business ground

Oil rises above $45 on IEA report, Saudi output

2008-12-11T07:29:00.000-08:00

Oil rises above $45 on IEA report, Saudi output
Oil rose above $45 on Thursday after the International Energy Agency predicted global growth in oil demand would resume in 2009 and Saudi oil minister said OPEC's top exporter pumped less oil than expected last month.
World oil demand growth would return in 2009 after shrinking this year for the first time since 1983, the IEA, which advises 28 industrialised nations on energy policy, said in a monthly report. It also cut forecasts for supply outside OPEC next year.
"We knew the bad bits, demand down, but the supply downgrade was supportive," said Rob Laughlin of MF Global.
U.S. crude was up $2.23 at $45.75 a barrel by 1152 GMT, after surging $1.45 to settle at $43.52 on Wednesday. Brent crude was up $2.55 at $44.95.
The IEA's view that demand would grow in 2009 contrasts with that of the U.S. government's Energy Information Administration, which forecast this week that world consumption would decline by 450,000 bpd next year.
The Paris-based IEA also lowered forecasts for supply from outside OPEC in 2009, leading to a 200,000 bpd increase in the amount it said OPEC needs to pump to balance the market.
SAUDI NUMBERS
Oil also rose as Saudi Oil Minister Ali al-Naimi said the world's largest exporter pumped 8.49 million bpd of oil in November, less than estimated by analysts and in line with its OPEC target.
"We will give you the November number because that's what everybody is looking for," Naimi said during a visit to Poznan, Poland. "It's 8,493,300 barrels per day."
That would put the kingdom's output in line with its implied OPEC target of 8.47 million bpd and is 560,000 bpd less than the IEA's estimate of Saudi November production, published earlier on Thursday, of 9.05 million bpd.
Industry sources told Reuters on Wednesday they expected January shipments to be below Saudi's existing OPEC target, implying it expects OPEC to agree a further supply cut when the producer group meets in Algeria on Dec. 17.
Russia, which will attend the Algeria meeting as an observer amid calls from some members for Moscow to join in output curbs, said on Wednesday it will present its own proposal at the talks.
Indicators on the health of the U.S. economy, such as weekly jobless claims due later in the day, could make grim reading for Wall Street and imply a further weakening in demand from the world's top oil consumer.
Oil has fallen by more than $100 a barrel from a record high of $147.27 reached in the summer, pressured by weakening global demand.

Gold steady after piggybacking on oil gains

2008-08-31T22:10:00.000-07:00

Gold steady after piggybacking on oil gains

SINGAPORE (Reuters) - Gold was trading largely unchanged on Monday, after gaining $5 early in the day on the back of oil-led gains ahead of Hurricane Gustav, but volumes will likely remain low because of a U.S. holidayPlatinum and silver shed early gains, while palladium dropped after hitting a two-week high last week on fund buying. Investors waited for the release of U.S. economic indicators, including Friday's non-farm payrolls.

Gold hit an intraday high of $835.25 an ounce before slipping to $830.50/831.50 an ounce, from $830.35/832.35 an ounce late in New York on Friday. U.S. markets were closed on Monday for Labour Day holiday.

"I guess with the United States on Labour Day today, markets are going to be a bit quieter. But I guess the focus for today and over the next few days will probably be on Hurricane Gustav and its after-effects," said Adrian Koh, an analyst at Phillip Futures.

"I think in the near-term, gold will still be looking at the $845 resistance and we will probably need a clear break above those regions before gold can head higher," he said.

Gold has bounced since tumbling to nine-month lows around $773 an ounce in mid-August but is still well below a record high of $1,030.80 struck in March.

"We saw a sharp decline in currencies and gold recently, and perhaps we are going to consolidate around those levels for a while before the market decides where to go next," said Koh.

"Frankly speaking, I think gold's going to consolidate around these levels. Probably around the $770-$900 ranges," he said.

Oil firmed almost $2 after U.S. energy companies raced to shut down offshore oil production and flood-prone refineries in the Gulf Coast ahead of Hurricane Gustav, which is evoking memories of 2005's Hurricane Katrina.

The benchmark gold contract on the Tokyo Commodity Exchange, August 2009, ended the morning session 31 yen per gram lower at 2,913 yen.

Gold futures for December delivery on the COMEX division of the New York Mercantile Exchange added $0.6 an ounce to $835.90.

Spot platinum fell to $1,459.50/1,479.50 an ounce, from $1,474.50/1,494.50 late in New York. Spot palladium eased to $299.00/307.00 an ounce from $303.00/341.00 an ounce.

Silver firmed to $13.62/13.68 an ounce from $13.58/13.68 an ounce late in New York.

(Reporting by Lewa Pardomuan;)

Two big utilities raise gas and power prices

2008-08-29T09:41:00.000-07:00

Two big utilities raise gas and power prices

LONDON (Reuters) - The last two of Britain's big six energy suppliers increased their retail power and gas prices on Friday, leaving most householders no escape from much bigger fuel bills this winter.RWE Npower increased its household gas prices by 26 percent and power prices by 14 percent from Friday, while ScottishPower customers will pay 34 percent more for gas and 9 percent more for electricity from Monday.

EDF Energy, British Gas, E.ON and Scottish and Southern Energy have all announced big retail price increases since July, blaming soaring wholesale energy costs for the second round of price hikes this year.

"These are difficult times and we understand the financial impact this announcement will have on our customers. Although we're one of the last companies to announce increases, we're sorry we couldn't hold on any longer," Willie MacDiarmid, ScottishPower's Director of Energy Retail, said.

"The continuing volatility in the global market for gas is directly contributing to increasing UK domestic energy prices and ScottishPower is not immune to these rises."

ScottishPower, which is owned by Spain's Iberdrola, said wholesale gas prices had risen by 65 percent in 2008, while coal, which it burns to produce a lot of its electricity, has risen in price by 45 percent.

Npower, owned by German utility RWE, was similarly apologetic about the huge increase in household heating bills for this winter, and pledged more help for the poorest customers.

"We've made this decision extremely reluctantly, especially as household budgets are being squeezed so much at the moment," Giuseppe Di Vita, managing director of Npower, said.

"There is help available for people who can't afford to pay their bills -- and we want our customers to get in touch if they're worried."

GLOBAL PROBLEM

Wholesale gas prices have risen strongly in Britain for over a year due to soaring oil markets and increasing dependence on imported gas, the price of which is often linked to oil.

Power prices are closely tied to wholesale gas costs because about 40 percent of Britain's electricity is produced by burning it. Power prices have not risen as sharply, partly because electricity is also produced from nuclear, wind and hydro power.

Soaring gas prices have led to big increases in household bills across Europe and all the big utilities in Britain put their prices up at the start of the year to pass on increased wholesale costs during 2007.

EDF was the first to hike prices for the second time this year when it put up gas prices by 22 percent and power by 17 percent in late July, followed a week later by British Gas which raised gas prices by 35 percent and power by 9 percent.

German-owned E.ON UK increased its residential gas prices by 26 percent and its power prices by 16 percent last week, followed shortly after by Scottish and Southern Energy's 29.2 percent gas and 19.2 percent power hikes.

(Reporting by Daniel Fineren, editing by Anthony Barker/Alex Lawler)

Stocks fall after personal income data; oil rises

2008-08-29T09:29:00.000-07:00

Stocks fall after personal income data; oil rises

NEW YORK - Stocks declined sharply Friday after the government said personal incomes fell last month by the largest amount in nearly three years while consumer spending slowed. The Dow Jones industrial average fell 150 points, while a disappointing profit report from computer maker Dell Inc. weighed on the technology-heavy Nasdaq composite index.Meanwhile, oil prices rose as investors charted the path of Tropical Storm Gustav as it heads toward the Gulf of Mexico and its oil rigs and refineries.

Wall Street's retreat following the downbeat news about consumers also comes after several days of sizable gains in stocks and on the final session before the long Labor Day weekend. Pre-holiday trading is generally light; therefore, some pullback was to be expected.

Still, investors were uneasy after the Commerce Department reported that personal incomes fell by 0.7 percent in July — well beyond the drop of 0.1 percent that analysts polled by Thomson IFR had predicted on average. That reflects the waning impact of tax rebate checks that Americans received this spring.

As expected, the government also said consumer spending rose a modest 0.2 percent. That was below the 0.6 percent increase seen in June and, accounting for rising prices, spending actually fell by 0.4 percent in July. Wall Street has been particularly concerned about Americans' ability to help the economy grow, since rising prices for gas and food have strapped many household budgets.

"My biggest concern with the income data is that we're getting off to a weak start to the third quarter," said Robert Dye, senior economist at PNC Financial Services Group. "The income numbers are a reminder that the economy is going to look worse before it gets better."

In midday trading, the Dow Jones industrial average fell 155.10, or 1.32 percent, to 11,560.08. The blue chips began the session having logged a three-day advance of nearly 330 points.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 15.33, or 1.18 percent, to 1,285.35. The Nasdaq fell 50.26, or 2.08 percent, to 2,361.38.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to an anemic 298.7 million shares. Trading has been light all week, prompting some observers to dismiss the market's moves as aberrations that occur when many traders are on vacation.

Bond prices fell Friday. The 10-year note's yield, which moves opposite its price, rose to 3.82 percent from 3.79 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose $1.85 to $117.43 per barrel on the New York Mercantile Exchange. So far, oil trading has been fairly orderly as Gustav progresses, although there is concern about damage from the storm or a disruption in the flow of gasoline and other fuel from Gulf Coast refineries.

With many investors fixated on the thickness of the consumers' wallets, Wall Street showed little reaction to the Reuters/University of Michigan's index on consumer sentiment, which rose to 63 for August from 61.2 in July, its highest level in five months. Still, most economists reason that consumers who are upbeat about their prospects are more likely to spend.

Also, investors shrugged off the Chicago Purchasing Managers' index, which measures business conditions across Illinois, Michigan and Indiana. It jumped to 57.9 from 50.8 in July.

In corporate news, Dell fell $3.23, or 13 percent, to $21.98 after the company's profit margins came in well below what analysts had been expecting.

The Russell 2000 index of smaller companies fell 10.15, or 1.36 percent, to 737.64.

In Tokyo, the Nikkei index rose 2.39 percent. In Europe, London's FTSE-100 index rose 0.68 percent, Frankfurt's DAX rose 0.03 percent and the CAC-40 index in Paris rose 0.47 percent

Jim Rogers Says Oil Price Rise to Continue for Decade

2008-08-23T02:22:00.000-07:00

Jim Rogers Says Oil Price Rise to Continue for Decade

Aug. 23 (Bloomberg) -- Jim Rogers, who in April 2006 correctly forecast the oil price would reach $100 a barrel and gold $1,000 an ounce, said he expects oil to continue to increase over the next decade.

``Over the course of time, it's a bull market,'' the chairman of Rogers Holdings said today after an investor conference in Kuala Lumpur. While the oil price could fall to $75 or rise to $175, the market will continue to increase over the next 10 years, he said.

Crude oil futures have dropped 22 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983. Oil slid more than $6 a barrel yesterday, falling the most in percentage terms since December 2004, as the rising dollar curbed demand for commodities as an inflation hedge and BP Plc restored shipments on a Caspian Sea pipeline through the former Soviet republic of Georgia to Turkey.

Rogers said Aug. 21 in Bangkok that declines in commodity prices from record highs represented a temporary reverse in a bull market that will last for several years.

David Cohen, director of Asian forecasting at Action Economics in Singapore, said the rise in the crude oil price ``was a recognition'' of the growing demand of emerging economies like China and India.

``Those countries will continue with their development process and continue to outpace global growth,'' he said.

Dollar Gains

Soybeans, copper, platinum and crude oil have dropped from all-time highs after a rally in the dollar curbed demand for raw materials as a hedge against inflation and concerns increased that economic growth will slow. The Reuters/Jefferies CRB Index plunged 10 percent in July, the biggest drop in 28 years.

Crude-oil futures for October delivery fell $6.59, or 5.4 percent, to $114.59 a barrel on the New York Mercantile Exchange yesterday. Crude oil may rise next week because of a weakening dollar, rising tension between the U.S. and Russia, the world's second-biggest crude exporter after Saudi Arabia, and falling gasoline stockpiles.

Sixteen of 29 analysts surveyed by Bloomberg News, or 55 percent, said prices will increase through Aug. 29. Seven of the respondents, or 24 percent, said oil will be little changed and six said there would be a drop in prices. Last week, 63 percent expected prices to increase.

`` I can certainly see crude continuing above $100 a barrel for the longer term,'' Cohen said. ``The fundamentals of supply and demand should be supportive'' of prices.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net

State lawmakers support Boeing's request on bid

2008-08-23T02:17:00.000-07:00

State lawmakers support Boeing's request on bid

WASHINGTON — Washington state lawmakers are backing a bid by Boeing for more time to bid on a $40 billion contract to build aerial-refueling tankers for the Air Force.

Boeing said Friday it is considering bailing out of the politically charged competition if it does not receive an additional four months from the Pentagon to assemble its offer.

"More time should be given to guarantee that all the bidders can provide the Air Force with the best options possible," said Sen. Maria Cantwell, D-Wash.

Rep. Norm Dicks, D-Wash., said it would be unfair for the Pentagon to hold a competition for a larger tanker than it initially sought without allowing adequate time for Boeing to revise its proposal.

"Given the delays already caused by the Air Force's own flawed selection process, the request for additional time to prepare a proposal based on a different aircraft is entirely reasonable, and it should be granted," Dicks said.

"These planes will be in the fleet for 40 to 60 years, and it's more important to make the right decision" than to make a choice by the end of the year, Dicks said.

Boeing lost the initial round in February to Northrop Grumman and its partner, Airbus parent European Aeronautic Defence and Space. The competition was reopened last month after government auditors found "significant errors" in the Air Force's decision.

Northrop Grumman Chief Operating Officer and President Wes Bush criticized Boeing's request for additional time, saying it will only cause more delays and higher costs for the taxpayer.

Sen. Patty Murray, D-Wash., said that because of major changes made by the Pentagon to its draft bid request, both companies deserve more time to respond.

"This is a $40 billion contract to design and build the backbone of our nation's military might and the requirements have changed overnight," Murray said in a statement. "The draft RFP clearly favors a larger plane.

"Providing only 60 days for a major design overhaul not only skews the competition toward Airbus but also breaks the promise of a fair competition for our military and taxpayers."

Murray and other Washington lawmakers say the Pentagon appears biased against Boeing as it seeks bids to build 179 aerial-refueling tankers to replace the Air Force's aging fleet.

The lawmakers have threatened congressional action if they are not satisfied that the revised competition is fair and transparent.

Fannie, Freddie: Plunge then rebound

2008-08-21T07:58:00.000-07:00

Fannie, Freddie: Plunge then rebound

NEW YORK (CNNMoney.com) -- Shares of mortgage finance giants Fannie Mae and Freddie Mac plunged and then rebounded in early trading on Thursday after new reports that the federal government may have to take over the troubled firms.

Fannie fell as much as 87 cents, or 20% to $3.53, but then rebounded to a small gain a half-hour into the trading day. Freddie shares tumbled as much as 99 cents, or 30%, to a record low before rebounding. The lows of the day represented a 20-year low for Fannie (FNM, Fortune 500) when adjusted for splits, and a record low on that basis for Freddie (FRE, Fortune 500), which started trading in 1989.

The Wall Street Journal Thursday said that the firms faced a need to refinance $225 billion in mostly short-term debt by the end on September. Concerns about the firms' ability to refinance the debt had prompted Treasury Department officials to begin developing a series of options to shore up the companies if necessary.

The two shareholder-owned firms were set up by the federal government to provide financing to the mortgage market. Today they are the primary source of funding for banks and other home lenders, and they own or guarantee more than $5 trillion in mortgages. But both have reported large losses due to rising foreclosures and declining home prices on the loans they own or back.

Earlier this summer, Treasury Secretary Henry Paulson secured congressional authority to lend the firms an unlimited amount of money if necessary, as well as the ability to have the government buy shares in the two firms. It is widely expected that such a move would wipe out the holdings of current shareholders.

Paulson and executives of the firms have continued to insist that they don't expect such moves to be necessary, as they have stated that both firms have capital in excess of levels required by regulators to cover their expected future losses. But the investors have not been convinced, sending shares down more than 60% in the first three trading days of this week alone. Shares have now lost nearly 90% year-to-date.

2008-08-21T07:39:00.000-07:00

Schaeffler, run by billionaire Maria-Elisabeth Schaeffler, won't go over a 49.99% ownership threshold in Continental for at least four years.
In addition, Schaeffler will pay Continental up to 522 million euros to compensate for any adverse changes to financing agreements and taxes as a result of the new investor agreement.
Including the possible compensation, Schaeffler may pay up to 6.5 billion euros ($9.6 billion) for the minority stake.
It also will give pre-emption rights on any Continental stock sale and won't press for a change in Continental's headquarters, stock exchange listing, dividend policy or gearing.
Germany's former chancellor, Gerhard Schroeder, will be authorized to enforce the terms of the agreement and will have the power to request information from Schaeffler about its level of compliance.
On the other hand, Continental CEO Manfred Wennemer, who had resisted the Schaeffler overtures, will be leaving by the end of the month.

Schaeffler had never shown much of an interest in completing a full buyout of Continental, and the group is paying less than the 80 to 85 euros a share that some analysts believe Continental is worth.
Instead, it's going to get board seats on Continental and will be examining cooperating with its target, such as in the production of powertrain systems.
The agreement also shows how Schaeffler's use of options and swaps to build a 36% stake in Continental paid handsome dividends.
Porsche also was able to build a large stake in Volkswagen in the same manner, a move that in other countries would be illegal without first publicly declaring an interest to the broader market.
Schaeffler pounced at a time when Continental had been struggling, in part due to the wider difficulties for carmakers around the globe and also due to its 11.4 billion euro acquisition of the VDO automotive electronics unit of Siemens.
In mid-morning trade, shares of Continental rose 0.6% to 73.91 euros.
Tim Schuldt, an analyst at German brokerage Equinet, swiftly downgraded the company to hold from buy.
"If the acceptance of the offer is too high, Schaeffler might be forced to sell some of its stake in the market in order to keep its stake below 50%," he said. "A further increase of the take-over offer is highly unlikely following today's agreement."

SSE hikes gas prices and power

2008-08-21T07:32:00.000-07:00

SSE hikes gas prices and power
LONDON (Reuters) - Scottish and Southern Energy is to increase its gas prices for residential customers by an average of 29.2 percent and power prices by 19.2 percent from Monday, the company said on Thursday afternoonThe announcement comes just four hours after rival E.ON UK announced similar increases, with both companies blaming soaring wholesale energy prices over the last year.

"Global demand for all types of energy has risen steeply and supplies of finite resources like oil and gas are under intense pressure," Alistair Phillips-Davies, Energy Supply Director of SSE said.

SSE said it would not increase prices again this year but warned that soaring global energy prices over the last year could force further increases beyond that.

"The world is experiencing an energy shock of a kind not seen since the early 1970s, but which is likely to have more profound and lasting consequences," Phillips-Davies said.

"The prices we all pay for electricity and gas are ultimately determined by the law of supply and demand in a global economy. This is what lies behind much of the dramatic increase in wholesale energy prices we have experienced."

The company said average wholesale power and gas prices had risen by 50 to 60 percent between February and July 2008.

SSE said the increases would not apply to poorer customers on its social tariff until the end of this winter, at the earliest.

(Reporting by Daniel Fineren)

Bank of Japan Holds Rates Steady,

2008-08-19T05:36:00.000-07:00

Bank of Japan Holds Rates Steady,
Offers Grim Economic Outlook
TOKYO -- The Bank of Japan held interest rates steady Tuesday but downgraded its assessment of the domestic economy, describing it as "sluggish" for the first time in 10 years.

Together with a recent economic downgrade by the government, the BOJ's revision suggests Japan has entered a recession. That means the country's policy interest rate, which the BOJ board voted unanimously Tuesday to keep at 0.5%, is likely to remain accommodative for the foreseeable future.

BOJ governor Masaaki Shirakawa said Japan isn't likely to suffer a deep downturn, but it is unclear when the economy will get back on the recovery track given lingering weakness around the globe.

In a statement released with its interest-rate decision, the central bank downgraded its view on the economy to reflect a string of recent weak data. Japan's gross domestic product, for example, shrank by an annualized 2.4% in the April-June period, officials said last week.

The BOJ statement cited "high energy and materials prices and weaker growth in exports" as key factors in the downturn.

It was the first time since May 1998, when Japan was suffering through a recession caused by a major banking crisis, that the BOJ has called the economy "sluggish."

"The timing of an economic recovery is likely to be delayed slightly longer than initially expected," Mr. Shirakawa said at a news conference following the board meeting. Mr. Shirakawa said it remains to be seen whether crude oil prices will keep falling and concerns over the U.S. economy and financial markets will fade. Still, he said "the possibility of a serious downtown in the near future is likely small."

The government this month also cut its view of the economy to "weakening." Yet despite the mounting evidence that the domestic and global economies have entered a downturn, Mr. Shirakawa said the BOJ still places equal weight on downside risks to the economy and upside risks to prices.

In the statement accompanying its rate decision, the policy board said inflation, as measured by the consumer price index, could move above the current 2% -- already its highest level since the early 1990s -- in the coming months, but should "moderate gradually thereafter."

"Thus it is likely that the economy will return onto a sustainable growth path with price stability," the statement said.

Lehman May Report $4 Billion Writedown, JPMorgan Says (Update2)

2008-08-19T05:20:00.000-07:00

Lehman May Report $4 Billion Writedown, JPMorgan Says (Update2)

``The credit environment continues to be difficult,'' New York-based analysts led by Kenneth Worthington wrote in a report yesterday. ``It will be another difficult quarter for Lehman.''

Lehman may mark down some of its $61 billion of mortgage and other asset-backed securities after benchmark residential and commercial mortgage-related indexes declined by as much as 20 percent, the analysts wrote. Lehman may have already been selling some commercial mortgage assets, they added.

Lehman, the largest underwriter of mortgage bonds before the subprime market collapsed, has slumped 77 percent in New York trading as it struggles to pare its holdings of mortgage- related debt. The New York-based bank has reported writedowns and credit losses of $8.2 billion in the past 12 months, according to data compiled by Bloomberg.

The analysts cut their per-share estimate for the third quarter to a loss of $3.30 from a 35-cent profit previously. They expect Lehman to report a loss of $6.77 a share for the full year, compared with their previous forecast of a $2.35 loss. They maintained their ``neutral'' recommendation on the stock.

`Mortgage Troubles'

``Lehman continues to have significant exposure to mortgages and asset backed securities,'' JPMorgan's Worthington said in the report. ``We believe management wants to leave its mortgage troubles behind and restore confidence.''

Securities firms are cutting their holdings of riskier loans and selling assets to shore up capital. Lehman wants to sell 20 percent of its more than $60 billion of ``distressed'' assets in the third quarter, Merrill Lynch & Co. analyst Guy Moszkowski, said in a July 28 note to clients. He expects the firm to post a $2.5 billion writedown on home loans in the quarter.

Lehman dropped 7.1 percent to $15.03 in New York yesterday, valuing the firm at about $10.4 billion. The stock is the worst performer this year in the 11-company Amex Securities Broker/Dealer Index. The stock was little-changed in German trading today.

The securities firm will probably retain its Neuberger Berman LLC asset-management unit, the JPMorgan analysts said.

``We don't think the ratings agencies would welcome this divestiture,'' they added.

The bank is in talks to sell parts of its investment management unit to potential bidders including private equity firms Carlyle Group, Hellman & Friedman LLC and General Atlantic LLC, the Wall Street Journal reported earlier today.

The firm has sent them detailed financial information about its hedge funds, private clients, private equity and Neuberger Berman units, the newspaper said, citing people familiar with the matter that it didn't identify. The investment management unit is valued at between $8 billion and $10 billion, the newspaper cited analysts as saying.

Patrick Meyer, a spokesman for Lehman in London, declined to comment on the report.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net; Joyce Moullakis in London at jmoullakis@bloomberg.net

German Investor Confidence Rises More Than Forecast (Update2)

2008-08-19T05:11:00.000-07:00

German Investor Confidence Rises More Than Forecast (Update2)

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations rose to minus 55.5 from minus 63.9 in July, the lowest since the survey began in 1991. Economists expected a gain to minus 62, the median of 43 forecasts in a Bloomberg News survey shows.

A 24 percent drop in oil prices from a July 11 record of $147.27 a barrel leaves companies with more money to spend just as a weaker euro underpins exports. Germany's BGA trade association today maintained its 2008 forecast for economic growth. Still, the DAX benchmark share index has shed 20 percent this year.

The report is ``providing a glimmer of hope that there is light at the end of the tunnel,'' Martin van Vliet, an economist at ING Group in Amsterdam, said in an e-mailed note today. ``We would caution against becoming overexcited about this. Investor confidence is still at recessionary levels.''

The German economy may expand 1.7 percent this year before cooling to less than 1 percent in 2009, the BGA said today. BGA President Anton Boerner said the economy is in a ``corrective phase'' after a ``strong start.''

`Positive Factors'

``We had two positive factors: the drop in oil prices and the depreciation of the euro,'' Sandra Schmidt, an economist at ZEW, said in an interview with Bloomberg Television. It ``should also have a positive influence on the indicator in the future.''

ThyssenKrupp AG and Salzgitter AG, Germany's largest steelmakers, on Aug. 14 both increased their full-year earnings forecasts on rising demand from builders and automakers. Salzgitter Chief Executive Officer Wolfgang Leese said that day that markets are ``stable.''

Still, gross domestic product may rise just 0.1 percent in the three months through September, the Berlin-based DIW economic institute predicted yesterday. In the second quarter, the economy shrank 0.5 percent from the first three months.

In the economy of the 15 euro nations, the slowdown is already deepening. Consumer and executive confidence in the outlook fell by the most since the Sept. 11 terrorist attacks. European manufacturing and service industries probably shrank for a third month in August, a Bloomberg survey shows.

Faster Inflation

Tognum AG, the German diesel-engine maker that former owner Daimler AG is reinvesting in, scaled back 2008 sales and margin forecasts on Aug. 12 after a declining dollar and slowing economic growth led to a drop in second-quarter orders.

Some companies are passing on higher costs to bolster earnings. German producer-price inflation accelerated to the fastest pace since October 1981 last month, the Federal Statistics Office in Wiesbaden said today.

While the euro's 8 percent drop against the dollar over the past month has made exports more affordable abroad, the U.S. economy, the world's largest, is grappling with a worsening housing slump, curbing economic growth.

The single currency rose to as high as $1.4690 after the release from $1.4665. It has since retreated to $1.4668 at 12:07 p.m. in Frankfurt.

Looking East

Some companies are looking to expand in faster-growing economies to boost sales. Hochtief AG, Germany's largest builder, on Aug. 14 raised its full-year earnings forecasts on rising demand in markets such as Australia and Asia.

``The biggest weakness is North America,'' Juergen Hambrecht, chief executive officer of BASF SE, the world's largest chemical producer, said last month. ``Asia and South America expand at a robust pace. In these regions, we'll continue to have very, very robust growth, also in the future.''

The euro dropped almost 8 cents after European Central Bank President Jean-Claude Trichet on Aug. 7 said growth will be ``particularly weak'' through the third quarter. The Frankfurt- based central bank that day kept its key rate at 4.25 percent.

The worsening European growth outlook may stop the central bank from raising rates further. Eonia forward contracts show investors have scaled back bets on higher interest rates, with the rate on the December contract at 4.24 percent today, down from 4.43 percent a month ago.

``The economic dynamic has considerably weakened and moved into a flattening phase, which will also influence next year,'' said Stephan Rieke, an economist at BHF-Bank AG in Frankfurt. Weaker growth also ``opens the window for inflation to slow, paving the way for the ECB to cut interest rates.''

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net

Fannie, Freddie shares battered

2008-08-19T05:04:00.000-07:00

Fannie, Freddie shares battered

Fannie stock falls 22% and Freddie 25% to near two-decade lows. Media report suggests the Bush administration doubts mortgage giant firms will be able to raise needed capital.
NEW YORK (CNNMoney.com) -- Shares of mortgage finance giants Fannie Mae and Freddie Mac, suffering their worst day since a mid-July free fall, plunged Monday to their lowest points in nearly two decades.

Fannie (FNM, Fortune 500) fell 22% and Freddie (FRE, Fortune 500) lost 25% after a Barron's report suggested that a government takeover of the troubled companies is inevitable. Fannie closed down $1.76 to $6.15 a share, the stock's lowest level since May 12, 1989, according to the Center for Research in Security Prices at the University of Chicago business school. Freddie ended down $1.46 to $4.39, its lowest point since Jan. 18, 1991.

Shares of both companies have plunged more than 80% since the start of the year.

In addition, the price of credit default swaps, financial instruments used to protect bondholders against default, jumped 11% at Fannie and 8% for Freddie in trading on Monday, according to tracking service CMA Datavision. That increase indicates that traders are pricing in a higher chance of a default on the firms' subordinated debt in the next five years. A wire service report on the change in those credit default swaps pricing fed into the sell-off of Fannie and Freddie shares just before noon.

Monday's stock plunges were ignited by an article in the financial newsweekly Barron's. The article cited an unnamed Bush administration official as saying that officials don't expect the two firms to be able to raise needed capital from private sector investors to cover future losses from rising defaults and foreclosures.

The article said that inability to raise capital would leave the government no choice but to have the federal government loan them money or buy their equity.

Congress recently granted the Treasury Department the power to loan Fannie and Freddie an unlimited amount of money or to buy up their shares. The Barron's article suggested that such an infusion of capital would wipe out the holdings of current shareholders.

Fannie spokesman Jason Lobo declined to comment. Freddie spokeswoman Sharon McHale denied that the company is in trouble.

"It significantly overstates our financial situation," McHale said. "We continue to be adequately capitalized and we are committed to raising additional capital. We're financially sound and have strong liquidity."

Officials from Freddie have pledged to regulators that the company will raise $5.5 billion in additional capital, but even without that the firm is meeting current capital requirements. Executives have not given a time frame for when they will raise that additional financial cushion.

"Any capital that we do raise will depend on a variety of factors, including prevailing market conditions," McHale said.

Executives at Fannie and Freddie, as well as Treasury Secretary Henry Paulson, have repeatedly said they do not expect the firms will need to turn to the government for loans or an equity infusion. Both recently reported steep quarterly losses that were much larger than expected. But even with those losses, executives said they have capital in excess of minimum requirements

Euro hits six-month dollar low

2008-08-19T04:59:00.000-07:00

Euro hits six-month dollar low

LONDON (AFP) - The euro slid to a six-month low against the dollar on Tuesday amid concerns over a weaker eurozone, while the US currency fell versus the yen on fresh worries about the health of US mortgage giants, dealers said.The European single currency dropped to 1.4631 dollars -- the lowest level since February. In later London trading, the euro stood at 1.4671 dollars compared with 1.4696 in New York late on Monday.

Against the Japanese currency, the dollar slipped to 109.90 yen from 110.09.

German investor confidence improved slightly in August, a key economic indicator suggested on Tuesday, thanks to the recent fall in the price of oil and a weakening of the euro.

The ZEW research institute said its index of economic sentiment stood at minus 55.5 points, up 8.4 points from July when the survey hit its lowest level since its creation in December 1991.

"The pick-up in the German ZEW index in August shows that investors' expectations for the economy have improved, but this is little consolation given the still low level of the index," said Capital Economics analyst Jennifer McKeown.

Elsewhere, the dollar slipped against the yen as currency markets also took their cue from a slump on Wall Street overnight caused by a report that mortgage finance giants Fannie Mae and Freddie Mac were in need of a government bailout.

Another report that US investment bank Lehman Brothers would post a loss of 1.8 billion dollars for the third quarter added to market worries that the credit crunch is far from over.

The yen tends to benefit from jitters on the financial market because it is often used to fund risky trades.

But some market watchers predicted the yen's rebound would be short-lived.

"The dollar's recent rise was driven mainly by falls in oil prices," Minoru Shioiri, senior foreign exchange manager at Mitsubishi UFJ Securities, told Dow Jones Newswires.

"But because the majority view is that there is more room for falls in oil prices, the dollar's current fall is only a correction and it's expected to resume rising again."

Traders showed little reaction to a decision by the Bank of Japan to leave its key interest rate on hold at 0.50 percent as it downgraded its assessment of Asia's largest economy, predicting continued "sluggish" growth.

"The grimmer view may prompt some players to start speculating (about) a higher possibility of a rate cut down the road," said Tohru Sasaki, chief foreign-exchange strategist at JP Morgan Chase in Tokyo.

"But because interest rate differentials (between countries) are not a trading factor right now, such speculation would have little impact."

In London trading on Tuesday, the euro changed hands at 1.4671 dollars against 1.4696 late on Monday, at 161.24 yen (161.83), 0.7893 pounds (0.7879) and 1.6117 Swiss francs (1.6127).

The dollar stood at 109.90 yen (110.09) and 1.0987 Swiss francs (1.0972).

The pound was at 1.8592 dollars (1.8650).

On the London Bullion Market, the price of gold fell to 789.85 dollars per ounce from 796.25 dollars late on Monday

BOJ Says Economy Is `Sluggish,' Keeps Rate at 0.5% (Update1)

2008-08-18T23:28:00.000-07:00

BOJ Says Economy Is `Sluggish,' Keeps Rate at 0.5% (Update1)
Aug. 19 (Bloomberg) -- The Bank of Japan said it became more pessimistic about the outlook for the economy and kept interest rates at the lowest level among industrial nations.

``Economic growth has been sluggish against the backdrop of high energy and materials prices and weaker growth in exports,'' Governor Masaaki Shirakawa and his six colleagues said in a statement today after leaving the key rate at 0.5 percent.

The world's second-largest economy shrank at an annual 2.4 percent pace in the second quarter, as decade-high inflation deterred spending and a global slowdown dented exports. In April, the central bank shelved a policy of raising rates, and with Japan on the verge of a recession, economists say borrowing costs are unlikely to increase until next year at the earliest.

``Now the focus is on how long the downturn will last,'' said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. ``The economy isn't likely to recover until 2010, and rates won't rise before then.''

Financial-market instability, the U.S. and global slowdown, and rising commodity prices all pose risks to Japan's economy, the central bank said in the statement. The bank cut its assessment for the second straight month, after saying in July that the economy was ``slowing further.''

`Moderate Growth Path'

``While growth will likely remain sluggish for the time being, it is expected to return gradually onto a moderate growth path'' as commodity prices ease and the global economy recovers, the bank said.

The yen traded at 109.74 per dollar compared with 109.80 before the announcement. The yield on Japan's 10-year bond rose half a basis point to 1.445 percent. The rate decision was unanimous, and expected by all 32 economists surveyed.

Analysts don't anticipate the bank will reduce borrowing costs because Shirakawa is wary that keeping them low could stimulate the economy too much once it recovers.

``If the downside risks to the economy turn out to decrease, there will be an increased risk that prolonging the period of accommodative financial conditions will lead to swings in economic activity and prices,'' the bank said.

Of 26 economists who gave predictions through June, 21 said there will be no move by then. Four estimated higher rates and one forecast a cut.

Resume Rate Increases

``The Bank of Japan will resume seeking normalization of interest rates once the economy shows signs of a recovery,'' said Teizo Taya, a former central bank policy maker and now adviser to the Daiwa Research Institute in Tokyo. ``Still, it's hard to anticipate a hike this year or even early next year.''

Exports dropped the most since the 2001-2002 recession, last week's gross domestic product report showed, robbing Japan of the engine that drove its longest postwar expansion. The government earlier this month described the economy as ``weakening,'' language it hadn't used since 2001, after reports showed shipments abroad, factory production and household spending all fell in June and the unemployment rate increased.

The central bank last month cut its growth forecast for the year ending March to 1.2 percent from 1.5 percent, saying higher commodity prices are hurting the expansion. Policy makers may have to lower the estimate again when they publish their next outlook in October, said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo.

Growth Outlook

``It's already become difficult for the economy to expand as much as the central bank forecast last month,'' said Kanno, who used to work at the Bank of Japan.

Rising energy and raw-material costs are squeezing businesses and consumers in a country that imports almost all of its oil and 60 percent of its food.

Consumer prices excluding fresh food climbed 1.9 percent in June from a year earlier, the fastest pace in a decade. Prices businesses pay for fuel and materials surged 7.1 percent in July, the most since the wake of the second oil crisis 27 years ago.

The central bank said consumer prices are ``expected to be somewhat higher over the coming months but to moderate gradually thereafter.''

So far there's little evidence that Japan's inflation is spreading from imported fuel and foods. Excluding food and energy, consumer prices rose 0.1 percent in June. The equivalent gauge in the U.S. climbed 2.5 percent last month.

``Even though Japan's inflation is surging, it remains considerably low compared with other countries','' said Ryutaro Kono, chief economist at BNP Paribas in Tokyo. ``A rate increase is just not an option.''

To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

European shares lose ground as oil prices climb

2008-08-18T06:36:00.000-07:00

European shares lose ground as oil prices climb

LONDON (AFP) - Europe's main stock markets weakened on Monday as higher crude oil prices stoked investor concerns about rising energy costs that erode company profits, dealers said.In late morning European trading, the FTSE 100 index of top companies stood at 5,439.20 points, a drop of 0.29 percent.

Frankfurt's DAX 30 slid 0.65 percent to 6,404.18 points and the Paris CAC 40 handed back 0.45 percent to 4,433.77 near the half-way mark.

The Euro Stoxx 50 index of leading eurozone shares fell 0.63 percent to 3,346.25 points.

In foreign exchange trade, the European single currency recovered to 1.4737 dollars after striking a six-month low on Friday.

World oil prices moved higher on Monday, after sharp losses last week, as traders fretted about the potential impact of Tropical Storm Fay on energy facilities in the Gulf of Mexico, dealers said.

Airlines were among the hardest hit in European stock market trading on Monday because of the soaring cost of jet fuel, analysts said.

Kerosene is refined from crude oil, whose prices had rocketed to record highs above 147 dollars a barrel in July.

In London, British Airways' share price dived 2.78 percent lower to 253.75 pence.

In Paris, Air France-KLM stock shed 2.47 percent to 16.98 euros and Lufthansa shares lost 1.90 percent to 14.99 euros in Frankfurt.

On the positive side, BHP Billiton saw its share price gain 0.59 percent to 1,538 pence in London.

The world's biggest mining company posted a record 15.39-billion-US-dollar annual net profit on Monday -- and said it expected Asian demand to remain strong despite a global slowdown.

Boosted by higher earnings from its petroleum and iron ore divisions, the Anglo-Australian resources giant beat last year's net profit of 13.42 billion dollars by 14.7 percent to set an Australian corporate record.

The firm, which in February embarked on a hostile takeover bid for rival Rio Tinto, said average prices for most of its major commodities were higher in the financial year to June 30, 2008.

"Demand for raw materials in the emerging market economies has remained strong," it said. "In particular, China remains a key driver of global commodity consumption through its position as a net importer of raw materials."

Before the weekend, Wall Street closed narrowly mixed Friday as falling oil prices tamped down inflation worries and the dollar continued to rally on mounting signs of a slowing global economy.

The Dow Jones Industrial Average advanced 0.38 percent to close at 11,659.90 points, while the tech-rich Nasdaq composite fell 0.05 percent to 2,452.52.

The broad-market Standard & Poor's 500 index gained 0.41 percent to finish at 1,298.20 points.

In Asia on Monday, Japanese share prices gained 1.12 percent, helped by a rebound in financial issues and a weaker yen, which is good for exporters, dealers said.

However, Hong Kong shares closed down 1.09 percent, hit by worries about slowing economic growth and another dive in mainland Chinese stocks.

UK 'Recession And Unemployment'

2008-08-18T06:33:00.000-07:00

UK 'Recession And Unemployment'

Some 300,000 people will lose their jobs over the next two to three years and unemployment levels may top two million, Britain's business leaders sayThe British Chambers of Commerce (BCC) also forecasts the UK economy will enter recession within the coming year.

In its latest quarterly economic forecast, the BCC said Britain was heading into a "technical" recession of two or more quarters of declining output over the next six or nine months.

But a major recession similar to the downturn seen in the early 1990s was unlikely, the organisation said.

However, the forecast also predicted that unemployment would climb by some 300,000 and could break through the two million barrier if conditions deteriorated.

The main reasons for the slump will be a "very sharp" slowdown in consumer spending growth as households tighten their belts amid soaring bills and falling house prices, the BCC said.

Last week, Bank of England Governor Mervyn King also warned that the UK economy could suffer two quarters of negative growth as it went through a "difficult and painful adjustment".

Inflation hit a record 4.4% in July, and Mr King warned it could spend the rest of this year around the 5% mark before falling away through 2009.

David Kern, the BCC's economic adviser, said the UK urgently needed an interest rate cut to stimulate the economy.

The Bank of England's Monetary Policy Committee (MPC) held rates at 5% in July, the third month in a row they were left unchanged.

"Our view is that the threats to growth are more serious and more immediate than the risks of higher inflation," Mr Kern said.

"The UK economy urgently needs an interest rate cut to counter threats of recession."

The report also warned that if the global slowdown got even worse, the MPC decided not to cut interest rates and the Government did not take corrective action, the UK's economic plight could become even worse than it had forecast.

UBS to return to profitability in 2009: chairman

2008-08-17T05:18:00.000-07:00

UBS to return to profitability in 2009: chairman
ZURICH (AFP) - Switzerland's biggest bank UBS, which has lost billions in the United States subprime crisis, would return to profitability next year, its chairman Peter Kurer said in remarks published Sunday."We will be profitable again in 2009," Kurer said in an interview with Swiss Sunday newspaper NZZ am Sonntag.

One of the worst-hit banks by the subprime crisis, UBS has written down some 42.5 billion dollars on its subprime-related assets.

For its second quarter, it posted a net loss of 358 million Swiss francs (221 million euros, 329 million dollars).

Kurer said the current situation faced by the bank could be compared to the aftermath of a severe storm.

"One must first remove the fallen trees, then tidy up the house and cellar, and in the third phase, bring the shine back to the house," he said, adding that he believes the bank to be now in the second phase.

"And I hope that we can end this quickly, maybe already by year-end. To bring the shine back to the house, that would take based on experience two to three years," he said.

BAA may be ordered to sell off some airports: chairman

2008-08-16T06:54:00.000-07:00

BAA may be ordered to sell off some airports: chairman
LONDON (AFP) - The chairman of BAA said he expected Britain's biggest airport operator to be ordered to break up the company, in an interview Saturday, which would mean selling off some of its key airportsNigel Rudd acknowledged that Britain's Competition Commission regulator could force the move when it announces next week the provisional findings of an inquiry into BAA, which is owned by Ferrovial of Spain.

One proposal to be put forward by the commission will be stripping BAA of two of the three London airports it operates -- Heathrow, Gatwick and Stansted -- the Financial Times newspaper reported.

Asked about reports that the commission will conclude that BAA's ownership of seven British airports is not in the public interest, Rudd told the BBC: "(From) all the things that I'm hearing, it looks like they will announce that."

But he insisted the break-up of BAA would not be a "disaster" and said BAA's owners had already received "huge expressions of interest" from potential buyers for Gatwick and Stansted, although neither is for sale at the moment.

BAA holds a 60 percent market share of all passengers passing through British airports, a figure which rises to 90 percent around London, according to Competition Commission data quoted by the FT

Euro falls on prospect of ECB rate cuts

2008-08-15T06:36:00.000-07:00

Euro falls on prospect of ECB rate cuts

LONDON (AFP) - The dollar hit a near six-month high against the euro Friday on speculation that the European Central Bank would begin cutting interest rates next year to boost the shrinking eurozone economy.In morning trade, the European single currency sank as low as 1.4698 dollars -- the lowest point since February 20. It later stood at 1.4716, down from 1.4824 late in New York on Thursday.

The dollar rose to 110.58 yen from 109.66 after earlier touching 110.66 -- a high against the Japanese currency last seen in January.

The greenback regained the key 110-yen level after a spike in US consumer price inflation sparked talk of Federal Reserve interest rate hikes, which could make the dollar more attractive to investors.

Investors will focus later Friday on upcoming economic data in the United States, including the University Of Michigan consumer confidence survey and the latest reading on industrial production.

"This survey could give some hints if US consumers are able to drag the economy out of the mud," Ulrich Leuchtmann, a currency strategist with Commerzbank in Frankfurt, told Dow Jones Newswires.

The euro began sliding against the dollar on Thursday after it emerged that the eurozone economy contracted 0.2 percent in the second quarter, rekindling speculation that the European Central Bank may have to lower borrowing costs to shore up flagging growth.

While the ECB is unlikely to move this year, "they will eventually start cutting rates from the early part of next year and that will be a key factor which will contribute to more euro weakness," predicted David Mann, currency strategist at Standard Chartered in Hong Kong.

"We probably have seen the top of the euro at 1.60," although the euro was unlikely to tumble below 1.40 dollars in the near future, he said.

"We're not convinced that we will see any interest rate hikes in the US this year, which will ultimately disappoint the markets," added Mann.

Elsewhere, the British pound continued to struggle against the dollar in morning trade.

Sterling slumped to 1.8512 dollars -- the lowest point since July 2006 -- after the Bank of England issued a gloomy economic outlook earlier this week.

In London trading on Friday, the euro changed hands at 1.4716 dollars against 1.4885 late on Thursday, at 162.73 yen (163.10), 0.7943 pounds (0.7969) and 1.6187 Swiss francs (1.6190).

The dollar stood at 110.58 yen (109.57) and 1.1000 Swiss francs (1.0877).

The pound was at 1.8530 dollars (1.8677).

On the London Bullion Market, the price of gold sank to 783.09 dollars per ounce from 818 dollars late on Thursday

Sterling slides to two-year low against dollar

2008-08-15T06:33:00.000-07:00

Sterling slides to two-year low against dollar

LONDON (AFP) - The British pound hit a two-year low point against the dollar on Friday as dealers predicted interest rate cuts from the Bank of England to combat flagging economic growthSterling slumped to 1.8512 dollars -- the lowest point since July 26, 2006. It later Friday stood at 1.8530, from 1.8677 in New York on Thursday.

The pound has shed more than 12 percent in value since hitting a 26-year high of 2.1161 dollars on November 9.

The British currency dived lower this week after the Bank of England issued a gloomy economic outlook.

The central bank had Wednesday said that British inflation could fall sharply toward the government's target of 2.0 percent from early 2009, which prompted traders to bet on interest rate cuts sooner than previously expected.

Barclays Capital analysts have said that they now expect quarter-point rate cuts in Britain in November, February, April, and May.

"The surprise was not so much that the next move in rates is likely to be down -- that has been our forecast for some time -- but that the (central bank) seems happy to nurture this expectation," Barclays Capital analyst Simon Hayes said on Friday.

Inflation above 12.4 pct on Aug 2 - paper

2008-08-14T06:38:00.000-07:00

Inflation above 12.4 pct on Aug 2 - paper
MUMBAI (Reuters) - The annual rate of inflation in India is seen "at above 12.4 percent" for the week ended Aug. 2, compared with 12.01 percent in the previous week, the Business Standard newspaper reported on its website without citing any sources.

The official data is due around 6 p.m.

Japan Nikkei slips, banks drag after Wall St fall

2008-08-13T20:25:00.000-07:00

Japan Nikkei slips, banks drag after Wall St fall

TOKYO (Reuters) - Japan's Nikkei stock average shed 0.6 percent on Thursday, with Sumitomo Mitsui Financial Group and other banks dragging on the market as worries about credit losses among their U.S. peers fed a Wall Street fall.

Real estate shares slid as well in the wake of the failure of developer Urban Corp on Wednesday with debts of ($2.4 billion). Caught in the global credit crunch, it was the biggest collapse by a listed Japanese company in six years and the third mid-sized property firm to go bust in recent months.

At 0005 GMT the benchmark Nikkei had lost 95.75 points to 12,927.30, while the broader Topix was down 0.8 percent at 1,236.53

Nokia ties up with wildlife fund to save tiger

2008-07-27T08:46:00.000-07:00

Nokia ties up with wildlife fund to save tiger

New Delhi, July 27 (IANS) Mobile handset maker Nokia has joined hands with wildlife conservation organisation World Wide Fund for Nature (WWF)-India, to support the tiger conservation initiatives in the country, the company announced Sunday.

Both sides have agreed to work together towards increasing awareness about need for tiger conservation in the villages surrounding the tiger reserves.

The joint initiative would also identify alternative livelihood programmes for the villagers around national parks, with special focus on the Ranthambore National Park.

Nokia India vice-president and managing director D. Shivakumar said: 'The tiger population in India has seen an alarming decrease due to shrinking forest cover, and increasing poaching. We have joined hands to spread awareness about this important cause.'

Ravi Singh, secretary general and CEO of WWF-India, said: 'This is an important step in bringing corporate institutional support for conservation, significantly tiger conservation, in India.'

Iran says oil could reach $500 on dollar, politics

2008-07-26T07:18:00.000-07:00

Iran says oil could reach $500 on dollar, politics

TEHRAN (Reuters) - Iran's OPEC governor said world oil prices could reach as high as $500 per barrel in a few years' time if the U.S. dollar falls further and political tension worsens, an Iranian weekly said.

"If the dollar's value continues to decrease and if the political crisis becomes worse, the oil price would reach up to $500," Mohammad Ali Khatibi told Shahrvand-e Emrooz in an interview published on Saturday.

He was asked about predictions that oil prices could reach up to $200 per barrel in the next two or three years.

Oil dropped $2 to a fresh seven-week low on Friday, extending a decline that has knocked more than $24 off crude in two weeks as high fuel prices continue to batter demand.

Crude prices reached an all-time peak of $147 earlier this month.

Khatibi also said oil exports from the whole Middle East region would be at risk if the Islamic state came under any military attack over its disputed nuclear programme.

"If there is another war in the region, it will not only be Iran's oil not reaching the market, but rather the oil of the whole region would be cut from the market," Khatibi said.

"In that case, we will not have a price rise. We will have a price explosion."

Around 40 percent of global oil shipments leave the Gulf through the Strait of Hormuz off Iran's southern coast and Tehran has threatened to impose controls on shipping there if it is attacked, and warned Gulf neighbours of reprisals if they took part.

The United States and Iran are at loggerheads over Tehran's disputed nuclear work. Washington says it wants a diplomatic solution to the row, but has not ruled out military action if that were to fail.

Tehran says its atomic activities are purely peaceful, aimed at generating electricity.

Roche offers $44B for remaining Genentech shares

2008-07-21T01:02:00.000-07:00

Roche offers $44B for remaining Genentech shares

BASEL, Switzerland - Roche Holding on Monday said it was offering $43.7 billion to take over the remaining shares of Genentech IncRoche, which already owns 55.9 percent of the San Francisco-based drug maker, said it was offering $89 per share, 8.8 percent above the closing price Friday and 19 percent above the price a month ago. It's the largest offer ever made by a Swiss concern for a takeover.

"The combined entity will be the seventh largest U.S. pharmaceuticals company in terms of market share," Roche said in a statement.

It will generate more than $15 billion in annual revenue and employ a total of about 25,000 people in the U.S., the statement said. The company did not specify how many of the 10,700 employees of Genentech would be retained.

Genentech did not immediately return a message seeking comment.

Franz Humer, Roche board chairman, said, "Our long and successful participation in Genentech has provided great benefits to both of our companies and shareholders. It has resulted in one of the biggest success stories in the healthcare industry."

Roche has been a partner with Genentech since 1990.

Roche said the takeover would improve operational efficiency by reducing complexity, eliminating duplications and increasing scale in the United States.

Humer said Roche's investment in Genentech over the years has helped it to focus on innovation and long-term projects, leading to some of the most important breakthroughs in the treatment of cancer and other life-threatening diseases.

"Combining the strengths of Roche and Genentech will create significant value and result in benefits for patients, employees and shareholders," he said.

Roche said Genentech's San Francisco site would operate as an independent research and early development center and become headquarters of combined U.S. commercial operations.

The statement said it expects the Genentech Board of Directors will establish a committee of independent directors to evaluate Roche's proposal with the assistance of independent outside financial and legal advisers.

Genentech board members who are employees of Roche will not participate in the evaluation of the proposal, it said.

The statement said Roche plans a cash merger between Genentech and a Roche subsidiary and that all currently outstanding shares and options of Genentech other than shares owned by Roche would be converted into cash.

Precise terms will be determined through negotiations with the independent directors, it said, adding that it expects the merger would be subject to the approval of holders of a majority of the Genentech outstanding shares not held by Roche.

"Roche expects to complete the transaction as soon as possible following negotiation of a definitive merger agreement," it said.

Treasury chief: Banks safe despite economic tumult

2008-07-20T10:26:00.000-07:00

Treasury chief: Banks safe despite economic tumult
WASHINGTON - Treasury Secretary Henry Paulson sought to reassure an anxious public Sunday that tI think it's going to be months that we're working our way through this period — clearly months," he said.

Paulson said the number of troubled banks will increase as they struggle to cope with big losses on bad mortgages. The government this month took over IndyMac after a run led it to become the largest regulated thrift to fail.

"Of course the list is going to grow longer given the stresses we have in the marketplace, given the housing correction. But again, it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation," he said in broadcast interviews.

Paulson used appearances on the Sunday talk shows to tell people that deposits up to $100,000 are fully insured. He said no one has lost a single penny on an insured deposit in the 75 years that the Federal Deposit Insurance Corporation has operated.

"We're going through a challenging time with our economy. This is a tough time. The three big issues we're facing right now are, first, the housing correction which is at the heart of the slowdown; secondly, turmoil of the capital markets; and thirdly, the high oil prices, which are going to prolong the slowdown," he said.

"But remember, our economy has got very strong long-term fundamentals, solid fundamentals. And you know, your policy-makers here, regulators, we're being very vigilant."

The secretary appeared on "Face the Nation" on CBS and "Late Edition" on CNN
he banking system is sound, while also bracing people for more troubled times ahead.

Satellite radio saga takes unexpected turn

2008-07-18T01:05:00.000-07:00

Satellite radio saga takes unexpected turn

WASHINGTON - During his tenure at the Federal Communications Commission, Jonathan Adelstein has been a fierce critic of government policies that allow big media companies to get bigger. So it came as a surprise when the Democratic commissioner put forth a proposal that would allow the nation's only two satellite radio companies to merge. Adelstein, the potential deciding vote, told The Associated Press on Thursday that he would support Sirius Satellite Radio Inc.'s $3.1 billion buyout of XM Satellite Radio Holdings Inc. if the companies agree to a six-year price cap and make one-quarter of their satellite capacity available for public interest and minority programming, plus other conditions.

It may be that the commissioner, a seasoned political operator who spent 15 years as a Senate staffer, recognized a limited window of opportunity.

Thus far, two of the five members of the commission have voted to approve the satellite radio deal, one vote shy of a majority. All eyes have been on Republican Deborah Taylor Tate, who is expected ultimately to vote in favor of the deal, but as a friend to the broadcast industry that opposes it, has been under intense pressure to reject it.

Her reluctance to cast the deciding vote created an opportunity for Adelstein to extract further conditions from the companies.

"It's critical that if we're going to allow a monopoly, that we put in adequate consumer protections and make sure they're enforced," Adelstein told the AP on Thursday.

Adelstein is seeking stronger concessions than the companies offered voluntarily one month ago. That offer led to FCC Chairman Kevin Martin's recommendation that the deal be approved. Robert McDowell, also a Republican, has voted in favor, too. Democrat Michael Copps is expected to be a "no" vote.

Commissioners are able to vote on items "on circulation," meaning by way of computer, rather than at a public meeting. Those votes are generally not made public until all have been cast.

Following Adelstein's offer, Martin, Tate and both companies all declined to respond to requests for comment.

XM and Sirius first announced their intent to merge in last year. The Justice Department cleared the combination in March. Martin made his recommendation for approval last month.

The companies have faced a tough challenge in gaining approval because the FCC, in creating the satellite radio industry in 1997, prohibited the only two licensees from merging. In an effort to prove the combination is in the public interest, lawyers for the companies volunteered to submit to a number of conditions, including a three-year price cap, a time frame Adelstein would like to see doubled.

They also agreed to turn over 24 channels to noncommercial and minority programming.

Adelstein is seeking 25 percent of the companies' satellite capacity for public interest programming — 10 percent for noncommercial programming and 15 percent for minority programming. That potentially would work out to about 75 channels.

XM broadcasts more than 170 channels, Sirius over 130 channels.

The companies also offered to adopt an "open radio" standard, meant to create competition among manufacturers of satellite radios. The condition was met with skepticism because the companies subsidize the price of radios, making it unlikely that competitors will get into the business.

Adelstein is proposing that the companies be required to include a digital radio tuner in any radios they subsidize that also include regular, non-digital AM-FM service.

Adelstein also wants to set up an enforcement regime to make sure the companies adhere to the conditions, something that was not outlined in the previous voluntary offer.

Sirius and XM have promised to include an "a la carte" offering that would be available within three months of the close of the deal. In addition, they have pledged to offer radios that are capable of receiving both XM and Sirius service within one year.

VW's choice eases Chattanooga's past auto snubs

2008-07-17T00:51:00.000-07:00

VW's choice eases Chattanooga's past auto snubs

CHATTANOOGA, Tenn. - When Volkswagen said yes, a city that shed its reputation for dirty air to become a top outdoors destination forgot years of frustrating rejections by automakers
Volkswagen's plans to build a $1 billion assembly plant and create 2,000 jobs in Chattanooga had radio listeners rejoicing on call-in shows, businesses hanging welcome signs and U.S. Sen. Bob Corker declaring the city "will never be the same again."

University of Tennessee economist Bill Fox said spinoff jobs in Tennessee and neighboring corners of Georgia and Alabama would probably total more than 10,000. That economic impact doesn't include the publicity from a global company planning a new sedan and seeking to boost its share of the U.S. market.

"The cachet of having the firm come there is something that will be talked about through much of the world," Fox said. "It gets the name of Chattanooga and the state of Tennessee in the media across the globe."

It's a welcome blast of attention for a city that once had the dirtiest air in the country. In 1969, the U.S. Department of Health, Education and Welfare ranked it No. 1 in particulate air pollution, thanks to smoke-belching foundries trapped by surrounding mountains.

Chattanooga and surrounding Hamilton County responded by creating an air pollution control bureau and in 1989 the Environmental Protection Agency took Chattanooga off its dirty air list.

In 2005, Chattanooga dedicated its redeveloped riverfront and Outside Magazine rated the Scenic City as one of America's Top 10 Dream Towns with hiking, camping, hang gliding, rock climbing and nearby whitewater rafting where 1996 Olympic competitions were held.

Hamilton County Mayor Claude Ramsey, who has worked for more than a decade to attract an automaker to Chattanooga, said the announcement answered "all those naysayers who said it would never happen."

"I can remember when the pollution was bad," Ramsey said. "The times have changed and manufacturing has changed and all that is for the better ... This is a community that can do about whatever it wants to once it makes up its mind."

Volkswagen's plans for the new plant would complement Chattanooga's environmental revival, company officials say.

It will be built on the site of a former Army ammunition plant, near a pair of interstate highways and rail lines. Volkswagen has heavily marketed its fuel-efficient cars and says it strives to make all of its operations environmentally sustainable.

And it will be an employment boon for a city still coping — like many industrial centers in the South — from the loss of manufacturing sites that sustained them for decades.

Jonathan Hood, a Chattanooga State Technical Community College freshman studying electronics, said he will be applying at Volkswagen.

Hood, a 39-year-old former Marine, said he works in construction but has always wanted to work in an auto plant. Hood said he has an aunt who works at a Chrysler plant in Ohio.

"She really makes good money," Hood said.

Dale Smith, general manager of Village Volkswagen of Chattanooga, said the company's choice of a plant site "is probably the biggest thing to ever happen to this town."

Stocks rise on drop in oil, Wells Fargo report

2008-07-16T10:28:00.000-07:00

Stocks advance as drop in oil prices eases some concern about jump in inflation

NEW YORK (AP) -- Wall Street turned higher Wednesday as another drop in oil prices helped offset concerns about a jump in inflation last month. The Dow Jones industrial average rose more than 150 points.

Stocks drew support from oil prices that pulled back for a second straight day on concerns that a slowing economy will curtail demand for fuel. Light, sweet crude fell $4.09 to $134.65 on the New York Mercantile Exchange, compounding a drop of $6.44 on Tuesday.

Meanwhile, bond prices fell sharply as investors retreated from the safety of government debt.

And a decision by Wells Fargo & Co. to boost its dividend countered some of the market's concerns about the health of banks. The San Francisco-based bank's move to raise its payout to investors is being seen as a bullish sign for the troubled banking sector. Still, the Labor Department's report that consumer prices shot up in June at the second fastest pace in 26 years is reminding investors that rising prices still pose a threat to economic growth.

Investors also remain worried about the economy and specifically the financial sector. This week has brought fresh attention to potential trouble spots in the mortgage market. Fannie Mae and Freddie Mac, the government-chartered mortgage financiers, remain a concern, as do regional banks that could have bad mortgage debt on their books.

But, for the moment, investors were pleased by the drop in oil.

"I think the pullback in oil is significant. The market and the market participants clearly had digested what the impact was going to be if oil prices had stayed at that level," said Dan Genter, president and chief investment officer of RNC Genter in Los Angeles.

In early afternoon trading, the Dow rose 161.45, or 1.47 percent, to 11,123.99. On Tuesday, stocks ended mostly lower on continuing worries about the financial sector and the Dow logged its first close below 11,000 since July 2006.

Broader stock indicators also rose after fluctuating in the early going. The Standard & Poor's 500 index advanced 13.66, or 1.12 percent, to 1,228.57, and the Nasdaq composite index rose 44.28, or 2 percent, to 2,259.99.

Advancing issues narrowly outpaced decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 819.01 million shares.

While Wednesday's advance likely indicates some enthusiasm among investors it can also reflect simple bargain hunting and traders laying down a few bets rather than any great change in conviction. With many quarterly reports due in the coming weeks, many investors remain uncertain about the health of the economy.

Bond prices declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 3.923 percent from 3.82 percent late Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.

Oil prices declined after Energy Department figures showed that domestic inventories of crude oil and gasoline rose last week, rather than declining as analysts had expected.

"I think what you're seeing is people are feeling more confident that civilization as we know it is not going to cease to exist and that we're going to make a landing here," Genter said of the decline in oil. "The negative is there is not much of a catalyst here to really pick us up and get us back in the air."

The Labor Department's report that its Consumer Price Index rose 1.1 percent in June came as economists had expected a gain of 0.8 percent. Two-thirds of the increase is linked to surging energy prices. The core reading, which excludes often volatile food and energy costs, ticked up 0.3 percent.

Wall Street has been concerned in recent months that rising prices for necessities like food and fuel would force investors to curb their spending in other areas. A pullback is a disturbing prospect for investors as consumer spending accounts for more than two-thirds of U.S. economic activity. In addition, rising prices could lead the Federal Reserve to raise interest rates, a move that risks derailing economic growth by making access to capital more expensive.

Beyond the inflation reading, which follows a report Tuesday that showed a 1.8 percent increase in wholesale prices for June, investors examined a Fed report that industrial production rose 0.5 percent in June after declining 0.2 percent in May. The increase was the highest since a 0.6 percent gain in July of last year.

Wall Street is also awaiting minutes from the last meeting of the Federal Open Market Committee, the arm of the Fed that sets interest rates. The Fed last month broke a string of reductions by leaving rates unchanged at its last meeting, a recognition that lower rates had weighed on the dollar and led to increases in commodities such as oil and food. The minutes are due at 2 p.m. EDT.

In corporate news, Wells Fargo & Co. said its second-quarter earnings fell 22 percent as more customers at the nation's fifth-largest bank failed to repay loans. But the company's results beat Wall Street expectations, and investors were pleased by Wells Fargo's decision to raise its quarterly dividend to 34 cents from 31 cents. Wells Fargo rose $5.03, or 24.52 percent, to $25.54.

Cleveland-Cliffs Inc., an iron and coal miner, said it agreed to acquire coal producer Alpha Natural Resources Inc. for nearly $10 billion in cash and stock in a move aimed at increasing its role as a supplier to the world's steel industry. Alpha Natural surged $11.44, or 10.86 percent, to $105.78, while Cleveland Cliffs fell $9.96, or 8.94 percent, to $101.50.

Delta Air Lines Inc. rose 83 cents, or 17.77 percent, to $5.50 after reporting that high fuel prices led to a hefty second-quarter loss despite a strong increase in sales. The results topped Wall Street estimates, however, which excluded one-time items.

The Russell 2000 index of smaller companies rose 13.70, or 2.07 percent, to 676.05.

Overseas, Japan's Nikkei stock average rose 0.05 percent. Britain's FTSE 100 fell 0.60 percent, Germany's DAX index rose 1.21 percent, and France's CAC-40 rose 1.26 percent.