Well, there's always July...

The close: Well, there's always JulyRTGAMFor a while there, it looked as though the U.S. stock market would put in a respectable finale to the second quarter of 2008, turning in a decent gain as crude oil prices came off the boil and gold calmed down.

No such luck.The Dow Jones industrial average closed at 11,350.01, up just 3.5 points or flat on a percentage basis - after it gave up about 50 points in the final half-hour of trading.

The broader S&P 500 followed a similar trajectory, closing at 1280.01, up 1.63 points or 0.1 per cent, after being up 9 points in the late afternoon.Financials were particularly weak as the seconds ran out on the quarter. You could blame this on institutional investors jettisoning their losers before they must submit quarterly reports on their holdings.

Or, if you're less inclined to blame the smart money, you could simply point to deteriorating hope for the U.S. economy and the housing market in particular.American International Group Inc. fell 4.7 per cent, Bank of America Corp. fell 2.9 per cent and Citigroup Inc. fell 2.8 per cent, with the losses accelerating toward the end of the day. Exxon Mobil Corp.,

meanwhile, rose 1.8 per cent after oil held at $140 (U.S.) a barrel.In Canada, the final day of the second quarter proved to be a snapshot of everything that is right and wrong with the stock market. Yes, the S&P/TSX composite index ended the day significantly higher, closing at 14,467.44, up 112.23, or 0.8 per cent. But once again, the winners were confined to the usual two sectors - energy and materials - while most of the rest of the market languished. Financials, in particular, fell 0.9 per cent.Among individual names, EnCana Corp. rose 3.9 per cent, Potash Corp. of Saskatchewan Inc. rose 2.7 per cent and Canadian Natural Resources Ltd. rose 0.4 per cent. On the downside,

Research In Motion Ltd. continued its decline to seven straight days, a trend that has existed since the BlackBerry maker disappointed the market with its quarterly results. Its shares fell 1.9 per cent. BCE Inc. closed at $35.55, down $1.21, or 3.3 per cent, on renewed speculation that its takeover deal could be delayed and possibly re-priced.

And Canadian Imperial Bank of Commerce fell 3.7 per cent to a new 52-week low on concerns about more writedowns ahead. Welcome to the third quarter.Copyright 2001 The Globe and Mail

Oil soars past $142 on sliding dollar

Oil soars past $142 on sliding dollar

DAVID McHUGH
Friday, June 27, 2008

LONDON — Oil prices climbed to a record above $142 (U.S.) a barrel Friday as the U.S. dollar's protracted slump and falling stock markets prompted investors to take refuge in oil.

Prices were also lifted Thursday after OPEC's president said crude prices could rise well above $150 a barrel this year and Libya said it may cut oil production.

Light, sweet crude for August delivery rose as high as $142.26 a barrel before pulling back to $141.40, up $1.76 in electronic trading on the New York Mercantile Exchange by early afternoon European time. The contract Thursday rose $5.09 to settle at a record $139.64.
The previous trading record for a front-month contract was $139.89, set on June 16.

The rise follows a sharp fall in U.S. stocks on Thursday and in Asia on Friday. “We need to observe that financial flows were leaving the equity markets as those markets are breaking below their support levels,” said analysts at Petromatrix in Switzerland. “When money has nowhere to go, it is parked in commodities as it is one of the few investment instruments that actually rises the more money you pour into it.”

The dollar also slipped against key currencies, as U.S. data showed sluggish economic growth and pointed to a struggling labour market. Oil is priced in U.S. dollars, and some investors buy oil contracts to protect the value of their assets against accelerating inflation when the dollar falls.
“The dollar movements caused the surge in oil pricing and the bullish trend remains intact,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “The oil market is subject to further spikes in the coming weeks.”

On Friday, the dollar was unchanged in early afternoon European trading, with a euro buying $1.5782.

Also driving crude futures higher were remarks by Chakib Khelil, president of the Organization of the Petroleum Exporting Countries, who said Thursday he believes oil prices could rise to between $150 and $170 a barrel this summer. Mr. Khelil also said prices will decline later in the year, and aren't likely to reach $200 a barrel.

Mr. Khelil joined a long list of forecasters who have made predictions of sharply higher prices this year. Each new forecast, such as Goldman Sachs' recent prediction that prices could rise as high as $200, causes a jump in prices as speculative buyers are drawn into the market.
Meanwhile, the head of Libya's national oil company said the country may cut crude production because the oil market is well supplied, according to news reports.

Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, said in a research note that Shokri Ghanem, the nation's top oil official, has declined to say when a decision would be made on whether to lower production, or give any indication of the size of the cut under consideration.

But analysts expressed skepticism over the comments out of Libya, saying the current level of oil prices provides an incentive for producers not to cut output.

“I doubt that any real effort in cutting output would be forthcoming, considering that pricing continues to hit new records,” Mr. Shum said. “There's no economic reason to cut output at this time so it's just talk.”

Oil prices have more than doubled over the past year on concerns about rising demand in fast-growing economies such as China and India, and supply disruptions in the Middle East and Nigeria.

Analysts have also attributed oil's rapid climb to speculative buying, with traders jumping into the market purely on the expectation that futures will continue to rise.

“Even though we have continued to see weakening demand in the U.S., other markets in the developing world still show growth,” Mr. Shum said. “The tight market has empowered speculators to invest in oil and the oil market is subject to further spikes in the coming weeks.”

In other Nymex trading, heating oil futures rose 6.55 cents to $3.9489 a gallon (3.8 litres) while gasoline prices rose 4.62 cents to $3.5575 a gallon. Natural gas futures rose 12.4 cents to $13.372 per 1,000 cubic feet.

Brent crude futures rose $1.32 to $141.15 a barrel on the ICE Futures exchange in London.
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Asian markets tumble as oil spikes, and Wall Street wobbles

Asian markets tumble as oil spikes, and Wall Street wobbles

JEREMIAH MARQUEZ
Friday, June 27, 2008

HONG KONG — Asian stock markets tumbled Friday amid growing alarm as oil prices spiked above $141 a barrel for the first time and Wall Street plummeted overnight.
The sell-off spread across the entire region, with every key index in the red.

Shanghai's benchmark plunged more than 5 per cent to 16-month low. India's Sensex was down 3.8 per cent in afternoon trade. Japanese stocks dropped for a seventh day to a two-month low. Markets in Hong Kong, South Korea, New Zealand and the Philippines were off around 2 per cent.

Sentiment took a hit after U.S. stocks sank Thursday, with the Dow Jones industrial average sliding more than 3 per cent to its lowest level in almost two years.

Worries about the outlook for the U.S. economy — a vital export market for Asia — intensified after dismal news about a number of industries. Analysts downgraded General Motors Corp., Citigroup and Merrill Lynch & Co., while tech companies Oracle Corp. and BlackBerry maker Research In Motion Ltd. offered disappointing forecasts.

Oil prices, which climbed above $140 (U.S.) a barrel late Thursday, surged above $141 in Asian trading Friday, spurring further concern about inflation and rising costs.
“We've still got bad news on the credit crunch, we've got bad news about consumers,” said Garry Evans, pan-Asian equity strategist with HSBC in Hong Kong. “The macro environment is not a good one and people are very risk averse.”

In China, the Shanghai Composite Index sank 5.3 per cent to 2,748.43 points, the lowest close since February 9, 2007. Aside from record crude prices, reports of speculation about possible bank rate hikes were spooking investors.


Institutional investors are becoming disappointed with the authorities for staying hands-off during this year's slide, said Xu Zhiyuan, strategist at Capital Edge Investment and Management in Shanghai.

“Investors are selling shares regardless of the loss,” he said.

Huaneng Power International Inc. was one of the hardest-hit stocks, falling nearly 10 per cent. Airlines also suffered from the oil news, with China Eastern Airlines falling 9.7 per cent and China Southern Airlines falling 9.5 per cent.

Tokyo's benchmark Nikkei 225 index shed 2 per cent to 13,544.36, the lowest finish since late April. Honda Motor Co. lost 2.7. Sony Corp. dropped 4.3 per cent.
Indian stocks sank as investors worried about inflation that has risen to 13-year highs and that recent interest rate hikes would temper consumer spending.

“Sentiment is bearish. There are fears that crude will touch $180, this is a worry that cannot be stamped out easily,” said Gul Tekchandani, a Mumbai-based investment adviser. “Few can stomach this volatility, plus there are weak global cues with the U.S. economy also down.”
Hong Kong's Hang Seng index trimmed earlier losses to close down 1.8 per cent at 22,042.35. Refiner China Petroleum & Chemical Corp, or Sinopec, lost 3.6 per cent, and airline Cathay Pacific was down 1.7 per cent.

Mobile phone maker Foxconn International Holdings, Motorola's primary contract manufacturer, tanked almost 8.5 per cent amid fears over consumer demand.
Elsewhere, the main Philippine Stock Exchange Index ended 2.2 per cent lower, it's lowest finish in 21 months.

In currency trading, the dollar stood at 106.86 mid-afternoon in Tokyo, little moved from 106.91 yen in New York late Thursday. The euro stood at $1.5772 in mid-afternoon in Tokyo, compared with $1.5751 in New York.

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Jeff Rubin and Benjamin Tal warned Thursday, saying that gasoline could surge to $7 a gallon

As oil hits $140, a new low for Detroit

GREG KEENAN
Thursday, June 26, 2008
Chrysler LLC trotted out celebrated retired chairman Lee Iacocca to rally employee spirits on Thursday, but investors were more interested in bankruptcy rumours that continued to haunt the auto maker and yet another fresh high for energy prices that are pounding the entire industry.

The Chrysler rumours and a downgrade of General Motors Corp. stock by Goldman Sachs Inc. knocked down the shares of major North American auto makers and their suppliers.
“There is no basis for the rumour,” said Chrysler spokesman David Elshoff, after the speculation started up in Europe and swirled throughout the North American auto industry, sparking a meltdown of auto industry stocks on Bay Street and Wall Street.

Hours later, Mr. Iacocca, told cheering employees at the company's headquarters in Auburn Hills, Mich., that the third-largest Detroit auto maker will ride out the storm the way it did when he was at the helm more than 25 years ago. Mr. Iacocca is still regarded as a saviour who helped keep it from falling into the financial abyss during the early 1980s.

The message didn't work as well with the Street. Making matters even more dour, oil surged above $140 (U.S.) a barrel again on the New York Mercantile Exchange and closed t a record $139.64.

The Detroit auto makers are reeling from a collapse in sales of pickup trucks and sport utility vehicles in the U.S. market amid gasoline prices above $4 a gallon and the U.S. real estate collapse.

It could get even worse, CIBC World Markets Inc. economists Jeff Rubin and Benjamin Tal warned Thursday, saying that gasoline could surge to $7 a gallon, which will cause Americans to abandon some of their vehicles and send sales through the floor.

Ford and GM have already scaled back truck and SUV production twice in recent weeks. Chrysler announced last November that it will slash production this year, but has insisted it will plow ahead with a redesign of its Dodge Ram pickup and has not adjusted production to deal with the recent slide in the U.S. market.

There are forecasts that June sales in the United States could reach a 16-year low of 12.5 million on an annualized basis – a bad sign because April, May and June are key months for sales.
“If you don't sell vehicles in April, May and June, you're screwed for the rest of the year,” the source said.

A day with wave upon wave of bad news is becoming a regular occurrence for auto makers – especially Detroit, where the U.S. housing crisis and the soaring price of gasoline are combining to cause what could be the worst situation the three auto makers have faced.

“We think GM's automotive cash flow burn this year and next is likely to lead it to look to raise capital, which we believe could lead to significant shareholder dilution and/or a cut to the company's dividend,” Goldman analyst Patrick Archambault wrote in a research note.

GM shares fell 11 per cent to a 33-year low and Ford Motor Co. shares briefly dipped below the $5 level to $4.94, a penny below their 52-week low.
Mr. Archambault urged investors to stay away from parts makers that have the bulk of their business with the Detroit Three.

That includes Magna International Inc.,which generates 53 per cent of its sales from Chrysler, Ford and GM, and has a close relationship with Chrysler that goes well beyond simply supplying the auto maker with parts.

The Motor City Meltdown spilled over to Magna's shares and sent them cascading. The stock fell $3.72 (Canadian) or 5.6 per cent Thursday and closed at a seven-year low of $62.27 on the Toronto Stock Exchange.

The growing crisis in Detroit overshadowed the positive news for Magna that Porsche AG has chosen the auto parts giant's Magna Steyr assembly division in Austria to build Boxster and Cayman sports cars beginning in 2012.

With files from Reuters and Associated Press
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