Japan and Australia pumped cash into their financial systems as Asian central banks attempted to calm markets after Lehman Brothers Holdings Inc. filed for bankruptcy.
The Bank of Japan added 2.5 trillion yen ($24 billion) into the financial system, its biggest money-market operation since March, and the Reserve Bank of Australia injected A$1.85 billion ($1.5 billion), for a two-day total of nearly A$4 billion. South Korea said it's ready to provide liquidity if needed.
Japanese bonds jumped, sending the yield on the benchmark 10-year bond to the lowest in more than a week on concern the credit crisis will worsen. Financial institutions worldwide have reported more than $510 billion in losses and writedowns and the credit-market collapse has erased $11 trillion from global stocks in the past year.
“Central banks have to show they are ready to take action to ensure stability,'' said Thomas Lam, an economist at United Overseas Bank Ltd. in Singapore. “Precautionary steps are high on their list to prevent any significant impact and support their markets.''
The Federal Reserve yesterday added $70 billion in reserves to the banking system, the most since the September 2001 terrorist attacks, and may cut its benchmark lending rate today. China lowered its key rate for the first time in six years late yesterday.
Bank of Japan
Japan's overnight call loan rates was at 0.545 percent at 3.35 p.m. in Tokyo after the Bank of Japan made two injections of cash. It rose as high as 0.57 percent, according to Tokyo Tanshi Co. The central bank's target rate is 0.5 percent.
Today's increase in funds was the first since June 30 and the biggest since March 31, when the central bank added 3 trillion yen.
Australian one-month money market rates dropped 3 basis points to 7.21 percent today, the first decline in five days.
The European Central Bank, the Bank of England and the Swiss central bank also added liquidity yesterday. Three-month money market rates in Europe fell 4 basis points to 4.25 percent yesterday, the lowest level since Aug. 27.
Yesterday, the federal funds rate soared as high as 6 percent, triple the Fed's target, as banks hoarded cash. That spurred the Fed to pump $70 billion into money markets through repurchase operations, the most since September 2001.
Financial-Market Stability
“The Bank of Japan will carefully monitor the recent developments among U.S. financial institutions and continue to try to secure smooth fund settlements and financial-market stability by implementing appropriate money-market operations,'' Governor Masaaki Shirakawa said. The central bank started a two- day policy meeting in Tokyo today cash advance guaranteed approval cash advance loans.
South Korea will provide liquidity “through open-market operations,'' Vice Finance Minister Kim Dong Soo said. He held an emergency meeting today with his counterparts from the central bank and the financial regulator in Seoul.
“The government and the Bank of Korea expect local and overseas financial markets will recover their stability considering key nations' efforts to stabilize the markets,'' Kim said after the meeting.
The Bank of Korea said in a separate statement today it will provide foreign currency liquidity through the swap market when necessary to “help calm market players.''
Indonesian Liquidity
Bank Indonesia cut its overnight rate, used to lend to commercial banks, by 2 percentage points and raised the rate on deposits placed by the lenders to ensure liquidity. The benchmark BI Rate was kept unchanged at 9.25 percent.
The People's Bank of China reduced the one-year lending rate to 7.20 percent from 7.47 percent, effective today. It lowered the reserve-requirement ratio for smaller banks to 16.5 percent from 17.5 percent.
“The authorities are afraid of a chain reaction and a further tightening of financial conditions, which would ultimately have a negative impact on the economy,'' said Tomoko Fujii, head of economics and strategy at Bank of America Corp. in Tokyo. “They have no choice but to try to calm the markets.''
Borrowing costs may be reduced further as Chinese officials seek to spur economic growth, analysts say.
“Policy makers will consider further interest-rate cuts in the coming month, in conjunction with a more proactive fiscal policy,'' said Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. in Hong Kong.
Taiwan's government instructed its four major funds and state-owned banks to buy shares to help reverse the stock market's slump. The Taiex index, which fell as much as 5.4 percent today, closed 4.9 percent lower.
Fed Meeting
Fed policy makers will meet today to decide on its key interest rate. The central bank hasn't reduced rates since April 30, when it made the seventh cut since September 2007, bringing the target rate for overnight loans between banks to 2 percent.
Futures show traders boosted odds to 68 percent that the Fed will cut rates at the meeting.
“Cutting interest rates may not be the most appropriate way to solve the crisis,'' said Lam. “It's better for them to continue or enlarge their liquidity and collateral program.''
Nearly a quarter of U.S. fuel production was shut down in the wake of Hurricane Ike, according to a government assessment released Saturday after the storm slammed into the heart of the Texas coast’s refinery base.
By noon ET, 14 of the 26 Texas refineries, representing a production capacity of 3.8 million barrels of fuel a day, had been shut down, the Energy Department said.
Almost all of those had been shut ahead of the storm and reports about the extent of damage were not yet available.
But even if the refineries were lucky enough to escape damage from the hurricane that came ashore at Galveston, Texas, early Saturday, they could remain shut due to near total power outages in the area.
Texas accounts for more than a quarter of the nation’s total capacity to produce gasoline and other petroleum fuels. In normal operation, facilities there can produce up to 4.8 million barrels a day, according to the government.
About half of the state’s capacity is in the Houston/Galveston area, which took the brunt of the storm. The eye of the hurricane passed directly over the ExxonMobil (XOM, Fortune 500) refinery in Baytown, Texas, the nation’s largest refinery.
CNN correspondent Ali Velshi reported Saturday morning that there was no apparent damage to the refinery that could be seen from outside it, despite extensive damage in Baytown.
Kevin Allexon, spokesman for ExxonMobil, said the company has yet to determine if there is damage that could further disrupt operations.
"There’s still some pretty significant weather that affects how safe it is to do assessment work," he said.
Velshi said that the Baytown refinery appeared to be on high enough ground to avoid flood damage. But refining facilities on land are more vulnerable to flooding and power outages than offshore facilities, according to Ray Carbone, president of oil trading company Paramount Options.
"Without power, no refineries will be working and the flooding could complicate how long it takes them to come back online," said Carbone.
The Energy Department reported that 2.4 million utility customers are without power, including essentially all those customers in the center of the storm’s path. While refineries have auxiliary power, it is typically for emergency use only and not enough to resume operations.
"Close to 20% of the U.S. refining capability could be lost for a long period of time," wrote Jim Rouiller, Senior Energy Meteorologist at Planalytics in an email ahead of the storm. "Major and long term damage likely at the major refining cities from Galveston and Texas City northward to Baytown," he wrote.
After Katrina, some refineries were shut down for 6 to 9 months, according to Tom Kloza, chief oil analyst for Oil Price Information Service.
All Texas ports from Freeport west to Louisiana were closed Friday as well, according to the Energy Department.
Much of the nation’s Gulf infrastructure had already been shut down or operating at minimal capacity due to Hurricane Gustav, which struck over Labor Day weekend payday advance low fees low rates payday advance.
However refineries in Louisiana that had been shut down due to the previous storm were in the process of re-starting or were already operating, the Energy Department said.
The refinery shutdowns drove up gas prices in the region.
The average gas price nationwide jumped nearly 6 cents in the Saturday survey of 5,000 stations, conducted Friday by AAA. But some markets, particularly along the Gulf Coast and the South, saw much sharper price spikes.
Pipelines: All of the major crude and natural gas pipelines flowing out of the region had been completely or partially shut ahead of the storm and remained shut Saturday, according to DOE. The approach of Ike has caused many pipelines to declare "force majeure," which frees them from delivery obligations in case the worst happens.
28 of the 39 natural gas pipelines in Ike’s path were confirmed shut down by the Energy Department Saturday, up from 20 that had been shut in advance of the storm. That reduced capacity by 13.5 billion cubic feet per day, an increase of 3 billion cubic feet from those shutdown ahead of the storm. The shutdowns include facilities already in stand-by mode as a result of Hurricane Gustav.
The government also shut down Strategic Petroleum Reserve sites at Bryan Mound and Big Hill, Texas, and West Hackberry, La.
Offshore rigs: Evacuations also continued from oil rigs and platforms in the Gulf of Mexico, and from parts of coastal Texas, including Galveston and parts of Houston.
Also Saturday, the Minerals Management Service reported 611 production platforms, or more than 85% of the 717 platforms in the Gulf, had been shut down. That’s up from the 562 that had been shut Thursday in advance of the storm.
In addition, 101 of the 121 rigs had been evacuated, up from 93 Thursday.
Many of the facilities were in the process of being restarted after Hurricane Gustav.
But experts said the major impact of the storm on energy prices is likely to come from the effect on refining capacity and pipelines, rather than offshore production.
Catherine Clifford, CNNMoney.com staff writer, and Chris Isidore, CNNMoney.com senior writer, contributed to this report.
The Confederation of British Industry, the nation's top business lobby, said the central bank should slash its benchmark interest rate in November by the most in seven years to halt a recession.
“Our members are having a tough time,'' Richard Lambert, director of the CBI, told reporters in London. “There's scope for a half-point cut in November,'' assuming the inflation outlook doesn't change. “We are now almost certainly in a mild recessionary phase.''
The Bank of England has kept its main rate at 5 percent since April on concern that the fastest inflation in at least a decade will become embedded in the economy. The European Commission says the U.K. has already entered its first recession since 1991 after growth ground to a halt in the second quarter, ending the longest stretch of uninterrupted expansion in a century.
Lehman Brothers Holdings Inc. plans to file for bankruptcy protection and Merrill Lynch & Co. agreed to sell itself this weekend, adding to the risk of further deterioration in Britain's financial services industry after the yearlong credit squeeze. The Bank of England pledged today to “take appropriate actions if necessary'' to stabilize money markets.
The central bank, which hasn't cut its key rate by more than a quarter point since the aftermath of the September 2001 terrorist attacks, should reduce its benchmark to 4.5 percent this year and to 4 percent in early 2009, the CBI said.
Recession Forecast
The economy will contract 0.2 percent in the third quarter and 0.1 percent in the final three months of the year, the CBI said. The lobby cut its full-year projection to 1.1 percent from a forecast of 1.7 percent in June. Growth will slump to 0.3 percent next year, the new forecasts show.
The flagging economy is hurting Prime Minister Gordon Brown's popularity first cash advance faxless cash advance. The ruling Labour Party has the weakest support in at least a decade and has ousted two officers in the past three days who have called for a leadership challenge against Brown.
The economic slowdown may cool inflation and make it easier for the Bank of England to help the economy, Lambert said. Inflation will reach 5 percent this year before slowing to 2.3 percent by the fourth quarter of 2009, the CBI's forecasts show.
“We hope and believe that this will give the Bank of England scope to cut interest rates,'' said Lambert, who sat on the central bank's Monetary Policy Committee between 2003 and 2006. “There is a significant risk that in 2010 inflation will actually be undershooting the 2 percent target by quite a way.''
Inflation Concern
Figures tomorrow will probably force Bank of England Governor Mervyn King to write a letter to Chancellor of the Exchequer Alistair Darling.
Inflation accelerated to 4.6 percent in August from 4.4 percent in the previous month, according to the median of 28 forecasts in a Bloomberg News survey of economists. That would be the fastest pace in at least 11 years. The central bank's mandate requires the governor to write a letter to the chancellor when the rate strays more than 1 percentage point from the target.
King will also release the bank's proposals for changing its money-market operations this week and invite comments from financial institutions and investors. The central bank will introduce a new facility to replace the Special Liquidity Scheme, an emergency lending program for banks which expires in October.
Stocks rallied Thursday after a report about potential buyers of Lehman Brothers - including Bank of America - gave investors some reassurance at the end of a choppy session.
After the close, the Washington Post reported that the Treasury Dept. and the Federal Reserve are putting together a sale of Lehman through a group of private firms, with a deal expected to be announced this weekend. The government and the Fed also teamed up to orchestrate the rescue of Bear Stearns in March.
Also after the close, Washington Mutual sought to reassure investors that its capital position and credit outlook were stable, amid escalating worries. Following the announcement, ratings agency Fitch downgraded the company’s debt rating. (Full story)
The Dow Jones industrial average (INDU) gained 165 points, or 1.5%. The Standard & Poor’s 500 (SPX) index gained 1.4% and the Nasdaq composite (COMP) added 1.3%.
Whether it’s Bank of America or a different firm or firms that end up purchasing Lehman may not be that important, said Michael Sheldon, chief market strategist at RDM Financial Group.
"I don’t think it matters who purchases them as long as their instability or the rumor of their possible demise is diminished," Sheldon said.
Sheldon noted that the session’s trading volume has been improving of late and that it will be important to see if that continues, as higher volumes can be seen as a sign of greater conviction on the part of investors.
Stocks were mostly lower through the morning as Lehman and other bank stocks tumbled on worries about their solvency. Meanwhile, a steeper-than-expected jump in the U.S. trade deficit and a weak jobless claims report added to recession fears.
While bank shares remained under pressure in the afternoon, the selloff in oil prices gave a lift to companies that benefit directly from lower fuel prices, including transportation stocks. Consumer stocks benefited too, on lower inflation expectations. Meanwhile, the S&P 500 flirted with its 2008 lows and then managed to bounce back.
But the market spiked heading into the close after the Wall Street Journal Web site reported that Lehman Brothers is actively shopping itself to potential acquirers, including Bank of America.
The report boosted a number of bank stocks, but failed to lift Lehman Brothers, which slumped almost 42% on the session.
Partly the day’s advance was a function of short-covering in some of the really beleaguered sectors of the market, said Tom Schrader, managing director at Stifel Nicolaus. Short-covering refers to the process by which traders, who have sold a stock short to take advantage of a falling market, buy the stock back.
Investors were also reacting to oil prices, which settled at a 5 1/2 month low.
For the past few weeks, falling oil prices have been seen as mostly a negative, in that they reflect a slowdown in the global economy. But Thursday, investors also seemed to focus on how lower fuel prices will help transportation and consumer stocks and also impact inflation expectations.
"The commodity crunch over the last few months has been across the board, and now it’s all coming back," Schrader said. "Oil is down over 30% from the highs, natural gas is down over 50% and grain prices are coming down. Inflation expectations have got to come down too."
"That’s the good news," he said. "The bad news is that it also means the global economy is weaker."
Lehman Brothers: Lehman (LEH, Fortune 500) shares plunged 42% Thursday, after having recovered some of those losses at midday.
On Wednesday, the bank reported a nearly $4 billion fiscal third-quarter loss, its biggest quarterly loss since it went public in 1994. Lehman also said it will spin off part of its commercial real estate business, cut its dividend and sell a 55% stake in its investment unit, which includes profitable money manager Neuberger Berman.
Investors initially took a lackluster response to the stock Wednesday, sending it 7% lower after boosting it right after the announcement faxless payday loan overnight payday loans. On Thursday, both Wall Street pros and investors sent the message that the restructuring moves seemed like too little, too late.
Goldman Sachs downgraded the stock to "neutral" from "buy," while Citigroup cut it to "hold" from "buy."
Lehman has struggled this year amid mounting losses related to bad mortgage bets and its inability to raise sufficient capital to continue operating its businesses properly. (Full story)
Investors have been particularly wary of the company in the wake of the government bailout of Fannie Mae and Freddie Mac announced last weekend and the near-failure and ultimate government rescue of Bear Stearns in March.
Banking: A number of other financial firms have sparked worries about their exposure to bad mortgage loans and their ability to raise money. AIG (AIG, Fortune 500) shares - as well as those of Washington Mutual (WM, Fortune 500) and Wachovia (WB, Fortune 500) - have been battered in recent days on such concerns.
AIG initially tumbled to a more than 13-year low on reports that the CEO may consider selling the consumer finance and reinsurance units to raise money. But the stock recovered with the broader financial sector near the close of trade. (Full story).
The hammering that AIG, WaMu and others are suffering is not to be taken lightly, said Joseph Saluzzi, co-head of equity trading at Themis Trading.
"It’s a ‘where there’s smoke, there’s fire’ situation with what’s happening to those stocks," he said.
But the sector bounced back by the close, with WaMu adding 21%, JP Morgan Chase (JPM, Fortune 500) adding 6% and Wells Fargo (WFC, Fortune 500) adding 7% among other gainers. The Philadelphia Bank Sector index gained 2.8%.
Among other movers, airline, railroad and trucker stocks advanced as investors focused on the positive benefits of lower fuel prices. The Dow Jones Transportation (DJTA) average gained 3.4%. Also helping was railroad CSX (CSX, Fortune 500), which boosted its 2008 forecast.
Automakers GM (GM, Fortune 500) and Ford (F, Fortune 500) also gained.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by eight to seven on volume of 1.45 billion shares. On the Nasdaq, decliners topped advancers by a narrow margin on volume of 2.34 billion shares.
Economy: In addition to the banking system woes, investors received two discouraging economic reports Thursday, on the trade deficit and the labor market.
The U.S. trade gap surged to $62.2 billion in July, its widest level in 16 months. Oil prices, which reached record levels in July before sliding the past two months, were the main reason for the increase. The report beat economists’ forecasts for a dip to $58 billion versus a revised $58.8 billion in June.
The number of Americans filing new claims for unemployment fell 6,000 to 445,000 last week, beating forecasts for a bigger drop to 440,000, the government reported.
Fuel prices: Oil prices fell as slumping demand reflected concern about the economic outlook. (Full story).
U.S. light crude oil for October delivery settled down $1.71 at $100.87 a barrel on the New York Mercantile Exchange, the lowest close since March 24.
Oil prices have lost more than $45 a barrel since peaking at $147.27 on July 11.
Gas prices rose overnight, climbing for the second day in a row as Hurricane Ike strengthened, according to a national survey of credit-card activity.
Other markets: In global trade, European and Asian markets ended lower.
In the bond market, Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.64% from 3.63% late Thursday. Prices and yields move in opposite directions.
The dollar fell versus the euro and the yen.
COMEX gold for December delivery fell $17 to $745.50 an ounce.
Japan's economy shrank 3 percent last quarter, the steepest contraction since 2001, as companies and households cut spending and exports fell.
Gross domestic product for the three months ended June 30 shrank more than the annualized 2.4 percent initially estimated, the Cabinet Office said in Tokyo today. Economists expect the slowdown to continue into next year as the U.S. slowdown spreads to Asia, where Japan ships half its exports.
The next prime minister will have little money to spend on an economy that may be in a recession, because public debt is about 1.8 times the size of GDP. Economic and Fiscal Policy Minister Kaoru Yosano, one of five candidates to replace Yasuo Fukuda, who resigned this month, said last week that there's “nothing to be done but wait'' for export markets to recover.
“Japan's economy will keep slowing at least until the end of this year,'' said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group in Tokyo. “Compared with previous recessions, this one will be very shallow. We're at the deepest point of the downturn now.''
The yen traded at 107.16 per dollar at 12:11 p.m. in Tokyo from 107.14 before the report was published. Economists surveyed by Bloomberg News expected the economy to contract 3.1 percent.
Taro Aso, the favorite in polls to become prime minister, said in a debate yesterday that balancing the budget isn't a priority. Yosano and the other three candidates — Yuriko Koike, Shigeru Ishiba, and Nobuteru Ishihara — want to maintain a goal of eliminating the fiscal deficit by 2011 to contain the debt.
Bank of Japan
Stalled growth and the fastest inflation in a decade have created a dilemma for the Bank of Japan, which will probably have to keep interest rates unchanged for the rest of the year, according to economists surveyed this week. At 0.5 percent, Japan's key rate is the lowest among major economies.
Central bank Governor Masaaki Shirakawa said last week growth in the world's second-largest economy is likely to “remain sluggish for the time being.''
From the first quarter, the economy shrank 0.7 percent, the biggest drop since the third quarter of 2001, when Japan was in a recession, and more than the 0.6 percent initially reported. Economists expected a 0.8 percent contraction.
Business spending slid 0.5 percent, more than twice the pace of the 0.2 percent drop reported last month. The revision reflected Finance Ministry figures last week that showed capital spending fell for a fifth quarter americashadvance faxless payday advance.
Consumers also reduced spending 0.5 percent, deterred by prices that rose faster than wages. Compensation adjusted for inflation fell 0.4 percent as higher fuel and food prices ate into paychecks.
Toyota Cuts Jobs
Slumping U.S. demand has forced exporters including Toyota Motor Corp. to cut production and jobs. A Kyushu-based Toyota subsidiary reduced output of sport-utility vehicles by at least 10 percent and fired 800 workers since June.
Markets outside the U.S. are also deteriorating. The European economy shrank for the first time in almost a decade last quarter, and EU Commissioner Joaquin Almunia said this week that the outlook is “unusually uncertain.''
Sales of construction equipment by companies including Komatsu Ltd. will fail to meet industry forecasts because of lower demand from India and China, the Japan Construction Equipment Manufacturers Association said last month.
“The market is heading into a turning point,'' said Michijiro Kikawa, chairman of the association and president of Hitachi Construction Machinery Co. “Although we expect the strength of emerging markets to continue, the speed of growth will decelerate.''
Exports Weaken
Exports dropped 2.5 percent and imports fell 2.6 percent, today's report showed. Net exports subtracted 0.1 percentage point from GDP, the first negative contribution in three years.
Even as exports weaken, economists say companies are better able to withstand the slowdown because they have shed the excess workers, factory lines and debt that contributed to a decade of economic stagnation in the 1990s.
“Japan's economy is weak because foreign demand is slumping and the terms of trade have been worsening, not because there are any big domestic structural problems,'' said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo.
Further declines in oil prices, which have eased 30 percent since reaching a record in July, will benefit Japan even more than other economies, according to Julian Jessop, chief international economist at Capital Economics Ltd. in London. Jessop says Japan escaped the credit crunch and the housing collapse that's hit the U.S. and Europe.
Package delivery company FedEx Corp. said Tuesday it expects its fiscal first-quarter results will exceed expectations, but it affirmed its fiscal 2009 outlook and cut its capital spending plan.
Investors sent shares up $4.55, or 5.4%, to $89.30 during aftermarket electronic trading, after closing at $84.75.
The company now expects net income for the quarter ended Aug. 31 will total $1.23, ahead of previous guidance of 80 cents to $1 per share.
Analysts polled by Thomson Reuters, on average, expect a profit of 95 cents per share.
The increase is due to lower-than-expected fuel costs late in the quarter as well as "stringent" cost-cutting, the company said.
However, FedEx (FDX, Fortune 500) did not raise fiscal 2009 guidance and instead affirmed its outlook of $4.75 to $5.25 per share, while analysts expect earnings of $4.98 per share.
Weaker macroeconomic conditions offset better-than-expected first-quarter results, the Memphis, Tenn.-based company said.
"While sustained declines in fuel prices could improve our full-year outlook, the slowing economic growth trends in the United States pay day advance instant payday loan. are now extending to other areas of the global economy," said Alan B. Graf Jr., executive vice president and chief financial officer, in a statement. "As a result, we have reduced our planned capital investments by $400 million, to $2.6 billion for fiscal 2009."
Oil prices closed below $104 a barrel Tuesday for the first time since early April, and prices are now down about 30% since peaking at $147.27 a barrel in July.
FedEx will also shift its meeting with investors and lenders from Oct. 2, to April 1-2, 2009, in China, where it will unveil its Asia-Pacific hub.
Oil prices fell Tuesday, as investors believed OPEC will keep production at current levels, and as Hurricane Ike lost strength over Cuba.
U.S. crude for October delivery settled down $3.08 to $103.26 a barrel, the lowest close since April 1, when oil ended the day at $100.98 a barrel.
Waiting for OPEC: The Organization of Petroleum Exporting Countries met Tuesday to discuss production levels in light of falling prices and a perceived pullback in demand as the world economy slows.
Slumping global energy demand has caused the price of crude to fall sharply from the record-high $147.27 a barrel, set on July 11.
Because of the more than $40 drop in oil prices, some OPEC member-states have been calling for tighter production requirements.
As the cartel met in Vienna, traders listened for word on possible production cuts.
The oil minister of Saudi Arabia, Ali Naimi, indicated that he did not think the production levels need to be changed, according to reports from the Associated Press.
"The market is fairly well balanced," Naimi told the AP on Tuesday. "I think things are in balance, in a healthy position." Because Saudi Arabia is a heavyweight in the cartel, Naimi’s comments were closely watched.
A day before, the oil minister from Kuwait expressed similar sentiment.
The meeting was still in progress as floor trading ended in New York.
"If they cut production to try to shore up prices, that would be viewed very unfavorably by the markets that are struggling," said Phil Flynn, senior market analyst at Alaron Trading.
"I don’t think OPEC wants to be viewed as muddying up the waters here, so they will be forced to do nothing," he said. "My general sense right now is that OPEC is more concerned about demand destruction than about the price drop."
Another analyst said that while it looks as if OPEC will not officially cut production, it may try to adhere to quotas more strictly.
"They are probably 700,000 to 800,000 barrels each day over their quotas," said Andrew Lebow, a broker at MF Global in New York. "The chat is that they might adhere more to the quotas."
"As usual, the Saudis are the key," said Lebow. When it comes to the "increase over the quotas, they are the ones that have the lion share."
Hurricane Ike: Hurricane Ike lost strength Tuesday and moved toward missing most U.S. offshore facilities, reducing worries that it could keep production shuttered in the Gulf of Mexico.
The National Hurricane Center downgraded the storm to a Category 1 hurricane as it passed over Cuba.
"There is a sense that the storm might not be as bad as originally feared, and that is good news for the market, but it is also bearish news," said Flynn faxless cash advance fast payday loan no faxing.
If supply is not impacted, then prices move lower, as the market focuses on sagging demand.
It seems that Ike "is going to miss most of the U.S. crude production and natural gas production areas, and track more toward Southern Texas and the Yucatan peninsula in Mexico," said Lebow. But the oil market will continue to monitor Ike, because the track can change.
The storm was expected to reach the southeastern Gulf of Mexico as early as Tuesday afternoon. "Some weakening is likely as Ike crosses Western Cuba," the Hurricane Center’s public advisory said. "But restrengthening is expected once Ike moves into the Gulf of Mexico."
Gulf production: Oil rigs and refineries in the Gulf region remained on standby more than a week after Hurricane Gustav slammed into the coast of Louisiana.
About one quarter of the nation’s oil production facilities are located in the Gulf.
As of Tuesday, 79.4% of crude oil production and 64.2% of natural gas production in the Gulf of Mexico remained shut from Gustav, according to the Department of Energy.
Gustav damaged two offshore drilling rigs owned by Transocean (RIG) in the Gulf of Mexico, according to Guy Cantwell, a spokesman for the company. Gustav also damaged the mooring system on a third rig, the company said Monday.
Shell has decided to wait until after Ike to return completely into the Gulf.
"Remaining production recovery from Gustav will be delayed until after we can redeploy after Hurricane Ike has safely passed," according to a written statement on Shell’s Web site.
Currently,Shell (RDSA) has 240 personnel working on offshore facilities, but plans to "evacuate most or all of our Shell operated assets by Wednesday or Thursday."
On Monday, U.S. crude oil for October delivery settled up 11 cents to $106.34 a barrel, but not before falling from a trading high of $109.89 earlier in the day. A dollar rally on Monday moved oil prices back more than $3 off early session highs.
Research In Motion appears to have dialed up a mainstream hit with the new flip version of its popular BlackBerry Pearl by tapping into cell phone users’ love affair with clamshell mobiles.
Also, analysts expect the flip Pearl will be relatively affordable right from its launch, which, combined with its shape, will make it RIM’s first truly mass market BlackBerry.
“There is a huge percentage of the population — especially North Americans and especially women — that seem to really like flip phones,” said Canaccord Adams analyst Peter Misek. “So now they have a BlackBerry that addresses that.”
RIM says that in the United States about 70 percent of mobile phone users opt for a flip phone. By attacking a market of that size, the Waterloo, Ontario-based company hopes to continue to diversify its customer base beyond its mainstay of executives and professionals.
“This device is a multimillion-unit device per year,” Misek said of the flip Pearl’s prospects.
The size and fashion appeal of a mobile phone are big considerations and consumers sometimes fickle tastes must be appeased if a device is to succeed.
“A lot of consumers don’t like the bulky BlackBerry holstered to a belt and having a small product that fits into a purse or a pant pocket is appealing,” Scott Pope, an analyst at First Analysis Securities Corp., said of RIM’s newest smartphone.
“It’s an excellent addition to the portfolio, which . easy fast cash. payday loan. has been short on consumer products.”
The federal government’s takeover of Fannie Mae and Freddie Mac may save the battered real estate market from a complete meltdown. But financial experts say the bailout won’t lead to a housing recovery just yet.
Instead, some on Wall Street said the housing sector is in as tough shape today as it was before Sunday’s rescue by the Treasury Department.
"This isn’t curing the patient. This is preventing the patient from developing a new problem he can’t survive," said Barry Ritholtz, CEO and director of equity research, Fusion IQ.
Ritholtz and others pointed to a series of problems plaguing housing that the bailout of Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) does little, if anything, to address.
In particular, there is still a large supply of unsold homes on the market and an increasing number of foreclosures that threatens to add to the glut.
What’s more rising unemployment and increased job losses should add to the woes for lenders, brokers, builders and others tied to the housing sector.
"Now we have a recession,’" said Dean Baker, co-director of the Center for Economic and Policy Research.
Baker added that even with home prices declining at a rate not seen since the Great Depression, the housing bubble hasn’t completely deflated yet.
In fact, some argue that considering the rise in home prices during 1996 to 2006 when compared to inflation, incomes and rents during the same period, home values need to fall another 50% in order to get back to normal.
Still, the Fannie and Freddie rescue is likely to help bring mortgage rates down.
That’s because it should help lower the gap between mortgage rates and Treasury bills, a spread that had risen in recent months on investor concerns about the firms and the rising mortgage defaults.
Fannie and Freddie also warned last month that they would cut back on the growth of their mortgage loan portfolios as they tried to preserve the capital they would need to cover rising losses payday loans $1500 payday loan.
With the Treasury Department now standing behind the firm, most experts expect additional money will be made available to mortgage lenders.
Those two factors prompt some to believe that the rescue will be a significant help for housing markets, even if it doesn’t solve all the problems.
"You’re going to have to work through all those other issues in order for there to be a meaningful recovery," said Timothy Speiss, head of the wealth management arm of accounting firm Eisner LLP. "But this is a significant step in the right direction: improving credit availability and affordability."
Lawrence Yun, chief economist for the National Association of Realtors, said his group’s members are hoping lower rates will help change the attitude of potential buyers about whether it’s a safe time to re-enter the market.
"Whether it’s a game changer or not, we can’t say. We have to see how far rates fall, or whether or not they continue to lack confidence even with these low rates," he said.
Thus, even if the bailout does have a positive impact on the real estate market, one economist said it will probably be limited and relatively slow to take effect.
"By no means is this a magic wand to rejuvenate the housing recession that has just entered its fourth year," said Rich Yamarone, director of economic research at Argus Research.
Former Bank of England policy maker DeAnne Julius said Prime Minister Gordon Brown shouldn't try to shore up Britain's housing market even though property prices are likely to fall further.
“It would be counterproductive at this point for the government to step in and try to prevent that correction from continuing,'' said Julius in an interview with BBC Radio 4's Today program today. Home values “will probably have to fall further.''
Brown's government is considering proposals on how to revive the country's mortgage market as falling house prices erode support for the ruling Labour Party. A Treasury-commissioned report said in July that the Bank of England could extend its Special Liquidity Scheme helping banks hurt by the credit crisis, or Brown could guarantee mortgage-backed securities.
Chancellor of the Exchequer Alistair Darling is scheduled to make a decision on the proposals, made by former HBOS Plc Chief Executive Officer James Crosby, in coming weeks. His U.S. counterpart, Henry Paulson, was forced on Sept. 7 to seize control of Fannie Mae and Freddie Mac after the housing slump threatened to topple the companies making up almost half of the U.S. home- loan market.
British house prices are falling as banks stung by the credit market rout hold onto their cash, making it harder for potential homebuyers to find mortgages. The Royal Institution of Chartered Surveyors said today that sales fell to a record in August, with some respondents saying they had sold less than one home per week.
Recession Risk
The housing-market slump has helped push the economy towards a recession. The U.K. statistics office said today manufacturing production declined in July to the lowest level in 1 1/2 years. The pound, which was little changed after today's reports, has dropped 11 percent against the dollar in the past month.
Julius said she expects the U.K cash till payday 1500 payday loans. economy to be “slow or flat'' for the next 12 to 18 months, though it will probably avoid the “deep recession'' experienced in the early 1990s.
While Brown is under pressure from his own party to turn around the government's fortunes, further efforts to rescue the housing market may face opposition from Bank of England Governor Mervyn King.
He has already rejected any government support for mortgages, saying last month “the last thing we want to do is to tell lenders it doesn't matter if they monitor the riskiness, the government will guarantee it.'' Crosby also warned in his report, which weighed the pros and cons of the various options, that such a move risks creating “moral hazard.''
`Trade Off?'
“Government intervention has its own weaknesses and its own risks,'' said Julius. It involves a “trade-off'' between taxpayers and special interests, she said.
The Crosby report said one option would be for the central bank to expand its Special Liquidity Scheme, due to expire next month, by accepting mortgage-backed securities issued this year. The Bank of England in April only agreed to accept securities issued before 2008 in return for government bonds.
Willem Buiter, another former Bank of England policy maker, argued today that Brown's government must do something to help unfreeze the mortgage market.
Policy makers should offer a “liquidity-support facility even for newly issued mortgage-backed securities, but do it at a price that makes banks and other mortgage lenders wince,'' Buiter said in an interview with CNBC television. “They have to actively try to reinvigorate the securities market for mortgage finance.''
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