Gustav fears ease; sterling and global stocks fall

[Ghost Dog]

Source: Reuters

Mon Sep 1, 2008 7:35am EDT

LONDON (Reuters) - Financial markets began the month in a volatile mood on Monday with economic fear driving equities lower and gloom about Britain's downturn knocking sterling to a 12-year low.

The price of oil swung from being up well over $1.50 a barrel to registering losses of around $1.75 as Hurricane Gustav showed no signs of strengthening in its way towards the U.S. state of Lousiana.

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The dollar was generally stronger and short-term euro zone government bond yields fell as investors bought into safe-haven plays.
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The FTSEurofirst 300 index of top European shares was down around 0.9 percent, starting the month off on a weak note after notching up a gain of 1.2 percent in August, only its second monthly gain in 10 months.

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Earlier, Japan's Nikkei stock average shed 1.8 percent as Honda Motor Co and other exporters fell on worries about the economy and a slightly stronger yen.

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Read more: http://www.reuters.com/article/hotStocksNews/idUSHKG10573020080901?sp=true

[Ghost Dog]

1. Asian Stocks Fall Most in 2 Weeks on Economic Outlook; LG Drops

Sept. 1 (Bloomberg) -- Asian stocks fell the most in almost two weeks, led by technology companies and automakers, on concern profits will decline as global economic growth slows.

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The MSCI Asia Pacific Index fell 1.8 percent to 123.03 at 8:29 p.m. in Tokyo, its largest drop since Aug. 19. All 10 industry groups retreated.

The regional measure has lost 22 percent this year as the global economy cooled and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.

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``Investors are getting worried again with a demand slowdown in the U.S.,'' said Seo Jung Ho, a fund manager at UBS Hana Asset Management Co. in Seoul, which has $30 billion in assets.

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South Korean exports, which make up more than half of gross domestic product, rose 20.6 percent in August from a year earlier, missing the 23.3 percent median estimate of economists surveyed by Bloomberg News.

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In China, manufacturing contracted for a second straight month in August, according to a survey of purchasing managers. Vice Commerce Minister Gao Hucheng said last week that weakness in global demand will weigh on exports for the rest of the year.

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Hanjin Shipping Co., South Korea's largest shipping line, tumbled 15 percent to 23,900 won, its biggest drop since March 2003. STX Pan Ocean Co., South Korea's No. 1 bulk carrier, lost 4.4 percent to S$2.39 in Singapore.

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=atUAUr8wrk0Q&refer=asia

[Ghost Dog]

2. Nikkei slips 1.8 percent on exporters, techs, Asia

Mon Sep 1, 2008 2:44am EDT

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"Things in the tech market are likely to get pretty tough and this will have to be taken into account in terms of plans for the future, but it's still too early to say anything for sure," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

"At the very least, tech shares are being sold right now based on the U.S. and the global economy."

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The benchmark Nikkei shed 238.69 points, completely erasing last week's gains, to finish at 12,834.18. The broader Topix lost 1.9 percent to 1,230.64.

Losses picked up speed in the afternoon as Asian shares fell more sharply, with the MSCI index of Asian stocks outside Japan .MIAPJ0000PUS down 2.4 percent by 0607 GMT.

Market players said bargain-hunting had emerged at the lows to stem the slide, but with a lack of buying incentives or substantial investor presence, rises were impossible.

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Exporters slipped as the dollar fell against the yen, fetching around 108.53 yen <JPY=>.

Honda lost 3.4 percent to 3,460 yen, becoming the biggest drag on the Nikkei 225 by volume weight. Toyota Motor Co (7203.T: Quote, Profile, Research, Stock Buzz) lost 2.2 percent to 4,820 yen.

"Basically autos are a sector that people probably want to lighten up on, given the economic outlook," said Shinkin's Yamashita.

Toyota last week cut its 2009 vehicle sales forecast by nearly 7 percent, hit by high fuel demand, a move that highlighted an increasingly difficult environment.

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Banks were down as well, weighing on the Topix in particular, though losses were limited by a lack of Japan-specific factors, market players said.

"Basically, worries are starting to emerge about U.S. bank results, which are set to start being released in a couple of weeks, and this makes it hard for investors to reach out their hand for bank shares," said Noritsugu Hirakawa, a strategist at Okasan Securities.

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Trade was thin, with 1.3 billion shares changing hands compared with last week's daily average of 1.4 billion. Declining shares outpaced advancing ones by nearly 8 to 1. <-- Not so very thin, then.

/... http://www.reuters.com/article/marketsNews/idCAT9119820080901?rpc=44&sp=true

[Ghost Dog]

8. China approves law to promote sustainable economy

Reuters, 30 August 2008 - China's legislature passed a law calling for fiscal spending, tax breaks and other measures to promote sustainable economic growth via resource conservation and pollution control, official media said on Saturday.

The law, passed on Friday at the closing of the fourth session of the National People's Congress standing committee, has been signed by President Hu Jintao and will come into effect on Jan. 1, 2009, the Xinhua news agency said.

The law calls for closer monitoring of resource-intensive and heavily polluting industries such as steelmaking, non-ferrous metal production, power generation, oil refining, construction and printing, Xinhua said.

It will encourage industries to adopt water-saving technologies and use cleaner sources of energy such as natural gas and alternative fuels.

It also promotes recycling or making use of waste materials, including the recycling of maize straw, livestock waste and farming by-products to produce marsh gas.

/... http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MzEzMDc

[Ghost Dog]

3. U.K. Mortgage Approvals Drop, Manufacturing Contracts

Sept. 1 (Bloomberg) -- U.K. mortgage approvals dropped to the lowest since at least 1999 and manufacturing contracted for a fourth month as the economy staggered toward a recession.

Banks granted 33,000 loans for house purchases in July, the fewest since comparable data began nine years ago, the Bank of England said in London today. An index based on a survey of factories by the Chartered Institute of Purchasing and Supply stayed below 50 in August, indicating contraction.

Prime Minister Gordon Brown will announce measures this week to shore up the economy as the Bank of England battles the fastest inflation in more than a decade, which may prevent it from cutting the main interest rate on Sept. 4. The squeeze on lending stalled economic growth in the second quarter and damaged the housing market, where prices are falling by the most since at least 2001.

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The pound fell to the lowest level since April 2006 against the dollar today and traded at $1.8033 as of 11:48 a.m. in London. The currency dropped to a record low against the euro and traded at 81.19 pence per euro. U.K. stocks declined for the first time in four days.

The Bank of England reported that the value of home loans rose to 3.23 billion pounds ($5.83 billion) in July from 3.14 billion pounds in June. The figure is down from 9.35 billion pounds in July 2007.

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The slump has led to a collapse in support for Brown since he took over from Tony Blair 15 months ago and reduced the popularity of the ruling Labour Party to the lowest since it took office. Labour trailed behind the opposition Conservative Party, led by David Cameron, by 20 percentage points in recent opinion polls.

Brown will hand U.K. local government authorities money to buy homes, a person familiar with the plan said last week, as part of a package to prevent the economy entering its first recession since 1991. Chancellor of the Exchequer Alistair Darling said in a Guardian newspaper interview Aug. 30 that the U.K. is facing ``arguably the worst'' economic crisis for the last 60 years.

Darling's comments contrast with those of Prime Minister Gordon Brown, who said Britain is better placed to weather global economic storms now than in the late 1970s and in the early 1990s.

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Financial institutions are reluctant to lend to one another almost a year after a freeze in interbank lending. Bank losses from the collapse of the U.S. subprime mortgage market now exceed $500 billion.

Oil prices, which surged to a record in July, are damping demand for manufactured goods and squeezing factories' margins. The euro area, Britain's biggest export market, contracted 0.2 percent in the second quarter. The U.K. failed to grow for the first time since 1992.

/... http://www.bloomberg.com/apps/news?pid=20601085&sid=aUV3kiavue7g&refer=europe

[Ghost Dog]

4. U.K. Interbank Lending Fell 68% in July From Year Ago

Sept. 1 (Bloomberg) -- Lending between U.K. banks slumped 68 percent in July as financial institutions hoarded cash to shore up their balance sheets, signaling Bank of England efforts to revive money markets aren't working.

The volume of interbank lending in the British currency fell to 205 billion pounds ($370 billion), from 635 billion pounds in July last year, according to central bank data published today. Lending averaged 269 billion pounds a month since the credit crunch started in August 2007.

Banks are curtailing lending while losses from the collapse of the U.S. subprime-mortgage market climb above $500 billion. Interbank lending rates are little lower now than they were in April, when the Bank of England offered to take on damaged mortgage-backed bonds in an effort to unfreeze lending. The strains in global money markets will probably persist ``for some time,'' the Bank for International Settlements said today.

``We're in the same position we were in last year, with banks hoarding cash to refinance their own beleaguered balance sheets,'' said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. ``The Special Liquidity Scheme has helped individual banks by preventing them from becoming illiquid, but it hasn't helped money markets return to normal.''

The July figure, which excludes central bank transactions, is up from 195 billion pounds in June. The total peaked at 656 billion pounds in February last year, and has averaged 270 billion pound since the data began in 1997.

The central bank program allows commercial banks to swap mortgage-backed securities harmed by the credit squeeze for government bonds. The lending freeze led to the collapse of mortgage lender Northern Rock Plc in September, triggering the first run on a U.K. bank in more than 140 years.

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Bank of England Governor Mervyn King said in June he will unveil a new money-market system this year to cope with both ``normal'' and ``stressed'' conditions. He hasn't said when or whether banks will reveal their participation in the April plan.

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``The term structure of Libor-OIS spreads suggests the interbank market pressures are expected to continue for some time,'' Ingo Fender and Jacob Gyntelberg, analysts at the BIS, wrote in the Basle-based bank's quarterly report.

The increase in short-term borrowing costs triggered questions over the accuracy of the London interbank offered rate, the benchmark interest rate administered by the British Bankers' Association and used to calculate rates on $360 trillion of financial products worldwide.

The BIS said in March some banks may have understated their borrowing costs to avoid being seen as having difficulty raising financing.

/... http://www.bloomberg.com/apps/news?pid=20601085&sid=aQbrt.3YiPTA&refer=europe

[Ghost Dog]

5. Banks lead European shares lower; Commerz tumbles

Mon Sep 1, 2008 11:56am BST

LONDON, Sept 1 (Reuters) - European share prices were down by midday on Monday, led by banks as investors gave the thumbs down to Commerzbank's (CBKG.DE: Quote, Profile, Research) $14.5 billion deal to buy Allianz's (ALVG.DE: Quote, Profile, Research) Dresdner Bank unit.

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Commerzbank tumbled 9 percent, and analysts said the news came on top of weak global equity markets sparked by technology spending concerns and worries about a U.S. hurricane that has shut oilfields in the Gulf of Mexico.

"Commerzbank's acquisition of Allianz's Dresdner Bank is the main news. Weakness in Asian trading Monday and U.S. trading Friday is also carrying through on to the European markets," said Bernard McAlinden, market strategist at NCB Stockbrokers.

He said that investor concerns about rising prices had been underlined last week by comments from European Central Bank board member Juergen Stark that referred to broad-based second round inflationary effects.

"Stagflation is worrying the market and interest rates are likely to stay on hold," said McAlinden.

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Adding to inflation worries, oil supplies were in focus as energy firms in the U.S. Gulf shut down nearly all offshore oil output and a host of flood-prone coastal refineries as Hurricane Gustav headed towards the coast.

Oil jumped initially but fell back 80 cents to just under $115 a barrel while shares in BP (BP.L: Quote, Profile, Research), Shell (RDSa.L: Quote, Profile, Research) and Total (TOTF.PA: Quote, Profile, Research) fell 0.3-1 percent.

Across Europe, Britain's FTSE .FTSE was down 0.9 percent, Germany's DAX .GDAXI down 0.7 percent and France's CAC .FCHI down 0.5 percent.

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Miners fell, tracking a sharp fall in copper futures <MCU3=LX>. Xstrata (XTA.L: Quote, Profile, Research), Vedanta (VED.L: Quote, Profile, Research), Anglo American (AAL.L: Quote, Profile, Research), Rio Tinto (RIO.L: Quote, Profile, Research) and Kazakhmys (KAZ.L: Quote, Profile, Research) fell 2-4 percent.

/... http://uk.reuters.com/article/eurMktRpt/idUKL135696620080901?sp=true

[Ghost Dog]

6. French August new car sales down 7 pct

PARIS, Sept 1 (Reuters) - French new passenger car sales in August fell 7.1 percent from a year earlier, the country's CCFA carmaker association said on Monday.

Groupe Renault (RENA.PA: Quote, Profile, Research, Stock Buzz) showed a 0.2 percent fall in sales while PSA Peugeot Citroen (PEUP.PA: Quote, Profile, Research, Stock Buzz) sales fell 4.9 percent.

GM Europe (GM.N: Quote, Profile, Research, Stock Buzz) sales fell 9.9 percent, Ford sales (F.N: Quote, Profile, Research, Stock Buzz) fell 8.8 percent while BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz) sales fell 5 percent.

Fiat (FIA.MI: Quote, Profile, Research, Stock Buzz) sales rose 21.3 percent.

/. http://www.reuters.com/article/marketsNews/idINWEA792020080901?rpc=611

[Ghost Dog]

7. Czech, Polish business shrinks, Romanian GDP soars

PRAGUE, Sept 1 (Reuters) - Czech and Polish manufacturing suffered the sharpest fall in more than five years in August, hit by a steep drop in Western demand and strong currencies, while Romania's economy posted a strong second quarter.

Analyst saw the data having different policy implications across the region, including a possible rate cut for the Czechs, stable borrowing costs for the Poles, and a hike in Romania, where economists warned of overheating.

The Czech Purchasing Managers' Index (PMI) dropped to 47.3 in August, the lowest level since the series began in July 2001, falling further below the 50 divide between growth and contraction from 49.9 in July, data from Markit Economics and ABN Amro showed on Monday.

In Poland, the largest ex-communist state to join the European Union, the contraction was sharper, to an index level of 45.8 in August from 46.4 in July, its sixth consecutive monthly decline and the worst figure since December 2002.

It came alongside PMI data from the euro zone -- emerging Europe's main export market -- that was a touch better than expected but still showed a significant contraction at 47.6.

/... http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=27b3aad7-559e-42a5-8031-fa847659ec54

[xchrom]

9. recommend

[skoalyman]

10. hopefully we'll see oil at or below 100 soon

B-)