European Economies: French Confidence Holds Near Five-Year High
By Gabriele Parussini
Nov. 24 (Bloomberg) -- French business confidence held near a five-year high in November on lower oil prices and declining unemployment as executives anticipate a fourth-quarter pickup in economic growth.
Insee, the Paris-based national statistics office, said today its index of sentiment remained at 107 this month after October's reading was revised down to 107. The gauge reached 109 in April, the highest since March 2001.
The durability in the economy's standstill in the third quarter was temporary. In Germany, France's largest trading partner, a gauge of business confidence rose yesterday to a 15- year high. The expansion in the euro region this year may reach 2.6 percent, the fastest in six years, before slowing to 2.1 percent next year as interest rates and the euro rise, the European Commission estimates.
``The main boost to confidence is from European growth and the exceptional news from Germany,'' said Maryse Pogodzinski, an economist at JPMorgan Chase & Co. in Paris. ``The fall in oil prices is doing the rest.''
A decline in oil prices from a record reached four months ago helped cut companies' costs and put more money in consumers' pockets. Crude oil traded below $59 a barrel yesterday, down from $78.40 on July 14.
A surge in the euro may restrain growth. The euro surged to a 20-month high of $1.3109 at 3:11 p.m. in Paris. The currency has gained 10.7 percent against the dollar this year. It has also risen 9 percent against the Japanese yen the past nine months, reducing euro-region exports' competitiveness.
`Measured' Optimism
``Companies' optimism remains measured,'' said Alexandre Bourgeois, an economist at Natixis in Paris, who expects the European Central Bank to raise interest rates to 4 percent in 2007. ``The euro remains quite high and there's a prospect of a global slowdown next year.''
As French industrial production fell 0.1 percent in the third quarter after a decline of 0.9 percent in September, with carmakers cutting production by 3.1 percent, Prime Minister Dominique de Villepin said Nov. 22 he will present a plan to support the country's struggling auto industry. He's already announced 145 million euros ($189 million) in subsidies to companies in the aviation industry.
With five months before the presidential elections in France, the government is counting on a strong economy to sustain the candidate of the ruling Union for a Popular Movement party, who will probably be Interior Minister Nicolas Sarkozy.
`Very Strong' Growth
Finance Minister Thierry Breton said last week he expects a ``very strong'' fourth quarter, with growth between 0.6 percent and 0.8 percent. He reiterated a forecast of 2 percent to 2.5 percent expansion for both 2006 and 2007.
Consumers in France helped sustain the economy in the third quarter as unemployment fell to 8.8 percent, a five-year low. The economy expanded 1.2 percent in the second quarter, the fastest pace since 2001, before grinding to a halt between July and September.
Morgan Stanley, Goldman Sachs Group Inc. and Unicredit SpA all raised their ECB forecasts this month. They expect the ECB's benchmark rate to reach 4 percent by the end of 2007. The bank is set to raise the rate to 3.50 percent next month on concern the economic expansion will fuel wage demands and lead to more persistent inflation.
``Things are going extremely well,'' Air France-KLM Chief Operating Officer Pierre-Henri Gourgeon told reporters yesterday after Europe's biggest airline reported a 26 percent increase in third-quarter profit.
A gauge of sentiment on past production rose to 15 from 8 in October, while the forecast on prices increased to 9 from 5, indicating that executives think they'll be able to raise prices, the report said
Sunday, November 26, 2006
EU's Beres Says ECB Rate Policy Wrong as Euro Rises (Update1)
EU's Beres Says ECB Rate Policy Wrong as Euro Rises (Update1)
By John Fraher
Nov. 24 (Bloomberg) -- The European Central Bank is wrong to raise interest rates as the euro's climb above $1.30 threatens to hurt export growth, said Pervenche Beres, head of the European Parliament's economic and monetary committee.
``It's not good news for the European economy,'' said Beres, whose committee oversees the ECB's activities, in an interview in Berlin today. ``It's not the right time to raise interest rates.''
Europe's single currency rose above $1.30 for the first time since April 2005 today on speculation ECB President Jean-Claude Trichet will keep raising borrowing costs next year to prevent faster economic growth fueling inflation. The rally puts an additional burden on the region's exporters, who are already coping with the currency's climb against the yen.
The euro is strengthening as the interest-rate gap between Europe and the U.S. narrows. The Federal Reserve has left its key rate at 5.25 percent since June 29, a period in which the ECB has lifted its benchmark 50 basis points to 3.25 percent.
With economists at Goldman Sachs Group Inc. and Merrill Lynch & Co. forecasting that the Fed will ease policy next year and European policy makers including Bundesbank President Axel Weber suggesting ECB rates will have increase rates further next year, the euro may come under even more pressure.
Morgan Stanley on Nov. 21 said the ECB will take its key rate to 4 percent in 2007.
Stronger Euro
Europe's single currency was worth $1.3089 at 12:25 p.m. in London, taking its gain in the past month to 4 percent. It traded at 151.43 yen, after reaching a record of 151.67 on Nov. 20.
The euro is gaining just as a U.S. slowdown threatens to damp export growth. DaimlerChrysler AG, the world's largest truckmaker, said Nov. 17 it expects a ``profound downturn'' in U.S. demand.
German lawmaker Joachim Poss, who sits on the country's budget committee, also said the ECB should be concerned by the currency's appreciation.
``I hope that the ECB will consider it carefully in its assessment'' of the interest rate outlook, Poss told reporters in Berlin.
Peres said the euro's rally also shows the need for ``coordination'' of foreign exchange policy between the ECB and the euro-region's finance ministers.
By John Fraher
Nov. 24 (Bloomberg) -- The European Central Bank is wrong to raise interest rates as the euro's climb above $1.30 threatens to hurt export growth, said Pervenche Beres, head of the European Parliament's economic and monetary committee.
``It's not good news for the European economy,'' said Beres, whose committee oversees the ECB's activities, in an interview in Berlin today. ``It's not the right time to raise interest rates.''
Europe's single currency rose above $1.30 for the first time since April 2005 today on speculation ECB President Jean-Claude Trichet will keep raising borrowing costs next year to prevent faster economic growth fueling inflation. The rally puts an additional burden on the region's exporters, who are already coping with the currency's climb against the yen.
The euro is strengthening as the interest-rate gap between Europe and the U.S. narrows. The Federal Reserve has left its key rate at 5.25 percent since June 29, a period in which the ECB has lifted its benchmark 50 basis points to 3.25 percent.
With economists at Goldman Sachs Group Inc. and Merrill Lynch & Co. forecasting that the Fed will ease policy next year and European policy makers including Bundesbank President Axel Weber suggesting ECB rates will have increase rates further next year, the euro may come under even more pressure.
Morgan Stanley on Nov. 21 said the ECB will take its key rate to 4 percent in 2007.
Stronger Euro
Europe's single currency was worth $1.3089 at 12:25 p.m. in London, taking its gain in the past month to 4 percent. It traded at 151.43 yen, after reaching a record of 151.67 on Nov. 20.
The euro is gaining just as a U.S. slowdown threatens to damp export growth. DaimlerChrysler AG, the world's largest truckmaker, said Nov. 17 it expects a ``profound downturn'' in U.S. demand.
German lawmaker Joachim Poss, who sits on the country's budget committee, also said the ECB should be concerned by the currency's appreciation.
``I hope that the ECB will consider it carefully in its assessment'' of the interest rate outlook, Poss told reporters in Berlin.
Peres said the euro's rally also shows the need for ``coordination'' of foreign exchange policy between the ECB and the euro-region's finance ministers.
Dollar Declines to 19-Month Low Versus Euro, Breaches $1.30
Dollar Declines to 19-Month Low Versus Euro, Breaches $1.30
By Daniel Kruger and Kabir Chibber
Nov. 24 (Bloomberg) -- The dollar fell to its lowest level in 19 months against the euro on speculation the Federal Reserve will lower interest rates early next year as central banks in Europe increase them.
The U.S. currency extended its losses after breaching $1.30 against the euro for the first time since April 2005, a level where traders had placed automatic orders to sell the dollar. The European Central Bank has raised rates to an almost four-year high and President Jean-Claude Trichet on Nov. 20 said inflation remains a threat. The Fed has left rates unchanged since August.
``The break of 1.30 is a strong signal that the dollar has to weaken,'' said Carsten Fritsch, a currency strategist at Commerzbank AG in Frankfurt. ``The sentiment for the dollar is negative. In the euro-zone, growth will remain strong.''
The dollar traded as low as $1.3109 per euro in London earlier today and breached $1.31 in New York trading. The U.S. currency was at $1.3094 at 5 p.m., from $1.2945 yesterday. The dollar also fell to 115.90 yen, from 116.30, and to as low as $1.9351 versus the U.K. pound, the weakest in almost two years.
The euro traded at 151.71 yen, from 150.52 yesterday, after touching a record of 151.76.
The volume of trading today may have been less than usual after public holidays yesterday in the U.S. and Japan.
`Weaker Side'
``It was easier to push through'' $1.30 in an illiquid market, said Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto. ``You had a battle in the ranges. The weaker side was the dollar side.''
Traders place automatic orders, or so-called stop-losses, at preset positions to sell the currency after it breaches certain key levels, such as $1.30. Before this week the euro had been stuck between $1.2458 and $1.2938 during the second half of this year.
``The move we saw overnight was very much driven by some important technical levels,'' said Matthew Strauss, senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``Some stop-losses were triggered and forced it above the psychological level of $1.30.''
Implied three-month volatility, which measures expected price moves during the period, rose to the highest level in two months for the dollar versus the euro.
Reducing Forecasts
Economic advisers to President George W. Bush on Nov. 21 cut their forecasts for growth next year on a weaker housing market. Gross domestic product will increase 2.9 percent next year, slower than the 3.6 percent forecast in June, the Council of Economic Advisers said.
ECB policy maker Klaus Liebscher told Reuters today that the central bank must remain ``vigilant'' on inflation. Trichet and fellow council member Miguel Angel Fernandez Ordonez also this week said inflation is a risk.
Europe's central bank has lifted borrowing costs five times since December, to 3.25 percent, to stem inflation. The Fed has left its benchmark rate at 5.25 percent for the past three meetings, after 17 straight quarter-percentage point increases since June 2004.
The three-month Euribor futures contract for June trades at a 3.875 percent yield, suggesting traders are nearly certain the ECB will raise interest rates two more times by June to 3.75 percent. The contract settles to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's benchmark rate since 1999.
Traders see a 51 percent chance the Fed will reduce interest rates at the central bank's March 21 meeting. That compares with an 11 percent chance on Nov. 16.
European Stocks
European stocks slumped today on speculation the stronger euro will hurt exports to the U.S., the region's biggest trading partner. The U.K.'s FTSE 100 Index lost 0.3 percent. France's CAC 40 benchmark dropped 0.7 percent. Germany's DAX slid 1 percent.
The extra yield investors earn on U.S. government bonds over those in Europe has shrunk to near the lowest in 17 months, attracting investors to assets in the euro region and away from the dollar.
The narrowing yield premium on dollar-denominated debt may also encourage central banks to hold more of their foreign- exchange reserves in other currencies.
People's Bank of China Vice-Governor Wu Xiaoling said East Asia needs to reduce its reliance on dollar inflows because of the risk of a further slump in the currency. China's foreign- exchange reserves exceed $1 trillion, the world's largest.
Wu's comments were released today in an article circulated during a press conference in Beijing.
``China holds most of its reserves in the dollar and these comments may lead to speculation they will sell,'' said Tohru Sasaki, a strategist in Tokyo at JPMorgan Chase & Co. and a former chief currency trader at the Bank of Japan. ``Diversifying reserves always puts downward pressure on the dollar.''
The U.S. currency fell for three straight years through 2004 versus the euro and the yen as the country's trade deficit widened, reaching a record $1.3666 per euro on Dec. 30, 2004. It advanced against the euro and yen last year as the Fed pushed borrowing costs higher at every meeting
By Daniel Kruger and Kabir Chibber
Nov. 24 (Bloomberg) -- The dollar fell to its lowest level in 19 months against the euro on speculation the Federal Reserve will lower interest rates early next year as central banks in Europe increase them.
The U.S. currency extended its losses after breaching $1.30 against the euro for the first time since April 2005, a level where traders had placed automatic orders to sell the dollar. The European Central Bank has raised rates to an almost four-year high and President Jean-Claude Trichet on Nov. 20 said inflation remains a threat. The Fed has left rates unchanged since August.
``The break of 1.30 is a strong signal that the dollar has to weaken,'' said Carsten Fritsch, a currency strategist at Commerzbank AG in Frankfurt. ``The sentiment for the dollar is negative. In the euro-zone, growth will remain strong.''
The dollar traded as low as $1.3109 per euro in London earlier today and breached $1.31 in New York trading. The U.S. currency was at $1.3094 at 5 p.m., from $1.2945 yesterday. The dollar also fell to 115.90 yen, from 116.30, and to as low as $1.9351 versus the U.K. pound, the weakest in almost two years.
The euro traded at 151.71 yen, from 150.52 yesterday, after touching a record of 151.76.
The volume of trading today may have been less than usual after public holidays yesterday in the U.S. and Japan.
`Weaker Side'
``It was easier to push through'' $1.30 in an illiquid market, said Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto. ``You had a battle in the ranges. The weaker side was the dollar side.''
Traders place automatic orders, or so-called stop-losses, at preset positions to sell the currency after it breaches certain key levels, such as $1.30. Before this week the euro had been stuck between $1.2458 and $1.2938 during the second half of this year.
``The move we saw overnight was very much driven by some important technical levels,'' said Matthew Strauss, senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``Some stop-losses were triggered and forced it above the psychological level of $1.30.''
Implied three-month volatility, which measures expected price moves during the period, rose to the highest level in two months for the dollar versus the euro.
Reducing Forecasts
Economic advisers to President George W. Bush on Nov. 21 cut their forecasts for growth next year on a weaker housing market. Gross domestic product will increase 2.9 percent next year, slower than the 3.6 percent forecast in June, the Council of Economic Advisers said.
ECB policy maker Klaus Liebscher told Reuters today that the central bank must remain ``vigilant'' on inflation. Trichet and fellow council member Miguel Angel Fernandez Ordonez also this week said inflation is a risk.
Europe's central bank has lifted borrowing costs five times since December, to 3.25 percent, to stem inflation. The Fed has left its benchmark rate at 5.25 percent for the past three meetings, after 17 straight quarter-percentage point increases since June 2004.
The three-month Euribor futures contract for June trades at a 3.875 percent yield, suggesting traders are nearly certain the ECB will raise interest rates two more times by June to 3.75 percent. The contract settles to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's benchmark rate since 1999.
Traders see a 51 percent chance the Fed will reduce interest rates at the central bank's March 21 meeting. That compares with an 11 percent chance on Nov. 16.
European Stocks
European stocks slumped today on speculation the stronger euro will hurt exports to the U.S., the region's biggest trading partner. The U.K.'s FTSE 100 Index lost 0.3 percent. France's CAC 40 benchmark dropped 0.7 percent. Germany's DAX slid 1 percent.
The extra yield investors earn on U.S. government bonds over those in Europe has shrunk to near the lowest in 17 months, attracting investors to assets in the euro region and away from the dollar.
The narrowing yield premium on dollar-denominated debt may also encourage central banks to hold more of their foreign- exchange reserves in other currencies.
People's Bank of China Vice-Governor Wu Xiaoling said East Asia needs to reduce its reliance on dollar inflows because of the risk of a further slump in the currency. China's foreign- exchange reserves exceed $1 trillion, the world's largest.
Wu's comments were released today in an article circulated during a press conference in Beijing.
``China holds most of its reserves in the dollar and these comments may lead to speculation they will sell,'' said Tohru Sasaki, a strategist in Tokyo at JPMorgan Chase & Co. and a former chief currency trader at the Bank of Japan. ``Diversifying reserves always puts downward pressure on the dollar.''
The U.S. currency fell for three straight years through 2004 versus the euro and the yen as the country's trade deficit widened, reaching a record $1.3666 per euro on Dec. 30, 2004. It advanced against the euro and yen last year as the Fed pushed borrowing costs higher at every meeting
Putin Deplores Failure of EU Trade Talks on Meat Row (Update3)
Putin Deplores Failure of EU Trade Talks on Meat Row (Update3)
By Sebastian Alison
Nov. 24 (Bloomberg) -- Russian President Vladimir Putin deplored the failure of his nation and the European Union to start negotiating a key trade deal after Poland vetoed talks due to a Russian ban on its meat exports. The EU vowed to get the talks going.
Russia and the EU were due to start talks, at a summit meeting in Helsinki, on a Partnership and Cooperation Agreement, the fundamental text defining trade and other relations between the two sides. It will replace an existing agreement that expires next year. Over 50 percent of Russia's exports go to the EU, which gets a quarter of its natural gas from Russia.
The European Commission, the EU's executive body, can only start negotiating the text when all 25 EU member states have given it a mandate to do so. Poland refused after Russia banned meat imports, and hasn't signed a separate agreement regulating energy trade.
``I deplore the fact that we haven't started work,'' Putin told a news conference at the end of the one-day summit meeting. ``Russia is prepared to launch these talks,'' he said.
`Common Future'
Jose Barroso, president of the European Commission, acknowledged it was a disappointment that talks had not started, saying the Russian ban on Polish meat was ``disproportionate'' and adding that ``I appealed to the President of Russia to lift it.'' He said the commission would work to relaunch the talks quickly, adding ``we cannot escape our common future.''
The failure of the talks followed days of ultimately fruitless attempts by EU officials to persuade Poland to drop its veto. Putin spokesman Dmitry Peskov said the failure was more a disappointment to the EU than to Russia.
The summit was still a success, EU foreign policy chief Javier Solana said, ``contrary to what public expectations were.''
In an indication the two sides want to develop relations, Finnish Prime Minister Matti Vanhanen announced the EU and Russia reached agreement to end fees on EU airlines flying over Siberia on routes to the Far East. This will have ``major significance for our economies,'' Barroso said.
`Trade Irritant'
``This issue has been a trade irritant for the EU and Russia for a long time,'' EU Trade Commissioner Peter Mandelson said in a statement released in Brussels.
Russian-EU trade has increased since the bloc enlarged to 25 members in 2004, taking in several former communist eastern European states once in the Soviet Union's sphere of influence. That's one reason why a new PCA is needed, Marc Franco, the head of the European Commission's delegation in Moscow, said in an interview.
A provisional draft of the text of the PCA to be negotiated, seen by Bloomberg News, states that ``it will be of long, preferably unlimited duration,'' unlike the current one, which was signed in 1997.
The summit came a day after Alexander Litvinenko, a former Russian spy who sought political asylum in London, died of poisoning in unexplained circumstances. Putin called his death a tragedy, while adding that ``I hope the British authorities will not contribute to the instigation of political scandals.''
He also cast doubt on a letter supposedly dictated by Litvinenko before his death, and added he understood British doctors didn't regard the death as violent.
Energy Charter
The EU wants Russia to agree to use the language of the so- called Energy Charter in the PCA. This sets out terms for trading and transporting energy across the Eurasian landmass. Russia signed it, then later said it won't ratify it. The EU sees the PCA as a way of getting the charter's language into a treaty without requiring Russian ratification of the original document.
Barroso said the two sides were working toward a ``win-win deal'' in which EU consumers would be ensured security of supply, while Russian producers would have a guaranteed market. ``We are basing ourselves on the principles of the Energy Charter treaty,'' he said.
The Russian meat ban was prompted by accusations by the Russian authorities that Polish producers are violating hygiene laws and smuggling. Putin said there's no problem with Polish produce itself.
``This is not about the quality of Polish meat,'' he said, adding that food producers in Poland ``know their business.'' He said the problem lay with meat from outside Poland, for example from China and India, which was imported and then relabelled as Polish for export. ``Please don't link this purely technical issue with the general state of EU-Russian relations,'' he said.
Polish Prime Minister Jaroslaw Kaczynski said in Warsaw it was impossible to reach a new agreement with Russia because Russian authorities have violated the current accord. ``There's no way we can agree to Russia treating Poland as if it wasn't a member of the EU,'' he said
By Sebastian Alison
Nov. 24 (Bloomberg) -- Russian President Vladimir Putin deplored the failure of his nation and the European Union to start negotiating a key trade deal after Poland vetoed talks due to a Russian ban on its meat exports. The EU vowed to get the talks going.
Russia and the EU were due to start talks, at a summit meeting in Helsinki, on a Partnership and Cooperation Agreement, the fundamental text defining trade and other relations between the two sides. It will replace an existing agreement that expires next year. Over 50 percent of Russia's exports go to the EU, which gets a quarter of its natural gas from Russia.
The European Commission, the EU's executive body, can only start negotiating the text when all 25 EU member states have given it a mandate to do so. Poland refused after Russia banned meat imports, and hasn't signed a separate agreement regulating energy trade.
``I deplore the fact that we haven't started work,'' Putin told a news conference at the end of the one-day summit meeting. ``Russia is prepared to launch these talks,'' he said.
`Common Future'
Jose Barroso, president of the European Commission, acknowledged it was a disappointment that talks had not started, saying the Russian ban on Polish meat was ``disproportionate'' and adding that ``I appealed to the President of Russia to lift it.'' He said the commission would work to relaunch the talks quickly, adding ``we cannot escape our common future.''
The failure of the talks followed days of ultimately fruitless attempts by EU officials to persuade Poland to drop its veto. Putin spokesman Dmitry Peskov said the failure was more a disappointment to the EU than to Russia.
The summit was still a success, EU foreign policy chief Javier Solana said, ``contrary to what public expectations were.''
In an indication the two sides want to develop relations, Finnish Prime Minister Matti Vanhanen announced the EU and Russia reached agreement to end fees on EU airlines flying over Siberia on routes to the Far East. This will have ``major significance for our economies,'' Barroso said.
`Trade Irritant'
``This issue has been a trade irritant for the EU and Russia for a long time,'' EU Trade Commissioner Peter Mandelson said in a statement released in Brussels.
Russian-EU trade has increased since the bloc enlarged to 25 members in 2004, taking in several former communist eastern European states once in the Soviet Union's sphere of influence. That's one reason why a new PCA is needed, Marc Franco, the head of the European Commission's delegation in Moscow, said in an interview.
A provisional draft of the text of the PCA to be negotiated, seen by Bloomberg News, states that ``it will be of long, preferably unlimited duration,'' unlike the current one, which was signed in 1997.
The summit came a day after Alexander Litvinenko, a former Russian spy who sought political asylum in London, died of poisoning in unexplained circumstances. Putin called his death a tragedy, while adding that ``I hope the British authorities will not contribute to the instigation of political scandals.''
He also cast doubt on a letter supposedly dictated by Litvinenko before his death, and added he understood British doctors didn't regard the death as violent.
Energy Charter
The EU wants Russia to agree to use the language of the so- called Energy Charter in the PCA. This sets out terms for trading and transporting energy across the Eurasian landmass. Russia signed it, then later said it won't ratify it. The EU sees the PCA as a way of getting the charter's language into a treaty without requiring Russian ratification of the original document.
Barroso said the two sides were working toward a ``win-win deal'' in which EU consumers would be ensured security of supply, while Russian producers would have a guaranteed market. ``We are basing ourselves on the principles of the Energy Charter treaty,'' he said.
The Russian meat ban was prompted by accusations by the Russian authorities that Polish producers are violating hygiene laws and smuggling. Putin said there's no problem with Polish produce itself.
``This is not about the quality of Polish meat,'' he said, adding that food producers in Poland ``know their business.'' He said the problem lay with meat from outside Poland, for example from China and India, which was imported and then relabelled as Polish for export. ``Please don't link this purely technical issue with the general state of EU-Russian relations,'' he said.
Polish Prime Minister Jaroslaw Kaczynski said in Warsaw it was impossible to reach a new agreement with Russia because Russian authorities have violated the current accord. ``There's no way we can agree to Russia treating Poland as if it wasn't a member of the EU,'' he said
China's Economy Unlikely to Slow `Sharply' in 2007 (Update1)
By Yanping Li
Nov. 26 (Bloomberg) -- China's economy is unlikely to slow ``sharply'' in 2007 because rising consumer spending and industrial production will underpin growth, said Yao Jingyuan, chief economist of the National Bureau of Statistics.
``The government's policy to boost consumption will show better results next year,'' Yao said in an interview at a business forum in Beijing today. Consumer spending should make a ``greater contribution to economic growth, even though investment may slow amid the government's curbing measures.''
China has raised minimum wages and increased welfare spending to get households to spend more and make the economy less dependent on investment and exports. As it encourages spending by consumers, China has increased interest rates and ordered banks to set aside more money as reserves to damp business investment and clamp down on wasteful factory expansion.
``Growth will continue to be strong, but weaker than this year,'' Federico Bazzoni, head of Asian equities at BNP Paribas SA, said in an interview in Milan on Nov. 24. ``That's good news, as there are fewer risks of overheating. Growth in 2007 will be less than 10 percent.''
China's economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business investment. The economy grew 10.4 percent in the quarter from the same period a year earlier, compared with 11.3 percent in the prior three months.
The world's fourth-largest economy will maintain ``steady and relatively fast growth'' in 2007, Yao said at today's conference, without providing a forecast.
World Bank Forecasts
The World Bank on Nov. 14 raised its estimate for China's 2007 economic growth for a second time in four months. The World Bank said the world's fastest growing major economy may expand 9.6 percent next year after advancing 10.4 percent in 2006.
China's 2006 growth rate may be as high as 10.7 percent, Yao said yesterday. Gross domestic product will rise between 10 percent and 10.7 percent this year, he said in Shanghai.
Consumer spending is gathering pace as curbs on lending and land use slow business investment, helping China's economy skirt a sharp slowdown. Retail sales jumped in October at the fastest pace in almost two years.
China is planning to increase wages for government employees by the end of the year, a move aimed at raising urban incomes and further stoking household spending, Yao said.
The World Bank has urged China to boost spending on healthcare, education and social security to encourage its 1.3 billion citizens to spend rather than putting their money in bank deposits. China's savings rate is double the world average.
Investment Controls
China needs to continue its economic, monetary and administrative measures to control bank lending and fixed-asset investment, Yao said. Growth in investment spending is still ``relatively high,'' he said.
Eight provinces out of the 31 in China had annual investment growth of more than 35 percent at the end of October, and three of those had investment growing faster than 40 percent annually, Yao said.
Investment growth in China's towns and cities slowed to 26.8 percent in the first 10 months from a year earlier, after rising 28.2 percent through September, a government report on Nov. 16 showed.
``Further tightening is expected since the government has failed to control investment growth to its targeted 18 percent for this year,'' said Zhu Baoliang, chief economist at the State Information Center, an affiliate of the country's top planning agency, the National Development and Reform Commission.
``We see next year's economic growth slowing mildly to around 9.5 percent, as investment and trade growth falls after government's curbing measures,'' Zhu said today.
By Yanping Li
Nov. 26 (Bloomberg) -- China's economy is unlikely to slow ``sharply'' in 2007 because rising consumer spending and industrial production will underpin growth, said Yao Jingyuan, chief economist of the National Bureau of Statistics.
``The government's policy to boost consumption will show better results next year,'' Yao said in an interview at a business forum in Beijing today. Consumer spending should make a ``greater contribution to economic growth, even though investment may slow amid the government's curbing measures.''
China has raised minimum wages and increased welfare spending to get households to spend more and make the economy less dependent on investment and exports. As it encourages spending by consumers, China has increased interest rates and ordered banks to set aside more money as reserves to damp business investment and clamp down on wasteful factory expansion.
``Growth will continue to be strong, but weaker than this year,'' Federico Bazzoni, head of Asian equities at BNP Paribas SA, said in an interview in Milan on Nov. 24. ``That's good news, as there are fewer risks of overheating. Growth in 2007 will be less than 10 percent.''
China's economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business investment. The economy grew 10.4 percent in the quarter from the same period a year earlier, compared with 11.3 percent in the prior three months.
The world's fourth-largest economy will maintain ``steady and relatively fast growth'' in 2007, Yao said at today's conference, without providing a forecast.
World Bank Forecasts
The World Bank on Nov. 14 raised its estimate for China's 2007 economic growth for a second time in four months. The World Bank said the world's fastest growing major economy may expand 9.6 percent next year after advancing 10.4 percent in 2006.
China's 2006 growth rate may be as high as 10.7 percent, Yao said yesterday. Gross domestic product will rise between 10 percent and 10.7 percent this year, he said in Shanghai.
Consumer spending is gathering pace as curbs on lending and land use slow business investment, helping China's economy skirt a sharp slowdown. Retail sales jumped in October at the fastest pace in almost two years.
China is planning to increase wages for government employees by the end of the year, a move aimed at raising urban incomes and further stoking household spending, Yao said.
The World Bank has urged China to boost spending on healthcare, education and social security to encourage its 1.3 billion citizens to spend rather than putting their money in bank deposits. China's savings rate is double the world average.
Investment Controls
China needs to continue its economic, monetary and administrative measures to control bank lending and fixed-asset investment, Yao said. Growth in investment spending is still ``relatively high,'' he said.
Eight provinces out of the 31 in China had annual investment growth of more than 35 percent at the end of October, and three of those had investment growing faster than 40 percent annually, Yao said.
Investment growth in China's towns and cities slowed to 26.8 percent in the first 10 months from a year earlier, after rising 28.2 percent through September, a government report on Nov. 16 showed.
``Further tightening is expected since the government has failed to control investment growth to its targeted 18 percent for this year,'' said Zhu Baoliang, chief economist at the State Information Center, an affiliate of the country's top planning agency, the National Development and Reform Commission.
``We see next year's economic growth slowing mildly to around 9.5 percent, as investment and trade growth falls after government's curbing measures,'' Zhu said today.
U.S. Retail Sales Rise 6% on Day After Thanksgiving (Update4)
U.S. Retail Sales Rise 6% on Day After Thanksgiving (Update4)
By Courtney Dentch
Nov. 25 (Bloomberg) -- U.S. retail sales rose 6 percent to $8.96 billion yesterday, the first day of the holiday shopping season, as discounts and lower gasoline costs encouraged consumers to buy more gifts, according to ShopperTrak RCT.
The increase may give retailers reason to be ``cautiously optimistic'' about this year's holiday sales, Chicago-based ShopperTrak said today in a statement. The last quarter of year accounts for almost one-third of U.S. retailers' annual profits.
``This data shows an even larger increase than expected as consumers proved they were more willing to spend,'' Bill Martin, co-founder of ShopperTrak, said in the statement. The firm measures foot traffic in shopping centers and malls using more than 45,000 video devices.
The day after Thanksgiving, called ``Black Friday'' because it was the day retailers traditionally expected to turn profitable for the year, has been the second- or third-busiest shopping day in past years. Stores kicked off the holiday season yesterday with early openings and discounts to win customers.
Wal-Mart Stores Inc., the world's largest retailer, opened at 5 a.m. yesterday with 42-inch plasma televisions for less than $1,000 and cashmere sweaters for $29, sales that lasted the first six hours of the day. It put other electronics on sale three weeks ago, and has reduced prices on toys, small appliances and food.
The Bentonville, Arkansas-based retailer said today its November sales at U.S. stores open more than a year fell 0.1 percent, the worst performance in more than a decade.
Discounts, Stunts
Target Corp., the second-biggest U.S. discounter, hired magician David Blaine to escape from shackles holding him to a spinning gyroscope five stories above New York's Times Square to promote a two-day sale that started yesterday.
Kmart, a unit of Hoffman Estates, Illinois-based Sears Holdings Corp. was open on Thanksgiving Day and offered discounts on games and cameras.
Customers took advantage of lower prices to buy electronics and large items such as furniture yesterday, said Wayne Best, who oversees economic analysis at Visa USA.
``It suggests people are spending more on themselves,'' Best said. About $17 of every $100 spent in the U.S. is paid for with a Visa credit or debit card, he said.
ShopperTrak said earlier this month that it expects Dec. 23, the Saturday before Christmas, to be the biggest shopping day of 2006. The firm estimates consumers will spend $457 billion during the holidays, up 5 percent from last year.
Cheaper Gasoline
A drop in oil prices in recent weeks may have contributed to yesterday's increase. Oil has traded between $54.86 and $61.33 a barrel this month because above-average temperatures in the northern U.S. have delayed demand for heating products. Crude oil hit a record $78.40 a barrel in July.
The price of unleaded gasoline at the pump averaged $2.24 a gallon earlier this week, down 26 percent from $3.04 in August, according to the U.S. Department of Energy.
ShopperTrak's figures exclude discount stores, such as Wal- Mart, and Internet transactions. It also uses U.S. Commerce Department data.
By Courtney Dentch
Nov. 25 (Bloomberg) -- U.S. retail sales rose 6 percent to $8.96 billion yesterday, the first day of the holiday shopping season, as discounts and lower gasoline costs encouraged consumers to buy more gifts, according to ShopperTrak RCT.
The increase may give retailers reason to be ``cautiously optimistic'' about this year's holiday sales, Chicago-based ShopperTrak said today in a statement. The last quarter of year accounts for almost one-third of U.S. retailers' annual profits.
``This data shows an even larger increase than expected as consumers proved they were more willing to spend,'' Bill Martin, co-founder of ShopperTrak, said in the statement. The firm measures foot traffic in shopping centers and malls using more than 45,000 video devices.
The day after Thanksgiving, called ``Black Friday'' because it was the day retailers traditionally expected to turn profitable for the year, has been the second- or third-busiest shopping day in past years. Stores kicked off the holiday season yesterday with early openings and discounts to win customers.
Wal-Mart Stores Inc., the world's largest retailer, opened at 5 a.m. yesterday with 42-inch plasma televisions for less than $1,000 and cashmere sweaters for $29, sales that lasted the first six hours of the day. It put other electronics on sale three weeks ago, and has reduced prices on toys, small appliances and food.
The Bentonville, Arkansas-based retailer said today its November sales at U.S. stores open more than a year fell 0.1 percent, the worst performance in more than a decade.
Discounts, Stunts
Target Corp., the second-biggest U.S. discounter, hired magician David Blaine to escape from shackles holding him to a spinning gyroscope five stories above New York's Times Square to promote a two-day sale that started yesterday.
Kmart, a unit of Hoffman Estates, Illinois-based Sears Holdings Corp. was open on Thanksgiving Day and offered discounts on games and cameras.
Customers took advantage of lower prices to buy electronics and large items such as furniture yesterday, said Wayne Best, who oversees economic analysis at Visa USA.
``It suggests people are spending more on themselves,'' Best said. About $17 of every $100 spent in the U.S. is paid for with a Visa credit or debit card, he said.
ShopperTrak said earlier this month that it expects Dec. 23, the Saturday before Christmas, to be the biggest shopping day of 2006. The firm estimates consumers will spend $457 billion during the holidays, up 5 percent from last year.
Cheaper Gasoline
A drop in oil prices in recent weeks may have contributed to yesterday's increase. Oil has traded between $54.86 and $61.33 a barrel this month because above-average temperatures in the northern U.S. have delayed demand for heating products. Crude oil hit a record $78.40 a barrel in July.
The price of unleaded gasoline at the pump averaged $2.24 a gallon earlier this week, down 26 percent from $3.04 in August, according to the U.S. Department of Energy.
ShopperTrak's figures exclude discount stores, such as Wal- Mart, and Internet transactions. It also uses U.S. Commerce Department data.
Saturday, November 25, 2006
Canada's Dollar Gains This Week on Inflation, Fiscal Surplus
Canada's Dollar Gains This Week on Inflation, Fiscal Surplus
By Haris Anwar
Nov. 25 (Bloomberg) -- Canada's dollar rose this week, ending a three-week losing streak, after a measure of inflation jumped, and the government said it'll post a surplus double the previous forecast.
The currency rebounded from a seven-month low as investors speculated a robust economy will keep the Bank of Canada from cutting the borrowing cost soon.
``There is no denying that there is a change in momentum for the Canadian dollar,'' said Linda Jespersen, managing director of currency trading at National Bank of Canada in Toronto. ``A lot of this has to do with the strong economy, a record high equity market, and relatively strong mining sector. The near-term trend is still going to be the Canadian dollar strengthening.''
The currency rose 1.1 percent this week, the most since the week ended Oct. 20, to 88.13 U.S. cents. One U.S. dollar buys C$1.1349. Canada's dollar dropped 1.2 percent during the week ended Nov. 17.
The core inflation rate, which tracks prices minus eight volatile goods and the impact of tax changes, rose 2.3 percent last month from a year earlier, the most since 2003, Statistics Canada said Nov. 22.
A day later, the Canadian government said it expected to double the federal surplus to C$7.2 billion ($6.35 billion) in the year ending in March. Finance Minister Jim Flaherty said the Canadian government is committed to buying back C$3 billion in bonds each year, part of a plan to eliminate net debt by 2021.
U.S. Slowdown
The currency also get a boost from a general weakness in the U.S. counterpart, which dropped to 19-month low against euro on speculation the Federal Reserve will reduce the borrowing cost as the world's largest economy slowed.
``We may have a reversal in place in terms of the short-term direction of the Canadian dollar,'' said Reid Farrill, executive director of foreign exchange at CIBC Worlds Markets Inc. in Toronto. ``If the major element of the story is an American recession, then it begs the question does Canada avoid that, or does Canada get dragged down with it?''
More than 80 percent of Canada's exports are to the U.S.
The Bank of Canada kept its key interest rate unchanged at 4.25 percent for a third meeting last month and predicted growth will drop to 2.5 percent next year from 2.8 percent this year.
The Canadian dollar has lost 2.9 percent versus its U.S. counterpart since May 31, when it touched a 28-year high of 91.44 U.S. cents. Traders have pared bets on the currency on declines in the price of energy and commodities.
``If the commodity prices remain relatively firm, then the Canadian dollar can weather the U.S. slowdown quite nicely,'' Farrill said.
Yields Decline
The yield on Canada's benchmark 10-year note fell about 4 basis points to 3.96 percent, the lowest since Sept. 27. The price of the 4 percent security maturing in June 2016 rose 31 cents to C$100.29. Bond yields move inversely to prices.
``This seems to be a knee-jerk reaction for bonds to improve after the news of a higher government surplus,'' said Edward Jong, who oversees C$100 million of fixed-income assets at Majorica Asset Management in Toronto, referring to yield. ``But I can't see this as a long-lasting trade. A lot of it is just a political posturing.''
Canadian 10-year government bonds yielded about 58 basis points less than comparable-maturity U.S. Treasuries. The difference was 77 basis points in May, the largest this year.
By Haris Anwar
Nov. 25 (Bloomberg) -- Canada's dollar rose this week, ending a three-week losing streak, after a measure of inflation jumped, and the government said it'll post a surplus double the previous forecast.
The currency rebounded from a seven-month low as investors speculated a robust economy will keep the Bank of Canada from cutting the borrowing cost soon.
``There is no denying that there is a change in momentum for the Canadian dollar,'' said Linda Jespersen, managing director of currency trading at National Bank of Canada in Toronto. ``A lot of this has to do with the strong economy, a record high equity market, and relatively strong mining sector. The near-term trend is still going to be the Canadian dollar strengthening.''
The currency rose 1.1 percent this week, the most since the week ended Oct. 20, to 88.13 U.S. cents. One U.S. dollar buys C$1.1349. Canada's dollar dropped 1.2 percent during the week ended Nov. 17.
The core inflation rate, which tracks prices minus eight volatile goods and the impact of tax changes, rose 2.3 percent last month from a year earlier, the most since 2003, Statistics Canada said Nov. 22.
A day later, the Canadian government said it expected to double the federal surplus to C$7.2 billion ($6.35 billion) in the year ending in March. Finance Minister Jim Flaherty said the Canadian government is committed to buying back C$3 billion in bonds each year, part of a plan to eliminate net debt by 2021.
U.S. Slowdown
The currency also get a boost from a general weakness in the U.S. counterpart, which dropped to 19-month low against euro on speculation the Federal Reserve will reduce the borrowing cost as the world's largest economy slowed.
``We may have a reversal in place in terms of the short-term direction of the Canadian dollar,'' said Reid Farrill, executive director of foreign exchange at CIBC Worlds Markets Inc. in Toronto. ``If the major element of the story is an American recession, then it begs the question does Canada avoid that, or does Canada get dragged down with it?''
More than 80 percent of Canada's exports are to the U.S.
The Bank of Canada kept its key interest rate unchanged at 4.25 percent for a third meeting last month and predicted growth will drop to 2.5 percent next year from 2.8 percent this year.
The Canadian dollar has lost 2.9 percent versus its U.S. counterpart since May 31, when it touched a 28-year high of 91.44 U.S. cents. Traders have pared bets on the currency on declines in the price of energy and commodities.
``If the commodity prices remain relatively firm, then the Canadian dollar can weather the U.S. slowdown quite nicely,'' Farrill said.
Yields Decline
The yield on Canada's benchmark 10-year note fell about 4 basis points to 3.96 percent, the lowest since Sept. 27. The price of the 4 percent security maturing in June 2016 rose 31 cents to C$100.29. Bond yields move inversely to prices.
``This seems to be a knee-jerk reaction for bonds to improve after the news of a higher government surplus,'' said Edward Jong, who oversees C$100 million of fixed-income assets at Majorica Asset Management in Toronto, referring to yield. ``But I can't see this as a long-lasting trade. A lot of it is just a political posturing.''
Canadian 10-year government bonds yielded about 58 basis points less than comparable-maturity U.S. Treasuries. The difference was 77 basis points in May, the largest this year.
Avoid Southbound Dollar Express, Chandler Advises: Chart of Day
Avoid Southbound Dollar Express, Chandler Advises: Chart of Day
By Thomas R. Keene
Nov. 24 (Bloomberg) -- Today's plunge in the dollar's value against major foreign currencies shows ``a run on the U.S. dollar is underway,'' according to Brown Brothers Harriman & Co. strategists.
The ``extreme'' move comes amid ``relatively thin market conditions'' and may be reversed ``as full liquidity returns,'' writes Marc Chandler, global head of currency strategy at Brown Brothers in New York, in a note to investors today.
``Rather than jump onboard what appears to be a southbound dollar express, traders might be better advised to take some profits and wait for the next train,'' writes Chandler.
The chart of the day shows changes in the value of the British pound sterling versus the dollar during the second half of this year. The blue mesh depicts one measure of trading volatility, a band of three standard deviations on either side of the 20-day moving average in the pound's value. Trading falls within the three-deviation range 99 percent of the time. Note that today's pound-dollar trading (the green circle) is outside the band at $1.93. The pound last traded above $2 in 1992. {GBP TE }
Chandler suggests the dollar may strengthen because of a set of economic and political realities including a tight U.S. labor market that could elevate inflation, weak Japanese domestic demand, and ``objections to further euro appreciation'' among European
By Thomas R. Keene
Nov. 24 (Bloomberg) -- Today's plunge in the dollar's value against major foreign currencies shows ``a run on the U.S. dollar is underway,'' according to Brown Brothers Harriman & Co. strategists.
The ``extreme'' move comes amid ``relatively thin market conditions'' and may be reversed ``as full liquidity returns,'' writes Marc Chandler, global head of currency strategy at Brown Brothers in New York, in a note to investors today.
``Rather than jump onboard what appears to be a southbound dollar express, traders might be better advised to take some profits and wait for the next train,'' writes Chandler.
The chart of the day shows changes in the value of the British pound sterling versus the dollar during the second half of this year. The blue mesh depicts one measure of trading volatility, a band of three standard deviations on either side of the 20-day moving average in the pound's value. Trading falls within the three-deviation range 99 percent of the time. Note that today's pound-dollar trading (the green circle) is outside the band at $1.93. The pound last traded above $2 in 1992. {GBP
Chandler suggests the dollar may strengthen because of a set of economic and political realities including a tight U.S. labor market that could elevate inflation, weak Japanese domestic demand, and ``objections to further euro appreciation'' among European
U.S. Rate Cut Would Raise Pressure on Yuan, China Official Says
U.S. Rate Cut Would Raise Pressure on Yuan, China Official Says
By Helen Yuan and Allen T. Cheng
Nov. 25 (Bloomberg) -- Federal Reserve interest rate cuts next year would put pressure on China's yuan to revalue, a Chinese central bank official said today.
``If the Federal Reserve lowers rates in 2007, it definitely would pressure the yuan to revalue further,'' Wang Yu, a director of the financial market division of the People's Bank of China, said at a steel conference in Shanghai today. ``There is the possibility that the Fed may lower rates next year.''
The yuan has risen 3.3 percent since China revalued the currency by 2.1 percent in July 2005. The currency last week made the biggest weekly gain in two months, closing at the strongest since the peg to the dollar was scrapped, on speculation China is allowing faster appreciation before a visit by U.S. Treasury Secretary Henry Paulson.
Fed policy makers voted on Oct. 25 to leave the benchmark lending rate at 5.25 percent for the third straight meeting. Officials are trying to tamp down inflation gradually without accelerating a decline in housing markets.
The U.S. blames an undervalued yuan for a widening trade deficit and the loss of American manufacturing jobs.
By Helen Yuan and Allen T. Cheng
Nov. 25 (Bloomberg) -- Federal Reserve interest rate cuts next year would put pressure on China's yuan to revalue, a Chinese central bank official said today.
``If the Federal Reserve lowers rates in 2007, it definitely would pressure the yuan to revalue further,'' Wang Yu, a director of the financial market division of the People's Bank of China, said at a steel conference in Shanghai today. ``There is the possibility that the Fed may lower rates next year.''
The yuan has risen 3.3 percent since China revalued the currency by 2.1 percent in July 2005. The currency last week made the biggest weekly gain in two months, closing at the strongest since the peg to the dollar was scrapped, on speculation China is allowing faster appreciation before a visit by U.S. Treasury Secretary Henry Paulson.
Fed policy makers voted on Oct. 25 to leave the benchmark lending rate at 5.25 percent for the third straight meeting. Officials are trying to tamp down inflation gradually without accelerating a decline in housing markets.
The U.S. blames an undervalued yuan for a widening trade deficit and the loss of American manufacturing jobs.
SG 0906994679
China's Economy May Expand as Fast as 10.7% in 2006 (Update3)
Dieu 0906994679
By Helen Yuan and Allen T. Cheng
Nov. 25 (Bloomberg) -- China's economy, the world's fourth- largest, may expand as much as 10.7 percent in 2006, said Yao Jingyuan, chief economist at the National Bureau of Statistics.
Gross domestic product may rise between 10 percent and 10.7 percent this year, Yao told reporters at a steel conference in Shanghai today. Growth close to the top of the range would exceed the World Bank's Nov. 14 estimate for China's economy to advance 10.4 percent in 2006.
China has raised minimum wages and increased welfare spending to get households to spend more and make the world's fastest growing major economy less dependent on investment and exports. Economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business spending.
``Given the pace of growth around the world, I don't think 10.7 percent is excessive,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``China definitely needs some rebalancing'' in growth away from business investment.
Standard Chartered forecasts China's economic growth will accelerate to between 10.6 percent and 10.8 percent this year. The economy advanced 10.2 percent in 2005.
The People's Bank of China, the nation's central bank, on Nov. 14 said the economy likely will expand at a more than 10 percent pace in 2006. The central bank raised interest rates twice this year to cool an investment boom that threatens to leave China with idle factories.
Growth in fixed-asset investment and industrial production has moderated since June, reflecting tighter rules on land use, higher rates and efforts by the central bank to remove funds from the financial system. By contrast, retail sales jumped in October at the fastest pace in almost two years as rising incomes spurred consumer spending.
Investment May Rebound
``China's macro-economic measures to rebalance growth are correct, but the question is whether the magnitude or aggressiveness are sufficient enough,'' Hui said.
Profits at industrial companies accelerated in October for a seventh straight month as steelmakers including Baoshan Iron & Steel Co. boosted prices, the statistics bureau reported Nov. 22. Rising profits may cause business investment to rebound as many companies finance capacity expansion from retained earnings.
China's inflation rate will be ``as high as 1.5 percent for 2006,'' Yao also said at the conference today. Rising prices are a sign that deflation, which has plagued China for years, may be on the wane, he said.
The nation's trade surplus will be more than $150 billion this year, Yao said, without giving a comparison for 2005.
Money Supply
China's trade surplus surged to a record $23.8 billion in the month of October as imports grew at the slowest pace in 15 months, raising the likelihood that the U.S. and Europe will intensify demands for currency gains and more market access.
U.S. and European policy makers have accused China of keeping its currency undervalued, ignoring copyrights and protecting local businesses.
The government's fiscal revenues for the year will be 4 trillion yuan ($510 billion), Yao said, without providing a comparison for 2005.
China's money supply measure, M2, will gain between 16 percent and 17 percent in 2007, said Wang Yu, a director of China's central bank. Wang also was speaking at the conference in Shanghai.
M2, the broadest measure of money supply, gained 17.1 percent in October from a year earlier, a Nov. 13 report showed.
China's foreign exchange reserves exceeded $1 billion by the end of October, Wang said. The nation's foreign exchange reserves are the world's largest.
Dieu 0906994679
By Helen Yuan and Allen T. Cheng
Nov. 25 (Bloomberg) -- China's economy, the world's fourth- largest, may expand as much as 10.7 percent in 2006, said Yao Jingyuan, chief economist at the National Bureau of Statistics.
Gross domestic product may rise between 10 percent and 10.7 percent this year, Yao told reporters at a steel conference in Shanghai today. Growth close to the top of the range would exceed the World Bank's Nov. 14 estimate for China's economy to advance 10.4 percent in 2006.
China has raised minimum wages and increased welfare spending to get households to spend more and make the world's fastest growing major economy less dependent on investment and exports. Economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business spending.
``Given the pace of growth around the world, I don't think 10.7 percent is excessive,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``China definitely needs some rebalancing'' in growth away from business investment.
Standard Chartered forecasts China's economic growth will accelerate to between 10.6 percent and 10.8 percent this year. The economy advanced 10.2 percent in 2005.
The People's Bank of China, the nation's central bank, on Nov. 14 said the economy likely will expand at a more than 10 percent pace in 2006. The central bank raised interest rates twice this year to cool an investment boom that threatens to leave China with idle factories.
Growth in fixed-asset investment and industrial production has moderated since June, reflecting tighter rules on land use, higher rates and efforts by the central bank to remove funds from the financial system. By contrast, retail sales jumped in October at the fastest pace in almost two years as rising incomes spurred consumer spending.
Investment May Rebound
``China's macro-economic measures to rebalance growth are correct, but the question is whether the magnitude or aggressiveness are sufficient enough,'' Hui said.
Profits at industrial companies accelerated in October for a seventh straight month as steelmakers including Baoshan Iron & Steel Co. boosted prices, the statistics bureau reported Nov. 22. Rising profits may cause business investment to rebound as many companies finance capacity expansion from retained earnings.
China's inflation rate will be ``as high as 1.5 percent for 2006,'' Yao also said at the conference today. Rising prices are a sign that deflation, which has plagued China for years, may be on the wane, he said.
The nation's trade surplus will be more than $150 billion this year, Yao said, without giving a comparison for 2005.
Money Supply
China's trade surplus surged to a record $23.8 billion in the month of October as imports grew at the slowest pace in 15 months, raising the likelihood that the U.S. and Europe will intensify demands for currency gains and more market access.
U.S. and European policy makers have accused China of keeping its currency undervalued, ignoring copyrights and protecting local businesses.
The government's fiscal revenues for the year will be 4 trillion yuan ($510 billion), Yao said, without providing a comparison for 2005.
China's money supply measure, M2, will gain between 16 percent and 17 percent in 2007, said Wang Yu, a director of China's central bank. Wang also was speaking at the conference in Shanghai.
M2, the broadest measure of money supply, gained 17.1 percent in October from a year earlier, a Nov. 13 report showed.
China's foreign exchange reserves exceeded $1 billion by the end of October, Wang said. The nation's foreign exchange reserves are the world's largest.
0983112209
Dollar's Weekly Loss Sends Currency to 19-Month Low Versus Euro
Thu 0983112209
By Daniel Kruger
Nov. 25 (Bloomberg) -- The dollar dropped to a 19-month low this week versus the euro and fell against the yen on speculation slowing U.S. growth will lead the Federal Reserve to cut interest rates as the European Central Bank boosts them.
Traders raised bets the Fed will reduce borrowing costs as advisers to President George W. Bush on Nov. 21 cut forecasts for growth next year on a weaker housing market. Gross domestic product will rise 2.9 percent next year, slower than the 3.6 percent forecast in June, the Council of Economic Advisers said.
``Everybody knows the ECB wants to hike rates and will do so in December and the first quarter as well,'' said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. ``We're looking for the dollar to sell off the rest of the year.''
The dollar weakened 2 percent to $1.3094 per euro from $1.2829 on Nov. 17. The U.S. currency dropped as low as $1.3109 yesterday. The dollar fell 1.6 percent to 115.90 yen from 117.75 a week ago. The euro also touched 151.76 yen yesterday, an all- time high, before closing at 151.71 from 151.05 a week ago.
The U.S. currency may reach $1.33 per euro by year-end, Reid said.
``You've got real money that is leaving the dollar,'' such as corporations hedging currency risk and central banks making multi-year allocations, said Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto. ``That's money that doesn't get injected back into the economy. These guys sit on reserves for years at a time.''
The U.S. currency's move through $1.30 per euro, which it had approached several times this year without breaching, may indicate a period of prolonged weakness, according to some dollar bears.
ECB Determined
``The extent of this rise in the euro will be completely determined by the ECB,'' said Matthew Lifson, chief currency trader at PNC Capital Markets in Pittsburgh. ``People ask me, `Can you get to $2 on the pound?' Why not?''
The dollar fell to as low as $1.9351 per pound yesterday, its weakest against the British currency since Dec. 31, 2004. It last traded above $2 in 1992.
The current account deficit in the U.S. may also weigh on the dollar, said Tim Mazanec, senior foreign-exchange strategist at Boston-based Investors Bank & Trust Co.
``The lack of a stimulus to attract investors to the U.S. has the dollar on the defensive,'' Mazanec said. ``The current account deficit is front and center, the number one problem with the dollar.''
The U.S. current account showed a $218.4 billion deficit in the second quarter, near the record $223.1 billion for the fourth quarter of 2005.
Stop Losses
The dollar's drop was assisted by trading volume below the $1.9 trillion daily average because of holidays in the U.S. and Japan and preset orders to sell the currency at certain levels, traders said.
``It was easier to push through'' $1.30 per euro in an illiquid market, BMO's Askari said. ``You had a battle in the ranges. The weaker side was the dollar side.''
Traders place automatic orders, or so-called stop-losses, at preset levels to sell the currency after it breaches certain key levels, such as $1.30. Before this week the euro had been stuck between $1.2458 and $1.2938 during the second half of this year.
Yesterday's decline in the dollar ``was very much driven by some important technical levels,'' said Matthew Strauss, senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``Some stop-losses were triggered and forced it above the psychological level of $1.30.''
Reduce Borrowing Costs
Traders are betting the Fed will cut borrowing costs in 2007. In contrast, interest-rate futures show investors expect the Frankfurt-based ECB to raise its main interest rate twice more by June 2007.
ECB policy maker Klaus Liebscher told Reuters yesterday that the central bank must remain ``vigilant'' on inflation.
Europe's central bank has lifted borrowing costs five times since December to 3.25 percent. The Fed has left its benchmark rate at 5.25 percent for the past three meetings, after 17 straight quarter-percentage point increases since June 2004.
Traders see a 51 percent chance the Fed will reduce interest rates at the central bank's March 21 meeting. That compares with an 11 percent chance on Nov. 16.
The U.S. currency fell for three straight years through 2004 versus the euro and the yen as the country's trade deficit widened, reaching a record $1.3666 per euro on Dec. 30, 2004. It advanced against the euro and yen last year as the Fed pushed borrowing costs higher at every meeting.
0919 700 510
Philippine Bonds Rise as Peso Gains: World's Biggest Mover
Huyền 0919 700 510
By Oliver Biggadike
Nov. 24 (Bloomberg) -- Philippine peso-denominated bonds rose, the biggest fluctuation of any government debt market today, on speculation peso gains will allow the central bank to retain this month's partial interest rate cut.
Bangko Sentral ng Pilipinas on Nov. 2 cut the rate it pays to commercial banks on overnight deposits between 5 billion ($101 million) and 10 billion pesos to 5.5 percent from 7.5 percent. The central bank will review the policy next month to see whether it has helped boost loan growth, Deputy Governor Diwa Gunigundo said on Nov. 21.
``The strength of the peso versus the dollar eliminated the worry that lower interest rates will weaken the foreign-exchange rate,'' said Rafael Algarra, head of the treasury at Security Bank Corp. in Manila. ``With most banks having excess cash, this created demand for higher-yielding securities.''
The yield on the benchmark 10-year note fell 22 basis points, or 0.22 percentage point, to 6.83 percent as of 1:03 p.m. in Manila, according to the Money Market Association. The price of the 6.25 percent bond due November 2016 rose 1.5281, or 152.8 pesos per 10,000 pesos face amount, to 95.8624. Bond yields move inversely to prices.
The peso traded at 49.745 against the dollar at 1:11 p.m. in Manila, the strongest since May 2002. The central bank's rate for deposits of more than 10 billion pesos is 3.5 percent.
The world's biggest movers are based on changes in price or yield and are screened for the size of the market and amount of daily trading
Huyền 0919 700 510
By Oliver Biggadike
Nov. 24 (Bloomberg) -- Philippine peso-denominated bonds rose, the biggest fluctuation of any government debt market today, on speculation peso gains will allow the central bank to retain this month's partial interest rate cut.
Bangko Sentral ng Pilipinas on Nov. 2 cut the rate it pays to commercial banks on overnight deposits between 5 billion ($101 million) and 10 billion pesos to 5.5 percent from 7.5 percent. The central bank will review the policy next month to see whether it has helped boost loan growth, Deputy Governor Diwa Gunigundo said on Nov. 21.
``The strength of the peso versus the dollar eliminated the worry that lower interest rates will weaken the foreign-exchange rate,'' said Rafael Algarra, head of the treasury at Security Bank Corp. in Manila. ``With most banks having excess cash, this created demand for higher-yielding securities.''
The yield on the benchmark 10-year note fell 22 basis points, or 0.22 percentage point, to 6.83 percent as of 1:03 p.m. in Manila, according to the Money Market Association. The price of the 6.25 percent bond due November 2016 rose 1.5281, or 152.8 pesos per 10,000 pesos face amount, to 95.8624. Bond yields move inversely to prices.
The peso traded at 49.745 against the dollar at 1:11 p.m. in Manila, the strongest since May 2002. The central bank's rate for deposits of more than 10 billion pesos is 3.5 percent.
The world's biggest movers are based on changes in price or yield and are screened for the size of the market and amount of daily trading
0982056396
China's Economy May Expand as Fast as 10.7% in 2006 (Update3)
Thanh 0982056396
By Helen Yuan and Allen T. Cheng
Nov. 25 (Bloomberg) -- China's economy, the world's fourth- largest, may expand as much as 10.7 percent in 2006, said Yao Jingyuan, chief economist at the National Bureau of Statistics.
Gross domestic product may rise between 10 percent and 10.7 percent this year, Yao told reporters at a steel conference in Shanghai today. Growth close to the top of the range would exceed the World Bank's Nov. 14 estimate for China's economy to advance 10.4 percent in 2006.
China has raised minimum wages and increased welfare spending to get households to spend more and make the world's fastest growing major economy less dependent on investment and exports. Economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business spending.
``Given the pace of growth around the world, I don't think 10.7 percent is excessive,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``China definitely needs some rebalancing'' in growth away from business investment.
Standard Chartered forecasts China's economic growth will accelerate to between 10.6 percent and 10.8 percent this year. The economy advanced 10.2 percent in 2005.
The People's Bank of China, the nation's central bank, on Nov. 14 said the economy likely will expand at a more than 10 percent pace in 2006. The central bank raised interest rates twice this year to cool an investment boom that threatens to leave China with idle factories.
Growth in fixed-asset investment and industrial production has moderated since June, reflecting tighter rules on land use, higher rates and efforts by the central bank to remove funds from the financial system. By contrast, retail sales jumped in October at the fastest pace in almost two years as rising incomes spurred consumer spending.
Investment May Rebound
``China's macro-economic measures to rebalance growth are correct, but the question is whether the magnitude or aggressiveness are sufficient enough,'' Hui said.
Profits at industrial companies accelerated in October for a seventh straight month as steelmakers including Baoshan Iron & Steel Co. boosted prices, the statistics bureau reported Nov. 22. Rising profits may cause business investment to rebound as many companies finance capacity expansion from retained earnings.
China's inflation rate will be ``as high as 1.5 percent for 2006,'' Yao also said at the conference today. Rising prices are a sign that deflation, which has plagued China for years, may be on the wane, he said.
The nation's trade surplus will be more than $150 billion this year, Yao said, without giving a comparison for 2005.
Money Supply
China's trade surplus surged to a record $23.8 billion in the month of October as imports grew at the slowest pace in 15 months, raising the likelihood that the U.S. and Europe will intensify demands for currency gains and more market access.
U.S. and European policy makers have accused China of keeping its currency undervalued, ignoring copyrights and protecting local businesses.
The government's fiscal revenues for the year will be 4 trillion yuan ($510 billion), Yao said, without providing a comparison for 2005.
China's money supply measure, M2, will gain between 16 percent and 17 percent in 2007, said Wang Yu, a director of China's central bank. Wang also was speaking at the conference in Shanghai.
M2, the broadest measure of money supply, gained 17.1 percent in October from a year earlier, a Nov. 13 report showed.
China's foreign exchange reserves exceeded $1 billion by the end of October, Wang said. The nation's foreign exchange reserves are the world's largest.
Thanh 0982056396
By Helen Yuan and Allen T. Cheng
Nov. 25 (Bloomberg) -- China's economy, the world's fourth- largest, may expand as much as 10.7 percent in 2006, said Yao Jingyuan, chief economist at the National Bureau of Statistics.
Gross domestic product may rise between 10 percent and 10.7 percent this year, Yao told reporters at a steel conference in Shanghai today. Growth close to the top of the range would exceed the World Bank's Nov. 14 estimate for China's economy to advance 10.4 percent in 2006.
China has raised minimum wages and increased welfare spending to get households to spend more and make the world's fastest growing major economy less dependent on investment and exports. Economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business spending.
``Given the pace of growth around the world, I don't think 10.7 percent is excessive,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``China definitely needs some rebalancing'' in growth away from business investment.
Standard Chartered forecasts China's economic growth will accelerate to between 10.6 percent and 10.8 percent this year. The economy advanced 10.2 percent in 2005.
The People's Bank of China, the nation's central bank, on Nov. 14 said the economy likely will expand at a more than 10 percent pace in 2006. The central bank raised interest rates twice this year to cool an investment boom that threatens to leave China with idle factories.
Growth in fixed-asset investment and industrial production has moderated since June, reflecting tighter rules on land use, higher rates and efforts by the central bank to remove funds from the financial system. By contrast, retail sales jumped in October at the fastest pace in almost two years as rising incomes spurred consumer spending.
Investment May Rebound
``China's macro-economic measures to rebalance growth are correct, but the question is whether the magnitude or aggressiveness are sufficient enough,'' Hui said.
Profits at industrial companies accelerated in October for a seventh straight month as steelmakers including Baoshan Iron & Steel Co. boosted prices, the statistics bureau reported Nov. 22. Rising profits may cause business investment to rebound as many companies finance capacity expansion from retained earnings.
China's inflation rate will be ``as high as 1.5 percent for 2006,'' Yao also said at the conference today. Rising prices are a sign that deflation, which has plagued China for years, may be on the wane, he said.
The nation's trade surplus will be more than $150 billion this year, Yao said, without giving a comparison for 2005.
Money Supply
China's trade surplus surged to a record $23.8 billion in the month of October as imports grew at the slowest pace in 15 months, raising the likelihood that the U.S. and Europe will intensify demands for currency gains and more market access.
U.S. and European policy makers have accused China of keeping its currency undervalued, ignoring copyrights and protecting local businesses.
The government's fiscal revenues for the year will be 4 trillion yuan ($510 billion), Yao said, without providing a comparison for 2005.
China's money supply measure, M2, will gain between 16 percent and 17 percent in 2007, said Wang Yu, a director of China's central bank. Wang also was speaking at the conference in Shanghai.
M2, the broadest measure of money supply, gained 17.1 percent in October from a year earlier, a Nov. 13 report showed.
China's foreign exchange reserves exceeded $1 billion by the end of October, Wang said. The nation's foreign exchange reserves are the world's largest.
Thu 0919881955
Australia's Foster's Credit Risk Rises on Buyout Speculation
Thu 0919881955
By Oliver Biggadike
Nov. 24 (Bloomberg) -- The perceived risk of owning debt sold by Australian beverage-maker Foster's Group Ltd. rose 22 percent this week to the highest since September on speculation the company is a takeover target.
Inbev NV, the maker of Beck's beer, is currently considering a bid, the Herald Sun newspaper reported yesterday, without identifying sources. Australia's largest producer of beer and wine said today it can't explain why its share price surged yesterday to a record high.
``When a leveraged buyout happens, the buyers are generally going to put more debt into the company,'' said Tony Adams, portfolio manager in Sydney at Colonial First State, Australia's largest money manager. ``What's potentially changed is the amount of leverage.''
Five-year contracts based on $10 million of Foster's debt rose to $49,300 from $40,300 last week, according to data compiled by Bloomberg. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on changes in a borrower's ability to repay.
An increase in the cost of credit-default swaps based on $2.1 billion of Foster's bonds signals the companies' credit quality fell.
Qantas Takeover Approach
Foster's shares rose 1.3 percent to A$6.89 at the 4:10 p.m. close of trading in Sydney, giving it a market value of A$14 billion ($11 billion). The stock rose 4.1 percent yesterday and traded as high as A$6.97.
Qantas Airways Ltd., Australia's biggest airline, on Nov. 22 said it received a takeover approach from Macquarie Bank Ltd. and Texas Pacific Group. Concerns about rising indebtedness pushed up the price of credit-default swaps based on the airline's bonds to $70,000 from $65,000 yesterday, according to prices from JPMorgan Chase & Co.
Credit-default swaps are the fastest growing market for derivatives, which are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.
The amount of outstanding credit-default swap contracts jumped to $20.3 trillion from $13.9 trillion at the end of last year, the Basel, Switzerland-based bank said on Nov. 17.
Thu 0919881955
By Oliver Biggadike
Nov. 24 (Bloomberg) -- The perceived risk of owning debt sold by Australian beverage-maker Foster's Group Ltd. rose 22 percent this week to the highest since September on speculation the company is a takeover target.
Inbev NV, the maker of Beck's beer, is currently considering a bid, the Herald Sun newspaper reported yesterday, without identifying sources. Australia's largest producer of beer and wine said today it can't explain why its share price surged yesterday to a record high.
``When a leveraged buyout happens, the buyers are generally going to put more debt into the company,'' said Tony Adams, portfolio manager in Sydney at Colonial First State, Australia's largest money manager. ``What's potentially changed is the amount of leverage.''
Five-year contracts based on $10 million of Foster's debt rose to $49,300 from $40,300 last week, according to data compiled by Bloomberg. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on changes in a borrower's ability to repay.
An increase in the cost of credit-default swaps based on $2.1 billion of Foster's bonds signals the companies' credit quality fell.
Qantas Takeover Approach
Foster's shares rose 1.3 percent to A$6.89 at the 4:10 p.m. close of trading in Sydney, giving it a market value of A$14 billion ($11 billion). The stock rose 4.1 percent yesterday and traded as high as A$6.97.
Qantas Airways Ltd., Australia's biggest airline, on Nov. 22 said it received a takeover approach from Macquarie Bank Ltd. and Texas Pacific Group. Concerns about rising indebtedness pushed up the price of credit-default swaps based on the airline's bonds to $70,000 from $65,000 yesterday, according to prices from JPMorgan Chase & Co.
Credit-default swaps are the fastest growing market for derivatives, which are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.
The amount of outstanding credit-default swap contracts jumped to $20.3 trillion from $13.9 trillion at the end of last year, the Basel, Switzerland-based bank said on Nov. 17.
0917609648 Thúy
Japan Bonds Post Biggest Weekly Gain in a Month on Stocks Drop
0917609648 Thúy
By Issei Morita
Nov. 25 (Bloomberg) -- Japan's 10-year bonds had the biggest weekly gain in almost a month as a drop in the Nikkei 225 Stock Average increased demand for government debt.
Benchmark bonds rose as the Nikkei this week fell the most since July after the government cut its evaluation of the economy for the first time in almost two years on Nov. 22. Bank of Japan policy maker Toshikatsu Fukuma yesterday said asset price gains don't pose an ``immediate'' threat to the economy.
``The drop in stocks was definitely supportive for the Japanese government bond market'' this week, said Keiko Onogi, a fixed-income strategist in Tokyo at Daiwa Securities SMBC Co., a subsidiary of Daiwa Securities Group Inc., Japan's second- largest brokerage.
The yield on the 1.8 percent bond due September 2016 fell 5.5 basis points this week, the biggest decline since the week ended Oct. 27. Yesterday the yield fell half a basis point to 1.655 percent in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. A basis point is 0.01 percentage point.
The Nikkei 225 lost 2.2 percent on the week, the biggest decline since the five days ended July 14. Ten-year yields had a correlation of about 0.88 with the Nikkei during the past two months, according to data compiled by Bloomberg. A value of 1 means the two moved in lock step.
Dovish Enough
``A decline in share prices supported government bonds,'' said Satoshi Yamada, who helps oversee the equivalent of $6.2 billion in assets at Japan Investment Trust Management Co. in Tokyo. ``Central bank's Fukuma avoided giving hawkish signals about the rate policy.''
Japan's government cut its assessment for the economy after the stock market closed on Nov. 22.
The central bank will closely judge when to raise interest rates and does not have any preconceived timing, Fukuma said in a speech to business executives in Ibaraki Prefecture.
``His views on the economy and prices are dovish enough to spur some buying,'' said Katsutoshi Inadome, a debt strategist at Mitsubishi UFJ Securities Co. in Tokyo.
Shares of exporters fell as the yen traded near the highest in more than two months against the dollar, spurring speculation profits at companies such as Honda Motor Co. and Sony Corp. will drop. The yen rose as high as 116.04 against the dollar on Nov. 23, the strongest since Sept. 7.
`Next Rate Increase'
Gains in government bonds were limited on concern Bank of Japan Governor Toshihiko Fukui will signal the central bank is ready to lift borrowing costs. He will speak in Osaka on Nov. 27.
Bonds are set for the worst year in three after the BOJ ended its deflation-fighting policy in March and raised rates in July for the first time since 2000.
``Central bank officials are likely to give clues about the next rate increase,'' said Jun Fukashiro, a fixed-income fund manager in Tokyo at Toyota Asset Management Co., which has the equivalent of $10 billion in assets under management. ``The bank is probably still confident about the economic outlook.''
Government bonds have handed investors a return of 0.06 percent this year, the least since 2003, according to an index of 229 of the securities compiled by Merrill Lynch & Co.
Japanese bonds also rose on speculation investors are buying to match a change in the benchmark index.
Nomura Securities Co. will add debt including 10- and 20- year bonds sold this month to its Bond Performance Index in December and remove securities due in a year and less. The length of the extension will be the largest in three months, according to Mitsubishi UFJ's Inadome.
``I noticed some buying of longer-dated bonds to match the extension of the index,'' said Yamada at Japan Investment Trust. ``Long-dated bonds, such as 10- and 20-years, are solid.''
The yield on 20-year bonds yesterday fell 2 basis points to 2.13 percent.
``There is some room for yields to decline,'' said Hajime Takata, chief strategist in Tokyo at Mizuho Securities Co. and the second-highest ranked bond analyst in Japan according to Nikkei Bonds and Financial Weekly. ``The economic situation in Japan and the U.S. is declining.''
0917609648 Thúy
By Issei Morita
Nov. 25 (Bloomberg) -- Japan's 10-year bonds had the biggest weekly gain in almost a month as a drop in the Nikkei 225 Stock Average increased demand for government debt.
Benchmark bonds rose as the Nikkei this week fell the most since July after the government cut its evaluation of the economy for the first time in almost two years on Nov. 22. Bank of Japan policy maker Toshikatsu Fukuma yesterday said asset price gains don't pose an ``immediate'' threat to the economy.
``The drop in stocks was definitely supportive for the Japanese government bond market'' this week, said Keiko Onogi, a fixed-income strategist in Tokyo at Daiwa Securities SMBC Co., a subsidiary of Daiwa Securities Group Inc., Japan's second- largest brokerage.
The yield on the 1.8 percent bond due September 2016 fell 5.5 basis points this week, the biggest decline since the week ended Oct. 27. Yesterday the yield fell half a basis point to 1.655 percent in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. A basis point is 0.01 percentage point.
The Nikkei 225 lost 2.2 percent on the week, the biggest decline since the five days ended July 14. Ten-year yields had a correlation of about 0.88 with the Nikkei during the past two months, according to data compiled by Bloomberg. A value of 1 means the two moved in lock step.
Dovish Enough
``A decline in share prices supported government bonds,'' said Satoshi Yamada, who helps oversee the equivalent of $6.2 billion in assets at Japan Investment Trust Management Co. in Tokyo. ``Central bank's Fukuma avoided giving hawkish signals about the rate policy.''
Japan's government cut its assessment for the economy after the stock market closed on Nov. 22.
The central bank will closely judge when to raise interest rates and does not have any preconceived timing, Fukuma said in a speech to business executives in Ibaraki Prefecture.
``His views on the economy and prices are dovish enough to spur some buying,'' said Katsutoshi Inadome, a debt strategist at Mitsubishi UFJ Securities Co. in Tokyo.
Shares of exporters fell as the yen traded near the highest in more than two months against the dollar, spurring speculation profits at companies such as Honda Motor Co. and Sony Corp. will drop. The yen rose as high as 116.04 against the dollar on Nov. 23, the strongest since Sept. 7.
`Next Rate Increase'
Gains in government bonds were limited on concern Bank of Japan Governor Toshihiko Fukui will signal the central bank is ready to lift borrowing costs. He will speak in Osaka on Nov. 27.
Bonds are set for the worst year in three after the BOJ ended its deflation-fighting policy in March and raised rates in July for the first time since 2000.
``Central bank officials are likely to give clues about the next rate increase,'' said Jun Fukashiro, a fixed-income fund manager in Tokyo at Toyota Asset Management Co., which has the equivalent of $10 billion in assets under management. ``The bank is probably still confident about the economic outlook.''
Government bonds have handed investors a return of 0.06 percent this year, the least since 2003, according to an index of 229 of the securities compiled by Merrill Lynch & Co.
Japanese bonds also rose on speculation investors are buying to match a change in the benchmark index.
Nomura Securities Co. will add debt including 10- and 20- year bonds sold this month to its Bond Performance Index in December and remove securities due in a year and less. The length of the extension will be the largest in three months, according to Mitsubishi UFJ's Inadome.
``I noticed some buying of longer-dated bonds to match the extension of the index,'' said Yamada at Japan Investment Trust. ``Long-dated bonds, such as 10- and 20-years, are solid.''
The yield on 20-year bonds yesterday fell 2 basis points to 2.13 percent.
``There is some room for yields to decline,'' said Hajime Takata, chief strategist in Tokyo at Mizuho Securities Co. and the second-highest ranked bond analyst in Japan according to Nikkei Bonds and Financial Weekly. ``The economic situation in Japan and the U.S. is declining.''
0918198896
Eurotunnel Creditor Oaktree Won't Vote for Debt Plan (Update2)
Thủy 0918198896
By Tracy Alloway and Evan Roth
Nov. 24 (Bloomberg) -- Eurotunnel SA creditor Oaktree Capital Management LLC said it will vote against an ``unfair'' plan by the struggling tunnel operator to exit bankruptcy protection.
``The proposed method of decision-making is inherently unfair,'' Los-Angeles based Oaktree said in a statement today. ``We are not aiming for special treatment. We have a right to be treated as fairly as other stakeholders.''
Under the proposed plan, creditors have been organized into tiers based on the type of debt they hold. Holders of senior debt, including Deutsche Bank AG, will be repaid in full. Mid-level creditors, or `Tier 3,' will get 150 million pounds ($289.8 million) in cash and 1.05 billion pounds of convertible bonds.
Oaktree, which is classified as ``Tier 3,'' said in the statement that the proposal is less favorable to holders of mid- level credit than an earlier plan. It wants the tiers of creditors to vote on the plan separately, it said.
Today's announcement comes after requests to Eurotunnel management for more information about the plan went unanswered, Oaktree said. ``More than ever we want a sound future for Eurotunnel which presupposes a reopening of negotiations.''
Eurotunnel sent a letter to its creditors with additional information about the plan to be voted upon next week, the company said in an e-mailed statement today.
``After having listened to its creditors and received their comments, Eurotunnel has provided additional information and clarifications through an addendum sent to creditors by the court- appointed representatives,'' the company said.
Long-Term Financing
The letter included points on which legal entities will receive long-term financing under the plan, how creditors who receive convertible bonds would be able to resell them to other creditors, and details on how shareholders can subscribe to convertible bonds, said Eurotunnel spokeswoman Mady Chabrier.
The company said Nov. 14 that it would support a debt plan with changes that didn't ``significantly'' alter the balance among creditors, bondholders and shareholders. The company plan would cut its 6.2 billion pounds of debt by more than half.
Oaktree's main objections to the plan are a reduction in the amount of equity it would get in a new company and lower premiums if Eurotunnel buys back the bonds. The earlier plan and a modified version on July 12 failed because Deutsche Bank AG and other bondholders complained they received too little. Under all plans, shareholders would be left with 13 percent of the company.
Debt Plan
Eurotunnel, operator of the rail link between the U.K. and France, submitted a debt restructuring plan to the Paris commercial court on Oct. 31 after receiving protection from creditors on Aug. 2. Lenders will vote on the proposal on Nov. 27, with suppliers voting the same day. Bondholders will vote a week later in a ``consultation'' whose outcome doesn't determine whether the plan can be accepted by the court.
Oaktree will not attend the creditors' meeting. The investment fund lost an initial decision late yesterday in the Paris Commercial Court. It had said it should be excluded from the creditors committee. It will appeal the court ruling.
Thủy 0918198896
By Tracy Alloway and Evan Roth
Nov. 24 (Bloomberg) -- Eurotunnel SA creditor Oaktree Capital Management LLC said it will vote against an ``unfair'' plan by the struggling tunnel operator to exit bankruptcy protection.
``The proposed method of decision-making is inherently unfair,'' Los-Angeles based Oaktree said in a statement today. ``We are not aiming for special treatment. We have a right to be treated as fairly as other stakeholders.''
Under the proposed plan, creditors have been organized into tiers based on the type of debt they hold. Holders of senior debt, including Deutsche Bank AG, will be repaid in full. Mid-level creditors, or `Tier 3,' will get 150 million pounds ($289.8 million) in cash and 1.05 billion pounds of convertible bonds.
Oaktree, which is classified as ``Tier 3,'' said in the statement that the proposal is less favorable to holders of mid- level credit than an earlier plan. It wants the tiers of creditors to vote on the plan separately, it said.
Today's announcement comes after requests to Eurotunnel management for more information about the plan went unanswered, Oaktree said. ``More than ever we want a sound future for Eurotunnel which presupposes a reopening of negotiations.''
Eurotunnel sent a letter to its creditors with additional information about the plan to be voted upon next week, the company said in an e-mailed statement today.
``After having listened to its creditors and received their comments, Eurotunnel has provided additional information and clarifications through an addendum sent to creditors by the court- appointed representatives,'' the company said.
Long-Term Financing
The letter included points on which legal entities will receive long-term financing under the plan, how creditors who receive convertible bonds would be able to resell them to other creditors, and details on how shareholders can subscribe to convertible bonds, said Eurotunnel spokeswoman Mady Chabrier.
The company said Nov. 14 that it would support a debt plan with changes that didn't ``significantly'' alter the balance among creditors, bondholders and shareholders. The company plan would cut its 6.2 billion pounds of debt by more than half.
Oaktree's main objections to the plan are a reduction in the amount of equity it would get in a new company and lower premiums if Eurotunnel buys back the bonds. The earlier plan and a modified version on July 12 failed because Deutsche Bank AG and other bondholders complained they received too little. Under all plans, shareholders would be left with 13 percent of the company.
Debt Plan
Eurotunnel, operator of the rail link between the U.K. and France, submitted a debt restructuring plan to the Paris commercial court on Oct. 31 after receiving protection from creditors on Aug. 2. Lenders will vote on the proposal on Nov. 27, with suppliers voting the same day. Bondholders will vote a week later in a ``consultation'' whose outcome doesn't determine whether the plan can be accepted by the court.
Oaktree will not attend the creditors' meeting. The investment fund lost an initial decision late yesterday in the Paris Commercial Court. It had said it should be excluded from the creditors committee. It will appeal the court ruling.
0988633992
Qantas Airways, Foster's, Technip: Credit-Default Swap Movers
nhi 0988633992
By Jennifer Ryan
Nov. 24 (Bloomberg) -- The following is a list of companies whose credit-default swap prices are changing today. Symbols are in parentheses after company names. All credit-default swap prices are as of 2:00 p.m. in London.
The perception of European credit quality as measured by the iTraxx Crossover Index fell today. A credit-default swap based on a 10 million-euro ($13 million) contract on the index, which includes 45 companies with investment-grade and non- investment grade ratings, rose to 241,500 euros, or 1.9 percent, from 237,000 euros according to data compiled by JPMorgan Chase & Co. The index moves an average of about 1.5 percent a day.
Companies in the Crossover Index have more than $80 billion of bonds outstanding. All prices below are based on a contract size of 10 million euros.
Qantas Airways Ltd. {CQTAS1U5 CBIL GP } rose after Macquarie Bank Ltd., which may bid for the airline, said any firm proposal will adhere to rules that majority Australian ownership of the Sydney-based carrier remains. Qantas said it received a ``confidential and incomplete'' takeover approach from Macquarie and Texas Pacific Group. The cost of credit- default swaps based on Qantas bonds rose to $93,000 from $62,000 yesterday, according to Deutsche Bank AG data.
Foster's Group Ltd. {CFBG1U5 CBIL GP }, the Australian beverage-maker, rose after the Herald Sun newspaper reported Inbev NV, the Belgium maker of Beck's beer, is considering a bid. The cost of credit-default swaps based on Foster's debt rose to $54,000 from $47,000, according to Deutsche Bank.
Technip SA {CTEC1E5 CBIL GP }, Europe's second- largest oil-services company, fell after La Tribune reported that Rome-based oil exploration company ENI SpA may bid for the Paris-based company. The cost of credit-default swaps based on Technip debt fell to 17,000 euros at about 7:50 a.m., from 22,000 euros yesterday, according to Deutsche Bank. The cost of a contract was quoted at 23,000 euros after 12:00 p.m., with no trades reported.
nhi 0988633992
By Jennifer Ryan
Nov. 24 (Bloomberg) -- The following is a list of companies whose credit-default swap prices are changing today. Symbols are in parentheses after company names. All credit-default swap prices are as of 2:00 p.m. in London.
The perception of European credit quality as measured by the iTraxx Crossover Index fell today. A credit-default swap based on a 10 million-euro ($13 million) contract on the index, which includes 45 companies with investment-grade and non- investment grade ratings, rose to 241,500 euros, or 1.9 percent, from 237,000 euros according to data compiled by JPMorgan Chase & Co. The index moves an average of about 1.5 percent a day.
Companies in the Crossover Index have more than $80 billion of bonds outstanding. All prices below are based on a contract size of 10 million euros.
Qantas Airways Ltd. {CQTAS1U5 CBIL
Foster's Group Ltd. {CFBG1U5 CBIL
Technip SA {CTEC1E5 CBIL
Ngọc:0903288248
Bond Strategists: Buy London Stock Exchange Debt, Barclays Says
Ngọc:0903288248
By Sebastian Boyd
Nov. 24 (Bloomberg) -- A takeover of London Stock Exchange Plc is likely to benefit holders of its bonds because the securities reward investors for any deterioration in credit ratings, Barclays Capital says.
Nasdaq Stock Market Inc. and buyout firms have built equity stakes in the U.K. exchange. A takeover by either could cause LSE to lose its investment-grade credit ratings because Nasdaq is rated high-yield, high-risk and a private-equity deal would be financed by loading the company with debt.
When LSE sold bonds in July, Nasdaq had already said it wanted to buy the U.K. bourse and the borrower included terms to protect investors. Interest payments on the bonds will rise by 25 basis points every time Moody's Investors Service lowers its ranking of the company's credit worthiness. If the rating falls to non-investment grade, or junk, the coupon will increase by 1 percent.
``The bonds are really cheap,'' said Puneet Sharma, a credit strategist in London at Barclays Capital, which has a ``buy'' recommendation. ``These days the risk of a takeover leading to a downgrade is substantial, so people are pushing for protection on bonds.''
`Negative Pressure'
Moody's has indicated it may cut LSE's ratings after a successful takeover by Nasdaq, saying on Nov. 20 that ``negative ratings pressure'' would be likely.
The yield premium, or spread, investors demand to buy the LSE's 250 million pounds of 5.87 percent bonds due in July 2016, compared with similar-maturity U.K. government debt, is 119 basis points.
Moody's Investors Service rates the bonds Baa1, the eighth- highest of 10 possible investment grades. Should Moody's cut the rating the spread would rise by between 10 basis points and 30 basis points. The bonds would return between 200 and 300 basis points more than government debt, according to Barclays' calculations. A basis point is 0.01 percentage point.
Moody's gives Nasdaq a non-investment grade ranking of Ba3, five steps below the London exchange, and three steps below investment grade. Standard & Poor's rates it BB+.
High-yield, high-risk bonds are rated below Baa3 at Moody's and BBB- at S&P.
Were Moody's to cut its rating on LSE in line with its rating on Nasdaq, investors would earn between 300 and 450 basis points more than government bonds, Barclays said.
``If the coupon steps up, the spread will initially widen to keep the price the same, but will then come back in,'' Sharma said.
Stake Building
Nasdaq has amassed 29 percent of the U.K. exchange and said on Nov. 21 it will take its offer directly to LSE's shareholders after the British bourse rejected the bid. LSE, which refused to meet Nasdaq executives for talks, said the U.S. exchange's 2.7 billion-pound ($5.2 billion) offer is too low.
Hedge fund investors, led by corporate raider Samuel Heyman, are also buying stakes in LSE. Heyman, acquired 8.8 percent of the exchange through derivatives including a total return swap and contracts for difference, paying as much as 3.8 percent more than Nasdaq's 1,243 pence-a-share offer, according to regulatory filings. GLG Partners, which controls about 1.3 percent of LSE through derivatives, paid as much as 1,275 pence, the filings show.
Leveraged buyout firms raise investor concerns because they buy companies using a little of their own money and typically borrow to pay about two-thirds of the purchase price. The result is that bond prices and credit ratings fall and spreads widen.
Investors are unlikely to sell, or put, the bonds back to the borrower, Sharma said. ``You'll be able to make a substantial profit on the price, so a put is likely to be excluded,'' he said.
Ngọc:0903288248
By Sebastian Boyd
Nov. 24 (Bloomberg) -- A takeover of London Stock Exchange Plc is likely to benefit holders of its bonds because the securities reward investors for any deterioration in credit ratings, Barclays Capital says.
Nasdaq Stock Market Inc. and buyout firms have built equity stakes in the U.K. exchange. A takeover by either could cause LSE to lose its investment-grade credit ratings because Nasdaq is rated high-yield, high-risk and a private-equity deal would be financed by loading the company with debt.
When LSE sold bonds in July, Nasdaq had already said it wanted to buy the U.K. bourse and the borrower included terms to protect investors. Interest payments on the bonds will rise by 25 basis points every time Moody's Investors Service lowers its ranking of the company's credit worthiness. If the rating falls to non-investment grade, or junk, the coupon will increase by 1 percent.
``The bonds are really cheap,'' said Puneet Sharma, a credit strategist in London at Barclays Capital, which has a ``buy'' recommendation. ``These days the risk of a takeover leading to a downgrade is substantial, so people are pushing for protection on bonds.''
`Negative Pressure'
Moody's has indicated it may cut LSE's ratings after a successful takeover by Nasdaq, saying on Nov. 20 that ``negative ratings pressure'' would be likely.
The yield premium, or spread, investors demand to buy the LSE's 250 million pounds of 5.87 percent bonds due in July 2016, compared with similar-maturity U.K. government debt, is 119 basis points.
Moody's Investors Service rates the bonds Baa1, the eighth- highest of 10 possible investment grades. Should Moody's cut the rating the spread would rise by between 10 basis points and 30 basis points. The bonds would return between 200 and 300 basis points more than government debt, according to Barclays' calculations. A basis point is 0.01 percentage point.
Moody's gives Nasdaq a non-investment grade ranking of Ba3, five steps below the London exchange, and three steps below investment grade. Standard & Poor's rates it BB+.
High-yield, high-risk bonds are rated below Baa3 at Moody's and BBB- at S&P.
Were Moody's to cut its rating on LSE in line with its rating on Nasdaq, investors would earn between 300 and 450 basis points more than government bonds, Barclays said.
``If the coupon steps up, the spread will initially widen to keep the price the same, but will then come back in,'' Sharma said.
Stake Building
Nasdaq has amassed 29 percent of the U.K. exchange and said on Nov. 21 it will take its offer directly to LSE's shareholders after the British bourse rejected the bid. LSE, which refused to meet Nasdaq executives for talks, said the U.S. exchange's 2.7 billion-pound ($5.2 billion) offer is too low.
Hedge fund investors, led by corporate raider Samuel Heyman, are also buying stakes in LSE. Heyman, acquired 8.8 percent of the exchange through derivatives including a total return swap and contracts for difference, paying as much as 3.8 percent more than Nasdaq's 1,243 pence-a-share offer, according to regulatory filings. GLG Partners, which controls about 1.3 percent of LSE through derivatives, paid as much as 1,275 pence, the filings show.
Leveraged buyout firms raise investor concerns because they buy companies using a little of their own money and typically borrow to pay about two-thirds of the purchase price. The result is that bond prices and credit ratings fall and spreads widen.
Investors are unlikely to sell, or put, the bonds back to the borrower, Sharma said. ``You'll be able to make a substantial profit on the price, so a put is likely to be excluded,'' he said.
0909862752
European Bonds Log Weekly Gain; Euro Rise Stokes Growth Concern
Em My, q10 0909862752
By Gavin Finch
Nov. 24 (Bloomberg) -- European government bonds gained this week as concerns a surge in the euro will crimp economic growth and erode company profits drove investors out of stocks and into fixed income assets.
Two-year debt rose by the most in two weeks after the 12- nation currency breached $1.30 for the first time since April 2005, sending all 18 western European benchmark equity indexes except Iceland lower. A stronger euro makes exports from the region more expensive in the U.S., the destination for a fifth of European companies' sales.
The weakening dollar has ``definitely had the positive impact on the euro-region bond markets one would expect,'' said Kornelius Purps, a fixed-income strategist in Munich at UniCredit Markets and Investment Banking. ``A strong euro isn't good for Europe's exporters and we've seen a decline in European stock markets because of that.''
The yield on the benchmark two-year note, which is more sensitive to changes in rate expectations than longer-dated debt, fell 4 basis points in the week to 3.66 percent at 4:25 p.m. in London.
The price of the 3.5 percent security due September 2008 rose 0.07, or 70 euro cents per 1,000 euro ($1,294) face amount, to 99.72. Bond prices move inversely to yields.
The common currency has risen more than 10 percent this year versus the dollar as the European Central Bank has indicated that signs of robust growth will result in higher interest rates in the $10 trillion economy.
Accelerating Inflation
The Dow Jones Stoxx 600 Index slid 0.8 percent to 355.75 as of 4:22 p.m. in London. The Stoxx 50 dropped 0.9 percent and the Euro Stoxx 50, a measure for the 12 nations sharing the euro, fell 1 percent.
A report today showed German consumer-price inflation accelerated more than expected in November. Rising inflation erodes the value of fixed income bonds.
Prices in Europe's largest economy increased 1.5 percent from a year ago, the Federal Statistics office said. Economists surveyed by Bloomberg had forecast a rate of 1.4 percent.
ECB policy maker Klaus Liebscher warned the central bank would ``keep vigilant'' on inflation, Reuters reported today, citing an interview. The phrase has been used before to signal an imminent rate increase.
Several ECB council members have joined Liebscher in voicing their concern this week that inflation is too high, and indicating further rate increases may prove necessary to curb inflation in the region.
Business Confidence
A French government report today showed business confidence in the region's second-largest economy held near the strongest in five years. Insee, the Paris-based national statistics office, said its index of sentiment among manufacturers held at 107 after October's reading was revised to 107. The gauge reached 109 in April, the highest since March 2001.
Benchmark debt fell by the most in three weeks yesterday after an industry report showed business confidence in Germany unexpectedly rose in November to match a 15-year high, its seventh quarterly rise in a row.
The Munich-based Ifo institute's gauge of business sentiment gained to 106.8 from 105.3 in October, its seventh quarterly rise in a row. The median forecast in a Bloomberg survey of economists was for a drop to 105.2. The index matched the 15-year high reached in June.
Traders are betting on at least one more interest-rate increase from the ECB next year, futures prices show. The yield on the three-month Euribor futures contract for March fell 2 basis points to 3.83 percent today.
The contract settles to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's benchmark rate since 1999.
Em My, q10 0909862752
By Gavin Finch
Nov. 24 (Bloomberg) -- European government bonds gained this week as concerns a surge in the euro will crimp economic growth and erode company profits drove investors out of stocks and into fixed income assets.
Two-year debt rose by the most in two weeks after the 12- nation currency breached $1.30 for the first time since April 2005, sending all 18 western European benchmark equity indexes except Iceland lower. A stronger euro makes exports from the region more expensive in the U.S., the destination for a fifth of European companies' sales.
The weakening dollar has ``definitely had the positive impact on the euro-region bond markets one would expect,'' said Kornelius Purps, a fixed-income strategist in Munich at UniCredit Markets and Investment Banking. ``A strong euro isn't good for Europe's exporters and we've seen a decline in European stock markets because of that.''
The yield on the benchmark two-year note, which is more sensitive to changes in rate expectations than longer-dated debt, fell 4 basis points in the week to 3.66 percent at 4:25 p.m. in London.
The price of the 3.5 percent security due September 2008 rose 0.07, or 70 euro cents per 1,000 euro ($1,294) face amount, to 99.72. Bond prices move inversely to yields.
The common currency has risen more than 10 percent this year versus the dollar as the European Central Bank has indicated that signs of robust growth will result in higher interest rates in the $10 trillion economy.
Accelerating Inflation
The Dow Jones Stoxx 600 Index slid 0.8 percent to 355.75 as of 4:22 p.m. in London. The Stoxx 50 dropped 0.9 percent and the Euro Stoxx 50, a measure for the 12 nations sharing the euro, fell 1 percent.
A report today showed German consumer-price inflation accelerated more than expected in November. Rising inflation erodes the value of fixed income bonds.
Prices in Europe's largest economy increased 1.5 percent from a year ago, the Federal Statistics office said. Economists surveyed by Bloomberg had forecast a rate of 1.4 percent.
ECB policy maker Klaus Liebscher warned the central bank would ``keep vigilant'' on inflation, Reuters reported today, citing an interview. The phrase has been used before to signal an imminent rate increase.
Several ECB council members have joined Liebscher in voicing their concern this week that inflation is too high, and indicating further rate increases may prove necessary to curb inflation in the region.
Business Confidence
A French government report today showed business confidence in the region's second-largest economy held near the strongest in five years. Insee, the Paris-based national statistics office, said its index of sentiment among manufacturers held at 107 after October's reading was revised to 107. The gauge reached 109 in April, the highest since March 2001.
Benchmark debt fell by the most in three weeks yesterday after an industry report showed business confidence in Germany unexpectedly rose in November to match a 15-year high, its seventh quarterly rise in a row.
The Munich-based Ifo institute's gauge of business sentiment gained to 106.8 from 105.3 in October, its seventh quarterly rise in a row. The median forecast in a Bloomberg survey of economists was for a drop to 105.2. The index matched the 15-year high reached in June.
Traders are betting on at least one more interest-rate increase from the ECB next year, futures prices show. The yield on the three-month Euribor futures contract for March fell 2 basis points to 3.83 percent today.
The contract settles to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's benchmark rate since 1999.
0909893154
Treasuries Gain This Week as Fed Rate-Cut Speculation Increases
Lan Q1: 0909893154
By Annie Pinkert
Nov. 25 (Bloomberg) -- Treasuries gained this week, pushing yields on benchmark 10-year notes to a nine-month low, as speculation increased that slower economic growth will prompt the Federal Reserve to reduce interest rates next year.
``We have had somewhat weak data'' including weaker than- expected reports on consumer confidence that pushed yields to the lower end of the recent trading range, said Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc.
Ten-year note yields fell 5 basis points, or 0.05 percentage point, this week to 4.55 percent, according to bond broker Cantor Fitzgerald LP. They touched 4.525 percent yesterday, the lowest since Feb. 23. The price of the 4 5/8 percent note due in November 2016 rose 12/32, or $3.75 per $1,000 face amount, to 100 18/32. Yields move inversely to prices.
Economic reports this week showing increases in jobless claims as well as weaker-than-expected confidence among U.S. consumers prompted investors to raise their bets that the Fed will reduce interest rates next quarter. Interest-rate futures showed that odds of a rate cut in the central bank's target borrowing rate increased to 51 percent from 34 percent last week.
Housing Market
Markets in the U.S. and Japan were closed Nov. 23 for holidays. The Securities Industry and Financial Markets Association recommended a trading stop at 2 p.m. New York time yesterday.
``The environment looks relatively positive for Treasuries,'' said John Canavan, a fixed-income analyst at Stone & McCarthy Research in Princeton, New Jersey. ``The market will continue to buy on dips.''
Advisers to President George W. Bush on Nov. 21 reduced their outlook for economic growth next year to 2.9 percent from 3.6 percent in June, due to a weakening housing market.
A report next week will probably show existing home sales fell to an annualized rate of 6.15 million in October, the lowest since 2004, according to economists surveyed by Bloomberg News. Notes rose the most in almost three weeks on Nov. 17 after a government report showed housing starts fell to the lowest in more than six years last month.
With the ``economic outlook being sort of negative and bullish for the bond market, we see a continued weak picture which will lead investors to revise their Fed easing expectations, which could potentially cause yields to break through 4.53,'' said Bernd Wuebben, a senior bond market strategist at primary dealer BNP Paribas Securities Corp. in New York.
Fed Expectations
The Fed has held its target rate for inter-bank lending at 5.25 percent since June, following 17 straight quarter-percentage point increases since June 2004. Minutes released Nov. 21 from the Fed's October meeting showed all but one of the 12 regional bank heads voted not to boost the discount rate.
St. Louis Fed President William Poole said in a Nov. 22 interview that economic reports may indicate that inflation is ``leveling off or declining,'' and the central bank's target borrowing rate is ``just about right.''
Federal Reserve Governor Kevin Warsh said the prior day that inflation remains too high during a speech at the New York Stock Exchange. All Fed governors vote on interest-rate policy.
Treasuries and European bonds rose yesterday as the dollar weakened to its lowest in 19 months against the euro, raising concern the surge in the currency will slow economic growth in Europe and make exports from the region more expensive.
Consumer Confidence
The U.S. currency extended its losses after breaching $1.30 against the euro for the first time since April 2005, a level where traders had placed automatic orders to sell the dollar.
Initial jobless claims climbed by 12,000 to 321,000 in the past week, the Labor Department said on Nov. 22. Economists had forecast claims of 310,000, according to the median estimate in a Bloomberg News survey.
A separate report showed consumer confidence this month was weaker than analysts projected. The University of Michigan revised down its gauge of sentiment this month among Americans, to 92.1 from an initial estimate of 92.3. The median estimate of economists in a Bloomberg survey was for an adjustment up to 93.3. In October, the gauge reached a 15-month high of 93.6.
Lan Q1: 0909893154
By Annie Pinkert
Nov. 25 (Bloomberg) -- Treasuries gained this week, pushing yields on benchmark 10-year notes to a nine-month low, as speculation increased that slower economic growth will prompt the Federal Reserve to reduce interest rates next year.
``We have had somewhat weak data'' including weaker than- expected reports on consumer confidence that pushed yields to the lower end of the recent trading range, said Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc.
Ten-year note yields fell 5 basis points, or 0.05 percentage point, this week to 4.55 percent, according to bond broker Cantor Fitzgerald LP. They touched 4.525 percent yesterday, the lowest since Feb. 23. The price of the 4 5/8 percent note due in November 2016 rose 12/32, or $3.75 per $1,000 face amount, to 100 18/32. Yields move inversely to prices.
Economic reports this week showing increases in jobless claims as well as weaker-than-expected confidence among U.S. consumers prompted investors to raise their bets that the Fed will reduce interest rates next quarter. Interest-rate futures showed that odds of a rate cut in the central bank's target borrowing rate increased to 51 percent from 34 percent last week.
Housing Market
Markets in the U.S. and Japan were closed Nov. 23 for holidays. The Securities Industry and Financial Markets Association recommended a trading stop at 2 p.m. New York time yesterday.
``The environment looks relatively positive for Treasuries,'' said John Canavan, a fixed-income analyst at Stone & McCarthy Research in Princeton, New Jersey. ``The market will continue to buy on dips.''
Advisers to President George W. Bush on Nov. 21 reduced their outlook for economic growth next year to 2.9 percent from 3.6 percent in June, due to a weakening housing market.
A report next week will probably show existing home sales fell to an annualized rate of 6.15 million in October, the lowest since 2004, according to economists surveyed by Bloomberg News. Notes rose the most in almost three weeks on Nov. 17 after a government report showed housing starts fell to the lowest in more than six years last month.
With the ``economic outlook being sort of negative and bullish for the bond market, we see a continued weak picture which will lead investors to revise their Fed easing expectations, which could potentially cause yields to break through 4.53,'' said Bernd Wuebben, a senior bond market strategist at primary dealer BNP Paribas Securities Corp. in New York.
Fed Expectations
The Fed has held its target rate for inter-bank lending at 5.25 percent since June, following 17 straight quarter-percentage point increases since June 2004. Minutes released Nov. 21 from the Fed's October meeting showed all but one of the 12 regional bank heads voted not to boost the discount rate.
St. Louis Fed President William Poole said in a Nov. 22 interview that economic reports may indicate that inflation is ``leveling off or declining,'' and the central bank's target borrowing rate is ``just about right.''
Federal Reserve Governor Kevin Warsh said the prior day that inflation remains too high during a speech at the New York Stock Exchange. All Fed governors vote on interest-rate policy.
Treasuries and European bonds rose yesterday as the dollar weakened to its lowest in 19 months against the euro, raising concern the surge in the currency will slow economic growth in Europe and make exports from the region more expensive.
Consumer Confidence
The U.S. currency extended its losses after breaching $1.30 against the euro for the first time since April 2005, a level where traders had placed automatic orders to sell the dollar.
Initial jobless claims climbed by 12,000 to 321,000 in the past week, the Labor Department said on Nov. 22. Economists had forecast claims of 310,000, according to the median estimate in a Bloomberg News survey.
A separate report showed consumer confidence this month was weaker than analysts projected. The University of Michigan revised down its gauge of sentiment this month among Americans, to 92.1 from an initial estimate of 92.3. The median estimate of economists in a Bloomberg survey was for an adjustment up to 93.3. In October, the gauge reached a 15-month high of 93.6.
0907850729
Canada to Use Revenue Windfall to Eliminate Net Debt (Update8)
0907850729 Ngọc
By Theophilos Argitis
Nov. 24 (Bloomberg) -- The Canadian government will seek to become the first Group of Seven nation to bring debt levels in line with assets, as it benefits from revenue windfalls stemming from the largest oil reserves outside of the Middle East.
Finance Minister Jim Flaherty moved the country in that direction by pledging yesterday to buy back C$3 billion ($2.63 billion) in bonds each year, as part of a plan to eliminate the country's ``net debt'' by 2021. He also forecast combined budget surpluses of $50.1 billion over six years, according to a fiscal update released in Ottawa late yesterday.
Flaherty's plan builds on a 10-year effort to improve Canada's competitiveness and prepare for an aging population by balancing its budget and cutting debt. Canada was the only Group of Seven country to post a budget surplus last year as the economy benefited from higher commodity prices and record corporate profits.
``Whatever bragging rights that brings, the fact is the lower debt burden you have, the more maneuverability you have down the road,'' said Tim O'Neill, president of O'Neill Strategic Economics and former chief economist at the Bank of Montreal.
Canada's bonds and the currency rose, with the yield on the 10-year note falling to 3.97 percent. The price of the 4 percent security maturing in June 2016 rose to C$100.24. The dollar rose 0.55 percent to 88.06 U.S. cents, the biggest gain in four weeks.
Canada would join countries including Australia, Norway and Finland that have eliminated their net debt, based on figures from the Organization for Economic Cooperation and Development. The Paris-based economic group defines net debt as total obligations of all levels of government, minus assets such as government pension funds.
Nine Surpluses
Canada has posted nine straight years of budget surpluses, allowing it to reduce debt by C$80 billion since 1997. The government estimates the surplus at C$7.2 billion in the year ending in March.
Canada's net debt has fallen to 30 percent of gross domestic product, less than half the rate a decade ago, and well below the average of 52.7 percent for the G-7 countries.
The country's falling debt level has bolstered investor confidence and helped fuel a 38 percent gain in the Canadian dollar over the past four years, the fifth-best performance against the U.S. dollar over the period. The currency reached a 28-year high on May 31.
Net Debt
The surpluses and rising output from Alberta's oil sands allow Flaherty to set out for the first time a target to eliminate the net debt. Flaherty, whose Conservative Party government has been in power since February, said the net debt would be about zero in 15 years because the assets of the Canada and Quebec pension plans will rise fourfold to about C$427 billion.
That will almost match the combined federal and provincial government debts, which are currently about C$525 billion. The federal government debt alone would decline to about C$280 billion from C$353 billion, he said, assuming the government continues to pay back C$3 billion each year. The target also assumes the provincial governments balance their budgets.
Flaherty was accused by opposition lawmakers of using an obscure net debt measurement. The reduction in net debt stems from an expected increase in pension plan assets, not an acceleration of debt repurchases, said John McCallum, the Liberal Party's finance critic.
``It's a pure gimmick,'' McCallum said. ``It's absolutely misleading to talk about eliminating the debt.''
Dominion Bond Rating Service said today that while the plan is ``optimistic'', it will likely result in further credit improvement.
Bonds Remain
The debt reduction may not have a significant impact on the bond market because the stock of government bonds won't be eliminated, economists said.
``While it was a grand announcement of an objective that perhaps all governments should work toward, it doesn't change anything in terms of the way the government is going to be behaving,'' said Ted Carmichael, an economist with JP Morgan Securities in Toronto. ``The financial markets shouldn't have any reaction at all.''
And some economists said the money reserved for debt payments could have been better used for investments or larger reductions in taxes.
``I am really surprised to see the heavy emphasis on debt elimination,'' said Todd Hirsch, chief economist of the Canada West Foundation, a public policy research group based in Calgary. ``When you're doing it at the expense of every other priority, it's akin to a family taking out a mortgage and not feeding the children until the mortgage is paid off.''
Productivity
Flaherty said he would seek in coming years to boost productivity by reducing taxes on savings, including capital gains. Canada will seek to have the lowest tax rates on new investments in the G-7, he said. He didn't say how much the measures would cost. And any unforeseen surpluses in coming years would be used to reduce personal income taxes, he said.
The government plans to put interest savings toward reducing income taxes, starting with C$800 million worth of tax cuts in next year's budget, and rising to C$1.4 billion in 2011, Flaherty said.
Flaherty also pledged to start slowing spending growth to below the pace of economic expansion. Total expenses are forecast to grow 3.9 percent next year, compared with 6.3 percent for the current fiscal year.
0907850729 Ngọc
By Theophilos Argitis
Nov. 24 (Bloomberg) -- The Canadian government will seek to become the first Group of Seven nation to bring debt levels in line with assets, as it benefits from revenue windfalls stemming from the largest oil reserves outside of the Middle East.
Finance Minister Jim Flaherty moved the country in that direction by pledging yesterday to buy back C$3 billion ($2.63 billion) in bonds each year, as part of a plan to eliminate the country's ``net debt'' by 2021. He also forecast combined budget surpluses of $50.1 billion over six years, according to a fiscal update released in Ottawa late yesterday.
Flaherty's plan builds on a 10-year effort to improve Canada's competitiveness and prepare for an aging population by balancing its budget and cutting debt. Canada was the only Group of Seven country to post a budget surplus last year as the economy benefited from higher commodity prices and record corporate profits.
``Whatever bragging rights that brings, the fact is the lower debt burden you have, the more maneuverability you have down the road,'' said Tim O'Neill, president of O'Neill Strategic Economics and former chief economist at the Bank of Montreal.
Canada's bonds and the currency rose, with the yield on the 10-year note falling to 3.97 percent. The price of the 4 percent security maturing in June 2016 rose to C$100.24. The dollar rose 0.55 percent to 88.06 U.S. cents, the biggest gain in four weeks.
Canada would join countries including Australia, Norway and Finland that have eliminated their net debt, based on figures from the Organization for Economic Cooperation and Development. The Paris-based economic group defines net debt as total obligations of all levels of government, minus assets such as government pension funds.
Nine Surpluses
Canada has posted nine straight years of budget surpluses, allowing it to reduce debt by C$80 billion since 1997. The government estimates the surplus at C$7.2 billion in the year ending in March.
Canada's net debt has fallen to 30 percent of gross domestic product, less than half the rate a decade ago, and well below the average of 52.7 percent for the G-7 countries.
The country's falling debt level has bolstered investor confidence and helped fuel a 38 percent gain in the Canadian dollar over the past four years, the fifth-best performance against the U.S. dollar over the period. The currency reached a 28-year high on May 31.
Net Debt
The surpluses and rising output from Alberta's oil sands allow Flaherty to set out for the first time a target to eliminate the net debt. Flaherty, whose Conservative Party government has been in power since February, said the net debt would be about zero in 15 years because the assets of the Canada and Quebec pension plans will rise fourfold to about C$427 billion.
That will almost match the combined federal and provincial government debts, which are currently about C$525 billion. The federal government debt alone would decline to about C$280 billion from C$353 billion, he said, assuming the government continues to pay back C$3 billion each year. The target also assumes the provincial governments balance their budgets.
Flaherty was accused by opposition lawmakers of using an obscure net debt measurement. The reduction in net debt stems from an expected increase in pension plan assets, not an acceleration of debt repurchases, said John McCallum, the Liberal Party's finance critic.
``It's a pure gimmick,'' McCallum said. ``It's absolutely misleading to talk about eliminating the debt.''
Dominion Bond Rating Service said today that while the plan is ``optimistic'', it will likely result in further credit improvement.
Bonds Remain
The debt reduction may not have a significant impact on the bond market because the stock of government bonds won't be eliminated, economists said.
``While it was a grand announcement of an objective that perhaps all governments should work toward, it doesn't change anything in terms of the way the government is going to be behaving,'' said Ted Carmichael, an economist with JP Morgan Securities in Toronto. ``The financial markets shouldn't have any reaction at all.''
And some economists said the money reserved for debt payments could have been better used for investments or larger reductions in taxes.
``I am really surprised to see the heavy emphasis on debt elimination,'' said Todd Hirsch, chief economist of the Canada West Foundation, a public policy research group based in Calgary. ``When you're doing it at the expense of every other priority, it's akin to a family taking out a mortgage and not feeding the children until the mortgage is paid off.''
Productivity
Flaherty said he would seek in coming years to boost productivity by reducing taxes on savings, including capital gains. Canada will seek to have the lowest tax rates on new investments in the G-7, he said. He didn't say how much the measures would cost. And any unforeseen surpluses in coming years would be used to reduce personal income taxes, he said.
The government plans to put interest savings toward reducing income taxes, starting with C$800 million worth of tax cuts in next year's budget, and rising to C$1.4 billion in 2011, Flaherty said.
Flaherty also pledged to start slowing spending growth to below the pace of economic expansion. Total expenses are forecast to grow 3.9 percent next year, compared with 6.3 percent for the current fiscal year.
0907260463
Massachusetts Trust Sells Its First Inflation-Linked Bonds
0907260463 tên Mỹ SG
By Jeremy R. Cooke
Nov. 24 (Bloomberg) -- The Massachusetts Water Pollution Abatement Trust sold $828 million of triple-A-rated bonds, including the issuer's first-ever inflation-linked securities, in this week's largest borrowing among U.S. states and localities.
The trust, which helps local governments finance clean-water and drinking-water projects, sold $77.3 million of bonds maturing in 2022 and 2023 that will pay investors interest at a variable rate based on changes in the U.S. consumer price index, or CPI.
The sale brings the total amount of inflation-linked municipal bonds sold in 2006 to more than $750 million, according to data compiled by Bloomberg. That's almost as much as the total amount of such bonds sold from 1997, when this kind of variable- rate debt debuted in the tax-exempt market, through 2005.
``We ended up pulling from the fixed-rate deal two maturities and selling those as CPI bonds instead,'' said Scott Jordan, executive director of the Massachusetts trust.
In connection with its inflation-linked bonds, the trust entered into an interest-rate swap agreement with Bear Stearns Cos., the managing underwriter on the overall sale, in which 22 other investment banks also participated.
A division of New York-based Bear Stearns, acting as the counterparty, will pay the water trust a variable rate matching what the bond investors will get. The trust will in turn pay the bank a fixed rate that's 12 basis points, or 0.12 percentage point, lower than comparable bonds, Jordan said.
``To us, they look and feel and act just like the bonds they replaced, except they're 12 basis points lower than the fixed- rate bonds we would've sold in those maturities,'' he added. ``We saved approximately $1 million, present value, over the life of the deal by using this structure rather than the fixed rate.''
Rate swaps are a kind of derivative, or a contract whose value is derived from tradable securities or linked to events such as interest-rate changes or the weather.
Dallas-based First Southwest Co. acted as the trust's adviser on the swap.
``First Southwest made the pricing fully transparent,'' Jordan said. ``It was done with tax counsel and bond counsel involved every step of the way. I'm comfortable and confident that we got a good deal.''
The trust's variable-rate bonds offer investors a rate equal to the consumer price index, a common measure of inflation, plus 99 basis points. The coupon will change each February and August, based on the year-over-year change in the index.
Officials at the Massachusetts water trust, which is run out of the state treasurer's office in Boston, decided to sell CPI bonds after the commonwealth itself sold $100 million of such securities during its general obligation sale earlier this month.
``We used their general structure,'' Jordan said.
Massachusetts' rates ranged from the consumer price index plus 86 basis points on bonds maturing in 2017 to the index plus 89 basis points on those due in 2020.
Eight other municipal borrowers this year, including the University of Dayton in Ohio and the New York Yankees baseball team, have linked part of their bond sales to inflation.
The Massachusetts Water Pollution Abatement Trust's CPI bonds were part of a $408 million portion of non-callable bonds that will be used to refinance existing higher-interest debt.
Demand for those so-called refunding bonds outstripped the total amount available, allowing the underwriters to raise prices and lower yields by as much as 3 basis points on some maturities.
The rest of the deal featured bonds to raise new money for 70 cities, towns and local authorities in the state that are building or improving water-quality projects.
The new-money piece offered a top yield of 4.45 percent on bonds due in 2036, which can be called, or bought back, by the trust beginning in 2016. That's 10 basis points more than where the Municipal Market Advisors' Consensus index of what top-rated issuers pay to borrow for 30 years stood earlier this week.
Orders from individual investors were equal to about 15 percent of the water trust's overall offering.
``We had great market focus. We were the only deal on the Street this week'' of any substantial size, Jordan said.
U.S. municipal issuers plan to sell $12 billion of fixed- rate bonds next week, after a holiday-shortened week of issuance that saw less than $3 billion of new sales, according to data compiled by Bloomberg.
The U.S. bond markets were closed yesterday and are to close early today in observance of the Thanksgiving holiday weekend
0907260463 tên Mỹ SG
By Jeremy R. Cooke
Nov. 24 (Bloomberg) -- The Massachusetts Water Pollution Abatement Trust sold $828 million of triple-A-rated bonds, including the issuer's first-ever inflation-linked securities, in this week's largest borrowing among U.S. states and localities.
The trust, which helps local governments finance clean-water and drinking-water projects, sold $77.3 million of bonds maturing in 2022 and 2023 that will pay investors interest at a variable rate based on changes in the U.S. consumer price index, or CPI.
The sale brings the total amount of inflation-linked municipal bonds sold in 2006 to more than $750 million, according to data compiled by Bloomberg. That's almost as much as the total amount of such bonds sold from 1997, when this kind of variable- rate debt debuted in the tax-exempt market, through 2005.
``We ended up pulling from the fixed-rate deal two maturities and selling those as CPI bonds instead,'' said Scott Jordan, executive director of the Massachusetts trust.
In connection with its inflation-linked bonds, the trust entered into an interest-rate swap agreement with Bear Stearns Cos., the managing underwriter on the overall sale, in which 22 other investment banks also participated.
A division of New York-based Bear Stearns, acting as the counterparty, will pay the water trust a variable rate matching what the bond investors will get. The trust will in turn pay the bank a fixed rate that's 12 basis points, or 0.12 percentage point, lower than comparable bonds, Jordan said.
``To us, they look and feel and act just like the bonds they replaced, except they're 12 basis points lower than the fixed- rate bonds we would've sold in those maturities,'' he added. ``We saved approximately $1 million, present value, over the life of the deal by using this structure rather than the fixed rate.''
Rate swaps are a kind of derivative, or a contract whose value is derived from tradable securities or linked to events such as interest-rate changes or the weather.
Dallas-based First Southwest Co. acted as the trust's adviser on the swap.
``First Southwest made the pricing fully transparent,'' Jordan said. ``It was done with tax counsel and bond counsel involved every step of the way. I'm comfortable and confident that we got a good deal.''
The trust's variable-rate bonds offer investors a rate equal to the consumer price index, a common measure of inflation, plus 99 basis points. The coupon will change each February and August, based on the year-over-year change in the index.
Officials at the Massachusetts water trust, which is run out of the state treasurer's office in Boston, decided to sell CPI bonds after the commonwealth itself sold $100 million of such securities during its general obligation sale earlier this month.
``We used their general structure,'' Jordan said.
Massachusetts' rates ranged from the consumer price index plus 86 basis points on bonds maturing in 2017 to the index plus 89 basis points on those due in 2020.
Eight other municipal borrowers this year, including the University of Dayton in Ohio and the New York Yankees baseball team, have linked part of their bond sales to inflation.
The Massachusetts Water Pollution Abatement Trust's CPI bonds were part of a $408 million portion of non-callable bonds that will be used to refinance existing higher-interest debt.
Demand for those so-called refunding bonds outstripped the total amount available, allowing the underwriters to raise prices and lower yields by as much as 3 basis points on some maturities.
The rest of the deal featured bonds to raise new money for 70 cities, towns and local authorities in the state that are building or improving water-quality projects.
The new-money piece offered a top yield of 4.45 percent on bonds due in 2036, which can be called, or bought back, by the trust beginning in 2016. That's 10 basis points more than where the Municipal Market Advisors' Consensus index of what top-rated issuers pay to borrow for 30 years stood earlier this week.
Orders from individual investors were equal to about 15 percent of the water trust's overall offering.
``We had great market focus. We were the only deal on the Street this week'' of any substantial size, Jordan said.
U.S. municipal issuers plan to sell $12 billion of fixed- rate bonds next week, after a holiday-shortened week of issuance that saw less than $3 billion of new sales, according to data compiled by Bloomberg.
The U.S. bond markets were closed yesterday and are to close early today in observance of the Thanksgiving holiday weekend
0908321220
Ecuador Bonds Fall on Concern Correa to Win Presidential Vote
Phung "0908321220
By Helen Murphy
Nov. 24 (Bloomberg) -- Ecuador's benchmark bonds fell to a six-week low on concern that presidential candidate Rafael Correa, who has said he may default on the nation's debt, will win this weekend's election.
Correa, 43, may have moved ahead of banana magnate Alvaro Noboa after finishing second to him in the Oct. 15 first-round vote, said Gianfranco Bertozzi, a Latin America economist at Lehman Brothers Holdings Inc. in New York.
``Correa now has momentum and he seems to have a slight advantage in the polls,'' Bertozzi said. ``Maybe the best that Noboa can hope for is a very slim victory.''
The yield on Ecuador's dollar-denominated bond due 2012 jumped 33 basis points, or 0.33 percentage point, today to 11.88 percent at 4:10 p.m. in New York, leaving it up 84 basis points since July 28, according to JPMorgan Chase & Co.
The bond's price, which moves inversely to the yield, fell 1.4 cents on the dollar to 100.5 cents today. That's the lowest price since Oct. 13, the last trading day before the first-round vote. The average yield spread on Ecuadorean dollar bonds over U.S. Treasuries has widened to 5.35 percentage points from 4.93 points on Nov. 6, according to JPMorgan's benchmark emerging- market index.
Demand for Ecuadorean bonds has sagged as investors have worried that Correa, who served a four-month stint as finance minister last year, will implement policies that will stunt economic growth and spark social conflict. The International Monetary Fund forecasts Ecuador's economy will expand 4.4 percent this year, buoyed by the rally in oil, the country's biggest export, after growing 3.9 percent in 2005.
`Extremely Tight'
In the first-round vote last month, Noboa, who has promised to create jobs and lure investment, took 26.8 percent while Correa, an ally of Venezuelan President Hugo Chavez, took 22.8 percent. The run-off vote is scheduled for Nov. 26.
Correa, who studied economics at the University of Illinois at Urbana-Champaign, has called for a constituent assembly to write a new constitution. He said he would scrap free trade talks with the U.S. and that he wouldn't rule out an Argentine- style default on Ecuador's $11 billion of foreign debt. Argentina halted payment on $95 billion of debt in 2001.
Noboa, a 55-year-old magnate whose holdings include banks and banana and coffee plantations, has pledged to sell bonds to build 300,000 low-cost homes a year and create 3 million jobs in the South American country. Noboa, who carries a bible on the campaign trail, fell to his knees at a rally this week and begged God to help him win.
``Polls are not reliable but it's pretty close,'' said Rodrigo Da Fonseca, an economist with BlueBay Asset Management, which manages about $1.6 billion of emerging-market assets in London. ``I still expect Noboa to win but the margin will be extremely tight.''
0906413652
Saudi Arabia's Tadawul and Kuwait's Index Decline: Arab Stocks
Mỹ Vân - 0906413652
By Marc Wolfensberger
Nov. 25 (Bloomberg) -- Stocks in Saudi Arabia fell, paced by Samba Financial Group, Saudi Arabia's largest publicly traded bank, and Banque Saudi Fransi. Shares in Kuwait fell for a second day.
Saudi Arabia's Tadawul All Share Index fell 0.2 percent to 8,687.02 at 1:12 p.m. in Riyadh.
The measure added 3.6 percent last week as investors took advantage of the low valuation of Saudi Arabian stocks following four weeks of index decline. The Tadawul All Share Index has lost more than 52 percent of its value since the beginning of the year. It's the second-worst performance among indexes tracked worldwide by Bloomberg this year. Only Dubai's gauge, in the United Arab Emirates, has tumbled further.
``We expect that the market will stabilize in the coming period until year-end,'' Saudi Arabia's Bakheet Financial Advisors wrote in its weekly report, published Nov. 22.
Shares of Samba Financial fell 1.3 percent to 151 riyals after rising for six consecutive trading days. Saudi Arabia's largest publicly traded bank said on Nov. 20 it plans to invest 6 billion rupees ($98.5 million) in Crescent Commercial Bank of Pakistan, seeking to tap accelerating economic growth in the South Asian country.
Banque Saudi Fransi, Saudi Arabia's fourth-biggest bank by market value, fell 2.7 percent to 135.75 riyals.
``Investors will keep eyeing'' the upcoming annual results of large companies, Bakheet wrote in its outlook for the week.
The Kuwait Stock Exchange Index declined for a second day, falling 101.80, or 1 percent, to 9,886.7, according to the exchange's Web site. The measure has gained 5.5 percent this month.
Exchanges in Saudi Arabia and Kuwait are the only Arab markets open on Saturdays that are followed by Bloomberg. Exchanges in the United Arab Emirates, Qatar, Bahrain, Oman, Egypt, Morocco, Tunisia, Jordan, Lebanon, and the Palestinian territories are shut today
0908460692
U.K. FTSE 100 Drops After Pound Soars; HSBC, Kingfisher Slide
Thanh - 0908460692
By Poppy Trowbridge and Jason Carey
Nov. 24 (Bloomberg) -- The U.K. FTSE 100 Index declined after the pound surged to its highest in almost two years against the dollar.
``All equity markets are responding to the currency movements,'' said Grahame Exton who helps manage $5 billion at Tilney Investment Management in Liverpool. ``Generally, a weak dollar does put more pressure on central banks. A weaker dollar does have an inflationary impact.''
HSBC Holdings Plc, Europe's biggest bank by market value, led a retreat by banks. Kingfisher Plc fell after Deutsche Bank AG lowered its recommendation on the shares. Marks & Spencer Group Plc declined following a report U.K. retail sales may barely grow over the Christmas holiday.
The FTSE 100 lost 17.9, or 0.3 percent, to 6122.10 at the close in London, bringing its drop to 1.1 percent this week. The FTSE All-Share Index fell 11.74, or 0.4 percent, to 3148.68. Ireland's ISEQ Index slid 26.8, or 0.3 percent, to 8872.70.
HSBC declined 8 pence, or 0.8 percent, to 968. Barclays Plc, the U.K.'s third-biggest bank by market value, dropped 7.5, or 1.1 percent, to 692 pence. HBOS Plc, Britain's biggest mortgage lender, declined 9, or 0.8 percent, to 1060 pence.
The pound surged to its highest in almost two years against the dollar on speculation the Bank of England will continue lifting interest rates to curb inflation. Against the dollar, the pound was at $1.9308 at 4:46 p.m. in London from $1.9165 late yesterday and $1.8946 a week ago. It earlier touched $1.9351, the highest since Dec. 31, 2004.
`Currency Movements'
``Currency movements appear to be underlying the current market decline,'' said Keith Bowman, a U.K. equity analyst at Hargreaves Lansdown in Bristol, England. ``There is not much to concentrate on in terms of earnings. The market is looking to other factors.''
Minutes from the Bank of England's latest rate-setting meeting showed the nine-member committee, led by Governor Mervyn King, voted 7-2 in favor of raising the key rate by a quarter point to a five-year high of 5 percent.
Lloyds TSB Group Plc, the U.K.'s fifth-largest bank by market value, dropped 7, or 1.3 percent, to 554.5 pence after Morgan Stanley downgraded the shares to ``equal-weight'' from ``overweight.'' The brokerage set a price estimate of 575 pence.
Kingfisher slipped 6.75 pence, or 2.3 percent, to 249.75. Deutsche Bank lowered its recommendation on the stock to ``sell'' from ``hold.'' The bank cited lower expected profits from Kingfisher's B&Q chain of home improvement stores.
``B&Q's profits are not likely to rebound as fast as the market expects,'' Deutsche Bank analyst Rod Whitehead wrote in a note. ``The shares are ahead of events.''
``With evidence pointing to a more cautious consumer, there is every possibility that consumers will start to reign in their spending even before Christmas,'' Richard Perks, Mintel's director of retail research, wrote in the report.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Adept Telecom Plc (ADT LN) slumped 33.5 pence, or 33 percent, to 69.5. The U.K. telecommunications provider whose shares have halved in the past six months said its fiscal-year results will be below market expectations because of ``increased competition.''
Eckoh Technologies Plc (ECK LN) slipped 1 pence, or 8.2 percent, to 11.25. The U.K. maker of speech-recognition software said takeover talks with an unidentified third party have been terminated.
Inion Oy (IIN LN) dropped, slipping 1 pence, or 3.9 percent, to 24.75. The Finnish maker of biodegradable medical implants whose shares trade in London said it won't meet sales targets for 2006.
Kiln Plc (KIN LN), a Lloyd's of London insurer, climbed 1.25 pence, or 1.2 percent, to 106. The company said the performance of its insurance pools from 2005 is ``very stable'' after last year's record storm losses.
Monstermob Group Plc (MOB LN) slid 5 pence, or 10 percent, to 42.75. Yesterday, the U.K. provider of cell phone ring tones and logos said it's ``unlikely'' to receive a takeover offer.
Regency Inns Plc (REG LN) dropped 1.25 pence, or 1.4 percent, to 87.5. The bar, comedy club and restaurant company said the late-night entertainment market continues to be ``highly competitive.'' The company also plans to sell its remaining 27 Old Orleans restaurants.
Robinson Plc (RBN LN), a maker of packaging for clients including Nestle SA, retreated 12.5 pence, or 14 percent, to 75 after the company said contracts with Goldenfry Foods Ltd. won't be renewed.
Trifast Plc (TRI LN) rose 3 pence, or 4.5 percent, to 70. The U.K. maker of industrial fasteners said fiscal first-half profit surged 86 percent after the company passed increased metals costs to clients and cut jobs to save money following an acquisition.
Thanh - 0908460692
By Poppy Trowbridge and Jason Carey
Nov. 24 (Bloomberg) -- The U.K. FTSE 100 Index declined after the pound surged to its highest in almost two years against the dollar.
``All equity markets are responding to the currency movements,'' said Grahame Exton who helps manage $5 billion at Tilney Investment Management in Liverpool. ``Generally, a weak dollar does put more pressure on central banks. A weaker dollar does have an inflationary impact.''
HSBC Holdings Plc, Europe's biggest bank by market value, led a retreat by banks. Kingfisher Plc fell after Deutsche Bank AG lowered its recommendation on the shares. Marks & Spencer Group Plc declined following a report U.K. retail sales may barely grow over the Christmas holiday.
The FTSE 100 lost 17.9, or 0.3 percent, to 6122.10 at the close in London, bringing its drop to 1.1 percent this week. The FTSE All-Share Index fell 11.74, or 0.4 percent, to 3148.68. Ireland's ISEQ Index slid 26.8, or 0.3 percent, to 8872.70.
HSBC declined 8 pence, or 0.8 percent, to 968. Barclays Plc, the U.K.'s third-biggest bank by market value, dropped 7.5, or 1.1 percent, to 692 pence. HBOS Plc, Britain's biggest mortgage lender, declined 9, or 0.8 percent, to 1060 pence.
The pound surged to its highest in almost two years against the dollar on speculation the Bank of England will continue lifting interest rates to curb inflation. Against the dollar, the pound was at $1.9308 at 4:46 p.m. in London from $1.9165 late yesterday and $1.8946 a week ago. It earlier touched $1.9351, the highest since Dec. 31, 2004.
`Currency Movements'
``Currency movements appear to be underlying the current market decline,'' said Keith Bowman, a U.K. equity analyst at Hargreaves Lansdown in Bristol, England. ``There is not much to concentrate on in terms of earnings. The market is looking to other factors.''
Minutes from the Bank of England's latest rate-setting meeting showed the nine-member committee, led by Governor Mervyn King, voted 7-2 in favor of raising the key rate by a quarter point to a five-year high of 5 percent.
Lloyds TSB Group Plc, the U.K.'s fifth-largest bank by market value, dropped 7, or 1.3 percent, to 554.5 pence after Morgan Stanley downgraded the shares to ``equal-weight'' from ``overweight.'' The brokerage set a price estimate of 575 pence.
Kingfisher slipped 6.75 pence, or 2.3 percent, to 249.75. Deutsche Bank lowered its recommendation on the stock to ``sell'' from ``hold.'' The bank cited lower expected profits from Kingfisher's B&Q chain of home improvement stores.
``B&Q's profits are not likely to rebound as fast as the market expects,'' Deutsche Bank analyst Rod Whitehead wrote in a note. ``The shares are ahead of events.''
``With evidence pointing to a more cautious consumer, there is every possibility that consumers will start to reign in their spending even before Christmas,'' Richard Perks, Mintel's director of retail research, wrote in the report.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Adept Telecom Plc (ADT LN) slumped 33.5 pence, or 33 percent, to 69.5. The U.K. telecommunications provider whose shares have halved in the past six months said its fiscal-year results will be below market expectations because of ``increased competition.''
Eckoh Technologies Plc (ECK LN) slipped 1 pence, or 8.2 percent, to 11.25. The U.K. maker of speech-recognition software said takeover talks with an unidentified third party have been terminated.
Inion Oy (IIN LN) dropped, slipping 1 pence, or 3.9 percent, to 24.75. The Finnish maker of biodegradable medical implants whose shares trade in London said it won't meet sales targets for 2006.
Kiln Plc (KIN LN), a Lloyd's of London insurer, climbed 1.25 pence, or 1.2 percent, to 106. The company said the performance of its insurance pools from 2005 is ``very stable'' after last year's record storm losses.
Monstermob Group Plc (MOB LN) slid 5 pence, or 10 percent, to 42.75. Yesterday, the U.K. provider of cell phone ring tones and logos said it's ``unlikely'' to receive a takeover offer.
Regency Inns Plc (REG LN) dropped 1.25 pence, or 1.4 percent, to 87.5. The bar, comedy club and restaurant company said the late-night entertainment market continues to be ``highly competitive.'' The company also plans to sell its remaining 27 Old Orleans restaurants.
Robinson Plc (RBN LN), a maker of packaging for clients including Nestle SA, retreated 12.5 pence, or 14 percent, to 75 after the company said contracts with Goldenfry Foods Ltd. won't be renewed.
Trifast Plc (TRI LN) rose 3 pence, or 4.5 percent, to 70. The U.K. maker of industrial fasteners said fiscal first-half profit surged 86 percent after the company passed increased metals costs to clients and cut jobs to save money following an acquisition.
0907741949
European Stocks Slide as Dollar Falls; Daimler, Aegon, BMW Drop
Thảo - 0907741949
By Alexis Xydias
Nov. 24 (Bloomberg) -- European stocks declined to a three- week low after the dollar slumped against the euro. DaimlerChrysler AG and Aegon NV led a slide by companies that rely most on the U.S. for sales.
``The weak dollar is poison for European exporters and the region's economy,'' said Guenther Gerstenberger, a fund manager at Oberursel, Germany-based PEH Wertpapier AG, which oversees about $2.5 billion.
The Dow Jones Stoxx 600 Index slid 0.8 percent to 355.98 in London, its lowest since Nov. 3 and the second weekly decline. The Stoxx 50 and the Euro Stoxx 50, a measure for the 12 nations sharing the euro, both lost 0.9 percent.
European companies get a fifth of their sales from the U.S. and the dollar's slide to a 19-month low of $1.3082 per euro means there's less profit for exporters to take home. The Stoxx 600 this week touched a 5 1/2-year high as earnings growth powered a rally in equities.
``Should the euro rise beyond $1.35, it will get dangerous,'' said PEH Wertpapier's Gerstenberger.
The pound surged to its highest in almost two years against the dollar while the Swedish krona and Swiss franc also rose.
National benchmarks fell in all 18 western European markets except Iceland. The U.K.'s FTSE 100 Index lost 0.3 percent. France's CAC 40 benchmark dropped 0.7 percent and Germany's DAX slid 1 percent.
Party Over?
DaimlerChrysler, the German carmaker that gets about 45 percent of sales in the U.S., fell 1.8 percent to 45.54 euros. Aegon, the second-largest Dutch insurer, fell 2 percent to 14.11 euros. About half of its revenue comes from the Americas.
Bayerische Motoren Werke AG, the world's largest maker of luxury cars, slumped 2.7 percent to 42.81 euros. North America accounts for a quarter of BMW's sales.
``The rising euro is going to hurt sentiment in Europe,'' said Gerhard Grebe, chief investment strategist at Bank Julius Baer & Co. in Frankfurt. Should the euro go to $1.35, the equity market's ``year-end party will be over shortly.''
Volvo AB, Europe's second-largest truckmaker, fell 1.2 percent to 454.5 kronor. Western European heavy-truck sales slid 1.7 percent in October as customers slowed purchases following the introduction of regulations making vehicles more costly.
Kingfisher Plc, the region's biggest home-improvement retailer, lost 2.6 percent to 249.75 pence. Deutsche Bank AG lowered the stock to ``sell'' from ``hold,'' saying there will be ``more pain before the gain'' as earnings growth falters.
Takeover Talks
Air France-KLM Group, Europe's largest airline, fell 1.1 percent to 29.82 euros, extending yesterday's 6.5 percent drop. Analysts at ABN Amro Holding NV cut the shares to ``sell'' from ``hold'' after the airline said it's revived takeover talks with unprofitable Alitalia SpA.
Technip SA, Europe's second-largest oil-services company, rose 7.6 percent to 55.7 euros, the biggest gain on the Stoxx 600. Eni SpA, Europe's fourth-largest oil company, plans to make an offer to buy the France company, La Tribune said, without citing anyone. The offer may come at the start of next week, the newspaper said.
Eni Chairman Roberto Poli declined to comment. Eni fell 0.4 percent to 24.66 euros.
RWE AG, Germany's second-largest utility, jumped 3.3 percent to 86.54 euros. The Rheinische Post reported the company may be a takeover target, without identifying possible bidders.
The newspaper said RWE managers are ``unsettled'' by large purchases of the company's stock and held a special meeting to discuss the situation. The report didn't say where it got the information.
Boost Payout
RWE spokeswoman Barbara Woydtke said no special meeting took place and declined to comment further.
Scania AB rose 2.2 percent to 475 kronor. Sweden's second- largest truckmaker again rejected MAN AG's hostile takeover bid as too low and said it may boost its payout to shareholders to 17 billion kronor ($2.46 billion) through next year to fend off MAN. MAN shares fell 2.2 percent to 69.94 euros.
Erste Bank AG, Austria's second-biggest lender, fell 2.4 percent to 54.22 euros. Morgan Stanley was selling shares worth about 100 million euros ($131 million) in Erste Bank, based on yesterday's closing price, said a person with knowledge of the transaction.
The U.S. brokerage offered 1.8 million shares in the Vienna- based bank, said the person, who asked to remain unidentified. The person declined to give a price for the offer.
Renova Energy Plc jumped 7 percent to 230 pence. The U.K. company that makes ethanol for use in the U.S. Rocky Mountains said first-half profit rose 45 percent on higher sales.
Ipsen SA, a French drugmaker controlled by the Mayroy family, added 2.9 percent to 33.33 euros. Analysts at Goldman, Sachs & Co. rated the shares ``buy'' in new coverage, citing new and planned drugs. The U.S. brokerage also added the stock to its ``conviction buy'' list of favorite stocks.
Thảo - 0907741949
By Alexis Xydias
Nov. 24 (Bloomberg) -- European stocks declined to a three- week low after the dollar slumped against the euro. DaimlerChrysler AG and Aegon NV led a slide by companies that rely most on the U.S. for sales.
``The weak dollar is poison for European exporters and the region's economy,'' said Guenther Gerstenberger, a fund manager at Oberursel, Germany-based PEH Wertpapier AG, which oversees about $2.5 billion.
The Dow Jones Stoxx 600 Index slid 0.8 percent to 355.98 in London, its lowest since Nov. 3 and the second weekly decline. The Stoxx 50 and the Euro Stoxx 50, a measure for the 12 nations sharing the euro, both lost 0.9 percent.
European companies get a fifth of their sales from the U.S. and the dollar's slide to a 19-month low of $1.3082 per euro means there's less profit for exporters to take home. The Stoxx 600 this week touched a 5 1/2-year high as earnings growth powered a rally in equities.
``Should the euro rise beyond $1.35, it will get dangerous,'' said PEH Wertpapier's Gerstenberger.
The pound surged to its highest in almost two years against the dollar while the Swedish krona and Swiss franc also rose.
National benchmarks fell in all 18 western European markets except Iceland. The U.K.'s FTSE 100 Index lost 0.3 percent. France's CAC 40 benchmark dropped 0.7 percent and Germany's DAX slid 1 percent.
Party Over?
DaimlerChrysler, the German carmaker that gets about 45 percent of sales in the U.S., fell 1.8 percent to 45.54 euros. Aegon, the second-largest Dutch insurer, fell 2 percent to 14.11 euros. About half of its revenue comes from the Americas.
Bayerische Motoren Werke AG, the world's largest maker of luxury cars, slumped 2.7 percent to 42.81 euros. North America accounts for a quarter of BMW's sales.
``The rising euro is going to hurt sentiment in Europe,'' said Gerhard Grebe, chief investment strategist at Bank Julius Baer & Co. in Frankfurt. Should the euro go to $1.35, the equity market's ``year-end party will be over shortly.''
Volvo AB, Europe's second-largest truckmaker, fell 1.2 percent to 454.5 kronor. Western European heavy-truck sales slid 1.7 percent in October as customers slowed purchases following the introduction of regulations making vehicles more costly.
Kingfisher Plc, the region's biggest home-improvement retailer, lost 2.6 percent to 249.75 pence. Deutsche Bank AG lowered the stock to ``sell'' from ``hold,'' saying there will be ``more pain before the gain'' as earnings growth falters.
Takeover Talks
Air France-KLM Group, Europe's largest airline, fell 1.1 percent to 29.82 euros, extending yesterday's 6.5 percent drop. Analysts at ABN Amro Holding NV cut the shares to ``sell'' from ``hold'' after the airline said it's revived takeover talks with unprofitable Alitalia SpA.
Technip SA, Europe's second-largest oil-services company, rose 7.6 percent to 55.7 euros, the biggest gain on the Stoxx 600. Eni SpA, Europe's fourth-largest oil company, plans to make an offer to buy the France company, La Tribune said, without citing anyone. The offer may come at the start of next week, the newspaper said.
Eni Chairman Roberto Poli declined to comment. Eni fell 0.4 percent to 24.66 euros.
RWE AG, Germany's second-largest utility, jumped 3.3 percent to 86.54 euros. The Rheinische Post reported the company may be a takeover target, without identifying possible bidders.
The newspaper said RWE managers are ``unsettled'' by large purchases of the company's stock and held a special meeting to discuss the situation. The report didn't say where it got the information.
Boost Payout
RWE spokeswoman Barbara Woydtke said no special meeting took place and declined to comment further.
Scania AB rose 2.2 percent to 475 kronor. Sweden's second- largest truckmaker again rejected MAN AG's hostile takeover bid as too low and said it may boost its payout to shareholders to 17 billion kronor ($2.46 billion) through next year to fend off MAN. MAN shares fell 2.2 percent to 69.94 euros.
Erste Bank AG, Austria's second-biggest lender, fell 2.4 percent to 54.22 euros. Morgan Stanley was selling shares worth about 100 million euros ($131 million) in Erste Bank, based on yesterday's closing price, said a person with knowledge of the transaction.
The U.S. brokerage offered 1.8 million shares in the Vienna- based bank, said the person, who asked to remain unidentified. The person declined to give a price for the offer.
Renova Energy Plc jumped 7 percent to 230 pence. The U.K. company that makes ethanol for use in the U.S. Rocky Mountains said first-half profit rose 45 percent on higher sales.
Ipsen SA, a French drugmaker controlled by the Mayroy family, added 2.9 percent to 33.33 euros. Analysts at Goldman, Sachs & Co. rated the shares ``buy'' in new coverage, citing new and planned drugs. The U.S. brokerage also added the stock to its ``conviction buy'' list of favorite stocks.
0919881955
Asian Stocks Fall in U.S. on Oil; Advanced Semiconductor Jumps
Thu - 0919881955 SG
By Lu Wang
Nov. 24 (Bloomberg) -- Asian stocks fell in U.S. trading as an increase in oil prices rekindled concern higher energy costs may hurt consumer spending. Toyota Motor Corp., the region's largest automaker, led the decline.
The Bank of New York Co.'s Asia ADR Index, which tracks the region's American depositary receipts, lost 0.3 percent to 147.70. For the week, the measure dropped 0.4 percent.
Crude oil for January delivery climbed 52 cents to $59.76 a barrel in electronic trading in New York on a report that Eni SpA halted delivery of 60,000 barrels of oil a day from Nigeria, Africa's biggest supplier, because of attacks by militants. Floor trading on the New York Mercantile Exchange was closed today for the Thanksgiving holiday.
Toyota dropped $1.08 to $118.61. Matsushita Electric Industrial Co., the largest maker of consumer electronics, slipped 6 cents to $19.28.
Advanced Semiconductor Engineering Inc. jumped 80 cents to $6.06. The world's largest packager of computer chips was offered a $5.7 billion bid by Carlyle Group as demand for computer and mobile-phone components increases.
Carlyle and Advanced Semiconductor Chairman Jason Chang, who holds 18.4 percent of the Taiwan-based company, may bid NT$39 a share for the company, 9.9 percent more than its last closing price, the buyout firm said in a statement.
ASE Test Ltd., a unit of Advanced Semiconductor, climbed $1.79 to $11.50.
Nikkei 225 Stock Average futures expiring in December were at 15,615 in Chicago, compared with 15,640 in Singapore and 15,730 in Osaka.
0909.212.300
Merrill, UBS Plan Istanbul Offices as Markets Grow (Update2)
Tuyền - 0909.212.300
By Ben Holland
Nov. 24 (Bloomberg) -- Merrill Lynch & Co., the largest U.S. retail brokerage, and UBS AG, the world's biggest wealth manager, are opening offices in Turkey to take advantage of its growing stock market and boost fees from company takeovers.
Merrill agreed to buy Tatbank in August to gain a banking license in Turkey and aims to start equity trading by year-end at an office staffed by as many as 40, said Kubilay Cinemre, head of the Turkish unit. Merrill will add a banking team by March and plans to be one of Turkey's top three brokers in a year.
Turkey's benchmark stock index has tripled since 2003. That plus slowing inflation and a move toward European Union membership have lured banks such as Merrill, UBS and Morgan Stanley. There's also money to be made from takeovers: Turkey's government reckons direct investment may double this year from $9.8 billion in 2005.
``There's a big push for everyone to become more efficient and productive, from the individual investor up to the biggest holding company,'' Cinemre said in Istanbul. ``That means there are going to be huge opportunities for a firm like Merrill.''
The ISE-100 Index of Turkey's biggest companies surged 59 percent in 2005, extending rallies of 34 percent and 80 percent the previous two years. Stocks in the index have dropped 5 percent this year amid concern over inflation and global interest rates.
UBS, Citigroup
Turkish brokerages received about $650 million in commissions from stock trading last year, the Turkish brokers association says. Foreign investors, who pay higher commissions, currently account for about 20 percent of trading and that's increasing, said Feyza Sensoy, head of UBS's new office in Istanbul's Kanyon complex.
Sensoy, who spoke in an interview Nov. 20, said the Swiss bank will expand its current staff in Turkey and also start brokerage operations there ``soon.''
The move comes as the number of investment banking deals has surged in Turkey the past two years.
Turkey sold about $16 billion worth of state-owned companies last year as foreign direct investment surged fourfold to a record.
Bank acquisitions were the biggest contributor. UBS advised on the sale of a 20 percent stake in Akbank TAS, the most valuable company on the Istanbul Stock Exchange, by the Sabanci family. Citigroup Inc. agreed to pay $3.1 billion for the shares last month.
General Electric Co. spent $1.8 billion to buy a stake in the Turkish lender Turkiye Garanti Bankasi AS last year. Garanti said today it plans to spend $1 billion to grow outside Turkey.
BNP Paribas, Merrill
More government asset sales are due next year, and investment banks also may earn higher fees from initial public offerings, as companies seek to raise funds to expand.
France's BNP Paribas SA, which bought a Turkish bank last year, is advising the government on an initial offering of shares in Turk Telekomunikasyon AS, the national fixed-line phone company. The government sold 55 percent of Turk Telekom to Saudi Oger Ltd. for $6.6 billion, the biggest acquisition of a Turkish company.
Merrill's Cinemre said he expects about $1.5 billion worth of new shares to be sold in Turkish IPOs next year compared with $920 million so far in 2006.
UBS, Merrill and Morgan Stanley, the No. 2 U.S. securities firm by market value, aren't alone in moving into Turkey. Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, last month appointed Uzay Kozak to open an office in Istanbul.
Morgan Stanley aims to open its Istanbul office in the first quarter of 2007 and to employ as many as 40 people there within a year, said Gulnaz Aricanli, who heads the office.
Morgan Stanley expects the flow of international funds into ``emerging, high-growth economies such as Turkey'' to accelerate as well as a rising number of mergers and acquisitions in areas such as insurance and telecommunications, Aricanli said in an e-mail.
Dubai-based Shuaa Capital PSC, the biggest investment bank in the United Arab Emirates, also is opening a Turkish office.
Turkey's economic growth and deregulation, coupled with the oil riches amassed by its neighbors in the Middle East and central Asia, may turn the country into a regional center for finance, Cinemre said.
``There's new wealth being built around Turkey,'' he said. ``And Istanbul, culturally and geographically, is much better- placed than any European city to serve that part of the world.''
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By Ben Holland
Nov. 24 (Bloomberg) -- Merrill Lynch & Co., the largest U.S. retail brokerage, and UBS AG, the world's biggest wealth manager, are opening offices in Turkey to take advantage of its growing stock market and boost fees from company takeovers.
Merrill agreed to buy Tatbank in August to gain a banking license in Turkey and aims to start equity trading by year-end at an office staffed by as many as 40, said Kubilay Cinemre, head of the Turkish unit. Merrill will add a banking team by March and plans to be one of Turkey's top three brokers in a year.
Turkey's benchmark stock index has tripled since 2003. That plus slowing inflation and a move toward European Union membership have lured banks such as Merrill, UBS and Morgan Stanley. There's also money to be made from takeovers: Turkey's government reckons direct investment may double this year from $9.8 billion in 2005.
``There's a big push for everyone to become more efficient and productive, from the individual investor up to the biggest holding company,'' Cinemre said in Istanbul. ``That means there are going to be huge opportunities for a firm like Merrill.''
The ISE-100 Index of Turkey's biggest companies surged 59 percent in 2005, extending rallies of 34 percent and 80 percent the previous two years. Stocks in the index have dropped 5 percent this year amid concern over inflation and global interest rates.
UBS, Citigroup
Turkish brokerages received about $650 million in commissions from stock trading last year, the Turkish brokers association says. Foreign investors, who pay higher commissions, currently account for about 20 percent of trading and that's increasing, said Feyza Sensoy, head of UBS's new office in Istanbul's Kanyon complex.
Sensoy, who spoke in an interview Nov. 20, said the Swiss bank will expand its current staff in Turkey and also start brokerage operations there ``soon.''
The move comes as the number of investment banking deals has surged in Turkey the past two years.
Turkey sold about $16 billion worth of state-owned companies last year as foreign direct investment surged fourfold to a record.
Bank acquisitions were the biggest contributor. UBS advised on the sale of a 20 percent stake in Akbank TAS, the most valuable company on the Istanbul Stock Exchange, by the Sabanci family. Citigroup Inc. agreed to pay $3.1 billion for the shares last month.
General Electric Co. spent $1.8 billion to buy a stake in the Turkish lender Turkiye Garanti Bankasi AS last year. Garanti said today it plans to spend $1 billion to grow outside Turkey.
BNP Paribas, Merrill
More government asset sales are due next year, and investment banks also may earn higher fees from initial public offerings, as companies seek to raise funds to expand.
France's BNP Paribas SA, which bought a Turkish bank last year, is advising the government on an initial offering of shares in Turk Telekomunikasyon AS, the national fixed-line phone company. The government sold 55 percent of Turk Telekom to Saudi Oger Ltd. for $6.6 billion, the biggest acquisition of a Turkish company.
Merrill's Cinemre said he expects about $1.5 billion worth of new shares to be sold in Turkish IPOs next year compared with $920 million so far in 2006.
UBS, Merrill and Morgan Stanley, the No. 2 U.S. securities firm by market value, aren't alone in moving into Turkey. Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, last month appointed Uzay Kozak to open an office in Istanbul.
Morgan Stanley aims to open its Istanbul office in the first quarter of 2007 and to employ as many as 40 people there within a year, said Gulnaz Aricanli, who heads the office.
Morgan Stanley expects the flow of international funds into ``emerging, high-growth economies such as Turkey'' to accelerate as well as a rising number of mergers and acquisitions in areas such as insurance and telecommunications, Aricanli said in an e-mail.
Dubai-based Shuaa Capital PSC, the biggest investment bank in the United Arab Emirates, also is opening a Turkish office.
Turkey's economic growth and deregulation, coupled with the oil riches amassed by its neighbors in the Middle East and central Asia, may turn the country into a regional center for finance, Cinemre said.
``There's new wealth being built around Turkey,'' he said. ``And Istanbul, culturally and geographically, is much better- placed than any European city to serve that part of the world.''
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