Archive for May, 2008

European equities chase Wall Street higher (AFP)

Friday, May 30th, 2008 | Finance News

LONDON (AFP) -
Europe's main stocks markets advanced on Friday, after overnight gains in New York and earlier in Asia, as the oil-exposed airline sector benefited from falling crude prices, dealers said.

London's FTSE 100 index of leading shares climbed 0.30 percent to 6,086.30 points in late morning trade.

Frankfurt's DAX 30 index gained 0.61 percent to 7,098.11 points near the half-way stage, and the Paris CAC 40 index increased 0.61 percent to 5,006.23.

The Euro Stoxx 50 index of top eurozone shares gained 0.63 percent to 3,775.75 points.

The European single currency stood at 1.5508 dollars.

Wall Street extended its gains to a third day on Thursday as investors were comforted by an upward revision to US economic growth and a further drop in crude oil costs.

Japanese share prices jumped on Friday to close at the highest level in almost five months as investors cheered US gains and a weaker yen.

In international commodity markets on Friday, crude prices fell further after heavy losses the previous day that were triggered by the strengthening dollar and concerns about falling US demand, traders said.

In reaction, European airlines saw their share prices gain ground because falling oil prices result in lower jet fuel costs.

British Airways shares surged 6.98 percent to 230 pence in London deals. On Thursday, BA had ramped up its fuel surcharge on plane tickets because of high oil prices.

In Paris on Friday, Air France-KLM shares surged 6.36 percent to 17.23 euros, and German carrier Lufthansa won 3.42 percent to 16.65 euros in Frankfurt.

The price of oil has still gained about 25 percent since the start of the year, despite recent losses. That weigh on most companies' profits because it increases transport costs and heating bills.

In London, British business-class airline Silverjet said that it had suspended operations after running into serious funding problems amid soaring fuel costs.

Silverjet said it had failed to secure new funding and was forced to close for business. The cash-strapped airline's shares were suspended last week.

In US deals on Thursday, the Dow Jones Industrial Average climbed 0.41 percent to close at 12,646.22 and the tech-dominated Nasdaq rallied 0.87 percent to 2,508.32.

The broad-market Standard and Poor's 500 index added 0.53 percent to end at 1,398.26 points.

Also lifting US sentiment was shareholder approval of the sale of troubled investment firm Bear Stearns to JP Morgan Chase, concluding the deal that some say marked a watershed in the global credit crisis.

In Asia on Friday, Tokyo's benchmark Nikkei-225 index gained 1.52 percent to end at 14,338.54 points -- the best finish since January 10. Hong Kong's key Hang Seng index closed up 0.61 percent at 24,533.12 points.

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U.S. oil probes focusing on price manipulation: report (Reuters)

Friday, May 30th, 2008 | Finance News

NEW YORK (Reuters) -
A U.S. regulatory probe into potential
oil-market trading abuses is focusing on possible short-term
manipulation of benchmark crude prices and the use of
information related to important oil storage tanks to influence
prices, the Wall Street Journal reported on Friday.

The report comes a day after the Commodity Futures Trading
Commission
, under pressure from U.S. lawmakers to crack down on
speculators they blame for pushing energy prices to record
highs, said it would step up market surveillance.

The CFTC announced a nationwide investigation into energy
trading last December, but is in fact pursuing several oil
investigations, many of which relate to one another, the Wall
Street Journal
reported, citing people familiar with
enforcement priorities of the agency.

It has expanded its probe into alleged short-term
manipulation of crude-oil prices via a widely used
price-reporting system run by Platts, a unit of McGraw-Hill Cos
(MHP.N), the newspaper reported.

The probes appear to focus on gambits well known by traders
in the opaque physical oil market, where trading a small volume
of cash crude or gasoline during a short period when benchmark
prices are set can yield big profits on derivatives positions.

Oil traders say that these kind of leveraged trading plays
-- which are generally not illegal -- were more common prior to
the Enron melt-down and the California power trading scandal
that triggered increased scrutiny of world energy markets
earlier this decade, but rarely had a lasting effect on prices.

However traders and analysts believe that increased
investment from pension and other funds into commodities
markets is partly responsible for causing prices to quadruple
since 2004, with U.S. crude hitting a record high of $135.09 a
barrel last week after rising by more than 40 percent this year
alone.

The Journal quoted CFTC enforcement chief Gregory Mocek as
saying the agency has about 60 manipulation investigations open
in various commodity markets.

On Thursday the CFTC said it would expand its oversight of
energy trading by tracking index funds, and had reached an
agreement with the U.K.'s Financial Services Authority and ICE
Futures Europe to share information.

WINDOW TRADE, STORAGE TANKS

One suspicion, the newspaper said, is that energy companies
and traders have at times issued a flood of orders during the
trading "window" used by Platts to determine its reported
prices for physical oil transactions, then used the potentially
distorted prices to make profits in other markets.

According to the Journal, Platts has said its system has
safeguards to protect against manipulation. Subpoenas on the
matter have gone out in several stages, the report cited people
familiar with the cases as saying.

A Platts spokesman was not immediately available to
comment.

The Journal cited people familiar with the matter as saying
the agency has also been questioning traders about similar
activity in the jet-fuel market.

Another area of concern for CFTC regulators is whether the
owners of crude-oil storage tanks use their knowledge to make
bets on oil-futures markets.

In theory, the owner of a tank could issue misleading
information about the tanks being full or empty, leaving the
wrong impression about whether oil is in plentiful supply. Then
they could make trades to profit on the misunderstanding.

Regulators have long been wary of allowing any one company
to gain too much control over storage tanks in Cushing,
Oklahoma, the delivery point for the New York Mercantile
Exchange
's light, sweet crude oil contract, the world's main
benchmark.

Government regulators forced BP (BP.L) to sell the Cushing
storage assets of ARCO before allowing it to buy the U.S.
company in 2001. BP is no longer the biggest tank holder at
Cushing.

(Reporting by Steve James; Editing by Jonathan Leff and
Michael Urquhart)

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Japan jobless rate rises, spending falls (AP)

Friday, May 30th, 2008 | Finance News

TOKYO - Japan's economy showed new signs of deterioration Friday, with the country's unemployment rate rising and consumers tightening their purse strings amid soaring food and oil prices, the government said.

The jobless rate in April rose to 4.0 percent, up from 3.8 percent in March, the highest level since last September, the Ministry of Internal Affairs and Communications said.

"Amid a slump in the economy, conditions of employment are not improving," said Keiji Kanda, an economist at think tank Daiwa Institute of Research. "The number of employees in the manufacturing sector is declining as companies are reluctant to hire people."

Japan's household spending in April dropped 2.7 percent from a year earlier, the government said. That was far worse than a 0.9 percent decline expected by economists.

"The data showed people were cutting back overall expenses to cope with rising food and energy prices. Food and energy are so vital, and a hike in those prices is directly affecting household spending," Kanda said.

Rising energy and food prices were major factors lifting Japan's core consumer price index, which rose 0.9 percent from a year earlier, the government said. That was down from 1.2 percent in March — the highest rate in a decade.

Oil prices soared 28.5 percent in April from a year ago and bread prices jumped 10.8 percent.

Another key indicator, Japan's industrial output, declined 0.3 percent from the previous month due to a slump in demand for passenger cars and mobile phones, the government said.

"The decline reflected uncertainty over the state of the global economy as well as sluggish demand at home," Kanda said. "In particular, demand for high-tech goods remained stagnant such as liquid display TVs."

Industrial shipments in April increased 0.7 percent from March, while industrial inventories fell 0.9 percent, the Ministry of Economy, Trade and Industry said.

But Economy Minister Hiroko Ota was upbeat on the latest showing of consumer prices, saying the country was making progress in its effort to combat deflation.

"The new ... data showed we're making progress in our effort to exit deflation," she said at a press conference. "Whether we can declare the end of deflation depends on whether this rising price trend will lead to a rise in wages."

"The data showed people were cutting back overall expenses to cope with rising food and energy prices. Food and energy are so vital, and a hike in those prices is directly affecting household spending," Kanda said.

The total number of jobless in April stood at 2.75 million, up by 70,000 from a year ago, marking the first rise in 29 months. Among industries, the number of workers in the construction sector dropped by 490,000 in April, with that in the retail sector declined by 110,000.

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