Page 3 of
5 Mortgage
crisis to corporate debt
crisis By Doug
Noland
state-owned bank, aid any developer
that ‘crashed,’ the news Web site said…"
January 8 – Bloomberg (Bryan Keogh): "The
global default rate on high-yield, high-risk
bonds, which finished 2007 at a 26-year low of
0.9%, will jump more than fivefold by the end of
2008, according to Moody’s… The high-yield default
rate will increase to 4.8% this year and reach 5%
by the end of 2009 because a weakening
economy and ratings cuts will
cause more issuers to miss their interest
payments, Moody’s analyst Kenneth Emery…said… ‘We
believe December 2007 likely marks the low point
of the current default rate cycle as several
issuers have missed interest payments in recent
weeks,’ Emery said..."
Currency
Watch The dollar recovered 0.2% during the
week to 75.98. For the week, the South African
rand rose 2.3%, the Australian dollar 2.1%, the
New Zealand dollar 1.8%, the Norwegian krone 1.4%,
and the Swiss franc 1.4%. On the downside, the
Iceland krona dropped 1.5%, the Canadian dollar
1.4%, the British pound 0.7%, and the Mexican peso
0.4%.
Commodities
Watch January
11 – Bloomberg (Pham-Duy Nguyen): "Gold futures
rose to a record $900.10 an ounce on speculation
the Federal Reserve will cut U.S. interest rates
further, weakening the dollar and boosting the
investment appeal of the precious metal. Silver
also gained."
January 8 – Bloomberg (Ayla
Jean Yackley): "Turkey, the world’s fourth-biggest
buyer of gold, imported 20 percent more of the
precious metal last year as prices rose to their
highest since 1980. Imports climbed to 230.8
metric tons last year, compared with 192.7 tons in
2006, according to…the Istanbul Gold Exchange."
January 11 – Bloomberg (Winnie Zhu):
"China’s crude oil imports rose 11% in December
from a year earlier as refiners, straining to end
a fuel shortage in the world’s fastest-growing
major economy, bought raw material to process at
their plants."
January 11 – Bloomberg
(Jeff Wilson and Tony C. Dreibus): "Soybeans
jumped to a record, corn reached an 11-year high
and wheat rallied after U.S. government reports
showed that production is failing to keep pace
with rising global demand for food and biofuels.
The world soybean harvest will fall 6.5% this
year, U.S. corn inventories will be 20% less than
estimated a month ago, and wheat farmers in Kansas
and Texas planted less even as the price of the
grain doubled…"
January 11 – Bloomberg
(Saijel Kishan): "Commodities will be ‘well
supported’ by rising demand and curbs on supply
even as the U.S. economy slows, Goldman Sachs
Group Inc. said. ‘Supply and demand offsets to the
weaker economic backdrop will largely keep
supportive fundamentals intact,’ Goldman wrote…
Any prices declines on concerns over economic
growth are a ‘buying opportunity,’ it said.
Goldman raised its six-month forecast for gold to
$900 an Ounce…"
January 11 – Associated
Press: "High dairy and wheat costs may draw extra
attention during a meeting General Mills Inc. will
host… General Mills, which makes Cheerios cereal,
Yoplait yogurt and Progresso soup, is exposed to a
wide variety of commodities. Grain and dairy costs
rose sharply last year because of demand abroad
and high prices for animal feed, which is made
from corn, a main ingredient in the alternative
energy ethanol. Earlier this week, JPMorgan
analyst Pablo Zuanic said rising U.S. grain prices
this year are expected to hurt cereal makers, like
General Mills. In a note to clients, Zuanic said
grain costs will climb 44% this year…"
Commodities were all over the place.
During the week, Gold jumped 4.2% to $895.4 and
Silver 5.9% to $16.37. March Copper rose 4.6%.
February Crude sank $5.22 to $92.69. February
Gasoline sank 7.5%, while January Natural Gas
jumped 4.3%. March Wheat dropped 3.2%. For the
week, the CRB index dipped 0.3%, reducing 2008
early gains to 1.9%. The Goldman Sachs Commodities
Index (GSCI) dropped 3.1%, with a y-t-d decline of
0.7% (52-week gain 51%).
China
Watch January 11 – Associated Press:
"China’s foreign exchange reserves hit $1.53
trillion at the end of 2007, up 43 percent from
the end of the previous year… The bank said…that
$461.9 billion was added to the country’s foreign
exchange reserves in 2007."
January 11 -
Market News International: "Speculative capital
inflows may have been a significant contributor to
the growth of China’s foreign exchange reserves
during 2007 as US interest rates fell, Chinese
asset prices rose and the pace of yuan
appreciation tempted investors worldwide…"
January 11 – Bloomberg (Li Yanping):
"China’s money-supply grew at the slowest pace in
seven months, evidence that central bank measures
to cool inflation and prevent the economy from
overheating are beginning to work. M2…rose
16.7%... from a year earlier…"
January 9 –
Bloomberg (Li Yanping): "China will freeze price
increases of oil products, natural gas and
electricity in the ‘near term,’ Premier Wen Jiabao
said, as the government tries to curb inflation at
an 11-year high. The government will cap costs of
daily goods when necessary, stop increases of fees
for public transportation and school tuition and
step up a crackdown on price manipulation, Wen
said… ‘Prices of crude oil, grains and other
primary products are still rising on the
international market, and China faces relatively
large pressures of further price increases,’ Wen
said…"
January 10 – Financial Times
(Richard McGregor and Javier Blas): "China has
vowed to ‘temporarily intervene’ in the market to
prevent excessive price rises for food and daily
necessities, raising the spectre of an enlarged
state role in the economy as part of an
anti-inflation campaign. The measures, announced
yesterday by the State Council, China's cabinet,
come after sharp rises in inflation, which has hit
11-year highs, driven by higher food prices.
However, it is not clear whether the measures are
an effort to talk down potential price rises or a
more serious effort to force producers and
retailers to forestall increases in line with
government demands. The announcement said
enterprises producing "general necessities" should
register with local price bureaux if they wanted
to lift prices."
January 11 - Market News
International: "China’s trade surplus fell to
$22.69 billion in December from $26.28 billion the
previous month… The report also said that China’s
trade surplus hit a record $262.2 billion in 2007,
up 47.7% over the previous year’s record $177.47
billion. The data indicate that Chinese exports
grew 21.6% year-on-year in December while imports
grew 25.5%..."
January 9 – Bloomberg
(Denise Kee): "The risk of property developers in
China defaulting on their debt rose to a record,
according to traders of credit-default swaps. The
cost to protect bonds sold by Agile Property
Holdings Ltd., Shimao Property Holdings Ltd. and
Hopson Development Holdings Ltd. rose by as much
as 80 bps, the most on record…"
Japan
Watch January 10 – Bloomberg (Jason
Clenfield): "Goldman Sachs Group cut its economic
growth estimate for Japan and said there’s a 50%
chance of a recession in the world’s
second-largest economy. ‘The probability of a
recession in Japan has risen to the danger level,’
Tetsufumi Yamakawa, chief Japan economist at
Goldman, said… ‘We project weaker-than-expected
growth in Japan.’"
January 11 – Bloomberg
(Dinakar Sethuraman and Shigeru Sato): "Japan paid
record prices for liquefied natural gas in
November from Australia, Brunei, Malaysia and
Indonesia… The world's largest LNG buyer imported
5.57 million metric tons in November at a cost of
as much as $9.17 a million British thermal units…
Brunei led price increases, earning 38% more than
a month earlier."
January 7 – Bloomberg
(Makiko Kitamura): "Japan’s vehicle sales fell in
2007 to the lowest in 35 years, led by Nissan
Motor Co. and Toyota Motor Corp., as declining
wages and a shrinking population cut demand for
automobiles. Sales of cars, trucks and buses
excluding minicars dropped 7.6% to 3.4 million…"
India
Watch January 11 –
Bloomberg (Anil Varma): "Indian banks’ loans rose
by 732 billion rupees ($18.6 billion) in the month
ended Dec. 28, taking outstanding advances to 21.5
trillion rupees… Credit climbed 21.4%..."
January 11 – Bloomberg (Cherian Thomas):
"India’s industrial production grew in November at
the slowest pace in 13 months… Production at
factories, utilities and mines rose 5.3% from a
year earlier…"
Asian Bubble
Watch January 9 – Financial Times (Raphael
Minder and Joe Leahy): "Several nights a week,
Reema Kapoor visits her local street market in
Goregaon, an outer suburb of Mumbai, on her way
home from work to buy the ingredients for her
evening meal. Lately, that routine has been
disrupted by rises in the prices of vegetables and
other ingredients. Ms Kapoor, like millions of
Indian shoppers, had grown to expect a seasonal
slump in prices in a country short on cold storage
as food keeps better in winter. But ‘prices are
not coming down, they’re just going up’, she says.
China’s battle with inflation…has drawn the most
attention until now. But what Ms Kapoor is seeing
in Mumbai is being repeated across Asia as higher
food prices and oil at $100 a barrel combine to
present a crucial test of the ability of
politicians and central bankers to manage
inflation. Asian consumers are confronting the
fact that ‘food inflation has moved from being
cyclical to being driven by structural factors’
says Glenn Maguire, Asia economist at Societe
Generale."
January 7 – Bloomberg (James
Peng and George Hsu): "Taiwan’s exports increased
almost twice as much as economists forecast
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
