UPDATE 1-BASF’s Q2 profit almost doubles on industrial sales

July 30, 2010 By Leave a Comment

* Q2 adj EBIT up 94 pct at 2.2 bln eur

* Confirms FY outlook for adj EBIT to see marked gains

* Still aims to increase dividend for 2010

(Adds details, background)

FRANKFURT, July 29 (Reuters) – German chemicals maker BASF (BASF.DE) surpassed analysts’ earnings expectations for the sixth straight quarter, bolstered by a rebound in the car and electronics industries.

The strong results add to evidence global chemical makers are out of the woods.

The world’s largest chemicals supplier by sales said on Thursday that second-quarter earnings before interest and tax (EBIT), adjusted for one-off items, almost doubled to 2.2 billion euros ($2.9 billion).

That surpassed the 2.03 billion euros expected on average in a Reuters poll of analysts as BASF continued to recover from an economic crisis. [ID:nLDE63P246]

BASF reiterated that adjusted operating profit was set to improve significantly this year compared with crisis-fraught 2009, when its operating margin hit an eight-year low.

It also confirmed its goal to increase the annual dividend.

The dominance of massive overhead costs in the industry means rising sales — 30 percent in the case of BASF’s second quarter — translate into a much stronger profit rebound as companies use capacity left idle during the slump.

Signs are rife that a rebounding global economy continues to fuel a recovery in the chemical sector. DuPont (DD.N), the third-largest U.S. chemical maker, on Tuesday forecast 2010 earnings well above expectations. [ID:nN26201739]

The Netherlands’ AkzoNobel (AKZO.AS), the world’s largest paint maker, hit its 2011 margin target early and reporting better-than-expected quarterly results last week. [ID:nLDE66M02Z] (Reporting by Ludwig Burger)

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Clariant AG: Clariant further improves profitability based on better demand and reduced cost base

July 30, 2010 By Leave a Comment

Clariant AG / Clariant further improves profitability based on better demand and reduced
cost base processed and transmitted by Hugin AS. The issuer is solely responsible for
the content of this announcement.

*

Q2 sales up 20% in local currencies and 18% in CHF as global economic activity continued
to rebound year on year

*

Q2 operating income before exceptional items rose to CHF 211 million compared to CHF 69
million a year ago and CHF 183 million in the first quarter, mainly driven by higher
sales volumes

*

Q2 operating income margin before exceptional items reached 11.1% compared to 4.3% a
year ago

*

Q2 cash flow from operations amounted to CHF 33 million from CHF 184 million in the
previous year given a volume-related temporary increase in inventories and trade
receivables

*

Outlook: Against the backdrop of an anticipated softening of the global economy,
Clariant expects lower sales growth in the second half of the year with demand remaining
solid. Clariant guides for sales growth in the high-single digit percentage range and an
operating margin before exceptionals for the full-year above 8%.

CEO Hariolf Kottmann commented: “In the first half of 2010 the economic tailwind
leveraged the results of our restructuring program. Consequently we recorded a good
operating income before exceptionals and a strong cash flow. We maintained our good cost
position and further reduced our debt. For the second half of the year we predict a
softening in demand compared to the first half as a result of a weaker economy and the
traditional seasonal effects of our businesses. Until the end of the year we will
continue with our focus on restructuring with the expected impact of restructuring costs
on our net income. All in all we expect a satisfactory year 2010 for our company. ”

Key Financial Data

Second quarter First half year
in CHF million 2010 2009 % CHF % LC 2010 2009 % CHF % LC
Sales 1’894 1’609 18 20 3’711 3’213 15 18
EBITDA before exceptional items 264 125 111 121 499 168 197 206
– margin 13.9% 7.8% 13.4% 5.2%
EBIT before exceptional items 211 69 206 218 394 56 604 626
– margin 11.1% 4.3% 10.6% 1.7%
EBIT 124 0 – – 198 -68 – –
Net income / loss 25 -61 – – 35 -152 – –
Operating cash flow 33 184 192 340
Number of employees 17’2681 17’5362

1 as of 30 June 2010 2 as of 31 December 2009

Clariant Q2, 2010 Performance

Muttenz, July 29, 2010

-Clariant, a world leader in specialty chemicals, today announced sales of CHF 1.894
billion in the second quarter 2010, compared to CHF 1.609 billion in the previous year.
Sales increased 18% in Swiss Francs and 20% in local currency.

Volumes were up 20% over an extremely weak second quarter 2009, but remained
significantly below pre-crisis levels. On the back of a broad economic recovery,
Clariant reported sales growth across all businesses and regions. The Business Units
Pigments, Additives, Leather and Masterbatches benefited the most from the improved
economic environment and grew above group average.

Against the backdrop of the depreciation of the Euro against the USD and an increased
competitiveness, demand in Europe developed better than expected compared to the low
basis year on year, which resulted in a strong 22% sales growth for Clariant. Demand in
the regions Asia, Latin and North America increased as well, favorably affecting the
company’s sales volumes.

Clariant significantly improved the gross margin to 28.9% from 24.8% year on year, based
on good capacity utilization. Sequentially, the company increased sales prices by 1% in
order to respond to a 4% uptake in raw material costs. However these price increases
have not been sufficient yet to fully compensate for the feedstock markup and will be
intensified in the coming months in particular as raw material costs are predicted to
further increase.

Despite the negative margin squeeze Clariant managed to keep the gross margin stable
sequentially also due to a favorable development of exchange rates and higher volumes.

As part of its Global Asset Network Optimization (GANO) efforts Clariant continued to
improve the structure of its production facilities and decided to relocate the Pigments
site in Tianjin (PR China) – as part of the consolidation of the Pigments activities in
China – and to close Pigments production in Onsan (South Korea). Both sites will have
stopped their operations in 2010/11. At the same time the investment in a new
ethoxylation plant in Dayabay (PR China) is proceeding as planned. The site will go on
stream in early 2011.

As a result of the ongoing focus on cost reduction, SG&A costs decreased to 16.3% of
sales, compared to 18.6% a year ago. In absolute terms, SG&A costs slightly increased to
CHF 309 million, from CHF 299 million year on year, due to one time costs resulting from
the restructuring projects and necessary IT upgrades. Personnel costs further decreased.

Consequently the operating income (EBIT) before exceptional items increased to CHF 211
million, compared to CHF 69 million a year ago and CHF 183 million in the first quarter
of 2010. The EBIT margin before exceptional items improved to 11.1% from 4.3% a year
ago.

Restructuring and impairment costs amounted to CHF 87 million. However, the favorable
development of the operating result could more than offset the restructuring costs.
Hence Clariant reported a net profit of CHF 25 million for the quarter, compared to a
net loss of CHF 61 million a year ago.

As a consequence of the pick-up in business activity, inventories and trade receivables
were significantly higher than in the second quarter of 2009 that had marked the peak of
the economic crisis. Nevertheless cash flow from operations remained positive at CHF 33
million compared to CHF 184 million in the second quarter of previous year based on
decisive net working capital management and good EBIT generation.

The company’s cash position – including an investment of CHF 382 million in short-term
deposits – remained strong at CHF 1’221 million.

Clariant continued to reduce its net debt to CHF 379 million from CHF 545 million at the
end of 2009. The gearing – net debt divided by equity – improved to 20%, compared to 29%
by year-end 2009 and remained stable compared to the end of the first quarter 2010.

Outlook

Although demand will remain solid in the remainder of the year, Clariant expects a
weaker second half-year as the global economy is expected to soften and the normal
seasonality of its businesses returns in 2010. In addition, raw material costs are
expected to rise further.

In the second half-year, Clariant will continue to focus on generating cash, decreasing
costs and reducing complexity, which will result in an additional reduction of job
positions. The ongoing restructuring program will be finalized by the end of the year
and the company will be managed for profitable growth as of 2011. However some of the
measures – in particular related to the GANO activities – will not be completely
implemented before 2013.

Based on the good results in the first half of the year and the continuing restructuring
efforts, Clariant aims for a high single digit sales growth in local currency and an
EBIT margin before exceptionals of above 8% for the full year. The cash flow from
operations will remain strong.

Clariant confirms its target of a sustainable, above-industry-average return on invested
capital (ROIC) by the end of 2010.

Contacts

Media Relations

Stefanie Nehlsen Phone: +41 61 469 67 42
E-Mail: stefanie.nehlsen@clariant.com
Arnd Wagner Phone: +41 61 469 61 58
E-Mail: arnd.wagner@clariant.com

Investor Relations

Ulrich Steiner Phone: +41 61 469 67 45
E-Mail: ulrich.steiner@clariant.com

Clariant – Exactly your chemistry.

Clariant is a global leader in the field of specialty chemicals. Strong business
relationships, commitment to outstanding service and wide-ranging application know-how
make Clariant a preferred partner for its customers.

Clariant, which is represented on five continents with over 100 group companies, employs
around 17,300 people. Head-quartered in Muttenz near Basel, Switzerland, it generated
sales of CHF 6.6 billion in 2009. Clariant is organized into ten Business Units:
Additives; Detergents & Intermediates; Emulsions; Industrial & Consumer Specialties;
Leather Services; Masterbatches; Oil & Mining Services; Paper Specialties; Pigments; and
Textile Chemicals.

Clariant is committed to sustainable growth, which is derived from its own innovative
strength. Clariant’s world-class products and services play a key role in its customers’
manufacturing processes and add value to their end products. The company’s success is
based on the know-how of its people and their ability to identify new customer needs at
an early stage and to work together with customers to develop innovative, efficient
solutions.

www.clariant.com

HUG#1434582

Financial Review Q2 2010 http://hugin.info/100166/R/1434582/380143.pdf
Media Release Deutsch http://hugin.info/100166/R/1434582/380142.pdf
Media Release English http://hugin.info/100166/R/1434582/380141.pdf

— End of Message —

Clariant AG
Rothausstrasse 61 Muttenz 1 Switzerland

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Analysis: U.S. refineries still need to trim capacity

July 30, 2010 By Leave a Comment

(Reuters) – Atlantic Basin refineries remain most at risk for closure as refiners cut more capacity to balance supply with still-weak demand for gasoline and other oil products, but refineries in other parts of the United States are not immune.

The global economy is expected to show signs of recovery in 2010 and oil demand is predicted to grow but key gasoline demand in the world’s largest oil consumer is not expected to return to its 2007 peak.

“Refineries at risk are not just in the Atlantic Basin,” said Mark Routt, senior staff consultant with the economics unit of Texas-based consultants, KBC Advanced Technologies.

“Small refiners will find it increasingly difficult to compete against economies of scale available to larger rivals. So, too places in Canada and even the U.S. Pacific Coast where there are several refineries are also under pressure.”

STRUCTURAL DEMAND SHIFT

Northeastern refineries are most at risk because they face strong competition from European imports and lower-cost Gulf Coast plants for part of a shrinking gasoline pie.

“The East Coast is two different markets,” said Michael Hileman, Vice President of Texas-based consultants, Solomon Associates.

“European refiners dump their gasoline on the East Coast. With the Colonial Pipeline, they are linked to the Gulf Coast refineries which are large and efficient.”

A recent study by Washington-based energy consultants PFC Energy found risk of closure for 58 out of the 230 refineries feeding the Atlantic Basin, comprised of East Coast and European refineries, markets where demand has been declining for several years.

Sunoco Inc, Petroplus and Total closed refineries in 2009 totaling 1.1 million bpd of capacity in the Atlantic Basin due to poor profit margins.

“PFC Energy’s view is that the market environment is currently in the midst of a structural shift in demand that goes beyond the impacts of the economic downturn,” said Nathan Schaffer, Director of Downstream and Petrochemical Group.

The growing mandate for using renewable fuels is shifting any demand increase for gasoline to ethanol and other alternative fuels, adding to the pressure on lagging Northeast refiner margins.

According to Credit Suisse, which closely tracks U.S. and global refinery profit margins, the four other U.S. regions are beating margin forecasts, with only the Northeast profits lagging at $7.63 a barrel versus expectations of $8.50.

SURVIVAL OF THE FITTEST

U.S. products demand has dropped about 2 million barrels per day from 2007 levels of 18.46 million bpd, eroded by the economic crisis.

East Coast gasoline demand was 13.5 percent below that level by March this year, and West Coast demand had fallen further, down 16.3 percent. Refiners in both regions adjusted their refinery runs down, mostly lagging the national average.

KBC’s Routt thinks California is well-positioned and will likely avoid closures but that refineries in Washington state, Alaska and Hawaii face pressure to rationalize.

Routt sees the Rockies region is relatively balanced but says that some smaller Gulf Coast refineries could at risk.

“The smaller players there are not going to get the economy of scale, particularly when Port Arthur comes on,” said Routt,

Motiva Enterprises LLC is expanding its joint venture Port Arthur, Texas refinery from 285,000 bpd to 600,000 bpd by 2012. Marathon Corp. recently completed a 180,000 bpd expansion of its 436,000 bpd Garyville, Louisiana refinery.

The Midwest is seen to be relatively immune for closures. The region cut almost half a million barrels of capacity beginning with 1990′s economic downturn by closing. A total of 1.2 million bpd of refinery capacity was permanently closed between 1990 and 2008.

With few exceptions, the region’s refinery run rates have exceeded the national average by several percentage points, eased along by access to Canadian oil flowing from Alberta’s oil sands.

As a result, some Midwestern refiners, like Marathon have been able to align supply from refineries with demand from gas stations.

“A large company with many refineries looks at the entire network. They look at the entire supply orbit cost,” said Solomon’s Hileman, citing Shell’s recent shutdown of their Montreal refinery as an example where the company decided it would be easier to meet supply obligations from other refineries.

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JGBs gain; curve flattens ahead of month’s end

July 28, 2010 By Leave a Comment

TOKYO, July 27 (Reuters) – Japanese government bonds gained on Tuesday, with futures climbing towards a seven-year peak, as investor purchases of superlongs before the month’s end added to a flattening in the yield curve.

A 2.6 trillion yen ($29.9 billion) auction of two-year government debt attracted solid demand, with the market increasingly secure in the view that the Bank of Japan will either keep rates low for the foreseeable future or ease monetary policy further.

The 0.2 percent coupon auction produced the highest bid-to-cover ratio in five years, at 5.67 from 4.31 at the last sale in June. [ID:nMOFG15004]

“The higher-than-expected lowest price at the auction suggests investors bid directly in the primary market instead of going through brokerages,” said Keiko Onogi, a senior JGB strategist at Daiwa Securities Capital Markets.

“It reflects deepening easing expectations, enhanced after the Fed’s stance last week.”

The market is focused on an uncertain outlook for the global economy now that Europe’s bank stress tests are out of the way.

Fewer-than-expected banks failed the stress tests but the JGB market reaction was limited with concerns about the banking system remaining amid criticism the tests may have been too lax.

Indicators in focus include U.S. June durable goods orders due on Wednesday and second quarter GDP on Friday.

Federal Reserve Chairman Ben Bernanke fuelled speculation of further easing last week when he said the U.S. economy faced “unusually uncertain” prospects, and Treasuries rallied with the 10-year note yield US10YT=RR falling to a 15-month low.

Market players said how Treasuries fare may be key for the JGB market.

“Treasuries are holding firm considering that U.S. stocks are doing relatively well, supported by prospects for further easing,” said Makoto Noji, a senior market analyst at Mizuho Securities.

“How Treasuries perform will be key, as a rise in U.S. long-term rates may drive the yen lower (against the dollar) and in turn lift stocks and hurt JGBs. On the other hand, a further decline in U.S. long-term rates would have the opposite effect.”

September 10-year futures 2JGBv1 gained 0.12 point to 141.86 after hitting a seven-year peak of 142.08 last week.

Trade in futures was thin at around 18,800 lots, compared to last week’s daily average of 23,300 lots.

The five-year yield JP5YTN=JBTC edged down 0.5 basis point to 0.345 percent.

The benchmark 10-year yield JP10YTN=JBTC fell 1 basis point to 1.050 percent, edging closer to a seven-year low of 1.045 percent hit last week.

The 20-year yield dropped 2.5 basis points to 1.745 percent.

Purchases by index-following pension funds pulled down superlong yields, said a dealer at a foreign securities house.

The five-year/20-year yield spread tightened by 2 basis points to 140 basis points, its flattest in a year.

Duration extensions by index players at the month’s end have added to flattening pressure on the yield curve, as investors like domestic banks buy more superlongs for their higher returns. (Editing by Edwina Gibbs)

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Are Your Cheeseburgers Causing Deforestation?

July 28, 2010 By Leave a Comment

Consider this thought experiment: Given the importance of the Amazon rainforest to the effort to curb climate change, and the potential value of the thousands of species that live only in the Amazon, and the vastness of the place (See Just how big is the Amazon?), what benefit, if any, can justify destroying a few trees, or a few thousand trees, or even a few thousand square miles of trees? Feeding a hungry family? Providing energy, at a lower cost to a nearby city? Making meat or cheese cheaper in the U.S. or Europe?

These are obviously not theoretical questions. They’re the kinds of questions facing the Brazilian government, and they are relevant to the rest of us because decision we make — about the government leaders we elect or about what to eat for dinner — can have an impact on the Amazon. These are also the kinds of questions that arose frequently during my six-day tour of Brazil last week. The government-organized trip for international reporters focused on the Amazon.

The good news is that the rate of deforestation of the Amazon is decreasing, and dramatically. Six years ago, 27,700 square kilometers of trees were cut down — that’s about 10,700 square miles, an area bigger than the state of Massachusetts. Last year, about 7,000 sq. km. were cut down, and this year the pace is slowing further, satellite photos show.

Americo Ribeiro Tunes, who’s in charge of protecting the forest for IBAMA, Brazil’s equivalent of the EPA, told us: “Brazil is on the verge of a major victory over deforestation.”

Well, maybe, but, along with stepped-up law enforcement, a big reason for the decline in deforestation is the global recession, which drove prices down timber, soy and beef, easing pressures on the Amazon. A strong global economy recovery will likely renew the pressure to destroy forest land to raise cattle or harvest timber, no matter what the laws say.

Besides, there’s plenty of opportunity for legal deforestation of the Amazon. Today, landowners are permitted to cut down up to 20 percent of their land under Brazil’s Forest Code; proposed revisions would raise that to 50 percent. Government-approved plans for industrial development include the controversial Belo Monte Dam, which would be the world’s third largest dame, and the potential expansion of the Urucu Oil Province, which we visited (See Deep in the Amazon, learning to like fossil fuels) also pose a threat. Revenues from Amazon development can be used to promote social and education programs in Brazil, the government says.

This may — may — justify drilling for more oil and gas at Urucu. The Petrobras project has done minimal damage to the rainforest, while providing tax benefits to the region, as well as cleaner energy and cheaper electricity to Manaus, where 2 million people live.

Similar arguments can be made for hydroelectric projects like the Belo Monte Dam, which has been in the works for years. The environmental costs are significant, Reuters reports:

The 6 kilometer-long (3.75 miles) dam will displace 30,000 river dwellers, partially dry up a 100-kilometer (62.5 mile) stretch of the Xingu, and flood a 190-square-mile (500-sq-km) area three times the size of Washington D.C.

And the benefits? According to Amazon Watch, which opposes the project,

The electricity may be exported in large part to eight industrial mining and construction companies: Alcoa, ArcelorMittal, Camargo Corrêa, CSN, Gerdau, Samarco, Vale, and Votorantim.

!–pagebreak–

Without knowing more about what these companies do, how much they pay in taxes and how many people they employ, it’s hard to whether the dam will be worth building. In an interview last week, Brazil’s energy minister, Marcio Zimmerman, said the dam is valuable because it’s a source of carbon-free electricity.

As an outsider, and someone just starting to learn about Brazil, I’m not prepared to offer an opinion about these big infrastructure projects. It turns out, though, that while they attract a lot of controversy — movie director James Cameron of Avatar fame last spring joined a protest against Belo Monte — they aren’t the major cause of deforestation. Cattle ranching is, by far, No. 1:

Which brings us to gouda cheese and weinerschnitzel. The oil and gas from Urucu are necessities, so long as we drive cars and fly in airplanes. Likewise electricity — energy is a driver of economic growth, jobs and wealth. But the soy plantations and cattle ranches? They occupy a great deal of land, employ relatively few people and produce animal feed and meat, much of which is shipped to Europe at the U.S. Ocean-going ships filled with soy, for example, travel from the Amazon port of Santerem to Amsterdam, to feed Dutch and German cows. Meat’s a luxury — millions of people can, and do, live without it.

Destroying rainforests to make cheese, veal and burgers seems like a bad trade-off. At the very least, it’s another reason to eat less meat — not that we really need one. (Among them: Meat is an inefficient and expensive way of getting calories, it contributes to heart disease and obesity, causes of animal suffering, pollutes waterways, etc.) Now that I’ve seen the Amazon, and come to understand the connection between deforestation, cattle and soy, I’m going to curb my own consumption of meat. It’s easy, and it seems like the very least we can do.

Disclosure: My week-long trip to Brazil, with a focus on the environment in the Amazon, was organized by Apex-Brasil, a government-backed agency that promotes trade and investment. It’s sponsored by Electrobras, Petrobras and Banco do Brasil.

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Latin America should embrace India trade -IADB

July 28, 2010 By Leave a Comment

BUENOS AIRES, July 27 (Reuters) – Latin America sends only 0.9 percent of its exports to India, a commodity-hungry country that should be a major growth engine for the region, the Inter-American Development Bank said in a report on Tuesday.

The IADB bemoaned the lack of direct shipping services between Latin America and the South Asian nation of 1.1 billion people and said punitive import taxes were stifling the potential for closer ties at a pivotal time for the global economy.

Economic output from China and India together is expected to be up to 10 times larger than Europe’s total gross domestic product by 2040, according to the Washington-based regional lender, whose 48 members include China but not India.

While China receives 3.8 percent of Latin American exports, India is “not yet on the radar” of the region’s businesses and politicians, said IADB President Luis Alberto Moreno, calling in the report’s preface for more attention to India.

“We are starting to see what the century of Asia will look like and Latin America cannot afford to be absent,” he said. “The region cannot afford to continue to ignore the implications of (India’s) emergence.”

Unlike in the case of China, there are no direct shipping routes between India and Latin America, the IADB report said. Goods are sent via Singapore or Europe, increasing both freight rates and shipping times — by as much as nine days in the case of Brazil, it said.

“A 10 percent reduction in freight rates would likely boost imports of Indian goods by as much as 46 percent and 47 percent in Chile and Argentina, respectively,” the IADB said.

India and Latin America also impose huge import duties on goods shipped between them despite a series of accords over the past decade that Moreno said have “yet to effectively address the most obvious and serious obstacles to bilateral trade.”

Latin American agricultural goods face average tariffs of 65 percent upon entry to India, more than five times China’s 12.5 percent average tariff, according to the IADB figures dating to 2006 and 2007.

Indian manufactured goods, in turn, are charged tariffs of up to 9.8 percent in Latin America. Cutting those tariffs on Indian products by 10 percent would spur a 36 percent jump in Indian goods entering Chile and Argentina, the report found.

TARIFFS AND TRADE BARRIERS

“In order to boost trade, both India and Latin America must lower tariffs and trade barriers,” it said.

India replaced China as the biggest market for Argentine soybean oil after Beijing imposed a boycott in late March in response to Argentina’s anti-dumping duties on certain Chinese products like shoes, textiles and steel products.

Argentine Agriculture Minister Julian Dominguez will go to India, the world’s biggest importer of edible oils, next week to discuss potential for continued soy oil and sunflower oil sales, the ministry said on Monday.

Rengaraj Viswanathan, India’s ambassador to Argentina, said there is enormous demand for edible oils in his country and suggested Indian tariffs on agricultural goods are not proving a problem for exporters from Latin America.

“No one has come to us saying, ‘We can’t export because of your high tariffs,’” he told Reuters in Buenos Aires. “Argentina has surplus agricultural produce and is an efficient producer, so there is a lot of opportunity.”

In its report, the IADB argued that demand for Latin America’s natural resources “should be strong enough to send bilateral trade soaring” as India seeks agricultural goods and minerals like copper to tackle poverty and build needed infrastructure.

(Additional reporting by Alexandra Ulmer; Editing by Will Dunham)

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S.Africa’s rand steadies vs dlr, risk appetite low

July 21, 2010 By Leave a Comment

JOHANNESBURG, July 20 (Reuters) – South Africa’s rand recovered its footing against the dollar on Tuesday after touching near 2-week lows overnight but remained vulnerable to risk aversion as the global economic recovery continues to stutter.

The JSE’s blue chip Top-40 September futures contract ALSIc1 was up 0.54 percent ahead of the 0700 GMT start of trade, suggesting a bounce on the bourse after miners and banks pulled stocks lower on Monday.

At 0652 GMT the rand ZAR=D3 was at 7.62 to the dollar, up 0.46 percent from Monday’s close at 7.6550.

But traders said the currency could revisit the 7.68 area it dipped to overnight as investors fretted about sluggish prospects for the global economy after last year’s recession.

“We’ve seen the dollar strengthening yesterday against the majors and that’s also supported the dollar against the rand,” a trader based in Johannesburg said.

“The consensus is that guys are taking a bit of risk off. I think we should find support towards 7.61 and we’ll trade up to 7.67/68 for the day.

Government bonds edged higher, with the yield on the benchmark 2015 bond ZAR157= falling five basis points to 7.70 percent while that on the 2036 ZAR209= note was down 4.5 basis points to 8.875 percent.

(Reporting by Stella Mapenzauswa; Editing by John Stonestreet)

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Q+A: Will BP spill taint Cameron’s U.S. visit?

July 21, 2010 By Leave a Comment

(Reuters) – David Cameron is making his first trip to the United States as British prime minister on Tuesday and Wednesday, a visit expected to be overshadowed by the BP Plc oil spill in the Gulf of Mexico.

Cameron will meet President Barack Obama, Vice President Joe Biden and congressional leaders then travel to New York for talks with business leaders and at the United Nations.

Here are some questions and answers about the visit.

WILL OBAMA AND CAMERON DISCUSS THE SPILL?

The two leaders will address a range of issues that will definitely include the oil spill, aides say.

White House spokesman Robert Gibbs said they would discuss issues including Afghanistan, the global economy and the Middle East, with Afghanistan “first and foremost” on the list.

The two men have discussed the spill during two of their three telephone conversations to date and it came up during their first face-to-face meeting since Cameron became prime minister in May, during the Group of Eight and Group of 20 meetings in Canada last month.

“The conversation is likely to be drawn into a larger discussion about BP on two fronts,” wrote Heather Conley and Rick Nelson of the Center for Strategic and International Studies in Washington.

The first, they said, is ensuring BP cleans up, compensates residents and restores the Gulf Coast after the disaster while remaining financially solvent.

They also said Obama and Cameron were likely to discuss whether the British oil giant had any influence over the release of the Lockerbie bomber, Abdel Basset al-Megrahi, from a Scottish prison last year.

WILL THE LOCKERBIE BOMBER COME UP?

Cameron’s office has tried to play down the concern, saying the U.S. debate over how the ill Libyan convicted of the 1988 bombing of a Pan Am flight was allowed to return home “may come up” but is not a “major issue.”

BP has confirmed it lobbied the British government in late 2007 over a prisoner transfer agreement with Libya but said it was not involved in talks on the release of al-Megrahi, which was strongly opposed by the Obama administration.

“Our viewpoint on this case last year was well-known and that was we opposed the release of the Lockerbie bomber. We made that opinion known,” Gibbs said, noting that Cameron — who was not prime minister when Megrahi was sent to Libya — also opposed the release.

But Gibbs said he expected the issue would come up in some form between Obama and Cameron, who said on BBC television: “I’ve no idea what BP did. I’m not responsible for BP.”

U.S. lawmakers have demanded an investigation but Cameron’s office said it had no plans to re-examine the case. “That will be up to the British government to determine,” Gibbs said.

The four U.S. senators from New York and New Jersey who want an investigation have been invited to meet Cameron on Tuesday night.

“He understands the strengths of feelings on this issue,” Cameron’s spokesman said.

WILL BP AFFECT THE “SPECIAL” RELATIONSHIP?

Washington and London have had their differences over the BP spill since it started in late April.

Obama has sought to convince Americans he is taking a tough stance against the giant oil firm to ensure it pays for the worst oil spill in U.S. history. And Cameron has said he will stand up for BP in Washington, worried that the firm could face unreasonable compensation claims from businesses and families affected by the spill.

But the disaster is not expected to put a long-term damper on the vaunted “special relationship” between the United States and Britain — at least as long as a new cap on the well holds and the cleanup goes well.

Obama and Cameron were eager to display their closeness when they met in Canada last month. Obama gave the new prime minister a ride in his helicopter and the two held a separate bilateral meeting in Toronto, at which they exchanged beers related to a bet over World Cup soccer.

Cameron’s Conservative-Liberal Democrat coalition government is aware Britain needs to build other special ties to maintain its influence and help its economy bounce back from recession. But Cameron is an outspoken fan of the American way of life and is not likely to distance himself from Washington.

In developing his relationship with Obama, the Conservative prime minister is likely to seek middle ground between what was seen as former Labour Prime Minister Tony Blair’s subordinate “poodle” relationship with former U.S. President George W. Bush and the businesslike tone set by Gordon Brown, the Labour prime minister who preceded Cameron, the CSIS experts said.

The tone also could be affected by the cool personal style of Obama, who is not known for warm personal relationships with other world leaders.

(Editing by Patricia Wilson and John O’Callaghan)

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Obama, Cameron to hold talks clouded by BP concerns

July 21, 2010 By Leave a Comment

WASHINGTON, July 20 (Reuters) – U.S. President Barack Obama and British Prime Minister David Cameron will hold talks on Tuesday overshadowed by controversy over BP Plc (BP.L)(BP.N) that could test the vaunted “special relationship” between their countries.

They are expected to discuss BP’s role in the Gulf of Mexico oil spill and whether the British energy giant had influence in the release of the Lockerbie bomber from a Scottish prison last year — issues that have complicated transatlantic ties. [ID:nN19218995]

Cameron’s first visit to Washington as British prime minister comes amid a U.S. backlash against BP. With an eye to British pensioners and other investors at home, he has pledged to stand up for the embattled company.

Aides to both leaders insist the talks aim to build on a personal rapport they struck up at last month’s Group of 20 summit in Canada and that the agenda will focus more on the war in Afghanistan, the global economy and the Middle East.

But BP and its role in the worst oil spill in U.S. history loom large. Differences over BP’s treatment and over approaches to economic recovery raise fresh questions about a historic Anglo-American alliance already past its heyday.

Scoffing at “endless British preoccupation with the health of the special relationship,” Cameron wrote in the Wall Street Journal that he would be “hard-headed and realistic” about U.S. ties and said both countries must also strengthen bonds with rising powers like China and India. [ID:nLDE66I0I8]

DEMANDS FOR INQUIRY

Under heavy criticism over the Gulf disaster, BP faces demands from U.S. lawmakers for an official inquiry into whether it had a hand in the release of the Libyan convicted in the 1988 bombing of a Pan Am flight over Lockerbie, Scotland.

BP has confirmed it lobbied the British government in 2007 over a prisoner transfer deal because it was concerned a slow resolution would hurt an offshore drilling deal with Libya.

But the company said it was not involved in talks on the release of Abdel Basset al-Megrahi, sentenced to life for the deaths of 270 people, including 189 Americans.

On the eve of Cameron’s visit, the British government reiterated that BP had no role in the decision to free Megrahi and said it had no plans to re-examine the release, which took place despite fierce U.S. objections.

Scottish authorities said they freed the intelligence officer because he was terminally ill and they believed he had only three months to live. He is still alive in Libya.

U.S. Secretary of State Hillary Clinton told senators she was urging Scottish and British authorities to review the case.

Cameron’s aides have sought to play down the issue. He stressed in a BBC interview that, as opposition leader at the time, he thought the release was “utterly wrong.”

His visit also comes as U.S. lawmakers consider a range of rules that could require tougher safety standards on offshore drilling or bar companies like BP from new offshore leases.

Cameron has made clear he will defend BP, saying it must remain “strong and stable” to make good on its promise to compensate oil spill victims and for the sake of employees and people with pension funds invested in the company in both countries.

Obama, whose approval ratings have been undercut by public anger over the disaster, has taken a hard line with BP, although his rhetoric has softened recently amid criticism his administration had gone too in bashing the company.

Obama and Cameron will meet amid hopes a capping test on the blown-out well, which has largely choked off the undersea flow of oil, will pave the way for a permanent fix. [ID:nLDE66I13M]

UNITED FRONT, DIFFERENCES

Against this backdrop, they will present a united front on issues like sanctions against Iran and try to strike a balance between keeping up the fight in Afghanistan while signaling to skeptical voters they are progressing on exit strategies.

Obama and Cameron are sure to pay homage to their countries’ special relationship — in keeping with predecessors since Winston Churchill coined the phrase in 1946 — when they hold a joint news conference after they meet and have lunch.

But Cameron has indicated his new Conservative-Liberal Democrat coalition will work together pragmatically without being too slavish to U.S. interests.

Obama has also demonstrated a desire to see relations evolve, although he has been careful to avoid offending British sensibilities as he did earlier when he returned a loaned bust of Churchill on display in the Oval Office.

Cameron has led European attempts to cut budget deficits that have ballooned in the wake of the global financial crisis, while the United States has urged caution, arguing that reducing borrowing too fast could hinder the fragile recovery.

Both sides have agreed to disagree for now.

Cameron seems unwilling to be cast as America’s “poodle” — as British media dubbed former Labour Prime Minister Tony Blair to former President George W. Bush. But he has acknowledged that Britain is the “junior partner” of the United States.

With more to gain from their encounter, Cameron is also looking to benefit from sharing a stage with Obama, who is more popular in Britain and much of Europe than he is at home. (Additional reporting by Matt Falloon; Editing by John O’Callaghan)

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Junior Achievement Announces Finalists in 2010 North American JA Company of the Year Competition

July 20, 2010 By Leave a Comment

HOUSTON, July 19 /PRNewswire/ — Junior Achievement of Southeast Texas is proud to announce that two local teams of young entrepreneurs have qualified for the finals of the 2010 North American JA Company of the Year Competition. Team WINC from Spring Woods High School and Team Black and White Xpressions from the Chinese Community Center will challenge the success, innovation and expertise of 23 other finalist companies vying for top honors at the highly anticipated event being held July 19-20 in Minneapolis. Locally, the students’ travel is being provided by Continental Airlines. The event is co-presented by FedEx Corp. and Best Buy.

The competition is Junior Achievement’s annual celebration of the accomplishments of JA Company Program® students (ages 15-19) in the United States and Canada. The finalists showcase their entrepreneurial acumen before a panel of independent judges who evaluate company performance in light of competition criteria as compared with other JA student companies. The goal is to balance the business achievements of each team as a whole with members’ individual personal development and knowledge.

Eligibility for the 2010 North American JA Student Company of the Year Competition was limited to qualifying student teams that completed or are currently completing JA Company Program during the 2009-2010 academic year. Qualified teams had to advance through preliminary selection in their home markets to earn eligibility to compete in the finals.

“According to a study by Gallup for Junior Achievement, 95 percent of individuals responsible for hiring decisions at their companies surveyed said that it was important for the American workforce to become more entrepreneurial in order to remain competitive in a global economy,” said Rick Franke, president of Junior Achievement of Southeast Texas. “This is an exciting opportunity for our community’s JA student entrepreneurs to share ideas with other JA students, while learning the value of responsibility and the pursuit of excellence as they build business—and personal—success.”

To learn more information about the JA Company Program, visit http://houston.ja.org or contact Jennifer Anderson at 713.682.4500 or janderson@jahouston.org. For more information about the study, contact Kevin R. Hattery at khattery@jahouston.org.

SOURCE Junior Achievement of Southeast Texas

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10 Things to Know About Life Cycle Assessments

July 20, 2010 By Leave a Comment

Life cycle assessment (LCA) has come a long way in the past few years, evolving from a niche activity carried out by academics and a few forward-thinking businesses to a mainstream practice talked about publicly by Fortune 500 companies.

But there is still some confusion about what LCA is, what it’s good (and not so good) for, and where it might be headed.

What follows here are 10 facts — and a few opinions — to help shed some light on this exciting young field.

1. LCA is a tool in a growing field called Industrial Ecology

Industrial Ecology seeks to redefine the global economy from the old paradigm of open loop systems (linear flows of materials where resources are extracted, goods are produced and used, and waste products are disposed) to closed loop models (the goal of which is to mimic nature, where the wastes from one product are the raw materials for another).

2. Think “cradle-to-grave,” or ideally, “cradle-to-cradle”

LCA is a “cradle-to-grave” (or, ideally, cradle to cradle) accounting of the key environmental impacts of products and services.
To perform an LCA, you essentially sum up all of the material and energy inputs to the production, use, and disposal of a product; then sum up all of the outputs (air and water emissions, materials, and waste) from each phase; and interpret the results in terms of impacts on human health, ecosystems quality, and resource depletion.

3. LCA is often performed to determine the impact of consumer products

Though there are many uses for LCA, consumer products have long been a prominent target for practitioners. There can be many reasons for this, but it seems likely that it is a response to the growing consumer demand for environmentally-responsible products. The increasing prevalence of product carbon footprints (see next bullet) is a good example of this phenomenon.

4. A product carbon footprint is a type of LCA

There are many ways that LCA can “quantify” the environmental impact of products. One such method is the product carbon footprint, which is really an LCA that focuses on climate change impacts. The increasing prevalence of carbon footprinting can only be good news, as so-called supply chain carbon (that is, carbon emissions that occur outside the direct control of the company selling the final product) make up a very large percentage of the emissions associated with the goods we buy and sell every day.

5. To do an LCA the right way, you need to know (and communicate) the “What” and the “Why”

Why are you performing an LCA? Is it intended for use only inside your organization to make improvements to a product? Or are you intending to “go public” with your findings and make an environmental claim? And what will you be evaluating? Is it a single, consumer facing item (like a can of soda), or is it an entire product line (such as carbonated beverages)? Also, what year will you be evaluating (most recent is always best)? These are the kind of questions you’ll need to answer when you state the “What and the Why” of your study (technically called the Goal and Scope), the first stage of any LCA.

!–pagebreak– 6. LCA is data driven

To perform an LCA, you need a lot of data. Some of the data is relatively easy to come by — the amount of energy used in a manufacturing plant that your company owns and operates, for example. Other types can be extremely difficult to obtain — a common example is a material used in your product (such as plastic packaging) that is bought from an overseas supplier. Fortunately, there are databases that contain representative information for common materials. Some of these databases are proprietary, others free, and all are of varying degrees of quality. But there are global efforts to improve the data available to LCA practitioners, so we can look forward to stronger and more robust results as time goes on.

7. The Life Cycle Inventory is the meat of LCA

The grunt work of LCA begins with data collection and modeling, or Life Cycle Inventory in LCA terms. This is often made easier by drawing a process map of your product’s life cycle — a box flow diagram of all the inputs and outputs across the entire supply chain. Once this is sketched out, the LCI essentially becomes a matter of acquiring and filling in data at each relevant step. So, the LCI is really a balance sheet of all the material and energy inputs and the emissions outputs over the product’s life cycle.

8. It’s not enough to know how much — we have to place the impacts in context

After the LCI is compiled, the inputs and outputs are interpreted to broadly explain their effect on key environmental categories — the usual suspects are human health, ecosystem quality, and resource depletion. This part of the LCA is known as life cycle impact assessment (LCIA), and is used by decision makers to make choices about how to lessen the environmental effects of the evaluated product. So, for example, while the LCI might tell us how many grams of different greenhouse gases are emitted across a product’s life cycle, the LCIA would go a step further and quantify the global warming potential of all those emissions.

9. Interpretation

Once the life cycle inventory and assessment are finished (these are usually accomplished with the help of software tools, which are proliferating at a rapid rate), it’s left to the human practitioner to frame the results. Questions such as which impact categories to emphasize the most (human health is a common choice) and which processes to focus on for improvement need to be decided. Answers to these questions are often highly subjective, and depend upon many things, such as the priorities of the organization performing the LCA, the target audience, and other issues decided in the Goal and Scope phase.

10. LCA is what we make of it

LCA is a powerful tool to help us understand the impacts of the products we make and use. But like any tool, it can be used in many different ways, some of them not so helpful. If, for example, we evaluate a “bad” product and use LCA to improve its impact incrementally, we still might not realize the true aim of our work — the production of goods and services that do not hinder the ability of current future generations to provide for themselves. In other words, only in the context of broader sustainability goals can LCA do what it was created to do — help to enable the creation of truly green economy.

Scott Kaufman is a senior manager at the Carbon Trust and Adjunct Professor at Columbia University, where he teaches a course in Industrial Ecology and Life Cycle Assesment (LCA).

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China’s Wen: “relatively fast” growth needed

July 19, 2010 By Leave a Comment

(Reuters) – Premier Wen Jiabao said China’s economy was responding appropriately to its stable policies, adding “relatively fast” growth would help create jobs and boost domestic demand, the Xinhua news agency reported on Sunday.

Ending a three-day visit to the northwestern provincial capital of Xi’an, Wen said the country’s economic performance was consistent with the government’s macro-economic controls.

China last week reported a moderation in annual gross domestic product growth in the second quarter to 10.3 percent from 11.9 percent in the first three months of the year.

On Friday, the premier attributed the slowdown in part to his government’s policies, which include steps to limit lending to property developers, home buyers and indebted local governments.

In Xi’an, he reiterated a call for restructuring to boost domestic demand.

“The global economy is recovering, but at a slow pace. There are many uncertainties. We should expand domestic demand while stabilizing overseas demand,” he said.

“Only through sound and relatively fast economic growth can we ensure employment and facilitate the restructuring of the economic development mode.”

Wen made visits to an auto-assembly line, a high-tech agriculture firm and aerospace and metals research firms, stressing the need for Chinese initiative and creativity.

“The world is experiencing a technological revolution and one of its key fields is materials technology. We must always remember that high technologies cannot be bought. We have to rely on ourselves,” he said.

(Reporting by Ken Wills, editing by Jonathan Thatcher))

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TREASURIES-Edge higher, extend gains made on Fed minutes

July 16, 2010 By Leave a Comment

July 15 (Reuters) – U.S. 10-year Treasury notes edged higher in Asian trading on Thursday, extending gains made the previous day due to weak retail sales data and a pared-back economic outlook from the Federal Reserve.

* Ten-year notes rose about 4/32 in price to yield 3.034 percent US10YT=RR, down 1 basis point from late U.S. trading on Wednesday. Ten-year note futures rose 3/32 to 122-10.5/32 TYv1.

* Two-year notes were unchanged in price to yield 0.6089 percent US2YT=RR, down about 1 basis point from late New York trading and hovering near a record low of 0.590 percent hit in late June. On Wednesday, the two-year yield had slid nearly 7 basis points for its biggest one-day drop in about six weeks.

* While the 10-year yield may head lower in the near term, a sustained drop from current levels seems unlikely, said Junji Kojima, senior deputy manager of Sompo Japan Insurance’s global securities investment department.

* “If the economy weakens too much, that may spur speculation about the possibility of further monetary easing steps and could give a lift to equities,” Kojima said.

* On the other hand, if the U.S. economy holds up relatively well that could also bode ill for Treasuries, which look a bit over-bought, Kojima said.

* Minutes from the Fed’s June policy meeting showed officials felt they should be ready to consider additional steps to boost the U.S. economy if an already softening outlook took a noticeable turn for the worse. [ID:nN14148574]

* Data on Thursday showing that China’s economy slowed in the second quarter contained no surprises, and gave little reason to think that China’s economy was headed for a sharp slowdown that could prompt market players to revise down their outlook for the global economy, said Kojima at Sompo Japan. [ID:nTOE66D06L] (Reporting by Masayuki Kitano; Editing by Michael Watson)

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Nikkei inches lower, eyes on yen and U.S. earnings

July 13, 2010 By Leave a Comment

TOKYO, July 12 (Reuters) – Japan’s Nikkei average inched lower on Monday as the yen pared its losses and exporters gave up some gains, although the technical picture was brightening.

Market players said the government’s election battering had been largely priced in although worries about policy deadlock could keep further advances in check, with attention now shifting to overseas factors such as the imminent U.S. earnings season.

The ruling Democratic Party’s thrashing in an election on Sunday could thwart efforts to curb a huge public debt and get the economy in shape, and put Prime Minister Naoto Kan’s job at risk. [ID:nTOE66A02V]

“The election results are neither negative nor positive, but what we wanted most was stability in politics — and that seems impossible for now,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

The benchmark Nikkei spent most of the day in positive territory after a negative start due to profit-taking in some exporter shares, edging higher on rises on Wall Street and expectations for U.S. earnings.

“I think U.S. shares are likely on a rising trend, which Japanese shares will follow, but a lot of this is based on market hopes for earnings,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

“If companies like Alcoa and Intel come in below expectations, this could set off selling.”

Alcoa (AA.N) reports on Monday and a raft of other firms, including Intel Corp (INTC.O), later this week.

But U.S. stock futures SPc1 slipped in later trade, weighing on shares, while the dollar slipped back below 89 yen JPY=.

In thin trade, the Nikkei ultimately slipped 0.4 percent or 37.21 points to 9,548.11. The broader Topix also shed 0.4 percent.

Receding pessimism about the global economy helped the Nikkei rise 4.1 percent last week despite hitting a seven-month low during that period.

The Nikkei’s next upward target is around 9,660, its 25-day moving average, which is a proxy for a one-month moving average that is closely watched in Japan. The next target lies around 10,250, roughly the level of its June high.

Technically, the picture for the Nikkei is brightening.

Its MACD, a measure of market momentum, is heading up after a bullish cross, while its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — has been climbing after a fall in June.

YEN PARES LOSSES

Though the dollar at one point rose above 89 yen, it gave up part of those gains by later trade — as did the euro, which edged down 0.1 percent to 111.84 yen EURJPY=R. Investors welcome a weaker yen as it boosts exporter profits when repatriated. [FRX/]

Sony Corp (6758.T) trimmed gains slightly as a result but still rose 3.6 percent to 2,532 yen. Honda Motor Co (7267.T) gained 3.1 percent to 2,687 yen.

But others fell, with Tokyo Electron (8035.T) down 1.7 percent at 4,830 yen and Canon Inc (7751.T) losing 0.9 percent to 3,450 yen.

Banks lost ground, with top lender Mitsubishi UFJ Financial Group (8306.T) falling 2.1 percent to 417 yen and No. 2 bank Mizuho Financial Group (8411.T) down 2.8 percent at 138 yen.

Gree (3632.T), an operator of game sites for mobile phones, fell 1.1 percent to 6,200 yen after Mitsubishi UFJ Morgan Stanley Securities cut its rating on the firm by two notches, to “3″ from “1″, and lowered the target price to 6,750 yen from 7,200 yen.

Shares of steelmakers and shipping firms gained after data showed China’s trade surplus in June topped expectations on surprising strength in exports, suggesting the global economic recovery remains on track despite worries about a fresh slowdown. [ID:nTOE669009]

Nippon Steel Corp (5401.T), the world’s second-biggest steelmaker, rose 2.3 percent to 308 yen and JFE Holdings Inc (5411.T) advanced 1.6 percent to 2,770 yen.

Shipper Kawasaki Kisen (9107.T) rose 1.1 percent to 368 yen.

Some 1.60 billion shares changed hands on the Tokyo exchange’s first section, its lowest volume in a week. Declining stocks outnumbered advancing ones, 984 to 524.

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Bookies see Europe stocks extending rally

July 13, 2010 By Leave a Comment

July 12 (Reuters) – Financial bookmakers expect to see the leading European benchmark indexes rising on Monday, adding to last week’s strong rally, as robust exports data from China helped boost sentiment about the global economy.

Financial spreadbetters expected Britain’s FTSE 100 .FTSE to open 30 to 33 points higher, or as much as 0.6 percent, Germany’s DAX .GDAXI to open 28 to 31 points higher, or as much as 0.5 percent, and France’s CAC-40 .FCHI to open 16 to 19 points higher, or as much as 0.5 percent.

(Reporting by Blaise Robinson)

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Nikkei posts best weekly rise in 7 months

July 10, 2010 By Leave a Comment

(Reuters) – Japan’s Nikkei average booked its best weekly rise in seven months on Friday and market players said more gains may be in store after it moved further away from a seven-month low and held above a key retracement support.

The Nikkei rose 0.5 percent on the day, and gained 4.1 percent this week, its best weekly performance since December, as pessimism about the outlook for the global economy receded.

But shares of Inpex plummeted more than 14 percent at one stage to a record low after Japan’s top oil and gas explorer unveiled a $6.7 billion global offering that will dilute the value of its existing stock by over 50 percent.

The sale, aimed at financing Inpex’s giant Ichthys gas project in Australia, is the biggest equity financing deal among non-financial companies in Japan this year.

The Nikkei has been mostly stuck in bearish trend since April, hurt by weeks of dismal economic reports, including U.S. jobs data last week and a further strengthening in the yen, but some market players said Nikkei seems to have sunk far enough.

“The market has factored in worries about Europe and the possibility of a double dip in the U.S. economy, and it’s now most likely found a floor,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

The Nikkei currently stands well above a key support level of 9,200, the 50 percent retracement of its move up from its March 2009 low to its April 2010 high. It has also tested 9,000 three times recently, also making that level strong support should 9,200 be broken.

“Yesterday’s gains were largely due to short-covering of futures in thin trade, and the market lacks further strong upward momentum to keep climbing. Also, there’s the upper house elections at the weekend,” said Takahashi.

Japan’s ruling Democratic Party could fall well short of Prime Minister Naoto Kan’s target in Sunday’s upper house election, media polls showed, putting his job at risk and threatening to stall steps to rein in massive public debt.

Although market players expect little impact from domestic politics on the Japanese stock market, investors also do not want to actively take positions right before the elections, with some saying a change of prime minister in such a short period of time would be seen as negative.

In light trade, the benchmark Nikkei added 49.58 points to 9,585.32, while the broader Topix was flat at 861.21.

Early this week the Nikkei slid as low as 9,091.70, just above a November 2009 low of 9,076 and a July 2009 low of 9,050.

But the Nikkei jumped 2.8 percent the previous day, boosted by short-covering by investors who believe the benchmark’s slide this week was overdone.

The Nikkei’s next upward target is around 9,700, its 25-day moving average, which is a proxy for a one-month moving average that is closely watched in Japan. The next target lies around 10,250, a recent high hit on June 21.

On the charts, the outlook for the Nikkei appears to be brightening. Its MACD, a measure of market momentum, has started to pick up, while its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — has turned higher after falling in June, moving away from oversold territory.

U.S. earnings begin in earnest next week when Alcoa Inc reports on Monday, and Japan’s reporting season gets into a full swing later this month.

“Japanese corporate earnings will likely beat previous forecasts and that hasn’t been fully reflected in current stock prices. The Nikkei could reach 10,000, either later this month or early next month,” said Soichiro Monji, chief strategist at Daiwa SB Investments.

On Thursday, Wall Street made a late-session rally after first-time U.S. jobless claims dropped to their lowest level in two months and handful of large retailers reported solid sales.

Some 1.67 billion shares changed hands on the Tokyo exchange’s first section, not too far from a four-month low marked last Monday. Advancing stocks outnumbered declining ones, 818 to 683.

INPEX TANKS

Inpex shares ended the day down 12.8 percent at 415,000 yen, after losing as much as 14.7 percent to a record low of 406,000 at one stage, as investors fretted about the announcement of the massive share offering.

“I think the timing is a little bad. Given the schedule (of the Ichthys project), the company has more time. It would have been better to wait for a recovery in the market,” said Deutsche Securities analyst Tomohiro Jikihara.

Shares of exporters rose, as the euro was firm near a two-week high against the yen at around 112.40 yen.

Sony Corp rose 0.9 percent to 2,445 yen and TDK Corp gained 1.2 percent to 5,080 yen.

Canon Inc gained 1 percent to 3,480 yen after the Nikkei business daily reported it is likely to post a near three-fold jump in its operating profit for the January-June period.

Shares of Kasai Kogyo jumped 5.5 percent to 306 yen after the Japanese car interior maker said on Friday it would build a plant in China to supply its products mainly to Chinese car maker Chery Automobile.

(Additional reporting by Taiga Uranaka; Editing by Edwina Gibbs)

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Nikkei posts best weekly rise in 7 mths; Inpex dives

July 10, 2010 By Leave a Comment

TOKYO, July 9 (Reuters) – Japan’s Nikkei average booked its best weekly rise in seven months on Friday and market players said more gains may be in store after it moved further away from a seven-month low and held above a key retracement support.

The Nikkei rose 0.5 percent on the day, and gained 4.1 percent this week, its best weekly performance since December, as pessimism about the outlook for the global economy receded.

But shares of Inpex (1605.T) plummeted more than 14 percent at one stage to a record low after Japan’s top oil and gas explorer unveiled a $6.7 billion global offering that will dilute the value of its existing stock by over 50 percent.

The sale, aimed at financing Inpex’s giant Ichthys gas project in Australia, is the biggest equity financing deal among non-financial companies in Japan this year. [ID:nTOE66800V]

The Nikkei has been mostly stuck in bearish trend since April, hurt by weeks of dismal economic reports, including U.S. jobs data last week and a further strengthening in the yen, but some market players said Nikkei seems to have sunk far enough.

“The market has factored in worries about Europe and the possibility of a double dip in the U.S. economy, and it’s now most likely found a floor,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

The Nikkei currently stands well above a key support level of 9,200, the 50 percent retracement of its move up from its March 2009 low to its April 2010 high. It has also tested 9,000 three times recently, also making that level strong support should 9,200 be broken.

“Yesterday’s gains were largely due to short-covering of futures in thin trade, and the market lacks further strong upward momentum to keep climbing. Also, there’s the upper house elections at the weekend,” said Takahashi.

Japan’s ruling Democratic Party could fall well short of Prime Minister Naoto Kan’s target in Sunday’s upper house election, media polls showed, putting his job at risk and threatening to stall steps to rein in massive public debt. [ID:nTOE66707U]

Although market players expect little impact from domestic politics on the Japanese stock market, investors also do not want to actively take positions right before the elections, with some saying a change of prime minister in such a short period of time would be seen as negative.

In light trade, the benchmark Nikkei .N225 added 49.58 points to 9,585.32, while the broader Topix was flat at 861.21.

Early this week the Nikkei slid as low as 9,091.70, just above a November 2009 low of 9,076 and a July 2009 low of 9,050.

But the Nikkei jumped 2.8 percent the previous day, boosted by short-covering by investors who believe the benchmark’s slide this week was overdone.

The Nikkei’s next upward target is around 9,700, its 25-day moving average, which is a proxy for a one-month moving average that is closely watched in Japan. The next target lies around 10,250, a recent high hit on June 21.

On the charts, the outlook for the Nikkei appears to be brightening. Its MACD, a measure of market momentum, has started to pick up, while its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — has turned higher after falling in June, moving away from oversold territory.

U.S. earnings begin in earnest next week when Alcoa Inc (AA.N) reports on Monday, and Japan’s reporting season gets into a full swing later this month.

“Japanese corporate earnings will likely beat previous forecasts and that hasn’t been fully reflected in current stock prices. The Nikkei could reach 10,000, either later this month or early next month,” said Soichiro Monji, chief strategist at Daiwa SB Investments.

On Thursday, Wall Street made a late-session rally after first-time U.S. jobless claims dropped to their lowest level in two months and handful of large retailers reported solid sales.

Some 1.67 billion shares changed hands on the Tokyo exchange’s first section, not too far from a four-month low marked last Monday. Advancing stocks outnumbered declining ones, 818 to 683.

INPEX TANKS

Inpex shares ended the day down 12.8 percent at 415,000 yen, after losing as much as 14.7 percent to a record low of 406,000 at one stage, as investors fretted about the announcement of the massive share offering.

“I think the timing is a little bad. Given the schedule (of the Ichthys project), the company has more time. It would have been better to wait for a recovery in the market,” said Deutsche Securities analyst Tomohiro Jikihara.

Shares of exporters rose, as the euro was firm EURJPY=R near a two-week high against the yen at around 112.40 yen.

Sony Corp (6758.T) rose 0.9 percent to 2,445 yen and TDK Corp (6762.T) gained 1.2 percent to 5,080 yen.

Canon Inc (7751.T) gained 1 percent to 3,480 yen after the Nikkei business daily reported it is likely to post a near three-fold jump in its operating profit for the January-June period. [ID:nSGE6670IL]

Shares of Kasai Kogyo (7256.T) jumped 5.5 percent to 306 yen after the Japanese car interior maker said on Friday it would build a plant in China to supply its products mainly to Chinese car maker Chery Automobile. (Additional reporting by Taiga Uranaka; Editing by Edwina Gibbs)

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JGB yield curve steepens before Japan election

July 10, 2010 By Leave a Comment

TOKYO, July 9 (Reuters) – Japanese government bonds fell on Friday as investors hesitated to buy before a weekend election that might impact the government’s fiscal reform strategy and as Tokyo stocks extended gains from the previous day’s rally.

Media surveys show that Prime Minister Naoto Kan’s ruling Democratic Party of Japan might fail to win its targeted number of seats in Sunday’s upper house election, an outcome that could stymie plans to curb the country’s huge public debt. [ID:nTOE668029]

“If the ruling party fails to win a majority, then I would have to say yields will likely rise, especially those of longer-dated maturities which led the recent rally,” said Shinji Nomura, chief fixed-income strategist at Nikko Cordial Securities.

“But it would not be that simple. The yield curve appeared ripe for a pull back from its recent bull flattening in any case and this has to be considered as well.”

The yield curve has steepened this week, with the five-year/20-year yield spread widening to 151.5 basis points from a nine-month low of 143.5 basis points hit a week ago.

Market players said some investors who trade the yield curve unwound their flattening positions, which involve buying long-end debt and selling shorter-dated maturities.

The market had rallied the previous week on expectations of a global economic slowdown, fiscal reform hopes and sharp declines in Tokyo share prices.

But the rally fizzled this week on growing speculation that Kan’s Democrats could fall well short of their election goal, a prospect that could dent the premier’s push for a sales tax hike as part of his fiscal reform ambitions.

Still, analysts suggest the momentum is there for a future sales tax hike even if the Democrats’ influence does wane after the election, with the main opposition Liberal Democratic Party having also proposed doubling the tax rate to 10 percent.

Bonds may also draw support in the long run from persisting concerns over the global economy and Europe’s sovereign debt crisis.

The JGB short-end held firm amid expectations of the Bank of Japan maintaining an easy policy or even coming under pressure to ease further depending on economic conditions.

“Some investors appear to have sold JGBs in the belly (middle of the yield curve) and shifted funds to the short end,” said a trader at a domestic bank.

The two-year yield JP2YTN=JBTC was flat at 0.140 percent.

The five-year yield JP5YTN=JBTC rose 1.5 basis points to to 0.370 percent.

The benchmark 10-year yield rose 1.5 basis point to 1.155 percent JP10YTN=JBTC after hitting a seven-year low of 1.055 percent the previous week.

The 20-year yield rose 2.5 basis points JP20YTN=JBTC to 1.885 percent.

The 30-year yield climbed 2.5 basis points to 1.960 percent JP30YTN=JBTC as dealers sold to tweak their inventories after bond investors chose not to bid aggressively at a 600 billion yen ($6.8 billion) auction of the maturity the previous day.

September 10-year futures 2JGBv1 fell 0.27 point to 141.21, pulling away from a seven-year peak of 141.95 struck the previous week.

Japan’s five-year sovereign credit default (CDS) swap spread has dipped about 3 basis points on the week to around 94 basis points JPGV5YUSAC=MP, in line with tightening in other sovereign CDS spreads following a slight thaw in pessimism over global economic growth and relief over Europe’s banking stress tests.

U.S. Treasuries fell after data on jobless claims and retail sales eased some of the fear that the economy would turn lower again. [US/] (Editing by Chris Gallagher)

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Dollar slides to 3-month low vs Swiss franc

July 7, 2010 By Leave a Comment

July 6 (Reuters) – The dollar fell to its weakest in nearly three months against the Swiss franc on Tuesday as the U.S. currency came under broad selling pressure in early European trade.

The dollar CHF= fell to 1.0563 francs according to Reuters data, down 0.7 percent on the day, to hit its lowest since mid-April.

Market participants said selling via system trades was helping to push the U.S. currency lower versus the Swiss franc.

The dollar’s broad losses came as the Australian dollar rallied to session high on short covering after the Reserve Bank of Australia said the global economy is continuing to expand, albeit unevenly.

(Reporting by Naomi Tajitsu)

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