Italy Sells 7.5 Billion Euros of Bills as Yield Drops

Italy sold 7.5 billion euros ($9.7 billion) of six-month Treasury bills, the maximum set for the auction, at the lowest yield on a similar note in more than two and a half years.
The Treasury in Rome today sold the 182-day bills at 0.919 percent, the lowest since April 2010 and down from 1.347 percent at the last auction on Oct. 29. Investors bid for 1.65 times the amount of bills offered, up from 1.52 times last month. Italy returns to the market tomorrow with the sale of as much as 6 billion euros of five and 10-year bonds.
“From a pricing perspective, Italy has overcome the euro- zone crisis,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “Italy is by no means out of the woods and has become a tale of two halves: an increasingly resilient and externally driven bond market and an economy in deep recession amid mounting political uncertainty.”
Italy’s 10-year yield declined 6 basis points to 4.67 percent at 12:07 p.m. in Rome, the lowest since June 2011. That left the difference with comparable-maturity German debt at 328 basis points.

Falling Yields

Italy sold 3.5 billion euros of zero-coupon bonds yesterday at the lowest yield on a similar bond since October 2010.
The country’s bond yields have fallen since European Central Bank President Mario Draghi said in July that the Frankfurt-based institute would do what’s needed to keep the euro and announce in September a bond-buying program for nations in financing stress.
Italy needs to uphold Prime Minister Mario Monti’s pledge to shore up public finances in order to enjoy investor confidence even after elections due by April, the Organization for Economic Cooperation and Development said in its latest Economic Outlook report this week.
The Paris-based OECD also said that Monti’s efforts to reduce the deficit won’t allow Italy to start trimming the euro region’s second-biggest debt next year and that “further fiscal tightening in 2014 would be necessary.”

Source: Bloomberg


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Euro Gains Most in Nine Months Versus Yen on Greek-Deal Optimism

The euro had its biggest gain against the yen in nine months on speculation Europe’s policy makers will agree to keep aid flowing to Greece next week.
The shared currency gained the most in two months versus the dollar as German business confidence unexpectedly rose from the lowest in 2 1/2 years. The yen fell at least 1.2 percent against all of its 16 most-traded counterparts as exports waned and amid speculation Japanese elections next month will hand power to an opposition party that advocates aggressive monetary easing. The dollars of Australia and Canada gained after the International Monetary Fund said the two may be classified as reserve currencies.

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Nov. 23 (Bloomberg) -- Ulrich Leuchtmann, head of currency strategy at Commerzbank AG, talks about the outlook for the euro, dollar and yen ahead of the Nov. 26 emergency meeting on Greece. He speaks from Frankfurt with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

“The euro’s strength is mostly short covering -- investors getting nervous in case we do get some kind of announcement on a Greek debt buyback or cuts to the interest rates on loans,” Eimear Daly, a currency-market analyst at Monex Europe Ltd. in London said Nov. 23. “Comments by the potentially new political leader have really been driving the yen in a way we really haven’t seen play out before. Low market volatility is really letting the yen weaken off.”
A short is wager an asset will weaken, and short covering involves investors buying an asset to offset a prior sale.
The euro rallied to 106.98 yen on Nov. 23, the highest since April, before trading at 106.94 for a 3.2 percent weekly advance, the most since the five days ended Feb. 24. The shared currency touched $1.2991 on Nov. 23, the strongest in three weeks versus the dollar, and ended the week 1.8 percent stronger at $1.2976. The yen fell for a second week against the dollar, declining 1.3 percent to 82.40. It reached 82.84 on Nov. 22, the weakest in more than seven months.

‘Technical Problems’

European finance ministers said a further meeting on Greece had been arranged for Nov. 26 and that only “technical problems” are holding up a deal. Among the options they are considering include recycling European Central Bank profits on Greek bonds, charging Greece lower interest rates and extending repayment deadlines.
The Munich-based Ifo institute said its business climate index climbed to 101.4 this month, compared with an estimated reading of 99.5 based on the median of 48 forecasts in a Bloomberg survey.
The yen has fallen 3.8 percent in the past month, the most among the 10 developed currencies measured by Bloomberg Correlation-Weighted Indexes. The euro is the second-worst performer, losing 0.5 percent, while the dollar has declined 0.4 percent.

Yen Declines

Shinzo Abe, leader of the Liberal Democratic Party that is favored to topple the ruling Democratic Party in Dec. 16 elections, has advocated an increase in the central bank’s inflation goal to as much as 3 percent from 1 percent.
The yen extended its decline even after the Bank of Japan (8301) completed a two-day policy meeting this week where Bank of Japan Governor Masaaki Shirakawa said the opposition party’s proposals to weaken the currency are unrealistic.
Japan’s exports decreased for a fifth straight month, falling 6.5 percent in October from a year earlier, leaving a trade deficit of 549 billion yen ($6.7 billion), according to a report on Nov. 20.
“The yen got an extra push because of the trade-balance figures,” Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York, said Nov. 21. “It showed a deficit that was larger than expected, which is putting pressure on the yen because Japan is an export-driven economy.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, dropped 1.3 percent to 80.217. It was the first weekly decline since the five days ended Oct. 19.

‘Aren’t Stupid’

The dollar fell against most of its major counterparts as U.S. lawmakers expressed optimism the $607 billion in automatic tax increases and spending cuts scheduled to take effect at the beginning of 2013 unless Congress acts would be avoided. The dollar usually gains in times of economic stress as investors seek the world’s reserve currency as a haven.
House Speaker John Boehner, who called Nov. 16 discussions with Obama “constructive,” said Republicans are willing to put revenue on the table in exchange for spending cuts.
“I’m assuming these people aren’t stupid, but I’d like them to prove it,” Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said Nov. 23. “If you remove the problem of the fiscal cliff, there is a danger the U.S. economy could surprise on the upside next year.”

Aussie, Loonie

The Canadian and Australian dollars advanced after the International Monetary Fund said in a Nov. 14 report that the two currencies “are to be considered for inclusion” separately in the IMF’s “Currency Composition of Official Foreign-Exchange Reserves” data. They’ve previously been included in an “other currencies” category in the Washington-based lender’s COFER reports.
The Canadian dollar, nicknamed the loonie, advanced 0.8 percent to 99.29 cents per U.S. dollar, in the biggest weekly gain since Aug. 10. The Aussie was 1.2 percent stronger at $1.0461.
Sweden’s krona was the best performer against the dollar after a survey of Swedish industrial companies showed investments are expected to rise 9 percent this year, Statistics Sweden said Nov. 21. The report damped concern over the economy amid reports of slumping exports and job cuts.
The krona rallied 2.5 percent against the dollar to 6.6228, the largest weekly gain in nine months. The Swedish currency advanced 0.7 percent to 8.5937 versus the euro.

Source: Bloomberg


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Gold Futures Top $1,750, Silver Rises as Dollar Declines

Gold futures topped $1,750 an ounce and silver climbed to a six-week high as the dollar’s drop spurred demand for the metals as alternative investments.
The greenback fell to a three-week low against a basket of major currencies as data showed German business confidence rose in November and speculation mounted that Europe’s policy makers will agree to keep aid flowing to Greece. Gold reached a five- week high.

“The dollar weakness is supporting gold,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview.
Gold futures for December delivery rose 1.3 percent to $1,751.40 at 12:45 p.m. on the Comex in New York. That’s the biggest gain for a most-active contract since Nov. 6. Earlier, the metal touched $1,755, the highest since Oct. 17.
Floor trading was closed yesterday for the U.S. Thanksgiving holiday.
Holdings in gold-backed exchange-traded products rose to a record 2,605.3 metric tons on Nov. 21, data compiled by Bloomberg show. The U.S. Mint sold 67,000 ounces of American Eagle gold coins this month, exceeding the 59,000 ounces for all of October, data on its website showed.
Silver futures for March delivery gained 2.3 percent to $34.206 an ounce. Earlier, the price reached $34.25, the highest since Oct. 11.
Platinum futures for January delivery advanced 2.1 percent to $1,617.10 an ounce on the New York Mercantile Exchange, while palladium futures for December delivery increased 2.5 percent to $667.60 an ounce.

Source: Bloomberg

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Yen Rallies From 7-Month Low as BOJ Refrains From Easing

The yen rallied from near its weakest level in almost seven months against the dollar after Bank of Japan (8301) Governor Masaaki Shirakawa said the opposition party’s proposals to weaken the currency are unrealistic.
The Japanese currency rose versus most of its 16 major counterparts as the BOJ refrained from adding to stimulus measures. Shinzo Abe, favored to topple Japan’s prime minister in Dec. 16 elections, has advocated unlimited easing. The euro weakened against the pound after Moody’s Investors Service cut France’s top rating, renewing concern that Europe’s debt crisis will deepen.

 

The euro slid versus most of its 16 major counterparts after Moody’s Investors Service lowered France’s government bond rating, renewing concern the currency bloc’s debt crisis is deepening. Photographer: Chris Ratcliffe/Bloomberg

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France lost its top credit rating with Moody’s Investors Service, dealing a blow to President Francois Hollande’s efforts to show budget credibility in the face of a stalled economy.

“Shirakawa is being cautious, pouring some cold water on some of the ideas that have been put out by the opposition,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It’s a reason to pare short positions on the yen.” A short position is a bet that an asset will fall in price.
The yen climbed 0.2 percent to 81.28 per dollar at 11 a.m. London time. It touched 81.59 yesterday, the weakest level since April 25. Japan’s currency rose 0.2 percent to 104.10 per euro. Europe’s currency was little changed at $1.2807.
The pound appreciated 0.2 percent to 80.43 pence per euro, after depreciating to 80.65 pence on Nov. 15, the weakest since Oct. 31.
The yen will strengthen toward 79 per dollar within the next six weeks, amid demand for the safest assets, Halpenny forecast.

BOJ Independence

Shirakawa told reporters in Tokyo he wants people to respect the BOJ’s independence and that unlimited money printing would be damaging. He spoke after the central bank said it would keep its asset fund at 66 trillion yen and a credit-lending facility unchanged at 25 trillion yen. All of 22 economists surveyed by Bloomberg News had forecast no change.
Abe, leader of Japan’s Liberal Democratic Party, has advocated an increase in the central bank’s inflation goal to as much as 3 percent from 1 percent. The BOJ is scheduled to hold a policy meeting three days after the election, with 16 economists forecasting easing.
“The markets are pausing for breath in dollar-yen,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “They’re now thinking about the election, who’s likely to win it and what form the next government would take.”

Dollar-Yen Overdone

The 14-day relative strength index for the dollar against the Japanese currency rose to 71 yesterday, above the 70 level that some traders see as a sign an asset’s move may change direction.
“The move looks a bit overdone,” Mitul Kotecha, Hong Kong-based head of currency strategy at Credit Agricole SA (ACA), said in an interview on Bloomberg Television. “I don’t think we’re going to see a quick move up to 85.”
The yen has declined 3.7 percent over the past three months, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 2.9 percent, while the dollar has dropped 1.2 percent.
Moody’s cut France by one grade to Aa1 from Aaa late yesterday and said the nation’s outlook remains negative “as a result of its deteriorating economic prospects.”
The move follows similar action by Standard & Poor’s in January. Since S&P’s rating action, French government bonds have returned 9.4 percent, compared with 3.4 percent for German debt, and 2.5 percent for that of the U.S., according to Bank of America Merrill Lynch data.

‘Kneejerk Reaction’

“There is probably more downside ’til the kneejerk reaction is out of the way,” Steven Englander, Citigroup Inc.’s New York-based global head of Group of 10 strategy wrote of the euro in an e-mail to clients. “On the whole, it seems likely that this more reflects an already existing reality than new information for the market, so the downside should be relatively limited.”
Europe’s shared currency may slide as it trades near the so-called neck line of an M-shaped trading pattern known as a double-top formation, according to Brown Brothers Harriman & Co.
The euro may drop toward $1.2450 as it trades near $1.28, the neck line between a high of $1.3172 on Sept. 17 and a peak of $1.3140 on Oct. 17, Marc Chandler, New York-based global head of currency strategy at BBH, wrote in an e-mailed note to clients yesterday. The $1.2450 level was last seen on Aug. 22, when it dipped to as low as $1.2431.

Source: Bloomberg


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Oil Drops in New York as Supplies Seen Increasing

Oil declined for a second day in New York amid speculation that U.S. crude inventories rose last week and after the International Energy Agency cut its forecast for global demand growth this quarter.
Futures slipped as much as 1.2 percent. U.S. crude stockpiles probably increased last week to the highest level in more than three months, according to a Bloomberg survey before an Energy Department report on Nov. 15. OPEC will need to pump less crude this quarter as demand growth slows, the IEA said. Oil slid yesterday as investors awaited budget talks in the U.S., and extended losses after European leaders said they’ll meet again Nov. 20 to discuss additional funding for Greece.
“Primarily bearish winds are blowing in oil markets at the moment,” said Filip Petersson, a commodities strategist at SEB AB in Stockholm who predicts Brent crude will average $110 a barrel this quarter. “On the macro side, bearish influences are coming from a new wave of Greek worries and the approaching U.S. fiscal cliff.”
Crude for December delivery slid as much as 99 cents to $84.58 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.49 at 12:10 p.m. London time. The contract fell 50 cents to $85.57 yesterday. Prices are down 13 percent this year.
Brent for December settlement declined 31 cents, or 0.3 percent, to $108.76 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $23.27 to West Texas Intermediate futures, compared with $23.50 yesterday.

Crude Output

U.S. crude inventories probably rose 2.5 million barrels to 377.3 million, according to the median estimate of seven analysts in the Bloomberg survey before the Energy Department report. Gasoline supplies climbed 800,000 barrels while distillate stockpiles declined 500,000 barrels, according to the survey. The inventory data will be released Nov. 15, a day later than usual because of the Veterans Day holiday yesterday.
Global oil consumption will average 90.1 million barrels a day this quarter, which is 290,000 barrels a day, or 0.3 percent less than previously forecast, the Paris-based IEA said in its monthly report today.
“The market is very well supplied,” Abdalla El-Badri, OPEC’s secretary-general, said today at the Oil & Money conference in London. “There is no doubt about it. Stocks are very high.”
The Organization of Petroleum Exporting Countries will need to supply 30 million barrels a day this quarter, 500,000 barrels a day less than previously projected because of the weaker demand outlook and expectations for increased non-OPEC supply, the IEA said. Global demand will rise by 830,000 barrels a day in 2013 to 90.4 million, 70,000 barrels less than last month’s forecast.

U.S., Europe

President Barack Obama invited the Democratic and Republican leaders in Congress to the White House this week to begin talks on a plan to avert the so-called fiscal cliff. If Congress doesn’t act by the end of the year, $607 billion in automatic spending cuts and tax increases are scheduled to take effect starting in January.
“The biggest challenge we are facing is the U.S. fiscal cliff,” El-Badri said.
European finance ministers meeting in Brussels yesterday put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute. They granted the country a two-year extension to 2016 to cut its budget deficit to 2 percent of gross domestic product.

Buzzard Field

The Buzzard oil field in the North Sea resumed production late yesterday after halting during the Nov. 10 to Nov. 11 weekend, according to three people with knowledge of the matter, who declined to be identified as the information is confidential.
The 200,000 barrel-a-day Buzzard field is the biggest contributor to Forties crude. Buzzard restarted production on Nov. 3 after two months of maintenance, Nexen Inc., the operator of the field, said on Nov. 5. Two officials at Nexen, based in Calgary, Canada, didn’t immediately respond to e-mails from Bloomberg today seeking comment.


Source: Blommberg

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Saudi Shares Drop to 3-Week Low as Sabic Declines on Lower Sales

Saudi Arabia’s benchmark stock index dropped the most in three weeks on investor concern over U.S. budget cuts and a decline in third-quarter sales at Saudi Basic Industries Corp. (SABIC)
The world’s largest petrochemicals maker by market value known as Sabic fell to the lowest level in a week. Al Rajhi Bank, the kingdom’s biggest publicly traded lender, declined for a second day. The Tadawul All Share Index lost 0.5 percent, the most since Oct. 22, to 6,884.29 at the close in Riyadh. The measure gained 2.2 percent last week. The Bloomberg GCC 200 Index (BGCC200) of regional stocks and Qatar’s QE Index lost 0.5 percent.
The Stoxx 600 Index dropped 1.7 percent last week and the MSCI Emerging Markets Index (MXEF) lost 1.4 percent on concern the U.S. will slip back into recession if lawmakers fail to reach a budget compromise on the so-called fiscal cliff, which refers to about $607 billion of tax increases and federal spending cuts set to kick in automatically in January. Saudi Arabia relies on oil exports for about 90 percent of government revenue, making it vulnerable to swings in global demand.
“Petrochemical stocks have high sensitivity to news about the global economy,” Turki Fadaak, head of research at Albilad Investment Co. in Riyadh, said by phone. “Any positive news has a good impact on the companies and any negative news has the opposite effect.”
Sabic’s sales dropped to 44.8 billion riyals ($11.9 billion), the company said in a regulatory filing today. Sabic said on Oct. 17 third-quarter profit tumbled 23 percent as prices for its products dropped amid slower global economic growth. Profit has fallen in the past four quarters as the maker of fertilizers, plastics and steel suffers from the effects of slowing growth in developed economies.

‘Below Expectations’

Sabic’s third-quarter sales were “a bit below expectations, primarily due to lower petrochemical prices in the third quarter,” Muhammad Faisal Potrik, an analyst at Riyad Capital, said by phone. “Ethylene prices were down 5 percent quarter on quarter, so that also had an impact.” He had estimated third-quarter sales at around 46 billion.
Sabic shares fell 0.6 percent to 90.25 riyals, the lowest since Nov. 5. Al Rajhi declined 0.4 percent to 69.50 riyals.
Elsewhere in the Middle East, Dubai’s DFM General Index lost 0.2 percent and Abu Dhabi’s index slipped 0.1 percent. Kuwait’s gauge gained 0.2 percent. Oman’s MSM30 Index (MSM30) and Egypt’s EGX 30 Index were little changed.
Israel’s TA-25 Index (TA-25) dropped 0.3 percent. The yield on the nation’s 5.5 percent bonds maturing in January 2022 fell two basis points, or 0.02 percentage point, to 3.9 percent.

Source: Bloomberg

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Dubai Index Drops as U.S. Fiscal Cliff Pressures Global Stocks

Dubai’s shares fell, leading declines in the Persian Gulf, after concern over U.S. budget cuts and a delay in the European Union’s bailout of Greece spurred drops in global shares.
Emirates Integrated Telecommunications Co (DU), the United Arab Emirates phone services company known as Du, and construction company Arabtec Holding Co. fell for a second time in three days. The benchmark DFM General Index (DFMGI) dropped 0.3 percent to 1,612.92 points at 12:31 p.m. in the emirate. The Bloomberg GCC 200 Index (BGCC200) of regional stocks lost 0.2 percent and Qatar’s QE Index decreased 0.3 percent.
The Stoxx 600 Index dropped 1.7 percent last week and the MSCI Emerging Markets Index (MXEF) lost 1.4 percent on concern the U.S. will slip back into recession if lawmakers fail to reach a budget compromise on the so-called fiscal cliff, which refers to about $607 billion of tax increases and federal spending cuts set to kick in automatically in January. Euro-area finance ministers may not make a decision on unlocking funds for Greece until late November, a European Union official said last week.
Share price declines in Dubai are “mostly due to the fears that global markets now face due to the fiscal cliff in the U.S. with their budget as well as fears of the Greek bailout being delayed,” Marwan Shurrab, vice-president at Gulfmena Investments Ltd. said by phone today. “What we are going to see is consolidation around these levels, until there is greater clarity on the views and direction from international markets and sentiment.”
Du retreated 1 percent to 3.79 dirhams. Arabtec, which fell 3.1 percent last week, lost 1.2 percent to 2.46 dirhams, set for the lowest close since Nov. 7. The biggest builder in the U.A.E. last week said it revived plans to increase capital and sell convertible bonds as it seeks financing for expansion amid a decline in quarterly profit.
Elsewhere in the Middle East, Abu Dhabi’s index slipped 0.3 percent and Kuwait’s gauge lost 0.2 percent. Oman’s MSM30 Index (MSM30) and Saudi Arabia’s Tadawul All Share Index (SASEIDX) were little changed.
Israel’s TA-25 Index (TA-25) dropped 1 percent. The yield on the nation’s 5.5 percent bonds maturing in January 2022 fell two basis points to 3.9 percent.

Source:Bloomberg: