Gebt den Fallenstellern keine Chance

Worst Wall Street Quarter Since 2001 Tempered by Goldman's Gain

By Christine Harper

Sept. 17 (Bloomberg) -- Wall Street's third quarter would be the worst since 2001 if it weren't for the timely sale of a power company by Goldman Sachs Group Inc.

Bear Stearns Cos. probably will report a 41 percent drop in earnings per share, Morgan Stanley may post an 11 percent decline and Lehman Brothers Holdings Inc. may say profit fell 5.1 percent, according to a Bloomberg survey of analysts. Goldman's earnings probably jumped 33 percent after a gain of as much as $1 billion from the sale of Horizon Wind Energy LLC.

Fixed-income trading, the industry's biggest source of revenue, faltered as sales of mortgage and asset-backed securities dropped 36 percent in the quarter, Lehman estimates. Banks also stopped financing new leveraged buyouts, which provided $8.4 billion of fees in the first half, as they struggle to clear a backlog of $350 billion in loan commitments. While revenue from takeover advice, stock trading and underwriting probably rose, it may not make up for writedowns to reflect the declining value of corporate loans and mortgage bonds.

``This is a more important period than the turbulence of 2001,'' said Peter Solomon, chairman and founder of New York- based investment bank Peter J. Solomon Co. and a former executive at New York-based Lehman. ``This is credit and this is risk. This turmoil is aimed right at the heart of their business, so everybody is interested in how they have managed.''

If the analysts are right, and they've underestimated the firms' profits for the past six quarters, it would be the worst year-on-year decline in earnings per share since the second quarter of 2005. When Goldman is excluded, it becomes the biggest drop since the fourth quarter of 2001.

Trading Whole Companies

UBS AG analyst Glenn Schorr is including Goldman's gain in profit estimates because buying and selling companies now is as much a part of how Wall Street makes money as trading stocks. Goldman's fixed-income revenue in the second quarter of 2006 reflected its profit from selling a power plant in Linden, New Jersey. In the fourth quarter, the New York-based firm included the $500 million made on the sale of Japan's Accordia Golf Co., which now trades on the Tokyo Stock Exchange.

Goldman, the world's largest securities firm by market value, recorded the $2.15 billion sale of Horizon Wind to EDP- Energias de Portugal SA in the third quarter. Analysts have to estimate the size of the gain because Goldman never disclosed how much it paid for Houston-based Horizon Wind in March 2005. Schorr figures it's between $750 million and $1 billion.

While Bear Stearns also runs a merchant-banking business, investors don't expect it to provide enough of a boost to offset the impact of subprime-mortgage defaults. Shares of the New York-based firm, the second-largest underwriter of U.S. mortgage bonds, have lost almost a third of their value this year and are on track for their biggest annual decline since 1987.

Profit Headwind

Lehman has fallen 24 percent, which would be the firm's steepest drop since its initial public offering in 1994. Goldman has fallen 4.4 percent, the biggest decline since 2002, and New York-based Morgan Stanley is down 2.2 percent.

``It's definitely going to be rough,'' said Ralph Cole, who helps manage $2.7 billion, including shares of Goldman and Merrill Lynch & Co., at Ferguson Wellman Capital Management in Portland, Oregon. ``The easiest money has been made. They had an incredible tailwind, but now it all seems like headwind.''

While Cole said the securities industry probably reached its earnings peak for this economic cycle in the first half, when Goldman, Morgan Stanley, Lehman, Bear Stearns and Merrill Lynch reported net income totaling $18.4 billion, he and other investors don't expect results for the fiscal quarter that ended in August will be as bad as analysts are forecasting.

Market Conditions

Wall Street is collecting more investment-banking fees than a year ago, data compiled by Bloomberg show. Completed takeovers rose 35 percent to $861 billion in the fiscal third quarter. Equity offerings climbed 76 percent to $170 billion, and sales of high-yield debt jumped 26 percent to $42 billion.

Trading also has been busier, indicating a probable increase in commissions. The average daily trading volume in mortgage-backed securities rose 55 percent in the past three months from a year earlier, while in corporate debt it swelled by 11 percent, Federal Reserve data show. On the New York Stock Exchange, average trading volume rose 7.6 percent.

The CBOE SPX Volatility Index, which measures the rate of price swings in stocks, averaged 19.3 during the quarter, up 27 percent from last year. Greater volatility typically means bigger trading profits on proprietary positions.

``With the volatility on the equity market and the fact that trading on all of the exchanges has been at record or near- record levels, these companies should all benefit from that,'' said Erin Archer, an analyst at Thrivent Financial for Lutherans in Minneapolis, which manages $75 billion, including shares of all four firms. ``They could all report very strong equity numbers.''

Kitchen Sink Option

There's also the chance that some chief executive officers will use the third quarter as a so-called kitchen sink, aggressively marking down securities holdings and taking as many one-time charges as possible to reduce the drag on future profits. Lehman CEO Richard Fuld, the first to report, on Sept. 18, is spending $72 million to scale back mortgage lending, including costs to fire 2,050 employees.

Merrill, the third-largest firm behind Goldman and Morgan Stanley, said Sept. 14 that ``challenging'' conditions in fixed- income markets required ``fair value adjustments'' in the carrying value of certain investments and financing commitments. Merrill's quarter ends this month and it reports in October.

Trouble is prices for some instruments are either unavailable or unreliable, turning such mark-to-market accounting into guesswork. Many securities have all but stopped trading since the sudden increase in defaults on subprime home loans early this year left investors leery of products with limited transparency, such as mortgage-backed bonds and collateralized debt obligations.

Marking to Market

Two hedge funds run by Bear Stearns collapsed in June partly because the firm couldn't find buyers for CDOs. Others including Wharton Asset Management's Y2K Finance have suspended withdrawals until they can accurately calculate the value of their investments. Securities firms hold many of the same assets.

One index that tracks the value of mortgage securities, the ABX BBB 07-01 Index, fell 51 percent from the end of May to the end of August. Another that reflects speculation on leveraged loans, the LCDX Index, fell about 5 percent during the period, according to David Hendler, a New York-based analyst who covers the securities industry at CreditSights Inc.

``There's going to be some mark-to-market in the securities portfolios, primarily among the mortgage products and fixed- income products that the brokerage firms are holding on their balance sheet,'' said Peter Kovalski, who helps manage about $12 billion, including shares of Morgan Stanley and Goldman, at Alpine Woods Investments in Purchase, New York. ``I think there's going to be a surprise there on the magnitude.''

Setting the Tone

Analysts such as Lehman's Roger Freeman say the approach Wall Street takes to fair value accounting will influence investors' confidence in the stocks.

Lehman will set the tone for this week's earnings reports because it reports first and is expected to post its biggest quarterly profit decline since 2004.

Of the 16 analysts who follow Lehman in Bloomberg's survey, 13 have reduced their third-quarter earnings estimates in the past four weeks. They expect Lehman, the biggest underwriter of U.S. mortgage bonds, to post profit of $1.49 a share, down from $1.57 a year earlier and $2.21 in the second quarter.

Fuld's Signal

Fuld, 61, signaled that Lehman's prospects may not be as dire as its stock price suggests when he told UBS analyst Schorr that the strains on the firm are less than half as severe as in 1998. That year, market turmoil triggered by Russia's debt default and fanned by the failure of hedge fund Long-Term Capital Management LP pushed Lehman close to insolvency.

Lehman, the fourth-largest U.S. securities firm, surprised analysts in the second quarter with stronger-than-expected revenue from equity trading and faster growth outside the U.S.

``Lehman is pretty well positioned to report a decent third quarter,'' said Thrivent's Archer. ``Fixed-income expectations may have come in too much.''

Morgan Stanley may report on Sept. 18 an 11 percent drop in earnings per share, the first decline since John Mack, 62, returned as CEO in mid-2005, according to the analyst survey.

Some bright spots remain. Morgan Stanley, the industry's second largest by market value after Goldman, managed 81 percent more in stock sales during the fiscal third quarter, Bloomberg data show. Its retail brokerage probably lured more customers and assets, said Douglas Ciocca, who owns Morgan Stanley shares among the $1.4 billion that he manages at Renaissance Financial Corp. in Leawood, Kansas.

Hedge Fund Losses

Goldman and Bear Stearns are scheduled to report on Sept. 20. While analysts expect Goldman CEO Lloyd Blankfein, 52, to say earnings per share rose to $4.35 from $3.26 a year ago, they also anticipate writedowns on the inventory of mortgage-related securities and its commitments to fund leveraged buyouts. Goldman's asset-management unit probably lost revenue after its Global Alpha hedge fund fell 22.5 percent in August and investors notified the firm they planned to withdraw $1.6 billion.

Bear Stearns, the smallest of Wall Street's five largest firms, may report its worst results since the first quarter of 2001, when profit fell 42 percent. Analysts expect earnings per share of $1.79, down from $3.02 a year earlier, according to estimates compiled by Bloomberg.

Mortgage-backed securities and related products provide about 30 percent of fixed-income sales and trading revenue at Bear Stearns, compared with about 20 percent at Lehman, according to Brad Hintz, an analyst at Sanford C. Bernstein & Co. After Bear Stearns's two hedge funds filed for bankruptcy in July, tarnishing the firm's reputation for managing risk, CEO James Cayne, 73, fired his 49-year-old Co-President Warren Spector.

``We know that Bear Stearns will probably have the biggest hit to earnings,'' said Stanley Nabi, who helps manage about $8.5 billion at Silvercrest Asset Management Group LLC in New York. ``I'm expecting a negative quarter, and in some instances, a significantly negative quarter, but nothing that would shake the foundation of any of them.''

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net .

Last Updated: September 16, 2007 19:04 EDT  

 

 

U.K. August Inflation Rate Falls to Lowest Since March 2006

By Brian Swint

Sept. 18 (Bloomberg) -- The U.K.'s inflation rate unexpectedly fell to the lowest since March 2006 last month, adding to evidence the Bank of England doesn't need to raise interest rates from a six-year high.

Consumer prices rose 1.8 percent from a year earlier compared with 1.9 percent in July, the Office for National Statistics said today in London. Economists expected inflation to be unchanged, according to the median of 35 forecasts in a Bloomberg News survey. From July, prices rose 0.4 percent.

The Bank of England, which a month ago signaled its benchmark interest rate may have to rise to curb inflation, is now facing an economy vulnerable to rising credit costs as financial-market turmoil pushes borrowing costs higher. Consumers are shouldering a record 1.3 trillion pounds ($2.6 trillion) in debt, a decade-long housing boom is cooling and the bank was last week forced to bail out mortgage lender Northern Rock Plc.

``A rate rise is now off the agenda,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. ``Inflation numbers should be helpful for the next few months. This gives the Bank of England a bit of breathing space.''

The collapse of subprime mortgages in the U.S. has boosted market interest rates and prompted lenders to hold back on loans to all but the safest borrowers. Customers of Northern Rock, the U.K.'s third-largest home-loan provider, today queued for a fourth day to withdraw their savings.

Slower Growth?

Slower inflation means the Bank of England may have scope to cut its benchmark rate from 5.75 percent if the credit rout continues. The central bank said Sept. 6 it expects inflation to stay around its 2 percent target in coming months and Governor Mervyn King said six days later the turmoil may curb consumer prices and hurt economic growth.

The housing market is also showing signs of slowing. London house prices dropped the most in three years this month, a report from Rightmove Plc on Sept. 14 showed.

Reductions in mortgage exit fees and clothing prices led the slowdown in inflation, the statistics office said. Financial services costs declined 3 percent from a year earlier and prices in the clothing and footwear category dropped 3.5 percent. Food and beverage costs climbed 3 percent and an increase in ticket prices for live music and theater also spurred inflation.

The Bank of England has so far proved itself more reluctant than the European Central Bank or the U.S. Federal Reserve to take action against the market slump.

The Fed may cut its benchmark rate by a quarter percentage point to 5 percent later today, a Bloomberg News survey showed, and the ECB has held seven special cash auctions for banks since Aug. 9. The U.K. central bank announced its second such move today.

Rate Forecasts

Investors have responded to the market slump by slashing forecasts for the bank's benchmark rate. The implied rate on the June futures contract was 5.55 percent today, down from 5.84 percent a month ago. The contract settles to the three-month London interbank offered rate for the pound.

Bank of England policy makers are nevertheless still concerned economic growth will allow companies to raise prices. The pace of growth accelerated to 0.8 percent in the second quarter from 0.7 percent in the previous three months.

The economy will expand 2.9 percent in 2007, the most in three years, the International Monetary Fund predicted July 25.

Raw material costs are also rising. Oil prices climbed to a record $81.24 a barrel today and global wheat prices surpassed $9 a bushel for the first time last month.

Premier Foods Plc, the U.K.'s biggest producer of cakes and instant soup, said Sept. 4 it sees a ``substantial inflationary environment on food.'' DS Smith Plc, the owner of the Spicers office products brand, said Sept. 5 higher polymer costs hurt first-quarter earnings from plastic packaging.

``There are a lot of upstream price pressures,'' said Alan Clarke, an economist at BNP Paribas SA in London. ``But we see the bank lowering rates once the inflation risks are squeezed out.''

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net .

Last Updated: September 18, 2007 04:31 EDT  

European Manufacturing, Services Growth Slows (Update1)

By Fergal O'Brien

Sept. 21 (Bloomberg) -- Europe's manufacturing and service industries grew at the slowest pace in two years this month as an economic expansion loses steam.

Royal Bank of Scotland Group Plc said a preliminary estimate of its composite index fell today to 54.5 in September from 57.4 in August. That's the lowest since September 2005 and below the 56.9 median of 15 forecasts in a Bloomberg News survey. A reading above 50 indicates growth.

The index drop prompted Royal Bank economists to predict European Central Bank interest-rate cuts next year and to lower their 2008 growth forecast. Europe's economy expanded at the slowest in more than two years in the second quarter. The ECB and European Commission this month cut 2007 estimates for expansion as oil and the euro rose to records and the fallout from a housing recession in the U.S. spreads.

``The downside risks are stacking up,'' said Kenneth Wattret, an economist at BNP Paribas in London. Global growth is slowing and the euro-area economy is ``quite vulnerable to external news.''

The manufacturing index declined to 53.2 in September from 54.3 in August, while a gauge of services dropped to 54 from 58, according to today's report. Both numbers were lower than economists forecast. A gauge of manufacturing orders dropped to 52.4 from 54.8 and the services new business measure also declined.

Confidence among consumers and business dropped to a six- month low last month, according to an Aug. 31 report. Germany's K+S AG, the world's third-largest producer of potash used in fertilizers, last month said increased energy expenses, as well as a further decline in the dollar, may hurt earnings in the ``medium term.''

`Subpar Growth'

The U.S. Federal Reserve cut interest rates by half a percentage point this week, saying tightening credit has the potential to ``intensify the housing correction, and to restrain economic growth more generally.''

If the U.S. keeps slowing, ``in a relatively short time we might be looking at subpar euro-area growth,'' said Austin Hughes, chief economist at IIB Bank Plc in Dublin. ``There is little to suggest momentum in domestic spending will be sufficient to offset any weakening in external demand.''

The ripple effects of the housing slump add to risks facing Europe's economy.

Crude oil futures rose to $82.51 on Sept. 19, the highest since trading began in 1983. Prices are up 35 percent from a year ago. The euro rose to a record high of $1.4120 today on speculation the Fed will keep cutting interest rates.

The European Commission cut its growth estimate for the euro area to 2.5 percent from a May forecast of 2.6 percent, joining the ECB and International Monetary Fund in becoming more pessimistic. The economy grew 2.8 percent last year, the fastest since 2000.

To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net .

Last Updated: September 21, 2007 04:45 EDT  

Goldman Sees `Bottom' as Besieged Wall Street Can't Yet Concur

By Christine Harper and Bradley Keoun

Sept. 24 (Bloomberg) -- Goldman Sachs Group Inc., the world's biggest and most profitable securities firm, has good news for its competitors: The worst credit-market shakeout since 1998 is abating.

After winning its third-quarter bet against all forms of money devalued by the subprime mortgage collapse, while almost everyone else on Wall Street did the opposite, Goldman is signaling a turnabout.

``We are a lot closer to the bottom than where we were at the end of last quarter,'' Chief Financial Officer David Viniar said in an interview assessing the third-highest earnings in Goldman's history and the industry's only increase last quarter. ``There are going to be opportunities in the mortgage business,'' he said, and ``there are certainly going to be opportunities to buy distressed assets.''

The emergence of a bullish sensibility is resonating if only because so many of the New York-based firm's strategies have been on target. It was Goldman that foresaw this decade's bull market in fixed income and built a team of traders that generated a record $14.3 billion of revenue last year.

Goldman shares are up 5.3 percent so far in 2007, the only equity among the five biggest U.S. securities firms to advance. Morgan Stanley fell 4.7 percent, while Merrill Lynch & Co. and Lehman Brothers Holdings Inc. dropped almost 20 percent, and Bear Stearns Cos. slumped 28 percent. Goldman trades at almost nine times earnings, more than Morgan Stanley, Merrill and Lehman. Only Bear Stearns trades at a higher multiple after profit plunged 61 percent in the third quarter.

Goldman's Patience

Goldman stuck with private-equity investing while Morgan Stanley and JPMorgan Chase & Co. exited the business, and it now reaps about $400 million a year managing the second-largest fund for leveraged buyouts, based on the typical 2 percent annual fee. Goldman also was quicker to respond to demand for alternatives to stocks, bonds and money markets by building the world's No. 2 hedge fund manager by assets after New York-based JPMorgan.

``They've been more right than wrong in how they've positioned their own book of business,'' said Mark Batty, a financial-services analyst at PNC Wealth Management in Philadelphia, which oversees $77 billion and holds shares of Goldman, Morgan Stanley and Merrill. ``So you give them the benefit of the doubt, in terms of their outlook, versus the other firms.''

At least six sell-side analysts raised estimates for Goldman's full-year earnings after last week's third-quarter report. The average profit estimate of 13 analysts in a Bloomberg survey now is $10.7 billion, compared with net income of $9.54 billion in 2006.

Misreading the Signs

Goldman's rivals misread the credit markets heading into the quarter that ended Aug. 31. They didn't anticipate that investors, spooked by rising defaults on subprime mortgages, would shun everything from leveraged-buyout debt to investment- grade bonds. The risk premium on bonds rated BB more than doubled to 3.53 percentage points in the three-month period, according to a Merrill index.

Not since Russia's debt default of 1998 and the collapse of hedge fund Long-Term Capital Management LP would Wall Street face such a bear market in credit. In the flight to quality, Treasury bonds rallied by the most in five years.

Morgan Stanley, the second-largest U.S. securities firm by market value after Goldman, was optimistic in June when CFO David Sidwell told analysts that ``the current market plays to our strengths'' and that ``concerns early in the quarter about whether issues in the subprime market were going to spread dissipated.''

Unhedged Loans

By the end of August, Morgan Stanley's credit-trading revenue had dropped by more than $1 billion from the second quarter, and the New York-based firm's losses in fixed income were exacerbated by a decision not to hedge its financing commitments to LBOs.

``They're going to think a lot harder about the bets that they take on from here until the end of the year,'' said Helena Ocampo, an analyst at Sentinal Asset Management in Montpelier, Vermont, which manages $4.4 billion and holds shares of Goldman, Morgan Stanley and Merrill.

Morgan Stanley isn't sure yet that now is the time to put capital at risk again, a reticence that may become an opportunity cost.

``We believe it will take at least a quarter or two for the credit markets to return to a more normal extension of credit and provision of liquidity,'' incoming CFO Colm Kelleher said on Morgan Stanley's earnings conference call Sept. 19.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said the same day that Germany's biggest bank will scale back hiring after making ``mistakes'' before the credit boom ground to a halt during the past two months.

`Challenging Markets'

New York-based Merrill, which reports earnings in October, said on Sept. 14 that ``credit market conditions have continued to remain challenging in the third quarter.''

Goldman hinted at its position on June 14, when Viniar said the firm expected ``more pain'' from the collapse of the subprime mortgage market. Less than two weeks later, Chief Executive Officer Lloyd Blankfein offered more clues.

``We certainly are organizing ourselves like the market is undervaluing risk, and so we are in a high state of nervousness,'' Blankfein said at a June 27 conference in New York organized by the Wall Street Journal. ``The biggest risk we face, and there are a lot of things that contribute to this risk, would be a very big crisis in the credit markets.''

New York-based Bear Stearns and Lehman Brothers, the two securities firms most reliant on mortgages, didn't share Blankfein's concerns.

Doomed Quarter

``Mortgages are obviously at a low point in this recent period here,'' Lehman's then-CFO, Chris O'Meara, said on June 12. ``And I think as we look forward, without giving specific guidance, I would think that we would be in for better performance.''

Bear Stearns CFO Samuel Molinaro told analysts and investors on a June 14 conference call that he anticipated trading ``to be a little bit challenging'' in the third quarter. It would turn out that the firm's earnings were already doomed.

Two Bear Stearns hedge funds that invested in mortgage securities melted down days later, resulting in $200 million of losses and related expenses. Bear Stearns last week reported its lowest quarterly net income in five years after a further $700 million loss for writing down mortgage holdings and loans for LBOs.

Lehman's third-quarter profit fell 3 percent, its first decline since 2002.

Trading Prowess

``Goldman had themselves set up correctly for what the market did, and their trading prowess really showed through,'' said Ryan Lentell, an analyst at Chicago-based Morningstar Inc. who gives Goldman three stars out of a possible high of five. ``They were short mortgages this quarter, which was the right way to be.''

June wasn't the first time Blankfein, 53, has called a credit crunch. As a senior Goldman partner in early 1998, he raised concerns about excessive leverage in the U.S. financial system, according to Roger Lowenstein's 2000 book about Long- Term Capital, ``When Genius Failed.'' He told Peter Fisher, then head of open market operations at the Federal Reserve Bank of New York, that investors weren't distinguishing between the risks of different securities.

``Blankfein thought the next big problem would be a credit problem, not a problem specific to any one market,'' Lowenstein wrote.

Later that year, Russia would default and the New York Fed would have to orchestrate a $4 billion bailout for Long-Term Capital to stabilize the financial system. Goldman, then run by current New Jersey Governor Jon Corzine, was one of 14 banks that participated in the rescue by putting up $300 million of its own capital.

Calling the Bottom

Today, at least two of Goldman's rivals also are ready to call the bottom, even after timing it wrong in June. Lehman's O'Meara said on Sept. 18 that ``we feel that the worst of this credit correction is behind us.'' Bear Stearns's Molinaro, who on Aug. 3 said the fixed-income market was ``about as bad as I have seen it'' in 22 years on Wall Street, declared last week that ``the worst is definitely behind us.''

To be sure, Goldman doesn't always get it right. The firm lost at least $350 million in 1994 after betting on an increase in Treasury bond prices and a decline in the British pound, according to Lisa Endlich's 1999 book ``Goldman Sachs: The Culture of Success.'' When the Fed and the U.K. central bank raised interest rates, both trades went haywire.

``Nobody is a super-trader,'' said Bruce Foerster, a former Lehman executive who now runs South Beach Capital Markets, an investment-advisory firm in Miami. ``Goldman was rocked by the 1994 trading losses. Everybody makes mistakes. Sometimes you're on the right side of the bet, sometimes not.''

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net ; Bradley Keoun in New York at bkeoun@bloomberg.net .

Last Updated: September 23, 2007 19:29 EDT  

sollte man auch adanch handeln, daher Shortoption Daxbiene und Dowhummel.  

Chicago  - Aufgrund der vortägigen sehr enttäuschenden US-Konjunkturdaten zum Konsumentenvertrauen und den Verkäufen gebrauchter Häuser sind nach Ansicht von Experten die Chancen für weitere Leitzinssenkungen durch die Federal Reserve deutlich gestiegen.
Der von Conference Board ermittelte Index zur Messung der Stimmung unter den Verbrauchern brach im September von 105,6 Punkten im August auf 99,8 Punkte ein. Gleichzeitig sind die Verkäufe bestehender Häuser im August um 4,3 Prozent gesunken. Weiters hat ein Index zur Messung der Hauspreise für Juli im Bereich der meisten Metropolen auf den größten Wertverfall seit sechs Jahren hingewiesen. Daraus ergebe sich, dass die Rezession des Hausmarktes noch immer in Fortsetzung begriffen ist. Dieser Umstand könnte die Konsumenten bis in das nächste Jahr zur Drosselung ihrer Ausgaben veranlassen. Die meisten Händler gehen anhand der Zinsfutures an der Terminbörse in Chicago davon aus, dass die Fed den Leitzinssatz im laufenden Jahr noch zweimal senkt. Für eine Herabnahme von 4,75 Prozent auf 4,25 Prozent ergibt sich eine aktuelle Wahrscheinlichkeit von 70 Prozent. Am Vortag lag die Rate bei 52 Prozent. - (© BörseGo AG 2007) Quelle: BoerseGo
Artikel drucken
 

Dollar Falls to Record Low Versus Euro Before New Home Sales

By Kosuke Goto

Sept. 27 (Bloomberg) -- The dollar fell to an all-time low against the euro on speculation a government report will show a drop in U.S. home sales, bolstering the Federal Reserve's case for cutting interest rates.

The currency is headed for its biggest quarterly slump versus the yen since December 2004 as the yield advantage for two-year Treasuries over similar-maturity Japanese debt reached the lowest in almost three weeks. It has weakened against 14 of the 16 most-active currencies since June 30, falling 4.4 percent versus the euro.

``A slowing housing market is an albatross around the U.S. economy's neck,'' said Yuji Saito, head of foreign-exchange sales at Societe Generale SA in Tokyo. ``The dollar remains weak amid concern over the slowdown in the U.S.''

Against the euro, the dollar fell to $1.4162 at 7:52 a.m. in London from $1.4128 in New York yesterday, and reached $1.4166, the lowest since the European currency's debut in January 1999. It was the sixth straight trading day the dollar touched a record. The U.S. currency was at 115.61 yen from 115.55, bringing losses this quarter to 6.2 percent.

The dollar may fall to $1.42 per euro today, Saito said.

The Commerce Department will report today that new home sales decreased 5.2 percent last month to an annual rate of 825,000, according to a Bloomberg News survey of economists.

Options Barriers

Losses in the dollar were limited as some investors bought the currency to prevent it triggering so-called option barriers at $1.4200, $1.4225 and $1.4250, said Lee Wai Tuck, strategist at Forecast Singapore Ltd. Options grant the holder the right to buy or sell a currency at a set price on a fixed date. A barrier is a level that renders an option worthless when breached.

Europe's single currency may strengthen to $1.4500 by year- end, Lee forecast, citing the prospects of a further shift in interest-rate differentials between the U.S. and the 13-nation region in favor of the euro.

Benchmark German two-year bunds yield 9 basis points more than similar-maturity Treasuries, the widest since September 2004. The extra yield two-year U.S. notes offer over Japanese equivalent debt has narrowed to 3.09 percentage points, the smallest since Sept. 10. A basis point is 0.01 percentage point.

Futures Bets

Futures contracts today showed 86 percent odds the Fed will lower its target overnight lending rate between banks by a quarter-percentage point to 4.50 percent at its next meeting Oct. 31, compared with 72 percent a week ago. The European Central Bank's key rate is 4 percent and the Bank of Japan's is 0.5 percent, the lowest among industrialized countries.

Bank of Japan policy board member Miyako Suda told a conference in Tsu, western Japan, that the economy may overheat if interest rates are raised slowly. Suda unsuccessfully proposed doubling the key rate to 0.5 percent in January, a month before the board proceeded with a rate increase.

``Suda spoke in hawkish manner,'' said Toru Umemoto, chief currency strategist at Barclays Capital in Tokyo. ``She will propose a rate hike in October. We think this is positive for the yen,'' which may rise to 109 per dollar by year-end, he said.

Investors see a 9 percent chance of a rate increase at a BOJ meeting on Oct. 11, unchanged from yesterday, according to Credit Suisse Group calculations using overnight interest rate swaps.

Gains in the yen may be limited by speculation Japanese investors will send money overseas in search of higher yields. Investment trusts are selling more than 1 trillion yen ($8.7 billion) of mutual funds today and tomorrow focused on foreign assets, according to data compiled by Bloomberg.

``Sales of investment trust funds are not so bad,'' said Kei Katayama, who helps oversee the equivalent of about $1 billion at Daiwa SB Investments Ltd. in Tokyo. ``This is contributing to the yen's depreciation.''

Japan's currency traded at 163.66 per euro from 163.26 yesterday, when it touched 163.44, the weakest since Aug. 9. It may move between 115 and 120 per dollar this year, Katayama said.

One-month dollar-yen implied volatility fell to 9.25 percent, the lowest since Aug. 8. That tends to encourage carry trades because it implies smaller swings in exchange rates.

To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net

Last Updated: September 27, 2007 02:57 EDT  

ECB Loans 3.9 Billion Euros at Emergency Rate, Most Since 2004

By John Fraher

Sept. 27 (Bloomberg) -- The European Central Bank loaned the most money at its penalty interest rate in almost three years.

The ECB loaned 3.9 billion euros ($5.5 billion) at its marginal lending rate of 5 percent yesterday, the most since October 2004, the Frankfurt-based central bank said today. It didn't provide details on who asked for the money.

To contact the reporter on this story: John Fraher in London jfraher@bloomberg.net

Last Updated: September 27, 2007 03:39 EDT