Dear
Ladies & Gentlemen,
Oh what a tangled web the US Administration is facing - and this week has highlighted that.
Forget talk of bailing out Banks, Carmakers or any company with a relative working for the Fed' (or any close Government department with an office in the same building), the US this week took on a new "charitable" cause.
The name of that cause?
California!
The state has asked the administration to provide loan guarantees for billions of dollars in emergency loans, saying it will soon run out of cash without help from Washington.
Honestly, this is not a joke; the State of California is 'broke' and has turned to the US's Sugar-Daddy Tim Geithner to bail them out.
But even Mr Geithner is struggling with this one. The Treasury Secretary Thursday expressed doubt that he had the authority, without new congressional legislation, to aid the state under the program set up by Congress to rescue financial institutions.
He told a Congressional committee that the primary burden rests with governors and mayors to bring their deficits down. But he added that in order to turn around the economy, "there are things that we've had to do I would never have contemplated doing."
It's a "difficult, complicated balance," he said. Geithner pledged to work with Congress to explore ways to help California - maybe print more money with Arnold Schwarzenegger's face on the front and give them their own currency - the Forno?
But seriously, come on Ladies and Gentlemen, can you imagine Sichuan Province - sans Earthquake and all - turning to Beijing and saying 'we have run out of money'?
How can a whole State in the largest, most democratic, forward-thinking, free-wheeling global economy go broke?
Quite simply, greed!
Moody's is considering downgrading the UK (not just a company, but a whole country) from its Triple A (AAA) debt rating. The US is in a very similar position (no surprises there) as Standard and Poor's also announced this week that they will probably cut the US from a Triple A credit rating.
Two countries, similar fiscal policy it seems (sounds like China's mantra).
One thing that absolutely stunned me Friday, was the UK Government refusing (note, no delaying, but refusing) to announce the results of the UK's own 'stress tests' on Banks. They have said that to announce the results would create 'instability' in the markets! As if refusing to publish them is creating confidence!
The UK has committed as much as 1.4 trillion Pounds ($2.2 trillion) to bolster the nation's banking system through direct investments, asset insurance and underwriting loans. The government has nationalized Northern Rock and Bradford & Bingley, and taken controlling stakes Royal Bank of Scotland Group Plc and Lloyds Banking Group.
On the subject of things going 'belly-up' this week, another one of the banks I predicted that would go under, has done just that and this time it is the largest one of the year (each month sees a bigger bank go under).
BankUnited Financial, the ailing Florida lender, was shut by regulators and its assets were sold to private-equity firms including WL Ross & Co. and Carlyle Group in the largest U.S. bank failure this year.
The group's purchase was the "least costly" resolution, the Federal Deposit Insurance Corp. said in a statement today.
BankUnited, based in Coral Gables joined 33 banks and at least five credit unions that have gone under since January. Former North Fork Bancorp Chief Executive Officer John Kanas led buyers that also included Blackstone Group LP and Centerbridge Capital Partners LLC.
BankUnited had $8.7 billion of deposits, regulators said. The failure will cost the FDIC $4.9 billion, the regulator said.
BankUnited's fiscal second-quarter loss probably rose to $443.1 million, or $12.55 a share, from a loss of $65.8 million, or $1.88, a year earlier, the company said in a May 12 regulatory filing. Loans no longer collecting interest rose to 18 percent of total loans from 14 percent in December.
And as I am typing this, across the wires has just come this news:
Citizens National Bank of Macomb, Illinois, was closed by regulators, pushing the toll of failed US lenders to 36 this year now.
Citizens National was shut a couple of hours ago by the Office of the Comptroller (great word) of the Currency and the Federal Deposit Insurance Corp. was named receiver, the FDIC said in a statement. The bank's deposits were assumed by Morton Community Bank of Morton, Illinois.
Then of course we've got the US and UK Tax issues; not a case of how much people have to pay, but more a case of how little tax is being paid!
Britain had an 8.5 billion-pound ($13.4 billion) budget deficit in April, the most for the month since records began in 1993, as the recession ravaged tax revenue.
The shortfall in the first month of the fiscal year compared with a 1.8 billion-pound deficit in April 2008, the Office for National Statistics said in London Thursday.
The damage inflicted by the worst recession since World War II has left Britons facing spending cuts and tax increases after the next general election. The International Monetary Fund Thursday urged Prime Minister Gordon Brown to take tougher action to reduce the deficit, forecast by the Treasury to double to 12.4 percent of economic output in the current fiscal year.
The government is receiving less money in taxes and increasing welfare spending as companies lose profits and cut jobs and bonuses. The Treasury has been hit hard by the loss of revenue from banks and the housing market, which helped Brown fund rapid investment in schools and hospitals during his decade as finance minister.
A measure of the cash entering and leaving the Treasury showed a deficit of 5.2 billion pounds, the first April shortfall since 1996 and the highest for the month since records began in 1984. The median forecast of economists was a 2.5 billion-pound deficit. The deficit excluding investment spending was 7 billion pounds, the most for the month since records started in 1998.
Concern over the U.K. fiscal position grew after the Treasury predicted the deficit will reach 175 billion pounds this fiscal year and said it plans to sell an unprecedented 220 billion pounds of debt to cover the shortfall and the cost of propping up banks.
What are the implications of this tanking tax revenue?
For starters, in the US it means the federal government deficit is going be as bad as or worse than the $2.5 trillion predicted by top economists last year.
If the shortfall in individual and corporate tax revenue persists - and it will - then the deep hole the government is already digging for itself will be that much deeper.
Using the government's own expense projections, the revenue shortfall, even if it doesn't worsen further, would push the fiscal 2009 budget deficit up to about $1.958 trillion.
That takes the total money owed at that point by the US of A, to over 15 Trillion US Dollars. No small amount by any stretch of the imagination.
Then we need to look at what I have been saying for months - whilst unemployment continues to rise, there is no 'bottoming-out'; no matter which way you look at it.
Data from the United States this week on jobless claims and business conditions on Thursday dented hopes of a quick economic rebound - even those 'Bulls' with 'rose-coloured-glasses' finally had to admit, perhaps they had been a little too hopeful (or blinded by the fear of missing out on another Bull run).
Jobless claims in the United States, the world's biggest economy and epicentre of the global crisis, rose to a record last week while new claims fell by 12,000.
Other data showed manufacturing in the U.S. Mid-Atlantic area shrank in May for the eighth straight month.
Treasury Secretary Timothy Geithner said the U.S. financial system was steadying from the taxpayer-funded bailout of banks but that care must be taken to ensure normal market forces are allowed to work.
Just who is he trying to kid with that comment? 'Allowing normal market forces to work' is about as far removed as you can possibly get that is happening across in the US. Government intervention is endemic and knows no bounds, obviously as I have pointed out in this Newsletter.
Broad regulatory reforms should be unveiled in a few weeks, including protection for consumers, Geithner said, as the Obama administration faces the task of "striking the delicate balance between interventions and allowing market participants latitude to operate."
The Conference Board research firm suggested more promise for U.S. growth, with its index of leading indicators for April showing the first rise since June 2008.
In that vein, the Congressional Budget Office said the U.S. economy will likely start growing again in the second half of 2009 but that the jobless rate could peak at more than 10 percent against the current 8.9 percent.
So the US is still hanging on the idea that jobless claims and unemployment will continue to rise but the economy will start growing.
Just what school of economics and common-sense did these people attend, I ask you?
The new reports came a day after the Federal Reserve, in minutes released from its April policy meeting, cut its outlook for U.S. growth over the next three years and said a full recovery could take five or six years.
So we are talking about the right hand not just disagreeing with the left hand, but outright contradicting themselves with each statement.
But there is equal blame apportionment here between the UK and the US for what is going on currently I feel.
In a bizarre twist of events, whereas the UK used to get all the US problems a few years down the line, Mr Obama and Mr Geithner seem to look up to Mr Brown and his own fiscal policy so much, that the US now seem to be copying what the UK are doing and this in turn means they will go the same way.
Investors fear the United States is "going the way of the UK" - this would be a definite case of 'the blind leading the blind' if indeed this is, as it looks at the moment, what is happening.
But there was some good news coming out of the US this week; shares in McDonald's Burgers and Campbell's soup staged a broad rally (I kid you not) - now there are two indicators that tell you more about the state of the US economy than any Fed' report for sure!
But I cannot dedicate this Newsletter solely to the UK and US problems - otherwise I will be accused once more of being YankoBritophobic. (For those of you that don't know, I am actually British and not afraid to criticise my own country's fiscal acumen).
Here in China, officials this week highlighted the risks facing the world's third-largest economy - one of the few still growing (albeit that's what they - the Government - are saying).
Vice Premier Li Keqiang said while the government's $585 billion stimulus plan had yielded initial results, it was too early to hail an economic recovery.
"The international financial crisis is still spreading and its impact on the real economy is deepening," the official Xinhua news agency quoted Li as saying.
This is China telling the truth and other 'democratic' countries denying what is so obvious to anyone and everyone not associated with politics.
Things are going to get worse before they get better - fact!
Elsewhere in the world South Africa, Africa's biggest economy, "faces a sharp cyclical downturn" after a prolonged boom, said Treasury Director-General Lesetja Kganyago, with the government having to manage borrowing carefully to avoid overburdening the country with debt.
Argentina's economy, Latin America's third biggest, grew a better-than-expected 2.7 percent in March from a year earlier, the government said, but many analysts say official data is downplaying the slowdown.
Singapore, a proxy for global trends due to its heavy exposure to international trade, saw its exports slip back in April after two months of growth, reinforcing a view that there is no clear recovery.
Singapore's April exports to the United States and Europe shrank by more than 30 percent and to China by 15 percent.
All told, this week has shown a much clearer picture and we have seen markets take a 'reality-check' - which is about time if I may say so.
Let's just see next week whether markets will continue to 'wake up and smell the coffee' or whether they'll continue their dreamy meanderings.
On to the numbers for the week that was: |
| US Markets
How the US did this week ..... |
 US stocks dropped, erasing gains in the final hour of trading for the third time this week, as government borrowing costs climbed to a six-month high and investors sold shares before the holiday weekend.
Bank of America and American Express slumped at least 3% and banks in the Standard & Poor's 500 Index lost 1.4% in the last half hour as the government prepared to raise $162 billion. Salesforce.com Inc. fell 8.8%, the most since December, after its revenue forecast missed analysts' estimates. General Motors Corp. tumbled 26% after surging 76% in the prior four days.
The S&P 500 retreated 0.2% to 887 in New York after gaining as much as 0.9%. The Dow Jones Industrial Average lost 14.81 points, or 0.2%, to 8,277.32. Treasury 10-year notes fell, pushing the yield to 3.45%. The Dollar slipped beyond $1.40 against the Euro for the first time in four months.
The S&P 500 rose 0.5% this week even after retreating in the final four days.
Financial stocks led the S&P 500's retreat in the final hour. Banks also were the biggest losers when the market's 19 May rally fizzled at the end of the day.
MasterCard fell 1.9% to $168.36. The world's second-largest electronic payments network will lose more than half of a $59 billion portfolio of debit-card users after JPMorgan Chase decided to shift more business to Visa.
The S&P 500 has surged 31% since March 9 on speculation the global recession is easing and as earnings at companies from Ford Motor Co. to Europe's Credit Suisse Group AG topped analysts' estimates. The Conference Board's measure of leading economic indicators, including stock prices and manufacturing, increased in April for the first time since June.
Salesforce.com lost 8.8% to $36.15. The biggest seller of Internet-based customer management software forecast full-year revenue of $1.27 billion at most. That trailed the average analyst estimate of $1.32 billon. Citigroup cut Salesforce to "hold."
GM dropped 26% to $1.43. Tentative union accords this week to trim US and Canadian labor expenses still leave GM deadlocked with bondholders in its bid to shrink $27 billion in debt, a step the Obama administration said must be taken to avoid bankruptcy.
Sears Holdings, the largest US department-store chain, surged 10%, the most in the S&P 500. The company posted an unexpected first-quarter profit, helped by cuts to advertising and payroll expenses. Excluding some items, Sears earned 38 cents a share. Analysts predicted a per-share loss of 87 cents, according to the average estimate in a Bloomberg survey.
McDonald's rose 2.5% to $57.08, the biggest gain in the Dow average. Analysts, including Deutsche Bank, who met with the company's management said the hamburger chain's European profit margins are improving. The region accounted for 38% of total sales at the end of the first quarter.
Autodesk surged 9.9% to $20.70 after the biggest maker of engineering-design software forecast profit that topped analysts' estimates. The company announced job cuts and said it will have profit excluding some items of at least 15 cents a share in the second quarter. Analysts on average expected the company to earn 14 cents, according to a survey.
Gap, the clothing company, beat its own forecasts by a single cent after also successfully cutting costs.
It saw slower declines at its Old Navy line, although there was weakness from the more upmarket Banana Republic brand. Its shares rose 2.6% to $16.39.
Campbell Soup was another household consumer name to report its results after the market closed on Thursday, beating predictions with its profit, which was boosted by higher prices. Its shares rose 2.1% to $27.35. |
| European Markets
What has been happening in Europe this week ..... |
 European stocks fell for a second day, as declining handset sales hurt mobile-phone companies and British Airways Plc posted a wider-than-estimated loss.
Nokia, the world's biggest maker of mobile phones, slid 6% after losing market share. British Airways retreated 3.8% as Europe's third-largest carrier reported its first full-year loss since 2002. Vedanta Resources Plc and Kazakhmys Plc added more than 3% as copper rose and Goldman Sachs Group Inc. recommended the shares.
Europe's Dow Jones Stoxx 600 Index dropped 0.3% to 207.01, trimming its weekly gain to 2%.
The regional gauge has surged 31% since 9 March on optimism that the global recession is easing; You know my views on this, totally unrealistic and European bourses - as will the rest of the world - are going to see most of those gains clawed back over the Summer months as we see another correction.
National benchmark indexes declined in 6 of the 17 western European markets that were open Friday. Denmark was closed for a holiday. The UK's FTSE 100 added 0.5% as Brixton Plc surged. France's CAC 40 gained 0.3%, while Germany's DAX increased 0.4%.
GERMANY
German stocks rose as Citigroup Inc. recommended buying K+S AG shares and Salzgitter AG was upgraded at Goldman Sachs Group Inc.
K+S, Europe's largest producer of potash used in fertilizers, gained 5.2%. Salzgitter AG, Germany's second-biggest steelmaker, advanced 4.2% as Goldman Sachs raised its price estimate on the stock 41% to 79 Euros.
The benchmark DAX Index added 0.4% to 4,918.75, bringing this week's gain to 3.8%. The measure has rallied 34% from this year's low, hit on March 6, as reports signaled the global recession is easing and lenders including Citigroup Inc. and Deutsche Bank said they made a positive start to the year. The HDAX Index of Germany's biggest companies climbed 0.3% Friday.
Salzgitter rallied 4.2% to 63.11 Euros.
H&R Wasag, a German specialty chemicals maker, jumped 5.3% to 10.34 Euros, the highest close this month. The company had its recommendation raised to "buy" from "hold" at Commerzbank AG, which said "investors have more visibility" after the company reported first-quarter results.
Arcandor, the owner of money-losing German department- store chain Karstadt, dropped 1.8% to 2.20 Euros, trimming Thursday's 3.7% gain. The company said it needs state aid by June 12 if it is to survive and that talks with Metro AG on a possible merger of the Karstadt and Kaufhof department-store chains are no alternative to government guarantees. Metro shares rose 3.3% to 36.36 Euros, the highest close since September.
Henkel dropped 1.9% to 22.17 Euros after HSBC Holdings Plc cut its recommendation on the stock to "underweight" from "neutral."
Qiagen NV, the Dutch biotechnology company whose tools are used to predict disease and isolate DNA, rose 2.3% to 12.12 Euros, amid speculation Sanofi-Aventis SA may make an offer.
Petrotec, the German producer of biodiesel from used cooking fat, fell 1.2% to 80 cents. The company posted a 3.6 million-Euro ($5.04 million) loss for the first quarter and said it could not make a concrete forecast for 2009.
FRANCE
France's benchmark CAC 40 Index rose 10.56, or 0.3%, to 3,227.97, bringing the weekly gain to 1.9%. The SBF 120 advanced 0.3% to 2,339.23.
Air France-KLM Group, Europe's biggest airline, fell 36 cents, or 3.3%, to 10.68 Euros, a second decline this week. France's SNPL pilots union, which represents about 75% of Air France pilots, has filed a notice for a national strike on each of the weekends from July 10 to August 3 to protest new laws on union representation, La Tribune reported.
Pernod Ricard dropped 43 cents, or 1%, to 44.95 Euros, a fourth day of declines. The world's second- largest liquor maker was given an "underweight" recommendation at Morgan Stanley, which cited "the risk of further cuts to earnings expectations."
Renault SA rose 90.5 cents, or 3.6%, to 26.27 Euros, a fourth gain this week. Royal Bank of Scotland Group Plc raised its price estimate on France's second-largest carmaker to 34 Euros from 30 Euros.
Societe Fonciere Financiere et de Participations advanced 1.88 Euros, or 6%, to 33.48 Euros, reversing Thursday's 2.8% drop. The holding company with a stake in PSA Peugeot-Citroen was raised to "buy" from "neutral" at UBS AG.
BELGIUM
In Brussels, the Bel 20 closed up 0.4% to finish the week at 2,064.64.
KBC Group NV, rallied 7.7% to 15.40 Euros. Belgium's third-biggest bank by assets was raised to "overweight" from "neutral" by HSBC Holdings, which cited "greater certainty" by the Belgian state guarantee on the bank's collateralized debt obligations portfolio and "greater resilience of the underlying operations."
A newly-elected board is preparing to reopen talks with BNP Paribas and the Belgian government.
The new board of Benelux bank Fortis is preparing to open up discussions - again - with BNP Paribas and the Belgian government, after angry shareholders on Wednesday rejected a rescue deal for the firm.
Fortis investors voted against a deal with the French bank late Wednesday, after a long and raucous meeting at which outgoing board members of Fortis showed little sign of wavering or attempting to improve the deal's terms.
Investors first rejected the sale of Fortis assets to the Dutch government, with just 43.0% in favor of the move. Then a vote on the sale to BNP, which hung on the vote on the sale of Fortis' Belgian banking assets, also failed: 50.53% said the Belgian assets should not go. When the meeting's moderator declared that a sale to BNP could no longer go ahead, loud applause and shouts erupted from the packed meeting hall, at which 22.3% of Fortis' capital was represented.
THE NETHERLANDS
In Amsterdam the AEX closed at 260.14, similar gains to those in Brussels at 0.43% on the day.
SWITZERLAND
The Swiss SMI index fell 1.7% to 5,417.09 as investors returned from the Ascension Day holiday to play catch-up with the rest of the European equity market which fell sharply on Thursday after Standard & Poor's cut the UK's credit outlook.
Defensives were among the top weighted losers in Europe, with drug stocks Novartis, AstraZeneca, GlaxoSmithKline and Sanofi Aventis down 0.9 to 1.9% and food group Nestle off 1.8%.
Among other Swiss stocks, banks Credit Suisse lost 2.7% and UBS fell 4.8%.
AUSTRIA
The ATX in Vienna suffered Friday, down 2.52% to close at 2,053.88.
Atrium European Real Estate, Austria's second-largest property company by market value, reported a loss of 231.7 million Euros ($323 million) for the first quarter as the value of its properties in central and eastern Europe fell.
The net loss compared with a profit of 3 million Euros a year earlier, the Vienna-based company said in a statement Friday. The company, registered in Jersey, said net rental income rose 13% to 28.7 million Euros.
Atrium, previously known as Meinl European Land, cut back its developments in central and eastern Europe and put on hold plans to sell malls because of the fall in property values. Citigroup and Gazit-Globe, an Israeli developer, took control of the company in August.
SWEDEN
The OMX 30 shed 1.83% Friday to close at 769.40 - ostensibly, these were losses carried over from Thursday where the Swedish bourse was closed for the Ascension day holiday.
Ericsson declined 2.4% to 65.80 Kronor. Sony Ericsson Mobile Communications Ltd.'s market share dropped to 5.4% from 7.5%.
Through its partly owned subsidiary IntelliCom Innovation AB, HMS Networks AB received two renewed delivery agreements for its Gateway products for industrial communication. The total value of these two agreements is approximately SEK 7,5 million. Delivery under these agreements will be completed during the next two years.
One of the customers is a world leading system supplier in power distribution and the other customer is a market leader in the area of ventilation in commercial properties.
FINLAND
The OMX in Helsinki dropped 3.49% Friday to close at 5,781.22.
Nokia slid 6% to 10.62 Euros, the biggest drop in two months, after market research firm Gartner said its market share fell to 36.2% in the first quarter from 39.1% a year earlier.
Worldwide mobile-phone sales dropped 8.6%, the industry's first year-on-year contraction, as the economic slowdown curtailed consumer spending in regions including Asia Pacific, Gartner said after the close of European trading on 20 May.
DENMARK
In Copenhagen the OMX 20 was closed for a Public Holiday.
NORWAY
The OBX in Oslo closed down 2.15% Friday to end the week at 256.47.
Norway's prime minister on Tuesday sought to prevent the court-ordered sale of Telenor ASA's main Russian asset amid a deepening dispute between the state-controlled telecommunications company and its Russian partners.
Telenor is appealing a $1.7 billion court ruling against it, but bailiffs have frozen the company's 29.9% stake in OAO Vimpelcom, Russia's No. 2 mobile-phone company, in preparation for sale to satisfy the judgment. Telenor rejects the court ruling as illegal and says it is the latest pressure tactic in a long-running battle with the Alfa Group, the Russian conglomerate that also owns a stake in Vimpelcom.
SPAIN
The Ibex closed out the week at 9,308.60, up 0.9% on the day Friday.
Madrid-based Banco Santander closed up 3.5% to $10.24.
PORTUGAL
The PSI General in Lisbon rounded off the week with the same level of gains as Spain, up 0.9% to close at 2,510.63.
Shares in Portugal's telecoms firm Sonaecom and Zon Multimedia rose on Friday as renewed talk of a merger between the two prompted estimates of hundreds of millions of Euros of potential synergy gains.
The shares extended Thursday's upturn, which came after Paulo Azevedo, CEO of Sonaecom's parent company Sonae, told Reuters he saw growing interest in a merger from Zon shareholders.
Sonaecom rose 6.6% to 2.089 Euros in early afternoon trading on Friday, Zon soared 6.4% to 4.223 Euros and Sonae holding was up 2.4 to 0.727 Euros.
ITALY
Italy's benchmark S&P/MIB Index rose for a fourth day this week, adding 124, or 0.6%, to 20,007 in Milan.
Arnoldo Mondadori Editore SpA (MN IM), the publisher controlled by Prime Minister Silvio Berlusconi, rose 19.25 cents, or 6.3%, to 3.26 Euros, snapping a two-day loss.
Bulgari, the world's third-largest jeweler, slid 5.25 cents, or 1.4%, to 3.69 Euros, falling for a second day.
Luxottica, the world's biggest maker of eyeglasses, declined 45 cents, or 3%, to 14.61 Euros.
Davide Campari-Milano rose 19 cents, or 3.5%, to 5.59 Euros, erasing Thursday's losses. The beverage maker known for its bittersweet red aperitif, was upgraded to "neutral" from "underweight" at JPMorgan Chase & Co., which also increased its price estimate to 5.4 Euros from 4.2 Euros.
The shares fell 13 cents, or 2.4%, to 5.4 Euros.
Edison gained for a fourth day this week, adding 1.1% to 99.45 cents. Morgan Stanley resumed coverage of Italy's second-biggest power generator, with an "overweight" recommendation. The brokerage also cut its recommendation on A2A SpA (A2A IM), the company formed by the merger of the Milan and Brescia municipal utilities, to "equal- weight" from "overweight."
A2A shares fell 0.5% to 1.32 Euros.
Gruppo Editoriale L'Espresso surged 21% to 1.3 Euros, the highest since December. The publisher controlled by financier Carlo De Benedetti was upgraded to "buy" from "underperform" at Bank of America Corp.
Compagnie Industriali Riunite, L'Espresso's main shareholder, rose 3 cents, or 2.7%, to 1.13 Euros. Cofide SpA (COF IM), CIR's main shareholder, advanced 3.9 cents, or 9.9%, to 43.4 cents. Bestinver Gestion SGIIC SA increased its stake in the company to 16.1% as of May 16 from 12.1%, according to market regulator Consob's Web site.
Maire Tecnimont, an Italian energy service specialist, gained 16 cents, or 8.3%, to 2.09 Euros, erasing Thursday's losses. Crude oil rose in New York, as the Dollar fell to a four-month low against the Euro, drawing investors to crude as an inflation hedge.
Prysmian SpA added 17 cents, or 1.7%, to 10.09 Euros. Basic resources were the best performers among the 19 industry groups in Europe's Dow Jones Stoxx 600 Index Friday.
Copper advanced after Chinese imports of the metal rose to a record in April, renewing expectations that the country's 4 trillion yuan ($586 billion) stimulus program will sustain prices in the short term.
Safilo Group, the world's second-largest maker of eyewear, slid for a third day, losing 1.6 cents, or 3.5%, to 44.7 cents.
GREECE
In Athens the Athex Composite closed up 1.29% to finish the day at 2,280.15.
Greek cooler maker Frigoglass said on Friday that first-quarter net profit fell 97% year-on-year as the global economic downturn hit demand for the company's products in key European markets.
The world's largest maker of drink refrigeration equipment said net profit fell to 0.6 million Euros ($827,100) in the first quarter, from 20.8 million Euros in the same period last year.
Last year, the firm shut two of its 11 production units and cut about 475 jobs in a bid to cut costs.
Frigoglass, which supplies Greek bottler Coca-Cola Hellenic and brewers such as Heineken, said customers in Russia, Germany and Italy deferred orders for coolers, hurting its top line.
Sales fell 56% to 71.6 million Euros, with weak demand in Europe and Africa more than offsetting strong growth in Asia.
Frigoglass said visibility for 2009 was still low but it was confident lower raw material prices and cost-cutting efforts would help it achieve positive operating free cash flow. |
| The UK Market
Did it follow the Global trend ..... |
 National Express, the heavily indebted bus and rail operator, was in demand on Friday. Its shares advanced 7.3% to 299¼p on rumours of a deal to exit a ruinously expensive rail franchise.
Advising clients to "buy" and setting a 350p target price, Investec Securities said it expected National Express, which is struggling under borrowings of £1.2bn, to walk away from the East Coast main line franchise.
Although this could also cost it participation in other rail franchises, it could pave the way for a successful rights issue and refinancing in September 2010, which would leave the shares looking inexpensive," said Investec.
In order to fund an exit, which would cost between £80m and £150m, and strengthen its balance sheet, sector watchers reckon that National Express needs to raise about £400m. Investec believes that a cash call would be well supported.
Leading shares, meanwhile, crept higher in quiet trading ahead of the long holiday weekend. The FTSE 100 closed 19.8 points, or 0.5%, higher at 4,365.3, leaving the index ahead 17 points on the week.
Mining stocks, which were hit hard by economic jitters on Thursday, bounced back and led the market higher. A bullish report from Goldman Sachs was seen as the key driver for the sector's gains.
Reiterating its "buy" rating on Xstrata, up 2.7% to 655½p, and upgrading Anglo American, up 2.9% to £16.25, Kazakhmys, 6.1% stronger at 682½p, Vedanta, 3.7% higher at £15.48, and Rio Tinto, 4.2% stronger at £27.69.
Elsewhere in the sector, Fresnillo rose 7.8% to 690p as the silver price hit a nine-month high.
On the downside, Cable & Wireless, which dropped almost 10% after disappointing results on Thursday, lost another 3.4% to 137.2p. Traders noted Investec Securities was telling clients to sell and had set a 115p target price. "C&W looks increasingly similar to other telco peers, and the significant premium is unwarranted," it said.
British Airways fell 3.8% to 156.7p after the airline scrapped its dividend and said it could not provide any guidance for investors because of the difficulty in forecasting revenues. There was also no update from BA on merger talks with Iberia or its pension.
Invensys, the controls and automation group, dipped 3.7% to 228¼p on profit-taking.
In the oil sector, Tullow Oil, down 0.2% to 978p, remained in focus, after Morgan Stanley said the explorer was its top pick in the sector. Setting a £12.25 target price, the broker said results of two imminent tests could change the scale of its Ugandan operations.
BP added 0.6% to 500¾p before next week's analysts' field trip - the first in three years.
Barclays firmed 0.8% to 286¾p in spite of continued speculation that Qatar Holding might be seeking to sell its 5.8% holding.
Among the mid-caps, Sports Direct International added 8.5% to a nine-month high of 80p on talk of strong trading and rumours that forecasts might have to be lifted before July's annual results.
Sports Direct is reckoned to have benefited from the travails of its main competitor JJB Sports, unchanged at 30p.
Cookson, the carbon and ceramics group, was another strong mid-cap performer, rising 8% to 239p on the back of a push from Goldman Sachs. Given improvements in the steel and electronics market, the broker said Cookson was unlikely to breach its banking covenants again.
Northern Foods fell 4.7% to 61½p on concerns it might announce a dividend cut with Wednesday's annual results. |
| Asia Pacific Regional Markets
Did they set the tone or follow the lead ..... |
 JAPAN
Japanese stocks fell as concern the US will eventually lose its top credit rating boosted the Yen, hurting earnings prospects for exporters and overshadowing the Bank of Japan's upgrade of its economic assessment.
Toyota Motors, which cut its second-half dividend this month, retreated 2.2% as the Yen appreciated beyond 94 per Dollar for the first time in two months. Bridgestone Corp., a tiremaker that earns three-quarters of its revenue overseas, sank 2.5% after the Washington Post said General Motors Corp. will file for bankruptcy. Japan Tobacco Inc., which plans to raise its full-year dividend, jumped 1.7%.
The Nikkei 225 Stock Average fell 38.34, or 0.4%, to close at 9,225.81. The broader Topix index fell 5.56, or 0.6%, to 875.88, with the value of stocks traded in Tokyo tumbling to a two-month low. For the week, the Nikkei lost 0.4%, while the Topix dropped 0.7%.
Shares fell even after the Bank of Japan raised its assessment of the economy for the first time since July 2006.
The Nikkei was up 4.1% on the year, compared with a 1.7% decline in the Standard & Poor's 500 Index. Companies on the Nikkei trade at 40 times their estimated net income for this fiscal year, making Japanese equities the most expensive among the world's five biggest markets.
Toyota, the world's biggest carmaker, dropped 2.2% to 3,570 Yen and was the most actively traded stock by value in Tokyo. Shin-Etsu Chemical Co., a silicon-wafer maker that earns almost two-thirds of its sales overseas, slid 2.9% to 5,000 Yen. Chemical makers contributed the most to the Topix's slump.
The Japanese currency strengthened to as much as 93.87 per Dollar, a level not seen since March 19, from 94.56 at the close of Tokyo stock trading Thursday. Japanese large manufacturers anticipate the Yen will trade at an average of 97.18 versus the Dollar this fiscal year, the Bank of Japan's Tankan quarterly survey showed last month.
The Yen strengthened further after Finance Minister Kaoru Yosano told reporters Friday that Japan isn't considering currency intervention.
Bridgestone, the world's biggest tiremaker, slid 2.5% to 1,411 Yen. The Washington Post Friday said the US government will send Detroit-based GM into bankruptcy next week. Separately, the Nikkei newspaper said Bridgestone and other Japanese suppliers are seeking US government guarantees on debts owed by GM and bankrupt Chrysler LLC.
Japan Tobacco, the world's No. 3 listed cigarette maker, added 1.7% to 277,400 Yen. Central Japan Railway Co., the country's largest bullet-train operator, climbed 2.9% to 644,000 Yen after Mitsubishi UFJ Securities Co. lifted its rating on the stock to "outperform" from "market perform."
Japan Tobacco plans to boost its annual dividend by 3.7% to 5,600 Yen for this business year, while Central Japan expects to maintain its full-year dividend of 9,000 Yen.
Nikkei futures expiring in June declined 0.5% to 9,230 in Osaka and retreated 1% to 9,200 in Singapore.
SOUTH KOREA
The KOSPI closed down 0.98% Friday, down 14.05 points at 1,421.65.
Analysts said ample liquidity in local financial markets may continue to support the index, preventing any drastic correction.
Samsung Electronics fell 2.3% to 563,000 won and Korean Air lost 2.5% to 40,450.
Doosan Heavy Industries declined 6.5% to 76,000 and Kia Motors dropped 3.5% to 12,450.
Foreign investors bought a net 52 billion won worth of shares and institutions sold a net 264.5 billion Won.
Retail investors bought a net 269 billion Won.
Decliners led advancers 492 to 323, with 73 unchanged.
Trading volume stood at 667 million shares worth 7.7 trillion Won compared with 858.7 million shares worth 7.8 trillion Won on Thursday.
The KOSPI 200 June futures index ended 3.60 points lower at 178.45, and the KOSPI 200 spot index fell 2.81 points to 179.01.
The junior Kosdaq market declined 0.9% to end at 554.09 points.
HONG KONG
Hong Kong stocks fell, led by commodity producers after oil and metal prices dropped Thursday, and after Lenovo Group Ltd. reported a record quarterly loss.
Aluminum Corp. of China Ltd., a unit of the nation's No. 1 maker of the metal, dropped 5% while Cnooc Ltd., China's biggest offshore oil producer, lost 3.9%. Lenovo, China's biggest personal-computer maker, plunged 6.4%. China Resources Enterprise Ltd. declined 3.9% after reporting lower profit. Shares also retreated after the Washington Post said the US will send General Motors Corp. into bankruptcy next week.
The Hang Seng Index lost 136.97, or 0.8%, to 17,062.52 after climbing as much as 0.6%. That pared the gauge's advance this week to 0.6%. The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, slid 2.3% to 9,698.32.
Sun Hung Kai Properties Ltd., Hong Kong's No. 1 developer by market value, climbed 2.8% after Morgan Stanley lifted its rating on the stock to "overweight."
The benchmark Hang Seng Index has climbed 49% from a four-month low on March 9 as investors speculated government stimulus efforts worldwide, including a 4 trillion RMB ($586 billion) package in China, will ease the global economic slump. The valuation of companies on the gauge is 15.5 times estimated earnings, down from 18.6 times at the beginning of 2008.
Chalco, as Aluminum Corp. is known, dropped 5% to HK$6.98. Cnooc declined 3.9% to HK$9.88. PetroChina Co., the nation's largest oil company, slipped 3.1% to HK$8.22.
A measure of six metals traded on the London Metal Exchange, including copper and zinc, retreated 3.7% Thursday.
Crude oil futures dropped 1.6% to $61.05 a barrel in New York Thursday. The contract was recently at $61.35 in after-hours trading as of 2:42 p.m. in Hong Kong.
Lenovo plunged 6.4% to HK$2.80. The company posted a record quarterly loss as the global recession reduced overseas sales and prompted the company to cut jobs. The fourth-quarter net loss was $264 million in the three months ended March 31, compared with a profit of $140 million a year earlier, Lenovo said Thursday. The company was expected to post a deficit of $211 million, based on the median estimate of analysts.
China Resources declined 3.9% to HK$15.62. The government-controlled retailer whose venture with SABMiller Plc makes China's best-selling beer announced during the lunchtime trading break that its first-quarter profit fell 35% to HK$417 million ($54 million) as slowing economic growth curbed consumer spending.
Sun Hung Kai climbed 2.8% to HK$84.10. Morgan Stanley lifted its rating on the stock to "overweight" from "equal-weight," according to a research note Friday.
The brokerage also raised its recommendation on Hong Kong's developers to "attractive" from "cautious."
More than nine stocks on the 42-member Hang Seng Index declined for each that rose. May futures slipped 1.8% 16,715.
CHINA
Chinese shares fell for a third straight session Friday on doubts over the economic outlook, giving the Shanghai benchmark its first weekly decline in a month.
The Shanghai Composite Index shed 13.02 points, or 0.5%, to 2,597.6, ending the week down 1.8%. The Shenzhen Composite Index for China's second exchange slipped 0.2% to 876.58.
Prices fell in the absence of any positive cues for the market, analysts said.
Energy shares fell on lower crude prices overnight.
The Shanghai benchmark was pulled lower by heavyweight PetroChina Ltd., Asia's biggest oil and gas producer, which fell 2.4% to 12.86 RMB.
China Shenhua Energy Ltd., the country's biggest coal producer, lost 2.1% to 26.09 RMB, while Pingdingshan Tianan Coal Mining Co. sank 3.3% to 34.22 RMB.
Home appliance makers were hit by profit taking after gains earlier in the week.
Qingdao Haier Co., a major refrigerator manufacturer, tumbled 4.2% to 11.91 RMB, while TV maker Hisense Kelon Electrical Holdings Co. lost 2.4% to 4.43 RMB.
A government announcement late Thursday on subsidizing renewable energy industry boosted solar power and wind energy shares. Shenzhen Topraysolar Co. soared 5.3% to 29.42 RMB, while Xinjiang Goldwind Sci & Tech Co. increased 1.4% to 33.9 RMB.
TAIWAN
Taiwan stocks rose 0.28% on Friday to a nine-month closing high on optimism the island's economy had bottomed out after suffering a record contraction in the first quarter.
The main TAIEX share index jumped 18.48 points to 6,737.29, finishing this week with a 3.8% rally and making the index the fourth-best performer among major globalmarkets so far this week.
The electronics sub-index rose 0.44%, with Taiwan's top chip design house, Mediatek , up 3.35%. It was the most actively traded issue by turnover.
Shares worth T$187 billion ($5.7 billion) changed hands,busier than T$182.9 billion a day earlier.
Taiwan's economy shrank at a record 10.24% in the first quarter due to poor exports and dismal private investment, prompting the government to cut its full-year growth target.
Mediatek, which designs chips used in cell phones, DVD players and flat-screen TVs, is expected to benefit from growing demand in China, analysts have said.
Electronics gear giant Hon Hai Precision Industry ,which has significant investments in mainland China, climbed 1.3%.
The day's top winner was construction shares , jumping 5.9%, on hopes that Chinese investors will invest in the local real estate market and a stronger Taiwan Dollar would boost the value of their properties.
Huaku Development and Far Glory , major real estate developers in Taipei, were both up by the 7-percent daily limit.
The Taiwan Dollar strengthened to a five-month high on Friday on signs the worst may be over for the island's economy, with demand picking up from foreign funds and some exporters.
Next week, Taiwan shares could trade in a narrow range ahead of the Dragon Boat Festival on Thursday and Friday, Lin added.
Bucking the gains, AU Optronics , the world's No.3 flat-panel maker, was off 2.78% after the company said the spike in demand from China and a recovering US market were pressuring supplies.
AU told Reuters in an interview that it expects to return to profitability in the second half of this year due to improving demand for flat-screen TVs, but that was sooner than most analysts expect.
THE PHILIPPINES
Share prices closed 0.72% lower on Friday, pulled down by overnight losses on Wall Street, dealers said.
The composite index fell 16.90 points to 2,316.89 while the all shares index closed down 7.51 points at 1,509.19.
There were 56 gainers, 50 decliners and 43 stocks unchanged.
Turnover totaled 3.40 billion shares worth P4.21 billion ($87.7 million).
The Peso traded higher at P47.05 to the Dollar in the morning from its close Thursday of P47.23.
Dealers said investors took profits on the back of the fall in the Dow Jones.
Volume was heavier than usual due to block sales in San Miguel Brewery, which were thought to be linked to the purchase of a stake in the beer manufacturer by Japan's Kirin Holdings, Dow Jones Newswires said.
Bank of the Philippine Islands was off 3.2% at P45, Energy Development Corp. fell 1.3% to P3.75 and Filinvest Land was down 5.2% at 73 Centavos.
SINGAPORE
Singapore markets closed down 2.57%. The blue-chip Straits Times Index tumbled 58.27 points to 2,210.97.
DBS fell 52 cents to 11.60 and United Overseas Bank slipped 50 cents to 14.08.
CapitaLand eased 12 cents to 3.39.
Singapore Airlines shed 24 cents to 12.00 and Singapore Telecommunications dipped 15 cents to 2.79.
MALAYSIA
Share prices on Bursa Malaysia ended higher Friday on bargain hunting on heavyweights, especially the plantation stocks, said dealers.
They said, however, the gains were capped by losses in key heavyweight, Sime Darby.
The benchmark Kuala Lumpur Composite Index (KLCI) rose 9.7 points, or 0.937%, to 1,045.26, after opening 4.88 points lower at 1,030.68.
The KLCI hit an intra-day high of 1,045.39 and an intra-day low of 1,030.04.
The Finance Index increased 58.55 points to 8,148.75, the Industrial Index gained 12.95 points to 2,301.09 and the Plantation Index jumped 56.35 points to 5,458.41.
The FBMEmas was 70.26 points higher at 6,970.32, the FBM30 went up by 65.14 points to 6,697.48, while the FBM2BRD slipped 5.96 points to 4,526.88 and the FBM-MDQ dropped 22.19 points to 3,947.92.
Gainers led losers by 364 to 250 while 231 counters were unchanged, 408 untraded and 39 others suspended.
Volume decreased to 1.268 billion shares worth RM1.344 billion from Thursday's 1.488 billion shares worth RM1.628 billion.
Among the active stocks, TA-WB and KNM were flat at 3.5 sen and 78 sen respectively, Tebrau gained 10 sen to RM76 sen, UEM Land went up 24 sen to RM1.62 and Mulpha rose three sen to 50.5 sen.
For the heavyweights, Sime Darby fell five sen to RM6.90, Maybank was flat at RM5.20, Tenaga Nasional rose 25 sen to RM7.65, Bumiputra-Commerce gained five sen to RM8.85 and IOI Corp went up eight sen to RM4.76.
Public Bank increased five sen to RM8.60, Axiata was one sen up at RM2.45, Genting jumped 28 sen to RM5.20 and PPB advanced 20 sen to RM11.30.
Volume on the Main Board fell to 1.088 billion shares worth RM1.297 billion from 1.267 billion shares worth RM1.565 billion Thursday.
Turnover on the Second Board declined to 63.168 million units valued at RM27.49 million from 115.836 million units valued at RM43.289 million previously.
Volume on the Mesdaq Market decreased to 56.399 million shares worth RM10.268 million from 73.544 million shares worth RM12.594 million on Thursday.
Warrants increased to 56.339 million units valued at RM10.268 million from 27.154 million units valued at RM5.549 million previously.
Bank Negara Malaysia has been ordered by the Minister of Finance to assume control of Tahan Insurance Malaysia Bhd effective Friday.
The order, pursuant to subsection 59(4)(a) of the Insurance Act 1996, is made due to Tahan's non-compliance with capital requirements and non-fulfillment of the capital restoration plans, Bank Negara said in a statement.
The central bank said the main aim of the order is to safeguard the interests of Tahan's policy owners, adding that the licensed general insurer has a market share of one%.
THAILAND
In Bangkok markets ended down 2.25%. The Stock Exchange of Thailand index fell 12.64 points to close at 548.77 points.
The energy sector dropped 3.26%, while the finance sector fell 3.06%.
Energy giant PTT Plc fell 6.00 baht to close at 214.00 and coal producer Banpu fell 8.00 to 307.00.
Bangkok Bank shed 2.00 to finish at 91.00 and Kasikornbank lost 1.50 to 58.00.
INDONESIA
Indonesia eased 0.2% on resuming trade after closing on Thursday for a market holiday. Despite the loss, the Jakarta index posted a 7.5% gain for the week.
The JCE declined 4.01 points (0.21%) to 1881.71 with transaction volume of 9.57 million shares worth 10.6 trillion rupiah (about 1.03 billion US Dollars).
INDIA
Indian shares rose 1.1% on Friday and took gains for the week to 14.1%, their most in 17 years, buoyed by hopes for pro-market reforms after the ruling coalition won general election last weekend.
Manmohan Singh was set to be sworn in later Friday as the prime minister for a second term, along with his new cabinet and the outlook for the market would depend on how quickly they are able to push asset sales in state firms, ease rules for foreign investment and boost sagging growth.
Some analysts believe the market is overbought after it leapt more than 17% at the start of the week following the unexpectedly easy election win. The BSE index has risen 73% from a 2009 low in early March and has climbed for 11 weeks in a row in the longest winning streak in four years.
The BSE index ended up 150.61 points at 13,887.15, with gainers and losers evenly matched. Trading was choppy with the index falling 0.9% at one stage.
Brokerages and investment houses polled by Reuters expected the benchmark to reach 15,750 by the end of December, gaining another 13%.
Energy giant Reliance Industries, private-sector lender ICICI Bank and infrastructure firm Larsen & Toubro led the market higher after a lower start.
Reliance, which has the biggest weight in the main index, rose 3.1% to 2,183.10 rupees, while private-sector lender ICICI gained 4.5% to 702.80 rupees.
Larsen & Toubro climbed 4.7% to 1,301.40 rupees.
The market has largely been powered by foreign funds, which have pumped about $5 billion into the market in the past two months, including more than $1 billion in this week.
Outsourcers Tata Consultancy and Wipro, which get most of their revenue from overseas, fell about 2% as the rupee climbed past 47 to a Dollar to its highest since December.
AUSTRALIA
Australian stocks fell 1.4% on Friday with miners including Rio Tinto and energy company Woodside Petroleum succumbing as global demand worries hit the prices of oil and base metals.
The benchmark S&P/ASX200 index was down 52.3 points, or 1.37%, at 3761.6, while the broader All Ordinaries index had fallen 49.3 points, or 1.3%, to 3755.4.
Woodside plunged $1.99, or 4.48%, to $42.41, Santos retreated 55 cents, or 3.73%, to $14.18 and Oil Search inched one cent lower to $5.12.
The big miners also weighed on the market.
BHP Billiton shed 94 cents, or 2.73%, to $33.46, while Rio Tinto sank $2.20, or 3.3%, to $64.44.
Investors flocked to safe-haven gold stocks.
Lihir put on five cents, or 1.59%, to $3.20, Newcrest gained 13 cents to $31.95 and Newmont was up eight cents, or 1.38%, at $5.89.
NAB was the only major bank in the black, adding 11 cents to $21.76.
Westpac was down six cents to $19.38, Commonwealth Bank backtracked nine cents at $35.51 and ANZ dipped 22 cents to $15.41.
Coca-Cola Amatil shares rose 11 cents to $8.60 after it said it expects to increase its profit in the first half of fiscal 2009 after a hotter summer boosted demand for beverages.
Virgin Blue inched one cent lower to 26 cents after it said its number of domestic and international customers increased in April compared with the same month last year.
Qantas was down 3.5 cents at $1.88.
Coles owner Wesfarmers has frozen the salaries of its senior management and board and reduced annual bonuses, and spoke out against the proposed crackdown on employee share schemes.
Shares in Wesfarmers were down 56 cents at $20.81.
Among other retailers, Woolworths dropped 30 cents to $25.83, Harvey Norman was four cents weaker at $2.96 and David Jones retreated 14 cents to $3.58.
NEW ZEALAND
The New Zealand sharemarket fell on light volume after a broad sell-off in United States stocks.
Brokers said the negative international backdrop provided an opportunity for investors to take profits and others took to the sidelines.
Contact Energy was down 9c to 576 but finished unchanged at 585 and TrustPower lost 15c to 765.
A Commerce Commission report released Thursday found the four largest electricity generator-retailers -- Contact, Genesis, Meridian and Mighty River Power -- overcharged by $4 billion.
Later , Energy Minister Gerry Brownlee said power companies should not put up prices this winter.
TrustPower Friday said its chief executive of eight years, Keith Tempest, was planning to step down at the end of the year.
The benchmark NZX-50 index closed down 15.767 points, or 0.568%, at 2760.544, having fallen 24.8 points Thursday. Turnover was worth $70 million. There were 28 rises and 60 falls among the 120 stocks traded.
Fletcher Building was down 12c to 643 and Stephen Wright at ASB Securities said it was likely to be due to profit-taking.
Telecom rose 2c to 260 after Vodafone suggested a co-investment model for broadband.
Westpac, which is chasing a New Zealand customer who took off with its money, fell 40c to 2510, while Tower fell 1c to 164. Nuplex was unchanged at 46. NZX rose 5c to 830. Michael Hill rose 5c to 65 and Methven eased 1c to 124.
Briscoe rose 2c to 102 on the day of its annual meeting and Renaissance rose 1c to 34 as it also held an annual meeting.
SkyCity eased 2c to 288 and $12.3m worth of shares were traded.
NorthPort eased 16c to 189 and PGG Wrightson eased 1c to 135. |
| Global Commodities
'Food for thought' or 'a Grain of truth' ..... |
 Crude oil prices on Friday closed the week above $60 a barrel for the first time since November, as the weakness of the US Dollar and signs that the worst of the economic crisis could be over attracted investors to commodities.
At the close, Nymex July West Texas Intermediate closed up 62 cents at $61.67 a barrel, up 9.4% on the week.
JPMorgan raised its forecast for WTI oil for the second half of the year by $10 a barrel, with the bank now expecting prices in the third quarter at $60 and at $65 in the fourth quarter.
I'm actually more bullish on oil than JP Morgan to be honest, I think we will see oil at closer to $80 Dollars a barrel by the end of this year.
Other commodities markets also closed the week showing strength.
US wheat, soyabean and corn prices climbed on the back of strong overseas demand, particularly from China, lower production in Latin America and delays in the critical planting season in the US due to the rains.
CBOT July soyabean on Friday hit an intraday peak of $11.84¾ a bushel, near an eight-month high, and 4.7% higher on the week. CBOT July corn rose to $4.31 a bushel, a four-month peak, while CBOT July wheat traded above $6 a bushel to hit also a four-month high.
ICE July Arabica coffee was in late trade at 136 cents per Pound, up 6.5% on the week. Coffee prices are rising on the back of a poor crop in Colombia, the world's third-largest exporter.
After a volatile week, most base metals prices closed little changed from the previous Friday's level. The only exception was aluminium, which posted a sharp drop.
London Metal Exchange aluminium for delivery in three months fell to $1,440 a tonne, down 4.9% on the week.
Gold prices hit a two-month high at above $950 an ounce on Friday in a sign that investor buying could still support bullion prices, in spite of a 20-year low in consumption of jewellery, the traditional backbone of the market.
Jewellery demand fell by almost a quarter between January and March compared with the same period in 2008, to 339.4 tonnes.
But this was outweighed by massive inflows by financial investors.
Inflows into gold exchange traded funds reached 465.1 tonnes in the first quarter, up more than sixfold on the same period last year.
Investors' rising appetite, both for gold derivatives such as futures of exchange traded funds or physical bullion such as bars and coins, appears now well supported, analysts and bankers said.
In London, gold spot prices on Friday surged to $960 an ounce, up 3.1% to its highest level since mid-March.
Although gold prices remain below last year's all-time high of $1,030 an ounce, some analysts believe that investor buying could push gold above that level.
Some argue that jewellery demand in India, the world's largest buyer, will recover later this year before the celebration of several Hindu festivals, including Diwali.
As you all know, my view on Gold is that within the next two years we will see Gold trading within the range of $1500 - $2000 - dizzying heights but I firmly believe Gold is heading that much higher as the 'safe-haven' mentality grows as stockmarkets and other instruments are 'found out' over the coming month/year. |
| Global Currencies
In for a Penny, in for a Pound ..... |
The Dollar dropped to its lowest level so far this year as optimism that the worst of the financial crisis may be over stemmed haven demand for the currency.
Analysts said the Dollar faced a near-perfect storm as improving risk conditions sparked higher oil prices and a strong rally in emerging markets.
Over the week, the Dollar dropped 3.8% to a four-month low of $1.4010 against the Euro, fell 0.8% to Y94.25 against the Yen and lost 3.2% to SFr1.0863 against the Swiss franc.
But the Pound advanced more strongly against the Dollar, rising 4.7% to a six-month high of $1.5880 on the week.
This was in spite of Standard & Poor's lowering its outlook on the triple A rating on UK debt to "negative" from "stable" on Thursday.
Indeed, Sterling advanced elsewhere as confidence in the financial sector was boosted by news that the UK government is in discussions to sell stakes in part-nationalised banks.
This, along with better than expected UK house price data, fanned confidence that the economy might be hitting a bottom for the cycle (no chance actually, but let them believe .....).
Over the week, the Pound rose 0.9% to a three-month high of £0.8805 against the Euro and gained 3.8% to Y149.65 against the Yen.
Increasing optimism also boosted commodity-linked currencies.
Over the week, the Australian Dollar climbed 4.3% to $0.7823 against the Dollar, the New Zealand Dollar rose 5.7% to $0.6195 and the Canadian Dollar gained 4.3% to C$1.1275.
Emerging market currencies rallied strongly, with the Turkish Lira climbing 1.6% to TL1.5400 against the Dollar on the week, the Brazilian Real gaining 3.7% to R$2.0330 and the South African Rand rising 4.9% to R8.2965.
The Indian Rupee surged to a five-month high against the Dollar. Over the week the Rupee rose 4.8% to Rs46.95 against the Dollar.
And bringing currencies to a close this Saturday, as always I round out with the RMB - the US Dollar depreciated vis-à-vis the Chinese RMB as the greenback closed at CNY 6.8215 in the over-the-counter market, down from CNY 6.8250 Thursday. |
| China
Key news eminating from China this week ..... |
 Companies operating in China using foreign-registered structures to minimise onshore tax should be braced for more aggressive scrutiny from mainland authorities, tax advisers have warned.
Thousands of companies, from state-owned industrial giants to small foreign investment vehicles, which conduct most of their business in China, are registered overseas for tax reasons.
However, tax advisers who have tracked a series of rulings and guidelines issued by central and provincial authorities said foreign-registered vehicles were coming under unprecedented scrutiny as governments adopt international standards to help boost revenue.
As a result, scores of foreign private equity and hedge funds could face larger Chinese tax bills. China typically levies a 10% capital gains tax on restructurings.
PwC said a trio of recent rulings by provincial tax bureaus in Chongqing, Xinjiang and Jiangxi had implications for overseas special purpose vehicles used by foreign investors. In the Xinjiang case, the tax authority ruled that a company registered in Barbados should be liable for capital gains tax for an onshore disposal because it could not prove it and its directors were based in the Caribbean country and thus could not utilise a China-Barbados double taxation exemption.
Overseas shareholders in some of China's biggest companies also face paying a new dividend withholding tax. China's State Administration of Taxation last month ruled that a 10% dividend withholding tax would apply to all overseas-listed companies that have their major business operations concentrated in China and whose senior management is primarily based on the mainland.
The new rules retroactively took effect on January 1 2008 and tax experts said the country's biggest companies would be affected.
CNOOC, China Netcom and Lenovo are among dozens of "red chip" companies - based in China but incorporated and listed overseas - and institutional investors will have to make special arrangements to try and avoid the tax. The withholding tax will not apply to individual investors.
The Hong Kong-listed shares of China Mobile were suspended last week for technical reasons relating to the new tax.
Analysts believe some foreign investors, such as pension funds reliant on dividend payouts, would become more cautious about investing in red chips.
**************************************
A bilateral trade agreement with China would boost Australia's gross domestic product by A$146bn ($114bn) over 20 years, according to a report due out on Thursday.
The Australia China Business Council's study was prepared by an independent economic consultancy but sponsored by Chinalco, the aluminium group trying to execute China's largest foreign investment with a US$19.5bn (€14bn, £12.4bn) injection into Rio Tinto, the Anglo-Australian miner.
The report comes as Canberra enters the final weeks of deliberations on whether to approve the Chinalco deal, which has raised concerns that a foreign state-backed enterprise would own a strategic stake in Australia's biggest natural resource assets. However, Canberra is mindful that blocking Chinalco could provoke a backlash from its biggest trading partner and a country that has underwritten its prosperity.
Canberra and Beijing have held 13 rounds of talks on a trade agreement over the past four years. Chinese barriers to agricultural goods, fishing and animal products are among the biggest obstacles to a comprehensive agreement.
The negotiations were re-energised after the 2007 election of Kevin Rudd, Australia's Mandarin-speaking prime minister. However, they have since stalled on "technical" issues, according to Simon Crean, trade minister, who this month noted that China was not "exactly your benchmark for speed".
Mr Crean said Beijing had not used the talks to seek a favourable outcome for Chinalco but had sought assurances that Australia would not discriminate against China. "I have assured them that we are open to foreign investment, we do not apply discriminatory procedures country by country," he said.
Frank Tudor, chairman of the business council, whose 800 corporate members include Rio, BHP Billiton, Qantas Airways, Chinalco subsidiary Chalco, and Bank of China, said bilateral barriers to trade and services should be removed.
A trade agreement would "yield major results for the Australian economy" and materially boost GDP over a sustained period, he said, whilst conceding that a "big bang" agreement would be difficult and protracted.
Mr Tudor said the report was prepared by the Centre for International Economics, an Australian consultancy, and the Chinese had not chosen its topic or author.
**************************************
Brazil and China will work towards using their own currencies in trade transactions rather than the US Dollar, according to Brazil's central bank and aides to Luiz Inácio Lula da Silva, Brazil's president.
The move follows recent Chinese challenges to the status of the Dollar as the world's leading international currency.
Mr Lula da Silva, who wass visiting Beijing this week, and Hu Jintao, China's president, first discussed the idea of replacing the Dollar with the RMB and the real as trade currencies when they met at the G20 summit in London last month.
An official at Brazil's central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil.
"Currency swaps are not necessarily trade related," the official said. "The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with RMB."
Henrique Meirelles and Zhou Xiaochuan, governors of the two countries' central banks, were expected to meet soon to discuss the matter, the official said.
Mr Zhou recently proposed replacing the US Dollar as the world's leading currency with a new international reserve currency, possibly in the form of special drawing rights (SDRs), a unit of account used by the International Monetary Fund.
In an essay posted on the People's Bank of China's website, Mr Zhou said the goal would be to create a reserve currency "that is disconnected from individual nations".
In September, Brazil and Argentina signed an agreement under which importers and exporters in the two countries may make and receive payments in pesos and reals, although they may also continue to use the US Dollar if they prefer.
An aide to Mr Lula da Silva on his visit to Beijing said the political will to enact a similar deal with China was clearly present. "Something that would have been unthinkable 10 years ago is a real possibility Friday," he said. "Strong currencies like the real and the RMB are perfectly capable of being used as trade currencies, as is the case between Brazil and Argentina."
In what was interpreted as a sign of Chinese concern about the future of the Dollar, the governor of China's central bank proposed in March that the US Dollar be replaced as the world's de-facto reserve currency.
In an essay posted on the People's Bank of China's website, Zhou Xiaochuan, the central bank's governor, said the goal would be to create a reserve currency "that is disconnected from individual nations" and modelled on the International Monetary Fund's special drawing rights, or SDRs.
Economists have argued that while the SDR plan is unfeasible now, bilateral deals between Beijing and its trading partners could act as pieces in a jigsaw designed to promote wider international use of the RMB.
Any move to make the RMB more acceptable for international trade, or to help establish it as a regional reserve currency in Asia, could enhance China's political clout around the world.
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China Resources Enterprise Ltd., the retailer whose venture with SABMiller Plc makes China's best- selling beer, said first-quarter profit fell 35% as slowing economic growth curbed consumer spending.
Net income declined to HK$417 million ($54 million) from HK$639 million a year ago, the government-controlled company, which makes Snow beer in partnership with SABMiller Plc, said in a statement to Hong Kong's stock exchange Friday.
"Retailers were prompted to introduce various types of discounts and promotional activities to boost sales, which undermined the profitability of the retail market in general," the company said in its statement.
Demand for beer may help Chairman Qiao Shibo as growth slows in the world's third-largest economy. China's first- quarter retail sales growth slowed to 15% from 21.6% last year as gross domestic product grew 6.1% in the first three months, the slowest pace in almost a decade.
China Resources slid 4.4% to HK$15.54 at the midday break in Hong Kong trading, before reporting earnings. That trimmed its gain this year to 15%, compared with 17% for the benchmark Hang Seng Index.
The company's sales rose 8% to HK$17.2 billion. Undiluted earnings per share slid to 17 Hong Kong cents from 27 cents.
Sales at the retail division, including supermarkets, rose 9% to HK$10.5 billion. The unit's contribution to profit fell 13% to HK$232 million.
Beverage sales increased 24% to HK$3.93 billion and the unit contributed HK$17 million of profit compared with a loss of HK$19 million a year earlier.
Beer sales by volume gained 20.5% to 1.57 million kiloliters. Sales of its bestselling Snow brand increased 25% to 1.34 million kiloliters. China Resources Snow Breweries, in which SABMiller holds a 49% stake with the remainder owned by China Resources, makes Snow.
Snow overtook Anheuser-Busch InBev NV's Bud Light as the world's top-selling brand because of increased Chinese demand, SABMiller said in November. China's per-capita beer consumption has doubled in the past 10 years on consumer-income growth. |
| Summary
The coming week looks like ..... |
In the US they have a shortened week next week; markets being closed Monday for Memorial Day.
General Motors will continue its efforts next week to ensure a quick trip through bankruptcy court or perhaps avoid filing altogether (why they would want to do this though, is anyone's guess).
GM could file for bankruptcy next week before a government-imposed June 1 deadline to reorganize itself into a viable company. The Detroit automaker hopes to rush through bankruptcy court in as few as 30 days, but the drive for an expedited bankruptcy could be challenged by GM's investors and dealers, who are expected to argue to a judge that they are being treated unfairly.
Economic reports due next week could turn out to be 'worse than expected' if figures this week are anything to go by. We have the existing home sales April figures due out and of course, revisions from the previous month.
A day later, the government is likely to report new-homes sales grew 2%. Lower prices and mortgage rates are helping unload some new homes, which have lagged existing homes in sales. On Tuesday, the Standard & Poor's/Case-Shiller index will report on March home prices in 20 major cities.
The latest government figure on first-quarter gross domestic product, due next Friday, is expected to show a 5.5% decline, compared with the first reading of a 6.1% drop.
The government details April durable goods orders Thursday, and regional manufacturing reports are due Tuesday from the Dallas Fed and Thursday from the Chicago and Kansas City Feds.
Also on tap are readings on May consumer confidence and the final reading for May on consumer sentiment from the Reuters/University of Michigan Surveys of Consumers.
House Speaker Nancy Pelosi, one of the most vocal critics of China, will visit here next week and I'm particularly looking forward to seeing whether she manages to put just one foot in the wrong place or actually puts 'both feet in it'.
I have to say, Mr Obama is a brave (or foolhardy) President, allowing such an outspoken lady that 'speaks before she thinks' visit China at such a precarious time as 10 days before the 20th Anniversary of Tiananmen Square. I somehow see Ms Pelosi managing to make waves somewhere and somehow during her visit that is ostensibly to give the keynote address at an environmental energy forum.
Next week, the US Treasury will auction $101 billion in bonds, matching the record, with $2 trillion in new bonds expected to hit the market in fiscal 2009 alone.
Here's a question; what happens if the demand isn't there from the foreign entities?
I can tell you what will happen.
There's $2 trillion of US Treasuries owned by foreign central banks, and if all of a sudden, they lose their appetite for US Treasuries, there's only one way to pay this debt, and that will be to increase interest rates. And then you get the potential problem of higher inflation, a lower Dollar and higher interest rates, like we had in the 1970s.
As if possible, the Eurozone calendar is a touch busier than the US next week. Monday has the German IFO index on tap. On Tuesday we see Eurozone current account, Eurozone industrial orders, French consumer spending, German GDP and German consumer confidence. Wednesday brings French consumer confidence, French business confidence and German consumer prices. Thursday has Eurozone consumer confidence and German employment while Friday rounds out the week with Eurozone consumer prices, French producer prices and German retail sales.
It is a light one in the UK and starts off on Wednesday with home loan data. Thursday sees the other noteworthy data with the quarterly distributive trades report (retail sales) and consumer confidence due.
Here in the AsiaPac' Region, Japan sees a pretty busy week ahead. The all industry activity index starts things off on Sunday while the Bank of Japan monthly report is due Monday. International trade is one of the week's highlight on Tuesday. Small business confidence and retail trade are on deck Wednesday while employment, household spending and industrial production make for a busy Thursday. Housing starts finish off the week on Friday.
Last but not least, the action down under is pretty normal. Monday has the New Zealand trade balance lined up while Tuesday sees New Zealand inflation expectations. On Wednesday we will see Australia leading index and New Zealand business confidence. Thursday brings Australia new home sales and New Zealand building permits while Friday closes things out with Australia private sector credit data.
All told, next week is going to be dismal for the Dollar I feel, as it will continue its decline against practically all currencies.
China is on a Public Holiday next weekend and I have already been warned that during that weekend and the week that follows, access to 'foreign' news websites from here in China will be massively censored/restricted due to the upcoming Tiananmen Anniversary - Internet access will be negligible to say the least.
So forearmed is forewarned and next weekend it is highly probable that I will not be able to release a Newsletter.
I will as always endeavour to get round this conundrum but wanted to keep you appraised in advance as to the possibilities. |
As always, I will keep you posted with major developments as/when they occur in the week ahead.
In the meantime, I wish you all a very pleasant weekend.
Market Newsletter Written By
Adrian Page
Managing Director
Financial Page International | |
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