Business Headlines

The IEA, based in Paris, said Wednesday it raised its global oil consumption forecast for this year and next. Despite the rosier outlook, the IEA still expects demand this year to fall 2.7 percent as economies struggle to emerge from recession.

“We’re forecasting an upswing in global oil demand from the second quarter into the fourth quarter,” Barclays Capital said in a report. “The grounds are being laid for a sustained push to the upside.”

Barclays expects oil to average $71 a barrel in the third quarter and $76 in the fourth.

Investors brushed off evidence that suggested crude demand remains weak in the U.S. The Energy Department’s Energy Information Administration said crude inventories rose last week by 2.5 million barrels and were up 7.5 million during the last four weeks.

Oil traders have also been watching global stock markets for signs of improving investor sentiment. The Dow Jones industrial average rose 1.3 percent Wednesday, and most Asian indexes gained in early trading Thursday.

“It might just be hard to break away from the major trend where equities go up and oil follows,” said Michael Sander of Sander Capital Advisors in Seattle. “I would bet more on oil going up than down at this point.”

In other Nymex trading, gasoline for September delivery rose 0.78 cent to $2.03 a gallon and heating oil gained 2.19 cents to $1.91. Natural gas for September delivery jumped 1.6 cents to $3.50

per 1,000 cubic feet.

In London, Brent prices rose 43 cents to $73.32 a barrel on the ICE Futures exchange.

European Markets Jump On Germany & France’s Unexpected GDP Growth

By Daniel Hauck

Aug. 13 (Bloomberg) — Stocks and commodities rose for a second day and bonds fell as the German and French economies unexpectedly grew in the second quarter and the Federal Reserve indicated the worst slump since the Great Depression is easing.

The MSCI World Index of 23 developed nations gained 0.5 percent at 10:00 a.m. in London and futures on the Standard & Poor’s 500 Index climbed 0.9 percent. Oil rose for a second day in New York, copper reached a level not seen since October on the London Metal Exchange and nickel advanced to the highest price in almost a year. Treasuries declined for a second day as the U.S. prepared to sell a record $15 billion of 30-year bonds.

European stocks climbed as government data showed gross domestic product rose a seasonally adjusted 0.3 percent from the first quarter in Germany and France, pulling the euro region’s two largest economies out of their worst contractions since World War II. Shares in Asia climbed after Fed policy makers signaled they aren’t rushing to end unprecedented efforts to promote lending and stabilize the world’s biggest economy.

“Overall the sentiment is positive with the Fed comment,” said Christoph Eibl, co-founder of Zug, Switzerland-based Tiberius Asset Management, which oversees $1.5 billion. “People are using every positive argument to get back into the markets. Definitely this is driven by some noise, but I believe things are getting better than many people think.”

Prudential, Rio Tinto

The Dow Jones Stoxx 600 Index of European shares climbed 0.9 percent as raw-material producers advanced with metals and Prudential Plc posted earnings that beat analysts’ estimates. The 46 percent rally in the Stoxx 600 since March 9 has driven price-earnings valuations to the highest level since September 2003, weekly data compiled by Bloomberg show.

Rio Tinto Group, the world’s third-largest metals producer, advanced 3.3 percent in London. Prudential, the U.K.’s biggest insurer by market value, climbed 6 percent after saying its first-half loss narrowed as U.S. sales rose and the value of securities increased.

The rise in U.S. futures indicated that the S&P 500 may extend a five-month, 49 percent surge that has been led by financial shares. John Paulson, the hedge-fund manager whose wagers against the U.S. housing market helped him earn an estimated $2.5 billion last year, bought Bank of America Corp. and Goldman Sachs Group Inc. stock in the second quarter, according to a filing yesterday with the U.S. Securities and Exchange Commission.

The MSCI Emerging Markets Index added 1.4 percent, the biggest increase since Aug. 3. The Dubai Financial Market General Index added 1.9 percent as oil climbed.

Micex Climbs

The Micex Index of stocks in Russia, the world’s biggest energy-exporting economy, jumped 1.8 percent. The ruble strengthened as much as 1.4 percent versus the dollar to 32.0291, snapping the longest slump in seven months.

Crude oil for September delivery rose 1.1 percent to $70.91 a barrel on the New York Mercantile Exchange.

Copper rose 2.5 percent to $6,345 a metric ton and nickel added 5.6 percent to $20,754 a ton on the LME. Gold for immediate delivery advanced 0.6 percent to $952.63 an ounce. Corn led an advance in grains in Chicago, rising 0.9 percent to $3.3925 a bushel.

The euro strengthened for a third day against the dollar, and for a second day versus the yen, after the European Union’s statistics office said the region’s economy contracted 0.1 percent in the second quarter, less than economists forecast, because of the unexpected strength in Germany and France. The euro gained to $1.4244, and to 137.26 yen. The dollar fell against 14 of the 16 major currencies after the Fed statement, while South Korea’s won led Asian currencies higher.

Treasuries Fall

Treasuries fell after the Fed said it will “gradually slow” its purchases of securities as it aims to purchase as much as $300 billion of bonds by the end of October, ending the program a month later than initially suggested. The yield on the 10-year note rose 2 basis points to 3.73 percent. The Treasury is scheduled to sell a record $15 billion of 30-year bonds today.

“The Treasury market is going to miss the Fed coming in and buying $50 billion a month,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York, wrote in a report on the U.S. central bank’s meeting. “Although the Fed did not say the recession had ended today, their actions suggest that they believe we are headed out of recession.”

The yield on the 10-year German government bond rose 2 basis points to 3.47 percent, while the 10-year French note yield climbed 2 basis points to 3.68 percent.

Credit-default swaps on the Markit iTraxx Crossover Index of 44 companies with mostly high-yield credit ratings dropped 29.5 basis points to 585.5, according to JPMorgan Chase & Co. prices. The decline signals an improvement in perceptions of credit quality.

India’s Wholesale Prices Fall The Most in 30 Years

By Kartik Goyal

Aug. 13 (Bloomberg) — India’s wholesale prices fell the most in three decades, giving the central bank more time to keep interest rates at a record low before weak monsoon rains reduce harvests and stoke inflation.

The benchmark wholesale-price index declined 1.74 percent in the week to Aug. 1 from a year earlier after falling 1.58 percent in the previous week, the government said today. That was the biggest retreat since June 1978, when prices dropped 1.9 percent, according to central bank monthly data.

Prime Minister Manmohan Singh on Aug. 8 said below-average monsoon rains are likely to reduce crop output and may have an inflationary impact “in the coming months.” India relies on the seasonal monsoon to produce food for its 1.2 billion people, as half the nation’s arable land isn’t irrigated.

“Food inflation, which is already pressurized, will face further pressure due to poor rainfall,” said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor’s. “An erratic monsoon so far and a severe deficiency in the first week of August have raised the specter of drought in India.”

The India Meteorological Department on Aug. 10 lowered its monsoon forecast for a second time this season, saying showers in the June-September season will be 13 percent below average, compared with a 7 percent shortfall estimated in June.

Poor rainfall may curb farm output and erode the purchasing power of 742 million Indians who live in the countryside, hurting Prime Minster Singh’s efforts to revive growth in order to create jobs and cut poverty.

Drought Districts

State governments have declared drought in 167 of India’s 626 districts, the farm ministry said yesterday. Areas under rice cultivation have declined 20 percent to 22.82 million hectares, according to the farm ministry.

Wholesale prices are falling because of a high base last year and inflation will accelerate to as much as 6.5 percent by March 2010, said Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai. That may prompt the central bank to reverse interest-rate cuts and raise borrowing costs by 300 basis points in 2010, he said.

The Reserve Bank of India on July 28 left its reverse repurchase rate at 3.25 percent and maintained the repurchase rate at 4.75 percent after cutting them by a quarter point each on April 21.

Inflation has slowed from a 16-year high of 12.91 percent in August 2008 as oil prices fell from an unprecedented $147.27 a barrel in the previous month. Global crude prices have gained about 50 percent this year, rekindling inflation concerns.

Consumer Prices

India may see food inflation accelerating at a faster pace from October onwards, adding to already high consumer-price inflation, Joshi of Crisil said.

India has four consumer price indices and uses the wholesale-price index as the benchmark as the other inflation measures don’t capture the aggregate price picture.

Consumer prices paid by farm workers jumped 11.52 percent in June from a year earlier after gaining 10.21 percent in May. Prices paid by rural workers rose 11.26 percent in June from 10.21 percent in the previous month. Consumer prices paid by industrial workers rose 9.26 percent in June from a year earlier, according to the latest government data.

India’s wholesale-price index published today may be revised in two months, after the government receives additional data. The commerce ministry today revised the rate for the week ended June 6 to a fall of 1.01 percent from a decline of 1.61 percent.

U.S. Food Giants Warn of a Sugar Shortages

(Reuters) – Large U.S. food companies said the country could “virtually run out of sugar” unless the Obama administration eased import curbs, the Wall Street Journal said.

In a letter to Agriculture Secretary Thomas Vilsack, the companies — including Kraft Foods Inc (KFT.N), General Mills Inc (GIS.N), Hershey Co (HSY.N) and Mars Inc — said there could be a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products, the paper said.

The companies warned they would hike consumer prices and lay off workers if the agriculture department did not allow them to import more tariff-free sugar, the paper said.

Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil, the paper said.

Sugar prices are poised to hit 30-year highs on a perfect storm of huge Indian imports and tight supplies.

The U.S. Department of Agriculture, Kraft, General Mills, Hershey and Mars did not immediately return calls seeking comment that were made outside regular U.S. business hours.

U.S. Home Foreclosures Hit New Highs in July

By Lynn Adler

NEW YORK (Reuters) – U.S. home loans failed at a record pace in July despite ongoing federal and state programs to avoid foreclosures, which have severely strained housing and the economy.

Foreclosure activity jumped 7 percent in July from June and 32 percent from a year earlier as one in every 355 households with a loan got a foreclosure filing, RealtyTrac said on Thursday.

Filings — including notices of default, auction and bank repossession — have escalated with unemployment.

“July marks the third time in the last five months where we’ve seen a new record set for foreclosure activity,” James J. Saccacio, RealtyTrac’s chief executive, said in a statement.

“Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we’re seeing significant growth in both the initial notices of default and in the bank repossessions.”

More than 360,000 households with loans drew a foreclosure filing in July, a record dating back to January 2005, when RealtyTrac started tracking monthly activity.

Notices of default, auction or repossession have reached nearly 2.3 million in the first seven months of the year — with more than half a million bank repossessions, the Irvine, California-based company said.

Making timely payments keeps getting more harder for borrowers who have lost their jobs or seen their wages cut.

The unemployment rate is 9.4 percent and President Barack Obama has said he expects it will hit 10 percent.

Obama’s housing rescue is gaining traction in altering terms of loans for struggling borrowers, but slowly.

Earlier this month the U.S. Treasury Department detailed the progress of the top servicers in modifying loans and prodded them to step up efforts to stem foreclosures.

SUN BELT STILL SUFFERING

States where sales and prices surged most in the five-year housing boom early this decade remain hardest hit.

California, Florida, Arizona, Nevada accounted for almost 57 percent of total U.S. foreclosure activity in July.

Illinois had the fifth-highest total filings, spiking nearly 35 percent from June, in an example of how moratoriums often delay rather than cure an inevitable loan failure.  Continued…

Home Prices Collapse Faster Than Data Suggests