FOREX currencies are traded in much smaller divisions than cash. Whereas the smallest division in US cash is the penny ($0.01), US currency can be traded on the FOREX in divisions of $0.0001. This smallest division is called the pip (short for Price Interest Point - sometimes just called 'points'). Since currencies are traded in large lots of (say) $100,000 - small movements in value can generate substantial profits and losses. In a lot of US$100,000 one pip is worth $10 so an increase in 40 pips (4/10 of one cent) can generate a profit or loss of $400.
Currencies are traded in lots of various sizes. The standard lot is 100,000 units of the base currency. A unit is the currency name e.g. one unit of US dollars is the dollar. So a standard lot of US currency is worth $100,000. FOREX trades can have lots of various sizes - a mini lot is 10,000 units, but the most trades are done using standard lots.
Various currencies have different sized pips. The US dollar is expressed in pips of 0.0001 while the Japanese yen is expressed in pips of 0.01. The value of a pip depends on the size of a lot and the currency pair traded. Currency pairs with USD as the quote (second) currency (e.g. CAD/USD) always have a pip value of $10 per standard lot or $1 per mini lot. A pip value calculator can be used to calculate other currencies.
Order Types
A trader has at his disposal different types of orders to make FOREX trades. A clear understanding of each type of order is necessary to be a successful FOREX trader.
Market Order - is an order to buy or sell at the current market price. They can be used to enter or exit a trade. Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction. This is due to slippage - the amount the market moves in the few seconds between giving an order and having it executed. Slippage could result in a loss or gain of several pips.
Limit Order - is an order to buy or sell at a certain limit. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. When selling, your order is executed when the market rises to your limit order price. There is no slippage with limit orders.
Stop Order - is an order to buy above the market or to sell below the market. They are most commonly used as stop-loss orders to limit losses if the market moves contrary to what the trader expected. A stop-loss order will sell the currency if the market falls below the point set by the trader.
One Cancels the Other (OCO) - this order is used when placing a limit order and a stop-loss order at the same time. If either order is executed the other is cancelled, allowing the trader to make a transaction without monitoring the market. If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.
Example OCO Transaction:
Buy: 1 standard lot EUR/USD @ 1.3228 = $132,280
Pip Value: 1 pip = $10
Stop-Loss: 1.3203
Limit: 1.3328
This is an order to buy US dollars at 1.3328 and to sell them if they fall to 1.3203 (resulting in a loss of 25 pips or $250) or to sell them if they rise to 1.3328 (resulting in a profit of 100 pips or $1,000).
Here's another example:
The current bid/ask price for US dollars and Canadian dollars is
USD/CDN 1.2152/57
...meaning you can buy $1 US for 1.2152 CDN or sell 1.2157 CDN for $1 US.
If you think that the US dollar (USD) is undervalued against the Canadian dollar (CDN) you would buy USD (simultaneously selling CDN) and wait for the US dollar to rise.
This is the transaction:
Buy USD: 1 standard lot USD/CDN @ 1.2157 = $121,570 CDN
Pip Value: 1 pip = $10
Stop-Loss: 1.2147
Margin: $1,000 (1%)
You are buying US$100,000 and selling CDN$121,570. Your stop loss order will be executed if the dollar falls below 1.2147, in which case you will lose $100.
However, USD/CDN rises to 1.2192/87. You can now sell $1 US for 1.2192 CDN or sell 1.2187 CDN for $1 US.
Because you entered the transaction by buying US dollars (buying long), you must now sell US dollars and buy back CDN dollars to realize your profit.
You sell US$100,000 at the current USD/CDN rate of 1.2192, and receive 121,920 CDN for which you originally paid CDN$121,570. Your profit is $350 Canadian dollars or US$287.19 (350 divided by the current exchange rate of 1.2187).
Feb 9, 2008
Feb 8, 2008
Euro Stocks Lower as Pharmas and Banks Sink
European stocks slipped into territory Friday afternoon, tracking U.S. futures and with declining pharmaceuticals and banks dragging on the major indexes.
U.S. stock index futures lost their positive bias, with fears of a U.S. recession returning to the market.
In Asia, many investors were away for the Lunar New Year. Japan fell 1.4 percent in a quiet session and Australia finished 1.1 percent higher, in thin volumes.
GlaxoSmithKline was one of the lead losers on the FTSE-100, with declines of 2.9 percent, as the London-listed drug maker was downgraded by Fitch Ratings after it warned on 2008 earnings Thursday. Sanofi-Aventis and Merck were also lower.
Fears over the health of the U.S. economy and the spreading of the credit crunch still remained a key concern, with some analysts saying any recovery is likely to be short-lived. 'The fundamental themes are still there, still a lack of confidence in economic figures and also increasingly in the corporate figures, with the likes of Glaxo,' Justin Urquhart Stewart, a director at 7 Investment Management, told Reuters. 'Any rebound we see today is going to be pretty thin stuff without much backbone.' Basic resources, financial services and technology stocks were the stars of Europe's Friday morning rally, rising more than 2 percent.
Alcatel Lucent's shares rose more than 2 percent despite the fact that it gave a grim outlook and suspended its dividend.
Construction group Sacyr Vallehermoso rose 4.2 percent after a newspaper report that a French-backed group of banks and insurers were in talks to buy its one third stake in Eiffage.
French construction group Lafarge rose 3.4 percent after a newspaper report said investment group GBL may raise its stake to 18 percent and possibly to 25 percent.
The rise in crude oil futures helped push up shares in BP, Total and Royal Dutch Shell, which rose between 0.6 and 1.4 percent.
U.S. stock index futures lost their positive bias, with fears of a U.S. recession returning to the market.
In Asia, many investors were away for the Lunar New Year. Japan fell 1.4 percent in a quiet session and Australia finished 1.1 percent higher, in thin volumes.
GlaxoSmithKline was one of the lead losers on the FTSE-100, with declines of 2.9 percent, as the London-listed drug maker was downgraded by Fitch Ratings after it warned on 2008 earnings Thursday. Sanofi-Aventis and Merck were also lower.
Fears over the health of the U.S. economy and the spreading of the credit crunch still remained a key concern, with some analysts saying any recovery is likely to be short-lived. 'The fundamental themes are still there, still a lack of confidence in economic figures and also increasingly in the corporate figures, with the likes of Glaxo,' Justin Urquhart Stewart, a director at 7 Investment Management, told Reuters. 'Any rebound we see today is going to be pretty thin stuff without much backbone.' Basic resources, financial services and technology stocks were the stars of Europe's Friday morning rally, rising more than 2 percent.
Alcatel Lucent's shares rose more than 2 percent despite the fact that it gave a grim outlook and suspended its dividend.
Construction group Sacyr Vallehermoso rose 4.2 percent after a newspaper report that a French-backed group of banks and insurers were in talks to buy its one third stake in Eiffage.
French construction group Lafarge rose 3.4 percent after a newspaper report said investment group GBL may raise its stake to 18 percent and possibly to 25 percent.
The rise in crude oil futures helped push up shares in BP, Total and Royal Dutch Shell, which rose between 0.6 and 1.4 percent.
Forex - Canadian dollar strengthens vs US dollar after strong employment data 02/08/2008
LONDON (Thomson Financial) - The Canadian dollar strengthened against the US dollar following a strong set of employment data, which dampened hopes for a large interest rate cut at the Bank of Canada's next meeting in March.
Statistics Canada said jobs rose by 46,000 in January, boosting the employment rate to a record high of 63.8 pct.
This brought the unemployment rate down to 5.8 pct from 5.9 pct in December, confounding Thomson IFR Markets' consensus expectation for a rise to 6.0 pct.
"The probability of the BoC doing a 50 basis point cut has dropped significantly," said James Vola at Thomson IFR Markets.
"The economy has had another monster print for employment and wages are rising, and the BoC does not seem likely to add to much fuel to the economy's fire."
At 12.49 pm, the US dollar had weakened to 1.0018 cad, from 1.0074 cad prior to the data.
Oil higher on Nigeria supply disruptions and cold US weather
LONDON (Thomson Financial) - Oil was up in London as supply disruptions in Nigeria and colder weather in the US gave prices a boost.
"On Thursday, Royal Dutch Shell announced that it was halting 130,000 bpd of production in Nigeria due to pipeline leaks," said analysts at Barclays Capital. "In addition, US weather forecasts indicated that temperatures in the North East would fall below normal next week leading to speculation that US demand would rise in response."
They cautioned however that gains have been capped by fears of a looming recession in the US and seasonally lower demand in Q2 of the year, which could yet see prices move further away from the highs.
At 12.38 pm, New York's WTI crude for March delivery was up 59 cents at 88.70 usd per barrel. Yesterday, prices dipped as low as 86.24 usd following a massive rise in US crude stocks the previous day, and lingering recession fears.
In London, Brent crude for March delivery was up 58 cents at 89.09 usd per barrel.
Shell said Thursday it would not be able to honour all its export contracts from its southern Nigerian Bonny export terminal for the rest of February and March because of sabotage.
Militant activity in the crude rich Niger Delta region has slashed around a quarter of production in Africa's largest oil exporter since January 2006. Shell's activities in the country account for around half of Nigeria's 2.6 mln bpd at peak production.
The oil giant has declared a force majeure, which allows companies to suspend contractual obligations such as deliveries of oil and gas following unforeseen events without incurring penalties.
While supply fears are boosting oil today, rising crude inventories in the US and fears demand could fall should the global economy falter have seen prices decline by almost 12 pct since briefly breaching the 100 usd mark in early January.
The dollar has also regained some strength, which could prove bearish for crude and other commodities priced in the US currency, as they become more expensive for overseas investors.
"The Dollar Index continues to gain and should stay under watch for any development of a rebounding trend," said Petromatrix analyst Olivier Jakob. The dollar has firmed against the euro as market watchers expect the European Central Bank to soon start cutting rates in response to the economic slowdown.
The dollar's fall to a series of all time lows, due to economic fears and rapid Federal Reserve rate cuts, has been consistently flagged as one of the key reasons for oil's rally up to its recent highs.
Higher than expected OPEC production is also weighing on prices. On Wednesday, OPEC Secretary General Abdalla El-Badri indicated production had risen slightly in January, despite the cartel holding production quotas steady at its last two meetings.
"On the supply side of the market, rising OPEC production has been widely dismissed in bullish circles, but has ultimately proven to have a calming influence on prices," said Citigroup analyst Tim Evans, adding that he saw the market having a supply surplus in the second quarter of the year.
forex earnings Week of 2/4/2008 thru 2/8/2008
Monday, February 04, 2008
Economic
7:30am Jan Challenger Job Cuts (last –18.7% y/y)
10:00am Dec Factory Orders (last 1.5%)
Events
11:20am Fed's Kroszner speaks on mortgage regulation in Las Vegas.1:15pm US Treasury's Solomon & Swagel hold briefing on 2009 budgetplan. Credit Suisse Energy Summit, Gartner Business Process ManagementSummit, Annual Meeting of the American Academy of Dermatology. TradesEx-dividend: XLNX $0.12, CTAS $0.46, ZION $0.43, FO, $0.42, HAR $0.013.
Earnings
Before the Open: AHCI, ADM, BEAV, CLX, FCTR, HUM, IR, NTE, NNN, PTIE, PMI, PCH, TPP, WEN. After the Close: ASEI, APC, AUDC, AXS, BMI, EFX, FEIC, HAIN, ILMN, LVS, LNC, MTW, NTCT, NUAN, OPNT, OMI, PKY, PRE, PPS, PWAV, PFG, RMBS, RCII, SVVS, SCUR, SIGI, SGTL, SIRF, SOHU, SPF, SNCR, TNB, TMA, TZIX, VASC, WGL, YUM.
Tuesday, February 05, 2008
Economic
10:00am Jan ISM Business Non Manufacturing (last 54.4)
Events
10:00am Treasury Secretary Paulson testifies to Senate Finance Committee. 12:15pm Fed's Lacker speaks on US economy in West Virginia.10:00am US Treasury's McCormick holds briefing on G-7 talks in Tokyo.12:00pm US Treasury's Steel speaks in Las Vegas on housing, US economy.12:00pm FDA Cellular, Tissue and Gene Therapies Advisory CommitteeMeeting. Redbook Retail Sales (8:55, last 0.4%). ABC ConsumerConfidence (last -27). Gartner Business Intelligence Summit; MerrillLynch Global Pharmaceutical, Biotech & Medical Device Conference;Credit Suisse Financial Services Forum. Trades Ex-split: PSEG 2-1.Trades Ex-dividend: INTC $0.128, TJX $0.09, MWV $0.23, MCHP $0.32, FE$0.55, KBH $0.25.
Earnings
Before the Open: ALEX, ARTG, AVP, BHE, BSX, CE, CNC, GIB, CHD, CME, CPO, COWN, DTPI, DUK, EMR, HNT, HEW, HEP, IEX, NRGY, KSU, KBW, KBALB, LIOX, LPX, MMP, MLM, MYGN, NSTC, NURO, NOOF, NYX, OSIS, PNR, PER, PRGO, SEPR, TE, THOR, TYC, VSH, WHR,WEC, WATG, WWY. During Trading Hours: VFC. After the Close: ACE, ADVS,ABCO, NLY, ATO, RATE, BBBB, BRE, BRS, CALL, CACS, CAKE, CNET, CVLT,XRAY, DBTK, EW, WIRE, EQR, FORM, GHDX, HAR, IIG, INSP, IVAC, IVGN,JDSU, KFRC, LNET, LOOP, MANH, MASI, MPWR, MFLX, NBR, NBIX, NUCO, OCNW,OTTR, PNSN, PEC, PLNR, QSFT, RSYS, RNR, RENT, RSG, RVBD, SGMO, SNCI,SRX, TMRK, THQI, TZOO, TMWD, USNA, VOCS, DIS, XL, ZL.
Wednesday, February 06, 2008
Economic
8:30am Q4 Nonfarm Productivity (last 6.3%), Q4 Unit Labor Costs (last –2.0%)
10:30am Crude Oil/Gasoline/Distillate Inventories 1:00pm US Treasury's 10-year note auction results ($13B)
Events
8:30am Former Fed Chairman Greenspan speaks at the Council on Foreign Relations in Washington, DC. 10:00am Fed's Lacker speaks at Marshall University in West Virginia. 12:30pm Fed's Kroszner speaks on mortgage regulation in Washington, DC. 1:40pm Fed's Plosser speaks on economic outlook in Alabama.MBA Mortgage Applications (7:00, last 7.5%). Same Store Sales after theclose. Ex-split: MCRS 2-1, SDA 3.33-1. Standard & Poor's WorldMoney Show. Trades Ex-dividend: AA $0.17, AEP $0.41, MTG $0.025, ENT$0.75, IBM $0.40, PFE $0.32, BA $0.40, WFC $0.31.
Earnings
Before the Open: ARXT, ASX, LNT, ALVR, AHG, ATMI, BCRX, BIIB, CACH, CCJ, CI, CINF, DWSN, DVN, ENB, FORR, RAIL, HNI, IDEV, IACI, ITT, KIM, LII, LFUS, MAG, MKTX, MMS, MNI, MM, MNC, MGAM, NOV, NSR, NJR, NUS, OSCI, PDX, PXD, RL, RBC, RTIX, SLE, SBGI, SON, TIN, TMO, TWX, TWC, TEL, VYYO, WMG, WXS. During Trading Hours: PARL. After the Close: AEA, AKAM, ACL, ACLI, ANDE, ATML, AVB, CSCO, CREL, EXBD, CPII, CCI, DTLK, DHX, DSCM, EDS, ENH, FISV, FMC, GNK, GRP, GXP, HB, HUBG, INWK, NSIT, ICO, JKHY, KNL, MEAS, MET, MGI, NAPS, NAVR, NVT, EGOV, POL, POWI, PPDI, PRU, RACK, RJET, SCSS, SFLY, SSTI, SNWL, SPTN, SRCL, TLEO, ULTI, UNCA, UFPI, UTI, EICU, WEDC, WSH, WSH, WMS.
Thursday, February 07, 2008
Economic
8:30am Initial Jobless Claims (last 375K), Continuing Claims (last 2.716M)
10:00am Dec Pending Home Sales m/m (last –2.6%)
10:30am Natural Gas Inventories
1:00pm Treasury's 30-year bond auction results ($9B)
3:00pm Dec Consumer Credit (last $15.4B)
Events
8:30am Fed's Lockhart speaks on credit market outlook in Atlanta. 1:00pm Fed's Fisher speaks on economic stability in Mexico City.8:00am FDA Psychopharmacologic Drugs Advisory Committee Meeting.ICSC/UBSW Chain Store Sales (last 0.9%). Same Store Sales before theopen. Trades Ex-dividend: XOM $0.35, GWW $0.35, BUD $0.33, ABK $0.07,COL $0.16, HCBK $0.09.
Earnings
Before the Open: ASF, AES, AET, AG, ATG, ALY, APA, ARJ, STST, ARQL, ASPM, AIZ, ASFI, AN, BDC, BPO, BG, CPHL, FUN, CBB, CNMD, CXW, CUB, DO, DRAD, DHI, ELNK, ELON, EMS, ENER, EXPE, FLIR, IT, GET, ITWO, IAR, IPCC, IP, KVHI, LH, LVLT, MHO, HZO, MDC, MDTH, MRGE, MESA, MGPI, MEND, MEH, MLNM, MKSI, MCO, MPS, NSSC, CHUX, PMTI, PTI, PENN, PEP, PLD, QCCO, RVSN, ROLL, RGC, RAI,SFUN, SBH, SNN, SPC, SPR, SPH, SXCI, TRA, PNX, TOC, TBL, TRMP, VNDA,WW. During Trading Hours: BWA, GCA. After the Close: APKT, ATVI, AEIS,ARE, ALKS, AYE, AMX, ACAP, ASCA, AOC, ATR, ATHN, ATW,BBSI, BNHN, BBND, BLKB, BMC, CELL, CPT, CBL, CTLM, CENT, CF, CHRD,CTSH, CSTR, CVGI, SCOR, DIVX, DRRX, EQ, EOG, EOG, EPIC, ESE, ESRX, FALC, FNET, GDI, GNW,GCOM, SRVY, HMN, ITMN, IWOV, XXIA, KNXA, LDSH, LQDT, LMNX, MFE, MTD,MSTR, NFG, NFS, NMHC, UEPS, NEXT, NINE, NMSS, OMTR, OTEX, PDFS, PBI,PWER, PL, QSII, RAH, RNWK, RMD, RTEC, SIMG, SINA, TWLL, TDG, TTMI,UNTD, UTSI, VMSI, VNUS, VMC, WLT, GB, ZOLT.
Friday, February 08, 2008
Economic
10:00am Dec Wholesale Inventories (last 0.6%)
Events
12:25am Fed's Yellen speaks on economy in Honolulu. 1:00pm Fed's Lockhart speaks on financial markets & the economy in Atlanta. Trades Ex-split: JASO 3-1. Trades Ex-dividend: CFC $0.15, BTU $0.06.
Earnings
Before the Open: AIXD, ALU, AIV, BECN, BEC, BW, CLWR, COT, CVH, DHT, DRS, FNM, LPNT, LZ, NNI, PBH, RTK, SKYW, SYNT, VTNC, WY, WIN. After the Close: None seen.
Feb 4, 2008
Shanghai rebounds strongly to lead Asian rally
HONG KONG (MarketWatch) -- Shanghai-listed shares rebounded strongly Monday to lead a regionwide rally, after the Chinese market regulator approved the launch of two new stock funds for the first time in several months, triggering heavy buying in beaten-down resource stocks such as Jiangxi Copper Co. and PetroChina Co.
Most other Asian markets were cheered by a higher close on Wall Street, with Japanese stocks rising sharply as shares of Yahoo Japan (4689) and its largest shareholder Softbank Corp. (9984) paced gains after Microsoft Corp. launched a $44.6 billion bid to acquire the Japanese Internet company's parent Yahoo on Friday.
Australian shares got a lift from miners after Alcoa Inc. and Aluminum Corp. of China, or Chinalco, jointly acquired a 12% stake in Rio Tinto (RIO)(RTP), raising hopes the duo may block BHP Billiton's attempts to acquire Rio.
However, banking shares such as National Bank of Australia reversed intraday highs after Moody's Investors Service placed A$83 billion ($74.7 billion) of mortgage-backed debt on watch for a possible downgrade.
China's Shanghai Composite advanced 8.1% to 4,672.17 to lead the region, after the stock market regulator Friday approved two stock funds to raise up to 14 billion yuan ($1.95 billion). These were the first such approvals in several months, according to reports.
"The Chinese government allowed the distribution of more funds in China, which has helped restore investor confidence in the market. Also, the snowstorm situation isn't worsening any more ... It really is reasonable after the recent panic-selling there," said Ben Kwong, chief operating officer at KGI Asia in Hong Kong.
The Shanghai Composite is 11.2% lower than its closing level for 2007 in spite of Monday's advance. The index lost heavily in the past few weeks in the wake of monetary tightening measures by the country's central bank, fears a U.S. slowdown and the impact from brutal weather conditions in south and central parts of the country.
The recovery followed reports that an official at China's top economic planning body has said the snowstorms won't have a big impact on the Chinese economy in spite of affecting more than a 100 million people over the last few days.
Investors shrugged off news the World Bank has cut China's 2008 economic growth forecast to 9.6% from 10.8% previously, citing the impact on exports from a global slowdown. It also raised the consumer price index forecast to 4.6% from 3.8% previously.
Tokyo, Hong Kong, Sydney advance
In Tokyo, the Nikkei Stock Average finished up 2.7% to 13,859.70 and the broader Topix index advanced 2.1% to 1,364.72.
Shares of Yahoo Japan Corp., in which Yahoo (YHOO) holds 33.4%, jumped 9.5% in the wake of Microsoft's (MSFT) takeover approach for Yahoo at a 62% premium. Shares of Softbank Corp., the single largest shareholder in the Japanese Internet company with a 41% stake, also soared 15.8%.
Elsewhere, Australia's S&P/ASX 200 gained 0.4% at 5,867.40, after rising as high as 6,022 at one point during the session; New Zealand's NZX 50 index climbed 0.1% to 3,711.73, South Korea's Kospi gained 3.4% to 1,690.13.
In afternoon trading, Singapore's Straits Times index advanced 3% to 3,096.70 and India's Sensitive Index, or Sensex, climbed 3.5% to 18,878.06.
In Hong Kong, the Hang Seng China Enterprises Index soared 6.3% to 14,120.84, encouraged by the gains in Shanghai. The benchmark Hang Seng Index climbed 3.8% to 25,032.08.
KGI's Kwong said the advance in Hong Kong was aided by bargain buying after stocks were oversold recently. "But we expect a relatively small upside from these levels as we might see some profit-taking ahead of the New Year holidays," he said.
Some Asian markets will be closed this week for the Lunar New Year holidays. Chinese, South Korean and Taiwanese exchanges will be closed from Wednesday through Friday; Hong Kong, Singaporean, Malaysian and Indonesian markets will be closed Thursday and Friday.
Sydney movers
In Sydney, shares of Rio Tinto ended 0.6% higher on hopes stake purchase by Alcoa (AA) and Aluminum Corp., or Chinalco, could lead them to a takeover battle for the company with BHP Billiton (BHP)(BHP).
Shares of BHP gained 2%, while shares of Aluminum Corp. of China Ltd. (ACH), the listed subsidiary of Chinalco, surged by the daily limit of 10% in Shanghai.
Tony Robson, an analyst at BMO Capital Markets, wrote in a note that Rio's shares have recently risen on news of the stake purchase by Alcoa-Chinalco and as the duo bought the take at 21% above Rio's market price. "However, this move may be enough to stop BHP from bidding, with potentially negative consequences to the Rio Tinto share price in the short-term."
Banking shares, however, succumbed to late selling in Sydney on Moody's. Moody's said its move followed the placement of U.S. bond insurer, PMI Mortgage Insurance, on review for a possible downgrade. The rating watch applies to some 325 tranches of 144 Australian residential mortgage backed securities, or RMBS transactions, that were insured by PMI.
"We note that depending on the proportion of loans insured by PMI, their seasoning and other structural features, a number of these transactions may see their ratings confirmed upon the conclusion of the review process," wrote Moody's in a statement.
Shares of National Australia Bank (NAB) shed 3.4%, while Commonwealth Bank of Australia (CBA) stock sank 4.2%.
Regional detail
In Tokyo, shares of financials and exporters were helped by the pre-weekend finish on Wall Street. Mizuho Financial Group (8411)(MFG) stock rose 4.7% and shares of Nomura Holdings (8604) gained 4.5%. Among exporters, Honda (7267)(HMC) rose 3% and Toyota Motor Corp. (7203)(TM) gained 2.1%.
Shares of steelmaker JFE Holdings (5411) lost 5.5% after it lowered its net profit forecast for the full-year and said it will book a special loss of 50 billion yen ($472 million) due to a loss at its engineering business.
Among other gainers in Shanghai, shares of PetroChina Co. (PTR) soared 8.1% and Jiangxi Copper (JIXAY) surged 10%, while shares of China Life Insurance Co. (LFC) ended 8.2% higher.
In currency trading, the U.S. dollar gained as much as 0.3% at 106.90 yen, and the Australian dollar added 0.5% at $0.91.
March crude-oil futures declined by one cent to $88.95 a barrel in electronic trading, after dropping more than $2 lower to $88.96 Friday on the New York Mercantile Exchange.
Friday on Wall Street, the Dow Jones Industrial Average ($INDU) rose 92.8 points to close at 12,743.2 and the S&P 500 index ($SPX) climbed 16.87 points to close at 1,395.42, while the Nasdaq Composite ($COMPX) gained 23.5 points to finish at 2,413.36.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau
Most other Asian markets were cheered by a higher close on Wall Street, with Japanese stocks rising sharply as shares of Yahoo Japan (4689) and its largest shareholder Softbank Corp. (9984) paced gains after Microsoft Corp. launched a $44.6 billion bid to acquire the Japanese Internet company's parent Yahoo on Friday.
Australian shares got a lift from miners after Alcoa Inc. and Aluminum Corp. of China, or Chinalco, jointly acquired a 12% stake in Rio Tinto (RIO)(RTP), raising hopes the duo may block BHP Billiton's attempts to acquire Rio.
However, banking shares such as National Bank of Australia reversed intraday highs after Moody's Investors Service placed A$83 billion ($74.7 billion) of mortgage-backed debt on watch for a possible downgrade.
China's Shanghai Composite advanced 8.1% to 4,672.17 to lead the region, after the stock market regulator Friday approved two stock funds to raise up to 14 billion yuan ($1.95 billion). These were the first such approvals in several months, according to reports.
"The Chinese government allowed the distribution of more funds in China, which has helped restore investor confidence in the market. Also, the snowstorm situation isn't worsening any more ... It really is reasonable after the recent panic-selling there," said Ben Kwong, chief operating officer at KGI Asia in Hong Kong.
The Shanghai Composite is 11.2% lower than its closing level for 2007 in spite of Monday's advance. The index lost heavily in the past few weeks in the wake of monetary tightening measures by the country's central bank, fears a U.S. slowdown and the impact from brutal weather conditions in south and central parts of the country.
The recovery followed reports that an official at China's top economic planning body has said the snowstorms won't have a big impact on the Chinese economy in spite of affecting more than a 100 million people over the last few days.
Investors shrugged off news the World Bank has cut China's 2008 economic growth forecast to 9.6% from 10.8% previously, citing the impact on exports from a global slowdown. It also raised the consumer price index forecast to 4.6% from 3.8% previously.
Tokyo, Hong Kong, Sydney advance
In Tokyo, the Nikkei Stock Average finished up 2.7% to 13,859.70 and the broader Topix index advanced 2.1% to 1,364.72.
Shares of Yahoo Japan Corp., in which Yahoo (YHOO) holds 33.4%, jumped 9.5% in the wake of Microsoft's (MSFT) takeover approach for Yahoo at a 62% premium. Shares of Softbank Corp., the single largest shareholder in the Japanese Internet company with a 41% stake, also soared 15.8%.
Elsewhere, Australia's S&P/ASX 200 gained 0.4% at 5,867.40, after rising as high as 6,022 at one point during the session; New Zealand's NZX 50 index climbed 0.1% to 3,711.73, South Korea's Kospi gained 3.4% to 1,690.13.
In afternoon trading, Singapore's Straits Times index advanced 3% to 3,096.70 and India's Sensitive Index, or Sensex, climbed 3.5% to 18,878.06.
In Hong Kong, the Hang Seng China Enterprises Index soared 6.3% to 14,120.84, encouraged by the gains in Shanghai. The benchmark Hang Seng Index climbed 3.8% to 25,032.08.
KGI's Kwong said the advance in Hong Kong was aided by bargain buying after stocks were oversold recently. "But we expect a relatively small upside from these levels as we might see some profit-taking ahead of the New Year holidays," he said.
Some Asian markets will be closed this week for the Lunar New Year holidays. Chinese, South Korean and Taiwanese exchanges will be closed from Wednesday through Friday; Hong Kong, Singaporean, Malaysian and Indonesian markets will be closed Thursday and Friday.
Sydney movers
In Sydney, shares of Rio Tinto ended 0.6% higher on hopes stake purchase by Alcoa (AA) and Aluminum Corp., or Chinalco, could lead them to a takeover battle for the company with BHP Billiton (BHP)(BHP).
Shares of BHP gained 2%, while shares of Aluminum Corp. of China Ltd. (ACH), the listed subsidiary of Chinalco, surged by the daily limit of 10% in Shanghai.
Tony Robson, an analyst at BMO Capital Markets, wrote in a note that Rio's shares have recently risen on news of the stake purchase by Alcoa-Chinalco and as the duo bought the take at 21% above Rio's market price. "However, this move may be enough to stop BHP from bidding, with potentially negative consequences to the Rio Tinto share price in the short-term."
Banking shares, however, succumbed to late selling in Sydney on Moody's. Moody's said its move followed the placement of U.S. bond insurer, PMI Mortgage Insurance, on review for a possible downgrade. The rating watch applies to some 325 tranches of 144 Australian residential mortgage backed securities, or RMBS transactions, that were insured by PMI.
"We note that depending on the proportion of loans insured by PMI, their seasoning and other structural features, a number of these transactions may see their ratings confirmed upon the conclusion of the review process," wrote Moody's in a statement.
Shares of National Australia Bank (NAB) shed 3.4%, while Commonwealth Bank of Australia (CBA) stock sank 4.2%.
Regional detail
In Tokyo, shares of financials and exporters were helped by the pre-weekend finish on Wall Street. Mizuho Financial Group (8411)(MFG) stock rose 4.7% and shares of Nomura Holdings (8604) gained 4.5%. Among exporters, Honda (7267)(HMC) rose 3% and Toyota Motor Corp. (7203)(TM) gained 2.1%.
Shares of steelmaker JFE Holdings (5411) lost 5.5% after it lowered its net profit forecast for the full-year and said it will book a special loss of 50 billion yen ($472 million) due to a loss at its engineering business.
Among other gainers in Shanghai, shares of PetroChina Co. (PTR) soared 8.1% and Jiangxi Copper (JIXAY) surged 10%, while shares of China Life Insurance Co. (LFC) ended 8.2% higher.
In currency trading, the U.S. dollar gained as much as 0.3% at 106.90 yen, and the Australian dollar added 0.5% at $0.91.
March crude-oil futures declined by one cent to $88.95 a barrel in electronic trading, after dropping more than $2 lower to $88.96 Friday on the New York Mercantile Exchange.
Friday on Wall Street, the Dow Jones Industrial Average ($INDU) rose 92.8 points to close at 12,743.2 and the S&P 500 index ($SPX) climbed 16.87 points to close at 1,395.42, while the Nasdaq Composite ($COMPX) gained 23.5 points to finish at 2,413.36.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau
Ryanair profit declines 27% outlook Airline warns that fiscal 2008 profit could fall as much as 50%
LONDON (MarketWatch) -- Shares of Ryanair Holdings Plc declined 12% on Monday as Europe's largest low-cost airline reported a 27% drop in adjusted third-quarter profit because of lower ticket prices, and warned that higher fuel prices and weaker consumer spending could cut next year's profit by as much as 50%.
Third-quarter net income at the budget carrier slipped to 47.2 million euros from 47.7 million euros a year earlier. Excluding a one-time gain of 12 million euros from the disposal of aircraft, adjusted profit fell 27% to 35 million euros.
Passenger traffic rose 16% to 12.4 million. Sales climbed 16% to 569 million euros as a 30% increase in ancillary revenue offset a 4% drop in yields, also known as ticket prices.
Ancillary revenue includes revenue from food sold on the plane, luggage charges and commissions on auto rentals and hotels booked through Ryanair's (RYA)(RYAAY) Web site.
The airline said it's on track to meet its ancillary sales target of 20% of revenue over the next three years and the planned introduction of in-flight mobile phone services on 25 planes this spring should further pad revenue.
Ryanair Chief Executive Michael O' Leary called the results a "creditable performance in very adverse market conditions" and confirmed the outlook for profit of roughly 470 million euros this year.
'Significant chance' that profit could decline
But the airline was much more cautious on the view for next year, saying that while it is too early to make an "accurate forecast," fuel prices hovering around $90 a barrel and fears of recession in the U.K. and many other European economies mean the current outlook is poor.
As a result, it said there is a "significant chance" that profit could decline as much as 50% in fiscal 2008 if ticket prices fall 5% and oil trades around $85 a barrel. In the best case scenario, assuming average fares are flat and oil prices fall to $75, Ryanair would post a 6% rise in profit to 500 million euros.
Ryanair shares were last down 13% in London morning trading. The weakness spread to the many other airlines. Shares of low-cost rival EasyJet (EZJ) fell 7.1%. Shares of German low-cost Air Berlin (AB1000) dropped 2.7%. See London Markets.
O' Leary reminded investors that the airline is unhedged for next year and said the 40% increase in fuel prices will impose "significantly higher costs" in a year when it plans to expand capacity by 20%.
The airline also said the slump in consumer confidence would likely result in flat or lower average ticket prices in 2008 and the recent weakness of the pound would bite.
"The European airline sector is presently facing one of these cyclical downturns, with possibility of a 'perfect storm' of higher oil prices, poor consumer demand, weaker sterling and higher costs at unchecked monopoly airports such as Dublin and Stansted," O' Leary said.
In response, Ryanair plans to slash ticket prices to stimulate demand, but said its low cost base means it would remain profitable in case of a recession.
But Deutsche Bank analyst Chris Reid doesn't think too much of the airline's cost base. He said in a note to clients Monday that Ryanair is not getting the benefit of its volume growth in its unit cost base, which is resulting in "business model failure."
Aude Lagorce is a senior correspondent for MarketWatch in London.Japan stocks rise on Microsoft factor
Shares in Softbank soared as much as 16% and Yahoo Japan was untraded due to a flood of buy orders on Monday in Tokyo, on hopes a potential Microsoft acquisition of Yahoo would boost the Japanese firms’ competitiveness, reports Reuters. Microsoft’s $44.6bn bid for Yahoo announced Friday was priced at $31 per share - a 62% premium to Yahoo Inc’s Thursday close. Internet and mobile phone service company Softbank owns 3.9% of Yahoo Inc in terms of voting rights. Yahoo Japan is owned 41% by Softbank and 33% by Yahoo Inc. The deal, if realised, would be highly positive for Yahoo Japan, said one analyst, as Microsoft’s financial prowess and technological expertise would help Yahoo Inc and Yahoo Japan compete better with Google in internet search services. Meanwhile, a weekend report in the Nikkei business newspaper said that a Microsoft acquisition of Yahoo Inc would likely result in an alliance among Microsoft, Softbank and Yahoo Japan.
Microsoft + Yahoo = Microsoft - $44.6 billion
NEW YORK (Reuters) - Microsoft Corp (MSFT.O: Quote) has made an unsolicited offer to buy Yahoo Inc (YHOO.O: Quote) for $44.6 billion in cash and stock, seeking to join forces against Google Inc (GOOG.O: Quote) in what would be the biggest Internet deal since the Time Warner-AOL merger.
In its boldest-ever acquisition move, Microsoft said on Friday it offered $31 per share for Yahoo, or a 62 percent premium over the Internet media company's closing stock price on Nasdaq Thursday.
Yahoo, whose shares jumped to $30.75 in premarket trading, said it would evaluate the bid.
Microsoft shares, which have a market capitalization of about $300 billion, fell 6 percent to $30.78.
World Economic Update
The International Monetary Fund (IMF) has again cut its forecast for world economic growth and is bracing for more bad news in rich and poor countries, even as it stopped short of using the word "recession" on Tuesday (WASHINGTON).
This year, the global economy will post its weakest performance in five years, the global economic watchdog said in an update to its semi-annual World Economic Outlook report.
The warning comes days after IMF managing director Dominique Strauss-Kahn broke with tradition and asked governments to spend more - even at the cost of increasing budget deficits, which the agency normally considers a cardinal sin - to stimulate their economies. Strauss-Kahn cited the severity of the unfolding downturn.
Growth in 2008 likely will slow to 4.1%, from 4.9% in 2007. Last October, it predicted 4.4% growth for 2008. This would be the worst performance since 2003, when the world economy grew by 3.6%, according to the IMF.
"The overall balance of risks to the global growth outlook is still tilted to the downside," the fund said.
"Growth in emerging market countries that are heavily dependent on capital inflows could be particularly affected, while the strong momentum of domestic demand in some emerging market countries provides upside potential" according to the World Economic Outlook Update.
The report also points to other risks: "monetary policy faces the difficult challenge of balancing the risks of higher inflation and slower economic activity although a possible softening of oil prices could moderate inflation pressures".
U.S. growth is projected by the IMF to slow to 1.5% this year, down from 2.2% in 2007 but the update points out that the 2008 number reflects the carryover from 2007. Projections on a quarterly basis (Q4-Q4) give a better sense of the slowing growth momentum. On this basis, growth is projected at 0.8% in the fourth quarter of 2008, compared with 2.6% during the same period of 2007. IMF also describes the recent move by the U.S. Federal Reserve to cut rates by 75 basis points as “appropriate and helpful”.
For the Euro area growth on an annual basis is projected at 1.6% in 2008, down from 2.6% last year. On a Q4-Q4 basis, growth is projected at 1.3%, compared with 2.3% in 2007. IMF economist Simon Johnson said inflation remained a serious concern in Europe and the European Central Bank had done a good job of managing liquidity.
The world’s second largest economy Japan has been dampened by a tightening in building standards, while consumer and business sentiment have weakened. Japan's growth is forecast on an annual basis at 1.5% in 2008, down from 1.9% last year.
Regarding emerging markets and developing countries, led by China and India they have continued to expand strongly. These countries have benefited from the strong momentum of domestic demand, more disciplined macroeconomic policy frameworks, and in the case of commodity exporters, from high food and energy prices. But growth is also expected to ease moderating from 7.8% in 2007 to 6.9% in 2008. In China, growth is projected to decelerate from 11.4% to 10%.
Headline inflation has increased since mid-2007 in both advanced and emerging economies and has become a major challenge. Core inflation has also drifted upward. In the United States, the Federal Reserve has been cutting interest rates in response to increasing downside risks to activity, while policy has been on hold in the Euro area and Japan. Meanwhile, central banks have continued to tighten monetary policy in many emerging market economies, where food and energy represent a higher share of consumption baskets and overheating is more of a concern.
In a separate Global Financial Stability Report Markets Update IMF said that deteriorating economic conditions could exacerbate pressures on major financial institutions that have already suffered big losses from the subprime crisis.
A possibly deeper economic downturn in the United States or elsewhere could also serve to widen the crisis beyond the subprime sector, as credit deteriorates more broadly, it stated. Already delinquency rates in 2007 vintages of U.S. prime mortgages (those to the most credit worthy borrowers) are rising faster than in previous years, albeit from low levels, and other forms of consumer credit show signs of deterioration.
IMF warns that in Western Europe signs of a future slowdown in credit growth are just now emerging and there is some potential for worsening credit quality as lending has been very robust in some countries and several countries face housing markets considered overvalued.
Lending in some segments of the corporate sector also expanded rapidly in the first half of 2007 with the rise in leverage buyouts. Weaker quality corporates have already seen a substantial rise in the cost of credit although yields investment grade debt has remained relatively stable. Additionally, a slowing economy will likely exacerbate the tighter credit environment further as unemployment picks up and job growth slows.
Emerging markets have been resilient so far, but face challenges ahead. Emerging market equities have outperformed mature equity markets, but prices in some markets have declined steeply since the start of the year on expectations that the U.S. economy may slow more rapidly.
The 19 biggest trading scams
Company: Societe Generale (2008) Detail: Lost 4.9 billion euros ($7.2 billion) before taxes after trader went beyond permitted limits on European stock index futures.
Company: Bank of Montreal (2007) Detail: Wrong-way bets on natural gas led to a pretax loss of about C$680 million ($663 million).
Company: Amaranth Advisors LLC (2006) Detail: Trader Brian Hunter's bad bets on natural gas triggered $6.6 billion of losses.
Company: Refco Inc. (2005) Detail: Declared bankruptcy after hiding $430 million of debt
Company: China Aviation Oil (2004) Detail: Lost $550 million on (Singapore) Corp. speculative oil-futures trades, forcing debt restructuring.
Company: Allied Irish Banks Plc (2002) Detail: Trader hid $691 million in currency market losses.
Company: Plains All American (1999) Detail: Lost $160 million because of Pipeline LP unauthorized crude-oil trading by an employee.
Company: Long-Term Capital (1998) Detail: Lost $4 billion after a debt Management default by Russia
Company: Peregrine Investments (1998) Detail: Collapsed from at least Holdings Ltd. $300 million of debt bought from insolvent companies.
Company: National Westminster (1997) Detail: Disclosed $125 million charge Bank Plc to cover options-trading loss.
Company: Deutsche Morgan (1996) Detail: Fired fund manager Peter Young Grenfell for unauthorized trading and paid $279 million to bail out investors.
Company: Sumitomo Corp. (1996) Detail: Disclosed a $2.6 billion loss on unauthorized copper trades by Yasuo Hamanaka.
Company: Daiwa Bank (1995) Detail: Disclosed a $1.1 billion loss from unauthorized trades.
Company: Barings Plc (1995) Detail: Collapsed after trader Nick Leeson racked up $1.4 billion in losses.
Company: Orange County (1994) Detail: Lost $1.7 billion from debt California and derivatives used to expand its investment fund.
Company: Kidder Peabody & Co. (1994) Detail: Took a $210 million charge to reflect what it said were false bond trading profits by trader Joseph Jett.
Company: Codelco (1994) Trader Juan Pablo Davila lost more than $200 million speculating on copper
Company: Metallgesellschaft AG (1993) Detail: Lost more than $1.5 billion trading oil futures contracts
Company: Drexel Burnham (1990) Detail: Filed for bankruptcy after Lambert Inc. pleading guilty to charges of insider trading and stock manipulation.
Feb 3, 2008
TFN NEWS BRIEFING: Macroeconomics highlights to 10:10 GMT
US, EU unlikely to stop Microsoft deal
WASHINGTON (AP) - U.S. and European antitrust regulators aren't likely
to prevent Microsoft from buying Yahoo, analysts said Friday, though scrutiny of
the deal could drag on for months.
2008-02-01 23:31:41
EconoLog
NEW YORK (AP) - Is the U.S. economy slipping into recession? Economists,
analysts, company executives and investors are increasingly recognizing the
possibility. Following are some comments Friday assessing the state of the
economy, and what may happen if it slides into a recession:
-- Analysts from Moody's in a conference call cited heightened fear of a
recession as one of the reasons the ratings agency is likely to downgrade some
bond insurers' financial-strength ratings by the end of the month.
UPDATE: Colombia Nov Trade Surplus $190M Vs Nov 2006 Deficit
Colombia posted a trade surplus of $190 million in November compared to a $239 million deficit in the same month in 2006, the national statistics department, known as DANE, said Friday.
DANE said exports in November advanced 47% to $2.59 billion.
In the first 11 months of the year, the country posted a trade deficit of $1.33 billion compared to a deficit of $52 million in the same period in 2006.
Exports of oil, coal, coffee and nickel rose 53% in November from the same month in 2006 to $1.43 billion, while other exports saw a 42% rise to $1.69 billion.
Exports of oil products in November rose 111% to $853 million, boosted by higher prices, as the country's oil companies shipped 25% more tons of oil and processed products out of the country. Coal exports rose 9.5% to $304 million in value, and were up 2.1% to 5.74 million metric tons in volume.
In November, the worth of nickel exports fell 6.1% to $118 million, while coffee exports rose 20% to $152 million.
The largest trade deficit registered by Colombia in the first 11 months of the year was with Mexico at $2.25 billion, followed by China at $2.02 billion and Brazil $1.67 billion.
The trade gap with those countries was partly offset by surpluses of $3.34 billion with Venezuela and $2.05 billion with the U.S.
Analysts partly attribute the wider deficit in the 11-month period to the appreciation of the Colombian peso, which gained 11% last year, made exports less competitive, while encouraging Colombians to buy more imported goods and services.
DANE said exports in November advanced 47% to $2.59 billion.
In the first 11 months of the year, the country posted a trade deficit of $1.33 billion compared to a deficit of $52 million in the same period in 2006.
Exports of oil, coal, coffee and nickel rose 53% in November from the same month in 2006 to $1.43 billion, while other exports saw a 42% rise to $1.69 billion.
Exports of oil products in November rose 111% to $853 million, boosted by higher prices, as the country's oil companies shipped 25% more tons of oil and processed products out of the country. Coal exports rose 9.5% to $304 million in value, and were up 2.1% to 5.74 million metric tons in volume.
In November, the worth of nickel exports fell 6.1% to $118 million, while coffee exports rose 20% to $152 million.
The largest trade deficit registered by Colombia in the first 11 months of the year was with Mexico at $2.25 billion, followed by China at $2.02 billion and Brazil $1.67 billion.
The trade gap with those countries was partly offset by surpluses of $3.34 billion with Venezuela and $2.05 billion with the U.S.
Analysts partly attribute the wider deficit in the 11-month period to the appreciation of the Colombian peso, which gained 11% last year, made exports less competitive, while encouraging Colombians to buy more imported goods and services.
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