Are Oil Prices Nearing a Bottom?

The recent decline in the price of oil has been among the swiftest ever. Crude prices have tumbled 22 percent so far this quarter, their steepest slide since the end of 2008, back in the deep, dark days of the financial crisis. Things are bad now for sure, with Europe on the brink and an underwhelming U.S. recovery. But are they Lehman Brothers, Bernie Madoff, AIG bad? Probably not. And there’s growing evidence that oil prices may be approaching a bottom.

Both domestic and international crude prices have risen over the past week. Since June 21, domestic West Texas Intermediate is up nearly 2 percent, while the price of international Brent is up 8 percent. That’s right about where they were during the last market bottom in early October. The seven-month buildup in U.S. oil supplies finally appears to be losing steam, after the Department of Energy reported that crude inventories fell 133,000 barrels last week (PDF). That’s not nearly as big a drop as many people expected—a Bloomberg survey forecast a 1.3 million-barrel decline. But it’s a drop nonetheless, and a rare one at that. Since December, U.S. oil inventories have risen 20 percent, yet over the past month the pace has flattened out. At 387 million barrels, the U.S. is still sitting on its highest supply of crude oil since July 1990.

The U.S. recovery also got a boost on Tuesday as the Commerce Department reported that May’s durable goods orders were better than expected.

The oil trade has also changed drastically in the last few months. After pouring billions of dollars into futures contracts from October through March, oil speculators have made a dash for the exits, taking with them the artificially high price of oil. Three months after the sell-off began, the amount of managed money betting that oil prices will rise is at its lowest level since September 2010. That could mark the beginning of a new buying cycle.

“Crude oil is no longer a crowded trade, so there is greater scope for a new cycle of buying to emerge,” says Tim Evans, an energy analyst at Citigroup (C). “The money is now on the sidelines and not in the market.”

For traders, oil at $80 a barrel (the current price of WTI) has significantly less downside risk than oil at $100. Barring some fundamental shock to the market that kills demand, there seems to be a natural equilibrium around $80 in the U.S. It’s high enough for producers to keep drilling and pumping, yet low enough that it shouldn’t curb consumer demand. At $3.43 a gallon, the average national price of gasoline in the U.S. is back to where it was in January.

That’s not to say a few risks aren’t out there that would lower the price of oil further. Europe is still an economic mess, and the reports leading up to this week’s EU summit in Brussels don’t offer much optimism. If the euro starts to crumble, oil prices will surely drop. China’s economy is slowing, faster perhaps than it’s letting on. And then there’s OPEC, which has significantly boosted production in recent months. Should Saudi Arabia continue to pump away at its fastest rate in more than 20 years, that will probably keep prices from rising too much.

View the original article here

Oil Prices Keep Falling, But a Strange Gap Persists

Oil prices are down more than 20 percent since mid-March. Yet that hasn’t erased a strange anomaly in the market: the gap between two essentially identical types of oil. North American light, sweet crude, also known as West Texas Intermediate, trades just below $84 while its international equivalent, known as Brent, is priced at $97.

Why would two similar products sell for such different prices? The problem is getting hold of WTI and connecting supply with demand. The gusher of new domestic oil production coming out of shale deposits in North Dakota, Texas, and Oklahoma has outstripped the country’s pipeline capacity to move it around. The result is a supply glut that has built up in the middle of the country, lowering the price of WTI. Refineries along the Gulf Coast would love to get their hands on more cheap domestic crude, but they can’t simply call an oil supplier and have a load of cheaper WTI delivered whenever they want. While pipeline projects to solve the problem are just getting underway, there’s still no easy way to get large quantities of WTI down to the country’s refining hub along the Gulf Coast. So refiners remain trapped, forced to keep taking more expensive imported oil.

The discrepancy has lasted a lot longer than most people thought. Although they’ve traded within a dollar of each other for the bulk of the past 20 years, starting in August 2010, WTI began trading below Brent by about two to three dollars. By February 2011, the spread widened to $20 as domestic production ramped up and turmoil hit the Middle East with the Arab Spring, spooking markets with concerns over threats to supply. The gap peaked at $27 last October, when Brent was trading at $114 and WTI was close to $87. The gap is currently about $13.

One of the big debates in the oil market right now is how tight that spread will get over the next half a year. Opinions vary considerably. The energy guys at Goldman Sachs, led by analyst David Greely, think that by the end of 2012 the price of WTI will be just $5 below Brent, largely because new pipeline projects, such as the recently reversed Seaway, will allow more domestic crude to reach refineries along the Gulf Coast, making WTI more valuable. In essence, the more domestic crude that reaches the Gulf Coast, the stronger the floor beneath the price of WTI becomes.

At the same time, though, domestic production shows no sign of abating. The number of oil rigs drilling in the U.S. has risen to 1,400 from 984 last June, a 43 percent increase. That extra supply should provide an equally strong (if not stronger) ceiling on the price of WTI. As a result, many analysts think the WTI-Brent spread will persist in double-digits for the foreseeable future. “Five dollars is not likely,” says Fadel Gheit, an analyst at Oppenheimer. “And even if it does go to $5, it’s not going to stay there.” Gheit points out that as long as WTI stays above $70, drilling companies can still make money producing new wells, which in turn, he says, will keep WTI anywhere from $8 to $12 below the price of Brent.

This price gap has created an arbitrage opportunity for some enterprising oil traders. For those who can buy domestic oil cheaply and have the means—either by leasing barges or rail cars—to move it down to the Gulf Coast, they can make money by selling it to refineries at a higher price. The tighter that spread, the trickier that trade becomes. Yet $13 is still a big enough window to make it work.

View the original article here

Falling Oil Prices Are No Mystery

Oil prices have fallen sharply in the past two months, with Brent crude sinking to $97 a barrel and West Texas Intermediate hitting $83. The explanation is simple: Since March, the world has been producing more oil than it’s consuming, according to data gathered by the Energy Intelligence Group. Global oil consumption has been declining since the end of 2011, falling to 88.5 million barrels per day at the end of April, from 90.4 million barrels per day in late December 2011. At the same time, world oil production has risen steadily for more than a year, driven by new finds and drilling techniques in North America and a 10 percent increase in production from OPEC during the past 12 months. The last time supply outstripped demand was in 2006.

The U.S. is now sitting on more oil supplies than it has since 1990. And yet our demand for it is at close to a 15-year low—a result of economic weakness and increased energy efficiency. “The amount of oil it takes to move the economy is declining,” says Fadel Gheit, an energy analyst at Oppenheimer.

The price declines have coincided with a steep selloff in oil futures contracts over the last two months. Speculators cut their net-long positions—bets that the price will rise—to the equivalent of 136 million barrels of oil, the lowest level since September 2010, according to the Commodity Futures Trading Commission. This follows a huge speculative buying binge. Oil prices spiked from October through March—a six-month bull run fueled by speculative worry over an Iranian supply disruption.

With speculative money pouring out of the oil market, the price is closer to reflecting supply-demand fundamentals. And that means the world’s two most traded oil contracts should continue to fall in price through the summer, analysts say. Religare Capital Markets forecasts that Brent crude, the benchmark for more than half the world’s oil, will fall to $90 a barrel by September, and that West Texas Intermediate should fall to $80.

Since two-thirds of the price of gasoline is determined by the price of oil, that should continue to lower prices at the pump. At the end of May, the average price of a gallon of gasoline in the U.S. was $3.66, 12? lower than it was a year ago. That will provide some relief at the pump in time for the summer driving season. Whether that amounts to enough of an economic stimulus for consumers to help lift the economy is much less clear.

View the original article here

A Flood of Crude Could Mean Oil Prices Will Drop

Two measures of oil availability have reached their highest levels in decades, according to Michael Shaoul, CEO of broker Oscar Gruss & Son. Demand “has been overwhelmed by supply,” he says.

View the original article here

Fewer Stock Splits, Record Share Prices

Stock splits, designed to attract investors by making stocks more affordable, have become a rarity since the 2008 financial crisis. Four companies in the Standard & Poor’s (MHP) 500-stock index split their shares this year, and 16 did in 2011. That’s down from an average of 35 annually from 2004 through 2007 and a recent peak of 102 in 1997, data compiled by S&P and Bloomberg show.

When a company splits its stock, holders get one or more shares for each share they own, while the price of the stock comes down proportionately, leaving the market value of the company unchanged. Traditionally, corporate boards have favored splits when the company’s share price has risen so high that individual investors find it difficult to buy 100 shares at a time. They often aimed to do a split at a time when they were “confident” the stock would maintain its value or rise, says Doug Ramsey, chief investment officer at Leuthold Group, a money management firm. The market plunge that accompanied the financial crisis has made corporate executives cautious about splits. “There’s a reluctance to split a stock after such a decline is still fresh in the collective memory of management,” he says.

The scarcity of splits has helped send the average stock price of companies in the S&P 500 to a record $58.52 on April 30, more than two decades of data compiled by Bloomberg show. That’s 9.1 percent higher than the average price of $53.66 when the index reached its all-time high of 1,565.15 in October 2007. With the S&P 500 up 97 percent as of May 15 from its low of March 2009, the effect has been to push 48 stocks above $100 a share, a record, according to Bloomberg data going back to 1990.

Individual investors have been wary of stocks since the market plunge that accompanied the financial crisis, and higher per-share prices may be contributing to the drop in stock trading by creating psychological barriers for investors who want to purchase blocks of 100 shares. “This is starting to be a real big issue for retail investors,” says Christopher Nagy, managing director for order routing sales and strategy at online brokerage TD Ameritrade (AMTD). “There’s this phenomenon going on where there’s hardly any trades in the marketplace, volume is at 10-year lows, and a lot of that can be attributed right back to share pricing.”

Trading at discount brokerages has slowed since the financial crisis, according to data on E*Trade Financial (ETFC) and TD Ameritrade compiled by Barclays (BCS). At 537,636 transactions per day in March, volume was 15 percent below a high in October 2008. Trading on all U.S. exchanges fell to 6.73 billion shares a day this year from 9.99 billion in the second half of 2008, data compiled by Bloomberg show.

Apple (AAPL), which hasn’t split since 2005, is up 37 percent this year to $553 on May 15. In the four months through April 9, it added more than $250 billion in market value. Priceline.com (PCLN) trades at $662, the highest price in the S&P 500.

Chipotle Mexican Grill (CMG), with the sixth-highest price in the S&P 500, hasn’t split its stock in the six years since it became a standalone company. The restaurant operator reached an all-time high of $440 on April 13. “Splitting is nothing more than window dressing,” says Chris Arnold, a Chipotle spokesman. “It doesn’t change or add value for anybody, not customers, not the company, and not shareholders. Doing these things to manipulate the price in a way that doesn’t create value just to make it accessible to a few more people is really unimportant to us.”

When Google (GOOG) announced its first stock split in April, it wasn’t to appease stockholders. Instead, the company said it created a class of nonvoting shares to exchange for options owned by employees, so that redemptions wouldn’t dilute the control of its top executives. After issuing the new stock, shares of the search engine operator will be cut in half from more than $600.

Warren Buffett is known for his opposition to stock splits, saying that companies that avoid them even when prices soar encourage investors to think like owners instead of traders. His Berkshire Hathaway (BRK/A) Class A shares trade above $120,000. Even Buffett bowed to investor demand for lower-priced stock by adding Class B shares that were worth about 1/30th the equity value when introduced in May 1996. He split those 50 for 1 in 2010 to facilitate the takeover of Burlington Northern Santa Fe.

Not everyone believes high share prices discourage investors. “I don’t think that just because stocks are not being split or they are too expensive would keep investors out of the market,” says Michael Gibbs, co-head of the equity advisory group at Raymond James & Associates. “It might push them to other stocks. The reason they’re not in the market is the decade they suffered.”

The bottom line: A decline in stock splits helped push the average price of a stock in the S&P 500 to a new record, $58.52, on April 30.

View the original article here

Why Lower Natural Gas Prices Help the U.S. Only a Little

There’s a rule of thumb that says a $10 rise in the price of a barrel of oil reduces gross domestic product growth by anywhere from 0.2 to 0.5 percentage points. Applied over the past six months, when crude prices rose by about $30 from early October to the end of March, that means dearer oil might’ve chewed as much as 1.5 percent out of GDP growth during the last two quarters. Not a trivial amount considering GDP increased 3 percent in the fourth quarter of 2011. Economists surveyed by Bloomberg tend to think the economy grew just 2.2 percent in the first three months of 2012, when the price of gas really took off.

Oil is our economy’s most important raw material. The price of it (and therefore, gasoline) impacts the price of just about everything we buy, from groceries to clothes to appliances. The more expensive oil is, the more expensive a whole lot of other stuff becomes. But what about that other gas, the kind that we’re practically swimming in these days? Natural gas is now 80 percent cheaper than it was four years ago. How much has that price decline counteracted our recent pain at the pump?

Unfortunately, not much. On the consumer side, at best you’ve seen a small reduction in your electricity bill. Natural gas has certainly played a part in slowing the pace of rising residential electricity prices, from an average annual increase of 5 percent between 2003 and 2008, to 0.8 percent from 2009 through 2013. Rates are actually forecast to fall 1.4 percent next year. According to the consumer price index, the cost of utility gas service for heating declined 9.1 percent over the past year. But that’s a relatively tiny portion of what we spend our money on—less than 1 percent. Motor fuels, on the other hand, carry a relative importance of 5.8 percent and have increased 9 percent in price over the past 12 months. So whatever you might’ve saved on your electric or home heating bill, you probably plowed right back into your gas tank.

Cities with public buses that run on compressed or liquefied natural gas have benefited from lower fuel costs. And if you happen to be one of the handful of people in the U.S. who drive a natural gas car, you’re probably coming out ahead on your fuel bill every month—especially in California, which has the bulk of the country’s 400 public natural gas fueling stations, and where regular gasoline prices are among the highest.

Manufacturers have certainly benefited from lower natural gas prices. The fuel is a particularly critical input for the petrochemical and refining industry, giving U.S. firms a big cost advantage over international competitors—as much as 70 percent over manufacturers in South Korea and Europe. Whether cheap natural gas is propelling any of the strong job growth in the manufacturing sector over the past couple years is debatable. It’s certainly making a lot of manufacturers more profitable. On the flip side, it’s been bad for producers. As prices have plummeted it’s become uneconomical to keep drilling for gas. There’s a good chance that if you were working on a natural gas drill rig a year ago, you’re not anymore.

Big picture as of today, cheap natural gas hasn’t done much to counteract the run-up in oil prices. “So far it’s been a pretty small positive,” says Mark Zandi, chief economist at Moody’s. That doesn’t mean that in the future it won’t pay big dividends for the U.S.—particularly, as Zandi points out, if we’re able to get more natural gas into our transportation network. T. Boone Pickens wants to retrofit our long-haul trucking fleet to run off natural gas. There’s evidence that’s starting to happen. If done on a large enough scale, that could take a big bite out of the impact high oil prices play in driving up the costs of goods.

We’re also severely limited in our capacity to export natural gas right now. The U.S. has just one export facility, in Alaska. A recently approved LNG export terminal in Louisiana will bring that to a grand total of two once completed in 2015. Regulators aren’t likely to approve any more LNG export projects in the coming year, though they probably will in the future. Depending on domestic demand, abundant natural gas could significantly reduce the U.S. trade deficit and perhaps turn us into a net exporter.

Although we have massive amounts of natural gas—an estimated 2,214 trillion cubic feet, enough to last 100 years by some measures—we still don’t use that much of it. Case in point: We’re drilling so much and using so little, it’s conceivable that we’ll max out our 4.3 trillion cubic feet of storage capacity at some point this year. Americans burn about 22 trillion cubic feet of natural gas every year, enough to fill up about 595,000 Empire State Buildings. But we could use a whole lot more, and certainly will soon. Until we do, the U.S. economy won’t see that big of an upside from cheap prices.

View the original article here

Taiwan Presidential Candidates Vow Taxes to Contain Prices

January 08, 2012, 6:32 PM EST By Andrea Wong

(Updates with stock prices in ninth paragraph.)

Jan. 6 (Bloomberg) -- Taiwan’s presidential candidates have vowed to rein in property prices by imposing new taxes, making surging housing values a key political issue.

President Ma Ying-jeou, the Kuomintang party chairman who is seeking re-election on Jan. 14, and opposition Democratic Progressive Party chairwoman Tsai Ing-wen both said they would introduce a capital gains tax on transactions of properties to curb speculative buying. Tsai plans to draft the law within a year, Apple Daily reported on Dec. 18.

The new taxes will add to Ma’s earlier efforts to fight real-estate speculation that led housing prices in the capital Taipei to more than double since 2000 and reach a record high in September. Ma has introduced a 15 percent tax on some homes sold within a year of purchase, and a 10 percent levy on some sold within two years.

“It’s quite clear that the rise in property prices is driven by investors speculating on the market, and that’s a bubble,” said Frank Lin, a Taipei-based analyst at CLSA Asia- Pacific Markets. “That has become a social issue and will be one of the most important election topics, not just this month, but in the future as well.”

Tsai, who has been campaigning on promises to narrow the wealth gap and contain property prices, said Ma’s administration had failed to look after the less privileged.

Widening Lead

Ma was widening his narrow lead over Tsai in public opinion polls taken prior to a blackout period for voter surveys that began Jan. 4. Taiwanese law bars publication or release of polls 10 days prior to presidential elections.

Taiwan’s home prices are set to fall this year with the new taxes, according to CLSA, which commissioned Gallup MRC Taiwan to conduct public opinion polls to help determine the outcome of the election next weekend.

Housing prices in Taipei are set to decline 10 percent this year, said Lin, while those in areas including New Taipei City, the metropolitan area outside of the capital with one of the highest vacancy rates on the island, may face a drop of as much as 20 percent, he said.

Farglory Land Development Co., Taiwan’s biggest construction company, fell 0.9 percent to close at NT$47.85, while Cathay Real Estate Development Co. lost 1 percent to NT$10.25. The benchmark Taiex index slipped 0.2 percent.

The average price of existing homes in Taipei dropped 2.3 percent in November from a record NT$571,000 ($18,870) per ping (36 square feet) in September, according to Sinyi Realty Co. Transactions slipped as much as 38 percent in the fourth quarter, the island’s biggest real-estate brokerage said.

‘Big Unknown’

The central bank tightened mortgage lending rules in 2010.

Signs of a slowdown in the U.S. and Europe will hurt Taiwan’s economy, adding to uncertainties in the property market, according to CLSA and Sinyi Realty. Exports account for more than two-thirds of Taiwan’s gross domestic product.

“The economy is a big unknown facing us at the moment,” said Stanley Su, chief analyst at Sinyi Realty. “Differences in the policy directions of the candidates will add to uncertainties. If we have a political change of power, potential buyers may be even less willing to make bids.”

--With assistance from Chinmei Sung in Taipei. Editors: Linus Chua, Andreea Papuc

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Sandy Hendry at shendry@bloomberg.net

View the original article here

Taiwan Presidential Candidates Vow Taxes to Contain Prices

January 07, 2012, 6:20 AM EST By Andrea Wong

(Updates with stock prices in ninth paragraph.)

Jan. 6 (Bloomberg) -- Taiwan’s presidential candidates have vowed to rein in property prices by imposing new taxes, making surging housing values a key political issue.

President Ma Ying-jeou, the Kuomintang party chairman who is seeking re-election on Jan. 14, and opposition Democratic Progressive Party chairwoman Tsai Ing-wen both said they would introduce a capital gains tax on transactions of properties to curb speculative buying. Tsai plans to draft the law within a year, Apple Daily reported on Dec. 18.

The new taxes will add to Ma’s earlier efforts to fight real-estate speculation that led housing prices in the capital Taipei to more than double since 2000 and reach a record high in September. Ma has introduced a 15 percent tax on some homes sold within a year of purchase, and a 10 percent levy on some sold within two years.

“It’s quite clear that the rise in property prices is driven by investors speculating on the market, and that’s a bubble,” said Frank Lin, a Taipei-based analyst at CLSA Asia- Pacific Markets. “That has become a social issue and will be one of the most important election topics, not just this month, but in the future as well.”

Tsai, who has been campaigning on promises to narrow the wealth gap and contain property prices, said Ma’s administration had failed to look after the less privileged.

Widening Lead

Ma was widening his narrow lead over Tsai in public opinion polls taken prior to a blackout period for voter surveys that began Jan. 4. Taiwanese law bars publication or release of polls 10 days prior to presidential elections.

Taiwan’s home prices are set to fall this year with the new taxes, according to CLSA, which commissioned Gallup MRC Taiwan to conduct public opinion polls to help determine the outcome of the election next weekend.

Housing prices in Taipei are set to decline 10 percent this year, said Lin, while those in areas including New Taipei City, the metropolitan area outside of the capital with one of the highest vacancy rates on the island, may face a drop of as much as 20 percent, he said.

Farglory Land Development Co., Taiwan’s biggest construction company, fell 0.9 percent to close at NT$47.85, while Cathay Real Estate Development Co. lost 1 percent to NT$10.25. The benchmark Taiex index slipped 0.2 percent.

The average price of existing homes in Taipei dropped 2.3 percent in November from a record NT$571,000 ($18,870) per ping (36 square feet) in September, according to Sinyi Realty Co. Transactions slipped as much as 38 percent in the fourth quarter, the island’s biggest real-estate brokerage said.

‘Big Unknown’

The central bank tightened mortgage lending rules in 2010.

Signs of a slowdown in the U.S. and Europe will hurt Taiwan’s economy, adding to uncertainties in the property market, according to CLSA and Sinyi Realty. Exports account for more than two-thirds of Taiwan’s gross domestic product.

“The economy is a big unknown facing us at the moment,” said Stanley Su, chief analyst at Sinyi Realty. “Differences in the policy directions of the candidates will add to uncertainties. If we have a political change of power, potential buyers may be even less willing to make bids.”

--With assistance from Chinmei Sung in Taipei. Editors: Linus Chua, Andreea Papuc

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Sandy Hendry at shendry@bloomberg.net

View the original article here

Asian Stocks Drop as U.S. Home Prices Slip; China Mengniu Falls

December 28, 2011, 6:06 AM EST By Yoshiaki Nohara

Dec. 28 (Bloomberg) -- Asian stocks fell for a second day amid slow trading, with the regional benchmark index headed for its biggest annual decline since 2008, after U.S. housing prices fell, damping the earnings outlook for Asia’s exporters.

Sony Corp., Japan’s No. 1 exporter of consumer electronics, dropped 2.4 percent. SK Telecom Co. paced declines among South Korean companies that went ex-dividend today. China Mengniu Dairy Co. plunged 24 percent after saying moldy feed given to cows led to excessive levels of a toxin in its milk. Tokyo Electric Power Co. fell to the lowest level in at least 37 years after Japan’s trade minister said the utility should consider temporary government control.

The MSCI Asia Pacific Index slipped 0.6 percent to 113 as of 7:41 p.m. in Tokyo, with all but one of the gauge’s 10 industry groups falling. For the month, the index is heading for a 0.5 percent decline. The measure has dropped 18 percent this year, the most since 2008.

“The U.S. housing market has yet to get on a firm recovery path because we don’t know if prices will actually come back,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $29.6 billion. “Market participants are in vacation mode and aren’t doing much.”

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent today. The gauge was little changed yesterday in New York as better-than-estimated U.S. consumer confidence overshadowed a decline in home prices and concern about Europe’s debt crisis.

‘No Incentive’

Japan’s Nikkei 225 Stock Average fell 0.2 percent after a report showed factory output fell 2.6 percent in November as Thailand’s floods disrupted supply chains at manufacturers such as Sony and Honda Motor Co. Trading volume on the Nikkei was 43 percent below the 100-day average.

“There’s no incentive for investors to move their positions at the end of year,” said Hisakazu Amano, who helps oversee the equivalent of $29 billion at Tokyo-based T&D Asset Management Co. “The bottleneck is U.S. housing data. Corporate earnings are recovering and consumer confidence was good.”

South Korea’s Kospi Index lost 0.9 percent. Yesterday was the last day to buy shares and still get a year-end dividend in 15 percent of the companies included in the 785-member gauge.

Australia’s S&P/ASX 200 lost 1.3 percent, while Hong Kong’s Hang Seng Index slid 0.6 percent. Markets in Australia and Hong Kong reopened today after a four-day weekend.

Exporters dropped after the S&P/Case-Shiller index of property values in 20 U.S. cities dropped 3.4 percent in the year ended October after decreasing 3.5 percent in the year ended September, the New York-based group said yesterday.

Sony fell 2.4 percent to 1,354 yen, and Canon Inc., the world’s biggest camera maker, slid 1.6 percent to 3,415 yen.

Going Ex-dividend

SK Telecom led declines among firms that have the highest dividend yields among South Korea’s 50 largest publicly traded companies, according to data compiled by Bloomberg. SK Telecom retreated 6.3 percent to 141,500 won. Rival KT Corp. slipped 4.8 percent to 35,850 won. Korea Exchange Bank fell 5.1 percent to 7,450 won.

China Mengniu Dairy plunged 24 percent to HK$20.00, the biggest loss since September 2008. In a random inspection, the level of a toxin in a batch of the firm’s milk was more than double the nation’s permitted level, an unidentified official at the General Administration of Quality Supervision, Inspection and Quarantine said in an interview with the Xinhua News Agency.

Tokyo Electric Plunges

Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.5 times for the Stoxx 600. Utilities have lost 27 percent this year, the worst among the 10 industry groups on the Asian benchmark gauge, as Japanese power generators tumbled after a nuclear crisis at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant.

Tepco, as the utility is known, slumped 12 percent to 186 yen today, the lowest since at least September 1974. The company needs to consider all options related to its survival, including the government taking temporary control of the utility, trade minister Yukio Edano told company president Toshio Nishizawa yesterday.

Tepco has lost 91 percent this year, the biggest drop in the MSCI All Country World Index, which includes both emerging and developed world markets.

--With assistance from Norie Kuboyama in Tokyo. Editors: Jason Clenfield, Jim Powell

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

View the original article here

Home Prices in 20 U.S. Cities Probably Dropped at Slower Rate

December 27, 2011, 2:47 AM EST By Timothy R. Homan

Dec. 27 (Bloomberg) -- Home prices in 20 U.S. cities probably fell at a slower pace and consumer confidence climbed, signs of resilience in the economy heading into 2012, economists said before reports today.

The S&P/Case-Shiller index of property values dropped 3.2 percent in October from the same month in 2010, the smallest year-over-year decrease since January, according to the median forecast of 20 economists surveyed by Bloomberg News. The Conference Board’s confidence gauge rose to a five-month high of 58.6 in December from 56 the previous month, separate figures may show.

Rising builder confidence, a decline in the number of unsold properties on the market and a pickup in construction suggest stabilization in the housing market early next year. Still, the unemployment rate at 8.6 percent and the prospect of another wave of foreclosures represent obstacles for residential real estate and consumer sentiment.

“The housing market is evidently making a turn for the better,” said Richard DeKaser, deputy chief economist at the Parthenon Group Inc. in Boston. “November saw some pretty strong momentum heading into yearend, with consumers looking up.”

The S&P/Case-Shiller index, based on a three-month average, is due at 9 a.m. New York time. Survey estimates ranged from declines of 2.4 percent to 3.5 percent.

The New York-based Conference Board’s consumer confidence measure is due at 10 a.m. The Bloomberg survey median was based on 61 estimates that ranged from 52 to 63.

Confidence Measures

Increased optimism has been evident in other data. The Bloomberg Consumer Comfort Index improved to minus 45 in the period ended Dec. 18 from a reading of minus 49.9 the prior week, marking the biggest seven-day gain since January. The Thomson Reuters/University of Michigan index of consumer sentiment rose to a six-month high in December.

Better job prospects and lower gasoline prices may be helping brighten consumers’ moods.

Employers boosted payrolls by 120,000 workers in November and the jobless rate unexpectedly fell to 8.6 percent, according to Labor Department figures earlier this month. The price of regular unleaded gasoline at the pump fell to $3.22 on Dec. 22, from $3.43 at the beginning of November, according to AAA, the biggest U.S. auto group.

Faster job growth may be needed to spur enough home sales to reduce inventory and push up property values. The Case- Shiller report will show home prices, after adjusting for seasonal variations, fell 0.3 percent in October from the prior month, according to the survey median.

Year-Over-Year

The year-over-year gauges provide better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Those gains have buoyed builders’ stocks since the end of the third quarter. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., has climbed 32 percent, while the broader S&P 500 has increased 12 percent.

Some homebuilders say an increase in sentiment is needed to help boost sales.

“We need a higher level of confidence to get back to the traditional move-upstream or first-time buyer out of the rental,” Jeffrey Mezger, chief executive officer of KB Home, said on a Dec. 21 conference call with analysts. “A lot of consumers are surprised, frankly, at how low home payments are compared to rent.”

Policy makers are promoting programs designed to reinvigorate the housing market. The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

Officials at the Federal Reserve this month reiterated that they will keep the benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Kevin Costelloe

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

View the original article here

Home Prices Probably Fell, Confidence Up: U.S. Economy Preview

December 25, 2011, 12:34 AM EST By Timothy R. Homan

Dec. 25 (Bloomberg) -- Home prices in 20 U.S. cities probably declined at a slower pace and consumer confidence improved, signs the economy gained strength heading into 2012, economists said before reports this week.

Property values dropped 3.2 percent in October from the same month in 2010, the smallest year-over-year decrease since January, according to the median forecast of 20 economists before a Dec. 27 report from S&P/Case-Shiller. Consumer confidence rose to a five-month high in December and more people signed contracts to buy previously owned homes than a month earlier, other data may show.

Rising builder confidence, fewer unsold new properties on the market and a pickup in construction point to improvement in the industry that triggered the last recession. Real estate is still facing another wave of foreclosures that may keep pressure on home prices, making for an uneven housing recovery.

“We’ll continue to see prices drop,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The middle of 2012 is when we think prices will actually bottom.”

Economists surveyed projected the gauge of residential real-estate values declined 0.3 percent in October from the prior month, when it fell 0.6 percent. The index was down 31 percent in September from its July 2006 peak.

The year-over-year gauge provides a better indication of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Pending Home Sales

Figures on Dec. 29 may show pending sales of previously owned homes rose 1.5 percent in November after a 10 percent jump, economists said before a report from the National Association of Realtors.

Reports last week showed a pickup in demand for houses. Sales of previously owned homes, which make up about 94 percent of the market, rose 4 percent to a 4.42 million annual pace, the most since January, the National Association of Realtors said Dec. 21.

Purchases of new single-family properties advanced 1.6 percent to a 315,000 annual pace, a seven-month high, figures from the Commerce Department showed Dec. 23. The increase pushed the number of new homes on the market to a record low.

Those gains have buoyed builders’ stocks since the end of the third quarter. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., has climbed 32 percent, while the broader S&P 500 has gained 12 percent.

Consumer Confidence

As housing stabilizes and employment strengthens, consumers are becoming more optimistic. Confidence rose to 58.6 from 56 last month, according to the Bloomberg survey median before a Dec. 27 report from the New York-based Conference Board.

Other surveys reflect gains in optimism. The Bloomberg Consumer Comfort Index improved to minus 45 in the period ended Dec. 18 from a reading of minus 49.9 the prior week, marking the biggest seven-day gain since January. The Thomson Reuters/University of Michigan index of consumer sentiment rose to a six-month high in December.

Some homebuilders say an increase in sentiment is needed to help boost demand.

“We need a higher level of confidence to get back to the traditional move-upstream or first-time buyer out of the rental,” Jeffrey Mezger, chief executive officer of KB Home, said on a Dec. 21 conference call with analysts. “A lot of consumers are surprised, frankly, at how low home payments are compared to rent.”

Policy makers are promoting programs designed to reinvigorate the housing market. The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

Officials at the Federal Reserve this month reiterated that they will keep the benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Kevin Costelloe

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

View the original article here

China to Expand Efforts to Curb Growth in Property Prices

July 14, 2011, 12:21 PM EDT By Bloomberg News

July 15 (Bloomberg) -- China will expand its efforts to curb the growth in residential prices to smaller cities after limiting home purchases in Beijing and Shanghai, according to a summary of a State Council meeting chaired by Premier Wen Jiabao.

The government said so-called second and third-tier cities which have seen excessive price gains should restrict the number of homes each family is allowed to buy, according to the State Council or cabinet yesterday.

China is intensifying property restrictions nationwide after developers posted gains in first-half sales and housing transactions climbed 31 percent last month, even after more curbs were added earlier this year. The central bank last week raised interest rates for the fifth time since October.

“If the government doesn’t step up to say anything at the half-year point, the market will interpret it as the government is tolerant to gains in the housing market,” said Yao Wei, an economist at Societe Generale SA in Hong Kong. “China is facing a big pressure from inflation and there’s no way the government will relax property curbs now.”

China’s June housing transactions increased to 499.2 billion yuan ($77 billion), compared with 380.9 billion yuan in the previous month, based on first-half economic data provided by China’s statistics bureau on June 13. Sales in the first half climbed 22 percent to 2.1 trillion yuan from a year earlier, according to the data.

Urumqi, Dandong

The property boom is shifting from Beijing and Shanghai as government measures to curb the market haven’t kept prices from rising in secondary cities. Urumqi in the northwest and northeastern Dandong posted the biggest gains in May home prices, according to the statistics bureau. The data for June is scheduled to be released on July 18.

Standard & Poor’s on June 15 cut its outlook on Chinese developers, echoing concerns of a property bubble aired by bears such as hedge fund manager Jim Chanos.

The measure tracking property stocks on the Shanghai Composite Index rose 8.1 percent this year, the most among five industry groups on the benchmark gauge.

China Vanke Co., the country’s biggest developer, reported last week that sales in the first six months rose 79 percent to 65.7 billion yuan, while Evergrande Real Estate Group said on July 11 that sales more than doubled to 42.3 billion yuan.

‘Proper and Adequate’

Cheung Kong Holdings Ltd., the developer controlled by Hong Kong billionaire Li Ka-shing, said yesterday it’s “proper and adequate” for China to impose measures to cool down its property market. Rising home prices run the risk of becoming a social problem, Executive Director Justin Chiu said in Shanghai, where he unveiled three new projects in the city.

“We do hope prices will remain stable, otherwise the government will take more action,” Chiu told reporters. “As a property developer, we don’t want prices to rise too quickly either and want prices to be stable.”

China’s rising inflation, which hit a three-year high in June, also boosted the investment data with higher costs for materials and wages, the statistics bureau said this week.

“The property policies are at a critical moment,” the State Council said in the report. “We must strictly uphold the direction of the curbs and won’t ease the tightening measures.”

June home prices climbed 0.4 percent from May, rising for a 10th straight month, according to SouFun Holdings Ltd., the country’s biggest real estate website. The increase was driven by smaller cities, while prices in larger ones including Beijing and Shanghai either posted slower gains or declines from May, SouFun said.

China will also curb gains in housing rents, the State Council report said. The government will ensure the construction of 10 million units of social or affordable housing begins by the end of November, according to the report.

“If they don’t continue to tighten the market, it will rebound soon,” said Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG, citing this week’s property sales data. “The property curbs haven’t showed positive effects.”

--Bonnie Cao, Liza Lin. Editors: Linus Chua, Allen Wan

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net; Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

View the original article here

Sports-Gear Prices May Rise in Latest Sign of Inflation

June 02, 2011, 12:47 AM EDT By Anna-Louise Jackson and Anthony Feld

June 2 (Bloomberg) -- Retailers are poised to boost prices on athletic footwear, apparel and sports equipment as they join other industries in passing along rising costs for commodities, foreign labor and freight.

More than 90 percent of sporting-goods manufacturers paid higher input costs in the first quarter, and 41 percent of these companies already increased wholesale prices, according to a quarterly survey of private, independent vendors and retailers conducted by Robert W. Baird & Co.

“This clearly demonstrates the emerging cost and price pressure across the sporting-good space,” said Peter Benedict, a retail analyst in Stamford, Connecticut, at Baird. “We’re hearing a consistent message from vendors and retailers that cotton, fuel and wage costs are starting to go up, and they’re slowly going to come through on the retail side later this year and certainly in 2012.”

When prices manufacturers paid for imported sporting goods grew 3.3 percent in 2008, retail price tags increased 3 percent, according to data from the Bureau of Labor Statistics. That pattern likely will be repeated following a 2.1 percent rise in April for imported goods compared with a year ago, said Dean Maki, chief U.S. economist at Barclays Capital in New York.

With these prices at the highest level in almost two years, “it would be reasonable” for consumers to pay more, Maki said.

Sporting goods is the latest industry to exercise pricing power, following similar moves by airlines, restaurants and the broader apparel sector that are starting to show up in the consumer price index, Maki said. The Federal Reserve’s preferred gauge, the personal-consumption expenditure index excluding food and energy, rose 1 percent in April from a year earlier, the most since September 2010.

Not Worried

“The Fed is still aiming for higher core inflation, so it will not be worried if retailers are able to pass along some of these price increases,” Maki said.

Policy makers have been boosting their forecast for 2011 inflation excluding food and energy, with the April projection at about 1.5 percent, compared with the January estimate of about 1.2 percent.

Twenty-five percent of sporting-goods retailers already raised prices on apparel in the first quarter, compared with 17 percent a year earlier, Benedict’s data show.

Nike Inc. introduced a women’s version of its “Dri-Fit Legend” T-shirt for $22 in February. Sales exceeded expectations, indicating that “consumers ate the extra $2” and signaling that its $20 men’s version soon will cost more, predicted Michael Binetti, an analyst for UBS Securities in New York.

Missed Estimates

Nike, maker of Air Jordan shoes and VR Pro golf clubs, will “take more significant price increases across a broader range of styles” beginning in spring 2012, Chief Financial Officer Don Blair said on a March 17 conference call after the company reported revenue and profits that missed analysts’ estimates.

Nike’s plans drew criticism from investors because the company didn’t raise prices quickly enough to offset higher input costs, Binetti said. Its stock fell 9.2 percent on March 18. Since Dec. 31, 2009, Nike is up 24 percent, compared with a 48 percent rise in the S&P Retail Exchange-Traded Fund and an 18 percent increase in the S&P 500 ETF.

Binetti said he expects the Beaverton, Oregon-based company will begin raising prices “fairly broadly” in July on apparel before the back-to-school shopping rush, with footwear later this year or in early 2012.

‘Good Traffic-Drivers’

Under Armour Inc., which makes sporting apparel, shoes and gear, also is planning broad-based adjustments next year, said Brad Dickerson, chief financial officer, on an April 26 conference call. The Baltimore-based company and Nike are “good traffic-drivers” for retailers such as Dick’s Sporting Goods Inc. and Foot Locker Inc., Binetti said.

“These are the kinds of companies big-box stores want to lean on for price increases because they have good products,” he said.

Retailers obviously want to push along higher input costs to consumers, “the question is, can they get away with it,” asked Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. With unemployment at 9 percent, gasoline prices averaging near $4 a gallon nationwide and no significant boost in wages yet, he predicts across-the-board increases won’t come until the second half of 2012, at the earliest.

“Retailers are likely hoping the economy will pick up out of these doldrums, but without that, I think it’s going to be a challenge for them to raise prices,” Feroli said.

Track Record

Retailers that do go ahead with increases will avoid a one- size-fits-all approach, Benetti said. Companies that will be successful “have earned their pricing power through a proven, sustained track record for innovation.”

While New York-based Foot Locker already is raising some prices, it likely will make more changes in “targeted, sensible ways,” during “the latter part of the year,” Chief Executive Officer Kenneth Hicks said on a May 20 conference call. “We believe these price increases will, in general, be accepted by our customers despite the macroeconomics headwinds,” he said.

--Editors: Melinda Grenier, Christopher Wellisz

To contact the reporters on this story: Anna-Louise Jackson in New York at ajackson36@bloomberg.net; Anthony Feld in New York at afeld2@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

View the original article here