Tuesday, August 26, 2008

Today's Headlines

- The US dollar rose to a six-month high against the euro on speculation the greenback will be the main beneficiary of a global economic slowdown as German business confidence dropped in August more than forecast. The U.S. currency was headed for the biggest monthly gain since the 15-nation euro debuted in 1999, increasing to an 11- month high versus the Australian dollar and gaining versus the New Zealand dollar and the Swedish krona. British sterling declined to the weakest level versus the dollar in two years as mortgage approvals held last month near a decade low.
- Federal Reserve policy makers agreed this month that their next change in interest rates will be to raise them, while reaching no conclusion on the timing of such a decision.
- Crude oil rose $1.13/bbl. on forecasts showing that Hurricane Gustav may enter the Gulf of Mexico.
- Corn, soybeans and wheat fell as the US dollar headed for a second straight monthly gain, eroding the appeal of U.S. supplies to importers. The dollar has jumped 5.4 percent in August against a basket of the euro, yen and four other major currencies, and rose 1.1 percent in July. The Reuters/Jefferies CRB Index of 19 raw materials has declined 4.5 percent this month. Corn futures for December delivery fell 7.25 cents, or 1.2 percent, to $5.9275 a bushel at 10:45 a.m. on the Chicago Board of Trade. The price has declined 26 percent from a record $7.9925 on June 27 as crop conditions improved in July after floods in parts of the U.S. Midwest in June. Soybean futures for November delivery slumped 4.75 cents, or 0.4 percent, to $13.4225 a bushel in Chicago. The price has dropped 18 percent from a record $16.3675 on July 3. Wheat futures for December delivery tumbled 14.5 cents, or 1.7 percent, to $8.5025 a bushel in Chicago. The price has plunged 37 percent from the all-time high of $13.495 on Feb. 27.
- Copper dropped on signs that slumping economic growth is spreading globally, spurring concern demand will decline for the metal used in pipes and wires. Business and consumer confidence in Germany, Europe's biggest economy, dropped in July, separate reports showed today. U.K. mortgage approvals last month held close to the lowest in at least 11 years, the British Bankers' Association said. Before today, copper dropped 19 percent from a record in May.

Russia's RTS Index fell to the lowest level in almost two years and the ruble dropped after the government's decision to recognize Georgia's breakaway regions threatened to deepen a rift with the West. The RTS index of 48 companies posted the biggest decline among 89 global equity measures tracked by Bloomberg, while Russia's currency slid to the lowest level in almost seven months against the dollar. Credit-default swaps on Russian debt climbed 8 basis points, according to CMA Datavision prices in London, as the U.K. Foreign Office ``categorically'' rejected President Dmitry Medvedev's move and Italy and France expressed regret. Investors have pushed the RTS to this quarter's steepest retreat among the world's stock markets as Russia invaded Georgia, tumbling oil prices sent energy producers lower and the government probed steel producer OAO Mechel. Medvedev's statement today accelerated a decline sparked by an earlier drop of more than 2 percent in crude and slumping metal prices.
- Lehman Brothers Holdings Inc.(LEH) may set up a company funded by outside investors to buy some of its mortgage assets, aiming to dispel concern the firm faces crippling losses, people familiar with the discussions said.
- Japanese companies are increasing overseas acquisitions, using their cash-hoards to snap up assets beaten down by the global credit crisis and economic slowdown. The value of foreign purchases by Japanese companies this year has already topped 2007's total by 91 percent, according to data compiled by Bloomberg.
- German business and consumer confidence fell more than economists forecast, heightening concern that Europe's largest economy may be slipping into a recession
- Investors should buy options to insure themselves against a drop in European stocks by June, and sell similar contracts on U.S. shares as profits in Europe are more at risk, according to Barclays Capital.
- Teva Pharmaceutical Industries Ltd. said its Azilect pill is the first to slow the progression of Parkinson's disease in new findings that may increase sales of the medicine to more than $1 billion.
- New York Times Co.(NYT), the third-largest U.S. newspaper publisher, reported revenue fell 10.1 percent in July as a slumping U.S. economy led to the steepest monthly declines in retail and classified advertising sales this year. Ad sales decreased 16.2 percent to $129.4 million from a year earlier, led by drops of 30.1 percent in classifieds and 13.3 percent in retail ads, the New York-based company said today in a statement.

Wall Street Journal:
- Russell Led Hedge Fund Investors to Losses. Small-Stock Expert Is Winding Down Some Poor Funds.

NY Times:
- Honda Motor Gains in US From Fuel-Efficiency Focus.

- Just a day after Barack Obama named Senator Joseph R. Biden Jr. of Delaware as his vice presidential running mate, media reports are tying members of his family to an alleged hedge fund fraud scheme.

- Mozambique’s sugar production may rise to 500,000 metric tons in 2009, citing Antonio Fernando, the company’s trade and industry minister. Production this year will be 295,000 tons compared with 243,000 tons in 2007.

Financial Times:
- Credit Crisis Takes Toll on London.

Sueddeutsche Zeitung:
- European Central Bank Executive Board member Juergen Stark said faster inflation is pushing up euro-zone wages. “Inflation risks over the medium-term have increased,” Stark said. “Broad-based second-round effects add to this.” He expects a period of economic weakness in the euro region followed by a “gradual recovery.”

- Standard & Poor’s forecast that gross domestic product in Ukraine will grow 6.5% this year and 2.5% in 2009. Annual inflation in 2008 will be 27%, S&P said.

- Asian bond spreads widened Tuesday as renewed concerns over the financial sector and slowing global economic growth kept investors away from riskier assets. "The fixed income markets are signaling to central banks the need to prepare for protracted sub-trend growth," said Brett Williams, a credit analyst at BNP Paribas in an email to clients. "Consecutive quarters of negative growth are already a Japanese phenomenon, and are also being priced in for the UK and euro zone. We see prolonged asymmetric downside price risks to credit valuations."

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