Tuesday, March 11, 2008
Oil touches $109 a barrel
Oil touches $109 a barrel
Tuesday, March 11, 2008
VIENNA, Austria —
Oil prices briefly are surging above $109 (U.S.) a barrel for the first time.
The rise comes as International Energy Agency is warning that there is unlikely to be much relief from current high oil prices because of brisk demand in China and other emerging markets.
Light, sweet crude for April delivery briefly climbed to $109.20 a barrel in electronic trading on the New York Mercantile Exchange by midday Tuesday in Europe.
The contract later fell back to $108.75 but that is still 54 cents above the previous high set on Monday.
Fed to Lend $200 Billion, Take on Mortgage Securities (Update2) By Scott Lanman
March 11 (Bloomberg) -- The Federal Reserve plans to lend up to $200 billion of Treasury securities in exchange for debt including private mortgage-backed securities that have slumped in value as homeowners defaulted on their payments.
The Fed set up a new tool, the Term Securities Lending Facility, to lend Treasuries to primary dealers for 28-day periods, through weekly auctions. The Fed also said in a statement in Washington that it's increasing the amount of dollars available to European central banks through swap lines.
Today's steps are the latest in Chairman Ben S. Bernanke's effort to alleviate increasing strains in financial markets that are curtailing credit to homeowners and companies, even after the Fed lowered its main interest rate by 2.25 percentage points. The Fed last week said it will make up to $200 billion available to banks through other tools to help boost liquidity.
The announcement ``is focused on getting the markets going,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. `` There is a lack of willingness to trade. They are continuing to focus on adding liquidity.''
The measures announced by the Fed are part of a coordinated effort with other central banks, including the Bank of England, Bank of Canada, European Central Bank and Swiss National Bank.
International Effort
The Federal Open Market Committee authorized increasing currency swap lines with the European Central Bank and Swiss National Bank to $30 billion and $6 billion, respectively, increasing the ECB's line by $10 billion and the Swiss line by $2 billion. The Fed extended the swaps through Sept. 30.
The ECB announced it will lend banks in Europe up to $15 billion for 28 days and the SNB announced a similar auction of up to $6 billion. The Bank of England will offer $20 billion of three-month loans on March 18 and hold a further auction on April 15. The Bank of Canada announced plans to purchase $4 billion of securities for 28 days.
Treasuries slid after the announcement, with yields on 10- year notes rising to 3.56 percent at 9:11 a.m. in New York, from 3.46 percent late yesterday.
Traders removed bets on the Fed to lower its benchmark rate by a full percentage point, to 2 percent, by the end of the next meeting on March 18, futures showed. The contracts indicate a 60 percent chance of a 0.75 percentage-point reduction.
The Fed's auctions of Treasuries, which will begin March 27, may be secured by collateral including agency and private residential mortgage-backed securities, the Fed said. The central bank ``will consult with primary dealers on technical design features'' of the new tool.
Primary dealers are a group of 20 banks and securities firms that trade Treasuries directly with the Federal Reserve Bank of New York.
Last Updated: March 11, 2008 09:23 EDT
Monday, March 10, 2008
The Close Was Ugly
Market News: After the BellThe close: Ugly, even without SpitzerRTGAMNorth American stocks were not doing well before Eliot Spitzer fell from grace, but the news that the Governor of New York was involved in a prostitution ring - disclosed by the New York Times in the afternoon - certainly did not give the market a much-needed shot of confidence.
The Dow Jones industrial average closed at 11,740.15, down 153.54 points or 1.3 per cent. The broader S&P 500 closed at 1273.37, down 20 points or 1.6 per cent - and now just 3 points above its intraday low point in January. The selloff was widespread, with all 10 sub-indexes down for the day, led by materials and financials. In particular, Bank of America Corp., Citigroup Inc., General Electric Co. and Google Inc. were the biggest drags on the benchmark index.In Canada, the S&P/TSX composite index closed at 13,005, down 276.63 points or 2.1 per cent - its worst one-day performance since the last day of February.
Its greatest stars in recent months went noticeably dim: Potash Corp. of Saskatchewan Inc. fell 7.1 per cent, Research In Motion Ltd. fell 3.9 per cent and Goldcorp Inc. fell 4.2 per cent.Overall, the materials sub-index suffered a 4.2 per cent drop, its worst performance since the steep Jan. 21 plunge. If you are looking for things to worry about, this could be it:
Materials stocks have kept the overall index far above its global peers in recent weeks and well out of recession territory; if materials change direction now, the index could shift to catch-up mode.Then again, you cannot blame tumbling commodity prices on the stock market's retreat: Oil rose to a new record of $107.94 (U.S.) a barrel, up $2.79.
And while gold fell, its dip was very slight - to $971.90 an ounce, down $1.30.More likely, the overall softness is due to yet more concerns about the U.S. economy. UBS said in a note to clients on Monday that it now expects the U.S. Federal Reserve to hack interest rates by three-quarters of a percentage point on Mar. 18 - a massive cut by historical standards - instead of an earlier expectation for a half-point cut (which is still pretty hefty).
Economists there now believe the Fed's key rate will eventually fall to just 1.5 per cent by August."We are not forecasting a deep recession, due in large part to only a small drag from inventories this time," said Maury Harris, an economist at UBS. "
Still, even if the recession is ultimately 'milder than average,' as we project, data in coming months are likely to show additional weakening. Meanwhile, ongoing financial markets problems raise the risk of greater-than-expected weakness."
Copyright 2001 The Globe and Mail
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