The Philippine peso rallied to the stronger side of the 44-per-dollar level on Wednesday, hitting a two-week high in reaction to a sharp drop in oil prices.
The peso <PHP=> rose to 43.85 against the dollar, its strongest since July 24, after a fall of more than $2 in one of its biggest import items, crude oil CLc1. Crude hit a low of $118 per barrel on Tuesday, its lowest since May 5.
"Lower oil prices is the main factor pushing the peso at the moment," a trader in Manila said.
He said the first resistance level for the peso would be at 43.83 per dollar, and although there was strong dollar selling pressure, he expected the central bank to intervene by buying dollars to cap the currency to prevent excessive peso movement.
The peso has lost 6 percent this year, a big turnaround from its pole position in Asia in 2007 when it gained 19 percent.
Magyar Telekom 2d-quarter net up 72.4 percent
Magyar Telekom MTEL.BU (MTA.N: Quote, Profile, Research, Stock Buzz) reported on Thursday a 72.4 percent increase in consolidated second-quarter net income as lower headcount costs more than offset sluggish revenue growth.
Second-quarter net profit rose to 31.5 billion forints ($207.4 million) from 18.27 billion a year earlier and came in well above analyst forecasts for a 27.2 percent increase to 23.25 billion in a Reuters poll earlier this week.
The company, a unit of Deutsche Telekom (DTEGn.DE: Quote, Profile, Research, Stock Buzz), began cutting jobs last year to slash staff-related expenses by five percent this year and slim its overall workforce by 15 percent by the end of 2008.
It said 90 percent of the planned layoffs were completed by the end of July. Employee-related expenses for the first half dropped by 9.3 percent to 48.53 billion forints.
"Our solid performance in the first half of 2008 shows the results of our strong commitment to increasing efficiency across the group through a new management structure and reduced headcount," Chairman and Chief Executive Christopher Mattheisen said.
Despite the better-than-expected results, the company did not revise its full-year guidance for stable revenues and a slight decline in earnings before interest, taxes, depreciation and amortisation (EBITDA) over last year's earnings.
Revenues in the second quarter rose by 3.5 percent to 173.12 billion forints, driven primarily by the reversal of provisions worth 8.5 billion forints accounted for under domestic outgoing revenues.
Without the accounting revision, Magyar Telekom said revenues dropped by 1.6 percent year-on-year in the second quarter as growth in mobile and internet revenues could not offset a continued decline in fixed voice revenues.
Mobile revenues rose 3.2 percent to 82.21 billion forints, while internet revenues were up by 4.4 percent to 15.2 billion. Revenues in the fixed line segment dropped by 7.4 percent to 81.22 billion forints.
EBITDA rose by 14.7 percent to 75.4 billion forints, also exceeding analyst forecasts for an increase of just 5.6 percent, due to lower severance payments and the reversal of provisions related to fixed to mobile revenues.
However, the costs of an ongoing internal investigation into several consultancy contracts at the company's foreign units in Macedonia and Montenegro rose to 1.9 billion forints in the second quarter from 1 billion a year ago.
For the first half, the company booked 3.4 billion forints as investigation-related expenses and said it could still not predict when the probe, which delayed approval of its 2005 accounts, would be concluded.
Second-quarter net profit rose to 31.5 billion forints ($207.4 million) from 18.27 billion a year earlier and came in well above analyst forecasts for a 27.2 percent increase to 23.25 billion in a Reuters poll earlier this week.
The company, a unit of Deutsche Telekom (DTEGn.DE: Quote, Profile, Research, Stock Buzz), began cutting jobs last year to slash staff-related expenses by five percent this year and slim its overall workforce by 15 percent by the end of 2008.
It said 90 percent of the planned layoffs were completed by the end of July. Employee-related expenses for the first half dropped by 9.3 percent to 48.53 billion forints.
"Our solid performance in the first half of 2008 shows the results of our strong commitment to increasing efficiency across the group through a new management structure and reduced headcount," Chairman and Chief Executive Christopher Mattheisen said.
Despite the better-than-expected results, the company did not revise its full-year guidance for stable revenues and a slight decline in earnings before interest, taxes, depreciation and amortisation (EBITDA) over last year's earnings.
Revenues in the second quarter rose by 3.5 percent to 173.12 billion forints, driven primarily by the reversal of provisions worth 8.5 billion forints accounted for under domestic outgoing revenues.
Without the accounting revision, Magyar Telekom said revenues dropped by 1.6 percent year-on-year in the second quarter as growth in mobile and internet revenues could not offset a continued decline in fixed voice revenues.
Mobile revenues rose 3.2 percent to 82.21 billion forints, while internet revenues were up by 4.4 percent to 15.2 billion. Revenues in the fixed line segment dropped by 7.4 percent to 81.22 billion forints.
EBITDA rose by 14.7 percent to 75.4 billion forints, also exceeding analyst forecasts for an increase of just 5.6 percent, due to lower severance payments and the reversal of provisions related to fixed to mobile revenues.
However, the costs of an ongoing internal investigation into several consultancy contracts at the company's foreign units in Macedonia and Montenegro rose to 1.9 billion forints in the second quarter from 1 billion a year ago.
For the first half, the company booked 3.4 billion forints as investigation-related expenses and said it could still not predict when the probe, which delayed approval of its 2005 accounts, would be concluded.
Singapore Hot Stocks-Hyflux up on water trust's strong earnings
Water treatment firm Hyflux (HYFL.SI: Quote, Profile, Research, Stock Buzz) rose as much as 5 percent after Hyflux Water Trust Management (HYWT.SI: Quote, Profile, Research, Stock Buzz) (HWT) posted better-than-expected results for the second quarter due to lower expenses.
Hyflux surged to a high of S$2.54 with over one million shares changing hands.
Shares of HWT, which owns water treatment plants and is about 32 percent held by Hyflux, jumped 3.9 percent to S$0.66.
HWT posted a net profit of S$2.2 million in the April-June period, and will distribute 1.30 Singapore cents a unit [ID:nSN8561092]
"HWT continues to excel as far as cost management is concerned and even bettered its first quarter's operating margins," said DBS analyst Suvro Sarkar in a research note.
0634 GMT - Straits Times Index .FTSTI was up 1.17 percent.
DBS RECOVERS AFTER ANALYSTS CALM CDO FEARS
Shares of DBS Group Holdings (DBSM.SI: Quote, Profile, Research, Stock Buzz), Southeast Asia's largest bank, climbed as much as 1.2 percent to recoup some of Tuesday's 3 percent drop after analysts calmed investor worries about potential losses on risky debt.
DBS rose to a high of S$19.04 with more than 7.7 million shares changing hands. But the stock had erased most of the gains by 0608 GMT and was trading up 0.2 percent at S$18.86.
Concerns over possible writedowns on DBS's risky loans arose after the Bank of East Asia (0023.HK: Quote, Profile, Research, Stock Buzz) reported worse-than-expected first-half results due to mark-to-market losses of $167.8 million against its collateralized debt obligations. [ID:nHKG294223]
"It is likely that the provisioning required on DBS's CDO portfolio is probably nowhere near that done for Bank of East Asia even if they were to take mark-to-market losses onto the profit and loss statements," said Goldman Sachs analysts Kelvin Teo and Roy Ramos in a research note.
DBS declined to comment.
0554 GMT - Straits Times Index .FTSTI was up 1.28 percent.
Hyflux surged to a high of S$2.54 with over one million shares changing hands.
Shares of HWT, which owns water treatment plants and is about 32 percent held by Hyflux, jumped 3.9 percent to S$0.66.
HWT posted a net profit of S$2.2 million in the April-June period, and will distribute 1.30 Singapore cents a unit [ID:nSN8561092]
"HWT continues to excel as far as cost management is concerned and even bettered its first quarter's operating margins," said DBS analyst Suvro Sarkar in a research note.
0634 GMT - Straits Times Index .FTSTI was up 1.17 percent.
DBS RECOVERS AFTER ANALYSTS CALM CDO FEARS
Shares of DBS Group Holdings (DBSM.SI: Quote, Profile, Research, Stock Buzz), Southeast Asia's largest bank, climbed as much as 1.2 percent to recoup some of Tuesday's 3 percent drop after analysts calmed investor worries about potential losses on risky debt.
DBS rose to a high of S$19.04 with more than 7.7 million shares changing hands. But the stock had erased most of the gains by 0608 GMT and was trading up 0.2 percent at S$18.86.
Concerns over possible writedowns on DBS's risky loans arose after the Bank of East Asia (0023.HK: Quote, Profile, Research, Stock Buzz) reported worse-than-expected first-half results due to mark-to-market losses of $167.8 million against its collateralized debt obligations. [ID:nHKG294223]
"It is likely that the provisioning required on DBS's CDO portfolio is probably nowhere near that done for Bank of East Asia even if they were to take mark-to-market losses onto the profit and loss statements," said Goldman Sachs analysts Kelvin Teo and Roy Ramos in a research note.
DBS declined to comment.
0554 GMT - Straits Times Index .FTSTI was up 1.28 percent.
Taiwan's Foxconn mulls listing overseas units
Taiwan's Foxconn Group said Wednesday it planned to list its overseas units on the island following the government's relaxation of rules governing flotations.
The group is the parent company of Hon Hai Precision Industry Co., the world's largest contract maker of electronics by revenue.
"We are doing all this because we are confident of the new government's measures and policies," said group Chairman Terry Gou after a closed meeting with Premier Liu Chao-shiuan.
Gou did not identify the companies likely to seek a flotation on Taiwan, but Hon Hai Precision officials have said Foxconn International, which makes phones for Nokia Corp. and Motorola Inc., is planning to list in Taiwan.
Foxconn International went public in Hong Kong in February 2005. It would be the most high profile share offering in Taiwan since late 2003.
Gou also said the group plans to invest more than 100 billion Taiwan dollars (3.26 billion US) to add jobs and set up an Asia logistics hub on the island.
Taiwan's government last month decided to allow foreign companies, including those with Chinese shareholders, to list shares on the domestic exchange.
The move comes amid thawing ties between Beijing and Taipei under the administration of Taiwan President Ma Ying-jeou, who took office May 20.
The group is the parent company of Hon Hai Precision Industry Co., the world's largest contract maker of electronics by revenue.
"We are doing all this because we are confident of the new government's measures and policies," said group Chairman Terry Gou after a closed meeting with Premier Liu Chao-shiuan.
Gou did not identify the companies likely to seek a flotation on Taiwan, but Hon Hai Precision officials have said Foxconn International, which makes phones for Nokia Corp. and Motorola Inc., is planning to list in Taiwan.
Foxconn International went public in Hong Kong in February 2005. It would be the most high profile share offering in Taiwan since late 2003.
Gou also said the group plans to invest more than 100 billion Taiwan dollars (3.26 billion US) to add jobs and set up an Asia logistics hub on the island.
Taiwan's government last month decided to allow foreign companies, including those with Chinese shareholders, to list shares on the domestic exchange.
The move comes amid thawing ties between Beijing and Taipei under the administration of Taiwan President Ma Ying-jeou, who took office May 20.
Australia undertakes biggest tax review in 50 years
Australia has launched the most comprehensive review of its tax laws in more than 50 years as it bids to make them simpler and more globally competitive, Treasurer Wayne Swan said Wednesday.
The government was serious about the "modernization of our tax and transfer payment system," Swan said as he released a tax discussion paper.
"So much has changed in Australia since the war: globalisation, the rise of new information technologies, population ageing, climate change -- all of these challenges demand a comprehensive review of our tax system," he said.
The paper is the first step in a review to simplify Australia's complicated taxation system, which includes at least 99 federal taxes, 25 state government taxes and one local government tax.
It suggests that the tax structure could discourage foreign investment in Australia at a time when the government is pushing to make the country a financial hub for the region.
"The rapid growth in cross-border investments has highlighted the importance of international factors when considering how Australia taxes savings and investments," the paper says.
It notes that Australia's company tax rate of 30 percent is the eighth highest among Organization for Economic Cooperation and Development countries, while company tax rates overseas are falling.
"There are ongoing challenges to our ability to tax residents on their foreign sourced income and nonresidents on their income from investing in Australia," it said.
Swan refused to comment on which taxes could be eliminated but said the aim of the review was to make the system simpler and more efficient.
The Australian government has already said the Goods and Services Tax (GST), which places a 10 percent levy on most goods and services and was introduced by the previous conservative administration, will not be altered.
The findings of the review are expected to be announced by the end of the year.
The government was serious about the "modernization of our tax and transfer payment system," Swan said as he released a tax discussion paper.
"So much has changed in Australia since the war: globalisation, the rise of new information technologies, population ageing, climate change -- all of these challenges demand a comprehensive review of our tax system," he said.
The paper is the first step in a review to simplify Australia's complicated taxation system, which includes at least 99 federal taxes, 25 state government taxes and one local government tax.
It suggests that the tax structure could discourage foreign investment in Australia at a time when the government is pushing to make the country a financial hub for the region.
"The rapid growth in cross-border investments has highlighted the importance of international factors when considering how Australia taxes savings and investments," the paper says.
It notes that Australia's company tax rate of 30 percent is the eighth highest among Organization for Economic Cooperation and Development countries, while company tax rates overseas are falling.
"There are ongoing challenges to our ability to tax residents on their foreign sourced income and nonresidents on their income from investing in Australia," it said.
Swan refused to comment on which taxes could be eliminated but said the aim of the review was to make the system simpler and more efficient.
The Australian government has already said the Goods and Services Tax (GST), which places a 10 percent levy on most goods and services and was introduced by the previous conservative administration, will not be altered.
The findings of the review are expected to be announced by the end of the year.
Taiwan's Asustek posts lowest profit in eight quarters
Taiwan's Asustek Computer Inc., the world's largest motherboard maker by shipments, posted Wednesday its lowest quarterly net profit in eight quarters for the April-June period.
The company said at an investors' conference that its net profit in the three months to June came in at 5.64 billion Taiwan dollars (183 million US), down 17.6 percent from 6.85 billion in the same period a year earlier.
The result, Asustek's lowest since the second quarter of 2006's 2.9 billion Taiwan dollars, missed the average 5.99 billion forecast of five analysts surveyed earlier by Dow Jones Newswires.
Asustek said it expects shipments of Eee PCs, its popular low-cost notebooks, to soar more than 50 percent in the three months to September.
Shipments of its conventional notebook lines will likely grow more than 30 percent in the third quarter, it said.
The company said at an investors' conference that its net profit in the three months to June came in at 5.64 billion Taiwan dollars (183 million US), down 17.6 percent from 6.85 billion in the same period a year earlier.
The result, Asustek's lowest since the second quarter of 2006's 2.9 billion Taiwan dollars, missed the average 5.99 billion forecast of five analysts surveyed earlier by Dow Jones Newswires.
Asustek said it expects shipments of Eee PCs, its popular low-cost notebooks, to soar more than 50 percent in the three months to September.
Shipments of its conventional notebook lines will likely grow more than 30 percent in the third quarter, it said.
Cathay Pacific slides into loss on fuel prices
Hong Kong airline Cathay Pacific said Wednesday it had tumbled to a loss of 663 million Hong Kong dollars (85 million US) in the first half of 2008 due to soaring fuel prices.
The loss came after a profit of 2.58 billion dollars over the same period last year, Cathay said in a statement.
The airline blamed the result on high jet fuel costs, which overshadowed a 22.6 percent rise in turnover to 42.45 billion dollars following a significant increase in both passenger and cargo revenues.
"The dramatic change to our fortune is down to one factor -- the relentless rise in the prices of fuel," Cathay chairman Christopher Pratt told reporters.
The average fuel price reached 132 US dollars per barrel in the first half of the year, a 60 percent rise against the same period last year, according to the statement.
"Suffice to say, at this price, our business model is severely challenged," Pratt said.
Fuel accounted for 45.3 percent of total operating costs for the first half against 33.6 percent over the same period last year, and Pratt said fuel surcharges approved by Hong Kong regulators fell far short of the higher bill.
Passenger and cargo fares would have to increase to reflect the airline's new operational costs, but it was difficult to forecast whether that would hit still robust demand, Pratt added.
"Cathay Pacific is reducing other costs where it can but there is a limit to how much cost can be saved before quality and brand are compromised," he said.
The airline would adjust flights to North America as long-haul routes required a large amount of fuel, but deploy more aircraft for trips to regions such as Australia and the Middle East where demand was growing, Pratt added.
The airline said it had also made a provision in its interim results for a 60-million-US-dollar fine it has agreed to pay following a sweeping probe by American regulators into air cargo price fixing by a number of carriers.
Cathay and its subsidiary Dragonair flew 12.5 million passengers in the first six months of 2008, up nearly 14 percent on 2007, and passenger revenue rose almost 22 percent to 25.5 billion dollars, the statement said.
The results follow warnings by analysts that high oil prices have sparked the biggest crisis in the Asian airline industry for years, with weaker carriers at risk of going under.
Upstart Hong Kong-based budget carrier Oasis has already folded this year, while other regional airlines have cut flights or closed routes in a desperate scramble to pare back costs.
All Nippon Airways, Japan's second largest carrier, became the latest to cut back after saying Wednesday it was scrapping routes and flights due to high fuel costs, while bigger rival Japan Airlines is considering downsizing too.
Earlier this week the air travel industry body IATA said the number of people travelling by air grew at the lowest rate for five years in June as the global economic slowdown sapped demand.
A typhoon shut Hong Kong's bourse Wednesday, but investors were anxiously waiting to see how Cathay's shares perform when trading resumes.
The loss came after a profit of 2.58 billion dollars over the same period last year, Cathay said in a statement.
The airline blamed the result on high jet fuel costs, which overshadowed a 22.6 percent rise in turnover to 42.45 billion dollars following a significant increase in both passenger and cargo revenues.
"The dramatic change to our fortune is down to one factor -- the relentless rise in the prices of fuel," Cathay chairman Christopher Pratt told reporters.
The average fuel price reached 132 US dollars per barrel in the first half of the year, a 60 percent rise against the same period last year, according to the statement.
"Suffice to say, at this price, our business model is severely challenged," Pratt said.
Fuel accounted for 45.3 percent of total operating costs for the first half against 33.6 percent over the same period last year, and Pratt said fuel surcharges approved by Hong Kong regulators fell far short of the higher bill.
Passenger and cargo fares would have to increase to reflect the airline's new operational costs, but it was difficult to forecast whether that would hit still robust demand, Pratt added.
"Cathay Pacific is reducing other costs where it can but there is a limit to how much cost can be saved before quality and brand are compromised," he said.
The airline would adjust flights to North America as long-haul routes required a large amount of fuel, but deploy more aircraft for trips to regions such as Australia and the Middle East where demand was growing, Pratt added.
The airline said it had also made a provision in its interim results for a 60-million-US-dollar fine it has agreed to pay following a sweeping probe by American regulators into air cargo price fixing by a number of carriers.
Cathay and its subsidiary Dragonair flew 12.5 million passengers in the first six months of 2008, up nearly 14 percent on 2007, and passenger revenue rose almost 22 percent to 25.5 billion dollars, the statement said.
The results follow warnings by analysts that high oil prices have sparked the biggest crisis in the Asian airline industry for years, with weaker carriers at risk of going under.
Upstart Hong Kong-based budget carrier Oasis has already folded this year, while other regional airlines have cut flights or closed routes in a desperate scramble to pare back costs.
All Nippon Airways, Japan's second largest carrier, became the latest to cut back after saying Wednesday it was scrapping routes and flights due to high fuel costs, while bigger rival Japan Airlines is considering downsizing too.
Earlier this week the air travel industry body IATA said the number of people travelling by air grew at the lowest rate for five years in June as the global economic slowdown sapped demand.
A typhoon shut Hong Kong's bourse Wednesday, but investors were anxiously waiting to see how Cathay's shares perform when trading resumes.
Cognizant tapping emerging markets to skirt US pinch
Cognizant Technology Solutions, rattled by the downturn in the U.S. economy, is expanding rapidly in emerging markets like China and India as it looks for succour, but the move may take a while to provide a balm for the information-technology services provider.
"Investments being made in those geographies will start showing results two to three years from now," Chief Executive Francisco D'Souza said in an interview with Reuters.
While competitors like Tata Consultancy Services and Infosys Technologies have made strides in galloping economies like China and India, Cognizant lags far behind with only 1.5 percent of its revenue coming from Asia.
The company, which gets the bulk of its revenue from the United States, drew 20 percent of its second-quarter revenue from Europe.
Cognizant, which serves many U.S. financial firms battered in the wake of the credit crunch and housing market slump, has been trying to diversify its business and beef up business in Europe as it fights the slowdown in the United States.
But as the malaise in the United States spreads to the other side of the Atlantic, and concerns mount about the company's ability to sustain its strong growth rate in Europe, Cognizant is testing other shores.
"We continue to focus on the markets in Asia and we have also started, in a preliminary way, to look at some of the markets in Latin America and the Middle East," CEO D'Souza, who has been with the company since its inception in 1994, told Reuters.
Kaufman Bros. analyst Karl Keirstead expects Cognizant to get about 10 to 15 percent of revenue from outside the United States and Europe in the next two to three years.
Almost three quarters of the company's 59,000 employees are based in India, providing low-cost software development services primarily to U.S. companies.
Shares of the company, which cut its 2008 outlook last week, have lost close to 30 percent of their value in the last 52 months. The broader S&P 1500 IT Services Industry Index has dropped about 11 percent during the period.
LOOKING BEYOND FINACIALS
IT infrastructure services, business process outsourcing (BPO) and Knowledge Process Outsourcing (KPO) are areas with potential for tremendous growth in a relatively short period of time, Cognizant's D'Souza, who graduated from Hong Kong's University of East Asia, said.
In 2006, Cognizant bought infrastructure and professional services firm AimNet Solutions to set up its IT Infrastructure Management business. For the second quarter, IT Infrastructure accounted for 5 percent of revenue.
"I expect this segment to continue to grow ahead of our company's average growth for some time to come," D'Souza, who holds an MBA from Carnegie-Mellon University, said.
The company's financial services segment, which serves customers like Citigroup , CompuCredit and Netherlands' Rabobank, posted 7 percent sequential growth in the second quarter and accounted for half of overall revenue.
But D'Souza expects concerns about the segment to prevail for the rest of the year because of the increasing turmoil in the industry.
Cognizant also expects slower growth in its health insurance business for the rest of the year as one of its top-five clients has decided to scale back spending significantly.
The company's healthcare segment, which contributed 20 percent to second-quarter revenue, provides services for clients in the health-insurance and life sciences sector including Aetna Inc and Molina Healthcare.
"Investments being made in those geographies will start showing results two to three years from now," Chief Executive Francisco D'Souza said in an interview with Reuters.
While competitors like Tata Consultancy Services and Infosys Technologies have made strides in galloping economies like China and India, Cognizant lags far behind with only 1.5 percent of its revenue coming from Asia.
The company, which gets the bulk of its revenue from the United States, drew 20 percent of its second-quarter revenue from Europe.
Cognizant, which serves many U.S. financial firms battered in the wake of the credit crunch and housing market slump, has been trying to diversify its business and beef up business in Europe as it fights the slowdown in the United States.
But as the malaise in the United States spreads to the other side of the Atlantic, and concerns mount about the company's ability to sustain its strong growth rate in Europe, Cognizant is testing other shores.
"We continue to focus on the markets in Asia and we have also started, in a preliminary way, to look at some of the markets in Latin America and the Middle East," CEO D'Souza, who has been with the company since its inception in 1994, told Reuters.
Kaufman Bros. analyst Karl Keirstead expects Cognizant to get about 10 to 15 percent of revenue from outside the United States and Europe in the next two to three years.
Almost three quarters of the company's 59,000 employees are based in India, providing low-cost software development services primarily to U.S. companies.
Shares of the company, which cut its 2008 outlook last week, have lost close to 30 percent of their value in the last 52 months. The broader S&P 1500 IT Services Industry Index has dropped about 11 percent during the period.
LOOKING BEYOND FINACIALS
IT infrastructure services, business process outsourcing (BPO) and Knowledge Process Outsourcing (KPO) are areas with potential for tremendous growth in a relatively short period of time, Cognizant's D'Souza, who graduated from Hong Kong's University of East Asia, said.
In 2006, Cognizant bought infrastructure and professional services firm AimNet Solutions to set up its IT Infrastructure Management business. For the second quarter, IT Infrastructure accounted for 5 percent of revenue.
"I expect this segment to continue to grow ahead of our company's average growth for some time to come," D'Souza, who holds an MBA from Carnegie-Mellon University, said.
The company's financial services segment, which serves customers like Citigroup , CompuCredit and Netherlands' Rabobank, posted 7 percent sequential growth in the second quarter and accounted for half of overall revenue.
But D'Souza expects concerns about the segment to prevail for the rest of the year because of the increasing turmoil in the industry.
Cognizant also expects slower growth in its health insurance business for the rest of the year as one of its top-five clients has decided to scale back spending significantly.
The company's healthcare segment, which contributed 20 percent to second-quarter revenue, provides services for clients in the health-insurance and life sciences sector including Aetna Inc and Molina Healthcare.
Charges weigh down Wendy's International second-quarter profits
Wendy's International Inc. reported lower second-quarter profits Tuesday on expenses from restructuring and a special committee formed a year ago to seek a possible sale.
The results missed Wall Street expectations.
Wendy's, the third-largest burger chain in the United States, earned US$19.9 million, or 22 cents per share, down from $29.3 million, or 33 cents per share, a year ago.
Revenue edged lower to $632 million from $633 million.
Excluding special expenses, earnings from continuing operations came in at 30 cents per share, versus 41 cents per share in the same period a year ago, and below the 37 cents per share that analysts polled by Thomson Financial had been expecting.
Atlanta-based Triarc Companies Inc., the owner of Arby's, announced a deal in April to acquired Wendy's. The deal is expected to close by the end of the year.
The results missed Wall Street expectations.
Wendy's, the third-largest burger chain in the United States, earned US$19.9 million, or 22 cents per share, down from $29.3 million, or 33 cents per share, a year ago.
Revenue edged lower to $632 million from $633 million.
Excluding special expenses, earnings from continuing operations came in at 30 cents per share, versus 41 cents per share in the same period a year ago, and below the 37 cents per share that analysts polled by Thomson Financial had been expecting.
Atlanta-based Triarc Companies Inc., the owner of Arby's, announced a deal in April to acquired Wendy's. The deal is expected to close by the end of the year.
Fed keeps rates on hold as economy sputters
The Federal Reserve, in a widely predicted move, kept its main interest rate unchanged at 2.0 percent citing concerns about sputtering economic growth and inflationary pressures.
The Dow Jones Industrial Average rocketed 331 points to close at 11,615.77 as investors cheered the announcement, although tumbling oil prices also boosted Wall Street's spirits.
The Fed said that relatively low rates should eventually fire up growth going forward, but warned that multiple hurdles stand in the path of a potential economic revival.
"Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters," the central bank cautioned.
Most economists expect the Federal Open Market Committee, chaired by Ben Bernanke, to maintain the federal funds rate at 2.0 percent for some time.
"My view has been all along and it remains that the Fed is going to be on hold for a good deal of time," said Josh Feinman, a chief economist at Deutsche Bank's institutional investment management group DB Advisors.
Feinman said the Fed kept rates on hold because of fears that the world's largest economy would "struggle" for momentum in the second half of the year amid a lingering housing downturn, a credit crunch and high oil prices.
Brain Bethune, chief US financial economist at Global Insight, agreed that rates are unlikely to change anytime soon.
"We believe that the Fed will be in a position to hold rates steady well into 2009," he said.
The Fed has now kept the fed funds rate on hold for two straight policy meetings after slashing rates by 3.25 percentage points between September and late April in an attempt to kick-start flagging growth.
The Fed stressed that it remains concerned about energy costs even though oil prices have cooled markedly in recent weeks to around 119 dollars a barrel Tuesday from record peaks over 147 dollars last month.
"The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain," the central bank said.
Searing energy prices have sapped economic momentum and lightened Americans' wallets in the past year, but Fed officials believe sluggish growth will weaken fuel prices, especially as America is the world's largest oil importer.
A government survey Monday showed that headline inflation jumped 0.8 percent during June, marking its biggest monthly gain since 1997.
Aside from the ailing housing and credit markets, some economists are also becoming more concerned about the labor market, especially after the unemployment rate ticked up to 5.7 percent in July to a four-year high.
"My view is that unemployment is going to go to 6.5 percent and that will be new information for the Fed that will force them to keep rates unchanged for the next 12 months," said Ian Morris, chief US economist at HSBC North America.
While voicing sustained concern about inflation, the Fed did note that employers are continuing to cut jobs.
Other economists believe the central bank could lift rates sooner, especially if the 14-trillion-dollar economy starts firing on all its cylinders.
US gross domestic product (GDP) growth accelerated to 1.9 percent during the second quarter, compared with 0.9 percent during the first quarter, and after a 0.2 percent contraction in the fourth quarter of 2007.
But fears are mounting that GDP growth could falter again in the second half of the year as the effects of an emergency 168-billion-dollar economic stimulus -- which propped up second-quarter growth -- wear off.
Most economists expect growth to remain sluggish in the next couple of months particularly as the credit crunch continues to plague major banks and finance firms.
Although the Dow posted its best one-day spurt in four months Tuesday, it is down 12 percent for the year-to-date.
The Dow Jones Industrial Average rocketed 331 points to close at 11,615.77 as investors cheered the announcement, although tumbling oil prices also boosted Wall Street's spirits.
The Fed said that relatively low rates should eventually fire up growth going forward, but warned that multiple hurdles stand in the path of a potential economic revival.
"Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters," the central bank cautioned.
Most economists expect the Federal Open Market Committee, chaired by Ben Bernanke, to maintain the federal funds rate at 2.0 percent for some time.
"My view has been all along and it remains that the Fed is going to be on hold for a good deal of time," said Josh Feinman, a chief economist at Deutsche Bank's institutional investment management group DB Advisors.
Feinman said the Fed kept rates on hold because of fears that the world's largest economy would "struggle" for momentum in the second half of the year amid a lingering housing downturn, a credit crunch and high oil prices.
Brain Bethune, chief US financial economist at Global Insight, agreed that rates are unlikely to change anytime soon.
"We believe that the Fed will be in a position to hold rates steady well into 2009," he said.
The Fed has now kept the fed funds rate on hold for two straight policy meetings after slashing rates by 3.25 percentage points between September and late April in an attempt to kick-start flagging growth.
The Fed stressed that it remains concerned about energy costs even though oil prices have cooled markedly in recent weeks to around 119 dollars a barrel Tuesday from record peaks over 147 dollars last month.
"The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain," the central bank said.
Searing energy prices have sapped economic momentum and lightened Americans' wallets in the past year, but Fed officials believe sluggish growth will weaken fuel prices, especially as America is the world's largest oil importer.
A government survey Monday showed that headline inflation jumped 0.8 percent during June, marking its biggest monthly gain since 1997.
Aside from the ailing housing and credit markets, some economists are also becoming more concerned about the labor market, especially after the unemployment rate ticked up to 5.7 percent in July to a four-year high.
"My view is that unemployment is going to go to 6.5 percent and that will be new information for the Fed that will force them to keep rates unchanged for the next 12 months," said Ian Morris, chief US economist at HSBC North America.
While voicing sustained concern about inflation, the Fed did note that employers are continuing to cut jobs.
Other economists believe the central bank could lift rates sooner, especially if the 14-trillion-dollar economy starts firing on all its cylinders.
US gross domestic product (GDP) growth accelerated to 1.9 percent during the second quarter, compared with 0.9 percent during the first quarter, and after a 0.2 percent contraction in the fourth quarter of 2007.
But fears are mounting that GDP growth could falter again in the second half of the year as the effects of an emergency 168-billion-dollar economic stimulus -- which propped up second-quarter growth -- wear off.
Most economists expect growth to remain sluggish in the next couple of months particularly as the credit crunch continues to plague major banks and finance firms.
Although the Dow posted its best one-day spurt in four months Tuesday, it is down 12 percent for the year-to-date.
Republicans strive to turn oil into electoral gold
The Republicans are in the mire over the economy but by staging an election-year clamor for offshore oil drilling, John McCain's party is taking the fight to a suddenly defensive Barack Obama.
White House hopeful McCain and his party appear to have struck a chord with a hard-pressed public with their demands to throw open US coasts to oil exploration, even if the slick fruits of the endeavor would be years away.
Having for years opposed offshore drilling before changing tack in June, McCain said Monday: "We have to drill here and we have to drill now."
After a week-long Republican offensive, McCain's Democratic opponent softened his position at the weekend, offering a qualified endorsement of coastal drilling as part of a broader energy revolution.
But Obama, and the Democrats as a whole, remained adamant that any oil from expanded drilling is at least a decade away and accused the Republicans of political posturing for short-term gain.
"The economy has been a sea of bad news for Republicans and this is the first island of hope they've found in a long time," former White House adviser William Galston of the Brookings Institution said.
"I don't think the public view is we can solely drill our way out of this. But clearly the Republicans believe that they have a political advantage on this and they are determined to exploit it for all it's worth," he said.
The Democratic candidate went further than his Republican rival by calling Monday for the US government to tap its Strategic Petroleum Reserve, triggering a new round of charges by the McCain camp of political opportunism.
The oil debate has coincided with an avalanche of attack ads by McCain, and the results appear to be showing in tracking polls with the White House race now locked in a dead heat.
"The question of offshore drilling, along with expanded domestic energy production, has suddenly become the biggest political and economic wedge issue of this election," conservative commentator and CNBC presenter Larry Kudlow wrote on his blog, drawing new hope for Republican electoral prospects.
In a piece of political theater, Republicans this week have taken to a darkened House of Representatives to demand Democratic leaders recall Congress from its summer recess for a vote on offshore drilling.
Polls suggest two-thirds of Americans support lifting a 27-year-old federal moratorium on such drilling, with slender majorities even in states affected such as California and Florida.
In June, President George W. Bush lifted executive restrictions on such exploration and called on Congress to lift its ban on drilling in the outer continental shelf, as well as in an Alaskan wildlife reserve.
But Obama and the Democratic Party are portraying McCain as a puppet of "Big Oil" awash in campaign contributions from the industry, and say some of his top aides are former lobbyists for petrochemical giants.
"The oil companies have placed their bet on Senator McCain, and if he wins, they will continue to cash in while our families and our economy suffer and our future is put in jeopardy," Obama said Tuesday.
The Democratic counter-offensive also involves tarring McCain by association with Bush, who has dismal approval ratings in part because of an economic squeeze that has seen a wave of home foreclosures and job losses.
And opponents of drilling question Republican claims about the oil said to be lying untapped offshore, noting that energy firms already have leases to explore 68 million acres of federal land that they are not using.
But analysts believe that whatever the economics of the drilling argument, McCain has tapped into Americans' desperate desire for relief from sky-high fuel prices, even if those prices have recently retreated a touch.
"There is some evidence to suggest that some poll numbers were moved by that because it is something tangible that non-expert voters can see and appreciate," said Bruce Buchanan at the University of Texas, Austin.
But the political scientist added that Obama had been clever by issuing counter-proposals for a long-term overhaul of US energy policy that would include some drilling.
"He is trying to have it both ways, that takes the edge off McCain's attack. Then they call him a flip-flopper. McCain of course flip-flopped on that issue and 15 others, like all politicians do."
White House hopeful McCain and his party appear to have struck a chord with a hard-pressed public with their demands to throw open US coasts to oil exploration, even if the slick fruits of the endeavor would be years away.
Having for years opposed offshore drilling before changing tack in June, McCain said Monday: "We have to drill here and we have to drill now."
After a week-long Republican offensive, McCain's Democratic opponent softened his position at the weekend, offering a qualified endorsement of coastal drilling as part of a broader energy revolution.
But Obama, and the Democrats as a whole, remained adamant that any oil from expanded drilling is at least a decade away and accused the Republicans of political posturing for short-term gain.
"The economy has been a sea of bad news for Republicans and this is the first island of hope they've found in a long time," former White House adviser William Galston of the Brookings Institution said.
"I don't think the public view is we can solely drill our way out of this. But clearly the Republicans believe that they have a political advantage on this and they are determined to exploit it for all it's worth," he said.
The Democratic candidate went further than his Republican rival by calling Monday for the US government to tap its Strategic Petroleum Reserve, triggering a new round of charges by the McCain camp of political opportunism.
The oil debate has coincided with an avalanche of attack ads by McCain, and the results appear to be showing in tracking polls with the White House race now locked in a dead heat.
"The question of offshore drilling, along with expanded domestic energy production, has suddenly become the biggest political and economic wedge issue of this election," conservative commentator and CNBC presenter Larry Kudlow wrote on his blog, drawing new hope for Republican electoral prospects.
In a piece of political theater, Republicans this week have taken to a darkened House of Representatives to demand Democratic leaders recall Congress from its summer recess for a vote on offshore drilling.
Polls suggest two-thirds of Americans support lifting a 27-year-old federal moratorium on such drilling, with slender majorities even in states affected such as California and Florida.
In June, President George W. Bush lifted executive restrictions on such exploration and called on Congress to lift its ban on drilling in the outer continental shelf, as well as in an Alaskan wildlife reserve.
But Obama and the Democratic Party are portraying McCain as a puppet of "Big Oil" awash in campaign contributions from the industry, and say some of his top aides are former lobbyists for petrochemical giants.
"The oil companies have placed their bet on Senator McCain, and if he wins, they will continue to cash in while our families and our economy suffer and our future is put in jeopardy," Obama said Tuesday.
The Democratic counter-offensive also involves tarring McCain by association with Bush, who has dismal approval ratings in part because of an economic squeeze that has seen a wave of home foreclosures and job losses.
And opponents of drilling question Republican claims about the oil said to be lying untapped offshore, noting that energy firms already have leases to explore 68 million acres of federal land that they are not using.
But analysts believe that whatever the economics of the drilling argument, McCain has tapped into Americans' desperate desire for relief from sky-high fuel prices, even if those prices have recently retreated a touch.
"There is some evidence to suggest that some poll numbers were moved by that because it is something tangible that non-expert voters can see and appreciate," said Bruce Buchanan at the University of Texas, Austin.
But the political scientist added that Obama had been clever by issuing counter-proposals for a long-term overhaul of US energy policy that would include some drilling.
"He is trying to have it both ways, that takes the edge off McCain's attack. Then they call him a flip-flopper. McCain of course flip-flopped on that issue and 15 others, like all politicians do."
Bank of England could spring surprise interest rate hike: analysts
The Bank of England could shock markets with an interest rate hike on Thursday to keep inflation in check, despite expectations for no change because of slower economic growth, analysts said.
Most economists think the British central bank's rate-setting monetary policy committee (MPC) will leave rates at 5.00 percent for the fourth straight month after a two-day meet that starts on Wednesday.
However, pundits are not ruling out a surprise quarter-point hike to 5.25 percent after British 12-month inflation spiked to a 16-year high in June on the back of surging food and fuel prices.
The European Central Bank was also forecast to keep eurozone borrowing costs at 4.25 percent on Thursday amid concerns about record eurozone inflation coupled with sluggish economic growth.
On Tuesday, the US Federal Reserve left American interest rates at 2.0 percent, given the weakness of the world's biggest economy.
Analysts warned that British inflation would spike even higher in the coming months because of recent steep price increases from domestic gas and electricity suppliers.
Energy firm Centrica last week hiked its gas prices by 35 percent because of the rocketing cost of wholesale energy.
"Pressures for higher rates are likely to linger on the committee," said Investec economist Philip Shaw, who is calling for no change this month.
"Overall we cannot entirely rule out the risk that the committee will sanction higher rates this time.
He added: "Centrica's 35 percent increase in domestic tariffs suggests that inflation will hit 5.0 percent."
The country's annual inflation rate spiked to 3.8 percent in June -- which was almost twice the Bank of England's official inflation target of 2.0 percent.
Britain's economy, meanwhile, grew by only 0.2 percent in the April to June period compared with the first three months of 2008.
That was the slowest pace of economic growth for more than three years and brought Britain closer to the threat of recession -- which is defined as two or more successive quarters of negative growth.
"Inflationary pressures continue to prevent the MPC from cutting rates in response to the deteriorating real economy," added Capital Economics analyst Vicky Redwood.
"In fact, if interest rates change this month, they are more likely to go up than down."
The nine-member MPC was split three ways when they left interest rates unchanged last month, reflecting the dilemma they face in controlling soaring inflation whilst seeking to boost growth.
The committee voted 7-2 to leave rates at 5.00 percent in July. Policymaker David Blanchflower voted for a quarter-point cut while Tim Besley urged the BoE to lift borrowing costs to 5.25 percent.
"We suspect that most MPC members are still firmly in wait-and-see mode and in no hurry to move interest rates, given the current major uncertainties surrounding both the medium-term inflation and growth outlooks," said Global Insight economist Howard Archer.
The BoE's last interest rate move had been in April when it cut borrowing costs from 5.25 percent.
Most economists think the British central bank's rate-setting monetary policy committee (MPC) will leave rates at 5.00 percent for the fourth straight month after a two-day meet that starts on Wednesday.
However, pundits are not ruling out a surprise quarter-point hike to 5.25 percent after British 12-month inflation spiked to a 16-year high in June on the back of surging food and fuel prices.
The European Central Bank was also forecast to keep eurozone borrowing costs at 4.25 percent on Thursday amid concerns about record eurozone inflation coupled with sluggish economic growth.
On Tuesday, the US Federal Reserve left American interest rates at 2.0 percent, given the weakness of the world's biggest economy.
Analysts warned that British inflation would spike even higher in the coming months because of recent steep price increases from domestic gas and electricity suppliers.
Energy firm Centrica last week hiked its gas prices by 35 percent because of the rocketing cost of wholesale energy.
"Pressures for higher rates are likely to linger on the committee," said Investec economist Philip Shaw, who is calling for no change this month.
"Overall we cannot entirely rule out the risk that the committee will sanction higher rates this time.
He added: "Centrica's 35 percent increase in domestic tariffs suggests that inflation will hit 5.0 percent."
The country's annual inflation rate spiked to 3.8 percent in June -- which was almost twice the Bank of England's official inflation target of 2.0 percent.
Britain's economy, meanwhile, grew by only 0.2 percent in the April to June period compared with the first three months of 2008.
That was the slowest pace of economic growth for more than three years and brought Britain closer to the threat of recession -- which is defined as two or more successive quarters of negative growth.
"Inflationary pressures continue to prevent the MPC from cutting rates in response to the deteriorating real economy," added Capital Economics analyst Vicky Redwood.
"In fact, if interest rates change this month, they are more likely to go up than down."
The nine-member MPC was split three ways when they left interest rates unchanged last month, reflecting the dilemma they face in controlling soaring inflation whilst seeking to boost growth.
The committee voted 7-2 to leave rates at 5.00 percent in July. Policymaker David Blanchflower voted for a quarter-point cut while Tim Besley urged the BoE to lift borrowing costs to 5.25 percent.
"We suspect that most MPC members are still firmly in wait-and-see mode and in no hurry to move interest rates, given the current major uncertainties surrounding both the medium-term inflation and growth outlooks," said Global Insight economist Howard Archer.
The BoE's last interest rate move had been in April when it cut borrowing costs from 5.25 percent.
Subprime meltdown behind worst stock market slide since 2001-2002
The collapse of the subprime mortgage market in the United States and the subsequent global financial crisis has provoked the sharpest fall on world stock markets since the end of the Internet bubble in 2001-2002.
In the last year, leading indices have lost between 12 and 25 percent of their value.
The sharpest plunge has been in Tokyo, 23.6 percent, followed by Paris, 20.7 percent, the Dow Jones Industrial Average in New York, 14.8 percent, the US Standard and Poor's 500 index, 13.6 percent, Frankfurt, 12.2 percent, and London, 12.1 percent.
Investor jitters regarding the health of securities backed by risky US home mortgages have weighed heavily on the financial sector. Major banks have announced big losses and asset writedowns while others have had to be saved with costly bailouts.
A credit squeeze, which emerged as nervous banks became reluctant to lend to one another and to businesses, has dragged down the most heavily indebted sectors and slowed the pace of mergers and acquisitions.
Initial signs that the turmoil was spreading from financial markets to the broader economy accentuated pressures on equity markets early in the year.
On January 21, for example, there were falls of 7.16 percent in Frankfurt, 6.83 percent in Paris, 5.48 percent in London and 3.86 percent in Tokyo.
A later surge in commodities prices eroded corporate operating margins and household purchasing power, severely penalising the consumer goods and automobile sectors.
In the last year, leading indices have lost between 12 and 25 percent of their value.
The sharpest plunge has been in Tokyo, 23.6 percent, followed by Paris, 20.7 percent, the Dow Jones Industrial Average in New York, 14.8 percent, the US Standard and Poor's 500 index, 13.6 percent, Frankfurt, 12.2 percent, and London, 12.1 percent.
Investor jitters regarding the health of securities backed by risky US home mortgages have weighed heavily on the financial sector. Major banks have announced big losses and asset writedowns while others have had to be saved with costly bailouts.
A credit squeeze, which emerged as nervous banks became reluctant to lend to one another and to businesses, has dragged down the most heavily indebted sectors and slowed the pace of mergers and acquisitions.
Initial signs that the turmoil was spreading from financial markets to the broader economy accentuated pressures on equity markets early in the year.
On January 21, for example, there were falls of 7.16 percent in Frankfurt, 6.83 percent in Paris, 5.48 percent in London and 3.86 percent in Tokyo.
A later surge in commodities prices eroded corporate operating margins and household purchasing power, severely penalising the consumer goods and automobile sectors.
BNP Paribas second quarter profits down 34 pct
French banking giant BNP Paribas reported second quarter profits of 1.5 billion euros (2.3 billion dollars) Wednesday, down 34 percent on the same period last year but nevertheless better than forecast.
The subprime credit crisis in the US property market cost the bank another 542 million euros over the quarter, a little less than the 575-million-euro writedown announced Tuesday by Societe Generale for the same reason.
That brings the cost of the so-called credit crunch to the bank to nearly 2.4 billion euros since the crisis began a year ago.
Because BNP Paribas stayed out of the banking activities worst hit by the crisis, that is far less than some of its French banking rivals.
Because of the volatile stock market, the bank's finance and investment wing suffered again this quarter, its revenue dropping 24.57 percent. This was nevertheless better than the 41 percent drop in the first quarter of the year.
"The financial crisis and its knock-on effects continued to weigh on the profitability of the banking sector in the second quarter 2008, again with significant differentiation between the results of the players," said director general Baudoin Prot.
"In this context, BNP Paribas again delivered robust operating results in all its business units."
The subprime credit crisis in the US property market cost the bank another 542 million euros over the quarter, a little less than the 575-million-euro writedown announced Tuesday by Societe Generale for the same reason.
That brings the cost of the so-called credit crunch to the bank to nearly 2.4 billion euros since the crisis began a year ago.
Because BNP Paribas stayed out of the banking activities worst hit by the crisis, that is far less than some of its French banking rivals.
Because of the volatile stock market, the bank's finance and investment wing suffered again this quarter, its revenue dropping 24.57 percent. This was nevertheless better than the 41 percent drop in the first quarter of the year.
"The financial crisis and its knock-on effects continued to weigh on the profitability of the banking sector in the second quarter 2008, again with significant differentiation between the results of the players," said director general Baudoin Prot.
"In this context, BNP Paribas again delivered robust operating results in all its business units."
Commerzbank second-quarter net profit up, but ops profit drops
Commerzbank, the second biggest German bank, posted on Wednesday a gain in second-quarter net profit, owing to a favourable tax effect, along with a plunge in operating earnings.
Net profit went up 6.4 percent to 817 million euros (1.26 billion dollars), a Commerzbank statement said, compared to forecasts of a loss by analysts polled by Dow Jones Newswires.
The result was boosted by a tax effect that added 386 million euros to the bank's bottom line, it added.
Operating profit fell by more than half meanwhile to 484 million euros from more than one billion in the same period a year earlier.
The market had expected an even bigger drop, however.
Commerzbank wrote down the value of real-estate finance assets by 369 million euros, reflecting persistent housing market turbulence, in the United States in particular.
The bank repeated that it would be "very difficult" this year to match results from 2007, when it had posted a record net profit of 1.9 billion euros.
Net profit went up 6.4 percent to 817 million euros (1.26 billion dollars), a Commerzbank statement said, compared to forecasts of a loss by analysts polled by Dow Jones Newswires.
The result was boosted by a tax effect that added 386 million euros to the bank's bottom line, it added.
Operating profit fell by more than half meanwhile to 484 million euros from more than one billion in the same period a year earlier.
The market had expected an even bigger drop, however.
Commerzbank wrote down the value of real-estate finance assets by 369 million euros, reflecting persistent housing market turbulence, in the United States in particular.
The bank repeated that it would be "very difficult" this year to match results from 2007, when it had posted a record net profit of 1.9 billion euros.
Xstrata launches six-billion-euro bid for Lonmin
Swiss mining giant Xstrata on Wednesday announced a bid for Lonmin, describing it as the world's third largest platinum producer and valuing the company at more than six billion euros.
Xstrata, which has interests in copper, coal, ferrochrome, nickel, zinc, gold, cobalt, lead and silver, and is listed on both the London and Swiss stock exchanges offered 33 pounds (42 euros, 65 dollars) a share.
That amounted to 42 percent more than its closing price of 23.19 pounds on the London stock exchange on Tuesday, said a statement from Xstrata.
The offer values the company at about five billion pounds (6.3 billion euros, 9.8 billion dollars).
Xstrata already has an 8.03 percent stake in Lonmin.
Xstrata, which has interests in copper, coal, ferrochrome, nickel, zinc, gold, cobalt, lead and silver, and is listed on both the London and Swiss stock exchanges offered 33 pounds (42 euros, 65 dollars) a share.
That amounted to 42 percent more than its closing price of 23.19 pounds on the London stock exchange on Tuesday, said a statement from Xstrata.
The offer values the company at about five billion pounds (6.3 billion euros, 9.8 billion dollars).
Xstrata already has an 8.03 percent stake in Lonmin.
Egypt shelves deal with Canadian fertilizer company Agrium
Agrium Inc. (TSX: AGU.TO) is trying to hammer out a new arrangement with the Egyptian government, which said Tuesday it will scrap a US$1.4-billion fertilizer plant it was jointly building with the Calgary-based farm-inputs company.
Egypt's cabinet cancelled its deal with Agrium due to "civic opposition" from the local community in the Nile Delta over possible environmental and health hazards.
The Egyptian People's Assembly recommended in June that the EAgrium project, which is already under construction, either be moved to another site or have its interests bought out by the government.
At that point Agrium said it may have to write off the US$280 million it has already committed to the project, in which it would have held a 60 per cent stake.
"The negotiations are ongoing with Egypt and it's still unclear whether we'll have to take a writedown in Egypt or not," said Agrium spokesman Richard Downey.
Agrium reports its second-quarter results on Wednesday.
In the meantime, Agrium is in discussions with the Egyptian government about what to do next.
One option is for the government to compensate Agrium for the investment it has already made. Another is for the company to acquire an ownership stake in an existing nitrogen facility that is currently being commissioned near the EAgrium site.
"We've been in Egypt for many years doing all the pre-work for this and so hopefully we can come to an arrangement that is mutually acceptable to both parties," Downey said.
"There is a possibility that we will be in Egypt longer term if we can come up to an arrangement with them."
Agrium has said starting from scratch at a new site would not be a viable option, since construction was already 42 per cent complete.
It would also have required all-new permitting and financing as well as engineering, procurement and construction contracts.
Terry Ortslan, an analyst with TSO and Associates, called the situation "unfortunate," but said there was not much Agrium could have done differently.
"The situation shows how many different stakeholders it takes to get any project going. So as a result, Agrium, like everybody else, has to compromise," he said.
"It's too bad, because it was bound to be a good project for the area."
Salman Partners analyst Raymond Goldie said even if Agrium has to take a writedown on its Egypt project, its shares will still be valued at around C$135.
That would be significantly higher than Tuesday's close of C$82.78, down about eight per cent, or $6.99, on the TSX.
Goldie said he does not expect Agrium to rush into any new acquisitions in the Middle East.
"I don't think you'll see them desperately doing a deal because they want to replace this. I think they will consider any alternatives in the usual patient matter," he said.
The Egyptian government ordered a construction halt to the plant in April, after local residents voiced their opposition to the fertilizer plant because of its potential health, safety and environmental risks. They also said the plant, at the port of Damietta, would pollute the area a few kilometres from a popular Nile Delta beach resort.
But a few days before legislators recommended moving or buying out the project, an assembly committee determined EAgrium met all health and environmental standards.
Agrium does not have any other expansion plans for the Middle East region, but there are still plenty of other opportunities for Agrium to grow its business, Downey said.
"We've got other expansion plans in potash and we've just expanded our retail pretty considerably," he said.
Earlier this year, Agrium closed its US$2.65-billion takeover of UAP Holdings Inc., making it the largest distributor of seeds, fertilizer and other farm inputs in North America.
Egypt's cabinet cancelled its deal with Agrium due to "civic opposition" from the local community in the Nile Delta over possible environmental and health hazards.
The Egyptian People's Assembly recommended in June that the EAgrium project, which is already under construction, either be moved to another site or have its interests bought out by the government.
At that point Agrium said it may have to write off the US$280 million it has already committed to the project, in which it would have held a 60 per cent stake.
"The negotiations are ongoing with Egypt and it's still unclear whether we'll have to take a writedown in Egypt or not," said Agrium spokesman Richard Downey.
Agrium reports its second-quarter results on Wednesday.
In the meantime, Agrium is in discussions with the Egyptian government about what to do next.
One option is for the government to compensate Agrium for the investment it has already made. Another is for the company to acquire an ownership stake in an existing nitrogen facility that is currently being commissioned near the EAgrium site.
"We've been in Egypt for many years doing all the pre-work for this and so hopefully we can come to an arrangement that is mutually acceptable to both parties," Downey said.
"There is a possibility that we will be in Egypt longer term if we can come up to an arrangement with them."
Agrium has said starting from scratch at a new site would not be a viable option, since construction was already 42 per cent complete.
It would also have required all-new permitting and financing as well as engineering, procurement and construction contracts.
Terry Ortslan, an analyst with TSO and Associates, called the situation "unfortunate," but said there was not much Agrium could have done differently.
"The situation shows how many different stakeholders it takes to get any project going. So as a result, Agrium, like everybody else, has to compromise," he said.
"It's too bad, because it was bound to be a good project for the area."
Salman Partners analyst Raymond Goldie said even if Agrium has to take a writedown on its Egypt project, its shares will still be valued at around C$135.
That would be significantly higher than Tuesday's close of C$82.78, down about eight per cent, or $6.99, on the TSX.
Goldie said he does not expect Agrium to rush into any new acquisitions in the Middle East.
"I don't think you'll see them desperately doing a deal because they want to replace this. I think they will consider any alternatives in the usual patient matter," he said.
The Egyptian government ordered a construction halt to the plant in April, after local residents voiced their opposition to the fertilizer plant because of its potential health, safety and environmental risks. They also said the plant, at the port of Damietta, would pollute the area a few kilometres from a popular Nile Delta beach resort.
But a few days before legislators recommended moving or buying out the project, an assembly committee determined EAgrium met all health and environmental standards.
Agrium does not have any other expansion plans for the Middle East region, but there are still plenty of other opportunities for Agrium to grow its business, Downey said.
"We've got other expansion plans in potash and we've just expanded our retail pretty considerably," he said.
Earlier this year, Agrium closed its US$2.65-billion takeover of UAP Holdings Inc., making it the largest distributor of seeds, fertilizer and other farm inputs in North America.
Bell Aliant Holdings LP reports Q2 sales of $823 million, up 2.4 per cent
Revenue at Bell Aliant Holdings LP increased to $823 million in the second quarter, up 2.4 per cent from $804 million a year earlier, Bell Aliant Regional Communications Income Fund (TSX: BA-UN.TO) reported Tuesday.
Bell Aliant, which operates phone and Internet services throughout parts of Ontario, Quebec and Atlantic Canada, said operating revenue increased by $19 million in the quarter, with strong growth in its information technology and Internet revenues.
Internet services revenue grew by $9.4 million, while information technology services revenue increased by $23.1 million.
Those gains were offset by a decline in local service and long distance revenue, which fell by 2.4 per cent and 4.8 per cent respectively.
Capital expenditures in the quarter were $127.5 million, down from $143.4 million from the same quarter in 2007.
Distributions to unitholders were $92.1 million, or 7.25 cents per unit for the quarter ended June 30.
The earnings come as the Atlantic regional unit of Bell Canada (TSX: BCE.TO) announced deals to sell non-core businesses as the telecom operator prepares to become a private company.
In separate announcements Tuesday, GFI Solutions Group Inc. bought Bell Business Solutions Inc., a business IT services subsidiary of Bell Canada, for an undisclosed price.
And, Pilot trainer CAE Inc. (TSX: CAE.TO) announced a deal to buy the defence, security and aerospace unit of Bell Aliant for C$26.1 million.
Bell Aliant carried out a strategic review of its defence, security and aerospace business and decided it can grow only under the ownership of a company with access to large-scale, multiyear and international projects.
Bell parent BCE is being privatized under a $52 billion cash and debt deal led by the Ontario Teachers Pension Plan board, a transaction slated to close by mid-December.
In trading on the TSX, Bell Aliant units rose 35 cents to close at $26.90 while BCE shares rose 19 cents to close at $39.16.
Bell Aliant, which operates phone and Internet services throughout parts of Ontario, Quebec and Atlantic Canada, said operating revenue increased by $19 million in the quarter, with strong growth in its information technology and Internet revenues.
Internet services revenue grew by $9.4 million, while information technology services revenue increased by $23.1 million.
Those gains were offset by a decline in local service and long distance revenue, which fell by 2.4 per cent and 4.8 per cent respectively.
Capital expenditures in the quarter were $127.5 million, down from $143.4 million from the same quarter in 2007.
Distributions to unitholders were $92.1 million, or 7.25 cents per unit for the quarter ended June 30.
The earnings come as the Atlantic regional unit of Bell Canada (TSX: BCE.TO) announced deals to sell non-core businesses as the telecom operator prepares to become a private company.
In separate announcements Tuesday, GFI Solutions Group Inc. bought Bell Business Solutions Inc., a business IT services subsidiary of Bell Canada, for an undisclosed price.
And, Pilot trainer CAE Inc. (TSX: CAE.TO) announced a deal to buy the defence, security and aerospace unit of Bell Aliant for C$26.1 million.
Bell Aliant carried out a strategic review of its defence, security and aerospace business and decided it can grow only under the ownership of a company with access to large-scale, multiyear and international projects.
Bell parent BCE is being privatized under a $52 billion cash and debt deal led by the Ontario Teachers Pension Plan board, a transaction slated to close by mid-December.
In trading on the TSX, Bell Aliant units rose 35 cents to close at $26.90 while BCE shares rose 19 cents to close at $39.16.
Plummeting oil takes steam out of loonie, dollar trades around 96 cents US
A sharp drop in oil prices has clipped the loonie's wings, dropping the Canadian dollar down to last September's values.
The Canadian currency ended the trading day at 95.98 cents U.S., down 1.38 cents US, after falling as low as 95.68 earlier in the day. The slide came was as commodity prices weakened generally and the U.S. dollar strengthened.
Oil fell as low as US$118 a barrel, off 19 per cent from the high of US$147 it touched in mid-July. The drop came amid growing concerns about an economic slowdown in the United States and a belief that high prices have curbed consumer demand.
The U.S. Federal Reserve decision to hold interest rates steady may also have helped undercut the loonie.
But the key influence is the slip in commodity prices, analysts said.
"It think it's largely a commodity price story especially as we've seen oil prices start to look like they are on a downward trend," said James Marple, an economist with TD Bank.
Paul Ferley, an analyst with the Royal Bank, said some of the earlier strength in the loonie was on the back of the strength in commodity prices.
"I think you're seeing some of that strength reverse . . . as a result you're seeing some weakening in commodity-based currencies including the Canada," Ferley said.
There are other factors as well.
"Generally, we're in an environment where the U.S. dollar seems to be on a bit of an upswing and that's adding further fuel to this depreciating trend for the Canada," said Ferley.
Marple said recent economic data suggesting the weaker U.S. economy is undercutting Canadian growth also put downward pressure on the loonie.
"Just last week, we had the monthly GDP contract again, so that made it the third of four months that we've seen the Canadian economy sort of shrink," he said.
"That's shown that the weakness in the U.S. economy is having a real impact on Canada's growth prospects and that's a also a reason that we started to see a bit of underperformance in the dollar."
Statistics Canada has said the economy rode a see-saw in recent months. Real GDP fell 0.1 per cent in May after rising 0.4 per cent in April.
The drop was reflected in lower numbers for the energy, finance, forestry, construction and wholesale trade sectors. Manufacturing, retail trade and the public sector advanced.
The drop in the Canadian dollar may be good news for the country's manufacturers, who have been hit with a triple whammy of a high loonie, rising energy and materials costs and a weakened American economy.
"Over the long term, it will make manufacturers a little more competitive," said Marple. "Unfortunately, they're also dealing with a U.S. economy that's looking very much to be in recession."
Jay Myer, president of Canadian Manufacturers and Exporters, said a downward blip won't be much help.
"If it stays down, it probably will relieve some of the pressure on manufacturers and exporters," he said.
"The big question mark is, is this a bet that the U.S. economy is going to rally? In which case that is extremely good news for Canadian manufacturers."
The Canadian currency ended the trading day at 95.98 cents U.S., down 1.38 cents US, after falling as low as 95.68 earlier in the day. The slide came was as commodity prices weakened generally and the U.S. dollar strengthened.
Oil fell as low as US$118 a barrel, off 19 per cent from the high of US$147 it touched in mid-July. The drop came amid growing concerns about an economic slowdown in the United States and a belief that high prices have curbed consumer demand.
The U.S. Federal Reserve decision to hold interest rates steady may also have helped undercut the loonie.
But the key influence is the slip in commodity prices, analysts said.
"It think it's largely a commodity price story especially as we've seen oil prices start to look like they are on a downward trend," said James Marple, an economist with TD Bank.
Paul Ferley, an analyst with the Royal Bank, said some of the earlier strength in the loonie was on the back of the strength in commodity prices.
"I think you're seeing some of that strength reverse . . . as a result you're seeing some weakening in commodity-based currencies including the Canada," Ferley said.
There are other factors as well.
"Generally, we're in an environment where the U.S. dollar seems to be on a bit of an upswing and that's adding further fuel to this depreciating trend for the Canada," said Ferley.
Marple said recent economic data suggesting the weaker U.S. economy is undercutting Canadian growth also put downward pressure on the loonie.
"Just last week, we had the monthly GDP contract again, so that made it the third of four months that we've seen the Canadian economy sort of shrink," he said.
"That's shown that the weakness in the U.S. economy is having a real impact on Canada's growth prospects and that's a also a reason that we started to see a bit of underperformance in the dollar."
Statistics Canada has said the economy rode a see-saw in recent months. Real GDP fell 0.1 per cent in May after rising 0.4 per cent in April.
The drop was reflected in lower numbers for the energy, finance, forestry, construction and wholesale trade sectors. Manufacturing, retail trade and the public sector advanced.
The drop in the Canadian dollar may be good news for the country's manufacturers, who have been hit with a triple whammy of a high loonie, rising energy and materials costs and a weakened American economy.
"Over the long term, it will make manufacturers a little more competitive," said Marple. "Unfortunately, they're also dealing with a U.S. economy that's looking very much to be in recession."
Jay Myer, president of Canadian Manufacturers and Exporters, said a downward blip won't be much help.
"If it stays down, it probably will relieve some of the pressure on manufacturers and exporters," he said.
"The big question mark is, is this a bet that the U.S. economy is going to rally? In which case that is extremely good news for Canadian manufacturers."
Blue Nile 2Q profit beats Wall Street estimates
Blue Nile Inc. late Tuesday reported second-quarter earnings that beat Wall Street's expections but still came 15 percent in below year-ago levels.
The online diamond and jewelry retailer posted net income of $3.2 million, or 20 cents per share, for the quarter ended June 29. That's down from $3.8 million, or 23 cents per share, in the second quarter of last year.
Sales rose 2.2 percent to $73.7 million in the quarter from $72.1 million a year ago.
Wall Street on average had expected Blue Nile to report earnings of 17 cents per share on $74.4 million in revenue for the latest quarter, according to a survey of analysts by Thomson Financial.
The Seattle company said international sales grew 179 percent to $8.1 million in the second quarter from $2.9 million a year earlier. Blue Nile said it now ships to nearly 30 countries, up from just four countries a year ago.
Looking ahead, Blue Nile said it expects to report earnings in the range of 15 cents to 17 cents per share for the third quarter and per-share earnings that are roughly even with 2007 levels for the full year. The company projects net sales growth in the mid-single-digit-percentage range for the year.
Blue Nile earned $3 million, or 18 cents per share, on $67.4 million in revenue in the third quarter of 2007. For the full year, the company earned $17.5 million, or $1.04 per share, on revenue of $319.3 million.
Blue Nile's shares rose 74 cents, or 1.9 percent, to $39.52 Tuesday.
The online diamond and jewelry retailer posted net income of $3.2 million, or 20 cents per share, for the quarter ended June 29. That's down from $3.8 million, or 23 cents per share, in the second quarter of last year.
Sales rose 2.2 percent to $73.7 million in the quarter from $72.1 million a year ago.
Wall Street on average had expected Blue Nile to report earnings of 17 cents per share on $74.4 million in revenue for the latest quarter, according to a survey of analysts by Thomson Financial.
The Seattle company said international sales grew 179 percent to $8.1 million in the second quarter from $2.9 million a year earlier. Blue Nile said it now ships to nearly 30 countries, up from just four countries a year ago.
Looking ahead, Blue Nile said it expects to report earnings in the range of 15 cents to 17 cents per share for the third quarter and per-share earnings that are roughly even with 2007 levels for the full year. The company projects net sales growth in the mid-single-digit-percentage range for the year.
Blue Nile earned $3 million, or 18 cents per share, on $67.4 million in revenue in the third quarter of 2007. For the full year, the company earned $17.5 million, or $1.04 per share, on revenue of $319.3 million.
Blue Nile's shares rose 74 cents, or 1.9 percent, to $39.52 Tuesday.
Asciano boss says he's open to fair takeover offer
Australian ports and rail operator Asciano Group's chief executive said Wednesday his board is open to a fair takeover offer after earlier this week rejecting an unsolicited 2.89 billion Australian dollar ($2.69 billion) bid.
Asciano directors on Monday rejected the bid by U.S. private equity group TPG Capital and independent investment fund Global Infrastructure Partners to buy all the company for 4.40 Australian dollars ($4.10) cash a share. There was also a share-exchange alternative.
Asciano said the offer undervalued the business.
"The board will keep an open mind, of course, for an offer of the whole company that reflects fair value," CEO Mark Rowsthorn said Wednesday during a briefing on the company's annual results.
"To gain a recommendation from the board and the right to conduct due diligence, any proposal must recognize the value of our unique set of assets and must contain a sufficient control premium, and this proposal did not reach the mark," he said.
Asciano, which was spun out of Australian transport giant Toll Holdings in June last year, on Wednesday reported a net loss of $182 million Australian dollars ($167 million) for the fiscal year that ended June 30.
Underlying earnings for the year were $653 million Australian dollars ($599 million), in line with the company's guidance.
Asciano directors on Monday rejected the bid by U.S. private equity group TPG Capital and independent investment fund Global Infrastructure Partners to buy all the company for 4.40 Australian dollars ($4.10) cash a share. There was also a share-exchange alternative.
Asciano said the offer undervalued the business.
"The board will keep an open mind, of course, for an offer of the whole company that reflects fair value," CEO Mark Rowsthorn said Wednesday during a briefing on the company's annual results.
"To gain a recommendation from the board and the right to conduct due diligence, any proposal must recognize the value of our unique set of assets and must contain a sufficient control premium, and this proposal did not reach the mark," he said.
Asciano, which was spun out of Australian transport giant Toll Holdings in June last year, on Wednesday reported a net loss of $182 million Australian dollars ($167 million) for the fiscal year that ended June 30.
Underlying earnings for the year were $653 million Australian dollars ($599 million), in line with the company's guidance.
Oil drops toward $118 ahead of inventory data
Oil prices fell toward $118 a barrel Wednesday in Asia as investors awaited weekly oil and gasoline inventory data for further evidence of declining crude demand in the U.S.
Light, sweet crude for September delivery fell 94 cents to $118.23 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract dropped $2.24 overnight to settle at $119.17 a barrel.
Oil will probably drop further unless the U.S. Energy Department's Energy Information Administration says in its weekly oil inventory report that gasoline stocks fell significantly, said Tetsu Emori, who manages a commodity markets fund at ASTMAX Futures Co. in Tokyo.
"If we don't get a strong number, oil prices will likely fall further," he said.
The EIA report on U.S. oil stocks for the week ended Aug. 1 was due out later in the day. The petroleum supply report was expected to show that gasoline stocks fell 1.4 million barrels, according to the average of analysts' estimates in a survey by energy research firm Platts.
The Platts survey also showed that analysts projected crude oil inventories to have fallen 1.2 million barrels during last week.
In London, September Brent crude was down 70 cents at $117 a barrel on the ICE Futures exchange.
The U.S. Federal Reserve in an economic assessment statement Tuesday said that along with tight credit and the housing contraction, "elevated energy prices are likely to weigh on economic growth over the next few quarters."
The Fed statement accompanied its decision to keep its key interest rate unchanged at 2 percent. Slower economic growth in the world's largest economy and energy consumer could lead to a significant drop in demand for oil.
"People are looking at the weaker demand," Tetsu said. "I expect prices to fall to between $100 and $110 by the end of the year."
Investors again shrugged off tension over Iran's nuclear program. Iran's response to an incentives package aimed at defusing a dispute over its enrichment of uranium is unacceptable, U.S. officials said Tuesday. Prospects of new sanctions against the country are now more likely.
Nymex front-month crude futures have fallen about $29, or almost 20 percent, since reaching a record high of $147.27 on July 11.
In other Nymex trading, heating oil futures fell 0.7 cents to $3.275 a gallon (3.8 liters) while gasoline prices dropped 1.39 cents to $2.9425 a gallon. Natural gas futures decreased 5.4 cents to $8.672 per 1,000 cubic feet.
Light, sweet crude for September delivery fell 94 cents to $118.23 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract dropped $2.24 overnight to settle at $119.17 a barrel.
Oil will probably drop further unless the U.S. Energy Department's Energy Information Administration says in its weekly oil inventory report that gasoline stocks fell significantly, said Tetsu Emori, who manages a commodity markets fund at ASTMAX Futures Co. in Tokyo.
"If we don't get a strong number, oil prices will likely fall further," he said.
The EIA report on U.S. oil stocks for the week ended Aug. 1 was due out later in the day. The petroleum supply report was expected to show that gasoline stocks fell 1.4 million barrels, according to the average of analysts' estimates in a survey by energy research firm Platts.
The Platts survey also showed that analysts projected crude oil inventories to have fallen 1.2 million barrels during last week.
In London, September Brent crude was down 70 cents at $117 a barrel on the ICE Futures exchange.
The U.S. Federal Reserve in an economic assessment statement Tuesday said that along with tight credit and the housing contraction, "elevated energy prices are likely to weigh on economic growth over the next few quarters."
The Fed statement accompanied its decision to keep its key interest rate unchanged at 2 percent. Slower economic growth in the world's largest economy and energy consumer could lead to a significant drop in demand for oil.
"People are looking at the weaker demand," Tetsu said. "I expect prices to fall to between $100 and $110 by the end of the year."
Investors again shrugged off tension over Iran's nuclear program. Iran's response to an incentives package aimed at defusing a dispute over its enrichment of uranium is unacceptable, U.S. officials said Tuesday. Prospects of new sanctions against the country are now more likely.
Nymex front-month crude futures have fallen about $29, or almost 20 percent, since reaching a record high of $147.27 on July 11.
In other Nymex trading, heating oil futures fell 0.7 cents to $3.275 a gallon (3.8 liters) while gasoline prices dropped 1.39 cents to $2.9425 a gallon. Natural gas futures decreased 5.4 cents to $8.672 per 1,000 cubic feet.
Fed leaves rates alone for second straight meeting
For a second straight meeting, the Federal Reserve has decided to remain on the sidelines and leave interest rates alone. In the opinion of many economists, that stance may prevail not only for the rest of this year but well into 2009.
The thinking is that the Fed doesn't want to cut interest rates further because of concerns about inflation. However, at the same time, the majority of Fed officials don't want to start raising interest rates because the economy is still hobbled by mounting job losses, a prolonged housing slump and a severe credit crisis.
The Fed cited both worries about inflation and weak economic activity in the statement it released after Tuesday's meeting explaining its decision to leave its target for the federal funds rate, the interest that banks charge each other, unchanged at 2 percent.
The Fed may not have moved interest rates on Tuesday but it certainly moved Wall Street. Stocks, already soaring, extended their advance, with the Dow Jones industrial average finishing the day up 331.42 points, or 2.87 percent. It was the biggest one-day gain for the Dow since April 1.
Investors were cheered not only by relief that the central bank did not signal that rate hikes were imminent but also by a continued drop in crude oil prices, which fell as low as $118 a barrel during the day and are now down $28 from levels seen on July 11.
The lower oil prices not only help motorists when they fill up -- gasoline has fallen as well in recent weeks -- but also help the Fed by relieving inflation pressures.
In a brief statement explaining Tuesday's decision, Fed Chairman Ben Bernanke and his colleagues said the central bank is still concerned about the weak economy and the dangers posed by inflation.
"Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the committee," the Fed said, splitting the difference between the two opposing forces battering the economy.
Analysts said the bottom line message from the statement is that the Fed doesn't plan to make any changes in rates any time soon.
"Unless something really weird happens, I don't see the Fed moving before the November election," said David Wyss, chief economist at Standard & Poor's in New York.
Many economists believe that the overall economy, as measured by the gross domestic product, will post moderate growth of around 2 percent in the current July-September quarter, helped by consumers continuing to spend the rebate checks sent to 130 million households. But activity is expected to plunge significantly in the final three months of this year and early in 2009 as the impact of the rebate checks wears off.
Wyss said he is looking for GDP to actually shrink in both the fourth quarter and the first quarter of next year, fulfilling the standard definition of a recession as back-to-back quarters of negative GDP.
However, Wyss looks for growth to start rebounding next spring as the problems related to housing begin to lessen. It is then that he believes the Fed will start raising interest rates as it turns its attention to making sure a rebounding economy doesn't ignite inflation.
The November presidential election is another reason many economists believe the Fed will prefer to keep rates unchanged at its next two meetings on Sept. 16 and Oct. 28-29.
"The Fed doesn't like to be in the spotlight during the heat of a presidential campaign," said David Jones, chief economist at DMJ Advisors. "I think they will prefer waiting now until they can get a better view of how the economy is unfolding and see if financial markets become less fragile."
The thinking is that the Fed doesn't want to cut interest rates further because of concerns about inflation. However, at the same time, the majority of Fed officials don't want to start raising interest rates because the economy is still hobbled by mounting job losses, a prolonged housing slump and a severe credit crisis.
The Fed cited both worries about inflation and weak economic activity in the statement it released after Tuesday's meeting explaining its decision to leave its target for the federal funds rate, the interest that banks charge each other, unchanged at 2 percent.
The Fed may not have moved interest rates on Tuesday but it certainly moved Wall Street. Stocks, already soaring, extended their advance, with the Dow Jones industrial average finishing the day up 331.42 points, or 2.87 percent. It was the biggest one-day gain for the Dow since April 1.
Investors were cheered not only by relief that the central bank did not signal that rate hikes were imminent but also by a continued drop in crude oil prices, which fell as low as $118 a barrel during the day and are now down $28 from levels seen on July 11.
The lower oil prices not only help motorists when they fill up -- gasoline has fallen as well in recent weeks -- but also help the Fed by relieving inflation pressures.
In a brief statement explaining Tuesday's decision, Fed Chairman Ben Bernanke and his colleagues said the central bank is still concerned about the weak economy and the dangers posed by inflation.
"Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the committee," the Fed said, splitting the difference between the two opposing forces battering the economy.
Analysts said the bottom line message from the statement is that the Fed doesn't plan to make any changes in rates any time soon.
"Unless something really weird happens, I don't see the Fed moving before the November election," said David Wyss, chief economist at Standard & Poor's in New York.
Many economists believe that the overall economy, as measured by the gross domestic product, will post moderate growth of around 2 percent in the current July-September quarter, helped by consumers continuing to spend the rebate checks sent to 130 million households. But activity is expected to plunge significantly in the final three months of this year and early in 2009 as the impact of the rebate checks wears off.
Wyss said he is looking for GDP to actually shrink in both the fourth quarter and the first quarter of next year, fulfilling the standard definition of a recession as back-to-back quarters of negative GDP.
However, Wyss looks for growth to start rebounding next spring as the problems related to housing begin to lessen. It is then that he believes the Fed will start raising interest rates as it turns its attention to making sure a rebounding economy doesn't ignite inflation.
The November presidential election is another reason many economists believe the Fed will prefer to keep rates unchanged at its next two meetings on Sept. 16 and Oct. 28-29.
"The Fed doesn't like to be in the spotlight during the heat of a presidential campaign," said David Jones, chief economist at DMJ Advisors. "I think they will prefer waiting now until they can get a better view of how the economy is unfolding and see if financial markets become less fragile."
GLOBAL MARKETS-Oil extends slump; Asia stocks at 3-wk low
Oil and metals prices skidded on Tuesday toward multi-month lows, denting shares of companies in the resources sector and sending Asian stocks to their lowest in three weeks amid deepening fears of a weakening global economy.
Oil prices fell more than $1 to near Monday's three-month low below $120 a barrel in a sharp retreat from a record above $147 touched in mid-July, on signs of rising OPEC output at a time of declining world demand.
Not even a storm in the Gulf of Mexico prevented the slide in oil, which comes as a mixed blessing for Asia. Weaker oil prices provide relief for countries grappling with double digit inflation, but also confirm suspicions of slowing global demand -- a bad omen for the export-reliant region.
The dollar got a boost from cheaper oil, though caution remained ahead of the Federal Reserve's meeting later on Tuesday. The Fed is expected to leave U.S. interest rates unchanged, partly due to easing energy prices.
'At the moment, people are taking the view that the glass is half-empty, rather than half-full,' said Greg Goodsell, equity strategist at ABN AMRO (Amsterdam: ABAGB.AS - news) in Sydney. 'Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth.'
U.S. crude futures <CLc1> were down $1.13 at $120.28 at 0250 GMT, after falling on Monday to as low as $119.50, the lowest level since early May.
OPEC oil supply rose for a third consecutive month in July due to higher output from the world's top exporter Saudi Arabia and smaller increases from other members, a Reuters survey showed on Monday.
The falls in crude prices came even as Tropical Storm Edouard moved across the Gulf of Mexico, with a 1-in-5 chance of hitting the Texas coast as a hurricane, according to U.S. forecasters.
Metals also slumped, with spot platinum <XPT=> dropping to its weakest in more than six months on fears of falling demand from struggling global auto makers. Spot prices fell as low as $1,530 compared to $1,551/$1,571 late in New York on Monday.
Gold <XAU=> edged down about $2 to $893.50 an ounce.
COMMODITY SHARES SLUMP
The falling prices of oil and metals dented commodity shares in Asia, with Australian resource firm BHP Billiton Ltd <BHP.AX> losing almost 6 percent and Japan's oil and gas developer Inpex Holdings <1605.T> shedding about 4 percent
Asian stock indices overall were broadly weaker as investors fret about a slowdown in global economic growth. The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> lost 1.5 percent and hit its lowest level in about three weeks.
The resource-heavy Australian index <.AXJO> slumped 2 percent, while the Hong Kong index <.HSI> lost 1.8 percent and shares in Taiwan <.TWII> dropped 2.1 percent.
Tokyo's Nikkei (news) average <.N225> swung between gains and losses, and was last up about 0.3 percent. Falls in commodity-related shares were offset by gains in exporters such as Honda Motor (Paris: JP3854600008 - news) <7267.T> that benefit from a weaker Japanese yen.
The dollar was range-bound at around 108.20 yen <JPY=>, near a six-week high of 108.39 yen hit last week. The euro, however, dipped to about $1.5525 <EUR=>, nearing last week's six-week low of around $1.5510.
Speculation that the Reserve Bank of Australia, which meets on Tuesday, could highlight risks to the economy and pave the way for monetary easing knocked the Australian dollar <AUD=> to nearly four-month lows against the U.S. dollar.
The Australian central bank's interest rate decision is due at 0430 GMT.
Oil prices fell more than $1 to near Monday's three-month low below $120 a barrel in a sharp retreat from a record above $147 touched in mid-July, on signs of rising OPEC output at a time of declining world demand.
Not even a storm in the Gulf of Mexico prevented the slide in oil, which comes as a mixed blessing for Asia. Weaker oil prices provide relief for countries grappling with double digit inflation, but also confirm suspicions of slowing global demand -- a bad omen for the export-reliant region.
The dollar got a boost from cheaper oil, though caution remained ahead of the Federal Reserve's meeting later on Tuesday. The Fed is expected to leave U.S. interest rates unchanged, partly due to easing energy prices.
'At the moment, people are taking the view that the glass is half-empty, rather than half-full,' said Greg Goodsell, equity strategist at ABN AMRO (Amsterdam: ABAGB.AS - news) in Sydney. 'Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth.'
U.S. crude futures <CLc1> were down $1.13 at $120.28 at 0250 GMT, after falling on Monday to as low as $119.50, the lowest level since early May.
OPEC oil supply rose for a third consecutive month in July due to higher output from the world's top exporter Saudi Arabia and smaller increases from other members, a Reuters survey showed on Monday.
The falls in crude prices came even as Tropical Storm Edouard moved across the Gulf of Mexico, with a 1-in-5 chance of hitting the Texas coast as a hurricane, according to U.S. forecasters.
Metals also slumped, with spot platinum <XPT=> dropping to its weakest in more than six months on fears of falling demand from struggling global auto makers. Spot prices fell as low as $1,530 compared to $1,551/$1,571 late in New York on Monday.
Gold <XAU=> edged down about $2 to $893.50 an ounce.
COMMODITY SHARES SLUMP
The falling prices of oil and metals dented commodity shares in Asia, with Australian resource firm BHP Billiton Ltd <BHP.AX> losing almost 6 percent and Japan's oil and gas developer Inpex Holdings <1605.T> shedding about 4 percent
Asian stock indices overall were broadly weaker as investors fret about a slowdown in global economic growth. The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> lost 1.5 percent and hit its lowest level in about three weeks.
The resource-heavy Australian index <.AXJO> slumped 2 percent, while the Hong Kong index <.HSI> lost 1.8 percent and shares in Taiwan <.TWII> dropped 2.1 percent.
Tokyo's Nikkei (news) average <.N225> swung between gains and losses, and was last up about 0.3 percent. Falls in commodity-related shares were offset by gains in exporters such as Honda Motor (Paris: JP3854600008 - news) <7267.T> that benefit from a weaker Japanese yen.
The dollar was range-bound at around 108.20 yen <JPY=>, near a six-week high of 108.39 yen hit last week. The euro, however, dipped to about $1.5525 <EUR=>, nearing last week's six-week low of around $1.5510.
Speculation that the Reserve Bank of Australia, which meets on Tuesday, could highlight risks to the economy and pave the way for monetary easing knocked the Australian dollar <AUD=> to nearly four-month lows against the U.S. dollar.
The Australian central bank's interest rate decision is due at 0430 GMT.
Oil prices fall in Asian trading on demand fears
Oil prices fell in Asian trading as fears about slowing US demand outweighed the increasing likelihood of heightened tensions over Iran's controversial nuclear programme, dealers said.
In morning trade, New York's main contract, light sweet crude for September delivery fell 1.14 dollars to 120.27 dollars a barrel from 121.41 dollars at the close of floor trading in the US.
London's Brent North Sea crude for September delivery dropped 1.13 dollars to 119.55 dollars.
Oil prices fell below 120 dollars in New York and London Monday.
Tropical Storm Edouard, expected to make landfall Tuesday, will likely only provide limited boost to prices as investors are more concerned with American oil demand, analysts said.
'US demand won't recover soon. Tropical Storm Edouard should bring a short term support, but demand outlook weighs on prices,' commodity analysts from Societe Generale (Paris: FR0000130809 - news) said in a report.
Phil Flynn, an analyst from Alaron Trading, agreed demand concerns were the biggest factor dragging down market sentiment.
'Slowing demand and the hope for more supply is weighing on the market even as the geopolitics and the weather is getting wild,' Flynn said.
Tensions over Iran's nuclear programme surged after it missed a deadline over the weekend to respond to an international package of incentives aimed at persuading Tehran to freeze uranium enrichment.
The US State Department said it and the five other powers holding nuclear talks with Iran had threatened to pursue new punitive action against Tehran.
In morning trade, New York's main contract, light sweet crude for September delivery fell 1.14 dollars to 120.27 dollars a barrel from 121.41 dollars at the close of floor trading in the US.
London's Brent North Sea crude for September delivery dropped 1.13 dollars to 119.55 dollars.
Oil prices fell below 120 dollars in New York and London Monday.
Tropical Storm Edouard, expected to make landfall Tuesday, will likely only provide limited boost to prices as investors are more concerned with American oil demand, analysts said.
'US demand won't recover soon. Tropical Storm Edouard should bring a short term support, but demand outlook weighs on prices,' commodity analysts from Societe Generale (Paris: FR0000130809 - news) said in a report.
Phil Flynn, an analyst from Alaron Trading, agreed demand concerns were the biggest factor dragging down market sentiment.
'Slowing demand and the hope for more supply is weighing on the market even as the geopolitics and the weather is getting wild,' Flynn said.
Tensions over Iran's nuclear programme surged after it missed a deadline over the weekend to respond to an international package of incentives aimed at persuading Tehran to freeze uranium enrichment.
The US State Department said it and the five other powers holding nuclear talks with Iran had threatened to pursue new punitive action against Tehran.
GLOBAL MARKETS-Asian stocks drop as oil slide raises fears
Asian stocks fell to their lowest level in more than a year on Tuesday as shares in resource firms such as BHP Billiton (LSE: BLT.L - news) were pummeled by a slump in oil and metals prices to multi-month lows.
Oil hovered just above a three-month low on signs of declining U.S. fuel demand, helping to lift the dollar to a seven-week high against a basket of major currencies.
But the steep decline in crude prices to $120 from a record high above $147 in mid-July is worrying some investors in Asia who had at first cheered the benefits in a region where countries are grappling with double-digit inflation.
Instead, the commodity declines are now reinforcing fears of a slowing global economy, one year after a downturn in the U.S. subprime mortgage market helped spark a financial crisis still reverberating around the world.
European shares were set for a mixed open, as the focus shifted towards a Federal Reserve meeting later on Tuesday. The U.S. central bank is expected to leave U.S. interest rates unchanged, partly due to easing energy prices.
'At the moment, people are taking the view that the glass is half-empty, rather than half-full,' said Greg Goodsell, equity strategist at ABN AMRO (Amsterdam: ABAGB.AS - news) in Sydney.
'Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth.'
The declines in resource firms, combined with the concerns over the global economy, brought the MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> at one point to its lowest level since March 2007, before it pared some of the losses.
The index was down 1.8 percent as of 0600 GMT.
U.S. crude futures <CLc1> were down $1.23 at $120.18 at 0600 GMT. A Reuters survey on Monday showed OPEC oil supply rose for a third consecutive month in July due to higher output from the world's top exporter Saudi Arabia and smaller increases from other members.
The falls in crude prices came even as Tropical Storm Edouard churns across the Gulf of Mexico, with forecasters expecting it will likely hit the Texas coast, a major U.S. oil and gas centre, with near-hurricane strength.
But energy companies have so far reported few production slowdowns, easing some of the concerns.
Metal prices also slumped. Spot platinum <XPT=> dropped to as low as $1,530.00 an ounce, its weakest in more than six months, from $1,551/$1,571 late in New York on Monday, on fears of falling demand from struggling global auto makers.
Gold <XAU=> edged down about $4 to $890.95/892.00 an ounce.
COMMODITY SHARES SLUMP
The falling prices of oil and metals dented commodity shares in Asia, with Australian resource firm BHP Billiton Ltd <BHP.AX> losing 6 percent and Hong Kong-listed oil offshore producer CNOOC <0883.HK> down 5.4 percent.
'Global slowdown worries have prompted an unwinding in the commodities market, which in turn has spurred a sell-off in commodity-linked stocks,' said Steven Leung, director with UOB Kay Hain in Hong Kong.
'If the U.S. dollar continues to advance we will see commodity stocks taking further hits in the short term.'
The resource-heavy Australian index <.AXJO> fell 1.4 percent, while the Hong Kong <.HSI> and Taiwan <.TWII> indexes dropped more than 2 percent each.
Tokyo's Nikkei (news) average <.N225> swung between gains and losses, to end down 0.1 percent. Falls in commodity-related shares were offset by gains in exporters such as Honda Motor (Paris: JP3854600008 - news) <7267.T> which benefit from a weaker Japanese yen.
The dollar benefitted as investors sold other major currencies against the U.S. unit given expectations that other economies are also slowing.
The dollar index, which measures the U.S. currency's performance against a basket of six currencies, rose 0.3 percent to 73.685 <.DXY> and reached as high as 73.699, the highest since mid-June.
The Australian dollar extended its slide, striking a four-month low of $0.9234 against the U.S. currency, after the central bank on Tuesday left the door open for the first cut in interest rates in seven years, that some investors believe could come as soon as September.
Oil hovered just above a three-month low on signs of declining U.S. fuel demand, helping to lift the dollar to a seven-week high against a basket of major currencies.
But the steep decline in crude prices to $120 from a record high above $147 in mid-July is worrying some investors in Asia who had at first cheered the benefits in a region where countries are grappling with double-digit inflation.
Instead, the commodity declines are now reinforcing fears of a slowing global economy, one year after a downturn in the U.S. subprime mortgage market helped spark a financial crisis still reverberating around the world.
European shares were set for a mixed open, as the focus shifted towards a Federal Reserve meeting later on Tuesday. The U.S. central bank is expected to leave U.S. interest rates unchanged, partly due to easing energy prices.
'At the moment, people are taking the view that the glass is half-empty, rather than half-full,' said Greg Goodsell, equity strategist at ABN AMRO (Amsterdam: ABAGB.AS - news) in Sydney.
'Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth.'
The declines in resource firms, combined with the concerns over the global economy, brought the MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> at one point to its lowest level since March 2007, before it pared some of the losses.
The index was down 1.8 percent as of 0600 GMT.
U.S. crude futures <CLc1> were down $1.23 at $120.18 at 0600 GMT. A Reuters survey on Monday showed OPEC oil supply rose for a third consecutive month in July due to higher output from the world's top exporter Saudi Arabia and smaller increases from other members.
The falls in crude prices came even as Tropical Storm Edouard churns across the Gulf of Mexico, with forecasters expecting it will likely hit the Texas coast, a major U.S. oil and gas centre, with near-hurricane strength.
But energy companies have so far reported few production slowdowns, easing some of the concerns.
Metal prices also slumped. Spot platinum <XPT=> dropped to as low as $1,530.00 an ounce, its weakest in more than six months, from $1,551/$1,571 late in New York on Monday, on fears of falling demand from struggling global auto makers.
Gold <XAU=> edged down about $4 to $890.95/892.00 an ounce.
COMMODITY SHARES SLUMP
The falling prices of oil and metals dented commodity shares in Asia, with Australian resource firm BHP Billiton Ltd <BHP.AX> losing 6 percent and Hong Kong-listed oil offshore producer CNOOC <0883.HK> down 5.4 percent.
'Global slowdown worries have prompted an unwinding in the commodities market, which in turn has spurred a sell-off in commodity-linked stocks,' said Steven Leung, director with UOB Kay Hain in Hong Kong.
'If the U.S. dollar continues to advance we will see commodity stocks taking further hits in the short term.'
The resource-heavy Australian index <.AXJO> fell 1.4 percent, while the Hong Kong <.HSI> and Taiwan <.TWII> indexes dropped more than 2 percent each.
Tokyo's Nikkei (news) average <.N225> swung between gains and losses, to end down 0.1 percent. Falls in commodity-related shares were offset by gains in exporters such as Honda Motor (Paris: JP3854600008 - news) <7267.T> which benefit from a weaker Japanese yen.
The dollar benefitted as investors sold other major currencies against the U.S. unit given expectations that other economies are also slowing.
The dollar index, which measures the U.S. currency's performance against a basket of six currencies, rose 0.3 percent to 73.685 <.DXY> and reached as high as 73.699, the highest since mid-June.
The Australian dollar extended its slide, striking a four-month low of $0.9234 against the U.S. currency, after the central bank on Tuesday left the door open for the first cut in interest rates in seven years, that some investors believe could come as soon as September.
Asian indices led lower by energy stocks
Asia-Pacific (002790.KS - news) equities were mostly lower on Tuesday after energy prices dropped overnight, sending resource heavy markets such as Australia down to its lowest in more than two and a half years.
Crude oil dropped below $120 per barrel for the first time in three months over concern that the high price of the energy would hurt demand, following negative consumer spending data out of the US. Nymex light sweet crude was trading at $120.01 a barrel for September delivery by late afternoon in Singapore. Copper and platinum hit six-month lows.
The MSCI Asia-Pacific Index had lost 1 per cent to 127.29 by late afternoon in Tokyo.
The Nikkei 225 average closed 0.1 per cent lower at 12,914.66 and the broader Topix index ended 0 per cent lower at 1,247.71. Earlier gains for exporters from a weaker yen overnight were scaled back as the Japanese currency appreciated from around Y108.20 to the dollar to Y107.81 in the afternoon session.
Sony (Munich: 853687 - news) rose by 1.5 per cent to Y4,060 after saying it would invest Y40bn in expanding production of lithium-ion batteries. Toyota Motor (Frankfurt: 853510 - news) gained 0.9 per cent to Y4,500 and Canon (Berlin: CNN1.BE - news) .
The consumer electronics and musical instrument maker Yamaha (Frankfurt: 855314 - news) slid for the third day, hitting a three-year low, after being downgraded by Goldman Sachs (NYSE: GS - news) and Daiwa Institute of Research because last week it cut its forecast of annual profit by 20 per cent. Yamaha plunged 7.3 per cent to close at Y1,750.
Merger talk sent the shares of the consumer credit companies Orix (Frankfurt: 851769 - news) and Credit Saison higher, despite the two lenders denying that they were discussing a deal. Credit Saison jumped 11.2 per cent to Y2,330 and Orix gained 2.6 per cent to Y15,070.
In other alliance talks in Japan, Seven & I Holdings jumped 3.2 per cent to Y3,510, and pharmacy store operator Ain surged 15.1 per cent to Y1,991on the Jasdaq following a local report that the two would form an alliance where Ain would open drug stores in Seven & I's shopping centres.
The news of Mitsubishi UFJ Financial (Berlin: MFZ.BE - news) 's 66 per cent drop in first-quarter profit came after market closed. The shares had ended 1.6 per cent higher at Y915.
In Australia, the S&P/ASX 200 slid to its lowest levels as resource in just over two years, but recovered a little to close 1.4 per cent lower at 4,820.40.
The Australian dollar sank to 92.12 US cents, its weakest level in four months, after the central bank hinted it may cut interest rates for the first time in nearly seven years as weaker economic growth was helping to curb inflation.
BHP Billiton (LSE: BLT.L - news) led Sydney's fall. It plunged 6.6 per cent to A$35.82 as it suffered both from weaker metal prices and cheaper oil, as it is big producer of energy as well as the world's largest miner.
Newcrest Mining (Berlin: NMA.BE - news) , a big gold producer, plummeted 11.5 per cent to A$26.31 as precious metal prices continued to decline. Woodside Petroleum (Berlin: WOPA.BE - news) fell by 5.2 per cent to A$51.20.
The chemical company Campbell Brothers surged Campbell Brothers rose by 15.2 per cent to A$31.23 after it said first-half profit would jump about 60 per cent and that the increase could be sustained for rest of the financial year.
Hong Kong shares sank to their lowest levels in more than two weeks as the company with the biggest weight in the Hang Seng (news) index, the bank HSBC (LSE: HSBA.L - news) , announced a 28 per cent fall in first half profit as subprime mortgage defaults in the US rose.
The Hang Seng index closed 2.5 per cent lower at 21,949.75 and the main sub-index of mainland companies listed in the territory was 2.8 per cent lower at 11,947.64
HSBC fell by 2.2 per cent to HK$126.60 as Royal Bank of Scotland (LSE: 91ID.L - news) advised investors to sell the shares instead of holding them. HSBC's results had been announced after the Hong Kong market had closed on Monday.
Other banks suffered. Bank Of East Asia (0023.HK - news) plunged 8.3 per cent to HK$33.20 to a two-year low after half-year profits halved. Bank of China (3988.HK - news) fell by 1.4 per cent to HK$3.50.
The territory's stock market operator, Hong Kong Exchanges & Clearing, lost 4.7 per cent to HK$108.50 after Goldman Sachs cut its estimate for the share price by 10 per cent.
Cnooc (0883.HK - news) , which is China's largest offshore oil producer, plunged 6.3 per cent to HK$10.80 and China Oilfield Services (601808.SS - news) fell by 5.0 per cent to HK$10.72.
On the mainland, the Shanghai composite index closed 1.9 per cent lower at 2,690.75. Energy stocks led the market lower. China Shenhua Energy, an integrated coal and transport company, plunged 6.4 per cent to Rmb28.39, China Coal Energy fell by 6.3 per cent to Rmb11.96 and PetroChina lost 1.3 per cent to Rmb14.68..
In India, the Sensex was 1.7 per cent higher by mid afternoon in Mumbai at 14,823.49.
ICICI Bank made the biggest gains, rising by 3.9 per cent to Rs665.60.
Indonesia's stock exchange was forced to delay the start of trading due to a technical hitch, but resumed later in the morning. The Jakarta Composite index closed 2.9 per cent lower at 2,164.19
Crude oil dropped below $120 per barrel for the first time in three months over concern that the high price of the energy would hurt demand, following negative consumer spending data out of the US. Nymex light sweet crude was trading at $120.01 a barrel for September delivery by late afternoon in Singapore. Copper and platinum hit six-month lows.
The MSCI Asia-Pacific Index had lost 1 per cent to 127.29 by late afternoon in Tokyo.
The Nikkei 225 average closed 0.1 per cent lower at 12,914.66 and the broader Topix index ended 0 per cent lower at 1,247.71. Earlier gains for exporters from a weaker yen overnight were scaled back as the Japanese currency appreciated from around Y108.20 to the dollar to Y107.81 in the afternoon session.
Sony (Munich: 853687 - news) rose by 1.5 per cent to Y4,060 after saying it would invest Y40bn in expanding production of lithium-ion batteries. Toyota Motor (Frankfurt: 853510 - news) gained 0.9 per cent to Y4,500 and Canon (Berlin: CNN1.BE - news) .
The consumer electronics and musical instrument maker Yamaha (Frankfurt: 855314 - news) slid for the third day, hitting a three-year low, after being downgraded by Goldman Sachs (NYSE: GS - news) and Daiwa Institute of Research because last week it cut its forecast of annual profit by 20 per cent. Yamaha plunged 7.3 per cent to close at Y1,750.
Merger talk sent the shares of the consumer credit companies Orix (Frankfurt: 851769 - news) and Credit Saison higher, despite the two lenders denying that they were discussing a deal. Credit Saison jumped 11.2 per cent to Y2,330 and Orix gained 2.6 per cent to Y15,070.
In other alliance talks in Japan, Seven & I Holdings jumped 3.2 per cent to Y3,510, and pharmacy store operator Ain surged 15.1 per cent to Y1,991on the Jasdaq following a local report that the two would form an alliance where Ain would open drug stores in Seven & I's shopping centres.
The news of Mitsubishi UFJ Financial (Berlin: MFZ.BE - news) 's 66 per cent drop in first-quarter profit came after market closed. The shares had ended 1.6 per cent higher at Y915.
In Australia, the S&P/ASX 200 slid to its lowest levels as resource in just over two years, but recovered a little to close 1.4 per cent lower at 4,820.40.
The Australian dollar sank to 92.12 US cents, its weakest level in four months, after the central bank hinted it may cut interest rates for the first time in nearly seven years as weaker economic growth was helping to curb inflation.
BHP Billiton (LSE: BLT.L - news) led Sydney's fall. It plunged 6.6 per cent to A$35.82 as it suffered both from weaker metal prices and cheaper oil, as it is big producer of energy as well as the world's largest miner.
Newcrest Mining (Berlin: NMA.BE - news) , a big gold producer, plummeted 11.5 per cent to A$26.31 as precious metal prices continued to decline. Woodside Petroleum (Berlin: WOPA.BE - news) fell by 5.2 per cent to A$51.20.
The chemical company Campbell Brothers surged Campbell Brothers rose by 15.2 per cent to A$31.23 after it said first-half profit would jump about 60 per cent and that the increase could be sustained for rest of the financial year.
Hong Kong shares sank to their lowest levels in more than two weeks as the company with the biggest weight in the Hang Seng (news) index, the bank HSBC (LSE: HSBA.L - news) , announced a 28 per cent fall in first half profit as subprime mortgage defaults in the US rose.
The Hang Seng index closed 2.5 per cent lower at 21,949.75 and the main sub-index of mainland companies listed in the territory was 2.8 per cent lower at 11,947.64
HSBC fell by 2.2 per cent to HK$126.60 as Royal Bank of Scotland (LSE: 91ID.L - news) advised investors to sell the shares instead of holding them. HSBC's results had been announced after the Hong Kong market had closed on Monday.
Other banks suffered. Bank Of East Asia (0023.HK - news) plunged 8.3 per cent to HK$33.20 to a two-year low after half-year profits halved. Bank of China (3988.HK - news) fell by 1.4 per cent to HK$3.50.
The territory's stock market operator, Hong Kong Exchanges & Clearing, lost 4.7 per cent to HK$108.50 after Goldman Sachs cut its estimate for the share price by 10 per cent.
Cnooc (0883.HK - news) , which is China's largest offshore oil producer, plunged 6.3 per cent to HK$10.80 and China Oilfield Services (601808.SS - news) fell by 5.0 per cent to HK$10.72.
On the mainland, the Shanghai composite index closed 1.9 per cent lower at 2,690.75. Energy stocks led the market lower. China Shenhua Energy, an integrated coal and transport company, plunged 6.4 per cent to Rmb28.39, China Coal Energy fell by 6.3 per cent to Rmb11.96 and PetroChina lost 1.3 per cent to Rmb14.68..
In India, the Sensex was 1.7 per cent higher by mid afternoon in Mumbai at 14,823.49.
ICICI Bank made the biggest gains, rising by 3.9 per cent to Rs665.60.
Indonesia's stock exchange was forced to delay the start of trading due to a technical hitch, but resumed later in the morning. The Jakarta Composite index closed 2.9 per cent lower at 2,164.19
Asian stock market summary
The Nikkei 225 Stock Average finished lower for the third straight day, down 0.1 percent at 12,914.66, following sustained losses on Wall Street.
Investors were cautious ahead of interest rate decisions by the Federal Reserve later on Tuesday and the European Central Bank on Thursday.
The broader Topix was ended down 0.04 percent at 1,247.71.
SOUTH KOREA
The Korea Composite Stock Price Index closed 0.49 percent lower at 1,535.54, led by steel-makers and shipbuilders as persistent worries about slower demand for heavy industrial goods weighed on the sector, while banks rebounded after their latest losses.
AUSTRALIA
The benchmark S&P/ASX 200 index finished 1.4 percent lower at 4,820.4, as concerns about slowing global demand hit oil and metals prices, sparking steep declines in heavyweight resource firms such as BHP Billiton Ltd.
The All Ordinaries closed down 1.5 percent at 4,882.0.
CHINA
The benchmark Shanghai Composite Index closed down 1.86 percent at 2,690.75, led by coal firms and metals stocks after a sharp decline in commodity prices.
The launch of IPO subscriptions for China South Locomotive & Rolling Stock helped to depress trade by draining funds out of the secondary market.
The Shanghai A-share Index was down 1.85 percent at 2,822.82, while the Shenzhen A-share Index fell 3.06 percent to 829.26.
The Shanghai B-share Index fell 4.17 percent to 199.20, while the Shenzhen B-share Index lost 3.63 percent to 433.83.
TAIWAN
The weighted index closed down 2.35 percent at 6,813.40, as steel and cement stocks slumped following a drop in metals and other commodity prices overnight amid worries over the global economy.
Investors were cautious ahead of interest rate decisions by the Federal Reserve later on Tuesday and the European Central Bank on Thursday.
The broader Topix was ended down 0.04 percent at 1,247.71.
SOUTH KOREA
The Korea Composite Stock Price Index closed 0.49 percent lower at 1,535.54, led by steel-makers and shipbuilders as persistent worries about slower demand for heavy industrial goods weighed on the sector, while banks rebounded after their latest losses.
AUSTRALIA
The benchmark S&P/ASX 200 index finished 1.4 percent lower at 4,820.4, as concerns about slowing global demand hit oil and metals prices, sparking steep declines in heavyweight resource firms such as BHP Billiton Ltd.
The All Ordinaries closed down 1.5 percent at 4,882.0.
CHINA
The benchmark Shanghai Composite Index closed down 1.86 percent at 2,690.75, led by coal firms and metals stocks after a sharp decline in commodity prices.
The launch of IPO subscriptions for China South Locomotive & Rolling Stock helped to depress trade by draining funds out of the secondary market.
The Shanghai A-share Index was down 1.85 percent at 2,822.82, while the Shenzhen A-share Index fell 3.06 percent to 829.26.
The Shanghai B-share Index fell 4.17 percent to 199.20, while the Shenzhen B-share Index lost 3.63 percent to 433.83.
TAIWAN
The weighted index closed down 2.35 percent at 6,813.40, as steel and cement stocks slumped following a drop in metals and other commodity prices overnight amid worries over the global economy.
Asia: Nikkei loses grip on earlier gains
The Nikkei initially snapped a three-day losing streak but momentum slowed as shares tracked a wider sell-off elsewhere in Asia.
Japanese banking giant Mitsubishi UFJ Financial (Berlin: MFZ.BE - news) joined local peers as it reported a slump in first quarter profit, lower than market expectations, as it was hit by write-downs related to bad-loans.
The blue chip Nikkei 225 (news) index fell 18 points to 12,914.
Oil related stocks slumped on the back of declining oil futures. Shares in Inpex dropped more than 4% after oil for September fell over $3 in New York overnight.
Commodities suffered a broad sell-off. Shares in steelmaker JFE Holdings (Frankfurt: 724564 - news) were down over 5% on concern about declining demand.
Clothing chain giant Fast Retailing weighed on the Nikkei, falling as much as 6% on Tuesday, as it revealed same-store sales at its Uniqlo casual clothing chain rose to a two year high.
Shares in heavyweights Canon (Berlin: CNN1.BE - news) , TDK (Frankfurt: 857032 - news) and Toyota provided some momentum on hopes that falling oil prices will boost consumer spending.
The weaker yen against the dollar also propped up exporters while bargain hunters picked up recently battered stocks.
Technology firms such as Kyocera (Munich: 860614 - news) and Tokyo Electron (Stuttgart: 865510 - news) enjoyed strong gains.
The Hang Seng fell sharply as a significant sell-off in commodities and jitters surrounding HSBC (LSE: HSBA.L - news) 's results hammered sentiment. The bank (TBHS - news) 's shares fell over 2% as investors mulled a sharp drop in profits and more write-down related to bad US home loan debts.
Hong Kong's Hang Seng (news) closed down 565 points at 21,949.
Concern about the financial sector trickled into commodities, with concern that there are more credit crunch related woes to come. CNOOC (0883.HK - news) sank over 5% as the price of crude fell sharply in New York.
Japanese banking giant Mitsubishi UFJ Financial (Berlin: MFZ.BE - news) joined local peers as it reported a slump in first quarter profit, lower than market expectations, as it was hit by write-downs related to bad-loans.
The blue chip Nikkei 225 (news) index fell 18 points to 12,914.
Oil related stocks slumped on the back of declining oil futures. Shares in Inpex dropped more than 4% after oil for September fell over $3 in New York overnight.
Commodities suffered a broad sell-off. Shares in steelmaker JFE Holdings (Frankfurt: 724564 - news) were down over 5% on concern about declining demand.
Clothing chain giant Fast Retailing weighed on the Nikkei, falling as much as 6% on Tuesday, as it revealed same-store sales at its Uniqlo casual clothing chain rose to a two year high.
Shares in heavyweights Canon (Berlin: CNN1.BE - news) , TDK (Frankfurt: 857032 - news) and Toyota provided some momentum on hopes that falling oil prices will boost consumer spending.
The weaker yen against the dollar also propped up exporters while bargain hunters picked up recently battered stocks.
Technology firms such as Kyocera (Munich: 860614 - news) and Tokyo Electron (Stuttgart: 865510 - news) enjoyed strong gains.
The Hang Seng fell sharply as a significant sell-off in commodities and jitters surrounding HSBC (LSE: HSBA.L - news) 's results hammered sentiment. The bank (TBHS - news) 's shares fell over 2% as investors mulled a sharp drop in profits and more write-down related to bad US home loan debts.
Hong Kong's Hang Seng (news) closed down 565 points at 21,949.
Concern about the financial sector trickled into commodities, with concern that there are more credit crunch related woes to come. CNOOC (0883.HK - news) sank over 5% as the price of crude fell sharply in New York.
Tokyo shares end morning sharply higher after Wall St rally, weaker yen
Japanese shares ended the morning session sharply higher on Wednesday after Wall Street rallied overnight, with sentiment supported by a tumble in the price of oil, the interest rate decision by the Federal Reserve, and a weaker yen.
The softer yen bolstered interest in major exporters such as Sony (Munich: 853687 - news) and Canon (Berlin: CNN1.BE - news) .
The dollar was last trading at 108.35 yen, up from the 107.81-82 yen levels late Tuesday.
Traders bought back stocks after the benchmark Nikkei (news) fell more than 460 points in the last three sessions.
The market found some comfort from continued declines in oil prices, closing down $2.24 at $119.17 in New York trading, after falling earlier to $118.
Wall Street also extended its advance on Tuesday after the Federal Reserve left interest rates unchanged and assuaged some of the market's fears about the economy. The Dow Jones industrial average shot up more than 330 points, and all the major indices had gains approaching 3 percent.
'Investors felt relieved as expectations of an early Fed interest rate hike are receding, after the central bank maintained it key interest rate at the current level,' said Yumi Nishimura, deputy general manager at Daiwa Securities SMBC.
The decision was made following a series of 'hawkish' comments from Fed officials that had caused investors to worry about a possible rate hike and its impact on the U.S. economy, Nishimura said.
The Fed announced on Tuesday it was keeping its target for the federal funds rate, the interest that banks charge each other on overnight loans, at 2 percent after a 10-1 vote.
In its after-session statement, the central bank said that 'economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports,' while dropping the June assertion that the downside growth risk has 'diminished somewhat.'
The Nikkei 225 Stock Average finished the session up 287.24 points or 2.2 percent at 13,201.90, off a high of 13,217.05.
The broader Topix climbed 22.22 points or 1.8 percent to 1,269.93.
Gainers outnumbered decliners 1,392 to 229, with 94 issues unchanged.
Volume of trade fell to 974 million shares, from 1.01 billion shares on Tuesday morning (NASDAQ: TUES - news) .
On Wall Street overnight, the Dow industrials soared 331.62 points or 2.9 percent to 11,615.77, registering one of the biggest gains this year.
Sony Corp rallied 5.4 percent to 4,280 yen after it signed a deal with Bertelsmann AG (Stuttgart: 522990 - news) to buy out the German firm's equity interest in music producer Sony BMG, making the joint venture a wholly-owned unit.
Other high-tech issues gained, with Canon rising 5 percent to 5,090 yen, semiconductor manufacturing equipment maker Tokyo Electron (Stuttgart: 865510 - news) climbing 3.4 percent to 6,310 yen and Chip tester maker Advantest (Berlin: VAN.BE - news) advancing 5.6 percent to 2,355 yen.
Export-oriented auto issues were firmer. Toyota Motor (Frankfurt: 853510 - news) gained 2.4 percent to 4,610 yen, Honda Motor (Paris: JP3854600008 - news) was up 4.2 percent at 3,450 yen and Nissan Motor was higher by 3.9 percent at 834 yen.
Shares of Mitsubishi UFJ Financial Group Inc lost 3.1 percent to 887 yen after the nation's largest banking group booked a 66 percent decline in first-quarter net profit, with total bad debt clean-up costs surging to 143.1 billion yen from 59.1 billion yen. The company had to downgrade its internal credit ratings for its borrowers and set aside more loan provisions in the quarter.
($1 = 108.35 yen)
The softer yen bolstered interest in major exporters such as Sony (Munich: 853687 - news) and Canon (Berlin: CNN1.BE - news) .
The dollar was last trading at 108.35 yen, up from the 107.81-82 yen levels late Tuesday.
Traders bought back stocks after the benchmark Nikkei (news) fell more than 460 points in the last three sessions.
The market found some comfort from continued declines in oil prices, closing down $2.24 at $119.17 in New York trading, after falling earlier to $118.
Wall Street also extended its advance on Tuesday after the Federal Reserve left interest rates unchanged and assuaged some of the market's fears about the economy. The Dow Jones industrial average shot up more than 330 points, and all the major indices had gains approaching 3 percent.
'Investors felt relieved as expectations of an early Fed interest rate hike are receding, after the central bank maintained it key interest rate at the current level,' said Yumi Nishimura, deputy general manager at Daiwa Securities SMBC.
The decision was made following a series of 'hawkish' comments from Fed officials that had caused investors to worry about a possible rate hike and its impact on the U.S. economy, Nishimura said.
The Fed announced on Tuesday it was keeping its target for the federal funds rate, the interest that banks charge each other on overnight loans, at 2 percent after a 10-1 vote.
In its after-session statement, the central bank said that 'economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports,' while dropping the June assertion that the downside growth risk has 'diminished somewhat.'
The Nikkei 225 Stock Average finished the session up 287.24 points or 2.2 percent at 13,201.90, off a high of 13,217.05.
The broader Topix climbed 22.22 points or 1.8 percent to 1,269.93.
Gainers outnumbered decliners 1,392 to 229, with 94 issues unchanged.
Volume of trade fell to 974 million shares, from 1.01 billion shares on Tuesday morning (NASDAQ: TUES - news) .
On Wall Street overnight, the Dow industrials soared 331.62 points or 2.9 percent to 11,615.77, registering one of the biggest gains this year.
Sony Corp rallied 5.4 percent to 4,280 yen after it signed a deal with Bertelsmann AG (Stuttgart: 522990 - news) to buy out the German firm's equity interest in music producer Sony BMG, making the joint venture a wholly-owned unit.
Other high-tech issues gained, with Canon rising 5 percent to 5,090 yen, semiconductor manufacturing equipment maker Tokyo Electron (Stuttgart: 865510 - news) climbing 3.4 percent to 6,310 yen and Chip tester maker Advantest (Berlin: VAN.BE - news) advancing 5.6 percent to 2,355 yen.
Export-oriented auto issues were firmer. Toyota Motor (Frankfurt: 853510 - news) gained 2.4 percent to 4,610 yen, Honda Motor (Paris: JP3854600008 - news) was up 4.2 percent at 3,450 yen and Nissan Motor was higher by 3.9 percent at 834 yen.
Shares of Mitsubishi UFJ Financial Group Inc lost 3.1 percent to 887 yen after the nation's largest banking group booked a 66 percent decline in first-quarter net profit, with total bad debt clean-up costs surging to 143.1 billion yen from 59.1 billion yen. The company had to downgrade its internal credit ratings for its borrowers and set aside more loan provisions in the quarter.
($1 = 108.35 yen)
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