Oil falls 3 percent as dollar recovers

08/10/07

By Robert Campbell

NEW YORK (Reuters) - Oil prices fell nearly 3 percent on Monday as part of a wider drop in commodities due to a recovery by the U.S. dollar against other major currencies.

U.S. crude futures traded $2.40 lower at $78.82 a barrel at 2:11 p.m. EDT after dipping as low as $78.35. London Brent crude fell $2.34 to $76.56.

"The stronger dollar is hurting commodities across the board, and for oil there is also a sense that the worst of the hurricane season has passed, and so that is adding to the weakness," said Mike Zarembski, senior commodities analyst with optionsXpress in Chicago.

The dollar firmed after a report showed September U.S. jobs growth was the best since May, easing concern about an imminent recession in the world's top energy consumer.

Metals prices also fell on Monday as the stronger dollar prompted investors to reduce positions. Some investors have also bought crude and other commodities in recent weeks as a hedge against the falling dollar, which has fallen to multiyear lows against other major currencies.

Further pressure came on easing concerns about Atlantic hurricane season, which officially runs through November but which peaks in August and September. Thirteen named storms have been tracked in the Atlantic this year, but no significant damage has been done to oil and gas infrastructure.

Oil prices hit a record high of $83.90 a barrel on September 20, after the U.S. Federal Reserve cut interest rates in a bid to calm credit markets, sending the dollar lower.

Concern that OPEC's decision to increase oil production by 500,000 barrels per day starting November 1 would not be enough to meet fourth quarter demand has also helped push prices higher.

Ecuador on Monday announced it plans to officially join OPEC when the group next meets as part of efforts by President Rafael Correa to revive the flagging oil industry of South America's No. 5 producer.

PRICE CONCERNS

The new executive director of the International Energy Agency, which represents 26 developed nations, warned high prices would eventually hurt consuming nations' economies.

"If the prices are going very high, certainly, it has a negative effect on the economy," said Nobuo Tanaka in an interview.

However, Tanaka stopped short of calling on OPEC to further increase production and said the IEA was still evaluating the impact of the subprime credit crisis on oil demand growth.

Some investors say the outlook for oil prices remains bullish, given poor growth in non-OPEC supplies.

"The most likely situation we are in is that we're going to see oil prices average $70 for the rest of the year," said Tim Guinness, chairman of Guinness Atkinson Asset Management.

"We think there is a 30 percent chance that we will see some sort of decisive assault on $100."

(Additional reporting by Matthew Robinson in New York; Fayen Wong in Sydney and Santosh Menon in London)

Breaking News from The Globe and Mail

Credit crunch will take its toll on U.S.: Greenspan
Pedro Nicolaci da Costa


Wednesday, October 10, 2007

NEW YORK — The credit crunch that has troubled financial markets in recent months will eventually take its toll on the U.S. economy, former Federal Reserve Chairman Alan Greenspan said on Wednesday.

Mr. Greenspan, who many now blame for inflating the housing bubble during his tenure, said home prices would almost certainly fall and that the slump will eventually prompt consumers to cut back spending.

"When you get house prices flattening out, you begin to get pressures on consumption," Mr. Greenspan told the World Business Forum at New York's Radio City Hall.

He added that rising stock prices, which pushed major indexes to a record this week, could help offset the drop in the value of home equity.

Mr. Greenspan has been an active commentator on the economy since leaving the Fed in early 2006. His pronouncements have roiled financial markets at times, though the frequency of his recent appearances have diluted their impact.

His record has also come under attack, with some critics lambasting him for inflating asset bubbles and undermining fiscal discipline in Washington. Mr. Greenspan has defended his policies, saying global forces out of the central bank's control have dictated the path of long-term borrowing costs.

Mr. Greenspan said the rate of U.S. economic growth was slowing, but the odds of a recession were less than 50 per cent.

Concern that a credit crunch and financial market disarray could hit the U.S. economy prompted the Fed to cut interest rates sharply last month, even though it was unclear how serious any damage could be.

In a separate appearance, Mr. Greenspan said that demographic shifts will strain U.S. Medicare resources but that financing the Iraq war would have no long-term impact on those resources.

"We do not have the resources in any credible economic scenario to fulfill what is currently on the books as an entitlement 10, 15, 20 years from now," he said in an interview on Canadian Broadcasting Corp. radio.

Mr. Greenspan said the cost of the U.S. war in Iraq would have no long-term impact on funding for Medicare, the health care financing program for the elderly. He said both political parties were afraid to confront the issue of Medicare's long-term solvency because of its political sensitivity.

He also said that not all of the Canadian dollar's rise to parity with the U.S. dollar was caused by U.S. dollar weakness.

© The Globe and Mail

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THE CANADIAN PRESS


Three of Canada's major banks are raising residential mortgage rates.

The Bank of Montreal (TSX: BMO) and Royal Bank (TSX: RY) said Wednesday their posted rates will rise as much as a quarter point beginning on Thursday.

TD Bank's (TSX: TD) rate changes went into effect Wednesday.

Most rates are going up by 0.10 percentage points to 0.25 points, depending on the term.

For example, BMO's five-year rate will increase 0.25 percentage points to 7.44 per cent, Royal Bank's five-year closed will rise 0.21 points to 7.4 per cent and TD's five-year rate increased 0.25 points to 7.44 per cent.

The increases come as bond yields rise on speculation the Bank of Canada continue to hold the line on its own benchmark rate and may even have to raise it to keep inflation within the acceptable target range.

Japan's grannies drive up gold prices
By Ambrose Evans-Pritchard
Last Updated: 1:37am BST 16/10/2007




Gold has soared to a fresh 28-year high of $760 (£372) an ounce on fears of global currency disorder and a surge of buying by Japanese investors using exotic trading signals.

Traders report a sudden burst of activity on the TOCOM gold futures markets in Tokyo as the price breaks through the psychological barrier of 3,000 yen (£12.52) per gramme, the measure used by the Japanese to trade gold.


The country's irrepressible grannies rely heavily on Ichimoku "cloud charts", multi-faceted indicators designed to give support/resistance levels in various markets, which have issued a powerful buy signal in recent days.

John Reade, head of precious metals at UBS, said the Japan can be a major driver of the gold price. "Japanese buying can come out of the blue, but it is too soon yet to tell whether they are about to take over the gold market," he said. "When the Japanese public move in with reckless abandon, everybody else gets out of the way. They can be the last to join the rally."

The fresh interest in gold comes as the yen renews its slide, hit by signs that the economy may be tipping back into deflation after the housing collapse during the summer. Housing starts fell 23.4pc in July and 43.4pc in August as new laws came into effect. The Bank of Japan has signalled that it will keep interest rates at 0.5pc for the foreseeable future, inviting funds to step up borrowing in Tokyo to chase higher yields elsewhere through the global "carry trade".

Rising inflation across China, India, the Middle East, eastern Europe and Latin America have all created the backdrop for a major move in gold. Citigroup said a global "reflation rally" caused by cuts in US interest rates could push prices above $1,000 an ounce.

UBS has upgraded its long-term forecast, but is cautious for now. "The net long positions on the US futures markets are at all-time highs. They have been at extreme levels for four weeks and when that happens you can be sure there will be a correction. It could be any time now," said Mr Reade. Read

The Asian era is coming!
Marcus Gee


Wednesday, October 17, 2007

It's hard not to feel a little sorry for the Asia Pacific Foundation of Canada. Since being established by an act of Parliament in 1984, it has been saying the same thing over and over again in a thousand different ways: Wake up, Canada, the Asian era is coming!

Funded with the proceeds of a federal endowment, the foundation gives out grants for research on business in Asia, organizes conferences on business in Asia, and sends its executives out to give speeches on business in Asia.

The message never changes. To succeed in today's world, Canadian companies simply must have a strategy for dealing with the rising influence of Asia's booming economies.

It's sad in the first place that Canada should need a special organization devoted to spreading a message so blindingly obvious. You only need to scan the headlines in any newspaper to know that China, India, and the other rising economies of the East are changing the world.

What's doubly sad is that most Canadian businesses don't seem to be paying the slightest attention.

A new report by the foundation says almost plaintively that, despite all its efforts, "Canada is losing economic relevance in Asia."

Canada's share of the overall Asian market is less than 1 per cent, down from 1.72 per cent in 1995 and 2.51 per cent in 1984.

Canadian direct investment in the Asia-Pacific region, at $30.4-billion in 2005, "seems paltry" compared with that of other countries, and much of it goes to established destinations, such as Australia and Japan.

"The recent Canadian enthusiasm for China does not match the reality that only 0.2 per cent of total Canadian outward investment is destined for China," the report notes with a hint of bitterness. "Clearly, Canadian firms have generally not seen Asia as part of their investment strategies."

As for trade, "Asia is booming and new markets are growing rapidly while Canada remains fixed in a pattern of trading relationships that has changed little in decades."

In other words, Canadian business has become so accustomed to the convenience of the U.S. market next door that it can't be bothered with Asia.

To show how shortsighted this is, the report rattles off a few eye-widening numbers:

"Asia is the fastest-growing region of the world, producing one-quarter of global exports, and accounting for over 35 per cent of the world's GDP. This is projected to rise to a 43 per cent share by 2020."

"By 2010, China is planning to have 11 new railways and 14 new expressways and increase its total port capacity by 80 per cent to 6.1 billion tons."

"China alone has more than 300,000 U.S. dollar millionaires."

Yet only 17 per cent of Canadian companies have a formal China strategy. How can they change their ways and get on the Asia train?

The foundation points out that making hay from Asia's boom doesn't just mean selling your product or service to the eager consumers of Shanghai or Mumbai.

Even if a company sells solely to Canadian or North American markets, it can bring Asia into the picture by sourcing components from Asia, outsourcing business functions such as billing or telemarketing to low-cost Asian outfits, or developing supply chains with links in Asia.

Canada's leading furniture maker, Palliser Furniture Ltd. of Winnipeg, brings in non-upholstered wooden furniture from Thailand, Malaysia, Taiwan and China.

Another Winnipeg firm, garment maker Gemini Fashions of Canada Ltd., has subcontractors in China and a plant with 2,000 employees in Bangalore, India.

Other companies have discovered niches to exploit in the Asian market.

Meat company Sunterra Enterprises Ltd. of Calgary completely overhauled its production line to produce specialty pork cuts for the Japanese market and now sends 70 per cent of its chilled pork there.

Saskcan Pulse Trading Inc. uses computerized colour-sorting technology to help produce high-quality lentils, chick peas and yellow peas for hungry markets in India, Sri Lanka and Bangladesh.

Still others are trying to meet Asia's growing demand for services such as insurance, banking and education. Vancouver-based CIBT School of Business and Technology Corp., a subsidiary of Capital Alliance Group Inc., offers business, language and technical training at 10 Chinese campuses.

Even reading these success stories, it's hard to escape the feeling that the foundation is stretching to find showcase companies. One of its case studies, fertilizer maker Hanfeng Evergreen Inc., is essentially a Chinese company with all of its operations in China, even if it is run by a Chinese-Canadian and has its formal headquarters in Toronto.

The Asia Pacific Foundation is full of good people doing a good job. The fault lies not with their advocacy, but with the laziness and indifference of the business community.

If Canadian business hasn't got the message about Asia after nearly a quarter century of wake-up calls, will it ever? The foundation must wonder sometimes.

At the end of the article check out one of the banks that is giving the lowest rates. Actually I used ICICI in July and August as they had very competitive rates


Breaking News from The Globe and Mail

Now's a good time to lock in a mortgage
Rob Carrick


Thursday, October 25, 2007

Mortgage rates have hit multiyear highs, and there could be worse to come before things settle down.

Call it yet another example of collateral damage from the problems in the U.S. subprime mortgage market.

Simply put, it's costing banks and other lenders more to raise the money they use to finance mortgages, and they're passing the cost on to people buying homes and refinancing existing mortgages.

That's why the posted major bank rate for five-year mortgages is as much as 7.44 per cent right now, which is the highest level since May, 2002, and why new variable-rate mortgages are becoming more expensive almost by the day (existing variable-rate mortgages are unaffected).

A discount of 0.9 of a percentage point off the prime rate used to be a good but attainable deal for borrowers. Today, mortgage broker websites - remember, these guys have access to many lenders - are showing best deals of prime minus 0.6 or 0.75 points.

Alex Haditaghi, CEO of Mortgagebrokers.com, said his contacts with bank representatives suggest that fully discounted five-year rates could go as high as 6.5 per cent from their current level around 6 per cent. He also warned maximum discounts on variable-rate mortgages may shrink further. "Two banks have given the heads-up that if you want to lock up your clients, do it now because by Nov. 15 you're going to see us go to 0.5 below prime."

If you're looking for a house or have a mortgage expiring in the next three or four months, you should talk to lenders right now to lock in the best possible rate. A 120-day rate guarantee is pretty common these days and it offers a shield against further rate increases. Shopping around for rates is more important than ever today because lenders are all taking different approaches to the current mortgage-market uncertainty.

Borrowing costs for mortgages track rates in the bond and money markets, which in turn are a reflection of sentiments about where the economy and inflation are headed. Today, inflation is contained in Canada and recently there have been economic forecasts that call for slower but still solid growth in 2008. Add it all up and you have an environment where rates should be holding tight, not rising.

The reason why this isn't happening is related to the same junk mortgages in the United States that helped pushed the stock market into its summer slump. These mortgages were packaged into investments that were widely purchased by banks, investment dealers and other institutional investors who are now a lot more risk-sensitive than they were before.

One way for investors to manage risk is to demand higher returns, and that's in fact what Canada's lenders are running into when they issue the short-term securities they use to finance variable mortgage loans. If the banks have to pay more, they have to charge more to keep up their profit margins. So it is that we have the incredible shrinking variable-rate mortgage discount in Canada.

Fixed-rate mortgage rates have jumped recently in what can best be described as a catch-up to this past summer's financial market troubles. You'll see this not only in the five-year rate, but also in posted big bank one-year rates that are as high as they've been since early 2001.

Benjamin Tal, senior economist at Canadian Imperial Bank of Commerce, said lenders held mortgage rates steady through August and September, and even cut them a bit at one point. Then, with bond yields on the rise earlier this month, a decision was made to bump up five-year rates significantly. "You might say that consumers got an extra two months of relatively cheap rates," Mr. Tal said.

The biggest victims of the U.S. subprime mortgage situation here in Canada are people with poor credit histories, new immigrants and the self-employed. Their mortgage applications are being scrutinized more carefully than six months ago, and some people are being offered loans at higher rates or are being rejected.

Tighter lending rules are going to be a fixture for a while, but higher mortgage rates may prove temporary. CIBC's Mr. Tal said the factors making variable-rate mortgages more expensive will slowly die away, and he argued that the state of the economy in both Canada and the United States doesn't suggest much risk of rising rates. "Over the next six months, it's very reasonable to think that rates will be stable, with a bias downwards."

If you're in the market for a home, get a rate guarantee and then keep an eye on the housing market. It's been hot, like, forever and high rates are just the sort of thing to cool things down.

Mortgage rates

Big Six banks

Bank of Montreal Mortgage 7.44%
Bank of Nova Scotia 7.44%
CIBC Mortgages 7.44%
National Bank 7.40%
Royal Bank of Canada 7.40%
T-D Mortgage 7.44%

Who has the lowest rates

ICICI Bank Canada 5.75%
Canadian Tire Bank 5.85%
Manulife Bank 5.85%
Citizens Bank of Canada 5.99%
Comtech Credit Union 5.99%
First National Financial 5.99%

SOURCES: BANK OF CANADA AND CANNEX FINANCIAL EXCHANGES

Toronto stocks shoot up on U.S. rate cut hopes

26/10/07

TORONTO (Reuters) - The Toronto Stock Exchange's main index rose on Friday, with all sectors except energy climbing on expectations of a U.S. interest rate cut, while metal prices boosted materials stocks.

The S&P/TSX composite index <.GSPTSE> advanced 75.93 points, or 0.5 percent, to 14,200.87. The materials sector was up 1.3 percent while financials added 0.8 percent.

Stocks rose partly on expectation that the U.S. Federal Reserve will cut interest rates next week. A rate cut could boost the slowing economy in the United States, Canada's biggest trading partner.

Royal Bank of Canada was up 1.1 percent.

Energy firms, meanwhile, were hit hard by a C$1.4-billion ($1.46-billion) increase in royalties, announced late on Thursday, for Alberta's booming oil and gas industry.

The new royalties are seen reducing the returns on investment in oil and gas projects, returns that are typically higher in Canada than in less-stable energy-producing countries.

Suncor Energy was down 1.1 percent.


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