.
Contracts to buy oil outnumbered contracts to sell by 44,366 contracts on March 20, up 20 percent from a week earlier, according to U.S. Commodity Futures Trading Commission data. The net-long positioned jumped as investors cut their bets on falling prices for a fifth straight week.
Saturday, March 24, 2007
Fed's Mishkin says inflation will gradually drop 2%
By Vivien Lou Chen
March 24 (Bloomberg) -- Federal Reserve Governor Frederic Mishkin, the newest member of the central bank's board, said inflation is poised to recede only ``gradually'' given the recent rise in fuel and energy prices.
The Fed's most closely watched measure of inflation should slow to about 2 percent from the current 2.25 percent, Mishkin said during a speech in San Francisco. Moving it below that would be difficult without a shift in monetary policy, he added.
``This process may take a while in light of the recent rebound in prices for gasoline and other petroleum products,'' Mishkin said in a speech yesterday at a conference organized by the San Francisco Fed. ``A substantial further decline in inflation would require a shift in expectations, and such a shift could be difficult and time-consuming to bring about.''
The Fed has been successful in anchoring consumers and companies' outlook for prices, which means the central bank doesn't have to respond as aggressively as it did in the late 1970s, Mishkin said. His speech, a largely academic study of inflation over the past four decades, didn't mention current prospects for economic growth or this week's interest-rate decision.
Inflation -- as determined by the personal consumption expenditures price index, minus food and energy -- has been at or above the top of the 1 percent to 2 percent comfort zone identified by Chairman Ben S. Bernanke for more than two years.
Higher Fuel Charges
Mishkin said higher fuel charges will seep through to core prices because companies will gradually pass increased energy costs on to their customers.
Mishkin said 2 percent is a reasonable estimate of current long-run expectations for inflation. ``I should stress that considerable uncertainty surrounds this estimate,'' he said.
``While recognizing how embarrassingly wrong such prognostications often turn out to be, I think that we can be reasonably optimistic that core PCE inflation will gradually drift down from its 12-month reading of 2.25 percent,'' he said.
Gasoline for April delivery in New York rose 4.08 cents, or 2.1 percent, to $1.9983 a gallon yesterday. Crude oil is up about 2 percent in the past month and climbed yesterday after Iran seized British naval personnel. Oil rose above $78 a barrel in July.
Mishkin, 56, took office in September, becoming the newest member of the policy-setting Federal Open Market Committee. He was previously a professor at Columbia University and collaborated on research with Bernanke, who was formerly an economist at Princeton University.
He is a supporter of a numerical inflation target and more openness in communications by the Fed. In response to a question from the audience, he declined to discuss the prospects for a long-run inflation target, citing the FOMC's ongoing effort to improve transparency.
Rate Unchanged
Policy makers voted unanimously on March 21 to keep their benchmark interest rate at 5.25 percent, the level it's been at since June. In the accompanying statement, the Fed dropped its tilt toward higher borrowing costs, while strengthening its language on inflation, calling it the ``predominant concern.''
Central bankers should be careful not to be lulled into a false sense of comfort by contained inflation expectations, Mishkin said in his speech.
``If the monetary authorities were to become complacent and to think that they could get away with not reacting to shocks that, in their mistaken view, no longer have the potential to cause inflation to rise persistently, then inflation expectations would surely become unhinged again,'' he said.
``Inflation has become less persistent over the past two decades, but the underlying trend may not yet be perfectly stable,'' Mishkin said.
Plosser, Geithner
He was the fourth Fed official to speak yesterday. Philadelphia Fed President Charles Plosser told a bankers' group gathered in Florida that inflation and inflation expectations are likely to be ``lower and more stable'' in the future.
New York Fed President Timothy Geithner told a separate group in Charlotte, North Carolina, that recent turmoil in the subprime mortgage market probably won't have a broader impact on related credit markets. Richmond Fed President Jeffrey Lacker moderated a panel at the same conference.
Central bank governors and presidents traditionally don't discuss the near-term outlook for the economy and monetary policy during a blackout period that spans one week before a Fed meeting through the Friday after a meeting.
March 24 (Bloomberg) -- Federal Reserve Governor Frederic Mishkin, the newest member of the central bank's board, said inflation is poised to recede only ``gradually'' given the recent rise in fuel and energy prices.
The Fed's most closely watched measure of inflation should slow to about 2 percent from the current 2.25 percent, Mishkin said during a speech in San Francisco. Moving it below that would be difficult without a shift in monetary policy, he added.
``This process may take a while in light of the recent rebound in prices for gasoline and other petroleum products,'' Mishkin said in a speech yesterday at a conference organized by the San Francisco Fed. ``A substantial further decline in inflation would require a shift in expectations, and such a shift could be difficult and time-consuming to bring about.''
The Fed has been successful in anchoring consumers and companies' outlook for prices, which means the central bank doesn't have to respond as aggressively as it did in the late 1970s, Mishkin said. His speech, a largely academic study of inflation over the past four decades, didn't mention current prospects for economic growth or this week's interest-rate decision.
Inflation -- as determined by the personal consumption expenditures price index, minus food and energy -- has been at or above the top of the 1 percent to 2 percent comfort zone identified by Chairman Ben S. Bernanke for more than two years.
Higher Fuel Charges
Mishkin said higher fuel charges will seep through to core prices because companies will gradually pass increased energy costs on to their customers.
Mishkin said 2 percent is a reasonable estimate of current long-run expectations for inflation. ``I should stress that considerable uncertainty surrounds this estimate,'' he said.
``While recognizing how embarrassingly wrong such prognostications often turn out to be, I think that we can be reasonably optimistic that core PCE inflation will gradually drift down from its 12-month reading of 2.25 percent,'' he said.
Gasoline for April delivery in New York rose 4.08 cents, or 2.1 percent, to $1.9983 a gallon yesterday. Crude oil is up about 2 percent in the past month and climbed yesterday after Iran seized British naval personnel. Oil rose above $78 a barrel in July.
Mishkin, 56, took office in September, becoming the newest member of the policy-setting Federal Open Market Committee. He was previously a professor at Columbia University and collaborated on research with Bernanke, who was formerly an economist at Princeton University.
He is a supporter of a numerical inflation target and more openness in communications by the Fed. In response to a question from the audience, he declined to discuss the prospects for a long-run inflation target, citing the FOMC's ongoing effort to improve transparency.
Rate Unchanged
Policy makers voted unanimously on March 21 to keep their benchmark interest rate at 5.25 percent, the level it's been at since June. In the accompanying statement, the Fed dropped its tilt toward higher borrowing costs, while strengthening its language on inflation, calling it the ``predominant concern.''
Central bankers should be careful not to be lulled into a false sense of comfort by contained inflation expectations, Mishkin said in his speech.
``If the monetary authorities were to become complacent and to think that they could get away with not reacting to shocks that, in their mistaken view, no longer have the potential to cause inflation to rise persistently, then inflation expectations would surely become unhinged again,'' he said.
``Inflation has become less persistent over the past two decades, but the underlying trend may not yet be perfectly stable,'' Mishkin said.
Plosser, Geithner
He was the fourth Fed official to speak yesterday. Philadelphia Fed President Charles Plosser told a bankers' group gathered in Florida that inflation and inflation expectations are likely to be ``lower and more stable'' in the future.
New York Fed President Timothy Geithner told a separate group in Charlotte, North Carolina, that recent turmoil in the subprime mortgage market probably won't have a broader impact on related credit markets. Richmond Fed President Jeffrey Lacker moderated a panel at the same conference.
Central bank governors and presidents traditionally don't discuss the near-term outlook for the economy and monetary policy during a blackout period that spans one week before a Fed meeting through the Friday after a meeting.
Porsche to bid for Volkswagen After increasing stake-Proton Opportunity??
By Chad Thomas and Jeremy van Loon-Bloomberg.com
March 24 (Bloomberg) -- Porsche AG, the world's most profitable carmaker, plans to raise its stake in Volkswagen AG to 31 percent, solidifying its control and forcing it to make an offer for the rest of Europe's largest carmaker.
Porsche, based in Stuttgart, said today it will offer 100.92 euros a share, the minimum allowed under German takeover law and 17 percent less than yesterday's close, which valued the company at 42.7 billion euros ($56.7 billion).
The company doesn't want a majority stake, said Frank Gaube, a Porsche spokesman. ``We want to be able to act, to increase our stake when it suits us,'' said Gaube. ``We don't want to be pushed.'' Under German law, an investor must make a takeover offer when a holding in a company reaches 30 percent.
Ferdinand Piech, whose family controls Porsche and whose grandfather started up Volkswagen in the 1930s under Adolf Hitler, has increased his control over Volkswagen since Porsche bought a stake a year and a half ago. A combination would realize the Porsche family's goal of uniting two carmakers their relatives began and would be the largest takeover ever in the industry.
``These are the best capitalists in the industry and they don't want to pay more than they have to,'' said Adam Jonas, an analyst at Morgan Stanley in London.
Porsche Stake
The company's supervisory board today authorized the sports- car maker to increase its holding to 31 percent from 27.3 percent on March 26, Gaube said.
Porsche, the maker of the 911 sports car, bought into Volkswagen in September 2005, saying it wanted to protect its partnership with its largest supplier. Porsche has steadily increased its influence, installing Chief Executive Officer Wendelin Wiedeking and Porsche Chief Financial Officer Holger Haerter on the supervisory board.
``Porsche will be able to instill its philosophy of strong focus on margins and profitability on the Volkswagen group,'' said Stephen Pope, an analyst at Cantor Fitzgerald in London with a ``buy'' rating on Volkswagen shares.
A credit facility to finance the takeover has been arranged by ABN Amro Bank NV, Barclays Capital, Merrill Lynch International, UBS Ltd. and Commerzbank AG, Porsche said.
Porsche said in a statement today that its offer for the common shares reflects the fact that the share price has more than doubled since Porsche first purchased a stake. Porsche said German financial regulators will set the minimum price for Volkswagen's preference shares. Porsche holds an option to increase its stake to 31 percent.
Buyout Offers
Shares of Volkswagen rose 6.90 euros to 117.70 euros in trading yesterday, while Porsche rose 21.56 euros to 1114.93 euros.
Porsche, once having made the minimum legal bid to all shareholders, is no longer required by law to present further buyout offers to all stakeholders should the company choose to increase the stake later, the company said.
A month ago, Porsche won a victory at the European Court of Justice, which moved to eliminate a law protecting Volkswagen from a takeover. Porsche is ``confident'' that the Volkswagen Law will be struck down, Gaube said.
An advocate general at the Luxembourg-based court European Court of Justice Feb. 13 recommended scrapping a 47-year-old German law protecting Volkswagen from a takeover because it ``restricts the free movement of capital.'' The EU court, expected to rule within the next three months, follows the recommendations in most cases.
Lower Saxony
The so-called Volkswagen Law caps shareholders' voting rights at 20 percent regardless of the size of the stake. Porsche, which supports abolishing the law, now has the same voting rights at Volkswagen as Lower Saxony, which owns 20.5 percent. Eliminating the law would give Porsche more say in decisions than Lower Saxony.
Christian Wulff, premier of Lower Saxony, said today in a text message Volkswagen benefits from having two stable shareholders who have a ``shared vision for Volkswagen.'' He made no reference to selling the state's holding.
Piech, a former Volkswagen CEO, reached an agreement last month with the German state of Lower Saxony, Volkswagen's second- largest shareholder, to remain chairman for another five-year term after he received the backing of the 10 labor representatives on the 20-member board. Piech, 69, was previously set to step down next month after shareholder opposition to his dual roles.
Piech's Reign
Piech has steadily consolidated his power at Volkswagen. In November, he helped orchestrate the ouster of Chief Executive Officer Bernd Pischetsrieder in favor of Martin Winterkorn, a long-time Piech protégé. The European Union's highest court has moved closer to striking down a law protecting Volkswagen from takeovers, a ruling that would increase Porsche's power.
Piech became Volkswagen CEO in 1993 and saved the carmaker from bankruptcy by trimming labor expenses and introducing common platforms for the model lines to cut costs. Investments in luxury models, including the Phaeton car and the Bugatti and Lamborghini brands, never helped profit. Volkswagen stock dropped 39 percent in the last four years of Piech's tenure as chief executive, which ended in April 2002.
The Piech and Porsche families are among the wealthiest in Germany, with most of their fortunes derived from stakes in Porsche, the carmaker with the industry's highest profit margins.
Holding Company
During the past 1 1/2 years, Piech has helped forge an alliance between Porsche and Wolfsburg-based Volkswagen. He worked for Volkswagen for 30 years and has been chairman of the supervisory board since 2002. He is a member of Porsche's supervisory board.
Volkswagen is Porsche's largest supplier. The two companies build the Porsche Cayenne, Volkswagen Touareg and Audi Q7 sport- utility vehicles at Volkswagen's plant in Slovakia. Volkswagen will build the body for Porsche's planned Panamera four-door model at its Hanover, Germany, factory.
A combined entity would be run as a holding company based in the Stuttgart area, with Porsche's carmaking business becoming a wholly owned subsidiary. The new company will be converted into a European stock corporation, or Societas Europaea.
The holding company would have a supervisory board, similar to an American board, with 12 members. Currently, Volkswagen's board has 20 members, with half the seats held by labor leaders.
Volkswagen welcomes Porsche's decision to increase its holding, the carmaker said in an e-mailed statement today.
``A stabile shareholder structure is important to the long- term oriented automobile business,'' CEO Winterkorn said in the statement.
March 24 (Bloomberg) -- Porsche AG, the world's most profitable carmaker, plans to raise its stake in Volkswagen AG to 31 percent, solidifying its control and forcing it to make an offer for the rest of Europe's largest carmaker.
Porsche, based in Stuttgart, said today it will offer 100.92 euros a share, the minimum allowed under German takeover law and 17 percent less than yesterday's close, which valued the company at 42.7 billion euros ($56.7 billion).
The company doesn't want a majority stake, said Frank Gaube, a Porsche spokesman. ``We want to be able to act, to increase our stake when it suits us,'' said Gaube. ``We don't want to be pushed.'' Under German law, an investor must make a takeover offer when a holding in a company reaches 30 percent.
Ferdinand Piech, whose family controls Porsche and whose grandfather started up Volkswagen in the 1930s under Adolf Hitler, has increased his control over Volkswagen since Porsche bought a stake a year and a half ago. A combination would realize the Porsche family's goal of uniting two carmakers their relatives began and would be the largest takeover ever in the industry.
``These are the best capitalists in the industry and they don't want to pay more than they have to,'' said Adam Jonas, an analyst at Morgan Stanley in London.
Porsche Stake
The company's supervisory board today authorized the sports- car maker to increase its holding to 31 percent from 27.3 percent on March 26, Gaube said.
Porsche, the maker of the 911 sports car, bought into Volkswagen in September 2005, saying it wanted to protect its partnership with its largest supplier. Porsche has steadily increased its influence, installing Chief Executive Officer Wendelin Wiedeking and Porsche Chief Financial Officer Holger Haerter on the supervisory board.
``Porsche will be able to instill its philosophy of strong focus on margins and profitability on the Volkswagen group,'' said Stephen Pope, an analyst at Cantor Fitzgerald in London with a ``buy'' rating on Volkswagen shares.
A credit facility to finance the takeover has been arranged by ABN Amro Bank NV, Barclays Capital, Merrill Lynch International, UBS Ltd. and Commerzbank AG, Porsche said.
Porsche said in a statement today that its offer for the common shares reflects the fact that the share price has more than doubled since Porsche first purchased a stake. Porsche said German financial regulators will set the minimum price for Volkswagen's preference shares. Porsche holds an option to increase its stake to 31 percent.
Buyout Offers
Shares of Volkswagen rose 6.90 euros to 117.70 euros in trading yesterday, while Porsche rose 21.56 euros to 1114.93 euros.
Porsche, once having made the minimum legal bid to all shareholders, is no longer required by law to present further buyout offers to all stakeholders should the company choose to increase the stake later, the company said.
A month ago, Porsche won a victory at the European Court of Justice, which moved to eliminate a law protecting Volkswagen from a takeover. Porsche is ``confident'' that the Volkswagen Law will be struck down, Gaube said.
An advocate general at the Luxembourg-based court European Court of Justice Feb. 13 recommended scrapping a 47-year-old German law protecting Volkswagen from a takeover because it ``restricts the free movement of capital.'' The EU court, expected to rule within the next three months, follows the recommendations in most cases.
Lower Saxony
The so-called Volkswagen Law caps shareholders' voting rights at 20 percent regardless of the size of the stake. Porsche, which supports abolishing the law, now has the same voting rights at Volkswagen as Lower Saxony, which owns 20.5 percent. Eliminating the law would give Porsche more say in decisions than Lower Saxony.
Christian Wulff, premier of Lower Saxony, said today in a text message Volkswagen benefits from having two stable shareholders who have a ``shared vision for Volkswagen.'' He made no reference to selling the state's holding.
Piech, a former Volkswagen CEO, reached an agreement last month with the German state of Lower Saxony, Volkswagen's second- largest shareholder, to remain chairman for another five-year term after he received the backing of the 10 labor representatives on the 20-member board. Piech, 69, was previously set to step down next month after shareholder opposition to his dual roles.
Piech's Reign
Piech has steadily consolidated his power at Volkswagen. In November, he helped orchestrate the ouster of Chief Executive Officer Bernd Pischetsrieder in favor of Martin Winterkorn, a long-time Piech protégé. The European Union's highest court has moved closer to striking down a law protecting Volkswagen from takeovers, a ruling that would increase Porsche's power.
Piech became Volkswagen CEO in 1993 and saved the carmaker from bankruptcy by trimming labor expenses and introducing common platforms for the model lines to cut costs. Investments in luxury models, including the Phaeton car and the Bugatti and Lamborghini brands, never helped profit. Volkswagen stock dropped 39 percent in the last four years of Piech's tenure as chief executive, which ended in April 2002.
The Piech and Porsche families are among the wealthiest in Germany, with most of their fortunes derived from stakes in Porsche, the carmaker with the industry's highest profit margins.
Holding Company
During the past 1 1/2 years, Piech has helped forge an alliance between Porsche and Wolfsburg-based Volkswagen. He worked for Volkswagen for 30 years and has been chairman of the supervisory board since 2002. He is a member of Porsche's supervisory board.
Volkswagen is Porsche's largest supplier. The two companies build the Porsche Cayenne, Volkswagen Touareg and Audi Q7 sport- utility vehicles at Volkswagen's plant in Slovakia. Volkswagen will build the body for Porsche's planned Panamera four-door model at its Hanover, Germany, factory.
A combined entity would be run as a holding company based in the Stuttgart area, with Porsche's carmaking business becoming a wholly owned subsidiary. The new company will be converted into a European stock corporation, or Societas Europaea.
The holding company would have a supervisory board, similar to an American board, with 12 members. Currently, Volkswagen's board has 20 members, with half the seats held by labor leaders.
Volkswagen welcomes Porsche's decision to increase its holding, the carmaker said in an e-mailed statement today.
``A stabile shareholder structure is important to the long- term oriented automobile business,'' CEO Winterkorn said in the statement.
Wall St consolidates gains??
By Alex Barker
Hints that the Federal Reserve was no longer biased towards raising interest rates sparked a strong rally on Wall Street this week, raising investors’ hopes that the recent slump had run its course.
While the Federal Open Market Committee statement on Wednesday was carefully worded, stirring debate about its meaning, the equity market’s response was unequivocal.
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The S&P 500 index bounced back into positive territory for the year with its biggest weekly rise in four years. The rally pushed the benchmark index above its 30-day moving average, an encouraging technical sign for bulls.
“What the market needed was for the Fed to show some flexibility in these troubling times, and they did just that,” said Art Hogan, chief market analyst at Jefferies & Co. “The markets are starting to stabilise and put into perspective some of the concerns that led to the recent sell-off.”
The S&P closed 0.1 per cent higher at 1,436.11, its fifth successive day of gains that put it up 3.5 per cent on the week. The Dow Jones Industrial Average rose 0.2 per cent on Friday to 12,481.01.
The recovery came as Blackstone, the buy-out group, prompted reflection on the recent private equity boom by filing for an initial public offering to raise $4bn.
Energy stocks made the biggest gains this week, buoyed by both rising oil prices and broad strength in equities. The S&P Energy index stands at its highest point since December, 17.3 per cent above its low for the year.
Exxon stock surged 7.4 per cent to $75.02 this week, while Chevron rose 8.3 per cent to $73.70. The odd one out in the sector was Halliburton, the oil services group, which slid 3.1 per cent to $31.08 after warning about weak US demand.
Homebuilders began to make headway on the back of sound housing data.
Sales of existing homes and housing starts were both in excess of depressed expectations.
Concerns about tighter mortgage lending standards hitting demand for homes checked the gains. The S&P Homebuilders index rose 2.4 per cent this week, but remains more than 20 per cent off its high for the year.
KB Home, which said it still envisaged instability in the market, rose 3.3 per cent to $46.86.
Morgan Stanley was the latest investment bank to dispel fears about possible subprime mortgage losses. Shares in the group soared 9 per cent to $81.10 after it reported a 70 per cent jump in first-quarter profit.
Beleaguered subprime mortgage group Accredited Home Lenders jumped 8 per cent to $11.77 after Citadel, the hedge fund, said it had bought a 4.5 per cent stake in the company.
“When the guy delivering your milk is talking about subprime mortgages, it tells you that the problems may have been over-exaggerated,” said Mr Hogan. “This is not going to wreak havoc with the financial system.”
Technology stocks had a patchy week. The Nasdaq Composite rose 0.2 per cent to 2,455.18 on Friday, up 3.5 per cent on the week.
The sector was lifted by software groups Oracle and Adobe and the flash-memory maker SanDisk, which all reported strong earnings on Monday. Oracle, boosted by reports that it was suing its German rival SAP, finished the week 9.2 per cent higher at $18.24.
But Motorola’s woes eventually soured the mood. The company admitted that performance at its mobile devices division had been “unacceptable” as it gave a profit warning. Motorola fell 2.5 per cent to $17.75.
The troubles dragged down chipmakers, with Broadcom falling 5.3 per cent to $32.32. Palm also suffered losses. The fortunes of the maker of the Treo phone waxed and waned this week as rumours of an impending offer swirled round the market. Motorola was considered a potential buyer. Palm stock fell from a high of $19.45 to stand 1.5 per cent up on the week at $18.10.
Vonage stock plunged 25.9 per cent to $3 on Friday after a judge blocked the company from infringing patents owned by Verizon when directing its customers’ internet telephone calls to landlines.
Hints that the Federal Reserve was no longer biased towards raising interest rates sparked a strong rally on Wall Street this week, raising investors’ hopes that the recent slump had run its course.
While the Federal Open Market Committee statement on Wednesday was carefully worded, stirring debate about its meaning, the equity market’s response was unequivocal.
ADVERTISEMENT
The S&P 500 index bounced back into positive territory for the year with its biggest weekly rise in four years. The rally pushed the benchmark index above its 30-day moving average, an encouraging technical sign for bulls.
“What the market needed was for the Fed to show some flexibility in these troubling times, and they did just that,” said Art Hogan, chief market analyst at Jefferies & Co. “The markets are starting to stabilise and put into perspective some of the concerns that led to the recent sell-off.”
The S&P closed 0.1 per cent higher at 1,436.11, its fifth successive day of gains that put it up 3.5 per cent on the week. The Dow Jones Industrial Average rose 0.2 per cent on Friday to 12,481.01.
The recovery came as Blackstone, the buy-out group, prompted reflection on the recent private equity boom by filing for an initial public offering to raise $4bn.
Energy stocks made the biggest gains this week, buoyed by both rising oil prices and broad strength in equities. The S&P Energy index stands at its highest point since December, 17.3 per cent above its low for the year.
Exxon stock surged 7.4 per cent to $75.02 this week, while Chevron rose 8.3 per cent to $73.70. The odd one out in the sector was Halliburton, the oil services group, which slid 3.1 per cent to $31.08 after warning about weak US demand.
Homebuilders began to make headway on the back of sound housing data.
Sales of existing homes and housing starts were both in excess of depressed expectations.
Concerns about tighter mortgage lending standards hitting demand for homes checked the gains. The S&P Homebuilders index rose 2.4 per cent this week, but remains more than 20 per cent off its high for the year.
KB Home, which said it still envisaged instability in the market, rose 3.3 per cent to $46.86.
Morgan Stanley was the latest investment bank to dispel fears about possible subprime mortgage losses. Shares in the group soared 9 per cent to $81.10 after it reported a 70 per cent jump in first-quarter profit.
Beleaguered subprime mortgage group Accredited Home Lenders jumped 8 per cent to $11.77 after Citadel, the hedge fund, said it had bought a 4.5 per cent stake in the company.
“When the guy delivering your milk is talking about subprime mortgages, it tells you that the problems may have been over-exaggerated,” said Mr Hogan. “This is not going to wreak havoc with the financial system.”
Technology stocks had a patchy week. The Nasdaq Composite rose 0.2 per cent to 2,455.18 on Friday, up 3.5 per cent on the week.
The sector was lifted by software groups Oracle and Adobe and the flash-memory maker SanDisk, which all reported strong earnings on Monday. Oracle, boosted by reports that it was suing its German rival SAP, finished the week 9.2 per cent higher at $18.24.
But Motorola’s woes eventually soured the mood. The company admitted that performance at its mobile devices division had been “unacceptable” as it gave a profit warning. Motorola fell 2.5 per cent to $17.75.
The troubles dragged down chipmakers, with Broadcom falling 5.3 per cent to $32.32. Palm also suffered losses. The fortunes of the maker of the Treo phone waxed and waned this week as rumours of an impending offer swirled round the market. Motorola was considered a potential buyer. Palm stock fell from a high of $19.45 to stand 1.5 per cent up on the week at $18.10.
Vonage stock plunged 25.9 per cent to $3 on Friday after a judge blocked the company from infringing patents owned by Verizon when directing its customers’ internet telephone calls to landlines.
Tuesday, March 20, 2007
Tokyo stocks continue rise on yen weakness
By David Turner in Tokyo-FT.com
Published: March 20 2007 03:15 Last updated: March 20 2007 08:41
The Japanese stock market extended gains into Tuesday, bolstered by continuing yen weakness and a jump in large property stocks.
The Nikkei 225 closed up 0.9 per cent at 17,163.20. The broader Topix rose 0.8 per cent to 1,708.29.
var mpusky = new Advert(AD_MPUSKY);mpusky.init();
By late afternoon the yen was trading at Y117.7 to the dollar, helping to push up export focused-sectors. The auto sector climbed 1 per cent. Toyota Motor, Japan’s biggest carmaker, was 0.9 per cent higher at Y7,740. Nissan Motor was 1.1 per cent higher at Y1,319, with Honda Motor up 0.7 per cent to Y4,160.
Mitsui Fudosan, Japan’s biggest property company, jumped 4 per cent to Y3,360 after Goldman Sachs raised its target share price to Y4,150 from Y3,659, citing higher land prices in southern Tokyo. Its two biggest rivals also gained from the general positive sentiment. Mitsubishi Estate advanced 3.6 per cent to Y3,780. Sumitomo Realty & Development was up 2.2 per cent to Y4,590.
Makers of construction materials rose. Sumitomo Osaka Cement leapt 4.9 per cent to Y408, with rival Taiheiyo Cement up 4.7 per cent to Y517, after Credit Suisse began coverage with “outperform” ratings, citing growing private demand.
Sanyo Electric, the troubled electronics manufacturer, had a volatile day, falling in morning trading before recovering to end 1.1 per cent higher at Y186 after the resignation of its chairwoman, Tomoyo Nonaka. Sanyo is set to report a third consecutive annual loss for the year to March, and is being investigated by the authorities for for possible accounting problems
Published: March 20 2007 03:15 Last updated: March 20 2007 08:41
The Japanese stock market extended gains into Tuesday, bolstered by continuing yen weakness and a jump in large property stocks.
The Nikkei 225 closed up 0.9 per cent at 17,163.20. The broader Topix rose 0.8 per cent to 1,708.29.
var mpusky = new Advert(AD_MPUSKY);mpusky.init();
By late afternoon the yen was trading at Y117.7 to the dollar, helping to push up export focused-sectors. The auto sector climbed 1 per cent. Toyota Motor, Japan’s biggest carmaker, was 0.9 per cent higher at Y7,740. Nissan Motor was 1.1 per cent higher at Y1,319, with Honda Motor up 0.7 per cent to Y4,160.
Mitsui Fudosan, Japan’s biggest property company, jumped 4 per cent to Y3,360 after Goldman Sachs raised its target share price to Y4,150 from Y3,659, citing higher land prices in southern Tokyo. Its two biggest rivals also gained from the general positive sentiment. Mitsubishi Estate advanced 3.6 per cent to Y3,780. Sumitomo Realty & Development was up 2.2 per cent to Y4,590.
Makers of construction materials rose. Sumitomo Osaka Cement leapt 4.9 per cent to Y408, with rival Taiheiyo Cement up 4.7 per cent to Y517, after Credit Suisse began coverage with “outperform” ratings, citing growing private demand.
Sanyo Electric, the troubled electronics manufacturer, had a volatile day, falling in morning trading before recovering to end 1.1 per cent higher at Y186 after the resignation of its chairwoman, Tomoyo Nonaka. Sanyo is set to report a third consecutive annual loss for the year to March, and is being investigated by the authorities for for possible accounting problems
Private equity raises ‘covenant-lite’ loans
By Gillian Tett in London-FT.com
Published: March 19 2007 22:03 Last updated: March 19 2007 22:03
Two private equity groups have taken a striking new step to protect themselves from any future downturn in the credit cycle by raising loans that remove most lenders’ rights for the first time in Europe.
The “covenant-lite” loan – or “cov-lite” – looks like a traditional syndicated loan but does not carry the legal clauses that allow investors to track the performance of a risky borrower or declare a default if financial measures are breached.
Published: March 19 2007 22:03 Last updated: March 19 2007 22:03
Two private equity groups have taken a striking new step to protect themselves from any future downturn in the credit cycle by raising loans that remove most lenders’ rights for the first time in Europe.
The “covenant-lite” loan – or “cov-lite” – looks like a traditional syndicated loan but does not carry the legal clauses that allow investors to track the performance of a risky borrower or declare a default if financial measures are breached.
Barclays confirms talks with ABN
By Jane Croft and Peter Smith-FT.com
Published: March 20 2007 08:01 Last updated: March 20 2007 08:11
The activist hedge fund which has been urging a break up or sale of ABN Amro said on Tuesday it was “encouraged” that Barclays was in “exclusive preliminary discussions” to buy the embattled Dutch bank in a move that would create one of the world’s biggest financial institutions with a market capitalisation of more than £80bn.
However The Children’s Investment Fund said it hoped the exclusivity granted to Barclays, the UK’s third largest bank, would not prevent ABN ‘s board from employing a process which “considers bids by other credible institutions” in order to produce the best result for shareholders.
Published: March 20 2007 08:01 Last updated: March 20 2007 08:11
The activist hedge fund which has been urging a break up or sale of ABN Amro said on Tuesday it was “encouraged” that Barclays was in “exclusive preliminary discussions” to buy the embattled Dutch bank in a move that would create one of the world’s biggest financial institutions with a market capitalisation of more than £80bn.
However The Children’s Investment Fund said it hoped the exclusivity granted to Barclays, the UK’s third largest bank, would not prevent ABN ‘s board from employing a process which “considers bids by other credible institutions” in order to produce the best result for shareholders.
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