SINGAPORE (Thomson Financial) - Oil prices were mixed in Asian trade Friday, with the market taking a hit from the escalating contagion sparked by troubles in the US subprime credit sector.There are concerns that the financial impact of US lending to borrowers with poor credit records would lead to slower economic growth in the US and elsewhere which would dampen demand for oil.At 11:55 am (0355 GMT), New York's main contract, light sweet crude for September delivery, was down one cent at 71.58 US dollars a barrel from 71.59 dollars in late US trades Thursday.Brent North Sea crude for September added seven cents to 70.28 dollars."There are concerns about the impact of the US credit woes on economic activity and hence oil demand," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz."Some investors have also moved their money out of oil to cover losses in other sectors."
The problems in the high-risk subprime home loan sector has been sending shockwaves through the markets worldwide.In the latest development, BNP Paribas Investment Partners, a unit of French bank BNP Paribas, said it had suspended three of its funds exposed to the subprime market, triggering heavy selling in equities globally.Oil prices have fallen sharply after hitting a fresh all-time high of 78.77 dollar on August 1.
"After establishing the new record high last week, the market was really vulnerable to a reversal," Shum said."All the market needed was a trigger and the market foundthat trigger in the concerns over the US subprime market."But he said there appeared to be strong support for prices at 70 dollars, with falling US energy inventories and a refusal by the OPEC cartel to raise output expected to help keep prices buoyant.
US crude inventories fell 4.1 million barrels to 340.4 million barrels for the week ended August 3, against the consensus forecast for 2.75 million barrels.US gasoline stocks dropped a surprising 1.7 million barrels against expectations for a rise of 775,000 barrels.Shum said that with the US hurricane season around the corner, "weather remains a wild card" as storms could threaten US oil production facilities in the Gulf of Mexico.
Hit Counter
Tuesday, August 14, 2007
Asian Stocks, Forex Extend Global Selloff;Yen Rallies
SINGAPORE (Dow Jones)--Extending a global selloff Asian stocks plunged Friday as traders sought to shore up capital wherever possible amid renewed jitters about the impact of a liquidity crisis in U.S. credit markets. The selling also made its way to several Asian currencies and to the region's offshore bond and credit markets, though the yen was buoyed amid unwinding of the carry trade. "This is what happens in a liquidity crisis, where they have positions which can be translated back into cash quickly, they will sell them," said Khiem Do, manager of the Asia Pacific Fund and head of Asian Multi-Asset at Baring Asset Management in Hong Kong. Japan's Nikkei Stock Average was recently off 2.5% to 16746.50; Korea's Kospi index was off 4.1% to 1831.19, Singapore's Straights Times Index lost 3.3% to 3298.42, the Standard & Poor's Australia Stock Exchange 200 slid 2.9% to 5986. In Hong Kong the Hang Seng Index fell 3.1% to 21,754.04.
As with U.S. and European markets overnight, selling in Asia was broad-based. Brokerages and banks were among the worst hit. Australia's Macquarie Bank (MBL.AU), lost 6.1% to A$72.79, Korea's Samsung Securities fell 5.6% to KRW79,300, and in Singapore, DBS Group slid 4.1% to S$20.90. On Friday Citigroup cut its price target on DBS and other Singapore banks to reflect, "re-pricing of risk," that might limit what traders are willing to pay for these stocks amid credit market worries. Still, the firm, in a note to clients, retained a buy rating on the group - arguing that the recent slide is a buying opportunity and that the banks' exposure to now illiquid credit instruments is limited.
The yen-carry trades unwinding hit the Australian dollar and New Zealand dollar particularly hard. The New Zealand dollar plunged below Y88 to its lowest level since May 25. The selling began late in the trading session Thursday following word from France's BNP Paribas (13110.FR) that it suspended three of its asset-backed securities funds because of a "complete evaporation of liquidity." Also fueling the fire was a report in the Wall Street Journal that U.S. lender Countrywide Financial Corp. (CFC) is facing "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition. Countrywide is the largest U.S. home mortgage lender in terms of loan volume. Traders said moves by the European Central Bank and U.S. Federal Reserve to inject billions of dollars of fresh funds into money markets contributed to uncertainty overnight, prompting some head scratching about how worried regulators are. Both the Bank of Japan and Reserve Bank of Australia made similar moves Friday, though Australian regulators played down the liquidity injection as routine operations
The Monetary Authority of Singapore also injected S$1.5 billion into the local money market Friday, traders said. The move came after MAS said earlier in the day that it was ready to intervene to stabilize the local market. Still, analysts expectations for further interest rate hikes were mixed. "We are still expecting the BOJ, ECB, BOE, BOC to hike rates the next few weeks, but if this panic gets worse, we may need to change that outlook," said JPMorgan Chase Bank currency strategist Tohru Sasaki. Barclays Capital's chief JGB strategist, Masuhisa Kobayashi, said the sudden supply of liquidity by the world's central banks can be interpreted either as a reaction to crisis or as a step to prevent one. "Taking the latter, more optimistic interpretation, we believe the possibility of an August rate hike should not be ruled out," he said. According to Credit Suisse, the likelihood of a rate increase by the BOJ at its meeting in late August fell to 37% from 64% the day before.
-By Mohammed Hadi, Dow Jones Newswires; 65-6415-4147; mohammed.hadi@dowjones.com. (END) Dow Jones Newswires
As with U.S. and European markets overnight, selling in Asia was broad-based. Brokerages and banks were among the worst hit. Australia's Macquarie Bank (MBL.AU), lost 6.1% to A$72.79, Korea's Samsung Securities fell 5.6% to KRW79,300, and in Singapore, DBS Group slid 4.1% to S$20.90. On Friday Citigroup cut its price target on DBS and other Singapore banks to reflect, "re-pricing of risk," that might limit what traders are willing to pay for these stocks amid credit market worries. Still, the firm, in a note to clients, retained a buy rating on the group - arguing that the recent slide is a buying opportunity and that the banks' exposure to now illiquid credit instruments is limited.
The yen-carry trades unwinding hit the Australian dollar and New Zealand dollar particularly hard. The New Zealand dollar plunged below Y88 to its lowest level since May 25. The selling began late in the trading session Thursday following word from France's BNP Paribas (13110.FR) that it suspended three of its asset-backed securities funds because of a "complete evaporation of liquidity." Also fueling the fire was a report in the Wall Street Journal that U.S. lender Countrywide Financial Corp. (CFC) is facing "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition. Countrywide is the largest U.S. home mortgage lender in terms of loan volume. Traders said moves by the European Central Bank and U.S. Federal Reserve to inject billions of dollars of fresh funds into money markets contributed to uncertainty overnight, prompting some head scratching about how worried regulators are. Both the Bank of Japan and Reserve Bank of Australia made similar moves Friday, though Australian regulators played down the liquidity injection as routine operations
The Monetary Authority of Singapore also injected S$1.5 billion into the local money market Friday, traders said. The move came after MAS said earlier in the day that it was ready to intervene to stabilize the local market. Still, analysts expectations for further interest rate hikes were mixed. "We are still expecting the BOJ, ECB, BOE, BOC to hike rates the next few weeks, but if this panic gets worse, we may need to change that outlook," said JPMorgan Chase Bank currency strategist Tohru Sasaki. Barclays Capital's chief JGB strategist, Masuhisa Kobayashi, said the sudden supply of liquidity by the world's central banks can be interpreted either as a reaction to crisis or as a step to prevent one. "Taking the latter, more optimistic interpretation, we believe the possibility of an August rate hike should not be ruled out," he said. According to Credit Suisse, the likelihood of a rate increase by the BOJ at its meeting in late August fell to 37% from 64% the day before.
-By Mohammed Hadi, Dow Jones Newswires; 65-6415-4147; mohammed.hadi@dowjones.com. (END) Dow Jones Newswires
Philippine central bank chief sees limited impact from US subprime crisis
MANILA (Thomson Financial) - Philippine central bank chief Amando Tetangco Friday downplayed any impact from the US subprime market woes on the domestic financial system, saying local banks have no significant exposure to collateralized debt obligations (CDOs), which are at the heart of the
US credit problems.He said any impact on the Philippine economy "will be largely indirect, mainly in the form of risk aversion.""It is expected to be limited. Philippine banks are not exposed in any significant way to CDOs," he said in a mobile phone text message.CDOs are securities backed by bonds and loans and which could include US subprime mortgages."There is sufficient liquidity.
More fundamentally, the increased availability of longer-term funding in pesos has also reduced the country's vulnerability to adverse external market developments," he said.Philippine equities plunged Friday following another major slump in markets worldwide after BNP Paribas, France's biggest bank, froze withdrawals from three of its funds that had invested in subprime mortgages in the US.At 11.42 am here, the composite index was down 97.19 points or 2.9 percent at 3,288.01.The peso fell to 45.73 against the US dollar from Thursday's close of 45.36.
US credit problems.He said any impact on the Philippine economy "will be largely indirect, mainly in the form of risk aversion.""It is expected to be limited. Philippine banks are not exposed in any significant way to CDOs," he said in a mobile phone text message.CDOs are securities backed by bonds and loans and which could include US subprime mortgages."There is sufficient liquidity.
More fundamentally, the increased availability of longer-term funding in pesos has also reduced the country's vulnerability to adverse external market developments," he said.Philippine equities plunged Friday following another major slump in markets worldwide after BNP Paribas, France's biggest bank, froze withdrawals from three of its funds that had invested in subprime mortgages in the US.At 11.42 am here, the composite index was down 97.19 points or 2.9 percent at 3,288.01.The peso fell to 45.73 against the US dollar from Thursday's close of 45.36.
BOJ Official: O/N Rate Rise May Be On Subprime Woes
TOKYO -(Dow Jones)- A Bank of Japan official said Friday that the central bank injected Y1 trillion into money markets after the overnight call rate rose from the BOJ's target of 0.50% to 0.54%-0.55%. The Japanese central bank's fund injection followed similar steps overnight by the U.S. Federal Reserve and the European Central Bank, as market worries about the U.S. subprime loan crisis escalated. The BOJ official said it was "possible" that the rise was tied to the subprime crisis, but that the bank didn't know for sure. "We're not certain if that is related (to subprime) or not. It all depends on why the overnight call rate was a little bit high this morning," the official said. "We're not sure why some of the financial institutions were raising funds at a higher rate than on other days.
" The official called the step "an extension of our normal day-to-day operations," but noted that the last time the BOJ made such a large cash injection was June 29 - just as the U.S. subprime crisis flared. The injections follow French banking giant BNP Paribas' decision to freeze three funds that trade in mortgage-backed securities, saying the dramatic absence of liquidity in the market for such products as the subprime crisis spreads has made it impossible to accurately value the funds' holdings. A BOJ official said the bank acted after the overnight call rate rose to 0.54%-0.55%, above the bank's target rate of 0.5%. It is "possible" that the rise in the key rate was related to the subprime chaos, the official said, though he added that the BOJ is "not certain" of the cause. "We're not certain if that is related (to subprime) or not. It all depends on why the overnight call rate was a little bit high this morning," said the BOJ official. "We're not sure why some of the financial institutions were raising funds at a higher rate than on other days." The official described the move as "an extension of our normal day-to-day operations. The rates were a bit high, deviating a little bit away from our target, so we thought it might be necessary to inject some liquidity.
" The ECB took the almost unprecedented step of injecting nearly EUR95 billion into European money markets overnight, and the Fed funneled $24 billion into U.S. credit markets. "Suddenly, central banks have changed their tune from a wait-and-see stance on the subprime issue to a move to stabilize the financial system," Barclays Capital analyst Masuhisa Kobayashi wrote in a research note Friday. He said the start of action could either mean that the credit market and financial system have destabilized to the extent that central banks had to take action, or that the action was meant to prevent such a situation, and things should calm down going forward. He added: "The market seems to have taken the former, more pessimistic view." But the BOJ official suggested that the central banks had not coordinated their moves. "We're all responding to the situation in our domestic markets. It might mean that something common behind our domestic markets is happening, but we're not certain," he said.
-By Michael S. Arnold, Dow Jones Newswires; 81-3-5255-2929; michael.arnold@dowjones.com (END) Dow Jones NewswiresAugust 09, 2007 23:39 ET (03:39 GMT)
" The official called the step "an extension of our normal day-to-day operations," but noted that the last time the BOJ made such a large cash injection was June 29 - just as the U.S. subprime crisis flared. The injections follow French banking giant BNP Paribas' decision to freeze three funds that trade in mortgage-backed securities, saying the dramatic absence of liquidity in the market for such products as the subprime crisis spreads has made it impossible to accurately value the funds' holdings. A BOJ official said the bank acted after the overnight call rate rose to 0.54%-0.55%, above the bank's target rate of 0.5%. It is "possible" that the rise in the key rate was related to the subprime chaos, the official said, though he added that the BOJ is "not certain" of the cause. "We're not certain if that is related (to subprime) or not. It all depends on why the overnight call rate was a little bit high this morning," said the BOJ official. "We're not sure why some of the financial institutions were raising funds at a higher rate than on other days." The official described the move as "an extension of our normal day-to-day operations. The rates were a bit high, deviating a little bit away from our target, so we thought it might be necessary to inject some liquidity.
" The ECB took the almost unprecedented step of injecting nearly EUR95 billion into European money markets overnight, and the Fed funneled $24 billion into U.S. credit markets. "Suddenly, central banks have changed their tune from a wait-and-see stance on the subprime issue to a move to stabilize the financial system," Barclays Capital analyst Masuhisa Kobayashi wrote in a research note Friday. He said the start of action could either mean that the credit market and financial system have destabilized to the extent that central banks had to take action, or that the action was meant to prevent such a situation, and things should calm down going forward. He added: "The market seems to have taken the former, more pessimistic view." But the BOJ official suggested that the central banks had not coordinated their moves. "We're all responding to the situation in our domestic markets. It might mean that something common behind our domestic markets is happening, but we're not certain," he said.
-By Michael S. Arnold, Dow Jones Newswires; 81-3-5255-2929; michael.arnold@dowjones.com (END) Dow Jones NewswiresAugust 09, 2007 23:39 ET (03:39 GMT)
Yen Rallied after BNP Froze Funds
The yen rose sharply BNP Paribas, France’s biggest bank, froze three investment funds worth 1.6 billion euros, raising concern the US subprime mortgage sector woes is spreading worldwide. The ECB today injected 94.8 billion euros into the region’s banking market to meet the sudden liquidity demand. The US subprime worries prompted investors to unwind carry trades, driving the yen higher against high-yielding currencies.The euro slumped from 165 to 161.55 versus the yen, while the sterling slid from 244 to test the 239 level. The yen strengthened from 119.75 to as low as 118.20 versus the dollar. As a safe haven currency, the dollar also benefited from anti-risk trades. The euro fell off the 1.38 handle and was supported by the 1.3650 level versus the dollar. The sterling dipped from 2.04 to as low as 2.0212.
Rate Sentiment Drives FX
The dollar was mixed in the Wednesday session amid a dearth of fresh US economic news, climbing higher against the yen but falling sharply versus the sterling. The data release was limited to June wholesale inventories, which was slightly higher than expected at 0.5%, unchanged from the previous month. Interest rate expectations continue to play a key role in the FX market, with the Aussie and sterling regaining its footing on hawkish sentiment from both respective central banks.
Dollar Slipped after FOMC
The Fed kept interest rates at 5.25% unchanged as widely expected. The Fed acknowledged tightening credit conditions and slowing economy, but maintained its bias against inflationary pressure for fear that inflation may not moderate as expected. The dollar fell slightly against the euro and sterling after the post-meeting statement.The euro will face resistance at 1.3750, followed by 1.3780 and 1.38. Additional gains will target 1.3830 and 1.3850. Meanwhile, on the downside the pair will encounter support at 1.3720 followed by 1.37 and 1.3680. Subsequent floors will emerge at 1.3650, backed by 1.3620 and 1.36.
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