The investment bank Goldman Sachs has predicted that the US economy will go into recession in 2008.
Its forecast follows comments from Merrill Lynch, which said that the US economy is already in recession.
Goldman Sachs said that the slowdown would force the US Federal Reserve to reduce interest rates to 2.5% from the current level of 4.25%.
But a survey of 62 economists by the Bloomberg news agency suggested the slowdown might not lead to a recession.
Taking the mid-point of the economists' predictions for US growth in the first six months of 2008 gave an average figure of 1.5%.
Prepare yourselves
"It's soft economic activity that feels like a recession, but we probably won't have one," Bloomberg quoted Mickey Levy at Bank of America as saying.
In a note to client entitled "Prepare for recession", Goldman Sachs cut its forecast for US growth this year to 0.8% from 1.8% and said that gross domestic product would decline in the second and third quarters of the year.
It predicts that US unemployment will rise from the current 5% to 6.5%.
Last Friday's labour market figures, which showed the jobless rate rising to 5%, set stock markets falling around the world and were described by Merrill Lynch as the final proof that the recession had started.
It recommended that investors should reduce holdings in the financial sector and information technology and opt instead for healthcare stocks.
View Keep calm by using a spreadsheet that emphasizes your total net worth, not the changes in each holding. Before you buy a stock or mutual fund, check whether it overlaps what you already own - try the Instant X-Ray tool at Morningstar.com.
Hope for the best - but expect the worst
Being braced for disaster - by diversifying and learning market history - can help keep you from panicking. Every good investment performs badly some of the time. Intelligent investors stick with solid companies that hit rough patches.
Investigate, then invest
A stock is not just a price; it's a piece of a living corporate organism. Study the company's financial statements. Read a mutual fund's prospectus before you buy. If you want to hire a broker or financial planner, do a background check before you write a check.
Never say always
No matter how sure you are that an investment is a winner, don't put more than 10% of your portfolio in it. If you turn out to be right, you'll still make plenty of money, but if you turn out to be wrong, you'll be glad you kept most of your powder dry.
Know what you don't know
Don't believe you are already an expert. Compare stock and fund returns against the overall market and across different time periods. Ask what might make this investment go down; find out if the people marketing it to you have their own money in it.
The past is not a prologue
On Wall Street, what goes up must come down, and what goes way up usually comes down with a sickening crunch. Never buy a stock or mutual fund just because it has been going up. Intelligent investors buy low and sell high, not the other way around.
Weigh what they say
The easiest way to silence a market forecaster is to ask for the complete track record of all his or her predictions. If you can't get a complete list, don't listen. Before trying any strategy, gather objective evidence on the performance of others who have used it.
If it sounds too good to be true, it probably is
More precisely: If it sounds too good to be true, it absolutely is. Anyone who offers a high return at a low risk in a short time is probably a fraud. Anyone who listens is definitely a fool.
Costs are killers
Trading costs can eat up 1% of your money per year, while taxes and mutual fund fees can take another 1% to 2%. If middlemen take 3% to 5% of your money per year, they will get rich. If you want to get rich, comparison shop and trade at a snail's pace.
Eggs go splat
Never keep all your eggs in one basket. Spread your bets across U.S. and foreign stocks, bonds, and cash. No matter how much you like your job, don't put all your 401(k) into your company's stock; employees at Enron and WorldCom liked their company too.
按传统,每年头,工会都会与雇主商讨工资加幅,通胀飙升,加上11月份失业率下跌至7.2%纪录低位,反映劳工市场紧绌,不难触发大幅加薪之冀望,连全德国最大工会1GMetall之主席胡拔(Berthod Huber)也扬言,08年是「大工资年」(mega wage year ),足见不达开天索价之加幅,誓不罢休。
China's first gold futures contract surged by its 10 percent daily limit on trading debut - on a day that the spot price of gold hit a record US$891 (HK$6,949.80) an ounce on the back of a weak dollar and inflation concerns. Contracts for June delivery hit US$988 an ounce in Shanghai.
Spot gold hit US$891 in London afternoon trade yesterday, surpassing the previous high of US$881.10 reached on Tuesday.
Gold for June delivery, the most active contract in Shanghai, rose as much as 21 yuan (HK$22.53) to 230.99 yuan a gram, or nearly US$100, leading to the belief the metal may reach US$1,000 an ounce.
Trading was heavy yesterday with more than 120,000 contracts exchanged and 21,810 still outstanding.
As the third-largest consumer of gold, China has made clear its intention to gain stronger bargaining power through setting up a futures market.
However, prices are expected to be pushed up further with the addition of a new trading center and more demand within the country, a spokesperson at the Chinese Gold and Silver Exchange Society said.
The start of futures trading in Shanghai is one of the biggest events in the gold market over past few years, which also saw the launch of gold exchange- traded funds.
"Futures will allow leveraged investment in gold from Chinese investors and speculators," wrote John Reade, a London-based metals analyst at UBS. It is expected that Chinese gold producers will use the market to hedge low-cost exposure to the metal while investors will leverage their holdings to bullion.
China is the world's second-largest gold supplier, producing 191.456 tonnes during the first nine months of last year. Its manufacturing sector consumes about 9.2 percent of the world's total, according to Xinhua News Agency. The global gold price gained 31 percent in 2007 against the backdrop of a declining dollar and concern the United States would cut interest rates to avert a slowdown.
Gold has more than tripled in price since 2000 and is thought likely to surge 15 percent this year to average US$800 an ounce compared to US$696 in 2007.
Plunge in key interest rate may lead to cheaper home loans
Interbank lending rate drops to lowest in three years and is expected to fall further by mid-year
By Alvin Foo Jan 10, 2008
HOMEBUYERS could be in for some cheer in the coming months after a recent plunge in a crucial interest rate that indirectly determines how banks set mortgages.
The three-month Singapore interbank offered rate (Sibor), as it is called, has hit its lowest level since February 2005 and is expected to sink further by the middle of the year.
It is significant as the Sibor is the rate at which banks lend cash to each other and thus influences what consumers pay on loans such as mortgages.
It hit 1.7625 per cent yesterday, down about 0.8 percentage point in a fortnight, and the lowest since the 1.75 per cent level nearly three years ago.
With banks getting cheaper money, it is expected that homebuyers could benefit in turn from cheaper mortgages, although there is usually a lag between Sibor and consumer loan rate movements.
Citigroup economist Chua Hak Bin said: 'Mortgage rates could head lower in two months.'
But a Sibor fall is bad news for savers as fixed deposit rates could drop too.
Economists say the Sibor's sharp dip is due to recent interest rate cuts in the United States - with more likely to come later this month, huge capital inflows into Singapore and poor stock market sentiment, which have prompted investors to leave more money in the bank.
CIMB-GK economist Song Seng Wun said: 'The Sibor's plunge corresponds with the recent sharp decline in US interest rates and the expectation of more cuts.
'People have started 2008 with plenty of uncertainty, and are holding on to more cash and being more risk-averse.'
OCBC economist Selena Ling added: 'It's due to foreign funds coming in, seeking refuge from the weakening US dollar, and the recent plunges in the equity market.'
The US Federal Reserve has cut key interest rates from 5.25 per cent to 4.25 per cent in recent months.
Market experts predict a further 50-basis point cut later this month as part of moves to avert a possible recession.
Economists expect the Sibor to remain soft, due to the likelihood of further rate cuts and the cautious equity market sentiment.
Dr Chua said: 'We expect the Sibor to fall by a further 30 to 50 basis points by mid-year, especially if the Fed cuts rates by 75 basis points by the end of the second quarter.'
While home owners welcome a Sibor fall, banks dread it.
It affects their net interest margins because most of their Singdollar corporate and small business loans are linked to the Sibor.
A Deutsche Bank analyst report noted: 'This plunge is of concern, as we estimate that a 25 basis point fall in the Sibor will eventually lead to a fall in earnings per share of 4 per cent for DBS Group Holdings, 2 per cent for United Overseas Bank and 1 per cent for OCBC Bank.'
And savers will get belted too. Low interest rates combined with the high inflation now building up in Singapore spell 'negative real interest rates' - the interest earned on savings will not be able to offset the rise in prices.
Mr Song said: 'It's a sign for people not to keep money in the bank, as savers lose out.
'It's a good period to borrow, as there is more incentive for people to take money out rather than put it in.'
Thus, Dr Chua advocates that 'some diversification away might be prudent'.
He suggested alternative instruments such as real estate investment trusts, utility stocks and foreign currency fixed deposits, which offer higher rates, to hedge against inflation risk.
Nigeria Militants Say Major Attack Is `Imminent' (Update2)
By Julie Ziegler
Jan. 9 (Bloomberg) -- The Nigerian militant group known as the Movement for the Emancipation of the Niger Delta, or MEND, said it's planning a major attack against the oil industry.
``An attack is imminent that will rock the foundation of the international oil market,'' MEND spokesman Jomo Gbomo said in an e-mail to Bloomberg. A ``smoke screen'' is being devised to divert attention away from the actual target, he said.
Gbomo said the strike would be a reprisal for a government attack last month on a warlord's camp. Nigeria is Africa's biggest oil producer.
MEND's assaults have halted as much as 20 percent of Nigeria's oil production since they started afresh in early 2006. The group's latest action came on Jan. 1, when it attacked two police stations and a hotel in the hub of Nigeria's oil producing-region. At least 12 people were killed in the shooting incident, according to the Nigerian state news service. The action also helped push oil prices about $100 for the first time.
Gbomo yesterday urged ``freelance troublemakers'' to join his fight against the government and achieve a goal of halting 100 percent of oil production in Nigeria.
Armed groups may be preparing for a large-scale attack on an oil installation in Rivers state in Nigeria's delta region, Reuters reported today, citing Jonjon Oyeinfie, a former leader of ethnic rights group Ijaw Youth Council.
Being Held
Gbomo also said that Henry Okah, a leader of MEND, is still being held in an Angolan prison after being arrested on arms charges in September. Okah's arrest sparked a series of kidnappings and attacks against oil companies such as Royal Dutch Shell Plc and Exxon Mobil Corp.
``Henry Okah does seem to be at the center of a lot'' of the motivation for MEND's attacks, said Antony Goldman, a UK- based independent analyst specializing in Nigeria.
Goldman said Gbomo's threat may be genuine, though he pointed out that MEND in the past has not always carried out its threats.
``The do have a slightly surprising capacity, but they're not always good for their word'' Goldman said in an interview from London. ``Traders of course will take positions.''
Crude oil for February delivery fell 51 cents, or 0.5 percent, to $95.82 a barrel at 9:06 a.m. on the New York Mercantile Exchange. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 72 percent from a year ago.
Militants are demanding a greater share of the wealth from the delta region's oil resources, which have been exploited by foreign oil companies for decades.
US slowdown could spark global economic recession - UN
January 10, 2008
THE apparent US economic slowdown could trigger global recession this year and stymie years of robust growth in Asia and Africa, the UN said.
"The major uncertainty for 2008 now emanates from the US economy," according to the world body's World Economic Situation and Prospects 2008.
"A further slowdown in the world's major economy will hit many of the poor nations hard, as it will slow world trade and put an end to the boom in commodity prices that benefited them over the past years," it said.
The report said the economies of Japan and Western Europe, already operating near production potential, were not capable of taking up the slack.
"The domino effect of a US recession would be to knock down export growth from China, Europe and Japan, in turn reducing their demand for exports from developing countries," it said.
The report forecast that the world economy would grow at 3.4 per cent this year, down from 3.7 per cent in 2007 and 3.9 per cent in 2006.
It stressed that world growth was "robust and broad-based" last year, with more than 100 economies posting 3 per cent growth of per capita output or more.
It said developing economies and those in transition boosted their share of world trade from 35 per cent in 2000 to over 40 per cent last year.
"Remarkably, economic growth in Africa strengthened in 2007 to near 6 per cent," the report said.
But it cited "a clear and present danger of the world economy coming to a near standstill" linked to the housing slump in the US and the subsequent credit crunch as high-risk borrowers defaulted on mortgage payments.
"The ongoing housing downturn in the United States became much more serious in the third quarter of 2007, with the meltdown of sub-prime mortgages triggering a full-scale credit crunch that reverberated throughout the global financial system," the report said.
In addition to the US subprime home loan crisis, where billions of dollars have been lost on mortgage-backed securities, other factors feeding fears of a global recession include the sharp decline of the US dollar and a gloomy outlook for the US labor market.
The report noted that while central banks in major economies had acted to alleviate the financial stress, these measures "do not address the root causes of huge imbalances" between financial surplus nations, such as China, Japan and major oil-producing nations on the one hand and deficit countries such as the US on the other.
The UN said a realignment of exchange rates was one way of addressing global imbalances, although it could lead to a loss of confidence in and a run on the dollar.
The report instead recommended economic stimulus through stronger demand in countries with large savings and current account surpluses, such as China, Japan and oil-exporting countries.
Alcoa Net Tops Estimates on Gain From Sale of Unit (Update2)
By Dale Crofts
Jan. 9 (Bloomberg) -- Alcoa Inc., the world's third-largest aluminum company, said fourth-quarter profit rose 76 percent as a $323 million gain from the sale of a unit more than offset lower metal prices. The shares rose the most since October.
Net income rose to $632 million, or 75 cents a share, from $359 million, or 41 cents, a year earlier, New York-based Alcoa said today in a statement. Excluding some items, profit fell to 36 cents. The company was expected to earn 34 cents, based on the average of 13 estimates in a Bloomberg survey.
Alcoa, seeking to regain investor confidence after its failed $27.7 billion takeover bid for Alcan Inc., is buying back stock and selling less profitable units to boost a share price that had tumbled 32 percent since July 12. Sales declined 5.8 percent to $7.39 billion as aluminum prices fell.
``The metal price was weaker in the quarter and Alcoa got hit,'' said Charles Bradford a metals and mining analyst at Soleil Securities in New York. ``The one big positive was they bought back a lot of shares. The initial reaction was positive, but I think people are going to be cutting their estimates.''
Alcoa rose $1.12, or 3.6 percent, to $32.37 at 6:12 p.m. in New York. A close at that price would be the biggest gain since Oct. 9. Before the results were announced, the shares had dropped 17 percent in the past month.
Metals Profit Falls
Profit in the primary-metals business fell 59 percent to $196 million from $480 million a year earlier because of lower prices and higher costs, Alcoa said. The company also reported a $16 million loss in flat-rolled products, compared with a $62 million profit a year earlier.
``Aluminum prices are less buoyant and costs are rising, squeezing Alcoa's profit margins,'' Leo Larkin, a metals and mining analyst at Standard & Poor's in New York, said before the results were released. ``Selling the underperforming businesses is a positive, but I'm surprised the company isn't having more success controlling costs.''
Alcoa agreed last month to sell its packaging unit to New Zealand billionaire Graeme Hart for $2.7 billion and plans to spend $6.9 billion to buy back about 25 percent of its stock. A tax benefit related to the transaction helped boost per-share earnings in the quarter by 38 cents, the company said.
During the third quarter, the company incurred a $604 million charge related to the sale of the packaging unit.
The company, led by Chief Executive Officer Alain Belda, has struggled to pass on higher costs for raw materials and energy.
Lower Prices
``You can't ignore the macro headwinds Alcoa is facing,'' Scott Burns, a metals and mining analyst at MorningStar Inc. in Chicago, said before the results. ``Lower aluminum prices, a weaker dollar and a slowing U.S. economy are all going against them.''
Alcoa said it sold aluminum on average at $2,646 a metric ton during the quarter, down 4.3 percent from $2,766 a year earlier, as U.S. demand slowed for the metal in autos and new- home construction.
World demand for aluminum probably will rise about 9.6 percent to 41.7 million tons this year, led by a 24 percent rise in demand from China and an 8.3 percent gain in India, Belda said on a conference call with analysts. Chinese demand this year will be about 14.9 million tons, compared with 6.8 million for the U.S.
The metal is sold mostly in dollars, so the U.S. currency's decline against the Australian dollar or Brazilian real hurts earnings by increasing costs for the company in those countries. Costs also have risen for the energy used to power aluminum smelters and for raw materials such as resins.
Share Repurchases
The company said it repurchased about 68 million shares through the quarter, with the purchase of another 150 million authorized.
``We see no major catalyst other than share repurchases to drive the stock higher in the near term,'' analysts including Lloyd O'Carroll at Davenport & Company LLC in Richmond, Virginia, wrote in a Jan. 3 note to investors. They have a ``buy'' rating on Alcoa.
Alcoa is the first company in the Dow Jones Industrial Average to report fourth-quarter earnings.
The company expects its Fjardaal smelter in Iceland to produce 300,000 tons of aluminum this year and also to complete a 90,000 ton expansion of the Pinjarra alumina refinery in Australia. These and other projects will add 40 cents to 50 cents earnings per share on an annual basis, the company said.
Industry Consolidation
Alcoa slipped from its position as the world's largest aluminum producer last year after a merger that led to the creation of Russian aluminum producer United Co. Rusal. That combination was eclipsed in size by the takeover of Alcan by Rio Tinto Group Plc. As an alternative, Alcoa is seeking joint ventures in China, the Middle East and North America to boost smelting capacity, Belda has said.
The company hired former Siemens AG Chief Executive Officer Klaus Kleinfeld as chief operating officer effective Oct. 1 and said it expects him to become chief executive officer and chairman when Belda retires. Belda, who hasn't set a formal date for his retirement, is blamed by some investors for not boosting the stock enough during a six-year rally in commodities.
CNAHC Seeks Partnership With China Eastern, Not Merger
HONG KONG (Dow Jones)--China National Aviation Holding Co. is seeking a partnership with China Eastern Airlines Corp. (CEA) rather than a full merger, the Shanghai Securities News reported Thursday, citing an unnamed CNAHC official.
The official said the company’s proposal to take a stake in China Eastern - to be submitted to China Eastern’s board within two weeks - will include terms on the shareholding arrangement, business integration and the building of Shanghai’s aviation hub.
CNAHC would maintain the independent operations and separate brands of its Air China Ltd. unit and China Eastern if the offer is accepted, the official added.
Cathay Pacific Airways Ltd., may not take an equity stake in China Eastern under the proposal, but its involvement in China Eastern’s management couldn’t be ruled out, the official said.
Cathay Pacific said on Monday it will seriously consider any proposal that Air China or its parent may make on a strategic partnership with China Eastern. The Hong Kong-based carrier has a 17.6% cross shareholding tie-up with the national flag carrier.
CES: Are we ready for a PC made partially from corn?
January 09, 2008
Fujitsu made a lot of noise coming into CES about its PC made from corn. Well, let's clarify, the body shell of the PC is made from corn-based polymers, which actually make up only half of the composition. The other half is traditional oil-based plastic.
There's a bit of confusion over the environmental benefits of using corn. Some people thought that by using corn, the shell can bio-degrade natually when tossed out. But not so. You would have to separate the corn-based stuff from the oil based stuff first. Or better yet, why not just recycle the whole thing?
The real environmental boost comes from the fact that manufacturing with corn cuts down on CO2 emissions by 15 percent. It costs about 50 percent more but Fujitsu said it's been worth it.
They've been selling corn-based PCs since 2002 and after its first showcase in the U.S. at CES, Fujitsu officials are deciding whether to bring it to U.S. consumers. A lot will depend on how consumer respond.
It should be a no-brainer, really. Fujitsu said it hasn't upped the price on its corn-based PCs in Japan. And the company said working with corn doesn't affect the structural integrity of the PC body. The big challenge will be to come up with a way to market the corn products, so consumers can understand its environmental benefits. Fujitsu said it's working on some kind of labeling similar to the Energy Star seal.
So what do you think? You ready for a corn-based PC?
UBS boss says no further capital hike needed 1 day ago
ZURICH (AFP) — UBS does not need a new capital hike after Singapore helped plug a 10 billion dollar (6.8 billion euros) hole caused by the bank's exposure to the troubled US subprime home loan market, the bank's CEO Marcel Rohner said.
"Thanks to the 13 billion Swiss francs in new capital, and the replacement of a cash dividend by a share dividend, we have sufficiently firmed up our capital base," Rohner told the Swiss newspaper Handelszeitung in an interview to appear on Wednesday.
UBS in December turned to the Government of Singapore Investment Corporation (GIC) and an unnamed Middle Eastern investor to help restore its balance sheet which had been badly hit by losses in the US mortgage crisis.
GIC said it would inject 11 billion Swiss francs into UBS, giving it a stake of around nine percent and thus making it the largest single shareholder, while the Middle Eastern investor was to put up two billion Swiss francs.
Rohner said it was vital that shareholders approve the deal and that any rejection would "seriously damage UBS."
Some shareholders have said they were unhappy with the plans to raise funds from foreign, state-controlled investment authorities, fearing the terms of the deal put existing investors at a disadvantage.
Asked about future possible share price falls, Rohner said it was impossible to give a definitive yes or no answer, but stressed that the bank had "substantially" cut its risk exposure.
He also rejected any hiving off of UBS's investment banking arm -- primarily responsible for its subprime exposure -- saying it "lies at the heart" of the bank's activities.
UBS warned in December that its subprime losses could lead it to end the full year 2007 in the red.
Investors took heart from Rohner's comments, with UBS shares up 3.57 percent at 49.94 Swiss francs in late trade on the Zurich stock exchange.
A US recession will dampen China's surging exports but the impact on the world's most populous nation may be limited, experts say.
But they also cautioned that Beijing must be prepared to face protectionist trade policies from Washington as a result of a recession, with the sub-prime mortgage crisis and the credit rout showing little sign of easing.
Many experts believe there is a greater than a 50 per cent likelihood of the United States, a huge absorber of Chinese exports, plunging into at least a short, shallow recession over the next 18 months or so.
Fred Hu, managing director of Goldman Sachs (Asia), said a modest US downturn could not take a heavy toll on China, which was stepping up efforts to cool inflation to prevent the world's fastest growing major economy from overheating.
"If the US economy really does enter into recession, there could be an impact on China in a direct way, but the timing however is not all that bad," he said on the sidelines of a Washington conference on China's economic growth and its implications for the world.
"If there is a mild recession, not a protracted, deep recession, that may provide some welcome cooling agent to the Chinese economy, whose rapid growth is largely export-driven," he said.
Daniel Rosen, a China expert at the Washington-based Peterson Institute for International Economics, said a US recession could take a toll on industries in China most dependent on US exports, especially those producing goods for the American household sector.
But he hastened to add that China's ongoing moves to boost domestic consumption in a bid to be less reliant on exports could be a critical cushion.
"At the same time though, as China shifts more to domestic consumption itself, then it relies less on US consumers and more on the Chinese consumer. So I don't expect there to be a heavy hit on China from a moderate recession," he said.
The World Bank said today that US economic growth likely slowed to 2.2 per cent in 2007. The bank forecast a 1.9 per cent expansion in 2008, then a rise to 2.3 per cent in 2009.
"External demand for the products of developing countries could weaken much more sharply and commodity prices could decline if the faltering US housing market or further financial turmoil were to push the United States into a recession," a bank report warned.
US economic data through the third quarter of 2007 remained robust, but more recent reports suggest softer conditions.
With the housing sector slowing sharply, oil prices hovering near 100 dollars a barrel and the US dollar slumping, Beijing appears to be bracing also for financial market turbulence.
Jan. 9 (Bloomberg) -- The U.S. will skirt recession as consumer spending slows without collapsing, a survey of economists showed.
Economic growth will average 1.5 percent in the first six months of 2008, matching the fourth quarter's pace, according to the median estimate of 62 economists surveyed by Bloomberg News from Jan. 3 to Jan. 8. The rate of expansion would be the weakest since the last nine months of 2001.
``It's soft economic activity that feels like a recession, but we probably won't have one,'' said Mickey Levy, chief economist at Bank of America Corp. in New York. ``The state of the consumer is clearly softening, but spending is not declining. That's very important.''
The Federal Reserve will cut interest rates more than previously anticipated, economists said, triggering a reacceleration in growth by the third quarter that will keep the economy from stalling.
Economists put the odds of a recession developing within the next year at 40 percent, according to the median estimate. Nine of the 47 economists responding to the question put the odds at about even and five said the economy would contract.
Goldman Sachs Group Inc. economists now predict a recession, joining their counterparts at Merrill Lynch & Co. and Morgan Stanley.
Bonds, Stocks
Treasury yields have fallen and stocks in the U.S. have dropped as the economic outlook deteriorated. Yields on benchmark 10-year notes yesterday reached 3.77 percent, the lowest since March 2004. They were at 3.81 percent at 7:56 a.m. in New York today. The Standard & Poor's 500 stock index yesterday fell to the lowest closing level since March.
Growth forecasts were lowered for every quarter of the year, even as the estimate for the last three months of 2007 was boosted. The world's largest economy will expand 2.1 percent in 2008, down from 2.3 percent forecast last month and the weakest since 2002.
``We're skating on the thin edge of a recession, but we'll narrowly miss one,'' said Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina. ``At the end of the day, it boils down to the consumer, who has remained relatively resilient.''
Gains in income will help ``prop up'' spending, which accounts for more than two-thirds of the economy, even after the job market softened in December, said Bryson.
Spending Growth
Spending grew at a 2.6 percent annual pace during the holidays last quarter, little changed from the previous three months and about a percentage point faster than predicted in December, according to the survey median. Economists pared estimates for the first six months of this year and boosted the forecast for the third quarter.
The Fed will reduce borrowing costs in both the first and second quarters, bringing the benchmark interest rate down to 3.5 percent by mid-year. Last month, economists forecast the Fed would reduce the rate just once more and hold it at 4 percent through 2008.
Interest-rate reductions will ``eventually stimulate demand,'' said Bank of America's Levy. Growth in the second half of the year will pick up to an average 2.5 percent pace, according to the latest estimates.
Rising exports and business investment will also help keep the economy's head above water. Still, growth concerns will trump some policy makers' unease about inflation as food and fuel prices climb, economists said.
Impact From Housing
The housing slump, now in its third year, will lead to more foreclosures that will further depress property values, making Americans feel less wealthy.
Employment, once a bright spot, may now become another headwind for consumers. The economy created just 18,000 jobs in December, capping the worst year for hiring since 2003, government data showed last week. The jobless rate jumped to a two-year high of 5 percent as builders, mortgage companies and manufacturers reduced payrolls.
The increase in unemployment convinced Harvard University economist Martin Feldstein, head of the National Bureau of Economic Research and member of the committee that determines when recessions begin and end, that a downturn was on the way.
``We are now talking about more likely than not,'' Feldstein said in a Jan. 5 interview. ``I have been saying about 50 percent. This now pushes it up a bit above that.''
`By Their Fingernails'
``Consumers are holding on by their fingernails,'' said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta. ``We still have spending on absolute necessities while they're cutting back on discretionary purchases.''
December retail sales figures won't be available until the Commerce Department's Jan. 15 report, making forecasting even more difficult, economists said. Combined November-December purchases probably amounted to the weakest holiday season in five years, according to forecasts from industry groups including the International Council of Shopping Centers.
``The debate here is whether the economy is quite weak or whether it is falling into a recession,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``So far, I'm in the quite-weak camp.''
- We had forecasted in our 28 Nov report that the rebound will wane out as it approached the 3,650 level, which has unfolded as per our forecast.
- The STI has failed to deliver a sustainable rally over the last 3 months since it rebounded off the 3,300 level in Mid-Nov 07. It tested this support level once in Mid-Dec 07 and is again approaching the 3,300 mark.
- As the decline over the last 2 trading days was made on the back of rising volume, we could see a little more downside from here, which would take the STI to our immediate support at 3,300.
- Elliot wave counts suggest the current down wave is segmented into 5 smaller waves. Currently, this puts the STI at the tail end of the current down wave (Wave V), which would take the index below our support level at 3,300 and we could witness the STI slips toward our 2nd support around 2,900 – 3,000.
- But should the 3,300 support level hold up strongly, we could be in store for a strong rebound that would take the STI towards the 1st resistance level at 3,650. However, it would face minor resistance at where the moving averages have converged around 3,500 – 3,550.
SINGAPORE, Jan 10 (Reuters) - Singapore switched to a new benchmark stock index .FTSTI on Thursday, but many stockbrokers were left frustrated without real-time quotes on their screens, traders said.
Singapore Exchange (SGXL.SI: Quote, Profile, Research), together with partners FTSE Group and Singapore Press Holdings (SPRM.SI: Quote, Profile, Research), on Thursday launched a slimmer 30-stock Straits Times Index and 18 other new indexes, including one tracking China shares listed in the city-state.
But traders using GL Trade, the system that is being rolled in to replace the Singapore Exchange's SESOP trading terminals, told Reuters that their screens could not display the latest index readings in real time, hindering their ability to follow the stock market and advise clients.
"It is not a technical issue," said Richard Zhu, GL Trade's deputy managing director in Singapore. "SGX's member (firms) have to give their written endorsement to GL Trade so that they can have the new STI on their screen. No members have given their agreement yet," he told Reuters.
"As soon as we have their endorsement, we will invest on development so that the system will be able to display STI indices," he added.
According to sources familiar with the discussions, the impasse was due to GL Trade, a Paris-based financial services firm, wanting to pass on the development and running costs to traders. The stockbroking firms were, however, reluctant to incur additional charges.
The problems affected mainly remisiers, who cater mostly to retail investors and earn a commission on trades. These traders generally do not have personal use of news and data terminals such as those provided by Reuters (RTR.L: Quote, Profile, Research) and Bloomberg, unlike institutional dealers.
"I can't take decisive action if I have positions in Singapore," said a trader with a local broking firm. "It's a major blindspot."
A Singapore Exchange spokesman said SGX and its partners are providing traders with live quotes for free and that the broking firms could also provide the information on their Web sites.
Hsieh Fu Hua, SGX's chief executive, said the new indexes follow a "globally recognised methodology" used by FTSE, which would make them more popular with international investors.
"We expect that the revamped STI and new indices will stimulate the development of more index-related products, spurring greater trading on our exchange and creating a more vibrant Singapore securities market."
Robert McHugh: "We are in the midst of a stock market crash that started at 14,200 in October 2007, and is likely to continue to at least 11,500 the first half of 2008."
19 comments:
Goldman Sachs sees US recession
The investment bank Goldman Sachs has predicted that the US economy will go into recession in 2008.
Its forecast follows comments from Merrill Lynch, which said that the US economy is already in recession.
Goldman Sachs said that the slowdown would force the US Federal Reserve to reduce interest rates to 2.5% from the current level of 4.25%.
But a survey of 62 economists by the Bloomberg news agency suggested the slowdown might not lead to a recession.
Taking the mid-point of the economists' predictions for US growth in the first six months of 2008 gave an average figure of 1.5%.
Prepare yourselves
"It's soft economic activity that feels like a recession, but we probably won't have one," Bloomberg quoted Mickey Levy at Bank of America as saying.
In a note to client entitled "Prepare for recession", Goldman Sachs cut its forecast for US growth this year to 0.8% from 1.8% and said that gross domestic product would decline in the second and third quarters of the year.
It predicts that US unemployment will rise from the current 5% to 6.5%.
Last Friday's labour market figures, which showed the jobless rate rising to 5%, set stock markets falling around the world and were described by Merrill Lynch as the final proof that the recession had started.
It recommended that investors should reduce holdings in the financial sector and information technology and opt instead for healthcare stocks.
10 Tricks for Better Investing
Take the global view
View Keep calm by using a spreadsheet that emphasizes your total net worth, not the changes in each holding. Before you buy a stock or mutual fund, check whether it overlaps what you already own - try the Instant X-Ray tool at Morningstar.com.
Hope for the best - but expect the worst
Being braced for disaster - by diversifying and learning market history - can help keep you from panicking. Every good investment performs badly some of the time. Intelligent investors stick with solid companies that hit rough patches.
Investigate, then invest
A stock is not just a price; it's a piece of a living corporate organism. Study the company's financial statements. Read a mutual fund's prospectus before you buy. If you want to hire a broker or financial planner, do a background check before you write a check.
Never say always
No matter how sure you are that an investment is a winner, don't put more than 10% of your portfolio in it. If you turn out to be right, you'll still make plenty of money, but if you turn out to be wrong, you'll be glad you kept most of your powder dry.
Know what you don't know
Don't believe you are already an expert. Compare stock and fund returns against the overall market and across different time periods. Ask what might make this investment go down; find out if the people marketing it to you have their own money in it.
The past is not a prologue
On Wall Street, what goes up must come down, and what goes way up usually comes down with a sickening crunch. Never buy a stock or mutual fund just because it has been going up. Intelligent investors buy low and sell high, not the other way around.
Weigh what they say
The easiest way to silence a market forecaster is to ask for the complete track record of all his or her predictions. If you can't get a complete list, don't listen. Before trying any strategy, gather objective evidence on the performance of others who have used it.
If it sounds too good to be true, it probably is
More precisely: If it sounds too good to be true, it absolutely is. Anyone who offers a high return at a low risk in a short time is probably a fraud. Anyone who listens is definitely a fool.
Costs are killers
Trading costs can eat up 1% of your money per year, while taxes and mutual fund fees can take another 1% to 2%. If middlemen take 3% to 5% of your money per year, they will get rich. If you want to get rich, comparison shop and trade at a snail's pace.
Eggs go splat
Never keep all your eggs in one basket. Spread your bets across U.S. and foreign stocks, bonds, and cash. No matter how much you like your job, don't put all your 401(k) into your company's stock; employees at Enron and WorldCom liked their company too.
曾淵滄：3類股份見調整就買
2008年01月10日
2008年開市至今，美股就跌個不停，前晚道瓊斯指數再下跌兩百多點，但是，港股終於出現大幅度的反彈，收市恒指上升502點。
港股不追隨美股再跌，相信不少人覺得美國的所謂壞消息已經出盡，是時候博反彈。此外，本地地產股在本地樓價不斷上升的支撐下，股價也沒有理由下跌。昨日我已經在這個專欄詳細分析過，今後，每逢本地地產股受到美國經濟衰退、美股下跌的影響而下跌時，都是趁低吸納的時機。
昨日港股的全面反彈，也只能視為無方向性的技術性反彈，不代表調整結束。但是，不必太擔心，至少，中國內地消費股、基建股都不受美股影響，也不受宏觀調控影響，我們也沒有必要去博那些後市不明朗的股，就專心投資國企基建股、消費股，同時逢低吸納本地地產股就行了，餘者不妨採取觀望態度。
美國經濟出問題，布殊總統不會坐視不救，問題是布殊手上有甚麼籌碼？派錢？減息？直接派錢，作用快一點，減息則得減多幾次才能見效。如果只是靠減息，效果要到今年下半年才可能顯現，因此，股市可能會有先苦後甜的可能。
A股反彈利好H股
內地宏觀調控的問題比較簡單，這是人為的壓抑，不過，中央高層也不想見到中國經濟放慢，壓一壓，有一定的作用就會放寬。上海A股指數已經從低位反彈了相當水平，對香港國企H股有啟示作用。
這一回中航集團反對新加坡航空與淡馬錫入股東方航空（670）的公開理由就是：入股價太低。可見「賤價出售國家資產」是罪名，不能「賤價出售國家資產」的意思就是股價不能不繼續在一個高位。
東航與新航的「婚姻」失敗，結果是國航（753）、東航、國泰（293）股價皆跌，東航跌幅最小，因為許多人早已在國航前董事長李家祥升任國家民航總局局長時就不再看好這宗「婚姻」，東航股價早已向下調整近兩成。將來會如何發展？中航收購東航？新航再出更高的價格？我認為短期內這些事都不會發生，因為這將是另一個更複雜的問題，涉及中國航空業的長遠發展與內部權力鬥爭。
股市為甚麼會出現周期？如何預測股市周期？本星期六我將會在城大一年一度的高級學位課程資訊開放日發表演說，題目是：「股市周期研究」，演說語言是廣東話，地點是城大第8演講廳，時間為下午5時正，歡迎你參加。
王冠一：企业盈利 不宜憧憬
2008-1-10
美国企业发表07年第4季业绩期即将展开,打头阵的金融机构於去年底已吓了投资者一跳— —华尔街大行除高盛外,差不多全部录得亏损,若高盛不是有非经常性收益项目顶住,实可以用全军尽墨来形容。一众银行须为次按大幅拨备及撇账,自身难保必不敢胡乱放水? 如果信贷标准继续收紧,相信做生意的和消费者未来必叫苦连天。
通常派成绩表之序幕会由美国铝业(Alcoa)揭开,然不幸的是,美铝光是周一和周二两个交易日,股价共跌11%,是道指成份股中跌幅最大者,是否反映拖累美国经济的楼市大势已去,兼会持续恶化,或是继金融环节后,另一给投资者的当头棒喝?
分析师有惊人预测
瞧瞧周二美股走势之凶险,开出稳步上升,食晏前滑落,午市中段又回升,临尾市突如阿聋烧炮 — —冚巴烂散晒! 三大指数分别插水1.84至2.36%。道指穿12,700点兼见12,500点,如果这水平守不住,真系要唱句: goodbye Sam了!
回说企业盈利,乐观的分析员认为第4季按年或可录得双位数字增长,若光从金融类别表现衡量,几可肯定机会极微。悲观一派则预测,标普500成份股平均盈利或倒退9.8%。苟如是,岂不比第3季还差? 难怪美股有点儿似散band格了!
那麼今年展望又如何? 有分析家估计,08年企业盈利首两季应有6%和5%增长,第3及第4季增长可能高达23%和25%。语出惊人如斯,冠一实在佩服!
国际视野：欧通胀升 经济信心降
2008-1-9
美国经济急剧滑坡,英国五十步笑百步,欧洲看似还顶得住,可是近日发表的经济数据,使决策者头痛。头痛者,不外经济放缓、通胀上升,若果只须针对一瓣治理,难度不大,问题是滞胀阴影若隐若现,究竟该如何取舍。
美国可以用2%的核心通胀来愚人,甚麼与食品及能源有关的价格升幅,都可以撇开不谈,皆因一言堂怳。欧洲却不可以对实在影响民生的食品及能源不屑一顾,不然欧洲央行上次议息,为甚麼会传来有理事建议加息?
须知非核心消费物价指数(CPI),11月份已飙升至3.1%,创6年新高,汝道视通胀如猛虎的欧洲,其决策者又怎敢掉以轻心?
讲开通胀,另一比食品及能源更重要的元素便是工资。欧元区之生活通胀率多高,人民如鱼饮水、冷暖自知。
大工资年
按传统,每年头,工会都会与雇主商讨工资加幅,通胀飙升,加上11月份失业率下跌至7.2%纪录低位,反映劳工市场紧绌,不难触发大幅加薪之冀望,连全德国最大工会1GMetall之主席胡拔(Berthod Huber)也扬言,08年是「大工资年」(mega wage year ),足见不达开天索价之加幅,誓不罢休。
欧洲经济信心指数已下跌至两年低位——12月消费信心由11月的104.8下降至104.7,是06年3月以来最低。
另外制造业因定单减少及生产物价上升(11月升至4.1%)导致信心下降,这经济嘛……何况金融环节在过年前表演的「饿狼抢钱」还历历在目?
王冠一
China gold goes limit-up on debut
Katherine Ng
January 10, 2008
China's first gold futures contract surged by its 10 percent daily limit on trading debut - on a day that the spot price of gold hit a record US$891 (HK$6,949.80) an ounce on the back of a weak dollar and inflation concerns.
Contracts for June delivery hit US$988 an ounce in Shanghai.
Spot gold hit US$891 in London afternoon trade yesterday, surpassing the previous high of US$881.10 reached on Tuesday.
Gold for June delivery, the most active contract in Shanghai, rose as much as 21 yuan (HK$22.53) to 230.99 yuan a gram, or nearly US$100, leading to the belief the metal may reach US$1,000 an ounce.
Trading was heavy yesterday with more than 120,000 contracts exchanged and 21,810 still outstanding.
As the third-largest consumer of gold, China has made clear its intention to gain stronger bargaining power through setting up a futures market.
However, prices are expected to be pushed up further with the addition of a new trading center and more demand within the country, a spokesperson at the Chinese Gold and Silver Exchange Society said.
The start of futures trading in Shanghai is one of the biggest events in the gold market over past few years, which also saw the launch of gold exchange- traded funds.
"Futures will allow leveraged investment in gold from Chinese investors and speculators," wrote John Reade, a London-based metals analyst at UBS. It is expected that Chinese gold producers will use the market to hedge low-cost exposure to the metal while investors will leverage their holdings to bullion.
China is the world's second-largest gold supplier, producing 191.456 tonnes during the first nine months of last year. Its manufacturing sector consumes about 9.2 percent of the world's total, according to Xinhua News Agency. The global gold price gained 31 percent in 2007 against the backdrop of a declining dollar and concern the United States would cut interest rates to avert a slowdown.
Gold has more than tripled in price since 2000 and is thought likely to surge 15 percent this year to average US$800 an ounce compared to US$696 in 2007.
Plunge in key interest rate may lead to cheaper home loans
Interbank lending rate drops to lowest in three years and is expected to fall further by mid-year
By Alvin Foo
Jan 10, 2008
HOMEBUYERS could be in for some cheer in the coming months after a recent plunge in a crucial interest rate that indirectly determines how banks set mortgages.
The three-month Singapore interbank offered rate (Sibor), as it is called, has hit its lowest level since February 2005 and is expected to sink further by the middle of the year.
It is significant as the Sibor is the rate at which banks lend cash to each other and thus influences what consumers pay on loans such as mortgages.
It hit 1.7625 per cent yesterday, down about 0.8 percentage point in a fortnight, and the lowest since the 1.75 per cent level nearly three years ago.
With banks getting cheaper money, it is expected that homebuyers could benefit in turn from cheaper mortgages, although there is usually a lag between Sibor and consumer loan rate movements.
Citigroup economist Chua Hak Bin said: 'Mortgage rates could head lower in two months.'
But a Sibor fall is bad news for savers as fixed deposit rates could drop too.
Economists say the Sibor's sharp dip is due to recent interest rate cuts in the United States - with more likely to come later this month, huge capital inflows into Singapore and poor stock market sentiment, which have prompted investors to leave more money in the bank.
CIMB-GK economist Song Seng Wun said: 'The Sibor's plunge corresponds with the recent sharp decline in US interest rates and the expectation of more cuts.
'People have started 2008 with plenty of uncertainty, and are holding on to more cash and being more risk-averse.'
OCBC economist Selena Ling added: 'It's due to foreign funds coming in, seeking refuge from the weakening US dollar, and the recent plunges in the equity market.'
The US Federal Reserve has cut key interest rates from 5.25 per cent to 4.25 per cent in recent months.
Market experts predict a further 50-basis point cut later this month as part of moves to avert a possible recession.
Economists expect the Sibor to remain soft, due to the likelihood of further rate cuts and the cautious equity market sentiment.
Dr Chua said: 'We expect the Sibor to fall by a further 30 to 50 basis points by mid-year, especially if the Fed cuts rates by 75 basis points by the end of the second quarter.'
While home owners welcome a Sibor fall, banks dread it.
It affects their net interest margins because most of their Singdollar corporate and small business loans are linked to the Sibor.
A Deutsche Bank analyst report noted: 'This plunge is of concern, as we estimate that a 25 basis point fall in the Sibor will eventually lead to a fall in earnings per share of 4 per cent for DBS Group Holdings, 2 per cent for United Overseas Bank and 1 per cent for OCBC Bank.'
And savers will get belted too. Low interest rates combined with the high inflation now building up in Singapore spell 'negative real interest rates' - the interest earned on savings will not be able to offset the rise in prices.
Mr Song said: 'It's a sign for people not to keep money in the bank, as savers lose out.
'It's a good period to borrow, as there is more incentive for people to take money out rather than put it in.'
Thus, Dr Chua advocates that 'some diversification away might be prudent'.
He suggested alternative instruments such as real estate investment trusts, utility stocks and foreign currency fixed deposits, which offer higher rates, to hedge against inflation risk.
Nigeria Militants Say Major Attack Is `Imminent' (Update2)
By Julie Ziegler
Jan. 9 (Bloomberg) -- The Nigerian militant group known as the Movement for the Emancipation of the Niger Delta, or MEND, said it's planning a major attack against the oil industry.
``An attack is imminent that will rock the foundation of the international oil market,'' MEND spokesman Jomo Gbomo said in an e-mail to Bloomberg. A ``smoke screen'' is being devised to divert attention away from the actual target, he said.
Gbomo said the strike would be a reprisal for a government attack last month on a warlord's camp. Nigeria is Africa's biggest oil producer.
MEND's assaults have halted as much as 20 percent of Nigeria's oil production since they started afresh in early 2006. The group's latest action came on Jan. 1, when it attacked two police stations and a hotel in the hub of Nigeria's oil producing-region. At least 12 people were killed in the shooting incident, according to the Nigerian state news service. The action also helped push oil prices about $100 for the first time.
Gbomo yesterday urged ``freelance troublemakers'' to join his fight against the government and achieve a goal of halting 100 percent of oil production in Nigeria.
Armed groups may be preparing for a large-scale attack on an oil installation in Rivers state in Nigeria's delta region, Reuters reported today, citing Jonjon Oyeinfie, a former leader of ethnic rights group Ijaw Youth Council.
Being Held
Gbomo also said that Henry Okah, a leader of MEND, is still being held in an Angolan prison after being arrested on arms charges in September. Okah's arrest sparked a series of kidnappings and attacks against oil companies such as Royal Dutch Shell Plc and Exxon Mobil Corp.
``Henry Okah does seem to be at the center of a lot'' of the motivation for MEND's attacks, said Antony Goldman, a UK- based independent analyst specializing in Nigeria.
Goldman said Gbomo's threat may be genuine, though he pointed out that MEND in the past has not always carried out its threats.
``The do have a slightly surprising capacity, but they're not always good for their word'' Goldman said in an interview from London. ``Traders of course will take positions.''
Crude oil for February delivery fell 51 cents, or 0.5 percent, to $95.82 a barrel at 9:06 a.m. on the New York Mercantile Exchange. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 72 percent from a year ago.
Militants are demanding a greater share of the wealth from the delta region's oil resources, which have been exploited by foreign oil companies for decades.
US slowdown could spark global economic recession - UN
January 10, 2008
THE apparent US economic slowdown could trigger global recession this year and stymie years of robust growth in Asia and Africa, the UN said.
"The major uncertainty for 2008 now emanates from the US economy," according to the world body's World Economic Situation and Prospects 2008.
"A further slowdown in the world's major economy will hit many of the poor nations hard, as it will slow world trade and put an end to the boom in commodity prices that benefited them over the past years," it said.
The report said the economies of Japan and Western Europe, already operating near production potential, were not capable of taking up the slack.
"The domino effect of a US recession would be to knock down export growth from China, Europe and Japan, in turn reducing their demand for exports from developing countries," it said.
The report forecast that the world economy would grow at 3.4 per cent this year, down from 3.7 per cent in 2007 and 3.9 per cent in 2006.
It stressed that world growth was "robust and broad-based" last year, with more than 100 economies posting 3 per cent growth of per capita output or more.
It said developing economies and those in transition boosted their share of world trade from 35 per cent in 2000 to over 40 per cent last year.
"Remarkably, economic growth in Africa strengthened in 2007 to near 6 per cent," the report said.
But it cited "a clear and present danger of the world economy coming to a near standstill" linked to the housing slump in the US and the subsequent credit crunch as high-risk borrowers defaulted on mortgage payments.
"The ongoing housing downturn in the United States became much more serious in the third quarter of 2007, with the meltdown of sub-prime mortgages triggering a full-scale credit crunch that reverberated throughout the global financial system," the report said.
In addition to the US subprime home loan crisis, where billions of dollars have been lost on mortgage-backed securities, other factors feeding fears of a global recession include the sharp decline of the US dollar and a gloomy outlook for the US labor market.
The report noted that while central banks in major economies had acted to alleviate the financial stress, these measures "do not address the root causes of huge imbalances" between financial surplus nations, such as China, Japan and major oil-producing nations on the one hand and deficit countries such as the US on the other.
The UN said a realignment of exchange rates was one way of addressing global imbalances, although it could lead to a loss of confidence in and a run on the dollar.
The report instead recommended economic stimulus through stronger demand in countries with large savings and current account surpluses, such as China, Japan and oil-exporting countries.
Alcoa Net Tops Estimates on Gain From Sale of Unit (Update2)
By Dale Crofts
Jan. 9 (Bloomberg) -- Alcoa Inc., the world's third-largest aluminum company, said fourth-quarter profit rose 76 percent as a $323 million gain from the sale of a unit more than offset lower metal prices. The shares rose the most since October.
Net income rose to $632 million, or 75 cents a share, from $359 million, or 41 cents, a year earlier, New York-based Alcoa said today in a statement. Excluding some items, profit fell to 36 cents. The company was expected to earn 34 cents, based on the average of 13 estimates in a Bloomberg survey.
Alcoa, seeking to regain investor confidence after its failed $27.7 billion takeover bid for Alcan Inc., is buying back stock and selling less profitable units to boost a share price that had tumbled 32 percent since July 12. Sales declined 5.8 percent to $7.39 billion as aluminum prices fell.
``The metal price was weaker in the quarter and Alcoa got hit,'' said Charles Bradford a metals and mining analyst at Soleil Securities in New York. ``The one big positive was they bought back a lot of shares. The initial reaction was positive, but I think people are going to be cutting their estimates.''
Alcoa rose $1.12, or 3.6 percent, to $32.37 at 6:12 p.m. in New York. A close at that price would be the biggest gain since Oct. 9. Before the results were announced, the shares had dropped 17 percent in the past month.
Metals Profit Falls
Profit in the primary-metals business fell 59 percent to $196 million from $480 million a year earlier because of lower prices and higher costs, Alcoa said. The company also reported a $16 million loss in flat-rolled products, compared with a $62 million profit a year earlier.
``Aluminum prices are less buoyant and costs are rising, squeezing Alcoa's profit margins,'' Leo Larkin, a metals and mining analyst at Standard & Poor's in New York, said before the results were released. ``Selling the underperforming businesses is a positive, but I'm surprised the company isn't having more success controlling costs.''
Alcoa agreed last month to sell its packaging unit to New Zealand billionaire Graeme Hart for $2.7 billion and plans to spend $6.9 billion to buy back about 25 percent of its stock. A tax benefit related to the transaction helped boost per-share earnings in the quarter by 38 cents, the company said.
During the third quarter, the company incurred a $604 million charge related to the sale of the packaging unit.
The company, led by Chief Executive Officer Alain Belda, has struggled to pass on higher costs for raw materials and energy.
Lower Prices
``You can't ignore the macro headwinds Alcoa is facing,'' Scott Burns, a metals and mining analyst at MorningStar Inc. in Chicago, said before the results. ``Lower aluminum prices, a weaker dollar and a slowing U.S. economy are all going against them.''
Alcoa said it sold aluminum on average at $2,646 a metric ton during the quarter, down 4.3 percent from $2,766 a year earlier, as U.S. demand slowed for the metal in autos and new- home construction.
World demand for aluminum probably will rise about 9.6 percent to 41.7 million tons this year, led by a 24 percent rise in demand from China and an 8.3 percent gain in India, Belda said on a conference call with analysts. Chinese demand this year will be about 14.9 million tons, compared with 6.8 million for the U.S.
The metal is sold mostly in dollars, so the U.S. currency's decline against the Australian dollar or Brazilian real hurts earnings by increasing costs for the company in those countries. Costs also have risen for the energy used to power aluminum smelters and for raw materials such as resins.
Share Repurchases
The company said it repurchased about 68 million shares through the quarter, with the purchase of another 150 million authorized.
``We see no major catalyst other than share repurchases to drive the stock higher in the near term,'' analysts including Lloyd O'Carroll at Davenport & Company LLC in Richmond, Virginia, wrote in a Jan. 3 note to investors. They have a ``buy'' rating on Alcoa.
Alcoa is the first company in the Dow Jones Industrial Average to report fourth-quarter earnings.
The company expects its Fjardaal smelter in Iceland to produce 300,000 tons of aluminum this year and also to complete a 90,000 ton expansion of the Pinjarra alumina refinery in Australia. These and other projects will add 40 cents to 50 cents earnings per share on an annual basis, the company said.
Industry Consolidation
Alcoa slipped from its position as the world's largest aluminum producer last year after a merger that led to the creation of Russian aluminum producer United Co. Rusal. That combination was eclipsed in size by the takeover of Alcan by Rio Tinto Group Plc. As an alternative, Alcoa is seeking joint ventures in China, the Middle East and North America to boost smelting capacity, Belda has said.
The company hired former Siemens AG Chief Executive Officer Klaus Kleinfeld as chief operating officer effective Oct. 1 and said it expects him to become chief executive officer and chairman when Belda retires. Belda, who hasn't set a formal date for his retirement, is blamed by some investors for not boosting the stock enough during a six-year rally in commodities.
CNAHC Seeks Partnership With China Eastern, Not Merger
HONG KONG (Dow Jones)--China National Aviation Holding Co. is seeking a partnership with China Eastern Airlines Corp. (CEA) rather than a full merger, the Shanghai Securities News reported Thursday, citing an unnamed CNAHC official.
The official said the company’s proposal to take a stake in China Eastern - to be submitted to China Eastern’s board within two weeks - will include terms on the shareholding arrangement, business integration and the building of Shanghai’s aviation hub.
CNAHC would maintain the independent operations and separate brands of its Air China Ltd. unit and China Eastern if the offer is accepted, the official added.
Cathay Pacific Airways Ltd., may not take an equity stake in China Eastern under the proposal, but its involvement in China Eastern’s management couldn’t be ruled out, the official said.
Cathay Pacific said on Monday it will seriously consider any proposal that Air China or its parent may make on a strategic partnership with China Eastern. The Hong Kong-based carrier has a 17.6% cross shareholding tie-up with the national flag carrier.
CES: Are we ready for a PC made partially from corn?
January 09, 2008
Fujitsu made a lot of noise coming into CES about its PC made from corn. Well, let's clarify, the body shell of the PC is made from corn-based polymers, which actually make up only half of the composition. The other half is traditional oil-based plastic.
There's a bit of confusion over the environmental benefits of using corn. Some people thought that by using corn, the shell can bio-degrade natually when tossed out. But not so. You would have to separate the corn-based stuff from the oil based stuff first. Or better yet, why not just recycle the whole thing?
The real environmental boost comes from the fact that manufacturing with corn cuts down on CO2 emissions by 15 percent. It costs about 50 percent more but Fujitsu said it's been worth it.
They've been selling corn-based PCs since 2002 and after its first showcase in the U.S. at CES, Fujitsu officials are deciding whether to bring it to U.S. consumers. A lot will depend on how consumer respond.
It should be a no-brainer, really. Fujitsu said it hasn't upped the price on its corn-based PCs in Japan. And the company said working with corn doesn't affect the structural integrity of the PC body. The big challenge will be to come up with a way to market the corn products, so consumers can understand its environmental benefits. Fujitsu said it's working on some kind of labeling similar to the Energy Star seal.
So what do you think? You ready for a corn-based PC?
UBS boss says no further capital hike needed
1 day ago
ZURICH (AFP) — UBS does not need a new capital hike after Singapore helped plug a 10 billion dollar (6.8 billion euros) hole caused by the bank's exposure to the troubled US subprime home loan market, the bank's CEO Marcel Rohner said.
"Thanks to the 13 billion Swiss francs in new capital, and the replacement of a cash dividend by a share dividend, we have sufficiently firmed up our capital base," Rohner told the Swiss newspaper Handelszeitung in an interview to appear on Wednesday.
UBS in December turned to the Government of Singapore Investment Corporation (GIC) and an unnamed Middle Eastern investor to help restore its balance sheet which had been badly hit by losses in the US mortgage crisis.
GIC said it would inject 11 billion Swiss francs into UBS, giving it a stake of around nine percent and thus making it the largest single shareholder, while the Middle Eastern investor was to put up two billion Swiss francs.
Rohner said it was vital that shareholders approve the deal and that any rejection would "seriously damage UBS."
Some shareholders have said they were unhappy with the plans to raise funds from foreign, state-controlled investment authorities, fearing the terms of the deal put existing investors at a disadvantage.
Asked about future possible share price falls, Rohner said it was impossible to give a definitive yes or no answer, but stressed that the bank had "substantially" cut its risk exposure.
He also rejected any hiving off of UBS's investment banking arm -- primarily responsible for its subprime exposure -- saying it "lies at the heart" of the bank's activities.
UBS warned in December that its subprime losses could lead it to end the full year 2007 in the red.
Investors took heart from Rohner's comments, with UBS shares up 3.57 percent at 49.94 Swiss francs in late trade on the Zurich stock exchange.
A US recession will dampen China's surging exports but the impact on the world's most populous nation may be limited, experts say.
But they also cautioned that Beijing must be prepared to face protectionist trade policies from Washington as a result of a recession, with the sub-prime mortgage crisis and the credit rout showing little sign of easing.
Many experts believe there is a greater than a 50 per cent likelihood of the United States, a huge absorber of Chinese exports, plunging into at least a short, shallow recession over the next 18 months or so.
Fred Hu, managing director of Goldman Sachs (Asia), said a modest US downturn could not take a heavy toll on China, which was stepping up efforts to cool inflation to prevent the world's fastest growing major economy from overheating.
"If the US economy really does enter into recession, there could be an impact on China in a direct way, but the timing however is not all that bad," he said on the sidelines of a Washington conference on China's economic growth and its implications for the world.
"If there is a mild recession, not a protracted, deep recession, that may provide some welcome cooling agent to the Chinese economy, whose rapid growth is largely export-driven," he said.
Daniel Rosen, a China expert at the Washington-based Peterson Institute for International Economics, said a US recession could take a toll on industries in China most dependent on US exports, especially those producing goods for the American household sector.
But he hastened to add that China's ongoing moves to boost domestic consumption in a bid to be less reliant on exports could be a critical cushion.
"At the same time though, as China shifts more to domestic consumption itself, then it relies less on US consumers and more on the Chinese consumer. So I don't expect there to be a heavy hit on China from a moderate recession," he said.
The World Bank said today that US economic growth likely slowed to 2.2 per cent in 2007. The bank forecast a 1.9 per cent expansion in 2008, then a rise to 2.3 per cent in 2009.
"External demand for the products of developing countries could weaken much more sharply and commodity prices could decline if the faltering US housing market or further financial turmoil were to push the United States into a recession," a bank report warned.
US economic data through the third quarter of 2007 remained robust, but more recent reports suggest softer conditions.
With the housing sector slowing sharply, oil prices hovering near 100 dollars a barrel and the US dollar slumping, Beijing appears to be bracing also for financial market turbulence.
Jan. 9 (Bloomberg) -- The U.S. will skirt recession as consumer spending slows without collapsing, a survey of economists showed.
Economic growth will average 1.5 percent in the first six months of 2008, matching the fourth quarter's pace, according to the median estimate of 62 economists surveyed by Bloomberg News from Jan. 3 to Jan. 8. The rate of expansion would be the weakest since the last nine months of 2001.
``It's soft economic activity that feels like a recession, but we probably won't have one,'' said Mickey Levy, chief economist at Bank of America Corp. in New York. ``The state of the consumer is clearly softening, but spending is not declining. That's very important.''
The Federal Reserve will cut interest rates more than previously anticipated, economists said, triggering a reacceleration in growth by the third quarter that will keep the economy from stalling.
Economists put the odds of a recession developing within the next year at 40 percent, according to the median estimate. Nine of the 47 economists responding to the question put the odds at about even and five said the economy would contract.
Goldman Sachs Group Inc. economists now predict a recession, joining their counterparts at Merrill Lynch & Co. and Morgan Stanley.
Bonds, Stocks
Treasury yields have fallen and stocks in the U.S. have dropped as the economic outlook deteriorated. Yields on benchmark 10-year notes yesterday reached 3.77 percent, the lowest since March 2004. They were at 3.81 percent at 7:56 a.m. in New York today. The Standard & Poor's 500 stock index yesterday fell to the lowest closing level since March.
Growth forecasts were lowered for every quarter of the year, even as the estimate for the last three months of 2007 was boosted. The world's largest economy will expand 2.1 percent in 2008, down from 2.3 percent forecast last month and the weakest since 2002.
``We're skating on the thin edge of a recession, but we'll narrowly miss one,'' said Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina. ``At the end of the day, it boils down to the consumer, who has remained relatively resilient.''
Gains in income will help ``prop up'' spending, which accounts for more than two-thirds of the economy, even after the job market softened in December, said Bryson.
Spending Growth
Spending grew at a 2.6 percent annual pace during the holidays last quarter, little changed from the previous three months and about a percentage point faster than predicted in December, according to the survey median. Economists pared estimates for the first six months of this year and boosted the forecast for the third quarter.
The Fed will reduce borrowing costs in both the first and second quarters, bringing the benchmark interest rate down to 3.5 percent by mid-year. Last month, economists forecast the Fed would reduce the rate just once more and hold it at 4 percent through 2008.
Interest-rate reductions will ``eventually stimulate demand,'' said Bank of America's Levy. Growth in the second half of the year will pick up to an average 2.5 percent pace, according to the latest estimates.
Rising exports and business investment will also help keep the economy's head above water. Still, growth concerns will trump some policy makers' unease about inflation as food and fuel prices climb, economists said.
Impact From Housing
The housing slump, now in its third year, will lead to more foreclosures that will further depress property values, making Americans feel less wealthy.
Employment, once a bright spot, may now become another headwind for consumers. The economy created just 18,000 jobs in December, capping the worst year for hiring since 2003, government data showed last week. The jobless rate jumped to a two-year high of 5 percent as builders, mortgage companies and manufacturers reduced payrolls.
The increase in unemployment convinced Harvard University economist Martin Feldstein, head of the National Bureau of Economic Research and member of the committee that determines when recessions begin and end, that a downturn was on the way.
``We are now talking about more likely than not,'' Feldstein said in a Jan. 5 interview. ``I have been saying about 50 percent. This now pushes it up a bit above that.''
`By Their Fingernails'
``Consumers are holding on by their fingernails,'' said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta. ``We still have spending on absolute necessities while they're cutting back on discretionary purchases.''
December retail sales figures won't be available until the Commerce Department's Jan. 15 report, making forecasting even more difficult, economists said. Combined November-December purchases probably amounted to the weakest holiday season in five years, according to forecasts from industry groups including the International Council of Shopping Centers.
``The debate here is whether the economy is quite weak or whether it is falling into a recession,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``So far, I'm in the quite-weak camp.''
Straits Times Index - Will 3,300 hold?
By Ritesh Menon
Wed, 9 Jan 2008, 08:43:35 SGT
- We had forecasted in our 28 Nov report that the rebound will wane out as it approached the 3,650 level, which has unfolded as per our forecast.
- The STI has failed to deliver a sustainable rally over the last 3 months since it rebounded off the 3,300 level in Mid-Nov 07. It tested this support level once in Mid-Dec 07 and is again approaching the 3,300 mark.
- As the decline over the last 2 trading days was made on the back of rising volume, we could see a little more downside from here, which would take the STI to our immediate support at 3,300.
- Elliot wave counts suggest the current down wave is segmented into 5 smaller waves. Currently, this puts the STI at the tail end of the current down wave (Wave V), which would take the index below our support level at 3,300 and we could witness the STI slips toward our 2nd support around 2,900 – 3,000.
- But should the 3,300 support level hold up strongly, we could be in store for a strong rebound that would take the STI towards the 1st resistance level at 3,650. However, it would face minor resistance at where the moving averages have converged around 3,500 – 3,550.
红天绿叶雾环境，
处处芬花展其姿。
不见仙人赏花美，
只见孤魂寻花香。
Switch to new Singapore index frustrates traders
By Kevin Lim
SINGAPORE, Jan 10 (Reuters) - Singapore switched to a new benchmark stock index .FTSTI on Thursday, but many stockbrokers were left frustrated without real-time quotes on their screens, traders said.
Singapore Exchange (SGXL.SI: Quote, Profile, Research), together with partners FTSE Group and Singapore Press Holdings (SPRM.SI: Quote, Profile, Research), on Thursday launched a slimmer 30-stock Straits Times Index and 18 other new indexes, including one tracking China shares listed in the city-state.
But traders using GL Trade, the system that is being rolled in to replace the Singapore Exchange's SESOP trading terminals, told Reuters that their screens could not display the latest index readings in real time, hindering their ability to follow the stock market and advise clients.
"It is not a technical issue," said Richard Zhu, GL Trade's deputy managing director in Singapore. "SGX's member (firms) have to give their written endorsement to GL Trade so that they can have the new STI on their screen. No members have given their agreement yet," he told Reuters.
"As soon as we have their endorsement, we will invest on development so that the system will be able to display STI indices," he added.
According to sources familiar with the discussions, the impasse was due to GL Trade, a Paris-based financial services firm, wanting to pass on the development and running costs to traders. The stockbroking firms were, however, reluctant to incur additional charges.
The problems affected mainly remisiers, who cater mostly to retail investors and earn a commission on trades. These traders generally do not have personal use of news and data terminals such as those provided by Reuters (RTR.L: Quote, Profile, Research) and Bloomberg, unlike institutional dealers.
"I can't take decisive action if I have positions in Singapore," said a trader with a local broking firm. "It's a major blindspot."
A Singapore Exchange spokesman said SGX and its partners are providing traders with live quotes for free and that the broking firms could also provide the information on their Web sites.
Hsieh Fu Hua, SGX's chief executive, said the new indexes follow a "globally recognised methodology" used by FTSE, which would make them more popular with international investors.
"We expect that the revamped STI and new indices will stimulate the development of more index-related products, spurring greater trading on our exchange and creating a more vibrant Singapore securities market."
Robert McHugh: "We are in the midst of a stock market crash that started at 14,200 in October 2007, and is likely to continue to at least 11,500 the first half of 2008."
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