Stocks Plunge With Dollar; Dow Down 360
Number of posts : 440
Registration date : 2007-07-01
|Subject: Stocks Plunge With Dollar; Dow Down 360 Wed Nov 07, 2007 9:22 pm|| |
Stocks Plunge With Dollar; Dow Down 360
Wednesday November 7, 7:06 pm ET
By Tim Paradis, AP Business Writer
Stocks Fall Sharply As Dollar Sinks to Fresh Lows, Credit Concerns Grow, Financial Stocks DropNEW YORK (AP) -- Wall Street suffered its second big drop in a week Wednesday, with investors worried about spreading fallout from the credit crisis at banks and about a dollar that just keeps getting weaker. The Dow Jones industrial average fell more than 360 points -- just about matching its pullback of last Thursday.
A passel of worries tormented investors, including comments by New York Attorney General Andrew Cuomo about conflicts of interest in the mortgage industry that exacerbated declines among bank stocks.Meanwhile, the dollar swooned amid speculation that China will seek to diversify some of its foreign currency stockpiles beyond the greenback and General Motors Corp. further dampened sentiment by posting a record loss tied to an accounting adjustment.Oil hit a record, rising above $98 per barrel before retreating, and gold pushed higher, moves exacerbated by an anemic dollar.The fear with a huge drop like Wednesday's is whether it is part not just of a correction, which is a 10 percent pullback in stock prices, but that it could be the beginning of a bear market. With the huge volatility that has swept Wall Street since the summer, and triple-digit moves in the Dow becoming commonplace, no one can be sure.Still, the concern on the Street is that the extent of the fallout from the credit market crisis that has led to billions of dollars in losses for major banks and investment firms is not yet known. With Citigroup Inc. announcing Sunday it needed to take an additional $8 billion to $11 billion in writedowns, investors are very uneasy not just about stocks, but the economy as a whole."The financials are the bodyguards of the market and when the bodyguards are taking shots then the market can't do well," said David Darst, chief investment strategist for Morgan Stanley's global wealth management group."A lot of the bad stuff is known; what the markets are worrying about is the unknown," Darst said.The Dow fell 360.92, or 2.64 percent, to 13,300.02. The Dow, which had gained 117 points on Tuesday, had fallen 362.14 last Thursday, reflecting the extreme fractiousness on Wall Street these days. It was the third time in a month the blue chip index has dropped by more than 350 points, and leaves the Dow up 6.71 percent for the year.Broader stock indicators also pulled back Wednesday. The Standard & Poor's 500 index fell 44.65, or 2.94 percent, to 1,475.62 -- moving below the 1,500 benchmark. The Nasdaq composite index fell 76.42, or 2.70 percent, to 2,748.76. For the year, the S&P 500 is up 4.04 percent, while the Nasdaq is up 13.81 percent.The Russell 2000 index of smaller companies fell 25.81, or 3.22 percent, to 775.96.A drop in the NYSE composite index proved steep enough to trigger trading curbs, which puts restrictions on certain kinds of sell orders and are meant to help stabilize the market.Government bonds jumped as investors transferred money from stocks to fixed-income investments. The yield on the 10-year Treasury note, which moves opposite its price, fell to 4.34 percent from 4.37 percent late Tuesday. It was down to 4.30 percent in after-hours trading.The pullback among the financials made clear the urgency of some investors' concerns about balance sheets.Washington Mutual Inc. fell after Cuomo stepped up claims that the bank shares blame for inflated home prices nationwide. The bank, which also warned it expects loan defaults to continue in the first quarter at the same pace as in the present quarter, fell $4.19, or 17.3 percent, to $20.04.Cuomo issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac as part of his inquiry into what he regards as conflicts of interest in the mortgage industry. Fannie Mae fell $5.60, or 10.1 percent, to $49.79, while Freddie Mac fell $4.26, or 8.6 percent, to $45.13.In addition, American International Group fell $4.15, or 6.7 percent, to $57.90 ahead of a quarterly financial report due after the closing bell.Other financial names fell as well. American Express Co. fell $3.20, or 5.5 percent, to $55.37. Citigroup, which like AIG and American Express is among the 30 stocks that make up the Dow industrials, fell $1.67, or 4.8 percent, to $33.41. Morgan Stanley fell $3.32, or 6.1 percent, to $51.19.Illustrating investors' unease, the Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," spiked, jumping nearly 24 percent.The 13-nation euro hit a fresh record against the dollar -- rising to $1.4729 -- before falling back. The dollar lost ground following word that a senior Chinese political figure said China should spread its $1.43 trillion foreign exchange reserves beyond the dollar into the euro and other strong currencies.The euro's rally put it well above the $1.4554 the currency bought late Tuesday in New York. The previous record high, also set Tuesday, was $1.4571.The weak dollar helped keep pressure on the price of oil during much of the session. Light, sweet crude fell 33 cents to settle at $96.37 per barrel on the New York Mercantile Exchange after the goverment reported inventories fell less than expected last week while refinery utilization remained flat.December gold rose but also came off its highs, adding $10.10 to settle at $833.50 an ounce on the Nymex.Comments from Federal Reserve officials didn't give investors much reason to reconsider their bets. St. Louis Fed President William Poole said recent weeks have seen the credit markets make clear progress in returning to normal but said the Fed might have to make other rate cuts. Such a move would likely hasten the dollar's fall as investors would seek better interest rates elsewhere. The central bank reduced the federal funds rate in September and again last month.Corporate news likewise was depressing. GM reported a $39 billion loss for the third quarter due to an accounting shift. The company booked a $38.6 billion noncash charge largely related to establishing a valuation allowance, which is taken when the future benefit of deferred tax assets is less likely to be realized.GM's loss came to $68.85 per share, compared with a loss of $147 million, or 26 cents per share, in the third quarter last year. The stock fell $2.21, or 6.1 percent, to $33.95.Declining issues outnumbered advancers by about 10 to 1 on the New York Stock Exchange, where consolidated volume came to 4.22 billion shares, compared with 3.77 billion shares traded Tuesday.Overseas, Japan's Nikkei stock average closed down 0.94 percent. Britain's FTSE 100 fell 0.85 percent, Germany's DAX index fell 0.35 percent, and France's CAC-40 fell 0.46 percent.
Number of posts : 440
Registration date : 2007-07-01
|Subject: 7 Countries Considering Abandoning the US Dollar (and what i Wed Nov 07, 2007 9:53 pm|| |
7 Countries Considering Abandoning the US Dollar (and what it means)
November 6th, 2007
It’s no secret that the dollar is on a downward spiral. Its value is
dropping, and the Fed isn’t doing a whole lot to change that. As a
result, a number of countries are considering a shift away from the
dollar to preserve their assets. These are seven of the countries
currently considering a move from the dollar, and how they’ll have an
effect on its value and the US economy.
What does this all mean?
- Saudi Arabia: The Telegraph reports
that for the first time, Saudi Arabia has refused to cut interest rates
along with the US Federal Reserve. This is seen as a signal that a
break from the dollar currency peg is imminent. The kingdom is taking
“appropriate measures” to protect itself from letting the dollar cause
problems for their own economy. They’re concerned about the threat of
inflation and don’t want to deal with “recessionary conditions” in the
US. Hans Redeker of BNP Paribas believes
this creates a “very dangerous situation for the dollar,” as Saudi
Arabia alone has management of $800 billion. Experts fear that a break
from the dollar in Saudi Arabia could set off a “stampede” from the
dollar in the Middle East, a region that manages $3,500 billion.
- South Korea: In 2005, Korea announced
its intention to shift its investments to currencies of countries other
than the US. Although they’re simply making plans to diversify for the
future, that doesn’t mean a large dollar drop isn’t in the works. There
that the Bank of Korea is planning on selling $1 billion US bonds in
the near future, after a $100 million sale this past August.
- China: After already dropping the dollar peg in 2005, China has more trouble up its sleeve. Currently, China is threatening
a “nuclear option” of huge dollar liquidation in response to possible
trade sanctions intended to force a yuan revaluation. Although China
“doesn’t want any undesirable phenomenon in the global financial
order,” their large sum of US dollars does serve as a “bargaining
chip.” As we’ve noted in the past, China has the power to take the wind out of the dollar.
- Venezuela: Venezuela holds little loyalty to the dollar. In fact, they’ve shown overt disapproval, choosing to establish barter deals
for oil. These barter deals, established under Hugo Chavez, allow
Venezuela to trade oil with 12 Latin American countries and Cuba
without using the dollar, shorting the US its usual subsidy. Chavez is
not shy about this decision, and has publicly encouraged others to
adopt similar arrangements. In 2000, Chavez recommended
to OPEC that they “take advantage of high-tech electronic barter and
bi-lateral exchanges of its oil with its developing country customers,”
or in other words, stop using the dollar, or even the euro, for oil
transactions. In September, Chavez instructed
Venezuela’s state oil company Petroleos de Venezuela SA to change its
dollar investments to euros and other currencies in order to mitigate
- Sudan: Sudan is, once again, planning
to convert its dollar holdings to the euro and other currencies.
Additionally, they’ve recommended to commercial banks, government
departments, and private businesses to do the same. In 1997, the
Central Bank of Sudan made a similar recommendation in reaction to US
sactions from former President Clinton, but the implementation failed.
This time around, 31 Sudanese companies have become subject to
sanctions, preventing them from doing trade or financial transactions
with the US. Officially, the sanctions are reported
to have little effect, but there are indications that the economy is
suffering due to these restrictions. A decision to move Sudan away from
the dollar is intended to allow the country to work around these
sanctions as well as any implemented in the future. However, a Khartoum
committee recently concluded
that proposals for a reduced dependence on the dollar are “not
feasible.” Regardless, it is clear that Sudan’s intent is to attempt a
break from the dollar in the future.
- Iran: Iran is perhaps the most likely candidate for an imminent abandonment of the dollar. Recently, Iran requested that its shipments to Japan be traded for yen instead of dollars. Further, Iran has plans in the works to create an open commodity exchange
called the Iran Oil Bourse. This exchange would make it possible to
trade oil and gas in non-dollar currencies, the euro in particular.
Athough the oil bourse has missed at least three of its announced
opening dates, it serves to make clear Iran’s intentions for the
dollar. As of October 2007, Iran receives non-dollar currencies for 85%
of its oil exports, and has plans to move the remaining 15% to
currencies like the United Arab Emirates dirham.
- Russia: Iran is not alone in its desire to
establish an alternative to trading oil and other commodities in
dollars. In 2006, Russian President Vladmir Putin expressed interest
in establishing a Russian stock exchange which would allow “oil, gas,
and other goods to be paid for in Roubles.” Russia’s intentions are no
secret–in the past, they’ve made it clear that they’re wary of holding
too many dollar reserves. In 2004, Russian central bank First Deputy
Chairmain Alexei Ulyukayev remarked,
“Most of our reserves are in dollars, and that’s a cause for concern.”
He went on to explain that, after considering the dollar’s rate against
the euro, Russia is “discussing the possibility of changing the reserve
structure.” Then in 2005, Russia put an end to its dollar peg, opting
instead to move towards a euro alignment. They’ve discussed
pricing oil in euros, a move that could provide a large shift away from
the dollar and towards the euro, as Russia is the world’s
second-largest oil exporter.
Countries are growing weary of losing money on the falling dollar.
Many of them want to protect their financial interests, and a number of
them want to end the US oversight that comes with using the dollar.
Although it’s not clear how many of these countries will actually
follow through on an abandonment of the dollar, it is clear that its
status as a world currency is in trouble.
Obviously, an abandonment of the dollar is bad news for the
currency. Simply put, as demand lessens, its value drops. Additionally,
the revenue generated from the use of the dollar will be sorely missed
if it’s lost. The dollar’s status as a cheaply-produced US export is a
vital part of our economy. Losing this status could rock the financial
lives of both Americans and the worldwide economy.
Number of posts : 440
Registration date : 2007-07-01
|Subject: How Low Can the Dollar Go? Thoughts from 12 Expert Wed Nov 07, 2007 9:56 pm|| |
How Low Can the Dollar Go? Thoughts from 12 Experts
November 1st, 2007
Recently the dollar has seen troubled times. After reaching parity
with the Canadian dollar and the offloading of US Treasuries from Asian
countries, things just aren’t looking good. Find out what financial
experts have to say about the dollar’s future.
Paul Robinson, Barclays: “We expect it to get quite a bit weaker.”
The Telegraph reports,
“Barclays expect the Fed to cut rates by another quarter point to 5pc
in a move that further erode one of the dollar’s key props.” Paul
Robinson, strategist for Barclays, explains, “We’re dollar bears. The
dollar is coming up for an important few weeks. We expect it to get
quite a bit weaker.” They believe that it’s possible the dollar could
fall to $1.50 on the euro.
Thomas Stopler, Goldman Sachs: “The data suggests there will be a weaker dollar.”
Thomas Stopler, economist for Goldman Sachs, predicts a troublesome
future for the dollar. Based on the negative capital-flows situation,
he interprets data to mean that “there will be a weaker dollar.”
Marc Ostwald, Insinger de Beaufort: “Woe betide US Treasuries if inflation does not remain benign.”
According to a report
from The Telegraph, “data from the US Treasury showed outflows of
$163bn (£80bn) from all forms of US investments.” Mac Ostwald of
Insinger de Beaufort finds these numbers “absolutely stunning,” and
warns that inflation could make things even worse for the dollar: “”Woe
betide US Treasuries if inflation does not remain benign.” $52 billion
worth of the treasuries in the outflow are from Asian investors,
including Japan, China, and Taiwan.
Ian Stannard, Paribas: Data is “extremely negative.”
According to Ian Stannard of Paribas, things aren’t looking good for
the dollar, as “it is not just foreigners who are selling US assets.
Americans are turning their back as well.” He believes that this
situation “exceeds the worst fears,” and ultimately, the data is
“extremely negative” for the dollar.
Rodrigo de Rato, IMF: “The dollar remains overvalued.”
Although the dollar has fallen quite a bit already, International
Monetary Fund chief Rodrigo de Rato asserts that it’s still “overvalued
relative to medium-term fundamentals.” Digital Journal reports
that the IMF hinted “the dollar may be headed for further decline,”
with the US trade deficit, slow-growing economy, and cut in interest
rates to blame.
Jerome Booth, Ashmore Group: “The dollar will keep falling in the near term no matter what.”
Jerome Booth isn’t optimistic for the dollar, either. He believes
that it’s just not a good investment vehicle: “It’s a question of
returns, and returns in dollar-denominated assets are simply very low
when compared with other regions.” Because of this, his prediction is
grim, asserting that “the dollar will keep falling in the near term no
Nick Bennenbroek, Wells Fargo Bank: Recent “strength in the greenback is corrective.”
In a note to clients, Wells Fargo currency strategist Nick
Bennenbroek asserts that there’s still room for a greater dollar fall.
He explains, “We do believe the greenback is consolidating and not too
far from bottoming out, but today’s price action suggests there is
still potential for some further weakness.” According to Bennenbroek,
recent gains in the dollar’s strength are “corrective.”
Michael Woolfolk, Bank of New York Mellon: “The dollar has further room to fall regardless of incoming US data.”
Senior Bank of New York Mellon strategist Michael Woolfolk seems to
think data and opinionated buzz points to a weakening dollar. “Bearish
dollar-sentiment appears to be solidly in place going into the
weekend,” he said. Because of this, Woolfolk thinks that, regardless of
incoming US data, “the dollar has further room to fall.”
Alan Greenspan, Former Federal Reserve Chairman: China offloading of US Treasuries “won’t trigger any rapid drop in the US dollar.”
Greenspan doesn’t see doom in the dollar’s near future. Although
China sales of US Treasuries are troublesome, he believes that “markets
are clever enough not to overreact.” He says this is old news, and
doesn’t expect to see a large reaction. An attendee of Greenspan’s
presentation reports his sentiment as, “It’s already-known information
that won’t trigger any rapid drop in the U.S. dollar.”
Eisuke Sakakibara, former top Japanese Ministry of Finance official: “We could see a plunge in the dollar.”
Eisuke Sakakibara is concerned that if US economic growth “fall[s]
below 1 percent,” the dollar may “plunge.” This plunge, according to
Sakakibara, would require intervention from the US, Japan and the EU to
put a stop to it.
Masashi Kurabe, Bank of Tokyo-Mitsubishi UFJ: “Negative implications for the dollar.”
Masashi Kurabe sees the possibility of stagflation,
a period of both inflation and economic stagnation. “Economic data
raise the question whether the U.S. economy will fall into
stagflation,” he says. A period of stagflation could have “negative
implications for the dollar.”
Mansoor Mohiuddin. UBS AG: “We continue to view dollar weakness as unsustainable.”
Mansoor Mohiuddin sees a positive future for the dollar, calling its
current weakness “unsustainable.” He believes that the G7 meeting will
spark a resurgence of the dollar, explaining, “A strong G7 statement
this weekend could be just what the dollar needs.” Bloomberg reports
UBS “predicted the dollar will rise 5.2 percent in the next three
months as the Federal Reserve delays further interest rate cuts.”
Despite a few experts with a positive outlook for the dollar, the
general consensus reflects a future that doesn’t look good. According
to these experts, there is room for the dollar to continue to fall, and
currency traders should vigilantly look for political and economic
indicators that could bring trouble for the dollar.
|Subject: Re: Stocks Plunge With Dollar; Dow Down 360 || |