Australian Gold Output Climbs to Six-Year High, Boosted by Newcrest Mines

Australian Gold Output Climbs to Six-Year High, Boosted by Newcrest Mines

By Editors: [bn:PRSN=1] Indranil Ghosh [] - Aug 29, 2010 11:01 AM GMT+0500

Australia’s gold production in the June quarter gained 20 percent compared with the same period a year ago to reach the highest level in more than six years, aided by increased output from Newcrest Mining Ltd.’s Cadia Hill and Telfer mines, a research group said.

Production climbed to 67 metric tons, the highest level since December 2003, Sandra Close, a director of Surbiton Associates Pty that collates results from Australia’s gold- mining companies, said in an e-mailed statement. Output during the year ended June 30 climbed 11 percent to 245 tons, the Melbourne-based company said.

“The June quarter was somewhat of a ‘perfect storm’ for Australian gold production,” said Close. Higher gold prices were “one reason” for new mines coming on stream as well as production restarts, she said.

Gold is headed for a 10th annual gain and prices may reach at least $1,300 an ounce this year as investors seek a shield against financial turmoil, weak currencies and inflation, according to GFMS Ltd.

Abu Dhabi, Israel Shares Rise on Bernanke's Pledge on Economy; Oil Gains - Bloomberg

 

Abu Dhabi, Israel Shares Rise on Bernanke's Pledge on Economy; Oil Gains - Bloomberg

Gold May Rise to $1,300 an Ounce Fueled by Investment Demand, GFMS Says

By Madelene Pearson - Aug 28, 2010 3:47 AM GMT+0500

Gold, headed for a 10th annual gain, may reach at least $1,300 an ounce this year as investors seek a shield against financial turmoil, weak currencies and inflation, according to GFMS Ltd.

“There is going to be in all likelihood a surge in investment demand toward the end of this year, driving prices toward the $1,300 level and possibly beyond,” Chief Executive Officer Paul Walker said in an interview, repeating a June forecast. “Prices are going to ratchet up.”

Bullion demand increased 36 percent in the second quarter as investors boosted purchases of gold-backed funds and pushed up prices to a record during Europe’s sovereign-debt crisis, the World Gold Council said Aug. 25. Investors bought 291.3 metric tons of the metal in exchange-traded funds, or ETFS, the second- highest quarter on record, the producer-funded group said.

“There is a wide enough group of people who are going to continue buying gold for a variety of reasons and that’s going to be the key driver of price action,” Walker said from Goa, India, where he spoke at a conference yesterday. “The physical market, the jewelry market, will be playing a somewhat minor supportive role in price determination going forward.”

Goldman Sachs Group Inc. forecast earlier this month that prices may reach $1,300 in six months and Deutsche Bank AG said June 3 that the metal may surge to $1,700 as currencies slump. The euro fell to a four-year low versus the dollar in June.

Immediate-delivery bullion traded in London added as much as 0.4 percent to $1,242.35 an ounce and traded at 1,233.80 at 7:38 p.m. Mumbai time yesterday.

U.S. Recession

Prices have rallied 13 percent this year in New York and reached a record $1,266.50 on June 21 as investors sought to protect their wealth against financial woes in Europe and the prospect of slowing economic growth. Nouriel Roubini, the New York University economist who predicted the global financial crisis, said Aug. 25 U.S. expansion will be “well below” 1 percent in the third quarter and put the odds of a renewed recession at 40 percent.

“There are still uncertainties looming in the global economy and that’s continuously driving demand for gold,” Kunal Shah, head of commodities research at Nirmal Bang Commodities Pvt., said at the Goa conference. “The risk premium which are there right now in the market can take gold to $1,300. It has the potential to break its all-time high.”

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged at 1,297.95 tons as of Aug. 26, figures on the company’s website showed. Holdings reached a record of 1,320.44 tons in June.

‘Robust Demand’

In India, the biggest gold user, demand almost doubled in the first-half on increased jewelry purchases and investments, the council said Aug. 25. Imports by the country this year may equal 2009’s level as early as this month because of “robust” demand, the group forecast.

Purchases in the first half were 348 tons, compared with 559 tons in 2009, according to council’s data.

“This year we are seeing an underlying and somewhat remarkable theme in the Indian market; a willingness to continue to buy at high prices and a belief that the price will continue to go up,” Walker said. “You would have to have a pretty catastrophic final quarter of the year for imports not to match the 2009 level.”

Gold futures in India climbed to a record 19,198 rupees ($410) per 10 grams on June 8. Local prices have advanced 13 percent this year.

The price of silver may reach $20 an ounce as industrial demand rebounds, Walker said. The metal for immediate delivery was at $18.98 an ounce at 7:32 p.m. in Mumbai yesterday and has added 12 percent this year.

“The fundamental underpinnings of the silver market, fundamental industrial demand, has been incredibly strong this year to date,” said Walker. “The price trajectory is biased toward the upside.”

Silver doubles as a store of value for investors concerned about the economy and as a raw material. Industrial applications including electrical conductors and batteries account for about half of demand.

To contact the reporter on this story: Madelene Pearson in Mumbai on mpearson1@bloomberg.net

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I am spending my vacation with my family.

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Bank of Japan Intervention Risk at Six-Year High, Morgan Stanley Says

By Dave Liedtka - Aug 20, 2010 2:38 AM GMT+0400

The probability that the Bank of Japan will intervene in foreign-exchange markets for the first time since March 2004 is at a six-year high of 51 percent, according to a Morgan Stanley model.

The strengthening of the yen and its misalignment from economic fundamentals is increasingly likely to spur government response, Stephen Hull, London-based head of global currency strategy at Morgan Stanley, wrote in a note dated yesterday.

Japanese policy makers are facing pressure to aid the economy after the yen’s climb to a 15-year high of 84.73 against the dollar on Aug. 11 stoked concern that exporters’ earnings could weaken and deflation might deepen. Trade Minister Masayuki Naoshima said yesterday that the yen is too strong against the dollar and should drop about 6 percent to help exporters.

Japan hasn’t intervened in the currency markets since March 16, 2004, when the yen was at about 109 per dollar. The Bank of Japan sold 14.8 trillion yen during the first three months of 2004, after record sales of 20.4 trillion yen in 2003. The currency ended 2004 at 102.63 to the dollar.

Japan last bought the currency in 1998, purchasing 3.05 trillion yen as the exchange rate weakened to 147.66. The yen was little changed at 85.39 per dollar yesterday in New York.

World Bank Pledges $900 Million for Pakistan Flood Aid as Damage Worsens

By Adi Narayan and Farhan Sharif - Aug 17, 2010 12:30 PM GMT+0400

Emergency relief to Pakistan is “trickling in” and must increase to help up to 20 million people displaced by the country’s worst-ever floods, an aid agency said.

Almost three weeks of flooding from the northwest to the southern province of Sindh has killed 1,600 people, displaced millions more, and destroyed homes, farms and bridges. Relief groups are coping with an area of 160,000 square kilometers (100,000 square miles), almost the size of Uruguay.

“We have big stocks in the country, but getting them on the road to places that need them takes time,” Patrick Fuller, spokesman for the International Federation of Red Cross and Red Crescent Societies, said by phone from Kuala Lumpur after spending 10 days in Pakistan. “At the moment, the funds are trickling in, not pouring in.”

The federation tomorrow will launch a new appeal to double the $16 million it has raised, he said. The World Bank yesterday pledged $900 million in assistance, while the United Nations has raised about a third of the $460 million it is seeking for emergency relief, the BBC reported today. Australia today increased its aid for Pakistan to A$35 million ($31.6 million).

Forecasters said more than two weeks without heavy rains is necessary for the risk of more flooding to be averted. The government yesterday warned of a new flood wave making its way south as well as more monsoons, exacerbating the country’s “worst natural disaster” since its creation in 1947.

Rivers ‘Running Over’

Pakistan’s river network, centered on the Indus that runs through the nation’s economic and farming heartland, will remain “sensitive” to a third wave of flooding until early September as the monsoon weather system plays out, said Ajmal Shad, senior director at the Floods Forecasting Division in Lahore.

“The next two weeks are very crucial, since our rivers are already running over burdened,” he said.

Almost 900,000 homes have been destroyed, Information Minister Qamaruz Zaman Kaira said yesterday. The World Bank estimates crop damage at $1 billion, while Pakistan’s farm minister said agricultural losses may top $3 billion as rivers swamp up to a fifth of the country’s land.

The disaster area “is so massive,” said Fuller, who visited villages in northwest Khyber Pakhtunkhwa province, where the flooding began late last month and where Taliban insurgents have been fighting Pakistani troops for over a year.

‘A Cyclone’

Some villages appear as if “a cyclone has ripped through,” he said. “People are sleeping out on the roadside, on embankments, on boons, wherever there is a bit of high ground.”

At the other end of the country, almost one million people living in and around the city of Jacobabad in Sindh province have been evacuated, local official Ziaul Islam said by phone yesterday.

“The floodwaters have destroyed 90 percent of the agricultural land, but not entered Jacobabad city,” he said.

Underscoring the need for urgent relief, the United Nations said as many as 3.5 million children are at risk from water- borne diseases, including dysentery. Cholera, typhoid, hepatitis A and E are also concerns, UN spokesman Maurizio Giuliano said in a text message.

One in 10 patients treated by Medecins Sans Frontieres’ eight mobile clinics in Pakistan had acute watery diarrhea, the medical aid group said. MSF teams have treated about 10,000 patients in total so far, the organization’s New York office said in a statement on its website.

UN Secretary-General Ban Ki-moon said two days ago that the body will allocate a further $10 million from its Central Emergency Response Fund, bringing its contribution to $27 million since the crisis began more than two weeks ago.

The floods destroyed homes, cut communications and inundated sugar, cotton and rice crops. The disaster may cut Pakistan’s economic growth in half, Finance Secretary Salman Siddique said Aug. 13, with expansion falling as much as 2.5 percentage points short of a 4.5 percent target for the year ending June 30.

To contact the reporters on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net; Farhan Sharif in Karachi at fsharif2@bloomberg.net

King Obliged to Explain Inflation Plan as Rate Exceeds 3% for Fifth Month

By Jennifer Ryan - Aug 17, 2010 1:02 PM GMT+0400

U.K. inflation held above the government’s 3 percent limit in July, forcing Bank of England Governor Mervyn King to write his third public letter this year to explain how he will bring prices under control.

Consumer prices rose 3.1 percent from a year earlier, compared with a 3.2 percent increase in June, the Office for National Statistics said today in London. The result matched the median forecast of 31 economists in a Bloomberg News survey. The bank will publish King’s letter to finance minister George Osborne at 10:30 a.m. today in London.

King predicted last week that inflation will slow below the 2 percent target next year as the government’s budget squeeze constrains growth. Today’s reading may harden a divide on the Monetary Policy Committee, where policy maker Andrew Sentance has argued for an interest-rate increase to tame consumer prices while other officials have warned more stimulus may be needed.

“There are a few things that have been out of their hands that have caused inflation to surprise on the upside,” George Buckley, chief U.K. economist at Deutsche Bank AG in London, said in a telephone interview. “The Bank of England is still credible, it will keep inflation at target over the long run. The bigger question is what combination of interest rates and policy that means.”

The pound was little changed after the report at $1.5657 as of 9:59 a.m. in London. The yield on the benchmark two-year government bond rose 4 basis points to 0.685 percentage point.

Baking Ingredients

Inflation slowed because of lower costs of transport, clothing and footwear, and miscellaneous items such as financial services, the statistics office said. The rate stayed higher because transport and food costs remained more elevated than a year earlier.

Newcastle, England-based Greggs Plc, the U.K.’s biggest baker, said August 10 the higher price of wheat has pushed up ingredient costs, though it isn’t planning to increase the prices of its products yet. First-half profit rose 13 percent as it offered meal deals to attract customers who had less disposable income than a year ago.

Under U.K. law, the Bank of England governor must write a letter to the chancellor of the exchequer every three months when inflation exceeds the 3 percent upper limit. King already sent explanations to the Treasury in February and May.

Core inflation, which excludes the cost of food, tobacco, alcohol and energy prices, slowed to 2.6 percent from 3.1 percent in June. Economists forecast a reading of 3 percent according to the median of 9 predictions in a Bloomberg survey.

Inflation Deviation

The inflation rate has held above the government ceiling since March as the weaker pound and higher commodity costs feed price pressures in the economy. Sterling has fallen by about a quarter on a trade-weighted basis since the start of 2007 while oil prices have more than doubled in the last 18 months. Wheat prices have surged 44 percent in the past year.

The bank’s inflation projections show the rate will be higher next year than it had previously forecast after Osborne raises sales tax to 20 percent in January from the current 17.5 percent. The higher levy will accompany the biggest round of budget cuts since World War Two to tackle a record deficit. The bank predicts inflation will then slow below 1.5 percent.

Policy makers held the key interest rate at a record low of 0.5 percent this month and their bond-purchase plan at 200 billion pounds ($313 billion). The bank will publish minutes of the decision tomorrow. Sentance argued in June and July that the benchmark interest rate should be raised to control inflation.

King said last week the overall outlook for the economy is weaker than in May, and “if it is necessary to respond, then we are quite prepared to do that.”

Retail price inflation, a measure of the cost of living used in wage negotiations, slowed to 4.8 percent from 5 percent in June. The result was exactly the same for the rate excluding mortgage-interest payments.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net.

Gold May Extend Rally to Six-Week High on Signs of Wilting Economic Growth

By Kim Kyoungwha - Aug 17, 2010 8:51 AM GMT+0400

Gold traded near the highest level in more than six weeks as signs of a cooling global economy are luring investors back to the metal to protect their wealth.

Gold for immediate delivery swung between a gain of 0.1 percent and a loss of 0.2 percent before trading at $1,224.10 an ounce at 12:45 p.m. in Singapore, after rallying to as high as $1,227.65 an ounce yesterday, the highest level since July 1.

“People are getting worried about the economy again, more worried than a month ago,” Ghee Peh, Hong Kong-based head of Asian mining research with UBS Securities Asia Ltd. “Gold will extend its rally.”

Gold has strengthened 12 percent this year, reaching a record $1,265.30 an ounce in June, as investors sought protection against financial turmoil and currency debasement. The metal is on course for its 10th annual advance, the longest winning streak since at least 1920.

Economists said reports today will show German investor confidence deteriorated, U.K. inflation slowed and Canadian factory sales declined. Bank of Korea Governor Kim Choong Soo said today international economic uncertainty may stoke turbulence in global financial markets.

Markets “may prove turbulent in the future” and there may be “heightened” volatility in business activity in key nations because of uncertainty from slowdowns in the U.S. and China and Southern Europe’s sovereign-debt woes, Kim said in Seoul.

‘Strong Support’

Gold will trade between $1,220 and $1,230 an ounce today, said Ong Yi Ling, Singapore-based investment analyst with Phillip Futures Pte Ltd.

“The recent rally might induce some profit-taking activity among investors who have positions in gold when it was at sub- $1,200 prices,” she said. “However, the price level of $1,220 an ounce forms a strong level of support.”

Bullion may rally to a record $1,300 an ounce in six months, driven by low interest rates and the prospect of renewed quantitative easing in the U.S., Goldman Sachs Group Inc. said last week.

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged at 1,286.7 metric tons yesterday, the company’s website showed. Holdings reached an all-time high of 1,320.44 tons in June.

Silver for immediate delivery was little changed at $18.405 an ounce, platinum gained 0.2 percent at $1,537.10 an ounce and palladium was little changed at $483.45 an ounce.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

China Economy Surpasses Japan, Capping Three-Decade Rise

China surpassed Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower.

Japan’s nominal gross domestic product for the second quarter totaled $1.288 trillion, less than China’s $1.337 trillion, the Japanese Cabinet Office said today. Japan remained bigger in the first half of 2010, the government agency said.

China led the world out of last year’s global recession with an economy that’s more than 90-times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free-market reforms in 1978. The country of 1.3 billion people will overtake the U.S., where annual GDP is about $14 trillion, as the world’s largest economy by 2027, according to Goldman Sachs Group Inc. chief economist Jim O’Neill.

China’s surpassing of Japan “is a marker of its increasingly dominant role in the global economy,” said Eswar Prasad, a senior fellow at the Brookings Institution and former head of the China division at the International Monetary Fund. “The resilience of China’s growth during the crisis enabled a number of other countries, particularly commodity-exporting economies, to ride on its coattails.”

The benchmark Shanghai stock index rose 2.1 percent at the 3 p.m. close today, climbing the most this month.

Tricky Comparison

China overtook the U.S. last year as the biggest automobile market and Germany as the largest exporter. The nation is the world’s No. 1 buyer of iron ore and copper and the second- biggest importer of crude oil, and has underpinned demand for exports by its Asian neighbors.

While China’s output was also larger in the fourth quarter of 2009, Japan’s GDP rebounded to exceed China’s in the first quarter, according to data compiled by Bloomberg News. According to IMF data using purchasing-power-parity calculations to adjust for exchange-rate differences, China overtook Japan in 2001.

Quarterly comparisons between China and Japan are “a little tricky because they do not take account of different seasonal patterns between the two countries,” said David Cohen, head of Asian forecasting at Action Economics in Singapore.

China’s economy is cooling as the government trims credit growth from last year’s record $1.4 trillion and discourages multiple-home purchases to cool surging property prices. July industrial output rose the least in 11 months, retail sales growth eased and new loans climbed less than estimated. China Petroleum & Chemical Corp. said last month that its crude-oil processing increased at a slower pace in the second quarter as fuel demand faltered.

Property Collapse

The country’s property market is beginning a “collapse” that will hit the nation’s banking system, Kenneth Rogoff, a Harvard University professor and former chief economist of the IMF, said July 6.

Still, China is on course to overtake the U.S. as the world’s largest economy around 2020, PricewaterhouseCoopers said in a January report.

With China’s growth surging 10.3 percent in the second quarter from a year earlier and Japan expanding 2 percent, the “gap is going to widen” in future, said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. “It is not likely that Japan will retake the No. 2 spot given the likely growth rates.”

Four of the world’s top 10 companies by market capitalization are from China, including PetroChina Co., Industrial & Commercial Bank of China Ltd., China Mobile Ltd. and China Construction Bank Corp.

Agricultural Bank

Agricultural Bank of China Ltd. boosted the size of its initial public offering to $22.1 billion this month after selling more stock in Shanghai, making it the world’s largest first-time share sale. The IPO made the nation home to four of the world’s 10 biggest banks by market value, half a decade after the country’s first major state-owned lender went public.

China may be the biggest IPO market in 2010 as companies are likely to raise 500 billion yuan ($74 billion) in Shanghai and Shenzhen, PricewaterhouseCoopers forecast last month.

Since introducing free-market policies, China has lifted 300 million citizens out of poverty, according to the United Nations. The country remains a developing nation, with its per capita gross national income ranked 127th in the world at $2,940 at the end of 2008, behind Angola and Azerbaijan, according to the World Bank.

Cultural Revolution

In the first three decades of Communist Party rule before Deng took power, China’s economy was hobbled by the chaos of the Great Leap Forward, a failed attempt to transform the agrarian nation into an industrial powerhouse, and the Cultural Revolution, a decade of political upheaval led by Mao Zedong’s Red Guards.

“China has a large population, a weak economic foundation, relatively few resources and a large poverty population, which remains our basic situation,” Ma Jiantang, head of China’s statistics bureau, said in January. “Therefore, while we take note of our expanding size of economy and enhancing economic strength, we should also have a sober understanding that China remains a developing nation.”

China’s future influence on the global economy will increase, said Shen at Mizuho. The country’s “double-digit” expansion will contribute a third of global growth this year, the Organization for Economic Cooperation and Development said in March.

“Japan had a huge impact on the global commodities market and foreign direct investment flows in the 1980s” as China is doing now, Shen said. “The major difference is that China’s population is 10-times bigger than Japan’s, its economy is still growing at above 9 percent per year, and Chinese investors are just beginning to invest abroad. You can imagine that China’s impact will be so much bigger.”

--Kevin Hamlin, Li Yanping. With assistance from Marco Babic and Sunil Jagtiani in Singapore, Russell Ward and Keiko Ujikane in Tokyo and Zhang Shidong in Shanghai. Editors: Stephanie Phang, Cherian Thomas

To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

Mr. Yen' Says Japan Can't Stem Currency's Rise as U.S. Economy Falters

Mr. Yen' Says Japan Can't Stem Currency's Rise as U.S. Economy Falters
By Yasuhiko Seki - Aug 15, 2010 7:01 PM GMT+0400

Eisuke Sakakibara said the yen may match its April 1995 peak of 79.75 to the dollar. Photographer: Haruyoshi Yamaguchi/Bloomberg

Japan’s yen, the best performer among major currencies this year with a 7.9 percent gain against the dollar, may surge further as concern grows that U.S. efforts to boost economic growth may fail.

“What we are seeing is not appreciation of the yen but weakness of the dollar, reflecting concerns that the U.S. economy may falter,” Eisuke Sakakibara, formerly Japan’s top currency official, said yesterday on the Fuji television network. “There is a chance the yen will reach an all-time high and stay at that level for the time being.”

The Japanese government has yet to formulate strategy for stemming a yen surge that threatens the earnings of exporters including Toyota Motor Corp., Honda Motor Co. and Canon Inc. A report today probably will show the nation’s economy grew at the slowest pace in three quarters in the period ended June 30, economists surveyed by Bloomberg News forecast.

The yen reached 84.73 to the dollar on Aug. 11, a high since July 1995. Sakakibara -- known as “Mr. Yen” for his efforts to influence exchange rates through verbal and actual currency market intervention while at the Ministry of Finance in 1997-1999 -- said the currency may match its April 1995 peak of 79.75.

‘Feel the Pinch’

“Japanese companies will feel the pinch of a stronger yen and a weakness in share prices around the end of this year,” Sakakibara said. The Nikkei 225 Stock Average fell to a year-to- date low of 9,065.94 on Aug. 12.

Canon, the world’s second-largest printer maker loses about 6.8 billion yen of annual operating profit for every 1 yen gain in its value against the dollar and 4.1 billion yen of profit for each 1 yen rise versus the euro, the company said in April.

Sakakibara spoke after Finance Minister Yoshihiko Noda last week refrained from outlining steps to slow the yen’s rise and the Bank of Japan maintained its policy guidance.

“We will monitor economic conditions carefully and respond appropriately,” Noda said in an unscheduled press conference in Tokyo on Aug. 12. Asked whether action could include currency intervention, he declined to elaborate.

Noda and central bank Governor Masaaki Shirakawa said on Aug. 12 they were closely watching the currency, comments investors said indicate preparedness to curb the yen’s gains to protect the nation’s economic recovery.

Poised to Move?

More than a third of Japan’s margin traders think policy makers will intervene to weaken the yen if it strengthens past the 15-year high reached this week, a survey by Gaitame.com Research Institute Ltd. showed.

Lawmakers from Japan’s ruling party last week urged Prime Minister Naoto Kan to consider intervening in the currency market for the first time since 2004. They also called on the Bank of Japan to “engage in large-scale monetary easing.”

Kan and Shirakawa may meet this week to discuss measures to address the yen’s strength, the Asahi newspaper reported on Aug. 13. Kan said he’s “concerned” about the yen’s recent appreciation, Kyodo News reported on Aug. 14.

“Investors know that the Japanese government can’t come up with decisive measures that can stem the appreciation of the yen,” said Morio Okayasu, chief analyst in Tokyo at FOREX.com Japan Co., a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey.

Japan hasn’t intervened in the currency market since March 2004, when the yen was around 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($172 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. The currency ended 2004 at 102.63 to the dollar.

To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

U.S. Retail Sales Rise Less Than Forecast, Confidence Firms

By Bob Willis and Shobhana Chandra - Aug 14, 2010 12:19 AM GMT+0400 Fri Aug 13 20:19:11 GMT 2010

The cost of clothing, used cars and tobacco climbed, diminishing the risk of a protracted drop in prices. Photographer: Andrew Harrer/Bloomberg

Aug. 13 (Bloomberg) -- Joe Feldman, managing director at Telsey Advisory Group, talks about the outlook for U.S. retail sales. Feldman also discusses his investment strategy for retailers. He talks with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Aug. 13 (Bloomberg) -- Stephen Chick, an analyst at FBR Capital Markets & Co., talks with Bloomberg's Julie Hyman about U.S. consumer spending trends and a recent Gallup poll that finds back-to-school sales have yet to increase this year. (Source: Bloomberg)

Aug. 13 (Bloomberg) -- Michael Darda, chief economist at MKM Partners, talks with Bloomberg's Julie Hyman about the U.S. government's fiscal policies. Darda also discusses the Japanese and U.S. economies, Federal Reserve monetary policy and the U.S. tax code. (Source: Bloomberg)

Aug. 13 (Bloomberg) -- Mohammed El-Erian, chief executive officer and co-chief investment officer at Pacific Investment Management Co., discusses Federal Reserve monetary policy. El-Erian, speaking with Tom Keene and Ken Prewitt on Bloomberg Radio's "Bloomberg Surveillance," also discusses deflation and the outlook for the U.S. economy. (This report is an excerpt of the full interview. Source: Bloomberg)

Partially completed townhouses stand at the Lexington Park development in Des Plaines, Illinois. Photographer: Tim Boyle/Bloomberg

Sales at U.S. retailers rose less than forecast and consumer confidence held near an eight-month low, indicating the economic slowdown will persist into the second half of 2010.

Purchases in July climbed 0.4 percent, led by autos and gasoline, figures from the Commerce Department in Washington showed today. A preliminary sentiment index for August rose to 69.6 from 67.8 the prior month, according to data from Thomson Reuters/University of Michigan.

Consumer spending, which makes up 70 percent of the world’s largest economy, is unlikely to pick up in the absence of a recovery in the labor market. Federal Reserve policy makers this week made their first attempt to shore up a recovery they said was likely to be “more modest” than earlier anticipated.

“The numbers are consistent with a sluggish consumer profile,” said Jonathan Basile, an economist at Credit Suisse in New York. “Things just don’t feel good enough in terms of the level of economic activity and the pace of growth. It reinforces the Fed’s concern.”

Stocks fell for a fourth day after the report. The Standard & Poor’s 500 Index declined 0.4 percent to 1,079.25 at the 4 p.m. close in New York. The S&P Supercomposite Retailing Index dropped 1.4 percent and Treasury securities rose.

Economists forecast retail sales would rise 0.5 percent, according to the median of 77 projections in a Bloomberg News survey. Estimates ranged from a 0.1 percent drop to a 0.9 percent gain. June sales were revised to show a 0.3 percent drop rather than the previously reported 0.5 percent decrease.

Influence on Growth

Excluding autos, gasoline and building materials, which are the figures used in calculating gross domestic product, sales dropped 0.1 percent in July after a 0.3 percent rise the prior month. Economists at Morgan Stanley in New York were among those lowering their estimate for consumer spending this quarter after the report.

J.C. Penney Co., the third-biggest U.S. department-store chain, today lowered its profit forecast for the year, citing an “uncertain” outlook for consumer spending. Kohl’s Corp., the fourth-largest U.S. department-store chain, yesterday lowered its profit forecast for next year.

“We do see a cautious consumer, we see one that’s reluctant to spend,” Kevin Mansell, chairman and chief executive officer at Kohl’s, said in a teleconference.

One reason Americans are hesitating may be because they are concerned about jobs and wages. The share of consumers that believe unemployment will rise over the next year climbed to 32 percent, the highest level this year, the University of Michigan survey showed. Expectations about personal finances dropped to a 17-month low.

Sentiment Forecast

The sentiment gauge was forecast to rise to 69, according to the median of 65 economists in a Bloomberg survey. Estimates ranged from 64 to 74. The index averaged 89 in the five years leading up to the recession that began December 2007, and last month’s reading was the lowest since November.

The cost of living climbed in July for the first time in four months, pointing to a stabilization in prices that may ease concern a slowdown in growth will spur deflation, or a protracted drop that hurts the economy, figures from the Labor Department also showed today.

The consumer-price index increased 0.3 percent, the most in a year and exceeding the 0.2 percent gain projected by the median forecast of economists surveyed. A gauge excluding volatile food and fuel costs, the so-called core rate, increased 0.1 percent, as projected.

Rents Stabilize

The report showed rents, the biggest component in CPI, increased for a second month, and the cost of clothing, used cars and tobacco climbed. Economists say the lack of inflation gives Fed policy makers scope to leave the benchmark interest rate near zero into 2011 to help invigorate the economy.

“There’s been some firming in core inflation in recent months,” said Julia Coronado, a senior U.S. economist at BNP Paribas in New York, who accurately forecast the 0.3 percent gain in the overall prices. “This takes some pressure off the Fed in terms of deflation.”

The Fed said this week in its policy statement that since its June meeting, “the pace of the recovery in output and employment has slowed. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit.”

Central bankers retained their commitment to keep the benchmark interest rate close to zero for an “extended period” and said they will reinvest holdings of agency debt and mortgage-backed securities.

More Inventories

Another report today showed inventories climbed in June, led by gains at retailers that indicate companies may need to cut prices to clear out merchandise as demand slows. The 0.3 percent increase in the value of business stockpiles followed a revised 0.2 percent rise in May, the Commerce Department said.

“It doesn’t look like it will be a good back-to-school season, so that will probably lead to incredible bargains” as companies try to trim stockpiles, said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida.

July is typically the slowest month of the third quarter for retailers as they clear out summer merchandise for the back- to-school season, the second-largest sales period after the year-end holidays.

To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

KSE-100 further move

The KSE-100 index is making a next advance solid entry point in the market. Although the index has cross over all the moving averages but settle on 100 DMA. We recommend the following entry.

Buying index point 9800 to 9900

Stop/loss index point 9500

Target profit index point 9700.