Finance Markets

May 3, 2006

Government bond yields down in Eurozone

Permalink: Government bond yields down in Eurozone

Filed under: Bonds, Economy, Politics

Yields were up on Eurozone government bonds on Wednesday ahead of a meeting of the European Central Bank on Thursday. The Bank is expected to keep interest rates at 2.5 percent for the time being, but new economic data has many analysts expecting that rates will be raised sooner rather than later. Producer price inflation was up in the latest figures, while unemployment fell from 8.2 percent in March to 8.1 percent in April, the lowest it has been in four years.

By late afternoon, yields on the two-year Schatz had risen by 4.6 basis points to 3.386 percent, while the ten-year Bund was yielding 3.990 percent, a gain of 1.9 basis points.

In the UK, however, most gilt prices were up and yields were down, primarily on demand for longer-dated issues. Fifty-year gilt yields were down by 5.1 basis points to 4.051 percent, while thirty-year yields dropped 4.4 basis points to 4.247 percent and ten-year gilts were 3.2 basis points lower at a yield of 4.627 percent. Only two-year gilts saw yields rise, and then only by 0.5 basis points to 4.659 percent.

September 19, 2005

German election results cause investor concern

Permalink: German election results cause investor concern

Filed under: Markets, Europe, Politics
German election results cause investor concern

The German election on Sunday, the outcome of which is seen key to economic reform in Germany, ended in a virtual stalemate, with Angela Merkel’s Christian Democrats claiming only three more seats in parliament than Gerhard Schroeder’s Social Democrats.

Each side is claiming victory, and a mandate to rule, even though neither has enough votes to form a majority with their usual allies.

Most analysts think that the eventual outcome will be a “grand coalition” government between the two main parties, but personal animosity between Schroeder and Merkel spurring hostility between the parties, negotiations could take weeks.

The financial markets reacted to the outcome of the election with declines on Monday. German stocks fell by 1.7 percent, while the euro reached a 7-week low in relation to the US dollar.

Analysts feel that economic reform in Germany will be slowed no matter what sort of coalition government emerges, and that the uncertainty about what the final outcome will be will not benefit the German economy.

The parties have until October 18, when parliament must meet, to form a government.

September 16, 2005

CNOOC CFO speaks out on US political pressure

Permalink: CNOOC CFO speaks out on US political pressure

Filed under: Oil, Companies, Politics
CNOOC CFO speaks out on US political pressure

The chief financial officer of CNOOC, the Chinese oil company that made an unsuccessful bid to acquire US oil company Unocal earlier in the year, has spoken out about the political pressure brought to bear in the US to block the bid.

Yang Hua’s comments, to journalists in Hong Kong on Thursday, not only revealed resentment about that political pressure but hinted that CNOOC would be looking in different parts of the world for future acquisition targets.

He called the political pressure against CNOOC’s bid for Unocal an infringement of human rights, asserting that such rights include having guaranteed access to energy, saying that it was important for nations such as his own and India to have long-term energy security.

Mr. Yang would not comment on where his company might look for acquisitions in the future, but mentioned that there are many places in the world where China and Chinese companies are welcomed, naming Africa as an example.

He also mentioned oil and natural gas reserves in Western Australia without saying that his company was interested in acquiring those reserves.

September 14, 2005

European equity markets nervous before German elections

Permalink: European equity markets nervous before German elections

Filed under: Equities, Europe, Politics
European equity markets nervous before German elections

European equities markets gained back a little ground on Wednesday despite continuing concern about the outcome of Sunday’s election in Germany and new gains in the price of crude oil.

The FTSE Eurofirst 300 was up 0.3 percent to 1,205.27, while the Xetra Dax in Germany gained 0.2 percent to end the day at 4,911.17. The Frankfurt-based Dax had been down by 1.8 percent on Tuesday.

The European automobile manufacturing sector saw gains on the day on positive sales numbers from August. Fiat rose 1.5 percent to €7.775 on the announcement that talks with Ford about a partnership to develop small cars for the European market should be concluded by the end of October.

Volkswagen gained 1 percent to €44.56 on news that sales are up by 20 percent. Renault advanced by 0.9 percent to €73.10 on a 9.9 percent increase in sales by Nissan of Japan. Renault owns 44 percent of Nissan. DaimlerChrysler was up 0.3 percent to €40.91.

The oil sector saw gains as well, as Norsk Hydro was up 2.1 percent to NKr716, Statoil ended the day even at NKr158.50, and OMV added 3.2 percent to €48.10 when Merrill Lynch raised its target price to €53 from €43.

In the pharmaceuticals sector, Belgian drug and chemicals group Solvay gained 2.3 percent to €92 on the announcement of plans to open a research and development facility in Shanghai sometime in the first three months of next year.

September 12, 2005

Tokyo equities up on election

Permalink: Tokyo equities up on election

Filed under: Equities, Countries & Regions, Japan, Politics
Foreign stocks down on leading ADR index

The Tokyo equities markets were up substantially on the landslide election victory Sunday of Prime Minister Junichiro Kozumi’s Liberal Democratic party, as foreign investors seemed particularly enthusiastic in the post-election buying.

Upward revision of second-quarter gross domestic product figures also helped the markets to their gains. GDP growth was put at 0.8 percent in the second quarter, up from the original figures of 0.3 percent.

The Nikkei 225 was up 1.6 percent to 12,896.43, while the Topix index gained 1.3 percent to 1,309.80.

The LDP won 296 seats in the lower house of parliament, the first single-party majority there in 15 years. In addition the LDP’s coalition partner, the New Komeito party, won 31 seats, bringing administration-friendly seats to more than two-thirds of the lower house.

Analysts say that this all but guarantees that the prime minister’s postal privatization bill will pass when it is reintroduced in the autumn.

August 22, 2005

Investors assured as Palocci denies scandal involvement

Permalink: Investors assured as Palocci denies scandal involvement

Filed under: Markets, Americas, Politics
Brazil markets disappointed as politics scandal grows

In Brazil on Monday, both the equities markets and currency were up after Finance Minister Antonio Palocci held a press conference Sunday to deny that he has any involvement in the bribes-for-votes scandal currently rocking the country.

He said that he would not resign his post and that Brazil’s economy would survive the current political turmoil.

Analysts said that Mr. Palocci’s speech had been convincing and would go a long way to calming investor speculation over whether or not he would quit his job.

One analyst, however, said that investors would probably remain cautious with testimony scheduled for Wednesday from a former aide of Mr. Palocci’s who accuses the finance minister of taking bribes.

The Bovespa index in Sao Paulo gained 1.97 percent to 27,169, while the real gained 2 percent to rise to 2.402 to the US dollar.

The real had lost 2.8 percent on Friday, while the Bovespa had fallen by 2.75 percent on the accusations against Mr. Palocci, who allegedly took the bribes when he was mayor of Ribeirao Preto.

China makes bid on PetroKazakhstan

Permalink: China makes bid on PetroKazakhstan

Filed under: Oil, China, Politics
China makes bid on PetroKazakhstan

State-owned Chinese oil company CNPC launched on Monday a bid of $4.18 billion for PetroKazakhstan.

Acquisition of the company would give China access to PetroKazakhstan’s 150,000 barrels per day of oil production, only a small fraction of China’s daily consumption.

Still, it is considered a strategic investment for China, which is the second-largest consumer of oil in the world.

If CNPC’s bid is successful, it would mark the first acquisition for China of a foreign-listed oil company.

CNPC might have competition for PetroKazakhstan, however, as Indian oil company, Oil and National Gas Corporation Ltd. (ONGC), has said that it is preparing a counter-bid.

Analysts said that the CNPC bid was high for an asset that is already considered to be past its prime, but it is considered likely that if ONGC makes a bid, it will be larger than that CNPC has made.

News of the Chinese bid sent shares of PetroKazakhstan up by 19 percent to $54.06 on the New York Stock Exchange in morning trade while shares in PetroChina, a unit of CNPC, gained less than 1 percent, to $82.38 on the NYSE.

August 9, 2005

Investor confidence strong in Japan despite political upheaval

Permalink: Investor confidence strong in Japan despite political upheaval

Filed under: Equities, Japan, Politics
Investor confidence strong in Japan despite political upheaval

Political upheaval did not seem to dampen investors’ confidence in Tokyo on Tuesday after post office privatization was voted down by the upper house of parliament on Monday. The Nikkei 225 closed up 1 percent to 11,900.32 and the Topix index gained 1.2 percent to end the session at 1,206.27.

Most analysts seemed to minimize the impact of the vote and the fact that the ruling Liberal Democratic Party might lose power in snap elections scheduled for September 11.

The predominant opinion seems to be that Japan’s current economic recovery is stable enough that it will not be disturbed by the political uncertainty inherent in the upcoming elections. Oil stocks rose on higher crude oil prices.

Nippon Oil gained 2.1 percent to ¥812. Good quarterly reports translated into gains in share prices for camera manufacturer Nikon and nonferrous metal smelter Mitsubishi Materials. Mitsubishi reported a 31 percent rise in quarterly net profits due to high copper prices.

Nikon more than quadrupled its operating profit in the quarter on sales of high-end digital cameras, which spurred it to raise its full-year earnings predictions by 9 percent. This news helped Nikon’s shares to advance by 3.8 percent to ¥1,296.

August 1, 2005

Japan adds tariffs for US WTO violations

Permalink: Japan adds tariffs for US WTO violations

Filed under: US, Japan, Politics
Japan adds tariffs for US WTO violations

Japan announced Monday that it plans to raise tariffs on 15 US products by 15 percent in retaliation for the US continuation of the Byrd Amendment, which gives funds raised by duties charged to foreign countries for their violations of US trade laws directly to industries affected rather than putting the money in the US treasury.

The World Trade Organization ruled in 2003 that the amendment is illegal and ordered the US to repeal it. While the US agreed to do so, it has so far not complied with the WTO’s ruling.

Japan said it would give the US until September 1 to stop operating under the Byrd Amendment, which the WTO said in its ruling unfairly protects American manufacturers. If the US does not change its policy by then, Japan will begin to levy the higher tariffs on products made from US steel, such as ball bearings and airplane parts.

The cost of the new levies could be as much as ¥5.7 billion (£29 million, $51 million), according to sources in the Japanese trade ministry.

The European Union and Canada have already levied tariffs on various US products in connection with its continued operation of the amendment. The EU has hiked tariffs on US-made paper, fabric, clothing, shoes, and machinery, while Canada has put such taxes on oysters, live swine, and cigarettes.

Death of King Fahd causes sharp oil price increases

Permalink: Death of King Fahd causes sharp oil price increases

Filed under: Commodities, Oil, Countries & Regions, Middle East, Politics
Death of King Fahd causes sharp oil price increases

Crude oil prices rose above $61 per barrel on Monday after Saudi Arabia reported the death of King Fahd. He will be succeeded by Crown Prince Abdullah, his half brother, who has been acting ruler since King Fahd suffered a stroke in 1995.

Because of this continuity of rule, Saudi Arabia’s oil policies are not expected to change, and most analysts believe that oil prices will not be materially affected by the king’s death in the long run.

Saudi Arabia’s long-held oil policy has been to keep the world’s markets well-supplied. Some called the rise in prices on Monday after the announcement of the king’s death “psychological” in nature.

The death of the Saudi Arabian king was not the only factor in Monday’s price hikes, with refinery problems in the United States causing more concerns that strong demands might not be able to be met.

Prices for West Texas Intermediate crude were up to $61.23 at one point during the day, but remained below the all-time high of $62.10, which was reached on July 7.

July 20, 2005

WTO returns to Boeing and Airbus dispute

Permalink: WTO returns to Boeing and Airbus dispute

Filed under: Companies, US, Europe, Politics
WTO returns to Boeing and Airbus dispute

The World Trade organization returned to look into the complaints brought by the EU and the US that subsidies paid by the other to the private companies are not allowable under WTO rules.

The EU says that US government subsidies gives Boeing an advantage, while the US claims that subsidies from European governments unfairly aids Airbus.

The WTO investigation is automatic, as it is the second complaint on the matter by both parties. However, a spokesman for the US Trade Representative said from Washington that the US would prefer a negotiated settlement to the dispute, while a EU spokesman said that it remains open to talks toward settlement.

The first complaints came in October of 2004, followed by an agreement to postpone litigation in favor of negotiation.

However, with no settlement forthcoming, both parties returned to the WTO earlier this year to seek a ruling.

A decision from the WTO will not come soon, though, as it is expected to take up to two months to even decide who is to sit on the panel considering the dispute.

A decision is not likely to be reached until the end of next year.

July 8, 2005

Oxley admits excessive reforms

Permalink: Oxley admits excessive reforms

Filed under: US, Politics
Oxley admits excessive reforms

US Representative Michael Oxley, one of the authors of the Sarbanes-Oxley act that requires companies trading on public exchanges to prove they have adequate provision to oversee accounting practices, said at a conference in London on Thursday that he agreed that some of the reforms introduced by the act are “excessive.”

He admitted that the legislation had been pushed through in a rush following the collapse of WorldCom and Enron due to accounting scandals.

He defended the principle of federal mandate of investor-friendly reforms, however, in the face of criticism that such reforms should be left to the individual states.

The act has been the target of criticism from businesses who say that compliance with its provisions costs too much. Small- and medium-sized companies also have complained because there are no exemptions in the act based on business size.

Mr. Oxley said that if he had another chance to write the legislation, e would put in more flexibility for smaller firms.

However, he also said that Congress will not reconsider the issue and that the Securities and Exchange Commission’s consideration of different rules for smaller companies will not lead to reforms of the current rules.

June 28, 2005

US proposes end to credit rating monopolies

Permalink: US proposes end to credit rating monopolies

Filed under: Equities, Companies, US, Politics
US proposes end to credit rating monopolies

Legislation introduced last week in the United States would open up the credit rating industry to more competition.

It would end the current system in which the Securities and Exchange Commission designates only select ratings agencies as “nationally recognized statistical rating organizations.”

Only credit ratings issued by those designated agencies are considered legally valid in the US.

The new legislation would allow any rating agency to register with the SEC as long as it meets certain standards.

Not only would the change open up competition, but it would substantially reduce the power of agencies such as S&P and Moody’s, which together currently hold an 80 percent market share in the industry.

The legislation would also let the SEC inspect rating agencies and regulate how they must handle conflicts of interest and non-public information.

Representative Michael Fitzpatrick, who authored the legislation, criticized the near monopoly of S&P and Moody’s, as well as their failure to warn of the collapses of Enron and WorldCom.

Farmers march in Brazil protest

Permalink: Farmers march in Brazil protest

Filed under: Economy, Americas, Politics
Farmers march in Brazil protest

In Brasilia on Tuesday over 10,000 farmers marched past the palace of President Luiz Inacio Lula da Silva in an attempt to draw government attention to the worst farm crisis in Brazil in at least 10 years.

Prices for several crops have fallen sharply in the past year while Brazil’s currency has gained over 25 percent since last year’s crops were planted.

The head of Aprosoja, the soybean growers’ association, Jose Rogerio Salles, said that while costs were calculated with the real at R$3.20 to the dollar, crops are currently selling at R$2.40 to the dollar.

With soybean prices down 47 percent and cotton prices down 35 percent, farmers stand to lose over R$10 billion this year.

The farmers are asking for aid to assist in refinancing their expenditures for this year’s harvest, but finance minister Antonio Palocci has said that the government does not have the money to help.

According to one economist, Brazilian farmers are more at the mercy of market fluctuations than American and European farmers, with no insurance and no subsidies.

In addition, a drought in the south of Brazil has meant the loss of 15 percent of the grain crop, further hurting farmers.

June 20, 2005

Euro loses value as oil threatens inflation

Permalink: Euro loses value as oil threatens inflation

Filed under: Forex, Euro, Economy, Europe, Politics
Bond investors expect UK rates to rise

The euro lost value against the US dollar, the yen, and sterling on Monday after a European Union summit that could not agree on a budget.

It was additionally affected on continuing rumors that the European Central Bank is thinking about cutting interest rates in the eurozone.

However, analysts say that the fact that the euro continues to decline is making it less likely that the ECB would reduce rates, especially now as crude oil price increases threaten inflation.

The euro fell 1.2 percent to $1.2136 in relation to the US dollar, was down 0.4 percent against the yen to ¥132.81, and declined 0.8 percent to £0.6656 in relation to sterling.

Meanwhile, the US dollar advanced 0.6 percent to ¥109.40 in relation to the yen. It also rose against the Swiss franc, gaining 0.8 percent to SFr1.2724.

The Australian dollar held steady in relation to the US dollar at $9.7762. The New Zealand dollar and sterling did likewise, sitting at $0.7152 and $1.8232 respectively against the US dollar.

Sterling was up in relation to the yen and the Swiss franc, rising 0.4 percent to ¥199.41 in relation to the yen and 0.6 percent against the Swiss franc to SFr2.3197.

US politicians target Airbus

Permalink: US politicians target Airbus

Filed under: Companies, US, Europe, Politics
US politicians target Airbus

The Republican chairman of the aviation subcommittee of the US House of Representatives, John Mica, has introduced a bill which would, if passed and signed by President George W. Bush, require aircraft carrying more than 800 passengers to install the technology to combat Stinger missiles and similar weapons.

That would mean that European aircraft manufacturer Airbus would have to put such technology on its A380 if that aircraft is to fly in US airspace.

While the bill does not specifically mention the Airbus aircraft, the A380 is the only plane currently under development that could carry that many passengers.

The legislation comes at a time when the US and the European Union are engaged in a dispute concerning subsidies to both Airbus and its US rival, Boeing.

Mr. Mica insists that his legislation is not aimed at Airbus, but the European aircraft maker has dismissed the bill as aimed at giving Boeing an advantage over Airbus, and one Airbus official called the legislation “silly”.

The Air Transport Association, which represents US airlines, oppose the legislation as a congressional attempt to mandate aircraft technology.

June 15, 2005

Brazil corruption enquiry hits equity exchange

Permalink: Brazil corruption enquiry hits equity exchange

Filed under: Equities, Markets, Americas, Politics
Brazil corruption enquiry hits equity exchange

In early trade on Wednesday the São Paulo equities exchange in Brazil fell by at least three percent on renewed concern over a corruption scandal involving the ruling Worker’s party (PT).

There had been signs earlier in the week that the scandal was receding when a key witness was only able to provide circumstantial evidence that the PT had bribed some legislators.

However, fresh evidence brought forth Wednesday seemed to conform the information that had been testified to by Roberto Jefferson, head of the PTB party, a left-of-center member of the ruling coalition, when a former secretary to a PT aide said in an interview that she had seen repeated delivers of cash to government officials.

Economic analysts are now convinced that the crisis over the charges will continue for some time, especially as claim and counter-claim during the congressional hearings on the matter make the controversy seem to be tied as much to the upcoming general election in October as to an inquiry into corruption.

Japan to cut working week for parents

Permalink: Japan to cut working week for parents

Filed under: Japan, Politics
Japan to cut working week for parents

The Japanese government is looking at a proposal to cut work hours for government workers with young children in an attempt to make it more attractive for couples to have more children.

The proposal would cut work hours for parents with children age six and under to 4 hours per day (20 hours per week).

At present, national public employees work at least 40 hours per week, although those workers with children less than three years old can currently take off two hours per day.

Critics of the government have said that the public sector is far behind the private sector in this area. The private sector has already put policies into place to help working parents.

Among these policies are provisions for in-house child care, flex-time schedules, and vouchers to pay for babysitters.

Those skeptical of the new government plan, however, wonder who will do the extra work of those on a 20 hour per week schedule.

Others feel that the drastically falling fertility rate in Japan - down to 1.29 children per woman - is a serious enough problem to justify the dramatic plan.

Previous government efforts to raise the birth rate have had little success.

June 13, 2005

G8 agrees to cancel debts

Permalink: G8 agrees to cancel debts

Filed under: Economy, Politics
G8 agrees to cancel debts

While Germany and Japan worried that a G8 plan to provide debt relief to certain poor countries would be perceived as a reward for reckless borrowing, their concerns did not stop the finance minister of the G8 from agreeing to cancel the debts of 18 “poor but well-governed” countries over the weekend.

Concerns were raised, however, that the amount of money involved is really very small - $40 billion in debts belonging to 18 heavily indebted poor countries (HIPC) - and that there is much more to be done for poor nations around the world.

Those pushing for debt relief maintained that this step should be accompanied by extra aid to the countries involved. One organization mentioned a figure of $25 billion per year in extra aid.

It is unclear whether extra payments pledged by rich countries would cover the full amount of payments that would have been made to the World Bank, the International Monetary Fund, and the African Development Bank over the term of the deal.

The nations whose debt was cancelled include Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia. In addition, nine other countries are likely to qualify for debt cancellation under the plan soon.

The guidelines for relief eligibility are those set up by the World Bank and International Monetary Fund in the HIPC Initiative of 1996.

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