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Optimism Makes a Comeback After Year-Long U.S. Stock Surge: Chart of Day

by on March 12, 2010

By David Wilson March 12 (Bloomberg) — Bullishness on U.S. stocks is beginning to emerge after the market’s rally in the past year, according to a gauge derived from data compiled by the American Association of Individual Investors. The CHART OF THE DAY displays the percentage-point gap between bulls and bears, based on 52-week averages, since 1990 among respondents in weekly surveys done by the association. The Standard & Poor’s 500 Index is also included. This week, optimists outweighed pessimists for the first time since January 2008, three months after the previous bull market ended. The average rose to 0.64 point from minus 0.26 a week ago, thanks to an increase in the number of participants expecting higher share prices in the next six months and a decline in those anticipating losses. Even after the gain, the barometer is near its lows in April 2003, when the previous bull market was getting started, and April 1994, when the Internet bubble was about to begin inflating. The average hit bottom at minus 1.98 and minus 2.48, respectively. The 52-week moving average is designed to smooth out week- to-week fluctuations in the survey results. This week’s figures, for example, showed bulls rose to 45.3 percent from 35.9 percent a week earlier and bears sank to 29.4 percent from 37.9 percent. The level of bullishness is “relatively neutral” for stocks, Kevin Lane , managing partner of Fusion Analytics Research Partners LLC, wrote yesterday in a posting on the Big Picture blog. Prices are unlikely to tumble at this point, he added. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Optimism Makes a Comeback After Year-Long U.S. Stock Surge: Chart of Day

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Yen Weakens Against Euro on Speculation Global Recovery Gaining Momentum

by on March 7, 2010

By Yoshiaki Nohara March 8 (Bloomberg) — The yen fell to a two-week low against the euro as signs the global economic recovery remains on track boosted demand for higher-yielding assets. The yen weakened against 15 of its 16 major counterparts after Japanese exports grew in January for a second month and before data today that economists said will show German industrial output rose. Australia’s dollar touched the strongest in six weeks against the U.S. currency as risk sentiment improved after French President Nicolas Sarkozy said yesterday the euro region is ready to rescue Greece. “We are seeing a classic reversal of the yen, having been the preeminent safe-haven currency in recent weeks,” said Ray Attrill , global research director at Forecast Ltd. in Sydney. “The U.S. dollar is generally being sold off because of an improvement in risk appetite. The yen is being sold off even more.” Japan’s currency fell to 123.60 per euro as of 9:29 a.m. in Tokyo from 123.00 in New York on March 5. It earlier touched 123.69, the weakest since Feb. 23. The yen dropped to 90.48 per dollar from 90.28 after reaching 90.68, the lowest since Feb. 23. The euro rose to $1.3665 from $1.3626. Australia’s currency was at 90.94 U.S. cents from 90.77 cents after climbing to 91.06, the most since Jan. 21. The yen dropped against the dollar for a third day as Japan’s current-account surplus was 899.8 billion yen ($9.9 billion) from a year earlier, when it was in deficit, the Ministry of Finance said in Tokyo today. Exports surged 41 percent on an annual basis. ‘We Are Ready’ German industrial production rose 1 percent in January after falling 2.6 percent the previous month, according to a Bloomberg News survey before the Economy Ministry report today. The euro advanced against the dollar for a second day after Sarkozy voiced his support for Greece. “I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris after a meeting with Greek Prime Minister George Papandreou . “There can be no doubt in this regard.” While Greece doesn’t need assistance right now, “we have measures, we are ready, we are determined,” he said. Sarkozy’s comments are among the strongest by a European Union leader to signal the bloc would bail out Greece if necessary as officials strive to warn investors against making further bets against the euro and Greek bonds. Papandreou’s government last week passed a further round of austerity measures and sold 5 billion euros ($6.8 billion) in government debt. Futures traders decreased bets the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain — so-called net shorts — was 66,770 on March 2, compared with net shorts of 71,623 a week earlier. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Yen Weakens Against Euro on Speculation Global Recovery Gaining Momentum

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Treasuries Gain on U.S. Economic Reports, Threat to Greece’s Debt Ratings

February 27, 2010

By Cordell Eddings and Susanne Walker Feb. 27 (Bloomberg) — Treasuries advanced for the first time in three weeks as weaker-than-forecast economic reports and the threat of credit-rating downgrades for Greece spurred demand for the safety of U.S. government debt. Yields on 30-year bonds fell the most this week in six months as reports showed sales of new and existing homes unexpectedly tumbled, consumer confidence dropped and fourth- quarter consumer spending grew less than forecast. A report on March 5 is forecast to show that U.S. employers cut 50,000 jobs in February. “The government did a lot to prop up our economy and get things going, but there just has been no follow-through from consumers or employment,” said Justin Hoogendoorn , Chicago- based chief investment strategist at Bank of Montreal’s BMO Capital Markets unit. “Add the sovereign concerns and you have a lot of uncertainty.” The benchmark 10-year note yield fell 16 basis points, the most since the five days ended Nov. 27, to 3.62 percent, according to BGCantor Market Data. A basis point is 0.01 percentage point. The 3.625 percent security due February 2020 rose 1 10/32, or $13.13 per $1,000 face amount, to 100 2/32. The 30-year bond yield decreased 15 basis points, the most since Aug. 28, to 4.56 percent. The yield difference between 2- and 10-year notes, known as the yield curve, was at 2.81 percentage points after narrowing for a second week. It touched a record high of 2.94 percentage points on Feb. 18. Treasuries advanced for a second month, returning investors 0.12 percent after a 1.6 percent gain in January, according to Bank of America Corp.’s Merrill Lynch index data. Greece’s Ratings Standard & Poor’s and Moody’s Investors Service both said this week that Greece faces potential debt rating downgrades as it struggles to reduce the European Union’s biggest budget shortfall. “The situation in Greece has been a factor for the last few weeks,” said Tom Roth , senior Treasury trader in New York at Mitsubishi UFJ Securities. “Any uncertainty will cause people to stay close to home or stay in quality products. Uncertainty helps the Treasury market.” Concern that Greek fiscal problems may spread boosted demand at a $32 billion auction of U.S. seven-year securities on Feb. 25. The number of bids was 2.98 times the securities offered, the highest since the note was reintroduced in February 2009 after a 16-year hiatus. The sale was the last of four auctions this week totaling a record $126 billion of 2-, 5- and 7-year notes and $8 billion of 30-year inflation-linked bonds. Supply ‘Well Absorbed’ “Supply surely hasn’t become the concern that many had feared and continues to be well absorbed,” Martin Mitchell , head government bond trader at the Baltimore unit of Stifel Nicolaus & Co., a St. Louis-based brokerage firm, wrote in a note to clients. “Friendly data” and Federal Reserve Chairman Ben S. Bernanke ’s congressional testimony this week did nothing to derail the positive sentiment, he said. Bernanke said the U.S. economy is in a “nascent” recovery. Conditions are likely to warrant “exceptionally low levels” of the benchmark interest rate for an extended but unspecified period, he said, delivering his semiannual report on monetary policy. Sales of previously owned U.S. homes unexpectedly tumbled in January for a second month. Purchases fell 7.2 percent, the second-largest drop ever, the National Association of Realtors said yesterday in Washington. The data followed a Commerce Department report on Feb. 24 that showed new-home sales dropped to a record low last month, an annual pace of 309,000. Confidence among U.S. consumers fell in February to the lowest level in 10 months, the Conference Board’s confidence index showed on Feb. 23. Consumer Spending A Commerce Department report yesterday showed consumer spending rose at a 1.7 percent pace from October through December, compared with a 2 percent rate forecast by economists in a Bloomberg News survey. Revised gross domestic product for the quarter increased at a 5.9 percent annual pace, the fastest in six years. The median forecast was for a 5.7 percent advance. “The economic data has been mixed to outright negative,” said George Goncalves , head of interest-rate strategy at Nomura Holdings Inc., one of 18 primary dealers that trade directly with the Federal Reserve. “People expected to see brighter horizons, but actually the numbers are coming in weaker.” Traders cut bets the Fed will raise the cost of borrowing. Rate futures on the Chicago Board of Trade yesterday showed a 48 percent chance U.S. policy makers would raise the target lending rate by November. The odds were 61 percent a week earlier. The difference in yields between 10-year inflation-linked Treasuries and comparable conventional U.S. notes, known as the breakeven rate, touched 2.14 percentage points yesterday, the lowest since Dec. 11. The rate, which reached a 2010 high of 2.49 percent on Jan. 11, is a measure of traders’ expectations for inflation. To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net ; Susanne Walker in New York at swalker33@bloomberg.net

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Euro Falls Toward Eight-Month Low Versus Dollar on European Budget Concern

February 7, 2010

By Yoshiaki Nohara and Ron Harui Feb. 8 (Bloomberg) — The euro fell toward the lowest level in eight months against the dollar on speculation mounting budget deficits in some European nations will keep policymakers from raising interest rates. The euro approached a one-year low against the yen as concern about sovereign risk remain elevated even as Group of Seven finance ministers meeting on the weekend pledged to press ahead with economic stimulus measures. The Australian and New dollars weakened as Asian stocks fell, reducing demand for higher-yielding assets. “As sovereign risks spread in the euro-zone, risk aversion will continue in the market,” said Susumu Kato , chief economist for Japan in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA. “Investors are wondering how financial issues in those small nations may affect bigger ones.” The euro fell to $1.3647 as of 9:01 a.m. in Tokyo from $1.3678 in New York on Feb. 5, when it declined to $1.3586, the lowest since May 20. The euro dropped to 121.84 yen from 122.09, after touching 120.71 on Feb. 5, the weakest since Feb. 24. The dollar was at 89.27 yen from 89.25 yen. G-7 finance chiefs met in Iqaluit, Canada, as governments try to secure economic recoveries, while widening budget deficits threaten to hamper future expansion. “We need to continue to deliver the stimulus to which we are mutually committed and begin looking at exit strategies to move to a more sustainable fiscal track,” Canada’s Finance Minister Jim Flaherty told reporters on Feb. 6. ECB Rates The European Central Bank left its benchmark rate at a record low of 1 percent on Feb. 4, and ECB President Jean-Claude Trichet signaled he is in no rush to raise borrowing costs. Nikkei 225 Stock Average fell 0.9 percent today after declined for the past three weeks. The euro also weakened for a fourth day against the dollar as futures traders raised bets to the highest level in more than a decade that Europe’s currency will fall against the greenback, data from the Washington-based Commodity Futures Trading Commission showed on Feb. 5. “The euro continues to feel the impact of escalating concerns over sovereign credit risk,” Gareth Berry , a currency strategist in Singapore at UBS AG, wrote in a research note today. “Short euro positions held by futures traders have now reached record levels.” The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain — so-called net shorts — was 43,741, on Feb. 2, the most since the euro’s debut in 1999, compared with net shorts of 39,539 a week earlier. Credit-default swaps on five-year sovereign bonds of Greece, Spain and Portugal rose to record levels last week. The cost of insuring against a Greece debt default advanced to 428.3. Credit swaps tied to Spain climbed to 170.8 and those on Portugal increased to 229.6, according to CMA DataVision prices. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net ; Ron Harui in Singapore at rharui@bloomberg.net .

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Futures Traders Increase Bets Euro Will Decline to Record Against Dollar

February 5, 2010

By Allison Bennett Feb. 5 (Bloomberg) — Futures traders increased bets that the euro will decline against the U.S. dollar to a record level on concern budget deficits in Greece and other European nations will hamper the region’s economic growth. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, known as the net-short position, was 43,741 on Feb. 2, compared with 39,539 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show. “The current downward spiral in markets stems from confidence, which makes the solution a difficult one,” Sacha Tihanyi, a currency strategist at Bank of Nova Scotia in Toronto, wrote in a note to clients. “The markets are increasingly nervous about what path lies ahead for the euro zone and the euro.” The price of default protection on government debt for Greece, Portugal and Spain rose to a record today on concern the nations’ efforts to rein in their budget shortfalls will hamper growth and cut tax revenue. Global stocks fell, with the MSCI World Index dropping 1 percent. Greece’s biggest union approved yesterday the second mass strike this month and tax collectors began a 48-hour walkout. The euro declined for a third day, slumping 0.3 percent to $1.3678 at 5 p.m. in New York, from $1.3723 yesterday. The shared currency touched $1.3595, the least since May 20. Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday. Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators’ positions because such transactions can reflect an expectation of a change in prices. To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

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Asian Currencies Post Weekly Drop on China Tightening, Obama’s Bank Curbs

January 22, 2010

By Bob Chen Jan. 23 (Bloomberg) — Asian currencies fell this week, led by South Korea’s won and the Indonesian rupiah, on speculation China will take more steps to curb inflation after economic growth accelerated to a three-year high. The Bloomberg-JPMorgan Asia Dollar Index declined 0.7 percent this week, the biggest drop in eight months, on concern monetary tightening in China will damp a recovery in global trade. A proposal by President Barack Obama to reduce risk- taking by U.S. financial institutions cooled demand for emerging-market assets, dragging regional stocks lower. “The China bubble risk is a big source of fear for financial markets, particularly investors in risky assets around the world,” said Tim Condon , head of Asia research at ING Groep NV in Singapore. “Lower stocks in the U.S. are going to mean knee-jerk selling in Asia and that is going to show up in a higher dollar against Asia ex-Japan currencies.” South Korea’s won fell 2.4 percent over the last five days to 1,150.85 per dollar in Seoul, according to data compiled by Bloomberg. Indonesia’s rupiah declined 1.7 percent to 9,359 and Malaysia’s ringgit slid 1.7 percent to 3.3997. China is stepping up measures to slow record lending and inflation in the world’s fastest-growing major economy. The central bank has guided short-term bill yields higher and raised the amount of funds banks must set aside as reserves this month to drain funds from the financial system. China Tightening Gross domestic product on the mainland increased 10.7 percent in the fourth quarter, the biggest gain since 2007, the National Bureau of Statistics said in Beijing on Jan. 21. Economic growth accelerated from a revised 9.1 percent in the prior three months. Inflation quickened to 1.9 percent in December, the most since November 2008, a separate report showed. “China might raise interest rates,” said Janet Lin , a currency trader in Taipei at Taiwan Business Bank. “The global market is worried about that.” Policy makers will likely act sooner than previously anticipated to contain prices, a Bloomberg News survey of economists showed after the data release. China will raise interest rates by the end of June and also ratchet up banks’ reserve requirements , according to the median of 17 forecasts. Stocks slumped on Obama’s plan to curb banks’ trades that aren’t done for the benefit of customers. The Standard & Poor’s 500 Index of U.S. shares dropped 3.9 percent this week, the biggest decline since October, while the MSCI Asia-Pacific Index fell 3.5 percent, the most in seven months. Obama Proposals Obama’s proposals, which will be added to an overhaul of regulations being considered by Congress, would also prohibit banks from investing in hedge funds and private equity funds. “Currency markets in Asia are tumbling on risk aversion caused by news of Obama’s plans to curb banks’ trading,” said Dariusz Kowalczyk , chief investment strategist at SJS Markets Ltd. in Hong Kong. “Obama is getting more populist and his move may signal more anti-business policies ahead, which could drag on economic growth and business’s profits.” The ringgit posted the biggest weekly drop since February 2009, and the rupiah had its steepest decline in seven months. China’s 12-month yuan forwards fell 0.4 percent to 6.6315 per dollar, reflecting traders’ bets for a 2.9 percent gain in the currency in a year. The contracts were signaling 3.3 percent appreciation a week earlier. Rate Decisions Bank Negara Malaysia will maintain its overnight interest rate at a record-low 2 percent on Jan. 26 to help pull the economy out of a recession, according to all 13 economists in a Bloomberg News survey. Policy makers in the Philippines and India also meet next week to decide on borrowing costs. South Korea and the Philippines are due to report gross domestic product numbers for the fourth quarter. Elsewhere in Asian currency trading, Thailand’s baht weakened 0.4 percent this week to 32.99, the Taiwan dollar dropped 0.5 percent to NT$31.980 and the Philippine peso declined 0.8 percent to 46.19. China’s yuan was little changed at 6.8269 in the spot market. To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net

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Orders for Durable Goods in U.S. Unexpectedly Decline on Defense Equipment

November 25, 2009

By Courtney Schlisserman Nov. 25 (Bloomberg) — Orders for goods meant to last several years unexpectedly fell in October, restrained by a drop in demand for defense equipment and a reminder the economic recovery will be slow to gain speed. The 0.6 percent decrease in bookings for durable goods followed a revised 2 percent gain in September that was larger than previously estimated, figures from the Commerce Department showed today. Excluding defense bookings, orders rose 0.4 percent. Concern that consumer spending may retrench as unemployment mounts will probably cause companies to limit spending on new equipment and keep inventories lean. While another Commerce Department report showed consumer spending rose more than forecast last month, the world’s largest economy needs a rebound in manufacturing and housing for the recovery to gain momentum. “Many firms are still hesitant to make capital investments,” said Guy Lebas , chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “What we saw in the month of October was a big, big drop in machinery orders after a large increase in September.” Commerce Department figures also showed spending by consumers rebounded in October more than anticipated. The 0.7 percent increase in purchases was larger than the median estimate of economists surveyed by Bloomberg News and followed a 0.6 percent September drop. Incomes climbed 0.2 percent, also exceeding expectations. Jobless Claims A separate report from the Labor Department today showed the number of Americans filing claims for unemployment benefits fell last week to the lowest level since September 2008. Claims declined to 466,000 in the week ended Nov. 21 from 501,000 a week earlier, the report showed. Futures on the Standard & Poor’s 500 Index were up 0.4 percent to 1,107.2 at 9:08 a.m. in New York. Economists forecast durable-goods orders would increase 0.5 percent, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from a decline of 1 percent to a 2.1 percent gain. Excluding transportation equipment, orders fell 1.3 percent, the biggest decrease since March. These bookings were forecast to increase 0.7 percent. Less demand for machinery, computers, communications equipment in addition to defense gear contributed to last month’s decrease. Shipments for non-defense capital goods excluding aircraft, which is used in calculating gross domestic product, fell 0.2 percent in October. Bookings for such goods, a proxy for future business spending, decreased 2.9 percent in October. Emerging Rebound The figures raise questions on the sustainability of the emerging rebound in business investment. A report from the Commerce Department yesterday showed the economy grew at a 2.8 percent annual pace last quarter, less than previously estimated. Spending on equipment and software climbed at a 2.3 percent annual pace, the first gain in more than a year. Demand for transportation equipment increased 1.5 percent, led by a 51 percent surge in orders for commercial aircraft. Auto bookings fell 0.1 percent. Auto production is moderating after surging in the three months through September as “cash-for-clunkers” incentives to buy cars expired in late August. Motor vehicle and parts production fell 1.7 percent in October, after an 8.1 percent increase a month earlier, according to industrial production figures released from the Federal Reserve on Nov. 17. Auto Sales Even so, auto sales rose at a 10.45 million annual rate in October, according to Bloomberg data. Ford Motor Co. Chief Executive Officer Alan Mulally said Nov. 3 he is taking a “cautiously optimistic point of view” on 2010 and the automaker will be “solidly profitable” in 2011. Inventories were little changed last month, today’s report showed. Smaller reductions in inventories following the biggest plunge in stockpiles on record will probably support economic growth in comings months. The economy will grow at a 3 percent annual rate this quarter, according to the median projection of economists in a Bloomberg News survey earlier this month. “We exited the year pretty low on inventory — we saw higher demand for printers as we went through the end of the year,” Hewlett-Packard Co. Chief Executive Officer Mark Hurd said in an interview Nov. 23. Hewlett-Packard reported personal- computer sales for its fiscal fourth quarter that topped some analysts’ estimates. Also helping support manufacturing, exports rose in the five months through September, according to Commerce Department data. To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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Consumer Spending, Incomes in U.S. Increase More Than Economists Forecast

November 25, 2009

By Timothy R. Homan Nov. 25 (Bloomberg) — Spending by U.S. consumers rebounded in October more than anticipated, an indication that mounting unemployment has yet to stifle American’s willingness to buy. The 0.7 percent increase in purchases was larger than the median estimate of economists surveyed by Bloomberg News and followed a 0.6 percent September drop, Commerce Department figures showed today in Washington. Incomes climbed 0.2 percent, also exceeding expectations. A jobless rate that is projected to exceed 10 percent through the first half of next year means households will probably contribute less to growth as the economy recovers. Nonetheless, retailers such as J.Crew Group Inc. are among companies seeing improving demand heading into the holiday shopping season. “People have been too negative for too long on the consumer,” said John Herrmann , chief economist at Herrmann Forecasting in Summit, New Jersey, who accurately forecast the gain in spending. “We’re seeing very positive spending signals for November.” A separate report from the Labor Department today showed the number of Americans filing claims for unemployment benefits fell last week to the lowest level since September 2008. Claims declined to 466,000 in the week ended Nov. 21 from 501,000 a week earlier, the report showed. U.S. stock-index futures extended gains after the reports. Futures on the Standard & Poor’s 500 Index rose 0.7 percent to 1,110.60 at 8:37 a.m. in New York. Durable Goods Another Commerce Department report showed orders for long- lasting goods unexpectedly dropped last month, depressed by a slump in bookings for defense gear. The median estimate of 75 economists surveyed called for a 0.5 percent increase in spending after an originally reported decrease of 0.5 percent the prior month. Projections ranged from no change to a gain of 0.8 percent. The gain in incomes followed a similar 0.2 percent increase in September and exceeded the 0.1 percent median estimate in the Bloomberg survey. Wages and salaries were unchanged last month after decreasing 0.1 percent in September. Today’s report showed prices were stabilizing. The inflation gauge tied to spending patterns rose 0.2 percent from October 2008, the first year-over-year gain since April. The Fed’s preferred price measure, which excludes food and fuel, climbed 0.2 percent in October from the previous month and was up 1.4 percent from a year earlier. Adjusted for inflation, spending climbed 0.4 percent following a 0.7 percent drop the prior month. Savings Rate Because the increase in spending was larger than the gain in incomes, the savings rate fell to 4.4 percent from 4.6 percent the prior month. Disposable income, or the money left over after taxes, increased 0.4 percent, the most since May. Adjusted for inflation, disposable income increased 0.2 percent. J.Crew, the U.S. clothing retailer, yesterday reported that third-quarter profit more than doubled. Its shares have more than tripled so far this year. Still, uneven gains in spending are even hurting companies that appeal to bargain shoppers, such as Target Corp. , the second-largest U.S. discount chain. The Minneapolis-based company last week said it’s planning for a modest increase in fourth-quarter comparable sales. “We haven’t seen that rebound or that lift yet,” Chairman and Chief Executive Officer Gregg Steinhafel said in a Nov. 17 interview. Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, climbed 2 percent last month after falling 8.7 percent the prior month. Purchases of non-durable goods increased 0.2 percent, and Spending on services, which account for almost 60 percent of all outlays, climbed 0.3 percent. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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States Sell $9.5 Billion of Bonds as Connecticut Doubles Size of Offering

November 13, 2009

By William Selway Nov. 13 (Bloomberg) — U.S. state and local governments sold $9.5 billion of bonds this week, led by California, as demand from investors allowed Connecticut to almost double the size of its offering of tax-exempt securities. The number of new issues fell from $11 billion last week because the bond markets were closed Wednesday for the Veteran’s Day holiday, according to data compiled by Bloomberg. Prices were little changed as the Bond Buyer 20 Index, a benchmark measurement of yields on bonds maturing in 20 years, slipped 0.01 percentage point to 4.4 percent from a week earlier, leaving it about half a percentage point above the low set on Oct. 1 after a rally in prices. “Over the last couple of weeks they’ve been pushed up, but if you look at it in the totality of the year, we’ve had a big rally,” said Michael Walls , who oversees $540 million in high- yield municipal bonds for Waddell & Reed Financial Inc. in Overland Park, Kansas. “There has been some profit taking.” Municipal bond prices have soared this year as investors poured money into mutual funds, pushing down the yields that local governments needed to pay to raise money. While prices have slipped since last month, municipal bonds still have returned 13 percent this year, marking their best performance since a 17 percent gain in 2000, according to Merrill Lynch & Co. indexes. Connecticut Boost Connecticut used demand to boost the size of its offering this week. The state, which initially planned to offer $600 million of securities, sold $1.08 billion, raising funds to replenish cash used to close last year’s budget deficit and finance school construction projects. Meanwhile, an authority in California sold $1.9 billion of bonds on behalf of local governments whose taxes were tapped to help the state close its budget deficit. The debt, maturing in 2013, is backed by California’s requirement to repay the money, giving the securities the same credit rating as the cash- strapped state government. The sale added to a flood of borrowing by the California, with almost $12.5 billion of debt tied to the state sold since Oct. 5. The bonds sold this week by the California Statewide Communities Development Authority yielded 4 percent, compared with a yield of 3 percent that the state estimated last week. “New issues have been priced cheaper than they have in the past and thus have been well received,” Walls said. Following are descriptions of additional pending sales of municipal bonds; the timing and amounts may change. NEW YORK STATE’S MORTGAGE AGENCY plans to issue $100 million of fixed-rate, tax-exempt bonds backed by private student loans made under the newly created New York Higher Education Loan Program. The loans will be made to New York residents to finance higher education expenses at eligible colleges and universities, beginning in January 2010, preliminary bond documents show. The mortgage agency will issue the bonds under the name of the State of New York Higher Education Finance Authority. Bank of America Corp.’s Merrill Lynch & Co. will set prices and rates on the debt as soon as today. Maturities will range from 2012 to 2026. S&P gave the deal a preliminary rating of A+. (Updated Nov. 12) CALIFORNIA’S STATE PUBLIC WORKS BOARD plans to sell $1.3 billion of bonds backed by state appropriations on Nov. 19 to finance various capital projects. Banks led by Jefferies Group Inc. and Wells Fargo & Co. will underwrite the offering, the sixth of at least $1 billion in the state since the beginning of October. The debt carries a BBB- from Fitch Ratings, the lowest investment grade. (Added Nov. 12) AMERICAN MUNICIPAL POWER , a Columbus, Ohio-based supplier to public electric systems, intends to offer $600 million of bonds next week to refinance short-term notes and fund work on three hydroelectric generators on the Ohio River. Underwriters led by Bank of Montreal’s BMO Capital Markets GKST Inc. will handle the offering. It may include a mix of tax-exempt securities and taxable Build America Bonds, for which the federal government pays 35 percent of the interest cost. The bonds are secured by payments made under power sales contracts with municipal utilities in Ohio, Kentucky, Michigan, Virginia and West Virginia. (Added Nov. 12) To contact the reporter on this story: William Selway in San Francisco at wselway@bloomberg.net .

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Yen Rises to 3-Week Highs Against Dollar, Euro on CIT, Global Stocks Rout

November 1, 2009

By Yasuhiko Seki and Ron Harui Nov. 2 (Bloomberg) — The yen rose to the most in almost three weeks against the dollar and the euro after New York-based CIT Group Inc. filed for bankruptcy, boosting demand for Japan’s currency as a shelter from financial turmoil. The yen climbed after the 101-year-old commercial lender listed $71 billion in assets and $65 billion in debt in its bankruptcy protection. The Australian dollar pared earlier losses against the yen and the greenback after Treasurer Wayne Swan said economic growth will be faster than expected and a government report showed house price increases accelerated. “The collapse of the CIT Group revived credit fears, triggering sell-offs of riskier-assets and higher-yielding assets,” said Masakazu Sato , a foreign-exchange adviser at foreign exchange margin company Gaitameonline Co. “The atmosphere is beginning to resemble the way things were back in autumn last year before Lehman Brothers Holdings Inc. failed.” The yen was at 90.01 against the dollar as of 10:14 a.m. in Tokyo from 90.09 yen in New York on Oct. 30, after earlier touching 89.20 yen, the strongest since Oct. 14. It was at 131.01 against the euro, the strongest since Oct. 9, before trading at 132.51, from 132.61 in New York. Japan’s currency was at 81 against the Australian dollar from 81.05 on Oct. 30, after earlier touching 79.47, the most since Oct. 8. Australia’s currency bought 89.95 U.S. cents from 89.97 cents in New York on Oct. 30. New Zealand’s dollar was at 71.58 U.S. cents from 71.81 cents in New York last week. U.S. stocks fell the most since May last week, with the Standard & Poor’s 500 index dropping 4 percent. The MSCI Asia Pacific Index of regional shares slid 1.4 percent today and the Nikkei 225 Stock Average declined 2.6 percent. U.S. System Weak U.S. taxpayers probably won’t recoup much, if any, of the $2.3 billion in government funds that went to CIT Group , Treasury Department spokesman Andrew Williams said in an e- mailed statement after the 101-year-old commercial lender filed for bankruptcy protection. “The U.S. financial system is far from a perfect health,” said Mitsuru Saito , chief economist in Tokyo at Tokai Tokyo Securities Co. in Tokyo. Employers in the U.S. cut fewer jobs this month than in September while the unemployment rate rose to 9.9 percent in October, according to the median forecast in a survey of economists. The Labor Department’s report is due Nov. 6. Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. recession is “nowhere near” an end and the economy’s third-quarter growth rate of 3.5 percent, the first expansion in more than a year, won’t carry into 2010. Limited Gains “When we look at if workers can get jobs, if they can work full time, if businesses are able to sell goods they produce, in those terms, we are nowhere near the end of recession” in the U.S., Stiglitz, 66, the former chief economist at the World Bank said on Oct. 31. The U.S. job market is still “in very bad shape.” Gains in the yen and the dollar were curbed after China’s manufacturing expanded at the fastest pace in 18 months and Australia’s home prices rose in the third quarter, adding to signs the global economy is recovering. China’s Purchasing Managers’ Index rose to a seasonally adjusted 55.2 in October from 54.3 in September the Federation of Logistics and Purchasing said yesterday in Beijing. An Australian index measuring the weighted average of prices for established houses in the eight capital cities climbed 4.2 percent in the third quarter from the second quarter, the Australian Bureau of Statistics said in Sydney today. “There is bright news about economies worldwide, as China’s PMI suggests the recovery in the nation’s economy is picking up,” said Tsutomu Soma , a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “It’s mildly positive for risk appetite and a negative for the dollar and the yen.” Australian Economy Australia’s government also said today the nation’s economy will grow faster than previously expected and the budget deficit will be in line with a previous forecast. Australia will have a cash deficit in the 12 months ending June 30, 2010, of A$57.7 billion ($51.8 billion), compared with A$57.6 billion forecast in May, Treasurer Wayne Swan told reporters today in Canberra. The economy will grow 1.5 percent compared with a May forecast of a 0.5 percent contraction. Futures traders decreased their bets that the euro will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop — so-called net longs — was 32,869 on Oct. 27, compared with net longs of 36,033 a week earlier. Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday. To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net ; Ron Harui in Singapore at rharui@bloomberg.net

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Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Prices

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

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Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Prices

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

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Typhoon Parma Hovers Over Philippines, Boosting Landslide, Flood Threat

October 4, 2009

By Francisco Alcuaz Jr. Oct. 5 (Bloomberg) — Tropical Storm Parma hovered over the South China Sea after crossing Luzon in the Philippines, leaving at least 15 people dead and bringing more rain to areas still recovering from Tropical Storm Ketsana, which hit a week earlier. Two people are missing in northern Luzon after Parma hit as a typhoon two days ago, according to the National Disaster Coordinating Council’s latest report . The storm knocked out power supplies, blew roofs off houses and buildings and ruined rice and other crops. The world’s biggest importer of rice will assess the damage to determine whether it has to increase imports, Agriculture Secretary Arthur Yap said. Parma came a week after Ketsana dropped the most rain on Manila and nearby provinces in more than 40 years, leaving 293 dead. Some areas remain flooded, while others are still cleaning up the mud and damage. Schools, many used as shelters and for relief operations, were shut for a week. Parma “wrought a lot of damage,” Chief Superintendent Roberto Damian, the police chief in northeastern Luzon, said in a phone interview. About 170,000 people were evacuated before Parma hit, according to the disaster council. About 880,000 were evacuated for Ketsana. The storm was about 220 kilometers west-northwest of Laoag city in northern Luzon at 4 a.m. local time, according to the Philippine weather bureau , which says it may “remain almost stationary.” Laoag is about 420 kilometers north of Manila. Landslides Reported Parma’s winds declined to 102 kilometers per hour from 185 kph before it hit land, according to the U.S. Navy Joint Typhoon Warning Center . Landslides were reported in northwestern Luzon, Senior Superintendent Virgilio Fabros, the police chief of Ilocos Sur said in a phone interview. “I see extensive damage especially to our rice and vegetable crops that were about to be harvested,” he said. Parma spared Manila on its approach by veering further north than forecast from the capital. Parma is forecast to be almost stationary for as many as 72 hours, the Philippine weather bureau said yesterday morning. Areas of Luzon including Manila will probably have more rain and thunderstorms, it said. East of the Philippines, Typhoon Melor strengthened to a supertyphoon with winds of 259 kph, according to the U.S. warning center. Melor was 853 kilometers south-southeast of the Japanese island of Iwo To, formerly called Iwo Jima, at 3 a.m. Tokyo time. The storm was moving west at 31 kilometers per hour and is forecast to turn to the north and approach Tokyo early on Oct. 8. To contact the reporter on this story: Francisco Alcuaz Jr . in Manila at falcuaz@bloomberg.net

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GM, Toyota Expect U.S. Auto Sales to Rebound After Post-`Clunkers’ Slump

October 1, 2009

By Jeff Green and Keith Naughton Oct. 1 (Bloomberg) — General Motors Co. and Toyota Motor Corp., the biggest automakers in the U.S., said fourth-quarter sales may rise after a letdown from the “cash-for-clunkers” rebates dragged the industry to its second-worst month of 2009. September U.S. sales fell 23 percent as the incentive program left dealers’ inventory depleted. With the government cash boosting demand in July and August, third-quarter sales ran at an annualized pace of 11.5 million cars and trucks, the strongest in a year. “We’ve reached the crossroads where the recovery meets the downward slide from last year,” said Jeff Schuster , a Detroit- based analyst at researcher J.D. Power & Associates. “We’re on the upside now, but it will be a fairly slow ascent.” Easier fourth-quarter comparisons with 2008 and a stabilizing U.S. economy helped drive today’s outlook for improvement at GM and Toyota. Last month’s sales ran at an annualized rate of 9.22 million units, compared with the average estimate of 9.3 million among 8 analysts surveyed by Bloomberg. Clunkers rebates of as much as $4,500 produced almost 700,000 sales, and now that the incentives are gone the new-auto market is returning to levels that match underlying monthly demand, said Mike DiGiovanni , Detroit-based GM’s executive director of global marketing and industry analysis. “This is clearly behind us,” DiGiovanni said. Fourth-Quarter Outlook Fourth-quarter U.S. sales probably will run at about the same annualized rate as a year earlier, or 10.5 million units, Schuster said. The pace for the first and second quarters was about 9.6 million light vehicles. Toyota expects this quarter’s rate to be in the “high 10s,” Bob Carter , vice president of U.S. sales for the Toyota City, Japan-based automaker, said in a conference call today. “As we get into the fourth quarter we see it getting into the 11s,” Carter said. The company estimated that full-year sales would be 10.4 million units. The lowest pace this year was 9.11 million, in February. The annual rate is important to the industry because manufacturers, suppliers and dealers use it to compare monthly totals by taking into account seasonal buying patterns. Last year’s sales were 13.2 million, after averaging 16.8 million this decade through 2007. ‘Slow Going’ Ford also expects auto sales in the fourth quarter to run ahead of the annualized pace of 10.5 million units a year earlier, said George Pipas , the sales analyst for the Dearborn, Michigan-based automaker. “But I think it’s going to be pretty slow going.” Economists surveyed by Bloomberg in September projected the economy will expand at an average 2.6 percent pace in the second half. Consumer confidence also reached its highest level since January 2008 in the University of Michigan-Reuters index. GM’s September deliveries tumbled 45 percent, while Toyota dropped 13 percent, both worse than analysts had estimated. Ford slid 5.1 percent, and Auburn Hills, Michigan-based Chrysler Group LLC plunged 42 percent. Honda Motor Co. posted a 20 percent decline, and Nissan Motor Co. , which like Honda is based in Tokyo, said sales fell 7.1 percent. Hyundai Motor Co., South Korea’s largest automaker, bucked the industry slide with a 27 percent increase. Industry deliveries totaled 745,997, according to Autodata Corp., an auto-information company based in Woodcliff Lake, New Jersey. Ford fell 24 cents, or 3.3 percent, to $6.97 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have more than tripled this year. Sales Declines The industry’s 1 percent sales gain in August snapped a streak of monthly sales declines dating to 2007. With inventory at a 24-year low at the end of August because of demand during the $3 billion clunkers program, customers found fewer choices and automakers less willing to offer discounts last month. “We knew sales would slow down significantly after the cash for clunkers surge,” said Stephen Spivey , senior auto analyst at Frost & Sullivan in San Antonio. “October will tell you what kind of rebound comes off that dip.” Industrywide light-vehicle sales will be 10.3 million this year and 11.5 million in 2010, Westlake Village, California- based J.D. Power estimates. Last year’s sales were 13.2 million, after averaging 16.8 million this decade through 2007. Auto researcher Edmunds.com raised its forecast for September’s annual pace to 9.34 million on Sept. 24, from 8.8 million a week earlier. Late-Month Swoon? U.S. auto sales petered out at the end of September after a mid-month rebound from the end of the clunkers program, said Jessica Caldwell , an analyst at Santa Monica, California-based Edmunds. “The last days of the month didn’t finish on the strong note we expected,” Caldwell said in an interview. “That doesn’t say the most positive things for October, November and December.” Ford’s senior economist, Emily Kolinski Morris , said she detects a “more positive tone” in the economy because job losses are moderating, the housing market is stabilizing and a survey for the Institute of Supply Management suggested two months of manufacturing expansion. GM isn’t conceding that a weak September windup foreshadows more of the same for the rest of the year. “I’m still thinking the industry will start to come back into form in the fourth quarter,” said Mark LaNeve , GM’s vice president of U.S. sales. “Didn’t see it in September.” To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net ; Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net .

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GM, Toyota, Ford, Chrysler U.S. Sales Decline as `Cash for Clunkers’ Ends

October 1, 2009

By Jeff Green and Katie Merx Oct. 1 (Bloomberg) — General Motors Co. , Toyota Motor Corp. and Ford Motor Co. said sales fell in September as waning demand after the “cash for clunkers” rebates cut industry deliveries to the second-slowest rate this year. GM deliveries tumbled 45 percent, while Toyota dropped 13 percent, both worse than analysts had estimated. Ford slid 5.1 percent, and Chrysler Group LLC , Honda Motor Co. and Nissan Motor Co. also posted declines. “We knew sales would slow down significantly after the cash for clunkers surge,” said Stephen Spivey , senior auto analyst at Frost & Sullivan in San Antonio. “October will tell you what kind of rebound comes off that dip.” U.S. auto sales plunged 23 percent, and the seasonally adjusted annual sales rate fell to 9.22 million units, said industry researcher Autodata Corp. of Woodcliff Lake, New Jersey. July and August were the only months in 2009 when the sales pace topped 10 million, a level that Ford and researcher J.D. Power & Associates expect the U.S. to surpass for the year. The industry is coming off an August surge that snapped a streak of monthly sales declines dating to 2007. Buyers responded to the U.S. government’s offer of as much as $4,500 to trade in older, less fuel-efficient light vehicles from July 27 through Aug. 24, with almost 700,000 purchases. Shrinking Inventory Showroom visits fell after the $3 billion program helped empty dealers’ lots. With inventory at a 24-year low at the end of August, customers found fewer choices and automakers less willing to offer discounts. Analysts expected a sales rate of 9.3 million vehicles, based on the average of 8 estimates compiled by Bloomberg. Industrywide light-vehicle sales will be 10.3 million this year and 11.5 million in 2010, Westlake Village, California-based J.D. Power estimates. Last year’s sales were 13.2 million, after averaging 16.8 million this decade through 2007. The lowest pace this year was 9.11 million, in February. The annual rate is important to the industry because manufacturers, suppliers and dealers use it to compare monthly totals by taking into account seasonal buying patterns. September’s results brought the annualized sales rate in the third quarter to 11.5 million, the strongest since the same period a year earlier, when deliveries ran at an annual pace of 12.9 million units. Analysts’ Estimates Analysts’ sales estimates are adjusted for one more sales day this month than in September 2008. Unadjusted figures, used by Bloomberg and some automakers, would be about 4 percentage points lower. September sales at GM, the largest U.S. automaker, slid 47 percent on an adjusted basis, worse than the 44 percent decline projected by 6 analysts. Ford, the second-largest U.S. automaker, fell 8.9 percent on an adjusted basis, worse than the 5 percent average of 6 analysts’ estimates. The decline on that basis was 44 percent for Auburn Hills, Michigan-based Chrysler, matching the average of 5 estimates. Nissan’s adjusted decrease was 11 percent, compared with 2 analysts’ estimates of 7.1 percent, and Honda’s was 23 percent, worse than the estimates of 13 percent. Toyota’s adjusted decline was 16 percent, while analysts projected 13 percent. Light-Vehicle Totals U.S. light-vehicle sales for GM dropped to 155,679 from 282,806. Ford’s total including Volvo was 114,655 cars and trucks, compared with 120,788 a year earlier. Chrysler sales fell 42 percent to 62,197, down from 107,349. Nissan, which like Honda is based in Tokyo, said sales dropped 7 percent to 55,393 from 59,565. Honda said sales slid 20 percent to 77,229, compared with 96,626. Toyota, based in Toyota City, Japan, sold 126,015 Toyota, Lexus and Scion vehicles, down from 144,260. Hyundai Motor Co. , South Korea’s largest automaker, bucked the industry slide with a 27 percent increase. Seoul-based Hyundai said it sold 31,511 vehicles last month, up from 24,765 a year earlier. Industry deliveries totaled 745,997, Autodata said. Ford fell 24 cents, or 3.3 percent, to $6.97 at 4 p.m. in New York Stock Exchange composite trading. The shares have more than tripled this year. Auto sales improved later in September from early in the month as dealers restocked inventory and discounting picked up, said Jessica Caldwell , an analyst at auto-information provider Edmunds.com in Santa Monica, California. Edmunds raised its forecast for September’s annual pace to 9.34 million on Sept. 24, from 8.8 million a week earlier. Prices paid for GM, Ford and Chrysler vehicles rose by $2,000 on average in the second quarter as automakers slashed production, J.D. Power said. Incentives fell by 26 percent from March to August, according to Autodata. “The last two weeks of September could be an important indicator of the underlying rate auto sales are trending at,” Brian Johnson , a Chicago-based analyst at Barclays Capital, said in a note to clients. To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net ; Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net .

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Ford, Nissan U.S. Vehicle Sales Declined After `Cash for Clunkers’ Ended

October 1, 2009

By Jeff Green and Katie Merx Oct. 1 (Bloomberg) — Ford Motor Co. said September U.S. auto sales fell 5.1 percent, ending two months of gains, as waning demand after the “cash for clunkers” rebates may have cut industry deliveries to the second-slowest rate this year. Ford’s total including the Volvo brand fell to 114,655 cars and trucks from 120,788 a year earlier, the Dearborn, Michigan- based company said in a statement today. The decrease was worse than analysts’ estimates. “We knew sales would slow down significantly after the cash for clunkers surge,” said Stephen Spivey , senior auto analyst at Frost & Sullivan in San Antonio. “We see sales slowing down for the rest of the year. October will tell you what kind of rebound comes off that dip.” The seasonally adjusted annual sales rate slid to 9.3 million vehicles, based on the average of 8 analyst estimates compiled by Bloomberg. July and August were the only months in 2009 when the industry benchmark topped 10 million, a level that Ford and researcher J.D. Power & Associates expect the U.S. to surpass for the year. The industry is coming off an August surge that snapped a streak of monthly sales declines dating to 2007. Buyers responded to the U.S. government’s offer of as much as $4,500 to trade in older, less fuel-efficient light vehicles from July 27 through Aug. 24, with almost 700,000 purchases. Shrinking Inventory Showroom visits probably fell after the $3 billion program helped empty dealers’ lots. With inventory at a 24-year low at the end of August, customers found fewer choices and automakers less willing to offer discounts. Industrywide light-vehicle sales will be 10.3 million this year and 11.5 million in 2010, Westlake Village, California- based J.D. Power estimates. Last year’s sales were 13.2 million, after averaging 16.8 million this decade through 2007. The lowest pace this year was 9.11 million, in February. The annual rate is important to the industry because manufacturers, suppliers and dealers use it to compare monthly totals by taking into account seasonal buying patterns. September sales may have fallen 44 percent each at General Motors Co. and Chrysler Group LLC , based on analysts surveyed by Bloomberg. Those are averages of six estimates for Detroit-based GM and five for Auburn Hills, Michigan-based Chrysler. Deliveries probably dropped 9.7 percent at Toyota City, Japan-based Toyota Motor Corp., 13 percent at Honda Motor Co. and 7.1 percent at Nissan Motor Co. , which are both based in Tokyo, according to 2 analysts. Analysts’ Estimates The analysts’ estimates are adjusted for one more sales day this month than in September 2008. Unadjusted figures, used by Bloomberg and some automakers, would be about 4 percentage points lower. On an adjusted basis, Ford’s decline was 8.5 percent, worse than the 5 percent average of 6 analysts’ estimates. Ford fell 12 cents, or 1.7 percent, to $7.09 at 12:15 p.m. in New York Stock Exchange composite trading. The shares have more than tripled so far this year. Auto sales improved later in September from early in the month as dealers restocked inventory and discounting picked up, said Jessica Caldwell , an analyst at auto-information provider Edmunds.com in Santa Monica, California. Edmunds raised its forecast for September’s annual pace to 9.34 million on Sept. 24, from 8.8 million a week earlier. Prices paid for GM, Ford and Chrysler vehicles rose by $2,000 on average in the second quarter as automakers slashed production, J.D. Power said. Incentives fell by 26 percent from March to August, according to Autodata Corp. “The last two weeks of September could be an important indicator of the underlying rate auto sales are trending at,” Brian Johnson , a Chicago-based analyst at Barclays Capital, said in a note to clients. To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net ; Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net .

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Yvette Kantrow: Doom, the rerun

September 29, 2009

Like Top 10 lists and year-end retrospectives, anniversary stories are a convention of journalism that just won’t go away. So last week we were forced to endure an avalanche of coverage dedicated to re-enacting, re-analyzing, re-reporting, but mostly, regurgitating the fall of Lehman Brothers Holdings Inc. one year after the fact. The media has deemed Lehman’s failure to be the official start of the financial crisis, despite the cataclysmic events that preceded it, including not only the implosion of Bear Stearns Cos., but the government takeover of Fannie Mae and Freddie Mac just a week earlier. Funny how there were no anniversary stories commemorating that landmark event. With a few exceptions, the Lehman coverage consisted of the usual anniversary fare, from the pedestrian where-are-they-now stories to the handwringing what-have-we-learned pieces. (Answer: Not much.) The New York Times gave over a chunk of its op-ed page to former Lehmanites weighing in on the firm’s last days — “I was robbed first by Ben Bernanke, the Federal Reserve Chairman, and Henry Paulson, the former Treasury secretary,” whined one embittered Lehman employee — while CNN boasted of landing an interview with Alan Schwartz, the last Bear CEO. It seems any fallen Wall Street bigwig will do. Lehman’s Dick Fuld, however, remained largely out of view, except on Reuters, where reporter Clare Baldwin staked out his vacation home in Ketchum, Idaho. “Dick Fuld gave me a hug,” began Baldwin’s account of meeting the ex-Lehman chief, who told her that for legal reasons, he couldn’t talk about the events of last Sept. 15. Too bad. At least that would have been something new. As Slate’s Jack Shafer complained about Sept. 11 anniversary stories: “In its most naked form, the anniversary article makes no attempt to advance the story or deepen the collective understanding of the selected anniversary event.” In the case of Lehman’s anniversary, we’ll lodge another complaint: Many of the pieces were authored by journalists who have written or are writing books on the financial crisis. Are their pieces simply promos for their books? Or are their books just longer versions of their anniversary pieces? Where does the marketing end and the journalism begin? There was David Wessel, author of “In Fed We Trust: Ben Bernanke’s War on the Great Panic” on the front page of The Wall Street Journal last Monday arguing that the Fed deserves credit for preventing catastrophe last fall. Want more? Buy the book. At The Times, Joe Nocera, who is working on a crisis book with Bethany McLean, posited that Lehman’s death provided the political will needed to save the economy at large. Nocera also starred in a video on The Times’ Web site retelling the story of Lehman’s collapse, as if we had all just landed from Mars and needed to be filled in. His co-stars: Gretchen Morgenson and Andrew Ross Sorkin, whose own crisis book is scheduled for release next month. Newsweek, meanwhile, commemorated Lehman’s failure by excerpting an upcoming book on J.P. Morgan Chase & Co. CEO Jamie Dimon by Duff McDonald, who profiled Dimon for New York magazine after the Bear deal. And then there’s Lawrence McDonald, the former Lehman vice president who penned an “insider account” of the firm’s fall. He showed up on “The NewsHour with Jim Lehrer” to once again blame it all on Fuld and his private elevator. Needing to get away from all this, we happily retreated into James B. Stewart’s epic anniversary piece in The New Yorker, “Eight Days: The battle to save the American financial system.” (Good thing Roger Lowenstein changed his upcoming crisis book from “Six Days That Shook the World” to “The End of Wall Street.”) Stewart interviewed everyone from Bernanke to Timothy Geithner to Paulson to provide a clinical, behind-the-scenes account of what happened the week Lehman died. He tells his readers off the bat that “memories inevitably have been colored by hindsight and efforts to shade the truth, to affix blame and claim credit,” but his narrative is both highly credible and highly readable. Finishing the piece, you can’t help but wonder what’s left for all those upcoming books to say — a feeling that only deepens when you realize that some of those nearly-instant tomes were completed in about the same amount of time that it took Stewart to craft a 20,000-word magazine story. We suppose the books can offer insight or perspective that we haven’t heard before, but we’re not hopeful. After all, we’re already sick of hearing about Fuld’s damn elevator. Yvette Kantrow is executive editor of The Deal .

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Home sales drop 2.7 percent (Yesterday)

September 25, 2009

… 30. Congress is facing intense pressure from real estate agents and home builders to extend it, … a week earlier. Foreclosures and other financially distressed sellers accounted for about 30 percent of …

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Home resales take dip in August

September 25, 2009

… 30. Congress is facing intense pressure from real estate agents and homebuilders to extend it, but … a week earlier. Foreclosures and other financially distressed sellers accounted for about 30 percent of …

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Surprise Home sales fall

September 25, 2009

… week of October,” he said. In Washington, real estate agents and home builders are lobbying hard … a week earlier. Foreclosures and other financially distressed sellers accounted for about 30 percent of …

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Sales of U.S. Existing Homes Probably Rose to Two-Year High as Prices Fell

September 24, 2009

By Bob Willis Sept. 24 (Bloomberg) — Sales of existing U.S. homes probably climbed in August to the highest level in two years, another sign the real-estate collapse that triggered the global recession is abating, economists said before a report today. Purchases rose 2.1 percent to a 5.35 million annual rate, according to the median forecast of 74 economists in a Bloomberg News survey. It would be the fifth consecutive gain, capping the longest stretch of increases since 2004. Government tax credits for first-time buyers and foreclosure-induced price declines are helping the housing market recover from the worst slump since the Great Depression. Federal Reserve policy makers yesterday committed to keeping interest rates low to ensure the pickup in growth is sustained. “The housing recovery is under way,” said Michelle Meyer , an economist at Barclays Capital Inc. in New York. “While the first-time homebuyer tax credit likely boosted sales, there has been a fundamental shift in home buying due to greater affordability and confidence.” The National Association of Realtors’ report is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 5.1 million to 5.55 million after a 5.24 million rate in July. Resales reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. A report at 8:30 a.m. from the Labor Department is projected to show the number of Americans seeking jobless benefits rose last week to 550,000 from 545,000 a week earlier. Leading Indicator Purchases of existing homes, which make up more than 90 percent of the market, are tabulated when sales close and therefore reflect contracts signed a month or two earlier. Sales of newly built residences, which make up the rest, are considered a more leading indicator because they are counted when a contract is signed. The Commerce Department may report tomorrow that purchases of new houses rose in August to the highest level in 12 months, according to a Bloomberg survey. Fed policy makers yesterday maintained they will keep the benchmark lending rate near zero “for an extended period,” while noting that the economy and housing had strengthened. They also said they will slow central bank purchases of mortgage debt securities in order to extend the $1.45 trillion program through the first quarter of 2010 rather than completing it by the end of this year. They extended the period to allow more time “to work out of the housing problems,” John Silvia , chief economist at Wells Fargo Securities LLC in Charlotte, North, Carolina, said in a report to clients yesterday. First-Time Buyers The Obama administration’s $8,000 tax credit for first- time home buyers, which is due to expire at the end of November, combined with the plunge in prices as foreclosures climbed, have helped lift sales this year. The Realtors’ group and the National Association of Home Builders have lobbied to extend the credit on concern demand will wane after it lapses. Treasury Secretary Timothy Geithner told reporters on Sept. 17 that the administration would take a “careful look” at extending the credit and called signs of stabilization in the U.S. housing market “very encouraging.” Growing demand has prompted builders such as KB Home to get back to work. Housing starts rose to a nine-month high in August, the Commerce Department reported last week, indicating residential construction may soon add to growth after subtracting from gross domestic product since 2006. Builder Shares The Standard & Poor’s Homebuilder Supercomposite Index is up 32 percent so far this year, compared with a 17 percent gain for the broader S&P 500. Prices, which most economists forecast would be the last component of the market to turn, have begun to improve. The Federal Housing Finance Agency’s home-price index for purchases was up 1.1 percent in the three months through July, the best performance since early 2006. The recent increases may also be contributing to the rise in sales as buyers who had been waiting for prices to turn jump back into the market, economists said. “We’re seeing a firming of prices in a number of markets, not all,” Eli Broad , founder of Los Angeles-based KB Home, said yesterday in an interview with Bloomberg Television. “I think we have bottomed out in many markets.” KB Home on Sept. 16 announced it was resuming its building operations in the mid-Atlantic region, including the Washington, D.C., area. Still, with unemployment forecast to reach 10 percent by the end of the year and record foreclosures adding to the 4.4 million houses on the market, any rebound in sales, construction or prices will take time to strengthen. “I see this as a very slow recovery,” said Broad. “In some markets the inventory is so large it’s going to take a number of years before we go back to what I call normalcy.” To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Sales of U.S. Existing Homes Probably Rose to Two-Year High as Prices Fell

September 24, 2009

By Bob Willis Sept. 24 (Bloomberg) — Sales of existing U.S. homes probably climbed in August to the highest level in two years, another sign the real-estate collapse that triggered the global recession is abating, economists said before a report today. Purchases rose 2.1 percent to a 5.35 million annual rate, according to the median forecast of 74 economists in a Bloomberg News survey. It would be the fifth consecutive gain, capping the longest stretch of increases since 2004. Government tax credits for first-time buyers and foreclosure-induced price declines are helping the housing market recover from the worst slump since the Great Depression. Federal Reserve policy makers yesterday committed to keeping interest rates low to ensure the pickup in growth is sustained. “The housing recovery is under way,” said Michelle Meyer , an economist at Barclays Capital Inc. in New York. “While the first-time homebuyer tax credit likely boosted sales, there has been a fundamental shift in home buying due to greater affordability and confidence.” The National Association of Realtors’ report is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 5.1 million to 5.55 million after a 5.24 million rate in July. Resales reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. A report at 8:30 a.m. from the Labor Department is projected to show the number of Americans seeking jobless benefits rose last week to 550,000 from 545,000 a week earlier. Leading Indicator Purchases of existing homes, which make up more than 90 percent of the market, are tabulated when sales close and therefore reflect contracts signed a month or two earlier. Sales of newly built residences, which make up the rest, are considered a more leading indicator because they are counted when a contract is signed. The Commerce Department may report tomorrow that purchases of new houses rose in August to the highest level in 12 months, according to a Bloomberg survey. Fed policy makers yesterday maintained they will keep the benchmark lending rate near zero “for an extended period,” while noting that the economy and housing had strengthened. They also said they will slow central bank purchases of mortgage debt securities in order to extend the $1.45 trillion program through the first quarter of 2010 rather than completing it by the end of this year. They extended the period to allow more time “to work out of the housing problems,” John Silvia , chief economist at Wells Fargo Securities LLC in Charlotte, North, Carolina, said in a report to clients yesterday. First-Time Buyers The Obama administration’s $8,000 tax credit for first- time home buyers, which is due to expire at the end of November, combined with the plunge in prices as foreclosures climbed, have helped lift sales this year. The Realtors’ group and the National Association of Home Builders have lobbied to extend the credit on concern demand will wane after it lapses. Treasury Secretary Timothy Geithner told reporters on Sept. 17 that the administration would take a “careful look” at extending the credit and called signs of stabilization in the U.S. housing market “very encouraging.” Growing demand has prompted builders such as KB Home to get back to work. Housing starts rose to a nine-month high in August, the Commerce Department reported last week, indicating residential construction may soon add to growth after subtracting from gross domestic product since 2006. Builder Shares The Standard & Poor’s Homebuilder Supercomposite Index is up 32 percent so far this year, compared with a 17 percent gain for the broader S&P 500. Prices, which most economists forecast would be the last component of the market to turn, have begun to improve. The Federal Housing Finance Agency’s home-price index for purchases was up 1.1 percent in the three months through July, the best performance since early 2006. The recent increases may also be contributing to the rise in sales as buyers who had been waiting for prices to turn jump back into the market, economists said. “We’re seeing a firming of prices in a number of markets, not all,” Eli Broad , founder of Los Angeles-based KB Home, said yesterday in an interview with Bloomberg Television. “I think we have bottomed out in many markets.” KB Home on Sept. 16 announced it was resuming its building operations in the mid-Atlantic region, including the Washington, D.C., area. Still, with unemployment forecast to reach 10 percent by the end of the year and record foreclosures adding to the 4.4 million houses on the market, any rebound in sales, construction or prices will take time to strengthen. “I see this as a very slow recovery,” said Broad. “In some markets the inventory is so large it’s going to take a number of years before we go back to what I call normalcy.” To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Monsoon Revival Signals Worst Over for India Crops, Weather Official Says

September 7, 2009

By Thomas Kutty Abraham Sept. 7 (Bloomberg) — A revival in India’s monsoon rains is helping ease dry weather that’s caused drought in more than a third of the country, aiding crops in the world’s second-biggest producer of rice, wheat and sugar, a weather official said. Rainfall this year may be 15-to-20 percent less than the 50-year average, making it the weakest monsoon since 2002, Ajit Tyagi , director-general of India Meteorological Department , said in a phone interview today. The deficit narrowed to 21 percent last week from as high as 52 percent in June. The worst start to the June-September monsoon season in at least eight decades caused drought in 278 of the country’s 626 districts, damaging crops of sugar cane, rice and oilseeds. Raw sugar reached a 28-year high last week on speculation India, the biggest consumer, will boost imports to bolster supplies. “The worst is over,” Tyagi said from New Delhi. “Most parts of the country got good rains in the past 10 days,” improving prospects for winter crops of wheat and lentils. India’s benchmark stock index advanced to the highest level in 15 months on optimism a revival in rains may lift incomes of the 742 million people living in the villages, increasing demand for consumer goods. October-delivery soybean futures dropped as much as 2.9 percent to 1,948 rupees for 100 kilograms, an eight- month low. Corn for delivery in September fell as much as 0.7 percent to 954 for 100 kilograms. Sugar prices at Vashi, the nation’s biggest wholesale market for the commodity, lost 2 percent to 3,188.35 rupees per 100 kilograms. The monsoon will remain “active” for the next week to 10 days, helping replenish water levels in reservoirs . Farmers use this water to grow wheat and oilseeds sown between October and December. The country’s 81 main reservoirs were 45 percent full on Sept. 3, up from 42 percent a week earlier. Winter Crops “With the water reservoir levels looking up, the impact on winter crops may be limited,” said Sonal Varma , an economist at Nomura Securities Co. in Mumbai. “Standing crops may not be affected as much as one expected a month back” Planting of wheat and other winter-crops will begin early this year to make up for the 10 million tons loss of rice, Farm Minister Sharad Pawar said last month. Wheat may be seeded to a record 28 million hectares this winter, Agriculture Commissioner N.B. Singh told reporters Sept. 4. The grain, used in local flat breads, makes up a third of the total grain output. El Nino won’t impact the monsoon because the weather event hasn’t “accentuated and remains mild,” the weather bureau’s Tyagi said. The withdrawal of the rains, which typically starts in the second week of September, may be delayed this year, prolonging the rainy season, he said. El Nino El Nino occurs about every four to seven years and causes dry weather conditions in many Asian nations. India got below normal rains in 15 of the 36 El Nino years it had in the 1875- 2008 period, the weather office said June 24. “It’s good news that worries of El Nino impacting rains is receding,” Nomura’s Varma said. Rain deficit in northwest India, the country’s grain-bowl and biggest sugar cane producer, may narrow to 25-35 percent by the end of this month from as high as 50 percent in July, the weather bureau’s Tyagi said. Central and southern states may end the monsoon season with near normal falls, he said. The central region includes Madhya Pradesh, the biggest producer of soybeans, while the southern region includes Karnataka, Kerala and Maharashtra states, top growers of sugar cane, peanuts, cotton and coffee. The deficit in the northeastern states, the biggest tea grower, may narrow to 15-20 percent by the end of this month, from as high as 55 percent in June, Tyagi said. To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net .

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Dollar Rallies as U.S. Employers Cut Fewer Jobs Than Economists Estimated

August 8, 2009

By Ye Xie and Oliver Biggadike Aug. 8 (Bloomberg) — The dollar advanced to a seven-week high against the yen and gained versus the euro for the first week in almost a month as U.S. employers eliminated fewer jobs last month than economists forecast. The yen dropped against all of its major counterparts this week and fell to the lowest level against the euro since June as the Labor Department’s payroll report encouraged Japanese investors to buy higher-yielding assets overseas. Treasury 10- year yields posted their biggest weekly increase since 2003, making U.S. assets more attractive to international investors. “The recovery is setting in relatively quickly,” said Ulrich Leuchtmann , head of currency strategy at Commerzbank AG in Frankfurt. “It’s positive for the dollar in the long term because when the economy recovers it’ll be clear that the U.S. is coming out of the crisis better.” The dollar climbed 3.1 percent to 97.57 yen, from 94.68 on July 31. It touched 97.79 yesterday, the highest level since June 16. The U.S. currency appreciated 0.5 percent to $1.4183 per euro, the first weekly advance since the five-day period ended July 10. The euro appreciated 2.5 percent to 138.41 yen, from 134.99 a week earlier. It reached 138.72 yesterday, the highest level since June 5. The gains in the dollar yesterday marked a return to the view that good U.S. economic news should benefit the currency as traders speculated that the Federal Reserve will boost borrowing costs sooner rather than later. Dollar Index The Dollar Index , an ICE gauge of the greenback against the currencies of six major trading partners including the euro, yen and pound, increased 0.8 this week to 78.975. It dropped 2.9 percent this year as signs of global economic recovery reduced demand for a haven in the world’s main reserve currency. “This is monumental,” said Stephen Gallo , head of market analysis at Schneider Foreign Exchange in London. “This would mark a sea change in how speculators trade economic data and the overall view of the U.S.” Futures on the Chicago Board of Trade indicated a 64 percent chance that the Fed will increase the target lending rate from its range of zero to 0.25 percent by its January meeting, compared with 52 percent odds a month ago. Policy makers will probably keep the fed funds target unchanged when they meet on Aug. 12, according to the median forecast of 37 economists surveyed by Bloomberg News. The pound dropped 0.2 percent to $1.6684 this week as the Bank of England increased its asset-purchase plan by 50 billion pounds ($84 billion) on concern the recession is deeper than previously anticipated. Sterling reached $1.7043 on Aug 5, the highest level since Oct. 21. Yen Versus Real The yen declined 5.5 percent this week to 53.52 versus the Brazilian real and weakened 5 percent to 7.54 versus the Mexican peso on speculation investors will buy assets sensitive to global growth. Japan’s 0.1 percent target lending rate compares with 8.75 percent in Brazil and 4.5 percent in Mexico. “What you’ve started to see is further buying of emerging- market currencies and high-yielding currencies,” said MacNeil Curry, a technical analyst at Barclays Capital in New York. “What they’re buying these currencies against is no longer the dollar. They’re looking for other funding currencies to put this trade on. So you’ve got the yen coming under rather significant pressure.” U.S. government debt dropped on the employment data. The 10-year yield increased 0.37 percentage point to 3.85 percent on the week, the biggest gain since the five days ended March 21, 2003, when traders speculated the Iraq War’s end was imminent. Payroll Report Employers eliminated 247,000 jobs in July after a revised decrease of 443,000 in the previous month, the Labor Department reported yesterday in Washington. The median forecast of 82 economists surveyed by Bloomberg News was for a reduction of 325,000. The unemployment rate decreased to 9.4 percent. “There’s a sense that the market is now starting to look at fundamentals again,” said Montreal-based Yves Gauthier , a portfolio manager at Fjord Capital Inc., with $800 million under management. “There’s a potential that the market is thinking the Fed will raise rates earlier than initially thought. We think it’s premature.” The yen tumbled 2 percent versus the dollar yesterday as the yield advantage of 10-year Treasury notes over comparable- maturity Japanese securities increased to 2.42 percentage points, the widest level since Nov. 3. The dollar may resume its decline as U.S. investors continue to “put money somewhere else in the world” until year-end, said Ronald Plasser , a portfolio manager who oversees 100 million euros ($142 million) at Bankhaus Schelhammer & Schattera AG in Vienna. “My opinion on euro-dollar is that the first movement is toward $1.50 at the end of the year and later on it should go back, maybe next year to $1.30, because of this good U.S. data and decline of risk aversion,” said Plasser. To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net ; Oliver Biggadike in New York at obiggadike@bloomberg.net

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